The Story Behind Kay Properties and Its DST 1031 Exchange Marketplace

Nick Snyder:

Hello, everyone. Thank you for joining us on the DST Essentials with Kay Properties & Investments, an in-depth look at all of the Delaware Statutory Trust and the 1031 exchanges. This is Nick Snyder, associate Vice president of Kay Properties & Investments. We will begin with the risks and disclosures. This material is not tax or legal advice. Please speak with your CPA and attorney for tax and legal advice. All offerings discussed, if any, are regulation D 506(c) offerings which are solely available to accredited investors, generally described as having a net worth of over $1 million, exclusive of primary residence. Please verify with your CPA and attorney if you qualify as an accredited investor or entity.

The information is educational only and is not an offer to purchase securities or DST properties. Such offers are only made through private placement memorandums, which are solely available to accredited investors and encouraged to read through. Past performance does not guarantee future returns. Diversification does not guarantee profits or protect against losses. Returns are never guaranteed and could be lower than anticipated. All real estate and DST properties may go down in value. Securities are offered through FINX, member of FINRA and SIPC. FINX and Kay Properties are separate entities.

Thank you, everybody, for listening in. And now I'd like to turn the call over to Dwight Kay, CEO and founder with Kay Properties & Investments.

Dwight Kay, Founder & CEO Kay Properties :

Okay, great. Thanks, everybody, for joining us. Thanks, Nick, for the intro. As Nick said, this is Dwight Kay with Kay Properties. I'm the founder and CEO of Kay Properties & Investments. We really appreciate each one of you for joining us on the call today. I'll give a quick overview of Kay Properties, who we are and what we're doing, and then we'll talk about a couple specific opportunities that we have for our 1031 exchange, as well as cash investment clients. And then I'll go over a little bit after that, how we can help you in your particular situation or hopefully help you in your particular situation.

So again, really appreciate everybody for joining us today on this call here. So Kay Properties & Investments, we are a expert real estate investment firm specializing in Delaware Statutory Trust investments for 1031 exchange investors. So that right there is pretty rare to be a specialist in the DST space. And when I say specialists, the reason we are considered a specialist is because we're pretty much the preeminent firm that has done the most of these out of anybody else that is working with investors directly, helping them exchange into DSTs.

Our team has over 300 years of combined real estate DST and 1031 experience, 1031 exchange experience. We've helped thousands of clients nationwide purchase over 9,100 DST investments over our time in this space. So 9,100 specific investments into DSTs. It might've been somebody investing 600 grand or 25,000 or 6 million. We've helped clients purchase $50 million, $60 million, $70 million of DSTs on their large 1031 exchanges. And then we've helped clients that have had $8,000, $9,000, $10,000, $12,000, $18,000 lot sales of vacant land that they've owned for 20, 30 years. So we work with clients across the gamut, and we think that really provides a lot of value to our investors because we've seen a lot of exchanges, we've seen a lot of different investors.

We've worked with very large institutional firms that have placed tens and tens of millions of dollars with us, and then also smaller mom and pop investors that just started buying single family rentals over the years and amassed a portfolio of property. So we've seen it all. We've worked with thousands of investors throughout the country, and over 9,100 DST investments. And at Kay Properties & Investments, we've participated in, so been involved in over $39 billion of DST real estate programs. So that's a lot different than a lot of the other groups out there. A lot of the other groups, they've been doing this for a couple of years, maybe 3, 4, 5 years, but they really haven't seen the cycles. They haven't seen the ups and downs in this space. When I started in DSTs, that was back in 2007 working in DSTs, but prior to that, I was in commercial real estate at a large national brokerage firm working there.

And so, been in real estate for a long time, but nearly two decades working with DSTs and 1031 exchange investors. And so that's how we built the kpi1031.com platform, is through a vast amount of experience. So the first DST that I personally invested in was in 2008, I believe. And it was a small investment, just got married, just getting started. But really, that was a really foundational investment for me, and I realized this is what I want to specialize in, this is what I want to do. I want to be the best at DST's. I really believed that they could fit a need for clients, that people needed help in this area, and they needed a specialist. There wasn't anybody that was going, "This is all I do is DSTs." There was just people that are managing stocks and mutual funds and life insurance, and they did one or two DSTs or 1031 exchanges a year. That's hardly a specialist.

