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Sotherly Hotels Inc. Reports Financial Results for the Third Quarter Ended September 30, 2020

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Sotherly Hotels Inc.
·31 min read
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WILLIAMSBURG, Va., Nov. 09, 2020 (GLOBE NEWSWIRE) -- Sotherly Hotels Inc. (NASDAQ: 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 third quarter ended September 30, 2020. The Company’s results include the following*:

Three Months Ended

Nine Months Ended

September 30,
2020

September 30,
2019

September 30,
2020

September 30,
2019

($ in thousands except per share data)

($ in thousands except per share data)

Total Revenue

$

14,414

$

42,552

$

56,917

$

141,483

Net loss attributable to common stockholders

(12,260

)

(107

)

(43,708

)

(2,492

)

EBITDA

(2,021

)

10,974

(7,052

)

34,143

Hotel EBITDA

(1,154

)

8,904

(1,303

)

37,658

FFO attributable to common stockholders and unitholders

(8,162

)

4,719

(32,261

)

13,010

Adjusted FFO attributable to common stockholders and unitholders

(8,560

)

4,258

(25,483

)

16,213

Net loss per common share

$

(0.86

)

$

(0.01

)

$

(3.06

)

$

(0.18

)

FFO per common share and unit

$

(0.53

)

$

0.31

$

(2.08

)

$

0.84

Adjusted FFO per common share and unit

$

(0.55

)

$

0.28

$

(1.64

)

$

1.05

(*) 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 it is otherwise indicated.

COVID-19 UPDATE

The impact of the COVID-19 pandemic on the hospitality industry has been significant, with demand for hotel rooms in all of the markets the Company operates significantly reduced and occupancy rates reaching historic lows. We continued to experience a substantial decline in our revenues, profitability, and cash flows from operations during the third quarter of 2020. While the extent and duration of the negative effects resulting from COVID-19 on the Company’s business are highly uncertain and difficult to predict, we expect materially adverse effects on our operations and financial results to continue until travel and business restrictions are eased, travel orders are lifted, consumer confidence is restored, and an economic recovery takes hold. The COVID-19 pandemic has also significantly increased economic uncertainty and has led to disruption and volatility in the global capital markets, which has limited our access to capital and could increase our cost of capital. We continue to follow the procedures and strategies that we introduced at the outset of the pandemic, including enhanced cleaning protocols as well as several cost reduction initiatives.

ESTIMATED MONTHLY CASH USE

The Company estimates the average monthly cash use across its portfolio for the fourth quarter to be approximately $2.0 million (excluding capital investments) based on the following assumptions:

  • Average hotel-level monthly cash use of approximately $0 to $0.45 million;

  • Corporate-level monthly G&A cash use of $0.45 to $0.5 million; and

  • Corporate finance-related monthly cash use of $1.3 million, which includes principal and interest payments on the Company’s outstanding mortgage debt.

HIGHLIGHTS

  • 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 programs at the Hyde Resort & Residences and the Hyde Beach House Resort and Residences, during the three-month period ending September 30, 2020, decreased 63.3% over the three months ended September 30, 2019, to $36.68 reflecting a 59.8% decrease in occupancy and a 8.9% decrease in average daily rate (“ADR”). For the nine-month period ending September 30, 2020, RevPAR decreased 60.4% over the nine months ended September 30, 2019, to $46.20 driven by a 57.6% decrease in occupancy and a 6.5% decrease in ADR.

  • Revenue. For the three-month period ending September 30, 2020, total revenue decreased 66.1% over the three-month period ending September 30, 2019. For the nine-month period ending September 30, 2020, total revenue decreased 59.8% or by approximately $84.6 million to approximately $56.9 million, as compared to approximately $141.5 million for the nine-month period ending September 30, 2019.

  • Common Dividends. As approved by its Board of Directors, the Company has suspended its regular quarterly cash dividend in order to preserve liquidity. Accordingly, the Company did not pay a dividend on its common stock and common units for the quarter ended September 30, 2020. The Board of Directors will continue to monitor the situation and assess future quarterly common dividend declarations. Per the terms of the Company’s preferred stock, the Company cannot make any common dividend payments unless full cumulative distributions have been declared and paid for past distribution periods for each series of preferred stock.

