Is the first month equity raised for Delaware Statutory Trust (DST) a trend or a blip in 2025? 2024 achieve a 12 percent increase when compared to 2023 and with over $600 Million in January this is a positive sign.
By Al DiNicola, AIF®
January 16, 2024
DST 1031 Specialist
NAMCOA® – Naples Asset Management Company®, LLC
Securities offered through MSC-BD, LLC, Member of FINRA/SIPC
According to Mountain Dell Consulting, who engages and tracks activities from sponsors of Delaware Statutory Trust (DST) and TIC Market Equity investment, the January 2025 equity raised was $630,816,989. Using simple math and multiplying by 12 that would be over $7.5 Billion in equity for the entire year. It is too early to project the 2025 results.
2025 Early Indication.
As stated, it is too early to predict what the final equity number will be at the end of 2025. What we may be able to use are demographic and economic drivers that may increase demand for certain product offerings. The above monthly average of equity raised in January of 2025 (when compared to 2024) may have been as a result of an end of the year sale of investment properties. If investors sold their investment property utilizing a 1031 tax deferred exchange the move into a DST is relatively easy. Easy from the standpoint of the DST offerings being prepackages with non-recourse debt to facilitate the exchange. Life events may become more important than economic drivers. Certain life events such as moving from one location to another downsizing going off the college or utilizing self-storage facilities may happen more than economic situations.
Market Metrics.
When comparing available equity at the end of 2024 and the available equity overall at the end of 2025 there are just some small variations. There is approximately $75 million more in equity that is now available at the end of January 2025. There are also 5 fewer programs offering currently and you can see the other metrics in the chart below.
| End of 2024 | End of Jan 2025 | |
| Available Equity | $2,342,198,682 | $2,415,974,183 |
| Number of Programs | 93 | 88 |
| Days on Market | 317 | 323 |
| Number of active Sponsors | 50 | 50 |
| Average 1st Yr. Return | 4.94% | 4.93% |
One item that was not included in the overall summary of the Mountain Dell Report is the number of all cash DST. 38 of the 88 current offerings are all cash. That is almost 40%.
Current Asset Class Metrics
Sponsors have entered a more conservative underwriting, reduced the LTV and increased the equity needed for each DST.
| Asset Class | #’s of Programs | Available Equity | LTV | Dollar as % of offerings | #’s as % of offerings |
| Energy | 2 | $5,850,000 | 0.00% | 0.24% | 2.27% |
| Hospitality | 2 | $37,072,659 | 0.00% | 1.53% | 2.27% |
| Industrial | 14 | $464,825,271 | 28.28% | 19.24% | 15.91% |
| Multi-Family | 29 | $1,025,305,365 | 38.83% | 42.44% | 32.95% |
| Student Housing | 4 | $75,813,369 | 38.32% | 3.14% | 4.55% |
| Office | 4 | $159,083,980 | 36% | 6.58% | 4.55% |
| Office/medical | 4 | $172,722,200 | 25.65% | 7.15% | 4.55% |
| Retail | 18 | $144,456,558 | 16.73% | 5.98% | 20.45% |
| Self-Storage | 6 | $117,209,197 | 8% | 4.85% | 6.82% |
| Senior Housing | 3 | $126,305,584 | 16% | 5.23% | 3.41% |
| Manufactured Housing | 0 | 0.00% | 0.00% | ||
| Other | 2 | $87,330,000 | 0% | 3.61% | 2.27% |
| Total | 88 | $2,415,974,183 | 100.00% | 100.00% |
Noted in the chart above is the average LTV for each asset class. There are no asset classes with an average LTV of over 40%. Understanding that when displaying an average there may be (depending on the asset class) an LTV over 40%. Thus, for investors with a higher LTV need we have a few alternatives. When we assist an investor with a larger §1031 exchange ($1M and above) especially when debt needs to be replaced, we typically blend multiple DSTs with leverage to diversify the replacement portfolio for the investor. Please consult with us about that strategy
There are a few interesting takeaways from this chart as displayed. In looking at the number of programs offered by a single asset class multifamily with 29 surely is outpacing the rest of the offerings. Over the period last year there were almost as many industrial offerings as there were multifamily. Actually, while there was almost the same number of industrial multifamily offerings, and the volume of multifamily offerings was actually less than industrial offerings. There has been an increased absorption of industrial assets over the past few months. A note for retail which needs to be explained is that many of the offerings may be considered ‘necessary retail” such as f grocery stores and needed facilities as compared to your department store retail offerings. Noticeably absent from this is manufactured housing. Very few offerings came on the market last year based on the void of acquisition of manufactured housing. An item which we don’t report on too frequently is the inclusion of a §721 UPREIT at some point in time after the Delaware statutory trust is acquired. Some of the offerings will have optional §721 UPREITS, others will have mandatory upgrades. We will create an article on the advantages and disadvantages of the §721 UPREIT program.
