General

Condor Hospitality Trust, Inc., formerly Supertel Hospitality, Inc., was incorporated in Virginia on August 23, 1994. We reincorporated in Maryland on November 19, 2014. We are a self-administered real estate investment trust (REIT) for federal income tax purposes. References to “Company” “we”, “our”, and “us”, herein refer to Condor Hospitality Trust, Inc., including as the context requires, its direct and indirect subsidiaries.

The Company, through its wholly owned subsidiaries, Supertel Hospitality REIT Trust and E&P REIT Trust owns a controlling interest in Supertel Limited Partnership (“SLP”) and E&P Financing Limited Partnership (“E&P LP”). The Company owns 45 properties as follows:

All of the Company’s interests in 38 properties with the exception of furniture, fixtures and equipment on 34 properties held by TRS Leasing, Inc. and its subsidiaries are held directly or indirectly by E&P LP, SLP or Solomon’s Beacon Inn Limited Partnership (SBILP) (collectively, the “Partnerships”).

The Company’s interests in seven properties are held directly by either SPPR-Hotels, LLC (SHLLC), SPPR-South Bend, LLC (SSBLLC), or SPPR-Dowell, LLC (SDLLC).

The Company, through Supertel Hospitality REIT Trust, is the sole general partner in SLP and at September 30, 2015, owned approximately 93% of the partnership interests in SLP. SLP is the general partner in SBILP. At September 30, 2015, SLP and the Company owned 99% and 1% interests in SBILP, respectively, and the Company owned 100% of Supertel Hospitality Management, Inc, SPPR Holdings, Inc. (SPPRHI), and SPPR-Dowell Holdings, Inc. (SDHI). SLP and SPPRHI owned 99% and 1% of SHLLC, respectively, SLP owned 100% of SSBLLC and SLP and SDHI owned 99% and 1% of SDLLC, respectively.

As of September 30, 2015, the Company owned 45 limited service hotels, 42 of which are included in continuing operations. All of the hotels are leased to our wholly owned taxable REIT subsidiary, TRS Leasing, Inc. (“TRS”), and its wholly owned subsidiaries (collectively “TRS Lessee”), and are managed by eligible independent contractors: Hospitality Management Advisors, Inc. (“HMA”), Strand Development Company, LLC (“Strand”), Kinseth Hotel Corporation (“Kinseth”) and Cherry Cove Hospitality Management, LLC (“Cherry Cove”).

HMA manages 11 Company hotels in Louisiana, Kentucky, Indiana, and Florida. Strand manages the Company’s three economy extended-stay hotels in Georgia and South Carolina as well as 12 additional Company hotels located in Maryland, North Carolina, Pennsylvania, Tennessee, Virginia, and West Virginia. Kinseth manages 18 Company hotels in seven states primarily in the Midwest. Cherry Cove manages one Company hotel in Maryland. Each of the management agreements expired on June 30, 2015 and the new agreements were effective on July 1, 2015 under the new terms described below. The management agreements renew for additional terms of one year unless either party to the agreement gives the other party written notice of termination at least 90 days before the end of a term.

During the second quarter of 2015, the Company negotiated new agreements with the existing management companies. Beginning July 1, 2015, each of HMA, Strand, Kinseth, and Cherry Cove receives a monthly management fee, with respect to the hotels they manage, equal to 3.0% of gross hotel revenue. Incentive fees may be earned for performance above budgeted expectations up to a maximum payout of 2.0% of gross hotel revenue.

The monthly management fee under the prior agreements was 3.5% of gross hotel revenue and 2.25% of hotel net operating income (“NOI”). NOI is equal to gross hotel revenue less operating expenses (exclusive of management fees, certain insurance premiums and employee bonuses, and personal and real property taxes).

The management agreements generally require TRS Lessee to fund debt service, working capital needs, capital expenditures and third-party operating expenses for the management companies excluding those expenses not related to the operation of the hotels. TRS Lessee is responsible for obtaining and maintaining insurance policies with respect to the hotels.

The hotel industry is seasonal in nature. Generally, occupancy rates, revenues and operating results for hotels operating in the geographic areas in which we operate are greater in the second and third quarters of the calendar year than in the first and fourth quarters, with the exception of our hotel located in Florida, which experiences peak demand in the first and fourth quarters of the year.