• September 1, 2023
• Concorde Investment Services

The Wolper Law Firm represents investors around the country who have lost money in complex investment strategies and products, including Delaware Statutory Trusts, or “DSTs.”  The Epoch Fort Collins DST is a recent example of a DST “gone bad” when its issuer recently notified investors that it could no longer move forward with the project because, among other things, rising interest rates, and would be liquidating the underlying property for pennies on the dollar.  Investors who contributed capital to the Epoch Fort Collins DST are now facing massive investment losses.

The Wolper Law Firm has extensive experience litigating DST cases and, in particular, DSTs involving the student housing sector like Epoch Fort Collins DST.  If you have experienced investment losses due to the Epoch Fort Collins DST, please contact the Wolper Law Firm, P.A. for a free consultation.  We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.

What is the Epoch Fort Collins DST?

A DST is a legally recognized trust that is created for a specific business purpose.  Traditionally, DSTs are utilized to provide a governing agreement by which real estate can be purchased, held, managed and administered among a pool of investors who own participation interests in the DST.  The DST allows an investor the opportunity to own an interest in the underlying real estate without the responsibility of managing the property.  A trustee is appointed to manage the property on behalf of the investor pool.  A Tenant-in-Common or TIC investment offering is similar to a DST in that both investment vehicles pool investor capital toward the purchase of underlying real estate but the legal ownership structure is different.  DST and TIC investments are commonly used as a mechanism through which real estate owners can facilitate a 1031 exchange, which refers to a section of the Internal Revenue Code that allows a seller of real estate to defer paying capital gains taxes if the sale proceeds are reinvested in qualified real estate within a designated period of time.

 

DSTs and other private placements have increased in popularity over the years as investment professionals attempt to capitalize on volatility experienced among publicly trades securities.  Private placements, such as DSTs, are often marketed and sold as safe and tax-efficient income producing vehicles that are not subject to the same market forces as publicly traded securities.  While there is some level of truth to that statement, the reality is that private placements are speculative and do not have the same reporting requirements as publicly traded securities.  This means that DSTs can often mask financial difficulties until it is too late.  Moreover, because DSTs are illiquid, investors are often unable to sell their interests to third-parties before experiencing an investment loss.

 

According to SEC Filings, the Epoch Fort Collins DST raised $23.1 million from investors in order to fund its luxury student housing facility in Colorado.  Student housing DSTs are popular because of the perception of high occupancy rates.  In order to finance this project, the aforementioned capital was raised through FINRA registered brokerage firms, including Concorde Investment Services, LLC, and a series of independent advisors, including Bangerter Financial.  The Epoch Fort Collins DST was represented to gave passed an extensive due diligence process and would serve as a safe, tax-efficient investment vehicle that would produce income.

 

Investors have recently been advised that the Epoch Fort Collins DST has terminated its plans to develop the underlying student housing project because of, among other things, higher than expected interest rates.  The underlying property is being sold at a steep discount and investors are now facing large losses.  This has had a devastating impact on investors because they will no longer have a viable interest in the underlying property.  As is often the case with DSTs, individual investors do not have control of individual decisions made by the DST structure and, accordingly, rely on their financial professionals to recommend DSTs with seasoned, professional managers, that have undergone an extensive due diligence process.

 

What Can I Do to Recovery My Losses in the Epoch Fort Collins DST?

 

Investors who invested in the Epoch Fort Collins DST through brokerage firms or financial professionals have the ability to bring a FINRA arbitration claim to recover their losses.  FINRA Notice to Members 10-22 provides specific requirements that brokerages and financial professionals must undertake when conducting due diligence on privately held securities, including DSTs, before recommending them to investors.  Moreover, the FINRA suitability rule requires that brokerages and financial professionals make both reasonable basis and customer specific suitability determinations prior to recommending securities to customers.

 

According to SEC filings, Concorde Investment Services, LLC received compensation for the sale of the Epoch Fort Collins DST and has the aforementioned due diligence and suitability obligations

These due diligence obligations are absolute but are often overlooked by brokerage firms because they don’t have the resources or infrastructure to effectively conduct due diligence.  It is often passed along to third-parties, who fail to meet the exacting standards of FINRA Notice to Members 10-22.

The Wolper Law Firm, P.A. Offers Free Consultations to Discuss Losses in the Epoch Fort Collins DST

The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis.  Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled more than 1,000 securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.