Hospitality Investors Trust (HIT) – which was formerly named American Realty Capital Hospitality Trust, Inc. – has filed for chapter 11 bankruptcy.
If you were advised to invest in Hospitality Investors Trust (HIT) by your financial advisor or brokerage firm, you may be able to recover losses by filing a FINRA arbitration claim. We invite you to contact Sonn Law Group 24/7 for a free consultation. To do so call 844-689-5754 or reach us via email using our confidential online form.
Back in 2019, we published information on this blog related to financial difficulties and suspension of dividends by Hospitality Investors Trust, Inc. Now, in May of 2021, the company has filed for chapter 11 bankruptcy to restructure its $1.3 billion unsecured debt.
Non-Traded REITs like Hospitality Investors Trust are securities that do not trade on a public securities exchange. For this reason, Non-Traded REITs can be illiquid, meaning investors may be unable to sell their investments on demand. The underlying collateral of the REITs consists of income producing residential or commercial real estate.
Typically, the commissions generated on Non-Traded REITs are higher than industry norm (approx. 7%) and the investments themselves 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.
Investors should seek damages after Hospitality Investors Trust, Inc. brokers recommended investments that were unsuitable.
Hospitality Investors Trust, Inc. (HIT), a non-traded REIT formerly known as American Realty Capital Hospitality Trust, filed for Chapter 11 bankruptcy in Delaware in May 2021to restructure its $1.3 billion unsecured debt. The bankruptcy court is set to enter a confirmation order no later than June 23, 2021.
HIT acquired and owned hotels throughout the United States, collecting up to 101 properties worth approximately $2 million by the end of 2020. However, stock prices for the REIT have been dipping since 2017. The stocks were initially sold at $25.00/share. As of December 31, 2019, HIT stocks were trading at only $8.35/share.
HIT entered into a restructuring support agreement with its largest investor, Brookfield Strategic Real Estate Partners II Hospitality REIT II LLC (Brookfield).
Brookfield committed to providing a $65 million debtor-in-possession loan to fund HIT’s current obligations, including up to $10 million for interest payments and other approved expenses for mortgage loans, pending the Chapter 11 proceedings.
After the bankruptcy plan is effective, Brookfield will provide a $25 million exit facility. The loans will have an interest rate of 15% per year.
HIT stockholders will have their stocks canceled and exchanged for a right to receive contingent cash payments (CVR). The amount of payments made per CVR will not be more than $6.00 and will only be transferred in limited circumstances.
Non-traded REITs are speculative, risky investments can be illiquid, meaning an investor cannot sell the investment immediately on demand.
Despite the risks associated with non-traded REITs, brokers recommend these products to inexperienced, risk-averse investors because they generate higher commissions than other products. Non-traded REITs are only suitable for investors who prefer higher-risk investments with long-term investment horizons.
If your broker recommended investments in HIT without explaining the risks associated with the investments, you may be able to recover losses through FINRA arbitration.
FINRA Rules require brokers to only recommend products that are suitable for investors after consideration of their risk tolerance, investment goals, and financial situation. Recommending unsuitable investments entitles the investor to recover the losses they suffered in connection with the unsuitable products.
Contact Us to Discuss Options for Recovering Your Losses in Hospitality Investors Trust (HIT) REIT
The Sonn Law Group is currently investigating allegations that brokers recommended investments in Hospitality Investors Trust, Inc. We represent investors in claims against negligent brokers and brokerage firms. If you or your loved one experienced investment losses, we are here to help. For a free consultation, please call us now at 866-827-3202 or complete our contact form.