Sotherly Hotels(SOHO) - 2025 Q1 - Quarterly Report

PART I Consolidated Financial Statements 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 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] 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 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 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] - 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][101] - As of March 31, 2025, cumulative undeclared and unpaid dividends on preferred stock totaled approximately $21.9 million[131] - 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][150] - 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] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 performance, highlighting revenue growth, net income increase, liquidity challenges, and dividend policy Key Operating Metrics and Results of Operations 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][192] - 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][204] 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 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 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][222] - 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][229][230] - 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][221] - To fund capital needs, the company may seek to refinance mortgages on its Wilmington and Savannah hotels ahead of their maturity dates[231] Dividend Policy 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][238][239] - As of March 31, 2025, cumulative unpaid dividends on outstanding preferred shares amounted to approximately $21.9 million[240] Quantitative and Qualitative Disclosures About Market Risk 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] 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 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][256] - 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][258] PART II Legal Proceedings 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] Risk Factors 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] Defaults Upon Senior Securities 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][265] - Due to the arrearage exceeding six quarters, preferred stockholders are entitled to vote for the election of two additional company directors[264] - 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] Other Information 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]