Betty Friant, CCIM, Executive Vice President and Managing Director of Kay Properties & Investments, discusses the Delaware Statutory Trust and its beneficial ownership mechanism in various investment vehicles in a news article. She highlights how DSTs and beneficial interest ownership are used in financial instruments such as mutual funds, corporate bonds, real estate investment trusts, and 1031 exchanges to allow investors to own a piece of a larger asset or investment.
Friant explains the history of the Delaware Statutory Trust, which was established in 1988 to improve the functionality of trusts in structured financial transactions. The DST emerged as a preferred vehicle for organizing and managing assets across various structured financial transactions due to its beneficial ownership feature, which allows investors to access a range of investment opportunities and strategies, particularly for 1031 exchange real estate investors looking to diversify into larger real estate assets.
The concept of beneficial ownership in a DST refers to the right or interest that a beneficiary holds in a trust’s assets and potential income. Each beneficial owner receives 100% of their pro-rata benefits, including distributions, potential appreciation, and equity created through principal pay-down of loans. This feature opens avenues for real estate investors to achieve various investment objectives, with IRS Revenue Ruling 2004-86 approving DSTs for 1031 exchanges.
Friant discusses additional advantages of the DST beneficial ownership structure, including greater diversification and access to larger assets, limited liability for investors, greater flexibility in investment options and strategies, and estate planning benefits. She advises investors to review the risks associated with DSTs, as they entail the same risks as all other real estate investments, such as unexpected vacancies, economic downturns, and unexpected repairs that can impact monthly distributions.
Overall, Friant emphasizes the benefits and potential of DSTs and their beneficial ownership structure for investors seeking to diversify their portfolios, access larger real estate assets, and achieve various investment goals. She encourages investors to consult with their CPA or tax attorney before investing in DSTs to fully understand the risks and potential returns, as appreciation is not guaranteed and the loss of principal is possible. As an Executive Vice President and Managing Director of Kay Properties & Investments, Friant provides valuable insights and guidance on utilizing DSTs for investment purposes.
