Hospitality Investors Trust Inc. Files Chapter 11 Bankruptcy

Hospitality Investors Trust, Inc. (HIT REIT) 2021 Lawsuit *UPDATED*

Did your broker recommend an investment in Hospitality Investors Trust Inc. (fka ARC Hospitality Trust)? If so, the securities attorneys at The White Law Group may be able to help you to recover your losses by filing a FINRA dispute resolution claim against your brokerage firm. The firm has filed numerous claims on behalf of investors who have suffered losses investing in Hospitality Investors Trust. 

On May 19, 2021, Hospitality Investors Trust Inc., a non-traded REIT that owns a portfolio of hotel properties, filed for Chapter 11 bankruptcy in Delaware to restructure its $1.3 billion unsecured debt.

Last December we told you that Hospitality Investors Trust Inc. (HIT REIT), a publicly registered non-traded REIT,  amended its limited partnership agreement with its investment partner, Brookfield Strategic Real Estate Partners II Hospitality REIT II LLC.

The REIT explained in the filings that due to the impact of the coronavirus global pandemic on its 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.

HIT REIT believes that “additional liquidity from a source other than property operations the company requires may not be available on favorable terms or at all.”

The company notes that the objective of the limited partnership amendment with Brookfield is to preserve the company’s cash position as it continues discussions with the Brookfield investor regarding a “holistic solution to the company’s liquidity dilemma.”

Brookfield apparently holds all of the outstanding Class C units, which are limited partner interests in the REIT’s operating partnership. The HIT REIT made adjustments to bonuses for key executives, as well.

Brookfield has also reportedly agreed to provide a $65 million debtor-in-possession term loan to fund the REIT’s current obligations, including up to $10 million to fund interest payments and other approved expenses for the property-level mortgage loans, pending the Chapter 11 cases. After the bankruptcy plan becomes effective, Brookfield will provide a $25 million exit facility. Both loans bear interest at 15 percent per year.

What does Bankruptcy Mean for Hospitality Investors Trust Shareholders?

According to filings, each share of Hospitality Investors Trust common stock outstanding will be cancelled and exchanged for a right to receive contingent cash payments (CVR). Shareholders of the common stock will receive one CVR in exchange for each share of  common stock. The maximum amount of payments made per CVR will not exceed $6.00 and will not be transferable, except in limited instances such as the death of the holder.

Shares Value See Continual Decline since 2017

The company has yet to declare a Net Asset Value for 2020, but  as of December 31, 2019, it was $8.35 per share, a 9.3% decrease from the 2018 NAV. Shares were originally sold for $25.00 per share. According to Central Trade & Transfer, a secondary market for non-traded REITs, shares of HIT REIT sold on March 31, 2021 for just  $0.46 per share.

Recovery of Investment Losses

The White Law Group continues to investigate potential securities claims involving the liability brokerage firms may have for recommending Hospitality Investors Trust to its clients.

The trouble with non-traded REITs, like Hospitality Investors Trust Inc., is that they are complex and inherently risky products.

Broker dealers are required to inform clients of the risks associated with investment recommendations and to ensure that those recommendations are suitable for the investor in light of the investor’s age, risk tolerance, net worth, and investment experience. Firms that fail to do so, may be held responsible for any losses.

Lack of liquidity is often problematic for many investors.  Investors looking to sell often have difficulty finding a buyer, and can suffer significant losses on the sale.

Filing a Complaint against your Brokerage Firm

If you have suffered losses investing in Hospitality Investors Trust Inc., you may be able to recover your losses through FINRA arbitration. Please contact The White Law Group at 888-637-5510 for a free consultation with a securities attorney.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington.