Lodging Fund REIT III's Net Loss Widens 28% Amid Revenue Decline

TL;DR

**Lodging Fund REIT III is bleeding cash, with a massive net loss increase and shrinking asset base; steer clear.**

AI Summary

Lodging Fund REIT III, Inc. reported a significant decline in financial performance for the nine months ended September 30, 2025, with total revenue decreasing by 13.04% to $50,342,407 from $57,894,663 in the prior year. This was primarily driven by a 13.66% drop in room revenue, from $54,480,124 to $47,033,131. The company's net loss widened substantially, increasing by 28.08% to $23,575,281 from $18,421,087 year-over-year. A key factor contributing to this increased loss was an impairment loss of $5,123,541 on assets held for sale in 2025, which was not present in 2024. Additionally, interest expense rose by 18.01% to $14,957,457 from $12,673,839. The company's total assets decreased by 10.76% to $248,850,180 from $278,860,026 as of December 31, 2024, largely due to a reduction in investment in hotel properties, net, from $241,973,045 to $208,325,346. Total stockholders' deficit deepened to $(32,070,538) from $(14,119,383) at year-end 2024, reflecting the ongoing losses.

Why It Matters

This filing reveals a deteriorating financial position for Lodging Fund REIT III, Inc., with significant revenue drops and widening losses. For investors, the deepening stockholders' deficit to $(32,070,538) and the impairment loss on assets held for sale signal potential capital erosion and operational challenges in a competitive lodging market. Employees might face uncertainty given the company's struggles, while customers could see impacts on service or property quality if cost-cutting measures are implemented. The broader market may view this as a cautionary tale for niche REITs operating in specific geographic segments, especially if the 'America's Heartland' strategy isn't yielding expected returns.

Risk Assessment

Risk Level: high — The company's net loss increased by 28.08% to $23,575,281 for the nine months ended September 30, 2025, compared to $18,421,087 in the prior year. This, coupled with a 13.04% decline in total revenue and a deepening stockholders' deficit to $(32,070,538), indicates severe financial distress and a high risk of continued underperformance or potential solvency issues.

Analyst Insight

Investors should consider divesting any holdings in Lodging Fund REIT III, Inc. given the significant and accelerating net losses, declining revenues, and increasing stockholders' deficit. The impairment loss on assets held for sale suggests further asset value erosion, making this a high-risk investment with poor near-term prospects.

Financial Highlights

revenue

$50,342,407

total Assets

$248,850,180

total Debt

$151,288,568

net Income

-$23,575,281

eps

-$0.69

cash Position

$2,392,905

revenue Growth

-13.04%

Revenue Breakdown

Key Numbers

• $50.34M — Total Revenue (Decreased by 13.04% from $57.89M in 2024 for the nine months ended September 30.)
• $23.58M — Net Loss (Increased by 28.08% from $18.42M in 2024 for the nine months ended September 30.)
• $5.12M — Impairment Loss (New impairment loss on assets held for sale in 2025, contributing to increased net loss.)
• $14.96M — Interest Expense (Increased by 18.01% from $12.67M in 2024 for the nine months ended September 30.)
• $248.85M — Total Assets (Decreased by 10.76% from $278.86M as of December 31, 2024.)
• $(32.07M) — Total Stockholders' Deficit (Deepened from $(14.12M) as of December 31, 2024, indicating significant capital erosion.)
• 10,015,042 — Outstanding Shares (As of November 14, 2025, indicating shareholder base.)
• $0.69 — Basic and Diluted Net Loss Per Share (For the three months ended September 30, 2025, up from $0.66 in 2024.)

