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, 2020.
The Company’s results include the following*:
|
Three Months
Ended |
|
|
Six Months
Ended |
|
|
June 30, 2020 |
|
|
June 30, 2019 |
|
|
June 30, 2020 |
|
|
June 30, 2019 |
|
|
($ in thousands
except per share data) |
|
|
($ in thousands
except per share data) |
|
Total
Revenue |
$ |
5,294 |
|
|
$ |
51,541 |
|
|
$ |
42,502 |
|
|
$ |
98,931 |
|
Net loss available to common stockholders |
|
(17,125 |
) |
|
|
(732 |
) |
|
|
(31,448 |
) |
|
|
(2,385 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
(6,637 |
) |
|
|
12,006 |
|
|
|
(5,031 |
) |
|
|
23,168 |
|
Hotel EBITDA |
|
(5,209 |
) |
|
|
15,582 |
|
|
|
(149 |
) |
|
|
28,754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO available to common stockholders and unitholders |
|
(13,532 |
) |
|
|
4,302 |
|
|
|
(24,099 |
) |
|
|
8,290 |
|
Adjusted FFO available to common stockholders and
unitholders |
|
(13,297 |
) |
|
|
7,177 |
|
|
|
(16,923 |
) |
|
|
11,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share |
$ |
(1.20 |
) |
|
$ |
(0.05 |
) |
|
$ |
(2.20 |
) |
|
$ |
(0.18 |
) |
FFO per common share and unit |
$ |
(0.87 |
) |
|
$ |
0.28 |
|
|
$ |
(1.56 |
) |
|
$ |
0.54 |
|
Adjusted FFO per common share and unit |
$ |
(0.86 |
) |
|
$ |
0.47 |
|
|
$ |
(1.09 |
) |
|
$ |
0.78 |
|
(*) 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.
COVID-19 UPDATE
The impact of the COVID-19 pandemic on the hospitality industry
has been significant, with demand for hotel rooms in all of the
markets the Company operates significantly reduced and occupancy
rates reaching historic lows. We experienced a substantial decline
in our revenues, profitability, and cash flows from operations
during the second quarter of 2020. While the extent and duration of
the negative effects resulting from COVID-19 on the Company’s
business are highly uncertain and difficult to predict, we expect
materially adverse effects on our operations and financial results
to continue until travel and business restrictions are eased,
stay-at-home directives and travel orders are lifted, consumer
confidence is restored and an economic recovery commences. The
COVID-19 pandemic has also significantly increased economic
uncertainty and has led to disruption and volatility in the global
capital markets, which could increase our cost of, and limit
accessibility to, capital.
In response to the impact of COVID-19 on the hospitality
industry and the Company’s operations, we have taken the following
health and safety and cost-reduction measures at the property and
corporate levels:
- Implemented enhanced cleaning protocols at all of our
facilities to maintain a clean and safe environment for our
employees and guests at our hotels as well as our corporate staff.
We are also closely monitoring statements and reports issued by the
Centers for Disease Control and Prevention (CDC), WHO, and local
health agencies for the latest developments related to COVID-19 and
following their guidance on the appropriate health and safety
measures at our hotels;
- All our hotels (other than the rental programs at our
condominium hotels) remained open for business to serve the needs
of the community and to enable quicker ramp-up processes once
travel bans are lifted and in anticipation of normal travel
resuming;
- Implemented aggressive cost control measures at the
property-level working in concert with our managing company
partners in order to minimize the impact on profitability,
including “shrinking” the footprint of our properties and reducing
staffing levels;
- Seeking to rebook group business for the second half of
2020;
- Deferring all non-essential capital expenditures at our
properties;
- Significantly reducing corporate G&A, including immediate
reductions in compensation and benefits for all corporate staff,
and the voluntary waiver by the Company’s Board of Directors of its
director fees for the quarter;
- Suspending our regular quarterly cash common stock dividends in
order to preserve liquidity; and
- Deferring payment of the dividends for our Series B, C, and D
preferred stock.
ESTIMATED MONTHLY CASH USE
The Company estimates the average monthly cash use across its
portfolio for the third quarter to be approximately $1.80 to $1.90
million (excluding capital investments) based on the following
assumptions:
- Average hotel-level monthly cash use of approximately $0.40 to
$0.45 million;
- Corporate-level monthly G&A cash use of $0.35 to $0.40
million; and
- Corporate finance-related monthly cash use of $1.05 million,
which includes principal and interest payments on the Company’s
outstanding mortgage debt.
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 programs at the Hyde Resort & Residences and the Hyde
Beach House Resort and Residences, during the three-month period
ending June 30, 2020, decreased 89.9% over the three months ended
June 30, 2019, to $12.91 reflecting a 86.2% decrease in occupancy
and a 27.0% decrease in average daily rate (“ADR”). For the
six-month period ending June 30, 2020, RevPAR decreased 59.6% over
the six months ended June 30, 2019, to $50.50 driven by a 57.0%
decrease in occupancy and a 6.0% decrease in ADR.
- Revenue. For the three-month period
ending June 30, 2020, total revenue decreased 89.7% over the
three-month period ending June 30, 2019. For the six-month
period ending June 30, 2020, total revenue decreased 57.0% or by
approximately $56.4 million to approximately $42.5 million, as
compared to approximately $98.9 million for the six-month period
ending June 30, 2019.
