Research guide

Delaware Statutory Trust Returns: How Fees and Holding Periods Affect the Numbers

By Sequoia ResearchPublished Read as Markdown

What Is This Article About?

Fees affect both how much an investor receives and when money is available. A longer hold can add payments while also adding costs and delaying the largest receipt. This article uses controlled, invented cash flows to separate those effects. It shows how to compare total dollars and annualized results without changing the underlying assumptions halfway through the calculation.

Table of Contents

Begin With a Defined Cash-Flow Baseline

Start with a cash-flow record before debating whether a fee is large or small. Identify the investment amount, each payment, the expected or actual exit amount and the period. Then state which costs those figures already include. A comparison cannot isolate a fee if its starting figures change at the same time.

All examples in this article are invented. They describe a mathematical interest called the Cedar Point position. They are not a review of an offering or a claim about typical DST charges, income or holding periods. No sponsor is offering these terms.

The baseline costs $100,000 and pays $6,000 at the end of each full year. At the end of year five, it also returns $120,000 of exit cash. That exit amount is separate from the fifth $6,000 payment. It includes the cash returned on the original investment; it is not all profit.

The supplied annual and exit amounts are already after property expenses, financing and any costs inside the underlying model. We will add selected investor-level charges that are explicitly excluded from those figures. The example does not reconstruct a building's sale price or operating budget.

The five annual payments total $30,000. Including $120,000 at exit, receipts total $150,000. Subtracting the $100,000 initial payment leaves a $50,000 nominal gain before the selected charges and personal taxes. “Nominal” means we have not adjusted for changes in purchasing power.

For timing comparisons, this article uses equal annual periods. The first payment occurs one period after investment. The last operating payment and exit cash occur together at the fifth period's end. This is an annual-period model, not an actual-day calculation that accounts for leap years or irregular bank dates.

The SEC advises investors to check which fees and expenses a performance figure includes. A return marked “net” is useful only when its deductions are clear. In these examples, every result names its cost scope so that the fee comparisons remain traceable. SEC performance-claims bulletin

Record What Each Fee Applies To

A fee needs more than a name and a percentage. Record its amount or formula, the base used, the party that pays it and when payment occurs. Also note whether the supplied cash flows already include it. These details determine where the fee enters the investor's record.

We will test three selected charges:

Selected charge Stated terms in this example Where it enters
Entry charge $5,000 paid in addition to the $100,000 position Initial investor payment
Annual charge $1,000 deducted from each year-end $6,000 payment Net annual cash received
Exit charge 2% of the $120,000 exit cash before this charge Net exit cash received

All amounts are invented. The entry charge does not reduce the ownership interest in the main comparison because the investor pays it separately. The annual charge is deducted at the same time as the annual cash receipt. The exit charge uses investor exit cash, not the property's price or its debt balance.

If a real fee uses a different base, this table would need to change. One percent of total property value can differ greatly from one percent of investor equity. A charge based on assets under management may use a value that changes. A fixed annual dollar charge does not follow that same formula.

The SEC's fee bulletin distinguishes transaction charges from ongoing expenses and encourages investors to understand the costs they pay. The practical task is to connect those costs with their own cash flows. A fee shown in a property budget and again in a disclosure may be the same charge, not two bills. SEC fee bulletin, July 23, 2025

Save the source page for each term. An adviser can then explain whether a cost is direct, inside the investment, conditional or already deducted. If the answer is unknown, keep it unknown instead of choosing the treatment that produces the better result.

Separate an Added Entry Fee From a Fixed Budget

First add only the $5,000 entry charge. The investor still owns the same $100,000 Cedar Point position and receives the same five $6,000 payments and $120,000 exit amount. The cash paid at the start rises to $105,000.

Total receipts remain $150,000. The nominal gain falls from $50,000 to $45,000. Relative to the $105,000 initial payment, that gain is about 42.86%. It would be misleading to keep the $100,000 denominator while describing the percentage as gain on all the initial cash paid.

The fee also changes the annualized result because more money leaves at the beginning. Under the equal-period method explained below, the rate falls from about 9.32% before the selected fee to 8.14% with only the entry charge. The property's supplied cash flows have not changed; the investor's starting cost has.

