Being Defensive Pays Off: Kay Properties’ Clients Avoid Potential Hospitality & Senior Care Crash and Burn – Why Avoiding Hospitality and Senior Care is the Kay Properties Way

By Alex Madden, Vice President at Kay Properties and Investments

For many years Kay Properties has taken the position that we will not offer three asset classes to Investors because they carry too high of risk to investors equity: Hospitality, Senior Care, and Oil & Gas. While other groups have gleefully entered into some of these sectors searching for higher potential returns, Kay Properties has maintained the position that they are much too volatile, and much too risky for our client’s hard-earned investment dollars.

Instead, Kay Properties has always advocated for investors to take a potentially more defensive position by often investing in a diversified portfolio of multifamily, net lease, industrial and other offerings as well as placing an emphasis on staying in debt-free DSTs (where there is no long-term mortgage on the property) whenever possible. There are a number of DST Sponsors within the 1031 DST industry that specialize in providing debt-free DST 1031 vehicles. Many of Kay Properties clients over the years when walked through the potential pros and cons of the higher risk asset classes, feel they may be better off being potentially more defensive than entering potentially more volatile sectors like Hospitality, Senior Care, and Oil & Gas.

When the COVID-19 virus began to sweep the US many sectors of the economy were hit, and chief among them were Hospitality, and Senior Care. Few could have predicted the economic impact the virus would have on the country, but as business, personal travel, and quarantines took effect the entire Hospitality sector began to be experience significant negative effects with certain hospitality offerings suspending distributions.

Another potentially high-risk asset class affected by the COVID-19 virus was Senior Living and Senior Care. With the potential for disease, increased government regulations, and potential litigation risks associated with this asset class – it was particularly affected when COVID-19 swept the country.

No one has a crystal ball, and none of us know what the future holds – however Kay Properties is grateful to have rejected these asset classes and the DST investments that sponsors brought out in them for many years and will continue to in the future. This position has not always been popular, but we have seen through multiple downturns the decisions to be defensive, go debt-free if possible, and avoid the higher-risk asset classes available in the 1031 DST industry such as hospitality, senior care and oil and gas to be a prudent decision that we are glad we made.

About Kay Properties and www.kpi1031.com 

Kay Properties is a national Delaware Statutory Trust (DST) investment firm. The www.kpi1031.com platform provides access to the marketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients, independent advice on DST sponsor companies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST secondary market.  Kay Properties team members collectively have over 115 years of real estate experience, are licensed in all 50 states, and have participated in over 15 Billion of DST 1031 investments.

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk section prior investing.  IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation.  There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, general risks of owning/operating commercial and multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed.

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