As filed with the Securities and Exchange Commission on August 18, 2023

PART II—INFORMATION REQUIRED IN OFFERING CIRCULAR

An offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the offering statement filed with the Commission is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the offering statement in which such Final Offering Circular was filed may be obtained.

Preliminary Offering Circular dated August 18, 2023

OFFERING CIRCULAR

American Hospitality Properties REIT II, Inc.

Up to $75,000,000 in Shares of Common Stock

American Hospitality Properties REIT II, Inc. is a newly formed Delaware corporation (the “Company”), formed to invest in limited service hotels in the United States. Substantially all of our assets will be held by, and substantially all of our operations will be conducted through, our operating partnership, AHP REIT II OP, LP, a Delaware limited partnership (the “Operating Partnership”), either directly or through its subsidiaries, and we will be the sole general partner of our Operating Partnership. Additionally, we will contribute the net proceeds from this offering (including the proceeds from the private placements to our Sponsor, as described below) to our Operating Partnership in exchange for units of limited partnership in our Operating Partnership (“OP Units”). We intend to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with our taxable year ending December 31, 2024.

We are externally managed by Phoenix American Hospitality, LLC, or the Manager, which is also our Sponsor. Our principal office is: American Hospitality Properties REIT II, Inc., 14643 Dallas Parkway, Suite 970, Dallas, Texas 75254; telephone number (214) 750-2967.

We are offering up to $75,000,000 of our shares of common stock (the “Shares”) to the public at $10.00 per Share, an amount that was arbitrarily determined by the Manager, until 12 months after the commencement of this offering. Thereafter, the per Share purchase price will be adjusted every fiscal quarter as of January 1st, April 1st, July 1st and October 1st of each year and will equal the sum of our net asset value (“NAV”), divided by the number of Shares outstanding as of the end of the prior fiscal quarter (NAV per Share). The $10.00 per Share or NAV per Share, whichever is applicable, is referred to in this Offering Circular as the “Transaction Price.” The minimum investment in shares of our common stock for initial purchases is 500 Shares, or $5,000 based on the current Transaction Price. This offering will terminate on earliest of (1) the date on which $75,000,000 of Shares have been sold, (2) August __, 2025 or (3) the date on which we terminate this offering in our sole discretion.

In addition, our Sponsor has committed to purchase an aggregate of 25,000 Shares from us at $10.00 per Share in a private placement, 1,000 of which have been purchased as of the date of this Offering Circular, 11,500 of which will be purchased on a date no later than the initial closing of this offering and the other 12,500 of which will be purchased upon the termination of this offering.

The Company intends to conduct its operations so that it is not required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). As a result, investors in this offering will not be afforded any additional protections that might result from the Company complying with the registration and disclosure requirements of the Investment Company Act.

Investing in our Shares is speculative and involves substantial risks. You should purchase these securities only if you can afford a complete loss of your investment.

See “Risk Factors” beginning on page 7 to read about the more significant risks you should consider before buying Shares. These risks include the following:

The United States Securities and Exchange Commission does not pass upon the merits of or give its approval to any securities offered or the terms of this offering, nor does it pass upon the accuracy or completeness of any offering circular or other solicitation materials. These securities are offered pursuant to an exemption from registration with the Commission; however, the Commission has not made an independent determination that the securities offered are exempt from registration.

The use of projections or forecasts in this offering is prohibited. No one is permitted to make any oral or written predictions about the cash benefits or tax consequences you will receive from your investment in our Shares.

We will offer our Shares on a best efforts basis initially by our officers, directors and employees.

This Offering Circular follows the Offering Circular disclosure format.

The date of this Offering Circular is August __, 2023

IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR

Please carefully read the information in this Offering Circular and any accompanying Offering Circular supplements, which we refer to collectively as the Offering Circular. You should rely only on the information contained in this Offering Circular. We have not authorized anyone to provide you with different information. This Offering Circular may only be used where it is legal to sell these securities. You should not assume that the information contained in this Offering Circular is accurate as of any date later than the date hereof or such other dates as are stated herein or as of the respective dates of any documents or other information incorporated herein by reference.

This Offering Circular is part of an offering statement that we filed with the SEC, using a continuous offering process. Periodically, as we make material developments, we will provide an Offering Circular supplement that may add, update or change information contained in this Offering Circular. Any statement that we make in this Offering Circular will be modified or superseded by any inconsistent statement made by us in a subsequent Offering Circular supplement. The offering statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this Offering Circular. You should read this Offering Circular and the related exhibits filed with the SEC and any Offering Circular supplement, together with additional information contained in our annual reports, semi-annual reports and other reports and information statements that we will file periodically with the SEC. See the section entitled “Additional Information” below for more details.

The offering statement and all supplements and reports that we have filed or will file in the future can be read at the SEC website, www.sec.gov.

The Manager and those selling Shares on our behalf in this offering will be permitted to make a determination that the purchasers of Shares in this offering are “qualified purchasers” in reliance on the information and representations provided by the investor regarding the investor’s financial situation. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.stockholder.gov.

TABLE OF CONTENTS

INVESTMENT CRITERIA

The Shares are being offered and sold only to “qualified purchasers” (as defined in Regulation A under the Securities Act of 1933, as amended (the “Securities Act”)). As a Tier 2 offering pursuant to Regulation A under the Securities Act, this offering will be exempt from state law “Blue Sky” review, subject to meeting certain state filing requirements and complying with certain anti-fraud provisions, to the extent that the Shares offered hereby are offered and sold only to “qualified purchasers”. In order to be a “qualified purchaser,” a purchaser of Shares must satisfy one of the following:

(1) Non-Accredited Investors: If you are not an accredited investor (as defined below), your investment in Shares may not be more than 10% of the greater of:

(a) If you are a natural person:

i. your individual net worth, or joint net worth with your spouse, excluding the value of your primary residence (as described below); or

ii. your individual income, or joint income with your spouse, received in each of the two most recent years and you have a reasonable expectation that an investment in the Shares will not exceed 10% of your individual or joint income in the current year.

(b) If you are not a natural person,

i. your revenue, as of your most recently completed fiscal year end; or

ii. your net assets, as of your most recently completed fiscal year end.

For purposes of this definition, “net worth” means the excess of total assets at fair market value over total liabilities, except that the value of the principal residence owned by a natural person will be excluded for purposes of determining such natural person’s net worth. In addition, for purposes of this definition, the related amount of indebtedness secured by the primary residence up to the primary residence’s fair market value may also be excluded, except in the event such indebtedness increased in the 60 days preceding the purchase of our common stock and was unrelated to the acquisition of the primary residence, then the amount of the increase must be included as a liability in the net worth calculation. Moreover, indebtedness secured by the primary residence in excess of the fair market value of such residence should be considered a liability and deducted from the natural person’s net worth. In the case of fiduciary accounts, the net worth and/or income suitability requirements may be satisfied by the beneficiary of the account or by the fiduciary, if the donor or grantor is the fiduciary and fiduciary directly or indirectly provides funds for the purchase of the Shares; or

We reserve the right to reject any investor’s subscription in whole or in part for any reason, including if we determine in our sole and absolute discretion that such stockholder is not a “qualified purchaser” for purposes of Regulation A.

OFFERING CIRCULAR SUMMARY

The following summary highlights information continued elsewhere in this Offering Circular and should be read in conjunction with, and is qualified in its entirety by, the detailed information appearing elsewhere in this Offering Circular. To understand this offering fully, you should read the entire Offering Circular carefully, including the “Risk Factors” section, before making a decision to invest in our Shares. References to “we,” “us” “our” or “the Company” refer to American Hospitality Properties REIT II, Inc., a Delaware corporation.

RISK FACTORS

The purchase of Shares is speculative and involves substantial risk. It is impossible to predict accurately the results to a stockholder of an investment in the Company because of the recent formation of the Company and general uncertainties in the real estate and financing markets and the hotel industry.

This Offering Circular contains forward-looking statements that involve risks and uncertainties. These statements are only predictions and are not guarantees. Actual events and results of operations could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “will,” “should,” “expect,” “could,” “intend,” “anticipate,” “plan,” “estimate,” “believe,” “potential,” or the negative of such terms or other comparable terminology. The forward-looking statements included herein are based upon the Manager’s current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Although the Manager believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, the risk factors discussed below. Any assumptions underlying forward-looking statements could be inaccurate. Purchasers of Shares are cautioned not to place undue reliance on any forward-looking statements contained herein.

You should consider carefully the following risks, and should consult with your own legal, tax, and financial advisors with respect thereto. You are urged to read this entire Offering Circular and any Offering Circular supplements before investing in the Company.

Risks Related to an Investment in American Hospitality Properties REIT II, Inc.

We have no prior operating history, and the prior performance of our sponsor or other real estate investment opportunities sponsored by our sponsor may not predict our future results.

We have no prior operating history. As of the date of this Offering Circular, we have only $10,000 in total assets, consisting of cash and other assets. Our lack of an operating history significantly increases the risk and uncertainty you face in making an investment in our Shares.

Because no public trading market for your Shares currently exists, it will be difficult for you to sell your Shares and, if you are able to sell your Shares, you will likely sell them at a substantial discount to the public offering price.

Our charter does not require the Company to seek stockholder approval to liquidate our assets by a specified date, nor does our charter require the Company to list our Shares for trading on a national securities exchange by a specified date. There is no public market for our Shares and we currently have no plans to list our Shares on a stock exchange or other trading market. Until our Shares are listed, if ever, you may not sell your Shares unless the buyer meets the applicable suitability and minimum purchase standards. Therefore, it will be difficult for you to sell your Shares promptly or at all. If you are able to sell your Shares, you would likely have to sell them at a substantial discount to their public offering price. It is also likely that your Shares would not be accepted as the primary collateral for a loan. Because of the illiquid nature of our Shares, you should purchase our Shares only as a long-term investment and be prepared to hold them for an indefinite period of time.

The actual value of your investment may be substantially less than what you pay.

The initial Transaction Price is $10.00, an amount that was arbitrarily determined by the Manager, which Transaction Price will be in effect for 12 months after the commencement of this offering. Thereafter, the per share purchase price will be adjusted every fiscal quarter as of January 1st, April 1st, July 1st and October 1st of each year and will equal our net asset value, or NAV, divided by the number of shares of our common stock outstanding as of the end of the prior fiscal quarter on a fully diluted basis (NAV per Share). See “Plan of Distribution—Price per Share.”

Our NAV per Share will be calculated by the Manager at the end of each fiscal quarter on a fully diluted basis, beginning twelve months after commencement of the offering using a process that reflects several components, including (1) estimated values of each of our commercial real estate assets and investments, including related liabilities, based upon (a) market capitalization rates, comparable sales information, interest rates, net operating income, and (b) in certain instances individual appraisal reports of the underlying real estate provided by an independent valuation expert, (2) the price of liquid assets for which third party market quotes are available, (3) accruals of our periodic dividends and (4) estimated accruals of our operating revenues and expenses. In instances where the Manager determines that an independent appraisal of the real estate asset is necessary, including, but not limited to, instances where the Manager is unsure of its ability on its own to accurately determine the estimated values of our commercial real estate assets and investments, or instances where third party market values for comparable properties are either nonexistent or extremely inconsistent, the Manager may engage an appraiser that has expertise in appraising commercial real estate assets, to act as our independent valuation expert. The independent valuation expert will not be responsible for, or prepare, our NAV per Share. However, the Manager may hire a third party to calculate, or assist with calculating, the NAV calculation. The use of different judgments or assumptions would likely result in different estimates of the value of our real estate assets. Moreover, although we evaluate and provide our NAV per Share on a quarterly basis, our NAV per Share may fluctuate daily, so that the NAV per Share in effect for any fiscal quarter may not reflect the precise amount that might be paid for your Shares if you were to transfer your Shares to a third-party in a privately negotiated transaction. Further, our published NAV per Share may not fully reflect certain material events to the extent that they are not known or their financial impact on our portfolio is not immediately quantifiable. Any resulting potential disparity in our NAV per Share may be in favor of either stockholders who redeem their shares, or stockholders who buy new shares, or existing stockholders. In cases where we believe there has been a material change (positive or negative) to our NAV per Share since the beginning of the applicable quarter, we will update a previously disclosed Transaction Price. If we update the Transaction Price during any quarter, we will notify potential investors through the filing of a supplement to this Offering Circular. Note, in addition, that the determination of our NAV per Share is not based on, nor intended to comply with, fair value standards under generally accepted accounting principles (“GAAP”) and our NAV per Share may not be indicative of the price that we would receive for our assets at current market conditions. See “Plan of Distribution—Valuation Policies.”

If we are unable to find suitable investments, we may not be able to achieve our investment objectives or pay distributions.

Our ability to achieve our investment objectives and to pay distributions depends upon the performance of the Manager in the acquisition of the Properties and the ability of the Manager to source investment opportunities for us. The more money we raise in this offering, the greater our challenge will be to invest all of the net offering proceeds on attractive terms. We cannot assure you that the Manager will be successful in obtaining suitable investments on financially attractive terms or that, if the Manager makes investments on our behalf, our objectives will be achieved. If we, through the Manager, are unable to find suitable investments promptly, we will hold the proceeds from this offering in an interest-bearing account or invest the proceeds in short-term assets. If we would continue to be unsuccessful in locating suitable investments, we may ultimately decide to liquidate. In the event we are unable to timely locate suitable investments, we may be unable or limited in our ability to pay distributions and we may not be able to meet our investment objectives.

If we pay distributions from sources other than our cash flow from operations, we will have less funds available for investments and your overall return will be reduced.

Although our distribution policy is to use our cash flow from operations to make distributions, our organization documents do not prohibit us from paying distributions from any source, including borrowings or sales of assets. Until the proceeds from this offering are fully invested and from time to time during the operational stage, we may not generate sufficient cash flow from operations to fund distributions. If we pay distributions from financings, the net proceeds from this or future offerings or other sources other than our cash flow from operations, we will have less funds available for investments in Properties and the number of Properties that we invest in and the overall return to our stockholders may be reduced. If we fund distributions from borrowings, our interest expense and other financing costs, as well as the repayment of such borrowings, will reduce our earnings and cash flow from operations available for distribution in future periods, and accordingly your overall return may be reduced. The U.S. Federal Reserve began rapidly increasing the federal funds rate to decade-high levels in 2022 and early 2023 and the rate may continue to rise during the second half of 2023. This action has resulted in an increase in the prevailing interest rates. We cannot assure you that our access to capital and other sources of funding for distributions will not become constrained or unavailable at interest rates or other terms that are acceptable to the Company. Additionally, future increases in interest rates could negatively affect our ability to repay or refinance any borrowings that are subject to variable interest rates. If we fund distributions from the sale of assets, this will affect our ability to generate cash flows from operations in future periods. There can be no assurance that cash distributions will, in fact, be made or, if made, that those distributions will be made when anticipated.

Disruptions in the financial markets or deteriorating economic conditions could adversely impact the hotel real estate market, which could hinder our ability to implement our business strategy and generate returns to you.

The success of our business is significantly related to general economic conditions and, accordingly, our business could be harmed by any economic slowdown and downturn in real estate asset values and property sales. Periods of economic slowdown or recession, significantly rising interest rates, declining employment levels, decreasing demand for real estate, declining real estate values, or the public perception that any of these events may occur can reduce the volume of potential investments. These economic conditions have resulted in and could continue to result in a general decline in acquisition and disposition activities. In addition, these conditions have led and could continue to lead to a decline in property sales prices as well as a decline in funds invested in existing real estate assets and properties planned for development.

Inflation in the United States has accelerated to historically high levels and may continue at an elevated level in the near-term. Inflationary pressures may increase our direct and indirect operating costs, including for labor at the corporate levels.

During an economic downturn, it may also take longer for us to dispose of the Properties or the selling prices may be lower than originally anticipated. As a result, the carrying value of the Properties may become impaired and we could record losses as a result of such impairment or we could experience reduced profitability related to declines in real estate values. Further, as a result of our target leverage, our exposure to adverse general economic conditions is heightened. These negative general economic conditions could continue to reduce the overall amount of sale activity in the hotel real estate industry, and hence the demand for our services.

All of the conditions described above could adversely impact our business performance and profitability, which could result in our failure to make distributions to our stockholders and could decrease the value of an investment in us. In addition, in an extreme deterioration of our business, we could have insufficient liquidity to meet our debt service obligations when they come due in future years. If we fail to meet our payment or other obligations under our credit facilities, the lenders under those agreements will be entitled to proceed against the collateral granted to them to secure the debt owed.

We may suffer from delays in locating suitable investments, which could limit our ability to make distributions and lower the overall return on your investment.

We rely upon the Manager’s real estate professionals, including W.L “Perch” Nelson, its Founder and Chief Executive Officer, to identify suitable investments. Other Phoenix American entities also rely on Mr. Nelson for investment opportunities. To the extent that the Manager’s real estate professionals face competing demands upon their time in instances when we have capital ready for investment, we may face delays in execution.

Additionally, the current market for properties that meet our investment objectives is highly competitive. The more Shares we sell in this offering, the greater our challenge will be to invest all of the net offering proceeds on attractive terms. Except for investments that may be described in supplements to this Offering Circular prior to the date you subscribe for our Shares, you will have no opportunity to evaluate the terms of transactions or other economic or financial data concerning our investments. You must rely entirely on the oversight and management ability of the Manager and the performance of the Operator. We cannot be sure that the Manager will be successful in obtaining suitable investments on financially attractive terms.

We could also suffer from delays in locating suitable investments as a result of our reliance on the Manager at times when its officers, employees, or agents are simultaneously seeking to locate suitable investments for other Phoenix American sponsored programs, all of which have investment objectives and employ investment strategies that are similar to ours. Furthermore, where we acquire properties prior to the start or during the early stages of redevelopment, it will typically take several months to complete construction and commence operations. Therefore, you could suffer delays in the receipt of distributions attributable to those particular properties.

Further, because we are raising a “blind pool” without any pre-selected assets, it may be difficult for us to invest the net offering proceeds promptly and on attractive terms. Delays we encounter in the selection and acquisition of Properties would likely limit our ability to pay distributions to our stockholders and lower their overall returns.

Because we have not identified any Properties for acquisition, you will not have the opportunity to evaluate our investments before we make them, which makes your investment more speculative.

Because we have not identified any Properties that we may acquire, we are not able to provide you with any information to assist you in evaluating the merits of any specific investments that we may make, except for investments that may be described in supplements to this Offering Circular. We will seek to invest substantially all of the offering proceeds available for investment, after the payment of fees and expenses, in limited service hotels. However, because you will be unable to evaluate the economic merit of assets before we invest in them, you will have to rely entirely on the ability of the Manager to select suitable and successful investment opportunities. These factors increase the risk that your investment may not generate returns comparable to our competitors.

You may be more likely to sustain a loss on your investment because the Manager does not have as strong an economic incentive to avoid losses as do sponsors or managers who have made significant equity investments in their companies.

The Manager has committed to invest an aggregate of only $250,000 in the Company. Therefore, if we are successful in raising enough proceeds to be able to reimburse the Manager for our organization and offering expenses, the Manager will have little exposure to loss in the value of our Shares. Without this exposure, our stockholders may be at a greater risk of loss because the Manager does not have as much to lose from a decrease in the value of our Shares as do those sponsors who make more significant equity investments in their companies.

Because we are limited in the amount of funds we can raise, we will be limited in the number and type of investments we make and the value of your investment in us will fluctuate with the performance of the specific assets we acquire.

