May 15, 2022 DST Education Series B- Asset Classification Discussion

Editor’s note- this is part three of a ten-part series on the various asset types of DST offerings.

Part 3: Student Housing Asset Classification

By Al DiNicola, AIF®
May 15, 2022
DST 1031 Specialist
NAMCOA® – Naples Asset Management Company®, LLC
Securities offered through MSC-BD, LLC
 
Structurally many of the student housing buildings may resemble multifamily properties.  The Student Housing classification at one time was considered part of multifamily but because of the number of offerings student housing now commands its own classification.

Student housing, from an investment point of view, has provided stable returns especially in non-commuter schools.  Students need a place to live as well as keep the belongings they have moved out of their parents’ home. That is the big picture. Many advisers are bullish on student housing with sustainable occupancy.  The amount of student debt being taken on is another topic but suffice to say there is lending available for many students to go to school.

Over the years the stability of “universities & colleges” has been noted as an institution. These pillars of stability provide a path for many seeking higher education, social interaction as well as an avenue to showcase their talents as in the case of the athlete.  Two years ago, at the start of COVID there were many questions about the impact on private student housing locations as colleges were closing.

The colleges and universities were first to make a major statement with regards to the COVID pandemic.  One swift action taken was the NCAA March Madness tournament to be cancelled. Like all others in the country (and around the world) because of COVID we experienced new behavior in all facets of our lives.

What were the outlooks prior to COVID? The student housing sector has been one of the strongest investment sectors and there has been institutional money deployed in this sector. The DSTs that have been structured in specific locations have done well over the years. Not every college is a prime candidate for a private student housing property. (Many investors have utilized a 1031 tax deferred exchange with a DST as a replacement property). During recessions colleges and universities have seen an uptick in enrollment as people seek to obtain new skills.

Student housing has changed from the perspective of Animal House (the movie) to todays’ environment. There have been many product designs over the years and one plan that was popular was a four-bedroom unit with two bathrooms that would accommodate four students. This was a big step up from older campus housing with the bathroom at the end of the hall.  From a lease structure there are four leases with each individual student. Parents of the students would be required to sign on the lease (thus guaranteeing the lease or guaranteeing the bed lease).  This handles the potential eviction of one person or the exit of one student. When contrasting the parental guarantee vs. a typical multifamily rental there may be added comfort level for the investors.  Many of the parents who are guaranteeing the lease for their college student are backed up by one or more, six figure parental incomes and a 700 plus FICO score. If there was a 100-unit complex you may have 300 parental guarantees on the beds. Multifamily product references unit count Student housing references bed count.

In many universities the freshmen are required to live on campus in the dorms. First year of college is where most of the fall out or drop out occurs. (One of the big metrics colleges and universities use is the graduation rate of freshmen).  When students spend their freshmen year on campus there is a higher graduation rate). Student housing numbers will rise with increased enrollment but the increase with rentals will lag a year or so as the freshman move out of the dorms. The student housing markets have matured. Naturally, the locations within walking distance to campus is a plus. The other factor may be the type of colleges such as what is known as the Power Five schools. The physical location would also be important with destination campuses rather than commuter schools. Investors like stable, consistent occupancy, tax shelter, appreciation potential provided by student housing in well selected college locations.

So, what were the impacts from the COVID closings on student housing.  The initial reaction by many was student housing would be in the same position as hospitality with plunging occupancies. There was an interesting turn of events. The freshmen who were in the dorms were told to leave. While many may have gone home, they were faced with the challenge of what to do with their belongings.  Several self-storage facilities saw an increase in rentals.  Returning to their parents’ home was not an option for many and as a result there was an uptick in additional rentals in private student housing which were not forced to close. In addition, many students did not want to go home. If the students did go home, they wanted to return to college (or at least their off-campus apartment home). Colleges offered online classes to finish the semester. The private sector student housing management companies who were quick to respond with digital move in, face book page updates as well as increased bandwidth for WIFI did remarkably well.   If you were a student housing operator and you were behind the times in providing bandwidth, etc. that was a problem.  Many student housing communities provided study areas or rooms with the increased technology and including what was advanced technology for conferencing (Zoom meetings, green screens, etc.). Zoom has now become the norm in many daily activities. What became counter intuitive was when the school closed (or only offered classes online) parents were still on the hook for the rents.

Even with remote access to classes it was hard to replace brick and mortar experience. For schools who decide not to re-open some students transferred to other schools that provided the on-campus experience. Most all universities and colleges are back to normal in the post COVID environment. We will explore the anticipated Fall 2022 drivers.

Product design changes. What COVID did drive was the bedroom to bathroom parity requirement.  Meaning each bedroom requires its own bathroom.  This “de-densifying” requirement pushed students out of the dorms. Dormitories with four students sharing two bathrooms will be reduced to two students (in a four-bedroom unit) sharing the 2 bathrooms unless modifications can be made. In the older style dorms this will be even more of a challenge. The freshmen will need to seek off campus housing and add to the demand of private student housing.  The private sector may be at an advantage with the unit mix.  Many one-bedroom/one-bathroom units as well as two-bedroom/two-bathroom units will not be affected by the parity requirements. In the larger four-bedroom units that only had two bathrooms, the private sector had a solution.  The fourth bedroom may be converted into a high-tech bedroom and bathroom.  Converting the four bedroom two baths into three bedrooms and three baths became the solution.  Naturally, specific permitting and local jurisdiction will determine the process.

Campus visits are back to normal and rental lease ups for the 2022 fall semesters are in full swing. The outlook is encouraging.

FALL 2022 ENROLLMENT OUTLOOK: Record Application Numbers Reported Across US

Bolstered by escalating numbers of international students, interest in college attendance is higher than ever. Soaring past pre-pandemic levels. One sponsor believes the four-year, in-person experience is a rite of passage. Something both students and parents both see tremendous value. With more and more US high school students pursuing higher learning and even more international students seeking a US education, many sponsors believe this trend could lead to steady, sustainable incline in college enrollment.

