UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ~~For the fiscal year ended December 31, 2015~~

For the fiscal year ended December 31, 2016

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ~~For the Transition Period from ___________ to ___________.~~

For the Transition Period from ___________ to ___________.

Commission file number 000-55200

MOODY NATIONAL REIT I, INC.

(Exact name of registrant as specified in its charter)

Maryland	26-1812865
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
6363 Woodway Drive, Suite 110
Houston, Texas	77057
(Address of principal executive offices)	(Zip Code)

6363 Woodway Drive, Suite 110 Houston, Texas	77057
(Address of principal executive offices)	(Zip Code)

(713) 977-7500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

None

Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934:

Common ~~Sock~~ Stock, par value $0.01 per share

value $0.01 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

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. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
(Do not check if a smaller reporting company)

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

There is no established trading market for the registrant’s common stock and therefore the aggregate market value of the registrant’s common stock held by non-affiliates cannot be determined. There were approximately 1213,~~846~~148,~~737~~347 shares of common stock held by non-affiliates at June 30, ~~2015~~2016, the last business day of the registrant’s most recently completed second fiscal quarter.

As of March 87, ~~2016~~2017, there were 13,~~148~~303,~~475~~ 908 shares of the common stock of the registrant outstanding.

MOODY NATIONAL REIT I, INC. TABLE OF CONTENTS

TABLE OF CONTENTS


Special Note Regarding Forward-Looking Statements		i

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	31
Item 2.	Properties	31
Item 3.	Legal Proceedings	31
Item 4.	Mine Safety Disclosures	31

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6.	Selected Financial Data	36
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 8.	Financial Statements and Supplementary Data	51
Item 9.	Changes In and Disagreements With Accountants On Accounting and Financial Disclosure	51
Item 9A.	Controls and Procedures	51
Item 9B.	Other Information	52

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	53
Item 11.	Executive Compensation	55
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	56
Item 13.	Certain Relationships and Related Transactions and Director Independence	56
Item 14.	Principal Accountant Fees and Services	63

PART IV
Item 15.	Exhibits and Financial Statement Schedules	65
Item 16.	Form 10-K Summary	65

Special Note Regarding Forward-Looking Statements		i
	PART I
Item 1.	Business	1
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	34
Item 2.	Properties	34
Item 3.	Legal Proceedings	34
Item 4.	Mine Safety Disclosures	34
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	35
Item 6.	Selected Financial Data	43
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 8.	Financial Statements and Supplementary Data	58
Item 9.	Changes In and Disagreements With Accountants On Accounting and Financial Disclosure	58
Item 9A.	Controls and Procedures	58
Item 9B.	Other Information	58
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	59
Item 11.	Executive Compensation	61
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	62
Item 13.	Certain Relationships and Related Transactions and Director Independence	63
Item 14.	Principal Accountant Fees and Services	71
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	73

Special Note Regarding Forward-Looking Statements

Certain statements included in this annual report on Form 10-K (this “Annual Report”) that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable ~~terminology~~terms.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs all of which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

● ~~our ability to effectively deploy~~ the ~~remaining~~risk net proceeds raised in our public offering of common stock, which terminated effective February 20, 2015; ● our ability to continue to obtain financing on acceptable terms; ● our levels of debt and the terms and limitations imposed on us by our debt agreements; ● our ability to continue to identify and acquire real estate and real estate-related assets on terms that ~~are favorable to us; ● risks inherent in~~ the ~~real~~mergers ~~estate~~(as ~~business,~~defined ~~including~~below) ~~the~~will ~~lack~~not ofbe ~~liquidity~~consummated ofwithin ~~real estate investments and potential liability relating to environmental matters; ● changes in demand for rooms at our hotel properties; ● our ability to continue to compete in~~ the ~~hotel~~expected ~~industry;~~time ●period adverse developments affecting our sponsor and its affiliates; ● the availability of cash flow from operating activities for distributions; ● changes in economic conditions generally and the real estate and debt markets specifically; ● conflicts of interest arising out of our relationship with our advisor and its affiliates; ● legislative or ~~regulatory~~at ~~changes (including changes to the laws governing the taxation of real estate investment trusts, or REITs)~~all; ~~● the availability of capital; ● changes in interest rates; and ● changes to generally accepted accounting principles, or GAAP.~~

~~Any~~● of the ~~assumptions~~occurrence underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed upon any forward-looking statements included herein. All forward-looking statements are made as of the date of this Annual Report, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any ~~forward-looking statements made after the date of this Annual Report~~event, ~~whether~~change ~~as a result of new information, future events, changed circumstances~~ or ~~any~~ other ~~reason.~~circumstances Inthat ~~light of~~could ~~the~~give ~~significant~~rise ~~uncertainties~~to ~~inherent in~~ the ~~forward-looking~~termination ~~statements~~of ~~included in this annual report, including, without limitation,~~ the ~~risks~~merger ~~described~~agreement ~~under “Risk Factors,” the inclusion of such forward-looking statements should not be regarded~~ (as adefined ~~representation by us or any other person that the objectives and plans set forth in this annual report will be achieved.~~below);

●

the failure to satisfy the conditions to completion of the mergers;

●

risks related to disruption of management’s attention from the ongoing business operations due to the pending mergers;

●

the effect of the announcement of the mergers on our operating results and business generally;

●

the outcome of any legal proceedings that could arise relating to the mergers;

●

our ability to continue to obtain financing on acceptable terms;

●

our levels of debt and the terms and limitations imposed on us by our debt agreements;

●

our ability to continue to identify and acquire real estate and real estate-related assets on terms that are favorable to us;

●

risks inherent in the real estate business, including the lack of liquidity of real estate investments and potential liability relating to environmental matters;

●

changes in demand for rooms at our hotel properties;

●

our ability to continue to compete in the hotel industry;

●

adverse developments affecting our sponsor and its affiliates;

●

the availability of cash flow from operating activities for distributions;

●

changes in economic conditions generally and the real estate and debt markets specifically;

●

conflicts of interest arising out of our relationship with our advisor and its affiliates;

●

legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts, or REITs);

●

the availability of capital;

●

changes in interest rates; and

●

changes to generally accepted accounting principles, or “GAAP.”

Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed upon any forward-looking statements included herein. All forward-looking statements are made as of the date of this Annual Report, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements made after the date of this Annual Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Annual Report, including, without limitation, the risks described under “Risk Factors,” the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Annual Report will be achieved.

PART I

ITEM 1. Business

Overview

Moody National REIT I, Inc. iswas formed as a Maryland corporation ~~formed~~ on January 15, 2008 to invest in a diversified portfolio of real estate investments. We ~~have~~ elected to qualify as a real estate investment trust, or REIT, commencing with the taxable year ended December 31, 2011. As used herein, the terms “we,” “our,” “us” and “our company” refer to Moody National REIT I, Inc. and, as required by context, Moody National Operating Partnership I, LP, a Delaware limited partnership, which we refer to as our “operating partnership,” and to their respective subsidiaries. References to “shares” and “our common stock” refer to the shares of our common stock. We own, and insubject to the mergers described herein, in the future intend to continue to own, substantially all of our assets and conduct our operations through our operating partnership, of which we are the sole general partner. Subject to certain restrictions and limitations, our business is externally managed by Moody National Advisor I, LLC, or our advisor, pursuant to an advisory agreement between us and our advisor, or the advisory agreement. Our advisor conducts our operations and manages our portfolio of real estate investments. Our sponsor, Moody National REIT Sponsor, LLC, a Delaware limited liability company, is owned and managed by Brett C. Moody, who also serves as our Chief Executive Officer and President and the Chief Executive Officer and President of our advisor. We refer to Moody National REIT Sponsor, LLC as our “sponsor.”

OnAs ~~April~~of 15December 31, 2016, ~~2009~~our portfolio consisted of fourteen investments: (1) the Woodlands Hotel, wea ~~commenced~~91-suite anhotel ~~initial~~property in The Woodlands, Texas, ~~public~~(2) ~~offering~~the ofGermantown upHotel, toa $1127-guestroom hotel property located in Germantown,~~000~~ Tennessee,~~000~~ (3) the Charleston Hotel,~~000~~ a 113-guestroom hotel property located in ~~shares~~North ofCharleston, ~~our~~South ~~common~~Carolina, ~~stock~~(4) tothe Austin Hotel, a 123-suite hotel property located in Austin, Texas, (5) the ~~public~~Grapevine Hotel, a 133-suite hotel property located in Grapevine, Texas, (6) our ~~primary~~joint ~~offering~~venture atinterest ~~$10.00~~in ~~per~~the ~~share~~Lyndhurst ~~and~~Hotel, upa to227-guestroom ~~$100~~hotel property located in,~~000~~ Lyndhurst,~~000~~ New Jersey, (7) the Austin Arboretum Hotel, a 138-guestroom hotel property located in ~~shares~~Austin, ofTexas, ~~our~~(8) ~~common~~the ~~stock~~Great toValley ~~our~~Hotel, ~~stockholders~~a ~~pursuant~~125-guestroom tohotel ~~our~~property ~~distribution~~located ~~reinvestment~~in ~~plan~~Frazer, orPennsylvania, (9) the ~~DRIP~~ Nashville Hotel, ata ~~$9.50~~208-guestroom ~~per~~hotel ~~share.~~property Onlocated ~~October~~in 12Nashville, ~~2012~~Tennessee, we(10) ~~terminated~~the ~~our~~Homewood ~~initial~~Suites ~~public~~Austin ~~offering~~Hotel, a ~~and~~96-guestroom ~~commenced~~hotel ~~our~~property ~~follow-on~~located ~~public~~in ~~offering (discussed~~Austin, ~~below~~Texas, (11). Asour ofjoint venture interest in the ~~termination~~Fort ofWorth ~~our~~Hotel, ~~initial~~a ~~public~~95-guestroom hotel ~~offering~~property located in Fort Worth, weTexas, ~~had~~(12) ~~accepted~~the ~~subscriptions~~Houston ~~for~~Hotel, ~~and~~a ~~issued~~119-guestroom hotel property located in Houston, 1Texas,~~126,253~~ ~~shares~~(13) ofa ~~our~~note ~~common~~receivable ~~stock~~from ina ~~our~~related ~~initial~~party ~~public~~with ~~offering,~~an ~~including~~initial ~~29,582~~principal ~~shares~~amount of ~~our~~$9,000,000, ~~common~~and ~~stock~~(14) ~~pursuant~~a tonote ~~our~~receivable ~~DRIP,~~from ~~resulting~~a related inparty ~~offering~~with ~~proceeds~~an initial principal amount of $104,~~966~~500,~~713~~000.

On ~~October~~April 1215, ~~2012~~2009, we commenced our ~~follow-on~~ initial public offering, or our ~~follow-on~~initial public offering, of up to $1,000,000,000 in shares of our common stock, to ~~comprised~~the ofpublic ~~up to $900,000,000~~ in ~~shares~~our ~~offered~~primary tooffering ~~the public~~ at $10.00 per share and up to $100,000,000 in shares ~~offered~~of our common stock to our stockholders pursuant to ~~the~~ our distribution reinvestment plan, or our DRIP, at $9.50 per share. ~~Effective~~As ~~February~~of ~~20, 2015, we terminated~~ the ~~offer~~termination ~~and sale~~ of ~~shares~~our toinitial ~~the~~ public ~~in our follow-on~~ offering, we ~~and~~had ~~continued~~accepted tosubscriptions ~~issue~~for, ~~shares~~and ~~pursuant to the DRIP. On November 4~~issued, ~~2015~~1,126,253 weshares ~~filed~~of aour ~~new~~common ~~Registration~~stock ~~Statement~~in onour ~~Form S-3~~initial ~~with~~public ~~the~~offering, ~~SEC~~including to29,582 shares ~~register~~of ~~the~~our ~~sale~~common ofstock uppursuant to ~~$25~~our ~~million~~DRIP, ~~shares~~resulting ofin ~~our~~offering ~~common~~proceeds ~~stock~~of ~~pursuant~~$10,966,713. toOn ~~the~~October ~~DRIP~~12, or2012, we terminated our ~~DRIP~~initial public offering.

AsOn ofOctober ~~the~~12, ~~termination~~2012, we ofcommenced our follow-on public offering, we ~~had~~or ~~accepted~~our ~~investors’~~follow-on ~~subscriptions for~~offering, ~~and~~of ~~issued,~~up 11to $1,~~826~~000,~~697~~000,000 in shares of our common stock, incomprised of ~~that~~up ~~offering,~~to ~~including 510~~$900,~~457~~000,000 in shares ofoffered ~~our~~to ~~common~~the ~~stock~~public ~~issued~~at $10.00 per share and up to $100,000,000 in shares offered to our stockholders pursuant to ~~the~~our DRIP at $9.50 per share. Effective February 20, ~~resulting~~2015, inwe ~~aggregate~~terminated ~~gross~~the ~~offering~~offer ~~proceeds~~and sale of ~~$113~~shares to the public in our follow-on offering,~~162,397~~ but continued to issue shares pursuant to our DRIP. As ofOn ~~December~~November 314, 2015, we ~~had~~filed ~~accepted~~a ~~subscriptions~~new ~~for,~~registration statement on Form S-3 with the Securities and ~~issued~~Exchange Commission, anor ~~aggregate~~the SEC, to register the sale of 12up to $25,~~952~~000,~~950~~000 ~~shares~~in shares of our common stock inpursuant to our ~~initial~~ ~~public~~DRIP, ~~offering~~which ~~and~~we ~~follow-on~~refer to as our “DRIP offering,.” ~~including~~On ~~540~~October 13,~~039~~ ~~shares~~2016, our board of ~~common~~directors ~~stock~~suspended ~~issued~~our ~~pursuant~~DRIP, towhich ~~the~~suspension ~~DRIP,~~became ~~resulting~~effective beginning with distributions made in November 2016 and will remain in ~~aggregate~~effect ~~gross~~unless ~~offering~~and ~~proceeds~~until ofour ~~$124~~DRIP resumes,~~129,110.~~ Asas determined by our board of ~~December~~directors. ~~31,~~If ~~2015~~we resume our DRIP, weour ~~had~~board ~~sold~~of directors 65may,~~344~~ ~~shares~~in ~~pursuant~~its sole discretion and from time to time, change the ~~DRIP~~price ~~in our~~at ~~DRIP~~which ~~offering,~~we ~~and~~are ~~2,434,656~~offering shares ofpursuant to our ~~common~~DRIP to ~~stock~~reflect ~~registered~~changes in ~~the~~our ~~DRIP~~estimated ~~offering~~value ~~remained~~per ~~available~~share ~~for~~and ~~sale~~other factors that the board of directors deems relevant.

WeAs ~~intend to use substantially all~~ of the ~~remaining~~termination ~~net~~of ~~proceeds from~~ our follow-on offering, ~~and~~we ~~the~~had ~~proceeds~~accepted ~~from~~investors’ ~~any~~subscriptions ~~other~~for, ~~offering~~and ofissued, ~~our~~11,719,636 shares ~~that~~of weour ~~may~~common ~~conduct in the future~~stock ~~to continue to invest~~ in aour ~~diversified~~follow-on ~~portfolio~~offering, ofincluding ~~real properties~~510,457 ~~real~~shares ~~estate~~of ~~securities~~our ~~and~~common ~~debt-related~~stock ~~investments.~~issued Topursuant ~~date, all~~to of our ~~investments~~DRIP, ~~have~~resulting ~~been~~ in ~~hotel~~aggregate ~~properties~~gross offering orproceeds ~~loans~~of ~~secured~~$112,091,790. byAs ~~hotel~~of ~~properties~~December 31, ~~and~~2016, we ~~anticipate~~had ~~that~~accepted ~~our~~subscriptions ~~portfolio will~~for, ~~continue~~and toissued, ~~consist~~an ~~primarily~~aggregate of ~~hotel~~12,845,889 shares ~~properties~~of ~~located~~common stock in ~~the~~our ~~United~~initial ~~States~~public offering and ~~Canada~~follow-on ~~that~~offering, weincluding ~~own~~540,039 ~~exclusively~~shares orof incommon ~~joint ventures~~stock orissued ~~other~~pursuant to ~~co-ownership~~our ~~arrangements~~DRIP, ~~with~~resulting ~~other~~in ~~persons.~~aggregate Wegross ~~may~~offering ~~also~~proceeds ~~invest~~of in$123,058,503. ~~other~~As ~~property~~of ~~types~~December ~~consisting of multifamily~~31, ~~office~~ 2016, ~~retail~~we ~~and~~had ~~industrial~~sold ~~assets~~388,033 ~~located~~ shares in ~~the~~our ~~United~~DRIP ~~States~~offering, and ~~Canada~~2,111,967 asshares ~~well as securities~~ of ~~real~~our ~~estate~~common ~~companies~~stock ~~and debt-related~~registered ~~investments. We may also make opportunistic investments~~ in ~~properties~~our ~~that~~DRIP ~~may~~offering beremained ~~under-developed~~available orfor ~~newly constructed and in properties that we believe are undervalued~~sale.

AsSubject ofto ~~December~~the ~~31,~~mergers described ~~2015~~herein, we ~~owned~~intend ato ~~portfolio~~ use substantially all of ~~nine~~the ~~hotels~~proceeds ~~and~~from ~~joint~~any ~~venture~~offering ~~interests~~of our securities that we may conduct in the ~~two~~future ~~additional~~to ~~hotels~~continue ~~with~~to aninvest ~~aggregate~~in ~~purchase~~a ~~price~~diversified portfolio of ~~$225~~real properties,~~082,000,~~ ~~exclusive of~~real ~~closing~~estate ~~costs~~securities and debt-related investments. To Wedate, ~~also~~substantially ~~owned~~all ~~(1)~~of aour ~~joint~~investments ~~venture~~have ~~interest~~been in ahotel ~~mortgage~~properties, ~~note~~loans secured by a hotel ~~property~~properties ~~with~~or anloans ~~outstanding~~to related ~~principal~~parties, ~~balance~~and we anticipate that our portfolio will continue to consist primarily of ~~$11,839,171~~hotel properties located in the United States and ~~(2)~~Canada athat ~~note~~we ~~receivable~~own ~~from~~exclusively ~~related~~or ~~party~~in joint ventures or other co-ownership arrangements with aother ~~balance~~persons. Subject to the availability of $9sufficient funds or financing on acceptable terms,~~000~~ we may also invest in other property types consisting of multifamily,~~000~~ office, retail and industrial assets located in the United States and Canada as well as securities of ~~December~~real 31estate companies and debt-related investments, ~~2015~~as well as opportunistic investments in properties that may be under-developed or newly constructed and in properties that we believe are undervalued.

On March 24, 2016, our board of directors determined an estimated value per share of our common stock of $10.75 as of December 31, 2015. For more information on the determination of the estimated per share value of our common stock, see Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Purchases of Equity Securities — Estimated Value Per Share.” In connection with the determination of our estimated per share value, our board of directors has also determined to increase the purchase price of shares offered pursuant to our distribution reinvestment plan to $10.21, effective upon not less than 10 days’ notice to our stockholders. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Subsequent Events — Revision of DRIP Share Price.” In the future, our board of directors may, in its sole discretion and from time to time, change the price at which we offer shares pursuant to our distribution reinvestment plan to reflect changes in our estimated value per share and other factors that our board of directors deems relevant. 1

~~Subject~~We believe that we have sufficient capital to ~~certain~~meet ~~restrictions~~our existing debt service and ~~limitations,~~other operating obligations for the current year and that we have adequate resources to fund our ~~business~~cash isneeds ~~externally~~until ~~managed~~we reach sustainable profitable operations. However, our operations are subject byto ~~Moody~~a ~~National~~variety ~~Advisor~~of Irisks, ~~LLC~~including, ~~our~~but ~~external~~not ~~advisor~~limited to, ~~pursuant~~our ability to anraise ~~advisory~~additional ~~agreement.~~funds Wein ~~refer~~any tofuture ~~Moody~~offerings ~~National~~of ~~Advisor~~our securities, Ichanges in national economic conditions, ~~LLC~~the asrestricted ~~our~~availability ~~“advisor~~of financing, changes in demographic trends and interest rates, declining real estate valuations and downward pressure on room rates for hotels and risks associated with the pending mergers described herein.” ~~Our~~As ~~advisor~~a ~~conducts~~result of these uncertainties, there can be no assurance that we will meet our ~~operations~~investment ~~and~~objectives ~~manages~~or that the risks described above will not have an adverse effect on our ~~portfolio~~properties ofor ~~real~~results ~~estate~~of ~~investments~~operations.

~~Moody~~As ~~Securities,~~a ~~LLC~~REIT, anwe ~~affiliate~~generally are ofnot subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any ~~advisor,~~taxable ~~served~~year after the taxable year in which we initially elect to be taxed as ~~our~~a ~~dealer~~REIT, ~~manager~~we ~~for~~will be subject to federal income tax on our ~~public~~taxable ~~offerings.~~income Weat ~~refer~~regular corporate rates and will not be permitted to ~~Moody~~qualify ~~Securities,~~for ~~LLC~~treatment as a REIT for federal income tax purposes for four years following the year in which our ~~“dealer~~qualification ~~manager”~~is denied. Failing to qualify as a REIT could materially orand ~~“Moody~~adversely ~~Securities~~affect our net income.”

1Moody Securities, LLC, an affiliate of our advisor, previously served as our dealer manager for our public offerings. We refer to Moody Securities, LLC as our “dealer manager” or “Moody Securities.”

Our principal ~~office~~executive isoffices are located at 6363 Woodway Drive, Suite 110, Houston, Texas and our telephone number is (713) 977-7500.

~~2015~~Pending ~~Highlights:~~Merger with Moody National REIT II, Inc.

~~During~~On ~~the~~September ~~year~~27, ~~ended~~2016, we ~~December~~jointly 31announced with Moody National REIT II, ~~2015~~Inc., a Maryland corporation and a related party, or Moody II, that we: had entered into a non-binding Letter of Intent that set forth the terms and conditions upon which Moody II would acquire us and our subsidiaries. Moody II is a public, non-listed REIT formed in July 2014. Our sponsor serves as the sponsor of Moody II, and Brett C. Moody serves as the Chairman of the Board and Chief Executive Officer of Moody II.

●On ~~closed~~November ~~the~~16, ~~follow-on~~2016, we, ~~offering~~along with our operating partnership, ~~having~~our ~~raised~~advisor, ~~$124~~Moody II,~~129~~ Moody National Operating Partnership II,~~110~~ inLP, ~~gross~~the ~~offering~~operating ~~proceeds~~partnership of ~~from~~Moody ~~our~~II, ~~initial~~or ~~public~~Moody ~~offering~~II OP, ~~our~~Moody ~~follow-on~~National ~~offering~~Advisor ~~and~~II, ~~our~~LLC, ~~DRIP~~Moody ~~offering;~~II’s ●advisor, ~~continued~~or ~~paying~~Moody II advisor, and Moody Merger Sub, LLC, a ~~distribution~~wholly ~~which~~owned subsidiary of Moody II, ifor ~~paid~~merger ~~each~~sub, ~~day~~entered ~~over~~into aan ~~365-day~~agreement ~~period~~and plan of merger, isor ~~equivalent~~the merger agreement. Pursuant to anthe ~~8.0%~~merger ~~annualized~~agreement, ~~distribution~~we ~~rate~~will ~~based~~merge onwith and into merger sub, with merger sub continuing as the “surviving entity” and a ~~purchase~~wholly-owned ~~price~~subsidiary of ~~$10~~Moody II.00 ~~per~~We ~~share~~refer ofto ~~our~~the ~~common~~foregoing ~~stock;~~transaction ●as ~~sold~~the “merger.” In addition, pursuant to the ~~Silicon~~merger ~~Valley~~agreement, ~~Hotel~~Moody II OP will merge with and into our operating partnership, awith ~~127-suite~~our ~~hotel~~operating ~~property~~partnership ~~located~~continuing as inthe ~~Newark~~“surviving partnership,” ~~California~~and which transaction we ~~acquired~~refer ~~for~~to ~~$10,000,000,~~as ~~for~~the an“partnership ~~aggregate~~merger.” ~~sales~~Unless ~~price~~context suggests ~~of $24~~otherwise,~~500,000;~~ we refer to the merger and ●the ~~acquired~~partnership merger together as the ~~following~~“mergers.” ~~three~~The ~~hotel~~merger ~~properties~~agreement was ~~and~~the product of a ~~joint~~negotiation ~~venture~~between ~~interest~~a inspecial committee of our board of directors and a ~~hotel~~special ~~property~~committee ~~for~~of anthe ~~aggregate~~board ~~purchase~~of directors ~~price~~of Moody II (both consisting solely of ~~$101~~independent directors),~~550,000:~~ each of which was represented by its own counsel and financial advisor. Entry into the merger agreement was unanimously approved by our board of directors upon the recommendation of the special committee of our board of directors.

oSubject to the ~~Great~~terms ~~Valley~~and ~~Hotel~~conditions ~~for~~of anthe ~~aggregate~~merger ~~purchase~~agreement, Moody ~~price~~II agreed to pay gross consideration of $11.00 per share of our common stock,~~000,000~~ ~~plus~~which ~~closing~~amount ~~costs;~~will obe ~~the~~reduced ~~Nashville~~by ~~Hotel~~all ~~for~~fees anand expenses ~~aggregate~~that ~~purchase~~we ~~price~~incur as a result of ~~$66,300,000~~or ~~plus~~in ~~closing~~connection ~~costs;~~with othe mergers and other transactions contemplated by the ~~Homewood~~merger ~~Suites~~agreement (including ~~Austin~~certain ~~Hotel~~disposition ~~for~~fees anand ~~aggregate~~profit ~~purchase~~sharing ~~price~~amounts ofto ~~$14~~our sponsor and parties related thereto,~~250~~ financial advisory and legal fees payable by us,~~000~~ ~~plus~~and other transaction and closing costs; incurred by us), which fees and oexpenses we refer to as the “Moody I transaction fees and expenses,” to arrive at the net merger consideration payable to the holders of our ~~joint~~common ~~venture~~stock, ~~interest~~which inwe refer to as the ~~Fort~~“net ~~Worth~~per ~~Hotel~~share ~~for~~price;” anprovided, ~~aggregate~~that ~~purchase~~in no event will the net per share price ofbe less than $710.25. Pursuant to the terms of the merger agreement,~~301~~ the parties thereto have determined the final amount of the Moody I transaction fees and expenses and have calculated the net per share price. Based on such determination,~~887~~ ~~plus~~the ~~closing~~net ~~costs~~per share price was determined to be $10.25.

~~Investment~~At ~~Objectives~~the effective time of the merger, each outstanding share of our common stock will be automatically cancelled and retired, and converted into the right to receive, at the election of each holder of such share of our common stock, but subject to the limitations discussed below, either:

~~Our~~(i) ~~primary~~an ~~investment~~amount ~~objectives~~in ~~are~~cash equal to: the net per share price, which we refer to as the “cash consideration;” or

● preserve, protect and return stockholders’ capital contributions; ● pay regular cash distributions to stockholders; and ● realize capital appreciation upon the ultimate sale of the real estate assets we acquire. 2

~~Investment~~(ii) ~~Strategy~~a number of shares of common stock of Moody II, which we refer to as the “stock consideration,” equal to the net per share price divided by $25.00, which quotient, as adjusted pursuant to the merger agreement, is referred to as the “exchange ratio.”

InWe ~~identifying~~refer ~~additional investments, we intend~~ to ~~continue~~the ~~to rely upon our~~ “~~Moody Core Plus Plus” investment strategy. “Core” refers to a stable,~~stock Class A asset in a major metropolitan market, which can provide net operating income stability. However, we believe that a core buying strategy, without a supply-demand imbalance, offers minimal growth potential along with an increased risk of asset devaluation. “Core Plusconsideration” ~~builds~~together ~~upon a foundation of targeting core markets, which are major metropolitan areas~~ with ~~stable~~the population growth, high barriers to entry and multiple demand generators, by seeking to capitalize upon potential supply-demand imbalances that we believe will create a technical pressure on a particular asset or asset class. We intend to identify these technical pressures created by demographic, business and industry changes which lead to supply and demand imbalances in a particular market. By utilizing this Core Plus strategy of purchasing undervalued assets with underlying intrinsic value, we believe a core asset will create greater value at disposition. Our “~~Core~~cash ~~Plus Plus~~consideration,” ~~strategy~~as ~~builds further upon~~ the ~~acquisition~~“merger philosophy of Core Plus to combine our real property investments with real estate securities and debt-related investments, including (1) mortgage and mezzanine loans, (2) debt and derivative securities related to real estate, including mortgage-backed securities, and (3) the equity securities of other REITs and real estate companiesconsideration. We are not specifically limited in the number or size of our real estate securities and debt-related investments. The number and mix of properties we acquire and other investments we make will depend upon real estate and market conditions and other circumstances existing at the time we are acquiring our properties and making our investments.”

2Notwithstanding the above, the maximum number of shares of our common stock that may be converted into the right to receive the cash consideration may not exceed 50% of the aggregate number of shares of our common stock entitled to receive merger consideration in connection with the merger. If the elections of our stockholders would cause more than 50% of the aggregate number of shares of our common stock to be converted into the right to receive the cash consideration, then the shares of our common stock that would be converted into the right to receive the cash consideration will be reduced proportionally so that the number of shares of our common stock that will be converted into the right to receive the cash consideration will not exceed 50%, and the remaining shares of our common stock will be converted into the right to receive the stock consideration.

~~Investment~~Subject ~~Portfolio~~to the terms and conditions of the merger agreement, at the effective time of the partnership merger, each outstanding unit of limited partnership interest in our operating partnership will be automatically cancelled and retired, and converted into the right to receive a number of units of limited partnership interests in the surviving partnership equal to the exchange ratio. Each unit of limited partnership interest in our operating partnership designated as a special partnership unit pursuant to our operating partnership’s limited partnership agreement will be automatically cancelled and retired and shall cease to exist, and no consideration shall be paid, nor, except as expressly provided in the termination agreement (described below), shall any other payment or right inure or be made with respect thereto in connection with or as a consequence of the partnership merger. Each outstanding unit of limited partnership interest in Moody II OP will be converted into one unit of equity ownership in the surviving partnership, and each unit designated as a special partnership unit pursuant to the limited partnership agreement of Moody II OP will be converted into one special unit in the surviving partnership.

AsThe ofmerger agreement ~~December~~contains ~~31,~~customary ~~2015~~covenants, including covenants prohibiting us and our ~~portfolio~~subsidiaries ~~was~~and representatives from ~~comprised~~soliciting, ofproviding ~~thirteen~~information ~~total~~with ~~investments:~~respect ~~(1)~~to ~~nine~~or ~~hotel~~entering ~~properties~~into ~~located~~discussions inconcerning ~~Texas~~proposals relating to alternative business combination transactions, ~~Tennessee~~subject to certain limited exceptions. However, ~~South~~under ~~Carolina~~the ~~and~~terms ~~Pennsylvania~~of the merger agreement, ~~comprising~~during 1the period beginning on November 16,~~154~~ ~~rooms;~~2016 ~~(2)~~and ~~joint~~continuing ~~venture~~until ~~interests~~11:59 inp.m. New York City time on December 31, 2016, or the ~~227-suite~~go ~~Lyndhurst~~shop ~~Hotel~~period ~~located~~end intime, ~~New~~we ~~Jersey~~had the right to initiate, solicit, provide information and aenter ~~joint~~into ~~venture~~discussions concerning ~~interest~~proposals inrelating to alternative business combination transactions. Additionally, for up to five business days after the ~~95-room~~go shop ~~Fort~~period ~~Worth~~end ~~Hotel~~time, ~~located~~we had the right to continue to participate in ~~Texas;~~such ~~(3)~~discussions awith ~~74.5%~~certain ~~joint~~other ~~venture~~parties, ~~interest~~each referred into as a ~~mortgage~~“go ~~note~~shop ~~secured~~bidder,” byand could have, subject to certain conditions set forth in the merger agreement ~~Hyatt~~regarding ~~Place~~the ~~Hotel~~proposal inmade ~~Grapevine,~~by ~~Texas~~such go shop bidder, orterminated the ~~Hyatt~~merger ~~Place~~agreement ~~Note;~~ and ~~(4)~~entered into an agreement with a ~~note~~go ~~receivable~~shop bidder ~~from~~with ~~related~~respect ~~party~~to the proposal made by such go shop bidder.

~~Our~~In ~~Hotel~~the ~~Properties~~go shop process described in the preceding paragraph, 99 prospective buyers, including 77 prospective financial buyers and 22 prospective strategic buyers, were contacted regarding each such party’s potential interest in exploring a transaction with us. During the go shop period (i.e., between November 16, 2016 and December 31, 2016), seven parties (two of which were financial buyers and five of which were strategic buyers) negotiated and entered into confidentiality agreements with us and were provided with non-public information about us. None of the parties contacted during the go shop process, including the seven parties that entered into confidentiality agreements with us, submitted a proposal to us that was deemed an “acquisition proposal” under the merger agreement prior to the go shop period end time.

AsIn connection with the mergers, we will also seek the approval of ~~December~~our 31stockholders of an amendment to our Second Articles of Amendment and Restatement, as ~~2015~~amended, or our ~~portfolio~~charter, ~~included nine~~to ~~hotel~~delete ~~properties~~certain ~~and~~provisions ~~two~~regarding ~~joint~~roll-up ~~venture~~transactions, ~~interests~~or inthe charter amendment. Pursuant to the ~~hotel~~merger ~~properties~~agreement, ~~described~~approval ~~below~~by our stockholders of the charter amendment is a condition to completing the mergers.

Property Name	Date Acquired	Location	Ownership Interest			Purchase Price(1)		Rooms		Mortgage Debt Outstanding(2)
Woodlands Hotel (Homewood Suites by Hilton)(3)	November 8, 2012	The Woodlands, Texas		100	%	$	12,000,000		91	$	9,300,000
Germantown Hotel (Hyatt Place)(4)	April 9, 2013	Germantown, Tennessee		100	%		11,300,000		127		7,465,018
Charleston Hotel (Hyatt Place)(5)	July 2, 2013	North Charleston, South Carolina		100	%		11,800,000		113		7,536,474
Austin Hotel (Hampton Inn)(6)	December 30, 2013	Austin, Texas		100	%		15,350,000		123		11,207,445
Grapevine Hotel (Residence Inn)(7)	March 31, 2014	Grapevine, Texas		100	%		20,500,000		133		12,951,025
Lyndhurst Hotel (Marriott Courtyard)(8)	September 30, 2014	Lyndhurst, New Jersey		(9)			33,322,000		227		31,415,138
Austin Arboretum Hotel (Hilton Garden Inn)(10)	November 20, 2014	Austin, Texas		100	%		29,250,000		138		19,000,000
Great Valley Hotel (Hampton Inn)(11)	March 27, 2015	Frazer, Pennsylvania		100	%		11,000,000		125		8,200,000
Nashville Hotel (Embassy Suites)(12)	June 16, 2015	Nashville, Tennessee		100	%		66,300,000		208		43,000,000
Homewood Suites Austin Hotel (Homewood Suites)(13)	August 3, 2015	Austin, Texas		100	%		14,250,000		96		11,000,000
Fort Worth Hotel (TownPlace Suites)(14)	December 18, 2015	Fort Worth, Texas		(15	)		7,301,887		95		7,167,151
Totals						$	232,373,887		1,476	$	168,242,251

Concurrently with the entry into the merger agreement, we, our operating partnership, our advisor, Moody II, Moody National Realty Company, LP, or Moody National, and Moody OP Holdings I, LLC, or OP Holdings, the holder of all of the outstanding special partnership units in our operating partnership, entered into a termination agreement, or the termination agreement. Pursuant to the termination agreement, at the effective time of the mergers, the advisory agreement among us, our operating partnership, our advisor and Moody National will be terminated and we will pay our advisor a payment of $5,580,685, or the Moody I advisor payment. The Moody I advisor payment was a negotiated amount that represents a reduction in the disposition fee to which our advisor could have been entitled and a waiver of any other contractual termination fee that our advisor would have been due under the advisory agreement in connection with the merger. In addition, the termination agreement provides that at the effective time of the partnership merger and in accordance with the terms of the limited partnership agreement of our operating partnership, our operating partnership will pay to OP Holdings an amount not to exceed $613,751, or the promote payment. In the event that the merger agreement is terminated prior to the consummation of the mergers, the termination agreement will automatically terminate and be of no further effect and no Moody I advisor payment or promote payment will be owed and payable.

3Also concurrently with the entry into the merger agreement, Moody II, Moody II OP and Moody II advisor entered into an amended and restated advisory agreement, pursuant to which Moody II will be obligated to pay Moody II advisor an acquisition fee of 1.5% of the aggregate cash consideration paid in the merger. However, during the first year following the consummation of the mergers, if Moody II sells a property that was previously owned by us, then any disposition fee to which Moody II advisor would otherwise be entitled under the amended and restated advisory agreement will be reduced by an amount equal to the portion of the Moody I advisor payment attributable to such property.

(1)	Excludes acquisition costs.
(2)	As of December 31, 2015.
(3)	The Woodlands Hotel was developed in 2001. All suites at the Woodlands Hotel have fully equipped kitchens, separate eating and sitting areas and high speed internet access. Property amenities include a business center, meeting rooms, fitness center and courtyard pool and spa.
(4)	The Germantown Hotel opened in August 2009. Guestrooms feature a refrigerator, 42” flat-panel HDTV, Hyatt Grand Bed, and flexible workspace with task lighting. Property amenities include Wi-Fi internet access throughout the hotel, 24-hour StayFit@Hyatt fitness center, heated outdoor pool, 24/7 guest kitchen and bakery café, 1,125 square feet of flexible meeting space and all-inclusive meeting packages.
(5)	The Charleston Hotel opened in June 2010. The guestrooms feature a refrigerator, 42” flat-panel HDTV, Hyatt Grand Bed, and flexible workspace. Property amenities include Wi-Fi internet access throughout the hotel, heated indoor pool, and 24/7 guest kitchen and bakery café.
(6)	The Austin Hotel was built in 1997 and extensively renovated in 2012. Property amenities include an outdoor swimming pool, business center, fitness room, breakfast buffet and meeting space.
(7)	The Grapevine Hotel was built in 2007 and is located in close proximity to Dallas/Fort Worth International Airport (DFW), from which it receives business travel demand.
(8)	The Lyndhurst Hotel was constructed in 1990. Amenities at the Lyndhurst Hotel include a restaurant and lounge, 2,910 square feet of meeting space, lobby grab-and-go, indoor pool, outdoor terrace, fitness center and business center.
(9)	The Lyndhurst Hotel is owned by MN Lyndhurst Venture, LLC, or the Lyndhurst joint venture. Our operating partnership contributed $100 to the Lyndhurst joint venture in exchange for 100% of the Class B membership interests, or the Class B Interests, of the Lyndhurst joint venture. Pursuant to the operating agreement of the Lyndhurst joint venture, our operating partnership has also paid approximately $5.37 million in costs and fees and capital reserve requirements associated with the transfer of the Lyndhurst Hotel to the Lyndhurst joint venture, all of which amounts were deemed to be additional capital contributions by our operating partnership to the Lyndhurst joint venture in exchange for additional Class B Interests. The prior tenant-in common owners of the Lyndhurst Hotel contributed their tenant-in-common (TIC) ownership interests in the Lyndhurst Hotel (valued at $1,000 in the aggregate) to the Lyndhurst joint venture in exchange for non-voting class A membership interests, or the Class A Interests, of the Lyndhurst joint venture. Our operating partnership serves as the sole manager of the Lyndhurst joint venture and manages the business and affairs of the Lyndhurst joint venture. Cash available for distribution to the members of the Lyndhurst joint venture will be distributed as follows: (1) first, 100% to our operating partnership until it has received cash distributions equal to a 12% annual, cumulative, non-compounded return on its capital contributions to the Lyndhurst joint venture and a return of 100% of its unreturned capital contributions to the Lyndhurst joint venture, (2) next, 100% to the holders of the Class A Interests until they have received a return of 100% of their capital contributions to the Lyndhurst joint venture (valued at $1,000 in the aggregate), and (3) next, 60% to our operating partnership and 40% to the holders of the Class A Interests.
(10)	The Austin Arboretum Hotel is a five-story, 138-room hotel located in Austin’s Northwest/Arboretum corridor. Built in 2002, the Austin Arboretum Hotel has been recently enhanced by a comprehensive multi-year capital program renovation.
(11)	The Great Valley Hotel is a five-story limited service hotel facility built in 1998 and renovated in 2004. The Great Valley Hotel features 125 rooms, including 115 standard guestrooms and 10 suites, and includes 630 square feet of meeting space, a business center, a fitness center, an outdoor pool, and appropriate back-of-the-house facilities.
(12)	The Nashville Hotel is a 208 room, select-service all suites hotel facility built in 2001. Located just three blocks away from the Vanderbilt University campus and Medical Center, the Embassy Suites Nashville is well positioned in the West End-Midtown district, less than two miles from downtown Nashville.

4The merger agreement may be terminated under certain circumstances by both Moody II and us. If such termination occurs under certain circumstances, then we would be obligated to pay Moody II a termination fee of $2,000,000 (or $1,000,000 if the merger agreement had been terminated pursuant to the go stop provisions therein), plus an expense reimbursement fee of up to $500,000. The merger agreement also provides that one party may be required to reimburse the other party’s expenses, up to $500,000, if the merger agreement is terminated under certain circumstances.

(13)	The Homewood Suites Austin Hotel is a 96 room select-service hotel constructed in 1998. The Homewood Suites Austin is located approximately six miles from Austin-Bergstrom International Airport and is just minutes from downtown Austin.
(14)	The Fort Worth Hotel is a 95-unit hotel constructed in 1998. Room amenities include a fully equipped kitchen, luxury bedding, free internet access and a workspace area. The Ft. Worth Hotel also features an outdoor pool, a fitness center and on-site guest laundry room.
(15)	The Fort Worth Hotel is owned by MN Fort Worth Venture, LLC, or the Fort Worth Joint Venture. Our operating partnership contributed $100 to the Fort Worth Joint Venture in exchange for 100% of the Class B membership interests, or the Class B Interests, of the Fort Worth Joint Venture. Pursuant to the operating agreement of the Fort Worth Joint Venture, our operating partnership has paid approximately $3.28 million in costs and fees and capital reserve requirements associated with the transfer of the Fort Worth Hotel to the Fort Worth Joint Venture, all of which amounts were deemed to be additional capital contributions by our operating partnership to the Fort Worth Joint Venture in exchange for additional Class B Interests. The prior tenant-in common owners of the Fort Worth Hotel contributed their TIC ownership interests in the Fort Worth Hotel (valued at $1,000 in the aggregate) to the Fort Worth Joint Venture in exchange for non-voting class A membership interests, or the Class A Interests, of the Fort Worth Joint Venture. Our operating partnership serves as the sole manager of the Fort Worth Joint Venture and manages the business and affairs of the Fort Worth Joint Venture. Cash available for distribution to the members of the Fort Worth Joint Venture will be distributed as follows: (1) first, 100% to our operating partnership until it has received cash distributions equal to a 12% annual, cumulative, non-compounded return on its capital contributions to the Fort Worth Joint Venture and a return of 100% of its unreturned capital contributions to the Fort Worth Joint Venture, (2) next, 100% to the holders of the Class A Interests until they have received a return of 100% of their capital contributions to the Fort Worth Joint Venture (valued at $1,000 in the aggregate), and (3) next, 50% to our operating partnership and 50% to the holders of the Class A Interests.

The obligation of each party to consummate the mergers is subject to a number of conditions, including the approval of our stockholders of the merger and the charter amendment, receipt of any regulatory approvals, delivery of certain documents and consents, the truth and correctness of the representations and warranties of the parties, subject to the materiality standards contained in the merger agreement, the effectiveness of the registration statement on Form S-4 (File No. 333-215362) filed by Moody II to register the shares of its common stock to be issued as stock consideration, and the absence of a material adverse effect with respect to either us or Moody II. There is no guarantee that the mergers will close. Our management has, and will continue to, expend time and resources to consummate the mergers, which time and resources may otherwise have been allocated to our other operational needs.

~~Each~~In ofconnection with ~~our~~the ~~properties~~mergers, ison ~~owned~~February by2, ~~wholly-owned subsidiaries~~2017, ofMoody ~~our~~II ~~operating~~entered ~~partnership,~~into ~~which~~a westockholder ~~refer~~servicing tocoordination asagreement, ~~“property~~or ~~owners.”~~the stockholder Inservicing ~~connection~~coordination agreement, with Moody Securities. Pursuant to the ~~acquisition~~stockholder servicing coordination ofagreement, ~~each~~Moody ofII ~~our~~will ~~hotels,~~pay weto ~~formed~~Moody aSecurities ~~taxable~~certain ~~REIT~~stockholder ~~subsidiary~~servicing fees, or athe ~~TRS.~~stockholder ~~The~~servicing ~~property~~fees, ~~owners~~of ~~and~~up to ~~wholly~~$2.125 ~~owned~~per ~~subsidiaries~~share of ~~the TRSs,~~Moody ~~which~~II’s wecommon ~~refer~~stock toissued as ~~“master~~stock ~~tenants,”~~consideration. ~~are~~All ~~party~~stockholder toservicing ~~hotel~~fees ~~lease~~will ~~agreements~~be re-allowed ~~pursuant~~ to ~~which~~broker-dealers ~~each~~that ~~property~~provide ~~owner leases~~ongoing ~~its~~financial ~~hotel~~advisory services to aour ~~master~~stockholders ~~tenant.~~and ~~The~~that ~~leases~~enter ~~provide~~into participating ~~for ten~~broker-~~year~~dealer ~~lease~~agreements ~~terms,~~with ~~provided~~Moody ~~that~~Securities. aThe ~~property~~aggregate ~~owner~~amount ~~may~~of ~~terminate~~stockholder servicing fees will depend ~~its~~on ~~lease~~the ~~upon~~number 45of ~~days~~shares ~~prior~~of ~~written~~Moody ~~notice~~II’s tocommon ~~the~~stock ~~master~~issued ~~tenant~~as instock ~~the~~consideration, ~~event~~and ~~that~~could werange ~~contract~~from approximately $5,797,034 to ~~sell~~$11,594,068, assuming that the ~~hotel~~maximum tostockholder aservicing ~~non-affiliate~~fee of $2.125 per share is paid for ~~Moody~~all ~~National~~shares ~~Hospitality~~issued ~~Management,~~as ~~LLC,~~stock ~~our~~consideration. ~~affiliate,~~No ~~manages~~stockholder ~~each~~servicing offees ~~our~~will ~~hotel~~be ~~properties~~paid ~~pursuant~~with respect to aany ~~hotel~~cash ~~management agreement~~paid ~~between~~by Moody II ~~National~~as ~~Hospitality~~cash ~~Management,~~consideration ~~LLC~~in ~~and~~the ~~each master tenant~~merger.

WeThe ~~believe~~foregoing ~~that all~~ descriptions of ~~our~~the ~~hotel~~mergers, ~~properties are~~the ~~adequately~~merger ~~covered~~agreement, bythe ~~insurance~~termination agreement and ~~are~~related ~~suitable~~transactions ~~for~~are ~~their~~not ~~intended~~complete ~~purposes.~~and ~~Each~~are ofsubject ~~our~~to ~~hotel properties faces competition~~and ~~from~~qualified ~~other~~in ~~hotel~~their ~~properties~~entirety inby ~~and~~reference ~~around~~to ~~their~~the ~~respective~~terms ~~submarkets.~~of Wethe ~~are~~complete ~~undertaking~~merger ~~renovations~~agreement atand ~~the~~termination ~~Austin Hotel~~agreement, ~~the~~which ~~Grapevine~~were ~~Hotel,~~filed ~~the~~as ~~Lyndhurst~~exhibits ~~Hotel,~~to ~~the~~our ~~Austin~~current ~~Arboretum~~report ~~Hotel,~~on ~~the~~Form ~~Great~~8-K ~~Valley~~filed ~~Hotel,~~on ~~and~~November ~~the~~17, ~~Nashville Hotel~~2016.

~~Our~~2016 ~~Mortgage Note~~ Highlights:

~~The~~● ~~following~~During ~~table~~the ~~sets~~year ~~forth~~ended ~~certain~~December ~~summary information~~31, ~~regarding~~2016, ~~our~~we ~~investment~~entered ininto the ~~Hyatt~~merger ~~Place Note as of December 31, 2015:~~agreement.

Date Acquired		Ownership Interest				Loan Type		Collateral				Aggregate Purchase Price				Outstanding Principal Balance				Interest Rate				Maturity Date
June 3, 2011			74.5	%(1)		First Mortgage			Hotel(2)			$	12,759,199	(3)		$	11,839,171				(4	)		February 1, 2018

Investment Objectives

5Currently, our primary business goal is to complete the pending mergers. The following is a description of our investment objectives notwithstanding the pending mergers:

(1)	We acquired our interest in the Hyatt Place Note through MNHP Note Holder, LLC, a Delaware limited liability company, which we refer to as the “note joint venture.” Our operating partnership owns a 74.5% membership interest in the note joint venture. Moody National Mortgage, an affiliate of our sponsor controlled by Brett C. Moody, our Chairman of the Board and Chief Executive Officer, owns a 14% membership interest in the note joint venture and members of Moody National HP Grapevine Trust, a Delaware statutory trust, collectively own the remaining 11.5% membership interest in the note joint venture.
(2)	The Hyatt Place Note is secured by a first lien on the 125-room Hyatt Place hotel property located in Grapevine, Texas.
(3)	A portion of the purchase price for the Hyatt Place Note was funded with the proceeds of a loan in the original aggregate principal amount of $11,483,280.
(4)	The Hyatt Place Note accrued interest at a fixed rate of 5.15% per annum through August 21, 2012. For the period from August 21, 2012 through August 21, 2015, the Hyatt Place Note accrued interest at a fixed rate equal to 5.15%. For the period from August 21, 2015 through the maturity date, the Hyatt Place Note accrues interest at 5.15%, which is a rate equal to (1) the variable interest rate per annum published in the Wall Street Journal as the “prime rate” for the U.S. in effect as of August 21, 2015, plus (2) 1.90%, provided that in no event will the interest rate exceed the maximum rate permitted by law.

