Stirling Hotels & Resorts 10Q 2024 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number: 000-56623

STIRLING HOTELS & RESORTS, INC.

(Exact name of registrant as specified in its charter)


Maryland						93-3514045
(State or other jurisdiction of incorporation or organization)						(IRS employer identification number)

14185 Dallas Parkway
Suite 1200
Dallas
Texas						75254
(Address of principal executive offices)						(Zip code)

(972) 490-9600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes þ No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

As of August 9, 2024, the registrant had the following shares outstanding: 19 shares of Class D common stock, 0 shares of Class E common stock, 1,375 shares of Class I common stock, 19 shares of Class S common stock and 19 shares of Class T common stock.

STIRLING HOTELS & RESORTS, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2024

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Consolidated Balance Sheets as of J une 30 , 2024 and December 31, 2023			2
Consolidated Statement s of Operations for the Three and Six Months Ended June 30, 2024			3
Consolidated Statement s of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2024			4
Consolidated Statement s of Equity for the Three and Six Months Ended June 30, 2024			5
Consolidated Statement s of Cash Flows for the Six Months Ended June 30, 2024			6
Notes to Consolidated Financial Statements			7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			26
ITEM 4. CONTROLS AND PROCEDURES			26
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS			26
ITEM 1A. RISK FACTORS			26
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			26
ITEM 3. DEFAULTS UPON SENIOR SECURITIES			27
ITEM 4. MINE SAFETY DISCLOSURES			27
ITEM 5. OTHER INFORMATION			27
ITEM 6. EXHIBITS			43
SIGNATURES			44

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements (unaudited)

STIRLING HOTELS & RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)


	June 30, 2024		December 31, 2023
ASSETS
Cash and cash equivalents	$	—	$	—
Distributions receivable	148		—
Investment in Stirling REIT OP, LP	35,492		24
Total assets	$	35,640	$	24
LIABILITIES AND EQUITY
Dividends payable	$	148	$	—
Total liabilities	148		—
Commitments and contingencies (note 7)
Common stock - Class E shares, $0.01 par value per share, 100,000,000 shares authorized, 0 and 0 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	—		—
Equity:
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized, 0 and 0 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	—		—
Common stock - Class D shares, $0.01 par value per share, 300,000,000 shares authorized, 19 and 0 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	—		—

Common stock - Class I shares, $0.01 par value per share, 300,000,000 shares authorized, 1,371 and 1 share issued and outstanding at June 30, 2024 and December 31, 2023, respectively.	14		—
Common stock - Class S shares, $0.01 par value per share, 300,000,000 shares authorized, 19 and 0 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	—		—
Common stock - Class T shares, $0.01 par value per share, 300,000,000 shares authorized, 19 and 0 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	—		—
Additional paid-in-capital	36,511		25
Accumulated deficit	(1,033)		(1)
Total equity	35,492		24
Total liabilities and equity	$	35,640	$	24

See accompanying notes to consolidated financial statements.

STIRLING HOTELS & RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Three Months Ended June 30, 2024		Six Months Ended June 30, 2024

REVENUE





Total revenue	$	—		$	—
EXPENSES
Hotel operating expenses:












Total operating expenses	—			—

Operating income (loss)	—			—
Equity in earnings (loss) of Stirling REIT OP, LP	(592)			(760)







Income (loss) before income taxes	(592)			(760)
Income tax (expense) benefit	—			—










NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(592)		$	(760)

INCOME (LOSS) PER SHARE - BASIC AND DILUTED
Basic:


Net income (loss) attributable to common stockholders	$	(0.84)		$	(1.81)
Weighted average common shares outstanding – basic	701			420
Diluted:


Net income (loss) attributable to common stockholders	$	(0.84)		$	(1.81)
Weighted average common shares outstanding – diluted	701			420

See accompanying notes to consolidated financial statements.

STIRLING HOTELS & RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)


	Three Months Ended June 30, 2024		Six Months Ended June 30, 2024

Net income (loss)	$	(592)		$	(760)
Other comprehensive income (loss), net of tax:


Total other comprehensive income (loss)	—			—
Comprehensive income (loss)	$	(592)		$	(760)

See accompanying notes to consolidated financial statements.

STIRLING HOTELS & RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)


	Common Stock							Additional Paid-in Capital			Accumulated Deficit								Total
		Class D		Class I		Class S				Class T
			Shares	Amount			Shares			Amount			Shares				Amount				Shares				Amount
Balance at March 31, 2024			—	$	—		398	$	4			—			$	—		—			$	—			$	10,021			$	(210)			$	9,815

Issuance of common stock			19	—			973	10			19		—				19		—				26,490				—				26,500








Dividends declared - common stock			—	—			—	—			—		—				—		—				—				(231)				(231)















Net income (loss)			—	—			—	—			—		—				—		—				—				(592)				(592)
Balance at June 30, 2024			19	$	—		1,371	$	14		19		$	—			19		$	—			$	36,511			$	(1,033)			$	35,492


	Common Stock							Additional Paid-in Capital			Accumulated Deficit								Total
		Class D		Class I		Class S				Class T
			Shares	Amount			Shares			Amount			Shares				Amount				Shares				Amount
Balance at December 31, 2023			—	$	—		1	$	—			—			$	—		—			$	—			$	25			$	(1)			$	24

Issuance of common stock			19	—			1,370	14			19		—				19		—				36,486				—				36,500








Dividends declared - common stock			—	—			—	—			—		—				—		—				—				(272)				(272)















Net income (loss)			—	—			—	—			—		—				—		—				—				(760)				(760)
Balance at June 30, 2024			19	$	—		1,371	$	14		19		$	—			19		$	—			$	36,511			$	(1,033)			$	35,492

See accompanying notes to consolidated financial statements.

STIRLING HOTELS & RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Six Months Ended June 30, 2024

Cash Flows from Operating Activities
Net income (loss)	$	(760)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:






Equity in (earnings) loss of unconsolidated entities	760
Distributions from Stirling OP	124













Changes in operating assets and liabilities:
Distributions receivable	(124)
Distributions payable	124











Net cash provided by (used in) operating activities	124
Cash Flows from Investing Activities







Investment in Stirling OP, LP	(36,500)




Net cash provided by (used in) investing activities	(36,500)
Cash Flows from Financing Activities



Payments for dividends	(124)



Proceeds from issuance of common stock	36,500









Net cash provided by (used in) financing activities	36,376


Net increase (decrease) in cash, cash equivalents and restricted cash	—
Cash, cash equivalents and restricted cash at beginning of period	—
Cash, cash equivalents and restricted cash at end of period	$	—

Supplemental Cash Flow Information
Interest paid	$	—
Income taxes paid (refunded)	—
Dividends declared but not paid	148



























Distributions receivable	148
Supplemental Disclosure of Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents at beginning of period	$	—

Restricted cash at beginning of period	—

Cash, cash equivalents and restricted cash at beginning of period	$	—

Cash and cash equivalents at end of period	$	—
Restricted cash at end of period	—
Cash, cash equivalents and restricted cash at end of period	$	—

See accompanying notes to consolidated financial statements.

STIRLING HOTELS & RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization

Stirling Hotels & Resorts, Inc. (the “Company”) was formed on September 1, 2023 as a Maryland corporation and intends to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with the taxable year ending December 31, 2024 and will make an election in 2025 upon filing its 2024 tax return. Substantially all of the Company’s business will be conducted through Stirling REIT OP, LP (“Stirling OP”), a Delaware limited partnership formed on September 26, 2023. The Company is the sole member of the sole general partner of Stirling OP and owns a non-economic general partner interest in Stirling OP. A wholly owned subsidiary of the Company is a limited partner of Stirling OP. Stirling REIT Special Limited Partner LLC (the “Special Limited Partner”), a Delaware limited partnership, owns a special limited partnership interest in Stirling OP. In addition, in order for the income from any hotel property investments to constitute “rents from real properties” for purposes of the gross income test required for REIT qualification, the Company will lease each hotel property to a subsidiary of Stirling OP, which we intend to be treated as a taxable REIT subsidiary, or TRS.

The Company was organized to invest primarily in a diverse portfolio of stabilized income-producing hotels and resorts across all chain scales primarily located in the United States and operated under widely recognized brands. The Company and Stirling OP is externally managed by Stirling REIT Advisors LLC (the “Advisor”), an affiliate of Ashford Inc. (“Ashford”), the Company’s sponsor.

On December 6, 2023, Stirling OP acquired four hotel properties and assumed a mortgage loan secured by the four hotel properties (the “Initial Portfolio”) from Ashford Hospitality Limited Partnership (“Ashford Hospitality OP”) and Ashford TRS Corporation (“Ashford Hospitality TRS,” and together with Ashford Hospitality OP, the “Anchor Investor”), each a subsidiary of Ashford Hospitality Trust, Inc. (“Ashford Trust”), in exchange for Class I units of Stirling OP pursuant to the terms of the contribution agreement (the “Contribution Agreement”), by and among Stirling OP and the Anchor Investor. The gross contribution value was $56.2 million. Additionally, Stirling OP assumed a mortgage loan with a carrying value of $30.2 million. The acquisition also included $9.0 million of net working capital and reserves and was subject to customary post-closing adjustments resulting in a net contribution value of the Initial Portfolio of $35.0 million. During the three months ended March 31, 2024, estimated working capital and reserves were finalized resulting in the Anchor Investor returning 4,423 Class I units totaling approximately $111,000 to Stirling OP. The final net contribution value of the Initial Portfolio was $34.9 million.

The Company determined the acquisition of the Initial Portfolio resulted in Ashford Trust becoming the primary beneficiary of Stirling OP in contemplation of: 1) the related party group comprised of (i) Ashford Trust and (ii) the stockholders who have control over election or removal of the board of directors of the Company that have power to direct the most significant activities of Stirling OP; and 2) the consideration that substantially all the economics are held by Ashford Trust through its equity interest, and substantially all of the activities are performed on Ashford Trust’s behalf. As a result, Ashford Trust began consolidating Stirling OP as of December 6, 2023.

Pursuant to the Contribution Agreement, the Anchor Investor entered into a lock-up agreement with respect to its Class I units that restrict the assignment, sale, and transfer of the units for a period of one year following the closing of the transactions contemplated by the Contribution Agreement (the “Lock-Up Agreement”). In addition, pursuant to the Lock-Up Agreement, the Anchor Investor is prohibited from redeeming the Class I units for a period of three years following such closing. At the end of the three-year period, the Class I units may be redeemed pursuant to the terms of the Stirling OP Agreement and any Class I units converted to shares of the Company’s Class I common stock may be repurchased by the Company pursuant to the terms and conditions of the Company’s share repurchase plan. In addition, the Anchor Investor agreed not to withdraw as a participant in the distribution reinvestment plan of Stirling OP, and thereby receive any distributions payable on its Class I units in additional Class I units, through December 31, 2024.

Concurrently with entry into the Contribution Agreement, the Company, directly or through its wholly owned subsidiaries, entered into the Advisory Agreement, the Stirling OP Agreement, the Master Hotel Management Agreement and the Master Project Management Agreement, each as described in additional detail in note 4.

2. Capitalization

On September 5, 2023, the Company was capitalized with a $25 investment from its initial stockholder in exchange for the issuance of one share of the Company’s common stock.

The Company is undertaking a continuous private offering to accredited investors, pursuant to which it will offer and sell up to $1,000,000,000 in shares of its common stock consisting of up to $900,000,000 in shares in the primary offering and up to $100,000,000 in shares pursuant to the distribution reinvestment plan (the “Offering”). The Company intends to sell any combination of four classes of shares of its common stock, Class T, Class S, Class D and Class I shares, with a dollar value up

STIRLING HOTELS & RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

to the maximum offering amount. The share classes will have different upfront selling commissions, dealer manager fees and ongoing distribution fees. The purchase price per share for each class of common stock will vary and will generally equal the Company’s prior month’s net asset value (“NAV”) per share, as calculated monthly, plus applicable upfront selling commissions and dealer manager fees.

The Company has authorized Class E shares for the Advisor and its affiliates for receipt in payment of the management fee and the distribution of the performance participation allocation. The Class E shares are not subject to any upfront selling commissions, dealer manager fees, distribution fees, management fees payable to the Advisor or the performance participation allocation to the Special Limited Partner. See note 4 for additional information on fees payable to the Advisor and its affiliates.

On December 4, 2023, the Company filed with the Maryland State Department of Assessments and Taxation the (“SDAT”) Articles of Amendment and Restatement to provide that the Company has the authority to issue a total of 1,400,000,000 shares of capital stock, of which 1,300,000,000 shares are classified as common stock, of which 300,000,000 of which are classified as Class D common stock, 100,000,000 of which are classified as Class E common stock, 300,000,000 of which are classified as Class I common stock, 300,000,000 of which are classified as Class S common stock, 300,000,000 of which are classified as Class T common stock, and 100,000,000 shares are classified as preferred stock with a par value $0.01 per share. In addition, the sole share of common stock outstanding was reclassified as a Class I share of common stock. The Charter was effective upon filing.

The following tables present issuances of all classes of the Company’s common stock:


	Three Months Ended June 30, 2024
	Class D			Class I				Class S				Class T				Total
	Shares	Proceeds			Shares	Proceeds			Shares	Proceeds			Shares	Proceeds			Shares	Proceeds

Issuance of common stock	19	$	500		973	$	25,000		19	$	500		19	$	500		1,030	$	26,500


	Six Months Ended June 30, 2024
	Class D			Class I				Class S				Class T				Total
	Shares	Proceeds			Shares	Proceeds			Shares	Proceeds			Shares	Proceeds			Shares	Proceeds

Issuance of common stock	19	$	500		1,370	$	35,000		19	$	500		19	$	500		1,427	$	36,500

Distribution Reinvestment Plan

We have adopted a distribution reinvestment plan whereby stockholders will have their cash distributions automatically reinvested in additional shares of our common stock unless they elect to receive their distributions in cash. If stockholders participate in our distribution reinvestment plan, the cash distributions attributable to the class of shares that they own will be automatically invested in additional shares of the same class. The purchase price for shares purchased under our distribution reinvestment plan will be equal to the most recently disclosed transaction price for such shares at the time of the record date of the distribution. Stockholders will not pay upfront selling commissions or dealer manager fees when purchasing shares pursuant to the distribution reinvestment plan, but distribution fees will apply depending upon the class of shares purchased. Participants may terminate their participation in the distribution reinvestment plan with ten business days’ prior written notice to us.

