7. RELATED PARTY TRANSACTIONS

Legendary Capital REIT III, LLC—Substantially all of the Company’s business is managed by the Advisor and its affiliates, pursuant to the Advisory Agreement. The Company has no direct employees. The employees of Legendary Capital, LLC (the “Sponsor”), an affiliate of the Advisor, provide services to the Company related to the negotiations of property acquisitions and financing, asset management, accounting, investor relations, and all other administrative services. The Company reimburses the Advisor and its affiliates, at cost, for certain expenses incurred on behalf of the Company. The Advisory Agreement has a term of 10 years.

The Advisor earns a one-time acquisition fee of up to 1.4% of the hotel purchase price including funds allocated for any PIP at the time of each hotel property acquisition, a financing fee of up to 1.4% of the hotel purchase price including funds allocated for any PIP at the time of closing the initial financing, and an annual asset management fee of up to 0.75% of the gross assets of the Company, which is payable on a monthly basis. The Advisor will also be paid a refinancing fee of up to 0.75% of the principal amount of any refinancing at the time of closing the refinancing, and a disposition fee equal to between 0.0% and 4.0% of the hotel sales price, payable at the closing of the disposition, and real estate commissions of up to 3.0% of the hotel purchase price in connection with the sale of a hotel property in which the Advisor or its affiliates provided substantial services, but in no event greater than one-half of the total commissions paid with respect to such property if a commission is paid to a third-party as well as the Advisor, and in no event will total commissions exceed 5.0% of the hotel sales price. Certain affiliates of the Advisor may receive an annual guarantee fee equal to 1.0% of the guaranty amount, paid on a monthly basis, for debt obligations of the hotel properties personally guaranteed by such affiliates. The Advisor may earn an annual subordinated performance fee equal to 20% of the distributions after the common stockholders and Operating Partnership limited partners (other than the Series B Limited Partnership Unit (“Series B LP Unit”) holders) have received a 6% cumulative, but not compounded, return per annum.

Per the terms of the Operating Partnership’s operating agreement, the Advisor receives distributions from the Operating Partnership in connection with their ownership of non-voting Series B LP Units. The Advisor’s ownership of Series B LP Units is presented as non-controlling interest on the accompanying consolidated financial statements. In years other than the year of liquidation, after the Company’s common stockholders have received a 6% cumulative but not compounded return on their original capital contributions, the Advisor receives distributions equal to 5% of the total distributions made. In the year of liquidation, termination, merger or other cessation of the general partner, or the liquidation of the Operating Partnership, holders of the Series B LP Units shall be distributed an amount equal to 5% of the limited partners’ capital contributions after the common stockholders and the limited partners have received a return of their original capital contributions plus a 6% cumulative but not compounded return. In the year of liquidation, termination, merger or other cessation of the general partner, or the liquidation of the Operating Partnership holders of the Series B LP Units shall also be distributed an amount equal to 20% of the net proceeds from the sale of the properties, after the common stockholders and the limited partners have received a return of their original capital contributions plus a 6% cumulative but not compounded return from all distributions.

The Advisor and its affiliates may be reimbursed by the Company for certain organization and offering expenses in connection with the Offering, including legal, printing, marketing and other Offering related costs and expenses. Following the termination of the Offering, the Advisor will reimburse the Company for any such amounts incurred by the Company in excess of 15% of the gross proceeds of the Offering. In addition, the Company may pay directly or reimburse the Advisor and its affiliates for certain costs incurred in connection with its provision of services to the Company, including certain acquisition costs, financing costs, and sales and marketing costs, as well as an allocable share of general and administrative overhead costs. All reimbursements are paid to the Advisor and its affiliates at cost.

