{"url_path":"/sec/cik-0001745032/10-k/2026/item-1","section_key":"item-1","section_title":"Item 1 Financial Statements","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1745032/0001104659-26-062807-index.html","accession_number":"0001104659-26-062807","cik":"0001745032","ticker":null,"issuer_name":"Lodging Fund REIT III, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1745032/0001104659-26-062807-index.html","primary_entity_key":"0001745032","primary_entity_name":"Lodging Fund REIT III, Inc."},"word_count":22385,"has_tables":true,"body_markdown":"Item 1. Financial Statements\n\nLODGING FUND REIT III, INC.\n\nCONSOLIDATED BALANCE SHEETS\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**December 31, **\n\n​\n\n**December 31, **\n\n​\n\n​\n\n**2025**\n\n​\n\n**2024**\n\n**Assets**\n\n \n\n​\n\n  ​\n\n \n\n​\n\n  ​\n\nInvestment in hotel properties, net of accumulated depreciation and amortization of $30,989,984 and $33,318,590\n\n​\n\n$\n\n176,399,858\n\n​\n\n$\n\n241,973,045\n\nCash and cash equivalents\n\n​\n\n \n\n4,889,888\n\n​\n\n \n\n2,354,025\n\nRestricted cash\n\n​\n\n \n\n5,732,099\n\n​\n\n \n\n7,986,767\n\nAccounts receivable, net\n\n​\n\n \n\n932,754\n\n​\n\n \n\n1,092,900\n\nFranchise fees, net\n\n​\n\n \n\n1,064,264\n\n​\n\n \n\n1,616,447\n\nPrepaid expenses and other assets\n\n​\n\n \n\n1,046,368\n\n​\n\n \n\n2,007,058\n\nAssets held for sale\n\n​\n\n​\n\n29,278,922\n\n​\n\n​\n\n21,829,784\n\n**Total Assets (variable interest entities -****$21,140,527****and****$22,117,277****)**\n\n​\n\n$\n\n219,344,153\n\n​\n\n$\n\n278,860,026\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Liabilities and Equity**\n\n​\n\n \n\n  ​\n\n​\n\n \n\n  ​\n\nDebt, net\n\n​\n\n$\n\n128,733,353\n\n​\n\n$\n\n175,362,117\n\nFinance lease liabilities\n\n​\n\n​\n\n13,265,854\n\n​\n\n​\n\n13,185,884\n\nAccounts payable\n\n​\n\n \n\n4,089,950\n\n​\n\n \n\n6,101,337\n\nAccrued expenses\n\n​\n\n \n\n8,760,085\n\n​\n\n \n\n9,133,344\n\nDistributions payable\n\n​\n\n​\n\n263,182\n\n​\n\n​\n\n276,408\n\nDue to related parties\n\n​\n\n \n\n22,651,428\n\n​\n\n \n\n13,821,435\n\nOther liabilities\n\n​\n\n \n\n4,373,735\n\n​\n\n \n\n3,791,457\n\nMandatorily redeemable Series P preferred units, net\n\n​\n\n​\n\n1,335,037\n\n​\n\n​\n\n203,575\n\nLiabilities related to assets held for sale\n\n​\n\n​\n\n28,029,661\n\n​\n\n​\n\n16,512,618\n\n**Total liabilities (variable interest entities -****$17,465,166****and****$17,011,733****)**\n\n​\n\n \n\n211,502,285\n\n​\n\n \n\n238,388,175\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nCommitments and contingencies (See Note 12)\n\n​\n\n \n\n  ​\n\n​\n\n \n\n  ​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Equity**\n\n​\n\n \n\n  ​\n\n​\n\n \n\n  ​\n\nPreferred stock, $0.01 par value, 100,000,000 shares authorized; no shares issued and outstanding\n\n​\n\n \n\n—\n\n​\n\n \n\n—\n\nCommon stock, $0.01 par value, 900,000,000 shares authorized; 10,016,043 and 10,011,475 shares issued and outstanding\n\n​\n\n \n\n100,160\n\n​\n\n \n\n100,114\n\nAdditional paid-in capital\n\n​\n\n \n\n143,371,621\n\n​\n\n \n\n97,847,449\n\nAccumulated deficit\n\n​\n\n \n\n(137,978,273)\n\n​\n\n \n\n(112,066,946)\n\n**Total stockholders' equity**\n\n​\n\n​\n\n5,493,508\n\n​\n\n \n\n(14,119,383)\n\nNon-controlling interest – Series B LP Units\n\n​\n\n \n\n(7,202,288)\n\n​\n\n \n\n(5,482,556)\n\nNon-controlling interest – Series GO LP Units\n\n​\n\n​\n\n403,936\n\n​\n\n​\n\n5,606,139\n\nNon-controlling interest – Series GO II LP Units\n\n​\n\n​\n\n3,785,966\n\n​\n\n​\n\n2,639,750\n\nNon-controlling interest – Series T LP Units\n\n​\n\n​\n\n—\n\n​\n\n​\n\n45,475,938\n\nNon-controlling interest – Series Pref A Units\n\n​\n\n​\n\n4,555,739\n\n​\n\n​\n\n4,067,409\n\nNon-controlling interest – Common LP Units\n\n​\n\n​\n\n805,007\n\n​\n\n​\n\n2,284,554\n\n**Total equity**\n\n​\n\n \n\n7,841,868\n\n​\n\n \n\n40,471,851\n\n**Total Liabilities and Equity**\n\n​\n\n$\n\n219,344,153\n\n​\n\n$\n\n278,860,026\n\n*See accompanying notes to consolidated financial statements.*\n\nF-4\n\n[Table of Contents](#TOC)\n\nLODGING FUND REIT III, INC.\n\nCONSOLIDATED STATEMENTS OF OPERATIONS\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**For the Years Ended December 31, **\n\n​\n\n**  ​ ​ ​**\n\n**2025**\n\n**  ​ ​ ​**\n\n**2024**\n\n**Revenues**\n\n​\n\n​\n\n  ​\n\n​\n\n​\n\n  ​\n\nRoom revenue\n\n​\n\n$\n\n60,553,580\n\n​\n\n$\n\n69,484,481\n\nOther revenue\n\n​\n\n \n\n3,946,211\n\n​\n\n \n\n4,761,914\n\n**Total revenue**\n\n​\n\n \n\n64,499,791\n\n​\n\n \n\n74,246,395\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Expenses**\n\n​\n\n \n\n  ​\n\n​\n\n \n\n  ​\n\nProperty operations\n\n​\n\n \n\n32,702,737\n\n​\n\n \n\n35,825,468\n\nGeneral and administrative\n\n​\n\n \n\n10,490,043\n\n​\n\n \n\n12,025,473\n\nSales and marketing\n\n​\n\n \n\n4,593,254\n\n​\n\n \n\n4,886,032\n\nFranchise fees\n\n​\n\n \n\n5,632,663\n\n​\n\n \n\n6,526,117\n\nManagement fees\n\n​\n\n \n\n4,134,629\n\n​\n\n \n\n5,105,511\n\nAcquisition expense\n\n​\n\n \n\n39,998\n\n​\n\n \n\n34,353\n\nDepreciation and amortization\n\n​\n\n \n\n8,973,573\n\n​\n\n \n\n10,425,161\n\n**Total expenses**\n\n​\n\n \n\n66,566,897\n\n​\n\n \n\n74,828,115\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Other Income (Expense)**\n\n​\n\n \n\n  ​\n\n​\n\n \n\n  ​\n\nImpairment loss\n\n​\n\n​\n\n(10,055,803)\n\n​\n\n​\n\n(3,992,772)\n\nGain (loss) from sale of hotel property\n\n​\n\n \n\n591,880\n\n​\n\n \n\n(4,638,883)\n\nOther expense, net\n\n​\n\n​\n\n(3,424,850)\n\n​\n\n​\n\n(3,412,933)\n\nInterest expense\n\n​\n\n \n\n(19,622,508)\n\n​\n\n \n\n(17,500,036)\n\n**Total other expense, net**\n\n​\n\n \n\n(32,511,281)\n\n​\n\n \n\n(29,544,624)\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Net Loss Before Income Taxes**\n\n​\n\n \n\n(34,578,387)\n\n​\n\n \n\n(30,126,344)\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nIncome tax benefit\n\n​\n\n \n\n170,403\n\n​\n\n \n\n210,060\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Net Loss**\n\n​\n\n \n\n(34,407,984)\n\n​\n\n \n\n(29,916,284)\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nNet loss attributable to non-controlling interest - Series B LP Units\n\n​\n\n \n\n(1,719,732)\n\n​\n\n \n\n(1,494,865)\n\nNet loss attributable to non-controlling interest - Series GO LP Units\n\n​\n\n​\n\n(5,202,203)\n\n​\n\n​\n\n(4,624,151)\n\nNet loss attributable to non-controlling interest - Series GO II LP Units\n\n​\n\n​\n\n(1,630,484)\n\n​\n\n​\n\n(817,934)\n\nNet loss attributable to non-controlling interest - Common LP Units\n\n​\n\n​\n\n(1,479,547)\n\n​\n\n​\n\n(1,315,144)\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Net Loss Attributable to Common Stockholders**\n\n​\n\n$\n\n(24,376,018)\n\n​\n\n$\n\n(21,664,190)\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Basic and Diluted Net Loss Per Share of Common Stock**\n\n​\n\n$\n\n(2.43)\n\n​\n\n$\n\n(2.17)\n\n**Weighted-average Shares of Common Stock Outstanding, Basic and Diluted**\n\n​\n\n \n\n10,013,509\n\n​\n\n \n\n9,985,964\n\n​\n\n*See accompanying notes to consolidated financial statements.*\n\n​\n\n​\n\nF-5\n\n[Table of Contents](#TOC)\n\n​\n\nLODGING FUND REIT III, INC.\n\nCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Common Stock**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Additional**\n\n​\n\n​\n\n​\n\n​\n\n**Total**\n\n​\n\n**Non-controlling Interest**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Par**\n\n​\n\n**Paid-In**\n\n​\n\n**Accumulated**\n\n​\n\n**Stockholders'**\n\n​\n\n**Series B**\n\n​\n\n**Series GO**\n\n​\n\n**Series GO 2**\n\n​\n\n**Series T**\n\n​\n\n​\n\n**Series Pref**\n\n​\n\n**Common**\n\n​\n\n**Total**\n\n​\n\n**  ​ ​ ​**\n\n**Shares**\n\n**  ​ ​ ​**\n\n**Value**\n\n**  ​ ​ ​**\n\n**Capital**\n\n**  ​ ​ ​**\n\n**Deficit**\n\n**  ​ ​ ​**\n\n**Equity**\n\n**  ​ ​ ​**\n\n**LP Units**\n\n​\n\n**LP Units**\n\n​\n\n**LP Units**\n\n​\n\n**LP Units**\n\n​\n\n​\n\n**A Units**\n\n​\n\n**LP Units**\n\n**  ​ ​ ​**\n\n**Equity**\n\n**Balance at December 31, 2023**\n\n \n\n9,955,668\n\n​\n\n$\n\n99,556\n\n​\n\n$\n\n97,285,211\n\n​\n\n$\n\n(86,154,207)\n\n​\n\n$\n\n11,230,560\n\n​\n\n$\n\n(3,869,459)\n\n​\n\n$\n\n10,933,302\n\n​\n\n$\n\n765,162\n\n​\n\n$\n\n45,524,201\n\n​\n\n$\n\n—\n\n​\n\n$\n\n3,720,284\n\n​\n\n$\n\n68,304,050\n\nIssuance of common stock\n\n \n\n4,069\n\n​\n\n​\n\n40\n\n​\n\n​\n\n39,958\n\n​\n\n​\n\n—\n\n​\n\n​\n\n39,998\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n39,998\n\nIssuance of stock-based compensation\n\n​\n\n4,000\n\n​\n\n​\n\n40\n\n​\n\n​\n\n42,240\n\n​\n\n​\n\n—\n\n​\n\n​\n\n42,280\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n42,280\n\nIssuance of Pref A Units\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n4,067,409\n\n​\n\n​\n\n—\n\n​\n\n​\n\n4,067,409\n\nIssuance of GO II Units\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n2,850,000\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n2,850,000\n\nOffering costs\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(2,002,133)\n\n​\n\n​\n\n(2,002,133)\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(6)\n\n​\n\n​\n\n(157,478)\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(2,159,617)\n\nDistributions declared ($0.225 per share)\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(2,246,416)\n\n​\n\n​\n\n(2,246,416)\n\n​\n\n​\n\n(118,232)\n\n​\n\n​\n\n(703,006)\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(48,263)\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(120,586)\n\n​\n\n​\n\n(3,236,503)\n\nDistributions reinvested\n\n​\n\n47,738\n\n​\n\n​\n\n478\n\n​\n\n​\n\n480,040\n\n​\n\n​\n\n—\n\n​\n\n​\n\n480,518\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n480,518\n\nNet loss\n\n \n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(21,664,190)\n\n​\n\n​\n\n(21,664,190)\n\n​\n\n​\n\n(1,494,865)\n\n​\n\n​\n\n(4,624,151)\n\n​\n\n​\n\n(817,934)\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(1,315,144)\n\n​\n\n​\n\n(29,916,284)\n\n**Balance at December 31, 2024**\n\n \n\n10,011,475\n\n​\n\n$\n\n100,114\n\n​\n\n$\n\n97,847,449\n\n​\n\n$\n\n(112,066,946)\n\n​\n\n$\n\n(14,119,383)\n\n​\n\n$\n\n(5,482,556)\n\n​\n\n$\n\n5,606,139\n\n​\n\n$\n\n2,639,750\n\n​\n\n$\n\n45,475,938\n\n​\n\n$\n\n4,067,409\n\n​\n\n$\n\n2,284,554\n\n​\n\n$\n\n40,471,851\n\nIssuance of common stock\n\n \n\n568\n\n​\n\n​\n\n6\n\n​\n\n​\n\n5,994\n\n​\n\n​\n\n—\n\n​\n\n​\n\n6,000\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n6,000\n\nIssuance of stock-based compensation\n\n​\n\n4,000\n\n​\n\n​\n\n40\n\n​\n\n​\n\n42,240\n\n​\n\n​\n\n—\n\n​\n\n​\n\n42,280\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n42,280\n\nIssuance of Pref A Units\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n488,330\n\n​\n\n​\n\n—\n\n​\n\n​\n\n488,330\n\nIssuance of GO II Units\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n2,938,576\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n2,938,576\n\nConversion/Elimination of Series T LP Units\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n45,475,938\n\n​\n\n​\n\n—\n\n​\n\n​\n\n45,475,938\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(45,475,938)\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\nOffering costs\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(1,535,309)\n\n​\n\n​\n\n(1,535,309)\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(161,876)\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(1,697,185)\n\nNet loss\n\n \n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(24,376,018)\n\n​\n\n​\n\n(24,376,018)\n\n​\n\n​\n\n(1,719,732)\n\n​\n\n​\n\n(5,202,203)\n\n​\n\n​\n\n(1,630,484)\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(1,479,547)\n\n​\n\n​\n\n(34,407,984)\n\n**Balance at December 31, 2025**\n\n \n\n10,016,043\n\n​\n\n$\n\n100,160\n\n​\n\n$\n\n143,371,621\n\n​\n\n$\n\n(137,978,273)\n\n​\n\n$\n\n5,493,508\n\n​\n\n$\n\n(7,202,288)\n\n​\n\n$\n\n403,936\n\n​\n\n$\n\n3,785,966\n\n​\n\n$\n\n—\n\n​\n\n$\n\n4,555,739\n\n​\n\n$\n\n805,007\n\n​\n\n$\n\n7,841,868\n\n​\n\n*See accompanying notes to consolidated financial statement*\n\n​\n\n​\n\nF-6\n\n[Table of Contents](#TOC)\n\n​\n\n​\n\nLODGING FUND REIT III, INC.\n\nCONSOLIDATED STATEMENTS OF CASH FLOWS\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**For the Years Ended December 31, **\n\n​\n\n**  ​ ​ ​**\n\n**2025**\n\n**  ​ ​ ​**\n\n**2024**\n\n**Cash Flows from Operating Activities:**\n\n \n\n​\n\n  ​\n\n \n\n​\n\n  ​\n\nNet loss\n\n​\n\n$\n\n(34,407,984)\n\n​\n\n$\n\n(29,916,284)\n\nAdjustments to reconcile net loss to cash (used in) provided by operating activities:\n\n​\n\n \n\n​\n\n​\n\n \n\n​\n\nDepreciation and amortization\n\n​\n\n \n\n8,973,573\n\n​\n\n \n\n10,425,161\n\nStock-based compensation expense\n\n​\n\n​\n\n42,280\n\n​\n\n​\n\n42,280\n\nAmortization of franchise fees\n\n​\n\n​\n\n129,730\n\n​\n\n​\n\n105,000\n\nAmortization of deferred financing costs and debt premiums\n\n​\n\n \n\n476,303\n\n​\n\n \n\n1,766,446\n\nLoss on disposal of fixed assets\n\n​\n\n​\n\n213,782\n\n​\n\n​\n\n685,490\n\n(Gain) loss on sale of hotel property\n\n​\n\n​\n\n(591,880)\n\n​\n\n​\n\n4,638,883\n\nImpairment loss\n\n​\n\n​\n\n10,055,803\n\n​\n\n​\n\n3,992,772\n\nDeferred tax assets, net\n\n​\n\n​\n\n(307,184)\n\n​\n\n​\n\n(341,912)\n\nInterest accretion of finance lease liability\n\n​\n\n​\n\n704,082\n\n​\n\n​\n\n690,011\n\nChange in operating assets and liabilities:\n\n​\n\n \n\n​\n\n​\n\n​\n\n​\n\nAccounts receivable\n\n​\n\n \n\n(18,887)\n\n​\n\n \n\n316,162\n\nFranchise fees\n\n​\n\n \n\n—\n\n​\n\n \n\n175,000\n\nPrepaid expenses and other assets\n\n​\n\n \n\n363,610\n\n​\n\n \n\n(381,934)\n\nAccounts payable\n\n​\n\n \n\n(1,739,952)\n\n​\n\n \n\n2,539,323\n\nAccrued expenses\n\n​\n\n \n\n1,660,966\n\n​\n\n \n\n1,485,414\n\nDue to related parties\n\n​\n\n \n\n9,311,554\n\n​\n\n \n\n2,926,851\n\nOther liabilities\n\n​\n\n \n\n1,431,378\n\n​\n\n \n\n(2,225)\n\nNet cash used in operating activities\n\n​\n\n \n\n(3,702,826)\n\n​\n\n \n\n(853,562)\n\n**Cash Flows from Investing Activities:**\n\n​\n\n \n\n  ​\n\n​\n\n \n\n  ​\n\nProceeds from sale of hotel property\n\n​\n\n \n\n47,025,966\n\n​\n\n \n\n8,850,000\n\nImprovements and additions to hotel properties\n\n​\n\n \n\n(3,547,213)\n\n​\n\n \n\n(4,474,889)\n\nNet cash provided by investing activities\n\n​\n\n \n\n43,478,753\n\n​\n\n \n\n4,375,111\n\n**Cash Flows from Financing Activities:**\n\n​\n\n \n\n  ​\n\n​\n\n \n\n  ​\n\nProceeds from mortgage debt\n\n​\n\n \n\n5,478,432\n\n​\n\n \n\n45,881,801\n\nProceeds from lines of credit\n\n​\n\n​\n\n1,497,302\n\n​\n\n​\n\n5,534,593\n\nPrincipal payments on mortgage debt\n\n​\n\n \n\n(39,293,802)\n\n​\n\n \n\n(47,707,441)\n\nPrincipal payments on lines of credit\n\n​\n\n​\n\n(6,122,099)\n\n​\n\n​\n\n(4,957,400)\n\nPayments of deferred financing costs\n\n​\n\n \n\n(546,535)\n\n​\n\n \n\n(1,464,638)\n\nProceeds from issuance of common stock\n\n​\n\n \n\n6,000\n\n​\n\n \n\n39,998\n\nProceeds from issuance of GO II Units\n\n​\n\n​\n\n2,938,576\n\n​\n\n​\n\n2,850,000\n\nProceeds from issuance of Series P Preferred Units\n\n​\n\n​\n\n1,550,000\n\n​\n\n​\n\n350,000\n\nPayments of offering costs related to Series P Preferred Units\n\n​\n\n​\n\n(418,538)\n\n​\n\n​\n\n(146,425)\n\nPayments of offering costs\n\n​\n\n \n\n(2,399,964)\n\n​\n\n \n\n(2,364,042)\n\nPayments of finance lease liability\n\n​\n\n​\n\n(624,112)\n\n​\n\n​\n\n(610,237)\n\nDistributions paid\n\n​\n\n \n\n(13,226)\n\n​\n\n \n\n(3,510,245)\n\nNet cash used in financing activities\n\n​\n\n \n\n(37,947,966)\n\n​\n\n \n\n(6,104,036)\n\nNet change in cash, cash equivalents, and restricted cash\n\n​\n\n \n\n1,827,961\n\n​\n\n \n\n(2,582,487)\n\n**Beginning Cash, Cash Equivalents, and Restricted Cash**\n\n​\n\n \n\n10,361,842\n\n​\n\n \n\n12,944,329\n\n**Ending Cash, Cash Equivalents, and Restricted Cash**\n\n​\n\n$\n\n12,189,803\n\n​\n\n$\n\n10,361,842\n\n​\n\n*See accompanying notes to consolidated financial statements.