Market Overview

Sotherly Hotels Inc. Reports Financial Results for the Second Quarter Ended June 30, 2018

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WILLIAMSBURG, Va., Aug. 07, 2018 (GLOBE NEWSWIRE) -- 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, 2018. The Company's results include the following*:

           
  Three Months Ended     Six Months Ended  
  June 30, 2018     June 30, 2017     June 30, 2018     June 30, 2017  
  ($ in thousands except per share data)     ($ in thousands except per share data)  
Total Revenue $ 51,554     $ 40,643     $ 93,289     $ 79,338  
Net income available to common stockholders   1,352       277       1,114       2,148  
                               
EBITDA   14,886       9,672       25,231       19,423  
Hotel EBITDA   16,383       11,519       28,262       22,997  
                               
FFO   7,097       4,582       11,596       9,602  
Adjusted FFO available to common stockholders   8,353       4,961       13,099       10,115  
                               
Net income per share available to common stockholders $ 0.10     $ 0.02     $ 0.08     $ 0.15  
FFO per share and unit $ 0.46     $ 0.29     $ 0.76     $ 0.61  
Adjusted FFO available to common holders per share and unit $ 0.55     $ 0.32     $ 0.86     $ 0.65  
 
(*) Earnings before interest, taxes, depreciation and amortization ("EBITDA"), hotel EBITDA, funds from operations ("FFO"), adjusted FFO, FFO per share and unit and adjusted FFO per 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 where otherwise indicated.
 

HIGHLIGHTS:

  • Revenue and RevPAR. For the three-month period ending June 30, 2018, Total Revenue increased 26.8% over the three-month period ending June 30, 2017. Room revenue per available room ("RevPAR") for the Company's composite portfolio, which includes the performance of the rooms participating in our rental program at the Hyde Resort & Residences, during the three-month period ending June 30, 2018, increased 11.3% over the three months ended June 30, 2017, to $123.17 reflecting a 2.0% increase in occupancy and a 9.1% increase in average daily rate ("ADR"). For the six-month period ending June 30, 2018, RevPAR increased 9.2% over the six months ended June 30, 2017, to $117.81 driven by a 1.1% decrease in occupancy and a 10.3% increase in ADR.
  • Common Dividends. As previously reported on July 24, 2018, the Company announced a quarterly dividend (distribution) on its common stock (and units) of $0.125 per share (and unit) to stockholders (and unitholders) of record as of September 14, 2018, payable on October 11, 2018.
  • Hotel EBITDA. The Company generated hotel EBITDA of approximately $16.4 million during the three-month period ending June 30, 2018, an increase of 42.2%, or approximately $4.9 million, from the three months ended June 30, 2017. For the six-month period ending June 30, 2018, hotel EBITDA increased 22.9%, or approximately $5.3 million, over the six months ended June 30, 2017. 
  • EBITDA. The Company generated EBITDA of approximately $14.9 million during the three-month period ending June 30, 2018, an increase of 53.9% or approximately $5.2 million compared to the three months ended June 30, 2017. For the six-month period ending June 30, 2018, EBITDA increased 29.9% or approximately $5.8 million from the six months ended June 30, 2017.
  • Adjusted FFO. For the three-month period ending June 30, 2018, Adjusted FFO increased 68.4% or approximately $3.4 million from the three months ended June 30, 2017. For the six-month period ending June 30, 2018, adjusted FFO increased 29.5% or approximately $3.0 million over the six months ended June 30, 2017.

Andrew M. Sims, Chairman and Chief Executive Officer of Sotherly Hotels Inc., commented, "The company experienced a strong second quarter as a result of maturing asset repositionings executed over the past 24 months and the recent acquisition of the Hyatt Centric Arlington hotel. In terms of Adjusted FFO, we believe the second quarter was one of the most successful in the history of the company. We are pleased with the results and are focused on continuing the positive momentum for the balance of the year and beyond."

Balance Sheet/Liquidity

At June 30, 2018, the Company had approximately $33.7 million of available cash and cash equivalents, of which approximately $5.3 million was reserved for real estate taxes, insurance, capital improvements and certain other expenses or otherwise restricted. The Company had principal balances of approximately $381.6 million in outstanding debt at a weighted average interest rate of approximately 4.99%.