  • Hotel EBITDA. The Company generated hotel EBITDA of approximately $(1.2) million during the three-month period ending September 30, 2020. Hotel EBITDA decreased 113.0%, or approximately ($10.1) million, over the three months ended September 30, 2019. For the nine-month period ending September 30, 2020, hotel EBITDA decreased 103.5%, or approximately $(39.0) million, over the nine months ended September 30, 2019.

  • Adjusted FFO attributable to common stockholders and unitholders. For the three-month period ending September 30, 2020, adjusted FFO attributable to common stockholders and unitholders decreased 301.0%, or approximately $(12.8) million, over the three months ended September 30, 2019. For the nine-month period ending September 30, 2020, adjusted FFO attributable to common stockholders and unitholders decreased 257.2% or approximately $(41.7) million over the nine months ended September 30, 2019.

Dave Folsom, President and Chief Executive Officer, of Sotherly Hotels Inc., commented, “The efforts of the hotel associates and executive team at our management company, Our Town Hospitality, as well as the efforts of the Sotherly team, have been commendable during the pandemic. Since the historically low RevPAR levels witnessed in April, we have experienced incremental improvements in demand driven primarily by the transient leisure segment. We are also seeing an initial, albeit small, return of business and group bookings. We continue to seek capital to enhance the Company’s liquidity position and continue to work constructively with our lenders toward forbearance terms on our secured mortgage debt.”

Balance Sheet/Liquidity

As of September 30, 2020, the Company had approximately $23.2 million of available cash and cash equivalents, of which approximately $7.7 million was reserved for real estate taxes, insurance, capital improvements and certain other expenses or otherwise restricted. The Company had principal balances of approximately $367.7 million in outstanding debt, net, including mortgage and unsecured principal balances, at a weighted average interest rate of approximately 4.59%.

Other Developments

We have entered into various forbearance and loan modification agreements with our lenders for the mortgage loans secured by our hotels located in Laurel, MD, Savannah, GA, Wilmington, NC, Philadelphia, PA, Houston, TX, Jacksonville, FL, Jeffersonville, IN, Raleigh, NC, Tampa, FL, Arlington, VA, and Atlanta, GA. These agreements generally allow us to defer payments of principal and interest for periods that began in April 2020 and that extend through to various dates ending between September 2020 and April 2021. We are currently in negotiations with the lender for the mortgage loan secured by the DoubleTree Resort by Hilton Hollywood Beach, in which we are in default, and may seek additional concessions from our lenders as existing payment extensions and deferrals expire, to the extent warranted by market conditions and the financial performance of our hotels. There can be no assurance that we will be able to reach agreement with all of our lenders or that additional concessions, if needed, can be negotiated on terms that are acceptable.

On October 14, 2020 we entered into a hotel management agreement, effective as of November 15, 2020, with Our Town Hospitality, LLC (“Our Town”) for the management of the Hyatt Centric Arlington. On November 15, 2020, we expect management of the Hyatt Centric Arlington to transition from Highgate Hotels, L.P. to Our Town. Following the transition, Our Town will manage each of the Company’s twelve wholly-owned hotels, as well as our two condominium hotel rental programs.

2020 Outlook

On March 9, 2020, the Company withdrew its previously announced guidance for 2020. Due to the uncertainties related to the COVID-19 pandemic and its impact on travel, the Company is unable to provide guidance for 2020.

Earnings Call/Webcast

The Company will conduct its third quarter 2020 conference call for investors and other interested parties at 10:00 a.m. Eastern Time on Monday, November 9, 2020. 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 November 9 through November 9, 2021. To access the rebroadcast, dial 877-344-7529 and enter conference number 10148828. A replay of the call also will be available on the Internet at www.sotherlyhotels.com until November 9, 2021.