*\n\n​\n\nF-7\n\n[Table of Contents](#TOC)\n\nLODGING FUND REIT III, INC.\n\nCONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**For the Years Ended December 31, **\n\n​\n\n​\n\n**2025**\n\n**  ​ ​ ​**\n\n**2024**\n\n**Supplemental Disclosure of Cash Flow Information:**\n\n**  ​ ​ ​**\n\n \n\n  ​\n\n**  ​ ​ ​**\n\n \n\n  ​\n\nInterest paid\n\n​\n\n$\n\n18,510,076\n\n​\n\n$\n\n11,829,054\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Supplemental Disclosure of Non-Cash Investing and Financing Activities:**\n\n​\n\n \n\n  ​\n\n​\n\n \n\n  ​\n\nDebt issued for refinance of Lakewood Property\n\n​\n\n$\n\n—\n\n​\n\n$\n\n4,896,801\n\nSeries A Preferred Units issued in exchange for forgiveness of mortgage loan and interest on Northbrook Property\n\n​\n\n$\n\n488,330\n\n​\n\n$\n\n4,067,409\n\nReclassification of Series T LP Unit noncontrolling interest to additional paid-in capital upon conversion\n\n​\n\n$\n\n45,475,938\n\n​\n\n$\n\n—\n\nOffering costs included in accounts payable\n\n​\n\n$\n\n(140,690)\n\n​\n\n$\n\n47,032\n\nOffering costs included in due to related parties\n\n​\n\n$\n\n(562,089)\n\n​\n\n$\n\n(251,457)\n\nDistributions included in due to related parties\n\n​\n\n$\n\n—\n\n​\n\n$\n\n(18,389)\n\nReinvested distributions\n\n​\n\n$\n\n—\n\n​\n\n$\n\n480,518\n\nROU asset in exchange for lease liability\n\n​\n\n$\n\n679,038\n\n​\n\n$\n\n—\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Reconciliation of Cash, Cash Equivalents, and Restricted Cash:**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nCash and cash equivalents, end of period\n\n​\n\n$\n\n4,889,888\n\n​\n\n$\n\n2,354,025\n\nRestricted cash, end of period\n\n​\n\n​\n\n5,732,099\n\n​\n\n​\n\n7,986,767\n\nCash, cash equivalents, and restricted cash, end of period\n\n​\n\n$\n\n10,621,987\n\n​\n\n$\n\n10,340,792\n\nCash and cash equivalents, end of period included in assets held for sale\n\n​\n\n​\n\n386,116\n\n​\n\n​\n\n21,050\n\nRestricted cash, end of period included in assets held for sale\n\n​\n\n​\n\n1,181,700\n\n​\n\n​\n\n—\n\nCash, cash equivalents, and restricted cash, end of period (including cash, cash equivalents and restricted cash held for sale)\n\n​\n\n$\n\n12,189,803\n\n​\n\n$\n\n10,361,842\n\n​\n\n*See accompanying notes to consolidated financial statements.*\n\n​\n\nF-8\n\n[Table of Contents](#TOC)\n\nLODGING FUND REIT III, INC.\n\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n\n​\n\n1. ORGANIZATION\n\nLodging Fund REIT III, Inc. (“LF REIT III”), was formed on April 9, 2018 as a Maryland corporation. LF REIT III, together with its subsidiaries (the “Company”), was formed for the principal purpose of acquiring, through purchase or contribution, direct or indirect ownership interests in a diverse portfolio of limited-service, select-service, full-service and extended-stay hotel properties located primarily in “America’s Heartland,” which the Company defines as the geographic area from North Dakota to Texas and the Appalachian Mountains to the Rocky Mountains. LF REIT III has elected to be treated as a real estate investment trust, or REIT, for federal income tax purposes beginning with the taxable year ended December 31, 2018. The Company’s business activities are directed and managed by Legendary Capital REIT III, LLC (the “Advisor”) and its affiliates, which are related parties through common management, pursuant to the Amended and Restated Advisory Agreement (the “Advisory Agreement”), dated June 1, 2018. The Company has no foreign operations or assets and its operating structure includes only one operating and reportable segment. See Note 13 “Reportable Segments”.\n\nSubstantially all of the Company’s assets and liabilities are held by, and substantially all of its operations are conducted through, Lodging Fund REIT III OP, LP (the “Operating Partnership,” or “OP”), a subsidiary of LF REIT III. The OP has three voting classes of partnership units, Common General Partnership Units (“GP Units”), Interval Units and Common Limited Partnership Units (“Common LP Units”), and six classes of non-voting partnership units, Series B Limited Partnership Units (“Series B LP Units”), Series Growth & Opportunity (“GO”) Limited Partnership Units (“Series GO LP Units”), Series Growth & Opportunity II (“GO II”) Limited Partner Units (“Series GO II LP Units”), Series T Limited Partnership Units (“Series T LP Units”), Series P Preferred Units (“Series P Preferred Units”), and Series A Preferred Units (“Series A Preferred Units”). LF REIT III was the sole general partner of the OP, as of December 31, 2025 and 2024. As of December 31, 2025, there were 612,100 outstanding Common LP Units, no outstanding Interval Units, there were 1,000 outstanding Series B LP Units, all of which were owned by the Advisor, 3,124,503 Series GO LP Units, 895,520 Series GO II LP Units, no outstanding Series T LP Units, 155 Series P Preferred Units, and 4,555,739 Series A Preferred Units.\n\n2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES\n\n**Basis of Presentation and Principles of Consolidation**— The accompanying consolidated financial statements and related notes have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the SEC applicable to annual financial information. The consolidated financial statements include the accounts of LF REIT III, the OP, its wholly-owned subsidiaries and entities in which the Company has a controlling financial interest, including variable interest entities (“VIEs”) where the Company is the primary beneficiary. The determination of a controlling financial interest is based upon the terms of the governing agreements of the respective entities, including the evaluation of the rights held by other interests. If the entity is considered to be a VIE, the Company determines whether the Company is the primary beneficiary, and then consolidates those VIEs for which the Company has determined that the Company is the primary beneficiary. If the entity in which the Company holds an interest does not meet the definition of a VIE, the Company evaluates whether the Company has a controlling financial interest through the Company’s voting interest in the entity. The Company consolidates entities when the Company owns more than 50 percent of the voting shares of a company or otherwise has a controlling financial interest. References in these financial statements to the net loss attributable to stockholders do not include non-controlling interests, which represent the outside ownership interests of the Company’s consolidated, non-wholly owned entities and are presented separately in the consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation.\n\n**Use of Estimates**—The preparation of the Company’s consolidated financial statements and the accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and the amounts of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.\n\nF-9\n\n[Table of Contents](#TOC)\n\n**Revenue Recognition**—Revenues consist of amounts derived from hotel operations, including room sales and other hotel revenues, and are presented on a disaggregated basis in the Company’s consolidated statements of operations. These revenues are recorded net of any sales and occupancy taxes collected from the hotel guests. All revenues are recorded on an accrual basis as they are earned. Any cash received prior to a guest’s arrival is recorded as an advance deposit from the guest and recognized as revenue at the time of the guest’s occupancy at the hotel property. Advance deposits are included in other liabilities on the accompanying consolidated balance sheets.\n\n**Investment in Hotel Properties**—The Company evaluates 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 the Company’s acquisitions since inception have been determined to be asset acquisitions. Transaction costs associated with asset acquisitions are capitalized and transaction costs associated with business combinations would be expensed as incurred.\n\nThe Company’s acquisitions generally consist of land, land improvements, buildings, building improvements, and furniture, fixtures and equipment (“FF&E”). The Company 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, the Company allocates the purchase price among the assets acquired and the liabilities assumed on a relative fair value basis at the date of acquisition. The Company determines the fair value of assets acquired and liabilities assumed with the assistance of third-party valuation specialists, using cash flow analysis as well as available market and cost data. The determination of fair value includes making numerous estimates and assumptions.\n\nFor the years ended December 31, 2025 and 2024, there were no acquisitions in hotel properties.\n\nThe Company’s investments in hotel properties are carried at cost and are depreciated using the straight-line method over the estimated useful lives of 15 years for land improvements, 40 years for buildings and building improvements and 3 to 7 years for FF&E. Maintenance and repair costs are expensed in the period incurred and major renewals or improvements to the hotel properties are capitalized.\n\nThe Company evaluates its hotel properties for indicators of impairment. If there are indicators of impairment and we determine that the asset is not recoverable from future undiscounted cash flows to be received through the asset’s remaining life (or, if earlier, the expected disposal date), we record an impairment charge to the extent the carrying amount exceeds the asset’s estimated fair value or net proceeds from expected disposal. Other than the Cedar Rapids Property, the El Paso Property and the Lakewood Property (see Note 3), there were no indicators of impairment to the hotel properties and no impairment charges were recorded as of December 31, 2025. As of December 31, 2024, the Company recorded impairment losses of approximately $4.0 million in connection with the pending sales of the Pineville HGI Property and the Charlotte Property.\n\n**Assets Held for Sale -**The Company classifies assets as held for sale when management has committed to a plan to sell the property, the property is available for immediate sale in its present condition, an active program to locate a buyer has been initiated, the sale is probable and expected to be completed within one year, and the property is being actively marketed at a price that is reasonable in relation to its current fair value. Assets classified as held for sale are measured at the lower of their carrying amount or fair value less costs to sell. If these criteria are met, the Company will cease recording depreciation and amortization and will record an impairment charge if the fair value less costs to sell is less than the carrying amount of the disposal group. The Company will generally classify the impairment charge, together with the related operating results, as continuing operations in the Company’s consolidated statements of operations and classify the assets and related liabilities as held for sale in the Company’s consolidated balance sheets. If the Company’s plan of sale changes and the Company subsequently decides not to sell a property that is classified as held for sale, the property will be reclassified as held and used in the period the change occurs. As of December 31, 2025, the Company had three hotels classified as held for sale, all of which are expected to be sold to unrelated third parties in the first half of 2026, as discussed further in Note 3.\n\n**Advertising Costs**—The Company expenses advertising costs as incurred. These costs represent the expense for franchise advertising and reservation systems under the terms of the hotel management and franchise agreements and expenses that are directly attributable to advertising and promotion. Advertising expense was $2.5 million and $2.8 million for the years\n\nF-10\n\n[Table of Contents](#TOC)\n\nended December 31, 2025 and 2024, respectively, and is included in sales and marketing in the consolidated statements of operations.\n\n**Non-controlling Interest**—Non-controlling interests represent the portion of equity in a subsidiary held by owners other than the Company. Non-controlling interests are reported in the consolidated balance sheets within equity, separate from stockholders’ equity. Revenue and expenses attributable to both the Company and the non-controlling interests are reported in the consolidated statements of operations, with net income or loss attributable to non-controlling interests reported separately from net income or loss attributable to the Company.\n\nConsistent with the terms of the Partnership Agreement, no net income or loss is allocated to the Series T LP Unit holders, as allocations and distributions for the Series T LP Units are determined by the General Partner in its sole discretion based on the financial performance of the contributed real estate. During the year ended December 31, 2025, the Series T LP Units were converted and eliminated (see Note 11).\n\n**Cash and Cash Equivalents**—Cash and cash equivalents include cash in bank accounts as well as highly liquid investments with an original maturity of three months or less. The Company deposits cash with several high-quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to an insurance limit of $250,000. At times, the Company’s cash and cash equivalents may exceed federally insured levels.\n\n**Restricted Cash**—Restricted cash primarily consists of earnest money deposits related to hotel property acquisitions, as well as certain funds maintained in escrow accounts to fund future payments for insurance, property tax obligations, and reserves for future capital expenditures, as required by our debt agreements.\n\n**Accounts Receivable**—Accounts receivable consist primarily of receivables due from hotel guests for room stays and meeting and banquet room rentals, which are uncollateralized customer obligations. Management determines the likelihood of collectability of receivables on an individual customer basis, based on the amount of time the balance has been outstanding, likelihood of collecting, and the customer’s current economic status. The carrying amount of the accounts receivables is reduced by an allowance for credit losses that reflects management’s best estimate of the amounts that will not be collected. As of December 31, 2025 and 2024, there was no allowance for credit losses.\n\n**Deferred Financing Costs**—Deferred financing costs represent origination fees, legal fees, and other costs associated with obtaining financing. Deferred financing costs are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the related debt liability. These costs are amortized to interest expense over the terms of the respective financing agreements using the straight-line method, which approximates the effective interest method. The Company expenses unamortized deferred financing costs when the associated financing agreement is refinanced or repaid before maturity unless certain criteria are met that would allow for the carryover of such costs to the refinanced agreement. Costs incurred in connection with potential financial transactions that are not completed are expensed in the period in which it is determined the financing will not be completed.