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, 2019. The Company’s results include the following*:
  Three Months Ended     Nine Months Ended  
  September 30, 2019     September 30, 2018     September 30, 2019     September 30, 2018  
  ($ in thousands except per share data)     ($ in thousands except per share data)  
Total Revenue $ 42,552     $ 41,418     $ 141,483     $ 134,707  
Net (loss) income available to common stockholders   (107 )     (3,066 )     (2,492 )     (1,952 )
                               
EBITDA   10,974       7,036       34,143       33,162  
Hotel EBITDA   8,904       9,175       37,658       37,437  
                               
FFO available to common stockholders and unitholders   4,719       991       13,010       12,446  
Adjusted FFO available to common stockholders and unitholders   4,258       946       16,213       14,046  
                               
Net (loss) income per common share $ (0.01 )   $ (0.23 )   $ (0.18 )   $ (0.14 )
FFO per common share and unit $ 0.31     $ 0.06     $ 0.84     $ 0.82  
Adjusted FFO per common share and unit $ 0.28     $ 0.06     $ 1.05     $ 0.92  

(*)     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.

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 program at the Hyde Resort & Residences, during the three-month period ending September 30, 2019, increased 0.3% over the three months ended September 30, 2018, to $100.06 reflecting a 1.1% increase in occupancy offset by a 0.7% decrease in average daily rate (“ADR”). For the nine-month period ending September 30, 2019, RevPAR increased 4.5% over the nine months ended September 30, 2018, to $116.57 driven by a 2.2% increase in occupancy and a 2.3% increase in ADR. 
  • Revenue.  For the three-month period ending September 30, 2019, total revenue increased 2.7% over the three-month period ending September 30, 2018.  For the nine-month period ending September 30, 2019, total revenue increased 5.0% or by approximately $6.8 million to approximately $141.5 million, as compared to approximately $134.7 million for the nine-month period ending September 30, 2018. 
  • Gain on Exercise of Development Right.  On September 26, 2019, the Company received title to a commercial condominium unit of the Hyde Beach House Resort & Residences, a newly constructed 342-unit condominium hotel located in Hollywood, Florida (“Hyde Beach House”) consisting of a 3,000 square foot ballroom and adjacent pre-function space.  The unit will be available for use as additional ballroom and function space for our adjacent hotel, the DoubleTree Resort by Hilton Hollywood Beach.  Conveyance of the ballroom condominium unit was required pursuant to an existing obligation on the part of the owner of the property as a condition to the development of the Hyde Beach House.  Accompanying the title to the ballroom condominium unit are dedicated rights to 200 parking spaces within the six-story parking structure adjacent to the ballroom.  The estimated fair value of the ballroom condominium unit and parking right is approximately $3.9 million.
  • Common Dividends. On October 29, 2019, the Company announced a quarterly dividend (distribution) on its common stock (and units) of $0.13 per share (and unit) to stockholders (and unitholders) of record as of December 13, 2019, payable on January 10, 2020.
  • Hotel EBITDA. The Company generated hotel EBITDA of approximately $8.9 million during the three-month period ending September 30, 2019.  Hotel EBITDA decreased 3.0%, or approximately $0.3 million, over the three months ended September 30, 2018.  For the nine-month period ending September 30, 2019, hotel EBITDA increased 0.6%, or approximately $0.2 million, over the nine months ended September 30, 2018. 
  • Adjusted FFO available to common stockholders and unitholders. For the three-month period ending September 30, 2019, adjusted FFO available to common stockholders and unitholders increased 349.9% from the three months ended September 30, 2018.  For the nine-month period ending September 30, 2019, adjusted FFO available to common stockholders and unitholders increased 15.4% or approximately $2.2 million over the nine months ended September 30, 2018.

Andrew M. Sims, Chairman and Chief Executive Officer of Sotherly Hotels Inc., commented, “Operationally, we had a difficult quarter as a result of Hurricane Dorian.  While we did not experience any significant damage to our hotels located near Dorian’s path (South Florida, Tampa, Jacksonville, Savannah, Wilmington), we incurred a significant loss in revenue.  The hurricane languished for almost two weeks, washing out the Labor Day weekend and the following ten days.  On a positive note, we acquired two commercial condominium units in the Hyde Beach House in the quarter, which included the conveyance of a freestanding ballroom to our DoubleTree Resort by Hilton Hollywood Beach hotel.”

