Case Study: The Cove

Pilot Ventures assisted a long-term client in a 1031 tax differed exchange spanning five months and involving 12 properties. Eleven underleveraged rental properties were sold to exchange into the Cove Apartments, a 2017-constructed Class A property in Seattle’s Capitol Hill neighborhood.

The client’s cash flow increased by 49% due to the Cove’s prime location and desirability compared to the 11 sold properties. Cash on Cash returns rose to 3.8% from returns in the high 1% to low 2% range. Tax deductions were created as well. A number of the downlegs had been in the family for more than 30 years, fully depreciated and owned free and clear. The purchase of The Cove created interest and depreciation deductions, sheltering the aforementioned cash flow. The 7-year projections indicate The Cove will far outperform the combined 11 downlegs.