Share Repurchase Plan

Stockholders may request on a monthly basis that we repurchase all or any portion of their shares pursuant to our share repurchase plan. We are not obligated to repurchase any shares and may choose to repurchase only some, or even none, of the shares that have been requested to be repurchased in any particular month in our discretion. In addition, our ability to fulfill repurchase requests is subject to a number of limitations. As a result, share repurchases may not be available each month. Under our share repurchase plan, to the extent we choose to repurchase shares in any particular month, we will only repurchase shares as of the opening of the last business day of that month (each such date, a “Repurchase Date”). Repurchases will be made at the transaction price in effect on the Repurchase Date, except that shares that have not been outstanding for at least one year will be repurchased at 95% of the transaction price (an “Early Repurchase Deduction”). The end of the one-year holding period will be measured as of the first business day immediately following the prospective repurchase date. Additionally, stockholders who have received shares of our common stock in exchange for their common units in Stirling OP may include the period of time such stockholder held such common units in Stirling OP for purposes of calculating the holding period for such shares of our common stock. The Early Repurchase Deduction may only be waived in the case of repurchase requests arising from the death or qualified disability of the holder and in other limited circumstances. We will begin share repurchases under the plan on the

STIRLING HOTELS & RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

first month of the quarter following our first closing in the private offering. The Early Repurchase Deduction will not apply to shares acquired through our distribution reinvestment plan.

The aggregate NAV of total repurchases (based on the price at which the shares are repurchased) of all classes (excluding any Early Repurchase Deduction applicable to the repurchased shares) is limited to no more than 2% of our aggregate NAV per month (measured using the aggregate NAV attributable to stockholders as of the end of the immediately preceding month) and no more than 5% of our aggregate NAV per calendar quarter (measured using the aggregate NAV attributable to stockholders as of the end of the immediately preceding quarter). In the event that we determine to repurchase some but not all of the shares submitted for repurchase during any month, shares submitted for repurchase during such month will be repurchased on a pro rata basis after we have repurchased all shares for which repurchase has been requested due to death or disability. All unsatisfied repurchase requests must be resubmitted after the start of the next month or quarter, or upon the recommencement of the share repurchase plan, as applicable. Shares held by our Advisor or the Special Limited Partner acquired as payment of our Advisor’s management fee or in respect of distributions on the performance participation interest, respectively, will not be subject to our share repurchase plan, including with respect to any repurchase limits or the Early Repurchase Deduction and will not be included in the calculation of our aggregate NAV for purposes of the 2% monthly or 5% quarterly limitations on repurchases.

Declaration of Distributions

The following table details the aggregate distributions declared per share for each applicable class of stock for the three months ended June 30, 2024:


	Gross Distributions		Distribution Fee		Net Distributions
Class D Shares	$	0.1042	$	0.0054	$	0.0988
Class I Shares	0.3126		—		0.3126
Class S Shares	0.1042		0.0183		0.0859
Class T Shares	0.1042		0.0183		0.0859

The following table details the aggregate distributions declared per share for each applicable class of stock for the six months ended June 30, 2024:


	Gross Distributions		Distribution Fee		Net Distributions
Class D Shares	$	0.1042	$	0.0054	$	0.0988
Class I Shares	0.6252		—		0.6252
Class S Shares	0.1042		0.0183		0.0859
Class T Shares	0.1042		0.0183		0.0859

3. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation—The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and the rules and regulations of the Securities and Exchange Commission ( the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The accompanying consolidated financial statement includes the accounts of the Company and certain subsidiaries. All intercompany balances and transactions are eliminated in consolidation. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited consolidated financial statements. We believe the disclosures made herein are adequate to prevent the information presented from being misleading. However, the financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2023 Annual Report to Stockholders on Form 10-K filed with the SEC on March 29, 2024.

Use of Estimates—The preparation of these consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

STIRLING HOTELS & RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Cash and Cash Equivalents—Cash and cash equivalents represent cash held in banks, cash on hand, and liquid investments with original maturities of three months or less at the date of purchase. The Company may have bank balances in excess of federally insured amounts; however, the Company deposits its cash and cash equivalents with high credit-quality institutions to minimize credit risk exposure. The Company did not hold cash or cash equivalents as of June 30, 2024.

Investment in Stirling OP—Our investment in Stirling OP is accounted for under the equity method of accounting by recording the initial investment and our percentage of interest in the entities’ net income/loss. We review the investments for impairment each reporting period pursuant to the applicable authoritative accounting guidance. An investment is impaired when its estimated fair value is less than the carrying amount of our investment. Any other-than-temporary impairment is recorded in “equity in earnings (loss) of unconsolidated entities” in the consolidated statements of operations. No such impairment was recorded for the three and six months ended June 30, 2024.

Our investment in Stirling OP is considered to be variable interest in the underlying entities. Each variable interest entity (“VIE”), as defined by authoritative accounting guidance, must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. Because we do not have the power and financial responsibility to direct Stirling OP’s activities and operations, we are not considered to be the primary beneficiary of Stirling OP on an ongoing basis and therefore Stirling OP is not consolidated.

Income Taxes—The Company is a taxable corporation for the three and six months ended June 30, 2024. The Company intends to make an election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code beginning with its taxable year ending December 31, 2024. Until that time, the Company will be subject to taxation at regular corporate rates under the Internal Revenue Code. If the Company qualifies for taxation as a REIT, the Company generally will not be subject to federal corporate income tax to the extent it distributes 90% of its taxable income to its stockholders. REITs are subject to a number of other organizational and operational requirements. Even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income.

Organization and Offering Expenses—The Advisor has agreed to advance organization and offering expenses on behalf of the Company (including legal, accounting, and other expenses attributable to the organization, but excluding upfront selling commissions, dealer manager fees and distribution fees) through December 31, 2024. Pursuant to the Advisory Agreement, the Company will reimburse the Advisor for all such advanced expenses ratably over a 60 month period commencing January 1, 2025. As of June 30, 2024 and December 31, 2023, the Advisor and its affiliates have incurred organization and offering expenses on the Company’s behalf of approximately $2.1 million and $2.1 million, respectively. These organization and offering expenses are not recorded in the accompanying financial statements because such costs are the responsibility of Stirling OP and are included in its balance sheet and statement of operations for the applicable periods. When recorded by the Company, organization expenses will be expensed as incurred, and offering expenses will be charged to stockholders’ equity as such amounts will be reimbursed to the Advisor or its affiliates from the gross proceeds of the Offering. Any amount due to the Advisor but not paid will be recognized as a liability on the consolidated balance sheet.

Operating Expenses—Operating expenses incurred directly by the Company are expensed in the period incurred. The Advisor will advance on behalf of the Company certain of the Company’s general and administrative expenses through December 31, 2024, at which point the Company will reimburse the Advisor for all such advanced expenses ratably over a 60 month period commencing January 1, 2025.

Earnings Per Share—Basic net loss per share is computed by dividing net loss for the period by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed by dividing net loss for the period by the weighted average number of shares of common stock and common stock equivalents outstanding (unless their effect is anti-dilutive) for the period.

Recently Issued Accounting Standards—In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. As of June 30, 2024, the Company has not adopted this ASU. The adoption of this ASU is expected to only impact disclosures with respect to the Company’s consolidated financial statements.

STIRLING HOTELS & RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topics 740): Improvements to Income Tax Disclosures to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. The amendments in this ASU may be applied prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or the amendments may be applied retrospectively by providing the revised disclosures for all periods presented. As of June 30, 2024, the Company has not adopted this ASU. The adoption of this ASU is expected to only impact disclosures with respect to the Company’s consolidated financial statements.

4. Related Party Transactions

Certain affiliates of the Company, including the Advisor, will receive fees and compensation in connection with the offering and ongoing management of the assets of the Company.

Advisory Agreement—The Company entered into an advisory agreement (the “Advisory Agreement”) with the Advisor. Pursuant to the advisory agreement between the Company, Stirling OP, Stirling TRS Corporation (“Stirling TRS”), a Delaware corporation and the Company’s taxable REIT subsidiary, and the Advisor, the Advisor is responsible for sourcing, evaluating and monitoring the Company’s investment opportunities and making decisions related to the acquisition, management, financing and disposition of the Company’s assets, in accordance with the Company’s investment objectives, guidelines, policies and limitations, subject to oversight by the Company’s board of directors.

The Advisor will be paid an annual management fee (payable monthly in arrears) of 1.25% of aggregate NAV represented by the Class T, Class S, Class D and Class I shares. Additionally, to the extent Stirling OP issues Class T, Class S, Class D or Class I operating partnership units to parties other than the Company, Stirling OP will pay the Advisor a management fee equal to 1.25% of the aggregate NAV of Stirling OP attributable to such Class T, Class S, Class D and Class I operating partnership units not held by the Company per annum payable monthly in arrears. No management fee will be paid with respect to Class E shares or Class E units of Stirling OP. The management fee is allocated on a class-specific basis and borne by all holders of the applicable class. The management fee will be paid, at the Advisor’s election, in cash, Class E shares or Class E units of Stirling OP. If the Advisor elects to receive any portion of its management fee in Class E shares or Class E units of Stirling OP, the Company may be obligated to repurchase such Class E shares or Class E units from the Advisor at a later date. Such repurchases will be outside the Company’s share repurchase plan and thus will not be subject to the repurchase limits of the share repurchase plan or any early repurchase deduction.

The Company does not intend to pay the Advisor any acquisition or other similar fees in connection with making investments. The Company will, however, reimburse the Advisor for out-of-pocket expenses in connection with the selection and acquisition of properties and real estate-related debt, whether or not such investments are acquired, and make payments to third parties in connection with making investments.

In addition to organization and offering expense and acquisition expense reimbursements, the Company will reimburse the Advisor for out-of-pocket costs and expenses it incurs in connection with the services it provides to the Company, including, but not limited to, (i) the actual cost of goods and services used by the Company and obtained from third parties, including fees paid to administrators, consultants, attorneys, technology providers and other service providers, and brokerage fees paid in connection with the purchase and sale of investments, (ii) expenses of managing and operating the Company’s properties, whether payable to an affiliate or a non-affiliated person, and (iii) expenses related to personnel of the Advisor performing services for the Company other than those who provide investment advisory services or serve as executive officers of the Company.

Stirling OP Agreement—Upon the amendment and restatement of the agreement of limited partnership of Stirling OP (the “Stirling OP Agreement”), the Special Limited Partner will hold a performance participation interest in Stirling OP that entitles it to receive an allocation from Stirling OP equal to 12.5% of the annual Total Return, subject to a 5% annual Hurdle Amount and a High-Water Mark, with a Catch-Up (each term as will be defined in the Stirling OP Agreement). Such allocation will be measured on a calendar basis, made quarterly and accrued monthly. Class E units of Stirling OP will not be subject to the performance participation allocation. Distributions on the performance participation interest may be payable in cash or Class E units at the election of the Special Limited Partner. To the extent that the Special Limited Partner elects to receive such distributions in Class E units, the Special Limited Partner may request that Stirling OP repurchase such Class E units for cash at the then-current NAV per unit. Repurchase requests for Class E units will not be subject to the one-year hold period provided for other limited partners.

STIRLING HOTELS & RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Hospitality”), a wholly owned subsidiary of Ashford, to provide hotel and restaurant management services for certain of the Company’s hotels. For providing these services, Remington Hospitality will receive a monthly base fee on assets managed that is equal to the greater of (i) $16,897 (to be increased annually based on any increases in CPI over the preceding annual period) or (ii) 3% of a property’s gross revenues. Remington Hospitality may also earn an incentive management fee that is equal to the lesser of (i) 1% of a hotel’s gross revenues for each fiscal year and (ii) the amount by which the actual house profit exceeds the budgeted house profit determined on a property-by-property basis.

Master Project Management Agreement—The Company entered into a master project management agreement (the “Master Project Management Agreement”) with Premier Project Management LLC (“Premier”), a subsidiary of Ashford, to provide design, construction, architecture, development or project management, procurement and other project-related services to the Company and its properties. For providing these services, Premier may earn a project management fee equal to 4% of the total project costs associated with the implementation of the capital improvement budget, an architecture fee that is 6.5% of the total construction costs, an interior design fee that is 6.0% of the purchase price of furniture, fixtures and equipment (“FFE”), a procurement fee of 8.0% of the purchase price of FFE (if the purchase price of such FFE exceeds $2,000,000 for a specific hotel in a calendar year, the procurement fee shall be reduced to 6.0% for all FFE purchased in excess of $2,000,000), a construction fee of 10% of the total construction costs (for projects without a general contractor), a freight expediting fee that is 8% of the cost of expediting FFE, a warehousing fee that is 8% of the cost of warehousing goods delivered to the job site and a development fee of 4% on the total project costs associated with a development project.

Dealer Manager Agreement—The Company entered into a Dealer Manager Agreement with the Dealer Manager. Under the terms of the Dealer Manager Agreement, the Dealer Manager serves as the dealer manager, and certain participating broker-dealers solicit capital, for our private offering of Class T shares, Class S shares, Class D shares and Class I shares.

