Sotherly Hotels Inc. Reports Financial Results for the Quarter Ended March 31, 2017

WILLIAMSBURG, Va., May 09, 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 first quarter ended March 31, 2017. The Company’s results include the following*:

Hyde Resort & Residences


Three Months Ended
March 31, 2017 March 31, 2016
($ in thousands except per share data)
Total Revenue$38,695 $37,810
Net income available to common stockholders 1,851 483
EBITDA 9,751 8,402
Hotel EBITDA 11,479 10,060
FFO 5,000 4,215
Adjusted FFO available to common stockholders 5,134 3,778
Net income/(loss) per share available to common stockholders$0.13 $0.03
FFO per share and unit$0.32 $0.25
Adjusted FFO available to common holders per share and unit$0.32 $0.23

(*) 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:

  • RevPAR. 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 March 31, 2017, increased 5.3% over the three months ended March 31, 2016, to $105.03 driven by a 1.6% increase in occupancy and a 3.6% increase in average daily rate (“ADR”).
  • Common Dividends. As previously reported on April 25, 2017, the Company announced its quarterly dividend (distribution) on its common stock (and units) at $0.105 per share (and unit) to be paid on July 11, 2017 to stockholders (and unitholders) of record as of June 15, 2017.
  • Hotel EBITDA. The Company generated hotel EBITDA of approximately $11.5 million during the three-month period ending March 31, 2017, an increase of 14.1%, or approximately $1.4 million, over the three months ended March 31, 2016.
  • EBITDA. The Company generated EBITDA of approximately $9.8 million during the three-month period ending March 31, 2017, an increase of 16.1% or approximately $1.3 million compared to the three months ended March 31, 2016.
  • Adjusted FFO. For the three-month period ending March 31, 2017, adjusted FFO increased 35.9% or approximately $1.4 million over the three months ended March 31, 2016.

Andrew M. Sims, Chairman and Chief Executive Officer of Sotherly Hotels Inc., commented, “After a difficult fourth quarter last year, plagued by Hurricane Matthew and the Zika scare, the Company regained its footing and posted strong first quarter operating results. Both top and bottom line results exceeded our expectations, putting us on the path to meeting our 2017 goals.”

Balance Sheet/Liquidity

At March 31, 2017, the Company had approximately $26.4 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 $303.7 million in outstanding debt at a weighted average interest rate of approximately 4.71%.

A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/24bdf2a8-1ae3-4477-9a14-ee976394b803

Portfolio Update

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. In connection with the closing of the transaction, the Company entered into a lease agreement for the 400-space parking garage and meeting rooms associated with the condominium hotel, agreements relating to the operation and management of the hotel condominium association and a condominium unit rental program, and a pre-opening services agreement whereby the Seller paid the Company a fee of approximately $0.8 million for certain pre-opening related preparations. As of March 31, 2017, 100 condominium units were participating in our rental program.

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.

At the Company’s hotel in Wilmington, North Carolina, renovations of the guestrooms and public spaces totaling an estimated $8.4 million are underway. As of March 31, 2017, the Company had incurred costs totaling approximately $3.0 million toward this renovation. Renovations are expected to be complete in March 2018.

At the Company’s hotel in Savannah, Georgia, renovations of the guestrooms and public spaces totaling an estimated $8.2 million are nearing completion. As of March 31, 2017, the Company had incurred costs totaling approximately $7.2 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 March 31, 2017, the Company had incurred costs totaling approximately $2.0 million toward this rebranding. The conversion is expected to take place on or before October 31, 2017.

