Hospitality Investors Trust (HIT REIT)
Formerly called American Realty Capital Hospitality Trust (or ARC Hospitality Trust), this publicly registered non-traded real estate investment trust (non-traded REIT) is also known as HIT REIT. Owning Hilton, Marriott, and Hyatt hotel properties in the United States, shares were originally sold for $25/share.
HIT REIT has since filed for bankruptcy protection and its investors may have suffered losses of more than 95%. However, many were losing money even before then.
Our Hospitality Investors Trust investment fraud attorneys are working with those who sustained significant losses, including investors who were unsuitably sold this non-traded REIT or whose broker misrepresented the investment or did not properly apprise them of the risks.
Contact Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) today so that we can help you explore your legal options.Key Events Involving HIT REIT and Investors
Below are some of the key events involving HIT REIT and its investors over the past eight years:
2013: Hospitality Investors Trust was established. Its offering was announced effective in January 2014.
November 2015: Sales activities were suspended after $903M in investor equity was sold.
March 2017: HIT REIT cut ties with an AR Global affiliate as its external adviser and became self-managed.
2018: The company implemented a share repurchase program with the price at $9/share, which was lower than its net asset value (NAV) at the time.
Late 2019: HIT REIT stocks were sold for $8.35/share.
2020: In Hospitality Investors Trust’s Form 10-K, which is a yearly report that the Securities and Exchange Commission (SEC) requires, the non-traded REIT noted certain risks. These included the negative impact of the coronavirus on the hospitality industry.
HIT REIT stated that as a result, it would not have the money to pay its financial obligations during the first half of 2021.
Late March 2021: According to Central Trade & Transfer, a secondary market, by this time HIT REIT shares were selling there for 46 cents/share.
May 2021: Hospitality Investors Trust Operating Partnership, LP filed for bankruptcy protection in Delaware. Reporting assets and liabilities of $1B and $10B, the non-traded REIT wanted a restructuring plan, including for its $1.3B of unstructured debt, that was prepackaged and with the support of its largest investor Brookfield Real Estate Partners II Hospitality REIT II, LLC.
The latter agreed to not only provide HIT REIT with a $65M debtor-in-possession loan but also said that it would lend the non-traded REIT a $25M exit facility once the bankruptcy plan was put in place. A court-approved the plan.
HIT REIT investors were notified that their stocks would be canceled in exchange for contingent cash payments of no greater than $6/common stock share.Which Investors Purchased Hospitality Investors Trust Shares?
Like all publicly registered non-traded REITs, anyone (including accredited and non-accredited investors) can get involved. Although there is usually a minimum investment required. However, that doesn’t mean that every investor should, especially if they are conservative or inexperienced investors and lack the risk tolerance level or have incompatible investing goals.
An investment such as Hospitality Investors Trust is best suited for sophisticated investors who understand and can handle this type of complex and very illiquid investment.
Yet unfortunately, it seems that brokers and their firms also marketed and sold HIT REIT to conservative investors and retirees who lacked the investing profile for this type of product. Many retail investors and investors close to retiring reportedly were led to believe that this was a safe, asset-backed investment.
It did not help matters that Hospitality Investors Trust was originally a “blind pool” offering, which means that there was no way investors would have known ahead of time what properties the non-traded REIT would acquire. This would have made it hard not just for them, but also for their financial advisors to have a proper assessment of this investment beforehand.High Commissions and Due Diligence Failures
Unfortunately, the promise of high commissions can cloud a broker’s judgment, making some of them prone to unsuitably recommending an investment product to a customer or not conducting proper due diligence into the risks.
HIT REIT reportedly paid 10% in commissions and dealer management fees, which are significant. Regarding conflicts, there was its involvement with ex-CEO William Kahane, who is also the former owner of AR Capital. The latter shut down its operations in 2015. Kahane had financial stakes in other REITs.Recover Your Losses in Hospitality Investors Trust REIT
Were you an investor of Hospitality Investors Trust REIT? If your broker or brokerage firm unsuitably recommended this investment to you, seek legal advice from an experienced law firm. Our attorneys have worked tirelessly to help investors recover losses as a result of negligence and fraud.