Exchange Rights
Subject to restrictions on ownership in order to comply with the REIT rules, each Series GO II Limited Partner will have the right to exchange its Series GO II Limited Units for, at the option of the Operating Partnership, an equivalent number of shares of common stock of the Company (“Common Shares”), or cash equal to the fair market value of the Common Shares (the “Cash Amount”) which would have otherwise been received pursuant to such exchange; provided, however, that until such time as the Series GO II Limited Units have been allocated Net Income (including book-up income) such that their positive Capital Account balance is equal to the net asset value of the Company’s shares of common stock (the “Share NAV”), the exchange right will be limited and the Series GO II Limited Partners will only be entitled to receive a pro rata portion of a REIT Share equal to the positive Capital Account balance of the Series GO II Limited Unit divided by the Share NAV. The exchange right is not available until all of the following have occurred (the “Exchange Date”): (i) the Common Shares are listed on a national securities exchange, the occurrence of a Termination Event or, as determined in the sole discretion of the General Partner, the occurrence of a similar event; (ii) the Series GO II Limited Partner has held its Series GO II Limited Units for at least one year; (iii) the Common Shares to be issued pursuant to the redemption have been registered with the SEC and the registration statement has been declared effective, or an exemption from registration is available; and (iv) the exchange does not result in a violation of the shareholder ownership limitations set forth in the General Partner’s articles of incorporation. Notwithstanding the above, the General Partner may waive any of the requirements above in its sole discretion other than (ii) or (iv).
Call Right of the General Partner
In the event of a Termination Event or immediately prior to a Termination Event, the General Partner will have the right to purchase all of the Limited Partner Units (including the Series GO II Limited Units) held by a Limited Partner (the “Called Units”) for cash or, in the General Partner’s sole discretion, Common Shares in lieu of cash. A Limited Partner receiving a call notice from the General Partner will have no rights with respect to any interest in the Operating Partnership other than the right to receive payment for its Called Units.
Offering of Series GO II Limited Units
The Operating Partnership has commenced a separate offering for the purchase of the Series GO II Limited Units at a purchase price equal to 75% of the Share NAV. The purchase price based on the current Share NAV is $7.93 per Series Go II Limited Unit. The Series GO II Limited Units will be specially allocated all Net Income (including book-up income) in proportion to the 25% issue price shortfall, until the positive Capital Account balance of each Series GO II Limited Unit is equal to the Share NAV. As a result, the issuance of Series GO II Limited Units will be dilutive to the General Partner Units and therefore, to the shares of common stock of the Company.
The foregoing description of the Amendment does not purport to be a complete description and is qualified in its entirety by reference to the full text of the Amendment, a copy of which is attached as an exhibit to this Current Report on Form 8-K.
ITEM 2.02 Results of Operations and Financial Condition.
Lodging Fund REIT III, Inc. (the “Company”) is providing preliminary unaudited consolidated financial statements of the Company as of and for the year ended December 31, 2022, which financial statements are attached to this Current Report on Form 8-K (the “Current Report”) as Exhibit 99.1 and incorporated herein solely for the purposes of this Item 2.02 disclosure. The information in this Item 2.02 of this Current Report, including Exhibit 99.1 hereto, is being furnished and shall not be deemed to be filed for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, unless expressly set forth as being incorporated by reference into such filing.
