PROCACCIANTI HOTEL REIT, INC.

Previous wording

Factors that could have a material adverse effect on our operations and future prospectus include, but are not limited to:

Current wording

Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:

Previous wording

Other risks include those described under the section entitled Item 1A. “Risk Factors” of Part I our Annual Report and subsequent quarterly reports. Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this Quarterly Report. All forward-looking statements are made as of the date of this Quarterly Report and the risk that actual results will differ materially from the expectations expressed in this Quarterly Report will increase with the passage of time. These risks and uncertainties may be amplified by macroeconomic events, including but not limited to the conflict between Russia and Ukraine, Iran and Israel, the Hamas-Israel war, international trade relations and trade policy, including those related to tariffs, rising interest rates and inflation. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Quarterly Report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report will be achieved.

Current wording

Other risks include those described under the section entitled Item 1A. “Risk Factors” of Part I of our Annual Report and subsequent quarterly reports. Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this Quarterly Report. All forward-looking statements are made as of the date of this Quarterly Report and the risk that actual results will differ materially from the expectations expressed in this Quarterly Report will increase with the passage of time. These risks and uncertainties may be amplified by macroeconomic events, including but not limited to the conflict between Russia and Ukraine, Iran and Israel, the Hamas-Israel war, international trade relations and trade policy, including those related to tariffs, rising interest rates and inflation. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Quarterly Report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report will be achieved.

Previous wording

Subscription proceeds from Class K common stock (“K Shares”), Class K-I common stock (“K-I Shares”), and Class K-T common stock (“K-T Shares”) in our Private Offering and our Public Offering, which terminated in August

Current wording

Subscription proceeds from Class K common stock (“K Shares”), Class K-I common stock (“K-I Shares”), and Class K-T common stock (“K-T Shares”) in our Private Offering and our Public Offering, which terminated in August 2021, as discussed below, have been applied to investments in hotel properties or real estate-related investments relating to hotel properties.

Previous wording

Since the commencement of the Public Offering and through March 31, 2026, the Company received approximately $43,102,414 in gross proceeds from the sale of K Shares, K-I Shares, and K-T Shares in the Public Offering, inclusive of proceeds from the sale of $2,470,556 of K Shares, $1,759,134 of K-I Shares and $72,561 of K-T Shares pursuant to the DRIP. Additionally, on October 26, 2018, June 10, 2019 and January 19, 2021, the Company received $1,500,000, $690,000 and $440,000, respectively, from the sale of A Shares to THR in private placements, the proceeds of which were used to pay the selling commissions, dealer manager fees, stockholder servicing fees, and other organizational and offering expenses related to the K Shares, K-I Shares and K-T Shares sold in the primary offering portion of the Public Offering. In addition, the Company allocated proceeds from the sale of A Shares in amounts that represent the difference between (i) the applicable estimated NAV per K-I Share and the applicable offering price of K-I Shares sold in the primary offering and (ii) any discount to the applicable offering price of K Shares, K-I Shares and K-T Shares arising from reduced or waived selling commissions (other than reduced selling commissions for volume discounts) or dealer manager fees.

Current wording

Since the commencement of the Public Offering and through June 30, 2026, the Company received approximately $43,294,634 in gross proceeds from the sale of K Shares, K-I Shares, and K-T Shares in the Public Offering, inclusive of proceeds from the sale of $2,580,063 of K Shares, $1,841,847 of K-I Shares and $72,561 of K-T Shares pursuant to the DRIP. Additionally, on October 26, 2018, June 10, 2019 and January 19, 2021, the Company received $1,500,000, $690,000 and $440,000, respectively, from the sale of A Shares to THR in private placements, the proceeds of which were used to pay the selling commissions, dealer manager fees, stockholder servicing fees, and other organizational and offering expenses related to the K Shares, K-I Shares and K-T Shares sold in the primary offering portion of the Public Offering. In addition, the Company allocated proceeds from the sale of A Shares in amounts that represent the difference between (i) the applicable estimated NAV per K-I Share and the applicable offering price of K-I Shares sold in the primary offering and (ii) any discount to the applicable offering price of K Shares, K-I Shares and K-T Shares arising from reduced or waived selling commissions (other than reduced selling commissions for volume discounts) or dealer manager fees.

Previous wording

S2K Financial LLC was the dealer manager for our Public Offering and was responsible for the distribution of our common stock in our Public Offering. PHA is our advisor and is an affiliate of our Sponsor. Subject to certain restrictions and limitations, PHA manages our day-to-day operations and our portfolio of properties and real estate-related assets. PHA sources and presents investment opportunities to our board of directors and provides investment management, marketing, investor relations and other administrative services on our behalf. We have no paid employees and rely on PHA to provide substantially all of our services. Pursuant to our Advisory Agreement with PHA, we will reimburse PHA for costs incurred in providing these administrative services. PHA will be required to allocate the cost of such services to us based on objective factors such as total assets, revenues and/or time allocations. At least annually, our board of directors will review the amount of administrative services expense reimbursable to PHA to determine whether such amounts are reasonable in relation to the services provided. During the three months ended March 31, 2026 and 2025, the Sponsor requested reimbursement for $60,481 and $49,348, respectively, of such administrative service expenses. Of these amounts, $49,082 is included in due to related parties on the condensed consolidated balance sheet as of March 31, 2026.

