CX Station at Clift Farm DST Lawsuit and Complaints: Distributions Suspended
Carter Exchange has reportedly suspended monthly distributions for CX Station at Clift Farm, DST, a 315-unit apartment community in Madison, Alabama, according to a letter sent to investors. The White Law Group is investigating potential CX Station at Clift Farm DST lawsuit claims against the brokerage firms that recommended this investment. Investors who suffered losses may be able to recover through FINRA arbitration.
CX Station at Clift Farm DST Suspends Distributions
Starting with the October distribution paid in November, the sponsor reportedly cut the distribution rate from 1.00% to 0%. According to the letter, slow leasing and competition from newer apartment communities offering large concessions kept pressure on occupancy and rents. Third-quarter property revenue came in below budget.
The property has also reportedly faced several capital expenses over the past 18 months. These included repairs after lightning strikes and storm damage to the roof and windows. Carter Exchange said lower revenue and these repair costs have sharply reduced property reserves, and that the suspension will let the property keep cash to rebuild them.
The letter acknowledges that this suspension follows earlier distribution reductions. Management says it will review the property’s performance monthly and give investors separate notice before distributions resume. Carter Exchange puts the projected annualized distribution rate for 2026 at 1.00%.
What Is CX Station at Clift Farm, DST?
CX Station at Clift Farm, DST is a Delaware Statutory Trust sponsored by Tampa-based Carter Exchange. It owns The Station at Clift Farm, a 315-unit multifamily community in the Huntsville metro area that was built in 2021. DSTs like this one are often sold to investors completing a 1031 exchange who want to defer capital gains taxes.
For more on the sponsor’s other offerings, see our overview of Carter Exchange 1031 DST investments.
Offering Terms
According to its Form D filed with the SEC, CX Station at Clift Farm, DST sought to raise about $69.4 million in equity. The first sale took place in August 2022. As of a November 2023 amendment, the offering had sold about $25 million to 57 investors. The minimum investment was $25,000.
The filing estimates sales commissions at up to $6.42 million. That’s more than 9% of the total offering amount.
The Form D lists the following broker-dealers as recipients of sales compensation:
- Huntwicke Securities, LLC
- Stonecrest Capital Markets, Inc.
- American Trust Investment Services, Inc.
- Lightpath Capital, Inc.
- FNEX Capital, LLC
- WealthForge Securities, LLC
- Independent Financial Group, LLC
- Capulent LLC
- Calton & Associates, Inc.
- McDermott Investment Services, LLC
- Concorde Investment Services, LLC
- DFPG Investments, LLC
- The Strategic Financial Alliance, Inc.
- Aurora Securities
- Great Point Capital LLC
- Purshe Kaplan Sterling Investments
- DAI Securities, LLC
Broker Due Diligence Obligations
Under FINRA rules and Regulation Best Interest, brokerage firms must do reasonable due diligence before recommending a private placement. They also have to make sure the investment fits each client’s financial situation, goals and risk tolerance. A firm that sells a DST without investigating the sponsor, the property and the risks may be liable for investor losses.
Risks of DST Investments
DSTs are illiquid. There’s usually no public market for the shares, and investors may have to wait years for the property to sell. DSTs also generally can’t raise new capital from investors. So when repairs or revenue shortfalls drain reserves, cutting distributions is often one of the few options left. Investors also give up any say in how the property is managed.
Large fees and commissions add to the risk. They reduce the amount of investor money that actually goes into the property.
CX Station at Clift Farm DST Lawsuit and Recovery Options
Investors who lost money in CX Station at Clift Farm, DST may be able to file a claim against the brokerage firm that recommended it. Claims may involve unsuitable recommendations, misrepresented risks, overconcentration in a single illiquid investment, or a failure to do proper due diligence. These cases are typically resolved through FINRA arbitration.
Contact The White Law Group
The White Law Group is a national securities fraud and investment loss recovery law firm with offices in Chicago and Seattle. If you are concerned about your investment in CX Station at Clift Farm, DST, call us at (888) 637-5510 for a free consultation, or contact us online.
Frequently Asked Questions
1. How do I file a claim to recover money invested in CX Station at Clift Farm, DST?
Most investors file a FINRA arbitration claim against the brokerage firm that sold them the investment. Most brokerage account agreements typically include a pre-dispute arbitration clause, so these claims are generally heard in arbitration rather than court. Arbitration can still result in a monetary recovery.
2. What does a distribution suspension mean for my DST investment?
It means you won’t receive monthly income from the investment until the sponsor decides to resume payments. Because a DST generally can’t raise new money, it may withhold distributions to cover repairs and rebuild reserves. Since the shares are illiquid, investors usually can’t sell their way out.
3. Can the brokerage firm be held responsible for my losses?
Yes, a firm may be liable if it recommended the DST without reasonable due diligence or if the investment wasn’t suitable for you. Firms also have a duty to supervise their brokers, and a failure to do so can support a claim.