Balance Sheet/Liquidity

At September 30, 2019, the Company had approximately $35.3 million of available cash and cash equivalents, of which approximately $5.2 million was reserved for real estate taxes, insurance, capital improvements and certain other expenses or otherwise restricted. The Company had principal balances of approximately $363.0 million in outstanding debt at a weighted average interest rate of approximately 4.92%.

During the quarter, the Company sold and issued 202,469 shares of its 7.875% Series C Cumulative Redeemable Perpetual Preferred Stock (the “Series C Preferred Stock”) through its at-the-market program, for aggregate net proceeds of approximately $4.9 million.

Portfolio Update

On September 26, 2019, we closed on the purchase of a commercial unit of the Hyde Beach House from 4000 South Ocean Property Owner, LLLP.  In connection with the closing, we (i) acquired commercial unit 2 of the Hyde Beach House, along with rights to certain limited common elements appurtenant to the commercial unit, for an adjusted purchase price of approximately $5.4 million; (ii) purchased inventories and equipment for additional consideration in the amount of approximately $0.7 million; (iii) entered into a Second Addendum to the purchase agreement; (iv) entered into a 20-year parking and cabana management agreement for the parking garage and poolside cabanas associated with the Hyde Beach House; (v) entered into a 20-year management agreement relating to the operation and management of the Hyde Beach House condominium association; and (vi) received a pre-opening services fee of $1.0 million.  We began operating a condominium unit rental program for residential units in this facility in November 2019.

As stated above, in connection with the closing of the Hyde Beach House acquisition, the DoubleTree Resort by Hilton Hollywood Beach acquired a commercial condominium unit consisting of a 3,000 square foot ballroom and adjacent pre-function space as well as 200 dedicated parking spaces within the parking garage adjacent to the hotel.

2019 Outlook

The Company is updating its previously issued guidance for 2019, accounting for current and expected performance within its portfolio, taking into account market conditions, weather-related events and the acquisition of the commercial units within the Hyde Beach House.  The updated guidance is predicated on estimates of occupancy and ADR that are consistent with the most recent 2019 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 2019, in thousands of dollars, except per share and RevPAR data:

  Previous 2019 Guidance     Revised 2019 Guidance  
  Low Range     High Range     Low Range     High Range  
           
Total revenue $ 184,247     $ 187,053     $ 184,274     $ 185,755  
Net income   1,708       2,295       1,613       1,980  
Net loss available to common stockholders and unitholders   (5,899 )     (5,311 )     (6,208 )     (5,840 )
                               
EBITDA   41,977       42,914       42,330       42,782  
Hotel EBITDA   49,187       50,224       47,407       47,784  
                               
FFO available to common stockholders and unitholders   14,102       14,689       14,782       15,149  
Adjusted FFO available to common stockholders and unitholders   15,832       16,769       17,559       18,021  
                               
Net loss per share available to common stockholders $ (0.38 )   $ (0.34 )   $ (0.40 )   $ (0.38 )
FFO per common share and unit $ 0.91     $ 0.95     $ 0.96     $ 0.98  
Adjusted FFO per common share and unit $ 1.02     $ 1.08     $ 1.14     $ 1.17  
Rev PAR $ 109.60     $ 110.49     $ 110.02     $ 110.91  
Hotel EBITDA margin   26.7 %     26.9 %     25.7 %     25.7 %

Earnings Call/Webcast

The Company will conduct its third quarter 2019 conference call for investors and other interested parties at 10:00 a.m. Eastern Time on Tuesday, November 12, 2019. 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 7, 2019 through November 7, 2020. To access the rebroadcast, dial 877-344-7529 and enter conference number 10135555.  A replay of the call also will be available on the Internet at www.sotherlyhotels.com until November 7, 2020.

