Delaware Statuary Trusts


Delaware Statutory Trusts


While many Exchangers are content to use their local real estate professional to find a property in their own area, others desire a more diversified selection of property types and geographic locations. Some also desire to transition from an active ownership and management role into a more passive one. If that is the case, Breakwater Capital can help you build a diversified portfolio of several different types of like-kind investment properties (multi-family, healthcare, retail, industrial, etc.). 

The 45-day identification period moves very quickly and often creates needless stress. Our experienced team of securities and real estate professionals monitors the DST market daily. This means that at any time you have access to a fully-vetted, turnkey 1031 exchange solution where the loan, tenants and cash flow are already in place for a seamless 1031. And our streamlined process makes for both a simple and straightforward process.


A Replacement Property that meets the financial requirements of your exchange

One of the greatest benefits of selecting a Delaware Statutory Trust as a 1031 Replacement Property is being able to select the exact undivided interest which meets the financial requirements of your exchange. You determine how much you want to invest as well as how much debt you want the DST sponsor to assign to you. Obviously this means that you will be owning the property with other similarly situated investors and you will be receiving your portion of any property rents every month as well as the tax benefits.

We offer a seamless solution for your 1031 exchange. The 45-day identification period moves very quickly and often creates needless stress. Our experienced team of securities and real estate professionals monitor daily the available Delaware Statutory Trusts in the marketplace. This means that at any time you can have access to a fully-vetted, investment grade real estate alternative. And our streamlined process makes for both a simple and straightforward 1031 exchange.



When you invest l031 money into a DST, you take on partial ownership of the equity and debt. These sample clients’ investments provide tangible examples of what your DST could  potentially look like. 

investor spotlight

Smith Family

Sold Beach House.
Exchanged Into DST (10% Owner)







Main St. Apartments, DST

$20,000,000 Equity Offered / 7.0% Cash Flow / 60% LTV

investor spotlight

David Williams

Sold Industrial Building.
Exchanged Into DST (5% Owner)







DST 101

What is a Delaware Statutory Trust?
A Delaware Statutory Trust, or DST, is a legally recognized real estate investment trust in which investors can purchase ownership interest. Investors who own fractional ownership are known as beneficiaries of the trust. DSTs, unlike many other co-ownership real estate investment structures, are 1031-eligible. For many exchangers, DSTs are a better option than a traditional “whole property” exchange, where the investor sources and acquires 100% of a property (a “whole property”) and actively manages that property.
Timing Consideration of a 1031 Exchange
Timing is one of the most challenging aspects of a Section 1031 exchange. The taxpayer has only 45 days from the sale of their relinquished property to identify potential replacement properties, and up to 180 days to close the acquisition of one or more replacement properties. In addition to the time constraints, other factors can make exchanges very difficult to accomplish, including:

• complexity of the tax rules
• limited supply of replacement properties
• debt requirements
DSTs Solve These Challenges
DSTs are structured to satisfy the like-kind requirement and provide the same tax benefits as direct ownership of real estate. Combined with impressive returns generated by skillful and experienced sponsors, the simplified investment process makes DSTs a superior option for many exchangers. DST sponsors, such as Capital Square, have an inventory of qualifying DST replacement properties, solving the 1031 timing issues.

These properties have already been acquired by the DST; if the DST is leveraged, the loan is in place with no personal liability to the investors; and all due diligence has been completed, with investors given electronic access to documents and reports (title, survey, appraisal, environmental report, property condition report, roof report, etc.).
Benefitting Your Heirs
You can continue to defer capital gains taxes using the 1031 exchange process until you pass assets onto your heirs. DST shares can be evenly divided and passed on to multiple heirs, greatly simplifying investors’ estate planning.When real property is passed to your heirs, whether held directly or through a DST, the basis by which the capital gains are determined steps up to the current market value at the time of inheritance. After your heirs inherit the property, they may sell it for its current value and bypass any capital gains you amassed within your lifetime.
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Delaware Statutory Strust Investment Sponsors

Pros and Cons of DSTs

No Management Responsibilities

The DST is the single owner and agile decision maker on behalf of investors.


