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

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 December 31, 2024, as filed with the U.S. Securities and Exchange Commission (“SEC”) on March 24, 2025 (“Annual Report”).

Previous wording

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements.

Current wording

judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements.

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, 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

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 macroeconomic events, including but not limited to the conflict between Russia and Ukraine, 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

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 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

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.

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

Previous 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.

Current wording

Since the commencement of the Public Offering and through March 31, 2025, we received approximately $42,284,960 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 $2,015,844 of K Shares, $1,396,392 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

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 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.

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

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 March 31, 2025 and 2024, the Sponsor requested reimbursement for $49,348 and $47,393, respectively, of such administrative service expenses. Of these amounts, $28,484 is included in due to related parties on the condensed consolidated balance sheet as of March 31, 2025.

Previous 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).

Current wording

We incurred operating expenses of approximately $1,266,402 during the twelve months ended March 31, 2025, which was within the 2% of average invested assets and 25% of net income limitations (as defined in our charter).

Previous 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.

Current wording

While destination and leisure travel have rebounded and remain strong, business travel has been slower to recover. Ongoing 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 2025.

Previous wording

The hospitality sector entered 2024 on comparably stronger footing, however the horizon is not free of challenges. Travel costs have been on the rise, led by generally higher airfares, fuel costs and hotel rates. While pent-up demand has somewhat compensated for high inflation, the potential for a recession-driven pullback in consumer spending remains a credible risk to industry momentum. Scenic destinations that have outperformed in recent years may begin to revert to traditional demand levels. Businesses have suggested they may boost business travel this year, which, combined with additional international visitation and a larger convention slate, is poised to drive recovery in many of the nation’s larger hospitality markets.

Current wording

The hospitality sector entered 2025 on comparably stronger footing, however the horizon is not free of challenges. Travel costs have been on the rise, led by generally higher airfares, fuel costs and hotel rates. While pent-up demand had somewhat compensated for high inflation, the potential for a recession-driven pullback in consumer spending remains a credible risk to industry momentum. Scenic destinations that have outperformed in recent years may begin to revert to traditional demand levels. Businesses have suggested they may boost business travel this year, which, combined with additional international visitation and a larger convention slate, is poised to drive recovery in many of the nation’s larger hospitality markets.

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

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. However, we are, and intend to continue to be, organized and operated in such a manner as to qualify for treatment as a REIT.

Previous wording

We account for income taxes of our TRSs using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We record a valuation allowance for net deferred tax assets that are not expected to be realized.

Current wording

We account for income taxes of our TRSs using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement

Previous wording

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

Current wording

The following table shows distributions paid during the three months ended March 31, 2025 and 2024:

Previous 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.

Current wording

We paid quarterly distributions with respect to all four quarters of 2024 and the first quarter of 2025, 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 nine months ended September 30, 2024 and 2023.

Current wording

The discussion that follows is based on our consolidated results of operations for the three months ended March 31, 2025 and 2024.

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 $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.

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 $5,214,341 for the three months ended March 31, 2025 from $4,838,217 for the three months ended March 31, 2024. The net increase of $376,124, or 7.77%, was largely due to increases in ADR and occupancy.

Previous 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%.

Current wording

The decrease in rooms revenues of $65,290, or 7.13%, at the Springhill Suites Wilmington is primarily driven by a decrease in occupancy. Occupancy at the Springhill Suites Wilmington decreased from 72.89% for the three months ended March 31, 2024, to 68.73% for the three months ended March 31, 2025. The ADR at the Springhill Suites Wilmington decreased from $115.12 for the three months ended March 31, 2024, to $114.65 for the three months ended March 31, 2025, a decrease of 0.41%.

Previous 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

Current wording

The increase in rooms revenues of $399,157, or 23.30%, at the Staybridge Suites St. Petersburg is driven by an increase in occupancy. Occupancy at the Staybridge Suites St. Petersburg increased from 72.18% for the three months ended March 31, 2024, to 91.83% for the three months ended March 31, 2025. The occupancy increase is driven by extended stay guests displaced by the 2024 hurricanes and restoration contractors who are assisting with post-hurricane efforts. The ADR at the Staybridge Suites St. Petersburg decreased from $219.19 for the three months ended March 31, 2024, to $214.80 for the three months ended March 31, 2025, a decrease of 2.00%.

Previous 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%.

Current wording

Rooms revenues for the first three months of 2025 at the Hotel Indigo Traverse City have remained consistent to the first three months of 2024, with a decrease of only $41. Occupancy at the Hotel Indigo Traverse City decreased from 58.29% for the three months ended March 31, 2024 to 54.50 % for the three months ended March 31, 2025. The ADR at the Hotel Indigo Traverse City increased from $133.11 for the three months ended March 31, 2024 to $143.96 for the three months ended March 31, 2025, an increase of 8.15%.

Previous 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%.

Current wording

The decrease in rooms revenues of $7,353, or 0.67%, at the Hilton Garden Inn Providence is driven by a decrease in occupancy. Occupancy at the Hilton Garden Inn Providence decreased from 55.34% for the three months ended March 31, 2024 to 53.92% for the three months ended March 31, 2025. The ADR at the Hilton Garden Inn Providence increased from $158.50 for the three months ended March 31, 2024 to $163.38 for the three months ended March 31, 2025, an increase of 3.08%.

Previous 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%.

Current wording

The increase in rooms revenues of $49,651, or 13.81%, at the Cherry Tree Inn is primarily driven by an increase in both occupancy and ADR. Occupancy at the Cherry Tree Inn increased from 42.87% for the three months ended March 31, 2024 to 44.78% for the three months ended March 31, 2025. The ADR at the Cherry Tree Inn increased from $121.22 for the three months ended March 31, 2024 to $133.55 for the three months ended March 31, 2025, an increase of 10.17%.