The Dealer Manager is entitled to receive upfront selling commissions of up to 3.0%, and upfront dealer manager fees of 0.5%, of the transaction price of each Class T share sold in the primary offering; however such amounts may vary based on agreements between the Dealer Manager and certain selected dealers provided that the sum will not exceed 3.5% of the transaction price. The Dealer Manager is entitled to receive upfront selling commissions of up to 3.5% of the transaction price of each Class S share sold in the primary offering. The Dealer Manager is entitled to receive upfront selling commissions of up to 1.5% of the transaction price of each Class D share sold in the primary offering. The Dealer Manager anticipates that all or a portion of the upfront selling commissions and dealer manager fees will be retained by, or reallowed (paid) to, selected dealers.

No upfront selling commissions or dealer manager fees will be paid with respect to purchases of Class I shares or shares of any class sold pursuant to our distribution reinvestment plan.

From time-to-time Ashford Securities LLC, a subsidiary of Ashford, may serve as the Dealer Manager for future public or private programs with those offerings conducted concurrently with our offering. As a result, our sponsor and the Dealer Manager may face conflicts of interest arising from potential competition with these other programs for investors and investment capital.

Miscellaneous Agreements—Pursuant to the terms of the Advisory Agreement, and provided that the Company has the right to control the decision of the award of the applicable contract, Remington Hospitality, Premier, and other affiliates of the Advisor have exclusive rights to provide the applicable products and services to the Company and Stirling OP.

5. Investment in Stirling REIT OP, LP

The following tables summarizes the condensed consolidated balance sheets and our investment in Stirling OP as of June 30, 2024 and December 31, 2023, and the condensed consolidated statements of operations and our equity in earnings (loss) of Stirling OP for the three and six months ended June 30, 2024:

Stirling REIT OP, LP

Condensed Consolidated Balance Sheets


	June 30, 2024		December 31, 2023
Total Assets	$	47,454,000	$	47,845,000
Total Liabilities	35,904,000		33,452,000

Total partners’ capital of Stirling REIT OP, LP	11,550,000		14,393,000
Total liabilities and partners’ capital of Stirling REIT OP, LP	$	47,454,000	$	47,845,000

Our investment in Stirling REIT OP, LP	$	35,492	$	24

STIRLING HOTELS & RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Stirling REIT OP, LP

Condensed Consolidated Statements of Operations


	Three Months Ended June 30, 2024		Six Months Ended June 30, 2024
Total revenue	$	4,171,000	$	7,793,000
Total operating expenses	4,672,000		9,294,000
Operating income (loss)	(501,000)		(1,501,000)
Interest expense and amortization of loan costs	(728,000)		(1,453,000)
Interest income	24,000		40,000
Income tax (expense) benefit	—		—
Net income (loss)	$	(1,205,000)	$	(2,914,000)


Our equity in earnings (loss) of Stirling REIT OP, LP	$	(592)	$	(760)

6. Economic Dependency

The Company will be dependent on the Advisor and its affiliates for certain services that are essential to it, including the sale of the Company’s shares of common stock, acquisition and disposition decisions, hotel management, and certain other responsibilities. In the event that the Advisor and its affiliates are unable to provide such services, the Company would be required to find alternative service providers.

7. Commitments and Contingencies

The Company may be subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. As of June 30, 2024, the Company was not subject to any material litigation nor was the Company aware of any material litigation threatened against it.

8. Subsequent Event

On July 25, 2024, the Company’s board of directors declared a distribution for the month of July of $0.1042 per unit/share, less certain expenses for outstanding OP unitholders and common stockholders of record as of the close of business on July 31, 2024, to be paid on August 15, 2024.

On July 30, 2024, the Company entered into an Amended and Restated Dealer Manager Agreement (the “A&R Agreement”) with the Dealer Manager to reflect that the distribution fee paid on the Company’s Class T, Class S and Class D shares sold in its offering will cease when underwriting compensation paid by the Company reaches the 8.75% limit provided for in the A&R Agreement (or such lower limit as set forth in any applicable agreement between the Dealer Manager and a participating dealer at the time the shares were issued). Previously the limit was calculated irrespective of the source of funding for the fees.

On August 1, 2024, the Company filed Articles of Amendment with the Maryland State Department of Assessments and Taxation specifying that the limit at which Class T, Class S and Class D shares convert into an equivalent aggregate net asset value of Class I shares is determined based on upfront selling commissions, dealer manager fees and distribution fees paid by the Company. Previously the limit was calculated irrespective of the source of funding for the fees. The Articles of Amendment were effective upon filing.

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References herein to “Stirling Hotels & Resorts”, the “Company,” “we,” “us,” or “our” refer to Stirling Hotels & Resorts, Inc. and its subsidiaries unless the context specifically requires otherwise. References herein to "Stirling OP" or "our operating partnership" refer to Stirling REIT OP, LP. References herein to "Advisor" refer to Stirling REIT Advisors LLC. References herein to "Ashford" refer to Ashford Inc. and its subsidiaries unless the context specifically requires otherwise. References herein to "Ashford Trust" refer to Ashford Hospitality Trust, Inc. and its subsidiaries unless the context specifically requires otherwise.

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q.

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions, or the negatives thereof. These may include our financial projections and estimates and their underlying assumptions, statements about plans, objectives and expectations with respect to future operations, statements with respect to acquisitions, statements regarding future performance and statements regarding identified but not yet closed acquisitions. Such forward-looking statements are inherently uncertain and there are or may be important factors that could cause actual outcomes or results to differ materially from those indicated in such statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Form 10-Q. Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

Overview

Stirling Hotels & Resorts, Inc. was formed primarily to acquire and own a diverse portfolio of stabilized income-producing hotels and resorts across all chain scales located primarily in the United States that are operated under widely recognized brands licensed from hotel franchisors such as Marriott, Hilton, Hyatt, and Intercontinental Hotel Group, and to a lesser extent, invest in real estate debt secured by hotels and resorts and develop hotels and resorts. The Company is indirectly the sole general partner and a limited partner of Stirling OP. We are externally managed by our Advisor, an affiliate of Ashford.

The Company was formed on September 1, 2023 as a Maryland corporation and intends to qualify as a REIT for U.S. federal income tax purposes beginning with our taxable year ending December 31, 2024. Until that time, the Company will be subject to taxation at regular corporate rates under the Internal Revenue Code. If the Company qualifies for taxation as a REIT, we generally will not be subject to U.S. federal income taxes on our taxable income to the extent we annually distribute substantially all of our net taxable income to shareholders and maintain our qualification as a REIT.

In December 2023 the Company commenced a continuous private offering to accredited investors, pursuant to which it is offering for sale up to $1,000,000,000 in shares of common stock consisting of up to $900,000,000 in shares in the primary offering and up to $100,000,000 in shares pursuant to the distribution reinvestment plan.

On December 6, 2023, Stirling OP acquired four hotel properties and assumed a mortgage loan secured by the four hotel properties (the “Initial Portfolio”) from Ashford Hospitality Limited Partnership (“Ashford Hospitality OP”) and Ashford TRS Corporation (“Ashford Hospitality TRS,” and together with Ashford Hospitality OP, the “Anchor Investor”), each a subsidiary of Ashford Trust, in exchange for Class I units of Stirling OP pursuant to the terms of the contribution agreement (the “Contribution Agreement”), by and among Stirling OP and the Anchor Investor. The gross contribution value was $56.2 million which represented the appraised value of the Initial Portfolio as provided by LW Hospitality Advisors, an independent third-party appraiser engaged to value the Initial Portfolio with additional input and oversight by Altus Group U.S. Inc. and the Advisor. Additionally, Stirling OP assumed a mortgage loan with a carrying value of $30.2 million. The acquisition also included $9.0 million of net working capital and reserves and was subject to customary post-closing adjustments resulting in a net contribution value of the Initial Portfolio of $35.0 million. During the three months ended March 31, 2024, estimated working capital and reserves were finalized resulting in the Anchor Investor returning 4,423 Class I units totaling approximately $111,000 to Stirling OP. The resulting final net contribution value of the Initial Portfolio was $34.9 million.

Other than our investment in Stirling OP, we had neither engaged in any operations nor generated any revenues through June 30, 2024. Our entire activity from inception through June 30, 2024 primarily consisted of investment in Stirling OP and allocation of income (loss) from Stirling OP. When we receive proceeds from the sale of shares of our common stock in our

continuous private offering, we will contribute such proceeds to Stirling OP and receive common units in Stirling OP that correspond to the classes of our shares sold. On September 5, 2023 we were capitalized with an initial investment of $25 from our initial stockholder (at such time) to us, which we contributed to Stirling OP and, in exchange, we received one Class I common unit from Stirling OP. We have sold an additional 1,370 Class I common shares, 19 Class D common shares, 19 Class S common shares and 19 Class T common shares in the ongoing private offering, the proceeds of which we contributed to Stirling OP and, in exchange, we received an additional 1,370 Class I common units, 19 Class D common units, 19 Class S common units and 19 Class T common units from Stirling OP. We account for the common units acquired in Stirling OP as an equity method investment during any period our investment in Stirling OP is not considered significant to Stirling OP and will consolidate Stirling OP at such time our investment in Stirling OP is considered significant to Stirling OP (based on GAAP), and thereafter present the results of operations on a consolidated basis. We expect to invest our capital and all our offering proceeds in Stirling OP and hold no other assets other than Stirling OP common units. We therefore expect to eventually consolidate Stirling OP, and we have included the unaudited consolidated and combined consolidated financial statements of Stirling OP in Part II Item 5 of this Quarterly Report on Form 10-Q, as we believe a discussion of the performance and results of operations of Stirling OP would be meaningful to investors as our cash flows and operating results are driven by Stirling OP, and subsequent invested capital will be significant to the Company.

Current Market Conditions and Related Risks and Opportunities

The Company’s business is materially affected by conditions in the financial markets and economic conditions in the United States. Rising interest rates and a reduction in the availability of financing, especially from banks, has led to greater spreads between the prices sought by sellers and buyers, which may adversely affect the value of our real estate assets. However, given that we are seeking to raise and invest substantial equity capital, we believe that market stresses could lead to attractive acquisition opportunities. While higher interest rates make financing more expensive, we are fortunate that our Initial Portfolio locked in a mortgage loan at a favorable fixed interest rate.

Recent Developments

Hotel Portfolio

The following table presents certain information related to Stirling OP’s hotel properties as of June 30, 2024:



Hotel Property	Location	Service Type	Total Rooms	% Owned	Owned Rooms
Fee Simple Properties































Hampton Inn	Buford, GA	Select-service	92	100	92












SpringHill Suites by Marriott	Buford, GA	Select-service	97	100	97



























Marriott Residence Inn	Manchester, CT	Select-service	96	100	96
Marriott Residence Inn	Jacksonville, FL	Select-service	120	100	120





























Total			405		405

Results of Operations

Since the Company had no significant assets or operations prior to December 6, 2023, the Company does not have any results of operations for the three and six months ended June 30, 2023. The following results of operations for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 represent the operations of Stirling OP.

For periods prior to December 6, 2023, the date of Stirling OP’s acquisition of the Initial Portfolio, the accompanying historical combined consolidated financial statements of the Initial Portfolio have been “carved out” of Ashford Trust’s consolidated financial statements and reflect certain assumptions and allocations. These hotels are under Ashford Trust’s common control. The combined consolidated financial statements were prepared using the financial position and results of operations of the entities set forth above after adjustments for certain ownership related activities that have been historically accounted for by Ashford Trust. These ownership activities include mortgage indebtedness associated with the four hotels, debt-related expenses and other owner related expenses. In addition, the combined consolidated statements of operations include allocations of advisory service fees and corporate general and administrative expenses from Ashford Trust, which in the opinion of management, are reasonable. The historical financial information is not necessarily indicative of the Company’s future results of operations, financial position and cash flows subsequent to Stirling OP’s acquisition of the Initial Portfolio.

Key Indicators of Operating Performance

Stirling OP uses a variety of operating and other information to evaluate the operating performance of its business. These key indicators include financial information that is prepared in accordance with GAAP as well as other financial measures that are non-GAAP measures. In addition, it uses other information that may not be financial in nature, including statistical information and comparative data. Stirling OP uses this information to measure the operating performance of its individual hotels, groups of hotels and/or business as a whole. Stirling OP also uses these metrics to evaluate the hotels in its portfolio and potential acquisitions to determine each hotel’s contribution to cash flow and its potential to provide attractive long-term total returns. These key indicators include:

•Occupancy—Occupancy means the total number of hotel rooms sold in a given period divided by the total number of rooms available. Occupancy measures the utilization of Stirling OP hotels’ available capacity. Stirling OP uses occupancy to measure demand at a specific hotel or group of hotels in a given period.

•ADR—ADR means average daily rate and is calculated by dividing total hotel rooms revenues by total number of rooms sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. Stirling OP uses ADR to assess the pricing levels that it is able to generate.

•RevPAR—RevPAR means revenue per available room and is calculated by multiplying ADR by the average daily occupancy. RevPAR is one of the commonly used measures within the hotel industry to evaluate hotel operations. RevPAR does not include revenues from food and beverage sales or parking, telephone or other non-rooms revenues generated by the property. Although RevPAR does not include these ancillary revenues, it is generally considered the leading indicator of core revenues for many hotels. Stirling OP also uses RevPAR to compare the results of its hotels between periods and to analyze results of its comparable hotels (comparable hotels represent hotels it has owned for the entire period). RevPAR improvements attributable to increases in occupancy are generally accompanied by increases in most categories of variable operating costs. RevPAR improvements attributable to increases in ADR are generally accompanied by increases in limited categories of operating costs, such as management fees and franchise fees.

RevPAR changes that are primarily driven by changes in occupancy have different implications for overall revenues and profitability than changes that are driven primarily by changes in ADR. For example, an increase in occupancy at a hotel would lead to additional variable operating costs (including housekeeping services, utilities and room supplies) and could also result in increased other operating department revenue and expense. Changes in ADR typically have a greater impact on operating margins and profitability as they do not have a substantial effect on variable operating costs.