And so, I set out to build a platform that really was best in class in the 1031 exchange space, in the DST space. And what we've done, and obviously, I've been very blessed, and this is all the Lord's doing, but what we've been able to do is pretty remarkable. It blows my mind. Our team that we have, you guys have seen our website, you've seen the team on there, a phenomenal group of people, phenomenal group of experts and specialists. And each one of them have done hundreds and hundreds or thousands of these DST investments on hundreds and hundreds or thousands of 1031 exchange investors nationwide. So we've got a deep knowledge base.

And fast-forward. So 2008 was the first time I invested in a DST. And actually, I invested $1,000. I wanted to eat my own cooking. And from that sponsor, I got the minimum investment waived from $25,000 down to $1,000 because that's all I could afford. But I wanted to eat my own cooking and be right there with my investors side by side. Fast-forward, built the KPI platform, built a sponsor company, Cove Capital, which I'm going to talk about in a second. And then on top of that, I've personally invested. Okay? My wife and I. Just like you guys are considering on your end. I've personally invested in over 90 different DST properties. Okay? And that's from multiple different sponsors all over that nearly two decades of experience of working with DST.

So I have seen X, Y, and Z, A, B, C, X, Y, Z from these sponsor companies. I know them, I know their track records, I know what they've done in the past, I know what they're good at, I know what they're not so good at. And I have passed that down to my team so that it can be passed down to our investors and we can help our investors look at these things in a way that, in my opinion, really makes a lot of sense considering the history of the DST sponsors out there in the marketplace, the history of how they've performed, of these different asset classes, of these DST properties in my own portfolio. So over 90.

I don't think there's anybody really in the world that has invested in more DSTs than I have. And I'm not saying that to brag, I'm saying that because I want to share our knowledge and what we do and what we know about these DSTs with you, with our clients. That is my passion, to help you make the right decision for your particular situation. At Kay Properties, we're a little different than a lot of groups out there. Kay Properties is not a sponsor company. Kay Properties is a platform. Through the kpi1031.com platform, it provides you access to the marketplace of typically 20 to 40 different DSTs at any given time. That number can go up and down, but typically 20 to 40 different offerings from over 25 different Delaware Statutory Trust sponsor companies. Okay?

So these 25 sponsor companies, they are in the market, they're putting together DST offerings, and they're bringing them to Kay Properties, wanting us to raise capital for them. A lot of deals. Based on my experience of investing in more of these things than pretty much anybody, there's a lot of deals that you don't even see. You won't see on our platform because our team has deemed them, and myself personally, has deemed it way too high risk and not proven out where I wouldn't want to put my own money into it.

And so we're not going to have our clients putting money into that. And that really proved that process really worked well for our clients, especially during the coronavirus, that we rejected various asset classes like hotels and senior care. Because those asset classes during the Coronavirus Pandemic really got hit hard. And the reason why we rejected them in the coronavirus, because back in 2008, '09 and '10, I saw those asset classes, when I was working with DSTs back then, really get hit hard, and investors suffer. And so I decided we're not going to work with that stuff.

But fast-forward, our platform, our marketplace provides access to over 25 different DST sponsor companies. It might be a sponsor that we've worked with many, many years and we've raised hundreds of millions of dollars for them, but they might roll out a deal and offering that we just don't like, we don't think makes sense for our investors, it's a style drift, whatever the reason is, and we won't participate in that offering. And so that's who Kay Properties is, and that's who you're talking to when you're working with Chay, Jason, Betty, our managing directors. And Chay is our president. All our senior vice president, Steve Haskell, Matt McFarlane, Orrin Barrow, Alex Madden, Carmine Galimi.

I'm probably forgetting a few, but all our vice presidents across the board that you guys are working with, all our senior associates, all the associates, all the support staff at Kay Properties, our transaction coordinator, our legal team, our finance team, our CFO. When you're working with Kay Properties, that's what you're getting when you work with us. It's not just that one or two individuals that are calling you and walking through your options, but it's the entire team at Kay Properties. So that's who we are at Kay Properties. We work with all the different sponsors.

