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Sotherly Hotels Inc. Reports Financial Results For the Second Quarter Ended June 30, 2019

WILLIAMSBURG, Va., Aug. 06, 2019 (GLOBE NEWSWIRE) -- Sotherly Hotels Inc. (SOHO), (“Sotherly” or the “Company”), a self-managed and self-administered lodging real estate investment trust (a “REIT”), today reported its consolidated results for the second quarter ended June 30, 2019. The Company’s results include the following*:

  Three Months Ended     Six Months Ended  
  June 30, 2019     June 30, 2018     June 30, 2019     June 30, 2018  
  ($ in thousands except per share data)     ($ in thousands except per share data)  
Total Revenue $ 51,541     $ 51,554     $ 98,931     $ 93,289  
Net (loss) income available to common stockholders   (732 )     1,352       (2,385 )     1,114  
                               
EBITDA   12,006       14,914       23,168       26,125  
Hotel EBITDA   15,582       16,383       28,754       28,262  
                               
FFO available to common stockholders and unitholders   4,302       6,972       8,290       11,454  
Adjusted FFO available to common stockholders and unitholders   7,177       8,353       11,955       13,099  
                               
Net (loss) income per common share $ (0.05 )   $ 0.10     $ (0.18 )   $ 0.08  
FFO per common share and unit $ 0.28     $ 0.46     $ 0.54     $ 0.75  
Adjusted FFO per common share and unit $ 0.47     $ 0.55     $ 0.78     $ 0.86  
                               

(*)    Earnings before interest, taxes, depreciation and amortization (“EBITDA”), hotel EBITDA, funds from operations (“FFO”) available to common stockholders and unitholders, adjusted FFO available to common stockholders and unitholders, FFO per common share and unit and adjusted FFO per common share and unit are non-GAAP financial measures. See further discussion of these non-GAAP measures, including definitions related thereto, and reconciliations to net income (loss) later in this press release. The Company is the sole general partner of Sotherly Hotels LP, a Delaware limited partnership (the “Operating Partnership”), and all references in this release to the “Company”, “Sotherly”, “we”, “us” and “our” refer to Sotherly Hotels Inc., its Operating Partnership and its subsidiaries and predecessors, unless the context otherwise requires or where otherwise indicated.

HIGHLIGHTS:

  • Revenue and RevPAR.  Room revenue per available room (“RevPAR”) for the Company’s composite portfolio, which includes the Hyatt Centric Arlington and the rooms participating in our rental program at the Hyde Resort & Residences, during the three-month period ending June 30, 2019, increased 4.0% over the three months ended June 30, 2018, to $128.05 reflecting a 0.9% increase in occupancy and a 3.0% increase in average daily rate (“ADR”). For the six-month period ending June 30, 2019, RevPAR increased 6.1% over the six months ended June 30, 2018, to $124.97 driven by a 2.7% increase in occupancy and a 3.3% increase in ADR.  For the three-month period ending June 30, 2019, total revenue decreased 0.02% over the three-month period ending June 30, 2018.  For the six-month period ending June 30, 2019, total revenue increased 6.0% or by approximately $5.6 million to approximately $98.9 million, as compared to approximately $93.3 million for the six-month period ending June 30, 2018. 
  • Common Dividends. On July 30, 2019, the Company announced a quarterly dividend (distribution) on its common stock (and units) of $0.13 per share (and unit) to stockholders (and unitholders) of record as of September 13, 2019, payable on October 11, 2019.
  • Hotel EBITDA. The Company generated hotel EBITDA of approximately $15.6 million during the three-month period ending June 30, 2019.  Hotel EBITDA decreased 4.9%, or approximately $0.8 million, over the three months ended June 30, 2018.  For the six-month period ending June 30, 2019, hotel EBITDA increased 1.7%, or approximately $0.5 million, over the six months ended June 30, 2018. 
  • Adjusted FFO available to common stockholders and unitholders. For the three-month period ending June 30, 2019, adjusted FFO available to common stockholders and unitholders decreased 14.1% from the three months ended June 30, 2018.  For the six-month period ending June 30, 2019, adjusted FFO available to common stockholders and unitholders decreased 8.7% or approximately $1.1 million over the six months ended June 30, 2018.

