{"url_path":"/sec/cik-0001745032/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.","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":13916,"has_tables":true,"body_markdown":"Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.\n\n*A discussion regarding our financial condition and results of operations for year-end 2024 compared to year-end 2023 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the SEC on April 28, 2025 (“2024 Form 10-K”)*\n\nAs used herein, the terms “we,” “our,” “us” and “the Company” refer to Lodging Fund REIT III, Inc., a Maryland corporation, Lodging Fund REIT III OP, LP, a Delaware limited partnership, which we refer to as the “Operating Partnership,” Lodging Fund REIT III TRS, Inc., a Delaware corporation, which we refer to as the “Master TRS” and their subsidiaries, except where the context otherwise requires. The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of the Company and the notes thereto.\n\n47\n\n[Table of Contents](#TOC)\n\nOverview\n\nWe were formed on April 9, 2018 as a Maryland corporation for the primary purpose of acquiring a diversified portfolio of hotel properties (the “Projects”) located primarily in America’s Heartland, which we define as the geographic area from North Dakota to Texas and the Appalachian Mountains to the Rocky Mountains. We have elected to be taxed as a real estate investment trust, or REIT, beginning with the taxable year ended December 31, 2018. We conduct substantially all of our business and own substantially all real estate investments through the Operating Partnership. We are the sole general partner of the Operating Partnership. We and the Operating Partnership are advised by the Advisor pursuant to an advisory agreement, as amended, under which the Advisor performs advisory services regarding acquisition, financing and disposition of the Projects and origination of any loans, and is responsible for managing, operating and maintaining the Projects and day-to-day management of the Company. The Advisor may, in its sole discretion, perform these duties through one or more affiliates. Through February 2025, we have engaged National Hospitality Services (“NHS”) to manage nine of the Projects acquired as of that date; on February 10, 2025, the Company terminated the contract with NHS and entered into hotel management agreements with Hotel Equities Group, LLC, a third-party property management agency. We have engaged other third-party property management companies with the oversight and property management of the remaining properties within the portfolio. NHS is wholly-owned by Norman Leslie, a director and executive officer of the Company and a principal of the Advisor. The Advisor has no direct employees. The employees of the Sponsor, an affiliate of the Advisor, provide services to the Company related to the negotiations of property acquisitions and financing, asset management, accounting, legal, investor relations, and all other administrative services.\n\nWe have invested and continue to invest primarily in 80 to 200 room limited service, select-service, full-service and extended stay hotel properties with strong mid-market brands in America’s Heartland. As of December 31, 2025, we consolidated 14 hotel properties, consisting of 13 hotel properties owned by us and an equity and profits interest in the parent of the entity which holds the leasehold interest in one hotel property, with an aggregate of 1,745 rooms located in 8 states. See Part I, Item 1, “Business” of this Annual Report on Form 10-K for more details on our investment objectives and strategy.\n\nWe have raised capital through several private offerings conducted by the Company and the Operating Partnership described below.\n\nWe are currently conducting an offering (the “Offering”) of up to $150,000,000 in shares of our common stock under a private placement to qualified purchasers who meet the definition of “accredited investors,” as provided in Regulation D of the Securities Act of 1933, as amended (the “Securities Act”). The Offering commenced on June 1, 2018 and will continue until the earlier of (i) the date when the maximum offering amount is sold, (ii) May 31, 2025, which may be extended by our board of directors in its sole discretion, or (iii) a decision by the Company to terminate the Offering. On March 24, 2025, our board of directors extended the term of the Offering to May 31, 2026. As of December 31, 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. After deductions for payments of selling commissions, marketing and diligence allowances, other wholesale selling costs and expenses, we received net offering proceeds of approximately $83.6 million. The net offering proceeds have been used principally to fund property acquisitions and pay distributions and debt service obligations. During the year ended December 31, 2025, we repurchased no shares of our common stock. No public market exists for the shares of our common stock, and none is expected to develop.\n\nOn June 15, 2020, the Operating Partnership commenced a private offering of limited partnership units in the Operating Partnership, designated as Series GO LP Units, with a maximum offering of $20,000,000, which could be increased to $30,000,000 in our sole discretion as the General Partner of the Operating Partnership (the “GO Unit Offering”) to accredited investors only, pursuant to a confidential private placement memorandum exempt from registration under the Securities Act of 1933, as amended. The Series GO LP Units were being offered until the earlier of (i) the sale of $20,000,000 in Series GO LP Units (which could be increased to $30,000,000 in the Company’s sole discretion), (ii) June 14, 2022 or (iii) the Operating Partnership terminates the GO Unit Offering at an earlier date in its sole discretion. Our board of directors terminated the GO Unit Offering as of February 14, 2022. Our board of directors approved and ratified additional sales after February 14, 2022 in the GO Unit Offering for sales which were pending as of that date. As of December 31, 2025, the Operating Partnership had issued and sold 3,124,503 Series GO LP Units and received aggregate proceeds of $21.5 million. After deductions for payments of selling commissions, marketing and diligence allowances,\n\n48\n\n[Table of Contents](#TOC)\n\nother wholesale selling costs and expenses, and other offering expenses, we received net offering proceeds of approximately $19.4 million.\n\n​\n\nThe Operating Partnership may issue Series T LP Units or Common LP Units from time to time to persons who contribute direct or indirect interests in real estate to the Operating Partnership. The Series T LP Units will have allocations and distributions that are dictated by the Partnership Agreement of the Operating Partnership and the applicable contribution agreement for the real estate. Certain Series T LP Units may have different allocations and distributions than other Series T LP Units. The amount of the allocations and distributions will be determined by the General Partner in its sole discretion at the time of issuance of the Series T LP Units and any future distributions are dependent on the financial performance of the contributed real estate. The Series T LP Units are eligible for conversion into Common LP Units beginning 24 or 36 months, or longer in some instances, after their issuance and will automatically convert into Common LP Units upon a Termination Event as described in the Partnership Agreement of the Operating Partnership. The conversion of Series T LP Units into Common LP Units may vary with each issuance and is generally based on a formula that applies an applicable capitalization rate to the then current trailing twelve months net operating income of the hotel property less the loan balance outstanding as of the contribution date as assumed by the Operating Partnership, and less other amounts incurred by the Operating Partnership including but not limited to certain closing costs, loan assumption fees and defeasance costs, Property Improvement Plan (“PIP”) and capital expenditures, operating cash infused by the Operating Partnership, and any shortfall of certain minimum cumulative investment yield. There is no guarantee that the future financial performance of the contributed hotel property will be sufficient to result in the issuance of Common LP Units resulting from the application of the conversion formula applicable to the issuance Series T LP Units. As of December 31, 2025, the Company had issued an aggregate of 5,073,506 Series T LP Units and 612,100 Common LP Units in connection with such property contributions.\n\n​\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 property contributions.