Delaware Statutory Trust

A Seamless & Passive 1031 Solution

Delaware Statutory Trusts (DSTs) offer a compelling avenue for investors seeking to engage in real estate without the active management responsibilities typically associated with property ownership. DSTs are legal entities that enable investors to pool their resources to acquire fractional interests in large-scale, professionally managed real estate assets.


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Highly-vetted investments from institutional DST managers

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Build a diversified portfolio of DST properties using the industries top investment managers. Our platform allows you to diversify by property type, geography and across the industry's top investment managers.

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The 1031 Exchange Timeline

You only have 45 days to find your 1031 replacement property. Between the due diligence, the financing, and a highly competitive market, identifying and securing a replacement property in a short window of time can be difficult.

Day 1

Close the sale of your current property

Day 45

Identify replacement properties

Day 180

Complete the exchange

Explore the Benefits

Here are some potential advantages to consider when exploring DST investments.

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DST’s are now a mainstream alternative for 1031 investors

Passive 1031-eligible investments initially relied on Tenant in Common (TIC) ownership structures. However, over the last 25 years, investment sponsors have increasingly favored the Delaware Statutory Trust (DST) structure. The DST offers centralized decision-making and streamlined management, making it the preferred vehicle for investors.

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Understand the Risks

Here are some of the potential risks associated with investing in DSTs. 
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Difficult to Sell

There is no public market for DSTs, and one is unlikely to develop. Typical holding periods are 5 to 10 years, so you should be comfortable with a highly illiquid investment.

Fees and expenses

The DST structure includes various fees and expenses. As with any other investment, you should understand all fees and expenses prior to making your investment decision.

Lack of control

DSTs are professionally managed assets, and sponsors make all day-to-day and key operational decisions. Individual investors have no influence in the decision making process.

Subject to market risks

Like any real estate investment, DST cash flow levels and property values are subject to market, economic, tenant, and location risks. Projected cash flows are not guaranteed and can fluctuate over time.

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Frequently Asked Questions

Delaware Statutory Trust (DST) is a unique real estate investment vehicle that allows a group of individual investors to purchase fractional interests in large commercial real estate assets. These assets are typically beyond the financial reach of solo investors. Here’s how DSTs work and why they are relevant for real estate investors:

Formation and Sponsors:

  • DSTs are created under Delaware trust law.
  • Real estate companies (sponsors) form DSTs by identifying and acquiring assets using their own capital.
  • The sponsor then opens an offering period, and individual investors purchase fractional shares of the DST.
  • DST beneficiaries are passive investors, providing equity capital.

DST History:

  • DSTs were established in 1988 with the passing of the Delaware Business Trust Act (later renamed the Delaware Statutory Trust Act in 2002).

Ownership Structure:

  • DST investors, also known as beneficiaries, do not directly own physical real estate. Instead, they own shares of a trust specifically formed to be the legal owner of the underlying properties held within the trust.
  • The legal separation between the trust and the pool of DST investors is crucial.

Yes, the IRS has approved Delaware Statutory Trust (DST) investments as like-kind property for 1031 exchanges. This approval allows investors to defer capital gains taxes by reinvesting the proceeds from the sale of appreciated real estate into DSTs. The key consideration is that the IRS treats each investor’s beneficial interests in a DST as direct property ownership, making it eligible for 1031 exchanges both when acquiring and selling the DST. However, it is critical to

understand that if the DST sponsor fails to comply with IRS guidelines and requirements outlined in Revenue Ruling 2004-86 issued in 2004, the IRS may disqualify exchanges made in deficient structures. It is important to conduct diligence on each sponsor, their structure, review tax opinions related to each DST offering and talk with your tax and legal advisors prior to investing.

Filing taxes for Delaware Statutory Trust (DST) investments involves several considerations. Let’s break down the key aspects:

Beneficial Interest Ownership:

  • DST investors acquire a fractional interest in the trust, making them “beneficial interest owners.”
  • The IRS treats DSTs as “grantor trusts” disregarded for tax purposes.
  • Beneficial owners report their share of income, expenses, and other tax-related items.

Income & Expenses Reporting:

  • Instead of receiving Schedule K-1s or Form 1099s, DSTs issue grantor trust letters to beneficial owners.
  • These letters detail the investor’s share of rental income, expenses, and other financial information.
  • Beneficial owners report this information on IRS Schedule E or Form 1040, similar to reporting income from a single ownership rental property.

Phantom Income:

  • Sometimes, a DST’s taxable rental income exceeds the actual distributions received due to “phantom income.”
  • Phantom income can occur from rents received in advance or other factors.
  • Investors should be aware of this when reporting income.

