9955668P3YP4Y00017450322024FYfalsetrue00NONE573195731916240401230.33330.3333P15Y10.095010918115176510.57P3Y500002http://fasb.org/us-gaap/2024#PrimeRateMemberhttp://fasb.org/us-gaap/2024#PrimeRateMemberhttp://fasb.org/us-gaap/2024#PrimeRateMemberhttp://fasb.org/us-gaap/2024#PrimeRateMemberhttp://fasb.org/us-gaap/2024#SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMemberhttp://fasb.org/us-gaap/2024#SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember0001745032us-gaap:AdditionalPaidInCapitalMember2024-01-012024-12-310001745032us-gaap:AdditionalPaidInCapitalMember2023-01-012023-12-310001745032us-gaap:CommonStockMember2024-01-012024-12-310001745032us-gaap:CommonStockMember2023-01-012023-12-310001745032lfr:SeriesTLPUnitsMemberus-gaap:NoncontrollingInterestMember2024-12-310001745032lfr:SeriesPrefaUnitsMemberus-gaap:NoncontrollingInterestMember2024-12-310001745032lfr:SeriesGoTwoLpUnitsMemberus-gaap:NoncontrollingInterestMember2024-12-310001745032lfr:SeriesGoLpUnitsMemberus-gaap:NoncontrollingInterestMember2024-12-310001745032lfr:SeriesBLpUnitsMemberus-gaap:NoncontrollingInterestMember2024-12-310001745032lfr:CommonLimitedPartnershipUnitsMemberus-gaap:NoncontrollingInterestMember2024-12-310001745032us-gaap:RetainedEarningsMember2024-12-310001745032us-gaap:ParentMember2024-12-310001745032us-gaap:AdditionalPaidInCapitalMember2024-12-310001745032lfr:SeriesTLPUnitsMemberus-gaap:NoncontrollingInterestMember2023-12-310001745032lfr:SeriesGoTwoLpUnitsMemberus-gaap:NoncontrollingInterestMember2023-12-310001745032lfr:SeriesGoLpUnitsMemberus-gaap:NoncontrollingInterestMember2023-12-310001745032lfr:SeriesBLpUnitsMemberus-gaap:NoncontrollingInterestMember2023-12-310001745032lfr:CommonLimitedPartnershipUnitsMemberus-gaap:NoncontrollingInterestMember2023-12-310001745032us-gaap:RetainedEarningsMember2023-12-310001745032us-gaap:ParentMember2023-12-310001745032us-gaap:AdditionalPaidInCapitalMember2023-12-310001745032lfr:SeriesTLPUnitsMemberus-gaap:NoncontrollingInterestMember2022-12-310001745032lfr:SeriesGoLpUnitsMemberus-gaap:NoncontrollingInterestMember2022-12-310001745032lfr:SeriesBLpUnitsMemberus-gaap:NoncontrollingInterestMember2022-12-310001745032lfr:CommonLimitedPartnershipUnitsMemberus-gaap:NoncontrollingInterestMember2022-12-310001745032us-gaap:RetainedEarningsMember2022-12-310001745032us-gaap:ParentMember2022-12-310001745032us-gaap:AdditionalPaidInCapitalMember2022-12-310001745032us-gaap:CommonStockMember2024-12-310001745032us-gaap:CommonStockMember2023-12-310001745032us-gaap:CommonStockMember2022-12-310001745032lfr:SeriesTLPUnitsMember2023-01-060001745032lfr:CommonLimitedPartnershipUnitsMember2023-01-060001745032us-gaap:OperatingSegmentsMemberus-gaap:OccupancyMemberlfr:SingleReportableSegmentMember2024-01-012024-12-310001745032us-gaap:OperatingSegmentsMemberus-gaap:HotelOtherMemberlfr:SingleReportableSegmentMember2024-01-012024-12-310001745032us-gaap:OccupancyMember2024-01-012024-12-310001745032us-gaap:HotelOtherMember2024-01-012024-12-310001745032us-gaap:OperatingSegmentsMemberus-gaap:OccupancyMemberlfr:SingleReportableSegmentMember2023-01-012023-12-310001745032us-gaap:OperatingSegmentsMemberus-gaap:HotelOtherMemberlfr:SingleReportableSegmentMember2023-01-012023-12-310001745032us-gaap:OccupancyMember2023-01-012023-12-310001745032us-gaap:HotelOtherMember2023-01-012023-12-310001745032lfr:HolidayInnElPasoLoanMember2023-05-152023-05-150001745032srt:MinimumMemberlfr:SheratonHotelNorthbrookPropertyMember2024-12-310001745032srt:MinimumMemberlfr:ResidenceInnForCollinsPropertyMember2024-12-310001745032srt:MinimumMemberlfr:HomewoodSuitesSouthavenPropertyMember2024-12-310001745032srt:MinimumMemberlfr:Home2SuitesPrattvillePropertyMember2024-12-310001745032srt:MinimumMemberlfr:Home2SuitesLubbockHome2PropertyMember2024-12-310001745032srt:MinimumMemberlfr:HolidayInnExpressWichitaPropertyMember2024-12-310001745032srt:MinimumMemberlfr:HolidayInnExpressCedarRapidsPropertyMember2024-12-310001745032srt:MinimumMemberlfr:HolidayInnEiPasoPropertyMember2024-12-310001745032srt:MinimumMemberlfr:HiltonGardenInnPinevillePropertyMember2024-12-310001745032srt:MinimumMemberlfr:HiltonGardenInnHoustonPropertyMember2024-12-310001745032srt:MinimumMemberlfr:HiltonGardenInnElPasoPropertyMember2024-12-310001745032srt:MinimumMemberlfr:HiltonGardenInnCharlottePropertyMember2024-12-310001745032srt:MinimumMemberlfr:HamptonInnSuitesFargoPropertyMember2024-12-310001745032srt:MinimumMemberlfr:HamptonInnSuitesEaganPropertyMember2024-12-310001745032srt:MinimumMemberlfr:FairfieldInnSuitesLubbockTxMember2024-12-310001745032srt:MinimumMemberlfr:FairfieldInnAndSuitesLakewoodPropertyMember2024-12-310001745032srt:MinimumMemberlfr:CourtyardByMarriottElPasoPropertyMember2024-12-310001745032srt:MinimumMemberlfr:CourtyardByMarriottAuroraPropertyMember2024-12-310001745032srt:MaximumMemberlfr:SheratonHotelNorthbrookPropertyMember2024-12-310001745032srt:MaximumMemberlfr:ResidenceInnForCollinsPropertyMember2024-12-310001745032srt:MaximumMemberlfr:HomewoodSuitesSouthavenPropertyMember2024-12-310001745032srt:MaximumMemberlfr:Home2SuitesPrattvillePropertyMember2024-12-310001745032srt:MaximumMemberlfr:Home2SuitesLubbockHome2PropertyMember2024-12-310001745032srt:MaximumMemberlfr:HolidayInnExpressWichitaPropertyMember2024-12-310001745032srt:MaximumMemberlfr:HolidayInnExpressCedarRapidsPropertyMember2024-12-310001745032srt:MaximumMemberlfr:HolidayInnEiPasoPropertyMember2024-12-310001745032srt:MaximumMemberlfr:HiltonGardenInnPinevillePropertyMember2024-12-310001745032srt:MaximumMemberlfr:HiltonGardenInnHoustonPropertyMember2024-12-310001745032srt:MaximumMemberlfr:HiltonGardenInnElPasoPropertyMember2024-12-310001745032srt:MaximumMemberlfr:HiltonGardenInnCharlottePropertyMember2024-12-310001745032srt:MaximumMemberlfr:HamptonInnSuitesFargoPropertyMember2024-12-310001745032srt:MaximumMemberlfr:HamptonInnSuitesEaganPropertyMember2024-12-310001745032srt:MaximumMemberlfr:FairfieldInnSuitesLubbockTxMember2024-12-310001745032srt:MaximumMemberlfr:FairfieldInnAndSuitesLakewoodPropertyMember2024-12-310001745032srt:MaximumMemberlfr:CourtyardByMarriottElPasoPropertyMember2024-12-310001745032srt:MaximumMemberlfr:CourtyardByMarriottAuroraPropertyMember2024-12-310001745032lfr:SheratonHotelNorthbrookPropertyMember2024-12-310001745032srt:MinimumMemberus-gaap:FurnitureAndFixturesMember2024-12-310001745032srt:MaximumMemberus-gaap:FurnitureAndFixturesMember2024-12-310001745032us-gaap:LandImprovementsMember2024-12-310001745032us-gaap:BuildingImprovementsMember2024-12-310001745032srt:MinimumMemberlfr:NextThresholdNetProceedsUsedToPayAccruedInterestOnRefinancedLoanUponExceedingFirstThresholdMemberus-gaap:CumulativePreferredStockSubjectToMandatoryRedemptionMemberus-gaap:PrivatePlacementMember2024-01-012024-12-310001745032srt:MinimumMemberlfr:NextThresholdNetProceedsRetainedByOperatingPartnershipUponCrossingOfCumulativeThresholdMemberus-gaap:CumulativePreferredStockSubjectToMandatoryRedemptionMemberus-gaap:PrivatePlacementMember2024-01-012024-12-310001745032srt:MaximumMemberlfr:NextThresholdNetProceedsUsedToPayAccruedInterestOnRefinancedLoanUponExceedingFirstThresholdMemberus-gaap:CumulativePreferredStockSubjectToMandatoryRedemptionMemberus-gaap:PrivatePlacementMember2024-01-012024-12-310001745032srt:MaximumMemberlfr:NextThresholdNetProceedsRetainedByOperatingPartnershipUponCrossingOfCumulativeThresholdMemberus-gaap:CumulativePreferredStockSubjectToMandatoryRedemptionMemberus-gaap:PrivatePlacementMember2024-01-012024-12-310001745032lfr:FirstThresholdNetProceedsRetainedByOperatingPartnershipFromSaleOfUnitsMemberus-gaap:CumulativePreferredStockSubjectToMandatoryRedemptionMemberus-gaap:PrivatePlacementMember2024-01-012024-12-310001745032lfr:LegendaryCapitalReitIIILLCMemberlfr:SeriesGoLpUnitsMemberlfr:AdvisoryAgreementMemberlfr:CoreyMapleMember2024-01-012024-12-310001745032lfr:LegendaryCapitalReitIIILLCMemberlfr:AdvisoryAgreementMemberlfr:NormanLeslieMember2024-01-012024-12-310001745032lfr:LegendaryCapitalReitIIILLCMemberlfr:AdvisoryAgreementMemberlfr:CoreyMapleMember2024-01-012024-12-310001745032lfr:LegendaryCapitalReitIIILLCMemberlfr:SeriesGoLpUnitsMemberlfr:AdvisoryAgreementMemberlfr:CoreyMapleMember2023-01-012023-12-310001745032lfr:LegendaryCapitalReitIIILLCMemberlfr:AdvisoryAgreementMemberlfr:NormanLeslieMember2023-01-012023-12-310001745032lfr:LegendaryCapitalReitIIILLCMemberlfr:AdvisoryAgreementMemberlfr:CoreyMapleMember2023-01-012023-12-310001745032lfr:LodgingFundReitIIIOPLPMemberlfr:SeriesTLPUnitsMember2024-12-310001745032lfr:LodgingFundReitIIIOPLPMemberlfr:SeriesPreferredUnitsMember2024-12-310001745032lfr:LodgingFundReitIIIOPLPMemberlfr:SeriesPPreferredUnitsMember2024-12-310001745032lfr:LodgingFundReitIIIOPLPMemberlfr:SeriesGoTwoLpUnitsMember2024-12-310001745032lfr:LodgingFundReitIIIOPLPMemberlfr:SeriesGoLpUnitsMember2024-12-310001745032lfr:LodgingFundReitIIIOPLPMemberlfr:SeriesBLimitedPartnershipUnitsMember2024-12-310001745032lfr:LodgingFundReitIIIOPLPMemberlfr:IntervalUnitsMember2024-12-310001745032lfr:LodgingFundReitIIIOPLPMemberlfr:CommonLimitedPartnershipUnitsMember2024-12-310001745032us-gaap:RevolvingCreditFacilityMember2024-12-310001745032us-gaap:RevolvingCreditFacilityMember2023-12-310001745032us-gaap:RelatedPartyMember2024-12-310001745032us-gaap:NonrelatedPartyMember2024-12-310001745032us-gaap:RelatedPartyMember2023-12-310001745032us-gaap:NonrelatedPartyMember2023-12-310001745032lfr:AdvisorAndAffiliatesMember2023-12-310001745032us-gaap:StateAndLocalJurisdictionMember2024-12-310001745032us-gaap:DomesticCountryMember2024-12-310001745032us-gaap:StateAndLocalJurisdictionMember2023-12-310001745032us-gaap:DomesticCountryMember2023-12-310001745032lfr:SeriesPreferredUnitsMemberus-gaap:PrivatePlacementMember2024-01-012024-12-310001745032lfr:SeriesGoTwoLpUnitsMember2024-01-012024-12-310001745032lfr:CommonLimitedPartnershipUnitsMember2024-01-012024-12-310001745032lfr:SeriesGoTwoLpUnitsMember2023-01-012023-12-310001745032lfr:SeriesGoLpUnitsMember2023-01-012023-12-310001745032lfr:SeriesBLpUnitsMember2023-01-012023-12-310001745032lfr:CommonLimitedPartnershipUnitsMember2023-01-012023-12-3100017450322023-01-050001745032lfr:SeriesPrefaUnitsMember2024-12-310001745032lfr:SeriesGoTwoLpUnitsMember2024-12-310001745032lfr:SeriesGoLpUnitsMember2024-12-310001745032lfr:SeriesBLpUnitsMember2024-12-310001745032lfr:CommonLimitedPartnershipUnitsMember2024-12-310001745032lfr:SeriesTLPUnitsMember2023-12-310001745032lfr:SeriesGoTwoLpUnitsMember2023-12-310001745032lfr:SeriesGoLpUnitsMember2023-12-310001745032lfr:SeriesBLpUnitsMember2023-12-310001745032lfr:CommonLimitedPartnershipUnitsMember2023-12-310001745032us-gaap:RevolvingCreditFacilityMemberlfr:A1LineOfCreditMember2022-08-100001745032us-gaap:RevolvingCreditFacilityMemberlfr:WesternLineOfCreditMember2020-02-100001745032us-gaap:RevolvingCreditFacilityMemberlfr:WesternLineOfCreditMember2023-04-150001745032lfr:LegendaryOneBondsMemberlfr:A1LineOfCreditMemberus-gaap:RelatedPartyMember2024-12-310001745032lfr:LegendaryOneBondsMemberlfr:A1LineOfCreditMemberus-gaap:RelatedPartyMember2023-12-310001745032lfr:LodgingFundReitIIIOPLPMemberlfr:SeriesBLpUnitsMember2024-12-310001745032lfr:SeriesPreferredUnitsMember2024-12-310001745032lfr:HiltonGardenInnHoustonPropertyAndHolidayInnExpressWichitaPropertyMemberus-gaap:MortgagesMemberus-gaap:SubsequentEventMember2025-03-270001745032lfr:HamptonInnSuitesPinevillePropertyMemberlfr:HamptonStowContributionAgreementMember2024-01-012024-12-310001745032lfr:SheratonHotelNorthbrookPropertyMember2024-12-310001745032lfr:HiltonGardenInnElPasoPropertyMember2024-12-310001745032lfr:SheratonHotelNorthbrookPropertyMemberus-gaap:MortgagesMemberlfr:ContributionAgreementLoanRestructuringMember2024-12-242024-12-240001745032lfr:ResidenceInnByMarriottFortCollinsRIHotelPropertyMemberus-gaap:MortgagesMemberlfr:ContributionAgreementLoanRestructuringMember2024-12-242024-12-240001745032lfr:CourtyardByMarriottAuroraPropertyMemberus-gaap:MortgagesMemberlfr:ContributionAgreementLoanRestructuringMember2024-12-242024-12-240001745032lfr:HamptonStowContributionAgreementMember2024-04-1500017450322024-04-150001745032lfr:SeriesPreferredUnitsMemberus-gaap:PrivatePlacementMember2024-12-310001745032lfr:O2024Q4DividendsMember2024-10-012024-12-310001745032lfr:SeriesTLPUnitsMemberus-gaap:NoncontrollingInterestMember2024-01-012024-12-310001745032lfr:SeriesBLpUnitsMemberus-gaap:NoncontrollingInterestMember2024-01-012024-12-310001745032lfr:CommonLimitedPartnershipUnitsMemberus-gaap:NoncontrollingInterestMember2024-01-012024-12-310001745032lfr:SeriesTLPUnitsMemberus-gaap:NoncontrollingInterestMember2023-01-012023-12-310001745032lfr:SeriesBLpUnitsMemberus-gaap:NoncontrollingInterestMember2023-01-012023-12-310001745032lfr:CommonLimitedPartnershipUnitsMemberus-gaap:NoncontrollingInterestMember2023-01-012023-12-3100017450322024-09-012024-12-3100017450322024-01-012024-02-290001745032lfr:HolidayInnExpressCedarRapidsPropertyMemberus-gaap:RevolvingCreditFacilityMemberlfr:WesternLineOfCreditMemberus-gaap:SubsequentEventMember2025-02-260001745032lfr:HamptonInnSuitesEaganPropertyMemberus-gaap:RevolvingCreditFacilityMemberlfr:WesternLineOfCreditMemberus-gaap:SubsequentEventMember2025-02-260001745032lfr:CedarRapidsPropertyAndEaganPropertyMemberus-gaap:SubsequentEventMember2025-02-260001745032lfr:HolidayInnElPasoLoanMemberus-gaap:SubsequentEventMember2025-01-160001745032lfr:HolidayInnEiPasoPropertyMemberus-gaap:SubsequentEventMember2025-01-160001745032us-gaap:RevolvingCreditFacilityMemberlfr:WesternLineOfCreditMember2024-12-310001745032us-gaap:RevolvingCreditFacilityMemberlfr:A1LineOfCreditMember2024-12-310001745032lfr:A1LineOfCreditMemberlfr:LegendaryOneBondsMember2024-12-310001745032us-gaap:RevolvingCreditFacilityMemberlfr:A1LineOfCreditMember2024-12-200001745032srt:MinimumMemberlfr:NewPrattvilleLoanMember2024-11-040001745032us-gaap:RevolvingCreditFacilityMemberlfr:A1LineOfCreditMember2023-12-310001745032srt:MinimumMemberlfr:NewLakewoodLoanMember2024-03-270001745032lfr:ResidenceInnByFortCollinsPropertyMemberlfr:CoreyMapleMember2024-12-310001745032lfr:NhsLlcMemberus-gaap:RelatedPartyMember2024-12-310001745032lfr:HomeWoodSuitesFargoNorthDakotaMemberlfr:CoreyMapleMember2024-12-310001745032lfr:Home2SuitesPrattvillePropertyMemberlfr:NormanLeslieMember2024-12-310001745032lfr:HolidayInnExpressWichitaPropertyMemberlfr:CoreyMapleMember2024-12-310001745032lfr:HolidayInnEiPasoPropertyMemberlfr:CoreyMapleMember2024-12-310001745032lfr:HiltonGardenInnHoustonPropertyMemberlfr:CoreyMapleMember2024-12-310001745032lfr:FairfieldInnAndSuitesLakewoodPropertyMemberlfr:NormanLeslieMember2024-12-310001745032lfr:NhsLoanMember2024-12-310001745032lfr:NewSouthavenLoanMember2024-12-060001745032lfr:NewPrattvilleLoanMember2024-11-040001745032lfr:HamptonInnSuitesPinevillePropertyMemberlfr:NormanLeslieMember2024-07-220001745032lfr:LakewoodLoanExtendedMember2024-03-270001745032lfr:NhsLoanMember2023-12-310001745032lfr:NewFt.CollinsLoanAgreementMember2023-04-180001745032lfr:NhsLoanMember2023-03-060001745032lfr:ResidenceInnFortCollinsCapexMemberus-gaap:MortgagesMember2024-12-310001745032lfr:ResidenceInnByFortCollinsPropertyMemberus-gaap:MortgagesMember2024-12-310001745032lfr:ResidenceInnByFortCollinsA1Memberus-gaap:MortgagesMember2024-12-310001745032lfr:HomewoodSuitesSouthavenPropertyMemberus-gaap:MortgagesMember2024-12-310001745032lfr:Home2SuitesPrattvillePropertyMemberus-gaap:MortgagesMember2024-12-310001745032lfr:Home2SuitesLubbockHome2PropertyMemberus-gaap:MortgagesMember2024-12-310001745032lfr:HolidayInnExpressWichitaPropertyMemberus-gaap:MortgagesMember2024-12-310001745032lfr:HolidayInnExpressCedarRapidsPropertyMemberus-gaap:MortgagesMember2024-12-310001745032lfr:HolidayInnEiPasoPropertyMemberus-gaap:MortgagesMember2024-12-310001745032lfr:HiltonGardenInnHoustonPropertyMemberus-gaap:MortgagesMember2024-12-310001745032lfr:HiltonGardenInnElPasoPropertyMemberus-gaap:MortgagesMember2024-12-310001745032lfr:HamptonInnSuitesEaganPropertyMemberus-gaap:MortgagesMember2024-12-310001745032lfr:HamptonInnFargoPropertyMemberus-gaap:MortgagesMember2024-12-310001745032lfr:FairfieldInnSuitesLubbockTxMemberus-gaap:MortgagesMember2024-12-310001745032lfr:FairfieldInnSuitesLakewood1PropertyMemberus-gaap:MortgagesMember2024-12-310001745032lfr:FairfieldInnAndSuitesLakewoodPropertyMemberus-gaap:MortgagesMember2024-12-310001745032lfr:CourtyardByMarriottElPasoPropertyMemberus-gaap:MortgagesMember2024-12-310001745032lfr:CourtyardByMarriottAuroraPropertyMemberus-gaap:MortgagesMember2024-12-310001745032us-gaap:MortgagesMember2024-12-310001745032lfr:SheratonHotelNorthbrookPropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:ResidenceInnFortCollinsCapexMemberus-gaap:MortgagesMember2023-12-310001745032lfr:ResidenceInnByFortCollinsPropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:ResidenceInnByFortCollinsA1Memberus-gaap:MortgagesMember2023-12-310001745032lfr:HomewoodSuitesSouthavenPropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:Home2SuitesPrattvillePropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:Home2SuitesLubbockHome2PropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:HolidayInnExpressWichitaPropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:HolidayInnExpressCedarRapidsPropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:HolidayInnEiPasoPropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:HiltonGardenInnPinevilleHgiPropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:HiltonGardenInnHoustonPropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:HiltonGardenInnElPasoPropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:HiltonGardenInnCharlottePropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:HamptonInnSuitesPinevillePropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:HamptonInnSuitesEaganPropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:HamptonInnFargoPropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:FairfieldInnSuitesLubbockTxMemberus-gaap:MortgagesMember2023-12-310001745032lfr:FairfieldInnAndSuitesLakewoodPropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:CourtyardByMarriottElPasoPropertyMemberus-gaap:MortgagesMember2023-12-310001745032lfr:CourtyardByMarriottAuroraPropertyMemberus-gaap:MortgagesMember2023-12-310001745032us-gaap:MortgagesMember2023-12-310001745032lfr:HiltonGardenInnHoustonPropertyAndHolidayInnExpressWichitaPropertyMemberus-gaap:MortgagesMemberus-gaap:SubsequentEventMember2025-03-272025-03-270001745032lfr:NewSouthavenLoanMember2024-12-062024-12-060001745032us-gaap:RevolvingCreditFacilityMemberlfr:WesternLineOfCreditMember2024-05-102024-05-100001745032us-gaap:RevolvingCreditFacilityMemberlfr:WesternLineOfCreditMemberlfr:UsPrimeRateMember2024-01-012024-12-310001745032us-gaap:RevolvingCreditFacilityMemberlfr:WesternLineOfCreditMember2024-01-012024-12-310001745032lfr:ResidenceInnFortCollinsCapexMemberus-gaap:SecuredOvernightFinancingRateSofrMember2024-01-012024-12-310001745032lfr:ResidenceInnByFortCollinsPropertyMemberus-gaap:SecuredOvernightFinancingRateSofrMember2024-01-012024-12-310001745032lfr:FairfieldInnAndSuitesLakewoodPropertyMemberus-gaap:SecuredOvernightFinancingRateSofrMember2024-01-012024-12-310001745032us-gaap:RevolvingCreditFacilityMemberlfr:WesternLineOfCreditMember2023-01-012023-12-310001745032us-gaap:RevolvingCreditFacilityMemberlfr:WesternLineOfCreditMember2020-02-102020-02-1000017450322023-01-060001745032lfr:O2024Q3DividendsMember2024-07-012024-09-300001745032lfr:O2024Q2DividendsMember2024-04-012024-06-300001745032lfr:O2024Q1DividendsMember2024-01-012024-03-310001745032lfr:O2023Q4DividendsMember2023-10-012023-12-310001745032lfr:O2023Q3DividendsMember2023-07-012023-09-300001745032lfr:O2023Q2DividendsMember2023-04-012023-06-300001745032lfr:O2023Q1DividendsMember2023-01-012023-03-3100017450322022-12-310001745032us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2024-01-012024-12-310001745032lfr:PropertiesOtherThanPinevilleHgiAndCharlotteMember2024-01-012024-12-310001745032us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2023-01-012023-12-310001745032lfr:ResidenceInnForCollinsPropertyMember2024-12-310001745032lfr:HomewoodSuitesSouthavenPropertyMember2024-12-310001745032lfr:Home2SuitesPrattvillePropertyMember2024-12-310001745032lfr:Home2SuitesLubbockHome2PropertyMember2024-12-310001745032lfr:HolidayInnExpressWichitaPropertyMember2024-12-310001745032lfr:HolidayInnExpressCedarRapidsPropertyMember2024-12-310001745032lfr:HolidayInnEiPasoPropertyMember2024-12-310001745032lfr:HiltonGardenInnPinevillePropertyMember2024-12-310001745032lfr:HiltonGardenInnHoustonPropertyMember2024-12-310001745032lfr:HiltonGardenInnElPasoPropertyMember2024-12-310001745032lfr:HiltonGardenInnCharlottePropertyMember2024-12-310001745032lfr:HamptonInnSuitesFargoPropertyMember2024-12-310001745032lfr:HamptonInnSuitesEaganPropertyMember2024-12-310001745032lfr:FairfieldInnSuitesLubbockTxMember2024-12-310001745032lfr:FairfieldInnAndSuitesLakewoodPropertyMember2024-12-310001745032lfr:CourtyardByMarriottElPasoPropertyMember2024-12-310001745032lfr:CourtyardByMarriottAuroraPropertyMember2024-12-310001745032lfr:WhenNetProceedsReceivedUntilMarch242025ExceedsCumulativeThresholdMemberlfr:SeriesPreferredUnitsMemberus-gaap:PrivatePlacementMember2024-01-012024-12-310001745032lfr:WhenNetProceedsReceivedFromMarch242025ExceedsCumulativeThresholdMemberlfr:SeriesPreferredUnitsMemberus-gaap:PrivatePlacementMember2024-01-012024-12-310001745032us-gaap:CumulativePreferredStockSubjectToMandatoryRedemptionMember2024-12-310001745032lfr:LegendaryCapitalReitIIILLCMember2023-08-282023-08-280001745032lfr:SalesAndMarketingReimbursementMemberlfr:AdvisorAndAffiliatesMember2024-01-012024-12-310001745032lfr:OtherIncomeExpenseNetMemberlfr:AdvisorAndAffiliatesMember2024-01-012024-12-310001745032lfr:OfferingCostsReimbursementMemberlfr:AdvisorAndAffiliatesMember2024-01-012024-12-310001745032lfr:GeneralAndAdministrativeReimbursementMemberlfr:AdvisorAndAffiliatesMember2024-01-012024-12-310001745032lfr:AcquisitionCostsReimbursementMemberlfr:AdvisorAndAffiliatesMember2024-01-012024-12-310001745032lfr:SalesAndMarketingReimbursementMemberlfr:AdvisorAndAffiliatesMember2023-01-012023-12-310001745032lfr:OfferingCostsReimbursementMemberlfr:AdvisorAndAffiliatesMember2023-01-012023-12-310001745032lfr:GeneralAndAdministrativeReimbursementMemberlfr:AdvisorAndAffiliatesMember2023-01-012023-12-310001745032lfr:AcquisitionCostsReimbursementMemberlfr:AdvisorAndAffiliatesMember2023-01-012023-12-310001745032lfr:LegendaryCapitalReitIIILLCMembersrt:MinimumMemberlfr:AdvisoryAgreementMember2024-01-012024-12-310001745032lfr:LegendaryCapitalReitIIILLCMembersrt:MaximumMemberlfr:AdvisoryAgreementMember2024-01-012024-12-310001745032lfr:CompanySSponsorMemberus-gaap:SubsequentEventMemberlfr:HotelManagementAgreementWithHotelEquitiesGroupLlcMember2025-02-100001745032lfr:OneRepConstructionLlcMemberlfr:NormanLeslieMember2024-12-310001745032lfr:OneRepConstructionLlcMemberlfr:DavidEkmanMember2024-12-310001745032lfr:OneRepConstructionLlcMemberlfr:CoreyMapleMember2024-12-310001745032lfr:AdvisorAndAffiliatesMember2024-12-310001745032lfr:ManagementFeesMemberlfr:NhsLlcMember2024-12-310001745032lfr:AdministrativeFeesMemberlfr:NhsLlcMember2024-12-310001745032lfr:AccountingFeesMemberlfr:NhsLlcMember2024-12-310001745032lfr:OneRepConstructionLlcMember2024-12-310001745032lfr:NhsLlcMember2024-12-310001745032lfr:ManagementFeesMemberlfr:NhsLlcMember2023-12-310001745032lfr:AdministrativeFeesMemberlfr:NhsLlcMember2023-12-310001745032lfr:AccountingFeesMemberlfr:NhsLlcMember2023-12-310001745032lfr:OneRepConstructionLlcMember2023-12-310001745032lfr:NhsLlcMember2023-12-310001745032lfr:ManagementFeesMemberlfr:NhsLlcMember2024-01-012024-12-310001745032lfr:FinancingFeesMemberlfr:AdvisorAndAffiliatesMember2024-01-012024-12-310001745032lfr:ConstructionManagementFeesMemberlfr:OneRepConstructionLlcMember2024-01-012024-12-310001745032lfr:AssetManagementFeesMemberlfr:AdvisorAndAffiliatesMember2024-01-012024-12-310001745032lfr:AdministrativeFeesMemberlfr:NhsLlcMember2024-01-012024-12-310001745032lfr:AccountingFeesMemberlfr:NhsLlcMember2024-01-012024-12-310001745032lfr:AdvisorAndAffiliatesMember2024-01-012024-12-310001745032lfr:PerformanceFeesMemberlfr:AdvisorAndAffiliatesMember2023-01-012023-12-310001745032lfr:ManagementFeesMemberlfr:NhsLlcMember2023-01-012023-12-310001745032lfr:FinancingFeesMemberlfr:AdvisorAndAffiliatesMember2023-01-012023-12-310001745032lfr:ConstructionManagementFeesMemberlfr:OneRepConstructionLlcMember2023-01-012023-12-310001745032lfr:AssetManagementFeesMemberlfr:AdvisorAndAffiliatesMember2023-01-012023-12-310001745032lfr:AdministrativeFeesMemberlfr:NhsLlcMember2023-01-012023-12-310001745032lfr:AccountingFeesMemberlfr:NhsLlcMember2023-01-012023-12-310001745032lfr:NhsLlcMember2023-01-012023-12-310001745032lfr:AdvisorAndAffiliatesMember2023-01-012023-12-310001745032lfr:LegendaryCapitalReitIIILLCMemberlfr:AdvisoryAgreementMember2023-01-012023-12-310001745032srt:MinimumMemberlfr:OneRepConstructionLlcMember2024-01-012024-12-310001745032srt:MaximumMemberlfr:OneRepConstructionLlcMember2024-01-012024-12-310001745032lfr:LegendaryCapitalReitIIILLCMemberlfr:AdvisoryAgreementMember2024-01-012024-12-310001745032lfr:NormanLeslieMember2024-12-310001745032lfr:CoreyMapleMember2024-12-310001745032lfr:NormanLeslieMember2023-12-310001745032lfr:CoreyMapleMember2023-12-310001745032lfr:NhsLlcMember2024-01-012024-12-310001745032lfr:HamptonInnSuitesPinevillePropertyMember2024-07-232024-07-230001745032us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2021-12-310001745032us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2018-06-010001745032lfr:SeriesBLpUnitsMember2024-01-012024-12-310001745032lfr:SeriesGoIiLpUnitsMemberus-gaap:PrivatePlacementMember2023-04-072023-04-0700017450322024-03-012024-08-310001745032us-gaap:RevolvingCreditFacilityMemberlfr:A1LineOfCreditMemberlfr:CommonLimitedPartnershipUnitsMember2024-12-200001745032us-gaap:RevolvingCreditFacilityMemberlfr:A1LineOfCreditMemberlfr:CommonLimitedPartnershipUnitsMember2023-12-310001745032lfr:LegendaryCapitalReitIIILLCMemberlfr:SeriesGoLpUnitsMemberlfr:AdvisoryAgreementMemberlfr:CoreyMapleMember2024-12-310001745032lfr:LegendaryCapitalReitIIILLCMemberlfr:AdvisoryAgreementMemberlfr:NormanLeslieMember2024-12-310001745032lfr:LegendaryCapitalReitIIILLCMemberlfr:AdvisoryAgreementMemberlfr:CoreyMapleMember2024-12-310001745032lfr:LegendaryCapitalReitIIILLCMemberlfr:SeriesGoLpUnitsMemberlfr:AdvisoryAgreementMemberlfr:CoreyMapleMember2023-12-310001745032lfr:LegendaryCapitalReitIIILLCMemberlfr:AdvisoryAgreementMemberlfr:NormanLeslieMember2023-12-310001745032lfr:LegendaryCapitalReitIIILLCMemberlfr:AdvisoryAgreementMemberlfr:CoreyMapleMember2023-12-310001745032lfr:SheratonHotelNorthbrookPropertyMember2024-01-012024-12-310001745032lfr:ResidenceInnForCollinsPropertyMember2024-01-012024-12-310001745032lfr:HomewoodSuitesSouthavenPropertyMember2024-01-012024-12-310001745032lfr:Home2SuitesPrattvillePropertyMember2024-01-012024-12-310001745032lfr:Home2SuitesLubbockHome2PropertyMember2024-01-012024-12-310001745032lfr:HolidayInnExpressWichitaPropertyMember2024-01-012024-12-310001745032lfr:HolidayInnExpressCedarRapidsPropertyMember2024-01-012024-12-310001745032lfr:HolidayInnEiPasoPropertyMember2024-01-012024-12-310001745032lfr:HiltonGardenInnPinevillePropertyMember2024-01-012024-12-310001745032lfr:HiltonGardenInnElPasoPropertyMember2024-01-012024-12-310001745032lfr:HiltonGardenInnCharlottePropertyMember2024-01-012024-12-310001745032lfr:HamptonInnSuitesFargoPropertyMember2024-01-012024-12-310001745032lfr:HamptonInnSuitesEaganPropertyMember2024-01-012024-12-310001745032lfr:FairfieldInnSuitesLubbockTxMember2024-01-012024-12-310001745032lfr:FairfieldInnAndSuitesLakewoodPropertyMember2024-01-012024-12-310001745032lfr:CourtyardByMarriottAuroraPropertyMember2024-01-012024-12-310001745032lfr:PennsylvaniaPurchaseAgreementMember2019-11-012019-11-300001745032us-gaap:PrivatePlacementMember2024-01-012024-12-310001745032us-gaap:VariableInterestEntityPrimaryBeneficiaryMemberlfr:HolidayInnEiPasoPropertyMember2024-12-310001745032lfr:StaybridgeStowContributionAgreementMember2024-04-152024-04-150001745032lfr:SeriesGoLpUnitsMember2024-01-012024-12-310001745032lfr:SeriesGoIiLpUnitsMember2024-01-012024-12-310001745032lfr:SeriesPrefaUnitsMemberus-gaap:NoncontrollingInterestMember2024-01-012024-12-310001745032lfr:LodgingFundReitIIIOPLPMemberlfr:SeriesPreferredUnitsMemberus-gaap:PrivatePlacementMember2024-12-310001745032lfr:SeriesGoIiLpUnitsMemberus-gaap:PrivatePlacementMember2023-04-070001745032lfr:SeriesGoLpUnitsMemberus-gaap:PrivatePlacementMember2020-06-150001745032us-gaap:CorporateNonSegmentMember2024-01-012024-12-310001745032us-gaap:CorporateNonSegmentMember2023-01-012023-12-310001745032us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2024-12-310001745032us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2023-12-310001745032lfr:ResidenceInnByFortCollinsPropertyAndCourtyardByMarriottAuroraPropertyMemberus-gaap:MortgagesMemberlfr:ContributionAgreementLoanRestructuringMember2024-12-242024-12-240001745032lfr:WesternLineOfCreditMember2023-01-012023-12-310001745032lfr:WesternLineOfCreditMemberlfr:CoreyMapleMember2024-12-310001745032us-gaap:RevolvingCreditFacilityMemberlfr:A1LineOfCreditMember2023-01-012023-12-310001745032lfr:SheratonHotelNorthbrookPropertyMember2024-01-012024-12-310001745032lfr:FranchiseFeesMember2024-01-012024-12-310001745032lfr:FranchiseFeesMember2023-01-012023-12-310001745032srt:MinimumMember2024-12-310001745032srt:MaximumMember2024-12-310001745032srt:MinimumMember2023-12-310001745032srt:MaximumMember2023-12-310001745032srt:MinimumMember2024-01-012024-12-310001745032srt:MaximumMember2024-01-012024-12-310001745032srt:MinimumMember2023-01-012023-12-310001745032srt:MaximumMember2023-01-012023-12-310001745032lfr:StaybridgeStowContributionAgreementMember2024-04-150001745032lfr:LodgingFundReitIIIOPLPMemberlfr:SettlementAgreementNovember2023Member2023-11-200001745032lfr:CentralPaEquities17LlcCentralPaEquities19LlcAndSpringwoodFhpLpMemberlfr:SettlementAgreementNovember2023Member2023-11-200001745032us-gaap:CumulativePreferredStockSubjectToMandatoryRedemptionMember2024-01-012024-12-310001745032us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2024-12-020001745032us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2024-12-310001745032us-gaap:OperatingSegmentsMemberlfr:SingleReportableSegmentMember2024-01-012024-12-310001745032us-gaap:OperatingSegmentsMemberlfr:SingleReportableSegmentMember2023-01-012023-12-310001745032lfr:AccessPointFinancialLlcMemberlfr:SeriesPrefaUnitsMemberlfr:ContributionAgreementLoanRestructuringMember2024-12-242024-12-240001745032lfr:ContributionAgreementLoanRestructuringMember2024-12-242024-12-240001745032lfr:HiltonGardenInnHoustonPropertyAndHolidayInnExpressWichitaPropertyMemberus-gaap:MortgagesMemberlfr:CoreyMapleMemberus-gaap:SubsequentEventMember2025-03-272025-03-270001745032lfr:HolidayInnExpressWichitaPropertyMemberlfr:CoreyMapleMember2024-01-012024-12-310001745032lfr:HiltonGardenInnHoustonPropertyMemberlfr:CoreyMapleMember2024-01-012024-12-310001745032lfr:CourtyardByMarriottAuroraPropertyMemberlfr:LondonInterbankOfferedRateMember2024-01-012024-12-310001745032lfr:PrepaymentDueToRefinancingPaidInYearTwoMemberlfr:NewPrattvilleLoanMember2024-11-042024-11-040001745032lfr:PrepaymentDueToRefinancingPaidInYearThreeToFiveMemberlfr:NewPrattvilleLoanMember2024-11-042024-11-040001745032lfr:PrepaymentDueToRefinancingPaidInYearOneMemberlfr:NewPrattvilleLoanMember2024-11-042024-11-040001745032lfr:NewaOneLakewoodLoanMember2024-03-270001745032lfr:NewPrattvilleLoanMember2024-11-042024-11-040001745032lfr:HiltonGardenInnHoustonPropertyMember2024-01-012024-12-310001745032lfr:CourtyardByMarriottElPasoPropertyMember2024-01-012024-12-310001745032us-gaap:RevolvingCreditFacilityMemberlfr:WesternLineOfCreditMember2024-05-100001745032lfr:HolidayInnElPasoLoanMember2024-05-150001745032lfr:NewLakewoodLoanMember2024-03-270001745032lfr:NewaOneLakewoodLoanMember2024-03-272024-03-270001745032lfr:NhsLoanMember2023-03-062023-03-060001745032lfr:HolidayInnElPasoLoanMember2024-05-152024-05-150001745032lfr:NewLakewoodLoanMember2024-03-272024-03-270001745032lfr:NewFt.CollinsLoanAgreementMember2023-04-182023-04-180001745032lfr:LodgingFundReitIIIOPLPMemberlfr:CommonLimitedPartnershipUnitsMemberus-gaap:PrivatePlacementMember2024-12-310001745032us-gaap:CumulativePreferredStockSubjectToMandatoryRedemptionMemberus-gaap:PrivatePlacementMember2024-01-012024-12-310001745032lfr:SeriesGoIiLpUnitsMemberus-gaap:SubsequentEventMemberus-gaap:PrivatePlacementMember2025-04-280001745032lfr:SeriesGoLpUnitsMemberus-gaap:PrivatePlacementMember2024-12-310001745032lfr:SeriesGoIiLpUnitsMemberus-gaap:PrivatePlacementMember2024-12-310001745032us-gaap:CommonStockMemberus-gaap:SubsequentEventMemberus-gaap:PrivatePlacementMember2025-04-280001745032us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2024-12-310001745032srt:MinimumMemberlfr:SeriesTLPUnitsMember2024-01-012024-12-310001745032srt:MaximumMemberlfr:SeriesTLPUnitsMember2024-01-012024-12-310001745032lfr:HolidayInnElPasoLoanMember2021-05-122021-05-120001745032lfr:SeriesTLPUnitsMember2024-01-012024-12-310001745032lfr:SeriesTLPUnitsMember2023-01-012023-12-310001745032lfr:HamptonStowContributionAgreementMember2024-04-152024-04-150001745032us-gaap:MaterialReconcilingItemsMember2024-01-012024-12-310001745032us-gaap:MaterialReconcilingItemsMember2023-01-012023-12-310001745032lfr:PennsylvaniaPurchaseAgreementMember2019-11-300001745032lfr:HiltonGardenInnElPasoPropertyMember2024-01-012024-12-310001745032lfr:HolidayInnElPasoLoanMember2023-05-150001745032lfr:SeriesTLPUnitsMember2024-12-310001745032lfr:SeriesGoTwoLpUnitsMemberus-gaap:NoncontrollingInterestMember2024-01-012024-12-310001745032lfr:SeriesGoLpUnitsMemberus-gaap:NoncontrollingInterestMember2024-01-012024-12-310001745032us-gaap:RetainedEarningsMember2024-01-012024-12-310001745032us-gaap:ParentMember2024-01-012024-12-310001745032lfr:SeriesGoTwoLpUnitsMemberus-gaap:NoncontrollingInterestMember2023-01-012023-12-310001745032lfr:SeriesGoLpUnitsMemberus-gaap:NoncontrollingInterestMember2023-01-012023-12-310001745032us-gaap:RetainedEarningsMember2023-01-012023-12-310001745032us-gaap:ParentMember2023-01-012023-12-3100017450322023-01-012023-12-310001745032us-gaap:RevolvingCreditFacilityMemberlfr:WesternLineOfCreditMember2023-12-3100017450322024-12-3100017450322023-12-310001745032us-gaap:SubsequentEventMemberlfr:HotelManagementAgreementWithHotelEquitiesGroupLlcMember2025-02-102025-02-1000017450322024-10-012024-12-3100017450322025-04-232025-04-2300017450322024-06-3000017450322025-04-2800017450322024-01-012024-12-31lfr:statelfr:Voteiso4217:USDlfr:roomiso4217:USDlfr:propertyiso4217:USDxbrli:shareslfr:segmentxbrli:sharesiso4217:USDxbrli:purelfr:roomlfr:itemlfr:agreementlfr:classlfr:propertylfr:loan

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from to

Commission file number: 000-56082

LODGING FUND REIT III, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland		83-0556111
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1635 43rd Street South, Suite 205 Fargo, North Dakota		58103
(Address of Principal Executive Offices)		(Zip Code)

(701) 630-6500

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the common stock held by non-affiliates of the registrant: No established market exists for the registrant’s shares of common stock. On June 1, 2018 the registrant launched its ongoing private offering of its shares of common stock, which shares are being offered at $10.00 per share, with discounts available for certain categories of purchasers. There were 9,990,199 shares of common stock held by non-affiliates as of June 30, 2023.

