Sotherly Hotels Inc. [SOHON] Filings

10-Q 1 soho-20240331.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

SOTHERLY HOTELS INC.

(Exact name of registrant as specified in its charter)

    Maryland

    001-32379

    20-1531029

    (State or Other Jurisdiction of
Incorporation or Organization)

    (Commission 
File Number)

    (I.R.S. Employer
Identification No.)

   

SOTHERLY HOTELS LP

(Exact name of registrant as specified in its charter)

    Delaware

    001-36091

    20-1965427

    (State or Other Jurisdiction of
Incorporation or Organization)

    (Commission
File Number)

    (I.R.S. Employer
Identification No.)

   

306 South Henry Street, Suite 100

Williamsburg, Virginia 23185

(757) 229-5648

(Address and Telephone Number of Principal Executive Offices)

Securities registered pursuant to Section 12(b) of the Act.


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	SOHO	The NASDAQ Stock Market LLC
8.0% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value	SOHOB	The NASDAQ Stock Market LLC
7.875% Series C Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value	SOHOO	The NASDAQ Stock Market LLC
8.25% Series D Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value	SOHON	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Sotherly Hotels Inc. Yes ☐ No ☒ Sotherly Hotels LP Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)

Sotherly Hotels Inc. Yes ☐ No ☒ Sotherly Hotels LP Yes ☐ No ☒

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

Sotherly Hotels Inc.


Large Accelerated Filer	☐	Accelerated Filer	☐

Non-accelerated Filer	☒	Smaller Reporting Company	☒

Emerging Growth Company	☐

Sotherly Hotels LP


Large Accelerated Filer	☐	Accelerated Filer	☐

Non-accelerated Filer	☒	Smaller Reporting Company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Sotherly Hotels Inc. Yes ☐ No ☒ Sotherly Hotels LP Yes ☐ No ☒

As of October 29, 2024, there were 19,849,165 shares of Sotherly Hotels Inc.’s common stock issued and outstanding.

EXPLANATORY NOTE

We refer to Sotherly Hotels Inc. as the “Company,” Sotherly Hotels LP as the “Operating Partnership,” the Company’s common stock as “common stock,” the Company’s preferred stock as “preferred stock,” the Operating Partnership’s common partnership interest as “partnership units,” and the Operating Partnership’s preferred interest as the “preferred units.” References to “we” and “our” mean the Company, its Operating Partnership and its subsidiaries and predecessors, collectively, unless the context otherwise requires or where otherwise indicated.

The Company conducts virtually all of its activities through the Operating Partnership and is its sole general partner. The Operating Partnership’s partnership agreement provides that the Operating Partnership will assume and pay when due, or reimburse the Company for payment of all costs and expenses relating to the ownership and operations of, or for the benefit of, the Operating Partnership. The partnership agreement further provides that all expenses of the Company are deemed to be incurred for the benefit of the Operating Partnership. The Company does not conduct business itself, other than (a) acting as the sole general partner of the Operating Partnership, (b) issuing public equity from time to time, and (c) guaranteeing certain unsecured debt of the Operating Partnership and certain of its subsidiaries and affiliates. The Operating Partnership holds substantially all of the assets of the business, directly or indirectly. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from equity issuances made by the Company, which are generally contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required by the business through the Operating Partnership's operations, incurrence of indebtedness, and issuance of partnership units to third parties.

This report combines the Quarterly Reports on Form 10-Q for the period ended March 31, 2024, of the Company and the Operating Partnership. We believe combining the quarterly reports into this single report results in the following benefits:

•

combined reports better reflect how management and investors view the business as a single operating unit;

•

combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;

•

combined reports are more efficient for the Company and the Operating Partnership and result in savings of time, effort and expense; and

•

combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.

To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:

•

Consolidated Financial Statements;

•

the following Notes to Consolidated Financial Statements:

•

Note 6 – Preferred Stock and Units;

•

Note 7 – Common Stock and Units;

•

Note 12 – Loss Per Share and Per Unit; and

•

Part I, Item 4 - Controls and Procedures; and

•

Part II, Item 6 - Certifications of CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act.

SOTHERLY HOTELS INC.

SOTHERLY HOTELS LP

INDEX


		Page

PART I
Item 1.	Consolidated Financial Statements	5

	Sotherly Hotels Inc.
	Consolidated Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023	5
	Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2024 and 2023	6
	Consolidated Statements of Changes in Equity (unaudited) for the Three Months Ended March 31, 2024 and 2023	7
	Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2024 and 2023	9

	Sotherly Hotels LP
	Consolidated Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023	10
	Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2024 and 2023	11
	Consolidated Statements of Changes in Partners’ Capital (unaudited) for the Three Months Ended March 31, 2024 and 2023	12
	Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2024 and 2023	14
	Notes to Consolidated Financial Statements	15
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4	Controls and Procedures	43

PART II
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46

PART I

Item 1. Consolidated Financial Statements

SOTHERLY HOTELS INC.

