DST

WHAT IS A DELAWARE STATUTORY TRUST?

• A DST is a separate legal entity formed as a trust under Delaware law. When properly
  structured, the DST will be classified as a grantor trust for federal income tax purposes and, as a
  result, the purchaser of a beneficial interest in the trust will acquire an undivided interest in the
  asset(s) held by the DST. An investor can use a beneficial interest in a DST as replacement
  property in a 1031 or 1033 exchange.
• A DST investor must be an “Accredited Investor” which means $1 million of net worth exclusive
  of primary home ownership, or $200,000 of income ($300,000 with a spouse).
• The DST is structured so that each beneficiary (investor) owns a beneficial interest in the trust.
  The managing Trustee of the DST is either the Sponsor or an affiliate of the Sponsor.
• The DST holds title to 100% of the interest in the property.
• Tax reporting is done on a Schedule E utilizing property operating information provided by the
  sponsor. The IRS issued Revenue Ruling 2004-86 that set forth parameters a DST must meet in
  order to be viewed as a grantor trust.

BENEFITS OF USING A DST FOR 1031 OR 1033 REPLACEMENT PROPERTY

• The DST is the single owner and borrower. Accordingly, the lender only underwrites the DST, not
  each individual investor. Therefore, the loan is non-recourse to the investor and not reportable
  on any personal financial statement.
• The transfer of a DST ownership interest to an investor can be easier and quicker since there is
  generally less paperwork and due diligence time required as compared with buying a property
  directly.
• A typical minimum investment of $100,000 allows more flexibility for investors to 1) diversify
  into several replacement properties and 2) to invest the exact amount needed to complete the
  exchange.
• An investment in a DST is a passive investment with professional management in place for the
  DST and for the property. This relieves the owner/investor of the headaches and responsibilities
  associated with property management.
• Many DSTs own large institutional grade properties or a portfolio of properties to reduce risk
  and provide economies of scale. Different property types are generally available, including net
  lease with major credit tenants, multifamily, medical office buildings, industrial, other.
• The DST is sold as a security with several layers of due diligence performed, including third party
  reports.
• Investors can complete a 1031 exchange after the DST property is sold.
• A DST owner’s estate is likely to benefit from a significant marketability valuation discount.

POTENTIAL DRAWBACKS OF DST OWNERSHIP (Includes, but is not limited to:)

• A DST investment is an investment in real estate; and any real estate investment is subject to
  market value, rental income fluctuations, government regulations and other factors.
• A DST owner does not have management control over day to day operations.
• The investment in a DST is illiquid and no public market is likely to exist. While the sponsor may
  have an exit plan, there are no assurances that such plan will be realized.