PROCACCIANTI HOTEL REIT INC

Previous wording

Certain statements included in this Quarterly Report that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

Current wording

Certain statements included in this Quarterly Report that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). These statements are only predictions. We caution that forward-looking statements

Previous wording

Substantially all of our business is conducted through the Operating Partnership. We are the sole general partner of the Operating Partnership. We are externally managed by our advisor, Procaccianti Hotel Advisors, LLC (“PHA”) pursuant to an advisory agreement by and among us, our Operating Partnership and PHA, dated August 2, 2018 (as amended, the “Advisory Agreement”). PHA is an affiliate of our sponsor, Procaccianti Companies, Inc. (“Sponsor”).

Current wording

Substantially all of our business is conducted through the Operating Partnership. We are the sole general partner of the Operating Partnership. We are externally managed by our advisor, Procaccianti Hotel Advisors, LLC (“PHA”)

Previous wording

(“K Shares”) and Class A common stock (“A Shares”, including Units (which were comprised of one K Share and one A Share), in the Private Offering. Of the $15,582,755 in gross proceeds received, $2,954,095 was from the sale of A Shares to TPG Hotel REIT Investor, LLC (“THR”), an affiliate of PHA, to fund organization and offering expenses associated with the K Shares and Units.

Current wording

We terminated our Private Offering prior to the commencement of the Public Offering, and, as of such termination, received approximately $15,582,755 in gross proceeds from the sale of shares of Class K common stock (“K Shares”) and Class A common stock (“A Shares”, including Units (which were comprised of one K Share and one A Share), in the Private Offering. Of the $15,582,755 in gross proceeds received, $2,954,095 was from the sale of A Shares to TPG Hotel REIT Investor, LLC (“THR”), an affiliate of PHA, to fund organization and offering expenses associated with the K Shares and Units.

Previous wording

Since the commencement of the Public Offering and through March 31, 2024, we received approximately $41,477,576 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 $1,567,861 of K Shares, $1,037,510 of K-I Shares and $72,043 of K-T Shares pursuant to the DRIP. Additionally, on October 26, 2018, June 10, 2019 and January 19, 2021, we 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 our Public Offering. In addition, we allocated proceeds from the sale of A Shares in amounts that represent the difference between (i) the applicable estimated net asset value (“NAV”) per K-I Share and the applicable offering price of K-I Shares sold in our 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, 2024, we received approximately $41,677,066 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 $1,680,377 of K Shares, $1,123,965 of K-I Shares and $72,561 K-T Shares pursuant to the DRIP. Additionally, on October 26, 2018, June 10, 2019 and January 19, 2021, we 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 our Public Offering. In addition, we allocated proceeds from the sale of A Shares in amounts that represent the difference between (i) the applicable estimated net asset value (“NAV”) per K-I Share and the applicable offering price of K-I Shares sold in our 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

In addition, pursuant to provisions contained in our charter and in the Advisory Agreement, our board of directors has the ongoing responsibility of limiting our total operating expenses (as defined in our charter) for the trailing four consecutive quarters to amounts that do not exceed the greater of 2% of our average invested assets (as defined in our charter) or 25% of our net income (as defined in our charter), calculated in the manner set forth in our charter, unless a majority of the directors (including a majority of the independent directors) has made a finding that, based on unusual

Current wording

In addition, pursuant to provisions contained in our charter and in the Advisory Agreement, our board of directors has the ongoing responsibility of limiting our total operating expenses (as defined in our charter) for the trailing four consecutive quarters to amounts that do not exceed the greater of 2% of our average invested assets (as defined in our charter) or 25% of our net income (as defined in our charter), calculated in the manner set forth in our charter, unless a majority of the directors (including a majority of the independent directors) has made a finding that, based on unusual and non-recurring factors that they deem sufficient, a higher level of expenses is justified. In the event that a majority of the directors (including a majority of the independent directors) does not determine that such excess expenses are justified, PHA must reimburse to us the amount of the excess expenses paid or incurred (the “Excess Amount”).

Previous wording

Lingering impacts of the COVID-19 pandemic on the global and U.S. economy, and the travel industry in particular, continue to temper a full recovery to pre-pandemic performance levels in certain property segments and geographic areas. While destination and leisure travel have rebounded and remain strong, business travel has been slower to recover. Newer headwinds triggered by the pandemic including historic rises in interest rates, inflation, supply chain issues, insurance premiums, and labor costs present additional challenges which we believe will continue to hinder a full recovery of business travel throughout 2024 and 2025.

