DST Equity may reach over $5 Billion.
Industry experts will gather in August to review the state of the Delaware Statutory Trust (DST) and Equity Markets. DST fundraising may exceed $5 Billion in 2023, despite the slow commercial markets in many locations in the country.
By Al DiNicola, AIF®, CEPA™
August 5, 2023
Adinicola@namcoa.com
DST 1031 Specialist
NAMCOA® – Naples Asset Management Company®, LLC
Securities offered through MSC-BD
Many Investors will seek placement of proceeds from the sale of their investment properties by entering into a §1031 tax deferred exchange. At the end of July there was an estimated $2.8 Billion in equity invested as reported by Mountain Dell Consulting. Anticipation of exceeding the $5 Billion level is very optimistic.
Current Landscape (Equity Available)
At the start of August there were a total of 92 different alternative investment programs that included DST and TIC (tenants in Common). That represented approximately $2.8 Billion in equity. Most of the available equity is in the multifamily asset class (38%) and Industrial (26%).
Due Diligence Education
During the summer months financial advisors and representatives of investment firms will spend time attending due diligence conferences. These conferences are presented by third party due diligence firms. A few of the major firms (in no order of preference) Bowman, Buttonwood, Fact Right and Mick Law. Each of the firms evaluates a variety of offerings from oil & gas, real estate development deals, DST, income funds, and a variety of alternative investments. Aside from the review of the private placement memorandums the firms will conduct due diligence on the sponsors offering the opportunity, the property or deal itself, the financial projections, and potential exit strategies. In addition, each review would compare and contrast the structure of the offering compared to other offerings.
In addition to the review of the individual offerings the third-party conferences also identify current market conditions as well as forecasts. We anticipate the rise of interest rates and the effect on the overall real estate market to be one of the major topics. ESG investing is also often a topic and how advisors evaluate the offerings. ESG is an acronym that refers to a set of environmental, social, and governance standards that socially conscious investors use to select investments.
Educational commitment
We commit to attending a variety of conferences to gain first-hand knowledge from the third-party firms reviewing the offers. There is a benefit interfacing face to face with the sponsors of the offerings. We also conduct our own due diligence as well as suitability for the offering for individual investors. The suitability would be based on the risk profile of the individual investor as well as short- and long-term goals. In many cases investors are seeking deferral of taxes when selling investment properties. The DST solution provides an excellent alternative for certain investors.
Industry Involvement
We also are members of The Alternative & Direct Investment Securities Association (ADISA). This is a national trade association of professionals involved in primarily non-traded alternative investments. The most recent SEC rules and regulations are always topics of discussion. Many of the recent discussions have focused on Regulation BI (Best Interest). Regulation Best Interest (BI) is a Securities and Exchange Commission (SEC) rule that requires broker-dealers to only recommend financial products to their customers that are in their customers’ best interests, and to clearly identify any potential conflicts of interest and financial incentives the broker-dealer may have for the sale of those products. It is related to the U.S. Department of Labor’s (DOL) fiduciary rule. The Regulation BI rule falls under the Securities and Exchange Act of 1934 and establishes a standard of conduct for broker-dealers when recommending any securities transaction or investment strategy.
We have previously noted the record high reach of $9.2 billion in 2022 and $7.2 billion in 2021. The average DST equity investment over the past five (5) years has been $5.15 billion. Interesting average number when forecasting the potential equity raise projected in 2023.
NAMCOA® is a SEC registered investment advisory firm that provides comprehensive portfolio management, financial planning, and fiduciary decision-making services on behalf of retirement plan sponsors. Our Difference is summarized by our fiduciary approach which enables us to better meet portfolio and retirement plan objectives, resulting in stronger risk adjusted returns for investors and peace of mind for Clients. We also focus on alternative real estate investment. Many real estate investors are seeking tax deferred solutions utilizing §1031 exchanges or Opportunity Zones.
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@namcoa.com.
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. NAMCOA, 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. 8215 SW Tualatin- Sherwood Rd, Suite 200, Tualatin, OR 97062. MSC-BD, LLC and NAMCOA are independently owned and are not affiliated.
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