A Delaware Statutory Trust is a passive fractional ownership vehicle that qualifies as like-kind real property for 1031 exchanges. Common for LA sellers stepping down from active management.
DSTs allow investors to own a fractional interest in institutional-quality real estate without active management responsibility. The sponsor handles operations; investors receive distributions proportional to their interest. DST interests are IRS-qualified for 1031 exchange replacement.
Key evaluation criteria: sponsor track record, underlying property quality, fee structure (sponsor load can be high), tenant diversity, and secondary market liquidity.
For LA multifamily sellers over 60 looking to exit active management while preserving tax deferral, DSTs are a common 1031 replacement path. Not universally right — DSTs lock up capital and depend heavily on sponsor quality. Evaluate carefully; the marketing deck is not the investment thesis.
From the Sterman LA Multifamily Glossary — defined the way a broker with $1.41 billion across 254 closed transactions actually uses these terms.
Michael Sterman, Senior Managing Director Investments, Marcus & Millichap.
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