CONSOLIDATED BALANCE SHEETS


	March 31, 2024			December 31, 2023
	(unaudited)
ASSETS
Investment in hotel properties, net	$	352,455,889		$	354,919,106
Cash and cash equivalents		29,285,600			17,101,993
Restricted cash		10,341,209			9,134,347
Accounts receivable, net		6,968,335			5,945,724
Prepaid expenses, inventory and other assets		5,637,355			6,342,310
TOTAL ASSETS	$	404,688,388		$	393,443,480
LIABILITIES
Mortgage loans, net	$	325,106,994		$	315,989,194
Unsecured notes		1,347,998			1,536,809
Accounts payable and accrued liabilities		25,782,354			23,315,677
Advance deposits		2,879,763			2,614,981
Dividends and distributions payable		2,088,160			2,088,160
TOTAL LIABILITIES	$	357,205,269		$	345,544,821
Commitments and contingencies (See Note 5)		—			—
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 March 31, 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 March 31, 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 March 31, 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 March 31, 2024 and 19,696,805 shares issued and outstanding at December 31, 2023.		198,492			196,968
Additional paid-in capital		176,000,351			175,779,222
Unearned ESOP shares		(1,731,209	)		(1,764,507	)
Distributions in excess of retained earnings		(125,680,386	)		(125,021,013	)
Total Sotherly Hotels Inc. stockholders’ equity		48,826,981			49,230,403
Noncontrolling interest		(1,343,862	)		(1,331,744	)
TOTAL EQUITY		47,483,119			47,898,659
TOTAL LIABILITIES AND EQUITY	$	404,688,388		$	393,443,480

The accompanying notes are an integral part of these consolidated financial statements.

SOTHERLY HOTELS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Three Months Ended			Three Months Ended
	March 31, 2024			March 31, 2023
	(unaudited)			(unaudited)
REVENUE
Rooms department	$	29,739,657		$	28,401,688
Food and beverage department		9,752,449			8,748,726
Other operating departments		7,056,326			6,340,863
Total revenue		46,548,432			43,491,277
EXPENSES
Hotel operating expenses
Rooms department		6,552,184			6,413,094
Food and beverage department		6,464,855			5,935,560
Other operating departments		2,686,142			2,315,848
Indirect		18,484,896			16,747,577
Total hotel operating expenses		34,188,077			31,412,079
Depreciation and amortization		4,769,717			4,578,311
Corporate general and administrative		1,916,526			1,980,765
Total operating expenses		40,874,320			37,971,155
NET OPERATING INCOME		5,674,112			5,520,122
Other income (expense)
Interest expense		(4,888,806	)		(4,113,597	)
Interest income		214,772			146,665
Other income		124,877			—
Loss on early extinguishment of debt		(241,878	)		—
Realized and unrealized gain (loss) on hedging activities		335,446			(442,464	)
PPP loan forgiveness		—			275,494
Gain on involuntary conversion of assets		122,391			16,476
Net income before income taxes		1,340,914			1,402,696
Income tax provision		(18,093	)		(15,182	)
Net income		1,322,821			1,387,514
Add: Net loss attributable to noncontrolling interest		12,118			24,960
Net income attributable to the Company		1,334,939			1,412,474
Undeclared distributions to preferred stockholders		(1,994,312	)		(1,994,312	)
Net loss attributable to common stockholders	$	(659,373	)	$	(581,838	)
Net loss per share attributable to common stockholders:
Basic	$	(0.03	)	$	(0.03	)
Diluted	$	(0.03	)	$	(0.03	)
Weighted average number of common shares outstanding
Basic		19,359,601			18,635,004
Diluted		19,359,601			18,635,004

The accompanying notes are an integral part of these consolidated financial statements.

SOTHERLY HOTELS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


									Additional			Unearned			Distributions
	Preferred Stock				Common Stock				Paid-			ESOP			in Excess of			Noncontrolling
	Shares		Par Value		Shares		Par Value		In Capital			Shares			Retained Earnings			Interest			Total
Balances at December 31, 2023		3,973,310	$	39,733		19,696,805	$	196,968	$	175,779,222		$	(1,764,507	)	$	(125,021,013	)	$	(1,331,744	)	$	47,898,659
Net income		—		—		—		—		—			—			1,334,939			(12,118	)		1,322,821
Issuance of common stock		—		—		152,360		1,524		203,401			—			—			—			204,925
Preferred stock dividends declared:
Series B Preferred Stock, $0.50/share		—		—		—		—					—			(732,050	)		—			(732,050	)
Series C Preferred Stock, $0.492188/share		—		—		—		—					—			(662,539	)		—			(662,539	)
Series D Preferred Stock, $0.515625/share		—		—		—		—					—			(599,723	)		—			(599,723	)
Amortization of ESOP shares		—		—		—		—		(26,542	)		33,298			—			—			6,756
Amortization of restricted stock awards		—		—		—		—		44,270			—			—			—			44,270
Balances at March 31, 2024 (unaudited)		3,973,310	$	39,733		19,849,165	$	198,492	$	176,000,351		$	(1,731,209	)	$	(125,680,386	)	$	(1,343,862	)	$	47,483,119

The accompanying notes are an integral part of these consolidated financial statements.

