How Kay Properties Helped Three Different Sized Investors Match Their Specific Investment Goals, Objectives, and Risk Tolerances

A man writing down various 1031 exchange options

By: Kay Properties & Investments

Key Takeaways:

  • Most Delaware Statutory Trust investors are looking for a specific solution to their particular investment situation.
  • Three examples of how Kay Properties helped three different-sized investors with their DST investments.
  • Not all investors entering Delaware Statutory Trust investments have the same investment objectives.
  • Whether a large or small investor, Kay Properties puts a tremendous emphasis on client education and an emphasis on each investor’s specific situation and education on the potential risk factors of investing in DSTs.

Like Goldilocks in the famous fairy tale who was searching for the perfect bed, a bowl of porridge, and sitting chair, many Delaware Statutory Trust investors are also looking for “just right” when it comes to their investment strategies. Whether it’s a large real estate investment firm wanting to use DST properties to create a more diversified* portfolio or a small rental property investor who is tired of tenants, toilets, and trash and wants a passive management structure and the potential for monthly rental income distributions, Kay Properties works with all sizes of investors and understands that each investor is as unique as their investment objectives, goals and risk tolerances.

To illustrate this point, here are three very different clients that came to Kay Properties to potentially help satisfy their specific investment ambitions.

Example One: Large Investor
Kay Properties Helps a Large Real Estate Investment Firm Create Diversification.

    1. Client Looking for Diversification
      A large real estate investment firm wanted to liquidate a $100 million dollar retail real estate portfolio and reinvest via a 1031 exchange the proceeds from the relinquished assets into other real estate investments to create greater diversification. Because they were interested in Delaware Statutory Trusts, they contacted Kay Properties for expert consultation to investigate Delaware Statutory Trust (DST) investments into multiple Delaware Statutory Trust properties to create a more diverse investment portfolio. The clients valued the experience that Kay had with participating in over 25 different DST sponsor companies’ offerings in excess of 30 billion dollars in DST offering value provided them. Understanding what each type of DST offering can potentially bring to the table in terms of risk and benefit was something that this investor was keenly interested in the Kay Properties’ expertise on.

 

  1. Kay Facilitates DST Client Education
    Like all clients, the first step was to educate the firm on the nuances, potential risks, and benefits of DST investments.Steve Haskell, senior vice president and DST 1031 expert with Kay Properties explained that even though the real estate investment firm was extremely experienced with real estate acquisitions and operations, they required a considerable amount of education on DSTs and how to incorporate them into their larger investment objectives.“These particular clients were more experienced than many real estate investors, however, they still required a lot of education on the nuances in the DST world, so we worked with them for about a year to not only educate them but also create an investment strategy that fits into their larger objectives of diversification,” said Haskell.
  2. Kay Performs Test Investments
    The client requested they start with test investments to allow Kay Properties to demonstrate its expertise as a DST investment firm and showcase its knowledge of the DST structure as an investment vehicle.“Along the way, we were also introducing them to numerous DST real estate sponsor companies, and helping them create an investment overview that fit their specific investment criteria, goals, objectives, and risk tolerances. Also, we were able to have the specific properties they wanted already set up and reserved so that they could close on their DST 1031 exchange the same day they closed on their relinquished assets,” said Haskell.
  3. Kay Performs Test Investments
    As a result, the investment firm used Kay Properties and the kpi1031.com marketplace to invest $100 million of equity into DST investments and DST portfolios in multiple types of real estate asset classes, in different geographic locations, and across a variety of tenants and business models to help achieve the client’s goal of creating a much more diversified portfolio.

Example Two: Medium-Sized Investor
Kay Properties Helps Medium-sized Family-Owned Real Estate Investment Business

    1. Client Decides to Sell Small Portfolio but Defer Capital Gains and Other Taxes with a 1031 exchange
      When a couple decided to sell their small real estate portfolio of three single-family rental properties, they also wanted to defer capital gains and other taxes, and so after consulting their CPA about a 1031 exchange, the couple contacted Kay Properties to learn more about Delaware Statutory Trusts investments.