\n\n​\n\nOn April 7, 2023, the Operating Partnership commenced a private offering of the Series GO II LP Units, with a maximum offering of $30,000,000, which could be increased to $60,000,000 in the sole discretion of the Company as the General Partner of the Operating Partnership, (the “GO II Unit Offering”) to accredited investors only, pursuant to a confidential private placement memorandum exempt from registration under the Securities Act of 1933, as amended. The Series GO II LP Units are being offered until the earlier of (i) the sale of $30,000,000 in Series GO II LP Units (which could be increased to $60,000,000 in the Company’s sole discretion), (ii) March 31, 2024, which date may be extended for two 1-year extensions until March 31, 2026 in the sole discretion of the Operating Partnership or (iii) the Operating Partnership terminates the GO II Unit Offering at an earlier date in its sole discretion. On April 17, 2024, our board of directors extended the term of the GO II Unit Offering to March 31, 2025. On March 24, 2025, our board of directors extended the term of the GO II Unit Offering to March 31, 2026. As of December 31, 2025, the Operating Partnership had issued and sold 895,520 Series GO II LP Units and received gross aggregate proceeds of $6.7 million.\n\n​\n\nOn December 24, 2024, the Operating Partnership commenced a private offering for the purchase of up to $50,000,000 (which may be increased to $75,000,000 in the sole discretion of the Company) in Series P Preferred Units at a purchase price equal to $10,000 per Series P Preferred Unit. The first $1,250,000 of net proceeds received by the Operating Partnership from the sale of the Series P Preferred Units shall be retained by the Operating Partnership. If the Operating Partnership receives more than $1,250,000 of net proceeds from the sale of the Series P Preferred Units, the next $1,047,000 of net proceeds received by the Operating Partnership from the sale of the Series P Preferred Units shall be used to (i) pay accrued interest on the Fort Collins Loans and the Courtyard Aurora Loan through December 31, 2024 at or prior to the time of refinancing such loans or (ii) after the time of such refinancing, redeem outstanding Series A Preferred Units issued in exchange for the contribution of such loans. If the Operating Partnership receives more than $2,297,000 of net proceeds from the sale of the Series P Preferred Units, the next $7,550,000 of net proceeds received by the Operating Partnership from the sale of Series P Preferred Units shall be retained by the Operating Partnership. If the Operating Partnership receives more than $9,847,000 of net proceeds from the sale of the Series P Preferred Units, (A) until March 24, 2025, 50% of such additional net proceeds received by the Operating Partnership from the sale of the Series P Preferred Units shall be used to redeem the Series A Preferred Units and the remaining 50% shall be retained by the Operating Partnership, and (B) from and after March 24, 2025, 75% of such additional net proceeds received by the\n\n49\n\n[Table of Contents](#TOC)\n\nOperating Partnership from the sale of the Series P Preferred Units shall be used to redeem the Series A Preferred Units and the remaining 25% shall be retained by the Operating Partnership. As of December 31, 2025, the Operating Partnership has issued and sold 155 Series P Preferred Units, resulting in the receipt of gross offering proceeds of $1.6 million as of the date of this filing.\n\nOn December 24, 2024, the Operating Partnership entered into an amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership to establish the terms of a new limited partner unit designated as Series A Preferred Units. Concurrently, the Company entered a loan contribution agreement (the “Contribution Agreement”) to restructure four of its loans with Access Point Financial, LLC (the “Access Point Lender”) – 1) the mortgage loan secured by the Sheraton – Northbrook (“Sheraton Northbrook Loan”) with unpaid principal balance of approximately $4.0 million, 2) the loans secured by the Residence Inn - Fort Collins Loan (“Fort Collins Loans”) with collective unpaid principal balance of approximately $13.0 million, 3) the mortgage loan secured by the Courtyard by Marriott – Aurora (“Courtyard Aurora Loan”) with unpaid principal balance of approximately $14.9 million. With respect to the Sheraton Northbrook Loan, the Access Point Lender received 4,067,409 Series A Preferred Units in exchange for all of the remaining unpaid principal and interest on the Sheraton Northbrook Loan. With respect to the Fort Collins Loans and the Courtyard Aurora Loan, the Company is required to refinance each such loan within 90 days of the date of the Contribution Agreement, and to the extent there is remaining unpaid principal and interest on such loans after such refinancing, the Operating Partnership is required to enter into a contribution agreement with the Access Point Lender through which the Access Point Lender will receive Series A Preferred Units in exchange for all of such remaining unpaid principal and interest.\n\nSignificant 2025 Events\n\n​\n\n*Sale of Charlotte Property and Pineville HGI Property*\n\n​\n\nOn May 14, 2025, we 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*Sale of Fargo Property*\n\n​\n\nOn December 17, 2025, we 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 subsequently converted into a promissory note with Arcade Fargo LLC bearing interest at 16.0% per annum, with monthly principal and interest payments maturing on January 1, 2027.\n\n​\n\n*Sale of Prattville Property*\n\n​\n\nOn December 30, 2025, we 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*Conversion and Elimination of Series T LP Units*\n\nDuring the fourth quarter of 2025, all remaining conversion anniversary dates for the outstanding Series T LP Units elapsed. Upon application of the contractual conversion formula, the General Partner determined that none of the 5,073,506 outstanding Series T LP Units qualified for any value, and accordingly zero Common LP Units were issued upon conversion. The carrying amount of the Series T LP Unit noncontrolling interest of $45.5 million was reclassified\n\n50\n\n[Table of Contents](#TOC)\n\nto additional paid-in capital within stockholders' equity. This reclassification had no impact on total equity, net loss, or cash flows.\n\n*No Acquisitions*\n\n​\n\nDuring the year ended December 31, 2025, we acquired no hotel properties.\n\n​\n\nSignificant 2024 Events\n\n​\n\n*Exit Strategy*\n\n​\n\nOn May 7, 2024, our board of directors authorized management to pursue an exit strategy and position the Company for a sale or merger of the Company in 2025, provided that the economic environment is conducive to such a transaction, and to prepare the Company’s portfolio of hotel properties for a transaction through strategic acquisitions and dispositions with the objective of maximizing profitability at the hotel property level. There can be no assurances that we will achieve an exit strategy within the time period and in the manner anticipated. The process of exploring strategic alternatives and marketing our assets could be time consuming and disruptive to our business operations and could divert management’s attention from our business, and we could incur substantial expenses associated with identifying and evaluating potential transactions. Further, any potential transaction would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction with us and the availability of financing to potential buyers on favorable terms. There can be no assurance that we will successfully implement our strategy, or that any potential transaction or other strategic alternative will result in stockholder liquidity or provide a return to stockholders that equals or exceeds our estimated value per share.\n\n​\n\n*Sale 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.\n\n*No Acquisitions*\n\n​\n\nDuring the year ended December 31, 2024, we acquired no hotel properties.\n\n​\n\n​\n\n**Key Indicators of Operating Performance**\n\nIn evaluating financial condition and operating performance, important indicators on which we focus are revenue measurements, such as occupancy, ADR and RevPAR, and expenses, such as property operations expenses, general and administrative expenses and other expenses described below. Occupancy is the total number of rooms occupied for the period divided by the total number of available rooms for the period. ADR is equal to the total gross room revenue divided by the total number of rooms rented for the period. RevPAR is equal to the total gross room revenue divided by the total number of available rooms for the period.\n\nMarket Outlook\n\nThe U.S. hotel industry experienced a challenging 2025, with full-year occupancy and RevPAR declining year over year for the first time since 2020. According to CoStar, national occupancy fell 1.2% year over year to 62.3%, while RevPAR declined 0.3% to $100.02. ADR rose modestly at 0.9% to $160.54, but rate growth remained below the rate of inflation, putting additional pressure on operating margins.\n\n​\n\nPerformance was uneven across hotel segments throughout the year. Luxury and upper-upscale properties outperformed, while select-service and economy hotels faced continued downward pressure on ADR and occupancy. This bifurcation\n\n51\n\n[Table of Contents](#TOC)\n\nreflects broader macroeconomic conditions, as economic uncertainty disproportionately impacted lower-income households and reduced discretionary travel spending. ADR growth in midscale and economy segments continued to lag inflation, squeezing profit margins even as operating costs rose.