Meyer Wilson is currently reviewing potential claims from investors who lost money in Hospitality Investors Trust, Inc., previously known as American Reality Capital Hospitality Trust.
Due to a dramatic decrease in share price and HIT filing bankruptcy in May 2021, investors have suffered significant financial losses.
Meyer Wilson may be able to help. Our securities arbitration attorneys have extensive experience representing clients who suffered investment losses in non-traded REITS, a risky and illiquid investment product that is not suitable for most investors.
If you suffered losses investing in HIT REIT, we can explore your options for a claim against the brokerage firm, broker, or advisor who improperly recommended the investment.
HIT REIT, formerly known as American Reality Capital Hospitality Trust (ARC), is a non-traded real estate investment trust created in 2013 and sponsored by AR Capital.
Since its inception, HIT REIT has been embroiled in major problems. In 2017, AR Capital CFO Brian Block was sentenced to federal prison over alleged accounting irregularities. In 2019, the SEC charged AR Capital, Block, and AR Capital’s Founder Nicholas Schorsch with improper conduct and violations of securities laws. AR Capital agreed to pay over $60 million to settle the SEC charges.
In May 2021, HIT REIT filed Chapter 11 bankruptcy in Delaware to restructure $1.3 billion in unsecured debt. In June 2021, the Bankruptcy Court approved HIT REIT’s restructuring plan. Court filings indicate that investors with outstanding HIT REIT common stock will receive one CVR per share, with payments capped at a maximum of $6.00 per share. Originally sold for $25 per share, HIT REIT shares sold for under $.50 per share in 2021, according to Central Trade & Transfer.
HIT’s bankruptcy will cost investors significant sums. However, brokers and advisors who made unsuitable recommendations for clients to invest in HIT REIT may be responsible for investment losses.
HIT REIT is yet another example of the dangers of non-traded REITS, a private investment that is not traded on a public stock exchange. These investments are generally illiquid, lack valuation transparency, and include high fees and commissions that erode total return. According to a FINRA Investor Alert:
“Non-traded REITs are rarely, if ever, suitable for short-term investors and even long-term investors must be willing to bear the risks of illiquidity.”
Unfortunately, high commissions can incentivize brokers and advisors to sell non-traded REITs to investors even they are not appropriate for their portfolios or risk tolerance. Brokers may promote the relatively high dividend yields of these products or claim that they are a conservative risk investment, but the reality is that unlike public REITs, non-traded REITs frequently pay distributions in excess of their funds from operations, often by using offering proceeds and borrowings. This can reduce the value of shares and available cash for the company to purchase additional assets.
Moreover, non-traded REITs lack liquidity because they cannot be freely sold on the market. This can leave investors unable to access their principal when needed, or may leave them with the only option to sell shares for a loss.
Meyer Wilson is actively investigating potential claims against brokers and advisors who recommended HIT REIT and any other non-traded REIT to investors. Because non-traded REITs are generally not suitable for most retail investors and retirees, there may be grounds for a FINRA arbitration claim to recover losses when brokers or advisors make unsuitable recommendations or misrepresent the risky and speculative nature of these investment products.
Our investment loss attorneys have recovered over $350 million for wronged investors nationwide through securities arbitration and litigation. Call us or contact us online for FREE and confidential consultation.
