Navigating the complex world of real estate investment trusts (REITs) continues to be challenging for investors. Moody National REIT II, a non-traded REIT that has left many investors grappling with devastating losses, serves as a stark reminder of the risks inherent in alternative investments.
The team at Haselkorn & Thibaut (InvestmentFraudLawyers.com) continues investigating losses suffered by investors who bought Moody National REIT II based on their brokers’ recommendations. This non-traded REIT has experienced a catastrophic decline in value since the COVID-19 pandemic began.
Investors are encouraged to call our experienced investment fraud lawyers at 1-888-885-7162 to discuss investment loss recovery options.
Latest Developments in Moody National REIT II (2024-2025)
Table of Contents
Current Financial Distress Deepens
As of December 2024, Moody National REIT II continues facing severe financial challenges, with the Net Asset Value (NAV) declining from $19.45 per share at the end of 2022 to $17.25 per share as of December 31, 2023. However, the reality for investors is far worse than these official valuations suggest.
Shares have reportedly traded at prices as low as $9.00 per share in private transactions, representing a staggering loss of over 64% from the original offering price of $25 per share.
However, secondary market price levels we recently saw CTT Auctions indicates the value on some account statements around May 2025 was still reflecting estimated value of over $17/sh and the actual cash liquidation price according to the secondary market provider was between $3.50/sh – $4.75/sh indicating that losses for investors may be much more significant than some of them may realize!
Asset Sales at Significant Losses
In late 2024, Moody National REIT II entered into multiple Purchase and Sale Agreements to liquidate properties, including the Nashville Embassy Suites for $57.5 million, the Marriott Courtyard Lyndhurst for $21.3 million, the Residence Inn Grapevine for $22.5 million, and the Residence Inn Austin for $20.5 million.
The Nashville Embassy Suites was originally purchased for $66.3 million in 2015, meaning the sale represents a loss of approximately $8.8 million on this single property.
Debt Maturity Crisis
Approximately 70% of Moody National REIT II’s assets were purchased in 2014-2015, and their property loans were scheduled to mature in 2024 and 2025. The company faces significant refinancing challenges as interest rates have increased dramatically from the original 4.3-6% range to current rates of 7.5-10% or higher.
As a specific example, the Hampton Inn Austin and Hyatt Place North Charleston were refinanced at Prime + 150, equating to 9.00% in January 2025.
Operational Performance Continues Declining
For the period ended September 30, 2024, hotel revenue through the first nine months was $61.6 million, representing a 2% decrease from the same period in 2023. RevPAR (Revenue Per Available Room) was $99.18, a year-over-year decrease of 2.4%.
This performance remains significantly below pre-pandemic levels, when the Moody National REIT II portfolio achieved a $108.29 RevPAR during the same period in 2019.
The Devastating Impact on Investors
Share Price Collapse Timeline
- 2015-2019: Shares originally offered at $25.00 per share
- March 2020: COVID-19 pandemic hits; distributions and share repurchase program suspended
- May 2020: Mackenzie Realty Capital tender offer at $5.00 per share
- Late 2021: Secondary market prices dropped to $8.00 per share
- 2023: Shares reportedly selling for as low as $6.60 per share
- 2024: Private transactions occurring at $9.00 per share
Official NAV vs. Market Reality
While the official NAV declined to $17.25 per share as of December 31, 2023, the secondary market tells a different story. Non-traded REITs like Moody II often can only be sold at prices far below NAV, if at all.
Filing Delays and Regulatory Concerns
Moody II announced it was unable to file its Annual Report on Form 10-K for the period ended December 31, 2023, with the SEC by the prescribed filing deadline (April 1, 2024) because the Company’s independent auditors required additional time to complete the audit.
The REIT also reported in August 2024 that it was unable to file its quarterly report for the quarter ending June 30, 2024.
Why Moody National REIT II Should Never Have Been Sold to Most Investors
Unsuitable for Retail Investors
This investment product should not have been marketed and sold to most retail investors, including inexperienced investors and the majority of retirees. This non-traded REIT began as a blind pool, which means that early investors had no way to assess future investment performances before buying in.