Now consider a separate fixed-budget case. The investor can spend only $100,000 total, including a fixed $5,000 charge. That leaves $95,000 for the position. Assume, solely for this example, that fractional interests are available and every cash entitlement scales directly with the amount purchased.

The investor now buys 95% of the baseline position. Annual payments become $5,700 and exit cash becomes $114,000. Five annual payments total $28,500, bringing total receipts to $142,500. The nominal gain over the $100,000 total budget is $42,500. The annual-period rate is about 8.08%.

This is a different experiment from paying $105,000 for unchanged cash rights. It changes the interest purchased as well as the fee treatment. Both examples are valid under their stated assumptions, but their outputs should not be substituted for one another.

A real offering may have minimums, increments or other rights that prevent simple scaling. Check those terms before using a proportional model. “The fee comes out of the investment” should lead to a question about the actual interest acquired, not an automatic spreadsheet adjustment.

Count Recurring Fees for the Actual Period

Return to the original $100,000 position. Apply only the $1,000 annual charge, with no selected entry or exit charge. Each $6,000 gross annual receipt becomes $5,000 after the charge. The $120,000 exit amount remains unchanged.

Over five years, the charge totals $5,000. Net annual receipts total $25,000. Adding exit cash gives $145,000, leaving a $45,000 nominal gain over the initial $100,000. The annual-period return is about 8.38%.

This gain equals the $45,000 gain in the entry-fee-only example, but the timing and starting payment differ. The recurring charge is paid out of later receipts. The entry charge is paid immediately. Equal fee dollars therefore do not guarantee equal annualized results.

Our cash record deducts the annual fee from each receipt. Do not also enter a separate $1,000 outflow on those same dates unless you restore the receipt to $6,000. Either presentation can describe the same cash movement. Using both at once would charge the investor twice.

For a fee paid on a different date, preserve that date. A monthly invoice paid from a bank account does not necessarily occur on the date the investment distributes cash. Combining the two into one annual net amount can be a useful rough model, but it changes the timing detail. State that simplification when using it.

Recurring fees can also continue during periods with no distributions. Our main illustration does not test that contract. In an actual review, a payment stop does not prove that all related charges stop. Read the conditions for accrual, payment and termination separately.

The important questions are how often a charge is incurred and when it is paid. A balance that remains owed can affect later proceeds even if no money has left the account yet. Keep the paid-cash record and the outstanding obligation visible without treating an unpaid amount as a completed cash payment.

Apply the Exit Fee to Its Stated Base

Apply only the selected 2% exit charge to the baseline. Its base is the $120,000 investor exit amount before this fee. The charge is $2,400, leaving $117,600 of exit cash. The five annual $6,000 payments remain unchanged.

Total receipts become $147,600. The nominal gain is $47,600, or 47.60% of the initial $100,000. The annual-period return is about 8.94%. These amounts reflect this one selected fee, not a statement that all sale and account expenses have been identified in a real investment.

A small change in the fee base can change the answer. If the contract instead charged 2% of the $20,000 increase over the initial $100,000, the charge would be $400. That is $2,000 less than $2,400. This is a separate hypothetical formula, not an alternative interpretation of the main case's stated terms.

Likewise, a property-level disposition fee may be based on the whole property sale price. That price has not been supplied in Cedar Point's model. Do not use its $120,000 investor exit cash as a substitute. The missing base must be obtained before that fee can be calculated.

A final payment may already be net of a quoted fee. If so, deducting the fee again reduces the result twice. Ask for the gross-to-net exit schedule, including any amounts held for later bills. An estimate of final proceeds should also show which charges are estimated rather than known.

The exit amount in this article is paid in full at the stated period end. There is no later holdback, installment, retained ownership or claim. Those conditions would require more cash-flow entries or a remaining-value estimate. A single terminal number cannot represent both money received and rights still outstanding without explanation.

Compare the Fees One at a Time and Together

The five-year table holds all underlying annual and exit cash assumptions constant. Only the selected charges change. “Gain” means total cash left after the selected charges, less the initial payment. The percentage uses that initial payment as its denominator, not an undefined industry return measure.