This offering is being made on a “best efforts” basis and we may begin to invest net proceeds from this offering immediately after the commencement of this offering. Further, under Regulation A, we are only allowed to raise up to $75,000,000 in any 12-month period (although we may raise capital in other ways). We expect the size of the Properties that we will acquire will average about $10 million to $15 million per asset. As a result, the amount of proceeds we raise in this offering may be substantially less than the amount we would need to achieve a diversified portfolio of Properties, even if we are successful in raising the maximum offering amount. If we are unable to raise substantial funds, we will make fewer investments resulting in less diversification in terms of the type, number and size of Properties that we make. In that case, the likelihood that any single Property’s performance would adversely affect our profitability will increase. Your investment in our Shares will be subject to greater risk to the extent that we lack a diversified portfolio of Properties. Further, we will have certain fixed operating expenses, including certain expenses as a public reporting company, regardless of whether we are able to raise substantial funds in this offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.

Any adverse changes in the Manager or Operator’s financial health could hinder our operating performance and the return on your investment.

We have engaged the Manager to manage our operations. Our ability to achieve our investment objectives and to pay distributions is dependent upon the performance of the Manager and its affiliates, including the Operator, as well as the Manager’s real estate professionals in the identification and acquisition of investments, the management of our assets and operation of our day-to-day activities. Any adverse changes in the Manager or Operator’s financial condition could hinder the Manager’s or Operator’s ability to successfully manage our operations and our Properties.

If we do not successfully implement a liquidity transaction, you may have to hold your investment for an indefinite period.

Although we presently intend to complete a transaction or series of transactions, providing liquidity to our stockholders within approximately five years from the completion of this offering, our charter does not require our board of directors to pursue such a liquidity transaction. Market conditions and other factors could cause us to delay the commencement of a liquidation or other type of liquidity transaction, such as a merger or sale of assets, beyond five years from the termination of this offering. If the Manager does determine to pursue a liquidity transaction, we would be under no obligation to conclude the process within a set time. If we adopt a plan of liquidation, the timing of the sale of assets will depend on real estate and financial markets and the economic conditions in areas in which the Properties are located. We cannot guarantee that we will be able to liquidate all assets. After we adopt a plan of liquidation, we would likely remain in existence until all our investments are liquidated. If we do not pursue a liquidity transaction, or delay such a transaction due to market conditions, your Shares may continue to be illiquid and you may, for an indefinite period of time, be unable to convert your investment to cash easily and could suffer losses on your investment.

We have minimal operating capital, no significant assets and no revenue from operations.

We have minimal operating capital and for the foreseeable future will be dependent upon our ability to finance our operations from the sale of equity or other financing alternatives. There can be no assurance that we will be able to successfully raise operating capital. The failure to successfully raise operating capital, and the failure to attract qualified real estate companies and sufficient stockholder purchase commitments, could result in our bankruptcy or other event which would have a material adverse effect on us and our stockholders. We have no significant assets or financial resources, so such adverse event could put your investment dollars at significant risk.

Third party financing may be required to fund working capital requirements.

To the extent funds for working capital are not available from operations, the Company may be required to seek additional loans for capital improvements and other working capital needs. The Company has not received a commitment from any third party to make such future loans, if needed, and there can be no assurance that such loans can be arranged or what the terms of any such borrowings would be. In addition, it is anticipated that the loans obtained to acquire the Properties will restrict the ability of the borrowers to obtain secondary financing.

The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.

We compete with many other entities engaged in real estate investment activities, including corporations, bank and insurance company investment accounts, private real estate funds, and other entities engaged in real estate investment activities. This market is competitive and rapidly changing. We expect competition to persist and intensify in the future, which could harm our ability to acquire Properties.

Most of our current or potential competitors have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the acquisition of real estate assets. Larger real estate programs may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable properties may increase. Any such increase would result in increased demand for these assets and therefore increased prices paid for them. If we pay higher prices for our Properties, our profitability will be reduced and you may experience a lower return on your investment.

If the Manager fails to retain its key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.

Our future depends, in part, on the Manager’s ability to attract and retain key personnel. Our future also depends on the continued contributions of the executive officers and other key personnel of the Manager, each of whom would be difficult to replace. In particular, the Founder/Chief Executive Officer of the Manager, Mr. Nelson, is critical to the management of our business and operations and the development of our strategic direction. The loss of the services of Mr. Nelson or other executive officers or key personnel of the Manager and the process to replace any of the Manager’s key personnel would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives.

Our stockholders do not elect or vote on the Manager and have limited ability to influence decisions regarding our business.

The assets, affairs and business of the Company will be managed under the direction of the Manager. Our stockholders do not elect or vote on the Manager and have only limited voting rights on matters affecting our business and, therefore, limited ability to influence decisions regarding our business.

Our stockholders will have limited voting rights and may be bound by either a majority or supermajority vote.

Our stockholders will have voting rights only with respect to certain matters, primarily relating to amendments to our charter, the election of directors and the liquidation of the Company. Each outstanding Share entitles the holder to one vote on all matters submitted to a vote of stockholders. Generally, matters to be voted on by our stockholders must be approved by a majority of the votes cast by all Shares present in person or represented by proxy. If any vote occurs, you will be bound by the majority or supermajority vote, as applicable, even if you did not vote with the majority or supermajority.

As a non-listed company conducting an exempt offering pursuant to Regulation A, we are not subject to a number of corporate governance requirements, including the requirements for a board of directors or independent board committees.

As a non-listed company conducting an exempt offering pursuant to Regulation A, we are not subject to a number of corporate governance requirements that an issuer conducting an offering on Form S-11 or listing on a national stock exchange would be. Additionally, we are not required to have (i) a board of directors of which a majority consists of “independent” directors under the listing standards of a national stock exchange, (ii) an audit committee composed entirely of independent directors and a written audit committee charter meeting a national stock exchange’s requirements, (iii) a nominating/corporate governance committee composed entirely of independent directors and a written nominating/corporate governance committee charter meeting a national stock exchange’s requirements, (iv) a compensation committee composed entirely of independent directors and a written compensation committee charter meeting the requirements of a national stock exchange, and (v) independent audits of our internal controls. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of a national stock exchange.

If our techniques for managing risk are ineffective, we may be exposed to unanticipated losses.

In order to manage the significant risks inherent in our business, we must maintain effective policies, procedures and systems that enable us to identify, monitor and control our exposure to market, operational, legal and reputational risks. Our risk management methods may prove to be ineffective due to their design or implementation or as a result of the lack of adequate, accurate or timely information. If our risk management efforts are ineffective, we could suffer losses or face litigation.

Our techniques for managing risks may not fully mitigate the risk exposure in all economic or market environments, or against all types of risk, including risks that we might fail to identify or anticipate. Any failures in our risk management techniques and strategies to accurately quantify such risk exposure could limit our ability to manage risks or to seek positive, risk-adjusted returns. In addition, any risk management failures could cause fund losses to be significantly greater than historical measures predict. Our more qualitative approach to managing those risks could prove insufficient, exposing us to unanticipated losses in our net asset value and therefore a reduction in our revenues.

This offering is focused on attracting a large number of stockholders that plan on making relatively small investments. An inability to attract such stockholders may have an adverse effect on the success of our offering, and we may not raise adequate capital to implement our business strategy.

Our Shares are being offered and sold only to “qualified purchasers” (as defined in Regulation A). “Qualified purchasers” include: (i) “accredited investors” under Rule 501(a) of Regulation D (which, in the case of natural persons, (A) have an individual net worth, or joint net worth with the person’s spouse, that exceeds $1,000,000 at the time of the purchase, excluding the value of the primary residence of such person, or (B) earned income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year) and (ii) all other investors so long as their investment in the particular issuer does not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons).

Our reliance on attracting investors that may not meet the net worth or income requirements of “accredited investors” carries certain risks that may not be present in traditional initial public offerings. For example, certain economic, geopolitical and social conditions may influence the investing habits and risk tolerance of these smaller investors to a greater extent than “accredited investors,” which may have an adverse effect on our ability to raise adequate capital to implement our business strategy. Additionally, our focus on investors that plan on making, or are able to make, relatively small investments requires a larger investor base in order to meet our annual goal of raising $75,000,000 in our offering. We may have difficulties in attracting a large investor base, which may have an adverse effect on the success of this offering, and a larger investor base involves increased transaction costs, which will increase our expenses.

Maintenance of our exemption from the Investment Company Act of 1940 imposes limits on our operations, which may adversely affect our operations.

The Company will accept 100 or more stockholders. The Investment Company Act requires that any issuer that is beneficially owned by 100 or more persons and that owns certain securities be registered as required under the Investment Company Act. The Manager believes that, because the Company will be purchasing the Properties directly or through wholly-owned subsidiaries, the ownership of the Properties will not be deemed to be securities for purposes of the Investment Company Act. However, because one or more of the Properties may be acquired together with a joint venture partner, it is possible that such Properties will not qualify as real estate acquisitions for purposes of the Investment Company Act. Although the Manager intends to cause more than 55% of the Company’s assets to be direct investments in real estate in order for the Company to qualify for exemption from the Investment Company Act, it is possible that the Company may not be able to qualify for one or more of the exemptions under the Investment Company Act. If the Company fails to qualify under one of the exemptions or exclusions from the Investment Company Act, the Company will have to register under the Investment Company Act. In the event the Company is required to register under the Investment Company Act, the returns to our stockholders will likely be significantly reduced.

Risks Related to Compliance and Regulation

We are offering our Shares pursuant to recent amendments to Regulation A promulgated pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we cannot be certain if the reduced disclosure requirements applicable to Tier 2 issuers will make our Shares less attractive to investors as compared to a traditional initial public offering.

As a Tier 2 issuer, we will be subject to scaled disclosure and reporting requirements, which may make our Shares less attractive to investors as compared to a traditional initial public offering, which may make an investment in our Shares less attractive to investors who are accustomed to enhanced disclosure and more frequent financial reporting. In addition, given the relative lack of regulatory precedence regarding the recent amendments to Regulation A, there is a significant amount of regulatory uncertainty with regard to how the SEC or the individual state securities regulators will regulate both the offer and sale of our securities, as well as any ongoing compliance to which we may be subject. If our scaled disclosure and reporting requirements, or regulatory uncertainty regarding Regulation A, reduces the attractiveness of our Shares, we may be unable to raise the necessary funds necessary to commence operations, or to develop a diversified portfolio of Properties, which could severely affect the value of our Shares.

Our use of Form 1-A and our reliance on Regulation A for this offering may make it more difficult to raise capital as and when we need it, as compared to if we were conducting a traditional initial public offering.

Because of the exemptions from various reporting requirements provided to us under Regulation A and because we are only permitted to raise up to $75,000,000 in any 12-month period under Regulation A (although we may raise capital in other ways), we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

There may be deficiencies with our internal controls that require improvements, and if we are unable to adequately evaluate internal controls, we may be subject to sanctions.

As a Tier 2 issuer, we will not need to provide a report on the effectiveness of our internal controls over financial reporting, and we will be exempt from the auditor attestation requirements concerning any such report so long as we are a Tier 2 issuer. We are in the process of evaluating whether our internal control procedures are effective and, therefore, there is a greater likelihood of undiscovered errors in our internal controls or reported financial statements as compared to issuers that have conducted such evaluations.

Compliance with the Americans with Disabilities Act.

Under the Americans with Disabilities Act of 1990 (the “ADA”), public accommodations must meet certain federal requirements related to access and use by disabled persons. Facilities initially occupied after January 26, 1992 must comply with the ADA. When a building is being renovated, the area renovated, and the path of travel accessing the renovated area, must comply with the ADA. Further, owners of buildings occupied prior to January 26, 1992 must expend reasonable sums, and must make reasonable efforts, to make practicable or readily achievable modifications to remove barriers, unless the modification would create an undue burden. This means that so long as owners are financially able, they have an ongoing duty to make their property accessible. The definitions of “reasonable,” “reasonable efforts,” “practicable” or “readily achievable” are site-dependent and vary based on the owner’s financial status. The ADA requirements could require removal of access barriers at significant cost, and could result in the imposition of fines by the federal government or an award of damages to private litigants. Attorneys’ fees may be awarded to a plaintiff claiming ADA violations. State and federal laws in this area are constantly evolving, and could evolve to place a greater cost or burden on the Company. While the Manager will attempt to obtain information with respect to compliance with the ADA prior to investing in a Property, there can be no assurance that ADA violations do not or will not exist at a specific Property. If other violations do exist, there can be no assurance there will be funds available to pay for any necessary repairs.

Costs imposed pursuant to governmental laws and regulations may reduce our net income and the cash available for distributions to our stockholders.

Real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to protection of the environment and human health. We could be subject to liability in the form of fines, penalties or damages for noncompliance with these laws and regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the remediation of contamination associated with the release or disposal of solid and hazardous materials, the presence of toxic building materials and other health and safety-related concerns.

Some of these laws and regulations may impose joint and several liabilities on the tenants, owners or operators of real property for the costs to investigate or remediate contaminated properties, regardless of fault, whether the contamination occurred prior to purchase, or whether the acts causing the contamination were legal. Activities of our tenants, the condition of properties at the time we buy them, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties.

The presence of hazardous substances, or the failure to properly manage or remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings. Any material expenditures, fines, penalties or damages we must pay will reduce our ability to make distributions and may reduce the value of your investment.

Risks Related to Conflicts of Interest

There are conflicts of interest between us, the Manager and its affiliates.

The Manager provides asset management and other services to other funds. Prevailing market rates are determined by the Manager based on industry standards and expectations of what the Manager would be able to negotiate with a third party on an arm’s length basis. All of the agreements and arrangements between such parties, including those relating to compensation, are not the result of arm’s length negotiations. Some of the conflicts inherent in the Company’s transactions with the Manager and its affiliates, and the limitations on such parties adopted to address these conflicts, are described below. The Company, the Manager and their affiliates will try to balance our interests with their own. However, to the extent that such parties take actions that are more favorable to other entities than us, these actions could have negative impact on our financial performance and, consequently, on distributions to our stockholders and the value of our Shares. We have adopted a conflicts of interest policy and certain conflicts will be reviewed by the Independent Representative (defined below). See “Conflicts of Interest—Certain Conflict Resolution Measures—Independent Representative” and “—Our Policies Relating to Conflicts of Interest”.

The interests of the Manager, the principals and its other affiliates may conflict with your interests.

The management agreement provides the Manager with broad powers and authority which may result in one or more conflicts of interest between your interests and those of the Manager and its affiliates. This risk is increased by the Manager being controlled by Mr. Nelson, who participates, or expects to participate, directly or indirectly in other offerings by the Manager and its affiliates. Potential conflicts of interest include, but are not limited to, the following:

We have agreed to limit remedies available to us and our stockholders for actions by the Manager that might otherwise constitute a breach of duty.

The Manager maintains a contractual, as opposed to a fiduciary relationship, with us and our stockholders. Accordingly, we and our stockholders will only have recourse and be able to seek remedies against the Manager to the extent it breaches its obligations pursuant to the management agreement. Furthermore, we have agreed to limit the liability of the Manager and to indemnify the Manager against certain liabilities. These provisions are detrimental to our stockholders because they restrict the remedies available to them for actions that without those limitations might constitute breaches of duty, including fiduciary duties. In addition, we may choose not to enforce, or to enforce less vigorously, our rights under the management agreement because of our desire to maintain our ongoing relationship with the Manager.

The Manager and the Operator may be entitled to receive compensation regardless of the profitability of the Company.

The Manager and the Operator are entitled to receive certain significant fees and other significant compensation, payments and reimbursements regardless of whether the Company operates at a profit or a loss. In addition, the amount of compensation paid to the Manager and its affiliates will vary for each Property. See “Compensation to the Manager and its Affiliates.”

The hotel management agreements may limit the liability of the Operator to the Company.

The Operator and its agents and employees may not be liable to the Company for errors of judgment or other acts or omissions as set forth in any hotel management agreement(s) the terms of which are unknown. A successful claim for such indemnification would deplete the Company’s assets by the amount paid.

Risks Related to Our Properties

Our Properties will be subject to the risks typically associated with real estate.

Our Properties will be subject to the risks typically associated with real estate. The value of real estate may be adversely affected by a number of risks, including:

The value of each Property is affected significantly by its ability to generate cash flow and net income, which in turn depends on the amount of income that can be generated net of expenses required to be incurred with respect to the Property. Many expenditures associated with the Properties (such as operating expenses and capital expenditures) cannot be reduced when there is a reduction in income from the Properties.

Our concentration on limited service hotel assets may leave our profitability vulnerable to a downturn or slowdown in this sector.

If less than all of the Shares are sold by the termination date of this offering, the number of Properties may be limited and, as a result, the Properties may not be diversified. A limited number of Properties would place a substantial portion of the funds invested in a limited amount of geographical locations, some or all of which may have the same property-related risks. In addition, the Company has no plans to acquire any properties or investments other than the Properties. Thus, even if the maximum offering amount is sold, the Company will only have limited diversification as to the types of assets it owns. If any events negatively affect the areas in which the Properties are located, the performance of the Properties may be adversely affected and, as a result, the Company’s returns could be lower than as set forth in the projections prepared by the Manager. A more diversified investment portfolio would not be impacted to the same extent upon such an occurrence.

Actions of any joint venture partners that we may have in the future could reduce the returns on joint venture investments and decrease our stockholders’ overall return.

We may purchase and develop properties in joint ventures or in partnerships, co-tenancies or other co-ownership arrangements. Such investments may involve risks not otherwise present with other methods of investment, including, for example, the following risks:

The outbreak of the novel coronavirus (COVID-19) has significantly impacted the hotel industry’s occupancy rates and RevPar.

The hotel industry has been adversely affected by the impact of, and the public perception of a risk of, COVID-19. The pandemic resulted in increased travel restrictions and the extended shutdown of businesses in affected regions. As a result, the hotel industry experienced a significant decline in occupancy and RevPar and we expect the occupancy and RevPar reduction associated with COVID-19 will continue as hotels throughout the U.S. are recording significant reservation cancellations as well as a significant reduction in new reservations relative to prior expectations. Government authorities are already imposing restrictions on travel and other business activities and the continued outbreak of the virus in the U.S. would likely result in additional restrictions on business operations and further reduce travel and demand at hotels. The hotel industry is already experiencing the postponement or cancellation of business conferences and similar events. These events, as well other future, unpredictable occurrences, could result in a sustained and significant drop in the demand for hotels and have a material adverse effect on the hotel industry as a whole.

Any of the above might subject a property to liabilities in excess of those contemplated and thus reduce our returns on that investment and the value of your investment.

The lack of audited results of operation from the seller of a Property could result in inaccurate financial projections.

Although the Company intends to obtain audited results of operation for the Properties prior to acquisition, the Company may not be able to obtain such information. In such event, the Company will rely on unaudited financial information provided by the sellers of the Properties. Thus, it is possible that information relied upon by the Company with respect to the acquisition of a Property may not be accurate.

The lack of current reports from the seller of a Property could result in undisclosed liabilities.

Although the Company intends to obtain current property condition reports, title reports, appraisals and environmental reports for the Properties prior to acquisition, the Company may not be able to obtain such reports. In such cases, there will be less certainty regarding the condition of the Properties and the risk of acquiring the Properties will be increased. In the event that the Properties require repairs or improvements, the Company may not have sufficient funds to complete such repairs or improvements. The Company will only establish limited reserves. If the Company is required to expend amounts for repairs or improvements to the Properties, the return to our stockholders will be negatively impacted.

