Delaware Statutory Trust

DST

DST Ownership and Investment Structure

A More Passive Approach to Real Estate Ownership

An educational overview of a professionally managed real estate ownership structure that may suit certain investors and exchange strategies.

A Delaware Statutory Trust, or DST, can allow investors to acquire a beneficial interest in professionally managed real estate without assuming day-to-day property-management responsibilities. The trust owns the real estate, while investors hold fractional beneficial interests and may receive distributions based on property performance.

DSTs and 1031 Tax-Deferred Exchanges

Potential Role in a 1031 Exchange

Certain properly structured DST interests may qualify as replacement property in a Section 1031 exchange under IRS Revenue Ruling 2004-86, provided the investor and transaction satisfy all applicable requirements. Eligibility is not automatic, and investors should rely on their qualified intermediary, tax advisor and legal counsel.

Legal Framework, Tax Treatment, and Operational Limitations

What Investors Should Understand

DST interests are generally passive, illiquid investments with limited investor control. The sponsor or trustee makes operating, financing and disposition decisions, and the structure may restrict refinancing, renegotiating leases, raising additional capital or reinvesting sale proceeds. Results depend on the sponsor, property, tenants, financing and market conditions.

NNN Investment Advisors provides commercial real estate education and advisory support only. DST interests are typically offered as private-placement securities through appropriately licensed parties, may be available only to qualifying investors and involve substantial risk. We do not offer, sell or recommend DST securities.

Discuss Real Estate Strategy

DST Considerations

Key Characteristics and Considerations

DSTs can offer access to larger professionally managed properties, but their potential benefits must be weighed against limited liquidity, limited control, fees and property-specific risk.

Passive Ownership Structure

Investors participate through beneficial interests while the sponsor or trustee directs property operations, financing and disposition decisions.

Professional Asset Management

A sponsor or designated manager typically oversees leasing, reporting, property management and other operational responsibilities.

Potential 1031 Eligibility

A properly structured interest may qualify as replacement property in a Section 1031 exchange when all investor and transaction requirements are met.

Fractional Interest in Larger Assets

Fractional ownership may provide access to properties or portfolios that an individual investor might not acquire independently.

Limited Day-to-Day Control

Investors generally have little or no authority over leasing, financing, capital improvements, refinancing or the timing of a sale.

Illiquidity and Holding Period

DST interests are not publicly traded and may be difficult or impossible to sell before the sponsor disposes of the underlying property.

Sponsor and Property Risk

Performance depends on the sponsor, property condition, tenant credit, lease terms, location and broader real estate market.

Fees and Financing Risk

Offering, management, financing and disposition costs can affect returns, while leverage may amplify both gains and losses.

No Guaranteed Income or Exit

Distributions, appreciation, tax treatment and the timing or value of an eventual sale are not guaranteed. Investors may lose principal.

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