Five-year case Initial payment Net annual payment Net exit cash Nominal gain Annual-period return
Before the selected charges $100,000 $6,000 $120,000 $50,000 9.32%
Entry charge only $105,000 $6,000 $120,000 $45,000 8.14%
Annual charge only $100,000 $5,000 $120,000 $45,000 8.38%
Exit charge only $100,000 $6,000 $117,600 $47,600 8.94%
All three selected charges $105,000 $5,000 $117,600 $37,600 6.85%

For the combined case, the investor pays $105,000 at the start. The first four year-end receipts are $5,000 each. At the end of year five, the investor receives the fifth $5,000 plus $117,600, or $122,600. Total net receipts are $142,600, and the nominal gain is $37,600.

The selected fees total $12,400: $5,000 at entry, $5,000 across the five annual charges and $2,400 at exit. The baseline gain of $50,000 less $12,400 equals the combined gain of $37,600. This dollar check helps confirm that no charge was omitted or counted twice.

The annual-period figures use internal rate of return, or IRR. This finds the rate that makes the value today of the future cash receipts equal the initial payment. It uses each stated payment time. FINRA describes IRR as a cash-flow-based measure and notes that an unsold investment requires an estimated remaining value. FINRA Notice 20-21, IRR discussion

Here, each exit amount is a supplied illustration, not an actual completed-sale result. Solving the equation does not establish that the future cash will occur. It also does not demonstrate that distributions can be reinvested at the calculated rate. The table reports the modeled cash-flow rate, not a promise about wealth accumulated elsewhere.

Change the Holding Period Without Changing the Cash Rules

Now vary the holding period while keeping the same stated annual payments and exit cash. For each duration, the baseline pays $6,000 at every year-end and $120,000 at the final year-end. The combined-fee version pays $5,000 annually and $117,600 at exit, after an initial $105,000 payment.

The terminal amount is frozen across the cases. The model does not assume that an extra year automatically raises the property's value. It does allow another annual payment and annual charge for every added year. That is the controlled difference being tested.

Hold Baseline nominal gain Baseline annual-period return Gain after all selected fees Annual-period return after fees
Three years $38,000 11.93% $27,600 8.44%
Five years $50,000 9.32% $37,600 6.85%
Seven years $62,000 8.23% $47,600 6.18%

In the combined case, each added year contributes $5,000 of net cash. Going from three to five years adds $10,000 to the nominal gain. Going from five to seven adds another $10,000. Yet the modeled annualized return falls because the large exit receipt comes later while its amount stays fixed.

The selected fee totals also rise with the hold. They are $10,400 at three years, $12,400 at five and $14,400 at seven. The $5,000 entry charge and $2,400 exit charge stay fixed; the annual charges accumulate for more years.

This is why “more total profit” and “higher annualized return” are different claims. A longer wait can produce more dollars under these assumptions and still deliver a lower rate per year. Neither measure alone determines which investment an investor should own.

Actual longer holds can also change rent, costs, debt terms, sale prices and risk. Those changes belong in separate scenarios. Combining them immediately would make it hard to see whether a result changed because of the passage of time, added charges or a new view of the property.

Separate Pure Waiting From Extra Years of Operations

A delayed final payment is different from two extra years of normal operations. To isolate pure timing, keep the combined five-year case's five $5,000 payments exactly where they were. Move only the $117,600 exit receipt from the end of year five to the end of year seven.

For this separate illustration, assume there are no further annual fees, operating payments, interest earnings, losses or other changes in years six and seven. Those assumptions are deliberately restrictive. They allow us to measure waiting alone, rather than describe a real delay contract.

The investor still pays $105,000 initially and receives $142,600 in total. The nominal gain stays $37,600. But the annual-period rate falls from about 6.85% to 5.04% because the main receipt arrives two years later.

Compare that with the seven-year operating case in the prior table. That case pays $5,000 in years six and seven as well, so it gains another $10,000 and has an annual-period rate of about 6.18%. It is not the same cash-flow schedule as pure waiting.

A report saying “the hold was extended by two years” is therefore incomplete. Ask what happened during the extension. Were payments made? Did fees continue? Was cash retained, spent or released? Did the final amount change? The answers determine which comparison is appropriate.

FINRA's investor guidance explains that the time held matters and that a simple division of total return by years does not account for compounding. With interim payments, preserve the actual cash schedule as well. A rough average cannot reveal the difference between the two seven-year cases here. FINRA Calculating Your Investment Returns, December 4, 2024

Calculate What a Longer Hold Would Need to Deliver

A useful sensitivity question is how much additional exit cash would offset the longer wait under a chosen set of assumptions. This is a required-result calculation, not a forecast that the property can achieve it. The rate used should also be identified rather than presented as an investor's required return by default.

