Moody National REIT II – Investors May Have Right to Recover Losses
Investors in Moody National REIT II may have suffered devastating losses. Moody announced that its Board had decided to postpone the valuation of Moody National REIT II shares on August 5, 2021. In the past Moody declared its updated NAV at the end of the calendar year, but Moody has yet to update its NAV since December 2019. Moody’s refusal to estimate the value of its shares may be concerning to many investors. As of March 2021, shares of Moody National REIT traded on the secondary market for just $10.00 per share, representing a loss of approximately 60% when calculated based on the $25.00 per share most investors likely paid. In May 2020, a tender offer was made to purchase Moody National REIT II shares for $5 a share (which would represent an approximate loss of 80% for many investors). Given the Board’s refusal to estimate the share value, actual losses could be even greater.
While investors may have suffered major losses, there may be an avenue for recovery. Brokers and advisers who recommend investments to their client are obligated to recommend only suitable investments, conduct appropriate due diligence, and fairly and accurately describe the risks and features of the investments. Brokers and advisors who fail to meet their duties may be held legally liable for losses caused by their recommendations.
Moody National REIT II was a high risk investment. When it was first sold it had no operating history. Further, because Moody was a non-traded REIT, no public trading market existed for its shares and investors may not have had any meaningful options to sell their shares. Further, Moody National REIT II was a “blind pool” which meant that investors did not have an opportunity to actually evaluate future investments Moody would make before they purchased shares in the REIT. Moody has also disclosed that they “pay substantial fees and expenses” to their advisor and affiliates and the dealer managers. This included as much as 10% in sales commissions and dealer manager fees upfront. Between the commissions, fees, and offering expenses it is estimated that only approximately less than 86.5% of the investors’ capital actually went towards investments made by Moody National REIT II. Moody has admitted that Moody National REIT faced a variety of conflict of interest between it, its advisor, and other affiliates.
Retirees, elderly, conservative, and moderate risk investors may have been inappropriately sold or recommended Moody National REIT II. FINRA, the securities regulator, has long warned of the unique risks of non-conventional investments such as non-traded REITs. FINRA warned as early as 2003 that such products “may be suitable for recommendation to only a very narrow band of investors capable of evaluating and being financially able to bear those risks.”
If your broker or advisor recommended you invest in moody National REIT II or any other similar products, please call our firm for a free and confidential evaluation. The Securities and Business Litigation team at Levin, Papantonio, Rafferty, Proctor, Buchanan, O’Brien, Barr & Mougey, P.A. has handled claims involving non-traded REIT products and can work to help you recover your losses. Our law firm was founded in 1955, we have more than 50 attorneys and 150 support staff. We charge you attorney’s fees only if we recover for you.
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