Sponsor

In real estate private placements such as Delaware Statutory Trusts (DSTs), Opportunity Zone funds, and private REITs, the sponsor is the company that organizes, structures, and manages the investment offering. The sponsor sources and underwrites the property or portfolio, arranges any financing, forms the trust or fund entity, prepares the offering documents including the private placement memorandum, raises capital from investors, and oversees ongoing asset and property management. Through an affiliate acting as the master tenant in a DST, or as the general partner or manager in a fund, the sponsor also handles the active, day-to-day decisions that the passive investors cannot. Because investors are entirely dependent on the sponsor's competence and integrity, sponsor due diligence is one of the most important parts of evaluating an offering: investors and their advisors examine the sponsor's track record across full market cycles, the performance of prior offerings (including any that lost money or failed to meet projections), the firm's financial strength and depth of management, its fee structure and alignment of interests, and any litigation or regulatory history. Sponsor fees, which can include acquisition, asset-management, disposition, and other charges, reduce investor returns and should be understood in full. The sponsor's compensation and conflicts of interest are disclosed in the private placement memorandum.