UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
Information Required in Proxy Statement
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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MOODY NATIONAL REIT II, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than Registrant)
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6363 Woodway Drive, Suite 110 www.moodynationalreit.com | |
Moody National REIT II, Inc. |
Dear Stockholder:
On behalf of our Board of Directors, I cordially invite you to attend the 20182019 Annual Meeting of Stockholders of Moody National REIT II, Inc., to be held on Monday, August 13, 20185, 2019 at 10:30 a.m., Central Time, at the offices of Moody National Companies, located at 6363 Woodway Drive, Suite 200, Houston, Texas 77057. We look forward to your attendance.
The accompanying Notice of Annual Meeting of Stockholders and Proxy Statement include information on the matters to be voted on at the 20182019 Annual Meeting of Stockholders. Our Board of Directors has fixed the close of business on June 20, 201829, 2019 as the record date for the determination of stockholders entitled to notice of and to vote at the 20182019 Annual Meeting of Stockholders or any adjournment or postponement thereof.
Your vote is very important. Regardless of the number of our shares you own, it is important that your shares be represented at the 20182019 Annual Meeting of Stockholders.ACCORDINGLY, WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE 20182019 ANNUAL MEETING OF STOCKHOLDERS IN PERSON, I URGE YOU TO SUBMIT YOUR PROXY AS SOON AS POSSIBLE. You may do this by completing, signing and dating the accompanying proxy card and returning it in the accompanying self-addressed postage-paid return envelope. You may also electronically submit your proxy by internet atwww.proxypush.com/moody2www.proxyvote.com or by telephone by calling 866-858-9529800-690-6903 and following the instructions provided.
Please follow the voting directions provided in the proxy statement. This will not prevent you from voting in person at the 20182019 Annual Meeting of Stockholders, but will assure that your vote will be counted if you are unable to attend the 20182019 Annual Meeting of Stockholders.
YOUR VOTE COUNTS. THANK YOU FOR YOUR ATTENTION TO THIS MATTER, AND FOR YOUR CONTINUED SUPPORT OF, AND INTEREST IN, OUR COMPANY.
Sincerely, | |
Chief Executive Officer, Chairman of the Board, and President |
6363 Woodway Drive, Suite 110
Houston, Texas 77057
(713) 977-7500
NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the 20182019 Annual Meeting of Stockholders of Moody National REIT II, Inc. (the, a Maryland corporation (referred to herein as the “Company,” “we,” “our,” or “us”), will be held onMonday,on Monday, August 513, 2018, 2019 at 10:30 a.m., Central Time, at the offices of Moody National Companies, located at 6363 Woodway Drive, Suite 200, Houston, Texas 77057, for the following purposes:
1. | to elect to our Board of Directors the five director nominees named in the attached proxy statement to serve until our |
2. | to ratify the appointment of Frazier & Deeter, LLC as our independent registered public accounting firm for the fiscal year ending December 31, |
3. | to transact such other business properly coming before the |
The foregoing items are discussed in the following pages, which are made part of this notice. Our stockholders of record at the close of business on June 20, 201829, 2019 are entitled to vote at the 20182019 Annual Meeting of Stockholders of the Company. We reserve the right, in our sole discretion, to adjourn the 20182019 Annual Meeting of Stockholders to provide more time to solicit proxies for such meeting.
You may obtain directions to attend the 20182019 Annual Meeting of Stockholders by calling investor services at 1-888-457-2358.1-800-510-7348.
Please sign and date the accompanying proxy card and return it promptly in the accompanying self-addressed postage-paid return envelope whether or not you plan to attend. You may also submit your proxy by internet atwww.proxypush.com/moody2www.proxyvote.comor by telephone by calling 866-858-9529.800-690-6903. Instructions are included with the proxy card. Your vote is important to us and we therefore urge you to submit your ballot early. You may revoke your proxy at any time prior to its exercise. If you attend the 20182019 Annual Meeting of Stockholders, you may vote in person if you wish, even if you previously have returned your proxy card or authorized a proxy electronically.
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TABLE OF CONTENTS
6363 Woodway Drive, Suite 110
Houston, Texas 77057
(713) 977-7500
PROXY STATEMENT
The accompanyingThis proxy statement is solicitedbeing furnished by and on behalf of the Boardboard of Directors (thedirectors (our “Board of Directors”) of Moody National REIT II, Inc. for use in votingconnection with the solicitation of proxies to be voted at our 20182019 Annual Meeting of Stockholders (the “2018“2019 Annual Meeting”) to be held onMonday, August513, 2018, 2019 at 10:30 a.m., Central Time, at the offices of Moody National Companies, 6363 Woodway Drive, Suite 200, Houston, Texas 77057, and at any adjournment or postponement thereof, for the purposes set forth in the attached Notice of Annual Meeting of Stockholders provided with this proxy statement.thereof.
This proxy statement, form of proxy card and voting instructions are first being mailed or given to stockholders on or about June 27, 2018.July 5, 2019.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Q: | Why did you send me this proxy statement? |
A: | We are sending you this proxy statement and the enclosed proxy card because our Board of Directors is soliciting your proxy to vote your shares at the |
Q: | What is a proxy? |
A: | A proxy is a person who votes the shares of stock of another person who is not able to attend a |
Q: | When is the |
Q: | What is the purpose of the |
A: | At the |
In addition, at the 20182019 Annual Meeting, stockholders will vote upon the following:
● | the election to our Board of Directors of the five director nominees named in this proxy statement to serve until our |
● | the ratification of the appointment of Frazier & Deeter as our independent registered public accounting firm for the fiscal year ending December 31, |
● | the transaction of such other business properly coming before the |
No cumulative voting is authorized, and dissenters’ rights are not applicable to the matters being voted upon.
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Q: | What is our Board of Directors’ voting recommendation? |
A: | Unless you give other instructions on your proxy card, the individuals named on the card as proxy holders will vote in accordance with the recommendation of our Board of Directors. Our Board of Directors recommends that you vote your |
● | “FOR” all five director nominees to our Board of Directors; and |
● | “FOR” the ratification of the appointment of Frazier & Deeter as our independent registered public accounting firm for the fiscal year ending December 31, |
Q: | Who is entitled to vote? |
Q: | What constitutes a quorum? |
A: | If a majority of the shares of our common stock outstanding on the record date are present at the |
Q: | What vote is required to approve each proposal that comes before the |
A: | The following votes will be required at the |
● | Election of Directors — To elect the director nominees, the affirmative vote of a majority of the shares of our common stock present in person or by proxy at a meeting at which a quorum is present must be cast in favor of the proposal. This means that a director nominee needs to receive more votes for his or her election than withheld from or present but not voted in his or her election in order to be elected to our Board of Directors. Because of this requirement, “withhold” votes and broker non-votes will have the effect of a vote against each nominee for director. If an incumbent director nominee fails to receive the required number of votes for reelection, then under Maryland law, he or she will continue to serve as a “holdover” director until his successor is duly elected and qualifies. |
● | Ratification of Appointment of Independent Auditors — The ratification of the appointment of Frazier & Deeter requires the affirmative vote in favor of the proposal of a majority of all votes cast at the |
Q: | Can I attend the |
Q: | How do I vote my shares at the |
A: | You may vote your shares of our common stock in the following manner: |
● | Authorizing a Proxy by Mail — Stockholders may authorize a proxy by completing the accompanying proxy card and mailing it in the accompanying self-addressed postage-paid return envelope. |
● | Authorizing by Telephone — Stockholders may authorize a proxy by calling |
● | Authorizing a Proxy by Internet — Stockholders may authorize a proxy by completing the electronic proxy card at |
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● | In Person at the Meeting — Stockholders of record may vote in person at the |
If your shares of our common stock are held by a bank, broker or other nominee (that is, in “street name”), you are considered the beneficial owner of your shares and you should refer to the instructions provided by your bank, broker or nominee regarding how to vote. In addition, because a beneficial owner is not the stockholder of record, you may not vote shares of our common stock held by a bank, broker or nominee in street name at the 20182019 Annual Meeting unless you obtain a “legal proxy” from the bank, broker or nominee that holds your shares, giving you the right to vote the shares at the meeting.
Q: | Can I revoke my proxy after I return my proxy card or after I authorize a proxy by fax, telephone or internet? |
A: | If you are a stockholder of record at the close of business on |
● | delivering to our Secretary a written notice of revocation; |
● | returning a properly signed proxy bearing a later date; or |
● | attending the |
To revoke a proxy previously submitted by mail, fax, telephone or internet, you may simply authorize a proxy again at a later date using the procedures set forth above, but before the deadline for mail, fax, telephone or internet voting, in which case the later submitted proxy will be recorded and the earlier proxy revoked.
If you holdyour shares of our common stock in “streetare held in“street name,” you will need to contact the institution that holds your shares and follow its instructions for revoking a proxy.
Q: | What happens if additional proposals are presented at the |
A: | Other than the matters described in this proxy statement, we do not expect any additional matters to be presented for a vote at the |
Q: | How will shares be voted if a stockholder does not give specific voting instructions in the proxy submitted by the stockholder? |
A: | If you submit a proxy but do not indicate your specific voting instructions on one or more of the proposals listed |
Q: | Will my vote make a difference? |
A: | Yes. Your vote is needed to ensure that the proposals can be acted upon. Unlike most other public companies, no large brokerage houses or affiliated groups of stockholders own substantial blocks of shares of our |
Q: | Who will bear the costs of soliciting votes for the |
A: | We will bear the entire cost of the solicitation of proxies from our stockholders. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by our directors and officers, who will not receive any additional compensation for such solicitation activities. We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy solicitation materials to our stockholders. |
Q: | Who will count the votes? |
A: |
Q: | Where can I find the voting results of the |
A: | We will report voting results from the 2019 Annual Meeting by filing a current report on Form 8-K with the Securities and Exchange Commission (the “SEC”) within four business days following the date of the |
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Q: | Where can I find more information? |
A: | We file annual, quarterly, and current reports and other information with the SEC. Copies of our SEC filings, including exhibits thereto, can be obtained free of charge on our website atwww.moodynationalreit.com. This website address is provided for your information and convenience. Our website is not incorporated into this proxy statement and should not be considered part of this proxy statement. Additionally, you may read and copy any reports, statements or other information we file with the SEC on the website maintained by the SEC athttp:/www.sec.gov |
Q: | If I share my residence with another stockholder, how many copies of the proxy statement should I receive? |
A: | The SEC has adopted rules concerning the delivery of disclosure documents which allow us to send a single set of any annual report, proxy statement, proxy statement combined with a prospectus, or information statement to any household at which two or more stockholders reside if they share the same last name or we reasonably believe they are members of the same family. This procedure is referred to as “householding.” |
We will deliver promptly, upon written or oral request, a separate copy of the proxy statement to a stockholder at a shared address to which a single copy of the document was previously delivered. If you received a single set of disclosure documents for this year, but you would prefer to receive your own copy, you may direct requests for separate copies to MediantInvestor Services at (844) 305-20821-800-510-7348 or write to P.O. BOX 8035, Cary, NC 27512-9916.us at 6363 Woodway Drive, Suite 110, Houston, TX 77057, Attention: Investor Service. If you are a stockholder that receives multiple copies of our proxy materials, you may request householding by contacting us in the same manner and requesting a householding consent.
