Passco Preston Ridge DST Overview
Passco Preston Ridge DST is a Delaware statutory trust sponsored by Passco Companies that offers accredited investors a fractional, passive interest in Preston Ridge, a 340-unit multifamily apartment community situated on approximately 24.07 acres in Hickory, North Carolina, within the Hickory-Lenoir-Morganton MSA (Catawba County). The community was delivered in two recent phases - Phase I completed in 2020 and Phase II completed in 2023 - and comprises a mix of one-, two- and three-bedroom units averaging 960 square feet, roughly 326,381 rentable square feet in total, served by 654 parking spaces. As of the January 8, 2026 rent roll the property was approximately 89.12% occupied, at an average in-place rent of $1,570 per month. The Trust acquired the property on January 8, 2026 for a purchase price of $71,300,000 from an unaffiliated seller. The Offering raises up to $44,350,000 of equity through the sale of up to 8,870 Class A Beneficial Interests at $5,000 per Interest, with the balance of the roughly $83.6 million capitalization funded by a $39,215,000 fixed-rate, non-recourse loan from KeyBank, N.A. under the Fannie Mae DUS program. The Trust holds the property under a triple-net master lease to an affiliated master tenant, with day-to-day operations handled by Fogelman as property manager. Interests are offered only to accredited investors under Rule 506(c) of Regulation D. Because the vehicle is a DST holding stabilized replacement real estate, it is designed for Section 1031 exchange investors seeking to defer capital-gains taxes while stepping out of active management, as well as cash investors seeking passive monthly income. The minimum investment is $100,000 (20 Interests) for a 1031 exchanger and $25,000 (5 Interests) for a cash purchaser. The anticipated hold is approximately 10 years, with the Trust scheduled to terminate on April 30, 2036.
Highlights
The property sits in the Hickory-Lenoir-Morganton, North Carolina MSA, in Catawba County - a small but improving Sun Belt metro. According to the PPM, the MSA generated approximately $19.612 billion in GDP in 2023 and ranked 97th among small cities for 2018-2023 wage growth in the Milken Institute 2025 Best-Performing Cities rankings. Local unemployment compressed from roughly 5.57% in 2015 into the low-to-mid 3% range before the pandemic and has largely recovered since. The immediate area is anchored by healthcare and manufacturing employers including Catawba Valley Medical Center (a facility generating roughly $1.45 billion in annual revenue about three miles from the site), Corning, Frye Regional Medical Center, MDI and UNC Health Blue Ridge. Resident median household income at the property is approximately $75,000 - above the surrounding one-, three- and five-mile radii, Catawba County and North Carolina medians - and the cost of home ownership in Hickory exceeds the cost of renting at the community, which supports ongoing rental demand.
Preston Ridge is a newer, two-phase community completed in 2020 and 2023, so a substantial share of the asset is recently built and, per the PPM's Needs Assessment, in good condition - limiting near-term capital-expenditure exposure relative to older-vintage product. The 340 units span one-, two- and three-bedroom floor plans averaging 960 square feet, with roughly 326,381 rentable square feet and 654 parking spaces including surface, garage, handicap and cross-easement stalls. Tenancy quality is a genuine highlight: residents carry a median household income near $75,000 and earn roughly 3.98x their monthly rent, while paying only about 25.11% of income toward rent - below the 27.6% national rent-to-income ratio - which suggests both headroom for rent growth and resilience against payment stress. Average in-place rent was $1,570 per month as of the December 1, 2025 rent roll, and approximately 45% of residents earn $80,000 or more per year.
The Trust's leverage is conservative and fixed. Acquisition financing is a $39,215,000 loan from KeyBank, N.A. under the Fannie Mae DUS program - roughly 55% of the $71,300,000 purchase price - at a fixed interest rate of 5.01%, which the Trust bought down by 25 basis points for $784,300. The loan is non-recourse to the Trust and to the Holders, insulating investors from personal liability on the debt. It is interest-only through February 1, 2033 before amortizing, and matures on February 1, 2036, aligning with the roughly ten-year projected hold. Fixed-rate, agency-backed financing removes interest-rate reset risk during the hold, and the moderate loan-to-value leaves an equity cushion against value declines. The lender also requires ongoing monthly replacement-reserve deposits of $5,667 and maintains a lender-controlled reserve of $136,000, adding a measure of capital discipline over the term.