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, as well as interests in two condominium hotels and their associated rental programs. 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:

Mack Sims
Vice President – Operations & Investor Relations
Sotherly Hotels Inc.
306 South Henry Street, Suite 100
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, and as such may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe our current strategies, expectations, and future plans are generally identified by our use of words, such as “intend,” “plan,” “may,” “should,” “will,” “project,” “estimate,” “anticipate,” “believe,” “expect,” “continue,” “potential,” “opportunity,” and similar expressions, whether in the negative or affirmative, but the absence of these words does not necessarily mean that a statement is not forward-looking. All statements regarding our expected financial position, business and financing plans are forward-looking statements.

Currently, one of the most significant factors that could cause actual outcomes to differ materially from the Company’s forward-looking statements is the potential increased adverse effect of COVID-19 on the Company’s business, financial performance and condition, operating results and cash flows, the real estate market and the hospitality industry specifically, and the global economy and financial markets. The significance, extent and duration of the impacts caused by the COVID-19 outbreak on the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, including the scope, severity and duration of the pandemic, the extent and effectiveness of the actions mandated and taken to contain the pandemic or mitigate its impact, the Company’s ability to negotiate forbearance and/or modifications agreements with its lenders on acceptable terms, or at all, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified under the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. Such additional factors include, but are not limited to, the ability of the Company to effectively acquire and dispose of properties; the ability of the Company to implement its operating strategy; changes in general political, economic and competitive conditions and specific market conditions; reduced business and leisure travel due to travel-related health concerns, including the widespread outbreak of COVID-19 or any other infectious or contagious diseases in the U.S. or abroad; adverse changes in the real estate and real estate capital markets; financing risks; litigation risks; regulatory proceedings or inquiries; and changes in laws or regulations or interpretations of current laws and regulations that impact the Company’s business, assets or classification as a REIT. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the results or conditions described in such statements or the objectives and plans of the Company will be achieved. Additional factors which could have a material adverse effect on our operations and future prospects include, but are not limited to: national and local economic and business conditions that affect occupancy rates and revenues at our hotels and the demand for hotel products and services; the adverse effect of the novel coronavirus on the U.S., regional and global economies, travel, the hospitality industry, and the financial condition and results of operation of the Company; risks associated with civil unrest or disorder that could adversely impact demand for hotel rooms in our markets or result in damage to our hotels; 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; risks associated with the level of our indebtedness and our ability to meet covenants in our 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 our 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 our current and proposed market areas; risks associated with our ability to maintain our franchise agreements with our third party franchisors; and our ability to maintain adequate insurance coverage.

Additional factors that could cause actual results to vary from our forward-looking statements are set forth under the section titled “Risk Factors” in our Annual Report on Form 10-K, in this report 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

September 30,
2020

December 31,
2019

(unaudited)

ASSETS

Investment in hotel properties, net

$

432,180,657

$

443,267,448

Cash and cash equivalents

15,484,560

23,738,066

Restricted cash

7,697,508

4,246,170

Accounts receivable, net

1,437,230

4,812,479

Accounts receivable - affiliate

148,320

101,771

Prepaid expenses, inventory and other assets

9,260,763

5,648,772

Deferred income taxes

5,412,084

TOTAL ASSETS

$

466,209,038

$

487,226,790

LIABILITIES

Mortgage loans, net

$

357,002,952

$

358,633,884

Unsecured notes, net

10,719,100

-

Accounts payable and accrued liabilities

36,115,988

20,189,903

Advance deposits

1,361,525

2,785,338

Dividends and distributions payable

4,277,070

4,210,494

TOTAL LIABILITIES

$

409,476,635

$

385,819,619

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 September 30, 2020 and December 31, 2019, respectively.

16,100

16,100

7.875% Series C cumulative redeemable perpetual preferred stock,
liquidation preference $25 per share, 1,554,610 shares issued
and outstanding at September 30, 2020 and December 31, 2019, respectively.

15,546

15,546

8.25% Series D cumulative redeemable perpetual preferred stock,
liquidation preference $25 per share, 1,200,000 shares issued
and outstanding at September 30, 2020 and December 31, 2019, respectively.