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ELECTION OF DIRECTORS
Our Board of Directors currently consists of threefive directors. Our Articles of Amendment and Restatement (our “Charter”) and our bylaws provide that the number of directors may be established by a majority of our Board of Directors, but may not be fewer than three nor more than fifteen.
On November 16, 2016, we, along with our operating partnership; Moody National Advisor II, LLC (our “Advisor”); Moody National REIT I, Inc. (“Moody I”); Moody National Operating Partnership I, LP, the operating partnership of Moody I (“Moody I OP”); Moody National Advisor I, LLC, the advisor for Moody I (“Moody I Advisor”), and Moody Merger Sub, LLC, our wholly owned subsidiary (“Merger Sub”), entered into an agreement and plan of merger (as amended, the “Merger Agreement”). Pursuant to the Merger Agreement, on September 27, 2017 (the “Closing Date”), Moody I merged with and into Merger Sub (the “Merger”), with Merger Sub continuing as the surviving entity and our wholly owned subsidiary. Also on the Closing Date, pursuant to the Merger Agreement, our operating partnership merged with and into Moody I OP (the “Partnership Merger,” and together with the Merger, the “Mergers”). Pursuant to the Merger Agreement, our Board of Directors was expanded from three to five directors on the Closing Date, and William H. Armstrong and John P. Thompson, each of whom previously served as a director of Moody I, were appointed to our Board of Directors to fill the two resulting vacancies.
Our Board of Directors has nominated Brett C. Moody, William H. Armstrong, Charles L. Horn, Clifford P. McDaniel and John P. Thompson each to serve for a term of office commencing on the date of the 20182019 Annual Meeting and ending on the date of the 20192020 Annual Meeting of Stockholders and until each of their successors are elected and qualified. Each of Messrs. Moody, Armstrong, Horn, McDaniel and Thompson currently serves as a member of our Board of Directors. Our Board of Directors believes the director nominees have played and will continue to play a vital role in our management and operations through their participation on the Board of Directors.
Unless otherwise instructed on the proxy, the shares represented by proxies will be voted “FOR” all director nominees. Each director nominee has consented to being named as a director nominee in this proxy statement and has agreed that, if elected, he will serve on our Board of Directors for a one-year term and until his successor has been elected and qualified. If any director nominee becomes unavailable for any reason, the shares represented by proxies may be voted for a substitute director nominee designated by our Board of Directors. We are not aware of any family relationship among any of the director nominees and any of our directors or executive officers. Each of the director nominees has stated that there is no arrangement or understanding of any kind between him and any other person relating to his election as a director except that each such nominee has agreed to serve as our director if elected.
Our Board of Directors recommends a vote “FOR” all five director nominees to our Board of Directors.
Information about Director Nominees
The following table and biographical descriptions set forth information with respect to the individuals who are our director nominees.
Name | Age | Position(s) | ||
Brett C. Moody | Chairman of the Board, Chief Executive Officer and President | |||
Charles L. Horn | Independent Director | |||
Clifford P. McDaniel | Independent Director | |||
William H. Armstrong III | 54 | Independent Director | ||
John P. Thompson | Independent Director |
Brett C. Moody serves as our Chairman of the Board, Chief Executive Officer and President. Mr. Moody also serves as Chief Executive Officer and President of our Advisor.Moody National Advisor II, LLC (our “Advisor”). Mr. Moody also servesserved as Chairman of the Board of Directors, Chief Executive Officer and President of Moody National REIT I, Inc., a Maryland corporation which merged with and into our company on September 27, 2017 (“Moody I”), and Chief Executive Officer and President of Moody I Advisor, positions he has held since its inception in 2008.I’s advisor from January 2008 to September 2017. Mr. Moody founded Moody Mortgage Corporation in 1996 and has served as its Chairman and Chief Executive Officer since its formation. Mr. Moody, who has over 20 years of commercial real estate experience, has since guided the growth of his company from a mortgage company to a full-service real estate firm that includes Moody National Mortgage Corporation, Moody National Realty Company, L.P., Moody National Management, L.P., Moody National Hospitality Management, LLC, Moody National Development Company, L.P., and their respective subsidiaries (collectively, the “Moody National Companies”). His primary responsibilities include overseeing real estate acquisitions and management as well as building, coaching and leading the Moody National Companies team of professionals. As Chairman of the Board and Chief Executive Officer of Moody National Mortgage Corporation, Mr. Moody has closed over 200 transactions totaling over $2 billion. Prior to founding Moody National Mortgage Corporation, Mr. Moody was a financial analyst for the Dunkum Mortgage Group, now Live Oak Capital. Mr. Moody also serves on the Board of Directors of Foundation for the Future, the Yellowstone Academy for At Risk Children, and the Palmer Drug Abuse Program. Mr. Moody attended the University of Texas at Austin, but did not receive any degrees.
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Our Board of Directors, excluding Mr. Moody, has determined that the leadership positions previously and currently held by Mr. Moody, and the extensive experience he has accumulated from acquiring and managing investments in commercial real estate and debt, have provided Mr. Moody with the experiences, attributes and skills necessary to effectively carry out the duties and responsibilities of a director.
Charles L. Horn has served as one of our independent directors, and as Chairman of the Audit Committee of our Board of Directors (the “Audit Committee”), since August 2014. Mr. Horn also servesserved as an independent director and as Chairman of the Audit Committee of Moody I positions he has held since May 2012.from 2012 to 2017. Since December 2009, Mr. Horn has served as the Executive Vice President and Chief Financial Officer of Alliance Data Systems, Inc. (NYSE: ADS), a leading provider of customer loyalty and marketing solutions. From 1999 to November 2009, Mr. Horn served as Senior Vice President and Chief Financial Officer for Builders Firstsource, Inc. (NASDAQ: BLDR), a leading supplier of structural building materials to homebuilders. From 1994 to 1999, Mr. Horn served as Vice President of Finance and Treasury for the retail operations of Pier 1 Imports, Inc., and, from 1992 to 1994, Mr. Horn served as Executive Vice President and Chief Financial Officer of Conquest Industries. Mr. Horn holdsis a Certified Public Accountant in the State of Texas. Mr. Horn received a B.B.A. from Abilene Christian University and a M.B.A from the University of Texas at Austin. Mr. Horn is a Certified Public Accountant in the State of Texas.
Our Board of Directors, excluding Mr. Horn, has determined that Mr. Horn’s experience as the chief financial officer of public, listed companies and as a certified public accountant has provided Mr. Horn with the experiences, attributes and skills necessary to effectively carry out his duties and responsibilities as a director.
Clifford P. McDaniel has served as one of our independent directors and as a member of our Audit Committee since February 2016. Since February 2015, Mr. McDaniel has also served as an Executive Managing Director of the Affordable Housing Group in the Houston office of ARA, a Newmark Company, a real estate investment brokerage firm. From January 1996 to February 2015, Mr. McDaniel served as a Principal with ARA. In his roles at ARA, Mr. McDaniel has developed expertise in the financial and procedural aspects of real estate transactions for multiple institutional clients. Mr. McDaniel also serves at the Executive Director of On Track Ministries, Vice President of Club Outreach Ministries and Secretary of West Houston 15 MUD. Mr. McDaniel received a B.S. in Communications from the University of Texas in 1984.Texas.
Our Board of Directors, excluding Mr. McDaniel, has determined that Mr. McDaniel’s current and previous experience in strategic real estate acquisitions and dispositions has provided Mr. McDaniel with the experiences, attributes and skills necessary to effectively carry out the duties and responsibilities of a director.
William H. Armstrong III has served as one of our independent directors since the Closing Date.September 2017. Mr. Armstrong also served as one of Moody I’s independent directors from September 2008 until September 2017. Mr. Armstrong serves as Chairman of the Board, Chief Executive Officer and President of Stratus Properties Inc. (NASDAQ: STRS), a company engaged in the acquisition, development, management, operation and sale of commercial, hotel, entertainment, multifamily and single-family residential real estate properties located primarily in the Austin, Texas area. Mr. Armstrong has been employed by Stratus Properties since its inception in 1992, served as Chief Financial Officer and Chief Operating Officer of Stratus Properties from 1996 to 1998, and has served as Chairman of the Board, Chief Executive Officer and President of Stratus Properties since 1998. Prior to joining Stratus Properties, Mr. Armstrong was Vice President of Sonnenblick Goldman, a national real estate investment banking and advisory firm. Mr. Armstrong serves on the Finance Committee of the U.S. Green Building Council, a Washington, D.C.-based non-profit organization, and he has been active in the National Association of Real Estate Investment Trusts, or NAREIT, the Urban Land Institute and the Real Estate Council of Austin. Mr. Armstrong received hisa B.A. in Economics from the University of Colorado Denver.
Our Board of Directors, excluding Mr. Armstrong, has determined that Mr. Armstrong’s previous leadership positions, including directorships, with other organizations primarily engaged in investing in commercial real estate have provided Mr. Armstrong with the experiences, attributes and skills necessary to effectively carry out the duties and responsibilities of a director.
John P. Thompson has served as one of our independent directors since the Closing Date.September 2017. Mr. Thompson also served as one of Moody I’s independent directors from September 2008 until September 2017. Mr. Thompson is the founder of PinPoint Commercial, L.P., which provides real estate services focusing on industrial, senior housing and medical related projects primarily in Texas. As CEO of Pinpoint Commercial, Mr. Thompson leads all investment and development activities for the firm and oversees the company’s financial and management operations. Prior to founding PinPoint Commercial in 1998, Mr. Thompson served as an industrial real estate broker with CB Richard Ellis, Inc. Mr. Thompson received hisa B.B.A. in Finance from the University of Texas at Austin.
Our Board of Directors, excluding Mr. Thompson, has determined that Mr. Thompson’s experience managing investments in industrial and retail properties and brokering industrial properties has provided Mr. Thompson with the experiences, attributes and skills necessary to effectively carry out the duties and responsibilities of a director.
