ARCTRUST Exchange DST Overview
ARCTRUST Exchange DST is a Delaware statutory trust, formed on February 5, 2026 by ARCTRUST Exchange Holdings LLC (the Depositor), offering up to $12,245,000 of Class A beneficial interests to accredited investors seeking replacement property for a Section 1031 exchange. On February 17, 2026 the Trust acquired a six-property, single-tenant, net-lease portfolio for an aggregate purchase price of $17,709,934. The portfolio pairs three CVS pharmacies - two in Alabama (Hoover/Birmingham and Millbrook) and one in Charleston, West Virginia, each leased to a CVS entity guaranteed by CVS Health Corporation - with three Pinnacle Bank retail branches in North Carolina's Piedmont Triad (two in High Point and one in Thomasville). Every property is a one-story, freestanding, 100% triple-net-leased building, and the three pharmacy assets include drive-through service. Interests are priced at $1,000 each, with a 50-interest ($50,000) minimum, and are offered under Rule 506(c) of Regulation D with general solicitation, limited to a maximum of 480 holders. ARCTRUST Exchange ST LLC serves as Trust Manager and United Corporate Services, Inc. is the Delaware Trustee. The business plan targets current income distributed at annualized rates beginning at 5.01% and rising to 5.37% over the first five years, preservation of capital, and a sale of the portfolio in approximately five years, with the Trust scheduled to terminate on February 1, 2031. Acquisition financing consists of an $8,855,000 loan from Provident Bank, fixed at 5.75%, interest-only with a balloon at maturity. The DST structure delivers passive, fractional ownership eligible for 1031 exchange treatment, and beginning two years after the offering closes the Trust Manager holds an optional fair-market-value/Exchange Entity mechanism that can offer holders a potential tax-deferred path into an affiliated ARCTRUST REIT. The offering suits 1031 exchangers who want investment-grade-guaranteed pharmacy income blended with regional bank-branch leases, who accept illiquidity and no management control, and who value a defined, relatively short projected hold.
Highlights
The portfolio is geographically diversified across four distinct markets in three states, reducing reliance on any single local economy. The two Alabama CVS stores sit in the Birmingham/Hoover metro and the Montgomery MSA (Millbrook, in Elmore County), the latter a roughly 1,221-square-mile market of about 385,000 residents with a retail vacancy rate of 6.5% as of Q4 2025 and a diversified base of manufacturing, logistics, healthcare, education and business services. The Charleston, West Virginia pharmacy anchors the state capital market, and the three Pinnacle Bank branches are clustered in North Carolina's Piedmont Triad - two in High Point and one in Thomasville - an established furniture-and-manufacturing region within commuting distance of Greensboro and Winston-Salem. Each site is a freestanding, hard-corner-style retail pad with dedicated parking (38 to 63 spaces per site) and, at the pharmacies, drive-through access, positioning the assets on well-trafficked suburban commercial corridors that support essential retail and banking uses.
All six buildings are one-story, freestanding, single-tenant properties leased on a triple-net basis, so tenants carry taxes, insurance and maintenance - and, at the CVS stores, even structural upkeep. Credit quality anchors the portfolio: each of the three pharmacy leases is guaranteed by CVS Health Corporation, a large investment-grade, publicly traded company, while the three North Carolina branches are leased to Pinnacle Bank, a Tennessee banking corporation. Remaining lease terms extend well beyond the projected five-year hold: the Birmingham and Millbrook CVS leases run to February 28, 2036, the Charleston CVS lease to January 31, 2041, and the three Pinnacle Bank leases to late 2037 (Eastchester and Westchester to December 31, 2037; Thomasville to October 31, 2037). Every lease carries multiple five-year extension options (five successive options at the CVS stores, ten at Charleston, two at each bank branch). The Pinnacle Bank leases also step base rent up roughly 2% per year, providing contractual income growth alongside the pharmacy cash flow.
The Trust financed the acquisition with a single $8,855,000 loan from Provident Bank at a fixed 5.75% interest rate, structured interest-only for its entire five-year term with a balloon due at the February 1, 2031 maturity. Because the loan is interest-only and rate-locked, holders are insulated from interest-rate resets and rising-rate cash-flow pressure during the hold, and no cash flow is diverted to principal amortization. Leverage is moderate: the loan represents roughly 41.98% of the $21,091,810 offering value and about 50.00% of the $17,709,934 aggregate property cost (approximately 48.5% of the $18,250,000 appraised value). The Loan is nonrecourse to the Trust, with customary nonrecourse carve-outs backed by an indemnity from principal Gary Baumann as guarantor. A 50-interest purchase carries an allocated share of roughly $36,158 of the loan, giving each holder proportionate access to the leverage. The conservative loan-to-cost ratio provides an equity cushion beneath the debt relative to the acquisition basis.
