A Closer Look at Three 2023 Fully Subscribed Debt-Free Delaware Statutory Trust Offerings by Cove Capital Investments

Image of 3 fully subscribed debt-free DST offerings
By the Cove Capital Investments Team
Article Summary:
Although past performance does not guarantee future outcomes, fully subscribed DST offerings can potentially act as an indicator of the DST sponsor company's strategic vision, expertise within the DST industry, and the confidence DST 1031 exchange investors place in the sponsor firm. In 2023, Cove Capital Investments fully subscribed seven DST offerings across multiple geographic regions and asset classes totaling $106,948,368. This article takes a look at three different examples of Delaware Statutory Trust fully subscribed offerings that Cove Capital Investments team of real estate professionals executed during 2023.
Key Takeaways:
  • Cove Capital specializes in debt free DST offerings that often target opportunistic assets.
  • What does it mean when a DST offering is fully subscribed?
  • Cove Capital fully subscribed 7 DST properties totaling $106,948,368.00 all of which were Regulation D, Rule 506c offerings available to accredited 1031 exchange and direct cash investors.

Delaware Statutory Trust (DST) offerings have emerged as an important real estate investment vehicle for both 1031 exchange investors and DST sponsor firm Cove Capital Investments, a Delaware Statutory Trust sponsor company focused on providing debt free DST investments for 1031 exchange and direct cash investors.

For investors, (including accredited investors, Broker Dealers, Registered Representatives and Registered Investment Advisors), DST offerings provide a unique opportunity to invest in a tax smart investment vehicle that also provides the potential for diversification, passive management, and potential monthly distributions.

DST sponsor firm Cove Capital Investments uses DST offerings as a 1031 exchange vehicle to create value potential for investors by utilizing the firm’s expertise and unique investment philosophy within the Delaware Statutory Trust investment arena.

Cove Capital Investments for example, has established itself as a fully integrated DST sponsor firm that specializes in providing debt-free DST investments as a purposeful strategy to help mitigate risk. In addition, Cove Capital Investments is hyper focused on driving value potential for their investors by acquiring opportunistic assets at what we believe to be favorable prices.

What is a Fully Subscribed Delaware Statutory Trust Offering?

When talking about Delaware Statutory Trust sponsor companies and their DST real estate offerings, the term "fully subscribed" is often heard. The term "fully subscribed" is used when the DST has successfully secured and closed on equity commitments from investors for the entirety of its available beneficial ownership interests. When a DST property has been fully subscribed, it means that all the available equity within the DST has been closed on by investors, and that full participation in the investment opportunity has been reached.

Three Important Attributes Fully Subscribed DST Offerings Can Reveal About DST Sponsor Firms

Attribute #1

The Sponsor Firm Has Access to Capital:
DST sponsor firms like Cove Capital Investments depend on their ability to raise capital to execute their business plan. Fully subscribed DST offerings demonstrate the real estate sponsor firm has attracted the necessary funds through a diverse pool of investors who commit their capital to the DST so that the DST sponsor company can complete the investment strategy outlined in the Private Placement Memorandum (PPM).

Attribute #2

The Sponsor Has a Proven Record of Being Able to Execute Projects:
While it is true that past performance is not a guarantee of future results, and there are material risks associated with investing in real estate and DST properties including the loss of invested capital and that returns/distributions are never guaranteed, it is also true that fully subscribed offerings are one way to show investors a successful track record of raising capital from other investors.

In addition, sponsor companies with multiple fully subscribed DST offerings can possibly reflect the real estate sponsor expertise in navigating all the stages of real estate investing, including property acquisition, ongoing management, and ultimately disposition of the DST.

Attribute #3

1031 Exchange Investor Confidence and Credibility:
Fully subscribed DST offerings can also demonstrate investor confidence in both the DST sponsor firm itself (including its team of real estate professionals), and the specific Delaware Statutory Trust real estate investment offerings.

DST offerings that have been fully subscribed can indicate investors are confident in the viability and potential returns of an offering (although there are never any guarantees in real estate and all investors are encouraged to read the Private Placement Memorandum for details on the business plan and risk factors). This confidence instills trust and credibility in the DST sponsor firm's ability to potentially deliver value on behalf of tax deferred exchange investors.

Three Examples of Fully Subscribed Delaware Statutory Trust Offerings in 2023 from Cove Capital Investments

To help investors better understand the importance of fully subscribed DST offerings, here are three very different Delaware Statutory Trust fully subscribed offerings that Cove Capital Investments team of real estate professionals completed during 2023.

For a free menu of current Delaware Statutory Trust properties that are available for 1031 exchange or direct cash investors, please see here.

Cove Debt-Free Parkdale Commons Opportunity 62 DST: Total Equity Raise: $21,593,348

Image of Debt-Free Parkdale Commons Opportunity 62 DST

The Cove Parkdale Commons Opportunity is a multi-tenant retail offering that was offered to investors as a value-add DST offering that was debt free (no risk of lender foreclosure).

