PROCACCIANTI HOTEL REIT INC

Previous wording

The following discussions and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q (“Quarterly Report”). The following discussion should also be read in conjunction with our audited consolidated financial statements, the notes thereto, and the MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission (“SEC”) on March 24, 2023 (“Annual Report”).

Current wording

The following discussions and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q (“Quarterly Report”). The following discussion should also be read in conjunction with our audited consolidated financial statements, the notes thereto, and the MD&A included in our Annual Report on Form 10-K for the year ended

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

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 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.

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 the conflict between Russia and Ukraine, Hamas’ attack of Israel and the ensuing war and rising levels of inflation and interest rates, which have caused significant economic uncertainty. 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 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 the conflict between Russia and Ukraine, the Hamas-Israel war and rising levels of inflation and interest rates, which have caused significant economic uncertainty. 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

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”)

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”) 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”).

Previous 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.

Current wording

Since the commencement of the Public Offering and through September 30, 2024, we received approximately $41,875,257 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 $1,790,089 of K Shares, $1,212,443 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

On February 27, 2020, through a separate private placement and as partial consideration for our acquisition of the Hilton Garden Inn hotel property located in Providence, Rhode Island (“Hilton Garden Inn Providence”), the Operating Partnership issued 128,124 Class K units of limited partnership interests in the Operating Partnership ("Class K OP Units") at $10.00 per Class K OP Unit.

Current wording

On February 27, 2020, through a separate private placement and as partial consideration for our acquisition of the Hilton Garden Inn hotel property located in Providence, Rhode Island (“Hilton Garden Inn Providence”), the

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 June 30, 2024 and 2023, the Sponsor requested reimbursement for $47,393 and $39,847, respectively, of such administrative service expenses. Of these amounts, $28,468 is included in due to related parties on the condensed consolidated balance sheet as of June 30, 2024.

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

Previous wording

We incurred operating expenses of approximately $1,288,254 during the twelve months ended June 30, 2024, which was within the 2% of average invested assets and 25% of net income limitations (as defined in our charter).

Current wording

We incurred operating expenses of approximately $1,308,924 during the twelve months ended September 30, 2024, which was within the 2% of average invested assets and 25% of net income limitations (as defined in our charter).

Previous wording

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

While destination and leisure travel have rebounded and remain strong, business travel has been slower to recover. Newer headwinds including challenging interest rates, inflation, supply chain issues, insurance premiums, and labor costs present additional challenges which we believe may continue to hinder a full recovery of business travel throughout 2024 and 2025.

Previous wording

The U.S. lodging industry has historically exhibited a strong correlation to U.S. GDP. CBRE (U.S. Hotels State of the Union Feb 2024 Edition) raised its 2024 GDP growth outlook from 1.2% to 1.6%. The positive GDP revision is predicated on moderating inflation, employment gains of 0.5%, and a 100 basis points (bps) reduction in interest rates. Additionally, wage growth continued to outpace inflation in December 2023. With wage growth outpacing inflation, and airfares declining year over year, consumers have discretionary income to travel as supported by Transportation Security Administration (“TSA”) throughput which continues to post gains over 2019. Full-year 2023 TSA through put was 101% of 2019, increasing 12.4% year over year. In January of 2024, TSA throughput increased an additional 9.9% year over year, reaching 104% of 2019. Lower airfares have also contributed to a near full recovery in air travel.

Current wording

The U.S. lodging industry has historically exhibited a strong correlation to U.S. GDP. CBRE (U.S. Hotels State of the Union Feb 2024 Edition) raised its 2024 GDP growth outlook from 1.2% to 1.6%. The positive GDP revision is predicated on moderating inflation, employment gains of 0.5%, and a 100 basis points (bps) reduction in interest rates. Additionally, wage growth continued to outpace inflation in December 2023. With wage growth outpacing inflation, and airfares declining year over year, consumers may have discretionary income to travel as supported by Transportation Security Administration (“TSA”) throughput which continues to post gains over 2019. Full-year 2023 TSA through put was 101% of 2019, increasing 12.4% year over year. In January of 2024, TSA throughput increased an additional 9.9% year over year, reaching 104% of 2019. Lower airfares have also contributed to a near full recovery in air travel.

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.

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

Previous wording

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

Current wording

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

Previous wording

We paid quarterly distributions with respect to all four quarters of 2023 and the first quarter of 2024, 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 distributions with respect to all four quarters of 2023 and the first three quarters of 2024, 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 and six months ended June 30, 2024 and 2023.

Current wording

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

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 $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.

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 $9,759,659 for the three months ended September 30, 2024 from $9,577,029 for the three months ended September 30, 2023. The net increase of $182,630, or 1.91%, was largely due to increases in occupancy.

Previous 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%.

Current wording

The increase in rooms revenues of $18,536, or 1.4%, at the Springhill Suites Wilmington is primarily driven by an increase in occupancy. Occupancy at the Springhill Suites Wilmington increased from 74.94% for the three months ended September 30, 2023, to 77.62% for the three months ended September 30, 2024. The ADR at the Springhill Suites Wilmington decreased from $159.37 for the three months ended September 30, 2023, to $157.12 for the three months ended September 30, 2024, a decrease of 1.41%.

