Cove Capital Completes Essential Net Lease Portfolio 89 DST
Cove Capital Investments, LLC has completed the acquisition of two properties, finalizing its Essential Net Lease Portfolio 89 Delaware Statutory Trust (DST) offering. The portfolio consists of nearly 69,000 square feet across two newly constructed, last-mile distribution facilities in Joplin, MO, and Sylva, NC.
The Joplin, MO, property is a 63,000-square-foot, newly constructed build-to-suit last-mile distribution center leased to a national home improvement chain. The Sylva, NC, property is a new last-mile distribution facility leased to a recession-resistant essential business in the food and beverage sector.
Chay Lapin, managing member and co-founder, highlighted the portfolio’s distinctive exit strategy, featuring an optional 721 exchange and a 20-year tax protection agreement (TPA).
Optional 721 Exchange:
Investors have the flexibility to roll their investment into a Real Estate Investment Trust (REIT) through a 721 UPREIT structure. Unlike other sponsors that commonly enforce forced UPREITs, Cove Capital provides full optionality, allowing investors complete control over their decision.
“This full optionality benefit allows investors to participate in the 721 UPREIT if they choose to do so, but at their full 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 Lapin.
20-Year Tax Protection Agreement (TPA):
Investors who choose to participate in the 721 exchange benefit from 20-year TPA. If the REIT sells the property without executing a 1031 exchange, it will cover investors’ federal and state capital gains taxes, ensuring long-term tax advantages.
“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.
In line with the Los Angeles-based real estate investment firm’s strategy, the DST was acquired with no leverage and the assets are part of its portfolio of debt-free real estate assets for 1031 exchange and direct cash investors.
Last month, the firm finalized its Texas Small Bay Industrial Portfolio 86 DST offering by acquiring two properties, targeting nearly $14.8 million in capital.
In December 2024, the firm announced it fully subscribed its Net Lease Industrial 77 DS offering, raising over $13.3 million. The firm has acquired a slew of properties in recent months for various offerings. In November, it completed the purchase of a multi-tenant flex/industrial asset in San Antonio, TX that will be included in its Texas Small Bay 85 Flex DST and aims to raise over $15.3 million.
In October, it acquired a new net lease industrial asset in Athens, GA that will be part of the firm’s General Time Industrial Park Opportunity 84 DST. The firm is targeting a $16.5 million raise.
Cove Capital also purchased The Peanut Factory Lofts, a multifamily asset in downtown San Antonio, TX for its Cove Capital San Antonio Multifamily 74 DST; three net lease properties for its Cove Essential Net Lease 81 DST; and a net lease property for Cove Tractor Net Lease 79 DST.
The firm operates a portfolio of more than 2.5 million square feet of real estate in 33 states.