Mortgage Notes Payable	9 Months Ended
Sep. 30, 2022
Mortgage Notes Payable
Mortgage Notes Payable	Note 4 – Mortgage Notes Payable Included in mortgage notes payable at September 30, 2022, is a $12,853,374 mortgage payable secured by the Staybridge Suites St. Petersburg (the “St. Petersburg Note”), a $10,863,886 mortgage payable secured by the Springhill Suites Wilmington (the “Wilmington Note”), a $15,092,000 mortgage payable secured by the Hotel Indigo Traverse City (the “TCI Note”), a $16,936,901 mortgage payable secured by the Hilton Garden Inn Providence (the “HGI Note”) and a $9,270,226 mortgage payable secured by the Cherry Tree Inn (the “CTI Note”). The mortgage notes payable each contain customary affirmative covenants, negative covenants and events of default. The St. Petersburg Note required monthly interest payments at 4.34% through August 1, 2020, and subsequent to August 1, 2020, requires monthly principal and interest payments of $66,255 through July 1, 2024, the maturity date. The St. Petersburg Note is collateralized by the Staybridge Suites St. Petersburg, including equipment, and has been guaranteed by TH Investment Holdings II, LLC, an affiliate of the Sponsor. All required payments have been made as of September 30, 2022. As a result of the negative impact of the COVID-19 pandemic, the Staybridge Suites St. Petersburg failed to maintain the required debt service coverage ratio as defined in the St. Petersburg Note loan documents starting with the period ended June 30, 2020. The lender approved a series of modifications of the debt service coverage tests for periods through December 31, 2021. Debt service coverage tests resumed on January 1, 2022, and as of September 30, 2022, the Staybridge Suites St. Petersburg is in compliance. The Wilmington Note required monthly interest payments at 4.49% through June 1, 2020, and subsequent to June 1, 2020, requires monthly principal and interest payments of $57,026 through June 1, 2024, the maturity date. The Wilmington Note is collateralized by the Springhill Suites Wilmington, including equipment, and has been guaranteed by TH Investment Holdings II, LLC, an affiliate of the Sponsor. As of September 30, 2022, the Springhill Suites Wilmington was in compliance with its applicable covenants and all required payments have been made as agreed. The TCI Note bears interest at the Secured Overnight Financing Rate (“SOFR”) plus a SOFR rate margin of 2.50% at September 30, 2022. The TCI Note provides for interest only monthly payments until maturity. The principal amount will be due on the maturity date, which was initially August 15, 2021; however, it was extended for two one-year periods to August 15, 2023. The maturity date may be extended by an additional one-year period, provided no default exists. The TCI Note is collateralized by the Hotel Indigo Traverse City, including equipment, and has been guaranteed by TH Investment Holdings II, LLC, an affiliate of the Sponsor. As of September 30, 2022, the Hotel Indigo Traverse City was compliant with its loan obligations, including applicable covenants, and all required payments have been made as agreed. The HGI Note requires monthly interest payments at a fixed rate of 4.25% through February 15, 2023 and monthly principal and interest payments based on a 30-year amortization schedule thereafter to maturity on May 15, 2025. The HGI Note is collateralized by the Hilton Garden Inn Providence, including equipment, and has been guaranteed by the Company. On April 23, 2020, the Operating Partnership, through its subsidiary, and the Company entered into an Omnibus Amendment and Reaffirmation Agreement (the "Hilton Garden Inn Loan Modification Agreement") with the lender, to amend the terms of the mortgage loan and loan documents on the HGI Note. Pursuant to the Hilton Garden Inn Loan Modification Agreement, interest only payments that were due on the six consecutive payment dates starting with the payment scheduled for April 2020 are deferred until the date that is twelve months after the date each payment was originally due. The HGI Note resumed interest payments in October 2020. As of September 30, 2022, the deferred interest on the HGI Note has been repaid in full. As of September 30, 2022, the Hilton Garden Inn Providence was compliant with the above referenced loan arrangements. The CTI Note requires monthly interest payments at a fixed rate of 3.91% through November 23, 2023 and subsequent to November 23, 2023, monthly principal and interest payments of $52,601 through November 23, 2026, the maturity date. The CTI Note is collateralized by the Cherry Tree Inn & Suites, including equipment. All required payments have been made as of September 30, 2022. Annual compliance testing will commence as of December 31, 2022. In addition to the $9,270,226 outstanding as of September 30, 2022, the CTI Note allows for an additional $729,774 in borrowings for construction advances. At the time of this filing, the Company expects that $279,774 of these available borrowings will be utilized in the coming months. Although the Company has taken steps to enhance its ability to maintain sufficient liquidity, as noted here and elsewhere in this Quarterly Report on Form 10-Q, a protracted negative economic impact resulting from the COVID-19 pandemic, inflation and rising interest rates may cause increased pressure on the Company's ability to satisfy its mortgage loan covenants. Interest expense on mortgage notes payable for the three months ended September 30, 2022 and 2021 was $729,776 and $636,582, respectively. Interest expense on mortgage notes payable for the nine months ended September 30, 2022 and 2021 was $2,013,631 and $1,912,945, respectively. Also included in mortgage notes payable as of September 30, 2022 is $167,109 of net deferred financing costs and debt discounts and premiums. For the three months ended September 30, 2022 and 2021, the Company amortized $2,438 and $3,067, respectively, of net deferred financing costs and debt discounts and premiums as interest expense. For the nine months ended September 30, 2022 and 2021, the Company amortized $20,875 and $1,876, respectively, of net deferred financing costs and debt discounts and premiums as interest expense.