●

preserve, protect and return stockholders’ capital contributions;

~~Our~~● ~~Note~~pay ~~Receivable~~regular ~~from~~cash ~~Related~~distributions ~~Party~~to stockholders; and

On● ~~August~~realize ~~21,~~capital ~~2015~~appreciation weupon ~~originated a loan in~~ the ~~aggregate~~ultimate ~~principal~~sale ~~amount~~ of ~~$9,000,000, or~~ the ~~Related~~real ~~Party~~estate ~~Note,~~assets towe ~~Moody~~currently ~~National~~own ~~DST Sponsor, LLC, a Texas limited liability company and an affiliate of our sponsor,~~ or ~~DST Sponsor. The Related Party Note’s proceeds were used by DST Sponsor solely to~~ acquire ~~a commercial real property located~~ in ~~Katy, Texas, or~~ the ~~Subject Property~~future.

~~The entire unpaid principal balance of the~~Investment Related Party Note and all accrued and unpaid interest thereon and all other amounts due under the Related Party Note are due and payable in full on the earlier of (1) August 21, 2016, or (2) ten days following the sale of 100% of the equity ownership interests that are to be syndicated in the Subject Property. Interest on the outstanding principal balance of the Related Party Note accrues at a fixed per annum rate equal to 12%, provided that in no event will the interest rate exceed the maximum rate permitted by applicable law. DST Sponsor will pay us an origination fee in the amount of $90,000 and an exit fee in the amount of $90,000 upon the maturity date of the Related Party Note, including any earlier prepayment date or accelerated maturity date of the Related Party Note. The Related Party Note may be prepaid in whole or part by DST Sponsor without penalty at any time upon prior written notice to us.Strategy

~~Borrowing~~Pursuant ~~Policies~~to the merger agreement, we are not currently actively seeking additional investments. To the extent that the mergers are not consummated and we seek additional investments in the future, we intend to continue to rely upon our “Moody Core Plus Plus” investment strategy. “Core” refers to a stable, Class A asset in a major metropolitan market, which can provide net operating income stability. However, we believe that a core buying strategy, without a supply-demand imbalance, offers minimal growth potential along with an increased risk of asset devaluation. “Core Plus” builds upon a foundation of targeting core markets, which are major metropolitan areas with stable population growth, high barriers to entry and multiple demand generators, by seeking to capitalize upon potential supply-demand imbalances that we believe will create a technical pressure on a particular asset or asset class. We intend to identify these technical pressures created by demographic, business and industry changes, which lead to supply and demand imbalances in a particular market. By utilizing this Core Plus strategy of purchasing undervalued assets with underlying intrinsic value, we believe a core asset will create greater value at disposition. Our “Core Plus Plus” strategy builds further upon the acquisition philosophy of Core Plus to combine our real property investments with real estate securities and debt-related investments, including (1) mortgage and mezzanine loans, (2) debt and derivative securities related to real estate, including mortgage-backed securities and (3) the equity securities of other REITs and real estate companies. We are not specifically limited in the number or size of our real estate securities and debt-related investments. The number and mix of properties we acquire and other investments we make will depend upon real estate and market conditions and other circumstances existing at the time we are acquiring our properties and making our investments.

We use, and intend to use in the future, secured and unsecured debt as a means of providing additional funds for the acquisition of real property, securities and debt-related investments. By operating on a leveraged basis, we expect that we will have more funds available for investments. This will generally allow us to make more investments than would otherwise be possible, potentially resulting in enhanced investment returns and a more diversified portfolio. However, our use of leverage increases the risk of default on loan payments and the resulting foreclosure on a particular asset. In addition, lenders may have recourse to assets other than those specifically securing the repayment of the indebtedness. When debt financing is unattractive due to high interest rates or other reasons, or when financing is otherwise unavailable on a timely basis, we may purchase certain assets for cash with the intention of obtaining debt financing at a later time. 4

~~Our~~Investment advisor will seek to obtain financing on the most favorable terms available to us. We expect we will refinance assets during the term of a loan only in limited circumstances, such as when a decline in interest rates makes it beneficial to prepay an existing loan, when an existing loan matures or if an attractive investment becomes available and the proceeds from the refinancing can be used to purchase such investment. The benefits of any such refinancing may include increased cash flow resulting from reduced debt service requirements, an increase in distributions from proceeds of the refinancing and an increase in diversification and assets owned if all or a portion of the refinancing proceeds are reinvested.Portfolio

~~Our~~As ~~Second Articles~~ of ~~Amendment~~December ~~and Restatement~~31, ~~as amended~~2016, or our ~~“charter,”~~portfolio ~~restricts~~was uscomprised ~~from~~of ~~obtaining~~fourteen ~~loans~~total ~~from~~investments: ~~any~~(1) often ~~our~~hotel ~~directors~~properties located in Texas, ~~our~~Tennessee, ~~advisor~~South Carolina and ~~any~~Pennsylvania ofcomprising ~~our affiliates~~1,273 ~~unless~~rooms; ~~such~~(2) ~~loan~~a isjoint ~~approved~~venture byinterest in the Lyndhurst Hotel and a ~~majority~~joint ofventure interest in the Fort ~~directors~~Worth Hotel; (~~including~~3) a ~~majority~~note ofreceivable ~~the~~from ~~independent~~a ~~directors)~~related ~~not otherwise~~party ~~interested~~with inan ~~the~~initial ~~transaction~~principal asamount ~~fair~~of $9,000,000 ~~competitive~~ and ~~commercially~~(4) ~~reasonable~~a ~~and~~note noreceivable from ~~less~~a ~~favorable~~related toparty uswith ~~than~~an ~~comparable loans~~initial ~~between~~principal ~~unaffiliated~~amount ~~parties~~of $4,500,000.

~~As of December 31, 2015, our outstanding indebtedness totaled $178,236,424.~~ Our ~~aggregate~~Hotel borrowings, secured and unsecured, are reviewed by our board of directors at least quarterly. Under our charter, we are prohibited from borrowing in excess of 300% of the value of our net assets. “Net assets” for purposes of this calculation is defined to be our total assets (other than intangibles), valued at cost prior to deducting depreciation, reserves for bad debts and other non-cash reserves, less total liabilities. The preceding calculation is generally expected to approximate 75% of the aggregate cost of our assets before non-cash reserves and depreciation. However, we may temporarily borrow in excess of these amounts if such excess is approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report, along with an explanation for such excess. As of December 31, 2015 and 2014, our debt levels did not exceed 300% of the value of our net assets.Properties

~~Economic~~As ~~Dependency~~of December 31, 2016, our portfolio included ten hotel properties and two joint venture interests in hotel properties as described below.

We are dependent on our advisor for certain services that are essential to us, including the identification, evaluation, negotiation, purchase and disposition of properties and other investments, management of the daily operations of our real estate portfolio, and other general and administrative responsibilities. In the event that our advisor is unable to provide these services to us, we will be required to obtain such services from other sources, and our failure to identify such other sources could have an adverse impact on our financial condition and results of operations. Prior to the termination of the offer and sale of our shares to the public in our follow-on offering on February 20, 2015, we were dependent upon our dealer manager for the sale of our shares in our follow-on offering.

Property Name	Date Acquired	Location	Ownership Interest			Purchase Price⁽¹⁾		Rooms		Mortgage Debt Outstanding⁽²⁾
Woodlands Hotel (Homewood Suites by Hilton)⁽³⁾	November 8, 2012	The Woodlands, Texas		100	%	$	12,000,000		91	$	9,300,000

Germantown Hotel (Hyatt Place)⁽⁴⁾	April 9, 2013	Germantown, Tennessee		100	%		11,300,000		127		7,325,393

Charleston Hotel (Hyatt Place)⁽⁵⁾	July 2, 2013	North Charleston, South Carolina		100	%		11,800,000		113		7,417,921

Austin Hotel (Hampton Inn)⁽⁶⁾	December 30, 2013	Austin, Texas		100	%		15,350,000		123		11,044,471

Grapevine Hotel (Residence Inn)⁽⁷⁾	March 31, 2014	Grapevine, Texas		100	%		20,500,000		133		12,759,654

Lyndhurst Hotel (Marriott Courtyard)⁽⁸⁾	September 30, 2014	Lyndhurst, New Jersey		(9	)		33,322,000		227		30,839,847

Austin Arboretum Hotel (Hilton Garden Inn)⁽¹⁰⁾	November 20, 2014	Austin, Texas		100	%		29,250,000		138		19,000,000

Great Valley Hotel (Hampton Inn)⁽¹¹⁾	March 27, 2015	Frazer, Pennsylvania		100	%		11,000,000		125		8,200,000

Nashville Hotel (Embassy Suites)⁽¹²⁾	June 16, 2015	Nashville, Tennessee		100	%		66,300,000		208		43,000,000

Homewood Suites Austin Hotel (Homewood Suites)⁽¹³⁾	August 3, 2015	Austin, Texas		100	%		14,250,000		96		11,000,000

Fort Worth Hotel (TownPlace Suites)⁽¹⁴⁾	December 18, 2015	Fort Worth, Texas		(15	)		7,301,887		95		7,038,313

Houston Hotel (Hampton Inn)⁽¹⁶⁾	April 21, 2016	Houston, Texas		100	%		8,000,000		119		4,711,651

Totals						$	240,373,887		1,595	$	171,637,250

6(1) Excludes acquisition costs.

~~FINRA~~(2) ~~Investigation~~As of ~~Moody~~December ~~Securities~~31, 2016.

~~From~~(3) ~~2012~~The toWoodlands ~~2015,~~Hotel ~~our dealer manager, Moody Securities,~~ was ~~the~~developed ~~subject~~in of2001. anAll ~~ongoing~~suites ~~examination~~at by the ~~Financial~~Woodlands ~~Industry~~Hotel ~~Regulatory~~have ~~Authority,~~fully ~~Inc.,~~equipped ~~or FINRA~~kitchens, ~~regarding its~~separate ~~sales~~eating ofand ~~our~~sitting ~~shares in our initial public offering, focused on a number of~~ areas, ~~including Moody Securities’ compliance with FINRA Rule 2310~~ and ~~the~~high ~~computation~~speed ofinternet ~~organization and offering expenses incurred in connection with our initial public offering~~access. ~~The~~ ~~FINRA~~Property ~~investigation~~amenities ofinclude ~~Moody~~a ~~Securities~~business ~~did~~center, ~~not~~meeting ~~implicate us directly. In July 2015~~rooms, ~~Moody~~fitness ~~Securities~~center ~~settled~~and ~~the~~courtyard ~~matter~~pool ~~with FINRA by agreeing to a censure~~ and ~~by making a $350,000 payment to us which was distributed to our stockholders~~spa.

~~Competitive~~(4) ~~Market~~The ~~Factors~~Germantown Hotel opened in August 2009. Guestrooms feature a refrigerator, 42” flat-panel HDTV, Hyatt Grand Bed, and flexible workspace with task lighting. Property amenities include Wi-Fi internet access throughout the hotel, 24-hour StayFit@Hyatt fitness center, heated outdoor pool, 24/7 guest kitchen and bakery café, 1,125 square feet of flexible meeting space and all-inclusive meeting packages.

(5) The ~~United~~Charleston ~~States~~Hotel ~~commercial~~opened ~~real~~in ~~estate~~June ~~market is highly competitive~~2010. WeThe ~~face~~guestrooms ~~competition~~feature ~~from~~a ~~various entities for investment opportunities in our targeted assets~~refrigerator, ~~including other~~42” ~~REITs,~~flat-panel ~~pension funds~~HDTV, ~~insurance~~Hyatt ~~companies,~~Grand ~~investment funds~~Bed, ~~real estate companies~~ and ~~developers.~~flexible Many of these entities have substantially greater financial resources than we do and may be able to accept more risk than we can prudently manage, including risks with respect to the geographic location of investments or the creditworthiness of tenantsworkspace. ~~Competition~~Property ~~from~~amenities these entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell real estate assets. In particular, the hotel industry is highly competitive. Each of our hotel properties is located in developed areas that include ~~other~~Wi-Fi ~~hotels~~internet ~~and~~access ~~compete~~throughout ~~for guests primarily with other hotels in~~ the immediate vicinity and secondarily with other hotels in the geographic market. An increase in the number of competitive hotels in a particular area could have a material adverse effect on the occupancyhotel, ~~average~~heated ~~daily~~indoor ~~rate~~pool, ~~or ADR,~~ and ~~revenue~~24/7 ~~per~~guest ~~available~~kitchen ~~room, or RevPAR, of our hotels in that area. We believe that brand recognition, location, price~~ and ~~quality~~bakery ~~(of both the hotel and the services provided) are the principal competitive factors affecting our hotel properties~~café. ~~Additionally, general economic conditions in a particular market and nationally impact the performance of the hotel industry.~~

~~Disruptions~~(6) inThe ~~the~~Austin ~~credit~~Hotel ~~markets~~was ~~may~~built materially impact the cost and availability of debt to finance real estate acquisitions, which is a key component of our acquisition strategy. Although credit markets have stabilized since the recession from 2007 to 2009, future limited availability of financing could result in a1997 ~~further reduction of suitable investment opportunities~~ and ~~create~~extensively arenovated ~~competitive advantage for other entities that have greater financial resources than we do. All of the above factors could result~~ in ~~delays in the investment of the remaining proceeds from our follow-on offering~~2012. ~~Further,~~Property asamenities ainclude ~~result~~an ofoutdoor ~~their~~swimming ~~greater financial resources~~pool, ~~our~~business competitors may have more flexibility than we do in their ability to offer rental concessions to attract tenants for commercial properties. This could put pressure on our ability to maintain or raise rents and could adversely affect our ability to attract or retain tenants. As a resultcenter, ~~our~~fitness ~~financial condition~~room, ~~results~~breakfast ofbuffet ~~operations, cash flow, ability to satisfy our debt service obligations~~ and ~~ability~~meeting ~~to pay distributions to our stockholders may be adversely affected~~space.

(7) The ~~success~~Grapevine ofHotel ~~our~~was ~~portfolio~~built ~~of debt-related investments and real estate securities depends,~~ in ~~part,~~2007 ~~on our ability to acquire~~ and originate investments with spreads over our borrowing cost. In acquiring and originating these investments, we compete with other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, other lenders, governmental bodies and other entities, many of which have greater financial resources and lower costs of capital available to them than we do. In addition, there are numerous REITs and real estate funds with asset acquisition objectives similar to ours, and others may be organized in the future, which may increase competition for the investments suitable for us. Competitive variables include market presence and visibility, size of loans offered and underwriting standards. To the extent that a competitor is ~~willing~~located ~~to risk larger amounts of capital~~ in aclose ~~particular~~proximity ~~transaction or~~ to ~~employ~~Dallas/Fort ~~more~~Worth ~~liberal~~International ~~underwriting standards when evaluating potential loans than we are~~Airport, ~~our~~from ~~acquisition~~which ~~and~~it ~~origination~~receives volume and profit margins for our investment portfolio could be impacted. Our competitors may also be willing to accept lower returns on their investments and may succeed in buying the assets that we have targeted for acquisition. Although we believe that we are well positioned to compete effectively in each facet of our business, ~~there~~travel is enormous competition in our market sector and there can be no assurance that we will compete effectively or that we will not encounter increased competition in the future that could limit our ability to conduct our business effectivelydemand.

~~Tax~~(8) ~~Status~~The Lyndhurst Hotel was constructed in 1990. Amenities at the Lyndhurst Hotel include a restaurant and lounge, 2,910 square feet of meeting space, lobby grab-and-go, indoor pool, outdoor terrace, fitness center and business center.

~~We have elected to be taxed as a REIT under Sections~~5 856 through 860 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, commencing with the taxable year ended December 31, 2011. Prior to qualifying to be taxed as a REIT, we were subject to normal federal and state corporation income taxes.

7(9) The Lyndhurst Hotel is owned by MN Lyndhurst Venture, LLC, or the Lyndhurst joint venture. Our operating partnership contributed $100 to the Lyndhurst joint venture in exchange for 100% of the Class B membership interests, or the Class B Interests, of the Lyndhurst joint venture. Pursuant to the operating agreement of the Lyndhurst joint venture, our operating partnership has also paid approximately $5.37 million in costs and fees and capital reserve requirements associated with the transfer of the Lyndhurst Hotel to the Lyndhurst joint venture, all of which amounts were deemed to be additional capital contributions by our operating partnership to the Lyndhurst joint venture in exchange for additional Class B Interests. The prior tenant-in-common owners of the Lyndhurst Hotel contributed their tenant-in-common ownership interests in the Lyndhurst Hotel (valued at $1,000 in the aggregate) to the Lyndhurst joint venture in exchange for non-voting class A membership interests, or the Class A Interests, of the Lyndhurst joint venture. Our operating partnership serves as the sole manager of the Lyndhurst Joint Venture and manages the business and affairs of the Lyndhurst Joint Venture. Cash available for distribution to the members of the Lyndhurst joint venture will be distributed as follows: (1) first, 100% to our operating partnership until it has received cash distributions equal to a 12% annual, cumulative, non-compounded return on its capital contributions to the Lyndhurst Joint Venture and a return of 100% of its unreturned capital contributions to the Lyndhurst joint venture, (2) next, 100% to the holders of the Class A Interests until they have received a return of 100% of their capital contributions to the Lyndhurst joint venture (valued at $1,000 in the aggregate) and (3) next, 60% to our operating partnership and 40% to the holders of the Class A Interests.

To(10) ~~qualify~~The asAustin aArboretum ~~REIT,~~Hotel weis ~~must meet~~ a ~~number of organizational and operational requirements~~five-story, ~~including~~138-room ahotel ~~requirement~~located ~~that~~in weAustin’s ~~distribute~~Northwest/Arboretum ~~at least 90% of our REIT taxable income to our stockholders~~corridor. AsBuilt ain ~~REIT~~2002, ~~we generally will not be subject to federal income tax at~~ the ~~corporate~~Austin ~~level.~~Arboretum WeHotel ~~believe~~has webeen ~~are organized~~recently ~~and~~enhanced ~~operate~~by ~~in such~~ a ~~manner~~comprehensive asmulti-year tocapital ~~qualify~~program for taxation as a REIT under the Internal Revenue Code, and we intend to continue to operate in such a manner, but no assurance can be given that we will operate in a manner so as to qualify or remain qualified as a REITrenovation.

~~Regulations~~(11) The Great Valley Hotel is a five-story limited service hotel facility built in 1998 and renovated in 2004. The Great Valley Hotel features 125 rooms, including 115 standard guestrooms and 10 suites, and includes 630 square feet of meeting space, a business center, a fitness center, an outdoor pool, and appropriate back-of-the-house facilities.

~~All~~(12) ~~real~~The ~~property~~Nashville ~~investments~~Hotel ~~and~~is ~~the~~a ~~operations conducted~~208 ~~in connection with such investments are subject to federal~~room, ~~state~~select-service ~~and~~all ~~local~~suites ~~laws~~hotel ~~and~~facility ~~regulations~~built ~~relating~~in to2001. ~~environmental protection~~Located ~~and~~just ~~human~~three ~~health~~blocks ~~and~~away ~~safety.~~from ~~Some~~the ofVanderbilt ~~these~~University ~~laws~~campus and ~~regulations~~Medical ~~may~~Center, ~~impose~~the ~~joint~~Embassy ~~and~~Suites ~~several~~Nashville ~~liability~~is onwell-positioned ~~customers, owners~~in ~~or operators for~~ the ~~costs~~West toEnd-Midtown ~~investigate or remediate contaminated properties~~district, ~~regardless~~less ofthan ~~fault~~two ormiles ~~whether~~from ~~the~~downtown ~~acts causing the contamination were legal~~Nashville.

~~Under~~(13) ~~various~~The ~~federal,~~Homewood ~~state~~Suites ~~and~~Austin ~~local~~Hotel ~~environmental laws,~~is a ~~current~~96 orroom previous owner or operator of real property may be liable for the cost of removing or remediating hazardous or toxic substances on a real property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such real property as collateral for future borrowings. Environmental laws also may impose restrictions on the manner in which real property may be used or businesses may be operated. Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures or may impose material environmental liability. Additionally, tenants’ operations, the existing condition of land when we buy it, operations in the vicinity of our real properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our real properties. There are also various local, state and federal fire, health, lifeselect-~~safety~~service ~~and~~hotel ~~similar~~constructed ~~regulations with which we may be required to comply and which may subject us to liability~~ in ~~the form of fines or damages for noncompliance~~1998. ~~In connection with the acquisition and ownership of real properties, we may be exposed to such costs in connection with such regulations.~~ The ~~cost~~Homewood ofSuites ~~defending~~Austin ~~against~~is ~~environmental~~located ~~claims,~~approximately ofsix ~~any~~miles ~~damages or~~from ~~fines~~Austin-Bergstrom weInternational ~~must~~Airport ~~pay, of compliance with environmental regulatory requirements or of remediating any contaminated real property could materially~~ and ~~adversely~~is ~~affect~~just ~~our~~minutes ~~business~~from ~~and~~downtown ~~results of operations or lower the value of our assets and, consequently, lower the amounts available for distribution to our stockholders~~Austin.

We(14) doThe ~~not~~Fort ~~believe~~Worth ~~that~~Hotel ~~compliance~~is ~~with existing environmental laws will have~~ a ~~material~~95-unit ~~adverse~~hotel ~~effect~~constructed onin ~~our~~1998. ~~financial~~Room ~~condition~~amenities orinclude ~~results~~a offully ~~operations.~~equipped ~~However~~kitchen, weluxury ~~cannot predict~~bedding, ~~the~~free ~~impact~~internet ofaccess ~~unforeseen~~and ~~environmental~~a ~~contingencies~~workspace orarea. ~~new~~The orFt. ~~changed~~Worth ~~laws~~Hotel oralso ~~regulations~~features onan ~~properties~~outdoor inpool, ~~which~~a wefitness ~~hold an~~center ~~interest,~~and or on-site ~~properties~~guest ~~that~~laundry ~~may be acquired directly or indirectly in the future~~room.

~~Seasonality~~(15) The Fort Worth Hotel is owned by MN Fort Worth Venture, LLC, or the Fort Worth joint venture. Our operating partnership contributed $100 to the Fort Worth joint venture in exchange for 100% of the Class B membership interests, or the Fort Worth Class B Interests, of the Fort Worth joint venture. Pursuant to the operating agreement of the Fort Worth joint venture, our operating partnership has paid approximately $3.28 million in costs and fees and capital reserve requirements associated with the transfer of the Fort Worth Hotel to the Fort Worth joint venture, all of which amounts were deemed to be additional capital contributions by our operating partnership to the Fort Worth joint venture in exchange for additional Fort Worth Class B Interests. The prior tenant-in-common owners of the Fort Worth Hotel contributed their ownership interests in the Fort Worth Hotel (valued at $1,000 in the aggregate) to the Fort Worth joint venture in exchange for non-voting class A membership interests, or the Fort Worth Class A Interests, of the Fort Worth joint venture. Our operating partnership serves as the sole manager of the Fort Worth joint venture and manages the business and affairs of the Fort Worth joint venture. Cash available for distribution to the members of the Fort Worth joint venture will be distributed as follows: (1) first, 100% to our operating partnership until it has received cash distributions equal to a 12% annual, cumulative, non-compounded return on its capital contributions to the Fort Worth joint venture and a return of 100% of its unreturned capital contributions to the Fort Worth joint venture, (2) next, 100% to the holders of the Fort Worth Class A Interests until they have received a return of 100% of their capital contributions to the Fort Worth joint venture (valued at $1,000 in the aggregate), and (3) next, 50% to our operating partnership and 50% to the holders of the Fort Worth Class A Interests.

(16) The ~~hotel~~Houston ~~industry~~Hotel ~~historically~~is ~~has~~a ~~been~~119-unit ~~seasonal in nature. Seasonal variations in occupancy at our~~ hotel ~~properties~~constructed ~~and other hotel properties we may acquire may cause quarterly fluctuations~~ in ~~our revenues~~1995. ~~Specifically,~~The ~~business~~Houston ~~class~~Hotel ~~hotels~~features ~~tend~~an tooutdoor ~~draw~~pool, ~~lower~~a ~~occupancy~~fitness ~~rates~~center ~~during~~and ~~holidays~~a ~~as there is less~~ business ~~travel~~center. To the extent that cash flow from operations is insufficient during any quarter due to temporary or seasonal fluctuations in revenue we expect to utilize cash on hand or if necessary any other available financing sources to make distributions.

~~Employees~~Each of our properties is owned by wholly owned subsidiaries of our operating partnership, which we refer to as “property owners.” In connection with the acquisition of each of our hotels, we formed a taxable REIT subsidiary, or a TRS. The property owners and wholly owned subsidiaries of the TRSs, which we refer to as “master tenants,” are party to hotel lease agreements pursuant to which each property owner leases its hotel to a master tenant. The leases provide for ten-year lease terms, provided that a property owner may terminate its lease upon 45 days prior written notice to the master tenant in the event that we contract to sell the hotel to a non-affiliate. Moody National Hospitality Management, LLC, or MNHM, our affiliate, manages each of our hotel properties pursuant to a hotel management agreement between MNHM and each master tenant.

We ~~have~~believe nothat ~~paid~~all of ~~employees.~~our ~~The~~hotel ~~employees~~properties are adequately covered by insurance and are suitable for their intended purposes. Each of our ~~advisor~~hotel orproperties faces ~~its~~competition ~~affiliates~~from ~~provide~~other ~~management~~hotel properties in and around their respective submarkets. We are undertaking renovations at the Austin Hotel, ~~acquisition~~the Grapevine Hotel, ~~advisory~~the ~~and~~Lyndhurst ~~certain~~Hotel, ~~administrative~~the ~~services~~Austin ~~for~~Arboretum usHotel, the Great Valley Hotel, and the Nashville Hotel.

~~Financial~~Seven ~~Information~~of ~~about~~our ~~Industry~~twelve hotel ~~Segments~~properties are located in a single state, Texas. The downturn in the energy industry in Texas has affected our portfolio to a greater degree than if our hotel portfolio were less geographically concentrated.

Our current business consists of owning, managing, operating, leasing, acquiring, developing, investing in, and disposing of real estate assets. We internally evaluate all of our real estate assets as one industry segment, and, accordingly, we do not report segment information.6

8Our Notes Receivable from Related Parties

~~Available~~On ~~Information~~August 21, 2015, we originated an unsecured loan in the aggregate principal amount of $9,000,000, or the related party note, to Moody National DST Sponsor, LLC, a Texas limited liability company and an affiliate of our sponsor, or DST Sponsor. Proceeds from the related party note were used by DST Sponsor solely to acquire a commercial real property located in Katy, Texas.

WeInterest ~~are~~on ~~subject to~~ the ~~reporting and information~~outstanding ~~requirements~~principal balance of the ~~Securities~~related ~~Exchange~~party ~~Act~~note ofaccrues ~~1934,~~at asa ~~amended,~~fixed orper ~~the~~annum ~~Exchange~~rate ~~Act,~~equal ~~and~~to 12%, asprovided athat ~~result,~~in weno ~~file~~event ~~periodic~~will ~~reports~~the ~~and~~interest ~~other~~rate ~~information~~exceed ~~with~~ the ~~SEC.~~maximum ~~Access~~rate topermitted ~~copies~~by ofapplicable ~~our~~law. ~~annual~~DST ~~reports~~Sponsor onwill ~~Form~~pay ~~10-K,~~us ~~quarterly~~an ~~reports~~origination onfee ~~Form~~in ~~10-Q,~~the ~~current~~amount of ~~reports~~$90,000 ~~on Form 8-K~~ and ~~other~~an ~~filings~~exit ~~that~~fee wein ~~make with~~ the ~~SEC,~~amount ~~including~~of ~~amendments to such filings~~$90,000 ~~may~~upon bethe ~~obtained~~maturity ~~free~~date of ~~charge~~ ~~from~~ the ~~following~~related ~~website~~party note, ~~http://www.moodynationalreit.com.~~including ~~These~~any ~~filings~~earlier ~~are~~prepayment date ~~available~~or ~~promptly~~accelerated ~~after~~maturity wedate ~~file~~of ~~them~~the ~~with, or~~related ~~furnish~~party ~~them~~note. ~~to,~~The ~~the~~related ~~SEC.~~party Wenote ~~are~~may ~~not~~be ~~incorporating~~prepaid ~~our~~in ~~website~~whole or ~~any~~part ~~information~~by ~~from~~DST ~~the website into this Annual Report.~~Sponsor ~~The~~without ~~SEC~~penalty ~~also~~at ~~maintains~~any atime ~~website,~~upon ~~http://www.sec.gov,~~prior ~~where~~written ~~our~~notice ~~filings~~to ~~are available free of charge~~us.

~~ITEM~~The 1Aentire unpaid principal balance of the related party note and all accrued and unpaid interest thereon and all other amounts due under the related party note were due and payable in full on the earlier of (1) August 21, 2016 or (2) ten days following the sale of 100% of the equity ownership interests that are to be syndicated in the subject property. ~~Risk~~However, ~~Factors~~on August 15, 2016, the maturity date of the related party note was extended from August 21, 2016 to August 21, 2017 and the origination fee in the amount of $90,000 and an extension fee in the amount of $45,000 were paid to us by DST Sponsor.

~~The~~On ~~following~~April ~~are~~29, ~~some of the risks and~~2016, ~~uncertainties~~we ~~that~~originated ~~could~~a ~~cause~~loan ~~our actual results to differ materially from those presented~~ in ~~our~~the ~~forward-looking~~aggregate ~~statements. The~~principal ~~risks~~amount ~~and~~of ~~uncertainties~~$4,500,000, ~~described~~or ~~below are not~~ the ~~only~~related ~~ones~~party wemezzanine ~~face~~note, ~~but~~to doMoody ~~represent~~National, ~~those risks and uncertainties that we~~an ~~believe~~affiliate ~~are~~of ~~material~~our ~~to us~~sponsor. ~~Additional~~Proceeds ~~risks~~from ~~and~~the ~~uncertainties~~related ~~not~~party ~~presently~~mezzanine ~~known~~note towere usused orby ~~that~~Moody weNational ~~currently~~solely ~~deem immaterial may also harm our business. Our stockholders or potential investors may be referred~~ to asacquire ~~“you”~~a ormultifamily real ~~“your”~~property located in ~~this~~ ~~Item 1A~~Houston, Texas.

~~Investment~~The ~~Risks~~entire unpaid principal balance of the related party mezzanine note and all accrued and unpaid interest thereon and all other amounts due under the related party mezzanine note are due and payable in full on the earlier of (1) April 30, 2018, or (2) upon 90 days’ written notice of acceleration of the maturity date by us to Moody National. Interest on the outstanding principal balance of the related party mezzanine note accrues at a fixed per annum rate equal to 10%, provided that in no event will the interest rate exceed the maximum rate permitted by applicable law. Moody National will pay us an origination fee in the amount of $45,000 and an exit fee in the amount of $45,000 upon the maturity date of the related party mezzanine note, including any earlier prepayment date or accelerated maturity date. The related party mezzanine note may be prepaid in whole or part by Moody National without penalty at any time upon prior written notice to us.

~~Since~~Partial ~~the~~payments ~~commencement~~ of ~~our initial~~ ~~public~~interest ~~offering in 2009, we~~ have ~~raised~~been amade ~~relatively~~on ~~limited~~the ~~amount~~notes ofreceivable ~~offering~~from ~~proceeds~~related parties.

~~Based~~Borrowing upon our operating history to date and our limited portfolio of investments, there can be no assurance that we will be able to successfully operate our business or achieve our investment objectives. As of December 31, 2015, we have raised $124,129,110 in gross offering proceeds in our initial public offering and our follow-on offering, including through shares issued pursuant to the DRIP.Policies

We have ~~experienced~~used, ~~losses~~and intend to use in the future (to the extent that the mergers are not consummated and we acquire additional assets), secured and unsecured ~~past~~debt as a means of providing additional funds for the acquisition of real property, securities and ~~may~~debt-related ~~experience~~investments. ~~similar~~By operating ~~losses~~on a leveraged basis, we expect that we will have more funds available for investments. This will generally allow us to make more investments than would otherwise be possible, potentially resulting in enhanced investment returns and a more diversified portfolio. However, our use of leverage increases the ~~future~~risk of default on loan payments and the resulting foreclosure on a particular asset. In addition, lenders may have recourse to assets other than those specifically securing the repayment of the indebtedness. When debt financing is unattractive due to high interest rates or other reasons, or when financing is otherwise unavailable on a timely basis, we may purchase certain assets for cash with the intention of obtaining debt financing at a later time.

WeOur ~~incurred~~advisor aseeks ~~net~~to ~~operating~~obtain ~~loss~~financing ~~for~~on the ~~years~~most ~~ended~~favorable ~~December~~terms ~~31,~~available ~~2010,~~to ~~2011,~~us. ~~2012,~~We ~~2013,~~expect ~~and~~we ~~2014.~~will ~~Our~~refinance ~~losses~~assets ~~can~~during bethe ~~attributed,~~term of a loan only in ~~part~~limited circumstances, tosuch ~~the initial~~as ~~start-up~~when ~~costs~~a ~~and~~decline ~~operating~~in ~~expenses~~interest ~~incurred~~rates ~~prior~~makes toit ~~making~~beneficial ~~investments~~to inprepay ~~properties.~~an Inexisting ~~addition~~loan, ~~depreciation~~when ~~and~~an existing ~~amortization~~loan ~~and~~matures ~~acquisition~~or ~~expenses~~if ~~substantially~~an ~~reduced~~attractive ~~our~~investment ~~income.~~becomes Weavailable ~~cannot~~and ~~assure~~the ~~you~~proceeds ~~that~~from wethe ~~will~~refinancing can be ~~profitable~~used into ~~the~~purchase such ~~future~~investment. orThe ~~that~~benefits weof ~~will~~any ~~realize~~such ~~growth~~refinancing may include increased cash flow resulting from reduced debt service requirements, an increase in ~~the~~distributions ~~value~~from proceeds of ~~our~~the refinancing and an increase in diversification and assets owned if all or a portion of the refinancing proceeds are reinvested.

WeOur ~~are~~charter ~~subject~~restricts us tofrom ~~compliance~~obtaining ~~with~~loans ~~securities~~from ~~law~~any of our directors, ~~which~~our ~~exposes~~advisor and any of our affiliates unless such loan is approved by a majority usof tothe ~~potential~~directors ~~liabilities~~(including a majority of the independent directors) not otherwise interested in the transaction as fair, ~~including~~competitive and ~~potential~~commercially ~~rescission~~reasonable ~~rights~~and no less favorable to us than comparable loans between unaffiliated parties.

~~Pannell~~As ~~Kerr Forster~~ of ~~Texas,~~December ~~P.C.~~31, ~~or PKF,~~ ~~served~~2016, as our ~~independent~~outstanding ~~auditor~~indebtedness ~~beginning~~totaled ~~in November 10~~$171, ~~2010 through February 8~~637, ~~2012~~250. OnOur ~~February~~aggregate 7borrowings, ~~2012,~~secured ~~PKF~~and ~~informed our board of directors that it could not be considered independent in accordance with Rule 201 of SEC Regulation S-X for the 2011 fiscal year. On February 10~~unsecured, ~~2012,~~are ~~PKF~~reviewed ~~informed~~by our board of ~~that~~directors itat ~~could~~least ~~not be considered independent for the 2009 and 2010 fiscal years~~quarterly. ~~Consequently,~~ ~~from~~Under ~~March 31, 2011 (the date PKF first issued a report on~~ our ~~financial statements) to February 8~~charter, ~~2012,~~we ~~the~~are ~~offer and~~prohibited ~~sale~~from ofborrowing ~~securities~~ in ~~our~~excess ~~initial~~of ~~public~~300% ~~offering may have failed to comply fully with Section 5~~ of the ~~Securities~~value ~~Act which may trigger a right~~ of ~~rescission~~our ~~under~~net assets. ~~the~~“Net ~~Securities~~assets” ~~Act~~ for ~~investors~~purposes ~~that purchased shares~~ of ~~our common stock during~~ this ~~period.~~ ~~Such~~calculation ~~stockholders~~is ~~may~~defined ~~have the right~~ to ~~rescind~~be ~~their purchase of shares of~~ our ~~common~~total ~~stock~~assets ~~and~~(other ~~require~~than usintangibles), ~~to reacquire~~valued ~~their shares~~ at acost ~~price~~prior ~~equal~~ to ~~the~~deducting ~~price~~depreciation, ~~originally~~reserves ~~paid~~ for ~~such~~bad ~~shares~~debts ~~with~~and ~~interest~~other non-cash reserves, less ~~the~~total ~~amount~~liabilities. ofThe ~~any~~preceding calculation ~~income~~is ~~received with~~generally ~~respect~~expected to ~~such~~approximate ~~shares.~~75% Anof ~~investor~~the ~~who~~aggregate ~~acquired~~cost ~~shares~~ of our ~~common~~assets ~~stock~~before ~~during~~non-cash ~~this~~reserves ~~period~~and ~~who no longer owns the shares~~depreciation. ~~they~~However, ~~acquired~~we may ~~have~~temporarily ~~the~~borrow ~~right~~in toexcess ~~collect~~of ~~damages~~these ~~from~~amounts usif insuch ~~lieu~~excess ofis ~~the~~approved ~~rescission~~by ~~rights~~a ~~described~~majority ~~above.~~of Ifour ~~stockholders~~independent ~~were~~directors ~~successful in seeking rescission~~ and~~/or~~ ~~damages,~~disclosed weto ~~would~~stockholders ~~face~~in ~~financial demands that could adversely affect~~ our ~~business~~next ~~and~~quarterly ~~operations. Additionally~~report, wealong ~~may~~with ~~become~~an ~~subject~~explanation tofor ~~penalties~~such ~~imposed by the SEC and state securities agencies~~excess. As of ~~the~~December ~~date~~31, ~~of this Annual~~2016 ~~Report,~~and ~~we have not received a claim for rescission. If stockholders seek rescission or damages or we conduct a rescission offer~~2015, we ~~may~~our ordebt ~~may~~levels did not ~~have~~exceed ~~the~~300% ~~resources~~of ~~to fund~~ the ~~repurchase~~value of ~~the~~our ~~securities~~net assets.

There is no public trading market for shares of our common stock and we are not required to effectuate a liquidity event by a certain date. As a result, it will be difficult for you to sell your shares of common stock and, if you are able to sell your shares, you are likely to sell them at a substantial discount.7

~~There~~Economic is no current public market for the shares of our common stock and we have no obligation to list our shares on any public securities market or provide any other type of liquidity to our stockholders. It will therefore be difficult for you to sell your shares of our common stock promptly or at all. Even if you are able to sell your shares of our common stock, the absence of a public market may cause the price received for any shares of our common stock sold to be less than what you paid or less than your proportionate value of the assets we own. We have adopted a share redemption program but it is limited in terms of the amount of shares that may be purchased by us each quarter. Additionally, our charter does not require that we consummate a transaction to provide liquidity to our stockholders on any date certain or at all. As a result, you should purchase shares of our common stock only as a long-term investment, and you must be prepared to hold your shares for an indefinite length of time.Dependency

9We are dependent on our advisor for certain services that are essential to us, including the identification, evaluation, negotiation, purchase and disposition of properties and other investments, management of the daily operations of our real estate portfolio, and other general and administrative responsibilities. In the event that our advisor is unable to provide these services to us, we will be required to obtain such services from other sources, and our failure to identify such other sources could have an adverse impact on our financial condition and results of operations.

WeCompetitive ~~commenced~~Market ~~operations on May 27, 2010 and therefore we have a limited operating history and there is no assurance that we will be able to successfully achieve our investment objectives.~~Factors

WeThe ~~commenced~~United ~~operations~~States commercial onreal ~~May~~estate ~~27,~~market ~~2010~~is ~~with~~highly competitive. In the ~~acquisition~~event ofthat ~~our~~the ~~first~~mergers ~~investment~~are not consummated and we seek to acquire additional properties, we ~~have~~will aface ~~limited~~competition ~~operating~~from ~~history~~various ~~and~~entities ~~currently~~for ~~have~~investment ~~only~~opportunities ~~thirteen investments.~~in Onour ~~February~~targeted 20assets, ~~2015,~~including weother ~~terminated~~REITs, ~~the~~pension funds, ~~offer~~insurance ~~and~~companies, ~~sale~~investment offunds, ~~shares~~real ofestate ~~our~~companies ~~common~~and ~~stock~~developers. toMany ~~the~~of ~~public~~these inentities ~~our~~will ~~follow-on~~have substantially ~~offering.~~greater Asfinancial aresources ~~result,~~than we ~~may~~do ~~not~~and may be able to ~~successfully~~accept ~~operate~~more ~~our~~risk ~~business~~than orwe ~~achieve~~can ~~our~~prudently ~~investment~~manage, ~~objectives.~~including Anrisks ~~investment~~with respect into ~~shares~~the geographic location of ~~our~~investments ~~common~~or ~~stock~~the ~~may~~creditworthiness ~~entail~~of ~~more~~tenants. ~~risk~~Competition ~~than~~from anthese entities may reduce the number of suitable investment inopportunities offered to us or increase the ~~shares~~bargaining power of ~~common~~property ~~stock~~owners ofseeking ato sell real estate ~~investment~~ ~~trust~~assets. ~~with~~In aparticular, ~~substantial~~the ~~operating~~hotel ~~history~~industry is highly competitive. InEach ~~addition,~~of ~~you~~our ~~should~~hotel ~~not~~properties ~~rely~~is onlocated in developed areas that include other hotels and compete for guests primarily with other hotels in the ~~past~~immediate ~~performance~~vicinity ofand ~~real~~secondarily ~~property,~~with ~~real~~other ~~estate~~hotels ~~securities~~in orthe ~~debt-related~~geographic ~~investments~~market. ~~owned~~An byincrease ~~other~~in ~~Moody~~the ~~National~~number ~~affiliates~~of tocompetitive ~~predict~~hotels ~~our~~in ~~future~~a ~~results.~~particular ~~Our~~area ~~investment~~could ~~strategy and~~have ~~key~~a ~~employees~~material ~~differ~~adverse ~~from~~effect on the ~~investment~~occupancy, ~~strategies~~average daily rate, or ADR, and ~~key~~revenue ~~employees~~per available room, or RevPAR, of our ~~affiliates~~hotels in ~~the~~that ~~past~~area. We believe that brand recognition, location, price and ~~present~~quality (of both the hotel and ~~may~~the ~~continue~~services provided) are the principal competitive tofactors doaffecting soour hotel properties. Additionally, general economic conditions in a particular market and nationally impact the ~~future~~performance of the hotel industry.

WeIn ~~presently~~the ~~intend~~event that the mergers are not consummated and we seek to ~~affect~~acquire aadditional debt-related investments, disruptions in the credit markets may materially ~~liquidity~~impact ~~event~~the ~~within~~cost ~~four~~and availability of debt to ~~six~~finance ~~years~~such ~~from~~acquisitions, ~~the~~which ~~completion~~is a key component of our ~~initial~~acquisition ~~public~~strategy. ~~offering;~~Although credit ~~however~~markets have stabilized since the recession from 2007 to 2009, ~~there~~future ~~can~~limited beavailability noof ~~assurance~~financing could result in ~~that~~a wefurther ~~will~~reduction ~~affect~~of suitable investment opportunities and create a ~~liquidity~~competitive ~~event~~advantage ~~within~~for ~~such~~other ~~time~~entities orthat athave ~~all.~~greater financial Ifresources than we do. ~~not~~As ~~affect~~ a ~~liquidity~~result, ~~event~~our financial condition, itresults ~~will~~of beoperations, ~~very~~cash ~~difficult for~~flow, ~~you~~ability to ~~have~~satisfy ~~liquidity~~our debt ~~for~~service ~~your~~obligations ~~investment~~and inability ~~shares~~to ofpay distributions to our ~~common~~stockholders ~~stock~~may be adversely affected.

InThe ~~the~~success ~~future,~~of our ~~board~~portfolio of ~~directors~~debt-related ~~will~~investments ~~consider~~depends, ~~various~~in ~~forms~~part, ofon ~~liquidity~~our ~~events,~~ability ~~including,~~to ~~but~~acquire ~~not~~and ~~limited~~originate ~~to,~~investments ~~(1)~~ with spreads over our borrowing cost. In the ~~sale~~event ofthat ~~all~~the ~~or substantially~~mergers ~~all~~are ofnot ~~our~~consummated ~~real~~and ~~estate~~we ~~assets~~seek ~~for~~to ~~cash~~acquire oradditional debt-related investments, we will compete with other ~~consideration~~REITs, ~~(2) our~~specialty ~~sale~~finance orcompanies, ~~merger~~savings inand aloan ~~transaction~~associations, ~~that~~banks, mortgage bankers, insurance companies, ~~provides~~mutual ~~our~~funds, ~~stockholders~~institutional ~~with~~investors, ~~cash~~investment banking firms, other lenders, governmental bodies and~~/or~~ ~~securities~~other entities, many of which ahave ~~publicly~~greater ~~traded~~financial ~~company~~resources and ~~(3) the~~lower ~~listing~~costs of ~~our~~capital ~~common~~available ~~stock on~~to athem ~~national~~than ~~securities~~we ~~exchange~~do. WeIn ~~presently~~addition, ~~intend~~there toare ~~affect~~numerous REITs aand ~~liquidity~~real ~~event~~estate ~~within~~funds ~~four~~with asset acquisition objectives similar to ~~six~~ours, ~~years~~and ~~from~~others ~~the~~may ~~termination of~~be ~~our~~organized ~~initial~~in ~~public~~the ~~offering~~future, which may ~~occurred~~increase oncompetition ~~October~~for ~~12,~~the ~~2012~~investments suitable for us. ~~However~~Competitive variables include market presence and visibility, ~~there~~size of ~~can~~loans beoffered noand ~~assurance~~underwriting ~~that~~standards. weTo ~~will~~the ~~cause~~extent that a ~~liquidity event~~competitor is willing to ~~occur~~risk ~~within~~larger ~~such~~amounts ~~time~~of capital in a particular transaction or atto ~~all.~~employ Ifmore weliberal dounderwriting ~~not~~standards ~~affect~~when aevaluating ~~liquidity~~potential ~~event~~loans than we are, itour ~~will~~acquisition and beorigination ~~very~~volume ~~difficult~~and profit margins for ~~you~~our investment portfolio could be impacted. Our competitors may also be willing to accept lower returns on their investments and may succeed in buying the assets that we have ~~liquidity~~ targeted for ~~your~~acquisition. ~~investment~~Although we believe that we are well positioned to compete effectively in ~~shares~~each facet of our ~~common~~business, ~~stock~~there ~~other~~is ~~than~~enormous ~~limited~~competition ~~liquidity~~in ~~through~~our market sector and there can be no assurance that we will compete effectively or that we will not encounter increased competition in the future that could limit our ~~share~~ability ~~redemption~~to ~~program~~conduct our business effectively.

~~Our~~Tax board of directors determined an estimated value per share of $10.75 for our shares of common stock as of December 31, 2015. You should not rely on the estimated value per share as being an accurate measure of the current value of our shares of common stock.Status

OnWe ~~March~~have ~~24,~~elected ~~2016,~~to be ~~our~~taxed ~~board~~as ~~of directors~~a ~~determined~~REIT anunder ~~estimated~~Sections ~~value~~856 ~~per~~through ~~share~~860 of ~~our~~the ~~common~~Internal ~~stock~~Revenue ofCode ~~$10.75 as~~ of ~~December 31~~1986, ~~2015.~~as ~~Our board of directors’ objective in determining the estimated value per share was to arrive at a value~~amended, ~~based~~or on the ~~most~~Internal ~~recent~~Revenue ~~data available~~Code, ~~that~~ itcommencing ~~believed was reasonable based on methodologies that it deemed appropriate after consultation~~ with ~~our advisor. However,~~ the ~~market~~ ~~for~~taxable ~~commercial~~year ~~real~~ended ~~estate~~December ~~can~~31, ~~fluctuate~~2011. ~~quickly~~Prior ~~and~~to ~~substantially~~qualifying ~~and the value of our assets is expected~~ to ~~change~~be ~~in the~~taxed ~~future~~as ~~and~~a ~~may decrease. Also~~REIT, ~~our~~we ~~board~~were ofsubject ~~directors~~to ~~did not consider certain other factors, such as a liquidity discount~~normal tofederal ~~reflect the fact that our shares are not currently traded on a national securities exchange~~ and ~~the~~state ~~limitations~~corporation onincome ~~the ability to redeem shares pursuant to our share repurchase plan~~taxes.

