2020 Year in Review “Winners & Winners”

Al DiNi­co­la Feb­ru­ary 10^th, 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