SOHO Sotherly Hotels Inc

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 second quarter ended June 30, 2017. The Company’s results include the following*:

	Three Months Ended						Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
	($ in thousands except per share data)						($ in thousands except per share data)
Total Revenue	$	40,643		$	41,825		$	79,338		$	79,635
Net income available to common stockholders		277			1,761			2,148			2,244
EBITDA		9,672			11,105			19,423			19,508
Hotel EBITDA		11,519			12,478			22,997			22,538
FFO		4,582			5,919			9,602			10,134
Adjusted FFO available to common stockholders		4,961			6,515			10,115			10,293
Net income per share available to common stockholders	$	0.02		$	0.12		$	0.15		$	0.15
FFO per share and unit	$	0.29		$	0.35		$	0.61		$	0.61
Adjusted FFO available to common holders per share and unit	$	0.32		$	0.39		$	0.65		$	0.62

(*)     Earnings before interest, taxes, depreciation and amortization (“EBITDA”), hotel EBITDA, funds from operations (“FFO”), adjusted FFO, FFO per share and unit and adjusted FFO per 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 later in this press release. The Company is the sole general partner of Sotherly Hotels LP, a Delaware limited partnership (the “Operating Partnership”), and all references in this release to the “Company”, “Sotherly”, “we”, “us” and “our” refer to Sotherly Hotels Inc., its Operating Partnership and its subsidiaries and predecessors, unless the context otherwise requires or where otherwise indicated.

HIGHLIGHTS:

• RevPAR.  Room revenue per available room (“RevPAR”) for the Company’s composite portfolio, which includes the performance of the rooms participating in our rental program at the Hyde Resort & Residences, during the three-month period ending June 30, 2017, increased 1.4% over the three months ended June 30, 2016, to $110.67 driven by a 2.5% decrease in occupancy and a 4.0% increase in average daily rate (“ADR”).  For the six-month period ending June 30, 2017, RevPAR increased 3.3% over the six months ended June 30, 2016, to $107.93 driven by a 0.4% decrease in occupancy and a 3.8% increase in ADR. For properties in the Company’s composite portfolio not impacted by renovation activity, RevPAR for the three-month period ended June 30, 2017 increased 4.1% driven by a 5.1% increase in ADR offset by a 1.0% decrease in occupancy.  For the same properties, RevPAR for the six-month period ended June 30, 2017 increased 7.5% driven by a 6.0% increase in ADR and a 1.4% increase in occupancy.
• Common Dividends. As previously reported on July 25, 2017, the Company announced its quarterly dividend (distribution) on its common stock (and units) at $0.11 per share (and unit) to be paid on October 11, 2017 to stockholders (and unitholders) of record as of September 15, 2017.
• Hotel EBITDA. The Company generated hotel EBITDA of approximately $11.5 million during the three-month period ending June 30, 2017, a decrease of 7.7%, or approximately $1.0 million, from the three months ended June 30, 2016.  For the six-month period ending June 30, 2017, hotel EBITDA increased 2.0%, or approximately $0.5 million, over the six months ended June 30, 2016.
• EBITDA. The Company generated EBITDA of approximately $9.7 million during the three-month period ending June 30, 2017, a decrease of 12.9% or approximately $1.4 million compared to the three months ended June 30, 2016. For the six-month period ending June 30, 2017, EBITDA decreased 0.4% or approximately $0.1 million from the six months ended June 30, 2016.
• Adjusted FFO. For the three-month period ending June 30, 2017, adjusted FFO decreased 23.8% or approximately $1.6 million from the three months ended June 30, 2016.  For the six-month period ending June 30, 2017, adjusted FFO decreased 1.7% or approximately $0.2 million over the six months ended June 30, 2016.

Andrew M. Sims, Chairman and Chief Executive Officer of Sotherly Hotels Inc., commented, “We experienced a slower than expected second quarter as the impact from three hotel renovations and flat market conditions impaired our performance.  After a strong first quarter, our year-to-date performance for the first half of 2017 is on plan and consistent with our guidance.”

Balance Sheet/LiquidityAt June 30, 2017, the Company had approximately $39.1 million of available cash and cash equivalents, of which approximately $4.6 million was reserved for real estate taxes, insurance, capital improvements and certain other expenses or otherwise restricted. The Company had approximately $321.7 million in outstanding debt at a weighted average interest rate of approximately 4.79%.