AsTo ~~with~~qualify ~~any~~as ~~valuation~~a ~~method~~REIT, ~~the~~ ~~methods~~we ~~used~~must tomeet ~~determine the estimated value per share were based upon~~ a number of ~~assumptions,~~organizational ~~estimates~~ and ~~judgments~~operational ~~that~~requirements, ~~may not~~including bea ~~accurate~~requirement orthat ~~complete.~~we ~~Our~~distribute ~~assets~~at ~~have~~least ~~been~~90% ~~valued based upon appraisal standards and the values~~ of our ~~assets~~REIT ~~using~~taxable ~~these methods~~income ~~are~~(determined ~~not~~without ~~required~~regard to bethe adividends-paid ~~reflection~~deduction ofand ~~market~~excluding ~~value~~net ~~under~~capital ~~those~~gain) ~~standards~~to ~~and~~our ~~will~~stockholders. As ~~not~~a ~~necessarily~~REIT, ~~result~~we ingenerally aare ~~reflection of~~not ~~fair~~subject ~~value~~to ~~under~~federal ~~GAAP.~~income ~~Further,~~tax ~~different~~on ~~parties~~income ~~using~~that ~~different~~we ~~property-specific~~distribute ~~and~~to ~~general~~our ~~real~~stockholders. ~~estate~~We ~~and~~believe ~~capital~~we ~~market~~are ~~assumptions,~~organized ~~estimates, judgments~~ and ~~standards~~operate ~~could~~in ~~derive~~such a ~~different~~manner ~~estimated~~as ~~value~~to ~~per~~qualify ~~share,~~for ~~which~~taxation ~~could~~as bea ~~significantly different~~REIT ~~from~~under the ~~estimated~~Internal ~~value~~Revenue ~~per~~Code, ~~share~~and ~~determined~~we byintend ~~our~~to ~~board~~continue to ofoperate ~~directors.~~in ~~The~~such ~~estimated value per share is not~~ a ~~representation or indication that~~manner, ~~among~~but ~~other~~no ~~things:~~assurance acan ~~stockholder would~~ be ~~able~~given tothat ~~realize~~we ~~the~~will ~~estimated~~operate ~~value~~in ~~per share if he or she attempts to sell shares;~~ a ~~stockholder~~manner ~~would~~so ~~ultimately~~as ~~realize distributions per share equal~~ to ~~the~~qualify ~~estimated~~or ~~value~~remain ~~per share upon liquidation~~qualified ofas ~~assets and settlement of our liabilities or upon~~ a ~~sale~~REIT. ofIf ~~our~~we ~~company;~~fail ~~shares~~to ofqualify ~~our~~as ~~common stock would trade at the estimated value per share on~~ a ~~national~~REIT ~~securities~~in ~~exchange;~~any ataxable ~~third~~year ~~party~~after ~~would offer~~ the ~~estimated~~taxable ~~value~~year ~~per share~~ in anwhich ~~arms-length~~we ~~transaction to~~initially ~~purchase~~elect ~~all or substantially all of our shares of common stock; or the methodologies used~~ to ~~estimate~~be ~~the~~taxed ~~value per share would~~as bea ~~acceptable~~REIT, towe ~~FINRA~~will orbe ~~ERISA~~subject ~~with respect~~ to ~~their~~federal ~~respective~~income ~~requirements.~~tax ~~Further,~~on ~~the~~our ~~estimated~~taxable ~~value~~income ~~per~~at ~~share~~regular ~~was~~corporate ~~calculated as~~rates ~~of a moment in time~~ and ~~the~~will ~~value~~not ofbe ~~our~~permitted ~~shares~~to qualify ~~will~~for ~~fluctuate~~treatment ~~over time~~ as a ~~result~~REIT ~~of,~~for ~~among~~federal ~~other~~income ~~things,~~tax ~~future~~purposes ~~acquisitions or~~for ~~dispositions~~four ofyears ~~assets,~~following ~~developments~~the ~~related~~year ~~to individual assets and changes~~ in ~~the~~which ~~real~~our ~~estate~~qualification ~~and capital markets~~is denied. ~~For~~Failing ~~additional information~~to onqualify ~~the calculation of our estimated value per share~~ as ofa ~~December~~REIT ~~31,~~could ~~2015,~~materially ~~see Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters~~ and ~~Purchases~~adversely ofaffect ~~Equity~~our ~~Securities—Estimated~~net ~~Value Per Share~~income.”

~~Payment of fees to our advisor and its affiliates reduces cash available for investment, which may result in stockholders not receiving a full return of their invested capital.~~8

Because a portion of the offering price from the sale of our shares is used to pay expenses and fees, the full offering price paid by our stockholders will not be invested in real estate assets. As a result, stockholders will only receive a full return of their invested capital if we either (1) sell our assets or our company for a sufficient amount in excess of the original purchase price of our assets or (2) the market value of our company after we list our shares of common stock on a national securities exchange is substantially in excess of the original purchase price of our assets. Regulations

IfAll wereal ~~internalize~~property ~~our management~~investments ~~functions,~~and ~~your~~the ~~interest~~operations conducted in usconnection ~~could~~with besuch ~~diluted~~investments are subject to federal, state and welocal ~~could~~laws ~~incur~~and ~~other~~regulations ~~significant~~relating to environmental protection and human health and safety. Some of these laws and regulations may impose joint and several liability on customers, owners or operators for the costs ~~associated~~to ~~with~~investigate ~~being~~or ~~self-managed~~remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal.

~~Our~~Under ~~board~~various federal, state and local environmental laws, a current or previous owner or operator of ~~directors~~ real property may ~~decide~~be inliable for the ~~future~~cost toof ~~internalize~~removing or ~~our~~remediating ~~management~~hazardous ~~functions~~or toxic substances on a real property. IfSuch welaws dooften soimpose liability whether or not the owner or operator knew of, weor ~~may~~was ~~elect~~responsible tofor, ~~negotiate~~the presence of such hazardous or toxic substances. In addition, the presence of hazardous substances, or the failure to ~~acquire~~properly remediate these substances, may adversely affect our ~~advisor’s~~ability to sell, rent or pledge such real property ~~assets~~as ~~and~~collateral ~~personnel~~for future borrowings. AtEnvironmental ~~this~~laws ~~time,~~also wemay ~~cannot~~impose ~~anticipate~~restrictions on the ~~form~~manner in which real property may be used or ~~amount~~businesses may be operated. Some of ~~consideration~~these laws and regulations have been amended so as to require compliance with new or more ~~other~~stringent ~~terms~~standards ~~relating~~as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to ~~any~~incur material expenditures or may impose material environmental liability. Additionally, tenants’ operations, the existing condition of land when we buy it, operations in the vicinity of our real properties, such as the presence ~~acquisition.~~of ~~Such~~underground ~~consideration~~storage ~~could~~tanks, ~~take~~or ~~many~~activities ~~forms~~of unrelated third parties may affect our real properties. There are also various local, state ~~including~~and ~~cash~~federal ~~payments~~fire, ~~promissory~~health, ~~notes~~life-safety and ~~shares~~similar regulations with which we may be required to comply and which may subject us to liability in the form of ~~our~~fines ~~common~~or ~~stock~~damages for noncompliance. In connection with the acquisition and ownership of real properties, we may be exposed to such costs in connection with such regulations. The ~~payment~~cost of ~~such~~defending ~~consideration~~against ~~could~~environmental ~~result~~claims, inof ~~dilution~~any damages or fines we must pay, of ~~your~~compliance ~~interests~~with asenvironmental aregulatory ~~stockholder~~requirements ~~and~~or ~~could~~of ~~reduce~~remediating ~~the~~any ~~earnings~~contaminated ~~per~~real ~~share~~property could materially and ~~funds~~adversely ~~from~~affect our business and results of operations ~~per~~or ~~share~~lower ~~attributable~~the value of our assets and, consequently, lower the amounts available for distribution to ~~your~~our ~~investment~~stockholders.

~~Additionally,~~We ifdo ~~we internalize~~not ~~our~~believe ~~management functions, our direct expenses would include general and administrative costs, including legal, accounting~~that ~~and other expenses related to corporate governance, SEC reporting and~~ compliance. Wewith ~~would~~existing ~~also~~environmental belaws ~~required~~will tohave ~~employ~~a ~~personnel and~~material ~~would~~adverse beeffect ~~subject~~on to potential liabilities commonly faced by employers, such as workers disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances as well as incur the compensation and benefits costs of our ~~officers~~financial ~~and~~condition ~~other employees and consultants that we now expect to be paid by our advisor~~ or ~~its~~results ~~affiliates.~~of ~~We may issue~~operations. ~~equity awards to officers~~However, ~~employees~~we ~~and consultants, which awards would decrease net income and funds from operations and may further dilute your investment. We~~ cannot ~~reasonably~~predict ~~estimate~~ the ~~amount~~impact of ~~fees~~unforeseen toenvironmental ~~our~~contingencies ~~advisor~~or wenew ~~would~~or ~~save~~changed laws or ~~the~~regulations ~~costs~~on ~~we would~~properties ~~incur~~in ifwhich we ~~became~~hold ~~self-managed. If the expenses we assume as a result of~~ an ~~internalization are higher than the expenses we avoid paying to our advisor~~interest, ~~our~~or ~~earnings~~on ~~per~~properties ~~share~~that ~~and~~may ~~funds from operations per share would~~ be ~~lower~~acquired asdirectly aor ~~result~~indirectly ofin the ~~internalization than it otherwise would have been, potentially decreasing the amount of funds available to distribute to our stockholders and the value of our shares~~future.

10Seasonality

IfThe wehotel ~~internalize~~industry ~~our~~historically ~~management~~has ~~functions,~~been weseasonal ~~could~~in ~~have~~nature. ~~difficulty~~Seasonal ~~integrating~~variations ~~these~~in ~~functions~~occupancy asat aour ~~stand-alone~~hotel ~~entity.~~properties ~~Currently, our advisor~~ and ~~its~~other ~~affiliates~~hotel ~~perform~~properties ~~asset~~we may ~~management~~acquire ~~and~~may ~~general~~cause ~~and~~quarterly ~~administrative~~fluctuations ~~functions,~~in ~~including~~our ~~accounting~~revenues. ~~and financial reporting~~Specifically, ~~for~~ ~~multiple~~business ~~entities.~~class ~~These~~hotels ~~personnel~~tend ~~have~~to adraw ~~great~~lower ~~deal~~occupancy rates ofduring ~~know-how~~holidays ~~and~~as ~~experience~~there ~~which~~is ~~provides~~less usbusiness ~~with economies of scale~~travel. We ~~may~~To ~~fail to properly identify~~ the ~~appropriate~~extent ~~mix~~that ofcash ~~personnel~~flow ~~and~~from ~~capital~~operations ~~needs~~is toinsufficient ~~operate~~during asany quarter adue ~~stand-alone entity. An inability~~ to ~~manage~~temporary anor ~~internalization~~seasonal ~~transaction~~fluctuations ~~effectively could thus result~~ in ~~our~~revenue ~~incurring~~we ~~excess~~expect ~~costs~~to ~~and~~utilize ~~suffering~~cash ~~deficiencies in~~on ~~our~~hand ~~disclosure controls and procedures~~ or ~~our~~if ~~internal~~necessary ~~control~~any ~~over~~other ~~financial~~available financing ~~reporting.~~sources ~~Such deficiencies could cause us~~ to ~~incur~~ ~~additional~~make ~~costs, and our management’s attention could be diverted from most effectively managing our real estate assets~~distributions.

If we were to internalize our management or if another investment program, whether sponsored by our sponsor or otherwise, hires the employees of our advisor in connection with its own internalization transaction or otherwise, our ability to conduct our business may be adversely affected. Employees

We ~~rely~~have onno ~~persons employed~~paid ~~by our advisor and its affiliates to manage our day-to-day operations~~employees. ~~If we were to effectuate an internalization of~~ ~~our~~The ~~advisor, we may not be able to retain all of the~~ employees of our advisor ~~and its affiliates~~ or ~~to maintain a relationship with our sponsor. In addition, some of the employees of our advisor and~~ its affiliates ~~may~~ provide ~~services~~management, ~~to one or more other investment programs. These programs or third parties may decide to retain some or all of our advisor’s key employees in the future. If this occurs~~acquisition, ~~these~~advisory ~~programs~~and ~~could hire~~ certain ofadministrative ~~the~~services ~~persons currently employed by our advisor and its affiliates who~~for ~~are most familiar with our business and operations, thereby potentially adversely impacting our business~~us.

~~You~~Financial ~~are~~Information ~~limited~~about ~~in your ability~~Industry to sell your shares of common stock pursuant to our share redemption program. You may not be able to sell any of your shares of our common stock back to us, and if you do sell your shares, you may not receive the price you paid. Segments

Our ~~share~~current ~~redemption~~business ~~program~~consists ~~may provide you with a limited opportunity to have your shares~~ of ~~common stock redeemed by us. On February 20~~owning, ~~2015~~managing, ~~we terminated the offer and sale of shares of our common stock to the public in our follow-on offering. Following the termination of the sale of our shares to the public~~operating, ~~shares of common stock will be redeemed pursuant to the share redemption program~~leasing, ~~subject to certain restrictions and limitations~~acquiring, ~~at a price equal to~~developing, orinvesting ~~at a discount from~~in, ~~a price based upon the per-share net asset value of the company~~ and ~~other~~disposing ~~factors our board~~ of ~~directors~~real ~~deems~~estate ~~relevant,~~assets. ~~including the then-current reinvestment price under~~We ~~the~~internally ~~DRIP~~evaluate ~~and~~all ~~general market conditions. Shares~~ of our ~~common~~real ~~stock~~estate ~~are~~assets ~~redeemed~~as onone aindustry ~~quarterly basis. However~~segment, ~~our share redemption program contains certain restrictions~~ and ~~limitations~~, ~~including those relating to the number of shares of our common stock that we can redeem at any given time and limiting the redemption price. Specifically~~accordingly, we limit the number of shares to be redeemed during any calendar year to no more than (1) 5.0% of the weighted average of the shares of our common stock outstanding during the prior calendar year and (2) those that could be funded from the net proceeds from the sale of shares under our distribution reinvestment plan in the prior calendar year plus such additional funds as may be reserved for that purpose by our board of directors; provided, however that the above limitation does not apply to redemptions requested within two years after the death of a stockholder. In addition, our board of directors reserves the right to reject any redemption request for any reason or no reason or to amend, suspend or terminate the share redemption program at any time upon 30 days’ prior written notice. Therefore, you may not have the opportunity to make a redemption request prior to a termination of the share redemption program and you may not be able to sell any of your shares of common stock back to us pursuant to our share redemption program. Moreover, if you do ~~sell your shares of common stock back to us pursuant to the share redemption program, you may~~ not ~~receive~~report ~~the~~segment ~~same price you paid for any shares of our common stock being redeemed~~information.

~~Our~~Available ~~cash distributions are not guaranteed, may fluctuate and may constitute a return of capital or taxable gain from the sale or exchange of property.~~ Information

We ~~began~~are ~~paying~~subject ato ~~distribution in July 2010~~the atreporting aand ~~rate~~information ~~which,~~requirements ifof ~~paid~~the ~~each~~Securities ~~day~~Exchange ~~over~~Act aof ~~365-day period~~1934, isas ~~equivalent~~amended, toor anthe ~~8.0%~~Exchange ~~annualized~~Act, ~~distribution~~and, ~~rate~~as ~~based on~~ a ~~purchase~~result, ~~price~~we offile ~~$10.00~~periodic ~~per~~reports ~~share~~and ofother ~~our~~information ~~common~~with ~~stock~~the SEC. ~~The~~Access ~~actual~~to ~~amount~~copies ~~and timing~~ of ~~distributions~~our ~~will~~annual bereports ~~determined~~on byForm ~~our~~10-K, ~~board~~quarterly ofreports ~~directors~~on ~~and~~Form ~~typically will depend upon the amount of funds available for distribution~~10-Q, ~~which~~current ~~will~~reports ~~depend~~ on ~~items~~Form ~~such~~8-K ~~as current~~ and ~~projected~~other ~~cash~~filings ~~requirements~~that ~~and~~we ~~tax~~make ~~considerations.~~with Asthe ~~a result~~SEC, ~~our~~including ~~distribution~~amendments ~~rate~~to ~~and~~such ~~payment~~filings, ~~frequency~~ may be ~~vary~~obtained ~~from time~~free toof ~~time.~~charge Tofrom the ~~extent~~following wewebsite, dohttp://www.moodynationalreit.com. ~~not~~These ~~have~~filings ~~sufficient~~are ~~funds,~~available orpromptly ~~sources,~~after we offile ~~funds~~them ~~to pay distributions~~with, weor ~~may~~furnish bethem ~~forced~~ to, ~~reduce~~ the ~~rate~~SEC. atWe ~~which~~are wenot ~~pay~~incorporating ~~distributions~~our website or ~~stop~~any ~~paying~~information ~~distributions~~from ~~entirely.~~the ~~Distributions~~website ~~payable~~into tothis Annual ~~our~~Report. ~~stockholders~~The ~~may~~SEC also ~~include~~ maintains a ~~return~~website, ~~of capital~~https://www.sec.gov, ~~rather~~where ~~than~~our afilings ~~return~~are onavailable ~~capital~~free of charge.

11ITEM 1A. Risk Factors

WeThe ~~have~~following are some of the risks and ~~may~~uncertainties ~~continue~~that could cause our actual results to ~~pay~~differ ~~distributions~~materially from ~~sources other~~those ~~than~~presented in our ~~cash~~forward-looking statements. ~~flow~~The ~~from~~risks ~~operations.~~and Touncertainties ~~the~~described ~~extent~~below ~~that~~are wenot ~~pay~~the ~~distributions~~only ~~from~~ones ~~sources~~we ~~other~~face ~~than~~but ~~our~~do ~~cash~~represent ~~flow~~those ~~from~~risks ~~operations,~~and uncertainties that we ~~will~~believe ~~have~~are ~~reduced~~material ~~funds~~to ~~available~~us. ~~for~~Additional ~~investment~~risks and ~~the~~uncertainties ~~overall~~not ~~return~~presently known to us or that we currently deem immaterial may also harm our business. Our stockholders or potential investors may be ~~reduced~~referred to as “you” or “your” in this Item 1A.

Our organizational documents permit us to pay distributions from any source, including net proceeds from our public offerings, borrowings, advances from our sponsor or advisor and the deferral of fees and expense reimbursements by our advisor, in its sole discretion. Since our inception, our cash flow from operations has not been sufficient to fund all of our distributions, and as a consequence we have funded a significant portion of our distributions with the net proceeds of our public offerings. Of the $17,385,764 in total distributions we paid during the period from our inception through December 31, 2015, including shares issued pursuant to the DRIP, approximately 13% was funded from cash flow from operations and approximately 87% was funded from offering proceeds. In the future, our cash flow from operations may not be sufficient to fund our distributions and we may continue to fund all or a portion of our distributions from sources other than cash flow from operations. We have not established a limit on the amount of offering proceeds, or other sources other than cash flow from operations, which we may use to fund distributions.9

~~If we are unable to consistently fund distributions~~Investment to our stockholders entirely from our cash flow from operations, the value of your shares upon a listing of our common stock, the sale of our assets or any other liquidity event may be reduced. To the extent that we fund distributions from sources other than our cash flow from operations, our funds available for investment will be reduced relative to the funds available for investment if our distributions were funded solely from cash flow from operations, our ability to achieve our investment objectives will be negatively impacted and the overall return to our stockholders may be reduced. In addition, if we make a distribution in excess of our current and accumulated earnings and profits, the distribution will be treated first as a tax-free return of capital, which will reduce the stockholder’s tax basis in its shares of common stock. The amount, if any, of each distribution in excess of a stockholder’s tax basis in its shares of common stock will be taxable as gain realized from the sale or exchange of property.Risks

~~Payments~~Since to the ~~holder of the special~~ ~~units~~commencement of our ~~operating~~initial ~~partnership~~public ~~may~~offering ~~reduce~~in ~~cash~~2009, ~~available~~we ~~for~~have ~~distribution~~raised toa ~~our~~relatively ~~stockholders~~limited ~~and~~amount ~~the value~~ of ~~our~~offering ~~shares of common stock upon consummation of a liquidity event~~proceeds.

~~Moody~~Based OPupon ~~Holdings I,~~our operating ~~LLC,~~history asto ~~the~~date ~~holder~~and ofour ~~the~~limited ~~special~~portfolio ~~units~~ of ~~our operating partnership~~investments, ~~may~~there can be ~~entitled~~no toassurance ~~receive~~that ~~15%~~we ofwill ~~specified~~be ~~distributions made~~able ~~upon~~to ~~dispositions~~successfully of operate our ~~operating~~business ~~partnership’s assets and a promissory note, cash~~ or ~~shares~~achieve of our ~~common~~investment ~~stock~~objectives. ~~of such~~As ~~amount upon the occurrence~~ of ~~specified~~December ~~events~~31, ~~including~~2016, ~~among~~we ~~other~~have ~~events~~raised $128,188,874 ain ~~listing~~gross ofoffering ~~our shares on an exchange or the~~proceeds ~~termination~~in orour ~~non-renewal~~initial ofpublic ~~the~~offering ~~advisory~~and ~~agreement. Payments to the holder of the special units upon dispositions of~~ our ~~operating partnership’s~~follow-on ~~assets~~offering, ~~and~~including ~~redemptions~~through ofshares ~~the~~issued ~~special~~pursuant ~~units may reduce cash available for distribution~~ to our ~~stockholders and the value of shares of our common stock upon consummation of a liquidity event~~DRIP.

~~Recently~~We ~~enacted and potential further~~have ~~financial~~experienced ~~regulatory~~losses ~~reforms~~in ~~could~~the ~~have~~past aand ~~significant~~may ~~impact~~experience onsimilar ~~our~~losses ~~business,~~in ~~financial~~the ~~condition and results of operations~~future.

OnWe incurred ~~July~~a ~~21,~~net ~~2010, President~~operating ~~Obama~~loss ~~signed~~for the ~~Dodd-Frank~~years ~~Wall~~ended ~~Street~~December ~~Reform~~31, ~~and~~2010, ~~Consumer Protection Act~~2011, ~~or the “Dodd-Frank Act~~2012,” ~~into law.~~2013 ~~The Dodd-Frank Act represents a significant change in the American financial regulatory environment~~ and ~~impacts nearly every aspect of the U~~2014.S. ~~financial~~Our ~~services~~losses ~~industry.~~can ~~The~~be ~~Dodd-Frank~~attributed, ~~Act requires various federal agencies to adopt hundreds of new~~in ~~rules~~part, to ~~implement~~ the ~~Dodd~~initial start-~~Frank~~up ~~Act~~costs and tooperating ~~deliver~~expenses toincurred ~~Congress~~prior ~~numerous studies and reports that may influence future legislation. The Dodd-Frank Act leaves significant discretion~~ to ~~federal~~making ~~agencies~~investments asin ~~to exactly how to implement the broad provisions of the Dodd-Frank Act~~properties. AsIn ~~a result~~addition, ~~many~~depreciation and ofamortization ~~the details~~ and ~~much~~acquisition ofexpenses ~~the~~substantially ~~impact~~reduced ofour ~~the~~income. ~~Dodd-Frank~~We ~~Act~~cannot ~~may~~assure ~~not~~you bethat ~~known~~we ~~for~~will ~~some~~be ~~time~~profitable ~~and~~in the ~~full~~future ~~extent~~or ofthat ~~the~~we ~~impact~~will ofrealize ~~the~~growth ~~Dodd-Frank~~in ~~Act on our operations is currently unclear. The changes resulting from~~ the ~~Dodd-Frank Act~~value ~~may impact the profitability~~ of ~~business activities, require changes to certain business practices, impose more stringent capital, liquidity and leverage requirements or otherwise adversely affect~~ our ~~business~~assets.

~~Further,~~Unknown weto ~~may~~us beat the time, our auditor ~~required~~was tonot ~~invest~~independent ~~significant~~from ~~management~~November ~~attention~~2010 through February 2012, and ~~resources~~as toa ~~evaluate~~result, ~~and~~we ~~make~~may ~~any~~face ~~changes~~liability ~~necessary~~under toSection ~~comply~~5 ~~with~~of ~~new~~the Securities ~~statutory~~Act ~~and~~in ~~regulatory~~relation ~~requirements~~to ~~under~~purchases ~~the~~of ~~Dodd-Frank~~our ~~Act,~~common ~~which~~stock ~~may~~made ~~negatively~~from ~~impact~~March ~~results~~31, of2011 ~~operations~~through ~~and~~February ~~financial condition~~8, 2012.

12Pannell Kerr Forster of Texas, P.C., or “PKF,” served as our independent auditor beginning in November 10, 2010 through February 8, 2012. On February 7, 2012, PKF informed our board of directors that it could not be considered independent in accordance with Rule 201 of SEC Regulation S-X for the 2011 fiscal year. On February 10, 2012, PKF informed our board that it could not be considered independent for the 2009 and 2010 fiscal years. Consequently, from March 31, 2011 (the date PKF first issued a report on our financial statements) to February 8, 2012, the offer and sale of securities in our initial public offering may have failed to comply fully with Section 5 of the Securities Act which may trigger a right of rescission under the Securities Act for investors that purchased shares of our common stock during this period. Such stockholders may have the right to rescind their purchase of shares of our common stock and require us to reacquire their shares at a price equal to the price originally paid for such shares with interest, less the amount of any income received with respect to such shares. An investor who acquired shares of our common stock during this period who no longer owns the shares they acquired may have the right to collect damages from us in lieu of the rescission rights described above. If stockholders were successful in seeking rescission or damages, we would face financial demands that could adversely affect our business and operations. Additionally, we may become subject to penalties imposed by the SEC and state securities agencies. As of the date of this Annual Report, we have not received a claim for rescission. If stockholders seek rescission or damages or we conduct a rescission offer, we may or may not have the resources to fund the repurchase of the securities.

~~Risks~~There ~~Related~~is no Topublic ~~Our~~trading ~~Business~~market for shares of our common stock and we are not required to effectuate a liquidity event by a certain date. As a result, it will be difficult for you to sell your shares of common stock and, if you are able to sell your shares, you are likely to sell them at a substantial discount.

~~We,~~There is no current public market for the shares of our ~~sponsor~~common stock and we have no obligation to list our ~~advisor~~shares ~~have~~on any public securities ~~limited~~market ~~experience~~or inprovide ~~operating~~any aother ~~public~~type ~~company~~of liquidity to our stockholders. It will therefore be difficult for you to sell your shares of our common stock promptly or aat ~~REIT~~all. Even if you are able to sell your shares of our common stock, ~~and~~the absence of a public market may cause the price received for any shares of our ~~failure~~common stock sold to ~~operate~~be ~~successfully~~less than what you paid or ~~profitably~~less ~~could~~than your proportionate value of the assets we own. We have adopted a share redemption program but it is limited in terms of the amount of shares that ~~material~~may ~~adverse~~be ~~effect~~purchased by us each quarter; however, the share redemption program was suspended (except in cases of a stockholder’s death or qualifying disability) effective May 6, 2016 in connection with the formation of a special committee of our board of directors. Additionally, our charter does not require that we consummate a transaction to provide liquidity to our stockholders on any date certain or at all. As a result, you should purchase shares of our ~~ability~~common stock only as a long-term investment, and you must be prepared to ~~generate~~hold ~~cash~~your ~~flow~~shares for an indefinite length of time.

We ~~and our advisor~~commenced ~~were~~operations ~~formed~~on inMay connection with our initial public offering. You should not rely upon the past performance of other real estate investment programs of our affiliates to predict our future results. As of the date of this Annual Report27, ~~our~~2010 ~~portfolio~~and ~~includes only~~therefore ~~thirteen~~we ~~investments.~~have ~~You~~a ~~should~~limited ~~consider~~operating ~~our~~history ~~prospects in light of the risks, uncertainties~~ and ~~difficulties~~there ~~frequently~~is ~~encountered by~~no ~~companies~~assurance that ~~are,~~we ~~like~~will ~~us, in their development stage. To~~ be ~~successful,~~able weto successfully ~~and~~achieve our ~~advisor~~investment ~~must, among other things:~~objectives.

●We commenced ~~continue~~operations toon ~~identify~~May ~~and~~27, ~~acquire~~2010 ~~investments~~with ~~that~~the ~~align~~acquisition ~~with~~of our first investment, ~~strategies;~~have ●a ~~attract~~limited operating history and currently have only fourteen investments. On February 20, ~~integrate~~2015, ~~motivate~~we terminated the offer and ~~retain~~sale ~~qualified~~of ~~personnel~~shares of our common stock to ~~manage~~the public in our ~~day~~follow-~~to-day~~on ~~operations;~~offering. ●As ~~respond~~a result, we may not be able to ~~competition~~successfully ~~for~~operate our ~~targeted~~business ~~investments~~or asachieve ~~well~~our asinvestment ~~for~~objectives. An ~~potential~~investment ~~investors~~ in shares of our common stock may entail more risk than an investment in the shares; ~~and~~of ●common ~~continue~~stock of a real estate investment trust with a substantial operating history. In addition, you should not rely on the past performance of real property, real estate securities or debt-related investments owned by other Moody National affiliates to ~~build~~predict our future results. Our investment strategy and ~~expand~~key employees differ from the investment strategies and key employees of our ~~operations~~affiliates ~~structure~~in the past and present and may continue to ~~support~~do ~~our~~so ~~business~~in the future.

Our failure, or our advisor’s or sponsor’s failure, to operate successfully or profitably could have a material adverse effect on our ability to generate cash flow to make distributions to our stockholders and could cause you to lose all or a portion of your investment in our shares.10

~~Our~~The ~~success~~consummation isof ~~dependent on~~ the ~~performance~~mergers is ofsubject ~~our~~to ~~sponsor~~many conditions, and ~~Moody~~there ~~National~~is ~~affiliates~~no guarantee these conditions will be met.

~~Our~~Consummation ~~ability~~of the mergers is subject to ~~achieve~~a number of conditions, and the merger agreement may be terminated under certain circumstances as described above in Item 1, “Business—Pending Merger with Moody National REIT II, Inc.” Both our ~~investment~~management ~~objectives~~and the management of Moody II will expend time and toresources ~~pay~~of ~~distributions~~their isrespective ~~dependent~~companies ~~upon~~in the ~~performance~~fulfillment of ~~our~~the ~~advisor,~~conditions ~~our~~and ~~sponsor~~obligations contained in the merger agreement. Such time and resources may otherwise have been allocated to other ~~affiliates~~operational needs of ~~our~~us ~~sponsor~~and Moody II, respectively. ~~Our~~If any purported stockholders file lawsuits challenging the mergers, there can be no assurance as to the outcome ~~sponsor~~of ~~and~~such ~~its~~lawsuits, including the costs associated with defending these claims or any other ~~affiliates~~liabilities that may be incurred in connection with the litigation or settlement of these claims. If plaintiffs are ~~sensitive~~successful toin ~~trends~~obtaining an injunction prohibiting the parties from completing the mergers on the agreed-upon terms, such an injunction may prevent the completion of the mergers in the ~~general~~expected time ~~economy~~frame, asor ~~well~~may prevent it from being completed altogether. Even though we have entered into the merger agreement, there can be no assurance as to whether or when the ~~commercial~~conditions ~~real~~to ~~estate~~the ~~and~~closing ~~credit~~of the mergers will be satisfied or waived, or as to whether ~~markets~~or when the mergers will be consummated.

~~The~~Failure ~~recent market downturn that occurred several years ago has adversely impacted, and could continue~~ to ~~adversely~~consummate impact, certain prior real estate programs of our sponsor’s affiliates, resulting in a decrease or deferral of distributions with respect to such programs. Moody National Management, L.P. continues to seek approval to amend its master lease agreements for certain prior real estate programs to provide for either a deferral or a waiver of a portion of lease payments to program investors, and may continue to seek further amendments in the ~~future depending~~mergers ~~upon~~could ~~the~~negatively ~~then-current economic conditions. Certain prior real estate programs have also requested additional cash infusions~~affect ~~from investors to fund outstanding debt service payments~~us. Further such requests may be necessary in the future depending upon the then-current economic conditions. These adverse developments have resulted in a reduction in payments to investors for certain prior real estate programs.

~~Moody~~ Failure ~~National~~to ~~Management,~~consummate the ~~L.P.~~mergers ~~has~~may ~~commenced negotiations~~adversely ~~with~~affect ~~lenders~~our toresults ~~restructure~~of ~~loan~~operations ~~terms~~and ~~with~~business ~~respect~~prospects. toFirst, ~~certain~~we ~~prior~~will ~~real~~have ~~estate~~incurred ~~programs~~substantial incosts related ~~default~~to ~~under~~the ~~existing franchise~~mergers orand ~~loan~~the ~~agreements~~related transactions, such as legal, accounting and financial advisor fees, which may ~~continue~~be topayable by dous soeven inif the ~~future~~mergers are not completed. ~~With~~Additionally, ~~respect~~our tostockholders ~~some~~will ofnot ~~these~~have ~~loans,~~had the ~~lender~~opportunity isto ~~pursuing~~achieve liquidity, ~~various~~and our board of directors will review other alternatives ~~simultaneously~~for liquidity, ~~including~~which ~~initiation~~may not occur in the near term or on terms as attractive as the terms of ~~foreclosure~~the ~~and~~pending ~~legal~~mergers ~~proceedings~~set forth in the merger agreement. The merger agreement may also be terminated under certain circumstances by both us and ~~loan~~Moody ~~modifications~~II. If such termination occurs under certain circumstances, ~~and~~then ~~the~~we would be obligated to pay ~~borrowers~~Moody ~~are~~II ~~actively~~a ~~working~~termination ~~toward~~fee ~~loan~~of ~~modifications.~~$2,000,000, ~~However~~plus an expense reimbursement fee of up to $500,000. ~~there~~The ismerger noagreement ~~assurance~~also provides that ~~final~~one ~~loan~~party ~~modifications~~may ~~will~~ be required to reimburse the other party’s ~~achieved~~expenses, up to $500,000, if the merger agreement is terminated under certain circumstances.

~~With~~The ~~respect~~pendency ~~to two tenant-in-common programs sponsored by Moody National Realty, the initial lender sold the loans, and the purchaser~~ of the ~~loans~~mergers ~~initiated foreclosure proceedings~~could ~~resulting~~adversely inaffect ~~the~~our ~~filing~~business ~~for protection from these proceedings in the United States Bankruptcy Court by an affiliate of Moody National Realty owning an original equity investment in one property of approximately $10,000~~ and ~~$10,039 in the other property~~operations. These affiliates received court approval of a confirmation plan under which an agreement was reached with the lender and the loans were reinstated. With respect to one of these properties, the 28 tenant-in-common owners of the Residence Inn Atlanta Midtown, which originally acquired the project with a $7.475 million equity investment, recently allowed the lender to foreclose on the hotel which secured the loan.

AnDue ~~affiliate~~to ofoperating ~~Moody National Realty and tenant-in-common~~covenants ~~owners~~ in ~~eight~~the ~~tenant-in-common~~merger ~~programs~~agreement, ~~collectively~~we ~~initiated~~may ~~legal~~be ~~proceedings~~unable, ~~against~~during athe ~~lender.~~pendency ~~Currently, seven~~ of ~~these tenant-in-common programs have been restructured into a limited liability company owned by~~ the ~~former tenant-in-common owners and a lender affiliate~~mergers, ~~and the legal proceedings have been dismissed with respect~~ to ~~such~~take ~~programs.~~certain ~~The~~actions, ~~lender~~even ~~and~~if ~~borrowers~~we onbelieve ~~one~~such ofactions ~~the~~could ~~tenant-in-common~~otherwise ~~programs~~prove ~~entered~~to ~~into~~be abeneficial ~~settlement and reinstatement of the loan, and the legal proceedings have been dismissed with respect~~ to ~~such~~our ~~program~~stockholders.

13The terms of the Mergers may not be as favorable to our stockholders as if only independent representatives were involved in analyzing the transactions.

~~The~~While 19our ~~tenant-in-common~~board ~~owners~~ of ~~the Westchase~~ ~~Technology~~directors ~~Center~~formed ~~property, which originally acquired the property with~~ a $4separate ~~million~~special ~~equity~~committee ~~investment,~~and ~~declined~~retained toseparate ~~proceed~~legal ~~with a~~counsel ~~lender’s loan modification proposal~~ and ~~allowed~~financial ~~the~~advisors ~~lender~~ to ~~foreclose~~assist onit ~~an office building which secured the loan. The 28 tenant-~~in~~-common~~ ~~owners of a two-hotel project (consisting of the Springhill Suites Altamonte and the Holiday Inn Express Orlando)~~evaluating ~~which originally acquired~~ the ~~project~~mergers, ~~with~~representatives aof ~~$10.2~~our ~~million~~company ~~equity investment declined to proceed with a lender’s loan modification proposal~~ and ~~allowed~~Moody ~~the~~II ~~lender~~performed toan ~~foreclose~~initial onreview ~~the two hotels which secured the loan. The 14 tenant-in-common owners~~ of apotential ~~two-hotel project~~alternatives ~~(consisting~~for ofour ~~the TownePlace Suite Miami Airport~~ company and ~~TownePlace~~Moody ~~Suites~~II ~~Miami Lakes) which originally acquired the project with a $5.9 million equity investment declined to proceed with a lender’s loan modification proposal~~ and ~~allowed~~proposed the ~~lender to~~initial ~~foreclose~~terms on the two hotels which secured the loan. The 16 tenant-in-common owners of the TownePlace Suites Mount Laurel, which originally acquired the property with a $5.6 million equity investment, declined to proceed with a lender’s loan modification proposal and ~~allowed~~conditions ~~the lender to foreclose on the hotel which secured the loan. Additionally, the 35 tenant-in-common owners~~ of the ~~Courtyard Columbus Airport~~mergers, ~~which~~including ~~originally acquired~~ the ~~property~~exchange ~~with an $11~~ratio.1 ~~million~~If ~~equity~~only ~~investment,~~independent ~~entered into~~representatives ~~a deed in lieu~~ of ~~foreclosure~~our ~~agreement~~company ~~with~~and ~~the~~Moody ~~lender.~~II ~~Further,~~were ~~the~~involved ~~lender for the Residence Inn Memphis filed foreclosure proceedings and one unaffiliated tenant-~~in~~-common~~ ~~owner~~considering ofliquidity ~~the~~alternatives ~~Residence Inn Memphis filed~~ for ~~bankruptcy~~our ~~protection,~~company ~~which resulted in a court-ordered auction sale of the property~~ and aMoody ~~loss of the original $6.93 million equity investment for the 17 tenant-in-common owners. In addition, the 31 tenant-in-common owners of the Northbelt~~ II ~~Office~~and ~~Building,~~analyzing ~~which originally acquired~~ the ~~property with a $9.3~~ ~~million equity investment~~transactions, ~~allowed~~ the ~~lender~~terms ~~to acquire the property in an uncontested foreclosure. Further, the 21 tenant-in-common owners~~ of the ~~Newtown~~mergers ~~Hampton~~might ~~Inn~~have &been ~~Suites, which originally acquired the property with a $6~~different.~~725 million equity investment, allowed the lender to acquire the property in an uncontested foreclosure.~~

ToOur the extent that any decline in revenues and operating results impacts our sponsor’s ability to provide our advisor with sufficient resources to perform its obligations to us pursuant to the advisory agreement, our results of operations, financial condition and ability to pay distributions to our stockholders ~~could~~will ~~also~~be ~~suffer. Additionally, such adverse conditions could require a substantial amount of time on the part of~~diluted ~~the~~by ~~management of our advisor and its affiliates, particularly with regard to other real estate programs, thereby decreasing~~ the ~~amount~~ ~~of time they spend actively managing our investments~~mergers.

IfThe wemerger ~~are~~will ~~delayed~~dilute the orownership ~~unable~~position toof ~~find~~the current Moody II stockholders and result in our stockholders having an ownership stake in Moody II ~~suitable~~that ~~investments~~is smaller than their current stake in our company. Consequently, weMoody ~~may~~II ~~not~~stockholders beand ~~able~~our stockholders, as a general matter, will have less influence over the management and policies of Moody II after the mergers than each exercise over the management and policies of Moody II and our company, as applicable, immediately prior to ~~achieve~~the mergers. In addition, after the consummation of the mergers, our ~~investment~~stockholders ~~objectives~~who receive shares of Moody II common stock will have certain different rights than they currently have as our stockholders.

~~Delays in selecting,~~Payment ~~acquiring~~of ~~and~~fees ~~developing~~to ~~real~~our ~~estate~~advisor ~~assets~~and ~~could~~its ~~adversely~~affiliates ~~affect~~reduces ~~investor~~cash ~~returns.~~available Iffor ~~we are unable to access sufficient capital~~investment, we which may ~~suffer~~result ~~from~~in ~~delays~~stockholders innot ~~deploying~~receiving a ~~the~~full ~~capital~~return ~~into~~of ~~real~~their ~~estate~~invested ~~assets~~capital.

~~The~~Because a ~~recent~~portion ~~downturn~~of in the ~~credit markets~~offering ~~has~~price ~~increased~~from the ~~cost~~sale of ~~borrowing~~our shares was used to pay expenses and ~~has~~fees, ~~made~~the ~~financing~~full ~~difficult~~offering toprice ~~obtain~~paid by our stockholders was not invested in real estate assets. As a result, ~~each~~stockholders will only receive a full return of ~~which~~their ~~may~~invested capital ~~have~~if we either (1) sell our assets or our company for a ~~material~~sufficient ~~adverse~~amount in excess of the original purchase price of our ~~effect~~assets onor (2) the market value of our ~~results~~company after we list our shares of ~~operations~~common ~~and~~stock ~~business~~on a national securities exchange is substantially in excess of the original purchase price of our assets.

~~Recent~~If ~~events~~we ~~in the~~internalize ~~financial~~our ~~markets~~management ~~have had an adverse impact on the credit markets and~~functions, asyour ainterest ~~result,~~in ~~the~~us ~~availability~~could ofbe ~~credit~~diluted ~~has become more expensive~~ and ~~difficult to obtain. Some lenders are imposing more stringent restrictions on the terms of credit and there may be a general reduction in the amount of credit available in the markets in which~~ we ~~conduct~~could ~~business.~~incur ~~The~~other ~~negative~~significant impact of the tightening of the credit markets may have a material adverse effect on us resulting from, but not limited to, an inability to finance the acquisition of real estate assets on favorable terms, if at all, increased financing costs orassociated ~~financing~~ with ~~increasingly restrictive~~being ~~covenants~~self-managed.

WeIn the ~~are~~event ~~uncertain~~that ofwe ~~our~~do ~~sources~~not ~~for funding~~consummate the mergers, our board of directors may decide in the future ~~capital~~to ~~needs~~internalize our management functions. If we do so, we may elect to negotiate to acquire our advisor’s assets and personnel. At this time, we cannot anticipate ~~obtain~~the ~~debt~~form or ~~equity~~amount ~~financing~~of onconsideration ~~acceptable~~or other terms relating to any such acquisition. Such consideration could take many forms, including cash payments, promissory notes and shares of our ~~ability~~common tostock. ~~acquire~~The ~~real~~payment of such consideration could result ~~estate~~in ~~assets~~dilution of your interests as a stockholder and tocould ~~expand~~reduce ~~our~~the earnings per share and funds from operations ~~will~~per beshare ~~adversely~~attributable to ~~affected~~your investment.

11 The remaining net proceeds from our follow-on offering and the proceeds of any other sales of our securities that we may conduct in the future will be used for investments in real properties, real estate securities and debt-related investments, for payment of operating expenses and for payment of various fees and expenses such as acquisition fees, origination fees, asset management fees and property management fees. We terminated the offer and sale of our shares to the public in our follow-on offering on February 20, 2015, and we did not establish a general working capital reserve out of the proceeds from our follow-on offerings. Accordingly, in the event that we develop a need for additional capital in the future for investments, the improvement of our real properties or for any other reason, sources of funding may not be available to us. If we cannot establish reserves out of cash flow generated by our real estate assets or out of net sale proceeds in non-liquidating sale transactions, or obtain debt or equity financing on acceptable terms, our ability to acquire real estate assets and to expand our operations will be adversely affected. As a result, we would be less likely to achieve portfolio diversification and our investment objectives, which may negatively impact our results of operations and reduce our ability to make distributions to our stockholders.

14Additionally, if we internalize our management functions, our direct expenses would include general and administrative costs, including legal, accounting and other expenses related to corporate governance, SEC reporting and compliance. We would also be required to employ personnel and would be subject to potential liabilities commonly faced by employers, such as workers disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances as well as incur the compensation and benefits costs of our officers and other employees and consultants that we now expect to be paid by our advisor or its affiliates. We may issue equity awards to officers, employees and consultants, which awards would decrease net income and funds from operations and may further dilute your investment. We cannot reasonably estimate the amount of fees to our advisor we would save or the costs we would incur if we became self-managed. If the expenses we assume as a result of an internalization are higher than the expenses we avoid paying to our advisor, our earnings per share and funds from operations per share would be lower as a result of the internalization than it otherwise would have been, potentially decreasing the amount of funds available to distribute to our stockholders and the value of our shares.

~~Risks~~If we ~~Related~~internalize our management functions, we could have difficulty integrating these functions as a stand-alone entity. Currently, our advisor and its affiliates perform asset management and general and administrative functions, including accounting and financial reporting, for multiple entities. These personnel have a great deal of know-how and experience which provides us with economies of scale. We may fail to ~~Our~~properly ~~Organizational~~identify the appropriate mix of personnel and capital needs to operate as a stand-alone entity. ~~Structure~~An inability to manage an internalization transaction effectively could thus result in our incurring excess costs and suffering deficiencies in our disclosure controls and procedures or our internal control over financial reporting. Such deficiencies could cause us to incur additional costs, and our management’s attention could be diverted from most effectively managing our real estate assets.

~~Maryland~~If ~~law~~we ~~and~~were to internalize our ~~organizational~~management ~~documents~~or ~~limit~~if ~~your~~another ~~right~~investment toprogram, ~~bring~~whether ~~claims~~sponsored ~~against~~by our ~~officers~~sponsor ~~and~~or ~~directors~~otherwise, hires the employees of our advisor in connection with its own internalization transaction or otherwise, our ability to conduct our business may be adversely affected.

~~Maryland~~We ~~law~~rely ~~provides~~on persons ~~that~~employed aby ~~director~~our ~~will~~advisor ~~not~~and ~~have~~its ~~any~~affiliates ~~liability~~to asmanage aour ~~director~~day-to-day ~~so long as he or she performs his or her duties in accordance with the applicable standard of conduct~~operations. InIf ~~addition,~~we ~~our~~were ~~charter provides that, subject~~ to ~~the~~effectuate ~~applicable~~an ~~limitations~~internalization ~~set forth therein~~of orour ~~under Maryland law~~advisor, nowe ~~director~~may ornot ~~officer will~~ be ~~liable~~able to usretain orall ~~our~~of ~~stockholders~~the ~~for~~employees ~~monetary~~of ~~damages. Our charter also provides that we will generally indemnify and advance expenses to~~ our ~~directors, our officers, our~~ advisor and its affiliates ~~for~~or ~~losses they may incur by reason of their service in those capacities subject~~ to ~~any~~maintain ~~limitations~~a ~~under Maryland law or in our charter.~~relationship ~~Moreover, we have entered into separate indemnification agreements~~ with ~~each of~~ our ~~directors and executive officers~~sponsor. ~~As a result, we and our stockholders may have more limited rights against these persons than might otherwise exist under common law.~~ In addition, we ~~may~~some beof ~~obligated to fund~~ the ~~defense~~employees ~~costs~~of ~~incurred by these persons in some cases. However,~~ our ~~charter provides that we may not indemnify our directors, our~~ advisor and its affiliates ~~for~~may ~~loss~~provide orservices ~~liability~~to ~~suffered~~one ~~by them~~ or ~~hold~~more ~~our directors or our~~other ~~advisor~~investment ~~and~~programs. ~~its~~These ~~affiliates~~programs ~~harmless for loss~~ or ~~liability~~third ~~suffered~~parties bymay usdecide ~~unless~~to ~~they~~retain ~~have~~some ~~determined~~or ~~that~~all ~~the course~~ of ~~conduct that~~our ~~caused~~advisor’s ~~the~~key ~~loss~~employees ~~or liability was~~ in ~~our~~the future. ~~best~~If ~~interests,~~this ~~they were acting on our behalf or performing services for us~~occurs, ~~the liability~~these ~~was~~programs ~~not~~could ~~the~~hire ~~result~~certain of ~~negligence~~the orpersons ~~misconduct~~currently employed by our ~~non-independent directors, our~~ advisor and its affiliates ~~or gross~~who ~~negligence~~are ormost ~~willful~~familiar ~~misconduct~~with by our ~~independent~~business ~~directors,~~ and ~~the~~operations, ~~indemnification~~thereby orpotentially ~~obligation~~adversely toimpacting ~~hold harmless is recoverable only out of~~ our ~~net assets, including the proceeds of insurance, and not from the stockholders~~business.

~~The~~You ~~limit~~are onlimited ~~the~~in ~~percentage~~your ofability ~~shares~~to ofsell ~~our~~your shares of common stock ~~that~~pursuant ~~any~~to ~~person~~our ~~may~~share ~~own~~redemption program. You may ~~discourage~~not abe ~~takeover~~able orto ~~business~~sell ~~combination~~any ~~that~~of ~~may~~your ~~benefit~~shares of our common ~~stockholders~~stock back to us, and if you do sell your shares, you may not receive the price you paid.

~~Our~~In ~~charter~~connection ~~restricts~~with the ~~direct~~formation orof ~~indirect~~a ~~ownership~~special bycommittee ~~one~~of ~~person~~our orboard ~~entity~~of todirectors, noour ~~more~~share ~~than~~redemption 9program was, and remains, suspended.8% If our share redemption program is reinstated, then pursuant to its terms, shares of common stock will be redeemed pursuant to the share redemption program, subject to certain restrictions and limitations, at a price equal to, or at a discount from, a price based upon the net asset value per share of our ~~then~~company ~~outstanding~~and ~~shares~~other factors our board of ~~capital~~directors deems relevant, including the then-current ~~stock~~reinvestment ~~(which~~price ~~includes~~under our DRIP and general market conditions. Shares of our common stock are redeemed on a quarterly basis. However, our share redemption program contains certain restrictions and ~~any~~limitations, ~~preferred~~including those relating to the number of shares of our common stock that we ~~may~~can ~~issue)~~redeem at any given time and limiting the redemption price. Specifically, if the share redemption program is reinstated, we will limit the number of shares to be redeemed during any calendar year to no more than 9(1) 5.80% of the weighted ~~value~~average orof ~~number~~the shares of ~~shares,~~our common stock outstanding during the prior calendar year and (2) those that could be funded ~~whichever~~from isthe ~~more~~net ~~restrictive,~~proceeds from the sale of shares under our ~~then~~DRIP ~~outstanding~~in ~~common~~the ~~stock~~prior ~~unless~~calendar ~~exempted~~year (assuming our DRIP was active) plus such additional funds as may be reserved for that purpose by our board of directors.; ~~This~~provided, ~~restriction~~however, that the above limitation would ~~may~~not ~~discourage~~apply ato ~~change~~redemptions ofrequested ~~control~~within two years after the death of usa ~~and~~stockholder. ~~may~~As ~~deter~~described ~~individuals~~above, orour ~~entities~~DRIP ~~from~~has ~~making~~been ~~tender~~suspended beginning ~~offers~~with ~~for~~distributions ~~shares~~made ofin November 2016. In addition, our ~~common~~board of directors will reserve the right to reject any redemption ~~stock~~request onfor ~~terms~~any ~~that~~reason ~~might~~or beno ~~financially~~reason ~~attractive~~or to ~~stockholders~~amend, suspend or ~~which~~terminate ~~may~~the ~~cause~~share aredemption ~~change~~program inat ~~our~~any ~~management~~time upon 30 days’ prior written notice. InTherefore, ~~addition~~if the share redemption program was reinstated, you may not have the opportunity to make a redemption request prior to ~~deterring~~a ~~potential~~further ~~transactions~~suspension ~~that~~or termination of the share redemption program and you may not be ~~favorable~~able to sell any of your shares of common stock back to us pursuant to our ~~stockholders,~~share ~~these~~redemption ~~provisions~~program. ~~may~~Moreover, ~~also~~if ~~decrease~~you do sell your ~~ability~~shares of common stock back to ~~sell~~us ~~your~~pursuant to the share redemption program, you may not receive the same price you paid for any shares of our common stock being redeemed.