\n\n**Offering Costs**—The Company has incurred certain costs related directly to the Company’s private offerings consisting of, among other costs, commissions, legal, due diligence costs, printing, marketing, filing fees, postage, data processing fees, and other offering related costs. These costs are capitalized and recorded as a reduction of equity proceeds on the accompanying consolidated balance sheets.\n\n**Property Operations Expenses**—Property operations expenses consist of expenses related to room rental, food and beverage sales, telephone usage, and other miscellaneous service costs, as well as all costs of operating the Company’s hotel properties such as building repairs, maintenance, property taxes, utilities, and other related costs.\n\n**Property Management Fees**—Property management fees include expenses incurred for management services provided for the day-to-day operations of our hotel properties, which are generally charged at a rate of 4% of gross revenues. Property management fees also include asset management fees, which may be charged at an annual rate of up to 0.75% of gross assets and are paid to the Advisor.\n\n**Franchise Fees**—The Company pays initial fees related to hotel franchise rights prior to acquiring a hotel property. The fees are included in prepaid expenses and other assets until the time the related hotel property is acquired. Initial franchise fees related to hotel properties that are acquired are amortized on a straight-line basis over the life of the agreement. Initial\n\nF-11\n\n[Table of Contents](#TOC)\n\nfranchise fees related to hotel properties that are not acquired are refunded to the Company, net of any associated fees, and any fees are expensed as incurred. Franchise fees on the accompanying consolidated statements of operations include the amortization of initial franchise fees, as well as monthly fees paid to franchisors for royalty, marketing, and reservation fees and other related costs.\n\n**Acquisition Costs**—The Company incurs costs during the review of potential hotel property acquisitions including legal fees, environmental reviews, market studies, financial advisory services, and other professional service fees. If the Company does complete a property acquisition, an acquisition fee of up to 1.4% is charged by the Advisor, based on the purchase price of the property plus any estimated PIP costs. For transactions determined to be asset acquisitions, these costs are capitalized as part of the overall cost of the project. For transactions determined to be business combinations, these costs would be expensed in the period incurred. Acquisition-related and acquisition due diligence costs that relate to a property that is not acquired, are expensed and included in acquisition costs on the accompanying consolidated statements of operations. Prior to the ultimate determination of whether a property will be acquired or not, acquisition-related and acquisition due diligence costs are recorded as, and included in, prepaid expenses and other assets on the accompanying consolidated balance sheets.\n\n**Net Loss Per Share of Common Stock**—Basic net loss per common share is computed based upon the weighted average number of shares outstanding during the period. Diluted net loss per common share is calculated after giving effect to all potential common shares that were dilutive and outstanding for the period. Basic and diluted net loss per common share were the same for the periods presented.\n\n**Preferred Stock -**On December 24, 2024, the Company entered into two separate amendments to the Amended and Restated Limited Partnership Agreement of the Operating Partnership to establish the terms of a new series of limited partner units designated as Series P Preferred Units (“Series P Preferred Units”) and Series A Preferred Units (“Series A Preferred Units”). See Note 10.\n\nThe Company accounts for both the Series P Preferred Units and Series A Preferred Units pursuant to the guidance within ASC 480 – Distinguishing Liabilities from Equity.\n\n**Stock-Based Compensation**—During 2022, the Company began compensating its 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 the Company recognizes stock-based compensation expense based on the award’s fair value at the grant date. Compensation expense related to stock awards is determined on the grant date based on the offering price of our common stock and is charged to earnings when issued. Stock-based compensation expense was $42,280 and $42,280 for the years ended December 31, 2025 and 2024, respectively, and is included in general and administrative expense in the consolidated statements of operations.\n\n**Income Taxes**—The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it distribute at least 90% of its REIT taxable income, subject to certain adjustments and excluding any net capital gain, to stockholders. The Company’s intention is to adhere to the REIT qualification requirements and to maintain its qualification for taxation as a REIT.\n\nAs a REIT, the Company is generally not subject to U.S. federal corporate income tax on the portion of taxable income that is distributed to stockholders. If the Company fails to qualify for taxation as a REIT in any taxable year, the Company will be subject to U.S. federal income taxes at regular corporate rates and it may not be able to qualify as a REIT for four subsequent taxable years. As a REIT, the Company may be subject to certain state and local taxes on its income and property, and to U.S. federal income and excise taxes on undistributed taxable income. Taxable income from non-REIT activities managed through the Company’s taxable REIT subsidiary (“TRS”) is subject to U.S. federal, state, and local income taxes at the applicable rates.\n\nThe TRS accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax basis, and for net operating loss, capital loss and tax credit carryforwards. The deferred tax assets and liabilities are measured using the enacted income\n\nF-12\n\n[Table of Contents](#TOC)\n\ntax rates in effect for the year in which those temporary differences are expected to be realized or settled. The effect on the deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period when the new rate is enacted. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of all available evidence, including the future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies. Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company performs periodic reviews for any uncertain tax positions and, if necessary, will record the expected future tax consequences of uncertain tax positions in the consolidated financial statements.\n\n**Fair Value Measurement**—The Company establishes 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:\n\nLevel 1—Observable inputs such as quoted prices in active markets.\n\nLevel 2—Directly or indirectly observable inputs, other than quoted prices in active markets.\n\nLevel 3—Unobservable inputs in which there is little or no market data, which require a reporting entity to develop its own assumptions.\n\nThe Company’s 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. The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.\n\nThe Company’s financial instruments as of December 31, 2025 and 2024 consisted of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, lines of credit, and mortgage debt. With the exception of the Company’s mortgage debt, the carrying amounts of the financial instruments presented in the consolidated financial statements approximate their fair value as of December 31, 2025.\n\n**Leases**— The Company determines if an arrangement is a lease at inception. The Company's lease arrangements consist of operating leases for office space and ground leases, and finance leases related to certain hotel properties. Right-of-use (\"ROU\") assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company has elected the practical expedient to not separate lease and non-lease components for all classes of underlying assets. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Finance lease ROU assets are amortized on a straight-line basis over the shorter of the useful life of the asset or the lease term, with interest expense on the finance lease liability recognized using the effective interest method. The Company has elected not to recognize ROU assets and lease liabilities for leases with an initial term of twelve months or less.\n\n**Recent Accounting Pronouncements**— In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-09 for the year ended December 31, 2025, and applied the new disclosure requirements prospectively to the current annual period.\n\n​\n\n**Recent Accounting Pronouncements Not Yet Adopted**— In November 2024, the FASB issued ASU No. 2024-03, *Disaggregation of Income Statement Expenses*, which provides for enhanced disclosures for public business entities on certain income statement items by:  i) presenting the following within tabular format - a) purchases of inventory, b) employee compensation, c) depreciation, d) intangible asset amortization, e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities - ii) providing a qualitative description of amounts remaining in\n\nF-13\n\n[Table of Contents](#TOC)\n\nrelevant expense captions that are not separately disaggregated quantitatively and iii) disclosing the definition of selling expenses in addition to disclosing the total amount of selling expenses. The new standard is effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027.  The Company is evaluating the impact the adoption this ASU will have on the Company’s consolidated financial statements.\n\n​\n\nIn May 2025, the FASB issued ASU No. 2025-03, *Business Combinations (Topic 805): Determining the Accounting Acquirer in a Business Combination Involving a Variable Interest Entity*, which amends the guidance for identifying the accounting acquirer in business combinations involving a VIE that meets the definition of a business and where the primary form of consideration is equity interests. The new standard requires entities to apply the existing guidance under ASC 805-10-55-12 through 55-15 to determine the accounting acquirer, rather than defaulting to the primary beneficiary of the VIE as the acquirer. The amendments are intended to improve consistency and comparability in financial reporting across business combinations involving both VIEs and voting interest entities. The new standard is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the impact the adoption of this ASU will have on the Company’s consolidated financial statements.\n\n​\n\n**Reclassifications**—Certain amounts included in the December 31, 2024 consolidated financial statements have been reclassified to conform to the December 31, 2025 presentation.\n\n​\n\n3. INVESTMENT IN HOTEL PROPERTIES\n\nInvestment in hotel properties as of December 31, 2025 and 2024 consisted of the following:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**December 31, **\n\n​\n\n**December 31, **\n\n​\n\n​\n\n**2025**\n\n​\n\n**2024**\n\nLand and land improvements\n\n​\n\n$\n\n17,919,835\n\n​\n\n$\n\n27,154,255\n\nBuilding and building improvements\n\n​\n\n \n\n163,698,168\n\n​\n\n \n\n217,125,199\n\nFurniture, fixtures, and equipment\n\n​\n\n \n\n16,502,547\n\n​\n\n \n\n23,228,076\n\nRight-of-use asset - ground lease\n\n​\n\n​\n\n7,942,324\n\n​\n\n​\n\n7,340,868\n\nConstruction in progress\n\n​\n\n​\n\n1,326,968\n\n​\n\n​\n\n443,237\n\nInvestment in hotel properties, at cost\n\n​\n\n​\n\n207,389,842\n\n​\n\n \n\n275,291,635\n\nLess: accumulated depreciation and amortization\n\n​\n\n \n\n(30,989,984)\n\n​\n\n \n\n(33,318,590)\n\nInvestment in hotel properties, net\n\n​\n\n$\n\n176,399,858\n\n​\n\n$\n\n241,973,045\n\n​\n\nAs of December 31, 2025, the Company consolidated fourteen hotel properties, consisting of thirteen hotel properties owned by the Company and an equity and profits interest in the parent of the entity which holds a leasehold interest in one hotel property, with an aggregate of 1,745 rooms located in eight states. As of December 31, 2024, the Company consolidated eighteen hotel properties, consisting of seventeen hotel properties owned by the Company and an equity and profits interest in the parent of the entity which holds a leasehold interest in one hotel property, with an aggregate of 2,150 rooms located in ten states.\n\nProperties Under Contract\n\n​\n\nOn April 15, 2024, the Operating Partnership and Stow Hotel Associates, LLC (the “Stow Contributor”) entered into Legendary Equity Preservation UPREIT (Pat. Pend.) Contribution Agreements (the “Hampton Stow Contribution Agreement” and the “Staybridge Stow Contribution Agreement”) for the acquisition of two hotels:\n\n1) 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.\n\n2)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\n\nF-14\n\n[Table of Contents](#TOC)\n\n$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.\n\nAs 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.\n\nThe Company 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.\n\nSale of Pineville Property\n\nOn 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. During the year ended December 31, 2024, the Company recognized a loss of $4,638,883 related to this sale.\n\nSale of Pineville HGI Property and Charlotte Property\n\nOn May 14, 2025, the Company sold the Pineville HGI Property and Charlotte Property to an unaffiliated purchaser for $22,775,000 in cash. The mortgage loans secured by the Pineville HGI Property and Charlotte Property was 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. In connection with the classification of these properties as held for sale, the Company recognized an impairment loss of $3,992,772 during the year ended December 31, 2024. During the year ended December 31, 2025, the Company recognized a net gain on sale of $361,796 related to these dispositions.\n\nSale of Fargo Property\n\nOn December 17, 2025, the Company sold the Fargo Property to an unaffiliated purchaser for $10,500,000 in cash, subject to customary prorations and adjustments. The mortgage loan secured by the Fargo 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. In connection with the sale, $500,000 of the proceeds was held back by the purchaser and converted into a promissory note with Arcade Fargo LLC bearing interest at 16.0% per annum, with monthly principal and interest payments of approximately $45,365 maturing on January 1, 2027. During the year ended December 31, 2025, the Company recognized a loss of $1,135,173 related to this sale.\n\nSale of Prattville Property\n\nOn December 30, 2025, the Company sold the Prattville Property to an unaffiliated purchaser for $16,700,000 in cash. The mortgage loan secured by the Prattville 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. During the year ended December 31, 2025, the Company recognized a gain of $1,365,256 related to this sale.