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 investors. 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 spon­sors’ 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 pro­vid­ing 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 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@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