As of April 28, 2025, there were 10,013,042 outstanding shares of common stock of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Table of Contents


Part I
Item 1.	Business	4
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	38
Item 1C.	Cybersecurity	38
Item 2.	Properties	39
Item 3.	Legal Proceedings	41
Item 4.	Mine Safety Disclosures	41

Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	41
Item 6.	[Reserved]	47
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	68
Item 8.	Financial Statements and Supplementary Data	68
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	68
Item 9A.	Controls and Procedures	68
Item 9B.	Other Information	70
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspection	70

Part III
Item 10.	Directors, Executive Officers and Corporate Governance	71
Item 11.	Executive Compensation	76
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	77
Item 13.	Certain Relationships and Related Transactions, and Director Independence	78
Item 14.	Principal Accountant Fees and Services	82

Part IV
Item 15.	Exhibits and Financial Statement Schedules	84
Item 16.	Form 10-K Summary	105

Signatures

Index to Consolidated Financial Statements		F-1
Report of Independent Registered Public Accounting Firm		F-2

Table of Contents

FORWARD-LOOKING STATEMENTS

Certain statements included in this Annual Report on Form 10-K are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of the Company and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “should,” “expect,” “could,” “intend,” “anticipate,” “plan,” “estimate,” “believe,” “potential,” “continue,” “seek” or similar expressions. These statements include our plans and objectives for future operations, including plans and objectives relating to future growth and availability of funds, and are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to these statements involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to accurately predict and many of which are beyond our control. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

For a discussion of some of the risks and uncertainties, although not all risks and uncertainties, that could cause actual results to differ materially from those presented in our forward-looking statements, see the risks identified in “Summary Risk Factors” below and under the section entitled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. All forward-looking statements should be read in light of the risks identified in “Summary Risk Factors” below and in Part I, Item 1A of this Annual Report on Form 10-K. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.

SUMMARY RISK FACTORS

Our business faces significant risks and uncertainties. Set forth below is a summary list of the principal risk factors as of the date of the filing of this Annual Report on Form 10-K that could materially and adversely affect our business, financial condition, results of operations and cash flows. This summary highlights certain of the risks that are discussed further in this Annual Report but does not address all of the risks that we face. You should carefully review and consider the full discussion of our risk factors in the section entitled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.

Risks Related to Our Business

●

Our business strategy depends significantly on achieving revenue and net income growth from anticipated increases in demand for hotel rooms, which will be adversely affected by weak economic conditions and other economic events, elevated interest rates and travel-related concerns. If demand does not increase or if demand weakens, our occupancy or revenues per available room may decline, making it more difficult for us to implement our business strategy and to meet any debt service obligations we have incurred and limiting our ability to pay distributions to our stockholders.

●

Our advisor, Legendary Capital REIT III, LLC (the “Advisor”), its executive officers and other key personnel, the employees of Legendary Capital, LLC (the “Sponsor”), an affiliate of the Advisor as well as certain of our officers and directors, whose services are essential to the Company, may be involved in other business ventures, and will face a conflict in allocating their time and other resources between us and the other activities in which they are or may become involved. Failure of the Advisor, its executive officers and key personnel, the employees of the Sponsor, and our officers and directors to devote sufficient time or resources to our operations could result in reduced returns to our stockholders.

●

We will pay certain prescribed fees and expenses to the Advisor and its affiliates regardless of the quality of services provided. These fees were not negotiated at arm’s length and therefore may be higher than fees payable to unaffiliated third parties for the same or similar services. Such fees may result in conflicts of interest between the Advisor and our stockholders due to the nature of the incentive fees and management fees.

●

We have paid distributions from proceeds from our ongoing private offering described below (the “Offering”) and, to the extent our board of directors declares future distributions, we may continue to fund

Table of Contents

distributions with Offering proceeds. We have not established a limit on the amount of proceeds from our Offering that we may use to fund distributions. To the extent we fund distributions from sources other than our cash flow from operations, we will have less funds available for investment and the overall return to our stockholders may be reduced. We may fund distributions from other sources such as borrowings, which may constitute a return of capital.

●

If we are unable to raise substantial funds in our securities offerings, we may not be able to acquire a large portfolio of assets, which may cause the value of an investment in us to vary more widely with the performance of certain investments and cause our general and administrative expenses to constitute a greater percentage of our revenue.

●

We may be unable to identify properties that meet our investment criteria in a timely manner or on acceptable terms, and may be unable to consummate investment opportunities that we identify, which could result in reduced returns or reduce the amount available for distributions to our stockholders.

●

We intend to acquire only hotel properties. As a result, we will only have limited diversification as to the type of property we own. In the event of an economic recession affecting the economies of the areas in which the properties are located or a decline in values in general, our financial performance could be materially and adversely affected, which may limit our ability to pay distributions to our stockholders.

●

We and our hotel managers rely on information technology networks and systems, including the internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, personally identifiable information, reservations, billing and operating data. It is possible that our safety and security measures will not be able to prevent the systems’ improper functioning or damage, or the improper access or disclosure of personally identifiable information such as in the event of cyber-attacks. Security breaches, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential information, which may subject us to liability claims or regulatory penalties and could have a material adverse effect on our business, financial condition and results of operations.

●

We have been delinquent in our SEC reporting obligations for over 12 months. We cannot provide assurance that our business will not be materially adversely affected by our previous and potential future failures to file required periodic and annual reports on a timely basis. Despite the filing of this Annual Report on Form 10-K, we face a continuing risk that the SEC will initiate an administrative proceeding to suspend or revoke the registration of our common stock under the Exchange Act due to our previous failures to timely file our annual reports on Form 10-K and several quarterly reports on Form 10-Q. There may be continued concern on the part of investors and employees about our financial condition and extended filing delay status, which may result in the loss of business opportunities, limitations on our ability to raise capital, and general reputational harm. Any of the foregoing could materially adversely affect our business, results of operations and financial condition.

●

Table of Contents

Risks Related to the Lodging Industry and Real Estate Industry

●

We may be unable to dispose of our properties on advantageous terms or at all due to various factors, including weakness in our properties’ markets, unavailability of financing, changes in the financial condition of prospective purchasers or changes in general economic conditions, which could reduce our cash flow and limit our ability to make distributions to our stockholders.

●

Demand for our properties may be affected by various factors, including an over-supply or over-building of hotel properties in our properties’ markets and general economic conditions. If demand does not increase or if demand weakens, our occupancy or revenues per available room may decline, making it more difficult for us to implement our business strategy and to meet any debt service obligations we have incurred and limiting our ability to pay distributions to our stockholders.

●

Adverse economic, business or real estate developments in our markets, as well as low consumer confidence, declines in corporate budgets, elevated rates of inflation, newly-enacted political policies, and decreases in personal discretionary spending levels, may adversely affect our financial performance and the value of our properties and may limited our ability to pay distributions to our stockholders.

●

Competition for guests, including with other hotels, resorts and vacation rental marketplaces, make reduce our hotels’ revenues and profitability.

●

The hospitality industry is seasonal in nature. In addition, the hospitality industry is cyclical and demand generally follows the general economy on a lagged basis. The seasonality and cyclicality of our industry may contribute to fluctuations in our results of operations and financial condition.

●

We rely on management companies to operate our hotel properties, giving us less control than if we were managing the hotels ourselves.

●

Risks Related to Debt Financing

●

We have incurred significant debt in connection with our property acquisitions. Our use of leverage increases the risk of an investment in us. Our mortgage loans are collateralized by our hotel properties, which will put those investments at risk of forfeiture if we are unable to repay such debts. Principal and interest payments on these loans reduce the amount of money that would otherwise be available for distribution to our stockholders.

●

Our ability to acquire, rehabilitate, renovate and manage our properties may be limited if we cannot obtain satisfactory financing, refinance or extend existing financing, which will depend on debt and capital markets conditions. In addition, we have loans with variable interest rates, and may incur additional variable rate debt in the future. Volatility in these markets could negatively impact such loans. Interest rates remain elevated, and higher interest rates required by lenders on loans that we have refinanced or extended recently have resulted in higher debt service costs. There can be no assurance that we will be able to obtain financing or refinance or extend existing financing on favorable terms, or at all.

Federal Income Tax Risks

●

Failure to qualify as a REIT would reduce our net earnings available for investment or distribution to our stockholders.

Table of Contents

PART I

Item 1. Business.

Overview

Lodging Fund REIT III, Inc. was formed on April 9, 2018, as a Maryland corporation for the primary purpose of acquiring a diversified portfolio of limited-service, select-service, full-service and extended-stay hotel properties (the “Projects”) located primarily in “America’s Heartland,” which we define as the geographic area from North Dakota to Texas and the Appalachian Mountains to the Rocky Mountains. We have elected to be taxed as a real estate investment trust, or REIT, beginning with the taxable year ended December 31, 2018, and we intend to continue to operate in such a manner. Where applicable in this Form 10-K, “we,” “our,” “us,” and “the Company” refers to Lodging Fund REIT III, Inc., Lodging Fund REIT III OP, LP, a Delaware limited partnership and our operating partnership (the “Operating Partnership”), and its subsidiaries except where the context otherwise requires.

We conduct substantially all our business and own substantially all real estate investments through the Operating Partnership. We are the sole general partner (the “General Partner”) of the Operating Partnership. We and the Operating Partnership are advised by Legendary Capital REIT III, LLC, a Delaware limited liability company (the “Advisor”) pursuant to an advisory agreement, as amended, under which the Advisor performs advisory services regarding acquisition, financing and disposition of the Projects and origination of any loans, and is responsible for managing, operating and maintaining the Projects and day-to-day management of the Company. The Advisor may, in its sole discretion, perform these duties through one or more affiliates. The Operating Partnership has issued 1,000 Series B Limited Partnership Units (“Series B LP Units”) to the Advisor as part of its compensation. See Part II Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Overview” for further details of the compensation to the Advisor.

Our Advisor is wholly-owned by Corey Maple, a director of the Company, and Norman Leslie, an officer and director of the Company. To facilitate our REIT structure, the Operating Partnership formed Lodging Fund REIT III TRS, Inc., a Delaware corporation (“Master TRS”), to act as the “master” taxable REIT subsidiary (“TRS”) entity. When we acquire a Project, the Master TRS forms a separate wholly-owned TRS to act as lessee of the Project (a “TRS Lessee”). That TRS Lessee will enter into a lease agreement with a wholly-owned subsidiary of the Operating Partnership to operate the Project. Through February 2025, we have engaged National Hospitality Services (“NHS”) to manage nine of the Projects acquired to date; on February 10, 2025, the Company terminated the contract with NHS and entered into hotel management agreements with Hotel Equities Group, LLC, a third party property management agency. We have engaged other third party property management companies with the oversight and property management of the remaining nine properties within the portfolio. NHS is wholly-owned by Norman Leslie, a director and executive officer of the Company and a principal of the Advisor. The Advisor has no direct employees. The employees of Legendary Capital, LLC (the “Sponsor”), an affiliate of the Advisor, provide services to the Company related to the negotiations of property acquisitions and financing, asset management, accounting, legal, investor relations, and all other administrative services.

Initial Offering

We are currently conducting an offering (the “Offering”) in shares of our common stock under a private placement to qualified purchasers who meet the definition of “accredited investors,” as provided in Regulation D of the Securities Act of 1933, as amended (the “Securities Act”). The Offering commenced on June 1, 2018 in an amount of up to $100,000,000 in shares of our common stock, which amount was increased to $150,000,000 in shares of our common stock in December 2021. The Offering will continue until the earlier of (i) the date when the maximum offering amount is sold, (ii) May 31, 2025, which may be extended by our board of directors in its sole discretion, or (iii) a decision by the Company to terminate the Offering. On March 24, 2025, our board of directors extended the term of the Offering to May 31, 2026. In addition to sales of common stock for cash, the Company has adopted a dividend reinvestment plan (“DRIP”), which permits stockholders to reinvest their distributions back into the Company. Except as otherwise provided in the offering memorandum, we are currently offering the shares in the private offering at an offering price of $10.57 per share, with shares purchased in our dividend reinvestment plan at an offering price of $10.04 per share. As of December 31, 2024, the Company had issued and sold 10,298,999 shares of common stock, including 1,215,332 shares attributable to our DRIP, and received aggregate proceeds of $100.7 million. After deductions for payments of selling commissions, marketing and diligence allowances, other wholesale selling costs and expenses, we received net offering proceeds of approximately

Table of Contents

$84.9 million. The net offering proceeds have been used principally to fund property acquisitions and pay distributions and debt service obligations. No public market exists for the shares of our common stock and none is expected to develop.

We have adopted a share repurchase plan that may enable our stockholders to have their shares repurchased in limited circumstances. In its sole discretion, the board of directors could choose to terminate or suspend the plan or to amend its provisions without stockholder approval. The repurchase plan may be reviewed and modified by the board of directors as it deems necessary in its sole discretion. As of December 31, 2024, we have repurchased 287,525 shares, which represents an original investment of $2,858,355 for $2,794,469. See Part II Item 5 “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Share Repurchase Plan”.

GO Unit Offering

On June 15, 2020, the Operating Partnership commenced a private offering of limited partnership units in the OP, designated as Series Growth & Opportunity Limited Partner Units (“Series GO LP Units”), which our board of directors terminated as of February 12, 2022. As of December 31, 2024, the Operating Partnership had issued and sold 3,124,503 Series GO LP Units and received aggregate proceeds of $21.5 million. After deductions for payments of selling commissions, marketing and diligence allowances, other wholesale selling costs and expenses, and other offering expenses, we received net offering proceeds of approximately $19.4 million.

GO II Unit Offering

On April 7, 2023, the Operating Partnership commenced a private offering of limited partnership units in the OP, designated as Series Growth & Opportunity II Limited Partner Units (“Series GO II LP Units”), with a maximum offering of $30,000,000, which could be increased to $60,000,000 in the sole discretion of the Company as the General Partner of the Operating Partnership, (the “GO II Unit Offering”) to accredited investors only, pursuant to a confidential private placement memorandum exempt from registration under the Securities Act of 1933, as amended. The Series GO II LP Units are being offered until the earlier of (i) the sale of $30,000,000 in Series GO II LP Units (which could be increased to $60,000,000 in the Company’s sole discretion), (ii) March 31, 2024, which date may be extended for two 1-year extensions until March 31, 2026 in the sole discretion of the Operating Partnership or (iii) the Operating Partnership terminates the GO II Unit Offering at an earlier date in its sole discretion. On April 17, 2024, our board of directors extended the term of the GO II Unit Offering to March 31, 2025. On March 24, 2025, our board of directors extended the term of the GO II Unit Offering to March 31, 2026. As of December 31, 2024, the Operating Partnership had issued and sold 507,335 Series GO II LP Units and received gross aggregate proceeds of $3.8 million. After deductions for payments of selling commissions, marketing and diligence allowances, other wholesale selling costs and expenses, and other offering expenses, we received net offering proceeds of approximately $3.7 million.

Series T LP Units

The Operating Partnership may issue Series T LP Units from time to time to persons who contribute direct or indirect interests in real estate to the Operating Partnership. The Series T LP Units will have allocations and distributions that are dictated by the Partnership Agreement of the Operating Partnership and the applicable contribution agreement for the real estate. Certain Series T LP Units may have different allocations and distributions than other Series T LP Units. The amount of the allocations and distributions will be determined by the General Partner in its sole discretion at the time of issuance of the Series T LP Units and any future distributions are dependent on the financial performance of the contributed real estate based on a mathematical formula. The Series T LP Units are eligible for conversion into Common LP Units beginning 24 or 36 months, or longer in some instances, after their issuance and will automatically convert into Common LP Units upon other events as described in the Partnership Agreement of the Operating Partnership. The conversion of Series T LP Units into Common LP Units may vary with each issuance and is generally based on a formula that applies an applicable capitalization rate to the then-current trailing twelve months net operating income of the hotel property less the loan balance outstanding as of the contribution date as assumed by the Operating Partnership, and less other amounts incurred by the Operating Partnership including but not limited to certain closing costs, loan assumption fees and defeasance costs, property improvement plan (“PIP”) and capital expenditures, operating cash infused by the Operating Partnership, and any shortfall of certain minimum cumulative investment yield. There is no guarantee that the future financial performance of the contributed hotel property will be sufficient to result in the issuance of Common LP Units

Table of Contents

resulting from the application of the conversion formula applicable to the issuance of Series T LP Units at the time of conversion. As of December 31, 2024, the Company had recorded an aggregate value of $45.7 million to the Series T LP Units in connection with such property contributions. During the year ended December 31, 2024 and 2023, the Company declared distributions of $48,263 and $0.2 million for the Series T LP Units.

Common LP Units

On December 3, 2021, the Operating Partnership commenced a private placement offering of its Common LP Units. As of December 31, 2024, the Operating Partnership had issued and sold 612,100 Common LP Units, with a value of $10.00 per unit at the time of issuance, in connection with two property contributions.

Series P Preferred Units

On December 24, 2024, the Operating Partnership commenced a private offering for the purchase of up to $50,000,000 (which may be increased to $75,000,000 in the sole discretion of the Company) in Series P Preferred Units at a purchase price equal to $10,000 per Series P Preferred Unit. The first $1,250,000 of net proceeds received by the Operating Partnership from the sale of the Series P Preferred Units shall be retained by the Operating Partnership. If the Operating Partnership receives more than $1,250,000 of net proceeds from the sale of the Series P Preferred Units, the next $1,047,000 of net proceeds received by the Operating Partnership from the sale of the Series P Preferred Units shall be used to (i) pay accrued interest on the Fort Collins Loans and the Courtyard Aurora Loan through December 31, 2024 at or prior to the time of refinancing such loans or (ii) after the time of such refinancing, redeem outstanding Series A Preferred Units issued in exchange for the contribution of such loans. If the Operating Partnership receives more than $2,297,000 of net proceeds from the sale of the Series P Preferred Units, the next $7,550,000 of net proceeds received by the Operating Partnership from the sale of Series P Preferred Units shall be retained by the Operating Partnership. If the Operating Partnership receives more than $9,847,000 of net proceeds from the sale of the Series P Preferred Units, (A) until March 24, 2025, 50% of such additional net proceeds received by the Operating Partnership from the sale of the Series P Preferred Units shall be used to redeem the Series A Preferred Units and the remaining 50% shall be retained by the Operating Partnership, and (B) from and after March 24, 2025, 75% of such additional net proceeds received by the Operating Partnership from the sale of the Series P Preferred Units shall be used to redeem the Series A Preferred Units and the remaining 25% shall be retained by the Operating Partnership. As of December 31, 2024, the Operating Partnership has issued and sold 35 Series P Preferred Units, resulting in the receipt of gross offering proceeds of $0.4 million as of the date of this filing.

Series A Preferred Units

On December 24, 2024, the Operating Partnership entered into an amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership to establish the terms of a new limited partner unit designated as Series A Preferred Units. Concurrently, the Company entered a loan contribution agreement (the “Contribution Agreement”) to restructure four of its loans with Access Point Financial, LLC (the “Access Point Lender”) – 1) the mortgage loan secured by the Sheraton – Northbrook (“Sheraton Northbrook Loan”) with unpaid principal balance of approximately $4.0 million, 2) the loans secured by the Residence Inn - Fort Collins Loan (“Fort Collins Loans”) with collective unpaid principal balance of approximately $13.0 million, 3) the mortgage loan secured by the Courtyard by Marriott – Aurora (“Courtyard Aurora Loan”) with unpaid principal balance of approximately $14.9 million. With respect to the Sheraton Northbrook Loan, the Access Point Lender received 4,067,659 Series A Preferred Units in exchange for all of the remaining unpaid principal and interest on the Sheraton Northbrook Loan. With respect to the Fort Collins Loans and the Courtyard Aurora Loan, the Company is required to refinance each such loan within 90 days of the date of the Contribution Agreement, and to the extent there is remaining unpaid principal and interest on such loans after such refinancing, the Operating Partnership is required to enter into a contribution agreement with the Access Point Lender through which the Access Point Lender will receive Series A Preferred Units in exchange for all of such remaining unpaid principal and interest.

Exit Strategy

Table of Contents

to prepare the Company’s portfolio of hotel properties for a transaction through strategic acquisitions and dispositions with the objective of maximizing profitability at the hotel property level. There can be no assurances that we will achieve an exit strategy within the time period and in the manner anticipated. The process of exploring strategic alternatives and marketing our assets could be time consuming and disruptive to our business operations and could divert management’s attention from our business, and we could incur substantial expenses associated with identifying and evaluating potential transactions. Further, any potential transaction would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction with us and the availability of financing to potential buyers on favorable terms. There can be no assurance that we will successfully implement our strategy, or that any potential transaction or other strategic alternative will result in stockholder liquidity or provide a return to stockholders that equals or exceeds our estimated value per share.

Independent Director Compensation

During 2022, we began compensating our independent directors with stock-based compensation as approved by and administered under the supervision of our Board of Directors. The awards are fully vested at issuance and we recognize stock-based compensation expense based on the award’s fair value at the grant date. On March 31, 2023, June 30, 2023, September 30, 2023 and December 31, 2023, we issued 500 shares of our common stock to each of our two independent directors and on March 31, 2024, June 30, 2024, September 30, 2024 and December 31, 2024, we issued 500 shares of our common stock to each of our two independent directors. For the years ended December 31, 2024 and 2023, we recognized stock-based compensation expense of $42,280 and $42,280. These grants were made in reliance upon an exemption from the registration requirements provided by Section 4(a)(2) of the Securities Act as the grants did not involve any public offering.

SEC Settlement

As previously disclosed, the Advisor and Corey R. Maple received a “Wells notice” from the SEC stating that the SEC staff had made a preliminary determination to recommend to the SEC that it bring an enforcement action against the Advisor and Mr. Maple alleging violations of securities laws in connection with the SEC’s investigation of the Company’s reimbursement of and financial accounting for certain expenses incurred by the Advisor as well as the adequacy of its disclosures related to those policies and practices. The Wells notice was neither a formal charge of wrongdoing nor a final determination that the Advisor or Mr. Maple has violated any law.

On August 28, 2023, the Advisor and Mr. Maple, without admitting or denying the findings, agreed to an administrative cease-and-desist order relating to Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, as amended. A copy of the order can be found on the SEC’s website at https://www.sec.gov/files/litigation/admin/2023/33-11227.pdf. As part of the settlement, the Advisor paid disgorgement of $463,900, prejudgment interest of $85,432 and a civil monetary penalty of $225,000 and Mr. Maple paid a civil monetary penalty of $100,000. Additionally, the Advisor has undertaken to (a) retain a qualified independent consultant acceptable to the SEC, at the Advisor’s expense, within 60 days of the date of entry of the order to review the Advisor’s policies, procedures and controls regarding the proper allocation of expenses between the Advisor and the Company as provided in the order, (b) require the consultant to submit a report to the Advisor and the SEC staff within 120 days of the entry of the order with its findings and any recommendations for changes or improvements, and (c) adopt, implement and maintain all policies, procedures and practices recommended by

the consultant’s report within 120 days of receiving the report from the consultant. As of the date of this filing, each of these actions has been taken by the Advisor and Mr. Maple, as applicable, in accordance with the terms of the SEC order.

Our Investment Objectives and Operations

We have invested and intend to continue to invest primarily in 80 to 200 room limited-service, select-service, full-service and extended-stay hotel properties with strong mid-market brands in America’s Heartland. Our overall strategy is to purchase a diverse portfolio of hotels that presents a strong opportunity for both cash flow generation and capital appreciation. We will attempt to diversify our investment portfolio by geography, brand and asset opportunity type. Our target markets are metropolitan statistical areas in America’s Heartland with populations exceeding 250,000 that exhibit well-diversified business and leisure demand generators. We intend to focus mainly on well-known and established hotel brands, such as Marriott Hotels^®, Hilton^®, IHG and Hyatt^® and their affiliated “flags”, however, we may acquire lesser-

Table of Contents

known hotel brands where strategically appropriate. We will attempt to further diversify our investments based on three asset opportunity classes: “Stabilized” opportunities (steady historical performers), “Refresh” opportunities (needing capital expenditure or management upgrades) and “Value” opportunities (requiring significant upgrades and stabilization). We do not intend to add Value opportunities unless circumstances arise that would make it advantageous.

Our investment objectives are:

●

to preserve, protect and return investor capital contributions;

●

to pay regular cash distributions; and

●

to realize appreciation in the value of our investments upon the ultimate sale of such investments.

There is no assurance that we will attain these objectives or that there will be any return of capital to investors. Investment results may vary substantially over time and from period to period. Our board of directors may, from time to time, change our investment objectives if it determines it is advisable and in the best interest of our stockholders.

Our Investment Strategy

Real Estate Portfolio

We acquired our first real estate property on November 30, 2018. As of December 31, 2024, our real estate portfolio consisted of eighteen Projects located in the following cities: Cedar Rapids, Iowa; Pineville, North Carolina; Eagan, Minnesota; Prattville, Alabama; Lubbock, Texas; Southaven, Mississippi; Aurora, Colorado; El Paso, Texas; Houston, Texas; Northbrook, Illinois; Fargo, North Dakota; Lakewood, Colorado; Fort Collins, Colorado; Charlotte, North Carolina; and Wichita, Kansas, referred to in this Form 10-K as the “Cedar Rapids Property,” the “Eagan Property,” the “Prattville Property,” the “Lubbock Home2 Property,” the “Lubbock Fairfield Property,” the “Southaven Property,” the “Aurora Property,” the “El Paso HI Property,” the “Houston Property,” the “Northbrook Property”; the “Fargo Property”; the “El Paso Airport Property”; the “Lakewood Property”; the “Fort Collins Property”; the “El Paso University Property”; the “Charlotte Property”; the “Pineville HGI Property”; and the “Wichita Property” respectively. We own an equity and profits interest in the parent of the entity which holds a leasehold interest in the El Paso University Property. See Part I, Item 2 “Properties” for a more detailed description of our real estate portfolio.

Real Estate Investments

We believe there is a significant inventory of hotel properties in our target markets that are of quality construction, in good locations with well-known brands and historical track records that meet our diversified portfolio parameters. We have targeted and plan to continue to target markets that have been historically strong from a demand and growth perspective. We also plan to focus on hotel properties that we anticipate will require relatively modest necessary capital improvements in the short term. Our intention is to build a diversified portfolio of hotel properties, complete certain property improvements and operate the individual hotel properties with a final goal of selling the entire portfolio in a single transaction.

The majority of our current hotel properties are, and we expect the majority of future hotel properties to be midscale hotels that do not provide full-service facilities to guests including the following types of franchised hotel properties:

●

Limited-Service Hotels. Limited-service hotels offer limited facilities and amenities, typically without a full-service restaurant.

●

Select-Service Hotels. Select-service hotels offer the fundamentals of limited-service properties together with a selection of services and amenities characteristic of full-service hotels. Generally, the additional amenities are restaurants and banquet facilities but on a less elaborate scale than one would find at full-service hotels.

●

Full-Service Hotels. Full-service hotels offer restaurants, lounge facilities and meeting space as well as minimum service levels often including room service.

Table of Contents

●

Extended-Stay Hotels. Extended-stay hotels typically focus on attracting guests for extended periods. These properties quote weekly rates and blend transient and long-term bookings.

By concentrating on top-quality institutional franchisors like Marriott Hotels^®, Hilton^®, IHG and Hyatt^® and their affiliated “flags”, we believe we can (i) command a Revenue Per Available Room, or “RevPAR”, premium over sub-market competitive sets, (ii) take advantage of the brands’ strong loyalty programs, (iii) utilize brand channels to deliver guests, (iv) enjoy the benefits of premier system standards, where the brands drive consistent quality, high service standards, innovative design and modern amenities across each respective flag, (v) benefit from effective brand segmentation where, through a wide range of hospitality choices within each brand family, each brand appeals to a broad range of travelers with differing levels of amenities and rates and (vi) utilize the brands’ institutional character to drive faster and stronger resale, financing flexibility and investor confidence. We will attempt to enter into minimum ten-year franchise agreements for each of our franchised hotel properties.

We generally have acquired a fee interest in hotel properties directly through special purpose entities which are generally wholly owned subsidiaries of our Operating Partnership. We may also make investments in certain hotel properties through joint ventures with third-party institutions, developers, operators, investors and other third parties as well as with affiliates of the Advisor. Such joint ventures may be leveraged with debt financing or unleveraged. We invest in our hotels through a mechanism known as an Umbrella Partnership REIT (“UPREIT”), whereby the owner of the hotel property desires to exchange its hotel property for limited partnership interests in the Operating Partnership pursuant to an UPREIT contribution agreement. We have purchased hotel properties, and anticipate that we will purchase additional hotel properties, using the UPREIT model as they generally require less cash investment, while providing tax and other benefits to the property sellers, but we may also enter into purchase and sale agreements with the seller. As of the date of this filing, we acquired ten hotel properties pursuant to an UPREIT contribution agreement.

We have financed and plan to continue to finance the purchase of hotel properties with proceeds from the Offering and loans obtained from third-party lenders and Legendary A-1 Bonds, LLC, an affiliate of the Advisor. We expect to use moderate leverage to enhance the total cash flow to our stockholders. We anticipate that the aggregate loan-to-value ratio for the Company will be between 35% and 65%. We will target a loan-to-value ratio for the hotel properties of between 35% and 70%, based on the purchase price of the hotel properties; however, we may obtain financing that is less than or higher than such loan-to-value ratio for an individual hotel property at the discretion of our board of directors. As of December 31, 2024, our aggregate loan-to-value ratio, based on the aggregate purchase price of the hotel properties, was approximately 58%. We seek to obtain financing on the most favorable terms available. Loans are expected to be nonrecourse and will be secured by the applicable hotel property. In some cases, however, we have been, and in the future may be, required to enter into guarantees for the loans for certain non-recourse carve-outs.

We have obtained and may in the future obtain lines of credit or other financings, secured by one or more of the hotel properties, to provide financing for acquisitions, to fund property improvements and other capital expenditures, to make distributions, and for other purposes. In addition, we may borrow as necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes. As of December 31, 2024, we had a $5.0 million line of credit with Western Bank, a $20.0 million line of credit with Legendary A-1 Bonds, LLC to provide immediate capital to fund acquisitions of the hotel properties and a $0.6 million dollar Line of Credit with NHS. As of December 31, 2023, we had a $5.0 million line of credit with Western Bank and a $13.5 million line of credit with Legendary A-1 Bonds, LLC to provide immediate capital to fund acquisitions of the hotel properties. As of December 31, 2024, we had $19.0 million outstanding on the lines of credit. As of December 31, 2023, we had $18.4 million outstanding on the line of credit.

As of December 31, 2024 and 2023, we had $174.3 million and $180.2 million, respectively, in outstanding mortgage debt secured by eighteen and nineteen hotel properties, respectively, with maturity dates ranging from September 2024 to April 2029 and fixed and variable interest rates ranging from 3.70% to 14.5%. As of December 31, 2024 and 2023, the weighted-average interest rate was 7.48% and 6.24% respectively. See Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Debt” for additional details.

Table of Contents

Our Disposition Strategy

Our initial plan was to hold and manage the hotel properties and our other investments for approximately five years following the termination of the Offering, although our board of directors has discretion to extend this holding period indefinitely. Our current intention, however, is to dispose of our entire portfolio as soon as practicable when market conditions are favorable, pursuant to the exit strategy authorized by our board of directors on May 7, 2024. Circumstances may arise, however, that make it more beneficial to sell one or more hotel properties on an individual basis. The Advisor will continually evaluate each hotel property’s performance based on economic and market conditions and our overall objectives to determine an appropriate time to sell the hotel properties in an effort to maximize total returns to our stockholders. The determination of when a particular hotel property should be sold or otherwise disposed of will be made by our board of directors, upon recommendation by our Advisor.

Human Capital

Lodging Fund REIT III, Inc. has no direct employees. The employees of the Sponsor, as an affiliate of the Advisor, perform substantially all of the services related to our asset management, accounting, legal, investor relations, and other administrative activities. The hotel management companies we engage to operate our hotels are responsible for hiring and maintaining the labor force at each of our hotels. Although we do not manage employees at our hotels, we are still subject to the many costs and risks generally associated with the labor at our hotels.

Competition

Our current hotel properties compete with numerous other hotels throughout the United States in addition to alternative lodging. We believe that the markets in which our hotels are located, the proximity of our hotels to main transportation routes, hotel categories, and brand level enhanced safety protocols will provide a competitive advantage over other hotels.

The hotel business is management and marketing intensive. Our current hotel properties compete with other hotels throughout the United States for high quality management and marketing personnel. We believe that franchisors’ marketing scale and ability to manage group business have improved our hotels’ competitive position. However, there can be no assurance that our hotel properties will be able to continue to attract and retain employees with the requisite managerial and marketing skills.

Additionally, as a REIT, we compete for investment opportunities in the hospitality industry. As we acquire hotel properties to build our portfolio, we are in competition with other potential buyers for the same hotel properties, which may result in an increase in the amount we must pay to acquire a project or may limit the number of projects we are able to acquire. Other potential buyers may include other listed and non-listed REITs or private investors. These potential buyers may have substantially greater financial resources and experience than we do and may be able to accept more risk than we can prudently manage.

At the time we elect to dispose of our Projects, we may be in competition with sellers of similar hotel properties to locate suitable purchasers. This may result in a decrease in the amount we receive on the sale of a Project or may require us to defer the sale and increase our hold period on all or certain Projects.

Economic Dependency

We depend on the Advisor and its affiliates, including the Sponsor, to provide certain services essential to the Company, including asset management services, supervision of the management of the hotel properties, asset acquisition and disposition services, as well as other administrative responsibilities for the Company, including accounting services, legal, investor communications and investor relations. As a result of these relationships, we are dependent upon our Advisor and its affiliates.

Table of Contents

Governmental Regulation

Environmental

As an owner of real estate, we are subject to various environmental laws of federal, state, and local governments. Compliance with existing laws has not had a material adverse effect on our financial condition or results of operations, and management does not believe it will have such an impact in the future. However, we cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on properties we currently own, or on properties that may be acquired in the future.

Americans with Disabilities Act

Our hotel properties are subject to the Americans with Disabilities Act of 1990, as amended, and applicable regulations promulgated thereunder (the “ADA”). Under the ADA, “public accommodations” as defined by the ADA must meet certain federal requirements related to access and use by disabled persons. Although we believe our current hotel properties are in substantial compliance with the ADA, and we intend to acquire hotel properties that are substantially in compliance with the ADA, we may incur additional costs of complying with the ADA at the time of acquisition and from time to time in the future to remain in compliance. Also, non-compliance with the ADA may result in the imposition of fines or an award of damages to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and to make alterations as appropriate.

Industry Segments

Our current business consists of acquiring, managing, investing in and disposing of real estate assets. We internally evaluate all of our real estate assets as one industry segment and, accordingly, we do not report segment information.

Seasonality

Depending on a hotel property’s location and market, operations for the hotel may be seasonal in nature. This seasonality can be expected to cause fluctuations in our quarterly operating performance. Based on historic trends, for hotels located in non-resort markets, demand is generally lower in the winter months due to decreased travel and higher in the spring and summer months during the peak travel season. Accordingly, we generally would expect to have lower revenue, operating income and cash flow in the first and fourth quarters and higher revenue, operating income and cash flow in the second and third quarters.

Internet Address

Our website address is http://www.legendarycap.com.

Item 1A. Risk Factors.

In addition to the other information in this Annual Report on Form 10-K, the following risk factors should be considered carefully in evaluating our company and our business.

Risks Related to Owning Shares of Our Common Stock

The offering price for our shares of common stock in the Offering has been determined by us, and we cannot guarantee that it represents an accurate estimation of our enterprise value.

From inception of our Offering through December 31, 2022, the offering price for our shares of common stock in the Offering was $10.00 per share (ignoring purchase price discounts for certain purchasers), which was determined primarily by our board of directors and bore no relationship to any established criteria of value such as book value or earnings per share, or any combination thereof. Further, the price of our shares of common stock was not based on our past earnings, nor does that price necessarily reflect current market value for our assets. Our board of directors approved an estimated net asset value per share (“Share NAV”) of our assets as of December 31, 2022 and based on such Share NAV adjusted

Table of Contents

the offering price for our shares in the Offering to $10.57 per share, effective January 6, 2023. The Share NAV was determined by our board of directors taking into account appraisals of the Company’s real estate properties and other factors deemed relevant by the board of directors. The ordinary course of our business does not entail the valuation of businesses or securities, and therefore cannot guarantee that our estimation of the Share NAV will be an accurate estimation of our enterprise value. Further, we have not determined a new Share NAV since December 31, 2022 and, as a result, the current Share NAV and Offering price per share may not reflect an accurate estimation of the Company’s enterprise value.

