Executive Summary

Q1 2019 revenue rose sharply to $3.55M from $0.11M in Q1 2018, driven by ramping operations across three select‑service hotels; operating income was $0.14M vs a prior‑year operating loss, while net loss attributable to common stockholders was $(0.75)M vs $(0.55)M .
Operating cash flow turned positive at $0.64M in Q1 2019, and regular quarterly distributions of $0.195M were funded entirely from operations (vs. prior reliance on affiliate funding) .
The Board authorized Q1 distribution payments on April 29, 2019 at a daily rate of $0.0016438356 per K/K‑I/K‑T share (6.0% annualized on $10.00 par for K/K‑T; $9.30 for K‑I), paid May 1, 2019 .
Balance sheet de‑risking actions included $1.74M mortgage principal prepayment, $1.20M sponsor note prepayment, and ongoing swap hedging of the TCI mortgage; seasonality suggests stronger Q2/Q3 revenue cadence (a potential near‑term catalyst) .

What Went Well and What Went Wrong

What Went Well
- Revenue ramp and return to positive operating income: “We expect that room revenue will increase in future periods as a result of future acquisitions of hotel properties and owning the current portfolio for a full year reporting period.”
- Distributions funded by operations in Q1: 100% of Q1 distributions were sourced from cash flows provided by operations (vs. 100% from affiliate loans in Q1 2018) .
- Liability management: $1.744M mortgage principal and $1.200M affiliate loan were prepaid in Q1; TCI note is hedged via a $15.092M interest rate swap with a 2.80% strike .
What Went Wrong
- Net loss persists despite operational scaling: Q1 2019 net loss attributable to common stockholders was $(0.75)M (vs. $(0.55)M in Q1 2018) as interest expense rose materially with higher debt levels .
- Higher financing and derivative costs: Interest expense increased to $0.615M (vs. $0.009M), and the company recorded a $0.069M unrealized loss on the interest rate swap .
- Elevated expenses: Corporate G&A rose to $0.464M (vs. $0.187M), and asset management fees to affiliates increased to $0.087M (vs. $0.0005M) as the platform scales .

Financial Results

Metric	Q1 2018	Q3 2018	Q1 2019
Total Revenues ($)	$112,750	$3,932,477	$3,549,511
Rooms Revenue ($)	$110,853	$3,344,628	$3,170,512
Food & Beverage Revenue ($)	$833	$514,332	$286,738
Other Operating Revenue ($)	$1,064	$73,517	$92,261
Operating Income (Loss) ($)	$(518,806)	$331,277	$135,103
Interest Expense ($)	$9,035	$475,709	$614,696
Unrealized Loss on Interest Rate Swap ($)	$0	$0	$68,743
Depreciation & Amortization ($)	$11,630	$430,292	$544,401
Net Loss Attributable to Common ($)	$(550,085)	$(300,472)	$(749,178)
Net Loss per Class K Share (Basic/Diluted)	$(0.55)	$(0.17)	$(0.34)
Weighted Avg Class K Shares	694,052	1,210,468	1,522,595

Notes:

Immediate prior quarter (Q4 2018) standalone results were not disclosed in quarterly form; FY 2018 is available in the 10‑K .

KPIs

KPI	Q1 2019
Hotel Count	3 select‑service hotels
Total Rooms	346 rooms (120 Wilmington, 119 St. Petersburg, 107 Traverse City)
Cash from Operations ($)	$640,231
Distributions Paid ($)	$194,978 (cash $193,802; DRIP $1,176)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Regular Distribution Rate (per K/K‑I/K‑T share per day)	Q1 2019 payout	Maintain $0.0016438356 (K/K‑I; K‑T previously lower)	$0.0016438356 for K, K‑I, K‑T (paid May 1)	Maintained (K/K‑I); Raised for K‑T vs prior K‑T rate implied in Jan accrual
2019 Capex – Hotel Indigo Traverse City	FY 2019	~$808,000 plan indicated	~$808,000 (franchise PIP)	Maintained
TCI Note Interest‑Only Status	Through maturity if paydown met	Interest‑only if $2.744M paydown occurs	Paydown completed; IO through maturity confirmed	Achieved prerequisite
Sponsor Promissory Note ($6.6M original)	Due Aug 2019	Anticipated prepayment with offering proceeds; extension available	$5.4M outstanding at 3/31; extension available/anticipated if needed	Maintained flexibility

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2018)	Current Period (Q1 2019)	Trend
Seasonality	Portfolio expected to benefit from industry seasonality; ramping operations	“Given the geographical location… Q1 produces lower revenues than anticipated for Q2 and Q3.”	Stronger Q2/Q3 expected
Distribution Funding	Policy to refrain from funding distributions with offering proceeds; affiliates funded early distributions	Q1 distributions funded 100% from operations	Improving sustainability
Leverage & Hedging	TCI note swap (notional $15.092M, 2.80% strike) initiated; debt growth from acquisitions	Swap liability $215,433; unrealized loss $68,743; continued debt prepayments	Managing rate risk; derivative volatility
One‑time Events	Wilmington hurricane expense accrued in Q3	No hurricane‑related costs cited in Q1	Normalized operations
Operating Expense Discipline	Platform costs rising with ramp	G&A and affiliate fees higher; Board justified “Excess Amount” as unusual/non‑recurring during build‑out	Scaling, with oversight

Management Commentary

“We will elect to be taxed as, and currently qualify as, a REIT… commencing with our taxable year ended December 31, 2018.”
“Given the geographical location of our current portfolio… we expect that the results of operations for the three months ended March 31, 2019 will produce lower revenues than… second and third quarters of 2019.”
“Our board… has adopted a policy to refrain from funding distributions with offering proceeds; instead, we plan to fund distributions from cash flows from operations…”
“We anticipate that adequate cash will be generated from operations… including repayment of the $5,400,000 unsecured note… we have the ability and intent to extend the maturity date.”

Q&A Highlights

Not applicable; no earnings call transcript was filed for the period in the company’s documents.

Estimates Context

Wall Street consensus estimates from S&P Global were unavailable for PRXA for Q1 2019 (limited analyst coverage for a publicly registered, non‑listed REIT). As a result, no EPS/revenue estimate comparisons can be provided.

Key Takeaways for Investors

Early‑stage, publicly registered, non‑listed REIT scaling operations across three select‑service hotels; portfolio positioned for seasonally stronger Q2/Q3 performance .
Strong top‑line ramp with Q1 2019 revenue at $3.55M and a swing to positive operating income; however, higher interest and platform costs kept net loss at $(0.75)M .
Operating cash flow turned positive ($0.64M), and distributions were funded entirely from operations (a positive shift vs. Q1 2018 reliance on affiliate loans) .
Liability actions (mortgage and sponsor note prepayments) and ongoing interest rate swap hedging indicate active balance sheet management; watch derivative P&L volatility and interest expense trajectory .
2019 capex (~$808K) at TCI under the franchise property improvement plan should support asset quality and revenue durability into peak season .
Continued offering activity and share issuance may fund operations and deleveraging but can dilute per‑share metrics; monitor capital raising cadence and fee accruals to affiliates .
Near‑term trading implications: seasonal tailwinds and operating cash coverage of distributions are positives; medium‑term thesis hinges on disciplined expense control, deleveraging, and stabilizing derivative impacts on earnings .

PROCACCIANTI HOTEL REIT, INC. (PRXA)·Q1 2019 Earnings Summary