Worksheets · Reading order
How to Read a DST Private Placement Memorandum in Twenty Minutes
A reading-order worksheet for a DST private placement memorandum: ten sections, the minutes to give each, what to note from it, a note column and a checkbox.
What this worksheet does
A DST private placement memorandum runs to a few hundred pages, and most of it is there because securities counsel put it there. Twenty minutes in the right order tells you what the trust owns, what it owes, what you are paying to give up control, and how you get out. This worksheet is that order.
Print it and read with a pen: for each section write the one fact the column asks for, then tick the box. Where the fees hide in the memorandum and in the trust's Form D filing is covered on reading a DST PPM and Form D; the arithmetic on those fees is the fee and load worksheet.
The reading order
Twenty minutes in total. Write one fact per row in the note column; tick the box when the fact is written, not when the section is skimmed.
| # | Section of the memorandum | Min. | What to note | Your note | Done |
|---|---|---|---|---|---|
| 1 | Summary of the offering | 1 | Offering size, price per interest and the minimum; the property in one line; the loan in one line; who the sponsor, the signatory trustee and the master tenant are. The summary is written to sell, and every claim in it is qualified somewhere later. | ||
| 2 | Risk factors | 3 | Skip the risks every memorandum carries (illiquidity, no guarantee, tax law change) and copy the three specific to this property, this tenant, this loan or this sponsor. They are the offering's own view of what can go wrong. | ||
| 3 | The trust agreement and the Rev. Rul. 2004-86 restrictions | 3 | Confirm the trustee may not accept new capital, renegotiate or refinance the loan except on a tenant's bankruptcy or insolvency, reinvest sale proceeds, make more than minor non-structural improvements unless the law requires them, invest cash other than in short-term government obligations, hold cash beyond reserves, or enter into or renegotiate leases except on a tenant's bankruptcy or insolvency. Note whether the agreement lets the trust convert to an LLC when one of these becomes necessary, and who can trigger it. | ||
| 4 | The master lease | 3 | Who the master tenant is (usually a sponsor affiliate), its capitalisation and any guaranty; the base rent, how supplemental or additional rent is calculated, the term, who pays capital items, and what happens on the master tenant's default. The trust's income is this rent, not the property's income. | ||
| 5 | The property and its tenants | 2 | Address, year built, occupancy, the lease roll with expiry dates and renewal options; the appraised value and its date against the trust's purchase price; who sold it to the trust and whether the sponsor owned it first. | ||
| 6 | The loan | 2 | Lender, principal, fixed or floating, interest-only period, maturity date, prepayment terms, cash-management or sweep covenants, the non-recourse carve-outs and who guarantees them. Write the maturity date beside the projected hold. | ||
| 7 | Compensation | 2 | The three-stage compensation table: each payee, each basis, the whole-offering dollar estimate. Transfer it to the fee and load worksheet. | ||
| 8 | The pro forma and reserves | 2 | The sources and uses table (does it add up to the price plus costs?), the reserve line and what it may be spent on, the rent-growth and vacancy assumptions, the sensitivity table if there is one. Read assumptions, not outputs. | ||
| 9 | Conflicts of interest | 1 | Every role an affiliate fills: seller, master tenant, property manager, lender, dealer manager, trustee. More roles means fewer independent checks. | ||
| 10 | The exit | 1 | The projected hold, who decides when to sell, whether the sponsor's REIT holds an option to acquire the property for operating partnership units under section 721, what you would receive in that case, and the restrictions on transferring your interest meanwhile. | ||
| Total | 20 | Then the subscription documents, and the due-diligence questions you want answered in writing before you sign. | |||
Worked example (hypothetical)
A filled sheet for an imaginary trust. Round figures, no sponsor, no address. The three flags at the end are what the sheet is for.
| # | Note written |
|---|---|
| 1 | Equity raised $50,000,000; price $80,000,000; loan $40,000,000. Sponsor affiliate is master tenant and property manager. |
| 2 | One market; one anchor tenant whose lease expires in year six; floating-rate loan with a rate cap that expires in year three. |
| 3 | All restrictions present. Conversion to an LLC at the trustee's election, no beneficiary vote. |
| 4 | Master tenant capitalised with $500,000 and no parent guaranty. Base rent fixed; supplemental rent equals excess cash after the master tenant's costs. |
| 5 | Built 2016; 95 percent occupied; appraisal dated four months before closing at a value below the trust's purchase price. |
| 6 | $40,000,000, floating, interest-only, matures in year seven; cash sweep if debt service coverage falls below the covenant. |
| 7 | Transferred to the fee and load worksheet. |
| 8 | Sources and uses adds to $90,000,000, so $10,000,000 of the equity is costs, fees and reserves. Reserve of $2,000,000 for capital items and lease-up. |
| 9 | The affiliate fills five roles: seller, master tenant, property manager, dealer manager, signatory trustee. |
| 10 | Hold seven to ten years. The sponsor's REIT holds a purchase option exercisable for operating partnership units under section 721. |
Three flags fall out: the loan matures inside the hold on a floating rate with a short cap; the anchor lease ends before the loan does; the appraisal sits below the price. None is disqualifying on its own. Each is a written question for the sponsor before you subscribe, and a reason to compare this trust with two others on the [comparison sheet](/tools/dst-comparison-sheet/).
