Institutional Grade DSTs vs. Privately Owned DST Investments: Pros and Cons

Wally Smith:
Okay. More institutional players seem to be getting into the space. I think we both saw a news clip this morning about one of the big companies opening up one of the $3 billion REIT that they were going to be doing. Can you talk about that a little bit? The difference between Ma and Pa Kettle investing in a DST and then the role that these huge institutional players play?

Jeff Hertz:
Sure. Again, there are a lot of people that for better or worse want to control their own destiny, completely buy and sell their own assets, do their own 1031 exchanges. That’s great. That is completely understandable that they would want to be able to push the button when they want to sell the asset. Where again, people sometimes have run into situations is maybe a spouse dies and the other spouse has not been involved in the management of the property, the kids, so forth. This transition into not only securitized investments like DSTs, but larger institutional players, we’ve seen that played out over a couple other areas like non-listed REITs and other real estate solutions.

I think it’s a reflection of these companies have seen that the maturation of this space and seen that there are larger companies coming into the space. That’s good from a standpoint of having for the advisors to have more options for their clients. Generally speaking, when institutions come into these types of spaces, it drives down fees, because if I’m a multi-billion dollar corporation that’s been in business for 100 years, I don’t need to make all my money on a specific product. It’s more about offering those solutions. But maybe the con to that, just play devil’s advocate, is, does a large institution understand the liquidity needs of an 85 year old who is living on a fixed income? So you need to be cautious that you’re working with companies who their goals and their strategy aligns with your own.