Portfolio UpdateOn June 1, 2017, we entered into an agreement to purchase the commercial unit of the planned Hyde Beach House Resort & Residences, a condominium hotel under development in Hollywood, Florida, for a price of $5.10 million from 4000 South Ocean Property Owner, LLLP.  In connection with the agreement, we also entered into a pre-opening services agreement whereby the seller has agreed to pay the Company $0.75 million in connection with certain pre-opening activities to be undertaken prior to the closing.  The Company has agreed to purchase inventories at closing consistent with the management and operation of the hotel and the related condominium association for an additional amount and has further agreed to enter into a lease agreement for the parking garage and poolside cabanas associated with the hotel; and to enter into a management agreement relating to the operation and management of the hotel’s condominium association.  The Company anticipates that the closing of the transaction under the agreement and the execution of related agreements will take place in the second quarter of 2019, once construction of the hotel has been substantially completed.  The closing of the transaction is subject to various closing conditions as described in the purchase agreement.

At the Company’s hotel in Wilmington, North Carolina, renovations of the guestrooms and public spaces totaling an estimated $8.5 million are underway.  As of June 30, 2017, the Company had incurred costs totaling approximately $4.0 million toward this renovation.  Renovations are expected to be complete in March 2018.

At the Company’s hotel in Savannah, Georgia, renovations of the guestrooms and public spaces totaling an estimated $9.4 million are nearing completion.  As of June 30, 2017, the Company had incurred costs totaling approximately $8.5 million toward this renovation.  Renovations are expected to be complete in August 2017.

On July 31, 2017, the Company rebranded the Hilton Savannah DeSoto to The DeSoto.

At the Company’s hotel in Hollywood, Florida the Company previously announced that it has entered into a 10-year franchise agreement with Hilton Worldwide to rebrand its Hollywood, Florida hotel as the DoubleTree Resort by Hilton Hollywood Beach. The Company is currently making renovations of the guestrooms and public spaces totaling an estimated $7.0 million. As of June 30, 2017, the Company had incurred costs totaling approximately $4.0 million toward this renovation.  The conversion is expected to take place on or before October 31, 2017.

2017 OutlookThe Company is updating its previously issued guidance for 2017, accounting for current and expected performance within its portfolio, taking into account market conditions, impact of renovations at the Company's hotels in Savannah, Wilmington, and Hollywood, refinance of the DoubleTree by Hilton Jacksonville Riverfront, and ramp-up at the Hyde Resort & Residences. The guidance is predicated on estimates of occupancy and ADR that are consistent with the most recent 2017 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 2017, in thousands of dollars, except per share and RevPAR data:

		Prior 2017 Guidance								Revised 2017 Guidance
		Low Range				High Range				Low Range				High Range
Total revenue		$	156,016			$	158,494			$	152,655			$	156,504
Net income			5,335				6,111				4,345				5,396
EBITDA			35,375				36,336				34,710				35,961
Hotel EBITDA			41,575				42,436				41,335				42,536
FFO			17,115				17,891				16,125				17,176
Adjusted FFO available to common stockholders			16,265				17,541				15,955				17,206
Net income per share available to common stockholders		$	0.13			$	0.18			$	0.07			$	0.14
FFO per share and unit		$	1.07			$	1.12			$	1.03			$	1.10
Adjusted FFO available to common holders per share and unit		$	1.02			$	1.10			$	1.02			$	1.10
Rev PAR		$	103.04			$	103.25			$	101.09			$	102.11
Hotel EBITDA margin			26.6	%			26.8	%			27.1	%			27.2	%

Earnings Call/WebcastThe Company will conduct its second quarter 2017 conference call for investors and other interested parties at 10:00 a.m. Eastern Time on Tuesday, August 8, 2017. The conference call will be accessible by telephone and through the Internet. Interested individuals are invited to listen to the call by telephone at 888-339-0107 (United States) or 855-669-9657 (Canada) or +1 412-902-4188 (International). To participate on the webcast, log on to www.sotherlyhotels.com at least 15 minutes before the call to download the necessary software. For those unable to listen to the call live, a taped rebroadcast will be available beginning one hour after completion of the live call on August 8, 2017 through August 7, 2018. To access the rebroadcast, dial 877-344-7529 and enter conference number 10110236.  A replay of the call also will be available on the Internet at www.sotherlyhotels.com until August 7, 2018.

