CS1031 The Louis Apartments DST | Did you lose money in this investment?

CS1031 The Louis Apartments DST – Distribution Cut Raises Concerns for Investors

The White Law Group is investigating potential claims involving CS1031 The Louis Apartments, DST, a Delaware statutory trust (DST) sponsored by Capital Square Realty Advisors, LLC.

In February 2026, investors received a letter announcing a reduction in cash flow distributions, citing market challenges in Louisville, Kentucky. For many investors who purchased this DST as a passive income vehicle—often through a 1031 exchange—this development raises serious questions about underwriting, risk disclosures, and broker due diligence.

If you invested in CS1031 The Louis Apartments DST and have experienced reduced income or concerns about the offering, you may have legal options.

Overview of the Offering

According to its SEC Form D filing, CS1031 The Louis Apartments DST:

• Was formed in 2022 as a Delaware statutory trust

• Sought to raise $60,475,000 under Rule 506(c) of Regulation D

• Offered beneficial interests in a Delaware statutory trust

• Required a $50,000 minimum investment

• Estimated over $5.1 million in sales commissions

• Allocated an estimated $2.2 million to executive officers/promoters

• Listed WealthForge Securities, LLC as the broker-dealer receiving sales compensation

The property is located in Louisville, within a multifamily market that has experienced significant new supply and softening occupancy.

February 2026 Letter: Distributions Reduced

On February 16, 2026, investors were notified that cash flow distributions would be reduced from 3.32% to 2.32%, effective April 2026.

The sponsor cited:

• Rising insurance premiums

• Inflation in materials, utilities, and labor

• Increased competition from new apartment construction

• Declining occupancy in the Louisville market

• Concessions and rent reductions to maintain tenant demand

Notably, the offering was underwritten with a projected 95% occupancy, while recent market occupancy has reportedly stabilized in the low 90% range. Since 2023, more than 9,200 new apartment units were reportedly delivered in Louisville—an increase of over 10% in total inventory in just three years.

The sponsor also disclosed:

• Approximately $860,000 in capital reserves remaining

• Over $935,000 advanced by the sponsor to support operations

• That the DST structure does not permit capital calls, new equity, or debt modifications

Because DSTs are rigid structures, when performance declines, sponsors have limited flexibility. The only sources of liquidity are cash flow and reserves—both of which may be strained in a down market.

Key Risks in DST Investments

Delaware statutory trusts private placements are often marketed as:

• Passive income investments

• Replacement property options for 1031 exchanges

• Stable, income-producing real estate

However, DST investments carry material risks, including:

1. Illiquidity

DST interests are not publicly traded and may be difficult or impossible to sell before the end of the holding period.

2. Market Risk

Oversupply, declining occupancy, and rent pressure—like what has occurred in Louisville—can materially reduce income.

3. No Operational Control

Investors have no voting rights or management authority.

4. Structural Limitations

DSTs generally cannot:

• Raise new equity

• Renegotiate or refinance debt freely

• Accept capital calls

These structural restrictions can magnify losses during market downturns.

5. High Fees and Commissions

The estimated $5.1 million in commissions is significant. High upfront fees can reduce the amount of investor capital actually deployed into the property.

Were Brokers Required to Conduct Due Diligence?

Financial advisors recommending DST investments must comply with:

• FINRA’s suitability standards

• Regulation Best Interest (Reg BI)

• Reasonable due diligence obligations

Before recommending a DST, brokers should analyze:

• Market supply and demand trends

• Occupancy assumptions

• Sponsor track record

• Fee structure

• Risk tolerance and liquidity needs of the investor

If a broker presented this investment as “safe,” “stable,” or “bond-like” without fully explaining the risks of declining distributions or illiquidity, that may raise compliance concerns.

FINRA Arbitration for Investment Losses

Investors who suffer losses in private placements or DST offerings typically resolve disputes through Financial Industry Regulatory Authority arbitration rather than court litigation.

FINRA arbitration allows investors to pursue claims for:

• Unsuitable investment recommendations

• Misrepresentations or omissions

• Failure to conduct proper due diligence

• Overconcentration in illiquid alternatives

• Breach of fiduciary duty

Many investors are unaware that they may have a limited window of time to file a claim.

What Should Investors Do Now?

If you invested in CS1031 The Louis Apartments DST and:

• Are experiencing reduced distributions

• Were not informed about supply risks in Louisville

• Were told the investment was conservative or low-risk

• Concentrated a large portion of retirement assets into DSTs

• Completed a 1031 exchange and felt pressured to reinvest quickly

You may wish to explore your legal options.

Contact The White Law Group

With offices in Seattle and Chicago, The White Law Group represents investors nationwide in FINRA arbitration claims involving:

• Delaware statutory trusts (DSTs)

• 1031 exchange replacement properties

• Private placements

• Illiquid real estate investments

If you have questions about CS1031 The Louis Apartments DST or other Capital Square offerings, contact The White Law Group for a confidential case evaluation.

You may be entitled to recover investment losses through FINRA arbitration.

Call today to discuss your rights at 888-637-5510.