Unlock the potential of your investment strategy with Delaware Statutory Trusts (DSTs). Whether you’re an individual investor or a financial advisor, DSTs offer a unique and flexible way to diversify your portfolio and maximize returns.

What is a Delaware Statutory Trust (DST)?

A Delaware Statutory Trust (DST) is a legal entity created under Delaware law that allows multiple investors to hold interests in real estate properties. DSTs are commonly used for 1031 exchanges, enabling investors to defer capital gains taxes while gaining access to professionally managed, income-producing properties.

Why Choose a DST?

1. Tax Deferral

One of the most significant benefits of investing in a DST is the ability to defer capital gains taxes through a 1031 exchange. This means you can reinvest the proceeds from the sale of a property into a DST without immediate tax liability.

2. Passive Income

By investing in a DST, you gain access to professionally managed real estate properties that generate passive income. This allows you to enjoy the benefits of real estate ownership without the headaches of property management.

3. Diversification

DSTs offer a diversified portfolio of real estate properties, reducing your risk exposure. You can invest in various property types, including commercial, residential, industrial, and retail properties, geographically spread across different locations.

4. Accessibility

DSTs lower the barrier to entry for high-quality real estate investments, allowing smaller investors to participate in large-scale properties they might otherwise be unable to afford.

5. Professional Management

With DSTs, you benefit from the expertise of experienced real estate professionals who handle all aspects of property management, from tenant relations to maintenance and financial reporting.

How Does A DST Investment Work?

Step 1: Identify Your Investment Goals

Determine your investment objectives, whether it’s tax deferral, passive income, diversification, or all of the above.

Step 2: Choose a DST Offering

Browse our selection of DST offerings, each carefully vetted and managed by industry experts.

Step 3: Invest

Invest in one or more DSTs that align with your goals. Our team will guide you through the process, ensuring a seamless transaction.

Step 4: Enjoy the Benefits

Sit back and enjoy the benefits of your investment, including regular income distributions and tax advantages.

Step 5: Monitor and Adjust

Our team provides ongoing support and performance updates, helping you make informed decisions about your investment strategy.

Frequently Asked Questions

1. How does a DST differ from other types of real estate investments?

DSTs allow multiple investors to share in the ownership of property, which is managed by trustees. This structure can provide access to larger, more diversified properties that individual investors may not be able to afford on their own.

2. What are the benefits of investing in a DST?

Investing in a DST offers several benefits, including passive income, potential tax advantages, diversification, and access to institutional-quality real estate. Additionally, DSTs can be used in 1031 exchange transactions to defer capital gains taxes.

3. Can I use a DST in a 1031 exchange?

Yes, DST investments are eligible for 1031 exchanges, allowing investors to defer capital gains taxes by reinvesting proceeds from the sale of one property into a DST.

4. Are there any risks associated with DST investments?

Like any investment, DSTs carry risks, including market risk, property performance risk, and lack of liquidity. Investors should thoroughly research and consider their risk tolerance before investing.

5. How can I invest in a DST?

Investors typically acquire interests in a DST through a private placement offering, which requires working with a sponsor or trustee who coordinates the investment.

6. Are there any limitations on the number of investors in a DST?

Yes, DSTs are limited to a maximum of 499 investors per trust in order to maintain compliance with securities regulations and tax laws.

7. What types of properties are typically held in a DST?

DSTs commonly hold commercial real estate properties including office buildings, shopping centers, apartment complexes, and self-storage facilities. These properties are chosen for their potential to generate stable income.

8. How is income distributed to investors in a DST?

Income generated from the properties held in a DST is typically distributed to investors monthly or quarterly, depending on the terms of the trust agreement.

9. Can I sell my interest in a DST?

Selling interests in a DST can be challenging due to the lack of a secondary market. Investors should be prepared for a long-term investment and consider the illiquidity risk when investing in a DST.

10. What are the tax benefits of a DST investment?

DST investments can offer several tax benefits, including the ability to defer capital gains taxes through a 1031 exchange. Additionally, depreciation and other tax deductions associated with the property’s operational expenses can be passed through to investors, potentially reducing taxable income.

11. How is the management of a DST structured?

Management of a DST is carried out by a trustee or a sponsor, who handles the day-to-day operations, including property management, leasing, and maintenance. Investors typically have no active role in the management, making DSTs a passive investment.

12. How long does a DST investment typically last?

The holding period for a DST investment can vary, but it typically ranges from five to ten years. The duration depends on the investment strategy and market conditions. The trustee or sponsor will ultimately decide when to sell the property, aiming to maximize returns for investors.

13. Can I leverage (borrow against) my interest in a DST?

Generally, investors cannot directly leverage their interest in a DST. The trust itself may obtain financing to acquire properties, but individual investors are not able to take out loans using their DST interests as collateral.

