[PART I - Financial Information](index=5&type=section&id=PART%20I) This section presents the company's unaudited financial statements and management's discussion for the periods ended June 30, 2025 [Consolidated Financial Statements](index=5&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents Sotherly Hotels Inc. and LP's unaudited consolidated financial statements and detailed notes for Q2 2025 [Sotherly Hotels Inc. Financial Statements](index=5&type=section&id=Sotherly%20Hotels%20Inc.%20Financial%20Statements) Unaudited consolidated financial statements for Sotherly Hotels Inc. as of and for the period ended June 30, 2025 Balance Sheets | Financial Metric | June 30, 2025 (unaudited) ($) | December 31, 2024 ($) | | :--- | :--- | :--- | | **Assets** | | | | Total Assets | 411,117,831 | 414,375,920 | | **Liabilities & Equity** | | | | Total Liabilities | 366,835,493 | 372,777,154 | | Total Equity | 44,282,338 | 41,598,766 | | **Total Liabilities and Equity** | 411,117,831 | 414,375,920 | Statements of Operations | Income Statement Item | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | | :--- | :--- | :--- | | Total Revenue | 48,794,143 | 50,694,367 | | Net Operating Income | 6,574,752 | 9,299,783 | | Net Income | 1,556,424 | 4,664,232 | | Net Income Attributable to the Company | 1,577,985 | 4,616,081 | | Net (Loss) Attributable to Common Stockholders | (416,328) | 2,621,768 | | Basic and Diluted EPS | (0.02) | 0.13 | Statements of Cash Flows | Cash Flow Item | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | 10,134,183 | 16,660,560 | | Net cash used in investing activities | (4,800,503) | (5,002,351) | | Net cash used in financing activities | (7,512,504) | (578,741) | | Net (decrease) increase in cash | (2,178,824) | 11,079,468 | [Sotherly Hotels LP Financial Statements](index=11&type=section&id=Sotherly%20Hotels%20LP%20Financial%20Statements) Unaudited consolidated financial statements for Sotherly Hotels LP as of and for the period ended June 30, 2025 Balance Sheets | Financial Metric | June 30, 2025 (unaudited) ($) | December 31, 2024 ($) | | :--- | :--- | :--- | | **Assets** | | | | Total Assets | 411,117,831 | 415,183,080 | | **Liabilities & Partners' Capital** | | | | Total Liabilities | 366,835,493 | 372,777,154 | | Total Partners' Capital | 44,282,338 | 42,405,926 | | **Total Liabilities and Partners' Capital** | 411,117,831 | 415,183,080 | Statements of Operations | Income Statement Item | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | | :--- | :--- | :--- | | Total Revenue | 48,794,143 | 50,694,367 | | Net Operating Income | 6,574,752 | 9,299,783 | | Net Income | 1,556,424 | 4,664,232 | | Net (Loss) Attributable to Unit Holders | (437,889) | 2,669,919 | | Basic and Diluted EPU | (0.02) | 0.13 | [Notes to Consolidated Financial Statements](index=17&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed explanations of accounting policies, significant transactions, debt obligations, and other financial statement items - The company's portfolio as of June 30, 2025, consists of investments in **ten hotel properties with 2,786 rooms**, plus two hotel commercial condominium units. Seven hotels operate under Hilton, DoubleTree, and Hyatt brands, while three are independent[48](index=48&type=chunk) - Management has noted a going concern risk due to mortgages maturing in **2025 (approx. $87.3 million)** and **2026 (approx. $68.4 million)** that the company will be unable to repay from working capital. The company is also out of compliance with a financial covenant on the DoubleTree by Hilton Jacksonville Riverfront mortgage[59](index=59&type=chunk) - As of June 30, 2025, the company was in default on the mortgage for the Georgian Terrace hotel, which matured on June 1, 2025. The company has requested a **1-year extension** from the special servicer[107](index=107&type=chunk)[113](index=113&type=chunk) - As of June 30, 2025, total undeclared and unpaid cumulative cash dividends on Series B, C, and D preferred stock were approximately **$21.9 million**[139](index=139&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=50&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, operating metrics, liquidity challenges, capital expenditures, and dividend policies for Q2 2025 [Results of Operations](index=53&type=section&id=Results%20of%20Operations) Analysis of key operating metrics, revenue, and net income trends for the three and six months ended June 30, 2025 Composite Portfolio Metrics | Composite Portfolio Metrics | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Occupancy % | 70.8% | 73.4% | | ADR ($) | 183.88 | 187.51 | | RevPAR ($) | 130.20 | 137.67 | - For the three months ended June 30, 2025, total revenue decreased by **3.7% to $48.8 million**, and rooms revenue decreased by **5.9%**. This was driven by a **5.9% decrease in RevPAR**, resulting from lower occupancy and ADR. Net income fell to **$1.6 million from $4.7 million** in the prior-year period[199](index=199&type=chunk)[201](index=201&type=chunk)[213](index=213&type=chunk) - For the six months ended June 30, 2025, total revenue was nearly flat at **$97.1 million**. However, net income increased slightly to **$6.3 million from $6.0 million**, primarily due to a **$4.1 million gain** on involuntary conversion of assets related to hurricane damage at the Hotel Alba[214](index=214&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) [Non-GAAP Financial Measures](index=58&type=section&id=Non-GAAP%20Financial%20Measures) Reconciliation of non-GAAP financial measures, including FFO and Adjusted FFO, to GAAP net income FFO and Adjusted FFO Reconciliation | Reconciliation Item | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | | :--- | :--- | :--- | | Net