721 Skaneateles, DST: Securities Investigation
The White Law Group is investigating potential securities claims involving broker dealers who may have improperly recommended 721 Skaneateles, DST to investors.
According to SEC filings, 721 Skaneateles, DST based in Los Angeles, California filed a form D to raise capital from investors. The total offering amount sold was purportedly $8,350,000 according to the Reg D Filing.
A Delaware Statutory Trust, established according to Delaware legislation, is a common choice in commercial real estate transactions. Its primary purpose is to afford investors limited liability and serves as a vehicle for holding title to real property.
These trusts, often referred to as DSTs, possess a unique and relatively higher level of risk compared to other investment types. Recent data from Robert A. Stanger & Co. and Mountain Dell Consulting indicates that fundraising efforts for Delaware statutory trust offerings have reached slightly more than $2.5 billion for the year ending in June 2023. Based on this average monthly fundraising trend through June, it appears that DST statistics are projected to generate slightly over $5 billion in 2023.
Although 1031 DSTs may be suitable for some investors, they are not the best alternative for everyone due to their financial disadvantages. One example is that 1031 DSTs cannot raise additional capital after the initial investment, which means that investors may be responsible for unexpected expenses, such as repairs, or a decrease in occupancy or rental income. The investors also have limited authority over the property.
While the sponsor may welcome feedback from the investors in the DST, they don’t allow any actions to be taken by any one investor. The issue of illiquidity is also a primary concern when it comes to investing in a DST. This makes it difficult to find a buyer if an investor wants to sell their interest prior to sale of the property.
721 Skaneateles, DST – Suitable Investment for you?
Before suggesting investments to their clients, financial advisors should carefully assess their suitability. Numerous factors should be considered to guarantee that an investment aligns with the client’s financial situation. These factors encompass liquidity requirements, the time horizon for the investment, risk tolerance, age, and income level.
Following this assessment, the brokerage firm must confirm that comprehensive due diligence has been undertaken for each investment at every stage. They must examine all aspects of the investment and evaluate the available options before deciding to invest in a DST.
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The White Law Group is currently investigating the potential liabilities of FINRA registered brokerage firms for making improper recommendations of high-risk investments to investors. These brokerage firms persist in promoting such investments, despite the inherent risks associated with investing in DSTs, primarily due to the significant commissions tied to their sale and establishment.
It is important to note that FINRA does provide an arbitration forum for investors to resolve disputes if a broker or brokerage firm makes an unsuitable investment recommendation or fails to adequately disclose the risks associated with an investment. It is possible that they could be found liable for investment losses in a FINRA arbitration claim.
