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Articles Tagged with Hospitality Investors Trust

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Hospitality Investors Trust Inc. (“HIT”), previously known as American Realty Capital Hospitality Trust, recently announced a net asset value (NAV) of $9.21/share, representing a 33.6% decrease from the last announced NAV of $13.87/share.  The Board of HIT stated that this decrease in NAV was due to lower estimates of occupancy, increase in competition, and increase in costs.

money blowing in wind
As we previously reported, 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 a share repurchase program at $9.00/share effective December 31, 2018.  At the time, $9.00/share was an approximate 35% discount to the REIT’s then most recent NAV of $13.87/share. 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. The buyback program only lasted until February 2019.

HIT shares were originally offered at $25.00 a share, leaving investors at the initial offering price with principal losses of about 60% (not accounting for distributions).

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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.

Money Maze
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.

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Hospitality Investors Trust Inc. (“HIT”, formerly known as ARC Hospitality Trust, Inc.) has announced that it is buying back shares for $9.00 a share, which is a discount of approximately 35% to what it the company claims is the shares’ net asset value (NAV) of $13.87 a share.  It is also a far cry from the $25.00 a share price at which most investors initially acquired shares.

Building Demolished
HIT is a non-traded real estate investment trust (REIT) focused on ownership of hotels and other lodging properties in the United States.  As a publicly registered non-traded REIT, Hospitality Investors Trust was permitted to sell shares to the investing public at large, oftentimes upon the recommendation of a broker or financial advisor.  The REIT sold shares to the public for $25.00/share.  Some investors may not have been properly informed by their financial advisor or broker of the complexities and risks associated with investing in non-traded REITs.

HIT’s board has adopted the share repurchase program, effective October 1, 2018, for shareholders who desire immediate liquidity, and recommends that investors do not sell their shares unless they need immediate liquidity because (according to HIT) the initial repurchase price is well below the current and potential long-term value of the shares.  Shares bought at any time are eligible for repurchase under the program, and the first repurchase date under the to the program is scheduled for December 31, 2018.

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Apartment Building Investors who purchased shares in the publicly registered non-traded REIT Hospitality Investors Trust, Inc. (“HIT”) upon the recommendation of their financial advisor may be able to recover their losses in FINRA arbitration.  HIT owns a portfolio of hotel properties throughout North America, including various Hilton-, Marriott- and Hyatt- branded hotels, within the select service and full-service markets.  As of December 31, 2016, HIT owned 148 hotels; the company was founded in 2013 and is headquartered in New York, NY.

Recently, HIT commenced a defensive tender offer for up to 1 million shares of its common stock at a price of $6.50 per share.  According to HIT’s board, the defensive tender was made in order to deter another recent tender offer, made by third-party MacKenzie Realty Capital (“MacKenzie”), a non-traded business development company.  On October 23, 2017, MacKenzie notified HIT investors that it had commenced an unsolicited tender offer to purchase up to 300,000 shares of common stock for $5.53 per share.  The MacKenzie tender offer is set to expire on December 8, 2017, whereas the more recent HIT tender offer is set to expire on December 11, 2017.

These recent tender offers by both MacKenzie and HIT illustrate one of the significant risks associated with investing in non-traded REITs.  Specifically, an investment in a non-traded financial product is generally an illiquid investment that can only be sold through redemption to the sponsor, or in some instances, through a limited and fragmented secondary market.  In this instance, the defensive offer to redeem being made by HIT is at $6.50 per share.  For investors who purchased shares through the original offering, the shares were priced at $25.  Therefore, even when factoring in any distributions paid on the investment, any shareholder who participates in the HIT tender offer will be absorbing a steep loss on their investment of approximately 70%.

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Hospitality Investors Trust Inc. (formerly known as ARC Hospitality Trust, Inc.) is a non-traded real estate investment trust (REIT) focused on ownership of hotels and other lodging properties in the United States.  As a publicly registered non-traded REIT, Hospitality Investors Trust was permitted to sell shares to the investing public at large, oftentimes upon the recommendation of a broker or financial advisor.  The REIT sold shares to the public for $25.00/share.  Some investors may not have been properly informed by their financial advisor or broker of the complexities and risks associated with investing in non-traded REITs.

According to reports, Hospitality Investors Trust has terminated redemptions, and the company no longer pays a dividend.  The company must get approval from Class C units before doing future redemptions, and according to SEC filings it “no longer pays distributions.” The NAV of Hospitality Investors Trust has reportedly decreased by 47% since initial issuance to just $13.20, down from the $25 initial purchase price.  Thus, investors who bought shares at the $25.00 offering price have experienced a loss of nearly half of their principal.

On October 23, 2017, MacKenzie Realty Capital, Inc. reportedly extended a tender offer to purchase shares of Hospitality Investors Trust Inc. for $5.53 a share- suggesting that shares may be worth even less than the REIT’s reported NAV.