Income | 1,556,424 | 4,664,232 | | FFO attributable to common stockholders | 4,317,262 | 7,355,591 | | Adjusted FFO attributable to common stockholders | 4,757,690 | 7,503,096 | | **Per Share & Unit** | | | | FFO per common share and unit | 0.21 | 0.37 | | Adjusted FFO per common share and unit | 0.23 | 0.38 | Hotel EBITDA Reconciliation | Reconciliation Item | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :--- | :--- | :--- | | Net Income | 6,289,950 | 5,987,053 | | Hotel EBITDA | 26,813,154 | 28,058,034 | [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) Discussion of cash position, significant debt maturities, capital expenditure plans, and strategies to address liquidity challenges - As of June 30, 2025, the company had approximately **$10.6 million in unrestricted cash** and **$16.0 million in restricted cash**[237](index=237&type=chunk) - The company faces significant liquidity challenges with approximately **$87.3 million in mortgages maturing in 2025** and **$68.4 million in 2026**, which it will be unable to repay out of working capital[247](index=247&type=chunk) - The company has entered into an agreement to sell the parking garage associated with The Georgian Terrace for **$17.75 million**, with proceeds intended to reduce the hotel's existing defaulted mortgage[184](index=184&type=chunk)[253](index=253&type=chunk) - Significant capital expenditures are planned for fiscal years 2025 and 2026, including approximately **$11.5 million for the Philadelphia property** and **$14.6 million for the Jacksonville property**, as required for franchise license renewals[245](index=245&type=chunk)[246](index=246&type=chunk) [Dividend Policy](index=66&type=section&id=Dividend%20Policy) Overview of the company's dividend policy, including cumulative unpaid preferred dividends and arrearage status - As of June 30, 2025, the cumulative unpaid dividends on the company's outstanding preferred shares amounted to approximately **$21.9 million**. The company resumed quarterly payments but has not yet addressed the arrearage[269](index=269&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=68&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details the company's exposure to market risk, primarily interest rate risk from variable-rate debt - As of June 30, 2025, the company had approximately **$240.5 million of fixed-rate debt** and **$75.4 million of variable-rate debt**. A hypothetical **1% increase** in variable rates (SOFR and Prime Rate) would increase annual interest expense by approximately **$0.5 million**[279](index=279&type=chunk)[281](index=281&type=chunk) [Controls and Procedures](index=70&type=section&id=Item%204.%20Controls%20and%20Procedures) Management's evaluation of the effectiveness of disclosure controls and internal control over financial reporting - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[283](index=283&type=chunk) - There were no changes in internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[285](index=285&type=chunk) [PART II - Other Information](index=72&type=section&id=PART%20II) This section provides updates on legal proceedings, risk factors, equity sales, debt defaults, and other corporate information [Legal Proceedings](index=72&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material legal proceedings outside of routine business litigation [Risk Factors](index=72&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors from those disclosed in its prior annual report [Unregistered Sales of Equity Securities and Use of Proceeds](index=72&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Disclosure of unregistered common stock shares issued upon redemption of Operating Partnership units on May 1, 2025 - On May 1, 2025, **364,086 Operating Partnership units** were redeemed for an equivalent number of common stock shares in an unregistered transaction[294](index=294&type=chunk) [Defaults Upon Senior Securities](index=72&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Details significant defaults on preferred stock dividends and the Georgian Terrace hotel mortgage loan - Dividends on Series B, C, and D Preferred Stock are in arrears for **eleven quarterly periods**, entitling preferred stockholders to vote for the election of two additional directors[295](index=295&type=chunk) - The company received a Notice of Default for the mortgage on the Georgian Terrace hotel, which matured on June 1, 2025, with an outstanding obligation of approximately **$38.0 million** as of August 12, 2025[297](index=297&type=chunk) [Other Information](index=74&type=section&id=Item%205.%20Other%20Information) Announcement of the 2025 Annual Meeting of Stockholders and new deadlines for stockholder proposals - The 2025 Annual Meeting of Stockholders is scheduled for **November 17, 2025**, with a record date of **September 18, 2025**[302](index=302&type=chunk) [Exhibits](index=75&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and Interactive Data Files

Core Viewpoint - Sotherly Hotels Inc. is conducting its Q2 2025 earnings conference call, indicating a focus on financial performance and operational metrics for the quarter [1]. Group 1: Company Overview - The company is represented by key executives including Andrew Mack Sims, Anthony E. Domalski, David R. Folsom, and Scott M. Kucinski during the conference call [1][2]. - The earnings release is available on the company's website, which includes reconciled non-GAAP financial measures to GAAP measures as per regulatory requirements [3]. Group 2: Financial Performance - The call will include a review of the portfolio's key operating metrics for the second quarter, highlighting the company's performance in comparison to previous periods [6].

