DST.EDU Part 2: Multifamily Asset Classification in Delaware Statutory Trusts

Editor’s Note: This is Part Two of a Ten-Part Series on the Var­i­ous Asset Types Found in Delaware Statu­to­ry Trust (DST) Offer­ings. This is an updat­ed ver­sion of the orig­i­nal series post­ed in 2022.

June 27, 2026

By Al DiNicola, AIF®
Private Fund Advisor
DST 1031 Specialist
Fiduciary Capital Management, LLC
Securities offered through MSC-BD, LLC, Member of FINRA/SIPC

 Introduction

Mul­ti­fam­i­ly real estate remains one of the most pop­u­lar asset class­es with­in the Delaware Statu­to­ry Trust (DST) mar­ket­place. For many investors com­plet­ing a 1031 exchange, mul­ti­fam­i­ly prop­er­ties often rep­re­sent the first asset class they con­sid­er due to their long his­to­ry of gen­er­at­ing income, broad ten­ant demand, and rel­a­tive resilien­cy across eco­nom­ic cycles.

“When investors think of real estate, they often think of apart­ments first,” says Al DiNi­co­la. “Hous­ing is a fun­da­men­tal neces­si­ty, and that tends to cre­ate long-term demand regard­less of where we are in the eco­nom­ic cycle.”

While mul­ti­fam­i­ly is com­mon­ly asso­ci­at­ed with apart­ment com­plex­es, the clas­si­fi­ca­tion has expand­ed sig­nif­i­cant­ly over the past decade. Today’s mul­ti­fam­i­ly sec­tor includes tra­di­tion­al apart­ment com­mu­ni­ties, lux­u­ry urban devel­op­ments, work­force hous­ing, build-to-rent com­mu­ni­ties, senior hous­ing, and mixed-use res­i­den­tial devel­op­ments.

Under­stand­ing the dis­tinc­tions with­in mul­ti­fam­i­ly assets is essen­tial for investors eval­u­at­ing DST oppor­tu­ni­ties.

What Defines Multifamily Real Estate?

Broad­ly speak­ing, mul­ti­fam­i­ly real estate con­sists of res­i­den­tial prop­er­ties con­tain­ing mul­ti­ple hous­ing units under com­mon own­er­ship. These prop­er­ties can range from small duplex­es and gar­den-style apart­ment com­mu­ni­ties to large insti­tu­tion­al devel­op­ments con­tain­ing hun­dreds of units.

Mul­ti­fam­i­ly prop­er­ties may be locat­ed in:

• Urban down­town dis­tricts
• Sub­ur­ban com­mu­ni­ties
• Mixed-use devel­op­ments
• Tran­sit-ori­ent­ed neigh­bor­hoods
• Rede­vel­oped indus­tri­al or ware­house dis­tricts

One con­tin­u­ing trend has been the adap­tive reuse of old­er build­ings into res­i­den­tial com­mu­ni­ties.

“We con­tin­ue to see devel­op­ers repur­pos­ing obso­lete office build­ings, ware­hous­es, and indus­tri­al prop­er­ties into hous­ing,” explains DiNi­co­la. “In many mar­kets, rede­vel­op­ment is often more eco­nom­i­cal and sus­tain­able than new con­struc­tion.”

Sev­er­al munic­i­pal­i­ties through­out the coun­try have encour­aged rede­vel­op­ment through tax incen­tives, eco­nom­ic devel­op­ment pro­grams, and zon­ing flex­i­bil­i­ty.

Understanding Multifamily Property Classifications

Mul­ti­fam­i­ly prop­er­ties are com­mon­ly cat­e­go­rized into four class­es: A, B, C, and D. While these clas­si­fi­ca­tions pro­vide a use­ful frame­work, they are not stan­dard­ized and may vary by mar­ket and spon­sor.

