Procaccianti Hotel Reit 424B3 Prospectus supplement

Filed Pursuant to Rule 424(b)(3)

Registration No. 333- 217578

PROCACCIANTI HOTEL REIT, INC.
SUPPLEMENT NO. 3 DATED MAY 28, 2019
TO THE PROSPECTUS DATED APRIL 30, 2019

This Supplement No. 3 supplements, and should be read in conjunction with, our prospectus dated April 30, 2019, and Supplement No. 2 to our prospectus dated May 15, 2019. Terms used and not otherwise defined in this Supplement No. 3 shall have the same meanings as set forth in our prospectus.

The purpose of this Supplement No. 3 is to describe the following:

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the status of our initial public offering (the “Offering”);

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our board of directors’ determination of an updated estimated per share net asset value (“NAV”) of each of the Company’s K-I Shares, K Shares, K-T Shares, A Shares and B Shares;

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updates to our the section of our prospectus captioned “Risk Factors”;

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an update to the section of our prospectus captioned “Prospectus Summary — Terms of the Offering”; and

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a revised form of subscription agreement.

Status of this Offering

Our registration statement on Form S-11 for our initial public offering, or the Offering, of $550,000,000 of shares of Class K common stock, or K Shares, Class K-I common stock, or K-I Shares, and Class K-T common stock, or K-T Shares, consisting of up to $500,000,000 of K Shares, K-I Shares and K-T Shares in our primary offering and up to $50,000,000 of K Shares, K-I Shares and K-T Shares pursuant to our distribution reinvestment plan, was declared effective by the U.S. Securities and Exchange Commission, or SEC, on August 14, 2018. As of May 22, 2019, we had accepted investors’ subscriptions for and issued approximately 607,192 K Shares, 170,044 K-I Shares, and 4,050 K-T Shares in the primary portion of this Offering, resulting in receipt of gross proceeds of approximately $6,049,971, $1,583,650, and $40,500, respectively, for total gross proceeds in the primary portion of this Offering of approximately $7,674,121. As of May 22, 2019, we had issued approximately 336 K Shares and 427 K-I Shares pursuant to our DRIP, resulting in gross proceeds pursuant to our DRIP of approximately $3,190 and $4,060, respectively.

As previously disclosed, we terminated our private offering of up to $150,000,000 in K Shares and Units (a “Unit” consists of four K Shares and one A Share) prior to the SEC effective date of our Registration Statement on August 14, 2018. At the termination of our private offering, we had received aggregate gross offering proceeds of approximately $15,582,755 from the sale of approximately 1,253,617 K Shares and 318,409 shares of Class A common stock, or A Shares, which includes 295,409 A Shares purchased by TPG Hotel REIT Investor, LLC, an affiliate of our advisor, to fund organizational and offering expenses associated with the K Shares and Units sold in our private offering. Further, TPG Hotel REIT Investor, LLC purchased an additional $1,500,000 in A Shares on October 26, 2018 pursuant to a private placement pursuant to Section 4(a)(2) of the Securities Act.

Therefore, as of May 22, 2019, we had received total gross proceeds of approximately $24,764,126 from the sale of K Shares, K-I Shares, K-T Shares and A Shares in all offerings.

Determination of the Updated Estimated Per Share NAVs

The following information supplements, and should be read in conjunction with, all discussions contained in our prospectus regarding our calculation of an estimated per share NAV:

On May 23, 2019, our board of directors (the “Board”), at the recommendation of the Audit Committee of the Board (the “Committee”), comprised solely of independent directors, unanimously approved and established the estimated per share NAV of $10.00 (the “K Share Estimated Per Share NAV”) of each of the shares of the Company’s K-I Shares, K Shares and K-T Shares, of $3.97 (the “A Share Estimated Per Share NAV”) of the Company’s A Shares and of $0.00 (the “B Share Estimated Per Share

