Benefits of a Delaware Statutory Trust

One of the main reasons investors are so interested in purchasing an interest in a DST is the benefit of owning securitized real estate. However, a DST provides other benefits to investors, as well.

Eliminates Unanimous Approval Requirement

Unlike a Tenancy-In-Common (TIC) ownership structure, a DST does not require the unanimous approval of all the investors to make decisions related to the held real estate. For example, should the economic environment require the quick sale of a parcel of real estate held by the DST, the decision-making authority to list or sell the property lies with the signatory trustee of the DST rather than the investors themselves.

Limited Personal Liability

Because of the “bankruptcy-remote” provision of every DST, individual investors enjoy limited liability as to their personal assets. Should the DST fail and enter bankruptcy, the most at risk for any individual investor is his or her investment in the trust. Creditors of the trust are limited from reaching any other assets of any investor.

Streamlined Financing

For purposes of financing purchases by the DST, lenders treat the DST as a single borrower (rather than scrutinizing each and every individual investor). This makes financing easier and less expensive to obtain. Likewise, because the individual investor is not subject to a credit screening, his or her individual credit rating is not impacted by participation in a DST.

Loan Carve-Out Requirements Eliminated

Since a DST investor’s rights are limited to only receiving distributions and the investor has no voting authority related to day-to-day operations, investor fraud carve-outs are eliminated for the individual investors. Any lender will only look to the signatory trustee or sponsor for these carve-out provisions.

Lower Minimum Investment

A DST is allowed up to 499 individual investors, which allows the minimum investment amounts to be much lower than with a TIC (which only allows up to 35). This lets investors with less to invest to still participate in a shared-ownership strategy for real estate investments.

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