Cove Capital Reports 15% Increase in Distributions for Dallas-Fort Worth Multifamily DST Investors
Cove Capital Investments – a Delaware statutory trust sponsor company specializing in debt-free DST offerings – announced a 15.5% increase in annual distributions, paid monthly to investors in the Cove Multifamily 59 DST offering.
According to past reporting by The DI Wire, the offering was launched in August 2022 and raised nearly $33 million of equity from accredited investors. The all-cash/debt-free DST offering was designed to potentially mitigate risk of lender foreclosure or lender cash flow sweeps, according to Cove Capital.
The 130,128-square-foot complex contains 159 units and is located 20 minutes from downtown Dallas, in Lancaster, Texas.
“When we acquired the Cove Dallas Multifamily 59 DST, we quickly identified it as an asset with the potential for creating predictable monthly distributions for our investors through the quality of the property and our value-add strategy,” said Dwight Kay, managing member and co-founder of Cove Capital Investments.
According to Kay, the 15.5% increase over the same period a year ago marks the third consecutive DST distribution rate increase for these 1031 exchange investors in the past three years, totaling a 23.42% increase over that period. Cove Capital said the offering initially proved an annualized distribution equal to 3.5% in year one, 3.74% in year two, and 4.32% in year three.
“Since bringing this multifamily DST community into our portfolio, we have completed extensive renovations including improving common areas, and beautifying the property with pool renovations, new landscaping, and exterior cleaning and painting. In addition, we have added stainless steel appliances, upgraded plumbing and lighting fixtures, and installed carports,” said Kay.
The company credited its value-add strategy and underwriting standards as reasons why it was able to increase annual distributions, also driven by higher net operating income from increased rental rates, tenant occupancy levels, and intentional expense reduction and controls.
“The Cove Capital Investments’ asset team has done a terrific job of increasing net operating income, adding value where appropriate and reducing unnecessary expenses. The result is that the asset is performing to date exactly as we outlined in the private placement memorandum, and while there are never any guarantees, we anticipate [seeing] continued distribution increases throughout the hold period,” added Kay.
Although Cove Capital said there are no guarantees for similar positive returns in the future, managing member and co-founder Chay Lapin stipulated that Cove Capital’s debt-free DST strategy should continue to serve 1031 exchange investors in the future.
“For our DST investors, we consider this an incredible win to be able to deliver an increasing distribution rate as outlined in our [private placement memorandum], payable monthly, in a time where many multifamily real estate companies have had to lower monthly distributions due to unforeseen expense increases and rent growth stagnation.”
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 2.5 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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