12,000

12,000

Common stock, par value $0.01, 69,000,000 shares authorized, 14,881,267
shares issued and outstanding at September 30, 2020 and 14,272,378 shares issued
and outstanding at December 31, 2019.

148,812

142,723

Additional paid-in capital

180,134,597

180,515,861

Unearned ESOP shares

(3,917,594

)

(4,105,637

)

Distributions in excess of retained earnings

(115,173,422

)

(73,990,690

)

Total Sotherly Hotels Inc. stockholders’ equity

61,236,039

102,605,903

Noncontrolling interest

(4,503,636

)

(1,198,732

)

TOTAL EQUITY

56,732,403

101,407,171

TOTAL LIABILITIES AND EQUITY

$

466,209,038

$

487,226,790

SOTHERLY HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

Three Months Ended

Three Months Ended

Nine Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

(unaudited)

(unaudited)

(unaudited)

(unaudited)

REVENUE

Rooms department

$

10,327,164

$

29,253,447

$

38,957,907

$

98,561,643

Food and beverage department

1,166,014

8,997,948

9,465,179

29,584,705

Other operating departments

2,921,300

4,300,780

8,493,762

13,336,834

Total revenue

14,414,478

42,552,175

56,916,848

141,483,182

EXPENSES

Hotel operating expenses

Rooms department

3,199,346

8,064,771

12,033,911

24,264,623

Food and beverage department

799,028

7,036,887

7,531,235

21,795,051

Other operating departments

1,071,077

1,352,205

4,044,313

5,007,651

Indirect

10,498,795

17,194,148

34,610,401

52,757,527

Total hotel operating expenses

15,568,246

33,648,011

58,219,860

103,824,852

Depreciation and amortization

4,959,750

4,980,168

14,935,733

16,117,278

Loss on disposal of assets

137,014

4,918

136,563

32,088

Corporate general and administrative

1,159,207

1,768,912

4,267,141

5,008,290

Total hotel operating expenses

21,824,217

40,402,009

77,559,297

124,982,508

NET OPERATING (LOSS) INCOME

(7,409,739

)

2,150,166

(20,642,449

)

16,500,674

Other income (expense)

Interest expense

(4,237,866

)

(4,722,456

)

(13,519,502

)

(15,115,690

)

Interest income

46,116

102,768

178,483

357,576

Loss on early extinguishment of debt

(1,152,356

)

Unrealized gain (loss) on hedging activities

415,467

(226,491

)

(1,385,041

)

(1,554,924

)

Gain on exercise of development right

3,940,000

3,940,000

Gain on involuntary conversion of assets

13,518

130,569

40,125

291,902

Net (loss) income before income taxes

(11,172,504

)

1,374,556

(35,328,384

)

3,267,182

Income tax (provision) benefit

133,233

694,190

(5,344,164

)

(439,323

)

Net (loss) income

(11,039,271

)

2,068,746

(40,672,548

)

2,827,859

Less: Net loss attributable to noncontrolling interest

968,273

13,337

3,531,056

311,642

Net (loss) income attributable to the Company

(10,070,998

)

2,082,083

(37,141,492

)

3,139,501

Declared and undeclared distributions to preferred stockholders

(2,188,910

)

(2,188,910

)

(6,566,731

)

(5,631,799

)

Net loss attributable to common stockholders

$

(12,259,908

)

$

(106,827

)

$

(43,708,223

)

$

(2,492,298

)

Net loss per share attributable to common stockholders

Basic

$

(0.86

)

$

(0.01

)

$

(3.06

)

$

(0.18

)

Weighted average number of common shares outstanding

Basic

14,331,647

13,636,706

14,293,799

13,624,760

SOTHERLY HOTELS INC.
KEY OPERATING METRICS
(unaudited)

The following tables illustrate the key operating metrics for the three and nine months ended September 30, 2020 and 2019, respectively, for the Company’s twelve wholly-owned properties (“actual” portfolio metrics), Accordingly, the actual data does not include the participating condominium hotel rooms of the Hyde Resort & Residences and the Hyde Beach House 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 and the Hyde Beach House Resort & Residences during the three and nine months ended September 30, 2020 and the corresponding periods in 2019.