Andrew M. Sims, Chairman and Chief Executive Officer of Sotherly Hotels Inc., commented, “The Company experienced results in line with our expectations for the quarter.  Composite RevPAR increased approximately 4.0% for the quarter as compared to the prior year, resulting in six-month RevPAR increasing approximately 6.1% as compared to the prior year.  Hotel EBITDA and adjusted FFO were both lower for the quarter as compared to the same period in 2018, but these results were impacted by non-recurring events, including a large insurance claim settlement that was recorded in the second quarter of 2018, and the Easter holiday moving from the first quarter last year to the second quarter this year.  Hotel EBITDA results for the first half of the year were in line with our expectations.  After completing the second quarter, we continue to stand by our guidance for the year.”

Balance Sheet/Liquidity

At June 30, 2019, the Company had approximately $37.3 million of available cash and cash equivalents, of which approximately $4.9 million was reserved for real estate taxes, insurance, capital improvements and certain other expenses or otherwise restricted. The Company had principal balances of approximately $364.7 million in outstanding debt at a weighted average interest rate of approximately 4.98%.

On April 18, 2019, the Company closed a sale and issuance of 1,080,000 shares of its 8.25% Series D cumulative redeemable perpetual preferred stock (the “Series D Preferred Stock”), for total gross proceeds of $27.0 million before underwriting discounts and commissions and expenses payable by the Company.  On May 1, 2019, the Company closed a sale and issuance of an additional 120,000 shares of its Series D Preferred Stock, for gross proceeds of $3.0 million, in connection with the partial exercise of the underwriters’ option to purchase additional shares.  We used the net proceeds to redeem in full the Operating Partnership’s 7.25% Senior Unsecured Notes due 2021 (the “7.25% Notes”) and for working capital.

On April 26, 2019, we entered into amended loan documents to modify the existing mortgage loan on the Crowne Plaza Tampa Westshore with the existing lender, Fifth Third Bank.  Pursuant to the amended loan documents, the mortgage loan principal balance remained at approximately $18.2 million; the maturity date was extended to June 30, 2022, and may be extended for two additional periods of one year each, subject to certain conditions; the mortgage loan continues to bear a floating interest rate of 1-month LIBOR plus 3.75% subject to a floor rate of 3.75%, with a new provision to reduce the floating interest rate to 1-month LIBOR plus 3.00% upon the successful achievement of certain performance hurdles; the mortgage loan amortizes on a 25-year schedule; and the mortgage loan continues to be guaranteed by Sotherly Hotels LP.

On May 20, 2019, the Operating Partnership redeemed the entire $25.0 million aggregate principal amount of its 7.25% Notes, at a redemption price equal to 101% of the principal amount of the 7.25% Notes, plus any accrued and unpaid interest to, but not including, the redemption date.

Portfolio Update

On June 4, 2019, the Company’s hotel in Tampa, Florida was converted to the Hotel Alba, a member of the Tapestry Collection by Hilton, following the completion of an $11.3 million renovation project.  “Alba”, Spanish for sunrise, is a nod to the rise of Tampa’s historic cigar industry in the late nineteenth century, a transformative shift that ushered in the cultural diversity and economic prosperity that continues to define Tampa today.   

2019 Outlook

Set forth below is the Company’s guidance for 2019, as previously revised.  The guidance is predicated on estimates of occupancy and ADR that are consistent with the most recent 2019 calendar year forecasts by Smith Travel Research for the market segments in which the Company operates. 

The table below reflects the Company’s projections, within a range, of various financial measures for 2019, in thousands of dollars, except per share and RevPAR data:

  2019 Guidance  
  Low Range     High Range  
     
Total revenue $ 184,247     $ 187,053  
Net income   1,708       2,295  
Net loss available to common stockholders and unitholders   (5,899 )     (5,311 )
               
EBITDA   41,977       42,914  
Hotel EBITDA   49,187       50,224  
               
FFO available to common stockholders and unitholders   14,102       14,689  
Adjusted FFO available to common stockholders and unitholders   15,832       16,769  
               
Net loss per share available to common stockholders $ (0.38 )   $ (0.34 )
FFO per common share and unit $ 0.91     $ 0.95  
Adjusted FFO per common share and unit $ 1.02     $ 1.08  
RevPAR $ 109.60     $ 110.49  
Hotel EBITDA margin   26.7 %     26.9 %
               

Earnings Call/Webcast

The Company will conduct its second quarter 2019 conference call for investors and other interested parties at 10:00 a.m. Eastern Time on Tuesday, August 6, 2019. The conference call will be accessible by telephone and through the Internet. Interested individuals are invited to listen to the call by telephone at 888-339-0107 (United States) or 855-669-9657 (Canada) or +1 412-902-4188 (International). To participate on the webcast, log on to www.sotherlyhotels.com at least 15 minutes before the call to download the necessary software. For those unable to listen to the call live, a taped rebroadcast will be available beginning one hour after completion of the live call on August 6, 2019 through August 6, 2020. To access the rebroadcast, dial 877-344-7529 and enter conference number 10133236.  A replay of the call also will be available on the Internet at www.sotherlyhotels.com until August 6, 2020.

