Investors considering placing their equity in a Delaware Statutory Trust should consider all the benefits.
In most DSTs, the parties define their business relationship to best suit their own needs.
Investors do not have to unanimously agree
The signatory trustee holds the power to take any necessary actions to reduce loss. The trustee can restructure financing, renegotiate leases, and sell the property if necessary.
Costs Less, Easier to Finance
Because the trust is the sole borrower, it is easier, and less expensive, to obtain financing than when a lender has to approve many different borrowers. Additionally, investors do not have to worry about participation in the trust affecting their personal credit rating.
Eliminates The Daily Hassle of Property Management
The DSTs passive ownership structure allows investors to enjoy the benefits of their investments without having to handle day-to-day management chores such as dealing with tenants.
Eliminates Closing Costs
Investors save money because DSTs usually have no closing costs.
Eliminates State Filing Fees
The trust allows investors to do business without creating an LLC, saving annual state corporate filing fees.
Eliminates Loan Carve-Outs
In a DST, because the investor’s only right is to receive distributions, and because investors have no voting authority, the lenders only look to the sponsors for carve outs from the non-recourse provisions of a note.
Easy and Inexpensive to Form and Maintain
Each trust is formed by filing a short form certificate, which
Protects Personal Assets
A DST protects the liability of investors, so if the trust fails and goes into bankruptcy, the only risk to investors is their investment in the trust.
Tax Deferral Through 1031 Exchange
DST 1031 gives investors the ability to move from an active to a passive role without paying capital gains and depreciation recapture taxes.
No Involuntary Termination
A DST requires a Delaware trustee, which ensures that the trust will not terminate inadvertently.