- Common Dividends. As approved by its
Board of Directors, the Company has suspended its regular quarterly
cash dividend in order to preserve liquidity. Accordingly,
the Company did not pay a dividend on its common stock and common
units for the quarter ended June 30, 2020. The Board of Directors
will continue to monitor the situation and assess future quarterly
common dividend declarations. Per the terms of the Company’s
preferred stock, the Company cannot make any common dividend
payments unless full cumulative distributions have been declared
and paid for past distribution periods for each series of preferred
stock.
- Hotel EBITDA. The Company generated
hotel EBITDA of approximately $(5.2) million during the three-month
period ending June 30, 2020. Hotel EBITDA decreased 133.4%,
or approximately ($20.8) million, over the three months ended June
30, 2019. For the six-month period ending June 30, 2020,
hotel EBITDA decreased 100.5%, or approximately $(28.9) million,
over the six months ended June 30, 2019.
- Adjusted FFO available to common stockholders and
unitholders. For the three-month period ending June 30,
2020, adjusted FFO available to common stockholders and unitholders
decreased 285.3%, or approximately $(20.5) million, over the three
months ended June 30, 2019. For the six-month period ending June
30, 2020, adjusted FFO available to common stockholders and
unitholders decreased 241.6% or approximately $(28.9) million over
the six months ended June 30, 2019.
Dave Folsom, President and Chief Executive Officer, of Sotherly
Hotels Inc., commented, “While March saw the pandemic unfold and
impact both our Company and the industry, the second quarter
witnessed much broader effects and resulted in the worst financial
operating quarter in the 63-year history of the Company. The
environment was characterized by mass cancellations and little to
no pickup in reservations, while many of our markets were
concurrently coming under siege from massive civil protests and
disruptions. At the end of the first quarter we made
difficult, but nonetheless needed, changes to staffing levels
throughout the portfolio and at the corporate headquarters.
Reduced staffing remains in effect and is expected to
continue until demand resumes. In addition, we continue to
seek extended payment terms and covenant waivers with our mortgage
lenders. We have begun to see signs of demand returning,
particularly with respect to the leisure segment at our properties.
The pace of net cancellations has declined, and we believe
this points to better booking trends in the future. New or
expanded government assistance programs and policies, as well as
prospective vaccine introduction, would have the potential to
materially change the outlook for our industry moving forward.
In the interim, challenges will remain for our portfolio and
we will continue to take measures to address them.”
Balance Sheet/Liquidity
As of June 30, 2020, the Company had approximately $24.9 million
of available cash and cash equivalents, of which approximately $6.4
million was reserved for real estate taxes, insurance, capital
improvements and certain other expenses or otherwise restricted.
The Company had principal balances of approximately $369.9 million
in outstanding debt, net, at a weighted average interest rate of
approximately 4.59%.
Other Developments
We have entered into various forbearance and loan modification
agreements with our lenders for the mortgage loans secured by our
hotels located in Laurel, MD, Savannah, GA, Wilmington, NC,
Philadelphia, PA, Houston, TX, Jacksonville, FL, Jeffersonville,
IN, Raleigh, NC, Tampa, FL, and Arlington, VA. These
agreements generally allow us to defer payments of principal and
interest for periods beginning in April 2020 and extending through
to various dates ending between June 2020 and March 2021. We
are currently in negotiations with the lenders for the mortgage
loans secured by our remaining hotels, including two in which we
are in default, and may seek additional concessions from our
lenders as existing payment extensions and deferrals expire, to the
extent warranted by market conditions and the financial performance
of our hotels. There can be no assurance that we will be able
to reach agreement with all of our lenders or that additional
concessions, if needed, can be negotiated on terms that are
acceptable.
2020 Outlook
On March 9, 2020, the Company withdrew its previously announced
guidance for 2020. Due to the uncertainties related to the
COVID-19 pandemic and its impact on travel, the Company is unable
to provide guidance for 2020.
Earnings Call/Webcast
The Company will conduct its second quarter 2020 conference call
for investors and other interested parties at 10:00 a.m. Eastern
Time on Monday, August 10, 2020. 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 10 through August
10, 2021. To access the rebroadcast, dial 877-344-7529 and enter
conference number 10145834. A replay of the call also will be
available on the Internet at www.sotherlyhotels.com until
August 10, 2021.
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:
Mack SimsVice President – Operations & Investor
RelationsSotherly Hotels Inc.306 South Henry Street, Suite
100Williamsburg, 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, and as such may involve known and unknown risks,
uncertainties and other factors which may cause our actual results,
performance or achievements to be materially different from future
results, performance or achievements expressed or implied by such
forward-looking statements. Forward-looking statements, which are
based on certain assumptions and describe our current strategies,
expectations, and future plans are generally identified by our use
of words, such as “intend,” “plan,” “may,” “should,” “will,”
“project,” “estimate,” “anticipate,” “believe,” “expect,”
“continue,” “potential,” “opportunity,” and similar expressions,
whether in the negative or affirmative, but the absence of these
words does not necessarily mean that a statement is not
forward-looking. All statements regarding our expected
financial position, business and financing plans are
forward-looking statements.
Currently, one of the most significant factors that could cause
actual outcomes to differ materially from the Company’s
forward-looking statements is the potential increased adverse
effect of COVID-19 on the Company’s business, financial performance
and condition, operating results and cash flows, the real estate
market and the hospitality industry specifically, and the global
economy and financial markets. The significance, extent and
duration of the impacts caused by the COVID-19 outbreak on the
Company will depend on future developments, which are highly
uncertain and cannot be predicted with confidence at this time,
including the scope, severity and duration of the pandemic, the
extent and effectiveness of the actions taken to contain the
pandemic or mitigate its impact, the Company’s ability to negotiate
forbearance and/or modifications agreements with its lenders on
acceptable terms, or at all, and the direct and indirect economic
effects of the pandemic and containment measures, among others.
