In the context of the Delaware Statutory Trust (DST) industry, an Exit Strategy refers to a plan outlining how investors can realize a return on their investment or exit the investment.
A well-defined exit strategy will consider the best methods and timing to liquidate holdings, maximize returns, and minimize losses, taking into account market conditions, legal factors, and the specific characteristics of the investment. In the case of a DST, this could involve the sale of the underlying real estate assets held by the trust, a refinancing strategy, or a 1031 exchange, where the assets are exchanged for another property of equal or greater value to defer capital gains taxes.
DST sponsors typically have a planned holding period (generally between 5 to 10 years) after which they implement the exit strategy. However, the actual timing can depend on numerous factors, including market conditions and the performance of the trust’s assets.
It’s important to note that each DST will have its own unique exit strategy, and investors should make sure they understand these details before investing.