Cove Capital Investments, LLC (“Cove Capital”) announced it has completed the formation of its Texas Small Bay Industrial Portfolio 86 DST offering that highlights two highly sought after small bay Industrial assets in the income tax free State of Texas.
Cove Capital Investments, LLC, a Delaware Statutory Trust sponsor company that specializes in providing accredited investors access to debt-free options for their 1031 exchange and direct cash investments, announced it has recently completed the acquisition of two properties to finalize its new Texas Small Bay Industrial Portfolio 86 Delaware Statutory Trust offering.
According to Dwight Kay, Managing Member Founder of Cove Capital Investments, the Cove Texas Small Bay Industrial 86 DST is unique in that it provides investors the opportunity to invest in a newly constructed small bay Industrial portfolio in the greater Houston region.
“This small bay industrial portfolio is compelling for a number of reasons. First, we believe there are potential opportunities for adding value as leases roll whereby we will seek to bring them to market rates. Second, the ability to potentially pass inflationary expense increases onto our tenants via the in place triple net leases at the properties. Third, this small bay industrial portfolio DST offering is a fully debt-free investment that was created with the purposeful investment strategy of mitigating common risks associated with real estate debt, such as mortgage foreclosure, cash flow sweep clauses, and go-dark provisions,” explained Kay.
The small bay asset class has become the darling of industrial real estate in recent months as investors are attracted to smaller properties with multiple tenants because they provide the opportunity to potentially add value by raising rents to market rates with lease terms that are typically 12 to 36 months. In addition, investors face less risk from large event vacancies as small bay assets often involve multiple tenants across a wide variety of industries as opposed to the larger, single tenant industrial properties.
The recently assembled DST portfolio includes two properties with a total of five buildings located in the greater Houston MSA.
The first property is located in Katy, TX and includes three buildings totaling 29,165 square feet. The asset is 100% leased and was built in 2023.
The second property is located in Richmond, TX and consists of two newly constructed buildings situated on 2.52 acres with a total of 40,000 net rentable square feet. Located in a dense residential corridor of Southwest Houston with a population of more than one million people located in a 10-mile radius, this small bay industrial asset is also 100% leased.
“Another important aspect of the Cove Small Bay Industrial DST 86 portfolio is that it provides investors the possibility of using the 721 Exchange rollup as a fully optional exit strategy. Unlike many sponsors with forced 721 UPREITs, Cove Capital provides investors with full optionality whereby they are able to participate in the 721 UPREIT if they choose to do so, but at their sole discretion as opposed to being forced into the 721 exchange. This full optionality is a key differentiator in today’s marketplace of DST and 721 UPREIT vehicles.” said Chay Lapin, Managing Member and Founder of Cove Capital Investments.
“Another important feature of this offering is the inclusion of a 20-year Tax Protection Agreement (TPA) for investors who choose to participate in a potential future 721 exchange. This long-term TPA stands out in the 721 UPREIT DST marketplace, where many offerings either lack a TPA entirely or offer only limited protection for 2 to 5 years. The 20-year duration provides meaningful peace of mind—should the REIT sell the contributed DST property without executing a 1031 exchange, the REIT has committed to covering the investors’ Federal and State capital gains tax liabilities,” said Kay.
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