A Delaware Statutory Trust lets you own a fractional, beneficial interest in institutional-grade real estate — and, because the IRS treats that interest as like-kind real property, use it to complete a 1031 exchange.
A Delaware Statutory Trust (DST) is a legal entity that holds title to one or more real estate assets on behalf of many investors. Each investor owns a beneficial interest in the trust rather than a deeded piece of the property, and the trust — through a professional sponsor — handles financing, management, and eventual sale. In 2004, IRS Revenue Ruling 2004-86 confirmed that a properly structured DST interest is treated as like-kind real property, making it eligible as 1031 exchange replacement property.
For investors selling appreciated real estate, that ruling is the whole point: a DST can absorb exchange proceeds — including the debt that must be replaced — without the investor signing on a new loan or managing a building. Minimums are typically $25,000 to $100,000, so a single exchange can be diversified across several DSTs, property types, and sponsors.
Sponsor acquires the asset
A DST sponsor buys an institutional property (or portfolio), arranges any non-recourse financing, and places it into the trust before investors come in.
You purchase beneficial interests
Through a broker-dealer, accredited investors buy interests via private placement memorandum, often using 1031 exchange proceeds within the 45/180-day windows.
The sponsor manages, you receive distributions
All operations — leasing, capital projects, lender relations — are handled by the sponsor and its asset manager. Investors receive their pro-rata share of cash flow, typically monthly.
Full-cycle sale or 721 roll-up
When the trust sells, investors can 1031 again into a new DST, exchange into a REIT via a 721 UPREIT, or cash out and pay deferred tax.
Average current distribution by DST sector
Going-in yield · Q2 2026 · see Data Center for live benchmarksTruly passive
No tenants, toilets, or trash — the sponsor runs everything. DSTs are popular with investors exiting active management.
Debt comes pre-packaged
Non-recourse debt is arranged at the trust level, satisfying the 1031 requirement to replace debt without a personal loan application.
Diversification
Lower minimums let one exchange spread across sectors, geographies, and multiple sponsors instead of a single replacement building.
Backup-strategy fit
Because a DST can close quickly, it is widely used as an identified backup so an exchange doesn't fail at the 45-day mark.
Illiquidity
DSTs are long-term, illiquid holdings — typically 5–10 years — with no public secondary market. Plan to hold to the sponsor's full cycle.
No investor control
The '7 deadly sins' rules that protect 1031 status also prohibit investors from making management decisions; you are a passive owner.
Fees and load
Syndicated DSTs carry sponsor, broker-dealer, and ongoing fees that reduce net return; compare load and projected distributions across offerings.
Market and sponsor risk
Returns depend on the sponsor's execution and on real estate fundamentals. Diversify across sponsors and read each PPM's risk factors.
DST vs. direct property vs. tenant-in-common (TIC)
| Feature | DST | Direct property | TIC |
|---|---|---|---|
| 1031 eligible | Yes (Rev. Rul. 2004-86) | Yes | Yes |
| Number of investors | Unlimited | 1 | Up to 35 |
| Management | Sponsor (passive) | Owner (active) | Shared / manager |
| Financing | Non-recourse, pre-arranged | Investor-arranged | Each co-owner signs |
| Typical minimum | $25K–$100K | Full asset price | Larger |
| Decision-making | None (by design) | Full | Unanimous on key items |
General comparison; specific offerings vary. Not tax or legal advice.
