INVESTOR ALERT—Investor Recovery Options For The Hospitality Investors Trust Inc. Real Estate Investment Trust (HIT REIT)
Hospitality Investors Trust Inc. Real Estate Investment Trust (HIT REIT), formerly American Realty Capital Hospitality Trust, Inc., recently declared bankruptcy. The non-traded real estate investment (REIT) was formed in July 2013 by AR Capital to invest in hotel properties. By the following year, an investigation into the REIT’s accounting irregularities led to several board members resigning. In November 2017, AR Capital’s former chief financial officer, Brian Block, was sentenced to eighteen months in prison. In July 2019, the former board members agreed to settle with the SEC for $60 million related to fraud charges. Proper due diligence by the broker-dealers who sold the HIT REIT should have alerted them to the seriousness of these issues prior to the REIT’s recent bankruptcy filing. These issues have existed within the Non-Traded REIT for years and appropriate initial and ongoing due diligence should have uncovered the many problems which have led to the bankruptcy.
Hospitality Investors Trust, Inc. publicly announced a suspension of its dividend distribution to investors in 2017. After the suspension of its dividend, shares of Hospitality Investors Trust, Inc. plummeted from the initial offering price of $25 to less than $10 per share. By September 2019, the price per share of Hospitality Investors Trust, Inc. dropped to a staggering $5 per share, representing a near complete loss for investors. Without a dividend, the prospect of principal recovery is unlikely, which will cause additional selling pressure and principal price reduction.
In May 2021, The Hospitality Investors Trust filed for Chapter 11 bankruptcy protection, which will almost certainly result in investors losing all or most of their principal. The result is a long way from where the REIT started in 2014 when it raised $903 million from investors. It is believed that the Hospitality Investors Trust REIT will emerge from bankruptcy, maintaining many of its assets but shedding its liabilities, including responsibilities owed to investors.
Non-traded REITs do not trade a public securities exchange. For this reason, non-traded REITs can be illiquid, meaning investors may be unable to sell their investments on demand. Typically, the commissions generated on non-traded REITs are higher than industry norm and may be subject to extreme volatility due to associated risk factors. Non-traded REITs are only suitable for investors with a long-term investment horizon who are willing to accept higher levels of risk in their investments
Financial Advisors often solicit customers to invest in REITs or other privately held securities because there are high commissions associated with those transactions. These products are complex and often times illiquid, meaning that investors cannot freely sell them into the marketplace. These investment products are generally suitable for investors that are wealthy, sophisticated and have a long-term investment horizon.
The Wolper Law Firm, P.A. has extensive experience handling legal claims regarding REITs, privately held investments and other complex, structured investment products. If you or someone you know invested in the HIT REIT, please contact the Wolper Law Firm, P.A. at 800.931.8452 or by email at email@example.com to discuss your specific situation and the legal options available. The Wolper Law Firm, P.A. represents investors nationwide in securities litigation and arbitration.