Four Springs Capital 1031 Exchange DSTs: Investor Lawsuits

Four Springs Capital 1031 Exchange DSTs – Lawsuit Investigation Update

The securities attorneys at The White Law Group are investigating potential FINRA arbitration claims on behalf of investors who may have suffered losses in DST investments sponsored by Four Springs Capital Trust.

Background on Four Springs Capital Trust and its DST Offerings

Four Springs Capital Trust is a real estate investment trust (REIT) that focuses on acquiring and managing a diversified portfolio of single-tenant, net-leased properties, including retail, industrial, medical, and office properties. Its wholly owned subsidiary, Four Springs Capital, sponsors Delaware Statutory Trust (DST) investments as part of Section 1031 tax-deferred exchanges.

According to SEC filings, Four Springs Capital has reportedly offered many DST programs, including:

Four Springs TEN31 Xchange

• FSC Healthcare 7 DST
  FSC Industrial III DST
  FSC Automotive I DST
  FSC Healthcare II DST
  FSC Industrial 7 DST
  FSC Industrial 6 DST
  FSC Industrial 8 DST
  FSC Industrial 9 DST
  FSC Healthcare II DST
  FSC Healthcare III DST
  FSC Industrial IV DST
  FSC Diversified 2 DST
  FSC HEALTHCARE IV DST
  FSC AS Jonesboro AR, DST
  FSC AS Mt. Juliet TN DST
  FSC MRC Odessa TX, DST
  FSC GM Lebanon IN, DST
  FSC AS Jonesboro AR DST
  FSC BJ Tilton NH, DST

These investments are typically sold to retail investors seeking income and tax deferral benefits without the responsibilities of direct property ownership.

Four Springs Capital Trust’s Failed IPO Attempts

Four Springs Capital Trust attempted to go public on two separate occasions, filing for an initial public offering (IPO) in March 2017 and again in December 2022, according to filings with the SEC. Both IPO efforts were later withdrawn, citing “unfavorable market conditions.”

The Risks of 1031 Exchange DST Investments

Delaware Statutory Trusts are complex and carry numerous risks, including:

• Illiquidity – These investments are not traded on any public market, and resale is often impossible.

• Market Risk – The underlying properties may decline in value due to economic or regional downturns.

• Distribution Cuts – Distributions are not guaranteed and may be reduced or suspended if tenants default or the property incurs unexpected costs.

• High Fees – Commissions and upfront fees (often as high as 10%) can significantly reduce potential returns.

• Foreclosure Risk – If the property has financing, there is a risk of default and foreclosure.

• Tax Risks – Changes in IRS rules or structure of the DST could impact 1031 exchange eligibility.

Unsuitable Investment Recommendations

Despite these risks, some brokerage firms may have unsuitably recommended Four Springs DSTs to investors without properly disclosing the downsides. In some cases, these recommendations were made to conservative or elderly investors seeking income and capital preservation.

Because these investments typically pay high upfront commissions, brokerage firms may have been motivated by compensation rather than investor suitability. This could be grounds for a FINRA arbitration claim.

Class Action Lawsuit vs. FINRA Arbitration

If you have suffered losses in a Four Springs Capital 1031 DST investment, you may wonder whether to pursue a class action lawsuit or individual FINRA arbitration.

FINRA arbitration is usually the better route if your broker misrepresented the investment or failed to conduct due diligence.

Frequently Asked Questions

1. Is a DST investment guaranteed to generate income?
No. Income distributions can be reduced or suspended based on tenant issues, market conditions, or property performance.

2. Can I sell my DST investment?
DSTs are illiquid and not traded on public markets. There is generally no secondary market, making resale very difficult.

3. What are my options if I lost money in a Four Springs Capital DST?
You may be able to recover losses through a FINRA arbitration claim if your financial advisor made an unsuitable recommendation or failed to disclose the risks.

Free Consultation with a Securities Attorney

If you are concerned about your investment in a Four Springs Capital 1031 exchange DST, call The White Law Group at 888-637-5510 for a free consultation. Our attorneys have recovered millions of dollars for investors through FINRA arbitration nationwide.

The White Law Group is a national securities fraud and investor protection law firm with offices in Chicago, IL and Seattle, WA.

For more information, visit www.whitesecuritieslaw.com.