Key Players & Entities

• Lodging Fund REIT III, Inc. (company) — registrant
• Legendary Capital REIT III, LLC (company) — Advisor to LF REIT III
• Lodging Fund REIT III OP, LP (company) — Operating Partnership, subsidiary of LF REIT III
• SEC (regulator) — Securities and Exchange Commission
• $23,575,281 (dollar_amount) — Net Loss for nine months ended September 30, 2025
• $50,342,407 (dollar_amount) — Total revenue for nine months ended September 30, 2025
• $5,123,541 (dollar_amount) — Impairment loss on assets held for sale
• $14,957,457 (dollar_amount) — Interest expense for nine months ended September 30, 2025
• $248,850,180 (dollar_amount) — Total Assets as of September 30, 2025
• $(32,070,538) (dollar_amount) — Total stockholders' deficit as of September 30, 2025

FAQ

Risk Factors

• Deteriorating Financial Performance [high — financial]: The company experienced a 13.04% decrease in total revenue to $50,342,407 for the nine months ended September 30, 2025, and a substantial increase in net loss to $23,575,281. This widening loss was exacerbated by a new $5,123,541 impairment loss on assets held for sale.
• Increased Interest Expense [medium — financial]: Interest expense rose by 18.01% to $14,957,457 for the nine months ended September 30, 2025, compared to $12,673,839 in the prior year. This increased financing cost further pressured the company's profitability.
• Asset Value Decline [medium — financial]: Total assets decreased by 10.76% to $248,850,180 as of September 30, 2025, primarily due to a reduction in investment in hotel properties, net, from $241,973,045 to $208,325,346.
• Deepening Stockholders' Deficit [high — financial]: The total stockholders' deficit widened significantly to $(32,070,538) from $(14,119,383) at year-end 2024. This indicates a substantial erosion of equity and a negative net worth.
• Dependence on Hotel Property Performance [high — operational]: The company's primary revenue source is room revenue from hotel properties. A 13.66% drop in room revenue to $47,033,131 for the nine months ended September 30, 2025, highlights the sensitivity of the business to the performance of its underlying assets.
• Industry Downturn [medium — market]: The lodging industry can be cyclical and sensitive to economic conditions. A general downturn in travel and hospitality could further impact occupancy rates and revenue, as suggested by the reported revenue decline.

Industry Context

The lodging industry is highly sensitive to economic cycles, consumer spending, and travel trends. Lodging REITs like Lodging Fund REIT III, Inc. are particularly exposed to fluctuations in occupancy rates, average daily rates (ADR), and revenue per available room (RevPAR). The current environment appears challenging, with the company reporting significant revenue declines.

Regulatory Implications

As a REIT, Lodging Fund REIT III, Inc. must adhere to specific tax regulations regarding income distribution and asset ownership. Failure to comply could result in loss of REIT status, impacting its tax structure and overall financial viability. The company's financial performance and asset management practices are subject to scrutiny by regulatory bodies and investors.

What Investors Should Do

1. Monitor asset disposition strategy
2. Analyze debt structure and interest coverage
3. Evaluate the sustainability of operations
4. Assess the impact of non-controlling interests

Key Dates

• 2025-09-30: Nine Months Ended — Reporting period showing significant revenue decline and increased net loss, including a new impairment charge.
• 2024-12-31: Year End — Prior year-end balance sheet figures used for comparison, showing higher asset values and a smaller stockholders' deficit.
• 2025-11-14: Outstanding Shares Date — Indicates the shareholder base size (10,015,042 shares) as of a recent date.

Glossary

Assets held for sale

Assets that management has committed to selling and are available for immediate sale in their present condition, and for which the sale is probable within one year. (A significant impairment loss of $5,123,541 was recognized on these assets in 2025, contributing to the increased net loss.)

Stockholders' deficit

The amount by which total liabilities exceed total assets, resulting in a negative equity position for the stockholders. (The company's stockholders' deficit widened to $(32,070,538), indicating a deteriorating financial position and capital erosion.)

Accumulated deficit

The cumulative net losses of a company that have not been offset by net income or capital contributions. (This account increased to $(130,055,811) for the nine months ended September 30, 2025, reflecting ongoing operational losses.)

Non-controlling interest

The portion of equity in a subsidiary that is not attributable to the parent company. (Various series of LP units and preferred units represent non-controlling interests, which have changed in value and impact total equity.)

Variable interest entities (VIEs)

Entities for which the equity is not sufficient to permit the entity to finance its activities without additional financial support from other parties, or where the equity investors do not have the characteristics of a controlling financial interest. (The company consolidates VIEs, and their assets and liabilities are included in the consolidated balance sheet, with specific amounts noted for total assets and liabilities.)

