Delaware Statutory Trusts

The DST is a turnkey solution with the trust already owning the property with financing in place. You can generally close within 3-5 business days.

The DSTs are professionally managed and the investor has no management responsibility. Eventually, even hands-on investors age out of active management as they choose to focus their time and energy more meaningfully elsewhere.

All DST’s are structured to pay monthly distributions and all the tax shelter benefits of real estate ownership are passed to the investor.

DSTs allow exchangers to specify the amount of their fractional ownership investment, allowing for the flexibility to build diversified portfolios of multiple DSTs. Some DSTs today even own multiple properties resulting in a ‘mini REIT-like’’ intrinsic diversity.

Some DSTs are part of an UPREIT plan where the sponsor who created the DST offers to buy up the exchanger’s interest in the DST in exchange for operating units of an affiliated REIT in another tax deferred exchange under Section 721 of the Internal Revenue Code. From that point on, the exchanger can liquidate any portion of his REIT shares on their own time schedule. For more on UPREITs, click here.

DST’s generally hold institutional quality properties that were once the exclusive province of large pension funds, insurance companies, hedge funds and REITS. They cover the real estate spectrum from multifamily residential developments, to retail, hospitality, industrial, office, storage, and more.

If an exchanger needs to replace debt, most DST’s have in-place debt making it easy to avoid taxable mortgage boot. Further, the debt is nonrecourse, meaning that the lender cannot look to the exchanger for repayment of that debt.

DST’s pay regular monthly distributions.

DSTs are generally stabilized investments meaning that there is no developmental or lease-up risk. Most of the risks of professional managed stabilized properties is macro economically related and less related to intrinsic aspects of the property.

Because DST’s are securitized investments, they are subjected to next-level degrees of due diligence. They are subjected to much more scrutiny than an ordinary real estate deal.

In addition to being used as the primary replacement property vehicle, DSTs can also be used as a backup strategy for exchangers seeking to acquire private real estate. They can also be used to avoid residual taxable ‘boot’ issues because of their investment flexibility. So even if you have a private replacement property in mind, you can still benefit from DST’s as an integral part of your tax deferral strategy.

DSTs can offer numerous estate planning benefits from ease of splitting fractional interests among heirs to certain asset protection benefits.

Beneficiaries of DSTs relinquish control over management decisions. The ‘’sponsor’’ or its affiliate is responsible for day-to-day decisions as well as when to liquidate the investment.

Fees may be higher than direct purchase by the whole. Its ‘more
expensive to create a securitized offering that allows for fractional interest investments. Also, professional management adds another layer of cost over active management.

DSTs are illiquid investments, and most DSTs are targeting a 7-10 year holding period. There are some offerings targeting A shorter holding period of 3-5 years, but they are less common. While it is possible to sell your interest earlier, there is no formal secondary market, so it is likely to take time and sell for a discount to fair value.

DSTs are sold pursuant to an exemption to the registration rules under the SEC. Accordingly, that exemption requires that all investors be accredited investors demonstrating at least $1 million net worth or $200,000 in annual income.