National investment loss lawyers KlaymanToskes is investigating potential investor losses related to CS1031 Tapestry West Apartments DST Delaware Statutory Trust (DST) investments sold through various brokerage firms.
According to our investigation, CS1031 Tapestry West Apartments DST is a Delaware Statutory Trust investment offering that was primarily marketed to investors seeking 1031 exchange tax deferral benefits through fractional interests in multifamily real estate. Our investigation is focused on the liability of brokerage firms and financial advisors who may have failed to conduct adequate due diligence or misrepresented the risks associated with this private placement offering, potentially leading to significant losses and risk for investors.
Investors that suffered losses with CS1031 Tapestry West Apartments DST or any other investment are encouraged to contact attorney Lawrence L. Klayman, Esq, at 888-997-9956 or by email at investigations@klaymantoskes.com to discuss potential recovery options. We do not collect attorney’s fees unless we are able to obtain a financial recovery for you.
CS1031 Tapestry West Apartments DST is a private placement Delaware Statutory Trust (DST) investment sponsored by Capital Square Realty Advisors. DSTs are an alternative for 1031 exchange investors seeking replacement properties and allow for fractional ownership of properties acquired by and managed by large real estate firms (DST sponsors).
Capital Square Realty Advisors, a sponsor of 1031 exchanges structured through DSTs, filed a Form D with the Securities and Exchange Commission (“SEC”) to raise capital from investors for the offering of CS1031 Tapestry West Apartments DST in 2022. According to SEC filings, the total offering amount was over $60,000,000, with a minimum investment requirement of $50,000. Related sales commissions were $5,158,395. The property is a 262-unit Class A multifamily apartment community located in Richmond, Virginia, known as Tapestry West Apartments.
Investors must be aware that DSTs are speculative and illiquid, with limited secondary market options and vulnerability to market downturns, interest rate fluctuations, and tenant vacancies. Many investors, particularly conservative investors, may have suffered significant financial harm due to unsuitable recommendations of this high-risk alternative investment.
CS1031 Tapestry West Apartments DST is a high-risk, illiquid, private placement investment. Private placements or “Reg D” offerings can be highly volatile investments, as they are early-stage companies with limited information and are not bound to the same Securities Exchange Commission (“SEC”) disclosure requirements as public investment offerings.
Investors may consider this type of commercial real estate investment for the monthly returns and diversification offered, without any management duties. However, DSTs are highly illiquid, and are likely only suitable for investors who can afford to have their funds tied up for long holding periods.
The brokerage firms and financial advisors responsible for selling CS1031 Tapestry West Apartments DST may be held responsible for any financial losses sustained by investors. Brokerage firms and financial advisors must consider their client’s risk tolerance prior to making recommendations, and cannot overconcentrate their customers’ accounts in any one investment product or market sector.
DSTs are considered “non-conventional investments” by the Financial Industry Regulatory Authority (“FINRA”). In Notice to Member 03-71 FINRA reminded brokers/financial advisors and broker-dealers of their specific requirements regarding the sale of non-conventional investments, including conducting appropriate due diligence, performing a reasonable-basis suitability analysis, performing customer specific suitability analysis for recommended transactions, and providing a balanced disclosure of the risks and rewards associated with a particular product, especially when selling to retail investors.
Potential conflicts of interest may arise when issuers incentivize brokers/investment advisors with substantial commissions to promote their financial products. A problem often associated with private placement investment recommendations, such as DSTs, is the high sales commissions brokers typically earn for selling these investments. A representative that recommends investments for the purpose of being compensated through increased commissions, and enriches themselves rather than benefiting the client, is violating securities laws.
Delaware Statutory Trusts (DSTs) are legal entities that allow multiple investors to own fractional interests in institutional-quality real estate. DSTs are often marketed as suitable for 1031 like-kind exchanges, allowing investors to defer capital gains taxes when selling investment property. However, DST investments carry significant risks, including lack of liquidity, potential for total loss of principal, limited investor control, and dependence on the performance of underlying real estate properties. These investments are generally considered suitable only for sophisticated investors who can afford to lose their entire investment.
As an investor, there are several warning signs that you should look out for if you believe you may have been sold unsuitable DST investments. These signs could potentially indicate misconduct, negligence, or investment fraud. Investors are encouraged to contact our firm immediately if you have experienced any of the following:
DST investments are typically high-risk, illiquid real estate investments that are often unsuitable for retail investors who cannot afford to lose their investment or who need liquidity. These investments require careful analysis of the investor’s financial situation, risk tolerance, and investment objectives before they can be recommended.
According to FINRA and SEC regulations, brokerage firms have a duty to conduct reasonable due diligence on DST investments before offering them to customers. They must also ensure that any recommendations are suitable for the individual investor and provide adequate disclosure of all material risks.
To recover investment losses with your brokerage firm, you do not go through the traditional court system with a lawsuit. The only remedy is through a FINRA arbitration, a specific process designed for these types of disputes. This process involves presenting your case to a panel set by the Financial Industry Regulatory Authority (FINRA), not a courtroom. This approach is streamlined and focused on investment disputes, making it a suitable and effective way for investors to seek compensation for losses caused by financial advisors or brokerage firms.
FINRA arbitration is often an effective forum for resolving disputes between investors and brokerage firms related to DST investment losses. The arbitration process allows investors to seek damages for unsuitable recommendations, inadequate due diligence, failure to disclose material risks, and other securities violations. In DST cases, investors may be able to recover damages if they can demonstrate that their broker or brokerage firm violated industry standards in recommending or selling these investments. Claims may involve showing that the DST investment was unsuitable for the investor’s financial situation, risk tolerance, or investment objectives.
Engaging the services of an experienced securities attorney to evaluate your specific circumstances is strongly advised. At KlaymanToskes, our team of experienced securities attorneys has extensive experience with DST investment cases and the complex legal issues surrounding them, allowing us to provide invaluable insight and tailored guidance that directly addresses your individual investment losses.
It is important to note that securities claims, including those related to DST investments like CS1031 Tapestry West Apartments DST, are subject to strict time limitations. Generally, FINRA arbitration claims must be filed within six years of the occurrence or discovery of the alleged misconduct. However, the specific time limits can vary depending on the nature of the claims and the applicable law. Given these time constraints, it is crucial for investors who believe they have suffered losses related to CS1031 Tapestry West Apartments DST investments to contact an experienced securities attorney promptly to preserve their legal rights and evaluate their potential claims.
If you suffered losses with CS1031 Tapestry West Apartments DST investments, or have concerns regarding your DST portfolio, contact KlaymanToskes at 888-997-9956 or fill out a short contact form for a free and confidential consultation to discuss potential recovery options.
The firm has helped recover over $600 million* for investors, and can help you determine if your loss is due to unsuitable investment recommendations, inadequate due diligence, or other securities violations related to your DST investments.
*Exclusive of attorney’s fees and costs.