Delaware Statutory Trust (DST) 2026: $24.2B of Offerings, and the Failures

What a Delaware statutory trust is, in the words of the law

Two documents define a DST, and neither is a sales brochure.

Delaware law creates the entity. Title 12, Chapter 38 of the Delaware Code says a “Statutory trust” means an unincorporated association created by a governing instrument under which property is held or managed by a trustee for the benefit of beneficial owners. On its own that is just a trust; mutual funds and private credit funds use the same statute.

The IRS decides whether it works for a 1031 exchange, and it did so in Rev. Rul. 2004-86, published in Internal Revenue Bulletin 2004-33 on August 16, 2004. A 1031 exchange cannot be done into “certificates of trust or beneficial interests”; the statute excludes them. The ruling gets around that by treating each investor as a grantor of the trust, so that each one is “considered to own an undivided fractional interest in Blackacre for federal income tax purposes.” Its holding is narrow: “A taxpayer may exchange real property for an interest in the Delaware statutory trust described above without recognition of gain or loss under § 1031, if the other requirements of § 1031 are satisfied.”

“The Delaware statutory trust described above” is the catch. The ruling's trust is deliberately frozen. In its facts, the trust “will terminate on the earlier of 10 years from the date of its creation or the disposition of Blackacre,” the trustee “is required to distribute all available cash less reserves quarterly,” and the trustee may not “accept additional contributions of assets (including money) to DST.” Then it lists what would break it:

Source: Rev. Rul. 2004-86, I.R.B. 2004-33, text saved from irs.gov. The “seven deadly sins” list in sponsor and broker materials is these five powers plus two restrictions from the ruling's facts (no new capital contributions; cash held only in short-term obligations). The phrase itself is industry shorthand, not IRS language.

The escape hatch, and what it costs: the “springing LLC”

Because the trustee cannot refinance or re-lease, DST trust agreements usually include a way out. A 10-K filed by Strategic Student & Senior Housing Trust, which co-invested in its sponsor's DSTs, describes it: to take any of the forbidden actions “that may be necessary to avoid a loss of the property, the DST may be converted into a Delaware limited liability company (a “Springing LLC”).” The price is the tax benefit you bought the DST for: investors “will not be able to do a tax-free exchange when a Springing LLC ultimately disposes of the property.” (Form 10-K for fiscal 2021, accession 0000950170-22-004296.) A DST in trouble can be saved as an asset only by giving up the next 1031 exchange.

The DST market, read from 2,975 SEC filings

Every DST is sold as a private placement under Regulation D, and every Regulation D issuer files a Form D with the SEC. The SEC publishes the data from those forms as quarterly data sets. We downloaded all of them from 2021 through the third quarter of 2026 and kept every issuer whose name contains “DST” or “Delaware Statutory Trust” in a real estate industry group: 2,975 filings by 1,036 trusts. Each DST is counted once, in the year of its original Form D, with the figures from its latest filing.

Source: SEC Form D data sets, 2021Q1-2026Q3; sums and medians are our arithmetic. “Sold” is what each DST reported on its most recent Form D or D/A and is understated: many sponsors never amend after the first filing, and 2026 offerings are still raising.

Three readings of the table:

• In dollars, 2026 is the second-biggest year in the series. Counting only January 1 to September 30 each year, 2026 has 132 new DSTs and $8.10 billion, against 120 and $6.78 billion in 2025, 85 and $3.84 billion in 2024, and 209 and $10.42 billion at the 2022 peak (our sums). A seller being shown DSTs this autumn is shopping in a busy market.
• The entry ticket has doubled. The median minimum moved from $50,000 to $100,000. Of the 415 DSTs first filed since January 2024, 226 ask for $100,000 or more; 137 accept $25,000 or less, and Cove Capital's 42 DSTs list a $1,000 minimum. Among the 274 DSTs that report both a sold amount and an investor count, $776,034 was sold per investor (our arithmetic), with a median of $429,859 per DST. This is a product for six- and seven-figure exchanges.
• Rule 506(c) is now the majority. 235 of the 415 rely on Rule 506(c), which lets the sponsor advertise but obliges it to verify that each buyer is accredited. The large REIT-affiliated programs mostly stay on Rule 506(b).

