Single-Tenant Delaware Statutory Trusts (DSTs)

A Strategy for Consistent Returns in Uncertain Markets

Investment stability has become an increasingly sought-after quality in today’s economic environment. For advisors seeking reliable income-generating options for their clients, the single-tenant Delaware Statutory Trust (DST) structure can offer a compelling solution. By focusing on properties leased to essential, creditworthy tenants, single-tenant DSTs can help investors achieve predictable cash flows and reduce exposure to market volatility.

Why Single-Tenant DSTs Appeal in Volatile Markets

Single-tenant DSTs involve properties leased to one tenant, typically under long-term, triple-net leases where the tenant assumes responsibility for property expenses, including taxes, insurance, and maintenance. This arrangement simplifies management requirements and can provide investors with consistent returns, making it particularly appealing during periods of economic instability.

Single-tenant DSTs are also strategically positioned for investors who prioritize security and reliability. This stability is not solely based on lease terms; the quality of the tenant and the nature of their business are equally vital. For example, CAI Investments has structured its MEA (Manufacturing Essential Asset) projects around high-demand industries that continue to thrive despite market fluctuations. These projects underscore the importance of tenant quality in sustaining steady returns.

Case Study 1: U.S. Medical Nitrile & Polyisoprene Chemical Company (USMNPC) – A Strategic Essential Asset

One of CAI Investments’ notable single-tenant DSTs features a 96,000 sq. ft. facility leased to an affiliate of U.S. Medical Glove Company (USMGC), the only U.S.-based glove manufacturer capable of producing its own chemicals for nitrile and non-latex surgical gloves. The property, located in Greenville, SC, was structured as a sale-leaseback, allowing USMNPC to focus on its operational growth while enabling investors to benefit from a secure, long-term lease with an essential tenant in the healthcare sector.

USMNPC’s facility uniquely supports the U.S. Department of Defense and the Department of Health and Human Services, highlighting its role as a mission-critical operation in an essential industry. In uncertain times, sectors such as healthcare continue to demonstrate resilience, and investments tied to these industries can provide investors with additional assurance. With USMNPC’s strong position and essential product offerings, this single-tenant DST exemplifies the potential for consistent returns derived from creditworthy tenants in high-demand industries.

Case Study 2: Revitalizing the Motorola Facility – Leveraging Location and Strategic Redevelopment

CAI Investments’ acquisition and redevelopment of the former Motorola facility in Harvard, Illinois, further illustrates the value of investing in high-quality, single-tenant properties. Originally developed as a major telecommunications manufacturing center, the site presented challenges as market conditions evolved. Recognizing the potential for this strategically located property, CAI implemented a comprehensive redevelopment plan, including updates to zoning and infrastructure and securing Tax Increment Financing (TIF) support to enhance the site’s appeal to prospective tenants.

This approach transformed a dormant asset into an income-generating property, positioning it as a valuable component in CAI’s single-tenant DST offerings. By focusing on tenant suitability and the site’s strategic advantages, CAI turned a previously underutilized facility into a productive investment, benefiting investors through long-term leasing agreements and the potential for significant capital preservation.

Potential Benefits of Single-Tenant DSTs for Investors

• 1) Predictable Income
• Single-tenant DSTs typically feature long-term leases that contribute to predictable income streams. For investors looking to mitigate risk, these leases help ensure steady cash flows with minimal fluctuation.
  
  
• 2) Stability During Economic Uncertainty
• In times of volatility, single-tenant DSTs leased to mission-critical businesses can provide a buffer against economic downturns. Tenants in sectors like healthcare, manufacturing, and essential services are typically less affected by broader economic pressures, enhancing the stability of these DSTs as income-generating assets.
  
  
• 3) Ease of Financing
• Financing single-tenant properties can often be more straightforward, as lenders may find them less risky due to the stability of long-term leases and well-established tenants.
  

Conclusion

For advisors seeking resilient investment options, single-tenant DSTs can deliver stability and predictable returns. Concentrating on creditworthy, mission-critical tenants, this investment structure offers an effective strategy to counteract market volatility, preserving capital and securing steady income for investors.

As CAI Investments’ projects illustrate, single-tenant DSTs provide a possible pathway for achieving dependable income, often making them a prudent choice for investors seeking security in volatile economic conditions.