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Press Release

Sotherly Hotels Inc. Reports Financial Results for the Year Ended December 31, 2016

Company Release - 2/21/2017 9:00 AM ET

WILLIAMSBURG, Va., Feb. 21, 2017 (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 fourth quarter and year ended December 31, 2016. The Company’s results include the following*:

Artist Conceptual Rendering of the Hyde Resort & Residences
Artist Conceptual Rendering of the Hyde Resort & Residences


Artist Conceptual Rendering of the Hyde Resort & Residences
Artist Conceptual Rendering of the Hyde Resort & Residences


Artist Conceptual Rendering of the Hyde Resort & Residences
Artist Conceptual Rendering of the Hyde Resort & Residences


 Three Months Ended  Year Ended 
 December 31, 2016  December 31, 2015  December 31, 2016  December 31, 2015 
 ($ in thousands except per share data)  ($ in thousands except per share data) 
Total Revenue$35,935  $36,751  $152,846  $138,533 
Net income/(loss) attributable to the common shareholders (746)  (522)  (218)  5,357 
                
EBITDA 6,732   6,897   33,954   36,990 
Adjusted EBITDA 6,732   6,908   33,954   37,625 
Hotel EBITDA 8,392   8,777   40,013   36,447 
                
FFO 2,915   3,543   15,140   14,104 
Adjusted FFO attributable to common shareholders 2,077   3,257   15,100   14,905 
                
Net income/(loss) per share attributable to the common shareholders$(0.05) $(0.04) $(0.01) $0.43 
FFO per share and unit$0.17  $0.21  $0.91  $0.95 
Adjusted FFO attributable to common holders per share and unit$0.12  $0.20  $0.90  $1.00 

(*)    Earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted 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:

  • RevPAR.  Room revenue per available room (“RevPAR”) for the Company’s wholly-owned properties during the twelve-month period ending December 31, 2016, increased 4.7% over the twelve months ended December 31, 2015, to $98.18 driven by a 0.1% decrease in occupancy and a 4.8% increase in average daily rate (“ADR”).  For the fourth quarter 2016, RevPAR decreased 2.9%, compared to the fourth quarter 2015, to $87.73 driven by a 4.0% decrease in occupancy and a 1.2% increase in ADR.    
  • Common Dividends. As previously reported on October 25, 2016, the Company announced its quarterly dividend (distribution) on its common stock (and units) at $0.095 per share (and unit) which was paid on January 11, 2017 to stockholders (and unitholders) of record as of December 15, 2016.
  • Hotel EBITDA. The Company generated hotel EBITDA of approximately $40.0 million during the twelve-month period ending December 31, 2016, an increase of 9.8%, or approximately $3.6 million, over the twelve months ended December 31, 2015.  For the fourth quarter 2016, hotel EBITDA decreased by 4.4%, or approximately $0.4 million, compared to the fourth quarter 2015.  
  • Adjusted EBITDA. The Company generated adjusted EBITDA of approximately $34.0 million during the twelve-month period ending December 31, 2016, a decrease of 9.8% or approximately $3.7 million compared to the twelve months ended December 31, 2015.  Excluding the results from a one-time gain on change in control of approximately $6.6 million during the twelve months ended December 31, 2015, adjusted EBITDA for the twelve-month period ended December 31, 2016 increased 9.5%, or approximately $2.9 million, over the twelve months ended December 31, 2015.  For the fourth quarter 2016, adjusted EBITDA decreased by 2.6%, or approximately $0.2 million, compared to the fourth quarter 2015.  Excluding the results from a one-time gain on change in control of approximately $0.04 million during the fourth quarter ended December 31, 2015, adjusted EBITDA for the fourth quarter 2016 decreased 2.0%, or approximately $0.1 million, over the fourth quarter 2015. 
  • Adjusted FFO. For the twelve-month period ending December 31, 2016, adjusted FFO increased 1.3% or approximately $0.2 million over the twelve months ended December 31, 2015.  The Company generated adjusted FFO of approximately $2.1 million during the fourth quarter 2016, a decrease of 36.2% or approximately $1.2 million compared to the fourth quarter 2015.