2017 Outlook

As previously disclosed, 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 available to common stockholders 5,335 6,111
EBITDA 35,375 36,336
Hotel EBITDA 41,575 42,436
FFO 17,115 17,891
Adjusted FFO available to common stockholders 16,265 17,541
Net income per share available to common stockholders$0.13 $0.18
FFO per share and unit$1.07 $1.12
Adjusted FFO available to common holders 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 first quarter 2017 conference call for investors and other interested parties at 10:00 a.m. Eastern Time on Tuesday, May 9, 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 May 9, 2017 through May 8, 2018. To access the rebroadcast, dial 877-344-7529 and enter conference number 10105210. A replay of the call also will be available on the Internet at www.sotherlyhotels.com until May 8, 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 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; 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
March 31, 2017 December 31, 2016
(Unaudited)
ASSETS
Investment in hotel properties, net $355,997,751 $348,593,912
Investment in hotel properties held for sale, net 5,333,000
Cash and cash equivalents 21,743,744 31,766,775
Restricted cash 4,644,532 4,596,145
Accounts receivable, net 5,601,922 4,127,748
Accounts receivable-affiliate 475,537 4,175
Prepaid expenses, inventory and other assets 5,662,512 4,648,469
Deferred income taxes 6,831,290 6,949,340
TOTAL ASSETS $400,957,288 $406,019,564
LIABILITIES
Mortgage loans, net $279,269,154 $282,708,289
Unsecured notes, net 24,392,721 24,308,713
Accounts payable and accrued liabilities 14,445,106 12,970,960
Advance deposits 3,405,606 2,315,787
Dividends and distributions payable 2,362,619 2,376,527
TOTAL LIABILITIES $323,875,206 $324,680,276
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 issued and outstanding at March 31, 2017 and December 31, 2016 16,100 16,100
Common stock, par value $0.01, 49,000,000 shares authorized, 13,798,051 shares and 14,468,551 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively 137,980 144,685
Additional paid-in capital 118,564,177 118,395,082
Unearned ESOP Shares (4,874,758)
Distributions in excess of retained earnings (39,142,720) (39,545,754)
Total Sotherly Hotels Inc. stockholders’ equity 74,700,779 79,010,113
Noncontrolling interest 2,381,303 2,329,175
TOTAL EQUITY 77,082,082 81,339,288
TOTAL LIABILITIES AND EQUITY $400,957,288 $406,019,564


SOTHERLY HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Three Months Ended
March 31, 2017 March 31, 2016
(Unaudited) (Unaudited)
REVENUE
Rooms department $27,366,634 $27,322,413
Food and beverage department 8,323,759 8,249,679
Other operating departments 3,004,493 2,238,052
Total revenue 38,694,886 37,810,144
EXPENSES
Hotel operating expenses
Rooms department 6,682,279 7,080,633
Food and beverage department 5,728,473 5,939,861
Other operating departments 600,020 593,969
Indirect 14,205,231 14,135,595
Total hotel operating expenses 27,216,003 27,750,058
Depreciation and amortization 4,061,097 3,668,638
Corporate general and administrative 1,712,082 1,607,294
Total operating expenses 32,989,182 33,025,990
NET OPERATING INCOME 5,705,704 4,784,154
Other income (expense)
Interest expense (3,813,717) (4,632,632)
Interest income 39,705 8,830
Unrealized loss on hedging activities (15,945) (50,557)
Gain on sale of assets 100,407
Gain on involuntary conversion of assets 1,041,815
Net income before income taxes 3,057,969 109,795
Income tax (provision)/benefit (171,937) 436,079
Net income 2,886,032 545,874
Less: Net income attributable to the noncontrolling interest (229,942) (62,779)
Net income attributable to the Company 2,656,090 483,095
Distributions to preferred stockholders (805,000)
Net income available to common stockholders $1,851,090 $483,095
Net income per share available to common stockholders
Basic and diluted $0.13 $0.03
Weighted average number of common shares outstanding
Basic and diluted 14,025,489 14,792,911

SOTHERLY HOTELS INC.
KEY OPERATING METRICS
(unaudited)

The following tables illustrate the key operating metrics for the three months ended March 31, 2017 and 2016, respectively, for the Company’s wholly-owned properties (“actual” portfolio metrics), as well as the eleven wholly-owned properties in the portfolio that were under the Company’s control during the three months ended March 31, 2017 and the corresponding period in 2016 (“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, or our interest in the Hyde Resort & Residences which was acquired on January 30, 2017. 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 months ended March 31, 2017 and the corresponding period in 2016.