Financial Data and Key Metrics Changes - For the second quarter, total revenue was approximately $48.8 million, representing a decrease of 3.7% compared to the same quarter in 2024 [15] - Year-to-date total revenue was approximately $97.1 million, reflecting a decrease of 0.1% from the same period last year [16] - Hotel EBITDA for the quarter was approximately $13.9 million, a decrease of 11.5% from the same quarter in 2024 [16] - Year-to-date hotel EBITDA was approximately $26.8 million, representing a decrease of 4.4% over the same period last year [16] - Adjusted FFO for the quarter was approximately $4.8 million, a decrease of approximately $2.7 million from the same quarter in 2024 [16] - Year-to-date adjusted FFO was approximately $9.3 million, a decrease of $3.4 million from the same period last year [16] Business Line Data and Key Metrics Changes - Composite portfolio RevPAR decreased by 5.4% driven by a 3.5% decrease in occupancy and a 1.9% decrease in ADR [6] - Stripping out Tampa, the composite portfolio RevPAR decreased by 5% compared to the prior year, driven by a 2.3% decrease in occupancy and a 2.8% decrease in ADR [6] - Hotel Ballast in Wilmington posted a RevPAR increase of 1.3% year over year, driven by a 2.7% gain in average rate [10] - The Hyde Beach House delivered a RevPAR increase of 12.7%, driven by an 18.5% gain in occupancy [12] Market Data and Key Metrics Changes - Savannah saw an outsized impact during the quarter with RevPAR down nearly 10% year over year [23] - Group booking pace for the remainder of the year remains intact with only minor reductions compared to 2024 [21] - In Arlington, second quarter group revenue increased by 42% over the prior year [24] Company Strategy and Development Direction - The company remains focused on disciplined cost management and targeted revenue strategies to navigate the challenging operating environment [9] - The company is proactively managing upcoming debt maturities and is confident in its ability to work constructively with lending partners [14] - The company anticipates full year 2025 RevPAR for the actual portfolio to be approximately flat compared to last year [28] Management's Comments on Operating Environment and Future Outlook - Management noted that the portfolio underperformed expectations due to growing economic uncertainty and softening demand [7] - There is confidence in the long-term fundamentals of the Savannah market, expecting performance to recover as macro pressures ease [23] - Management expressed cautious optimism about the overall trajectory of the lodging industry despite elevated interest rates and persistent inflationary pressures [27] Other Important Information - The company had total cash of approximately $26.5 million as of June 30, 2025, with $10.5 million in unrestricted cash [18] - The company anticipates routine capital expenditures for the replacement and refurbishment of furniture fixtures and equipment to amount to approximately $7.1 million for calendar year 2025 [19] Q&A Session Summary Question: Why was Savannah the hardest hit hotel in the quarter? - Management clarified that Savannah had significant negative impacts due to a decline in transient travel and a surprising amount of government business affected by funding cuts [34][36] Question: What percentage of the portfolio is government-related business? - Management indicated that government-related business is likely in the high single digits, with some group bookings indirectly tied to government funding [38][40] Question: Does the guidance reduction reflect further government-related pullback? - Management stated that the guidance reflects the most recent forecast for the entire year based on current trends [42] Question: Are there plans for other asset sales? - Management confirmed that they are always looking at options for asset sales, including parking lots or other tangential assets [48] Question: Why is the mortgage market for hotels still challenged? - Management explained that lenders are cautious due to high debt yields and tougher debt service coverage ratios compared to pre-pandemic levels [50][52]

[Financial Performance Summary](index=1&type=section&id=Financial%20Performance%20Summary) Sotherly Hotels reported a Q2 2025 decline in key financial metrics, including revenues and a shift to net loss, reflecting decelerating hotel demand Q2 2025 vs Q2 2024 Financial Highlights ($ in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues ($) | $48,794 | $50,694 | -3.7 | | Net Income ($) | $1,556 | $4,664 | -66.6 | | Net (Loss) Income to Common Stockholders ($) | $(416) | $2,622 | -115.9 | | Diluted EPS ($) | $(0.02) | $0.13 | -115.4 | | Hotel EBITDA ($) | $13,892 | $15,698 | -11.5 | | Adjusted FFO ($) | $4,758 | $7,503 | -36.6 | Six Months Ended June 30, 2025 vs 2024 Financial Highlights ($ in thousands) | Metric | H1 2025 | H1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues ($) | $97,106 | $97,243 | -0.1 | | Net Income ($) | $6,290 | $5,987 | +5.1 | | Net Income to Common Stockholders ($) | $2,274 | $1,962 | +15.9 | | Hotel EBITDA ($) | $26,813 | $28,058 | -4.4 | | Adjusted FFO ($) | $9,275 | $12,683 | -26.9 | - The CEO, Dave Folsom, attributed the Q2 **deceleration in hotel demand** to broader macroeconomic uncertainty, including the interest rate climate and tariffs, while noting resilient group