INVESTMENTS

RK Properties targets multifamily assets in areas where economic and demographic trends drive strong occupancy numbers and rent growth. It is our philosophy to institute a conservative business plan in the acquisition of our properties, including the use of modest leverage of 50-60%.

DELAWARE STATUTORY TRUSTS (“DST”)

A DST is a separate legal entity formed as a trust under Delaware law. A beneficial interest in a DST may be used as replacement property in a 1031 tax deferred exchange. A DST is structured so that each beneficiary (investor) owns a beneficial interest in the trust. The managing Trustee of the DST is either the Sponsor or an affiliate of the Sponsor. The DST holds title to 100% of the interest in the property. If properly structured, the DST will be classified as a grantor trust for federal income tax purposes and, as a result, the purchaser of a beneficial interest in the trust will acquire an undivided interest in the asset(s) held by the DST. A DST owner does not maintain management control or dictate day-to-day property management operations. DST ownership is also subject to additional IRS regulations that affect the management of the property and your ownership interest.

Tax reporting for a DST is done on a Schedule E utilizing property operating information provided by the Sponsor. The IRS issued the Revenue Ruling 2004-86 that set forth parameters a DST must meet in order to be viewed as a grantor trust and qualify for a viable tax deferring vehicle. If the DST is structured responsibly, the parameters do not prohibit a successful business plan for a property.

A DST investment is an investment in real estate; any investment in real estate is subject to market value and rental income fluctuations, tenant issues, vacancies, taxes and governmental regulations. There are costs and fees associated with a DST investment and management and the tax benefits must be weighed against the investment costs.