Sotherly Hotels Inc. Reports Financial Results for the Third Quarter Ended September 30, 2024
WILLIAMSBURG, Va., Nov. 12, 2024 (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, 2024. The Company's results include the following*:
Three Months Ended
Nine Months Ended
September 30, 2024
September 30, 2023
September 30, 2024
September 30, 2023
($ in thousands except per share data)
($ in thousands except per share data)
Total revenue
$
40,700
$
39,181
$
137,943
$
131,690
Net loss attributable to common stockholders
(5,604
)
(3,904
)
(3,641
)
(1,353
)
EBITDA
6,424
6,539
31,501
30,589
Hotel EBITDA
8,087
7,567
36,145
34,488
FFO attributable to common stockholders and unitholders
(871
)
86
10,446
11,277
Adjusted FFO attributable to common stockholders and unitholders
(348
)
50
12,336
11,739
Net loss per common share - diluted
$
(0.29
)
$
(0.20
)
$
(0.19
)
$
(0.08
)
FFO per common share and unit
$
(0.04
)
$
0.00
$
0.53
$
0.58
Adjusted FFO per common share and unit
$
(0.02
)
$
0.00
$
0.62
$
0.60
(*) Earnings before interest, taxes, depreciation and amortization ("EBITDA"), Hotel EBITDA, Funds From Operations ("FFO") attributable to common stockholders and unitholders, Adjusted FFO attributable 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.
HIGHLIGHTS
RevPAR. Room revenue per available room ("RevPAR") for the Company's composite portfolio, which includes the rooms participating in our rental programs at the Lyfe Resort & Residences (f/k/a Hyde Resort & Residences) and the Hyde Beach House Resort & Residences, increased 4.1% to $107.02, for the three months ended September 30, 2024, from $102.82 in the comparable period in 2023. Changes in RevPAR were driven by a 7.8% increase in occupancy to 66.3% from 61.5% in the comparable 2023 period, and a (3.4)% decrease in the average daily rate ("ADR") to $161.37 for the three months ended September 30, 2024, from $167.10 for the comparable period in 2023. For the nine months ended September 30, 2024, RevPAR increased to $122.71, from $117.89 in the comparable period in 2023. Changes in RevPAR were driven by an increase in the occupancy to 68.2% for the nine months ended September 30, 2024, from 63.8% for the comparable period in 2023 and by a decrease in ADR to $179.92 from $184.83 in the comparable 2023 period.
Revenue. Total revenue increased to approximately $40.7 million, from approximately $39.2 million, for the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024, total revenue increased to approximately $137.9 million, from approximately $131.7 million during the comparable period in 2023.
Net loss attributable to common stockholders. For the three months ended September 30, 2024, net loss attributable to common stockholders increased approximately $1.7 million, compared to the three months ended September 30, 2023, from a loss of approximately $3.9 million to a loss of approximately $5.6 million. For the nine months ended September 30, 2024, net loss attributable to common stockholders increased 169.2%, or approximately $2.3 million, over the nine months ended September 30, 2023, from a loss of approximately $1.4 million to a loss of approximately $3.6 million.
Hotel EBITDA. Hotel EBITDA increased to approximately $8.1 million for the three months ended September 30, 2024, from approximately $7.6 million for the comparable period in 2023. Hotel EBITDA for the nine months ended September 30, 2024 increased approximately $1.7 million to approximately $36.1 million, from approximately $34.5 million generated in the comparable 2023 period.
Adjusted FFO attributable to common stockholders and unitholders. For the three months ended September 30, 2024, Adjusted FFO attributable to common stockholders and unitholders decreased 791.7%, or approximately $0.4 million, over the three months ended September 30, 2023, from approximately $0.1 million to approximately $(0.3) million. For the nine months ended September 30, 2024, adjusted FFO attributable to common stockholders and unitholders increased 5.1%, or by approximately $0.6 million, over the nine months ended September 30, 2023, from approximately $11.7 million to approximately $12.3 million.
Preferred Dividends. On October 29, 2024 the Company announced a quarterly cash dividend of $0.50 per share of beneficial interest of the Company's 8.0% Series B Cumulative Redeemable Perpetual Preferred Stock; a quarterly cash dividend of $0.492188 per share of beneficial interest of the Company's 7.875% Series C Cumulative Redeemable Perpetual Preferred Stock; and a quarterly cash dividend of $0.515625 per share of beneficial interest of the Company's 8.25% Series D Cumulative Redeemable Perpetual Preferred Stock. Each of the Series B, Series C and Series D preferred dividends will be paid on December 16, 2024 to shareholders of record as of November 29, 2024.
