GlobeNewswire Inc | Mar 4, 2021 06:30AM EST

March 04, 2021

WILLIAMSBURG, Va., March 04, 2021 (GLOBE NEWSWIRE) -- Sotherly Hotels Inc. (NASDAQ: SOHO), (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 year ended December 31, 2020. The Companys results include the following*:

Three Months Ended Year Ended December December December December 31, 2020 31, 2019 31, 2020 31, 2019 ($ in thousands except per ($ in thousands except per share data) share data)Total Revenue $ 14,586 $ 44,305 $ 71,503 $ 185,788 Net lossattributabletocommon (14,707 ) (3,419 ) (58,415 ) (5,911 )stockholders EBITDA (4,109 ) 7,745 (11,161 ) 41,887 Hotel EBITDA (1,921 ) 9,280 (3,224 ) 46,938 FFO attributable tocommon stockholders and (10,898 ) 1,754 (43,159 ) 14,763 unitholdersAdjusted FFOattributable to common (10,724 ) 951 (36,207 ) 17,164 stockholders andunitholders Net loss per common $ (1.02 ) $ (0.25 ) $ (4.08 ) $ (0.43 )shareFFO per common share and $ (0.70 ) $ 0.11 $ (2.78 ) $ 0.96 unitAdjusted FFO per common $ (0.69 ) $ 0.06 $ (2.33 ) $ 1.11 share and unit

(*) Earnings before interest, taxes, depreciation and amortization (EBITDA), hotel EBITDA, funds from operations (FFO) available to common stockholders and unitholders, adjusted FFO available to common stockholders and unitholders, FFO per common share and unit and adjusted FFO per common 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. The Company is the sole general partner of Sotherly Hotels LP, a Delaware limited partnership (the Operating Partnership), and all references in this release to the Company, Sotherly, we, us and our refer to Sotherly Hotels Inc., its Operating Partnership and its subsidiaries and predecessors, unless the context otherwise requires or it is otherwise indicated.

COVID-19 UPDATE

The impact of the COVID-19 pandemic on the hospitality industry has been significant, with demand for hotel rooms in all of the markets the Company operates significantly reduced and occupancy rates reaching historic lows. We continued to experience a substantial decline in our revenues, profitability, and cash flows from operations during the fourth quarter of 2020 on a year-over-year basis. While the extent and duration of the negative effects resulting from COVID-19 on the Companys business are highly uncertain and difficult to predict, we expect materially adverse effects on our operations and financial results to continue until travel and business restrictions are eased, travel orders are lifted, consumer confidence is restored, and a recovery of the lodging sector takes hold. The COVID-19 pandemic has also significantly increased economic uncertainty and has led to disruption and volatility in the global capital markets, which has limited our access to capital and has increased our cost of capital. We continue to follow the procedures and strategies that we introduced at the outset of the pandemic, including enhanced cleaning protocols as well as several cost reduction initiatives.

SECURED NOTE FINANCING

On December 31, 2020, we closed a transaction with KWHP SOHO, LLC, a Delaware limited liability company (KW), as collateral agent and an investor, and MIG SOHO, LLC, a Delaware limited liability company (MIG, and together with KW, the Investors), as an investor, whereby the Investors purchased $20.0 million in Notes from the Operating Partnership with an option to require the Investors to purchase an additional $10.0 million in Senior Secured Notes. We entered into the following agreements: (i) a Note Purchase Agreement; (ii) a Senior Secured Note with KW in the amount of $10.0 million and a Senior Secured Note with MIG in the amount of $10.0 million (collectively, the Notes); (iii) a Pledge and Security Agreement; (iv) a Board Observer Agreement; and (v) other related ancillary agreements. The Notes mature in 3 years and will be payable on or before the maturity date at the rate of 1.47x the principal amount borrowed during the initial 3-year term, with a 1-year extension at Companys option. The Notes also carry a 6.0% current interest rate, payable quarterly during the initial 3-year term.

ESTIMATED MONTHLY CASH USE

The Company estimates the average monthly cash use across its portfolio for the first quarter to be approximately $1.5 million based on the following assumptions:

-- Average hotel-level monthly positive cash flow of approximately $0.50 to $0.60 million; -- Corporate-level monthly G&A cash use of $0.50 to $0.55 million; -- Capital expenditures of approximately $0.30 million; and -- Corporate finance-related monthly cash use of $1.5 million, which includes principal and interest payments on the Companys outstanding mortgage debt.