Current wording

S2K Financial LLC was the dealer manager for our Public Offering and was responsible for the distribution of our common stock in our Public Offering. PHA is our advisor and is an affiliate of our Sponsor. Subject to certain restrictions and limitations, PHA manages our day-to-day operations and our portfolio of properties and real estate-related assets. PHA sources and presents investment opportunities to our board of directors and provides investment management, marketing, investor relations and other administrative services on our behalf. We have no paid employees and rely on PHA to provide substantially all of our services. Pursuant to our Advisory Agreement with PHA, we will reimburse PHA for costs incurred in providing these administrative services. PHA will be required to allocate the cost of such services to us based on objective factors such as total assets, revenues and/or time allocations. At least annually, our board of directors will review the amount of administrative services expense reimbursable to PHA to determine whether such amounts are reasonable in relation to the services provided. During the three months ended June 30, 2026 and 2025, the Sponsor requested reimbursement for $49,993 and $48,647, respectively, of such administrative service expenses. Of

Previous wording

We incurred operating expenses of approximately $1,385,531 and incurred an Excess Amount of approximately $122,157 during the twelve months ended March 31, 2026. Our board of directors (including a majority of our

Current wording

During each of the twelve months ended March 31, 2026 and June 30, 2026, our total operating expenses were less than 2% of our average invested assets but exceeded 25% of our net income. During each of the twelve months ended December 31, 2025, September 30, 2025, June 30, 2025, and March 31, 2025, our total operating expenses were less than 2% of our average invested assets and 25% of our net income. We incurred operating expenses of approximately $1,370,725 and incurred an Excess Amount of approximately $218,113 during the twelve months ended June 30, 2026. We incurred operating expenses of approximately $1,385,531 and incurred an Excess Amount of approximately $122,157 during the twelve months ended March 31, 2026. Our board of directors (including a majority of our independent directors) determined that the Excess Amount for the twelve months ended June 30, 2026 and March 31, 2026 was justified as unusual and non-recurring.

Previous wording

Our board of directors may authorize distributions in excess of those required for us to maintain REIT status as it deems appropriate. Our board of directors may reconsider our current distribution policy and may take further action with respect to distributions for our common stock, and could consider eliminating, suspending, or significantly reducing distributions in the future. The timing and amount of distributions will be determined by our board of directors, in its sole discretion, and may vary from time to time. Our board of directors’ discretion will be influenced in substantial part by its obligation to cause us to comply with the REIT requirements of the Code. We can provide no assurance that we will be able to pay distributions on our K Shares, K-I Shares or K-T Shares. However, distributions will continue to accumulate pursuant to our charter.

Current wording

Our board of directors may authorize distributions in excess of those required for us to maintain REIT status as it deems appropriate. Our board of directors may reconsider our current distribution policy and may take further action with respect to distributions for our common stock, and could consider eliminating, suspending, or significantly reducing distributions in the future. The timing and amount of distributions will be determined by our board of directors, in its sole discretion, and may vary from time to time. Our board of directors’ discretion will be influenced in substantial part by its obligation to cause us to comply with the REIT requirements of the Code. We can provide no assurance that we will be able to pay distributions on our K Shares or K-I Shares. However, distributions will continue to accumulate pursuant to our charter.

Previous wording

Although a portion of the tax composition of such distributions may be a return of capital, distributions for the three months ended March 31, 2026 and 2025 were paid for with gross cash flow from operations. To the extent we do not have taxable income, distributions paid will be considered a return of capital to stockholders.

Current wording

Although a portion of the tax composition of such distributions may be a return of capital, distributions for the six months ended June 30, 2026 and 2025 were paid for with gross cash flow from operations. To the extent we do not have taxable income, distributions paid will be considered a return of capital to stockholders.

Previous wording

On March 3, 2020, our stockholders approved to amend our charter (1) to increase the rate at which cash distributions on K Shares, K-I Shares and K-T Shares automatically accumulate under our charter from 6% to 7% per annum of the K Share Distribution Base of such K Share, K-I Share Distribution Base of such K-I Share and K-T Share Distribution Base of such K-T Share, respectively, and (2) to increase the maximum rate at which distributions on A Shares may be authorized by our board of directors and declared by us from 6% to 7% of the stated value of an A Share ($10.00) from income and cash flow from ordinary operations on a cumulative basis. The changes pursuant to the Articles of Amendment to our charter became effective beginning with distributions that accumulated on March 31, 2020.

