Easily Find DST Replacement Properties for your 1031 Exchange

What recent project, transaction or accomplishment are you most proud of? I think the accomplishment I am most proud of so far is the record year Kay Properties recorded in 2021. The firm posted $610 million of equity from accredited investors which represented a 49.5% increase over the previous year. Why this is so impressive to me is because it represents the total vision of Kay Properties coming into focus. This means a fully operational integrated real estate team of consummate professionals that assist our clients using our best-in-industry only real estate investment platforms.

What does it take to succeed in your specific industry? Because the Delaware Statutory Trust is a complex tax code, the only way to succeed is if our clients are fully educated on 1031 Exchanges and the Delaware Statutory Trust (DST) investment vehicle. That’s why we spend a great deal of time, energy, and resources to make sure each client is fully aware of the required timelines, nuances, and especially the risks, benefits, and strategies available to DST investors. On top of that, it also takes having relationships with a variety of DST sponsor companies that have access to investment-grade properties that are only available to Kay Properties clients.

What led you to your current profession? I built Kay Properties and Investments with the vision of reducing concentration risk for investors by providing them a broad menu of DST opportunities available for their 1031 exchanges and cash investments. I wanted to ensure that our clients were not putting their hard-earned nest eggs in one single basket. Instead, I sought to avoid concentration risk by providing investors with the options of spreading their equity over many properties, geographic locations, tenants, DST sponsor companies, and DST offerings. As a result, I started building relationships with DST sponsors in the industry that were willing to develop debt free DST solutions for investors.

What are the Top 3 Items for Your Bucket List? My bucket list for the future really revolves around building a real estate investment firm that is poised for success regardless of market conditions. Specifically, this means emphasizing a defensive stance when it comes to investment strategies to minimize downside risk. It also means continuing our dedication to our “integrity first” business model that emphasizes transparency, education, and one-on-one relationships with our clients that provide custom investment solutions. Finally, we want to create a company that embraces professionalism and provides a climate where our team members can not only reach their goals, but also exceed them.

What do you like to when not working? I am a proud husband and father of four children, ages 1-to-13. I think that explains my time when not working.

Kay Properties Announces Record Second Quarter and First Half of Year Results for 2022 in Total Equity Placed and Number of Transactions Completed on Behalf of Delaware Statutory Trust 1031 Exchange and Direct Cash Investors

Sep 07, 2022 (PRNewswire via COMTEX) -- PR Newswire

TORRANCE, Calif., Sept. 7, 2022

The fully integrated Kay Properties real estate investment marketplace successfully completes $215 million in equity placements for the second quarter and $357.8 million for the first half of 2022, setting new records for the real estate investment firm

TORRANCE, Calif., Sept. 7, 2022 /PRNewswire/ -- Kay Properties & Investments, which operates one of the nation's largest 1031 exchange property and real estate investment marketplaces, announced it has posted record second quarter results after successfully placing $215,450,440 million in equity for accredited investors participating in 1031 exchange Delaware Statutory Trust (DST) investments, Qualified Opportunity Zone Funds and direct cash investments into private real estate offerings. In addition, Kay Properties and Investments also reported record numbers for the first half of 2022 after placing $357,835,409 million for accredited investors.

These numbers represent an increase of 67.57% for the second quarter and 39.89% increase for the first six months of 2022, marking significant progress toward, God willing, another record-breaking year.

Record Number of Transactions for the Quarter and First Six Months of 2022

For the second three months of the year ending on June 30, 2022, Kay Properties also saw a 38.87% year-over-year increase in total number of transactions on the www.kpi1031.com marketplace performed on behalf of accredited investors who invested in DST assets within the multifamily, manufactured housing, single tenant net lease, industrial, self-storage and medical asset classes as well as direct cash investments into other real estate offerings. For the first half of 2022, Kay Properties saw a 24.46% increase in total transactions that translated into more than $357.8 million in placed equity, a large part of which were invested in unlevered/debt-free assets in order to minimize risk potential for investors.

Founded by CEO Dwight Kay, Kay Properties & Investments is considered an expert 1031 Exchange and DST investment firm, providing real estate investment options to high-net-worth clients seeking a passive management structure, and potentially broadening their real estate asset diversification via geography, asset class, and tenant mix.

The firm's results for the second quarter and the first six months of 2022 amplify its belief that Kay Properties has created one of the largest 1031 exchange and real estate investment online marketplaces in the country and generates some of the largest direct to accredited investor investment volume in the United States.

"The www.kpi1031.com online marketplace has truly become a best-in-class robust platform connecting high-net-worth investors with quality real estate offerings as well as a place for real estate sponsors and operators to connect with tens of thousands of high-net-worth investors seeking to deploy capital into real estate offerings. We believe our second quarter results reinforces our belief that the Kay Properties platform creates a perfect match for all sides of the 1031 exchange, DST, QOZ and private real estate investment equation," said Dwight Kay, Founder & CEO of Kay Properties & Investments.