\n\nF-15\n\n[Table of Contents](#TOC)\n\nVariable Interest Entity\n\nOn August 10, 2022, the Company consolidated a variable interest entity (“VIE”) that owns one hotel in El Paso, Texas (the “El Paso University Property”). The Company is the primary beneficiary of this VIE as the Company has the power to direct the activities that most significantly affect its economic performance. Additionally, the Company has the obligation to absorb its losses and the right to receive benefits that could be significant to it. Accordingly, the Company initially recognized the VIE’s assets, liabilities, and noncontrolling interest at fair value. The Company’s consolidated balance sheet includes the following assets and liabilities of this entity:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**December 31, **\n\n​\n\n**December 31, **\n\n​\n\n​\n\n**2025**\n\n​\n\n**2024**\n\n**Assets**\n\n \n\n​\n\n  ​\n\n \n\n​\n\n  ​\n\nInvestment in hotel properties, net of accumulated depreciation of $2,610,929 and $2,015,865\n\n​\n\n$\n\n20,001,056\n\n​\n\n$\n\n20,710,000\n\nCash and cash equivalents\n\n​\n\n \n\n201,051\n\n​\n\n \n\n262,857\n\nRestricted cash\n\n​\n\n \n\n417,740\n\n​\n\n \n\n573,748\n\nAccounts receivable, net\n\n​\n\n \n\n428,188\n\n​\n\n \n\n502,570\n\nPrepaid expenses and other assets\n\n​\n\n \n\n92,492\n\n​\n\n \n\n68,102\n\n**Total Assets**\n\n​\n\n$\n\n21,140,527\n\n​\n\n$\n\n22,117,277\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Liabilities**\n\n​\n\n \n\n  ​\n\n​\n\n \n\n  ​\n\nDebt, net\n\n​\n\n$\n\n11,843,539\n\n​\n\n$\n\n11,917,800\n\nFinance lease liability\n\n​\n\n​\n\n4,525,812\n\n​\n\n​\n\n4,638,771\n\nAccounts payable\n\n​\n\n \n\n160,124\n\n​\n\n \n\n411,057\n\nAccrued expenses\n\n​\n\n \n\n675,169\n\n​\n\n \n\n130,668\n\nOther liabilities\n\n​\n\n \n\n260,522\n\n​\n\n \n\n(86,563)\n\n**Total liabilities**\n\n​\n\n$\n\n17,465,166\n\n​\n\n$\n\n17,011,733\n\n​\n\nAcquisitions of Hotel Properties\n\nThe Company did not acquire any properties during the years ended December 31, 2025 and 2024.\n\nGround Leases\n\nThe Company has ground leases on two of its Hotel Properties in which a right-of-use asset and corresponding finance lease liability is recognized pursuant to ASU 2016-02:\n\na)Sheraton Northbrook - matures in 2067 and has a yearly base rent that increases 3% every year through maturity. As of December 31, 2025, this finance lease had a discount rate of 7.75%.\n\nb)El Paso University - matures in 2054 and has annual rentals comprised of a base rent due at the beginning of the year plus, if applicable, a percent of revenue in excess of the base rent. The annual base rent of the El Paso ground lease is adjusted every five years by an average of a percent of the annual revenue in preceding years. If revenue remains below the previous five-year base rent, then there is no change to base rent. As of December 31, 2025, the finance lease had a discount rate of 9.00%.\n\nFor the years ended December 31, 2025 and 2024, the Company recognized aggregate interest expense of $704,082 and $690,011, respectively, which is included within “Interest expense” on the consolidated statement of operations and right-of-use amortization expense of $205,828 and $205,828, respectively related to the finance lease, which is included within “Depreciation and amortization” on the consolidated statements of operations.\n\nF-16\n\n[Table of Contents](#TOC)\n\nThe following table reconciles the undiscounted cash flows for each of the next five years and total of the remaining years to the finance lease liability included in the Company’s consolidated balance sheet as of December 31, 2025.\n\n​\n\n​\n\n​\n\n​\n\n​\n\n2026\n\n  ​ ​ ​  ​ ​\n\n$\n\n645,791\n\n2027\n\n​\n\n \n\n660,511\n\n2028\n\n​\n\n \n\n675,672\n\n2029\n\n​\n\n \n\n691,288\n\n2030\n\n​\n\n \n\n707,372\n\nThereafter\n\n​\n\n \n\n41,942,465\n\nTotal finance lease payments\n\n​\n\n​\n\n45,323,099\n\nInterest\n\n​\n\n​\n\n(32,057,245)\n\nPresent value of finance lease liabilities\n\n​\n\n$\n\n13,265,854\n\n​\n\n*Assets Held for Sale*\n\n​\n\nThe Company had the following pending transactions as of December 31, 2025:\n\n​\n\n-On August 26, 2025, the Company entered into an Auction Marketing Agreement and on October 16, 2025, the Company attempted to complete an auction sale of the Holiday Inn Express – Cedar Rapids (the “Cedar Rapids Property”); however the purchaser could not provide funding to complete the sale.\n\n-During the second half of 2025, the Company entered into a Marketing Agreement in order to sell the Holiday Inn – El Paso (the “El Paso Property”) through an auction process.  Although this did not come to completion as of December 31, 2025, the Company was actively marketing the El Paso Property for sale and having concurrent correspondence with the Lender with regard to this property.  Effectively, on October 6, 2025, the Company entered into a Compromise and Settlement Agreement with the lender of the El Paso Property for the sale of the El Paso Property and other requirements.\n\n-On November 20, 2025, the Company entered into a Hotel Purchase and Sale Agreement (“PSA”) for the sale of the Lakewood Property.\n\n​\n\nDepreciation and amortization ceased for each of these properties as of the date each of the assets were deemed held for sale and these assets held for sale are measured at lower of their carrying amount or fair value less costs to sell.  Since each of these hotels individually did not represent a strategic shift that has (or will have) a major effect on the Company’s operations or financial results, its results of operations were not reported as discontinued operations in the consolidated financial statements.\n\n​\n\nOn December 2, 2024, the Company entered into two purchase and sale agreements for the Hilton Garden Inn – Pineville (the “Pineville HGI Property”) and the Hilton Garden Inn – Charlotte (the “Charlotte Property”) and as of December 31, 2024, the Pineville HGI Property and the Charlotte Property were classified as held for sale. These properties were sold for an aggregate sales price of $22,775,000 and both of these sales closed on May 15, 2025.\n\n​\n\nF-17\n\n[Table of Contents](#TOC)\n\nThe major classes of assets and liabilities related to assets held for sale included in the consolidated balance sheet at December 31, 2025 were as follows:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**December 31, **\n\n​\n\n**December 31, **\n\n​\n\n**  ​ ​ ​**\n\n**2025**\n\n**  ​ ​ ​**\n\n**2024**\n\n**Assets**\n\n​\n\n​\n\n  ​\n\n​\n\n​\n\n  ​\n\nInvestments in hotel properties, net\n\n​\n\n$\n\n26,695,206\n\n​\n\n$\n\n21,257,017\n\nCash and cash equivalents\n\n​\n\n \n\n386,116\n\n​\n\n \n\n21,050\n\nRestricted cash\n\n​\n\n​\n\n1,181,700\n\n​\n\n​\n\n—\n\nAccounts receivable, net\n\n​\n\n​\n\n163,688\n\n​\n\n​\n\n57,817\n\nFranchise fees, net\n\n​\n\n​\n\n179,236\n\n​\n\n​\n\n293,611\n\nPrepaid expenses and other assets\n\n​\n\n​\n\n672,976\n\n​\n\n​\n\n200,289\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Assets held for sale**\n\n​\n\n$\n\n29,278,922\n\n​\n\n \n\n21,829,784\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Liabilities**\n\n​\n\n \n\n  ​\n\n​\n\n \n\n  ​\n\nDebt, net\n\n​\n\n$\n\n25,061,252\n\n​\n\n$\n\n15,921,605\n\nAccounts payable\n\n​\n\n \n\n493,743\n\n​\n\n \n\n362,998\n\nAccrued expenses\n\n​\n\n \n\n1,686,556\n\n​\n\n \n\n160,188\n\nOther liabilities\n\n​\n\n \n\n788,110\n\n​\n\n \n\n67,827\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Liabilities related to assets held for sale**\n\n​\n\n$\n\n28,029,661\n\n​\n\n \n\n16,512,618\n\n​\n\nInvestments in hotel properties classified as held for sale are carried at the lower of carrying value or fair value less costs to sell. Accumulated depreciation reflects amounts recorded prior to held for sale classification, at which point depreciation ceased in accordance with ASC 360-10-35-43.\n\n​\n\n*Impairment*\n\n​\n\nDuring the year ended December 31, 2025, the Company recorded impairment losses of approximately $10.1 million in connection with the pending sales of the Cedar Rapids Property, the El Paso Property, and the Lakewood Property. During the year ended December 31, 2024, the Company recorded impairment losses of approximately $4.0 million in connection with the pending sales of the Pineville HGI Property and the Charlotte Property.\n\n​\n\nF-18\n\n[Table of Contents](#TOC)\n\n4. PREPAID EXPENSES AND OTHER ASSETS\n\nPrepaid expenses and other assets consisted of the following:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**December 31, **\n\n​\n\n**December 31, **\n\n​\n\n​\n\n**2025**\n\n​\n\n**2024**\n\nInsurance\n\n​\n\n$\n\n627,179\n\n​\n\n​\n\n856,646\n\nOther\n\n​\n\n​\n\n419,189\n\n​\n\n​\n\n1,150,412\n\n​\n\n​\n\n$\n\n1,046,368\n\n​\n\n$\n\n2,007,058\n\n​\n\n​\n\n​\n\n​\n\n5. ACCRUED EXPENSES\n\nAccrued expenses consisted of the following:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**December 31, **\n\n​\n\n**December 31, **\n\n​\n\n​\n\n**2025**\n\n​\n\n**2024**\n\nProperty taxes\n\n​\n\n$\n\n2,265,762\n\n​\n\n$\n\n2,612,022\n\nInterest\n\n​\n\n​\n\n5,768,598\n\n​\n\n​\n\n5,477,122\n\nOther\n\n​\n\n​\n\n725,725\n\n​\n\n​\n\n1,044,200\n\n​\n\n​\n\n$\n\n8,760,085\n\n​\n\n$\n\n9,133,344\n\n​\n\nF-19\n\n[Table of Contents](#TOC)\n\n6. DEBT\n\nAt December 31, 2025 and December 31, 2024, debt, net on the consolidated balance sheets consists of the following:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**Interest**\n\n​\n\n​\n\n​\n\n**Outstanding**\n\n​\n\n**Outstanding**\n\n​\n\n​\n\n**Rate as of**\n\n​\n\n​\n\n​\n\n**Balance as of**\n\n​\n\n**Balance as of**\n\n​\n\n​\n\n**December 31, **\n\n​\n\n**Maturity**\n\n​\n\n**December 31, **\n\n​\n\n**December 31, **\n\n​\n\n​\n\n**2025**\n\n​\n\n**Date**\n\n​\n\n**2025**\n\n​\n\n**2024**\n\nHoliday Inn Express - Cedar Rapids(1)\n\n​\n\n—\n\n \n\n—\n\n​\n\n$\n\n—\n\n​\n\n$\n\n5,619,577\n\nHampton Inn - Eagan(7)\n\n​\n\n9.50%\n\n​\n\n10/1/2025\n\n​\n\n \n\n8,468,346\n\n​\n\n \n\n8,672,347\n\nHome2 Suites - Prattville(2)\n\n​\n\n—\n\n \n\n—\n\n​\n\n \n\n—\n\n​\n\n \n\n9,164,964\n\nHome2 Suites - Lubbock\n\n​\n\n4.69%\n\n​\n\n10/6/2026\n\n​\n\n​\n\n6,586,836\n\n​\n\n​\n\n6,851,578\n\nFairfield Inn & Suites - Lubbock\n\n​\n\n4.93%\n\n​\n\n4/6/2029\n\n​\n\n​\n\n8,535,009\n\n​\n\n​\n\n8,639,616\n\nHomewood Suites - Southaven\n\n​\n\n7.77%\n\n​\n\n12/6/2029\n\n​\n\n​\n\n17,796,388\n\n​\n\n​\n\n18,000,000\n\nCourtyard by Marriott - Aurora(3)(4)\n\n​\n\n9.95%\n\n​\n\n2/5/2025\n\n​\n\n​\n\n14,935,816\n\n​\n\n​\n\n14,935,816\n\nHoliday Inn - El Paso(1)\n\n​\n\n—\n\n \n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n7,600,000\n\nHilton Garden Inn - Houston\n\n​\n\n3.85%\n\n​\n\n9/2/2026\n\n​\n\n​\n\n13,116,014\n\n​\n\n​\n\n13,484,482\n\nHampton Inn - Fargo(5)\n\n​\n\n—\n\n \n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n6,966,110\n\nCourtyard by Marriott - El Paso\n\n​\n\n6.01%\n\n​\n\n5/13/2027\n\n​\n\n​\n\n9,800,349\n\n​\n\n​\n\n9,800,349\n\nFairfield Inn & Suites - Lakewood(1)\n\n​\n\n—\n\n \n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n12,000,000\n\nFairfield Inn & Suites - Lakewood - A-1(1)(6)\n\n​\n\n14.50%\n\n​\n\n3/27/2026\n\n​\n\n​\n\n4,896,801\n\n​\n\n​\n\n4,896,801\n\nResidence Inn - Fort Collins(7)(8)\n\n​\n\n10.25%\n\n​\n\n5/4/2025\n\n​\n\n​\n\n11,200,000\n\n​\n\n​\n\n11,200,000\n\nResidence Inn - Fort Collins - CapEx(7)(9)\n\n​\n\n11.50%\n\n​\n\n5/4/2025\n\n​\n\n​\n\n1,806,143\n\n​\n\n​\n\n1,806,143\n\nResidence Inn - Fort Collins - A-1(4)\n\n​\n\n7.00%\n\n​\n\n8/2/2028\n\n​\n\n​\n\n501,465\n\n​\n\n​\n\n501,465\n\nHilton Garden Inn - El Paso(7)\n\n​\n\n4.94%\n\n​\n\n8/6/2025\n\n​\n\n​\n\n11,843,539\n\n​\n\n​\n\n12,033,256\n\nHoliday Inn Express - Wichita\n\n​\n\n6.41%\n\n​\n\n12/21/2027\n\n​\n\n​\n\n5,485,172\n\n​\n\n​\n\n5,589,430\n\nTotal Mortgage Debt\n\n​\n\n​\n\n​\n\n​\n\n​\n\n \n\n114,971,878\n\n​\n\n \n\n157,761,934\n\nPremium on assumed debt, net\n\n​\n\n​\n\n​\n\n​\n\n​\n\n \n\n246,579\n\n​\n\n \n\n234,911\n\nDeferred financing costs, net\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n(1,365,446)\n\n​\n\n​\n\n(1,639,867)\n\nNet Mortgage\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n113,853,011\n\n​\n\n​\n\n156,356,978\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n$5.0 million line of credit - Western(7)(10)\n\n​\n\n8.50%\n\n​\n\n6/15/2024\n\n​\n\n​\n\n292,040\n\n​\n\n​\n\n4,151,139\n\n$20.0 million revolving line of credit - A-1 Bonds\n\n​\n\n17.50%\n\n​\n\n12/31/2027\n\n​\n\n​\n\n13,488,302\n\n​\n\n​\n\n14,254,000\n\n$0.6 million loan - NHS(7)\n\n​\n\n7.00%\n\n​\n\n9/30/2025\n\n​\n\n​\n\n600,000\n\n​\n\n​\n\n600,000\n\n$0.5 million loan - Arcade\n\n​\n\n16.00%\n\n​\n\n12/17/2026\n\n​\n\n​\n\n500,000\n\n​\n\n​\n\n—\n\nTotal Lines of Credit and Other Corporate Debt\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n14,880,342\n\n​\n\n​\n\n19,005,139\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nDebt, net\n\n​\n\n​\n\n​\n\n​\n\n​\n\n$\n\n128,733,353\n\n​\n\n$\n\n175,362,117\n\n​\n\n(1)Asset is listed as held for sale as of December 31, 2025.\n\n(2)Asset was sold on December 30, 2025 and the loan was repaid on the closing date.\n\n(3)Variable interest rate equal to 30-day SOFR 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.\n\n(4)Loan is interest-only until maturity.\n\n(5)Asset was sold on December 17, 2025 and the loan was repaid on the closing date\n\n(6)This debt is held at the Operating Partnership\n\n(7)The Company and the lender are working to finalize an extension of these loans as of the date of this filing.\n\n(8)Variable interest rate equal to SOFR Index plus 6.25%.\n\n(9)Variable interest rate equal to SOFR Index plus 7.50%.\n\n(10)Variable interest rate equal to U.S. Prime plus 1.00%\n\n​\n\n​\n\nF-20\n\n[Table of Contents](#TOC)\n\n*Mortgage Debt*\n\nThe 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 December 31, 2025, the estimated fair value of the Company’s mortgage debt was $113.9 million, compared to the gross carrying value $115.0 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. The carrying values of the Company's lines of credit, the NHS Loan, and the Arcade Loan approximate their fair values due to the short-term nature or variable interest rates of these instruments. The A-1 Revolving Line of Credit is a related-party instrument with terms that may not be representative of market terms; accordingly, it is not practicable to estimate the fair value of this instrument without incurring excessive cost.\n\nWestern Line of Credit Amendments\n\n​\n\nThe 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.\n\n​\n\nArcade Loan\n\n​\n\nOn December 16, 2025, in connection with the sale of the Hampton Inn - Fargo property, the Operating Partnership entered into a promissory note with Arcade Fargo LLC in the principal amount of $500,000 (the \"Arcade Loan\"). The Arcade Loan bears interest at a fixed rate of 16.0% per annum, with monthly principal and interest payments of approximately $45,365 commencing February 1, 2026 and maturing on January 1, 2027. The Arcade Loan requires mandatory payments from net proceeds of any capital transaction with respect to the Company's remaining properties, and restricts distributions to the Company's equity holders until the note is repaid in full. The Arcade Loan is guaranteed by Lodging Fund REIT III TRS, Inc., Legendary Capital, LLC, Legendary Capital REIT III, LLC, Norman Leslie, and Corey Maple.\n\n​\n\nMortgage Loan Modifications\n\n​\n\nFrom 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.\n\n​\n\n*Contribution Agreement – Sheraton Northbrook, Residence Inn - Fort Collins and Courtyard by Marriot - Aurora*\n\nOn December 24, 2024, the Company entered into a Contribution Agreement (the “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 10) 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.\n\nF-21\n\n[Table of Contents](#TOC)\n\nWith 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.\n\n*El Paso HI Property*\n\nOn 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 entered into a Compromise and Settlement Agreement (the “Settlement Agreement”) on October 6, 2025, which provides direction for the sale of the El Paso Property and certain other conditions as described within the Settlement Agreement.