Current wording

On March 3, 2020, our stockholders approved amending our charter (1) to increase the rate at which cash distributions on K Shares, K-I Shares and K-T Shares automatically accumulate under our charter from 6% to 7% per annum of the K Share Distribution Base of such K Share, K-I Share Distribution Base of such K-I Share and K-T Share Distribution Base of such K-T Share, respectively, and (2) to increase the maximum rate at which distributions on

Previous wording

We paid quarterly K Share, K-I Share, and OP unit distributions with respect to all quarters of 2025 and the first quarter of 2026, funded from the operations of our hotel properties and proceeds received pursuant to the DRIP, consistent with prior distributions. Unpaid distributions will continue to accumulate pursuant to our charter. Our board of directors will make determinations as to the payment of future distributions on a quarter by quarter basis; however, distributions will continue to accumulate pursuant to our charter.

Current wording

We paid quarterly K Share, K-I Share, and OP unit distributions with respect to all quarters of 2025 and the first two quarters of 2026, funded from the operations of our hotel properties and proceeds received pursuant to the DRIP, consistent with prior distributions. Unpaid distributions will continue to accumulate pursuant to our charter. Our board of directors will make determinations as to the payment of future distributions on a quarter by quarter basis; however, distributions will continue to accumulate pursuant to our charter.

Previous wording

The discussion that follows is based on our consolidated results of operations for the three months ended March 31, 2026 and 2025.

Current wording

The discussion that follows is based on our consolidated results of operations for the three and six months ended June 30, 2026 and 2025.

Previous wording

We expect the majority of our revenues to be derived from the operation of our hotel properties. Rooms revenues are the product of the number of rooms sold and the average daily room rate. Rooms revenues decreased to $4,478,821 for the three months ended March 31, 2026 from $5,214,341 for the three months ended March 31, 2025. The net decrease of $735,520, or 14.1%, was largely due to decreases in ADR and occupancy.

Current wording

We expect the majority of our revenues to be derived from the operation of our hotel properties. Rooms revenues are the product of the number of rooms sold and the average daily room rate. Rooms revenues decreased to $7,624,728 for the three months ended June 30, 2026, from $8,089,157 for the three months ended June 30, 2025. The net decrease of $464,429, or 5.74%, was largely due to decreases in ADR and occupancy.

Previous wording

Food and beverage revenues increased to $359,861 for the three months ended March 31, 2026, from $359,086 for the three months ended March 31, 2025. These amounts are comprised of revenues realized in hotel food and beverage outlets as well as catering events.

Current wording

Food and beverage revenues increased to $811,931 for the three months ended June 30, 2026, from $705,152 for the three months ended June 30, 2025. These amounts are comprised of revenues realized in hotel food and beverage outlets as well as catering events. The increase of $106,779 is primarily driven by an increase in catering and beverage revenues at the Hotel Indigo Traverse City.

Previous wording

Other operating revenues decreased to $273,261 for the three months ended March 31, 2026, from $273,547 for the three months ended March 31, 2025. These amounts include ancillary hotel revenues and other items primarily driven by occupancy such as telephone/internet, parking, gift shops, and other guest services.

Current wording

Other operating revenues increased to $462,922 for the three months ended June 30, 2026, from $378,411 for the three months ended June 30, 2025. These amounts include ancillary hotel revenues and other items primarily driven by occupancy such as telephone/internet, parking, gift shops, and other guest services.

Previous wording

Other property expenses were $2,572,278 and $2,553,061, for the three months ended March 31, 2026, and 2025, respectively. These amounts include maintenance, utilities, sales and marketing, and general and administrative expenses of the hotel properties, as well as net franchise fees, property taxes and other taxes. The $19,217 increase in other property expenses is primarily driven by an increase in snow removal expenses at the Hilton Garden Inn Providence due to severe snowstorms.

Current wording

Other property expenses were $2,976,063 and $2,941,912, for the three months ended June 30, 2026, and 2025, respectively. These amounts include maintenance, utilities, sales and marketing, and general and administrative expenses of the hotel properties, as well as net franchise fees, property taxes and other taxes.

Previous wording

Property management fees to affiliates were $153,310 and $175,662 for the three months ended March 31, 2026 and 2025, respectively. Property management fees are property level expenses equal to 3% of the hotel properties’ gross revenues and we expect them to fluctuate accordingly.

Current wording

Property management fees to affiliates were $265,989 and $275,311 for the three months ended June 30, 2026 and 2025, respectively. Property management fees are property level expenses equal to 3% of the hotel properties’ gross revenues and we expect them to fluctuate accordingly.

Previous wording

Corporate general and administrative expenses were $310,441 and $284,776 for the three months ended March 31, 2026 and 2025, respectively. Corporate general and administrative expenses consist primarily of transfer agent fees, fees paid to the board of directors, audit and tax fees, and other professional services fees.

Current wording

Corporate general and administrative expenses were $336,045 and $350,851 for the three months ended June 30, 2026 and 2025, respectively. Corporate general and administrative expenses consist primarily of transfer agent fees, fees paid to the board of directors, audit and tax fees, and other professional services fees.