About Sotherly Hotels Inc.

Sotherly Hotels Inc. is a self-managed and self-administered lodging REIT focused on the acquisition, renovation, upbranding and repositioning of upscale to upper-upscale full-service hotels in the Southern United States. Currently, the Company’s portfolio consists of investments in twelve hotel properties, comprising 3,156 rooms, and an interest in the Hyde Resort & Residences, a luxury condo hotel. The Company owns hotels that operate under the Hilton Worldwide, Hyatt Hotels Corporation, and Marriott International, Inc. brands, as well as independent hotels. Sotherly Hotels Inc. was organized in 2004 and is headquartered in Williamsburg, Virginia. For more information, please visit www.sotherlyhotels.com.

Contact at the Company:

Scott Kucinski
Vice President – Operations & Investor Relations
Sotherly Hotels Inc.
410 West Francis Street
Williamsburg, Virginia 23185
757.229.5648

Forward-Looking Statements

This news release includes “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. Although the Company believes that the expectations and assumptions reflected in the forward-looking statements are reasonable, these statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict and many of which are beyond the Company’s control. Therefore, actual outcomes and results may differ materially from what is expressed, forecasted or implied in such forward-looking statements. Factors which could have a material adverse effect on the Company’s future results, performance and achievements, include, but are not limited to: national and local economic and business conditions that affect occupancy rates and revenues at the Company’s hotels and the demand for hotel products and services; risks associated with the hotel industry, including competition and new supply of hotel rooms, increases in wages, energy costs and other operating costs; risks associated with adverse weather conditions, including hurricanes; the availability and terms of financing and capital and the general volatility of the securities markets; the Company’s intent to repurchase shares from time to time; risks associated with the level of the Company’s indebtedness and its ability to meet covenants in its debt agreements and, if necessary, to refinance or seek an extension of the maturity of such indebtedness or modify such debt agreements; management and performance of the Company’s hotels; risks associated with maintaining our system of internal controls; risks associated with the conflicts of interest of the Company’s officers and directors; risks associated with redevelopment and repositioning projects, including delays and cost overruns; supply and demand for hotel rooms in the Company’s current and proposed market areas; risks associated with our ability to maintain our franchise agreements with our third party franchisors; the Company’s ability to acquire additional properties and the risk that potential acquisitions may not perform in accordance with expectations; the Company’s ability to successfully expand into new markets; legislative/regulatory changes, including changes to laws governing taxation of REITs; the Company’s ability to maintain its qualification as a REIT; and the Company’s ability to maintain adequate insurance coverage. These risks and uncertainties are described in greater detail under “Risk Factors” in the Company’s Annual Report on Form 10-K and subsequent reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to and does not intend to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Although the Company believes its current expectations to be based upon reasonable assumptions, it can give no assurance that its expectations will be attained or that actual results will not differ materially.