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:

Scott KucinskiVice President – Operations & Investor RelationsSotherly Hotels Inc.410 West Francis StreetWilliamsburg, Virginia 23185757.229.5648

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. 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; risks associated with adverse weather conditions, including hurricanes; 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

    September 30, 2019     December 31, 2018  
    (unaudited)          
ASSETS                
Investment in hotel properties, net   $ 446,839,580     $ 435,725,814  
Cash and cash equivalents     30,059,697       33,792,773  
Restricted cash     5,192,730       4,075,508  
Accounts receivable, net     6,298,119       6,766,696  
Accounts receivable - affiliate     86,663       262,572  
Prepaid expenses, inventory and other assets     5,494,165       5,262,884  
Favorable lease assets, net           2,465,421  
Deferred income taxes     4,679,010       5,131,179  
TOTAL ASSETS   $ 498,649,964     $ 493,482,847  
LIABILITIES                
Mortgage loans, net   $ 360,549,890     $ 364,828,845  
Unsecured notes, net           23,894,658  
Accounts payable and accrued liabilities     24,308,930       16,268,096  
Advance deposits     2,397,095       2,815,283  
Dividends and distributions payable     4,210,494       3,409,593  
TOTAL LIABILITIES   $ 391,466,409     $ 411,216,475  
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, 2019 and December 31, 2018, respectively.     16,100       16,100  
7.875% Series C cumulative redeemable perpetual preferred stock,  liquidation preference $25 per share, 1,554,610 and 1,352,141 shares issued  and outstanding at September 30, 2019 and December 31, 2018, respectively.     15,546       13,521  
8.25% Series D cumulative redeemable perpetual preferred stock,  liquidation preference $25 per share, 1,200,000 shares issued  and outstanding at September 30, 2019 and none at December 31, 2018.     12,000        
Common stock, par value $0.01, 49,000,000 shares authorized, 14,222,378  shares and 14,209,378 shares issued and outstanding at September 30, 2019  and December 31, 2018, respectively.     142,223       142,093  
Additional paid-in capital     180,415,231       147,085,112  
Unearned ESOP shares     (4,175,564 )     (4,379,742 )
Distributions in excess of retained earnings     (68,687,461 )     (61,052,418 )
Total Sotherly Hotels Inc. stockholders’ equity     107,738,075       81,824,666  
Noncontrolling interest     (554,520 )     441,706  
TOTAL EQUITY     107,183,555       82,266,372  
TOTAL LIABILITIES AND EQUITY   $ 498,649,964     $ 493,482,847  

SOTHERLY HOTELS INC.CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)

    Three Months Ended     Three Months Ended     Nine Months Ended     Nine Months Ended  
    September 30, 2019     September 30, 2018     September 30, 2019     September 30, 2018  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
REVENUE                                
 Rooms department   $ 29,253,447     $ 28,626,265     $ 98,561,643     $ 92,242,385  
 Food and beverage department     8,997,948       8,417,293       29,584,705       27,849,844  
 Other operating departments     4,300,780       4,374,504       13,336,834       14,614,915  
Total revenue     42,552,175       41,418,062       141,483,182       134,707,144  
EXPENSES                                
Hotel operating expenses                                
 Rooms department     8,064,771       7,873,836       24,264,623       22,750,381  
 Food and beverage department     7,036,887       6,680,563       21,795,051       20,748,688  
 Other operating departments     1,352,205       1,661,128       5,007,651       4,870,037  
 Indirect     17,194,148       16,027,496       52,757,527       48,901,037  
Total hotel operating expenses     33,648,011       32,243,023       103,824,852       97,270,143  
Depreciation and amortization     4,980,168       4,547,043       16,117,278       15,783,174  
Loss (gain) on disposal of assets     4,918       (7,555 )     32,088       (3,816 )
Corporate general and administrative     1,768,912       1,516,408       5,008,290       4,566,258  
Total hotel operating expenses     40,402,009       38,298,919       124,982,508       117,615,759  
NET OPERATING INCOME     2,150,166       3,119,143       16,500,674       17,091,385  
Other income (expense)                                
 Interest expense     (4,722,456 )     (5,306,641 )     (15,115,690 )     (14,571,142 )
 Interest income     102,768       88,484       357,576       236,693  
 Loss on early extinguishment of debt     -       (753,133 )     (1,152,356 )     (753,133 )
 Unrealized (loss) gain on hedging activities     (226,491 )     123,443       (1,554,924 )     141,970  
 Gain on exercise of development right     3,940,000             3,940,000        
 Gain on involuntary conversion of assets     130,569             291,902       898,565  
 Net (loss) income before income taxes     1,374,556       (2,728,704 )     3,267,182       3,044,338  
 Income tax benefit (provision)     694,190       746,924       (439,323 )     (882,045 )
 Net (loss) income     2,068,746       (1,981,780 )     2,827,859       2,162,293  
 Less: Net loss attributable to noncontrolling interest     13,337       385,616       311,642       245,298  
 Net (loss) income attributable to the Company     2,082,083       (1,596,164 )     3,139,501       2,407,591  
 Distributions to preferred stockholders     (2,188,910 )     (1,469,719 )     (5,631,799 )     (4,359,407 )
 Net loss available to common stockholders   $ (106,827 )   $ (3,065,883 )   $ (2,492,298 )   $ (1,951,816 )
 Net loss per share available to common stockholders                                
 Basic   $ (0.01 )   $ (0.23 )   $ (0.18 )   $ (0.14 )
 Weighted average number of common shares outstanding                                
 Basic     13,636,706       13,513,996       13,624,760       13,491,807  
                                 