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RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected and appointed Frazier & Deeter to act as our independent registered public accounting firm for the year ending December 31, 2018.2019.
Although stockholder ratification of the appointment of our independent auditor is not required by our bylaws or otherwise, we are submitting the selection of Frazier & Deeter to our stockholders for ratification as a matter of good corporate governance practice. Even if the appointment is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time if it determines that such a change would be in our best interests. If our stockholders do not ratify the Audit Committee’s selection, the Audit Committee will take that fact into consideration, together with such other factors it deems relevant, in determining its next selection of our independent registered public accounting firm.
Representatives of Frazier & Deeter are expected to be available during the 20182019 Annual Meeting, will have an opportunity to make a statement if they so desire, and will be available to respond to questions from our stockholders.
Ratification of the appointment of Frazier & Deeter as our independent registered public accounting firm requires the affirmative vote of a majority of the votes cast in person or by proxy at the 20182019 Annual Meeting, assuming a quorum is present. Any shares not voted, whether by abstention, broker non-vote or otherwise, have no impact on the vote.
Our Board of Directors recommends a vote “FOR” the ratification of the appointment of Frazier & Deeter as our independent registered public accounting firm for the fiscal year ending December 31, 2018.2019.
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Board of Directors
We operate under the direction of our Board of Directors. TheOur Board of Directors oversees our operations and makes all major decisions concerning our business. TheOur Board of Directors held four meetings during the fiscal year ended December 31, 2017.2018. Each of our directors attended at least 75% of the aggregate of the total number of meetings of our Board of Directors held during the period for which he served as a director and the aggregate total number of meetings held by all committees of our Board of Directors on which he served during the periods in which he served.
Director Attendance at Annual Meetings
Although we have no policy with regard to attendance by the members of our Board of Directors at our annual stockholder meetings, we invite and encourage the members of our Board of Directors to attend our annual stockholder meetings to foster communication between our stockholders and our Board of Directors.
Contacting theour Board of Directors
Our Board of Directors provides a process for our stockholders to send communications to our Board of Directors. Any stockholder who desires to contact members of our Board of Directors may do so by writing to Moody National REIT II, Inc., 6363 Woodway Drive, Suite 110, Houston, Texas 77057, Attention: Secretary. Communications received will be distributed by our Secretary to such member or members of our Board of Directors as deemed appropriate by our Secretary, depending on the facts and circumstances outlined in the communication received. For example, if any questions regarding accounting, internal accounting controls and auditing matters are received, they will be forwarded by our Secretary to the Audit Committee for review.
Director Independence
Our Charter provides that a majority of theour directors must be “independent directors” as defined by our Charter (as discussed below). We have a five-member board which, as noted above, was expanded from three directors to five directors upon the consummation of the Mergers on the Closing Date.board. One of our directors, Brett C. Moody, is affiliated with Moody National REIT Sponsor, LLC (our “Sponsor”) and its affiliates, and we do not consider Mr. Moody to be an independent director. Each of the four remaining directors currently serving on our Board of Directors, Messrs. Armstrong, Horn, McDaniel and Thompson, qualify as “independent directors” as defined in our Charter in compliance with the requirements of the North American Securities Administrators Association’s Statement of Policy Regarding Real Estate Investment Trusts.Charter.
As defined in our Charter, an “independent director” is a person who is not, on the date of determination, and within the last two years from the date of determination has not been, directly or indirectly, associated with our Sponsor or our Advisor by virtue of (1) ownership of an interest in our Sponsor, our Advisor, or any of their respective affiliates, other than us; (2) employment by our Sponsor, our Advisor, or any of their affiliates; (3) service as an officer or director of our Sponsor, our Advisor, or any of their affiliates, other than as one of our directors; (4) performance of services, other than as a director, for us; (5) service as a director or trustee of more than three real estate investment trusts organized by our Sponsor or advised by our Advisor; or (6) maintenance of a material business or professional relationship with our Sponsor, our Advisor, or any of their affiliates. A business or professional relationship is considered “material” if the aggregate gross revenue derived by the director from our Sponsor, our Advisor, and their affiliates (excluding fees for serving as one of our directors or other REIT or real estate program organized or advised or managed by the Advisor or its affiliates) exceeds 5% of either the director’s annual gross revenue during either of the last two years or the director’s net worth on a fair market value basis. An indirect association with our Sponsor or theour Advisor shall include circumstances in which a director’s spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in-law, or brother- or sister-in-law is or has been associated with our Sponsor, theour Advisor, any of their affiliates, or with us. None of our independent directors face conflicts of interest because of affiliations with other programs sponsored by our Sponsor and its affiliates.
Although our shares are not listed on any national securities exchange, our independent directors are “independent” as defined by the standards of the New York Stock Exchange (the “NYSE”). The NYSE standards provide that to qualify as an independent director, in addition to satisfying certain bright-line criteria, the Board of Directors must affirmatively determine that a director has no material relationship with us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us).
Nomination of Directors
We do not have a standing nominating committee. Our Board of Directors has determined that it is appropriate for us not to have a nominating committee because our Board of Directors presently considers all matters for which a nominating committee would be responsible. Each member of our Board of Directors participates in the consideration of director nominees. While we do not have any minimum qualifications with respect to director nominees, our Board of Directors considers many factors in connection with each candidate, including judgment, integrity, diversity, experience, the value of the candidate’s experience relative to the experience of other
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members of our Board of Directors and the candidate’s willingness to devote substantial time and effort to the responsibilities of our Board of Directors. Our Board of Directors does not have a formal written policy regarding the consideration of diversity in identifying director nominees. Nevertheless, considerations of diversity will continue to be important factors in identifying and recruiting new directors.
Our Board of Directors will also will consider recommendations made by stockholders for nominees to our Board of Directors. In order to be considered by our Board of Directors, recommendations made by stockholders must be submitted within the timeframe required to request a proposal to be included in theour proxy materials. See “Proposals for 20182020 Annual Meeting of Stockholders.” In evaluating the persons recommended as potential members of our Board of Directors, our Board of Directors will consider each candidate without regard to the source of the recommendation and take into account those factors that our Board of Directors determines are relevant. Stockholders may directly nominate potential members for our Board of Directors (without the recommendation of our Board of Directors) by satisfying the procedural requirements for such nomination as provided in Article II, Section 11 of our bylaws.
Board Structure; Oversight of Risk Management
Brett C. Moody serves as the Chairman of our Board of Directors and our Chief Executive Officer. The independent directors have determined that the most effective leadership structure for us at the present time is for our Chief Executive Officer to also serve as Chairman of our Board of Directors. The independent directors believe that because our Chief Executive Officer is ultimately responsible for our day-to-day operations and for executing our business strategy, and because our performance is an integral part of the deliberations of our Board of Directors, our Chief Executive Officer is the director best qualified to act as Chairman of our Board of Directors. Our Board of Directors retains the authority to modify this structure to best address our unique circumstances and to advance the best interests of allour stockholders, as and when appropriate. Although we do not have a lead independent director, our Board of Directors believes the current structure is appropriate, as all of our independent directors are actively involved in meetings of our Board of Directors.
Our Board of Directors has an active role in overseeing the management of risks applicable to us and our operations. We face a number of risks, including economic risks, environmental and regulatory risks, and other risks such as the impact of competition. How well we manage these and other risks can ultimately determine our success. Our Board of Directors manages our risk through its approval of all property acquisitions and assumptions of material levels of debt and its oversight of our executive officers and our Advisor. Our Board of Directors may also establish committees it deems appropriate to address specific areas in more depth than may be possible at a full Board of Directors meeting, provided that the majority of the members of each committee are independent directors. Our Board of Directors has established an Audit Committee, which oversees management of accounting, financial, legal and regulatory risks. For more information, see “—Audit Committee,” below.
Audit Committee
Our Board of Directors has a separately designated standing Audit Committee. The Audit Committee meets on a regular basis, at least quarterly and more frequently as necessary. During the year ended December 31, 2017,2018, the Audit Committee held four meetings. The Audit Committee’s primary functions are to evaluate and approve the services and fees of our independent registered public accounting firm, to periodically review our independent auditors’ independence and to assist theour Board of Directors in fulfilling its oversight responsibilities by reviewing the financial information to be provided to the stockholders and others, the system of internal controls which management has established and the audit and financial reporting process. The current members of the Audit Committee are Messrs. Horn and McDaniel, both of whom are “independent directors” as defined by our Charter. Mr. Horn currently serves as the Chairman of the Audit Committee and has been designated by the Board of Directors as the “audit committee financial expert” pursuant to the requirements of Item 407(d)(5) of Regulation S-K promulgated by the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee has adopted a written charter under which it operates, a copy of which is available on our website atwww.moodynationalreit.com.
Pre-Approval Policies
The Audit Committee’s charter imposes a duty on the Audit Committee to pre-approve all auditing services performed for us by our independent auditors as well as all permitted non-audit services in order to ensure that the provision of such services does not impair our independent auditors’ independence. In determining whether or not to pre-approve services, the Audit Committee will consider whether the service is a permissible service under the rules and regulations promulgated by the SEC. The Audit Committee, may, in its discretion, delegate to one or more of its members the authority to pre-approve any audit or non-audit services to be performed by the independent auditors, provided any such approval is presented to and approved by the full Audit Committee at its next scheduled meeting. All services rendered by Frazier & Deeter for the years ended December 31, 2015, 2016, 2017 and 20172018 were pre-approved in accordance with the policies and procedures described above.
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Independent Registered Public Accounting Firm Fees
The Audit Committee reviewed the audit and non-audit services performed by Frazier & Deeter, as well as the fees charged by Frazier & Deeter for such services. In its review of the non-audit service fees, the Audit Committee considered whether the provision of such services is compatible with maintaining the independence of Frazier & Deeter.Deeter did not provide any non-audit services. The aggregate fees billed to us by Frazier & Deeter for professional accounting services for the years ended December 31, 20172018 and 20162017 are set forth in the table below.
