Sotherly Hotels Inc. Files 2023 Annual Report on Form 10-K

TL;DR

<b>Sotherly Hotels Inc. has filed its annual 10-K report for the fiscal year ending December 31, 2023.</b>

AI Summary

Sotherly Hotels Inc. (SOHON) filed a Annual Report (10-K) with the SEC on March 22, 2024. Sotherly Hotels Inc. (SOHO) filed its 10-K for the fiscal year ending December 31, 2023. The filing covers Sotherly Hotels Inc. (CIK: 0001301236) and Sotherly Hotels LP (CIK: 0001313536). The company's business address is 306 South Henry Street, Suite 100, Williamsburg, VA 23185. The company was formerly known as Sotherly Hotel Inc. and MHI Hospitality CORP. The company was formerly known as MHI HOSPITALITY LP.

Why It Matters

For investors and stakeholders tracking Sotherly Hotels Inc., this filing contains several important signals. This 10-K filing provides a comprehensive overview of Sotherly Hotels Inc.'s financial performance, operational activities, and strategic outlook for the fiscal year 2023. Investors and stakeholders can use this report to assess the company's financial health, identify potential risks, and understand its business strategy in the real estate investment trusts and hotels & motels sectors.

Risk Assessment

Risk Level: medium — Sotherly Hotels Inc. shows moderate risk based on this filing. The company operates in the highly competitive hotel industry, which is subject to economic downturns, changing consumer preferences, and operational challenges, as indicated by its SIC codes for Real Estate Investment Trusts and Hotels & Motels.

Analyst Insight

Review the detailed financial statements and risk factors in the 10-K to understand Sotherly Hotels Inc.'s performance and outlook for the upcoming fiscal year.

Key Numbers

• 20231231 — Fiscal Year End (Conformed period of report)
• 20240322 — Filing Date (Filed as of date)
• 0000950170-24-035300 — Accession Number (SEC filing accession number)
• 001-32379 — SEC File Number (SEC file number for Sotherly Hotels Inc.)
• 001-36091 — SEC File Number (SEC file number for Sotherly Hotels LP)
• 6798 — SIC Code (Standard Industrial Classification for Sotherly Hotels Inc.)
• 7011 — SIC Code (Standard Industrial Classification for Sotherly Hotels LP)

Key Players & Entities

• Sotherly Hotels Inc. (company) — Filer name
• SOHO (company) — Ticker symbol
• Sotherly Hotels LP (company) — Filer name
• MHI Hospitality CORP (company) — Former company name
• MHI HOSPITALITY LP (company) — Former company name
• Williamsburg, VA (location) — Business address city and state
• 23185 (location) — Business address zip code
• 757-229-5648 (phone) — Business phone number

FAQ

Risk Factors

• Industry and Economic Conditions [high — market]: The company's operations are subject to the cyclical nature of the hospitality and real estate industries, and are sensitive to general economic conditions.
• Dependence on Key Personnel [medium — operational]: The success of the company depends significantly on the continued service of its key management personnel.
• Debt Obligations [high — financial]: The company has significant debt obligations, which could impact its financial flexibility and ability to meet its obligations.
• Real Estate Investment Trust (REIT) Compliance [medium — regulatory]: Failure to maintain REIT status could result in significant tax liabilities.

Key Financial Figures

• $0.01 — Sotherly Hotels Inc. Common Stock, $0.01 par value SOHO The NASDAQ Stock Mar

Filing Documents

• soho-20231231.htm (10-K) — 4618KB
• soho-ex4_4.htm (EX-4.4) — 263KB
• soho-ex19_1.htm (EX-19.1) — 90KB
• soho-ex21_1.htm (EX-21.1) — 43KB
• soho-ex21_2.htm (EX-21.2) — 42KB
• soho-ex23_1.htm (EX-23.1) — 4KB
• soho-ex23_2.htm (EX-23.2) — 4KB
• soho-ex31_1.htm (EX-31.1) — 12KB
• soho-ex31_2.htm (EX-31.2) — 12KB
• soho-ex31_3.htm (EX-31.3) — 12KB
• soho-ex31_4.htm (EX-31.4) — 13KB
• soho-ex32_1.htm (EX-32.1) — 8KB
• soho-ex32_2.htm (EX-32.2) — 8KB
• soho-ex32_3.htm (EX-32.3) — 8KB
• soho-ex32_4.htm (EX-32.4) — 8KB
• 0000950170-24-035300.txt (&nbsp;) — 17463KB
• soho-20231231.xsd (EX-101.SCH) — 2398KB
• soho-20231231_htm.xml (XML) — 3037KB

Business

Business 6 Item 1A.

Risk Factors

Risk Factors 13 Item 1B. Unresolved Staff Comments 36 Item 1C. CyberSecurity 36 Item 2.

Properties

Properties 37 Item 3.