SOTHERLY HOTELS INC.KEY OPERATING METRICS(unaudited)

The following tables illustrate the key operating metrics for the three and nine months ended September 30, 2019 and 2018, respectively, for the Company’s twelve 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 nine months ended September 30, 2019 and the corresponding periods in 2018 (“same-store” portfolio metrics). Accordingly, the actual data does not include the participating condominium hotel rooms at the Hyde Resort & Residences or the Hyde Beach House, and the same-store data does not include the performance of the Hyatt Centric Arlington which we acquired in March 2018 or the participating condominium hotel rooms at the Hyde Resort & Residences or the Hyde Beach House.  The composite portfolio metrics represent the Company’s twelve wholly-owned properties and the participating condominium hotel rooms at the Hyde Resort & Residences during the three and nine months ended September 30, 2019 and the corresponding period in 2018.  No metrics are reflected for the results of the Hyde Beach House because the condominium unit rental program did not begin until November 2019.

    Three Months Ended     Three Months Ended     Nine Months Ended     Nine Months Ended  
    September 30, 2019     September 30, 2018     September 30, 2019     September 30, 2018  
Actual Portfolio Metrics                                
Occupancy %     70.6 %     69.3 %     72.7 %     71.6 %
ADR   $ 142.75     $ 142.26     $ 157.36     $ 152.75  
RevPAR   $ 100.75     $ 98.59     $ 114.40     $ 109.44  
Same-Store Portfolio Metrics                                
Occupancy %     69.1 %     67.4 %     71.7 %     70.2 %
ADR   $ 139.98     $ 140.71     $ 153.33     $ 149.16  
RevPAR   $ 96.77     $ 94.89     $ 109.92     $ 104.77  
Composite Portfolio Metrics                                
Occupancy %     68.8 %     68.0 %     71.7 %     70.1 %
ADR   $ 145.51     $ 146.54     $ 162.69     $ 159.10  
RevPAR   $ 100.06     $ 99.72     $ 116.57     $ 111.60  

SOTHERLY HOTELS INC.SUPPLEMENTAL DATA(unaudited)

The following tables illustrate the key operating metrics for the three and nine months ended September 30, 2019, 2018 and 2017, respectively, for each of the Company’s wholly-owned properties during each respective reporting period, irrespective of ownership percentage during any period.

