I’m a Delaware Statutory Trust Investor. How Can I Pursue Damages for My Investment Losses?

This page explains the benefits and the risks involved in a DST investment, why many investors are suing their broker-dealer, and the reasons you should hire a skilled FINRA law firm to represent you.

• This is a legal entity that allows investors to purchase fractional, beneficial interests in institutional-grade commercial real estate and certain alternative asset classes.
• A Delaware Statutory Trust (DST) is a type of real estate investment trust (REIT). It is typically a private agreement for real property.
• DST offerings are set up under Securities and Exchange Commission (SEC) Regulation D. This means that only accredited investors can and should invest.
• A DST is allowed to have up to 499 investors. Minimum investments typically range from $25,000 to $100,000.
• A DST sponsor or manager typically oversees the properties, their acquisition, management, and operations.

• Student housing
• Net-leased retail centers
• Traditional or specialized office buildings
• Self-storage facilities
• Hotels
• Resorts
• Senior housing
• Medical facilities
• Apartment complexes
• Multifamily housing
• Fulfillment centers

Under the law, DSTs are considered securities. They have to be bought and sold through licensed brokerage firms and their registered representatives.

Shepherd Smith Edwards and Kantas (investorlawyers.com) represents Delaware Statutory Trust (DST) investors against brokerage firms and their financial advisors. We are a nationally recognized and well-respected securities law firm that has been fighting for investors for more than 35 years.

When your DST broker marketed and sold you a Delaware Statutory Trust, here are some of the benefits they might have told you about:

• Eligibility for a 1031 Exchange
  When correctly structured, DSTs are considered "like-kind" real estate under IRS Revenue Ruling 2004-86. This lets investors defer capital gains taxes when they sell a traditional investment property.
• Investing in institutional-grade real estate
  The types of real estate properties held in a DST are not the kinds of assets that most individual investors would be able to invest in otherwise.
• Total passive ownership
  DST investors don’t have to get involved in the running of the property. The DST sponsor handles all management, including the day-to-day operations.

• Illiquidity
  Investor funds can stay locked up in a fixed-holding period for years. Opportunities for reselling a secondary market can be few, even nonexistent. This would likely require offloading your investment at a highly reduced price.
• No investor control
  DST investors don’t have any voting rights or operational control. The Delaware Statutory Trust sponsor and trustee are in charge.
• High upfront fees that can eat up returns
  With a Delaware Statutory Trust, investors often end up having to pay a multilayer of fees. This can dramatically eat into the initial investment paid, as well as returns.

• Commissions & placement fees
• Dealer-management fees
• Wholesaling fee
• Broker-dealer allowance
• Marketing expenses

• Financial problems
  DSTs carry with them the risk of underperformance, the possibility that investor distributions might be suspended, and the chance the trust will have to file for bankruptcy.
• Market risks
  Rising interest rates, market fluctuation in terms of demand, tenant vacancies, economic crises, and sector-specific vulnerabilities can become issues.
• Financial restructuring restrictions
  Once a DST is closed, it is legally prohibited from raising new money, renegotiating loans, or adding more debt.

Our seasoned Delaware Statutory Trust loss attorneys are continuing to speak with investors who tell us that they were never fully apprised of all the risks. Many of those we are representing say they never would have gotten involved if they had known otherwise.

• There has been an increase of late in DST sponsors defaulting.
• There are Delaware Statutory Trusts that are suspending monthly distributions.
• Rising interest rates on floating debt rates is becoming a problem.
• Excessive debt (also known as high leverage) is occurring. With no option to finance or sell properties, foreclosure or bankruptcy can happen.
• Too high of upfront fees, with some investors reporting that up to 19% of their principal is going to these charges.
• Sponsor mismanagement.
• Changing market needs, tenant defaults, tenant concentration, renters not paying, and more.