Current wording

Lingering impacts of the COVID-19 pandemic on the global and U.S. economy, and the travel industry in particular, continue to temper a full recovery to pre-pandemic performance levels in certain property segments and geographic areas. While destination and leisure travel have rebounded and remain strong, business travel has been

Previous wording

We elected to be taxed as, and currently qualify as, a REIT under the Code and have operated as such commencing with our taxable year ended December 31, 2018. To qualify as a REIT for tax purposes, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to our stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). We must also meet certain asset and income tests, as well as other requirements. As a REIT, we will not be subject to U.S. federal income tax to the extent we make distributions to our stockholders equal to or in excess of our taxable income. We will monitor the business and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT in any taxable year following 2018, we would be subject to U.S. federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders. However, we are, and intend to continue to be, organized and operated in such a manner as to qualify for treatment as a REIT.

Current wording

We elected to be taxed as, and currently qualify as, a REIT under the Code and have operated as such commencing with our taxable year ended December 31, 2018. To qualify as a REIT for tax purposes, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to our stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). We must also meet certain asset and income tests, as well as other requirements. As a REIT, we will not be subject to U.S. federal income tax to the extent we make distributions to our stockholders equal to or in excess of our taxable income. We will monitor the business and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT in any taxable year following 2018, we would be subject to U.S. federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders.

Previous wording

Our board of directors may authorize distributions in excess of those required for us to maintain REIT status as it deems appropriate. Through the first quarter of 2020, we paid regular quarterly distributions to our stockholders. As a result of the impact of the COVID-19 pandemic on our business, 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. Through the first quarter of 2020, we paid regular quarterly distributions to our stockholders. 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.

Previous wording

The following table shows distributions paid during the three months ended March 31, 2024 and 2023:

Current wording

The following table shows distributions paid during the six months ended June 30, 2024 and 2023:

Previous wording

The discussion that follows is based on our consolidated results of operations for the three months ended March 31, 2024 and 2023.

Current wording

The discussion that follows is based on our consolidated results of operations for the three and six months ended June 30, 2024 and 2023.

Previous wording

The increase in rooms revenues of $115,562 or 14.43%, at the Springhill Suites Wilmington is driven by an increase in occupancy. Occupancy at the Springhill Suites Wilmington increased from 61.77% for the three months ended March 31, 2023, to 72.89% for the three months ended March 31, 2024. The ADR at the Springhill Suites Wilmington decreased from $120.04 for the three months ended March 31, 2023, to $115.12 for the three months ended March 31, 2024, a decrease of 4.1%.

Current wording

The increase in rooms revenues of $229,438, or 17.76%, at the Springhill Suites Wilmington is driven by an increase in both occupancy and ADR. Occupancy at the Springhill Suites Wilmington increased from 75.55% for the three months ended June 30, 2023, to 86.32% for the three months ended June 30, 2024. The ADR at the Springhill Suites Wilmington increased from $156.57 for the three months ended June 30, 2023, to $161.46 for the three months ended June 30, 2024, an increase of 3.12%.

Previous wording

The increase in rooms revenues of $171,013, or 18.54%, at the Hilton Garden Inn Providence is primarily driven by increases in both occupancy and ADR compared to the prior year. Occupancy at the Hilton Garden Inn Providence increased from 48.21% for the three months ended March 31, 2023 to 55.34% for the three months ended

Current wording

The increase in rooms revenues of $169,448, or 10.37%, at the Hilton Garden Inn Providence is primarily driven by an increase in occupancy compared to the prior year. Occupancy at the Hilton Garden Inn Providence increased from 61.76% for the three months ended June 30, 2023 to 68.73% for the three months ended June 30, 2024. The ADR at the Hilton Garden Inn Providence decreased from $211.00 for the three months ended June 30, 2023 to $210.15 for the three months ended June 30, 2024, a decrease of 0.40%.

