The Complete DST Investment Lifecycle

1. How a DST Comes to Market: The Sponsor's Role

A Delaware Statutory Trust (DST) begins its life with a sponsor—a real estate investment firm that acquires, stabilizes, and places a property within the DST structure. The sponsor is responsible for:

The process typically unfolds as follows: A sponsor identifies a desirable property, purchases it, and places it into the trust. Initially, the sponsor holds 100% ownership of the trust, with rent revenues flowing directly to them. The ultimate goal for the sponsor is to sell shares of this trust to 1031 exchange buyers. Investors can purchase their interests in the DST individually, allowing them to start earning revenue immediately without waiting for other investors to close.

2. Why DSTs Appeal to 1031 Exchangers

DSTs offer significant advantages for 1031 buyers, primarily because they are already acquired and stabilized. This means investors avoid the complexities of:

DSTs are "shelf-ready" investments, having completed due diligence, making it straightforward for 1031 investors to align their timelines. This eliminates the critical risk of failing to identify and close on a replacement property within the strict 45-day identification period of a 1031 exchange.

3. The Syndication Process and Due Diligence

Once the sponsor has stabilized the property within the trust, it undergoes syndication. The trust then holds legal title to the property. As asset managers, DST sponsors typically work with brokers and advisors, like Anchor1031, to connect with potential investors.

Sponsors compile a comprehensive due diligence package for brokers, which usually includes:

These documents are thoroughly reviewed by the broker-dealer, who then determine whether the investment is suitable for potential investors.

4. Our Broker-Dealer: Great Point Capital

At Anchor1031, we partner with Great Point Capital, a broker-dealer that works with a select group of sponsors in the 1031 exchange industry. Great Point conducts rigorous background checks on sponsors and reviews their track records to ensure they meet the highest standards for our platform.

When a sponsor seeks Great Point's recommendation for their DST offerings, they submit their due diligence materials to our team. Our review process includes:

Our analysts then compile questions for the sponsor's asset acquisitions team. If the responses are satisfactory, the DST is added to our platform. This enables our 1031 registered representatives to present these DSTs as potential investment options to our clients.

5. Determining Suitability for Each Investor

A crucial step in our process is determining the suitability of each DST for individual investors. This involves extensive conversations where we educate our clients on the potential upsides and drawbacks of each investment, with a strong emphasis on understanding associated risk factors.

We often engage clients months before their transaction to ensure a thorough education. Our goal is for investors to fully grasp both the potential risks and benefits of every Delaware Statutory Trust property on our platform.

Emphasizing Risk Education

During our educational discussions, we prioritize highlighting the inherent risks in private real estate securities investing. Key topics include:

We ensure our investors understand worst-case scenarios, not just the potential benefits of investing in DSTs. This commitment to transparency is a cornerstone of Anchor1031's "lead with the risk" philosophy.

6. Building Your Diversified Portfolio

Following our extensive conversations and education, we proceed to build a customized portfolio for our clients. We introduce them to various sponsor groups, helping them understand who might be the ideal partner for their 1031 exchange.

Our aim is to assist clients in selecting a portfolio that meticulously balances their risk profile with their financial goals and objectives. We then facilitate the reservation process by contacting sponsor groups to earmark equity in specific properties. This reservation is vital for 1031 exchange investors, especially given the strict 45-day identification period, ensuring availability when their exchange officially begins.