Kay Properties vs. Passco Companies: How Two DST Sponsors Actually Differ for 1031 Exchange Investors

TL;DR: Kay Properties & Investments is a marketplace. It doesn't sponsor its own DSTs; it gives investors access to offerings from more than 25 different DST sponsor companies and helps them pick and diversify across those firms. Passco Companies is one of those sponsor companies. It sources, underwrites, and manages its own multifamily and commercial properties directly, with no marketplace layer between the investor and the asset. Neither model is better in the abstract. The right one depends on the size of your exchange and whether you want breadth or a single operator you can vet down to the studs.

What Is a DST, and Why Does the Sponsor Matter?

A 1031 exchange lets a real estate investor sell an investment property and defer capital gains tax by rolling the proceeds into a "like-kind" replacement property, under Section 1031 of the Internal Revenue Code. A Delaware Statutory Trust, or DST, is one of the few structures the IRS has approved as replacement property for that purpose. Under IRS Revenue Ruling 2004-86, a beneficial interest in a properly structured DST counts as like-kind real estate, even though what you actually own is a fractional interest in a trust that holds the property, not a deed in your own name.

The "sponsor" in a DST is the company that finds the property, negotiates the purchase, structures the trust, and manages the asset for the life of the deal, typically five to ten years. The sponsor also usually acts as, or appoints, the trustee. A DST is legally passive once it closes. You cannot vote to fire the property manager or push through a renovation. You are underwriting the sponsor's competence as much as the building itself. That is why the identity of the sponsor, or in Kay's case, the identity of the many sponsors it works with, is close to the whole decision.

Kay Properties: A Marketplace, Not a Property Owner

Kay Properties & Investments, founded by Dwight Kay and based in Los Angeles, does not buy, develop, or manage real estate. It operates an online marketplace at kpi1031.com where accredited investors can browse DST offerings from other companies. The firm says its platform typically lists 20 to 40 active DST offerings at a time, sourced from more than 25 sponsor companies spanning multifamily, net lease, industrial, medical office, and self-storage. Kay Properties reports that clients have deployed capital into more than $20 billion of real estate offerings since the firm's founding, and that its team has completed more than 10,000 individual DST, 1031, and 721 UPREIT transactions.

The pitch is straightforward. Most financial advisors have selling agreements with one or two DST sponsors, so they can only show clients what those firms happen to be offering that month. Kay Properties instead functions as a broker-dealer-affiliated advisory shop that shops the whole market on the client's behalf, then layers its own due diligence on top of what each sponsor already submitted. That includes reviewing the appraisal, environmental reports, loan terms, and fee structure for every listed deal, and comparing the purchase price against comparable sales.

The tradeoff is that Kay Properties is an intermediary, not the operator. When something goes wrong with a property, accountability sits with the sponsor that built and manages the deal, not with Kay. Kay's value is in selection and access, not in construction quality, lease-up execution, or day-to-day asset management. Kay Properties, like any broker-dealer-affiliated advisor, is compensated through the same selling-commission structure baked into each DST's fee load. Its economic interest is tied to closed transactions across its sponsor network, not to any single deal performing well.

Passco Companies: One Sponsor, One Platform, Its Own Buildings

Passco Companies is a real estate operator, not an intermediary. Founded in Irvine, California in 1998, Passco was built by the late Bill Passo, who helped pioneer the tenant-in-common 1031 structure that preceded the modern DST. Passco reports roughly $4.1 billion in current assets under management, more than $8 billion in lifetime acquisitions, and ownership or management of about 30,000 multifamily units concentrated in the Southeast and secondary and tertiary markets. Independent sponsor tracking from Baker 1031 Investments lists 46 full-cycle DST programs from Passco, deals that were bought, held, and sold, with an average annual return near 11.74%, an average equity multiple of about 1.88x, and an average hold period near 5.6 years across that sample.