NAV”, collectively with the K Share Estimated Per Share NAV and A Share Estimated Per Share NAV, the “Estimated Per Share NAVs”) of the Company’s shares of Class B capital stock, or B Shares. The Estimated Per Share NAVs are each based on the estimated value of the Company’s assets less the estimated value of the Company’s liabilities, divided by the approximate number of shares of a particular class outstanding on a fully diluted basis, calculated as of March 31, 2019 (the “Valuation Date”). We are providing these Estimated Per Share NAVs to assist broker-dealers in connection with their obligations under National Association of Securities Dealers Conduct Rule 2340, as required by the Financial Industry Regulatory Authority (“FINRA”), with respect to customer account statements. This valuation was performed in accordance with the provisions of Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives (the “IPA”) in April 2013 (the “IPA Valuation Guidelines”), in addition to guidance from the U.S. Securities and Exchange Commission (the “SEC”). We believe that there were no material changes between the Valuation Date and the date of this filing that would impact the Estimated Per Share NAVs.

The Committee, pursuant to authority delegated by the Board, was responsible for the oversight of the valuation process, including the review and approval of the valuation process and methodology used to determine our Estimated Per Share NAVs, the consistency of the valuation and appraisal methodologies with real estate industry standards and practices and the reasonableness of the assumptions used in the valuations and appraisals.

The Estimated Per Share NAVs were determined after consultation with our advisor, Procaccianti Hotel Advisors, LLC (“PHA,” or, alternatively, the “Advisor”), and Robert A. Stanger & Co, Inc. (“Stanger”), an independent third-party valuation firm. The engagement of Stanger was approved by the Committee. Stanger prepared appraisal reports (collectively, the “Appraisal Reports”) that summarized key information and assumptions and provided an appraised value for each of the three properties (collectively, the “Appraised Properties”) in our portfolio as of March 31, 2019. Stanger also prepared a NAV report (the “NAV Report”) that estimates the NAV per share of each of our K-I Shares, K Shares, K-T Shares, A Shares, and B Shares. The NAV Report relied upon: (i) the Appraisal Reports for the Appraised Properties; (ii) Stanger’s estimate of our secured notes payable; (iii) Stanger’s estimate of the six percent per annum dividend rate on a stated value of $10.00 per share due to holders of K Shares, K-I Shares and K-T Shares (the “K Share Hurdle”) as of March 31, 2019; and (iv) the Advisor’s estimate of the value of our other assets and liabilities, to calculate each of the Estimated Per Share NAVs of our common and capital stock, and such other reviews as deemed necessary by Stanger. The process for estimating the value of our assets and liabilities was performed in accordance with the provisions of the IPA Valuation Guidelines.

Upon the Committee’s receipt and review of the Appraisal Reports and the NAV Report (collectively, the “Reports”), the Committee recommended to the Board: (i) $10.00 as the estimated per share NAV per K-I Share; (ii) $10.00 as the estimated per share NAV per K Share; (iii) $10.00 the estimated per share NAV per K-T Share; (iv) $3.97 as the estimated per share NAV per A Share; and (v) $0.00 as the estimated per share NAV per B Share, as of March 31, 2019. Upon the Board’s receipt and review of the Appraisal Reports and recommendation of the Committee, the Board approved the foregoing values as our Estimated Per Share NAVs.

The table below sets forth the calculation of our Estimated Per Share NAVs as of March 31, 2019, as well as the comparable calculation as of February 28, 2018. Certain amounts are reflected net of noncontrolling interests, as applicable. The “components of NAV” for each of March 31, 2019 and February 28, 2018 in the tables below differ due to the fact that we did not own any hotel properties as of February 28, 2018.

The Board determined that no updates to the offering prices of the K Shares, K-I Shares and K-T Shares in our public offering were required.

Components of NAV	As of March 31, 2019
Real Estate		$	71,130,000
Mortgage Notes Payable			(39,341,559)
Other Assets			6,155,891
Other Liabilities(1)			(8,512,002)
Noncontrolling Interest			(10,265,241)
NAV		$	19,167,090

(1)

Includes deferred asset management fees, acquisition fees and accrued interest.

