Lodging Fund REIT III Reports Widening Loss

The hotel-focused REIT navigates a turbulent quarter with refinancing activity, new offerings, and management shifts to stabilize operations.

April 16, 2025

Revenue Holds, but Expenses Climb

Lodging Fund REIT III posted a net loss of $6.4 million for the first quarter of 2024, compared to $3.9 million in the same period last year. The loss reflects rising operating costs and higher interest expenses, even as top-line revenue remained steady.

The REIT generated $16.0 million in revenue for the quarter, nearly matching its Q1 2023 total. Room revenue reached $14.9 million, with other hotel services contributing $1.1 million. But as revenue held flat, expenses moved higher across the board.

Key drivers of the increase included:

• Operating costs:$8.7 million


• General and administrative expenses:$3.1 million


• Interest expense:$3.9 million (up from $3.5 million in Q1 2023)

Altogether, these factors pushed net income further into negative territory.

Adjusting Capital and Cash Flow

Lodging Fund REIT III continues to fund operations and growth through multiple capital channels. Since inception, it has raised $100.3 million through its primary common stock offering, alongside $21.5 million in Series GO Units and $1.6 million from the Series GO II offering. The Series T Units—used in property contributions—remain a core part of its structure, accounting for $45.7 million in value as of March 31.

Distributions were paused for the first two months of the year and resumed in March at a reduced rate of $0.029 per share. Cash flow from operations was negative, totaling -$798,000 for the quarter, down from a positive $255,000 in Q1 2023.

Debt Strategy and Refinancing Activity

The company ended the quarter with $200 million in debt, spread across mortgage loans and lines of credit. Several of these carry high fixed or variable interest rates—some as high as 14.5%. In response, Lodging Fund REIT III has been actively refinancing.

Two transactions in Q1—$12 million and $4.9 million loans backed by the Lakewood property—replaced prior obligations. The refinancing activity continued after quarter-end, with further modifications and new financing for the Prattville and Southaven properties.

While these steps address near-term liquidity and extend maturities, they also reflect a higher cost of capital in the current rate environment.

Changes in Property Management and Governance

The REIT began transitioning away from related-party property management during the quarter. In February 2025, it terminated agreements with NHS and moved eight properties under Hotel Equities. The new contracts reflect a shift to third-party operators and include performance-based fees.

Governance updates also included stock-based compensation for independent directors and continued execution on a previously disclosed settlement with the SEC. In August 2023, the REIT’s advisor agreed to pay $463,900 related to historical expense disclosures. The matter is now closed, and the firm has since returned to timely financial reporting.

Looking Ahead

The board has extended its primary stock offering through mid-2026 and authorized management to pursue an exit strategy. A potential sale or merger is under evaluation, with the goal of completing a transaction in 2025 if market conditions support it.

With a large footprint in mid-market hotels across ten states and multiple capital sources in play, Lodging Fund REIT III is focused on managing cost pressures, stabilizing operations, and preparing for a potential liquidity event. The coming quarters will test that plan as it navigates both refinancing timelines and broader shifts in the hospitality sector.