NP Skyloft DST: Investors May be Entitled to Settlement

If you invested in NP Skyloft DST, you may be able to recover your losses. Following lawsuits by investors, Nelson Partners has agreed to a $50 million settlement.

Investors in Nelson Partners Skyloft, or NP Skyloft DST, were investing in an off-campus student housing complex located near the University of Texas at Austin. A promotional video for the property from 2019 showed off its top-of-the-line amenities and modern high-rise design, claiming Skyloft Austin would be in high demand with students and provide long-term value for investors.

Nelson Partners Student Housing allegedly raised $75 million from investors, took out a $66 million mortgage from several lenders, and received a $35 million short-term loan from hedge fund Axonic Capital in order to purchase the Skyloft Austin property.

However, court filings from 2021 alleged that Nelson Partners defaulted on this loan, resulting in Axonic Capital taking ownership of Skyloft Austin and selling the property. According to The New York Times, investors alleged that they were left in the dark about the relationship between these firms and did not know Axonic Capital could take the property.

Dozens of these investors filed lawsuits against Nelson Partners, alleging that owner Patrick Nelson enriched himself with proceeds from investors and reinvested funds into other student housing real estate projects.

NP Skyloft DST Settlement

On July 21, 2022, a Texas court approved a liquidation plan that included a $50 million settlement for investors in NP Skyloft DST. Nelson Partners has repeatedly fallen short of funding the settlement under the liquidation plan, providing only $9.3 million in funds, excluding fees paid to the plan administrator.

As of November 21, 2024, investors had only received $6 million in settlement funds.

Most recently, motions were filed to approve the dissolution of NP Skyloft DST and the transfer of its assets into a liquidating trust. These motions have not yet been decided on.

Meanwhile, a settlement with hedge fund Axonic Partners was proposed in August 2024, offering $9 million to investors. Investors who are eligible for Skyloft settlement payments may be eligible for this settlement as well, and will be paid separately.

What Kind of Investment was NP Skyloft DST?

NP Skyloft DST was a private placement, a kind of investment that allows investors to buy into private companies, and a Delaware statutory trust, which allows investors to purchase an interest in a trust rather than owning a property directly.

Private placements have fewer disclosure and regulatory obligations than public offerings, making them inherently risky for investors. Some DSTs, particularly those tied to rental spaces, lost a significant amount of value due to changes in behavior following the pandemic.

How DSTs and 1031 Exchanges Work

A DST is also a type of 1031 exchange, which are designed to provide a way for investors to avoid incurring property-related sales taxes by swapping one property for another. For example, an investor who sells a rental property they own can defer paying capital gains tax on their profits by reinvesting the money in a DST.

Under SEC rules, brokers cannot recommend 1031 exchanges to the public, and can only recommend them to clients if they have a reasonable basis to believe the investment serves their investor’s goals.

This requires brokers to do extensive research into a 1031 exchange’s issuer, management, business prospects, current or prospective assets, and the claims made about the investment by the issuer.

NP Skyloft DST Reviews

Rules and regulations like FINRA Rule 2111 and Regulation Best Interest require brokers to only recommend investments that suit their clients’ needs as investors. Factors like age, total assets, risk tolerance, and investing experience must be considered before a broker recommends an investment.

More than a hundred investors were drawn in by Skyloft Austin’s attractive features and expectations of long-term investment value, but several allege that they weren’t given all the facts.

Kurta Law knows of multiple brokers who have faced disputes from investors for allegedly failing to fully disclose information about NP Skyloft DST, including Dwight Kay of FNEX Capital and Robert Schmidt of Realized Financial, and Samuel Phillips of Cape Securities.

Investors who believe their broker misrepresented an investment can file a FINRA complaint. FINRA arbitration offers a faster alternative to civil court and can yield settlements for investors who lose money due to unsuitable investment recommendations or misrepresented investments.

How Can Investors Recover Their Money?

The best way for investors to recoup their losses in NP Skyloft DST is to contact a securities lawyer for help. Our attorneys offer free case evaluations and do not charge a fee unless we win your case. Call (877) 600-0098 or email info@kurtalawfirm.com.