HIGHLIGHTS

-- RevPAR. Room revenue per available room (RevPAR) for the Companys composite portfolio, which includes the Hyatt Centric Arlington and the rooms participating in our rental programs at the Hyde Resort & Residences and the Hyde Beach House Resort and Residences, during the three-month period ending December 31, 2020, decreased 62.3% over the three months ended December 31, 2019, to $38.54 reflecting a 52.6% decrease in occupancy and a 20.4% decrease in average daily rate (ADR). For the twelve-month period ending December 31, 2020, RevPAR decreased 60.8% over the twelve months ended December 31, 2019, to $44.28 driven by a 56.4% decrease in occupancy and a 10.1% decrease in ADR. -- Revenue. For the three-month period ending December 31, 2020, total revenue decreased 67.1% over the three-month period ending December 31, 2019. For the twelve-month period ending December 31, 2020, total revenue decreased 61.5% or by approximately $114.3 million to approximately $71.5 million, as compared to approximately $185.8 million for the twelve-month period ending December 31, 2019. -- Common Dividends. As approved by its Board of Directors, the Company has suspended its regular quarterly cash dividend in order to preserve liquidity. Accordingly, the Company did not pay a dividend on its common stock and common units for the quarter ended December 31, 2020. The Board of Directors will continue to monitor the situation and assess future quarterly common dividend declarations. Per the terms of the Companys preferred stock, the Company cannot make any common dividend payments unless full cumulative distributions have been declared and paid for past distribution periods for each series of preferred stock. -- Hotel EBITDA. The Company generated a deficit in hotel EBITDA of approximately $1.9 million during the three-month period ending December 31, 2020. Hotel EBITDA decreased 120.7%, or approximately $11.2 million, over the three months ended December 31, 2019. For the twelve-month period ending December 31, 2020, hotel EBITDA decreased 106.9%, or approximately $50.2 million, over the twelve months ended December 31, 2019. -- Adjusted FFO attributable to common stockholders and unitholders. For the three-month period ending December 31, 2020, adjusted FFO attributable to common stockholders and unitholders decreased 1,228.2%, or approximately $11.7 million, over the three months ended December 31, 2019. For the twelve-month period ending December 31, 2020, adjusted FFO attributable to common stockholders and unitholders decreased 311.0% or approximately $53.4 million over the twelve months ended December 31, 2019.

Dave Folsom, President and Chief Executive Officer, of Sotherly Hotels Inc., commented, The past yearwas the most difficult year inhistory for the lodging industryas well asour Company. Despite2020s unprecedentedoperating environment, we remaineddedicated to effectively managing the factors within our control, including mitigating risk, minimizing losses, and capitalizing on available opportunities. With the resolution of the presidential election and the rollout of the COVID-19 vaccine, we saw, and continue to see, material upticks in our business. Hospitalizations and infection rates, which continue to plummet, serve as positive indicators for the economy and the lodging markets. At the end of the year, we executed on a loan with an affiliate of the Kemmons Wilson Companies and a co-investor that provided much needed liquidity to Sotherlys balance sheet. The transaction allows Sotherly to continue to manage through the pandemic and positions us well for potential opportunities as the recovery progresses.

Balance Sheet/Liquidity

As of December 31, 2020, the Company had approximately $35.3 million of available cash and cash equivalents, of which approximately $10.0 million was reserved for real estate taxes, insurance, capital improvements and certain other expenses or otherwise restricted. The Company had principal balances of approximately $387.0 million in outstanding debt, net, including mortgage and secured and unsecured principal balances, at a weighted average interest rate of approximately 4.66%.

Other Developments

We have entered into various forbearance and loan modification agreements with our lenders for the mortgage loans secured by our hotels located in Laurel, MD, Savannah, GA, Wilmington, NC, Philadelphia, PA, Houston, TX, Jeffersonville, IN, Raleigh, NC, Tampa, FL, and Arlington, VA. These agreements generally allow us to defer payments of principal and interest for periods that began in April 2020 and that extend through to various dates ending between February 2021 and December 2021. We are currently in negotiations with the lender for the mortgage loan secured by the DoubleTree Resort by Hilton Hollywood Beach, in which we are in default, and may seek additional concessions from our lenders as existing payment extensions and deferrals expire, to the extent warranted by market conditions and the financial performance of our hotels. There can be no assurance that we will be able to reach agreement with all of our lenders or that additional concessions, if needed, can be negotiated on terms that are acceptable.

On October 14, 2020 we entered into a hotel management agreement with Our Town Hospitality, LLC (Our Town) for the management of the Hyatt Centric Arlington. Following the transition of the Hyatt Centric Arlington hotel to Our Town on November 15, 2020, Our Town manages each of the Companys twelve wholly-owned hotels, as well as our two condominium hotel rental programs.

