Sotherly Hotels Inc. Reports Financial Results for the First Quarter 2013

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Sotherly Hotels Inc. ReportsFinancial Resultsfor the First Quarter 2013

WILLIAMSBURG, Va.--(BUSINESS WIRE)-- Sotherly Hotels Inc. (Nasdaq: SOHO), formerly MHI Hospitality Corporation (NAS: MDH) ("Sotherly", "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, 2013. The Company's results include the following*:

    
Three Months ended
March 31, 2013March 31, 2012
($ in thousands except per share data)
 
Total Revenue$20,190$20,025
Net loss attributable to the Company(2,595)(2,294)
 
EBITDA

 

1,8802,836
Adjusted EBITDA

 

4,6224,014
Hotel EBITDA

 

4,8484,448
 
FFO

 

(1,168)(663)
Adjusted FFO

 

2,1731,206
 
Net loss per diluted share attributable to the Company

$

(0.24)$(0.23)
FFO per share and unit

 

(0.09)(0.05)
Adjusted FFO per share and unit

 

0.170.09
 

(*) 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. All references in this release to the "Company", "Sotherly", "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 increased 3.3 percent over the first quarter 2012 to $74.93 driven by a 4.1 percent increase in average daily rate ("ADR").
  • Hotel EBITDA. The Company generated hotel EBITDA of approximately $4.8 million during the first quarter 2013, an increase of 9.0% or approximately $0.4 million over the first quarter 2012.
  • Adjusted EBITDA. The Company generated adjusted EBITDA of approximately $4.6 million during the first quarter 2013, an increase of 15.1% or approximately $0.6 million over the first quarter 2012.
  • Adjusted FFO. The Company generated adjusted FFO of approximately $2.2 million during the first quarter 2013, an increase of 80.2% or approximately $1.0 million over the first quarter 2012.
  • Common Dividends. As previously reported on April 25, 2013, the Company announced a quarterly dividend (distribution) on its common stock of $0.035 per share (and unit), payable on July 11, 2013 to stockholders (and unitholders) of record as of June 14, 2013.

Andrew M. Sims, Chairman and Chief Executive Officer of Sotherly Hotels Inc., commented, "Although we experienced slower than expected top line growth, our management team continued to increase average daily rate, leading to improved margins and resulting in solid first quarter results. During the first quarter 2013, adjusted FFO increased 80.2% and adjusted EBITDA increased 15.1% over the first quarter 2012."

Financing Transactions

On March 22, 2013, the Company amended the original $8.0 million mortgage secured by its Doubletree by Hilton Brownstone-University hotel with its existing lender, Premier Bank, Inc. With the amendment, the loan's principal amount was increased to $10.0 million. The mortgage's interest rate will remain at 5.25% and the loan was amended to remove any prepayment penalty. Proceeds of the mortgage amendment were used to redeem approximately 1,902 shares of the Company's Series A Cumulative Redeemable Preferred Stock for an aggregate redemption price of approximately $2.1 million plus the payment of related accrued and unpaid cash and stock dividends.

Balance Sheet/Liquidity

At March 31, 2013, the Company had approximately $10.3 million of available cash and cash equivalents, of which approximately $3.1 million was reserved for real estate taxes, insurance, capital improvements and certain other expenses or otherwise restricted. The Company had approximately $153.3 million in outstanding debt at a weighted average interest rate of approximately 5.55%. At March 31, 2013, the Company also had $7.0 million of availability under its existing Note Agreement with Essex Equity High Income Joint Investment Vehicle, LLC.

2013 Outlook

The Company reiterates its previous guidance for 2013 which is predicated on continued strengthening of the economy and expected improvements in hotel lodging industry fundamentals. These projections are based on estimates of occupancy and average daily rates that are consistent with calendar year 2013 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 2013:

    
Low RangeHigh Range
Y/E Dec 31, 2013Y/E Dec 31, 2013
($ in thousands except per share data)
Total Revenue$87,425$91,170
Net income (loss)(2,131)90
 
EBITDA18,16520,485
Adjusted EBITDA20,06522,285
Hotel EBITDA22,46524,435
 
FFO7,1649,384
Adjusted FFO10,16412,384
 
Net income (loss) per share attributable to the Company$(0.16)$0.01
FFO per share and unit0.550.72
Adjusted FFO per share and unit0.780.95
 

Earnings Call/Webcast

The Company will conduct its first quarter 2013 conference call for investors and other interested parties at 10:00 a.m. Eastern Time on Tuesday, May 7, 2013. The conference call will be accessible by telephone and through the Internet. Interested individuals are invited to listen to the call by telephone at 888-317-6016 (United States) or 855-669-9657 (Canada) or +1 412-317-6016 (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 7, 2013 through March 31, 2014. To access the rebroadcast, dial 877-344-7529 and enter conference number 10027519. A replay of the call also will be available on the Internet at www.sotherlyhotels.com until March 31, 2014.