  • UCLA – Nearly 150,000 applications (Source: UCLA newsroom)
  • Auburn has reported record 40,000 applicants (Source: oanow.com)
  • 31% increase in international applications (12% domestic) (Source: Common App Data Analytics)
  • 21% increase in underrepresented domestic minorities

DEMAND AND SUPPLY OF STUDENT HOUSING: What has changed? First of all, enrollment in degree-granting institutions in the US is projected to hit 19.8 million by 2025, representing a 2.6 million increase from 2017.

  • New student housing deliveries for 2021 reached the lowest total since 2009
  • Pre-COVID vacancy rates of US student housing remained considerably low between 2016 and 2019: 2016 (1.7%), 2017 (2.5%), 2018 (2.6%), and 2019 (2.3%)

Sources: Axiometrics and https://www.guide2research.com/research/student-housing-statistics (July 07,2020)

Technology & Security– What has also changed in security both inside and outside the properties.  For example, some offerings boast the latest technology to restrict access to only residents.  The Blue Tooth applications where students have access through their phones eliminate the need for keys and other entry systems. Cameras are being positioned in nearly every location to monitor assess to buildings, hallways, and common areas.  Security has become a major required amenity or a demand of parents and students.

Final thoughts on American Education. There has been a premium placed on a US education by foreign students (and by foreign parents). Restrictions that were placed on foreign students during COVID have been lifted. During COVID there was a loss of revenue for colleges since many of these students pay full tuition.  However, when the foreign students could not return during COVID this did permit colleges to accept more US students.  Colleges have demonstrated they can pivot easily. The private sector student housing developers and sponsors are increasing the attraction of the property with enhanced designs and amenities. Many of the offerings (structurally and amenities) rival the Class A Multifamily properties and if you did not know the property was student housing you would never know the difference.

Content for this article was obtained through communications with DST sponsors of Student Housing. Not all Student Housing locations are the same and may have different results. 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.

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. 410 Peachtree Parkway Suite 4245, Cumming, GA 30041. MSC-BD, LLC and NAMCOA are independently owned and are not affiliated.

Thank you.

NAMCOA® – Naples Asset Management Company®, LLC

May 10, 2022 DST.EDU Series B Part 2 Multifamily Asset Class

Part 2: Multi Family Asset Classification

By Al DiNicola, AIF®
Editor’s note- this is part two of a ten-part series on the various asset types of DST offerings.
May 10, 2022
DST 1031 Specialist
NAMCOA® – Naples Asset Management Company®, LLC
Securities offered through MSC-BD, LLC

When multifamily asset class becomes a topic of discussion there is a lack of formal definition of the variations of multifamily assets.

Multifamily loosely defined would include apartment complexes. These are multi story buildings from two stories to multi story buildings as well as repurposed buildings.  These may be in suburban locations, an urban location, or the edge of urban locations. The construction of the buildings may be purpose built or a conversion of an older building. The conversion of older buildings to multi-tenant dwellings are appearing in cities as property owners may be repurposing the asset.

For example, in cities like Philadelphia a warehouse along the waterfront may be converted into residential flats. In certain cities there may be special tax abatement or incentives to redevelop. Recently we placed an investor in a multifamily property that had a twenty-year tax incentive.  Not all locations can be guaranteed this special situation.

The properties may also be separated into a classification or grading system from Class A (highest), Class B, C & D.  The grading may be subjective in nature depending on who is making the evaluation.  Sponsors of Delaware Statutory Trust (DST) will conduct due diligence into the various properties. It becomes very important to understand the underlying principles that create the risk / return profiles of the opportunities prior to acquisition. There may also be a fine line between the asset classification.  Sponsors, Investment representatives as well as investors need to be objective in evaluating the criteria and offerings.

The Class A properties will normally have similar qualities. These qualities may be the physical locations with access to good schools, shopping, and other geographic assets.  Normally these properties can generate the highest rents in the submarket. The construction may be more recent (built with the past 10 years) and there may be little deferred maintenance.  The word luxury is used often (maybe too often). However, this may be draw for high-income tenants.

The Class B properties are still very functional and useful and a step down from Class A.  The age may be older (built 10-30 years ago typically).  The properties may be in need of maintenance and potentially have need of interior upgrades as well as exterior amenities. Because of these factors rents will be at mid-level.  However, there may be upside potential for sponsors. The upside may be created as a result of interior finish packages being installed that may create rent increases.

The Class C properties may be an option for renters who rent out of necessity.  The term work force housing occasionally comes up in this discussion.  The properties tend to be older, build 30-50 years ago.  With properties built that long ago there may be obsolescence either in the floor plans, HVAC, ceiling heights and other outdated physical aspects. The tenant base may also be lower income (paycheck to paycheck). These properties may be a great opportunity for value-add strategy.  The caution would be the extend of additional capital required to elevate to class B.  The physical location of the property may warrant a full investigation.

Class D properties once again are older and may include very low-income housing. Unfortunately, the location may be in higher crime areas. These areas also have additional requirements for security and increased maintenance. The vacancy rate and turnover may also be a concern for investors.

Each of the asset classes have a different risk profile. When DST sponsors are seeking properties for acquisition and ultimate packaging for individual investors the Class A and potentially Class B become the low hanging fruit so to speak.

Recent Activity
Recently there has been a compression of cap rates on the Multifamily asset.  Prices of the properties have escalated over the past year as individual investors as well as institutional investors seek out properties to add to their portfolios.  Multifamily properties have been the first choice of investment option for a variety of reasons.  There are many reasons for the appeal of this asset class. Individual investor may be interested in smaller properties that contain less than 20 units.  For an active ”hands-on” investor this may be manageable.

