Lodging Fund REIT III: Investor Recovery

Lodging Fund REIT III Lawsuit Investigation Update

Have you suffered losses investing in Lodging Fund REIT III Inc.? The White Law Group continues to investigate potential securities claims involving broker-dealers who may have improperly recommended Lodging Fund REIT III to retail investors.

Hotel Sales Announced as SEC Fair Fund Moves Forward

Recently, Legendary Capital announced the sale of two hotel assets held by Lodging Fund REIT III:

• Hampton Inn Fargo (North Dakota) – Sold December 17, 2025 for $10.5 million

• Home2 Suites by Hilton Prattville (Alabama) – Sold December 30, 2025 for $16.7 million

Both properties were part of Lodging Fund REIT III’s 19-hotel portfolio, which the board approved for potential sale in May 2024 as part of a broader liquidity strategy.

While Legendary Capital characterized the sales as opportunistic exits at attractive valuations, investors should note:

• The Hampton Inn Fargo was originally acquired in 2022 for approximately $11.4 million (excluding transaction costs).

• The Home2 Suites Prattville was purchased in 2019 for approximately $14.75 million (excluding transaction costs).

These sales come amid ongoing SEC enforcement actions and financial reporting delays tied to Lodging Fund REIT III and affiliated entities.

If you suffered investment losses due to your broker’s recommendation of Lodging Fund REIT III, you may have recovery options.

SEC Fair Fund for Lodging Fund REIT III Investors

On September 4, 2025, the U.S. Securities and Exchange Commission announced a Notice of Proposed Plan of Distribution in Administrative Proceeding File No. 3-21586 involving:

• Legacy Hospitality II, LLC

• Legendary Capital REIT III, LLC

• Corey R. Maple

The SEC found that from 2014 to 2020, the Respondents improperly directed two REITs—including Lodging Fund REIT III—to reimburse approximately $5 million in overhead expenses in a manner inconsistent with disclosures made to investors.

Settlement Amount

The Respondents were ordered to pay:

• $2,746,900 in disgorgement

• $544,444.17 in prejudgment interest

• $1,475,000 in civil penalties

Total: $4,766,344.17

This amount has been placed in a Fair Fund under the Sarbanes-Oxley Act for distribution to harmed investors.

The Proposed Plan outlines that the Net Available Fair Fund (after taxes and fees) will compensate investors for losses tied to improperly allocated expenses.

Even if you qualify for Fair Fund compensation, you may still have the right to pursue additional recovery through FINRA arbitration.

Financial Filings Delays Raise Investor Concerns

Lodging Fund REIT III has experienced repeated delays in required financial filings:

• The 2023 annual report was filed approximately 9 months late

• The Q2 2024 report was not timely filed

• Multiple 2023 reports remained outstanding into 2024

In December 2024, the REIT amended its revolving line of credit, increasing borrowing capacity from $5 million to $20 million and extending the maturity date to December 31, 2027.

Persistent filing delays in non-traded REITs can be a red flag for investors evaluating transparency and financial health.

SEC Enforcement Action: Expense Reimbursement Scheme

In September 2023, the SEC fined Corey R. Maple, co-founder of Legendary Capital, $100,000 for his role in the improper reimbursement scheme.

The SEC concluded that offering documents assigned overhead costs to the advisors—not to the REITs—yet investors ultimately bore those expenses.

The enforcement action required disgorgement totaling approximately $4.8 million, including penalties and interest.

These regulatory findings are central to current investor claims.

Non-Traded REIT Risks: What Investors Should Know

Lodging Fund REIT III is a publicly registered, non-traded REIT. Unlike publicly traded REITs, non-traded REITs are:

• Illiquid

• Commission-heavy (up to 15% upfront)

• Difficult to value

• Subject to distribution suspensions

Hospitality-focused REITs are particularly sensitive to:

• Rising interest rates

• Economic slowdowns

• Travel demand volatility

• Capital expenditure requirements

Many retail investors are not fully informed about the risks associated with these products.

Broker Due Diligence and Suitability Obligations

Under FINRA rules, brokerage firms must:

• Conduct reasonable due diligence on private placements and REIT offerings

• Ensure recommendations are suitable based on age, net worth, liquidity needs, and risk tolerance

• Fully disclose material risks and conflicts of interest

If your broker recommended Lodging Fund REIT III without adequately explaining liquidity constraints, fee structures, or regulatory concerns, you may have grounds for a FINRA arbitration claim.

Class Action Lawsuit vs. FINRA Arbitration

Investors frequently ask whether to join a class action lawsuit or file an individual FINRA arbitration claim.

Class Action Lawsuit

• Appropriate for smaller losses

• Recovery shared among many investors

FINRA Arbitration

• Often better for losses exceeding $100,000

• Tailored to individual circumstances

• May allow recovery of larger damages

The appropriate path depends on the size of your loss and how the investment was recommended.

Recovery of Investment Losses – Lodging Fund REIT III

If you invested in Lodging Fund REIT III and experienced losses, you may be able to recover damages from your brokerage firm—not just the REIT itself.

The securities fraud attorneys at The White Law Group, with offices in Chicago and Seattle, have handled more than 800 FINRA arbitration cases nationwide and have over 30 years of experience representing retail investors.

We investigate claims involving:

• Unsuitable recommendations

• Failure to conduct due diligence

• Misrepresentation of non-traded REIT risks

• Concentration in illiquid alternative investments

For a free consultation, call 888-637-5510 or visit our website.

Frequently Asked Questions (FAQs)

What is the Lodging Fund REIT III lawsuit about?

The Lodging Fund REIT III lawsuit centers on SEC findings that executives improperly directed the REIT to reimburse approximately $5 million in overhead expenses despite disclosures stating those costs were the responsibility of the advisors.

What is the Lodging Fund REIT III Fair Fund?

The SEC established a Fair Fund totaling more than $4.7 million to compensate investors harmed by improper expense reimbursements.

Do the recent hotel sales affect investor claims?

The sale of the Hampton Inn Fargo and Home2 Suites Prattville may be part of a broader liquidity strategy. However, asset sales do not eliminate potential broker liability if the REIT was unsuitable for your investment objectives.

Can I still file a claim if there is a Fair Fund?

Yes. The Fair Fund does not prevent investors from filing FINRA arbitration claims against brokers or brokerage firms for unsuitable recommendations or misrepresentations.