January 16, 2017 Comments (0) Blog

American Realty Capital Hospitality Trust REIT Investment Losses

FINRA's BrokerCheck
(Last Updated On: April 3, 2017)

Are you concerned about your investment losses in American Realty Capital Hospitality Trust REIT?

Have you suffered losses in American Realty Capital Hospitality Trust REIT? If so, The White Law Group may be able to help you recover your losses by filing a FINRA Arbitration claim against the brokerage firm that sold you the investment.

The White Law Group is investigating potential securities fraud claims involving broker-dealers’ improper recommendations. Investors who purchase high-risk non-traded REIT investments, like American Realty Capital Hospitality Trust, aren’t fully aware of the problems and risks involved.

American Realty Capital Hospitality Trust, Inc.,is a non-traded real estate investment trust that acquires and owns hotels in the United States. The company primarily operates its hotels under a franchise or license agreement with various brands. According to Bloomberg, as of December 31, 2015, it owned and had interests in 136 hotels with a total of 16,644 guest rooms in 32 states. American Realty Capital Hospitality Trust, Inc. was founded in 2013 and is based in New York, New York.

ARC Hospitality Trust Announcement

American Realty Capital Hospitality Trust’s board of directors announced on January 13 that it had entered into an agreement with Brookfield Strategic Real Estate Partners II, a private equity fund managed by Brookfield Asset Management, Inc., whereby Brookfield will invest up to $400 million in convertible preferred limited partnership units of ARC Hospitality’s operating partnership.

In exchange for the investment, Brookfield will appoint two members of the board, and will have approval power of two additional independent members of the board who are yet to be nominated.  ARC Hospitality also announced that William Kahane will resign from the board upon the closing of Brookfield’s investment.

American Realty Capital Hospitality also announced that it will terminate its existing advisory agreement with American Realty Capital Hospitality Advisors, LLC and become a self-managed entity.  American Realty Capital Hospitality is also amending its property management arrangements with American Realty Capital Hospitality Properties, LLC, concurrent with Brookfield’s investment, to reduce the duration of certain property management agreements and total property management fees.

Proceeds from Brookfield’s investment, anticipated to begin in March 2017, will be used to repay outstanding preferred equity interests, ARC Hospitality debts, fund additional acquisitions and property improvement plans, as well as general corporate purposes.

Brookfield’s investment and terms of the agreement are subject to approval from ARC Hospitality’s lenders and hotel franchisors.

REITs are Risky

Real estate investment trusts (REITs) are complex and inherently risky products. Compared to traditional investments, such as stocks, bonds and mutual funds, REITs are significantly more complex and often better suited for sophisticated and institutional investors.

Another problem often associated with REIT recommendations is the high sales commissions brokers typically earn for selling REITs – as high as 15%. Brokers have an obligation to make investment recommendations that are consistent with their clients risk tolerance, net worth, investment objectives and experience in the market. Unfortunately, in many cases, the high sales commission may provide some brokers with enough incentive to make unsuitable investment recommendations.

In addition to the high risks, non-traded REITs, like American Realty Capital Hospitality Trust REIT often lack liquidity. Investors looking to sell these investments often have difficulty finding a buyer, and if they are able to find one can suffer significant losses on the sale.

Broker dealers are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor. Firms that fail to do so, may be held responsible for any losses in a FINRA arbitration claim.

If you suffered losses investing in American Realty Capital Hospitality Trust REIT and would like a free consultation with a securities attorney, please call The White Law Group at 888-637-5510.

The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on The White Law Group, visit www.whitesecuritieslaw.com.