Year ended December 31, 2017 | Year ended December 31, 2016 | Year ended December 31, 2018 | Year ended December 31, 2017 | |||||||||
Audit fees | $ | 306,561 | $ | 142,032 | $ | 438,531 | $ | 306,561 | ||||
Audit-related fees | — | — | — | — | ||||||||
Tax fees | — | — | — | — | ||||||||
All other fees | — | — | — | — | ||||||||
Total | $ | 306,561 | $ | 142,032 | $ | 438,531 | $ | 306,561 |
For purposes of the preceding tables, Frazier & Deeter’s professional fees are classified as follows:
● | Audit fees — These are fees for professional services performed for the audit of our annual financial statements, the required review of quarterly financial statements, registration statements and other procedures performed by our independent auditors in order for them to be able to form an opinion on our consolidated financial statements. |
● | Audit-related fees — These are fees for assurance and related services that traditionally are performed by our independent auditors that are reasonably related to the performance of the audit or review of the financial statements, such as due diligence related to acquisitions and dispositions, attestation services that are not required by statute or regulation, internal control reviews and consultation concerning financial accounting and reporting standards. |
● | Tax fees — These are fees for all professional services performed by professional staff in our independent auditor’s tax division, except those services related to the audit of our financial statements. These include fees for tax compliance, tax planning, and tax advice, including federal, state, and local issues. Services may also include assistance with tax audits and appeals before the IRS and similar state and local agencies, as well as federal, state and local tax issues related to due diligence. |
● | All other fees — These are fees for any services not included in the above-described categories, including assistance with internal audit plans and risk assessments. |
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AUDIT COMMITTEE REPORT TO STOCKHOLDERS
The Audit Committee operates under a written charter. The role of the Audit Committee is to oversee the Company’s financial reporting process on behalf of our Board of Directors, including: (1) the integrity of the Company’s financial statements and internal control over financial reporting, (2) compliance with legal and regulatory requirements, (3) the independent auditor’s qualifications and independence and (4) the performance of the Company’s independent auditor and its internal audit function.
Management has the primary responsibility for the Company’s financial statements as well as its financial reporting process, principles and internal controls. The independent registered public accounting firm is responsible for performing an audit of the Company’s annual financial statements and expressing an opinion as to the conformity of such financial statements with accounting principles generally accepted in the United States. The members of the Audit Committee are not Company employees and are not performing the functions of auditors or accountants. As such, it is not the duty or responsibility of the Audit Committee or its members to conduct “field work” or other types of auditing or accounting reviews or procedures or to set auditor independence standards. Members of the Audit Committee necessarily rely on the information provided to them by the Company’sour management and the independent auditors. Accordingly, the Audit Committee’s considerations and discussions referred to below do not assure that the audit of the Company’sour financial statements has been carried out in accordance with generally accepted auditing standards, that the Company’sour financial statements are presented in accordance with generally accepted accounting principles or that the Company’sour independent auditors are, in fact, “independent.”
In this context, in fulfilling its oversight responsibilities, the Audit Committee reviewed the 20172018 audited financial statements with management, including a discussion of the quality and acceptability of the Company’sour financial reporting and controls.
The Audit Committee reviewed with Frazier & Deeter, which is responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting principles, their judgments as to the quality and the acceptability of the financial statements and the matters required to be discussed under the statement on Auditing Standard No. 1301, as currently in effect, (which superseded the statement on Auditing Standard No. 16), as adopted by the Public Company Accounting Oversight Board (the “PCAOB”). The Audit Committee received from Frazier & Deeter the written disclosures and the letter required by applicable requirements of the PCAOB regarding Frazier & Deeter’s communications with the Audit Committee concerning independence, and discussed with Frazier & Deeter their independence from the Company. In addition, the Audit Committee considered whether Frazier & Deeter’s provision of non-audit services is compatible with Frazier & Deeter’s independence.
The Audit Committee discussed with Frazier & Deeter the overall scope and plans for the audit. The Audit Committee meets periodically with Frazier & Deeter, with and without management present, to discuss the results of their examinations, their evaluations of the overall quality of our financial reporting.
Based on the reviews and discussions described above, the Audit Committee recommended to theour Board of Directors that the audited financial statements be included in the Company’sour Annual Report on Form 10-K for the year ended December 31, 2017,2018, filed with the SEC on April 2, 2018.March 29, 2019.
TheSubmitted by the Audit Committee of the Board of Directors:
Charles L. Horn, Chairman
Clifford P. McDaniel
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COMPENSATION OF DIRECTORSEXECUTIVE OFFICERS AND EXECUTIVE OFFICERSDIRECTORS
Compensation of our Executive Officers
We do not currently have any employees nor do we currently intend to hire any employees who will be compensated directly by us. Our executive officers do not receive compensation directly from us for services rendered to us and we do not intend to pay any compensation to our executive officers. We do not reimburse our Advisor directly or indirectly for the salary or other compensation paid to any of our executive officers. As a result, we do not have nor has our boardBoard of Directors considered a compensation policy for our executive officers and we have not included a Compensation and Discussion Analysis in this proxy statement.
Each of our executive officers, including each executive officer who serves as a director, is an officer or employee of our Advisor or its affiliates and receives compensation for his or her services, including services performed on our behalf, from such entities. See “Certain Relationships and Related-Party Transactions” below for a discussion of fees paid to our Advisor and its affiliates.
Compensation of our Directors
If a director is also one of our executive officers or an affiliate of our Advisor, we do not pay any compensation to that person for services rendered as a director. The amount and form of compensation payable to our independent directors for their service to us is determined by our Board of Directors, based upon recommendations from our Advisor. The following table sets forth certain information regarding compensation earned by or paid to our directors during the year ended December 31, 2017.2018.
Name | Fees Earned or Paid in Cash(1) | Restricted Stock Grants(2) | All Other Compensation | Total | Fees Earned or Paid in Cash(1) | Restricted Stock Grants(2) | All Other Compensation | Total | ||||||||||||||||||||||||
Brett C. Moody | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Charles L. Horn(3) | 64,000 | 69,550 | — | 133,500 | 64,000 | 57,975 | — | 121,975 | ||||||||||||||||||||||||
Clifford P. McDaniel(3) | 54,000 | 69,550 | — | 123,550 | 54,000 | 57,975 | — | 111,975 | ||||||||||||||||||||||||
John P. Thompson(3) | 13,500 | 139,100 | — | 152,600 | 54,000 | 57,975 | — | 111,975 | ||||||||||||||||||||||||
William P. Armstrong(3) | 13,500 | 139,100 | — | 152,600 | 54,000 | 57,975 | — | 111,975 | ||||||||||||||||||||||||
Total | $ | 145,000 | $ | 417,300 | $ | — | $ | 562,300 | $ | 226,000 | $ | 231,900 | $ | — | $ | 457,900 |
___________
(1) | The amounts shown in this column include annual retainers and fees earned for attendance at meetings of the Board of Directors and committees, as described below under “—Cash Compensation.” |
(2) | As described below under “—Independent Directors Compensation Plan,” each of Messrs. Horn, McDaniel, Thompson and |
(3) | Independent director. |
Cash Compensation
Each of our executive officers, including each executive officer who serves as a director, is employed by our Advisor and receives compensation for his or her services, including services performed on our behalf, from our Advisor. Although we indirectly bear some of the costs of the compensation paid to our executive officers, either through fees or expense reimbursements we pay to our Advisor, we do not currently, nor do we intend to, pay any compensation directly to our executive officers. Our executive officers, as employees of our Advisor, are entitled to receive awards in the future under our long-term incentive plan as a result of their status as employees of our Advisor, although we do not currently intend to grant any such awards.
We pay each of our independent directors an annual retainer of $50,000, plus $2,000 per in-person meeting of our Board of Directors attended, $1,500 per in-person committee meeting attended and $1,000 for each telephonic board or committee meeting attended;provided, however, we do not pay an additional fee to our directors for attending a committee meeting when the committee meeting is held on the same day as a meeting of our Board of Directors. We also pay the Audit Committee Chairman an additional annual retainer of $10,000 and reimburse all directors for reasonable out-of-pocket expenses incurred in connection with attending meetings of our Board of Directors. In addition, in 2017, we paid Mr. McDaniel a fee of $35,000 for his service on an independent special committee of our Board of Directors formed to assist us in evaluating the Mergers,merger of our company and Moody I, in lieu of normal meeting fees that he would have been due for such service.
Independent Directors Compensation Plan
We have approved and adopted an independent directors compensation plan which operates as a sub-plan of our long-term incentive plan. Under our independent directors compensation plan, each of our then-current independent directors received 5,000 shares of restricted common stock when we raised the minimum offering amount of $2,000,000 in our initial public offering. Each new independent director that subsequently joins our Board of Directors receives 5,000 shares of restricted common stock on the date he or
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she joins our Board of Directors. In addition, following the date when we raised the minimum offering amount, on the date of an annual meetings of stockholders at whichfollowing an independent director is re-electeddirector’s reelection to our Board of Directors, he or she receives an additional grant of 2,500 shares of restricted common stock.stock upon each of the first four annual meetings of stockholders at which he or she is reelected to our Board of Directors. Subject to certain conditions, the shares of restricted common stock granted pursuant to the independent directors compensation plan will vest and become non-forfeitable in equal quarterly installments beginning on the first day of the first quarter following the date of grant. As of December 31, 2017, 35,0002018, 45,000 shares of restricted common stock have been granted to our independent directors.
Compensation Committee Interlocks and Insider Participation
We currently do not have a compensation committee of our Board of Directors because we do not pay or plan to pay any compensation to our officers. There are no interlocks or insider participation as to compensation decisions required to be disclosed pursuant to SEC regulations.
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EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights under our long-term incentive plan as of December 31, 2017:2018:
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |||||||||
Equity compensation plans approved by security holders: | — | — | ||||||||||
Equity compensation plans not approved by security holders: | N/A | N/A | N/A | |||||||||
Total | — | — |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our common stock as of May 18, 2018,June 27, 2019, for each person or group that holds more than 5.0% of our outstanding shares of common stock, for each director and executive officer and for our directors and executive officers as a group. On June 12, 2017, all outstanding shares of our common stock were renamed as Class A shares; all shares shown in the ownership table below are Class A shares. To our knowledge, each person that beneficially owns shares of our sharescommon stock has sole voting and disposition power with regard to such shares.