• Distribution suspensions can lead to loss of income.
• Lack of redemptions means investors can’t pull their money out.
• Financially beleaguered DSTs are unlikely to give back the money they owe you. Even when there is a bankruptcy proceeding, your chance of financial recovery is low.

What you can do is review the actions of your broker who sold you this Regulation D private placement. It is important that you explore your legal options, including whether you should file a Delaware Statutory Trust recovery claim against your financial advisor in FINRA arbitration.

Step One: Look at your original Delaware Statutory Trust private placement memorandum, annual statements, investment returns, other relevant documents, and review any communications you have in writing with your financial advisor.

• Did your DST financial advisor fully disclose how much interest and fees you would have to pay?
• Are you seeing a decline in your Delaware Statutory Trust’s value?
• Have you stopped receiving the monthly returns you were promised?
• Were you ever qualified as an accredited investor to invest in a DST?

Step Two: Contact our experienced Delaware Statutory Trust recovery lawyers so that they can help you assess whether your investment losses are a result of normal market risks or involve some type of broker misconduct or negligence, including whether your broker:

• Failed to conduct the proper due diligence to make sure this was a viable investment for you.
• Ignored your best interests because of the commissions that the broker-dealer and the financial advisor could earn from the sales.
• Unsuitably recommended this DST to a retail investor like you.

Step Three: If you do have grounds for a DST claim against your financial advisor, hire experienced securities lawyers who are also knowledgeable FINRA attorneys that know how to win cases in FINRA arbitration. This is the legal forum where you will be going after your financial advisor and suing for damages.

Many of the Delaware Statutory Trust investors who are reporting serious losses are not accredited investors. They are retail investors, retirees, or seniors. Also, not all investors who were sold DSTS were looking for or needed a 1031 exchange opportunity.

• Any ruling by a FINRA arbitration panel is likely going to be final. This is why you need to make sure that your Delaware Statutory Trust investor attorneys know how to successfully argue your case before the arbitrators.
• There is a strong possibility that you and your DST securities attorneys might reach a settlement before the final arbitration panel issues a ruling.
• If you don’t settle or win, then there may be no other legal recourse for your claim. Visit our FINRA arbitration page to find out more.

• Lost principal
• Lost income, including missed distributions
• Commissions and other fees that you paid upfront
• Opportunity costs
• Pre-award interest
• Attorney fees and arbitration costs
• Punitive damages

Because our securities law firm works on a contingency basis, we are only paid for the legal representation we provide if we win an award or secure a settlement for you. That money will not come directly from you but out of what you are paid for your losses.

• Our DST recovery attorneys represent many investors who have suffered losses in this type of Regulation D investment. We are well-versed in Delaware Statutory Trusts and the ways in which brokers should be held liable for unsuitably recommending this real estate offering to customers.
• Our securities law team has more than 100 years of combined experience in securities law and the securities industry. We have won a collective many millions of dollars in awards and settlements for thousands of retail investors, retirees, senior investors, accredited investors, high-net-worth individual investors, and institutional investors.
• When you work with us, you are hiring everyone at our firm to work on your DST recovery claim. We provide customized attention and quality securities representation.
• Many of us used to be former brokers. We now use what we know as former insiders of that industry to protect investors and help to make them financially whole again.
• If we agree to work together we will thoroughly investigate the cause of your Delaware Statutory Trust losses, file a complete Statement of Claim for you, and provide you with robust securities representation in any settlement negotiations or before the panel of FINRA arbitrators.
• At Shepherd Smith Edwards and Kantas, we take the time to get to know you and the nuances of your case. This allows us to present arbitrators with a full picture of who you are and how your DST investment losses are impacting you and your family.

• Versity Investments/Crew Enterprises
• CAI Investments Manufacturing Essential Assets
• Nelson Brothers
• The Nine @ Memphis
• Inspired Healthcare Capital
• Vintage DST
• Zero Coupon OH Fulfillment

Schedule your free, no obligation case assessment with one of our savvy DST investor lawyers today.

Call (800) 259-9010 or contact us online today.