Finding the Right DST Sponsor

Jeff Hertz:
The managers of the DST obviously are something you want to spend a significant amount of time researching and feeling comfortable with.

Wally Smith:
Well, what you said a moment ago about TICs having some element of control. With the DSTs you don’t have any control.

Jeff Hertz:
Correct.

Wally Smith:
So you better be comfortable with who that manager is.

Jeff Hertz:
The sponsor of the DST is of enormous importance. People tend to invest in what they know, and I’ve seen clients that say, well, I like a certain location or a certain asset class. But ultimately being comfortable with the sponsor and their ability to not only manage the property in good times, but obviously deal with issues that may arise further down the road.

Wally Smith:
Well, we look at any given time on the, I guess the Mountain Dell report, it’ll show 40, 50 sponsors, and there are, I don’t know, probably eight or 10 of them who we do most of our business with. And it’s because they know what they’re doing and we’ve seen how they weathered the storm in 2008 or the lockdowns that were put on us. And the rest of them, they’re probably half a dozen of them I wouldn’t touch. Of course, we know too much about them, and the majority of the rest are probably great folks. They just don’t have a track record yet. And I want to know before we put life savings in it, how have the companies done during good times, bad? Some of them during COVID had their best years ever.

Jeff Hertz:
And generally speaking of DSTs, there is no preset time that you’re going to be in the DST. Generally it’s going to be at least two to three years, but I’ve seen DSTs that ran as long as five to 10 years. So you want to make sure that you’re working with a sponsor that has been in business for a significant amount of time.