Watermark Lodging Trust Sale to Brookfield Real Estate Funds
The White Law Group continues to investigate potential securities claims involving Watermark Lodging Trust, Inc., a non-traded REIT formed by the merger of Carey Watermark Investors 2 Inc. and Carey Watermark Investors.
On May 6, 2022, Watermark Lodging announced that it reached a definitive agreement with Brookfield Real Estate Funds, in which the Brookfield funds will acquire all of the outstanding common stock of Watermark at a purchase price of $6.768 per Class A share and $6.699 per Class T share.
The transaction is expected to close in the fourth quarter subject to certain closing conditions and the approval of Watermark shareholders. Watermark’s portfolio consists of 25 hotels totaling 8,100 rooms.
Watermark was formed from the merger of Carey Watermark Investors I and Carey Watermark Investors 2 in April 2020, and struggled due to the onset of the COVID-19 pandemic. (See Bad News for Watermark Lodging Trust (fka Carey Watermark Investors) Shareholders) On March 18, 2020, due to the COVID-19 pandemic, the company announced that it was suspending future distributions on its common stock as well as redemptions. In April 2020, we reported that the REIT had to close all of its hotels due to the Covid-19 global pandemic, and were generating no revenues while lockdown orders were in effect.
Shares in the two Carey Watermark REITs were originally sold at $10.00 per share in offerings declared effective in 2010 and 2015, respectively.
After the merger, the REIT declared its first post-merger net asset value (NAV) of $5.51 per Class A share and $5.45 per Class T share. Original shares were sold for $10 each indicating nearly a 50% loss.
According to filings with the SEC, the REIT has declared Class A shares were valued at $6.29 per share, while Class T shares were valued at $6.22, as of December 31, 2021. The net asset value is calculated by taking the value of the company’s assets, less the estimated value of its liabilities, and dividing it by the number of shares outstanding.
The REIT noted in the filings that the reason for the increase in the NAVs was “the appreciation in hotel appraised values, which was partially offset by operating losses since the prior NAV valuation date.”
Despite the increase in NAV, the company’s shares recently sold on CTT Auctions, a secondary sales website, for just $4.75 per share.
Non-traded REITs are generally complex, high-risk investments and not suitable for every investor. They are also illiquid, meaning they are not traded on any market. Often investors find themselves in the situation of being unable to sell the investment when they are ready. If they are able to find a buyer, it is often at a reduced price. (See: Did your Financial Advisor Recommend Investing in Non-Traded REITs?)
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If you are concerned about your investment in Watermark Lodging Trust (fka Carey Watermark Investors I and II), the White Law Group may be able to help you. For a free consultation with a securities attorney, please call 888-637-5510.
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.