DEBT

6 Months Ended

Jun. 30, 2025

4. DEBT

At June 30, 2025 and December 31, 2024, all forms of debt consists of the following:


	Interest		Outstanding		Outstanding
	Rate as of		Balance as of		Balance as of
	June 30,	Maturity	June 30,		December 31,
	2025	Date	2025		2024
Holiday Inn Express - Cedar Rapids⁽¹⁾	9.50%	6/30/2025	$	5,566,475	$	5,619,577
Hampton Inn - Eagan⁽¹⁾	9.50%	6/30/2025		8,539,065		8,672,347
Home2 Suites - Prattville⁽³⁾	7.32%	11/4/2029		9,273,399		9,164,964
Home2 Suites - Lubbock	4.69%	10/6/2026		6,720,338		6,851,578
Fairfield Inn & Suites - Lubbock	4.93%	4/6/2029		8,550,642		8,639,616
Homewood Suites - Southaven	7.77%	12/6/2029		17,887,975		18,000,000
Courtyard by Marriott - Aurora⁽⁴⁾⁽⁵⁾	10.43%	2/5/2025		14,935,816		14,935,816
Holiday Inn - El Paso⁽²⁾⁽⁵⁾	12.00%	5/31/2025		7,600,000		7,600,000
Hilton Garden Inn - Houston	3.85%	9/2/2026		13,322,336		13,484,482
Hampton Inn - Fargo	4.00%	3/1/2027		6,914,005		6,966,110
Hampton Inn - Fargo - 2nd Mortgage	16.00%	2/1/2026		4,000,000		—
Courtyard by Marriott - El Paso	6.01%	5/13/2027		9,800,349		9,800,349
Fairfield Inn & Suites - Lakewood⁽⁵⁾⁽⁶⁾	11.32%	10/5/2025		12,000,000		12,000,000
Fairfield Inn & Suites - Lakewood - A-1⁽⁵⁾	14.50%	3/27/2026		4,896,801		4,896,801
Residence Inn - Fort Collins⁽²⁾⁽⁷⁾	10.57%	5/4/2025		11,200,000		11,200,000
Residence Inn - Fort Collins - CapEx⁽²⁾⁽⁸⁾	11.82%	5/4/2025		1,806,143		1,806,143
Residence Inn - Fort Collins - A-1⁽⁵⁾	7.00%	8/2/2028		501,465		501,465
Hilton Garden Inn - El Paso	4.94%	8/6/2025		11,871,444		12,033,256
Holiday Inn Express - Wichita	6.41%	12/21/2027		5,547,704		5,589,430
Total Mortgage Debt				160,933,958		157,761,934
Premium on assumed debt, net				256,684		234,911
Deferred financing costs, net				(1,380,057)		(1,639,867)
Net Mortgage				159,810,585		156,356,978

$5.0 million line of credit - Western⁽²⁾⁽⁹⁾	8.50%	6/15/2024		342,040		4,151,139
$20.0 million revolving line of credit - A-1 Bonds	17.50%	12/31/2027		14,086,000		14,254,000
$0.6 million loan - NHS	7.00%	9/30/2025		600,000		600,000
Total Lines of Credit				15,028,040		19,005,139

Debt, net			$	174,838,625	$	175,362,117

(1)	On July 25, 2025, the Cedar Rapids Property and Eagan Property loans were extended to October 1, 2025. See Note 10 “Subsequent Events.”

(2)	The Company and the lender are working to finalize an extension of these loans as of the date of this filing.

(3)	Variable interest rate equal to SOFR Index plus 3.00%

(4)	Variable interest rate equal to SOFR index plus 6.00%, provided that SOFR 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.

(5)	Loan is interest-only until maturity.