And what happened was, over the years, I noticed another trend, that being a specialist and doing the same thing over and over and over and over and over and over and over again, living and breathing it every day of my life, I noticed a trend. And these Delaware Statutory Trust sponsor companies, all they do is put out deals with debt on them. And financing can potentially be a good thing. There's a whole host of things, and we've got other presentations and educational webinars that we have that talk about the potential benefits of financing, but there's also potential downside and risk. Property values can go down, as we talked about in the disclosures that Nick read earlier. There is risk in real estate. And when you borrow money from a bank, you can lose money. If the market value goes down by 20% and you're at a 50% loan to value, you just lost 40% of your equity.

And so the trend was that these Delaware Statutory Trust sponsor companies, these DST asset managers, these sponsors, they didn't like to do deals that were debt-free. Every once in a while, one of them would do one or maybe two DSTs that were debt-free, per year. But as we grew, as we get started having hundreds and hundreds to thousands and thousands of clients doing these 1031 DSTs, we saw a need for more debt-free DST offerings for our investors. Because for a lot of our investors, they were at a point in their lives where they wanted to get away from the risks associated with leverage. They've used leverage over the years, they've paid off their properties, they're now at or near retirement, and they want to de-risk. They want to lower their risk potential. And these DST sponsors show up and to start talking about how great their deals are.

And it might be a nice property, it might make a lot of sense, but when it's got a 40%, 50%, 60% loan to value, if the market turns, if there's disruption, there can be problems. And I saw it back in the GFC, Great Financial Crisis. I saw it during Coronavirus, and now we're seeing it again with a number of sponsors that have debt on properties as interest rates have risen 200, 300 basis points, 2%, 3%. And the value of commercial real estate of residential properties has gone down. There's just less buyers in the market because banks are charging such a large amount of money to get a loan. Instead of a 3% or 4% loan, you're borrowing at a 6%, 7%, maybe 8% loan right now. And so that puts pressure on current property owners and property values.

And so, we decided that our clients deserve better. If a client was coming out of an exchange 1031 and they had a loan they paid off, well, they have to purchase equal or greater value in a property size, because the property they sold their down leg as their uplay, the one they're going to exchange into. So we do have, on the Kay Properties platform, with the 25 different DST sponsors, many different properties that have loans on them for those investors that need to replace debt. And that makes sense for that client. Because if they don't, then they get hit with Mortgage Boot, and that's taxable. But for a lot of our clients coming out of their exchanges, they paid off their properties or they've got very small loan amounts with their banks.

And so, it just didn't make sense for them to go into a property at 40%, 50%, 60% loan to value because that's taking on a huge amount of risk at a time in their lives when they're telling us we don't want more risk. We don't want to have that risk to our principle of a lender foreclosing on our investment or on the DST. And so we saw, years back, that there was a need, dearth in the marketplace for debt-free DST's. And the reason why we did that is because of our investors. Now, it's harder. It's harder to make deals work. You got to work a little harder. You got to find deals that can make sense because you don't have that positive arbitrage that you used to see back in the day where you're buying it at five or six cap rate, but you're financing at a three or four interest rate, and that creates that positive arbitrage in your cash on cash return potential.

So it was harder being debt-free back in the day, but we decided we wanted to do it for our investors. And so Kay Properties, our president at Kay Properties, many of you know him, over the years, Shay Lapin, he is the president of Kay Properties and he is the managing member and co-founder with me of Cove Capital Investments. And Cove Capital Investments is a sister company to Kay Properties. They're separate but is a sister company, common ownership. And Cove Capital, we started it because these DST sponsors, the 25 sponsors on the Kay Properties marketplace, they just weren't providing the debt-free options for our investors that we felt they deserved.

So years ago, we bought our first two properties in Cove Capital, one was a Walgreens pharmacy, one was a FedEx distribution facility, both were in North Carolina. And we started the monumental task of creating a DST sponsor company. And so we bought those two assets, they're debt-free. We were able to purchase those with our own capital. That's how it works as a sponsor, you're purchasing on your own. And if nobody else bought into them, and this is the same as it goes today, if nobody buys into the Cove Capital deals, then Chay and I, we are the owners. We are the owners of those properties, and we're prepared to hold them for the long term, 5, 10, 20 years.

