July 2023 Landscape Review

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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Thank you.