Three Months
Ended

Three Months
Ended

Nine Months
Ended

Nine Months
Ended

September 30,
2020

September 30,
2019

September 30,
2020

September 30,
2019

Actual Portfolio Metrics

Occupancy %

28.9

%

70.6

%

31.6

%

72.7

%

ADR

$

123.23

$

142.75

$

142.62

$

157.36

RevPAR

$

35.57

$

100.75

$

45.05

$

114.40

Composite Portfolio Metrics

Occupancy %

27.7

%

68.8

%

30.4

%

71.7

%

ADR

$

132.51

$

145.51

$

152.06

$

162.69

RevPAR

$

36.68

$

100.06

$

46.20

$

116.57

SOTHERLY HOTELS INC.
SUPPLEMENTAL DATA
(unaudited)

The following tables illustrate the key operating metrics for the three and nine months ended September 30, 2020, 2019 and 2018, respectively, for each of the Company’s wholly-owned properties during each respective reporting period, irrespective of ownership percentage during any period.

Occupancy

Q3 2020

Q3 2019

Q3 2018

YTD

YTD

YTD

The DeSoto
Savannah, Georgia

29.7

%

60.1

%

58.8

%

26.3

%

66.3

%

63.4

%

DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida

28.8

%

72.9

%

79.1

%

38.3

%

79.5

%

82.7

%

DoubleTree by Hilton Laurel
Laurel, Maryland

31.7

%

72.9

%

70.3

%

31.9

%

71.5

%

66.9

%

DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania

45.1

%

82.1

%

81.3

%

36.8

%

77.5

%

79.6

%

DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina

17.3

%

79.6

%

74.7

%

27.3

%

77.6

%

76.0

%

DoubleTree Resort by Hilton Hollywood Beach
Hollywood, Florida

28.1

%

60.8

%

63.0

%

32.3

%

70.9

%

71.4

%

Georgian Terrace
Atlanta, Georgia

18.4

%

66.4

%

69.4

%

23.5

%

70.8

%

69.3

%

Hotel Alba Tampa, Tapestry Collection by Hilton
Tampa, Florida

24.8

%

53.0

%

56.1

%

34.1

%

67.6

%

74.4

%

Hotel Ballast Wilmington, Tapestry Collection by Hilton
Wilmington, North Carolina

45.1

%

73.0

%

69.8

%

35.8

%

71.2

%

63.8

%

Hyatt Centric Arlington (1)
Arlington, Virginia

22.7

%

83.6

%

86.0

%

27.9

%

81.7

%

82.5

%

Sheraton Louisville Riverside
Jeffersonville, Indiana

44.1

%

76.7

%

63.1

%

43.8

%

68.9

%

61.2

%

The Whitehall
Houston, Texas

10.9

%

63.9

%

50.2

%

23.9

%

64.3

%

58.5

%

Hyde Resort & Residences (2)
Hollywood Beach, Florida

19.2

%

35.3

%

48.4

%

23.8

%

52.3

%

47.9

%

Hyde Beach House Resort & Residences (2)
Hollywood Beach, Florida

10.4

%

-

-

9.6

%

-

-

All properties weighted average (1)

27.7

%

68.8

%

69.6

%

30.4

%

71.7

%

71.4

%


(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 those condominium units participating in our rental program for the period.