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 eleven hotel properties, comprising 2,838 rooms, and an interest in the Hyde Resort & Residences, a luxury condo hotel. Most of the Company’s properties operate under the Hilton Worldwide, InterContinental Hotels Group and Marriott International, Inc. brands. Sotherly Hotels Inc. was organized in 2004 and is headquartered in Williamsburg, Virginia. For more information, please visit www.sotherlyhotels.com.Forward-Looking StatementsThis news release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the Company believes that the expectations and assumptions reflected in the forward-looking statements are reasonable, these statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict and many of which are beyond the Company’s control. Therefore, actual outcomes and results may differ materially from what is expressed, forecasted or implied in such forward-looking statements. Factors which could have a material adverse effect on the Company’s future results, performance and achievements, include, but are not limited to: national and local economic and business conditions that affect occupancy rates and revenues at the Company’s hotels and the demand for hotel products and services; risks associated with the hotel industry, including competition and new supply of hotel rooms, increases in wages, energy costs and other operating costs; the availability and terms of financing and capital and the general volatility of the securities markets; the Company’s intent to repurchase shares from time to time; risks associated with the level of the Company’s indebtedness and its ability to meet covenants in its debt agreements and, if necessary, to refinance or seek an extension of the maturity of such indebtedness or modify such debt agreements; management and performance of the Company’s hotels; risks associated with maintaining our system of internal controls; risks associated with the conflicts of interest of the Company’s officers and directors; risks associated with redevelopment and repositioning projects, including delays and cost overruns; supply and demand for hotel rooms in the Company’s current and proposed market areas; risks associated with our ability to maintain our franchise agreements with our third party franchisors; the Company’s ability to acquire additional properties and the risk that potential acquisitions may not perform in accordance with expectations; the Company’s ability to successfully expand into new markets; legislative/regulatory changes, including changes to laws governing taxation of REITs; the Company’s ability to maintain its qualification as a REIT; and the Company’s ability to maintain adequate insurance coverage. These risks and uncertainties are described in greater detail under “Risk Factors” in the Company’s Annual Report on Form 10-K and subsequent reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to and does not intend to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Although the Company believes its current expectations to be based upon reasonable assumptions, it can give no assurance that its expectations will be attained or that actual results will not differ materially.

Financial Tables Follow...

SOTHERLY HOTELS INC.
CONSOLIDATED BALANCE SHEETS
						June 30, 2017				December 31, 2016
						(Unaudited)
ASSETS
Investment in hotel properties, net						$	357,466,632			$	348,593,912
Investment in hotel properties held for sale, net							-				5,333,000
Cash and cash equivalents							34,438,950				31,766,775
Restricted cash							4,617,495				4,596,145
Accounts receivable, net							3,287,118				4,127,748
Accounts receivable - affiliate							563,905				4,175
Prepaid expenses, inventory and other assets							5,927,753				4,648,469
Deferred income taxes							6,691,344				6,949,340
TOTAL ASSETS						$	412,993,197			$	406,019,564
LIABILITIES
Mortgage loans, net						$	294,437,781			$	282,708,289
Unsecured notes, net							24,476,728				24,308,713
Accounts payable and accrued liabilities							13,468,659				12,970,960
Advance deposits							2,270,227				2,315,787
Dividends and distributions payable							2,442,283				2,376,527
TOTAL LIABILITIES						$	337,095,678			$	324,680,276
Commitments and contingencies							--				--
EQUITY
Sotherly Hotels Inc. stockholders’ equity
8% Series B cumulative redeemable perpetual preferred stock, par value $0.01,  11,000,000 shares authorized, liquidation preference $25 per share, 1,610,000  shares issued and outstanding at June 30, 2017 and December 31, 2016							16,100				16,100
Common stock, par value $0.01, 49,000,000 shares authorized, 13,815,035  shares and 14,468,551 shares issued and outstanding at June 30, 2017  and December 31, 2016, respectively							138,150				144,685
Additional paid-in capital							118,497,398				118,395,082
Unearned ESOP shares							(4,753,453	)			--
Distributions in excess of retained earnings							(40,229,144	)			(39,545,754	)
Total Sotherly Hotels Inc. stockholders’ equity							73,669,051				79,010,113
Noncontrolling interest							2,228,468				2,329,175
TOTAL EQUITY							75,897,519				81,339,288
TOTAL LIABILITIES AND EQUITY						$	412,993,197			$	406,019,564