Previous wording

Depreciation and amortization expenses were $954,594 and $1,091,161 for the three months ended March 31, 2026 and 2025, respectively. These amounts include depreciation on our hotel buildings, improvements, furniture, fixtures and equipment, along with amortization of our franchise fees and certain intangibles.

Current wording

Depreciation and amortization expenses were $954,306 and $983,663 for the three months ended June 30, 2026 and 2025, respectively. These amounts include depreciation on our hotel buildings, improvements, furniture, fixtures and equipment, along with amortization of our franchise fees and certain intangibles.

Previous wording

Interest income on interest-bearing cash accounts was $38,360 and $56,274 for three months ended March 31, 2026 and 2025, respectively. Interest income is presented as a reduction of the total interest expense on the consolidated statement of operations.

Current wording

Interest income on interest-bearing cash accounts was $32,138 and $48,591 for three months ended June 30, 2026 and 2025, respectively. Interest income is presented as a reduction of the total interest expense on the consolidated statement of operations.

Previous wording

For the three months ended March 31, 2026 and 2025, we recorded a net loss of $1,810,747 and $933,641, respectively. The increase in net loss of $877,106 is the result of the revenue and expense changes discussed above.

Current wording

For the three months ended June 30, 2026 and 2025, we recorded net income of $987,555 and $1,413,202, respectively. The decrease in net income of $425,647 is the result of the revenue and expense changes discussed above.

Previous wording

For the three months ended March 31, 2026 and 2025, we recorded net income relating to noncontrolling interests of $49,154 and $252,679, respectively. This amount includes net income or losses attributable to a third-party’s 49% ownership interest in PCF and will fluctuate accordingly with any increases or decreases to net income of PCF. This amount also includes net income or losses attributable to the noncontrolling Class K OP Units issued as part of the Hilton Garden Inn Providence acquisition. The noncontrolling Class K OP Units are allocated net income or loss attributable to the Operating Partnership based on the total outstanding Class K OP Units as a percentage of all our outstanding common stock.

Current wording

For the three months ended June 30, 2026 and 2025, we recorded net income relating to noncontrolling interests of $252,256 and $219,612, respectively. This amount includes net income or losses attributable to a third party’s 49% ownership interest in PCF and will fluctuate accordingly with any increases or decreases to net income of PCF. This amount also includes net income or losses attributable to the noncontrolling Class K OP Units issued as part of the Hilton Garden Inn Providence acquisition. The noncontrolling Class K OP Units are allocated net income or loss attributable to the Operating Partnership based on the total outstanding Class K OP Units as a percentage of all our outstanding common stock.

Previous wording

The decrease in rooms revenues of $72,363 or 8.50%, at the Springhill Suites Wilmington is primarily driven by a decrease in occupancy. Occupancy at the Springhill Suites Wilmington decreased from 68.73% for the three months ended March 31, 2025, to 63.16% for the three months ended March 31, 2026. The ADR at the Springhill Suites Wilmington decreased from $114.65 for the three months ended March 31, 2025, to $114.16 for the three months ended March 31, 2026, a decrease of 0.43%.

Current wording

The decrease in rooms revenues of $61,548 or 2.65%, at the Springhill Suites Wilmington is primarily driven by a decrease in occupancy. Occupancy at the Springhill Suites Wilmington decreased from 77.03% for the six months ended June 30, 2025, to 73.46% for the six months ended June 30, 2026. The ADR at the Springhill Suites Wilmington increased from $138.57 for the six months ended June 30, 2025 to $141.45 for the six months ended June 30, 2026, an increase of 2.08%.

Previous wording

The decrease in rooms revenues of $466,018, or 22.06%, at the Staybridge Suites St. Petersburg is driven by a decrease in both ADR and occupancy. The ADR at the Staybridge Suites St. Petersburg decreased from $214.80 for the three months ended March 31, 2025, to $195.97 for the three months ended March 31, 2026, a decrease of 8.77 %. Occupancy at the Staybridge Suites St. Petersburg decreased from 91.83% for the three months ended March 31, 2025,

Current wording

The decrease in rooms revenues of $355,618, or 10.26%, at the Staybridge Suites St. Petersburg is driven by a decrease in both ADR and occupancy. The ADR at the Staybridge Suites St. Petersburg decreased from $186.43 for the six months ended June 30, 2025, to $180.20 for the six months ended June 30, 2026, a decrease of 3.34 %. Occupancy at the Staybridge Suites St. Petersburg decreased from 86.32% for the six months ended June 30, 2025, to 80.14% for the six months ended June 30, 2026. The decrease in occupancy for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 was primarily driven by high occupancy in the six months ended June 2025, due to extended stay guests displaced by the 2024 hurricanes as well as restoration contractors assisting with post-hurricane efforts.

