Skip to main content

How to Recover Losses in Hospitality Investors Trust REIT

Levin Papantonio Rafferty may be able to help you recover your losses in the Hospitality Investors Trust. Hospitality Investors Trust (HIT) is a publicly registered non-traded real estate investment trust (REIT), formerly known as American Realty Capital Hospitality Trust. Thousands of investors who were sold HIT have suffered severe losses. Shares were originally sold to most investors at $25 a share. The estimated current value of a share based on limited secondary trading values is less than $1, and HIT has now filed for bankruptcy. This means that investors could have suffered over 95% losses on their investment, or even worse.  Despite a number of significant red flags dating back many years, HIT continued to be sold to many clients around the country.

According to Law360, the Hospitality Investors Trust received court approval for its Chapter 11 bankruptcy restructuring plans. This bankruptcy may be bad news for investors who were sold shares in HIT. Many debts under the plan are to be satisfied in full, including those of general unsecured creditors. Unfortunately, it appears that the shareholders and investors who bought the Hospitality Investors Trust may be left with little or nothing after the restructuring. The bankruptcy plan merely provides a “contingent value right” to shareholders that provides the potential for future payments that is dependent on the reorganized companies performance. Those payments, which are not guaranteed, are reportedly set at a maximum amount of $6.00 a share and are generally not transferrable. The bankruptcy could leave investors who were sold shares in HIT with no real recovery of their investments, and the bankruptcy will undoubtedly leave many investors with substantial losses. However, brokers and financial advisors who improperly recommended HIT or other similar products may be legally responsible for the losses suffered by their clients.

The Levin Papantonio Rafferty law firm is representing investors who were sold shares of the HIT REIT in claims to recover their losses. Our firm’s investigation has revealed that some brokers and financial advisors allegedly sold the HIT REIT as a conservative, safe, asset backed, or moderate risk investment. Further, some brokers allegedly sold the HIT REIT to retirees or elderly clients close to retirement. Unfortunately, the Hospitality Investors Trust was a high risk investment that carried a number of substantial risks. Brokers who failed to conduct adequate due diligence or did not appropriately disclose the risk of HIT to their clients may be liable for the losses suffered as a result of their failure. In addition, our investigation has revealed that some advisors who sold HIT REIT to their clients also sold other questionable or potentially unsuitable products to their clients.

 One reason many brokers may have sold HIT REIT to their clients is because of the significant commissions paid to them as HIT charged high upfront fees and commissions. For example, the Trust charged 10% of the investment for selling commissions and dealer manager fee. Combined with other smaller fees and expenses, approximately 86% of an investor’s investment was actually being used for instruments by the Trust. At the moment an investor purchased HIT, they were automatically at a significant disadvantage due to the fees and commissions charged.

HIT was originally a “blind pool” offering, further making the investment highly speculative. This meant that the fund had not had any net income and did not own any properties. Further, the fund had not even identified any properties to acquire with the offering proceeds. Thus, investors and advisors were unable to evaluate the investment portfolio prior to the initial investment.

Advisors and brokers who improperly recommended the HIT to their clients may be held liable for the losses. These professionals are ethically bound to tell their clients about the risks associated with recommended investments. A broker also has an ethical obligation to consider an investor’s risk tolerance, age, investment experience, and net worth when determining whether a certain investment is suitable for the client. When a broker fails to fulfill these obligations, the firm that employs them may be held accountable for losses suffered by an investor to whom an unsuitable investment recommendation was made.

An REIT is a company that owns and operates large amounts of real estate. Unlike other reality companies, an REIT does not develop land to resell the land, but instead seeks to operate the prosperities as an investment. There are two types of REITs: publicly traded and non-traded. HIT is a non-traded REIT. The Securities and Exchange Commission (SEC) states that non-traded REITs have particular risks such as lack of liquidity, share value transparency, distribution of funds, and conflicts of interest.

Non-traded REITs are known to be risky investments suitable only for a narrow band of investors. FINRA cautions investors to carefully consider the fact that these products are generally illiquid. It can be extremely difficult to valuate or sell a non-traded REIT, especially as these shares are not listed on a national securities exchange. Even when a sale does transpire, the high fees commissions often diminish the investor’s total return.

The distribution of payments also carries risk. Distributions can be paid from any source, including unlimited amounts from offering proceeds and borrowings. These distributions could reduce the amount of capital invested in properties and could negatively impact the value of an investor’s investment.