But we're creating at Cove a product that really is different in the marketplace. 90% to 95% of the offerings in the DST space from those 25 sponsors are leveraged. They have debt. There is risk of foreclosure, and it is a very real thing that people need to be concerned about. For those investors that want to lower their risk potential, don't want the risk of a lender foreclosure and don't have to replace debt in their 1031 exchange, they've already paid off their loans free and clear, being debt-free makes a lot of sense for that particular investor. And also for cash investors, people that want to participate in real estate and the potential opportunities that are available in today's marketplace in 2024, they want to deploy capital into the real estate market because we think that now is a pretty good time to buy, especially pretty good time when we compare it to two, three, four years ago.

And so, being debt-free is the prudent thing to do for that type of investor. Again, Kay Properties, we have a bunch of properties or DST offerings that have loans on them to replace debt if that's your situation, but that's what the Kay team does. They talk to you, they learn your situation, they learn your goals and objectives, your risk tolerances, understand what you're looking for, and then from there show you, hey, based on what you are looking for, what your situation is, here's the ones that I think make a lot of sense for you. And a lot of times the Cove capital deals don't make sense for investors if they have to replace debt, is a big one.

And so, Cove Capital and Kay Properties are sister companies, but you as a Kay investor, you can invest in any one of the DST offerings on the space. You are not required to invest in Cove by any means. And quite frankly, we've told clients many times, "Hey, these ones don't make sense for you for these particular reasons." Okay? So we'll walk you through that. Now, a lot of times those investors that need to be debt-free, the Cove ones often make a lot of sense for their situation. And that's why we've had such great success with Cove, or one of the main reasons.

So fast-forward over the years since we started Cove Capital, we have over 1,600 investors that have trusted Cove Capital with their 1031 exchanges and their real estate investments. The Cove Capital portfolio has over 2.1 million square feet of real estate in it. We're in 33 different states. We might be in 34 now. I know we just had an acquisition, but 33 states throughout the country, we have properties in. We're approaching $700 million in offerings and 89 properties in the Cove portfolio. So we've had a very, very large amount of success rolling out these debt-free DST offerings for our investors.

Again, when you're working with Kay Properties, you get to see the 20 to 40 different offerings from all the sponsors that we have on our platform there at Kay Properties. And out of the 20 to 40, maybe three or four or five might be Cove that are debt-free, the others aren't. So you get to see, you get to compare, and we encourage you to do that. And we think that our properties stack up very, very nicely in the marketplace, and so do almost 2,000 investors that have trusted Cove Capital. So at Cove Capital, across that 2.1 million square foot portfolio, we've had a number of national tenants that are our tenants, that are paying rent every month to our investors, Tractor Supply, FedEx Ground, FedEx Freight, FedEx Express, Amazon, Chipotle, CVS, Walgreens, PepsiCo, FritoLay, Dollar General, Advanced Auto Parts, Hobby Lobby, Dutch Brothers, and many, many more.

So we've got some of the largest companies in the world that are our tenants paying us rent each and every month that we then distribute to our investors. So Cove Capital, again, a Delaware Statutory Trust sponsor company providing debt-free properties, DSTs, as well as we have cash investments. We've got opportunistic debt-free funds for investors wanting to participate in real estate. And they're not in exchange, but they want to participate. They want potential income, potential appreciation and potential tax benefits that real estate can provide. And so, we have those funds as well, but that's who Cove Capital is.

Again, a sister company with Kay Properties, and it was born out of the extreme need in the marketplace for a sponsor company that was going to put out debt-free properties in a meaningful way, not just once or twice a year, but always in the market. And we've been blessed and we've been fortunate with our investors resonating. And we listen to our investors, we listen to our investors. Yes, when you do debt-free, you're not able to charge the same type of upfront and ongoing fees as a regular leveraged DST sponsor, for various reasons. But at the end of the day, we wanted to create a product that really made sense for our investors, and it's done very well.

So fast-forward, I'm going to talk about two different specific Cove offerings right now. I do encourage you go to the Kay Properties website, www.kpi1031.com, register, log in. You'll be able to view all those 25 DST sponsors, and you'll see these cove offerings there as well. And you'll be able to dig in. Talk to the Kay team, talk to them. Why would you do a cove deal and why not a cove deal? Why debt-free and why not debt-free? And "Oh, well, I've always used debt on real estate. Is it really that risky?" And we'll just walk you through the potential pros and cons. That's our job, is to educate our investors.