On April 5, 2018, the Company drew down an additional $3.3 million of loan proceeds available on the Crowne Plaza Tampa Westshore mortgage loan.

On May 10, 2018, the Company made a principal payment of approximately $4.0 million on Note B to the Hyatt Centric Arlington mortgage.

Subsequent to the balance sheet date, on July 27, 2018, we entered into a promissory note and other loan documents to secure a mortgage on the DoubleTree by Hilton Raleigh Brownstone-University hotel with MetLife Commercial Mortgage Originator, LLC. The mortgage has an initial principal balance of $18.3 million, with an additional $5.2 million available upon the satisfaction of certain conditions. The mortgage has an initial term of 4 years with a 1-year extension subject to certain terms and conditions, bears a floating rate of interest equal to the 1-month LIBOR rate plus 4.00%, with an interest rate cap of 7.25%. The mortgage requires monthly interest-only payments and, following a 12-month lockout, can be prepaid with a penalty during its second year and without penalty thereafter. We used a portion of the proceeds to repay the existing first mortgage on the DoubleTree by Hilton Raleigh Brownstone-University hotel and to pay closing costs and intends to use the balance of the proceeds for general corporate purposes.

Also subsequent to the balance sheet date, on July 31, 2018, we entered into a second amendment to loan and security agreement; an amended, restated and consolidated mortgage loan note; and other related documents with its existing lender, TD Bank, N.A., to amend the terms of its mortgage loan on the DoubleTree by Hilton Philadelphia Airport hotel. Concurrent with the loan modification, we also entered into a 5-year swap agreement with The Toronto-Dominion Bank. Pursuant to the amended loan documents: (i) the principal balance of the loan was increased from approximately $30.0 million to $42.2 million; (ii) the loan's maturity date was extended to July 31, 2023; (iii) the loan bears a floating interest rate equal to the 1-month LIBOR rate plus 2.27% (the "Loan Rate"); (iv) the loan amortizes on a 30-year schedule with payments of principal and interest beginning immediately; (v) the loan can be prepaid without penalty; and (vi) the loan will no longer be fully guaranteed by the Operating Partnership, but the Operating Partnership has guaranteed certain standard "bad boy" carveouts. Pursuant to the swap agreement: (i) the Loan Rate is swapped for a fixed interest rate of 5.237%; (ii) notional amounts of the swap approximate the declining balance of the loan; and (iii) we are responsible for any potential termination fees associated with early termination of the swap agreement. We used a portion of the proceeds to repay in full the existing Note B to the mortgage loan on our Hyatt Centric Arlington hotel and to pay closing costs associated with the amendment, and will use the balance of the proceeds for general corporate purposes.

Portfolio Update

At the Company's hotel in Tampa, Florida, renovations are underway for an estimated $11.0 million renovation project in anticipation of a planned conversion in June 2019 from the Crowne Plaza Tampa Westshore to Hotel Alba, which we expect to become a member of the Tapestry Collection by Hilton. As of June 30, 2018, we incurred costs totaling approximately $3.0 million toward this renovation.

Subsequent to the balance sheet date, on July 2, 2018 the Company purchased a portion of the parking lot located adjacent to the DoubleTree by Hilton Raleigh Brownstone-University hotel for $3.5 million, that the Company had previously leased.

2018 Updated Outlook

The Company is updating its previously issued guidance for 2018, accounting for current and expected performance within its portfolio, taking into account market conditions, the impact of renovations at the Company's hotels in Wilmington and Tampa, the issuance of the 7.25% unsecured notes in February 2018, the acquisition of the Hyatt Centric Arlington hotel, the acquisition of the parking lot adjacent to the hotel in Raleigh, the refinance of the hotel in Raleigh and the amended loan on the hotel in Philadelphia. The updated guidance is predicated on estimates of occupancy and ADR that are consistent with the most recent 2018 calendar year forecasts by STR for the market segments in which the Company operates.

