Wolper Law Firm, P.A. is Pursuing Recovery Options for Investors with Losses in the Kingsbarn Green Valley North DST

• November 8, 2024
• Uncategorized

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 Kingsbarn Green Valley North DST (also known as the KB Green Valley North DST) is a recent example of a DST “gone bad” when the issuer notified investors that the lender exercised a “cash sweep,” resulting in a cessation of distributions and potential loss of the property.  Investors who contributed capital to the Kingsbarn Green Valley North 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 Kingsbarn Green Valley North DST.  If you have experienced investment losses due to the Kingsbarn Green Valley North 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 Kingsbarn Green Valley North 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 Kingsbarn Green Valley North DST sought to raise $35 million from investors in order to fund the acquisition and management of various commercial properties in Nevada.  The Kingsbarn Green Valley North DST was represented to have 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 lender exercised a cash sweep option, which occurs when the lender uses the cash flow generated from the DST to cover and/or reduce the costs associated with a loan.  This most commonly occurs when a tenant’s credit drops, occupancy of the property declines or other risk factors come to fruition that compromise the lender’s security in the underlying property.  In the case of Kingsbarn Green Valley North DST, as part of the cash sweep, distributions to investors have been discontinued and it is unlikely that those distributions will resume any time soon.  This has had a devastating impact on investors.  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 and creditworthy tenants, that have undergone an extensive due diligence process.

 

What Can I Do to Recovery My Losses in the Kingsbarn Green Valley North DST?

 

Investors who invested in the Kingsbarn Green Valley North DST through brokerage firms or financial professionals have the ability to bring a court action or 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.  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 Kingsbarn Green Valley North 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.