Andrew M. Sims, Chairman and Chief Executive Officer of Sotherly Hotels Inc., commented, “The company experienced a difficult quarter largely as the result of two events.  Hurricane Matthew disrupted operations at six of our twelve hotels during the high season.  Because we have not concluded negotiations with our insurance carriers, we have not included any lost revenue in the fourth quarter financials.  In addition, the Zika scare had a negative effect on the Miami market that severely hurt our Hollywood operations in the fourth quarter.  On a more positive note, for 2016, Total Revenue increased 10.3% over the prior year, exceeding industry averages for the same period.  For 2016, Hotel EBITDA increased 9.8% and FFO increased 7.3%.  With these two acts of God behind us, we look forward to returning to good operating metrics in the first quarter of 2017.”

Balance Sheet/Liquidity

At December 31, 2016, the Company had approximately $36.4 million of available cash and cash equivalents, of which approximately $4.6 million was reserved for real estate taxes, insurance, capital improvements and certain other expenses or otherwise restricted. The Company had approximately $307.0 million in outstanding debt at a weighted average interest rate of approximately 4.66%.

On October 12, 2016, we entered into a loan agreement to secure a $20.5 million mortgage on The Whitehall with International Bank of Commerce.  Pursuant to the loan documents, the loan provides initial proceeds of $15.0 million, with an additional $5.5 million available upon the satisfaction of certain conditions; has a term of five years; bears a floating interest rate of the 30-day LIBOR plus 3.5%, subject to a floor rate of 4.0%; amortizes on an 18-year schedule after a 2-year interest only period; is subject to prepayment fees; and is guaranteed by the Operating Partnership.

On November 3, 2016, we entered into a loan agreement to refinance the mortgage on the Sheraton Louisville Riverside with Symetra Life Insurance Company.  Pursuant to the loan documents, the loan: provides proceeds of $12.0 million; has a maturity date of December 1, 2026; bears a fixed interest rate of 4.27% for the first 5 years of the loan with an option for the lender to reset that rate after 5 years; amortizes on a 25-year schedule; is subject to prepayment fees; and is guaranteed by the Operating Partnership at 50% of the unpaid principal balance, interest, and other amounts owed.

On December 1, 2016, we entered into a promissory note agreement and other loan documents to secure a $35.0 million mortgage on the Hilton Wilmington Riverside with MONY Life Insurance Company.  Pursuant to the loan documents, the loan provides initial proceeds of $30.0 million, with an additional $5.0 million available upon the satisfaction of certain conditions, namely, the completion of a renovation project; has a term of 10 years; bears a fixed interest rate of 4.25%; amortizes on a 25-year schedule after a 1-year interest-only period; and is subject to a prepayment premium.

On December 2, 2016, the Company’s Board of Directors authorized a stock repurchase program under which the Company may purchase up to $10.0 million of its outstanding common stock, par value $0.01 per share, at prevailing prices on the open market or in privately negotiated transaction, at the discretion of management.  The Company has used and expects to continue to use available working capital to fund purchases under the stock repurchase program and intends to complete the repurchase program prior to December 31, 2017, unless extended by the Board of Directors.  Through December 31, 2016, the Company repurchased 481,100 shares of common stock for approximately $3.2 million, and the repurchased shares have been returned to the status of authorized but unissued shares of common stock.  In December of 2016 the Company initiated an Employee Stock Ownership Plan (the “ESOP”) and agreed to loan up to $5.0 million to the trust that implements and forms a part of the ESOP (the “Trust”) in order to allow the Trust to purchase shares of the Company’s common stock.

Portfolio Update

On September 14, 2016, we entered into a Commercial Unit Purchase Agreement and a related addendum to purchase the commercial unit and certain related inventories of the Hyde Resort & Residences, a condominium hotel located in the Hollywood, Florida market, for an aggregate price of approximately $4.8 million from 4111 South Ocean Drive, LLC.  The purchase agreement and addendum includes the purchase of certain inventories consistent with the management and operation of the hotel and the related condominium association for a price of approximately $0.5 million. In connection with the closing of the transaction which occurred on January 30, 2017, the Company entered into a lease agreement for the 400-space parking garage and meeting rooms associated with the hotel, a management agreement relating to the operation and management of the hotel condominium association, and a pre-opening services agreement whereby the Seller paid the Company a fee of approximately $0.8 million for certain pre-opening preparations.