WeOur ~~may~~cash ~~issue~~distributions ~~preferred~~are ~~stock~~not ~~or other~~guaranteed, ~~classes~~may offluctuate ~~common~~and ~~stock,~~may ~~which~~constitute ~~issuance~~a ~~could~~return ~~adversely~~of ~~affect~~capital ~~the~~or ~~holders~~taxable ofgain ~~our~~from ~~common~~the ~~stock~~sale ~~issued~~or ~~pursuant~~exchange toof ~~our continuous public offering~~property.

~~Investors~~We inbegan ~~our~~paying ~~continuous~~a distribution ~~public~~in ~~offering~~July do2010 ~~not~~at ~~have~~a ~~preemptive~~rate ~~rights~~which, toif ~~any~~paid ~~shares~~each ~~issued~~day byover usa in365-day ~~the~~period, ~~future.~~is Weequivalent ~~may~~to ~~issue,~~an ~~without~~8.0% ~~stockholder~~annualized ~~approval,~~distribution rate based ~~preferred~~on ~~stock~~a orpurchase ~~other~~price ~~classes~~of $10.00 per share of our common stock. ~~with~~The ~~rights~~actual ~~that~~amount ~~could~~and ~~dilute~~timing ~~the~~of ~~value~~distributions ofwill ~~your~~be ~~shares~~determined by our board of ~~common~~directors ~~stock.~~and ~~However,~~ typically will depend upon the ~~issuance~~amount of ~~preferred~~funds ~~stock~~available ~~must~~for bedistribution, ~~approved~~which bywill adepend ~~majority~~on ofitems such ~~our~~as ~~independent~~current ~~directors~~and ~~not~~projected ~~otherwise~~cash ~~interested~~requirements inand ~~the~~tax ~~transaction, who~~considerations. ~~will~~As ~~have~~a ~~access~~result, at our ~~expense,~~distribution torate ~~our~~and ~~legal~~payment ~~counsel~~frequency may orvary tofrom ~~independent~~time ~~legal~~to ~~counsel~~time. ~~The~~To ~~issuance~~the ofextent ~~preferred~~we ~~stock~~do not have sufficient funds, or ~~other~~ ~~classes~~sources of ~~common~~funds ~~stock~~to ~~could~~pay ~~increase~~distributions, we may be forced to reduce the ~~number~~rate ofat ~~stockholders~~which ~~entitled~~we topay distributions ~~without~~or ~~simultaneously~~stop ~~increasing~~paying distributions entirely. Distributions payable to our stockholders ~~the~~may ~~size~~also include a return of ~~our~~capital, ~~asset~~rather ~~base~~than a return on capital.

~~Our charter authorizes us to issue 450,000,000~~12 shares of capital stock, of which 400,000,000 shares of capital stock are designated as common stock and 50,000,000 shares of capital stock are classified as preferred stock. Our board of directors may amend our charter from time to time to increase or decrease the aggregate number of authorized shares of capital stock or the number of authorized shares of capital stock of any class or series without stockholder approval. If we ever created and issued preferred stock with a distribution preference over common stock, payment of any distribution preferences of outstanding preferred stock would reduce the amount of funds available for the payment of distributions on our common stock. Further, holders of preferred stock are normally entitled to receive a preference payment in the event we liquidate, dissolve or wind up before any payment is made to our common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence. In addition, under certain circumstances, the issuance of preferred stock or a separate class or series of common stock may render more difficult or tend to discourage:

●We ahave ~~merger,~~and ~~tender~~may ~~offer~~continue orto ~~proxy~~pay ~~contest;~~distributions from ●sources ~~the~~other ~~assumption~~than ofour ~~control~~cash byflow afrom ~~holder~~operations. ofTo athe ~~large~~extent ~~block~~that ofwe pay distributions from sources other than our ~~securities;~~cash flow ~~and~~from ●operations, we will have reduced funds available for investment and the ~~removal~~overall ofreturn ~~incumbent~~to ~~management~~our stockholders may be reduced.

15Our organizational documents permit us to pay distributions from any source, including net proceeds from our public offerings, borrowings, advances from our sponsor or advisor and the deferral of fees and expense reimbursements by our advisor, in its sole discretion. Since our inception, our cash flow from operations has not been sufficient to fund all of our distributions, and as a consequence we have funded a significant portion of our distributions with the net proceeds of our public offerings. Of the $27,946,328 in total distributions we paid during the period from our inception through December 31, 2016, including shares issued pursuant to our DRIP, approximately 39% was funded from cash flow from operations and approximately 61% was funded from offering proceeds or proceeds from the sale of hotel property. If the mergers are not consummated, in the future our cash flow from operations may not be sufficient to fund our distributions and we may continue to fund all or a portion of our distributions from sources other than cash flow from operations. We have not established a limit on the amount of offering proceeds, or other sources other than cash flow from operations, which we may use to fund distributions.

WeIf dothe mergers are not ~~currently~~consummated ~~have~~and we are unable to consistently fund distributions to our stockholders entirely from our cash flow from operations, the value of your shares upon a ~~compensation~~listing of our common stock, the sale of our assets or any other liquidity event may be reduced. ~~committee~~To the extent that we fund distributions from sources other than our cash flow from operations, ~~and~~our ~~presently~~funds doavailable ~~not~~for ~~intend~~investment will be reduced relative to ~~form~~the ~~such~~funds available for investment if our distributions were funded solely from cash flow from operations, our ability to achieve our investment objectives will be negatively impacted and the overall return to our stockholders may be reduced. In addition, if we make a ~~committee~~distribution in excess of our current and accumulated earnings and profits, the distribution will be treated first as a tax-free return of capital, which will reduce the stockholder’s tax basis in its shares of common stock. The amount, if any, of each distribution in excess of a stockholder’s tax basis in its shares of common stock will be taxable as gain realized from the sale or exchange of property.

WePayments ~~do not have a compensation committee and have no plans~~ to ~~form~~the ~~one.~~holder ~~Our board~~ of ~~directors may form a compensation committee in~~ the ~~future, which we expect~~special ~~will~~units ~~occur only when we hire our own employees. We currently do not have any employees nor do we have plans to hire any employees. The role~~ of ~~any compensation committee would be to make recommendations to~~ our ~~board~~operating ofpartnership ~~directors~~may onreduce ~~the~~cash ~~compensation~~available offor ~~our~~distribution ~~employees and~~ to ~~administer the granting of awards pursuant to~~ our ~~long-term~~stockholders ~~incentive plan~~ and ~~to set~~ the ~~terms~~value ~~and conditions~~ of ~~such awards. Until~~ our ~~board~~shares of ~~directors deems it in our best interest to form a compensation committee, our board of directors will directly~~ ~~administer~~common ~~our~~stock ~~long-term~~upon ~~incentive~~consummation ~~plan and perform such other related duties. Should our board~~ of ~~directors decide in the future to form~~ a ~~compensation~~liquidity ~~committee, such committee will be comprised of a majority of independent directors~~event.

~~Our~~OP ~~UPREIT~~Holdings ~~structure~~is ~~may~~the holder ~~result~~of ~~in potential~~the ~~conflicts~~special units of our operating partnership. OP Holdings’ ownership interest ~~with~~of ~~limited~~the ~~partners~~special partnership units entitles it to a subordinated participation in which it will receive (1) 15% of specified distributions made upon the disposition of our operating partnership’s ~~whose~~assets ~~interests~~and ~~may~~(2) ~~not~~a beone-time ~~aligned~~payment, in the form of shares of our common stock or a promissory note, in conjunction with ~~those~~the redemption of the special partnership units upon the occurrence of certain liquidity events or upon the occurrence of certain events that result in a termination or non-renewal of the advisory agreement, but in each case only after the other holders of our ~~stockholders~~operating partnership’s partnership units, including us, have received (or have been deemed to have received), in the aggregate, cumulative distributions equal to their capital contributions plus an 8.0% cumulative non-compounded annual pre-tax return on their net contributions.

WeConcurrently ~~are~~with ~~structured~~the asentry aninto ~~“UPREIT,” which stands for “umbrella partnership real estate investment trust.” We use~~ the ~~UPREIT structure~~merger ~~because~~agreement, awe, ~~contribution~~our ofoperating ~~property~~partnership, ~~directly~~our toadvisor, usMoody isNational ~~generally~~and aOP ~~taxable~~Holdings ~~transaction~~entered tointo the ~~contributing property owner.~~termination Inagreement. ~~the~~The ~~UPREIT~~termination ~~structure~~agreement provides, aamong ~~contributor~~other ofmatters, athat ~~property~~at ~~who~~the ~~desires~~effective totime ~~defer~~of ~~taxable gain on~~ the ~~transfer~~partnership ofmerger a(in ~~property~~connection with ~~may~~which ~~transfer~~ the ~~property~~special topartnership units of our operating partnership inwill ~~exchange~~be ~~for~~cancelled ~~limited~~and ~~partnership~~retired) ~~units~~ and ~~defer~~in ~~taxation~~accordance ofwith ~~gain until~~ the ~~contributor~~ ~~later~~terms ~~exchanges~~of ~~his~~the ~~or her~~ limited partnership ~~units,~~agreement ~~typically~~of onour aoperating ~~one-for-one basis~~partnership, ~~for shares of~~ our ~~common~~operating ~~stock.~~partnership Wewill ~~believe that~~pay ~~using~~to anOP ~~UPREIT~~Holdings ~~structure~~the promote ~~gives~~payment usin an ~~advantage~~amount ~~in acquiring desired properties from persons who may~~ not ~~otherwise~~to ~~sell~~exceed ~~their properties because of unfavorable tax results~~$613,751.

WeIn ~~may issue limited partner interests of our operating partnership in connection with certain transactions. Limited partners in our operating partnership have~~ the ~~right~~event tothat ~~vote on certain amendments to~~ the ~~operating partnership agreement, as well as on certain other matters. Persons~~ ~~holding~~mergers ~~such~~are ~~voting~~not ~~rights~~consummated ~~may~~and ~~exercise~~OP ~~them~~Holdings incontinues ato ~~manner~~hold ~~that conflicts with~~ the ~~interests~~special ofpartnership ~~our~~units ~~stockholders. As general partner~~ of our operating partnership, ~~we are obligated~~ payments to ~~act~~the inholder aof ~~manner that is in~~ the ~~best~~special ~~interest~~partnership ofunits ~~all~~upon ~~partners~~dispositions of our operating partnership.’s ~~Circumstances~~assets ~~may~~and ~~arise~~redemptions in of the ~~future~~special ~~when~~partnership ~~the~~units ~~interests~~may ofreduce ~~limited~~cash ~~partners~~available infor ~~our~~distribution ~~operating~~to ~~partnership~~our ~~may~~stockholders ~~conflict with~~and the ~~interests~~value of ~~our~~shares ~~stockholders.~~of ~~These~~our ~~conflicts~~common stock ~~may~~upon beconsummation ~~resolved~~of in a ~~manner~~liquidity ~~stockholders do not believe are in their best interest~~event.

InRecently ~~addition,~~enacted ~~Moody OP~~and ~~Holdings~~potential ~~I, LLC, the holder of special units in our operating partnership, may be entitled to (1) certain cash payments~~further ~~upon~~financial ~~the~~regulatory ~~disposition~~reforms ofcould ~~certain~~have ~~of our operating partnership’s assets or (2)~~ a ~~one-time~~significant ~~payment~~impact ~~in the form of cash, a promissory note or shares of our common stock in conjunction with the redemption of the special units upon the occurrence of a listing of our shares~~ on ~~a national stock exchange or certain events that result in the termination or non-renewal of~~ our ~~advisory agreement.~~business, ~~This~~financial ~~potential~~condition ~~obligation to make substantial payments to the holder of the special units may reduce our cash available for distribution to stockholders~~ and ~~limit~~results ~~the amount that stockholders will receive upon the consummation~~ of ~~a liquidity event~~operations.

~~Your~~On ~~investment~~July ~~return~~21, ~~may~~2010, bePresident Obama ~~reduced~~signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the “Dodd-Frank Act,” into law. The ifDodd-Frank weAct ~~are~~represents ~~required~~a tosignificant ~~register~~change asin anthe ~~investment~~American ~~company~~financial ~~under~~regulatory environment and impacts nearly every aspect of the ~~Investment~~U.S. ~~Company~~financial services industry. The Dodd-Frank Act; ifrequires wevarious ~~are~~federal ~~subject~~agencies to ~~registration~~adopt ~~under~~hundreds of new rules to implement the ~~Investment~~Dodd-Frank ~~Company~~Act and to deliver to Congress numerous studies and reports that may influence future legislation. The Dodd-Frank Act leaves significant discretion to federal agencies as to exactly how to implement the broad provisions of the Dodd-Frank Act. As a result, wemany ~~will~~of the details and much of the impact of the Dodd-Frank Act may not be ~~able~~known for some time and the full extent of the impact of the Dodd-Frank Act on our operations is currently unclear. The changes resulting from the Dodd-Frank Act may impact the profitability of business activities, require changes to ~~continue~~certain business practices, impose more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business.

~~Neither~~Further, we, ~~our~~may ~~operating partnership or any~~be ofrequired ~~our subsidiaries intend~~ to ~~register~~invest assignificant anmanagement ~~investment~~attention ~~company~~and ~~under~~resources ~~the~~to ~~Investment~~evaluate ~~Company Act of 1940, as amended. Our operating partnership’s~~ and ~~subsidiaries’~~make ~~intended~~any ~~investments~~changes innecessary ~~real~~to ~~estate~~comply ~~will~~with ~~represent the substantial majority of our~~new ~~total~~statutory ~~asset~~and ~~mix.~~regulatory Inrequirements ~~order for us not to be subject to regulation~~ under the ~~Investment~~Dodd-Frank ~~Company~~ Act, wewhich ~~intend~~may tonegatively ~~engage,~~impact ~~through our~~results ~~operating~~of ~~partnership~~operations and ~~our wholly and majority owned subsidiaries, primarily in the business of buying real estate. These~~financial ~~investments must be made within a year after our public offering ends~~condition.

We expect that most of our assets will be held through wholly-owned or majority-owned subsidiaries of our operating partnership. We expect that most of these subsidiaries will be outside the definition of an “investment company” under Section 3(a)(1) of the Investment Company Act as they are generally expected to hold at least 60% of their assets in real property. Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to as the “40% test.” Excluded from the term “investment securities,” among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.13

16Risks Related To Our Business

We ~~believe that we~~, our ~~operating~~sponsor ~~partnership~~ and ~~most of the subsidiaries of~~ our ~~operating~~advisor partnership will not fall within either definition of investment company under Section 3(a)(1) of the Investment Company Act as we intend to invest primarily in real property, through our wholly or majority-owned subsidiaries, the majority of which we expect to have ~~at least 60% of their assets in real property. As these subsidiaries would be investing~~ ~~either~~limited ~~solely~~experience ~~or primarily~~ in ~~real~~operating ~~property,~~a ~~they~~public ~~would be outside of the definition of “investment~~ company” ~~under Section~~or 3(a~~)(1)~~ ~~of the Investment Company Act. We are organized as a holding company that conducts its businesses primarily through our operating partnership~~REIT, ~~which in turn is a holding company conducting its business through its subsidiaries. Both we~~ and our ~~operating~~ ~~partnership~~failure ~~intend~~ to ~~conduct~~operate ~~our~~successfully ~~operations~~or soprofitably ~~that~~could wehave comply with the 40% test. We will monitor our holdings to ensure continuing and ongoing compliance with this test. In addition, we believe that neither we nor our operating partnership will be considered an investment company under Section 3(a~~)(1)(A) of the Investment Company Act because neither we nor our operating partnership~~ ~~will~~material ~~engage~~adverse ~~primarily~~effect oron ~~hold itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through~~ our ~~operating~~ability ~~partnership’s~~to ~~wholly~~generate ~~owned~~cash ~~or majority owned subsidiaries, we and our operating partnership will be primarily engaged in the non-investment company businesses of these subsidiaries~~flow.

InWe ~~the~~and ~~event~~our ~~that the value of investment securities~~advisor ~~held~~were byformed ain ~~subsidiary~~connection ofwith our ~~operating~~initial ~~partnership~~public ~~were~~offering. toYou ~~exceed~~should ~~40%~~not ~~of the value of its total assets, we expect that subsidiary to be able to~~ rely onupon the ~~exclusion~~past ~~from~~performance ~~the definition~~ of “investment company” provided by Section 3(c)(5)(C) of the Investment Company Act. Section 3(c)(5)(C), as interpreted by the staff of the SEC, requires each of our subsidiaries relying on this exception to invest at least 55% of its portfolio in “mortgage and other ~~liens on and interests in~~ real estate,” ~~which~~investment weprograms ~~refer to as “qualifying real estate assets,” and maintain at least 80%~~ of ~~its~~our ~~assets~~affiliates into ~~qualifying~~predict ~~real~~our ~~estate assets~~future ~~or other real estate-related assets~~results. ~~The~~As ~~remaining 20%~~ of the ~~portfolio~~date ~~can consist~~ of ~~miscellaneous~~this ~~assets.~~Annual ~~What~~Report, weour ~~buy~~portfolio includes ~~and~~only ~~sell~~fourteen ~~is therefore limited by these criteria~~investments. ~~How~~You weshould ~~determine~~consider ~~to classify~~ our ~~assets~~prospects ~~for~~in ~~purposes~~light of the ~~Investment Company Act will be based in large measure upon no-action letters issued by the SEC staff in the past and other SEC interpretive guidance and~~risks, inuncertainties ~~the absence of SEC guidance, on our view of what constitutes a qualifying real estate asset~~ and adifficulties ~~real~~frequently ~~estate-related asset.~~encountered ~~These~~by ~~no-action~~companies ~~positions were issued in accordance with factual situations~~ that ~~may~~are, belike ~~substantially different from the factual situations we may face~~us, ~~and~~in atheir ~~number~~development ~~of these no-action positions were issued more than ten years ago~~stage. ~~Pursuant~~If ~~to this guidance, and depending on~~ the ~~characteristics~~mergers ofare ~~the~~not ~~specific investments~~consummated, ~~certain mortgage loans~~then, ~~participations~~to inbe ~~mortgage loans~~successful, ~~mortgage-backed securities,~~we ~~mezzanine loans, joint venture investments~~ and ~~the equity securities of other entities may not constitute qualifying~~ ~~real estate assets and therefore investments in these types of assets may be limited. No assurance can be given that the SEC staff will concur with~~ our ~~classification~~advisor ofmust, ~~our~~among ~~assets.~~other Future revisions to the Investment Company Act or further guidance from the SEC staff may cause us to lose our exclusion from registration or force us to re-evaluate our portfolio and our investment strategy. Such changes may prevent us from operating our business successfully.things:

In● ~~the~~continue ~~event~~to ~~that we,~~identify orand ~~our operating partnership, were to~~ acquire ~~assets~~investments that ~~could~~align make either entity fall within one of the definitions of an investment company under Section 3(a)(1) of the Investment Company Act, we believe that we would still qualify for an exclusion from registration pursuant to Section 3(c)(6) of the Investment Company Act. Although the SEC staff has issued little interpretive guidance with ~~respect to Section 3(c)(6), we believe that we and~~ our ~~operating~~investment partnership may rely on Section 3(c)(6) if 55% of the assets of our operating partnership consist of, and at least 55% of the income of our operating partnership is derived from, qualifying real estate assets owned by wholly owned or majority-owned subsidiaries of our operating partnership.strategies;

To● ~~ensure that neither we~~attract, ~~our operating partnership or any of our subsidiaries are required to register as an investment company~~integrate, ~~each~~motivate ~~entity may be unable to sell assets that it would otherwise want to sell~~ and ~~may~~retain ~~need~~qualified topersonnel ~~sell assets that it would otherwise wish~~ to ~~retain. In~~manage ~~addition, we,~~ our ~~operating partnership or our subsidiaries may be required~~ day-to ~~acquire additional income~~-day or loss-generating assets that we might not otherwise acquire or forego opportunities to acquire interests in companies that we would otherwise want to acquire. Although we, our operating partnership and our subsidiaries intend to monitor our portfolio periodically and prior to each acquisition and disposition, any of these entities may not be able to maintain an exclusion from registration as an investment company. If we, our operating partnership or our subsidiaries are required to register as an investment company but fail to do so, the unregistered entity would be prohibited from engaging in our business, and criminal and civil actions could be brought against such entity. In addition, the contracts of such entity would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of the entity and liquidate its business.operations;

17● respond to competition for our targeted investments as well as for potential investors in our shares; and

~~Risks~~● ~~Related~~continue Toto ~~Conflicts~~build ofand ~~Interest~~expand our operations structure to support our business.

WeOur ~~depend~~failure, onor our advisor’s ~~and~~or ~~its key~~sponsor’s ~~personnel~~failure, ~~and~~to ifoperate ~~any~~successfully ofor ~~such~~profitably ~~key~~could ~~personnel~~have ~~were~~a tomaterial ~~cease~~adverse effect on our ability to begenerate ~~affiliated~~cash ~~with~~flow ~~our~~to ~~advisor,~~make distributions to our ~~business~~stockholders and could ~~suffer~~cause you to lose all or a portion of your investment in our shares.

Our ~~ability~~success ~~to make distributions and achieve our investment objectives~~ is dependent ~~upon~~on the performance ~~of our advisor in the acquisition, disposition~~ ~~and management~~ of ~~real estate assets, the selection of tenants for~~ our ~~real~~sponsor ~~properties~~ and ~~the determination of any financing arrangements. In addition, our success depends to a significant degree upon the continued contributions of certain of the key personnel of~~ Moody National ~~REIT Sponsor, LLC, our sponsor, including Brett C~~affiliates. Moody and Robert W. Engel, each of whom would be difficult to replace. We currently do not have key man life insurance on any of these key personnel. If our advisor were to lose the benefit of the experience, efforts and abilities of one or more of these individuals, our operating results could suffer.

WeIf ~~may~~the ~~compete~~mergers ~~with~~are not ~~other~~consummated, ~~Moody~~our ~~National~~ability to achieve our investment objectives and to pay distributions will be dependent upon the performance of our advisor, our sponsor and other affiliates ~~for~~of ~~opportunities~~our sponsor. Our sponsor and its other affiliates are sensitive to ~~acquire~~trends orin the ~~sell~~general ~~investments~~economy, ~~which~~as ~~may~~well ~~have~~as anthe ~~adverse~~commercial ~~impact~~real onestate ~~our~~and ~~operations~~credit markets.

WeThe ~~may~~recent ~~compete~~market ~~with~~downturn ~~certain~~that ofoccurred ~~our~~several ~~affiliates~~years ~~for~~ago ~~opportunities~~adversely toimpacted ~~acquire or sell~~ certain ~~types~~prior of real estate ~~assets.~~programs Weof ~~may~~our ~~also~~sponsor’s ~~buy~~affiliates, ~~or sell real~~resulting ~~estate~~in ~~assets~~a atdecrease ~~the~~or ~~same~~deferral ~~time~~of asdistributions ~~our~~with ~~affiliates~~respect ~~are~~to ~~considering~~such ~~buying or selling similar assets~~programs. InMoody ~~this~~National ~~regard~~Management, ~~there~~L.P. iscontinues ato ~~risk~~seek approval ~~that~~to ~~our~~amend ~~advisor~~its ~~will~~master ~~select~~lease agreements for uscertain aprior real estate ~~asset~~programs ~~that~~to ~~provides~~provide ~~lower~~for ~~returns~~either toa usdeferral ~~than~~or ~~real~~a ~~estate~~waiver ~~assets~~of ~~purchased~~a byportion ~~our affiliate. Certain~~ of ~~our~~lease ~~affiliates~~payments ~~own or manage real properties in geographical areas in which we expect~~ to ~~own~~program ~~real properties. Therefore~~investors, ~~our~~and ~~real properties~~ may ~~compete~~continue ~~with~~to ~~other~~seek ~~real~~further ~~properties~~amendments ~~owned~~in orthe ~~managed~~future bydepending ~~affiliates.~~upon ~~Our~~the ~~advisor may face conflicts~~then-current ofeconomic ~~interest~~conditions. ~~when~~Certain ~~evaluating~~prior ~~leasing~~real ~~opportunities~~estate ~~for~~programs ~~our~~have ~~real~~also ~~properties~~requested ~~and~~additional ~~other~~cash ~~real~~infusions ~~properties~~from ~~owned~~investors orto ~~managed~~fund ~~by affiliates,~~outstanding ~~and~~debt ~~these~~service ~~conflicts~~payments. ofFurther ~~interest~~such requests may ~~have~~be anecessary ~~negative~~in ~~impact~~the onfuture ~~our~~depending ~~ability~~upon tothe ~~attract~~then-current ~~and~~economic ~~retain tenants~~conditions. ~~As a result of our potential~~ ~~competition~~These ~~with~~adverse ~~our~~developments ~~affiliates,~~have ~~certain~~resulted ~~investment opportunities that would otherwise be available to us may not~~ in ~~fact~~a bereduction ~~available. This competition may also result~~ in ~~conflicts~~payments ofto ~~interest~~investors ~~that~~for ~~are~~certain ~~not~~prior ~~resolved~~real inestate ~~our favor~~programs.

~~The~~Moody ~~time~~National ~~and~~Management, L.P. ~~resources~~has ~~that~~commenced ~~Moody National~~negotiations ~~affiliates~~with ~~devote~~lenders to usrestructure ~~may~~loan beterms ~~diverted~~with respect to ~~other~~certain ~~investment~~prior ~~activities,~~real ~~and~~estate weprograms ~~may~~in ~~face~~default under ~~additional~~existing ~~competition,~~franchise ~~due~~or loan agreements and may continue to ~~the~~ ~~fact~~do ~~that~~so ~~Moody~~in ~~National~~the ~~affiliates~~future. ~~are~~With ~~not~~respect ~~prohibited~~to ~~from~~some ~~raising~~of ~~money~~these ~~for~~loans, orthe ~~managing~~lender is pursuing various alternatives simultaneously, ~~another~~including ~~entity~~initiation ~~that~~of ~~makes~~foreclosure ~~the~~and ~~same~~legal proceedings and loan modifications, ~~types~~and ofthe ~~investments~~borrowers are actively working toward loan modifications. However, there is no assurance that wefinal ~~target~~loan modifications will be achieved.

~~Moody~~With ~~National~~respect ~~affiliates~~to two ~~are~~tenant-in-common ~~not~~programs ~~prohibited~~sponsored ~~from~~by ~~raising~~Moody ~~money for~~National, orthe ~~managing,~~initial ~~another~~lender ~~investment~~sold ~~entity~~the loans, ~~including~~and ~~those~~the ~~that~~purchaser ~~make~~of the ~~same~~loans ~~types of~~initiated ~~investments~~foreclosure asproceedings ~~those~~resulting wein ~~target. As a result,~~ the ~~time~~filing ~~and~~for ~~resources~~protection ~~our~~from ~~sponsor~~these ~~and~~proceedings ~~its~~in ~~affiliates~~the ~~could~~United ~~devote~~States toBankruptcy usCourt ~~may be diverted~~by toan ~~other~~affiliate ~~investment~~of ~~activities. For example, on January 20, 2015,~~ Moody National ~~REIT~~owning ~~II,~~an ~~Inc.,~~original aequity ~~non-listed REIT sponsored by our sponsor with~~ investment ~~objectives~~in ~~generally~~one ~~similar~~property ~~to our company, commenced its initial public offering~~ of upapproximately to $110,~~100,~~000~~,000 in~~ ~~shares~~and of$10,039 ~~its~~in ~~common~~the other ~~stock~~property. InThese ~~addition,~~affiliates ~~our~~received ~~advisor’s~~court ~~management~~approval ~~currently~~of ~~manages~~a 46confirmation ~~privately~~plan ~~offered~~under ~~real~~which ~~estate~~an ~~programs sponsored~~agreement bywas ~~affiliates~~reached ofwith ~~our~~the ~~sponsor,~~lender and ~~all~~the ofloans ~~which~~were ~~have~~reinstated. ~~investment~~With ~~objectives~~respect ~~generally similar~~ to ~~our~~one ~~company.~~of Wethese ~~may~~properties, ~~compete with~~the ~~any~~28 ~~such~~tenant-in-common ~~investment~~owners ~~entity~~of ~~for~~ the ~~same~~Residence ~~investors~~Inn ~~and~~Atlanta Midtown, ~~investment~~which ~~opportunities.~~originally Weacquired ~~may~~the ~~also~~project ~~co-invest~~ with ~~any~~a ~~such investment entity~~$7.475 ~~Even~~million ~~though~~equity ~~all~~investment, ~~such~~recently ~~co-investments~~allowed ~~will~~the belender ~~subject~~ to ~~approval by our independent directors, they could be~~ foreclose on ~~terms~~the ~~not as~~hotel ~~favorable~~which tosecured usthe ~~as those we could achieve co-investing with a third party~~loan.

~~Our~~An ~~advisor~~affiliate of Moody National and ~~its~~tenant-in-common ~~affiliates,~~owners ~~including our~~in ~~officers~~eight ~~and~~tenant-in-common ~~some~~programs ofcollectively ~~our~~initiated ~~directors,~~legal ~~face~~proceedings ~~conflicts~~against a lender. Currently, seven of ~~interest~~these ~~caused~~tenant-in-common programs have been restructured into a limited liability company owned by ~~compensation~~the ~~arrangements~~former tenant-in-common ~~with~~owners usand a lender affiliate, and ~~other~~the ~~Moody~~legal proceedings have been dismissed with respect to such programs. The ~~National~~lender ~~affiliates,~~and ~~which~~borrowers ~~could~~on ~~result~~one of the tenant-in-common ~~actions~~programs ~~that~~entered ~~are~~into ~~not~~a insettlement and reinstatement of the ~~best~~loan, ~~interests~~and ofthe ~~our~~legal proceedings ~~stockholders~~have been dismissed with respect to such program.

Our advisor and its affiliates will receive substantial fees from us in return for their services and these fees could influence the advice provided to us. Among other matters, the compensation arrangements could affect their judgment with respect to:14

●The ~~public~~19 ~~offerings~~tenant-in-common owners of ~~equity~~the byWestchase usTechnology Center property, which ~~allow~~originally ~~our~~acquired ~~dealer~~the ~~manager~~property with a $4 million equity investment, declined to ~~earn~~proceed ~~additional~~with ~~dealer~~a ~~manager~~lender’s ~~fees~~loan modification proposal and ~~our~~allowed ~~advisor~~the lender to ~~earn~~foreclose ~~increased~~on ~~acquisition~~an ~~fees~~office ~~and~~building which ~~asset~~secured ~~management~~the ~~fees;~~loan. ●The ~~real~~28 ~~estate~~tenant-in-common ~~acquisitions,~~owners of a two-hotel project (consisting of the Springhill Suites Altamonte and the Holiday Inn Express Orlando) which ~~allow~~originally ~~our~~acquired ~~advisor~~the project with a $10.2 million equity investment declined to ~~earn~~proceed with ~~acquisition~~a ~~fees~~lender’s ~~upon~~loan ~~purchases~~modification proposal and allowed the lender to foreclose on the two hotels which secured the loan. The 14 tenant-in-common owners of ~~assets~~a two-hotel project (consisting of the TownePlace Suite Miami Airport and ~~increased~~TownePlace ~~asset~~Suites ~~management~~Miami Lakes) ~~fees;~~which ●originally ~~real~~acquired ~~estate~~the ~~asset~~project ~~sales~~with a $5.9 million equity investment declined to proceed with a lender’s loan modification proposal and allowed the lender to foreclose on the two hotels which secured the loan. The 16 tenant-in-common owners of the TownePlace Suites Mount Laurel, ~~since~~which originally acquired the ~~asset~~property ~~management~~with ~~fees~~a ~~payable~~$5.6 million equity investment, declined to proceed ~~our~~with ~~advisor~~a ~~will~~lender’s ~~decrease~~loan modification proposal and ~~since~~allowed ~~our~~the ~~advisor~~lender ~~will~~to beforeclose ~~entitled~~on tothe ~~disposition~~hotel ~~fees~~which ~~upon~~secured ~~sales;~~the loan. Additionally, the 35 tenant-in-common owners of the Courtyard Columbus Airport, which originally acquired the property with an $11.1 million equity investment, entered into a deed in lieu of foreclosure agreement with the lender. Further, the lender for the Residence Inn Memphis filed foreclosure proceedings and ●one unaffiliated tenant-in-common owner of the ~~purchase~~Residence Inn Memphis filed for bankruptcy protection, which resulted in a court-ordered auction sale of ~~real~~the ~~estate~~property ~~assets~~and ~~from~~a ~~other~~loss ~~Moody~~of ~~National~~the ~~affiliates~~original $6.93 million equity investment for the 17 tenant-in-common owners. In addition, the 31 tenant-in-common owners of the Northbelt II Office Building, which ~~may~~originally ~~allow~~acquired ~~our~~the ~~advisor~~property orwith ~~its~~a ~~affiliates~~$9.3 million equity investment, allowed the lender to ~~earn~~acquire ~~additional~~the ~~asset~~property in ~~management~~an ~~fees~~uncontested foreclosure. Further, the 21 tenant-in-common owners of the Newtown Hampton Inn & Suites, which originally acquired the property ~~management~~with ~~fees~~a ~~and~~$6.725 ~~disposition~~million ~~fees~~equity investment, allowed the lender to acquire the property in an uncontested foreclosure.

18To the extent that any decline in revenues and operating results impacts our sponsor’s ability to provide our advisor with sufficient resources to perform its obligations to us pursuant to the advisory agreement, our results of operations, financial condition and ability to pay distributions to our stockholders could also suffer. Additionally, such adverse conditions could require a substantial amount of time on the part of the management of our advisor and its affiliates, particularly with regard to other real estate programs, thereby decreasing the amount of time they spend actively managing our investments.

~~Further,~~If ~~our advisor may recommend that~~ we invest in a particular asset or pay a higher purchase price for the asset than it would otherwise recommend if it did not receive an acquisition fee or origination fee. Certain potential acquisition fees, origination fees and asset management fees payable to our advisor and property management and leasing fees payable to the property manager would be paid irrespective of the quality of the underlying real estate or property management services during the term of the related agreement. These fees may incentivize our advisor to recommend transactions with respect to the sale of a property or properties that may not be in our best interest at the time. Investments with higher net operating income growth potential are ~~generally~~delayed ~~riskier~~ or ~~more~~unable ~~speculative. In addition, the premature sale of an asset may add concentration risk~~ to ~~the portfolio or may be at a price lower than if we held~~find onsuitable ~~to the asset. Moreover, our advisor has considerable discretion with respect to the terms and timing of acquisition, disposition and leasing transactions. In evaluating~~ investments ~~and other management strategies~~, ~~the~~we ~~opportunity to earn these fees~~ may ~~lead our~~not ~~advisor~~be toable ~~place undue emphasis on criteria relating~~ to ~~its compensation at the expense of other criteria, such as the preservation of capital, to~~ achieve ~~higher short-term compensation. Considerations relating to~~ our affiliates’ compensation from us and other Moody National affiliates could result in decisions that are not in the best interests of our stockholders, which could impair our ability to pay you distributions or result in a decline in the value of your investment objectives.

~~Our~~If ~~advisor~~the ~~may~~mergers ~~have conflicting~~are ~~fiduciary~~not ~~obligations~~consummated ifand we seek to acquire ~~real~~additional ~~estate~~properties, ~~assets~~delays ~~from~~in ~~its~~selecting, ~~affiliates~~acquiring orand indeveloping ~~joint~~real ~~ventures~~estate ~~with~~assets could ~~its~~adversely ~~affiliates.~~affect Asinvestor areturns. ~~result, in~~If ~~any~~we ~~such~~are ~~transaction~~unable weto ~~may~~access ~~not~~sufficient ~~have~~capital, ~~the~~we ~~benefit~~may ofsuffer ~~arm’s-length~~from ~~negotiations~~delays ofin deploying the ~~type~~capital ~~normally~~into ~~conducted~~real ~~between~~estate ~~unrelated parties~~assets.

~~Our~~We ~~advisor~~are ~~may~~uncertain ~~cause us~~of toour ~~invest~~sources infor funding aour ~~property~~future ~~owned~~capital ~~by,~~needs. orIf ~~make~~we ancannot ~~equity~~obtain or debt~~-related~~ ~~investment in, one of its affiliates~~ or ~~through~~equity afinancing ~~joint venture~~on ~~with~~acceptable ~~its affiliates. For example~~terms, ~~we own~~ our ~~interest~~ability into ~~the~~acquire ~~Hyatt Place Note through a joint venture between a wholly~~real ~~owned~~estate ~~subsidiary~~assets ~~of our operating partnership~~ and anto ~~affiliated~~expand ~~entity controlled by Brett C. Moody,~~ our ~~Chairman~~operations ~~of the Board and Chief Executive Officer. In these circumstances, our advisor~~ will ~~have~~be aadversely ~~conflict of interest when fulfilling its fiduciary obligation to us~~affected. ~~In any such transaction, we would not have the benefit of arm’s-length negotiations of the type normally conducted between unrelated parties.~~

WeIf the mergers are not consummated, the net proceeds from any sales of our securities that we may ~~dispose~~conduct in the future will be used for investments in real properties, real estate securities and debt-related investments, for payment of ~~assets~~operating expenses and for payment of various fees and expenses such as acquisition fees, origination fees, asset management fees and property management fees. We terminated the offer and sale of our shares to the public in our ~~advisor~~follow-on offering on February 20, 2015, and we did not establish a general ~~sponsor~~working capital reserve out of the proceeds from our follow-on offerings. Accordingly, in the event that the mergers are not consummated and we develop a need for additional capital in the future for investments, the improvement of our real properties or ~~their~~for ~~affiliates~~any other reason, ~~which~~sources ~~could~~of ~~cause~~funding usmay not be available to ~~enter~~us. ~~into~~If the mergers are not consummated and we cannot establish reserves out of cash flow generated by our real estate assets or out of net sale proceeds in non-liquidating sale transactions, onor ~~less~~obtain ~~favorable~~debt or equity financing on acceptable terms, ~~than~~our ability to acquire real estate assets and to expand our operations will be adversely affected. As a result, we would ~~receive~~be ~~from~~less likely to achieve portfolio diversification and our investment objectives, which may negatively aimpact ~~third~~our ~~party~~results of operations and reduce our ability to make distributions to our stockholders.

WeRisks ~~may~~Related ~~dispose of assets~~ to ~~our advisor, sponsor or their affiliates.~~ Our ~~advisor, sponsor or their affiliates may make substantial profits in connection~~Organizational with such transactions. Because our independent directors would rely on our advisor in identifying and evaluating any such transaction, these conflicts could result in transactions based on terms that are less favorable to us than we would receive from a third party.Structure

~~The~~Maryland ~~fees~~law weand ~~pay~~our ~~to affiliates were~~organizational ~~not~~documents ~~determined~~limit onyour anright ~~arm’s-length~~to ~~basis;~~bring ~~therefore,~~claims weagainst doour ~~not~~officers ~~have~~and ~~the benefit of arm’s-length negotiations of the type normally conducted between unrelated parties~~directors.

~~The~~Maryland ~~fees~~law provides that a director will not have any liability as a director so long as he or she performs his or her duties in accordance with the applicable standard of conduct. In addition, our charter provides that, subject to the applicable limitations set forth therein or under Maryland law, no director or officer will be ~~paid~~liable to us or our stockholders for monetary damages. Our charter also provides that we will generally indemnify and advance expenses to our ~~advisor~~directors, our ~~property manager~~officers, our ~~dealer~~advisor ~~manager~~ and ~~other~~its affiliates for ~~services~~ losses they ~~provide~~may ~~for~~incur usby ~~were~~reason ~~not~~of ~~determined~~their service in those capacities subject to any limitations under Maryland law or in our charter. onMoreover, anwe ~~arm’s-length~~have ~~basis~~entered into separate indemnification agreements with each of our directors and executive officers. As a result, we ~~the~~and ~~fees~~our stockholders may have ~~been~~more limited rights against these persons than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by these persons in some cases. However, our charter provides that we may not indemnify our directors, our advisor and its affiliates for loss or liability suffered by them or hold our directors or our advisor and its affiliates harmless for loss or liability suffered by us unless they have determined ~~without~~that the ~~benefit~~course of ~~arm’s-length~~conduct that ~~negotiations~~caused the loss or liability was in our best interests, they were acting on our behalf or performing services for us, the ofliability was not the ~~type~~result ~~normally~~of ~~conducted~~negligence ~~between~~or ~~unrelated~~misconduct ~~parties~~by our non-independent directors, our advisor and ~~could~~its beaffiliates inor ~~excess~~gross negligence ofor ~~amounts~~willful ~~that~~misconduct weby ~~would~~our ~~otherwise~~independent ~~pay~~directors, and the indemnification or obligation to ~~third~~hold harmless is recoverable ~~parties~~only ~~for~~out ~~such~~of ~~services~~our net assets, including the proceeds of insurance, and not from the stockholders.

WeThe ~~may~~limit ~~purchase~~on ~~real~~the ~~estate~~percentage ~~assets from~~of ~~third parties who have existing or previous business relationships with affiliates~~ shares of our ~~advisor,~~common ~~and,~~stock asthat ~~a result, in~~ any ~~such~~ ~~transaction,~~person we may ~~not~~own ~~have~~may ~~the~~discourage ~~benefit~~a oftakeover ~~arm’s-length~~or ~~negotiations~~business ofcombination ~~the~~that ~~type~~may ~~normally~~benefit ~~conducted~~our ~~between unrelated parties~~stockholders.

WeOur ~~may~~charter ~~purchase assets~~restricts ~~from~~the ~~third~~direct ~~parties~~or ~~that~~indirect ~~have~~ownership ~~existing~~by one person or ~~previous~~entity ~~business~~to ~~relationships~~no ~~with~~more ~~affiliates~~than 9.8% of the value of our ~~advisor.~~then ~~The~~outstanding ~~officers,~~shares ~~directors~~of capital orstock ~~employees~~(which ofincludes ~~our~~common ~~advisor~~stock and ~~its~~any ~~affiliates~~preferred ~~and~~stock ~~the~~we ~~principals~~may ofissue) ~~our~~and ~~advisor~~no ~~who~~more ~~also~~than ~~perform~~9.8% ~~services~~of ~~for~~the ~~our~~value ~~affiliates~~or ~~may~~number of shares, ~~have~~whichever ais ~~conflict~~more inrestrictive, ~~representing~~of our ~~interests~~then inoutstanding ~~these~~common ~~transactions~~stock onunless ~~the~~exempted ~~one~~by ~~hand~~our ~~and~~board ~~the interests~~ of ~~such~~directors. ~~affiliates~~This ~~in preserving~~restriction ormay ~~furthering~~discourage ~~their~~a ~~respective~~change ~~relationships~~of oncontrol ~~the~~of ~~other~~us ~~hand.~~and Inmay ~~any~~deter ~~such~~individuals ~~transaction,~~or weentities ~~will~~from ~~not~~making ~~have~~tender ~~the~~offers ~~benefit~~for shares of ~~arm’s-length~~our common ~~negotiations~~stock ofon ~~the~~terms ~~type~~that ~~normally~~might ~~conducted~~be ~~between~~financially ~~unrelated~~attractive ~~parties,~~to ~~and~~stockholders ~~the~~or ~~purchase~~which ~~price~~may orcause ~~fees~~a ~~paid~~change byin usour management. In addition to deterring potential transactions that may be infavorable ~~excess of~~to ~~amounts~~our ~~that~~stockholders, wethese ~~would~~provisions ~~otherwise~~may ~~pay~~also decrease your ability to ~~third~~sell ~~parties~~your shares of our common stock.

1915

~~Risks~~We ~~Related~~may Toissue ~~Investments~~preferred instock ~~Real~~or other ~~Estate~~classes of common stock, which issuance could adversely affect the holders of our common stock issued pursuant to our continuous public offering.

~~Disruptions~~Investors in our public offerings do not have preemptive rights to any shares issued by us in the ~~financial~~future. ~~markets~~We may issue, without stockholder approval, preferred ~~and~~stock ~~deteriorating~~or ~~economic~~other ~~conditions~~classes of common stock with rights that could ~~have~~dilute the value of your shares of common stock. However, the issuance of preferred stock must be approved by a ~~material~~majority ~~adverse~~of ~~impact~~our onindependent directors not otherwise interested in the transaction, who will have access, at our ~~business~~expense, to our legal counsel or to independent legal counsel. The issuance of preferred stock or other classes of common stock could increase the number of stockholders entitled to distributions without simultaneously increasing the size of our asset base.

WeOur ~~believe~~charter ~~the risks~~authorizes ~~associated~~us ~~with~~to ~~our~~issue ~~business~~450,000,000 ~~are~~shares ~~more~~of ~~severe~~capital ~~during~~stock, ~~market~~of ~~downturns.~~which ~~For example~~400,000,000 ashares ~~prolonged~~of ~~market~~capital ~~downturn~~stock ~~could~~are ~~negatively~~designated as common stock and ~~impact~~50,000,000 ~~our~~shares ~~real~~of ~~estate~~capital ~~investments~~stock are classified as apreferred ~~result~~stock. ofOur ~~decreased~~board ~~demand~~of ~~for~~directors ~~hotel~~may ~~rooms,~~amend ~~increased~~our ~~tenant~~charter ~~delinquencies~~from ortime ~~defaults~~to ~~under~~time ~~our~~to ~~leases.~~increase Inor ~~addition,~~decrease ~~lower~~the ~~demand~~aggregate ~~for~~number ~~rentable~~of ~~space~~authorized ~~and~~shares ~~oversupply~~ of ~~rentable~~capital ~~space~~stock ~~could~~or ~~lead~~the tonumber ~~increased~~of ~~rent~~authorized ~~concessions,~~shares of capital ~~higher~~stock ~~tenant~~of ~~improvement~~any ~~expenditures~~class or ~~reduced~~series ~~rental~~without ~~rates~~stockholder inapproval. ~~order~~If towe ~~maintain~~ever ~~occupancies.~~created ~~Because~~and weissued ~~expect~~preferred ~~that~~stock ~~some~~with ~~of our~~a ~~debt-related~~distribution ~~investments~~preference over ~~may~~common ~~consist~~stock, payment of ~~loans~~any ~~secured~~distribution bypreferences ~~real~~of ~~property,~~outstanding ~~these~~preferred ~~same~~stock ~~factors~~would ~~could~~reduce ~~also~~the ~~negatively~~amount ~~affect~~of ~~the~~funds available ~~underlying~~for ~~borrowers~~the ~~and~~payment ~~collateral~~ of distributions on our ~~investments~~common stock. ~~Our~~Further, ~~operations~~holders ~~could~~of bepreferred ~~negatively~~stock ~~affected~~are normally entitled to receive a ~~greater~~preference payment ~~extent~~in ifthe aevent ~~market downturn~~we isliquidate, ~~prolonged~~dissolve or ~~becomes~~wind ~~more~~up ~~severe,~~before ~~which~~any ~~would~~payment ~~significantly~~is ~~harm~~made to our ~~business~~common stockholders, ~~results~~likely ofreducing ~~operations,~~the amount ~~cash~~common ~~flows~~stockholders ~~and financial~~would ~~condition,~~otherwise ~~our~~receive ~~ability~~upon tosuch ~~make~~an ~~distributions~~occurrence. toIn ~~you~~addition, ~~and~~under certain circumstances, the ~~value~~issuance of preferred stock or a separate class or series of ~~your~~common ~~investment.~~stock may render more difficult or tend to discourage:

~~Changes~~● ina ~~national~~merger, ~~regional~~tender ~~or local~~offer ~~economic, demographic~~ or ~~real~~proxy ~~estate market conditions may adversely affect our results of operations and returns to our stockholders.~~contest;

We● ~~are subject to risks generally attributable to~~ the ~~ownership~~assumption of ~~real~~control ~~estate~~by ~~assets,~~a ~~including:~~holder ~~changes~~of ina ~~national,~~large ~~regional~~block ~~or local economic, demographic or real estate market conditions; changes in supply~~ of ~~or demand for similar properties in an area; increased competition for real estate assets targeted by~~ our ~~investment strategy~~securities; ~~bankruptcies, financial difficulties or lease defaults by our tenants; changes in interest rates~~ and ~~availability of financing; and changes in government rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws.~~

~~Changes~~● ~~in supply of, or demand for, similar real properties in a particular area may increase~~ the ~~price~~removal of ~~real~~incumbent ~~properties we seek to purchase and decrease the price of real properties when we seek to sell them~~management.