Moreover, investors are cautioned to interpret many of the risks
identified under the section titled “Risk Factors” in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31,
2019 as being heightened as a result of the ongoing and numerous
adverse impacts of COVID-19. Such additional factors include, but
are not limited to, the ability of the Company to effectively
acquire and dispose of properties; the ability of the Company to
implement its operating strategy; changes in general political,
economic and competitive conditions and specific market conditions;
reduced business and leisure travel due to travel-related health
concerns, including the widespread outbreak of COVID-19 or any
other infectious or contagious diseases in the U.S. or abroad;
adverse changes in the real estate and real estate capital markets;
financing risks; litigation risks; regulatory proceedings or
inquiries; and changes in laws or regulations or interpretations of
current laws and regulations that impact the Company’s business,
assets or classification as a REIT. Although the Company believes
that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be
inaccurate, and therefore there can be no assurance that such
statements included in this report will prove to be accurate. In
light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the
Company or any other person that the results or conditions
described in such statements or the objectives and plans of the
Company will be achieved. Additional factors which could have a
material adverse effect on our operations and future prospects
include, but are not limited to: national and local economic and
business conditions that affect occupancy rates and revenues at our
hotels and the demand for hotel products and services; the adverse
effect of the novel coronavirus on the U.S., regional and global
economies, travel, the hospitality industry, and the financial
condition and results of operation of the Company; risks associated
with civil unrest or disorder that could adversely impact demand
for hotel rooms in our markets or result in damage to our hotels;
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; risks associated with the level of our indebtedness and
our ability to meet covenants in our 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 our hotels; risks associated with maintaining our
system of internal controls; risks associated with the conflicts of
interest of the Company’s officers and directors; risks associated
with redevelopment and repositioning projects, including delays and
cost overruns; supply and demand for hotel rooms in our current and
proposed market areas; risks associated with our ability to
maintain our franchise agreements with our third party franchisors;
and our ability to maintain adequate insurance coverage.
Additional factors that could cause actual results to vary from
our forward-looking statements are set forth under the section
titled “Risk Factors” in our Annual Report on Form 10-K, in this
report 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.
SOTHERLY HOTELS
INC.CONSOLIDATED BALANCE SHEETS
|
June 30, 2020 |
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
Investment in hotel properties, net |
$ |
436,890,062 |
|
|
$ |
443,267,448 |
|
Cash and cash equivalents |
|
18,520,897 |
|
|
|
23,738,066 |
|
Restricted cash |
|
6,402,032 |
|
|
|
4,246,170 |
|
Accounts receivable, net |
|
2,289,460 |
|
|
|
4,812,479 |
|
Accounts receivable - affiliate |
|
58,555 |
|
|
|
101,771 |
|
Prepaid expenses, inventory and other assets |
|
7,970,698 |
|
|
|
5,648,772 |
|
Deferred income taxes |
|
— |
|
|
|
5,412,084 |
|
TOTAL
ASSETS |
$ |
472,131,704 |
|
|
$ |
487,226,790 |
|
LIABILITIES |
|
|
|
|
|
|
|
Mortgage loans, net |
$ |
357,051,526 |
|
|
$ |
358,633,884 |
|
Unsecured notes, net |
|
10,719,100 |
|
|
|
- |
|
Accounts payable and accrued liabilities |
|
30,788,625 |
|
|
|
20,189,903 |
|
Advance deposits |
|
1,559,496 |
|
|
|
2,785,338 |
|
Dividends and distributions payable |
|
4,277,071 |
|
|
|
4,210,494 |
|
TOTAL
LIABILITIES |
$ |
404,395,818 |
|
|
$ |
385,819,619 |
|
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
each issued and outstanding at June 30, 2020 and December 31,
2019, respectively. |
|
16,100 |
|
|
|
16,100 |
|
7.875% Series C cumulative redeemable perpetual preferred
stock, liquidation preference $25 per share, 1,554,610 shares
each issued and outstanding at June 30, 2020 and December 31,
2019, respectively. |
|
15,546 |
|
|
|
15,546 |
|
8.25% Series D cumulative redeemable perpetual preferred
stock, liquidation preference $25 per share, 1,200,000 shares
each issued and outstanding at June 30, 2020 and December 31,
2019, respectively. |
|
12,000 |
|
|
|
12,000 |
|
Common stock, par value $0.01, 69,000,000 shares authorized,
14,881,267 shares issued and outstanding at June 30, 2020 and
14,272,378 shares issued and outstanding at December 31,
2019. |
|
148,812 |
|
|
|
142,723 |
|
Additional paid-in capital |
|
180,200,464 |
