PROCACCIANTI HOTEL REIT, INC.

Previous 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.

Current 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.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

We intend to make reserve allocations as necessary to aid our objective of preserving capital for investors by supporting the maintenance and viability of properties we acquire in the future. If reserves and any other available income become insufficient to cover our operating expenses and liabilities, it may be necessary to obtain additional funds by borrowing, refinancing properties or liquidating our investment in one or more properties. There is no assurance that such funds will be available or, if available, that the terms will be acceptable to us.

Current wording

We intend to make reserve allocations as necessary to aid our objective of preserving capital for investors by supporting the maintenance and viability of properties we acquire in the future. If reserves and any other available income become insufficient to cover our operating expenses and liabilities, it may be necessary to obtain additional

Previous 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.

Current wording

Since the commencement of the Public Offering and through June 30, 2025, we received approximately $42,487,291 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 $2,126,282 of K Shares, $1,488,284 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

We intend to establish an estimated per share net asset value (“Estimated Per Share NAV”) on at least an annual basis. Each Estimated Per Share NAV is determined by our board of directors after consultation with our advisor and an independent third-party valuation firm. The Estimated Per Share NAV is not subject to audit by our independent registered public accounting firm. The following table outlines the established Estimated Per Share NAV as determined by our board of directors for the last five years as of each valuation date presented below (which were the Estimated Per Shares NAVs for the K Shares, K-I Shares and K-T Shares, unless otherwise indicated):

Current wording

We intend to establish an estimated per share net asset value (“Estimated Per Share NAV”) on at least an annual basis. Each Estimated Per Share NAV is determined by our board of directors after consultation with our advisor and an independent third-party valuation firm. The Estimated Per Share NAV is not subject to audit by our independent registered public accounting firm. The following table outlines the established Estimated Per Share NAV as determined by our board of directors for the last seven years as of each valuation date presented below (which were the Estimated Per Shares NAVs for the K Shares, K-I Shares and K-T Shares, unless otherwise indicated):

Previous wording

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

Current wording

S2K Financial LLC was the dealer manager for our Public Offering and was responsible for the distribution of our common stock in our Public Offering. PHA is our advisor and is an affiliate of our Sponsor. Subject to certain restrictions and limitations, PHA manages our day-to-day operations and our portfolio of properties and real estate-related assets. PHA sources and presents investment opportunities to our board of directors and provides investment management, marketing, investor relations and other administrative services on our behalf. We have no paid employees and rely on PHA to provide substantially all of our services. Pursuant to our Advisory Agreement with PHA, we will reimburse PHA for costs incurred in providing these administrative services. PHA will be required to allocate the cost of such services to us based on objective factors such as total assets, revenues and/or time allocations. At least annually, our board of directors will review the amount of administrative services expense reimbursable to PHA to determine whether such amounts are reasonable in relation to the services provided. During the three months ended June 30, 2025 and 2024, the Sponsor requested reimbursement for $48,647 and $47,393, respectively, of such administrative service expenses. Of these amounts, $25,536 is included in due to related parties on the condensed consolidated balance sheet as of June 30, 2025.

Previous 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).

Current wording

We incurred operating expenses of approximately $1,249,853 during the twelve months ended June 30, 2025, which was within the 2% of average invested assets and 25% of net income limitations (as defined in our charter).

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

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 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.

Previous wording

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

Current wording

The following table shows K Share distributions paid during the six months ended June 30, 2025 and 2024:

Previous 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.

Current wording

We paid quarterly K Share distributions with respect to all quarters of 2024 and the first two quarters 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 months ended March 31, 2025 and 2024.

Current wording

The discussion that follows is based on our consolidated results of operations for the three and six months ended June 30, 2025 and 2024.

Previous 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%.

Current wording

The decrease in rooms revenues of $54,048, or 3.55%, at the Springhill Suites Wilmington is primarily driven by a decrease in occupancy and ADR. Occupancy at the Springhill Suites Wilmington decreased from 86.32% for the three months ended June 30, 2024, to 85.25% for the three months ended June 30, 2025. The ADR at the Springhill Suites Wilmington decreased from $161.46 for the three months ended June 30, 2024, to $157.65 for the three months ended June 30, 2025, a decrease of 2.36%.

Previous 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%.