	K-I Shares(1)			K Shares(1)			K-T Shares(1)			A Shares			B Shares
NAV		$	665,173		$	16,637,838		$	5,100		$	1,858,978		$	0
Shares Outstanding			66,517			1,663,571			510			468,410			125,000
NAV Per Share		$	10.00		$	10.00		$	10.00		$	3.97		$	0.00

(1)

In general, because the proceeds from the sale of A Shares are used to pay organization and offering expenses of K Shares, K-I Shares and K-T Shares, the value of each of the K Shares, K-I Shares and K-T Shares is higher than if such shares paid their associated organization and offering expenses.

Components of NAV	As of February 28, 2018
Cash		$	7,176,528
Due From Related Parties(1)			300,200
Accrued Expenses			(144,505)
Loan Payable to PHA for Prior Distributions Funded			(94,194)
I Shares Accumulated, Accrued and Unpaid Distributions			—
K Shares Accumulated, Accrued and Unpaid Distributions			(61,479)
T Shares Accumulated, Accrued and Unpaid Distributions			—
A Shares Accumulated, Accrued and Unpaid Distributions(2)			(68,486)
NAV		$	7,108,064

(1)

$300,000 represents an accounts receivable from TPG Hotel REIT Investor, LLC for its capital commitment of A Shares. TPG Hotel REIT Investor, LLC made the $300,000 capital contribution on March 30, 2018. In addition, $100 in each of K-I and K-T shares were accrued as an accounts receivable, which will be contributed by TPG Hotel REIT Investor, LLC once the offering commences.

(2)

Represents amounts available for distribution after payment of the accumulated, accrued and unpaid distributions to holders of K Shares, K-I Shares and K-T Shares. Accumulated, accrued and unpaid distributions on A Shares totaled $126,004 as of the Valuation Date.

Note:

Estimated NAV Per Share:	K-I Shares(1)			K Shares(1)			K-T Shares(1)			A Shares			B Shares
NAV		$	100		$	7,107,864		$	100		$	0		$	0
Shares Outstanding			10			710,786			10			300,410			125,000
NAV Per Share		$	10.00		$	10.00		$	10.00		$	0.00		$	0.00

(1)

Methodology and Key Assumptions

In determining the Estimated Per Share NAVs, the Board considered the recommendation of the Committee, the Reports provided by Stanger and information provided by the Advisor. Our goal in calculating the Estimated Per Share NAVs is to arrive at a value that is reasonable and supportable using what the Committee and the Board each deems to be appropriate valuation methodologies and assumptions.

FINRA’s current rules provide no guidance on the methodology an issuer must use to determine its estimated per share NAV. As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated per share NAV, and these differences could be significant. The Estimated Per Share NAVs are not audited and do not represent the fair value of our assets less our liabilities according to U.S. generally accepted accounting principles (“GAAP”), nor do they represent a liquidation value of our assets and liabilities or the amount that shares of our common stock would trade at on a national securities exchange. The estimated asset values may not, however, represent current market value or book value. The estimated value of the Appraised Properties do not necessarily represent the value we would receive or accept if the assets were marketed for sale. The Estimated Per Share NAVs do not reflect a discount for the fact that we are externally managed, nor do they reflect a real estate portfolio premium/discount compared to the sum of the individual property values. The Estimated Per Share NAVs also do not take into account estimated disposition costs and fees for real estate properties that are not held for sale.