 

    1. Kay Properties Facilities Year-Long Education Process on Delaware Statutory Trust Investments
      Kay Properties dedicated a full year to carefully educating the husband-and-wife team on all aspects of DST investing, along with the associated potential risks and benefits.According to Betty Friant, Senior Vice President and DST expert, the couple thoroughly embraced the education process and were incredibly diligent with absorbing all of the educational materials Kay Properties provided.“They were very diligent and thoughtful about investing in DSTs and wanted to read and learn everything there was about them. We spent nearly one year teaching the couple about the DST market, and helping them learn about the different 1031 exchange strategies and specific DST investments that were available,” said Friant.
    2. Client Thoroughly Absorbs Private Placement Memorandum (PPM)
      Once the couple was prepared to invest in specific DST investments that they picked as part of a larger investment strategy, they made sure to pay particular attention to every word of each Private Placement Memorandum (PPM). They were very careful to understand what every term meant, and how every single detail and risk factor could potentially impact themselves and their investments. At the advice of Kay Properties, the couple also sought advice from their attorney and accountant.

 

  1. Client Invests in Three Debt-Free DST offerings Across Multiple Asset Classes
    The client sold one of their rental properties and invested the proceeds via a 1031 exchange into three different debt-free DSTs that included net-lease, industrial, and self-storage assets.“Because they had become so familiar and informed about DST investments, the couple invested in all-cash/debt-free investments to avoid the potential of lender foreclosure, prepayment penalties, or balloon payments which are just a few of the potential risk factors when investing in DSTs with debt on them. They also invested across three different asset classes, three different locations, with multiple tenants, and with three different DST sponsors.“The client was very pleased with how Kay Properties worked closely and diligently with them along the way. This was such a great example of how all investors should approach any investment,” said Friant.

Example Three: Smaller-Sized Investor
Kay Properties Helps Smaller-sized Family-Owned Real Estate Investment Business

    1. Client Decides to Sell Small Portfolio but Defer Capital Gains and Other Taxes with a 1031 exchange
      When a couple decided to sell their small real estate portfolio of three single-family rental properties, they also wanted to defer capital gains and other taxes, and so after consulting their CPA about a 1031 exchange, the couple contacted Kay Properties to learn more about Delaware Statutory Trusts investments.

 

    1. Kay Properties Facilities Year-Long Education Process on Delaware Statutory Trust Investments
      Kay Properties dedicated a full year to carefully educating the husband-and-wife team on all aspects of DST investing, along with the associated potential risks and benefits.According to Betty Friant, Senior Vice President and DST expert, the couple thoroughly embraced the education process and were incredibly diligent with absorbing all of the educational materials Kay Properties provided.“They were very diligent and thoughtful about investing in DSTs and wanted to read and learn everything there was about them. We spent nearly one year teaching the couple about the DST market, and helping them learn about the different 1031 exchange strategies and specific DST investments that were available,” said Friant.
    2. Client Thoroughly Absorbs Private Placement Memorandum (PPM)
      Once the couple was prepared to invest in specific DST investments that they picked as part of a larger investment strategy, they made sure to pay particular attention to every word of each Private Placement Memorandum (PPM). They were very careful to understand what every term meant, and how every single detail and risk factor could potentially impact themselves and their investments. At the advice of Kay Properties, the couple also sought advice from their attorney and accountant.

 

  1. Client Invests in Three Debt-Free DST offerings Across Multiple Asset Classes
    The client sold one of their rental properties and invested the proceeds via a 1031 exchange into three different debt-free DSTs that included net-lease, industrial, and self-storage assets.“Because they had become so familiar and informed about DST investments, the couple invested in all-cash/debt-free investments to avoid the potential of lender foreclosure, prepayment penalties, or balloon payments which are just a few of the potential risk factors when investing in DSTs with debt on them. They also invested across three different asset classes, three different locations, with multiple tenants, and with three different DST sponsors.“The client was very pleased with how Kay Properties worked closely and diligently with them along the way. This was such a great example of how all investors should approach any investment,” said Friant.
*Diversification does not guarantee profits or protect against losses.