Altigo Surpasses $3B in Alts Transactions

May 11, 2023 | Heather Acey

Less than a year after hitting the $2 billion mark, Altigo has crossed $3 billion in alternative investments completed on the platform, a new milestone revealing enduring demand for transformative alts technology and amplified interest in alternatives as a way to weatherproof investor portfolios during turbulent economic times.

Since reaching $2 billion in June 2022, Altigo’s growth and adoption continued with alternative investment sponsors including CAI, CIM, Cottonwood, Hamilton Point, Hines and Livingston Street joining the platform as well as firms such as Alliance Global Partners, Newbridge, ProFi, and Realized Financial. With over 260 alternative investment offerings currently “live” and accepting investments on the platform, Altigo’s latest milestone represents more than 12,000 alts subscriptions since its debut in mid-2019.

Altigo’s success and high rate of adoption shows how straight-through processing technology for alternative investments is swiftly moving from something that firms consider “nice to have” to something they now need to stay in sync with the next generation of advisors’ and investors’ digital-first expectations. Altigo’s success is also due to the meaningful results it provides for users such as reduced NIGO (not-in-good-order) paperwork error rates, which can be as low as 4%.

Altigo streamlines investment processing and compliance by providing access to all firm-approved alts offerings in a single white-labeled portal. The platform also includes custom firm forms and custodian partners’ letters of investment authorization within the workflow. Altigo integrates with popular CRM and compliance and risk management tools as well.

“We look forward to Altigo setting a new standard of service for our affiliated registered representatives and advisors as well as for their supervision,” said Newbridge CTO Kurosh Golchubian. “The home office is prioritizing automation of our core capabilities to up our service game and to stay in sync with rising demand for digital-first solutions. Straight-through processing provides reduced regulatory risk and the satisfaction of knowing that submissions will be in good order the first time—giving our supervisors more time to supervise rather than micromanage paperwork.”

Today, Altigo supports a range of alternative investment offerings from more than 100 sponsors, including non-listed REITs, qualified opportunity zone funds, non-listed preferreds, interval funds, direct private placements, DSTs, private equity funds, and non-listed BDCs.

“Altigo’s continued growth demonstrates that firms and sponsors are still seeking digital solutions for their alts business to meet investor demand despite the recent market slowdown,” said Bill Robbins, CEO of Altigo. “We’re already seeing signs of a resurgence in the industry and will continue to provide our clients with solutions that make it easier for them to do business.”

UPREITs: Keeping Real Estate Investments in Play

April 11, 2023 | Altigo

Asset managers know there’s more than one way to invest in real estate, and many of them manage multiple funds with different strategies and structures to give investors options. Those choices might include either a Delaware Statutory Trust (DST) or a Real Estate Investment Trust (REIT)—tax-advantaged alternative investment products that grew in popularity after the economic crisis of 2007-09.

More recently, sponsors have begun equipping their DSTs with an exit strategy that lets investors keep their investment in play without taxation by bridging it from a less-liquid DST to the operating partnership (OP) of a REIT, while staying with the same sponsor. These special property-to-OP unit conversions are known as UPREITs, or umbrella partnership real estate investment trust transactions. UPREITs have emerged as the latest evolution in the DST space, which last year raised a record $9 billion, according to data from Mountain Dell Consulting. Sponsors employ UPREIT transactions because they create a more stable investment compared to the DST structure, which for tax purposes has many restrictions that limit the ability to hold investments long-term, add capital, and maximize a property’s value. Advisors recommend them because they offer their clients more liquid investment options, tax planning flexibility, and portfolio diversification. And investors prize their ability to increase access to economies of scale—exposing them to the larger, diversified, better-capitalized portfolios of properties that REITs manage through the operating partnership, which can potentially reduce their exposure to risk.

“Three years ago, 100% of our exit planning practice with respect to 1031 exchanges was concentrated in traditional DSTs,” said Carl Sera, President of Sera Capital Management, a registered investment advisor and real estate consultant. “Now it is about 30% with the UPREIT solution at 70%. Once people analyze the differences, it becomes obvious which way they should go.”

Why the upward trend in UPREITs? In short: DSTs are maturing and the UPREIT reflects adoption of the structure commonly used by institutions for decades. As more financial professionals and individual investors learn about this exit option, and their potential benefits, the more word spreads about them. UPREITs were pioneered by Sam Zell in the 1980’s and, over the last five years, by sponsors Dividend Capital (now Ares Management), JLL, and others who broke into the wirehouses with this type of DST structure and where, to date, the most volume in UPREIT transactions has occurred. DSTs typically consist of a single property, have a holding period of about 5-7 years, and are largely illiquid. Selling a DST investment to another accredited investor can be logistically difficult, and 1031 exchanges—”like-kind” exchanges that let investors roll proceeds from one property into another—while also tax-advantaged, are typically less flexible than UPREITs.

