CS1031 Kinston MOB, DST Investor Alert!

Soreide Law Group is investigating potential investor claims involving CS1031 Kinston MOB, DST, an illiquid private real estate investment that held a single medical office property in Kinston, North Carolina. The firm is examining whether securities brokers or financial advisors improperly recommended the investment. The Delaware statutory trust was designed in part for accredited investors seeking Section 1031 tax-deferred exchanges.

The offering carried significant risks involving concentration, liquidity, management, financing, taxes, and conflicts of interest. A closer look at the property and offering terms helps put those risks in context.

What Is CS1031 Kinston MOB, DST?

CS1031 Kinston MOB, DST was formed in 2016 and sponsored by Capital Square Realty Advisors LLC, with CSRA Manager LLC identified as an affiliate. A November 2016 Form D described a Rule 506(b) private offering of up to $2.462 million for accredited investors, with a $25,000 minimum investment.

The trust owned a 10,880-square-foot medical office building fully leased to Bio-Medical Applications of North Carolina. Sponsor materials linked the tenant to Fresenius, which reported approximately $16.7 billion in revenue for fiscal 2015. As of June 30, 2016, the clinic reportedly served more than 104 patients and had 39 dialysis chairs. The lease had about six years remaining, along with two five-year renewal options. The property was adjacent to Eastern Nephrology’s outpatient office and about one mile from Lenoir Memorial Hospital.

Capital Square announced in October 2023 that it had sold the Kinston property. According to the sponsor, sale proceeds and distributions over the investment's life amounted to 147.63% of investors' initial equity, equivalent to a 7.15% annualized return, net of fees.

Concerns About CS1031 Kinston MOB, DST

The trust offered no diversification across properties: its performance depended on one building and one tenant. Investors had no voting rights over management, operations, or a property sale. They relied on the master tenant to collect rent and handle the property's operations, leasing, management, and maintenance.

Capital Square said it acquired the property without debt. The offering nonetheless identified broader risks involving financing, the North Carolina commercial real estate market, leasing, competition, environmental issues, taxes, and conflicts of interest among the trust, sponsor, trustee, and affiliates. DST interests were illiquid, with no established secondary market, and distributions were not guaranteed. Poor property performance could still have put investors' principal at risk.

The Form D estimated $172,340 in sales commissions and approximately $29,550 for executive officers, directors, or promoters. No specific commission recipient was identified in the filing. These expenses, along with sponsor-related fees, could leave less of investors' money available to support the investment.

Potential Sales Practice Violations Involving CS1031 Kinston MOB, DST

Investors may have claims if a broker failed to explain that CS1031 Kinston MOB, DST was a private, illiquid investment tied to a single medical property, or recommended it to someone who needed liquidity, diversification, or ready access to principal. Concerns may also arise if an advisor failed to investigate the tenant, lease term, financing, master-tenant structure, sponsor conflicts, commissions, fees, or property-specific risks.

Investors may also have claims if a broker overstated the safety or expected income of the DST, minimized the possibility of principal loss, misrepresented resale options, or failed to explain tax and 1031-exchange risks. Depending on the facts, investors may seek compensation through FINRA arbitration or litigation.

Seeking Recovery For CS1031 Kinston MOB, DST Losses?

If you lost money investing in CS1031 Kinston MOB, DST and believe your financial advisor or securities broker was responsible, you can speak with a securities attorney about possible recovery. Contact Soreide Law Group online or at (888) 760-6552 to discuss your situation. Soreide Law Group has recovered losses for investors throughout the United States. The firm works on a contingency fee basis and advances all costs.