Typically, larger institutional investors look for projects that contain higher number of rental units.  Projects that have over 200 units (and upwards of 400 units) are preferred.  In addition, DST sponsors may package several complexes to offer assets that contain 800 units.  The dynamics of multiple units all with different lease expiration dates enable the property managers to respond to market rate increases.  The rental increases may only happen once per year on the renewal or on the turnover when a renter moves out. The property managers have the responsibility to minimize the down time and release the property. DST are passive investment that enable the individual investor to enjoy the benefits of ownership without dealing with property management, lease renewals, or capital improvements.

Each property may have unique features that may add to the overall appeal of the property.
The overall size of the property may be an advantage.  Technology has increased the ability for property managers to handle larger numbers of units.  When COVID occurred the management companies who embraced the electronic entry and digital lease and online application increased efficiencies.  The product mix meaning the numbers of studios, one bedroom, two bedrooms and potentially three bedrooms may be different depending on the market.  In urban areas the need for smaller units may be greater than suburban locations. When you look at a matrix of the DST offerings the majority of units are one and two bedrooms.

The community amenities could separate one asset from another.  Here is an example from one closed DST offering. Please note this not to represent what all Multifamily properties contain. “Community amenities may include a designer clubhouse with complimentary gourmet coffee bar; a workspace with private, fully supplied offices, dedicated coffee bar and conference room; resort-style pool with sun shelf and poolside cabanas; a state-of-the-art 24-hour fitness and yoga/cross training center with fitness on-demand kiosk; weekly onsite fitness classes; community iMac and resident printer station; a 24-hour access-controlled package room; multiple outdoor grilling stations; Wi-Fi access throughout the clubhouse and common areas; a family hangout and kids play area; valet waste and recycling; a social room with poker table and shuffleboard; an outdoor pavilion with lounge seating and a ping pong table; a fenced pet park; a pet spa with multiple wash stations and a grooming table; car charging stations; outdoor courtyard with hammocks and firepit; controlled access gated community; 24-hour onsite community market; private garages and storage; and elevator access”.

The physical location of the property may be another important feature.
Many potential tenants want to know how close the shopping is, restaurants, employment opportunities, school quality and proximity, and other external amenities.

There may also be regional features such as a highly educated population of residents within a certain radius on the property. Having an educated workforce may assist companies looking to relocate which in turn could bring an increase of jobs which benefits the overall community.

One of the metrics some real estate professionals use what is known as the Yardi Matrix© which identifies long term occupancy in the property’s submarket. This is not the only element of evaluation but may indicate stability in the marketplace.

The sponsor’s experience may also be a competitive advantage.  The overall question regarding the sponsor may be do they specialize in acquisition development, management and reposition if real estate investment assets.

We will expand on other asset classes in future sections of the Educational Series B DST Asset Classifications. The next topic of discussion will be Student Housing.  This is similar in many ways to Multifamily and at one time was a subsection of Multifamily.

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. 410 Peachtree Parkway Suite 4245, Cumming, GA 30041. MSC-BD, LLC and NAMCOA are independently owned and are not affiliated.

Thank you.

NAMCOA® – Naples Asset Management Company®, LLC

Educational Series B- DST Asset Classification Discussion

Editor’s note- this is part one of a ten-part series on the various asset types of DST offerings.
Part 1: Asset Overview.

By Al DiNicola, AIF®
May 5, 2022
DST 1031 Specialist
NAMCOA® – Naples Asset Management Company®, LLC
Securities offered through MSC-BD, LLC

At times there may be difficulty in connecting the terms or words Delaware Statutory Trust (DST) to the underlying asset that may comprise the investment portfolio. DST Assets are the same as commercial asset classification. Part of the disconnect may be with the words “trust” and then when you layer in “Delaware” and the word “statutory” it evokes an aurora of confusion sorting through the structure.

The DST structure started around 2003 when an investment real estate company from Chicago (name available upon request) petitioned the IRS to create another structure of fractional ownership other than the Tenants in Common (TIC). The intention of the petition was to create a structure that may limit the financial exposure for the individual investors. There are many differences between the TIC structure and the DST structure. TIC structure has investors personally responsible for any debt associated with the real estate. The DST structure includes non-recourse debt to the investor. The other component of the DST is an increase in the number of potential investors from thirty-five to a larger number.  A larger number of investors increases the amount of potential funding.

In a TIC environment to purchase a $35 Million asset each investor would need to contribute $1 million each. With an expanded investor pool the DST sponsor may have the ability to raise the same $35 Million but offering would include many more investors at a lower investment threshold. Lower threshold may limit individual investor exposure. A lower threshold may also satisfy the needs of smaller investors seeking to complete a 1031 tax deferred exchange. TICs are still available as a 1031 solution but may not be the first solution for a 1031 exchange utilized for many reasons. We will cover the differences between the TIC structure and the DST structure in detail in another writing.

Investors who have invested in commercial real estate over decades now are more than tipping their toe into the waters of Delaware Statutory Trusts. In 2021 nearly $8 Billion have been in alternative real estate which was more than the previous two years combined. 2022 may exceed the record-breaking year of 2021. Many of the same investment criteria used by investors on traditional real estate acquisitions are used for evaluating a DST investment. In a previous Educational Series, we covered many aspects of the DST structure.

Since the twenty-year evolution of DSTs there have been as many as seventy sponsors of DST at one time prior to the great recession.  Currently there are approximately 35-40 sponsors with a variety of types and styles of offerings. DSTs may also be found in various locations throughout the USA. Some types of DST may be referenced as the asset class. The asset may be in an individual location or include multiple locations if the offering is structured as a portfolio. The portfolio may be within one state or in different states. At any given point in time there may be $500 Million of available DST equity to a Billion dollars of equity.  We track most of the major sponsors (potentially 25-30) at any given time. Tracking becomes somewhat of a constant monitoring on an ongoing basis. A sponsor with $15 Million of equity may last just a few weeks and the remaining balance can be acquired by a few larger cash and/or 1031 exchange investors. Larger offerings (above $50,000,000) may be available longer simply because of the offering size.

