Hotel Acquisition

On June 19, 2017, Condor Hospitality Limited Partnership
(“CHLP”), the operating partnership of Condor Hospitality
Trust, Inc. (the “Company”), completed the acquisition of a
hotel to a purchase agreement dated April 29, 2017 with SI Lake
Mary, LP. The hotel is the Hampton Inn and Suites, with 130
rooms, located in Lake Mary, Florida, a part of the Orlando
Kissimmee Sanford Metropolitan Statistical Area.

The aggregate purchase price for the hotel was $19.25 million
which was paid with a combination of debt financing (as discussed
below) and CHLP limited partnership units (as discussed below).
The purchase price is subject to a post-closing adjustment of up
to $250,000 to be paid to the seller if the hotel achieves a
stipulated hotel net operating income level (“NOI”) in 2017.
The closing of the transaction was subject to customary closing
conditions including accuracy of representations and warranties
and compliance with covenants and obligations under the purchase
agreement.

The hotel acquisition was completed by CDOR MCO Village, LLC
(“CMV”), a subsidiary 100% owned by CHLP. In connection with
the closing of the acquisition, the hotel was leased to TRS MCO
Village, LLC (“TMV”), a subsidiary 100% owned TRS Leasing,
Inc., the taxable REIT subsidiary of the Company.

The description of the purchase agreement for the hotel is
qualified in its entirety by the form of such agreement filed
with this report as Exhibit 10.1 and is incorporated herein by
reference.

Management Agreement

Hotel Management. On June 19, 2017, TMV entered into a
hotel management agreement with Peachtree Hospitality Management,
LLC (“Peachtree”), an eligible independent operator, to manage
the Lake Mary hotel. Peachtree managed the hotel prior to the
acquisition and is an affiliate of the seller of the hotel.

Under the hotel management agreement, Peachtree operates and
manages the hotel. Peachtree provides all property management,
financial accounting, reporting, marketing and other operational
services for the hotel, and employees for operating the hotel.
Peachtree must generally maintain the hotel in good operating
condition. Peachtree must operate the hotel in accordance with
the national franchise agreement that covers the hotel, which
includes using franchisor sales and reservation systems.

The management agreement generally requires TMV to fund budgeted
capital expenditures and operating expenses, except those
expenses not related to the operation of the hotel. TMV is
responsible for obtaining and maintaining insurance policies with
respect to the hotel.

Management Fee. Peachtree will receive a monthly
management fee with respect to the hotel equal to 2.5% of the
gross hotel income, which fee will increase to 3% if the hotel
achieves a stipulated NOI in 2017. Incentive fees may be earned
by Peachtree for performance above budgeted expectations for the
hotel up to a maximum payout of 2% of gross hotel income in 2017
and 2018 as follows:

For 2019 and until termination of the management agreement,
incentive fees with respect to the hotel may be earned by
Peachtree as follows, up to a maximum payout of 2% of gross hotel
income:

NOI is equal to gross hotel income less operating expenses
(exclusive of management fees, certain insurance premiums and
employee bonuses, and personal and real property taxes).

Term and Termination. The management agreement expires on
June 19, 2020 and will renew for two additional terms of one year
unless either party to the agreement gives the other party
written notice of termination at least 90 days before the end of
a term.

TMV may terminate the management agreement, subject to cure
rights, due to certain inspection failures or if performance
metrics tied to the hotel are not met. TMV may also terminate the
management agreement without reason on 60 days’ notice. Upon any
such termination without reason by TMV, TMV must pay Peachtree a
termination fee equal to the lesser of: (a) 50% of the monthly
management fee paid during the trailing 12 months (including any
such fees paid prior to the commencement of the management
agreement); or (b) 50% of the average monthly management fee paid
during the trailing 12 months multiplied by the number of months
remaining in the initial term or renewal term; provided, that
such termination fees in (a) and (b) above reduce to 25% in the
event there is less than 18 months remaining in the initial term
or renewal term. The management agreement terminates upon a sale
of the hotel, subject to certain notice requirements.

The description of the management agreement for the hotel is
qualified in its entirety by the form of such agreement filed
with this report as Exhibit 10.2 and is incorporated herein by
reference.

Debt Financing

On June 19, 2017, CHLP borrowed $20.0 million under the Credit
Agreement dated as of March 1, 2017 by and among CHLP, as
Borrower, KeyBank National Association and the other lenders
party thereto, as Lenders, and KeyBank National Association, as
Agent (the “Credit Agreement”). The borrowings under the Credit
Agreement were used to pay the aggregate purchase price for the
Lake Mary hotel and to pay the reserves and costs related to the
acquisition and financing.

On June 21, 2017, CMV and TMV were added as guarantors under the
Credit Agreement and the hotel property (together with the
tangible and intangible personal property used in connection with
such hotel property) was added to the collateral pool securing
indebtedness under the Credit Agreement.

The terms and conditions of the Credit Agreement are described in
the Company’s Current Reports on Form 8-K dated March 1, 2017
and May 11, 2017 and are incorporated herein by reference.

Item 2.01. Completion of Acquisition or Disposition of Assets.

The information provided in Item 1.01 is incorporated herein by
reference.

Item 2.03. Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a
Registrant.

The information provided in Item 1.01 is incorporated herein by
reference.

Item 3.02 Unregistered Sales of Equity Securities.

Item 1.01 is incorporated herein by reference.

to the purchase agreement for the Lake Mary hotel, as partial
consideration for the purchase price of the hotel, CHLP issued to
Peachtree Hotel Group II, LLC (“PHG”), an affiliate of the
seller, limited partnership units with an aggregate value of
$85,000. On June 19, 2017, 411,648 limited partnership units were
issued to PHG.

The CHLP limited partnership units were issued to PHG in a
transaction exempt from registration under the Securities Act of
1933, as amended, in reliance on Section 4(a)(2) thereof, as such
issuance of securities was not made in a public offering, neither
the Company or CHLP engaged in general solicitation or
advertising, the limited partnership units were not offered to
the public in connection with this transaction, and the investor
is an accredited investor.

Item 5.02 Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.

The form of the director restricted stock agreement under the
Company’s 2016 Stock Plan is filed as Exhibit 10.3 with this
report.

Item 9.01 Financial Statements and Exhibits.