Name of Beneficial Owner(1) | Number of Shares Beneficially Owned(2) | Percent of All Shares | Number of Shares Beneficially Owned(2) | Percent of All Shares | ||||||||||||
Officers and Directors | ||||||||||||||||
Brett C. Moody(3) | 9,693 | 0.1 | % | 10,515 | 0.1 | % | ||||||||||
William H. Armstrong | 14,468 | 0.2 | % | 18,311 | 0.2 | % | ||||||||||
Robert W. Engel | — | — | — | — | ||||||||||||
Charles L. Horn | 13,075 | 0.1 | % | 15,575 | 0.1 | % | ||||||||||
Clifford P. McDaniel | 11,155 | 0.1 | % | 14,717 | 0.1 | % | ||||||||||
John P. Thompson | 5,171 | 0.1 | % | 8,226 | 0.1 | % | ||||||||||
All Directors and Executive Officers as a group (6 persons)(3) | 53,562 | 0.6 | % | 67,344 | 0.6 | % |
___________
(1) | The address of each of Messrs. Moody, Armstrong, Engel, Horn, McDaniel and Thompson is c/o Moody National REIT II, Inc., 6363 Woodway Drive, Suite 110, Houston, Texas 77057. |
(2) | Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to dispose of or to direct the disposition of such security. A person also is deemed to be a beneficial owner of any securities which that person has a right to acquire within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which he or she has no economic or pecuniary interest. |
(3) | Includes |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of our common stock to file with the SEC, within specified time frames, initial reports of beneficial ownership and reports of changes in ownership of our shares of common stock. Officers, directors and greater than ten percent stockholdersThese specified time frames require the reporting of changes in ownership within two business days of the transaction giving rise to the reporting obligation. Reporting persons are required by SEC regulation to furnish us with copies of all Section 16(a) forms they filefiled with the SEC. Based solely on a review of the copies of such forms furnished to us during and with respect to the fiscal year ended December 31, 2017,2018, or written representations that no additional forms were required, we believe that all required Section 16(a) filings were timely and correctly made by reporting persons during the year ended December 31, 2017.2018, except as follows:
● | due to an administrative oversight, a Form 4 was not timely filed in 2018 to report the issuance of 2,500 shares of restricted common stock to Mr. Horn in connection with his continuing service as a non-employee member of our Board of Directors; |
● | due to an administrative oversight, a Form 4 was not timely filed in 2018 to report the issuance of 2,500 shares of restricted common stock to Mr. McDaniel in connection with his continuing service as a non-employee member of our Board of Directors; |
● | due to an administrative oversight, a Form 4 was not timely filed in 2018 to report the issuance of 2,500 shares of restricted common stock to Mr. Thompson in connection with his continuing service as a non-employee member of our Board of Directors; and |
● | due to an administrative oversight, a Form 4 was not timely filed in 2018 to report the issuance of 2,500 shares of restricted common stock to Mr. Armstrong in connection with his continuing service as a non-employee member of our Board of Directors. |
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following describes all transactions during the period from January 1, 20162017 through December 31, 20172018 involving us, our directors, our Advisor, our Sponsor and any affiliate thereof and all such proposed transactions. Our independent directors are specifically charged with and have examined the fairness of such transactions to our stockholders, and have determined that all such transactions are fair and reasonable to us.
Merger with Moody I
On November 16, 2016, we, alongSeptember 27, 2017, the merger of Moody I with and into our company (the “Merger”) and the merger of Moody National Operating Partnership I, L.P., the operating partnership of Moody I (“Moody I OP”), with and into our operating partnership our Advisor, Moody I, Moody I OP, Moody I Advisor, and Merger Sub, entered into the Merger Agreement. On the Closing Date, pursuant(the “Partnership Merger”), were completed. We refer to the Merger Agreement, Moody I merged with and intothe Partnership Merger Sub, with Merger Sub continuingherein as the surviving entity and our wholly owned subsidiary. In addition, pursuant to“Mergers.” Upon the Merger Agreement, our operating partnership merged with and into Moody I OP, with our operating partnership continuing as the surviving partnership. The Merger Agreement was the product of a negotiation between a special committee of our Board of Directors and a special committeeconsummation of the Board of Directors of Moody I (both consisting solely of independent directors), each of which was represented by its own counsel and financial advisor. Entry into the Merger Agreement was unanimously approved by our Board of Directors upon the recommendation of the special committee of our Board of Directors. Pursuant to the terms of the Merger Agreement,Mergers, former Moody I stockholders had the right to receivereceived a total of approximately 3.633.61 million or our Class A shares of our common stockShares as stock consideration, which was equal to approximately 43%42% of our diluted common equity as of the Closing Date,closing date, and a total of approximately $44.7$45.4 million in cash consideration. In addition, upon consummation of the Partnership Merger, each issued and outstanding unit of limited partnership interest in Moody I OP was automatically cancelled and retired and converted into 0.41 units of Class A limited partnership interest in our operating partnership. As a result of
In connection with the Mergers, our portfolio was expanded from two hotel properties and one note receivable to 14 hotel properties and three notes receivable from related parties.
Concurrently with the entry into the Merger Agreement, we Moody I, Moody I OP, Moody I Advisor, Moody National, and Moody OP Holdings I, LLC (“OP Holdings”), the holder of all of the outstanding special partnership units in Moody I OP, entered into a termination agreement (the “Termination Agreement”). Pursuant to the Termination Agreement, at the effective time of the Mergers, the amended and restated advisory agreement, dated August 14, 2009, among Moody I, Moody I OP, Moody I Advisor and Moody National was terminated and Moody I paid Moody I Advisor a payment of $5,580,685 (the “Moody I Advisor Payment”). During the first year following the consummation of the Mergers, if we sell a property that was previously owned by Moody I, then any disposition fee to which our Advisor would be entitled under the Second Amended & Restated Advisory Agreement, dated as of June 12, 2017, by and among our Advisor, our operating partnership and us (the “Advisory Agreement”) will be reduced by an amount equal to the portion of the Moody I Advisor Payment attributable to such property. In addition, in accordance with the terms of the limited partnership agreement of Moody I OP, Moody I OP paid to OP Holdings $613,751. We paid our Advisor an acquisition fee of $670,000, in connection with the Mergers, which amount was equal toequaled 1.5% of the cash consideration paid to Moody I stockholders. Additionally, we paid our Advisorstockholders, and a financing coordination fee of $1,720,000, which amount was based on the loans assumed from Moody I in connection with the Mergers, including debt held by us relatedwith respect to our Marriott Courtyard Lyndhurst and the Townplace Suites Fort Worth hotel properties.
Additionally,two properties that were previously owned by Moody I. Moody I paid its advisor $5,580,685 in connection with the Mergers on February 2, 2017, we entered into(the “Moody I Advisor Payment”). The Moody I Advisor Payment was a stockholder servicing coordinationnegotiated amount that represents a reduction in the disposition fee to which Moody I’s advisor could have been entitled and a waiver of any other fees that Moody I’s advisor would have been due under the Moody I advisory agreement with Moody Securities, LLC (“Moody Securities”), the dealer manager for our initial public offering, which provided for the payment of certain “stockholder servicing fees” in connection with the Mergers. AllIn addition, Moody I OP paid $613,751 to OP Holdings I, LLC, which amount represented the promote payment to which OP Holdings I, LLC was entitled under the terms of the limited partnership agreement of Moody I OP. We also paid Moody Securities, LLC, an affiliate of our Advisor (“Moody Securities”), a stockholder servicing fee of up to $2.125 per share of our Class A Shares issued as stock consideration in the Merger, for an aggregate amount of approximately $7.0 million in stockholder servicing fees, were re-allowedall of which was reallowed to broker-dealers that provide ongoing financial advisory services to former stockholders of Moody I stockholders following the Mergers and that entered into participating broker-dealer agreements with Moody Securities. The aggregate amount of stockholder servicing fees was based on the number of shares of our common stock issued as consideration in the Mergers, and was approximately $7.0 million. No stockholder servicing fees were paid with respect to any cash paid by us as cash consideration in the Mergers.
Ownership Interests
Our Sponsor owns 8,000 shares of our common stock that it purchased for an aggregate of $200,000 on August 14, 2014. Moody LPOP II, LLC (“Moody LPOP II”) contributed $1,000 to our operating partnership in exchange for special limited partnership interests therein and our affiliate, Moody OP Holdings II, LLC (“Moody Holdings II”), contributed $1,000 to our operating partnership in exchange for limited partnership interests.
As of December 31, 2017,2018, Moody Holdings II owned less than 1% of the outstanding limited partnership interests in our operating partnership and Moody LPOP II owned 100% of the special limited partnership interests issued by our operating partnership. We are the sole general partner of our operating partnership and own approximately 96.5%97% of the limited partnership units of our operating partnership. As we accept subscriptions for shares of our common stock, we transfer substantially all of the net offering proceeds from our public offering to our operating partnership as a contribution in exchange for partnership interests and our percentage ownership in our operating partnership increases proportionately. Moody LPOP II’s ownership interest of the special limited partnership interests entitles it to receive distributions equal to 15% of our net cash flows, whether from continuing operations, the repayment of loans, the disposition of assets or otherwise, but only after our stockholders have received, in the aggregate, cumulative distributions equal to their total invested capital plus a 6% cumulative, non-compounded annual pre-tax return on such aggregated invested capital. In addition, the special limited partnership interest holder will be entitled to a separate payment if it redeems its special limited partnership interests. The special limited partnership interests may
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be redeemed upon: (1) the listing of our common stock on a national securities exchange or (2) the occurrence of certain events that result in the termination or non-renewal of our Advisory Agreement, in each case for an amount that Moody LPOP II would have been entitled to receive as if our operating partnership had disposed of all of its assets at the enterprise valuation as of the date of the event triggering the redemption.
Springhill Suites Seattle
On May 24, 2016, our operating partnership acquired fee simple title to a hotel property located in Seattle, Washington commonly known as the Springhill Suites Seattle from its tenant-in-common owners for an aggregate purchase price, exclusive of closing costs, of $74,100,000. The tenant-in-common owners acquired their interests in the Springhill Suites Seattle in a tenant-in-common program sponsored by an affiliate of our Sponsor.
MN TX II Note
On October 6, 2016, our operating partnership originated a secured loan in the aggregate principal amount of $11,200,000 (the “MN TX II Note”) to MN TX II, LLC, a Texas limited liability company and a party related to our Advisor (“MN TX II”). Proceeds from the MN TX II Note were used by MN TX II solely to acquire a commercial property located in Houston, Texas. The entire unpaid principal balance of the MN TX II Note and all accrued and unpaid interest thereon and all other amounts due thereunder are due and payable on October 6, 2018. Interest on the outstanding principal balance of the MN TX II Note accrues at a fixed per annum rate equal to 5.5%, provided that in no event will the interest rate exceed the maximum rate permitted by applicable law. The MN TX II Note may be prepaid in whole or in part by MN TX II without penalty at any time upon prior written notice to our operating partnership.
Townplace Suites Forth Worth Loan
On August 15, 2017, our operating partnership made a loan in the amount of $7,106,506 to Moody National International-Fort Worth Holding, LLC, an indirect subsidiary of Moody I OP. The loan matured and was retired upon completion of the Mergers.
Marriott Courtyard Lyndhurst Loan
On September 6, 2017, our operating partnership made a loan in the amount of $30,647,770 to Moody National 1 Polito Lyndhurst Holding, LLC, an indirect subsidiary of Moody I OP. The loan matured and was retired upon completion of the Mergers.
