Not all DST asset classes distribute operating-cost risk identically. The structural distinction is between net-lease and gross-lease arrangements, and it determines which party pays when expenses rise.
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When the Tenant Pays
In a single-tenant net-lease structure, the tenant absorbs increases in maintenance, taxes, and insurance rather than the DST. That cost-passthrough protects the trust's net cash flow when operating expenses rise with inflation. The landlord's income stream is largely insulated from the inflationary expense growth that would otherwise compress returns. The trust's income depends on the rent obligation itself, not on the spread between rent and a fluctuating expense line.
When the Landlord Pays
In multifamily and self-storage DSTs, the dynamic reverses. The landlord bears increases in maintenance, taxes, and insurance rather than the tenant, exposing those vehicles to operating-cost inflation. Revenue may keep pace with broader inflation, but operating expenses can outpace rent growth in certain market conditions, narrowing or eliminating the distribution.
The distinction is contractual, not cosmetic. The same inflationary environment produces different distribution outcomes depending on which party signed up to pay the expense line.
Read the Lease Structure Before the Sector
This structural distinction reframes asset-class selection as an inflation-hedge decision, not merely a sector-preference decision. A preference for multifamily over retail, or for industrial over self-storage, answers a different question than the one that matters here: which party contractually absorbs expense growth.
Investors evaluating DST asset classes should confirm which party bears operating-cost increases and model the implications across a range of inflationary scenarios. A distribution that holds up when expenses rise is a function of the lease, not of the sector label on the offering. The operational cost structure of any specific offering is set out in its Private Placement Memorandum, which governs over any marketing material.
Accredited investors can review the lease structures of current offerings against their income requirements through the partnered broker-dealer's intake.