The offering is sponsored by the ARCTRUST Group of Companies, a vertically integrated real estate organization that since 1985 has been involved in the development, acquisition and joint-venture funding of over 500 properties with an aggregate value of more than $5 billion. Affiliated ARCTRUST REIT vehicles, advised by ARCTRUST Capital Advisors, L.P. (formed 2009), have collectively raised more than $350,000,000 in gross offering proceeds and invested in over 200 real estate and real estate-related investments valued in excess of $850,000,000; from 1993 to 2008 the advisor also served ARC Corporate Realty Trust, a publicly registered non-listed REIT specializing in net-lease properties. The platform's leadership includes Gary S. Baumann, Esq. (CEO and Chairman of ARCTRUST III, an attorney with the group since 2005), Jason Kessler (President and Chief Investment Officer, a former Bear Stearns and Lehman Brothers professional who joined in 2014), and Silvia P. Fernandes, Esq. (Chief Legal and Operating Officer). The group has earned industry honors including ICSC, EPA Phoenix and Globe Street awards.
Structured as a Delaware statutory trust, the offering is designed so that a holder's beneficial interest qualifies as like-kind replacement property under Section 1031 of the Internal Revenue Code, allowing an exchanger to defer capital-gains and depreciation-recapture tax while stepping out of active management. Investors receive passive, fractional ownership of a stabilized net-lease portfolio, current income, and a pro-rata share of depreciation, with tenants bearing operating costs under the triple-net leases. For the eventual disposition, beginning two years after the Offering Termination Date the Trust Manager holds a fair-market-value (FMV) Option to acquire the interests for cash or for units in an Exchange Entity, and ARCTRUST may cause an affiliated ARCTRUST REIT to acquire the interests - a Section 721-style path that could let holders roll into a REIT on a tax-deferred basis rather than recognizing gain. The value under the FMV Option is set by independent appraisal within 90 days of exercise. These features give a 1031 investor both entry-stage tax deferral and a potential tax-efficient exit, though the FMV and REIT options are discretionary and never guaranteed.
Analysis of ARCTRUST Exchange DST
Insights
For a 1031 exchanger, ARCTRUST Exchange DST reads as a credit-forward, defined-hold income vehicle rather than a growth play - a bond-like wrapper around investment-grade net-lease rent with a scheduled exit. The headline return is a roughly 5.0% initial annualized distribution rising toward about 5.37% over the projected five-year hold, underpinned by CVS Health-guaranteed pharmacy rent and Pinnacle Bank branch leases. Against the net-lease benchmark that pricing is unremarkable: average and peak yields meet the market while projected growth screens below it - fitting a portfolio whose two Alabama CVS leases are flat through their initial terms and whose fixed rents cannot reprice upward. This is durable income bought at a market coupon, not at a discount. Coverage bears watching: the Year-1 payout ratio is about 1.01, so first-year distributions marginally exceed first-year NOI and lean on financing and reserves for the last sliver rather than being fully earned by the properties - and the initial reserve is a slim $8,190, leaving no slack if a tenant stumbles early.
The number that governs total return is the entry load. Holders buy in at a $21,091,810 value while the Trust paid $17,709,934 for the real estate and BDO appraised the leased-fee interest at $18,250,000 - an entry basis roughly 16% above appraised value and 19% above what the sponsor itself paid, on top of an 8.25% total load at the heavier end of the DST range. That premium must be recovered through cap-rate compression or rent growth for holders to get full capital back at exit - a real headwind when every lease carries fixed rent that cannot rise if market cap rates do. The crux is exit-cap-rate sensitivity against a load-inflated basis: the debt is interest-only, the full $8,855,000 balloon falls due at the February 1, 2031 maturity, refinancing is contractually prohibited, and the sale window compresses into a roughly three-year band after the two-year lock - timing risk concentrated on a single, non-negotiable date. We would watch tenant durability as the income swing factor: CVS is actively rationalizing its store base even under a corporate guaranty, and branch banking faces secular pressure from digital adoption, though remaining terms to 2036-2041 (pharmacy) and 2037 (bank) comfortably span the hold.
The non-obvious tradeoff: leverage is genuinely conservative - about 42% of offering value, 50% loan-to-cost - so the real risk is not a debt blow-up but that low leverage plus a rich entry price cap the upside, leaving holders dependent on exit pricing they do not control. An optional FMV Option and ARCTRUST REIT 721 roll-up could offer a tax-deferred exit, but both are discretionary and priced net of a 4% commission. The parent is seasoned (500-plus properties, $5 billion-plus since 1985) yet has only about four full-cycle programs behind it near an 11% average annual return, and this is effectively its DST debut through a newly formed manager whose PPM openly discloses prior programs that missed projections and cost investors capital. Net: this suits an income-oriented exchanger who wants passive, investment-grade-backed cash flow on a defined timeline and can accept a market coupon, single-tenant concentration (six assets, two tenants), and a balloon-driven exit. Those who need diversification, rent growth, liquidity, or a below-market entry basis should pass. Income durability hinges on CVS and Pinnacle staying in place; total return hinges on the exit cap rate measured against that load-inflated basis.