\n\n*Cedar Rapids Property and Eagan Property*\n\nOn 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.\n\n​\n\nOn July 25, 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 October 1, 2025.\n\n​\n\nThe Company and Western State Bank are working to finalize an extension of the loans secured by 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. As aforementioned in Note 3, the Cedar Rapids Property was recorded as a property held for sale as of December 31, 2025.\n\n*Houston Property and Wichita Property*\n\nOn 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 Prime 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.\n\n*El Paso Courtyard Property, Charlotte Property and Pineville HGI Property Mortgage Loan Modifications*\n\nOn 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.\n\n​\n\nF-22\n\n[Table of Contents](#TOC)\n\n*Charlotte Property and Pineville HGI Property Sale and Loan Termination*\n\n​\n\nOn 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.\n\n​\n\n*Lubbock Expo Special Servicing*\n\n​\n\nIn October 2025, the mortgage loan secured by the Fairfield Inn & Suites - Lubbock (the \"Lubbock Fairfield Loan\") was transferred to special servicing. As of December 31, 2025, the outstanding principal balance on the Lubbock Fairfield Loan was approximately $8.5 million, with a fixed interest rate of 4.93% and a maturity date of April 6, 2029. The Company is in discussions with the special servicer regarding the status of the loan. There can be no assurance that these discussions will result in a favorable outcome.\n\n​\n\n*Fargo Property Sale and Loan Termination*\n\nOn December 17, 2025, the Company sold the Fargo Property to an unaffiliated purchaser for $10,500,000 in cash, subject to customary prorations and adjustments. The mortgage loan secured by the Fargo 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.\n\n​\n\n*Prattville Property Sale and Loan Termination*\n\n​\n\nOn December 30, 2025, the Company sold the Prattville Property to an unaffiliated purchaser for $16,700,000 in cash, subject to customary prorations and adjustments. The mortgage loan secured by the Prattville Property was repaid in full at closing from sale proceeds. All guaranties in connection with such loan and collateral with respect to such loan have been terminated or released, and all commitments with respect to such loans have been terminated or released.\n\n​\n\n*Future Minimum Payments*\n\nAs of December 31, 2025, the future minimum principal payments on the Company’s debt were as follows:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n2026\n\n  ​ ​ ​\n\n$\n\n74,977,477\n\n2027\n\n​\n\n \n\n15,434,532\n\n2028\n\n​\n\n \n\n14,470,937\n\n2029\n\n​\n\n \n\n8,258,172\n\n2030\n\n​\n\n \n\n16,711,102\n\n​\n\n​\n\n​\n\n129,852,220\n\n​\n\n​\n\n​\n\n​\n\nPremium on assumed debt, net\n\n​\n\n \n\n246,579\n\nDeferred financing costs, net\n\n​\n\n \n\n(1,365,446)\n\n​\n\n​\n\n$\n\n128,733,353\n\n​\n\nThe $75.0 million of future minimum principal payments due in 2026 includes the maturities of the mortgage debt secured individually by the Eagan Property, Lubbock Home2 Property, Lakewood Property, Houston Property, Fort Collins Property, El Paso University Property, and Aurora Property, as well as the maturities of the Western Line of Credit, the NHS Line of Credit, and the Arcade Loan. The future minimum principal payments do not include the assets classified as held for sale as of December 31, 2025.\n\nF-23\n\n[Table of Contents](#TOC)\n\n7. INCOME TAXES\n\nThe Company’s earnings (losses), other than those generated by the Company’s TRS, are not generally subject to federal corporate and state income taxes due to the Company’s REIT election. The Company did not pay any federal taxes for the years ended December 31, 2025 and 2024. For the year ended December 31, 2025, the Company adopted ASU-2023-09, Improvements to Income tax Disclosures, which expands and disaggregates income tax disclosures, including a more detailed rate reconciliations and disaggregation of income taxes paid by jurisdiction.\n\nThe Company paid state franchise taxes only to Texas in the amount of $136,781 and $131,851 for the years ended December 31, 2025 and 2024, respectively. The Company did not have any uncertain tax positions as of December 31, 2025 and 2024, respectively and as of December 31, 2025, the tax years 2018 through 2025 remain subject to examination by the U.S. Internal Revenue Service (“IRS”) and various state tax jurisdictions. For the years ended December 31, 2025 and 2024, all distributions paid were determined to be 100% returns of capital contributions.\n\nThe Company’s TRS generated a net operating loss (“NOL”) for both the years ended December 31, 2025 and 2024, each of which can be carried forward to offset future taxable income. As of December 31, 2025 and 2024, the Company’s deferred tax assets and liabilities consisted of the following:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**December 31, **\n\n​\n\n​\n\n**2025**\n\n​\n\n**2024**\n\nDeferred Tax Assets:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nNet operating loss carryforwards - Federal\n\n​\n\n$\n\n10,947,140\n\n​\n\n$\n\n8,912,921\n\nNet operating loss carryforwards - State\n\n​\n\n​\n\n1,733,868\n\n​\n\n​\n\n1,554,141\n\nValuation Allowance\n\n​\n\n​\n\n(12,681,008)\n\n​\n\n​\n\n(10,467,062)\n\nTotal deferred tax assets, net\n\n​\n\n​\n\n-\n\n​\n\n​\n\n-\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nDeferred Tax Liabilities:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nTax FF&E basis less than book basis - Federal\n\n​\n\n​\n\n(2,044,780)\n\n​\n\n​\n\n(2,278,523)\n\nTax FF&E basis less than book basis - State\n\n​\n\n​\n\n(323,864)\n\n​\n\n​\n\n(397,305)\n\nTotal deferred tax liabilities, net\n\n​\n\n​\n\n(2,368,644)\n\n​\n\n​\n\n(2,675,828)\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nDeferred tax liabilities, net\n\n​\n\n$\n\n(2,368,644)\n\n​\n\n$\n\n(2,675,828)\n\n​\n\nAs of December 31, 2025, the Company's TRS had federal net operating loss carryforwards of approximately $10.9 million, which may be carried forward indefinitely subject to an annual limitation of 80% of taxable income under the Tax Cuts and Jobs Act of 2017. State net operating loss carryforwards of approximately $1.7 million have varying expiration periods depending on the applicable state tax jurisdiction.\n\nThe components of the Company’s income tax benefit are as follows:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**For the Years Ended December 31, **\n\n​\n\n**2025**\n\n​\n\n**2024**\n\nFederal:\n\n​\n\n​\n\n​\n\n​\n\n​\n\nDeferred\n\n$\n\n233,743\n\n​\n\n$\n\n183,690\n\nState:\n\n​\n\n​\n\n​\n\n​\n\n​\n\nCurrent\n\n​\n\n(136,781)\n\n​\n\n​\n\n(131,851)\n\nDeferred\n\n​\n\n73,441\n\n​\n\n​\n\n158,221\n\nIncome tax benefit\n\n$\n\n170,403\n\n​\n\n$\n\n210,060\n\n​\n\nF-24\n\n[Table of Contents](#TOC)\n\nThe provision for income taxes is derived from the income tax expense that is determined by applying the applicable U.S. statutory federal income tax rate to pretax income as a result of the following differences:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**For the Years Ended December 31, **\n\n​\n\n​\n\n**2025**\n\n**%**\n\n​\n\n**2024**\n\n**%**\n\nExpected income tax benefit at U.S. Federal statutory rate\n\n​\n\n$\n\n7,263,982\n\n-21.0%\n\n​\n\n$\n\n6,326,532\n\n-21.0%\n\nTax impact of REIT election\n\n​\n\n​\n\n(4,995,877)\n\n14.4%\n\n​\n\n​\n\n(4,289,317)\n\n14.2%\n\nExpected tax benefit at TRS\n\n​\n\n​\n\n2,268,105\n\n-6.6%\n\n​\n\n​\n\n2,037,215\n\n-6.8%\n\nValuation Allowance\n\n​\n\n​\n\n(2,378,584)\n\n6.9%\n\n​\n\n​\n\n(2,041,087)\n\n6.8%\n\nGross tax expense\n\n​\n\n​\n\n(110,479)\n\n​\n\n​\n\n​\n\n(3,872)\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nState income tax expense, net\n\n​\n\n​\n\n258,290\n\n-0.7%\n\n​\n\n​\n\n355,140\n\n-1.2%\n\nTemporary differences - deprecation\n\n​\n\n​\n\n42,868\n\n-0.1%\n\n​\n\n​\n\n(133,260)\n\n0.4%\n\nPermanent differences\n\n​\n\n​\n\n(20,276)\n\n0.1%\n\n​\n\n​\n\n(7,948)\n\n0.0%\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nIncome tax benefit\n\n​\n\n$\n\n170,403\n\n-0.5%\n\n​\n\n$\n\n210,060\n\n-0.7%\n\n​\n\n​\n\n​\n\n​\n\n8. RELATED PARTY TRANSACTIONS\n\n**Legendary Capital REIT III, LLC**—Substantially all of the Company’s business is managed by the Advisor and its affiliates, pursuant to the Advisory Agreement. The Advisor is owned by Corey R. Maple and Norman H. Leslie. The Company 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. The Company reimburses the Advisor and its affiliates, at cost, for certain expenses incurred on behalf of the Company, as described in more detail below. The Advisory Agreement has a term of 10 years, ending in December 2028.\n\n​\n\nThe Advisor earns 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, 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 will 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, and 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 Limited Partnership Unit (“Series B LP Unit”) holders) have received a 6% cumulative, but not compounded, return per annum.\n\nPer 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. 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\n\nF-25\n\n[Table of Contents](#TOC)\n\nPartnership, holders of the Series B LP Units shall be distributed an amount equal to 5% of the limited partners’ capital contributions 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. 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.\n\nThe 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.\n\nFees and reimbursements earned and payable to the Advisor and its affiliates, for the years ended December 31, 2025 and 2024, were as follows:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Incurred**\n\n​\n\n​\n\n**For the Years Ended December 31, **\n\n​\n\n​\n\n**2025**\n\n​\n\n**2024**\n\nFees:\n\n​\n\n​\n\n  ​\n\n \n\n​\n\n  ​\n\nFinancing fees\n\n​\n\n$\n\n645,614\n\n​\n\n$\n\n90,000\n\nAsset management fees\n\n​\n\n \n\n2,232,285\n\n​\n\n \n\n2,451,957\n\n​\n\n​\n\n$\n\n2,877,899\n\n​\n\n$\n\n2,541,957\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nReimbursements:\n\n​\n\n​\n\n  ​\n\n \n\n​\n\n  ​\n\nOffering costs\n\n​\n\n$\n\n1,530,562\n\n​\n\n$\n\n1,901,538\n\nGeneral and administrative\n\n​\n\n \n\n3,167,907\n\n​\n\n \n\n3,631,895\n\nSales and marketing\n\n​\n\n \n\n62,687\n\n​\n\n \n\n57,574\n\nAcquisition costs\n\n​\n\n​\n\n40,146\n\n​\n\n​\n\n185,115\n\nOther expense, net\n\n​\n\n​\n\n992,614\n\n​\n\n​\n\n113,982\n\n​\n\n​\n\n$\n\n5,793,916\n\n​\n\n$\n\n5,890,104\n\n​\n\nFor the years ended December 31, 2025 and 2024, the Operating Partnership recognized distributions payable to the Advisor in the amount of $0 and $118,232 respectively, in connection with the Advisor’s ownership of Series B LP Units. For the years ended December 31, 2025 and 2024, the Company paid distributions in the amount of $0 and $16,240 respectively, to Corey Maple and Norman Leslie in connection with their ownership of 57,319 shares each, of the Company’s common stock. For the years ended December 31, 2025 and 2024, the Company paid Corey Maple distributions in an amount of $0 and $4,352, respectively, in connection with his ownership of 15,361 Series GO LP Units.\n\nThe 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, 2025, Corey Maple 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. Mr. Maple was a guarantor of the Company’s loan secured by the Company’s hotel property in Fargo, North Dakota, which had an original loan amount of $7.4 million. That loan was repaid in full and the guaranty terminated on December 17, 2025. As of December 31, 2025, 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.\n\nF-26\n\n[Table of Contents](#TOC)\n\nMr. 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. Mr. Leslie was also a guarantor of the Company’s loan secured by the Prattville Property, which had an original loan amount of $11.0 million. That loan was repaid in full and the guaranty terminated on December 30, 2025. For the years ended December 31, 2025 and 2024, the Company accrued guarantee fees in the amount of $0.1 million and $0.1 million respectively to each Mr. Maple and Mr. Leslie. In addition, during the second quarter of 2025, the Company recorded approximately $0.9 million of previously unrecorded guarantee fees relating to certain loans for the periods from October 1, 2021 through December 31, 2024. The Company evaluated this matter under SEC Staff Accounting Bulletins No. 99 and No. 108 and concluded that the omission of these fees was not material to any prior annual or interim period, nor to the current period. Accordingly, the cumulative amount was recorded as an out-of-period adjustment during the second quarter of 2025 and did not result in a restatement of previously issued financial statements. The guarantee fees are presented within Other Expense in the accompanying consolidated statements of operations. The total amount accrued of $2.9 million remained unpaid at December 31, 2025 and is included in Due to Related Party on the accompanying consolidated balance sheet.\n\nAs of December 31, 2025 and 2024, the Company had amounts due and payable to the Advisor and its affiliates of $21.6 million and $12.7 million respectively, which is included in due to related parties on the accompanying consolidated balance sheets.\n\n**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.\n\n*Property Management Services*\n\nNHS provides property management and hotel operations management services for the Company’s hotel properties, pursuant to individual management agreements. The agreements have an initial term expiring on December 31st of the fifth full calendar year following the effective date of the agreement, which automatically renews for a period of five years on each successive five-year period, unless terminated in accordance with its terms.  In February 2025, the Company 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.\n\nPrior to its termination, NHS earned the following:\n\n●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.\n\n●an accounting fee of $14.00 per room for accounting services, payable monthly,\n\n●an administrative fee equal to 0.60% of gross revenues for administrative and other services.\n\n●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.\n\n*Loan Agreement*\n\nThe Company has a $600,000 loan (the “NHS Loan”) with NHS (see Note 6). The NHS Loan requires interest only payments, with all outstanding principal and interest amounts being due and payable at maturity. The NHS Loan has a fixed interest rate of 7.0% and a maturity date on September 30, 2025. The Company and NHS are working to finalize an extension of this loan as of the date of this filing.