DST and 1031 offering: the room exchange investors read
A DST offering sells beneficial interests in a Delaware statutory trust that owns real property, mostly to investors completing a 1031 exchange. The room has to support fast decisions inside the exchange deadlines and show that the trust follows the limits in Rev. Rul. 2004-86.
- 45 daysIdentification period for replacement property, IRC 1031(a)(3)(A)
- 180 daysOutside date to receive replacement property, or the return due date if earlier, IRC 1031(a)(3)(B)
Folder index
- 01 Offering summary Property, total offering size, loan to value, projected distributions, minimums.
- 02 Trust structure Trust agreement, master lease, tax opinion or counsel summary on section 1031 treatment.
- 03 Property Purchase agreement, appraisal, property condition report, environmental report, title.
- 04 Tenants and leases Tenant leases, credit information, rent schedule, expiration profile.
- 05 Financing Loan agreement summary, maturity, rate, reserves, prepayment terms.
- 06 Sponsor Program history with distributions paid against projections, full-cycle results.
- 07 Broker-dealer diligence Third-party due diligence report and sponsor responses, restricted to selling firms.
How this raise works
Under IRC section 1031, an exchanger must identify replacement real property within 45 days of selling the relinquished property and receive it within 180 days or by the due date of the tax return, if earlier. Investors who cannot find a whole property in that window often buy DST interests, which are sold through broker-dealers and registered representatives under Regulation D.
Rev. Rul. 2004-86 held that, on its facts, a DST can be treated as a grantor trust so its beneficial interests count as real property for section 1031. The trustee's role in that ruling is narrow: no new capital contributions, no new properties, no renegotiating the loan or the lease except on tenant insolvency, only minor non-structural changes, short-term government or bank investments for cash, and regular distributions. Sponsors usually address those limits with a master lease structure, and the room should explain it.
Broker-dealers run their own due diligence before they sell an offering, often with a third-party due diligence report. Investors and their advisers then read the PPM, the property reports, the loan terms, the master lease and the sponsor's full DST track record, including programs that cut distributions.
Best data rooms for this raise
The 16 rooms re-ranked with this raise's weights. Investor tracking carries the most weight here.
- Investor tracking 23%
- Permission control 22%
- Raise workflow 19%
- Investor onboarding 20%
- Cost of a raise 16%
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Folder index for the room
A starting index for this raise. Number the folders so the order survives exports and investors can cite them in questions.
- 01 Offering summaryProperty, total offering size, loan to value, projected distributions, minimums.
- 02 Trust structureTrust agreement, master lease, tax opinion or counsel summary on section 1031 treatment.
- 03 PropertyPurchase agreement, appraisal, property condition report, environmental report, title.
- 04 Tenants and leasesTenant leases, credit information, rent schedule, expiration profile.
- 05 FinancingLoan agreement summary, maturity, rate, reserves, prepayment terms.
- 06 SponsorProgram history with distributions paid against projections, full-cycle results.
- 07 Broker-dealer diligenceThird-party due diligence report and sponsor responses, restricted to selling firms.
- 08 Offering documentsPPM, purchase agreement for interests, investor questionnaire.
- 09 Exchange timingIdentification letter templates, closing calendar, qualified intermediary contact steps.
- 10 Q&AQuestions from representatives and investors with answers.
Features this raise needs
| Feature | Why | Ellty | iDeals | Datasite | Ansarada | SecureDocs | Firmex |
|---|---|---|---|---|---|---|---|
| Q&A module | LPs and lead investors post questions on a file; the deal team routes each one, drafts a reply and decides who sees it. | ||||||
| Investor activity log | A per-investor record of opens, pages and minutes, which tells the IR team who is in diligence and who stalled. | ||||||
| NDA e-sign step | Confidentiality terms an investor must accept in the room before folder one appears. | ||||||
| Dynamic watermarks | Stamps the reader and a timestamp over every page, so a PPM that leaks carries its source with it. | ||||||
| 2-step verification | A code or an approval on a second device every time someone logs in. |
Setting up the room
- 01
Separate selling firm access
Broker-dealer diligence materials go to selling firms only. Investors see the offering and property folders.
- 02
Explain the trust limits
Summarize in plain words what the trustee cannot do under the trust agreement and how the master lease handles operations.
- 03
Publish the full program history
Show every prior DST with projected and paid distributions. Representatives ask for it first.
- 04
Support the exchange clock
Post identification templates and a closing calendar so investors can act inside their 45-day and 180-day periods.
- 05
Keep a clean audit trail
Record which version of the PPM each representative and investor received, with dates.
Common mistakes
- Describing a DST as fit for every exchanger without the illiquidity and fixed-structure risks.
- Leaving out loan maturity risk when the trust cannot refinance under its own terms.
- Letting old PPM versions stay available after a supplement.
- Opening broker-dealer diligence reports to investors.
Calculators for this raise
Or take the four-question quiz and check the raise checklist.
Questions and answers
Why does the trust have so many limits?
Rev. Rul. 2004-86 treated the DST as a grantor trust because the trustee had no power to vary the investment. Adding powers can change that treatment, so trust agreements restrict them.
Can DST interests be sold to non-accredited investors?
Most DST programs are offered under Rule 506 to accredited investors only. Check the offering terms.
What if the property needs a new loan?
The trustee generally cannot renegotiate the debt, so trust agreements commonly allow converting to a different entity in a defined distress case. Explain this in the risk factors.