2021 Outlook

Due to the uncertainties related to the COVID-19 pandemic and its impact on travel, the Company is unable to provide guidance for 2021.

Earnings Call/Webcast

The Company will conduct its fourth quarter 2020 conference call for investors and other interested parties at 10:00 a.m. Eastern Time on Thursday, March 4, 2021. The conference call will be accessible by telephone and through the Internet. Interested individuals are invited to listen to the call by telephone at 888-339-0107 (United States) or 855-669-9657 (Canada) or +1 412-902-4188 (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 March 4, 2021 through March 4, 2022. To access the rebroadcast, dial 877-344-7529 and enter conference number 10150991. A replay of the call also will be available on the Internet at www.sotherlyhotels.com until March 4, 2022.

About Sotherly Hotels Inc.

Sotherly Hotels Inc. 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 Companys portfolio consists of investments in twelve hotel properties, comprising 3,156 rooms, as well as interests in two condominium hotels and their associated rental programs. The Company owns hotels that operate under the Hilton Worldwide, Hyatt Hotels Corporation, and Marriott International, Inc. brands, as well as independent hotels. 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:

Mack SimsVice President Operations & Investor RelationsSotherly Hotels Inc.306 South Henry Street, Suite 100Williamsburg, Virginia 23185757.229.5648

Forward-Looking Statements

This news release includes forward-looking statements within the meaning of Section27A of the Securities Act of 1933, as amended, and Section21E 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.

Currently, one of the most significant factors that could cause actual outcomes to differ materially from the Companys forward-looking statements is the potential increased adverse effect of COVID-19 on the Companys business, financial performance and condition, operating results and cash flows, the real estate market and the hospitality industry specifically, and the global economy and financial markets. The significance, extent and duration of the impacts caused by the COVID-19 outbreak on the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, including the scope, severity and duration of the pandemic, the extent and effectiveness of the actions mandated and taken to contain the pandemic or mitigate its impact, the Companys ability to negotiate forbearance and/or modifications agreements with its lenders on acceptable terms, or at all, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified under the section titled Risk Factors in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2019 as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. Such additional factors include, but are not limited to, the ability of the Company to effectively acquire and dispose of properties; the ability of the Company to implement its operating strategy; changes in general political, economic and competitive conditions and specific market conditions; reduced business and leisure travel due to travel-related health concerns, including the widespread outbreak of COVID-19 or any other infectious or contagious diseases in the U.S. or abroad; adverse changes in the real estate and real estate capital markets; financing risks; litigation risks; regulatory proceedings or inquiries; and changes in laws or regulations or interpretations of current laws and regulations that impact the Companys business, assets or classification as a REIT. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the results or conditions described in such statements or the objectives and plans of the Company will be achieved. Additional factors which could have a material adverse effect on our operations and future 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; the adverse effect of the novel coronavirus on the U.S., regional and global economies, travel, the hospitality industry, and the financial condition and results of operation of the Company; risks associated with civil unrest or disorder that could adversely impact demand for hotel rooms in our markets or result in damage to our hotels; risks associated with the hotel industry, including competition and new supply of hotel rooms, increases in wages, energy costs and other operating costs; risks associated with adverse weather conditions, including hurricanes; the availability and terms of financing and capital and the general volatility of the securities markets; risks associated with the level of our indebtedness and our ability to meet covenants in our 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 our hotels; risks associated with maintaining our system of internal controls; risks associated with the conflicts of interest of the Companys officers and directors; risks associated with redevelopment and repositioning projects, including delays and cost overruns; supply and demand for hotel rooms in our current and proposed market areas; risks associated with our ability to maintain our franchise agreements with our third party franchisors; and our ability to maintain adequate insurance coverage.