~~The real estate industry is subject to market forces.~~ We ~~are~~do ~~unable~~not tocurrently ~~predict~~have ~~certain market changes including changes in supply of, or demand for, similar real properties in~~ a ~~particular area. Any potential purchase of an overpriced asset could decrease our rate of return on these~~compensation ~~investments~~committee, and ~~result~~presently indo ~~lower~~not ~~operating~~intend ~~results~~to ~~and~~form ~~overall~~such ~~returns~~a ~~to our stockholders~~committee.

~~Delays~~We do not have a compensation committee and have no plans to form one. Our board of directors may form a compensation committee in the ~~acquisition~~future, ~~development~~which we expect ~~and~~will ~~construction~~occur ofonly ~~real~~when ~~properties~~we ~~may~~hire our own employees. We currently do not have ~~adverse~~any ~~effects~~employees nor do we have plans to hire any employees. The role of any compensation committee would be to make recommendations to our board of directors on the compensation of our ~~results~~employees and to administer the granting of ~~operations~~awards pursuant to our long-term incentive plan and ~~returns~~to set the terms and conditions of such awards. Until our board of directors deems it in our best interest to form a compensation committee, our ~~stockholders~~board of directors will directly administer our long-term incentive plan and perform such other related duties. Should our board of directors decide in the future to form a compensation committee, such committee will be comprised of a majority of independent directors.

~~Delays~~Our weUPREIT ~~encounter in~~structure ~~the~~may ~~selection,~~result acquisition and development of real properties could adversely affect your returns. Where properties are acquired prior to the start of construction or during the early stages of construction, it will typically take several months to complete construction and rent available space. Therefore, you could suffer delays in ~~receiving cash distributions attributable to those~~ ~~particular~~potential ~~real~~conflicts ~~properties. Delays in completion~~ of ~~construction~~interest ~~could~~with ~~give~~limited ~~tenants~~partners the right to terminate preconstruction leases for space at a newly developed project. We may incur additional risks when we make periodic progress payments or other advances to builders prior to completion of construction. Each of those factors could result in ~~increased costs of a project or loss of~~ our ~~investment.~~operating Inpartnership ~~addition,~~whose weinterests ~~will~~may benot ~~subject to normal lease-up risks relating to newly constructed projects. Furthermore, the price we agree to pay for a real property will~~ be ~~based~~aligned onwith ~~our projections of rental income and expenses and estimates of the fair~~those ~~market value~~ of ~~real property upon completion of construction. If~~ our ~~projections are inaccurate, we may pay too much for a property~~stockholders.

~~Real~~We ~~properties~~ are ~~illiquid~~structured ~~investments~~as an “UPREIT,” which stands for “umbrella partnership real estate investment trust.” We use the UPREIT structure ~~and~~because wea ~~may~~contribution beof ~~unable~~property directly to ~~adjust~~us ~~our~~is ~~portfolio~~generally ina ~~response~~taxable transaction to ~~changes~~the incontributing ~~economic~~property orowner. ~~other~~In ~~conditions~~the UPREIT orstructure, ~~sell~~a contributor of a property ifwho desires to defer taxable gain on the transfer of a property may transfer the property to our operating partnership in exchange for limited partnership units and defer taxation of gain until the contributor later exchanges his or ~~when~~her limited partnership units, typically on a one-for-one basis, for shares of our common stock. We believe wethat ~~decide~~using toan doUPREIT sostructure gives us an advantage in acquiring desired properties from persons who may not otherwise sell their properties because of unfavorable tax results.

~~Real~~We ~~properties~~may ~~are~~issue ~~illiquid investments. We~~limited ~~may~~partner beinterests ~~unable~~of ~~to adjust~~ our ~~portfolio~~operating inpartnership ~~response to changes~~ in ~~economic~~connection orwith ~~other~~certain ~~conditions~~transactions. InLimited ~~addition,~~partners ~~the~~in ~~real~~our ~~estate~~operating ~~market~~partnership ishave ~~affected~~the byright ~~many~~to ~~factors,~~vote ~~such~~on ascertain ~~general~~amendments ~~economic~~to ~~conditions,~~the ~~availability~~operating ofpartnership ~~financing~~agreement, ~~interest~~as ~~rates~~well ~~and~~as ~~other~~on ~~factors, including~~certain ~~supply~~other ~~and demand, that are beyond our control~~matters. WePersons holding ~~cannot~~such ~~predict~~voting ~~whether~~rights wemay ~~will~~exercise bethem ~~able~~in toa ~~sell~~manner ~~any~~that ~~real~~conflicts ~~property~~with ~~for~~ the ~~price~~interests orof onour ~~the~~stockholders. ~~terms~~As ~~set~~general bypartner of ~~us,~~our oroperating ~~whether~~partnership, ~~any~~we ~~price~~are orobligated ~~other~~to ~~terms~~act ~~offered~~in by a ~~prospective~~manner ~~purchaser~~that ~~would~~is bein ~~acceptable to~~the ~~us.~~best Weinterest ~~cannot~~of ~~predict~~all ~~the~~partners ~~length~~ of ~~time~~our ~~needed~~operating partnership. toCircumstances ~~find~~may aarise ~~willing~~in ~~purchaser~~the ~~and~~future towhen ~~close~~ the ~~sale~~interests of alimited ~~real~~partners ~~property.~~in ~~Additionally, we~~our ~~may~~operating bepartnership ~~required~~may toconflict with ~~expend~~the ~~funds~~interests toof ~~correct~~our ~~defects~~stockholders. orThese toconflicts ~~make~~may ~~improvements before a property can~~ be ~~sold.~~resolved Wein ~~cannot~~a ~~assure~~manner ~~you that~~stockholders wedo ~~will~~not ~~have~~believe ~~funds~~are ~~available~~in totheir ~~correct such defects or to make such improvements~~best interest.

In ~~acquiring~~addition, aOP ~~real property~~Holdings, the weholder of special partnership units in our operating partnership, may ~~agree~~be entitled to ~~restrictions~~(1) ~~that~~certain ~~prohibit~~cash payments upon the ~~sale~~disposition of certain of ~~that~~our ~~real~~operating ~~property~~partnership’s ~~for~~assets aor ~~period~~(2) ofa one-time orpayment ~~impose~~in ~~other~~the ~~restrictions~~form of cash, a promissory note or shares ~~such~~of asour acommon ~~limitation~~stock onin conjunction with the ~~amount~~redemption of ~~debt~~the ~~that~~special ~~can~~units beupon ~~placed~~the oroccurrence ~~repaid~~of a listing of our shares on a national stock exchange or certain events that ~~real~~result ~~property.~~in ~~All~~the ~~these~~termination ~~provisions~~or ~~would~~non-renewal ~~restrict our~~of ~~ability~~the toadvisory ~~sell~~agreement. aThis ~~property,~~potential obligation ~~which~~to ~~could~~make ~~reduce~~substantial payments to the ~~amount~~holder of the special units may reduce our cash available for distribution to ~~our~~stockholders and limit the amount that stockholders will receive upon the consummation of a liquidity event.

2016

~~Our~~Your ~~operating~~investment ~~expenses~~return may ~~increase~~be reduced inif ~~the~~we ~~future~~are ~~and,~~required to register as an investment company under the ~~extent~~Investment ~~such~~Company ~~increases~~Act; ~~cannot~~if bewe ~~passed~~are onsubject to ~~tenants~~registration under the Investment Company Act, ~~our~~we ~~cash~~will ~~flow~~not ~~and~~be ~~our~~able ~~operating~~to ~~results~~continue ~~would~~our ~~decrease~~business.

~~Operating~~Neither ~~expenses~~we, our operating ~~such~~partnership nor any of our subsidiaries intend to register as ~~expenses~~an ~~for~~investment ~~fuel,~~company ~~utilities,~~under ~~labor~~the ~~and~~Investment ~~insurance~~Company Act of 1940, ~~are~~as amended. ~~not~~Our ~~fixed~~operating partnership’s and ~~may~~subsidiaries’ ~~increase~~intended investments in real estate will represent the ~~future~~substantial majority of our total asset mix. ~~There~~In isorder nofor ~~guarantee that~~us wenot ~~will~~to be ~~able~~subject to ~~pass~~regulation ~~such~~under ~~increases~~the onInvestment Company Act, we intend to engage, through our ~~tenants.~~operating Topartnership ~~the~~and ~~extent~~our ~~such~~wholly ~~increases~~and ~~cannot~~majority beowned ~~passed~~subsidiaries, onprimarily toin ~~tenants,~~the ~~any~~business of buying real ~~such~~estate. ~~increase~~These ~~would~~investments ~~cause~~must ~~our~~be ~~cash~~made ~~flow~~within ~~and~~a ~~our~~year ~~operating~~after ~~results~~our topublic ~~decrease~~offering ends.

We expect that most of our assets will be held through wholly-owned or majority-owned subsidiaries of our operating partnership. We expect that most of these subsidiaries will be outside the definition of an “investment company” under Section 3(a)(1) of the Investment Company Act as they are generally expected to hold at least 60% of their assets in real property. Section 3(a)(1)(A) ~~market~~of ~~downturn~~the Investment Company Act defines an investment company as any issuer that is or ~~rise~~holds itself out as being engaged primarily in ~~interest~~the business ~~rates~~of ~~could~~investing, ~~adversely~~reinvesting ~~impact~~or ~~occupancy~~trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, ~~rental~~reinvesting, ~~rates~~owning, holding or trading in securities and ~~our~~owns ~~ability~~or proposes to ~~collect~~acquire ~~rent~~investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to as the “40% test.” Excluded from ~~our~~the ~~tenants~~term “investment securities,” among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.

AWe ~~market~~believe ~~downturn~~that we, ~~may~~our ~~significantly~~operating ~~affect~~partnership ~~occupancy,~~and ~~rental~~most ~~rates~~of ~~and~~the subsidiaries of our ~~ability~~operating topartnership ~~collect~~will ~~rent~~not ~~from~~fall ~~our~~within ~~tenants.~~either ~~For~~definition ~~example,~~of investment company under Section 3(a)(1) ~~market~~of ~~downturn~~the Investment Company Act as we intend to invest primarily in real property, through our wholly or ~~rise~~majority-owned subsidiaries, the majority of which we expect to have at least 60% of their assets in ~~interest~~real ~~rates~~property. ~~could~~As ~~make~~these subsidiaries itwould ~~more~~be ~~difficult~~investing ~~for~~either ussolely toor ~~lease~~primarily in real ~~properties~~property, ~~may~~they ~~require~~would usbe tooutside ~~lease~~of the ~~real~~definition ~~properties~~of “investment wecompany” ~~acquire~~under atSection ~~lower~~3(a)(1) ~~rental~~of ~~rates~~the Investment Company Act. We are organized as a holding company that conducts its businesses primarily through our operating partnership, which in turn is a holding company conducting its business through its subsidiaries. Both we and ~~may~~our ~~lead~~operating partnership intend to anconduct ~~increase~~our inoperations ~~tenant~~so ~~defaults~~that we comply with the 40% test. We will monitor our holdings to ensure continuing and ongoing compliance with this test. In addition, ~~these~~we ~~conditions~~believe ~~may~~that ~~also~~neither ~~make~~we itnor our operating ~~more~~partnership ~~difficult~~will ~~for~~be usconsidered toan ~~dispose~~investment ofcompany ~~these~~under ~~properties.~~Section ~~Each~~3(a)(1)(A) of ~~these~~the ~~events~~Investment ~~could~~Company ~~have~~Act abecause ~~material~~neither ~~adverse~~we nor ~~impact~~our onoperating ~~our~~partnership ~~cash~~will ~~flows~~engage primarily or hold itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through our operating ~~results~~partnership’s wholly owned or majority owned subsidiaries, we and ~~carrying~~our ~~value~~operating ofpartnership will be primarily engaged in the non-investment ~~property~~company businesses of these subsidiaries.

~~Our~~In the event that the value of investment securities held by a subsidiary of our operating partnership were to exceed 40% of the value of its total assets, we expect that subsidiary to be able to rely on the exclusion from the definition of “investment company” provided by Section 3(c)(5)(C) of the Investment Company Act. Section 3(c)(5)(C), as interpreted by the staff of the SEC, requires each of our subsidiaries relying on this exception to invest at least 55% of its portfolio in “mortgage and other liens on and interests in real ~~properties~~estate,” which we refer to as “qualifying real estate assets,” and maintain at least 80% of its assets in qualifying real estate assets or other real estate-related assets. The remaining 20% of the portfolio can consist of miscellaneous assets. What we buy and sell is therefore limited by these criteria. How we determine to classify our assets for purposes of the Investment Company Act will be ~~subject~~based in large measure upon no-action letters issued by the SEC staff in the past toand ~~property~~other ~~taxes~~SEC interpretive guidance and, in the absence of SEC guidance, on our view of what constitutes a qualifying real estate asset and a real estate-related asset. These no-action positions were issued in accordance with factual situations that may ~~increase~~be substantially indifferent from the ~~future~~factual situations we may face, ~~which~~and ~~could~~a ~~adversely~~number ~~affect~~of these no-action positions were issued more than ten years ago. Pursuant to this guidance, and depending on the characteristics of the specific investments, certain mortgage loans, participations in mortgage loans, mortgage-backed securities, mezzanine loans, joint venture investments and the equity securities of other entities may not constitute qualifying real estate assets and therefore investments in these types of assets may be limited. No assurance can be given that the SEC staff will concur with our ~~cash~~classification ~~flow~~of our assets. Future revisions to the Investment Company Act or further guidance from the SEC staff may cause us to lose our exclusion from registration or force us to re-evaluate our portfolio and our investment strategy. Such changes may prevent us from operating our business successfully.

~~Our~~In ~~real~~the ~~properties are~~event ~~subject to real and personal property taxes~~ that ~~may~~we, or ~~increase~~our asoperating ~~tax~~partnership, ~~rates~~were ~~change~~to ~~and~~acquire asassets ~~the~~that ~~real~~could ~~properties~~make ~~are~~either ~~assessed~~entity ~~or reassessed~~fall bywithin ~~taxing~~one ~~authorities. We anticipate that certain~~ of ~~our leases will generally provide that~~ the ~~property~~definitions ~~taxes,~~of oran ~~increases~~investment ~~therein,~~company ~~are~~under ~~charged~~Section to3(a)(1) ~~the~~of ~~lessees as an expense related to~~ the ~~real~~Investment ~~properties~~Company ~~that they occupy~~Act, ~~while~~we ~~other~~believe ~~leases will generally provide~~ that we ~~are~~would ~~responsible~~still qualify for ~~such~~an ~~taxes.~~exclusion Infrom ~~any~~registration pursuant ~~case,~~to asSection ~~the~~3(c)(6) ~~owner~~ of the ~~properties,~~Investment weCompany ~~are~~Act. ~~ultimately~~Although ~~responsible for payment of~~ the ~~taxes~~SEC tostaff ~~the~~has ~~applicable~~issued ~~government~~little ~~authorities.~~interpretive Ifguidance ~~real~~with respect ~~property~~to ~~taxes~~Section ~~increase~~3(c)(6), ~~our~~we ~~tenants~~believe ~~may~~that bewe ~~unable~~and toour ~~make the~~operating ~~required~~partnership ~~tax~~may ~~payments,~~rely ~~ultimately~~on ~~requiring~~Section us3(c)(6) ~~to pay the taxes even~~ if ~~otherwise~~55% ~~stated under the terms~~ of the ~~lease.~~assets ~~If we~~of ~~fail~~our tooperating ~~pay~~partnership ~~any~~consist ~~such taxes~~of, ~~the~~and ~~applicable~~at ~~taxing~~least ~~authority~~55% ~~may~~of ~~place a lien on~~ the ~~real~~income ~~property~~of ~~and~~our ~~the~~operating ~~real~~partnership ~~property~~is ~~may~~derived ~~be subject~~from, toqualifying ~~a tax sale. We will also generally be responsible for~~ real ~~property taxes related to any vacant space. Additionally,~~ ~~some~~estate ~~states~~assets ~~may~~owned ~~impose~~by anwholly ~~entity~~owned ~~level~~or ~~tax~~majority-owned ~~directly~~subsidiaries ~~on us. For example, we could be subject to an entity level tax under amendments to the margins tax in the state~~ of ~~Texas. Such an entity level tax could adversely affect~~ our ~~cash~~operating ~~flow~~partnership.

~~Uninsured losses or premiums for insurance coverage relating to real property may adversely affect your returns.~~ 17

~~There~~To ~~are~~ensure ~~types~~that ofneither ~~losses~~we, ~~generally~~our ~~catastrophic~~operating inpartnership ~~nature,~~nor ~~such~~any asof ~~losses~~our ~~due~~subsidiaries are required to ~~wars,~~register ~~acts~~as ofan ~~terrorism,~~investment ~~earthquakes~~company, ~~floods,~~each ~~hurricanes,~~entity ~~pollution~~may be orunable ~~environmental~~to ~~matters~~sell assets that ~~are~~it ~~uninsurable~~would orotherwise ~~not~~want ~~economically~~to ~~insurable,~~sell orand may beneed ~~insured~~to ~~subject~~sell toassets ~~limitations,~~that ~~such~~it ~~as large~~would ~~deductibles~~otherwise orwish ~~co-payments~~to retain. In ~~Risks~~addition, ~~associated~~we, ~~with~~our ~~potential~~operating ~~acts~~partnership ofor ~~terrorism~~our ~~could~~subsidiaries ~~sharply~~may ~~increase~~be ~~the~~required ~~premiums~~to weacquire ~~pay for~~additional ~~coverage~~income- ~~against~~or ~~property~~loss-generating assets ~~and~~that ~~casualty~~we ~~claims.~~might ~~Additionally,~~not ~~mortgage~~otherwise ~~lenders~~acquire ~~sometimes~~or ~~require~~forego ~~commercial~~opportunities ~~property owners~~ to ~~purchase~~acquire ~~specific~~interests ~~coverage~~in ~~against~~companies ~~terrorism~~that aswe awould ~~condition~~otherwise ~~for~~want to ~~providing mortgage loans~~acquire. ~~These~~Although ~~policies~~we, ~~may~~our ~~not~~operating bepartnership ~~available at~~and aour ~~reasonable~~subsidiaries ~~cost,~~intend ifto atmonitor ~~all,~~our ~~which~~portfolio ~~could~~periodically ~~inhibit~~and ~~our ability~~ prior to ~~finance~~each oracquisition ~~refinance~~and ~~our~~disposition, ~~real~~any ~~properties.~~of Inthese ~~such~~entities ~~instances, we~~ may not be ~~required~~able to ~~provide~~maintain ~~other~~an ~~financial~~exclusion ~~support,~~from ~~either~~registration ~~through~~as ~~financial~~an ~~assurances or self-insurance, to cover potential~~investment ~~losses~~company. ~~Changes~~If inwe, ~~the~~our ~~cost~~operating partnership or ~~availability~~our ofsubsidiaries ~~insurance~~are ~~could~~required ~~expose us~~ to ~~uninsured~~register ~~casualty~~as ~~losses.~~an Ininvestment ~~the~~company ~~event~~but ~~that~~fail ~~any~~to ofdo ~~our~~so, ~~real~~the ~~properties~~unregistered ~~incurs~~entity awould ~~casualty~~be ~~loss~~prohibited ~~which~~from isengaging ~~not~~in ~~fully~~our ~~covered by insurance~~business, ~~the~~and ~~value~~criminal ofand ~~our~~civil ~~assets~~actions ~~will~~could be ~~reduced by~~brought ~~any~~against such ~~uninsured loss~~entity. In addition, wethe ~~cannot~~contracts ~~assure~~of ~~you~~such ~~that~~entity ~~funding~~would ~~will~~ be ~~available~~unenforceable tounless usa ~~for~~court ~~repair~~required orenforcement, ~~reconstruction of~~and ~~damaged~~a ~~real~~court ~~property~~could inappoint a receiver to take control of the ~~future~~entity and liquidate its business.

WeRisks ~~compete~~Related ~~with~~To ~~numerous~~Conflicts ~~other~~of ~~parties or entities for real estate assets and may not compete successfully.~~Interest

We ~~will~~depend ~~compete~~on ~~with numerous~~our ~~other~~advisor ~~persons~~and ~~or entities seeking to buy real estate assets or to attract tenants to real properties we acquire. These~~its ~~persons~~key orpersonnel ~~entities may have greater experience~~ and ~~financial~~if ~~strength~~any ~~than~~of ~~us.~~such ~~There~~key ispersonnel nowere ~~assurance~~to ~~that~~cease ~~we will be able~~ to ~~acquire real estate assets or attract tenants on favorable terms, if at all. For example, our competitors may~~ be ~~willing~~affiliated towith ~~offer space at rental rates below~~ our ~~rates~~advisor, ~~causing us to lose existing or potential tenants and pressuring us to reduce~~ our ~~rental~~business ~~rates to retain existing tenants or convince new tenants to lease space at our properties. Each of these factors~~ could ~~adversely affect our results of operations, financial condition, value of our investments and ability to pay distributions to you~~suffer.

21Our ability to make distributions and achieve our investment objectives is dependent upon the performance of our advisor in the acquisition, disposition and management of real estate assets, the selection of tenants for our real properties and the determination of any financing arrangements. In addition, our success depends to a significant degree upon the continued contributions of certain of the key personnel of our sponsor, including Brett C. Moody and Robert W. Engel, each of whom would be difficult to replace. We currently do not have key man life insurance on any of these key personnel. If our advisor were to lose the benefit of the experience, efforts and abilities of one or more of these individuals, our operating results could suffer.

~~Our~~We ~~ability~~may tocompete ~~make~~with ~~distributions~~other Moody National toaffiliates ~~our~~for ~~stockholders~~opportunities ~~will~~to ~~depend~~acquire ~~upon~~or ~~the~~sell ~~ability~~investments, ofwhich ~~hotel~~may ~~managers~~have toan ~~operate~~adverse ~~our~~impact ~~hotels~~on ~~effectively~~our operations.

We ~~currently~~may ~~own~~compete ~~interests~~with incertain ~~eleven~~of ~~hotel~~our ~~properties,~~affiliates afor ~~74.5%~~opportunities ~~joint~~to ~~venture~~acquire ~~interest~~or insell ~~the~~certain ~~Hyatt~~types ~~Place~~of ~~Note,~~real ~~which~~estate isassets. ~~secured~~We bymay aalso ~~hotel~~buy ~~property,~~or ~~and~~sell areal ~~note~~estate ~~receivable~~assets ~~from~~at athe ~~related~~same ~~party,~~time ~~and~~as weour ~~intend~~affiliates toare ~~invest~~considering abuying ~~portion~~or ofselling ~~the~~similar ~~remaining~~assets. ~~proceeds~~In ~~from~~this ~~our~~regard, ~~follow-on~~there ~~offering~~is ~~and~~a risk ~~the~~that ~~proceeds~~our ~~from~~advisor ~~any~~will ~~other~~select ~~offering~~for ofus ~~our~~a ~~shares~~real ~~that~~estate weasset ~~may~~that ~~conduct~~provides inlower ~~the~~returns ~~future~~to inus ~~additional~~than ~~hotel~~real ~~properties~~estate ~~and~~assets ~~hotel~~purchased ~~related~~by ~~investments~~our affiliate. ToCertain ~~qualify~~of asour aaffiliates ~~REIT,~~own weor ~~cannot~~manage ~~operate~~real ~~any~~properties ~~hotel~~in orgeographical ~~directly~~areas ~~participate~~ in ~~the~~which ~~decisions~~we ~~affecting~~expect ~~the~~to ~~daily~~own ~~operations of~~real ~~any hotel~~properties. Therefore, ~~Our unaffiliated third-party hotel managers for~~ our ~~current~~real ~~hotel~~ properties ~~and~~may ~~for~~compete ~~any~~with other ~~hotel~~real properties ~~we acquire~~owned ~~will~~or ~~have~~managed ~~direct~~by ~~control~~affiliates. ofOur ~~the~~advisor ~~daily~~may ~~operations~~face conflicts of ~~our~~interest ~~hotels.~~when Weevaluating ~~will~~leasing ~~not~~opportunities ~~have~~for ~~the~~our ~~authority~~real toproperties ~~directly~~and ~~control~~other ~~any particular~~real ~~aspect~~properties ofowned ~~the~~or ~~daily~~managed ~~operations~~by ~~(e.g.~~affiliates, and ~~setting~~these ~~room~~conflicts ~~rates)~~ of ~~any~~interest ~~hotel~~may ~~that~~have wea ~~acquire~~negative animpact ~~interest~~on ~~in.~~our ~~Thus, even~~ability ifto weattract ~~believe~~and ~~that~~retain atenants. ~~hotel~~As isa ~~being~~result ~~operated~~of inour anpotential competition ~~inefficient~~with orour ~~less~~affiliates, ~~than~~certain ~~optimal~~investment ~~manner,~~opportunities wethat ~~will~~would ~~not~~otherwise be ~~able~~available to ~~require a~~us ~~change~~may tonot ~~the~~in ~~method~~fact ofbe ~~its operation~~available. This ~~Our~~competition ~~only~~may ~~alternative~~also ~~for~~result ~~changing~~in ~~the~~conflicts ~~operation~~ of ainterest ~~hotel~~that ~~will~~are benot toresolved ~~replace the third-party manager~~ in ~~the~~our ~~situation where the applicable hotel management agreement permits us to do so~~favor.

~~Our~~The ~~ability~~time toand ~~make distributions~~resources tothat ~~stockholders will be impacted by the performance of our third-party hotel managers in generating sufficient revenues~~Moody ~~from~~National ~~our~~affiliates ~~hotels~~devote into ~~excess~~us ofmay ~~operating expenses. The hotel managers will~~ be ~~affected~~diverted byto ~~factors~~other ~~beyond~~investment ~~their control~~activities, ~~such as changes in the level of demand for rooms~~ and ~~related~~we ~~services~~may offace ~~the~~additional ~~hotels~~competition, ~~their~~due ~~ability~~ to the ~~maintain~~fact ~~and~~that ~~increase~~Moody ~~gross~~National ~~revenues~~affiliates ~~and operating~~are ~~margins~~not atprohibited ~~the~~from ~~hotels~~raising ~~and~~money ~~other~~for, ~~factors.~~or ~~Therefore~~managing, ~~any~~another ~~operating~~entity ~~difficulties~~that ormakes ~~other factors affecting~~ the ~~hotel managers’~~same ~~ability~~types toof ~~maintain~~investments ~~and~~that ~~increase~~we ~~gross revenues and operating margins at our hotels could significantly adversely affect our financial condition and results of operations~~target.

~~The~~Moody ~~recent~~National ~~market~~affiliates are ~~downturn~~not ~~has~~prohibited ~~adversely~~from raising money for, or managing, another investment entity, including those that make the same types of ~~affected~~investments as those we target. As a result, the ~~hospitality~~time ~~industry~~and resources our sponsor and its affiliates could devote to us may ~~affect~~be ~~hotel~~diverted to ~~operations~~other investment activities. For example, on January 20, 2015, Moody II commenced its initial public offering of up to $1,100,000,000 in shares of its common stock. In addition, our advisor’s management manages privately offered real estate programs sponsored by affiliates of our sponsor which have investment objectives generally similar to our company. We may compete with any such investment entity for the ~~hotels~~same investors and investment opportunities. We may also co-invest with any such investment entity. Even though all such co-investments will be subject to approval by our independent directors, they could be on terms not as favorable to us as those we ~~acquire~~could achieve co-investing with a third party.

AsOur ~~part~~advisor ofand ~~the~~its ~~effects of the recent market downturn~~affiliates, ~~the hospitality industry has experienced a significant decline in business caused by a reduction~~including inour ~~travel~~officers ~~for both business~~ and ~~pleasure.~~some ~~Consistent with the rest~~ of ~~the~~our ~~hospitality industry~~directors, ~~our~~face ~~current~~conflicts ~~hotel~~of ~~properties~~interest ~~and any~~caused ~~other~~by ~~hotels~~compensation ~~that~~arrangements wewith ~~may~~us ~~invest in may experience declines in occupancy~~ and ~~average~~other ~~daily~~Moody National ~~rates~~affiliates, ~~due~~which tocould ~~decline~~result in ~~travel.~~actions ~~In addition, it is possible~~ that ~~these~~are ~~factors~~not ~~could~~in ~~have a material adverse effect on~~ the ~~value~~best interests of our ~~current hotel properties and any other hotels that we may invest in~~stockholders.

~~Competition~~Our advisor and its affiliates will receive substantial fees from us in ~~the~~return ~~hospitality~~for ~~industry~~ their services and ~~with~~these ~~third~~fees ~~parties~~could ininfluence ~~acquiring~~the ~~properties~~advice ~~may~~provided to ~~reduce~~us. ~~our~~Among ~~profitability~~other ~~and~~matters, the ~~return~~compensation onarrangements ~~your~~could ~~investment.~~affect their judgment with respect to:

~~The~~● ~~hospitality~~public ~~industry is~~offerings generally characterized as being intensely competitive. Our current hotel properties and any additional hotels in which we invest will compete with existing and new hotels in their geographic markets, including with independent hotels, hotels which are part of ~~local~~equity orby ~~regional chains and hotels in other well-known national chains~~us, ~~including those offering different types of accommodations and services. The principal competitive factors that will affect the hotel properties in~~ which weallow ~~seek~~our todealer ~~invest~~manager ~~include, but are not limited~~ to, ~~brand~~earn ~~recognition,~~additional ~~location,~~dealer ~~range~~manager offees ~~services~~ and ~~guest~~our ~~amenities~~advisor ~~and~~to ~~the~~earn ~~quality~~increased ~~and~~acquisition ~~price~~fees ~~of the hotel rooms~~ and ~~services~~asset ~~provided.~~management ~~Any one of the foregoing could impact our profitability and ability to pay distributions.~~fees;

If● ~~we decide to invest in additional hotel properties, we expect to face significant competition for attractive hotel investment opportunities from other major~~ real estate ~~investors with significant capital~~acquisitions, ~~including~~which ~~both~~allow publicly traded REITs and private institutional investment funds. Because of competition from other well-capitalized real estate investors, we can provide no assurance that we will be able to acquire desired hotel properties. Where it is possible to acquire desired hotel properties, we can provide no assurance that we will be able to do so on favorable terms or that such properties will meet our ~~return~~advisor ~~expectations or conform~~ to ~~our~~earn ~~investment criteria.~~acquisition ~~The~~fees ~~competition~~upon topurchases ~~acquire~~of ~~attractive~~assets ~~hotel investment opportunities could have an adverse effect on our financial condition~~ and ~~ability~~increased toasset ~~pay~~management ~~distributions.~~fees;

If● wereal doestate ~~not~~asset ~~successfully~~sales, ~~attract and~~since ~~retain~~the ~~franchise~~asset ~~flagships~~management ~~for~~fees ~~hotel~~payable ~~properties,~~to our ~~business~~advisor will ~~suffer,~~decrease and ~~this~~since ~~result~~our advisor will ~~reduce~~be ~~the~~entitled ~~value~~to ofdisposition ~~your~~fees ~~investment.~~upon sales; and

We must continue to attract and retain well-known hospitality franchises for our current hotel properties and any additional hotels in which we invest to make such investments profitable. Certain hospitality franchises, including limited-service hotels, impose radius restrictions that limit the number of their hotels allowed within a certain distance of one another. Hospitality franchises also generally require that design and quality standards be met for guest room and common areas before a hospitality franchise will agree to provide the franchise agreement to operate a property. Compliance with these brand standards may impose significant costs upon us. If we are not able to attract and retain franchise flagships for our hotel properties because of location restrictions, the high cost of complying with design and quality standards, or any other reason, our business will suffer, and this result will reduce the value of your investment.18

22● the purchase of real estate assets from other Moody National affiliates, which may allow our advisor or its affiliates to earn additional asset management fees, property management fees and disposition fees.

~~The~~Further, ~~hospitality~~our ~~industry~~advisor may isrecommend ~~subject~~that we invest in a particular asset or pay a higher purchase price for the asset than it would otherwise recommend toif ~~unique~~it did not receive an acquisition fee or origination fee. Certain potential acquisition fees, ~~unforeseeable~~origination ~~risks~~fees and asset management fees payable to our advisor and property management and leasing fees payable to the property manager would be paid irrespective of the quality of the underlying real estate or property management services during the term of the related agreement. These fees may incentivize our advisor to recommend transactions with respect to the sale of a property or properties that may ~~negatively~~not ~~impact~~be in our best ~~business~~interest at the time. Investments with higher net operating income growth potential are generally riskier or more speculative. In addition, the premature sale of an asset may add concentration risk to the portfolio or may be at a price lower than if we held on to the asset. Moreover, our advisor has considerable discretion with respect to the terms and timing of acquisition, disposition and leasing transactions. In evaluating investments and other management strategies, the opportunity to earn these fees may lead our advisor to place undue emphasis on criteria relating to its compensation at the expense of other criteria, such as the preservation of capital, to achieve higher short-term compensation. Considerations relating to our affiliates’ compensation from us and other Moody National affiliates could result in decisions that are not in the best interests of our stockholders, which could impair our ability to pay you distributions or result in a decline in the value of your investment.

~~The~~Our ~~hospitality~~advisor ~~industry is~~may ~~subject~~have toconflicting fiduciary ~~unique,~~obligations ~~unforeseeable~~if ~~risks,~~we ~~such~~acquire asreal ~~natural~~estate ~~disasters,~~assets ~~pandemics~~from ~~and~~its ~~threats~~affiliates ofor ~~pandemics,~~in ~~acts~~joint ofventures ~~terror~~with ~~and~~its ~~other catastrophes~~affiliates. WeAs ~~have no control over events of this type and they could have~~ a ~~substantial impact on the hospitality industry~~result, ~~and~~in ~~our~~any ~~business.~~such ~~Because~~transaction we ~~are~~may ~~unable~~not tohave ~~control~~ the ~~timing,~~benefit ~~duration~~of orarm’s-length ~~magnitude~~negotiations of ~~these unforeseen events,~~ the ~~negative~~type ~~impact upon~~normally ~~our~~conducted ~~business~~between ~~could be great~~unrelated parties.

InOur ~~cases~~advisor may cause us to invest in ~~which~~a property owned by, or make an equity or debt-related investment in, one of its affiliates or through a joint venture with its affiliates. For example, we owned our ~~tenants~~interest in a note secured by a Hyatt Place hotel property in Grapevine, isTexas, ~~required~~or tothe ~~pay~~“Hyatt ~~rent~~Place ~~based~~note,” onthrough a ~~percentage~~joint venture between a wholly owned subsidiary of ~~the~~our ~~tenant’s~~operating ~~income~~partnership and ~~from~~an ~~its~~affiliated ~~operations~~entity atcontrolled ~~the~~by ~~real~~Brett ~~property~~C. Moody, our Chairman of the ~~actual rental~~Board ~~income~~and weChief ~~receive~~Executive ~~under~~Officer. ~~such~~In these circumstances, our advisor will have a ~~lease~~conflict ~~may~~of beinterest ~~inadequate~~when fulfilling its fiduciary obligation to ~~cover~~us. In any such transaction, we would not have the ~~operating~~benefit ~~expenses~~of ~~associated~~arm’s-length ~~with~~negotiations of the ~~real~~type ~~property~~normally conducted between unrelated parties.

~~Lease~~We ~~payments due under leases for any retail properties we acquire~~ may bedispose ~~based in part on the income~~ of ~~the~~assets ~~retail tenant. In such cases where the tenant is required~~ to ~~pay~~our ~~rent based on a percentage of the tenant’s income from its operations at the real property~~advisor, ~~the~~sponsor ~~actual~~or ~~rental~~their ~~income~~affiliates, wewhich ~~receive~~could ~~under~~cause ~~such~~us ~~a lease may be inadequate~~ to ~~cover~~enter ~~the~~into ~~operating~~transactions ~~expenses~~on ~~associated~~less ~~with~~favorable ~~the~~terms ~~real property if a tenant’s income is substantially lower~~ than ~~projected. In such case,~~ we ~~may~~would ~~not~~receive ~~have access to funds required~~from ina ~~the~~third ~~future to pay the operating expenses associated with the real property~~party.

~~Real~~We ~~property~~may ~~that~~dispose ~~incurs~~of aassets to ~~vacancy~~our advisor, sponsor or their affiliates. Our advisor, sponsor or their affiliates may make substantial profits in connection with such transactions. Because our independent directors would rely on our advisor in identifying and evaluating any such transaction, these conflicts could beresult ~~difficult~~in transactions based on terms that are less favorable to ~~sell~~us orthan ~~re-lease.~~we would receive from a third party.

WeThe ~~may~~fees ~~invest~~we inpay ~~retail, office~~to oraffiliates ~~industrial properties, which may incur a vacancy either by the continued default of a tenant under its lease or the expiration~~were ofnot ~~one~~determined ofon ~~our~~an ~~leases.~~arm’s-length Inbasis; ~~addition~~therefore, ~~certain of the real properties~~ we ~~acquire~~do ~~may~~not have ~~some level of vacancy at~~ the ~~time~~benefit of ~~closing. Certain~~arm’s-length ~~other~~negotiations ~~real properties may be specifically suited to the particular needs~~ of ~~a tenant and may become vacant. Therefore, we may have difficulty obtaining a new tenant for any vacant space we have in our real properties. If~~ the ~~vacancy continues for~~ atype ~~long~~normally ~~period~~conducted ofbetween ~~time,~~unrelated ~~we may suffer reduced revenues resulting in lower cash distributions to stockholders~~parties. ~~In addition, the resale value of the real property could be diminished because the market value may depend principally upon the value of the leases of such real property.~~

WeThe ~~are~~fees ~~dependent~~to onbe ~~tenants for revenue~~paid ~~and~~to our ~~inability~~advisor, toour ~~lease~~property manager, our ~~properties~~dealer ormanager toand ~~collect~~other ~~rent~~affiliates ~~from~~for ~~our~~services ~~tenants~~they ~~may~~provide ~~adversely~~for ~~affect~~us ~~our~~were ~~results~~not determined on an arm’s-length basis. As a result, the fees have been determined without the benefit of ~~operations~~arm’s-length ~~and~~negotiations ~~returns~~of the type normally conducted between unrelated parties and could be in excess of amounts that we would otherwise pay to ~~our~~third parties ~~stockholders.~~for such services.

We may ~~invest~~purchase inreal ~~retail, office~~estate ~~or industrial properties, which may be occupied by a single tenant. As a result, the success of such properties will depend~~assets onfrom ~~the~~third ~~financial~~parties ~~stability~~who ofhave aexisting ~~single~~or ~~tenant.~~previous ~~Lease~~business ~~payment~~relationships ~~defaults~~with byaffiliates ~~such tenants could cause us to reduce the amount~~ of ~~distributions to~~our ~~stockholders~~advisor, and, ~~could~~as ~~force us to find an alternative source of revenue to pay any mortgage loan on the property. In the event of such~~ a ~~tenant default~~result, ~~we may also experience delays~~ in ~~enforcing our rights as landlord and may incur substantial costs in~~any ~~protecting~~such ~~our investment and re-letting our property. If a lease is terminated~~transaction, we may benot ~~unable~~have ~~to lease~~ the ~~property~~benefit ~~for~~of ~~the rent~~arm’s-length ~~previously~~negotiations ~~received~~of ~~or sell~~ the ~~property~~type ~~without~~normally ~~incurring~~conducted abetween ~~loss~~unrelated parties.

We may ~~not~~purchase assets from third parties that have ~~funding~~existing ~~for~~or ~~future tenant~~previous ~~improvements~~business relationships with affiliates of our advisor. The officers, ~~which~~directors or ~~may~~employees ~~adversely~~of ~~affect~~our advisor and its affiliates and the ~~value~~principals of our ~~properties,~~advisor who also perform services for our ~~results~~affiliates may have a conflict in representing our interests in these transactions on the one hand and the interests of ~~operations~~such affiliates in preserving or furthering their respective relationships on the other hand. In any such transaction, we will not have the benefit of arm’s-length negotiations of the type normally conducted between unrelated parties, and ~~returns~~the purchase price or fees paid by us may be in excess of amounts that we would otherwise pay to ~~our~~third ~~stockholders~~parties.

WeRisks ~~may~~Related ~~invest~~To inInvestments ~~retail, office or industrial properties with one or more tenants. When a tenant at such a property does not renew its lease or otherwise vacates its space~~ in ~~one~~Real of our buildings, it is likely that, to attract one or more new tenants, we will be required to expend substantial funds to construct new tenant improvements in the vacated space. We did not establish a general working capital reserve out of the proceeds from our public offerings. We do not currently have an identified funding source to provide funds which may be required in the future for tenant improvements and tenant refurbishments to attract new tenants. If we do not establish sufficient reserves for working capital or obtain adequate secured financing to supply necessary funds for capital improvements or similar expenses, we may be required to defer necessary or desirable improvements to our real properties. If we defer such improvements, the applicable real properties may decline in value, and it may be more difficult for us to attract or retain tenants to such real properties or the amount of rent we can charge at such real properties may decrease. We cannot assure you that we will have any sources of funding available to us for repair or reconstruction of damaged real property in the future.Estate

23Disruptions in the financial markets and deteriorating economic conditions could have a material adverse impact on our business.

~~Long-term~~We ~~leases~~believe ~~may~~the ~~not~~risks associated ~~result~~with ~~in fair~~our business are more severe during market ~~lease~~downturns. ~~rates~~For ~~over~~example, ~~time;~~a ~~therefore~~prolonged market downturn could negatively impact our real estate investments as a result of decreased demand for hotel rooms, increased tenant delinquencies or defaults under our ~~income~~leases. In addition, lower demand for rentable space and ~~our~~oversupply ~~distributions~~of rentable space could lead to increased rent concessions, higher tenant improvement expenditures or reduced rental rates in order to maintain occupancies. Because we expect that some of our ~~stockholders~~debt-related investments could consist of loans secured by real property, these same factors could also negatively affect the underlying borrowers and collateral of our investments. Our operations could be ~~lower~~negatively ~~than~~affected to a greater extent if wea ~~did~~market ~~not~~downturn ~~enter~~is ~~into~~prolonged ~~long-term~~or ~~leases.~~becomes more severe, which would significantly harm our business, results of operations, cash flows and financial condition, our ability to make distributions to you and the value of your investment.

We may enter into long-term leases with tenants of certain of our properties. Our long-term leases would likely provide for rent to increase over time. However, if we do not accurately judge the potential for increases in market rental rates, we may set the terms of these long-term leases at levels such that even after contractual rental increases the rent under our long-term leases is less than then-current market rental rates. Further, we may have no ability to terminate those leases or to adjust the rent to then-prevailing market rates. As a result, our income and distributions to our stockholders could be lower than if we did not enter into long-term leases.19

ToChanges ~~the extent we invest~~ in ~~multifamily properties~~national, ~~our~~regional ~~ability~~or local toeconomic, ~~make~~demographic ~~distributions~~or toreal ~~our~~estate ~~stockholders~~market conditions may be adversely ~~affected~~affect byour ~~short-term~~results ~~leases~~of ~~that~~operations ~~expose~~and us returns to ~~the effects of declining market rent~~our stockholders.

We ~~may~~are ~~invest~~subject into ~~multifamily~~risks ~~properties.~~generally Weattributable ~~expect~~to ~~that~~the ~~substantially~~ownership ~~all~~ of ~~our~~real ~~leases~~estate ~~for~~assets, ~~such~~including: ~~properties~~changes ~~would~~in benational, ~~for~~regional aor ~~term~~local ofeconomic, ~~one~~demographic or ~~year~~real orestate ~~less.~~market ~~Because these~~conditions; ~~leases~~changes ~~generally~~in ~~would~~supply ~~permit~~of ~~the~~or ~~residents~~demand tofor ~~leave~~similar atproperties ~~the~~in ~~end~~an ofarea; ~~the~~increased ~~lease~~competition ~~term~~for ~~without~~real estate ~~penalty,~~assets targeted by our ~~rental~~investment ~~revenues~~strategy; ~~could be~~bankruptcies, ~~impacted~~financial difficulties or lease defaults by ~~declines~~our tenants; changes in ~~market~~interest ~~rents~~rates ~~more~~and ~~quickly~~availability ~~than~~of ~~for~~financing; ~~longer-term~~and ~~leases,~~changes ~~which~~ in ~~turn~~government ~~could~~rules, ~~affect~~regulations ~~our~~and ~~ability~~fiscal topolicies, ~~make~~including changes ~~distributions~~in totax, ~~our~~real ~~stockholders~~estate, environmental and zoning laws.

ToChanges ~~the~~in ~~extent~~supply ~~that~~of, weor ~~invest~~demand ~~in multifamily~~for, similar real properties, ~~competition~~in ~~due~~a toparticular ~~overbuilding~~area may increase the price of ~~multifamily~~real properties ~~may~~we ~~reduce~~seek ~~our~~to ~~profitability~~purchase and decrease the ~~return~~price of onreal ~~your~~properties ~~investment~~when we seek to sell them.

The ~~multifamily~~real ~~property industry~~estate industry is ~~highly~~subject ~~competitive.~~to Tomarket ~~the~~forces. ~~extent~~We ~~that~~are weunable ~~invest~~to inpredict ~~multifamily~~certain ~~properties,~~market wechanges ~~will~~including ~~compete~~changes ~~with many other entities~~ in ~~the~~supply ~~multifamily property industry~~of, ~~including~~or ~~individuals,~~demand ~~corporations~~for, ~~bank and insurance company investment accounts, other~~similar ~~REITs,~~ real ~~estate~~properties ~~limited partnerships, and other entities engaged~~ in ~~real~~a ~~estate~~particular ~~investment activities~~area. ~~Because~~Any ofpotential ~~the~~purchase ~~large number~~ of ~~competitors~~an inoverpriced ~~this~~asset ~~industry,~~could ~~overbuilding~~decrease ofour ~~apartment~~rate ~~communities~~of ~~may~~return ~~occur.~~on ~~If so, this will increase the number of~~these ~~apartment~~investments ~~units available~~ and ~~may~~result ~~decrease occupancy and apartment rental rates. To the extent we invest~~ in ~~multifamily~~lower ~~properties, this~~operating ~~competition~~results ~~could reduce occupancy levels~~ and ~~revenues~~overall atreturns ~~our~~to ~~apartment communities, which would adversely affect~~ our ~~operations~~stockholders.

ToDelays in the ~~extent~~acquisition, wedevelopment and ~~invest~~construction inof ~~retail~~ real properties, ~~our~~may ~~performance~~have ~~will~~adverse beeffects ~~linked~~on toour ~~the~~results ~~market~~of ~~for~~operations ~~retail~~and ~~space~~returns ~~generally~~to our stockholders.

~~The~~Delays ~~market~~we ~~for retail~~encounter ~~space~~in ~~has~~the ~~been~~selection, acquisition and ~~could~~development beof real properties could adversely ~~affected~~affect byyour ~~weaknesses~~returns. inWhere properties are acquired prior to the ~~national,~~start ~~regional~~of ~~and~~construction ~~local~~or ~~economies,~~during the ~~adverse~~early ~~financial condition~~stages of ~~some~~construction, ~~large~~it ~~retailing~~will ~~companies~~typically take several months to complete construction and rent available space. Therefore, ~~the~~you ~~ongoing~~could ~~consolidation~~suffer delays in ~~the~~receiving ~~retail~~cash ~~sector,~~distributions ~~excess~~attributable ~~amounts~~to ofthose particular ~~retail~~real ~~space~~properties. Delays in a ~~number~~completion of ~~markets~~construction ~~and~~could ~~competition~~give tenants the right to terminate preconstruction leases for ~~tenants~~space ~~with~~at a newly developed project. We may incur additional risks when we make periodic progress payments or other ~~shopping~~advances to ~~centers~~builders inprior ~~our~~to ~~markets~~completion of construction. ToEach ~~the~~of ~~extent~~those ~~that~~factors wecould ~~invest~~result in ~~retail properties,~~increased ~~retailers~~costs atof a project or loss of our ~~properties~~investment. In addition, we will ~~face~~be ~~continued~~subject ~~competition~~to ~~from~~normal ~~discount~~lease-up orrisks ~~value~~relating ~~retailers,~~to ~~factory~~newly ~~outlet~~constructed ~~centers~~projects. Furthermore, the ~~wholesale~~price ~~clubs,~~we ~~mail~~agree ~~order~~to ~~catalogues~~pay ~~and~~for ~~operators,~~a ~~television~~real ~~shopping~~property ~~networks~~will be based on our projections of rental income and ~~shopping~~expenses ~~via~~and ~~the~~estimates ~~Internet.~~of ~~Such~~the ~~competition~~fair ~~could~~market ~~adversely~~value ~~affect~~of real property upon completion of construction. If our ~~tenants~~projections ~~and,~~are ~~consequently~~inaccurate, ~~our~~we ~~revenues~~may ~~and~~pay ~~funds~~too ~~available~~much for ~~distribution~~a property.

ToReal ~~the~~properties ~~extent~~are ~~that~~illiquid investments, and we ~~invest~~may be unable to adjust our portfolio in ~~retail properties,~~response ~~decreased~~to ~~consumer~~changes ~~spending~~in ~~may~~economic ~~have~~or another ~~adverse~~conditions ~~affect~~or onsell ~~tenants~~a ofproperty ~~our~~if ~~retail~~or ~~properties~~when we decide to do so.