14. How do I receive updates on the performance of my DST investment?

Investors usually receive regular updates from the trustee or sponsor, detailing the performance of the properties, income distributions, and any significant events affecting the trust. These updates can typically be accessed through investor portals, emails, or periodic reports.

15. Are DST investments suitable for retirement accounts?

Yes, DST investments can be incorporated into retirement accounts such as IRAs and 401(k)s. Including DSTs in a retirement portfolio can provide diversification and potential for passive income, although investors should consult with their financial advisor or retirement plan custodian to ensure compliance with relevant regulations and suitability for their individual retirement goals.

Summary of Delaware Statutory Trusts (DSTs)

About Delaware Statutory Trust (DST)

A Delaware Statutory Trust (DST) is a legal entity created under Delaware law for property ownership by multiple investors. It is often used in real estate investments where investors hold fractional interests in properties. 

Differences from Other Investments 

DSTs allow shared ownership and are managed by trustees, providing access to larger properties. This helps individual investors participate in more diversified and higher-quality real estate. 

Investment Benefits 

Investing in a DST offers passive income, potential tax advantages, and diversification. It also supports 1031 exchange transactions, which can defer capital gains taxes. Additionally, DSTs can provide more predictable and stable income streams compared to direct property ownership. Due to professional management by experienced trustees, investors benefit from a hands-off approach to property management. This allows individuals to enjoy the economic advantages of real estate without the associated complexities and responsibilities.

1031 Exchange Eligibility 

DST investments qualify for 1031 exchanges, enabling capital gains tax deferral. This facilitates reinvesting proceeds from property sales into a DST. 

Investment Risks 

DSTs carry risks such as market risk and lack of liquidity. Investors must assess their risk tolerance and thoroughly research before investing. 

Investment Process 

Investments in DSTs usually occur through private placement offerings. Investors work with sponsors or trustees to coordinate the investment. The process typically starts with an investor identifying a suitable DST sponsor, followed by a detailed review of the offering memorandum and due diligence materials provided by the sponsor. After this evaluation, qualified investors purchase a beneficial interest in the trust using funds earmarked for the investment. The sponsor then manages the property on behalf of the investors, handling all operational aspects and financial reporting.

Investor Limitations 

DSTs have a maximum limit of 499 investors to comply with regulations. This ensures adherence to securities laws and tax guidelines. 

Property Types 

Typical properties held in DSTs include commercial real estate like office buildings and apartment complexes. These properties are selected for stable income potential. 

Income Distribution 

DST income is generally distributed monthly or quarterly. The distribution schedule depends on the trust agreement terms. 

Selling Interests 

Selling DST interests is challenging due to a lack of a secondary market. Investors should consider DSTs as long-term, illiquid investments. Moreover, the process of selling an interest often involves complex legal requirements and potentially significant fees, which can further hamper liquidity. In some cases, investors may need to sell at a discount to attract buyers, making it crucial to thoroughly assess exit strategies before committing to a DST investment. Additionally, potential buyers are often limited to accredited investors, which further restricts the pool of potential purchasers.

Tax Benefits 

DST investments offer tax benefits like capital gains tax deferral through 1031 exchanges. Depreciation and operational expense deductions can reduce taxable income. Additionally, DSTs can help investors manage their tax liabilities by spreading out income across different tax years. This strategy can be particularly beneficial for high-net-worth individuals looking to optimize their tax situations while maintaining a diversified real estate portfolio.

Management Structure 

DSTs are managed by trustees or sponsors handling operations like property management. This structure makes DSTs a passive investment for investors. The trustees or sponsors take on responsibilities such as tenant relations, maintenance, and financial oversight, ensuring the property is well-managed for optimal performance. They also handle compliance with legal regulations and market standards, which can be complex and time-consuming for individual investors. Through professional management, investors benefit from the expertise and efficiencies that come with experienced property managers, further enhancing the potential for stable returns.

Investment Duration 

DST investments typically last five to ten years. The duration depends on the strategy and market conditions, with trustees aiming to maximize returns. 

Leveraging Interests 

Generally, investors cannot leverage their DST interests directly. The DST might obtain financing, but individual leveraging is not possible. This is a significant consideration for investors looking to enhance returns through leverage, as they must rely on the trust’s financing capabilities rather than their own. Additionally, the financial leverage utilized by the DST is carefully managed by the trustees or sponsors to ensure it aligns with the overall investment strategy and risk profile of the properties. As a result, the risk associated with leverage is effectively mitigated, providing a more stable investment environment for all participants.

Performance Updates 

Investors receive regular performance updates from trustees or sponsors. Updates include income distributions and significant events, accessed via investor portals or reports. This ensures investors remain informed about their investment and can make informed decisions regarding future investments.