Financial Tables Follow…

SOTHERLY HOTELS INC.
CONSOLIDATED BALANCE SHEETS

  June 30, 2019     December 31, 2018  
  (unaudited)          
ASSETS              
Investment in hotel properties, net $ 436,509,664     $ 435,725,814  
Cash and cash equivalents   32,402,174       33,792,773  
Restricted cash   4,936,628       4,075,508  
Accounts receivable, net   9,610,320       6,766,696  
Accounts receivable - affiliate   95,392       262,572  
Prepaid expenses, inventory and other assets   5,594,024       5,262,884  
Favorable lease assets, net         2,465,421  
Deferred income taxes   3,976,235       5,131,179  
TOTAL ASSETS $ 493,124,437     $ 493,482,847  
LIABILITIES              
Mortgage loans, net $ 362,062,982     $ 364,828,845  
Unsecured notes, net         23,894,658  
Accounts payable and accrued liabilities   20,700,490       16,268,096  
Advance deposits   2,000,943       2,815,283  
Dividends and distributions payable   3,993,966       3,409,593  
TOTAL LIABILITIES $ 388,758,381     $ 411,216,475  
Commitments and contingencies          
EQUITY              
Sotherly Hotels Inc. stockholders’ equity              
Preferred stock, $0.01 par value, 11,000,000 shares authorized;              
8.0% Series B cumulative redeemable perpetual preferred stock, liquidation preference $25 per share, 1,610,000 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively.   16,100       16,100  
7.875% Series C cumulative redeemable perpetual preferred stock, liquidation preference $25 per share, 1,352,141 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively.   13,521       13,521  
8.25% Series D cumulative redeemable perpetual preferred stock, liquidation preference $25 per share, 1,200,000 shares issued and outstanding at June 30, 2019 and none at December 31, 2018.   12,000        
Common stock, par value $0.01, 49,000,000 shares authorized, 14,222,378 shares and 14,209,378 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively.   142,223       142,093  
Additional paid-in capital   175,557,743       147,085,112  
Unearned ESOP shares   (4,245,348 )     (4,379,742 )
Distributions in excess of retained earnings   (66,820,158 )     (61,052,418 )
Total Sotherly Hotels Inc. stockholders’ equity   104,676,081       81,824,666  
Noncontrolling interest   (310,025 )     441,706  
TOTAL EQUITY   104,366,056       82,266,372  
TOTAL LIABILITIES AND EQUITY $ 493,124,437     $ 493,482,847  
               

SOTHERLY HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

  Three Months Ended     Three Months Ended     Six Months Ended     Six Months Ended  
  June 30, 2019     June 30, 2018     June 30, 2019     June 30, 2018  
  (unaudited)     (unaudited)     (unaudited)     (unaudited)  
REVENUE                              
Rooms department $ 36,356,324     $ 35,330,676     $ 69,308,196     $ 63,616,121  
Food and beverage department   10,863,633       11,080,568       20,586,757       19,432,551  
Other operating departments   4,320,744       5,142,283       9,036,054       10,240,411  
Total revenue   51,540,701       51,553,527       98,931,007       93,289,083  
EXPENSES                              
Hotel operating expenses                              
Rooms department   8,418,413       8,176,164       16,199,852       14,876,545  
Food and beverage department   7,621,331       7,673,049       14,758,164       14,068,125  
Other operating departments   1,745,311       1,680,582       3,655,446       3,208,909  
Indirect   18,173,700       17,640,285       35,563,380       32,873,541  
Total hotel operating expenses   35,958,755       35,170,080       70,176,842       65,027,120  
Depreciation and amortization   5,108,375       5,601,940       11,137,110       11,236,130  
Loss on disposal of assets   31,179             27,171       3,739  
Corporate general and administrative   1,554,934       1,503,549       3,239,378       3,049,849  
Total operating expenses   42,653,243       42,275,569       84,580,501       79,316,838  
NET OPERATING INCOME   8,887,458       9,277,958       14,350,506       13,972,245  
Other income (expense)                              
Interest expense   (5,088,121 )     (5,087,482 )     (10,393,235 )     (9,264,501 )
Interest income   155,512       66,505       254,808       148,209  
Loss on early extinguishment of debt   (1,152,356 )           (1,152,356 )      
Unrealized gain (loss) on hedging activities   (837,822 )     5,798       (1,328,432 )     18,528  
Gain on involuntary conversion of assets         27,824       161,334       898,565  
Net income before income taxes   1,964,671       4,290,603       1,892,625       5,773,046  
Income tax provision   (815,356 )     (1,323,014 )     (1,133,513 )     (1,628,969 )
Net income   1,149,315       2,967,589       759,112       4,144,077  
Less: Net income (loss) attributable to the noncontrolling interest   91,356       (170,331 )     298,305       (140,318 )
Net income attributable to the Company   1,240,671       2,797,258       1,057,417       4,003,759  
Distributions to preferred stockholders   (1,972,382 )     (1,444,844 )     (3,442,890 )     (2,889,688 )
Net (loss) income available to common stockholders $ (731,711 )   $ 1,352,414     $ (2,385,473 )   $ 1,114,071  
Net (loss) income per share available to common stockholders                              
Basic $ (0.05 )   $ 0.10     $ (0.18 )   $ 0.08  
Weighted average number of common shares outstanding                              
Basic   13,626,435       13,488,526       13,618,688       13,480,529  
                               

SOTHERLY HOTELS INC.
KEY OPERATING METRICS
(unaudited)

The following tables illustrate the key operating metrics for the three and six months ended June 30, 2019 and 2018, respectively, for the Company’s twelve wholly-owned properties (“actual” portfolio metrics), as well as the eleven wholly-owned properties in the portfolio that were under the Company’s control during the three and six months ended June 30, 2019 and the corresponding periods in 2018 (“same-store” portfolio metrics). Accordingly, the actual data does not include the participating condominium hotel rooms at the Hyde Resort & Residences, and the same-store data does not include the performance of the Hyatt Centric Arlington which we acquired in March 2018 or the participating condominium hotel rooms at the Hyde Resort & Residences.  The composite portfolio metrics represent the Company’s twelve wholly-owned properties and the participating condominium hotel rooms at the Hyde Resort & Residences during the three and six months ended June 30, 2019 and the corresponding period in 2018.

