Risks Involved in DST Investments
• No contribution can be made upon closing -A DST can’t accept any contribution from its new or current beneficiaries once the offering is closed.
• No renegotiation on existing loans –The trustee can’t renegotiate the terms of the existing loans. Neither can it borrow new funds from any lender.
• Limitation on capital investment – Any cash held during distribution dates can only be invested for paying short-term debts.
• Can’t reinvest real estate proceeds –The trustee isn’t allowed to reinvest the proceeds obtained from the sale of its real estate.
• Limitation on capital expenditure –The trustee is allowed to make limited capital expenditures on the property pertaining to (a) normal repair and maintenance, (b) minor non-structural capital improvements, and (c) those required by the law.
• No extra reserves –It’s mandatory that all cash, other than necessary reserves, is distributed among the beneficiaries on a current basis.
• No new leases –The trustee can't enter into new leases, neither can it renegotiate the current leases.