Overall asset classes as mentioned previously are the same as traditional real estate ownership.

  • The list would include Multifamily (most often apartments), and all the former subsets of multifamily that include student housing, senior housing, single family rental communities, and manufactured housing communities.
  • The industrial sector may include distribution centers as well as the popular last mile distribution centers.
  • Operating companies such as manufacturing companies (some credit rated public companies) may offer triple net structures.
  • There are medical office buildings (MOB) that are small to medium size and may include portfolios.
  • Necessary retail that may be large facilities may include such recognizable names as Wal Mart neighborhood centers, Cabala’s Bass Pro Shops, etc.
  • Self-storage facilities offer single sites as well as portfolios.
  • The office sector may be structured as a typical DST with a distribution stream or other structures offering special benefits to satisfy investor needs.
  • There is a new subset of office called Life Science.

The DST offering maybe an all-cash investment or may be structured as a leveraged offering. All cash investment eliminates the risk of foreclosure of the property. Many investors do require some leverage to comply with the 1031 tax deferred exchange rules. Other investors enjoy leverage to increase the return potential. The Loan to Value (LTV) will be disclosed within the Private Placement Memorandum (PPM). LTV may range from 0% (all cash) to as high as 85% in what is specifically designed as a Zero Coupon Offering.

Frequently we recommend to investors to consider diversifying their holdings by asset class, and geographic locations.
This naturally depends on how much cash is allocated to the investment or the amount of the 1031 proceeds that need to be reinvested. Typically, the minimum investment amount is $50,000 for cash investors and $100,000 for 1031 tax deferred exchange investors. Identifying the assets for cash investors typically is easier. Cash investors are ready, willing, and able to submit paperwork to secure their investment. 1031 Exchange investors may be limited by the closing date of the property they are selling. Prior to the 1031 investor closing on their relinquished property there may be review and due diligence perform on the potential asset.

However, many sponsors may want the 1031 investor to be “in cash” prior to submitting paperwork that reserves a position or portion of the sponsor’s DST offering. In cash means the 1031 investor has closed on their relinquished property and the qualified intermediary (QI) has the proceeds of the closed relinquished property. Thus starts the critical 45-day identification period. This may be a stressful period of time.  However, with some pre planning on asset classes and underlying needs and suitability criteria, we hope to provide viable options for the investor. Options change depending on the current inventory of DST available at any given point in time.

We will expand on all the asset classes in future sections of the Educational Series B DST Asset Classifications

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. 410 Peachtree Parkway Suite 4245, Cumming, GA 30041. MSC-BD, LLC and NAMCOA are independently owned and are not affiliated.

Thank you.

NAMCOA® – Naples Asset Management Company®, LLC

May Landscape Summary “Fast, Fluid, and Forward Thinking”

BY Al DiNicola June 10, 2021

As the weather warmed up in most of the country (our weather in Naples, Florida is stunning) cash investors as well as the dramatic increase of sellers utilizing the 1031 tax deferred exchange program continued to fuel the DST market. On our weekly calls to Sponsors many are scratching their heads as daily reservation agreement come across their desk.  At NAMCOA we have always proposed to assess the client’s needs and then prescribe a balance portfolio of DST acquisitions.  For example, a seller selling a real estate holding (commercial brick and mortar) for $500,000 and utilizing the services of a real estate broker would typically purchase another $500,000 property.  We assess the client needs and may recommend splitting the sales proceeds into at least two DST acquisitions. The feedback from the sponsors during May has been investors are adopting this strategy and breaking their proceeds into manageable asset acquisitions of about $500,000. Oddly enough that number. under President Biden’s tax plan, has been tossed around as one of the benchmarks for a new 1031 tax deferred exchange (not a loophole) limit for certain taxpayers.  We do not know the exact criteria for 1031 exchanges going forward.  Suffice to say that advisors and investors are seeking to protect their assets.  Another interesting focus of President Biden’s Tax Plan may be elimination of the step up in basis on the transfer of the property.  Under current rules if a property owner who acquired the property for $250,000 years ago (with a current market value of $1,500,000) passes away, the heirs will acquire the property at a value of $1,500,000. There would be no tax on the transfer. If the basis is eliminated, the heirs would need to pay tax on the difference between the acquisition price and the transfer price.  Meaning the heirs would come out of pocket and pay capital gains if the heirs are to retain the property. The gain of $1,250,000 would be taxed let’s say at current 21% up to proposed 43%. That amount may vary between $225,000 to over $500,000 in cash on the transfer.   If the heirs don’t have the cash, then the property will need to be sold.

So, what happen in May in the DST equity landscape?  It has become fast, fluid, and forward thinking.  As you may be aware we track most of the major sponsors on a weekly basis either by email and more often phone calls for the weekly updates and in some cases with smaller offerings twice a week.  We do that so when we receive a call from an investor, we already have guidance on what assets may still be available. We are well prepared so we may be responsive to the investor call. Especially when we receive a call from an investor who is already well within their 45-day identification period.  In many cases we are able to suggest alternatives either as a first options or at least a backup.  Preferrable we would like to have more than 48 hours remaining in the 45-day identification period and preferable not receive the request on 5 PM Friday. Yes, that happened on one occasion.  Even with 4 days remaining we have been successful in creating an alternative.

During May we continuously updated the Landscape summary of offerings.  In one stretch of 10 days the Landscape was very fluid. From the posted numbers it may not have seen to be a big movement.  However, during that stretch of 10 days there was $400,000,000+ of equity secured.  The overall available equity was reduced from $850,000,000 down to $425,000,000.  However, within a three-day period Sponsors were able to make available additional equity in the forms of new offerings.  When looking at the Landscape Summary you may see 28-34 available DST offerings.  However, what you don’t see is the 90 funded offerings over the past 12-15 months.