\n\n​\n\nMultiple headwinds contributed to the industry's underperformance in 2025. Rising operating expenses, including labor, insurance, and food and beverage costs, pressured margins throughout the year. Job market softening, policy uncertainty, and tariff-related costs weighed on consumer spending. The STR/Tourism Economics forecast was downgraded multiple times during the year, with the final November 2025 revision projecting full-year RevPAR to decline 0.4%, reflecting what STR President Amanda Hite characterized as an environment where \"unemployment and prices continue to rise\" and \"ADR is growing well below the rate of inflation.\"\n\n​\n\nReduced federal government travel activity and government workforce reductions created additional uncertainty for properties in markets with significant government-related demand, including certain of our Heartland markets. Declining international inbound visitation, particularly from Canada, further constrained demand.\n\n​\n\nThe Company's portfolio was not immune to these trends. For the year ended December 31, 2025, total room revenue declined to $60.6 million from $69.5 million in 2024. While the sale of four hotel properties during the year contributed to this decrease, same-property performance also reflected the broader industry softness. Routine shareholder distributions have been suspended since September 2024, and the Company continues to evaluate distribution capacity in light of liquidity, cash flow, and strategic capital allocation priorities.\n\n​\n\nThe outlook for 2026 remains cautious. The February 2026 STR/Tourism Economics forecast projects full-year RevPAR growth of just 0.6%, characterizing 2025's decline as the first non-recessionary RevPAR decline ever recorded in the U.S. hotel industry. Select-service and economy hotels are expected to continue facing flat to slightly negative RevPAR, while improvement is projected to be concentrated in upper-tier segments. The forecast noted that the same headwind pressures of broad economic uncertainty, geopolitical instability, government cutbacks, and rising domestic tensions persist into early 2026.\n\n​\n\nEvolving governmental policies may also adversely impact our financial condition and results of operations, specifically with the uncertainty surrounding tariffs and their potential material impact on operating costs and consumer travel behavior. Any increase in inflation could have an adverse impact on our expenses, which could increase at a rate higher than revenue. Additionally, elevated inflation could cause increases in variable interest rates, further impacting our debt service obligations. Continued improvement in our operating results will be dependent on moderating inflation and interest rates, stabilization of government policy, and sustained leisure travel demand across our Heartland markets.\n\n​\n\nAdditionally, if in the future there is a pandemic, epidemic, or outbreak of another highly infectious or contagious disease or other health concern affecting states or regions in which we operate, we and our properties may be subject to similar risks and uncertainties as posed by COVID-19.\n\n​\n\n**Liquidity and Capital Resources**\n\nOverview\n\nOur short-term liquidity requirements consist primarily of funds necessary to pay our scheduled debt service, operating expenses, including payments to our Advisor and property managers, capital expenditures directly associated with our hotels, distributions to our stockholders and expenses related to implementing our exit strategy, to the extent market conditions are favorable to pursue such a strategy in the near-term. Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional hotels, renovations, and other capital expenditures that need to be made periodically to our hotels, scheduled debt payments, debt maturities, operating expenses, including payments to our Advisor and property managers, making distributions to our stockholders and continued expenses related to implementing our exit strategy if such implementation is delayed. We expect to meet our long-term liquidity requirements through various sources of capital, including cash provided by operations, borrowings, issuances of additional equity, including OP units, and proceeds from property dispositions. Lenders in connection with several recent refinancings and extensions of debt obligations have required increased interest rates, increasing our debt service obligations. Our interest\n\n52\n\n[Table of Contents](#TOC)\n\nexpense could increase in the future as a result of these recent refinancings and extensions and as we continue to refinance our maturing debt. Our ability to incur additional debt is dependent upon a number of factors, including the state of the credit markets, our degree of leverage, the value of our unencumbered assets and borrowing restrictions imposed by existing lenders. Our ability to raise capital through the issuance of additional equity is also dependent on a number of factors including the current state of the capital markets, investor sentiment and intended use of proceeds. We may need to raise additional capital if we identify acquisition opportunities that meet our investment objectives and require liquidity in excess of existing cash balances. Our ability to raise funds through the issuance of equity securities depends on, among other things, general market conditions for hotel companies and REITs and market perceptions about us. The distribution rate for distributions declared during 2023 was equal to an annualized rate of 7.00% per share based on our initial offering price of $10.00. In an effort to conserve cash, our board of directors reduced the distribution rates for distributions beginning in April 2024 to annualized rates ranging from 3.50% to 5.00% per share based on our initial offering price of $10.00. Our board of directors will determine whether to authorize and declare distributions in such amounts or if at all based on our financial conditions and such other factors as our board of directors deems relevant.\n\n​\n\nAs of December 31, 2025, the Company has incurred recurring net losses, used cash in operating activities, and has several debt obligations that have matured or are approaching maturity for which extensions are being negotiated. In addition, the El Paso HI Property is subject to a receivership proceeding (see Note 14). Management has evaluated these conditions and believes that the Company's planned property dispositions pursuant to its exit strategy, combined with ongoing negotiations with lenders to extend or refinance near-term maturities and available proceeds from its securities offerings, provide sufficient liquidity to meet its obligations as they come due for at least the next twelve months from the date of issuance of these financial statements. However, there can be no assurance that the Company will be successful in completing planned dispositions or obtaining extensions or refinancings on acceptable terms.\n\n​\n\nWe are dependent upon the net proceeds from our Offering and offerings of our Operating Partnership to conduct our proposed operations. The Offering will continue until the earlier of (i) the date when the maximum offering amount is sold, (ii) May 31, 2025, which may be extended by our board of directors in its sole discretion, or (iii) a decision by the Company to terminate the Offering. On March 24, 2025, our board of directors extended the term of the Offering to May 31, 2026. We had also used the net proceeds from the GO Unit Offering to conduct our operations. Our board of directors terminated the GO Unit Offering as of February 14, 2022. Our board of directors approved and ratified additional sales after February 14, 2022 in the GO Unit Offering for sales which were pending as of that date. We intend to obtain the capital required to make real estate and real estate-related investments and conduct our operations from the proceeds of our Offering, GO II Unit Offering and Series P Preferred Unit Offering, from secured or unsecured financings from banks and other lenders and from any undistributed funds from our operations. As of December 31, 2025, we had raised approximately $100.8 million in gross offering proceeds from the sale of shares of our common stock in the Offering, approximately $21.5 million in gross offering proceeds from the sale of the Series GO LP Units in our GO Unit Offering, approximately $6.7 million in gross offering proceeds from the sale of the Series GO II LP Units in our GO II Unit Offering and approximately $1.6 million in gross offering proceeds from the sale of the Series P Preferred Units in our Series P Preferred Unit Offering. If we are unable to raise substantial funds in the Offering and the Operating Partnership offerings, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and the value of an investment in us will fluctuate more significantly with the performance of the specific assets we acquire. There may be a delay between the sale of shares of our common stock and units and our purchase of assets, which could result in a delay in the benefits to our stockholders, if any, of returns generated from our investment operations. Further, we will have certain fixed operating expenses regardless of whether we are able to raise substantial funds in the Offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and cash flow and limiting our ability to make distributions to our stockholders.