Occupancy, ADR and RevPAR are commonly used measures within the lodging industry to evaluate operating performance. RevPAR is an important statistic for monitoring operating performance at the individual hotel level and across Stirling OP’s entire business. Stirling OP evaluates individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a regional and company-wide basis. ADR and RevPAR include only rooms revenue. Rooms revenue is dictated by demand (as measured by occupancy), pricing (as measured by ADR) and its available supply of hotel rooms.

Principal Factors Affecting Stirling OP’s Results of Operations

The principal factors affecting Stirling OP’s operating results include overall demand for hotel rooms compared to the supply of available hotel rooms, and the ability of its contracted hotel management companies to increase or maintain revenues while controlling expenses.

Demand—The demand for lodging, including business travel, is directly correlated to the overall economy; as GDP increases, lodging demand typically increases. Historically, periods of declining demand are followed by extended periods of relatively strong demand, which typically occurs during the growth phase of the lodging cycle.

Supply—The development of new hotels is driven largely by construction costs, the availability of financing and expected performance of existing hotels. Short-term supply is also expected to be below long-term averages. While the industry is expected to have supply growth below historical averages, Stirling OP may experience supply growth, in certain markets, in excess of national averages that may negatively impact performance.

Stirling OP expects that its ADR, occupancy and RevPAR performance will be impacted by macroeconomic factors such as national and local employment growth, personal income and corporate earnings, GDP, consumer confidence, office vacancy rates and business relocation decisions, airport and other business and leisure travel, new hotel construction, the pricing strategies of competitors and currency fluctuations. In addition, its ADR, occupancy and RevPAR performance are dependent on the continued success of the Marriott and Hilton brands.

Revenue—Substantially all of Stirling OP’s revenue is derived from the operation of hotels. Specifically, its revenue is comprised of:

•Rooms revenue: Occupancy and ADR are the major drivers of rooms revenue. Rooms revenue accounts for the substantial majority of Stirling OP’s total revenue.

•Other hotel revenue: Occupancy and the nature of the property are the main drivers of other ancillary revenue, such as telecommunications, parking and leasing services.

Hotel Operating Expenses—The following presents the components of Stirling OP’s hotel operating expenses:

•Rooms expense: These costs include housekeeping wages and payroll taxes, reservation systems, room supplies, laundry services and front desk costs. Like rooms revenue, occupancy is the major driver of rooms expense and, therefore, rooms expense has a significant correlation to rooms revenue. These costs can increase based on increases in salaries and wages, as well as the level of service and amenities that are provided.

•Management fees: Base management fees are computed as a percentage of gross revenues. Incentive management fees generally are paid when operating profits exceed certain threshold levels.

•Other hotel expenses: These expenses include labor and other costs associated with the other operating department revenues, as well as labor and other costs associated with administrative departments, franchise fees, sales and marketing, repairs and maintenance and utility costs.

Most categories of variable operating expenses, including labor costs such as housekeeping, fluctuate with changes in occupancy. Increases in occupancy are accompanied by increases in most categories of variable operating expenses, while increases in ADR typically only result in increases in limited categories of operating costs and expenses, such as franchise fees, management fees and credit card processing fee expenses, which are based on hotel revenues. Thus, changes in ADR have a more significant impact on operating margins than changes in occupancy.

Comparison of the Three Months Ended June 30, 2024 and 2023

The following table summarizes the changes in key line items from Stirling OP’s consolidated and combined consolidated statements of operations for the three months ended June 30, 2024 and 2023 (dollars in thousands):


	Three Months Ended June 30,				Favorable (Unfavorable)
	2024		2023		$ Change		% Change
Revenue
Rooms	$	4,112	$	4,487	$	(375)	(8.4)	%

Other hotel revenue	59		64		(5)		(7.8)	%


Total hotel revenue	4,171		4,551		(380)		(8.3)	%
Expenses
Hotel operating expenses:
Rooms	974		990		16		1.6	%

Other expenses	1,495		1,670		175		10.5	%
Management fees	185		183		(2)		(1.1)	%
Total hotel expenses	2,654		2,843		189		6.6	%
Property taxes, insurance and other	287		238		(49)		(20.6)	%
Depreciation and amortization	1,167		923		(244)		(26.4)	%



Advisory service fee	238		134		(104)		(77.6)	%
Corporate, general and administrative	326		54		(272)		(503.7)	%

Operating income (loss)	(501)		359		(860)		(239.6)	%

Interest income	24		—		24

Interest expense and amortization of loan costs	(728)		(406)		(322)		(79.3)	%




Income tax benefit (expense)	—		(177)		177		100.0	%



Net income (loss)	(1,205)		(224)		(981)		(437.9)	%

The following table illustrates the key performance indicators of the four hotel properties included in Stirling OP’s results of operations:


	Three Months Ended June 30,
		2024			2023
RevPAR (revenue per available room)		$	111.56		$	121.75
Occupancy		76.78		%	81.74		%
ADR (average daily rate)		$	145.29		$	148.95
Rooms revenue (in thousands)		$	4,112		$	4,487
Total hotel revenue (in thousands)		$	4,171		$	4,551

Net Income (Loss). Net loss increased $1.0 million, from $224,000 for the three months ended June 30, 2023 (the “2023 quarter”) to $1.2 million for the three months ended June 30, 2024 (the “2024 quarter”) as a result of the factors discussed below.

Rooms Revenue. Rooms revenue decreased $375,000, or 8.4%, to $4.1 million during the 2024 quarter compared to the 2023 quarter. During the 2024 quarter, we experienced a 496 basis point decrease in occupancy and a 2.5% decrease in room rates.

Fluctuations in rooms revenue between the 2024 quarter and the 2023 quarter are a result of the changes in occupancy and ADR between the 2024 quarter and the 2023 quarter as reflected in the table below (dollars in thousands):


	Favorable (Unfavorable)
Hotel Property	Rooms Revenue		Occupancy (change in bps)	ADR (change in %)

Residence Inn Manchester (1)	$	(145)	(986)	(0.8)	%
Hampton Inn Buford (2)	(151)		(865)	(3.7)	%
SpringHill Suites Buford	33		45	2.9	%
Residence Inn Jacksonville	(112)		(257)	(6.4)	%
Total	$	(375)	(496)	(2.5)	%

_______

(1) The decline in rooms revenue and occupancy in the 2024 quarter compared to the 2023 quarter was attributable to the ongoing full renovation of the property, which is expected to be completed later in 2024.

(2) The decline in rooms revenue in 2024 quarter compared to 2023 quarter was driven by particularly strong results in 2023 quarter, when inclement weather in the region allowed the property to realize unseasonably high occupancy and ADR.

Other Hotel Revenue. Other hotel revenue, which consists mainly of Internet access, parking, and spa revenue, decreased $5,000, or 7.8%, to $59,000. This decrease is primarily attributable to a decrease of $6,000 at three hotel properties, partially offset by an increase of $1,000 at SpringHill Suites Buford.

Rooms Expense. Rooms expense decreased $16,000, or 1.6%, to $974,000 in the 2024 quarter compared to the 2023 quarter. The decrease is attributable to a decrease of $34,000 at two hotel properties, partially offset by an increase of $18,000 at SpringHill Suites Buford and Residence Inn Jacksonville. Rooms margin was 76.3% in the 2024 quarter and 77.9% in the 2023 quarter.

Other Operating Expenses. Other operating expenses decreased $175,000, or 10.5%, to $1.5 million in the 2024 quarter compared to the 2023 quarter. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees.

The Initial Portfolio experienced a decrease in indirect expenses of $175,000. Direct expenses were 0.5% of total hotel revenue in the 2024 quarter and 0.4% in the 2023 quarter. The decrease in indirect expenses was attributable to decreases in (i) general and administrative costs of $86,000; (ii) repairs and maintenance of $48,000; (iii) marketing costs of $38,000; and (iv) $12,000 in incentive management fees. These decreases were partially offset by an increase in energy costs of $9,000.

Property Taxes, Insurance and Other. Property taxes, insurance and other expense increased $49,000, or 20.6%, to $287,000 during the 2024 quarter compared to the 2023 quarter, which was primarily due to higher property insurance costs of $38,000, and higher miscellaneous tax expense of $11,000.

Depreciation and Amortization. Depreciation and amortization increased $244,000, or 26.4%, to $1.2 million during the 2024 quarter compared to the 2023 quarter as a result of higher fixed asset balances in the 2024 quarter related to renovations.

Advisory Services Fee. Advisory services fee was $238,000 in 2024 quarter that was comprised of base advisory fee of $195,000 and reimbursable expenses of $43,000.

In the 2023 quarter, advisory services fee consisted of an allocated advisory services fee of $134,000 from Ashford Trust.

Corporate, General and Administrative. Corporate, general and administrative expense of $326,000 in the 2024 quarter consisted of legal, accounting and other professional fees of $271,000, equity-based compensation of $27,000 and miscellaneous expenses of $28,000. In the 2023 quarter, corporate, general and administrative expense of $54,000 was comprised of allocated expenses from Ashford Trust.

Interest Income. Interest income was $24,000 for the 2024 quarter.

Interest Expense and Amortization of Loan Costs. Interest expense and amortization of discounts and loan costs increased $322,000, or 79.3%, to $728,000 during the 2024 quarter compared to the 2023 quarter, due primarily to a higher stated interest rate on current mortgage loans compared to the stated interest rates on the mortgage loans that were refinanced, partially offset by a lower principal balance. On November 16, 2023, Ashford Trust refinanced the $6.2 million mortgage loan secured by the Residence Inn Manchester, the $9.1 million mortgage loan secured by the Residence Inn Jacksonville, and the $21.9 million mortgage loan secured by the Hampton Inn Buford and the SpringHill Suites Buford. The new mortgage loan totaled $30.2 million.

Income Tax (Expense) Benefit. Income tax expense decreased $177,000, from $177,000 in the 2023 quarter to $0 in the 2024 quarter. This decrease was primarily due to a decrease in the profitability of the Stirling TRS entities in the 2024 quarter compared to the profitability of the Ashford TRS entities as it relates to the Initial Portfolio in the 2023 quarter.

Comparison of the Six Months Ended June 30, 2024 and 2023

The following table summarizes the changes in key line items from Stirling OP’s consolidated and combined consolidated statements of operations for the six months ended June 30, 2024 and 2023 (dollars in thousands):


	Six Months Ended June 30,			Favorable (Unfavorable)
		2024		2023		$ Change		% Change
Revenue
Rooms		$	7,669	$	8,356	$	(687)	(8.2)	%

Other hotel revenue		124		124		—		—	%


Total hotel revenue		7,793		8,480		(687)		(8.1)	%
Expenses
Hotel operating expenses:
Rooms		1,914		1,915		1		0.1	%

Other expenses		2,970		3,164		194		6.1	%
Management fees		358		358		—		—	%
Total hotel expenses		5,242		5,437		195		3.6	%
Property taxes, insurance and other		521		446		(75)		(16.8)	%
Depreciation and amortization		2,119		1,827		(292)		(16.0)	%



Advisory service fee		542		279		(263)		(94.3)	%
Corporate, general and administrative		870		83		(787)		(948.2)	%

Operating income (loss)		(1,501)		408		(1,909)		(467.9)	%

Interest income		40		—		40

Interest expense and amortization of loan costs		(1,453)		(810)		(643)		(79.4)	%




Income tax benefit (expense)		—		(257)		257		100.0	%



Net income (loss)		$	(2,914)	$	(659)	$	(2,255)	(342.2)	%

The following table illustrates the key performance indicators of the four hotel properties included in Stirling OP’s results of operations:


	Six Months Ended June 30,
		2024			2023
RevPAR (revenue per available room)		$	104.04		$	113.99
Occupancy		72.54		%	77.83		%
ADR (average daily rate)		$	143.43		$	146.46
Rooms revenue (in thousands)		$	7,669		$	8,356
Total hotel revenue (in thousands)		$	7,793		$	8,480

Net Income (Loss). Net loss increased $2.3 million from $659,000 for the six months ended June 30, 2023 (the “2023 period”) to $2.9 million for the six months ended June 30, 2024 (the “2024 period”) as a result of the factors discussed below.

Rooms Revenue. Rooms revenue decreased $687,000, or 8.2%, to $7.7 million during the 2024 period compared to the 2023 period. During the 2024 period, the Initial Portfolio experienced a 2.1% decrease in room rates and a 529 basis point decrease in occupancy.

Fluctuations in rooms revenue between the 2024 period and the 2023 period are a result of the changes in occupancy and ADR between 2024 and 2023 as reflected in the table below (dollars in thousands):


	Favorable (Unfavorable)
Hotel Property	Rooms Revenue		Occupancy (change in bps)	ADR (change in %)

Residence Inn Manchester (1)	$	(371)	(1,589)	2.0	%
Hampton Inn Buford (2)	(365)		(996)	(6.0)	%
SpringHill Suites Buford	178		703	—	%
Residence Inn Jacksonville	(129)		(320)	(1.8)	%




Total	$	(687)	(529)	(2.1)	%

_______

(1) The decline in rooms revenue and occupancy in the 2024 period compared to the 2023 period was attributable to the ongoing full renovation of the property, which is expected to be completed later in 2024.

(2) The decline in rooms revenue in the 2024 period compared to the 2023 period was driven by particularly strong results in the 2023 period, when inclement weather in the region allowed the property to realize unseasonably high occupancy and ADR.

Other Hotel Revenue. Other hotel revenue, which consists of various miscellaneous revenues, was $124,000 for both the 2024 period and the 2023 period.

Rooms Expense. Rooms expense was $1.9 million in both the 2024 period and the 2023 period. Rooms margin was 75.0% in the 2024 period and 77.1% in the 2023 period.