Previous 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.

Current wording

Food and beverage revenues increased to $359,086 for the three months ended March 31, 2025 from $288,425 for the three months ended March 31, 2024. These amounts are comprised of revenues realized in hotel food and beverage outlets as well as catering events. The $70,661 increase from the prior year period is primarily due to an increase in restaurant sales at the Hotel Indigo Traverse City, which has recently implemented live music in order to attract more patrons.

Previous 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.

Current wording

Other operating revenues increased to $273,547 for the three months ended March 31, 2025, from $236,691 for the three months ended March 31, 2024. 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 $36,856 increase from the prior year period is primarily due to an increase in parking revenues at the Staybridge Suites St. Petersburg.

Previous 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.

Current wording

Rooms expenses increased to $1,367,983 for the three months ended March 31, 2025 from $1,234,065 for the three months ended March 31, 2024. The $133,918 net increase in rooms expenses is primarily due to an increase in housekeeping and hospitality expenses. Rooms expenses are typically primarily driven by the corresponding revenue account and occupancy. Rooms expenses of $1,367,983 and $1,234,065 represent 26.2% and 25.5% of rooms revenues for the three-month period ended March 31, 2025 and 2024, respectively.

Previous 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.

Current wording

Food and beverage expenses were $338,392 and $275,287 for the three months ended March 31, 2025 and 2024, respectively. The $63,105 increase in food and beverage expenses is primarily due to an increase in the cost of beverages. Food and beverage expenses are historically primarily driven by the corresponding revenue account and occupancy. Food and beverage expenses represent 94.2% and 95.4% of food and beverage revenues for the three-month period ended March 31, 2025 and 2024, respectively.

Previous 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.

Current wording

Other property expenses were $2,553,061 and $2,448,374, for the three months ended March 31, 2025 and 2024, 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 $104,687 increase in other property expenses is primarily driven by an increase in administrative costs.

Previous 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.

Current wording

Property management fees to affiliates were $175,662 and $161,070 for the three months ended March 31, 2025 and 2024, 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 $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.

Current wording

Corporate general and administrative expenses were $284,776 and $278,413 for the three months ended March 31, 2025 and 2024, 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 $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.

Current wording

Other fees to affiliates were $233,113 and $227,606 for the three months ended March 31, 2025 and 2024, 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 $183,765 for the three months ended March 31, 2025 from $181,038 for the three months ended March 31, 2024. Other fees to affiliates also includes certain administrative fees charged to us by our Sponsor. Such administrative fees were $49,348 and $46,568 during the three months ended March 31, 2025 and 2024, respectively.

Previous 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.

Current wording

Depreciation and amortization expenses were $1,091,161 and $1,043,407 for the three months ended March 31, 2025 and 2024, 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 $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.

Current wording

Interest expense, net, was $953,354 and $780,671 for the three months ended March 31, 2025 and 2024, respectively. The increase of $172,683 is attributable to the refinancing of the St. Petersburg Note, the Wilmington Note, and the TCI 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, 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. For the three months ended March 31, 2024, we recognized $33,079 of interest income 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.

Previous 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.

Current wording

Interest income on interest-bearing cash accounts was $56,274 and $67,352 for three months ended March 31, 2025 and 2024, respectively. Interest income is presented as a reduction of the total interest expense on the consolidated statement of operations.

Previous 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.

Current wording

Unrealized gain on our interest rate swap was $0 and $15,874 for the three months ended March 31, 2025 and 2024, respectively. The interest rate swap was terminated in connection with the June 6, 2024 refinancing of the TCI Note.

Previous 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.

Current wording

For the three months ended March 31, 2025 and 2024, we had a net loss of $1,151,928 and $830,685, respectively. The increase in net loss of $321,243 is the result of the revenue and expense changes discussed above.

Previous 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.

Current wording

Net income relating to noncontrolling interests was $248,109 and $195,430 for the three months ended March 31, 2025 and 2024, 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

During the nine months ended September 30, 2024 and 2023, we owned an interest in five hotel properties. During the nine months ended September 30, 2024, net cash provided by operating activities was $5,900,438 compared to the net cash provided by operating activities of $6,303,615 for the nine months ended September 30, 2023. Our operating cash flows during the nine months ended September 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 nine months ended September 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.

Current wording

During the three months ended March 31, 2025 and 2024, we owned an interest in five hotel properties. During the three months ended March 31, 2025, net cash provided by operating activities was $117,357 compared to the net cash provided by operating activities of $825,576 for the three months ended March 31, 2024. Our operating cash flows during the three months ended March 31, 2025, were the result of our net loss, 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, 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.

Previous wording

Cash Flows Used in Investing Activities

Current wording

Cash Flow Used in Investing Activities

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 nine months ended September 30, 2024, net cash used in investing activities was $963,036 and was the result of capital improvements at our hotel properties. During the nine months ended September 30, 2023, net cash used in investing activities was $768,983 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 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. 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.

Previous wording

During the nine months ended September 30, 2023, net cash used in financing activities was $4,481,667. We paid stockholder servicing fees totaling $1,145. 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 $511,347. We paid deferred financing costs of $38,534 related to extending the TCI Note. We paid cash distributions of $2,244,497 to stockholders with proceeds from operations. Cash flow from financing activities for the nine months ended September 30, 2023, also includes $884,450 of distributions to noncontrolling interests. Additionally, we repurchased $937,189 of outstanding shares of common stock.

Current wording

During the three months ended March 31, 2025, net cash used in financing activities was $1,393,369. During the three months ended March 31, 2025, we paid cash distributions of $747,769 to stockholders with proceeds from 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 Wilmington Note, the St. Petersburg Note, 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.