Investors in Moody National REIT II (“Moody II”) may have FINRA arbitration claims, if their investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the stockbroker or advisor.
Moody II announced in August 2021 that its Board had made the decision to postpone the valuation of its shares. Considering that the non-traded REIT has not updated its net asset value (NAV) since December 2019, investors may have cause for concern that the shares’ value has dropped. The last estimate of Moody II’s net asset value (NAV) per share- which now seems hopelessly unrealistic- was $23.50 a share as of late 2019.
Moody II is a non-traded real estate investment trust (non-traded REIT). According to secondary market quotes, Moody II shares have decreased in value Investors who were relying on Moody II’s most recent (but now nearly two-year-old) estimated NAV (net asset value) of $23.50 a share announced by its sponsor could be in for an unwelcome surprise, as shares have reportedly been sold on the limited secondary market for prices as low as between $5.50 and $6.00 a share during 2021.
Mostly investing in securities and hotels (including properties branded by Marriott and Hilton), Moody II is a highly illiquid and costly non-traded REIT. In March 2020 Moody II suspended its distribution reinvestment plan and share repurchase program. According to filings with the SEC, on March 24, 2020, Moody II’s board of directors approved the suspension of the payment of distributions to the company’s stockholders- leaving investors with shares of uncertain value, providing no income.
In May 2020, Mackenzie Realty Capital announced a tender offer to purchase Moody National REIT II shares at $5/share.
Moody II was formed in July 2014 to acquire a portfolio of hospitality properties (a/k/a hotels and resorts) focusing primarily on the select-service segment of the hospitality sector with premier brands including, but not limited to, Marriott, Hilton and Hyatt. According to the investments’ Fact Sheet, Moody REIT’s objectives are to “Preserve, protect and return stockholders’ capital contributions. Pay regular cash distributions to stockholders. Realize capital appreciation upon the ultimate sale of the real estate assets acquired by Moody National REIT II, Inc.”
Non-traded REITs pose many risks that are often not readily apparent to retail investors, or adequately explained by the financial advisors and stockbrokers who recommend these complex investments. One significant risk associated with non-traded REITs has to do with their high up-front commissions, typically between 7-10%. In addition to high commissions, non-traded REITs like Moody II generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%.
Furthermore, non-traded REITs are generally illiquid investments. Unlike traditional stocks and mutual funds, non-traded REITs do not trade on a national securities exchange. Many uninitiated investors in non-traded REITs have come to learn too late that their ability to exit their investment position is limited. Typically, investors in non-traded REITs can only exit their investment through redemption directly with the sponsor on a limited basis, and often at a disadvantageous price, or through sales in a limited secondary market as discussed above.
Investors who wish to discuss a possible claim may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation. The firm has handled numerous cases against financial advisors who allegedly made misleading or unsuitable recommendations of alternative investments. Attorneys at the firm are admitted in New York, Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).
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