Other Operating Expenses. Other operating expenses decreased $194,000, or 6.1%, to $3.0 million in the 2024 period compared to the 2023 period. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees.

The Initial Portfolio experienced a decrease in indirect expenses of $194,000. Direct expenses were 0.5% of total hotel revenue in the 2024 period and 0.5% in the 2023 period. The decrease in indirect expenses was attributable to decreases in (i) general and administrative costs of $73,000; (ii) marketing costs of $64,000; and (iii) repairs and maintenance of $57,000. These decreases were partially offset by an increase in energy costs of $2,000.

Property Taxes, Insurance and Other. Property taxes, insurance and other expense increased $75,000 or 16.8%, to $521,000 in the 2024 period compared to the 2023 period, which was primarily due to higher property insurance costs of $78,000, partially offset by lower miscellaneous tax expense of $3,000.

Depreciation and Amortization. Depreciation and amortization increased $292,000 or 16.0%, to $2.1 million in the 2024 period compared to the 2023 period as a result of higher fixed asset balances in the 2024 period.

Advisory Services Fee. Advisory services fee was $542,000 in the 2024 period that was comprised of base advisory fee of $452,000 and reimbursable expenses of $90,000. In the 2023 period, advisory services fee consisted of an allocated advisory services fee of $279,000 from Ashford Trust.

Corporate, General and Administrative. Corporate, general and administrative expense of $870,000 in the 2024 period consisted of legal, accounting and other professional fees of $782,000, miscellaneous expenses of $48,000 and equity based compensation of $40,000. In the 2023 period, corporate, general and administrative expense of $83,000 was comprised of allocated expenses from Ashford Trust.

Interest Income. Interest income was $40,000 in the 2024 period.

Interest Expense and Amortization of Loan Costs. Interest expense and amortization of loan costs increased $643,000 or 79.4% to $1.5 million in the 2024 period compared to the 2023 period, due primarily to a higher stated interest rate on current mortgage loans compared to the stated interest rates on the mortgage loans that were refinanced, partially offset by a lower principal balance. On November 16, 2023, Ashford Trust refinanced the $6.2 million mortgage loan secured by the Residence Inn Manchester, the $9.1 million mortgage loan secured by the Residence Inn Jacksonville, and the $21.9 million mortgage loan secured by the Hampton Inn Buford and the SpringHill Suites Buford. The new mortgage loan totaled $30.2 million.

Income Tax (Expense) Benefit. Income tax expense decreased from $257,000 in the 2023 period to $0 in the 2024 period. This decrease was primarily due to a decrease in the profitability of the Stirling TRS entities in the 2024 period compared to the profitability of the Ashford TRS entities as it relates to the Initial Portfolio in the 2023 period.

Liquidity and Capital Resources

Liquidity

We believe that Stirling OP has sufficient liquidity to operate its business. Stirling OP’s cash and cash equivalents as of June 30, 2024 was approximately $3.8 million. In addition to Stirling OP’s immediate liquidity, we expect to obtain incremental liquidity through the sale of our common shares in our ongoing private offering. In addition, Stirling OP may incur indebtedness secured by its real estate investments, borrow money through unsecured financings, or incur other forms of indebtedness. Stirling OP may also generate incremental liquidity through the sale of real estate.

Our primary liquidity needs are to fund future investments, make distributions to our stockholders, repurchase common shares pursuant to our share repurchase plan, pay operating expenses, fund capital expenditures, and repay indebtedness. Our operating expenses will include, among other things, the management fee Stirling OP pays to the Advisor and the performance participation allocation that Stirling OP pays to the Special Limited Partner, both of which will impact our liquidity to the extent the Advisor or the Special Limited Partner elect to receive such payments in cash, or subsequently redeem common shares or common units previously issued to them in lieu of cash.

We expect that our cash needs for acquisitions and other capital investments will be funded primarily from the sale of common shares and through the incurrence or assumption of debt. Other potential future sources of capital include secured or unsecured financings from banks or other lenders and proceeds from the sale of assets. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures.

We believe that our current liquidity position is sufficient to meet the need of our expected investment and operating activity.

Stirling OP’s cash and cash equivalents are primarily comprised of corporate cash held at commercial banks in Insured Cash Sweep (“ICS”) accounts, which are fully insured by the FDIC. Stirling OP’s cash and cash equivalents also includes property-level operating cash deposited with commercial banks that have been designated as a Global Systemically Important Bank (“G-SIB”) by the Financial Stability Board (“FSB”) and a small amount deposited with other commercial banks.

Capital Resources

As of August 9, 2024, Stirling OP’s indebtedness included a single mortgage loan secured by all four of its hotel properties, which carries a fixed interest rate of 8.51% and matures in December 2028.

In December 2023, the Company commenced the offering of its Class I shares through a continuous private offering. On February 13, 2024, we commenced issuing Class D, Class S, and Class T shares in the offering. As of August 9, 2024, we have sold 1,370 Class I common shares, 19 Class D common shares, 19 Class S common shares and 19 Class T common shares in the ongoing private offering.

Sources and Uses of Cash

Our and Stirling OP’s principal sources of funds to meet cash requirements include cash on hand, cash flow from operations, capital market activities, property refinancing proceeds and asset sales. Additionally, our and Stirling OP’s principal uses of funds are expected to include possible operating shortfalls, owner-funded capital expenditures, dividends, new investments, and debt interest and principal payments. Items that impacted Stirling OP’s cash flow and liquidity during the periods indicated are summarized as follows:

Net Cash Flows Provided by (Used in) Operating Activities. Net cash flows provided by operating activities, pursuant to our consolidated statements of cash flows, which includes changes in balance sheet items, were $333,000 and $1.4 million for the six months ended June 30, 2024 and 2023, respectively. Cash flows provided by (used in) operations were impacted by changes in hotel operations as well as the timing of collecting receivables from hotel guests, paying vendors, settling with related parties and settling with hotel managers.

Net Cash Flows Provided by (Used in) Investing Activities. For the six months ended June 30, 2024, net cash flows used in investing activities were $3.5 million, which consisted of $3.5 million for capital improvements made to various hotel properties.

For the six months ended June 30, 2023, net cash flows used in investing activities were $3.1 million, which consisted of $3.1 million for capital improvements made to various hotel properties.

Net Cash Flows Provided by (Used in) Financing Activities. For the six months ended June 30, 2024, net cash flows provided by financing activities were $35,000, which consisted of proceeds of $37,000 from the issuance of common units, partially offset by $2,000 of distributions paid.

For the six months ended June 30, 2023, net cash flows provided by financing activities were $2.7 million. Cash inflows consisted of $3.1 million of contributions from parent, partially offset by cash outflows of $378,000 for repayments of indebtedness.

Distributions

We intend to declare monthly distributions as authorized by our board of directors (or a committee of the board of directors) and to pay such distributions on a monthly basis. Our first such distribution was declared for our holders of record as of December 31, 2023 in an amount equal to $0.1042 per share/unit, less certain expenses. Subsequent monthly distributions were declared for our holders of record as of each month through July 31, 2024, each in an amount equal to $0.1042 per share/unit less certain expenses. Our distribution policy is set by our board of directors and is subject to change based on available cash flows and other factors. We cannot guarantee the amount of distributions that will be paid, if any. In connection with a distribution to our stockholders/unitholders, our board of directors approves a monthly distribution for a certain dollar amount per share for each class of our common stock/units. Share repurchases under our share repurchase plan will be effectuated as of the opening of the last business day of each month and we expect to declare monthly distributions with a record date as of the close of business of the last calendar day of each month. You will not be entitled to receive a distribution on any of your shares that are repurchased prior to the applicable record date for such distribution.

Sources of Distributions

During our offering stage, when we may raise capital more quickly than we acquire income-producing assets, and for some period after our offering stage, Stirling OP may not be able to make distributions solely from its cash flows from operating activities. Further, because Stirling OP may receive income from its investments at various times during its fiscal year and because it may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that at least during the early stages of our existence and from time to time during our operational stage, we will declare distributions in anticipation of cash flows that we expect to receive during a later period and we will make these distributions in advance of our actual receipt of these funds.

The following table presents information with respect to Stirling OP’s distributions declared and cash flow provided by (used in) provided by operating activities during the three and six months ended June 30, 2024:


	Three Months Ended June 30, 2024		Six Months Ended June 30, 2024
Distributions
Payable in cash	$	1,433	$	2,346
Reinvested in common units pursuant to distributions reinvestment plan (“DRIP”)	448,299		891,941
Total distributions (1)	$	449,732	$	894,287

Sources of distributions
Cash flows from operating activities	$	1,433	$	2,346

Offering proceeds from issuance of common units, including pursuant to DRIP	448,299		891,941
Total sources of distributions	$	449,732	$	894,287

Net cash provided by (used in) provided by operating activities (2)	$	666,000	$	333,000

___________

(1) Distributions are generally expected to be paid on a monthly basis. In general, distributions for all record dates of a given month are paid on or about the 15th of the following month.

(2) The allocation of total sources are calculated on a quarterly basis. Generally, for purposes of determining the source of our distributions paid, we assume first that positive cash flow from operating activities from the relevant or prior quarter is used to fund distribution payments.

For the three and six months ended June 30, 2024, distributions declared by Stirling OP were $449,732 and $894,287, respectively, including distributions to the general partner for distribution to common stockholders of $230 and $272, respectively. For the three and six months ended June 30, 2024, Stirling OP paid aggregate distributions of $447,801 and $890,509, respectively, including distributions to the general partner for distribution to common stockholders of $123 and $124,

respectively. For the three and six months ended June 30, 2024, Stirling OP’s net loss was $1.2 million and $2.9 million, respectively.

NAV and NAV Per Share Calculation

We calculate NAV per share in accordance with the valuation guidelines that have been approved by our board of directors. Our total NAV in the following table includes the NAV of our outstanding common stock as of June 30, 2024 as well as the partnership interests of Stirling OP held by parties other than us. The following table sets forth the components of our NAV as of June 30, 2024 (amounts in thousands, except per share/unit data):


Components of NAV (1)
Investments in real properties	$	63,100
Cash and cash equivalents	4,245
Restricted cash	2,848
Other assets	605
Mortgage notes, term loans, and revolving credit facilities, net	(30,671)
Other liabilities	(2,628)
Management fee payable	(84)
Non-controlling interests in joint ventures	—
Net asset value	$	37,415
Number of outstanding shares/units	1,445
NAV per share/unit	$	25.8891

_____________

(1) Due to the nature of hotel operations, we expect that the most recent property-level financial information available for use in calculating our NAV will be as of the end of the month prior to the NAV unless otherwise adjusted by the Advisor for material changes.

The following table provides a breakdown of our total NAV and NAV per share/unit by class as of June 30, 2024 ($ and shares in thousands, expect per share/unit data):


	Class D Shares		Class S Shares		Class T Shares		Class I Shares		Third Party Operating Partnership Units (1)		Total
As of June 30, 2024
Net Asset Value	$	1	$	1	$	1	$	35	$	37,377	$	37,415
Number of outstanding shares/units	—		—		—		1		1,444		1,445
NAV per share/unit	$	25.8972	$	25.8972	$	25.8972	$	25.8869	$	25.8891	$	25.8891

_____________

(1) Includes the partnership interest of Stirling OP held by the Special Limited Partner, if any.

Set forth below are the weighted averages of the key assumptions in the discounted cash flow methodology used in the June 30, 2024 valuations:


	Discount Rate		Exit Capitalization Rate
Hotel properties	11.13	%	8.60	%

These weighted averages of key assumptions are calculated by our Advisor using information provided by our independent valuation advisor. A change in these assumptions would impact the calculation of the value of our hotel properties. For example, assuming all other factors remain unchanged, the changes listed below would result in the following effects on our property values (asset values in thousands):


Sensitivities	Change	Asset Values
Discount rate	0.25% decrease	$	64,100
	0.25% increase	$	62,000
Exit capitalization rate	0.25% decrease	$	63,900
	0.25% increase	$	62,200

Limits on the Calculation of Our NAV Per Share

The overarching principle of our valuation guidelines is to produce reasonable estimated values for each of our investments (and other assets and liabilities), or the price that would be received for that investment in orderly transactions between market participants. However, the majority of our assets will consist of real estate properties and the valuation of our properties (and other assets and liabilities) is based on a number of judgments, assumptions and opinions about future events that may not prove to be correct. The use of different judgments, assumptions or opinions would likely result in a different estimate of the value of our real estate properties (and other assets and liabilities). Any resulting potential disparity in our NAV per share may be in favor of stockholders whose shares are repurchased or new purchasers of our common stock, as the case may be, depending on the circumstances at the time (for cases in which our transaction price is based on NAV).

Additionally, while the methodologies contained in our valuation guidelines are designed to operate reliably within a wide variety of circumstances, it is possible that in certain unanticipated situations or after the occurrence of certain extraordinary events (such as a significant disruption in relevant markets, a terrorist attack or an act of nature), our Advisor’s ability to calculate NAV may be impaired or delayed, including, without limitation, circumstances where there is a delay in accessing or receiving information from vendors or other reporting agents upon which our Advisor may rely upon in determining the monthly value of our NAV. In these circumstances, a more accurate valuation of our NAV could be obtained by using different assumptions or methodologies. Accordingly, in special situations when, in our Advisor’s reasonable judgment, the administration of the valuation guidelines would result in a valuation that does not represent a fair and accurate estimate of the value of our investment, alternative methodologies may be applied, provided that our Advisor must notify our board of directors at the next scheduled board meeting of any alternative methodologies utilized and their impact on the overall valuation of our investment. Notwithstanding the foregoing, our board of directors may suspend the offering and/or our share repurchase plan if it determines that the calculation of our NAV is materially incorrect or unreliable or there is a condition that restricts the valuation of a material portion of our assets.