Occupancy

                       
  Q3 2019     Q3 2018     Q3 2017  
  YTD     YTD     YTD  
The DeSotoSavannah, Georgia   60.1 %     58.8 %     62.8 %
    66.3 %     63.4 %     68.2 %
DoubleTree by Hilton Jacksonville RiverfrontJacksonville, Florida   72.9 %     79.1 %     79.7 %
    79.5 %     82.7 %     80.5 %
DoubleTree by Hilton LaurelLaurel, Maryland   72.9 %     70.3 %     68.5 %
    71.5 %     66.9 %     67.3 %
DoubleTree by Hilton Philadelphia AirportPhiladelphia, Pennsylvania   82.1 %     81.3 %     77.4 %
    77.5 %     79.6 %     76.6 %
DoubleTree by Hilton Raleigh Brownstone – UniversityRaleigh, North Carolina   79.6 %     74.7 %     74.3 %
    77.6 %     76.0 %     75.7 %
DoubleTree Resort by Hilton Hollywood BeachHollywood, Florida   60.8 %     63.0 %     68.7 %
    70.9 %     71.4 %     75.8 %
Georgian TerraceAtlanta, Georgia   66.4 %     69.4 %     69.4 %
    70.8 %     69.3 %     71.9 %
Hotel Alba Tampa, Tapestry Collection by HiltonTampa, Florida   53.0 %     56.1 %     72.2 %
    67.6 %     74.4 %     79.3 %
Hotel Ballast Wilmington, Tapestry Collection by HiltonWilmington, North Carolina   73.0 %     69.8 %     70.0 %
    71.2 %     63.8 %     70.5 %
Hyatt Centric Arlington (1)Arlington, Virginia   83.6 %     86.0 %     87.5 %
    81.7 %     82.5 %     86.7 %
Sheraton Louisville RiversideJeffersonville, Indiana   76.7 %     63.1 %     73.7 %
    68.9 %     61.2 %     69.0 %
The WhitehallHouston, Texas   63.9 %     50.2 %     65.0 %
    64.3 %     58.5 %     63.8 %
Hyde Resort & Residences (2)Hollywood Beach, Florida   35.3 %     48.4 %     46.3 %
    52.3 %     47.9 %     38.4 %
                       
All properties weighted average (1)   68.8 %     69.6 %     75.7 %
    71.7 %     71.4 %     74.0 %
(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 the condominium units at the Hyde Resort & Residences participating in our rental program for the period those units participated in our rental program.
   

ADR

                       
  Q3 2019     Q3 2018     Q3 2017  
  YTD     YTD     YTD  
The DeSotoSavannah, Georgia $ 155.52     $ 161.68     $ 146.76  
  $ 176.43     $ 178.34     $ 159.98  
DoubleTree by Hilton Jacksonville RiverfrontJacksonville, Florida $ 133.71     $ 136.77     $ 125.14  
  $ 140.04     $ 141.46     $ 129.54  
DoubleTree by Hilton LaurelLaurel, Maryland $ 102.79     $ 104.26     $ 104.72  
  $ 108.45     $ 109.28     $ 108.64  
DoubleTree by Hilton Philadelphia AirportPhiladelphia, Pennsylvania $ 137.37     $ 138.80     $ 131.76  
  $ 143.58     $ 139.14     $ 134.55  
DoubleTree by Hilton Raleigh Brownstone – UniversityRaleigh, North Carolina $ 135.64     $ 131.28     $ 130.42  
  $ 139.50     $ 134.28     $ 133.85  
DoubleTree Resort by Hilton Hollywood BeachHollywood, Florida $ 130.16     $ 131.74     $ 134.83  
  $ 177.85     $ 177.20     $ 171.58  
Georgian TerraceAtlanta, Georgia $ 180.82     $ 183.46     $ 173.31  
  $ 208.14     $ 183.98     $ 171.56  
Hotel Alba Tampa, Tapestry Collection by HiltonTampa, Florida $ 117.74     $ 112.25     $ 110.98  
  $ 131.68     $ 127.01     $ 121.00  
Hotel Ballast Wilmington, Tapestry Collection by HiltonWilmington, North Carolina $ 173.57     $ 159.76     $ 155.41  
  $ 162.65     $ 151.09     $ 150.19  
Hyatt Centric Arlington (1)Arlington, Virginia $ 163.14     $ 153.12     $ 154.90  
  $ 188.93     $ 178.06     $ 177.27  
Sheraton Louisville RiversideJeffersonville, Indiana $ 106.70     $ 113.70     $ 117.55  
  $ 117.64     $ 125.99     $ 132.72  
The WhitehallHouston, Texas $ 137.58     $ 141.85     $ 135.55  
  $ 143.49     $ 145.51     $ 146.08  
Hyde Resort & Residences (2)Hollywood Beach, Florida $ 247.31     $ 242.62     $ 256.68  
  $ 300.07     $ 299.26     $ 278.60  
                       
All properties weighted average (1) $ 145.51     $ 147.25     $ 155.45  
  $ 162.69     $ 161.38     $ 154.06  
(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 the condominium units at the Hyde Resort & Residences participating in our rental program for the period those units participated in our rental program.
   