1031 Exchanges:

  • DSTs qualify as like-kind replacement property for Section 1031 exchanges.
  • Investors can defer capital gains taxes by reinvesting proceeds from the sale of real estate into DSTs.

Location and Tax Liability:

Remember that consulting with a qualified CPA or tax professional is essential to navigate DST tax obligations effectively.

In the Delaware Statutory Trust (DST) investment landscape, a broker-dealer plays a crucial role in marketing and selling DST offerings to investors. Let’s delve into the specifics:

DST Broker-Dealer:

  • A DST broker-dealer is a securities company that specializes in selling investments related to DSTs.
  • These broker-dealers collaborate with DST sponsors to market and distribute DST offerings to potential investors.
  • To operate legally, the Securities and Exchange Commission (SEC) must license DST broker-dealers.

Due Diligence and Analysis:

Registered Representatives:

  • Broker-dealers typically have a group of registered representatives who hold securities licenses with the broker-dealer.
  • These representatives act as intermediaries between the broker-dealer and individual investors.
  • They provide information, answer questions, and facilitate the investment process for clients interested in DSTs.

In summary, DST broker-dealers bridge the gap between DST sponsors and investors, ensuring that potential investors receive accurate information and have access to DST investment opportunities. Their due diligence helps investors make informed decisions about participating in DST offerings.

When evaluating potential parties for Delaware Statutory Trust (DST) investments, ensuring their reputation and trustworthiness is crucial. Here are some essential steps to help you identify reputable DST sponsors and advisors:

Research the DST Sponsor:

Check for Transparency:

Avoid Conflicts of Interest:

  • Be cautious of sponsor-affiliated advisors who may prioritize specific deals or offerings from a single sponsor.
  • Independent advisors (not affiliated with a specific sponsor) may provide more objective advice.
  • Ask whether the advisor offers deals from multiple sponsors or just one. Ensure they act in your best interest3.

Due Diligence on Advisors:

References and Background Checks:

Remember that due diligence is essential when choosing reputable parties for DST investments. Seek professional advice and thoroughly assess the sponsor’s and advisor’s qualifications before making investment decisions.

Assessing the quality of a Delaware Statutory Trust (DST) investment involves thorough analysis and consideration of several factors. Here are key steps to help you evaluate DST opportunities:

Property Quality and Location:

  • Examine the underlying real estate property held by the DST. Consider factors such as location, property type (e.g., office, retail, multifamily), and market demand.
  • A well-located property in a strong market with stable or growing rental income is generally preferable.

Sponsor Reputation and Track Record:

  • Research the DST sponsor’s history and experience. Look for sponsors with a successful track record in managing DSTs.
  • Consider their ability to acquire, manage, and exit properties effectively.

Financial Performance:

  • Review financial statements, including income and expense reports provided by the sponsor.
  • Assess the property’s historical performance, projected cash flow, and potential for appreciation.
  • Evaluate the stability of rental income and any potential risks (e.g., lease expirations, market fluctuations).

Tenant Quality and Leases:

  • Understand the tenant mix. Are there creditworthy tenants with long-term leases?
  • Evaluate lease terms, rent escalations, and tenant stability.
  • Vacancy rates and tenant turnover can impact cash flow.

Exit Strategy:

  • Consider the sponsor’s exit plan. How will the property be sold or refinanced?
  • Understand the timeline for potential liquidity events.
  • DSTs typically have a finite holding period (often 5 to 10 years).

Tax Implications:

  • Consult with a tax advisor to understand the tax benefits and implications of DST investments.
  • DSTs are commonly used for 1031 exchanges, allowing investors to defer capital gains taxes.

Risk Tolerance and Investment Goals:

  • Assess your own risk tolerance and investment objectives.
  • DSTs are generally considered passive investments, so be prepared for limited control over property management decisions.

Due Diligence and Professional Advice:

  • Conduct thorough due diligence. Read offering documents, legal agreements, and sponsor materials.
  • Seek advice from professionals, including real estate attorneys, CPAs, and financial advisors.

Remember that each investor’s situation is unique, and what constitutes a quality DST investment may vary based on individual goals and preferences. Always make informed decisions and seek professional guidance.

The monthly cash flow from Delaware Statutory Trust (DST) investments is not guaranteed. Here’s why:

Passive Investment Structure:

  • DSTs are typically structured as passive investments.
  • Investors contribute capital to the DST but do not actively manage the property.
  • Cash flow depends on the performance of the underlying real estate asset.

Rental Income Variability:

  • DSTs primarily generate cash flow from rental income (e.g., from commercial properties, apartment complexes, etc.).
  • Rental income can fluctuate due to factors such as vacancies, lease renewals, and market conditions.
  • If tenants vacate or lease rates decrease, it directly impacts the cash flow.