|
|
|
180,515,861 |
|
Unearned ESOP shares |
|
(3,976,951 |
) |
|
|
(4,105,637 |
) |
Distributions in excess of retained earnings |
|
(105,129,724 |
) |
|
|
(73,990,690 |
) |
Total Sotherly Hotels Inc. stockholders’ equity |
|
71,286,247 |
|
|
|
102,605,903 |
|
Noncontrolling interest |
|
(3,550,361 |
) |
|
|
(1,198,732 |
) |
TOTAL
EQUITY |
|
67,735,886 |
|
|
|
101,407,171 |
|
TOTAL LIABILITIES AND
EQUITY |
$ |
472,131,704 |
|
|
$ |
487,226,790 |
|
|
SOTHERLY HOTELS
INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(unaudited)
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
|
June 30, 2020 |
|
|
June 30, 2019 |
|
|
June 30, 2020 |
|
|
June 30, 2019 |
|
|
(unaudited) |
|
|
(unaudited) |
|
|
(unaudited) |
|
|
(unaudited) |
|
REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms department |
$ |
3,885,820 |
|
|
$ |
36,356,324 |
|
|
$ |
28,630,743 |
|
|
$ |
69,308,196 |
|
Food and beverage department |
|
155,192 |
|
|
|
10,863,633 |
|
|
|
8,299,166 |
|
|
|
20,586,757 |
|
Other operating departments |
|
1,252,895 |
|
|
|
4,320,744 |
|
|
|
5,572,462 |
|
|
|
9,036,054 |
|
Total revenue |
|
5,293,907 |
|
|
|
51,540,701 |
|
|
|
42,502,371 |
|
|
|
98,931,007 |
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms department |
|
1,751,374 |
|
|
|
8,418,413 |
|
|
|
8,834,565 |
|
|
|
16,199,852 |
|
Food and beverage department |
|
119,901 |
|
|
|
7,621,331 |
|
|
|
6,732,207 |
|
|
|
14,758,164 |
|
Other operating departments |
|
701,608 |
|
|
|
1,745,311 |
|
|
|
2,973,236 |
|
|
|
3,655,446 |
|
Indirect |
|
7,929,765 |
|
|
|
18,173,700 |
|
|
|
24,111,606 |
|
|
|
35,563,380 |
|
Total hotel operating expenses |
|
10,502,648 |
|
|
|
35,958,755 |
|
|
|
42,651,614 |
|
|
|
70,176,842 |
|
Depreciation and
amortization |
|
4,993,107 |
|
|
|
5,108,375 |
|
|
|
9,975,983 |
|
|
|
11,137,110 |
|
Gain on disposal of
assets |
|
(451 |
) |
|
|
31,179 |
|
|
|
(451 |
) |
|
|
27,171 |
|
Corporate general and
administrative |
|
1,227,808 |
|
|
|
1,554,934 |
|
|
|
3,107,933 |
|
|
|
3,239,378 |
|
Total hotel operating expenses |
|
16,723,112 |
|
|
|
42,653,243 |
|
|
|
55,735,079 |
|
|
|
84,580,501 |
|
NET OPERATING (LOSS)
INCOME |
|
(11,429,205 |
) |
|
|
8,887,458 |
|
|
|
(13,232,708 |
) |
|
|
14,350,506 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(4,719,796 |
) |
|
|
(5,088,121 |
) |
|
|
(9,281,636 |
) |
|
|
(10,393,235 |
) |
Interest income |
|
72,001 |
|
|
|
155,512 |
|
|
|
132,366 |
|
|
|
254,808 |
|
Loss on early extinguishment of debt |
|
— |
|
|
|
(1,152,356 |
) |
|
|
— |
|
|
|
(1,152,356 |
) |
Unrealized loss on hedging activities |
|
(214,876 |
) |
|
|
(837,822 |
) |
|
|
(1,800,508 |
) |
|
|
(1,328,432 |
) |
Gain on involuntary conversion of assets |
|
14,168 |
|
|
|
— |
|
|
|
26,607 |
|
|
|
161,334 |
|
Net (loss) income before
income taxes |
|
(16,277,708 |
) |
|
|
1,964,671 |
|
|
|
(24,155,879 |
) |
|
|
1,892,625 |
|
Income tax provision |
|
(23,362 |
) |
|
|
(815,356 |
) |
|
|
(5,477,396 |
) |
|
|
(1,133,513 |
) |
Net (loss) income before
income taxes |
|
(16,301,070 |
) |
|
|
1,149,315 |
|
|
|
(29,633,275 |
) |
|
|
759,112 |
|
Less: Net loss attributable to noncontrolling interest |
|
1,365,368 |
|
|
|
91,356 |
|
|
|
2,562,783 |
|
|
|
298,305 |
|
Net (loss) income
attributable to the Company |
|
(14,935,702 |
) |
|
|
1,240,671 |
|
|
|
(27,070,492 |
) |
|
|
1,057,417 |
|
Distributions to preferred stockholders |
|
(2,188,910 |
) |
|
|
(1,972,382 |
) |
|
|
(4,377,821 |
) |
|
|
(3,442,890 |
) |
Net loss available to
common stockholders |
$ |
(17,124,612 |
) |
|
$ |
(731,711 |
) |
|
$ |
(31,448,313 |
) |
|
$ |
(2,385,473 |
) |
Net loss per share
available to common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(1.20 |
) |
|
$ |
(0.05 |
) |
|
$ |
(2.20 |
) |
|
$ |
(0.18 |
) |
Weighted average number
of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
14,303,119 |
|
|
|
13,626,435 |
|
|
|
14,274,668 |
|
|
|
13,618,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOTHERLY HOTELS INC.KEY
OPERATING METRICS(unaudited)
The following tables illustrate the key operating metrics for
the three months ended June 30, 2020 and 2019, respectively, for
the Company’s twelve wholly-owned properties (“actual” portfolio
metrics), as well as the twelve wholly-owned properties in the
portfolio that were under the Company’s control during the three
and six months ended June 30, 2020 and the corresponding periods in
2019 (“same-store” portfolio metrics). Accordingly, the actual data
does not include the participating condominium hotel rooms the Hyde
Beach House Resort & Residences, and the same-store data does
not include the performance of the participating condominium hotel
rooms at the Hyde Beach House Resort & Residences. The
composite portfolio metrics represent the Company’s twelve
wholly-owned properties and the participating condominium hotel
rooms at the Hyde Resort & Residences and the Hyde Beach House
Resort & Residences during the three and six months ended June
30, 2020 and the corresponding period in 2019.