On Realized 1031's sponsor directory, Passco discloses 73 real estate programs since its formation, raising approximately $1.37 billion from more than 4,464 investors and acquiring 77 properties for a combined purchase price near $3.25 billion. Those are Passco's own reported figures, not independently audited totals. Past full-cycle performance says nothing about how any future offering will perform, and DST distributions are targets, not guarantees, that can be reduced or suspended if a property underperforms.

Because Passco is vertically integrated, its acquisitions team, asset managers, and property managers are typically Passco employees or affiliates, not subcontracted third parties. That concentrates control in one place. It also concentrates risk in one place. Your outcome depends on how well Passco underwrote and now runs that specific property, with no marketplace layer independently re-checking the sponsor's own numbers, beyond whatever due diligence your broker-dealer performs.

How the Fee Math Actually Differs

Every DST, regardless of sponsor or how you found it, is built on roughly the same fee architecture, as Baker 1031 Investments lays out in detail. There is an upfront load made up of selling commissions, dealer-manager fees, organization and offering costs, and an acquisition fee, typically running in the high single digits to low double digits as a percentage of equity raised. There are ongoing fees during the hold, chiefly an annual asset management fee plus a separate property management fee, paid from operating cash flow before you see a distribution. At sale, the sponsor usually collects a disposition fee, sometimes a promote above a return hurdle. Total sponsor compensation across these buckets commonly lands in an 8% to 15% range of equity raised over a typical hold, though the exact figure for any offering only lives in that deal's private placement memorandum, or PPM, the formal disclosure document every DST must provide.

The difference between Kay Properties and Passco is not that one charges fees and the other doesn't. Every DST on Kay's marketplace, including Passco offerings when they appear there, carries that same fee stack, because the sponsor built it. The difference is who else sits in the fee chain. Kay Properties has argued publicly that a one-time, fully disclosed DST commission, which it puts at roughly 5% in its own materials, compares favorably over a decade-plus hold against a 1% annual assets-under-management fee some registered investment advisors charge. That comparison favors Kay's brokerage model over a competing advisory-fee model. It is worth checking against your own advisor's fee schedule, but it is not a Kay-versus-Passco comparison, since Passco is a sponsor, not a fee-based advisor.

With Passco, because it is both sponsor and, often, property manager, more of the fee stack stays inside one company. Fewer intermediaries take a cut, but there is also less independent friction checking whether the sponsor's own fees and acquisition pricing are fair. With Kay Properties, an additional selling and advisory layer sits between you and the sponsor, and Kay's stated practice of comparing acquisition price against third-party appraisals is one way that layer earns its keep. Read the "Compensation to Sponsor" section of any PPM before you commit capital. That section, not the marketing brochure, is where every fee is itemized.

Comparing the Two Models Side by Side

Dimension	Kay Properties & Investments	Passco Companies
Business model	Marketplace/aggregator, broker-dealer-affiliated advisory firm	Vertically integrated sponsor, owner, and manager
How it earns money	Selling commissions and advisory fees tied to DSTs closed across its 25-plus sponsor network	Acquisition, asset management, property management, and disposition fees on properties it sponsors directly
Property sourcing and underwriting	Reviews and compares deals sourced by outside sponsors, does not originate properties itself	Originates, negotiates, finances, and manages its own acquisitions in-house
Track record transparency	Aggregates and discloses sponsor track records across many firms via its own due diligence process	Publishes its own history: ~$4.1B AUM, $8B+ lifetime acquisitions, 46 tracked full-cycle programs per Baker 1031
Diversification	Easy to spread one exchange across multiple sponsors, asset classes, and geographies	Diversification limited to Passco's own property types and markets unless paired with other sponsors separately
Best-fit investor	Exchangers who want breadth, comparison shopping, or to split capital across several operators	Exchangers who want to concentrate with one operator they can vet deeply, often for larger multifamily-focused exchanges

What Are the Real Risks of Each Approach?

The marketplace model's main risk is diffusion of accountability. If a Kay-sourced DST underperforms, the responsible party is the sponsor that built it. Kay's own due diligence, however thorough, is a screening layer, not a guarantee, and it does not own the building. A second risk is breadth itself. With 25-plus sponsors and dozens of live offerings, an investor can end up comparing deals on headline distribution rate alone instead of digging into each sponsor's specific fee stack and track record, which still varies firm to firm on the same platform.