Photos accompanying this release are available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/f5df7660-90a5-4c6f-9ef8-c65b9a7e8553

http://www.globenewswire.com/NewsRoom/AttachmentNg/d86f2eb7-64b3-42f7-b6b4-bf28f9c86ebe

http://www.globenewswire.com/NewsRoom/AttachmentNg/9caedc4e-1b19-499e-824f-3004c7a72b63

At the Company’s hotel in Savannah, Georgia, renovations of the guestrooms and public spaces totaling an estimated $8.2 million are underway.  As of December 31, 2016, the Company had incurred costs totaling approximately $5.1 million toward this renovation.  Renovations are expected to be complete in August 2017.

At the Company’s hotel in Hollywood, Florida the Company previously announced that it has entered into a 10-year franchise agreement with Hilton Worldwide to rebrand its Hollywood, Florida hotel as the DoubleTree Resort by Hilton Hollywood Beach. The Company is currently making renovations of the guestrooms and public spaces totaling an estimated $6.9 million. As of December 31, 2016, the Company had incurred costs totaling approximately $0.3 million toward this rebranding.  The conversion is expected to take place on or before October 31, 2017.

Subsequent Events

On January 30, 2017, we closed on the purchase of the commercial unit of the Hyde Resort & Residences, a condominium hotel located in the Hollywood, Florida market, for an aggregate price of approximately $4.8 million, including inventory and closing fees, from 4111 South Ocean Drive, LLC.

On February 7, 2017, we closed on the sale of the Crowne Plaza Hampton Marina to Marina Hotels, LLC for a price of approximately $5.6 million.

2017 Outlook

Set forth below is guidance for 2017, which accounts for the sale of the Crowne Plaza Hampton Marina.  The guidance is predicated on estimates of occupancy and ADR that are consistent with the most recent 2017 calendar year forecasts by Smith Travel Research for the market segments in which the Company operates.

The table below reflects the Company’s projections, within a range, of various financial measures for 2017, in thousands of dollars, except per share and RevPAR data:

 2017 Guidance 
 Low Range  High Range
        
Total revenue$156,016  $158,494 
Net income 5,335   6,111 
        
EBITDA 35,375   36,336 
Adjusted EBITDA 35,375   36,336 
Hotel EBITDA 41,575   42,436 
        
FFO 17,115   17,891 
Adjusted FFO 16,265   17,541 
        
Net income per share attributable to the common shareholders$0.13  $0.18 
FFO per share and unit$1.07  $1.12 
Adjusted FFO per share and unit$1.02  $1.10 
Rev PAR$103.04  $103.25 
Hotel EBITDA margin 26.6%  26.8
        

Earnings Call/Webcast

The Company will conduct its fourth quarter 2016 conference call for investors and other interested parties at 10:00 a.m. Eastern Time today, Tuesday, February 21, 2017. 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 February 21, 2017 through February 21, 2018. To access the rebroadcast, dial 877-344-7529 and enter conference number 10098762.  A replay of the call also will be available on the Internet at www.sotherlyhotels.com until February 21, 2018.

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 eleven hotel properties, comprising 2,838 rooms, and an interest in the Hyde Resort & Residences, a 400-unit luxury condo-hotel. Most of the Company’s properties operate under the Hilton Worldwide, InterContinental Hotels Group and Marriott International, Inc. brands. Sotherly Hotels Inc. was organized in 2004 and is headquartered in Williamsburg, Virginia. For more information, please visit www.sotherlyhotels.com.

Forward-Looking Statements

This news release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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, increases in wages, energy costs and other operating costs; the magnitude and sustainability of the economic recovery in the hospitality industry and in the markets in which the Company operates; the availability and terms of financing and capital and the general volatility of the securities markets; 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
 
