Moody National REIT II Plunges Amid Asset Sales, Impairments

TL;DR

**Moody National REIT II is in liquidation mode, selling off hotels and cutting investor payouts; get out now.**

AI Summary

Moody National REIT II, Inc. reported a significant decline in financial performance for the three and six months ended June 30, 2025, primarily driven by hotel property impairments and reduced revenue. Total hotel revenue decreased by 46.9% to $12.088 million for the three months ended June 30, 2025, from $22.766 million in the prior year, and by 34.6% to $26.807 million for the six months ended June 30, 2025, from $40.928 million in 2024. The company recorded a net loss of $8.004 million for the three months ended June 30, 2025, a substantial improvement from the $25.782 million net loss in the same period of 2024, largely due to a gain on sale of hotel properties of $4.126 million and a lower loss on impairment of hotel properties of $7.000 million compared to $21.833 million in 2024. For the six months, the net loss was $10.433 million, down from $32.710 million in 2024. Investment in hotel properties, net, decreased from $174.712 million at December 31, 2024, to $122.358 million at June 30, 2025, reflecting asset sales and impairments. The company also repaid $98.657 million in notes payable and $22.000 million in related party notes payable during the six months ended June 30, 2025. Strategic outlook includes the indefinite suspension of distributions and share repurchases, and a potential liquidation plan.

Why It Matters

This filing reveals a REIT in distress, actively liquidating assets and facing significant operational challenges, which is critical for investors. The substantial reduction in hotel properties and the indefinite suspension of distributions signal a shift from growth to potential wind-down, impacting investor returns directly. For employees, continued asset sales could lead to job insecurity. The broader market might see this as a cautionary tale for niche REITs heavily exposed to specific economic shocks like the COVID-19 pandemic, especially in the hospitality sector, potentially influencing valuations of similar assets and competitive dynamics as properties change hands.

Risk Assessment

Risk Level: high — The company's risk level is high due to a significant decline in total assets from $321.404 million at December 31, 2024, to $171.203 million at June 30, 2025, a 46.7% reduction. This is coupled with an accumulated deficit of $301.086 million as of June 30, 2025, and the indefinite suspension of distributions and share repurchases, indicating severe financial strain and a potential liquidation scenario.

Analyst Insight

Investors should consider divesting their holdings in Moody National REIT II, Inc. given the ongoing asset liquidation, significant accumulated deficit, and the indefinite suspension of distributions and share repurchases. The company's financial trajectory suggests a focus on debt reduction and potential wind-down rather than growth or shareholder returns.

Financial Highlights

debt To Equity

41.1

revenue

$12,088,000

operating Margin

-66.2%

total Assets

$171,203,000

total Debt

$148,298,000

net Income

$-8,004,000

eps

$-0.57

gross Margin

N/A

cash Position

$7,442,000

revenue Growth

-46.9%

Revenue Breakdown

Key Numbers

• $12.088M — Total hotel revenue (Q2 2025) (Decreased 46.9% from $22.766 million in Q2 2024)
• $8.004M — Net loss (Q2 2025) (Improved from $25.782 million net loss in Q2 2024)
• $7.000M — Loss on impairment of hotel properties (Q2 2025) (Decreased from $21.833 million in Q2 2024)
• $4.126M — Gain on sale of hotel properties (Q2 2025) (No gain in Q2 2024, contributing to reduced net loss)
• $122.358M — Investment in hotel properties, net (June 30, 2025) (Decreased from $174.712 million at December 31, 2024)
• $98.657M — Repayment of notes payable (YTD June 30, 2025) (Significant debt reduction activity)
• $22.000M — Repayment of notes payable to related party (YTD June 30, 2025) (Further debt reduction)
• $171.203M — Total Assets (June 30, 2025) (Decreased 46.7% from $321.404 million at December 31, 2024)
• $301.086M — Accumulated deficit (June 30, 2025) (Increased from $290.890 million at December 31, 2024)
• 13,640,429 — Shares of common stock outstanding (August 8, 2025) (Consistent share count despite financial changes)

Key Players & Entities

• Moody National REIT II, Inc. (company) — Registrant
• Moody National REIT Sponsor, LLC (company) — Initial capital provider
• Moody National Advisor II, LLC (company) — Company's advisor
• Moody National Operating Partnership II, LP (company) — Primary business operating entity
• SEC (regulator) — Securities and Exchange Commission
• Hilton Garden Inn Austin (company) — Hotel property foreclosed on May 2, 2025
• $16.2 million (dollar_amount) — Principal amount of mortgage note for Hilton Garden Inn Austin
• $120.657 million (dollar_amount) — Net cash used in financing activities for six months ended June 30, 2025
• $137.594 million (dollar_amount) — Proceeds from sale of hotel properties for six months ended June 30, 2025
• $301.086 million (dollar_amount) — Accumulated deficit as of June 30, 2025