Independent Valuation Firm

Stanger was selected by the Committee to appraise and provide a value on the three Appraised Properties. Stanger is engaged in the business of appraising commercial real estate properties and is not affiliated with us or the Advisor. The compensation we paid to Stanger related to the valuation is based on the scope of work and not on the appraised values of our real estate properties. The appraisals were performed in accordance with the Code of Ethics and the Uniform Standards of Professional Appraisal Practice, or USPAP, the real estate appraisal industry standards created by The Appraisal Foundation. The Appraisal Reports were reviewed, approved, and signed by an individual with the professional designation of MAI licensed in the state where each real property is located. The use of the reports is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. In preparing its Reports, Stanger did not, and was not requested to, solicit third-party indications of interest for our common stock in connection with possible purchases thereof or the acquisition of all or any part of our company.

Stanger collected reasonably available material information that it deemed relevant in appraising our real estate properties. Stanger relied in part on property-level information provided by the Advisor, including historical and projected operating revenues and expenses and information regarding recent or planned capital expenditures.

In conducting their investigation and analyses, Stanger took into account customary and accepted financial and commercial procedures and considerations as they deemed relevant. Although Stanger reviewed information supplied or otherwise made available by us or the Advisor for reasonableness, they

assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to them by any other party and did not independently verify any such information. Stanger has assumed that any operating or financial forecasts and other information and data provided to or otherwise reviewed by or discussed with Stanger were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of our management, the Board, and/or the Advisor. Stanger relied on us to advise them promptly if any information previously provided became inaccurate or was required to be updated during the period of their review.

In performing its analyses, Stanger made numerous other assumptions as of various points in time with respect to industry performance, general business, economic, and regulatory conditions, and other matters, many of which are beyond their control and our control. Stanger also made assumptions with respect to certain factual matters. For example, unless specifically informed to the contrary, Stanger assumed that we have clear and marketable title to each real estate property appraised, that no title defects exist, that any improvements were made in accordance with law, that no hazardous materials are present or were present previously, that no significant deed restrictions exist, and that no changes to zoning ordinances or regulations governing use, density, or shape are pending or being considered. Furthermore, Stanger’s analyses, opinions, and conclusions were necessarily based upon market, economic, financial, and other circumstances and conditions existing as of or prior to the date of the Appraisal Reports, and any material change in such circumstances and conditions may affect Stanger’s analyses and conclusions. The Appraisal Reports contain other assumptions, qualifications, and limitations that qualify the analyses, opinions, and conclusions set forth therein. Furthermore, the prices at which our real estate properties may actually be sold could differ from Stanger’s analyses.

Stanger is actively engaged in the business of appraising commercial real estate properties similar to those owned by us in connection with public securities offerings, private placements, business combinations, and similar transactions. We do not believe that there are any material conflicts of interest between Stanger, on the one hand, and us, the Advisor, and their affiliates, on the other hand. We engaged Stanger, with approval from the Committee, to deliver its Reports to assist in the NAV calculation and Stanger received compensation for those efforts. In addition, we have agreed to indemnify Stanger against certain liabilities arising out of this engagement. In the two years prior to the date of this filing, Stanger was engaged by us in connection with the February 28, 2018 estimated per share NAVs for which Stanger was paid usual and customary fees. Stanger may from time to time in the future perform other services for us, so long as such other services do not adversely affect the independence of Stanger as certified in the applicable Appraisal Reports.

Although Stanger considered any comments received from us or the Advisor relating to their Reports, the final appraised values of our real estate properties were determined by Stanger for the Appraised Properties. The Reports are addressed solely to the Committee to assist it in calculating and recommending to the Board an estimated per share NAV of our common and capital stock. The Reports are not addressed to the public, may not be relied upon by any other person to establish an estimated per share NAV of our common and capital stock, and do not constitute a recommendation to any person to purchase or sell any shares of our common and capital stock.

The foregoing is a summary of the standard assumptions, qualifications, and limitations that generally apply to the Reports. The Reports, including the analysis, opinions, and conclusions set forth in such reports, are qualified by the assumptions, qualifications, and limitations set forth in the respective reports.

