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SoTHERLY Hotels Inc. Reports Financial Results for the Fourth Quarter and Year 2013

  SoTHERLY Hotels Inc. Reports Financial Results for the Fourth Quarter and
  Year 2013

Business Wire

WILLIAMSBURG, Va. -- February 18, 2014

Sotherly Hotels Inc. (NASDAQ:SOHO), formerly MHI Hospitality Corporation
(NASDAQ: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 fourth quarter and the year ended
December 31, 2013. The Company’s results include the following^*:


                Three months ended             Year ended
                  December 31,    December       December 31,   December
                  2013              31, 2012       2013             31, 2012
                  ($ in thousands except per share data)
                                                                    
Total Revenue     $  22,475         $  20,434      $  89,375        $ 87,343
Net income
(loss)
attributable         (44     )         1,458          (2,978  )       (4,105 )
to the
Company
                                                                    
EBITDA               5,428             6,849          18,883          18,032
Adjusted             4,594             4,613          20,998          20,183
EBITDA
Hotel EBITDA         5,358             5,091          23,280          22,440
                                                                    
FFO                  2,431             4,165          5,189           3,925
Adjusted FFO         1,843             2,146          10,898          9,471
                                                                    
Net income
(loss) per
diluted share     $  0.00           $  0.14        $  (0.27   )     $ (0.39  )
attributable
to the
Company
FFO per share        0.19              0.32           0.40            0.30
and unit
Adjusted FFO
per share and        0.14              0.17           0.84            0.73
unit


^(*) 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 $1.8
    million during the fourth quarter 2013, a decrease of 14.2% or
    approximately $0.3 million over the fourth quarter 2012. For the year
    ended December 31, 2013, the Company generated adjusted FFO of
    approximately $10.9 million, an increase of 15.1% or approximately $1.4
    million over 2012.
  *Common Dividends. As previously reported on January 21, 2014, the Company
    announced its quarterly dividend (distribution) on its common stock (and
    units) of $0.045 per share (and unit), payable on April 11, 2014 to
    stockholders (and unitholders) of record as of March 14, 2014.
  *RevPAR. Room revenue per available room (“RevPAR”) for the Company’s
    wholly-owned properties during the fourth quarter 2013 increased 5.0% over
    the fourth quarter 2012 to $73.13 driven by a 0.4% decrease in occupancy
    and a 5.4% increase in average daily rate (“ADR”). For the year ended
    December 31, 2013, RevPAR for the Company’s wholly-owned properties
    increased by 1.9% over 2012 to $80.16 driven by a 4.1% increase in ADR and
    a 2.1% decrease in occupancy.
  *Hotel EBITDA. The Company generated hotel EBITDA of approximately $5.4
    million during the fourth quarter 2013, an increase of 5.3% or
    approximately $0.3 million over the fourth quarter 2012. For the year
    ended December 31, 2013, the Company generated hotel EBITDA of
    approximately $23.3 million, an increase of 3.7% or approximately $0.9
    million over 2012.
  *Adjusted EBITDA. The Company generated adjusted EBITDA of approximately
    $4.6 million during the fourth quarter 2013 – approximately the same as
    for the fourth quarter 2012. For the year ended December 31, 2013, the
    Company generated adjusted EBITDA of approximately $21.0 million, an
    increase of 4.0% or approximately $0.8 million over 2012.

Andrew M. Sims, Chairman and Chief Executive Officer of Sotherly Hotels Inc.,
commented, “Calendar year 2013 marked a significant step forward for the
Company. A return to the public markets with a new offering by the Company’s
operating partnership restarted growth and completed the Company’s balance
sheet restructuring, culminating in several fourth quarter transactions which
we believe have positioned the Company for significant growth in the coming
year.”

Acquisitions

On November 13, 2013, the Company acquired the entity which owns the Crowne
Plaza Houston Downtown (the “Houston Hotel”) for $30.65 million in cash,
32,929 units of limited partnership interests in Sotherly Hotels LP valued at
approximately $0.15 million, and an additional cash amount for working capital
as of the closing date.