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
|
June 30, 2020 |
|
|
June 30, 2019 |
|
|
June 30, 2020 |
|
|
June 30, 2019 |
|
Actual Portfolio Metrics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy % |
|
11.5 |
% |
|
|
77.4 |
% |
|
|
33.0 |
% |
|
|
73.8 |
% |
ADR |
$ |
117.60 |
|
|
$ |
163.48 |
|
|
$ |
151.23 |
|
|
$ |
164.47 |
|
RevPAR |
$ |
13.53 |
|
|
$ |
126.59 |
|
|
$ |
49.85 |
|
|
$ |
121.33 |
|
Same-Store Portfolio
Metrics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy % |
|
12.1 |
% |
|
|
76.2 |
% |
|
|
33.2 |
% |
|
|
73.0 |
% |
ADR |
$ |
118.36 |
|
|
$ |
155.65 |
|
|
$ |
149.95 |
|
|
$ |
159.76 |
|
RevPAR |
$ |
14.29 |
|
|
$ |
118.62 |
|
|
$ |
49.82 |
|
|
$ |
116.61 |
|
Composite Portfolio
Metrics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy % |
|
10.5 |
% |
|
|
76.3 |
% |
|
|
31.4 |
% |
|
|
73.1 |
% |
ADR |
$ |
122.51 |
|
|
$ |
167.87 |
|
|
$ |
160.71 |
|
|
$ |
170.91 |
|
RevPAR |
$ |
12.91 |
|
|
$ |
128.05 |
|
|
$ |
50.50 |
|
|
$ |
124.97 |
|
|
SOTHERLY HOTELS
INC.SUPPLEMENTAL
DATA(unaudited)
The following tables illustrate the key operating metrics for
the three and six months ended June 30, 2020, 2019 and 2018,
respectively, for each of the Company’s wholly-owned properties
during each respective reporting period, irrespective of ownership
percentage during any period.
Occupancy
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2
2020 |
|
|
Q2
2019 |
|
|
Q2
2018 |
|
|
YTD |
|
|
YTD |
|
|
YTD |
|
The
DeSoto |
|
9.2 |
% |
|
|
75 |
% |
|
|
74.6 |
% |
Savannah,
Georgia |
|
|
24.5 |
% |
|
|
69.4 |
% |
|
|
65.7 |
% |
DoubleTree
by Hilton Jacksonville Riverfront |
|
16.8 |
% |
|
|
82.8 |
% |
|
|
84.8 |
% |
Jacksonville, Florida |
|
|
43.0 |
% |
|
|
82.9 |
% |
|
|
84.6 |
% |
DoubleTree
by Hilton Laurel |
|
16.0 |
% |
|
|
80.2 |
% |
|
|
79.5 |
% |
Laurel,
Maryland |
|
|
32.3 |
% |
|
|
70.8 |
% |
|
|
65.2 |
% |
DoubleTree
by Hilton Philadelphia Airport |
|
12.2 |
% |
|
|
85.1 |
% |
|
|
86.3 |
% |
Philadelphia, Pennsylvania |
|
|
32.6 |
% |
|
|
75.1 |
% |
|
|
78.8 |
% |
DoubleTree
by Hilton Raleigh Brownstone – University |
|
8.2 |
% |
|
|
81.3 |
% |
|
|
81.9 |
% |
Raleigh,
North Carolina |
|
|
32.3 |
% |
|
|
76.6 |
% |
|
|
76.7 |
% |
DoubleTree
Resort by Hilton Hollywood Beach |
|
7.0 |
% |
|
|
73.8 |
% |
|
|
73.5 |
% |
Hollywood,
Florida |
|
|
34.5 |
% |
|
|
76.0 |
% |
|
|
75.6 |
% |
Georgian
Terrace |
|
3.7 |
% |
|
|
70.9 |
% |
|
|
74.8 |
% |
Atlanta,
Georgia |
|
|
26.1 |
% |
|
|
73.0 |
% |
|
|
69.2 |
% |
Hotel Alba
Tampa, Tapestry Collection by Hilton |
|
9.2 |
% |
|
|
70.5 |
% |
|
|
76.8 |
% |
Tampa,
Florida |
|
|
38.3 |
% |
|
|
75.1 |
% |
|
|
83.7 |
% |
Hotel
Ballast Wilmington, Tapestry Collection by Hilton |
|
14.5 |
% |
|
|
78.2 |
% |
|
|
69.9 |
% |
Wilmington,
North Carolina |
|
|
31.2 |
% |
|
|
70.3 |
% |
|
|
60.7 |
% |
Hyatt
Centric Arlington (1) |
|
6.4 |
% |
|
|
88.4 |
% |
|
|
89.2 |
% |
Arlington,
Virginia |
|
|
30.6 |
% |
|
|
80.7 |
% |
|
|
80.8 |
% |
Sheraton
Louisville Riverside |
|
36.4 |
% |
|
|
75.6 |
% |
|
|
68.9 |
% |
Jeffersonville, Indiana |
|
|
43.7 |
% |
|
|
64.9 |
% |
|
|
60.3 |
% |
The
Whitehall |
|
8.6 |
% |
|
|
64.5 |
% |
|
|
67.7 |
% |
Houston,
Texas |
|
|
30.6 |
% |
|
|
64.5 |
% |
|
|
62.7 |
% |
Hyde Resort
& Residences (2) |
|
4.0 |
% |
|
|
53.9 |
% |
|
|
43.2 |
% |
