PROCACCIANTI HOTEL REIT, INC.
For the period ended Dec 31, 2025. Filed Mar 23, 2026.
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FY2025 · Filed Mar 23, 2026
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Item 8. Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Procaccianti Hotel REIT, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Procaccianti Hotel REIT, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, stockholders’ equity and noncontrolling interest and cash flows for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
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| | Evaluation of investments in hotels for impairment |
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| Description of the Matter | The Company’s investments in hotels, included in property and equipment, net, totaled $92.5 million as of December 31, 2025. As discussed in Note 2 to the consolidated financial statements, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.Auditing the Company’s assessment of investments in hotels for impairment was challenging because of the subjective auditor judgment in evaluating the Company’s identification of indicators of impairment. In particular, the evaluation of impairment indicators was based on qualitative and quantitative factors for the specific hotel investments. Such factors included, but were not limited to, current and anticipated operating performance, market pricing and the Company’s expected hold period. |
| How We Addressed the Matter in Our Audit | Our testing of the Company’s identification of impairment indicators included, among other procedures, obtaining evidence to corroborate management’s judgments and searching for contrary evidence such as significant declines in operating results, market and economic trends, or changes in disposition strategies. As part of our evaluation of indicators of impairment, we considered management’s estimates of market pricing, hold period, current industry and economic trends and other relevant factors. We evaluated certain significant inputs used by management to estimate market pricing, including third party valuations and comparable sales and the Company’s expected hold period as applicable. We reviewed meeting minutes and held discussions with management about the current status of potential transactions and about management's judgments to understand the probability of future events that could affect the hold period and other cash flow assumptions for the properties. |
/s/Ernst & Young LLP
We have served as the Company’s auditor since 2016.
Boston, Massachusetts
March 23, 2026
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