Written by The White Law Group• February 10, 2021• 8:33 pm• Blog, Investment Loss Recovery

Greeley Flats DST Investment Losses

Greeley Flats DST: Investigating Potential Claims

The White Law Group continues to investigate potential securities claims involving broker dealers who may have unsuitably recommended Greeley Flats DST to investors.

Table of Contents

Greeley Flats DST, sponsored by Nelson Partners, LLC, filed a form D to raise capital from investors for the offering Greeley Flats DST in 2018. The total offering amount sold was purportedly $10,961,579.

Nelson Partners Allegedly Defaulted on Loans

According to the Reporter Herald in Loveland in October 2022, University Flats, a 262-bed student housing complex in Greeley, Colorado, was placed into receivership by a Weld County District Court judge due to lawsuits alleging loan defaults and mechanics liens against the property owner, Nelson Partners LLC. The judge’s order required Nelson to hand over the property to a receiver to protect its value and satisfy creditor claims.

Nelson Partners was accused of defaulting on two loans totaling over $10 million and faces mechanics liens from various companies amounting to $338,624. Despite the complex being 90% leased, Nelson Partner allegedly failed to make payments to creditors. Issues with the property have included sanitation problems and unpaid utility bills.

Greeley Flats Files Chapter 11 Bankruptcy

On April 03, 2024 Greeley Flats, DST filed for chapter 11 protection in the District of Colorado (Case No. 24-11573).

Risk Factors related to a 1031 Exchange

Delaware Statutory Trusts, or DSTs, are an alternative for 1031 exchange investors seeking replacement properties, allegedly offering the potential for monthly income and diversification without any on-going landlord duties.

Property Value Loss – All real estate investments have the potential to lose value over time.

Tax Status Changes – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities.

Possibility of Foreclosure – All financed real estate investments have potential for foreclosure.

Illiquid Investments – 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.

Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions.

Fees/Expenses – Investors’ returns may be affected by the costs associated with the transaction. and may outweigh the tax benefits.

Securities Investigation

The White Law Group is investigating potential securities claims involving broker dealers who may have improperly recommended 1031 exchange investments to clients.

Despite the risks of investing in DSTs, The White Law Group has seen a number of instances where brokerage firms continue to push this type of investment because of the high commissions associated with their sale and creation.

Fortunately, FINRA does provide for 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.