Our Relationships with our Advisor and our Sponsor
Our Advisor, Moody National Advisor II, LLC, supervises and manages our day-to-day operations and selects our real property investments and real estate-related investments, subject to the oversight byof our Board of Directors. Our Advisor also provides marketing, sales and client services on our behalf. Our Advisor was formed in July 2014 and is indirectly owned by our Sponsor. Brett C. Moody, our Chairman of the Board, Chief Executive Officer and President, also serves as the Chief Executive Officer of our Sponsor and our Advisor. All of our officers and directors, other than our independent directors, are officers of our Advisor and serve, and may serve in the future, as directors or officers other affiliates of our Advisor.
We and our operating partnership have entered into the Advisory Agreement with our Advisor, which has a one-year term expiring January 20, 2020, subject to an unlimited number of successive one-year renewals upon mutual consent of the parties. Our Charter provides that a majority of the independent directors may terminate the Advisory Agreement without cause or penalty on 60 days’ written notice and that we may terminate the Advisory Agreement immediately for fraud, criminal conduct, misconduct or negligent breach of fiduciary duty by our Advisor, a material breach of the Advisory Agreement by our Advisor or upon the bankruptcy of our Advisor. Services provided by the Advisor under the terms of the Advisory Agreement include the following:
● | participating in formulating an investment strategy and asset allocation framework consistent with achieving our investment objectives; |
● | researching, identifying, reviewing and recommending to our Board of Directors for approval investments in real estate assets and dispositions consistent with our investment policies and objectives; |
● | structuring the terms and conditions of transactions pursuant to which acquisitions and dispositions of real estate assets will be made; |
● | actively overseeing and managing our portfolio of real estate assets for purposes of meeting our investment objectives; |
● | managing our day-to-day affairs, including financial accounting and reporting, investor relations, marketing, informational systems and other administrative services on our behalf; |
● | selecting joint venture partners, structure corresponding agreements and oversee and monitor these relationships; |
● | arranging for financing and refinancing of our real estate assets; and |
● | recommending various liquidity events to our Board of Directors when appropriate. |
The above summary is provided to illustrate the material functions that our Advisor performs for us and is not intended to include all of the services that may be provided to us by our Advisor, its affiliates or third parties.
Fees and Expense Reimbursements Paid to our Advisor
Pursuant to the Advisory Agreement, we pay our Advisor or its affiliates the fees described below.
●
As of January 16, 2018, our Advisor assumed responsibility for the payment of all selling commissions, dealer manager fees and stockholder servicing fees paid in connection with our ongoing public offering. In connection therewith, we increased the acquisition fee we pay our Advisor from 1.5% to 3.85% of (1) the cost of all investments that we acquire (including our pro rata share of any indebtedness assumed or incurred in respect of the investment and exclusive of acquisition and financing coordination fees), (2) our allocable cost of investments acquired in a joint venture (including our pro rata share of the purchase price and our pro rata share of any indebtedness assumed or incurred in respect of that investment and exclusive of acquisition fees and financing coordination fees) or (3) the amount funded by us to acquire or originate a loan or other investment, including mortgage, mezzanine or bridge loans (including any third-party expenses related to such investment and exclusive of acquisition fees and financing coordination fees). The 3.85% acquisition fees consists of (i) a 1.5% base acquisition fee and (ii) up to an additional 2.35% contingent advisor payment (the “Contingent Advisor Payment”); provided, however, that.The 1.5% base acquisition fee will always be payable upon our acquisition of an investment, unless the first $3,500,000 of aggregate contingent advisor payments that would otherwise be paid toreceipt thereof is waived by our Advisor for dealer manager fees, sales commissions or stockholder servicing fees (the “Contingent Advisor Holdback”) will be retained by us until January 16, 2019, at which time any portionAdvisor. The amount of the Contingent Advisor Holdback owedPayment to our Advisorbe paid in connection with the closing of an acquisition will be reviewed on an acquisition-by-acquisition basis and such payment shall not exceed the then-outstanding amounts paid by the Advisor for selling commissions, dealer manager fees, stockholder servicing fees or other fees paid on behalf of clients of nonaffiliated registered investment advisors at the time of such closing. For purposes of determining the amount of Contingent Advisor Payment payable, the amounts paid by the Advisor for selling commissions, dealer manager fees, stockholder servicing fees or other fees paid on behalf of clients of nonaffiliated registered investment advisors and considered “outstanding” will be reduced by the amount of the Contingent Advisor Payment previously paid. Our Advisor may waive or defer all or a portion of the acquisition fee at any time and from time to time, in our Advisor’s sole discretion.Our Advisor intends to recoup the selling commissions, dealer manager fees and stockholder servicing fees it funds through receipt of the Contingent Advisor Payment. For the year ended December 31, 2018, we did not pay our Advisor any acquisition fees. For the year ended December 31, 2017, we paid our Advisor acquisition fees of $670,000 in connection with the Mergers, which amount was equal to 1.5% of the cash consideration paid to the stockholders of Moody I. For the year ended December 31, 2016, we paid our Advisor acquisition fees of $1,111,500 in connection with the acquisition of the Springhill Suites Seattle.
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● | We pay our Advisor a financing coordination fee of 1% of the amount available under any loan or line of credit made available to us and 0.75% of the amount available or outstanding under any refinanced loan or line of credit. Our Advisor will pay some or all of these fees to third parties with whom it subcontracts to coordinate financing for us. For the year ended December 31, |
● | We pay our Advisor a monthly asset management fee of one-twelfth of 1% of the cost of investment of all real estate investments we acquire. For the years ended December 31, |
● | We pay Moody National Hospitality Management, LLC (the “Property Manager”), an affiliate of our Advisor, a monthly hotel management fee equal to 4% of the monthly gross receipts from the properties managed by the Property Manager for services it provides in connection with operating and managing such properties. The Property Manager may pay some or all of the compensation it receives from us to a third-party property manager for management or leasing services. In the event that we contract directly with a non-affiliated third-party property manager, we will pay the Property Manager a market-based oversight fee. We will reimburse the costs and expenses incurred by the Property Manager on our behalf, including legal, travel and other out-of-pocket expenses that are directly related to the management of specific properties, but we will not reimburse the Property Manager for general overhead costs or personnel costs other than employees or subcontractors who are engaged in the on-site operation, management, maintenance or access control of the properties. For the years ended December 31, |
● | We will also pay an annual incentive fee to the Property Manager. Such annual incentive fee is equal to 15% of the amount by which the operating profit from the properties managed by the Property Manager for such fiscal year (or partial fiscal year) exceeds 8.5% of the total investment in such properties. The Property Manager may pay some or all of this annual fee to third-party sub-property managers for management services. For purposes of this fee, “total investment” means the sum of (i) the price paid to acquire a property, including closing costs, conversion costs, and transaction costs; (ii) additional invested capital; and (iii) any other costs paid in connection with the acquisition of the property, whether incurred pre- or post-acquisition. As of December 31, 2018, we had not paid the Property Manager any annual incentive fees. |
● | If our Advisor provides a substantial amount of services in connection with the sale of a property or other investment, as determined by our independent directors, we may also pay our Advisor a disposition fee in an amount of up to one-half of the brokerage commission paid but in no event greater than 3% of the contract sales price of each property or other investment sold; provided, however, in no event may the aggregate disposition fees paid to our Advisor and any real estate commissions paid to unaffiliated third parties exceed 6% of the contract sales price. |
In addition to the fees we pay to our Advisor pursuant to the Advisory Agreement, we also reimburse our Advisor for the following costs and expenses:
● | We will reimburse our Advisor for organizational and offering expenses incurred on our behalf, but only to the extent that such reimbursements do not exceed actual expenses incurred by our Advisor and do not cause the cumulative |
● | We will reimburse our Advisor for all expenses paid or incurred by our Advisor in connection with the services provided to |
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$1,189,530 incurred by our Advisor on our behalf. Of the $1,698,408 and $3,468,733 in total operating expenses incurred during the four fiscal quarters ended December 31, 2016 and 2017, respectively, $103,093 and $0 exceeded the 2%/25% Limitation. We reimbursed our Advisor $472,000 and $1,297,000 during the four fiscal quarters ended December 31, 2016 and 2017, respectively. The reimbursements for the four fiscal quarters ended December 31, 2017 includes reimbursements for quarters prior to the four quarters ended December 31, 2017. As of December 31, 2016 and 2017, we had $0 and $419,000 due from our Advisor for operating expense reimbursement.
● | We reimburse our Advisor for acquisition expenses incurred related to the selection and acquisition of real property investments and real estate-related investments;provided,however, that in no event will the total of all acquisition fees (including financing coordination fees) and acquisition expenses payable exceed 6% of the contract purchase price of all real estate investments acquired. As of December 31, |
Dealer Manager and Participating Broker-Dealer Compensation and Terms
The dealer manager for our initial public offering of our common stock is Moody Securities, an affiliate of our Advisor. Moody Securities is a licensed broker-dealer registered with FINRA. As the dealer manager for our initial public offering, Moody Securities is entitled to certain selling commissions, dealer manager fees, stockholder servicing fees and reimbursements related to our capital raising efforts. OnFrom January 1, 2017 through June 12, 2017, we renamed our common, as Class A Common Stock (the “Class A Shares”) and re-designated 250,000,000 authorized but unissuedpaid Moody Securities an up-front selling commission of up to 7.0% of the gross proceeds of what are now the Class A Shares as Class T Common Stock (the “Class T Shares”), 250,000,000 authorized but unissuedsold in our primary offering and a dealer manager fee of up to 3.0% of the gross proceeds of what are now the Class A Shares as Class D Common Stock (the “Class D Shares”), and 250,000,000 authorized by unissued Class A Shares as Class I Common Stock (the “Class I Shares,” collectively with thesold in our primary offering. Beginning on June 12, 2017, we reallocated our common shares into four separate share classes, Class A Shares, Class T Shares, Class I Shares and Class D Shares the “Shares”). In connection(provided that no Class D Shares are outstanding and Class D Shares are no longer being offered in our public offering), with the foregoing, we entered into a Second Amendedfollowing upfront selling commissions and Restated Dealer Manager Agreement with Moody Securities, which provides for the following compensation:dealer manager fees and trailing stockholder servicing fee:
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All selling commissions will be paid by our Advisor. Our Advisor intends to recoup the selling commissions it funds through the receipt of the Contingent Advisor Payment, as described above.