Excessive Fees and Commissions
Broker-dealers and their financial advisors earned high commissions and dealer management fees of up to 10% from selling Moody National REIT II to customers. Add that to other costs incurred, and this means that less than 87% of investors’ funds went toward the non-traded REIT.
The Ongoing Risks of Non-Traded REITs
Fundamental Structural Problems
Non-traded REITs like Moody National REIT II present several critical risks that are often not adequately disclosed:
- Illiquidity: Unlike publicly traded REITs, these investments cannot be easily sold
- Lack of Transparency: Limited pricing information and infrequent valuations
- High Fees: Commissions typically range from 7-10%
- Concentration Risk: Often focused on single property types or geographic areas
- Interest Rate Sensitivity: Vulnerable to rising interest rates affecting refinancing
Current Market Challenges
The hotel industry faces a notable bifurcation, with higher-priced hotels significantly outperforming lower-priced hotels. As workers arrange their travels around hybrid schedules, trips will likely become compressed into a shorter travel week, likely hurting business-oriented hotels, which is the core of Moody National REIT II’s portfolio.
Legal Recovery Options for Investors
FINRA Arbitration Claims
Investors in Moody National REIT II may have FINRA arbitration claims if their investment was recommended by a financial advisor without a reasonable basis, or if the customer was otherwise misled into investing without being adequately informed of the many risk components.
Broker Suitability Requirements
Applicable FINRA rules mandate that broker-dealers, and by extension their financial advisors, must perform adequate due diligence on an investment before it is recommended to an investor. Furthermore, a financial advisor must perform a suitability analysis to ensure that the investment is appropriate based upon criteria such as the investor’s age, net worth and income, liquidity needs, and risk tolerance.
Common Broker Misconduct
Unfortunately, there are brokerage firms and their registered representatives that, despite knowing better, not only unsuitably sold Moody National REIT II to investors but also misrepresented the risks. Many brokers omitted to disclose how much of customers’ money was going toward fees or overconcentrated certain customers’ accounts with this investment.
What Investors Should Do Now
Immediate Steps
- Review your investment statements to calculate your total losses
- Gather documentation including all communications with your broker
- Contact experienced securities attorneys who specialize in non-traded REIT cases
- Act quickly as there may be time limitations on filing claims
Legal Representation
The White Law Group continues to investigate potential securities lawsuits involving Moody National REIT II and may be able to help by filing a FINRA Dispute Resolution claim against the brokerage firm that sold the investment.
Experienced investment fraud lawyers like those at Haselkorn & Thibaut specialize in representing investors in FINRA arbitration claims, helping them recover losses stemming from unsuitable investment recommendations.
Key Takeaways for Future Investors
Red Flags to Watch For
- High upfront commissions (7-10% or higher)
- Lack of liquidity or clear exit strategy
- Infrequent or suspended valuations
- Complex fee structures
- Pressure from brokers to invest quickly
Due Diligence Essentials
Before investing in any non-traded REIT:
- Understand all fees and expenses
- Review the prospectus carefully
- Assess your liquidity needs
- Consider your risk tolerance
- Consult with independent financial advisors
The Bottom Line
The ongoing saga of Moody National REIT II serves as a powerful reminder of the risks inherent in non-traded REITs. With only 14 remaining hotels in its portfolio and facing significant debt maturities in challenging capital markets, the outlook for investor recovery through the REIT itself appears bleak.
For investors who have suffered substantial losses, pursuing FINRA arbitration claims against the brokerage firms that recommended these unsuitable investments may provide the best path to recovery.
If you invested in Moody National REIT II and suffered losses, contact Haselkorn & Thibaut at 1-888-885-7162 for a free consultation to discuss your legal options.
This article is for informational purposes only and does not constitute legal advice. Past performance does not guarantee future results. Always consult with qualified legal and financial professionals before making investment decisions.