  Three Months Ended     Three Months Ended     Six Months Ended     Six Months Ended  
  June 30, 2019     June 30, 2018     June 30, 2019     June 30, 2018  
Actual Portfolio Metrics                              
Occupancy %   77.4 %     77.8 %     73.8 %     72.9 %
ADR $ 163.48     $ 158.14     $ 164.47     $ 157.99  
RevPAR $ 126.59     $ 123.02     $ 121.33     $ 115.15  
Same-Store Portfolio Metrics                              
Occupancy %   76.2 %     76.5 %     73.0 %     71.7 %
ADR $ 155.65     $ 151.19     $ 159.76     $ 153.20  
RevPAR $ 118.62     $ 115.69     $ 116.61     $ 109.80  
Composite Portfolio Metrics                              
Occupancy %   76.3 %     75.6 %     73.1 %     71.2 %
ADR $ 167.87     $ 162.93     $ 170.91     $ 165.37  
RevPAR $ 128.05     $ 123.17     $ 124.97     $ 117.81  
                               

SOTHERLY HOTELS INC.
SUPPLEMENTAL DATA
(unaudited)

The following tables illustrate the key operating metrics for the three and six months ended June 30, 2019, 2018 and 2017, respectively, for each of the Company’s wholly-owned properties during each respective reporting period, irrespective of ownership percentage during any period.

Occupancy

                 
  Q2 2019     Q2 2018     Q2 2017  
  YTD     YTD     YTD  
The DeSoto
Savannah, Georgia
75.0 %   74.6 %   75.1 %
  69.4 %   65.7 %   71.0 %
DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida
82.8 %   84.8 %   80.9 %
  82.9 %   84.6 %   80.9 %
DoubleTree by Hilton Laurel
Laurel, Maryland
80.2 %   79.5 %   82.9 %
  70.8 %   65.2 %   66.6 %
DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania
85.1 %   86.3 %   83.3 %
  75.1 %   78.8 %   76.2 %
DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina
81.3 %   81.9 %   78.6 %
  76.6 %   76.7 %   76.4 %
DoubleTree Resort by Hilton Hollywood Beach
Hollywood, Florida
73.8 %   73.5 %   76.0 %
  76.0 %   75.6 %   79.5 %
Georgian Terrace
Atlanta, Georgia
70.9 %   74.8 %   71.6 %
  73.0 %   69.2 %   73.1 %
Hotel Alba Tampa, Tapestry Collection by Hilton
Tampa, Florida
70.5 %   76.8 %   80.0 %
  75.1 %   83.7 %   82.9 %
Hotel Ballast Wilmington, Tapestry Collection by Hilton
Wilmington, North Carolina
78.2 %   69.9 %   77.5 %
  70.3 %   60.7 %   70.8 %
Hyatt Centric Arlington (1)
Arlington, Virginia
88.4 %   89.2 %   93.6 %
  80.7 %   80.8 %   83.0 %
Sheraton Louisville Riverside
Jeffersonville, Indiana
75.6 %   68.9 %   75.6 %
  64.9 %   60.3 %   66.6 %
The Whitehall
Houston, Texas
64.5 %   67.7 %   60.8 %
  64.5 %   62.7 %   63.1 %
Hyde Resort & Residences (2)
Hollywood Beach, Florida
53.9 %   43.2 %   29.0 %
  61.0 %   47.7 %   30.7 %
                 
All properties weighted average (1) 76.3 %   75.6 %   75.7 %
  73.1 %   71.0 %   74.4 %


(1 Includes operating results under previous ownership.  Results for periods prior to the Company’s ownership were provided by prior owners of the hotel and have not been audited or confirmed by the Company.
(2 ) Reflects only the condominium units at the Hyde Resort & Residences participating in our rental program for the period those units participated in our rental program.
   