The big question may be how to stay ahead of the curve on what may potentially become available?  We have  very good communications with the sponsors on what the Sponsors have in the pipeline.  Through our weekly conversations we understand the geographic locations and asset classes the Sponsors are preparing to close on which will become DST opportunities.   We are able to understand the Sponsor strategies for future acquisitions and align that with the investors who are in the process of selling their real estate and look to doing a 1031 exchange.  When we are engages a few weeks prior to investors closing on their property we have a much better opportunity to suggest a tailored designed strategy. Once a property owner close on their property being sold and the qualified intermediary is holding the sales proceeds then we quickly can offer several solid recommendations. Naturally, the cash investors who utilize DST are at an advantage in as much as they are ready to acquire the asset.

May was also a great month for education of potential investors.  We have engaged in many discussions with potential clients i.  These were investors who have long standing relationship with their current advisor who simply wanted another opinion for planning.  We welcome all discussion with investors.  DST acquisition by investors will continue and we are extremely happy with the trust our investors place in us when we have the opportunity to assist them.  Last month we predicted the 2021 total DST equity investment to be $4.25B.  We are raising that mount to $4.5B.  Check back next month for the DST Landscape Summary Update.

Please contact us for forward thinking strategies involving your real estate, 1031 tax deferral potentials or any other discussion regarding securitized real estate offerings.

Please refer us to any others you may know that may need advice on their 1031 Exchange!

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 1031 Tax 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@dst.investments.

Any information provided has been prepared from sources deemed to be reliable but is not guaranteed to be a complete summary or statement of all available data necessary for making an investment decision. Past performance is not a guarantee of future results. Price and yield are subject to daily change and as of the specified date. Any information provided is for informational purposes only and does not constitute a recommendation.  

DST 1031 consulting advisory services may be offered through: NAMCOA® – Naples Asset Management Company®, LLC | 999 Vanderbilt Beach Rd, Suite 200 | Naples, FL 34108.  Direct:  239-691-8098.  www.NAMCOA.com Click here to view our Firm Brochure (ADV2)

Securities may be offered through MSC-BD, LLC, Member of FINRA/SIPC.  CRD #142927.  NAMCOA® and MSC-BD, LLC are Independently owned and operated.

Cash and 1031 Proceeds Seeking Placement

April Landscape Summary “Cash and 1031 Proceeds Seeking Placement”

BY Al DiNicola May 10, 2021

After an outstanding beginning of 2021 with a reported $1.5B of equity placed with DST sponsors, some advisors felt as though the velocity was left over from 2020.  2020 is so far in the rear-view mirror and now investors may wonder how to position their real estate assets for the future.  There are a few concerns for investors with regards to selling their property especially when the task of locating a replacement property seems overwhelming.  The DST sponsors are securing additional properties to facilitate what may be the biggest year in DST equity investment.  Based on an outstanding first quarter and continued investment in April the industry may well move over the $4.25B equity investment mark. Considering that most DST have a debt component by design (average of 50%) that would indicate $8.5B in DST purchases.  Mountain Dell Consulting reports the outstanding success in a variety of asset classes.

  • The top three equity raised for Q1 2021 are: Multifamily $600M (51.24%); Industrial $178 M (15.23%); Retail $166M (14.21%). Multi family tends to lead the pack for a variety of reasons. MF has been the preferred asset class and also has the largest supply of properties.  The Industrial sector with the distribution centers is much sought after but there is limited supply.  The retail asset class consists of necessary retails grocery, neighborhood drug stores and larger properties including kidney centers and neighborhoods discount stores.
  • Multi-manufactured housings asset class is a new separate asset class (was split out from Multifamily) and raised $60M. Look for more institutional money purchasing manufactured home parks in southern states as long-term ‘mom and pop’ owners sell.  Self-storage continued with a limited number of offerings and raising $54M. Surprisingly, Office raised nearly $50M.
  • Office medical is starting to rebound with $31M. The Multi Senior Housing $17M and Multi Student Housing $9M. All of these asset classes were affected more than other with COVID.  Accessibility to due diligence as well as limited new supply on the market may be corrected in the near future. One note on Student Housing would be to monitor the increase in enrollment in colleges as a return to normal may boost enrollment.
  • These are all first quarter results. 2021 is shaping up to be a “fast and fluid” year form the standpoint of equity or cash being available.  Cash from sponsors to acquire properties and proceeds from 1031 investors and straight-out cash investors.

However, there is an investment elephant (or donkey) in the room.  As many investors understand there are discussions on what President Biden may or may not due with regards to raising the necessary capital to pay for his programs.  Over the past years the 1031 tax deferred exchange (not a loophole) has been the subject of modification and even thoughts of elimination. President Biden has also floated and proposed the idea of doubling the capital gains tax, eliminating the step up in basis upon transfer upon death to the heirs as well as a few other potential eliminations including raising the top tax bracket. Many of these programs have a dollar amount of either gains, profits or other exclusions for certain income earners.  Family businesses and farmers may also have special exemptions. We will continue to write about these items in future articles.  DSTs may provide diversification and restructuring of investor assets to fall under the projected dollar amounts. The good news are these unknows as well as how the red-hot real estate markets in many parts of the country are leading property owners to become sellers.  The rationale is to sell now, lock in profits, seek replacement properties and hopefully be grandfathered in on the current tax situation.  DSTs are becoming the new alternatives because of the tax favored returns as well as the turnkey solution the provide. Commercial real estate brokers are recommending the DST as the replacement solution for their sellers.  Commercial Real Estate brokers are not able to offer a DST unless they have the necessary qualification and security license. Property owners are becoming sellers and there is a buyer ready to close.  Investors should always consider their alternatives and DST are not for all investors and you must be an accredited investor to purchase a DST.

