How a Delaware Statutory Trust (DST) Exchange Transformed Our Client’s Portfolio

How a Delaware Statutory Trust (DST) Exchange Transformed Our Client’s Portfolio

HOW A DELAWARE STATUTORY TRUST (DST) EXCHANGE TRANSFORMED OUR CLIENT’S PORTFOLIO

By Juno Kenny, VP, Exchange Manager, Genesis Bank Exchange

The Genesis team recently completed an exchange for a client who sold a property in California and purchased interests in seven separate properties/portfolios of properties through the use of Delaware Statutory Trusts or DSTs as they are commonly referred to. This exchange allowed our client a variety of different opportunities and benefits.

  1. Geographic Diversification: Repositioned a portion of their real estate portfolio from California (a state that has become less friendly to property owners in recent years) and placed it across a variety of different properties throughout the United States.
    • All Real Property within the United States is “like kind” to other Real Property within the United States. It is a common misconception that property located in one state can only be exchanged for property located in the same state.
  1. Portfolio Diversification: They successfully diversified their portfolio, moving from one large Residential property into various sectors, including Industrial, Storage, Mineral Interests, Multifamily, and Commercial.
    • DSTs allow investors to purchase fractional interests in a property or portfolio of properties. The small minimum investment amount, typically somewhere in the $100,000 range, makes it easier for investors with a limited amount of funds to acquire replacement properties consisting of a large variety of asset classes. Additionally, DSTs allow investors with limited funds access to institutional-grade properties that would typically be out of their price range.
  1. Passive Management: Our client moved from an investment that required active management into a variety of passively managed investments.
    • While many investors prefer to manage their properties, there are also those who have been in the business for quite some time, and the idea of a check in the mail sounds more attractive than the idea of managing a property, dealing with tenants, etc.

Ultimately, our client walked away happy with a more diverse portfolio and less management to worry about.

If you’re interested in learning more about the 1031 exchange process and how it may benefit you, connect with the Genesis Bank Exchange team by calling 800.797.1031, or explore further details on our website: https://www.mygenesisbank.com/1031Exchange.