FAQ

Risk Factors

• Significant Decline in Property Value [high — financial]: The company recorded a $7.000 million loss on impairment of hotel properties in Q2 2025, a substantial decrease from $21.833 million in Q2 2024. This indicates ongoing challenges in maintaining asset value, impacting the overall financial health.
• Reduced Revenue and Profitability [high — financial]: Total hotel revenue for Q2 2025 was $12.088 million, a 46.9% decrease from $22.766 million in Q2 2024. This sharp decline contributed to a net loss of $8.004 million in Q2 2025.
• Substantial Debt Reduction [medium — financial]: The company repaid $98.657 million in notes payable and $22.000 million in related party notes payable in the first six months of 2025. While this reduces leverage, it also signifies a significant outflow of cash and potential distress.
• Hotel Industry Volatility [high — market]: The company's performance is heavily tied to the hotel industry, which is subject to economic downturns, travel restrictions, and changing consumer preferences. The significant revenue drop highlights this sensitivity.
• Asset Sales and Portfolio Reduction [medium — operational]: Investment in hotel properties decreased from $174.712 million at year-end 2024 to $122.358 million by June 30, 2025, due to asset sales and impairments. This strategic shift may indicate a contraction of the business.
• Accumulated Deficit Growth [high — financial]: The accumulated deficit increased from $290.890 million at December 31, 2024, to $301.086 million at June 30, 2025. This trend indicates persistent unprofitability over time.
• Suspension of Distributions and Share Repurchases [high — financial]: The indefinite suspension of distributions and share repurchases signals a critical financial situation, likely to preserve cash and explore strategic alternatives such as liquidation.
• Potential Liquidation Plan [high — legal]: The company is considering a liquidation plan, which introduces significant uncertainty for shareholders regarding the recovery of their investment and the timing of any potential distributions.

Industry Context

The hotel real estate investment trust (REIT) sector is highly sensitive to economic cycles, travel trends, and consumer spending. Recent performance indicates a challenging environment, with many hotels experiencing reduced occupancy and average daily rates. Competition remains intense, with established players and new entrants vying for market share. The industry is also subject to evolving guest expectations regarding amenities, technology, and sustainability.

Regulatory Implications

As a publicly traded company, Moody National REIT II, Inc. is subject to SEC regulations and reporting requirements. Changes in accounting standards, tax laws affecting REITs, and potential new regulations related to real estate or financial markets could impact its operations and financial reporting. The company's current strategic review, including potential liquidation, may also trigger specific regulatory disclosures and approvals.

What Investors Should Do

1. Monitor the progress and outcome of the potential liquidation plan, as this will determine the ultimate return of capital to shareholders.
2. Analyze the company's ability to service its remaining debt obligations given the current revenue trends and cash flow generation.
3. Evaluate the fair value of remaining hotel properties and other assets to assess the potential recovery value in a liquidation scenario.
4. Understand the implications of the suspended distributions and share repurchases on future shareholder returns.
5. Assess the management's strategy for winding down operations and distributing remaining assets to shareholders.

Key Dates

• 2025-06-30: Quarterly Financial Reporting — Reported a net loss of $8.004 million and a 46.9% decrease in hotel revenue, highlighting ongoing financial challenges.
• 2025-06-30: Significant Debt Repayments — Repaid $98.657 million in notes payable and $22.000 million in related party notes payable, indicating a deleveraging strategy or financial distress.
• 2025-06-30: Reduction in Hotel Property Investments — Investment in hotel properties decreased to $122.358 million from $174.712 million at year-end 2024 due to sales and impairments.
• 2025-06-30: Suspension of Distributions and Share Repurchases — Indefinite suspension signals a critical need to conserve cash and explore strategic alternatives, including potential liquidation.
• 2024-06-30: Prior Year Comparison — Q2 2024 net loss was $25.782 million and hotel revenue was $22.766 million, providing a benchmark for the current period's severe decline.
• 2024-12-31: Year-End Financial Position — Total assets were $321.404 million and investment in hotel properties was $174.712 million, showing the scale of asset reduction by mid-2025.