As a part of the transaction, the Company closed on a $21.5 million loan with
Mutual of Omaha Bank collateralized by a first mortgage on the Houston Hotel.
The loan matures in April 2016, but can be extended through the fourth and
fifth anniversary of the commencement date of the loan, subject to certain
terms and conditions. The loan also carries a fixed interest rate of 4.50% and
amortizes on a 25-year schedule. The balance of the cash portion of the
purchase price was funded by the Company with available cash.

Financing Transactions

On October 23, 2013, the Company entered into a Warrant Redemption Agreement,
with Essex Illiquid, LLC and Richmond Hill Capital Partners, LP (collectively,
the “Holders”) to redeem a portion of the Warrant corresponding to an
aggregate of 900,000 Issuable Warrant Shares (as defined in the Warrant) for
an aggregate cash redemption price of $3.2 million.

The Company also entered into an amendment of the Warrant with the Holders
whereby the Holders agreed to extend the holding period of the Warrant from
April 18, 2014 to April 18, 2015.

On December 23, 2013, the Company entered into a second Warrant Redemption
Agreement with the Holders to redeem the remaining portion of the Warrant
corresponding to an aggregate of 1,000,000 Issuable Warrant Shares for an
aggregate cash redemption price of $3.975 million.

On December 27, 2013, the joint venture that owns the Crowne Plaza Hollywood
Beach Resort in Hollywood Beach, Florida (the “Hollywood Hotel”) closed on a
$57.0 million refinancing of its outstanding mortgage indebtedness. The
Company has a 25.0 percent interest in the Hotel through a joint venture with
The Carlyle Group. The Bank of America, N.A. loan is collateralized by an
interest-only non-recourse first mortgage on the Hollywood Hotel which bears a
floating interest rate of the one-month LIBOR rate plus 3.95% and matures in
January 2017. The proceeds from the loan were used to repay the existing first
mortgage and to make distributions to the joint venture partners. The Company
used approximately $3.5 million of its share of the distribution proceeds to
extinguish its indebtedness related to the joint venture.

Balance Sheet/Liquidity

At December 31, 2013, the Company had approximately $13.2 million of available
cash and cash equivalents, of which approximately $3.8 million was reserved
for real estate taxes, insurance, capital improvements and certain other
expenses or otherwise restricted. The Company had approximately $188.0 million
in outstanding debt at a weighted average interest rate of approximately
5.38%.

2014 Outlook

Set forth below is guidance for 2014, which is predicated on continued
strengthening of the economy and expected improvements in hotel lodging
industry fundamentals. The outlook is based on estimates of occupancy and
average daily rates that are consistent with most recent calendar year 2014
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 2014:


                                      Low Range           High Range
                                        Y/E Dec 31, 2014      Y/E Dec 31, 2014
                                        ($ in thousands except per share data)
Total Revenue                           $      103,171        $     106,224
Net income                                     2,949                4,282
                                                              
EBITDA                                         24,995               26,351
Hotel EBITDA                                   26,924               28,293
                                                              
FFO                                            12,599               13,932
Adjusted FFO                                   13,099               14,432
                                                              
Net income per share attributable       $      0.22           $     0.33
to the Company
FFO per share and unit                         0.96                 1.06
Adjusted FFO per share and unit                1.00                 1.10


Earnings Call/Webcast

The Company will conduct its fourth quarter 2013 conference call for investors
and other interested parties at 10:00 a.m. Eastern Time on Tuesday, February
18, 2014. 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 February 18, 2014 through December 31, 2014. To access the
rebroadcast, dial 877-344-7529 and enter conference number 10039709. A replay
of the call also will be available on the Internet at www.sotherlyhotels.com
until December 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 Southern United States. Currently, the Company’s portfolio consists of
investments in 11 hotel properties, 10 of which are wholly-owned and comprise
2,372 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
Vice President – Operations & Investor Relations
Sotherly Hotels Inc.
410 West Francis Street
Williamsburg, Virginia 23185
757.229.5648

Forward-Looking Statements

This news release includes “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933 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.