The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property or of paying personal injury or other damage claims could reduce the amounts available for distribution to our stockholders.

Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose liens on property or restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials and lead-based paint. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances and governments may seek recovery for natural resource damage. The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury, property damage or natural resource damage claims could reduce the amounts available for distribution to you.

We expect that all of our Properties will be subject to Phase I environmental assessments at the time they are acquired; however, such assessments may not provide complete environmental histories due, for example, to limited available information about prior operations at the properties or other gaps in information at the time we acquire the property. A Phase I environmental assessment is an initial environmental investigation to identify potential environmental liabilities associated with the current and past uses of a given property. If any of our Properties were found to contain hazardous or toxic substances after our acquisition, the value of our investment could decrease below the amount paid for such investment.

The Properties could be subject to construction defects which could reduce the returns on the investment.

Some of the Properties may be subject to construction defect claims that only reveal themselves over time. The Company may have remedies under state law as well as under any warranties from the contractors for the construction work. If the warranties do not cover all the expenses associated with any construction defects that may arise, the Company could be liable for the expenses associated with correcting the construction defects. If work is required to cure any construction defects, it is likely that the reserves established by the Company will be insufficient to pay for such work. Accordingly, the presence of construction defects could adversely affect the financial performance of the Company.

Potential development and construction delays and resultant increased costs and risks may hinder our operating results and decrease our net income.

From time to time we may acquire Properties that are under development or construction. Properties in such properties will be subject to the uncertainties associated with the development and construction of real property, including those related to re-zoning land for development, environmental concerns of governmental entities and/or community groups and our builders’ ability to build in conformity with plans, specifications, budgeted costs and timetables. If a builder fails to perform, we may resort to legal action to rescind the purchase or the construction contract or to compel performance. A builder’s performance may also be affected or delayed by conditions beyond the builder’s control. We may incur additional risks when we make periodic progress payments or other advances to builders before they complete construction. These and other factors can result in increased costs of a Property or loss of our investment. We also must rely on income and expense projections and estimates of the fair market value of a Property upon completion of construction when agreeing upon a purchase price at the time we acquire the Property. If our projections are inaccurate, we may pay too much for a Property, and the return on our investment could suffer.

We may not be able to rebuild our Properties to their then existing specifications if we experience a substantial or comprehensive loss of such properties.

In the event that we experience a substantial or comprehensive loss of one of our Properties, we may not be able to rebuild such property to its existing specifications. Further, reconstruction or improvement of such a property would likely require significant upgrades to meet zoning and building code requirements. Environmental and legal restrictions could also restrict the rebuilding of our Properties.

The Company could incur expenses associated with existence of toxic mold.

Litigation and concern about indoor exposure to certain types of toxic molds has been increasing as the public becomes aware that exposure to mold can cause a variety of health effects and symptoms, including allergic reactions. Toxic molds can be found almost anywhere; they can grow on virtually any organic substance, as long as moisture and oxygen are present. There are molds that can grow on wood, paper, carpet, foods, and insulation. When excessive moisture accumulates in buildings or on building materials, mold growth will often occur, particularly if the moisture problem remains undiscovered or unaddressed. It is impossible to eliminate all mold and mold spores in the indoor environment. In warm or humid climates, the likelihood of toxic mold can be exacerbated by the necessity of indoor air-conditioning year-round. The difficulty in discovering indoor toxic-mold growth could lead to an increased risk of lawsuits by affected persons, and the risk that the cost to remediate toxic mold will exceed the value of the property. Because of attempts to exclude damage caused by toxic mold growth from certain liability provisions in insurance policies, there is no guarantee that insurance coverage for toxic mold will be available now or in the future.

Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce our cash flows and the return on our stockholders’ investment.

There are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable or may be insured subject to limitations, such as large deductibles or co-payments. Insurance risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders in some cases insist that commercial property owners purchase coverage against terrorism as a condition for providing mortgage loans. Such insurance policies may not be available at reasonable costs, if at all, which could inhibit our ability to finance or refinance our Properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate coverage for such losses. If any of our Properties incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any such uninsured loss, which may reduce the value of your investment. In addition, other than any working capital reserve or other reserves we may establish, we have no source of funding to repair or reconstruct any uninsured property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions to our stockholders.

Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it infeasible to use insurance proceeds to replace a Property if it is damaged or destroyed. Under such circumstances, the insurance proceeds, if any, might not be adequate to restore the economic value of the Property, which might decrease the value of the Property.

Many of our investments are illiquid and we may not be able to vary our portfolio in response to changes in economic and other conditions.

Many factors that are beyond our control affect the real estate market and could affect our ability to sell properties and other investments for the price, on the terms or within the time frame that we desire. These factors include general economic conditions, the availability of financing, interest rates and other factors, including supply and demand. Because real estate investments are relatively illiquid, we have a limited ability to vary our portfolio in response to changes in economic or other conditions. Further, before we can sell a property on the terms we want, it may be necessary to expend funds to correct defects or to make improvements. However, we can give no assurance that we will have the funds available to correct such defects or to make such improvements. As a result, we expect many of our investments will be illiquid, and if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments and our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited, which could adversely affect our results of operations and financial condition.

Declines in the market values of our investments may adversely affect periodic reported results of operations and credit availability, which may reduce earnings and, in turn, cash available for distribution to our stockholders.

Some of our assets will be classified for accounting purposes as “available-for-sale.” These investments are carried at estimated fair value and temporary changes in the market values of those assets will be directly charged or credited to stockholders’ equity without impacting net income on the income statement. Moreover, if we determine that a decline in the estimated fair value of an available-for-sale security falls below its amortized value and is not temporary, we will recognize a loss on that security on the income statement, which will reduce our earnings in the period recognized.

A decline in the market value of our assets may adversely affect us particularly in instances where we have borrowed money based on the market value of those assets. If the market value of those assets declines, the lender may require us to post additional collateral to support the loan. If we were unable to post the additional collateral, we may have to sell assets at a time when we might not otherwise choose to do so. A reduction in credit available may reduce our earnings and, in turn, cash available for distribution to stockholders.

Further, credit facility providers may require us to maintain a certain amount of cash reserves or to set aside unlevered assets sufficient to maintain a specified liquidity position, which would allow us to satisfy our collateral obligations. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on equity. In the event that we are unable to meet these contractual obligations, our financial condition could deteriorate rapidly.

Market values of our investments may decline for a number of reasons, such as changes in prevailing market capitalization rates, increases in market vacancy, or decreases in market rents.

If we sell a property by providing financing to the purchaser, we will bear the risk of default by the purchaser, which could delay or reduce the dividends available to our stockholders.

If we decide to sell any of our properties, we intend to use our best efforts to sell them for cash; however, in some instances, we may sell our properties by providing financing to purchasers. When we provide financing to a purchaser, we will bear the risk that the purchaser may default, which could reduce our cash dividends to stockholders. Even in the absence of a purchaser default, the distribution of the proceeds of the sale to our stockholders, or the reinvestment of the proceeds in other assets, will be delayed until the promissory note or other property we may accept upon a sale are actually paid, sold, refinanced or otherwise disposed.

Delays in the sale or refinancing of the Properties could adversely affect the proceeds received.

The Company anticipates that the Properties will be sold in approximately five years from the time they are acquired. It may not be possible to sell the Properties at such time. Further, it is anticipated that the Company’s financing documents may not allow for prepayment except shortly before the maturity date and may require the payment of a yield maintenance penalty or defeasance and the lender’s approval of the buyer in order to have a loan assumed. If a Property is not sold as anticipated, the Company may have to attempt to refinance the indebtedness incurred to acquire the Property. Current interest rates are low and, as a result, it is likely that the interest rate that may be obtained upon refinancing will be higher than that of the loans. Fluctuations in the supply of money for such loans affect the availability and cost of loans, and the Company is unable to predict the effects of such fluctuations on the Company. Prevailing market conditions at the time the Company seeks to refinance a loan may make such loans difficult or costly to obtain. Such conditions may also adversely affect cash flow and/or profitability of the Company.

Ground leases expose the Company to the potential loss of the Properties.

The Company may acquire long-term ground lease interests in the Properties. In any such event, the Company may lose its interests in such Properties if it is unable to make the required lease payments.

The failure to obtain representations and warranties in the purchase agreements may result in unexpected losses.

The Company may acquire Properties from sellers who make only limited or no representations and warranties regarding the condition of the Properties and the underlying real estate, including the occupancy levels, the presence of hazardous materials or hazardous substances, the status of governmental approvals and entitlements or other matters adversely affecting such real property. In addition, the right to sue the sellers with respect to a breach of a representation or warranty may expire within a relatively short period of time after acquisition of the Property. In certain cases, the Manager may also agree to release the sellers from certain claims, costs and liabilities in the purchase agreements between the Company and the sellers. As a result, if defects in a Property or other matters adversely affecting a Property are discovered, the Company may not be able to pursue a claim for damages against the seller of the Property. The extent of damages that the Company may incur as a result of such matters cannot be predicted, but potentially could result in a significant adverse effect on the value of such Properties.

The Company’s ability to operate a Property may be limited by its obligations under CC&Rs.

The Properties may be subject to various covenants, conditions and restrictions (“CC&Rs”) that were recorded against the land. The CC&Rs may place certain obligations on the Company with respect to the maintenance of the common areas of a Property and other matters. The CC&Rs may place restrictions on how a Property may be rehabilitated or repaired. The CC&Rs may also set forth reciprocal rights with respect to issues such as encroachments, parking, utility lines and ingress and egress and may place limitations on the way the Company operates a Property. Restrictions in the CC&Rs could negatively impact the results of the Properties.

The value of a Property would be materially adversely affected if the land on which it is located were condemned.

The Properties, or a portion thereof, could become subject to an eminent domain or inverse condemnation action. Any such action could have a material adverse effect on the marketability of a Property or the amount of return on the investment for our stockholders.

Risks Relating to the Hotel Industry

Our Properties will be subject to operating risks associated with hotels.

The Properties will be subject to operating risks that are common to the hotel industry. These risks include, among other things:

The hotel industry is highly volatile which could decrease our stockholders’ overall return.

The hotel industry is a volatile industry, is dependent on the disposable income of consumers and the travel industry and is subject to greater risk than that typically associated with an investment in real estate. The Properties will be subject to these heightened risks.

The franchise agreements under which our Properties will be operated may restrict the hotels’ operations.

It is anticipated that the Properties will be operated under existing franchises or license agreements or will be subject to new franchise or license agreements. Such agreements will require that the applicable hotel be maintained and operated in accordance with specific standards and restrictions in order to maintain uniformity with the franchisor’s brand of hotels. Compliance with these standards, and changes in these standards, could cause the Company to incur significant expenses or capital expenditures, which would adversely affect the results of operation of the hotels and returns to our stockholders. In the event a Property loses any licenses, franchises or permits required to operate the hotel under the applicable brand, hotel operations may not meet anticipated levels and it may be difficult to sell the hotel. In addition, the Company may be required to pay various acquisition fees when it acquires Properties from franchisees, including transfer fees and affiliation fees, which will increase the acquisition cost of the Properties.

The franchise agreements may require property improvement plans which would increase the costs associated with operating the Properties.

Franchisors of the Properties may require the Company to adhere to property improvement plans with respect to the hotels it acquires. The costs of the property improvement plans are unknown. Costs associated with property improvement plans may be required to be paid at the time of acquisition of the Properties and/or during the course of ownership of the Properties. Failure to comply with the property improvement plans may result in franchisors disallowing the use of the franchised brands associated with the Properties. Also, in connection with the disposition of the Properties by the Company, the purchaser may be required to pay costs associated with property improvement plans, which may result in a lower sales price for the Properties or otherwise make the sale of the Properties more difficult.

The hotel industry is highly competitive and if we do not compete effectively, the return on our investments could be adversely affected.

The hotel industry is highly competitive and the Properties will compete with other hotels in their geographic areas. The building of additional hotel rooms in the geographic areas in which the Properties are located could result in an oversupply of hotel rooms which could adversely affect both occupancy and room rates for the Properties. A significant increase in the supply of hotel rooms and suites, if demand fails to increase at least proportionately, could have an adverse effect on the operational results of the Properties and returns to our stockholders could be adversely affected.

The seasonality of the hotel industry could affect the timing and amount of distributions paid to our stockholders.

The hotel industry is seasonal in nature. Some seasons may be more profitable for certain hotels than for others. Seasonal variations can be expected to cause fluctuations in the revenue generated by the hotels, and, thus, the revenues of the Company.

Our operating results will depend in substantial part on the success of the Operator.

The Company has no experience in owning or managing hotels and will rely on the Operator or another operator to manage the operations at the Properties. It is anticipated that the Properties will be operated by the Operator, which is an affiliate of the Manager. If the Operator is contractually prohibited or is otherwise unable or elects not to operate a Property, another operator will be chosen for that Property in the sole discretion of the Manager. Most decisions regarding the operation of the Properties will be made exclusively by the Operator. The Operator may from time to time receive information or notices regarding the Properties. It is anticipated that the hotel management agreements for the Properties will require the Operator to furnish to the Company, promptly after receipt, any notice of violation of any governmental requirement or order issued by any governmental entity, any notice of default from the holder of any mortgage or deed of trust encumbering the Properties or any notice of termination or cancellation of any insurance policy. If the Operator fails to furnish such notices or other notices or information it receives with respect to the Properties to the Company, the ability of the Company to protect its interest in the Properties may be adversely affected. Potential stockholders must carefully evaluate the personal experience and business performance of the principals of the Operator. It is not anticipated that the Operator will enter into subcontract agreements relating to the operation of any Property. The Operator has no fiduciary duty to our stockholders and may not perform as expected. See “Experience of PAH Management LLC.”

Complying with federal, state and local regulations could result in unexpected loss.

The hotel industry is subject to federal, state and local regulations, including building and zoning requirements, all of which can increase the cost of operating hotel facilities. In addition, the hotel industry and hotel operators are subject to laws governing their relationship with employees, including minimum wage and overtime payment requirements and rules pertaining to working conditions. Increases in benefit costs or other costs associated with employees will increase operating costs and, in turn, could adversely affect the results of the Properties and the return to our stockholders.

Financing Risks

The Company expects to use leverage to acquire the Properties, which will subject the Company to risks associated with financing.

The acquisition of the Properties will require the Company to obtain third-party financing. Thus, the Properties will be leveraged. The loan-to-value ratio for each Property acquired will not exceed 70%. The Manager has not obtained any financing commitments for any Property. Therefore, the amount and terms of any future loans are uncertain and will be negotiated by the Manager. No assurance can be given that future cash flow will be sufficient to make the debt service payments on any loans and to cover all operating expenses. If the Properties’ revenues are insufficient to pay debt service and operating costs, the Company may be required to seek additional working capital. There can be no assurance that such additional funds will be available. In the event additional funds are not available, the lenders may foreclose on the Properties and our stockholders could lose their investment. In addition, the degree to which the Company is leveraged could have an adverse impact on the Company, including

The Company does not have any financing currently in place and, as a result, the terms of such loans are unknown.

The Company will need to obtain loans to acquire the Properties and may need to obtain additional loans to finance its internal operations as well as the operations of the Properties. The terms of the loans to be obtained or assumed by the Company to acquire the Properties will vary and the exact terms are unknown. It may be difficult to obtain financing when needed and the terms and conditions under which any financing can be obtained are uncertain and could be unfavorable. If the Company is not able to obtain financing, the Company may not be able to acquire Properties. It is anticipated that the loans will not allow for any type of prepayment except shortly before the maturity date and any prepayment may require the payment of a yield maintenance penalty or defeasance. Consequently, the Company may not be able to take advantage of favorable changes in interest rates.

Variable interest rates of financing used to acquire Properties could affect future revenues.

The Company may pay interest at a variable or fixed rate of interest on monies borrowed to acquire the Properties. When interest rates change it is possible that the interest paid on funds used to acquire Properties will be higher than the rate of return from the Properties and may result in the loss of the Properties. For example, the debt service payments on a variable interest rate loan obtained to acquire a Property may increase and the Property secured by such loan may not generate sufficient cash flow to pay the increasing debt service payments.

Hedging against interest rate exposure may adversely affect our earnings, limit our gains or result in losses, which could adversely affect cash available for distribution to our stockholders.

We may enter into interest rate swap agreements or pursue other interest rate hedging strategies. Our hedging activity will vary in scope based on the level of interest rates, the type and expected duration of portfolio investments held, and other changing market conditions. Interest rate hedging may fail to protect or could adversely affect us because, among other things:

Any hedging activity we engage in may adversely affect our earnings, which could adversely affect cash available for distribution to our stockholders. Therefore, while we may enter into such transactions to seek to reduce interest rate risks, unanticipated changes in interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged or liabilities being hedged may vary materially. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss.

Financing to acquire the Properties may not be available or only available on terms that reduce the projected returns from the Properties.

Market fluctuations in real estate loans may affect the availability and cost of loans needed for the Properties. Credit availability has been restricted in the past and may become so in the future. Restrictions upon the availability of real estate financing, or high interest rates on real estate loans, may adversely affect the Company. It is anticipated that the lenders will restrict the ability to obtain subordinate financing for the Properties. The Company does not have any commitments for loans to acquire any Property and there is no assurance that such loans will be available. Restrictions upon the availability of real estate financing or high interest rates on real estate loans may also adversely affect the ability of the Company to sell the Properties.

The repayment terms of the Company’s loans could result in the loss of the affected Property.

It is anticipated that the loans obtained to acquire the Properties may have short terms and will require the Company to make large balloon payments on the maturity dates of the loans. If the Company is unable to make a balloon payment or to refinance any of the loans for any reason or at reasonable cost, the ownership of a Property could be jeopardized.

Risks Related to Our Corporate Structure

The ownership limits that apply to REITs, as prescribed by the Code and by our charter, limits the number of shares a person may own, which may inhibit market activity in shares of our common stock and restrict our business combination opportunities.

In order for us to qualify as a REIT, not more than 50% in value of our outstanding shares of stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year after the first year for which we elect to qualify as a REIT. Additionally, at least 100 persons must beneficially own our stock during at least 335 days of a taxable year (other than the first taxable year for which we elect to be taxed as a REIT). Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. To help us comply with the REIT ownership requirements of the Code, our charter prohibits a person from directly, beneficially or constructively owning more than 9.8% by value or number of shares, whichever is more restrictive, of our outstanding shares of common stock, or 9.8% by value or number of shares, whichever is more restrictive, of our outstanding capital stock, unless exempted by our Board of Directors. These 9.8% ownership limitations will apply as of the first date of the second taxable year for which we elect to be treated as a REIT, which will be January 1, 2025 assuming we elect to be treated as a REIT for the taxable year ending December 31, 2024. However, our charter will also prohibit any actual, beneficial or constructive ownership of our shares that causes us to fail to qualify as a REIT (including any ownership that would result in any of our income that would otherwise qualify as “rents from real property” for purposes of the REIT rules to fail to qualify as such) and such ownership limitation shall not be waived. In addition, our charter will prohibit a person from owning actually or constructively shares of our outstanding capital stock if such ownership would result in any of our income that would otherwise qualify as “rents from real property” for purposes of the REIT rules to fail to qualify as such. Our Board of Directors may, in its sole discretion, subject to such conditions as it may determine and the receipt of certain representations and undertakings, prospectively or retroactively, waive the 9.8% ownership limits or establish a different limit on ownership, or excepted holder limit, for a particular stockholder if the stockholder’s ownership in excess of the ownership limit would not result in our being “closely held” under Section 856(h) of the Code or otherwise failing to qualify as a REIT. These restrictions may have the effect of delaying, deferring, or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock or otherwise be in the best interest of our stockholders.

