Updated: November 2023
Delaware Statutory Trust
A Delaware Statutory Trust (DST) is a legally recognized real estate investment trust (REIT) in which investors can purchase fractional ownership in property as beneficiaries of the trust.
Internal Revenue Ruling 2004-86 declared that DST’s are like-kind and therefore qualify as 1031 exchange property. A 1031 exchange allows real estate investors to swap one investment for another and defer capital gains taxes.
Ownership of real property as a beneficiary of the DST offers investors the same benefits and risks as direct ownership without the management responsibility since a trustee is appointed to manage the property on behalf of the investors. Since the IRS has declared ownership of real property via a Delaware Statutory Trust to be like kind property for purposes of 1031 exchange, a much broader and diverse selection of investment property is now available.
PROs and CONs of Delaware Statutory Trusts
Pros:
- Qualify as like kind for 1031 Exchange purposes
- Capital Gains Deferral
- Passive Monthly Income
- Estate Planning Tool
- Professional Property Manager
- Prepackaged Offerings
- Efficient Form of Fractional Ownership
- Access to Multiple Property Types
Cons:
- Loss of Control
- Illiquidity- No Secondary Market
- Economic Risk Should Economy Fail
- Must be an Accredited Investor
- Potentially High Fees
Securities Regulators Warnings About Delaware Statutory Trusts
A DST investment is considered a Non-Conventional Investment (NCI), also known as an alternative investment . NASD Notice to Members 03-71 reminds members selling NCI’s of their obligations to conduct adequate due diligence, preform a reasonable suitability analysis, perform a customer specific suitability analysis , provide full and balanced disclosure of the risks and rewards and to train brokers regarding the features risks and suitability of these products.
Alternative Investments: These are assets that are not stocks, bonds or cash. Alternative investments generally fall within five categories: hedge funds, private capital, natural resources (oil and gas, energy), real estate (REITs) and infrastructure. They are typically less liquid that conventional investments, less regulated with higher fees and generally higher risk.
When making any recommendation a broker is required to make only ‘suitable recommendations taking into account the investors age, health, financial sophistication, financial wherewithal, risk tolerance and investment objectives.
Companies That Sponsor Delaware Statutory Trusts
There are many companies that sponsor Delaware Statutory Trusts, including these:
- AEI
- Black Creek Group
- Bluerock
- Cantor Fitzgerald
- Capital Square 1031
- Core
- Cove Capital
- Cunat Exchange
- ExchangeRIght
- Griffin Capital
- InCommercial Property Group
- Inland Private Capital Corporation
- LSC
- Nelson Partners
- NB Private Capital
- Nexpoint
- Passco
- REVA
- Valeo Groupe Americas
The Investment Loss Recovery Lawyers at Rex Securities Law Can Help You Recover Your Investment Losses
If you have suffered investment losses on and investment in a Delaware Statutory Trust or if you have questions about how your account has been handled by a financial advisor, contact us for a complimentary consultation with an experienced securities lawyer to learn how you may be able to recover damages through FINRA arbitration.
The Financial Industry Regulatory Authority (FINRA) is the agency that licenses and regulates stockbrokers and brokerage firms. FINRA requires brokers and brokerage firms to report customer complaints and disputes as well as regulatory sanctions. In addition brokers are required to disclose certain financial matters such as personal bankruptcies, judgments and liens
With offices in Boca Raton, FL and Austin, TX, stockbroker fraud attorney Bob Rex provides representation to investors nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers, financial advisors, and broker dealers.
If you have questions about how your account has been handled, call (877) 224-3199 to speak with an experienced securities attorney at no cost to you.
Most cases are handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.