Most real estate investors can’t afford to own multi­million dollar properties. DSTs allow investors to acquire partial ownership in properties that otherwise would be out-of-reach. 


Loans are nonrecourse to the investor. The DST is the sole borrower. 

Lower Minumum Investments

DSTs can accommodate much lower minimum investments, typically around $100,000.


Investors can divide their investment among multiple DSTs, which may provide for a more diversified real estate portfolio across geography and property types. 


If you intend to leave behind your real estate to multiple heirs, DSTs provide the opportunity to break up individual properties into multiple properties. Each DST could have their own beneficiary and exact dollar figure attached to it.


If for some reason the investor can’t acquire the original property they identified, a secondary DST option allows them to meet the exchange deadlines and defer the capital gains tax. 


Any remaining profit on the sale of your relinquished property is considered “boot.” This remaining money becomes taxable unless you eliminate it. The excess cash (boot) can be invested in a DST to avoid incurring tax. 


The DST structure allows the investor to continue to exchange real properties over and over again until th investor’s death. 


Can close in as little as 3-5 business days with no interaction with a bank and possibly continue your cash flow uninterrupted as soon as the following month. 


As long as there is available equity, exchangers can make reservations in a given DST until their sale closes. Should they change their mind or if their sale doesn’t close, the investor is not obligated to the sponsor, nor will they be charged any penalties.


Not for those seeking outsized returns in a short amount of time or are pursuing aggressive growth strategies (developing or deep value adds). 

Lack of Control

Not for investors who need 100% control.


Interests of a DST should be considered illiquid just like any other real estate, especially if you invest via a 1031 exchange.

Inherent DST Qualities

DSTs were created specifically for those seeking to perform a 1031 exchange, but also in mind for investors preferring to place their funds into an asset with the potential for stable, income producing properties.

These investments were designed for the tax sensitive investor seeking income, capital preservation and a more conservative approach (with appreciation secondary).

Low Leverage

Most DSTs employ an LTV between 0% to 60%

Fully Stabilized

The property must meet certain occupancy thresholds before it comes out to investors.

Less Speculative Investment Strategy

Sponsors cannot employ high-speculation tactics like ground-up developments or deep value-adds

DST Diversification

Attempting to reduce risk in real estate real estate investments is possible by practicing diversifica­tion. Instead of investing in a single property with concentration risk, prudence dictates investing in a number of properties with different investment and risk parameters.

By investing in different asset classes, different loca­tions and properties leased by different tenants, you may be able to mitigate certain risks associated with investing in a concentrated invest­ment. By diversifying your holding periods, all of your investments will not mature and have to be sold at the same time. If you invest in Delaware Statutory Trusts, it also is practical to diversify by sponsorship so that your assets are not all managed by the same real estate firm.


Multi-Family DST

Multifamily DST portfolios are typically your more conservative investment. One of the biggest benefits of investing in multifamily real estate is the promise of a reliable monthly cash flow from renters.


Self-storage can be an excellent investment choice. The short-term leases (often month-by-month) potentially make self-storage a super-efficient investment choice.

Senior Housing

With baby boomers aging Senior Housing could potentially be a smart and lucrative investment. 2 million Americans will live in senior care communities by 2030, doubling from 2016, ensuring a steady source of revenue. (Source: CNBC “Aging Baby Boomers Raise The Risk of a Long Term Care Crisis in the U.S.”)


Forecasts suggest the demand for healthcare-related real estate should continue growing. REITs are likely to benefit from steadily rising rental rates on existing properties. (Source: The Real Deal: “Healthcare real estate investment expected to hit $25B this year: report”)


Industrial real estate tends to provide more passive income than residential real estate. The average rental yield for industrial property in the US is significantly higher than the average for residential and office properties. (Source:

Corporate-Leased Triple Net

Investors often purchase NNN property to provide passive income for their family and to fund their retirement. NNN property also will be an anchor in the financial legacy you leave when you pass.

