Analysis of Investments

Tampa UBC

REVA Kay

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.

Investment Highlights

  • Yr. 1 Cash-on-Cash 7.01%
  • Initial Occupancy 100.00%
  • Est. Time Horizon None YEARS
  • Current Cash Flow
  • Yr. 1 Cap Rate to Investor 6.74%
  • Investor Purchase Price $29,500,000
  • Total Offering Size $12,250,000

Loan Information

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-Offering 58.47%
  • Hold Period DSCR 1.9

Tenant Information & Lease Terms

Quest Diagnostics carries a BBB+ credit rating from the S&P with gross revenue of $7.7B in 2017j, with more than 2,200 locations. The lease has expiration dates of April 2021 and May 2021. 

Sypris Electronic provides tech services and provider products for defenses, truck components and aerospace Their contracts are typically multi-year with major corporations and government agencies. Sypris' lease expires on December 2027. 

Hillsborough Country Tax Collector's lease expires on August 2025.

Key Positives

  • The area has strong demographics.

  • Quest Diagnostics is an investment-grade corporation.

Key Risks to Consider

  • 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.

Investment Sponsor Information

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.

  PAST Investments