The Last Stop

Every UPREIT transaction will be structured differently, but they allow investors to break out of repetitive cycles of 1031 exchanges and avoid cashing out early and face tax consequences.

“An UPREIT is your last stop,” said Jay Frank, President of Cantor Fitzgerald Asset Management. “But it potentially allows investors to get partial liquidity over time from a REIT’s OP. While it can cause a taxable event, it may provide investors additional flexibility and liquidity which you wouldn’t have in a DST. There are also ways to manage any tax liability created.”

Carl Sera says UPREIT transactions are popular with many older first-time DST investors. “These are investors who have made the decision to move from active ownership to passive ownership. Once an investor decides to move to passive ownership, they don’t revert to active.”

Taxation and Administration

An UPREIT transaction allows investors to exchange property for OP ownership in a standard REIT. UPREITs are subject to Title 26, Section 721 of the Internal Revenue Code, which specifies that property-to-share conversions are not generally considered taxable events. Otherwise, UPREIT structures are taxed similarly to that of standard REITs, which are not taxed on most of their earnings, as the taxes are paid by investors when they claim dividends as income. Following completion of the 721 exchange, the UPREIT sponsor owns the newly acquired property and manages its administration. In return, the seller gains operating partnership units that can be converted into REIT shares (a taxable event) or put toward other investment strategies. REITs have the potential to generate risk-adjusted returns through rental and other related income. They are required to return 90 percent of earnings to investors in the form of dividends. While some REITs are traded on public exchanges like NYSE and NASDAQ, non-traded REITs are sold by individual broker-dealers. Investors that UPREIT into a publicly registered non-traded REIT can potentially benefit from the various investor protections inherent in a public company including the transparency that comes with financial record keeping and reporting. Asset managers have sole discretion over how UPREIT transactions are administered, and typically dictate in the private placement memorandum whether or not the option is included. These types of exchanges cannot be guaranteed to happen—they’re strictly optional—and a minimum of two years must go by before an investor can elect to make the exchange. The sponsor then dictates when the elected exchange occurs, not the investor.

Perhaps another reason 721 exchanges are on the rise is due to persistent bipartisan scrutiny that 1031 exchanges have garnered from the last three presidential administrations, all of which have sought to scale back 1031 exchange tax benefits.

“1031 has been attacked in the past. Under the Tax Cuts and Jobs Act, 1031 was limited to real property and no longer applies to personal property,” said Cantor’s Jay Frank. “Real estate survived, but it could be looked at again. Getting into a REIT structure mitigates the legislative risk of Section 1031—or Section 721—being materially altered.”

Increased interest in UPREITs also comes as rising interest rates and recession worries have put downward pressure on real estate and reduced demand for DSTs. While this has forced some sponsors to scale back property purchases, other firms like Capital Square started 2023 off by completing the acquisition of multiple multifamily properties for both DST and Opportunity Zone Fund offerings. The industry is currently in a process of “price discovery” as buyers and sellers come to terms with the new reality around debt terms.

“At Capital Square, we view the UPREIT as a method of adding value to quality multifamily investments that otherwise have to be sold to comply with DST tax rules,” said Louis Rogers, founder and Co-CEO of Capital Square. “The IRS revenue ruling requires sale of DST properties when the mortgage matures, and it is not possible to refinance or recapitalize even when it would be in the best interests of the investors. This means that quality real estate that should be held long-term must be sold, with the funds returned to DST investors who will likely structure another 1031 exchange to continue the tax deferral.”

As with any real estate investment, especially alternative investments like DSTs and REITs, there are a number of risk factors that should be considered, such as declines in market value, local economic conditions, operating costs, and more. Current economic conditions around real estate underscores the importance of educating investors on the long-term nature of alts.

A.G.P./Alliance Global Partners Select Altigo to Streamline its Alts Program

March 21, 2023 | Altigo

A.G.P./Alliance Global Partners, a full-service investment firm and SEC-registered broker-dealer, has chosen Altigo as its digital solution to streamline its alternative investment program. A.G.P. will benefit from platform features that make the subscription process easier and more efficient for both reps and the home office.

Altigo integrates all aspects of alternative investment subscription and compliance, while significantly reducing not-in-good-order (NIGO) errors and other administrative headaches. The platform will help A.G.P. manage its alts paperwork and grant approved reps access to all their firm-approved alternative investment offerings in a single, white-labeled portal.