Putting it all Together

A Hypothetical Client Allocation

One of the single greatest advantages of utilizing DSTs in a 1031 exchange is the power to diversify your investment. In the example below, we took an investor exchanging their single-family rental into multiple DSTs. They are still taQking on similar real estate risk, but are now more diversified in several aspects: Number of properties & tenants, multiple geographic locations and a balanced mix of asset classes and strategies.

Breakwater Can Handle the Debt for You

The DST seeks to secure non-recourse financing at favorable terms

The DST sponsor leverages their strong lender relationships to attempt to obtain financing terms investors would most likely not be able to obtain on their own.

The DST assigns the pro-rata share of debt to the investor

The DST Assigns The Benefits Of The Debt But Retains The Obligations. The Debt Is Non–Recourse To The Investor. The Investor Does Not Need To Qualify For The Debt Personally.

Investors can relax and know the debt is handled!

Investors fulfill their debt requirements without the headache associated with qualifying for and being liable for the debt obligations.

Hypothetical Case Study

The IRS allows individuals to bypass the capital gains tax on the sale of real estate if they invest the proceeds into a “like kind” investment, effectively creating a exit strategy for assets that are highly appreciated. However, actually pulling this off is no easy feat and requires a considerable amount of timing and knowledge. Affluent families have been using this tactic for decades as a means to avoid capital gains and minimize the tax impact of their real estate holdings to their heirs. Like our hypothetical outcome as expressed below, we can show you how to take advantage of this rule, and provide turnkey 1031 exchange solutions that take away the complexity typically associated with this type of transaction.


John & Cindy, a married couple in their 60’s, owned several rental properties in Southern California that had done quite well. Even though they were making a good income, one property in particular was aging and needed some work in order to attract the quality tenant that John & Cindy were accustomed to. Now a decision had to be made; either spend a considerable amount to make the improvements, or sell the property and pay massive capital gains taxes. John was aware of the concept of a 1031 exchange, but the complexities and timing issues were preventing him from taking full advantage of it.


By utilizing a 1031 exchange we were able to reinvest the proceeds from the sale of their property into three different DSTs. Each of these properties were institutional quality assets utilizing different strategies located in multiple states.  Furthermore, their was no 1031 exchange risk or an interruption in rental income for John & Cindy.


John & Cindy were very satisfied with the fact that they were now much more diversified investors and not having to rely on just a handful on tenants.  In addition, their after-tax net income from the property increased from approximately $45,000 annually to over $60,000 annually. John & Cindy also loved that they no longer had to manage the day to day issues that came with the property and had more time to enjoy their retirement together.

The hypothetical scenarios provided herein are meant only to demonstrate mathematical principals. There can be no guarantee of performance or that any investment will achieve its stated objectives.

Completed Deals

Our mission is to provide a state-of-the-art platform and resources so you can make confident investments. We offer a turn-key solution for your 1031 exchange to streamline your investment process while we handle the logistics. We personalize our services to your unique investment goals and needs to empower you throughout the investment process.

Astoria at Celebration, DST


NB Private Capital

Purchase Price

LTV Ratio

Year(s) Built

Min. Investment

Asset Class

DATE ADDED: SEP 01, 2020

Net-Leased Portfolio, DST


Exchange Right

Purchase Price

LTV Ratio

Year(s) Built

Min. Investment

Asset Class
Net-Leased Portfolio

DATE ADDED: AUG 20, 2021

Inspired Senior Living, DST


Mercer Asset Management

Purchase Price

LTV Ratio

Year(s) Built

Min. Investment

Asset Class
Senior Living

DATE ADDED: FEB 12, 2022