Previous wording

The decrease in rooms revenues of $119,954, or 15.88%, at the Hotel Indigo Traverse City is driven by a decrease in both ADR and occupancy. The ADR at the Hotel Indigo Traverse City decreased from $143.96 for the three months ended March 31, 2025, to $134.50 for the three months ended March 31, 2026, a decrease of 6.57%. Occupancy at the Hotel Indigo Traverse City decreased from 54.50% for the three months ended March 31, 2025, to 49.07% for the three months ended March 31, 2026. The decrease in occupancy for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 was primarily driven by inclement weather in the three months ended March 2026, causing guest reservation cancellations.

Current wording

The decrease in rooms revenues of $243,702, or 9.15%, at the Hotel Indigo Traverse City is driven by a decrease in both ADR and occupancy. The ADR at the Hotel Indigo Traverse City decreased from $203.71 for the six months ended June 30, 2025, to $194.99 for the six months ended June 30, 2026, a decrease of 4.28%. Occupancy at the Hotel Indigo Traverse City decreased from 67.50% for the six months ended June 30, 2025, to 64.06% for the six

Previous wording

The decrease in rooms revenues of $100,148 or 24.48%, at the Cherry Tree Inn is primarily driven by a decrease in both ADR and occupancy. The ADR at the Cherry Tree Inn decreased from $133.55 for the three months ended March 31, 2025, to $119.46 for the three months ended March 31, 2026, a decrease of 10.55%. Occupancy at the Cherry Tree Inn decreased from 44.78% for the three months ended March 31, 2025, to 37.81% for the three months ended March 31, 2026. The decrease in occupancy for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 was primarily driven by inclement weather in the three months ended March 2026, causing guest reservation cancellations.

Current wording

The decrease in rooms revenues of $129,784, or 9.37%, at the Cherry Tree Inn is primarily driven by a decrease in both ADR and occupancy. The ADR at the Cherry Tree Inn decreased from $193.51 for the six months ended June 30, 2025, to $183.59 for the six months ended June 30, 2026, a decrease of 5.13%. Occupancy at the Cherry Tree Inn decreased from 52.04% for the six months ended June 30, 2025, to 49.71% for the six months ended June 30, 2026. The decrease in occupancy for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 was primarily driven by market softening in the six months ended March 2026, causing guest reservation cancellations.

Previous wording

Rooms expenses decreased to $1,241,255 for the three months ended March 31, 2026, from $1,367,983 for the three months ended March 31, 2025. The $126,728 net decrease in rooms expenses is primarily due to a decrease in travel agent commissions. Rooms expenses are typically primarily driven by the corresponding revenue account and occupancy. Rooms expenses of $1,241,255 and $1,367,983 represent 27.7% and 26.2% of rooms revenues for the three-month period ended March 31, 2026 and 2025, respectively.

Current wording

Rooms expenses decreased to $2,782,441 for the six months ended June 30, 2026, from $2,913,270 for the six months ended June 30, 2025. The $130,829 net decrease in rooms expenses is primarily due to a decrease in rooms revenue. Rooms expenses are typically primarily driven by the corresponding revenue account and occupancy. Rooms expenses of $2,782,441 and $2,913,270 represent 21.90% and 19.10% of rooms revenues for the three-month period ended June 30, 2026 and 2025, respectively.

Previous wording

Food and beverage expenses were $358,092 and $338,392 for the three months ended March 31, 2026 and 2025, respectively. The $19,700 increase in food and beverage expenses is primarily due to an increase in the cost of food and food preparation. Food and beverage expenses are historically primarily driven by the corresponding revenue account and occupancy. Food and beverage expenses represent 99.5% and 94.2% of food and beverage revenues for the three-month period ended March 31, 2026 and 2025, respectively.

Current wording

Food and beverage expenses were $884,889 and $774,378 for the six months ended June 30, 2026 and 2025, respectively. The $110,511 increase in food and beverage expenses is primarily due to an increase in food and beverage revenue. Food and beverage expenses are historically primarily driven by the corresponding revenue account and occupancy. Food and beverage expenses represent 75.52% and 72.76% of food and beverage revenues for the three-month period ended June 30, 2026 and 2025, respectively.

Previous wording

Other fees to affiliates were $246,370 and $233,113 for the three months ended March 31, 2026 and 2025, respectively. Other fees to affiliates include asset management fees due to PHA that are paid quarterly in arrears equal to one-fourth of 0.75% of the adjusted cost of our assets. Asset management fees increased to $185,889 for the three months ended March 31, 2026, from $183,765 for the three months ended March 31, 2025. Other fees to affiliates also includes certain administrative fees charged to us by our Sponsor. Such administrative fees were $60,481 and $49,348 during the three months ended March 31, 2026 and 2025, respectively.

Current wording

Other fees to affiliates were $482,941 and $466,214 for the six months ended June 30, 2026 and 2025, respectively. Other fees to affiliates include asset management fees due to PHA that are paid quarterly in arrears equal to one-fourth of 0.75% of the adjusted cost of our assets. Asset management fees increased to $372,468 for the six months ended June 30, 2026, from $368,219 for the six months ended June 30 2025. Other fees to affiliates also includes certain administrative fees charged to us by our Sponsor. Such administrative fees were $110,474 and $97,995 during the six months ended June 30, 2026 and 2025, respectively.