Fees and reimbursements incurred and payable to the Advisor and its affiliates, for the three months ended March 31, 2020 and 2019, and amounts outstanding and payable as of March 31, 2020 and December 31, 2019, were as follows:


	Incurred				Payable as of
	For the Three Months Ended March 31,				March 31,		December 31,
	2020		2019		2020		2019
Fees:
Acquisition fees	$	501,949	$	200,324	$	—	$	213,402
Financing fees		501,949		200,324		—		213,402
Asset management fees		197,165		25,784		74,464		81,389
Performance fees		—		—		—		68,534
	$	1,201,063	$	426,432	$	74,464	$	576,727

Reimbursements:
Offering costs	$	583,926	$	611,135	$	21,179	$	122,833
General and administrative		813,575		523,066		26,549		120,386
Sales and marketing		76,153		91,342		9,647		3,333
Acquisition costs		64,847		58,951		15,956		31,966
Other		282		—		7,477		—
	$	1,538,783	$	1,284,494	$	80,808	$	278,518

For the three months ended March 31, 2020 and 2019, the Operating Partnership recognized distributions payable to the Advisor in the amount of $60,308 and $14,004, respectively, in connection with the Advisor’s ownership of Series B LP Units. As of March 31, 2020 and December 31, 2019, the Company had distributions payable to the Advisor $123,925 and $63,617, respectively. For the three months ended March 31, 2020 and 2019, the Company paid distributions in the amount of $9,409 and $9,409, respectively, to Corey Maple and Norman Leslie in connection with their ownership of 53,763 shares each, of the Company’s common stock.

The members of the Advisor personally guaranty certain loans of the Company and may receive a guarantee fee of up to 1.0% per annum of the guaranty amount. Mr. Maple, our Chief Executive Officer and Chairman of the Board, is a guarantor of the Company’s loans secured by the hotel properties located in Prattville, Alabama and Southaven, Mississippi, which had original loan amounts of $9.6 million and $13.5 million, respectively, and is a guarantor of the Company’s $5.0 million line of credit which is secured by the hotel properties located in Cedar Rapids, Iowa and Eagan, Minnesota, and 100,000 limited partnership units of Lodging Fund REIT III OP, LP. Mr. Leslie, our President, Chief Investment Officer and Director, is a guarantor of the Company’s loan secured by the Company’s hotel property in Pineville, North Carolina, which had an original loan amount of $9.3 million. Mr. Maple and Mr. Leslie are also guarantors of the Company’s $3.0 million line of credit, each in the amount of $1.2 million. For the three months ended March 31, 2020, the Company incurred $69,334 of loan guarantee fees, and as of March 31, 2020, there were $63,334 of loan guarantee fees outstanding and payable. No guarantee fees were assessed for three months ended March 31, 2019, and no guarantee fees were outstanding and payable at December 31, 2019.

NHS, LLC dba National Hospitality Services—NHS is wholly-owned by Norman Leslie, a director and executive officer of the Company and a principal of the Advisor. NHS provides property management and hotel operations management services for the Company’s hotel properties, pursuant to individual management agreements. The agreements have an initial term expiring on December 31st of the fifth full calendar year following the effective date of the agreement, which automatically renews for a period of five years on each successive five-year period, unless terminated in accordance with its terms.

NHS earns a monthly base management fee for property management services, including overseeing the day-to-day operations of the hotel properties equal to 4% of gross revenue. NHS may also earn an accounting fee of $14.00 per room for accounting services, payable monthly, and an administrative fee equal to 0.60% of gross revenues for administrative and other services. The Company reimburses NHS for certain costs of operating the properties incurred on behalf of the Company. All reimbursements are paid to NHS at cost.

Fees and reimbursements incurred and payable to, NHS for the three months ended March 31, 2020 and 2019, and amounts outstanding and payable as of March 31, 2020 and December 31, 2019, were as follows:


	Incurred				Payable as of
	For the Three Months Ended March 31,				March 31,		December 31,
	2020		2019		2020		2019
Fees:
Management fees	$	116,089	$	24,207	$	36,182	$	30,024
Administrative fees		17,863		9,202		5,821		4,617
Accounting fees		20,820		5,040		7,968		4,303
	$	154,772	$	38,449	$	49,971	$	38,944

Reimbursements	$	80,576	$	16,790	$	9,715	$	8,572