Delaware Statutory Trusts (DSTs) are sophisticated investment vehicles that allow individual investors to purchase fractional shares of the types of real estate often owned by real estate investment trusts, pension funds, and institutional investment firms.
A DST broker-dealer is a securities company that sells investments in Delaware Statutory Trusts (DSTs) to investors. DST broker-dealers typically work with DST sponsors to market and sell these offerings. DST broker-dealers must be licensed by the Securities and Exchange Commission (SEC).
In our experience, no two DSTs are the same. We believe that statement is equally true in regards to DST brokers, and that choosing a DST broker can be as important as choosing the types of assets held within a Delaware Statutory Trust.
This article may help investors learn how to pick a Delaware Statutory Trust broker by highlighting key attributes, competencies, and costs that investors should seek when researching prospective DST brokers.
DST brokers, much like the sponsors that assemble and package these unique investment vehicles, should be carefully vetted prior to making any investment decisions. Conducting due diligence on both DST brokers and sponsors may help investors make more informed investment decisions. You also could potentially save money since the fees for DST brokerage and investment services can vary greatly depending on an organization's business model.
Delaware Statutory Trust brokers work in tandem with DST sponsors to market these investments and connect investors with trust offerings, mostly through online listing platforms. Sponsors typically self-fund investments and then market their DST offerings to broker-dealers, who in turn offer them to investors until enough equity has been raised to fully displace the sponsor’s investment. Although sponsors fully analyze the assets they place under trust, brokers also conduct extensive due diligence on the properties prior to offering them to clients and typically pass on this information via private placement memorandums or investment decks.
Since DSTs are viewed as securities, all DST brokers and their registered representatives must be fully licensed to offer DSTs to individual investors. When reviewing potential DST investment opportunities, here are five things we recommend looking for and discussing prior to jumping in:
There are numerous brokers who can provide investors with DST investment opportunities. Creating a broker checklist and ticking off the concerns listed above can lead to more educated investment decisions and help investors find DST investment opportunities that align with their investment goals and tolerance for risk.
This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk. No public market currently exists and one may never exist. DST programs are speculative and suitable only for Accredited Investors who do not anticipate a need for liquidity or can afford to lose their entire investment. All real estate investments have the potential to lose value during the life of the investment.