“Prop­er­ty clas­si­fi­ca­tions should always be viewed as guide­lines rather than absolute def­i­n­i­tions,” says DiNi­co­la. “Investors need to look beyond the let­ter grade and eval­u­ate the actu­al fun­da­men­tals of the prop­er­ty.”

Class A Properties

Class A mul­ti­fam­i­ly prop­er­ties typ­i­cal­ly rep­re­sent the high­est-qual­i­ty assets with­in a mar­ket.

Char­ac­ter­is­tics often include:

• New­er con­struc­tion
• Prime loca­tions
• Lux­u­ry ameni­ties
• High­er-income ten­ant demo­graph­ics
• Strong school dis­tricts
• Min­i­mal deferred main­te­nance

Many Class A prop­er­ties fea­ture resort-style ameni­ties such as:

• Fit­ness cen­ters
• Club­hous­es
• Swim­ming pools
• Co-work­ing spaces
• Pack­age deliv­ery sys­tems
• Pet ameni­ties
• Elec­tric vehi­cle charg­ing sta­tions

“The term lux­u­ry may be overused in today’s mar­ket,” notes DiNi­co­la, “but ten­ants con­tin­ue to place a pre­mi­um on con­ve­nience, tech­nol­o­gy, and lifestyle ameni­ties.”

Class A prop­er­ties gen­er­al­ly com­mand the high­est rents with­in their sub­mar­kets but may also have less room for rent growth com­pared to val­ue-add oppor­tu­ni­ties.

Class B Properties

Class B prop­er­ties are often con­sid­ered the work­hors­es of the mul­ti­fam­i­ly sec­tor.

Typ­i­cal­ly:

• Built 10–30 years ago
• Well main­tained but not brand new
• Mid-mar­ket rental rates
• Sta­ble ten­ant base
• Poten­tial ren­o­va­tion oppor­tu­ni­ties

Many DST spon­sors active­ly pur­sue Class B assets because they often offer oppor­tu­ni­ties for strate­gic improve­ments.

“A ren­o­vat­ed kitchen, upgrad­ed floor­ing, mod­ern light­ing, or enhanced ameni­ties can cre­ate mean­ing­ful rent growth with­out tak­ing on exces­sive devel­op­ment risk,” says DiNi­co­la.

For many investors, Class B prop­er­ties pro­vide an attrac­tive bal­ance between sta­bil­i­ty and appre­ci­a­tion poten­tial.

Class C Properties

Class C mul­ti­fam­i­ly prop­er­ties fre­quent­ly serve work­force hous­ing ten­ants.

Com­mon char­ac­ter­is­tics include:

• Old­er con­struc­tion
• Func­tion­al but dat­ed designs
• Low­er rental rates
• High­er main­te­nance require­ments
• Greater man­age­ment inten­si­ty

Work­force hous­ing has become increas­ing­ly impor­tant as hous­ing afford­abil­i­ty chal­lenges per­sist through­out many regions of the Unit­ed States.

“Afford­able hous­ing short­ages con­tin­ue to sup­port demand for work­force hous­ing,” explains DiNi­co­la. “How­ev­er, investors need to care­ful­ly eval­u­ate cap­i­tal expen­di­ture require­ments and neigh­bor­hood dynam­ics.”

Many Class C prop­er­ties are acquired as val­ue-add invest­ments requir­ing sub­stan­tial ren­o­va­tions.

Class D Properties

Class D prop­er­ties gen­er­al­ly rep­re­sent the high­est-risk seg­ment of the mul­ti­fam­i­ly spec­trum.

These assets may fea­ture:

• Sig­nif­i­cant deferred main­te­nance
• High­er crime expo­sure
• Ele­vat­ed vacan­cy rates
• Low­er-income ten­ant demo­graph­ics
• Greater oper­a­tional chal­lenges

While some investors spe­cial­ize in turn­around oppor­tu­ni­ties, most DST spon­sors focus pri­mar­i­ly on Class A and Class B prop­er­ties because they align more close­ly with the objec­tives of pas­sive investors seek­ing income and sta­bil­i­ty.

