Sotherly Hotels' Net Income Plunges 68% Amid Rising Interest Costs

TL;DR

**SOHOB's financials are flashing red, with net income down 68% and rising debt costs eating into profits – time to be cautious.**

AI Summary

Sotherly Hotels LP (SOHOB) reported a significant decline in net income for the nine months ended September 30, 2025, falling to $731,560 from $2,297,431 in the prior year, a decrease of 68.16%. Total revenue also saw a dip, decreasing by 2.05% to $135,119,610 from $137,942,779 in the same period. This revenue decline was primarily driven by a 2.6% decrease in rooms department revenue, from $91,479,915 to $89,015,733. The company experienced increased interest expenses, rising to $16,515,817 from $15,231,626, a 8.43% increase, and a loss on early extinguishment of debt of $463,195. Despite these challenges, cash and cash equivalents increased to $9,432,658 from $7,327,880, and total assets slightly decreased to $411,381,376 from $414,375,920. The company also saw a net loss attributable to common stockholders of $5,210,335 for the nine months ended September 30, 2025, compared to a net loss of $3,641,367 in the prior year.

Why It Matters

Sotherly Hotels' substantial drop in net income and revenue signals potential headwinds for investors, particularly given the rising interest expenses which are eroding profitability. This performance could impact dividend sustainability for preferred stockholders (SOHOB, SOHOO, SOHON) and common stockholders (SOHO), making the stock less attractive compared to competitors in a challenging hospitality market. Employees might face pressure if cost-cutting measures are implemented to offset declining revenue. For customers, this could mean reduced investment in property upgrades or services. The broader market may view this as an indicator of softening demand in the hotel sector, especially for smaller, regional players.

Risk Assessment

Risk Level: high — The company reported a significant 68.16% decrease in net income for the nine months ended September 30, 2025, falling to $731,560 from $2,297,431. Additionally, interest expense increased by 8.43% to $16,515,817, and the company incurred a loss on early extinguishment of debt of $463,195, indicating financial strain and increased cost of capital.

Analyst Insight

Investors should carefully re-evaluate their positions in SOHOB, SOHO, SOHOO, and SOHON. Given the significant decline in net income and rising interest expenses, consider reducing exposure or holding off on new investments until a clear path to improved profitability and debt management is demonstrated.

Financial Highlights

revenue

$135,119,610

total Assets

$411,381,376

net Income

$731,560

eps

-$0.26

cash Position

$9,432,658

revenue Growth

-2.05%

Revenue Breakdown

Key Numbers

• $731,560 — Net Income (Decreased by 68.16% for the nine months ended September 30, 2025, from $2,297,431 in the prior year.)
• $135,119,610 — Total Revenue (Decreased by 2.05% for the nine months ended September 30, 2025, from $137,942,779 in the prior year.)
• $16,515,817 — Interest Expense (Increased by 8.43% for the nine months ended September 30, 2025, from $15,231,626 in the prior year.)
• $5,210,335 — Net Loss Attributable to Common Stockholders (Increased for the nine months ended September 30, 2025, from $3,641,367 in the prior year.)
• $0.26 — Net Loss Per Share (Basic and Diluted) (Increased for the nine months ended September 30, 2025, from $0.19 in the prior year.)
• $463,195 — Loss on Early Extinguishment of Debt (Incurred for the nine months ended September 30, 2025.)
• $9,432,658 — Cash and Cash Equivalents (Increased from $7,327,880 at December 31, 2024.)
• $320,510,464 — Mortgage Loans, net (Increased from $316,516,148 at December 31, 2024.)

