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Lodging Fund REIT III Updates NAV and Announces New Acquisition

Lodging Fund REIT III Inc., a publicly registered non-traded real estate investment trust, announced that the board of directors approved a revised net asset value of the company’s assets as of Dec. 31, 2022, and funded the acquisition of a Holiday Inn Express & Suites.

As a result of the revised NAV, the price per share of the Lodging Fund REIT III’s ongoing private offering of shares was adjusted from $10.00 to $10.57, effective Jan. 6, 2023. Launched in 2018, the company’s current offering of shares of common stock seeks to raise up to $150 million in investor equity. As of June 30, 2022, the company has raised aggregate proceeds of $91.7 million and repurchased shares for a total price of approximately $2.7 million.

The company has not yet filed its quarterly report for the third quarter of 2022, stating in a filing with the U.S. Securities and Exchange Commission that it was unable to file the report “due to uncertainty related to the SEC matter” disclosed earlier in the year.

As reported by The DI Wire, in September the SEC issued a Wells notice to the company’s advisor and its senior executive, Cory Maple, following an investigation into the reimbursement of and financial accounting for certain expenses, as well as the adequacy of its disclosures related to those policies and practices. Following the disclosure of the Wells Notice, the company issued a statement to The DI Wire denying any wrongdoing and pledging to “vigorously defend” itself if any enforcement action is instituted by the SEC.

Lodging Fund REIT III also announced that, through their operating partnership, it has entered into a “Legendary Equity Preservation UPREIT” Contribution Agreement, the Wichita HIEX Contribution Agreement, with Wichita Airport Hospitality LLC, in which Wichita Airport Hospitality agreed to contribute the 84-room Holiday Inn Express & Suites Wichita Airport hotel in Wichita, Kansas to the operating partnership.

The 84-room Holiday Inn Express & Suites Wichita Airport was acquired for $7.4 million on Dec. 22, 2022. The deal utilized Legendary Capital’s proprietary Equity Preservation UPREIT (EPU) structure in which the ownership of the hotel contributed the hotel in exchange for a special class of Transition Partnership Units (T-Units), allowing for the potential preservation of the contributor’s equity as the property restabilizes.

The agreement consisted of a new loan by subsidiaries of the operating partnership with Choice Financial Group for $5.6 million, secured by the Wichita HIEX, the issuance by the operating partnership of 121,762 Series T Limited Units of the operating partnership, and the payment by the operating partnership of $0.5 million in cash, a portion of which was used to pay off the portion of the Wichita Airport Hospitality’s existing loan.

The property sits next to the Wichita Dwight D. Eisenhower National Airport and is in the Wichita Metropolitan Statistical Area, which has a population of 640,000. Wichita is the largest city in Kansas with a population of approximately 400,000 people. Wichita also has two large hospital systems and a children’s hospital that serves all of Kansas and northern Oklahoma, as well as a predominant college, Wichita State University.

“Wichita is a growing city infused with vibrant energy. It checks all our boxes as a great place to invest,” said Corey Maple, Legendary Capital’s chief executive officer. “We are optimistic the property will continue as a top performer in the submarket and capture new demand in the market.”

On Dec. 22, 2022, Lodging Fund, through its subsidiary LF3 Wichita Airport TRS LLC entered into a management agreement with KAJ Hospitality Inc., to provide property management and hotel operations management services for the Wichita HIEX, which has an initial term of five years.

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