Year-Over-Year Comparison

Compared to the prior year's nine-month period, Lodging Fund REIT III, Inc. has experienced a significant downturn. Total revenue decreased by 13.04% to $50.34M, driven by a 13.66% drop in room revenue. The company's net loss widened by 28.08% to $23.58M, notably including a new $5.12M impairment loss on assets held for sale. Interest expenses also rose by 18.01%, further pressuring profitability. Total assets have shrunk by 10.76%, and the stockholders' deficit has more than doubled, indicating a substantial deterioration in financial health.

Filing Documents

• lfr-20250930x10q.htm (10-Q) — 2474KB
• lfr-20250930xex31d1.htm (EX-31.1) — 13KB
• lfr-20250930xex31d2.htm (EX-31.2) — 12KB
• lfr-20250930xex32d1.htm (EX-32.1) — 8KB
• 0001104659-25-112565.txt ( ) — 10419KB
• lfr-20250930.xsd (EX-101.SCH) — 83KB
• lfr-20250930_cal.xml (EX-101.CAL) — 72KB
• lfr-20250930_def.xml (EX-101.DEF) — 344KB
• lfr-20250930_lab.xml (EX-101.LAB) — 629KB
• lfr-20250930_pre.xml (EX-101.PRE) — 501KB
• lfr-20250930x10q_htm.xml (XML) — 1897KB

Financial Statements (unaudited)

Financial Statements (unaudited) 2 Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 2 Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2025 and 2024 3 Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months Ended September 30, 2025 and 2024 4 Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended September 30, 2025 and 2024 5 Notes to the Condensed Consolidated Financial Statements 7 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 31 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 53 Item 4.

Controls and Procedures

Controls and Procedures 53 PART II. OTHER INFORMATION 54 Item 1.

Legal Proceedings

Legal Proceedings 54 Item 1A.

Risk Factors

Risk Factors 54 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 54 Item 3. Defaults upon Senior Securities 58 Item 4. Mine Safety Disclosures 58 Item 5. Other Information 58 Item 6. Exhibits 59

SIGNATURES

SIGNATURES 61 i Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements LODGING FUND REIT III, INC. CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 2025 2024 (unaudited) (audited) Assets Investment in hotel properties, net of accumulated depreciation and amortization of $ 34,902,951 and $ 33,318,590 $ 208,325,346 $ 241,973,045 Cash and cash equivalents 2,392,905 2,354,025 Restricted cash 6,718,585 7,986,767 Accounts receivable, net 1,753,271 1,092,900 Franchise fees, net 1,304,503 1,616,447 Prepaid expenses and other assets 1,371,122 2,007,058 Assets held for sale 26,984,448 21,829,784 Total Assets (variable interest entities - $ 21,268,990 and $ 22,117,277 ) $ 248,850,180 $ 278,860,026 Liabilities and Equity Debt, net $ 151,288,568 $ 175,362,117 Finance lease liabilities 13,217,692 13,185,884 Accounts payable 6,514,093 6,101,337 Accrued expenses 13,427,254 9,133,344 Distributions payable 263,182 276,408 Due to related parties 15,169,456 13,821,435 Other liabilities 4,692,233 3,791,457 Mandatorily redeemable Series P preferred units, net 174,294 203,575 Liabilities related to assets held for sale 25,964,650 16,512,618 Total liabilities (variable interest entities - $ 16,985,754 and $ 17,011,733 ) 230,711,422 238,388,175 Commitments and contingencies (See Note 10) Equity Preferred stock, $ 0.01 par value, 100,000,000 shares authorized; no shares issued and outstanding — — Common stock, $ 0.01 par value, 900,000,000 shares authorized; 10,015,042 and 10,011,475 shares issued and outstanding 100,150 100,114 Additional paid-in capital 97,885,123 97,847,449 Accumulated deficit ( 130,055,811 ) ( 112,066,946 ) Total stockholders' deficit ( 32,070,538 ) ( 14,119,383 ) Non-controlling interest – Series B LP Units ( 6,660,668 ) ( 5,482,556 ) Non-controlling interest – Series GO LP Units 2,031,892 5,606,139 Non-controlling interest – Series GO II LP Units

View Full Filing

View this 10-Q filing on SEC EDGAR