\n\nAs of December 31, 2025, we consolidated fourteen hotel properties, consisting of thirteen hotel properties owned by us and an equity and profits interest in the parent of the entity which holds a leasehold interest in one hotel property. We acquired these investments with the proceeds from the sale of our common stock in the Offering, proceeds from the GO Unit Offering and debt financing and, for all but one of the properties acquired in 2022 and the equity and profits interest acquired in 2022, the issuance of Series T LP Units to the contributor as part of the consideration. Operating cash needs during the year ended December 31, 2025 were met through cash flow generated by these real estate investments and with proceeds from our Offering, the GO Unit Offering, the GO II Unit Offering, and the Series P Preferred Unit Offering.\n\n53\n\n[Table of Contents](#TOC)\n\nOur investments in real estate generate cash flow in the form of hotel room rentals and guest expenditures, which are reduced by operating expenditures, debt service payments and corporate general and administrative expenses. Each of our current properties is owned and future properties will be owned by a direct special purpose entity subsidiary of the Operating Partnership, which leases the properties to direct special purpose entity subsidiaries of the Master TRS, referred to as “TRS Lessees.” The TRS Lessees are or will be required to make rent payments to the owners of the properties pursuant to the lease agreements relating to each property. Such TRS Lessees’ ability to make rent payments to the owner subsidiaries and our liquidity, including our ability to make distributions to our stockholders, are dependent upon the TRS Lessees ability to generate cash flow from the operations of the hotel properties. The TRS Lessees are dependent upon the management companies with whom they have entered or will enter into management agreements with to operate the hotel properties.\n\nCash flow from operations from real estate investments will be primarily dependent upon the occupancy level and average daily rate, or “ADR”, of our portfolio, and how well we manage our expenditures.\n\nWe anticipate that our aggregate loan-to-value ratio will be between 35% and 65%, however, there can be no assurance that we will achieve this ratio. We target a loan-to-value ratio for the Projects of between 35% and 70%, based on the purchase price of the Projects, however, we may obtain financing that is less than or higher than such loan-to-value ratio for an individual Project at the discretion of the board of directors. Though this is our estimated leverage, our charter does not limit us from incurring debt in excess of this amount. As of December 31, 2025, our aggregate loan-to-value ratio, based on the aggregate purchase price of the Projects, was approximately 56%.\n\nIn addition to making investments in accordance with our investment objectives and potential expenditures in connection with the implementation of our exit strategy, we expect to use capital resources to make certain payments to the Advisor and its affiliates and NHS. These payments include the various fees and expenses to be paid to the Advisor and its affiliates in connection with the selection, acquisition and management of Projects, as well as reimbursement of certain organization and other offering expenses described below. The Advisor earns a one-time acquisition fee of up to 1.4% of the hotel purchase price including funds allocated for any property improvement plan (“PIP”) at the time of each hotel property acquisition, a financing fee of up to 1.4% of the hotel purchase price including funds allocated for any PIP at the time of closing the initial financing, and an annual asset management fee of up to 0.75% of the gross assets of the Company, which is payable on a monthly basis. The Advisor may also be paid a refinancing fee of up to 0.75% of the principal amount of any refinancing at the time of closing the refinancing. The Advisor may also be paid a disposition fee equal to between 0.0% and 4.0% of the hotel sales price, payable at the closing of the disposition, which disposition fee in connection with a sale of all or substantially all of the Company’s assets, merger or similar transaction, shall be equal to between 0.0% and 4.0% of the gross consideration received (grossed up for liabilities of the Company), with the percentage dependent on the total return per share and timing of such transaction, payable at the closing of such sale, merger or transaction. The Advisor may also be paid real estate commissions of up to 3.0% of the hotel purchase price in connection with the sale of a hotel property in which the Advisor or its affiliates provided substantial services, but in no event greater than one-half of the total commissions paid with respect to such property if a commission is paid to a third-party as well as the Advisor, and in no event will total commissions exceed 5.0% of the hotel sales price. Certain affiliates of the Advisor may receive an annual guarantee fee equal to 1.0% of the guaranty amount, paid on a monthly basis, for debt obligations of the hotel properties personally guaranteed by such affiliates. The Advisor may earn an annual subordinated performance fee equal to 20% of the distributions after the common stockholders and Operating Partnership limited partners (other than the Series B LP Unit holders) have received a 6% cumulative, but not compounded, return per annum. Per the terms of the Operating Partnership’s operating agreement, the Advisor receives distributions from the Operating Partnership in connection with their ownership of non-voting Series B LP Units. The Advisor’s ownership of Series B LP Units is presented as non-controlling interest on the accompanying consolidated financial statements.\n\nThe Advisor and its affiliates may be reimbursed by us for certain organization and offering expenses in connection with the Offering, the GO Unit Offering and the GO II Unit Offering, including legal, printing, marketing and other offering-related costs and expenses. Following the termination of the Offering, the Advisor will reimburse us for any such amounts incurred by us in excess of 15% of the gross proceeds of the Offering. In addition, we may pay directly or reimburse the Advisor and its affiliates for certain costs incurred in connection with its provision of services to us, including certain acquisition costs, financing costs, and sales and marketing costs, as well as an allocable share of general and administrative overhead costs. All reimbursements are paid to the Advisor and its affiliates at cost.\n\n54\n\n[Table of Contents](#TOC)\n\nThrough February 10, 2025, NHS earned a monthly base management fee for property management services, including overseeing the day-to-day operations of the nine hotel properties for which it served as the property manager, in an amount up to 4% of gross revenue, plus additional fees and expense reimbursements. Effective as of February 10, 2025, all of the NHS management agreements have been terminated and Hotel Equities, LLC (“Hotel Equities”), a third-party management company, now manages those properties. The Company did not incur any material early termination penalties in connection with such terminations.\n\nPursuant to the Agreements, Hotel Equities will receive a management fee equal to 3.00% of gross revenues of the Properties. Hotel Equities will also receive an accounting services fee of $2,500 per month, a revenue management fee of $2,000 per month, and a technology fee of $1,000 per month for accounting, data intelligence and budget forecast system costs, each with annual escalations of 3% or as set forth in the hotel operating budget. Hotel Equities will also receive a quarterly incentive fee equal to 0.45% of gross revenues of each of the Properties to the extent certain key performance indicators are achieved with respect to such quarter for such Property. Hotel Equities will also be reimbursed for its out-of-pocket expenses incurred in accordance with the hotel operating budget that are directly related to the performance of the hotel management functions. Each Agreement has a five-year initial term, which will be automatically renewed for additional 3-year terms unless earlier terminated by the parties. Except for certain circumstances described in the Agreement or otherwise agreed to by the parties, if Hotel Equities is not retained by the new property owner after a sale of the Property, Hotel Equities is entitled to an off-boarding fee equal to the management fees paid during the 12-month period immediately preceding the date of sale, subject to a 10% reduction following each 12-month period following the effective date of the Agreement. Hotel Equities is also entitled to a termination fee if Hotel Equities terminates the Agreement due to the Company failing to cure certain defaults under the Agreement or if the Company terminates the Agreement other than for cause, which fee is equal to the trailing 12 months of management fees paid to Hotel Equities immediately preceding the date of termination. Further, the Company is required to pay Hotel Equities an annual portfolio incentive fee of 15% of the combined gross operating profit for the Properties which is in excess of the budgeted gross operating profit for such calendar year, provided that total annual management fees, quarterly incentive fees, and portfolio incentive fees shall not exceed 4.5% of the total gross revenue for the calendar year.