  
  December 31,
2016
  December 31,
2015
 
         
ASSETS        
Investment in hotel properties, net $348,593,912  $354,963,242 
Investment in hotel properties held for sale, net  5,333,000    
Cash and cash equivalents  31,766,775   11,493,914 
Restricted cash  4,596,145   5,793,840 
Accounts receivable, net  4,127,748   4,071,175 
Accounts receivable-affiliate  4,175   226,552 
Loan proceeds receivable     2,600,711 
Prepaid expenses, inventory and other assets  4,648,469   4,432,431 
Deferred income taxes  6,949,340   5,390,374 
TOTAL ASSETS $406,019,564  $388,972,239 
LIABILITIES        
Mortgage loans, net $282,708,289  $270,331,724 
Unsecured notes, net  24,308,713   50,460,106 
Accounts payable and accrued expenses  12,970,960   12,334,878 
Advance deposits  2,315,787   1,651,840 
Dividends and distributions payable  2,376,527   1,335,323 
TOTAL LIABILITIES $324,680,276  $336,113,871 
Commitments and contingencies      
EQUITY        
Sotherly Hotels Inc. stockholders’ equity        
8% Series B Cumulative Redeemable Perpetual Preferred stock, par value $0.01,
 11,000,000 shares authorized, liquidation preference $25 per share, 1,610,000
 shares and 0 shares issued and outstanding at December 31, 2016 and 2015, respectively
  16,100    
Common stock, par value $0.01, 49,000,000 shares authorized, 14,468,551 shares and
 14,490,714 shares issued and outstanding at December 31, 2016 and 2015, respectively
  144,685   144,907 
Additional paid in capital  118,395,082   82,749,058 
Distributions in excess of retained earnings  (39,545,754)  (33,890,834)
Total Sotherly Hotels Inc. stockholders’ equity  79,010,113   49,003,131 
Noncontrolling interest  2,329,175   3,855,237 
TOTAL EQUITY  81,339,288   52,858,368 
TOTAL LIABILITIES AND EQUITY $406,019,564  $388,972,239 
         


  
SOTHERLY HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
  
  Three Months Ended  Three Months Ended  Twelve Months Ended  Twelve Months Ended 
  December 31, 2016  December 31, 2015  December 31, 2016  December 31, 2015 
REVENUE                
Rooms department $24,302,318  $25,017,420  $108,199,151  $96,837,386 
Food and beverage department  9,143,598   9,384,508   35,384,530   33,273,599 
Other operating departments  2,489,423   2,348,935   9,262,071   8,422,491 
Total revenue  35,935,339   36,750,863   152,845,752   138,533,476 
EXPENSES                
Hotel operating expenses                
Rooms department  6,978,596   6,784,028   28,895,371   25,782,992 
Food and beverage department  6,106,707   6,337,605   24,357,248   23,005,629 
Other operating departments  558,242   593,279   2,438,860   1,786,197 
Indirect  13,900,259   14,264,017   57,141,692   51,310,292 
Total hotel operating expenses  27,543,804   27,978,929   112,833,171   101,885,110 
Depreciation and amortization  3,758,083   4,007,989   15,019,071   13,591,495 
Impairment of investment in hotel properties, net     500,000      500,000 
(Gain) loss on disposal of assets  35,859   (248,673)  365,319   (41,435)
Corporate general and administrative  1,689,169   1,889,228   6,021,065   7,268,256 
Total operating expenses  33,026,915   34,127,473   134,238,626   123,203,426 
NET OPERATING INCOME  2,908,424   2,623,390   18,607,126   15,330,050 
Other income (expense)                
Interest expense  (3,862,974)  (4,655,178)  (17,735,107)  (16,515,827)
Interest income  52,262   9,573   115,785   50,461 
Equity income (loss) in joint venture     (31,377)     475,514 
Loss on early debt extinguishment  (260,217)     (1,417,905)  (772,907)
Unrealized gain (loss) on hedging activities  29,182   (2,011)  (37,384)  (108,819)
Gain on change in control     42,191      6,603,148 
Loss on involuntary conversion of asset     (37,835)     
Net income/(loss) before income taxes  (1,133,323)  (2,051,247)  (467,485)  5,061,620 
Income tax benefit  1,059,236   1,339,288   1,367,634   1,336,033 
Net income/(loss)  (74,087)  (711,959)  900,149   6,397,653 
Less: Net (income) loss attributable to the noncontrolling interest  132,944   189,785   26,567   (1,040,987)
Net income/(loss) attributable to the Company  58,857   (522,174)  926,716   5,356,666 
Distributions to preferred shareholders  (805,000)     (1,144,889)   
Net income/(loss) attributable to the common shareholders $(746,143) $(522,174) $(218,173) $5,356,666 
   Net income/(loss) per share attributable to the common shareholders                
Basic and diluted $(0.05) $(0.04) $(0.01) $0.43 
                 