SOTHERLY HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
		Three Months Ended				Three Months Ended				Six Months Ended				Six Months Ended
		June 30, 2017				June 30, 2016				June 30, 2017				June 30, 2016
REVENUE
Rooms department		$	28,906,872			$	29,909,287			$	56,273,506			$	57,231,700
Food and beverage department			8,583,358				9,578,410				16,907,117				17,828,089
Other operating departments			3,152,402				2,337,257				6,156,895				4,575,309
Total revenue			40,642,632				41,824,954				79,337,518				79,635,098
EXPENSES
Hotel operating expenses
Rooms department			6,743,788				7,599,209				13,426,067				14,679,842
Food and beverage department			6,151,495				6,490,681				11,879,968				12,430,542
Other operating departments			623,530				644,430				1,223,550				1,238,399
Indirect			15,605,262				14,613,064				29,810,493				28,748,658
Total hotel operating expenses			29,124,075				29,347,384				56,340,078				57,097,441
Depreciation and amortization			4,219,712				3,801,478				8,280,809				7,470,115
Corporate general and administrative			1,834,930				1,356,754				3,547,012				2,964,048
Total operating expenses			35,178,717				34,505,616				68,167,899				67,531,604
NET OPERATING INCOME			5,463,915				7,319,338				11,169,619				12,103,494
Other income (expense)
Interest expense			(3,874,076	)			(4,613,165	)			(7,687,793	)			(9,245,797	)
Interest income			13,294				10,207				72,925				19,038
Loss on early debt extinguishment			(228,087	)			(70,293	)			(228,087	)			(70,293	)
Unrealized loss on hedging activities			(11,261	)			(15,517	)			(27,206	)			(66,074	)
Gain (loss) on disposal of assets			(51,507	)			(140,193	)			48,900				(140,193	)
Gain on involuntary conversion of assets			--				--				1,041,815			--
Net income before income taxes			1,312,278				2,490,377				4,390,173				2,600,175
Income tax provision			(196,483	)			(512,827	)			(368,420	)			(76,747	)
Net income			1,115,795				1,977,550				4,021,753				2,523,428
Less: Net income attributable to the noncontrolling interest			(33,869	)			(216,444	)			(263,811	)			(279,223	)
Net income attributable to the Company			1,081,926				1,761,106				3,757,942				2,244,205
Distributions to preferred stockholders			(805,000	)			--				(1,610,000	)			-
Net income available to common stockholders		$	276,926			$	1,761,106			$	2,147,942			$	2,244,205
Net income per share available to common stockholders
Basic		$	0.02			$	0.12			$	0.15			$	0.15
Diluted		$	0.02			$	0.12			$	0.15			$	0.15
Weighted average number of common shares outstanding
Basic			13,813,168				14,949,651				13,898,910				14,871,281
Diluted			13,815,035				14,949,651				13,908,359				14,871,281

SOTHERLY HOTELS INC.KEY OPERATING METRICS(unaudited)

The following tables illustrate the key operating metrics for the three and six months ended June 30, 2017 and 2016, respectively, for the Company’s wholly-owned properties (“actual” portfolio metrics), as well as the eleven wholly-owned properties in the portfolio that were under the Company’s control during the three and six months ended June 30, 2017 and the corresponding periods in 2016 (“same-store” portfolio metrics). Accordingly, the same-store data does not reflect the performance of the Crowne Plaza Hampton Marina which was sold in February 2017, or our interest in the Hyde Resort & Residences which was acquired on January 30, 2017.  The composite portfolio metrics represent all of the Company’s wholly-owned properties and the participating condominium hotel rooms at the Hyde Resort & Residences during the three and six months ended June 30, 2017 and the corresponding periods in 2016.