Who sponsors them

We attributed each DST to its sponsor from the issuer name, address and related persons on its Form D. The fifteen largest, for DSTs first filed from January 2024 to September 30, 2026:

Source: SEC Form D data sets; sponsor attribution, sums and medians are our arithmetic. Individual filings behind the largest figures: ADREX Diversified 10 DST, Form D/A accession 0002090008-26-000002 (September 30, 2026: $489,650,000 offered and sold, 265 investors, $500,000 minimum); Boston Logistics Property DST, accession 0000932440-25-000014 ($591,792,700 offered, $584,656,989 sold, 270 investors); HREX 9, DST, accession 0002100016-25-000001 ($618,397,358 offered).

The shape of the list is the news. The biggest DST programs of 2024-2026 belong to managers that also run non-traded REITs (Ares, Hines, JLL, Blue Owl, Blackstone), with high minimums and a built-in exit: a later swap of the DST interest into the REIT's operating partnership. That exit has its own trade-offs, set out in our page on the DST-to-REIT 721 exchange. What each sponsor charges is not repeated here: the selling commissions and payments to related persons on every 2026 Form D are in our DST fees analysis, and three sponsors have their own pages: Capital Square, Inland Private Capital and Kingsbarn.

When DSTs go wrong: what the record shows

We looked for DST failures in the places where they would be on the record: SEC litigation and administrative releases, FINRA's monthly disciplinary reports, and federal court dockets. The finding is uncomfortable for anyone selling the “regulated, safe” story: the regulators' public record on DSTs is nearly empty, and the damage shows up in bankruptcy court. We read 48 of FINRA's 57 monthly “Disciplinary and Other FINRA Actions” reports from January 2022 to September 2026 (the other nine could not be retrieved) and none names a DST, a Delaware statutory trust or a tenant-in-common interest. Absence there is not proof that no case exists, since the summaries do not always name the product.

Inspired Healthcare Capital: the pattern in one sponsor

Inspired Healthcare Capital is the clearest DST failure on the record, and its own Form Ds and its own bankruptcy filing tell the story without any help.

From the SEC data sets: 32 DSTs named “Inspired Senior Living of ...” or “IHC - ...” filed a Form D between March 2, 2021 and July 8, 2025, listing $888.5 million of offerings (our sum). 29 of the 32 never filed an amendment, so the SEC record shows only $57.8 million sold. The last one, Inspired Senior Living of Beaverton DST, filed its Form D on July 8, 2025 (accession 0002076206-25-000001), reporting a first sale on June 23, 2025, $1,408,511 sold to 7 investors, sales commissions of $3,417,636 on a $37,973,742 offering (9.0%, our arithmetic) itemized as “Selling commissions of $2,278,425 + Dealer Management Fee of $379,737 + DD Allowance of $379,737 + Wholesaling Fee of $379,737,” and a further “Sponsor received $569,607 for O&O & Marketing.”

From the bankruptcy court: the sworn first-day declaration of its chief restructuring officer, filed February 4, 2026, says the sponsor raised “more than $1.2 billion in cash from 3,300 Fund Investors, 2,300 DST Investors, and 200 Development Investors.” The DST structure looked like the ruling's frozen trust: each DST leased its community to a master tenant owned by the sponsor, which paid rent. The rent was not what the buildings earned. The declaration defines “Stated Rent” as “a monthly payment equal to a percentage of the equity invested in the Community,” and then says: “Of the 31 DST Communities, only 8 operated without direct cash subsidy from the Debtor Sponsor.” It adds that money from healthier communities and from the sponsor's investment funds was used “to support other Communities and their related DSTs that were not producing sufficient net operating income to pay their debt obligations or make investor distributions.” And: “On April 30, 2025, the Securities and Exchange Commission (the “SEC”) initiated a formal investigation into the Company.” Payments to investors stopped in June 2025. The Beaverton DST above had its first sale that same month.

The declaration is the debtor's own account, and we found no public SEC charges arising from the investigation as of October 8, 2026. But the mechanism it describes is one any DST buyer can test for.