So jumping in here, Cove Eastwood Village Opportunity 71 DST. This is a property in Birmingham, Alabama. It's the number one retail shopping center in the market. Okay? So the Eastwood Village opportunity 71 DST, this is what we call a buoy investment. So there's potential for increasing rents and backfilling space and extending leases and adding term to leases. And you can really get in there, roll up your sleeves. And our asset management team, this is what we do. We extend leases. We take leases from gross to triple net. We do all sorts of tenant improvements, things to improve the curve appeal of the asset, and really just to shine up the asset and increase potential value for our investors.

And we've done this multiple times. This offering is in Birmingham, Alabama. We're about halfway through the equity raise. We just purchased it a couple months ago. It's being very well received by our investors, but we believe it's an opportunistic acquisition for investors. We purchased it well below replacement cost. We have a value add strategy and an effort to potentially increase the net operating income. And what that does, when you increase the NOI, you increase the property value and investor equity in a property. It's an all cash debt-free DST offering. So there's no loan, there's no bank. And that's another unique thing about being out there buying debt-free in the commercial real estate space, we get awarded deals. We're offering, depending on the week, 10, 20, 30 different offers with owners selling properties all over the country, whether it be multi-tenant retail, like this one, industrial, multifamily, single tenant, net lease. We're offering 10, 20, 30 different times per week.

Now, we're not going to be the highest bidder. I can almost promise you that. Okay? We're not going to be the highest bidder, but we're not going to have a financing contingency in our offer. And so when these sellers look at us, they go, "Wow, here's the 89 buildings this company's bought over the last handful of years. They've got an all cash offer." A lot of these sellers we've closed with before we've closed with the broker that brought it to us off market, or there was a relationship with the developer, we've closed with them before, so we won't be the highest bidder because we don't have a financing contingency. It makes it a much cleaner, smoother transaction for these sellers. And so, we really think that helps us to buy below replacement costs a lot of times, makes it opportunistic for our investors. We really like that. So again, a debt-free offering, no risk of lender foreclosure.

So, Eastwood Village, it's in Birmingham, Alabama on Montclair Road. The tenant mix, we've got Ross, Office Depot, Party City, Starbucks, T-Mobile, Five Below, Michaels, Cato Fashions, Hibbett Sports, and a number of other kind of well-known regional and national tenants. So really solid center. And this center shares a parking lot with a Super Walmart. And this Super Walmart is not a part of the offering, so you're not investing in that Super Walmart, but we really like it because of the synergies that it brings to our center and the amount of traffic come to our center after being at that Super Walmart or vice versa. So this kind of synergy makes Eastwood Village the number one retail center in the market with over 3.4 million annual visits.

At Cove Capital, we are subscribed to a number of different commercial real estate data and analytics services for our asset management team, for our acquisition team, et cetera. One of them is Placer AI and Placer AI essentially pings cell phones. And so you can see the number of visits to each and every one of these locations. So over 3.4 million annual visits, it makes Eastwood Village the number one retail center in the market. So the Super Walmart next door, it's a very high performing Super Walmart. The area, we really feel strongly about the area. You've got over $106,000 average household income within a five-mile radius. So very strong population and dense population in this Birmingham market.

All around the property, you've got other synergies that are bringing shoppers to this destination. It's the retail node of this area. Other tenants include Chick-fil-A, Wells Fargo, Walgreens, Regions Bank, Waffle House, PC Bank, Pet Boys. So a lot of other national retailers and tenants. And again, those ones that I just mentioned, they're not part of this offering. But the tenants that I mentioned earlier, and you'll get the private placement memorandum if you're interested in this offering, you'll get that. It'll go over the business plan and the risk factors so you can understand exactly what it is you're getting into.

So this property, it's well positioned in the market. It's just off the intersection of I-20 and Crestwood Boulevard, and that sees a combined 78,000 vehicles per day. So we've really got a nice location in our opinion. And it's not just our opinion, if you look at the map, you'll see Walmart, their opinion, they really like this location, their store is performing well for them. And then also right behind our center is a brand new Amazon distribution facility. And this Amazon, again, it's not part of the center. You'll see it in the map, you'll see the highlighted part of what you would be investing in.

But we really like to look at the location, location, location, location. What's going around this property? Is it in the middle of a cornfield in Missouri or where is it? What's happening there? Well, Amazon just built this brand new distribution facility. It's providing 1,500 jobs to the area, so that's 1,500 more people that are going to be at our center for their daily needs. So we really liked that about the location, everything I went over. And then that Amazon is the cherry on top of one of the reasons why our acquisitions team felt strongly about the asset. So the property's 96% occupied. We've had recent tenant lease extensions and renewals showing strong commitment to the location. Starbucks just renewed their lease, and a handful of the other tenants renewed their lease. Why? Because they're making money there as a tenant and it's where they want to be for their business model.

So we really like the property. Our goal for the property is to renew and extend leases. We're power washing the property. We have capital set aside for various upgrades to the property, working on the parking lot, repainting, restriping, resealing the parking lot, power washing the building. And with these tenants, what we'll do is we'll go to them 12 to 18 months before their lease expires. And we'll want to ask them, what's your plan for the space? What are you looking for? And maybe we can offer tenant improvement dollars to them to upgrade their store or improve their elevation, the facade on their storefront. And that gets us term. When we can do that, and we've done this multiple times at other properties that we have, very similar to this one. And what we can do there is get term. And so, when a tenant is already enjoying their space and maybe they have one or two years remaining on the lease, we can go in and say, "Hey, how about we do this for you in exchange for that new five or 10 year lease?"

And when you have term on a lease, an added term, you're stepping into more potential value, because the next buyer is going to look at those leases and go, "Wow, we've got a nice amount of term there." And they can capitalize the income stream and understand where they're at. Where, with Eastwood Village, when we bought it, we saw a handful of tenants renew their leases, extended their leases early. We liked that. We liked the Placer AI data, we liked the Amazon, we liked the Walmart, we liked the 3.4 million annual visits. And then we go, okay, well we can step in here, roll up our sleeves, do some of the heavy lifting the previous owner didn't want to do and buy it debt-free. So we're buying it at a very attractive price per pound or price per square foot, well below replacement cost. Our rents, we feel really strongly about our rents, and we can roll up our sleeves and do some dirty work. It's not easy. And that's potential value for our investors.

So that being said, at Cove Capital, every single one of these properties that we're buying, my partner and I, Chay Lapin, we are investing in the property side by side with our investors. That's not always the case with DSD sponsors, but we again want to eat our own cooking. We want to invest in every single one of the properties that we do in a way that shows our investors we have an alignment of interest, we have skin in the game. So we're very focused on these assets. And you can see we've got some case studies of other ones like this of what we've done. So at the end of the day, past performance doesn't guarantee future results. And there's risk in real estate because property values can go up, they can go down, tenants can go out of business, tenants can stop paying rent. So cash flows can go down on real estate. There's all those risks.

And that's again why we like to do the debt-free strategy. Because when you don't have a bank, you're really setting yourself up for the maximum protection from what we believe is the greatest risk in all of real estate investing. And that's a lender foreclosure. And by the way, there's a lot of big, big institutional firms, asset managers and sponsors out there right now that are being foreclosed on. They're walking away from their buildings, they're losing hundreds of millions of dollars of investor equity. You read it in the paper every day. Just because a firm has a very big name and they've been in the news and they've got 50 billion under management or whatever it is, does not mean that they are infallible. And we have seen them lose hundreds of millions of dollars of investor equity, and that is not where we want to be.

And that's why Cove Capital does not have a loan on this property. So we bought this for about 136 bucks a foot, and that's well below replacement costs. The market rents at the property are estimated to be two to three, or sorry, the market rents are estimated to be $2 to $3 a square foot higher than our existing tenancy. I think our tenants on average are paying about 12 bucks a foot, where the market rent is about $15 a foot. So we really like to be below market rents. Why? Because if one of the tenants doesn't exercise an option or they move out or maybe go bankrupt, a smaller tenant, guess what? The markets we're able to potentially mark that lease to market.