booking pace[5](index=5&type=chunk) [Key Operating Metrics](index=3&type=section&id=Key%20Operating%20Metrics) The composite portfolio's Q2 2025 RevPAR decreased by **5.4%** to **$130.20**, driven by declines in occupancy and ADR Composite Portfolio Key Metrics - Q2 2025 vs Q2 2024 | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | RevPAR ($) | $130.20 | $137.67 | -5.4 | | Occupancy (%) | 70.8 | 73.4 | -3.5 | | ADR ($) | $183.88 | $187.51 | -1.9 | Composite Portfolio Key Metrics - Six Months Ended June 30 | Metric | H1 2025 | H1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | RevPAR ($) | $129.97 | $130.64 | -0.5 | | Occupancy (%) | 69.8 | 69.2 | +0.9 | | ADR ($) | $186.14 | $188.91 | -1.5 | [Balance Sheet, Liquidity, and Strategic Updates](index=3&type=section&id=Balance%20Sheet%2C%20Liquidity%2C%20and%20Strategic%20Updates) Sotherly reported **$26.5 million** cash and **$315.8 million** debt as of June 30, 2025, with a **$17.75 million** parking garage sale planned to reduce debt - As of June 30, 2025, the Company had approximately **$26.5 million** of available cash and cash equivalents, of which about **$16.0 million** was restricted[7](index=7&type=chunk) - Total outstanding debt principal was approximately **$315.8 million** with a weighted average interest rate of **5.89%**[7](index=7&type=chunk) - The company has entered an agreement to sell the parking garage associated with the Georgian Terrace hotel in Atlanta for **$17.75 million**, expected to close in **Q4 2025**, with proceeds used to pay down the existing mortgage[6](index=6&type=chunk)[8](index=8&type=chunk) [Revised 2025 Outlook](index=3&type=section&id=2025%20Outlook) The company revised its full-year 2025 guidance downwards, anticipating lower revenues, a wider net loss, and reduced Hotel EBITDA and Adjusted FFO Revised Full-Year 2025 Guidance (Low Range) | Metric | Previous Guidance | Revised Guidance | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues ($k) | $183,388 | $185,157 | +1.0 | | Net Loss ($k) | $(676) | $(1,230) | -81.9 | | Hotel EBITDA ($k) | $48,829 | $45,340 | -7.1 | | Adj. FFO per Share ($) | $0.57 | $0.34 | -40.4 | | RevPAR ($) | $119.77 | $115.98 | -3.2 | Revised Full-Year 2025 Guidance (High Range) | Metric | Previous Guidance | Revised Guidance | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues ($k) | $188,168 | $188,168 | 0.0 | | Net Income/Loss ($k) | $129 | $(624) | -583.7 | | Hotel EBITDA ($k) | $49,619 | $45,821 | -7.7 | | Adj. FFO per Share ($) | $0.61 | $0.37 | -39.3 | | RevPAR ($) | $122.89 | $117.15 | -4.7 | [Financial Tables](index=8&type=section&id=Financial%20Tables) This section presents detailed unaudited financial statements, including balance sheets, statements of operations, property operating metrics, and non-GAAP reconciliations [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were **$411.1 million**, liabilities **$366.8 million**, and equity **$44.3 million**, reflecting minor shifts from year-end 2024 Balance Sheet Summary ($ in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets ($) | $411,118 | $414,376 | | Total Liabilities ($) | $366,835 | $372,777 | | Total Equity ($) | $44,282 | $41,599 | [Consolidated Statements of Operations](index=9&type=section&id=Consolidated%20Statements%20of%20Operations) For Q2 2025, total revenues were **$48.8 million**, net operating income **$6.6 million**, and the company reported a **$0.4 million** net loss Q2 Statement of Operations Summary ($ in thousands) | Account | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Revenue ($) | $48,794 | $50,694 | | Total Hotel Operating Expenses ($) | $34,902 | $34,997 | | Net Operating Income ($) | $6,575 | $9,300 | | Net Income ($) | $1,556 | $4,664 | | Net (Loss) Income to Common Stockholders ($) | $(416) | $2,622 | [Supplemental Data](index=11&type=section&id=Supplemental%20Data) This section details individual hotel property operating metrics (Occupancy, ADR, RevPAR) for Q2 and YTD periods across 2023-2025, showing varied performance - The tables provide **detailed Occupancy, ADR, and RevPAR data** for each individual hotel property in the portfolio for Q2 and YTD across 2025, 2024, and 2023[26](index=26&type=chunk) Q2 2025 RevPAR Performance for Select Properties | Property | Q2 2025 RevPAR ($) | Q2 2024 RevPAR ($) | YoY Change (%) | | :--- | :--- | :--- | :--- | | The DeSoto, Savannah | $171.69 | $190.14 | -9.7 | | Hotel Ballast, Wilmington | $168.61 | $166.44 | +1.3 | | Hyatt Centric, Arlington | $191.89 | $198.42 | -3.3 | | Georgian Terrace, Atlanta | $92.99 | $109.51 | -15.1 | [Reconciliation of Non-GAAP Measures](index=14&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) This section provides detailed reconciliations of GAAP Net Income to non-GAAP measures like FFO, Adjusted FFO, EBITDA, and Hotel EBITDA Q2 2025 Reconciliation Summary ($ in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income ($) | $1,556 | $4,664 | | FFO Attributable to Common Stockholders ($) | $4,317 | $7,356 | | Adjusted FFO Attributable to Common Stockholders ($) | $4,758 | $7,503 | | EBITDA ($) | $12,022 | $14,292 | | Hotel EBITDA ($) | $13,892 | $15,698 | - The company provides definitions for FFO, Adjusted FFO, EBITDA, and Hotel EBITDA, explaining them as **key supplemental measures of performance** used by industry analysts and investors[35](index=35&type=chunk)[36](index=36&type=chunk)[38](index=38&type=chunk)

