What is a DST? What Kind of Properties Can be in a DST?

Wallace:
You know, let’s go over some real basics. Describe what is a Delaware Statutory Trust. Pretty basic question.

Brandon:
Well, yeah. So, I mean, it’s essentially a wrapper or a type of legal entity that’s established in the state of Delaware. In our context, the trust holds title to the underlying property or properties and investors are beneficiaries of the trust. They will be entitled to the revenues of the trust and ultimately the assets when the trust terminates. I guess the reason we care about this, the reason why we’re having this conversation, is because the IRS has blessed the DST structure for purposes of a Section 1031 exchange, meaning that the beneficiaries of the trust will be deemed to own an undivided interest in the trust held real estate and that allows for like kind exchange under the Internal Revenue Code, so investors who own real estate and want to exchange it for another real estate interest and defer taxes can use a syndicated DST investment to do so.

Wallace:
So what kind of … What’s the range of products that you see going in? I mean, certainly apartment buildings, warehouses, that kind of thing. Are there any unusual assets that you see in a DST structure?

Brandon:
Yeah, I think some kind of real estate asset classes work better in a DST structure than others, but as you mentioned, we see all kinds. The major asset class right now is multifamily, it makes up about half the market in part, because the market believes in the multifamily thesis over the long term, but we see plenty-

Wallace:
People have to live somewhere.

Brandon:
That’s true, yep. We see plenty of net lease retail, industrial office, self storage. We are seeing hospitality come back into this space after being on the sidelines for a couple years, for obvious reasons. Some of the more esoteric ones that you might be asking about, we’re seeing some sub-asset classes that are emerging, like manufactured housing communities, student housing, senior living. Those are all offshoots of multifamily. We’re seeing life sciences as sort of a sub-asset class of industrial. I wouldn’t be surprised if someday we see telecommunications or cell phone antenna towers as part of these structures.

Wallace:
You see those in the alts, that’s for sure.

Brandon:
Yeah, and I mean, all you technically need is an interest in real estate and I would say that any property that has stable, positive cash flow and does not require major structural improvements would likely be a good candidate for a DST program.

Wallace:
How about, I don’t know, mineral assets, oil, and gas, that kind of thing? Do you see energy properties being appropriate?

Brandon:
We do, and there is sort of a limited sliver of the industry dedicated to that kind of underlying asset.