Previous wording

The decrease in rooms revenues of $55,127, or 13.30%, at the Cherry Tree Inn is primarily driven by decreases in both occupancy and ADR compared to the prior year. Occupancy at the Cherry Tree Inn decreased from 49.37% for the three months ended March 31, 2023 to 42.87% for the three months ended March 31, 2024. The ADR at the Cherry Tree Inn decreased from $122.75 for the three months ended March 31, 2023 to $121.22 for the three months ended March 31, 2024, an decrease of 1.2%.

Current wording

The increase in rooms revenues of $14,475, or 1.46%, at the Cherry Tree Inn is primarily driven by an increase in occupancy compared to the prior year. Occupancy at the Cherry Tree Inn increased from 64.31% for the three months ended June 30, 2023 to 68.96% for the three months ended June 30, 2024. The ADR at the Cherry Tree Inn decreased from $213.47 for the three months ended June 30, 2023 to $202.53 for the three months ended June 30, 2024, a decrease of 5.12%.

Previous wording

Food and beverage revenues decreased to $288,425 for the three months ended March 31, 2024 from $294,325 for the three months ended March 31, 2023. These amounts are comprised of revenues realized in hotel food and beverage outlets as well as catering events. The $5,900 decrease from the prior year period is primarily driven by lower occupancy at TCI correlating to a decrease in food and beverage revenue during the three months ended March 31, 2024.

Current wording

Food and beverage revenues decreased to $628,305 for the three months ended June 30, 2024 from $739,770 for the three months ended June 30, 2023. These amounts are comprised of revenues realized in hotel food and beverage outlets as well as catering events. The $111,465 decrease from the prior year period is primarily due to inclement weather at TCI, correlating to a decrease in food and beverage revenue of the rooftop restaurant during the three months ended June 30, 2024.

Previous wording

Other operating revenues increased to $236,691 for the three months ended March 31, 2024, from $218,935 for the three months ended March 31, 2023. These amounts include ancillary hotel revenues and other items primarily driven by occupancy such as telephone/internet, parking, gift shops, and other guest services. The $17,756 increase from the prior year period is primarily due to an increase in parking revenues.

Current wording

Other operating revenues increased to $365,110 for the three months ended June 30, 2024, from $263,499 for the three months ended June 30, 2023. These amounts include ancillary hotel revenues and other items primarily driven by occupancy such as telephone/internet, parking, gift shops, and other guest services. The $101,611 increase from the prior year period is primarily due to increases in resort fees at the Cherry Tree Inn and parking revenues.

Previous wording

Rooms expenses increased to $1,234,065 for the three months ended March 31, 2024 from $1,216,887 for the three months ended March 31, 2023. The $17,178 net increase in rooms expenses is primarily due to increased housekeeping and hospitality expenses resulting from the overall increase in occupancy. Rooms expenses are typically primarily driven by the corresponding revenue account and occupancy. Rooms expenses of $1,234,065 and $1,216,887 represent 25.5% and 25.6% of rooms revenues for the three-month period ended March 31, 2024 and 2023, respectively.

Current wording

Rooms expenses increased to $1,568,087 for the three months ended June 30, 2024 from $1,526,032 for the three months ended June 30, 2023. The $42,055 net increase in rooms expenses is primarily due to increased housekeeping and complimentary breakfast expenses resulting from the overall increase in occupancy. Rooms expenses are typically primarily driven by the corresponding revenue account and occupancy. Rooms expenses of $1,568,087 and $1,526,032 represent 20.8% and 21.3% of rooms revenues for the three-month period ended June 30, 2024 and 2023, respectively.

Previous wording

Food and beverage expenses were $275,287 and $258,418 for the three months ended March 31, 2024 and 2023, respectively. The $16,869 increase in food and beverage expenses is primarily due to an increase in managment costs. Food and beverage expenses are historically primarily driven by the corresponding revenue account and occupancy. Food and beverage expenses represent 95.4% and 87.8% of food and beverage revenues for the three-month period ended March 31, 2024 and 2023, respectively.

Current wording

Food and beverage expenses were $423,543 and $439,638 for the three months ended June 30, 2024 and 2023, respectively. The $16,095 decrease in food and beverage expenses is primarily due to lower occupancy. Food and beverage expenses are historically primarily driven by the corresponding revenue account and occupancy. Food and beverage expenses represent 67.4% and 59.4% of food and beverage revenues for the three-month period ended June 30, 2024 and 2023, respectively.