ADR

Q3 2020

Q3 2019

Q3 2018

YTD

YTD

YTD

The DeSoto
Savannah, Georgia

$

149.23

$

155.52

$

161.68

$

158.03

$

176.43

$

178.34

DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida

$

131.37

$

133.71

$

136.77

$

139.52

$

140.04

$

141.46

DoubleTree by Hilton Laurel
Laurel, Maryland

$

84.43

$

102.79

$

104.26

$

91.86

$

108.45

$

109.28

DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania

$

112.23

$

137.37

$

138.80

$

113.61

$

143.58

$

139.14

DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina

$

95.89

$

135.64

$

131.28

$

124.48

$

139.50

$

134.28

DoubleTree Resort by Hilton Hollywood Beach
Hollywood, Florida

$

117.90

$

130.16

$

131.74

$

196.03

$

177.85

$

177.20

Georgian Terrace
Atlanta, Georgia

$

175.53

$

180.82

$

183.46

$

194.42

$

208.14

$

183.98

Hotel Alba Tampa, Tapestry Collection by Hilton
Tampa, Florida

$

115.32

$

117.74

$

112.25

$

147.74

$

131.68

$

127.01

Hotel Ballast Wilmington, Tapestry Collection by Hilton
Wilmington, North Carolina

$

158.88

$

173.57

$

159.76

$

151.98

$

162.65

$

151.09

Hyatt Centric Arlington (1)
Arlington, Virginia

$

100.98

$

163.14

$

153.12

$

146.56

$

188.93

$

178.06

Sheraton Louisville Riverside
Jeffersonville, Indiana

$

97.04

$

106.70

$

113.70

$

98.70

$

117.64

$

125.99

The Whitehall
Houston, Texas

$

108.78

$

137.58

$

141.85

$

137.23

$

143.49

$

145.51

Hyde Resort & Residences (2)
Hollywood Beach, Florida

$

321.26

$

247.31

$

242.62

$

330.03

$

300.07

$

299.26

Hyde Beach House Resort & Residences (2)
Hollywood Beach, Florida

$

296.94

$

-

$

-

$

323.06

$

-

$

-

All properties weighted average (1)

$

132.51

$

145.51

$

147.25

$

152.06

$

162.69

$

161.38


(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 those condominium units participating in our rental program for the period.

RevPAR

Q3 2020

Q3 2019

Q3 2018

YTD

YTD

YTD

The DeSoto
Savannah, Georgia

$

44.34

$

93.51

$

95.01

$

41.53

$

116.95

$

113.01

DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida

$

37.87

$

97.54

$

108.12

$

53.39

$

111.38

$

117.01

DoubleTree by Hilton Laurel
Laurel, Maryland

$

26.78

$

74.88

$

73.25

$

29.27

$

77.55

$

73.08

DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania

$

50.67

$

112.82

$

112.78

$

41.85

$

111.23

$

110.75

DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina

$

16.59

$

107.98

$

98.11

$

34.01

$

108.26

$

102.07

DoubleTree Resort by Hilton Hollywood Beach
Hollywood, Florida

$

33.09

$

79.15

$

83.02

$

63.35

$

126.08

$

126.48

Georgian Terrace
Atlanta, Georgia

$

32.28

$

120.11

$

127.39

$

45.75

$

147.39

$

127.49

Hotel Alba Tampa, Tapestry Collection by Hilton
Tampa, Florida

$

28.64

$

62.44

$

62.98

$

50.43

$

89.07

$

94.47

Hotel Ballast Wilmington, Tapestry Collection by Hilton
Wilmington, North Carolina

$

71.67

$

126.71

$

111.52

$

54.48

$

115.86

$

96.34

Hyatt Centric Arlington (1)
Arlington, Virginia

$

22.96

$

136.32

$

131.66

$

40.94

$

154.33

$

146.94

Sheraton Louisville Riverside
Jeffersonville, Indiana

$

42.83

$

81.83

$

71.78

$

43.27

$

81.02

$

77.17

The Whitehall
Houston, Texas

$

11.87

$

87.94

$

71.23

$

32.75

$

92.28

$

85.09

Hyde Resort & Residences (2)
Hollywood Beach, Florida

$

61.74

$

87.25

$

117.37

$

78.70

$

156.90

$

143.45

Hyde Beach House Resort & Residences (2)
Hollywood Beach, Florida

$

30.75

$

-

$

-

$

30.85

$

-

$

-

All properties weighted average (1)

$

36.68

$

100.06

$

102.48

$

46.20

$

116.57

$

115.19


(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 those condominium units participating in our rental program for the period.