                           Financial Tables Follow…


SOTHERLY HOTELS INC.
CONSOLIDATED BALANCE SHEETS

                                     December 31, 2013   December 31, 2012
                                       (unaudited)           (audited)
ASSETS
Investment in hotel properties,        $  204,017,845        $  176,427,904
net
Investment in joint venture               2,446,039             8,638,967
Cash and cash equivalents                 9,376,628             7,175,716
Restricted cash                           3,796,141             3,079,894
Accounts receivable, net                  1,982,091             1,478,923
Accounts receivable-affiliate             101,439               8,657
Prepaid expenses, inventory and           1,683,763             1,684,951
other assets
Shell Island sublease, net                240,196               480,392
Deferred income taxes                     1,186,122             2,649,282
Deferred financing costs, net            3,820,838           2,406,183    
                                                             
TOTAL ASSETS                           $  228,651,102       $  204,030,869  
                                                             
LIABILITIES
Mortgage debt                          $  160,363,549        $  135,674,432
Loans payable                             —                     4,025,220
Unsecured notes                           27,600,000            —
Series A Cumulative Redeemable
Preferred Stock, par value $0.01,
27,650 shares authorized, 0 and
14,228 shares issued and                  —                     14,227,650
outstanding at December 31, 2013
and December 31, 2012,
respectively
Accounts payable and accrued              7,650,219             6,786,684
liabilities
Advance deposits                          666,758               625,822
Dividends and distributions               588,197               389,179
payable
Warrant derivative liability             —                   4,969,752    
                                                             
TOTAL LIABILITIES                        196,868,723         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          —                     —
December 31, 2013 and December 31,
2012, respectively
Common stock, par value $0.01;
49,000,000 shares authorized;
10,206,927 shares and 9,999,786           102,069               99,998
shares issued and outstanding at
December 31, 2013 and December 31,
2012, respectively
Additional paid in capital                57,505,827            57,020,979
Distributions in excess of               (31,734,837  )       (27,179,392  )
retained earnings
Total Sotherly Hotels Inc.                25,873,059            29,941,585
stockholders’ equity
Noncontrolling interest                  5,909,320           7,390,545    
TOTAL EQUITY                             31,782,379          37,332,130   
                                                             
TOTAL LIABILITIES AND EQUITY           $  228,651,102       $  204,030,869  



SOTHERLY HOTELS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

                 Three months ended December 31,     Year ended December 31,
                    2013           2012             2013            2012        
REVENUE
Rooms              $ 15,144,624       $ 13,542,843       $ 62,837,422        $ 60,824,016
department
Food and
beverage             6,106,212          5,713,500          22,054,209          21,961,328
department
Other
operating           1,224,598        1,177,995        4,482,896         4,557,876   
departments
                                                                             
Total revenue        22,475,434         20,434,338         89,374,527          87,343,220
                                                                             
EXPENSES
Hotel
operating
expenses
Rooms                4,332,808          3,809,974          17,210,445          16,613,769
department
Food and
beverage             3,792,151          3,471,822          14,066,145          14,284,057
department
Other
operating            161,129            114,346            508,868             480,307
departments
Indirect            8,673,628        7,792,530        33,683,486        32,919,610  
                                                                             
Total hotel
operating            16,959,716         15,188,672         65,468,944          64,297,743
expenses
                                                                             
Depreciation
and                  2,345,357          2,136,208          8,467,228           8,661,769
amortization
Corporate
general and         1,276,559        1,005,818        4,360,583         4,078,826   
administrative
                                                                             
Total
operating            20,581,632         18,330,698         78,296,755          77,038,338
expenses
                                                                          
NET OPERATING        1,893,802          2,103,640          11,077,772          10,304,882
INCOME
                                                                             
Other income
(expense)
Interest             (2,734,822 )       (2,367,164 )       (11,647,141 )       (12,382,146 )
expense
Interest             6,774              4,173              17,914              16,158
income
Equity income
(loss) in            19,221             156,921            453,700             172,172
joint venture
Impairment of
note                 —                  (110,871   )       —                   (110,871    )
receivable
Unrealized
gain (loss) on      815,712          2,317,973        (2,205,248  )      (2,026,677  )
warrant
derivative
                                                                             