About Sotherly Hotels Inc.

Sotherly Hotels Inc., formerly MHI Hospitality Corporation, 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 Mid-Atlantic and Southern United States. Currently, the Company's portfolio consists of investments in ten hotel properties, nine of which are wholly-owned and comprise 2,113 rooms. The Company also has a 25.0 percent interest in the Crowne Plaza Hollywood Beach Resort. All of the Company's properties operate under the Hilton Worldwide, InterContinental Hotels Group and Starwood Hotels and Resorts 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 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. 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, including recessionary economic conditions existing over the last several years, that affect occupancy rates 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, sustainability and timing 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 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; 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.

 
SOTHERLY HOTELS INC.
CONSOLIDATED BALANCE SHEETS
 
 
  March 31, 2013  December 31, 2012
(unaudited)(audited)
ASSETS
Investment in hotel properties, net

$

175,453,822

$176,427,904
Investment in joint venture9,108,7068,638,967
Cash and cash equivalents7,234,0537,175,716
Restricted cash3,118,9033,079,894
Accounts receivable, net2,304,7931,478,923
Accounts receivable-affiliate7,1058,657
Prepaid expenses, inventory and other assets2,389,4091,684,951
Shell Island sublease, net420,343480,392
Deferred income taxes2,387,5862,649,282
Deferred financing costs, net 2,225,584  2,406,183 
 
TOTAL ASSETS$204,650,304 $204,030,869 
 
LIABILITIES
Mortgage debt$136,923,431$135,674,432
Loans payable4,025,2204,025,220
Series A Cumulative Redeemable Preferred Stock, par value $0.01, 27,650 shares authorized, 12,396 and 14,228 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively12,395,74414,227,650
Accounts payable and accrued liabilities8,488,6986,786,684
Advance deposits940,531625,822
Dividends and distributions payable456,684389,179
Warrant derivative liability 7,738,817  4,969,752 
 
TOTAL LIABILITIES 170,969,125  166,698,739 
 
Commitments and contingencies
 
EQUITY
Sotherly Hotels Inc. stockholders' equity

Preferred stock, par value $0.01; 972,350 shares authorized, 0 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively

Common stock, par value $0.01; 49,000,000 shares authorized; 10,125,286 shares and 9,999,786 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively101,25399,998
Additional paid in capital57,303,41357,020,979
Distributions in excess of retained earnings (30,128,693) (27,179,392)
Total Sotherly Hotels Inc. stockholders' equity27,275,97329,941,585
Noncontrolling interest 6,405,206  7,390,545 
TOTAL EQUITY 33,681,179  37,332,130 
 
TOTAL LIABILITIES AND EQUITY$204,650,304 $204,030,869 
 
 
SOTHERLY HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
 
  Quarter ended  Quarter ended
March 31, 2013March 31, 2012
REVENUE
Rooms department$14,249,959$13,943,706
Food and beverage department4,851,5714,994,465
Other operating departments 1,088,282  1,086,975 
 
Total revenue 20,189,812  20,025,146 
 
EXPENSES
Hotel operating expenses
Rooms department4,013,7333,950,486
Food and beverage department3,224,4803,397,386
Other operating departments106,674123,493
Indirect 7,815,061  7,936,089 
 
Total hotel operating expenses15,159,94815,407,454
 
Depreciation and amortization2,052,8212,179,963
Corporate general and administrative 1,093,787  1,131,587 
 
Total operating expenses18,306,55618,719,004
      
NET OPERATING INCOME1,883,2561,306,142
 
Other income (expense)
Interest expense(2,680,547)(3,288,630)
Interest income3,9064,683
Equity income in joint venture469,739265,794
Unrealized loss on warrant derivative (2,769,065) (1,163,758)
 
Net loss before taxes(3,092,711)(2,875,769)
Income tax provision (263,055) (104,575)
 
Net loss(3,355,766)(2,980,344)
Add: Net loss attributable to the noncontrolling interest 760,850  685,989 
 
Net loss attributable to the Company$
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