Real Estate Valuation

As described above, we engaged Stanger to provide an appraisal of the Appraised Properties consisting of three properties in our portfolio as of March 31, 2019. In preparing the Appraisal Report, Stanger, among other things:

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performed a site visit of each Appraised Property;

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interviewed our officers or the Advisor’s personnel to obtain information relating to the physical condition of each Appraised Property, including known environmental conditions, status of ongoing or planned property additions and reconfigurations, and other factors for such leased properties;

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reviewed historical operating statements, revenue per available room, average daily rate, occupancy for the subject properties and competing properties, current tax information and a review of tax comparable properties, where appropriate; and

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reviewed the acquisition criteria and parameters used by real estate investors for properties similar to the subject Properties, including a search of real estate data sources and publications concerning real estate buyer’s criteria, discussions with sources deemed appropriate, and a review of transaction data for properties similar to the Properties.

Stanger employed the Income Approach and Sales Comparison Approach, each described below, to estimate the value of the Appraised Properties. The Income Approach is based on the assumption that the value of a property is dependent upon the property’s ability to produce income. In the Income Approach, a direct capitalization analysis and a discounted cash flow (“DCF”) analysis was used to determine the value of the fee simple or leased fee estate, as applicable, in the Appraised Properties. The indicated value by the Income Approach represents the amount an investor may pay for the expectation of receiving the net cash flow from the property and the proceeds from the ultimate sale of the property.

The Sales Comparison Approach utilizes indices of value derived from actual or proposed sales of comparable properties to estimate the value of the subject Property. The appraiser analyzed such comparable sale data as was available to develop a market value conclusion for the subject Property.

Stanger prepared the Appraisal Reports, which summarize key inputs and assumptions, providing a value for each of the Appraised Properties using financial information provided by us and the Advisor. From such review, Stanger selected the appropriate terminal capitalization rate and discount rate in its DCF analysis, the appropriate direct capitalization rate in its direct capitalization analysis and the appropriate price per room in its sales comparison analysis.

As of March 31, 2019, we owned an interest in three real estate assets. The total aggregate purchase price to us of these properties at our respective ownership interest was approximately $46.1 million. In addition, through the Valuation Date, at our respective ownership interest, we had invested $0.6 million in capital improvements on these real estate assets since inception. As of the Valuation Date, the total value of the Appraised Properties at our respective ownership interest was approximately $49.9 million. This represents an approximately 7% increase in the total value of the real estate assets over the aggregate purchase price and aggregate improvements. The following summarizes the key assumptions that were used in the discounted cash flow and direct capitalization analysis to arrive at the appraised value of the Appraised Properties:

	Range			Weighted Average
Terminal Capitalization Rate		8.25%	9.50%		8.81%
Discount Rate		9.75%	11.00%		10.31%
Direct Capitalization Rate		7.75%	9.00%		8.31%
Income and Expense Growth	3.00%				3.00%

While we believe that Stanger’s assumptions and inputs are reasonable, a change in these assumptions and inputs would impact the calculation of the appraised value of the Appraised Properties. The table below illustrates the impact on the appraised values, before noncontrolling interest adjustments, if the terminal capitalization rates, discount rates and direct capitalization rates were adjusted by 25 basis points or 5.0%, assuming the value conclusion for each Appraised Property is based on the method being sensitized and all other factors remain unchanged:

	Estimated Impact to Appraised Values Due to:
	Increase 25 Basis Points			Decrease 25 Basis Points			Increase 5.0%			Decrease 5.0%
Terminal Capitalization Rate		($	30,000)		$	1,830,000		($	690,000)		$	2,570,000
Discount Rate		($	300,000)		$	2,070,000		($	1,510,000)		$	3,350,000
Direct Capitalization Rate		($	2,120,000)		$	2,190,000		($	3,410,000)		$	3,720,000

Loan Valuation

Values for our consolidated secured notes payable (the “Secured Notes Payable”) were estimated by Stanger using a discounted cash flow analysis, which used inputs based on the remaining loan terms and estimated current market interest rates for notes payable with similar characteristics, including remaining loan term, loan-to-value ratios, debt-service-coverage ratios, prepayment terms, and collateral property attributes. The current market interest rate was generally determined based on market rates for available comparable debt. The estimated current market interest rates ranged from 4.7% to 5.1% for the Secured Notes Payable.