DBSI, 2008: the same mechanism, twenty years earlier

DBSI sold tenant-in-common interests, the structure DSTs largely replaced after 2004. The SEC's 2015 initial decision barring its founder, Douglas L. Swenson, quotes the trial court's description of the model: DBSI would lease each property back from investors under a master lease “in which the investors would be guaranteed a set return”, typically 7%, and subsidize properties that ran at a loss. The portfolio was represented as self-sustaining; “This was false.” In 2007 and 2008 it had “a negative cash flow of approximately $3 million per month and used new investor funds to meet its existing obligations.” DBSI raised “over $458 million from investors” in 2007 alone. Swenson was convicted on 44 counts of securities fraud and sentenced to twenty years.

The common thread: in both cases the payout to investors was set by a master lease, not by what the property produced, and a sponsor-affiliated tenant covered the difference with other people's money until it could not.

The return question: why there is no honest “average DST return”

“What is the average return on a DST?” is one of the most searched questions about the product, and the honest answer is that no public source can tell you. A DST files a Form D, and the Form D has fields for the offering amount, the amount sold, the number of investors, commissions and the minimum. It has no field for distributions, income or the sale price. DSTs do not file annual reports with the SEC. Any “average” you are quoted comes from a sponsor's own track record or from an industry vendor, and neither is checkable.

What the filings let you say:

• A projected distribution rate is a lease term, not an earning. Inspired Healthcare Capital's “Stated Rent” was a percentage of the equity raised; DBSI's investors were promised “a set return”. When the rent is a function of the money you put in, the rate you are shown says nothing about the building.
• Realized outcomes exist only where a public company happened to invest. Strategic Student & Senior Housing Trust disclosed two sponsor-affiliated DSTs it co-invested in: about $1.03 million into Reno Student Housing DST (October 2017), which sold its property on December 14, 2021 and made a final distribution of about $1.4 million; and about $0.8 million into Power 5 Conference Student Housing I DST (October 2018), which sold on February 9, 2022 with a final distribution of about $1.0 million. Interim distributions are not included in those figures, and two student-housing deals by one sponsor in a strong sale market are anecdotes, not an average.
• The cost is knowable, the return is not. That is why our fee analysis exists: front-end loads from the Form D are the one number you can check before you sign.

Pros and cons, honestly

What a 1031 investor can do with this

1. Pull the DST's Form D before you sign. Search the trust's exact name on SEC EDGAR. Check the first-sale date, the amount sold, the number of investors, the sales commissions and the minimum. A DST that has been “open” for months with no amended Form D is telling you nothing about how it is selling.
2. Ask who the master tenant is and who owns it. If it is an affiliate of the sponsor, ask in writing whether any DST of that sponsor has received rent support or a subsidy from the sponsor in the last three years, and how distributions compared with the projections.
3. Ask what happens at loan maturity. The trustee cannot refinance. Ask for the loan's maturity date, the springing LLC provision in the trust agreement, and whether any of the sponsor's DSTs have converted.
4. Price the deferral against the load. Compute your deferred federal and state tax plus depreciation recapture, and compare it with the dollar load on your investment; the method is in our fee analysis, and the exchange deadlines are in our 1031 rules page.
5. Search the sponsor's name in federal court. As Inspired Healthcare Capital and Kingsbarn show, the first public sign of trouble is usually a lawsuit or a bankruptcy, not a regulator's release.

This is analysis of public documents, not investment, legal or tax advice.

FAQ

Sources, read and saved on October 8, 2026: SEC Form D data sets for 2021Q1 to 2026Q3 (2,975 DST Form D and D/A filings; extract and accession numbers in the CSV) and the Form D XML of ADREX Diversified 10 DST, Boston Logistics Property DST, HREX 9, DST and Inspired Senior Living of Beaverton DST; Rev. Rul. 2004-86, Internal Revenue Bulletin 2004-33 (irs.gov); Delaware Code, Title 12, Chapter 38; Strategic Student & Senior Housing Trust Form 10-K for 2021 (accession 0000950170-22-004296); Declaration of M. Benjamin Jones, In re Inspired Healthcare Capital Holdings, LLC, Bankruptcy Court for the Northern District of Texas, case 26-90004, Doc 33 (February 4, 2026); SEC Initial Decision Release No. 795 (Douglas L. Swenson, May 19, 2015); SEC Exchange Act Release No. 71340 (CapWest Securities, January 17, 2014); FINRA monthly disciplinary reports, January 2022 to September 2026. Sponsor attribution, sums, medians and percentages are our arithmetic. This is analysis of public documents, not investment, legal or tax advice.