Selling appreciated real estate comes with a significant tax bill. Capital gains on a property that’s doubled in value over a holding period can consume a meaningful share of the proceeds. Section 1031 of the Internal Revenue Code offers an alternative: defer those taxes by rolling the sale proceeds into “like-kind” replacement property within specific time windows.
Delaware Statutory Trusts have become one of the most popular vehicles for executing that exchange. A DST allows investors to hold fractional, passive interests in institutional-grade commercial real estate while qualifying as replacement property under Section 1031. The structure opens access to asset types (industrial, retail, healthcare) that individual investors couldn’t acquire on their own.
How a DST Works
An investor sells a property, identifies a DST offering within 45 days, and completes the exchange within 180 days. The DST holds the replacement property; the investor holds a beneficial interest in the trust. Capital gains taxes are deferred as long as the exchange is executed properly. Income distributions from the property’s cash flow arrive without the investor managing the asset directly.
The 1031 DST market raised $8.41 billion in equity in 2025, a 49% increase from $5.66 billion the year before. Record-setting volumes reflect both rising property values (which create larger capital gains exposure) and the entry of institutional-scale sponsors that have expanded the product set.
Blue Owl Capital’s Approach
Blue Owl’s OREX programs are designed to feed into ORENT, the firm’s non-traded REIT focused on net-leased commercial properties. After a two-year holding period, the REIT’s operating partnership may acquire DST interests by exchanging them for operating partnership (OP) units, deferring taxes potentially indefinitely. ORENT delivered a gross return of 13.4% and a net return of 10.9% for 2025 on Class I shares, well ahead of the FTSE REIT index total return of 2.3%.
For financial advisors placing client 1031 proceeds, that pathway changes the proposition. The client isn’t locked into a specific property’s exit timeline. There’s a structured route into a diversified, income-producing REIT that outperformed the public market benchmark by a wide margin.
