Sotherly Hotels Inc. [SOHOO] Filings

10-Q 1 soho-20230930.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 September 30, 2023


☐	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)

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 November 10, 2023, there were 19,696,805 shares of Sotherly Hotels Inc.’s common stock issued and outstanding.

Securities registered or to be 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

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,” and 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 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.

This report combines the Quarterly Reports on Form 10-Q for the period ended September 30, 2023 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 – Income (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 September 30, 2023 (unaudited) and December 31, 2022	5
	Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022	6
	Consolidated Statements of Changes in Equity (unaudited) for the Three Months Ended March 31, June 30, September 30, 2023 and 2022	7
	Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2023 and 2022	9

	Sotherly Hotels LP
	Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022	10
	Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022	11
	Consolidated Statements of Changes in Partners’ Capital (unaudited) for the Three Months Ended March 31, June 30, September 30, 2023 and 2022	12
	Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2023 and 2022	14
	Notes to Consolidated Financial Statements	15
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4	Controls and Procedures	46

PART II
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities, Use of Proceed and Issuer Purchases of Equity Securities	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	49

PART I

Item 1. Consolidated Financial Statements

SOTHERLY HOTELS INC.

CONSOLIDATED BALANCE SHEETS


	September 30, 2023			December 31, 2022
	(unaudited)
ASSETS
Investment in hotel properties, net	$	357,027,422		$	365,070,725
Cash and cash equivalents		19,198,625			21,918,680
Restricted cash		10,205,947			5,422,950
Accounts receivable, net		4,776,701			5,844,904
Prepaid expenses, inventory and other assets		9,553,741			8,311,862
TOTAL ASSETS	$	400,762,436		$	406,569,121
LIABILITIES
Mortgage loans, net	$	317,633,743		$	320,482,103
Unsecured notes		1,722,700			2,545,975
Accounts payable and accrued liabilities		25,957,518			25,704,835
Advance deposits		2,872,457			2,233,013
Dividends and distributions payable		2,088,160			4,082,472
TOTAL LIABILITIES	$	350,274,578		$	355,048,398
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 September 30, 2023 and December 31, 2022, 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, 2023 and December 31, 2022, 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, 2023 and December 31, 2022, respectively.		11,631			11,631
Common stock, par value $0.01, 69,000,000 shares authorized, 19,696,805 shares issued and outstanding at September 30, 2023 and 18,951,525 shares issued and outstanding at December 31, 2022.		196,968			189,515
Additional paid-in capital		176,304,184			175,611,370
Unearned ESOP shares		(2,464,231	)		(2,601,134	)
Distributions in excess of retained earnings		(122,338,042	)		(120,985,183	)
Total Sotherly Hotels Inc. stockholders’ equity		51,738,612			52,254,301
Noncontrolling interest		(1,250,754	)		(733,578	)
TOTAL EQUITY		50,487,858			51,520,723
TOTAL LIABILITIES AND EQUITY	$	400,762,436		$	406,569,121

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			Nine Months Ended			Nine Months Ended
	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
REVENUE
Rooms department	$	26,260,586		$	26,110,030		$	87,915,797		$	83,509,003
Food and beverage department		7,522,753			6,816,327			25,772,453			20,146,373
Other operating departments		5,398,024			6,286,338			18,001,724			21,080,181
Total revenue		39,181,363			39,212,695			131,689,974			124,735,557
EXPENSES
Hotel operating expenses
Rooms department		6,437,081			6,539,306			19,866,515			19,694,649
Food and beverage department		5,607,350			4,731,787			17,933,777			13,868,567
Other operating departments		2,198,058			2,386,901			6,819,661			7,470,380
Indirect		17,372,167			15,731,938			52,582,080			49,132,884
Total hotel operating expenses		31,614,656			29,389,932			97,202,033			90,166,480
Depreciation and amortization		4,715,019			4,704,806			14,056,523			13,889,621
(Gain) loss on disposal of assets		(4,700	)		1,215			(4,700	)		491,828
Corporate general and administrative		1,688,535			1,827,746			5,458,340			4,774,139
Total operating expenses		38,013,510			35,923,699			116,712,196			109,322,068
NET OPERATING INCOME		1,167,853			3,288,996			14,977,778			15,413,489
Other income (expense)
Interest expense		(4,466,630	)		(4,224,387	)		(12,868,595	)		(15,280,531	)
Interest income		222,878			40,581			592,315			92,515
Loss on early extinguishment of debt		—			—			—			(5,944,881	)
Unrealized gain (loss) on hedging activities		103,946			1,457,552			(51,686	)		2,992,311
PPP loan forgiveness		—			—			275,494			—
Gain on sale of hotel properties		—			—			—			30,053,977
Gain on involuntary conversion of assets		551,729			1,422,295			1,331,374			1,473,842
Net (loss) income before income taxes		(2,420,224	)		1,985,037			4,256,680			28,800,722
Income tax benefit (provision)		354,398			(12,474	)		322,679			(33,744	)
Net (loss) income		(2,065,826	)		1,972,563			4,579,359			28,766,978
Add: Net loss (income) attributable to noncontrolling interest		156,558			51,094			50,720			(1,317,225	)
Net (loss) income attributable to the Company		(1,909,268	)		2,023,657			4,630,079			27,449,753
Undeclared distributions to preferred stockholders		(1,994,313	)		(1,813,820	)		(5,982,938	)		(5,639,906	)
(Loss) gain on extinguishment of preferred stock		—			(97,157	)		—			64,518
Net (loss) income attributable to common stockholders	$	(3,903,581	)	$	112,680		$	(1,352,859	)	$	21,874,365
Net (loss) income per share attributable to common stockholders:
Basic	$	(0.20	)	$	0.01		$	(0.08	)	$	1.24
Diluted	$	(0.20	)	$	0.01		$	(0.08	)	$	1.20
Weighted average number of common shares outstanding
Basic		18,906,851			18,045,365			18,742,219			17,598,153
Diluted		18,906,851			18,559,666			18,742,219			18,209,766

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
Net income		—		—		—		—		—			—			5,126,872			130,798			5,257,670
Conversion of units in Operating Partnership to shares of common stock		—		—		75,000		750		426,049			—			—			(426,799	)		—
Preferred stock dividends declared:

Sotherly Hotels Inc. [SOHOO] Filings
Sotherly Hotels Inc. [SOHO] Filings
Sotherly Hotels Inc. [SOHOB] Filings
Sotherly Hotels Inc. [SOHON] Filings
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. [SOHOO] Filings

Sotherly Hotels Inc. [SOHO] Filings

Sotherly Hotels Inc. [SOHOB] Filings

Sotherly Hotels Inc. [SOHON] Filings