Our charter permits our Board of Directors to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.

Our Board of Directors may classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other dividends, qualifications and terms or conditions of redemption of any such stock. Thus, our Board of Directors could authorize the issuance of preferred stock with priority as to dividends and amounts payable upon liquidation over the rights of the holders of our common stock. Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to holders of our common stock. In connection with the foregoing, following completion of this offering, to the extent necessary to assist us in obtaining a sufficient number of stockholders to meet certain of the qualification requirements for taxation as a REIT under the Code, we may undertake to issue and sell up to approximately 125 shares of a new series of preferred stock in a private placement to up to approximately 125 investors who qualify as “accredited investors” (as that term is defined in Rule 501(a) of Regulation D under the Securities Act). The preferred stock is expected to be perpetual, pay an annual market dividend for securities of this type and be redeemable by us at a premium to the aggregate liquidation value. For example, if we issue 125 shares of preferred stock with a liquidation price of $1,000 per share and an annual dividend of 12.5%, we would raise additional capital of $125,000 and be required to be pay or set aside for payment, in the aggregate, approximately $15,625 annually, before any distributions on shares of our common stock could be made.

Rapid changes in the values of our assets may make it more difficult for us to maintain our qualification as a REIT or our exception from the definition of an investment company under the Investment Company Act.

If the market value or income potential of our qualifying real estate assets changes as compared to the market value or income potential of our non-qualifying assets, or if the market value or income potential of our assets that are considered “real estate-related assets” under the Investment Company Act or REIT qualification tests changes as compared to the market value or income potential of our assets that are not considered “real estate-related assets” under the Investment Company Act or REIT qualification tests, whether as a result of increased interest rates, prepayment rates or other factors, we may need to modify our investment portfolio in order to maintain our REIT qualification or exception from the definition of an investment company. If the decline in asset values or income occurs quickly, this may be especially difficult, if not impossible, to accomplish. This difficulty may be exacerbated by the illiquid nature of many of the assets that we may own. We may have to make investment decisions that we otherwise would not make absent REIT and Investment Company Act considerations.

Our stockholders will have limited voting rights and will not have control over changes in our policies and operations, which increases the uncertainty and risks our stockholders face.

The Manager and/or our Board of Directors determines our major policies, including our policies regarding financing, growth, debt capitalization, REIT qualification and dividends. The Manager and/or our Board of Directors may amend or revise these and other policies without a vote of the stockholders. Under the Delaware General Corporation Law and our charter, our stockholders have a right to vote only on limited matters. The Manager’s and/or our Board of Directors’ broad discretion in setting policies and our stockholders’ inability to exert control over those policies increases the uncertainty and risks our stockholders face.

Federal Income Tax Risks

Failure to qualify as a REIT would reduce our net earnings available for investment or distribution and would adversely affect the timing, amount, and character of dividends to stockholders.

Our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, dividends of our income, the nature and diversification of our income and assets, and other tests imposed by the Code. If we fail to qualify as a REIT for any taxable year after electing REIT status, we will be subject to federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, dividends to stockholders would no longer qualify for the dividends-paid deduction and we would no longer be required to pay dividends. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable taxes. For a discussion of the REIT qualification tests and other considerations relating to our election to be taxed as a REIT, see “U.S. Federal Income Tax Considerations.”

Even if we qualify as a REIT for federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to pay dividends to our stockholders.

Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property. For example:

We intend to pay dividends to our stockholders to comply with the REIT requirements of the Code.

REIT distribution requirements could adversely affect our ability to execute our business plan or our liquidity and may force us to borrow funds during unfavorable market conditions.

In order to maintain our REIT status and to meet the REIT distribution requirements, we may need to borrow funds on a short-term basis or sell assets, even if the then-prevailing market conditions are not favorable for these borrowings or sales. In addition, we may need to reserve cash (including proceeds from this offering) to satisfy our REIT distribution requirements, even though there are attractive investment opportunities that may be available. To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our net taxable income each year, excluding capital gains. In addition, we will be subject to corporate income tax to the extent we distribute less than 100% of our taxable income including any net capital gain. We intend to make distributions to our stockholders to comply with the requirements of the Code for REITs and to minimize or eliminate our corporate income tax obligation to the extent consistent with our business objectives. Our cash flows from operations may be insufficient to fund required distributions, for example as a result of differences in timing between the actual receipt of income and the recognition of income for U.S. federal income tax purposes, the effect of non-deductible capital expenditures, the creation of reserves or required debt service or amortization payments (including, for example, where a borrower defers the payment of interest in cash pursuant to a contractual right or otherwise). The insufficiency of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short- and long-term debt or sell equity securities in order to fund distributions required to maintain our REIT status. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. To address and/or mitigate some of these issues, we may make taxable distributions that are in part paid in cash and in part paid in our common stock. In such cases our stockholders may have tax liabilities from such distributions in excess of the cash they receive. The treatment of such taxable share distributions is not clear, and it is possible the taxable share distribution will not count towards our distribution requirement, in which case adverse consequences could apply.

Dividends payable by REITs generally do not qualify for the reduced tax rates on dividend income from regular corporations, which could adversely affect the value of our common stock.

The maximum regular U.S. federal income tax rate for certain qualified dividends payable to U.S. holders of U.S. corporate stock that are individuals, is currently 20%. Dividends payable by REITs, however, are generally not eligible for the reduced rates and therefore are subject to regular U.S. federal income tax rates on ordinary income of a noncorporate U.S. holder (currently at a maximum rate of 37.0%). Such dividends are also not eligible for the dividends received deduction generally available to corporations with respect to dividends from U.S. corporations. Although the reduced U.S. federal income tax rate applicable to dividend income from regular corporate dividends does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock.

To maintain our REIT status, we may be forced to forego otherwise attractive opportunities, which may delay or hinder our ability to meet our investment objectives and reduce our stockholders’ overall return.

To qualify as a REIT, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets, and the amounts we distribute to our stockholders. We may be required to pay dividends to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and the value of our stockholders’ investment.

If we fail to invest a sufficient amount of the net proceeds from selling our common stock in real estate assets within one year from the receipt of the proceeds, we could fail to qualify as a REIT.

Temporary investment of the net proceeds from sales of our common stock in short-term securities and income from such investment generally will allow us to satisfy various REIT income and asset requirements, but only during the one-year period beginning on the date we receive the net proceeds. If we are unable to invest a sufficient amount of the net proceeds from sales of our common stock in qualifying real estate assets within such one-year period, we could fail to satisfy one or more of the gross income or asset tests and/or we could be limited to investing all or a portion of any remaining funds in cash or cash equivalents. If we fail to satisfy any such income or asset test, unless we are entitled to relief under certain provisions of the Code, we could fail to qualify as a REIT. See “U.S. Federal Income Tax Considerations.”

Our ability to provide certain services to our tenants may be limited by the REIT rules or may have to be provided through a taxable REIT subsidiary.

As a REIT, we generally cannot hold interests in rental property where tenants receive services other than services that are customarily provided by landlords, nor can we derive income from a third party that provides such services. If services to tenants at properties in which we hold an interest are limited to customary services, those properties may be disadvantaged as compared to other properties that can be operated without the same restrictions. However, we can provide such non-customary services to tenants or share in the revenue from such services if we do so through a taxable REIT subsidiary (“TRS”), though income earned through the TRS will be subject to corporate income taxes.

Even if we remain qualified for taxation as a REIT under the Code, we may face other tax liabilities that reduce our cash flow.

Even if we remain qualified for taxation as a REIT under the Code, we may be subject to federal, state and local taxes on our income and assets, including taxes on any undistributed income, excise taxes, state or local income, property and transfer taxes, and other taxes. Also, some jurisdictions may in the future limit or eliminate favorable income tax deductions, including the dividends paid deduction, which could increase our income tax expense. In addition, in order to meet the requirements for qualification and taxation as a REIT under the Code, prevent the recognition of particular types of non-cash income, or avert the imposition of a 100% tax that applies to specified gains derived by a REIT from dealer property or inventory, we may hold or dispose of some of our assets and conduct some of our operations through our TRSs or other subsidiary corporations that will be subject to corporate level income tax at regular rates. In addition, while we intend that our transactions with our TRSs will be conducted on arm’s length bases, we may be subject to a 100% excise tax on a transaction that the IRS or a court determines was not conducted at arm’s length. Any of these taxes would decrease cash available for distribution to our shareholders.

If arrangements involving our TRSs fail to comply as intended with the REIT qualification and taxation rules, we may fail to qualify for taxation as a REIT under the Code or be subject to significant penalty taxes.

We lese most of our hotel properties to our TRSs pursuant to arrangements that, under the Code, are intended to qualify the rents we receive from our TRSs as income that satisfies the REIT gross income tests. We also intend that our transactions with our TRSs be conducted on an arm’s length bases so that we and our TRSs will not be subject to penalty taxes under the Code applicable to mispriced transactions. While relief provisions can sometimes excuse REIT gross income test failures, significant penalty taxes may still be imposed.

For our TRS arrangements to comply as intended with the REIT qualification and taxation rules under the Code, a number of requirements must be satisfied, including:

We cannot be sure that the Internal Revenue Service (“IRS”) or a court will agree with our assessment that our TRS arrangements comply as intended, we may fail to qualify for taxation as a REIT under the Code or be subject to significant penalties.

We may become subject to a 100% excise tax if our TRSs pay us excessive rent.

The IRS could challenge the rents paid to us by our TRSs as excessive, and a court could reach a similar conclusion. In either event, we could be taxed at 100% of the amount of rents determined to be excessive. There can be no assurance that we will not be subjected to that excise tax. If we are, and if the amount is material, our liquidity and ability to serve our debt and pay dividends could be materially and adversely affected.

If any hotel management companies that we engage do not qualify as “eligible independent contractors,” or if our hotels are not “qualified lodging facilities,” we would likely fail to qualify as a REIT.

Rent paid by a lessee that is a “related party tenant” of ours generally will not be qualifying income for purposes of the two gross income tests applicable to RETTs. An exception is provided, however, for leases of “qualified lodging facilities” to a TRS so long as the hotels are managed by an “eligible independent contractor” and certain other requirements are satisfied. We lease and expect to lease all or substantially all of our hotels to TRS lessees, which are disregarded subsidiaries of the TRSs, and to engage hotel management companies that are intended to qualify as “eligible independent contractors.” Among other requirements, in order to qualify as an eligible independent contractor, the hotel management company must not own, directly or through its stockholders, more than 35% of our outstanding shares, and no person or group of persons can own more than 35% of our outstanding shares and the shares (or ownership interest) of the hotel management company (taking into account certain ownership attribution rules and, with respect to our shares and the outstanding shares of any publicly traded hotel management company, only the shares owned by persons who own, directly or indirectly, more than 5% of a publicly traded class of shares). The ownership attribution rules that apply for purposes of these 35% thresholds are complex, and monitoring actual and constructive ownership of our shares by the hotel management companies and their owners may not be practical. Accordingly, there can be no assurance that these ownership levels will not be exceeded.

In addition, for a hotel management company to qualify as an eligible independent contractor, such company or a related person must be actively engaged in the trade or business of operating “qualified lodging facilities” (as defined below) for one or more persons not related to the REIT or its TRSs at each time that such company enters into a hotel management contract with a TRS or its TRS lessee. As of the date hereof, we believe the hotel management companies operate qualified lodging facilities for certain persons who are not related to us or our TRS. However, no assurances can be provided that this will continue to be the case or that any other hotel management companies that we may engage in the future will in fact comply with this requirement in the future. Failure to comply with this requirement would require us to find other managers for future contracts, and, if we hired a management company without knowledge of the failure, could jeopardize our status as a REIT.

Finally, each hotel with respect to which our TRS lessees pay rent must be a “qualified lodging facility.” A “qualified lodging facility” is a hotel, motel or other establishment more than one-half of the dwelling units in which are used on a transient basis, including customary amenities and facilities, provided that no wagering activities are conducted at or in connection with such facility by any person who is engaged in the business of accepting wagers and who is legally authorized to engage in such business at or in connection with such facility. As of the date hereof, we believe that all of the hotels leased to our TRS lessees will be qualified lodging facilities. Although we intend to monitor future acquisitions and improvements of hotels, the REIT provisions of the IRS Code provide only limited guidance for making determinations under the requirements for qualified lodging facilities, and there can be no assurance that these requirements will be satisfied in all cases.

Although our use of TRSs may partially mitigate the impact of meeting certain requirements necessary to maintain our qualification as a REIT, there are limits on our ability to own and engage in transactions with TRSs, and a failure to comply with such limits would jeopardize our REIT qualification and may result in the application of a 100% excise tax.

A REIT may own up to 100% of the stock or securities of one or more TRSs. A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs. In addition, the rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. We may jointly elect with one or more subsidiaries for those subsidiaries to be treated as TRSs for U.S. federal income tax purposes. These TRSs will pay U.S. federal, state and local income tax on their taxable income, and their after-tax net income will be available for distribution to us but is not required to be distributed to us. We will monitor the value of our respective investments in any TRSs we may form for the purpose of ensuring compliance with TRS ownership limitations and intend to structure our transactions with any such TRSs on terms that we believe are arm’s-length to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with the TRS ownership limitation or to avoid application of the 100% excise tax.

You may be restricted from acquiring, transferring or redeeming certain amounts of our common stock.

In order to maintain our REIT qualification, among other requirements, no more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals, as defined in the Code to include certain kinds of entities, during the last half of any taxable year, other than the first year for which a REIT election is made. To assist us in qualifying as a REIT, our charter contains an aggregate share ownership limit and a common stock ownership limit. Generally, any of our shares owned by affiliated owners will be added together for purposes of the aggregate share ownership limit, and any common stock owned by affiliated owners will be added together for purposes of the common stock ownership limit. In addition, our charter prohibits a person from owning actually or constructively shares of our outstanding capital stock if such ownership would result in any of our income that would otherwise qualify as rents from real property for purposes of the REIT rules to fail to qualify as such.

If anyone attempts to transfer or own shares in a way that would violate the aggregate share ownership limit or the common stock ownership limit or results in ownership that would result in any of our income that would otherwise qualify as rents from real property for purposes of the REIT rules to fail to qualify as such, or would prevent us from continuing to qualify as a REIT), unless such ownership limits have been waived by the Manager, those shares instead will be deemed transferred to a trust for the benefit of a charitable beneficiary and will be either redeemed by us or sold to a person whose ownership of the shares will not violate the aggregate share ownership limit or the common stock ownership limit and will not prevent us from qualifying as a REIT. If this transfer to a trust fails to prevent such a violation or our disqualification as a REIT, then the initial intended transfer or ownership will be null and void from the outset. Anyone who acquires or owns shares in violation of the aggregate share ownership limit or the common stock ownership limit, unless such ownership limit or limits have been waived by the Manager, or the other restrictions on transfer or ownership in our charter, bears the risk of a financial loss when the shares are redeemed or sold, if the NAV of our shares falls between the date of purchase and the date of redemption or sale.

Our limits on ownership of our shares also may require us to decline redemption requests that would cause other stockholders to exceed such ownership limits or to the extent we determine is necessary to preserve our status as a REIT. In addition, in order to comply with certain of the distribution requirements applicable to REITs we will decline to honor any redemption request that we believe is a “dividend equivalent” redemption as discussed in “U.S. Federal Income Tax Considerations—Taxation of Taxable U.S. Stockholders—Redemption or Repurchase by Us.”

In addition, our charter provides that, prior to the first date on which any class or series of shares of our capital stock constitutes “publicly-offered securities” (as defined in the Plan Assets Regulation), “benefit plan investors” may not hold, in the aggregate, 25% or more of the value of any class or series of shares of our capital stock. If benefit plan investors exceed this 25% limit, we may redeem their interests at a price equal to the then current NAV per Share or transfer their interests to a trust for the benefit of a charitable beneficiary. See “Investment by Qualified Plans and IRAs—Plan Asset Regulations” for more information.

Furthermore, our charter provides that, in the event we determine in our discretion that there is a material likelihood that we would be a fiduciary under applicable law with respect to an investor that is subject to ERISA and/or Section 4975 of the Code (e.g., an IRA), we have the authority to redeem such investor’s interests at a price equal to the then current NAV per Share.

The tax on prohibited transactions will limit our ability to engage in transactions that would be treated as sales for federal income tax purposes.

A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of assets, other than foreclosure property, deemed held primarily for sale to customers in the ordinary course of business (subject to a safe harbor under the Code for certain sales). It may be possible to reduce the impact of the prohibited transaction tax by conducting certain activities through TRSs. However, to the extent that we engage in such activities through TRSs, the income associated with such activities may be subject to full corporate income tax.

Non-United States investors may be subject to FIRPTA on the sale of shares of our common stock if we are unable to qualify as a “domestically controlled qualified investment entity.”

Except with respect to a “qualified foreign pension plan” or a non-United States person that is a “qualified stockholder”, a non-United States person disposing of a United States real property interest, including shares of a United States corporation whose assets consist principally of United States real property interests, is generally subject to a tax under the Foreign Investment in Real Property Trust Act, or FIRPTA, on the gain recognized on the disposition of such interest. FIRPTA does not apply, however, to the disposition of shares in a REIT if the REIT is a “domestically controlled qualified investment entity.” A REIT is a domestically controlled qualified investment entity if, at all times during a specified testing period (the continuous five-year period ending on the date of disposition or, if shorter, the entire period of the REIT’s existence), less than 50% in value of its shares is held directly or indirectly by non-United States holders. We cannot assure you that we will qualify as a domestically controlled qualified investment entity. If we were to fail to so qualify, gain realized by a non-United States investor that is not a “qualified foreign pension plan” or a “qualified stockholder” on a sale of our common stock would be subject to FIRPTA unless our common stock was regularly traded on an established securities market and the non-United States investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock.

Complying with REIT requirements may limit our ability to hedge effectively.

The REIT provisions of the Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate, inflation and/or currency risks will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges (i) interest rate risk on liabilities incurred to carry or acquire real estate, (ii) risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the REIT 75% or 95% gross income tests or (iii) certain other offsetting positions, and such instrument is properly identified under applicable Treasury Regulations. Income from hedging transactions that do not meet these requirements will generally constitute nonqualifying income for purposes of both the REIT 75% and 95% gross income tests. As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur.

If we were considered to actually or constructively pay a “preferential dividend” to certain of our stockholders, our status as a REIT could be adversely affected.