Glossary

Loss on impairment of hotel properties

A non-cash charge taken when the carrying value of an asset (in this case, hotel properties) exceeds its fair value. (A significant $7.000 million charge in Q2 2025, contributing to the net loss and indicating a decline in the value of the company's real estate assets.)

Accumulated deficit

The cumulative net losses of a company that have not been offset by net income. (The company's accumulated deficit increased to $301.086 million as of June 30, 2025, reflecting a history of unprofitability.)

Notes payable

Short-term or long-term borrowings that a company has taken out. (The company significantly reduced its notes payable by $98.657 million in the first half of 2025, impacting its liabilities.)

Real estate assets held for sale

Properties that a company intends to sell in the near future, classified separately on the balance sheet. (These assets decreased from $115.346 million at year-end 2024 to $30.368 million by June 30, 2025, indicating active asset disposition.)

Gain on sale of hotel properties

Profit realized from selling hotel properties. (A gain of $4.126 million in Q2 2025 helped to offset losses, but the underlying operational performance remains weak.)

Noncontrolling interests deficit

The portion of equity in a subsidiary that is not owned by the parent company, presented as a deficit when it represents a net loss. (The deficit in noncontrolling interests increased, reflecting losses attributable to minority shareholders in the operating partnership.)

Distribution reinvestment plan (DRP)

A plan that allows existing shareholders to reinvest their cash dividends into buying additional shares of the company's stock. (Mentioned in the company's history, but currently suspended, indicating a shift away from returning capital to shareholders.)

Weighted average common shares outstanding

The average number of shares of common stock outstanding during a period, used for calculating earnings per share. (The share count remained constant at 13,640,000, meaning per-share metrics directly reflect changes in net income/loss.)

Year-Over-Year Comparison

Compared to the prior year, Moody National REIT II, Inc. has experienced a dramatic decline in revenue, with total hotel revenue dropping by 46.9% in Q2 2025. While the net loss has improved significantly from $25.782 million to $8.004 million in Q2 2025, this is largely due to a substantial reduction in impairment charges ($7.000 million vs. $21.833 million) and a gain on asset sales, rather than an improvement in core operations. Total assets have shrunk by 46.7%, reflecting aggressive asset sales and impairments, and the company has undertaken significant debt reduction. New risks have emerged, including the potential for liquidation and the indefinite suspension of distributions.

Filing Documents

• mnrtii-10q_063025.htm (10-Q) — 1054KB
• ex31-1.htm (EX-31.1) — 8KB
• ex31-2.htm (EX-31.2) — 8KB
• ex32-1.htm (EX-32.1) — 4KB
• ex32-2.htm (EX-32.2) — 4KB
• 0001999371-25-011263.txt ( ) — 6279KB
• mnrtii-20250630.xsd (EX-101.SCH) — 58KB
• mnrtii-20250630_cal.xml (EX-101.CAL) — 79KB
• mnrtii-20250630_def.xml (EX-101.DEF) — 224KB
• mnrtii-20250630_lab.xml (EX-101.LAB) — 389KB
• mnrtii-20250630_pre.xml (EX-101.PRE) — 314KB
• mnrtii-10q_063025_htm.xml (XML) — 959KB

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION 3 Item 1.

Financial Statements (Unaudited)

Financial Statements (Unaudited) 3 Consolidated Balance Sheets (unaudited) as of June 30, 2025 and December 31, 2024 3 Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2025 and 2024 4 Consolidated Statements of Changes in Equity (unaudited) for the three and six months ended June 30, 2025 and 2024 5 Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2025 and 2024 6

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 7 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 23 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 41 Item 4.

Controls and Procedures

Controls and Procedures 42

— OTHER INFORMATION

PART II — OTHER INFORMATION 43 Item 1.

Legal Proceedings

Legal Proceedings 43 Item 1A.