Core Viewpoint - Sotherly Hotels Inc. reported a decline in financial performance for the second quarter of 2025, with decreases in total revenues, net income, and key operating metrics such as RevPAR and EBITDA, reflecting broader macroeconomic challenges impacting hotel demand [1][3][5]. Financial Performance - Total revenues for Q2 2025 were approximately $48.8 million, down from $50.7 million in Q2 2024 [2][7]. - Net income attributable to common stockholders decreased from approximately $2.6 million in Q2 2024 to a loss of approximately $0.4 million in Q2 2025 [7]. - EBITDA for Q2 2025 was approximately $12.0 million, compared to $14.3 million in Q2 2024 [7]. Key Operating Metrics - RevPAR for the composite portfolio decreased by 5.4% to $130.20 in Q2 2025 from $137.67 in Q2 2024, driven by a 3.5% decrease in occupancy and a 1.9% decrease in average daily rate (ADR) [2][22]. - Occupancy rates for the composite portfolio were 70.8% in Q2 2025, down from 73.4% in Q2 2024 [22]. - ADR decreased to $183.88 in Q2 2025 from $187.51 in Q2 2024 [22]. Balance Sheet and Liquidity - As of June 30, 2025, the company had approximately $26.5 million in available cash, with $16.0 million reserved for various expenses [5]. - The company had outstanding debt of approximately $315.8 million at a weighted average interest rate of 5.89% [5]. Strategic Initiatives - The company is working on extending certain mortgages and refinancing hotels with significant equity to improve liquidity [4][5]. - A prospective sale of a parking garage in Atlanta for $17.75 million is expected to close in Q4 2025, which will provide additional liquidity [6][8]. Outlook - The company updated its 2025 guidance, projecting total revenues between $185.2 million and $188.2 million, with a net loss attributable to common stockholders ranging from $9.2 million to $8.6 million [9]. - The company remains cautious about demand in the lodging market, citing macroeconomic factors as potential catalysts for future improvement [5].

WILLIAMSBURG, Va., July 16, 2025 (GLOBE NEWSWIRE) -- Sotherly Hotels Inc. (NASDAQ: SOHO) (the “Company”) announced that the Company will report financial results for the second quarter 2025 prior to the market opening on Tuesday, August 12, 2025. A conference call for investors and other interested parties is scheduled for 10:00 a.m. Eastern Time (ET) that same day, at which time management will discuss the Company’s second quarter 2025 results. The information to be discussed on the call will be contained ...

Core Viewpoint - Sotherly Hotels Inc. has received a Notice of Default regarding its mortgage loan secured by the Georgian Terrace in Atlanta, indicating financial distress with an estimated obligation of approximately $38.0 million as of July 2, 2025 [1][2][3] Financial Situation - The Company is currently in default due to failure to pay amounts due under the loan documents, with the lender indicating potential foreclosure actions [1][3] - A consultant has been engaged to negotiate an extension of the mortgage loan, and the Company plans to continue making interest payments and required reserve payments during this period [2][3] Management Commentary - The Chairman noted that extensions of CMBS loans typically involve a formal process, and the Company is currently in the negotiation phase with assistance from a CMBS consultant [3] - The President and CEO acknowledged that the default was anticipated and emphasized that it is a maturity default, which does not affect the Company's ability to meet ongoing interest payments [3] Company Overview - Sotherly Hotels Inc. is a self-managed and self-administered lodging REIT focused on acquiring, renovating, and repositioning upscale hotels primarily in the Southern United States, with a portfolio of ten hotel properties comprising 2,786 rooms [7]

PART I [Consolidated Financial Statements](index=5&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents Sotherly Hotels Inc. and LP's unaudited consolidated financial statements for Q1 2025, showing increased revenue and net income [Sotherly Hotels Inc. Financial Statements](index=5&type=section&id=Sotherly%20Hotels%20Inc.%20Financial%20Statements) Unaudited financial statements for Sotherly Hotels Inc. detail Q1 2025 key financials, balance sheet, and cash flow activities - Net cash provided by operating activities was approximately **$8.2 million** for the three months ended March 31, 2025, a slight increase from **$8.1 million** in the prior year period[28](index=28&type=chunk) Sotherly Hotels Inc. - Key Financials (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (unaudited) | Q1 2024 (unaudited) | | :--- | :--- | :--- | | **Total Revenue** | $48,312,344 | $46,548,432 | | **Net Operating Income** | $6,112,724 | $5,674,112 | | **Net Income** | $4,733,526 | $1,322,821 | | **Net Income Attributable to Common Stockholders** | $2,690,529 | $(659,373) | | **EPS (Basic and Diluted)** | $0.13 | $(0.03) | Sotherly Hotels Inc. - Balance Sheet Summary | Metric | March 31, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | $418,088,238 | $414,375,920 | | **Total Liabilities** | $373,427,887 | $372,777,154 | | **Total Equity** | $44,660,351 | $41,598,766 | [Sotherly Hotels LP Financial Statements](index=11&type=section&id=Sotherly%20Hotels%20LP%20Financial%20Statements) Unaudited