Current wording

The decrease in rooms revenues of $29,432, or 2.93%, at the Cherry Tree Inn is primarily driven by an decrease in occupancy partially offset by an increase in ADR. Occupancy at the Cherry Tree Inn decreased from 68.96% for the three months ended June 30, 2024, to 59.21% for the three months ended June 30, 2025. The ADR at the Cherry Tree Inn increased from $202.53 for the three months ended June 30, 2024, to $238.36 for the three months ended June 30, 2025, an increase of 17.69%.

Previous 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.

Current wording

Food and beverage revenues increased to $705,152 for the three months ended June 30, 2025, from $628,305 for the three months ended June 30, 2024. These amounts are comprised of revenues realized in hotel food and beverage outlets as well as catering events. The $76,847 increase from the prior year period is primarily due to an increase in restaurant sales at the Hotel Indigo Traverse City and an increase in occupancy at the Hilton Garden Inn Providence.

Previous 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.

Current wording

Other operating revenues increased to $378,411 for the three months ended June 30, 2025, from $365,110 for the three months ended June 30, 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 $13,301 increase from the prior year period is primarily due to an increase in parking revenues at the Staybridge Suites St. Petersburg and at the Hilton Garden Inn Providence.

Previous 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.

Current wording

Food and beverage expenses were $435,986 and $423,543 for the three months ended June 30, 2025 and 2024, respectively. The $12,443 increase in food and beverage expenses is primarily due to an increase in the cost of food. Food and beverage expenses are historically primarily driven by the corresponding revenue account and occupancy. Food and beverage expenses represent 61.83% and 67.41% of food and beverage revenues for the three-month period ended June 30, 2025 and 2024, respectively.

Previous 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.

Current wording

Other property expenses were $2,941,912 and $2,847,263, for the three months ended June 30, 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 $94,649 increase in other property expenses is primarily driven by an increase in franchise fees.

Previous 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.

Current wording

Property management fees to affiliates were $275,311 and $256,105 for the three months ended June 30, 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 $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.

Current wording

Corporate general and administrative expenses were $350,851 and $366,800 for the three months ended June 30, 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 $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.

Current wording

Other fees to affiliates were $233,100 and $225,212 for the three months ended June 30, 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 $184,454 for the three months ended June 30, 2025, from $181,576 for the three months ended June 30, 2024. Other fees to affiliates also includes certain administrative fees charged to us by our Sponsor. Such administrative fees were $48,647 and $44,706 during the three months ended June 30, 2025 and 2024, respectively.

Previous 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.

Current wording

Depreciation and amortization expenses were $983,663 and $1,067,970 for the three months ended June 30, 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 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.

Current wording

Interest income on interest-bearing cash accounts was $48,591 and $58,378 for three months ended June 30, 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 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.

Current wording

Unrealized gain on our interest rate swap was $0 and $8,637 for the three months ended June 30, 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 March 31, 2025 and 2024, we had an income tax benefit of $216,887 and $239,001, respectively.

Current wording

For the three months ended June 30, 2025 and 2024, we had an income tax benefit of $7,732 and $6,736, respectively.

Previous 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.

Current wording

For the three months ended June 30, 2025 and 2024, we had net income of $1,413,202 and $790,241, respectively. The increase in net income of $622,961 is the result of the revenue and expense changes discussed above.

Previous 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.

Current wording

Net income relating to noncontrolling interests was $219,612 and $184,249 for the three months ended June 30, 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

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.

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 $13,303,498 for the six months ended June 30, 2025 from $12,380,385 for the six months ended June 30, 2024. The net increase of $923,113, or 7.46%, was largely due to increases in ADR and occupancy.

Previous 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%.

Current wording

The increase in rooms revenues of $318,442, or 10.12%, at the Staybridge Suites St. Petersburg is driven by an increase in occupancy. Occupancy at the Staybridge Suites St. Petersburg increased from 76.18% for the six months ended June 30, 2024, to 86.32% for the six months ended June 30, 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 $190.78 for the six months ended June 30, 2024, to $186.43 for the six months ended June 30, 2025, a decrease of 2.28%.

Previous 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%.

Current wording

The increase in rooms revenues of $574,313, or 19.83%, at the Hilton Garden Inn Providence is driven by an increase in occupancy and ADR. Occupancy at the Hilton Garden Inn Providence increased from 62.04% for the six months ended June 30, 2024 to 67.79% for the six months ended June 30, 2025. The ADR at the Hilton Garden Inn Providence increased from $187.25 for the six months ended June 30, 2024, to $206.45 for the six months ended June 30, 2025, an increase of 10.25%.

Previous 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.