Hollywood
Beach, Florida |
|
|
24.6 |
% |
|
|
61.0 |
% |
|
|
47.7 |
% |
Hyde Beach
House Resort & Residences (2) |
|
1.2 |
% |
|
- |
|
|
- |
|
Hollywood
Beach, Florida |
|
|
7.7 |
% |
|
- |
|
|
- |
|
All
properties weighted average (1) |
|
10.5 |
% |
|
|
76.3 |
% |
|
|
75.6 |
% |
|
|
31.4 |
% |
|
|
73.1 |
% |
|
|
71.0 |
% |
(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 those condominium
units participating in our rental program for the period. |
|
|
ADR
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2
2020 |
|
|
Q2
2019 |
|
|
Q2
2018 |
|
|
YTD |
|
|
YTD |
|
|
YTD |
|
The
DeSoto |
$ |
162.10 |
|
|
$ |
190.12 |
|
|
$ |
191.37 |
|
Savannah,
Georgia |
|
$ |
163.42 |
|
|
$ |
185.63 |
|
|
$ |
185.91 |
|
DoubleTree
by Hilton Jacksonville Riverfront |
$ |
123.34 |
|
|
$ |
139.46 |
|
|
$ |
143.08 |
|
Jacksonville, Florida |
|
$ |
142.28 |
|
|
$ |
142.87 |
|
|
$ |
143.69 |
|
DoubleTree
by Hilton Laurel |
$ |
80.65 |
|
|
$ |
112.76 |
|
|
$ |
113.85 |
|
Laurel,
Maryland |
|
$ |
94.61 |
|
|
$ |
111.40 |
|
|
$ |
112.03 |
|
DoubleTree
by Hilton Philadelphia Airport |
$ |
107.98 |
|
|
$ |
163.31 |
|
|
$ |
147.86 |
|
Philadelphia, Pennsylvania |
|
$ |
114.58 |
|
|
$ |
147.02 |
|
|
$ |
139.32 |
|
DoubleTree
by Hilton Raleigh Brownstone – University |
$ |
107.34 |
|
|
$ |
146.19 |
|
|
$ |
137.65 |
|
Raleigh,
North Carolina |
|
$ |
132.57 |
|
|
$ |
141.54 |
|
|
$ |
135.77 |
|
DoubleTree
Resort by Hilton Hollywood Beach |
$ |
117.88 |
|
|
$ |
161.72 |
|
|
$ |
164.99 |
|
Hollywood,
Florida |
|
$ |
228.20 |
|
|
$ |
197.24 |
|
|
$ |
196.45 |
|
Georgian
Terrace |
$ |
191.68 |
|
|
$ |
190.59 |
|
|
$ |
178.44 |
|
Atlanta,
Georgia |
|
$ |
201.14 |
|
|
$ |
220.76 |
|
|
$ |
184.25 |
|
Hotel Alba
Tampa, Tapestry Collection by Hilton |
$ |
128.14 |
|
|
$ |
128.69 |
|
|
$ |
121.79 |
|
Tampa,
Florida |
|
$ |
160.37 |
|
|
$ |
136.69 |
|
|
$ |
132.04 |
|
Hotel
Ballast Wilmington, Tapestry Collection by Hilton |
$ |
156.8 |
|
|
$ |
172.00 |
|
|
$ |
156.69 |
|
Wilmington,
North Carolina |
|
$ |
146.93 |
|
|
$ |
156.88 |
|
|
$ |
146.03 |
|
Hyatt
Centric Arlington (1) |
$ |
104.91 |
|
|
$ |
223.78 |
|
|
$ |
211.29 |
|
Arlington,
Virginia |
|
$ |
163.70 |
|
|
$ |
202.50 |
|
|
$ |
191.56 |
|
Sheraton
Louisville Riverside |
$ |
92.92 |
|
|
$ |
132.00 |
|
|
$ |
141.53 |
|
Jeffersonville, Indiana |
|
$ |
99.55 |
|
|
$ |
124.21 |
|
|
$ |
132.53 |
|
The
Whitehall |
$ |
104.31 |
|
|
$ |
146.77 |
|
|
$ |
146.91 |
|
Houston,
Texas |
|
$ |
141.58 |
|
|
$ |
146.46 |
|
|
$ |
147.00 |
|
Hyde Resort
& Residences (2) |
$ |
295.94 |
|
|
$ |
290.49 |
|
|
$ |
290.13 |
|
Hollywood
Beach, Florida |
|
$ |
333.26 |
|
|
$ |
315.72 |
|
|
$ |
326.83 |
|
Hyde Beach
House Resort & Residences (2) |
$ |
304.65 |
|
|
$ |
- |
|
|
$ |
- |
|
Hollywood
Beach, Florida |
|
$ |
338.65 |
|
|
$ |
- |
|
|
$ |
- |
|
All
properties weighted average (1) |
$ |
122.51 |
|
|
$ |
167.87 |
|
|
$ |
162.93 |
|
|
$ |
160.71 |
|
|
$ |
170.91 |
|
|
$ |
164.70 |
|
(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 those condominium
units participating in our rental program for the period. |
|
|
RevPAR
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2
2020 |
|
|
Q2
2019 |
|
|
Q2
2018 |
|
|
YTD |
|
|
YTD |
|
|
YTD |
|
The
DeSoto |
$ |
14.84 |
|
|
$ |
142.65 |
|
|
$ |
142.74 |
|
Savannah,
Georgia |
|
$ |
40.11 |