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

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

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

(9)	Variable interest rate equal to U.S. Prime plus 1.00%

Mortgage Debt

The fair value of the Company’s mortgage debt was estimated by discounting each loan’s future cash flows over the remaining term of the mortgage using current borrowing rates for debt instruments with similar terms and maturities, which are Level 3 inputs in the fair value hierarchy. As of June 30, 2025, the estimated fair value of the Company’s

mortgage debt was $165.5 million, compared to the gross carrying value $160.9 million. As of December 31, 2024, the estimated fair value of the Company’s mortgage debt was $158.6 million, compared to the gross carrying value $157.8 million.

Western Line of Credit Amendments

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. Historically, the Company has successfully negotiated extensions, including in instances where the maturity date had passed.

Mortgage Loan Modifications

From time to time, the Company may amend or refinance its existing mortgages. The Company follows guidance prescribed by FASB ASC 470, Debt, in order to determine whether a change in terms or an amendment would be accounted for as a modification or an extinguishment of debt. Under modification accounting, no gain or loss is recorded in connection with the debt, any new lender related fees are capitalized and amortized pursuant to the term of the related debt facility and any fees paid to the third parties are expensed as incurred. Under extinguishment accounting, a gain or loss may derive based on the difference between the fair value of the new debt and the carrying amount of the old debt, any fees paid to the existing lender are expensed as incurred and new fees are capitalized and amortized pursuant to the term of the related debt facility.

Contribution Agreement – Sheraton Northbrook, Residence Inn - Fort Collins and Courtyard by Marriot - Aurora

On December 24, 2024, the Company entered into a Contribution Agreement (the “Contribution Agreement”), Contribution Agreement to restructure four of its loans with Access Point Financial, LLC (the “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 Lender received 4,067,409 Series A Preferred Units (See Note 9) amounting to $4,067,409 in exchange for all of the remaining unpaid principal and interest on the Sheraton Northbrook Loan. In accordance with ASC 470, Debt, the Company accounted for this exchange as an extinguishment of debt. Management concluded that the fair value of the unpaid principal and interest was the same as the fair value of the Series A Preferred Units issued and accordingly, no gain or loss was recorded in connection with this transaction.

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 Lender through which the Lender will receive Series A Preferred Units in exchange for all of such remaining unpaid principal and interest. The Company and the Lender have been in communication as the Company works to finalize refinancing.

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

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%. On May 2, 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 June 30, 2025.

The Company 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. Historically, the Company has successfully negotiated extensions, including in instances where the maturity date had passed.

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 guarantee 50% of each of the indebtedness of the Houston Property and the Wichita Property.

El Paso Courtyard Property, Charlotte Property and Pineville HGI Property Mortgage Loan Modifications

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, the Company was 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. The Company plans 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 the Company’s financial condition and liquidity. Historically, the Company has successfully negotiated new payment terms, including in instances where the maturity date had passed.

Charlotte Property and Pineville HGI Property Sale and Loan Termination

On May 14, 2025, the Company sold the Pineville HGI Property and Charlotte Property to an unaffiliated purchaser for $22,775,000 in cash, subject to customary prorations and adjustments. The mortgage loans secured by the Pineville HGI Property and Charlotte Property were repaid in full at closing from sale proceeds. All guaranties in connection with such loans and collateral with respect to such loans have been terminated or released, and all commitments with respect to such loans have been terminated or released.

Future Minimum Payments

As of June 30, 2025, the future minimum principal payments on the Company’s debt were as follows:


2025 (6 months)	$	75,280,942
2026		29,628,297
2027		36,844,008
2028		1,898,388
2029		15,628,086
Thereafter		16,682,277
		175,961,998

Premium on assumed debt, net		256,684
Deferred financing costs, net		(1,380,057)
	$	174,838,625

The $75.3 million of future minimum principal payments due in 2025 includes the maturities of the mortgage debt secured individually by the Cedar Rapids Property, Eagan Property, Prattville Property, El Paso Property, Lakewood Property, Fort Collins Property, El Paso University Property and Aurora Property, along with the Western Lines of Credit.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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+ Details

Lodging Fund REIT III, Inc. 10-Q