Once a property owner close on their property being sold and the qualified intermediary is holding the sales proceeds then the “fast and furious” 45 days starts to identify properties. A strategy may be to have a conversation with an investment adviser two to three weeks ahead of the closing on the real estate being sold.  This could line up a potential asset class and a few options to consider.  The DST are tracked similar to real estate as Days on Market (DOM).  In 2020 the median DOM was 164 days across all asset classes.  In 2021 the medium DO is 75 days.  Naturally certain assets with smaller offerings (under $20M) may only last a week or so.  While other larger offerings $150M may take longer to be subscribed. We, as advisors, track the DST offerings continuous can make recommendation on potential position, diversification, and geographic locations. We also balance the necessary cash reinvestment (being held by the QI) as well as securing the balance of debt (if applicable) as required by the 1031 deferred process.

April was an outstanding month for DST investment and as we move into May and the Summer the key will be available DST offerings to satisfy the surge in demand from cash investors and 1031 Exchanges.

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 1031 Tax 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@dst.investments.

Any information provided has been prepared from sources deemed to be reliable but is not guaranteed to be a complete summary or statement of all available data necessary for making an investment decision. Past performance is not a guarantee of future results. Price and yield are subject to daily change and as of the specified date. Any information provided is for informational purposes only and does not constitute a recommendation.  DST 1031 consulting advisory services may be offered through: NAMCOA® – Naples Asset Management Company®, LLC | 999 Vanderbilt Beach Rd, Suite 200 | Naples, FL 34108.  Direct:  239-691-8098

www.NAMCOA.com  Firm Brochure (ADV2)    Securities may be offered through MSC-BD, LLC, Member of FINRA/SIPC.  CRD #142927.  NAMCOA® and MSC-BD, LLC are Independently owned and operated.

Landscape Summary March 2021 “In Like a Lion” DST Investments

Al DiNicola
April 9, 2021

The Farmers’ Almanac notably referenced the weather in March as “In Like a Lion, Out like a Lamb”. Anther statement in the Almanac include “ideas that there should be a balance in weather and life”.  The investments in DSTs continued into the beginning of March. However, there is no indication that the equity investments came out of March like a lamb.  It appears that the search for quality DST investments is roaring.  While the multifamily assets continue to maintain the lion’s share of the equity investments there are other assets making their presence known.  The equity came from 1031 tax deferred exchanges as well as cash investor seeking the same advantages of a passive, tax advantaged return. However, as investors seek to balance their portfolios other asset classes are in high demand.  Simply put for every 10 multifamily offerings there may be one student housings, one self-storage, one necessary retail, one industrial. The limited supply of other assets (other than Multifamily) creates the rapid subscription and sellout of other assets.

Even though there is a surge in DST investment there is a need for Sponsor Due Diligence as well as Asset Due Diligence. We receive regular questions on how to evaluate a DST sponsor?  For those doing their initial investigation on DST here is a quick recap. A DST (Delaware Statutory Trust), is an investment vehicle only for accredited investors and provides the opportunity to own a fractional interest in institutional-grade commercial real estate. Cash investors and 1031 invesotrs both seek DSTs. Beneficial interests in DSTs are considered “like-kind” property for purposes of 1031 exchanges. DSTs may own a single property, properties within a single geographic region. Other DSTs may be a collection of properties in a focused geography or multiple properties in various geographic locations. In the context of a 1031 exchange, investors can allocate assets to one or more DSTs, providing a more diversified real estate portfolio. Cash investors are driving additional shortages in certain assets.

DST sponsors are professional real estate companies that identify properties and structure DST investment programs owning those properties. A primary role of an experienced sponsor is, directly or through affiliates, to manage each property owned by the DST including asset management duties, quarterly reporting, annual tax and reporting packages, performance reviews and budgets. In addition, many sponsors have an investor relations team to handle investor requests and inquiries. DST Sponsors work with representatives of Broker Dealer Firms or Registered Investment Advisors. Interest in DSTs continue to grow each year as well as number of DST sponsors. We do research on each of the sponsors (due diligence) to minimize unnecessary risk to the investors.

Here are a few key areas we evaluate: Industry Expertise, Track Record, Acquisition Process, Underwriting Standards, Transparency, Sponsor Fees  and Ongoing Support & Guidance. Many of these areas are required elements to be reported or listed within the Private Placement Memorandum (PPM).  We take to extra steps to communicate on an ongoing basis with the sponsors as well as reviewing the new offerings that are brought to the market.  The sponsor’s executive management team is only one component. We review how past program offerings have performed. The cash flow and total returns are only part of the underwriting standards. We want to understand why a certain property was identified for acquisition. Obtaining clear insight into every aspect of the business is part of the transparency aspect. Sponsor fee structure must be identified in the PPM. During and after the purchase sponsor communication is vital especially over the past year with the COVID interruption. This includes timely reporting for tax matters. Sponsors also need to protect the integrity of the 1031 tax deferred exchange.

We recommend that every DST investor review the due diligence materials that should be provided by their financial representative. DST, Investments, LLC can assist in your search for quality assets offered by Sponsors whom we have a relationship with and understand their background and past performance.

The current Landscape Summary on DST News.Org https://dstnews.org/  identifies over $600,000,000 of potential DST properties from the major sponsors. There also continues to be a constant movement of what is available on a daily basis. The challenge for both the investors as well as financial advisors assisting the investors may be securing the assets prior to another investor executing the subscription agreement.

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 1031 Tax 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@dst.investments.

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.   DST Investments, 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. 410 Peachtree Parkway Suite 4245, Cumming, GA 30041

2020 DST Year in Review ” Winners & Winners”

February 10th, 2021

Many financial advisers subscribe to a variety of industry newsletters, affiliations and webinars to take a deeper dive into the alternative real estate investment asset class.  There are plenty of analyst who spent a great deal of time identifying the effects of the COVID pandemic.  Recently Mountain Dell Consulting, LLC (an affiliate of Orchard Securities, LLC) shared their findings of 2020 equity raised for Delaware Statutory Trust (DST).