Previous wording

The decrease in rooms revenues of $59,783, or 4.00%, at the Staybridge Suites St. Petersburg is primarily driven by a decrease in both occupancy and ADR. Occupancy at the Staybridge Suites St. Petersburg decreased from 82.10% for the three months ended June 30, 2023, to 80.18% for the three months ended June 30, 2024. The ADR at the Staybridge Suites St. Petersburg decreased from $167.93 for the three months ended June 30, 2023, to $165.25 for the three months ended June 30, 2024, a decrease of 1.60%.

Current wording

The decrease in rooms revenues of $138,019, or 10.85%, at the Staybridge Suites St. Petersburg is driven by a decrease in both occupancy and ADR. Occupancy at the Staybridge Suites St. Petersburg decreased from 75.62% for the three months ended September 30, 2023, to 72.15% for the three months ended September 30, 2024. The ADR at the

Previous 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%.

Current wording

The decrease in rooms revenues of $63,503, or 1.98%, at the Hotel Indigo Traverse City is primarily driven by a decrease in occupancy. Occupancy at the Hotel Indigo Traverse City decreased from 90.89% for the three months ended September 30, 2023 to 89.22 % for the three months ended September 30, 2024. The ADR at the Hotel Indigo Traverse City increased from $356.86 for the three months ended September 30, 2023 to $357.35 for the three months ended September 30, 2024, an increase of 0.14%.

Previous 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%.

Current wording

The increase in rooms revenues of $247,614, or 13.14%, at the Hilton Garden Inn Providence is driven by an increase in both occupancy and ADR. Occupancy at the Hilton Garden Inn Providence increased from 71.90% for the three months ended September 30, 2023 to 73.70% for the three months ended September 30, 2024. The ADR at the Hilton Garden Inn Providence increased from $207.88 for the three months ended September 30, 2023 to $229.48 for the three months ended September 30, 2024, an increase of 10.39%.

Previous 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%.

Current wording

The increase in rooms revenues of $118,002, or 6.27%, 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 76.55% for the three months ended September 30, 2023 to 84.30% for the three months ended September 30, 2024. The ADR at the Cherry Tree Inn decreased from $346.05 for the three months ended September 30, 2023 to $336.40 for the three months ended September 30, 2024, a decrease of 2.79%.

Previous wording

Food and beverage revenues decreased to $916,730 for the six months ended June 30, 2024 from $1,034,095 for the six months ended June 30, 2023. These amounts are comprised of revenues realized in hotel food and beverage outlets as well as catering events. The $117,365 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 six months ended June 30, 2024.

Current wording

Food and beverage revenues decreased to $990,011 for the three months ended September 30, 2024 from $1,061,479 for the three months ended September 30, 2023. These amounts are comprised of revenues realized in hotel food and beverage outlets as well as catering events. The $71,468 decrease from the prior year period is primarily due to a decrease in functions at HGI, correlating to a decrease in food and beverage revenue during the three months ended September 30, 2024.

Previous 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.

Current wording

Other operating revenues increased to $450,203 for the three months ended September 30, 2024, from $347,705 for the three months ended September 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 $102,498 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 $2,802,152 for the six months ended June 30, 2024 from $2,742,919 for the six months ended June 30, 2023. The $59,233 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 $2,802,152 and $2,742,919 represent 22.6% and 23.0% of rooms revenues for the three-month period ended June 30, 2024 and 2023, respectively.

Current wording

Rooms expenses increased to $1,730,483 for the three months ended September 30, 2024 from $1,710,208 for the three months ended September 30, 2023. The $20,275 net increase in rooms expenses is primarily due to increased housekeeping expenses. Rooms expenses are typically primarily driven by the corresponding revenue account and occupancy. Rooms expenses of $1,730,483 and $1,710,208 represent 17.7% and 17.9% of rooms revenues for the three-month period ended September 30, 2024 and 2023, respectively.

Previous 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.

Current wording

Food and beverage expenses were $564,890 and $550,315 for the three months ended September 30, 2024 and 2023, respectively. The $14,575 increase in food and beverage expenses is primarily due to increased costs for food and beverage. Food and beverage expenses are historically primarily driven by the corresponding revenue account and occupancy. Food and beverage expenses represent 57.1% and 51.8% of food and beverage revenues for the three-month period ended September 30, 2024 and 2023, respectively.

Previous 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.

Current wording

Other property expenses were $3,152,258 and $3,041,061, for the three months ended September 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 $112,197 increase in other property expenses is primarily driven by an increase in property taxes.

Previous 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.

Current wording

Property management fees to affiliates were $335,856 and $329,697 for the three months ended September 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 $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.

Current wording

Corporate general and administrative expenses were $280,147 and $320,940 for the three months ended September 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 $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.

Current wording

Other fees to affiliates were $230,795 and $209,558 for the three months ended September 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 $182,165 for the three months ended September 30, 2024 from $182,544 for the three months ended September 30, 2023.Other fees to affiliates also includes certain administrative fees charged to us by our Sponsor. Such administrative fees were $48,630 and $29,734 during the three months ended September 30, 2024 and 2023, respectively.