Key Players & Entities

• Sotherly Hotels LP (company) — registrant for 10-Q filing
• Sotherly Hotels Inc. (company) — sole general partner of the Operating Partnership
• NASDAQ Stock Market LLC (regulator) — exchange where SOHO, SOHOB, SOHOO, SOHON are registered
• $731,560 (dollar_amount) — Net income for nine months ended September 30, 2025
• $2,297,431 (dollar_amount) — Net income for nine months ended September 30, 2024
• $135,119,610 (dollar_amount) — Total revenue for nine months ended September 30, 2025
• $137,942,779 (dollar_amount) — Total revenue for nine months ended September 30, 2024
• $16,515,817 (dollar_amount) — Interest expense for nine months ended September 30, 2025
• $15,231,626 (dollar_amount) — Interest expense for nine months ended September 30, 2024
• $463,195 (dollar_amount) — Loss on early extinguishment of debt for nine months ended September 30, 2025

FAQ

Risk Factors

• Increased Interest Expense [medium — financial]: Interest expense rose by 8.43% to $16,515,817 for the nine months ended September 30, 2025, from $15,231,626 in the prior year. This increase puts additional pressure on profitability.
• Loss on Extinguishment of Debt [low — financial]: The company incurred a loss of $463,195 on early extinguishment of debt during the nine months ended September 30, 2025. This non-recurring charge negatively impacted net income.
• Declining Net Income and EPS [high — financial]: Net income decreased by 68.16% to $731,560 for the nine months ended September 30, 2025, from $2,297,431 in the prior year. Net loss attributable to common stockholders widened to $5,210,335 from $3,641,367, and EPS fell to a loss of $0.26 from $0.19.
• Revenue Decline [medium — market]: Total revenue decreased by 2.05% to $135,119,610 for the nine months ended September 30, 2025, from $137,942,779 in the prior year. The rooms department, a key revenue driver, saw a 2.6% decline.

Industry Context

The hotel industry is sensitive to economic cycles, travel trends, and consumer spending. Companies like Sotherly Hotels LP operate in a competitive landscape, facing challenges from both independent hotels and larger chains. Recent performance suggests potential headwinds in demand or operational efficiency within the sector.

Regulatory Implications

As a publicly traded entity, Sotherly Hotels LP is subject to SEC regulations and reporting requirements. Compliance with accounting standards and timely disclosure of financial information are critical. Any misstatements or failures in compliance could lead to regulatory scrutiny and penalties.

What Investors Should Do

1. Monitor the drivers of the rooms department revenue decline to assess sustainability and potential recovery strategies.
2. Analyze the impact of increased interest expenses and the loss on debt extinguishment on future profitability and cash flow.
3. Evaluate the company's strategy for managing its debt obligations in light of rising interest costs.
4. Assess the trend in net loss attributable to common stockholders and its implications for shareholder value.

Glossary

Net Loss Attributable to Common Stockholders

The portion of the company's net loss that belongs to the common shareholders after accounting for preferred dividends and other allocations. (Indicates the profitability available to common shareholders, which has worsened in the current period.)

Loss on Early Extinguishment of Debt

A loss recognized when a company repays debt before its scheduled maturity date, often due to refinancing at a lower interest rate or other strategic reasons. (This non-recurring charge negatively impacted the company's net income for the period.)

Year-Over-Year Comparison

For the nine months ended September 30, 2025, Sotherly Hotels LP experienced a significant 68.16% decrease in net income compared to the prior year, alongside a 2.05% dip in total revenue. This was exacerbated by an 8.43% increase in interest expenses and a new loss on early extinguishment of debt. While cash and cash equivalents saw an increase, the net loss attributable to common stockholders widened, indicating a deteriorating profitability trend.

Key Financial Figures

• $0.01 — nge on which registered Common Stock, $0.01 par value SOHO The NASDAQ Stock Mar

Filing Documents

• soho-20250930.htm (10-Q) — 5034KB
• soho-ex10_2.htm (EX-10.2) — 534KB
• soho-ex10_3.htm (EX-10.3) — 30KB
• soho-ex10_4.htm (EX-10.4) — 29KB
• soho-ex10_5.htm (EX-10.5) — 29KB
• soho-ex31_1.htm (EX-31.1) — 19KB
• soho-ex31_2.htm (EX-31.2) — 19KB
• soho-ex31_3.htm (EX-31.3) — 20KB
• soho-ex31_4.htm (EX-31.4) — 20KB
• soho-ex32_1.htm (EX-32.1) — 12KB
• soho-ex32_2.htm (EX-32.2) — 12KB
• soho-ex32_3.htm (EX-32.3) — 14KB
• soho-ex32_4.htm (EX-32.4) — 15KB
• 0001193125-25-282761.txt ( ) — 18778KB
• soho-20250930.xsd (EX-101.SCH) — 2335KB
• soho-20250930_htm.xml (XML) — 3545KB