Property-Specific Risks:

  • Each DST property has its own unique risks.
  • Factors like location, tenant quality, property management, and market trends affect cash flow.
  • Unexpected expenses (e.g., repairs, maintenance) can reduce available cash flow.

Market Conditions and Economic Cycles:

  • Economic cycles impact real estate markets.
  • During economic downturns, rental demand may decrease, affecting cash flow.
  • Conversely, strong market conditions can lead to stable or increasing cash flow.

Loan Payments and Debt Service:

  • DSTs often use financing (mortgages) to acquire properties.
  • Loan payments (debt service) reduce available cash flow.
  • Investors receive their share of cash flow after deducting debt payments.

Distribution Timing:

  • DSTs distribute cash flow periodically (e.g., monthly or quarterly).
  • The timing and amount of distributions depend on property performance and lease terms.

Risk Disclosure:

  • DST offering documents provide detailed risk disclosures.
  • Investors should carefully review these documents before investing.

In summary, while DSTs offer tax benefits and passive ownership, cash flow is subject to various factors. It is essential to assess each DST opportunity thoroughly and understand the associated risks. Consult with financial professionals to make informed investment decisions. 

The Debt Service Coverage Ratio (DSCR) is a critical metric when evaluating an investment in a Delaware Statutory Trust (DST) property with an associated loan. Let us explore why it matters:

Definition of DSCR:

    • The DSCR measures the property’s ability to cover its debt obligations (loan payments) using its net operating income (NOI).

Importance of DSCR:

  • Risk Assessment: A high DSCR indicates that the property generates sufficient income to cover its debt payments comfortably. Conversely, a low DSCR suggests higher risk.
  • Lender Requirements: Lenders often require a minimum DSCR to approve a loan. If the property’s DSCR falls below their threshold, financing may be denied.
  • Investor Protection: A healthy DSCR provides a buffer against unexpected expenses or fluctuations in rental income. It safeguards investors from default risk.


    • A DSCR of 1.0 means the NOI exactly covers debt payments. Ideally, investors prefer a DSCR above 1.2 or 1.25.
    • A DSCR below 1.0 indicates insufficient income to cover debt, which is risky.
    • Higher DSCR values indicate stronger financial health.


  • Conservative Approach: Some investors aim for a higher DSCR to mitigate risk. They seek properties with substantial NOI relative to debt payments
  • Property-Specific Factors: Consider the property type, location, and market conditions. Different property types may have varying acceptable DSCR thresholds.

Due Diligence:

    • When evaluating a DST investment, review the sponsor’s projected DSCR for the property.
    • Understand how the sponsor calculated NOI and debt service.
    • Assess the impact of potential changes (e.g., vacancies, rent adjustments) on the DSCR.
  1. In summary, a healthy DSCR is essential for the financial stability of a DST investment. It ensures that the property generates enough income to meet its debt obligations and provides confidence to both investors and lenders.


Broker Check is a valuable tool provided by the Financial Industry Regulatory Authority (FINRA) that allows investors to research the professional backgrounds of investment professionals, brokerage firms, and investment adviser firms. Here is why it is crucial to use BrokerCheck:

Transparency and Informed Decisions:

Investment Professional Histories:

Barred Brokers:

In summary, BrokerCheck empowers investors to make informed decisions by providing insights into the backgrounds and qualifications of financial professionals. It is a crucial step in vetting potential advisors and safeguarding your investments.

Delaware Statutory Trusts (DSTs) come with various fees and expenses. As an investor, it’s essential to understand these costs before considering a DST investment. Here are some common fees associated with DSTs:
  1. Initial Fees: These cover the setup and administrative costs of the DST. They may include legal fees, due diligence expenses, and other upfront charges.
  2. Closing Costs: Similar to traditional real estate transactions, DSTs involve closing costs. These include escrow fees, title charges, and other expenses related to finalizing the investment.
  3. Property Management Fees: DSTs typically hire professional property management companies to handle day-to-day operations. Investors pay fees for these services, which cover tasks like tenant management, maintenance, and repairs.
  4. Sales Commissions: When you invest in a DST, the sponsor or broker may charge a sales commission. This fee compensates them for facilitating the investment.
  5. Other Expenses: Depending on the specific DST, there may be additional costs, such as appraisals, environmental reports, and property condition assessments

Download Our DST Guide

Inside you’ll find a comprehensive overview of the 1031 exchange DST process, risks, and benefits so that you know what to expect every step of the way.

Do you Still have questions?

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We’ll talk through your circumstances, your goals, and your questions so that you can make the most informed decisions. Fill out the form below or give us a call, and you’ll hear back from us within 1 business day.

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