Previous wording

Other property expenses were $2,448,374 and $2,271,870, for the three months ended March 31, 2024 and 2023, 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 $176,504 increase in other property expenses is primarily driven by an increase in management costs.

Current wording

Other property expenses were $2,847,263 and $2,732,762, for the three months ended June 30, 2024 and 2023, 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 $114,501 increase in other property expenses is primarily driven by an increase in management costs.

Previous wording

Property management fees to affiliates were $161,070 and $158,030 for the three months ended March 31, 2024 and 2023, 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 $256,105 and $245,209 for the three months ended June 30, 2024 and 2023, 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 $278,413 and $328,644 for the three months ended March 31, 2024 and 2023, 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 $366,800 and $351,690 for the three months ended June 30, 2024 and 2023, 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

Other fees to affiliates were $227,606 and $218,678 for the three months ended March 31, 2024 and 2023, 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 $181,038 for the three months ended March 31, 2024 from $178,832 for the three months ended March 31, 2023.Other fees to affiliates also includes certain administrative fees charged to us by our Sponsor. Such administrative fees were $46,568 and $39,847 during the three months ended March 31, 2024 and 2023, respectively.

Current wording

Other fees to affiliates were $225,212 and $215,805 for the three months ended June 30, 2024 and 2023, 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 $181,576 for the three months ended June 30, 2024 from $179,185 for the three months ended June 30, 2023.Other fees to affiliates also includes certain administrative fees charged to us by our Sponsor. Such administrative fees were $44,706 and $36,620 during the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Depreciation and amortization expenses were $1,043,407 and $1,010,814 for the three months ended March 31, 2024 and 2023, 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 $1,067,970 and $1,018,347 for the three months ended June 30, 2024 and 2023, 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 expense, net, was $780,671 and $690,855 for the three months ended March 31, 2024 and 2023, respectively. Interest expense includes monthly fixed 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, 2024, we incurred $33,079 of interest expense relating to the amortization of the fair value of debt premium, offset by $28,557 relating to the amortization of deferred financing costs and debt discounts.

Current wording

Interest expense, net, was $988,461 and $724,906 for the three months ended June 30, 2024 and 2023, respectively. Interest expense includes monthly fixed 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 June 30, 2024, we incurred $49,267 of interest expense relating to the amortization of the fair value of debt premium, offset by $33,081 relating to the amortization of deferred financing costs and debt discounts. For the three months ended June 30, 2023, we incurred $34,138 of interest expense relating to the amortization of the fair value of debt premium, offset by $33,079 relating to the amortization of deferred financing costs and debt discounts.

Previous wording

Interest income on interest-bearing cash accounts was $67,352 and $48,606 for three months ended March 31, 2024 and 2023, respectively. Interest income is presented as a reduction of the total interest expense on the consolidated income statement.

Current wording

Interest income on interest-bearing cash accounts was $58,378 and $55,589 for three months ended June 30, 2024 and 2023, respectively. Interest income is presented as a reduction of the total interest expense on the consolidated income statement.

Previous wording

Income tax benefit was $239,001 and $133,152 for the three months ended March 31, 2024 and 2023, respectively. They related to taxable income at the TRSs.

Current wording

Income tax benefit was $6,736 and $52,612 for the three months ended June 30, 2024 and 2023, respectively. They related to activity at the TRSs.

Previous wording

For the three months ended March 31, 2024 and 2023, we had net loss of $830,685 and $805,433, respectively. The increase in net loss of $25,252 is the result of the revenue and expense changes discussed above.

Current wording

For the three months ended June 30, 2024 and 2023, we had net income of $790,241 and $910,213, respectively. The decrease in net income of $119,972 is the result of the revenue and expense changes discussed above.

Previous wording

Net income relating to noncontrolling interests was $195,430 and $226,505 for the three months ended March 31, 2024 and 2023, 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 Operating Partnership 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

Net income relating to noncontrolling interests was $184,249 and $235,898 for the three months ended June 30, 2024 and 2023, 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 Operating Partnership 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

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 increased to $4,838,217 for the three months ended March 31, 2024 from $4,751,617 for the three months ended March 31, 2023. The net increase of $86,600, or 1.82%, was largely due to increases in occupancy and ADR.

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 increased to $12,380,385 for the six months ended June 30, 2024 from $11,915,947 for the six months ended June 30, 2023. The net increase of $464,438 or 3.9%, was largely due to increases in occupancy.