There were numerous conflicts of interest within the trust. For example, several executives in the trust have financial interests in other REITs and other non-traded business development companies. The most clear and obvious example is William Kahane, the chief executive officer of the trust. Kahane is a director at Business Development Corporation of America, American Reality New York Recovery REIT, Inc., and several other American Reality companies. AR Capital is the now-infamous company that sponsored billions of dollars of non-traded REITs and other similar deals. AR Capital has been subjected to significant regulatory action and fines and the former CFO was even sentenced to federal prison.

If you suffered financial loss because your broker recommended HIT or any other similar programs to you, you may have a right to file a claim to recover your losses. If you are interested in a free and confidential case review, contact us at (800) 277-1193. Or you may email our attorneys directly, shareholder and attorney Michael Bixby may contacted at mbixby@levinlaw.com.

The Securities and Business Litigation team at Levin, Papantonio, Rafferty, Proctor, Buchanan, O’Brien, Barr & Mougey, P.A. has handled claims involving HIT REIT and other similar products and can help you fight to recover your losses. We provide confidential and free initial consultations and case reviews. We do not charge any fees or costs unless you first recover. 

 
Why Choose Our Law Firm

Our law firm has been in existence for more than 65 years, and is recognized as one of the preeminent law firms in the United States. Based on law firm verdicts and settlements exceeding $4 billion, our securities fraud lawyers are committed to seeking justice for the victims of investment fraud and misconduct.

Led by attorney Peter Mougey, the past President of the national securities bar PIABA, our Securities and Business Tort Department has represented more than 1,500 investment fraud victims across the country in state and federal court and securities industry arbitration.

We are the founder of Mass Torts Made Perfect. This is a national conference attended by 1,500 lawyers each year where we teach how to successfully handle lawsuits against the largest companies in the world. For more information, please visit our About Us section.

in Business 65 years * $4 Billion in Verdicts & Settlements * Best Law Firms: U.S. News & World Reports * Trial Lawyers Hall of Fame * SuperLawyers
 
Our Fees & Costs

Our lawyers provide free confidential case evaluations, and we never charge any fees or costs unless you first recover.

The contingency fee we charge ranges from 20% to 40%. The amount we charge is based on how much we recover for you. To review a summary of our fees and costs, click Fees & Costs.

 
Free Case Evaluation

To contact us for a free confidential consult, you can call us at (800) 277-1193. You also can request a free private and confidential evaluation by clicking Free & Confidential Consult. Your inquiry will be immediately reviewed by one of our attorneys who handles securities litigation.

 
 

What Our Clients Say

Client Testimonials

Below are some of the emails and letters that our clients have sent us.

At a time in our life when we were most vulnerable we lost control of our finances. We fell victim to a broker that took huge commissions and did not disclose that we were not able to access our money. Peter Mougey and his wonderful staff worked with us to make us whole again and got our money released. I cannot say enough about their work ethic, professionalism, and kindness during this stressful time for us. We had a 100% positive conclusion to our case and we strongly recommend Peter and the firm. We can now sleep at night! Fred & Pat H.

My husband and I were very pleased with the work that Peter and his team provided. He was very knowledgeable of the circumstances of our case and kept us informed throughout the process. He is extremely qualified and worked diligently on our behalf. We are positive that this case would not have been resolved in our favor had it not been for Peter's expertise and his passion. He definitely cares about his clients and we sincerely appreciate his efforts. Rachel C.

FRS is a governmental body. FRS retained the services of Peter Mougey of the LP law firm in a multimillion dollar lawsuit involving extremely complex issues. Mr. Mougey quickly mastered the issues and gave advice that was vital in bringing about a successful resolution. Two of the most important features of Mr. Mougey’s representation was his understanding of government and his ability to communicate complicated legal concepts to a 10-member board of trustees in language that was easily understood by all. I did not know Mr. Mougey before FRS retained him and, fortunately, have not experienced circumstances where the system would need his services again. However, if needed, I would have no hesitation in retaining his services again. Please let me know if you need any additional information or assistance. Steven S.

Edison's famous adage can't ever be ignored of course: 1 part inspiration and 99 parts perspiration. However the two attitudes must be present indissolubly--both are essential--if results are to be obtained. Peter Mougey’s group is aware of such a requirement, they work very hard at the latter, and the former comes easily to them, a rare combination anywhere to be found indeed. Raphael B.

I would like to express my sincere gratitude to Peter Mougey and your entire team on behalf of my family for the amazing job done during your representation. From day one I received kindness, rapid responses to all of my questions, with polite and patient encounters with all of your staff assistants. You are the best- and I will be eternally grateful to you and your entire team. Michelle E.

 
Customize This