Cove Capital Commences Diversified DST Seeking to Raise Nearly $15.6M
Cove Capital Investments LLC has completed the purchase of a diversified portfolio in Norton, Va., and Lexington, Kent. The acquisition establishes Diversified Portfolio 94 DST, a Regulation D, Rule 506(c) Delaware statutory trust offering that seeks to raise nearly $15.6 million in equity.
The Virginia asset within the portfolio consists of a net lease industrial facility for an established essential business tenant, and features seven loading docks and abundant yard space to potentially expand the facility in the future.
“This Norton, Virginia, distribution center was custom built in 2024 for the current tenant and based on market survey reports, we believe was acquired at below current market prices,” said Dwight Kay, managing member and co-founder of Cove Capital. “In addition, the building is strategically located in Southwest Virginia, providing easy access to markets in the Appalachian region and beyond.”
The second asset within the portfolio includes a 46,647 square foot multi-tenant retail center located in Lexington. The center has a current occupancy rate of 97% and derives 84% of its income from multiple national tenants.
“This multi-tenant retail center has an average combined daily traffic count of more than 50,000 vehicles and is located in the second largest city in Kentucky with a population of 771,000 residents. We also acquired the asset with a staggered lease schedule providing the opportunity for negotiating renewals and raising rents to market as leases expire,” said Kay.
According to the company, its Diversified Portfolio 94 DST also provides investors the unique opportunity to invest in both an “anchor” and “buoy” asset within a single DST portfolio.
Kay explained that anchor investments provide investors the potential for a more fixed income stream with a lower degree of variability in performance. Conversely, a “buoy” investment has the potential to more efficiently increase rental rates and adjust occupancy or tenant mix, which can be both a value-add opportunity and potential buffer for inflation.
“This portfolio has multiple interesting aspects to it including that it combines a brand new tenant net lease distribution facility located along strategic transportation routes and occupied by an essential business tenant that is a best in-class operator within the global distribution industry. In addition, the Cove Diversified Portfolio 94 DST also includes a multi-tenant retail center occupied by multiple national retailers with upside potential for mark to market rent adjustments,” said Kay.
According to the company, it acquired the asset entirely debt-free and, as a result, mitigated common risks associated with real estate debt, such as mortgage foreclosure, cash flow sweep clauses, and go-dark provisions. Finally, as with most Cove Capital offerings, the firm’s principals will be personally investing in the offering alongside investors.
According to Chay Lapin, managing member and co-founder of Cove Capital, another compelling aspect of the offering is that it has the potential for a 721 exchange rollup as a potential exit strategy.
“Instead of signing up today in a forced 721 UPREIT DST, our investors are going to be given the option to participate in a future potential 721 UPREIT or not – at their discretion,” said Lapin. “This means that at the time of any potential future 721 UPREIT transaction, our investors will be able to analyze the final destination REIT by examining key areas such as: REIT debt levels, dividend coverage ratios, the use of floating rate debt, does the REIT offer 721 investors a tax protection agreement? If so, how long is it for?”
Cove Capital Investments is a private equity real estate firm providing accredited investors access to 1031 exchange-eligible DST properties, as well as other real estate investment offerings. The team consists of acquisitions, asset management, accounting, due diligence, in-house counsel, investor relations, marketing, and capital markets. Cove Capital has sponsored over 3 million square feet of 1031 DST and real estate offerings in the multifamily, net lease, industrial, and office sectors in 35 states nationwide.
Click here to visit the AltsWire directory page.