Previous wording

The decrease in rooms revenues of $88,385, or 4.91%, at the Staybridge Suites St. Petersburg is primarily driven by a decrease in occupancy. Occupancy at the Staybridge Suites St. Petersburg decreased from 80.56% for the three months ended March 31, 2023, to 72.18% for the three months ended March 31, 2024. The ADR at the Staybridge Suites St. Petersburg increased from $208.83 for the three months ended March 31, 2023, to $219.19 for the three months ended March 31, 2024, an increase of 5.0%.

Current wording

The decrease in rooms revenues of $148,168, or 4.5%, at the Staybridge Suites St. Petersburg is primarily driven by a decrease in occupancy. Occupancy at the Staybridge Suites St. Petersburg decreased from 81.33% for the six months ended June 30, 2023, to 76.18% for the six months ended June 30, 2024. The ADR at the Staybridge Suites St. Petersburg increased from $188.14 for the six months ended June 30, 2023, to $190.78 for the six months ended June 30, 2024, an increase of 1.40%.

Previous wording

The decrease in rooms revenues of $56,463 or 6.95%, at the Hotel Indigo Traverse City is primarily driven by a decrease in occupancy. Occupancy at the Hotel Indigo Traverse City decreased from 63.21% for the three months ended March 31, 2023 to 58.29% for the three months ended March 31, 2024. The ADR at the Hotel Indigo Traverse City decreased from $133.40 for the three months ended March 31, 2023 to $133.11 for the three months ended March 31, 2024, a decrease of 0.2%.

Current wording

The decrease in rooms revenues of $32,203, or 1.26%, at the Hotel Indigo Traverse City is primarily driven by a decrease in occupancy. Occupancy at the Hotel Indigo Traverse City decreased from 72.17% for the six months ended June 30, 2023 to 69.45% for the six months ended June 30, 2024. The ADR at the Hotel Indigo Traverse City increased from $183.56 for the six months ended June 30, 2023 to $187.33 for the six months ended June 30, 2024, an increase of 2.05%.

Previous wording

Unrealized gain on our interest rate swap was $15,874 for the three months ended March 31, 2024. Unrealized loss on our interest rate cap was $49,266 for the three months ended March 31, 2023. They related to the note secured by the Hotel Indigo Traverse City (the “TCI Note”) interest rate swap which expires on August 15, 2024 and interest rate cap that expired on August 15, 2023.

Current wording

Gain on our interest rate swap was $7,237 for the six months ended June 30, 2024. Unrealized loss on our interest rate cap was $104,855 for the six months ended June 30, 2023. The interest rate swap was terminated in connection with the June 6, 2024 refinancing of the TCI Note.

Previous wording

During the three months ended March 31, 2024 and 2023, we owned an interest in five hotel properties. During the three months ended March 31, 2024, net cash provided by operating activities was $825,576 compared to the net cash provided by operating activities of $825,048 for the three months ended March 31, 2023. Our operating cash flows during the three months ended March 31, 2024, were the result of our net loss, offset by 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. Our operating cash flows during the three months ended March 31, 2023 were the result of our net loss, offset by adjustments for non-cash expenses, including depreciation and amortization, the change in fair value of the interest rate cap 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, 2024 and 2023, we owned an interest in five hotel properties. During the six months ended June 30, 2024, net cash provided by operating activities was $3,414,592 compared to the net cash provided by operating activities of $3,302,660 for the six months ended June 30, 2023. Our operating cash flows during the six months ended June 30, 2024, were the result of our net income, offset by 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. Our operating cash flows during the six months ended June 30, 2023 were the result of our net loss, offset by adjustments for non-cash expenses, including depreciation and amortization, the change in fair value of the interest rate cap agreement and by 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 of real estate and real-estate related investments. During the three months ended March 31, 2024, net cash used in investing activities was $361,827 and was the result of capital improvements at our hotel properties. During the three months ended March 31, 2023, net cash used in investing activities was $238,307 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, 2024, net cash used in investing activities was $648,600 and was the result of capital improvements at our hotel properties. During the six months ended June 30, 2023, net cash used in investing activities was $441,882 and was the result of capital improvements at our hotel properties.