Weighted average number of common shares outstanding                
  Basic and diluted  14,895,203   14,490,714   14,896,994   12,541,117 
                 

SOTHERLY HOTELS INC.
KEY OPERATING METRICS
(unaudited)

The following tables illustrate the key operating metrics for the three and twelve months ended December 31, 2016 and 2015, respectively, for the Company’s wholly-owned properties, including the Crowne Plaza Hollywood Beach Resort for the period from August 1, 2015 to December 31, 2015, during each respective reporting period (“actual” portfolio metrics), as well as the eleven wholly-owned properties in the portfolio that were under the Company’s control during the three and twelve months ended December 31, 2016 and the corresponding periods in 2015 (“same-store” portfolio metrics). Accordingly, the same-store data does not reflect the performance of the Crowne Plaza Hollywood Beach Resort, which was acquired through a joint venture in August 2007 and in which the Company had a 25.0% indirect interest during each respective reporting period prior to its acquisition of the remaining 75.0% interest in July 2015.

             
  Three Months Ended  Three Months Ended  Year Ended  Year Ended 
  December 31, 2016  December 31, 2015  December 31, 2016  December 31, 2015 
Actual Portfolio Metrics                
Occupancy %  63.2%  65.9%  69.8%  69.9%
ADR $138.81  $137.21  $140.63  $134.21 
RevPAR $87.73  $90.37  $98.18  $93.80 
Same-Store Portfolio Metrics                
Occupancy %  62.0%  63.8%  68.7%  65.7%
ADR $136.39  $128.76  $136.63  $130.09 
RevPAR $84.63  $82.14  $93.86  $85.47 
                 

SOTHERLY HOTELS INC.
SUPPLEMENTAL DATA
(unaudited)

The following tables illustrate the key operating metrics for the three and twelve months ended December 31, 2016, 2015 and 2014, respectively, for each of the Company’s wholly-owned properties during each respective reporting period, irrespective of ownership percentage during any period.

Occupancy

 Q4 2016  Q4 2015  Q4 2014 
 12 Months 2016  12 Months 2015  12 Months 2014 
Crowne Plaza Hampton Marina
Hampton, Virginia
 40.3%  49.3%  45.6%
  55.2%  55.2%  51.8%
Crowne Plaza Hollywood Beach Resort*
Hollywood, Florida
 73.2%  81.9%  80.1%
  79.6%  80.5%  83.1%
Crowne Plaza Tampa Westshore
Tampa, Florida
 67.2%  71.0%  66.7%
  74.6%  72.5%  72.5%
DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida
 72.0%  62.7%  64.5%
  77.4%  67.4%  65.8%
DoubleTree by Hilton Laurel
Laurel, Maryland
 52.7%  39.0%  53.9%
  60.5%  48.2%  60.8%
DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania
 67.7%  72.9%  63.9%
  77.0%  79.3%  75.9%
DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina
 66.9%  61.7%  66.1%
  70.0%  71.5%  73.4%
The Georgian Terrace *
Atlanta, Georgia
 70.2%  65.7%  66.4%
  70.8%  69.9%  76.2%
Hilton Savannah DeSoto Ϯ
Savannah, Georgia
 63.0%  72.4%  71.9%
  71.5%  76.9%  75.7%
Hilton Wilmington Riverside
Wilmington, North Carolina
 61.9%  67.6%  59.5%
  70.5%  71.6%  69.7%
Sheraton Louisville Riverside
Jeffersonville, Indiana
 53.8%  63.6%  59.9%
  63.1%  69.5%  66.8%
The Whitehall
Houston, Texas
 52.3%  66.2%  70.7%
  54.4%  70.9%  76.1%
All properties weighted average* 63.2%  65.9%  65.1%
  69.8%  70.5%  71.8%


*Includes periods of non-ownership/partial ownership.
Property undergoing renovation during the current quarter.
  

