Land Ho! New Asset Class for Delaware Statutory Trust ~Pros and Cons

Invest­ing in a Land Delaware Statu­to­ry Trust (DST)—a type of DST that holds raw or unde­vel­oped land—can offer unique advan­tages and draw­backs com­pared to tra­di­tion­al DSTs hold­ing income-gen­er­at­ing prop­er­ties like mul­ti­fam­i­ly or indus­tri­al assets.

June 29, 2025

By Al DiNi­co­la, AIF®
1031 Tax Deferred Exchange Spe­cial­ists & DST Advi­sor
NAMCOA® — Naples Asset Man­age­ment Com­pa­ny®, LLC
Secu­ri­ties offered through MSC-BD, LLC, Mem­ber of FINRA/SIPC

The Land DST strat­e­gy was devel­oped in response to con­sis­tent requests from advi­sors and pro­duc­ers for a 1031-com­pli­ant way to access long-stand­ing land invest­ment exper­tise. AS with all DST the strat­e­gy offers accred­it­ed investors a way to defer cap­i­tal gains tax­es while par­tic­i­pat­ing in the growth-focused appre­ci­a­tion of land locat­ed in high-demand U.S. mar­kets.

This DST strat­e­gy was devel­oped to meet grow­ing demand for 1031 exchange solu­tions tied to land. There appears to be an align­ment between the ris­ing investor appetite for tax-advan­taged, pas­sive alter­na­tives. In addi­tion, spon­sors who are ver­ti­cal­ly inte­grat­ed and seek­ing to secure oppor­tu­ni­ties have intro­duced land DST offer­ings.  In addi­tion­al and poten­tial­ly a greater need would be Builder demand for off-bal­ance sheet treat­ment of land. The key would be in the spon­sors’ abil­i­ty to source, enti­tle, and exit strate­gic land posi­tions.

Builder man­dates. Many larg­er (pub­lic) builders wish to secure land with­out the land appear­ing on their bal­ance sheet until the builder is ready to start con­struc­tion. This means that builders are seek­ing an alter­na­tive in secur­ing the land while the builders acquire all the enti­tle­ments for devel­op­ment.  This may be a peri­od of 3–5 years. The struc­ture, maybe the DST spon­sor at a spe­cif­ic point in time, enters into a for­ward pur­chase con­tract with the builder for the land.  Once under con­tract the builder may pro­ceed in obtain­ing all the enti­tle­ments for the prop­er­ty. One all the enti­tle­ments are in place the prop­er­ty may be ref­er­enced as shov­el ready. This is the point where the DST would be sold to the builder.

Spon­sors of small­er projects (Senior hous­ing for exam­ple) may use the same strat­e­gy.

Here’s a break­down of the pros and cons of invest­ing in a Land DST:

 Pros of Invest­ing in a Land DST

1. 1031 Exchange Eli­gi­bil­i­ty
   • Land DSTs are struc­tured to qual­i­fy as “like-kind” prop­er­ty for 1031 exchanges, allow­ing investors to defer cap­i­tal gains tax­es upon sale of pri­or invest­ment prop­er­ty.
2. Low Man­age­ment Respon­si­bil­i­ty
   • As with all DSTs, land DSTs are pas­sive invest­ments. No land­lord duties or active involve­ment is required from the investor.
3. Port­fo­lio Diver­si­fi­ca­tion
   • Adds asset class diver­si­fi­ca­tion to a real estate port­fo­lio, espe­cial­ly if most cur­rent hold­ings are in income-gen­er­at­ing assets.
4. Poten­tial for Long-Term Appre­ci­a­tion
   • Land often appre­ci­ates over­time, par­tic­u­lar­ly if locat­ed in areas of pro­ject­ed devel­op­ment or pop­u­la­tion growth.
   • Depend­ing on the pre­arranged agree­ment with the devel­op­er or builder there may be enti­tle­ments obtained that add val­ue dur­ing the hold­ing peri­od as ref­er­enced above.
5. Estate Plan­ning Ben­e­fits
   • DSTs can sim­pli­fy estate plan­ning and offer a step-up in basis upon death of the own­er, min­i­miz­ing cap­i­tal gains for heirs.
6. Low­er Entry Point
   • Frac­tion­al own­er­ship allows investors to par­tic­i­pate in land invest­ments that would oth­er­wise require large cap­i­tal out­lays.

Cons of Invest­ing in a Land DST

1. No Cur­rent Income
   • Land DSTs typ­i­cal­ly gen­er­ate no rental income, as the prop­er­ty is unde­vel­oped. Investors must be com­fort­able with a zero-cash-flow invest­ment.
2. Illiq­uid­i­ty
   • DSTs are long-term, illiq­uid invest­ments. Exit­ing ear­ly is dif­fi­cult and may result in a loss of cap­i­tal. Many DST will have stat­ed exits at 7–10 years.  The exit for Land may be 3–5 years.
3. Mar­ket and Enti­tle­ment Risk
   • The val­ue of raw land is spec­u­la­tive and heav­i­ly depen­dent on zon­ing changes, enti­tle­ment approvals, or future buy­er demand. As not­ed above, cer­tain offer­ings require the builder (under pre­arranged pur­chase con­tract) to acquire enti­tle­ments.
4. Long Invest­ment Hori­zon
   • Appre­ci­a­tion or a prof­itable exit might take years. If mar­ket or local con­di­tions shift, the pro­ject­ed time­line could be extend­ed.
5. Lim­it­ed Con­trol
   • Investors can­not influ­ence devel­op­ment, man­age­ment, or dis­po­si­tion deci­sions due to the DST struc­ture.
6. No Depre­ci­a­tion Ben­e­fits
   • Unlike improved prop­er­ty, land can­not be depre­ci­at­ed, so investors receive no tax shel­ter from depre­ci­a­tion loss­es. If an investor is mov­ing into a land DST, the investor will car­ry for­ward any basis into the new DST. There would be no depre­cia­ble com­po­nent.

 Best Use Cas­es

• Investors seek­ing 1031 exchange tax defer­ral and not in need of reg­u­lar income.
• Long-term investors are com­fort­able with spec­u­la­tive growth and zero cash flow.
• Those aim­ing for cap­i­tal preser­va­tion with appre­ci­a­tion poten­tial rather than yield.

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. 5 Cen­ter­pointe Dri­ve, Ste. 400 Lake Oswego, OR, 97035MSC-BD, LLC and NAMCOA are inde­pen­dent­ly owned and are not affil­i­at­ed.

Thank you.