Our shares of common stock have no public market, no public market is expected to develop, and consequently, it may be difficult for you to sell your shares.

There is no public trading market for our shares of common stock and we do not expect one to develop in the foreseeable future. The absence of a public market for our shares of common stock could impair your ability to sell your shares at a fair price or at all. In addition, the transfer of shares will be subject to additional limitations. Although our board of directors has adopted a share repurchase plan, there is no guarantee that such program will remain in place in its current form, and our board of directors may suspend, modify or terminate the share repurchase plan at any time. Consequently, you may have to hold your shares for an indefinite period of time because it may be difficult for you to sell your shares.

There are restrictions on transferring our shares of common stock, which may make your shares unattractive to prospective purchasers and may prevent you from selling them when you desire.

Transfer of your shares is restricted by applicable federal and state securities laws as well as the charter. The offering of our shares in the Offering has not been registered under federal securities laws or the securities laws of any other state. Each investor who purchases shares must represent that it is acquiring our shares of common stock for investment and not with a view to distribution or resale and that it understands our shares of common stock are not freely transferable. You may not sell, offer for sale, or transfer your shares in the absence of either an effective registration statement under the Securities Act and under applicable state securities laws, or an opinion of counsel satisfactory to our legal counsel that such transaction is exempt from registration under the Securities Act and under applicable state securities laws. These restrictions may make your shares unattractive to prospective purchasers and may reduce the price prospective investors are willing to pay for your shares, even if transfer of these shares is allowed by state and federal securities laws. Consequently, an investment in our shares of common stock should be considered only as a long-term investment for persons of adequate financial means who do not need liquidity.

There is no specified or guaranteed liquidation date for our shares of common stock.

There is no specified or guaranteed liquidity event or liquidation date for our shares of common stock. Accordingly, shares must be considered solely as long-term investments.

The actual value of shares that we repurchase under our share repurchase plan may be substantially less than what we pay.

Under our share repurchase plan, shares currently may be repurchased at varying prices depending on the number of years our shares of common stock have been held and whether the repurchases are sought upon a stockholder’s death. The repurchase price is based on the NAV on the date of repurchase and is not based on the price at which a stockholder initially purchased its shares. Stockholders may receive less than the price that they paid for their shares upon repurchase by us pursuant to the stock repurchase plan. The maximum price that may be paid under our program was $10.00 per share through December 31, 2022 and is currently $10.57 per share, which is the current Offering price of our shares of common stock in the Offering (ignoring purchase price discounts for certain purchasers). This repurchase price is likely to differ from the price at which a stockholder could resell its shares. Thus, when we repurchase shares at $10.57 per share, the actual value of our shares of common stock that we repurchase may be less, and the repurchase will be dilutive to our remaining stockholders. Even at lower repurchase prices, the actual value of our shares of common stock may be substantially less than what we pay and the repurchase may be dilutive to our remaining stockholders.

Table of Contents

Our stockholders have limited redemption rights.

Our share repurchase plan includes numerous restrictions that severely limit our stockholders’ ability to redeem their shares for cash should they require liquidity. See “Part II. Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Share Repurchase Plan” for more information about the plan.

Our shares of common stock are being offered in reliance upon a private offering exemption under the Securities Act. If we should fail to comply with the requirements of such exemption, our stockholders would have the right to rescind their purchase of shares.

Our shares of common stock are being offered and will be sold to investors in reliance upon a private offering exemption from registration provided in the Securities Act. If we should fail to comply with the requirements of such exemption, our stockholders would have the right to rescind their purchase of their shares if they so desired. It is possible that one or more stockholders seeking rescission would succeed. This might also occur under applicable state securities laws and regulations in states where our shares of common stock will be offered without registration or qualification pursuant to a private offering or other exemption. If a number of stockholders were successful in seeking rescission, we would face severe financial demands that would adversely affect us as a whole and, consequently, the investment in our shares of common stock by the remaining stockholders.

Our board of directors may create additional classes of our securities.

Our board of directors has the authority under the charter to create and issue additional classes of securities and to designate the rights, preferences and privileges thereof, such as the Interval Common Stock. Our board of directors may in the future create one or more additional classes of securities having rights, preferences and privileges that are superior to and dilutive of our shares of common stock, including additional shares of common stock, preferred stock, warrants and options. This could reduce the amount of cash available for distribution from our operations and liquidation to our stockholders and increases the risk that our stockholders will not profit from their acquisition of shares or will lose their investment entirely. Our stockholders do not have any preemptive rights with respect to any equity which the Company may issue in the future. Preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to holders of our shares of common stock.

Risks Related to Our Business

Our business strategy depends significantly on achieving revenue and net income growth from anticipated improvement in demand for hotel rooms. We cannot, however, provide any assurances that demand for hotel rooms will increase from current levels, or the time or extent of any demand growth that we do experience. If demand does not increase in the near future, or if demand weakens, our operating results and growth prospects could be adversely affected. The lodging industry has historically been closely linked to the performance of the general economy and thus, is sensitive to business and personal discretionary spending levels. Declines in consumer demand due to adverse general economic conditions can result from various events that are beyond our control, including terrorist attacks, wars, including the current conflict between Russia and Ukraine, travel-related health concerns, travel-related accidents, and unusual weather patterns and natural disasters such as tornados, hurricanes, or earthquakes, and uncertainties regarding actual and potential shifts in United States and foreign trade, economic and other policies, including treaties, tariffs, layoffs of U.S. federal workers and freezes of federal funding.

The United States has recently experienced significant inflation. Inflation could have an adverse impact on our financing costs (either through near-term borrowings on our variable rate debt, including our credit facilities, or refinancing of existing debt at higher interest rates), and general and administrative expenses and property operating expenses, as these costs could increase at a rate higher than our rental and other revenue. To the extent our exposure to increases in interest

Table of Contents

rates is not eliminated through interest rate caps or other protection agreements, such increases may also result in higher debt service costs, which will adversely affect our cash flows. Historically, during periods of increasing interest rates, real estate valuations have generally decreased due to rising capitalization rates, which tend to move directionally with interest rates. Consequently, prolonged periods of higher interest rates may negatively impact the valuation of our real estate assets. Although the extent of any prolonged periods of higher interest rates remains unknown at this time, negative impacts to our cost of capital may adversely affect our future business plans and growth, at least in the near term. Elevated inflation may also have an adverse effect on our operating expenses, including, but not limited to, labor, supplies, repairs and maintenance, as these costs could increase at a rate higher than our revenues. Inflation could also have an adverse effect on consumer spending, which could impact occupancy levels at our hotel properties and, in turn, our own results of operations.

If we experience a pandemic or epidemic in the future, any increases in unemployment, increasing labor costs and shortages, decreased capital spending, declines in consumer confidence, commodity and other price inflation, supply chain disruptions, or economic slowdowns or recessions that may result therefrom may cause sustained negative consumer or business sentiment and reduced demand for travel and lodging, and may cause an increase in renovation, construction and operating costs, and may limit our access to critical operating supplies, all of which would materially and adversely affect our business, financial performance and condition, operating results and cash flows.

Additionally, the management companies that operate our hotel properties may be limited in their ability to properly maintain the properties. Market fluctuations may affect our ability to obtain necessary funds for the operation of our hotels from current lenders or new borrowings. In addition, we may be unable to obtain financing for the acquisition of new hotels on satisfactory terms, or at all. Further, we have entered into agreements with lenders under our mortgage loans to provide for relief from certain obligations under the loan agreements, including deferral of payment obligations and covenant relief. If our financial condition and results of operation continue to be negatively affected beyond the terms of our existing lender accommodations, we may be unable to obtain further extensions of the payment obligations and covenant relief, and may be forced to make additional payments on the loans which could adversely affect our ability to pay distributions to our stockholders. Third-party reports relating to market studies or demographics we obtained prior to the COVID-19 virus outbreak for hotels we acquired or have identified for acquisition may no longer be accurate or complete. The occurrence of any of the foregoing events or any other related matters could materially and adversely affect our business, financial condition, results of operation and the overall value of our properties, and stockholders may lose all or a substantial portion of their investment in us.

We depend on the efforts and expertise of the Advisor and its officers and principals, whose continued service is not guaranteed.

We depend on the efforts and expertise of our officers, the Advisor and its principals to execute our business strategy. The loss of their services, and our inability to find suitable replacements, could have an adverse effect on our business and, in turn, any return to our stockholders.

Our Advisor, its executive officers and other key personnel, the Sponsor’s employees and certain of our officers and directors will not devote their time and energies exclusively to us.

Our Advisor, its executive officers and other key personnel, the employees of the Sponsor, an affiliate of the Advisor, as well as certain of our officers and directors, whose services are essential to the Company, are, and will continue to be, involved in other business ventures, and will devote only such portion of their time to our affairs as they believe is appropriate to manage our affairs effectively. They will face a conflict in allocating their time and other resources between us and the other activities in which they are or may become involved. Failure of the Advisor, its executive officers and key personnel, the employees of the Sponsor, and our officers and directors to devote sufficient time or resources to our operations could result in reduced returns to our stockholders.

There is no assurance that we will satisfy our business objectives, which could limit our ability to make distributions and decrease the value of your investment.

There is no assurance that we will satisfy our business objectives. No assurance can be given that our stockholders will realize a substantial return, if any, on their purchase or that we will be able to make distributions to our stockholders. We

Table of Contents

may not be able to achieve our investment objectives, may make unwise decisions or may make decisions that are not in an investor’s best interests because of conflicts of interest. No assurance can be given that the Company will be able to acquire suitable investments or that the Company’s objectives will be achieved.

We own only hotel properties, which will limit the diversification of our investments.

As of December 31, 2024, we owned a portfolio of eighteen hotel properties, including the equity and profits interest in the parent of the entity which holds a leasehold interest in the El Paso University Property. We have no plans to acquire assets other than hotel properties, which limits the diversification of the type of properties we own. If we do not raise substantial funds in our securities offerings, we will be limited in the number and type of investments we and the Operating Partnership may make, which will result in a less diversified portfolio. We may not be able to acquire a large portfolio of assets, which may cause the value of an investment in us to experience more volatility due to the performance of certain investments and cause our general and administrative expenses to constitute a greater percentage of our revenue. In such event, the likelihood of our profitability being affected by the poor performance of any single investment will increase, which may limit our ability to pay distributions to our stockholders. A limited number of hotel properties may place a substantial portion of the funds invested in the same geographical location with the same property-related risks. In that case, the decline in a particular real estate market could substantially and adversely impact us. In the event of an economic recession affecting the economies of the areas in which the hotel properties are located, a decline in real estate values in general or the occurrence of any one of many other adverse circumstances, our financial performance could be materially and adversely affected.

Our investment policies are subject to revision from time to time at our board of directors’ discretion, which could diminish stockholder returns below expectations.

Our investment policies may be amended or revised from time to time at the discretion of our board of directors, without a vote of our stockholders. Such changes could result in investments that may not yield returns consistent with our stockholders’ expectations.

If we are unable to successfully manage our growth, our operating results and financial condition could be adversely affected.

Our ability to grow our business depends upon our agreements with the Operating Partnership and the Advisor, and the business acumen of the individuals managing each of these entities. If these agreements are terminated, we may not be able to hire and train sufficient personnel or develop management, information and operating systems suitable for our expected growth. If we are unable to manage any future growth effectively, our operating results and financial condition could be adversely affected.

Our future growth and success depends on obtaining financing, and if we cannot secure financing on acceptable terms or at all, our growth may be limited.

The success of our growth strategy depends on access to capital through the use of excess cash flow, borrowings or subsequent issuances of our common stock or other securities. We will require significant capital to acquire, renovate, rehabilitate, operate, and make periodic capital improvements at the hotel properties. We may not be able to fund acquisitions, renovations or capital improvements solely from cash provided from our operating activities. To the extent required funds are not available from operations, we will need to obtain new or additional borrowings on satisfactory terms, which will depend on capital markets conditions. There is no assurance that we will be able to obtain the required financing for our hotel properties on favorable terms, or at all.

We may be unable to raise substantial funds in our securities offerings or to invest the proceeds of our securities offerings in a timely manner or on acceptable terms.

We may be unable to raise substantial funds in our securities offerings, which could limit our ability to acquire a large portfolio of diverse assets. We may be unable to invest the Offering proceeds on acceptable terms, or at all, which could delay stockholders from receiving an appropriate return on their investment and reduce the amount available for distribution to our stockholders. We cannot assure you that we will be able to identify properties that meet our investment criteria, that we will successfully consummate any investment opportunities we identify or that investments we may make

Table of Contents

will generate income or cash flow. Our failure to find suitable hotel properties to acquire in a timely manner or on acceptable terms could result in returns that are substantially below expectations or result in losses.

Despite the filing of this annual report on Form 10-K, we face a continuing risk that the SEC will initiate an administrative proceeding to suspend or revoke the registration of our common stock under the Exchange Act due to our previous failure to timely file our annual reports on Form 10-K and our quarterly reports on Form 10-Q. There may be continued concern on the part of investors and employees about our financial condition and extended filing delay status, which may result in the loss of business opportunities, limitations on our ability to raise capital, and general reputational harm. Any of the foregoing could materially adversely affect our business, results of operations and financial condition.

We must rely on management companies that are eligible independent contractors to operate the hotel properties in order to qualify as a REIT and, as a result, we have less control than if we were operating the hotel properties directly.

In order for us to qualify as a REIT, management companies that are eligible independent contractors must operate the hotel properties. Each of the hotel properties will be owned by a direct subsidiary of the Operating Partnership, which will lease the hotel properties to the TRS Lessees. The TRS Lessees, in turn, will enter into management agreements with a management company to operate the hotel properties. While we expect to have some input into operating decisions for the hotel properties leased by our TRS Lessees and operated under such management agreements, we have less control than if we were managing the hotels ourselves. Even if we believe that our hotels are not being operated efficiently, we may not be able to require an operator to change the way it operates our hotels. If this is the case, we may decide to terminate the management agreement and potentially incur costs associated with the termination.

Our management agreements could adversely affect the sale or financing of the hotel properties and, as a result, our operating results and ability to make distributions to our stockholders could suffer.

We have entered into, and may continue to enter into, or acquire hotels subject to, management agreements that contain restrictive covenants. For example, the terms of some management agreements may restrict our ability to sell a hotel property unless, among other conditions, the purchaser is not a competitor of the operator and assumes the related management agreement. Also, the provisions of a long-term management agreement encumbering a hotel property may reduce the value of such hotel property. If we enter into or acquire hotel properties subject to any such management agreements, we may be precluded from taking actions that would otherwise be in our best interest or could cause us to incur substantial expense, which could adversely affect our operating results and our ability to make distributions to stockholders.

Our franchisors could cause us to expend additional funds on upgraded operating standards, which may reduce cash available for distribution to stockholders.

Our existing hotel properties are, and we expect future hotel properties will be, subject to franchise agreements, and we may become subject to the risks that result from concentrating the hotel properties in one or several hotel franchise brands. Our hotel operators will need to comply with operating standards and terms and conditions imposed by the franchisors of the hotel brands under which the hotel properties will operate. Pursuant to certain franchise agreements, certain upgrades are required every few years, and franchisors may also impose upgraded or new brand standards, which can add substantial expense for the affected hotel properties. The franchisors also may require us to make certain capital improvements to maintain the hotel properties in accordance with system standards, the cost of which can be substantial and may reduce cash available for distribution to our stockholders. Planned capital expenditures and upgrades may cost more and take longer to complete than expected as a result of increasing labor costs and shortages and other price inflation and shortages of materials due to supply chain challenges and adverse impacts of various political policies, including tariffs and immigration.

Table of Contents

Our franchisors may cancel or fail to renew our existing franchise licenses, which could adversely affect our operating results and our ability to make distributions to stockholders.

Franchisors periodically inspect hotels to confirm adherence to their operating standards. We will rely on our operators to conform to the franchisors’ operating standards. The failure of a hotel property to maintain standards could result in the loss or cancellation of a franchise license. In addition, when the term of a franchise expires, the franchisor has no obligation to issue a new franchise. The loss of a franchise could have a material adverse effect on the operations or the underlying value of the affected hotel property because of the loss of associated name recognition, marketing support and centralized reservation systems provided by the franchisor. The loss of a franchise or adverse developments with respect to a franchise brand under which our hotels operate could also have a material adverse effect on our financial condition, results of operations and cash available for distribution to our stockholders.

Fluctuations in our financial performance, capital expenditure requirements and excess cash flow could adversely affect our ability to make and maintain distributions to our stockholders.

As a REIT, we are required to distribute at least 90% of our REIT taxable income each year to our stockholders (determined before the deduction for dividends paid and excluding any net capital gains). In the event of downturns in our operating results and financial performance or unanticipated capital improvements to the hotel properties (including capital improvements that may be required by franchisors), we may be unable to declare or pay distributions to our stockholders. The timing and amount of distributions are at the sole discretion of our board of directors, which considers, among other factors, our financial performance, debt service obligations, applicable debt covenants (if any), and capital expenditure requirements. Among the factors which could adversely affect our results of operations and distributions to stockholders are reductions in hotel revenues, increases in operating expenses at the hotels leased to our TRS Lessees and capital expenditures at the hotels, including capital expenditures required by the franchisors. We cannot assure you we will generate sufficient cash in order to continue to fund distributions.

We have not paid, and may not in the future pay, distributions solely from our cash flow from operations. To the extent we pay distributions from sources other than our cash flow from operations, the overall return to our stockholders may be reduced and subsequent investors will experience dilution.

We may not be able to pay distributions solely from our cash flow from operations, in which case distributions may be paid in whole or in part from other sources, including debt financing and proceeds from our Offering. There is no limit on the amount of distributions we may fund from sources other than from cash flow from operations. Distributions we paid through December 31, 2024 have been paid from proceeds from our Offering, and we expect that future distributions we may pay will not be made solely from our cash flow from operations. To the extent we fund distributions from sources other than our cash flow from operations, we will have less funds available for investment and the overall return to our stockholders may be reduced and subsequent investors will experience dilution.

We have made, and may from time to time continue to make, distributions to our stockholders in the form of our common stock, which could result in stockholders incurring tax liability without receiving sufficient cash to pay such tax.

We have distributed, and we may in the future distribute, taxable dividends that are payable in cash or common stock. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for federal income tax purposes. As a result, stockholders may be required to pay income taxes with respect to such dividends in excess of the cash dividends received. Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold federal income tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in common stock.

We may be subject to various conflicts of interest due to the relationships among the Advisor, the Operating Partnership, NHS, One Rep Construction, LLC (“One Rep”), Legendary A-1 Bonds, LLC (“A-1 Bonds”) and their respective affiliates.

We pay certain prescribed fees and expenses to the Advisor and its affiliates regardless of the quality of services provided. These fees were not negotiated at arm’s length and therefore, may be higher than fees payable to unaffiliated third parties.

Table of Contents

The Advisory Agreement may result in a conflict of interest between the Advisor and our stockholders due to the Advisor’s receipt of certain incentive and management fees related to operating the Company. For example, the Advisor may earn increased management fees if a hotel property is retained, but it may be advantageous for our stockholders for such hotel property to be sold and the proceeds distributed. In addition, certain incentive fees are payable to the Advisor upon the sale or acquisition of a hotel property. This could incentivize the Advisor to acquire or dispose of hotel properties in instances where such acquisitions or dispositions are not in the best interests of our stockholders. Furthermore, NHS, the company which provides certain due diligence services related to property acquisitions and a lender under one of our loans, is an affiliate of Norman H. Leslie who is an officer of the Company and the Advisor. In addition, One Rep, the construction management company which provides construction oversight, project management and other related services, is owned by Corey Maple, Norman H. Leslie and David Ekman. In addition, A-1 Bonds a lender under one of our lines of credit and several loans secured by certain of our hotel properties, is an affiliate of Norman H. Leslie and Corey Maple. These relationships may be determined to cause conflicts of interest among the affected parties.

Our current hotel properties include, and our future hotel properties will likely include certain amenities for hotel guests that could increase the potential liabilities at the hotel properties.

Our current hotel properties include, and our future hotel properties will likely include, one or more amenities, such as swimming pools, exercise rooms, laundry facilities, business centers and rentable event rooms. Certain claims could arise in the event that a personal injury, death or injury to property should occur in, on, or around any of these improvements. There can be no assurance that particular risks pertaining to these improvements that are insured will continue to be insurable on an economical basis or that current levels of coverage will continue to be available. If a loss occurs that is partially or completely uninsured, we may lose all or part of our investment in the affected hotel property. We may also be liable for uninsured or underinsured personal injury, death or property damage claims. Liability in such cases may be unlimited but stockholders will not be personally liable.

Although we have authorized management to pursue an exit strategy and position the Company for a sale or merger, we can give no assurances regarding the consummation of any particular transaction or that we will be successful in executing such strategy or in creating additional stockholder value.

Although our board of directors has authorized management to pursue an exit strategy and position us for a sale or merger as early as 2025, there is no assurance that this process will result in the approval or completion of any specific transaction or outcome. Further, although we have begun the process of exploring strategic alternatives and marketing for sale our assets, there is no assurance that we will achieve an exit strategy within the proposed time period or in the manner anticipated. The process of exploring strategic alternatives and marketing our assets could be time-consuming and disruptive to our business operations and could divert management’s attention from our business, and we could incur substantial expenses associated with identifying and evaluating potential transactions. Further, any potential transaction would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction with us and the availability of financing to potential buyers on favorable terms. Specifically, current general economic conditions, including high interest rates in a high inflation environment, may adversely impact the valuation of our assets and make it more difficult for potential purchasers to obtain acquisition financing on acceptable terms or at all. There can be no assurance that we will successfully implement our strategy, or that any potential transaction or other strategic alternative will result in stockholder liquidity or provide a return to stockholders that equals or exceeds our estimated value per share.

Risks Related to the Lodging Industry

The lodging industry has experienced significant declines and failure of the lodging industry to exhibit improvement may adversely affect our ability to execute our business strategy.

The performance of the lodging industry has historically been closely linked to the performance of the general economy and, specifically, growth in U.S. GDP. It is also sensitive to business and personal discretionary spending levels. Declines in corporate budgets and consumer demand due to adverse general economic conditions and political policies, risks affecting or reducing travel patterns, lower consumer confidence or adverse political conditions can lower the revenues and profitability of the hotel properties and therefore, the net operating profits of our TRS Lessees. A substantial part of our business strategy is based on the anticipation that the lodging markets will experience improving economic

Table of Contents

fundamentals in the future. We cannot predict the extent to which the lodging industry will improve. In the event conditions in the industry do not improve, or if they deteriorate, our ability to execute our business strategy would be adversely affected, which could adversely affect our financial condition, results of operations and our ability to make distributions to our stockholders.

Competition for acquisitions may reduce the number of properties we can acquire.

We compete for hotel investment opportunities with competitors that may have a different tolerance for risk or have substantially greater financial resources than are available to us. This competition may generally limit the number of hotel properties that we are able to acquire and may also increase the bargaining power of hotel owners seeking to sell, making it more difficult for us to acquire hotel properties on attractive terms, or at all.

Competition for guests may lower our hotels’ revenues and profitability.

The limited-service, select-service, full-service and extended-stay segments of the hotel business are competitive. Our hotels compete on the basis of location, room rates and quality, service levels, reputation and reservation systems, among many other factors. Many competitors have substantially greater marketing and financial resources than our operators or us. New hotels create new competitors, in some cases without corresponding increases in demand for hotel rooms. The result in some cases may be lower revenue, which would result in lower cash available for distribution to stockholders.

The seasonality of the hotel industry may cause fluctuations in our quarterly revenues which may require us to borrow money to fund distributions to stockholders.

Some hotel properties have business that is seasonal in nature. This seasonality can be expected to cause quarterly fluctuations in revenues. Quarterly earnings may be adversely affected by factors outside our control, including weather conditions and poor economic factors. As a result, we may have to enter into short-term borrowings in order to offset these fluctuations in revenue and to make distributions to our stockholders.

The cyclical nature of the lodging industry may cause the return on our investments to be substantially less than we expect.

The lodging industry is cyclical in nature. Fluctuations in lodging demand and therefore, operating performance, are caused largely by general economic and local market conditions, which subsequently affects levels of business and leisure travel. Any increases in inflation may adversely affect consumer confidence, which could reduce consumer purchasing power and dampen consumer demand for lodging, and which may also increase or operating and renovation costs. In addition to general economic conditions, new hotel room supply can significantly affect the lodging industry’s performance and overbuilding has the potential to further exacerbate the negative impact. Room rates and occupancy tend to increase when demand growth exceeds supply growth. Decline in lodging demand, or a continued growth in lodging supply, could result in returns that are substantially below expectations or result in losses, which could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders.

The ongoing need for capital expenditures at our hotel properties may adversely affect our financial condition and limit our ability to make distributions to our stockholders.

Hotel properties have an ongoing need for renovations and other capital improvements, including replacements, from time to time, of furniture, fixtures and equipment. The franchisors of our hotels also require periodic capital improvements as a condition of keeping the franchise licenses. These capital improvements may give rise to the following risks:

●

Possible environmental problems;

●

Construction cost overruns and delays, particularly in light of supply chain disruption;

●

Revenues may be reduced temporarily while rooms are out of service during construction;

●

Possible shortage of available cash to fund capital improvements;

●

Capital improvement financing may not be available on attractive terms;

Table of Contents

●

Market demand uncertainties or a loss of market demand after capital improvements have begun; and

●

Disputes with franchisors/managers regarding compliance with relevant management/franchise agreements.

We have established, and intend to continue to establish, capital reserves in amounts we believe are necessary for the hotel properties. If we have insufficient capital reserves, we will be required to obtain financing from other sources to fund our capital expenditure requirements. There can be no assurance that sufficient financing will be available or, if available, will be available on economically feasible terms or on terms acceptable to us. Additional borrowing for capital needs and capital improvements will also increase our interest expense. The costs and expenses of all these capital improvements could adversely affect our financial condition and amounts available for distribution to our stockholders.

The increasing use of Internet travel intermediaries by consumers may adversely affect our profitability.

Some of our hotel rooms are booked through Internet travel intermediaries, including, but not limited to, Travelocity.com, Expedia.com and Priceline.com. As Internet bookings increase, these intermediaries may be able to obtain higher commissions, reduced room rates or other significant contract concessions from us and our management companies. Moreover, some of these Internet travel intermediaries are attempting to offer hotel rooms as a commodity, by increasing the importance of price and general indicators of quality (such as “three-star downtown hotel”) at the expense of brand identification. These intermediaries hope that consumers will eventually develop brand loyalties to their reservations system rather than to the hotel brands under which our properties are franchised. Although most of the business for our hotels is expected to be derived from traditional channels, if the amount of sales made through Internet intermediaries increases significantly, room revenues may flatten or decrease and our profitability may be adversely affected.

We and our hotel managers and franchisors rely on information technology in our operations, and any material failure, inadequacy, interruption, cyber-attack or security failure of that technology could harm our business.

We and our hotel managers and franchisors rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, personal identifying information, reservations, billing and operating data. We rely on commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential customer information, such as personally identifiable information, including information relating to financial accounts. Although we have taken steps, and plan to continue to take steps, to protect the security of our information systems and the data maintained in those systems, it is possible that our safety and security measures will not be able to prevent the systems’ improper functioning or damage, or the improper access or disclosure of personally identifiable information such as in the event of cyber-attacks. Cyber-attacks are expected to accelerate on a global basis in both frequency and magnitude as threat actors are becoming increasingly sophisticated in using techniques that circumvent controls, evade detection, and remove or obfuscate forensic evidence, which means that we and our third-party providers may be unable to detect, investigate, contain or recover from future attacks or incidents in a timely or effective manner. The rapid evolution and increased adoption of artificial intelligence technologies, but us or by third parties, may also heighten our cybersecurity risks by making cyberattacks more difficult to detect, contain and mitigate. Security breaches, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential information. In addition, cybersecurity risk has increased as a result of global remote working dynamics for our customers, employees and third-party providers that present additional opportunities for threat actors to engage in social engineering and to exploit vulnerabilities in non-corporate networks. Many of the information systems and networks used to operate our lodging properties are managed by our third-party property managers or franchisors and are not under our control. Any failure to maintain proper function, security and availability of our information systems or the information networks managed by our third-party property managers or franchisors could interrupt our operations, result in delayed sales or bookings or lost guest reservations, damage our reputation, subject us to liability claims or regulatory penalties and could have a material adverse effect on our business, financial condition and results of operations.

Table of Contents

Labor shortages and increased costs for labor could adversely affect our business and financial results.

Our success depends in part upon our management companies’ ability to attract, motivate and retain a sufficient number of qualified employees. Qualified individuals needed to fill these positions are in increasingly short supply in some areas, with such supply issues increasing to historical levels in 2024 and 2023. The inability to recruit and retain these individuals may adversely impact hotel operations and guest satisfaction, which could harm our business. Additionally, competition for qualified employees has required us to pay meaningfully higher wages to attract employees, and continued tightness in labor markets could result in continued escalation of labor costs.

Future terrorist attacks or changes in terror alert levels could adversely affect travel and hotel demand.

Recent world events including increased terrorist activities and the political and military responses of the targeted countries have created an air of uncertainty concerning security and the stability of the United States economy. Previous terrorist attacks and subsequent terrorist alerts have adversely affected the U.S. travel and hospitality industries over the past several years, often disproportionately to the effect on the overall economy. The impact that terrorist attacks in the U.S. or elsewhere could have on domestic and international travel and our business in particular cannot be determined but any such attacks or the threat of such attacks could have a material adverse effect on our business, our ability to finance our business, our ability to insure our properties and our results of operations and financial condition.

Competition, including with vacation rental online marketplaces, may reduce our hotels’ revenues and profitability.

In addition to competing with other hotels, our hotel businesses compete with resorts, motels, inns and vacation rentals in their geographic markets or customer segments, including facilities owned by local interests, individuals, national and international chains, institutions, investment and pension funds and real estate investment trusts (“REITs”). Competition in this industry generally is based on the attractiveness of the facility, location, level of service, quality of accommodations, amenities, food and beverage options, public spaces and other guest services, consistency of service, room rate, brand reputation and the ability to earn and redeem loyalty program points. Our principal competitors include other branded and independent hotel operating companies, national and international hotel brands and ownership companies, and independently owned vacation rentals, such as those listed on vacation rental online marketplaces. Increased demand for vacation rental online marketplaces and reduced demand for hotels could result in lower revenue and reduced cash availability for distribution to stockholders.

Adverse developments affecting the financial services industry may adversely affect our business, financial condition and results of operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank (now a division of First Citizens Bank) was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver, which has been followed by the collapse of Signature Bank, Silvergate Capital Corp. and First Republic Bank. Other than one account at Signature Bank for one of our hotel properties, we do not currently have direct exposure to these financial institutions. If a depository institution in which we deposit funds is adversely impacted from conditions in the financial or credit markets or otherwise, it could impact access to our cash or cash equivalents and could adversely impact our financial condition. Our cash and cash equivalents balance exceeded federally insurable limits as of December 31, 2024. In addition, if any parties with whom we conduct business are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, such parties' ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected. Although we assess our banking relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect us, the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry

Table of Contents

or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry.

General Risks Related to the Real Estate Industry

The hotel properties are subject to various risks associated with an investment in real estate.

The economic success of an investment in the Company will depend upon the results of the operations of the hotel properties, which are subject to those risks typically associated with an investment in real estate. Fluctuations in land values, occupancy levels, revenue and operating expenses can adversely affect operating results or render the sale or refinancing of the hotel properties difficult or unattractive. No assurance can be given that certain assumptions as to the future levels of occupancy of the hotel properties or future costs of operating the hotel properties will be accurate because such matters will depend on events and factors beyond our control. Such factors include, among others, occupancy levels, revenue and sales levels in the local areas where the hotel properties are located, adverse changes in local population trends, market conditions, neighborhood values, local economic and social conditions, supply and demand for property such as the hotel properties, competition from similar projects, interest rates, real estate tax rates, governmental rules, regulations and fiscal policies, including the effects of inflation and enactment of unfavorable real estate, environmental or zoning laws, hazardous material laws, uninsured losses and other risks.

Illiquidity of real estate investments could significantly impede our ability to liquidate our portfolio on advantageous terms or within any given period of time.

Because real estate investments are relatively illiquid and difficult to sell quickly, we have limited ability to vary our portfolio in response changes in economic and other conditions. Return of capital and realization of gains, if any, from an investment generally will occur upon disposition or refinance of the underlying hotel property. We may be unable to realize our investment objectives by sale, other disposition or refinance at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy. In particular, these risks could arise from weakness in or even the lack of an established market for a hotel property, availability of financing, capitalization rates, changes in the financial condition or prospects of prospective purchasers, changes in national or international economic conditions, and changes in laws, regulations or fiscal policies of jurisdictions in which the hotel property is located. Further, we may be required to expend funds to correct defects or to make improvements before a hotel property can be sold. We cannot assure you that we will have funds available to correct those defects or to make those improvements. In addition, we may agree to lock-out provisions when acquiring a hotel property that materially restrict us from selling that hotel property for a period of time or impose other restrictions. Our inability to sell the hotel properties at the time and on the terms we desire could reduce our cash flow and limit our ability to make distributions to our stockholders.

Uninsured and underinsured losses could adversely affect our operating results and our ability to make distributions to our stockholders.

We maintain comprehensive insurance on each of our current hotel properties, and anticipate maintaining comprehensive insurance on future hotel properties, including liability, terrorism, fire and extended coverage, of the type and amount customarily obtained for or by hotel property owners. There can be no assurance that such coverage will continue to be available at reasonable rates, or at all. Various types of catastrophic losses, like earthquakes and floods and losses from toxic mold, terrorist activities and pandemic outbreaks may not be insurable or may not be insurable on reasonable economic terms. Lenders may require such insurance and failure to obtain such insurance could constitute a default under the loan agreements. Depending on our access to capital, liquidity and the value of the properties securing the affected loan in relation to the balance of the loan, a default could have a material adverse effect on our results of operations and ability to obtain future financing.

In the event of a substantial loss, insurance coverage may not be sufficient to cover the full current market value or replacement cost of the hotel property. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we invested in a hotel property, as well as the anticipated future revenue from that particular hotel property. In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the hotel property. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also keep us from using insurance proceeds to replace, rehabilitate or renovate a hotel after it has been

Table of Contents

damaged or destroyed. Under those circumstances, the insurance proceeds we receive might be inadequate to restore our economic position on the damaged or destroyed hotel property.

Noncompliance with environmental laws and governmental regulations could adversely affect our operating results and our ability to make distributions to stockholders.

Federal, state and local laws impose liability on a landowner for the release or the otherwise improper presence on the premises of hazardous materials or hazardous substances. This liability is without regard to fault for, or knowledge of, the presence of such materials or substances, subject to certain defenses. A landowner may be held liable for hazardous materials or substances brought onto the property before it acquired title and for hazardous materials or substances that are not discovered until after it sells the property. In addition, a landowner may be held liable for hazardous materials or substances that migrate from the property onto or beneath adjacent sites, as well as hazardous materials or substances from unknown or unidentified sources that may migrate from adjacent sites onto or beneath the property. Similar liability may occur under applicable state law. If any hazardous materials or substances are found within the real property underlying any of the hotel properties at any time, we could be held liable for cleanup costs, fines, penalties and other costs, and we may have little or no recourse against the sellers of the hotel properties. Furthermore, various court decisions have established that third parties may recover damages for injury caused by release of hazardous substances and for property contamination. Although we will attempt to obtain current environmental site assessments for the hotel properties prior to acquisition, we may not obtain such information. If losses arise from hazardous substance contamination that cannot be recovered from responsible parties, the financial viability of the hotel properties may be materially and adversely affected.

Compliance with the Americans with Disabilities Act of 1990, as amended, and applicable regulations promulgated thereunder (“ADA”) and other changes in governmental rules and regulations could substantially increase our cost of doing business and adversely affect our operating results and our ability to make distributions to our stockholders.

Our hotel properties are subject to the ADA. Under the ADA, “public accommodations” as defined by the ADA must meet certain federal requirements related to access and use by disabled persons. Although we believe our current hotel properties are in substantial compliance with the ADA, and we intend to acquire future hotel properties that are substantially in compliance with the ADA, we may incur additional costs of complying with the ADA at the time of acquisition and from time-to-time in the future to remain in compliance. A number of additional federal, state and local laws exist that also may require modifications to the hotel properties or restrict certain renovations with respect to access by disabled persons. A violation of the ADA could result in the imposition of fines by the federal government or an award of damages to private litigants, and attorneys’ fees may be awarded to a plaintiff claiming ADA violations. State and federal laws in this area are constantly evolving and could place a greater cost or burden on us. If we were required to expend unbudgeted funds to comply with the ADA or other applicable rules and regulations, our financial condition, results of operations, the market price of our shares of common stock and our ability to make distributions to our stockholders could be adversely affected. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and to make alterations as appropriate.

The hotel properties are subject to property taxes that may increase in the future, which could adversely affect our ability to make distributions to our stockholders.

The hotel properties are subject to real and personal property taxes. These taxes may increase as tax rates change and as the hotel properties are assessed or reassessed by taxing authorities, including upon acquisition. If property taxes increase, our financial condition, results of operations and our ability to make distributions to our stockholders could be materially and adversely affected. As the owner of the hotel properties, we are ultimately responsible for payment of the taxes to the applicable government authorities. If we fail to pay any such taxes, the applicable taxing authority may place a lien on the hotel property, and the hotel property could become subject to a tax sale.

The hotel properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem.

Litigation and concern about indoor exposure to certain types of toxic molds have been increasing as the public becomes aware that exposure to mold can cause a variety of health effects and symptoms, including allergic reactions and respiratory problems. Toxic molds can be found almost anywhere; they can grow on virtually any organic substance, as long as

Table of Contents

moisture and oxygen are present. There are molds that can grow on wood, paper, carpet, foods and insulation. When excessive moisture accumulates in buildings or on building materials, mold growth will often occur, particularly if the moisture problem remains undiscovered or unaddressed. It is impossible to eliminate all molds and mold spores in the indoor environment. In warm or humid climates, the likelihood of toxic mold can be exacerbated by the necessity of indoor air conditioning year-round. The difficulty in discovering indoor toxic mold growth could lead to an increased risk of lawsuits by affected persons, and the risk that the cost to remediate toxic mold will exceed the value of the property. Because of attempts to exclude investigations, abatement and damage costs caused by toxic mold growth from certain liability provisions in insurance policies, there is no guarantee that insurance coverage for toxic mold will be available now or in the future.

Future changes in laws and regulations may adversely affect the resale value of real estate.

Future changes in land use and environmental laws and regulations, whether federal, state or local, may impose new restrictions on the development or use, and therefore the value, of real estate. The resale of real estate by us may be adversely affected by such regulations. In addition, cities and other municipalities may have different rules and regulations which may change from time to time, including retrofit ordinances, which may affect the capital needs of the hotel properties. Any such changes would need to be addressed by us, which would reduce our net income and the amount of cash available for distributions to our stockholders.

Certain sellers of hotel properties have made, and future sellers may only make, limited or no representations and warranties regarding the condition of the properties.

We have acquired, and may in the future acquire real estate from sellers who make only limited or no representations and warranties regarding the condition of such real estate, the presence of hazardous materials or hazardous substances within such real estate, the status of governmental approvals and entitlements for such real estate or other matters adversely affecting such real estate. We may not be able to pursue a claim for damages against such sellers except in limited circumstances. The extent of damages that we may incur as a result of such matters cannot be predicted but potentially could result in a significant adverse effect on the value of such real estate.

We may acquire hotel properties from affiliates of the Advisor.

We may acquire hotel properties from affiliates of the Advisor. Accordingly, notwithstanding that the purchase price will be based on a third-party appraisal, the purchase agreements for such hotel properties will not be negotiated on a third-party arm’s length basis. Some of the terms of the purchase agreements with affiliates of the Advisor may not be on market terms. The stockholders will not have approval rights with respect to the acquisition of hotel properties from affiliates.

We may not obtain audited results of operations for the hotel properties prior to acquiring the hotel properties.

