A Delaware Statutory Trust (DST) is a legal entity, formed under Delaware law, that allows multiple investors to own a fractional beneficial interest in institutional quality real estate. In a 1031 exchange, a DST can be used as replacement property because you are exchanging into an interest in real estate, not shares of a company.
Most DST offerings are sponsored and professionally managed. The sponsor acquires and operates the underlying property (such as multifamily, industrial, self storage, medical office, or net lease assets), while investors participate in potential income and appreciation without having to manage the property day to day.
For 1031 exchange investors, DSTs are often used to help:
- Meet strict 1031 deadlines when direct property purchases are difficult
- Replace management intensive rentals with passive, professionally managed real estate
- Diversify across multiple properties or markets by splitting exchange proceeds
- Pursue predictable cash flow potential through stabilized assets
Like any investment, DSTs have risks and limitations. They are typically illiquid, have sponsor and offering fees, and investors have limited control over decisions. A DST may be a good fit if you want passive real estate ownership and need a replacement property solution that can align with 1031 exchange requirements.