Phoenix American Hospitality, President to Pay $709,352 in SEC Hotel Fund Fraud Settlement

The U.S. Securities and Exchange Commission has filed a settled enforcement action against Phoenix American Hospitality, LLC, a Dallas-based manager of hotel-focused investment vehicles, and its president, William Lee “Perch” Nelson, alleging the two made materially false statements to retail investors about the assets and profitability of two hotel investment funds the firm marketed as nontraded real estate investment trusts.

According to the complaint, filed June 4 in the U.S. District Court for the Northern District of Texas, PAH and Nelson raised approximately $86 million from more than 2,000 retail investors between March 2022 and July 2024 through two hotel-focused vehicles – referred to as REIT I and REIT II – offered under the Regulation A exemption.

PAH was founded by Nelson in 2009 and is wholly owned by Nelson and a trust he controls, according to the complaint.

The two funds are American Hospitality Properties REIT, Inc. and American Hospitality Properties REIT II, Inc., both  of which were externally managed by PAH from its Dallas headquarters. The SEC qualified REIT I’s $50 million Regulation A offering in February 2021. REIT II was organized in March 2023, and the SEC qualified its $75 million Regulation A offering in September 2023.

According to the SEC, the alleged misrepresentations fell into two categories: false claims about the number of hotels owned by REIT I, and false claims that both funds were distributing profits to investors.

The complaint alleges PAH and Nelson told investors – through marketing emails, webinars, and a consulting firm they retained – that REIT I had acquired as many as 11 hotels. In an October 2022 email cited in the complaint, Nelson directed the consulting firm to update REIT I’s website to state that the fund had “already purchased … eleven (11) hotels.”

In reality, the complaint alleges, REIT I held only a preferred equity interest in a single hotel from its inception until January 2024. On Jan. 31, 2024, the two funds entered into a joint venture that acquired a seven-hotel portfolio from an affiliated entity, Lakemore-Phoenix Investment Platform B, LLC.

The SEC also alleges PAH and Nelson told investors the funds were paying annualized distributions of up to 12% from operating profits. In a December 2022 webinar cited in the complaint, Nelson said the fund “paid out to our investors an annualized average distribution of a little bit over 12%” and attributing the payout to a requirement to distribute 90% of operating income under REIT rules.

The complaint alleges neither fund was profitable during the relevant period. REIT I earned just more than $200,000 from its single hotel investment through the end of 2022, the complaint says, while distributing more than $1.4 million to investors during the same period. REIT II had no hotel assets until the first quarter of 2024, the complaint alleges, and therefore could not have generated the operating income Nelson described.

The investigation that led to the June 4 complaint had been disclosed nearly two years earlier. In July 2024, REIT II reported that PAH had received an SEC subpoena on June 21, 2024, seeking documents related to an investigation of the manager and related entities.

Without admitting or denying the allegations, PAH and Nelson each consented to the entry of a final judgment, subject to court approval, that would permanently enjoin both from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934. The proposed settlement would require PAH to pay a $591,127 civil penalty and Nelson to pay a $118,225 civil penalty. The final judgment would also impose a five-year officer and director bar on Nelson.

Both REITs had cut ties with PAH and Nelson roughly two weeks before the SEC filed its complaint. Effective May 20, 2026, REIT I and REIT II terminated their management agreements with PAH, and Nelson resigned from his roles as chief executive officer and director of both companies. No termination fee was paid to PAH. Jay Anderson, who served as executive vice president, controller, and a director of both REITs, also resigned and entered into consulting agreements with the companies.

Joseph Reardon, a director of both REITs, was named president of each. Under a separate services agreement between the funds, REIT I will provide REIT II with administrative, management, and operations services, including making Reardon available as REIT II’s president. REIT II also appointed Mary Pfeifer as an independent director and designated her to address conflicts of interest involving related parties. The REITs’ hotels will continue to operate under their existing management agreements with a PAH affiliate.

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