Kay Properties' Successful Business Model Emphasizes Unlevered/Debt-Free DST Assets for Potential Reduced Exposure to Risk

Other notable trends for the second quarter include a growing number of investors across the country being attracted to Kay Properties' business model that was founded on the philosophy of providing custom DST properties and real estate funds using an unleveraged/debt-free strategy, providing investors several potential advantages including no risk of lender foreclosure, no lender prepayment penalties or defeasance costs and no lender cash flow sweeps. This emphasis on providing investments on an debt-free basis also provides greater flexibility to hold through any potential market downturns, credit crunches, recessions and/or depressions.

"We continue to see a growing number of high-net-worth investors recognizing the value of investing in DST properties, private real estate investment funds, and other real estate offerings that operate without the use of borrowed money. In addition, investors continue to be drawn to DSTs as a tax deferral strategy for their 1031 exchanges as well as direct investments into real estate opportunities via the Kay online real estate marketplace at www.kpi1031.com. We wouldn't be in this amazing position if it wasn't first and foremost for the Lord, our amazing clients, and our team members nationwide," stated Kay.

Usually investments are sought out as anchors OR buoys for your portfolio, but DSTs can embody positive traits from both investing styles.

For investors currently considering a Delaware Statutory Trust investment for either their 1031 exchange or direct-cash investment, one of the first things to consider is what investment strategy should be pursued? For example, is the goal to achieve greater appreciation, even if it means investing in an asset that carries greater risk? Or rather is the long-term strategy to have steady monthly income, even if it means lower overall appreciation potential?

Sometimes, investment professionals call this the “anchor and buoy” investment theory. One of the beautiful things about Delaware Statutory Trust investments is that they can potentially provide investors the benefits of both the anchor and buoy investment strategies.

How Can a Delaware Statutory Trust Be a ‘Buoy Investment’?

A Delaware Statutory Trust is a real estate ownership structure that allows multiple investors to each hold an undivided beneficial interest in the holdings of the trust. The term “beneficial interest” means that investors hold a percentage of the ownership, and no single owner can claim exclusive ownership over any specific aspect of the real estate. The laws of DSTs allow the trust to hold title to one or more investment properties that can include commercial, multifamily, net lease, retail, office, industrial, self-storage, etc. 

To better understand how to use the anchor and buoy theory to evaluate potential DST investments, consider a multifamily building that has 500 tenants. First, while residential properties use comparable sales or “comps” to approximate valuation, multifamily properties are also valued based on the amount of net operating income (NOI) they produce. NOI is calculated by subtracting a property’s operating expenses from its gross income.

• Gross income is derived from the sum of all sources of income for the multifamily property. While the vast majority of income comes from rent payments, there could also be ancillary sources of income, such as covered parking fees, laundry/vending income, pet rent income and even rent for storage unit access.
• On the flip side, operating expenses are the costs required to run the multifamily property on a day-to-day basis. Although these amounts vary depending on the type of building, the line items typically will be very similar. These can include utilities, taxes, insurance, maintenance, property management fees and even legal fees.

In this example, the multifamily building has a diversified tenant base of 500 tenants who are paying rent each month. Additionally, because most multifamily assets use an annual lease, landlords have the opportunity to potentially raise rents every year. In addition, any vacancies can provide owners another opportunity to potentially raise rents when filling the vacancy. In this way, multifamily properties act like a buoy, moving and adjusting with the conditions.

While all real estate investments have some form of material risks associated with them, such as interest rate risks, vacancies, general market conditions and financing risks, many investors like assets like multifamily and self-storage because they have the potential to appreciate over time. In addition, multifamily and self-storage are considered good “buoys” to potentially hedge against inflation, because owners can hopefully raise the rents each year to help offset rising costs.

How Can a Delaware Statutory Trust Be an ‘Anchor Investment’?

So, if a multifamily building or self-storage facility are considered “buoy” DST investments, then what is an “anchor” DST investment? Many investors consider a commercial net lease type of asset as more of an anchor investment for their DST 1031 exchange investments. Net lease arrangements are where the tenant pays a portion of or all of the expenses associated with the commercial property, including taxes, insurance fees, and maintenance costs in addition to a base rent.

Net lease properties can be considered more of an anchor because instead of using NOI and market capitalization rates (cap rates) solely as a valuation measurement, most commercial net lease assets are going to additionally tie the valuation of the property with the creditworthiness of the tenant. For example, Joe’s Pizza Shop is not as creditworthy of a tenant as FedEx or Walgreens, both of which are considered investment grade tenants. Joe’s Pizza Shop can shut down, and investors are left with an empty building, which comes with the potential for expensive maintenance costs and unpaid rent.  While it is possible that FedEx or Walgreens can also shut down a location, the odds are that these multibillion-dollar public companies will continue to pay rent as they have investment-grade credit ratings by Standard and Poor’s.