\n\nOur other hotel properties are managed by Vista Host Inc., Interstate Management Company, LLC (“Aimbridge”) and KAJ Hospitality Inc. These management companies earn a base management fee in an amount between 2.0% and 3.0% of gross revenue, plus monthly accounting fees and in some cases a monthly fee for customized accounting services, revenue management and digital marketing. They also may earn an incentive management fee if certain performance metrics are achieved. We also reimburse the management companies for certain costs of operating the hotel properties on our behalf. All reimbursements are paid to such management companies at cost.\n\nOne Rep, a related party, provides construction oversight, project management, and other related services to the Company. For the services provided, One Rep is paid a construction management fee equal to 6% or 7% of the total project costs. The Company also reimburses One Rep for certain costs incurred on behalf of the Company, and all reimbursements are paid to One Rep at cost.\n\n​\n\nThe franchise agreements for certain of our hotels require that we provide property improvement plans to cover, among other things, replacing and repairing furniture, fixtures and equipment at our hotels and other routine capital expenditures. As of December 31, 2025, we set aside $3.9 million for capital projects in property improvement funds, which are included in restricted cash.\n\n​\n\nWe spent approximately $3.5 million on capital improvements at our operating hotels during the year ended December 31, 2025.\n\n​\n\n55\n\n[Table of Contents](#TOC)\n\n**Debt**\n\n​\n\n*Mortgage Debt*\n\nAt December 31, 2025 and December 31, 2024, our mortgage debt obligations consists of the following:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**  ​**\n\n  ​ ​ ​\n\n  ​\n\n**  ​ ​ ​**\n\n**Outstanding**\n\n​\n\n**Outstanding**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Balance as of**\n\n​\n\n**Balance as of**\n\n​\n\n​\n\n**Interest**\n\n​\n\n**Maturity**\n\n​\n\n**December 31, **\n\n​\n\n**December 31, **\n\n**Hotel Property**\n\n**  ​ ​ ​**\n\n**Rate**\n\n**  ​ ​ ​**\n\n**Date**\n\n**  ​ ​**\n\n**2025**\n\n​\n\n**2024**\n\nHoliday Inn Express - Cedar Rapids(1)\n\n​\n\n—\n\n \n\n—\n\n​\n\n$\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​\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​\n\n*Lines of Credit & Corporate Loans*\n\n*Line of Credit – Western State Bank*\n\nOn February 10, 2020, we entered into a line of credit with Western State Bank (“Western Line of Credit”) with a $5.0 million credit limit and an interest rate equal to the U.S. Prime Rate, plus 0.50% (8.50 % as of December 31, 2025 and December 31, 2024). Throughout 2021 and 2022, the Company amended the Western Line of Credit whereby the maturity was extended to April 15, 2023 and established a rate floor of 4.00%. Further the Western Line of Credit is secured by the Company’s Hampton Inn hotel property in Eagan, Minnesota, the Company’s Holiday Inn Express hotel property in Cedar Rapids, Iowa, the Company’s Hampton Inn hotel property in Fargo, North Dakota and limited partnership units of the Operating Partnership.\n\n56\n\n[Table of Contents](#TOC)\n\nDuring 2023, the Company amended the Western Line of Credit several times which added an additional 200,000 limited partnership units of the Operating Partnership as collateral for the loan, for a total of 300,000 limited partnership units, extended the maturity date of the Western Line of Credit to November 15, 2023, and reduced the maximum credit to $4.67 million and required the Operating Partnership to pay Western State Bank a principal curtailment of $0.3 million. On December 27, 2023, the Operating Partnership, the Company, Corey Maple, LF3 Fargo Med, LLC, LF3 Eagan, LLC, and LF3 Cedar Rapids, LLC entered into a Change in Terms Agreement in connection with the Western Line of Credit, which extended the maturity date of the Western Line of Credit from November 15, 2023 to April 30, 2024 and increased the interest rate to U.S. Prime Rate, plus 1.00%, with a rate floor of 8.25%. On May 10, 2024, the Operating Partnership, the Company, Corey Maple, LF3 Fargo Med, LLC, LF3 Eagan, LLC, and LF3 Cedar Rapids, LLC entered into a Change in Terms Agreement in connection with the Western Line of Credit, which extended the maturity date of the Western Line of Credit from April 30, 2024 to June 5, 2024. In addition, the Operating Partnership was required to make a principal payment in the amount of $250,000. The interest rate as of December 31, 2025 was 8.50%. The Company and Western State Bank are working to finalize an extension of the Western Line of Credit as of the date of this filing, however, there can be no assurance that an extension will be granted.\n\nThe Western Line of Credit includes cross-collateralization and cross-default provisions such that the existing mortgage loan agreements with respect to the Cedar Rapids Property, the Eagan Property, and the Fargo Property as well as future loan agreements that we may enter into with this lender, are cross-defaulted and cross-collateralized with each other. The Western Line of Credit, including all cross-collateralized debt, is guaranteed by Corey Maple. As of December 31, 2025 and, 2024, there was a $0.3 million and $4.2 million balance outstanding on the Western Line of Credit, respectively.\n\n​\n\n*Revolving Line of Credit – Legendary A-1 Bonds, LLC*\n\n​\n\nOn August 10, 2022, the Operating Partnership entered into a $5.0 million revolving line of credit loan agreement (the “A-1 Line of Credit”) with Legendary A-1 Bonds, LLC (“A-1 Bonds”), which is an affiliate of the Advisor which is owned by Norman Leslie, a director and officer of the Company and principal of the Advisor and Corey Maple, a director of the Company and principal of the Advisor. The A-1 Revolving Line of Credit requires monthly payments of interest only, with all outstanding principal and interest amounts being due and payable at maturity. Outstanding amounts under the A-1 Revolving Line of Credit may be prepaid in whole or in part without penalty.\n\n​\n\nDuring 2023, the A-1 Revolving Line of Credit was amended twice to increase the line of credit to $13.3 million, to increase the number of Common LP Units of the Operating Partnership securing the A-1 Revolving Line of Credit to 1,330,000 unissued Common LP Units and extend the maturity date to December 31, 2023. At December 31, 2023, the A-1 Revolving Line of Credit had a fixed interest rate of 7.00% per annum.\n\n​\n\nOn December 20, 2024, the Operating Partnership, the Company and A-1 Bonds amended the A-1 Line of Credit to extend the maturity date to December 31, 2027, increase the interest rate to 17.5% per annum, increase the A-1 Line of Credit to $20.0 million and increase the number of Common LP Units of the Operating Partnership securing the A-1 Revolving Line of Credit to 2,000,000 unissued Common LP Units.\n\nAs of December 31, 2025 and 2024, there was $13.5 million and $14.3 million balance outstanding on the A-1 Line of Credit, respectively.\n\n​\n\n*NHS Loan*\n\nOn March 6, 2023, we entered into a $600,000 loan agreement (the “NHS Loan”) with NHS. The NHS Loan requires the payment of monthly interest beginning on April 6, 2023, with all outstanding principal and interest amounts being due and payable at maturity on July 6, 2023. On December 28, 2023, we entered into a Change in Terms Agreement with the Operating Partnership and NHS in connection with the NHS Loan to extend the maturity date of the NHS Loan to January 31, 2024. This amendment also provided that in lieu of monthly interest payments, all accrued interest shall be due and payable on the maturity date with the full principal balance. On August 21, 2024, we entered into a Change in Terms Agreement with the Operating Partnership and NHS in connection with the NHS Loan to extend the maturity date of the NHS Loan to September 30, 2025. The NHS Loan has a fixed interest rate of 7.0% per annum. Outstanding amounts under the NHS Loan may be prepaid in whole or in part without penalty. The NHS Loan is secured by 60,000 partnership units\n\n57\n\n[Table of Contents](#TOC)\n\nof the Operating Partnership. The Company and NHS are working to finalize an extension of the NHS Loan as of the date of this filing, however there can be no assurance that an extension will be granted.\n\nAs of December 31, 2025 and 2024, there was a $600,000 balance outstanding on the NHS Loan.\n\n*Arcade Loan*\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\nAs of December 31, 2025, there was a $500,000 balance outstanding on the Arcade Loan.