Moody National REIT II Investigation
Have you suffered losses investing in Moody National REIT II? If so, The White Law Group may be able to help you by filing a FINRA Dispute Resolution claim against the brokerage firm that sold you the investment.
Moody National REIT II Announces Sale of Property at a Loss
According to SEC filings, Moody National REIT II announced the sale of Nashville Embassy Suites to a third party on December 6, 2024 for $57 million. The transaction is expected to close prior to February 2025. The hotel was originally purchased for $66.3 million in 2015 by Moody National REIT I, Inc. before the merger of the two affiliated REITs. The REIT reported that there was $37.2 million in outstanding mortgage debt on the asset as of September 30, 2024. Moody National REIT II reportedly has 14 remaining hotels in its portfolio.
The REIT reported in August 2024 that it was unable to file its quarterly report for the quarter ending June 30, 2024.
Decline in NAV per Share
June 6, 2024: According to FactRight, the CEO of Moody National REIT II, shared a detailed update on the REIT’s performance and capital markets activity. The REIT reported a notable decrease in net asset value (NAV) per share, dropping from $19.45 at the end of 2022 to $17.25 as of December 31, 2023. This 11.3% decline was backed by appraisals from Kendall Realty Consulting Group, LLC.
As of March 31, 2024, about 38% of the REIT’s $228 million in outstanding debt is set to mature within the year.
Share Redemption Program Remains Suspended
The company also addressed the potential reinstatement of shareholder distributions and the share redemption program. These will only be reconsidered once the REIT’s operational cash flow is sufficient to cover its operational expenses, which include deferred mortgage payments, payroll obligations, and repaying a $50 million loan from Moody National Capital, LLC, according to the article. As previously reported, the REIT suspended distributions and its share repurchase program in April 2020 due to the financial impact of the COVID-19 pandemic.
Moody National REIT II Fails to File Financials
In April 2024, the REIT reported that it would need more time to file its annual reports due to the REIT’s independent auditors needing more time to complete the audit of the REIT’s financial statements.
Tender Offer Price Suggests Losses for Moody National REIT II Investors
According to filings with the SEC, Comrit Investments 1 LP made an offer to purchase up to purchase up to 346,534 shares of Class A common stock and up to 38,504 shares of Class T common stock in Moody National REIT II, Inc. at a purchase price equal to $9.09 per Share dated April 24, 2024.
At the time, Moody National REIT II estimated that its net asset value (NAV) per share was $19.45 as of December 31, 2022.
The REIT noted previously in SEC filings that it was severely impacted by the Covid-19 pandemic. Shares were originally offered for $25 per share, but according to LODAS, a secondary market for non-traded investments, Moody shares recently sold for $8.25 per share.
In April 2020, the REIT reportedly terminated its IPO and suspended its offering, distributions, and share repurchase program.
Moody National REIT II – Risks of Non-traded REITs
A real estate investment trust (REIT) is a company that owns, and in most cases, operates income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers and hotels. Some REITs also engage in financing real estate. The REIT structure was designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.
Non-traded REITs are complex and high risk investments that are really only suitable for sophisticated investors. Your brokerage firm has a duty to perform due diligence on any investment. They must ensure that the investment is suitable for a particular investor considering that investor’s age, investment objectives, income, net worth, and investment experience. Due to the current risk of devaluation of these REITs, its likely they are only suitable for wealthy and/or sophisticated investors.
Liquidity Issues
Non-traded REITs also face several liquidity issues due to their unique characteristics and structure. They don’t trade on a public exchange like traditional stocks. As a result, if they try to sell the shares on a secondary market before the REIT’s liquidation event, it is almost always at a loss.
Due Diligence
Financial advisors have a fiduciary duty to put their client’s needs ahead of their own. If a stockbroker recommends an investment that is unsuitable for the client or fails to perform adequate due diligence on an investment, the advisor and his/her firm can be held liable for the resulting losses.
The White Law Group continues to investigate the liability that brokerage firms have for unsuitably recommending non-traded REITs such as Moody National REIT II.
Class Action vs. Individual FINRA Arbitration Lawsuit
People often wonder whether a large class action lawsuit is a better litigation option for them than an individual FINRA arbitration case. The answer depends on many factors, but typically if the loss sustained is large (say larger than $100,000), an individual arbitration claim is likely a better option. Class actions as a recovery option are more appropriate for grouping large numbers of individuals who have small claims – too small to generally pursue individually.
Free Consultation
If you are concerned about your investment in Moody National REIT II, please call the securities attorneys of The White Law Group at (888)637-5510 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 800 FINRA arbitration cases.
Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.
With over 35 years of securities law experience, The White Law Group has the expertise to help investors defrauded in securities and investment fraud attempt to recover their investment losses.
Tags: Moody National REIT II, non-traded REITs Last modified: December 27, 2024