And that means more income for the property, more net operating income means higher potential value. So we're excited about that. And that's basically the offering. So Eastwood Village. Cove Eastwood Village, it is a 506(c) offering, a regulation D 506(c) offering available only to accredit investors. So we encourage you, if you're interested, reach out to the Kay team, we'll get you a copy of the private placement memorandum, and we'll dig right into help you walk through the business plan and the risk factors of investing. Okay?

So jumping next, we have the Cove Pharmacy net lease 65 DST. This is a Walgreens pharmacy and it's located at 1320 Encinitas Boulevard in Encinitas, California. So Encinitas, for those of you that don't know, is in San Diego, California. It's a beautiful beach town, very affluent community, and this is on the main thoroughfare, Encinitas Boulevard, in that town. And so we really like the asset. I mean, there's million dollar homes all over the place, very close to the asset. The Pacific Ocean is just about five minute drive away. And now, it's not just us that liked this asset. Walgreens had been there for many, many years, but they just recently, right prior to us purchasing the building, executed a brand new 15 year absolute triple net lease. So they liked the property so well, their sales were at a point where they really wanted to stay there. And so they decided, let's extend our term for another 15 years.

So we really liked that about the property. We feel we got a favorable price on the property as well. Again, we've got a reputation for closing commercial properties and apartment properties and industrial, as well as single tenant lease like this throughout the country. We bought a lot of properties over the years, and we're debt-free. So again, we're oftentimes not the highest bidder, but we have that surety of close that sellers are looking for. So 15 year absolute triple net lease. It's an all cash debt-free offering. So no risk of lender foreclosure. Recent lease extension, you've got the Walgreens corporate lease guarantee. Multi, multi-billion dollar company like Walgreens, because through the great financial crisis, they clipped their coupon the entire time, they paid their rent.

We like Walgreens, because during the coronavirus, they clipped their coupon, they paid their rent, they were deemed an essential business, they stayed open. We like this asset because there's zero landlord obligations. It's an absolute triple net lease. It's in Encinitas, California, as I said. And there's a ton of other surrounding tenants, nearby tenants that are national retailers that also like this location. You've got Sprouts Farmer's Market, you've got Kohl's, Peet's Coffee, LA Fitness, and many others. So really unique asset. Again, strong tenant commitment to the location. When a tenant exercises an option or extends their lease, especially if they do it for 15 years, you know that they're happy with that location.

And so, that gives you a confidence as a buyer, that real strong signal from the tenant that they like it there, they want to be there. Okay? So another nice thing about the property is that built into the lease, you've got 5% increases every five years. A lot of other Walgreens and sponsors that have Walgreens in the market right now in their DSTs, they don't have 5% increases built into the leases every five years. They're flat leases. It doesn't mean that the flat leases are bad. We bought a number of those at Cove Capital and done well for our investors on them. But when you can get a rent bump in a Walgreens lease, especially a brand new one that's this close to the Pacific Ocean, North County, San Diego, highly sought after location, we really feel strongly about that and we like that. So the property, it's location, location, location.

A lot of DST offerings in the space, they are not in a location as strong as this one. So the projected cash flow on this is a little lower than the per se, the Eastwood Village that we just talked about in Alabama. It's just a totally different location and it's a totally different animal. Eastwood Village, we've got multiple tenants. There's a lot of moving parts, where this Walgreens is very, very stable, not a lot of moving parts, very strong tenant, clipping the coupon, paying rent each and every month. Yes, Walgreens could go out of business, they could go bankrupt and rent would stop. Well, that's the worst case scenario. Guess what? We have a beautiful building in a beautiful town, and we think that a lot of other companies and businesses would want to be in this location. So we would backfill that space. And in the meantime, your cashflow would stop.

When you have a building, whether it be an apartment, a house, a commercial property, if a tenant moves out, they're not paying rent anymore. That's how real estate works. And so the main thing though is that we're doing these debt-free. So if that worst case scenario happens, the tenant moves out, tenant goes bankrupt, something happens in the US economy, whatever it is, you're debt-free. You don't have to worry about a lender coming in and foreclosing on the building, as we've seen many of these institutional large sponsor companies in the general REIT space, in the institutional real estate space, throughout the country, they're losing buildings. They are walking away, they're being foreclosed on, deed in lieu of foreclosure, because the market has had a tumultuous time over the last 18 to 24 months. These interest rate hikes and what's going on at the US economy has not been kind to a lot of properties.