Current wording

Rooms expenses increased to $2,913,270 for the six months ended June 30, 2025, from $2,802,152 for the six months ended June 30, 2024. The $111,118 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 $2,913,270 and $2,802,152 represent 21.9% and 22.6% of rooms revenues for the six-month period ended June 30, 2025 and 2024, respectively.

Previous 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.

Current wording

Interest expense, net, was $1,954,494 and $1,769,132 for the six months ended June 30, 2025 and 2024, respectively. The increase of $185,362 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 six months ended June 30, 2025, we recognized $127,912 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 six months ended June 30, 2024, we recognized $77,824 of interest income relating to the amortization of deferred financing costs and debt discounts, offset by $66,160 relating to the amortization of the fair value of debt premium.

Previous wording

We paid quarterly distributions with respect to all four quarters of 2024 and the first quarter of 2025, with operating cash flow, consistent with prior distributions. Our board of directors will make determinations as to the payment of future distributions on a quarter-by-quarter basis; however, distributions will continue to accumulate pursuant to our charter.

Current wording

We paid quarterly distributions with respect to all four quarters of 2024 and the first two quarters of 2025, with operating cash flow, consistent with prior distributions. Our board of directors will make determinations as to the payment of future distributions on a quarter-by-quarter basis; however, distributions will continue to accumulate pursuant to our charter.

Previous wording

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.

Current wording

During the six months ended June 30, 2025 and 2024, we owned an interest in five hotel properties. During the six months ended June 30, 2025, net cash provided by operating activities was $3,623,226 compared to the net cash provided by operating activities of $3,414,592 for the six months ended June 30, 2024. Our operating cash flows during the six months ended June 30, 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 six months ended June 30, 2024, were the result of our net income, adjustments for non-cash expenses, including depreciation and amortization, the change in fair value of the interest rate swap agreement and by adjustments for receivables, other assets, amounts due to and from related parties, and accounts payable and accrued liabilities.

Previous wording

Cash used in investing activities will vary based on the funds raised by the issuance of shares of common stock pursuant to the DRIP and how quickly we invest those funds towards acquisitions or improvements of real estate and real-estate related investments. During the three months ended March 31, 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.

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, 2025, net cash used in investing activities was $765,146 and was the result of capital improvements at our hotel properties. During the three 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.

Previous 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.

Current wording

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

Previous wording

We intend to maintain amounts outstanding under long-term debt arrangements or lines of credit so that we will have more funds available for investment in properties. However, the percentage of debt financing we utilize at any given time will be dependent upon various factors to be considered in the sole discretion of our board of directors, including, but not limited to, our ability to pay distributions, the availability of properties meeting our investment criteria, the availability of debt financing, and changes in the cost of debt financing. To help finance our initial acquisitions, we may utilize short-term borrowings. However, after our initial property acquisitions, as a general

Current wording

We intend to maintain amounts outstanding under long-term debt arrangements or lines of credit so that we will have more funds available for investment in properties. However, the percentage of debt financing we utilize at any given time will be dependent upon various factors to be considered in the sole discretion of our board of directors, including, but not limited to, our ability to pay distributions, the availability of properties meeting our investment criteria, the availability of debt financing, and changes in the cost of debt financing. To help finance our initial acquisitions, we may utilize short-term borrowings. However, after our initial property acquisitions, as a general principle, we anticipate that the term of any debt financing we utilize will correspond to the anticipated holding period for the respective property.

Previous wording

The TCI Note was refinanced as of June 6, 2024. The TCI Note bears interest at a fixed per annum rate equal to 7.025% during the initial three year term. This rate is calculated to 2.50% in excess of the yield on United States Treasury Securities adjusted to a constant maturity of three years as made available by the Federal Reserve Board. The TCI Note provides for interest only monthly payments for the initial three year term. After the interest only period, principal will be amortized over a 30-year amortization schedule at a fixed per annum rate of interest equal to 2.50% in excess of the yield on United States Treasury Securities adjusted to a constant maturity of one year as made available by the Federal Reserve Board thereafter to maturity on June 6, 2028. The loan agreement allows for two one-year extensions. The TCI Note is collateralized by the Hotel Indigo Traverse City, including equipment, and is guaranteed by the Company (pursuant to a customary carveout/bad acts guaranty). As of March 31, 2025, we believe the Operating Partnership and its subsidiary for the Hotel Indigo Traverse City were in compliance with the loan requirements, including applicable covenants, and all required payments have been made as agreed.