financial statements for Sotherly Hotels LP present Q1 2025 key financials and balance sheet data Sotherly Hotels LP - Key Financials (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (unaudited) | Q1 2024 (unaudited) | | :--- | :--- | :--- | | **Total Revenue** | $48,312,344 | $46,548,432 | | **Net Operating Income** | $6,112,724 | $5,674,112 | | **Net Income** | $4,733,526 | $1,322,821 | | **Net Income Attributable to Unit Holders** | $2,739,214 | $(671,491) | Sotherly Hotels LP - Balance Sheet Summary | Metric | March 31, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | $418,500,327 | $415,183,080 | | **Total Liabilities** | $373,427,887 | $372,777,154 | | **Total Partners' Capital** | $45,072,440 | $42,405,926 | [Notes to Consolidated Financial Statements](index=17&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed notes cover portfolio, debt, preferred stock dividends, related party transactions, and asset conversions - As of March 31, 2025, the company's portfolio consisted of **ten hotel properties** with **2,786 rooms** and interests in two hotel commercial condominium units[46](index=46&type=chunk) - Total mortgage debt outstanding was approximately **$315.3 million** as of March 31, 2025, with significant maturities in 2025 and 2026 requiring potential refinancing or extensions[96](index=96&type=chunk)[101](index=101&type=chunk) - As of March 31, 2025, cumulative undeclared and unpaid dividends on preferred stock totaled approximately **$21.9 million**[131](index=131&type=chunk) - The company has management agreements with Our Town Hospitality, a related party, for all ten wholly-owned hotels, with base management fees of approximately **$1.3 million** for Q1 2025[146](index=146&type=chunk)[150](index=150&type=chunk) - A gain of approximately **$3.9 million** was recognized on the involuntary conversion of assets, primarily from insurance proceeds for Hurricane Helene damage to the Hotel Alba in Tampa[89](index=89&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 performance, highlighting revenue growth, net income increase, liquidity challenges, and dividend policy [Key Operating Metrics and Results of Operations](index=52&type=section&id=Key%20Operating%20Metrics%20and%20Results%20of%20Operations) This section details Q1 2025 key operating metrics and financial results, including revenue, occupancy, ADR, RevPAR, and net income drivers - Total revenue for Q1 2025 increased by **3.8%** to **$48.3 million**, primarily due to a **3.9%** increase in room occupancy, with food and beverage revenues also rising by **4.1%**[189](index=189&type=chunk)[192](index=192&type=chunk) - Net income for Q1 2025 was **$4.7 million**, a significant increase from **$1.3 million** in Q1 2024, largely driven by a **$3.9 million** gain on involuntary conversion of assets[203](index=203&type=chunk)[204](index=204&type=chunk) Composite Portfolio Key Performance Indicators (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | **Occupancy %** | 68.8% | 64.9% | +3.9 p.p. | | **ADR** | $188.49 | $190.50 | -1.1% | | **RevPAR** | $129.74 | $123.59 | +5.0% | [Non-GAAP Financial Measures](index=56&type=section&id=Non-GAAP%20Financial%20Measures) This section reconciles non-GAAP financial measures, including FFO, Adjusted FFO, and Hotel EBITDA, to GAAP net income for Q1 2025 FFO and Adjusted FFO Reconciliation (Q1 2025 vs Q1 2024) (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Income** | $4.73 | $1.32 | | **FFO** | $5.76 | $5.96 | | **Adjusted FFO** | $4.52 | $5.18 | | **FFO per Share/Unit** | $0.19 | $0.20 | | **Adjusted FFO per Share/Unit** | $0.22 | $0.26 | Hotel EBITDA Reconciliation (Q1 2025 vs Q1 2024) (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Income** | $4.73 | $1.32 | | **EBITDA** | $15.03 | $10.78 | | **Hotel EBITDA** | $12.92 | $12.36 | [Liquidity, Capital Resources, and Expenditures](index=58&type=section&id=Liquidity%2C%20Capital%20Resources%2C%20and%20Expenditures) This section discusses liquidity, capital resources, and planned expenditures, highlighting cash, upcoming debt maturities, and renovation commitments - As of March 31, 2025, the company had approximately **$11.5 million** of unrestricted cash and **$21.3 million** of restricted cash[212](index=212&type=chunk)[222](index=222&type=chunk) - The company faces significant upcoming mortgage maturities for The Georgian Terrace (June 2025), DoubleTree Hollywood Beach (October 2025), and DoubleTree Philadelphia Airport (May 2026), potentially requiring debt reductions of up to **$3.9 million**, **$10.3 million**, and **$13.9 million**, respectively[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) - Significant capital expenditures are planned for renovations in Philadelphia (~**$11.5 million**) and Jacksonville (~**$14.6 million**) during fiscal years 2025 and 2026, as required by franchise license renewals[220](index=220&type=chunk)[221](index=221&type=chunk) - To fund capital needs, the company may seek to refinance mortgages on its Wilmington and Savannah hotels ahead of their maturity dates[231](index=231&type=chunk) [Dividend Policy](index=63&type=section&id=Dividend%20Policy) This section outlines the company's dividend policy, including resumed preferred stock dividends and cumulative unpaid amounts - The company has resumed quarterly dividend payments on its preferred