\n\n*Mortgage Debt*\n\n*El Paso HI Loan Modifications*\n\nOn May 15, 2024, the El Paso HI Borrower, the Operating Partnership and Corey R. Maple entered into a second loan modification agreement with EPH, which extended the maturity date to November 15, 2024. As a condition to the extension, the El Paso HI Borrower agreed to pay a $76,000 extension fee. With the second modification agreement, the El Paso HI Borrower is entitled to an additional six-month extension, if requested. In addition, the Holiday Inn El Paso Loan has a new interest rate of 9.00%.\n\n​\n\n*Lakewood Loan Extension, Termination and New Loans*\n\nThe subsidiaries of the Operating Partnership and A-1 Bonds entered into a loan agreement in the amount of $12.6 million secured by the Lakewood Property (the “Original Lakewood Loan”). Per the terms of the agreement, the subsidiaries of the Operating Partnership executed the option to extend the maturity date of the loan to March 28, 2024.\n\n​\n\nOn March 27, 2024, the subsidiaries of the Operating Partnership entered into a new $12.0 million loan with Bluebird Credit EM LLC (the “New Lakewood Loan”) secured by the Lakewood Property. The New Lakewood Loan is evidenced by a promissory note and has an adjustable interest rate based on the SOFR Index plus 7.0% (increasing to 7.5% during the extension of the loan), with an initial interest rate of 12.327%; provided, however, in no event will the interest rate be adjusted to less than 11.0%. The maturity date of the New Lakewood Loan is October 5, 2025, with an option to extend the term for an additional 6 months through April 6, 2026, upon payment of a $60,000 extension fee and satisfaction of certain other conditions. The New Lakewood Loan requires monthly interest-only payments throughout the term, with the outstanding principal and interest due at maturity. The Borrower has the right to prepay the New Lakewood Loan in whole but not in part at any time, subject to a 30-day prior notice to the New Lakewood Lender and payment of an exit fee equal to $120,000 and a prepayment premium calculated pursuant to the terms of the New Lakewood Loan Agreement.\n\n​\n\nPursuant to the New Lakewood Loan Agreement, Norman Leslie, a director and executive officer of the Company, entered into a Guaranty (the “New Lakewood Guaranty”) with the New Lakewood Lender to guarantee payment when due of the principal amount of indebtedness outstanding, including accrued interest and collection costs and expenses, as further described in the New Lakewood Guaranty.\n\n​\n\nAdditionally, on March 27, 2024, the Operating Partnership entered into a new loan in an amount up to $4,896,801 (the “New A-1 Lakewood Loan”) with the A-1 Lender, an affiliate of the Company’s Advisor. The New A-1 Lakewood Loan is evidenced by a promissory note and has a fixed interest rate of 14.5% per annum and a maturity date of March 27, 2026. The New A-1 Lakewood Loan requires monthly interest-only payments throughout the term, with the outstanding principal and interest due at maturity. The Operating Partnership has the right to prepay the New A-1 Lakewood Loan in whole or in part without charge, penalty or premium. The A-1 Lender received an origination fee of $73,452 on the effective date\n\n58\n\n[Table of Contents](#TOC)\n\nof the New A-1 Lakewood Loan and will receive an exit fee equal to 1.5% of the full amount of the New A-1 Lakewood Loan upon the earlier of (a) full repayment (whether on the maturity date or prior thereto or any other date), and (b) the maturity date. Pursuant to a Pledge and Security Agreement entered into by the Company with the A-1 Lender, the New A-1 Lakewood Loan is secured by 489,680 unissued common limited partnership units of the Operating Partnership.\n\n​\n\nOn March 27, 2024, the proceeds from the New Lakewood Loan and the New A-1 Lakewood Loan were used to refinance the Original Lakewood Loan, and the outstanding obligations under Original Lakewood Loan were repaid in full. At the closing of the refinancing, an unpaid extension fee in the amount of $138,450 was paid to the A-1 Lender under the Original Lakewood Loan which was due but not paid in connection with the prior March 2023 extension of the Original Lakewood Loan. All guaranties in connection and collateral with respect to the Original Lakewood Loan have been terminated or released, and all commitments with respect to the Original Lakewood Loan have been terminated or released.\n\n*Southaven Refinance*\n\nOn December 6, 2024, the subsidiaries of the Operating Partnership (the “New Southaven Borrower”) entered into a new $18.0 million loan (the “New Southaven Loan”) with UBS AG. (the “New Southaven Lender”) secured by the Southaven Property. The New Southaven Loan is evidenced by a promissory note and has a fixed interest rate that is equal to the five-year United States Treasury rate plus 3.58%, resulting in an interest rate of 7.77%. The maturity date of the New Southaven Loan is December 6, 2029. The New Southaven Loan requires monthly interest-only payments for the life of the loan, with the outstanding principal balance due at maturity. Prepayment is not permitted during the first year of the New Southaven Loan, but prepayment is permissible with certain stipulations laid out in the loan agreement.\n\nOn December 6, 2024, the proceeds from the New Southaven Loan were used to refinance the Original Southaven Loan, and the outstanding obligations under the Original Southaven Loan were repaid in full. All guarantees in connection and collateral with respect to the Original Southaven Loan have been terminated or released, and all commitments with respect to the Original Southaven Loan have been terminated or released.\n\n*Northbrook, Fort Collins and Aurora Contribution Agreement*\n\nOn December 24, 2024, the Company entered a loan contribution agreement (the “Contribution Agreement”) to restructure four of its loans with Access Point Financial, LLC (the “Access Point Lender”) – 1) the mortgage loan secured by the Sheraton – Northbrook (“Sheraton Northbrook Loan”) with unpaid principal balance of approximately $4.0 million, 2) the loans secured by the Residence Inn - Fort Collins Loan (“Fort Collins Loans”) with collective unpaid principal balance of approximately $13.0 million, 3) the mortgage loan secured by the Courtyard by Marriott – Aurora (“Courtyard Aurora Loan”) with unpaid principal balance of approximately $14.9 million. With respect to the Sheraton Northbrook Loan, the Access Point Lender received 4,067,409 Series A Preferred Units in exchange for all of the remaining unpaid principal and interest on the Sheraton Northbrook Loan. With respect to the Fort Collins Loans and the Courtyard Aurora Loan, the Company is required to refinance each such loan within 90 days of the date of the Contribution Agreement, and to the extent there is remaining unpaid principal and interest on such loans after such refinancing, the Operating Partnership is required to enter into a contribution agreement with the Access Point Lender through which the Access Point Lender will receive Series A Preferred Units in exchange for all of such remaining unpaid principal and interest\n\nSee “– Subsequent Events” below for a description of changes to mortgage debt occurring subsequent to December 31, 2025.\n\n**Contracts for Purchase and Sale of Hotel Properties**\n\n​\n\n*Contribution Agreements*\n\n​\n\nAs of December 31, 2024, we had two properties under contract pursuant to Legendary Equity Preservation UPREIT (Pat. Pend.) Contribution Agreements entered into on April 15, 2024:\n\n​\n\n1)\n\nthe 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\n\n59\n\n[Table of Contents](#TOC)\n\nof 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)\n\nthe Staybridge Suites Stow – the contribution of a 92-room Staybridge Suites hotel in Stow, Ohio to the Operating Partnership. The aggregate consideration for this hotel under the Staybridge Stow Contribution Agreement is $10.9 million, with a majority of the consideration consisting of the assumption by the Operating Partnership of existing debt secured by the hotel and the remaining consideration consisting of the issuance of Series T LP Units of the Operating Partnership and cash at closing.\n\n​\n\nAs required by the Contribution Agreements, the Operating Partnership deposited $100,000 in aggregate\n\n($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\n​\n\nWe 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\n​\n\nAgreement to Sell Pineville HGI Property and Charlotte Property\n\n​\n\nOn December 2, 2024, we entered into two purchase and sale agreements for the Pineville HGI Property and the Charlotte Property. The agreements are subject to closing conditions. There can be no assurance we will complete any or all of these pending property dispositions on the contemplated terms, or at all. We recorded impairment losses of approximately $4.0 million in connection with the pending sales of the Pineville HGI Property and the Charlotte Property.