The table below reflects the Company's prior and revised projections, within a range, of various financial measures for 2018, in thousands of dollars, except per share and RevPAR data:

 
  Prior 2018 Guidance     Revised 2018 Guidance  
  Low Range     High Range     Low Range     High Range  
           
Total revenue $ 167,750     $ 169,095     $ 172,308     $ 175,187  
Net loss   (2,804 )     (2,352 )     (7,177 )     (6,711 )
                               
EBITDA   40,997       41,481       41,498       42,079  
Hotel EBITDA   46,997       47,581       47,498       48,179  
                               
FFO   15,843       16,352       15,259       15,725  
Adjusted FFO available to common stockholders   15,873       16,493       15,874       16,490  
                               
Net loss per share available to common stockholders $ (0.21 )   $ (0.17 )   $ (0.47 )   $ (0.44 )
FFO per share and unit $ 1.04     $ 1.07     $ 1.00     $ 1.03  
Adjusted FFO available to common holders per share and unit $ 1.04     $ 1.08     $ 1.04     $ 1.08  
Rev PAR $ 106.23     $ 107.09     $ 104.74     $ 105.59  
Hotel EBITDA margin   31.4 %     31.6 %     27.5 %     27.6 %
                               

Earnings Call/Webcast

The Company will conduct its second quarter 2018 conference call for investors and other interested parties at 10:00 a.m. Eastern Time on Tuesday, August 7, 2018. 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 7, 2018 through August 6, 2019. To access the rebroadcast, dial 877-344-7529 and enter conference number 10121885. A replay of the call also will be available on the Internet at www.sotherlyhotels.com until August 6, 2019.

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, and an interest in the Hyde Resort & Residences, a luxury condo hotel. The Company owns hotels that operate under the Hilton Worldwide, InterContinental Hotels Group and Marriott International, Inc. brands, as well as independent hotels. Sotherly Hotels Inc. was organized in 2004 and is headquartered in Williamsburg, Virginia. For more information, please visit www.sotherlyhotels.com.

Contact at the Company:

Scott Kucinski
Vice President – Operations & Investor Relations
Sotherly Hotels Inc.
410 West Francis Street
Williamsburg, Virginia 23185
757.229.5648

Forward-Looking Statements

This news release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Although the Company believes that the expectations and assumptions reflected in the forward-looking statements are reasonable, these statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict and many of which are beyond the Company's control. Therefore, actual outcomes and results may differ materially from what is expressed, forecasted or implied in such forward-looking statements. Factors which could have a material adverse effect on the Company's future results, performance and achievements, include, but are not limited to: national and local economic and business conditions that affect occupancy rates and revenues at the Company's hotels and the demand for hotel products and services; risks associated with the hotel industry, including competition and new supply of hotel rooms, increases in wages, energy costs and other operating costs; risks associated with adverse weather conditions, including hurricanes; the availability and terms of financing and capital and the general volatility of the securities markets; the Company's intent to repurchase shares from time to time; risks associated with the level of the Company's indebtedness and its ability to meet covenants in its debt agreements and, if necessary, to refinance or seek an extension of the maturity of such indebtedness or modify such debt agreements; management and performance of the Company's hotels; risks associated with maintaining our system of internal controls; risks associated with the conflicts of interest of the Company's officers and directors; risks associated with redevelopment and repositioning projects, including delays and cost overruns; supply and demand for hotel rooms in the Company's current and proposed market areas; risks associated with our ability to maintain our franchise agreements with our third party franchisors; the Company's ability to acquire additional properties and the risk that potential acquisitions may not perform in accordance with expectations; the Company's ability to successfully expand into new markets; legislative/regulatory changes, including changes to laws governing taxation of REITs; the Company's ability to maintain its qualification as a REIT; and the Company's ability to maintain adequate insurance coverage. These risks and uncertainties are described in greater detail under "Risk Factors" in the Company's Annual Report on Form 10-K and subsequent reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to and does not intend to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Although the Company believes its current expectations to be based upon reasonable assumptions, it can give no assurance that its expectations will be attained or that actual results will not differ materially.

