Hospitality Investors Trust Inc. (formerly known as American Realty Capital Hospitality Trust) is a publicly registered non-traded real estate investment trust (“REIT”) which owns a portfolio of hotel properties throughout North America. The company operates its hotels under a franchise or license agreement with various brands. As of December 31, 2017, it owned and had interests in 145 hotels in 33 states. Shares in the REIT were originally sold to investors for $25.00 each. The board of Hospitality Investors Trust Inc. most recently approved an estimated net asset value per share of $13.87, a 47% decline from the initial offering share price. Furthermore, effective October 1, 2018, the company announced that it is willing to repurchase shares for only $9.00 per share; a steep discount to the current net asset value. The offering for this REIT was effective in January 2014 and closed to further investments in November 2015 after raising $903 million in investor equity, according to Summit Investment Research.
REITs such as Hospitality Investors Trust Inc. are not listed on a national exchange and are not publicly traded. Accordingly, there is a lack of liquidity, meaning they cannot be easily sold in the market. Also, there is a lack of share value transparency, meaning it can be difficult to determine the value and/or performance of the investment. Additionally, these investments typically charge very high upfront fees to compensate a firm or individual selling the investment as well as high transaction costs. With non-traded REITs, the fees and costs can represent up to 15% of the offering price, which substantially lowers the value and return of the investment. Furthermore, distributions are not guaranteed and can be suspended for a period of time or halted altogether.
Before recommending an investment in a non-traded REIT, a brokerage firm and its financial advisors have a duty to adequately disclose the risks involved in the investment and to perform the necessary due diligence to determine whether the investment is suitable for each individual investor.
If your broker recommended the purchase of Hospitality Investors Trust, Inc. in your brokerage account, you may be able to recoup your losses under applicable state and/or federal law. Please contact us for a free confidential consultation.
Gregory B. Simon Law, LLC is a national securities law firm that provides legal services to investors and financial advisors on a wide range of financial industry matters. For more information on the firm, please visit https://www.gregsimonlaw.com.