Delaware Statutory Trust transactions can be expensive since fees are typically assessed at three levels: upfront, operating, and disposition. While legal, loan, and lender expenses are typical in most real estate acquisitions, some upfront costs in Delaware Statutory Trusts aren’t as typical. These fees include:
The majority of DST investment sales are conducted via third-party selling groups. These groups include registered representatives and registered investment advisors (RIA). Since RIAs are compensated from their clients based on assets under management, commissions are typically re-allowed to registered representatives that execute sales of DST interests.
Managing broker-dealers are often reimbursed for expenses related to their marketing and due-diligence efforts. This allowance can be in addition to other managing broker-dealer fees.
Since DSTs are recognized as securities, DST offerings are often issued through entities known as “managing broker-dealers.” When broker-dealers are involved, they typically assist in due diligence, document preparation, and securities compliance and are subsequently compensated for these efforts.
Sponsor’s typically utilize in-house selling teams, known as wholesalers, who work with registered representatives and RIAs to ensure they obtain all information and documents needed to effectively sell an offering. These individuals are typically responsible for a geographical area and receive a commission for sales that occur within their region.
Offering & Organization Expenses.
These include any overhead costs associated with establishing and running the Delaware Statutory Trust, including printing costs, securities registration, and other miscellaneous costs.
Sometimes referred to as a “finder’s fee,” acquisition fees are payments to the Sponsor for identifying, negotiating, and acquiring the asset in the DST. Sponsors may also take an additional fee for obtaining financing for the acquisition.
Capital for fees and reserve accounts above the purchase price of the underlying asset are commonly referred to as the “load.” It’s important to consider these fees when thinking about returning 100 percent of your capital when it comes time to sell — the greater the load, the higher the underlying property in the Delaware Statutory Trust must be sold for in order to return investors’ original equity. There can be other fees over the lifespan of the DST as well, including sponsor asset management fees and disposition fees upon the sale of the property.