We include no discounts to our NAV for the illiquid nature of our shares, including the limitations on stockholders’ ability to sell shares under our share repurchase plan and our ability to suspend or terminate our share repurchase plan at any time. Our NAV generally does not consider exit costs (e.g., selling costs and commissions and debt prepayment penalties related to the sale of a property) that would likely be incurred if our assets and liabilities were liquidated or sold. While we may use market pricing concepts to value individual components of our NAV, our per share NAV is not derived from the market pricing information of open-end real estate funds listed on stock exchanges.

Our NAV per share does not represent the amount of our assets less our liabilities in accordance with GAAP. We do not represent, warrant or guarantee that:

•a stockholder would be able to realize the NAV per share for the class of shares a stockholder owns if the stockholder attempts to sell its shares;

•a stockholder would ultimately realize distributions per share equal to the NAV per share for the class of shares it owns upon liquidation of our assets and settlement of our liabilities or a sale of our company;

•shares of our common stock would trade at their NAV per share on a national securities exchange;

•a third party would offer the NAV per share for each class of shares in an arm’s-length transaction to purchase all or substantially all of our shares; or

•the NAV per share would equate to a market price of an open-ended real estate fund.

Inflation

We rely entirely on the performance of our hotel properties and the ability of the hotel properties’ managers to increase revenues to keep pace with inflation. Hotel operators can generally increase room rates, but competitive pressures may limit their ability to raise rates faster than inflation. Our general and administrative costs, real estate and personal property taxes, property and casualty insurance, labor costs and utilities are subject to inflation as well.

Seasonality

The hospitality business is seasonal, highly competitive and influenced by factors such as general and local economic conditions, location, room rates, quality, service levels, reputation and reservation systems, among many other factors. The hospitality industry generally experiences seasonal slowdown in the third quarter and, to a lesser extent, in the fourth quarter of each year. As a result of such seasonality, there will likely be quarterly fluctuations in results of operations of any hospitality properties that we may own.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Our accounting policies that are critical or most important to understanding our financial condition and results of operations and that require management to make the most difficult judgments are described in our 2023 Form 10-K. There have been no material changes in these critical accounting policies.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Stirling OP’s primary market risk exposure consists of changes in interest rates on borrowings under our debt instruments. Currently Stirling OP’s mortgage loan has a fixed rate.

ITEM 4.CONTROLS AND PROCEDURES

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2024 (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective (i) to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms; and (ii) to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

From time to time we may be involved in various claims and legal actions arising in the ordinary course of business. As of June 30, 2024, we were not involved in any material legal proceedings.

ITEM 1A.RISK FACTORS

The Registrant has omitted a discussion of risk factors because as a smaller reporting company, it is not required to provide such information.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company is undertaking a continuous private offering to accredited investors, pursuant to which it is offering for sale up to $1,000,000,000 in shares of common stock consisting of up to $900,000,000 in shares in the primary offering and up to $100,000,000 in shares pursuant to the distribution reinvestment plan. The offering is being made pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder, and other exemptions of similar import in the laws of the states and other jurisdictions where the offering is being made. In December 2023, the Company commenced the offering of Class I shares, and on February 13, 2024, the Company commenced the offering of Class D, Class S, and Class T shares. During the three months ended June 30, 2024, the Company issued the following:


	Three Months Ended June 30, 2024

Class I shares issued	973
Class I gross proceeds	$	25,000
Class D shares issued	19
Class D gross proceeds	$	500
Class S shares issued	19
Class S gross proceeds	$	500
Class T shares issued	19
Class T gross proceeds	$	500

No upfront selling commissions or dealer manager fees were paid with respect to the sale of the Class I, D, S and T shares.

During the three months ended June 30, 2024, the Company did not receive any repurchase requests.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

Financial Statements of Stirling REIT OP, LP

We account for the common units acquired in Stirling OP as an equity method investment during any period our investment in Stirling OP is not considered significant to Stirling OP and will consolidate Stirling OP at such time that our investment in Stirling OP is considered significant to Stirling OP (based on generally accepted accounting principles). We expect to invest our capital and all our offering proceeds in Stirling OP and hold no assets other than Stirling OP common units. We therefore expect to eventually consolidate Stirling OP. As such, we have included the unaudited consolidated and combined consolidated financial statements of Stirling OP as we believe these financial statements would be meaningful to investors, and subsequent invested capital will be significant to us.

Index to Financial Statements












Stirling REIT OP, LP and Subsidiaries
Unaudited Consolidated and Combined Consolidated Financial Statements

Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023			29
Consolidated and Combined Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023			30
Consolidated and Combined Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2024 and 2023			31
Consolidated and Combined Consolidated Statements of Partners' Capital/Parent Net Investment for the Three and Six Months Ended June 30, 2024 and 2023			32
Consolidated and Combined Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023			33
Notes to Consolidated and Combined Consolidated Financial Statements			34

STIRLING REIT OP, LP AND SUBSIDIARIES

CONSOLIDATED AND COMBINED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)


	June 30, 2024		December 31, 2023
ASSETS


Investments in hotel properties, net	$	37,746	$	35,580
Cash and cash equivalents	3,845		2,363
Restricted cash	3,318		7,957

Accounts receivable, net of allowance of $1 and $1, respectively	221		271
Inventories	5		5




Deferred costs, net	104		125
Prepaid expenses	239		111


Other assets	1,956		1,433



Due from related parties, net	20		—


Total assets	$	47,454	$	47,845
LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Indebtedness, net	$	28,440	$	28,285


Accounts payable and accrued expenses	2,619		1,436
Accrued interest payable	214		221
Distributions payable	151		147

Due to Ashford Inc., net	4,289		2,447
Due to Ashford Trust, net	63		683
Due to related parties, net	—		123
Due to third-party hotel manager	128		110





Total liabilities	35,904		33,452
Commitments and contingencies (note 8)



Partners’ capital








General Partner	—		—
Limited Partners	11,550		14,393
Total partners’ capital	11,550		14,393


Total liabilities and partners’ capital	$	47,454	$	47,845

See Notes to Consolidated and Combined Consolidated Financial Statements.

STIRLING REIT OP, LP AND SUBSIDIARIES

CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
REVENUE
Rooms	$	4,112	$	4,487	$	7,669	$	8,356

Other hotel revenue	59		64		124		124
Total hotel revenue	4,171		4,551		7,793		8,480


EXPENSES
Hotel operating expenses:
Rooms	974		990		1,914		1,915

Other expenses	1,495		1,670		2,970		3,164
Management fees	185		183		358		358
Total hotel expenses	2,654		2,843		5,242		5,437
Property taxes, insurance and other	287		238		521		446
Depreciation and amortization	1,167		923		2,119		1,827



Advisory services fee	238		134		542		279
Corporate, general and administrative	326		54		870		83
Total operating expenses	4,672		4,192		9,294		8,072

OPERATING INCOME (LOSS)	(501)		359		(1,501)		408

Interest income	24		—		40		—

Interest expense and amortization of loan costs	(728)		(406)		(1,453)		(810)




INCOME (LOSS) BEFORE INCOME TAXES	(1,205)		(47)		(2,914)		(402)
Income tax (expense) benefit	—		(177)		—		(257)



NET INCOME (LOSS)	$	(1,205)	$	(224)	$	(2,914)	$	(659)

See Notes to Consolidated and Combined Consolidated Financial Statements.

STIRLING REIT OP, LP AND SUBSIDIARIES

CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income (loss)	$	(1,205)	$	(224)	$	(2,914)	$	(659)
Other comprehensive income (loss), net of tax:


Total other comprehensive income (loss)	—		—		—		—
Comprehensive income (loss)	$	(1,205)	$	(224)	$	(2,914)	$	(659)

See Notes to Consolidated and Combined Consolidated Financial Statements.

STIRLING REIT OP, LP AND SUBSIDIARIES

CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENTS OF

PARTNERS’ CAPITAL/PARENT NET INVESTMENT

(unaudited, in thousands)


	General Partner		Limited Partners		Total














Balance at March 31, 2024	$	—	$	12,704	$	12,704

Distributions declared	—		(449)		(449)


Equity-based compensation	—		27		27
Issuance of common units	—		473		473
Net income (loss)	—		(1,205)		(1,205)

Balance at June 30, 2024	$	—	$	11,550	$	11,550


	General Partner		Limited Partners		Total














Balance at December 31, 2023	$	—	$	14,393	$	14,393

Distributions declared	—		(894)		(894)


Equity-based compensation	—		40		40
Issuance of common units	—		925		925
Net income (loss)	—		(2,914)		(2,914)

Balance at June 30, 2024	$	—	$	11,550	$	11,550


	Parent Net Investment














Balance at March 31, 2023	$	3,891
Distributions to parent, net	(224)





Net income (loss)	1,071

Balance at June 30, 2023	$	4,738


	Parent Net Investment














Balance at December 31, 2022	$	2,344
Contributions from parent, net	3,053





Net income (loss)	(659)

Balance at June 30, 2023	$	4,738

See notes to Consolidated and Combined Consolidated Financial Statements

STIRLING REIT OP, LP AND SUBSIDIARIES

CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Six Months Ended June 30,
	2024		2023
Cash Flows from Operating Activities
Net income (loss)	$	(2,914)	$	(659)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	2,119		1,827



Bad debt expense	37		20










Amortization of loan costs and capitalized default interest	155		(39)

Equity-based compensation	40		—


Changes in operating assets and liabilities:
Accounts receivable and inventories	13		(117)
Prepaid expenses and other assets	(651)		(27)
Accounts payable and accrued expenses	616		286
Due to/from related parties	(143)		30
Due to third-party hotel manager	18		26
Due to Ashford Trust, net	(620)		—
Due to Ashford Inc., net	1,663		8







Net cash provided by (used in) operating activities	333		1,355
Cash Flows from Investing Activities
Improvements and additions to hotel properties	(3,525)		(3,135)











Net cash provided by (used in) investing activities	(3,525)		(3,135)
Cash Flows from Financing Activities

Repayments of indebtedness	—		(378)

Payments for distributions	(2)		—




Proceeds from issuance of common units	37		—




Contributions from/(distributions to) parent	—		3,053



Net cash provided by (used in) financing activities	35		2,675
Net increase (decrease) in cash, cash equivalents and restricted cash	(3,157)		895


Cash, cash equivalents and restricted cash at beginning of period	10,320		2,229
Cash, cash equivalents and restricted cash at end of period	$	7,163	$	3,124

Supplemental Cash Flow Information
Interest paid	$	1,306	$	853
Income taxes paid (refunded)	37		71
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Accrued but unpaid capital expenditures	$	1,422	$	109
Distributions declared but not paid	151		—
Non-cash distributions	888		—
























Supplemental Disclosure of Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents at beginning of period	$	2,363	$	997

Restricted cash at beginning of period	7,957		1,232

Cash, cash equivalents and restricted cash at beginning of period	$	10,320	$	2,229

Cash and cash equivalents at end of period	$	3,845	$	1,592
Restricted cash at end of period	3,318		1,532
Cash, cash equivalents and restricted cash at end of period	$	7,163	$	3,124

See Notes to Consolidated and Combined Consolidated Financial Statements.

STIRLING REIT OP, LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Description of Business

Stirling Hotels & Resorts, Inc. (“Stirling Inc.”) was formed on September 1, 2023 as a Maryland corporation and intends to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with the taxable year ending December 31, 2024. Substantially all of the Stirling Inc.’s business will be conducted through Stirling REIT OP, LP (“Stirling OP” or the “Company”), a Delaware limited partnership formed on September 26, 2023. Stirling Inc. is the sole member of the sole general partner of Stirling OP and owns a non-economic general partnership interest in Stirling OP. Stirling REIT Special Limited Partner LLC (the “Special Limited Partner”), a Delaware limited partnership, will own a special limited partner interest in Stirling OP. In addition, in order for the income from any hotel property investments to constitute “rents from real properties” for purposes of the gross income test required for REIT qualification, Stirling Inc. will lease each hotel property to a subsidiary of Stirling OP, which we intend to be treated as a taxable REIT subsidiary, or TRS.

Stirling Inc. was organized to invest primarily in a diverse portfolio of stabilized income-producing hotels and resorts across all chain scales primarily located in the United States and operated under widely recognized brands. Stirling Inc. and Stirling OP are externally managed by Stirling REIT Advisors LLC (“Stirling Advisor” or the “Advisor”), an affiliate of Ashford Inc. (“Ashford”), Stirling Inc.’s sponsor. We do not have any employees. All of the services that might be provided by employees are provided to us by the Advisor.

On December 6, 2023, Stirling OP acquired four hotel properties and assumed a mortgage loan secured by the four hotel properties (the “Initial Portfolio”) from Ashford Hospitality Limited Partnership (“Ashford Hospitality OP”) and Ashford TRS Corporation (“Ashford Hospitality TRS,” and together with Ashford Hospitality OP, the “Anchor Investor”), each a subsidiary of Ashford Hospitality Trust, Inc. (“Ashford Trust”), in exchange for Class I units of Stirling OP pursuant to the terms of the contribution agreement (the “Contribution Agreement”), by and among Stirling OP and the Anchor Investor. The contribution value was approximately $56.2 million. Additionally, Stirling OP assumed a mortgage loan with an estimated fair value of approximately $30.2 million. The acquisition also included $9.0 million of net working capital and reserves and was subject to customary post-closing adjustments resulting in a net contribution value of the Initial Portfolio of $35.0 million. During the three months ended March 31, 2024, estimated working capital and reserves were finalized resulting in Ashford Trust returning 4,423 Class I units totaling approximately $111,000 to Stirling OP. The final net contribution value of the Initial Portfolio was $34.9 million.