|
|
$ |
128.87 |
|
|
$ |
122.16 |
|
DoubleTree
by Hilton Jacksonville Riverfront |
$ |
20.75 |
|
|
$ |
115.49 |
|
|
$ |
121.40 |
|
Jacksonville, Florida |
|
$ |
61.24 |
|
|
$ |
118.42 |
|
|
$ |
121.52 |
|
DoubleTree
by Hilton Laurel |
$ |
12.91 |
|
|
$ |
90.48 |
|
|
$ |
90.55 |
|
Laurel,
Maryland |
|
$ |
30.52 |
|
|
$ |
78.91 |
|
|
$ |
73.00 |
|
DoubleTree
by Hilton Philadelphia Airport |
$ |
13.17 |
|
|
$ |
139.06 |
|
|
$ |
127.66 |
|
Philadelphia, Pennsylvania |
|
$ |
37.40 |
|
|
$ |
110.41 |
|
|
$ |
109.72 |
|
DoubleTree
by Hilton Raleigh Brownstone – University |
$ |
8.77 |
|
|
$ |
118.79 |
|
|
$ |
112.70 |
|
Raleigh,
North Carolina |
|
$ |
42.82 |
|
|
$ |
108.41 |
|
|
$ |
104.08 |
|
DoubleTree
Resort by Hilton Hollywood Beach |
$ |
8.29 |
|
|
$ |
119.31 |
|
|
$ |
121.28 |
|
Hollywood,
Florida |
|
$ |
78.65 |
|
|
$ |
149.93 |
|
|
$ |
148.58 |
|
Georgian
Terrace |
$ |
7.08 |
|
|
$ |
135.06 |
|
|
$ |
133.53 |
|
Atlanta,
Georgia |
|
$ |
52.56 |
|
|
$ |
161.26 |
|
|
$ |
127.54 |
|
Hotel Alba
Tampa, Tapestry Collection by Hilton |
$ |
11.84 |
|
|
$ |
90.67 |
|
|
$ |
93.57 |
|
Tampa,
Florida |
|
$ |
61.44 |
|
|
$ |
102.60 |
|
|
$ |
110.47 |
|
Hotel
Ballast Wilmington, Tapestry Collection by Hilton |
$ |
22.80 |
|
|
$ |
134.42 |
|
|
$ |
109.56 |
|
Wilmington,
North Carolina |
|
$ |
45.79 |
|
|
$ |
110.34 |
|
|
$ |
88.63 |
|
Hyatt
Centric Arlington (1) |
$ |
6.71 |
|
|
$ |
197.73 |
|
|
$ |
188.46 |
|
Arlington,
Virginia |
|
$ |
50.03 |
|
|
$ |
163.49 |
|
|
$ |
154.70 |
|
Sheraton
Louisville Riverside |
$ |
33.84 |
|
|
$ |
99.81 |
|
|
$ |
97.50 |
|
Jeffersonville, Indiana |
|
$ |
43.49 |
|
|
$ |
80.60 |
|
|
$ |
79.91 |
|
The
Whitehall |
$ |
8.97 |
|
|
$ |
94.61 |
|
|
$ |
99.46 |
|
Houston,
Texas |
|
$ |
43.30 |
|
|
$ |
94.49 |
|
|
$ |
92.14 |
|
Hyde Resort
& Residences (2) |
$ |
11.73 |
|
|
$ |
156.48 |
|
|
$ |
125.44 |
|
Hollywood
Beach, Florida |
|
$ |
81.91 |
|
|
$ |
192.65 |
|
|
$ |
155.97 |
|
Hyde Beach
House Resort & Residences (2) |
$ |
3.56 |
|
|
$ |
- |
|
|
$ |
- |
|
Hollywood
Beach, Florida |
|
$ |
26.05 |
|
|
$ |
- |
|
|
$ |
- |
|
All
properties weighted average (1) |
$ |
12.91 |
|
|
$ |
128.05 |
|
|
$ |
123.17 |
|
|
$ |
50.50 |
|
|
$ |
124.97 |
|
|
$ |
116.96 |
|
(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 those condominium
units participating in our rental program for the period. |
|
|
SOTHERLY HOTELS
INC.RECONCILIATION OF NET LOSS
TOFFO, Adjusted FFO, EBITDA and Hotel
EBITDA(unaudited)
|
Three Months
Ended |
|
|
Three Months
Ended |
|
|
Six Months
Ended |
|
|
Six Months
Ended |
|
|
June 30, 2020 |
|
|
June 30, 2019 |
|
|
June 30, 2020 |
|
|
June 30, 2019 |
|
Net loss available to common stockholders |
$ |
(17,124,612 |
) |
|
$ |
(731,711 |
) |
|
$ |
(31,448,313 |
) |
|
$ |
(2,385,473 |
) |
Add: Net loss attributable to noncontrolling interest |
|
(1,365,368 |
) |
|
|
(91,356 |
) |
|
|
(2,562,783 |
) |
|
|
(298,305 |
) |
Depreciation and amortization - real estate |
|
4,972,125 |
|
|
|
5,094,339 |
|
|
$ |
9,939,574 |
|
|
|
11,108,206 |
|
Gain on involuntary conversion of assets |
|
(14,168 |
) |
|
|
— |
|
|
|
(26,607 |
) |
|
|
(161,334 |
) |
(Gain) loss on disposal of assets |
|
(451 |
) |
|
|
31,179 |
|
|
|
(451 |
) |
|
|
27,171 |
|
FFO
available to common stockholders and unitholders |
$ |
(13,532,474 |
) |
|
$ |