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

Three Months
Ended

Three Months
Ended

Nine Months
Ended

Nine Months
Ended

September 30,
2020

September 30,
2019

September 30,
2020

September 30,
2019

Net loss attributable to common stockholders

$

(12,259,908

)

$

(106,827

)

$

(43,708,223

)

$

(2,492,298

)

Add: Net loss attributable to noncontrolling interest

(968,273

)

(13,337

)

(3,531,056

)

(311,642

)

Depreciation and amortization - real estate

4,942,480

4,965,299

14,882,053

16,073,505

Gain on involuntary conversion of assets

(13,518

)

(130,569

)

(40,125

)

(291,902

)

Loss on disposal of assets

137,014

4,918

136,563

32,088

FFO attributable to common stockholders and unitholders

$

(8,162,205

)

$

4,719,484

$

(32,260,788

)

$

13,009,751

Decrease (increase) in deferred income taxes

(702,775

)

5,412,084

452,169

Amortization

17,270

14,869

53,680

43,773

Termination fee

(72,960

)

Loss on early extinguishment of debt

1,152,356

Unrealized (gain) loss on hedging activities

(415,467

)

226,491

1,385,041

1,554,924

Adjusted FFO attributable to common stockholders and unitholders

$

(8,560,402

)

$

4,258,069

$

(25,482,943

)

$

16,212,973

Weighted average number of shares outstanding, basic

14,331,647

13,636,706

14,293,799

13,624,760

Weighted average number of non-controlling units

1,181,501

1,778,140

1,200,660

1,778,140

Weighted average number of shares and units outstanding, basic

15,513,148

15,414,846

15,494,459

15,402,900

FFO per common share and unit

$

(0.53

)

$

0.31

$

(2.08

)

$

0.84

Adjusted FFO per common share and unit

$

(0.55

)

$

0.28

$

(1.64

)

$

1.05


Three Months
Ended

Three Months
Ended

Nine Months
Ended

Nine Months
Ended

September 30,
2020

September 30,
2019

September 30,
2020

September 30,
2019

Net loss attributable to common stockholders

$

(12,259,908

)

$

(106,827

)

$

(43,708,223

)

$

(2,492,298

)

Add: Net loss attributable to noncontrolling interest

(968,273

)

(13,337

)

(3,531,056

)

(311,642

)

Interest expense

4,237,866

4,722,456

13,519,502

15,115,690

Interest income

(46,116

)

(102,768

)

(178,483

)

(357,576

)

Income tax benefit (provision)

(133,233

)

(694,190

)

5,344,164

439,323

Depreciation and amortization

4,959,750

4,980,168

14,935,733

16,117,278

Distributions to preferred stockholders

2,188,910

2,188,910

6,566,731

5,631,799

EBITDA

(2,021,004

)

10,974,412

(7,051,632

)

34,142,574

Loss on disposal of assets

137,014

4,918

136,563

32,088

Loss on early extinguishment of debt

1,152,356

Gain on exercise of development right

(3,940,000

)

(3,940,000

)

Gain on involuntary conversion of assets

(13,518

)

(130,569

)

(40,125

)

(291,902

)

Subtotal

(1,897,508

)

6,908,761

(6,955,194

)

31,095,116

Corporate general and administrative

1,159,207

1,768,912

4,267,141

5,008,290

Unrealized (gain) loss on hedging activities

(415,467

)

226,491

1,385,041

1,554,924

Hotel EBITDA

$

(1,153,768

)

$

8,904,164

$

(1,303,012

)

$

37,658,330

Non-GAAP Financial Measures

The Company considers the non-GAAP financial measures of FFO (including FFO per share), Adjusted FFO, 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 that are not in NAREIT’s definition of FFO 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, management contract termination costs, operating asset depreciation and amortization, 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) gain on exercise of development right, (12) corporate general and administrative expense, (13) depreciation and amortization, (14) gains and losses on involuntary conversions of assets, (15) distributions to preferred stockholders and (16) 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.