Three Months Ended Three Months Ended
March 31, 2017 March 31, 2016
Actual Portfolio Metrics
Occupancy % 70.1% 68.6%
ADR $149.08 $145.37
RevPAR $104.46 $99.72
Same-Store Portfolio Metrics
Occupancy % 71.0% 69.9%
ADR $147.33 $147.91
RevPAR $104.58 $103.43
Composite Portfolio Metrics
Occupancy % 69.7% 68.6%
ADR $150.65 $145.37
RevPAR $105.03 $99.72

SOTHERLY HOTELS INC.
SUPPLEMENTAL DATA
(unaudited)

The following tables illustrate the key operating metrics for the three months ended March 31, 2017, 2016 and 2015, respectively, for each of the Company’s wholly-owned properties during each respective reporting period, irrespective of ownership percentage during any period.

Occupancy

Q1 2017 Q1 2016 Q1 2015
Crowne Plaza Hampton Marina (1)
Hampton, Virginia
34.4% 46.7% 40.7%
Crowne Plaza Hollywood Beach Resort (2)(3)
Hollywood, Florida
83.0% 88.5% 87.5%
Crowne Plaza Tampa Westshore
Tampa, Florida
85.7% 83.7% 82.4%
DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida
80.9% 76.8% 70.2%
DoubleTree by Hilton Laurel
Laurel, Maryland
50.2% 44.5% 47.4%
DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania
69.1% 73.1% 80.0%
DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina
74.2% 69.4% 70.8%
The Georgian Terrace
Atlanta, Georgia
74.6% 70.2% 67.9%
Hilton Savannah DeSoto (3)
Savannah, Georgia
66.8% 74.5% 74.2%
Hilton Wilmington Riverside (3)
Wilmington, North Carolina
64.1% 58.6% 60.2%
Sheraton Louisville Riverside
Jeffersonville, Indiana
57.5% 51.1% 62.2%
The Whitehall
Houston, Texas
65.5% 64.8% 80.0%
Hyde Resort & Residences (4)
Hollywood Beach, Florida
39.3% - -
All properties weighted average (1) (2) 67.9% 68.6% 70.3%


1Includes only the period of ownership for the Crowne Plaza Hampton Marina up to February 7, 2017.
2Includes periods of partial ownership.
3Property undergoing renovation during the current quarter.
4Reflects 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

Q1 2017 Q1 2016 Q1 2015
Crowne Plaza Hampton Marina (1)
Hampton, Virginia
$84.95 $82.95 $82.25
Crowne Plaza Hollywood Beach Resort (2)(3)
Hollywood, Florida
$216.61 $221.48 $164.20
Crowne Plaza Tampa Westshore
Tampa, Florida
$136.95 $130.90 $122.49
DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida
$132.16 $122.43 $106.05
DoubleTree by Hilton Laurel
Laurel, Maryland
$113.28 $100.06 $87.72
DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania
$120.02 $121.90 $117.55
DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina
$135.59 $134.87 $128.41
The Georgian Terrace
Atlanta, Georgia
$171.32 $160.52 $140.75
Hilton Savannah DeSoto (3)
Savannah, Georgia
$162.04 $157.34 $152.18
Hilton Wilmington Riverside (3)
Wilmington, North Carolina
$126.66 $128.12 $122.22
Sheraton Louisville Riverside
Jeffersonville, Indiana
$121.10 $141.14 $143.10
The Whitehall
Houston, Texas
$161.18 $149.40 $146.74
Hyde Resort & Residences (4)
Hollywood Beach, Florida
$397.16 - -
All properties weighted average (1) (2)$152.25 $141.05 $128.03