Previous wording

Interest expense, net, was $1,084,750 and $953,354 for the three months ended March 31, 2026 and 2025, respectively. The increase of $131,396 is attributable to the refinancing of the TCI Note, and the HGI Note at increased interest rates. Interest expense includes monthly fixed rate and variable rate payments on the outstanding mortgage notes payable balance, accrued interest on the outstanding asset management fees, acquisition fees and promissory notes from PHA and our Sponsor, and the amortization of deferred financing costs and debt discounts or premiums. For the three months ended March 31, 2026, we recognized $64,364 of interest expense relating to the amortization of deferred financing costs. For the three months ended March 31, 2025, we recognized $51,591 of interest expense relating to the amortization of deferred financing costs and debt discounts, offset by $22,052 relating to the amortization of the fair value of debt premium.

Current wording

Interest expense, net, was $2,154,819 and $1,954,494 for the six months ended June 30, 2026 and 2025, respectively. The increase of $200,325 is attributable to the reduction of the interest of the HGI Note at increased interest rates. Interest expense includes monthly fixed rate and variable rate payments on the outstanding mortgage notes payable balance, accrued interest on the outstanding asset management fees, acquisition fees and promissory notes from PHA and our Sponsor, and the amortization of deferred financing costs and debt discounts or premiums. For the six months ended June 30, 2026, we recognized $128,728 of interest expense relating to the amortization of deferred financing costs. For the six months ended June 30, 2025, we recognized $127,912 of interest expense relating to the amortization of deferred financing costs, offset by $22,052 relating to the amortization of the fair value of debt premium.

Previous wording

For the three months ended March 31, 2026 and 2025, we incurred income tax expense of $1,600 and income tax benefit of $216,887, respectively. The $218,487 difference is primarily due to a valuation adjustment placed into effect during the three months ended September 30, 2025, eliminating the deferred tax asset recorded on the balance sheet. We expect income tax expense to normalize for year ending December 31, 2026, as compared to the year ended December 31, 2025.

Current wording

For the six months ended June 30, 2026 and 2025, we incurred income tax expense of $6,600 and income tax benefit of $224,619, respectively. The $231,219 difference is primarily due to a valuation adjustment placed into effect during the nine months ended September 30, 2025, eliminating the deferred tax asset recorded on the balance sheet. We expect income tax expense to normalize for year ending December 31, 2026, as compared to the year ended December 31, 2025.

Previous wording

We paid quarterly K Share, K-I Share, and OP Unit distributions with respect to all four quarters of 2025 and the first quarter of 2026, with operating cash flow, consistent with prior distributions. Our board of directors will make determinations as to the payment of future distributions on a quarter-by-quarter basis; however, distributions will continue to accumulate pursuant to our charter.

Current wording

We paid quarterly K Share, K-I Share, and OP Unit distributions with respect to all four quarters of 2025 and the first two quarters of 2026, with operating cash flow, consistent with prior distributions. Our board of directors will make determinations as to the payment of future distributions on a quarter-by-quarter basis; however, distributions will continue to accumulate pursuant to our charter.

Previous wording

In addition, in a normal operating environment, we expect to use debt financing as a source of capital. Our charter provides that the maximum amount of our total indebtedness shall not exceed 300% of our total “net assets” (as defined in accordance with Statement of Policy Regarding Real Estate Investment Trusts revised and adopted by the North American Securities Administrators Association on May 7, 2007) as of the date of any borrowing, which is generally expected to be approximately 75% of the cost of our investments; however, we may exceed that limit if approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report following such borrowing along with justification for exceeding such limit. This charter limitation, however, does not apply to individual real estate assets or investments. In addition, it is currently our intention to limit our aggregate borrowings to

Current wording

In addition, in a normal operating environment, we expect to use debt financing as a source of capital. Our charter provides that the maximum amount of our total indebtedness shall not exceed 300% of our total “net assets” (as defined in accordance with Statement of Policy Regarding Real Estate Investment Trusts revised and adopted by the North American Securities Administrators Association on May 7, 2007) as of the date of any borrowing, which is generally expected to be approximately 75% of the cost of our investments; however, we may exceed that limit if approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report following such borrowing along with justification for exceeding such limit. This charter limitation, however, does not apply to individual real estate assets or investments. In addition, it is currently our intention to limit our aggregate borrowings to 50% of the aggregate fair market value of our assets, unless borrowing a greater amount is approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report following such borrowing along with justification for borrowing such a greater amount. This limitation, however, will not apply to individual real estate assets or investments. At the date of acquisition of each asset, we anticipate that the cost of investment for such asset will be substantially similar to its fair market value. However, subsequent events, including changes in the fair market value of our assets, could result in our exceeding these limits.