RevPAR

                       
  Q3 2019     Q3 2018     Q3 2017  
  YTD     YTD     YTD  
The DeSotoSavannah, Georgia $ 93.51     $ 95.01     $ 92.22  
  $ 116.95     $ 113.01     $ 109.16  
DoubleTree by Hilton Jacksonville RiverfrontJacksonville, Florida $ 97.54     $ 108.12     $ 99.69  
  $ 111.38     $ 117.01     $ 104.27  
DoubleTree by Hilton LaurelLaurel, Maryland $ 74.88     $ 73.25     $ 71.71  
  $ 77.55     $ 73.08     $ 73.06  
DoubleTree by Hilton Philadelphia AirportPhiladelphia, Pennsylvania $ 112.82     $ 112.78     $ 101.98  
  $ 111.23     $ 110.75     $ 103.07  
DoubleTree by Hilton Raleigh Brownstone – UniversityRaleigh, North Carolina $ 107.98     $ 98.11     $ 96.83  
  $ 108.26     $ 102.07     $ 101.30  
DoubleTree Resort by Hilton Hollywood BeachHollywood, Florida $ 79.15     $ 83.02     $ 92.60  
  $ 126.08     $ 126.48     $ 130.12  
Georgian TerraceAtlanta, Georgia $ 120.11     $ 127.39     $ 120.35  
  $ 147.39     $ 127.49     $ 123.30  
Hotel Alba Tampa, Tapestry Collection by HiltonTampa, Florida $ 62.44     $ 62.98     $ 80.08  
  $ 89.07     $ 94.47     $ 95.91  
Hotel Ballast Wilmington, Tapestry Collection by HiltonWilmington, North Carolina $ 126.71     $ 111.52     $ 108.74  
  $ 115.86     $ 96.34     $ 105.95  
Hyatt Centric Arlington (1)Arlington, Virginia $ 136.32     $ 131.66     $ 135.55  
  $ 154.33     $ 146.94     $ 153.75  
Sheraton Louisville RiversideJeffersonville, Indiana $ 81.83     $ 71.78     $ 86.60  
  $ 81.02     $ 77.17     $ 91.54  
The WhitehallHouston, Texas $ 87.94     $ 71.23     $ 88.09  
  $ 92.28     $ 85.09     $ 93.15  
Hyde Resort & Residences (2)Hollywood Beach, Florida $ 87.25     $ 117.37     $ 118.96  
  $ 156.90     $ 143.45     $ 107.09  
                       
All properties weighted average (1) $ 100.06     $ 102.48     $ 117.60  
  $ 116.57     $ 115.19     $ 114.01  
(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 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 LOSS TOFFO, Adjusted FFO, EBITDA and Hotel EBITDA(unaudited)

    Three Months Ended     Three Months Ended     Nine Months Ended     Nine Months Ended  
    September 30, 2019     September 30, 2018     September 30, 2019     September 30, 2018  
Net loss available to common stockholders   $ (106,827 )   $ (3,065,883 )   $ (2,492,298 )   $ (1,951,816 )
Add: Net loss attributable to noncontrolling interest     (13,337 )     (385,616 )     (311,642 )     (245,298 )
Depreciation and amortization - real estate     4,965,299       4,450,181       16,073,505       15,545,088  
Gain on involuntary conversion of assets     (130,569 )           (291,902 )     (898,565 )
(Gain) loss on disposal of assets     4,918       (7,555 )     32,088       (3,816 )
FFO available to common stockholders and unitholders   $ 4,719,484     $ 991,127     $ 13,009,751     $ 12,445,593  
(Increase) decrease in deferred income taxes     (702,775 )     (771,190 )     452,169       750,739  
Amortization     14,869       96,862       43,773       238,086  
Loss on early extinguishment of debt           753,133       1,152,356       753,133  
Unrealized (gain) loss on hedging activities     226,491       (123,443 )     1,554,924       (141,970 )
Adjusted FFO available to common stockholders and unitholders   $ 4,258,069     $ 946,489     $ 16,212,973     $ 14,045,581  
                                 
Weighted average number of shares outstanding, basic     13,636,706       13,513,996       13,624,760       13,491,807  
                                 
Weighted average number of non-controlling units     1,778,140       1,778,140       1,778,140       1,778,140  
                                 
Weighted average number of shares and units outstanding, basic     15,414,846       15,292,136       15,402,900       15,269,947  
                                 