			Three Months Ended				Three Months Ended					Six Months Ended				Six Months Ended
			June 30, 2017				June 30, 2016					June 30, 2017				June 30, 2016
Actual Portfolio Metrics
Occupancy %				76.5	%			76.0	%				73.3	%			72.3	%
ADR			$	146.32			$	143.65				$	147.65			$	144.47
RevPAR			$	111.93			$	109.16				$	108.20			$	104.44
Same-Store Portfolio Metrics
Occupancy %				76.5	%			76.6	%				73.8	%			73.3	%
ADR			$	146.32			$	145.62				$	148.02			$	146.71
RevPAR			$	111.93			$	111.56				$	109.18			$	107.50
Composite Portfolio Metrics
Occupancy %				74.1	%			76.0	%				72.0	%			72.3	%
ADR			$	149.39			$	143.65				$	149.99			$	144.47
RevPAR			$	110.67			$	109.16				$	107.93			$	104.44

SOTHERLY HOTELS INC.SUPPLEMENTAL DATA(unaudited)

The following tables illustrate the key operating metrics for the three and six months ended June 30, 2017, 2016 and 2015, respectively, for each of the Company’s wholly-owned properties during each respective reporting period, irrespective of ownership percentage during any period.

Occupancy

			Q2 2017				Q2 2016				Q2 2015
			YTD				YTD				YTD
Crowne Plaza Hampton Marina (1)Hampton, Virginia			N/A					65.8	%			62.2	%
				35.4	%			56.3	%			51.5	%
Crowne Plaza Hollywood Beach Resort (2)(3)Hollywood, Florida				76.0	%			78.0	%			82.0	%
				79.5	%			83.3	%			84.7	%
Crowne Plaza Tampa WestshoreTampa, Florida				80.0	%			79.9	%			75.4	%
				82.9	%			81.8	%			78.9	%
The DeSoto (3)Savannah, Georgia				75.1	%			77.8	%			85.9	%
				71.0	%			76.2	%			80.1	%
DoubleTree by Hilton Jacksonville RiverfrontJacksonville, Florida				80.9	%			81.7	%			68.5	%
				80.9	%			79.3	%			69.4	%
DoubleTree by Hilton LaurelLaurel, Maryland				82.9	%			80.0	%			59.5	%
				66.6	%			62.3	%			53.5	%
DoubleTree by Hilton Philadelphia AirportPhiladelphia, Pennsylvania				83.3	%			85.6	%			84.4	%
				76.2	%			79.3	%			82.2	%
DoubleTree by Hilton Raleigh Brownstone - UniversityRaleigh, North Carolina				78.6	%			75.4	%			78.2	%
				76.4	%			72.4	%			74.5	%
The Georgian TerraceAtlanta, Georgia				71.6	%			74.3	%			74.6	%
				73.1	%			72.3	%			71.3	%
Hilton Wilmington Riverside (3)Wilmington, North Carolina				77.5	%			83.2	%			80.7	%
				70.8	%			70.9	%			70.5	%
Sheraton Louisville RiversideJeffersonville, Indiana				75.6	%			75.1	%			77.7	%
				66.6	%			63.1	%			70.0	%
The WhitehallHouston, Texas				60.8	%			48.9	%			74.6	%
				63.1	%			56.9	%			77.3	%
Hyde Resort & Residences (4)Hollywood Beach, Florida				30.6	%		N/A				N/A
				32.1	%		N/A				N/A
All properties weighted average (1) (2)				74.1	%			76.0	%			76.0	%
				72.0	%			72.3	%			73.2	%

1		Includes only the period of ownership for the Crowne Plaza Hampton Marina up to February 7, 2017.
2		Includes periods of partial ownership.
3		Property undergoing renovation during the current quarter.
4		Reflects only the condominium units at the Hyde Resort & Residences participating in our rental program for the period those units participated in our rental program.