Previous wording

During the three months ended March 31, 2026 and 2025, we owned an interest in five hotel properties. During the three months ended March 31, 2026, net cash provided by operating activities was $62,759 compared to the net cash provided by operating activities of $117,357 for the three months ended March 31, 2025. Our operating cash flows during the three months ended March 31, 2026, were the result of our net income, offset by adjustments for non-cash expenses, including depreciation and amortization, adjustments for receivables, other assets, amounts due to and from related parties, and accounts payable and accrued liabilities. Our operating cash flows during the three months ended March 31, 2025, were the result of our net income, adjustments for non-cash expenses, including depreciation and amortization, the change in fair value of the interest rate swap agreement and by adjustments for receivables, other assets, amounts due to and from related parties, and accounts payable and accrued liabilities.

Current wording

During the six months ended June 30, 2026 and 2025, we owned an interest in five hotel properties. During the six months ended June 30, 2026, net cash provided by operating activities was $2,155,375 compared to the net cash provided by operating activities of $3,623,228 for the six months ended June 30, 2025. Our operating cash flows during the six months ended June 30, 2026, were the result of our net loss, adjustments for non-cash expenses, including depreciation and amortization, adjustments for receivables, other assets, amounts due to and from related parties, and accounts payable and accrued liabilities. Our operating cash flows during the six months ended June 30, 2025, were the result of our net income, adjustments for non-cash expenses, including depreciation and amortization, adjustments for receivables, other assets, amounts due to and from related parties, and accounts payable and accrued liabilities.

Previous wording

Cash used in investing activities will vary based on the funds raised by the issuance of shares of common stock pursuant to the DRIP and how quickly we invest those funds towards acquisitions or improvements of real estate and real-estate related investments. During the three months ended March 31, 2026, net cash used in investing activities was $169,238 and was the result of capital improvements at our hotel properties. During the three months ended March 31, 2025, net cash used in investing activities was $418,064 and was the result of capital improvements at our hotel properties.

Current wording

Cash used in investing activities will vary based on the funds raised by the issuance of shares of common stock pursuant to the DRIP and how quickly we invest those funds towards acquisitions or improvements of real estate and real-estate related investments. During the six months ended June 30, 2026, net cash used in investing activities was $537,015 and was the result of capital improvements at our hotel properties. During the six months ended June 30, 2025, net cash used in investing activities was $765,146 and was the result of capital improvements at our hotel properties.

Previous wording

During the three months ended March 31, 2026, net cash used in financing activities was $1,033,369. We made principal payments on the CTI Note totaling $71,562. During the three months ended March 31, 2026, we paid cash distributions of $755,987 to stockholders with proceeds from operations. During the three months ended March 31, 2026, we repurchased $205,820 of outstanding shares of common stock. For information on repurchases of common stock made during the three months ended March 31, 2026, refer to Note 6 – “Stockholders’ Equity” to our unaudited interim condensed consolidated financial statements included in this Quarterly Report.

Current wording

During the six months ended June 30, 2026, net cash used in financing activities was $2,323,213. We made principal payments on the CTI Note, the Wilmington Note, and the St. Petersburg Note totaling $220,827. During the six months ended June 30, 2026, we paid cash distributions of $1,499,753 to stockholders with proceeds from operations. During the six months ended June 30, 2026, we repurchased $406,633 of outstanding shares of common stock. For information on repurchases of common stock made during the six months ended June 30, 2026, refer to Note 6 – “Stockholders’ Equity” to our unaudited interim condensed consolidated financial statements included in this Quarterly Report.

Previous wording

operations. During the three months ended March 31, 2025, we repurchased $204,863 of outstanding shares of common stock. We made principal payments on the note secured by the HGI Note and the CTI Note totaling $146,736. Cash flow from financing activities for the three months ended March 31, 2025, also includes $294,000 of distributions to noncontrolling interests.

Current wording

During the six months ended June 30, 2025, net cash used in financing activities was $2,865,578. During the six months ended June 30, 2025, we paid cash distributions of $1,480,676 to stockholders with proceeds from operations. During the six months ended June 30, 2025, we repurchased $409,703 of outstanding shares of common stock. We made principal payments on the Wilmington Note, the St. Petersburg Note, the HGI Note and the CTI Note totaling $289,200. Cash flow from financing activities for the six months ended June 30, 2025, also includes $686,000 of distributions to noncontrolling interests.

Previous wording

The TCI Note was refinanced as of June 6, 2024. The TCI Note bears interest at a fixed per annum rate equal to 7.025% during the initial three year term. This rate is calculated to 2.50% in excess of the yield on United States Treasury Securities adjusted to a constant maturity of three years as made available by the Federal Reserve Board. The TCI Note provides for interest only monthly payments for the initial three year term. After the interest only period, principal will be amortized over a 30-year amortization schedule at a fixed per annum rate of interest equal to 2.50% in excess of the yield on United States Treasury Securities adjusted to a constant maturity of one year as made available by the Federal Reserve Board thereafter to maturity on June 6, 2027. The loan agreement allows for two one-year extensions. The TCI Note is collateralized by the Hotel Indigo Traverse City, including equipment, and is guaranteed by the Company (pursuant to a customary carveout/bad acts guaranty). As of March 31, 2026, we believe the Operating Partnership and its subsidiary for the Hotel Indigo Traverse City were in compliance with the loan requirements, including applicable covenants, and all required payments have been made as agreed.