FFO per common share and unit   $ 0.31     $ 0.06     $ 0.84     $ 0.82  
                                 
Adjusted FFO per common share and unit   $ 0.28     $ 0.06     $ 1.05     $ 0.92  
    Three Months Ended     Three Months Ended     Nine Months Ended     Nine Months Ended  
    September 30, 2019     September 30, 2018     September 30, 2019     September 30, 2018  
Net loss available to common stockholders   $ (106,827 )   $ (3,065,883 )   $ (2,492,298 )   $ (1,951,816 )
Add: Net loss attributable to noncontrolling interest     (13,337 )     (385,616 )     (311,642 )     (245,298 )
Interest expense     4,722,456       5,306,641       15,115,690       14,571,142  
Interest income     (102,768 )     (88,484 )     (357,576 )     (236,693 )
Income tax provision (benefit)     (694,190 )     (746,924 )     439,323       882,045  
Depreciation and amortization     4,980,168       4,547,043       16,117,278       15,783,174  
Distributions to preferred stockholders     2,188,910       1,469,719       5,631,799       4,359,407  
EBITDA     10,974,412       7,036,496       34,142,574       33,161,961  
(Gain) loss on disposal of assets     4,918       (7,555 )     32,088       (3,816 )
Loss on early extinguishment of debt           753,133       1,152,356       753,133  
Gain on exercise of development right     (3,940,000 )           (3,940,000 )      
Gain on involuntary conversion of assets     (130,569 )           (291,902 )     (898,565 )
Subtotal     6,908,761       7,782,074       31,095,116       33,012,713  
Corporate general and administrative     1,768,912       1,516,408       5,008,290       4,566,258  
Unrealized (gain) loss on hedging activities     226,491       (123,443 )     1,554,924       (141,970 )
Hotel EBITDA   $ 8,904,164     $ 9,175,039     $ 37,658,330     $ 37,437,001  
Reconciliation of Outlook of Net Income to EBITDA and Hotel EBITDA                  
                               
  Previous 2019 Guidance     Revised 2019 Guidance  
  Low Range     High Range     Low Range     High Range  
                               
Net income $ 1,708     $ 2,295       1,613       1,980  
Interest expense   19,899       19,899       19,802       19,802  
Interest income   (380 )     (380 )     (435 )     (450 )
Income tax provision   750       1,100       100       200  
Depreciation and amortization   20,000       20,000       21,250       21,250  
                               
EBITDA   41,977       42,914       42,330       42,782  
Loss on early extinguishment of debt   1,160       1,160       1,152       1,152  
(Gain) loss on disposal of assets   -       -       40       40  
Unrealized loss on hedging activities   -       -       1,550       1,550  
Gain on exercise of development right   (1,160 )     (1,155 )     (3,940 )     (3,940 )
Gain on involuntary conversion of assets   (12,763 )     (12,867 )     (300 )     (300 )
Corporate general and administrative   6,050       6,150       6,575       6,500  
                               
Hotel EBITDA $ 49,187     $ 50,224     $ 47,407     $ 47,784  
                               
                               
Reconciliation of Outlook of Net Income to FFO and Adjusted FFO                  
                               
  Previous 2019 Guidance     Revised 2019 Guidance  
  Low Range     High Range     Low Range     High Range  
                               
Net income   1,708       2,295       1,613       1,980  
Depreciation and amortization   20,000       20,000       21,250       21,250  
(Gain) loss on disposal of assets   -       -       40       40  
Gain on involuntary conversion of assets   -       -       (300 )     (300 )
                               
FFO   21,708       22,295       22,603       22,970  
Distributions to preferred stockholders   (7,606 )     (7,606 )     (7,821 )     (7,821 )
                               
FFO available to common stockholders and unitholders   14,102       14,689       14,782       15,149  
Decrease in deferred income taxes   570       920       75       170  
Unrealized loss on hedging activities   -       -       1,550       1,550  
Loss on early extinguishment of debt   1,160       1,160       1,152       1,152  
Adjusted FFO available to common stockholders and unitholders $ 15,832     $ 16,769     $ 17,559     $ 18,021  
                               

Non-GAAP Financial Measures

The 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. 

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 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.

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.

Sotherly Hotels (NASDAQ:SOHO)
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