Education
What is a Delaware Statutory Trust?
A DST is a legal structure that lets multiple investors own fractional interests in institutional-quality real estate — and those interests qualify as replacement property for a 1031 exchange.
The Basics
Fractional ownership of institutional real estate.
A Delaware Statutory Trust (DST) is a legally recognized trust formed under Delaware law that holds title to one or more income-producing properties. A sponsor — such as NEWSTAR Exchange — acquires the real estate, places it in the trust, and offers beneficial interests in that trust to investors.
Each investor owns a beneficial interest in the trust and participates proportionately in the income and overall economic performance of the underlying property. The trustee, sponsor, and affiliated management professionals oversee financing, asset management, reporting, and property operations, allowing investors to maintain a passive ownership position.
Under IRS Revenue Ruling 2004-86, a beneficial interest in a properly structured DST is generally treated as an interest in real estate for purposes of Section 1031, making it eligible as like-kind replacement property in a 1031 exchange.
Potential Benefits
Why investors choose DSTs.
Truly passive
No tenants, toilets, or trash. The sponsor, trustee, and affiliated management professionals oversee property operations, financing, reporting, and asset management, allowing investors to maintain a passive ownership position.
1031 eligible
Beneficial interests in properly structured Delaware Statutory Trusts generally qualify as like-kind replacement property under IRS Revenue Ruling 2004-86, allowing investors to defer capital gains taxes through a 1031 exchange.
Institutional quality
Access larger, professionally managed assets that may be difficult to acquire and operate individually.
Lower minimums
The fractional ownership structure allows investors to participate with significantly less capital than purchasing an entire property outright.
Precise equity fit
DST interests can often be purchased in increments that closely match exchange proceeds, helping investors fully deploy capital and reduce the risk of taxable boot.
Potential diversification
Exchange proceeds can be allocated across multiple DST offerings, property types, geographic markets, or tenant profiles rather than being concentrated in a single replacement property.
Non-recourse debt
Financing, when used, is typically arranged at the trust level and is generally non-recourse to investors. Investors also receive their proportionate share of tax benefits, including depreciation deductions.
Estate planning
DST interests are generally includable in an investor's estate and may receive a step-up in tax basis at death under current tax law, potentially enhancing wealth-transfer planning opportunities.
Backup identification option
Many investors identify a DST as a backup replacement property within the 45-day identification period, helping reduce the risk of a failed exchange if a primary acquisition is delayed or does not close.
Risks & Considerations
What every investor should weigh.
DSTs are not suitable for every investor. They are speculative, illiquid securities available only to accredited investors and involve substantial risks, including the possible loss of principal.
Discuss with our team- IlliquidityThere is no public market for DST interests. Investors should expect to hold their investment for the full projected investment period, often five to ten years.
- No investor controlInvestors cannot direct property management, financing, leasing, or sale decisions.
- Fees and costsSponsor and offering costs reduce the capital invested in real estate and can affect returns.
- Real estate riskInvestment performance depends on market conditions, occupancy, rental income, operating expenses, and broader economic factors.
- Distributions not guaranteedDistributions are not guaranteed and may be reduced, suspended, or eliminated.
- Potential loss of principalReal estate values can decline, and investors could lose some or all of their investment.
- Exit riskThe timing and proceeds from a property sale are uncertain and may differ from projections.
How It Works
From sponsor to investor.
Sponsor acquires
NEWSTAR Exchange acquires a stabilized property that generates rental income and places it into a Delaware Statutory Trust.
Trust is offered
Beneficial interests in the trust are offered to accredited investors through the managing broker-dealer pursuant to a private placement memorandum (PPM).
Investors exchange in
Investors reinvest 1031 exchange proceeds into the trust and participate proportionately in the property's income, appreciation potential, and tax benefits.
Sponsor manages & exits
The property is professionally managed throughout the hold period and, upon sale, investors receive their share of the net proceeds, which may be eligible for a subsequent 1031 exchange.
Ready to look at a real offering?
Review NEWSTAR Exchange's current DST offering and request the Private Placement Memorandum.
View Current OfferingImportant Disclosures
This page is provided for general educational purposes only and does not constitute tax, legal, or investment advice. An investment in a Delaware Statutory Trust is speculative and involves a high degree of risk, including illiquidity and the possible loss of the entire investment. DST interests are sold only to accredited investors by means of a Private Placement Memorandum, which should be read carefully before investing.
This material does not constitute an offer to sell or a solicitation of an offer to buy any security. Securities offered through Preferred Capital Securities, LLC, member FINRA/SIPC. Neither the SEC nor any state securities commission has approved or disapproved of any offering. Consult your own tax, legal, and financial advisors.