1Includes only the period of ownership for the Crowne Plaza Hampton Marina up to February 7, 2017.
2Includes periods of partial ownership.
3Property undergoing renovation during the current quarter.
4Reflects 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

Q1 2017 Q1 2016 Q1 2015
Crowne Plaza Hampton Marina (1)
Hampton, Virginia
$29.24 $38.73 $33.51
Crowne Plaza Hollywood Beach Resort (2)(3)
Hollywood, Florida
$179.81 $196.11 $205.23
Crowne Plaza Tampa Westshore
Tampa, Florida
$117.43 $109.57 $100.94
DoubleTree by Hilton Jacksonville Riverfront
Jacksonville, Florida
$106.92 $94.08 $74.44
DoubleTree by Hilton Laurel
Laurel, Maryland
$56.83 $44.53 $41.61
DoubleTree by Hilton Philadelphia Airport
Philadelphia, Pennsylvania
$82.90 $89.12 $94.04
DoubleTree by Hilton Raleigh Brownstone – University
Raleigh, North Carolina
$100.63 $93.60 $90.96
The Georgian Terrace
Atlanta, Georgia
$127.77 $112.74 $110.07
Hilton Savannah DeSoto (3)
Savannah, Georgia
$108.29 $117.29 $112.95
Hilton Wilmington Riverside (3)
Wilmington, North Carolina
$81.18 $75.13 $73.60
Sheraton Louisville Riverside
Jeffersonville, Indiana
$69.61 $72.19 $88.97
The Whitehall
Houston, Texas
$105.55 $96.86 $117.39
Hyde Resort & Residences (4)
Hollywood Beach, Florida
$155.97 - -
All properties weighted average (1) (2)$103.69 $99.74 $100.00


1Includes only the period of ownership for the Crowne Plaza Hampton Marina up to February 7, 2017.
2Includes periods of partial ownership.
3Property undergoing renovation during the current quarter.
4Reflects 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 (LOSS) TO FFO, Adjusted FFO, EBITDA and Hotel EBITDA
(unaudited)
Three Months Ended Three Months Ended
March 31, 2017 March 31, 2016
Net income available to common stockholders $1,851,090 $483,095
Add: Net income attributable to noncontrolling interest 229,942 62,779
Depreciation and amortization 4,061,097 3,668,638
Gain on involuntary conversion of assets (1,041,815)
Gain on sale of assets (100,407)
FFO $4,999,907 $4,214,512
Decrease (increase) in deferred income taxes 118,050 (487,469)
Unrealized loss on hedging activities 15,945 50,557
Adjusted FFO available to common stockholders $5,133,902 $3,777,600
Weighted average number of shares outstanding, basic and diluted 14,025,489 14,792,911
Weighted average number of non-controlling units 1,778,140 1,922,133
Weighted average number of shares and units outstanding, basic and diluted 15,803,629 16,715,044
FFO per share and unit $0.32 $0.25
Adjusted FFO per share and unit $0.32 $0.23


Three Months Ended Three Months Ended
March 31, 2017 March 31, 2016
Net income available to common stockholders $1,851,090 $483,095
Add: Net income attributable to noncontrolling interest 229,942 62,779
Interest expense 3,813,717 4,632,632
Interest income (39,705) (8,830)
Income tax provision (benefit) 171,937 (436,079)
Depreciation and amortization 4,061,097 3,668,638
Gain on sale of assets (100,407)
Gain on involuntary conversion of assets (1,041,815)
Distributions to preferred shareholders 805,000
EBITDA 9,750,856 8,402,235
Corporate general and administrative 1,712,082 1,607,294
Unrealized loss on hedging activities 15,945 50,557
Hotel EBITDA $11,478,883 $10,060,086

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 and (14) 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.

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

Source:Sotherly Hotels Inc.