Securities Lawyers Blog
The securities lawyers of Gana Weinstein LLP are investigating investor losses in American Realty Capital Hospitality Trust Inc. (Hospitality Trust), a non-traded real estate investment trust (Non-Traded REIT). The company then changed its name to Hospitality Investors Trust Inc.
Hospitality Trust acquires select-service lodging properties and brand national hotel. Hospitality Trust initial offering was January 2014 and raised $911 million. Hospitality Trust suspended dividend distributions in January 2017 and is not currently offering a redemption plan to shareholders trapping investors in the product.
According to a secondary market providers which allow investors to bid and sell illiquid products such as Non-Traded REITs, Hospitality Trust sells for just $10.50 per share – a significant loss on the original purchase price of $25.00.
Our firm often handles cases involving direct participation products (DPPs), private placements, Non-Traded REITs, and other alternative investments. These products are almost always unsuitable for middle class investors.
All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds. For example, products like oil and gas partnerships, REITs, and other alternative investments are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed. However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them. Indeed, many states limit investors from investing more than 10% of their liquid assets in Non-Traded REITs implying that these products do not benefit investors and come with high risks.
Further, investors often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.
Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.
The investment lawyers at Gana Weinstein LLP represent investors who have suffered investment losses due to allegations of wrongdoing. The majority of these claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.