INVESTOR'S GUIDE
How DSTs May Help Diversify Your Real Estate Holdings
A short guide to Delaware Statutory Trusts (DSTs): how they let you trade one concentrated, actively managed property for shares in a professionally managed, diversified portfolio, without giving up your exchange.
THE DIVERSIFICATION PROBLEM
Most real estate portfolios aren't as diversified as they look
Real estate investors often own a single asset type, such as an apartment building, a rental home, or a small retail property leased to a single tenant, concentrated in one region. That's the same market cycle, over and over. This guide walks through how a Delaware Statutory Trust (DST) can let you roll your 1031 exchange proceeds into a professionally managed, multi-property portfolio instead.
- Why single-asset-type portfolios move in lockstep with one market cycle
- The five major commercial real estate sectors, and how differently each is performing right now
- What a DST actually is, and how it differs from a conventional 1031 exchange
- How a 1031 DST exchange works, from sale to purchase
- Five reasons investors consider identifying a DST for their exchange
WHY DIVERSIFICATION MATTERS
No single sector wins every cycle.
Five major commercial sectors, five different stories right now: a snapshot pulled from inside the guide.
INDUSTRIAL
156M sf
Projected industrial absorption, well below pandemic-era peak years
COMMERCIAL RETAIL
23.2%
Share of total retail sales now happening online, on track to reach 25% by year-end
MULTIFAMILY
2.2%
Freddie Mac's projected rent growth, below the long-term average, with vacancy rising to 6.2%
COMMERCIAL OFFICE
Uneven
Large CBD (Central Business District) towers hit hardest; suburban single-tenant assets far more resilient
Yesterday's laggard is often tomorrow's leader sector rotation is notoriously difficult to predict
Figures cited are third-party projections referenced inside the guide (Freddie Mac, CBRE) and are forward-looking estimates, not guarantees of future performance. Sources and full context are in the guide.
INSIDE THE GUIDE
Short, focused, and specific to DSTs
A quick read built to help you decide whether a DST belongs in your next exchange.
The Case for Diversification
Why concentrated, single-asset-type portfolios carry more cyclical risk than most investors realize, and how that risk shows up across market downturns.
Five Sectors, Five Cycles
A current look at multifamily, office, industrial, retail, and hotels: how each is performing today, and why they rarely move together.
What Is a Delaware Statutory Trust?
The core distinction between a conventional 1031 exchange and a DST: trading active management for a passive, professionally managed ownership structure.
Anatomy of a 1031 DST Exchange
A visual walkthrough of the exchange itself, from the sale of your appreciated property through the qualified intermediary to your purchase of a diversified DST portfolio.
Five Reasons to Consider a DST
Tax deferral, passive income, diversification, exchange assurance, and a place for "leftover" proceeds: the compelling reasons investors identify a DST.
HOW IT WORKS
One exchange, a diversified outcome
The mechanics of a 1031 DST exchange follow the same qualified-intermediary structure as any other exchange; the difference is what you buy on the other side.
WHY INVESTORS IDENTIFY A DST
Five reasons investors consider a DST
Compelling reasons to consider identifying a DST when completing a 1031 Exchange.
✓ Potential to defer capital gains taxes
✓ Diversify your real estate holdings
✓ Opportunity to invest "leftover" exchange proceeds
✓ Opportunity to invest "leftover" exchange proceeds
✓ Generate passive income
FREE DOWNLOAD
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Whether a sale is already on the table or you're planning years out, this is the reference to read before you decide how to reinvest your exchange proceeds.
+1 (212) 575-2152 · invest@knpre.com · New York | Los Angeles
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1031 Risk Disclosure:
• There is no guarantee that any strategy will be successful or achieve investment objectives;
• Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
• Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
• Potential for foreclosure – All financed real estate investments have potential for foreclosure;
• Illiquidity – Because 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.
• Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
• Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits.
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