The offering is sponsored by Passco Companies, which together with its predecessor Passco Real Estate Enterprises, Inc. and affiliate Passco Companies Development, LLC has sponsored real estate investment programs since 1998 - giving the platform more than two decades of multifamily acquisition, management and 1031/DST syndication experience. The Trust Manager, Passco Preston Ridge Manager, LLC, is a Passco affiliate responsible for managing the Trust for a fixed administrative fee ($13,750 for the initial 2026 period and $25,000 per year thereafter). Day-to-day operations of the community are handled by Fogelman, an experienced third-party multifamily operator engaged under a management agreement, which also compiled the due-diligence and lease-audit reports underlying the offering. CSC Delaware Trust Company serves as the independent Delaware Trustee. This affiliated-manager, third-party-operator structure is typical of institutional DST programs and lets Holders remain entirely passive.
Structured as a Delaware statutory trust, the offering is designed to qualify as replacement property for a Section 1031 like-kind exchange, allowing real-estate investors to defer capital-gains and depreciation-recapture taxes while transitioning from active ownership to a fully passive interest. Holders receive their pro-rata share of income and depreciation and, at disposition, another 1031 exchange may be available. The PPM also describes an FMV Option: beginning two years after the Offering Termination Date, the Trust Manager may - but is not obligated to - acquire the Interests for cash or, at the Holder's election and subject to suitability, for units in an Exchange Entity, offering a potential tax-efficient exit akin to a Section 721 UPREIT-style conversion. The minimum 1031 investment is $100,000, and the roughly ten-year hold suits exchangers seeking long-term deferral. Holders not already filing in North Carolina may be required to file a state income tax return there.
Analysis of Passco Preston Ridge DST
Insights
Read Passco Preston Ridge as a capital-preservation coupon in a growth-story costume — a low-leverage, fixed-rate bet on stabilized Sun Belt multifamily that pays you to wait, not to win. Projected cash yield averages about 4.81%, opening at 4.45% and cresting at 5.19%; the benchmark screen flags income and peak yields as Meets Average but growth Below Average, so this is a hold-for-the-coupon deal, not an appreciation play. The strength is the balance sheet: roughly 47% LTV, non-recourse agency debt fixed at 5.01% and interest-only into 2033, which strips out the rate-reset and refi risk that sank levered 2021-vintage DSTs. Year-1 distributions are covered by NOI at a 1.08x payout ratio — thin, but genuine coverage, not a return of capital, and rare for a DST at 89% going-in occupancy. The 7.65% load is mid-pack — market freight for an institutional sponsor and agency debt.
The crux is the exit. With the coupon defended by low leverage, total return lives or dies on the terminal cap rate at a roughly 2036 open-market sale — there is no 721/UPREIT off-ramp — into a small Hickory MSA that CoStar pegs at high-teens vacancy and ~1.4% rent growth. Watch submarket absorption and where caps sit in 2035.
What the marketing buries: distributions don't rise in a straight line. They peak at 5.19% in Year 7, then fall to 4.72% in Year 8 — exactly when interest-only expires and amortization begins eating cash flow. Note: Passco's 46 exits averaged a 5.6-year hold, yet this deal is underwritten to ten, so its 1.89x historical equity multiple is not the base case.
Verdict: own it if you're a 1031 exchanger who wants fixed-rate, low-leverage passive income and can sit through a decade of illiquidity, concentration, and no control. Pass if you need total-return upside, inflation-beating rent growth, or expect to match Passco's back-catalog multiple — this asset wasn't built for it.
