Haselkorn and Thibaut (InvestmentFraudLawyers.com) have started investigating the sales and marketing practices of advisors and brokers that sold the Waterman Lodging Trust, a non-traded REIT (Real Estate Investment Trust), to investors. They have put out a call to anyone with information pertaining to the case to contact them on 886-628-5590.
The investigation has been initiated based on complaints of steep erosion is the value of holdings. The NAV (net asset value) recently declared by the REIT was $5.51 for each Class A share and $5.45 for each Class T share. This is for shares that were sold for $10 apiece, amounting to an almost 50% erosion in value, and is the first NAV declaration since April 2020, when Carey Watermark Investor and Carey watermark Investors 1 merged to form Watermark Lodging Trust.
A 50% erosion in value is not all that investors are facing. When they attempt to sell in the secondary market, prices being offered are at a 70% discount to the original price.
With an ownership interest in 31 hotels, Watermark has been hit hard by the pandemic, as the travel industry has come to a standstill. Industry analysts are not hopeful of a recovery in the near future. The poor performance has been attributed to Covid-19 even in filings with the SEC (Securities and Exchange Commission).
Distribution and redemptions had been suspended by the REIT in March with the onset of the pandemic, with a provision for investors faced with special circumstances to submit a request to the Board for consideration.
Watermark had an infusion of capital in July in the form of $200 million of preferred equity capital. In addition, another $250 over the next eighteen months has been committed as new preferred equity capital. These were the result of a financing transaction between Ascendant Capital Partners and Oaktree Capital management being completed by them. Despite the infusion of fresh capital, it is unlikely Watermark will be able to go anywhere close to its original NAV.
It seems that in recent years billions of dollars of non-traded REIT investments have been sold. It is a worry for regulators that many of these purchases are by investors who have bought into these in the belief that is a safe investment. This is despite repeated warnings issued by SEC and FINRA and guidance that these products are only for accredited high net worth investors.
It is well understood that no-traded REITS are a riskier and less liquid proposition as compared to their traded brethren that can be bought and sold through exchanges.
The moment of truth usually arrives when the investor seeks to sell his holding. At that stage, he realizes that the price is nowhere near the price at which it had been purchased.
Owing to a spate of lawsuits in which they have lost or spent millions, many broker-dealers have stopped dealing in these products.
But that might prevent future missteps by investors. What is an investor, left holding this security, to do?
The best way is to initiate a discussion with an investment fraud lawyer that specializes in cases pertaining to non-traded REITs.