ExchangeRight Net-Leased Portfolio 48 DST – Investigating Potential Claims
The White Law Group is investigating potential securities claims involving broker-dealers who may have unsuitably recommended ExchangeRight Net-Leased Portfolio 48 DST to investors. The Delaware statutory trust, sponsored by Pasadena, ExchangeRight, raised $39.34 million from 109 accredited investors in a Regulation D private placement, according to a Form D amendment filed with the SEC in March 2023 (CIK #1864240). The trust used the proceeds, along with financing, to acquire 21 net-leased commercial properties valued at approximately $86.4 million.
If you suffered losses investing in ExchangeRight Net-Leased Portfolio 48 DST or a similar 1031 exchange investment, the securities attorneys at The White Law Group may be able to help. Contact our FINRA arbitration attorneys at (888) 637-5510 for a free consultation.
What is ExchangeRight Net-Leased Portfolio 48 DST?
ExchangeRight Net-Leased Portfolio 48 DST is a private placement real estate offering structured as a Delaware statutory trust, a vehicle commonly marketed to investors seeking to defer capital gains taxes through a Section 1031 exchange. The offering launched on June 30, 2021 and was reportedly fully subscribed by October 2021.
According to the sponsor, the portfolio holds 21 single-tenant, net-leased properties totaling more than 287,000 square feet across 11 states, including Georgia, Illinois, and Louisiana. Tenants reportedly include CVS, Dollar General, Dollar Tree, First Midwest Bank, Food 4 Less, Fresenius Medical Care, Memorial Health System, Sherwin Williams, Verizon, and Walgreens. The offering was structured with 10-year fixed-rate financing and targeted monthly distributions starting at an annualized rate of 6.11 percent, according to the sponsor’s announcement.
The Form D filing lists a minimum investment of $100,000 and identifies David Fisher, Joshua Ungerecht, and Warren Thomas as executive officers of the issuer.
High Commissions and Broker-Dealer Sales of Portfolio 48 DST
The Form D discloses estimated sales commissions of $2,360,400 — roughly 6 percent of the $39.34 million in equity raised. High selling commissions like these can create a significant conflict of interest, giving brokers a powerful incentive to recommend a DST regardless of whether it fits the client’s investment objectives, liquidity needs, or risk tolerance.
More than 20 broker-dealers were listed as sales compensation recipients in the filing, including Emerson Equity LLC (CRD #130032), Concorde Investment Services, LLC (CRD #151604), National Securities Corporation (CRD #7569), Western International Securities, Inc. (CRD #39262), Center Street Securities, Inc. (CRD #26898), Cape Securities Inc. (CRD #7072), Newbridge Securities Corporation (CRD #104065), Purshe Kaplan Sterling Investments (CRD #35747), and Cabin Securities, Inc. (CRD #137608), among others.
The Risks of DST and 1031 Exchange Investments
Delaware statutory trusts are complex, illiquid investments that are generally suitable only for a narrow class of investors. Common risks include:
- Illiquidity: There is no established secondary market for DST interests. Investors who need to exit early may be forced to sell at a steep discount, if a buyer can be found at all.
- Lack of control: DST investors are passive. IRS rules governing 1031-eligible DSTs (the so-called “seven deadly sins”) prohibit the trustee from renegotiating leases, refinancing debt, or making significant capital improvements, limiting the trust’s ability to respond to changing market conditions.
- Leverage risk: Portfolio 48 was structured with 10-year financing. Debt magnifies both gains and losses, and refinancing risk at maturity can pressure investor returns.
- Tenant concentration: Single-tenant net-leased properties depend entirely on the financial health of each tenant. A tenant bankruptcy or lease non-renewal can leave a property vacant and eliminate its income.
- Fees and conflicts of interest: Selling commissions, organizational costs, and ongoing management fees reduce the capital actually invested in real estate and create conflicts for the brokers and sponsors involved.
Because of these features, FINRA requires brokerage firms to perform reasonable due diligence on private placements and to ensure that any recommendation is suitable — or, under Regulation Best Interest, in the retail customer’s best interest — based on the investor’s age, income, net worth, investment experience, and liquidity needs.
Failure to Supervise and Broker-Dealer Liability
Brokerage firms that sell private placements like ExchangeRight Net-Leased Portfolio 48 DST have a duty to supervise their registered representatives. When a firm fails to reasonably supervise its brokers, or approves the sale of a complex alternative investment to a client for whom it is unsuitable, the firm may be held liable for resulting losses in a FINRA arbitration claim.
Unsuitable recommendations of DSTs, non-traded REITs, and other Regulation D offerings have been a recurring source of investor claims, particularly where retirees or conservative investors were placed in illiquid products they did not fully understand.
How to Recover Investment Losses
If you invested in ExchangeRight Net-Leased Portfolio 48 DST on the recommendation of a financial advisor and have concerns about how the investment was sold to you, you may be able to recover your losses through FINRA arbitration. FINRA arbitration is generally faster and less expensive than court litigation, and most cases resolve within 12 to 18 months.
Contact The White Law Group
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington. Our attorneys have handled over 800 FINRA arbitration claims on behalf of investors nationwide.
If you have questions about your investment in ExchangeRight Net-Leased Portfolio 48 DST, please call The White Law Group at (888) 637-5510 for a free consultation, or contact us online.
Frequently Asked Questions (FAQs)
1. What is ExchangeRight Net-Leased Portfolio 48 DST?
It is a Delaware statutory trust private placement sponsored by ExchangeRight that raised $39.34 million from 109 accredited investors beginning in 2021. The trust owns 21 net-leased retail, banking, and healthcare properties across 11 states and was marketed primarily to 1031 exchange investors.
2. Can I sell my interest in ExchangeRight Net-Leased Portfolio 48 DST?
DST interests are highly illiquid, and there is no established public market for resale. Investors seeking early liquidity are often limited to secondary market buyers who may offer significantly less than the original investment amount.
3. Can I recover losses on my ExchangeRight Net-Leased Portfolio 48 DST investment?
Possibly. If your financial advisor recommended the DST without adequately considering your investment objectives, risk tolerance, or liquidity needs, you may have a claim against the brokerage firm through FINRA arbitration. Contact The White Law Group at (888) 637-5510 to discuss your options.
