Hospital Investors Trust Inc. (known as “HIT”), previously known as American Realty Capital Hospitality Trust, announced on February 28, 2019 that it was suspending a share repurchase program under which the REIT had repurchased some shares from investors at $9.00 a share. HIT framed the program as an accommodation for investors who needed liquidity and recommended that investors not sell their shares.
Back in October 2018, the company, a public, non-traded real estate investment (REIT) with a focus on hospitality properties in the United States, announced the buyback program of $9.00/share effective December 31, 2018. $9.00/share was an approximate 35% discount to the REIT’s most recent net asset value (NAV) per share of $13.87 and significantly less than the $25.00/share price at which most investors purchased shares. When HIT’s board announced the buyback program in October, they recommended that only those investors that required immediate liquidity should sell their shares, as the $9.00/share price was a significant decrease in the current market value.
Non-traded REITs are risky investments for investors, but lucrative for financial advisors and brokerages. Many investors have reportedly been pressured into investing in non-traded REITs by their financial advisors or brokers, without ever receiving the proper explanation as to the risk and complexity of non-traded REITS. Further, once invested, investors, are often forced to rely upon the REIT’s own estimate of its value, since non-traded REIT shares do not trade in a liquid public market like shares of stock.