We may not obtain audited operating statements regarding the prior operations of the hotel properties prior to acquiring the hotel properties. We may rely on unaudited financial information provided by the sellers of the hotel properties. Thus, it is possible that information we relied on with respect to the acquisition of the hotel properties may not be accurate.

We may not obtain independent third-party appraisals or valuations of a hotel property before acquiring it and our valuation may not be accurate.

We have obtained independent third-party appraisals or valuations or other reports for some, but not all, of our current hotel properties before purchasing them and may not obtain independent third-party appraisals or valuations of a future hotel property, or other reports with respect to a future hotel property, before we invest in such hotel property. If we do not obtain such third-party appraisals or valuations, there can be no assurance that our valuation of a hotel property will be accurate or that a hotel property’s value will exceed its cost to us or that any sale or other disposition of such hotel property will result in a profit for us. Third-party appraisals and other reports may be prepared for lenders, in which case we typically will try to obtain a copy of such appraisals and reports for review, as well as reliance letters from the third-party preparers to allow us to rely on such appraisals and reports. To the extent we do not obtain such other reports or reliance letters before investing in a hotel property, the risk of investing in such hotel property may be increased.

Table of Contents

If capitalization rates increase, the value of our assets may decrease and we may not be able to sell our assets at anticipated prices.

The value of commercial real estate is generally based on capitalization rates. Capitalization rates generally trend with interest rates. Consequently, if interest rates go up, so do capitalization rates. If interest rates rise in the future, it is likely that capitalization rates will also rise and, as a result, the value of real estate will decrease. If capitalization rates continue to increase, the hotel properties will likely achieve lower sales prices than anticipated, resulting in reduced returns.

Certain of the hotel properties in our current portfolio are, and future hotel properties may be, located in areas with increased risk of tornados, floods and other natural disasters and face risks associated with the direct and indirect physical effects of climate change, and we do not intend to obtain insurance to cover these natural disasters unless required by a lender.

Some of the hotel properties in our current portfolio are, and future hotel properties may be, located in areas in the United States that have increased risk of tornados, floods, earthquakes, hurricanes, high winds or wildfires. A tornado, flood, earthquake, hurricane, high winds or wildfire could cause structural damage to or destroy a hotel property. Over time, our hotels located in coastal markets and other areas that may be impacted by climate change are expected to experience increases in storm intensity and rising sea-levels, which may cause damage to our hotel properties. As a result, we could become subject to significant losses and/or repair costs. Other markets may experience prolonged variations in temperature or precipitation that may limit access to the water needed to operate our hotel properties or significantly increase energy costs, which may subject those properties to additional regulatory burdens, such as limitations on water usage or stricter energy efficiency standards. We do not intend to obtain wind, flood or earthquake insurance for the hotel properties unless required by a lender. We have obtained flood insurance for one of our hotels. It is possible that any such insurance, if obtained, will not be sufficient to pay for damage to any hotel property. Further, to the extent we do obtain insurance for such hotels, weather events and climate change may increase the cost of, or make unavailable, such property insurance, on terms we find acceptable in areas most vulnerable to such events.

We may not have control of hotel properties we acquire through joint ventures.

We may make some of our investments through joint ventures between the Company and both affiliated and non-affiliated parties. It is anticipated that, with respect to any such investment, we and the joint venture partner will have joint control over the management and operation of the hotel property. Thus, we will be dependent on the decisions made by our joint venture partner. Such joint venture partner may have objectives which are different than those of the Company.

The presence of construction defects in newly or recently constructed hotel properties could adversely affect the financial performance of a hotel property.

Some of our current hotel properties are, and future hotel properties may be, newly or recently constructed. Newly constructed properties are sometimes subject to construction defects that only reveal themselves over time. If any of the hotel properties should become subject to any construction defect issues, we may have remedies under state law as well as under any warranties from the contractors for the construction work, provided that the warranties were assigned to such owner. If the warranties do not cover all the expenses associated with any construction defects that may arise, we could be liable for the expenses associated with correcting the construction defect. If work is required to cure any construction defects, reserves may not be sufficient to pay for such work. Accordingly, the presence of construction defects could adversely affect the financial performance of the hotel properties, we may be required to pay for all or part of the repair of such construction defects, which will reduce the cash flow from the hotel properties, and the return to our stockholders may be reduced.

Construction and rehabilitation at the hotel properties entails risks that are beyond our and any general contractor’s control, and the costs may exceed the funds available to us.

We have rehabilitated, renovated and made capital improvement at some of the hotel properties in our current portfolio, and expect to do so with future hotel properties. Hotel properties have an ongoing need for capital improvements and the franchisors of our hotels also require periodic capital improvements as a condition of keeping the franchise licenses. The

Table of Contents

construction of commercial real property is cyclical and is significantly affected by changes in national and local economic and other conditions, such as employment levels, availability of financing, interest rates and demand for commercial properties. Such uncertainties could adversely affect our performance. In addition, construction entails risks that are beyond our or any general contractor’s control. Completion of new construction, rehabilitation or redevelopment may be delayed or prevented, and costs of such capital improvements may be increased, by factors such as adverse weather, strikes or energy shortages, shortages or increased costs of labor and material for construction, delays in construction schedules, cost overruns, inflation, environmental, zoning, title or other legal matters and unknown contingencies, including any such factors caused by supply chain disruptions. Changes in construction plans and specifications, delays due to compliance with governmental requirements, increases in real estate taxes and other local government fees or imposition of fees not yet levied, or other delays could cause construction costs to exceed the amounts available from the Offering proceeds and any loans. In the event that construction costs exceed funds available, our ability to complete the work to be done on a development hotel property will depend upon our ability to supply additional funds. There can be no assurance that we will have adequate funds available for that purpose. Any delays in construction may have an adverse impact on our cash flow and long-term success.

We will be required to obtain the approval of various governmental authorities when rehabilitating and improving the hotel properties, which may result in delays and increased costs.

In rehabilitating and improving the hotel properties, we will be required to obtain the approval of various government authorities regulating such matters as permitted land uses and levels of density and the installation of utility services such as water and waste disposal. Governmental authorities have imposed impact fees as a means of defraying the cost of providing certain governmental services to developing areas and the amount of these fees has increased significantly during recent years. Many state laws require the use of specific construction materials which reduce the need for energy consuming heating and cooling systems. Local governments also, at times, declare moratoriums on the issuance of building permits and impose other restrictions in areas where sewage treatment facilities and other public facilities do not reach minimum standards. We will also be subject to a variety of federal, state and local statutes, ordinances, rules and regulations concerning protection of health and the environment. Such governmental regulation may result in delays, cause us to incur substantial compliance and other costs and prohibit or severely restrict development in certain regions or areas, which could have an adverse effect on our business and results of operations.

We may not discover defects in the hotel properties prior to acquisition.

Although we intend to perform due diligence on the hotel properties before we acquire them, there can be no assurance that all defects (including physical defects, title issues and financial issues) will be discovered prior to acquisition. In the event that a significant issue is not discovered with respect to a particular hotel property, our performance may be negatively impacted.

The hotel properties could become subject to condemnation actions.

The hotel properties or a portion of the hotel properties could become subject to an eminent domain or inverse condemnation action. Any such action could have a material adverse effect on the marketability of a hotel property or the amount of return on investment for our stockholders.

We may sustain losses resulting from litigation that is not completely covered by insurance.

We anticipate that litigation will occur in the ordinary course of our business. We intend to maintain adequate general liability insurance to cover such potential litigation which stems from the ordinary course of owning and operating the hotel properties; however, there can be no assurance that all losses will be covered. If a loss occurs that is partially or completely uninsured, we may lose all or part of our investment.

Table of Contents

Risks Related to Debt Financing

We have obtained, and in the future likely will obtain, mortgage indebtedness and other borrowings, which increases our risk of loss due to potential foreclosures.

We have obtained, and expect in the future to obtain, loans to acquire the hotel properties and thus, the hotel properties will be leveraged. We may also obtain mortgage debt on hotel properties that we already own in order to obtain funds to acquire additional hotel properties, to fund property improvements and other capital expenditures, to make distributions and for other purposes. In addition, we may borrow as necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes, including borrowings to satisfy the REIT requirement that we distribute at least 90% of our annual REIT taxable income (computed without regard to the dividends-paid deduction and excluding net capital gain) to our stockholders. We anticipate that the aggregate loan-to-value ratio for the Company will be between 35% and 65%. We target a loan-to-value ratio for the hotel properties of between 35% and 70%, based on the purchase price of the hotel properties, however, we may obtain financing that is less than or higher than such loan-to-value ratio for an individual hotel property at the discretion of our board of directors. As of December 31, 2024, our aggregate loan-to-value ratio, based on the aggregate purchase price of the hotel properties, was approximately 57%. No assurance can be given that future cash flow will be sufficient to make the debt service payments on any loans and to cover all operating expenses. If the hotel properties’ revenues are insufficient to pay debt service and operating costs, we may be required to seek additional working capital. There can be no assurance that such additional funds will be available. In the event additional funds are not available, the lenders may foreclose on the hotel properties and our stockholders could lose their investment. In addition, the degree to which we are leveraged could have an adverse impact on us, including (i) increased vulnerability to adverse general economic and market conditions, (ii) impaired ability to expand and to respond to increased competition, (iii) impaired ability to obtain additional financing for future working capital, capital expenditures, general corporate or other purposes and (iv) requiring that a significant portion of cash provided by operating activities be used for the payment of debt obligations, thereby reducing funds available for distributions, operations and future business opportunities.

Restrictions on the availability of real estate financing, high interest rates and the cost of loans has increased our debt service payments and may make it difficult for us to finance or refinance the hotel properties on terms acceptable to us or at all.

Market fluctuations in real estate loans may affect the availability and cost of loans needed to acquire or refinance the hotel properties. Lenders of several loans that we have refinanced or extended recently have required higher interest rates than the original loans. There is no assurance that we will be able to obtain the required financing to acquire or refinance the hotel properties. Restrictions on the availability of real estate financing or high interest rates on real estate loans may also adversely affect our ability to sell the hotel properties. Interest rates have increased and may continue to rise, though the timing and amount of any such future interest rate increases are uncertain. As a result, the interest rates available for future real estate loans and refinancings may be higher than the current interest rates for such loans, which may have a material and adverse impact on the hotel properties and us.

Some of our financing arrangements involve interest only loans and balloon payment obligations and an inability to prepay until shortly before maturity. These may, in the future, adversely affect our ability to make distributions.

Debt on some of our existing hotel properties require us, and debt on future hotel properties may also require us, to make interest only payments with a lump-sum or “balloon” payment at maturity. Our ability to make a balloon payment at maturity is uncertain and may depend upon our ability to obtain additional financing or to sell the hotel property. At the time the balloon payment is due, we may or may not be able to refinance the balloon payment on terms as favorable as the original loan or sell the hotel property at a price sufficient to make the balloon payment. Several of the loans obtained to acquire our existing hotel properties do not allow for prepayment until shortly before maturity and provide that any prepayment may require the payment of a prepayment fee. Consequently, we may not be able to take advantage of favorable changes in interest rates. The effect of a refinancing or sale could affect the rate of return to our stockholders and the projected time of disposition of the hotel properties. In addition, payments of principal and interest made to service our debts may leave us with insufficient cash to pay the distributions that we are required to pay to maintain our qualification as a REIT and/or avoid federal income tax.

Table of Contents

Elevated interest rates have increased our interest costs, and future increases in interest rates could further increase our interest costs and reduce our cash flows.

As of the date of this filing, we had a total of $39.9 million of variable rate notes payable, including our existing line of credit with Western State Bank, and it is anticipated that the loans we obtain in the future may have variable interest rates. Any increase in interest rates would increase our interest costs, which would reduce our cash flows and our ability to make distributions to our stockholders. An increase in interest rates could also affect our ability to refinance or extend existing financing on favorable terms, or at all. Lenders of several loans that we have refinanced or extended recently have required higher interest rates that the original loans. Given the challenges affecting the U.S. real estate industry and the elevated interest rate environment, in order to refinance or extend loans, we expect our interest expense to increase in the future as a result of recent extensions and as we continue to refinance our maturing debt. In the event that the interest rate on any loan increases significantly, we may not have sufficient funds to pay the required interest payments. In such event, the continued ownership of the applicable hotel property may be threatened. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times or on terms that may not permit realization of the maximum return on such investments. Increases in interest rates may cause our operations to suffer and the amount of distributions our stockholders receive and their overall return on investment may decline.

We have incurred, and may in the future incur, recourse debt or be liable for nonrecourse carve-outs and springing recourse events under the loans for the hotel properties, which may permit the lenders to proceed against our assets.

Although we attempt to obtain loans for the hotel properties that will be nonrecourse as to principal and interest, we have obtained and may in the future obtain recourse debt to finance our acquisitions. Further, lenders have required and may in the future require us to be personally liable for certain carve-outs and springing recourse events. In circumstances where personal liability attaches, the lender could proceed against our assets. If a lender successfully forecloses upon any of our assets, our ability to pay cash distributions to our stockholders will be reduced and our stockholders may lose part of their investment.

If we violate any restrictions on transfer imposed by lenders, the lender could have the right to declare the entire amount of the loan to be immediately due and payable.

Loans on our existing hotel properties restrict, and we anticipate that loans on future hotel properties will, restrict our ability to sell our interests in the hotel properties. The lenders may also impose restrictions on the transferability of our shares of common stock. Upon violation of the restrictions on transfer or encumbrance, a lender will have the right to declare the entire amount of the loan, including principal, interest, prepayment premiums and other charges, to be immediately due and payable. If the lender declares the loan to be immediately due and payable, we will have the obligation to immediately pay the loan in full, including applicable prepayment charges. If replacement financing is not found or the loan is not immediately paid in full, the lender may invoke its other remedies under the loan, which may include proceeding with a foreclosure that would cause us to lose our entire interest in the applicable hotel property.

If we default on a loan, it could result in foreclosure of the hotel property, which could result the loss of all or a substantial portion of the investment we made in the hotel property.

Loans on our existing hotel properties include, and we anticipate that future loans will include, various actions by us that will cause an event of default under such loans, including, among others, the failure to pay required payments under the loan, the failure to pay taxes, the failure to maintain insurance, the assignment by an owner of a hotel property of an interest in such hotel property to a creditor, the bankruptcy of an owner of a hotel property, the filing of an action for partition or the transfer of an interest in a hotel property without lender’s consent. Additional events of default may be applicable to some or all of the loans. If we default under a loan for any reason, the lender may declare a default under the applicable loan, which could result in foreclosure by the lender on the applicable hotel property and the loss of all or a substantial portion of the investment we made in such hotel property.

Table of Contents

The derivative financial instruments we use to hedge against interest rate fluctuations may not be successful in mitigating our risks associated with interest rates and could reduce the overall returns on our stockholders’ investment.

We are exposed to the effects of interest rate changes as a result of borrowings we use to maintain liquidity and to fund the acquisition, expansion and refinancing of the hotel properties and our operations. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. We may choose to manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. We may utilize a variety of derivative financial instruments, including interest rate caps, floors and swap agreements, in order to hedge exposures and limit the effects of changes in interest rates on our operations, but no hedging strategy can protect us completely. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that counterparties may fail to honor their obligations under these arrangements, these arrangements may not be effective in reducing our exposure to interest rate changes, and losses on a hedge position will reduce the funds available for the payment of distributions to our stockholders, and the losses may exceed the amount we invested in the instruments. These hedging agreements involve risks. We cannot assure you that our hedging strategy and the derivatives that we use will adequately offset the risk of interest rate volatility or that its hedging transactions will not result in losses. In addition, the use of such instruments may reduce the overall return on our investments. These instruments may also generate income that may not be treated as qualifying REIT income for purposes of the 75% or 95% REIT gross income tests.

Certain of the hotel properties and our other assets are cross-collateralized.

We have obtained a line of credit, and may obtain other debt financing, which require that our assets be cross-collateralized. No assurance can be given that future cash flow will be sufficient to make the debt service payments on our loans and to cover all operating expenses.

Risks Related to Our Organization and Structure

Our TRS Lessee structure subjects us to the risk of increased hotel operating expenses that could adversely affect our operating results and our ability to make distributions to our stockholders.

Our leases with our TRS Lessees require our TRS Lessees to pay the owners of the hotel properties (which are wholly-owned subsidiaries of the Operating Partnership) rent based, in part, on revenues from the hotel properties. Our operating risks include decreases in hotel property revenues and increases in operating expenses, which would adversely affect our TRS Lessees’ ability to pay rent due under the leases, including, but not limited to, increases in wage and benefit costs, repair and maintenance expenses, energy costs, property taxes, insurance costs and other operating expenses. As these rent payments will be a primary source of our revenue, any inability of our TRS Lessees to make such rent payments would likely have a significant adverse impact on our financial condition, results of operations and our ability to make distributions to our stockholders.

Our TRS structure increases our overall tax liability.

Our TRS Lessees are subject to federal, state and local income tax on their taxable income, which consists of the revenues from the hotel properties, net of the operating expenses for the hotel properties and rent payments to the Operating Partnership. Accordingly, although ownership of our TRS Lessees allows us to participate in the operating income from the hotel properties in addition to receiving rent, that operating income is fully subject to corporate income tax. The after-tax net income of our TRS Lessees will be available for distribution to us.

Our ownership of our TRSs is limited and our transactions with our TRSs will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.

A REIT may own up to 100% of the stock of one or more TRSs. A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT, including gross operating income from hotels that are operated by eligible independent contractors pursuant to management agreements. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% of the value of

Table of Contents

a REIT’s gross assets may consist of stock or securities of one or more TRSs. In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. Our TRS entities are subject to federal, state and local income tax on their taxable income, and their after-tax net income is available for distribution, but is not required to be distributed to us. There can be no assurance that we will be able to comply with the 20% limitation or to avoid application of the 100% excise tax.

If our leases with our TRS Lessees are not respected as true leases for federal income tax purposes, we would not qualify as a REIT.

To qualify as a REIT, we are required to satisfy two gross income tests pursuant to which specified percentages of our gross income must be passive income, such as rent. For the rent paid pursuant to the leases with our TRS Lessees, which should constitute substantially all of our gross income, to qualify for purposes of the gross income tests, the leases must be respected as true leases for federal income tax purposes and must not be treated as service contracts, joint ventures or some other type of arrangement. We plan to structure our leases so that they will be respected as true leases for federal income tax purposes, but there can be no assurance that the Internal Revenue Service (“IRS”) will agree with this characterization or will not challenge this treatment, or that a court would not sustain such a challenge. If the leases were not respected as true leases for federal income tax purposes, we would not be able to satisfy either of the two gross income tests applicable to REITs and likely would fail to qualify for REIT status.

If our hotel operators do not qualify as “eligible independent contractors,” we would not qualify as a REIT.

Rent paid by a lessee that is a “related party tenant” of a REIT will not be qualifying income for purposes of the two gross income tests applicable to REITs. We lease all of the hotel properties to our TRS Lessees. A TRS Lessee will not be treated as a “related party tenant,” and will not be treated as directly operating the hotel properties to the extent the hotel properties are operated by an “eligible independent contractor.” If our hotel property operators do not qualify as “eligible independent contractors,” we would not qualify as a REIT. Each of the management companies that enters into a management agreement with our TRS Lessees must qualify as an “eligible independent contractor” under the REIT rules in order for the rent paid to us by our TRS Lessees to be qualifying income for our REIT income test requirements. In order to qualify as an eligible independent contractor, an operator must not own more than 35% of our outstanding shares (by value). In addition, if the operator is a corporation, not more than 35% of the total combined voting power of whose stock (or 35% of the total shares of all classes of whose stock), or, if the operator is not a corporation, not more than 35% of the interest in whose assets or net profits is owned, directly or indirectly, by one or more persons owning 35% or more of our shares of common stock. Complex ownership attribution rules apply for purposes of these 35% thresholds. Although we intend to monitor ownership of our shares of common stock by our hotel property operators and their owners, there can be no assurance that these ownership levels will not be exceeded.

The lease of the hotel properties to a TRS is subject to special requirements.

We may lease certain “qualified lodging facilities” to a TRS (or a limited liability company of which a TRS is a member). The TRS in turn will contract with a management company to operate the lodging facility operations at the hotels. The rents paid by a TRS in this structure would be treated as qualifying rents from real property for purposes of the REIT requirements only if (i) they are paid pursuant to an arm’s-length lease of a qualified lodging facility property and (ii) the operator qualifies as an “eligible independent contractor” with respect to the property. An operator will qualify as an eligible independent contractor if it meets certain ownership tests with respect to us, and if, at the time the operator enters into the management agreement, the operator is actively engaged in the trade or business of operating qualified lodging facility properties for any person who is not a related person to us or our TRSs. If any of the above conditions are not satisfied, then the rents will not be considered income from a qualifying source for purposes of the REIT rules, which could cause us to incur penalty taxes or to fail to qualify as a REIT.

Table of Contents

The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.

Our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to qualify as a REIT, we would become subject to federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders.

The ability of our board of directors to change our major policies may not be in your best interest.

Our board of directors determines our major policies, including policies and guidelines relating to our acquisitions, leverage, financing, growth, operations and distributions to stockholders and our continued qualification as a REIT. Our board of directors may amend or revise these and other policies and guidelines from time to time without the vote or consent of our stockholders. Accordingly, our stockholders will have limited control over changes in our policies and those changes could adversely affect our financial condition, results of operations, the market price of our shares of common stock and our ability to make distributions to our stockholders.

We have not established a minimum distribution payment level and we may be unable to generate sufficient cash flows from our operations to make distributions to our stockholders at any time in the future.

We are generally required to distribute to our stockholders at least 90% of our REIT taxable income each year for us to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), which requirement we currently intend to satisfy. To the extent we satisfy the 90% distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. We have not established a minimum distribution payment level, and our ability to make distributions to our stockholders may be adversely affected by the risk factors described herein. Subject to satisfying the requirements for REIT qualification, in general, we intend over time to make regular monthly distributions to our stockholders. Our board of directors has the sole discretion to determine the timing, form and amount of any distributions to our stockholders. Our board of directors makes determinations regarding distributions based upon factors that it deems relevant.

Among the factors that could impair our ability to make distributions to our stockholders are:

●

our inability to realize attractive returns on our investments;

●

unanticipated expenses that reduce our cash flow or non-cash earnings;

●

decreases in the value of the underlying assets; and

●

the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.

As a result, no assurance can be given that we will be able to continue to make distributions to our stockholders or that the level of any distributions we do make to our stockholders will achieve a market yield or increase or even be maintained over time. Distributions could be dilutive to our financial results and may constitute a return of capital to our investors, which would have the effect of reducing each stockholder’s basis in its shares.

If we are deemed to be an investment company under the Investment Company Act of 1940, our stockholders’ investment return may be reduced.

The Investment Company Act of 1940, as amended (the “Investment Company Act”) requires that any issuer that is beneficially owned by 100 or more persons and that owns certain securities be registered as required under the Investment Company Act. Pursuant to the Operating Partnership Agreement, we are solely responsible for the management and operation of the Operating Partnership and, as a result, our interest in the Operating Partnership has significant incidents of a true general partnership interest and does not fall within the definition of a “security” for purposes of the Investment Company Act. If our interest in the Operating Partnership is deemed to be a security or if the Operating Partnership fails to qualify for an exemption or exclusions from the Investment Company Act, we will be required to register under the

Table of Contents

Investment Company Act. In the event we are required to register under the Investment Company Act, the returns to our stockholders will likely be significantly reduced.

We will be subject to certain risks relating to the Operating Partnership’s acceptance of contributed property in exchange for limited partnership interests.

We intend to own all of our assets through the Operating Partnership. The Operating Partnership has accepted, and may in the future accept, contributions of property from certain persons in exchange for limited partnership interests in the Operating Partnership. The acceptance of persons as limited partners in the Operating Partnership involves certain risks including (i) entering into certain indemnification agreements with the contributing limited partners that would cause us to indemnify such persons for tax liability that may be incurred by the contributing limited partners related to the sale of the contributed property, (ii) the fact that the contributing limited partners will have certain voting rights with respect to the Operating Partnership and (iii) the need for the Operating Partnership to allocate debt to contributing limited partners.

We may need to modify our investment portfolio in the future in order to qualify as a REIT, which may adversely affect our performance.

If the market value or income potential of our qualifying real estate assets changes as compared to the market value or income potential of our non-qualifying assets, or if the market value or income potential of our assets that are considered “real estate-related assets” under the Investment Company Act or REIT qualification tests changes as compared to the market value or income potential of our assets that are not considered “real estate-related assets” under the Investment Company Act or REIT qualification tests, whether as a result of increased interest rates, prepayment rates or other factors, we may need to modify our investment portfolio in order to qualify as a REIT or maintain our exclusion from the definition of an investment company. If the decline in asset values or income occurs quickly, this may be especially difficult, if not impossible, to accomplish. This difficulty may be exacerbated by the illiquid nature of many of the assets that we intend to own. We may have to make investment decisions that we otherwise would not make absent REIT and Investment Company Act considerations.

Under Maryland law, our directors have limited liability if they perform their duties in good faith, in a manner he or she reasonably believes to be in our best interests, and with the care that an ordinarily prudent person in a like position would use under similar circumstances. We are required to indemnify our directors and officers to the maximum extent permitted under Maryland law.

Maryland law provides that a director will not have any liability in that capacity so long as he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests, and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter provides that to the maximum extent permitted by Maryland law, none of our present or former officers or directors will be liable to us or our stockholders for money damages. In addition, the charter and the bylaws require us to indemnify (including advancement of expenses) our directors and officers for actions taken by them in those capacities to the maximum extent permitted by Maryland law. As a result, we and our stockholders may have more limited rights against these persons than might otherwise exist under common law.

Maryland law prohibits business combinations with certain interested stockholder and their affiliates unless otherwise approved by our board of directors, which could inhibit a change in control.

Certain provisions of the Maryland General Corporation Law applicable to us prohibit business combinations with (i) any person who beneficially owns, directly or indirectly, 10% or more of the voting power of our outstanding voting stock, which is referred to as an “interested stockholder,” (ii) an affiliate or associate of the Company who, at any time within the two-year period prior to the date in question, beneficially owned, directly or indirectly, 10% or more of the voting power of our then outstanding stock, which is also referred to as an interested stockholder or (iii) an affiliate of an interested stockholder. These prohibitions last for five years after the most recent date on which the interested stockholder became an interested stockholder. Thereafter, any business combination with the interested stockholder must be recommended by our board of directors and approved by the affirmative vote of at least 80% of the votes entitled to be cast by holders of our outstanding voting stock and two-thirds of the votes entitled to be cast by holders of shares of our voting stock other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected

Table of Contents

or held by an affiliate or associate of the interested stockholder. These requirements could have the effect of inhibiting a change in control even if a change in control were in our stockholders’ interest. These provisions of Maryland law do not apply, however, to business combinations that are approved or exempted by our board of directors prior to the time that someone becomes an interested stockholder.

Provisions contained in Maryland law that are reflected in our charter and bylaws may have anti-takeover effects, potentially preventing investors from receiving a “control premium” for their shares.

Provisions contained in our charter and bylaws, as well as Maryland corporate law, may have anti-takeover effects that delay, defer or prevent a takeover attempt, which may prevent our stockholder from receiving a “control premium” for their shares. For example, these provisions may defer or prevent tender offers for our common stock or purchases of large blocks of our common stock, thereby limiting the opportunities for our stockholders to receive a premium for their shares over then-prevailing market prices. These provisions include the following:

●

Ownership limit. The ownership limit in our charter limits related investors including, among other things, any voting group, from acquiring no more than 9.8% of the value or number of the aggregate, whichever is more restrictive, of our then outstanding shares of common stock, and no more than 9.8% of the value of our then outstanding capital stock (which includes all of our common stock and preferred stock), without the consent of our board of directors.

●

Preferred stock. Our charter authorizes our board of directors to issue preferred stock in one or more classes and to establish the preferences and rights of any class of preferred stock issued. These actions can be taken without soliciting stockholder approval.

●

Maryland control share acquisition statute. Maryland law limits the voting rights of “control shares” of a corporation in the event of a “control share acquisition.”

Federal Income Tax Risks

If we sell a built-in gain asset within five years of the effective date of our REIT election, we may be subject to corporate-level tax on the built-in gain component.

Upon our conversion from an entity taxable as a corporation to a REIT, each asset held directly, or indirectly through a partnership, that had a fair market value in excess of its adjusted basis generally will be considered a “built-in gain asset.” This built-in gain component will be fixed as of the date of conversion to REIT status. If we sell a built-in gain asset within five years of the effective date of our REIT election, we will (subject to certain exceptions) be subject to a corporate-level tax on the built-in gain component. To the extent that we are required to pay federal, state and local taxes, we will have less cash available for distributions.

Failure to qualify as a REIT would reduce our net earnings available for investment or distribution.

Our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our gross income (an annual test) and assets (tested as of the end of each calendar quarter) and other tests imposed by the Code. If we fail to qualify as a REIT for any taxable year after electing REIT status, we will be subject to federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for investment or distributions to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends-paid deduction and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax.

Generally, ordinary dividends payable by REITs do not qualify for reduced U.S. federal income tax rates.

Currently, the maximum tax rate applicable to qualified dividend income payable to certain non-corporate U.S. stockholders, is 20%. Dividends payable by REITs, however, generally are not eligible for the reduced rates. REIT dividends that are not designated as qualified dividend income or capital gain dividends are taxable as ordinary income.

Table of Contents

Although this does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividend income could cause certain non-corporate investors to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends. Commencing with taxable years beginning on or after January 1, 2018 and continuing through 2025, non-corporate U.S. taxpayers may be entitled to claim a deduction in determining their taxable income of up to 20% of qualified REIT dividends (dividends other than capital gain dividends and dividends attributable to certain qualified dividend income received by us). In addition, Treasury Regulations impose a minimum holding period for the 20% deduction that was not set forth in the Code. Under the Treasury Regulations, in order for a REIT dividend with respect to a share of REIT stock to be treated as a qualified REIT dividend, the U.S. stockholder (i) must have held the share for more than 45 days during the 91-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend and (ii) cannot have been under an obligation to make related payments with respect to positions in substantially similar or related property, e.g., pursuant to a short sale. Prospective investors are urged to consult with their tax advisors regarding the effect of this change on their effective tax rate with respect to REIT dividends.

Even if we qualify as a REIT for federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to make distributions to our stockholders.

Even if we qualify as a REIT for federal income tax purposes, we may still be subject to some federal, state and local taxes on our income or property. For example:

●

In order to qualify as a REIT, we must distribute annually at least 90% of our taxable income to our stockholders (which is determined without regard to the dividends-paid deduction or net capital gain). To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on the undistributed income. We intend to make distributions to our stockholders to comply with the REIT requirements of the Code.

●

We will be subject to a 4.0% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.

●

If we have net income from the sale of foreclosure property that we hold primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, we must pay a tax on that income at the highest corporate income tax rate.

●

If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, our gain would be subject to the 100% “prohibited transaction” tax unless such sale were made by one of our taxable REIT subsidiaries or we qualified for a “safe harbor” under the Code.

●

If we hold or acquire assets when we are taxable as a corporation prior to our qualification as a REIT, such assets when held by us as a REIT may be subject to tax if sold in the five-year period following the acquisition of such assets.

The ownership limits that apply to REITs, as prescribed by the Code and by the charter, may inhibit market activity in our shares of common stock and restrict our business combination opportunities.

In order for us to qualify as a REIT, not more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year after the first year for which we elect to qualify as a REIT. Additionally, at least 100 persons must beneficially own our capital stock during at least 335 days of a taxable year (other than the first taxable year for which we elect to be taxed as a REIT). The charter, with certain exceptions, authorizes our board of directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. The charter also provides that, unless exempted by the Board, no person may own more than 9.8% by value or number of shares, whichever is more restrictive, of our outstanding shares of common stock, or 9.8% by value or number of shares, whichever is more restrictive, of our outstanding capital stock. Our board of directors may, in its sole discretion, subject to such conditions as it may determine and the receipt of certain representations and undertakings, prospectively or retroactively, waive the ownership limit or establish a different limit on ownership, or excepted holder limit, for a particular stockholder if the stockholder’s ownership

Table of Contents

in excess of the ownership limit would not result in our being “closely held” under Code Section 856(h) or otherwise failing to qualify as a REIT. These ownership limits could delay or prevent a transaction or a change in control of the Company that might involve a premium price for our shares of common stock or otherwise be in the best interest of our stockholders.

REIT distribution requirements could adversely affect our ability to execute our business plan.

To qualify as a REIT, we must distribute to our stockholders each year 90% of our REIT taxable income (which is determined without regard to the dividends-paid deduction or net capital gain). Further, we must distribute 100% of our REIT taxable income in order to avoid a corporate level tax. From time to time, we may generate taxable income greater than our income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to our stockholders (for example, where a borrower defers the payment of interest in cash pursuant to a contractual right or otherwise). If we do not have other funds available in these situations, we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4.0% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our shares of common stock. In order to meet these tests, we may be required to forego investments we might otherwise make. Thus, compliance with the REIT requirements may hinder our performance. In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our gross assets consists of cash, cash items, government securities and qualified real estate assets. The remainder of our investment in securities (other than government securities, securities that constitute qualified real estate assets and securities of our TRSs) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our gross assets (other than government securities, securities that constitute qualified real estate assets and securities of our TRSs) can consist of the securities of any one issuer, and no more than 20% of the value of our total gross assets can be represented by the securities of one or more TRSs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

The tax on prohibited transactions will limit our ability to engage in transactions that would be treated as sales for federal income tax purposes.

A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of assets, other than foreclosure property, deemed held primarily for sale to customers in the ordinary course of business (subject to a safe harbor under the Code for certain sales). It may be possible to reduce the impact of the prohibited transaction tax by conducting certain activities through taxable REIT subsidiaries. However, to the extent that we engage in such activities through taxable REIT subsidiaries, the income associated with such activities may be subject to full corporate income tax.

Non-United States investors may be subject to FIRPTA on the sale of its shares if we are unable to qualify as a “domestically controlled” REIT.

A non-United States person disposing of a United States real property interest, including shares of a United States corporation whose assets consist principally of United States real property interests, is generally subject to a tax under the Foreign Investment in Real Property Tax Act, known as FIRPTA, on the gain recognized on the disposition of such interest. Note that “qualified foreign pension funds” and certain other qualified foreign stockholders may be generally exempt from

Table of Contents

FIRPTA. In addition, FIRPTA does not apply, however, to the disposition of shares in a REIT if the REIT is a “domestically controlled” REIT. A REIT is a domestically controlled REIT if, at all times during a specified testing period (the continuous five-year period ending on the date of disposition or, if shorter, the entire period of the REIT’s existence), less than 50% in value of its shares is held directly or indirectly by non-United States holders. We cannot assure you that we will qualify as a domestically controlled REIT. Final Treasury regulations effective April 25, 2024 (the “Final Regulations”) modify the existing prior tax guidance relating to the manner in which we determine whether we are a domestically controlled REIT. These regulations provide a look through rule for our stockholders that are non-publicly traded partnerships, non-public REITs, non-public regulated investment companies, or domestic “C” corporations owned 50% or more directly or indirectly by foreign persons (“foreign-controlled domestic corporations”) and treat “qualified foreign pension funds” and “international organizations” as foreign persons for this purpose. The look-through rule in the Final Regulations applicable to foreign-controlled domestic corporations will not apply to a REIT for a period of up to ten years if the REIT is able to satisfy certain requirements during that time, including not undergoing a significant change in its ownership and not acquiring a significant amount of new U.S. real property interests, in each case since April 24, 2024, the date the Final Regulations were issued. If a REIT fails to satisfy such requirements during the ten-year period, the look-through rule in the Final Regulations applicable to foreign-controlled domestic corporations will apply to such REIT beginning on the day immediately following the date of such failure. We cannot predict when we will commence being subject to such look-through rule in the Final Regulations and we may not be able to satisfy the applicable requirements for the duration of the ten-year period. Prospective investors are urged to consult with their tax advisors regarding the application and impact of these rules. If we were to fail to qualify as a domestically controlled REIT, and if a separate exemption did not apply, gain realized by a non-United States investor on a sale of its shares would be subject to FIRPTA unless our shares of common stock were traded on an established securities market and the non-United States investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock.

Complying with the REIT requirements may limit our ability to hedge effectively.

The REIT provisions of the Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate, inflation and/or currency risks, including gain from the disposition of certain hedging transactions, will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges (i) interest rate risk on liabilities incurred to carry or acquire real estate, (ii) risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the REIT 75% or 95% gross income tests or (iii) risks associated with the extinguishment of certain indebtedness or the disposition of certain property related to prior hedging transactions described in (i) or (ii) above and each such instrument is properly identified under applicable Treasury Regulations. Income from hedging transactions that do not meet these requirements will generally constitute nonqualifying income for purposes of both the REIT 75% and 95% gross income tests. As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur.

If we were considered to actually or constructively pay a “preferential dividend” to certain of our stockholders, our status as a REIT could be adversely affected.

In order to qualify as a REIT, we must distribute annually to our stockholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain. For so long as we are not a publicly offered REIT (defined below), in order for distributions to be counted as satisfying the annual distribution requirements for REITs, and to provide us with a REIT-level tax deduction, the distributions must not be “preferential dividends.” A dividend is generally not a preferential dividend if the distribution is pro rata among all outstanding shares of stock within a particular class, and in accordance with the preferences among different classes of stock as set forth in the REIT’s organizational documents. There is no de minimis exception with respect to preferential dividends. However, the preferential dividend rules do not apply to a “publicly offered REIT.” A publicly offered REIT is defined as a REIT that is required to file annual and periodic reports with the SEC under the Securities and Exchange Act of 1934. We are required to file annual and periodic reports with the SEC.

Table of Contents

Changes made to the U.S. tax laws could have a negative impact on our business.

The tax laws or regulations governing REITs or the administrative interpretations thereof may be amended at any time. We cannot predict if or when any new or amended law, regulation, or administrative interpretation will be adopted, promulgated, or become effective, and an such change may apply retroactively. Because the IRS, the U.S. Treasury Department and Congress frequently review federal income tax legislation, we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted. In particular, the federal income taxation of REITs may be modified, possibly with retroactive effect, by legislative, administrative or judicial action at any time. We anticipate that legislative and regulatory changes, including tax reform, may be likely in the 119th Congress, which convened in January 2025. There can be no assurance that future tax law changes will not increase income tax rates, impose new limitations on deductions, credits or other tax benefits, or make other changes that may adversely affect our business, cash flows or financial performance or the tax impact to a stockholder of an investment in our common stock. Stockholders are urged to consult with their tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares.

Retirement Plan Risks

If the fiduciary of an employee benefit plan fails to meet the fiduciary requirements and other standards under ERISA and the Code as a result of investment in our shares of common stock, the fiduciary could be subject to criminal and civil penalties.

Special considerations apply to (i) employee benefit plans subject to ERISA, (ii) plans, IRAs and other arrangements subject to Code Section 4975 (such as an individual retirement account (“IRA”)) and (iii) entities deemed under ERISA to hold the “plan assets” of any such employee benefit plans or plans that are investing in our shares of common stock. Fiduciaries investing the assets of such a plan in our shares of common stock should, among other things, consider the following:

●

whether the investment is in accordance with the documents and instruments governing such plan;

●

the definition of “plan assets” under ERISA and the impact thereof on the plan’s investment in the Company;

●

whether the investment satisfies the diversification requirements of Section 404(a)(1)(C) of ERISA (or other applicable law);

●

whether, under Section 404(a)(1)(B) of ERISA (or other applicable law), the investment is prudent, considering the nature of an investment in the Company and our compensation structure and the fact that there is not expected to be a market created in which our shares of common stock can be sold or otherwise disposed of;

●

that we have a limited history of operations;

●

whether we or any of our affiliates are a “party-in-interest” (within the meaning of Section 3(14) of ERISA) or “disqualified person” (within the meaning of Code Section 4975) with respect to the plan;

●

the need to annually value our shares of common stock; and

●

whether an investment in the Company will cause the plan to recognize unrelated business taxable income.

With respect to the annual valuation requirements described above, we will provide an estimated value for our shares of common stock annually beginning after the Initial Valuation Date. We can make no claim whether such estimated value will or will not satisfy the applicable annual valuation requirements under ERISA and the Code. The Department of Labor or the IRS may determine that a plan fiduciary is required to take further steps to determine the value of our shares of common stock. In the absence of an appropriate determination of value, a plan fiduciary may be subject to damages, penalties or other sanctions.