And so these are debt-free. You don't have to worry about a lender stepping in, doing a cash flow sweep, foreclosing on the building, anything like that. And we just really, really like that. So that's the Cove Pharmacy net least 65 DST. We're about halfway through that equity raise as well. So those are just two of the options in the Cove portfolio. Again, encourage you, go to kpi1031.com, register, log in. You'll view all the different DST sponsors. You'll be able to see these two properties. Cove Eastwood Village 71 in Alabama, Birmingham, as well as Cove Pharmacy, net lease 65 DST in Encinitas, California, the Walgreens. You'll be able to compare and contrast and see what's available in the market.

And if you're looking for debt-free, I would say you've definitely come to the right place. So with that, a few other ways, as I promised that we can help you in your search for 1031 exchange properties and opportunities and what makes sense for your situation. First and foremost, set up a call, get on the Calendly link with our team, set up a call, talk to us about your situation. Let us understand how we can help you best. So that's number one. Get on the call with our team. Number two, get access to our website to be able to see the market of 1031 opportunities in the DST space. We're updating the website constantly with new inventory, new offerings, so check back often to see those.

I'd say number three is we are big on education. So we do educational dinner events for our clients throughout the country. Like I said, we've had clients, thousands of clients from all over the United States. I haven't looked yet, but I'm sure it's 30 plus states that we've had clients invest with us from. And so, we do client dinner events all over the United States. And we've got a handful of them coming up in various locations throughout the United States, East Coast, Midwest, Texas, and West Coast. So we'd love to have you come out, meet with our team, hear more, talk with us, learn about what your options are and what the potential pros and the potential cons are. That's another way that we're different.

Oftentimes, we'll see sponsors, they're just selling their one deal that they have. And we'll see them over concentrate a client, put their whole exchange into one deal. At Kay Properties, we're going to walk you through the pros and cons. And one of the neat things about a Delaware Statutory Trust is you can diversify your 1031 exchange equity. You don't have to just choose one property. If you're going to choose one property, then buy your own. But the DST, the whole reason is that it's hands-off management. You don't have to deal with the tenants, toilets and trash, and the fact that you're able to diversify. And instead of putting your $1 million into one property in your town, you can do 100 here, 200 there, 300 here, 100 here, and build a portfolio of DSTs so that if something catastrophic happens to that one town or that one tenant or that one asset class or whatever it is, it's not affecting your entire $1 million. And that's how the diversified portfolio makes a lot of sense.

And so diversification, it never guarantees profit, it never guarantees protection against losses. So don't get me wrong, you can still lose money in real estate and DSTs, but we do believe it's the prudent thing to do, and it's the way that I personally invest in DSTs through a diversified strategy. So come out to our dinners, talk with us, understand how our program works, and we'd love to have you at one of those educational dinners. You'll be seeing invitations for those soon. Also, come to our headquarters. We're in Torrance, California. We'd like to invite each and every one of you to fly out here, meet with us. We'll do meetings, presentations, and you'll get to see and meet the people face-to-face. You'll get to meet us and you'll get to see our CFO, our general counsel, our in-house counsel team, our paralegal team.

You'll get to meet and see the sales team members, the Kay team that's working with you on choosing the DST offerings, as well as you'll get to see the transaction coordinator team and our team of accountants. You'll get to really see who we are and what we do. So we'd love to have you come out here, host you here at our office. From there, we probably have a DST in your backyard. We've got almost a hundred buildings in 33 states. We'd love to set up a tour for you on one of our assets. It might not be available for you to invest in right now, but you could probably drive 15, 20 minutes, an hour, and kick the tires and see one of the properties we own. So that's another way we can help you.

But with that, we just really appreciate everybody for getting on the line today. Thanks so much for your time. Thanks for your trust over the years, and we're excited for the next couple of decades helping investors like yourselves. It's just been a really fun time, and we appreciate our thousands of clients nationwide that have already invested with us, and many of them over and over and over repeat investors. We really appreciate each and every one of you, if any of you're on the line.

Thank you so much, everybody. Have a wonderful weekend, and we'll talk to you soon. Bye-bye.