stock[236](index=236&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk) - As of March 31, 2025, cumulative unpaid dividends on outstanding preferred shares amounted to approximately **$21.9 million**[240](index=240&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=65&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risk from interest rate changes on variable-rate debt, with a hypothetical 1% increase impacting annual interest expense by $0.4 million - A one percent increase in SOFR and the Prime Rate would result in an approximate **$0.4 million** increase in annual interest expense on the company's variable-rate debt[250](index=250&type=chunk) Debt Structure and Interest Rate Sensitivity (as of March 31, 2025) | Debt Type | Amount | Weighted-Average Interest Rate | | :--- | :--- | :--- | | **Fixed-Rate Debt** | ~$242.0 million | 5.4% | | **Variable-Rate Debt** | ~$75.6 million | N/A | [Controls and Procedures](index=65&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control - The CEO and CFO concluded that as of March 31, 2025, the disclosure controls and procedures for both Sotherly Hotels Inc. and Sotherly Hotels LP were effective[252](index=252&type=chunk)[256](index=256&type=chunk) - No changes in internal control over financial reporting occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[255](index=255&type=chunk)[258](index=258&type=chunk) PART II [Legal Proceedings](index=68&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material legal proceedings, expecting routine litigation to be covered by insurance without material impact - The company reports no material legal proceedings and expects routine litigation to be covered by insurance without material impact[261](index=261&type=chunk) [Risk Factors](index=68&type=section&id=Item%201A.%20Risk%20Factors) No material changes in risk factors are reported since the last Annual Report on Form 10-K - No material changes in risk factors are reported since the last Annual Report on Form 10-K[262](index=262&type=chunk) [Defaults Upon Senior Securities](index=68&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company is in arrears on preferred stock dividends for eleven quarters, entitling preferred stockholders to elect two additional directors, with total arrearage of $21.9 million - Dividends on Series B, C, and D Preferred Stock are in arrears for **eleven quarterly periods**[264](index=264&type=chunk)[265](index=265&type=chunk) - Due to the arrearage exceeding six quarters, preferred stockholders are entitled to vote for the election of **two additional company directors**[264](index=264&type=chunk) - The total cumulative unpaid cash dividends for all preferred series through May 12, 2025, is approximately **$21.9 million** ($8.05M for Series B, $7.29M for Series C, and $6.60M for Series D)[265](index=265&type=chunk) [Other Information](index=68&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading plans during Q1 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the quarter ended March 31, 2025[267](index=267&type=chunk)

Financial Data and Key Metrics Changes - For Q1 2025, total revenue was approximately $48.3 million, representing a 3.8% increase year-over-year [14] - Hotel EBITDA for the quarter was approximately $12.9 million, reflecting a 4.5% increase compared to the same quarter last year [14] - FFO was approximately $4.5 million, a decrease of approximately $700,000 from the same quarter last year [14] - RevPAR increased by 6.4%, driven by a 6.4% increase in occupancy, with ADR remaining flat compared to the prior year [3][4] - Hotel EBITDA across the entire portfolio increased by 4.5% year-over-year, and when excluding a one-time benefit from a COVID-related grant, it increased by 9.4% [10] Business Line Data and Key Metrics Changes - The Doubletree Resort in Hollywood, Florida, saw RevPAR up 11.9%, primarily due to an 11.8% increase in occupancy [6] - Hotel Ballast in Wilmington achieved RevPAR growth of 6.5%, supported by a 3.5% increase in occupancy and a 2.9% increase in rate [7] - The Whitehall in Houston reported a 19.4% increase in RevPAR, driven by a 20.5% gain in occupancy [8] - The Doubletree Philadelphia Airport experienced a 34.3% increase in RevPAR, driven by a 38.7% increase in occupancy, despite a 3.1% decline in rate [9] Market Data and Key Metrics Changes - Urban markets showed pronounced gains, indicating stabilization in lodging fundamentals and normalization of demand patterns [4] - Group business and special events significantly contributed to performance, particularly in urban markets [4][20] - The company noted a pullback in government segment demand, particularly in the Washington DC submarket [21] Company Strategy and Development Direction - The company is advancing planning for two upcoming PIP renovations, with a total budget of $26.1 million for properties in Philadelphia and Jacksonville [11][12] - The company is taking a disciplined approach to managing its capital structure, with a focus on refinancing and extensions for upcoming debt maturities [12][36] - The portfolio is expected to outperform the broader market, with upscale and upper upscale assets positioned well [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the first quarter results, driven by occupancy recovery in urban markets and strong group business [20] - There is caution