Risk Factors

Risk Factors 43 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities 47 Item 3. Defaults Upon Senior Securities 47 Item 4. Mine Safety Disclosures 47 Item 5. Other Information 47 Item 6. Exhibits 47

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION

FINANCIAL STATEMENTS (Unaudited)

ITEM 1. FINANCIAL STATEMENTS (Unaudited) MOODY NATIONAL REIT II, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) June 30, 2025 December 31, 2024 (unaudited) (audited) ASSETS Investment in hotel properties, net $ 122,358 $ 174,712 Real estate assets held for sale 30,368 115,346 Cash and cash equivalents 7,442 9,305 Restricted cash 9,306 19,886 Accounts receivable, net of allowance of $ 23 and $ 34 as of June 30, 2025 and December 31, 2024 772 744 Prepaid expenses and other assets 709 932 Deferred franchise costs, net of accumulated amortization of $ 391 and $ 567 at June 30, 2025 and December 31, 2024, respectively 248 479 Total Assets $ 171,203 $ 321,404 LIABILITIES AND EQUITY Liabilities: Notes payable, net of unamortized debt issuance costs of $ 510 and $ 702 as of June 30, 2025 and December 31, 2024 $ 120,298 $ 218,764 Notes payable to related party 28,000 50,000 Accounts payable and accrued expenses 4,274 14,855 Due to related parties, net 14,492 23,213 Dividends payable 70 70 Total Liabilities 167,134 306,902 Special Limited Partnership Interests 1 1 Equity: Stockholders' equity: Preferred stock, $ 0.01 par value per share; 100,000 shares authorized; no shares issued and outstanding — — Common stock, $ 0.01 par value per share; 1,000,000 shares authorized, 13,640 shares issued and outstanding at June 30, 2025 and December 31, 2024 136 136 Additional paid-in capital 305,641 305,641 Accumulated deficit ( 301,086 ) ( 290,890 ) Total stockholders' equity 4,691 14,887 Noncontrolling interests deficit in Operating Partnership ( 623 ) ( 386 ) Total Equity 4,068 14,501 Total Liabilities and Equity $ 171,203 $ 321,404 See accompanying notes to unaudited consolidated

financial statements

financial statements. 3 MOODY NATIONAL REIT II, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Revenue Room revenue $ 11,479 $ 21,362 $ 25,163 $ 38,245 Other hotel revenue 609 1,404 1,644 2,683 Total hotel revenue 12,088 22,766 26,807 40,928 Expenses Hotel operating expenses 8,414 14,185 18,635 27,114 Property taxes, insurance and other 1,207 1,774 2,748 3,537 Depreciation and amortization 2,153 4,032 4,009 8,058 Corporate general and administrative 1,316 1,754 3,249 3,616 Loss on impairment of hotel properties 7,000 21,833 7,000 21,833 Total expenses 20,090 43,578 35,641 64,158 Operating loss ( 8,002 ) ( 20,812 ) ( 8,834 ) ( 23,230 ) Other expenses (income) Interest expense and amortization of debt issuance costs 3,885 4,886 8,645 9,384 Gain on sale of hotel properties ( 4,126 ) — ( 7,285 ) — Total other expenses ( 241 ) 4,886 1,360 9,384 Loss before income taxes ( 7,761 ) ( 25,698 ) ( 10,194 ) ( 32,614 ) Income tax expense 243 84 239 96 Net loss ( 8,004 ) ( 25,782 ) ( 10,433 ) ( 32,710 ) Loss attributable to noncontrolling interests in Operating Partnership 181 584 237 741 Net loss attributable to common stockholders $ ( 7,823 ) $ ( 25,198 ) $ ( 10,196 ) $ ( 31,969 ) Per-share information – basic and diluted: Net loss attributable to common stockholders $ ( 0.57 ) $ ( 1.85 ) $ ( 0.75 ) $ ( 2.34 ) Weighted average common shares outstanding 13,640 13,640 13,640 13,640 See accompanying notes to unaudited consolidated

financial statements

financial statements. 4 MOODY NATIONAL REIT II, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Three and six months ended June 30, 2025 and 2024 (in thousands) (unaudited) Preferred Stock Common Stock Noncontrolling Interests in Operating Partnership Number of Shares Par Value Number of Shares Par Value Additional Paid-In Capital Accumulated Deficit Number of Units Value Total Equity Balance at March 31, 2024 — $ — 13,640 $ 136 $ 305,641 $ ( 200,018 ) 316 $ 1,719 $ 107,478 Net loss — — — — — ( 25,198 ) — ( 584 ) ( 25,782 ) Balance at June 30, 2024 — $ — 13,640 $ 136 $ 305,641 $ ( 225,216 ) 316 $ 1,135 $ 81,696 Balance at March 31, 2025 — $ — 13,640 $ 136 $ 305,641 $ ( 293,263 ) 316 $ ( 442 ) $ 12,072 Net loss — — — — — ( 7,823 ) — ( 181 ) ( 8,004 ) Balance at June 30, 2025 — $ — 13,640 $ 136 $ 305,641 $ ( 301,086 ) 316 $ ( 623 ) $ 4,068 Balance at December 31, 2023 — $ — 13,640 $ 136 $ 305,641 $ ( 193,247 ) 316 $ 1,876 $ 114,406 Net loss — — — — — ( 31,969 ) — ( 741 ) ( 32,710 ) Balance at June 30, 2024 — $ — 13,640 $ 136 $ 305,641 $ ( 225,216 ) 316 $ 1,135 $ 81,696 Balance at December 31, 2024 — $ — 13,640 $ 136 $ 305,641 $ ( 290,890 ) 316 $ ( 386 ) $ 14,501 Net loss — — — — — ( 10,196 ) — ( 237 ) ( 10,433 ) Balance at June 30, 2025 — $ — 13,640 $ 136 $ 305,641 $ ( 301,086 ) 316 $ ( 623 ) $ 4,068 See accompanying notes to unaudited consolidated