Mortgage Notes Payable

9 Months Ended

Sep. 30, 2022

Note 4 – Mortgage Notes Payable

Included in mortgage notes payable at September 30, 2022, is a $12,853,374 mortgage payable secured by the Staybridge Suites St. Petersburg (the “St. Petersburg Note”), a $10,863,886 mortgage payable secured by the Springhill Suites Wilmington (the “Wilmington Note”), a $15,092,000 mortgage payable secured by the Hotel Indigo Traverse City (the “TCI Note”), a $16,936,901 mortgage payable secured by the Hilton Garden Inn Providence (the “HGI Note”) and a $9,270,226 mortgage payable secured by the Cherry Tree Inn (the “CTI Note”). The mortgage notes payable each contain customary affirmative covenants, negative covenants and events of default.

The St. Petersburg Note required monthly interest payments at 4.34% through August 1, 2020, and subsequent to August 1, 2020, requires monthly principal and interest payments of $66,255 through July 1, 2024, the maturity date. The St. Petersburg Note is collateralized by the Staybridge Suites St. Petersburg, including equipment, and has been

guaranteed by TH Investment Holdings II, LLC, an affiliate of the Sponsor. All required payments have been made as of September 30, 2022.

As a result of the negative impact of the COVID-19 pandemic, the Staybridge Suites St. Petersburg failed to maintain the required debt service coverage ratio as defined in the St. Petersburg Note loan documents starting with the period ended June 30, 2020. The lender approved a series of modifications of the debt service coverage tests for periods through December 31, 2021. Debt service coverage tests resumed on January 1, 2022, and as of September 30, 2022, the Staybridge Suites St. Petersburg is in compliance.

The Wilmington Note required monthly interest payments at 4.49% through June 1, 2020, and subsequent to June 1, 2020, requires monthly principal and interest payments of $57,026 through June 1, 2024, the maturity date. The Wilmington Note is collateralized by the Springhill Suites Wilmington, including equipment, and has been guaranteed by TH Investment Holdings II, LLC, an affiliate of the Sponsor. As of September 30, 2022, the Springhill Suites Wilmington was in compliance with its applicable covenants and all required payments have been made as agreed.

The TCI Note bears interest at the Secured Overnight Financing Rate (“SOFR”) plus a SOFR rate margin of 2.50% at September 30, 2022. The TCI Note provides for interest only monthly payments until maturity. The principal amount will be due on the maturity date, which was initially August 15, 2021; however, it was extended for two one-year periods to August 15, 2023. The maturity date may be extended by an additional one-year period, provided no default exists. The TCI Note is collateralized by the Hotel Indigo Traverse City, including equipment, and has been guaranteed by TH Investment Holdings II, LLC, an affiliate of the Sponsor. As of September 30, 2022, the Hotel Indigo Traverse City was compliant with its loan obligations, including applicable covenants, and all required payments have been made as agreed.

The HGI Note requires monthly interest payments at a fixed rate of 4.25% through February 15, 2023 and monthly principal and interest payments based on a 30-year amortization schedule thereafter to maturity on May 15, 2025. The HGI Note is collateralized by the Hilton Garden Inn Providence, including equipment, and has been guaranteed by the Company.

On April 23, 2020, the Operating Partnership, through its subsidiary, and the Company entered into an Omnibus Amendment and Reaffirmation Agreement (the "Hilton Garden Inn Loan Modification Agreement") with the lender, to amend the terms of the mortgage loan and loan documents on the HGI Note. Pursuant to the Hilton Garden Inn Loan Modification Agreement, interest only payments that were due on the six consecutive payment dates starting with the payment scheduled for April 2020 are deferred until the date that is twelve months after the date each payment was originally due. The HGI Note resumed interest payments in October 2020. As of September 30, 2022, the deferred interest on the HGI Note has been repaid in full. As of September 30, 2022, the Hilton Garden Inn Providence was compliant with the above referenced loan arrangements.

The CTI Note requires monthly interest payments at a fixed rate of 3.91% through November 23, 2023 and subsequent to November 23, 2023, monthly principal and interest payments of $52,601 through November 23, 2026, the maturity date. The CTI Note is collateralized by the Cherry Tree Inn & Suites, including equipment. All required payments have been made as of September 30, 2022. Annual compliance testing will commence as of December 31, 2022. In addition to the $9,270,226 outstanding as of September 30, 2022, the CTI Note allows for an additional $729,774 in borrowings for construction advances. At the time of this filing, the Company expects that $279,774 of these available borrowings will be utilized in the coming months.

Although the Company has taken steps to enhance its ability to maintain sufficient liquidity, as noted here and elsewhere in this Quarterly Report on Form 10-Q, a protracted negative economic impact resulting from the COVID-19 pandemic, inflation and rising interest rates may cause increased pressure on the Company's ability to satisfy its mortgage loan covenants.

Interest expense on mortgage notes payable for the three months ended September 30, 2022 and 2021 was $729,776 and $636,582, respectively. Interest expense on mortgage notes payable for the nine months ended September 30, 2022 and 2021 was $2,013,631 and $1,912,945, respectively.

Also included in mortgage notes payable as of September 30, 2022 is $167,109 of net deferred financing costs and debt discounts and premiums. For the three months ended September 30, 2022 and 2021, the Company amortized $2,438 and $3,067, respectively, of net deferred financing costs and debt discounts and premiums as interest expense. For the nine months ended September 30, 2022 and 2021, the Company amortized $20,875 and $1,876, respectively, of net deferred financing costs and debt discounts and premiums as interest expense.