ADR

		Q2 2017				Q2 2016				Q2 2015
		YTD				YTD				YTD
Crowne Plaza Hampton Marina (1)Hampton, Virginia		N/A				$	106.02			$	100.59
		$	84.95			$	96.44			$	93.38
Crowne Plaza Hollywood Beach Resort (2)(3)Hollywood, Florida		$	156.52			$	164.60			$	161.28
		$	187.73			$	194.85			$	199.69
Crowne Plaza Tampa WestshoreTampa, Florida		$	113.24			$	112.51			$	110.52
		$	125.44			$	121.92			$	116.74
The DeSoto (3)Savannah, Georgia		$	169.35			$	166.42			$	164.69
		$	165.93			$	161.98			$	158.92
DoubleTree by Hilton Jacksonville RiverfrontJacksonville, Florida		$	131.32			$	123.12			$	107.21
		$	131.74			$	122.79			$	106.63
DoubleTree by Hilton LaurelLaurel, Maryland		$	109.15			$	108.41			$	102.22
		$	110.70			$	105.43			$	95.83
DoubleTree by Hilton Philadelphia AirportPhiladelphia, Pennsylvania		$	149.11			$	153.11			$	153.70
		$	136.00			$	138.73			$	136.21
DoubleTree by Hilton Raleigh Brownstone - UniversityRaleigh, North Carolina		$	135.52			$	136.50			$	133.01
		$	135.55			$	135.72			$	130.83
The Georgian TerraceAtlanta, Georgia		$	170.10			$	156.95			$	148.45
		$	170.72			$	158.69			$	154.92
Hilton Wilmington Riverside (3)Wilmington, North Carolina		$	164.67			$	158.03			$	147.10
		$	147.57			$	145.67			$	136.54
Sheraton Louisville RiversideJeffersonville, Indiana		$	156.41			$	160.36			$	234.72
		$	141.25			$	152.57			$	194.24
The WhitehallHouston, Texas		$	141.37			$	149.63			$	142.20
		$	151.59			$	149.50			$	144.54
Hyde Resort & Residences (4)Hollywood Beach, Florida		$	288.14			N/A				N/A
		$	311.05			N/A				N/A
All properties weighted average (1) (2)		$	149.39			$	143.65			$	142.45
		$	149.99			$	144.47			$	140.96

1		Includes only the period of ownership for the Crowne Plaza Hampton Marina up to February 7, 2017.
2		Includes periods of partial ownership.
3		Property undergoing renovation during the current quarter.
4		Reflects only the condominium units at the Hyde Resort & Residences participating in our rental program for the period those units participated in our rental program.

RevPAR

		Q2 2017				Q2 2016				Q2 2015
		YTD				YTD				YTD
Crowne Plaza Hampton Marina (1)Hampton, Virginia		N/A				$	69.80			$	62.54
		$	30.03			$	54.26			$	48.11
Crowne Plaza Hollywood Beach Resort (2)(3)Hollywood, Florida		$	118.91			$	128.35			$	133.54
		$	149.19			$	162.23			$	169.15
Crowne Plaza Tampa WestshoreTampa, Florida		$	90.62			$	89.94			$	83.29
		$	103.95			$	99.76			$	92.07
The DeSoto (3)Savannah, Georgia		$	127.15			$	129.52			$	141.46
		$	117.77			$	123.40			$	127.28
DoubleTree by Hilton Jacksonville RiverfrontJacksonville, Florida		$	106.27			$	100.54			$	73.46
		$	106.60			$	97.31			$	73.95
DoubleTree by Hilton LaurelLaurel, Maryland		$	90.49			$	86.77			$	60.86
		$	73.75			$	65.65			$	51.29
DoubleTree by Hilton Philadelphia AirportPhiladelphia, Pennsylvania		$	124.14			$	131.01			$	129.71
		$	103.63			$	110.06			$	111.97
DoubleTree by Hilton Raleigh Brownstone - UniversityRaleigh, North Carolina		$	106.49			$	102.86			$	104.03
		$	103.57			$	98.23			$	97.53
The Georgian TerraceAtlanta, Georgia		$	121.86			$	116.66			$	110.80
		$	124.80			$	114.70			$	110.44
Hilton Wilmington Riverside (3)Wilmington, North Carolina		$	127.64			$	131.56			$	118.76
		$	104.53			$	103.35			$	96.31
Sheraton Louisville RiversideJeffersonville, Indiana		$	118.23			$	120.41			$	182.33
		$	94.05			$	96.30			$	135.91
The WhitehallHouston, Texas		$	86.01			$	73.17			$	106.09
		$	95.73			$	85.01			$	111.71
Hyde Resort & Residences (4)Hollywood Beach, Florida		$	88.06			N/A				N/A
		$	99.71			N/A				N/A
All properties weighted average (1) (2)		$	110.67			$	109.16			$	110.01
		$	107.93			$	104.44			$	105.02

