Delaware Statutory Trust Offerings
Property Type and Debt Structures
The Delaware Statutory Trust Marketplace
The Delaware Statutory Trust (DST) market has expanded greatly over the past few decades.
As the United States population has aged, real estate owners seeking to shed management responsibilities have been drawn to the professional management and high-quality properties a DST can offer.
As such, there is a robust market for Delaware Statutory Trust's with a wide-range of selection regarding property type, tenant, geography, debt level and more. This diversity allows investors to choose offerings that most closely match their exchange requirements and personal preference.
Source: Mountain Dell Consulting Market Report Securitized 1031 Industry as of September 20, 2019
Rental and Homeowner vacancy rates are at or near 20 year lows, with strong demand fueling continued multifamily growth.
Source: US Census: Quarterly Residential Vacancies and Homeownership, Q3 2020
Common amenities of multifamily include:
Resort style pools
Health and wellness fitness centers
Executive business centers
Picnic areas with grills
Car care centers
Complimentary coffee bars
Pet-friendly outdoor facilities
Under a triple net lease (NNN) structure, the tenant is responsible for real estate taxes, building insurance and maintenance, in addition to any normal fees and rent payments. This provides for minimal landlord responsibilities.
New leases typically have longer terms of 10-25 years, with property prices and lease terms having a high correlation to the credit quality of the tenant.
Net Lease Retail can offer prominent, well-known brand names in high-traffic locations
Medical Office properties have benefited from an aging population and expanding healthcare field
Other Important Sectors
Grocery Anchored Shopping
Demand for self-storage comes from the reduction in home ownership and subsequent increase in apartment rentals.
Renter ship is also driven by people on the move that need temporary space. Both demographics continue to use the properties in good or bad economies.
Grocery-anchored shopping centers are typically less cyclical than other real estate sectors based on the non-discretionary nature of purchases made by consumers.
The anchor of the center is usually on a longer-term lease and ideally, produces 40 to 60 percent of the property’s net operating income.
A popular form of industrial ownership has been distribution centers, where facilities are mission-critical to their respective companies.
Industrial properties often have significant customization and expense outlays by the tenant, with long-term leases.
For an investor to defer taxes fully, one requirement is that all proceeds from the sale of a relinquished property must be reinvested in replacement property. In addition, an investor must assume an equal or greater amount of debt than that which was held on the relinquished property (or if reducing debt, an equal or greater amount of new equity must offset the reduction).
DST debt is non-recourse to its investors as it is held at the trust level and linked to their specific properties. Depending on the investors' debt level requirements and preference, there are a variety of Delaware Statutory Trusts from which to choose.
Zero leverage DST's offer investors the opportunity to participate in all cash acquisitions.
As there is no mortgage debt, they are not subject to the risks of debt servicing, refinancing, or foreclosure.
A majority of DST's consist of leverage in the 45-60% loan-to-offering range.
This moderate level has been a fit for most investors needs regarding debt requirements and desired level of risk.
Investors with a highly levered property can utilize offerings with debt that exceeds 60%.
Many of these programs retain a significant portion of rental income to aggressively pay down debt.