Investigating Lawsuits: Government Lease Holdings DST (1031 DST Offering)
The White Law Group is investigating potential securities lawsuits involving brokerage firms that may have unsuitably recommended Government Lease Holdings DST to investors. The Delaware statutory trust raised its full $153.8 million from 244 investors in 2022, many of them 1031 exchange buyers. If you are concerned about your investment, contact our FINRA arbitration attorneys for a free consultation.
What Is Government Lease Holdings DST?
Government Lease Holdings DST is a Delaware statutory trust sponsored by Net Lease Capital Advisors LLC of Nashua, New Hampshire. It was formed in 2021 to sell beneficial interests in a commercial real estate investment. The trust filed its first Form D in March 2022 and amended it seven times.
Government Lease Holdings DST Offering Terms
The final amendment, filed in August 2022, reports these terms:
- Exemption: Rule 506(b) of Regulation D
- Total offering: $153,840,000, fully sold
- Number of investors: 244
- Minimum investment: $100,000
- Date of first sale: March 28, 2022
- Estimated sales commissions: $11,662,173
Those commissions equal about 7.6% of the money raised. Clearview Trading Advisors, Inc. was also set to receive a 0.10% placement fee and a $5,000 monthly advisory fee. The offering went from no sales at all in March 2022 to fully sold by August, through 28 brokerage firms listed on the filing including Emerson Equity, LLC, Great Point Capital, LLC, Arkadios Capital, WealthForge Securities, LLC and Purshe Kaplan Sterling Investments.
Complex, Illiquid Investments
DST interests are long-term investments that are hard to sell. There is no public market for them, and investors who need cash early may find no buyer. Some private placement investments pay regular distributions, while others pay little or nothing.
Investors also give up control. A trustee makes the management decisions, and investors have no vote on how the property is run or when it is sold. Tax benefits can be lost if the trust fails to meet the rules for a 1031 exchange, and poor property performance or a weak real estate market can cost investors principal.
Was This Investment Suitable for You?
Under Regulation Best Interest, a brokerage firm must perform due diligence on an investment before recommending it. That means looking at the sponsor, the property, the debt and the fees, not just the sales materials. The broker must also decide whether a $100,000 or larger stake in one illiquid trust fits the customer’s age, finances and need for cash.
If your advisor unsuitably recommended Government Lease Holdings DST and you lost money, you may be able to recover your losses through a FINRA arbitration claim against the brokerage firm that sold it.
Recovering Government Lease Holdings DST Losses
Claims over DST losses are usually brought against the brokerage firm, not the sponsor. Common claims include unsuitable recommendations, misrepresenting the risks and failing to investigate the offering. 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 Government Lease Holdings DST, call (888) 637-5510 for a free consultation, or contact us online.
Frequently Asked Questions
How do I file a claim to recover money I invested in Government Lease Holdings DST?
You file a claim against the brokerage firm that recommended the DST to you. Most brokerage account agreements typically include a pre-dispute arbitration clause, so these claims usually go to FINRA arbitration instead of court. An individual arbitration claim is often a better fit than a class action for larger losses, and it can still lead to a money recovery.
What are the main risks of a DST bought through a 1031 exchange?
The biggest risks are illiquidity, high upfront costs and dependence on a small number of properties. Investors can’t easily sell, have no control over management, and can lose 1031 tax benefits if the trust runs into problems. Estimated commissions on this offering alone came to about 7.6% of the money raised.
Can the brokerage firm that sold me this DST be held responsible for my losses?
Yes, a brokerage firm can be liable if its broker made an unsuitable recommendation or the firm failed to perform proper due diligence. Firms also have a duty to supervise how their brokers sell private placements. That duty applies even when the sponsor, not the firm, created the investment.
