By Al DiNicola, DST Investments, LLC
August 25, 2020
Last month the focus was on the $200 MM of DST investments made by individual investors. August continued to see additional investment as DST offerings were funded. Many eyes are focused on the response of the Sponsor in securing additional properties and structuring into offerings for the large anticipated number of individual sellers of real estate prior to year end. The old phrase the “Dog days of August” did not really exist in the acquisition teams of the Sponsors. During the height of the COVID restricted activity, many due diligence teams could not physically inspect the properties that were the subject of future acquisition. Without following the strict compliance of evaluation of every property that would ultimately be offered to individual investors (either cash investors or 1031 exchangors) the investment would not be sound. Many of the sponsors have multiple DST properties in the process of final evaluation.
Many Sponsors are continuing to experience good rent collection results considering the current responses (moratorium) by states on eviction of renters who cannot pay the rent or choose not to pay the rent. The suspicion may be that the multifamily sector, as well as student housing would see a drastic drop in rental collection. Contrary to that suspicion, many have seen strong occupancy as well as strong rental collection. Even in areas like Las Vegas rent collection have been strong. As the colleges continue their individual decision on how to operate college classes (either in person or virtual) private student housing is seeing an uptick in leases signed. Many students are returning to the college towns even though the future of classes and college athletics are in flux. These two sectors (multifamily and student housing) make up nearly 60% of all DST offerings. However, the core competencies of each offering need to be strong. Meaning once we are on the road to returning to more businesses opening (such as in Las Vegas) are the demographics positive, are businesses expanding and hiring employees, and are the assets or properties those that would attract renters. The essential businesses in the retail sector continues to be stable. Food stores, pharmacies and the local economic drivers continue to have be demand. Industrial and self-storage are stable but new offerings have been slow to enter the pipeline. Many of the self-storage offerings have been relatively small (under $15 MM each) and are subscribed quickly. Medical and senior housing are still attractive.
The sponsors re active in getting new assets in the pipeline. Sponsor are completing the pre closing DST due diligence and expect to have multiple offerings coming on the market in the beginning of September. There continues to be equity and liquidity looking to purchase new DST offerings. Many investors will be seeking to balance their real estate holdings by end of 2020. Look for a robust 4th quarter.
Our DST Landscape Survey provides a snapshot of comparative data representing most available DST offerings based on actual data provided by DST Sponsors. This landscape survey is updated in real time as Sponsors provide updates on current properties and on their new DST initiatives.
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DSTs are for accredited investors only. DST as well as all real estate investments carry risk. This is not an offer to purchase any security and all purchases must include a Private Placement memorandum (PPM) Please consult your CPA for questions regarding qualifications for 1031 tax deferred exchange