Lodging Fund REIT III Inc., a publicly registered non-traded real estate investment trust, has disclosed in its year-end filing that the Securities and Exchange Commission is conducting an inquiry into the reimbursement of certain expenses to its advisor, Legendary Capital REIT III LLC, as well as its disclosure of reimbursement policies and procedures. The notice was received by the REIT in December 2020.
A spokesperson for the REIT said, “Lodging Fund REIT III, Inc. is a regulated fund that supports the important missions of its respective regulators. The company is voluntarily cooperating with its regulators to ensure they have the information they require to perform their duties. Out of respect for that process, the company is not able to comment on specific details related to regulatory inquiries.”
Although few details were disclosed, the company stated in the risk factors section of the filing that it is unable to estimate the cost of complying with the inquiry or its outcome at this time.
“The inquiry could result in considerable legal expenses, divert management’s attention from other business concerns and harm our business. If the SEC were to determine that legal violations occurred, we could be required to pay significant civil and/or criminal penalties or other amounts and remedies or conditions could be imposed as part of any resolution. We can provide no assurances as to the outcome of the inquiry,” the filing stated.
Lodging Fund REIT III was formed in April 2018 to invest in limited-service, select-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. The REIT raised $75.3 million in investor equity, as of the fourth quarter of 2020, and owned a portfolio of seven hotel properties purchased for approximately $100 million.