ADR

                       
  Q2 2019     Q2 2018     Q2 2017  
  YTD     YTD     YTD  
The DeSoto
Savannah, Georgia
$ 190.12     $ 191.37     $ 169.35  
  $ 185.63     $ 185.91     $ 165.93  
DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida
$ 139.46     $ 143.08     $ 131.32  
  $ 142.87     $ 143.69     $ 131.74  
DoubleTree by Hilton Laurel
Laurel, Maryland
$ 112.76     $ 113.85     $ 109.15  
  $ 111.40     $ 112.03     $ 110.70  
DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania
$ 163.31     $ 147.86     $ 149.11  
  $ 147.02     $ 139.32     $ 136.00  
DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina
$ 146.19     $ 137.65     $ 135.52  
  $ 141.54     $ 135.77     $ 135.55  
DoubleTree Resort by Hilton Hollywood Beach
Hollywood, Florida
$ 161.72     $ 164.99     $ 156.52  
  $ 197.24     $ 196.45     $ 187.73  
Georgian Terrace
Atlanta, Georgia
$ 190.59     $ 178.44     $ 170.10  
  $ 220.76     $ 184.25     $ 170.72  
Hotel Alba Tampa, Tapestry Collection by Hilton
Tampa, Florida
$ 128.69     $ 121.79     $ 113.24  
  $ 136.69     $ 132.04     $ 125.44  
Hotel Ballast Wilmington, Tapestry Collection by Hilton
Wilmington, North Carolina
$ 172.00     $ 156.69     $ 164.67  
  $ 156.88     $ 146.03     $ 147.57  
Hyatt Centric Arlington (1)
Arlington, Virginia
$ 223.78     $ 211.29     $ 198.61  
  $ 202.50     $ 191.56     $ 196.40  
Sheraton Louisville Riverside
Jeffersonville, Indiana
$ 132.00     $ 141.53     $ 156.41  
  $ 124.21     $ 132.53     $ 141.25  
The Whitehall
Houston, Texas
$ 146.77     $ 146.91     $ 141.37  
  $ 146.46     $ 147.00     $ 151.59  
Hyde Resort & Residences (2)
Hollywood Beach, Florida
$ 290.49     $ 290.13     $ 288.14  
  $ 315.72     $ 326.83     $ 311.05  
                       
All properties weighted average (1) $ 167.87     $ 162.93     $ 155.45  
  $ 170.91     $ 164.70     $ 154.06  


(1 Includes operating results under previous ownership.  Results for periods prior to the Company’s ownership were provided by prior owners of the hotel and have not been audited or confirmed by the Company.
(2 ) Reflects only the condominium units at the Hyde Resort & Residences participating in our rental program for the period those units participated in our rental program.
   

RevPAR

  Q2 2019     Q2 2018     Q2 2017
  YTD     YTD     YTD
The DeSoto
Savannah, Georgia
$ 142.65     $ 142.74     $ 127.15
  $ 128.87     $ 122.16     $ 117.77
DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida
$ 115.49     $ 121.40     $ 106.27
  $ 118.42     $ 121.52     $ 106.60
DoubleTree by Hilton Laurel
Laurel, Maryland
$ 90.48     $ 90.55     $ 90.49
  $ 78.91     $ 73.00     $ 73.75
DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania
$ 139.06     $ 127.66     $ 124.14
  $ 110.41     $ 109.72     $ 103.63
DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina
$ 118.79     $ 112.70     $ 106.49
  $ 108.41     $ 104.08     $ 103.57
DoubleTree Resort by Hilton Hollywood Beach
Hollywood, Florida
$ 119.31     $ 121.28     $ 118.91
  $ 149.93     $ 148.58     $ 149.19
Georgian Terrace
Atlanta, Georgia
$ 135.06     $ 133.53     $ 121.86
  $ 161.26     $ 127.54     $ 124.80
Hotel Alba Tampa, Tapestry Collection by Hilton
Tampa, Florida
$ 90.67     $ 93.57     $ 90.62
  $ 102.60     $ 110.47     $ 103.95
Hotel Ballast Wilmington, Tapestry Collection by Hilton
Wilmington, North Carolina
$ 134.42     $ 109.56     $ 127.64
  $ 110.34     $ 88.63     $ 104.53
Hyatt Centric Arlington (1)
Arlington, Virginia
$ 197.73     $ 188.46     $ 185.96
  $ 163.49     $ 154.70     $ 163.00
Sheraton Louisville Riverside
Jeffersonville, Indiana
$ 99.81     $ 97.50     $ 118.23
  $ 80.60     $ 79.91     $ 94.05
The Whitehall
Houston, Texas
$ 94.61     $ 99.46     $ 86.01
  $ 94.49     $ 92.14     $ 95.73
Hyde Resort & Residences (2)
Hollywood Beach, Florida
$ 156.48     $ 125.44     $ 83.56
  $ 192.65     $ 155.97     $ 95.45
                     