Legal Proceedings

Legal Proceedings 37 Item 4. Mine Safety Disclosure 37 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 38 Item 6. [Reserved] 40 Item 7.

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

Management's Discussion and Analysis of Financial Condition and Results of Operations 41 Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 54 Item 8.

Financial Statements and Supplementary Data

Financial Statements and Supplementary Data 55 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 55 Item 9A.

Controls and Procedures

Controls and Procedures 55 Item 9B. Other Information 57 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 57 PART III Item 10. Information about our Directors, Executive Officers and Corporate Governance 58 Item 11.

Executive Compensation

Executive Compensation 58 Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 58 Item 13. Certain Relationships and Related Transactions, and Director Independence 59 Item 14. Principal Accountant Fees and Services 59 PART IV Item 15. Exhibits and Financial Statement Schedules 60 3 EXPLANATORY NOTE We refer to Sotherly Hotels Inc. as the "Company" or "Sotherly", Sotherly Hotels LP as the "Operating Partnership," the Company's common stock as "common stock," the Company's preferred stock as "preferred stock," the Operating Partnership's partnership interests as "partnership units," and the Operating Partnership's preferred interests as the "preferred units." References to "we" and "our" mean the Company, its Operating Partnership and its subsidiaries and predecessors, collectively, unless the context otherwise requires or where otherwise indicated. The Company is a real estate investment trust, or a "REIT." It conducts virtually all of its activities through the Operating Partnership and is its sole general partner. The Operating Partnership holds substantially all of the Company's assets. The partnership agreement provides that the Operating Partnership will assume and pay when due, or reimburse the Company for payment of, all costs and expenses relating to the ownership and operations of, or for the benefit of, the Operating Partnership. The partnership agreement of the Operating Partnership further provides that all expenses of the Company are deemed to be incurred for the benefit of the Operating Partnership. This report combines the Annual Reports on Form 10-K for the period ended December 31, 2023 of the Company and the Operating Partnership. We believe combining the annual reports into this single report results in the following benefits: combined reports better reflect how management and investors view the business as a single operating unit; combined reports enhance investors' understanding of the Company

– Controls and Procedures;

Item 9A – Controls and Procedures; Consolidated Financial Statements; the following Notes to Consolidated Financial Statements: Note 6 – Preferred Stock and Units; Note 7 – Common Stock and Units; Note 12 – Earnings (Loss) per Share and per Unit; and Certifications of CEO and CFO Pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act. 4 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Information included and incorporated by reference in this Form 10-K may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as such may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe our current strategies, expectations and future plans, are generally identified by our use of words, such as "intend," "plan," "may," "should," "will," "project," "estimate," "anticipate," "believe," "expect," "continue," "potential," "opportunity," and similar expressions, whether in the negative or affirmative, but the absence of these words does not necessarily mean that a statement is not forward looking. All statements regarding our expected financial position, business and financing plans are forward-looking statements. Factors which could have a material adverse effect on the Company's future operations, performance and prospects include, but are not limited to: national and local economic and business conditions that affect occupancy rates and revenues at our hotels and the demand for hotel products and services; risks associated with the hotel industry, including competition and new supply of hotel rooms, increases in wages, energy costs and

B usiness

Item 1. B usiness Organization Sotherly Hotels Inc. (the "Company") is a self-managed and self-administered lodging real estate investment trust, or REIT, that was formed in August 2004 to own, acquire, renovate and reposition full-service, primarily upscale and upper-upscale hotel properties located in primary markets in the mid-Atlantic and southern United States. On December 21, 2004, the Company successfully completed its initial public offering and elected to be treated as a self-advised REIT for federal income tax purposes. The Company conducts its business through Sotherly Hotels LP, its operating partnership (the "Operating Partnership"), of which the Company is the general partner. As of the filing date, the Company owns approximately 98.2% of the general and limited partnership units in the Operating Partnership. Limited partners own the remaining 1.8% limited partnership units in the Operating Partnership. As of December 31, 2023, our portfolio consisted of ten full-service, primarily upscale and upper-upscale hotels located in seven states with an aggregate of 2,786 hotel rooms, and interests in two condominium hotels and their associated rental programs. All of our hotels are wholly-owned by subsidiaries of the Operating Partnership and are managed on a day-to-day basis by Our Town Hospitality, LLC ("Our Town"). Our portfolio is concentrated in markets that we believe possess multiple demand generators and have significant barriers to entry for new product delivery, which are important factors for us in identifying hotel properties that we expect will be capable of providing strong risk-adjusted returns. In order for the Company to qualify as a REIT, it cannot directly manage or operate our hotels. Therefore, we lease our wholly-owned hotel properties to entities that we refer to as our "TRS Lessees", which are wholly-owned subsidiaries of MHI Hospitality TRS Holding, Inc. ("MHI Holding", and collectively with the TRS Lessees, the "MHI TRS Entit

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