TSWR Development, LLC launches Securitized Saltwater Disposal Portfolio for 1031 exchange buyers
March 21, 2016
TSWR Development, LLC (“TSWR Development”) has launched its TSWR Development SWD Portfolio I, DST (“SWD 1”) investment program offering accredited investors with the ability to acquire undivided fractional beneficial interests in a Delaware Statutory Trust which can be used as qualified replacement property for 1031 tax deferred exchanges.
Since 2012 Greenville, SC based TSWR Development has been an investor and developer of saltwater disposal well operation properties (“SWDs”) throughout the Permian Basin in West Texas. “The Permian continues to rule the U.S. oil markets,” states Trevor Gordon, CEO and co-founder of TSWR Development. “The Permian has the largest proven oil reserves in the country and the infrastructure and support in place to make drilling and production simple and lower risk than it has been historically.” Gordon continues, “Despite recent weakness in the oil prices, drilling and production is still occurring with the bulk of domestic drilling and production in this region, and you can’t have production without the disposal of saltwater recovered in these processes. TSWR (Development) continues to identify opportunities and work with an industry leading operator in the region to further invest and develop income opportunities for our clients.”
Class 2 Saltwater Disposal Wells are the only approved method to dispose of waste water captured in the drilling and extraction of oil and natural gas and is a critical component of the entire industry. “Oil wells produce large quantities of water in conjunction with the extraction, on an average of 10 barrels of water per each barrel of oil,” states Joseph Spagnoli, VP of Research and Operations for TSWR Development. “This water has to be disposed of in an approved facility. Water transport trucks load water from the storage tanks and haul the contents to a nearby disposal well where, for us we will then skim any remaining oil and dispose of the reclaimed water.” Spagnoli continues, “This creates two separate and distinct potential revenue streams for our operations between disposal revenue and revenue from the sale of the oil we are able to extract.”
The Trust will acquire several undivided fractional working interests in four (4) operational SWDs and will lease these interests back to an affiliate of the sponsor who will become the Master Tenant responsible for making lease payments to the DST beneficial interest owners. Since 2004 the IRS has recognized properly structured beneficial interests in Delaware Statutory Trusts (DSTs) as qualified replacement property for use when seeking deferral of capital gains (or losses) in a 1031 exchange. Most DSTs on the market today own traditional commercial properties such as apartments, retail centers and industrial buildings (such as the SL – FL NNN Industrial Portfolio I, DST offered by affiliate Sandlapper Capital Investments, LLC). SWD 1 is the first known DST to acquire undivided fractional working interests in SWD properties and offer them as replacement property for the 1031 exchange buyer. “With an increased demand for suitable 1031 replacement properties of late, we wanted to be able to provide real property exchange buyers with options beyond traditional commercial properties,” states Gordon. “One of our core investment strategies within the collective SANDLAPPER family of companies (TSWR Development is part of the SANDLAPPER group of investment companies and is a joint venture between Greenville, SC based Sandlapper Capital Investments and Newport Beach, CA based Tiburon Research Holdings run by founder and CEO Paul Brahe, co-founder and Chief Investment Officer of TSWR Development) is to look to enhance diversity and mitigate greater portfolio risk by looking for those additional asset classes that may be underserved in the investment community. SWDs are an example of just such an industry.”
2015 saw over $1 billion in equity placed to acquire securitized undivided fraction interests in real estate for the 1031 exchange buyer, and the expectations for 2016 are in excess of $3 billion, principally from roll over need of full cycle tenant in common investment programs originated in 2006 with maturing debt. “Trevor worked for over two years researching and building the model to be able to offer interests in SWDs in a 1031 exchange program,” said Jack Bixler, VP of Sales and Marketing for TSWR Development and President of affiliate Sandlapper Capital Investments. “With traditional real estate markets continuing to be highly sought after, we are seeing greater compression of capitalization rates thus reducing ability for greater current cash flow on more high quality institutional grade properties, thus forcing investors with greater current cash needs to take more risks with less mature, lower quality or assets that need a lot of work.” Bixler continues, “We wanted to be able to offer something with greater substance, greater inverse correlation to the broader markets, multiple and varying revenue streams, and more diversity for the 1031 exchanger. SWDs are one area we believe we achieve much of this.”
SWD 1 is now available for qualified accredited investors and is immediately suitable for identification as 1031 exchange replacement property. The DST has a minimum investment of $100,000 and is available via private placement memorandum (prospectus). For more information on this and other available replacement property solutions, interested parties can receive such by visiting www.sandlappercapital.com/investments.
About TSWR Development, LLC
TSWR Development, LLC was founded in 2012 as a joint venture between Sandlapper Capital Investments, LLC and Tiburon Research Holdings, LLC to participate in the acquisition and development of saltwater disposal operations throughout the Permian Basin. The principals and senior management team have significant experience in the acquisition and operation of commercial real estate, business entities, finance and management as well as with alternative financial instruments. TSWR Development, based in Greenville, SC, was recognized as the number three best small company based in South Carolina in the annual GSA Business Roaring 20s in 2015.
Since 2012, TSWR Development and/or its affiliates have owned interests in and/or participated in developing or redeveloping twenty-two salt water disposal wells in West Texas.