\n\nF-27\n\n[Table of Contents](#TOC)\n\nFees and reimbursements earned and payable to, NHS for the years ended December 31, 2025 and 2024, were as follows:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Incurred**\n\n​\n\n**Payable as of**\n\n​\n\n​\n\n**For the Years Ended December 31, **\n\n​\n\n**December 31, **\n\n​\n\n**December 31, **\n\n​\n\n​\n\n**2025**\n\n​\n\n**2024**\n\n​\n\n**2025**\n\n​\n\n**2024**\n\nFees:\n\n​\n\n​\n\n  ​\n\n​\n\n​\n\n​\n\n \n\n​\n\n  ​\n\n​\n\n​\n\n​\n\nManagement fees\n\n​\n\n$\n\n—\n\n​\n\n$\n\n761,201\n\n​\n\n$\n\n103,070\n\n​\n\n$\n\n321,408\n\nAdministrative fees\n\n​\n\n \n\n—\n\n​\n\n \n\n80,118\n\n​\n\n \n\n5,615\n\n​\n\n \n\n31,950\n\nAccounting fees\n\n​\n\n \n\n—\n\n​\n\n \n\n100,992\n\n​\n\n \n\n9,600\n\n​\n\n \n\n47,616\n\n​\n\n​\n\n$\n\n—\n\n​\n\n$\n\n942,311\n\n​\n\n$\n\n118,285\n\n​\n\n$\n\n400,974\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nReimbursements\n\n​\n\n$\n\n(260,177)\n\n​\n\n$\n\n672,472\n\n​\n\n$\n\n(19,140)\n\n​\n\n$\n\n421,333\n\n​\n\n**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 2025 and 2024 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, 2025 and 2024, the Company incurred $78,352 and $8,278 of construction management fees and reimbursements payable to One Rep, respectively. As of December 31, 2025 and 2024, the amounts outstanding and due to One Rep were $3,690 and $44,474 respectively, which is included in due to related parties on the accompanying consolidated balance sheets.\n\n**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, 2025 and 2024, the Company has an outstanding balance on its line of credit (the “A-1 Revolving Line of Credit”) amounting to $13.5 million and $14.3 million, respectively (see Note 6). As of December 31, 2025, 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.\n\n9. FRANCHISE AGREEMENTS\n\nAs of December 31, 2025 and 2024, all of the Company’s 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, the Company pays 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. The Company 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. For the year ended December 31, 2025 and 2024, amortization in connection with these agreements was $129,730 and $105,000 respectively and is included within “Franchise fees, net” on the consolidated balance sheet.\n\n​\n\n**10. MANDATORILY REDEEMABLE SERIES P PREFERRED UNITS**\n\nOn December 24, 2024, the Company commenced a private offering of limited partnership units in the OP, designated as Series P Preferred Units, with a maximum offering of $50,000,000 (which may be increased to $75,000,000 in the sole discretion of the General Partner) at a purchase price equal to $10,000 per Series P Preferred Unit. Subject to the rights of the holders of the Series A Preferred Units described below, holders of the Series P Preferred Unit are entitled to receive $10,000 per Series P Preferred Unit plus an amount equal to all distributions accrued and unpaid on the Series P Preferred Unit, in the event of liquidation, dissolution or winding up of the Company. Subject to the rights of the holders of the Series A Preferred Units described below, the Series P Preferred Unit holders are entitled to receive a distribution payable equal to 7.50% cumulative but not compounded annual return on the Series P Preferred Unit purchase price and may receive a bonus distribution based on the timing and amount of each holder’s investment as defined within the Partnership\n\nF-28\n\n[Table of Contents](#TOC)\n\nAgreement. The Series P Preferred Units will be redeemed by the Partnership on the occurrence of the earlier of the following: a) in connection with a hardship on the Partnership, b) in connection with a listing of LF REIT III’s shares of common stock on a national securities exchange, a liquidation event or approval for a strategic transaction, c) at any point on or after December 31, 2025 or d) December 31, 2034. The Series P Preferred Unit holders are not permitted to take part in the management or control of the business of the Operating Partnership; however, they have the right to approve amendments to the Partnership Agreement that impact the allocations and distributions of the Series P Preferred Units, except for the issuance of additional interests to the Operating Partnership. Gross income and gains are allocated to the holder of the Series P Preferred Units for any fiscal year to the extent that the holder of the Series P Preferred Units receives a distribution.\n\nThe Company has classified the Series P Preferred Units as a liability in accordance with ASC 480 due to the mandatory redemption feature. The accretion of the Series P Preferred Units is recorded as interest expense in the consolidated statement of operations. From the inception of the offering through December 31, 2025, the Company issued 155 units of Series P Preferred Units in an amount of $1,550,000. This amount is included as a liability as within the line item of Mandatorily redeemable preferred units, Series P, net of unamortized offering costs of $1,335,037. For the year ended December 31, 2025, the Company recorded $76,505 of distributions which are included within interest expense within the consolidated statements of operations. At December 31, 2025, this amount is payable and included within distributions payable in the consolidated balance sheets. As of the date of this filing these have remained unpaid.\n\n11. STOCKHOLDERS’ EQUITY\n\nThe Company is authorized to issue 900,000,000 shares of common stock and 100,000,000 shares of preferred stock. Each share of common stock entitles the holder to one vote per share on all matters upon which stockholders are entitled to vote and to receive distributions as authorized by the Company’s board of directors. The rights of the holders of shares of preferred stock may be defined at such time any series of preferred shares are issued.\n\n​\n\n**Common Stock**\n\n​\n\nInitial Offering\n\n​\n\nOn June 1, 2018, the Company commenced a private offering of shares of common stock, $0.01 par value per share, at a price of $10.00 per share, with a maximum offering of $100,000,000, which was increased to $150,000,000 in December 2021, to accredited investors only pursuant to a confidential private placement memorandum exempt from registration under the Securities Act of 1933, as amended. As of December 31, 2025, the Company had issued and sold 10,303,567 shares of common stock, including 1,215,332 shares attributable to our DRIP, and received aggregate proceeds of $100.8 million.\n\n​\n\nStock-Based Compensation\n\n​\n\nThe Company compensates its independent directors with quarterly grants of shares of common stock, which are fully vested upon issuance. During the years ended December 31, 2025 and 2024, each independent director received 2,000 shares (500 shares per quarter), valued at the estimated share NAV of $10.57 per share at the date of issuance. Total stock-based compensation expense recognized was $42,280 and $42,280 for the years ended December 31, 2025 and 2024, respectively, and is included in general and administrative expenses in the consolidated statements of operations. As of December 31, 2025, there was no unrecognized compensation cost related to these awards as all shares are fully vested upon grant. The Company has assessed the additional disclosure requirements under ASC 718 and determined that they are not material to the consolidated financial statements given the limited nature and size of the stock-based compensation program\n\n​\n\nDividend Reinvestment Plan\n\n​\n\nThe Company has adopted a dividend reinvestment plan (“DRIP”), which permits stockholders to reinvest their distributions back into the Company, purchasing shares of common stock at 95% of the then-current share net asset value (“NAV”).\n\nF-29\n\n[Table of Contents](#TOC)\n\n​\n\nDistributions\n\n​\n\nDistributions are determined by the board of directors based on the Company’s financial condition and other relevant factors.\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Distribution**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Distributions**\n\n​\n\n**Declared Per**\n\n​\n\n**Distributions Paid **(3)\n\n**Period**\n\n  ​ ​ ​\n\n**Declared **(1)\n\n  ​ ​ ​\n\n**Share **(1) (2)\n\n  ​ ​ ​\n\n**Cash**\n\n  ​ ​ ​\n\n**Reinvested**\n\n  ​ ​ ​\n\n**Total**\n\nFirst Quarter 2025\n\n​\n\n$\n\n—\n\n​\n\n$\n\n—\n\n​\n\n$\n\n—\n\n​\n\n$\n\n—\n\n​\n\n$\n\n—\n\nSecond Quarter 2025\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\nThird Quarter 2025\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\nFourth Quarter 2025\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n$\n\n—\n\n​\n\n$\n\n—\n\n​\n\n$\n\n—\n\n​\n\n$\n\n—\n\n​\n\n$\n\n—\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Distribution**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Distributions**\n\n​\n\n**Declared Per**\n\n​\n\n**Distributions Paid **(3)\n\n​\n\n​\n\n**Declared **(1)\n\n​\n\n**Share **(1) (2)\n\n​\n\n**Cash**\n\n  ​ ​ ​\n\n**Reinvested**\n\n  ​ ​ ​\n\n**Total**\n\nFirst Quarter 2024\n\n​\n\n$\n\n306,065\n\n​\n\n$\n\n0.029\n\n​\n\n$\n\n903,061\n\n​\n\n$\n\n109,218\n\n​\n\n$\n\n1,012,279\n\nSecond Quarter 2024\n\n​\n\n​\n\n1,181,705\n\n​\n\n​\n\n0.113\n\n​\n\n​\n\n820,706\n\n​\n\n​\n\n176,589\n\n​\n\n​\n\n997,295\n\nThird Quarter 2024\n\n​\n\n​\n\n876,877\n\n​\n\n​\n\n0.083\n\n​\n\n​\n\n1,192,192\n\n​\n\n​\n\n193,549\n\n​\n\n​\n\n1,385,741\n\nFourth Quarter 2024\n\n​\n\n​\n\n—\n\n​\n\n​\n\n—\n\n​\n\n​\n\n(1,162)\n\n​\n\n​\n\n1,162\n\n​\n\n​\n\n—\n\n​\n\n​\n\n$\n\n2,364,648\n\n​\n\n$\n\n0.225\n\n​\n\n$\n\n2,914,797\n\n​\n\n$\n\n480,518\n\n​\n\n$\n\n3,395,315\n\n​\n\n(1)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, 2025\n\n(2)Assumes share was issued and outstanding each day that was a record date for distributions during the period presented.\n\n(3)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, 2025\n\n​\n\nShare Repurchase Plan\n\nThe board of directors has adopted a share repurchase plan that may enable its 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 price at which the Company will repurchase shares is dependent on the amount of time the holder has owned the shares, and the then current value of the shares. There are several limitations on the Company’s ability to repurchase shares under the share repurchase plan, including, but not limited to, a limitation that during any calendar year, the maximum number of shares potentially eligible for repurchase can only be the number of shares that the Company could purchase with the amount of net proceeds from the sale of shares under the Company’s dividend reinvestment plan during the prior calendar year. The board of directors may, in its sole discretion, reject any request for repurchase and may, at any time and without stockholder approval, upon 10 business days’ written notice to the stockholders (i) amend, suspend or terminate its share repurchase plan and (ii) increase or decrease the funding available for the repurchase of shares pursuant to our share repurchase plan. The Company repurchased no shares during the years ended December 31, 2025 and 2024. As of December 31, 2025, all redemption proceeds had been paid. As of December 31, 2025, the Company had $370,138 available for eligible repurchases.\n\nUpdate to Offering Price and Share NAV\n\nThe Company’s board of directors approved a revised NAV of the Company’s assets as of December 31, 2022. As a result, the price per share of the Company’s common stock, $0.01 par value per share (each, a “Share”), in the Offering and the Share NAV were adjusted from $10.00 to $10.57 effective January 6, 2023. The issue price of the Common LP Unit and the Series T LP Unit of the Operating Partnership also increased to $10.57. The Offering price was determined by the 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 board of directors has not determined the NAV of the Company’s assets since December\n\nF-30\n\n[Table of Contents](#TOC)\n\n31, 2022. As a result, the current Share NAV and Offering price per Share may not reflect an accurate estimation of the Company’s enterprise value. The Company makes no representations, whether express or implied, as to the value of the Shares offered in the Offering. In the event the Offering price per Share is increased or decreased, the number of Shares subject to the Offering will be adjusted to reflect such change and the maximum offering amount will remain unchanged.\n\n**Non-Controlling Interests**\n\nAs of December 31, 2025, the Operating Partnership had seven classes of Limited Partner Units – 1) the Common LP Units, 2) the Series B LP Units, 3) the Series T LP Units, 4) the Series GO LP Units, 5) the Series GO II LP Units, 6) Series P Preferred Units, and 7) Series A Preferred Units. The Series B LP Units are issued to the Advisor and entitle the Advisor to receive annual distributions and an incentive distribution based on the net proceeds received from the sale of the Projects (as defined below).\n\nNon-Controlling Interest – Common LP Units\n\nOn December 3, 2021, the Operating Partnership commenced a private placement offering of its Common LP Units. As of December 31, 2025, 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 the Northbrook Property acquisition and El Paso Airport Property acquisition.\n\nNon-Controlling Interest – Series B LP Units\n\nUnder the Operating Partnership Agreement, the Advisor, as the Series B Limited Partner, will receive, from the Operating Partnership, distributions as follows: (a) for all years, an amount equal to 5.0% of the total of (i) the total distributions made to the Partners (other than the Series B Limited Partner) and (ii) the total distributions made to the Series B Limited Partner, after the Partners (other than the Series B Limited Partner) have received a 6.0% cumulative, but not compounded, return on their original capital contributions, and (b) for the year of liquidation or other cessation of the General Partner or the Partnership, an amount equal to 5.0% of the original capital contributions made by the Partners, after the Partners (other than the Series B Limited Partner) have received a return of their capital contributions plus a six percent (6%) cumulative, but not compounded return from all distributions.\n\nAs of December 31, 2025, the Operating Partnership has issued 1,000 Series B LP Units to the Advisor.\n\nNon-Controlling Interest – Series T LP Units\n\nThe Series T LP Units are expected to be issued to persons who contribute their property interests in certain Projects to the Partnership in exchange for Series T LP Units. The Series T LP Units will have allocations and distributions as 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. 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 of the Series T LP Units at the time of conversion. As of December 31, 2025, 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 years ended December 31, 2025 and 2024, the Company declared distributions of $0 and $48,263, respectively, for the Series T LP Units.\n\n*Conversion of Series T LP Units*\n\nDuring the year ended December 31, 2025, all remaining anniversary dates triggering conversion of the outstanding Series T LP Units under the Partnership Agreement elapsed. Upon application of the Series T Value formula to each outstanding series of T-Units, the General Partner determined that the cumulative deductions from the capitalized net operating income — including mortgage debt assumed, property improvement plan and capital expenditures, operating cash infused by the Operating Partnership, and the agreed-upon specified return — exceeded or equaled the capitalized value for all\n\nF-31\n\n[Table of Contents](#TOC)\n\noutstanding series. Accordingly, the Series T Value for all 5,073,506 outstanding Series T LP Units was determined to be zero, and no Common LP Units were issued upon conversion. The Series T LP Units were cancelled and extinguished upon conversion.