A sponsor is a real estate corporation that buys a specific property that is structured under a newly created DST. Most individual real estate investors would be unable to purchase such huge institutional-grade properties on their own.
Apartment complexes, office buildings, NNN properties, assisted living, self-storage, medical offices, student housing, industrial buildings, and even golf courses are all purchased through a DST. After the property is purchased, investors are offered DST interests, which are sold through secondary escrow closings until the DST’s equity is sold. Cash flow dividends are paid to investors on a monthly basis based on their ownership interest.
The sponsor provides investors with a Year-End Operating Statement every year that includes all of the information they need to report their income, deductions, and depreciation to balance their taxes, including valuation. DSTs are bought for the purpose of completing a 1031 exchange and then sold for a profit in the future. DSTs are often sold seven years after purchase, but this varies depending on the property and market conditions. Each investor receives their proportionate part of the net sales revenues when the property sells.
Investors have the option of taking the cash proceeds or doing another 1031 exchange to continue deferring their taxes.