Financial Tables Follow…

 
SOTHERLY HOTELS INC.
CONSOLIDATED BALANCE SHEETS
 
    June 30, 2018     December 31,
2017
 
    (unaudited)          
ASSETS                
Investment in hotel properties, net   $ 434,285,458     $ 357,799,512  
Cash and cash equivalents     28,435,806       29,777,845  
Restricted cash     5,301,033       3,651,197  
Accounts receivable, net     10,972,446       5,587,077  
Accounts receivable - affiliate     426,041       394,026  
Prepaid expenses, inventory and other assets     6,693,982       7,292,565  
Favorable lease assets, net     2,655,069        
Deferred income taxes     3,929,188       5,451,118  
TOTAL ASSETS   $ 492,699,023     $ 409,953,340  
LIABILITIES                
Mortgage loans, net   $ 354,529,454     $ 297,318,816  
Unsecured notes, net     23,635,174        
Accounts payable and accrued liabilities     17,277,577       13,813,623  
Advance deposits     1,861,704       1,572,388  
Dividends and distributions payable     3,302,095       3,073,483  
TOTAL LIABILITIES   $ 400,606,004     $ 315,778,310  
Commitments and contingencies            
EQUITY                
Sotherly Hotels Inc. stockholders' equity                
Preferred stock, $0.01 par value, 11,000,000 shares authorized;                
8.0% Series B cumulative redeemable perpetual preferred stock,
   liquidation preference $25 per share, 1,610,000 shares issued
   and outstanding at June 30, 2018 and December 31, 2017, respectively
    16,100       16,100  
7.875% Series C cumulative redeemable perpetual preferred stock,
   liquidation preference $25 per share, 1,300,000 shares issued
   and outstanding at June 30, 2018 and December 31, 2017, respectively
    13,000       13,000  
Common stock, par value $0.01, 49,000,000 shares authorized, 14,121,081
   shares and 14,078,831 shares issued and outstanding at June 30, 2018
   and December 31, 2017, respectively
    141,211       140,788  
Additional paid-in capital     146,368,293       146,249,339  
Unearned ESOP shares     (4,511,269 )     (4,633,112 )
Distributions in excess of retained earnings     (50,811,546 )     (48,765,860 )
Total Sotherly Hotels Inc. stockholders' equity     91,215,789       93,020,255  
Noncontrolling interest     877,230       1,154,775  
TOTAL EQUITY     92,093,019       94,175,030  
TOTAL LIABILITIES AND EQUITY   $ 492,699,023     $ 409,953,340  


SOTHERLY HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
    Three Months Ended     Three Months Ended     Six Months Ended     Six Months Ended  
    June 30, 2018     June 30, 2017     June 30, 2018     June 30, 2017  
                                 
REVENUE                                
Rooms department   $ 35,330,676     $ 28,906,872     $ 63,616,121     $ 56,273,506  
Food and beverage department     11,080,568       8,583,358       19,432,551       16,907,117  
Other operating departments     5,142,283       3,152,402       10,240,411       6,156,895  
Total revenue     51,553,527       40,642,632       93,289,083       79,337,518  
EXPENSES                                
Hotel operating expenses                                
Rooms department     8,176,164       6,743,788       14,876,545       13,426,067  
Food and beverage department     7,673,049       6,151,495       14,068,125       11,879,968  
Other operating departments     1,680,582       623,530       3,208,909       1,223,550  
Indirect     17,640,285       15,605,262       32,873,541       29,810,493  
Total hotel operating expenses     35,170,080       29,124,075       65,027,120       56,340,078  
Depreciation and amortization     5,601,940       4,219,712       11,236,130       8,280,809  
Loss on disposal of assets           51,507       3,739       51,507  
Corporate general and administrative     1,503,549       1,834,930       3,049,849       3,547,012  
Total operating expenses     42,275,569       35,230,224       79,316,838       68,219,406  
NET OPERATING INCOME     9,277,958       5,412,408       13,972,245       11,118,112  
Other income (expense)                                
Interest expense     (5,087,482 )     (3,874,076 )     (9,264,501 )     (7,687,793 )
Interest income     66,505       13,294       148,209       72,925  
Loss on early extinguishment of debt           (228,087 )           (228,087 )
Unrealized gain (loss) on hedging activities     5,798       (11,261 )     18,528       (27,206 )
Gain on sale of assets                       100,407  
Gain on involuntary conversion of assets     27,824             898,565       1,041,815  
Net income before income taxes     4,290,603       1,312,278       5,773,046       4,390,173  
Income tax provision     (1,323,014 )     (196,483 )     (1,628,969 )     (368,420 )
Net income     2,967,589       1,115,795       4,144,077       4,021,753  
Less: Net income attributable to the noncontrolling interest     (170,331 )     (33,869 )     (140,318 )     (263,811 )
Net income attributable to the Company     2,797,258       1,081,926       4,003,759       3,757,942  
Distributions to preferred stockholders     (1,444,844 )     (805,000 )     (2,889,688 )     (1,610,000 )
Net income available to common stockholders   $ 1,352,414     $ 276,926     $ 1,114,071     $ 2,147,942  
Net income per share available to common stockholders                                
Basic   $ 0.10     $ 0.02     $ 0.08     $ 0.15  
Diluted   $ 0.10     $ 0.02     $ 0.08     $ 0.15  
Weighted average number of common shares outstanding                                
Basic     13,488,526       13,813,168       13,480,529       13,898,910  
Diluted     13,489,475       13,815,035       13,486,140       13,908,359  
                                 