Additional factors that could cause actual results to vary from our forward-looking statements are set forth under the section titled Risk Factors in our Annual Report on Form 10-K, in this report 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, December 31, 2020 2019 ASSETS Investment in hotel properties, net $ 427,824,585 $ 443,267,448 Cash and cash equivalents 25,297,771 23,738,066 Restricted cash 10,002,775 4,246,170 Accounts receivable, net 1,779,776 4,812,479 Accounts receivable - affiliate 401,924 101,771 Prepaid expenses, inventory and other 7,726,980 5,648,772 assetsDeferred income taxes ? 5,412,084 TOTAL ASSETS $ 473,033,811 $ 487,226,790 LIABILITIES Mortgage loans, net $ 357,545,977 $ 358,633,884 Secured notes, net 18,694,355 ? Unsecured notes, net 10,719,100 ? Accounts payable and accrued liabilities 36,133,642 20,189,903 Advance deposits 1,964,073 2,785,338 Dividends and distributions payable 4,277,070 4,210,494 TOTAL LIABILITIES $ 429,334,217 $ 385,819,619 Commitments and contingencies ? ? EQUITY Sotherly Hotels Inc. stockholders? equity Preferred stock, $0.01 par value, 11,000,000 shares authorized:8.0% Series B cumulative redeemableperpetual preferred stock,liquidation preference $25 per share, 16,100 16,100 1,610,000 shares issuedand each outstanding at December 31, 2020and 2019, respectively.7.875% Series C cumulative redeemableperpetual preferred stock,liquidation preference $25 per share, 15,546 15,546 1,554,610 shares issuedand each outstanding at December 31, 2020and 2019, respectively.8.25% Series D cumulative redeemableperpetual preferred stock,liquidation preference $25 per share, 12,000 12,000 1,200,000 shares issuedand each outstanding at December 31, 2020and 2019, respectively.Common stock, par value $0.01, 69,000,000shares authorized, 15,023,850shares issued and outstanding at December 150,238 142,723 31, 2020 and 14,272,378shares issued and outstanding at December31, 2019.Additional paid-in capital 180,189,699 180,515,861 Unearned ESOP shares (3,636,026 ) (4,105,637 )Distributions in excess of retained (127,663,127 ) (73,990,690 )earningsTotal Sotherly Hotels Inc. stockholders? 49,084,430 102,605,903 equityNoncontrolling interest (5,384,836 ) (1,198,732 )TOTAL EQUITY 43,699,594 101,407,171 TOTAL LIABILITIES AND EQUITY $ 473,033,811 $ 487,226,790

SOTHERLY HOTELS INC.CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)

ThreeMonthsEnded ThreeMonthsEnded Twelve Months Twelve Months Ended Ended December 31, 2020 December 31, 2019 December 31, December 31, 2020 2019 REVENUE Rooms $ 10,234,681 $ 29,501,291 $ 49,192,589 $ 128,062,932 departmentFood andbeverage 1,211,466 10,682,535 10,676,646 40,267,240 departmentOtheroperating 3,139,579 4,121,127 11,633,341 17,457,961 departmentsTotal revenue 14,585,726 44,304,953 71,502,576 185,788,133 EXPENSES Hoteloperating expensesRooms 3,531,401 7,877,548 15,565,313 32,142,171 departmentFood andbeverage 1,000,176 7,560,029 8,531,411 29,355,080 departmentOtheroperating 1,098,540 1,949,674 5,142,853 6,957,325 departmentsIndirect 10,876,907 17,638,106 45,487,308 70,395,633 Total hoteloperating 16,507,024 35,025,357 74,726,885 138,850,209 expensesDepreciationand 4,961,039 5,520,038 19,896,772 21,637,316 amortization(Gain) loss ondisposal of (500 ) 91,650 136,063 123,739 assetsCorporategeneral and 2,225,386 1,822,063 6,492,526 6,830,354 administrativeTotal hoteloperating 23,692,949 42,459,108 101,252,246 167,441,618 expensesNET OPERATING (9,107,223 ) 1,845,845 (29,749,670 ) 18,346,515 (LOSS) INCOMEOther income (expense)Interest (4,537,372 ) (4,652,502 ) (18,056,874 ) (19,768,193 )expenseInterest 31,943 86,883 210,426 444,459 incomeLoss on earlyextinguishment ? ? ? (1,152,356 )of debtUnrealized(loss) gain on (102,871 ) 377,053 (1,487,911 ) (1,177,871 )hedgingactivitiesGain onexercise of ? ? ? 3,940,000 developmentrightGain oninvoluntary 139,731 1,630 179,856 293,534 conversion ofassetsNet (loss)income before (13,575,792 ) (2,341,091 ) (48,904,173 ) 926,088 income taxesIncome tax(provision) 63,721 688,803 (5,280,443 ) 249,480 benefitNet (loss) (13,512,071 ) (1,652,288 ) (54,184,616 ) 1,175,568 incomeLess: Net lossattributableto 994,358 422,235 4,525,414 733,876 noncontrollinginterestNet (loss)income (12,517,713 ) (1,230,053 ) (49,659,202 ) 1,909,444 attributableto the CompanyDeclared andundeclareddistributions (2,188,910 ) (2,188,897 ) (8,755,642 ) (7,820,695 )topreferredstockholdersNet lossattributable $ (14,706,623 ) $ (3,418,950 ) $ (58,414,844 ) $ (5,911,251 )to commonstockholdersNet loss pershareattributable to commonstockholdersBasic $ (1.02 ) $ (0.25 ) $ (4.08 ) $ (0.43 )Weightedaverage numberof common sharesoutstandingBasic 14,366,399 13,695,964 14,312,049 13,642,573