Why Multifamily Remains a Leading DST Asset Class

Mul­ti­fam­i­ly con­tin­ues to attract insti­tu­tion­al cap­i­tal, pri­vate investors, and DST spon­sors for sev­er­al rea­sons.

Diverse Income Streams

Unlike office build­ings or sin­gle-ten­ant retail prop­er­ties, mul­ti­fam­i­ly com­mu­ni­ties gen­er­ate income from numer­ous ten­ants.

“When a ten­ant moves out of a 300-unit apart­ment com­mu­ni­ty, the impact on rev­enue is lim­it­ed,” says DiNi­co­la. “Diver­si­fi­ca­tion with­in the prop­er­ty itself cre­ates a degree of income sta­bil­i­ty.”

Ongoing Housing Demand

Hous­ing remains a basic neces­si­ty regard­less of eco­nom­ic con­di­tions.

Pop­u­la­tion growth, house­hold for­ma­tion, immi­gra­tion trends, and afford­abil­i­ty chal­lenges con­tin­ue to sup­port rental demand across many mar­kets.

Lease Reset Opportunities

Mul­ti­fam­i­ly prop­er­ties typ­i­cal­ly have short­er lease terms than many com­mer­cial asset class­es.

This allows prop­er­ty man­agers to adjust rental rates more fre­quent­ly in response to mar­ket con­di­tions.

“Apart­ment own­ers have the abil­i­ty to cap­ture mar­ket rent growth much faster than office or indus­tri­al land­lords oper­at­ing under ten-year leas­es,” notes DiNi­co­la.

Trends Shaping Multifamily in 2026

The mul­ti­fam­i­ly land­scape con­tin­ues to evolve.

Sev­er­al key trends influ­enc­ing DST acqui­si­tions include:

Sun Belt Migration

States such as Flori­da, Texas, Ten­nessee, North Car­oli­na, South Car­oli­na, Ari­zona, and Geor­gia con­tin­ue to attract res­i­dents and busi­ness­es.

Pop­u­la­tion growth often trans­lates into increased hous­ing demand and stronger occu­pan­cy lev­els.

Build-to-Rent Communities

One of the fastest-grow­ing sec­tors today is the build-to-rent mar­ket.

These com­mu­ni­ties pro­vide sin­gle-fam­i­ly homes for rent while offer­ing pro­fes­sion­al man­age­ment and com­mu­ni­ty ameni­ties.

“Build-to-rent has become a mean­ing­ful alter­na­tive for fam­i­lies who want the lifestyle of home­own­er­ship with­out the finan­cial com­mit­ment of pur­chas­ing a home,” says DiNi­co­la.

Technology Integration

Mod­ern apart­ment com­mu­ni­ties increas­ing­ly uti­lize:

• Dig­i­tal leas­ing plat­forms
• Smart-home tech­nol­o­gy
• Mobile access sys­tems
• Online rent col­lec­tion
• Vir­tu­al tours

The adop­tion of tech­nol­o­gy has improved oper­a­tional effi­cien­cy and ten­ant sat­is­fac­tion.

Evaluating Multifamily DST Opportunities

When review­ing mul­ti­fam­i­ly DST offer­ings, investors should con­sid­er sev­er­al fac­tors:

Market Fundamentals

• Pop­u­la­tion growth
• Employ­ment trends
• New sup­ply pipeline
• Occu­pan­cy lev­els
• Rent growth his­to­ry

Property Features

• Unit mix
• Ameni­ty pack­age
• Prop­er­ty age
• Cap­i­tal improve­ment needs
• Com­pet­i­tive posi­tion­ing

Sponsor Experience

The sponsor’s acqui­si­tion, man­age­ment, and asset man­age­ment capa­bil­i­ties remain crit­i­cal.

“A strong spon­sor can make a mean­ing­ful dif­fer­ence in exe­cu­tion,” says DiNi­co­la. “The prop­er­ty mat­ters, but the team’s abil­i­ty to man­age and enhance the asset mat­ters as well.”