ADR

 Q4 2016  Q4 2015  Q4 2014 
 12 Months 2016  12 Months 2015  12 Months 2014 
Crowne Plaza Hampton Marina
Hampton, Virginia
$88.88  $88.41  $87.43 
 $96.81  $93.59  $93.17 
Crowne Plaza Hollywood Beach Resort*
Hollywood, Florida
$156.61  $122.83  $164.20 
 $170.57  $172.89  $163.13 
Crowne Plaza Tampa Westshore
Tampa, Florida
$115.81  $106.81  $98.84 
 $116.15  $111.08  $104.90 
DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida
$143.00  $122.40  $104.65 
 $126.67  $109.20  $99.20 
DoubleTree by Hilton Laurel
Laurel, Maryland
$105.18  $99.48  $89.39 
 $104.35  $95.19  $89.08 
DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania
$137.14  $136.33  $133.75 
 $144.92  $136.32  $133.78 
DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina
$140.87  $138.33  $127.39 
 $134.74  $131.61  $122.60 
The Georgian Terrace *
Atlanta, Georgia
$160.31  $153.83  $140.75 
 $160.89  $155.56  $137.65 
Hilton Savannah DeSoto Ϯ
Savannah, Georgia
$151.81  $152.61  $146.52 
 $155.87  $154.52  $146.75 
Hilton Wilmington Riverside
Wilmington, North Carolina
$141.37  $132.55  $131.30 
 $147.14  $138.36  $139.09 
Sheraton Louisville Riverside
Jeffersonville, Indiana
$125.95  $131.74  $125.55 
 $137.34  $161.03  $150.20 
The Whitehall
Houston, Texas
$136.22  $141.61  $138.51 
 $140.70  $142.05  $138.93 
All properties weighted average*$138.81  $137.21  $124.00 
 $140.63  $134.21  $125.77 


*Includes periods of non-ownership/partial ownership.
Property undergoing renovation during the current quarter.
  

RevPAR

 Q4 2016  Q4 2015  Q4 2014 
 12 Months 2016  12 Months 2015  12 Months 2014 
Crowne Plaza Hampton Marina
Hampton, Virginia
$35.80  $43.63  $39.84 
 $53.40  $51.64  $48.27 
Crowne Plaza Hollywood Beach Resort*
Hollywood, Florida
$114.65  $99.73  $132.56 
 $135.74  $146.53  $135.55 
Crowne Plaza Tampa Westshore
Tampa, Florida
$77.81  $75.85  $65.93 
 $86.69  $80.53  $76.09 
DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida
$102.93  $76.77  $67.47 
 $98.06  $73.60  $65.24 
DoubleTree by Hilton Laurel
Laurel, Maryland
$55.42  $38.75  $48.18 
 $63.16  $45.86  $54.19 
DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania
$92.88  $99.34  $85.53 
 $111.66  $108.13  $101.58 
DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina
$94.28  $85.31  $84.17 
 $94.33  $94.16  $90.04 
The Georgian Terrace *
Atlanta, Georgia
$112.54  $101.05  $93.46 
 $113.88  $108.70  $105.88 
Hilton Savannah DeSoto Ϯ
Savannah, Georgia
$95.67  $110.52  $105.31 
 $111.48  $118.89  $111.14 
Hilton Wilmington Riverside
Wilmington, North Carolina
$87.53  $89.64  $78.18 
 $103.72  $99.07  $96.90 
Sheraton Louisville Riverside
Jeffersonville, Indiana
$67.82  $83.74  $75.26 
 $86.60  $111.87  $100.31 
The Whitehall
Houston, Texas
$71.24  $93.70  $97.91 
 $76.56  $100.66  $105.66 
All properties weighted average*$87.73  $86.00  $84.17 
 $98.18  $98.00  $93.73 


*Includes periods of non-ownership/partial ownership.
Property undergoing renovation during the current quarter. 
  


  
SOTHERLY HOTELS INC.
RECONCILIATION OF NET INCOME (LOSS) TO
FFO, Adjusted FFO, EBITDA, Adjusted EBITDA and Hotel EBITDA
(unaudited)
 
