Glossary

A Delaware Statutory Trust (DST) is a legal trust that owns one or more income-producing properties, and investors buy a beneficial interest in it. An interest in a DST is generally treated as an interest in real estate for a 1031 exchange, so it can qualify as replacement property. DSTs offer passive, professionally managed ownership, which is why they are often used by owners who no longer want to manage property themselves.

Key Features

• 1031-eligible: Investors can use a DST interest as primary or backup replacement property within the 45-day identification and 180-day exchange deadlines.
• Already structured: DST offerings are already structured, which can make them easier to close within the exchange period.
• Passive ownership: The sponsor manages the property, and investors usually receive a grantor trust statement of income and expenses.
• Exit options: At the end of a DST’s hold, a property may be sold for cash, the proceeds may go into another 1031 exchange, or, in some offerings, the property may be contributed to a REIT in an UPREIT.

Considerations

DST offerings are available only to accredited investors, they can fill before you invest, and each carries its own risks, including illiquidity and the potential loss of principal. The gain is deferred, not eliminated, and the transaction must follow standard 1031 exchange rules and deadlines.

To learn more, see how SREI Group approaches DST investments, or find your 1031 exchange deadlines.