Overview
Lone Star Mineral & Royalty Fund I holds perpetual royalty interests across producing Permian Basin acreage. Because the IRS treats these interests as real property, a 1031 exchange can roll into the fund and keep the gain deferred, an option for investors who cannot find or do not want more buildings.
Royalty owners take a share of gross production revenue before any cost. The operator drills and runs the wells and bears the risk. Income arrives monthly, roughly 15% sheltered by percentage depletion, and moves with production and commodity prices.
Gallery
Highlights
- Perpetual mineral interests qualify as 1031 real property.
- No drilling, operating costs, or capital calls to the owner.
- Roughly 15% of income sheltered by percentage depletion.
- Can absorb leftover exchange proceeds to avoid cash boot.
Projected Annual Distribution
Illustrative distribution reflecting natural production decline; income falls over time as wells deplete unless the fund acquires new interests. Not a forecast.
Benchmark Analysis
| Metric | This Offering | Peer Average |
|---|---|---|
| Year 1 yield | 8.5% | 7.6% |
| Average yield (hold) | 7.1% | 6.4% |
| Production trend | Declining | Declining |
Compared to the average diversified royalty fund in the marketplace. Illustrative.
Features
Offering Details
| Offering type | Oil & Gas · 1031 Exchange |
|---|---|
| Asset | Mineral & Royalty Interests · Permian Basin |
| Sponsor | Baker Real Assets |
| Current yield | 8.5%, paid monthly |
| Minimum investment | $25,000 |
| Leverage | None |
| Tax treatment | Portfolio income; ~15% depletion allowance |
| Offering exemption | Reg D 506(c) · accredited only |
Documents
Analyst Notes
A debt-free income sleeve for a 1031 exchange, best sized as a diversifier rather than a core position given commodity exposure.
Pros. No leverage, monthly income, depletion-sheltered distributions, and a genuine like-kind option when replacement real estate is scarce or overpriced.
Cons. Distributions track oil and gas prices, production declines over time, and there is no secondary market for the interests.
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