SOTHERLY HOTELS INC.
KEY OPERATING METRICS
(unaudited)

The following tables illustrate the key operating metrics for the three and six months ended June 30, 2018 and 2017, respectively, for the Company's wholly-owned properties ("actual" portfolio metrics), as well as the ten wholly-owned properties in the portfolio that were under the Company's control during the three and six months ended June 30, 2018 and the corresponding periods in 2017 ("same-store" portfolio metrics). Accordingly, the same-store data does not reflect the performance of the Crowne Plaza Hampton Marina which was sold in February 2017, our interest in the Hyde Resort & Residences which was acquired on January 30, 2017, or the Hyatt Centric Arlington which we acquired in March 2018. The composite portfolio metrics represent all of the Company's wholly-owned properties and the participating condominium hotel rooms at the Hyde Resort & Residences during the three and six months ended June 30, 2018 and the corresponding periods in 2017.

                           
    Three Months Ended     Three Months Ended       Six Months Ended     Six Months Ended  
    June 30, 2018     June 30, 2017       June 30, 2018     June 30, 2017  
Actual Portfolio Metrics                                  
Occupancy %     77.8 %     76.5 %       72.9 %     73.3 %
ADR   $ 158.14     $ 146.32       $ 157.99     $ 147.65  
RevPAR   $ 123.02     $ 111.93       $ 115.15     $ 108.20  
Same-Store Portfolio Metrics                                  
Occupancy %     76.5 %     76.5 %       71.7 %     73.8 %
ADR   $ 151.19     $ 146.32       $ 153.20     $ 148.02  
RevPAR   $ 115.69     $ 111.93       $ 109.80     $ 109.18  
Composite Portfolio Metrics                                  
Occupancy %     75.6 %     74.1 %       71.2 %     72.0 %
ADR   $ 162.93     $ 149.39       $ 165.37     $ 149.99  
RevPAR   $ 123.17     $ 110.67       $ 117.81     $ 107.93  
                                   

SOTHERLY HOTELS INC.
SUPPLEMENTAL DATA
(unaudited)

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

Occupancy

                       
  Q2 2018     Q2 2017     Q2 2016  
  YTD     YTD     YTD  
Crowne Plaza Tampa Westshore
Tampa, Florida
  76.8 %     80.0 %     79.9 %
    83.7 %     82.9 %     81.8 %
The DeSoto
Savannah, Georgia
  74.6 %     75.1 %     77.8 %
    65.7 %     71.0 %     76.2 %
DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida
  84.8 %     80.9 %     81.7 %
    84.6 %     80.9 %     79.3 %
DoubleTree by Hilton Laurel
Laurel, Maryland
  79.5 %     82.9 %     80.0 %
    65.2 %     66.6 %     62.3 %
DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania
  86.3 %     83.3 %     85.6 %
    78.8 %     76.2 %     79.3 %
DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina
  81.9 %     78.6 %     75.4 %
    76.7 %     76.4 %     72.4 %
DoubleTree Resort by Hilton Hollywood Beach
Hollywood, Florida
  73.5 %     76.0 %     78.0 %
    75.6 %     79.5 %     83.3 %
Georgian Terrace
Atlanta, Georgia
  74.8 %     71.6 %     74.3 %
    69.2 %     73.1 %     72.3 %
Hotel Ballast Wilmington, Tapestry Collection by Hilton
Wilmington, North Carolina
  69.9 %     77.5 %     83.2 %
    60.7 %     70.8 %     70.9 %
Hyatt Centric Arlington (1)
Arlington, Virginia
  89.2 %     93.6 %     90.6 %
    80.8 %     83.0 %     84.8 %
Sheraton Louisville Riverside
Jeffersonville, Indiana
  68.9 %     75.6 %     75.1 %
    60.3 %     66.6 %     63.1 %
The Whitehall
Houston, Texas
  67.7 %     60.8 %     48.9 %
    62.7 %     63.1 %     56.9 %
Hyde Resort & Residences (2)
Hollywood Beach, Florida
  43.2 %     29.0 %   N/A  
    47.7 %     30.7 %   N/A  
All properties weighted average (1)   75.6 %     75.7 %     78.0 %
    71.0 %     74.0 %     74.4 %
 