SOTHERLY HOTELS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


									Additional			Unearned			Distributions
	Preferred Stock				Common Stock				Paid-			ESOP			in Excess of			Noncontrolling
	Shares		Par Value		Shares		Par Value		In Capital			Shares			Retained Earnings			Interest			Total
Balances at December 31, 2022		3,973,310	$	39,733		18,951,525	$	189,515	$	175,611,370		$	(2,601,134	)	$	(120,985,183	)	$	(733,578	)	$	51,520,723
Net income		—		—		—		—		—			—			1,412,474			(24,960	)		1,387,514
Issuance of common stock		—		—		64,278		643		120,842			—			—			—			121,485
Issuance of restricted common stock awards		—		—		220,000		2,200		101,701			—			—			—			103,901
Amortization of ESOP shares		—		—		—		—		(33,439	)		45,634			—			—			12,195
Amortization of restricted stock awards		—		—		—		—		22,883			—			—			—			22,883
Balances at March 31, 2023 (unaudited)		3,973,310	$	39,733		19,235,803	$	192,358	$	175,823,357		$	(2,555,500	)	$	(119,572,709	)	$	(758,538	)	$	53,168,701

The accompanying notes are an integral part of these consolidated financial statements.

SOTHERLY HOTELS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Three Months Ended			Three Months Ended
	March 31, 2024			March 31, 2023
	(unaudited)			(unaudited)
Cash flows from operating activities:
Net income	$	1,322,821		$	1,387,514
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,769,717			4,578,311
Amortization of deferred financing costs		153,650			157,434
Amortization of mortgage premium		(6,170	)		(6,170	)
Gain on involuntary conversion of assets		(122,391	)		(16,476	)
Realized (gain) and unrealized loss on hedging activities		(335,446	)		442,464
Loss on early extinguishment of debt		241,878			—
PPP loan forgiveness		—			(275,494	)
ESOP and stock - based compensation		255,956			260,463
Changes in assets and liabilities:
Accounts receivable		(1,022,611	)		1,119,628
Prepaid expenses, inventory and other assets		667,389			259,438
Accounts payable and other accrued liabilities		1,885,162			761,332
Advance deposits		264,782			1,299,626
Net cash provided by operating activities		8,074,737			9,968,070
Cash flows from investing activities:
Improvements and additions to hotel properties		(2,398,177	)		(1,533,821	)
Proceeds from involuntary conversion		122,391			425,104
Net cash used in investing activities		(2,275,786	)		(1,108,717	)
Cash flows from financing activities:
Proceeds from mortgage loans		35,000,000			—
Redemption of interest rate swap		965,000			—
Payments on mortgage loans		(25,585,343	)		(1,945,624	)
Payments on unsecured notes		(188,811	)		(142,502	)
Payments of deferred financing costs		(605,015	)		(132,309	)
Preferred dividends paid		(1,994,313	)		(1,994,312	)
Net cash provided by (used in) financing activities		7,591,518			(4,214,747	)
Net increase in cash, cash equivalents and restricted cash		13,390,469			4,644,606
Cash, cash equivalents and restricted cash at the beginning of the period		26,236,340			27,341,630
Cash, cash equivalents and restricted cash at the end of the period	$	39,626,809		$	31,986,236
Supplemental disclosures:
Cash paid during the period for interest	$	4,252,586		$	4,042,426
Cash paid during the period for income taxes	$	-		$	-
Non-cash investing and financing activities:
Change in amount of improvements to hotel property in accounts payable and accrued liabilities	$	210,223		$	858,120
Right of use assets acquired under lease liability	$	103,125		$	-

The accompanying notes are an integral part of these consolidated financial statements.