How the numbers are calculated
The order follows four questions in sequence: what does the trust own, what does it owe, what will I pay, and how do I leave. The summary answers the first roughly; the trust agreement and the master lease say what you are actually buying, which is a right to the master-lease rent from a trustee who may not act; the loan and compensation sections say what comes off the top; the pro forma, conflicts and exit sections say how the sponsor expects the story to end and who controls it.
The restrictions in section 3 come from the facts of Rev. Rul. 2004-86. In the ruling, the trust agreement limits the trustee to collecting and distributing income; the trustee may not exchange the property, buy anything other than short-term government obligations between distributions, accept additional contributions, renegotiate the loan, renegotiate the lease or lease to anyone else except on the tenant's bankruptcy or insolvency, or make more than minor non-structural modifications unless the law requires them, and must distribute all cash less reserves. Sponsors copy those limits into every trust agreement so the ruling's conclusion, that the interest is an interest in the real estate for section 1031, applies.
The trust itself is a creature of 12 Del. C. chapter 38: an unincorporated association created by a governing instrument and a certificate of trust, managed by or under the direction of its trustees, whose beneficial owners get the same limit on personal liability as stockholders of a Delaware corporation under section 3803, and whose governing instrument may contain any provision on management under section 3806. That is why the limits live in the trust agreement rather than the statute, and why you read the agreement rather than assume it.
The memorandum exists because of Regulation D. Under Rule 506(b) an issuer that admits non-accredited purchasers must give them disclosure comparable to a registered offering and make the same information available to accredited purchasers; under Rule 506(c) the issuer may advertise but must verify every purchaser is accredited. The SEC's investor bulletin says issuers may provide a document called a private placement memorandum, and tells you to ask how the money will be used, what your investment professional is paid, and whether you could hold the investment indefinitely or lose all of it. Those three questions are sections 7, 9 and 2 of this sheet. A DST interest is illiquid and the equity can be lost; the memorandum says so in the risk factors, and so should your notes.
Questions about this worksheet
Is a sponsor required to give me a memorandum at all?
Under Rule 506(b), only if the offering admits non-accredited purchasers, who must receive disclosure comparable to a registered offering; an accredited-only offering has no prescribed document, though the antifraud rules still apply to whatever is said. In practice every DST offering carries one. The accreditation tests are on DST accredited investor rules.
What is the difference between the memorandum and the pro forma?
The pro forma is one exhibit inside the memorandum: the sponsor's projection of income, expenses, reserves and distributions over the hold. Section 8 of this sheet reads its assumptions; the line-by-line walk is on how to read a DST pro forma.
What is the conversion clause in the trust agreement?
A provision letting the trust convert into a limited liability company if the property needs something the trustee is barred from doing, such as refinancing or re-leasing. After conversion the entity is taxed as a partnership and the interest no longer qualifies for a later exchange on its own. The trust agreement explained covers who can trigger it.
When do I get to read the memorandum?
In a Rule 506(b) offering, after the sponsor or your broker-dealer has a relationship with you, because the offering cannot be advertised; in a 506(c) offering it can be sent sooner but you must be verified as accredited before you buy. Why most offerings never appear on a public page is on why DST offerings are not listed online.
What do I read after the memorandum?
The subscription documents: the purchaser questionnaire, the subscription agreement, the trust agreement signature page and the wiring instructions for your intermediary. Each is explained on DST subscription documents.
Why is every trust a Delaware statutory trust?
Because the ruling that lets a beneficial interest count as real estate for section 1031, Rev. Rul. 2004-86, was written on the facts of a trust formed under 12 Del. C. chapter 38, which gives beneficial owners the liability shield of corporate stockholders and lets the governing instrument contain any provision on management. Sponsors copy those facts so the ruling applies.
Sources
Figures checked on October 8, 2026. Rates and thresholds change each year; this page is general information, not tax or legal advice.
- IRS, Rev. Rul. 2004-86 (Delaware statutory trust as replacement property)
- 12 Del. C. chapter 38, Treatment of Delaware Statutory Trusts
- 12 Del. C. chapter 38, subchapter I, Domestic Statutory Trusts (sections 3801, 3803, 3806)
- SEC Office of Investor Education and Advocacy, Private Placements under Regulation D, Updated Investor Bulletin
- SEC, Private placements, Rule 506(b)
- SEC, General solicitation, Rule 506(c)
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