In order to qualify as a REIT, we must distribute annually to our stockholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain. In order for dividends to be counted as satisfying the annual distribution requirements for REITs, and to provide us with a REIT-level tax deduction, the dividends must not be “preferential dividends.” A dividend is generally not a preferential dividend if the distribution is pro rata among all outstanding shares of stock within a particular class, and in accordance with the preferences among different classes of stock as set forth in the REIT’s organizational documents. There is no de minimis exception with respect to preferential dividends. Therefore, if the Internal Revenue Service (the “IRS”) were to take the position that we inadvertently paid a preferential dividend, we may be deemed either to (a) have distributed less than 100% of our REIT taxable income and be subject to tax on the undistributed portion, or (b) have distributed less than 90% of our REIT taxable income and our status as a REIT could be terminated for the year in which such determination is made if we were unable to cure such failure. It also is possible that under certain technical rules relating to the deduction for dividends paid, the IRS could take the position that redemptions taxed as dividends impair our ability to satisfy our distribution requirements under the Code. To avoid certain issues related to our ability to comply with the REIT distribution requirements (see “U.S. Federal Income Tax Considerations— Qualification as a REIT — Annual Distribution Requirements”), we have implemented procedures designed to track our stockholders’ percentage interests in our common stock and identify any such dividend equivalent redemptions, and we will decline to effect a redemption to the extent that we believe that it would constitute a dividend equivalent redemption. However, we cannot assure you that we will be successful in preventing all dividend equivalent redemptions. We can provide no assurance that we will not be treated as inadvertently paying preferential dividends.

Sales of our assets may constitute “prohibited transactions,” which are subject to a 100% tax.

Net income derived from prohibited transactions is subject to a 100% tax. The term “prohibited transactions” generally includes a sale or other disposition of property (other than foreclosure property) that is held primarily for sale to customers in the ordinary course of a trade or business. Whether property is held “primarily for sale to customers in the ordinary course of a trade or business” depends on the specific facts and circumstances. The Code provides a safe harbor pursuant to which sales of properties held for at least two years (which period, for property being developed, does not begin to run until the property is placed in service) and meeting certain additional requirements will not be treated as prohibited transactions, but compliance with the safe harbor may not always be practical. We intend to continue to conduct our operations so that no asset that we own (or are treated as owning) will be treated as held as inventory or for sale to customers and that a sale of any such asset will not be treated as having been in the ordinary course of our business. However, we may have to sell assets from time to time to fund redemption requests, to satisfy our REIT distribution requirements, to satisfy other REIT requirements, or for other purposes. In addition, part of our investment strategy is to purchase assets that provide an opportunity for gain through capital appreciation, and we may sell such assets if beneficial opportunities arise. Therefore, no assurance can be given that any particular property in which we hold a direct or indirect interest will not be treated as property held for sale to customers, or that the safe-harbor provisions will apply. The potential application of the prohibited transactions tax could cause us to forego potential dispositions of other property or to forego other opportunities that might otherwise be attractive to us (such as developing property for sale), or to undertake such dispositions or other opportunities through a TRS, which would generally result in corporate income taxes being incurred.

The ability of our Board of Directors to revoke the REIT election of the Company without the approval of the holders of our common stock may cause adverse consequences to holders of our common stock.

Our governing documents provide that our Board of Directors may revoke or otherwise terminate the REIT election of the Company, without the approval of holders of our common stock, if our Board of Directors determines that it is no longer in the best interest of the stockholders to continue to qualify as a REIT. If the Company ceases to qualify as a REIT, it would become subject to U.S. federal income tax on its net taxable income and it generally would no longer be required to distribute any of its net taxable income to its stockholders, which may have adverse consequences on its total return to holders of our common stock.

The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.

We may make mezzanine loans. The IRS has provided a safe harbor in Revenue Procedure 2003-65 for structuring mezzanine loans so that they will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from mezzanine loans will be treated as qualifying mortgage interest for purposes of the 75% gross income test, as discussed below. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. We may make mezzanine loans that do not meet all of the requirements of the safe harbor. In the event a mezzanine loan does not meet the safe harbor, the IRS could challenge such loan’s treatment as a real estate asset for purposes of the REIT asset and income tests and, if such a challenge were sustained, we could fail to continue to qualify as a REIT.

Our qualification as a REIT and avoidance of 100% tax may depend on the characterization of any loans that we make as debt for U.S. federal income tax purposes.

For U.S. federal income tax purposes, the IRS or a court may treat a loan with sufficient equity characteristics as equity for tax purposes. We may obtain equity participation rights with respect to our loans, and we may make loans with relatively high loan-to-value ratios and/or high yields, which are among the features that can cause a loan to be treated as equity for federal income tax purposes. Although we intend to structure each of our loans so that the loan should be respected as debt for U.S. federal income tax purposes, it is possible that the IRS or a court could disagree and seek to re-characterized the loan as equity. Re-characterization of one of our loans to a non-corporate borrower as equity for U.S. federal income tax purposes generally would require us to include our share of the gross assets and gross income of the borrower in our REIT asset and income tests. Inclusion of such items could jeopardize our REIT status. Moreover, to the extent our borrowers hold their assets as dealer property or inventory, if we are treated as holding equity in a borrower for U.S. federal income tax purposes, our share of gains from sales by the borrower would be subject to the 100% tax on prohibited transactions (except to the extent earned through a TRS). To the extent one of our loans to a corporate borrower is recharacterized as equity for U.S. federal income tax purposes, it could cause us to fail one or more of the asset tests applicable to REITs.

The treatment of an investment in preferred equity could adversely affect our ability to qualify as a REIT.

We may make investments in preferred equity in an entity that directly or indirectly owns real property. Although economically comparable to investments in mezzanine loans in many cases, investments in preferred equity will be treated differently for tax purposes. If the issuer of the preferred equity is taxed as a partnership or an entity disregarded as separate from its owners for U.S. federal income tax purposes (aside from a qualified REIT subsidiary), we will generally be treated as owing an interest in the underlying real estate and other assets of the partnership for tax purposes. As a result, absent sufficient controls to ensure that the underlying real property is operated in compliance with the REIT rules, preferred equity investments may jeopardize our compliance with the REIT income and asset tests. In addition, the treatment of interest-like preferred returns in a partnership or disregarded entity (other than a qualified REIT subsidiary) also is not clear under the REIT rules and could be treated as non-qualifying income. More importantly, in many cases the status of debt-like preferred equity as debt or equity for tax purposes is unclear. The IRS could challenge our treatment of such preferred equity investment for purposes of applying the REIT income and asset tests and, if such a challenge were sustained, we could fail to continue to qualify as REIT. In addition to the risk of loss of REIT status due to nonqualifying income, if the underlying property is dealer property, our gains from the sale of the property would be subject to a 100% tax. In addition, if the issuer of the preferred equity is taxed as a corporation for U.S. federal income tax purposes, such preferred equity generally will be a nonqualifying asset unless the issuer is a REIT, qualified REIT subsidiary or TRS.

A portion of our distributions may be treated as a return of capital for U.S. federal income tax purposes, which could reduce the basis of a stockholder’s investment in our common stock and may trigger taxable gain.

A portion of our distributions may be treated as a return of capital for U.S. federal income tax purposes. As a general matter, a portion of our distributions will be treated as a return of capital for U.S. federal income tax purposes if the aggregate amount of our distributions for a year exceeds our current and accumulated earnings and profits for that year. To the extent that a distribution is treated as a return of capital for U.S. federal income tax purposes, it will reduce a holder’s adjusted tax basis in the holder’s shares, and to the extent that it exceeds the holder’s adjusted tax basis will be treated as gain resulting from a sale or exchange of such shares. See “U.S. Federal Income Tax Considerations.”

Legislative, regulatory, or administrative changes could adversely affect us or our security holders.

The tax laws or regulations governing REITs or the administrative interpretations thereof may be amended at any time. We cannot predict if or when any new or amended law, regulation, or administrative interpretation will be adopted, promulgated, or become effective, and any such change may apply retroactively. We and our security holders may be adversely affected by any new or amended law, regulation, or administrative interpretation.

On December 22, 2017, the Tax Cuts and Jobs Act was enacted. The Tax Cuts and Jobs Act makes significant changes to the U.S. federal income tax rules related to the taxation of individuals and corporations, generally effective for taxable years beginning after December 31, 2017. In addition to reducing corporate and non-corporate tax rates, the Tax Cuts and Jobs Act eliminates and restricts various deductions and limits the ability to utilize net operating losses. Most of the changes applicable to individuals are temporary and apply only to taxable years beginning after December 31, 2017, and before January 1, 2026. The Tax Cuts and Jobs Act makes numerous large and small changes to the tax rules that do not affect REITs directly but may affect our security holders and may indirectly affect us.

Prospective investors are urged to consult with their tax advisors with respect to the status of the Tax Cuts and Jobs Act and any other regulatory or administrative developments and proposals and their potential effect on investment in our securities.

Your investment has various tax risks.

Although the provisions of the Code generally relevant to an investment in shares of our common stock are described in “U.S. Federal Income Tax Considerations,” we urge you to consult your tax advisor concerning the effects of United States federal, state, local and non-U.S. tax laws to you with regard to an investment in shares of our common stock.

Retirement Plan Risks

If the fiduciary of an employee pension benefit plan subject to ERISA (such as profit sharing, Section 401(k) or pension plan) or any other retirement plan or account fails to meet the fiduciary and other standards under ERISA or Section 4975 of the Code as a result of an investment in our common stock, the fiduciary could be subject to penalties.

There are special considerations that apply to employee benefit plans subject to ERISA (such as profit sharing, Section 401(k) or pension plans) and other retirement plans or accounts subject to Section 4975 of the Code (such as an IRA) that are investing in our shares. Fiduciaries investing the assets of such a plan or account in our common stock should satisfy themselves that:

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Code may result in the imposition of penalties and could subject the fiduciary to claims for damages or for equitable remedies. In addition, if an investment in our shares constitutes a non-exempt prohibited transaction under ERISA or Section 4975 of the Code, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested. In the case of a prohibited transaction involving an IRA owner, the IRA may be disqualified and all of the assets of the IRA may be deemed distributed and subjected to tax. ERISA plan fiduciaries and IRA custodians should consult with counsel before making an investment in our common stock.

We may become subject to Title I of ERISA, which may lead to the rescission of certain transactions, tax or fiduciary liability and our being held in violation of certain ERISA and Code requirements.

If for any reason our assets are deemed to be “plan assets” because we do not qualify as either a “real estate operating company” or a “venture capital operating company” and there is no other exemption available to prevent our assets from being deemed “plan assets,” certain transactions, including acquisitions, sales and exchanges of properties, might constitute non-exempt prohibited transactions under Section 406 of ERISA and/or Section 4975 of the Code and might have to be rescinded and may give rise to prohibited transaction excise taxes and fiduciary liability. In addition, if our assets are deemed to be “plan assets,” our management may be considered to be fiduciaries under ERISA. In this regard, while we intend to be structured to qualify as either a “real estate operating company” or a “venture capital operating company,” fiduciaries of employee benefit plans subject to Title I of ERISA and/or Section 4975 of the Code should make an independent determination whether such status can be achieved.

STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

We make statements in this offering circular that are forward-looking statements within the meaning of the federal securities laws. The words “believe,” “estimate,” “expect,” “anticipate,” “intend,” “plan,” “seek,” “may,” and similar expressions or statements regarding future periods are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this offering circular or in the information incorporated by reference into this offering circular.

The forward-looking statements included in this offering circular 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. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

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 offering circular. All forward-looking statements are made as of the date of this offering circular and the risk that actual results will differ materially from the expectations expressed in this offering circular will increase with the passage of time. 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 offering circular, 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 offering circular, including, without limitation, the risks described under “Risk Factors,” 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 offering circular will be achieved.

PLAN OF DISTRIBUTION

General

We are continuing to offer a maximum of up to $75,000,000 in Shares, pursuant to this Offering Circular on a best efforts basis initially by our officers, directors and employees. In order to acquire Shares, all investors must meet the suitability standards discussed in the section of this Offering Circular titled “Investment Criteria.” No person engaged as an investment adviser or bank trust department will be directly or indirectly compensated as an inducement for such investment adviser or bank trust department to advise favorably for an investment in us.

This offering will commence as of the date the offering statement of which this Offering Circular forms a part is qualified by the SEC. We reserve the right to terminate this offering at any time and to extend our offering term to the extent permissible under applicable law. As of the date of this Offering Circular, unless otherwise permitted by applicable law, we do not intend to accept subscriptions from investors in this offering who reside in certain states. We reserve the right to temporarily suspend and/or modify this offering and this Offering Circular in the future, during the offering period, in order to take such actions necessary to enable the Company to accept subscriptions in this offering from investors residing in any such states.

There is no aggregate minimum to be raised in order for this offering to become effective, and therefore, this offering is being conducted on a “rolling basis,” meaning the Company will be entitled to apply all proceeds of this offering, commencing with the initial subscription received after the offering statement is qualified by the SEC, toward its business strategy, offering expenses, reimbursement and other uses, all as more specifically set forth under the caption “Use of Proceeds” contained elsewhere is this Offering Circular. We will hold closings, meaning the Company will have accepted a subscription, on the 10^th business days following the delivery the applicable subscription agreement by an investor. Once a subscription has been submitted, the Company has the right, for a period of 10 days following receipt, in its sole discretion, to accept or reject the subscription, in whole or in part, for any reason. The investors do not have the right to request a refund of their subscription payment once they have submitted their subscription agreements; however, if the Company rejects a subscription, it will return the applicable investor’s subscription payment within five (5) business days following such rejection. It is expected that settlement will occur on the same day as each closing date. On each closing date, offering proceeds for that closing will be disbursed to us and the Shares purchased will be issued to the investors in this offering. If the Company rejects a subscription, the respective subscription payment will be returned to the subscriber.

Purchase Price per Share

The per Share purchase price will be $10.00 for the first 12 months of this offering. Thereafter, the offering price will be represented by the then-current “Transaction Price,” which will be determined on a quarterly basis. The “Transaction Price” generally will be the most recently determined NAV per Share; however, we may offer Shares at a price that we believe reflects the NAV per Share more appropriately than the prior quarter’s NAV per Share, including by updating a previously disclosed Transaction Price, in cases where we believe there has been a material change (positive or negative) to our NAV per unit since the end of the prior quarter. See “—Valuation Policies” for more information about the determination of our NAV per Share.

Marketing Compensation

We will incur, or reimburse the Manager for, our cumulative organization and offering expenses incurred by the Manager and its affiliates in connection with this offering and our organization, in an amount equal to up to 5.0% of gross offering proceeds from this offering, provided that the aggregate amount of any such reimbursements will not exceed $3,750,000 or 5.0% of the gross proceeds of this offering. We will reimburse the Manager for all such advanced expenses, as well as any organization and offering expenses incurred in prior periods related to this offering.

Included in the organization and offering expenses for which we will reimburse the Manager are amounts that the Manager will use for underwriting expenses in connection with the offering. Such underwriting expenses may include, without limitation, fees paid to attend retail seminars sponsored by broker dealers, costs associated with sponsoring conferences, including reimbursements for registered representatives associated with broker dealers to attend educational conferences sponsored by us or broker dealers, reimbursements for customary lodging, meals and reasonable entertainment expenses and promotional items and technology costs. The marketing fees may be paid to any broker dealer based upon prior or projected volume of sales and the amount of marketing assistance and the level of marketing support provided by a broker dealer.

Other than the fees described above, we may not pay referral or similar fees to any professional or other person in connection with the distribution of the Shares in this offering.

The Subscription Process and Admission of Stockholders

We are required to make every reasonable effort to determine whether a purchase of our Shares is suitable for you. To purchase Shares pursuant to this offering, you must deliver a completed subscription agreement, in substantially the form that accompanies this Offering Circular, any required supporting documentation and the payment for the entire subscription amount. You should pay for your Shares by check payable to the Company or wire transfer directed to the deposit account set forth in the subscription agreement.

We plan to make this Offering Circular and the appendices available electronically and such documents will be available on our website at www.phoenixamericanhospitality.com/investorkit/. Any Offering Circular amendments and supplements, as well as any periodic reports, proxy statements or other reports required to be made available to you will be posted on our website at www.phoenixamericanhospitality.com/investorkit/.

All investors will be required to complete and execute a subscription agreement in the form attached as Appendix B to this Offering Circular is a part. The subscription agreement should be delivered to the Company at the address set forth in the subscription agreement, together with payment in full by check or wire of your subscription purchase price in accordance with the instructions in the subscription agreement.

Proceeds will be held in our deposit account with JPMorgan Chase until a closing occurs.

You will be required to represent and warrant in your subscription agreement that you are an accredited investor as defined under Rule 501 of Regulation D or that your investment in the Shares does not exceed 10% of your net worth or annual income, whichever is greater, if you are a natural person, or 10% of your revenues or net assets, whichever is greater, calculated as of your most recent fiscal year if you are a non-natural person. By completing and executing your subscription agreement you will also acknowledge and represent that you have received a copy of this Offering Circular, you are purchasing the Shares for your own account and that your rights and responsibilities regarding your Shares will be governed by the indenture and the form of global bond certificate each filed as an exhibit to the Offering Statement of which this Offering Circular is a part.

The initial Transaction Price will be $10.00, an amount that was arbitrarily determined by the Manager, until 12 months after the commencement of this offering. Thereafter, the Shares will generally be sold at the prior quarter’s NAV per Share. Although, following such 12-month period, the price paid for the Shares will generally be based on the prior quarter’s NAV per Share, the NAV per Share for the quarter in which you make your purchase may be significantly different. We may offer Shares at a price that we believe reflects the NAV per Share more appropriately than the prior quarter’s NAV per Share (including by updating a previously disclosed Transaction Price) or suspend our offering in cases where we believe there has been a material change (positive or negative) to our NAV per unit since the end of the prior quarter. We expect to establish a new NAV per unit on a quarterly basis.

Subscription Agreement

The general forms of subscription agreement that investors will use to subscribe for the purchase of Shares in this offering is included as Appendix B to this Offering Circular. The subscription agreements will be returned to the Company’s Transfer Agent, see “Description of Capital Stock — Transfer Agent” and “How to Subscribe.” The subscription agreement requires all investors subscribing for Shares to make the following certifications or representations:

The above certifications and representations are included in the subscription agreement in order to help satisfy our responsibility to make every reasonable effort to determine that the purchase of our Shares is a suitable and appropriate investment for you and that appropriate income tax reporting information is obtained. We will not sell any Shares to you unless you are able to make the above certifications and representations by executing the subscription agreement. By executing the subscription agreement, you will not, however, be waiving any rights you may have under the federal securities laws.

Minimum Investment

In order to purchase Shares in this offering, you must initially acquire at least 500 Shares, regardless of the then-applicable Transaction Price, unless waived by us. Thereafter, subject to restrictions imposed by state law, you may purchase additional Shares in whole or fractional unit increments subject to a minimum for each additional purchase of 100 Shares. You should carefully read the minimum investment requirements explained in the “Investment Criteria” section of this Offering Circular.

Suitability

The soliciting dealers and registered investment advisors recommending the purchase of Shares in this offering have the responsibility to make every reasonable effort to determine that your purchase of the Shares in this offering is a suitable and appropriate investment for you based on information provided by you regarding your financial situation and investment objectives. In making this determination, these persons have the responsibility to ascertain that you:

Relevant information for this purpose will include at least your age, investment objectives, investment experience, income, net worth, financial situation, and other investments as well as any other pertinent factors. The soliciting dealers and registered investment advisors recommending the purchase of shares in this offering must maintain, for a six-year period, records of the information used to determine that an investment in shares is suitable and appropriate for you.

Valuation Policies

We set our initial offering price at $10.00, a price arbitrarily determined by the Manager, which will be the purchase price of our Shares until 12 months following the commencement of this offering. Thereafter, the per Share purchase price will be adjusted every fiscal quarter and, as of January 1st, April 1st, July 1st and October 1st of each year, will be equal to the sum of our NAV divided by the number of Shares outstanding as of the close of business on the last business day of the prior fiscal quarter.