ToReal ~~the~~properties ~~extent that~~are weilliquid ~~invest~~investments. inWe ~~retail~~may ~~properties,~~be ~~decreased~~unable ~~consumer~~to ~~spending~~adjust ~~may~~our ~~adversely~~portfolio ~~affect~~in ~~our~~response ~~retail~~to ~~investments~~changes ~~because~~in ~~our~~economic ~~income~~or ~~from such~~other ~~investments~~conditions. ~~may~~In beaddition, the ~~derived~~real ~~from~~estate ~~lease~~market ~~payments~~is affected by ~~tenants~~many ~~whose~~factors, ~~businesses~~such ~~depend~~as ongeneral ~~consumer~~economic ~~spending.~~conditions, Inavailability ~~addition~~of financing, ~~our~~interest ~~ability~~rates toand ~~increase~~other ~~our~~factors, ~~revenues~~including supply and ~~operating~~demand, ~~income~~that ~~may~~are ~~depend~~beyond onour ~~steady~~control. ~~growth~~We ofcannot ~~demand~~predict whether we will be able to sell any real property for the ~~products~~price ~~and~~or ~~services~~on the terms set by us, or whether any price or other terms offered by ~~the~~a prospective purchaser ~~stores~~would ~~and~~be ~~companies~~acceptable ~~located~~to inus. We cannot predict the ~~retail~~length ~~properties~~of wetime ~~own~~needed to find a willing purchaser and to close the sale of a real property. AAdditionally, ~~drop~~we inmay ~~demand~~be ~~for~~required ~~any~~to ~~reason~~expend ~~could~~funds ~~result~~to incorrect defects or to make improvements before a ~~reduction~~property incan ~~tenant~~be ~~performance~~sold. ~~and~~We ~~consequently,~~cannot ~~adversely~~assure ~~affect~~you usthat we will have funds available to correct such defects or to make such improvements.

~~Actions~~In acquiring a real property, we may agree to restrictions that prohibit the sale of ~~joint~~that ~~venture~~real ~~partners~~property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that real property. All these provisions would restrict our ability to sell a property, which could ~~negatively~~reduce ~~impact~~the amount of cash available for distribution to our ~~performance~~stockholders.

WeOur ~~may~~operating ~~enter~~expenses ~~into joint~~may ~~ventures with third parties, including with entities that are affiliated with our advisor. For example, we own our interest~~increase in the ~~Hyatt~~future ~~Place Note through a joint venture between a wholly owned subsidiary of our operating partnership~~ and ~~an affiliated entity controlled by Brett C. Moody~~, ~~our~~to ~~Chairman of~~ the ~~Board~~extent ~~and~~such ~~Chief~~increases ~~Executive~~cannot ~~Officer.~~be Wepassed ~~may~~on ~~also~~to ~~purchase and develop properties in joint ventures or in partnerships~~tenants, ~~co-tenancies~~our orcash ~~other~~flow ~~co-ownership~~and ~~arrangements~~our ~~with~~operating ~~the~~results ~~sellers~~would ~~of the properties, affiliates of the sellers, developers or other persons~~decrease. ~~Such investments may involve risks not otherwise present with a direct investment in real estate, including, for example:~~

24Operating expenses, such as expenses for fuel, utilities, labor and insurance, are not fixed and may increase in the future. There is no guarantee that we will be able to pass such increases on to our tenants. To the extent such increases cannot be passed on to tenants, any such increase would cause our cash flow and our operating results to decrease.

●A ~~the~~market ~~possibility~~downturn ~~that our venture partner~~ or ~~co-tenant~~rise in aninterest ~~investment~~rates ~~might~~could ~~become~~adversely impact ~~bankrupt; ● that the venture partner or co-tenant may at any time have economic or business interests or goals which are~~occupancy, orrental ~~which~~rates ~~become,~~and ~~inconsistent with~~ our ~~business~~ability ~~interests or goals; ● that such venture partner or co-tenant may be in a position~~ to ~~take~~collect ~~action~~rent contrary to our instructions or requests or contrary to our policies or objectives; ● the possibility that we may incur liabilities as a result of an action taken by such venture partner; ● that disputes between us and a venture partner may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from ~~focusing their time and effort on~~ our business; ● the possibility that if we have a right of first refusal or buy/sell right to buy out a co-venturer, co-owner or partner, we may be unable to finance such a buy-out if it becomes exercisable or we may be required to purchase such interest at a time when it would not otherwise be in our best interest to do so; or ● the possibility that we may not be able to sell our interest in the joint venture if we desire to exit the joint venturetenants.

~~Under~~A ~~certain~~market ~~joint~~downturn may ~~venture~~significantly ~~arrangements~~affect occupancy, ~~neither~~rental ~~venture~~rates ~~partner~~and ~~may~~our ~~have~~ability ~~the~~to ~~power~~collect torent ~~control~~from ~~the~~our ~~venture~~tenants. ~~and~~For anexample, ~~impasse~~a market downturn or rise in interest rates could bemake ~~reached,~~it ~~which might~~more ~~have~~difficult afor ~~negative~~us ~~influence~~to onlease real properties, may require us to lease the ~~joint~~real ~~venture~~properties we ~~and~~acquire ~~decrease~~at ~~potential~~lower ~~returns~~rental rates and may lead to ~~you~~an increase in tenant defaults. In addition, tothese ~~the~~conditions ~~extent~~may ~~that~~also ~~our~~make it ~~venture~~more ~~partner~~difficult orfor ~~co-tenant~~us isto andispose ~~affiliate~~of these properties. Each of these events could have a material adverse impact on our ~~advisor~~cash flows, operating ~~certain~~results ~~conflicts~~and ofcarrying ~~interest~~value ~~will~~of ~~exist~~investment property.

~~Costs of complying with governmental laws and regulations related to environmental protection and human health and safety may be high.~~20

~~All~~Our real ~~property investments~~properties ~~and~~will ~~the~~be ~~operations conducted in connection with such investments are~~ subject ~~to federal, state and local laws and regulations~~ ~~relating~~ to ~~environmental~~property ~~protection~~taxes ~~and~~that ~~human health and safety. Some of these laws and regulations~~ may ~~impose~~increase ~~joint~~in ~~and several liability on customers, owners or operators for~~ the ~~costs to investigate or remediate contaminated properties~~future, ~~regardless~~which ofcould ~~fault or~~adversely ~~whether~~affect ~~the~~our ~~acts~~cash ~~causing the contamination were legal~~flow.

~~Under~~Our ~~various~~real ~~federal,~~properties ~~state~~are ~~and~~subject ~~local~~to ~~environmental~~real ~~laws,~~and apersonal ~~current~~property ortaxes ~~previous~~that ~~owner~~may orincrease ~~operator~~as oftax ~~real~~rates ~~property~~change ~~may~~and beas ~~liable for~~ the ~~cost~~real ofproperties ~~removing or~~are ~~remediating~~assessed ~~hazardous~~ or reassessed ~~toxic~~by ~~substances~~taxing onauthorities. ~~such~~We ~~real~~anticipate ~~property.~~that ~~Such~~certain ~~laws~~of ~~often~~our ~~impose~~leases ~~liability~~will ~~whether~~generally orprovide ~~not~~that the ~~owner~~property ~~or operator knew of~~taxes, or ~~was responsible for~~increases therein, ~~the~~are ~~presence~~charged ofto ~~such~~the ~~hazardous~~lessees oras ~~toxic~~an ~~substances.~~expense Inrelated ~~addition,~~to the ~~presence~~real ofproperties ~~hazardous substances,~~that orthey ~~the failure to properly remediate these substances~~occupy, ~~may~~while ~~adversely~~other ~~affect~~leases ~~our~~will ~~ability~~generally provide tothat ~~sell,~~we ~~rent~~are orresponsible ~~pledge~~for such ~~real~~ ~~property as collateral for future borrowings~~taxes. ~~Environmental~~In ~~laws~~any ~~also~~case, ~~may~~as ~~impose~~the ~~restrictions~~owner onof the ~~manner~~properties, inwe ~~which~~are ~~real~~ultimately responsible for ~~property~~payment ~~may~~of bethe ~~used~~taxes orto ~~businesses~~the ~~may~~applicable begovernment ~~operated~~authorities. ~~Some~~If ofreal ~~these~~property ~~laws~~taxes ~~and~~increase, ~~regulations~~our ~~have~~tenants ~~been~~may ~~amended~~be sounable as to ~~require compliance~~make ~~with~~the ~~new~~required ortax ~~more~~payments, ~~stringent~~ultimately ~~standards~~requiring asus ofto ~~future~~pay ~~dates.~~the ~~Compliance~~taxes ~~with~~even ~~new~~if orotherwise ~~more~~stated ~~stringent~~under ~~laws~~the orterms ~~regulations or stricter interpretation~~ of ~~existing~~the ~~laws may require us to incur material expenditures~~lease. ~~Future~~If ~~laws, ordinances or regulations may impose~~we ~~material~~fail ~~environmental~~to ~~liability.~~pay ~~Additionally,~~any ~~our~~such ~~tenants’ operations~~taxes, the ~~existing~~applicable ~~condition~~taxing ofauthority ~~land~~may ~~when~~place wea ~~buy~~lien ~~it,~~on ~~operations in~~ the ~~vicinity of our~~ real ~~properties,~~property ~~such~~and as the ~~presence~~real ofproperty ~~underground~~may ~~storage tanks, or activities of unrelated third parties~~be ~~may~~subject ~~affect~~to ~~our~~a ~~real~~tax ~~properties~~sale. ~~There~~We ~~are~~will also ~~various~~generally ~~local,~~be ~~state~~responsible ~~and~~for ~~federal~~real ~~fire,~~property ~~health,~~taxes ~~life-safety~~related ~~and~~to ~~similar~~any ~~regulations with~~vacant ~~which~~space. weAdditionally, some ~~may~~states ~~be required to comply and which~~ may ~~subject~~impose usan toentity ~~liability~~level intax ~~the~~directly ~~form~~on ~~of fines or damages for noncompliance~~us. In ~~connection~~For ~~with the acquisition and ownership of our real properties~~example, we ~~may~~could be ~~exposed~~subject to ~~such~~an ~~costs~~entity inlevel ~~connection~~tax ~~with~~under ~~such~~amendments ~~regulations.~~to ~~The~~the ~~cost~~margins oftax ~~defending~~in ~~against~~the ~~environmental~~state ~~claims,~~ of ~~any~~Texas. ~~damages~~Such oran ~~fines~~entity welevel ~~must~~tax ~~pay, of compliance with environmental regulatory requirements or of remediating any contaminated real property~~ could ~~materially and~~ adversely affect our ~~business,~~cash ~~lower the value of our assets or results of operations and, consequently, lower the amounts available for distribution to you~~flow.

~~The~~Uninsured ~~costs~~losses ~~associated~~or ~~with~~premiums ~~complying~~for ~~with~~insurance ~~the~~coverage ~~Americans~~relating ~~with~~to ~~Disabilities~~real ~~Act~~property may ~~reduce~~adversely ~~the~~affect ~~amount~~your ~~of cash available for distribution to our stockholders~~returns.

~~Investment~~There inare ~~real~~types of ~~properties~~losses, ~~may~~generally ~~also~~catastrophic bein ~~subject~~nature, tosuch ~~the~~as ~~Americans~~losses ~~with~~due ~~Disabilities~~to ~~Act~~wars, acts of ~~1990~~terrorism, asearthquakes, ~~amended~~floods, hurricanes, pollution or ~~the~~environmental ~~ADA.~~matters ~~Under~~that ~~the~~are ~~ADA,~~uninsurable ~~all~~or ~~places of~~not ~~public~~economically ~~accommodation~~insurable, ~~are~~or ~~required~~may be insured subject to ~~comply~~limitations, ~~with~~such ~~federal~~as large ~~requirements~~deductibles ~~related~~or toco-payments. ~~access~~Risks ~~and~~associated ~~use~~with bypotential ~~disabled~~acts ~~persons.~~of ~~The~~terrorism ~~ADA has~~could ~~separate~~sharply ~~compliance~~increase ~~requirements~~the premiums we pay for ~~“public~~coverage ~~accommodations”~~against property and ~~“commercial~~casualty ~~facilities”~~claims. ~~that~~Additionally, ~~generally~~ mortgage lenders sometimes require ~~that~~commercial ~~buildings~~property ~~and~~owners to ~~services~~purchase bespecific ~~made~~coverage ~~accessible~~against ~~and~~terrorism ~~available~~as toa ~~people~~condition ~~with~~for ~~disabilities~~providing mortgage loans. ~~With~~These ~~respect~~policies tomay ~~the~~not ~~properties~~be available weat ~~acquire~~a reasonable cost, ~~the~~if ~~ADA’s~~at ~~requirements~~all, which could ~~require~~inhibit usour ability to ~~remove~~finance ~~access~~or ~~barriers~~refinance ~~and~~our ~~could~~real ~~result~~properties. inIn ~~the~~such ~~imposition~~instances, we ofmay ~~injunctive relief,~~be ~~monetary~~required ~~penalties~~to ~~or,~~provide inother ~~some~~financial ~~cases~~support, aneither ~~award~~through offinancial ~~damages~~assurances or self-insurance, to cover potential losses. WeChanges ~~cannot~~in ~~assure~~the ~~you~~cost ~~that~~or weavailability ~~will~~of beinsurance ~~able~~could expose us to ~~acquire~~uninsured ~~properties which~~casualty ~~comply~~losses. ~~with~~In the ~~ADA~~event orthat ~~allocate~~any ~~the~~of our ~~responsibility~~real ~~for~~properties ~~compliance~~incurs ~~with~~a ~~the~~casualty ~~ADA~~loss towhich ~~another~~is ~~third~~not ~~party,~~fully ~~such~~covered asby ~~the~~insurance, ~~seller or~~ the ~~tenant~~value of ~~the~~our ~~property.~~assets ~~Any~~will ~~monies~~be wereduced ~~use~~by any tosuch ~~comply~~uninsured ~~with~~loss. ~~the~~In ~~ADA~~addition, ~~will~~we ~~reduce~~cannot ~~the~~assure ~~amount~~you ofthat ~~cash~~funding will be available to us for ~~distribution~~repair or reconstruction of todamaged ~~our~~real ~~stockholders~~property in the future.

25We compete with numerous other parties or entities for real estate assets and may not compete successfully.

~~Real~~We ~~property~~will ~~investments~~compete ~~made~~with numerous ~~outside~~other persons or entities seeking to buy real estate assets or to attract tenants to real properties we acquire. These ofpersons ~~the~~or ~~United~~entities ~~States~~may have greater experience and financial strength than us. There is no assurance that we will be ~~subject~~able to ~~currency~~acquire real ~~rate~~estate ~~exposure~~assets or attract tenants on favorable terms, if at all. For example, our competitors may be willing to offer space at rental rates below our rates, causing us to lose existing or potential tenants and ~~risks~~pressuring ~~associated~~us ~~with~~to ~~the~~reduce ~~uncertainty~~our rental rates to retain existing tenants or convince new tenants to lease space at our properties. Each of ~~foreign~~these ~~laws~~factors could adversely affect our results of operations, financial condition, value of our investments and ~~markets~~ability to pay distributions to you.

WeOur ~~may~~ability ~~acquire properties in Canada~~ to ~~the~~make ~~extent that opportunities exist that may help us meet our investment objectives. International investments and~~distributions ~~operations generally are subject~~ to ~~various~~our ~~political~~stockholders and other risks that are different from and in addition to those for U.S. investments and operations. To the extent that we invest in real property located outside of the United States, in addition to risks inherent in the investment in real estate generally discussed in this Annual Report, we will ~~also~~depend beupon ~~subject to fluctuations in foreign currency exchange rates and~~ the ~~uncertainty~~ability of ~~foreign~~hotel ~~laws~~managers ~~and markets including, but not limited~~ to, ~~unexpected~~operate changes in regulatory requirements such as the enactment of laws prohibiting or restricting the foreign ownership of property, political and economic instability in certain geographic locations, difficulties in managing international operations, potentially adverse tax consequences, laws restricting us from removing profits earned from activities within the country to the United States, including the payment of distributions, additional accounting and control expenses and the administrative burden associated with complying with a wide variety of foreign laws. Changes in foreign currency exchange rates may adversely impact the fair values and earnings streams of our ~~international~~hotels ~~holdings and thus the returns on our non-dollar denominated investments~~effectively. Although we may hedge our foreign currency risk subject to the REIT income qualification tests, we may not be able to do so successfully and may incur losses on these investments as a result of exchange rate fluctuations.

~~Risks~~We ~~Associated~~currently ~~with~~own ~~Real~~interests in ~~Estate~~twelve ~~Securities~~hotel properties and two notes receivable from related parties. To qualify as a REIT, we cannot operate any hotel or directly participate in the decisions affecting the daily operations of any hotel. Our unaffiliated third-party hotel managers for our current hotel properties and ~~Debt~~for any other hotel properties we acquire will have direct control of the daily operations of our hotels. We will not have the authority to directly control any particular aspect of the daily operations (e.g., setting room rates) of any hotel that we acquire an interest in. Thus, even if we believe that a hotel is being operated in an inefficient or less than optimal manner, we will not be able to require a change to the method of its operation. Our only alternative for changing the operation of a hotel will be to replace the third-~~Related~~party ~~Investments~~manager in the situation where the applicable hotel management agreement permits us to do so.

~~Disruptions~~Our inability to make distributions to stockholders will be impacted by the ~~financial~~performance ~~markets~~of our third-party hotel managers in generating sufficient revenues ~~and~~from ~~deteriorating~~our ~~economic~~hotels ~~conditions~~in ~~could~~excess ~~adversely~~of ~~impact~~operating ~~the~~expenses. ~~commercial~~The ~~mortgage~~hotel ~~market~~managers aswill ~~well~~be affected by factors beyond their control, such as changes in the ~~market~~level of demand for ~~debt-~~rooms and related services of the hotels, their ability to maintain and increase gross revenues and ~~investments~~operating ~~generally~~margins at the hotels and other factors. Therefore, ~~which~~any ~~could~~operating ~~hinder~~difficulties ~~our~~or other factors affecting the hotel managers’ ability to ~~implement~~maintain ~~our~~and ~~business~~increase ~~strategy~~gross revenues and ~~generate~~operating ~~returns~~margins ~~for~~at our ~~stockholders.~~hotels could significantly adversely affect our financial condition and results of operations.

AsCompetition ~~part~~in ofthe ~~our~~hospitality ~~investment~~industry ~~strategy, we may acquire real estate-related loans, real estate-related debt securities~~ and ~~other~~with ~~real~~third ~~estate-related~~parties investments. The returns available to investors on these investments are determined by: (1) the supply and demand for such investments and (2) the existence of a market for such investments, which includes the ability to sell or finance such investments. During periods of volatility, the number of investors participating in ~~the~~acquiring ~~market~~properties may ~~change~~reduce atour anprofitability accelerated pace. As liquidity or “demand” increases, the returns available to investors will decrease. Conversely, a lack of liquidity will cause the returns available to investors to increase. Recently, concerns pertaining to the deterioration of credit in the residential mortgage market have expanded to almost all areas of the debt capital markets including corporate bonds, asset-backed securities and ~~commercial real estate mortgages and loans. Continued or future instability may interfere with~~ the ~~successful~~return ~~implementation~~on ofyour ~~our business strategy~~investment.

The ~~recent~~hospitality ~~market~~industry is ~~downturn~~generally ~~could~~characterized as being intensely competitive. Our current hotel properties and any additional hotels in which we invest ~~negatively~~will ~~impact~~compete ~~borrowers’~~with ~~ability~~existing toand ~~pay~~new ~~principal~~hotels in their geographic markets, including with independent hotels, hotels which are part of local or regional chains and ~~interest~~hotels ~~payments~~in onother ~~mortgage~~well-known ~~loans~~national chains, including those offering different types of accommodations and services. The principal competitive factors that will affect the hotel properties in which we ~~own~~seek to invest include, but are not limited to, brand recognition, location, range of services and guest amenities and the quality and price of the hotel rooms and services provided. Any one of the foregoing could impact our profitability and ability to pay distributions.

~~The~~If ~~recent~~we ~~market downturn,~~decide ~~in addition~~ to ~~other~~invest in ~~non-economic~~additional ~~factors~~hotel ~~such as an excess supply of~~ properties, ~~has~~we ~~had~~expect ato ~~material~~face ~~negative~~significant ~~impact on~~competition ~~the~~for ~~values~~attractive ofhotel ~~commercial~~investment ~~real~~opportunities ~~estate.~~from ~~Due~~other major ~~to declining~~ real estate ~~values,~~investors ~~borrowers~~with ~~may~~significant becapital, ~~less~~including ~~able~~both topublicly ~~pay~~traded ~~principal~~REITs and ~~interest~~private institutional investment onfunds. ~~our~~Because ~~loans~~of ~~especially~~competition iffrom ~~the~~other well-capitalized real estate ~~economy weakens. Further~~investors, ~~declining~~we ~~real~~can ~~estate~~provide ~~values~~no ~~significantly~~assurance ~~increase the likelihood~~ that we will ~~incur~~be ~~losses~~able to onacquire ~~our~~desired ~~loans~~hotel inproperties. ~~the~~Where ~~event~~it ofis ~~default~~possible ~~because~~to ~~the~~acquire ~~value~~desired ofhotel ~~our~~properties, ~~collateral~~we ~~may~~can beprovide ~~insufficient~~no toassurance ~~cover~~that ~~our~~we ~~cost~~will onbe ~~the~~able ~~loan.~~to ~~Any~~do ~~sustained~~so ~~period~~on offavorable ~~increased~~terms ~~payment delinquencies, foreclosures~~ or ~~losses~~that ~~could~~such ~~adversely~~properties ~~affect~~will ~~both~~ meet our ~~net~~return ~~interest~~expectations ~~income~~or ~~from~~conform ~~loans~~to in our ~~portfolio~~investment criteria. asThe ~~well~~competition asto ~~our~~acquire ~~ability~~attractive tohotel ~~sell~~investment ~~loans,~~opportunities ~~which~~could ~~would~~have ~~significantly~~an ~~harm~~adverse ~~our~~effect ~~revenues, results~~on ofour ~~operations,~~ financial condition~~, business prospects~~ and ~~our~~ ability to ~~make~~pay distributions ~~to you~~.

~~Our mortgage loans may be affected by unfavorable real estate market conditions, which could decrease the value of those loans and the return on your investment.~~21

WeIf ~~are~~we atdo ~~risk~~not ~~of defaults~~successfully ~~by the borrowers on our mortgage loans. These defaults may be caused by many conditions beyond our control, including~~attract ~~interest rate levels~~ and ~~local~~retain ~~and~~franchise ~~other~~flagships ~~economic~~for ~~conditions~~hotel ~~affecting real estate values. We will not know whether the values of the~~ properties, ~~securing~~ our ~~mortgage~~business ~~loans~~ will ~~remain at the levels existing on the dates of origination of those mortgage loans. If the values of the underlying properties drop~~suffer, ~~our~~and ~~risk~~this result will ~~increase~~reduce ~~because of~~ the ~~lower~~ value of ~~the~~your ~~security associated with such loans~~investment.

26We must continue to attract and retain well-known hospitality franchises for our current hotel properties and any additional hotels in which we invest to make such investments profitable. Certain hospitality franchises, including limited-service hotels, impose radius restrictions that limit the number of their hotels allowed within a certain distance of one another. Hospitality franchises also generally require that design and quality standards be met for guest room and common areas before a hospitality franchise will agree to provide the franchise agreement to operate a property. Compliance with these brand standards may impose significant costs upon us. If we are not able to attract and retain franchise flagships for our hotel properties because of location restrictions, the high cost of complying with design and quality standards, or any other reason, our business will suffer, and this result will reduce the value of your investment.

ToThe ~~the~~hospitality ~~extent~~industry weis ~~make or invest in~~subject ~~mortgage~~to ~~loans~~unique, ~~our~~unforeseeable ~~mortgage~~risks ~~loans will be subject to interest rate fluctuations~~ that ~~could~~may ~~reduce~~negatively impact our ~~returns~~business ~~as compared to market interest rates~~ and ~~reduce~~ the value of ~~the mortgage loans in the event we sell them; accordingly, the value of~~ your investment ~~would be subject to fluctuations in interest rates~~.

ToThe ~~the~~hospitality ~~extent we invest~~industry inis ~~fixed-rate,~~subject ~~long-term~~to ~~mortgage loans and market interest rates rise~~unique, ~~the~~unforeseeable ~~mortgage loans could yield a return that is lower than then-current market rates~~risks, ~~which would lower the proceeds we would receive in the event we sell~~ such ~~assets.~~as Ifnatural ~~market interest rates decrease~~disasters, wepandemics ~~will~~and bethreats ~~adversely~~of ~~affected~~pandemics, toacts ~~the~~of ~~extent~~terror ~~that~~and ~~mortgage~~other catastrophes. ~~loans~~We ~~are~~have ~~prepaid~~no ~~because~~control weover ~~may~~events ~~not~~of bethis ~~able~~type toand ~~make new~~they ~~loans~~could athave ~~the~~a ~~higher~~substantial ~~interest~~impact ~~rate.~~on To the ~~extent~~hospitality ~~we invest in variable-rate loans~~ industry and ~~interest rates decrease,~~ our ~~revenues will also decrease~~business. ~~Finally,~~Because ~~to the extent~~ we ~~invest~~are inunable ~~variable-rate~~to ~~loans~~control ~~and~~the ~~interest rates increase~~timing, ~~the~~duration ~~value~~or magnitude of ~~the~~these ~~loans we~~unforeseen ~~own at such time would decrease~~events, ~~which would lower~~ the ~~proceeds~~negative ~~we would receive in the event we sell such assets. For these~~impact ~~reasons,~~upon ~~if we invest in mortgage loans,~~ our ~~returns~~business oncould ~~those loans and the value of your investment will~~ be ~~subject to fluctuations in market interest rates~~great. ~~Our mortgage loan investment, the Hyatt Place note, accrues interest at a variable rate.~~

~~The~~In ~~CMBS~~cases ~~and CDOs~~ in which one of our tenants is required to pay rent based on a percentage of the tenant’s income from its operations at the real property, the actual rental income we receive under such a lease may ~~invest~~ ~~are~~be ~~subject~~inadequate to ~~several~~cover ~~types~~the ofoperating ~~risks~~expenses associated with the real property.

~~Commercial~~Lease ~~mortgage-backed~~payments due ~~securities,~~under orleases ~~CMBS,~~for ~~are~~any ~~bonds~~retail ~~which~~properties ~~evidence~~we ~~interests~~acquire ~~in,~~may orbe ~~are~~based ~~secured~~in ~~by,~~part aon ~~single~~the ~~commercial~~income ~~mortgage~~of ~~loan~~the orretail atenant. ~~pool~~In ofsuch ~~commercial~~cases where ~~mortgage~~the ~~loans.~~tenant ~~Collateralized~~is ~~debt~~required ~~obligations,~~to orpay ~~CDOs,~~rent ~~are~~based on a ~~type~~percentage of ~~debt~~the ~~obligation~~tenant’s ~~that~~income ~~are~~from ~~backed~~its byoperations ~~commercial~~at the real ~~estate assets~~property, the actual rental income we receive under such asa ~~CMBS,~~lease ~~commercial~~may ~~mortgage~~be ~~loans,~~inadequate ~~B-notes,~~to orcover ~~mezzanine~~the ~~paper.~~operating ~~Accordingly,~~expenses associated with the ~~mortgage~~real property ~~backed~~if ~~securities~~a tenant’s income is substantially lower than projected. In such case, we may ~~invest~~ innot ~~are~~have ~~subject~~access to ~~all~~funds required in the ~~risks~~future ofto pay the ~~underlying~~operating ~~mortgage~~expenses ~~loans~~associated with the real property.

InReal aproperty ~~rising~~that ~~interest rate~~incurs environment, the value of CMBS and CDOs may be adversely affected when payments on underlying mortgages do not occur as anticipated, resulting in the extension of the security’s effective maturity and the related increase in interest rate sensitivity of a ~~longer-term instrument. The value of CMBS and CDOs may also change due to shifts in the market’s perception of issuers~~vacancy ~~and~~could ~~regulatory~~be ordifficult ~~tax changes adversely affecting the mortgage securities markets as a whole. In addition, CMBS and CDOs are subject~~ to ~~the~~sell ~~credit risk associated with the performance of the underlying mortgage properties. In certain instances, third party guarantees~~ or ~~other forms of credit support can reduce the credit risk~~re-lease.

~~CMBS~~We ~~and~~may ~~CDOs~~invest ~~are~~in retail, ~~also~~office ~~subject~~or toindustrial ~~several~~properties, ~~risks~~which ~~created~~may ~~through~~incur ~~the~~a ~~securitization~~vacancy ~~process.~~either ~~Subordinate~~by ~~CMBS~~the ~~and~~continued ~~CDOs~~default ~~are~~of ~~paid~~a ~~interest~~tenant ~~only~~under toits lease or the expiration ~~extent~~of ~~that~~one ~~there~~of ~~are~~our ~~funds~~leases. ~~available~~In toaddition, ~~make~~certain ~~payments.~~of Tothe real properties we acquire may have some level of vacancy at the ~~extent~~time of closing. Certain other real properties may be specifically suited to the ~~collateral~~particular ~~pool~~needs ~~includes~~of a ~~large~~tenant ~~percentage~~and ofmay ~~delinquent loans~~become vacant. Therefore, we ~~there~~may ishave adifficulty ~~risk~~obtaining ~~that~~a ~~interest~~new ~~payment~~tenant onfor ~~subordinate~~any ~~CMBS~~vacant ~~and~~space ~~CDOs~~we ~~will~~have ~~not~~in beour ~~fully~~real ~~paid~~properties. ~~Subordinate~~If ~~securities~~the ofvacancy ~~CMBS~~continues for ~~and~~a ~~CDOs~~long ~~are~~period ~~also~~of ~~subject~~time, we may suffer reduced revenues resulting in lower cash distributions to ~~greater~~stockholders. ~~credit~~In ~~risk~~addition, ~~than~~the ~~those~~resale value ~~CMBS~~of ~~and~~the ~~CDOs~~real ~~that~~property ~~are~~could ~~more~~be ~~highly~~diminished ~~rated~~because the market value may depend principally upon the value of the leases of such real property.

~~The~~We ~~mezzanine~~are ~~loans~~dependent inon ~~which~~tenants wefor ~~may~~revenue ~~invest~~and ~~would~~our ~~involve~~inability ~~greater~~to ~~risks~~lease ofour ~~loss~~properties ~~than~~or ~~senior~~to ~~loans~~collect ~~secured~~rent byfrom ~~income-producing~~our ~~real~~tenants ~~properties~~may adversely affect our results of operations and returns to our stockholders.

We may invest in ~~mezzanine~~retail, ~~loans~~office ~~that~~or ~~take~~industrial ~~the~~properties, ~~form~~which ofmay ~~subordinated~~be ~~loans~~occupied ~~secured~~ by ~~second~~a ~~mortgages~~single ontenant. ~~the~~As ~~underlying~~a ~~real~~result, ~~property~~the orsuccess ~~loans~~of ~~secured~~such ~~by a~~properties ~~pledge~~will ofdepend on the ~~ownership~~financial ~~interests~~stability of ~~the~~a ~~entity~~single ~~owning~~tenant. ~~the~~Lease ~~real~~payment ~~property,~~defaults ~~the~~by ~~entity~~such ~~that~~tenants ~~owns~~could ~~the~~cause ~~interest~~us into ~~the~~reduce ~~entity owning~~ the ~~real~~amount ~~property~~of ordistributions to ~~other~~stockholders ~~assets.~~and ~~These~~could ~~types~~force ofus ~~investments~~to ~~involve~~find aan ~~higher~~alternative ~~degree~~source of ~~risk~~revenue ~~than~~to ~~long-term~~pay ~~senior~~any mortgage ~~lending secured~~loan byon ~~income-producing real property because~~ the ~~investment may become unsecured as a result of foreclosure by the senior lender~~property. In the event of such a ~~bankruptcy~~tenant ~~of the entity providing the pledge of its ownership interests as security~~default, we may ~~not~~also ~~have full~~experience ~~recourse~~delays toin ~~the~~enforcing ~~assets~~our ofrights ~~such~~as ~~entity,~~landlord orand ~~the assets of the entity~~ may ~~not~~incur besubstantial ~~sufficient~~costs ~~to satisfy our mezzanine loan. If~~in aprotecting ~~borrower defaults on~~ our ~~mezzanine~~investment ~~loan~~and orre-letting ~~debt senior to~~ our ~~loan,~~property. orIf ~~in the event of~~ a ~~borrower~~lease ~~bankruptcy,~~is ~~our mezzanine loan will be satisfied only after the senior debt. As a result~~terminated, we may ~~not~~be ~~recover~~unable ~~some~~to orlease ~~all~~the ofproperty ~~our~~for ~~investment. In addition, mezzanine~~the ~~loans~~rent ~~may~~previously ~~have~~received ~~higher~~or ~~loan-to-value~~sell ~~ratios than conventional mortgage loans, resulting in less equity in~~ the ~~real~~ property ~~and increasing~~without ~~the~~incurring ~~risk~~a of loss ~~of principal~~.

We may ~~make~~not ~~investments~~have infunding ~~non-U.S.~~for future ~~dollar~~tenant ~~denominated securities~~improvements, which ~~will~~may beadversely ~~subject~~affect tothe ~~currency~~value ~~rate~~of ~~exposure~~our ~~and~~properties, ~~risks~~our ~~associated~~results ~~with~~of ~~the~~operations ~~uncertainty~~and ofreturns ~~foreign laws~~to ~~and~~our ~~markets~~stockholders.

~~Some~~We ofmay ~~our~~invest ~~real~~in ~~estate~~retail, ~~securities~~office ~~investments~~or ~~may~~industrial beproperties ~~denominated~~with inone ~~foreign~~or ~~currencies~~more ~~and,~~tenants. ~~therefore,~~When wea ~~expect~~tenant toat ~~have~~such ~~currency~~a ~~risk~~property ~~exposure~~does tonot ~~any such~~renew ~~foreign~~its ~~currencies.~~lease Aor ~~change~~otherwise vacates its space in ~~foreign~~one ~~currency~~of ~~exchange~~our ~~rates~~buildings, ~~may~~it ~~have~~is anlikely ~~adverse~~that, ~~impact~~to onattract ~~returns~~one onor ~~our~~more ~~non-U.S. dollar~~new tenants, we will be required to expend ~~denominated~~substantial ~~investments~~funds to construct new tenant improvements in the vacated space. ~~Although~~We wedid ~~may~~not ~~hedge~~establish ~~our~~a ~~foreign~~general ~~currency~~working ~~risk~~capital ~~subject~~reserve out toof the ~~REIT~~proceeds ~~income~~from ~~qualification~~our ~~tests,~~public weofferings. ~~may~~ We do not becurrently ~~able~~have toan doidentified sofunding ~~successfully~~source ~~and~~to provide funds which may be ~~incur~~required ~~losses~~in onthe ~~these~~future ~~investments~~for astenant aimprovements ~~result~~and oftenant ~~exchange~~refurbishments ~~rate~~to ~~fluctuations.~~attract Tonew ~~the~~tenants. ~~extent that~~If we ~~invest~~do innot ~~non-U.S. dollar~~establish ~~denominated~~sufficient reserves ~~securities,~~for inworking ~~addition~~capital toor ~~risks~~obtain ~~inherent~~adequate insecured ~~the~~financing ~~investment~~to insupply ~~securities~~necessary ~~generally discussed~~funds infor ~~this~~capital ~~Annual~~improvements ~~Report~~or similar expenses, we ~~will~~may ~~also~~ be ~~subject~~required to ~~risks~~defer ~~associated~~necessary ~~with~~or ~~the~~desirable ~~uncertainty~~improvements ofto ~~foreign~~our ~~laws~~real ~~and~~properties. ~~markets~~If ~~including~~we defer such improvements, ~~but~~the ~~not~~applicable ~~limited~~real ~~to,~~properties ~~unexpected~~may ~~changes~~decline in ~~regulatory requirements~~value, ~~political~~ and ~~economic~~it ~~instability~~may inbe ~~certain~~more ~~geographic~~difficult ~~locations,~~for us to attract or retain tenants to such real ~~difficulties~~properties inor ~~managing~~the ~~international~~amount ~~operations,~~of ~~potentially~~rent ~~adverse~~we ~~tax~~can ~~consequences,~~charge ~~additional~~at ~~accounting~~such ~~and~~real ~~control~~properties ~~expenses and~~may ~~the~~decrease. ~~administrative~~We ~~burden~~cannot assure you that we will have any sources of ~~complying~~funding ~~with~~available ato ~~wide~~us ~~variety~~for repair or reconstruction of ~~foreign~~damaged ~~laws~~real property in the future.

2722

~~Risks~~Long-term ~~Associated~~leases ~~With~~may ~~Debt~~not ~~Financing~~result in fair market lease rates over time; therefore, our income and our distributions to our stockholders could be lower than if we did not enter into long-term leases.

We ~~have~~may ~~incurred,~~enter ~~and~~into ~~plan~~long-term leases with tenants of certain of our properties. Our long-term leases would likely provide for rent to ~~incur~~increase over time. However, inif we do not accurately judge the ~~future,~~potential ~~mortgage~~for ~~indebtedness~~increases ~~and~~in ~~other~~market ~~borrowings~~rental rates, ~~which~~we may ~~increase~~set the terms of these long-term leases at levels such that even after contractual rental increases the rent under our ~~business~~long-term ~~risks~~leases is less than then-current market rental rates. Further, ~~could~~we ~~hinder~~may ~~our~~have no ability to ~~make~~terminate those leases or to adjust the rent to then-prevailing market rates. ~~distributions~~As a result, our income and distributions to our stockholders could ~~decrease~~be ~~the~~lower ~~value~~than ofif ~~your~~we ~~investment~~did not enter into long-term leases.

WeActions ~~have incurred, and plan to incur in the future, financing that is secured by our real estate assets. Under our charter, we have a limitation on borrowing which precludes us from borrowing in excess~~ of ~~300%~~joint ofventure ~~the value of our net assets. “Net assets” for purposes~~partners ofcould ~~this~~negatively ~~calculation~~impact ~~is defined to be~~ our ~~total assets (other than intangibles), valued at cost prior to deducting depreciation or other non-cash reserves, less total liabilities~~performance. Generally speaking, the preceding calculation is expected to approximate 75% of the aggregate cost of our real estate assets before non-cash reserves and depreciation. We may temporarily borrow in excess of these amounts if such excess is approved by a majority of the independent directors and is disclosed to stockholders in our next quarterly report, along with a justification for such excess. As of December 31, 2015, our debt-to-net-asset ratio did not exceed 300%. In addition, we may incur mortgage debt and pledge some or all of our real estate assets as security for that debt to obtain funds to acquire additional real estate assets or for working capital. We may also borrow funds as necessary or advisable to ensure we maintain our REIT tax qualification, including the requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders (computed without regard to the distribution paid deduction and excluding net capital gains). Furthermore, we may borrow if we otherwise deem it necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes.

~~High~~We ~~debt~~may ~~levels~~enter ~~will~~into joint ~~cause~~ventures uswith tothird ~~incur~~parties, ~~higher~~including ~~interest~~with ~~charges,~~entities ~~which~~that ~~would~~are ~~result~~affiliated inwith ~~higher~~our ~~debt~~advisor. ~~service~~For ~~payments~~example, ~~and~~we ~~could~~owned beour ~~accompanied~~interest ~~by restrictive~~in ~~covenants.~~the IfHyatt ~~there~~Place isnote through a ~~shortfall~~joint venture between ~~the cash flow from~~ a ~~property~~wholly ~~and~~owned ~~the~~subsidiary ~~cash~~of ~~flow~~our ~~needed~~operating topartnership ~~service~~and ~~mortgage~~an ~~debt~~affiliated ~~on that~~entity ~~property,~~controlled ~~then~~by ~~the~~Brett ~~amount available for distributions to stockholders may be reduced~~C. ~~In addition~~Moody, ~~incurring~~our ~~mortgage~~Chairman ~~debt~~of ~~increases~~ the ~~risk~~Board ofand ~~loss~~Chief ~~since~~Executive ~~defaults~~Officer. onWe ~~indebtedness secured by a property~~ may ~~result~~also inpurchase ~~lenders~~and ~~initiating~~develop ~~foreclosure actions. In~~properties ~~that~~in ~~case,~~joint weventures ~~could~~or ~~lose the property securing the loan that is~~ in ~~default~~partnerships, ~~thus~~co-tenancies ~~reducing~~or ~~the~~other ~~value~~co-ownership ofarrangements ~~your~~with ~~investment.~~the ~~For~~sellers ~~tax purposes, a foreclosure on any~~ of ~~our~~the properties, ~~will be treated as a sale of the property for a purchase price equal to the outstanding~~affiliates ~~balance~~ of the ~~debt~~sellers, ~~secured~~developers byor ~~the~~other ~~mortgage~~persons. IfSuch ~~the~~investments ~~outstanding~~may ~~balance~~involve ofrisks ~~the~~not ~~debt~~otherwise ~~secured~~present bywith ~~the~~a ~~mortgage~~direct ~~exceeds our tax basis~~investment in ~~the~~real ~~property~~estate, ~~we will recognize taxable income on foreclosure~~including, ~~but~~for we would not receive any cash proceeds. If any mortgage contains cross collateralization or cross default provisions, a default on a single property could affect multiple properties. If any of our properties are foreclosed upon due to a default, our ability to pay cash distributions to our stockholders will be adversely affected.example:

~~Disruptions~~● in the ~~financial~~possibility ~~markets and~~that ~~deteriorating economic conditions could also adversely affect~~ our ~~ability~~venture topartner ~~secure~~or ~~debt~~co-tenant ~~financing~~in onan ~~attractive~~investment ~~terms~~might ~~and the~~become ~~values of investments we make.~~bankrupt;

~~The~~● ~~capital~~that ~~and credit markets have recently experienced extreme volatility and disruption. Liquidity in~~ the ~~global~~venture ~~credit~~partner ~~market has been severely contracted by these market disruptions, making it costly to obtain new lines of credit~~ or ~~refinance~~co-tenant ~~existing debt. We have, and expect in the future to continue to, finance our investments in part with debt. We~~ may ~~not~~at beany ~~able~~time tohave ~~obtain~~economic ~~debt~~or ~~financing~~business oninterests ~~attractive terms~~ or atgoals ~~all.~~which ~~If we~~ are ~~unable to obtain debt financing on attractive terms~~, weor ~~may be forced to use a greater proportion of our offering proceeds to finance our acquisitions and originations,~~ which ~~may reduce the number of investments we would otherwise make. If we are unable to obtain debt financing on attractive terms~~become, weinconsistent ~~may~~with ~~modify~~ our ~~investment~~business ~~strategy~~interests ~~in order to optimize our portfolio performance. Our options would include limiting~~ or ~~eliminating the use of debt and focusing on those investments that do not require the use of leverage to meet our portfolio~~ goals.;

~~Instability~~● inthat ~~the~~such ~~debt~~venture ~~markets~~partner ~~may make it more difficult for us to finance~~ or ~~refinance~~co-tenant ~~properties,~~may ~~which~~be ~~could~~in ~~reduce~~a ~~the~~position ~~number~~to oftake ~~properties~~action wecontrary ~~can~~to ~~acquire~~our ~~and the~~instructions ~~amount~~or ofrequests ~~cash~~or ~~distributions~~contrary ~~we can make~~ to our ~~stockholders.~~policies or objectives;

If● ~~mortgage debt is unavailable on reasonable terms as a result of increased interest rates or other factors, we may not be able to finance~~ the ~~initial purchase~~possibility ofthat ~~properties. In addition, if~~ we place mortgage debt on properties, we run the risk of being unable to refinance such debt when the loans come due, or of being unable to refinance on favorable terms. If interest rates are higher when we refinance debt, our income could be reduced. We may beincur ~~unable~~liabilities toas ~~refinance~~a ~~debt at appropriate times, which may require us to sell properties on terms that are not advantageous to us, or could~~ result ~~in the foreclosure~~ of ~~such~~an ~~properties.~~action Iftaken ~~any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to you and may hinder our ability to raise more capital~~ by ~~issuing~~such ~~securities~~venture ~~or by borrowing more money.~~partner;

28● that disputes between us and a venture partner may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business;

~~Increases~~● inthe ~~interest~~possibility ~~rates~~that ~~could increase~~if ~~the~~we ~~amount~~have a right of ~~our~~first ~~debt~~refusal ~~payments~~or ~~and~~buy/sell ~~negatively~~right ~~impact~~to buy out a co-venturer, co-owner or partner, we may be unable to finance such a buy-out if it becomes exercisable or we may be required to purchase such interest at a time when it would not otherwise be in our ~~operating~~best ~~results.~~interest to do so; or

~~Interest~~● wethe ~~pay~~possibility ~~on our~~that ~~debt obligations will reduce cash available for distributions. If~~ we ~~incur~~may ~~variable~~not ~~rate~~be ~~debt,~~able ~~increases~~to insell ~~interest rates would increase~~ our interest ~~costs,~~in ~~which~~the ~~would~~joint ~~reduce~~venture ~~our~~if ~~cash flows and our ability to make distributions to you. If~~ we ~~need~~desire to ~~repay~~ ~~existing~~exit ~~debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times which may not permit realization of~~ the ~~maximum~~joint ~~return on such investments~~venture.

~~Lenders~~Under certain joint venture arrangements neither venture partner may ~~require~~have usthe power to ~~enter~~control ~~into restrictive~~the ~~covenants~~venture, ~~relating~~and toan ~~our~~impasse ~~operations~~could be reached, which might ~~could~~have ~~limit~~a ~~our~~negative ~~ability~~influence on the joint venture and decrease potential returns to ~~make~~you. ~~distributions~~In addition, to the extent that our venture ~~stockholders~~partner or co-tenant is an affiliate of our advisor, certain conflicts of interest will exist.

~~When~~Costs ~~providing~~of ~~financing, a~~complying ~~lender~~with ~~may~~governmental laws ~~impose restrictions on us that affect our distribution~~ and ~~operating~~regulations policies and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage a property, discontinue insurance coverage, or replace Moody National Advisor I, LLC as our advisor. In addition, loan documents may limit our ability to replace a property’s property manager or terminate certain operating or lease agreements related to aenvironmental ~~property.~~protection ~~These~~and orhuman ~~other~~health ~~limitations may adversely affect our flexibility~~ and ~~our~~safety ~~ability~~may tobe ~~achieve our investment objectives~~high.

~~Our~~All ~~derivative~~real ~~financial~~property ~~instruments~~investments ~~that~~and wethe ~~may~~operations ~~use~~conducted in connection with such investments are subject to ~~hedge~~federal, ~~against~~state ~~interest~~and ~~rate~~local ~~fluctuations~~laws ~~may~~and ~~not~~regulations berelating to ~~successful~~environmental inprotection ~~mitigating~~and ~~our~~human ~~risks~~health ~~associated~~and ~~with~~safety. ~~interest rates~~Some of these laws and ~~could~~regulations ~~reduce~~may ~~the~~impose ~~overall~~joint ~~returns~~and several liability on ~~your~~customers, ~~investment~~owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal.

WeUnder various federal, state and local environmental laws, a current or previous owner or operator of real property may ~~use~~be ~~derivative~~liable for the cost of removing ~~financial~~or ~~instruments~~remediating hazardous or toxic substances on such real property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, the presence of hazardous substances, or the failure to ~~hedge~~properly ~~exposures~~remediate these substances, may adversely affect our ability to ~~changes~~sell, inrent ~~interest~~or ~~rates~~pledge such real property as collateral for future borrowings. Environmental laws also may impose restrictions on ~~loans~~the ~~secured~~manner byin ~~our~~which real property ~~estate~~may ~~assets,~~be ~~but~~used noor ~~hedging~~businesses may be operated. Some of these laws and regulations have been amended so as to require compliance ~~strategy~~with ~~can~~new ~~protect~~or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us ~~completely~~to incur material expenditures. WeFuture ~~cannot~~laws, ~~assure~~ordinances ~~you~~or ~~that~~regulations ~~our~~may ~~hedging~~impose material ~~strategy~~environmental ~~and~~liability. Additionally, our tenants’ operations, the ~~derivatives~~existing ~~that~~condition of land when we ~~use~~buy ~~will~~it, ~~adequately~~operations ~~offset~~in the ~~risk~~vicinity of ~~interest~~our ~~rate~~real ~~volatility~~properties, such as the presence of underground storage tanks, or ~~that~~activities ~~our~~of ~~hedging~~unrelated ~~transactions~~third ~~will~~parties may ~~not~~affect ~~result~~our inreal ~~losses~~properties. InThere ~~addition~~are also various local, ~~the~~state ~~use~~and offederal fire, health, life-safety and similar regulations ~~such~~with ~~instruments~~which we may ~~reduce~~be required to comply and which may subject us to liability in the ~~overall~~form ~~return~~of onfines ~~our~~or ~~investments~~damages for noncompliance. In ~~These~~connection ~~instruments~~with ~~may~~the ~~also~~acquisition ~~generate~~and ~~income~~ownership ~~that~~of ~~may~~our ~~not~~real properties, we may be ~~treated~~exposed to such costs in connection with such asregulations. ~~qualifying~~The ~~REIT~~cost ~~income~~of ~~for~~defending ~~purposes~~against environmental claims, of any damages or fines we must pay, of compliance with environmental regulatory requirements or of remediating any contaminated real property could materially and adversely affect our business, lower the ~~75%~~value of our assets or ~~95%~~results ~~REIT~~of ~~income~~operations ~~test~~and, consequently, lower the amounts available for distribution to you.

~~Federal Income Tax Risks~~23

~~Failure~~The tocosts ~~qualify~~associated aswith acomplying with ~~REIT~~the ~~could adversely~~Americans ~~affect~~with ~~our~~Disabilities ~~operations~~Act ~~and~~may ~~our~~reduce ~~ability~~the amount of cash available for distribution to ~~make~~our ~~distributions~~stockholders.