● | up-front dealer manager fees of up to (i) 3.0% of the gross proceeds of the Class A Shares sold in our primary offering, (ii) 2.5% of the gross proceeds of the Class T Shares sold in our primary offering, and (iii) 1.0% of the |
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All dealer manager fees will be paid by our Advisor. Our Advisor intends to recoup the dealer manager fees it funds through the receipt of the Contingent Advisor Payment, as described above.
The trailing stockholder servicing fee paid on the Class D Shares and Class T Shares will terminate on the earlier of (i) a listing of the Class A Shares on a national securities exchange; (ii) our merger or consolidation with or into another entity, any voluntary or involuntary liquidation, dissolution or winding up of our company or other disposition of all or substantially all of our assets, in each case in a transaction in which our stockholders receive cash and/or shares listed on a national securities exchange; (iii) the end of the month in which Moody Securities determines that total underwriting compensation paid in the primary offering is equal to 10.0% of the gross proceeds of the primary offering from the sale of Class A Shares, Class D Shares, Class I Shares and Class T Shares; (iv) with respect to Class T Shares held in a particular stockholder account, at the
end of the month in which total underwriting compensation from whatever source (including dealer manager fees, selling commissions, trailing stockholder servicing fees and any other underwriting compensation paid to participating broker-dealers with respect such Class T Shares in the stockholder account) would be in excess of 8.5% (or a lower limit as set forth in any applicable agreement between the dealer manager and a participating broker-dealer) of the total gross investment amount in Class T Shares determined at the time of the most recent purchase of the Class T Shares held in such account; and (v) with respect to Class D Shares held in a particular stockholder account, at the end of the month in which the trailing stockholder servicing fee would be in excess of 2.5% (or a lower limit as set forth in any applicable agreement between Moody Securities and a participating broker-dealer) of the total gross investment amount in Class D Shares determined at the time of the most recent purchase of the Class D Shares held in such account.
As of December 31, 2016 and 2017, we had paid Moody Securities $5,921,786 and $9,423,133, respectively, in selling commissions and trailing stockholder servicing fees related to our initial public offering and $1,310,259 and $2,099,018, respectively, in dealer manager fees related to our initial public offering. As noted above, beginning as ofBeginning January 16, 2018, our Advisor assumed responsibility for the payment of all selling commissions, dealer manager fees and stockholder servicing fees paid in connection with our initialongoing public offering. Additionally, inoffering;provided, however, that our Advisor intends to recoup the funding of such amounts through the Contingent Advisor Payment. In connection with the Mergers,implementation of the Contingent Advisor Payment, we reduced the up-front selling commission paid approximately $7.0 millionwith respect to the Class A Shares from up to 7.0% to up to 6.0% of the gross proceeds of the Class A Shares sold in our primary offering and reduced the dealer manager fee paid with respect to the Class A Shares from up to 3.0% to up to 2.5% of the gross proceeds of the Class A Shares sold in our primary offering.
Shares sold pursuant to our distribution reinvestment plan are not subject to selling commissions, dealer manager fees or stockholder servicing fees. Moody Securities may reallow all or a portion of the foregoing selling commissions, dealer manager fees or stockholder servicing fees to participating broker-dealers.
As of both December 31, 2017 and December 31, 2018, we had paid Moody Securities all$9,423,133 in selling commissions and $2,099,018 in dealer manager fees in connection with our initial public offering, which amounts have been recorded as a reduction to additional paid-in capital in the consolidated balance sheets. As of December 31, 2018, our Advisor had paid Moody Securities $3,731,889 in selling commissions, dealer manager fees and stockholder servicing fees in connection with our initial public offering and our follow-on public offering, which were re-allowed to broker-dealers that provide ongoing financial advisory services to former Moody I stockholders.amounts could potentially be recouped by our Advisor at a later date through the Contingent Advisor Payment.
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Currently Proposed Transactions
Other than as described above, there are no currently proposed material transactions with related persons other than those covered by the terms of the agreements described above.persons.
Approval of Related Party Transactions
Our Board of Directors, including our independent directors, has examined the material terms, factors and circumstances surrounding the transactions and arrangements described above. On the basis of such examination, our Board of Directors, including our independent directors, has determined that such transactions are fair and reasonable to us and on terms and conditions not less favorable to us than those available from unaffiliated third parties.
Conflict Resolution Procedures
As discussed above, we are subject to potential conflicts of interest arising out of our relationship with our Advisor and its affiliates. These conflicts may relate to compensation arrangements, the allocation of investment opportunities, the terms and conditions on which various transactions might be entered into by us and our Advisor or its affiliates and other situations in which our interests may differ from those of our Advisor or its affiliates. We have adopted the procedures set forth below to address these potential conflicts of interest.
Priority Allocation of Investment Opportunities
Many investment opportunities that are suitable for us may also be suitable for our Sponsor or its affiliates. We, our Sponsor, our Advisor and other affiliates share certain of the same executive officers and key employees. In the event that we, or any other investment vehicle formed or managed by these real estate professionals, or any other investment vehicle sponsored by our Sponsor and its affiliates are in the market and seeking investments similar to those we intend to make, these real estate professionals will review the investment objectives, portfolio and investment criteria of each such investment vehicle to determine the suitability of the investment opportunity.
In connection with determining whether an investment opportunity is suitable for one or more investment vehicles sponsored by our Sponsor and its affiliates, these real estate professionals may take into account such factors as they, in their discretion, deem relevant, including, amongst others, the following:
● | the investment objectives and criteria of our Sponsor and other affiliates; |
● | the cash requirements of our Sponsor and its affiliates; |
● | the portfolio of our Sponsor and its affiliates by type of investment and risk of investment; |
● | the policies of our Sponsor and its affiliates relating to leverage; |
● | the anticipated cash flow of the asset to be acquired; |
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● | the income tax effects of the purchase; |
● | the size of the investment; and |
● | the amount of funds available to our Sponsor and its affiliates and the length of time such funds have been available for investment. |
Following the completion of suitability determinations, these real estate professionals shall have the authority, in their sole discretion, to direct the investment opportunity to the entity for which such investment opportunity would be the most suitable. The Advisory Agreement requires that this determination be made in a manner that is fair without favoring our Sponsor or any other affiliate. Notwithstanding the foregoing, in the event that an investment opportunity becomes available that is equally suitable under all of the factors considered by these real estate professionals for both us and one or more other public or private entities sponsored by our Sponsor and its affiliates, or managed by these real estate professionals, then the entity that has had the longest period of time elapsed since it was offered an investment opportunity will first be offered such investment opportunity.
If a subsequent event or development causes any investment, in the opinion of these real estate professionals, to be more appropriate for another affiliated entity, they may offer the investment to such entity. In making an allocation determination, these real estate professionals have no obligation to make any investment opportunity available to us.
Independent Directors
Our independent directors, acting as a group, will resolve potential conflicts of interest whenever they determine that the exercise of independent judgment by theour Board of Directors or our Advisor or its affiliates could reasonably be compromised. However, the independent directors may not take any action which, under Maryland law, must be taken by the entire Board of Directors or which is otherwise not within their authority. The independent directors, as a group, are authorized to retain their own legal and financial advisors. Among the matters we expect the independent directors to review and act upon are:
● | the continuation, renewal or enforcement of our agreements with our Advisor and its affiliates, including the Advisory Agreement with our |
● | transactions with affiliates, including our directors and officers; |
● | awards under our long-term incentive plan; and |
● | pursuit of a potential liquidity event. |
Compensation Involving Our Advisor and its Affiliates
The independent directors will evaluate at least annually whether the compensation that we contract to pay to our Advisor and its affiliates is reasonable in relation to the nature and quality of services performed and whether such compensation is within the limits prescribed by our Charter. The independent directors will supervise the performance of our Advisor and its affiliates and the compensation we pay to them to determine whether the provisions of our Advisory Agreement are being carried out. The independent directors record their findings on the factors they deem relevant in the minutes of the meetings of our Board of Directors.
Term of Advisory Agreement
Each contract for the services of our Advisor may not exceed one year, although there is no limit on the number of times that we may retain a particular advisor. Our Charter provides that a majority of the independent directors may terminate an advisory agreement with our Advisor without cause or penalty on 60 days’ written notice and that we may terminate such agreement immediately for fraud, criminal conduct, misconduct or negligent breach of fiduciary duty by our Advisor, a material breach of an advisory agreement by our Advisor or upon the bankruptcy of our Advisor.
Acquisition, Leases and Sales Involving Affiliates
We will not purchase assets in which our Sponsor, our Advisor, any of our directors or any of their affiliates has an interest without a determination by a majority of our Board of Directors, including a majority of the independent directors, not otherwise interested in the transaction that such transaction is fair and reasonable to us and at a price to us no greater than the cost of the asset to the affiliated party from which we are purchasing the asset, or, if the price to us is in excess of such cost, that substantial justification for such excess exists and such excess is reasonable. In no event may we acquire or lease any such asset at an amount in excess of its current appraised value.
We will not sell or lease assets to our Advisor, our Sponsor, any of our directors or any of their respective affiliates without a determination by a majority of our Board of Directors, including a majority of the independent directors, not otherwise interested in the transaction that such transaction is fair and reasonable to us.
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Our Charter provides that the consideration we pay for real property will ordinarily be based on the fair market value of the property as determined by a majority of our Board of Directors or the members of a duly authorized committee of the Board of Directors. In cases in which a majority of our independent directors so determine, and in all cases in which real property is acquired from our Sponsor, our Advisor, any of our directors or any of their affiliates, the fair market value shall be determined by an independent expert selected by our independent directors not otherwise interested in the transaction.
Mortgage Loans Involving Affiliates
We are prohibited from investing in or making mortgage loans unless an appraisal of the underlying property is obtained. In all cases in which the transaction is with our Advisor, our Sponsor, our directors or any of their respective affiliates, the appraisal must be obtained by an independent expert, and we must keep the appraisal for at least five years and make it available for inspection and duplication by any of our common stockholders. In addition, we must obtain a mortgagee’s or owner’s title insurance policy or commitment as to the priority of the mortgage or the condition of the title. Our Charter prohibits us from investing in indebtedness secured by a mortgage that is subordinate to any lien or other indebtedness of our Sponsor, our Advisor, any of our directors or any of our affiliates.