The single-sponsor model's main risk is concentration. Put your entire exchange into one sponsor's DSTs, and your outcome rides on that company's underwriting discipline, balance sheet, and execution across every property you're in. A DST is legally frozen once it closes. The trustee cannot renegotiate a bad loan or fire an underperforming lease-up plan the way an active owner could. If a sponsor mistimes an acquisition or over-levers a property, there is no marketplace-level second opinion sitting between you and that outcome, only whatever due diligence you or your advisor did before closing. Passco's 46 tracked full-cycle programs and 11.74% average return are a real, disclosed history, but a history of prior programs is not a projection for the next one. DST offerings carry no guarantee of distributions, no assured liquidity, and no public resale market.

Which Model Fits Your Exchange?

Exchange size matters more than most investors assume. DST minimums commonly start around $100,000, so a $250,000 to $500,000 exchange can realistically spread across only two or three DSTs before minimums crowd out true diversification. For an exchange that size, a marketplace like Kay's can still add value by helping you pick the two or three best-fitted sponsors out of 25, instead of taking whatever one or two sponsors your existing broker happens to sell.

A larger exchange, $2 million or more, has room to actually diversify within a single high-quality sponsor's platform, spreading across several of that sponsor's own multifamily properties in different markets, while allocating a portion elsewhere for true sponsor diversification. If you have already vetted a specific operator like Passco, through its disclosed track record, property tours, or an advisor who has followed the firm across cycles, going direct removes a layer of intermediary compensation and gives you a cleaner relationship with the entity actually managing your capital.

Neither path removes the need for basic diligence. Read the PPM's use-of-proceeds table to find the load. Check the loan-to-value ratio and whether the loan's maturity matches the sponsor's planned hold period. Ask how many of the sponsor's prior programs went full cycle, bought, held, and sold, with capital returned, versus how many are still open. That question applies whether you found the deal through a 25-sponsor marketplace or by walking straight into one operator's office.

Frequently Asked Questions

Is Kay Properties itself a DST sponsor?

No. Kay Properties & Investments is a broker-dealer-affiliated marketplace and advisory firm. It sources offerings from more than 25 outside DST sponsor companies rather than sponsoring, owning, or managing property itself. Some listings are custom DSTs made available exclusively to Kay clients, but the underlying sponsor company, not Kay, builds and manages those trusts.

Does Passco offer its DSTs through platforms like Kay Properties?

Passco Companies distributes its DST offerings through multiple channels, including broker-dealers and marketplaces such as Kay Properties and Realized 1031, in addition to direct relationships with financial advisors. An investor can potentially access a Passco DST either directly or through a marketplace. The underlying property, sponsor, and fee structure for that specific offering are the same either way.

Which company has a longer track record?

Passco was founded in 1998 and has sponsored 73 real estate programs, according to its own disclosures, with 46 tracked as full-cycle DST programs by independent sponsor-tracking site Baker 1031 Investments. Kay Properties was founded roughly two decades ago and reports facilitating more than 10,000 individual DST, 1031, and 721 UPREIT transactions across its marketplace, but that is transaction volume as an intermediary, not its own operating history, since it does not sponsor property.

Can I use both models in the same 1031 exchange?

Yes. Many exchangers split proceeds across multiple DSTs to satisfy diversification goals, and there is nothing preventing an investor from allocating part of an exchange to a Passco-sponsored DST found through a marketplace like Kay's, and another part directly with a different sponsor. The main constraints are DST minimum investment amounts, which commonly start near $100,000, and the total size of your exchange proceeds.

Author Disclosure: Jeff Barnes, MBA has no personal position in any company, fund, or platform named in this article. Angel Investors Network has no current commercial relationship with any party mentioned. AIN provides marketing and education services, not investment advice. Past performance does not guarantee future results. All investments involve risk, including loss of principal.