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

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Sotherly Hotels Inc. ReportsFinancial Results for the Second 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 second quarter ended June 30, 2013. The Company's results include the following*:

    
Three months endedSix months ended
June 30, 2013June 30, 2012June 30, 2013June 30, 2012
($ in thousands except per share data)
 
Total Revenue

$

25,251

$

25,113

$

45,440

$

45,138

Net income (loss) attributable to the Company1,311(1,654)(1,284)(3,948)
 
EBITDA7,415

 

5,580

 

9,295

 

8,416
Adjusted EBITDA7,308

 

7,124

 

11,930

 

11,138
Hotel EBITDA7,967

 

7,714

 

12,815

 

12,161
 
FFO3,865

 

232

 

2,698

 

(430)
Adjusted FFO4,814

 

4,237

 

6,987

 

5,442
 
Net income (loss) per diluted share attributable to the Company

$

0.12

 

$

(0.16

)

 

$

(0.12

)

 

$

(0.38

)

FFO per share and unit0.30

 

0.02

 

0.21

 

(0.03)
Adjusted FFO per share and unit0.37

 

0.33

 

0.54

 

0.42
 

(*) 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:

  • Adjusted FFO. The Company generated adjusted FFO of approximately $4.8 million during the second quarter 2013, an increase of 13.6% or approximately $0.6 million over the second quarter 2012.
  • Common Dividends. As previously reported on July 24, 2013, the Company announced an increase in its quarterly dividend (distribution) on its common stock (and units) to $0.04 per share (and unit), payable on October 11, 2013 to stockholders (and unitholders) of record as of September 13, 2013.
  • RevPAR. Room revenue per available room ("RevPAR") for the Company's wholly-owned properties during the second quarter 2013 increased 2.2 percent over the second quarter 2012 to $94.40 driven by a 5.9 percent increase in average daily rate ("ADR").
  • Hotel EBITDA. The Company generated Hotel EBITDA of approximately $8.0 million during the second quarter 2013, an increase of 3.3% or approximately $0.3 million over the second quarter 2012.
  • Adjusted EBITDA. The Company generated adjusted EBITDA of approximately $7.3 million during the second quarter 2013, an increase of 2.6% or approximately $0.2 million over the second quarter 2012.

Andrew M. Sims, Chairman and Chief Executive Officer of Sotherly Hotels Inc., commented, "Early in the second quarter, we changed the name of our Company from MHI Hospitality Corporation to Sotherly Hotels Inc. The goal of the name change is to more clearly define our future mission, which is to expand our operations in the Southern U.S. We believe the Southland will continue its long-term outperformance in demographics and offer a fertile market for growth."

Financing Transactions

On June 28, 2013, the Company entered into an agreement with TowneBank to extend the maturity of the mortgage on the Crowne Plaza Hampton Marina in Hampton, Virginia, until June 30, 2014. Under the terms of the extension, the Company made a principal payment of approximately $1.1 million to reduce the principal balance on the loan to approximately $6.0 million and is required to continue to make monthly principal payments of $16,000. Interest payable monthly pursuant to the mortgage will remain at a rate of LIBOR plus additional interest of 4.55% and a minimum total rate of interest of 5.00% per annum. Pursuant to certain terms and conditions, the Company may extend the maturity date of the loan to June 30, 2015.

Subsequent Events

On August 1, 2013, the Company obtained a $15.6 million mortgage with CIBC, Inc. on the DoubleTree by Hilton Raleigh Brownstone - University in Raleigh, North Carolina. The mortgage bears interest at a rate of 4.78% and provides for level payments of principal and interest on a monthly basis under a 30-year amortization schedule. The maturity date is August 1, 2018. Approximately $0.7 million of the loan proceeds were placed into a restricted reserve which can be disbursed to the Company upon satisfaction of certain financial performance criteria. The remaining proceeds of the mortgage were used to repay the existing mortgage indebtedness, to pay closing costs, to redeem 2,460 shares of the Company's Series A Cumulative Redeemable Preferred Stock for an aggregate redemption price of approximately $2.7 million plus the payment of related accrued and unpaid cash and stock dividends and for working capital. The redemption resulted in a prepayment fee pursuant to the provisions of the Articles Supplementary of approximately $0.2 million.