1 Includes operating results under previous ownership. Results for periods prior to the Company's ownership were provided by prior owners of the hotel and have not been audited or confirmed by the Company.
2 Reflects only the condominium units at the Hyde Resort & Residences participating in our rental program for the period those units participated in our rental program.
 

ADR

                       
  Q2 2018     Q2 2017     Q2 2016  
  YTD     YTD     YTD  
Crowne Plaza Tampa Westshore
Tampa, Florida
$ 121.79     $ 113.24     $ 112.51  
  $ 132.04     $ 125.44     $ 121.92  
The DeSoto
Savannah, Georgia
$ 191.37     $ 169.35     $ 166.42  
  $ 185.91     $ 165.93     $ 161.98  
DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida
$ 143.08     $ 131.32     $ 123.12  
  $ 143.69     $ 131.74     $ 122.79  
DoubleTree by Hilton Laurel
Laurel, Maryland
$ 113.85     $ 109.15     $ 108.41  
  $ 112.03     $ 110.70     $ 105.43  
DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania
$ 147.86     $ 149.11     $ 153.11  
  $ 139.32     $ 136.00     $ 138.73  
DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina
$ 137.65     $ 135.52     $ 136.50  
  $ 135.77     $ 135.55     $ 135.72  
DoubleTree Resort by Hilton Hollywood Beach
Hollywood, Florida
$ 164.99     $ 156.52     $ 164.60  
  $ 196.45     $ 187.73     $ 194.85  
Georgian Terrace
Atlanta, Georgia
$ 178.44     $ 170.10     $ 156.95  
  $ 184.25     $ 170.72     $ 158.69  
Hotel Ballast Wilmington, Tapestry Collection by Hilton
Wilmington, North Carolina
$ 156.69     $ 164.67     $ 158.03  
  $ 146.03     $ 147.57     $ 145.67  
Hyatt Centric Arlington (1)
Arlington, Virginia
$ 211.29     $ 198.61     $ 199.69  
  $ 191.56     $ 196.40     $ 178.17  
Sheraton Louisville Riverside
Jeffersonville, Indiana
$ 141.53     $ 156.41     $ 160.36  
  $ 132.53     $ 141.25     $ 152.57  
The Whitehall
Houston, Texas
$ 146.91     $ 141.37     $ 149.63  
  $ 147.00     $ 151.59     $ 149.50  
Hyde Resort & Residences (2)
Hollywood Beach, Florida
$ 290.13     $ 288.14     N/A  
  $ 326.83     $ 311.05     N/A  
All properties weighted average (1) $ 162.93     $ 155.45     $ 151.95  
  $ 164.70     $ 154.06     $ 150.33  
 
1 Includes operating results under previous ownership. Results for periods prior to the Company's ownership were provided by prior owners of the hotel and have not been audited or confirmed by the Company.
2 Reflects only the condominium units at the Hyde Resort & Residences participating in our rental program for the period those units participated in our rental program.
 

