Delaware Statutory Trusts (DST)
A Delaware Statutory Trust, or DST, is a type of trust formed for the purpose of conducting business on behalf of its owners. In the context of real estate and 1031 Exchanges, DSTs are formed to own and manage real estate on behalf of the owners of the trust. In 2004 the IRS issued a regulation which clarified that interest in a DST could be classified as like-kind property for the purpose of 1031 exchanges. As a result, DSTs have become a popular type of like-kind replacement property for investors looking for an investment that does not require as much hands-on management as direct ownership of real estate.
The kinds of properties typically owned by DSTs can vary, but are often focused on high value commerical properties such “Triple-Net” retail properties (Dollar General stores are a good example), senior care properties, student housing, and office buildings.
The advantages of buying into a DST include the ability to buy into large scale investments at lower dollar amounts, getting returns without direct management, and the ability to exchange into the investment.
Disadvantages include a loss of control for the investor, and difficulty getting out of the investment.