Balance Sheet/Liquidity

At June 30, 2013, the Company had approximately $10.8 million of available cash and cash equivalents, of which approximately $4.3 million was reserved for real estate taxes, insurance, capital improvements, cash collateral and certain other expenses or otherwise restricted. The Company had approximately $151.0 million in outstanding debt at a weighted average interest rate of approximately 5.57%.

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 second quarter 2013 conference call for investors and other interested parties at 10:00 a.m. Eastern Time on Tuesday, August 6, 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 August 6, 2013 through June 30, 2014. To access the rebroadcast, dial 877-344-7529 and enter conference number 10031136. A replay of the call also will be available on the Internet at www.sotherlyhotels.com until June 30, 2014.

The Company will not be conducting its customary question and answer session as part of the August 6, 2013 earnings call.

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 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.

 
Contact at the Company:
 
Scott Kucinski
Director - 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 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 and other labor costs, 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 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

 
June 30, 2013December 31, 2012
(unaudited)(audited)
ASSETS
Investment in hotel properties, net

$

174,718,233

$

176,427,904

Investment in joint venture8,446,0838,638,967
Cash and cash equivalents6,561,7847,175,716
Restricted cash4,257,0373,079,894
Accounts receivable, net2,158,0651,478,923
Accounts receivable-affiliate10,6658,657
Prepaid expenses, inventory and other assets2,294,0471,684,951
Shell Island sublease, net360,294480,392
Deferred income taxes1,331,5302,649,282
Deferred financing costs, net 2,152,654  2,406,183 
 
TOTAL ASSETS

$

202,290,392

 

$

204,030,869

 
 
LIABILITIES
Mortgage debt

$

134,893,689

$

135,674,432

Loans payable3,650,2204,025,220
Series A Cumulative Redeemable Preferred Stock, par value $0.01, 27,650 shares authorized, 12,458 and 14,228 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively12,457,55214,227,650
Accounts payable and accrued liabilities7,403,4686,786,684
Advance deposits881,192625,822
Dividends and distributions payable456,334389,179
Warrant derivative liability 7,649,962  4,969,752 
 
TOTAL LIABILITIES 167,392,417  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 June 30, 2013 and December 31, 2012, respectively

Common stock, par value $0.01; 49,000,000 shares authorized; 10,156,927 shares and 9,999,786 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively101,56999,998
Additional paid in capital57,383,602

 

57,020,979
Distributions in excess of retained earnings 

(29,173,594

)

 

 

(27,179,392

)

Total Sotherly Hotels Inc. stockholders' equity28,311,57729,941,585
Noncontrolling interest 6,586,398 

 

 7,390,545 
TOTAL EQUITY 34,897,975  37,332,130 
 
TOTAL LIABILITIES AND EQUITY

$

202,290,392

 

$

204,030,869

 
 
  

SOTHERLY HOTELS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 
Three months ended June 30,Six months ended June 30,
2013 20122013 2012
REVENUE
Rooms department

$

18,152,020

$

17,756,867

$

32,401,979

$

31,700,572

Food and beverage department5,974,7956,181,54210,826,36611,176,007
Other operating departments 1,123,828  1,174,113  2,212,109  2,261,088 
 
Total revenue25,250,64325,112,52245,440,45445,137,667
 
EXPENSES
Hotel operating expenses
Rooms department4,563,4634,470,1598,577,1968,420,645
Food and beverage department3,690,9113,958,1506,915,3917,355,536
Other operating departments119,350117,445226,025240,938
Indirect 8,756,559  8,706,610  16,571,618  16,642,698 
 
Total hotel operating expenses17,130,28317,252,36432,290,23032,659,817
 
Depreciation and amortization Read Full Story

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