Table of Contents

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Code may result in the imposition of criminal and civil penalties and could subject the fiduciary to claims for damages or for equitable remedies. In addition, if an investment in our shares of common stock constitutes a prohibited transaction under ERISA or the Code, the fiduciary who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested. In the case of a prohibited transaction involving an IRA owner, the IRA may loss its tax-exempt status and thus, the entire value of the IRA would be considered to be distributed and taxable to the IRA sponsor. Plan fiduciaries should consult with their own legal advisors before making an investment in our shares of common stock.

Item 1B. Unresolved Staff Comments.

None

Item 1C. Cybersecurity.

Risk Management and Strategy

We have developed and implemented a cybersecurity risk management policy intended to protect the confidentiality, integrity and availability of our critical systems and information. Our policy establishes the framework for managing cybersecurity risks and outlines the measures and protocols to protect our information systems. Our risk management and strategy is managed by our third-party IT Management Service Provider, Network Center, Inc. (“Network Center”) with oversight by our VP of Operations. Our policy applies to all employees, contractors, and all third-party partners who have access to our information systems. Our cybersecurity risk management policy is integrated into our overall enterprise risk management processes.

Our risk management policy includes continual monitoring by Network Center, as they manage our technical defenses. Risk assessments and penetration testing are performed on a quarterly basis to identify and mitigate potential threats. Procedures have been implemented for identifying, evaluating and addressing vulnerabilities. Additionally, vulnerability assessments are performed monthly by Network Center. An additional part of our risk management strategy is having a clear process for reporting cybersecurity incidents and the development and maintenance of an incident response plan to address and mitigate the impact of cybersecurity incidents.

A key component of our risk management and strategy surrounds data protection. We have implemented strict access controls for each individual employee to ensure only authorized personnel can access sensitive and confidential data. All digital communication is pre-screened for potentially malicious actions through a dedicated email security provider. For additional protection, we have implemented multi-factor authentication along with email encryption to ensure data is protected while at rest and in transit. We are also protected through a multilayered approach to security through the ESET Protection Platform, which provides formidable defense through cyber threat prevention, detection and response.

In addition, we provide regular cybersecurity training to all employees on a quarterly basis and conduct ongoing awareness programs to keep employees informed about cybersecurity best practices. Employees have been trained, enabling them to detect and report on any malicious intrusions or social engineering attempts to infiltrate our systems. They are also regularly trained, tested and reported on through KnowB4 spear-phishing email campaigns to ensure our training is effective.

We are fully insured for cyber risk through our insurance provider.

Governance

Our board of directors is responsible for overseeing our policies and practices related to corporate governance including cybersecurity risks. On an annual basis, management receives a report from Operations Management on our cybersecurity threat risk, management processes, and strategies. In addition to annual meetings, our board of directors, management and Audit Committee are notified of any cybersecurity incident, its threat level and the response. The threat level and response are evaluated and documented in a report by Operations leadership and our IT Services Provider. Based on our board of directors and Audit Committee review of the incident report, they determine if the findings require disclosure to the SEC.

Table of Contents

Our cyber security policies and procedures are reviewed and updated annually or as needed to address any emerging threats and changes in regulatory requirements.

To date, there have been no confirmed cyber security breaches, unauthorized intrusions or threats detected within our mainframe operating systems, our encrypted e-mail servers, or our advanced firewall protections, and we have not identified risks from known cybersecurity threats, that have materially affected or that are reasonably likely to materially affect our business. However, future incidents could have a material impact on our business strategy, results of operations or financial condition. For additional discussion of the risks posed by cybersecurity threats, see “Item 1A. Risk Factors – We and our hotel managers and franchisors rely on information technology in our operations, and any material failure, inadequacy, interruption, cyber-attack or security failure of that technology could harm our business.”

Item 2. Properties.

Our principal executive offices are located at 1635 43rd Street South, Suite 205, Fargo, North Dakota 58103. Our telephone number is (701) 630-6500. We lease our offices from an unrelated third party.

Hotel Properties

As of December 31, 2024, we consolidated eighteen hotel properties, consisting of seventeen hotels properties owned by us and an equity and profits interest in the parent of the entity which holds as leasehold interest in one hotel property. The following table provides summary information regarding the hotel properties owned by us as of December 31, 2024:


				Number
			Date	of Guest	Purchase		Transaction		Total		%
Hotel	Property Type	Location	Purchased	Rooms	Price		Costs		Purchase Price		Interest
Holiday Inn Express (the “Cedar Rapids Property)	Limited-Service	Cedar Rapids, IA	November 30, 2018	83	$	7,700,000	$	158,333	$	7,858,333	100	%
Hampton Inn (the “Eagan Property”)	Limited-Service	Eagan, MN	June 19, 2019	122		13,950,000		278,333		14,228,333	100	%
Home2 Suites (the “Prattville Property”)	Extended-Stay	Prattville, AL	July 11, 2019	90		14,750,000		356,014		15,106,014	100	%
Home2 Suites (the “Lubbock Home2 Property”)	Extended-Stay	Lubbock, TX	December 30, 2019	100		14,150,000		284,776		14,434,776	100	%
Fairfield Inn & Suites (the "Lubbock Property")	Limited-Service	Lubbock, TX	January 8, 2020	101		15,150,000		496,431		15,646,431	100	%
Homewood Suites (the "Southaven Property")	Extended-Stay	Southaven, MS	February 21, 2020	99		20,500,000		445,090		20,945,090	100	%
Courtyard by Marriott (the "Aurora Property")	Select-Service	Aurora, CO	February 4, 2021	141		23,610,000		458,129		24,068,129	100	%
Holiday Inn (the "El Paso HI Property")	Select-Service	El Paso, TX	May 12, 2021	175		10,300,000		361,019		10,661,019	100	%
Hilton Garden Inn (the "Houston Property")	Select-Service	Houston, TX	August 3, 2021	182		19,910,000		918,353		20,828,353	100	%
Sheraton Hotel (the "Northbrook Property")	Full-Service	Northbrook, IL	December 3, 2021	160		11,400,000		340,005		11,740,005	100	%
Hampton Inn & Suites (the “Fargo Property”)	Limited-Service	Fargo, ND	January 18, 2022	90		11,440,000		302,222		11,742,222	100	%
Courtyard by Marriott (the "El Paso Airport Property")	Select-Service	El Paso, TX	February 8, 2022	90		15,120,000		333,234		15,453,234	100	%
Fairfield Inn & Suites (the "Lakewood Property")	Limited-Service	Lakewood, CO	March 29, 2022	142		18,800,000		862,117		19,662,117	100	%
Residence Inn (the "Fort Collins Property")	Extended-Stay	Fort Collins, CO	August 3, 2022	113		15,800,000		546,009		16,346,009	100	%
Hilton Garden Inn (the "Pineville HGI Property")	Select-Service	Pineville, NC	August 25, 2022	113		10,930,000		347,149		11,277,149	100	%
Hilton Garden Inn (the "Charlotte Property")	Select-Service	Charlotte, NC	August 25, 2022	112		15,440,000		416,387		15,856,387	100	%
Holiday Inn Express (the "Wichita Property")	Limited-Service	Wichita, KS	December 22, 2022	84		7,400,000		234,310		7,634,310	100	%
				1,997	$	246,350,000	$	7,137,911	$	253,487,911

On August 10, 2022, we acquired a 24.9% equity and profits interest in High Desert Garden Holdings, LLC, which is the parent of the entity which holds a leasehold interest in the Hilton Garden Inn, located in El Paso, Texas (the “El Paso

Table of Contents

University Property”) in exchange for a capital contribution of $3.2 million. The El Paso University Property is a select-service hotel with 153 guest rooms. See Note 3 “Investment In Hotel Properties” of the notes to the consolidated financial statements included as part of this Annual Report on Form 10-K for additional information regarding this transaction.

For a description of the debt associated with each of these hotel properties, see Part II. Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt.”

Management Agreements

NHS Agreement

As of December 31, 2024, nine of our hotel properties were subject to management agreements with NHS with an initial term expiring on December 31 of the fifth full calendar year following the effective date of the agreement. The agreement will automatically renew for successive five-year periods unless terminated earlier in accordance with its terms. On February 10, 2025, we terminated the management agreements with NHS and entered into new agreements with Hotel Equities Group, LLP (“Hotel Equities”). See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Subsequent Events”.

Vista Host Agreement

As of December 31, 2024, our Southaven Property was subject to a management agreement with Vista Host Inc. (“Vista”) with an initial term expiring on February 21, 2025. The agreement automatically renews for two (2) successive five-year periods unless terminated earlier in accordance with its terms.

Aimbridge Agreement

As of December 31, 2024, each of our Houston Property, El Paso Airport Property and El Paso University Property was subject to a management agreement with Interstate Management Company, LLC (“Aimbridge”). The Aimbridge agreement for the Houston Property had an initial term expiring on August 3, 2024 and automatically renewed for additional successive terms of one year each unless terminated earlier in accordance with its terms. The Aimbridge agreement for the El Paso Airport Property and the El Paso University Property has an initial term expiring on February 8, 2027 and August 10, 2027, respectively, both of which will automatically renew for one (1) year periods unless terminated earlier in accordance with its terms.

KAJ Agreement

As of December 31, 2024, each of the Fargo Property and the Wichita Property was subject to a management agreement with KAJ Hospitality Inc. (“KAJ”), each with an initial term expiring January 18, 2027 and December 22, 2027, respectively, both of which automatically renews for successive one-year periods, unless terminated in accordance with its terms.

Raines Agreement

As of December 31, 2024, the Charlotte Property and the Pineville HGI Property were each subject to a management agreement with Raines Hospitality, Inc. (“Raines”), both with an initial term expiring on August 25, 2025 and both of which automatically renews for successive three-year periods, unless terminated in accordance with its terms.

Franchise Agreements

As of December 31, 2024, all of our hotel properties were operated under franchise agreements with initial terms of 10 to 18 years. Franchise agreements allow the hotel properties to operate under the respective brands. Pursuant to the franchise agreements, we pay a royalty fee of 5% to 6% of room revenue, plus additional fees for marketing, central reservation systems and other franchisor costs. Certain hotels are also charged a program fee of generally between 3% and 4% of room revenue. We paid an initial fee of $50,000 to $175,000 at the time of entering into each franchise agreement which is being amortized over the term of each agreement.

Table of Contents

Item 3. Legal Proceedings.

We may from time to time be a party to legal proceedings which arise in the ordinary course of our business. See Note 12 “Commitments and Contingencies” of the notes to the consolidated financial statements included as part of this Annual Report on Form 10-K for a discussion of legal proceedings and governmental authority inquiries that were ongoing during the year ended December 31, 2024. Management is not aware of any current or pending legal proceedings to which we or any of our subsidiaries are a party or to which any of our property is subject, the outcome of which would, in management’s judgment based on information currently available, have a material adverse effect on our results of operations or financial condition, nor is management aware of any such legal proceedings contemplated by governmental authorities.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

No public market currently exists for our shares of common stock, and we currently have no plans to list our shares on a national securities exchange.

Share Valuation

We are not required to establish an updated net asset value of the Company (“Company NAV”) or an estimated net asset value per share (“Share NAV”) in accordance with FINRA Rules 5110 and 2231 as we are not conducting any public offering of our shares. The initial Share NAV was $10.00, the price at which we offered our shares in the Offering from the inception of the Offering through December 31, 2022, which was determined by our board of directors and bears no relationship to any established criteria of value such as book value or earnings per share, is not based on our past earnings, and does not reflect current market value for our assets. Our board of directors approved a revised Company NAV as of December 31, 2022, and a Share NAV of $10.57 per share effective January 6, 2023, determined by dividing the Company NAV by the number of then-outstanding shares of the Company’s common stock. The Company NAV and Share NAV were determined by our board of directors taking into account appraisals of the Company’s real estate properties and other factors deemed relevant to our board of directors. The Advisor administers our valuation policy and is responsible for the oversight of the valuation process, including the review and approval of the valuation and appraisal processes and methodologies used to determine our Company NAV and Share NAV, the consistency of the valuation and appraisal methodologies with real estate industry standards and practices, and the reasonableness of the assumptions used in the valuations and appraisals.

At any time that a new Company NAV is calculated as provided above prior to the termination of the Offering, we intend to adjust the Offering price of the shares in an amount equal to the Company NAV divided by the number of outstanding shares. Our board of directors will determine a new Share NAV at such times and in conjunction with our determination of the Company NAV, and we will report the new Share NAV to our stockholders.

Equity Compensation Plans

Our board of directors has approved the adoption of a phantom stock plan (the “Phantom Stock Plan”) for the Company. However, the specific terms of the Phantom Stock Plan have not yet been determined and approved by our board. We intend for the shares designated pursuant to the Phantom Stock Plan (the “Phantom Shares”) to be allocated to the Advisor, the TRS subsidiaries and NHS for distribution of the proceeds to their respective employees and service providers in accordance with their compensation plans, however, Corey Maple, Norman Leslie and Samuel Montgomery will not receive any Phantom Shares pursuant to the Phantom Stock Plan.

Table of Contents

Stockholder Information

As of the date of this filing, we had 10,300,567 shares of our common stock outstanding, held by a total of 1,359 stockholders.

Distribution Information

During our Offering, when we may raise capital more quickly than we acquire income-producing assets, and from time to time after the Offering, we may not pay distributions solely from our cash flow from operating activities, in which case distributions may be paid in whole or in part from proceeds from the Offering or debt financing.

Distributions declared, distributions paid, and net cash flow used in operations during 2024 and 2023, aggregated by quarter, are as follows:


			Distribution								Net Cash
	Distributions		Declared Per		Distributions Paid ⁽³⁾						Flows Provided By
Period	Declared ⁽¹⁾		Share ^(1) (2)		Cash		Reinvested		Total		(Used In) Operations
First Quarter 2024	$	306,065	$	0.029	$	903,061	$	109,218	$	1,012,279	$	(797,789)
Second Quarter 2024		1,181,705		0.113		820,706		176,589		997,295		2,025,385
Third Quarter 2024		876,877		0.083		1,192,192		193,549		1,385,741		(813,219)
Fourth Quarter 2024		—		—		(1,162)		1,162		(0)		(1,983,176)
	$	2,364,648	$	0.225	$	2,914,797	$	480,518	$	3,395,315	$	(1,568,799)

			Distribution								Net Cash
	Distributions		Declared Per		Distributions Paid ⁽³⁾						Flows Provided By
Period	Declared ⁽¹⁾		Share ^(1) (2)		Cash		Reinvested		Total		(Used In) Operations
First Quarter 2023	$	1,779,846	$	0.175	$	1,424,802	$	395,820	$	1,820,622	$	264,655
Second Quarter 2023		1,794,077		0.175		1,317,166		384,772		1,701,938		3,484,371
Third Quarter 2023		1,816,105		0.175		1,344,743		381,033		1,725,776		2,155,873
Fourth Quarter 2023		1,826,402		0.175		1,433,319		335,912		1,769,231		(2,345,442)
	$	7,216,430	$	0.700	$	5,520,030	$	1,497,537	$	7,017,567	$	3,559,457

(1)

Distributions for the period from January 1, 2023 through December 31, 2023 were payable to each stockholder as 100% in cash on a monthly basis. No distributions were declared for the period of January 1, 2024 through February 29, 2024. Distributions for the period from March 1, 2024 through August 31, 2024 were payable to each stockholder as 100% in cash. No distributions were declared for the period of September 1, 2024 through December 31, 2024

(2)

Assumes share was issued and outstanding each day that was a record date for distributions during the period presented.

(3)

Distributions for the period from January 1, 2023 through December 31, 2023 were paid on a monthly basis. In general, distributions for all record dates of a given month during such period are paid on or about the tenth day of the following month. No distributions were declared for the period of January 1, 2024 through February 29, 2024, but resumed for the period of March 1, 2024 through August 31 2024. No distributions were declared for the period of September 1, 2024 through December 31, 2024

For the year ended December 31, 2024, we paid aggregate distributions of $3.4 million, including $2.9 million of distributions paid in cash and $0.5 million of distributions reinvested through our dividend reinvestment plan. For the year ended December 31, 2023, we paid aggregate distributions of $7.0 million, including $5.5 million of distributions paid in cash and $1.5 million of distributions reinvested through our dividend reinvestment plan. Our net loss for the years ended December 31, 2024 and 2023, was $29.9 million and $13.4 million, respectively. Net cash flows provided by or used in operations for the years ended December 31, 2024 and 2023, were $1.5 million used in operations and $3.6 million provided by operations, respectively. We funded 100% of our distributions paid, which includes cash distributions and distributions reinvested by stockholders, with proceeds from the Offering.

To the extent that we pay distributions from sources other than our cash flows from operating activities, we will have less funds available for the acquisition of real estate investments, the overall return to our stockholders may be reduced, and subsequent investors will experience dilution.

Going forward we expect our board of directors to continue to authorize and declare distributions, if at all, based on daily record dates. Distributions will be determined by our board of directors based on our financial condition and such other

Table of Contents

factors as our board of directors deems relevant, and may be paid in cash or in shares pursuant to the DRIP. Our board of directors has not pre-established a percentage rate of return for cash distributions or stock distributions to stockholders. We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders.

Unregistered Sales of Equity Securities

Initial Offering

On June 1, 2018, we commenced an offering (the “Offering”) of up to $100,000,000 in shares of our common stock, which amount was increased to $150,000,000 in shares of our common stock in December 2021. We are offering these securities in reliance upon exemptions from the registration requirements provided by Section 4(a)(2) of the Securities Act and Regulation D under the Securities Act relating to sales not involving any public offering. The securities are being offered and sold only to purchasers who are “accredited investors,” as defined in Rule 501 of Regulation D of the Securities Act, and without the use of general solicitation, as that concept is embodied in Regulation D. In addition to sales of common stock for cash, we have adopted a dividend reinvestment plan, which permits stockholders to reinvest their distributions back into the Company. Except as otherwise provided in the offering memorandum, we are currently offering the shares in the private offering at an offering price of $10.57 per share, with shares purchased in our dividend reinvestment plan at an offering price of $10.04 per share. During the year ended December 31, 2024, we sold 8,069 shares of common stock in the private offering, resulting in gross offering proceeds of approximately $0.1 million, in addition to 47,738 shares issued pursuant to our dividend reinvestment plan. During the year ended December 31, 2024, aggregate selling commissions of $1,101 and marketing and diligence allowances and other wholesale selling costs and expenses of $1.6 million were paid in connection with the private offering. During the year ended December 31, 2023, we sold 199,071 shares of common stock in the private offering, resulting in gross offering proceeds of approximately $2.0 million, including 149,135 shares issued pursuant to our dividend reinvestment plan. During the year ended December 31, 2023, aggregate selling commissions of $0.1 million and marketing and diligence allowances and other wholesale selling costs and expenses of $1.3 million were paid in connection with the private offering.

GO II Units Offering

On April 7, 2023, the Operating Partnership commenced a private placement offering of its Series GO II LP Units, with a maximum offering of $30,000,000, which could be increased to $60,000,000 in the sole discretion of LF REIT III as the General Partner of the Operating Partnership, (the “GO II Unit Offering”) to accredited investors only, pursuant to a confidential private placement memorandum exempt from registration under the Securities Act of 1933, as amended. The Series GO II LP Units are being offered until the earlier of (i) the sale of $30,000,000 in Series GO II LP Units (which could be increased to $60,000,000 in the Company’s sole discretion), (ii) March 31, 2024, which date may be extended for two 1-year extensions until March 31, 2026 in the sole discretion of the Operating Partnership or (iii) the Operating Partnership terminates the GO II Unit Offering at an earlier date in its sole discretion. On March 24, 2025, our board of directors extended the term of the GO II Unit Offering to March 31, 2026. The Operating Partnership is offering these securities in reliance upon exemptions from the registration requirements provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act relating to sales not involving any public offering. The securities are being offered and sold only to purchasers who are “accredited investors,” as defined in Rule 501 of Regulation D of the Securities Act, and without the use of general solicitation, as that concept is embodied in Regulation D. Subject to restrictions on ownership in order to comply with rules governing real estate investment trusts and the terms of the partnership agreement of the Operating Partnership, each holder of Series GO II LP Units (a “Series GO II Limited Partner”) will have the right to exchange its Series GO II LP Units for, at the option of the Operating Partnership, an equivalent number of shares of common stock of the Company (“Common Shares”), or cash equal to the fair market value of the Common Shares (the “Cash Amount”) which would have otherwise been received pursuant to such exchange; provided, however, that until such time as the Series GO II LP Units have been allocated Net Income (including book-up income) such that their positive Capital Account balance is equal to the net asset value of the Company’s shares of common stock (the “Share NAV”), the exchange right will be limited and the Series GO II Limited Partners will only be entitled to receive a pro rata portion of a REIT Share equal to the positive Capital Account balance of the Series GO II LP Unit divided by the Share NAV. The exchange right is not available until all of the following have occurred (the “Exchange Date”): (i) the Common Shares are listed on a national securities exchange, the sale of all or substantially all of the GP Units and Interval Units held by the Company or any sale, exchange or merger of the Company or the Operating Partnership or, as determined in the sole

Table of Contents

discretion of the Company, the occurrence of a similar event; (ii) the Series GO II Limited Partner has held its Series GO II LP Units for at least one year; (iii) the Common Shares to be issued pursuant to the redemption have been registered with the SEC and the registration statement has been declared effective, or an exemption from registration is available; and (iv) the exchange does not result in a violation of the shareholder ownership limitations set forth in the Company’s articles of incorporation. Notwithstanding the above, the Company may waive any of the requirements above in its sole discretion other than (ii) or (iv). During the year ended December 31, 2024, the Operating Partnership issued 377,548 Series GO II LP Units. During the year ended December 31, 2024, aggregate selling commissions were $47,570 and marketing and diligence allowances and other wholesale selling costs and expenses of $9,168 were paid in connection with the GO II Unit Offering. During the year ended December 31, 2023, the Operating Partnership issued 129,787 Series GO II LP Units. During the year ended December 31, 2023, aggregate selling commissions were $3,370 and marketing and diligence allowances and other wholesale selling costs and expenses of $6,345 were paid in connection with the GO II Unit Offering. As of December 31, 2024, the Operating Partnership had issued and sold 507,335 Series GO II LP Units and received gross aggregate proceeds of $3.8 million.

Series P Preferred Units

On December 24, 2024, the Operating Partnership commenced a private offering for the purchase of up to $50,000,000 (which may be increased to $75,000,000 in the sole discretion of the Company) in Series P Preferred Units at a purchase price equal to $10,000 per Series P Preferred Unit to accredited investors only, pursuant to a confidential private placement memorandum. The Operating Partnership is offering these securities in reliance upon exemptions from the registration requirements provided by Section 4(2) of the Securities Act and Rule 506(c) of Regulation D under the Securities Act relating to sales not involving any public offering. The securities are being offered and sold only to purchasers who are “accredited investors,” as defined in Rule 501 of Regulation D of the Securities Act, whose accredited investor status has been verified by us. Under Rule 506(c), general solicitation and advertisement of offerings is permitted, however, all purchasers in the offering must be accredited investors and the Operating Partnership must take reasonable steps to verify the accredited investor status of each purchaser, among other requirements. The first $1,250,000 of net proceeds received by the Operating Partnership from the sale of the Series P Preferred Units shall be retained by the Operating Partnership. If the Operating Partnership receives more than $1,250,000 of net proceeds from the sale of the Series P Preferred Units, the next $1,047,000 of net proceeds received by the Operating Partnership from the sale of the Series P Preferred Units shall be used to (i) pay accrued interest on the Fort Collins Loans and the Courtyard Aurora Loan through December 31, 2024 at or prior to the time of refinancing such loans or (ii) after the time of such refinancing, redeem outstanding Series A Preferred Units issued in exchange for the contribution of such loans. If the Operating Partnership receives more than $2,297,000 of net proceeds from the sale of the Series P Preferred Units, the next $7,550,000 of net proceeds received by the Operating Partnership from the sale of Series P Preferred Units shall be retained by the Operating Partnership. If the Operating Partnership receives more than $9,847,000 of net proceeds from the sale of the Series P Preferred Units, (A) until March 24, 2025, 50% of such additional net proceeds received by the Operating Partnership from the sale of the Series P Preferred Units shall be used to redeem the Series A Preferred Units and the remaining 50% shall be retained by the Operating Partnership, and (B) from and after March 24, 2025, 75% of such additional net proceeds received by the Operating Partnership from the sale of the Series P Preferred Units shall be used to redeem the Series A Preferred Units and the remaining 25% shall be retained by the Operating Partnership. As of December 31, 2024, the Operating Partnership has issued and sold 35 Series P Preferred Units, resulting in the receipt of gross offering proceeds of $0.4 million as of the date of this filing.

Series A Preferred Units

On December 24, 2024, the Operating Partnership issued 4,067,659 Series A Preferred Units of the Operating Partnership to Access Point Financial, LLC in exchange for all of the remaining $4.6 million of unpaid principal and interest on the Sheraton Northbrook Loan as of December 24, 2024, pursuant to the terms of a loan contribution agreement between the Operating Partnership and the lender. The Series A Preferred Units were issued in reliance upon exemptions from the registration requirements provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act relating to sales not involving any public offering. The securities were sold to an “accredited investor,” as defined in Rule 501 of Regulation D of the Securities Act, and without the use of general solicitation, as that concept is embodied in Regulation D.

Table of Contents

Share Repurchase Plan

The board of directors has adopted a share repurchase plan that may enable our stockholders to have their shares repurchased in limited circumstances. In its sole discretion, the board of directors could choose to terminate or suspend the plan or to amend its provisions without stockholder approval. The repurchase plan may be reviewed and modified by the board of directors as it deems necessary in its sole discretion. The following discussion summarizes the principal terms of our share repurchase plan.

Repurchase Price

Under certain circumstances and subject to the death repurchase described below, the prices at which we will repurchase shares under our repurchase plan are as follows:

●

For those shares held by the stockholder for at least one year, 92% of the current share NAV;

●

For those shares held by the stockholder for at least two years, 96% of the current share NAV; and

●

For those shares held by the stockholder for at least three years, 100% of the current share NAV.

For purposes of determining the time period a stockholder has held each share, the time period begins as of the date the stockholder acquired the share, provided that shares purchased by the stockholder pursuant to our dividend reinvestment plan will be deemed to have been acquired on the same date as the initial shares to which the dividend reinvestment plan shares relate. The board of directors may, in its sole discretion, reject any request for repurchase and may, upon notice to the stockholders, amend, suspend or terminate the repurchase program at any time.

Limitations on Repurchase

There are several limitations on our ability to repurchase shares under our share repurchase plan:

●

Unless the shares are being repurchased in connection with a stockholder’s death, we may not repurchase shares unless the stockholder has held the shares for at least one year.

●

During any calendar year, we will repurchase only the number of shares that we could purchase with the amount of net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year. However, we may increase or decrease the funding available for the repurchase of shares pursuant to our share repurchase plan upon 10 business days’ notice to our stockholders.

●

During any calendar year, we will limit the total shares repurchased to no more than 5.0% of the weighted-average number of shares outstanding as of December 31 of the prior calendar year.

●

We have no obligation to repurchase shares if the repurchase would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.

●

We will not repurchase shares if the board of directors determines, in its sole discretion, that the repurchase price determined in accordance with the terms of our share repurchase plan exceeds the then current fair market value of the shares to be repurchased.

Procedures for Repurchase

We will repurchase shares within 21 days following the end of a calendar quarter. We must receive a written request for repurchase at least two business days before the end of the calendar quarter in order for us to repurchase a stockholder’s shares on the repurchase date. If we cannot repurchase all shares presented for repurchase in any quarter, we will attempt to honor repurchase requests on a pro rata basis. The board of directors may, in its sole discretion, reject any request for repurchase.

Table of Contents

If we did not completely satisfy a stockholder’s repurchase request on a repurchase date because we did not receive the request in time, because of the limitations on repurchases set forth in our share repurchase plan or because of a suspension of our share repurchase plan, we would treat the unsatisfied portion of the repurchase request as a request for repurchase at the next repurchase date at which funds are available for repurchase unless the stockholder withdraws its request. Any stockholder may withdraw a repurchase request upon written notice to the program administrator if such notice is received at least two business days before the repurchase date.

All shares to be repurchased must be (i) fully transferable and not be subject to any liens or other encumbrances and (ii) free from any restrictions on transfer. If we determine that a lien or other encumbrance or restriction exists against the shares, we will not repurchase any such shares.

Neither we nor the board of directors will have any liability to any stockholder for any damages resulting from or related to the stockholder’s presentment of its shares. Further, stockholders will have complete responsibility for payment of all taxes, assessments and other applicable obligations and third-party costs resulting from or relating to our repurchase of shares. All repurchased shares shall be repurchased as treasury shares and may be made available for purchase to new or existing stockholders.

Special Repurchases—Death Repurchase

In the event of the death of a stockholder, we will, upon request and within six months from the date of the request, repurchase such stockholder’s shares regardless of the period the deceased stockholder has owned such shares at the following prices:

●

92% of the current share NAV if death occurs less than six months of the purchase;

●

96% of the current share NAV if death occurs from six months to one year of purchase; and

●

100% of the current share NAV if death occurs after one year of purchase.

We will not be obligated to repurchase a deceased stockholder’s shares if more than two years have elapsed from the date of death.

Amendment, Suspension or Termination of Program and Notice

The board of directors may, at any time and without stockholder approval, upon 10 business days’ written notice to the stockholders (i) amend, suspend or terminate our share repurchase plan and (ii) increase or decrease the funding available for the repurchase of shares pursuant to our share repurchase plan.

Table of Contents

Shares Repurchased

Pursuant to the terms of our Share Repurchase Plan, we will repurchase shares within 21 days following the end of a calendar quarter. During the year ended December 31, 2024, we repurchased no shares of our common stock. During the year ended December 31, 2024, there were unfulfilled repurchase requests of $3.6 million.


Month	Total Number of Shares Repurchased		Average Price Paid Per Share		Approximate Dollar Value of Shares Available That May Yet Be Repurchased Under the Program
January 2024		—	$	—		(1)
February 2024		—	$	—		(1)
March 2024		—	$	—		(1)
Total		—
April 2024		—	$	—		(1)
May 2024		—	$	—		(1)
June 2024		—	$	—		(1)
Total		—
July 2024		—	$	—		(1)
August 2024		—	$	—		(1)
September 2024		—	$	—		(1)
Total		—
October 2024		—	$	—		(1)
November 2024		—	$	—		(1)
December 2024		—	$	—		(1)
Total		—
Year Ended December 31, 2024		—

⁽¹⁾

We limit the dollar value of shares that may be repurchased under the plan as described above. One of these limitations is that during each calendar year, our share repurchase plan limits the number of shares we may repurchase to those that we could purchase with the amount of the net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year. However, we may increase or decrease the funding available for the repurchase of shares upon ten business days’ notice to our stockholders.

The above table is on a cash basis, but we record our shares repurchased, as described below, on an accrual basis. During the years ended December 31, 2024 and 2023, we repurchased no shares of our common stock. Based on the repurchase limits described above, as of December 31, 2024 we had $1,466,850 available for eligible repurchases during 2024.

Item 6. [Reserved]

Table of Contents

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

A discussion regarding our financial condition and results of operations for year-end 2023 compared to year-end 2022 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on December 17, 2024 (“2023 Form 10-K”)

As used herein, the terms “we,” “our,” “us” and “the Company” refer to Lodging Fund REIT III, Inc., a Maryland corporation, Lodging Fund REIT III OP, LP, a Delaware limited partnership, which we refer to as the “Operating Partnership,” Lodging Fund REIT III TRS, Inc., a Delaware corporation, which we refer to as the “Master TRS” and their subsidiaries, except where the context otherwise requires. The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of the Company and the notes thereto.

Overview

We were formed on April 9, 2018 as a Maryland corporation for the primary purpose of acquiring a diversified portfolio of hotel properties (the “Projects”) located primarily in America’s Heartland, which we define as the geographic area from North Dakota to Texas and the Appalachian Mountains to the Rocky Mountains. We have elected to be taxed as a real estate investment trust, or REIT, beginning with the taxable year ended December 31, 2018. We conduct substantially all of our business and own substantially all real estate investments through the Operating Partnership. We are the sole general partner of the Operating Partnership. We and the Operating Partnership are advised by the Advisor pursuant to an advisory agreement, as amended, under which the Advisor performs advisory services regarding acquisition, financing and disposition of the Projects and origination of any loans, and is responsible for managing, operating and maintaining the Projects and day-to-day management of the Company. The Advisor may, in its sole discretion, perform these duties through one or more affiliates. Through February 2025, we have engaged National Hospitality Services (“NHS”) to manage nine of the Projects acquired to date; on February 10, 2025, the Company terminated the contract with NHS and entered into hotel management agreements with Hotel Equities Group, LLC, a third-party property management agency. We have engaged other third-party property management companies with the oversight and property management of the remaining nine properties within the portfolio. NHS is wholly-owned by Norman Leslie, a director and executive officer of the Company and a principal of the Advisor. The Advisor has no direct employees. The employees of the Sponsor, an affiliate of the Advisor, provide services to the Company related to the negotiations of property acquisitions and financing, asset management, accounting, legal, investor relations, and all other administrative services.

We have invested and continue to invest primarily in 80 to 200 room limited service, select-service, full-service and extended stay hotel properties with strong mid-market brands in America’s Heartland. As of December 31, 2024, we consolidated 18 hotel properties, consisting of 17 hotel properties owned by us and an equity and profits interest in the parent of the entity which holds the leasehold interest in one hotel property, with an aggregate of 2,150 rooms located in 10 states. See Part I, Item 1, “Business” of this Annual Report on Form 10-K for more details on our investment objectives and strategy.

We have raised capital through several private offerings conducted by the Company and the Operating Partnership described below.

We are currently conducting an offering (the “Offering”) of up to $150,000,000 in shares of our common stock under a private placement to qualified purchasers who meet the definition of “accredited investors,” as provided in Regulation D of the Securities Act of 1933, as amended (the “Securities Act”). The Offering commenced on June 1, 2018 and will continue until the earlier of (i) the date when the maximum offering amount is sold, (ii) May 31, 2025, which may be extended by our board of directors in its sole discretion, or (iii) a decision by the Company to terminate the Offering. On March 24, 2025, our board of directors extended the term of the Offering to May 31, 2026. As of December 31, 2024, the Company had issued and sold 10,298,999 shares of common stock, including 1,215,332 shares attributable to our DRIP, and received aggregate proceeds of $100.7 million. After deductions for payments of selling commissions, marketing and diligence allowances, other wholesale selling costs and expenses, we received net offering proceeds of approximately $84.9 million. The net offering proceeds have been used principally to fund property acquisitions and pay distributions and debt service obligations. During the year ended December 31, 2024, we repurchased no shares of our common stock. No public market exists for the shares of our common stock, and none is expected to develop.

Table of Contents

On June 15, 2020, the Operating Partnership commenced a private offering of limited partnership units in the Operating Partnership, designated as Series GO LP Units, with a maximum offering of $20,000,000, which could be increased to $30,000,000 in our sole discretion as the General Partner of the Operating Partnership (the “GO Unit Offering”) to accredited investors only, pursuant to a confidential private placement memorandum exempt from registration under the Securities Act of 1933, as amended. The Series GO LP Units were being offered until the earlier of (i) the sale of $20,000,000 in Series GO LP Units (which could be increased to $30,000,000 in the Company’s sole discretion), (ii) June 14, 2022 or (iii) the Operating Partnership terminates the GO Unit Offering at an earlier date in its sole discretion. Our board of directors terminated the GO Unit Offering as of February 14, 2022. Our board of directors approved and ratified additional sales after February 14, 2022 in the GO Unit Offering for sales which were pending as of that date. As of December 31, 2024, the Operating Partnership had issued and sold 3,124,503 Series GO LP Units and received aggregate proceeds of $21.5 million. After deductions for payments of selling commissions, marketing and diligence allowances, other wholesale selling costs and expenses, and other offering expenses, we received net offering proceeds of approximately $19.4 million.

The Operating Partnership may issue Series T LP Units or Common LP Units from time to time to persons who contribute direct or indirect interests in real estate to the Operating Partnership. The Series T LP Units will have allocations and distributions that are dictated by the Partnership Agreement of the Operating Partnership and the applicable contribution agreement for the real estate. Certain Series T LP Units may have different allocations and distributions than other Series T LP Units. The amount of the allocations and distributions will be determined by the General Partner in its sole discretion at the time of issuance of the Series T LP Units and any future distributions are dependent on the financial performance of the contributed real estate. The Series T LP Units are eligible for conversion into Common LP Units beginning 24 or 36 months, or longer in some instances, after their issuance and will automatically convert into Common LP Units upon a Termination Event as described in the Partnership Agreement of the Operating Partnership. The conversion of Series T LP Units into Common LP Units may vary with each issuance and is generally based on a formula that applies an applicable capitalization rate to the then current trailing twelve months net operating income of the hotel property less the loan balance outstanding as of the contribution date as assumed by the Operating Partnership, and less other amounts incurred by the Operating Partnership including but not limited to certain closing costs, loan assumption fees and defeasance costs, Property Improvement Plan (“PIP”) and capital expenditures, operating cash infused by the Operating Partnership, and any shortfall of certain minimum cumulative investment yield. There is no guarantee that the future financial performance of the contributed hotel property will be sufficient to result in the issuance of Common LP Units resulting from the application of the conversion formula applicable to the issuance Series T LP Units. As of December 31, 2024, the Company had issued an aggregate of 5,073,506 Series T LP Units and 612,100 Common LP Units in connection with such property contributions.

On December 3, 2021, the Operating Partnership commenced a private placement offering of its Common LP Units. As of December 31, 2024, the Operating Partnership had issued and sold 612,100 Common LP Units, with a value of $10.00 per unit, at the time of issuance, in connection with property contributions.

On April 7, 2023, the Operating Partnership commenced a private offering of the Series GO II LP Units, with a maximum offering of $30,000,000, which could be increased to $60,000,000 in the sole discretion of the Company as the General Partner of the Operating Partnership, (the “GO II Unit Offering”) to accredited investors only, pursuant to a confidential private placement memorandum exempt from registration under the Securities Act of 1933, as amended. The Series GO II LP Units are being offered until the earlier of (i) the sale of $30,000,000 in Series GO II LP Units (which could be increased to $60,000,000 in the Company’s sole discretion), (ii) March 31, 2024, which date may be extended for two 1-year extensions until March 31, 2026 in the sole discretion of the Operating Partnership or (iii) the Operating Partnership terminates the GO II Unit Offering at an earlier date in its sole discretion. On April 17, 2024, our board of directors extended the term of the GO II Unit Offering to March 31, 2025. On March 24, 2025, our board of directors extended the term of the GO II Unit Offering to March 31, 2026. As of December 31, 2024, the Operating Partnership had issued and sold 507,335 Series GO II LP Units and received gross aggregate proceeds of $3.8 million.

Table of Contents

Partnership receives more than $1,250,000 of net proceeds from the sale of the Series P Preferred Units, the next $1,047,000 of net proceeds received by the Operating Partnership from the sale of the Series P Preferred Units shall be used to (i) pay accrued interest on the Fort Collins Loans and the Courtyard Aurora Loan through December 31, 2024 at or prior to the time of refinancing such loans or (ii) after the time of such refinancing, redeem outstanding Series A Preferred Units issued in exchange for the contribution of such loans. If the Operating Partnership receives more than $2,297,000 of net proceeds from the sale of the Series P Preferred Units, the next $7,550,000 of net proceeds received by the Operating Partnership from the sale of Series P Preferred Units shall be retained by the Operating Partnership. If the Operating Partnership receives more than $9,847,000 of net proceeds from the sale of the Series P Preferred Units, (A) until March 24, 2025, 50% of such additional net proceeds received by the Operating Partnership from the sale of the Series P Preferred Units shall be used to redeem the Series A Preferred Units and the remaining 50% shall be retained by the Operating Partnership, and (B) from and after March 24, 2025, 75% of such additional net proceeds received by the Operating Partnership from the sale of the Series P Preferred Units shall be used to redeem the Series A Preferred Units and the remaining 25% shall be retained by the Operating Partnership. As of December 31, 2024, the Operating Partnership has issued and sold 35 Series P Preferred Units, resulting in the receipt of gross offering proceeds of $0.4 million as of the date of this filing.