Use the combined five-year rate, about 6.85%, as a comparison target. Keep the $105,000 initial payment and seven year-end $5,000 payments in the longer case. Then solve for the net terminal receipt needed at the end of year seven to reproduce the five-year rate.

Using the unrounded five-year rate in the calculation, the required net terminal receipt is about $123,931.97. This is separate from the seventh $5,000 annual payment. With a 2% charge on exit cash before that fee, the needed pre-fee exit amount is about $126,461.20.

That is about $6,461.20 more than the original $120,000 pre-fee exit assumption. The result is not a required building sale price. It is the investor exit-cash input in our simplified model. Translating it into a property sale price would require the debt, costs, reserves and payout rights that this example has not supplied.

The threshold also depends on continued annual payments. If those payments stop or decline, the required final amount changes. If fees change, it changes again. Present the assumptions beside the threshold so that nobody carries the number into a different scenario.

This reverse calculation can improve a review discussion. Instead of saying that an extension “should be fine,” ask what cash improvement would be needed to preserve the chosen result and what evidence supports that improvement. A mathematical target makes the question concrete while leaving the business outcome unresolved.

Check Partial Years and Billing Dates

Real holds rarely match neat whole-year models. A fee's billing rule can change the number of charges even when two investors sell only a month apart. Check the contract's start date, renewal date, partial-period policy and termination terms.

In a separate example, a position is held for five years and three months. One invented agreement charges $1,000 per completed year plus a prorated amount for the final three months. Under that stated rule, the total is $5,250: five $1,000 charges plus $250.

Another invented agreement charges the next full $1,000 when the sixth year begins and provides no partial-year refund. That rule produces $6,000 over the same holding time, a $750 difference. Neither result is a default rule for DSTs. They illustrate why the words in the agreement matter.

A monthly arrangement can introduce further detail. The fee may be based on month-end assets, the prior month's balance or a fixed amount. It may stop when the property sells, when cash is distributed or when the account closes. Those dates can differ.

Keep any accrued charge visible through the final calculation. If a final schedule deducts an unpaid fee from exit proceeds, it has been paid through the lower receipt. Do not retain the same amount as an additional liability after the deduction unless another balance truly remains.

For an actual-day return calculation, use the investment and payment dates from the records. A rounded “five years” label may be suitable for a summary, but it does not replace the underlying timeline. Save both the exact dates and the method used so another reviewer can reproduce the result.

Compare the Same Fee Paid at Different Times

The payment date of a fee can matter even when its total amount is unchanged. Consider two separate five-year cases with the baseline's five $6,000 annual payments. Each case charges a single flat $5,000 fee and no other selected fee.

In the first case, the fee is added at entry. The investor pays $105,000 and receives $120,000 at exit. In the second, the investor pays $100,000 initially and receives $115,000 at exit after the same $5,000 fee. Both produce a $45,000 nominal gain.

The annual-period rates differ: about 8.14% with the entry fee and 8.53% with the fee at exit. Paying later leaves less money committed at the beginning under this comparison. The example assumes no interest, extra charge or change in services for delaying the fee.

Do not conclude that any deferred fee is better. A real agreement might increase the amount, impose a minimum, accrue interest or make payment depend on a larger base. A later charge might also remain payable after a weak result. Its complete terms determine the tradeoff.

The same principle applies to a fee waiver. A permanent waiver removes a cost. A deferral moves it. A conditional waiver may reinstate it if a stated event occurs. These are different cash-flow instructions and should have different lines in the review file.

If only the payment timing changes, hold the amount and every other cash input fixed for the first comparison. Then test any additional terms separately. That sequence makes it possible to explain what caused the difference rather than attributing every change to “lower fees.”

Avoid Charging a Fee Twice in the Review

Start every calculation with a clear statement of what is already net. Suppose an investor report shows $5,000 paid after deducting a $1,000 annual charge. Entering $5,000 and then subtracting another $1,000 would report $4,000 of net cash, even though the investor actually received $5,000.