The 191,559 square-foot building is in Waco, TX, and is anchored by one of Hobby Lobby’s retail stores along with a strong roster of other regional and national tenants.

The total equity raise for this asset was $21,593,348.

Investment Business Plan:
Capital executive team acquired this value-add asset 100% debt-free and at a price below replacement costs. The business plan as outlined in the Private Placement Memorandum was to seek to create equity growth for our investors by implementing the following investment strategy:

  • Expedite an extensive marketing, leasing, and renewal program.
  • Create new leases, extend existing leases, and attract new tenants to the retail center.
  • Complete several deferred maintenance projects that previous ownership had neglected.
  • Work with tenants to improve their storefronts and curb appeal.
“While past performance is never a guarantee of future results, Cove Capital Investments' investment thesis to reposition the multi-tenant retail center in Waco, Texas is a good example of the DST sponsor company’s investment vision that often involves contrarian investment strategies. Through the acquisition of the DST asset without leverage and at a price below replacement cost, the Cove Capital team swiftly implemented a comprehensive value-add strategy, showcasing their commitment to potentially generating value for investors,” said Dwight Kay, Managing Member and Co-Founder of Cove Capital Investments.

Cove Debt-Free Dallas Multifamily 59 DST: Total Equity Raise: $32,493,647

Image of Debt-Free Dallas Multifamily 59 DST

The Cove Dallas Multifamily 59 DST is a multifamily offering that was offered to investors as a value-add DST offering on an all-cash/debt-free basis.

This 130,128 square-foot complex has 159 units and is located 20 minutes from downtown Dallas in Lancaster, TX.

The total equity raise for this asset was $32,493,647.

Investment Business Plan:
Cove Capital investments acquired its Dallas Multifamily 59 DST offering as an opportunistic debt free investment designed to potentially drive value through various initiatives. These initiatives included the following for select units:

  • Adding new flooring
  • Adding new kitchen countertops
  • Upgrading appliances
  • Upgrading kitchen and bathroom plumbing fixtures
  • Focus on increasing rates on renewals and new leases
  • Improve curb appeal and upgrade common areas
  • 721 exchange exit strategy possibility - Cove Capital currently manages a portfolio of 2.1 million square feet of real estate and the 721 exchange is a strategy that will likely be offered to these DST investors.
“The Cove Capital team of Delaware Statutory Trust experts are not afraid to dive in and get our hands dirty with assets like this multifamily DST offering. We are excited about the future for the asset as well as are happy to have provided our investors with another debt free multifamily DST investment that has no risk of a lender foreclosure,” said Dwight Kay, Managing Member and Founding Partner of Cove Capital Investments.

Cove Debt-Free Texas Net Lease 67 DST: $21,450,625

Image of Cove Debt-Free Texas Net Lease 67 DST

The Cove Debt-Free Texas Net Lease 67 DST is a net lease portfolio of two buildings located in the Dallas-Fort Worth, TX MSA. This 100% debt-free DST offering was offered to 1031 exchange and direct cash investors.

The total equity raise for this asset was $21,450,625.

Investment Business Plan:
Cove Capital investments acquired its Cove Debt-Free Texas Net Lease 67 DST as a net lease portfolio designed to create value through long-term corporate leases with corporate tenants. The highlights of this fully subscribed asset include:

  • • A corporate tenant with over 95 locations both nationally and globally.
  • • All-Cash / Debt-Free DST Offering
  • • Two Property Net Lease DST Portfolio
  • • 721 Exchange Exit Potential - A tax deferred transaction whereby the investors can move from one DST investment into a large portfolio of diversified properties.*
  • • Brand New 20-Year Corporate Net Leases with Annual Rental Increases
  • • Full Corporate Guaranty
  • • Income Tax Free State of Texas
  • • Mansfield and Hurst are dynamic suburban communities located in the thriving Dallas-Fort Worth Metroplex
* Diversification does not guarantee profits and does not guarantee protection from losses.

“Our tenant has numerous locations nationally and globally. Both properties are strategically located in high-income trade areas with average household incomes of more than $133,000 within a 1-mile radius of each subject property. We felt confident our 1031 exchange investors would be attracted to these unique assets and the overall business strategy set forth in the Private Placement Memorandum of this Delaware Statutory Trust (DST) offering,” said Dwight Kay, Managing Member and Founding Partner of Cove Capital Investments.

In Summary:

While past performance cannot ensure future results, fully subscribed DST offerings may serve as indicators of the DST sponsor company's strategic foresight, industry expertise, and the trust DST 1031 exchange investors have in the sponsor firm. In 2023, Cove Capital Investments fully subscribed seven DST properties across diverse geographic regions and asset classes, totaling $106,948,368. These three offerings along consisted of XXXX accredited 1031 exchange and direct cash investors.

To view a complete current menu of available DST properties from Cove Capital and Investments, please visit us at: www.covecapitalinvestments.com.