SOTHERLY HOTELS LP

CONSOLIDATED BALANCE SHEETS


	March 31, 2024			December 31, 2023
	(unaudited)
ASSETS
Investment in hotel properties, net	$	352,455,889		$	354,919,106
Cash and cash equivalents		29,285,600			17,101,993
Restricted cash		10,341,209			9,134,347
Accounts receivable, net		6,968,335			5,945,724
Loan receivable - affiliate		1,707,102			1,744,532
Prepaid expenses, inventory and other assets		5,637,355			6,342,310
TOTAL ASSETS	$	406,395,490		$	395,188,012
LIABILITIES
Mortgage loans, net	$	325,106,994		$	315,989,194
Unsecured notes, net		1,347,998			1,536,809
Accounts payable and other accrued liabilities		25,782,354			23,315,677
Advance deposits		2,879,763			2,614,981
Dividends and distributions payable		2,088,160			2,088,160
TOTAL LIABILITIES	$	357,205,269		$	345,544,821

Commitments and contingencies (see Note 5)		—			—

PARTNERS’ CAPITAL
Preferred units, 11,000,000 units authorized;
8.0% Series B cumulative redeemable perpetual preferred unit; 1,464,100 and 1,464,100 units issued and outstanding; aggregate liquidation preference each $44,655,050, at March 31, 2024 and December 31, 2023, respectively.	$	34,344,086		$	34,344,086
7.875% Series C cumulative redeemable perpetual preferred units, 1,346,110 and 1,346,110 units issued and outstanding; aggregate liquidation preference each $40,940,681, each at March 31, 2024 and December 31, 2023, respectively.		31,571,778			31,571,778
8.25% Series D cumulative redeemable perpetual preferred units, 1,163,100 and 1,163,100 units issued and outstanding; aggregate liquidation preference each $35,674,458, each at March 31, 2024 and December 31, 2023, respectively.		27,504,901			27,504,901
General Partner: 206,744 units and 205,220 units issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.		(165,719	)		(171,830	)
Limited Partners: 20,006,607 units and 19,855,771 units issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.		(44,064,825	)		(43,605,744	)
TOTAL PARTNERS’ CAPITAL		49,190,221			49,643,191
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	406,395,490		$	395,188,012

The accompanying notes are an integral part of these consolidated financial statements.

SOTHERLY HOTELS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Three Months Ended		Three Months Ended
	March 31, 2024		March 31, 2023
	(unaudited)		(unaudited)
REVENUE
Rooms department	$	29,739,657	$	28,401,688
Food and beverage department		9,752,449		8,748,726
Other operating departments		7,056,326		6,340,863
Total revenue		46,548,432		43,491,277
EXPENSES
Hotel operating expenses
Rooms department		6,552,184		6,413,094
Food and beverage department		6,464,855		5,935,560
Other operating departments		2,686,142		2,315,848
Indirect		18,484,896		16,747,577
Total hotel operating expenses		34,188,077		31,412,079
Depreciation and amortization		4,769,717		4,578,311
Corporate general and administrative		1,916,526

Sotherly Hotels Inc. [SOHON] Filings
Sotherly Hotels Inc. [SOHO] Filings
Sotherly Hotels Inc. [SOHOB] Filings
Sotherly Hotels Inc. [SOHOO] Filings
10-Q	[2024-11]
10-Q	[2024-11]
10-Q	[2024-11]
10-K	[2024-03-22]
10-Q	[2023-11-13]
10-Q	[2023-08-14]
10-Q	[2023-05-12]
10-K	[2023-03-21]
10-Q	[2022-11-14]
10-Q	[2022-08-15]
10-Q	[2022-05-13]
10-K	[2022-03-25]
10-Q	[2021-11-12]
10-Q	[2021-08-16]
10-Q	[2021-05-17]
10-K	[2021-03-24]
10-Q	[2020-11-09]
10-Q	[2020-08-10]
10-Q	[2020-06-24]
10-K	[2020-03-16]
10-Q	[2019-11-12]
10-Q	[2019-08-08]
10-Q	[2019-05-08]
10-K	[2019-03-15]
10-Q	[2018-11-09]
10-Q	[2018-08-09]
10-Q	[2018-05-10]
10-K	[2018-03-16]
10-Q	[2017-11-08]
10-Q	[2017-08-10]
10-Q	[2017-05-12]
10-K	[2017-03-23]
10-Q	[2016-11-14]
10-Q	[2016-08-12]
10-Q	[2016-05-11]
10-K	[2016-03-25]
10-Q	[2015-11-13]
10-Q	[2015-08-12]
10-Q	[2015-05-14]
10-K	[2015-04-14]
10-Q	[2014-11-05]
10-Q	[2014-08-06]
10-Q	[2014-05-14]
10-K	[2014-03-25]
10-Q	[2013-11-07]
10-Q	[2013-08-07]
10-Q	[2013-05-08]
10-K	[2013-03-20]
10-Q	[2012-11-07]
10-Q	[2012-08-09]
10-Q	[2012-05-02]
10-K	[2012-03-20]

Sotherly Hotels Inc. [SOHON] Filings

Sotherly Hotels Inc. [SOHO] Filings

Sotherly Hotels Inc. [SOHOB] Filings

Sotherly Hotels Inc. [SOHOO] Filings