Evaluating DST Sponsors

In a DST investment, you are not just buying real estate—you are entrusting your capital to a sponsor who will make every decision about the property for the duration of your investment. Unlike direct ownership, you cannot change property managers, negotiate leases, or decide when to sell.

This makes sponsor due diligence arguably more important than property due diligence. A great property with a poor sponsor can underperform, while a capable sponsor can navigate challenges and create value even in difficult circumstances.

Key questions to keep in mind throughout your evaluation:

• Does this sponsor have the experience and resources to execute their business plan?
• Are their interests aligned with mine as an investor?
• How have they performed on past investments?
• Are their claims and projections realistic and well-supported?

While sponsor evaluation is critical, you should also assess the quality of the underlying property and the sponsor's plan for managing it:

Sponsors make projections about future performance. Evaluating the reasonableness of these projections is a key part of due diligence:

Understanding the fee structure and capital structure is essential for evaluating whether the offering is fair to investors:

A good sponsor maintains open communication with investors and provides regular, transparent reporting:

• Regular Updates: Quarterly or semi-annual reports on property performance, occupancy, and significant events.
• Timely K-1s: Annual tax documents delivered in a reasonable timeframe.
• Accessible Team: A responsive investor relations team that answers questions.
• Proactive Communication: Sponsors should inform investors of material developments, both positive and negative.

Ask current or past investors about their experience with the sponsor's communication. A sponsor who goes silent or is difficult to reach is a red flag.