Advantages
Preston Ridge offers accredited 1031 exchangers a genuinely passive way to complete an exchange into stabilized, recently built multifamily without taking on active management. Advantages specific to this offering include: (1) Newer asset - both phases were delivered in 2020 and 2023 and are reported in good condition, limiting near-term capital needs. (2) Conservative, fixed financing - the $39,215,000 KeyBank/Fannie Mae DUS loan is roughly 55% loan-to-value, non-recourse to Holders, fixed at 5.01% (bought down 25 basis points), interest-only through February 2033, and maturity-matched to the roughly ten-year hold, removing floating-rate and refinancing-during-hold risk. (3) Strong resident profile - median resident income near $75,000, rent-to-income of about 25.11% (below the 27.6% national average), and residents earning roughly 3.98x rent, all of which support collections and rent growth. (4) Favorable rent-versus-own economics in Hickory, where owning costs more than renting at the community. (5) Institutional sponsorship - Passco has sponsored programs since 1998 and pairs its affiliated Trust Manager and master tenant with Fogelman as third-party operator. (6) Tax efficiency - a DST structure aimed at 1031 qualification, monthly distributions projected to begin near 4.45% and rise toward 5.19%, and a potential FMV/Exchange-Entity option that could provide a tax-deferred off-ramp at disposition. (7) Comparatively low minimums for the space - $100,000 for exchangers and $25,000 for cash investors.
Concerns
The PPM is explicit that an Interest is speculative and that a Holder should be able to afford the loss of all or a substantial part of the investment. Specific, PPM-sourced risks include: (1) Illiquidity - there is no public market for the Interests and transfers are restricted and subject to consent and suitability, so capital is effectively locked up for the roughly ten-year hold. (2) No control - Holders have no voting rights over daily operations, cannot remove the Trust Manager, and cannot decide when the property is sold; the Trust generally may not sell until at least two years after the Offering Termination Date. (3) Single-asset concentration - the Trust owns one apartment community in one small MSA, with no diversification across property, tenant or geography. (4) Leverage and balloon - the $39,215,000 loan requires a balloon payment at its February 1, 2036 maturity, is interest-only until February 2033 (so little principal is repaid), and the Trust is not permitted to refinance; if the property cannot be sold or the loan repaid, continued ownership could be jeopardized through the Springing LLC. (5) Reliance on affiliates - the Trust Manager and master tenant are Passco affiliates, creating conflicts of interest, and distributions depend on the master tenant paying rent, which is not guaranteed. (6) Reserve-supported distributions - projected returns rely on assumptions and may be supported by reserves and by the interest-rate buydown rather than solely by operations. (7) Occupancy and market softness - the property was only about 89.12% occupied at acquisition, and CoStar projects the submarket to average roughly 15.88% vacancy and only about 1.37% annual rent growth through 2029. (8) Fees and load - a meaningful portion of equity covers commissions and fees (only about 76.93% of equity funds the real-estate acquisition), and the price paid to redeem the Depositor's interests ($44,350,000) exceeds its $37,723,122 cost basis. (9) Tax risk - 1031/DST treatment is not guaranteed and could be affected by a conversion to the Springing LLC.
Passco Preston Ridge DST — Complete Offering Data
Offering & Structure
Investment NamePassco Preston Ridge DST
SponsorPassco
StructureDelaware Statutory Trust (DST)
Offering Type506(c)
StatusClosed
Last Updated2026-08-10
Size & Availability
Total Offering$83,565,000
Equity$44,350,000
Debt$39,215,000
Available Equity$0 (0% of equity)
Minimum Investment$100,000
Total Load7.65%
Initial Reserves9.50%
Property
Property TypeMultifamily
StrategyCore-Plus
LocationNC
Market TierTier 3
Income & Projections
Average Yield4.81%
Projected Yields (Y1–Y10)Y1 4.45% · Y2 4.56% · Y3 4.56% · Y4 4.69% · Y5 4.96% · Y6 5.05% · Y7 5.19% · Y8 4.72% · Y9 4.87% · Y10 5.02%
Tax-Adjusted Yield11.29%
Cap Rate Equivalent8.36%
Year 1 NOI$4,097,524
Y1 Payout Ratio1.08
Financing
In-Place LTV46.93% LTV
LenderKeyBank, N.A.
Loan TypeFixed
Interest Rate5.01% (Fixed)
Loan Term10 years
I/O Period7 years
Amortization30 years
Y1 DSCR2.06x
Exit
Estimated Hold Period10 years
721 Exchange ExitNone
Benchmarks (vs sector median)
Avg. Income4.81% vs 4.85% market — Meets Average
Growth16.63% vs 24.76% market — Below Average
Peak5.19% vs 5.55% 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.