Previous 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.

Current wording

Depreciation and amortization expenses were $1,079,125 and $1,031,180 for the three months ended September 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 $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.

Current wording

Interest expense, net, was $986,900 and $744,035 for the three months ended September 30, 2024 and 2023, respectively.The increase of $242,865 is attributable to the refinancing of the St. Peterburg Note, The Wilimington Note, and the CTI Note at an increased interest rate. 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 September 30, 2024, we incurred $53,170 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. For the three months ended September 30, 2023, we earned $33,079 of interest income relating to the amortization of the fair value of debt premium, offset by $30,417 relating to the amortization of deferred financing costs and debt discounts.

Previous 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.

Current wording

Interest income on interest-bearing cash accounts was $80,208 and $72,328 for three months ended September 30, 2024 and 2023, respectively. Interest income is presented as a reduction of the total interest expense on the consolidated income statement.

Previous wording

Unrealized loss on our interest rate swap was $8,637 for the three months ended June 30, 2024 and $55,589 for the three months ended June 30, 2023. The interest rate swap was terminated in connection with the June 6, 2024 refinancing of the TCI Note.

Current wording

Unrealized loss on our interest rate swap was $0 for the three months ended September 30, 2024 and $42,035 for the three months ended September 30, 2023. The interest rate swap was terminated in connection with the June 6, 2024 refinancing of the TCI Note.

Previous 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.

Current wording

Income tax expense was $261,801 and $193,881 for the three months ended September 30, 2024 and 2023, respectively. They related to activity at the TRSs.

Previous 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.

Current wording

For the three months ended September 30, 2024 and 2023, we had net income of $2,577,617 and $2,814,303, respectively. The decrease in net income of $236,686 is the result of the revenue and expense changes discussed above.

Previous 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.

Current wording

Net income relating to noncontrolling interests was $80,429 and $184,066 for the three months ended September 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 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

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 $22,140,044 for the nine months ended September 30, 2024 from $21,492,976 for the nine months ended September 30, 2023. The net increase of $647,068, or 3.01%, was largely due to increases in occupancy.

Previous wording

A comparison of hotel rooms revenues for the six months ended June 30, 2024 and 2023 is as follows:

Current wording

A comparison of hotel rooms revenues for the nine months ended September 30, 2024 and 2023 is as follows:

Previous wording

The increase in rooms revenues of $345,000, or 16.48%, at the Springhill Suites Wilmington is driven by an increase in occupancy. Occupancy at the Springhill Suites Wilmington increased from 68.55% for the six months ended June 30, 2023, to 79.61% for the six months ended June 30, 2024. The ADR at the Springhill Suites Wilmington decreased slightly from $140.56 for the six months ended June 30, 2023, to $140.22 for the six months ended June 30, 2024, a decrease of 0.02%.

Current wording

The increase in rooms revenues of $363,536, or 10.63%, at the Springhill Suites Wilmington is driven by an increase in occupancy offset by a slight decrease in ADR. Occupancy at the Springhill Suites Wilmington increased from 70.74% for the nine months ended September 30, 2023, to 78.94% for the nine months ended September 30, 2024. The ADR at the Springhill Suites Wilmington decreased slightly from $147.58 for the nine months ended September 30, 2023, to $145.77 for the nine months ended September 30, 2024, a decrease of 1.23%.

Previous wording

The increase in rooms revenues of $24,260, or 1.38%, at the Hotel Indigo Traverse City is primarily driven by an increase in ADR. The ADR at the Hotel Indigo Traverse City increased from $218.96 for the three months ended June 30, 2023 to $222.47 for the three months ended June 30, 2024, an increase of 1.60%. Occupancy at the Hotel

Current wording

The decrease in rooms revenues of $95,706, or 1.66%, at the Hotel Indigo Traverse City is primarily driven by a decrease in occupancy. Occupancy at the Hotel Indigo Traverse City decreased from 78.49% for the nine months ended September 30, 2023 to 76.09% for the nine months ended September 30, 2024. The ADR at the Hotel Indigo Traverse City increased from $251.99 for the nine months ended September 30, 2023 to $254.79 for the nine months ended September 30, 2024, an increase of 1.11%.

Previous wording

The increase in rooms revenues of $340,461 or 13.32%, 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 55.01% for the six months ended June 30, 2023 to 62.04% for the six months ended June 30, 2024. The ADR at the Hilton Garden Inn Providence decreased from $187.38 for the six months ended June 30, 2023 to $187.25 for the six months ended June 30, 2024, a negligible decrease.

Current wording

The increase in rooms revenues of $588,077, or 13.25%, at the Hilton Garden Inn Providence is driven by an increase in occupancy and ADR. Occupancy at the Hilton Garden Inn Providence increased from 60.71% for the nine months ended September 30, 2023 to 65.95% for the nine months ended September 30, 2024. The ADR at the Hilton Garden Inn Providence increased from $195.54 for the nine months ended September 30, 2023 to $203.09 for the nine months ended September 30, 2024, an increase of 3.86% .