2020 Year in Review “Winners & Winners”

Al DiNicola February 10th, 2021

Many financial advisers subscribe to a variety of industry newsletters, affiliations and webinars to take a deeper dive into the alternative real estate investment asset class.  There are plenty of analyst who spent a great deal of time identifying the effects of the COVID pandemic.  Recently Mountain Dell Consulting, LLC (an affiliate of Orchard Securities, LLC) shared their findings of 2020 equity raised for Delaware Statutory Trust (DST).

The comparison from 20219 to 2020 is interesting since there was still over $3B in equity raised.  2019 equity raised was $3.486 Billion compared to $3.192 Billion in 2020. An outstanding year when the market disruptor of COVID sidelined many of the activities to bring assets to the market.  End of first quarter and second quarter prohibited the availability, acquisition, inspections, and closing of assets to put in the pipeline. 2020.  Glancing back to 2018 equity raised results of $2.48 Billion the amount of equity in 2020 was outstanding.  Investors placed their equity into DST as an alternative to traditional brick and mortar real estate for a variety of reasons.  Basically, DST equity created a “win-win” when evaluating the results. Both cash investors as well as 1031 Tax deferred exchange investors all benefited.

The results by asset type are worth identifying with a few comments.  In some cases, the amount of equity may be as a result of assets not being available for investments.  Multifamily which continues to be the largest asset class and the equity raised was within $1 Million of the 2019 total represented 51.12% of all equity representing $1.631 Billion. In the future Manufactured housing (currently a subset of Multifamily) will become its own group. 

Retail equity investment was up $20 Million year over year. The retail offerings were limited but when made available investors seek this asset class.  The necessary retail asset class should continue to do well. Retail represented 15.64% of all equity with $500 Million raided.

Self-storage continued to have limited new offerings coming on the market and the relative size of the individual asset are smaller than other asset type. Self-storage was down only $8 Million year over year. Storage raised $231 Million and represented 7.26% of all equity raised.

Industrial asset class (also in limited supply) was about even year over year.  This asset class also includes the distribution centers and with limited offerings are subscribed quickly. Equity raised was $207 Million and represented 6.50% of all equity raised.

It comes as no surprise that Office was going to be under a microscope with the COVID effect and the work from home requirement.  Office was down $40 Million but still raised $159 Million in 2020.  This represented 4.99% of all equity raised.  There continues to be a limited supply of Office asset type. There are many people still working from home because of COVID and the future of the asst type may be limited.

Senior Housing was very surprising to me as the asset class was up $50 Million year over year. This asset class is a small part of the over all results with 4.37% and $139 Million raised.  The Senior Housing sector continues to seek clarity on protecting the residents as well as the staff who work and operate these assets. 

Medical Office may have seen the largest reduction year over year. This asset type was down $155 Million.  Representing 3.61% of all equity with $115 Million the asset type has limited offerings.  There will still be offerings brought to the market. Medical office will seek to identify the right combinations of location, services and solutions.  With an aging population medical office will continue to evolve.

Hospitality (hotel industry) suffered greatly under COVID with the entire travel industry being sidelined and has not totally bounced back. However, there as a limited amount of Hospitality DST offerings and year over year was down $20 Million.  This asst type raised $69 Million and represents 2.18% of all equity raised.

There are bright spots on the horizon for Student Housing in the right locations. Colleges and universities located in value location (where tuition is reasonable) will see continued interest in student housing offerings. The unit configuration will evolve to protect students. The final thought will be COVID bounce in college enrollment anticipated by many college administrators for the fall of 2021 and into the future. Student housing raised $69 Million in 2020 and represented 2.18% of equity raised.

2021 is off and running and has a tremendous back log of cash investors as well as 1031 exchange investors.  There may be a total of $4 Billion in equity invested in 2021.  Sponsors are adding to their pipeline of assets that will be offered to investors.  Cash Investors will benefit from being able to invest as soon as the asst is offered by the sponsor. 1031 exchangers are somewhat challenged with certain assets being in high demand. Financial adviser who properly position the 1031 exchangers and investors ahead of the closing on what many referenced as the “down-leg”. The down leg is the selling of the existing property.  Timing is key and 2021 will see outstanding results with DST equity investment.

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 1031 Tax 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


About the author

Al DiNicola, AIF, CEPA, specializes in 1031 Exchanges utilizing DST as a viable alternative for accredited investors. He also is well versed in Opportunity Zones and Alternative Real Estate Investments. Mr. DiNicola has more than 40 years of experience in commercial & residential sales and development. Al has extensive experience in real estate land acquisitions, development, investment and real estate securities.

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