Previous wording

During the three months ended March 31, 2024, net cash used in financing activities was $1,199,381. We paid stockholder servicing fees totaling $76. We made principal payments on the note secured by the Springhill Suites Wilmington (the “Wilmington Note”), the note secured by the Staybridge Suites St. Petersburg (the “St. Petersburg Note”), the note secured by the Hilton Garden Inn Providence (the “HGI Note”) and the note secured by the Cherry Tree Inn (the “CTI Note”) totaling $249,985. During the three months ended March 31, 2024, we paid cash distributions of $751,985 to stockholders with proceeds from operations. Additionally, during the three months ended March 31, 2024, we repurchased $197,335 of outstanding shares of common stock.

Current wording

During the six months ended June 30, 2024, net cash used in financing activities was $2,216,541. We refinanced the notes secured by the Springhill Suites Wilmington (the “Wilmington Note”), the note secured by the Staybridge Suites St. Petersburg (the “St. Petersburg Note”) and the note secured by the Hotel Indigo, Traverse City (the “Indigo Note”), paying the old notes of $10,569,193, $12,497,424 and $15,092,000, and borrowing $10,850,000, $12,820,000 and $15,600,000, respectively . During the six months ended June 30, 2024, we made other principal payments on the Wilmington Note, the St. Petersburg Note, the note secured by the Hilton Garden Inn Providence (the “HGI Note”) and the note secured by the Cherry Tree Inn (the “CTI Note”) totaling $38,545,151. During the six months ended June 30, 2024, we paid cash distributions of $1,494,474 to stockholders with proceeds from operations. During the three months ended June 30, 2024, we repurchased $400,157 of outstanding shares of common stock. Additionally, we paid stockholder servicing fees totaling $127.

Previous wording

During the three months ended March 31, 2023, net cash used in financing activities was $1,362,329. We paid stockholder servicing fees totaling $447. We made principal payments on the Wilmington Note, the St. Petersburg Note and the HGI Note totaling $159,878. During the three months ended March 31, 2023, we paid cash distributions of $757,737 to stockholders with proceeds from operations. Cash flow from financing activities for the three months ended March 31, 2023, also includes $232,750 of distributions to noncontrolling interests. Additionally, during the three months ended March 31, 2023, we repurchased $211,517 of outstanding shares of common stock.

Current wording

During the six months ended June 30, 2023, net cash used in financing activities was $3,051,293. We paid stockholder servicing fees totaling $769. We received $135,495 of mortgage note proceeds related to capital improvements at the Cherry Tree Inn. We made principal payments on the Wilmington Note, the St. Petersburg Note, and the HGI Note totaling $333,886. We paid deferred financing costs of $38,534 related to extending the TCI Note. We paid cash distributions of $1,497,707 to stockholders with proceeds from operations. Cash flow from financing activities for the six months ended June 30, 2023, also includes $575,750 of distributions to noncontrolling interests. Additionally, we repurchased $740,142 of outstanding shares of common stock.

Previous wording

targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to publicly registered, non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence the use of such measures may be useful to investors. For example, acquisition fees and expenses are intended to be funded from the proceeds of our offering and other financing sources and not from operations. By excluding acquisition fees and expenses, the use of MFFO provides information consistent with management’s analysis of the operating performance of its real estate assets. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as the ADR and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such charges that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Current wording

We use MFFO and the adjustments used to calculate it in order to evaluate our performance against other publicly registered, non-listed REITs, which intend to have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to publicly registered, non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence the use of such measures may be useful to investors. For example, acquisition fees and expenses are intended to be funded from the proceeds of our offering and other financing sources and not from operations. By excluding acquisition fees and expenses, the use of MFFO provides information consistent with management’s analysis of the operating performance of its real estate assets. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as the ADR and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such charges that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Previous wording

Presentation of this information is intended to assist management and investors in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) as an indication of our performance, as an indication of our liquidity, or indicative of funds available for our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with other measurements as an indication of our performance. MFFO may be useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and NAV is disclosed. MFFO is not a useful measure in evaluating NAV since impairment write-downs are taken into account in determining NAV but not in determining MFFO.

Current wording

so comparisons with other REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) as an indication of our performance, as an indication of our liquidity, or indicative of funds available for our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with other measurements as an indication of our performance. MFFO may be useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and NAV is disclosed. MFFO is not a useful measure in evaluating NAV since impairment write-downs are taken into account in determining NAV but not in determining MFFO.