regarding macroeconomic uncertainty impacting near-term visibility in the lodging industry, with potential increased price sensitivity among transient guests [21] - Despite uncertainty, the company has not seen widespread cancellations and maintains a solid group booking pace [22] Other Important Information - The company has approximately $32.8 million in total cash, with $11.5 million in unrestricted cash [15][16] - The principal balance of outstanding debt is approximately $317.6 million at a weighted average interest rate of 5.88% [17] - The accrued balance on preferred dividends is approximately $21.9 million, with current payments being made [43][44] Q&A Session Summary Question: Renovation plans for the Philadelphia hotel - Management indicated that the reverse split timing is likely to occur close to the August 11 deadline, with preparations ongoing [26][27] Question: Business interruption insurance for Hotel Alba - Management clarified that while room revenue is down due to fewer guests, profitability is largely maintained through insurance coverage [28][30] Question: Refinancing of loans for Hollywood and Atlanta - Management discussed the likelihood of extensions and modifications for upcoming debt maturities, reflecting broader market trends [33][36] Question: Cash management regarding CapEx and refinancing - Management noted that they are evaluating cash needs against refinancing activities and have significant equity in other assets that could be leveraged [38][39] Question: Accrued balance on preferred dividends - Management confirmed that the accrued balance is approximately $21.9 million, with current payments being made [43][44]

Financial Data and Key Metrics Changes - In Q1 2025, RevPAR increased by 6.4%, driven by a 6.4% increase in occupancy, while ADR remained flat compared to the prior year [3] - Excluding the impact of Hurricane Helene in Tampa, RevPAR increased by 7.3% year over year, supported by a 7.5% increase in occupancy [3] - Total revenue for Q1 2025 was approximately $48.3 million, representing a 3.8% increase over the same quarter last year [15] - Hotel EBITDA for the quarter was approximately $12.9 million, reflecting a 4.5% increase year over year [15] - Adjusted FFO was approximately $4.5 million, a decrease of about $700,000 from the same quarter last year [15] Business Line Data and Key Metrics Changes - The Doubletree Resort in Hollywood, Florida, saw RevPAR increase by 11.9%, driven by an 11.8% increase in occupancy [7] - Hotel Ballast in Wilmington achieved RevPAR growth of 6.5%, supported by a 3.5% increase in occupancy and a 2.9% increase in rate [8] - The Whitehall in Houston reported a 19.4% increase in RevPAR, driven by a 20.5% gain in occupancy [9] - The Doubletree Philadelphia Airport experienced a 34.3% increase in RevPAR, with a 38.7% increase in occupancy [10] Market Data and Key Metrics Changes - Urban markets showed pronounced gains in occupancy, indicating a stabilization of lodging fundamentals post-pandemic [4] - Group business and special events contributed significantly to performance in urban markets, with notable events like the presidential inauguration and NFL playoffs [4] Company Strategy and Development Direction - The company is advancing plans for two upcoming PIP renovations, including a $11.5 million renovation in Philadelphia and a $14.6 million project in Jacksonville [12][13] - The company is taking a disciplined approach to managing its capital structure, with a focus on refinancing and addressing upcoming debt maturities [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the overall outlook for the industry, despite macroeconomic uncertainties impacting near-term visibility [21] - The company noted a solid group booking pace and a lack of widespread cancellations, although there was a pause in group lead conversions in late March [22] - The company expects full-year 2025 RevPAR to range between 103-105% of 2024 levels, indicating confidence in continued occupancy growth [25] Other Important Information - The company had total cash of approximately $32.8 million as of March 31, 2025, with $11.5 million in unrestricted cash [16][17] - The principal balance of outstanding debt was approximately $317.6 million at a weighted average interest rate of 5.88% [18] Q&A Session Summary Question: Reverse split timing - Management indicated that the reverse split is likely to occur close to the August 11 deadline, with preparations ongoing [27][28] Question: Business interruption insurance for Hotel Alba - Management clarified that while room revenue has decreased due to fewer guests, profitability is largely maintained through insurance proceeds, estimating a 95% recovery of expected performance [31][32] Question: Refinancing of loans for Hollywood and Atlanta - Management discussed the likelihood of extensions and modifications for upcoming loan maturities, reflecting broader trends in the CMBS market [36][39] Question: Cash management regarding CapEx and refinancing - Management noted that they are evaluating cash needs against refinancing activities and have significant equity in other assets that could be leveraged [41][43] Question: Accrued balance on preferred dividends - Management confirmed that the accrued balance on preferred dividends is approximately $21.9 million, with current payments being made [44][45]