  
  Three Months Ended  Three Months Ended  Year Ended  Year Ended 
  December 31, 2016  December 31, 2015  December 31, 2016  December 31, 2015 
Net income/(loss) attributable to the common shareholders $(746,143) $(522,174) $(218,173) $5,356,666 
Add: Net income/(loss) attributable to the noncontrolling interest  (132,944)  (189,785)  (26,567)  1,040,987 
Depreciation and amortization  3,758,083   4,007,989   15,019,071   13,591,495 
Impairment of Investment in hotel properties, net     500,000      500,000 
Equity in depreciation and amortization of joint venture           259,279 
Loss on involuntary conversion of asset     37,835      
Gain on change in control     (42,191)     (6,603,148)
Loss (gain) on disposal of assets  35,859   (248,673)  365,319   (41,435)
FFO $2,914,855  $3,543,001  $15,139,650  $14,103,844 
Increase in deferred income taxes  (1,102,777)  (1,364,402)  (1,558,966)  (1,780,571)
Acquisition costs     11,402      634,376 
Loss on Starwood settlement     324,271      324,271 
Over-assessed real estate taxes under appeal     497,733      497,733 
Loss on early debt extinguishment  260,217      1,417,905   772,907 
Loan modification fees  33,980   243,229   64,215   243,229 
Unrealized (gain)loss on hedging activities  (29,182)  2,011   37,384   108,819 
Adjusted FFO attributed to common shareholders $2,077,093  $3,257,245  $15,100,188  $14,904,608 
                 
Weighted average number of shares outstanding, basic and diluted  14,895,203   14,490,714   14,896,994   12,541,117 
                 
Weighted average number of non-controlling units  1,778,140   2,125,175   1,813,941   2,383,293 
                 
Weighted average number of shares and units outstanding, basic and diluted  16,673,343   16,615,889   16,710,935   14,924,410 
                 
FFO per share and unit $0.17  $0.21  $0.91  $0.95 
                 
Adjusted FFO per share and unit $0.12  $0.20  $0.90  $1.00 
                 


             
  Three Months Ended  Three Months Ended  Year Ended  Year Ended 
  December 31, 2016  December 31, 2015  December 31, 2016  December 31, 2015 
Net income/(loss) attributable to the common shareholders $(746,143) $(522,174) $(218,173) $5,356,666 
Add: Net income/(loss) attributable to the noncontrolling interest  (132,944)  (189,785)  (26,567)  1,040,987 
Interest expense  3,862,974   4,655,178   17,735,107   16,515,827 
Interest income  (52,262)  (9,573)  (115,785)  (50,461)
Income tax benefit  (1,059,236)  (1,339,288)  (1,367,634)  (1,336,033)
Depreciation and amortization  3,758,083   4,007,989   15,019,071   13,591,495 
Impairment of Investment in hotel properties, net     500,000      500,000 
Equity in interest, depreciation and amortization of joint venture           640,188 
Loss on early debt extinguishment  260,217      1,417,905   772,907 
Loss (gain) on disposal of assets  35,859   (243,271)  365,319   (41,435)
Loss on involuntary conversion of asset     37,835       
Distributions to preferred shareholders  805,000      1,144,889    
EBITDA  6,731,548   6,896,911   33,954,132   36,990,141 
Acquisition costs     11,402      634,376 
Adjusted EBITDA  6,731,548   6,908,313   33,954,132   37,624,517 
Corporate general and administrative  1,689,169   1,877,822   6,021,065   6,633,880 
Equity in Adjusted EBITDA of joint venture     31,377      (1,115,702)
Unrealized (gain) loss on hedging activities  (29,182)  2,011   37,384   108,819 
Gain on change in control     (42,191)     (6,603,148)
Other fee income           (200,976)
Hotel EBITDA $8,391,535  $8,777,332  $40,012,581  $36,447,390 
                 

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.

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) loan modification fees and (15) other operating revenue not related to the Company’s wholly-owned portfolio. We believe this provides a more complete understanding of the operating results over which the Company’s 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 the Company’s hotels and the effectiveness of third-party management companies operating the Company’s business on a property-level basis. The Company’s calculation of hotel EBITDA may be different from similar measures calculated by other REITs.

Adjusted FFO and Adjusted EBITDA

The Company presents adjusted FFO, including adjusted FFO per share and unit, and adjusted EBITDA, which adjusts for certain additional items including changes in deferred income taxes, any unrealized gain (loss) on its hedging instruments or warrant derivative, loan impairment losses, losses on early extinguishment of debt, aborted offering costs, franchise termination costs, loan modification fees, 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. The Company excludes these items as it believes it allows for meaningful comparisons between periods and among other REITs and is more indicative of the on-going performance of its business and assets. The Company’s calculation of adjusted FFO and adjusted EBITDA may be different from similar measures calculated by other REITs.

Contact at the Company:

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

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Source: Sotherly Hotels Inc.