Dave Folsom, President and Chief Executive Officer of Sotherly Hotels Inc., commented, "In the third quarter, Sotherly's portfolio continued to experience year-over-year growth in both total revenues and Hotel EBITDA, compared to the same period in 2023. Our refinancing of the mortgage at our Jacksonville Doubletree location was a major milestone and highlight for the Company in the quarter, given the current tough conditions in the mortgage and lending markets for commercial properties. The mortgage provides for nearly $9.5 million in available financing to fund life cycle capital improvements at this property, which will commence in early Q2 of 2025 and conclude at the end of 2026. Also in the quarter, Hurricane Helene impacted Florida. In our portfolio, only the Hotel Alba in Tampa was materially impacted by the storm, which was the most severe hurricane to hit Tampa in 100 years. The storm produced a record surge two feet greater than any previously measured. Our hotel experienced flooding on its ground floor that resulted in a material casualty to interior spaces and systems. The hotel remained open, and remediation and restoration commenced immediately. The hotel is fully insured, has remained open, and the Company expects to recover lost revenues through business interruption insurance. Our staff and partners did a superb job in handling this dangerous casualty."
Balance Sheet/Liquidity
As of September 30, 2024, the Company had approximately $32.5 million of available cash and cash equivalents, of which approximately $18.5 million was reserved for real estate taxes, insurance, capital improvements and certain other expenses or otherwise restricted. The Company had principal balances of approximately $321.3 million in outstanding debt, including mortgage and unsecured principal balances, at a weighted average interest rate of approximately 5.95%.
Other Events
On July 8, 2024, affiliates of the Company entered into loan documents to secure a mortgage loan on the DoubleTree by Hilton Jacksonville Riverfront hotel located in Jacksonville, FL with Fifth Third Bank, N.A. Pursuant to the loan documents, the mortgage loan: (i) has an initial principal balance of $26.25 million (the "Initial Tranche"), with an additional $9.49 million available to fund a product improvement plan at the hotel (the "Renovation Tranche"); (ii) has a 5-year term maturing on July 8, 2029; (iii) carries a floating interest rate of SOFR plus 3.00%; (iv) amortizes the Initial Tranche on a 25-year schedule at 7.0% interest rate and requires payments of interest only on the Renovation Tranche; (v) is guaranteed by the Operating Partnership, with the guarantee reducing to 25% upon achieving a 1.35x debt service coverage ratio (DSCR) for two consecutive quarters following a renovation period; and (vi) contains customary representations, warranties, covenants and events of default for a mortgage loan.
On August 14, 2024, affiliates of the Company entered into loan documents to secure a second mortgage loan on the DeSoto hotel located in Savannah, GA with MONY Life Insurance Company. Pursuant to the loan documents, the second mortgage: (i) has an initial principal balance of $5.0 million; (ii) has a maturity date of July 1, 2026; (iii) carries a fixed interest rate of 7.50%; (iv) amortizes on a 25-year schedule; (v) allows for prepayment with a premium due; and (vi) contains customary representations, warranties, covenants and events of default for a mortgage loan.
2024 Outlook
The Company is updating its previously issued guidance for 2024, accounting for current and expected performance within its portfolio, taking into account market conditions, the refinance of the mortgage on the DoubleTree by Hilton Jacksonville Riverfront, the second mortgage on The DeSoto hotel in Savannah, Georgia and weather-related events including Hurricane Helene. The updated guidance is predicated on estimates of occupancy and ADR that are consistent with the most recent 2024 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 2024, in thousands of dollars, except per share and RevPAR data:
Previous 2024 Guidance
Revised 2024 Guidance
Low Range
High Range
Low Range
High Range
Total revenue
$
178,952
$
182,567
$
177,795
$
180,138
Net (loss) income
1,598
2,593
(497
)
100
Net loss attributable to common stockholders and unitholders
(6,377
)
(5,382
)
(8,472
)
(7,875
)
EBITDA
39,858
40,853
38,993
39,590
Hotel EBITDA
46,103
46,898
44,974
45,571
FFO attributable to common stockholders and unitholders
12,373
13,368
10,481
11,078
Adjusted FFO attributable to common stockholders and unitholders
12,778
13,773
12,821
13,418
Net loss per share attributable to common stockholders
$
(0.32
)
$
(0.27
)
$
(0.43
)
$
(0.40
)
FFO per common share and unit
$
0.62
$
0.67
$
0.53
$
0.56
Adjusted FFO per common share and unit
$
0.64
$
0.69
$
0.65
$
0.68
Rev PAR
$
117.16
$
119.52
$
115.51
$
117.03
Hotel EBITDA margin
25.8
%
25.7
%
25.3
%
25.3
%
Earnings Call/Webcast
The Company will conduct its third quarter 2024 conference call for investors and other interested parties at 10:00 a.m. Eastern Time on Tuesday, November 12, 2024. The conference call will be accessible by telephone and through the Internet. Interested individuals are invited to listen to the call by telephone at 833-470-1428 (United States) and enter access code 033574. 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 12, 2024 through November 19, 2024. To access the rebroadcast, dial 866-813-9403 and enter access code 629306.
