In the last couple of years, a shift has been observed in the strategy of multiple real estate investment trusts (REITs), as shown by filings made with the Securities and Exchange Commission. They have been increasingly adopting a Delaware Statutory Trust (DST) program. This tends to include a conversion feature, in which initial investors in the DST program have their beneficial interests converted into limited partner interests within the REIT’s operational partnership. These limited partner interests can then be converted into REIT shares or cash.
This trend has been spotted by seasoned law firm Polsinelli. The adoption of the aforesaid structure as part of capital raise presents numerous benefits for non-traded REITs and real estate funds, as it provides enhanced flexibility from a tax and regulatory perspective. Moreover, it offers relief from certain aspects of the Investment Company Act of 1940.
Accordingly, the use of a DST structure in a capital raise can be particularly advantageous for non-traded REITs and similar type of real estate ventures.
To understand more, here is further reading on the subject of REITs opting to adopt a DST structure as part of their fundraising strategy.