Current wording

The TCI Note was refinanced as of June 6, 2024. The TCI Note interest rate from June 6, 2024 to May 5, 2026 had a fixed per annum rate equal to 7.025%. On May 6, 2026, PHR TCI, LLC, as borrower, and Beacon Bank & Trust, successor by merger to Berkshire Bank, as lender, entered into a Change in Terms Agreement with respect to the Refinancing Loan and the TCI Note. Effective as of the date of the Change in Terms Agreement, the interest rate applicable to the Refinancing Loan was reduced to a fixed rate of 6.50% per annum for the remainder of the initial term of the Refinancing Loan, which currently matures on June 6, 2027. The TCI Note provides for interest only payments for the initial three-year term. After the interest only period, principal will be amortized over a 30-year amortization schedule at a fixed per annum rate of interest equal to 2.50% in excess of the yield on United States Treasury Securities adjusted to a constant maturity of one year as made available by the Federal Reserve Board thereafter to maturity on June 6, 2027. The loan agreement allows for two one-year extensions. The TCI Note is collateralized by the Hotel Indigo Traverse City, including equipment, and is guaranteed by the Company (pursuant to a customary carveout/bad acts guaranty). As of June 30, 2026, the Operating Partnership and its subsidiary for the Hotel Indigo Traverse City were compliant with the loan obligations under the TCI Note, including applicable covenants, and all required payments have been made as agreed.

Previous wording

The HGI Note was refinanced as of July 10, 2025. The HGI note bears interest at a fixed rate of 6.10% through July 10, 2030. The HGI Note requires interest only payments for the first two years of the five-year term, payments subsequent to July 10, 2027 will consist of principal and interest based on a 25-year amortization schedule. The HGI Note is collateralized by the Hilton Garden Inn Providence, including equipment, and has been guaranteed by the Company (pursuant to a customary carveout/bad acts guaranty). Out of the entire refinance amount of $19,200,000, $1,975,241 was allocated to fund a portion of the A Shares distribution, and $743,386 was allocated for renovation funding. As of March 31, 2026, we believe the Operating Partnership and its subsidiary for the Hilton Garden Inn Providence were in compliance with the loan requirements, including applicable covenants, and all required payments have been made as agreed.

Current wording

The HGI Note was refinanced as of July 10, 2025. The HGI Note bears interest at a fixed rate of 6.10% through July 10, 2030, the maturity date. The HGI Note requires interest only payments for the first two years of the five-year term, payments subsequent to July 10, 2027 will consist of principal and interest based on a 25-year amortization schedule. The HGI Note is collateralized by the Hilton Garden Inn Providence, including equipment, and has been guaranteed by the Company (pursuant to a customary carveout/bad acts guaranty). Out of the entire refinance amount of $19,200,000, $1,975,241 was allocated to fund a portion of the A Shares distribution, and $743,386 was allocated for renovation funding. As of June 30, 2026, we believe the Operating Partnership and its subsidiary for the Hilton Garden Inn Providence were in compliance with the loan requirements, including applicable covenants, and all required payments have been made as agreed.

Previous wording

The Wilmington Note was refinanced as of April 25, 2024. The Wilmington Note bears interest at SOFR plus a SOFR rate margin of 2.50%. The Wilmington Note requires monthly interest payments for the first two years, and

Current wording

The Wilmington Note was refinanced as of April 25, 2024. The Wilmington Note bears interest at SOFR plus a SOFR rate margin of 2.50%. The Wilmington Note requires monthly interest payments for the first two years, and monthly principal and interest payments based on a 25-year amortization schedule thereafter to maturity on April 25, 2029. The Wilmington Note is collateralized by the Springhill Suites Wilmington, including equipment. The Wilmington

Previous wording

monthly principal and interest payments based on a 25-year amortization schedule thereafter to maturity on April 25, 2029. The Wilmington Note is collateralized by the Springhill Suites Wilmington, including equipment. The Wilmington Note is also guaranteed by the Company (pursuant to a customary carveout/bad acts guaranty), and is cross collateralized by the St. Petersburg Note. As of March 31, 2026, the Operating Partnership and its subsidiary for the Springhill Suites Wilmington were in compliance with the loan requirements, including applicable covenants, and all required payments have been made as agreed.

Current wording

Note is also guaranteed by the Company (pursuant to a customary carveout/bad acts guaranty), and is cross collateralized by the St. Petersburg Note. As of June 30, 2026, the Operating Partnership and its subsidiary for the Springhill Suites Wilmington were in compliance with the loan requirements, including applicable covenants, and all required payments have been made as agreed.