Net income
(loss) before        687                2,104,672          (2,303,003  )       (4,026,482  )
taxes
Income tax          (52,347    )      (210,529   )      (1,521,182  )      (1,301,229  )
provision
                                                                             
Net income           (51,660    )       1,894,143          (3,824,185  )       (5,327,711  )
(loss)
Add: Net
(income) loss
attributable        7,729            (435,789   )      846,206           1,223,036   
to the
noncontrolling
interest
                                                                             
Net income
(loss)             $ (43,931    )     $ 1,458,354       $ (2,977,979  )     $ (4,104,675  )
attributable
to the Company
                                                                             
Net income
(loss) per
share
attributable
to the Company
Basic              $ 0.00             $ 0.15             $ (0.29       )     $ (0.41       )
Diluted            $ 0.00             $ 0.14             $ (0.27       )     $ (0.39       )
Weighted
average number
of shares
outstanding
Basic                10,206,927         9,999,786          10,156,955          9,995,638
Diluted              10,883,542         10,722,219         11,088,145          10,647,246


                             SOTHERLY HOTELS INC.
                            KEY OPERATING METRICS
                                 (unaudited)

The following tables illustrate the key operating metrics for the three months
and years ended December 31, 2013 and 2012, respectively, for the Company’s
wholly-owned properties during each respective reporting period
(“consolidated” properties) as well as the nine wholly-owned properties in the
portfolio that were under the Company’s control during both the three months
and year ended December 31, 2013 and the corresponding periods in 2012
(“same-store” properties). Accordingly, the same-store data does not reflect
the performance of the Crowne Plaza Houston Downtown, which was acquired in
November 2013. Each table excludes performance data for the Crowne Plaza
Hollywood Beach Resort hotel property, which was acquired through a joint
venture in August 2007 and in which the Company has a 25.0% indirect interest.


Consolidated Properties (All    Three Months Ended December 31,  
Hotels)
                                    2013            2012        Variance
Occupancy                            61.7%              61.9%       -0.4  %
ADR                               $  118.57           $  112.46       5.4   %
RevPAR                            $  73.13            $  69.67        5.0   %



Same-Store Properties (9        Three Months Ended December 31,  
Hotels)
                                    2013            2012        Variance
Occupancy                            62.1%              61.9%       0.2   %
ADR                               $  118.15           $  112.46       5.1   %
RevPAR                            $  73.32            $  69.67        5.2   %



Consolidated Properties (All          Year Ended December 31,    
Hotels)
                                         2013       2012        Variance
Occupancy                                 67.4%         68.9%       -2.1  %
ADR                                     $ 118.91       $ 114.22       4.1   %
RevPAR                                  $ 80.16        $ 78.65        1.9   %



Same-Store Properties (9 Hotels)   Year Ended December 31,    
                                      2013       2012        Variance
Occupancy                              67.6%         68.9%       -1.8  %
ADR                                  $ 118.82       $ 114.22       4.0   %
RevPAR                               $ 80.32        $ 78.65        2.1   %



SOTHERLY HOTELS INC.
RECONCILIATION OF NET INCOME (LOSS) TO
FFO, Adjusted FFO, EBITDA, Adjusted EBITDA and Hotel EBITDA
(unaudited)

                 Three months ended December 31,     Year ended December 31,
                    2013           2012             2013           2012       
                                                                            
Net income
(loss)             $ (43,931    )     $ 1,458,354        $ (2,977,979 )     $ (4,104,675 )
attributable
to the Company
Noncontrolling       (7,729     )       435,789            (846,206   )       (1,223,036 )
interest
Depreciation
and                  2,345,357          2,136,208          8,467,228          8,661,769
amortization
Equity in
depreciation
and                 136,940          134,262          545,667          590,675    
amortization
of joint
venture
                                                                            