Stirling Inc. determined the acquisition of the Initial Portfolio resulted in Ashford Trust becoming the primary beneficiary of Stirling OP in contemplation of: 1) the related party group comprised of (i) Ashford Trust and (ii) the initial stockholder who has control over election or removal of the board of directors of Stirling Inc. that have power to direct the most significant activities of Stirling OP; and 2) the consideration that substantially all the economics are held by Ashford Trust through its equity interest, and substantially all of the activities are performed on Ashford Trust’s behalf. As a result, Ashford Trust began consolidating Stirling OP as of December 6, 2023.

Pursuant to the Contribution Agreement, the Anchor Investor entered into a lock-up agreement with respect to its Class I units that restrict the assignment, sale, and transfer of the units for a period of one year following the closing of the transactions contemplated by the Contribution Agreement (the “Lock-Up Agreement”). In addition, pursuant to the Lock-Up Agreement, the Anchor Investor is prohibited from redeeming the Class I units for a period of three years following such closing. At the end of the three-year period, the Class I units may be redeemed pursuant to the terms of the Stirling OP Agreement and any Class I units converted to shares of Stirling Inc.’s Class I common stock may be repurchased by Stirling Inc. pursuant to the terms and conditions of Stirling Inc.’s share repurchase plan. In addition, the Anchor Investor agreed not to withdraw as a participant in the distribution reinvestment plan of Stirling OP, and thereby receive any distributions payable on its Class I units in additional Class I units, through December 31, 2024.

Concurrently with entry into the Contribution Agreement, Stirling Inc. and Stirling OP, directly or through its wholly owned subsidiaries, entered into the Advisory Agreement, the Stirling OP Agreement, the Master Hotel Management Agreement and the Master Project Management Agreement, each as described in additional detail in note 7.

Ashford also provides other products and services to us or our hotel properties through certain entities in which Ashford has an ownership interest. These products and services include, but are not limited to, design and construction services, debt placement and related services, audio visual services, real estate advisory and brokerage services, insurance policies covering general liability, workers’ compensation and business automobile claims, insurance claims services, hypoallergenic premium rooms, broker-dealer and distribution services, mobile key technology and cash management services.

STIRLING REIT OP, LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

On December 7, 2023, Stirling OP issued 8,000 Class E units at a price of $25.00 per unit to the Advisor in exchange for a cash contribution of $200,000.

For periods subsequent to December 6, 2023, the accompanying consolidated financial statements include the accounts of certain wholly owned subsidiaries of Stirling OP that own and operate four hotels in three states, which are all wholly owned hotel properties as of June 30, 2024. These hotels represent 405 rooms. As of June 30, 2024, the four hotel properties were leased by Stirling OP’s indirect wholly owned subsidiaries that are treated as taxable REIT subsidiaries (“TRS”) for federal income tax purposes. Each leased hotel is leased under a percentage lease that provides for each lessee to pay in each calendar month the base rent plus, in each calendar quarter, percentage rent, if any, based on hotel revenues. Lease revenue from the TRS is eliminated in combination and/or consolidation. Stirling OP does not operate any of its hotel properties directly; instead Stirling OP employs hotel management companies to operate them for Stirling OP under management contracts. Remington Lodging & Hospitality, LLC (“Remington Hospitality”), a subsidiary of Ashford, manages three of Stirling OP’s four operating hotel properties and Crossroads Hospitality Management Company (“Crossroads”) manages the remaining hotel property.

For periods prior to December 6, 2023, the accompanying combined consolidated financial statements include the accounts of the following subsidiaries of Ashford Trust:

1. Ashford Jacksonville IV LP

2. Ashford TRS Jacksonville IV LLC

3. Ashford Buford I LP

4. Ashford Buford II LP

5. Ashford Pool C3 GP LLC

6. Ashford Pool C3 Senior Mezz LLC

7. Ashford Pool C3 Junior Mezz LLC

8. Ashford Pool C3 Junior Holder LLC

9. Ashford TRS Pool C3 LLC

10. Ashford TRS Pool C3 Senior Mezz LLC

11. Ashford TRS Pool C3 Junior Mezz LLC

12. Ashford TRS Pool C3 Junior Holder LLC

13. RI Manchester Hotel Partners, L.P.

14. RI Manchester Tenant Corporation

Terms such as the “Company,” “we,” “us,” or “our” refer to Stirling OP and all entities included in its consolidated and combined consolidated financial statements.

2. Significant Accounting Policies

Basis of Presentation and Principles of Combination and Consolidation—The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited consolidated financial statements. We believe the disclosures made herein are adequate to prevent the information presented from being misleading. However, the financial statements should be read in conjunction with the consolidated and combined consolidated financial statements and notes thereto included in the 2023 Stirling Hotels & Resorts, Inc. Annual Report to Stockholders on Form 10-K filed with the SEC on March 29, 2024.

For periods prior to December 6, 2023, the date of the contribution of the Initial Portfolio, the accompanying historical combined consolidated financial statements of Initial Portfolio have been “carved out” of Ashford Trust’s consolidated financial statements and reflect certain assumptions and allocations. These entities were considered to be under Ashford Trust’s common control, under the applicable accounting guidance. The combined consolidated financial statements of the Initial Portfolio were prepared using the financial position and results of operations of the entities set forth above after adjustments for certain ownership-related activities that have been historically accounted for by Ashford Trust. These ownership activities include

STIRLING REIT OP, LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

mortgage indebtedness associated with the four hotels, debt related expenses and other owner related expenses. In addition, the combined consolidated statements of operations of the Initial Portfolio include allocations of advisory service fees and corporate general and administrative expenses from Ashford Trust, which in the opinion of management, are reasonable. The historical financial information is not necessarily indicative of the Company’s future results of operations, financial position and cash flows subsequent to the contribution.

All significant intercompany accounts and transactions between consolidated and combined consolidated entities have been eliminated in these historical consolidated and combined consolidated financial statements.

Historical seasonality patterns at some of our hotel properties cause fluctuations in our overall operating results. Consequently, operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Use of Estimates—The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Equity-Based Compensation—Equity-based compensation for non-employees is measured at the grant date and expensed ratably over the vesting period based on the original measurement as of the grant date. This results in the recording of expense, included in “advisory services fee,” “management fees” and “corporate, general and administrative” expense, equal to the ratable amount of the grant date fair value based on the requisite service period satisfied during the period. The Company recognizes forfeitures as they occur.

Recently Issued Accounting Standards—In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. As of June 30, 2024, the Company has not adopted this ASU. The adoption of this ASU is expected to only impact disclosures with respect to the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topics 740): Improvements to Income Tax Disclosures to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. The amendments in this ASU may be applied prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or the amendments may be applied retrospectively by providing the revised disclosures for all periods presented. As of June 30, 2024, the Company has not adopted this ASU. The adoption of this ASU is expected to only impact disclosures with respect to the Company’s consolidated financial statements.

3. Revenue

The following tables present our revenue disaggregated by geographical area (dollars in thousands):


	Three Months Ended June 30, 2024
Primary Geographical Market	Number of Hotels	Rooms		Other Hotel		Total
Atlanta, GA area	2	$	2,011	$	29	$	2,040
Hartford, CT area	1	1,053		12		1,065
Jacksonville, FL area	1	1,048		18		1,066
















Total	4	$	4,112	$	59	$	4,171


	Three Months Ended June 30, 2023
Primary Geographical Market	Number of Hotels	Rooms		Other Hotel		Total
Atlanta, GA area	2	$	2,127	$	30	$	2,157
Hartford, CT area	1	1,199		14		1,213
Jacksonville, FL area	1	1,161		20		1,181
















Total	4	$	4,487	$	64	$	4,551

STIRLING REIT OP, LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)


	Six Months Ended June 30, 2024
Primary Geographical Market	Number of Hotels	Rooms		Other Hotel		Total
Atlanta, GA area	2	$	3,684	$	62	$	3,746
Hartford, CT area	1	1,751		27		1,778
Jacksonville, FL area	1	2,234		35		2,269
















Total	4	$	7,669	$	124	$	7,793


	Six Months Ended June 30, 2023
Primary Geographical Market	Number of Hotels	Rooms		Other Hotel		Total
Atlanta, GA area	2	$	3,871	$	54	$	3,925
Hartford, CT area	1	2,122		27		2,149
Jacksonville, FL area	1	2,363		43		2,406
















Total	4	$	8,356	$	124	$	8,480

4. Investments in Hotel Properties, net

Investments in hotel properties, net consisted of the following (in thousands):


	June 30, 2024		December 31, 2023
Land	$	5,760	$	5,760
Buildings and improvements	47,679		45,764
Furniture, fixtures and equipment	8,786		5,725
Construction in progress	2,271		3,057


Total cost	64,496		60,306
Accumulated depreciation	(26,750)		(24,726)
Investments in hotel properties, net	$	37,746	$	35,580

For the six months ended June 30, 2024 and 2023, no impairment charges were recorded.

5. Indebtedness, net

Indebtedness consisted of the following (in thousands):


					June 30, 2024		December 31, 2023
Indebtedness	Collateral		Maturity	Interest Rate	Debt Balance			Debt Balance



Mortgage loan	4	hotels	December 2028	8.51%	$	30,200		$	30,200



























					30,200			30,200


Deferred loan costs, net					(1,760)			(1,915)

Indebtedness, net					$	28,440		$	28,285

The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group. Presently, our existing covenants are non-recourse. As of June 30, 2024, we were in compliance with all covenants related to our mortgage loan.

STIRLING REIT OP, LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

6. Summary of Fair Value of Financial Instruments

Determining estimated fair values of our financial instruments such as indebtedness requires considerable judgment to interpret market data. Market assumptions and/or estimation methodologies used may have a material effect on estimated fair value amounts. Accordingly, estimates presented are not necessarily indicative of amounts at which these instruments could be purchased, sold, or settled. Carrying amounts and estimated fair values of financial instruments, for periods indicated, were as follows (in thousands):


	June 30, 2024				December 31, 2023
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value







Financial assets not measured at fair value:
Cash and cash equivalents	$	3,845	$	3,845	$	2,363	$	2,363
Restricted cash	3,318		3,318		7,957		7,957
Accounts receivable, net	221		221		271		271


Due from related parties, net	20		20		—		—


Financial liabilities not measured at fair value:
Indebtedness	$	30,200	$	30,671	$	30,200	$	28,476
Accounts payable and accrued expenses	2,619		2,619		1,436		1,436

Distributions payable	151		151		147		147
Due to Ashford Inc., net	4,289		4,289		2,447		2,447
Due to Ashford Trust, net	63		63		683		683
Due to related parties, net	—		—		123		123
Due to third-party hotel manager	128		128		110		110

Cash, cash equivalents and restricted cash. These financial assets bear interest at market rates and have original maturities of less than 90 days. The carrying value approximates fair value due to their short-term nature. This is considered a Level 1 valuation technique.

Accounts receivable, net, due from related parties, net, accounts payable and accrued expenses, due to Ashford Inc., net due to Ashford Trust, net and due to third-party hotel manager. The carrying values of these financial instruments approximate their fair values due to their short-term nature. This is considered a Level 1 valuation technique.

Indebtedness. Fair value of indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. Cash flows are determined using a forward interest rate yield curve. Current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied and adjusted for credit spreads. Credit spreads take into consideration general market conditions, maturity, and collateral. We estimated the fair value of total indebtedness to be approximately 101.6% of the face value of $30.2 million at June 30, 2024 and approximately 94.3% of the face value of $30.2 million at December 31, 2023. These fair value estimates are considered a Level 2 valuation technique.

7. Related Party Transactions

Ashford Inc.

Advisory Agreement with Stirling OP

Stirling Advisor, a subsidiary of Ashford Inc., acts as the advisor to Stirling OP. The Advisory Agreement became effective on December 6, 2023. Mr. Monty J. Bennett, chief executive officer of Stirling Inc. serves as chairman of the board of directors and chief executive officer of Ashford Inc.

Stirling Advisor is paid an annual management fee (payable monthly in arrears) of 1.25% of aggregate NAV represented by the Class T, Class S, Class D and Class I shares of Stirling Inc. Additionally, to the extent Stirling OP issues Class T, Class S, Class D or Class I operating partnership units to parties other than Stirling Inc., Stirling OP will pay Stirling Advisor a management fee equal to 1.25% of the aggregate NAV of Stirling OP attributable to such Class T, Class S, Class D and Class I operating partnership units not held by Stirling Inc. per annum payable monthly in arrears. No management fee will be paid with respect to Class E shares of Stirling Inc. or Class E units of Stirling OP. The management fee is allocated on a class-specific basis and borne by all holders of the applicable class. The management fee will be paid, at Stirling Advisor’s election,

STIRLING REIT OP, LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

in cash, Class E shares of Stirling Inc. or Class E units of Stirling OP. If Stirling Advisor elects to receive any portion of its management fee in Class E shares or Class E units of Stirling OP, Stirling Inc. may be obligated to repurchase such Class E shares of Stirling Inc. or Class E units of Stirling OP from Stirling Advisor at a later date. Such repurchases will be outside Stirling Inc.’s share repurchase plan and thus will not be subject to the repurchase limits of the share repurchase plan or any early repurchase deduction.

Stirling OP does not intend to pay Stirling Advisor any acquisition or other similar fees in connection with making investments. Stirling OP will, however, reimburse Stirling Advisor for out-of-pocket expenses in connection with the selection and acquisition of properties and real estate related debt, whether or not such investments are acquired, and make payments to third parties in connection with making investments. In addition to organization and offering expense and acquisition expense reimbursements, Stirling OP will reimburse Stirling Advisor for out-of-pocket costs and expenses it incurs in connection with the services it provides to Stirling Inc., including, but not limited to, (i) the actual cost of goods and services used by Stirling OP and obtained from third parties, including fees paid to administrators, consultants, attorneys, technology providers and other service providers, and brokerage fees paid in connection with the purchase and sale of investments, (ii) expenses of managing and operating Stirling OP’s properties, whether payable to an affiliate or a non-affiliated person, and (iii) expenses related to personnel of Stirling Advisor performing services for Stirling OP other than those who provide investment advisory services or serve as executive officers of Stirling Inc.