financial statements

financial statements. 5 MOODY NATIONAL REIT II, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six months ended June 30, 2025 2024 Cash flows from operating activities Net loss $ ( 10,433 ) $ ( 32,710 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 4,009 8,058 Amortization of debt issuance costs 192 286 Loss on impairment of hotel properties 7,000 21,833 Gain on sale of hotel properties ( 7,285 ) — Changes in operating assets and liabilities Accounts receivable ( 28 ) ( 427 ) Prepaid expenses and other assets 223 ( 1 ) Accounts payable and accrued expenses ( 10,581 ) 535 Due to related parties ( 8,721 ) ( 1,009 ) Net cash used in operating activities ( 25,624 ) ( 3,435 ) Cash flows from investing activities Proceeds from sale of hotel properties 137,594 — Improvements and additions to hotel properties ( 650 ) ( 935 ) Payment of hotel property selling costs ( 3,106 ) — Net cash provided by (used in) investing activities 133,838 ( 935 ) Cash flows from financing activities Repayment of notes payable ( 98,657 ) ( 2,583 ) Proceeds of notes payable to related party — 10,000 Repayment of notes payable to related party ( 22,000 ) — Payment of debt issuance costs — ( 115 ) Net cash (used in) provided by financing activities ( 120,657 ) 7,302 Net change in cash and cash equivalents and restricted cash ( 12,443 ) 2,932 Cash and cash equivalents and restricted cash at beginning of period 29,191 25,064 Cash and cash equivalents and restricted cash at end of period $ 16,748 $ 27,996 Supplemental Disclosure of Cash Flow Activity Cash paid for interest $ 12,004 $ 5,608 Cash paid for income taxes $ 99 $ — Supplemental Disclosure of Non-Cash Investing Activity Non-cash proceeds from foreclosure of hotel property $ 15,844 $ — See accompanying notes to unaudited consolidated fi

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (unaudited) 1. Organization As discussed in Note 5, "Equity," Moody National REIT II, Inc. (the "Company") was initially capitalized by Moody National REIT Sponsor, LLC (the "Sponsor"). The Company's fiscal year end is December 31. As of June 30, 2025, the Company owned interests in nine hotel properties located in five states comprising a total of 1,210 rooms. For more information on the Company's real estate investments, see Note 3, "Investment in Hotel Properties, Real Estate Assets Held for Sale, and Dispositions." On January 20, 2015, the Securities and Exchange Commission (the "SEC") declared the Company's registration statement on Form S-11 effective, and the Company commenced its initial public offering of up to $ 1.1 billion in shares of common stock consisting of up to $ 1.0 billion in shares of the Company's common stock offered to the public, and up to $ 100.0 million in shares offered to the Company's stockholders pursuant to its distribution reinvestment plan (the "DRP"). On June 26, 2017, the Company reallocated the Company's shares of common stock as Class A common stock, $ 0.01 par value per share ("Class A Shares"), Class D common stock, $ 0.01 par value per share ("Class D Shares"), Class I common stock, $ 0.01 par value per share ("Class I Shares"), and Class T common stock, $ 0.01 par value per share ("Class T Shares" and, together with the Class A Shares, the Class D Shares and the Class I Shares, the "Shares"). On January 16, 2018, the Advisor (as defined below) assumed responsibility for the payment of all selling commissions, dealer manager fees and stockholder servicing fees paid in connection with the Company's public offering; provided, however , that the Advisor intended to recoup the selling commissions, dealer manager fees and stockholder servicing fees that it funds through an increased acquisition fee, or "Contingent Advisor Payment," as described in Note 6, "Related

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