Hospitality Investors Trust, Inc. (HIT REIT) is a non-traded real estate investment trust (REIT). REITs like this are only suitable for savvy and wealthy investors, because these complex investment products are often risky and highly illiquid, meaning investors may be stuck and not able to access their money. The risks materialized and HIT REIT filed for bankruptcy in May 2021. Hospitality Investors Trust REIT was formed in July 2013 by AR Capital, a now-infamous company in the non-traded REIT space that has sponsored over $20 billion in deals. Since its inception, HIT REIT has had serious problems, which ultimately resulted in AR Capital’s former CFO being sentenced to federal prison. Now, Hospitality Investors Trust REIT investors have suffered significant losses. Brokers, financial advisors, and brokerage firms who recommended HIT REIT knew or should have known of the risks and issues; brokers should never have sold HIT REIT to investors.
If you invested in HIT REIT, Contact Peiffer Wolf for a FREE CONSULTATION by calling 585-310-5140 or by filling out a Contact Form on this website.
HIT REIT is another stark reminder of how disastrous non-traded REITs can be for investors. According to the US Securities and Exchange Commission, “[b]ecause they do not trade on a stock exchange, non-traded REITs involve special risks”.
They are illiquid investments, which means that “if you need to sell an asset to raise money quickly, you may not be able to do so with shares of a non-traded REIT.” Moreover, “it can be difficult to determine the value of a share of a non-traded REIT. Non-traded REITs typically do not provide an estimate of their value per share until 18 months after their offering closes. This may be years after you have made your investment. As a result, for a significant time period you may be unable to assess the value of your non-traded REIT investment and its volatility.”
Financial advisors (brokers) have a legal obligation and regulatory obligation to recommend only suitable investments that are appropriate for their individual clients. Their broker-dealer (employing brokerage firm) has a legal obligation and regulatory obligation to supervise the financial advisor’s sales practices and dealings with clients. To the extent that any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.
Thus, the securities law firm of Peiffer Wolf has begun another investigation into any and all brokers and advisors who recommended HIT REIT to investors. If you invested in Hospitality Investors Trust REIT, Contact Peiffer Wolf for a FREE CONSULTATION by calling 585-310-5140 or by filling out a Contact Form on this website.
On May 19, 2021, Hospitality Investors Trust Inc., a non-traded REIT that owns a portfolio of hotel properties, filed for Chapter 11 bankruptcy in Delaware to restructure its $1.3 billion unsecured debt. According to filings in the bankruptcy case, each share of Hospitality Investors Trust common stock will be canceled and exchanged for a right to receive contingent cash payments (CVR). Shareholders of the common stock will receive one CVR in exchange for each share of common stock. The maximum amount of payments made per CVR will not exceed $6.00 and will not be transferable, except in limited instances such as the death of the holder.
HIT REIT has yet to declare a Net Asset Value (NAV) for 2020. As of December 31, 2019, it was listed at $8.35 per share, a 9.3% decrease from the 2018 NAV. HIT REIT Shares were originally sold for $25.00 per share. According to Central Trade & Transfer, a secondary market for non-traded REITs, shares of HIT REIT sold for just $0.46 per share in 2021. Drawn to recommending this REIT because of the high commissions associated with the transaction, brokers and financial advisors made unsuitable recommendations to many clients who lost a lot of money.
Similar to American Finance Trust, Inc. (AFIN), VEREIT, and ARC NYC REIT, HIT REIT is another stark reminder of how disastrous non-traded REITs can be for investors. Eerily reminiscent of AFIN, VEREIT, and ARC NYC REIT, HIT REIT has experienced the same dramatic decrease in share prices for investors. Even worse, HIT REIT is now in bankruptcy.
Thus, the securities law firm of Peiffer Wolf Carr Kane & Conway (“Peiffer Wolf”) has begun another investigation into American Realty Capital (“ARC”). Specifically, Peiffer Wolf is investigating any and all brokers and advisors who recommended ARC HIT REIT and any non-traded REITs to investors. If you invested in HIT REIT, Contact Peiffer Wolf for a FREE CONSULTATION by calling 585-310-5140 or by filling out a Contact Form on this website.
Brokers and financial advisors are often drawn to recommending REITs because of the high commissions associated with the transaction. These alternative investments are generally only suitable for savvy investors who are wealthy and sophisticated. These complex investment products are often highly illiquid, meaning investors may be stuck and not able to access their money. Moreover, many illiquid REITs cannot be freely sold in the marketplace. All too often, investors trying to exit or access their money are faced with two bad options: sell the shares directly back to the sponsor at a heavily discounted price or sell the shares for pennies on the dollar through the limited secondary markets.
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If you believe you lost money because of unsuitable recommendations, including the addition of Hospitality Investors Trust REIT (HIT REIT) to your portfolio, it is important to take action. Peiffer Wolf has represented thousands of victims, and we remain committed to fighting on behalf of investors.