The comparison from 20219 to 2020 is interesting since there was still over $3B in equity raised.  2019 equity raised was $3.486 Billion compared to $3.192 Billion in 2020. An outstanding year when the market disruptor of COVID sidelined many of the activities to bring assets to the market.  End of first quarter and second quarter prohibited the availability, acquisition, inspections, and closing of assets to put in the pipeline. 2020.  Glancing back to 2018 equity raised results of $2.48 Billion the amount of equity in 2020 was outstanding.  Investors placed their equity into DST as an alternative to traditional brick and mortar real estate for a variety of reasons.  Basically, DST equity created a “win-win” when evaluating the results. Both cash investors as well as 1031 Tax deferred exchange investors all benefited.

The results by asset type are worth identifying with a few comments.  In some cases, the amount of equity may be as a result of assets not being available for investments.  Multifamily which continues to be the largest asset class and the equity raised was within $1 Million of the 2019 total represented 51.12% of all equity representing $1.631 Billion. In the future Manufactured housing (currently a subset of Multifamily) will become its own group.

Retail equity investment was up $20 Million year over year. The retail offerings were limited but when made available investors seek this asset class.  The necessary retail asset class should continue to do well. Retail represented 15.64% of all equity with $500 Million raided.

Self-storage continued to have limited new offerings coming on the market and the relative size of the individual asset are smaller than other asset type. Self-storage was down only $8 Million year over year. Storage raised $231 Million and represented 7.26% of all equity raised.

Industrial asset class (also in limited supply) was about even year over year.  This asset class also includes the distribution centers and with limited offerings are subscribed quickly. Equity raised was $207 Million and represented 6.50% of all equity raised.

It comes as no surprise that Office was going to be under a microscope with the COVID effect and the work from home requirement.  Office was down $40 Million but still raised $159 Million in 2020.  This represented 4.99% of all equity raised.  There continues to be a limited supply of Office asset type. There are many people still working from home because of COVID and the future of the asst type may be limited.

Senior Housing was very surprising to me as the asset class was up $50 Million year over year. This asset class is a small part of the over all results with 4.37% and $139 Million raised.  The Senior Housing sector continues to seek clarity on protecting the residents as well as the staff who work and operate these assets.

Medical Office may have seen the largest reduction year over year. This asset type was down $155 Million.  Representing 3.61% of all equity with $115 Million the asset type has limited offerings.  There will still be offerings brought to the market. Medical office will seek to identify the right combinations of location, services and solutions.  With an aging population medical office will continue to evolve.

Hospitality (hotels industry) suffered greatly under COVID with the entire travel industry being sidelined and has not totally bounced back. However, there as a limited amount of Hospitality DST offerings and year over year was down $20 Million.  This asst type raised $69 Million and represents 2.18% of all equity raised.

There are bright spots on the horizon for student housing in the right locations. Colleges and universities located in value location (where tuition is reasonable) will see continued interest in student housing offerings. The unit configuration will evolve to protect students. The final thought will be COVID bounce in college enrollment anticipated by many college administrators for the fall of 2021 and into the future. Student housing raised $69 Million in 2020 and represented 2.18% of equity raised.

2021 is off and running and has a tremendous back log of cash investors as well as 1031 exchange investors.  There may be a total of $4 Billion in equity invested in 2021.  Sponsors are adding to their pipeline of assets that will be offered to investors.  Cash Investors will benefit from being able to invest as soon as the asst is offered by the sponsor. 1031 exchangers are somewhat challenged with certain assets being in high demand. Financial adviser who properly position the 1031 exchangers/investors ahead of the closing on what many referenced as the “down-leg”. The down leg is the selling of the existing property.  Timing is key and 2021 will see outstanding results with DST equity investment.

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 1031 Tax 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@dst.investments.

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.   DST Investments, 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. 410 Peachtree Parkway Suite 4245, Cumming, GA 30041

December 2020 Experiences Brisk DST Activity

Al DiNicola

January 15, 2021

Over the past year we have provided an overview of the types of DST that are being offered. This 30,000-foot view for accredited investors is called the Landscape Summary.  We interact monthly with many of the major sponsors of DSTs and provide updates on the availability of offerings in numbers of programs, equity as well as other components which many potential accredited investors (through their feedback) state is important.

When looking at the numbers month over month there may be some changes on the dollar amount of availability with some of the most notable months have $100,000,000 changes in the equity when viewing the results. The December numbers have a notable change from November in the amount of $150,000,000 less equity.  However, that is only part of the results.  Within the activity from sponsors and investors there was a tremendous change.

Sponsors often will grant financial advisors and representatives the ability to reserve a position for an investor for a limited period of time. The sponsors wanted to complete as many subscription agreements (typically step one) and then close on the transaction (step two). Many investors seeking to close before year end reaffirmed their reservation positions and closed on their cash positions. In the case of 1031 exchanges investors executed (closed) well ahead of the 180-day required closing. As a practice we assist 1031 exchange investors with identifying their potential replacement properties ahead of their actual closing on their current property. (Occasionally the sale of the current property is called the “down-leg”).   Upon the actual closing of the down-leg a good strategy is to have the 45-day identification list ready for submission to the Qualified Intermediary (QI) or Accommodator. The other part of rationale for this strategy is since the DST availability changes on a weekly basis.  New issues that come out may be quickly subscribed. The other rationale comes from the investor who may want his down-leg proceeds reinvested sooner rather than later. Almost all our clients identify as soon as possible and most close on the replacement property (occasionally referenced as the “up-leg”) prior to the 45-day period and in some cases with 10 days of their down-leg closing.

The back story would be investors wanting to close as soon as possible to put their funds to work rather than sitting in the QIs account, as well as the sponsors wanting to close as many positions by year end.  During the month of December, in the offerings we review, there was over $350,000,000 in closed offering positions reported. In the beginning of December there were 32 available DST offerings and 18 were reported either fully subscribed or over reserved. When looking at the current available DST Equity (and this changes weekly) there is about $420,000,000.  The sponsors were also very busy with filling the pipeline with replacement offerings.