1		Includes only the period of ownership for the Crowne Plaza Hampton Marina up to February 7, 2017.
2		Includes periods of partial ownership.
3		Property undergoing renovation during the current quarter.
4		Reflects only the condominium units at the Hyde Resort & Residences participating in our rental program for the period those units participated in our rental program.

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

		Three Months Ended				Three Months Ended					Six Months Ended				Six Months Ended
		June 30, 2017				June 30, 2016					June 30, 2017				June 30, 2016
Net income available to common stockholders		$	276,926			$	1,761,106				$	2,147,942			$	2,244,205
Add: Net income attributable to noncontrolling interest			33,869				216,444					263,811				279,223
Depreciation and amortization			4,219,712				3,801,478					8,280,809				7,470,115
Gain on involuntary conversion of assets			--				--					(1,041,815	)			--
Loss (gain) on disposal of assets			51,507				140,193					(48,900	)			140,193
FFO		$	4,582,014			$	5,919,221				$	9,601,847			$	10,133,736
Decrease (increase) in deferred income taxes			139,946				479,854					257,996				(7,615	)
Loss on early debt extinguishment			228,087				70,293					228,087				70,293
Loan modification fees			--				30,235					--				30,235
Unrealized loss on hedging activities			11,261				15,517					27,206				66,074
Adjusted FFO available to common stockholders		$	4,961,308			$	6,515,120				$	10,115,136			$	10,292,723
Weighted average number of shares outstanding, basic			13,813,168				14,949,651					13,898,910				14,871,281
Weighted average number of non-controlling units			1,778,140				1,778,140					1,778,140				1,850,136
Weighted average number of shares and units outstanding, basic			15,591,308				16,727,791					15,677,050				16,721,417
FFO per share and unit		$	0.29			$	0.35				$	0.61			$	0.61
Adjusted FFO per share and unit		$	0.32			$	0.39				$	0.65			$	0.62

		Three Months Ended				Three Months Ended					Six Months Ended				Six Months Ended
		June 30, 2017				June 30, 2016					June 30, 2017				June 30, 2016
Net income available to common stockholders		$	276,926			$	1,761,106				$	2,147,942			$	2,244,205
Add: Net income attributable to noncontrolling interest			33,869				216,444					263,811				279,223
Interest expense			3,874,076				4,613,165					7,687,793				9,245,797
Interest income			(13,294	)			(10,207	)				(72,925	)			(19,038	)
Income tax provision			196,483				512,827					368,420				76,747
Depreciation and amortization			4,219,712				3,801,478					8,280,809				7,470,115
Loss on early debt extinguishment			228,087				70,293					228,087				70,293
Loss (gain) on disposal of assets			51,507				140,193					(48,900	)			140,193
Gain on involuntary conversion of assets			--				--					(1,041,815	)			--
Distributions to preferred stockholders			805,000				--					1,610,000				--
EBITDA			9,672,366				11,105,299					19,423,222				19,507,535
Corporate general and administrative			1,834,930				1,356,754					3,547,012				2,964,048
Unrealized loss on hedging activities			11,261				15,517					27,206				66,074
Hotel EBITDA		$	11,518,557			$	12,477,570				$	22,997,440			$	22,537,657

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

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

EBITDAThe 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 EBITDAThe Company defines Hotel EBITDA as net income or loss excluding: (1) interest expense, (2) interest income, (3) income tax provision or benefit, (4) equity in the income or loss of equity investees, (5) unrealized gains and losses on derivative instruments not included in other comprehensive income, (6) gains and losses on disposal of assets, (7) realized gains and losses on investments, (8) impairment of long-lived assets or investments, (9) loss on early debt extinguishment, (10) gains or losses on change in control, (11) corporate general and administrative expense, (12) depreciation and amortization, (13) gains and losses on involuntary conversions of assets and (14) 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.

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