During 2024 we monitored the equity raised in the Delaware Statutory Trust (DST) market. With much anticipation the overall market did achieve a 12 percent increase when compared to 2023.
January 16, 2024
By Al DiNicola, AIF®
DST 1031 Specialist
NAMCOA® – Naples Asset Management Company®, LLC
Securities offered through MSC-BD, LLC, Member of FINRA/SIPC
There was an equity raise (from investors) of $5.67 Billion during 2024. This was reported by Mountain Dell Consulting who engages and tracks activities from sponsors of Delaware Statutory Trust (DST) and TIC Market Equity investment.
2024 Reversed the Contraction
Macroeconomic headwinds impacted the equity raise in 2023. The 12% increase in equity raise (2024 year over year) is an encouraging sign for investors. 2023 may have been the “Valley” in transaction volume. This 2024 increase may be evaluated as a mild rebound, or a thawing of the transaction volume and more transactions were flowing again. In looking back in 2023 there were many escrows that were delayed and fell out due to many issues facing investors. The increase in 2024 may be due to people getting used to higher rates. (Although I remember my first mortgage in Florida was at 14%). Investors are accepting the reality of higher rates (and maybe rates will come back down). There are other macroeconomic headwinds affecting many classes of real estate (multifamily, student housing, etc.). The drastic rise in insurance premiums and other operating costs effects the bottom line. Contraction of the DST market was anticipated given a variety of market dynamics, the least of which was the rising interest rates. The rise in interest rates caused an overall slowdown in the real estate market. Investors holding traditional real estate may have seen fewer buyers. These buyers may have needed access to capital at an acceptable borrowing rate. However, there is much expectation that conditions will improve in 2024.
Market Metrics.
When comparing year over year market metrics (aside from equity volume) there are a few items to compare.
| 2023 | 2024 | |
| Available Equity | $2,500,412 | $2,342,198,682 |
| Number of Programs | 93 | 93 |
| Days on Market | 264 | 317 |
| Number of active Sponsors | 51 | 50 |
| Average 1st Yr. Return | 4.70% | 4.94% |
There is less equity currently available compared to the end of 2023. The number of overall programs remains the same. Having a variety of asset classes helps investors who seek a replacement property for a 1031 tax deferred exchange. The days on the market have increased which means longer time to sell out a DST asset. The longer time may provide investors with additional options. There has also been an increase in the projected average first year distribution. One item that was not included in the overall summary of the Mountain Dell Report is the number of all cash DST. There continues to be a consistent number of all cash DST (an increase on previous years) as well as reduced LTV (Loan to value) or reduced leverage in the DST offerings. This may not be all good news for investors who need to balance their exchanges with debt. Investors with higher than 60% LTV replacement are most affected.
2024 Equity Invested by Asset Class
| Asset Class | Amount Raised | % of Total |
| Multi Family | $2,133,917,044 | 37.71 |
| Industrial | $1,668,220,377 | 29.48% |
| Retail | $642,299,534 | 11.35% |
| Student Housing | $318,215,226 | 5.62% |
| Senior Housing | $258,169,846 | 4.56% |
| Self-Storage | $173,515,723 | 3.07% |
| Hospitality | $121,691,948 | 2.15% |
| Office | $193,802,764 | 1.83% |
| Office Medical | $89,953,140 | 1.59% |
| Other | $72,448,563 | 1.20% |
| Manufactured Housing | $8,891,737 | 0.16% |
| Total | $5,658,752,034 | 100% |
There is a relationship between the above chart of equity raised and the below chart equity available. It should be clear that because there is more equity available in the Multifamily and Industrial asset class there would be more equity raised. Multifamily and Industrial are still in much demand.
Current Asset Class Metrics
Sponsors have entered a more conservative underwriting reducing the LTV and increasing the equity needed for each DST. Noted in the chart below is average LTV for each asset class. There are no asset classes with an average LTV of over 50%. Understanding that when displaying an average there may be (depending on the asset class) an LTV over 50%. 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 for that strategy.
| Asset Class | Number of Programs | Available Equity | LTV | Projected Returns |
| Multi Family | 24 | $687,265,113 | 39.34% | 4.57% |
| Industrial | 21 | $835,839,369 | 24.24% | 4.63% |
| Retail | 20 | $293,412,900 | 16.82% | 5.23% |
| Office | 5 | $194,839,980 | 28.68% | 5.64% |
| Senior Housing | 3 | $161,187,315 | 16.17% | 5.52% |
| Hospitality | 1 | $10,975,354 | 0% | 6.01% |
| Student Housing | 4 | $132,647,258 | 38.32% | 4.69% |
| Office/Medical | 6 | $194,839,261 | 26.45% | 5.01% |
| Self-Storage | 5 | $ 37,421,430 | 0% | 4.65% |
| Energy | 1 | $6,213,678 | 0% | 9% |
| Manufactured Housing | 0 | $0 | 4% | |
| Other | 1 | $4,331,000 | 0% | 5% |
Final DST Market Overview Comments
If we reflect on the six (6) year average of equity raised prior to 2024 that number was $5.1532 Billion. (See Chart below). In reviewing the numbers 2024 is higher than the 6-year average for equity raised. If you use a 5-year moving average, it was just slightly above. It may take a few years to get close to the record high reach of $9.2 billion in equity raised in 2022 or the $7.2 billion of equity raised in 2021. 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.
| Year | Equity Raised |
| 2018 | $2.80B |
| 2019 | $3.486B |
| 2020 | $3.192B |
| 2021 | $7.2B |
| 2022 | $9.2B |
| 2023 | $5.04B |
| Six Year Average | $5.153B |
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.