Skip to main content

How to Recover Losses in Watermark Lodging Trust REIT (formerly Carey Watermark REITs)

Investors who were sold the Watermark Lodging Trust REIT have suffered dramatic losses. Shares were originally sold to investors at $10 a share. In November 2020 the company declared its net asset value to be $5.51 per share for Class A shares. However, since November the limited sales on the secondary market have ranged from $3 per share to less than $4 per share, suggesting investors could have suffered losses of 60% or even 70% from their investment in the Watermark REIT.  However, options to actually sell or liquidate the Watermark Lodging Trust REIT may be extremely limited.

When investors purchased this REIT, it may have been under a different name. In October 2019, the Carey Watermark Investors 1 Incorporated (CWI 1 / CWI I) and Carey Watermark Investors 2 Incorporated (CWI 2 / CWI II) announced a proposed merger. The merger was completed in 2020, and the two Carey Watermark REITs (CWI 1 and CWI 2) became Watermark Lodging Trust (for each of reference this article will refer to the Watermark REIT generally).

The Watermark Lodging Trust REIT was a high risk investment. The REIT charged high upfront fees and commissions, for instance CWI 2 charged 10% or more in selling commissions, dealer manager fees, and other offering expenses, in additional to other fees and expenses. This ultimately resulted in less than approximately 87% of an investor’s investment actually being used for investments by the Fund. Thus, an investor who bought $100,000 of CWI 2 could be down over 10% immediately when factoring in commissions and fees paid to the broker/advisor and the dealer manager. In addition, the sponsor charged annual asset management fees, operating expenses, loan refinancing fees, and participated in “profits” which were 10% of distributions of available cash. The payment of the “profits” was not conditioned on prior return to stockholders of their invested capital. The lucrative upfront commissions may explain why many brokers sold this REIT to their customers.

The Watermark REIT was originally a blind pool offering. This meant that the fund had not had any net income and did not own any properties. Further, the fund had not even identified any properties to acquire with the offering proceeds, and it had not established financing sources. Thus, investors and advisors were unable to evaluate the investment portfolio prior to the initial investment. Further, the distributions were known to likely exceed the REITs earnings during the startup period, and thus some of the distributions were merely a return of the investors’ capital.

Non-traded REITs are known to be risky investments suitable only for a narrow band of investors. FINRA cautions investors to carefully consider the fact that these products are generally illiquid, frequently for time spans of at least eight years. It can be extremely difficult to valuate or sell a non-traded REIT, especially as these shares are not listed on a national securities exchange. Even when a sale does transpire, the high fees from the sale diminish the investor’s total return.

Advisors and brokers who improperly recommended the Watermark REIT or other similar investments to their clients may be held liable for the losses. These professionals are ethically bound to tell their clients about the risks associated with recommended investments. A broker also has an ethical obligation to consider an investor’s risk tolerance, age, investment experience, and net worth when determining whether a certain investment is suitable for the client. When a broker fails to fulfill these obligations, the firm that employs them may be held accountable for losses suffered by an investor to whom an unsuitable investment recommendation was made.

 
 
Why Choose Our Law Firm

Our law firm has been in existence for more than 65 years, and is recognized as one of the preeminent law firms in the United States. Based on law firm verdicts and settlements exceeding $4 billion, our securities fraud lawyers are committed to seeking justice for the victims of investment fraud and misconduct.

Led by attorney Peter Mougey, the past President of the national securities bar PIABA, our Securities and Business Tort Department has represented more than 1,500 investment fraud victims across the country in state and federal court and securities industry arbitration.

We are the founder of Mass Torts Made Perfect. This is a national conference attended by 1,500 lawyers each year where we teach how to successfully handle lawsuits against the largest companies in the world. For more information, please visit our About Us section.

in Business 65 years * $4 Billion in Verdicts & Settlements * Best Law Firms: U.S. News & World Reports * Trial Lawyers Hall of Fame * SuperLawyers
 
Our Fees & Costs

Our lawyers provide free confidential case evaluations, and we never charge any fees or costs unless you first recover.

The contingency fee we charge ranges from 20% to 40%. The amount we charge is based on how much we recover for you. To review a summary of our fees and costs, click Fees & Costs.

 
Free Case Evaluation

To contact us for a free confidential consult, you can call us at (800) 277-1193. You also can request a free private and confidential evaluation by clicking Free & Confidential Consult. Your inquiry will be immediately reviewed by one of our attorneys who handles securities litigation.

 

What Our Clients Say

Client Testimonials

Below are some of the emails and letters that our clients have sent us.

At a time in our life when we were most vulnerable we lost control of our finances. We fell victim to a broker that took huge commissions and did not disclose that we were not able to access our money. Peter Mougey and his wonderful staff worked with us to make us whole again and got our money released. I cannot say enough about their work ethic, professionalism, and kindness during this stressful time for us. We had a 100% positive conclusion to our case and we strongly recommend Peter and the firm. We can now sleep at night! Fred & Pat H.

My husband and I were very pleased with the work that Peter and his team provided. He was very knowledgeable of the circumstances of our case and kept us informed throughout the process. He is extremely qualified and worked diligently on our behalf. We are positive that this case would not have been resolved in our favor had it not been for Peter's expertise and his passion. He definitely cares about his clients and we sincerely appreciate his efforts. Rachel C.

FRS is a governmental body. FRS retained the services of Peter Mougey of the LP law firm in a multimillion dollar lawsuit involving extremely complex issues. Mr. Mougey quickly mastered the issues and gave advice that was vital in bringing about a successful resolution. Two of the most important features of Mr. Mougey’s representation was his understanding of government and his ability to communicate complicated legal concepts to a 10-member board of trustees in language that was easily understood by all. I did not know Mr. Mougey before FRS retained him and, fortunately, have not experienced circumstances where the system would need his services again. However, if needed, I would have no hesitation in retaining his services again. Please let me know if you need any additional information or assistance. Steven S.

Edison's famous adage can't ever be ignored of course: 1 part inspiration and 99 parts perspiration. However the two attitudes must be present indissolubly--both are essential--if results are to be obtained. Peter Mougey’s group is aware of such a requirement, they work very hard at the latter, and the former comes easily to them, a rare combination anywhere to be found indeed. Raphael B.

I would like to express my sincere gratitude to Peter Mougey and your entire team on behalf of my family for the amazing job done during your representation. From day one I received kindness, rapid responses to all of my questions, with polite and patient encounters with all of your staff assistants. You are the best- and I will be eternally grateful to you and your entire team. Michelle E.
 
Customize This