Investors in Hospitality Investors Trust (“HIT”), also known as American Realty Capital Hospitality Trust or ARC Hospitality, may have FINRA arbitration claims, if their investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the stockbroker or advisor.
HIT, a public, non-traded real estate investment trust (“REIT”) with a focus on hospitality properties in the United States, reportedly recently amended its limited partnership agreement with a major investor, Brookfield Strategic Real Estate Partners II Hospitality REIT II LLC. Brookfield reportedly holds all of the outstanding Class C limited partnership units in the REIT’s operating partnership. Under the amendment, reportedly Brookfield will receive additional limited partnership units instead of cash distributions to which it would otherwise be entitled.
HIT characterized the move as caused by a cash crunch: “As previously disclosed, due to the impact of the coronavirus pandemic on the company’s business, the company expects it will no longer have sufficient cash on hand to continue to pay its current obligations during the first half of 2021 and the additional liquidity from a source other than property operations the company requires may not be available on favorable terms or at all,” the REIT state in a filing with the SEC. “The objective of the [limited partnership amendment with Brookfield] is to preserve at least in the short-term the company’s cash position as it continues discussions with the Brookfield investor regarding a holistic solution to the company’s liquidity dilemma.”