The same mistake can occur at entry. If the recorded $105,000 payment already includes the $5,000 fee, adding another $5,000 overstates initial cash paid as $110,000. At exit, subtracting $2,400 from an amount already reduced to $117,600 would produce $115,200 and repeat the charge.

Use either a complete gross-and-fee record or a verified net receipt with a clear explanation. Keep the detail that supports the net figure. A separate fee disclosure is useful for analysis, but it is not automatically another cash flow.

Also distinguish cash costs from estimates of lost opportunity. The $12,400 of selected fees in the five-year case is a defined nominal amount. Any claim about what that money could have earned elsewhere needs another investment, rate and timing assumption. This article has not added such hypothetical earnings to the fee total.

A source-based fee review can be simple: name the charge, locate its term, show where it entered the cash record and check that it appears once. If a charge is unresolved, use a labeled alternative rather than silently choosing zero. The resulting range is conditional on that missing fact, not a measured range of actual outcomes.

Use the Results Without Turning Them Into a Forecast

The tables explain relationships. They do not estimate what a particular DST will pay. Before applying the method, replace the teaching inputs with records and distinguish paid amounts from projected ones. Keep uncertain exit values visibly separate from completed sale receipts.

The SEC describes private placements as illiquid and notes their limited disclosure. A modeled exit date therefore does not create a right to sell on that date. Actual investment terms, market conditions and available buyers still matter. SEC private-placement bulletin, updated September 21, 2026

A useful review states the original cash schedule, included fees, added fee assumptions and holding-period alternatives. It reports nominal dollars alongside the annual-period rate. It also explains any change to the ownership amount, payment schedule or final value.

Avoid choosing the most attractive cell from each scenario. A shorter hold, larger terminal receipt and lower fee might rely on conflicting assumptions. Keep each scenario intact so that a reader can see the complete set of conditions behind its result.

Finally, separate the calculation from the investment decision. These examples omit personal taxes, inflation, other portfolio needs and the chance that cash will differ from the model. A lower fee does not establish a suitable investment, and a longer hold is not automatically a mistake. The review should make the financial tradeoffs clear enough for an informed decision using the actual facts.

FAQ

Do fees always reduce the calculated result?

When all cash rights and other facts stay the same, an added cost reduces the investor's result. But real comparisons can involve different services, properties or rights. First isolate the fee under fixed assumptions. Then evaluate any differences in what the investor receives. A lower quoted charge alone does not establish a better investment.

Why do equal fee totals produce different annualized returns?

The payment dates and initial cash amounts can differ. A fee paid at entry uses money sooner than the same fee paid years later. Our five-year $5,000 examples have the same nominal gain but different annual-period rates. That comparison assumes no extra cost or other change for paying later.

Does a longer hold always mean a lower return?

No. The result depends on later payments, expenses and exit cash. In the controlled table, the final amount stays fixed, so longer holds add income but reduce the modeled annual-period rate. A different final value or payment schedule could change the result. State those assumptions rather than treating time alone as a verdict.

Can I divide total gain by the number of years?

That gives a simple average, not the cash-flow-based annual-period return used here. It ignores when interim receipts arrive and how much cash is committed. Use a method suited to the payment schedule and preserve its timing assumptions. Actual-day calculations require the actual dates, not just a rounded holding-period label.

What is the difference between a fee inside my budget and an added fee?

An added fee can increase total cash paid while leaving the position unchanged. A fee inside a fixed budget can reduce the amount purchased. The effects depend on the actual rights and purchase terms. Cedar Point shows both cases separately rather than treating them as equivalent.

Should fees shown in a disclosure be subtracted from reported net returns again?

Only if they were excluded from that result. Check the stated cost scope and supporting calculation. A fee can appear in several documents while being paid once. Repeating it understates cash received or overstates cash paid. Preserve the source-to-calculation link for each charge.

Are the example rates forecasts for DST investments?

No. They are results of invented cash schedules chosen to isolate fees and timing. They do not represent market averages, quoted offerings or guaranteed distributions. A real analysis must use its own documents and separate known cash from assumptions about future payments and exit value.

About Sequoia Research

Sequoia Research, LLC provides independent research on DSTs and other real estate investment offerings. This educational library explains how to examine sources, compare defined facts and recognize limits in investment information.

Sources