\n\nThe elimination of the Series T LP Unit noncontrolling interest was accounted for as an equity transaction in accordance with ASC 810-10-45-23. Because the Company, as sole General Partner, retained its controlling financial interest in the Operating Partnership, the carrying amount of the Series T LP Unit noncontrolling interest of $45,475,938 was reclassified to additional paid-in capital within stockholders' equity. No gain or loss was recognized in the consolidated statement of operations. Following the conversion, no further allocations of net income or loss will be made to the Series T LP Unit noncontrolling interest.\n\nNon-Controlling Interest – Series GO LP Units\n\nThe holders of Series GO LP Units will not receive any distributions from the Operating Partnership until after they have held their Series GO LP Units for a period of 18 months. Thereafter, the Series GO Limited Partners will receive the same distributions payable to the holders of the Common LP Units and GP Units (together with the Series GO LP Units and Interval Units, the “Participating Partnership Units”), other than with respect to proceeds received upon the sale or exchange of a property which are not reinvested in additional properties.\n\nUpon the sale of all or substantially all of the GP Units held by LF REIT III or any sale, exchange or merger of LF REIT III or the Operating Partnership (each, a “Termination Event”), or with respect to proceeds received upon the sale or exchange of a property which are not reinvested in additional properties, distributions will be made between the Series GO LP Units and the other Participating Partnership Units as follows: (i) first, to the Participating Partnership Units in proportion to their Partnership Units until the GP Units (the Common LP Units and the Interval Units) have received 70% of their original capital contributions (determined on a grossed-up basis) reduced by any prior distributions received in connection with the sale of a property in which the sale proceeds are not reinvested in additional properties; (ii) second, to the Participating Partnership Units in proportion to their Partnership Units until each Participating Partnership Unit has received a Participating Amount ($1.00 for any period after December 31, 2020, $2.00 for any period after December 31, 2021 and $3.00 for any period after December 31, 2022, determined as a singular determination and not a cumulative determination); (iii) third, to the Participating Partnership Units (other than the Series GO LP Units) in proportion to their Partnership Units until the GP Units have received any remaining unreturned original capital contributions; (iv) fourth, to the Series GO Limited Partners in proportion to their Series GO LP Units until the amount distributed to the Series GO Limited Partners per Series GO LP Unit is equal to the amount distributed to the Participating Partnership Units per Participating Partnership Unit (other than the Series GO Limited Partners) pursuant to (iii); and (v) thereafter, to the Participating Partnership Units in proportion to their Participating Partnership Units.\n\nOn June 15, 2020, the Operating Partnership commenced a private offering of limited partnership units in the OP, designated as Series GO LP Units, with a maximum offering of $20,000,000, which could be increased to $30,000,000 in the sole discretion of LF REIT III 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. The Company’s board of directors terminated the GO Unit Offering as of February 14, 2022. The Company’s board of directors approved and ratified additional sales after February 14, 2022 in the GO Units Offering for sales which were pending as of that date. As of December 31, 2025, the Operating Partnership had issued and sold 3,124,503 Series GO LP Units and received aggregate proceeds of $21.5 million.\n\n​\n\nNon-Controlling Interest – Series GO II LP Units\n\nThe holders of Series GO II LP Units will not receive any distributions from the Operating Partnership until after they have held their Series GO II LP Units for a period of 18 months. Thereafter, the Series GO II Limited Partners will receive the same distributions payable to the holders of the Common LP Units, the Series GO LP Units and GP Units (together with the Series GO II LP Units and Interval Units, the “Participating Partnership Units”), other than with respect to\n\nF-32\n\n[Table of Contents](#TOC)\n\nproceeds received upon the sale or exchange of a property which are not reinvested in additional properties provided, however, that upon any event in which capital is distributed to the Participating Partnership Units, the Series GO II LP Units will only be distributed an amount equal to their positive Capital Account balances. Once the Series GO II LP Units have received income allocations of Net Income (including book-up income) such that their Capital Accounts are equal to the other Participating Partnership Units, distributions will be made in proportion to their Units.\n\nUpon the sale of all or substantially all of the GP Units held by LF REIT III or any sale, exchange or merger of LF REIT III or the Operating Partnership (each, a “Termination Event”), or with respect to proceeds received upon the sale or exchange of a property which are not reinvested in additional properties, distributions will be made between the Series GO LP Units and the other Participating Partnership Units (including the Series GO II LP Units) as follows: (i) first, to the Participating Partnership Units in proportion to their Partnership Units until the GP Units (the Common LP Units and the Interval Units) have received 70% of their original capital contributions (determined on a grossed-up basis) reduced by any prior distributions received in connection with the sale of a property in which the sale proceeds are not reinvested in additional properties; (ii) second, to the Participating Partnership Units in proportion to their Partnership Units until each Participating Partnership Unit has received a Participating Amount ($1.00 for any period after December 31, 2020, $2.00 for any period after December 31, 2021 and $3.00 for any period after December 31, 2022, determined as a singular determination and not a cumulative determination); (iii) third, to the Participating Partnership Units (other than the Series GO LP Units) in proportion to their Partnership Units until the GP Units have received any remaining unreturned original capital contributions; (iv) fourth, to the Series GO Limited Partners in proportion to their Series GO LP Units until the amount distributed to the Series GO Limited Partners per Series GO LP Unit is equal to the amount distributed to the Participating Partnership Units per Participating Partnership Unit (other than the Series GO Limited Partners) pursuant to (iii); and (v) thereafter, to the Participating Partnership Units in proportion to their Participating Partnership Units.****\n\nOn April 7, 2023, the Operating Partnership commenced a private offering of limited partnership units in the OP, designated as 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 purchase price of the Series GO II LP Units in the offering is equal to 75% of the Share NAV and, based on the current Share NAV, is $7.93 per Series GO II LP Unit. The Series GO II LP Units will be specially allocated all Net Income (including book up income) in proportion to the 25% issue price shortfall, until the positive Capital Account balance of each Series GO II LP Unit is equal to the Share NAV. As a result, the issuance of the Series GO II LP Units will be dilutive to the General Partner Units and therefore, to the shares of common stock of the Company. 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, the Company’s Board of Directors extended the term of the GO II Unit Offering to March 31, 2025. On March 24, 2025, the Company’s Board of Directors extended the term of the GO II Unit Offering to March 31, 2026. As of December 31, 2025, the Operating Partnership had issued and sold 895,520 Series GO II LP Units and received aggregate proceeds of $6.7 million.  \n\n*Non-Controlling Interest – Series A Units*\n\nOn December 24, 2024, the Company created a series of limited partnership units the OP designated as Series A Preferred Units, and may issue up to 40,000,000 Series A Preferred Units in accordance with the Partnership Agreement. Holders of the Series A Preferred Unit are entitled to receive distributions either in the form of cash distributions or in-kind distributions based on the terms outlined in the Partnership Agreement. The Series A Units will be redeemed by the Partnership on the occurrence of the earlier of the following: a) at the option of the OP, b) upon receiving proceeds from a refinancing or disposition from certain hotels as named or to be named in the Contribution Agreement, or c) in connection with a listing of LF REIT III’s shares of common stock on a national securities exchange, a liquidation event or approval for a strategic transaction. The Series A Preferred Unit holders are not permitted to take part in the management or control of the business of the Operating Partnership; however, there are certain protective provisions with regard to the Series A Preferred Units that could be impactful to the stature or preference of the Series A Preferred Unit holders as defined within the Partnership Agreement. No income or loss is allocated to the Series A Preferred Unit holders.\n\nF-33\n\n[Table of Contents](#TOC)\n\nThe Company has classified the Series A Preferred Units as permanent equity in accordance with ASC 480 since there are several conditions, all within the Company’s control, that could cause the Company to require mandatory redemption of the Series A Preferred Units.\n\nIn connection with the establishment of both the Series P Preferred Units and the Series A Preferred Units, there are special provisions added to the Partnership Agreement with regard to the Series P Preferred Units:\n\na) the first $1,250,000 of net proceeds received by the Partnership from the sales of Series P Preferred Units will be retained by the Partnership,\n\nb) remaining proceeds between $1,250,000 and $2,297,000 from the sales of Series P Preferred Units will be used to pay (i) accrued interest on the loans of the Fort Collins Property and the Courtyard Aurora Property through December 31, 2024 prior to refinancing those loans or (ii) redeem outstanding Series A Preferred Units in exchange for contribution of those loans pursuant to the Contribution Agreement\n\nc) remaining proceeds between $2,297,000 and $9,847,000 from the Sale of Series P Preferred Units will be retained by the Partnership\n\nd) remaining proceeds greater than $9,847,000 from the Sale of Series P Preferred Units: (i) until March 24, 2025, 50% of such additional net proceeds will be used to redeem the Series A Preferred Units and the remaining 50% will be retained by the Partnership, and (ii) after March 24, 2025, 75% of the additional proceeds will be used to redeem the Series A Preferred Units and the remaining 25% will be retained by the Partnership.\n\nConcurrently, the Company entered into the Contribution Agreement to restructure four of its loans (See Note 6 – Debt.) As of December 31, 2025, the Company issued 4,555,739 Series A Preferred Units amounting to $4,555,739. As of December 31, 2025, there were distributions of 488,330 Series A Preferred Units amounting to $488,330.\n\n12. COMMITMENTS AND CONTINGENCIES\n\n​\n\n**Legal Matters** — From time to time, the Company may become party to legal proceedings that arise in the ordinary course of its business. After consulting with legal counsel, management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company's results of operations, cash flows or financial condition, which would require accrual or disclosure of the contingency and possible range of loss, other than the matter described below.\n\n*El Paso HI Receivership* — In January 2026, a receiver was appointed over the Holiday Inn — El Paso property in connection with the default on the mortgage loan secured by that property. The Company is cooperating with the receiver and evaluating its options with respect to the property. See Note 14 \"Subsequent Events\" for further details regarding this matter.\n\n13. REPORTABLE SEGMENTS\n\n​\n\nAs of December 31, 2025, we have one operating segment, our consolidated hotel properties. Our CODM, who is our chief executive officer, evaluates our consolidated hotel properties primarily based on house profit when deciding how to allocate resources, in making other day-to-day operating decisions and evaluating our operating performance against other companies within our industry.\n\n​\n\nHouse Profit, presented herein, is calculated as revenues generated through hotel operations (room revenue and food & beverage revenue) less total segment expenses in connection with operating the hotels, which includes all department expenses incurred in connection with supporting the operations (i.e. franchise fees, management fees, sales and marketing and certain general and administrative expenses). The Company believes House Profit is useful to investors because it helps the Company and its investors evaluate the ongoing operating performance of the Company by removing the impact of its capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization). The Company further excludes the following items that are not reflective of its ongoing operating performance or incurred in\n\nF-34\n\n[Table of Contents](#TOC)\n\nthe normal course of business, and thus not utilized in the CODM’s analysis to allocate resources and assess operating performance of the Company’s business:\n\n​\n\n●gains or losses from sales of hotel properties\n\n●real estate related impairments\n\n●actual corporate-level expenses, which includes property taxes and insurance and other owner-level expenses and any acquisition expenses\n\n●other corporate income, including interest income.\n\n​\n\nThe following table presents our reportable segment revenues reconciled to our consolidated amounts, reportable segment expenses and House Profit reconciled to net loss:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**For the Years Ended December 31, **\n\n​\n\n**  ​ ​ ​**\n\n**2025**\n\n**  ​ ​ ​**\n\n**2024**\n\n**Revenues**\n\n​\n\n​\n\n  ​\n\n​\n\n​\n\n  ​\n\nRoom revenue\n\n​\n\n$\n\n60,553,580\n\n​\n\n$\n\n69,484,481\n\nOther revenue\n\n​\n\n \n\n3,946,211\n\n​\n\n \n\n4,761,914\n\n**Total segment revenue**\n\n​\n\n \n\n64,499,791\n\n​\n\n \n\n74,246,395\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Expenses**\n\n​\n\n \n\n  ​\n\n​\n\n \n\n  ​\n\nRoom Expense\n\n​\n\n \n\n15,415,350\n\n​\n\n \n\n17,272,363\n\nOther departmental and support expense\n\n​\n\n \n\n10,924,134\n\n​\n\n \n\n12,191,460\n\nFranchise fees\n\n​\n\n \n\n5,491,243\n\n​\n\n \n\n6,368,166\n\nManagement fees\n\n​\n\n \n\n1,902,344\n\n​\n\n \n\n2,323,728\n\nSales and marketing\n\n​\n\n \n\n4,526,134\n\n​\n\n \n\n4,823,461\n\nGeneral and Administrative\n\n​\n\n \n\n6,254,600\n\n​\n\n \n\n6,878,498\n\n**Total segment expenses**\n\n​\n\n \n\n44,513,805\n\n​\n\n \n\n49,857,676\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**House Profit**\n\n​\n\n \n\n19,985,986\n\n​\n\n \n\n24,388,719\n\nOther (income)\n\n​\n\n \n\n(82,102)\n\n​\n\n \n\n(84,428)\n\nProperty taxes and insurance\n\n​\n\n​\n\n6,363,252\n\n​\n\n​\n\n6,361,645\n\nCorporate general and administrative expense\n\n​\n\n​\n\n4,235,443\n\n​\n\n​\n\n5,146,975\n\nCorporate sales and marketing expense\n\n​\n\n​\n\n67,121\n\n​\n\n​\n\n62,572\n\nCorporate asset management fees\n\n​\n\n​\n\n2,232,285\n\n​\n\n​\n\n2,451,957\n\nAcquisition expense\n\n​\n\n​\n\n39,998\n\n​\n\n​\n\n34,353\n\nImpairment loss on assets held for sale\n\n​\n\n​\n\n10,055,803\n\n​\n\n​\n\n3,992,772\n\nOwner expenses\n\n​\n\n​\n\n3,506,952\n\n​\n\n​\n\n3,827,187\n\nDepreciation and amortization\n\n​\n\n​\n\n9,114,993\n\n​\n\n​\n\n10,583,112\n\nInterest expense\n\n​\n\n​\n\n19,622,508\n\n​\n\n​\n\n17,500,036\n\nIncome tax benefit\n\n​\n\n​\n\n(170,403)\n\n​\n\n​\n\n(210,060)\n\n(Gain) Loss from sale of hotel property\n\n​\n\n \n\n(591,880)\n\n​\n\n \n\n4,638,883\n\n**Net Loss**\n\n​\n\n$\n\n(34,407,984)\n\n​\n\n$\n\n(29,916,284)\n\n​\n\n​\n\n14. SUBSEQUENT EVENTS\n\n​\n\nMortgage Loan Modifications\n\n​\n\n*El Paso Airport Loan Modification*\n\n​\n\nIn January 2026, the Company entered into a Loan Modification Agreement with PCF IV NP El Paso, LLC, the successor lender to Western Alliance Bank, with respect to the mortgage loan secured by the Courtyard by Marriott - El Paso Airport (the \"El Paso Airport Loan\"). The loan had been assigned to the new lender in March 2025. Under the modification, the interest rate was amended to SOFR plus 4.50% (with a SOFR floor of 4.00%), monthly payments were converted to interest-only, and the financial covenants were waived. The Company incurred a modification fee and an exit fee, each of approximately $98,000. The Company is also required to fund an interest reserve equal to three months of debt service from excess property cash flow and is subject to Fund Liquidity Event provisions that require application of net proceeds\n\nF-35\n\n[Table of Contents](#TOC)\n\nfrom any disposition of Fund Assets toward the loan obligations. Failure to satisfy Fund Liquidity Event payment obligations constitutes full recourse to the Guarantor under the guaranty agreement.