Significant 2024 Events

Exit Strategy

On May 7, 2024, our board of directors authorized management to pursue an exit strategy and position the Company for a sale or merger of the Company in 2025, provided that the economic environment is conducive to such a transaction, and to prepare the Company’s portfolio of hotel properties for a transaction through strategic acquisitions and dispositions with the objective of maximizing profitability at the hotel property level. There can be no assurances that we will achieve an exit strategy within the time period and in the manner anticipated. The process of exploring strategic alternatives and marketing our assets could be time consuming and disruptive to our business operations and could divert management’s attention from our business, and we could incur substantial expenses associated with identifying and evaluating potential transactions. Further, any potential transaction would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction with us and the availability of financing to potential buyers on favorable terms. There can be no assurance that we will successfully implement our strategy, or that any potential transaction or other strategic alternative will result in stockholder liquidity or provide a return to stockholders that equals or exceeds our estimated value per share.

Sale of Pineville Property

On July 23, 2024, the Company sold the Pineville Property to an unaffiliated purchaser for $8,850,000 in cash. The mortgage loan secured by the Pineville Property was repaid in full at closing from sale proceeds. All guaranties in connection with such loan and collateral with respect to such loan have been terminated or released, and all commitments with respect to such loan have been terminated or released.

Table of Contents

No Acquisitions

During the year ended December 31, 2024, we acquired no hotel properties.

Significant 2023 Events

SEC Settlement

Resolution of Litigation with PA Sellers

Effective November 20, 2023, the Operating Partnership and Central PA Equities 17, LLC, Central PA Equities 19, LLC, and Springwood – FHP LP (collectively, the “PA Seller”) enter into a settlement agreement and general release of all claims (the “Settlement Agreement”) regarding the asset purchase agreement dated November 22, 2019 (as amended, the “Purchase Agreement”). Pursuant to the Purchase Agreement, the Operating Partnership agreed to acquire the 108-room Fairfield Inn & Suites by Marriott hotel in Hershey, Pennsylvania, the 107-room Home2 Suites by Hilton hotel in York, Pennsylvania, and the 100-room Hampton Inn & Suites by Hilton hotel in York, Pennsylvania (collectively, the “Hotel Properties”) from the PA Seller for $46.9 million plus closing costs, subject to adjustment as provided in the Purchase Agreement. As required by the Purchase Agreement, the Operating Partnership deposited a total of $1.5 million into escrow as earnest money pending the closing or termination of the Purchase Agreement (the “Earnest Money Deposit”).

Pursuant to the Settlement Agreement, the PA Seller received $700,000 of the Earnest Money Deposit, and the Operating Partnership received $800,000 of the Earnest Money Deposit. Accrued interest on the Deposit was split between the parties with 7/15 of the total amount being paid to the PA Seller and 8/15 of the total amount being paid to the Operating Partnership. Incurred fees of the Escrow Agent were paid by the Operating Partnership in accordance with the Settlement Agreement. The Operating Partnership and all related entities are released and forever discharged from all claims related to or arising from the Purchase Agreement.

No Acquisitions

During the year ended December 31, 2023, we acquired no hotel properties.

Table of Contents

Key Indicators of Operating Performance

In evaluating financial condition and operating performance, important indicators on which we focus are revenue measurements, such as occupancy, ADR and RevPAR, and expenses, such as property operations expenses, general and administrative expenses and other expenses described below. Occupancy is the total number of rooms occupied for the period divided by the total number of available rooms for the period. ADR is equal to the total gross room revenue divided by the total number of rooms rented for the period. RevPAR is equal to the total gross room revenue divided by the total number of available rooms for the period.

Market Outlook

The outlook for the lodging industry in the first half of 2025 remains cautiously optimistic, driven by strong leisure demand and a steady recovery in business travel. Upscale and Upper Midscale hotels are benefiting from cost-conscious travelers seeking value amid inflationary pressures. Industry trends include increased focus on sustainability, adoption of digital technologies, and enhanced guest experiences to compete with alternative accommodations like vacation rentals. While economic uncertainties and labor shortages pose challenges, the midscale segment is well-positioned to attract a broad customer base due to its affordability and evolving amenities. Challenges persisted in 2024 and will continue to persist through 2025, with inflation, interest rates, insurance premiums, supply chain disruptions, labor costs and labor shortages all contributing to the slow recovery.

While the government has taken steps to curb inflation, there is much uncertainty as to the impact these steps will have on the elevated inflation rates. This elevated inflation may impact financial conditions and results of operations. Any increase in inflation could have an adverse impact on expenses, which could potentially increase at a rate higher than revenue. Additionally, an increase in inflation could cause an increase in variable interest rates.

Evolving governmental policies may also adversely impact financial conditions and results of operations, specifically with the uncertainty surrounding tariffs and their material impact on business. A segment of our business comes from federal employees, and with governmental layoffs, there is uncertainty surrounding the potential impact on our results of operations.

Continued improvement in operating results will be dependent on continued strength in leisure travel and a recovery of business travel, as well as moderating inflation and interest rates. In addition, if in the future there is a pandemic, epidemic or outbreak of another highly infectious or contagious disease or other health concern affecting states or regions in which we operate, we and our properties may be subject to similar risks and uncertainties as posed by COVID-19.

Liquidity and Capital Resources

Overview

Our short-term liquidity requirements consist primarily of funds necessary to pay our scheduled debt service, operating expenses, including payments to our Advisor and property managers, capital expenditures directly associated with our hotels, distributions to our stockholders and expenses related to implementing our exit strategy, to the extent market conditions are favorable to pursue such a strategy in the near-term. Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional hotels, renovations, and other capital expenditures that need to be made periodically to our hotels, scheduled debt payments, debt maturities, operating expenses, including payments to our Advisor and property managers, making distributions to our stockholders and continued expenses related to implementing our exit strategy if such implementation is delayed. We expect to meet our long-term liquidity requirements through various sources of capital, including cash provided by operations, borrowings, issuances of additional equity, including OP units, and proceeds from property dispositions. Lenders in connection with several recent refinancings and extensions of debt obligations have required increased interest rates, increasing our debt service obligations. Our interest expense could increase in the future as a result of these recent refinancings and extensions and as we continue to refinance our maturing debt. Our ability to incur additional debt is dependent upon a number of factors, including the state of the credit markets, our degree of leverage, the value of our unencumbered assets and borrowing restrictions imposed by existing lenders. Our ability to raise capital through the issuance of additional equity is also dependent on a number of

Table of Contents

factors including the current state of the capital markets, investor sentiment and intended use of proceeds. We may need to raise additional capital if we identify acquisition opportunities that meet our investment objectives and require liquidity in excess of existing cash balances. Our ability to raise funds through the issuance of equity securities depends on, among other things, general market conditions for hotel companies and REITs and market perceptions about us. The distribution rate for distributions declared during 2023 was equal to an annualized rate of 7.00% per share based on our initial offering price of $10.00. In an effort to conserve cash, our board of directors reduced the distribution rates for distributions beginning in April 2024 to annualized rates ranging from 3.50% to 5.00% per share based on our initial offering price of $10.00. Our board of directors will determine whether to authorize and declare distributions in such amounts or if at all based on our financial conditions and such other factors as our board of directors deems relevant.

We are dependent upon the net proceeds from our Offering and offerings of our Operating Partnership to conduct our proposed operations. The Offering will continue until the earlier of (i) the date when the maximum offering amount is sold, (ii) May 31, 2025, which may be extended by our board of directors in its sole discretion, or (iii) a decision by the Company to terminate the Offering. On March 24, 2025, our board of directors extended the term of the Offering to May 31, 2026. We had also used the net proceeds from the GO Unit Offering to conduct our operations. Our board of directors terminated the GO Unit Offering as of February 14, 2022. Our board of directors approved and ratified additional sales after February 14, 2022 in the GO Unit Offering for sales which were pending as of that date. We intend to obtain the capital required to make real estate and real estate-related investments and conduct our operations from the proceeds of our Offering, GO II Unit Offering and Series P Preferred Unit Offering, from secured or unsecured financings from banks and other lenders and from any undistributed funds from our operations. As of December 31, 2024, we had raised approximately $100.7 million in gross offering proceeds from the sale of shares of our common stock in the Offering, approximately $21.5 million in gross offering proceeds from the sale of the Series GO LP Units in our GO Unit Offering, approximately $3.8 million in gross offering proceeds from the sale of the Series GO II LP Units in our GO II Unit Offering and approximately $0.4 million in gross offering proceeds from the sale of the Series P Preferred Units in our Series P Preferred Unit Offering. If we are unable to raise substantial funds in the Offering and the Operating Partnership offerings, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and the value of an investment in us will fluctuate more significantly with the performance of the specific assets we acquire. There may be a delay between the sale of shares of our common stock and units and our purchase of assets, which could result in a delay in the benefits to our stockholders, if any, of returns generated from our investment operations. Further, we will have certain fixed operating expenses regardless of whether we are able to raise substantial funds in the Offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and cash flow and limiting our ability to make distributions to our stockholders.

As of December 31, 2024, we consolidated eighteen hotel properties, consisting of seventeen hotel properties owned by us and an equity and profits interest in the parent of the entity which holds a leasehold interest in one hotel property. We acquired these investments with the proceeds from the sale of our common stock in the Offering, proceeds from the GO Unit Offering and debt financing and, for all but one of the properties acquired in 2022 and the equity and profits interest acquired in 2022, the issuance of Series T LP Units to the contributor as part of the consideration. Operating cash needs during the year ended December 31, 2024 were met through cash flow generated by these real estate investments and with proceeds from our Offering, the GO Unit Offering, the GO II Unit Offering, and the Series P Preferred Unit Offering.

Our investments in real estate generate cash flow in the form of hotel room rentals and guest expenditures, which are reduced by operating expenditures, debt service payments and corporate general and administrative expenses. Each of our current properties is owned and future properties will be owned by a direct special purpose entity subsidiary of the Operating Partnership, which leases the properties to direct special purpose entity subsidiaries of the Master TRS, referred to as “TRS Lessees.” The TRS Lessees are or will be required to make rent payments to the owners of the properties pursuant to the lease agreements relating to each property. Such TRS Lessees’ ability to make rent payments to the owner subsidiaries and our liquidity, including our ability to make distributions to our stockholders, are dependent upon the TRS Lessees ability to generate cash flow from the operations of the hotel properties. The TRS Lessees are dependent upon the management companies with whom they have entered or will enter into management agreements with to operate the hotel properties.

Cash flow from operations from real estate investments will be primarily dependent upon the occupancy level and average daily rate, or “ADR”, of our portfolio, and how well we manage our expenditures.

Table of Contents

We anticipate that our aggregate loan-to-value ratio will be between 35% and 65%, however, there can be no assurance that we will achieve this ratio. We target a loan-to-value ratio for the Projects of between 35% and 70%, based on the purchase price of the Projects, however, we may obtain financing that is less than or higher than such loan-to-value ratio for an individual Project at the discretion of the board of directors. Though this is our estimated leverage, our charter does not limit us from incurring debt in excess of this amount. As of December 31, 2024, our aggregate loan-to-value ratio, based on the aggregate purchase price of the Projects, was approximately 58%.

In addition to making investments in accordance with our investment objectives and potential expenditures in connection with the implementation of our exit strategy, we expect to use capital resources to make certain payments to the Advisor and its affiliates and NHS. These payments include the various fees and expenses to be paid to the Advisor and its affiliates in connection with the selection, acquisition and management of Projects, as well as reimbursement of certain organization and other offering expenses described below. The Advisor earns a one-time acquisition fee of up to 1.4% of the hotel purchase price including funds allocated for any property improvement plan (“PIP”) at the time of each hotel property acquisition, a financing fee of up to 1.4% of the hotel purchase price including funds allocated for any PIP at the time of closing the initial financing, and an annual asset management fee of up to 0.75% of the gross assets of the Company, which is payable on a monthly basis. The Advisor may also be paid a refinancing fee of up to 0.75% of the principal amount of any refinancing at the time of closing the refinancing. The Advisor may also be paid a disposition fee equal to between 0.0% and 4.0% of the hotel sales price, payable at the closing of the disposition, which disposition fee in connection with a sale of all or substantially all of the Company’s assets, merger or similar transaction, shall be equal to between 0.0% and 4.0% of the gross consideration received (grossed up for liabilities of the Company), with the percentage dependent on the total return per share and timing of such transaction, payable at the closing of such sale, merger or transaction. The Advisor may also be paid real estate commissions of up to 3.0% of the hotel purchase price in connection with the sale of a hotel property in which the Advisor or its affiliates provided substantial services, but in no event greater than one-half of the total commissions paid with respect to such property if a commission is paid to a third-party as well as the Advisor, and in no event will total commissions exceed 5.0% of the hotel sales price. Certain affiliates of the Advisor may receive an annual guarantee fee equal to 1.0% of the guaranty amount, paid on a monthly basis, for debt obligations of the hotel properties personally guaranteed by such affiliates. The Advisor may earn an annual subordinated performance fee equal to 20% of the distributions after the common stockholders and Operating Partnership limited partners (other than the Series B LP Unit holders) have received a 6% cumulative, but not compounded, return per annum. Per the terms of the Operating Partnership’s operating agreement, the Advisor receives distributions from the Operating Partnership in connection with their ownership of non-voting Series B LP Units. The Advisor’s ownership of Series B LP Units is presented as non-controlling interest on the accompanying consolidated financial statements.

The Advisor and its affiliates may be reimbursed by us for certain organization and offering expenses in connection with the Offering, the GO Unit Offering and the GO II Unit Offering, including legal, printing, marketing and other offering-related costs and expenses. Following the termination of the Offering, the Advisor will reimburse us for any such amounts incurred by us in excess of 15% of the gross proceeds of the Offering. In addition, we may pay directly or reimburse the Advisor and its affiliates for certain costs incurred in connection with its provision of services to us, including certain acquisition costs, financing costs, and sales and marketing costs, as well as an allocable share of general and administrative overhead costs. All reimbursements are paid to the Advisor and its affiliates at cost.

As of December 31, 2024, NHS earns a monthly base management fee for property management services, including overseeing the day-to-day operations of the hotel properties for which it serves as the property manager, in an amount up to 4% of gross revenue. NHS may also earn a monthly accounting fee of $14.00 per room for accounting services, payable monthly, and an administrative fee equal to 0.60% of gross revenues for administrative and other services. We reimburse NHS for certain costs of operating the hotel properties incurred on our behalf. All reimbursements are paid to NHS at cost. NHS also earns a flat fee of $5,000 per hotel property for due diligence services, including analyzing, evaluating, and reporting on documentation and information received from sellers or contributors during the period of due diligence. Such fee is waived if, upon acquisition by us, NHS is selected as the management company for the hotel property. NHS is also reimbursed for actual out-of-pocket costs incurred in providing the due diligence services. As of December 31, 2024, NHS served as property manager for nine of our hotel properties. On February 10, 2025, we terminated the management agreements with NHS and entered into new agreements with Hotel Equities Group, LLP (“Hotel Equities”). See “ – Subsequent Events”.

Table of Contents

Our other hotel properties are managed by Vista Host Inc., Interstate Management Company, LLC (“Aimbridge”), KAJ Hospitality Inc. and Raines Hospitality Inc. These management companies earn a base management fee in an amount between 2.0% and 3.0% of gross revenue, plus monthly accounting fees and in some cases a monthly fee for customized accounting services, revenue management and digital marketing. They also may earn an incentive management fee if certain performance metrics are achieved. We also reimburse the management companies for certain costs of operating the hotel properties on our behalf. All reimbursements are paid to such management companies at cost.

One Rep, a related party, provides construction oversight, project management, and other related services to the Company. For the services provided, One Rep is paid a construction management fee equal to 6% or 7% of the total project costs. The Company also reimburses One Rep for certain costs incurred on behalf of the Company, and all reimbursements are paid to One Rep at cost.

The franchise agreements for certain of our hotels require that we provide property improvement plans to cover, among other things, replacing and repairing furniture, fixtures and equipment at our hotels and other routine capital expenditures. As of December 31, 2024, we set aside $6.0 million for capital projects in property improvement funds, which are included in restricted cash.

We spent approximately $4.4 million on capital improvements at our operating hotels during the year ended December 31, 2024.

Table of Contents

Debt

Mortgage Debt

At December 31, 2024 and December 31, 2023, our mortgage debt obligations consists of the following:


			Outstanding		Outstanding
			Balance as of		Balance as of
	Interest	Maturity	December 31,		December 31,
Hotel Property	Rate	Date	2024		2023
Holiday Inn Express - Cedar Rapids⁽¹⁾	5.33%	9/1/2024	$	5,619,577	$	5,698,543
Hampton Inn & Suites - Pineville⁽²⁾	—	—		—		8,368,135
Hampton Inn - Eagan⁽¹⁾	7.60%	1/1/2025		8,672,347		8,839,737
Home2 Suites - Prattville	7.63%	11/4/2029		9,164,964		8,984,688
Home2 Suites - Lubbock	4.69%	10/6/2026		6,851,578		7,103,138
Fairfield Inn & Suites - Lubbock	4.93%	4/6/2029		8,639,616		8,809,051
Homewood Suites - Southaven	7.77%	12/6/2029		18,000,000		12,658,773
Courtyard by Marriott - Aurora⁽³⁾⁽⁴⁾	11.31%	2/5/2025⁽⁷⁾		14,935,816		15,000,000
Holiday Inn - El Paso⁽⁴⁾⁽⁵⁾	9.00%	11/15/2024⁽⁸⁾		7,600,000		7,600,000
Hilton Garden Inn - Houston⁽⁶⁾	3.85%	9/2/2026		13,484,482		13,852,705
Sheraton - Northbrook	—	—		—		4,026,202
Hampton Inn - Fargo	7.00%	3/1/2027		6,966,110		7,095,283
Courtyard by Marriott - El Paso^(7)(14)	6.01%	5/13/2027		9,800,349		9,975,072
Fairfield Inn & Suites - Lakewood⁽⁴⁾⁽⁸⁾	11.65%	10/5/2025		12,000,000		13,845,000
Fairfield Inn & Suites - Lakewood - A-1	14.50%	3/27/2026		4,896,801		—
Residence Inn - Fort Collins^(9)(10)	10.58%	5/4/2025		11,200,000		11,200,000
Residence Inn - Fort Collins - CapEx^(9)(11)	12.86%	5/4/2025		1,806,143		1,875,000
Residence Inn - Fort Collins - A-1^(9)(12)	7.00%	8/2/2028		501,465		501,465
Hilton Garden Inn - El Paso	4.94%	8/6/2025		12,033,256		12,341,759
Hilton Garden Inn - Pineville^(13)(14)	—	—		—		7,020,000
Hilton Garden Inn - Charlotte^(13)(14)	—	—		—		9,805,000
Holiday Inn Express - Wichita⁽⁷⁾	6.41%	12/21/2027		5,589,430		5,642,000
Total Mortgage Debt				157,761,934		180,241,551
Premium on assumed debt, net				234,911		203,135
Deferred financing costs, net				(1,639,867)		(2,574,861)
Net Mortgage			$	156,356,978	$	177,869,825

(1)	On February 26, 2025, the Cedar Rapids Property and Eagan Property loans were extended to March 31, 2025 along with a new interest rate of 9.50%. The Company and the lender are working to finalize an extension of these loans as of the date of this filing. See Note 14 “Subsequent Events.”

(2)	On July 23, 2024, the Hampton Inn & Suites Pineville was sold and the loan was repaid on the closing date.

(3)	Variable interest rate equal to 30-day LIBOR plus 6.00%, provided that LIBOR shall not be less than 1.00%. The Company and the lender are working to finalize an extension of these loans as of the date of this filing.

(4)	Loan is interest-only until maturity.

(5)	On January 16, 2025, the maturity date was extended to April 15, 2025 along with a new interest rate of 12.00%. See Note 14 “Subsequent Events.”

(6)	Loan is interest-only for the first 24 months after origination.

(7)	Loan is interest-only for the first 18 months after origination.

(8)	Variable interest rate equal to SOFR Index plus 7.00%.

(9)	On April 18, 2023, Tranche 1 and Tranche 2 were repaid in full and refinanced with a new loan secured by the Fort Collins Property.

(10)	Variable interest rate equal to SOFR Index plus 6.25%.

(11)	Variable interest rate equal to SOFR Index plus 7.50%.

(12)	Tranche 3’s maturity date is August 2, 2028.Loan is interest-only through February 25, 2024.

(13)	On December 2, 2024, the Company entered into two purchase agreements for the Pineville HGI Property and the Charlotte Property and both assets were classified as assets held for sale. See Note 3 “Investment in Hotel Properties”

Table of Contents

(14)	On March 27, 2025, the lender of the El Paso Courtyard Property, Pineville HGI Property, and Charlotte Property sold the loan to a new lender. See Note 14 “Subsequent Events.”

As of December 31, 2024, we were not in compliance with the required financial covenants under the terms of its promissory note for the Cedar Rapids Property, Eagan Property, Pineville HGI Property, and Wichita Property. However, we have continued to meet all debt obligations with the respective lenders other than as described under “—Subsequent Events – Mortgage Loan Modifications” below.

Lines of Credit

Line of Credit – Western State Bank

On February 10, 2020, we entered into a line of credit with Western State Bank (“Western Line of Credit”) with a $5.0 million credit limit and an interest rate equal to the U.S. Prime Rate, plus 0.50% (8.50 % as of December 31, 2024 and 9.50% as of December 31, 2023). Throughout 2021 and 2022, the Company amended the Western Line of Credit whereby the maturity was extended to April 15, 2023 and established a rate floor of 4.00%. Further the Western Line of Credit is secured by the Company’s Hampton Inn hotel property in Eagan, Minnesota, the Company’s Holiday Inn Express hotel property in Cedar Rapids, Iowa, the Company’s Hampton Inn hotel property in Fargo, North Dakota and limited partnership units of the Operating Partnership.

During 2023, the Company amended the Western Line of Credit several times which added an additional 200,000 limited partnership units of the Operating Partnership as collateral for the loan, for a total of 300,000 limited partnership units, extended the maturity date of the Western Line of Credit to November 15, 2023, and reduced the maximum credit to $4.67 million and required the Operating Partnership to pay Western State Bank a principal curtailment of $0.3 million. On December 27, 2023, the Operating Partnership, the Company, Corey Maple, LF3 Fargo Med, LLC, LF3 Eagan, LLC, and LF3 Cedar Rapids, LLC entered into a Change in Terms Agreement in connection with the Western Line of Credit, which extended the maturity date of the Western Line of Credit from November 15, 2023 to April 30, 2024 and increased the interest rate to U.S. Prime Rate, plus 1.00%, with a rate floor of 8.25%. On May 10, 2024, the Operating Partnership, the Company, Corey Maple, LF3 Fargo Med, LLC, LF3 Eagan, LLC, and LF3 Cedar Rapids, LLC entered into a Change in Terms Agreement in connection with the Western Line of Credit, which extended the maturity date of the Western Line of Credit from April 30, 2024 to June 5, 2024. In addition, the Operating Partnership was required to make a principal payment in the amount of $250,000. The interest rate as of December 31, 2024 was 8.50%. The Company and Western State Bank are working to finalize an extension of the Western Line of Credit as of the date of this filing, however, there can be no assurance that an extension will be granted.

The Company and Western State Bank are working to finalize an extension of the Western Line of Credit as of the date of this filing, however there can be no assurance that an extension will be granted.

The Western Line of Credit includes cross-collateralization and cross-default provisions such that the existing mortgage loan agreements with respect to the Cedar Rapids Property, the Eagan Property, and the Fargo Property as well as future loan agreements that we may enter into with this lender, are cross-defaulted and cross-collateralized with each other. The Western Line of Credit, including all cross-collateralized debt, is guaranteed by Corey Maple. As of December 31, 2024 and, 2023, there was a $4.2 million and $4.7 million balance outstanding on the Western Line of Credit, respectively.

Revolving Line of Credit – Legendary A-1 Bonds, LLC

On August 10, 2022, the Operating Partnership entered into a $5.0 million revolving line of credit loan agreement (the “A-1 Line of Credit”) with Legendary A-1 Bonds, LLC (“A-1 Bonds”), which is an affiliate of the Advisor which is owned by Norman Leslie, a director and officer of the Company and principal of the Advisor and Corey Maple, a director of the Company and principal of the Advisor. The A-1 Revolving Line of Credit requires monthly payments of interest only, with all outstanding principal and interest amounts being due and payable at maturity. Outstanding amounts under the A-1 Revolving Line of Credit may be prepaid in whole or in part without penalty.

During 2023, the A-1 Revolving Line of Credit was amended twice to increase the line of credit to $13.3 million, to increase the number of Common LP Units of the Operating Partnership securing the A-1 Revolving Line of Credit to

Table of Contents

1,330,000 unissued Common LP Units and extend the maturity date to December 31, 2023. At December 31, 2023, the A-1 Revolving Line of Credit had a fixed interest rate of 7.00% per annum.

On December 20, 2024, the Operating Partnership, the Company and A-1 Bonds amended the A-1 Line of Credit to extend the maturity date to December 31, 2027, increase the interest rate to 17.5% per annum, increase the A-1 Line of Credit to $20.0 million and increase the number of Common LP Units of the Operating Partnership securing the A-1 Revolving Line of Credit to 2,000,000 unissued Common LP Units.

As of December 31, 2024 and 2023, there was $14.3 million and $13.2 million balance outstanding on the A-1 Line of Credit, respectively.

NHS Loan

On March 6, 2023, we entered into a $600,000 loan agreement (the “NHS Loan”) with NHS. The NHS Loan requires the payment of monthly interest beginning on April 6, 2023, with all outstanding principal and interest amounts being due and payable at maturity on July 6, 2023. On December 28, 2023, we entered into a Change in Terms Agreement with the Operating Partnership and NHS in connection with the NHS Loan to extend the maturity date of the NHS Loan to January 31, 2024. This amendment also provided that in lieu of monthly interest payments, all accrued interest shall be due and payable on the maturity date with the full principal balance. On August 21, 2024, we entered into a Change in Terms Agreement with the Operating Partnership and NHS in connection with the NHS Loan to extend the maturity date of the NHS Loan to September 30, 2025. The NHS Loan has a fixed interest rate of 7.0% per annum. Outstanding amounts under the NHS Loan may be prepaid in whole or in part without penalty. The NHS Loan is secured by 60,000 partnership units of the Operating Partnership.

As of both December 31, 2024 and 2023, there was a $600,000 balance outstanding on the NHS Loan.

Mortgage Debt

Fort Collins Loan Refinancing

On April 18, 2023, pursuant to the Loan Agreement, dated as of April 18, 2023 (the “New Fort Collins Loan Agreement”), LF3 RIFC, LLC and LF3 RIFC TRS LLC (collectively, the “Fort Collins Borrower”), subsidiaries of the Operating Partnership entered into a new $11.2 million loan with Access Point Financial, LLC (“Access Point”), which is secured by the Fort Collins Property (the “New Fort Collins Loan”). Access Point is not affiliated with the Company or the Advisor. The New Fort Collins Loan is evidenced by a promissory note and has a variable interest rate per annum equal to 30-day secured overnight financing rate plus 6.25%. The New Fort Collins Loan matures May 4, 2025, with the option for up to three one-year extensions if requirements are met, including certain required debt service coverage ratios and the payment of an extension fee. The New Fort Collins Loan requires monthly interest-only payments through May 4, 2025, followed by monthly payments of principal and interest through any extensions, with the outstanding principal and interest due at maturity. The Fort Collins Borrower has the right to prepay up to 10% of the outstanding principal amount of the New Fort Collins Loan on certain permitted prepayment dates with a 10-day notice. If prepaid during the first 25 months of the initial term, such a prepayment would include a prepayment fee equal to the sum of 24 months of interest payments that, but for the prepayment, would have been due and payable on the prepaid principal amount had a prepayment not occurred. When the Fort Collins Borrower pays the entire remaining principal balance, whether prepaid or on maturity, the Fort Collins Borrower will incur an exit fee of $112,000. The New Fort Collins Loan includes cross-default provisions such that a default under certain other agreements of the Fort Collins Borrower, the Guarantors described below and the property manager of the Fort Collins Property constitute a default under the New Fort Collins Loan.

Pursuant to the New Fort Collins Loan Agreement, Corey Maple and Norman Leslie entered into a Guaranty with Access Point to guarantee payment when due of the principal amount of indebtedness outstanding, including accrued interest and collection costs and expenses, and the performance of the agreements of the Fort Collins Borrower contained in the loan documents.

Table of Contents

El Paso HI Loan Modifications

On May 15, 2023, LF3 El Paso, LLC and LF3 El Paso TRS LLC (collectively, the “El Paso HI Borrower”), subsidiaries of the Operating Partnership, the Operating Partnership and Corey R. Maple entered into a first loan modification agreement with EPH, which extended the maturity date to May 15, 2024. As a condition to the extension, the El Paso HI Borrower agreed to pay down $300,000 of the Holiday Inn El Paso Loan, modifying the principal outstanding balance to be $7.6 million. In addition, as a condition to the extension, the El Paso HI Borrower agreed to deposit $819,674 into an FF&E Reserve account held by EPH.

As an additional condition to the extension, the Operating Partnership and HD Sunland Park Property LLC (the “El Paso HI Contributor”) agreed to amend the Amended and Restated Contribution Agreement, dated as of May 12, 2021, to allow the Operating Partnership to offer the El Paso HI Contributor of the El Paso HI Property an adjustment in the conversion of Series T Limited Units to Common Limited Units or other financial adjustments if the Operating Partnership determines that the El Paso HI Contributor’s extension of the determination of the Series T value to 48 months after issuance to the El Paso HI Contributor may result in actual or possible financial or other loss or litigation.

On May 15, 2024, the El Paso HI Borrower, the Operating Partnership and Corey R. Maple entered into a second loan modification agreement with EPH, which extended the maturity date to November 15, 2024. As a condition to the extension, the El Paso HI Borrower agreed to pay a $76,000 extension fee. With the second modification agreement, the El Paso HI Borrower is entitled to an additional six-month extension, if requested. In addition, the Holiday Inn El Paso Loan has a new interest rate of 9.00%.

Lakewood Loan Extension, Termination and New Loans

The subsidiaries of the Operating Partnership and A-1 Bonds entered into a loan agreement in the amount of $12.6 million secured by the Lakewood Property (the “Original Lakewood Loan”). Per the terms of the agreement, the subsidiaries of the Operating Partnership executed the option to extend the maturity date of the loan to March 28, 2024.

On March 27, 2024, the subsidiaries of the Operating Partnership entered into a new $12.0 million loan with Bluebird Credit EM LLC (the “New Lakewood Loan”) secured by the Lakewood Property. The New Lakewood Loan is evidenced by a promissory note and has an adjustable interest rate based on the SOFR Index plus 7.0% (increasing to 7.5% during the extension of the loan), with an initial interest rate of 12.327%; provided, however, in no event will the interest rate be adjusted to less than 11.0%. The maturity date of the New Lakewood Loan is October 5, 2025, with an option to extend the term for an additional 6 months through April 6, 2026, upon payment of a $60,000 extension fee and satisfaction of certain other conditions. The New Lakewood Loan requires monthly interest-only payments throughout the term, with the outstanding principal and interest due at maturity. The Borrower has the right to prepay the New Lakewood Loan in whole but not in part at any time, subject to a 30-day prior notice to the New Lakewood Lender and payment of an exit fee equal to $120,000 and a prepayment premium calculated pursuant to the terms of the New Lakewood Loan Agreement.

Pursuant to the New Lakewood Loan Agreement, Norman Leslie, a director and executive officer of the Company, entered into a Guaranty (the “New Lakewood Guaranty”) with the New Lakewood Lender to guarantee payment when due of the principal amount of indebtedness outstanding, including accrued interest and collection costs and expenses, as further described in the New Lakewood Guaranty.

Additionally, on March 27, 2024, the Operating Partnership entered into a new loan in an amount up to $4,896,801 (the “New A-1 Lakewood Loan”) with the A-1 Lender, an affiliate of the Company’s Advisor. The New A-1 Lakewood Loan is evidenced by a promissory note and has a fixed interest rate of 14.5% per annum and a maturity date of March 27, 2026. The New A-1 Lakewood Loan requires monthly interest-only payments throughout the term, with the outstanding principal and interest due at maturity. The Operating Partnership has the right to prepay the New A-1 Lakewood Loan in whole or in part without charge, penalty or premium. The A-1 Lender received an origination fee of $73,452 on the effective date of the New A-1 Lakewood Loan and will receive an exit fee equal to 1.5% of the full amount of the New A-1 Lakewood Loan upon the earlier of (a) full repayment (whether on the maturity date or prior thereto or any other date), and (b) the maturity date. Pursuant to a Pledge and Security Agreement entered into by the Company with the A-1 Lender, the New A-1 Lakewood Loan is secured by 489,680 unissued common limited partnership units of the Operating Partnership.

Table of Contents

On March 27, 2024, the proceeds from the New Lakewood Loan and the New A-1 Lakewood Loan were used to refinance the Original Lakewood Loan, and the outstanding obligations under Original Lakewood Loan were repaid in full. At the closing of the refinancing, an unpaid extension fee in the amount of $138,450 was paid to the A-1 Lender under the Original Lakewood Loan which was due but not paid in connection with the prior March 2023 extension of the Original Lakewood Loan. All guaranties in connection and collateral with respect to the Original Lakewood Loan have been terminated or released, and all commitments with respect to the Original Lakewood Loan have been terminated or released.

Prattville Refinance

On November 4, 2024, the subsidiaries of the Operating Partnership (the “New Prattville Borrower”) entered into a new $11.0 million loan (the “New Prattville Loan”) with Independent Bank (the “New Prattville Lender”) secured by the Prattville Property. The New Prattville Loan is evidenced by a promissory note and has an adjustable interest rate that is the higher of (i) 4.85%, or (ii) the SOFR rate plus 3.0%, with an initial interest rate of 7.84%. The maturity date of the New Prattville Loan is November 4, 2029. The New Prattville Loan requires monthly interest-only payments for the first 24 months, principal payments in the amount of $15,200 plus interest for the remainder of the life of the loan and the outstanding principal balance due at maturity. There is no prepayment penalty or premium for prepayments of the principal under the New Prattville Loan, but if the prepayment is the result of a refinance with a financial institution other than the New Prattville Lender, the New Prattville Borrower must pay the New Prattville Lender an amount equal to 3.0% of the amount being prepaid if during the first year of the New Prattville Loan, an amount equal to 2.0% of the amount being prepaid if paid during the second year of the New Prattville Loan, and an amount equal to 1.0% of the amount being prepaid if paid during the third, fourth, or fifth years of the New Prattville Loan.

Pursuance to the New Prattville Loan Agreement, Norman Leslie, a director and executive officer of the Company, entered into a Guaranty (the “New Prattville Guaranty”) with the New Prattville Lender to guarantee payment when due of the principal amount of indebtedness outstanding, including accrued interest and collection costs and expenses, as further described in the New Prattville Guaranty.

On November 4, 2024, the proceeds from the New Prattville Loan were used to refinance the Original Prattville Loan, and the outstanding obligations under the Original Prattville Loan were repaid in full. All guarantees in connection and collateral with respect to the Original Prattville Loan have been terminated or released, and all commitments with respect to the Original Prattville Loan have been terminated or released.

Southaven Refinance

On December 6, 2024, the subsidiaries of the Operating Partnership (the “New Southaven Borrower”) entered into a new $18.0 million loan (the “New Southaven Loan”) with UBS AG. (the “New Southaven Lender”) secured by the Southaven Property. The New Southaven Loan is evidenced by a promissory note and has a fixed interest rate that is equal to the five-year United States Treasury rate plus 3.58%, resulting in an interest rate of 7.77%. The maturity date of the New Southaven Loan is December 6, 2029. The New Southaven Loan requires monthly interest-only payments for the life of the loan, with the outstanding principal balance due at maturity. Prepayment is not permitted during the first year of the New Southaven Loan, but prepayment is permissible with certain stipulations laid out in the loan agreement.

On December 6, 2024, the proceeds from the New Southaven Loan were used to refinance the Original Southaven Loan, and the outstanding obligations under the Original Southaven Loan were repaid in full. All guarantees in connection and collateral with respect to the Original Southaven Loan have been terminated or released, and all commitments with respect to the Original Southaven Loan have been terminated or released.

Northbrook, Fort Collins and Aurora Contribution Agreement

On December 24, 2024, the Company entered a loan contribution agreement (the “Contribution Agreement”) to restructure four of its loans with Access Point Financial, LLC (the “Access Point Lender”) – 1) the mortgage loan secured by the Sheraton – Northbrook (“Sheraton Northbrook Loan”) with unpaid principal balance of approximately $4.0 million, 2) the loans secured by the Residence Inn - Fort Collins Loan (“Fort Collins Loans”) with collective unpaid principal balance of approximately $13.0 million, 3) the mortgage loan secured by the Courtyard by Marriott – Aurora (“Courtyard Aurora Loan”) with unpaid principal balance of approximately $14.9 million. With respect to the Sheraton Northbrook Loan, the

Table of Contents

Access Point Lender received 4,067,659 Series A Preferred Units in exchange for all of the remaining unpaid principal and interest on the Sheraton Northbrook Loan. With respect to the Fort Collins Loans and the Courtyard Aurora Loan, the Company is required to refinance each such loan within 90 days of the date of the Contribution Agreement, and to the extent there is remaining unpaid principal and interest on such loans after such refinancing, the Operating Partnership is required to enter into a contribution agreement with the Access Point Lender through which the Access Point Lender will receive Series A Preferred Units in exchange for all of such remaining unpaid principal and interest

See “– Subsequent Events” below for a description of changes to mortgage debt occurring subsequent to December 31, 2024.

Loan Guarantees

As of December 31, 2024 and, we have accrued a total of $1.5 million and $1.2 million, respectively in guarantee payments due to certain affiliates of the Advisor that have provided personal guarantees on some of our debt obligations, which is included in accrued expense on the accompanying consolidated balance sheets.

Employee Retention Credit (“ERC”)

Under the provisions of the CARES Act, and the subsequent extension of the CARES Act, the Company was eligible for a refundable Employee Retention Credit (“ERC”) subject to certain criteria. During 2021, the Company applied for and received a $0.8 million employee retention credit that is included in other income (expense) in the consolidated statements of operations. The Company received the funds from the ERC in April of 2023.

Contracts for Purchase and Sale of Hotel Properties

Contribution Agreements

As of December 31, 2024, we had two properties under contract pursuant to Legendary Equity Preservation UPREIT (Pat. Pend.) Contribution Agreements entered into on April 15, 2024:

the Hampton Inn Stow – the contribution of an 84-room Hampton Inn hotel in Stow, Ohio to the Operating Partnership. The aggregate consideration for this hotel under the Hampton Stow Contribution Agreement is $10.2 million, with a majority of the consideration consisting of the assumption by the Operating Partnership of existing debt secured by the hotel and the remaining consideration consisting of the issuance of Series T LP Units of the Operating Partnership.

the Staybridge Suites Stow – the contribution of a 92-room Staybridge Suites hotel in Stow, Ohio to the Operating Partnership. The aggregate consideration for this hotel under the Staybridge Stow Contribution Agreement is $10.9 million, with a majority of the consideration consisting of the assumption by the Operating Partnership of existing debt secured by the hotel and the remaining consideration consisting of the issuance of Series T LP Units of the Operating Partnership and cash at closing.

As required by the Contribution Agreements, the Operating Partnership deposited $100,000 in aggregate

($50,000 for each hotel) into an escrow as earnest money pending the closing or termination of each Contribution Agreement. Except in certain circumstances described in each Contribution Agreement, if the Operating Partnership fails to perform its obligations under either Contribution Agreement, it will forfeit the earnest money for the respective acquisition.

We terminated the Hampton Stow Contribution Agreement and the Staybridge Stow Contribution Agreement on March 1, 2025. The earnest money deposits were fully refunded to the Operating Partnership.

Table of Contents

Agreement to Sell Pineville HGI Property and Charlotte Property

On December 2, 2024, we entered into two purchase and sale agreements for the Pineville HGI Property and the Charlotte Property. The agreements are subject to closing conditions. There can be no assurance we will complete any or all of these pending property dispositions on the contemplated terms, or at all. We recorded impairment losses of approximately $4.0 million in connection with the pending sales of the Pineville HGI Property and the Charlotte Property.