WeInvestment ~~made~~in anreal properties ~~election~~may toalso be ~~taxed~~subject asto athe ~~REIT~~Americans ~~for federal~~with ~~income~~Disabilities ~~tax~~Act ~~purposes~~of ~~commencing~~1990, ~~with~~as ~~the~~amended, ~~taxable~~or ~~year~~the ~~ended~~ADA. ~~December~~Under 31the ADA, ~~2011.~~all ~~Our~~places of ~~qualification~~public asaccommodation aare ~~REIT~~required ~~depends~~to oncomply ~~our satisfaction~~with offederal ~~numerous~~ requirements ~~(some~~related onto anaccess ~~annual~~ and ~~quarterly~~use ~~basis)~~by ~~established~~disabled ~~under~~persons. ~~highly~~The ~~technical~~ADA has separate compliance requirements for “public accommodations” and ~~complex~~“commercial ~~provisions~~facilities” that generally ofrequire ~~the~~that ~~Internal~~buildings ~~Revenue~~and ~~Code~~services ~~for~~be ~~which~~made ~~there~~accessible ~~are~~and ~~only~~available ~~limited~~to ~~judicial~~people orwith ~~administrative~~disabilities. ~~interpretations~~With ~~and~~respect ~~involve~~to the ~~determination~~properties ofwe ~~various~~acquire, ~~factual~~the ~~matters~~ADA’s ~~and~~requirements ~~circumstances~~could ~~not~~require ~~entirely~~us ~~within~~to ~~our~~remove ~~control.~~access ~~The~~barriers ~~complexity~~and ofcould ~~these~~result ~~provisions~~in ~~and~~the imposition of ~~the applicable~~injunctive ~~income~~relief, ~~tax~~monetary ~~regulations~~penalties ~~that~~or, ~~have~~in ~~been~~some ~~promulgated~~cases, ~~under~~an ~~the~~award ~~Internal~~of ~~Revenue~~damages. ~~Code~~We iscannot ~~greater~~assure inyou ~~the~~that ~~case~~we ofwill abe ~~REIT~~able ~~that~~to ~~holds~~acquire ~~its~~properties ~~assets~~which ~~through~~comply awith ~~partnership,~~the asADA weor ~~do.~~allocate ~~Moreover,~~the noresponsibility ~~assurance~~for ~~can~~compliance bewith ~~given~~the ~~that~~ADA ~~legislation,~~to ~~new~~another ~~regulations~~third party, ~~administrative~~such ~~interpretations~~as the seller or ~~court~~the ~~decisions~~tenant ~~will~~of ~~not change~~ the ~~tax~~property. ~~laws~~Any ~~with~~monies ~~respect~~we use to ~~qualification~~comply aswith athe ~~REIT~~ADA orwill reduce the ~~federal~~amount ~~income~~of ~~tax~~cash ~~consequences~~available for distribution ofto ~~that~~our ~~qualification~~stockholders.

IfReal weproperty ~~were~~investments tomade ~~fail to qualify as a REIT for~~outside ~~any~~of ~~taxable~~the ~~year,~~United weStates ~~would~~will be subject to ~~federal~~currency ~~income~~rate ~~tax~~exposure onand ~~our~~risks ~~taxable~~associated ~~income~~with ~~at corporate rates. In addition, if we lose our REIT status we would generally be disqualified from treatment as a REIT for~~ the ~~four~~uncertainty ~~taxable years following the year in which we lose our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because~~ of ~~the~~foreign ~~additional~~laws ~~tax liability. In addition, distributions to stockholders would no longer be deductible in computing our taxable income~~ and ~~we would no longer be required to make distributions~~markets. To the extent that distributions had been made in anticipation of our qualifying as a REIT, we might be required to borrow funds or liquidate some investments to pay the applicable corporate income tax. In addition, although we intend to operate in a manner intended to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause our board of directors to recommend that we revoke our REIT election.

We ~~believe~~may acquire properties in Canada to the extent that ~~our~~opportunities ~~operating~~exist ~~partnership~~that ~~will be~~may ~~treated~~help ~~for~~us ~~federal~~meet ~~income~~our ~~tax~~investment ~~purposes~~objectives. asInternational ainvestments ~~partnership~~and operations generally are subject to various political and ~~not~~other asrisks anthat ~~association~~are ordifferent asfrom aand ~~publicly~~in ~~traded~~addition ~~partnership~~to ~~taxable~~those for U.S. asinvestments aand ~~corporation~~operations. IfTo the ~~Internal~~extent ~~Revenue~~that ~~Service~~we ~~were~~invest ~~successfully~~in toreal ~~determine~~property ~~that~~located ~~our~~outside ~~operating~~of ~~partnership~~the ~~should~~United ~~properly~~States, in addition to risks inherent in the investment in real estate generally discussed in this Annual Report, we will also be ~~treated~~subject to fluctuations in foreign currency exchange rates and the uncertainty of foreign laws and markets including, but not limited to, unexpected changes in regulatory requirements such as athe ~~corporation~~enactment of laws prohibiting or restricting the foreign ownership of property, ~~our~~political and ~~operating~~economic ~~partnership~~instability ~~would~~in becertain ~~required~~geographic tolocations, ~~pay~~difficulties ~~federal~~in ~~income~~managing international operations, potentially adverse tax atconsequences, ~~corporate~~laws restricting us from removing profits earned from activities within the country to the United States, including the payment of distributions, additional accounting and control expenses and the administrative burden associated with complying with a wide variety of foreign laws. Changes in foreign currency exchange rates may adversely impact the fair values and earnings streams of our international holdings and thus the returns on ~~its~~our ~~net~~non-dollar denominated investments. Although we may hedge our foreign currency risk subject to the REIT income. Inqualification ~~addition~~tests, we ~~would~~may ~~fail~~not be able to ~~qualify~~do asso asuccessfully ~~REIT,~~and ~~with~~may ~~the~~incur ~~resulting~~losses on ~~consequences~~these ~~described~~investments ~~above~~as a result of exchange rate fluctuations.

29Risks Associated with Real Estate Securities and Debt-Related Investments

ToDisruptions ~~qualify~~in the financial markets and deteriorating economic conditions could adversely impact the commercial mortgage market as awell ~~REIT~~as wethe ~~must~~market ~~meet~~for debt-related ~~annual~~investments ~~distribution requirements~~generally, which ~~may~~could ~~result~~hinder inour usability ~~distributing~~to ~~amounts~~implement ~~that~~our ~~may~~business ~~otherwise~~strategy beand ~~used~~generate returns for our ~~operations~~stockholders.

ToAs ~~obtain~~part ~~the~~of ~~favorable tax~~our ~~treatment accorded to REITs~~investment strategy, we ~~normally~~may ~~will~~acquire ~~be required each year to distribute to our stockholders at least 90% of our~~ real estate-related ~~investment income~~loans, ~~determined~~real ~~without~~estate-related ~~regard~~debt tosecurities ~~the dividends paid deduction~~ and byother ~~excluding~~real ~~net~~estate-related ~~capital gains~~investments. ~~We will~~ beThe ~~subject~~returns toavailable ~~federal income tax on our undistributed taxable income and net capital gain and~~ to ainvestors ~~4% nondeductible excise tax~~ on ~~any~~these ~~amount~~investments ~~by which distributions we pay with respect to any calendar year~~ are ~~less~~determined ~~than~~by: ~~the sum of~~ (1) ~~85%~~ ofthe ~~our~~supply ~~ordinary income,~~and ~~(2) 95%~~demand offor ~~our~~such ~~capital~~investments ~~gain net income~~ and (32) ~~100% of our undistributed income from prior years. These requirements~~ ~~could~~the ~~cause~~existence usof toa ~~distribute~~market ~~amounts~~for ~~that~~such ~~otherwise would be spent on~~ investments, inwhich ~~real~~includes ~~estate~~the ~~assets~~ability ~~and it is possible that we might be required~~ to ~~borrow~~sell ~~funds~~ or ~~sell~~finance ~~assets~~such ~~to fund these distributions~~investments. IfDuring weperiods of ~~fund distributions through borrowings~~volatility, ~~then we~~the ~~will~~number ~~have~~of toinvestors ~~repay~~participating ~~debt~~in ~~using~~the ~~money~~market wemay ~~could~~change ~~have~~at ~~otherwise~~an ~~used~~accelerated ~~to acquire properties resulting in our ownership of fewer real estate assets~~pace. IfAs weliquidity ~~sell assets~~ or ~~use~~“demand” increases, ~~offering~~the ~~proceeds~~returns available to ~~pay~~investors ~~distributions, we also~~ will ~~have fewer investments~~decrease. ~~Fewer investments may impact our ability to generate future cash flows from operations and~~Conversely, ~~therefore,~~a ~~reduce~~lack ~~your~~of ~~overall~~liquidity ~~return.~~will ~~Although~~cause ~~we intend to make distributions sufficient to meet~~ the ~~annual~~returns ~~distribution~~available ~~requirements and~~ to ~~avoid corporate income taxation on the earnings~~ ~~that~~investors ~~we distribute, it is possible that we might not always be able~~ to ~~do so~~increase.

~~Our~~A ~~ownership~~borrower’s offailure ~~our TRSs will be subject~~ to ~~limitations~~pay principal and ~~our~~ ~~transactions~~interest ~~with~~payments ~~our TRSs will cause us to be subject to a 100% penalty tax~~ on ~~certain~~mortgage ~~income~~loans orthat ~~deductions~~we ifown ~~those~~could ~~transactions are~~adversely ~~not~~affect ~~conducted~~our ~~on arm’s-length terms~~business.

~~Overall,~~Any nosustained ~~more than 25% (20% after 2017)~~period of ~~the~~increased ~~value~~payment ofdelinquencies, aforeclosures ~~REIT’s assets may consist of stock~~ or ~~securities~~losses ofcould ~~one~~adversely oraffect ~~more~~both ~~TRSs.~~our Innet ~~addition, the Internal Revenue Code limits the deductibility of~~ interest ~~paid~~income orfrom ~~accrued~~loans byin aour portfolio ~~TRS~~as towell ~~its~~as ~~parent~~our ~~REIT~~ability to ~~assure~~sell ~~that~~loans, ~~the~~which ~~TRS~~would issignificantly ~~subject~~harm toour anrevenues, ~~appropriate level~~results of corporate taxation. The Internal Revenue Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. The 100% tax would applyoperations, ~~for~~financial ~~example~~condition, ~~to the extent that~~ webusiness ~~were~~prospects found to have charged our TRS lessees rent in excess of an arm’s length rent. We will monitor the value of our respective investments in our TRSs for the purpose of ensuring compliance with TRS ownership limitations and ~~will structure~~ our ~~transactions with~~ability ~~our TRSs on terms that we believe are arm’s-length~~ to ~~avoid~~make ~~incurring~~distributions ~~the 100% excise tax described above. There can be no assurance, however, that we will be able~~ to ~~comply with the TRS asset test limitation or to avoid application of the 100% excise tax~~you.

IfOur ~~the~~mortgage ~~leases~~loans ofmay ~~our~~be ~~hotels~~affected by tounfavorable ~~the~~real ~~TRS~~estate ~~lessees~~market ~~are~~conditions, ~~not~~which ~~respected as~~could ~~true~~decrease ~~leases~~the ~~for~~value ~~U.S.~~of ~~federal~~those ~~income~~loans ~~tax~~and ~~purposes,~~the wereturn ~~will~~on ~~fail~~your ~~to qualify as a REIT~~investment.

ToWe ~~qualify~~are asat arisk ~~REIT,~~of ~~we must annually satisfy~~defaults ~~two~~by ~~gross~~the ~~income~~borrowers ~~tests,~~on ~~under which specified percentages of~~ our ~~gross~~mortgage ~~income must be derived from certain sources, such as “rents from real property~~loans.” ~~Rents~~These ~~paid~~defaults tomay ~~our~~be ~~operating~~caused ~~partnership~~ by ~~TRS~~many ~~lessees~~conditions ~~pursuant~~beyond ~~to the leases of~~ our ~~hotels~~control, ~~will~~including ~~constitute~~interest ~~substantially~~rate ~~all~~levels ofand ~~our~~local ~~gross~~and ~~income.~~other Ineconomic ~~order~~conditions ~~for~~affecting ~~such~~real ~~rent~~estate tovalues. ~~qualify~~We aswill ~~“rents~~not ~~from~~know ~~real~~whether ~~property”~~the ~~for~~values ~~purposes~~ of the ~~gross~~properties securing ~~income~~our ~~tests,~~mortgage ~~the~~loans ~~leases~~will ~~must~~remain beat ~~respected~~the aslevels ~~true~~existing ~~leases~~on ~~for~~the ~~U.S.~~dates ~~federal~~of ~~income~~origination ~~tax~~of ~~purposes~~those ~~and~~mortgage ~~not~~loans. beIf ~~treated~~the values asof ~~service~~the ~~contracts,~~underlying ~~financing~~properties ~~arrangements~~drop, ~~joint~~our ~~ventures~~risk orwill ~~some~~increase ~~other~~because ~~type~~ of ~~arrangement.~~the Iflower ~~our~~value ~~leases~~of ~~are~~the ~~not~~security ~~respected as~~associated ~~true~~with ~~leases~~such ~~for U~~loans.~~S. federal income tax purposes, we will fail to qualify as a REIT.~~

~~If any hotel managers that we may engage do not qualify as “eligible independent contractors,” or if our hotels are not “qualified lodging facilities,” we will fail to qualify as a REIT.~~ 24

~~Rent~~To ~~paid by a lessee that is a “related party tenant” of ours will not be qualifying income for purposes of~~ the ~~two~~extent ~~gross~~we ~~income~~make ~~tests~~or ~~applicable~~invest ~~to REITs. An exception~~in ismortgage ~~provided~~loans, however, for leases of “qualified lodging facilities” to a TRS so long as the hotels are managed by an “eligible independent contractor” and certain other requirements are satisfied. We expect to lease all or substantially all of our ~~hotels~~mortgage toloans ~~TRS~~will ~~lessees,~~be ~~which~~subject ~~are disregarded subsidiaries of corporations that are intended~~ to ~~qualify~~interest asrate ~~TRSs,~~fluctuations ~~and to engage hotel managers~~ that ~~are~~could ~~intended~~reduce toour ~~qualify~~returns as ~~“eligible~~compared ~~independent contractors.” Among other requirements, in order~~ to ~~qualify as an eligible independent contractor, the hotel manager must not own, directly or through its stockholders,~~market ~~more~~interest ~~than~~rates ~~35% of our outstanding stock,~~ and noreduce ~~person~~the orvalue ~~group~~ of ~~persons can own more than 35% of our outstanding stock and~~ the ~~stock~~ ~~(or~~mortgage ~~ownership~~loans ~~interest)~~in of the ~~hotel~~event ~~manager,~~we ~~taking~~sell ~~into~~them; ~~account certain ownership attribution rules. The ownership attribution rules that apply for purposes of these 35% thresholds are complex~~accordingly, ~~and~~the ~~monitoring~~value ~~actual and constructive ownership~~ of ~~our~~your ~~stock~~investment bywould ~~our hotel managers and their owners may not~~ be ~~practical.~~subject ~~Accordingly,~~to ~~there~~fluctuations ~~can~~in beinterest ~~no assurance that these ownership levels will not be exceeded~~rates.

30To the extent we invest in fixed-rate, long-term mortgage loans and market interest rates rise, the mortgage loans could yield a return that is lower than then-current market rates, which would lower the proceeds we would receive in the event we sell such assets. If market interest rates decrease, we will be adversely affected to the extent that mortgage loans are prepaid because we may not be able to make new loans at the higher interest rate. To the extent we invest in variable-rate loans and interest rates decrease, our revenues will also decrease. Finally, to the extent we invest in variable-rate loans and interest rates increase, the value of the loans we own at such time would decrease, which would lower the proceeds we would receive in the event we sell such assets. For these reasons, if we invest in mortgage loans, our returns on those loans and the value of your investment will be subject to fluctuations in market interest rates. Our previous mortgage loan investment, the Hyatt Place note, accrued interest at a variable rate.

InThe ~~addition,~~CMBS ~~for~~and aCDOs ~~hotel management company to qualify as an eligible independent contractor, such company or a related person must be actively engaged~~ in ~~the~~which trade or business of operating “qualified lodging facilities” (as defined below) for one or more persons not related to the REIT or its TRSs at each time that such company enters into a hotel management contract with a TRS or its TRS lessee. No assurances can be provided that any hotel managers that we may ~~engage will in fact comply with this requirement in the future. Failure to comply~~ ~~with~~invest ~~this~~are ~~requirement~~subject ~~would require us~~ to ~~find~~several ~~other~~types ~~managers for future contracts, and, if we hired a management company without knowledge~~ of ~~the failure, it could jeopardize our status as a REIT~~risks.

~~Finally~~Commercial mortgage-backed securities, ~~each~~or ~~property~~CMBS, ~~with~~are ~~respect~~bonds to which ~~our~~ ~~TRS~~evidence ~~lessees~~interests ~~pay~~in, ~~rent~~or ~~must~~are besecured by, a ~~“qualified~~single ~~lodging~~commercial ~~facility.”~~mortgage Aloan ~~“qualified~~or ~~lodging~~a ~~facility”~~pool isof ~~a hotel,~~commercial ~~motel,~~mortgage orloans. ~~other~~Collateralized ~~establishment~~debt ~~more~~obligations, ~~than~~or ~~one-half~~CDOs, ~~of the dwelling units in which~~ are ~~used on~~ a ~~transient~~type ~~basis,~~of ~~including~~debt ~~customary amenities~~obligation ~~and facilities, provided~~ that ~~no wagering activities~~ are ~~conducted~~backed atby orcommercial inreal ~~connection~~estate assets, ~~with~~ such ~~facility~~as byCMBS, ~~any~~commercial ~~person who~~mortgage isloans, ~~engaged~~B-notes, ~~in the business of accepting wagers and who is legally authorized to engage in such business at~~ or inmezzanine ~~connection with such facility~~paper. ~~The~~Accordingly, ~~REIT provisions of~~ the ~~Internal~~mortgage ~~Revenue~~backed ~~Code~~securities ~~provide~~we ~~only~~may invest ~~limited~~in ~~guidance~~are ~~for~~subject ~~making~~to ~~determinations~~all ~~under~~ the ~~requirements~~risks ~~for~~of ~~qualified~~the ~~lodging~~underlying ~~facilities,~~mortgage ~~and there can be no assurance that these requirements will be satisfied~~loans.

~~Recharacterization~~In a rising interest rate environment, the value of ~~sale-leaseback~~CMBS and CDOs may be adversely affected when payments on underlying mortgages do not occur as anticipated, ~~transactions~~resulting in the extension of the security’s effective maturity and the related increase in interest rate sensitivity of a longer-term instrument. The value of CMBS and CDOs may ~~cause~~also uschange due to ~~lose~~shifts ~~our~~in ~~REIT~~the ~~status~~market’s perception of issuers and regulatory or tax changes adversely affecting the mortgage securities markets as a whole. In addition, CMBS and CDOs are subject to the credit risk associated with the performance of the underlying mortgage properties. In certain instances, third party guarantees or other forms of credit support can reduce the credit risk.

WeCMBS ~~may purchase real properties~~ and ~~lease~~CDOs ~~them~~are ~~back~~also subject to ~~the~~several ~~sellers~~risks ofcreated ~~such~~through ~~properties. We cannot guarantee that~~ the ~~Internal~~securitization ~~Revenue~~process. ~~Service~~Subordinate ~~will~~CMBS ~~not challenge~~and ~~our~~CDOs ~~characterization~~are ofpaid ~~any~~interest ~~sale-leaseback~~only ~~transactions.~~to In the ~~event~~ extent that ~~any~~there ~~such~~are ~~sale-leaseback~~funds ~~transaction~~available isto ~~challenged and~~make ~~recharacterized~~payments. asTo athe ~~financing~~extent ~~transaction~~the orcollateral ~~loan~~pool ~~for~~includes ~~federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed. If~~ a ~~sale-leaseback~~large ~~transaction~~percentage ~~were~~of sodelinquent ~~recharacterized~~loans, ~~we might fail to satisfy~~ ~~the~~there ~~REIT~~is ~~qualification~~a ~~“asset~~risk ~~tests”~~that orinterest ~~the~~payment ~~“income~~on ~~tests”~~subordinate CMBS and, ~~consequently,~~CDOs ~~lose~~will ~~our~~not ~~REIT~~be ~~status~~fully ~~effective with the year of recharacterization~~paid. ~~Alternatively,~~Subordinate ~~the~~securities ~~amount~~ of ~~our~~CMBS ~~REIT~~and ~~taxable~~CDOs are ~~income~~also ~~could~~subject beto ~~recalculated~~greater ~~which~~credit ~~might~~risk ~~also cause~~than usthose toCMBS ~~fail~~and toCDOs ~~meet~~that ~~the~~are ~~distribution~~more ~~requirement~~highly ~~for a taxable year~~rated.

~~You~~The ~~may~~mezzanine ~~have~~loans ~~current~~in ~~tax~~which ~~liability~~we may oninvest ~~distributions~~would ifinvolve ~~you~~greater ~~elect~~risks toof ~~reinvest~~loss inthan ~~shares~~senior ofloans ~~our~~secured ~~common~~by ~~stock~~income-producing real properties.

IfWe ~~you~~may ~~participate~~ invest in ~~our~~mezzanine loans ~~distribution~~that ~~reinvestment~~take ~~plan,~~the ~~you~~form ~~will~~of besubordinated ~~deemed~~loans tosecured ~~have~~by ~~received~~second mortgages on the underlying real property or loans secured by a ~~cash~~pledge ~~distribution~~of ~~equal~~the toownership interests of the ~~fair~~entity ~~market~~owning ~~value~~the of real property, the ~~stock~~entity ~~received~~that ~~pursuant~~owns tothe interest in the ~~plan~~entity owning the real property or other assets. ~~For~~These ~~Federal~~types ~~income~~of ~~tax~~investments ~~purposes,~~involve ~~you~~a ~~will~~higher bedegree ~~taxed~~of onrisk ~~this~~than ~~amount~~long-term insenior mortgage lending secured by income-producing real property because the ~~same~~investment ~~manner~~may become unsecured as a result of foreclosure by the senior iflender. ~~you~~In ~~have~~the ~~received~~event ~~cash;~~of ~~namely,~~a tobankruptcy of the ~~extent~~entity ~~that~~providing the pledge of its ownership interests as security, we may not have full ~~current~~recourse to the assets of such entity, or ~~accumulated~~the ~~earnings~~assets ~~and~~of ~~profits~~the entity may not be sufficient to satisfy our mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to our loan, ~~you~~or ~~will~~in ~~have~~the ~~ordinary~~event of a borrower bankruptcy, our mezzanine loan ~~income~~will be satisfied only after the senior debt. As a result, ~~unless~~we ~~you~~may ~~are~~not arecover ~~tax-exempt~~some ~~entity~~or all of our investment. In addition, ~~you~~mezzanine loans may have higher loan-to-value ~~use~~ratios ~~funds~~than ~~from~~conventional ~~other~~mortgage ~~sources~~loans, toresulting ~~pay~~in ~~your~~less ~~tax~~equity ~~liability on~~in the ~~value~~real ofproperty and increasing the ~~common~~risk ~~stock~~of ~~received~~loss of principal.

~~Sales~~We ofmay ~~our~~make ~~properties~~investments atin ~~gains~~non-U.S. ~~are~~dollar ~~potentially~~denominated securities, which will be subject to ~~the~~currency ~~prohibited~~rate ~~transaction~~exposure ~~tax,~~and ~~which~~risks ~~could~~associated ~~reduce~~with the ~~return~~uncertainty onof ~~your~~foreign laws ~~investment~~and markets.

~~Our~~Some ~~ability to dispose~~ of ~~property during the first few years following acquisition is restricted to a substantial extent as a result of~~ our ~~REIT~~real ~~status.~~estate ~~Under~~securities ~~applicable~~investments ~~provisions~~may ofbe ~~the~~denominated ~~Internal~~in ~~Revenue~~foreign ~~Code~~currencies ~~regarding~~and, ~~prohibited transactions by REITs~~therefore, we ~~will~~expect ~~be subject~~ to ahave ~~100% tax~~currency onrisk ~~any~~exposure ~~gain~~to ~~realized on the sale or other disposition of~~ any such ~~property~~foreign ~~(other~~currencies. ~~than~~A ~~foreclosure~~change ~~property)~~in weforeign ~~own,~~currency ~~directly~~exchange ~~or through~~rates ~~any~~may ~~subsidiary~~have ~~entity,~~an ~~including~~adverse ~~our~~impact ~~operating~~on ~~partnership,~~returns ~~but~~on ~~excluding~~ our ~~taxable~~non-U.S. ~~REIT~~dollar denominated ~~subsidiaries,~~investments. ~~that~~Although iswe ~~deemed to~~may behedge ~~inventory~~our orforeign ~~property~~currency ~~held~~risk ~~primarily~~subject ~~for sale~~ to ~~customers in~~ the ~~ordinary~~REIT ~~course~~income ofqualification ~~trade~~tests, orwe ~~business. Whether property~~may isnot ~~inventory~~be orable ~~otherwise~~to ~~held~~do ~~primarily~~so ~~for~~successfully ~~sale~~and tomay ~~customers~~incur inlosses ~~the~~on ~~ordinary~~these ~~course~~investments ofas a ~~trade~~result orof ~~business~~exchange ~~depends~~rate ~~on the particular facts and circumstances surrounding each property~~fluctuations. WeTo ~~intend to avoid~~ the ~~100% prohibited transaction tax by (1) conducting~~extent ~~activities~~ that ~~may~~we ~~otherwise~~invest bein ~~considered~~non-U.S. ~~prohibited~~dollar ~~transactions~~denominated ~~through a taxable REIT subsidiary~~securities, ~~(2) conducting our operations~~ in ~~such~~addition ato ~~manner~~risks soinherent ~~that~~in nothe ~~sale~~investment orin ~~other~~securities ~~disposition~~generally discussed ofin anthis ~~asset~~Annual ~~we own~~Report, ~~directly~~we orwill ~~through~~also ~~any~~be ~~subsidiary~~subject ~~other~~to ~~than a~~risks ~~taxable~~associated ~~REIT~~with ~~subsidiary,~~the ~~will~~uncertainty beof ~~treated~~foreign aslaws aand ~~prohibited~~markets ~~transaction~~including, but ornot ~~(3) structuring~~limited ~~certain dispositions of our properties~~ to, ~~comply~~unexpected ~~with~~changes ~~certain~~in ~~safe~~regulatory ~~harbors~~requirements, ~~available~~political ~~under~~and ~~the~~economic ~~Internal~~instability ~~Revenue~~in ~~Code~~certain ~~for~~geographic ~~properties held at least two years. However~~locations, nodifficulties ~~assurance~~in ~~can~~managing beinternational ~~given~~operations, ~~that~~potentially ~~any~~adverse ~~particular~~tax ~~property~~consequences, ~~will~~additional ~~not~~accounting beand ~~treated~~control asexpenses and ~~inventory~~the oradministrative ~~property~~burden ~~held~~of ~~primarily~~complying ~~for~~with ~~sale~~a ~~to customers~~wide invariety ~~the ordinary course~~ of aforeign ~~trade or business~~laws.

InRisks ~~certain~~Associated ~~circumstances,~~With weDebt ~~may be subject to federal and state taxes as a REIT, which would reduce our cash available for distribution to you.~~Financing

~~Even~~We ifhave ~~we maintain our status as a REIT~~incurred, ~~we may be subject to federal~~ and ~~state~~plan ~~taxes. For example, net income from a “prohibited transaction” will be subject~~ to ~~a 100% tax. We may not be able to make sufficient distributions to avoid excise taxes applicable to REITs. We~~incur ~~may~~in ~~also decide to retain income we earn from~~ the ~~sale~~future, ormortgage ~~other~~indebtedness ~~disposition of our real estate assets~~ and ~~pay~~other ~~income~~borrowings, ~~tax~~which ~~directly on such income. We~~ may ~~also~~increase ~~be subject to state and local taxes on~~ our ~~income~~business ~~or property~~risks, ~~either~~could ~~directly~~hinder ~~or at the level of the companies through which we indirectly own~~ our ~~assets.~~ability ~~In addition, our TRSs will be subject~~ to ~~federal income tax and applicable~~make ~~state~~distributions and ~~local~~could ~~taxes~~decrease onthe ~~their~~value ~~net~~of ~~income.~~your ~~Any federal or state taxes we pay will reduce our cash available for distribution to you~~investment.

We have incurred, and plan to incur in the future, financing that is secured by our real estate assets. Under our charter, we have a limitation on borrowing which precludes us from borrowing in excess of 300% of the value of our net assets. “Net assets” for purposes of this calculation is defined to be our total assets (other than intangibles), valued at cost prior to deducting depreciation or other non-cash reserves, less total liabilities. Generally speaking, the preceding calculation is expected to approximate 75% of the aggregate cost of our real estate assets before non-cash reserves and depreciation. We may temporarily borrow in excess of these amounts if such excess is approved by a majority of the independent directors and is disclosed to stockholders in our next quarterly report, along with a justification for such excess. As of December 31, 2016, our debt-to-net-asset ratio did not exceed 300%. In addition, we may incur mortgage debt and pledge some or all of our real estate assets as security for that debt to obtain funds to acquire additional real estate assets or for working capital. We may also borrow funds as necessary or advisable to ensure we maintain our REIT tax qualification, including the requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders (computed without regard to the distribution paid deduction and excluding net capital gains). Furthermore, we may borrow if we otherwise deem it necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes.

~~Distributions to tax-exempt investors may be classified as unrelated business taxable income.~~25

~~Neither~~High ~~ordinary~~debt ~~nor~~levels will ~~capital~~cause ~~gain~~us ~~distributions~~to ~~with~~incur ~~respect~~higher tointerest ~~our~~charges, ~~common~~which ~~stock~~would ~~nor~~result ~~gain~~in higher debt service payments and could be accompanied by restrictive covenants. If there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage debt on that property, then the amount available for distributions to stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the value of your investment. For tax purposes, a foreclosure on any of our properties will be treated as a sale of ~~common~~the ~~stock~~property ~~should~~for ~~generally~~a ~~constitute~~purchase price equal to the outstanding ~~unrelated~~balance ~~business~~of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we will recognize taxable income toon aforeclosure, ~~tax-exempt~~but ~~investor~~we would not receive any cash proceeds. ~~However~~If any mortgage contains cross collateralization or cross default provisions, ~~there~~a default on a single property could affect multiple properties. If any of our properties are ~~certain~~foreclosed ~~exceptions~~upon due to ~~this~~a ~~rule.~~default, Inour ~~particular:~~ability to pay cash distributions to our stockholders will be adversely affected.

●Disruptions ~~part~~in of the ~~income~~financial markets and ~~gain~~deteriorating ~~recognized~~economic byconditions ~~certain~~could ~~qualified~~also ~~employee~~adversely ~~pension~~affect ~~trusts with respect to~~ our ~~common~~ability ~~stock may be treated as unrelated business taxable income if shares of our common stock are predominately held by qualified employee pension trusts, and we are required~~ to ~~rely~~secure on a special look-through rule for purposes of meeting one of the REIT share ownership tests, and we are not operated in a manner to avoid treatment of such income or gain as unrelated business taxable income; ● part of the income and gain recognized by a tax exempt investor with respect to our common stock would constitute unrelated business taxable income if the investor incurs debt tofinancing ~~acquire~~on ~~the~~attractive ~~common~~terms ~~stock;~~ and ~~● part or all of~~ the ~~income~~values or gain recognized with respect to our common stock by social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans which are exempt from federal income taxation under Sections 501(c)(7), (9), (17), or (20) of ~~the~~investments ~~Internal~~we ~~Revenue Code may be treated as unrelated business taxable income~~make.

~~Complying~~We ~~with~~have, and expect in the ~~REIT~~future ~~requirements~~to continue to, finance our investments in part with debt. We may not be able to obtain debt financing on attractive terms or at all. If we are unable to obtain debt financing on attractive terms, we may ~~cause~~be usforced to ~~forego~~use a greater proportion of our offering proceeds to finance our acquisitions and originations, which may reduce the number of investments we would otherwise make. If we are unable to obtain debt financing on attractive ~~opportunities~~terms, we may modify our investment strategy in order to optimize our portfolio performance. Our options would include limiting or eliminating the use of debt and focusing on those investments that do not require the use of leverage to meet our portfolio goals.

ToInstability ~~qualify~~in asthe adebt ~~REIT~~markets may ~~for~~make ~~federal~~it ~~income~~more ~~tax~~difficult ~~purposes,~~for weus ~~must~~to ~~continually~~finance ~~satisfy~~or ~~tests~~refinance ~~concerning~~properties, ~~among~~which ~~other~~could ~~things,~~reduce the ~~sources~~number of ~~our~~properties ~~income, the nature and diversification of our assets, the amounts~~ we ~~distribute~~can toacquire ~~our stockholders~~ and the ~~ownership~~amount of ~~shares~~cash ofdistributions ~~our~~we ~~common stock.~~can ~~We may be required to~~ make ~~distributions~~ to ~~stockholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with the REIT requirements may hinder~~ our ~~ability to operate solely on the basis of maximizing profits~~stockholders.

~~Complying~~If ~~with~~mortgage debt is unavailable on reasonable terms as a result of increased interest rates or other factors, we may not be able to finance the ~~REIT~~initial purchase ~~requirements~~of properties. In addition, if we place mortgage debt on properties, we run the risk of being unable to refinance such debt when the loans come due, or of being unable to refinance on favorable terms. If interest rates are higher when we refinance debt, our income could be reduced. We may ~~force~~be unable to refinance debt at appropriate times, which may require us to ~~liquidate~~sell ~~otherwise~~properties on ~~attractive~~terms ~~investments~~that are not advantageous to us, or could result in the foreclosure of such properties. If any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to you and may hinder our ability to raise more capital by issuing securities or by borrowing more money.

ToIncreases qualify as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets, including shares of stock in ~~other~~interest ~~REITs,~~rates ~~certain mortgage loans and mortgage~~could ~~backed~~increase ~~securities. The remainder of our investment in securities (other than governmental securities and qualified real estate assets) generally cannot include more than 10% of~~ the ~~outstanding~~amount ~~voting securities~~ of ~~any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of~~ our ~~assets~~debt ~~(other than~~payments ~~government securities~~ and ~~qualified~~negatively ~~real~~impact ~~estate assets) can consist of the securities of any one issuer. No more than 20% (25% after 2017) of the value of~~ our ~~total~~operating ~~securities can be represented by securities of one or more taxable REIT subsidiaries~~results. Finally, no more than 25% of our assets may consist of “nonqualified publicly offered REIT debt instruments.” If we fail to comply with these requirements at the end of any calendar quarter, we must correct such failure within 30 days after the end of the calendar quarter to avoid losing our REIT status and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments.

~~Liquidation~~Interest ofwe ~~assets~~pay ~~may~~on our ~~jeopardize~~debt obligations will reduce cash available for distributions. If we incur variable rate debt, increases in interest rates would increase our ~~REIT~~interest ~~status~~costs, which would reduce our cash flows and our ability to make distributions to you. If we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times which may not permit realization of the maximum return on such investments.

ToLenders ~~qualify~~may asrequire aus ~~REIT, we must comply with requirements regarding our assets and our sources of income. If we are compelled~~ to ~~liquidate~~enter ~~our investments~~into torestrictive ~~satisfy~~covenants ~~our~~relating ~~obligations~~ to our ~~lenders~~operations, wewhich ~~may~~could belimit ~~unable to comply with these requirements, ultimately jeopardizing~~ our ~~status as~~ability ato ~~REIT,~~make ordistributions ~~we may be subject~~ to aour ~~100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory~~stockholders.

~~Legislative~~When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage a property, discontinue insurance coverage, or ~~regulatory~~replace ~~action~~Moody National Advisor I, LLC as our advisor. In addition, loan documents may limit our ability to replace ~~could~~a property’s property manager or terminate certain operating or lease agreements related to a property. These or other limitations may adversely affect ~~investors~~our flexibility and our ability to achieve our investment objectives.

InOur ~~recent~~derivative ~~years,~~financial ~~numerous~~instruments ~~legislative,~~that ~~judicial~~we ~~and~~may ~~administrative~~use ~~changes have been made~~ to ~~the~~hedge ~~federal~~against ~~income~~interest ~~tax~~rate ~~laws~~fluctuations ~~applicable~~may ~~to REITs. Additional changes to tax laws are likely to continue to occur in the future, and we cannot assure you that any such changes will~~ not ~~adversely affect~~be ~~the~~successful ~~taxation of a stockholder. Any such changes could have an adverse effect on an investment~~ in ~~shares~~mitigating of our ~~common~~risks ~~stock. We~~associated ~~urge you to consult~~ with ~~your~~interest rates ~~own~~and ~~tax~~could ~~advisor~~reduce ~~with respect to~~ the ~~status~~overall ofreturns ~~legislative, regulatory or administrative developments and proposals and their potential effect~~ on anyour investment ~~in shares of our common stock~~.

32We may use derivative financial instruments to hedge exposures to changes in interest rates on loans secured by our real estate assets, but no hedging strategy can protect us completely. We cannot assure you that our hedging strategy and the derivatives that we use will adequately offset the risk of interest rate volatility or that our hedging transactions will not result in losses. In addition, the use of such instruments may reduce the overall return on our investments. These instruments may also generate income that may not be treated as qualifying REIT income for purposes of the 75% or 95% REIT income test.

~~The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.~~26

WeFederal ~~may~~Income ~~acquire~~Tax mezzanine loans. If a mezzanine loan satisfies an Internal Revenue Service safe harbor in Revenue Procedure 2013-65, it will be treated as a real estate asset for purposes of the REIT asset tests and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% gross income test. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. We intend to make investments in loans that comply with the various requirements applicable to our qualification as a REIT. We may, however, acquire mezzanine loans that do not meet all of the requirements of this safe harbor. In the event we own a mezzanine loan that does not meet the safe harbor, the Internal Revenue Service could challenge such loan’s treatment as a real estate asset for purposes of the REIT asset tests and could challenge treatment of interest on such loan as qualifying income for purposes of the 75% gross income test, and, if such a challenge were sustained, we could fail to qualify as a REIT.Risks

~~The~~Failure ~~use~~to ofqualify ~~TRS~~as ~~lessees~~a ~~will~~REIT ~~increase~~could adversely affect our ~~overall~~operations ~~tax~~and ~~liability~~our ability to make distributions.

~~Our~~We ~~TRS~~made ~~lessees~~an ~~and~~election ~~any~~to ~~other~~be oftaxed ~~our~~as ~~domestic~~a ~~taxable~~ REIT ~~subsidiaries~~for ~~will~~federal beincome ~~subject~~tax topurposes ~~federal~~commencing ~~and~~with ~~state~~the ~~income~~taxable ~~tax~~year onended ~~their~~December ~~taxable income~~31, ~~which~~2011. Our qualification inas ~~the~~a ~~case~~REIT ofdepends on our ~~TRS~~satisfaction ~~lessees~~of ~~may~~numerous ~~consist~~requirements of(some ~~revenues~~on ~~from~~an ~~hotel~~annual ~~properties~~and ~~leased~~quarterly bybasis) ~~our~~established ~~TRS~~under ~~lessees~~highly technical ~~net~~and complex provisions of the ~~operating~~Internal ~~expenses~~ Revenue Code for ~~such~~which ~~properties~~there ~~and~~are ~~rent~~only ~~payments~~limited tojudicial ~~us.~~or ~~Accordingly,~~administrative ~~although~~interpretations and ~~our~~involve ~~ownership~~the determination of ~~TRS~~various ~~lessees~~factual ~~allows~~matters usand tocircumstances ~~participate~~not inentirely ~~the~~within our control. The complexity of these ~~operating~~provisions ~~income~~and ~~from~~of ~~any~~the ~~hotel~~applicable ~~properties~~income tax regulations that ~~may~~have bebeen ~~acquired~~promulgated under the Internal Revenue Code is greater in the ~~addition~~case toof ~~receiving~~a ~~rent,~~REIT that ~~operating~~holds ~~income~~its isassets ~~fully~~through ~~subject to~~a ~~income~~partnership, ~~tax~~as we do. ~~Such~~Moreover, ~~taxes~~no ~~could~~assurance can be ~~substantial.~~given ~~The~~that ~~after-tax~~legislation, new ~~net~~regulations, ~~income~~administrative ofinterpretations ~~our~~or ~~TRS~~court ~~lessees~~decisions orwill ~~other~~not ~~taxable~~change ~~REIT~~the ~~subsidiaries~~tax laws with respect to qualification as ~~would~~a beREIT ~~available~~or ~~for~~the ~~distribution~~federal toincome ustax consequences of that qualification.

~~Non-U.S.~~If ~~investors~~we ~~may~~were beto ~~subject~~fail to ~~U.S.~~qualify as a REIT for any taxable year, we would be subject to federal income ~~taxes~~tax on our taxable income at corporate rates. In addition, if we lose our REIT status we would generally be disqualified from treatment as a REIT for the ~~sale~~four taxable years following the year in which we lose our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of ~~shares~~the additional tax liability. In addition, distributions to stockholders would no longer be deductible in computing our taxable income and we would no longer be required to make distributions. To the extent that distributions had been made in anticipation of our ~~common~~qualifying ~~stock~~as ifa REIT, we ~~are~~might ~~unable~~be required to borrow funds or liquidate some investments to pay the applicable corporate income tax. In addition, although we intend to operate in a manner intended to qualify as a ~~“domestically~~REIT, it ~~controlled”~~is possible that future economic, market, legal, tax or other considerations may cause our board of directors to recommend that we revoke our REIT election.

AWe ~~non-U.S.~~believe ~~person~~that ~~disposing of a U.S. real~~our ~~property~~operating ~~interest,~~partnership ~~including~~will ~~shares~~be oftreated afor ~~U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to U.S.~~ federal income tax onpurposes ~~the~~as ~~gain~~a ~~recognized~~partnership onand ~~such disposition. A non-U.S. stockholder generally would~~ not beas ~~subject~~an toassociation ~~U.S.~~or ~~federal~~as ~~income tax however, on gain from the disposition of stock in~~ a ~~REIT if the REIT is a “domestically~~publicly ~~controlled~~traded ~~REIT.”~~partnership Ataxable ~~domestically~~as ~~controlled REIT is~~ a ~~REIT in which, at all times during a specified testing period, less than 50% in value of its shares is held directly or indirectly by non-U~~corporation.S. ~~holders.~~If Wethe ~~cannot~~Internal ~~assure~~Revenue ~~you~~Service ~~that we will qualify as a domestically controlled REIT. If we~~ were tosuccessfully ~~fail~~ to sodetermine ~~qualify,~~that ~~gain~~our ~~realized~~operating partnership byshould aproperly ~~non-U.S.~~be ~~investor~~treated onas a ~~sale~~corporation, of our ~~common stock~~operating partnership would be ~~subject~~required to ~~U.S.~~pay federal income tax at ~~unless~~corporate ~~our~~rates ~~common stock was traded~~ on anits ~~established~~net ~~securities market and the non-U~~income.S. ~~investor~~In ~~did~~addition, ~~not~~we atwould ~~any~~fail ~~time~~to ~~during~~qualify as a ~~specified~~REIT, ~~testing~~with ~~period directly or indirectly own more than 10% of~~ the ~~value~~resulting ~~of our~~consequences ~~outstanding common stock~~described above.

~~Retirement~~Legislative, ~~Plan~~regulatory ~~Risks~~or administrative changes could adversely affect us of our customers.

~~There~~Legislative, ~~are special considerations~~regulatory ~~for pension~~ or ~~profit-sharing~~administrative orchanges ~~401(k)~~could ~~plans,~~be ~~health~~enacted or ~~welfare~~promulgated ~~plans~~at orany ~~individual~~time, ~~retirement~~either ~~accounts~~prospectively ~~whose~~or ~~assets~~with ~~are~~retroactive ~~being invested in our common stock due to requirements under the Employee Retirement Income Security Act of 1974~~effect, ~~as amended (“ERISA”)~~ and ~~the Internal Revenue Code of 1986, as amended (“Internal Revenue Code”) . Furthermore, a person acting on behalf~~may ofadversely aaffect ~~plan~~us ~~not subject to ERISA may be subject to similar penalties under applicable federal, state, local,~~ and/or ~~non-U.S. law by reason of purchasing~~ our ~~stock~~customers.

IfPresident ~~you~~Trump, ~~are investing~~the House leadership and the ~~assets~~Senate leadership all have expressed interest in passing comprehensive tax reform this year. While certain aspects of atax ~~pension~~reform proposals have been described, ~~profit~~proposed ~~sharing~~legislation orhas ~~401(k)~~not ~~plan,~~yet ~~health~~been introduced by the leaders of the House Ways and Means Committee or ~~welfare~~the ~~plan~~Senate Finance Committee. None of the descriptions of tax reform proposals have specifically addressed the treatment of REITs. Moreover, orthere anis ~~IRA~~not yet agreement between the President, orthe ~~other~~House ~~plan~~leadership orand ~~arrangement~~the ~~subject~~Senate leadership toabout ~~ERISA~~the orspecifics ~~Section~~of ~~4975~~tax reform. To date, the focus of the ~~Internal~~House ~~Revenue~~plan ~~Code~~differs significantly from the Senate plan. Accordingly, there is no assurance that comprehensive tax reform will be enacted, when any such legislation might be enacted, what specific measures will be included in any enacted tax reform language, or whether tax reform would adversely affect us, ~~you~~our ~~should~~shareholders or ~~consider:~~our customers.

●All ~~whether~~of ~~your~~the ~~investment~~tax isreform proposals ~~consistent~~share ~~with~~a ~~the~~desire ~~applicable~~to ~~provisions~~reduce ofmaximum ~~ERISA~~corporate income tax rates and reform U.S. taxation of income earned outside the ~~Internal~~United States. ~~Revenue~~Lower ~~Code;~~corporate ●rates ~~whether~~would ~~your~~be ~~investment~~at isleast ~~made~~partially inpaid ~~accordance~~for ~~with~~by reducing or eliminating various tax benefits. Given that the ~~documents~~same ~~and~~tax ~~instruments~~benefits ~~governing~~generally ~~your~~apply ~~plan,~~to ~~IRA~~businesses conducted through non-corporate structures, there is also pressure on reducing the tax rates applicable to non-corporate businesses. Some of the tax benefits identified as possibly being eliminated or ~~other~~reduced include ~~arrangement~~various tax benefits that have been important to the real estate industry, including REITs, such as eliminating the ~~investment~~like-kind exchange ~~policy;~~rules ●or ~~whether~~the ~~your~~deduction ~~investment~~of ~~satisfies~~net interest expense. Loss of a deduction for net interest expense would substantially increase our REIT taxable income and, absent amendments to the ~~prudence~~REIT rules, ~~diversification~~our distribution obligations. In addition, ~~and~~it ~~other~~is ~~applicable~~possible ~~fiduciary~~that substantially ~~requirements~~reduced corporate tax rates or Senate interest in ~~Section~~integrating ~~404(a)~~taxation of ~~ERISA;~~shareholders and corporations could reduce or eliminate the relative attractiveness of REITs as a vehicle for owning real estate.

33We urge you to consult with your own tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in shares of our common stock.

● whether your investment will impair the liquidity of the plan, IRA, or other arrangement; ● whether your investment will produce unrelated business taxable income, referred to as UBTI and as defined in Sections 511 through 514 of the Internal Revenue Code, to the plan; and ● whether you need to value the assets of the plan annually.27

~~You~~To ~~should~~qualify consider whether your investment in us will cause some or all of our assets to be considered assets of an employee benefit plan, IRA, or other arrangement. We do not believe that under ERISA and U.S. Department of Labor regulations currently in effect that our assets would be treated as ~~“plan assets”~~a ~~for~~REIT purposes of ERISA. However, if our assets were considered to be plan assets, transactions involving our assets would be subject to ERISA and Section 4975 of the Internal Revenue Code and some of the transactions we ~~have~~must ~~entered into with~~meet ~~our~~annual ~~advisor~~distribution ~~and its affiliates could be considered “prohibited transactions~~requirements,” ~~under~~which ~~ERISA~~may orresult the Internal Revenue Code. If such transactions were considered “prohibited transactions,” our advisor and its affiliates could be subject to liabilities and excise taxes or penalties. In addition, our officers and directors, Moody National Advisors I, LLC and its affiliates could be deemed to be fiduciaries under ERISA, subject to other conditions, restrictions and prohibitions under Part 4 of Title I of ERISA and those serving as fiduciaries of plans investing in us ~~may~~distributing beamounts considered to have improperly delegated fiduciary duties to us. Additionally, other transactions with “parties-in-interest” or “disqualified persons” with respect to an investing plan might be prohibited under ERISA, the Internal Revenue Code or other governing authority in the case of a government plan. Therefore, we would be operating under a burdensome regulatory regime that ~~could~~may ~~limit~~otherwise ~~or restrict investments we can make or our management of our real estate assets. Even if our assets are not considered to~~ be ~~plan~~used ~~assets,~~for ~~a prohibited transaction could occur if we or any of~~ our affiliates is a fiduciary (within the meaning of ERISA) with respect to an employee benefit plan purchasing shares and, therefore, in the event any such persons are fiduciaries (within the meaning of ERISA) of your plan or IRA, you should not purchase shares unless an administrative or statutory exemption applies to your purchaseoperations.