Beginning after one year from the commencement of this offering, we will file with the SEC on a quarterly basis an offering circular supplement disclosing the quarterly determination of our NAV per Share that will be applicable for such fiscal quarter, which we refer to as the pricing supplement. Except as otherwise set forth in this Offering Circular, we will disclose, on a quarterly basis in an offering circular supplement filed with the SEC, the principal valuation components of our NAV.

Our NAV per Share will be calculated by the Manager at the end of each fiscal quarter, on a fully diluted basis, beginning twelve months after commencement of this offering using a process that reflects several components as more fully described below.

Specifically, the Manager will calculate NAV primarily utilizing a discounted cash flow methodology and will then compare that NAV estimate to a valuation utilizing a comparable sales methodology, to ensure no material variances exist. Both the discounted cash flow methodology and the comparable sales methodology are summarized below.

Discounted Cash Flow Methodology — The Manager estimates NAV of the Company’s ownership interest in an investment based on a forecasted cash flow stream to the Company (including a contemplated disposition) discounted to a present/fair value at a risk adjusted rate. Yield rates, disposition capitalization rates, and growth assumptions are derived from market transactions as well as other financial and industry data. The discount rate utilized to establish fair value is intended to reflect the leveraged return required of a third-party stockholder acquiring the Company’s ownership interest at the date of the valuation. The discount rate is also intended to reflect key risk factors associated with real estate properties under development, redevelopment, repositioning, or stabilization, including entitlement risk, construction risk, leasing/sales risk, operation expense risk, credit risk, capital market risk, pricing risk, event risk and valuation risk. Additionally, the fair value is intended to include the timely recognition of estimated entrepreneurial profit after such consideration.

Comparable Sales Methodology — The Manager also estimates NAV of the Company’s ownership interest in an investment based on completed sales and/or quoted prices in active marketing of comparable assets. Comparable sales are identified by reviewing recent sales of similar vintage in a defined geographic region that are comparable in quality of improvements and tenancy. From the real estate property fair value, the Manager estimates the NAV of the Company’s ownership interest by reducing the real estate property value by (i) any ownership liabilities (i.e., senior loans, secured and unsecured creditors, etc.) and (ii) the ownership interest and/or profit participation of any other members in the applicable venture.

We expect that the NAV calculations described above will primarily be undertaken by the Manager’s internal accountants. Members of the Manager’s real estate team have extensive expertise as real estate fund managers, real estate property managers, financial analysts, accountants and real estate market research consultants. These team members have extensive direct management experience with hotel acquisition, management, construction and financing.

In instances where the Manager determines that an independent appraisal of the one or more of our real estate assets is necessary, including, but not limited to, instances where the Manager is unsure of its ability on its own to accurately determine the estimated values of one or more of our real estate assets and investments, or instances where third party market values for comparable properties are either nonexistent or extremely inconsistent, the Manager may engage an appraiser that has expertise in appraising commercial real estate assets, to act as our independent valuation expert with respect to those particular assets. The independent valuation expert will not be responsible for calculating, or preparing, our NAV per Share, as making such calculation is the responsibility of the Manager. However, we may hire a third party to calculate, or assist with calculating, the value of one or more of our assets.

The use of different judgments or assumptions would likely result in different estimates of the value of our real estate assets. Moreover, although we evaluate and provide our NAV per Share on a quarterly basis, our NAV per Share may fluctuate in the interim, so that the NAV per Share in effect for any fiscal quarter may not reflect the precise amount that might be paid for your Shares in a market transaction. Further, our published NAV per Share may not fully reflect certain material events to the extent that they are not known or their financial impact on our portfolio is not immediately quantifiable. Any resulting potential disparity in our NAV per Share may be in favor of either stockholders who redeem their Shares, or stockholders who buy new Shares, or existing stockholders.

Our goal is to provide a reasonable estimate of the NAV per Share on a quarterly basis. However, all of our assets will consist of hotel properties and, as with any commercial real estate valuation protocol, the conclusions reached by the Manager will be based on a number of judgments, assumptions and opinions about future events that may or may not prove to be correct. The use of different judgments, assumptions or opinions would likely result in different estimates of the value of our commercial real estate assets and investments. In addition, for any given quarter, our published NAV per Share may not fully reflect certain material events, to the extent that the financial impact of such events on our portfolio is not immediately quantifiable. As a result, the quarterly calculation of our NAV per Share may not reflect the precise amount that might be paid for your Shares in a market transaction, and any potential disparity in our NAV per Share may be in favor of either stockholders who buy new Shares or existing stockholders. However, to the extent quantifiable, if a material event occurs in between quarterly updates of NAV that would cause our NAV per Share to change by 10% or more from the last disclosed NAV, we will disclose the updated NAV per Share and the reason for the change in an offering circular supplement as promptly as reasonably practicable. Note, in addition, that the determination of our NAV is not based on, nor intended to comply with, fair value standards under generally accepted accounting principles and our NAV may not be indicative of the price that we would receive for our assets at current market conditions.

The calculation of NAV will consist of the following components:

Assets

Real Estate:

Land

Buildings and improvements

Total real estate=, net, at fair value

Cash:

Restricted cash

Rent and other receivables, net

Other assets, net

Total Assets

Liabilities and stockholders’ equity

Liabilities:

Secured notes payable, net

Accounts payable, accrued, and other liabilities

Unearned tenant rents

Security and investor deposits

Total liabilities

Stockholders’ equity:

Common stock; 10,000,000 shares authorized; _______ shares issued and outstanding at ______, __, 202_

Additional paid in capital

Cumulative distributions and net gain

Total stockholders’ equity

Total liabilities and stockholders’ equity

Net asset value per share on _________ shares issued and outstanding on _________, __, 202_

The NAV per Share will be calculated by the Manager on a fully diluted basis using a process that reflects several components, including (1) the estimated values of the Company’s commercial real estate and investments, including relating liabilities, based upon (a) market capitalization rates, comparable sales information, discount rates and net operating income and (b) in certain instances, individual appraisal reports of the underlying real estate, (2) the price of liquid assets for which third party market quotes are available, (3) accruals of the Company’s periodic dividends and (4) estimated accruals of the Company’s operating revenues and expenses. The key assumptions in calculating NAV will be market capitalization rates and discount rates, which numbers will be used the Manager in determining the value of the Company’s assets using the discounted cash flow methodology described above.

ESTIMATED USE OF PROCEEDS

The following table sets forth certain information about the estimated use of the proceeds of the Offering:

DESCRIPTION OF BUSINESS

General

American Hospitality Properties REIT II, Inc. is a newly organized Delaware corporation, formed to invest in limited service hotels in the United States. Substantially all of our assets will be held by, and substantially all of our operations will be conducted through, our Operating Partnership, either directly or through its subsidiaries, and we will be the sole general partner of our Operating Partnership. Additionally, we will contribute the net proceeds from this offering (including the proceeds from the private placements to our Sponsor, as described below) to our Operating Partnership in exchange for OP Units. We intend to qualify as a REIT for U.S. federal income tax purposes beginning with our taxable year ending December 31, 2024. As of the date of this Offering Circular, we own no Properties.

The Manager believes that the current hospitality real estate environment provides the Company the opportunity to acquire attractively priced hotel properties. The Manager’s ability to increase value will be based on applying sound acquisition policies and taking advantage of the disparity between the purchase price and stabilized value and replacement cost of these properties. The Company expects to acquire the Properties at prices that are less than the stabilized values and replacement costs of the properties.

The Manager is a strategic buyer of hotel properties and brings proven hotel management expertise to each investment. The Manager will apply aggressive expense reduction strategies to each acquired hotel. By doing so, the Manager expects to increase net revenues at each hotel without any improvement in occupancy or room rates or gross revenues. This should create enhanced stockholder value through greater net operating income and increased cash flow to the stockholders while maintaining a high level of guest service.

The Company’s objective is to provide its stockholders with risk-adjusted returns through investments in the Properties. The Company believes that the Properties will generate positive cash flow because:

(i) Expense Reduction and Revenue Improvement. The Manager will apply cost reduction measures to increase cash flow and repositioning procedures to improve gross revenues upon takeover.

(ii) Location. The Manager intends to acquire Properties located in areas of the United States that it believes are business destinations or otherwise expected to experience an influx of travelers seeking hotel rooms.

(iii) Occupancy. The number of hotel rooms in the United States has decreased in the recent past due, in part, to issues facing the global credit markets. Additionally, current data suggests that business travel has increased. The Manager believes that this has contributed to an increase in demand for hotel rooms, resulting in higher rates.

(iv) Strong Brand Affiliation. The Properties are anticipated to be operated under worldwide recognized brands with strong, global reservation systems, including, without limitation, Marriott, Hilton and Hyatt.

(v) Barriers to Entry. The Properties are anticipated to be located in regions where new construction is difficult due to high construction costs and limited available sites zoned for hotel use. The Manager believes this will provide the hotels acquired by the Fund greater market Share than would be the case if numerous competitive hotels were able to be developed nearby.

(vi) Pricing Opportunity. The Manager expects to acquire the Properties at a price below the current replacement cost.

The Manager expects to operate the Company for approximately five years following the completion of this offering. After that time, the Company anticipates selling the Properties for the best possible price, either to an affiliated public entity or to an independent third party.

Our REIT Structure

We believe that our currently contemplated business operations will enable us to qualify as a REIT beginning with our taxable year ending December 31, 2024. Our qualification and taxation as a REIT depends upon our ability to meet, on a continuing basis, various qualification requirements imposed upon REITs by the Code relating to, among other things, compliance with the REIT income and asset tests. See “U.S. Federal Income Tax Considerations—Requirements for Qualification as a REIT.” There is no assurance that we will qualify as a REIT or, if qualified, will maintain such qualification in the future. See “Risk Factors—Federal Income Tax Risks.”

In order for the income from our hotel operations to be REIT qualifying income, we cannot directly operate any of our hotel properties. As a result, we intend to lease our hotel properties to one or more TRSs that are wholly owned by our Operating Partnership. The rent paid to us by each of these TRSs will be REIT qualifying income provided that the hotels are managed by an “eligible independent contractor” and the lease rates do are not “excessive.” It is currently anticipated that the Operator will manage our hotels. We believe that the Operator will qualify as an eligible independent contractor. A TRS is a corporate entity that pays federal income tax at regular corporate rates on its taxable income.

Company’s Opportunity

The Company believes that it will continue to be able to identify acquisition opportunities that will allow it to utilize its strengths to create above average investment returns. The Company generally believes that its ability to generate profits is grounded upon implementing sound acquisition policies, and that a critical benchmark for acquisition decision-making is disparity of purchase price to stabilized value and replacement costs. The company will seek to purchase the Properties at a price that is less than the stabilized and replacement value, as determined by the Manager, which would allow the Company to make capital expenditures for upgrades and other items to increase occupancy and room rental rates. In addition, through a strategic and tactical business platform, it is anticipated that the Operator will apply aggressive hotel management strategies to each Property it manages to provide value.

The Company generally expects to hold and operate each Property for approximately five years, and then to sell the Properties for the best price obtainable. The Company anticipates that it should be able to sell Properties for more that it paid for them, but there can be no assurances. If a Property is sold within one year of the termination date of this offering, the Manager, may at its sole discretion, reinvest the sale proceeds from the sale of such Property in a new Property. The Manager intends to obtain financing to acquire the Properties.

Company’s Goals

The following are some of the Company’s goals:

THERE CAN BE NO ASSURANCE THAT ANY OF THESE OBJECTIVES WILL BE ACHIEVED.

Property Philosophy and Strategy

The principals of the Manager believe that rewards should be based on performance, which is why the Manager’s Asset Management Fee is based on the total revenue of the Properties as opposed to another factor such as the total amount invested in Shares. The Company also believes that the primary key to success include disciplined and aggressive property and asset management, as well as acquiring Properties at a significant discount to (1) projected stabilized value after occupancy and room rental rates have been optimized and improvements have been made and (2) replacement cost in order to afford necessary capital expenditures to improve the Properties to competitive standards. The Company intends to use the techniques to provide it with sufficient margin to improve, manage and sell the Properties in a compressed time frame.

The Company intends to acquire Properties, where the hotels are value-add, with RevPAR that is lower than hotels competing in the same class or lower than similar positioned hotels in the Company portfolio. RevPAR is typically calculated by dividing the total revenue of the rooms by the total number of rooms available during a particular time frame (or alternatively by multiplying a hotel’s average daily room rate by its occupancy rate), and is often used in the hotel industry as an indicator of the overall financial performance of a hotel relative to other comparable hotels. Through aggressive management, sales and marketing as well as strategic capital improvements, the Company believes that it will be able to successfully reposition the hotels it acquires and increase RevPAR to competitive levels.

The Company also intends to acquire Properties both through its extensive relationship with the broker networks as well as the hotel ownership community at large. The Company expects to be able to transact on both on-market opportunities, i.e. properties listed through brokers, and off-market opportunities, i.e. properties sold through direct contact and negotiations with the sellers. In addition, the Company will also look at opportunistic transactions, such as transactions with distressed sellers or recapitalization efforts as well as mergers and acquisitions deals typically offered through investment banking relationships. All these types of acquisitions generally require good timing and a sufficient amount of available capital. The company believes that the experience of the principals of the Manager and the capital management policies of the Company will enable the Company to acquire Properties quickly and with less leverage than most competitors.

Property Acquisition Sources

The Manager will engage in competitive bidding situations in which properties are marketed by traditional commercial real estate brokers as well as pursue off-market opportunities. The Manager has a network of resources to assist it in identifying potential sellers of attractive properties. Though time consuming, the benefits to the seller from this “off market” strategy are the avoidance of business disruption, no broker fees, greater transaction certainty and seller privacy. The obvious benefit to the Company is a discount to the market price.

Joint Venture Investments

We expect to enter into joint ventures with third party capital sources in order to achieve the following objectives: (1) increasing the return on the Company’s invested capital, (2) diversifying our access to equity capital and (3) leveraging the invested capital to promote our brand and increase market share. The Manager has sponsored five other funds that have raised an aggregate of approximately $120 million from third-party institutional investors and have acquired an aggregate of 17 hotels. There can be no assurance that the Company will be able to raise similar amounts of capital or acquire a similar number of hotels. In addition, the co-venturer under any joint venture agreement we enter into may have the right to compel us to buy out their interest at a time when we may not have sufficient funds to acquire the interest. In that event, we may need to sell the Properties owned by that joint venture.

Description of the Properties

The Company will seek to invest substantially all of the net Offering Proceeds available for investment in limited service hotels, which will be located in the United States. The Company defines limited service hotels as those that have more limited food and beverage service and less meeting space that full service hotels. It is anticipated that the Properties will consist of existing hotels. All of the Properties are anticipated to be branded, franchised hotels. There are no limitations on the number or size of Properties to be acquired by the Company or the percentage of the proceeds from this offering that may be invested in a single Property.

As of the commencement of this offering, the Company has not identified any Properties for acquisition. As to making material developments, this Offering Circular will be supplemented with a supplement which may add, update or change information contained in this Offering Circular, including the acquisition of Properties. The number and mix of Properties acquired by the Company will be determined in the sole discretion of the Manager and will depend, in part, on the net proceeds of this offering, the real estate market and financing conditions existing at the time the Company makes its investments in Properties, and other circumstances outside the control of the Company and the Manager. The number of Properties to be acquired is unknown and may vary.

The Company’s primary strategy will be to identify and acquire Properties which provide a value added opportunity for the Company. The Company currently intends to seek Properties that have one or more of the following characteristics:

Acquisition and Financing Terms

Acquisition Terms

The Company intends to purchase the Properties from unaffiliated sellers. The Company will acquire the Properties “as is” except as otherwise set forth in the purchase agreements. The terms of the purchase and sale agreements are not currently known. It is anticipated that the Company will be responsible for paying all or a portion of the closing costs related to the acquisition of the Properties and that the Company will be required to establish reserves related to each Property acquired. The Company may be required to pay various acquisition fees when it acquires Properties from franchisees, including transfer fees, affiliation fees and costs associated with property improvement plans.

The Manager has formed an investment committee, which is initially comprised of W. L. “Perch” Nelson and Jay Anderson, both of whom are officers of the Manager (the “Investment Committee”). See “Management.” The Investment Committee will have two members unless otherwise determined by the Manager, and the consent of the two members of the Investment Committee is required to authorize any recommendation of the Investment Committee. The Investment Committee will provide recommendations to the Company regarding the identification, acquisition and disposition of the Properties, but will not have the authority to decide which Properties to acquire.

It is anticipated that the Company will own the Properties either directly or through special purpose entities; provided, however, that the Company may purchase some of the Properties in connection with joint venture partners, and the Company may acquire long-term ground lease interests or limited liability company membership interests in entities that own the Properties. In the event the Company acquires a Property together with a joint venture partner, it is anticipated that the Company will enter into a partnership or operating agreement with the joint venture partner and the joint venture partner will hold the ownership interest in any such Properties. Thus, the Company will only own an interest in an entity in the event any Property is purchased in a joint venture. The Company will not acquire undivided interests in any Properties, including interests offered through a tenant-in-common syndication program.

The acquisition structure for the Properties is unknown, and the manner of acquisition will be determined in the sole discretion of the Manager. The Manager or its Affiliates are entitled to receive an Acquisition Fee with respect to the Properties in an amount up to 3% of the gross sales price of each Property. The Company generally expects to hold and operate each Property for approximately five years from the date of its acquisition, and it is anticipated that no Property will be held for more than 10 years from the date of acquisition of such Property. The Properties may be sold to affiliates of the Manager, but only if the price is equal to or greater than the value determined by an independent appraisal.

Financing Terms

The Company anticipates that it will enter into loans from various third party lenders to acquire the Properties. The terms of such loans are unknown. Although the Company anticipates obtaining loans for the Properties that will be nonrecourse as to principal and interest, it is possible that lenders may require the Manager and the Company to be personally liable for certain nonrecourse carve-outs and springing recourse events. In circumstances where personal liability attaches, the lender could proceed against the Company’s assets. The loan-to-value ratio for each Property acquired will not exceed 70%. The Manager has not obtained any financing commitments for any Properties. The terms of the Property loans will vary. The loans obtained by the Company may be interest only loans and variable interest rate loans. The lenders may require certain reserves to be funded and maintained by the Company, including interest reserves. It is anticipated that the loans will have short terms and will require balloon payments at the end of the loan term. The Company will not incur any recourse indebtedness.

Target Markets

The Company intends to seek investment opportunities in value-add Properties located throughout the United States. The Company anticipates determining the relative strength and position of each market under consideration by analyzing RevPAR trends, new construction, forecasted rates and occupancy figures and by applying measurable metric criteria to each market analyzed. The investment potential of a hotel in a specific market depends significantly upon where the market is in the cycle. For example, a market that has entered the last stage of a recessionary phase could be expected to begin its recovery by the end of the year. As the fundamentals improve, the value of the property in such market would also be expected to improve. The Company currently intends to seek Properties, where the hotels are located in a high growth area or an area with relatively few competing properties.