As of March 31, 2019, Stanger’s estimated fair value of our Secured Notes Payable was $39.3 million, before noncontrolling interest adjustments. The weighted-average discount rate applied to the future estimated debt payments of the Secured Notes Payable was approximately 4.9%.

While we believe that Stanger’s assumptions and inputs are reasonable, a change in these assumptions and inputs would impact the calculation of the estimated value of our Secured Notes Payable. The table below illustrates the impact on the estimated value of the Secured Notes Payable, before noncontrolling interest adjustments, if the market interest rate of the Secured Notes Payable were adjusted by 25 basis points or 5.0%, and assuming all other factors remain unchanged:

Estimated Impact to Fair Market Value of the Company’s Secured Notes due to:
Decrease 25 Basis Points	Increase 25 Basis Points	Decrease 5.0%	Increase 5.0%
$280,300	$362,200	$268,000	$351,400

Cash, Other Assets, Other Liabilities and Credit Facility

The fair value of our cash, other assets and other liabilities were estimated by the Advisor to approximate carrying value as of the Valuation Date.

The carrying value of a majority of our other assets and liabilities are considered to equal their fair value due to their short maturities or liquid nature. Certain balances, such as intangible assets and liabilities and deferred financing costs, have been eliminated for the purpose of the valuation due to the fact that the value of those balances were already considered in the valuation of the respective investments.

Different parties using different assumptions and estimates could derive a different estimated per share NAVs, and these differences could be significant. The value of our shares will fluctuate over time in response to developments related to individual assets in our portfolio and the management of those assets and in response to the real estate and finance markets.

K Share Hurdle

The Estimated Per Share NAVs were calculated inclusive of the K Share Hurdle to each share class, net of any distributions made, from inception of the Company through the Valuation Date.

The Board’s Determination of the Estimated Per Share NAVs

Based upon a review of the Reports provided by Stanger, upon the recommendation of the Committee, the Board estimated the per share NAV for (i) the K-I Shares to be $10.00; (ii) the K Shares to be $10.00; (iii) the K-T Shares to be $10.00; (iv) the A Shares to be $3.97; and (v) the B Shares to be $0.00.

Limitations of Estimated Per Share NAVs

The various factors considered by the Board in determining the Estimated Per Share NAVs were based on a number of assumptions and estimates that may not be accurate or complete. As disclosed above, we are providing the Estimated Per Share NAVs to assist broker-dealers that participate, or participated, in our public offering in meeting their customer account statement reporting obligations. As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive different estimated per share NAVs. The Estimated Per Share NAVs are not audited and do not represent the fair value of our assets or liabilities according to GAAP.

Accordingly, with respect to the Estimated Per Share NAVs, we can give no assurance that:

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a stockholder would be able to resell his or her K-I Shares, K Shares and K-T Shares at the K Share Estimated Per Share NAV;

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a stockholder would ultimately realize distributions per share equal to our Estimated Per Share NAV upon liquidation of our assets and settlement of its liabilities or a sale of the Company;

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our K-I Shares, K Shares and K-T Shares would trade at the K Share Estimated Per Share NAV on a national securities exchange;

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a different independent third-party appraiser or other third-party valuation firm would agree with the our Estimated Per Share NAVs; or

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the Estimated Per Share NAVs, or the methodology used to estimate our Estimated Per Share NAVs, will be found by any regulatory authority to comply with ERISA, the Internal Revenue Code of 1986, as amended or other regulatory requirements.

Similarly, the amount a stockholder may receive upon repurchase of his or her shares, if he or she participates in our share repurchase program, may be greater than or less than the amount a stockholder paid for the shares, regardless of any increase in the underlying value of any assets owned by us.

