DST 101: Delaware Statutory Trusts
A Delaware Statutory Trust is a separate legal entity created as a trust under Delaware statutory law. Delaware law provides great flexibility in the design and operation of the entity. However, to use a DST in a Section 1031 tax-deferred exchange program, it must comply with the requirements of IRS Revenue Ruling 2004-86 so that a beneficial interest in the trust is treated as a direct interest in real estate for tax purposes. The trust also must satisfy lender requirements, especially if the loan is to be securitized.
Simplified 1031 Exchange Solution
Purchasers of DST-structured real estate investments typically enjoy monthly cash flow from high quality properties. A KB Exchange Trust DST investment affords purchasers an investment free of day-to-day management responsibilities as KB Exchange Trust and its third-party management partners professionally conduct all property and asset management.
KB Exchange Trust facilitates the entire transaction:
- Identifying the real property
- Professional due diligence reports
- Securing financing (non-recourse to DST Investors)
- Coordinating with qualified intermediaries
- Providing all organizational and offering documentation
- Providing a legal Tax Opinion
- Professional third party property and asset management services
- Monthly check issuance to investors (by check or direct-deposit)
DST Advantages
A DST-structure is a "pooled-equity" investment. DST purchasers realize significant benefits by acquiring a property that is typically a higher-quality asset than could be purchased individually. Investors looking for stabilized, core properties often favor a DST-structured investment.
- Provides investors with lower minimum equity requirements
- Provides more simple and efficient closing process
- Provides investors protection against loan recourse liability
- Provides the ability to act quickly when issues arise
- Provides investors greater security against rogue investors
- Provides a less complex structure for investors
- Eliminates annual LLC fees to investors
- Eliminates need for investors to provide tax returns to lenders