RevPAR

                       
  Q2 2018     Q2 2017     Q2 2016  
  YTD     YTD     YTD  
Crowne Plaza Tampa Westshore
Tampa, Florida
$ 93.57     $ 90.62     $ 89.94  
  $ 110.47     $ 103.95     $ 99.76  
The DeSoto
Savannah, Georgia
$ 142.74     $ 127.15     $ 129.52  
  $ 122.16     $ 117.77     $ 123.40  
DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida
$ 121.40     $ 106.27     $ 100.54  
  $ 121.52     $ 106.60     $ 97.31  
DoubleTree by Hilton Laurel
Laurel, Maryland
$ 90.55     $ 90.49     $ 86.77  
  $ 73.00     $ 73.75     $ 65.65  
DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania
$ 127.66     $ 124.14     $ 131.01  
  $ 109.72     $ 103.63     $ 110.06  
DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina
$ 112.70     $ 106.49     $ 102.86  
  $ 104.08     $ 103.57     $ 98.23  
DoubleTree Resort by Hilton Hollywood Beach
Hollywood, Florida
$ 121.28     $ 118.91     $ 128.35  
  $ 148.58     $ 149.19     $ 162.23  
Georgian Terrace
Atlanta, Georgia
$ 133.53     $ 121.86     $ 116.66  
  $ 127.54     $ 124.80     $ 114.70  
Hotel Ballast Wilmington, Tapestry Collection by Hilton
Wilmington, North Carolina
$ 109.56     $ 127.64     $ 131.56  
  $ 88.63     $ 104.53     $ 103.35  
Hyatt Centric Arlington (1)
Arlington, Virginia
$ 188.46     $ 185.96     $ 180.87  
  $ 154.70     $ 163.00     $ 151.12  
Sheraton Louisville Riverside
Jeffersonville, Indiana
$ 97.50     $ 118.23     $ 120.41  
  $ 79.91     $ 94.05     $ 96.30  
The Whitehall
Houston, Texas
$ 99.46     $ 86.01     $ 73.17  
  $ 92.14     $ 95.73     $ 85.01  
Hyde Resort & Residences (2)
Hollywood Beach, Florida
$ 125.44     $ 83.56     N/A  
  $ 155.97     $ 95.45     N/A  
All properties weighted average (1) $ 123.17     $ 117.60     $ 118.54  
  $ 116.96     $ 114.01     $ 111.89  
 
1 Includes operating results under previous ownership. Results for periods prior to the Company's ownership were provided by prior owners of the hotel and have not been audited or confirmed by the Company.
2 Reflects only the condominium units at the Hyde Resort & Residences participating in our rental program for the period those units participated in our rental program.


SOTHERLY HOTELS INC.
RECONCILIATION OF NET INCOME TO
FFO, Adjusted FFO, EBITDA and Hotel EBITDA
(unaudited)
 
    Three Months
Ended
    Three Months
Ended
      Six Months
Ended
    Six Months
Ended
 
    June 30, 2018     June 30, 2017       June 30, 2018     June 30, 2017  
Net income available to common stockholders   $ 1,352,414     $ 276,926       $ 1,114,071     $ 2,147,942  
Add: Net income attributable to noncontrolling interest     170,331       33,869         140,318       263,811  
Depreciation and amortization     5,601,940       4,219,712         11,236,130       8,280,809  
Gain on involuntary conversion of assets     (27,824 )             (898,565 )     (1,041,815 )
Loss (gain) on disposal and/or sale of assets           51,507         3,739       (48,900 )
FFO   $ 7,096,861     $ 4,582,014       $ 11,595,693     $ 9,601,847  
Decrease in deferred income taxes     1,261,667       139,946         1,521,929       257,996  
Loss on early extinguishment of debt           228,087               228,087  
Unrealized (gain) loss on hedging activities     (5,798 )     11,261         (18,528 )     27,206  
Adjusted FFO available to common stockholders   $ 8,352,730     $ 4,961,308       $ 13,099,094     $ 10,115,136  
                                   
Weighted average number of shares outstanding, basic     13,488,526       13,813,168         13,480,529       13,898,910  
                                   
Weighted average number of non-controlling units     1,778,140       1,778,140         1,778,140       1,778,140  
                                   
Weighted average number of shares and units outstanding, basic     15,266,666       15,591,308         15,258,669       15,677,050  
                                   
FFO per share and unit   $ 0.46     $ 0.29       $ 0.76     $ 0.61  
                                   
Adjusted FFO per share and unit   $ 0.55     $ 0.32       $ 0.86     $ 0.65  


    Three Months
Ended
    Three Months
Ended
      Six Months
Ended
    Six Months
Ended
 
