The offering comprises three properties, located in a suburban neighborhood of Tampa, Florida. The properties all have leases through 2021 to current tenants Hillsborough Tax Collector, Sypris Electronics, and Quest Diagnostics.
- Year 1 Cash Flow 7.01%
- Initial Occupancy 100.00%
- Est. Time Horizon None
- Yr 1. Cap Rate to Investors 6.74%
- Investor Purchase Price $29,500,000
- Total Offering Size $12,250,000
The loan is set for 10-years. The first year is interest-only, fixed interest at 5% for the first seven years. If the loan is not paid within the first seven years, the interest rate will rise to match the yield on the 3-year U.S. Treasury Bill, with an additional 2.10%. If Quest Diagnostics does not renew, terms for the loan will automatically convert to payment interest-only for either 12-months or until space is leased 80%.
- Yr. 1 DSCR 2.27
- Loan-to-Value 58.47%
- Hold Period DSCR 1.9
The area has strong demographics.
Quest Diagnostics is an investment-grade corporation.
High leverage (63%) creates a significant risk of foreclosure.
The recent changes in the treasuries yield spread may make it difficult for the sponsor to cover their debt terms.
The largest tenant has fewer than three-years remaining on their lease.
The sponsor did not obtain a Physical Condition Report before acquiring the properties.
Two tenants are not rated by an agency, and their financials are not available. The loan is essentially only 7-years, while the remaining three are on hyper-amortization schedules. This coincides with Hillsborough Country Tax Collectors lease expiration in the eighth-year, which would detract from cash flow.
The Sponsor’s models show significant Tenant Improvements and Leasing Commission cost ($1.76 million) in the eight-year, which coincides with the hyper-amortization period. The cost could negatively affect the return of client capital upon exit.
The disposition fee is not contingent on returning client capital.
The ongoing fees are high.
There is a low investor CAP rate.
About REVA Kay
Kay Properties and Investments, LLC is a national Delaware Statutory Trust (DST) investment firm with offices in Los Angeles, San Diego, San Francisco, Seattle, New York City and Washington DC Kay Properties team members collectively have over 114 years of real estate experience, are licensed in all 50 states, and have participated in over $7 Billion of DST real estate.