4,302,451 |
|
|
$ |
(24,098,580 |
) |
|
$ |
8,290,265 |
|
Decrease in deferred income taxes |
|
— |
|
|
|
870,265 |
|
|
|
5,412,084 |
|
|
|
1,154,944 |
|
Amortization |
|
20,982 |
|
|
|
14,036 |
|
|
|
36,409 |
|
|
|
28,904 |
|
Termination fee |
|
— |
|
|
|
— |
|
|
|
(72,960 |
) |
|
|
— |
|
Loss on early extinguishment of debt |
|
— |
|
|
|
1,152,356 |
|
|
|
— |
|
|
|
1,152,356 |
|
Unrealized loss on hedging activities |
|
214,876 |
|
|
|
837,822 |
|
|
|
1,800,508 |
|
|
|
1,328,432 |
|
Adjusted FFO available to common stockholders and
unitholders |
$ |
(13,296,616 |
) |
|
$ |
7,176,930 |
|
|
$ |
(16,922,539 |
) |
|
$ |
11,954,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding, basic |
|
14,303,119 |
|
|
|
13,626,435 |
|
|
|
14,274,668 |
|
|
|
13,618,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of non-controlling units |
|
1,181,501 |
|
|
|
1,778,140 |
|
|
|
1,210,345 |
|
|
|
1,778,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares and units outstanding, basic |
|
15,484,620 |
|
|
|
15,404,575 |
|
|
|
15,485,013 |
|
|
|
15,396,828 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO per common share and unit |
$ |
(0.87 |
) |
|
$ |
0.28 |
|
|
$ |
(1.56 |
) |
|
$ |
0.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted FFO per common share and unit |
$ |
(0.86 |
) |
|
$ |
0.47 |
|
|
$ |
(1.09 |
) |
|
$ |
0.78 |
|
|
Three Months
Ended |
|
|
Three Months
Ended |
|
|
Six Months
Ended |
|
|
Six Months
Ended |
|
|
June 30, 2020 |
|
|
June 30, 2019 |
|
|
June 30, 2020 |
|
|
June 30, 2019 |
|
Net loss available to common stockholders |
$ |
(17,124,612 |
) |
|
$ |
(731,711 |
) |
|
$ |
(31,448,313 |
) |
|
$ |
(2,385,473 |
) |
Add: Net loss attributable to noncontrolling interest |
|
(1,365,368 |
) |
|
|
(91,356 |
) |
|
|
(2,562,783 |
) |
|
|
(298,305 |
) |
Interest expense |
|
4,719,796 |
|
|
|
5,088,121 |
|
|
|
9,281,636 |
|
|
|
10,393,235 |
|
Interest income |
|
(72,001 |
) |
|
|
(155,512 |
) |
|
|
(132,366 |
) |
|
|
(254,808 |
) |
Income tax provision |
|
23,362 |
|
|
|
815,356 |
|
|
|
5,477,396 |
|
|
|
1,133,513 |
|
Depreciation and amortization |
|
4,993,107 |
|
|
|
5,108,375 |
|
|
|
9,975,983 |
|
|
|
11,137,110 |
|
Distributions to preferred stockholders |
|
2,188,910 |
|
|
|
1,972,382 |
|
|
|
4,377,821 |
|
|
|
3,442,890 |
|
EBITDA |
|
(6,636,806 |
) |
|
|
12,005,655 |
|
|
|
(5,030,626 |
) |
|
|
23,168,162 |
|
(Gain) loss on disposal of assets |
|
(451 |
) |
|
|
31,179 |
|
|
|
(451 |
) |
|
|
27,171 |
|
Loss on early extinguishment of debt |
|
— |
|
|
|
1,152,356 |
|
|
|
— |
|
|
|
1,152,356 |
|
Gain on involuntary conversion of assets |
|
(14,168 |
) |
|
|
— |
|
|
|
(26,607 |
) |
|
|
(161,334 |
) |
Subtotal |
|
(6,651,425 |
) |
|
|
13,189,190 |
|
|
|
(5,057,684 |
) |
|
|
24,186,355 |
|
Corporate general and administrative |
|
1,227,808 |
|
|
|
1,554,934 |
|
|
|
3,107,933 |
|
|
|
3,239,378 |
|
Unrealized loss on hedging activities |
|
214,876 |
|
|
|
837,822 |
|
|
|
1,800,508 |
|
|
|
1,328,432 |
|
Hotel EBITDA |
$ |
(5,208,741 |
) |
|
$ |
15,581,946 |
|
|
$ |
(149,243 |
) |
|
$ |
28,754,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
management contract termination costs and change in control gains
or losses. 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.
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