\n\n​\n\nCash Flows\n\nThe following table provides a breakdown of the net change in our cash, cash equivalents, and restricted cash:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**For the Years Ended December 31, **\n\n​\n\n​\n\n**2025**\n\n**  ​ ​ ​**\n\n**2024**\n\nNet cash used in operating activities\n\n​\n\n$\n\n(3,702,826)\n\n \n\n$\n\n(853,562)\n\nNet cash provided by investing activities\n\n​\n\n​\n\n43,478,753\n\n​\n\n​\n\n4,375,111\n\nNet cash used in financing activities\n\n​\n\n​\n\n(37,947,966)\n\n​\n\n​\n\n(6,104,036)\n\nNet increase (decrease) in cash, cash equivalents and restricted cash\n\n​\n\n$\n\n1,827,961\n\n​\n\n$\n\n(2,582,487)\n\n​\n\nCash Flows From Operating Activities\n\nAs of December 31, 2025, we owned thirteen hotel properties and an equity and profits interest in the parent of the entity which holds a leasehold interest in one hotel property, and during the year ended December 31, 2025, net cash used in operating activities was $3.7 million. As of December 31, 2024, we owned seventeen hotel properties and an equity and profits interest in the parent of the entity which holds a leasehold interest in one hotel property, and net cash used in operating activities was $0.9 million. Our cash flows used in operating activities generally consist of the net cash generated by our hotel operations, partially offset by the cash paid for corporate expenses, certain acquisition-related expenses, property management fees, and other working capital changes. The increase in cash used in operating activities during 2025 was primarily attributable to reduced revenue from the sale of hotel properties during the year and increased amounts due to related parties, partially offset by lower property operating expenses associated with a smaller portfolio. See \"– Results of Operations\" below for further discussion of our operating results for the years ended December 31, 2025 and 2024.\n\n60\n\n[Table of Contents](#TOC)\n\nCash Flows From Investing Activities\n\nNet cash provided by investing activities was $43.5 million for the year ended December 31, 2025, primarily driven by $47.0 million in aggregate proceeds from the sales of the Charlotte Property, Pineville HGI Property, Fargo Property, and Prattville Property, partially offset by approximately $3.5 million used for improvements and additions to hotel properties. Net cash provided by investing activities was $4.4 million for the year ended December 31, 2024, primarily driven by $8.9 million in proceeds from the sale of the Pineville Property offset by $4.5 million used for improvements and additions to hotel properties.\n\nCash Flows From Financing Activities\n\nDuring the year ended December 31, 2025, net cash used in financing activities was $37.9 million and consisted primarily of the following:\n\n●$1.7 million of net cash provided by offering proceeds related to our Offering, including $2.9 million net cash related to the GO II Unit Offering and $1.1 million net cash related to the Series P Preferred Unit Offering, which was net of payments of commissions and other offering costs of $2.4 million\n\n●$39.6 million of net cash used in debt financing as a result of proceeds from debt financing of $5.5 million and $1.5 million in draws on our line of credit, offset by principal payments on debt financing of $39.3 million, $6.1 million in payments on our line of credit, $0.6 million in payments on finance lease liabilities and payments of financing costs of $0.5 million; and\n\n●Less than $0.1 million of net cash distributions.\n\nDuring the year ended December 31, 2024, net cash used in financing activities was $6.1 million and consisted primarily of the following:\n\n●$0.7 million of net cash provided by offering proceeds related to our Offering, including $2.9 million net cash related to the GO II Unit Offering and $0.2 million net cash related to the Series P Preferred Unit Offering, which was net of payments of commissions and other offering costs of $2.4 million;\n\n●$3.3 million of net cash used in debt financing as a result of proceeds from debt financing of $45.9 million and $5.5 million in draws on our line of credit, offset by principal payments on debt financing of $47.7 million, $5.0 million in payments on our line of credit, $0.6 million in payments on finance lease liabilities and payments of financing costs of $1.5 million; and\n\n●$3.5 million of net cash distributions, after giving effect to distributions reinvested by stockholders of $0.5 million.\n\nSee Part II. Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Distribution Information” for details regarding our distribution history as well as sources used to pay our distributions.\n\nResults of Operations\n\nWe expect that revenue, operating expenses, maintenance costs, real estate taxes and insurance, interest expense and management fees will each increase in future periods as a result of anticipated future acquisitions of real estate investments. Interest expenses are also expected to increase in future periods as a result of higher interest rates on recently financed or extended loans as well as future refinancings of maturing debt. Future operating results could be impacted by changing market and industry factors, see “ – Market Outlook” above.\n\nOur results of operations for the years ended December 31, 2025 and December 31, 2024 are not indicative of those expected in future periods. As of December 31, 2025 and 2024, we consolidated fourteen and eighteen properties, respectively. During the year ended December 31, 2025, we sold four hotel properties (the Charlotte Property and Pineville\n\n61\n\n[Table of Contents](#TOC)\n\nHGI Property in May 2025, the Fargo Property in December 2025, and the Prattville Property in December 2025), which impacts the comparability of our results between periods.\n\nIn evaluating financial condition and operating performance, we believe Revenue per Available Room (\"RevPAR\"), which we calculate by dividing total gross room revenue by the total number of available rooms for the period, is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for properties. We also believe occupancy and average daily rate (\"ADR\"), which are components of calculating RevPAR, are meaningful indicators of our performance. Occupancy, which we calculate by dividing occupied rooms by total rooms available, measures the utilization of a property's available capacity. ADR, which we calculate by dividing total gross room revenue by the total number of rooms rented for the period, measures average room price and is useful in assessing pricing levels.\n\n*Comparison of the year ended December 31, 2025 versus the year ended December 31, 2024*\n\nRevenue\n\nRoom revenues totaled $60.6 million and $69.5 million for the years ended December 31, 2025 and December 31, 2024, respectively. The $8.9 million decrease was primarily due to the sale of four hotel properties during 2025 and the sale of one hotel property during 2024, resulting in fewer properties contributing revenue for the full year. Other revenue, which consists primarily of hotel food and beverage revenues as well as revenues from other hotel services, was $3.9 million and $4.8 million for the years ended December 31, 2025 and December 31, 2024, respectively. Hotel occupancy, ADR, and RevPAR were 65.15%, $127.10, and $82.80, respectively, for the year ended December 31, 2025. Hotel occupancy, ADR, and RevPAR were 67.46%, $127.90, and $86.29, respectively, for the year ended December 31, 2024.\n\nProperty Operations Expenses\n\nProperty operations expenses were $32.7 million and $35.8 million for the years ended December 31, 2025 and December 31, 2024, respectively. The $3.1 million decrease was primarily due to fewer properties in the portfolio following the sale of four hotel properties during 2025. Property operations expenses consist primarily of hotel personnel costs, property taxes, insurance, repair and maintenance, and other costs of operating our hotel properties.\n\nGeneral and Administrative Expenses\n\nGeneral and administrative expenses were $10.5 million and $12.0 million for the years ended December 31, 2025 and December 31, 2024, respectively. The $1.5 million decrease was primarily attributable to reduced overhead costs associated with a smaller portfolio and ongoing cost management efforts. General and administrative expenses consist primarily of administrative personnel costs, rent, professional fees and the cost of office supplies and equipment.\n\nSales and Marketing Expenses\n\nSales and marketing expenses were $4.6 million and $4.9 million for the years ended December 31, 2025 and December 31, 2024, respectively. The decrease was primarily due to the reduction in properties in the portfolio following dispositions during 2025. Sales and marketing expenses consist primarily of sales and marketing personnel costs, hotel brand loyalty program costs, advertising and other marketing costs.\n\nFranchise Fees\n\nFranchise fees were $5.6 million and $6.5 million for the years ended December 31, 2025 and December 31, 2024, respectively. The $0.9 million decrease was primarily due to fewer properties in the portfolio. Franchise fees include the amortization of initial franchise fees, as well as monthly fees paid to franchisors for royalty, marketing, reservation fees and other related costs.