Creating the DST pipeline takes a lot of work upfront. We have good working relationships with many of the sponsors. Financial advisors who specialize in the DST space will receive advanced notice of potential DST offering that may be available in the near future.  This provides us (as well as other advisors) the ability to properly align our investor needs with the best potential cash investment or 1031 replacement property. The multifamily options (including the manufactured housing offerings) dominate the list of properties with a consistent 50%+ of the available equity. The industrial space is often sought after especially if there is an Amazon involvement. Necessary Retail has also been very popular and becomes fully subscribed quickly. Senor housings has not seen an uptick in offerings.  However, the 55 Plus offerings seems to be popular.  There is a difference between the assisted living (senior housings) and the active 55 Plus. Student housing has seen limited offerings because of the campus situation still lingering with the COVID situation. Colleges are attempting to figure out the dormitory and campus housing solutions.  There may be a few exceptions where there are population shifts into states. Student housing is similar to multifamily in design and structure in some regions.  For example, there is a migration of companies from California to Nevada.  Many of the younger workers are moving into the student housing properties that offer internet connectivity and other lifestyle components.  These new student housing offerings are different housing options then when many of us went to college. Florida is also benefiting from the general population shift from the northeast (NY, NJ, CT) to the sunshine state.

What is the forecast for 2021?  Sponsors will still be looking at bringing online multifamily opportunities. The industrial space and distribution should remain strong as well as the necessary retail. Select manufactured housing offerings as well as the 55 Plus will be offerings to watch. Assisted living and student housing may be very limited. Medical offerings which have been limited may have an uptick.

We are awaiting the new administration’s plans for the country.  There has been speculation that Mr. Biden’s plans include some changes to the 1031 tax deferred exchange.  Please look for our next blog article on the unintended outcomes if the 1031 exchange in altered or eliminated. Currently the cash investors are seeking tax preferred returns and the 1031 Exchangers are seeking to utilize the benefits provided.

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 1031 Tax 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@dst.investments.

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.   DST Investments, 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. 410 Peachtree Parkway Suite 4245, Cumming, GA 30041

December Year End Will Experience a Flurry of Activity

Al DiNicola

December 5, 2020

It has been stated so many times this year that 2020 is a year like no other with many factors. These factors include many effects from COVID issues, business uncertainty, shifts to working at home (rather than being in the office), parents assisting children with at home classroom, and the overall economic changes the country and the world is dealing with this year. In addition, there is a change in the political scene and climate in Washington.  At the same time there are sectors of the economy that has responded to the challenges and created opportunities.  The online economy and the delivery process of all the in-home shopping has energized certain businesses.  The end of the year traditionally creates a push or rush to settle certain tax and investment positioning continues to be a goal among investors, buyers and sellers.  The Delaware Statutory Trust (DST) environment will be no different.

Sponsors, working with financial advisors representing investors, have secured reservations and indication of interest in many assets

and properties.  These assets may represent single properties or may be portfolio of assets (from 2 properties to nearly 20 properties).  The assets that may be smaller offering, under $20MM may have a shorter “runway” for potential investors.  Runway meaning how long an investor may have to identify and ultimately close on an identified property. Larger offerings, over $50MM provide longer periods of time.  This longer period of time may assist investors who are engaged with a 1031 tax deferred exchange especially if the investor is anticipating on closing and not within their 45-day identification period.  Cash investors or 1031 investors who are already “in cash” do have an advantage with the ability to close.  In Cash references the 1031 funds are already being held by a Qualified Intermediary (QI).

The multifamily sector continues to have the largest availability for investors.  If we look at a total of twenty DST offerings 10-12 may be multifamily. The balance is comprised of industrial/distribution center, senior housing, student housing, medical, necessary retail and manufactured housing. The multifamily sector continues to have great appeal to many investors especially in the geographic regions that continue to see increased population such as Texas, Nevada, Tennessee and Florida. There are specific examples of infill locations that may be considered trophy locations. When multifamily dominates the offering selection there are the occasional high demands for other asset classes such as industrial/distribution. Many of these offerings are associated with the “Amazon Factor”. This factor represents the supply chain associated with the online shopping increase. The online increase not only was evident before the COVID with a shift away from the shopping center or mall experience, but also with the COVID restrictions.

The interaction between the sponsors and financial advisors is critical for obtaining the right asset for the inve

 

stors. Sponsors who are preparing to close on the initial acquisition of the property by year end will see continued interest not only by year end but moving into 2021. There will be a push to close as many cash positions as well as completing the 1031 exchanges.  Currently 1031 exchangers anticipating closing on their “down-leg” (property they are selling) in December, may seek to have a quick turnaround and close on their “up-leg” (replacement property) by year end. While this is possible it requires financial advisors identifying the best replacement solution that have available equity.  Especially with the ability for the spo

 

nsors’ closing department having the capacity to handle all the paperwork necessary for completing the transaction.

Sponsors have also been able to communicate to the financial advisors of upcoming releases.  Recently we were fortunate to position investors with specific requested assets prior to the actual release of the assets. This was done with indication of interest or reservations. This helps the cash investors but more importantly the 1031 exchangers with knowing the replacement property. Frequently investors contemplating selling their real estate holdings may resist not knowing what property will replace their current real estate.  The DST has provided an easy path to solving the replacement property dilemma

2020 will go down as an unusual year.  What will remain constant will be the success the sponsors and investors have experience.  Sponsors will report an outstanding year in volume of equity invested as well as the value of real estate that has been sold.  We have enjoyed prov

 

iding the monthly landscape update on the DST markets. We also appreciated all those who have engaged in conversation with us sharing your questions as well as encouragement.

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 1031 Tax 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@dst.investments.

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.   DST Investments, 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. 410 Peachtree Parkway Suite 4245, Cumming, GA 30041