Risk Management/Mitigation

The Manager believes that the best way to position an acquisition to offset a significant potential market downturn is through “best in class” due diligence, conservative underwriting and market evaluation and intensive management of cash flow. The Manager strongly believes that its ability to buy a Property “right,” the thoroughness of its due diligence process and its conservative approach to pro forma analysis will mitigate the controllable acquisition risk. In addition, the Manager’s expertise in reducing costs and improving net income should result in stable valuations of the Properties acquired even in times of reduced occupancy and lower gross revenues. In the event the Company is faced with an economic downturn similar to what existed in 2008 and 2009, there are a number of measures that are built into the Company’s investment and management process that should minimize risk from market downturn:

Comparison with Other Real Estate Funds

Alignment of Interests

The Company is structured to align the interests of our stockholders and the Manager. For instance, the Manager’s Asset Management Fee is based on the gross revenues of the Properties, not the total amount invested in the Company by our stockholders.

Effective Operator

The Operator, PAH Management, LLC, is an affiliate of the Manager and currently serves as the onsite manager for four of the 11 hotels managed by the Manager. The Manager is in the process of transitioning the onsite management services for the other seven hotels to the Operator, which is expected to be complete by the end of the third quarter of 2023. The principals of the Operator, who are also members of the Manager’s management team, have over 185 years of collective experience operating hotels and resorts. The Company believes that the properties held by certain other real estate funds may not be managed or operated by persons or entities with as much experience as the management team of the Operator. If the Operator is contractually prohibited or is otherwise unable or elects not to operate a Property, another operator will be chosen for that Property in the sole discretion of the Manager.

Properties Recommended by the Investment Committee

The Investment Committee will provide recommendations to the Company regarding the identification, acquisition and disposition of the Properties, and our board of directors will not cause the Company to purchase any Properties without the recommendation of the Investment Committee.

Shorter Property Period

The Company anticipates an investment period of approximately five years after the termination date of this offering.

Low Minimum Investment Amount

The Company believes that many other private real estate funds typically require high minimum investment amounts and are available only to institutional stockholders and ultra high-net-worth individuals. By offering a minimum investment amount of 500 shares, or $5,000 based on the $10.00 initial Transaction Price, the Company provides the opportunity for a wide range of stockholders who are “qualified purchasers” to make an investment that is in line with their investment goals. See “Investment Criteria.”

Property Operation

It is anticipated that the TRSs will enter into one or more hotel management agreements with the Operator to operate the Properties. It is anticipated that the Operator will operate all of the Properties, but if the Operator is contractually prohibited or is otherwise unable or elects not to operate a Property, another operator will be chosen for that Property in the sole discretion of the Manager, provided that such operator qualifies as an eligible independent contractor. It is not anticipated that the Operator will enter into any subcontract agreements relating to the operation of any Property. The Company seeks to acquire Properties that will generate positive cash flow after payment of all expenses, including amortization of any Property loans and payment of hotel management fees. The Company believes that the operating methodology employed by the Operator will help the Company achieve this goal. See “Experience of PAH Management, LLC.”

Competition

Our net income depends, in large part, on our ability to source, acquire and manage Properties with attractive risk-adjusted yields. We compete with many other entities engaged in real estate investment activities, including individuals, corporations, bank and insurance company investment accounts, REITs, private real estate funds, and other entities engaged in real estate investment activities, which have greater financial resources and lower costs of capital available to them than we have. In addition, there are numerous other entities with asset acquisition objectives similar to ours, and others may be organized in the future, which may increase competition for the investments suitable for us. Competitive variables include market presence and visibility, amount of capital to be invested per Property and underwriting standards. To the extent that a competitor is willing to risk larger amounts of capital in a particular transaction or to employ more liberal underwriting standards when evaluating potential investments than we are, our investment volume and profit margins for our investment portfolio could be impacted. Our competitors may also be willing to accept lower returns on their investments and may succeed in buying the assets that we have targeted for acquisition. Although we believe that we are well positioned to compete effectively, there is enormous competition in our market sector and there can be no assurance that we will compete effectively or that we will not encounter increased competition in the future that could limit our ability to conduct our business effectively.

Investment Company Act Considerations

We intend to conduct our operations so that neither we, nor any of our subsidiaries, is required to register as investment companies under the Investment Company Act of 1940, as amended, or the Investment Company Act. Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. Government securities and cash items) on an unconsolidated basis, which we refer to as the 40% test. Excluded from the term “investment securities,” among other things, are U.S. Government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.

We anticipate that we will hold real estate and real estate-related assets described below (1) directly, (2) through wholly-owned subsidiaries, (3) through majority-owned joint venture subsidiaries, and (4) to a lesser extent, through minority-owned joint venture subsidiaries.

We expect to use substantially all of the net proceeds from this offering (after paying or reimbursing organization and offering expenses) to invest in and manage a diverse portfolio of assets primarily consisting of multifamily rental properties and development projects through the acquisition of equity interests in such properties or debt, as well as commercial real estate debt securities and other real estate-related assets, where the underlying assets primarily consist of such properties.

We will monitor our compliance with the 40% test and the holdings of our subsidiaries to ensure that each of our subsidiaries is in compliance with an applicable exemption or exclusion from registration as an investment company under the Investment Company Act.

The securities issued by any wholly-owned or majority-owned subsidiary that we may form and that are excluded from the definition of  “investment company” based on Section 3(c)(1) or 3(c)(7) of the Investment Company Act, together with any other investment securities we may own, may not have a value in excess of 40% of the value of our total assets on an unconsolidated basis.

The Investment Company Act defines a majority-owned subsidiary of a person as a company 50% or more of the outstanding voting securities of which are owned by such person, or by another company which is a majority-owned subsidiary of such person. We treat companies in which we own at least a majority of the outstanding voting securities as majority-owned subsidiaries. The determination of whether an entity is a majority-owned subsidiary of the Company is made by us. We also treat subsidiaries of which we or our wholly-owned or majority-owned subsidiary is the manager (in a manager-managed entity) or managing member (in a member-managed entity) or in which our agreement or the agreement of our wholly-owned or majority-owned subsidiary is required for all major decisions affecting the subsidiaries (referred to herein as “Controlled Subsidiaries”), as majority-owned subsidiaries even though none of the interests issued by such Controlled Subsidiaries meets the definition of voting securities under the Investment Company Act. We reached our conclusion on the basis that the interests issued by the Controlled Subsidiaries are the functional equivalent of voting securities. We have not asked the SEC staff for concurrence of our analysis and it is possible that the SEC staff could disagree with any of our determinations. If the SEC staff were to disagree with our treatment of one or more companies as majority-owned subsidiaries, we would need to adjust our strategy and our assets. Any such adjustment in our strategy could have a material adverse effect on us.

We believe that neither we nor certain of our subsidiaries will be considered investment companies for purposes of Section 3(a)(1)(A) of the Investment Company Act because we and they will not engage primarily or hold themselves out as being primarily in the business of investing, reinvesting or trading in securities. Rather, we and such subsidiaries will be primarily engaged in non-investment company businesses related to real estate. Consequently, we and our subsidiaries expect to be able to conduct our operations such that none will be required to register as an investment company under the Investment Company Act.

Qualification for exemption from registration under the Investment Company Act will limit our ability to make certain investments. To the extent that the SEC staff provides more specific guidance regarding any of the matters bearing upon such exclusions, we may be requiring to adjust our strategy accordingly. Any additional guidance from the SEC staff could provide additional flexibility to us, or it could further inhibit our ability to pursue the strategies we have chosen.

The loss of our exclusion from regulation pursuant to the Investment Company Act could require us to restructure our operations, sell certain of our assets or abstain from the purchase of certain assets, which could have an adverse effect on our financial condition and results of operations. See “Risk Factors—Risks related to Our Organizational Structure—Maintenance of our Investment Company Act exemption imposes limits on our operations, which may adversely affect our operations.”

Litigation

There are no legal actions pending against the Company or the Manager, nor, to the knowledge of management, is any litigation threatened either any of them, any of their management, or any affiliate, which may materially affect operations or projected goals.

MANAGEMENT

Board of Directors

We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders as fiduciaries. Our board of directors has retained the Manager to direct the management of our business and affairs, manage our day-to-day affairs, and implement our investment strategy, subject to the board of directors’ supervision. The current board members are W.L. “Perch” Nelson and Jay Anderson.

All members of our board of directors will serve annual terms. Upon the expiration of their terms at the annual meeting of stockholders in 2024, directors will be elected to serve a term of one year and until his or her successor is elected and qualified. With respect to the election of directors, each candidate nominated for election to our board of directors must receive a plurality of the votes cast, in person or by proxy, in order to be elected.

Our current directors are also executive officers of the Manager and serve on the investment committees for affiliates of the Manager. In order to ameliorate the risks created by conflicts of interest, our board of directors will appoint an independent representative to address any potential conflicts (the “Independent Representative”). The Independent Representative will act upon conflicts of interest matters, including transactions between us and the Manager. For more details, see “Conflicts of Interest and Related Party Transactions.”

Although the number of board members may be increased or decreased, a decrease may not have the effect of shortening the term of any incumbent director. Any director may resign at any time or may be removed for fraud, gross negligence or willful misconduct as determined by non-appealable decision of a court of competent jurisdiction, or by the stockholders upon the affirmative vote of at least two-thirds of all the votes entitled to be cast at a meeting called for the purpose of the proposed removal. The notice of the meeting will indicate that the purpose, or one of the purposes, of the meeting is to determine if the director will be removed.

Our charter and bylaws provide that any and all vacancies on our board of directors may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any individual elected to fill such vacancy will serve for the remainder of the full term of the class in which the vacancy occurred and until a successor is duly elected and qualifies.

Our charter and bylaws provide that any action required or permitted to be taken at any meeting of the stockholders may be taken without a meeting with the unanimous consent, in writing or by electronic transmissions, of each stockholder entitled to vote on the matter.

Under Delaware law, our directors must perform their duties in good faith and in a manner each director believes to be in our best interests. Further, our directors must act with such care as a prudent person in a similar position would use under similar circumstances, including exercising reasonable inquiry when taking actions. However, our directors and executive officers are not required to devote all of their time to our business and must devote only such time to our affairs as their duties may require. We do not expect that our directors will be required to devote a substantial portion of their time to us in discharging their duties.

Our general investment and borrowing policies are set forth in this offering circular. Our directors may establish further written policies on investments and borrowings and will monitor our administrative procedures, investment operations and performance to ensure that our executive officers and Manager follow these policies and that these policies continue to be in the best interests of our stockholders. Unless modified by our directors, we will follow the policies on investments and borrowings set forth in this offering circular.

Committees of the Board of Directors

Our board of directors may delegate many of its powers to one or more committees. As of the date of this Offering Circular, no board committees have been established.

Executive Officers and Directors

We have provided below certain information about our directors and executive officers.

Currently, all of our directors are also officers of the Manager and serve as members on the Investment Committee. The address of each director listed is 14643 Dallas Parkway, Suite 970, Dallas, Texas 75254. Biographical information for each of our directors may be found above in “The Manager and the Management Agreement—Management Biographical Information.”

Compensation of Officers and Directors

Our board of directors has the authority to fix the compensation of all officers that it selects and may pay compensation to directors for services rendered to us in any other capacity. However, we currently do not intend to pay our board members or officers any compensation for serving as members of our board of directors and officers, respectively.

A member of our board of directors who is also an employee of the Manager or our sponsor is referred to as an executive director. Executive directors will not receive compensation for serving on our board of directors. Our board of directors has the authority to fix the compensation of any non-executive directors that may serve on our board of directors in the future. Our board of directors may pay compensation to directors for services rendered to us in any other capacity. We will also reimburse each of our directors for their travel expenses incurred in connection with their attendance at full board of directors and committee meetings, if any, including meetings of the Investment Committee. We have not made any payments to any of our directors to date.

Compensation of Executive Officers

We do not currently have any employees nor do we currently intend to hire any employees who will be compensated directly by us. Each of the executive officers of our Sponsor also serves as an executive officer of the Manager. Each of these individuals receives compensation for his or her services, including services performed for us on behalf of the Manager, from our Sponsor. As executive officers of the Manager, these individuals will serve to manage our day-to-day affairs, oversee the review, selection and recommendation of investment opportunities, service acquired investments and monitor the performance of these investments to ensure that they are consistent with our investment objectives. Although we will indirectly bear some of the costs of the compensation paid to these individuals, through fees we pay to the Manager, we do not intend to pay any compensation directly to these individuals.

Limitations on Director and Officer Liability and Indemnification

Our certificate of incorporation limits the liability of our directors to the maximum extent permitted by Delaware Law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for:

Upon completion of this offering, our certificate of incorporation and our bylaws will provide that we are required to indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. Any repeal of or modification to our certificate of incorporation and our bylaws may not adversely affect any right or protection of a director or officer for or with respect to any acts or omissions of such director or officer occurring prior to such amendment or repeal. Upon completion of this offering, our bylaws will also provide that we shall advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her inactions in connection with their services to us, regardless of whether our bylaws permit such indemnification.

Prior to the completion of this offering, we intend to enter into separate indemnification agreements with our directors and executive officers, in addition to the indemnification provided for in our bylaws. These agreements, among other things, provide that we will indemnify our directors and executive officers for certain expenses (including attorneys’ fees), judgments, fines, penalties and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of such person’s services as one of our directors or executive officers, or any other company or enterprise to which the person provides services at our request. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers.

The limitation of liability and indemnification provisions that will be contained in our certificate of incorporation and our bylaws upon completion of this offering may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. There is no pending litigation or proceeding involving one of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

THE MANAGER AND THE MANAGEMENT AGREEMENT

The Manager

We operate under the direction of the Manager, which is responsible for directing the management of our business and affairs, managing our day-to-day affairs, and implementing our investment strategy. The Manager has established the Investment Committee that will make decisions with respect to all acquisitions and dispositions. See “—Investment Committee of the Manager” below. The Manager and its officers and directors are not required to devote all of their time to our business and are only required to devote such time to our affairs as their duties require; however, it is currently anticipated that our two executive officers, Mr. Nelson and Mr. Anderson, who are officers of the Manager, will devote at least 75% (approximately 35-40 hours/week) of their time to managing the operations of the Company.

We will follow investment guidelines adopted by the Manager and the investment and borrowing policies set forth in this Offering Circular unless they are modified by our board of directors. The Manager may establish further written policies on investments and borrowings and will monitor our administrative procedures, investment operations and performance to ensure that the policies are fulfilled, subject to approval by our board of directors.

The Manager performs its duties and responsibilities pursuant to a management agreement between the Manager and the Company. The Manager maintains a contractual, as opposed to a fiduciary relationship, with us and our stockholders. Furthermore, we have agreed to limit the liability of the Manager and to indemnify the Manager against certain liabilities.

Responsibilities of the Manager

The responsibilities of the Manager include:

Property Advisory, Origination and Acquisition Services

Offering Services

Asset Management Services

Accounting and Other Administrative Services

Stockholder Services

Financing Services

Disposition Services

Allocation of Property Opportunities

For more information regarding the factors that the Investment Committee may consider in allocating investment opportunities among our additional similar programs, please see “Conflicts of Interest – Our Affiliates’ Interests in Other Phoenix Entities – Allocation of Property Opportunities”.

Executive Officers of the Manager

As of the date of this offering circular, the executive officers of the Manager and their positions and offices are as follows:

W.L. “Perch” Nelson has served as President of the Manager since 2009. Perch Nelson’s achievements demonstrate his strengths in real estate development, acquisition and capital management. He served as Capital Asset Manager for Wyndham Hotels & Resorts charged with capital improvement budgets. At Wyndham, he was responsible for developing and executing the strategic re-positioning plans for the Garden, Hotel and Resort Divisions. Following the merger of Wyndham Hotels & Resorts and Patriot American Hospitality, Mr. Nelson also assumed the departmental responsibility of the Capital Management and Product Development for all Wyndham International’s brands. He was responsible for 200 hotels, but not only the Wyndham branded hotels but also the franchise products flagged by Hyatt, Radisson, Holiday Inn Select, Hampton Inn, Doubletree, and Marriott. Mr. Nelson, as head of the capital deployment area, managed post-merger growth in the annual development budget from $214 million to well over $300 million.

Mr. Nelson left Wyndham to acquire hotels for his own personal account. Using his own funds, Mr. Nelson successfully acquired and managed a small group of hotels. This served as additional exposure to the day- to-day management required to run a hotel. Post-acquisition, he oversaw hotel operations including management of the employees, revenue maximization, purchasing, customer relations, and human resources. Mr. Nelson, as the owner, had a hand in everything related to the operation of the hotel.

Mr. Nelson has over 30 years of experience in the Real Estate industry in acquisition, development and the asset management of commercial properties. Mr. Nelson achieved Dean’s list Honors at Southern Methodist University while pursuing a BA in economics.

Jay Anderson has served as Executive Vice President/Controller of the Manager since 2009. Prior to joining the Manager, Mr. Anderson started as a Controller with Wyndham International, working in both the downtown hotel and resort markets. He was soon promoted to Area Controller, overseeing a diverse portfolio of fifteen hotels and resorts in the North West and Mid-West, including The Buttes Resort, The Peaks, Carmel Valley Ranch, The Golden Door Spa, and the Boulders Resort. Jay soon moved to the corporate office in Dallas, responsible for maintaining their SAP and Hyperion Essbase systems. He eventually moved to Aimbridge Hospitality as a Director of Finance, where he was responsible for building their reporting and budgeting tools. As Aimbridge grew, Mr. Anderson was promoted to VP of Finance and Assistant Treasurer and took ownership for the daily cash management of over eighty hotels as well as all corporate reporting to ownership. Jay then became the VP of Information Systems, where he successfully migrated their reporting system to Alloso Technologies.

Investment Committee of the Manager

The Investment Committee will assist the Manager in fulfilling its oversight responsibilities by (1) considering and approving of each investment made by us, (2) establishing our investment guidelines and overseeing our investments, and the investment activity of other accounts and funds held for our benefit and (3) overseeing the investment activities of certain of our subsidiaries. The Investment Committee will consist of at least two members, each of whom will be appointed by the Manager, who will serve until such time as such Investment Committee member resigns or is replaced by the Manager, in its sole and absolute discretion. The Investment Committee is currently comprised of Messrs. Nelson and Anderson. See “Conflicts of Interest—Certain Conflict Resolution Measures—Our Policies Relating to Conflicts of Interest”.

Compensation of Executive Officers

We do not currently have any employees nor do we currently intend to hire any employees who will be compensated directly by us. Each of the executive officers of our sponsor also serves as an executive officer of the Manager. Each of these individuals receives compensation for his or her services, including services performed for us on behalf of the Manager, from the Manager. As executive officers of the Manager, these individuals will serve to manage our day-to-day affairs, oversee the review, selection and recommendation of investment opportunities, service acquired investments and monitor the performance of these investments to ensure that they are consistent with our investment objectives. Although we will indirectly bear some of the costs of the compensation paid to these individuals, through fees we pay to the Manager, we do not intend to pay any compensation directly to these individuals.

Limited Liability and Indemnification of the Manager and Others

Subject to certain limitations, the management agreement limits the liability of the Manager, its officers, members and affiliates for monetary damages and provides that we will indemnify and pay or reimburse reasonable expenses in advance of final disposition of a proceeding to the Manager, its officers, members and affiliates.

The management agreement provides that to the fullest extent permitted by applicable law the Manager, its officers, members and affiliates will not be liable to us. In addition, pursuant to the management agreement, we have agreed to indemnify the Manager, its officers, members and affiliates to the fullest extent permitted by law, against all expenses and liabilities (including judgments, fines, penalties, interest, amounts paid in settlement with the approval of the company and attorney’s fees and disbursements) arising from the performance of any of their obligations or duties in connection with their service to us or the management agreement, including in connection with any civil, criminal, administrative, investigative or other action, suit or proceeding to which any such person may hereafter be made party by reason of being or having been the Manager or one of the Manager’s directors or officers.