, Item 4 - Controls and Procedures; and

Part I, Item 4 - Controls and Procedures; and

, Item 6 - Certifications of CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act

Part II, Item 6 - Certifications of CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act. 3 SOTHERLY HOTELS INC. SOTHERLY HOTELS LP INDEX Page PART I Item 1. Consolidated Financial Statements 5 Sotherly Hotels Inc. Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024 5 Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2025 and 2024 6 Consolidated Statements of Changes in Equity (unaudited) for the Three Months Ended March 31, June 30 and September 30, 2025 and 2024 7 Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2025 and 2024 9 Sotherly Hotels LP Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024 11 Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2025 and 2024 12 Consolidated Statements of Changes in Partners' Capital (unaudited) for the Three Months Ended March 31, June 30 and September 30, 2025 and 2024 13 Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2025 and 2024 15

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 17 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 39 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 52 Item 4

Controls and Procedures

Controls and Procedures 53 PART II Item 1.

Legal Proceedings

Legal Proceedings 54 Item 1A.

Risk Factors

Risk Factors 54 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 55 Item 3. Defaults Upon Senior Securities 55 Item 4. Mine Safety Disclosures 56 Item 5. Other Information 56 Item 6. Exhibits 57 4 PART I

Consolidated Financi al Statements

Item 1. Consolidated Financi al Statements SOTHERLY H OTELS INC. C ONSOLIDATED BALANCE SHEETS September 30, 2025 December 31, 2024 (unaudited) ASSETS Investment in hotel properties, net $ 369,124,422 $ 372,376,626 Cash and cash equivalents 9,432,658 7,327,880 Restricted cash 20,189,363 21,382,595 Accounts receivable, net 6,666,602 7,525,356 Prepaid expenses, inventory and other assets 5,968,331 5,763,463 TOTAL ASSETS $ 411,381,376 $ 414,375,920 LIABILITIES Mortgage loans, net $ 320,510,464 $ 316,516,148 Unsecured notes 53,875 658,766 Finance lease liabilities 24,024,607 23,201,751 Accounts payable and accrued liabilities 22,456,213 26,577,504 Advance deposits 3,497,927 3,734,825 Dividends and distributions payable 4,082,473 2,088,160 TOTAL LIABILITIES $ 374,625,559 $ 372,777,154 Commitments and contingencies (See Note 5) — — EQUITY Sotherly Hotels Inc. stockholders' equity Preferred stock, $ 0.01 par value, 11,000,000 shares authorized: 8.0 % Series B cumulative redeemable perpetual preferred stock, 1,464,100 and 1,464,100 shares issued and outstanding; aggregate liquidation preference each $ 44,655,050 , at September 30, 2025 and December 31, 2024, respectively. 14,641 14,641 7.875 % Series C cumulative redeemable perpetual preferred stock, 1,346,110 and 1,346,110 shares issued and outstanding; aggregate liquidation preference each $ 40,940,681 , at September 30, 2025 and December 31, 2024, respectively. 13,461 13,461 8.25 % Series D cumulative redeemable perpetual preferred stock, 1,163,100 and 1,163,100 shares issued and outstanding; aggregate liquidation preference each $ 35,674,458 , at September 30, 2025 and December 31, 2024, respectively. 11,631 11,631 Common stock, par value $ 0.01 , 69,000,000 shares authorized, 20,490,501 shares issued and outstanding at September 30, 2025 and 19,849,165 shares issued and out

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View this 10-Q filing on SEC EDGAR