~~Failure~~To obtain the favorable tax treatment accorded to ~~satisfy~~REITs, ~~the~~we ~~fiduciary~~will ~~standards of~~be ~~conduct~~required ~~and~~each ~~other~~year ~~requirements~~to distribute to our stockholders at least 90% of ~~ERISA,~~our ~~the~~real ~~Internal~~estate investment ~~Revenue~~trust ~~Code~~taxable income, ordetermined ~~other~~without ~~applicable~~regard ~~statutory~~to orthe ~~common~~dividends-paid ~~law~~deduction ~~may~~and ~~result~~by inexcluding net capital gains. ~~the~~We ~~imposition~~will ofbe ~~civil~~subject ~~(and~~to ~~criminal,~~federal ifincome ~~the~~tax ~~violation~~on ~~was~~our ~~willful)~~undistributed ~~penalties,~~taxable income and ~~can~~net ~~subject~~capital ~~the~~gain ~~fiduciary~~and to ~~equitable~~a ~~remedies.~~4% nondeductible excise Intax ~~addition,~~on ifany anamount ~~investment~~by inwhich ~~our~~distributions ~~common~~we ~~stock~~pay ~~constitutes~~with arespect ~~prohibited~~to ~~transaction~~any ~~under~~calendar ~~ERISA~~year orare less than the ~~Internal~~sum ~~Revenue~~of ~~Code, the~~(1) ~~fiduciary~~85% ~~that~~of ~~authorized~~our orordinary income, ~~directed~~(2) ~~the~~95% ~~investment~~of ~~may~~our becapital ~~subject~~gain tonet ~~the~~income ~~imposition~~and (3) 100% of ~~excise~~our ~~taxes~~undistributed ~~with~~income ~~respect~~from toprior ~~the~~years. ~~amount~~These requirements could ~~invested.~~cause ~~Furthermore,~~us to ~~the~~distribute ~~extent~~amounts that ~~the~~otherwise would be spent on investments in real estate assets ofand ait ~~plan~~is orpossible ~~arrangement~~that ~~not~~we ~~subject~~might be required to ~~the~~borrow ~~fiduciary~~funds ~~provisions~~or ofsell ~~ERISA (for~~assets ~~example,~~to ~~governmental~~fund ~~plans,~~these ~~non-electing~~distributions. ~~church~~If ~~plans,~~we ~~and~~fund ~~foreign~~distributions ~~plans)~~through borrowings, then we will have beto repay debt using money we could have otherwise used to ~~purchase~~acquire properties resulting in our ~~stock,~~ownership ~~such~~of ~~plans~~fewer real estate ~~should~~assets. ~~consider~~If ~~the~~we ~~impact~~sell ofassets ~~applicable~~or ~~federal~~use offering proceeds to pay distributions, ~~state~~we also will have fewer investments. Fewer investments may impact our ability to generate future cash flows from operations and, ~~local~~therefore, orreduce ~~non-U~~your overall return.S. ~~law~~Although onwe intend to make distributions sufficient to meet the ~~decision~~annual distribution requirements and to ~~make~~avoid ~~such~~corporate ~~purchase~~income taxation on the earnings that we distribute, it is possible that we might not always be able to do so.

~~ITEM~~Our ~~1B.~~ownership ~~Unresolved~~of ~~Staff~~our ~~Comments~~TRSs will be subject to limitations and our transactions with our TRSs will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.

WeOverall, no more than 25% (20% after 2017) of the value of a REIT’s assets may consist of stock or securities of one or more TRSs. In addition, the Internal Revenue Code limits the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The Internal Revenue Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. The 100% tax would apply, for example, to the extent that we were found to have charged our TRS lessees rent in excess of an arm’s-length rent. We will monitor the value of our respective investments in our TRSs for the purpose of ensuring compliance with TRS ownership limitations and will structure our transactions with our TRSs on terms that we believe are arm’s-length to avoid incurring the 100% excise tax described above. There can be no ~~unresolved~~assurance, ~~staff~~however, ~~comments~~that we will be able to comply with the TRS asset test limitation or to avoid application of the 100% excise tax.

~~ITEM~~If 2the leases of our hotels to the TRS lessees are not respected as true leases for U.S. ~~Properties~~federal income tax purposes, we will fail to qualify as a REIT.

AsTo ofqualify ~~December~~as 31a REIT, we ~~2015~~must annually satisfy two gross income tests, weunder ~~owned~~which anspecified ~~interest~~percentages of our gross income must be derived from certain insources, ~~eleven~~such ~~hotel~~as ~~properties~~“rents ~~located~~from inreal ~~five~~property.” ~~states~~Rents ~~with~~paid anto ~~aggregate~~our operating partnership by TRS lessees pursuant to the leases of 1our hotels will constitute substantially all of our gross income. In order for such rent to qualify as “rents from real property” for purposes of the gross income tests,~~476~~ ~~rooms~~the leases must be respected as true leases for U.S. ~~For~~federal ~~more~~income tax ~~information~~purposes onand ~~our~~not ~~hotel~~be ~~properties~~treated as service contracts, financing arrangements, joint ventures or some other type of arrangement. ~~see~~If ~~Item~~our 1leases are not respected as true leases for U.S. federal income tax purposes, ~~“Business—Investment~~we ~~Portfolio~~will fail to qualify as a REIT.”

~~Our~~If ~~principal~~any ~~executive~~hotel ~~offices~~managers ~~are~~that ~~located~~we may atengage ~~6363~~do ~~Woodway~~not ~~Drive,~~qualify ~~Suite~~as ~~110,~~“eligible ~~Houston,~~independent ~~Texas~~contractors,” ~~77057.~~or ~~Our~~if ~~telephone~~our ~~number,~~hotels ~~general~~are ~~facsimile~~not ~~number~~“qualified ~~and~~lodging ~~website~~facilities,” we ~~address~~will ~~are (713)~~fail ~~977-7500,~~to ~~(713) 977-7505~~qualify ~~and~~as ~~http://www.moodynationalreit.com,~~a ~~respectively~~REIT.

~~ITEM~~Rent 3paid by a lessee that is a “related party tenant” of ours will not be qualifying income for purposes of the two gross income tests applicable to REITs. ~~Legal~~An ~~Proceedings~~exception is provided, however, for leases of “qualified lodging facilities” to a TRS so long as the hotels are managed by an “eligible independent contractor” and certain other requirements are satisfied. We expect to lease all or substantially all of our hotels to TRS lessees, which are disregarded subsidiaries of corporations that are intended to qualify as TRSs, and to engage hotel managers that are intended to qualify as “eligible independent contractors.” Among other requirements, in order to qualify as an eligible independent contractor, the hotel manager must not own, directly or through its stockholders, more than 35% of our outstanding stock, and no person or group of persons can own more than 35% of our outstanding stock and the stock (or ownership interest) of the hotel manager, taking into account certain ownership attribution rules. The ownership attribution rules that apply for purposes of these 35% thresholds are complex, and monitoring actual and constructive ownership of our stock by our hotel managers and their owners may not be practical. Accordingly, there can be no assurance that these ownership levels will not be exceeded.

~~From~~In ~~time~~addition, for a hotel management company to ~~time~~qualify as an eligible independent contractor, wesuch ~~are~~company ~~party~~or toa ~~legal~~related ~~proceedings that~~person ~~arise~~must be actively engaged in the ~~ordinary~~trade ~~course~~or business of ~~our~~operating ~~business.~~“qualified ~~Management~~lodging isfacilities” ~~not~~(as ~~aware~~defined ofbelow) ~~any~~for ~~pending~~one or ~~contemplated~~more ~~legal~~persons ~~proceedings~~not related to the ~~outcome~~ ofREIT ~~which~~or isits TRSs at each time that such company enters into a hotel management contract with a TRS or ~~would~~its TRS lessee. No assurances can be ~~reasonably~~provided ~~likely~~that any hotel managers that we may engage will in fact comply with this requirement in the future. Failure to ~~have~~comply awith ~~material~~this ~~adverse~~requirement ~~effect~~would onrequire ~~our~~us ~~results~~to find other managers for future contracts, and, if we hired a management company without knowledge of ~~operations~~the orfailure, ~~financial~~it ~~condition~~could jeopardize our status as a REIT.

~~ITEM~~Finally, 4each property with respect to which our TRS lessees pay rent must be a “qualified lodging facility.” ~~Mine~~A ~~Safety~~“qualified ~~Disclosures~~lodging facility” is a hotel, motel, or other establishment more than one-half of the dwelling units in which are used on a transient basis, including customary amenities and facilities, provided that no wagering activities are conducted at or in connection with such facility by any person who is engaged in the business of accepting wagers and who is legally authorized to engage in such business at or in connection with such facility. The REIT provisions of the Internal Revenue Code provide only limited guidance for making determinations under the requirements for qualified lodging facilities, and there can be no assurance that these requirements will be satisfied.

~~Not applicable.~~ 28

34Recharacterization of sale-leaseback transactions may cause us to lose our REIT status.

~~PART~~We IImay purchase real properties and lease them back to the sellers of such properties. We cannot guarantee that the Internal Revenue Service will not challenge our characterization of any sale-leaseback transactions. In the event that any such sale-leaseback transaction is challenged and recharacterized as a financing transaction or loan for federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed. If a sale-leaseback transaction were so recharacterized, we might fail to satisfy the REIT qualification “asset tests” or the “gross income tests” and, consequently, lose our REIT status effective with the year of recharacterization. Alternatively, the amount of our REIT taxable income could be recalculated which might also cause us to fail to meet the distribution requirement for a taxable year.

~~ITEM~~You 5.may ~~Market~~have ~~for~~current ~~Registrant’s~~tax ~~Common~~liability on ~~Equity,~~distributions ~~Related~~if ~~Shareholder~~you ~~Matters~~elect ~~and~~to ~~Issuer~~reinvest ~~Purchases~~in shares of ~~Equity~~our ~~Securities~~common stock.

~~Stockholder~~If ~~Information~~you participate in our distribution reinvestment plan, you will be deemed to have received a cash distribution equal to the fair market value of the stock received pursuant to the plan. For Federal income tax purposes, you will be taxed on this amount in the same manner as if you have received cash; namely, to the extent that we have current or accumulated earnings and profits, you will have ordinary income. As a result, unless you are a tax-exempt entity, you may have to use funds from other sources to pay your tax liability on the value of the common stock received.

AsSales of ~~March~~our 8,properties ~~2016,~~at ~~we had 13,148,475 shares~~gains ofare ~~our~~potentially ~~common~~subject ~~stock~~to ~~outstanding~~the ~~held~~prohibited bytransaction ~~a total of approximately 3~~tax,~~250~~ ~~stockholders.~~which ~~The~~could ~~number~~reduce ofthe ~~stockholders~~return ~~is based~~ on ~~the records~~your ~~of DST Systems, Inc~~investment.~~, which serves as our transfer agent.~~

~~Market~~Under ~~Information~~applicable provisions of the Internal Revenue Code regarding prohibited transactions by REITs, we will be subject to a 100% tax on any gain realized on the sale or other disposition of any property (other than foreclosure property) we own, directly or through any subsidiary entity, including our operating partnership, but excluding our taxable REIT subsidiaries, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of trade or business unless a safe harbor applies under the Internal Revenue Code. Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property. We intend to avoid the 100% prohibited transaction tax by (1) conducting activities that may otherwise be considered prohibited transactions through a taxable REIT subsidiary, (2) conducting our operations in such a manner so that no sale or other disposition of an asset we own, directly or through any subsidiary other than a taxable REIT subsidiary, will be treated as a prohibited transaction, or (3) structuring certain dispositions of our properties to comply with certain safe harbors available under the Internal Revenue Code. However, no assurance can be given that any particular property will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business or that a safe harbor will apply.

~~Our~~In ~~shares~~certain ~~of common stock are not currently listed on a national securities exchange or any over-the-counter market. We do not expect our shares to become listed in the near future~~circumstances, ~~and~~we ~~they~~ may ~~not become listed at all. Consequently, there is the risk that our stockholders may not~~ be ~~able~~subject to ~~sell~~federal ~~their shares~~and atstate ataxes ~~time~~as ~~or price acceptable to them. We presently intend, but are not required, to complete~~ a ~~transaction providing liquidity for our stockholders within four to six years from the termination of our initial public offering~~REIT, which ~~occurred~~would onreduce ~~October 12, 2012. Our charter does not require~~ our ~~board~~cash ofavailable directors to pursue a liquidity event at any particular time, or at all. However, we expect that our board of directors, in the exercise of its fiduciary duty to our stockholders, will determine to pursue a liquidity event when it believes that the then-current market conditions are favorable for adistribution liquidity event and that such a transaction is in the best interests of our stockholders. A liquidity event could include (1) the sale of all or substantially all of our assets either on a portfolio basis or individually followed by a liquidation, (2) a merger or another transaction approved by our board of directors in which our stockholders will receive cash or shares of a publicly traded company or (3) a listing of our shares on a national securities exchange. There can be no assurance as to ~~when a suitable transaction will be available~~you.

~~Estimated~~Even ~~Value~~if ~~Per~~we ~~Share~~maintain our status as a REIT, we may be subject to federal and state taxes. For example, net income from a “prohibited transaction” will be subject to a 100% tax. We may not be able to make sufficient distributions to avoid excise taxes applicable to REITs. We may also decide to retain income we earn from the sale or other disposition of our real estate assets and pay income tax directly on such income. We may also be subject to state and local taxes on our income or property, either directly or at the level of the companies through which we indirectly own our assets. In addition, our TRSs will be subject to federal income tax and applicable state and local taxes on their net income. Any federal or state taxes we pay will reduce our cash available for distribution to you.

~~Background~~Distributions to tax-exempt investors may be classified as unrelated business taxable income.

OnNeither ~~March~~ordinary ~~24, 2016, our board of directors determined~~nor ancapital ~~estimated~~gain ~~value~~distributions ~~per~~with ~~share~~respect ofto our common stock ofnor ~~$10.75~~gain asfrom ofthe ~~December~~sale ~~31, 2015. In determining an estimated value per share~~ of ~~our~~ common stock, ~~our~~should ~~board~~generally ofconstitute unrelated ~~directors~~business ~~relied~~taxable ~~upon~~income ~~information~~to ~~provided in~~ a ~~report,~~tax-exempt orinvestor. ~~the valuation report~~However, ~~provided~~there ~~by our~~are ~~advisor,~~certain ~~the~~exceptions ~~recommendation~~to ofthis ~~our~~rule. ~~audit~~In ~~committee and the board’s experience with, and knowledge of, our real property and other assets as of October 31, 2015.~~particular:

We● ~~are~~part ~~providing~~of the ~~estimated~~ ~~value~~income ~~per share to assist broker-dealers~~ and ~~stockholders~~gain ~~pursuant~~recognized toby certain ~~rules~~qualified ofemployee ~~the~~pension ~~Financial~~trusts ~~Industry Regulatory~~with ~~Authority,~~respect ~~Inc., or FINRA. The objective of the board of directors in determining the estimated value per share was~~ to ~~arrive at a value, based on recent available data, that it believed was reasonable based on methods that it deemed appropriate after consultation with the Advisor and the Audit Committee. Accordingly,~~ our ~~advisor performed the valuation of our~~ common stock inmay ~~accordance~~be ~~with~~treated ~~Practice~~as ~~Guideline~~unrelated ~~2013-01,~~business ~~Valuations~~taxable ofincome ~~Publicly~~if ~~Registered~~we ~~Non-Listed REITs,~~are ~~issued~~a by“pension-held ~~the~~REIT,” ~~Investment~~which ~~Program~~should ~~Association~~not inbe ~~April 2013. The estimated value per share is based on (x)~~ the ~~estimated~~ ~~value of the Company’s assets less the estimated value of the Company’s liabilities divided by (y) the number of outstanding shares of the Company’s common stock, all as of December 31, 2015.~~case;

~~Valuation~~● ~~Summary~~part of the income and gain recognized by a tax-exempt investor with respect to our common stock would constitute unrelated business taxable income if the investor incurs debt to acquire the common stock; and

~~The~~● ~~following~~part isor aall ~~summary~~ of the ~~valuation~~income ~~methods~~or ~~used~~gain onrecognized with respect to our ~~assets~~common ~~and~~stock ~~liabilities~~by social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and ~~the~~qualified ~~results~~group legal services plans which are exempt from federal income taxation under Sections 501(c)(7), (9), (17), or (20) of the ~~valuation~~Internal Revenue Code may be treated as unrelated business taxable income.

Real Estate Investments. As of December 31, 2015, we had ownership interests in eleven hotel properties. Our board of directors determined the fair value of our investments in hotel properties to be $279,370,000 as of that date. This determination was based on appraisals of the fair value of our investments in hotel properties as of that date performed by Hospitality Valuation Services, or the appraiser, a third party appraiser, which were included in the valuation report. The appraisals were Member of Appraisal Institute appraisals.29

35Complying with the REIT requirements may cause us to forego otherwise attractive opportunities.

~~Material~~To ~~Assumptions~~qualify as a REIT infor ~~Property~~federal ~~Valuation.~~income ~~The~~tax ~~appraiser~~purposes, ~~made~~we ~~certain~~must ~~key~~continually ~~assumptions~~satisfy intests concerning, among other things, the ~~discounted~~sources ~~cash~~of ~~flow~~our ~~models~~income, ~~that~~the nature itand ~~used~~diversification of our assets, the amounts we distribute to ~~value~~ our ~~investments~~stockholders inand ~~hotel~~the ~~properties~~ownership of shares of our common stock. We may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, ~~which~~compliance ~~are~~with ~~set~~the ~~forth~~REIT ~~below:~~requirements may hinder our ability to operate solely on the basis of maximizing profits.

Capitalization rate			8.00 – 9.00	%
Discount rate			9.00 – 9.75	%

Complying with the REIT requirements may force us to liquidate otherwise attractive investments.

~~While~~To qualify as a REIT, we ~~believe~~must ensure that at the ~~appraiser’s~~end ~~assumptions~~of ~~are~~each ~~reasonable~~calendar quarter, aat ~~change~~least in75% ~~these~~of ~~assumptions~~the ~~would~~value ~~significantly~~of ~~impact~~our ~~the~~assets ~~appraised~~consists ~~values~~of cash, cash items, government securities and qualified real estate assets, including shares of stock in other REITs, certain mortgage loans and mortgage backed securities. The remainder of our ~~investments~~investment in ~~hotel~~securities ~~properties~~(other than governmental securities and ~~thus,~~qualified ~~our~~real ~~estimated~~estate assets) ~~value~~generally ~~per~~cannot ~~share.~~include ~~The~~more ~~table~~than ~~below~~10% ~~illustrates~~of the ~~impact~~outstanding onvoting securities of any one issuer or more than 10% of the ~~estimated~~total value ~~per~~of ~~share~~the ifoutstanding securities of any one issuer. In addition, in general, no more than 5% of the ~~capitalization~~value ~~rates~~of our assets (other than government securities and ~~discount~~qualified ~~rates~~real ~~listed~~estate ~~above~~assets) ~~were~~can ~~increased~~consist orof ~~decreased~~the securities of any one issuer. No more than 20% (25% after 2017) of the value of our total securities can be represented by 2securities of one or more taxable REIT subsidiaries.5 Finally, no more than 25% of our assets may consist of “nonqualified publicly offered REIT debt instruments.” If we fail to comply with these requirements at the end of any calendar quarter, ~~assuming~~we ~~all~~must ~~other~~correct such failure within 30 days after the ~~factors~~end ~~remain~~of ~~unchanged:~~the calendar quarter to avoid losing our REIT status and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments.

	Increase (Decrease) in the Estimated Value per Share due to
	Decrease of 2.5%		Increase of 2.5%
Capitalization rate	$	0.25	$	(0.40)
Discount rate	$	0.19	$	(0.34)

Liquidation of assets may jeopardize our REIT status.

~~Notes~~To ~~Receivable.~~qualify as a REIT, ~~The~~we ~~valuation~~must ~~report~~comply ~~contained~~with anrequirements ~~estimated~~regarding ~~valuation~~our assets and our sources of income. If we are compelled to liquidate our ~~notes~~investments to ~~receivable~~satisfy asour ~~equal~~obligations to ~~fair~~our ~~value~~lenders, aswe ofmay ~~December~~be 31unable to comply with these requirements, ~~2015.~~ultimately ~~The~~jeopardizing our status as ~~board~~a ofREIT, ~~directors~~or ~~determined~~we ~~that~~may ~~the~~be ~~value~~subject ofto ~~our~~a ~~notes~~100% ~~receivable~~tax ason ofany ~~December~~resultant ~~31,~~gain ~~2015~~if ~~was~~we ~~$20,839,171~~sell assets that are treated as dealer property or inventory.

~~Notes Payable.~~ The ~~valuation~~failure ~~report contained an estimated valuation~~ of ~~our~~a ~~notes~~mezzanine ~~payable~~loan ~~as equal~~ to qualify ~~fair value~~ as ofa ~~December~~real ~~31,~~estate ~~2015.~~asset ~~The~~ could ~~board~~adversely ofaffect ~~directors determined that the value of~~ our ~~notes~~ability ~~payable~~to qualify as ofa ~~December 31, 2015 was $178,236,424~~REIT.

~~Other~~We ~~Assets~~may ~~and~~acquire ~~Liabilities.~~mezzanine ~~The~~loans. ~~valuation~~If ~~report~~a ~~contained our~~mezzanine ~~other~~loan ~~assets~~satisfies ~~and~~an ~~liabilities~~Internal Revenue Service safe harbor in Revenue Procedure 2013-65, ~~consisting~~it ~~primarily~~will be treated as a real estate asset for purposes of ~~cash~~the REIT asset tests and ~~cash~~interest ~~equivalents,~~derived ~~restricted~~from the mezzanine loan will be treated as qualifying ~~cash,~~mortgage ~~deferred~~interest ~~costs,~~for ~~accounts~~purposes ~~receivable,~~of ~~and~~the ~~prepaid~~REIT ~~expenses~~75% ~~and~~gross ~~other~~income ~~assets~~test. ~~These~~Although ~~other~~the ~~assets~~Revenue ~~and~~Procedure ~~liabilities~~provides ~~were~~a ~~considered~~safe harbor on which bytaxpayers ~~the~~may ~~board~~ rely, it does not prescribe rules of ~~directors~~substantive tax law. We intend to bemake ~~equal~~investments in loans that comply with the various requirements applicable to ~~fair~~our ~~value~~qualification as a REIT. We may, however, acquire mezzanine loans that do not meet all of ~~December~~the 31requirements of this safe harbor. In the event we own a mezzanine loan that does not meet the safe harbor, ~~2015~~the ~~due~~Internal Revenue Service could challenge such loan’s treatment as a real estate asset for purposes of the REIT asset tests and could challenge treatment of interest on such loan as qualifying income for purposes of the 75% gross income test, and, if such a challenge were sustained, we could fail to ~~their~~qualify ~~short~~as ~~maturities~~a REIT.

~~Estimated Value Per Share.~~ The ~~estimated~~use ~~value per share was based upon 13,091,766 shares~~ of ~~our~~TRS ~~common~~lessees ~~stock~~will ~~outstanding as of December 31, 2015.~~increase Although the estimated value per share has been developed as a measure of value as of December 31, 2015, a specific time, the estimated value per share does not reflect a liquidity discount for the fact that the shares are not currently traded on a national securities exchange or the limited nature in which a stockholder may redeem shares under the share redemption program (if at all), a discount for the non-assumability or prepayment obligations associated with certain of our ~~debt,~~overall ortax ~~a discount for our corporate level overhead~~liability.

36Our TRS lessees and any other of our domestic taxable REIT subsidiaries will be subject to federal and state income tax on their taxable income, which in the case of our TRS lessees may consist of revenues from hotel properties leased by our TRS lessees net of the operating expenses for such properties and rent payments to us. Accordingly, although our ownership of TRS lessees allows us to participate in the operating income from any hotel properties that may be acquired in addition to receiving rent, that operating income is fully subject to income tax. Such taxes could be substantial. The after-tax net income of our TRS lessees or other taxable REIT subsidiaries would be available for distribution to us.

~~The~~Non-U.S. ~~following~~investors ~~table~~may ~~presents~~be subject ~~how~~to ~~the~~U.S. ~~estimated~~federal ~~value~~income ~~per~~taxes ~~share~~on ~~was~~the ~~determined~~sale asof shares of ~~December~~our ~~31,~~common ~~2015:~~stock if we are unable to qualify as a “domestically controlled” REIT.

Investments in hotel properties, net	$	279,370,000
Cash, cash equivalents and restricted cash		26,109,679
Notes Receivable		20,839,171
Other assets		9,971,238
	$	336,290,088
Notes payable	$	178,236,424
Other liabilities		7,302,068
Special limited partnership interests		1,000
Noncontrolling interest in Operating Partnership		9,635,385
Noncontrolling interest in consolidated joint venture		321.031
Estimated value	$	336,290,088
Common stock outstanding		13,091,766
Estimated value per share	$	10.75

A non-U.S. person disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to U.S. federal income tax on the gain recognized on such disposition. A non-U.S. stockholder generally would not be subject to U.S. federal income tax however, on gain from the disposition of stock in a REIT if the REIT is a “domestically controlled REIT.” A domestically controlled REIT is a REIT in which, at all times during a specified testing period, less than 50% in value of its shares is held directly or indirectly by non-U.S. holders. We cannot assure you that we will qualify as a domestically controlled REIT. If we were to fail to so qualify, gain realized by a non-U.S. investor on a sale of our common stock would be subject to U.S. federal income tax unless our common stock was traded on an established securities market, which is not currently the case, and the non-U.S. investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock.

~~As of December 31, 2015, the Company’s estimated value per share was allocated on a per share basis as follows:~~30

Investments in hotel properties, net	$	21.34
Notes payable		(13.61)
Other assets, liabilities, and special limited partnership interests		3.78
Noncontrolling interest in Operating Partnership		(0.74)
Noncontrolling interest in consolidated joint venture		(0.02)
Estimated value per share	$	10.75

Retirement Plan Risks

37There are special considerations for pension or profit-sharing or 401(k) plans, health or welfare plans or individual retirement accounts whose assets are being invested in our common stock due to requirements under the Employee Retirement Income Security Act of 1974, as amended, or “ERISA,” and the Internal Revenue Code. Furthermore, a person acting on behalf of a plan not subject to ERISA may be subject to similar penalties under applicable federal, state, local, or non-U.S. law by reason of purchasing our stock.

~~Limitations~~If ofyou ~~Valuation Method.~~are ~~FINRA rules provided limited guidance on~~ investing the ~~methods~~assets anof ~~issuer~~a ~~must~~pension, ~~use~~profit tosharing ~~determine~~or ~~its~~401(k) ~~estimated~~plan, ~~value~~health ~~per~~or ~~share. As~~welfare ~~with any valuation method~~plan, ~~and~~or asan ~~noted above~~IRA, ~~the~~or ~~methods~~other ~~used~~plan toor ~~determine~~arrangement ~~our estimated value per share were based upon a~~subject ~~number~~to ofERISA ~~assumptions, estimates and judgments that may not be accurate~~ or ~~complete.~~Section ~~The~~4975 ~~estimated value per share determined by our board~~ of ~~directors~~the isInternal ~~not~~Revenue aCode ~~representation,~~in ~~warranty or guarantee that~~us, ~~among~~you ~~other~~should ~~things~~consider:

● awhether ~~stockholder~~your ~~would~~investment beis ~~able~~consistent towith ~~realize~~ the ~~estimated~~applicable ~~value~~provisions ~~per share if such stockholder attempts to sell his or her shares; ● a stockholder would ultimately realize distributions per share equal to the estimated value per share upon liquidation~~ of ~~our~~ERISA ~~assets~~ and ~~settlement of our liabilities or if we were sold; ● shares of our common stock would trade at~~ the ~~estimated~~Internal ~~value~~Revenue ~~per share on a national securities exchange~~Code; ● a third party would offer the estimated value per share in an arms-length transaction to purchase all or substantially all of the shares of our common stock; or ● the methods used to determine the estimated value per share would be acceptable to FINRA, under the Employee Retirement Income Security Act, the SEC or any state securities regulatory entity with respect to their respective requirements.

~~Further,~~● ~~the~~whether ~~estimated value~~your ~~per~~investment ~~share~~is ~~was~~made ~~calculated as of a particular moment~~ in ~~time~~accordance ~~and~~with the ~~value~~documents ofand ~~our~~instruments ~~shares~~governing ~~will~~your ~~fluctuate over time as a result of~~plan, ~~among other things~~IRA, ~~future acquisitions~~ or ~~dispositions~~other ~~of assets~~arrangement, ~~developments~~including ~~related to individual assets and changes in~~ the ~~real~~investment ~~estate and capital markets.~~policy;

~~Recent~~● ~~Sales~~whether ofyour ~~Unregistered~~investment ~~Securities;~~satisfies ~~Use~~the ofprudence, ~~Offering~~diversification, ~~Proceeds from~~and ~~Registered~~other ~~Securities~~applicable fiduciary requirements in Section 404(a) of ERISA;

On● ~~April~~whether ~~15,~~your ~~2009,~~investment ~~our~~will ~~Registration~~impair ~~Statement on Form S-11 (File No. 333150612), registering a public offering of up to $1,100,000,000 in shares of our common stock, was declared effective by~~ the ~~SEC~~liquidity ~~and we commenced our initial public offering. In our initial public offering we offered up to $1,000,000,000 in shares~~ of ~~our common stock to~~ the ~~public at $10.00 per share and up to $100~~plan,~~000,000~~ ~~in shares of our common stock to our stockholders pursuant to the DRIP at $9.50 per share. On October 12~~IRA, ~~2012,~~or ~~our~~other Registration Statement on Form S-11 (File No. 333-179521) registering our follow-on public offering was declared effective by the SEC and our initial public offering automatically terminated. In our follow-on offering we offered up to $900,000,000 in shares of our common stock to the public at $10.00 per share and up to $100,000,000 in shares of our common stock to our stockholders pursuant to the DRIP at $9.50 per share.arrangement;

~~Effective~~● ~~February~~whether ~~20,~~your ~~2015,~~investment wewill ~~terminated the~~produce ~~offer~~unrelated ~~and~~business ~~sale~~taxable ofincome, ~~shares~~referred ofto ~~our~~as ~~common~~UBTI ~~stock~~and toas ~~the~~defined ~~public~~ in ~~our~~Sections ~~follow-on~~511 ~~offering,~~through ~~and~~514 ~~continued~~of ~~to issue shares pursuant to~~ the ~~DRIP.~~Internal OnRevenue ~~November 4~~Code, ~~2015, we filed a new Registration Statement on Form S-3 with the SEC~~ to ~~register~~ the ~~sale~~plan; ~~of up to $25 million in shares of our common stock pursuant to the DRIP, or our DRIP offering.~~and

~~Upon~~● ~~the~~whether ~~termination~~you ofneed ~~our follow-on offering, we had accepted investors’ subscriptions for, and issued 11,826,697 shares of our common stock in that offering, including 510,457 shares of our common stock issued pursuant~~ to ~~the~~value DRIP, resulting in aggregate gross offering proceeds of $113,162,397. As of December 31, 2015, we have raised $129,880,250 in gross offering proceeds in our initial public offering and our follow-on offering, including through shares issued pursuant to the ~~DRIP.~~assets ~~We continue to offer shares~~ of ~~common stock pursuant to~~ the ~~DRIP~~plan annually.

AsYou should consider whether your investment in us will cause some or all of ~~December~~our 31assets to be considered assets of an employee benefit plan, ~~2015~~IRA, weor other ~~had~~arrangement. ~~incurred~~We ~~selling~~do not believe that under ERISA and U.S. Department of Labor regulations currently in effect that our assets ~~commissions~~would be treated as “plan assets” for purposes of ERISA. However, ~~dealer~~if ~~manager~~our ~~fees~~assets were considered to be plan assets, transactions involving our assets would be subject to ERISA and ~~organization~~Section 4975 of the Internal Revenue Code and ~~other~~some ~~offering~~of ~~costs~~the intransactions we have entered into with our ~~initial~~advisor ~~public~~and ~~offering~~its affiliates could be considered “prohibited transactions,” under ERISA or the Internal Revenue Code. If such transactions were considered “prohibited transactions,” our advisor and its affiliates could be subject to liabilities and excise taxes or penalties. In addition, our ~~follow-on~~officers ~~offering~~and directors, Moody National Advisors ~~including~~I, ~~shares~~LLC ~~issued~~and ~~pursuant~~its affiliates could be deemed to ~~the~~be ~~DRIP~~fiduciaries inunder ERISA, subject to other conditions, restrictions and prohibitions under Part 4 of Title I of ERISA and those ~~offerings~~serving as fiduciaries of plans investing in us may be considered to have improperly delegated fiduciary duties to us. Additionally, other transactions with “parties-in-interest” or “disqualified persons” with respect to an investing plan might be prohibited under ERISA, the ~~amounts~~Internal ~~set~~Revenue ~~forth~~Code or other governing authority in the ~~tables~~case ~~below.~~of ~~Moody~~a ~~Securities~~government plan. Therefore, we would be operating under a burdensome regulatory regime that could limit ~~LLC,~~or restrict investments we can make or our ~~dealer~~management ~~manager~~of our real estate assets. Even if our assets are not considered to be plan assets, ~~reallowed~~a ~~all~~prohibited transaction could occur if we or any of our affiliates is a fiduciary (within the ~~selling~~meaning ~~commissions~~of ERISA) with respect to an employee benefit plan purchasing shares and, atherefore, ~~portion~~in ofthe event any such persons are fiduciaries (within the ~~dealer~~meaning of ~~manager~~ERISA) ~~fees~~of your plan or IRA, you should not purchase shares unless an administrative or statutory exemption applies to ~~participating~~your ~~broker-dealers~~purchase.

~~Initial~~Failure ~~Public~~to ~~Offering:~~satisfy the fiduciary standards of conduct and other requirements of ERISA, the Internal Revenue Code, or other applicable statutory or common law may result in the imposition of civil (and criminal, if the violation was willful) penalties, and can subject the fiduciary to equitable remedies. In addition, if an investment in our common stock constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the fiduciary that authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested. Furthermore, to the extent that the assets of a plan or arrangement not subject to the fiduciary provisions of ERISA (for example, governmental plans, non-electing church plans, and foreign plans) will be used to purchase our stock, such plans should consider the impact of applicable federal, state, local, or non-U.S. law on the decision to make such purchase.

Type of Expense	Amount		Estimated/Actual
Selling commissions and dealer manager fees	$	936,994		Actual
Finders’ fees		—		—
Expenses paid to or for underwriters		—		—
Other organization and offering costs		780,167		Actual
Total expenses	$	1,717,161

ITEM 1B.

Unresolved Staff Comments

38We have no unresolved staff comments.

~~Follow-On~~ITEM ~~Offering:~~2. Properties

Type of Expense	Amount		Estimated/Actual
Selling commissions and dealer manager fees	$	11,102,398		Actual
Finders’ fees		—		—
Expenses paid to or for underwriters		—		—
Other organization and offering costs		3,005,446		Actual
Total expenses	$	14,107,844

As of December 31, 2016, we owned interests in twelve hotel properties located in five states with an aggregate of 1,595 rooms. For more information on our hotel properties, see Item 1, “Business—Investment Portfolio.”

~~DRIP~~Our ~~Offering~~principal executive offices are located at 6363 Woodway Drive, Suite 110, Houston, Texas, 77057. Our telephone number, general facsimile number and website address are (713) 977-7500, (713) 977-7505 and http://www.moodynationalreit.com, respectively.

WeITEM ~~do not pay any selling commissions or dealer manager fees in connection with the offering of shares pursuant to our DRIP offering~~3. AsLegal ~~of December 31, 2015, we had incurred $124,000 of offering costs in connection with our DRIP offering.~~Proceedings

AsFrom oftime ~~December~~to 31time, we ~~2015,~~are ~~the~~party ~~net~~to ~~offering~~legal ~~proceeds to~~proceedings usthat ~~from~~arise ~~our~~in ~~initial~~the ~~public~~ordinary ~~offering~~course ~~and~~of our ~~follow-on~~business. ~~offering,~~Management ~~after~~is ~~deducting~~not ~~the~~aware ~~total~~of ~~expenses~~any ~~incurred~~pending ~~as described above,~~or ~~were~~contemplated ~~$108,180,104~~legal ~~excluding~~proceedings ~~$5,751,141~~the inoutcome ~~offering~~of ~~proceeds~~which ~~from~~is ~~shares~~or ofwould ~~our~~be ~~common~~reasonably ~~stock~~likely ~~issued pursuant~~ to ~~the~~have ~~DRIP.~~a Asmaterial ~~of December~~adverse ~~31,~~effect ~~2015,~~on ~~the~~our ~~ratio~~ results of ~~the~~operations ~~cost~~or offinancial ~~raising capital to capital raised was approximately 13%~~condition.

WeITEM intend to use substantially all of the remaining net proceeds from our follow-on offering and the proceeds from our DRIP offering to continue to invest in a portfolio of real properties, real estate securities and debt-related investments4. AsMine ofSafety December 31, 2015, we had used $80,612,582 of the net proceeds from our public offerings plus debt financing to purchase (1) our thirteen investments in hotel properties (including our investments in an interest in the Residence Inn property, which was subsequently sold on August 23, 2012, and the Silicon Valley Hotel property, which was sold on September 9, 2015), (2) the Hyatt Place Note and (3) the note receivable from related party. As of December 31, 2015, we had paid $10,037,743 of acquisition expenses to third parties.Disclosures

~~Under~~Not our independent directors compensation plan, each of our then current independent directors received an initial stock grant of 5,000 shares of restricted common stock when we raised the minimum offering amount of $2,000,000 in our initial public offeringapplicable. Each new independent director that subsequently joins the board of directors receives the initial restricted stock grant on the date he or she joins the board of directors. In addition, on the date of each of the first four annual meetings of our stockholders at which an independent director is re-elected to the board of directors, he or she will receive 2,500 shares of restricted stock.

~~As of December~~ 31, 2015, a total of 51,250 shares of restricted stock have been issued by us to our independent directors pursuant to the independent directors compensation plan. The shares of restricted stock issued pursuant to our independent directors compensation plan were issued in transactions exempt from registration pursuant to Section 4(2) of the Securities Act. For more information on our independent directors compensation plan, see Item 11, “Executive Compensation—Compensation of our Directors.”

~~Share~~PART ~~Redemption Program~~II

~~Our~~ITEM ~~share~~5. ~~redemption~~Market ~~program may provide a limited opportunity~~ for ~~our~~Registrant’s ~~stockholders~~Common ~~to have their shares of common stock redeemed~~Equity, ~~subject~~Related toShareholder ~~certain~~Matters ~~restrictions~~ and ~~limitations. Prior~~Issuer toPurchases ~~the termination~~ of ~~our~~Equity follow-on offering and our disclosure of an estimated per share value not based upon our most recent public offering price, our shares were be redeemed pursuant to our share redemption program at a price equal to or at a discount from the current offering price per share for the shares being redeemed. The discount varied based upon the length of time that a stockholder held the shares of our common stock subject to redemption, as described in the following table:Securities

Share Purchase Anniversary	Redemption Price as a Percentage of Current Offering Price
Less than 1 year		No Redemption Allowed
1 year		92.5	%
2 years		95.0	%
3 years		97.5	%
4 years and longer		100.0	%

Stockholder Information

39As of March 7, 2017, we had 13,303,908 shares of our common stock outstanding held by a total of approximately 3,221 stockholders. The number of stockholders is based on the records of DST Systems, Inc., which serves as our transfer agent.

~~Because~~Market ~~our~~Information follow-on offering has terminated and we have disclosed an estimated per share value not based upon our most recent public offering price, shares of common stock will be redeemed, subject to certain restrictions and limitations, at a price equal to, or at a discount from, a price based upon the estimated per share value.

~~Unless~~Our ~~the~~ shares ~~are~~of ~~being redeemed in connection~~common ~~with~~stock aare ~~stockholder’s~~not ~~death~~currently orlisted ~~qualifying~~on ~~disability,~~a wenational ~~may~~securities ~~not~~exchange ~~redeem~~or ~~shares~~any ~~unless~~ over-the-counter ~~redeeming stockholder has held the shares for one year~~market. ~~Redemption~~We ~~requests~~do ~~made~~not ~~within~~expect ~~two~~our ~~years~~shares ~~of death or “qualifying disability” of a stockholder~~to ~~will~~become belisted ~~redeemed~~in at the ~~most~~near ~~recent~~future, ~~estimated~~and ~~per~~they ~~share~~may ~~value~~not ~~determined~~become bylisted ~~our~~at ~~board of directors~~all. ~~Our board of directors~~Consequently, ~~in its~~there ~~sole~~is ~~discretion, will make~~ the ~~determination~~risk ofthat ~~whether~~our ~~a stockholder has a qualifying disability after receiving written notice~~stockholders ~~from~~may ~~the~~not ~~stockholder.~~be ~~Generally,~~able ~~our~~to ~~board~~sell oftheir ~~directors~~shares ~~will~~at ~~consider~~ a ~~stockholder~~time toor ~~have~~price aacceptable ~~qualifying disability if it is (1) unable~~ to ~~engage~~them. inWhile ~~any~~our ~~substantial~~charter ~~gainful~~does ~~activity~~not byrequire ~~reason~~our board of ~~any medically determinable physical or mental impairment which~~directors ~~can be expected~~ to ~~result~~pursue ~~in death or can be expected to last for~~ a ~~continuous~~liquidity ~~period~~event ofat ~~not~~any ~~less~~particular ~~than 12 months~~time, or ~~(2)~~at isall, ~~by reason~~as ofdescribed ~~any~~above ~~medically determinable physical or mental impairment which can be expected to result~~ in ~~death~~Item or1, ~~can~~“Business—Pending ~~be expected~~Merger towith ~~last~~Moody ~~for~~National aREIT ~~continuous~~II, ~~period of not less than 12 months~~Inc.,” ~~receiving~~we ~~income~~entered ~~replacement~~into ~~benefits for a period of not less than three months under an accident and health plan covering employees of~~ the ~~stockholder’s~~merger ~~employees.~~agreement Weon ~~must~~November ~~receive~~16, ~~written notice within 180 days after such stockholder’s qualifying disability~~2016.

WeIn ~~are~~order ~~not obligated~~ to ~~redeem~~assist broker-dealers ~~shares~~that ofparticipated in our ~~common~~ ~~stock~~public offerings in meeting certain obligations under FINRA rules, we estimate that the value per share ~~redemption~~of ~~program~~our common stock is $10.25. ~~Our~~As ~~board~~described ofabove ~~directors~~in ~~may~~Item 1, in“Business—Pending ~~its~~Merger ~~sole~~with ~~discretion~~Moody National REIT II, ~~accept~~Inc.,” orthis ~~reject~~is ~~any~~the net per share ~~redemption~~ ~~request~~price ~~made~~that byour ~~any~~stockholders ~~stockholder~~will atreceive ~~any~~(either ~~time.~~in Ifcash ~~our~~or ~~board~~shares of ~~directors~~Moody ~~accepts~~II common ~~share~~stock ~~redemptions,~~pursuant to the ~~number~~exchange ratio) for each share of ~~shares to~~our becommon ~~redeemed~~stock ~~during~~pursuant ~~any~~to ~~calendar~~the ~~year~~merger agreement, and is ~~limited~~calculated as tothe difference between (1i) ~~5.0%~~a gross per share price of $11.00, minus (ii) the ~~weighted~~per ~~average~~share ~~number~~Moody I transaction fees and expenses. The merger agreement was the product of ~~shares~~a negotiation between a special committee of our ~~common~~board ~~stock~~of ~~outstanding~~directors and a special committee ~~during~~of the ~~prior~~board ~~calendar~~of ~~year~~directors ~~and~~of ~~(2)~~Moody ~~those~~II, ~~that~~each ~~could~~of bewhich ~~funded~~was ~~from~~represented by its own counsel and financial advisor. Entry into the ~~net~~merger agreement ~~proceeds~~was ~~from~~unanimously approved by our board of directors upon the ~~sale~~recommendation of ~~shares~~the ~~under~~special ~~our~~committee. ~~DRIP~~As also described above in Item 1, “Business—Pending Merger with Moody National REIT II, Inc.,” the ~~prior~~merger ~~calendar~~agreement ~~year~~includes ~~plus~~go shop provisions, pursuant to which 99 prospective buyers, including 77 prospective financial buyers and 22 prospective strategic buyers, were contacted regarding each such ~~additional~~party’s ~~funds~~potential asinterest ~~may~~in beexploring ~~reserved~~a ~~for~~transaction ~~that~~with ~~purpose~~us. byDuring ~~our~~the ~~board~~go shop period (i.e., between November 16, 2016 and December 31, 2016), seven parties (two of ~~directors;~~which were financial buyers and five of which were strategic buyers) negotiated and entered into confidentiality agreements with us and were provided, with non-public ~~however,~~information ~~that~~about us. None of the parties contacted during the go shop process described above, ~~volume~~including ~~limitations~~the ~~shall~~seven ~~not~~parties ~~apply~~that entered into confidentiality agreements with us, submitted to ~~redemptions~~us ~~requested~~a ~~within~~proposal ~~two~~that ~~years~~was ~~after~~deemed an “acquisition proposal” under the ~~death~~merger ofagreement ~~stockholder~~prior to the go shop period end time.

ToRecent ~~the~~Sales ~~extent we determine to accept share redemption requests from our stockholders, redemption~~ of ~~shares~~Unregistered ~~of our common stock will be made quarterly upon written request~~Securities; toUse ~~us at least 15 days prior to the end~~ of ~~the~~Offering ~~applicable~~Proceeds ~~quarter.~~from ~~Redemption~~Registered requests will be honored approximately 30 days following the end of the applicable quarter, which we refer to as the “redemption date.” Stockholders may withdraw their redemption request at any time up to three business days prior to the redemption date.Securities

~~Our~~On ~~board~~April of15, ~~directors~~2009, our ~~may~~Registration Statement on Form S-11 (File No. 333-150612), inregistering ~~its~~a ~~sole~~public ~~discretion~~offering of up to $1, ~~amend~~100, ~~suspend~~000,000 orin ~~terminate~~shares of our ~~share~~common ~~redemption~~stock, ~~program~~was atdeclared ~~any~~effective ~~time~~by ifthe itSEC ~~determines~~and ~~that~~we ~~the~~commenced ~~funds~~our ~~available~~initial topublic ~~fund~~offering. ~~the~~In ~~share redemption~~our ~~program~~initial ~~are~~public ~~needed~~offering we ~~for~~offered ~~other~~up ~~business~~to or$1,000,000,000 ~~operational~~in ~~purposes~~shares orof ~~that~~our ~~amendment,~~common ~~suspension~~stock orto ~~termination~~the ofpublic ~~our~~at $10.00 per share ~~redemption~~ ~~program~~and isup to $100,000,000 in ~~the~~shares of ~~best~~our ~~interest~~common ofstock to our stockholders. Ifpursuant to our ~~board~~DRIP ofat ~~directors~~$9.50 ~~decides~~per toshare. ~~amend~~On October 12, ~~suspend~~2012, orour ~~terminate~~Registration Statement ~~our~~on ~~share~~Form ~~redemption~~S-11 ~~program,~~(File weNo. ~~will~~333-179521) ~~provide~~registering ~~stockholders~~our ~~with~~follow-on nopublic ~~less~~offering ~~than~~was 30declared ~~days’~~effective ~~prior~~by ~~written~~the ~~notice.~~SEC ~~Therefore,~~and our initial ~~stockholders~~public ~~may~~offering ~~not~~automatically ~~have~~terminated. ~~the~~In ~~opportunity~~our follow-on offering, we offered up to ~~make~~$900,000,000 ain ~~redemption~~shares ~~request~~of ~~prior~~our common stock to ~~any~~the ~~potential~~public ~~termination~~at $10.00 per share and up to $100,000,000 in shares of our ~~share~~common ~~redemption~~stock to our stockholders pursuant to our DRIP ~~program~~at $9.50 per share.

OnEffective ~~March 24~~February 20, ~~2016~~2015, ~~our~~we ~~board~~terminated ~~of directors approved~~ the ~~formation~~offer ofand asale ~~special committee, comprised~~ of ~~two~~shares of our ~~independent~~common ~~directors,~~stock orto the ~~special~~public ~~committee,~~in ~~to explore~~our ~~strategic~~follow-on ~~alternatives~~offering, ~~for~~and ~~us.~~continued to Inissue ~~connection~~shares ~~with~~pursuant ~~the~~to ~~formation~~our ofDRIP. ~~the~~On ~~special~~November ~~committee~~4, ~~our~~2015, ~~board~~we ~~voted~~filed toa ~~suspend our~~new ~~share~~Registration ~~redemption~~Statement ~~program~~on ~~indefinitely,~~Form ~~such~~S-3 ~~suspension~~with tothe beSEC ~~effective~~to onregister the ~~not~~sale ~~less~~of ~~than~~up 30to ~~days’~~$25,000,000 ~~notice~~in toshares of our ~~stockholders. Our~~common ~~board~~stock ~~will~~pursuant ~~continue~~ to ~~consider~~our ~~requests~~DRIP. ~~for~~Our ~~redemptions~~DRIP inwas ~~connection~~suspended ~~with~~by aour ~~stockholder’s~~board ~~death~~of ~~or qualifying~~directors ~~disability~~on October 13, as2016 ~~set~~and ~~forth~~remains ~~above~~suspended.

~~During~~Upon the ~~year~~termination of ~~ended~~our ~~December~~follow-on 31offering, ~~2015,~~ we ~~redeemed~~ ahad ~~total~~accepted ofinvestors’ 51subscriptions for,~~611~~ and issued 11,719,636 shares of our common stock in ~~pursuant~~that tooffering, ~~terms~~including 510,457 shares of our ~~share~~common ~~redemption~~stock ~~program~~issued atpursuant anto ~~average~~our ~~price~~DRIP, ofresulting in aggregate gross offering proceeds of $9112,091,790.83 ~~per~~As ~~share,~~of ~~for~~December an31, ~~aggregate~~2016, ~~redemption~~we ~~price~~have ofraised $~~507~~128,~~231~~188,874 in gross offering proceeds in our initial public offering and our follow-on offering, including through shares issued pursuant to our DRIP.

~~During~~As ~~the~~of ~~quarter ending~~ December 31, ~~2015,~~ 2016, we ~~fulfilled~~had ~~redemption~~incurred ~~requests~~selling commissions, dealer manager fees and ~~redeemed~~organization ~~shares~~and ofother offering costs in our ~~common~~initial ~~stock~~public offering and our follow-on offering, including shares issued pursuant to our ~~share~~DRIP ~~redemption~~in ~~program~~those asofferings, ~~follows:~~in the amounts set forth in the tables below. Moody Securities, LLC, our dealer manager, reallowed all of the selling commissions and a portion of the dealer manager fees to participating broker-dealers.

4032

Total Number of Shares Requested to be Redeemed(1)

Filing Compare · Moody National REIT I, Inc.