Investment Strategy and Offering Details

Investment Strategy:

Procaccianti Hotel REIT, Inc. intends to acquire and own a diversified portfolio of hospitality properties consisting primarily of existing extended-stay, select-service and compact full-service hotel properties that are classified in the “upper midscale,” “upscale,” and “upper upscale” chain scales of the hospitality industry, as defined by STR, and that are operated under widely recognized brands licensed from hotel franchisors. Chain scale segments are a method by which STR groups branded hotels based on actual average room rates. STR classifies hotel chain scale segments as follows, from highest priced to lowest priced: (1) Luxury; (2) Upper Upscale; (3) Upscale; (4) Upper Midscale; (5) Midscale; and (6) Economy. Independent hotels, regardless of average room rates, are included in STR’s statistical data as a separate chain scale category. We expect that our hotel properties will be located in areas that we believe exhibit strong economic features, based on factors such as employment and income levels, corporate earnings, office vacancy rates, airport and other business and leisure travel, new hotel property construction, hotel renovations, and pricing strategies of competitors.

For some of the hotel properties we acquire, we intend to execute a modest value-add strategy, whereby we acquire assets underperforming their full potential in high-demand markets, remedy operational or managerial inefficiencies, implement sophisticated revenue optimization strategies, invest additional capital to improve the competitiveness of the assets, and increase occupancies, average daily rates, and the property value.

Offering Details:

SPONSOR: Procaccianti Companies, Inc.
STRUCTURE: Public, non-traded corporation that intends to elect to be taxed as a real estate investment trust (REIT).
OFFERING SIZE: Up to $550 million, including DRIP
MINIMUM INVESTMENT: $4,000 initial purchase, $100 minimum additional purchase.
PRIMARY OFFERING PRICE PER SHARE: $10.00 per K-SHARE; $9.30 per K-I SHARE; $10.00 per K-T SHARE
DISTRIBUTION REINVESTMENT PLAN (DRIP);
PRICE PER SHARE:
$9.50 per K SHARE; $9.50 per K-I SHARE; $9.50 per K-T SHARE
ADVISOR FUNDING OF ORGANIZATION & OFFERING EXPENSES: Our advisor and its affiliates have agreed to purchase A Shares in sufficient quantity through a private offering in order to pay the selling commissions, dealer manager fees, stockholder servicing fees and other organization and offering expenses in connection with K Shares, K-I Shares and K-T Shares, the difference between $10.00 and the $9.30 initial price of K-I Shares in the primary offering, the difference between any discounting purchase price and the initial offering price of the K Shares, K-I Shares and K-T Shares.

DEFERRAL/SUBORDINATION OF ADVISOR FEES: Payment of disposition fees and acquisition fees incurred and payable to the Advisor will be deferred until our liquidation (or other “liquidity event” as defined in the prospectus) and will not be paid until payment in full of the “liquidation preference” of each of the K Shares, K-I Shares and K-T Shares, which is equal to $10.00 per share, plus all accumulated, accrued and unpaid distributions on such K Shares, K-I Shares and K-T Shares (whether or authorized), reduced by any distributions to such share classes paid from net sales proceeds. In addition, Payment of the asset management fee incurred and payable to the Advisor will be will be deferred on a quarterly basis if at any time all accumulated, accrued, and unpaid distributions have not been paid in full to the holders of the K-I Shares, K Shares, K-T Shares.
SHARE REPURCHASE PROGRAM(1):

0-1 years: no redemption; after 1 year, may repurchase generally at estimated NAV per share, reduced based on applicable holding period. Repurchases of our K-I Shares, K Shares, and K-T Shares, when requested, are at our sole discretion and generally will be made quarterly.

TAX REPORTING: 1099 DIV
LIQUIDATION STRATEGY: We intend to begin the process of achieving a liquidity event no later than five to seven years after the termination of our initial public offering.  However, we may seek to achieve a liquidity event prior to that time if our board of directors determines an opportune time is at hand. A liquidity event may include a sale of assets to one or more REITs or other third parties, a merger into an existing publicly traded REIT or other publicly traded vehicle, a listing of our shares on a national securities exchange, or some other transaction that would provide liquidity to our stockholders.

NOTE: There is no guarantee that we will be able to achieve a liquidity event.
INVESTOR SUITABILITY: Net worth of at least $250,000 or gross annual income of at least $70,000 and a minimum net worth of at least $70,000, and any applicable heightened state suitability standard.

 (1) Repurchase limited to 5% of the weighted average number of K Shares, K-I Shares and K-T Shares outstanding during the prior calendar year; program may be amended, suspended or terminated without stockholder approval upon 30 days notice to stockholders. Early repurchase fee based on the current net asset value. Repurchases of our K Shares, K-I Shares and K-T Shares, when requested, are at our sole discretion and generally will be made quarterly.