Hospitality Investors Trust, Inc. Investment Losses
Posted on Friday, June 25th, 2021 at 7:33 am
Erez Law is currently investigating brokers across the country who recommended their clients invest in Hospitality Investors Trust Inc., which was previously known as American Realty Capital Hospitality Trust.
According to their website, Hospitality Investors Trust, Inc. is a publicly registered non-traded real estate investment trust (REIT) that owns a diversified portfolio of strategically-located hotel properties throughout North America within the select service and full-service markets of the hospitality sector.
In May 2021, Hospitality Investors Trust Inc. filed for Chapter 11 bankruptcy to restructure $1.3 billion worth of unsecured debt. Each share of Hospitality Investors Trust common stock was to be canceled and exchanged for a right to receive contingent cash payments (CVR). For shareholders, they will receive one CVR in exchange for each share of common stock, not to exceed $6.
Hospitality Investors Trust Inc. did not declare a Net Asset Value (NAV) for 2020, as of June 2021. As of December 31, 2019, Hospitality Investors Trust Inc. was listed at $8.35 per share, which was a 9.3% decrease from the NAV in 2018. A secondary market for non-traded REITs, shares of Hospitality Investors Trust Inc. REIT sold for just $0.46 per share in 2021.
In December 2018, Hospitality Investors Trust, Inc. saw a more than 30% decrease in its net asset value (NAV), from $13.87 a share (in December 2017) down to just $9.21 a share, according to public records. Shares were originally sold at $25, accounting for a 60% loss from the original offering price. The NAV for a share is based on an estimated fair value of a company’s assets minus the estimated fair value of its liabilities, and then divided by its shares of outstanding common stock.
The Hospitality Investors Trust, Inc. board cited the decrease to its NAV was due to lower estimates of occupancy and daily rate forecasts, increases in competition in certain markets, increases in costs including labor and sales/marketing, and lower estimates of future expenditures and returns on investments.
In December 2018, Hospitality Investors Trust, Inc.’s gross asset value dropped to $2.3 billion, from $2.48 billion at the end of 2017. Hospitality Investors Trust, Inc. had 144 properties in its book as of December 2018.
In September 2018, Hospitality Investors Trust, Inc. announced a share repurchase program at $9 per share that would take effect on December 31, 2018. Hospitality Investors Trust, Inc. recommended that only investors that required immediate liquidity should sell their shares, noting that a NAV of $9.00 per share was a significant decrease in the market value. According to the announcement, “The Board strongly recommends that stockholders do not request that the Company repurchase their shares at this price due to the Board’s belief that the initial Repurchase Price is well below the current and potential long-term value of a share of common stock, as described in more detail in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the ’SEC’) on September 24, 2018.” In February 2019, the buyback program ended.
A REIT is a company, modeled after mutual funds, that owns or finances income-producing real estate and provides investors of all types regular income streams, diversification and long-term capital appreciation. Unlike other real estate investments, REITs are often entirely illiquid. Non-traded REITs hold additional risks for investors because they often feature limited redemption programs, high fees and commissions, and internal conflicts of interest. Unlike stocks on the New York Stock Exchange, REITs are not publicly traded and cannot be sold through an exchange, only through secondary market auctions.
Non-traded REITs hold additional risks for investors because they often feature limited redemption programs, high fees and commissions, and internal conflicts of interest. They are also illiquid investments.
Many brokers at brokerage firms across the country did not disclose the significant risks involved with investments in Hospitality Investors Trust, Inc.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, brokerage firms across the country may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If you have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.