Altigo’s Supervision Assistant feature will help A.G.P. establish thorough suitability review and other home office supervision processes that can be completed in one streamlined workflow, as well as simplify and condense document review using a repeatable digital process.

Altigo and WealthForge CEO Bill Robbins said, “Technology must be flexible enough to adapt to the way your clients want to do business, and we’re excited that Alliance Global Partners is working with our team to customize their alts investment experience. Straight-through processing is going to make it easier for A.G.P. to deliver value to their reps, increase the quality of their sales supervision and operational control, and simplify the compliance review process.”

About Alliance Global Partners

Alliance Global Partners (A.G.P.) is a regional investment and advisory firm that has been a member of FINRA and registered with the SEC since 1980. A.G.P. specializes in wealth management and the middle market institutional arena. We have Full-Service capabilities with a global ability to handle domestic as well as international customers. A.G.P. prides itself on providing its clients with boutique-level services along with the confidence of knowing their assets are held at Fidelity Clearing and Custody. Whether a client is looking for wealth management advice, Institutional services, or investment banking, we have a track record and a proven team to assist. We pride ourselves on long-lasting relationships with our clients, ranging from some of the largest institutions and crossing over to the individual investor. We strive to make sure your interests become our interests.

About Altigo

Altigo is the leading open network alts subscription technology used by a community of 300+ sponsors, broker-dealers, and RIA firms. The platform enables secure electronic alternative investment transactions between asset managers, wealth advisors, custodians, and transfer agents. With over 11,000 alts subscriptions completed on the platform since its debut in mid-2019, Altigo’s adoption reflects the valuable benefits it provides to reps and advisors including diverse product offerings, nearly error-free paperwork, and lightning-fast order entry. Altigo’s team of experienced professionals is committed to client experience, adding new features on a regular basis and helping its ever-expanding client base streamline investment workflows and eliminate reliance on outdated paper subscriptions and snail mail.

Gentry Mills Joins Altigo’s Growing Roster of Sponsors

February 15, 2023 | John Rickman | Altigo

Real estate investment firm Gentry Mills Capital has signed with Altigo, expanding the pool of asset managers on the platform and making investing in alts easier for the 200+ transactional broker-dealer and RIA firms that use Altigo. In partnering with us late last year, Gentry Mills had the distinction of being the 50th sponsor in 2022 to sign with Altigo.

After hearing about Altigo from their distribution partners, sponsors are discovering the benefits of investments being completed quickly and correctly the first time. Altigo integrates all aspects of alternative investment subscription and compliance, while significantly reducing not-in-good-order (NIGO) errors and other headaches. The platform will help Gentry Mills manage paperwork and make their real estate investment offerings available in a single, white-labeled portal.

“We’re excited about our partnership with Altigo and the positive impact it will have on our processes, especially in terms of making things more convenient for our clients who are financial advisors,” said Gentry Mills President Billy Glass. “Any tool that makes us more accessible or user friendly to our clients is a tool we want to utilize.”

Altigo allows asset managers to invite their distribution partners to their own branded portal on the platform to view available offerings, or to add their offerings to their partners’ portals. In either case, Altigo streamlines the alts investment process through the use of digital workflows and by bringing the process and all of its participants under one virtual “roof.”

Altigo Chief Revenue Officer Mat Dellorso said, “Altigo’s scalable subscription technology and compliance services for alternative investments are pillars supporting an overall mission to increase transparency, efficiency, and access to alternative investments for issuers and advisors. We welcome Gentry Mills to the platform and look forward to collaborating with their team on making their offerings easy to access and subscribe to.”

About Gentry Mills Capital

Gentry Mills Capital is a real estate investment firm whose purpose is to seek out, package, and provide quality commercial real estate investment opportunities. We have raised over a quarter of a billion in capital with over $1 billion in assets acquired and over $500 million in AUM. With a wealth of experience in the commercial real estate industry, our success is a result of our commitment to quality investment opportunities, transparency, and unsurpassed customer service.

About Altigo

Altigo is the leading open network alts subscription technology used by a community of 300+ sponsors, broker-dealers, and RIA firms. The platform enables secure electronic alternative investment transactions between asset managers, wealth advisors, custodians, and transfer agents.

With over 11,000 alts subscriptions completed on the platform since its debut in mid-2019, Altigo’s adoption reflects the valuable benefits it provides to reps and advisors including diverse product offerings, nearly error-free paperwork, and lightning-fast order entry.

Altigo’s team of experienced professionals is committed to client experience, adding new features on a regular basis and helping its ever-expanding client base streamline investment workflows and eliminate reliance on outdated paper subscriptions and snail mail.