Cash Flows

The following table provides a breakdown of the net change in our cash, cash equivalents, and restricted cash:


	For the Years Ended December 31,
	2024		2023
Net cash (used in) provided by operating activities	$	(1,568,799)	$	3,559,457
Net cash provided by (used in) investing activities		4,480,111		(7,316,870)
Net cash used in financing activities		(5,493,799)		(224,539)
Net decrease in cash, cash equivalents and restricted cash	$	(2,582,487)	$	(3,981,952)

Cash Flows From Operating Activities

As of December 31, 2024, we owned seventeen hotel properties and an equity and profits interest in the parent of the entity which holds a leasehold interest in one hotel property, and during the year ended December 31, 2024, net cash used in operating activities was $1.6 million. As of December 31, 2023, we owned eighteen hotel properties and an equity and profits interest in the parent of the entity which holds a leasehold interest in one hotel property, and net cash provided by operating activities was $3.6 million. Our cash flows used in operating activities generally consist of the net cash generated by our hotel operations, partially offset by the cash paid for corporate expenses, certain acquisition-related expenses, property management fees, and other working capital changes. See “– Results of Operations” below for further discussion of our operating results for the years ended December 31, 2024 and 2023.

Cash Flows From Investing Activities

Net cash provided by investing activities was $4.5 million for the year ended December 31, 2024, and primarily driven by $8.9 million in proceeds from the sale of the Pineville Property offset by $4.4 million used for the improvements and additions to hotel properties. Net cash used in investing activities was $7.3 million for the year ended December 31, 2023, and primarily used for the improvements and additions to hotel properties.

Cash Flows From Financing Activities

During the year ended December 31, 2024, net cash used in financing activities was $5.5 million and consisted primarily of the following:

●

$0.7 million of net cash provided by offering proceeds related to our Offering, including $2.9 million net cash related to the GO II Unit Offering, which was net of payments of commissions and other offering costs of $2.5 million;

●

$2.7 million of net cash used in debt financing as a result of proceeds from debt financing of $45.8 million and $5.5 million in draws on our line of credit, offset by principal payments on debt financing of $47.7 million, $5.0 million in payments on our line of credit and payments of financing costs of $1.5 million; and

●

$3.5 million of net cash distributions, after giving effect to distributions reinvested by stockholders of $0.5 million.

Table of Contents

During the year ended December 31, 2023, net cash used in financing activities was $0.2 million and consisted primarily of the following:

●

$1.5 million of net cash provided by offering proceeds related to our Offering, including $1.0 million net cash related to the GO II Unit Offering, which was net of payments of commissions and other offering costs of $1.4 million;

●

$6.3 million of net cash provided by debt financing as a result of proceeds from debt financing of $13.3 million and $6.8 million in draws on our line of credit, offset by principal payments on debt financing of $12.7 million, with $11.0 million related to the RIFC Property, $0.8 million in payments on our line of credit and payments of financing costs of $0.4 million; and

●

$7.4 million of net cash distributions, after giving effect to distributions reinvested by stockholders of $1.5 million.

See Part II. Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Distribution Information” for details regarding our distribution history as well as sources used to pay our distributions.

Results of Operations

We expect that revenue, operating expenses, maintenance costs, real estate taxes and insurance, interest expense and management fees will each increase in future periods as a result of anticipated future acquisitions of real estate investments. Interest expenses are also expected to increase in future periods as a result of higher interest rates on recently financed or extended loans as well as future refinancings of maturing debt. Future operating results could be impacted by changing market and industry factors, see “ – Market Outlook” above.

Our results of operations for the years ended December 31, 2024 and December 31, 2023 are not indicative of those expected in future periods. As of December 31, 2024 and 2023, we consolidated eighteen and nineteen properties, respectively, for a full 12-month operating cycle.

In evaluating financial condition and operating performance, we believe Revenue per Available Room (“RevPAR”), which we calculate by dividing total gross room revenue by the total number of available rooms for the period, is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for properties. We also believe occupancy and average daily rate (“ADR”), which are components of calculating RevPAR, are meaningful indicators of our performance. Occupancy, which we calculate by dividing occupied rooms by total rooms available, measures the utilization of a property’s available capacity. ADR which we calculate by dividing total gross room revenue by the total number of rooms rented for the period, measures average room price and is useful in assessing pricing levels.

Comparison of the year ended December 31, 2024 versus the year ended December 31, 2023

Revenue

Room revenues totaled $69.5 million and $70.2 million for the years ended December 31, 2024 and December 31, 2023, respectively. Other revenue, which consists primarily of hotel food and beverage revenues as well as revenues from other hotel services, was $4.8 million and $4.7 million for the years ended December 31, 2024 and December 31, 2023, respectively. Hotel occupancy, ADR, and RevPAR were 67.46%, $127.90, and $86.29, respectively, for the year ended December 31, 2024. Hotel occupancy, ADR, and RevPAR were 67.50%, $126.00, and $85.05, respectively, for the year ended December 31, 2023.

Property Operations Expenses

Property operations expenses remained generally unchanged at $35.8 million and $35.9 million for the years ended December 31, 2024 and December 31, 2023, respectively. Property operations expenses consist primarily of hotel personnel costs, property taxes, insurance, repair and maintenance, and other costs of operating our hotel properties.

Table of Contents

General and Administrative Expenses

General and administrative expenses were $12.0 million and $10.5 million for the years ended December 31, 2024 and December 31, 2023, respectively. General and administrative expenses consist primarily of administrative personnel costs, rent, professional fees and the cost of office supplies and equipment. The $1.5 million increase can be attributed to rising costs due to an inflationary environment.

Sales and Marketing Expenses

Sales and marketing expenses remained flat at $4.9 million for the years ended December 31, 2024 and December 31, 2023, respectively. Sales and marketing expenses consist primarily of sales and marketing personnel costs, hotel brand loyalty program costs, advertising and other marketing costs.

Franchise Fees

Franchise fees remained generally unchanged at $6.5 million and $6.4 million for the years ended December 31, 2024 and December 31, 2023, respectively. Franchise fees include the amortization of initial franchise fees, as well as monthly fees paid to franchisors for royalty, marketing, reservation fees and other related costs.

Management Fees

Management fees were $5.1 million and $5.5 million for the years ended December 31, 2024 and December 31, 2023, respectively. Management fees include asset management fees paid to the Advisor and management fees paid to property management service providers who manage the day-to-day operations of our hotel properties.

Acquisition Expenses

Acquisition expenses were $34,353 and $1.3 million for the years ended December 31, 2024 and December 31, 2023, respectively. Acquisition expenses include acquisition-related and due diligence costs that relate to a property that was not ultimately acquired, as well as costs related to hotel property acquisition activities that are not attributable to specific property acquisitions, along with any acquisition costs associated with the acquisition of a VIE. The decrease in acquisition expenses is primarily due to pending acquisitions that were terminated in 2023.

Depreciation and Amortization

Depreciation and amortization expense remained generally unchanged at $10.4 million and $10.2 million for the years ended December 31, 2024 and December 31, 2023, respectively.

Impairment Loss

Impairment loss was $4.0 million for the year ended December 31, 2024 in connection with the evaluation of Pineville HGI Property and Charlotte Property, both of which are concluded to be held for sale as of December 31, 2024. For the year ended December 31, 2023, there was no impairment loss.

Loss From Sale of Hotel Property

Loss from sale of hotel property was $4.6 million for the year ended December 31, 2024 resulting from the sale of the Pineville Property in July, 2024. For the year ended December 31, 2023, there was no property sales.

Other (Expense) Income, net

Other expense, net was $3.4 million and other income, net was $1.0 million for the years ended December 31, 2024 and December 31, 2023, respectively. The change was primarily due to a majority of the expense related to writing off uncompleted projects in 2024 compared to a gain recorded upon acquisition of the VIE in 2023.

Table of Contents

Interest Expense

Interest expense was $17.5 million and $14.6 million for the years ended December 31, 2024 and December 31, 2023, respectively. The $2.9 million increase in interest expense was primarily due to amendments in the debt structure and an increase in interest rates due to inflation.

We expect that in future periods our interest expense will vary based on the amount of our borrowings, which will depend on the cost of borrowings, higher interest rates on several of our recently refinanced and extended loans as well as future refinancings of maturing debt, the amount of proceeds we raise in our Offering and our ability to identify and acquire hotel properties and real estate-related assets that meet our investment objectives or any disposals of hotel properties pursuant to our exit strategy.

Critical Accounting Estimates

Below is a discussion of the accounting estimates that management believes are or will be critical to our operations. We consider these estimates critical in that they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

Acquisition of Hotel Properties

We evaluate whether each hotel property acquisition should be accounted for as an asset acquisition or a business combination. If substantially all of the fair value of the gross assets acquired is concentrated in a single asset or a group of similar identifiable assets, then the transaction is considered to be an asset acquisition. All of our acquisitions since inception have been determined to be asset acquisitions. Transaction costs associated with asset acquisitions will be capitalized and transaction costs associated with business combinations will be expensed as incurred.

Our acquisitions generally consist of land, land improvements, buildings, building improvements, and furniture, fixtures and equipment (“FF&E”). We may also acquire intangible assets or liabilities related to in-place leases, management agreements, debt, and advanced bookings. For transactions determined to be asset acquisitions, we allocate the purchase price among the assets acquired and the liabilities assumed based on their respective fair values at the date of acquisition. For transactions determined to be business combination, we record the assets acquired and the liabilities assumed at their respective fair values at the date of acquisition. We determine the fair value by using market data and independent appraisals available to us and making numerous estimates and assumptions.

The difference between the relative fair value and the face value of debt assumed in connection with an acquisition is recorded as a premium or discount and amortized to interest expense over the remaining term of the debt assumed. The valuation of assumed liabilities is based on our estimate of the current market rates for similar liabilities in effect at the acquisition date.

Impairment of Hotel Properties

We assess the carrying value of our hotel properties whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The recoverability is measured by comparing the carrying amount to the estimated future undiscounted cash flows which take into account current market conditions and our intent with respect to holding or disposing of the hotel properties. If our analysis indicates that the carrying value is not recoverable on an undiscounted cash flow basis, we will recognize an impairment loss for the amount by which the carrying value exceeds the fair value. The fair value is determined through various valuation techniques, including internally developed discounted cash flow models, comparable market transactions or third-party appraisals.

Table of Contents

The use of projected future cash flows is based on assumptions that are consistent with a market participant’s future expectations for the travel industry and the economy in general and our expected use of the underlying hotel properties. The assumptions and estimates related to the future cash flows and the capitalization rates are complex and subjective in nature. Changes in economic and operating conditions that occur subsequent to a current impairment analysis and our ultimate use of the hotel property could impact the assumptions and result in future impairment losses to the hotel properties. We recorded a $4.0 million impairment charge for the year ended December 31, 2024 and no impairment charges for the year ended December 31, 2023.

Assessment of Variable Interest Entities

We use judgment when evaluating whether we have a controlling financial interest in an entity, including the assessment of the importance of rights and privileges of the partners based on voting rights, as well as financial interests in an entity that are not controllable through voting interests. If the entity is considered to be a variable interest entity (“VIE”), we use judgment in determining whether we are the primary beneficiary, and then consolidate those VIEs for which we have determined we are the primary beneficiary. If the entity in which we hold an interest does not meet the definition of a VIE, we evaluate whether we have a controlling financial interest through our voting interest in the entity. Changes to judgments used in evaluating our partnerships and other investments could materially affect our consolidated financial statements.

Fair Value Measurement

We establish fair value measures based on the fair value definition and hierarchy levels established by GAAP. These fair values are based on a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 Observable inputs such as quoted prices in active markets.

Level 2 Directly or indirectly observable inputs, other than quoted prices in active markets.

Level 3 Unobservable inputs in which there is little or no market data, which require a reporting entity to develop its own assumptions.

Our estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. We classify assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.

Off-Balance Sheet Arrangements

As of December 31, 2024 and 2023, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Seasonality

Depending on a hotel’s location and market, operations for the hotel may be seasonal in nature. This seasonality can be expected to cause fluctuations in our quarterly operating performance. Based on historic trends, for hotels located in non-resort markets, demand is generally lower in the winter months due to decreased travel and higher in the spring and summer months during the peak travel season. Accordingly, we generally would expect to have lower revenue, operating income and cash flow in the first and fourth quarters and higher revenue, operating income and cash flow in the second and third quarters.

Table of Contents

Subsequent Events

Western Line of Credit Amendments

We and Western State Bank are working to finalize an extension of the Western Line of Credit as of the date of this filing, however there can be no assurance that an extension will be granted.

Mortgage Loan Modifications

El Paso HI Property

On January 16, 2025, the Company modified the mortgage loan secured by the El Paso Holiday Inn, which increased the interest to 12.00% and extended the maturity date to May 31, 2025, provided certain conditions are met.

Cedar Rapids Property and Eagan Property

On February 26, 2025, the Company entered into a Change in Terms Agreement with Western State Bank to amend the existing loans secured by the Cedar Rapids Property and the Eagan Property to extend the maturity date of each loan to March 31, 2025 and to increase the interest rate of each loan to a fixed rate of 9.50%.

We and Western State Bank are working to finalize an extension of the loans secured by the Cedar Rapids Property and the Eagan property as of the date of this filing, however there can be no assurance that an extension will be granted.

Houston Property and Wichita Property

On March 27, 2025, the Company entered into a Forbearance Agreement with Choice Financial Group for the Houston Property and the Wichita Property whereby the Company is required to make payments in the amount aggregating approximately $204,000, accrue interest on each loans secured by the Houston Property and the Wichita Property at a rate of Prine Rate plus 0.50%, and the assignment of sale proceeds from the completion of the pending sale of Pineville HGI in payment for various obligations on the Houston Property and Wichita Property. In addition, Corey Maple is required to guaranty 50% of each of the indebtedness of the Houston Property and the Wichita Property.

El Paso Airport Property, Charlotte Property and Pineville HGI Property

On March 27, 2025, the mortgage loans secured by the El Paso Airport Property, the Charlotte Property and the Pineville HGI Property (collectively, the “Western Alliance Loans”) were sold to a new lender. From January 2025 through the date of this filing, we were not in compliance with the payment obligations under the Western Alliance Loans. However, as discussed above, the sales of the properties are anticipated to close in the near future, and the proceeds are expected to be utilized toward various corporate purposes, including the repayment of these loans. We plan to engage in discussions with the new lender to defer the payment of principal and interest, similar to the terms previously discussed with the old lender. However, there can be no assurance that the new lender will approve these new payment terms, which could have a material adverse impact on our financial condition and liquidity.

Status of the Offering

On March 24, 2025, our board of directors extended the term of the Offering to May 31, 2026. As of the date of this filing, the Company’s private offering remained open for new investment, and since the inception of the offering the Company had issued and sold 10,300,567 shares of common stock, including 1,215,332 shares issued pursuant to the DRIP, resulting in the receipt of gross offering proceeds of $100.8 million.

GO II Unit Offering

On March 24, 2025, our board of directors extended the term of the GO II Unit Offering to March 31, 2026. The Operating Partnership has issued and sold 636,945 Series Go II LP Units, resulting in the receipt of gross offering proceeds of $4.8 million as of the date of this filing.

Table of Contents

Termination of NHS Property Management Agreements

On February 10, 2025, the Company entered into hotel management agreements (each, an “Agreement”) with Hotel Equities Group, LLC (“Hotel Equities”), a hotel management company based in Atlanta, Georgia, with respect to each of the eight hotel properties (the “Properties”) currently under hotel management agreements with NHS, a hotel management company owned primarily by Norman Leslie, an officer and director of the Company who is also a 50% owner of the Company’s Sponsor. Hotel Equities is currently providing certain management duties with respect to the Properties pursuant to a partnership agreement with NHS entered into in 2023, pursuant to which NHS received a loan from Hotel Equities and an ongoing revenue participation on certain hotels subject to the partnership agreement in exchange for NHS delegating certain hotel operational duties to Hotel Equities. The newly executed Agreements between the Company and Hotel Equities are not within the scope of this partnership agreement. The hotel management agreements with the Properties were terminated, effective as of this date. The Company did not incur any material early termination penalties in connection with such terminations.

Concurrently, the new Agreements appoint Hotel Equities as the exclusive manager for the Properties. Pursuant to the Agreements, Hotel Equities will receive a management fee equal to 3.00% of gross revenues of the Properties. Hotel Equities will also receive an accounting services fee of $2,500 per month, a revenue management fee of $2,000 per month, and a technology fee of $1,000 per month for accounting, data intelligence and budget forecast system costs, each with annual escalations of 3% or as set forth in the hotel operating budget. Hotel Equities will also receive a quarterly incentive fee equal to 0.45% of gross revenues of each of the Properties to the extent certain key performance indicators are achieved with respect to such quarter for such Property. Hotel Equities will also be reimbursed for its out-of-pocket expenses incurred in accordance with the hotel operating budget that are directly related to the performance of the hotel management functions. Each Agreement has a five-year initial term, which will be automatically renewed for additional 3-year terms unless earlier terminated by the parties. Except for certain circumstances described in the Agreement or otherwise agreed to by the parties, if Hotel Equities is not retained by the new property owner after a sale of the Property, Hotel Equities is entitled to an off-boarding fee equal to the management fees paid during the 12-month period immediately preceding the date of sale, subject to a 10% reduction following each 12-month period following the effective date of the Agreement. Hotel Equities is also entitled to a termination fee if Hotel Equities terminates the Agreement due to the Company failing to cure certain defaults under the Agreement or if the Company terminates the Agreement other than for cause, which fee is equal to the trailing 12 months of management fees paid to Hotel Equities immediately preceding the date of termination. Further, the Company is required to pay Hotel Equities an annual portfolio incentive fee of 15% of the combined gross operating profit for the Properties which is in excess of the budgeted gross operating profit for such calendar year, provided that total annual management fees, quarterly incentive fees, and portfolio incentive fees shall not exceed 4.5% of the total gross revenue for the calendar year.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Quantitative and qualitative disclosures about market risk have been omitted as permitted under rules applicable to smaller reporting companies.

Item 8. Financial Statements and Supplementary Data.

See the Index to Financial Statements at page F-1 of this report.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Based on the evaluation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), our Chief Executive

Table of Contents

Officer and our Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective.

Management’s Assessment of Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that: (1) pertain to maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of our assets that could have a material effect on our financial statements. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness for future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In connection with the preparation of our Form 10-K, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making that assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). A material weakness is a deficiency, or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Based on its assessment and the remediation efforts described below, our management believes that, as of December 31, 2024, our internal control over financial reporting was effective based upon those criteria.

Remediation of Previously Reported Material Weakness in Internal Control over Financial Reporting

In connection with the review of the Company’s consolidated financial statements for the quarter ended September 30, 2022, we identified a material weakness in our control activities related to the accounting treatment of an acquisition of a controlling interest in an entity which holds the leasehold interest in a hotel property that occurred in August of 2022. This material weakness was identified as a result of the incorrect application of the prevailing accounting guidance under accounting principles generally accepted in the United States of America (“US GAAP”). This material weakness did not result in any misstatement to the financial statements issued for the three months ended March 31, 2022 or the three and six months ended June 30, 2022.

Management’s Remediation Efforts

Management has implemented comprehensive measures to ensure that control deficiencies contributing to the material weakness are remediated The remediation actions include:

●

Engaging with an external consulting firm who has expertise in technical matters involving US GAAP to assist with technical accounting matters as needed.

●

Expanding controls to establish a formal review process to enhance the completeness and accuracy of the accounting records and financial statements.

●

Strengthening the risk and control matrix to enable management to better assess areas of higher susceptibility to financial statement risk.

●

Formalizing and documenting processes and controls within significant accounts and cycles.

Table of Contents

●

Broadening the process for management to test the effectiveness of key controls within the financial reporting process.

We believe that as a result of these actions, the previously reported material weakness has been remediated.

Changes in Internal Control Over Financial Reporting

During the year ended December 31, 2024, other than the remediation actions described above, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We will continue to monitor the design and effectiveness of these and other processes, procedures, and controls and will make any further changes management deems appropriate.

Item 9B. Other Information.

(a) Amendment to Code of Conduct and Ethics

On April 25, 2025, we amended our Code of Conduct and Ethics to adopt insider trading policies and procedures governing the purchase, sale and/or other dispositions of our securities by our directors and officers and the managers, officers and employees of our advisor and its affiliates who provide services to us, which policies and procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations, and any listing standards applicable to us. We also updated the person who will serve as the Compliance Officer.

(b) None of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarter ended December 31, 2024.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Table of Contents

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Executive Officers and Directors

The following table sets forth certain information about our executive officers and directors as of April 28, 2025.


Name and Address⁽¹⁾	Position(s)	Age	Year First Became a Director	Class
Corey R. Maple	Chairman of the Board and Director	59	2018	Class I
Norman H. Leslie	President, Chief Executive Officer, Secretary, Chief Investment Officer, Treasurer, and Director	58	2018	Class II
Samuel C. Montgomery	Chief Financial Officer	43	n/a	n/a
Perry M. Rynders	Independent Director	67	2019	Class II
Jeffrey T. Leighton	Independent Director	55	2018	Class III
David G. Ekman	Director	63	2018	Class III

(1)	The address of each named executive officer and director is 1635 43rd Street South, Suite 205, Fargo, North Dakota 58103.

Corey R. Maple

Corey R. Maple serves as Chairman of our board of directors and a director, positions he has held since April 2018. From April 2018 to May 2023, Mr. Maple served as the Company’s Chief Executive Officer and Secretary. He also served as the Chief Executive Officer and Secretary of the Advisor, positions he held from April 2018 to May 2023. Mr. Maple has also served as Managing Member of the Sponsor since 2018. In 1992, Mr. Maple served as manager of a branch office of Maier Engineering in St. Paul, Minnesota. In 1993, Mr. Maple and three partners purchased Maier from its principal, Gordon Maier. In 1996, Mr. Maple founded MiniMax Software Corp. to build engineering applications for the electric utility market. Also in 1996, Mr. Maple acquired a 100% interest in Maier by buying out the interests of his other three partners in the company. In 2005, MiniMax merged with Powel, ASA, a privately held Norwegian company. In 2006, Mr. Maple helped lead a successful public offering of the combined entity on the Oslo Bourse. Mr. Maple served as the President of U.S. operations and member of the board of directors for the next two years until the company was purchased by a Scandinavian conglomerate. In 2008, Mr. Maple founded Cordonco.com, an online transaction processing service. Also in 2008, Mr. Maple served as a founder of Lodging Opportunity Fund, an investment fund sponsored by an affiliate of our Advisor that purchased distressed, limited-service hotels, and currently serves as an officer and director of that entity. Mr. Maple also owns or has an interest in Seven Sisters Spirits, a large full-service liquor store near Detroit Lakes MN, and MapleTree LLC, an investment company. Mr. Maple holds a Bachelor of Science degree in Electrical Engineering from North Dakota State University. We believe that Mr. Maple’s experience as a founder of Lodging Opportunity Fund and his private board experience make him well qualified to serve as a member of our board of directors.

On August 28, 2023, Mr. Maple, the Advisor and an affiliated manager of another REIT sponsored by our Sponsor, Legacy Hospitality II, LLC (“Legacy”), agreed to an administrative cease-and-desist order filed by the Securities and Exchange Commission (the “SEC”) relating to matters previously discussed in our prior public filings and described more fully in Part II Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Subsequent Events – SEC Settlement” herein. A copy of the order can also be found on the SEC’s website at https://www.sec.gov/files/litigation/admin/2023/33-11227.pdf. The SEC’s order states that Mr. Maple, the Advisor and Legacy violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, as amended, through the improper reimbursement of and financial accounting for certain expenses incurred by the Advisor and Legacy as well as the adequacy of disclosures to investors related to those policies and practices. As part of the settlement, the Advisor paid disgorgement of $463,900, prejudgment interest of $85,431.50 and a civil monetary penalty of $225,000, Legacy agreed to disgorgement of $2,283,000, prejudgment interest of $4,359,012.67 and a civil monetary penalty of $1,150,000, and Mr. Maple paid a civil monetary penalty of $100,000. The Advisor, Legacy and Mr. Maple did not admit or deny the

Table of Contents

findings contained in the order, except that solely for purposes of exceptions to discharge set forth in Section 523 of the Bankruptcy Code, the findings in the order are true and admitted by Mr. Maple.

Norman H. Leslie

Norman H. Leslie serves as Chief Executive Officer and Secretary of the Company, positions he has held since May 19, 2023. In addition, he serves as the President of the Company, a position he has held since August 2019, and Chief Investment Officer, Treasurer and director of the Company, positions he has held since April 2018. Mr. Leslie also serves as the President, Chief Investment Officer and Treasurer of the Advisor, positions he has held since April 2018. Mr. Leslie has also served as the Managing Member of the Sponsor since 2018. Mr. Leslie has 33 years of real estate experience and has worked extensively in the hotel industry starting at the age of 13, working in his family’s roadside inn, where he developed an in-depth understanding of hotel operations. Mr. Leslie organized NHS, LLC (dba National Hospitality Services) in 2001. Today, NHS manages 48 hotels across the United States and is recognized as a Top 200 management company in the United States by size. NHS operates hotels franchised through IHG®, Marriott®, Hilton®, Hyatt®, Radisson®, Choice Hotels® and Wyndham®. As co-founder of Bridge Hospitality LLC and other development companies, he was instrumental in the multiple new-build IHG and Marriott hotels in the United States. Mr. Leslie has also led the development of commercial properties including Grade A offices and retail centers in North Dakota. He was also a co-founder of Heritage Homes, a premiere homebuilder in the Fargo-Moorhead market.

Mr. Leslie co-founded Lodging Opportunity Fund LLLP, Lodging Opportunity Fund Real Estate Investment Trust, the Company and their corresponding sponsor entities. These entities acquired over 40 hotels between 2011 and today. Mr. Leslie served on the IHG Owners Association Global Board of Directors (2018-present) and was elected as Chair of the Board for 2022. He has served on the board of directors of the Fargo-Moorhead-West Fargo Chamber of Commerce, Ramada Inns National Association (RINA), and four Owner Association panels for IHG.

Mr. Leslie holds a Bachelor of Commerce Degree (Honors) from the University of Manitoba. We believe that Mr. Leslie’s significant experience in the real estate and hotel industry makes him well qualified to serve as a member of the Company’s board of directors.

Samuel C. Montgomery

Samuel C. Montgomery serves as Chief Financial Officer of the Company, a position he has held since October 2020. Mr. Montgomery also serves as Chief Operating Officer of our Sponsor, a position he has held since December 2016. Mr. Montgomery oversees every aspect of Legendary Capital’s operations. He is a certified public accountant in North Dakota, Florida and Tennessee and has more than a decade of experience serving asset managers in the REIT and private equity sectors. He spent the first six years of his career with Ernst & Young LLP, primarily with its Chicago, Illinois, financial services group. In this role, he served as a business advisor to several of the country’s largest REITs on tax consulting, mergers and acquisitions and public offerings. He also contributed to the growth of the company’s financial services practice with a rotation in Bangalore, India, to help develop Ernst & Young’s outsourced tax compliance functions for financial services clients. In 2011, Montgomery transferred to PricewaterhouseCoopers LLP, where he spent five years serving financial services clients primarily from the Tampa, Florida, office. As one of two individuals tasked with developing a financial services practice in western and central Florida, he helped broaden the footprint to cover the entire state. Upon relocating to Fargo, North Dakota in June 2016, Mr. Montgomery joined Eide Bailly LLP’s tax practice serving a variety of real estate clients. He holds a Bachelor’s degree in Business Administration-Accounting from the University of Miami and a Master’s degree in Taxation from Nova Southeastern University.

Perry M. Rynders

Perry M. Rynders is one of our independent directors and is the Chairman of the Audit Committee of our board of directors, positions he has held since April 2019. Mr. Rynders is also the Chairman of the Audit Committee of Lodging Opportunity Fund REIT, an affiliate of the Company. Mr. Rynders was the Chief Executive Officer and member of the Board of Governors of A'viands, LLC, a food services management company, from 2005 through September of 2014. In August of 2011, A'viands was sold to TrustHouse Services Group, LLC. In April of 2013, TrustHouse Services Group, LLC was sold to Elior, a publicly traded company out of France. Mr. Rynders continued as a consultant to A'viands, LLC through

Table of Contents

March of 2018. Mr. Rynders is a 50% owner, CEO and Chairman of the Board of Governors of Best Development Company, LLC. Best Development Company, LLC's primary asset is approximately 80 acres of land in Dakota County, MN which is currently farmed. Mr. Rynders is a 50% owner, CEO and Chairman of the Board of Governors of Best Holding Company, LLC. Best Holding Company, LLC's primary asset is a 30,000 square foot office building in Roseville, MN. Mr. Rynders is a 50% owner, CEO and Chairman of the Board of Governors of Best Investment Company II, LLC. Best Investment Company II, LLC's primary asset is an investment is Tamarack Aerospace Group, Inc. Mr. Rynders is also an investor in Lodging Opportunity Fund REIT, an affiliate of the Company. Mr. Rynders is a Certified Public Accountant (Inactive). We believe that Mr. Rynders experience as Chairman of the Audit Committee of Lodging Opportunity Fund REIT and other business experience make him well qualified to serve as a member of our board of directors and the Chairman of our Audit Committee.

Jeffrey T. Leighton

Jeffrey T. Leighton is one of our independent directors, a position he has held since August 2018. Jeffrey T. Leighton currently is Vice President and a board member of Leighton Broadcasting, a second-generation radio broadcast company. Mr. Leighton has spent most his life in Central Minnesota. Beginning in 1992 he worked as a financial advisor for American Express and attained a Series 7, 63 and 65 license for investments. In 1996, Mr. Leighton joined Leighton Broadcasting as Sales Manager for their Detroit Lakes, Minnesota market and in 2003, he was promoted to Market Manager for this same market. Mr. Leighton has led the Company in its completion of two acquisitions within this market since 2010. Mr. Leighton served on the Essentia Health Foundation and was a driving force in its creation of the Business Relations committee. Mr. Leighton has also served in various positions with the Detroit Lakes Chamber of Commerce, Rotary and Health Resource Center. He holds a Bachelor of Arts degree in Finance and Marketing from The University of St. Thomas in St. Paul, Minnesota. We believe that Mr. Leighton’s finance and acquisitions experience makes him well qualified to serve as a member of our board of directors.

David G. Ekman

David G. Ekman is one of our directors, a position he has held since April 2018. He purchased a ComputerLand franchise in 1982 and later developed his own full-service computer company named Corporate Technologies in Fargo, North Dakota. In 1994, Mr. Ekman launched a regional Internet Service Provider (ISP) company, Corporate Communications, which was later sold. In 1999, Mr. Ekman merged his computer company with a voice and data company. The entity eventually became Multiband Subscriber Services, a field services company with over 3,000 U.S. employees, formerly listed on NASDAQ. Mr. Ekman ended his career as Multiband’s Chief Information Officer in January 2015 after the company’s sale. Mr. Ekman currently serves as President and founding partner of Bridge Hospitality, a company that performs hotel development and investment. Mr. Ekman is also a partner and President of One Rep Construction, an owners representative company for hotel construction and renovations. Additionally, he is co-owner of Travel Travel Fargo-Moorhead, Inc., a regional travel agency. Mr. Ekman has been involved with many associations and committees throughout his career including public company board of directors experience with Multiband. He currently serves on the Board of Trustees of the North Dakota State University Foundation, the NDSU Research and Technology Park board, the Sanford Medical Foundation board, and the Audit Committee of LOF-REIT, a non-registered, non-traded REIT sponsored by an affiliate of our Advisor. Mr. Ekman holds an Associate’s degree in agricultural business from University of Minnesota Crookston. He then transferred to North Dakota State University, majoring in agricultural economics. We believe that Mr. Ekman’s significant business experience, knowledge of the hospitality industry, and various boards membership makes him well qualified to serve as a member of our board of directors.

Board Composition

We currently have five seats on our board of directors. Pursuant to our charter, our board of directors is currently divided into three classes with staggered three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. We did not hold an annual meeting of stockholders in 2023 or 2024 and, as of the date of filing, we did not hold an annual meeting of stockholders in 2025. As a result, all of our directors are continuing to serve because their

Table of Contents

successors have not yet been elected. We anticipate that we will hold an annual meeting during 2025 to elect directors. The board of directors is divided into three classes as follows:

●

Class I directors. The sole Class I director is Corey R. Maple, whose term expires at the annual meeting of stockholders to be held in 2025 or until his successor is elected and qualified;

●

Class II directors. The Class II directors are Norman H. Leslie and Perry M. Rynders. The Class II directors’ terms were scheduled to expire at the annual meeting of stockholders in 2023, but since neither that meeting nor the annual meeting of stockholders in 2024 was held, the Class II directors’ terms will expire at the annual meeting of stockholders to be held in 2025 or until their successors are elected and qualified; and

●

Class III directors. The Class III directors are David G. Ekman and Jeffrey T. Leighton, whose terms were scheduled to expire at the annual meeting of stockholders to be held in 2024, but since that meeting was not held, the Class III directors’ terms will expire at the annual meeting of stockholders to be held in 2025 or until their successors are elected and qualified.

Each director will serve for a term of three years, until his or her successor is duly elected and qualified; provided, that the Class II directors will serve a term expiring at the annual meeting of stockholders in 2026 and the Class III directors will serve a term expiring at the annual meeting of stockholders in 2027. There is no limit on the number of times a director may be elected to office.

Code of Conduct and Ethics

We have adopted a Code of Conduct and Ethics, which includes insider trading policies and procedures and which applies to all of our officers and directors. The full text of our Code of Conduct and Ethics is posted on our website at https://legendarycap.com/sec-info/ and is filed as an exhibit to this Annual Report on Form 10-K. If any substantive amendments are made to the Code of Conduct and Ethics or any waiver is granted, we intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding such amendment to, or waiver from, a provision of this Code of Conduct and Ethics by posting such information on our website, at the address and location specified above.

Audit Committee

The board of directors established an Audit Committee currently composed of two directors. Perry M. Rynders, an independent director, is the Chairman of the Audit Committee. Jeffrey Leighton, an independent director, is a member of the Audit Committee. The board of directors has determined that Mr. Rynders and Mr. Leighton are “financially literate,” and have “accounting or related financial management expertise,” as such qualifications are interpreted by the board of directors in its business judgment and has determined that Mr. Rynders and Mr. Leighton are each an "audit committee financial expert" as that term is defined by the SEC. The Audit Committee is responsible for the oversight of (i) our accounting and financial reporting processes, (ii) the integrity of our financial statements, (iii) our compliance with legal and regulatory requirements, and (iv) our independent registered public accounting firm’s qualifications, performance and independence. The audit committee fulfills these responsibilities primarily by carrying out the activities enumerated in the audit committee charter. The audit committee charter is available on our website at https://legendarycap.com/sec-info/. To assist the Audit Committee with its responsibilities, we created an advisory committee (the "Audit Advisory Committee"). Todd Fisher is currently the sole member of the Audit Advisory Committee. Mr. Rynders was a member of the Audit Advisory Committee prior to being appointed to the board of directors in April 2019.

Conflicts Committee

The board of directors established a conflicts committee of the board of directors (the “Conflicts Committee”) composed of all of the independent directors. The members of the Conflicts Committee are Jeffrey T. Leighton and Perry M. Rynders. The Conflicts Committee may act on any matter permitted under Maryland law. Both the board of directors and the Conflicts Committee must act upon those conflicts of interest matters that cannot be delegated to a committee under

Table of Contents

Maryland law. The Conflicts Committee may also retain its own legal and financial advisors at our expense when appropriate. Among the matters that the Conflicts Committee may act upon are the following:

●

the continuation, renewal or enforcement of our agreements with the Advisor and its affiliates, including the Advisory Agreement;

●

specific known and disclosed conflicts including the approval of any management agreements between NHS, LLC dba National Hospitality Services (“NHS”) and the TRS subsidiaries who are lessees of the properties;

●

transactions with affiliates;

●

the offering of any of the Company’s securities;

●

whether and when we seek to list our common stock on a national securities exchange;

●

whether and when we seek to become self-managed; and

●

whether and when we seek to sell the Company or substantially all of its assets.

In addition, all purchases and sales of hotel properties and third-party borrowings require the approval of at least a majority of the Conflicts Committee. The Conflicts Committee does not have a separate committee charter.

Nominating Committee

In April 2023, our board of directors established a nominating committee of the board of directors (the “Nominating Committee”), composed of all of the independent directors, as well as Corey R. Maple. The current members of the Nominating Committee are Corey R. Maple, Jeffrey T. Leighton and Perry M. Rynders. The Nominating Committee is responsible for, among other things, assisting the board of directors in identifying individuals to become members of the board of directors and officers of the Company and providing recommendations to the board of directors for director nominees for the annual meeting of stockholders, filling director vacancies, and officers of the Company.

There have been no material changes to the procedures by which shareholders may recommend nominees to our board of directors since last disclosed to shareholders.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires executive officers, directors and persons who beneficially own any class of a company’s common stock, to file reports of ownership and changes in ownership with the SEC. To our knowledge, based solely on a review of the copies of reports or written representations from such persons, we believe that our executive officers and directors have complied in a timely manner with all applicable Section 16(a) filing requirements for the year ended December 31, 2024 to the date of this filing except as follows:

●

One Form 4 was filed on July 29, 2024 for each of Jeffrey Leighton and Perry Rynders to report the acquisition of shares on June 30, 2024. These reports were untimely with respect to the disclosure of the acquisition of shares on June 30, 2024.

●

One Form 4 was filed on December 10, 2024 for David Ekman to report the acquisition of Series GO II LP Units on May 29, 2024. This report was untimely with respect to the disclosure of the acquisition of shares on May 29, 2024.

Table of Contents

Item 11. Executive Compensation.

Compensation of Executive Officers

Our executive officers do not receive compensation directly from us for services rendered to us. Our executive officers are officers and/or employees of, or hold an indirect ownership interest in, the Advisor, and/or its affiliates, and our executive officers are compensated by these entities, in part, for their services to us. Samuel C. Montgomery, our Chief Financial Officer, is an employee of an affiliate of the Advisor and we reimburse the affiliate, at cost, for an allocated portion of his compensation to the extent he provides services to us. See Item 13 of this Annual Report on Form 10-K for the year ended December 31, 2024, “Certain Relationships and Related Transactions, and Director Independence” for a discussion of the fees and expense reimbursements paid to the Advisor and its affiliates. The Conflicts Committee will discharge the board of directors’ responsibilities relating to the compensation of our executives to the extent applicable.

Compensation of Directors

If a director is also one of our executive officers or is otherwise affiliated with our Sponsor or Advisor, we do not pay any compensation to that person for services rendered as a director. Our current policy, effective as of March 31, 2022, is to pay $2,500 in cash and issue 500 shares of our common stock on the last day of each calendar quarter, valued at fair value at the date of issuance, to each independent director who is qualified and acting as an independent director on such date. Prior to 2022, we paid our independent directors $500 for each regularly scheduled board of directors or board of directors committee meeting the director attended in person and $250 for each meeting the director attended virtually or by telephone. If there was a meeting of the board of directors and one or more board of directors committees in a single day, the fees were limited to $500 or $250 per day, as applicable. The members of the Audit Advisory Committee will receive the same pay described above for independent directors. In addition, effective as of March 31, 2022, the chairman of the Audit Committee will also receive $5,000 per year and $500 per calendar quarter as compensation for the additional duties performed as chairman of the Audit Committee. The other members of the Audit Committee will receive $500 per calendar quarter as compensation for the additional duties performed as a member of the Audit Committee. Prior to 2022, the chairman of the Audit Committee received $2,500 each year and $500 per Audit Committee meeting as compensation for the additional duties performed as chairman of the Audit Committee. This compensation policy may be modified by the board of directors from time to time.

We have provided below certain information regarding compensation earned by or paid to our directors during fiscal year 2024.


	Fees Earned or Paid in				All Other
Name	Cash in 2024⁽¹⁾		Stock Awards⁽²⁾		Compensation⁽⁴⁾		Total
Corey R. Maple⁽³⁾	$	—	$	—	$	—	$	—
Norman H. Leslie⁽³⁾		—		—		—		—
David G. Ekman		—		—		—		—
Jeffrey T. Leighton		21,000		21,140		1,324		43,464
Perry M. Rynders		29,750		21,140		1,324		52,214

(1)

Fees Earned in 2024 or Paid in Cash include meeting fees earned in: (i) 2023 but paid or reimbursed in the first quarter of 2024 as follows: $21,750; and (ii) 2024 and paid in 2025 as follows: $29,000.

(2)

Beginning in the first quarter of 2022, each independent member of the Board of Directors received 500 shares of our common stock every quarter, valued at fair value at the date of issuance. The fair value of the stock for all four quarters of 2024 was $10.57 per share as determined in accordance with FASB ASC Topic 718.

(3)

Directors who are also our executive officers do not receive compensation for services rendered as a director.

(4)

Represents dividends paid on stock awards. Messrs. Leighton and Rynders reinvested dividends pursuant to our dividend reinvestment plan.