All properties weighted average (1) $ 128.05     $ 123.17     $ 117.60
  $ 124.97     $ 116.96     $ 114.01


(1 Includes operating results under previous ownership.  Results for periods prior to the Company’s ownership were provided by prior owners of the hotel and have not been audited or confirmed by the Company.
(2 ) Reflects only the condominium units at the Hyde Resort & Residences participating in our rental program for the period those units participated in our rental program.
   

SOTHERLY HOTELS INC.
RECONCILIATION OF NET LOSS TO
FFO, Adjusted FFO, EBITDA and Hotel EBITDA
(unaudited)

  Three Months Ended     Three Months Ended     Six Months Ended     Six Months Ended  
  June 30, 2019     June 30, 2018     June 30, 2019     June 30, 2018  
Net (loss) income available to common stockholders $ (731,711 )   $ 1,352,414     $ (2,385,473 )   $ 1,114,071  
Add: Net (loss) income attributable to noncontrolling interest   (91,356 )     170,331       (298,305 )     140,318  
Depreciation and amortization - real estate   5,094,339       5,477,331       11,108,206       11,094,906  
Gain on involuntary conversion of assets         (27,824 )     (161,334 )     (898,565 )
Loss on disposal of assets   31,179             27,171       3,739  
FFO available to common stockholders and unitholders $ 4,302,451     $ 6,972,252     $ 8,290,265     $ 11,454,469  
Decrease in deferred income taxes   870,265       1,261,667       1,154,944       1,521,929  
Amortization   14,036       124,609       28,904       141,224  
Loss on early extinguishment of debt   1,152,356             1,152,356        
Unrealized (gain) loss on hedging activities   837,822       (5,798 )     1,328,432       (18,528 )
Adjusted FFO available to common stockholders and unitholders $ 7,176,930     $ 8,352,730     $ 11,954,901     $ 13,099,094  
                               
Weighted average number of shares outstanding, basic   13,626,435       13,488,526       13,618,688       13,480,529  
                               
Weighted average number of non-controlling units   1,778,140       1,778,140       1,778,140       1,778,140  
                               
Weighted average number of shares and units outstanding, basic   15,404,575       15,266,666       15,396,828       15,258,669  
                               
FFO per common share and unit $ 0.28     $ 0.46     $ 0.54     $ 0.75  
                               
Adjusted FFO per common share and unit $ 0.47     $ 0.55     $ 0.78     $ 0.86  
                               


  Three Months Ended     Three Months Ended     Six Months Ended     Six Months Ended  
  June 30, 2019     June 30, 2018     June 30, 2019     June 30, 2018  
Net (loss) income available to common stockholders $ (731,711 )   $ 1,352,414     $ (2,385,473 )   $ 1,114,071  
Add: Net (loss) income attributable to noncontrolling interest   (91,356 )     170,331       (298,305 )     140,318  
Interest expense   5,088,121       5,087,482       10,393,235       9,264,501  
Interest income   (155,512 )     (66,505 )     (254,808 )     (148,209 )
Income tax provision   815,356       1,323,014       1,133,513       1,628,969  
Depreciation and amortization   5,108,375       5,601,940       11,137,110       11,236,130  
Distributions to preferred stockholders   1,972,382       1,444,844       3,442,890       2,889,688  
EBITDA   12,005,655       14,913,520       23,168,162       26,125,468  
Loss on disposal of assets   31,179             27,171       3,739  
Loss on early extinguishment of debt   1,152,356             1,152,356        
Gain on involuntary conversion of assets         (27,824 )     (161,334 )     (898,565 )
Subtotal   13,189,190       14,885,696       24,186,355       25,230,642  
Corporate general and administrative   1,554,934       1,503,549       3,239,378       3,049,849  
Unrealized (gain) loss on hedging activities   837,822       (5,798 )     1,328,432       (18,528 )
Hotel EBITDA $ 15,581,946     $ 16,383,447     $ 28,754,165     $ 28,261,963  
                               


