Investor Lawyers Blog
Investors in Moody National REIT II (“Moody II”) may have FINRA arbitration claims, if their investment was recommended by a stockbroker or financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented.
Moody II shares have continued to drop in value. According to an update provided by the REIT on June 6, 2024. the REIT reported a decline in Net Asset Value (“NAV”) per share from $19.45 as of December 31, 2022, to $17.25 as of December 31, 2023. However, publicly traded REITs typically trade at a discount to NAV, meaning a they are bought and sold at a lower price, and non-traded REITs like Moody II often can be sold only at prices far below NAV, if at all. Moody II shares have reportedly traded at prices as low as $9.00 a share in private transactions. Shares were originally sold to investors at a price of $25/share.
Concerningly, Moody II also announced that it will be impacted by debt maturities in 2024 because of anticipated increases in interest rates of approximately 300 to 500 basis points on the debts that have to be refinanced. Approximately 38% of the REIT’s $228 million in outstanding indebtedness, as of March 31, 2024, is reportedly scheduled to mature in 2024. Moody II also announced earlier this year that it was unable to file its Annual Report on Form 10-K for the period ended December 31, 2023 with the U.S. Securities and Exchange Commission by the prescribed filing deadline (April 1, 2024) without unreasonable effort or expense because the Company’s independent auditors, require additional time to complete an audit.
Moody II previously suspended distributions and its share repurchase program in April 2020 at the onset of the COVID-19 pandemic. The REIT reportedly owns a portfolio of 15 hotels and reported total assets of $412 million as of early 2024, with total liabilities of $304 million.
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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