The Estimated Per Share NAVs are based on the estimated value of our assets less the estimated value of the our liabilities divided by the number of shares outstanding on an adjusted fully diluted basis, calculated as of March 31, 2019.

Further, the value of our shares will fluctuate over time as a result of, among other things, developments related to individual assets and responses to the real estate and capital markets. The Estimated Per Share NAVs do not reflect a discount for the fact that we are externally managed, nor do they reflect a real estate portfolio premium/discount versus the sum of the individual property values. The Estimated Per Share NAVs also do not take into account estimated disposition costs and fees for real estate properties that are not held for sale. The Company currently expects to utilize an independent valuation firm to update the Estimated Per Share NAVs in the first half of 2020, in accordance with IPA Valuation Guidelines, but is not required to update the Estimated Per Share NAVs more frequently than annually.

Risk Factors

The following risk factor supersedes and replaces in its entirety the first risk factor contained in the “Risk Factors — Risks Related to this Offering” section on page 66 of the prospectus:

The estimated NAVs per K-I Share, K Share, K-T Share, A Share, and B Share are estimates as of a given point in time and likely will not represent the amount of net proceeds that would result if we were liquidated or dissolved or completed a merger or other sale of the company.

The Estimated Per Share NAVs and any subsequent values are likely to differ from the price at which a stockholder could resell such shares because: (1) there is no public trading market for our shares at this time; (2) the prices do not reflect, and will not reflect, the fair value of our assets as we acquire them, nor do they represent the amount of net proceeds that would result from an immediate liquidation of our assets or sale of the Company, because the amount of proceeds available for investment from this offering is net of acquisition fees and expenses; (3) the Estimated Per Share NAVs do not take into account how market fluctuations affect the value of our investments, including how the current conditions in the financial and real estate markets may affect the value of our investments; (4) the Estimated Per Share NAVs do not take into account how developments related to individual assets may increase or decrease the value of our portfolio; and (5) the Estimated Per Share NAVs do not take into account any premiums to value that may be achieved in a liquidation or sale of our assets. Further, the value of our shares will fluctuate over time as a result of, among other things, developments related to individual assets we may acquire and responses to the real estate and capital markets. The Estimated Per Share NAVs do not reflect a discount for the fact that we are externally managed. There are currently no SEC, federal and state rules that establish requirements specifying the methodology to employ in determining an estimated NAV per share; provided, however, that pursuant to FINRA rules, the determination of the estimated NAV per share must be conducted by, or with

the material assistance or confirmation of, a third-party valuation expert and must be derived from a methodology that conforms to standard industry practice. Subsequent estimates of our estimated NAV or NAVs per share will be done at least annually. Our Estimated Per Share NAVs are estimates as of a given point in time and likely do not represent the amount of net proceeds that would result from an immediate sale of our assets.

The following risk factor supersedes and replaces in its entirety the second risk factor contained in the “Risk Factors — Risks Related to this Offering” section on page 66 of the prospectus:

Our Estimated Per Share NAVs are based upon a number of estimates, assumptions, judgments and opinions that may not be, or may later prove not to be, accurate or complete, which could make the estimated valuations incorrect. As a result, our Estimated Per Share NAVs may not reflect the amount that you might receive for your shares in a market transaction, and the purchase price you pay may be higher than the value of our assets per share of common stock at the time of your purchase.