Loans Involving Affiliates
We will not make any loans to our Advisor, our Sponsor, any of our directors or any of their respective affiliates except mortgage loans for which an appraisal of the underlying property is obtained from an independent appraiser or loans to wholly owned subsidiaries. In addition, we will not borrow from our Advisor, our Sponsor, any of our directors or any of their respective affiliates unless a majority of our Board of Directors, including a majority of the independent directors, not otherwise interested in the transaction approve the transaction as being fair, competitive and commercially reasonable and no less favorable to us than comparable loans between unaffiliated parties. These restrictions on loans will only apply to advances of cash that are commonly viewed as loans, as determined by our Board of Directors. By way of example only, the prohibition on loans would not restrict advances of cash for legal expenses or other costs incurred as a result of any legal action for which indemnification is being sought, nor would the prohibition limit our ability to advance reimbursable expenses incurred by our directors or officers, our Sponsor, our Advisor or any of their respective affiliates.
Other Transactions Involving Affiliates
We will not engage in any other transaction with our Sponsor, our Advisor, any of our directors or any of their respective affiliates unless a majority of our Board of Directors, including a majority of the independent directors, not otherwise interested in such transaction approve such transaction as fair and reasonable to us and on terms and conditions no less favorable to us than those available from unaffiliated third parties.
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Our Annual Report on Form 10-K for the fiscal year ended December 31, 20172018 was mailed to our stockholders on or about April 27, 2018.May 13, 2019.
ANY STOCKHOLDER WHO DID NOT RECEIVE A COPY OF OUR MOST RECENT ANNUAL REPORT ON FORM 10-K OR WOULD LIKE ADDITIONAL COPIES, INCLUDING THE FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES, AS FILED WITH THE SEC, SHALL BE FURNISHED A COPY WITHOUT CHARGE UPON WRITTEN REQUEST TO:
MOODY NATIONAL REIT II, INC.
6363 WOODWAY DRIVE, SUITE 110, HOUSTON, TEXAS 77057
ATTENTION: SECRETARY.
CODE OF BUSINESS CONDUCT AND ETHICS
We have adopted a Code of Business Conduct and Ethics (the “Code of Ethics”), which contains general guidelines for conducting our business and is designed to help directors, employees and independent consultants resolve ethical issues in an increasingly complex business environment. The Code of Ethics applies to all of our officers, including our principal executive officer, principal financial officer and principal accounting officer and persons performing similar functions and all members of our Board of Directors. The Code of Ethics covers topics including, but not limited to, conflicts of interest, record keeping and reporting, payments to foreign and U.S. government personnel and compliance with laws, rules and regulations. We will provide to any person without charge a copy of our Code of Ethics, including any amendments or waivers, upon written request delivered to our principal executive offices located at 6363 Woodway Drive, Suite 110, Houston, Texas 77057, Attention: Secretary.
PROPOSALS FOR 20192020 ANNUAL MEETING OF STOCKHOLDERS
Under SEC regulations, any stockholder desiring to make a proposal to be acted upon at the 20192020 Annual Meeting of Stockholders must cause such proposal to be received at our principal executive offices located at 6363 Woodway Drive, Suite 110, Houston, Texas 77057, Attention: Secretary, no later than 120 days prior to the one year anniversary of the date of this proxy statement in order for the proposal to be considered for inclusion in our proxy statement for the 20192020 Annual Meeting;provided, however, that in the event that the date of the 20192020 Annual Meeting of Stockholders is advanced or delayed by more than 30 days from the first anniversary of the date of the 20182019 Annual Meeting, the deadline for the delivery of such stockholder proposal will be a reasonable time prior to the date we begin to print and send our proxy materials. Stockholders also must follow the procedures prescribed in Rule 14a-8 promulgated under the Exchange Act.
Pursuant to Article II, Section 11(a)(2) of our Bylaws, if a stockholder wishes to present a proposal at the 20192020 Annual Meeting of Stockholders, whether or not the proposal is intended to be included in the proxy statement for that meeting, the stockholder must give advance written notice thereof to our Secretary at our principal executive offices no earlier than the 150th day prior to the one year anniversary of the date of this proxy statement and no later than 5:00 p.m., Central Time, on the 120th day prior to the one year anniversary of date of this proxy statement;provided,however, that in the event that the date of the 20192020 Annual Meeting of Stockholders is advanced or delayed by more than 30 days from the first anniversary of the date of the 20182019 Annual Meeting, of Stockholders, written notice of a stockholder proposal must be delivered not earlier than the 150th day prior to the date of the 20192020 Annual Meeting of Stockholders and not later than 5:00 p.m., Central Time, on the later of (1) the 120th day prior to the date of the 20192020 Annual Meeting of Stockholders or (2) the tenth day following the day on which public announcement of the date of the 20192020 Annual Meeting is first made. Any stockholder proposals not received by us by the applicable date in the previous sentence will be considered untimely. Rule 14a-4(c) promulgated under the Exchange Act permits our management to exercise discretionary voting authority under proxies it solicits with respect to such untimely proposals. We presently anticipate holding the 20192020 Annual Meeting of Stockholders in August 2019.2020.
The only business to come before the 20182019 Annual Meeting of which management is aware is set forth in this proxy statement. If any other business does properly come before the 20182019 Annual Meeting or any postponement or adjournment thereof, the proxy holders will vote in regard thereto according to their discretion insofar as such proxies are not limited to the contrary.
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IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS
We will mail a proxy card together with this proxy statement to all stockholders of record as ofthe close of business on June 20, 2018,29, 2019, the record date, on or aboutJune 27, 2018.July 5, 2019. The SEC permits corporations to send a single set of annual disclosure documents to any household at which two or more stockholders reside, unless contrary instructions have been received, but only if the corporation provides advance notice and follows certain procedures. In such cases, each stockholder continues to receive a separate notice of the meeting and proxy card. This householding process reduces the volume of duplicate information and reduces printing and mailing expenses. If your family has multiple accounts holding shares of our common stock, you should have already received a householding notification from us. If you have any questions or require additional copies of the annual disclosure documents, please contact us by mail at Moody National REIT II, Inc., 6363 Woodway Drive, Suite 200, Houston, Texas 77057, or by phone at 1-888-457-2358.1-800-510-7348. We will arrange for delivery of a separate copy of this proxy statement or our annual report promptly upon your written or oral request. You may decide at any time to revoke your decision to household, and thereby receive multiple copies. If you are a stockholder who receives multiple copies of the annual disclosure documents, you may request householding by contacting us in the same manner and requesting a householding consent form.
It is important that proxies be returned promptly. Therefore, stockholders are urged to date and sign the accompanying proxy card and return it in the accompanying return envelope. Investors may also vote by telephone by calling 866-858-9529800-690-6903 or by internet atwww.proxypush.com/moody2www.proxyvote.com. If you need additional assistance, please call: 844-281-4284.855-835-8313.
MOODY NATIONAL REIT II, INC. | ||
Your Proxy Vote is Important! | ||
Edgewood, NY 11717 | Vote by Internet | |
Please go to the electronic voting website at | ||
Vote by Telephone | ||
Please call us toll free at | ||
Vote by Mail | ||
Complete, sign and date your proxy card and return it promptly in the enclosed envelope. | ||
If Voting by Mail: | ||
Please ensure the address to the right shows through the window of the enclosed postage paid return envelope. |
Edgewood, NY 11717 |
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6363 Woodway Drive, Suite 110
Houston, Texas 77057
(713) 977-7500
PROXY CARD
This Proxy Is Solicited by the Board of Directors
Please Vote by August12, 2018 5, 2019
The undersigned stockholder of Moody National REIT II, Inc. a Maryland corporation, hereby appoints Brett C. Moody and Robert W. Engel, and each of them, as proxies for the undersigned, with full power of substitution in each of them, to attend the 20182019 Annual Meeting of Stockholders of Moody National REIT II, Inc., to be held on Monday, August 13, 20185, 2019 at 10:30 a.m., Central Time, at the offices of Moody National Companies, 6363 Woodway Drive, Suite 200, Houston, Texas 77057, and any and all adjournments and postponements thereof, to cast, on behalf of the undersigned, all votes that the undersigned is entitled to cast, and otherwise to represent the undersigned, at such meeting and all adjournments and postponements thereof, with all power possessed by the undersigned as if personally present and to vote in their discretion on such other matters as may properly come before the meeting. The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and of the accompanying proxy statement, which is hereby incorporated by reference, and revokes any proxy heretofore given with respect to such meeting.
You may obtain directions to attend the 20182019 Annual Meeting of Stockholders of Moody National REIT II, Inc. by calling investor services at 1-888-457-2358.1-800-510-7348.
This proxy is solicited on behalf of the Moody National REIT II, Inc. Board of Directors. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the 20182019 Annual Meeting, including matters incident to its conduct.
SIGN, DATE and RETURN: | ||||
When shares are held by joint tenants or tenants in common, the signature of one shall bind all unless the Secretary of the company is given written notice to the contrary and furnished with a copy of the instrument or order which so provides. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by an authorized officer. If a partnership, please sign in partnership name by an authorized person. | ||||
Signature | Date | |||
Signature | Date | |||
EVERY STOCKHOLDER’S VOTE IS IMPORTANT
This communication presents only an overview of the more complete proxy materials that
are available to you in this packet and on the Internet. We encourage you to access and
review all of the important information contained in the proxy materials before voting.
The Proxy Statement and Annual Report are available at:www.proxypush.com/moody2www.proxyvote.com
PLEASE AUTHORIZE YOUR PROXY TODAY!
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL THE DIRECTOR NOMINEES TO THE BOARD OF DIRECTORS NAMED IN PROPOSAL 1 AND “FOR” PROPOSAL 2.IF THIS PROXY IS EXECUTED BUT NO SPECIFICATIONS ARE MADE, THE VOTES ENTITLED TO BE CAST BY THE STOCKHOLDER WILL BE VOTED “FOR ALL” NOMINEES IN PROPOSAL 1 AND “FOR” PROPOSAL 3.
1. | For the election of Brett C. Moody, Charles L. Horn, Clifford P. McDaniel, William H. Armstrong III and John P. Thompson to serve as Directors until the Annual Meeting of Moody National REIT II, Inc. to be held in the year | FOR ALL | WITHHOLD ALL | FOR ALL EXCEPT | |||||||
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01. Brett C. Moody 02. Charles L. Horn 03. Clifford P. McDaniel 04. William H. Armstrong III 05. John P. Thompson | * To withhold authority to vote for any individual nominee(s), write the number of the nominee(s) in the box below: | ||||||||||
2. | Ratification of the appointment of Frazier & Deeter, LLC to act as independent registered public accounting firm for the fiscal year ending December 31, | FOR | AGAINST | ABSTAIN | |||||||
☐ | ☐ | ☐ | |||||||||
YOUR VOTE IS IMPORTANT! PLEASE SIGN, DATE, AND RETURN YOUR PROXY CARD TODAY. | |||||||||||