Submarket Analysis

Many pro­fes­sion­als uti­lize research tools such as Yar­di Matrix®, CoStar®, Real­Page®, and local mar­ket stud­ies to eval­u­ate occu­pan­cy trends and rental per­for­mance.

While no sin­gle met­ric tells the entire sto­ry, under­stand­ing sub­mar­ket fun­da­men­tals can pro­vide valu­able insight into long-term per­for­mance poten­tial.

Conclusion

Mul­ti­fam­i­ly real estate con­tin­ues to be one of the cor­ner­stone asset class­es with­in the DST mar­ket­place. Its com­bi­na­tion of recur­ring income, broad ten­ant demand, diver­si­fi­ca­tion across mul­ti­ple units, and long-term hous­ing needs has made it a pre­ferred choice for many 1031 exchange investors.

“Mul­ti­fam­i­ly has remained one of the most durable sec­tors of com­mer­cial real estate because peo­ple will always need a place to live,” con­cludes DiNi­co­la. “The chal­lenge for investors is iden­ti­fy­ing the right prop­er­ty, in the right mar­ket, with the right spon­sor and invest­ment strat­e­gy.”

In the next install­ment of this series, we will explore Stu­dent Hous­ing, an asset class that shares many char­ac­ter­is­tics with tra­di­tion­al mul­ti­fam­i­ly prop­er­ties while pos­sess­ing unique oper­a­tional and mar­ket dynam­ics.

Delaware Statu­to­ry Trusts (DSTs) have become a notable part of com­mer­cial real estate invest­ing. As Al DiNi­co­la empha­sizes, a DST is a struc­ture, not an asset class, the focus should remain on the qual­i­ty of the under­ly­ing prop­er­ty and how it fits your goals.  DSTs are for accred­it­ed investors and car­ry risks, i.e. illiq­uid­i­ty, real estate mar­ket fluc­tu­a­tions, and spon­sor deci­sions. Con­sult your advis­er about suit­abil­i­ty, espe­cial­ly for §1031 exchanges. For more details, please con­tact:

• Al DiNi­co­la adnicola@fiduciarycm.com  
• Direct: 239 691 8098
• Sched­ule Appoint­ment

Advi­so­ry ser­vices are offered through Fidu­cia­ry CM, an SEC-reg­is­tered advis­er. Invest­ments involve risk and are not guar­an­teed. Always refer to offer­ing doc­u­ments for full risk dis­clo­sures. Delaware Statu­to­ry Trust (DST) invest­ments involve risks asso­ci­at­ed with com­mer­cial real estate own­er­ship and are not suit­able for all investors. These risks may include, but are not lim­it­ed to, loss of prin­ci­pal, illiq­uid­i­ty, ten­ant vacan­cy, financ­ing risk, inter­est rate fluc­tu­a­tions, prop­er­ty val­ue declines, eco­nom­ic and mar­ket con­di­tions, and risks asso­ci­at­ed with spon­sor and prop­er­ty man­age­ment deci­sions. Please refer to the applic­a­ble Prop­er­ty Pri­vate Place­ment Mem­o­ran­dum (PPM) for a com­plete dis­cus­sion of the risks and con­sid­er­a­tions spe­cif­ic to that offer­ing. For addi­tion­al infor­ma­tion regard­ing gen­er­al DST invest­ment risks, please click here. Past per­for­mance is not indica­tive of future results. Nei­ther the Reg­is­tered Rep­re­sen­ta­tive nor the Bro­ker-Deal­er can con­trol or guar­an­tee future deci­sions made by the DST spon­sor, asset man­ag­er, prop­er­ty man­ag­er, ten­ants, lenders, or oth­er third par­ties involved in the oper­a­tion of the prop­er­ty. Past per­for­mance is not indica­tive of future results. Secu­ri­ties may be offered through MSC-BD, LLC, a mem­ber of FINRA/ SIPC.