Currently, there are no SEC, federal or state rules that establish requirements specifying the methodology to employ in determining an estimated NAV per share. The audit committee of our board of directors, pursuant to authority delegated by our board of directors, is responsible for the oversight of the valuation process, including the review and approval of the valuation process and methodology used to determine our Estimated Per Share NAVs, the consistency of the valuation methodologies with real estate industry standards and practices and the reasonableness of the assumptions used in the valuations. Pursuant to the prior approval of the audit committee of our board of directors, which is solely comprised of our independent directors, in accordance with the valuation policies previously adopted by our board of directors, we engaged Robert A. Stanger & Co., Inc., or Stanger, an independent third-party valuation firm, to assist with determining the Estimated Per Share NAVs. Our Estimated Per Share NAVs were determined after consultation with our advisor and Stanger. Stanger prepared appraisal reports (collectively, the “Appraisal Reports”) that summarized key information and assumptions and provided an appraised value for each of the three properties (collectively, the “Appraised Properties”) in our portfolio as of March 31, 2019. Stanger also prepared a NAV report (the “NAV Report”) that estimated the NAV per share of each of our K-I Shares, K Shares, K-T Shares, A Shares, and B Shares. The NAV Report relied upon: (i) the Appraisal Reports for the Appraised Properties; (ii) Stanger’s estimate of our secured notes payable; (iii) the K Share Hurdle to each share class as of March 31, 2019; and (iv) the Advisor’s estimate of the value of our other assets and liabilities, to calculate each of the Estimated Per Share NAVs of our common and capital stock, and such other reviews as deemed necessary by Stanger. The valuation was based upon the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding on an adjusted fully diluted basis, calculated as of the NAV pricing date, and was performed in accordance with the IPA Valuation Guidelines. The estimated NAVs per share were determined by our board of directors. Subsequent estimates of our Estimated Per Share NAVs will be prepared at least annually. Our Estimated Per Share NAVs are estimates as of a given point in time and likely do not represent the amount of net proceeds that would result from an immediate sale of our assets. The Estimated Per Share NAVs are not intended to be related to any values at which individual assets may be carried on financial statements under applicable accounting standards. We do not intend to release any of the data supporting the Estimated Per Share NAVs.

The following risk factor supersedes and replaces in its entirety the third risk factor contained in the “Risk Factors — Risks Related to this Offering” section on page 67 of the prospectus:

It may be difficult to accurately reflect material events that may impact our Estimated Per Share NAVs between valuations, and accordingly we may be selling and repurchasing shares at too high or too low a price.

Our independent third-party valuation expert will calculate estimates of the market value of our principal real estate and real estate-related assets that we acquire, and our board of directors will determine the net value of such real estate and real estate-related assets and liabilities taking into consideration such estimates provided by the independent third-party valuation expert. Our board of directors is ultimately responsible for determining the Estimated Per Share NAVs. Since our board of directors will determine our Estimated Per Share NAVs at least annually, there may be changes in the value of our properties that are not fully reflected in the most recent Estimated Per Share NAVs. As a result, the published Estimated Per

Share NAVs may not fully reflect changes in value that may have occurred since the prior valuation. Furthermore, our advisor will monitor our portfolio, but it may be difficult to reflect changing market conditions or material events that may impact the value of our portfolio between valuations, or to obtain timely or complete information regarding any such events. Therefore, the Estimated Per Share NAVs published before the announcement of an extraordinary event may differ significantly from our actual Estimated Per Share NAVs until such time as sufficient information is available and analyzed, the financial impact is fully evaluated, and the appropriate adjustment is made to our Estimated Per Share NAVs, as determined by our board of directors. Any resulting disparity may be to the detriment of a purchaser of our shares or a stockholder selling shares pursuant to our share repurchase program.

Terms of the Offering

The following information supersedes and replaces the first sentence of the second paragraph in the section captioned “Prospectus Summary — Terms of the Offering” on page 30 of our prospectus:

We will offer K-I Shares, K Shares and K-T Shares in our primary offering until the earlier of August 14, 2020, which is two years from the SEC effective date of this registration statement, or the date we sell $550,000,000 in shares, unless we elect to extend it to a date no later than February 10, 2022, which is 180 days following the third anniversary of the effective date of the offering.

Revised Form of Subscription Agreement

A revised form of our subscription agreement is attached as Appendix C and supersedes and replaces Appendix C in the prospectus.

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Procaccianti Hotel Reit 424B3Prospectus supplement