Table of Contents

Phantom Stock Plan

The board of directors has approved the adoption of a phantom stock plan (the "Phantom Stock Plan") for the Company. However, the specific terms of the Phantom Stock Plan have not yet been determined and approved by our board. The Company intends for the shares designated pursuant to the Phantom Stock Plan (the "Phantom Shares") to be allocated to the Advisor, the Company’s taxable REIT subsidiaries collectively and NHS for distribution of the proceeds to their respective employees and service providers in accordance with their compensation plans; however, none of Corey R. Maple, Norman H. Leslie or Samuel C. Montgomery will receive any Phantom Shares pursuant to the Phantom Stock Plan.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table shows, as of March 31, 2025, the amount of our common stock beneficially owned (unless otherwise indicated) by any person who is known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock, and the amount of our common stock and Operating Partnership units beneficially owned (unless otherwise indicated) by (1) our directors, (2) our executive officers, and (3) all of our directors and executive officers as a group.


	Common Stock Beneficially Owned⁽²⁾			Common Stock, Series GO LP Units and Series GO II LP Units Beneficially Owned⁽²⁾				Series B Units Beneficially Owned ⁽²⁾
Name and Address of Beneficial Owner ⁽¹⁾	Number of Shares		Percent⁽³⁾	Number of Shares and Units		Percent⁽⁴⁾	Percent⁽³⁾	Number of Units		Percent⁽⁵⁾
Ownership in Excess of 5% of Outstanding Common Stock
N/A
Directors and Executive Officers
Corey R. Maple	57,318.6		*	116,761.9	⁽⁶⁾	*	1.17%	1,000.0	⁽⁹⁾	100%
Norman H. Leslie	57,318.6		*	101,400.9	⁽⁷⁾	*	1.01%	1,000.0	⁽⁹⁾	100%
Samuel C. Montgomery	—		—	6,781.9	⁽⁸⁾	*	*	—		—
David G. Ekman	3,039.8		*	13,212.6	⁽¹¹⁾	*	*	—		—
Jeffrey T. Leighton	18,785.6		*	18,785.6		*	*	—		—
Perry M. Rynders	6,867.3	⁽¹⁰⁾	*	6,867.3		*	*	—		—
All directors and executive officers as a group	143,329.9		1.43%	263,810.2		1.92%	2.63%	1,000.0		100%

^* Less than 1% of the outstanding shares of common stock

(1)	The address of each named beneficial owner is 1635 43rd Street South, Suite 205, Fargo, North Dakota 58103.

(2)

Beneficial ownership is determined in accordance with the rules of the SEC. 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 vote, or to direct the voting of, such security, or "investment power," which includes the right 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. Except as otherwise indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. None of the shares or units is pledged as security.

(3)	Based on a total of 10,013,042 shares of common stock issued and outstanding as of April 28, 2025.

(4)	Based on a total of 10,013,042 shares of common stock, 3,124,503 Series GO LP Units, and 636,945 Series GO II LP Units issued and outstanding as of April 28, 2025.

(5)	Based on a total of 1,000.0 Series B partnership units of the Operating Partnership issued and outstanding as of April 28, 2025.

(6)	Includes 15,361 Series GO LP Units and 44,082.3 Series GO II LP Units

(7)	Includes 44,082.3 Series GO II LP Units

Table of Contents

(8)	Includes 6,781.9 Series GO II LP Units

(9)	Includes 1,000.0 Series B partnership units of the Operating Partnership owned by Legendary Capital REIT III, LLC, which is owned and controlled by Messrs. Maple and Leslie.

(10)	Mr. Rynders owns all shares through the Rynders Family Trust, with respect to which he shares voting and investment power with Leah K. Rynders, Trustee.

(11)	Includes 10,172.8 Series GO II LP Units

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Policy Regarding Transactions with Related Persons

The Conflicts Committee will review and approve all matters our board of directors believes may involve a conflict of interest, including all transactions between the Company and affiliates of the Company and the Advisor. If we decide to acquire a property in which the Advisor, one of our directors or their respective affiliates owns an interest, a majority of members of the Conflicts Committee must first make a determination that such transaction is fair and reasonable to us and the purchase price is no greater than the price of the property to the affiliated seller, unless there is substantial justification for the excess amount and such excess amount is reasonable. Notwithstanding the foregoing, in no event will we acquire any property from an affiliated seller at an amount in excess of its current appraised value as determined by an independent third-party appraiser.

In addition, our Code of Conduct and Ethics lists examples of types of transactions with related parties that would create prohibited conflicts of interest and requires our officers and directors to be conscientious of actual and potential conflicts of interest with respect to our interests and to seek to avoid such conflicts or handle such conflicts in an ethical manner at all times consistent with applicable law. Our executive officers and directors are required to report potential and actual conflicts to the Chairman of the Audit Committee.

Certain Transactions with Related Persons

The Conflicts Committee has reviewed the material transactions between our affiliates and us since January 1, 2023, as well as any such currently proposed material transactions. Set forth below is a description of such transactions.

Our Relationship with Legendary Capital REIT III, LLC. Substantially all of our business is managed by the Advisor and its affiliates, pursuant to the Advisory Agreement. The Advisor is co-owned by Corey R. Maple and Norman H. Leslie. The Company has no direct employees. The employees of Legendary Capital, LLC, our sponsor and an affiliate of the Advisor (the “Sponsor”), provide services to us related to the negotiations of property acquisitions and financing, asset management, accounting, legal, investor relations, and all other administrative services. Pursuant to the terms of the Advisory Agreement, the Advisor is entitled to specified fees upon the provision of certain services, including acquisition fees, asset management fees, debt financing and refinancing fees, and disposition fees and real estate commissions. We also reimburse the Advisor and its affiliates, at cost, for certain expenses incurred on our behalf, including offering expenses, acquisition expenses and operating expenses. The Advisory Agreement has a term of 10 years. Pursuant to the terms of the Operating Partnership’s operating agreement, the Advisor also receives distributions from the Operating Partnership in connection with its ownership of non-voting Series B Limited Partnership Units (“Series B LP Units”) in certain circumstances.

We pay the Advisor a one-time acquisition fee of up to 1.4% of the hotel purchase price including funds allocated for any PIP at the time of each hotel property acquisition, and a financing fee of up to 1.4% of the hotel purchase price including funds allocated for any PIP at the time of closing the initial financing and a refinancing fee of up to 0.75% of the principal amount of any refinancing at the time of closing the refinancing. We also pay an annual asset management fee of up to 0.75% of the gross assets of the Company, which is payable on a monthly basis. We also pay a disposition fee equal to between 0.0% and 4.0% of the hotel sales price, payable at the closing of the disposition, which disposition fee in connection with a sale of all or substantially all of the Company’s assets, merger or similar transaction, shall be equal to between 0.0% and 4.0% of the gross consideration received (grossed up for liabilities of the Company), with the percentage

Table of Contents

dependent on the total return per share and timing of such transaction, payable at the closing of such sale, merger or transaction. We may also pay real estate commissions of up to 3.0% of the hotel purchase price in connection with the sale of a hotel property in which the Advisor or its affiliates provided substantial services, but in no event greater than one half of the total commissions paid with respect to such property if a commission in paid to a third party as well as the Advisor, and in no event will total commissions exceed 5.0% of the hotel sales price. Certain affiliates of the Advisor may receive an annual guarantee fee equal to 1.0% of the guaranty, paid on a monthly basis, for debt obligations of the hotel properties personally guaranteed by such affiliates. The Advisor may also receive an annual subordinated performance fee equal to 20% of the distributions after the common stockholders and Operating Partnership limited partners (other than the Series B LP Unit holders) have received a 6% cumulative, but not compounded, return per annum.

Per the terms of the Operating Partnership’s operating agreement, the Advisor receives distributions from the Operating Partnership in connection with its ownership of non-voting Series B LP Units. In years other than the year of liquidation, after the Company’s common stockholders have received a 6% cumulative but not compounded return on their original capital contributions, the Advisor receives distributions equal to 5% of the total distributions made. In the year of liquidation, termination, merger or other cessation of the general partner, or the liquidation of the Operating Partnership, holders of the Series B LP Units shall be distributed an amount equal to 5% of the limited partner’s capital contributions after the common stockholders and the limited partners have received a return of their capital contributions plus a 6% cumulative but not compounded return. In the year of liquidation, termination, merger or other cessation of the general partner, or the liquidation of the Operating Partnership, holders of the Series B LP Units shall also be distributed an amount equal to 20% of the net proceeds from the sale of the properties, after the common stockholders and the limited partners have received a return of their original capital contributions plus a 6% cumulative but not compounded return from all distributions.

The Advisor and its affiliates may be reimbursed by the Company for certain organization and offering expenses in connection with the Company’s securities offerings, including legal, printing, marketing and other offering-related costs and expenses. Following the termination of the Offering, the Advisor will reimburse the Company for any such amounts incurred by the Company in excess of 15% of the gross proceeds of the Offering. In addition, the Company may pay directly or reimburse the Advisor and its affiliates for certain costs incurred in connection with its provision of services to the Company, including certain acquisition costs, financing costs, and sales and marketing costs, as well as an allocable share of general and administrative overhead costs. All reimbursements are paid to the Advisor and its affiliates at cost.

Table of Contents

Fees and reimbursements earned and payable to the Advisor and its affiliates for the years ended December 31, 2024 and 2023, were as follows:


	Incurred
	For the Years Ended December 31,
	2024		2023
Fees:
Financing fees	$	90,000	$	84,000
Asset management fees		2,451,957		2,488,100
Performance fees		—		195,874
	$	2,541,957	$	2,767,974

Reimbursements:
Offering costs	$	1,901,538	$	1,935,023
General and administrative		3,631,895		3,258,648
Sales and marketing		57,574		144,421
Acquisition costs		185,115		185,115
Other		113,982		—
	$	5,890,104	$	5,523,207

For the years ended December 31, 2024 and 2023, the Operating Partnership recognized distributions payable to the Advisor in the amounts of $118,232 and $360,821, respectively, in connection with the Advisor’s ownership of Series B LP Units.

Samuel C. Montgomery, the Company’s Chief Financial Officer, is an employee of the Sponsor, and the Company reimburses the Sponsor, at cost, for an allocated portion of his compensation to the extent he provides services to the Company. For the years ended December 31, 2024 and 2023, the total amount of executive compensation expenses reimbursed by the Company for Samuel C. Montgomery was $0.1 million and $0.1 million, respectively. For the years ended December 31, 2024 and 2023, the Company paid Corey Maple and Norman Leslie distributions in the amount of $16,240 in connection with their ownership of 57,319 shares and $40,123 in connection with their ownership of 57,319 shares, respectively, each, of the Company’s common stock. Additionally, for the years ended December 31, 2024 and 2023, the Company paid Corey Maple distributions in amount of $4,532 and $1,994, respectively, in connection with his ownership of 15,361 Series GO LP Units.

Our Relationship with NHS, LLC dba National Hospitality Services. NHS is wholly-owned by Norman Leslie, a director and executive officer of the Company and a principal of the Advisor.

Table of Contents

Property Management Services

Through February 2025, NHS provided property management and hotel operations management services for our hotel properties, pursuant to individual management agreements. The agreements had an initial term expiring on December 31st of the fifth full calendar year following the effective date of the agreement, which automatically renewed for a period of five years on each successive five-year period, unless terminated in accordance with its terms.

Pursuant to the management agreements, NHS earned a monthly base management fee for property management services, including overseeing the day-to-day operations of the hotel properties, equal to up to 4% of gross revenue. NHS may also earn an accounting fee of $14.00 per room for accounting services, payable monthly, and an administrative fee equal to 0.60% of gross revenues for administrative and other services. We reimbursed NHS for certain costs of operating the properties incurred on behalf of the Company. All reimbursements are paid to NHS at cost.

NHS also earns a flat fee of $5,000 per hotel property for due diligence services, including analyzing, evaluating, and reporting on documentation and information received by sellers or contributors during the period of due diligence. Such fee is waived if, upon acquisition by us, NHS is selected as the management company for the hotel property. NHS is also reimbursed for actual out-of-pocket costs incurred in providing the due diligence services.

In February 2025, we terminated all property management agreements with NHS and entered into new property management agreements for those hotels with Hotel Equities Group, LLC a third party (See Note 14 “Subsequent Events” of the notes to the consolidated financial statements included as part of this Annual Report on Form 10-K).

Loan Agreement

We have a $600,000 loan (the “NHS Loan”) with NHS (see Note 6 “Debt” of the notes to the consolidated financial statements included as part of this Annual Report on Form 10-K). The NHS Loan requires interest only payments, with all outstanding principal and interest amounts being due and payable at maturity. The NHS Loan has a fixed interest rate of 7.0% and a maturity date on September 30, 2025.

Fees and reimbursements earned and payable to, NHS for the years ended December 31, 2024 and 2023, were as follows:


	Incurred				Payable as of
	For the Years Ended December 31,				December 31,
	2024		2023		2024		2023
Fees:
Management fees	$	761,201	$	1,073,723	$	321,408	$	186,298
Administrative fees		80,118		119,613		31,950		20,962
Accounting fees		100,992		159,896		47,616		32,220
	$	942,311	$	1,353,232	$	400,974	$	239,480

Reimbursements	$	672,472	$	810,723	$	421,333	$	216,595

Our Relationship with One Rep Construction, LLC (“One Rep”). One Rep is a related party through common management and ownership, as Corey Maple, Norman Leslie, and David Ekman, each hold a 33.33% ownership interest in One Rep. One Rep is a construction management company which provided construction management services to the Company during 2024 and 2023 related to the renovation construction activities at certain hotel properties. For the services provided, One Rep is paid a construction management fee equal to 6% or 7% of the total project costs. The Company reimburses One Rep for certain costs incurred on behalf of the Company, and all reimbursements are paid to One Rep at cost. For the years ended December 31, 2024 and 2023, the Company incurred $8,278 and $191,803 of construction management fees and reimbursements payable to One Rep, respectively. As of December 31, 2024 and 2023, the amounts outstanding and due to One Rep were $44,474 and $34,856 respectively, which is included in due to related parties on the accompanying consolidated balance sheets.

Table of Contents

Our Relationship with Legendary A-1 Bonds, LLC (“A-1 Bonds”). A-1 Bonds is an affiliate of the Advisor which is owned by Mr. Leslie a director and executive officer of the Company and principal of the Advisor and Mr. Maple a director of the Company and principal of the Advisor. As of December 31, 2024 and 2023, the Company has an outstanding balance on its line of credit (the “A-1 Revolving Line of Credit”) amounting to $14.3 million and $13.2 million, respectively (see Note 6 “Debt” of the notes to the consolidated financial statements included as part of this Annual Report on Form 10-K). As of December 31, 2024, the A-1 Revolving Line of Credit was a $20.0 million line of credit with a fixed interest rate of 17.50% and a maturity of December 31, 2027.

Loan Guarantees. The members of the Advisor personally guaranty certain loans of the Company and may receive a guarantee fee of up to 1.0% per annum of the guaranty amount. As of December 31, 2024, Corey Maple, is a guarantor of the Company’s loans secured by the hotel property located in Fargo, North Dakota, which had original loan amounts of $7.4 million, is a guarantor of 50% of the loan secured by the Houston Property, which had an original loan amount of $13.9 million, is a guarantor of 50% of the loan secured by the Wichita Property, is a guarantor of the new loan secured by the Fort Collins Property, which had an original loan amount of $11.2 million and is a guarantor of the Company’s $5.0 million line of credit which is secured by the hotel properties located in Cedar Rapids, Iowa and Eagan, Minnesota, and 100,000 Common LP Units of Lodging Fund REIT III OP, LP. Mr. Maple is also a guarantor of the loan secured by the El Paso University Property, which had an original principal loan amount of $14.4 million. As of December 31, 2024, Norman Leslie is a guarantor of the Company’s new loan secured by the Fort Collins Property, which had an original loan amount of $11.2 million, and is a guarantor under the Company’s new loan secured by the Lakewood Property, which had an original loan amount of $12.0 million and is a guarantor under the Company’s new loan secured by the Prattville Property, which had an original loan amount of $11.0 million. Mr. Leslie was a guarantor of the Company’s loan secured by the Company’s hotel property in Pineville, North Carolina, which had an original loan amount of $9.3 million. That loan was repaid in full and the guaranty terminated on July 23, 2024. For the years ended December 31, 2024 and 2023, the Company accrued guarantee fees in the amount of $109,181 and $151,765 respectively to each Mr. Maple and Mr. Leslie. The total amount accrued of $1.5 million remained unpaid at December 31, 2024 and is included in Due to Related Party on the accompanying consolidated balance sheet.

Currently Proposed Transactions. There are no currently proposed transactions in which we were or are to be a participant and the amount involved exceeded $120,000 and in which any related person had or will have a direct or indirect material interest.

Director Independence

Two members of our board of directors, Jeffrey T. Leighton and Perry M. Rynders, are “independent” as defined by the rules of the New York Stock Exchange. The New York Stock Exchange 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). The board of directors has affirmatively determined that Jeffrey T. Leighton and Perry M. Rynders each satisfies the New York Stock Exchange independence standards. Neither of these directors has ever served as (or is related to) an employee of ours or any of our predecessors or acquired companies (if applicable) or received or earned any compensation from us or any such entities except for compensation directly related to service as a director of us. Therefore, we believe that both of these directors are independent directors. Accordingly, all of the members of the Audit Committee and the Conflicts Committee are “independent” as defined by the New York Stock Exchange.

Item 14. Principal Accountant Fees and Services.

Independent Registered Public Accounting Firm

On October 24, 2023, based on the approval of our Audit Committee, the Company engaged Marcum LLP (“Marcum”), a nationally recognized accounting firm, as the Company’s new independent registered public accounting firm. Marcum has audited the financial statements included in this Annual Report on Form 10-K for the years ended December 31, 2024 and 2023.

Table of Contents

The Audit Committee reviewed the audit and non-audit services performed by Marcum, as well as the fees charged 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 auditor’s independence.

Pre-Approval Policies

In order to ensure that the provision of such services does not impair the independent registered public accounting firm’s independence, the Audit Committee charter imposes a duty on the Audit Committee to pre-approve all auditing services performed for us by our independent registered public accounting firm, as well as all permitted non-audit services. In determining whether or not to pre-approve services, the Audit Committee considers 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 our independent registered public accounting firm, provided any such approval is presented to and approved by the full Audit Committee at its next scheduled meeting.

For the years ended December 31, 2024 and 2023, all services rendered by Marcum were pre-approved in accordance with the policies and procedures described above.

Principal Independent Registered Public Accounting Firm Fees

Fees Paid to Independent Registered Public Accounting Firm

The aggregate fees billed to us for professional accounting services, including the audit of our annual financial statements for the years ended December 31, 2024 and 2023, by Marcum are set forth in the table below.


	2024		2023
Fees:
Audit fees	$	605,000	$	641,500
Audit-related fees		18,150		29,873
Tax fees		100,000		100,116
All other fees		—		—
Total	$	723,150	$	771,489

For purposes of the preceding table, Marcum’s professional fees are classified as follows:

●

Audit fees – These are fees for professional services performed for the audit of our annual financial statements and the required review of quarterly financial statements and other procedures performed by Marcum in order for them to be able to form an opinion on our consolidated financial statements. These fees also cover services that are normally provided by independent registered public accounting firms in connection with statutory and regulatory filings or engagements.

●

Audit-related fees – These are fees for assurance and related services that traditionally are performed by independent registered public accounting firms that are reasonably related to the performance of the audit or review of our financial statements, such as due diligence related to acquisitions and dispositions, attestation services that are not required by statute or regulation, subscription to an online accounting research tool and 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 registered public accounting firm’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 U.S. Internal

Table of Contents

Revenue Service (the “IRS”) and similar state and local agencies, as well as federal, state and local tax issues related to due diligence.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) Financial Statement Schedules

See the Index to Financial Statements at page F-1 of this report.

The following financial statement schedule is included herein at page F-43 of this report:

Schedule III – Real Estate Assets and Accumulated Depreciation

(b) Exhibits

Exhibit No.		Description

3.1		Articles of Amendment and Restatement, dated as of June 1, 2018 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed May 14, 2020)

3.2		Articles Supplementary for Interval Common Stock (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed May 14, 2020)

3.3		Bylaws, dated of as April 9, 2018, as amended by Amendment No. 1 dated as of November 12, 2019 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed November 12, 2019)

3.4		Limited Partnership Agreement of the Operating Partnership, dated as of April 11, 2018 (incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

3.5		First Amendment to Limited Partnership Agreement of the Operating Partnership, effective as of April 29, 2020 (incorporated by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q filed May 14, 2020)

3.6		Amended and Restated Limited Partnership Agreement of the Operating Partnership, effective as of June 15, 2020 (incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q filed August 14, 2020)

3.7		First Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership, effective as of February 4, 2021 (incorporated by reference to Exhibit 3.7 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

3.8		Second Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership, effective as of May 12, 2021 (incorporated by reference to Exhibit 3.5 to the Company's Quarterly Report on Form 10-Q filed August 13, 2021)
3.9		Third Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership, effective as of August 3, 2021 (incorporated by reference to Exhibit 3.6 to the Company's Quarterly Report on Form 10-Q filed August 13, 2021)

Table of Contents

3.10		Fourth Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership, effective as of December 3, 2021 (incorporated by reference to Exhibit 3.10 to the Company’s Annual Report on Form 10-K filed March 31, 2022)

3.11		Fifth Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership, effective as of January 18, 2022 (incorporated by reference to Exhibit 3.11 to the Company’s Annual Report on Form 10-K filed March 31, 2022)

3.12		Sixth Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership, effective as of March 24, 2022 (incorporated by reference to Exhibit 3.12 to the Company’s Annual Report on Form 10-K filed March 31, 2022)
3.13		Seventh Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership, effective as of March 29, 2022 (incorporated by reference to Exhibit 3.13 to the Company's Quarterly Report on Form 10-Q filed March 27, 2024)
3.14		Eighth Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership, effective as of August 3, 2022 (incorporated by reference to Exhibit 3.14 to the Company's Quarterly Report on Form 10-Q filed March 27, 2024)
3.15		Ninth Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership, effective as of August 25, 2022 (incorporated by reference to Exhibit 3.15 to the Company's Quarterly Report on Form 10-Q filed March 27, 2024)
3.16		Tenth Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership, effective as of August 25, 2022 (incorporated by reference to Exhibit 3.16 to the Company's Quarterly Report on Form 10-Q filed March 27, 2024)
3.17		Eleventh Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership, effective as of December 22, 2022 (incorporated by reference to Exhibit 3.17 to the Company’s Annual Report on Form 10-K filed March 27, 2024)
3.18		Twelfth Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership, effective as of January 10, 2023 (incorporated by reference to Exhibit 3.18 to the Company’s Annual Report on Form 10-K filed March 27, 2024)
3.19		Thirteenth Amendment to the Amended and Restated Limited Partnership Agreement of Lodging Fund REIT III OP, LP, effective as of April 7, 2023 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed April 13, 2023)
3.20		Fourteenth Amendment to the Amended and Restated Limited Partnership Agreement of Lodging Fund REIT III OP, LP, effective as of December 24, 2024 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed January 3, 2025)
3.21		Fifteenth Amendment to the Amended and Restated Limited Partnership Agreement of Lodging Fund REIT III OP, LP, effective as of December 24, 2024 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed January 3, 2025)
4.1		Dividend Reinvestment Plan of the Registrant (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

Table of Contents

4.2		Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.1		Amended and Restated Advisory Agreement among the Registrant, the Operating Partnership and the Advisor, effective as of June 1, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.2*		Form of Management Agreement with Hotel Equities Group, LLC

10.3		Form of TRS Lease Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.6		Business Loan Agreement for the Cedar Rapids Property with Western State Bank, dated March 5, 2019 (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.7		Promissory Note issued to Western State Bank relating to the Cedar Rapids Property, dated March 5, 2019 (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.8		Mortgage relating to the Cedar Rapids Property, dated March 5, 2019 (incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.9		Assignment of Rents relating to the Cedar Rapids Property, dated March 5, 2019 (incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.10.1		Commercial Security Agreement (Fixtures) relating to the Cedar Rapids Property, dated March 5, 2019 (incorporated by reference to Exhibit 10.10.1 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.10.2		Commercial Security Agreement (Inventory) relating to the Cedar Rapids Property, dated March 5, 2019 (incorporated by reference to Exhibit 10.10.2 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.10.3		Commercial Security Agreement (Franchise) relating to the Cedar Rapids Property, dated March 5, 2019 (incorporated by reference to Exhibit 10.10.3 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.11.1		Commercial Guaranty relating to the Cedar Rapids Property, dated March 5, 2019 (incorporated by reference to Exhibit 10.11.1 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.11.2		Commercial Guaranty relating to the Cedar Rapids Property, dated March 5, 2019 (incorporated by reference to Exhibit 10.11.2 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.12.1		Agreement to Provide Insurance (Property) relating to the Cedar Rapids Property, dated March 5, 2019 (incorporated by reference to Exhibit 10.12.1 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

Table of Contents

10.12.2		Agreement to Provide Insurance (Fixtures) relating to the Cedar Rapids Property, dated March 5, 2019 (incorporated by reference to Exhibit 10.12.2 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.12.3		Agreement to Provide Insurance (Franchise) relating to the Cedar Rapids Property, dated March 5, 2019 (incorporated by reference to Exhibit 10.12.3 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.15		Business Loan Agreement with Western State Bank relating to the Eagan Property, dated June 19, 2019 (incorporated by reference to Exhibit 10.15 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.16		Promissory Note issued to Western State Bank relating to the Eagan Property, dated June 19, 2019 (incorporated by reference to Exhibit 10.16 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.17		Mortgage to Western State Bank relating to the Eagan Property, dated June 19, 2019 (incorporated by reference to Exhibit 10.17 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.18		Assignment of Rents relating to the Eagan Property, dated June 19, 2019 (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.19.1		Commercial Security Agreement (Fixtures) relating to the Eagan Property, dated June 19, 2019 (incorporated by reference to Exhibit 10.19.1 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.19.2		Commercial Security Agreement (Inventory) relating to the Eagan Property, dated June 19, 2019 (incorporated by reference to Exhibit 10.19.2 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.19.3		Commercial Security Agreement (Franchise) relating to the Eagan Property, dated June 19, 2019 (incorporated by reference to Exhibit 10.19.3 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.20.1		Commercial Guaranty relating to the Eagan Property, dated June 19, 2019 (incorporated by reference to Exhibit 10.20.1 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.20.2		Commercial Guaranty relating to the Eagan Property, dated June 19, 2019 (incorporated by reference to Exhibit 10.20.2 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.21		Agreements to Provide Insurance relating to the Eagan Property, dated June 19, 2019 (incorporated by reference to Exhibit 10.21 to the Company’s Registration Statement on Form 10 filed August 8, 2019)

10.54.1		Assumption Agreement relating to the Lubbock Home2 Suites loan, dated as of December 30, 2019 (incorporated by reference to Exhibit 10.54.1 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

Table of Contents

10.54.2		Joinder by and Agreement of New Indemnitor relating to the Lubbock Home2 Suites, effective as of December 30, 2019 (incorporated by reference to Exhibit 10.54.2 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.54.3		Assignment and Subordination of Management Agreement relating to the Lubbock Home2 Suites, dated as of December 30, 2019 (incorporated by reference to Exhibit 10.54.3 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.54.4		Promissory Note relating to the Lubbock Home2 Suites, dated as of October 4, 2016 (incorporated by reference to Exhibit 10.54.4 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.54.5		Loan Agreement relating to the Lubbock Home2 Suites, dated as of October 4, 2016 (incorporated by reference to Exhibit 10.54.5 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.54.6		Deed of Trust relating to the Lubbock Home2 Suites, dated as of October 4, 2016 (incorporated by reference to Exhibit 10.54.6 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.54.7		Assignment of Leases and Rents relating to the Lubbock Home2 Suites, dated as of October 4, 2016 (incorporated by reference to Exhibit 10.54.7 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.54.8		Guaranty of Recourse Obligations relating to the Lubbock Home2 Suites, dated as of October 4, 2016 (incorporated by reference to Exhibit 10.54.8 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.55.1		Consent, Amendment and Assumption Agreement relating to the Lubbock Fairfield Inn loan, dated as of January 8, 2020 (incorporated by reference to Exhibit 10.55.1 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.55.2		Promissory Note relating to the Lubbock Fairfield Inn, dated as of April 4, 2019 (incorporated by reference to Exhibit 10.55.2 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.55.3		Loan Agreement relating to the Lubbock Fairfield Inn, dated as of April 4, 2019 (incorporated by reference to Exhibit 10.55.3 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.55.4		Assignment of Leases and Rents relating to the Lubbock Fairfield Inn, dated as of April 4, 2019 (incorporated by reference to Exhibit 10.55.4 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.55.5		Deed of Trust relating to the Lubbock Fairfield Inn, dated as of January 8, 2020 (incorporated by reference to Exhibit 10.55.5 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.55.6		Guaranty of Recourse Obligations relating to the Lubbock Fairfield Inn, dated as of January 8, 2020 (incorporated by reference to Exhibit 10.55.6 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.55.7		Environmental Indemnity Agreement relating to the Lubbock Fairfield Inn, dated as of January 8, 2020 (incorporated by reference to Exhibit 10.55.7 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

Table of Contents


10.55.8		Acknowledgement of Property Manager and Borrower relating to the Lubbock Fairfield Inn, dated as of January 8, 2020 (incorporated by reference to Exhibit 10.55.8 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.56.1		Business Loan Agreement for Revolving Line of Credit with Western State Bank, dated February 10, 2020 (incorporated by reference to Exhibit 10.3.1 to the Company’s Quarterly Report on Form 10-Q filed May 14, 2020)

10.56.2		Promissory Note issued to Western State Bank, dated February 10, 2020 (incorporated by reference to Exhibit 10.3.2 to the Company’s Quarterly Report on Form 10-Q filed May 14, 2020)

10.56.3		Mortgage granted to Western State Bank relating to the Cedar Rapids Property, dated February 10, 2020 (incorporated by reference to Exhibit 10.56.3 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.56.4		Mortgage granted to Western State Bank relating to the Eagan Property, dated February 10, 2020 (incorporated by reference to Exhibit 10.56.4 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.56.5		Assignment of Rents granted to Western State Bank relating to the Cedar Rapids Property, dated February 10, 2020 (incorporated by reference to Exhibit 10.56.5 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.56.6		Assignment of Rents granted to Western State Bank relating to the Eagan Property, dated February 10, 2020 (incorporated by reference to Exhibit 10.56.6 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.56.7		Commercial Security Agreement relating to the Cedar Rapids Property, dated February 10, 2020 (incorporated by reference to Exhibit 10.56.7 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.56.8		Commercial Security Agreement relating to the Eagan Property, dated February 10, 2020 (incorporated by reference to Exhibit 10.56.8 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.56.10		Commercial Guaranty by Corey R. Maple to Western State Bank, dated February 10, 2020 (incorporated by reference to Exhibit 10.56.10 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.56.11		Commercial Guaranty by the Registrant to Western State Bank, dated February 10, 2020 (incorporated by reference to Exhibit 10.56.11 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.56.13		Agreement to Provide Insurance relating to the Eagan Property, dated February 10, 2020 (incorporated by reference to Exhibit 10.56.13 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

10.59		Hotel Management Agreement between LF Southaven TRS, LLC and Vista Host Inc. relating to the Southaven Homewood Suites, dated as of February 21, 2020 (incorporated by reference to Exhibit 10.59 to the Company’s Annual Report on Form 10-K filed March 25, 2020)

Table of Contents


10.66.1		Change in Terms Agreement with Western State Bank, dated April 17, 2020, relating to the loan dated March 5, 2019 related to the Cedar Rapids Property (incorporated by reference to Exhibit 10.13.1 to the Company’s Quarterly Report on Form 10-Q filed May 14, 2020)

10.66.2		Modification of Mortgage, dated April 17, 2020 relating to the mortgage dated March 5, 2019 related to the Cedar Rapids Property (incorporated by reference to Exhibit 10.13.2 to the Company’s Quarterly Report on Form 10-Q filed May 14, 2020)

10.67.1		Change in Terms Agreement with Western State Bank, dated April 17, 2020, relating to the loan dated June 19, 2019 related to the Eagan Property (incorporated by reference to Exhibit 10.14.1 to the Company’s Quarterly Report on Form 10-Q filed May 14, 2020)

10.67.2		Modification of Mortgage, dated April 17, 2020 relating to the mortgage dated June 19, 2019 related to the Eagan Property (incorporated by reference to Exhibit 10.14.2 to the Company’s Quarterly Report on Form 10-Q filed May 14, 2020)

10.68		Forbearance Agreement with Wells Fargo Bank, National Association, dated as of April 22, 2020 and effective as of May 1, 2020, relating to the loan dated July 11, 2019 related to the Prattville Property (incorporated by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q filed May 14, 2020)

10.69		Forbearance Agreement with Wells Fargo Bank, National Association, dated as of April 22, 2020 and effective as of May 1, 2020, relating to the loan dated February 21, 2020 related to the Southaven Property (incorporated by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q filed May 14, 2020)

10.74		Form of Services Agreement with One Rep Construction (incorporated by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q filed August 14, 2020)

10.75		First Amendment to Management Agreement, dated August 14, 2020, by and among the Company, LF3 Prattville TRS, LLC and NHS LLC dba National Hospitality Services (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed November 12, 2020)

10.85.1		Loan Agreement by and among LF3 Aurora, LLC, LF3 Aurora TRS, LLC and Access Point Financial, LLC, relating to the Aurora Property, dated as of February 4, 2021 (incorporated by reference to Exhibit 10.85.1 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

10.85.2		Promissory Note issued by LF3 Aurora, LLC and LF3 Aurora TRS, LLC to Access Point Financial, LLC, relating to the Aurora Property, dated as of February 4, 2021 (incorporated by reference to Exhibit 10.85.2 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

10.85.3		Fee and Leasehold Deed of Trust and Security Agreement by and among LF3 Aurora, LLC, LF3 Aurora TRS, LLC and Access Point Financial, LLC, relating to the Aurora Property, dated as of February 4, 2021 (incorporated by reference to Exhibit 10.85.3 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

Table of Contents

10.85.4		Guaranty Agreement, by and among Access Point Financial, LLC, LF3 Aurora, LLC, LF3 Aurora TRS, LLC and the Company, relating to the Aurora Property, dated as of February 4, 2021 (incorporated by reference to Exhibit 10.85.4 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

10.85.5		Environmental Indemnity Agreement, by and among LF3 Aurora, LLC, LF3 Aurora TRS, LLC, and the Company, to Access Point Financial, LLC, relating to the Aurora Property, dated as of February 4, 2021 (incorporated by reference to Exhibit 10.85.5 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

10.85.6		Assignment of Leases and Rents by and among LF3 Aurora, LLC, LF3 Aurora TRS, LLC and Access Point Financial, LLC, relating to the Aurora Property, dated as of February 4, 2021 (incorporated by reference to Exhibit 10.85.6 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

10.85.7		Agreement for Subordination of Payments to Related Parties by and among LF3 Aurora, LLC, LF3 Aurora TRS, LLC and Access Point Financial, LLC, relating to the Aurora Property, dated as of February 4, 2021 (incorporated by reference to Exhibit 10.85.7 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

10.85.8		Pledge Agreement by and between Lodging Fund REIT III OP, LP and Access Point Financial, LLC relating to LF3 Aurora, LLC and the Aurora Property, dated as of February 4, 2021 (incorporated by reference to Exhibit 10.85.8 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

10.85.9		Pledge Agreement by and between Lodging Fund REIT III TRS, Inc. and Access Point Financial, LLC relating to LF3 Aurora TRS, LLC and the Aurora Property, dated as of February 4, 2021 (incorporated by reference to Exhibit 10.85.9 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

10.85.10		Acknowledgement of CoPACE Assessment by and between LN Hospitality Denver, LLC and LF3 Aurora, LLC to Twain Funding I, LLC, relating to the Aurora Property, dated as of February 3, 2021 (incorporated by reference to Exhibit 10.85.10 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

10.87		Change in Terms Agreement for Revolving Line of Credit with Western State Bank, dated as of January 19, 2021 (incorporated by reference to Exhibit 10.87 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

10.96		Form of Services Agreement with NHS dba National Hospitality Services (incorporated by reference to Exhibit 10.96 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

10.97		Letter Agreement between Midland Loan Services, LF3 Lubbock Expo, LLC and LF3 Lubbock Expo TRS, LLC regarding the Lubbock Fairfield Inn loan, dated as of March 2, 2021 (incorporated by reference to Exhibit 10.97 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

10.101		Consent to PPP Loan Agreement, dated March 5, 2021 between Wells Fargo Bank, National Association, LF3 Lubbock Expo, LLC, Lodging Fund REIT III, Inc., and Lodging Fund REIT III OP, LP regarding to the Lubbock Fairfield Inn loan (incorporated by reference to Exhibit 10.101 to the Company’s Annual Report on Form 10-K filed March 31, 2021)

Table of Contents

10.105		Change in Terms Agreement for Revolving Line of Credit with Western State Bank, dated as of May 6, 2021 (incorporated by reference to Exhibit 10.22 to the Company's Quarterly Report on Form 10-Q filed May 17, 2021)
10.107		Loan Agreement between LF3 El Paso, LLC, LF3 El Paso TRS, LLC, and EPH Development Fund LLC, relating to the El Paso Property, dated as of May 12, 2021 (incorporated by reference to Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q filed May 17, 2021)
10.108		Special Warranty Deed between HD Sunland Park Property LLC and LF3 El Paso, LLC, relating to the EL Paso Property, dated as of May 12, 2021 (incorporated by reference to Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q filed May 17, 2021)
10.109		Continuing Guaranty by Lodging Fund REIT III OP, LP in favor of EPH Development Fund LLC, relating to the El Paso Property, dated as of May 12, 2021 (incorporated by reference to Exhibit 10.26 to the Company's Quarterly Report on Form 10-Q filed May 17, 2021)
10.110		Assignment, Consent and Subordination of Management Agreement by and among LF3 El Paso, LLC, LF3 El Paso TRS, LLC, Elevation Hotel Management, LLC and EPH Development Fund LLC, relating to the El Paso Property, dated as of May 12, 2021 (incorporated by reference to Exhibit 10.27 to the Company's Quarterly Report on Form 10-Q filed May 17, 2021)
10.111		Assignment and Assumption of Management Agreement, by and between HD Sunland Park Property, LLC and LF3 El Paso TRS, LLC, and LF3 El Paso, LLC, relating to the El Paso Property, dated as of May 12, 2021 (incorporated by reference to Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q filed May 17, 2021)
10.113		Loan Assumption Agreement by and among HD Sunland Park Property, L.L.C., LF3 El Paso, LLC, LF3 El Paso TRS, LLC, and EPH Development Fund LLC, relating to the El Paso Property, dated as of May 12, 2021 (incorporated by reference to Exhibit 10.30 to the Company's Quarterly Report on Form 10-Q filed May 17, 2021)
10.114		Carve Out Guaranty by Corey R. Maple in favor of EPH Development Fund LLC, relating to the El Paso Property, dated as of May 12, 2021 (incorporated by reference to Exhibit 10.31 to the Company's Quarterly report on Form 10-Q filed August 13, 2021)
10.115		Deposit Account Control Agreement by and among LF3 El Paso TRS, LLC, EPH Development Fund LLC and Wells Fargo Bank, National Association, relating to the El Paso Property, dated as of May 12, 2021 (incorporated by reference to Exhibit 10.32 to the Company's Quarterly Report on Form 10-Q filed August 13, 2021)
10.116		Continuing Guaranty by Lodging Fund REIT III OP, LP in favor of EPH Development Fund LLC, relating to the El Paso Property, dated as of May 12, 2021 (as amended) (incorporated by reference to Exhibit 10.33 to the Company's Quarterly Report on Form 10-Q filed August 13, 2021)
10.118		Hotel Management Agreement between HD Sunland Park Property, L.L.C. and Elevation Hotel Management, L.L.C., relating to the El Paso Property, dated as of November 29, 2018 (incorporated by reference to Exhibit 10.35 to the Company's Quarterly Report on Form 10-Q filed August 13, 2021)

Table of Contents

10.119

First Amendment to the Hotel Management Agreement between HD Sunland Park Property, L.L.C. and Elevation Hotel Management, L.L.C., relating to the El Paso Property, dated as of December 19, 2020 (incorporated by reference to Exhibit 10.36 to the Company's Quarterly Report on Form 10-Q filed August 13, 2021)

10.123

Lodging Fund REIT III, Inc. 10-K