Insofar as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under the Securities Act, we have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Term and Removal of the Manager

The management agreement provides that the Manager will serve as our manager for an indefinite term, but that the Manager may be removed by us, or may choose to withdraw as manager, under certain circumstances.

Our board of directors may only remove the Manager at any time with 30 days’ prior written notice for “cause.” “Cause” is defined as:

Unsatisfactory financial performance does not constitute “cause” under the management agreement.

In the event of the removal of the Manager, the Manager will cooperate with us and take all reasonable steps to assist in making an orderly transition of the management function. The Manager will determine whether any succeeding manager possesses sufficient qualifications to perform the management function.

Holdings of our Shares

The Manager has committed to purchase $250,000 in Shares from us in a private placement, $10,000 of which has been purchased as of the date of this Offering Circular, 115,000 will be purchased on a date not later than the date of the initial closing of this offering and the other $125,000 will be purchased upon the termination of this offering.

MANAGEMENT COMPENSATION

The following information summarizes the forms and estimated amounts of compensation (some of which involve cost reimbursements) to be paid by the special purpose entities (“SPEs”) acquiring from Properties, or others, to the Manager and its affiliates. Much of this compensation will be paid regardless of the success or profitability of the acquired Properties. None of these fees were determined by arm’s length negotiations. Except as disclosed in this Offering Circular, neither the Company nor any of its Affiliates, directors, officers, employees, agents or counselors are participating, directly or indirectly, in any other compensation or remuneration with respect to this offering. The percentage of such fees that will be attributable to the Company will be equal to the Company’s percentage interest in the SPE making the applicable payment.

PRINCIPAL STOCKHOLDERS

The following table sets forth the beneficial ownership of our Shares as of the date of this Offering Circular for each person or group that holds more than 10% of our Shares, for each director and executive officer and for the directors and executive officers as a group. To our knowledge, each person that beneficially owns our Shares has sole voting and disposition power with regard to such Shares.

Unless otherwise indicated below, each person or entity has an address in care of our principal executive offices at 14643 Dallas Parkway, Suite 970, Dallas, Texas 75254.

EXPERIENCE OF PAH MANAGEMENT, LLC

PAH Management, LLC, an affiliate of the Manager, is the Operator; however, the Manager has the discretion to retain one or more additional or replacement entities to manage the operations at the Properties. The Operator currently manages 11 hotels owned by affiliates of the Manager, which are operated under the Hyatt, Marriott and Hilton brands and provides onsite management services at two of these hotels. The Operator will provide management, asset management, capital renovation supervision, accounting and consulting services for the Properties. The Operator provides onsite management services at four of these hotels, with onsite management services at the other seven currently being by Ambridge Hospitality LLC. The Manager is in the process of transitioning the onsite services at the seven hotels to the Operator, which is expected to be completed by the end of the third quarter of 2023. The management team of the Operator, which consists of the same personnel as the management team of the Manager, has over 185 years of collective experience operating hotels, including marketing, finance and Property management experience. The goal of the Operator is to enhance the value of each hotel it operates and increase owner profitability. The Operator will be paid an annual base management fee equal to 3% of aggregate gross revenues of the Properties.

PRIOR PERFORMANCE SUMMARY

The information presented in this section represents the historical operating results for real estate funds managed by the Manager, which are referred to herein as the “Programs.” Investors in our common stock should not assume that they will experience returns, if any, comparable to those experienced by investors in the Programs. Investors who purchase Shares will not thereby acquire any ownership in any of the entities to which the following information relates.

The returns to our stockholders will depend in part on the mix of assets in which we invest. As our portfolio may not mirror the portfolios of the Programs in all respects, the returns to our stockholders may vary from those generated by the Programs. The Programs were conducted through privately-held entities that were not subject to the fees and expenses associated with this offering or many of the laws and regulations to which we will be subject. As a result, you should not assume the past performance of the Programs will be indicative of our future performance.

The Programs

Overview

As of December 31, 2022, the Manager solely manages five real estate funds that have raised an aggregate of approximately $91.5 million of equity capital and have acquired a total of 17 hotel properties with an aggregate acquisition cost of approximately $200.6 million, including total debt of approximately $135.8 million. None of the investors in these funds has any responsibility or authority over the day-to-day operations of these funds, which are managed exclusively by the Manager. The investments are located throughout the United States and consist of limited service hotels. All investments were fee interests in properties owned directly or with joint venture partners with approximately 67.6% portfolio-wide leverage utilization. As of the date of this Offering Circular, none of the Programs has sold any of its assets to third parties and, prior to the onset of the COVID-19 pandemic, had not experienced any material adverse business developments or conditions. The effects of the COVID-19 pandemic had a significant adverse impact on the funds’ businesses, results of operations, financial condition and ability to comply with the terms if their financing documents. During the second half of 2020 and 2021, each of the funds fell out of compliance with one or more of the terms of its financing documents requiring each entity to enter into forbearance agreements and/or loan modifications in order to avoid default. As of the date of this Offering Circular, each of the funds is current on all payments per their modified loan agreements. None of the funds have failed to provide a liquidity event within the estimated or targeted time frame disclosed to investors at the time the equity interests in such funds were initially offered.

Lakemore-Phoenix Investment Platform A, LLC

Lakemore-Phoenix Investment Platform A, LLC (“Platform A”) closed on January 17, 2017, with $32.0 million of committed capital, including an aggregate of $3.2 invested American Hospitality Properties Fund I, LLC (“Fund I”) and American Hospitality Properties Fund III, LLC (“Fund”). Both Fund I and Fund III are managed by the Manager and are affiliates of the Company. Platform A acquired a portfolio of six hotel properties, consisting of an aggregate of 754 rooms, for a total purchase price of $80,250,000, including approximately $55.0 million of debt. The names and addresses of the hotels owned by Platform A are set forth below. There are a total of three investors in Platform A, and two those investors, Fund I and Fund III, each own 5% of Platform A. The Manager does not directly own any interest in Platform A.

Lakemore-Phoenix Investment Platform B, LLC

Lakemore-Phoenix Investment Platform B, LLC (“Platform B”) closed on July 14, 2017, with $44.0 million of committed capital, including $3.6 investment by Fund III. Platform B acquired seven hotel properties, consisting of an aggregate of 778 rooms, for a total purchase price of $101,700,000, including approximately $65.0 million of debt. The names and addresses of the hotel owned by Platform B are set forth below. There are a total of two investors in Platform B, and one of which, Fund III, owns 8.2% of Platform B. The Manager does not directly own any interest in Platform B.

APIP-C Borrower, LLC

APIP-C Borrower, LLC (“Platform C”) closed on August 16, 2018 with $9.8 million of committed capital. Platform C acquired two hotel properties, consisting of an aggregate of 163 rooms, for a total purchase price of $18,645,000, including approximately $15.8 million of debt. The names and addresses of the hotels owned by Platform C are set forth below. There are two investors in Platform C, and one of which, Fund III, owns 20% of Platform C. The Manager does not directly own any interest in Platform C.

American Hospitality Properties Fund I, LLC

Fund I closed in December 2014 with approximately $8.5 million of committed capital. Fund I invested approximately $1.6 million in Platform A and approximately $6.1 million in PAH Charlotte, LLC (“PAH Charlotte”) as partial consideration for the Hilton Doubletree Hotel in Charlotte, North Carolina. As of December 31, 2022, there are 151 investors in Fund I, and the Manager does not own any interest in Fund I.

American Hospitality Properties Fund III, LLC

American Hospitality Properties III, LLC (“Fund III”) closed in May 2019 with approximately $48.14 million of committed capital. Fund III invested approximately $1.6 million in Platform A, approximately $3.6 million in Platform B, approximately $2.0 million in Platform C and approximately $4.9 million in PAH Charlotte. In addition, Fund III invested approximately $4.9 million in the Residence Inn Cape Canaveral Hotel, located at 8959 Astronaut Boulevard, Cape Canaveral, Florida, which has 150 hotel rooms. As of December 31, 2022, there are 455 investors in Fund III, and the Manager does not own any interest in Fund III.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

American Hospitality Properties REIT II, Inc. was organized in the State of Delaware on March 10, 2023 to engage primarily in the acquisition and management of limited service hotels in the United States. We believe that the current hospitality real estate environment provides us the opportunity to acquire attractively priced hotel properties. We anticipate being able to increase the value of the Properties we acquire through applying sound acquisition policies and taking advantage of the disparity between the purchase price and the stabilized value and replacement costs of the properties. The Company expects to acquire the Properties at prices that are less than the stabilized values and replacement costs of the properties. The Manager, directly and through its oversight of the Operator, will apply aggressive expense reduction strategies to each Property. By doing so, the Manager expects to increase net revenues at each Property without any improvement in occupancy or room rates or gross revenues. The Company expects to generate positive cash flow from the Properties based on a number of factors, including reducing expenses, acquiring Properties in areas we believe are business destinations, operating the Properties under widely recognized brands and acquiring the Properties at prices below the current replacement costs. See “Description of Business.”

Operating Results

As of the date of this Offering Circular, we have not commenced operations. We expect to use substantially all of the net proceeds from this offering to invest in and manage a diverse portfolio of hotel properties. To meet our need for cash, we are attempting to raise money from this offering. The maximum aggregate amount of this offering will be required to fully implement our business plan. If we are unable to successfully generate revenue, we may quickly use up the proceeds from this offering and will need to find alternative sources. If we need additional cash and cannot raise it, we will either have to suspend operations until we do raise the cash, or cease operations entirely.

Liquidity and Capital Resources

We are dependent upon the net proceeds from this offering to conduct our proposed operations. We will obtain the capital required to purchase the Properties and conduct our operations from the proceeds of this offering, from secured or unsecured financings from banks and other lenders and from any undistributed funds from our operations. As of date of this Offering Circular, we have not any investments, and our total operating assets consist of $10,000 in cash. For information regarding the anticipated use of proceeds from this offering, see “Estimated Use of Proceeds.”

If we are unable to raise the maximum offering amount, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and the value of an investment in us will fluctuate with the performance of the specific assets we acquire. Further, we will have certain fixed operating expenses, including certain expenses as a publicly offered company, regardless of whether we are able to raise substantial funds in this offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions. To the extent that we have insufficient funds for maintenance and repair of the Properties, we may establish reserves from gross offering proceeds or out of cash flow from operations.

We currently have no outstanding debt. Once we have fully invested the proceeds of this offering, we expect our debt financing to be approximately 70% of the value of our assets. Our charter does not limit us from incurring debt.

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make certain payments to the Manager and its affiliates. During our organization and offering stage, these payments will include payments to the Manager for reimbursement of certain organization and offering expenses. During our acquisition and development stage, we expect to make payments to the Manager and its affiliates in connection with the selection and purchase of the Properties, the management of the Properties and costs incurred by the Manager and its affiliates in providing services to us. For a discussion of the compensation to be paid to the Manager and its affiliates, see “Management Compensation.”

We are highly dependent upon the success of this offering, as described herein. Therefore, the failure thereof would result in the need to seek capital from other resources such as incurring indebtedness, which would likely not be possible for the Company. However, if such financing will available, because we are a development stage company with no operations to date, we would likely have to pay additional costs in order to obtain such debt financing. If the Company cannot raise additional proceeds through a private placement of its equity or debt securities, or secure a loan, the Company would be required to cease business operations. As a result, stockholders would lose all of their investment.

There can be no assurance of the Company’s ability to accomplish its business strategy or that additional capital will be available to the Company. If so, the Company’s investment objective will be adversely affected and the Company may not be able to execute on its business plan. The Company currently has no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since the Company has no such arrangements or plans currently in effect, its inability to raise funds for the above purposes will have a severe negative impact on its ability to remain a viable company. There can be no assurance that additional capital will be available to the Company. If we are successful at raising capital by issuing more stock, or securities which are convertible into Shares of the Company, your investment will be diluted as a result of such issuance.

Plan of Operations

We intend to execute on our proposed business plan of acquiring limited service hotels throughout the United States. See “Description of Business.” The number of Properties that we will be able to acquire will depend on how quickly we are able to raise funds through this offering and the availability of debt financing. We expect the proceeds of this offering, together with funds from third party financings, will be sufficient for us to implement our business plan and that no additional equity, other than the proceeds of this offering, will need to be raised over the next six months in order to implement our business plan.

CONFLICTS OF INTEREST

We are subject to various conflicts of interest arising out of our relationship with the Manager and its affiliates. We discuss these conflicts below and conclude this section with a discussion of the corporate governance measures we have adopted to mitigate some of the risks posed by these conflicts.

Our Affiliates’ Interests in Other Phoenix American Entities

General

The officers and the key real estate professionals of the Manager, who perform services for us also perform such services for the Manager, are also officers, directors, managers, and/or key professionals of our sponsor and other Phoenix American entities. These persons have legal obligations with respect to those entities that are similar to their obligations to us. In the future, these persons and other affiliates of the Manager may organize other real estate programs and acquire for their own account real estate investments that may be suitable for us.

Allocation of Property Opportunities

We rely on the Manager’s executive officers and key real estate professionals to identify suitable investments. Other Phoenix American entities also rely on these same key real estate professionals. The Manager has in the past, and expects to continue in the future, to establish and sponsor additional offerings, and to continue to offer investment opportunities primarily through the Phoenix American platform, including offerings that will acquire or invest in commercial real estate investment. The Manager has previously organized, as of the date of this Offering Circular, the following similar programs:

Each of these programs is ongoing and none of these programs has passed the liquidation date that was disclosed in the offering document for each such program. As a result, the Manager has not liquidated any prior investment programs.

These additional programs have investment criteria that compete with us. If a sale, financing, investment or other business opportunity would be suitable for more than one program, the Investment Committee will allocate it according to the policies and procedures adopted by the Manager. Any allocation of this type may involve the consideration of a number of factors that the Investment Committee determines to be relevant. The factors that the members of the Investment Committee could consider when determining the entity for which an investment opportunity would be the most suitable include the following:

If, given all factors considered, a property is equally appropriate for more than one Phoenix American entity, the determining factor will be decided by which entity has had investable funds available for the longest period of time.

If a subsequent event or development causes any investment, in the opinion of the Investment Committee, to be more appropriate for another Phoenix American entity, they may offer the investment to such entity.

Except under any policies that may be adopted by the Manager, which policies will be designed to minimize conflicts among the Phoenix American programs, no Phoenix American program, including the Company, will have any duty, responsibility or obligation to refrain from:

In addition, any decisions by the Manager to renew, extend, modify or terminate an agreement or arrangement, or enter into similar agreements or arrangements in the future, may benefit one Phoenix American program more than another Phoenix American program or limit or impair the ability of any Phoenix American program to pursue business opportunities. In addition, third parties may require as a condition to their arrangements or agreements with or related to any one particular Phoenix American program that such arrangements or agreements include or not include another Phoenix American program, as the case may be. Any of these decisions may benefit one Phoenix American program more than another Phoenix American program.

Allocation of Our Affiliates’ Time

We rely on the Manager’s key real estate professionals, including Mr. Nelson, for the day-to-day operation of our business. Mr. Nelson, in his capacity as the Chief Executive Officer of the Manager, also, provider services to other Phoenix American programs. As a result of his interests in other Phoenix American programs, his obligations to other stockholders and the fact that he engages in and will continue to engage in other business activities on behalf of himself and others, Mr. Nelson will face conflicts of interest in allocating his time among us and other Phoenix American programs and other business activities in which he is involved. However, we believe that the Manager and its affiliates have sufficient real estate professionals to fully discharge their responsibilities to the Phoenix American programs for which they work.

Receipt of Fees and Other Compensation by the Manager and its Affiliates

The Manager and its affiliates will receive substantial fees from us, which fees will not be negotiated at arm’s length. These fees could influence the Manager’s advice to us as well as the judgment of affiliates of the Manager, some of whom also serve as the Manager’s officers and the key real estate professionals. Among other matters, these compensation arrangements could affect their judgment with respect to:

Duties Owed by Some of Our Affiliates to the Manager and the Manager’s Affiliates

The Manager’s officers and the key real estate professionals performing services on our behalf also perform such services to the following entities:

As a result, they owe duties to each of these entities and their equity holders. These duties may from time-to-time conflict with the duties that they owe to us.

Indemnification Agreements

We intend to enter into an indemnification agreement with each of our directors and executive officers. The indemnification agreements and our charter and bylaws require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law. See “Management — Limitations on Director and Officer Liability and Indemnification.”

Certain Conflict Resolution Measures

Independent Representative

If the Manager or its affiliates have a conflict of interest with us that is not otherwise covered by an existing policy we have adopted or a transaction is deemed to be a “principal transaction,” the Independent Representative will review and approve such transactions. Principal transactions are defined as transactions between the Manager or its affiliates, on the one hand, and us or one of our subsidiaries, on the other hand. The Manager is only authorized to execute principal transactions with the prior approval of the Independent Representative and in accordance with applicable law. Such prior approval may include but not be limited to pricing methodology for the acquisition of assets and/or liabilities for which there are no readily observable market prices.

Our Policies Relating to Conflicts of Interest

In addition to the provisions in the management agreement described below and the Manager’s investment allocation policies described above, we have adopted the following policies prohibiting us from entering into certain types of transactions with the Manager, its officers or any of its affiliates in order to further reduce the potential for conflicts inherent in transactions with affiliates.

Pursuant to these conflicts of interest policies, we may not engage in the following types of transactions unless such transaction is approved by the Independent Representative:

We may, however, purchase an investment from another Phoenix American entity in the event that such entities initially acquire an investment that is suitable for us at a time when we are unable to do so, with the intention of providing us the opportunity to acquire the investment at a later date when we are able to acquire the investment. We will not purchase investments from another Phoenix American entity in these circumstances without a determination by the Independent Representative that such transaction is fair and reasonable to us and at a price to us that is not materially greater than the cost of the asset to other Phoenix American entity.

These conflicts of interest policies may be amended at any time in the sole discretion of our board of directors.

Other Management Agreement Provisions Relating to Conflicts of Interest

The management agreement contains many other restrictions relating to conflicts of interest including the following:

Term of the Manager. The management agreement provides that the Manager will serve as our manager for an indefinite term, but that the Manager may be removed by us, or may choose to withdraw as manager, under certain circumstances. Our board of directors may remove the Manager at any time with 30 days’ prior written notice for “cause.” Unsatisfactory financial performance does not constitute “cause” under the management agreement. The Manager may withdraw as manager if we become required to register as an investment company under the Investment Company Act, with such withdrawal deemed to occur immediately before such event. In the event of the removal of the Manager, it will cooperate with us and take all reasonable steps to assist in making an orderly transition of the management function. The Manager will determine whether any succeeding manager possesses sufficient qualifications to perform the management function. See “Management—Term and Removal of the Manager.”

Other Transactions Involving Affiliates. Before engaging in a transaction involving an affiliate, the Manager must conclude that all other transactions between us and our sponsor, the Manager, any of their officers or directors, or any of their affiliates are fair and reasonable to us and on terms and conditions not less favorable to us than those available from unaffiliated third parties. See “Management—Investment Committee of the Manager.”

DESCRIPTION OF CAPITAL STOCK AND CERTAIN PROVISIONS OF DELAWARE LAW, OUR CHARTER AND BYLAWS