Sotherly Hotels(US:SOHO)2025-08-14 15:38PART I - Financial Information This section presents the company's unaudited financial statements and management's discussion for the periods ended June 30, 2025 Consolidated Financial Statements This section presents Sotherly Hotels Inc. and LP's unaudited consolidated financial statements and detailed notes for Q2 2025 Sotherly Hotels Inc. Financial Statements 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 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 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 independent48 - 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 mortgage59 - 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 servicer107113 - As of June 30, 2025, total undeclared and unpaid cumulative cash dividends on Series B, C, and D preferred stock were approximately $21.9 million139 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, operating metrics, liquidity challenges, capital expenditures, and dividend policies for Q2 2025 Results of Operations Analysis of key operating metrics, revenue, and net income trends for the three and six months ended June 30, 2025 Composite Portfolio Metrics | Composite Portfolio Metrics | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Occupancy % | 70.8% | 73.4% | | ADR ($) | 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 period199201213 - 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 $4.1 million gain on involuntary conversion of assets related to hurricane damage at the Hotel Alba214227228 Non-GAAP Financial Measures Reconciliation of non-GAAP financial measures, including FFO and Adjusted FFO, to GAAP net income FFO and Adjusted FFO Reconciliation | Reconciliation Item | Three Months Ended June 30, 2025 ($) | 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 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 cash237 - 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 capital247 - 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 mortgage184253 - 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 renewals245246 Dividend Policy 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 arrearage269 Quantitative and Qualitative Disclosures About Market Risk 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 million279281 Controls and Procedures 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 effective283 - 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 controls285 PART II - Other Information This section provides updates on legal proceedings, risk factors, equity sales, debt defaults, and other corporate information Legal Proceedings The company is not involved in any material legal proceedings outside of routine business litigation Risk Factors 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 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 transaction294 Defaults Upon Senior Securities 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 directors295 - 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, 2025297 Other Information 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, 2025302 Exhibits Lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and Interactive Data Files