\n\n​\n\n*El Paso Receivership*\n\n​\n\nOn January 19, 2026, the District Court of El Paso County, Texas entered an Agreed Order Appointing Receiver in connection with the lawsuit filed by EPH Development Fund LLC against LF3 El Paso, LLC and LF3 El Paso TRS, LLC relating to the Holiday Inn - El Paso property. A receiver was appointed over the specific assets of the Borrower, including the hotel property located at 900 Sunland Park Drive, El Paso, Texas. Under the order, the Borrower was directed to deliver possession of the property, all cash collateral, accounts, records, contracts, and other assets to the Receiver, and is prohibited from collecting rents or proceeds or taking any actions that would adversely impact the value of the property. As of December 31, 2025, the Holiday Inn - El Paso property was classified as held for sale on the Company's consolidated balance sheet. The Company is evaluating the impact of the receivership on the carrying value and disposition of the property.\n\n​\n\n*Lubbock Expo Forbearance Agreement*\n\n​\n\nOn February 5, 2026, the Company entered into a Limited Forbearance Agreement (the \"Lubbock Expo Forbearance Agreement\") with K-Star Asset Management LLC, as Special Servicer and attorney-in-fact for Wells Fargo Bank, National Association, as Trustee, with respect to the mortgage loan secured by the Fairfield Inn & Suites - Lubbock (the \"Lubbock Fairfield Loan\"). The Lubbock Fairfield Loan had been transferred to special servicing in October 2025 following the Borrowers' failure to timely remit monthly debt service payments beginning in August 2025, among other noticed defaults. Under the Lubbock Expo Forbearance Agreement, the Lender has agreed to forbear from exercising certain remedies through the earlier of (a) March 31, 2026 if a final purchase and sale agreement is not executed by February 28, 2026, (b) April 30, 2026 if such agreement is executed by February 28, 2026, or (c) the occurrence of an incurable Forbearance Termination Event. As a condition of the Lubbock Expo Forbearance Agreement, the Borrowers paid a forbearance fee of approximately $85,000, outstanding special servicing fees, legal fees, and resumed monthly debt service payments at the default interest rate of 5.00%.\n\n​\n\nOn April 1, 2026, the Company entered into a First Amended Limited Forbearance Agreement (the \"Lubbock Expo Amended Forbearance Agreement\") with K-Star Asset Management LLC, as Special Servicer, with respect to the Lubbock Fairfield Loan. The Borrowers did not execute a final purchase and sale agreement by the February 28, 2026 deadline under the original Lubbock Expo Forbearance Agreement, which triggered an incurable Forbearance Termination Event as of March 31, 2026. Under the Lubbock Expo Amended Forbearance Agreement, the Lender has agreed to forbear from exercising remedies through the earlier of (a) June 30, 2026, (b) the occurrence of an incurable Forbearance Termination Event, or (c) the closing of a sale of the property satisfying the loan obligations in full. The Borrowers continue to remit monthly debt service payments at the default interest rate, and are required to pay an additional monthly forbearance fee of $15,000 during the forbearance period, provide bi-weekly liquidation status updates, and comply with cash management and operational reporting requirements. Special servicing fees continue to accrue.\n\n​\n\nNew Northbrook Loan\n\n​\n\nOn February 13, 2026, the Company, through its indirect wholly-owned subsidiaries LF3 Northbrook, LLC and LF3 Northbrook TRS, LLC (collectively, the \"Northbrook Borrowers\"), entered into a Business Loan Agreement and related promissory note with Town Center Bank (the \"Northbrook Loan\") in the principal amount of $2,250,000. The Northbrook Loan bears interest at a fixed rate of 6.75% per annum and matures on February 15, 2031, at which time the remaining principal balance will be due as a balloon payment. The loan is secured by the Sheraton Chicago Northbrook Hotel and related collateral, and is guaranteed by Norman H. Leslie pursuant to an unlimited personal guaranty. The Northbrook Borrowers are subject to customary affirmative and negative covenants, including a minimum 1.20x debt service coverage ratio and ongoing financial reporting requirements.\n\n​\n\nF-36\n\n[Table of Contents](#TOC)\n\nSale of Lakewood Property\n\n​\n\nOn March 19, 2026, the Company sold the Lakewood Property to an unaffiliated purchaser for $12,400,000 in cash. The mortgage loan secured by the Lakewood 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.\n\n​\n\nStatus of the Offering\n\n​\n\nAs 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 10,304,567 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.\n\nGO II Unit Offering\n\n​\n\nOn March 31, 2026, the GO II Unit Offering terminated in accordance with its terms. The Operating Partnership has issued and sold 901,827 Series Go II LP Units, resulting in the receipt of gross offering proceeds of $6.8 million as of the date of termination.\n\nEngagement of Financial Advisor\n\nOn April 24, 2026, the Company announced that a Special Committee of its Board of Directors, comprised solely of independent directors, engaged Piper Sandler & Co. as financial advisor to assist in the exploration and evaluation of potential strategic alternatives available to the Company. Faegre Drinker Biddle & Reath LLP is serving as legal counsel to the Special Committee. No timetable has been established, and there can be no assurance that the process will result in any particular transaction or strategic outcome.\n\n​\n\nF-37\n\n[Table of Contents](#TOC)\n\n**LODGING FUND REIT III, INC. -****SCHEDULE III**\n\n**Real Estate and Accumulated Depreciation**\n\n**As of December 31, 2025**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Costs**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Capitalized**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Subsequent to**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Initial Cost**\n\n​\n\n**Acquisition**\n\n​\n\n**Gross Amounts at End of Year**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n​\n\n**  ​ ​ ​**\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n​\n\n​\n\n**Building,**\n\n​\n\n**Building,**\n\n​\n\n​\n\n​\n\n**Building,**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Land and**\n\n​\n\n**Building**\n\n​\n\n**Building**\n\n​\n\n**Land and**\n\n​\n\n**Building**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Date**\n\n​\n\n**Number**\n\n​\n\n​\n\n​\n\n​\n\n**Land**\n\n​\n\n**Improvements**\n\n​\n\n**Improvements**\n\n​\n\n**Land**\n\n​\n\n**Improvements**\n\n​\n\n​\n\n​\n\n**Accumulated**\n\n​\n\n**Depreciable**\n\n**Description**\n\n​\n\n**Acquired**\n\n​\n\n**of Rooms**\n\n​\n\n**Encumbrances**\n\n​\n\n**Improvements**\n\n​\n\n**and FF&E**\n\n​\n\n**and FF&E**\n\n​\n\n**Improvements**\n\n​\n\n**and FF&E**\n\n​\n\n**Total**(1)\n\n​\n\n**Depreciation**\n\n​\n\n**Lives**\n\nHoliday Inn Express -\nCedar Rapids, IA\n\n​\n\nNov - 2018\n\n​\n\n83\n\n​\n\n$\n\n5,619,577\n\n​\n\n$\n\n1,536,966\n\n​\n\n$\n\n6,321,367\n\n​\n\n$\n\n1,009,320\n\n​\n\n$\n\n1,547,077\n\n​\n\n$\n\n7,330,687\n\n​\n\n$\n\n8,877,764\n\n​\n\n$\n\n(2,121,137)\n\n​\n\n3 - 40 yrs.\n\nHampton Inn -\nEagan, MN\n\n \n\nJun - 2019\n\n​\n\n122\n\n​\n\n​\n\n8,672,347\n\n \n\n​\n\n1,691,813\n\n​\n\n​\n\n12,536,520\n\n​\n\n​\n\n396,607\n\n​\n\n​\n\n1,691,813\n\n​\n\n​\n\n12,933,127\n\n​\n\n​\n\n14,624,940\n\n​\n\n​\n\n(3,297,532)\n\n​\n\n3 - 40 yrs.\n\nHome2 Suites -\nLubbock, TX\n\n  ​\n\nDec - 2019\n\n​\n\n100\n\n​\n\n​\n\n6,851,578\n\n​\n\n​\n\n803,229\n\n​\n\n​\n\n13,906,502\n\n​\n\n​\n\n2,651,119\n\n​\n\n​\n\n803,229\n\n​\n\n​\n\n16,557,621\n\n​\n\n​\n\n17,360,850\n\n​\n\n​\n\n(3,443,020)\n\n​\n\n3 - 40 yrs.\n\nFairfield Inn & Suites -\nLubbock, TX\n\n​\n\nJan - 2020\n\n​\n\n101\n\n​\n\n​\n\n8,639,616\n\n​\n\n​\n\n982,934\n\n​\n\n​\n\n15,261,162\n\n​\n\n​\n\n273,311\n\n​\n\n​\n\n982,934\n\n​\n\n​\n\n15,534,473\n\n​\n\n​\n\n16,517,407\n\n​\n\n​\n\n(3,782,916)\n\n​\n\n3 - 40 yrs.\n\nHomewood Suites -\nSouthaven, MS\n\n​\n\nFeb - 2020\n\n​\n\n99\n\n​\n\n​\n\n18,000,000\n\n​\n\n​\n\n1,593,232\n\n​\n\n​\n\n19,351,858\n\n​\n\n​\n\n351,636\n\n​\n\n​\n\n1,593,232\n\n​\n\n​\n\n19,703,494\n\n​\n\n​\n\n21,296,726\n\n​\n\n​\n\n(3,875,157)\n\n​\n\n3 - 40 yrs.\n\nCourtyard by Marriott -\nAurora, CO\n\n​\n\nFeb - 2021\n\n​\n\n141\n\n​\n\n​\n\n14,935,816\n\n​\n\n​\n\n4,400,098\n\n​\n\n​\n\n19,668,031\n\n​\n\n​\n\n403,329\n\n​\n\n​\n\n4,400,098\n\n​\n\n​\n\n20,071,360\n\n​\n\n​\n\n24,471,458\n\n​\n\n​\n\n(3,610,231)\n\n​\n\n3 - 40 yrs.\n\nHoliday Inn -\nEl Paso, TX\n\n​\n\nMay - 2021\n\n​\n\n175\n\n​\n\n​\n\n7,600,000\n\n​\n\n​\n\n1,747,553\n\n​\n\n​\n\n8,913,467\n\n​\n\n​\n\n3,899,280\n\n​\n\n​\n\n1,747,553\n\n​\n\n​\n\n12,812,747\n\n​\n\n​\n\n14,560,300\n\n​\n\n​\n\n(2,303,927)\n\n​\n\n3 - 40 yrs.\n\nHilton Garden Inn -\nHouston, TX\n\n​\n\nAug - 2021\n\n​\n\n182\n\n​\n\n​\n\n13,484,507\n\n​\n\n​\n\n3,168,376\n\n​\n\n​\n\n17,659,977\n\n​\n\n​\n\n5,103,522\n\n​\n\n​\n\n3,168,376\n\n​\n\n​\n\n22,763,499\n\n​\n\n​\n\n25,931,876\n\n​\n\n​\n\n(3,091,512)\n\n​\n\n3 - 40 yrs.\n\nSheraton Hotel -\nNorthbrook, IL\n\n​\n\nDec - 2021\n\n​\n\n160\n\n​\n\n​\n\n—\n\n​\n\n​\n\n2,856,747\n\n​\n\n​\n\n16,859,016\n\n​\n\n​\n\n167,866\n\n​\n\n​\n\n2,856,747\n\n​\n\n​\n\n17,026,882\n\n​\n\n​\n\n19,883,629\n\n​\n\n​\n\n(2,121,494)\n\n​\n\n3 - 40 yrs.\n\nCourtyard by Marriott -\nEl Paso, TX\n\n​\n\nFeb - 2022\n\n​\n\n90\n\n​\n\n​\n\n9,800,349\n\n​\n\n​\n\n1,856,428\n\n​\n\n​\n\n13,596,806\n\n​\n\n​\n\n269,789\n\n​\n\n​\n\n1,856,428\n\n​\n\n​\n\n13,866,595\n\n​\n\n​\n\n15,723,023\n\n​\n\n​\n\n(2,010,102)\n\n​\n\n3 - 40 yrs.\n\nFairfield Inn & Suites -\nLakewood, CO\n\n​\n\nMar - 2022\n\n​\n\n142\n\n​\n\n​\n\n16,896,801\n\n​\n\n​\n\n2,091,051\n\n​\n\n​\n\n17,571,066\n\n​\n\n​\n\n552,500\n\n​\n\n​\n\n2,091,051\n\n​\n\n​\n\n18,123,566\n\n​\n\n​\n\n20,214,617\n\n​\n\n​\n\n(2,476,608)\n\n​\n\n3 - 40 yrs.\n\nResidence Inn -\nFort Collins, Co\n\n​\n\nAug - 2022\n\n​\n\n113\n\n​\n\n​\n\n13,507,608\n\n​\n\n​\n\n2,402,288\n\n​\n\n​\n\n13,943,721\n\n​\n\n​\n\n3,138,605\n\n​\n\n​\n\n2,402,288\n\n​\n\n​\n\n17,082,326\n\n​\n\n​\n\n19,484,614\n\n​\n\n​\n\n(1,680,626)\n\n​\n\n3 - 40 yrs.\n\nHilton Garden Inn -\nEl Paso, TX\n\n​\n\nAug - 2022\n\n​\n\n153\n\n​\n\n​\n\n12,033,256\n\n​\n\n​\n\n4,862,172\n\n​\n\n​\n\n17,600,000\n\n​\n\n​\n\n149,813\n\n​\n\n​\n\n4,862,172\n\n​\n\n​\n\n17,749,813\n\n​\n\n​\n\n22,611,985\n\n​\n\n​\n\n(2,610,929)\n\n​\n\n3 - 40 yrs.\n\nHoliday Inn Express -\nWichita Property\n\n​\n\nDec - 2022\n\n​\n\n84\n\n​\n\n​\n\n5,589,430\n\n​\n\n​\n\n632,735\n\n​\n\n​\n\n7,001,575\n\n​\n\n​\n\n1,156,367\n\n​\n\n​\n\n632,735\n\n​\n\n​\n\n8,157,942\n\n​\n\n​\n\n8,790,677\n\n​\n\n​\n\n(773,807)\n\n​\n\n3 - 40 yrs.\n\n​\n\n​\n\n​\n\n​\n\n1,745\n\n​\n\n$\n\n141,630,885\n\n \n\n$\n\n30,625,622\n\n​\n\n$\n\n200,191,068\n\n​\n\n$\n\n19,523,064\n\n​\n\n$\n\n30,635,733\n\n​\n\n$\n\n219,714,132\n\n​\n\n$\n\n250,349,866\n\n​\n\n$\n\n(37,198,998)\n\n​\n\n​\n\n(1)The aggregate cost for federal income tax purposes is approximately $249.5 million at December 31, 2025 (unaudited).\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Investment in Real Estate:**\n\n​\n\n​\n\n​\n\n**2025**\n\n​\n\n**2024**\n\nBalance at beginning of period\n\n​\n\n​\n\n​\n\n$\n\n274,826,095\n\n​\n\n$\n\n314,816,929\n\nImprovements\n\n​\n\n​\n\n​\n\n​\n\n5,974,639\n\n​\n\n​\n\n4,171,700\n\nAssets held for sale\n\n​\n\n​\n\n​\n\n​\n\n(33,596,877)\n\n​\n\n​\n\n(23,316,095)\n\nImpairment\n\n​\n\n​\n\n​\n\n​\n\n(10,055,803)\n\n​\n\n​\n\n(3,992,772)\n\nSale of hotel property not held for sale prior year\n\n​\n\n​\n\n​\n\n​\n\n(29,959,634)\n\n​\n\n​\n\n(16,054,082)\n\nAsset write-offs\n\n​\n\n​\n\n​\n\n​\n\n(491,235)\n\n​\n\n​\n\n(799,585)\n\nBalance at end of period\n\n​\n\n​\n\n​\n\n$\n\n206,697,185\n\n​\n\n$\n\n274,826,095\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Accumulated Depreciation:**\n\n​\n\n​\n\n​\n\n**2025**\n\n​\n\n**2024**\n\nBalance at beginning of period\n\n​\n\n​\n\n​\n\n$\n\n32,853,050\n\n​\n\n$\n\n27,469,450\n\nDepreciation expense\n\n​\n\n​\n\n​\n\n​\n\n6,051,566\n\n​\n\n​\n\n10,121,972\n\nAssets held for sale\n\n​\n\n​\n\n​\n\n​\n\n(6,901,672)\n\n​\n\n​\n\n(2,059,078)\n\nSale of hotel property not held for sale prior year\n\n​\n\n​\n\n​\n\n​\n\n(3,487,243)\n\n​\n\n​\n\n(2,565,199)\n\nAsset write-offs\n\n​\n\n​\n\n​\n\n​\n\n(277,453)\n\n​\n\n​\n\n(114,095)\n\nBalance at end of period\n\n​\n\n​\n\n​\n\n$\n\n28,238,248\n\n​\n\n$\n\n32,853,050\n\n​\n\n​\n\n​\n\nF-38\n\n[Table of Contents](#TOC)\n\nSIGNATURES\n\nPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.\n\n​\n\n**LODGING FUND REIT III, INC.**\n\n​\n\n​\n\nDate: May 15, 2026\n\nBy:\n\n/s/ Norman H. Leslie\n\n​\n\n​\n\nNorman H. Leslie\n\n​\n\n​\n\nPresident, Chief Executive Officer, Secretary, Chief Investment Officer, Treasurer and Director\n\n​\n\n​\n\n(principal executive officer)\n\n​\n\nPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on the dates indicated.\n\n**Date**\n\n****​\n\n**Name and Title**\n\n​\n\n​\n\n​\n\nMay 15, 2026\n\n​\n\n/s/ Norman H. Leslie\n\n​\n\n​\n\nNorman H. Leslie, President, Chief Executive Officer, Secretary, Chief Investment Officer, Treasurer and Director\n\n(principal executive officer)\n\n​\n\n​\n\n​\n\nMay 15, 2026\n\n​\n\n/s/ Samuel C. Montgomery\n\n​\n\n​\n\nSamuel C. Montgomery, Chief Financial Officer and Director (principal financial officer and principal accounting officer)\n\n​\n\n​\n\n​\n\nMay 15, 2026\n\n​\n\n/s/ Corey R. Maple\n\n​\n\n​\n\nCorey R. Maple, Chairman of the Board and Director\n\n​\n\n​\n\n​\n\nMay 15, 2026\n\n​\n\n/s/ Jeffrey T. Leighton\n\n​\n\n​\n\nJeffrey T. Leighton, Director\n\n​\n\n​\n\n​\n\nMay 15, 2026\n\n​\n\n/s/ Perry Rynders\n\n​\n\n​\n\nPerry Rynders, Director\n\n​\n\n​\n\n​\n\n​\n\n​"}