    June 30, 2018     June 30, 2017       June 30, 2018     June 30, 2017  
Net income available to common stockholders   $ 1,352,414     $ 276,926       $ 1,114,071     $ 2,147,942  
Add: Net income attributable to noncontrolling interest     170,331       33,869         140,318       263,811  
Interest expense     5,087,482       3,874,076         9,264,501       7,687,793  
Interest income     (66,505 )     (13,294 )       (148,209 )     (72,925 )
Income tax provision     1,323,014       196,483         1,628,969       368,420  
Depreciation and amortization     5,601,940       4,219,712         11,236,130       8,280,809  
Loss on early extinguishment of debt           228,087               228,087  
Loss (gain) on disposal and/or sale of assets           51,507         3,739       (48,900 )
Gain on involuntary conversion of assets     (27,824 )             (898,565 )     (1,041,815 )
Distributions to preferred stockholders     1,444,844       805,000         2,889,688       1,610,000  
EBITDA     14,885,696       9,672,366         25,230,642       19,423,222  
Corporate general and administrative     1,503,549       1,834,930         3,049,849       3,547,012  
Unrealized (gain) loss on hedging activities     (5,798 )     11,261         (18,528 )     27,206  
Hotel EBITDA   $ 16,383,447     $ 11,518,557       $ 28,261,963     $ 22,997,440  

Non-GAAP Financial Measures

The Company considers the non-GAAP measures of FFO (including FFO per share), EBITDA and hotel EBITDA to be key supplemental measures of the Company's performance and could be considered along with, not alternatives to, net income (loss) as a measure of the Company's performance. These measures do not represent cash generated from operating activities determined by generally accepted accounting principles ("GAAP") or amounts available for the Company's discretionary use and should not be considered alternative measures of net income, cash flows from operations or any other operating performance measure prescribed by GAAP.

FFO

Industry analysts and investors use Funds from Operations ("FFO"), as a supplemental operating performance measure of an equity REIT. FFO is calculated in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). FFO, as defined by NAREIT, represents net income or loss determined in accordance with GAAP, excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated operating real estate assets, plus certain non-cash items such as real estate asset depreciation and amortization, and after adjustment for any noncontrolling interest from unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by itself.

The Company considers FFO to be a useful measure of adjusted net income (loss) for reviewing comparative operating and financial performance because we believe FFO is most directly comparable to net income (loss), which remains the primary measure of performance, because by excluding gains or losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization, FFO assists in comparing the operating performance of a company's real estate between periods or as compared to different companies. Although FFO is intended to be a REIT industry standard, other companies may not calculate FFO in the same manner as we do, and investors should not assume that FFO as reported by us is comparable to FFO as reported by other REITs.

Adjusted FFO

The Company presents adjusted FFO, including adjusted FFO per share and unit, which adjusts for certain additional items including changes in deferred income taxes, any unrealized gain (loss) on hedging instruments or warrant derivative, loan impairment losses, losses on early extinguishment of debt, aborted offering costs, loan modification fees, franchise termination costs, costs associated with the departure of executive officers, litigation settlement, over-assessed real estate taxes on appeal, change in control gains or losses and acquisition transaction costs. We exclude these items as we believe it allows for meaningful comparisons between periods and among other REITs and is more indicative than FFO of the on-going performance of our business and assets. Our calculation of Adjusted FFO may be different from similar measures calculated by other REITs.

EBITDA

The Company believes that excluding the effect of non-operating expenses and non-cash charges, and the portion of those items related to unconsolidated entities, all of which are also based on historical cost accounting and may be of limited significance in evaluating current performance, can help eliminate the accounting effects of depreciation and financing decisions and facilitate comparisons of core operating profitability between periods and between REITs, even though EBITDA also does not represent an amount that accrued directly to shareholders.

Hotel EBITDA

The Company defines Hotel EBITDA as net income or loss excluding: (1) interest expense, (2) interest income, (3) income tax provision or benefit, (4) equity in the income or loss of equity investees, (5) unrealized gains and losses on derivative instruments not included in other comprehensive income, (6) gains and losses on disposal of assets, (7) realized gains and losses on investments, (8) impairment of long-lived assets or investments, (9) loss on early debt extinguishment, (10) gains or losses on change in control, (11) corporate general and administrative expense, (12) depreciation and amortization, (13) gains and losses on involuntary conversions of assets, (14) distributions to preferred stockholders and (15) 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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