\n\n62\n\n[Table of Contents](#TOC)\n\nManagement Fees\n\nManagement fees were $4.1 million and $5.1 million for the years ended December 31, 2025 and December 31, 2024, respectively. The $1.0 million decrease was primarily due to fewer properties in the portfolio. Management fees include asset management fees paid to the Advisor and management fees paid to property management service providers who manage the day-to-day operations of our hotel properties.\n\nAcquisition Expenses\n\nAcquisition expenses were $40,000 and $34,353 for the years ended December 31, 2025 and December 31, 2024, respectively. Acquisition expenses include acquisition-related and due diligence costs that relate to a property that was not ultimately acquired, as well as costs related to hotel property acquisition activities that are not attributable to specific property acquisitions, along with any acquisition costs associated with the acquisition of a VIE.\n\nDepreciation and Amortization\n\nDepreciation and amortization expense was $9.0 million and $10.4 million for the years ended December 31, 2025 and December 31, 2024, respectively. The $1.4 million decrease was primarily due to fewer depreciable assets in the portfolio following the sale of hotel properties during 2025.\n\nImpairment Loss\n\nImpairment loss was $10.1 million and $4.0 million for the years ended December 31, 2025 and December 31, 2024, respectively. The 2025 impairment loss was recorded in connection with the evaluation of hotel properties classified as held for sale and other properties for which indicators of impairment were identified. The 2024 impairment loss was recorded in connection with the evaluation of the Pineville HGI Property and Charlotte Property, both of which were concluded to be held for sale as of December 31, 2024.\n\nGain (Loss) From Sale of Hotel Property\n\nGain from sale of hotel property was $0.6 million for the year ended December 31, 2025, resulting from the aggregate net gains on the sales of the Charlotte Property, Pineville HGI Property, Fargo Property, and Prattville Property. Loss from sale of hotel property was $4.6 million for the year ended December 31, 2024, resulting from the sale of the Pineville Property in July 2024.\n\nOther Expense, net\n\nOther expense, net was $3.4 million for each of the years ended December 31, 2025 and December 31, 2024. The 2025 amount includes costs related to the write-off of disposed fixed assets and other non-recurring charges. The 2024 amount was primarily due to writing off uncompleted projects.\n\nInterest Expense\n\nInterest expense was $19.6 million and $17.5 million for the years ended December 31, 2025 and December 31, 2024, respectively. The $2.1 million increase in interest expense was primarily due to the continued impact of elevated interest rates on variable rate debt and the issuance of Series A Preferred Units in lieu of cash interest, partially offset by the reduction in outstanding mortgage debt from property dispositions during 2025.\n\nCritical Accounting Estimates\n\nBelow is a discussion of the accounting estimates that management believes are or will be critical to our operations. We consider these estimates critical in that they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during\n\n63\n\n[Table of Contents](#TOC)\n\nthe reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.\n\nAcquisition of Hotel Properties\n\nWe evaluate whether each hotel property acquisition should be accounted for as an asset acquisition or a business combination. If substantially all of the fair value of the gross assets acquired is concentrated in a single asset or a group of similar identifiable assets, then the transaction is considered to be an asset acquisition. All of our acquisitions since inception have been determined to be asset acquisitions. Transaction costs associated with asset acquisitions will be capitalized and transaction costs associated with business combinations will be expensed as incurred.\n\nOur acquisitions generally consist of land, land improvements, buildings, building improvements, and furniture, fixtures and equipment (“FF&E”). We may also acquire intangible assets or liabilities related to in-place leases, management agreements, debt, and advanced bookings. For transactions determined to be asset acquisitions, we allocate the purchase price among the assets acquired and the liabilities assumed based on their respective fair values at the date of acquisition. For transactions determined to be business combination, we record the assets acquired and the liabilities assumed at their respective fair values at the date of acquisition. We determine the fair value by using market data and independent appraisals available to us and making numerous estimates and assumptions.\n\nThe difference between the relative fair value and the face value of debt assumed in connection with an acquisition is recorded as a premium or discount and amortized to interest expense over the remaining term of the debt assumed. The valuation of assumed liabilities is based on our estimate of the current market rates for similar liabilities in effect at the acquisition date.\n\nImpairment of Hotel Properties\n\nWe assess the carrying value of our hotel properties whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The recoverability is measured by comparing the carrying amount to the estimated future undiscounted cash flows which take into account current market conditions and our intent with respect to holding or disposing of the hotel properties. If our analysis indicates that the carrying value is not recoverable on an undiscounted cash flow basis, we will recognize an impairment loss for the amount by which the carrying value exceeds the fair value. The fair value is determined through various valuation techniques, including internally developed discounted cash flow models, comparable market transactions or third-party appraisals.\n\nThe use of projected future cash flows is based on assumptions that are consistent with a market participant’s future expectations for the travel industry and the economy in general and our expected use of the underlying hotel properties. The assumptions and estimates related to the future cash flows and the capitalization rates are complex and subjective in nature. Changes in economic and operating conditions that occur subsequent to a current impairment analysis and our ultimate use of the hotel property could impact the assumptions and result in future impairment losses to the hotel properties. We recorded a $10.1 million impairment charge for the year ended December 31, 2025 and a $4.0 million impairment charges for the year ended December 31, 2024.\n\nAssessment of Variable Interest Entities\n\n​\n\nWe use judgment when evaluating whether we have a controlling financial interest in an entity, including the assessment of the importance of rights and privileges of the partners based on voting rights, as well as financial interests in an entity that are not controllable through voting interests. If the entity is considered to be a variable interest entity (“VIE”), we use judgment in determining whether we are the primary beneficiary, and then consolidate those VIEs for which we have determined we are the primary beneficiary. If the entity in which we hold an interest does not meet the definition of a VIE, we evaluate whether we have a controlling financial interest through our voting interest in the entity. Changes to judgments used in evaluating our partnerships and other investments could materially affect our consolidated financial statements.\n\n​\n\n64\n\n[Table of Contents](#TOC)\n\nFair Value Measurement\n\nWe establish fair value measures based on the fair value definition and hierarchy levels established by GAAP. These fair values are based on a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:\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\nOur estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. We classify assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.\n\nOff-Balance Sheet Arrangements\n\nAs of December 31, 2025 and 2024, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.\n\nSeasonality\n\nDepending on a hotel’s location and market, operations for the hotel may be seasonal in nature. This seasonality can be expected to cause fluctuations in our quarterly operating performance. Based on historic trends, for hotels located in non-resort markets, demand is generally lower in the winter months due to decreased travel and higher in the spring and summer months during the peak travel season. Accordingly, we generally would expect to have lower revenue, operating income and cash flow in the first and fourth quarters and higher revenue, operating income and cash flow in the second and third quarters.\n\nSubsequent Events\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 from 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.\n\n65\n\n[Table of Contents](#TOC)\n\nAs 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\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\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\n66\n\n[Table of Contents](#TOC)\n\nGO II Unit Offering\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​"}