Advantages
Accessibility and credit: the $50,000 (50-interest) minimum opens an institutionally structured net-lease portfolio to individual exchangers, and three of the six leases are guaranteed by investment-grade CVS Health Corporation, with the balance leased to Pinnacle Bank. True triple-net structure shifts taxes, insurance and maintenance (including structural work at the CVS stores) to tenants, supporting predictable cash flow. Lease duration is a strength: contractual terms run to 2036 (Alabama CVS), 2041 (Charleston CVS) and 2037 (Pinnacle Bank), all extending beyond the projected five-year hold, and the bank leases escalate roughly 2% annually while every lease carries multiple five-year renewal options. Diversification across four markets in Alabama, West Virginia and North Carolina and across two essential-use property types (pharmacy and bank branch) tempers single-location exposure. Financing is conservative and locked: a fixed 5.75%, interest-only, nonrecourse loan at roughly 42% of offering value (about 50% loan-to-cost) removes interest-rate and amortization drag during the hold. The plan offers targeted monthly income beginning at 5.01% and rising to 5.37%, a defined approximately five-year horizon, and an experienced, vertically integrated sponsor with a track record dating to 1985. Finally, the DST wrapper provides 1031 tax deferral on entry, passive ownership with no landlord duties, and an optional FMV/ARCTRUST REIT mechanism that could enable a tax-deferred exit.
Concerns
The interests are illiquid: no public market exists or is expected, transfers are restricted under securities laws and capped at 480 holders, and investors must be prepared to hold for an indefinite period. Holders have no voting rights and no control - all decisions rest with a Trust Manager (ARCTRUST Exchange ST LLC) that is newly formed with no operating history managing a DST or single-tenant retail, so investors rely entirely on the sponsor. All six properties are held in a single entity and pledged as collateral for one loan, creating cross-default and cross-liability risk, and the portfolio is undiversified - concentrated in two tenants (CVS-guaranteed pharmacies at roughly half the value and Pinnacle Bank at the balance) and in net-lease retail. The $8,855,000 loan is interest-only with a balloon due February 1, 2031, and the Trust is prohibited from refinancing; if a sale cannot be completed, the Projects may be transferred to a Springing LLC, causing holders to lose 1031 eligibility. Reserves are minimal - an initial reserve of just $8,190 - so unexpected costs could reduce distributions or force a conversion or sale. The two Alabama CVS leases carry flat base rent during their initial terms, exposing income to inflation, and because the leases have fixed rents, rising capitalization rates could depress the eventual sale price and returns. Costs are significant: selling commissions and expenses of up to 8.25%, plus a markup - holders acquire interests at a $21,091,810 value versus the $17,709,934 purchase price and $18,250,000 appraised value - and the sponsor earns ongoing fees ($79,593 annual management fee, disposition fees, and a 4% commission deduction under the FMV Option). The PPM candidly discloses that some prior ARCTRUST-affiliated programs did not meet projected income and that some investors lost all or a significant portion of their investment. Single-tenant assets are hard to re-lease due to special design, tenant-credit risk is real (including retail-pharmacy store rationalization and secular pressure on bank branches), and tax treatment depends on continued compliance with IRS Revenue Ruling 2004-86, with reserve amounts potentially treated as taxable boot.
ARCTRUST Exchange DST — Complete Offering Data
Offering & Structure
Investment NameARCTRUST Exchange DST
SponsorARCTRUST
StructureDelaware Statutory Trust (DST)
Offering Type506(c)
StatusAvailable
Last Updated2026-08-03
Size & Availability
Total Offering$20,355,000
Equity$11,500,000
Debt$8,855,000
Available Equity$11,500,000 (100% of equity)
Minimum Investment$50,000
Total Load8.25%
Initial Reserves0.07%
Property
Property TypeNet Lease
StrategyCore
LocationAL, NC, WV
Market TierTier 3
Income & Projections
Average Yield4.75%
Projected Yields (Y1–Y10)Y1 5.01% · Y2 5.10% · Y3 5.19% · Y4 5.28% · Y5 5.23% · Y6 4.12% · Y7 4.08% · Y8 4.31% · Y9 4.42%
Tax-Adjusted Yield11.85%
Cap Rate Equivalent8.56%
Year 1 NOI$1,129,369
Y1 Payout Ratio1.08
Financing
In-Place LTV41.98% LTV
LenderProvident Bank
Loan TypeFixed
Interest Rate5.75% (Fixed)
Loan Term9 years
I/O Period5 years
Amortization25 years (after I/O)
Y1 DSCR2.19x
Exit
Estimated Hold Period5-9 years
721 Exchange ExitOptional
Benchmarks (vs sector median)
Avg. Income4.75% vs 5.10% market — Meets Average
Growth5.39% vs 7.54% market — Below Average
Peak5.28% vs 5.33% market — Meets Average
Every data point Baker 1031 tracks for this offering, in one place. Figures are drawn from the offering’s private placement memorandum and sponsor materials unless noted, are summaries for convenience only, and are qualified in their entirety by the PPM. Tap the ⓘ icon next to any label for what it means and how it is calculated.