Final DST Market Overview Comments
If we reflect on the past seven (7) years, the average annual equity raise was $5.37 Billion. Some analysts will use a rolling 5-year average, and that number would be $6.658 with the potential outlier year of 2022 with over $9.2 Billion raised. Drilling down even further, eliminating the high and low over the past 7 years, the average year would be $5.1 Billion. The underlying demographics for investors wanting to sell actively managed real estate and move into passive ownership could be at an all-time high. We will see if the other market dynamics provide momentum for investors to see their existing properties.
We continue to research, review, and monitor all the major DST sponsors. We speak weekly with our sponsor contacts and conduct due diligence on DST offerings. Our continued research enables us to provide a quick response to investor questions regarding their cash investing needs as well as their §1031 tax deferred exchange. We are especially skilled at balancing the exchange debt equity requirements. We also specialize in the §1033 exchange in the case of natural disaster or eminent domain cases. The timeline for investors to decide on their utilization of a §1033 may extend beyond the benchmark 2 years as identified in the §1033 Code and potentially extend to 4 years. With the 2023 hurricanes in Florida and North Carolina as well as the 2024 fires in California, it may be too early to make any prediction on how many investors will take advantage of the §1033 tax advantages. Over the years we have assisted investors in dealing with their emotions as well as their replacement strategy. We are so fortunate in our specific location in Florida dealing with three hurricanes in 2024. Even though the eye of hurricane Milton came over us we were spared damage to our property. Our thoughts and prayers are with the people in southern California at this time.
What to Look for in 2025 and 2026
DSTs have been gaining broader institutional exposure and acceptance. The inclusion of the 721 UPREIT (after a safe harbor period). Large institutional investors have been stepping into the space. Not only on the sponsor level but also the large institutional player and advisors prospective. Schwab and Fidelity have entered the participation via platforming DSTs. Large wire houses are stepping into the 1031 space on the wealth management side of the business. On a different topic, but potentially of vast interest may be the extension of the tax cuts with the new administration as well as a potential modification and extension to the Opportunity Zone (OZ) investment opportunity.
NAMCOA® is a SEC registered investment advisory firm that provides comprehensive portfolio management, financial planning, and fiduciary decision-making services on behalf of retirement plan sponsors. Our Difference is summarized by our fiduciary approach which enables us to better meet portfolio and retirement plan objectives, resulting in stronger risk adjusted returns for investors and peace of mind for Clients. We also focus on alternative real estate investment. Many real estate investors are seeking tax deferred solutions utilizing §1031 exchanges or Opportunity Zones.
DSTs are not for all investors. The acquisition of a DST is for accredited investors only. Contact your investment adviser for additional details on how a DST may be a solution to your 1031 Exchange and suited for your investment future. For more information on how to properly set up an IRC 1031Tax Deferred Exchange or if you are an accredited investor and would like additional information on a DST contact Al DiNicola at 239-691-8098 or email adinicola@namcoa.com.
This is not an offer to purchase or solicitation to purchase any security, as such be made only through an offering memorandum or prospectus. Investing in securities, real estate, or any investment, whether public or private, involves risk, including but not limited to the potential of losing some or all of your investment dollars when you invest in securities. You should review any planned financial transactions that may have tax or legal implications with your personal tax or legal advisor. NAMCOA, LLC is a Registered Investment Advisor, regulated by SEC (Securities and Exchange Commission). Our corporate office is located at 999 Vanderbilt Beach Road, Suite 200, Naples Florida 34108. Securities Offered through MSC-BD, LLC, Member of FINRA/SIPC. 8215 SW Tualatin- Sherwood Rd, Suite 200, Tualatin, OR 97062. MSC-BD, LLC and NAMCOA are independently owned and are not affiliated.
Thank you.
