Securities Regulator Reportedly Investigating Lodging Fund REIT III Over Reimbursement Policy
The Securities and Exchange Commission (“SEC”) has reportedly opened an investigation into Lodging Fund REIT III Inc. Critically, this investigation might have an adverse effect on the value of your Lodging Fund REIT III holdings. Here’s more about Lodging Fund REIT and the investigation.
Who Is Lodging Fund REIT III Inc. and Legendary Capital REIT III LLC?
Evidently, on April 9, 2018, Lodging Fund REIT III Inc. was formed as a Maryland corporation. It focuses on holding a diversified portfolio of select service, limited service and extended stay hotels located in the heartland of America. It appears that Lodging Fund REIT III is advised by Legendary Capital REIT III LLC, meaning that it receives advice from Legendary Capital regarding the acquisition, financing, and disposition of hotel-based projects and more. So, Legendary Capital REIT III manages Lodging Fund REIT and is responsible for their underlying projects.
According to SEC filings, on June 1, 2018, Lodging Fund REIT III offered $100,000,000 in common stock to accredited investors through a private placement, at $10 a share. Evidently, as of year-end 2020, the REIT issued and sold 7,675,843 shares which generated $75,300,000 in proceeds.
SEC’s Investigation Concerns Expense Reimbursements, Disclosure Of Reimbursement Policy
Notably, SEC filings indicate that the regulator is investigating Lodging Fund REIT III and Legendary Capital REIT III. Specifically, Lodging Fund REIT III filed an Annual Report this year relaying that in December 2020, it became aware that SEC began investigating their reimbursement of expenses to Legendary Capital REIT III. Also, the regulator is investigating Lodging Fund REIT III’s disclosure of policies and procedures concerning reimbursements.
Additionally, Lodging Fund REIT III relayed that it is complying with SEC’s investigation. However, the company mentioned that it can’t estimate how much it will cost to comply “with the inquiry or its outcome.”
Investor Concerns About Lodging Fund REIT III
Aside from the foregoing investigation being a cause for concern, investors should consider that Lodging Fund REIT was just formed in 2018. It does not have a substantial operating history like some other REITs do. Because of this, Lodging Fund REIT might carry more risk given its operating inexperience.
Also, there is no guarantee that the REIT will achieve its objectives or generate a certain return for stockholders. Critically, the strategy of Lodging Fund REIT III is to profit from the increase in hotel room demand. For this reason, when there are substandard economic conditions or travel concerns, such as those caused by the ongoing COVID-19 pandemic, then this can adversely affect hotel room demand.
Moreover, Lodging Fund REIT III is a non-traded REIT. So, no public market exists for the shares. While investors might be able to redeem their shares in limited circumstances, it is always possible that directors could nix the repurchase plan or amend it without stockholder approval.
Concerns Of Unsuitable REIT Sales, Misrepresentations By Financial Advisors
Financial advisors and securities brokers often recommend REITs to investors seeking income. While the investments may appear sensible for some investors, they are not suitable for most. Particularly, REITs contain special risks which include the possible suspension of dividends and the inability to sell holdings. It is vital that financial advisors and securities brokers ensure that their clients understand and can handle those risks.
Further, it is important that financial professionals examine each investor’s suitability profile before making REIT recommendations. Suitability involves things like investment objectives, risk tolerance, liquidity needs and more. For this reason, if a financial advisor or securities broker sold you unsuitable or misrepresented REITs, then you could potentially bring a lawsuit to potentially recover your losses.
Have You Experienced Losses By Investing In Lodging Fund REIT III?
Have you experienced losses by investing in Lodging Fund REIT III because of your financial advisor or securities broker? If you have, contact Soreide Law Group at (888) 760-6552 and speak with an experienced securities lawyer concerning a possible recovery of your investment losses. Soreide Law Group represents clients on a contingency fee basis and advances all costs. The law firm has recovered millions of dollars for investors who have been wronged by securities brokers and financial advisors.