Reconciliation of Outlook of Net Income to EBITDA and Hotel EBITDA  
               
  2019 Guidance  
  Low Range     High Range  
               
Net income $ 1,708     $ 2,295  
Interest expense   19,899       19,899  
Interest income   (380 )     (380 )
Income tax provision   750       1,100  
Depreciation and amortization   20,000       20,000  
               
EBITDA   41,977       42,914  
Loss on early extinguishment of debt   1,160       1,160  
Corporate general and administrative   6,050       6,150  
               
Hotel EBITDA $ 49,187     $ 50,224  
               
               
Reconciliation of Outlook of Net Income to FFO and Adjusted FFO  
               
  2019 Guidance  
  Low Range     High Range  
               
Net income   1,708       2,295  
Depreciation and amortization   20,000       20,000  
               
FFO   21,708       22,295  
Distributions to preferred stockholders   (7,606 )     (7,606 )
               
FFO available to common stockholders and unitholders   14,102       14,689  
Decrease in deferred income taxes   570       920  
Loss on early extinguishment of debt   1,160       1,160  
Adjusted FFO available to common stockholders and unitholders $ 15,832     $ 16,769  
               

Non-GAAP Financial Measures

The Company considers the non-GAAP measures of FFO (including FFO per share), EBITDA and hotel EBITDA to be key supplemental measures of the Company’s performance and could be considered along with, not alternatives to, net income (loss) as a measure of the Company’s performance. These measures do not represent cash generated from operating activities determined by generally accepted accounting principles (“GAAP”) or amounts available for the Company’s discretionary use and should not be considered alternative measures of net income, cash flows from operations or any other operating performance measure prescribed by GAAP. 

FFO

Industry analysts and investors use Funds from Operations (“FFO”), as a supplemental operating performance measure of an equity REIT. FFO is calculated in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). FFO, as defined by NAREIT, represents net income or loss determined in accordance with GAAP, excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated operating real estate assets, plus certain non-cash items such as real estate asset depreciation and amortization, and after adjustment for any noncontrolling interest from unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by itself.

The Company considers FFO to be a useful measure of adjusted net income (loss) for reviewing comparative operating and financial performance because we believe FFO is most directly comparable to net income (loss), which remains the primary measure of performance, because by excluding gains or losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization, FFO assists in comparing the operating performance of a company’s real estate between periods or as compared to different companies. Although FFO is intended to be a REIT industry standard, other companies may not calculate FFO in the same manner as we do, and investors should not assume that FFO as reported by us is comparable to FFO as reported by other REITs.

Adjusted FFO

The Company presents adjusted FFO, including adjusted FFO per share and unit, which adjusts for certain additional items including changes in deferred income taxes, any unrealized gain (loss) on hedging instruments or warrant derivative, loan impairment losses, losses on early extinguishment of debt, aborted offering costs, loan modification fees, franchise termination costs, costs associated with the departure of executive officers, litigation settlement, over-assessed real estate taxes on appeal, change in control gains or losses and acquisition transaction costs. We exclude these items as we believe it allows for meaningful comparisons between periods and among other REITs and is more indicative than FFO of the on-going performance of our business and assets. Our calculation of adjusted FFO may be different from similar measures calculated by other REITs.

EBITDA

The Company believes that excluding the effect of non-operating expenses and non-cash charges, and the portion of those items related to unconsolidated entities, all of which are also based on historical cost accounting and may be of limited significance in evaluating current performance, can help eliminate the accounting effects of depreciation and financing decisions and facilitate comparisons of core operating profitability between periods and between REITs, even though EBITDA also does not represent an amount that accrued directly to shareholders.

Hotel EBITDA

The Company defines hotel EBITDA as net income or loss excluding: (1) interest expense, (2) interest income, (3) income tax provision or benefit, (4) equity in the income or loss of equity investees, (5) unrealized gains and losses on derivative instruments not included in other comprehensive income, (6) gains and losses on disposal of assets, (7) realized gains and losses on investments, (8) impairment of long-lived assets or investments, (9) loss on early debt extinguishment, (10) gains or losses on change in control, (11) corporate general and administrative expense, (12) depreciation and amortization, (13) gains and losses on involuntary conversions of assets, (14) distributions to preferred stockholders and (15) other operating revenue not related to our wholly-owned portfolio.  We believe this provides a more complete understanding of the operating results over which our wholly-owned hotels and its operators have direct control.  We believe hotel EBITDA provides investors with supplemental information on the on-going operational performance of our hotels and the effectiveness of third-party management companies operating our business on a property-level basis. The Company’s calculation of hotel EBITDA may be different from similar measures calculated by other REITs.