FFO                  2,430,637        $ 4,164,613          5,188,710        $ 3,924,733
Unrealized
(gain) loss on       (18,689    )       (28,683    )       (89,998    )       13,752
hedging
activities^(1)
Unrealized
(gain) loss on       (815,712   )       (2,317,973 )       2,205,248          2,026,677
warrant
derivative
Decrease in
deferred             51,637             217,616            1,463,160          1,412,467
income taxes
Impairment of
note                 —                  110,871            —                  110,871
receivable
Acquisition          89,743             —                  89,743             —
costs
Loss on early
extinguishment      104,970          —                2,040,662        1,982,184  
of debt^(2)
(3)
                                                                            
Adjusted FFO       $ 1,842,586       $ 2,146,444       $ 10,897,524      $ 9,470,684  
                                                                            
Weighted
average shares       10,206,927         9,999,786          10,156,955         9,995,638
outstanding
Weighted
average units       2,848,736        2,972,839        2,885,065        2,978,315  
outstanding
                                                                            
Weighted
average shares      13,055,663       12,972,625       13,042,020       12,973,953 
and units
                                                                            
FFO per share      $ 0.19            $ 0.32            $ 0.40            $ 0.30       
and unit
                                                                            
Adjusted FFO
per share and      $ 0.14            $ 0.17            $ 0.84            $ 0.73       
unit
                                                                            
                                                                          
                   Three months ended December 31,       Year ended December 31,
                    2013             2012             2013             2012       
                                                                            
Net income(
loss)              $ (43,931    )     $ 1,458,354        $ (2,977,979 )     $ (4,104,675 )
attributable
to the Company
Noncontrolling       (7,729     )       435,789            (846,206   )       (1,223,036 )
interest
Interest             2,734,822          2,367,164          11,647,141         12,382,146
expense
Interest             (6,774     )       (4,173     )       (17,914    )       (16,158    )
income
Income tax           52,347             210,529            1,521,182          1,301,229
provision
Depreciation
and                  2,345,357          2,136,208          8,467,228          8,661,769
amortization
Equity in
interest
expense and
depreciation        354,291          244,885          1,089,350        1,030,234  
and
amortization
of joint
venture
                                                                            
EBITDA               5,428,383          6,848,756          18,882,802         18,031,509
Unrealized
(gain) loss on       (18,689    )       (28,683    )       (89,998    )       13,752
hedging
activities^(1)
Unrealized
(gain) loss on       (815,712   )       (2,317,973 )       2,205,248          2,026,677
warrant
derivative
Impairment of
note                —                110,871          —                110,871    
receivable
                                                                            
Adjusted             4,593,982          4,612,971          20,998,052         20,182,809
EBITDA
Corporate
general and          1,276,559          1,005,818          4,360,583          4,078,826
administrative
Equity in
adjusted             (354,822   )       (373,125   )       (1,453,051 )       (1,216,158 )
EBITDA of
joint venture
Net lease            (87,500    )       (87,500    )       (350,000   )       (350,000   )
rental income
Other fee           (69,964    )      (67,206    )      (275,775   )      (255,707   )
income
                                                                            
Hotel EBITDA       $ 5,358,255       $ 5,090,958       $ 23,279,809      $ 22,439,770 


    ^(1)    Includes equity in unrealized (gain)/loss on hedging
                   activities of joint venture.
        ^(2)       Reflected in interest expense for the periods presented
                   above.
        ^(3)       Includes equity in loss on early extinguishment of debt of
                   joint venture.


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) equity in the income or loss of equity
investees, (4) unrealized gains and losses on derivative instruments not
included in other comprehensive income, (5) gains and losses on disposal of
assets, (6) realized gains and losses on investments, (7) impairment of
long-lived assets or investments, (8) corporate general and administrative
expense; (9) depreciation and amortization; and (10) 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 any
unrealized gain (loss) on its hedging instruments or warrant derivative, loan
impairment losses, losses on early extinguishment of debt, aborted offering
costs, costs associated with the departure of executive officers 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:

Sotherly Hotels Inc.
Scott Kucinski, 757-229-5648
Vice President – Operations & Investor Relations
 
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