Delaware statutory trust company Cove Capital Investments LLC recently completed the acquisition of two properties to finalize its Essential Net Lease Portfolio 89 Delaware statutory trust offering. The DST offering seeks to raise approximately $13.5 million in equity.
According to Cove Capital, the two-building portfolio consists of last-mile industrial distribution assets, totaling 68,967 square feet. One asset is located in Joplin, Mo., and the other is located in Sylva, N.C.
“This essential net lease portfolio provides investors high-quality, newly constructed assets that are strategically located in multiple geographic locations. Both locations are near transportation arteries, making them essential for last-mile distribution facilities,” said Dwight Kay, managing member and co-founder of Cove Capital Investments. “The assets are 100% leased to high-quality tenants, with long-term leases in place. We believe this portfolio offers significant income potential for investors, with the added benefit of providing enhanced geographic diversification.”
Kay continued, “In addition, like all of Cove Capital’s offerings, this essential net lease portfolio was acquired as an all-cash transaction with the purposeful investment strategy for our investors of mitigating common risks associated with real estate debt, such as mortgage foreclosure, cash flow sweep clauses, and go-dark provisions. Consistent with most Cove Capital offerings, the firm’s principals will personally invest in this opportunity alongside our investors – demonstrating our shared commitment and aligned interests.”
According to Cove Capital, the property located in Joplin is a newly constructed, build-to-suit last-mile distribution facility for a national home improvement chain and features 63,000 square feet and 20 dock-high doors. The location is also supply chain-optimized with highway access serving key Midwest markets and sits in an established industrial corridor alongside other major tenants.
The Sylva asset is similarly a newly constructed, last-mile distribution facility leased to a recession-resistant essential business that operates in the food and beverage segment. The 2024 build-to-suit property has a long-term net lease with multiple renewal options, along with excess land for possible tenant expansion. The debt-free industrial facility was purpose-built for the high-quality tenant and purportedly benefits from strong daily traffic counts of more than 20,000 vehicles.
“This portfolio includes two strategically positioned assets and underscores Cove Capital’s focus on debt-free, operationally efficient industrial investments aligned with tenant longevity and market demand,” said Chay Lapin, co-founder and managing member of Cove Capital Investments. “However, another important aspect of the Cove Essential Net Lease 89 portfolio is that it provides investors the possibility of using the 721 exchange rollup as a fully optional exit strategy.”
According to Kay, this optional 721 exchange exit strategy differs from other DST sponsors who require a “forced 721 UPREIT.” With Cove’s optional 721 UPREIT, investors may participate in a 721 exchange at their discretion. Cove Capital’s executives also highlighted the offering’s 20-year tax protection agreement, or TPA, for those who choose to do a 721 exchange rollup. Kay said that in the 721 UPREIT marketplace, many offerings lack such agreements entirely or offer just limited protection for two to five years.
“This 20-year TPA is a significant benefit for investors knowing that if the REIT ends up selling the contributed DST asset, without completing an internal 1031 exchange, that they will not be stuck with a tax bill, as the REIT is agreeing to pay their federal and state capital gains taxes,” said Kay.
These acquisitions follow closely on Cove’s recent purchases in Texas, where the firm acquired two properties to finalize its Texas Small Bay Industrial Portfolio 86 DST. In fall 2024, the firm also acquired a small bay industrial asset in San Antonio for its Texas Small Bay 85 Flex DST.
Cove Capital Investments is a DST sponsor company providing accredited investors access to 1031 exchange-eligible 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 2.6 million square feet of 1031 DST and real estate offerings in the multifamily, net lease, industrial, and office sectors in 33 states nationwide.
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