The following table summarizes the advisory services fees incurred (in thousands):


	Three Months Ended June 30, 2024		Six Months Ended June 30, 2024

Advisory services fee
Base advisory fee	$	195		$	452
Reimbursable expenses (1)	43			90


Total advisory services fee	$	238		$	542

________

(1)Reimbursable expenses include overhead, internal audit, risk management advisory and asset management services.

Advisory Agreement with Ashford Trust

Ashford LLC, a subsidiary of Ashford, acts as the Advisor to Ashford Trust. Mr. Monty J. Bennett, chairman of the board of directors of Ashford Trust, serves as chairman of the board of directors and chief executive officer of Ashford.

Under the Ashford Trust advisory agreement, Ashford Trust pays advisory fees to Ashford LLC. Advisory fees consist of base fees and incentive fees. Ashford Trust pays a monthly base fee in an amount equal to 1/12 of (i) 0.70% of the Total Market Capitalization (as defined in the advisory agreement) of Ashford Trust for the prior month, plus (ii) the Net Asset Fee Adjustment (as defined in the advisory agreement), if any, on the last day of the prior month during which the advisory agreement was in effect; provided, however in no event shall the Base Fee (as defined in the advisory agreement) for any month be less than the Minimum Base Fee as provided by the advisory agreement. Ashford Trust shall pay the Base Fee or the Minimum Base Fee (as defined in the advisory agreement) on the fifth business day of each month.

The Minimum Base Fee for Ashford Trust for each quarter is equal to the greater of:

(i) ninety percent (90%) of the base fee paid for the same month in the prior fiscal year; and

(ii) 1/12th of the G&A Ratio (as defined in the advisory agreement) for the most recently completed fiscal quarter multiplied by Ashford Trust’s Total Market Capitalization.

Ashford Trust is also required to pay Ashford LLC an incentive fee that is measured annually (or for a stub period if the advisory agreement is terminated at other than year-end). In each year that Ashford Trust’s total shareholder return exceeds the average total shareholder return for the peer group, Ashford Trust shall pay to Ashford LLC an incentive fee. The incentive fee, if any, subject to the Fixed Coverage Charge Ratio Condition (as defined in the advisory agreement), shall be payable in arrears in three equal annual installments.

Ashford Trust also reimburses Ashford LLC for certain reimbursable overhead and internal audit, risk management advisory and asset management services, as specified in the advisory agreement. Ashford Trust also records equity-based compensation expense for equity grants of common stock and LTIP units awarded to officers and employees of Ashford LLC in connection with providing advisory services.

STIRLING REIT OP, LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The advisory service fee reflected in these combined consolidated financial statements through December 5, 2023, represents an allocation of the Ashford Trust advisory fee. The costs were allocated based on the pro rata share of our net investments in hotel properties in relation to Ashford Trust’s net investments in hotel properties.

The following table summarizes the amount of allocated advisory services fees (in thousands):


	Three Months Ended June 30, 2023		Six Months Ended June 30, 2023

Advisory services fee
Base advisory fee	$	90	$	185
Reimbursable expenses (1)	33		69
Equity-based compensation (2)	11		25

Total advisory services fee	$	134	$	279

________

(1)Reimbursable expenses include overhead, internal audit, risk management advisory, asset management services and deferred cash awards.

(2) Equity-based compensation is associated with equity grants of Ashford Trust’s common stock, LTIP units and Performance LTIP units awarded to officers and employees of Ashford LLC.

Pursuant to the Company’s hotel management agreements with each hotel management company, the Company bears the economic burden for casualty insurance coverage. Under the advisory agreement, Ashford secures casualty insurance policies to cover Ashford Trust, Braemar Hotels & Resorts Inc. (“Braemar”), Stirling OP, their hotel managers, as needed, and Ashford. The total loss estimates included in such policies are based on the collective pool of risk exposures from each party. Ashford. has managed the casualty insurance program and beginning in December 2023, Warwick Insurance Company (“Warwick”), a subsidiary of Ashford, provides and manages the general liability, workers’ compensation and business automobile insurance policies within the casualty insurance program. Each year Ashford collects funds from Ashford Trust, Braemar, Stirling OP and their respective hotel management companies, to fund the casualty insurance program as needed, on an allocated basis.

Design and Construction Services

Master Project Management Agreement—The Company entered into a master project management agreement (the “Master Project Management Agreement”) with Premier Project Management LLC (“Premier”), a subsidiary of Ashford, to provide design, construction, architecture, development or project management, procurement and other project related services to the Company and its properties. For providing these services, Premier may earn a project management fee equal to 4% of the total project costs associated with the implementation of the capital improvement budget, an architecture fee that is 6.5% of the total construction costs, an interior design fee that is 6.0% of the purchase price of furniture, fixtures and equipment (“FFE”), a procurement fee of 8.0% of the purchase price of FFE (if the purchase price of such FFE exceeds $2,000,000 for a specific hotel in a calendar year, the procurement fee shall be reduced to 6.0% for all FFE purchased in excess of $2,000,000), a construction fee of 10% of the total construction costs (for projects without a general contractor), a freight expediting fee that is 8% of the cost of expediting FFE, a warehousing fee that is 8% of the cost of warehousing goods delivered to the job site and a development fee of 4% on the total project costs associated with a development project.

Hotel Management Services

At June 30, 2024, Remington Hospitality managed three of our four hotel properties.

Master Hotel Management Agreement—The Company, through Stirling TRS, entered into a master hotel management agreement (the “Master Hotel Management Agreement”) with Remington Lodging & Hospitality, LLC (“Remington Hospitality”), a wholly owned subsidiary of Ashford, to provide hotel and restaurant management services for certain of the Company’s hotels. For providing these services, Remington Hospitality will receive a monthly base fee on assets managed that is equal to the greater of (i) $16,897 (to be increased annually based on any increases in CPI over the preceding annual period) or (ii) 3% of a property’s gross revenues. Remington Hospitality may also earn an incentive management fee that is equal to the lesser of (i) 1% of a hotel’s gross revenues for each fiscal year and (ii) the amount by which the actual house profit exceeds the budgeted house profit determined on a property-by-property basis.

As of June 30, 2024, we had a due from related parties, net, which included a net receivable from Remington Hospitality in the amount of $20,000, primarily related to certain advances to Remington partially offset by hotel management fees.

STIRLING REIT OP, LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

As of December 31, 2023, we had due to related parties, net, which included a net payable to Remington Hospitality in the amount of $123,000, primarily related to hotel management fees.

As of June 30, 2024 and December 31, 2023, we had payable to Ashford Trust of approximately $63,000 and $683,000, respectively, related to various costs, which were paid on our behalf by Ashford Trust.

8. Commitments and Contingencies

Restricted Cash—Under certain management and debt agreements existing at June 30, 2024, escrow payments are required for insurance, real estate taxes, and debt service. In addition, for certain properties based on the terms of the underlying debt and management agreements, we escrow generally 4% of gross revenues for capital improvements. From time to time, we may work with our property managers and lenders in order to utilize lender and manager held reserves to fund operating shortfalls.

Franchise Fees—Under franchise agreements existing at June 30, 2024, we pay franchisor royalty fees between 4% and 6% of gross rooms revenue. Additionally, we pay fees for marketing, reservations, and other related activities aggregating between 3% and 4% of gross rooms revenue. These franchise agreements expire on varying dates between 2024 and 2035. When a franchise term expires, the franchisor has no obligation to renew the franchise. In addition, if we breach the franchise agreement and the franchisor terminates a franchise prior to its expiration date, we may be liable for up to three times the average annual fees incurred for that property.

The table below summarizes the franchise fees incurred (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
Line Item	2024		2023		2024		2023
Other hotel expenses	$	397	$	420	$	746	$	790

Management Fees—Under hotel management agreements for our hotel properties existing at June 30, 2024, we pay monthly hotel management fees equal to the greater of approximately $16,897 per hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues, or in some cases 3% of gross revenues, as well as annual incentive management fees, if applicable. These hotel management agreements expire from 2026 through 2031, with renewal options. If we terminate a hotel management agreement prior to its expiration, we may be liable for estimated management fees through the remaining term and liquidated damages or, in certain circumstances, we may substitute a new management agreement.

Litigation—The Company is or may be a party to various legal proceedings that arise in the ordinary course of business. The Company is not currently involved in any litigation nor, to management’s knowledge, is any litigation threatened against the Company where the outcome would, in management’s judgment based on information currently available to the Company, have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

Income Taxes—We and our subsidiaries will file income tax returns in the federal jurisdiction and various states. Tax years 2019 through 2023 remain subject to potential examination by certain federal and state taxing authorities.

9. Segment Reporting

We operate in one business segment within the hotel lodging industry: direct hotel investments. Direct hotel investments refer to owning hotel properties through either acquisition or new development. We report operating results of direct hotel investments on an aggregate basis as substantially all of our hotel investments have similar economic characteristics. As of June 30, 2024 and December 31, 2023, all of our hotel properties were located domestically.

STIRLING REIT OP, LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

10. Equity and Equity-Based Compensation

Declaration of Distributions—The following table details the aggregate distributions declared per unit for each applicable unit class for the three months ended June 30, 2024:


	Gross Distributions		Distribution Fee		Net Distributions
Class D units	$	0.1042	$	0.0054	$	0.0988
Class I units	0.3126		—		0.3126
Class S units	0.1042		0.0183		0.0859
Class T units	0.1042		0.0183		0.0859
Class E units	0.3126		—		0.3126

The following table details the aggregate distributions declared per share for each applicable unit class for the six months ended June 30, 2024:


	Gross Distributions		Distribution Fee		Net Distributions
Class D units	$	0.1042	$	0.0054	$	0.0988
Class I units	0.6252		—		0.6252
Class S units	0.1042		0.0183		0.0859
Class T units	0.1042		0.0183		0.0859
Class E units	0.6252		—		0.6252

Equity-based Compensation—We incur equity-based compensation expense in connection with equity grants made to certain of our independent directors, which vests over a period of one year.

In February 2024, approximately 4,200 LTIP units were issued to independent directors with a fair value of approximately $65,000, which will vest over a period of one year.

Unit Issuances—The following tables present issuances of all classes of the Company’s common units:


	Three Months Ended June 30, 2024
	Class D			Class I				Class S				Class T				Total
	Units	Proceeds			Units	Proceeds			Units	Proceeds			Units	Proceeds			Units	Proceeds

Issuance of common units	19	$	500		973	$	25,000		19	$	500		19	$	500		1,030	$	26,500


	Six Months Ended June 30, 2024
	Class D			Class I				Class S				Class T				Total
	Units	Proceeds			Units	Proceeds			Units	Proceeds			Units	Proceeds			Units	Proceeds

Issuance of common units	19	$	500		1,370	$	35,000		19	$	500		19	$	500		1,427	$	36,500

11. Subsequent Events

On July 25, 2024, the Stirling Inc. board of directors declared a distribution for the month of July of $0.1042 per unit/share, less certain expenses for outstanding Stirling OP unitholders and common stockholders of Stirling Inc. of record as of the close of business on July 31, 2024, to be paid on August 15, 2024.

Subsequent events for the reporting period ended June 30, 2024, were evaluated through August 13, 2024, the date the consolidated financial statements were available for issuance and there were no additional events to accrue or disclose.

ITEM 6.EXHIBITS


Exhibit						Description
3.1						Articles of Amendment and Restatement of Stirling Hotels & Resorts, Inc. (the “Registrant”), effective as of December 4, 2023, incorporated by reference to Exhibit 3.1 on Form 10 (No. 000-56623) filed December 15, 2023
3.1.1						Articles of Amendment, adopted July 31, 2024, incorporated by reference to Exhibit 3.1 on Form 8-K (No. 000- 56623) filed August 1, 2024
3.1.2*						Articles of Amendment and Restatement of the Registrant, effective as of December 4, 2023, as amended by Articles of Amendment adopted July 31, 2024
3.2						Amended and Restated Bylaws of the Registrant, dated of as December 6, 2023, incorporated by reference to Exhibit 3.2 on Form 10 (No. 000-56623) filed December 15, 2023
















10.1						Amended and Restated Dealer Manager Agreement, effective July 30, 2024, incorporated by reference to Exhibit 10.1 on Form 8-K filed August 1 , 2024 (No. 000-56623).
31.1*						Certification of the Chief Executive Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
31.2*						Certification of the Chief Financial Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
32.1**						Certification of the Chief Executive Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (In accordance with SEC Release 33-8212, this exhibit is being furnished, and is not being filed as part of this report or as a separate disclosure document, and is not being incorporated by reference into any Securities Act of 1933 registration statement.)
32.2**						Certification of the Chief Financial Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (In accordance with SEC Release 33-8212, this exhibit is being furnished, and is not being filed as part of this report or as a separate disclosure document, and is not being incorporated by reference into any Securities Act of 1933 registration statement.)


The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 are formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements Comprehensive Income (Loss); (iv) Consolidated Statements of Equity; (v) Consolidated Statement of Cash Flows; and (vi) Notes to the Consolidated Financial Statements. In accordance with Rule 402 of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document	Submitted electronically with this report.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	Submitted electronically with this report.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	Submitted electronically with this report.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.	Submitted electronically with this report.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.	Submitted electronically with this report.
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

___________________________________

* Filed herewith.

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

STIRLING HOTELS & RESORTS, INC.

Date:

August 13, 2024

By:

/s/ MONTY J. BENNETT

Monty J. Bennett

Chief Executive Officer

Date:

August 13, 2024

By:

/s/ STEPHEN ZSIGRAY

Stephen Zsigray

Chief Financial Officer

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. sophomore Avg

Stirling Hotels & Resorts 10-Q2024 Q2 Quarterly report

Content analysis