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. Sotherly may also opportunistically acquire hotels throughout the United States. Currently, the Company's portfolio consists of investments in ten hotel properties, comprising 2,786 rooms, as well as interests in two condominium hotels and their associated rental programs. The Company owns hotels that operate under the Hilton Worldwide and Hyatt Hotels Corporation 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.
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. We also sometimes refer to our booking pace. Booking pace is an industry term that we define as the estimated value of committed future bookings at a given point in time. Booking pace can be further separated into various segments, including group booking pace or business travel booking pace. All statements regarding our expected financial position, booking pace, business and financing plans are forward-looking statements.
Factors which could have a material adverse effect on the Company's future operations, results, performance and 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; 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 the level of our indebtedness and our ability to meet covenants in our debt agreements, including loan modifications and, as necessary, to refinance or seek an extension of the maturity of such indebtedness or further modification of such debt agreements; risks associated with adverse weather conditions, including hurricanes; impacts on the travel industry from pandemic diseases, including COVID-19; the availability and terms of financing and capital and the general volatility of the securities markets; 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; our ability to acquire additional properties and the risk that potential acquisitions may not perform in accordance with expectations; our ability to successfully expand into new markets; legislative/regulatory changes, including changes to laws governing taxation of real estate investment trusts ("REITs"); the Company's ability to maintain its qualification as a REIT; and our ability to maintain adequate insurance coverage. 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 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 press release and subsequent reports filed with the Securities and Exchange Commission. Except as required by law, 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, 2024
December 31, 2023
(unaudited)
ASSETS
Investment in hotel properties, net
$
372,952,913
$
354,919,106
Cash and cash equivalents
14,017,642
17,101,993
Restricted cash
18,488,112
9,134,347
Accounts receivable, net
3,185,999
5,945,724
Prepaid expenses, inventory and other assets
6,309,930
6,342,310
TOTAL ASSETS
$
414,954,596
$
393,443,480
LIABILITIES
Mortgage loans, net
$
318,061,006
$
315,989,194
Unsecured notes
906,280
1,536,809
Finance lease liabilities
22,742,195
—
Accounts payable and accrued liabilities
23,713,552
23,315,677
Advance deposits
2,879,011
2,614,981
Dividends and distributions payable
2,088,160
2,088,160
TOTAL LIABILITIES
$
370,390,204
$
345,544,821
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, 1,464,100 and 1,464,100 shares issued and outstanding; aggregate liquidation preference each $44,655,050, at September 30, 2024 and December 31, 2023, respectively.
14,641
14,641
7.875% Series C cumulative redeemable perpetual preferred stock, 1,346,110 and 1,346,110 shares issued and outstanding; aggregate liquidation preference each $40,940,681, at September 30, 2024 and December 31, 2023, respectively.
13,461
13,461
8.25% Series D cumulative redeemable perpetual preferred stock, 1,163,100 and 1,163,100 shares issued and outstanding; aggregate liquidation preference each $35,674,458, at September 30, 2024 and December 31, 2023, respectively.
11,631
11,631
Common stock, par value $0.01, 69,000,000 shares authorized, 19,849,165 shares issued and outstanding at September 30, 2024 and 19,696,805 shares issued and outstanding at December 31, 2023.
198,492
196,968
Additional paid-in capital
176,029,053
175,779,222
Unearned ESOP shares
(1,664,624
)
(1,764,507
)
Distributions in excess of retained earnings
(128,662,378
)
(125,021,013
)
Total Sotherly Hotels Inc. stockholders' equity
45,940,276
49,230,403
Noncontrolling interest
(1,375,884
)
(1,331,744
)
TOTAL EQUITY
44,564,392
47,898,659
TOTAL LIABILITIES AND EQUITY
$
414,954,596
$
393,443,480
SOTHERLY HOTELS INC.CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)
Three Months Ended
Three Months Ended
Nine Months Ended
Nine Months Ended
September 30, 2024
September 30, 2023
September 30, 2024
September 30, 2023
(unaudited)
(unaudited)
(unaudited)
(unaudited)
REVENUE
Rooms department
$
27,164,369
$
26,260,586
$
91,479,915
$
87,915,797
Food and beverage department
7,759,489
7,522,753
27,413,491
25,772,453
Other operating departments
5,776,123
5,398,024
19,049,373
18,001,724
Total revenue
40,699,981
39,181,363
137,942,779
131,689,974
EXPENSES
Hotel operating expenses
Rooms department
6,597,088
6,437,081
20,601,678
