Lodging Fund REIT III, a nonlisted real estate investment trust, has turned to a financial adviser as it weighs major strategic decisions amid falling hotel revenue, suspended distributions and mounting balance-sheet pressure.
It’s also been selling off properties to boost its available cash.
The hospitality REIT, sponsored by Fargo, North Dakota-based Legendary Capital, reported in a securities filing that a special committee of independent directors has hired Piper Sandler & Co. to evaluate strategic alternatives designed to maximize value for stockholders. The review could lead to asset sales, a merger, a public listing, recapitalization or other transactions.
Lodging Fund REIT III “is committed to conducting a thorough and disciplined review process focused on identifying the path that best serves the interests of our stockholders,” Perry Rynders, chair of the special committee, said in a statement.
Legendary Capital did not immediately respond to a request for additional comment from CoStar News.
The hiring of Piper Sandler signals rising urgency inside the hotel owner as operating headwinds persist and financial flexibility tightens.
The REIT owns a portfolio of roughly a dozen hotels following recent property sales primarily in secondary and tertiary U.S. markets.
The company is under strain from several fronts. Revenue has weakened. Room revenue fell 17% in the third quarter compared with the prior year, driven largely by softer demand across retained properties, the company reported in its last quarterly report filed in November. The REIT has postponed filing its annual report for 2025. Nine-month 2025 revenue declined 11%.
Cash flow pressure forced management to suspend shareholder distributions starting in September 2024. No distributions have been declared since.
At the same time, debt remains material. As of Sept. 30, the REIT carried about $151.3 million in net debt, including mortgage obligations and lines of credit. Several loans are subject to extensions or refinancing discussions, often at higher interest rates.
Management acknowledged that lenders have demanded increased pricing on refinancings, raising debt service costs and tightening margins. Variable rate debt further exposes the portfolio to interest-rate risk.
Against that backdrop, the broader lodging backdrop compounds the challenge. Industry forecasts cited by the company point to declining occupancy, weak revenue per available room, elevated costs, and uneven recovery in corporate and group travel.
Interest rates remain high. Insurance and labor costs continue to rise. Demand patterns have shifted away from historical norms. Even traditionally strong seasonal quarters have underperformed expectations.
Within its own portfolio, Lodging Fund REIT III reported softness across multiple markets, underscoring the need for balance sheet flexibility and capital discipline.
Since its third quarter earnings’ filing, the REIT has sold at least five hotels, according to CoStar data and REIT reporting. The most recent sale occurred last month when it sold the 142-room Fairfield Inn at 3605 S. Wadsworth Blvd. in Lakewood, Colorado, for $12.4 million. The REIT had purchased the property four years earlier for $19.4 million.