July 2024 DST Landscape Review – Increasing momentum

Equi­ty absorp­tion con­tin­ues in the right direc­tion. Last month we report­ed sev­en Delaware Statu­to­ry Trust (DST) equi­ty offer­ings have been ful­ly sub­scribed to and this past month there were eight addi­tion­al offer­ings ful­ly sub­scribed.   

August 2, 2024

By Al DiNi­co­la, AIF®, CEPA™
DST 1031 Spe­cial­ist
NAMCOA® — Naples Asset Man­age­ment Com­pa­ny®, LLC
Secu­ri­ties offered through MSC-BD, LLC Mem­ber of FINRA/SIPC

There are a few offer­ings that once again were on the mar­ket near­ly two years.  How­ev­er, there was a self-stor­age offer­ing that was on the mar­ket for less than two months. Aver­age days on the mar­ket for an offer­ing report­ed at 307 days.  Equi­ty vol­ume was $540 Mil­lion com­pared to $400 Mil­lion in the last month. Anoth­er sign indi­cat­ing move­ment in the right direc­tion.  

Avail­able equi­ty:

 Avail­able equi­ty was reduced by near­ly $100 Mil­lion. While the shift in the per­cent­age of equi­ty absorbed and avail­able may only be minor there may be ear­ly signs of trends. Avail­able equi­ty nat­u­ral­ly is dri­ven by absorp­tion from the pre­vi­ous month.  There was a bal­anced absorp­tion in the mul­ti­fam­i­ly asset class­es with 45% of the equi­ty absorbed and the same per­cent­age of avail­able equi­ty (42%).  Self-stor­age and indus­tri­al rep­re­sent­ed 18% respec­tive­ly of the equi­ty absorbed.

Four New Offer­ings:

The num­ber of new offer­ings added total only four (4) as com­pared to sev­en (7) last month. Added pro­grams includ­ed a stu­dent hous­ing offer­ing, an indus­tri­al offer­ing, and two nec­es­sary retail offer­ings.  Notice­ably absent form new offer­ings con­tin­ue to be mul­ti­fam­i­ly.  Net avail­able equi­ty is now under $2.1 Bil­lion.  As a note we typ­i­cal­ly review all new offer­ings and review due dili­gence mate­ri­als when avail­able.

Track­ing Inven­to­ry:

 Anoth­er obser­va­tion not­ed was the per­cent­age of mul­ti­fam­i­ly offer­ings that were avail­able.  Of the approx­i­mate under $2.1 Bil­lion mul­ti­fam­i­ly offer­ings is still about 40% and near­ly 25% of all offer­ings are indus­tri­al offer­ings. Over the years mul­ti­fam­i­ly has com­prised near­ly 50% of all offer­ings. There are under­ly­ing con­cerns in the mul­ti­fam­i­ly sec­tor (espe­cial­ly in pre­vi­ous demand loca­tions) of the deliv­ery of new mul­ti­fam­i­ly offer­ings as well as the absorp­tion of the new units.  There also have been rental incen­tives in cer­tain areas to increase occu­pan­cy lev­els, espe­cial­ly on renewals of leas­es. A not­ed obser­va­tion would be 12 of the 16 retail offer­ings are all cash offer­ings (with­out lever­age or debt).

Aver­age Pro­ject­ed Year One dis­tri­b­u­tion:

Many of the investors who are mov­ing into DSTs are arriv­ing via 1031 tax deferred exchange.  There are many ben­e­fits of that vehi­cle.  Investors enjoy the pas­sive income and poten­tial tax advan­taged income.  The pro­ject­ed first year dis­tri­b­u­tion notched up to 4.95% aver­age. Offer­ings that are all cash may have less risk but offer chal­lenges to investors who need debt replace­ment with their exchange require­ments.  Loan to val­ue has moved under 50%. This may be some­what more con­ser­v­a­tive under­writ­ing. Cer­tain investors may need greater LTV replace­ment to sat­is­fy their debt replace­ment. Cer­tain loans are inter­est only loans and con­vert­ed to amor­tized loans dur­ing the course of own­er­ship.

Accred­it­ed Investors and Risk:

One of the first ques­tions we ask to a poten­tial investor is if they qual­i­fy as an accred­it­ed investor.  Investors need to have a net worth of $1 Mil­lion (exclud­ing pri­ma­ry res­i­dence) or annu­al income of $200,000 for a sin­gle per­son or $300,000 for a cou­ple. Even if the investor qual­i­fies as an accred­it­ed investor we still con­duct a risk assess­ment with each investor.  DST are con­sid­ered illiq­uid invest­ments.

Investor Restric­tion:

DST’s (Delaware Statu­to­ry Trusts) are for accred­it­ed investors only.  Con­tact your invest­ment advis­er for addi­tion­al details on how a DST may be a solu­tion to your 1031 Exchange and com­pli­ment your finan­cial objec­tives. 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, in any form, 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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