Current wording

The TCI Note was refinanced as of June 6, 2024. The TCI Note bears interest at a fixed per annum rate equal to 7.025% during the initial three year term. This rate is calculated to 2.50% in excess of the yield on United States Treasury Securities adjusted to a constant maturity of three years as made available by the Federal Reserve Board. The TCI Note provides for interest only monthly payments for the initial three year term. After the interest only period, principal will be amortized over a 30-year amortization schedule at a fixed per annum rate of interest equal to 2.50% in excess of the yield on United States Treasury Securities adjusted to a constant maturity of one year as made available by the Federal Reserve Board thereafter to maturity on June 6, 2028. The loan agreement allows for two one-year extensions. The TCI Note is collateralized by the Hotel Indigo Traverse City, including equipment, and is guaranteed by the Company (pursuant to a customary carveout/bad acts guaranty). As of June 30, 2025, we believe the Operating

Previous wording

The HGI Note required monthly interest payments at a fixed rate of 4.25% through February 15, 2023, and subsequent to February 15, 2023, requires monthly principal and interest payments based on a 30-year amortization schedule through the original maturity date of May 15, 2025. On April 30, 2025 Rockland Trust Bank granted an extension of 90 days, for an updated maturity date of August 15, 2025.

Current wording

The HGI Note required monthly interest payments at a fixed rate of 4.25% through February 15, 2023, and subsequent to February 15, 2023, requires monthly principal and interest payments based on a 30-year amortization schedule through the original maturity date of May 15, 2025. The HGI Note was refinanced as of July 10, 2025. The HGI note bears interest at a fixed rate of 6.16% through July 10, 2030. The HGI Note requires interest only payments for the first two years of the five-year term, payments subsequent to July 10, 2027 will consist of principal and interest based on a 25-year amortization schedule. The HGI Note is collateralized by the Hilton Garden Inn Providence, including equipment, and has been guaranteed by the Company (pursuant to a customary carveout/bad acts guaranty). As of June 30, 2025, all required payments to the original Rockland Trust loan were made as agreed. Annual compliance testing for the refinanced loan will commence as of December 31, 2025. Out of the entire refinance amount of $19,200,000, a portion of $1,975,241 was allocated to the payment of A Shares.

Previous wording

In addition, we believe it is appropriate to disregard asset impairment write-downs as they are a non-cash adjustment to recognize losses on prospective sales of real estate assets. Since losses from sales of real estate assets are excluded from FFO, we believe it is appropriate that asset impairment write-downs in advancement of realization of losses should be excluded. Impairment write-downs are based on negative market fluctuations and underlying assessments of general market conditions. When indicators of potential impairment suggest that the carrying value of real estate and related assets may not be recoverable, we assess the recoverability by estimating whether we will recover the carrying value of the asset through undiscounted future cash flows and eventual disposition (including, but not limited to, net rooms revenues, net proceeds on the sale of property and any other ancillary cash flows at a property or group level under GAAP). If based on this analysis, we do not believe that we will be able to recover the carrying value of the real estate asset, we will record an impairment write-down to the extent that the carrying value exceeds the estimated fair value of the real estate asset. Testing for indicators of impairment is a continuous process and is analyzed on a quarterly basis. Investors should note, however, that determinations of whether impairment charges have been

Current wording

In addition, we believe it is appropriate to disregard asset impairment write-downs as they are a non-cash adjustment to recognize losses on prospective sales of real estate assets. Since losses from sales of real estate assets are excluded from FFO, we believe it is appropriate that asset impairment write-downs in advancement of realization of losses should be excluded. Impairment write-downs are based on negative market fluctuations and underlying assessments of general market conditions. When indicators of potential impairment suggest that the carrying value of real estate and related assets may not be recoverable, we assess the recoverability by estimating whether we will recover the carrying value of the asset through undiscounted future cash flows and eventual disposition (including, but not limited to, net rooms revenues, net proceeds on the sale of property and any other ancillary cash flows at a property or group level under GAAP). If based on this analysis, we do not believe that we will be able to recover the carrying value of the real estate asset, we will record an impairment write-down to the extent that the carrying value exceeds the estimated fair value of the real estate asset. Testing for indicators of impairment is a continuous process and is analyzed on a quarterly basis. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rooms revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and that we intend to have a relatively limited term of our operations, it could be difficult to recover any impairment charges through the eventual sale of the property. No impairment losses have been recorded to date.