SOTHERLY HOTELS INC.KEY OPERATING METRICS(unaudited)

The following tables illustrate the key operating metrics for the three and twelve months ended December 31, 2020 and 2019, respectively, for the Companys twelve wholly-owned properties (actual portfolio metrics), Accordingly, the actual data does not include the participating condominium hotel rooms of the Hyde Resort & Residences and the Hyde Beach House Resort & Residences. The composite portfolio metrics represent the Companys twelve wholly-owned properties and the participating condominium hotel rooms at the Hyde Resort & Residences and the Hyde Beach House Resort & Residences during the three and twelve months ended December 31, 2020 and the corresponding periods in 2019.

Three Months Three Months Year Ended Year Ended Ended Ended December 31, December 31, December 31, December 31, 2020 2019 2020 2019ActualPortfolio MetricsOccupancy % 31.9 % 67.5 % 31.7 % 71.3 %ADR $ 110.48 $ 150.50 $ 134.48 $ 155.92 RevPAR $ 35.25 $ 101.61 $ 42.59 $ 111.17 CompositePortfolio MetricsOccupancy % 31.1 % 65.7 % 30.6 % 70.1 %ADR $ 123.89 $ 155.57 $ 144.88 $ 161.17 RevPAR $ 38.54 $ 102.27 $ 44.28 $ 112.94

SOTHERLY HOTELS INC.SUPPLEMENTAL DATA(unaudited)

The following tables illustrate the key operating metrics for the three and twelve months ended December 31, 2020, 2019 and 2018, respectively, for each of the Companys wholly-owned properties during each respective reporting period, irrespective of ownership percentage during any period.

Occupancy

Q4 Q4 Q4 2020 2019 2018 YTD YTD YTD The DeSoto 38.3 % 62.9 % 56.5 %Savannah, Georgia 29.3 % 65.4 % 61.6 %DoubleTree by Hilton Jacksonville Riverfront 38.4 % 75.4 % 78.2 %Jacksonville, Florida 38.3 % 78.5 % 81.6 %DoubleTree by Hilton Laurel 32.0 % 65.2 % 66.4 %Laurel, Maryland 31.9 % 69.9 % 66.8 %DoubleTree by Hilton Philadelphia Airport 35.3 % 73.9 % 74.0 %Philadelphia, Pennsylvania 36.4 % 76.6 % 78.2 %DoubleTree by Hilton Raleigh Brownstone ?University 25.8 % 72.5 % 71.0 %Raleigh, North Carolina 27.0 % 76.3 % 74.8 %DoubleTree Resort by Hilton Hollywood Beach 44.0 % 69.5 % 62.6 %Hollywood, Florida 35.3 % 70.5 % 69.2 %Georgian Terrace 29.8 % 67.5 % 63.9 %Atlanta, Georgia 25.1 % 70.0 % 67.9 %Hotel Alba Tampa, Tapestry Collection by Hilton 36.9 % 61.8 % 64.7 %Tampa, Florida 34.8 % 66.2 % 71.9 %Hotel Ballast Wilmington, Tapestry Collection byHilton 25.0 % 60.3 % 64.2 %Wilmington, North Carolina 33.1 % 68.5 % 63.9 %Hyatt Centric Arlington ^(1) 20.7 % 74.8 % 74.8 %Arlington, Virginia 26.1 % 79.1 % 83.8 %Sheraton Louisville Riverside 42.8 % 65.0 % 58.5 %Jeffersonville, Indiana 43.6 % 67.9 % 60.6 %The Whitehall 15.8 % 56.0 % 54.6 %Houston, Texas 21.8 % 62.2 % 57.5 %Hyde Resort & Residences ^(2) 24.8 % 44.6 % 39.3 %Hollywood Beach, Florida 24.1 % 50.5 % 49.8 %Hyde Beach House Resort & Residences ^(2) 18.7 % 15.0 % - Hollywood Beach, Florida 11.7 % 15.0 % - All properties weighted average ^(1) 31.1 % 65.7 % 64.7 % 30.6 % 70.1 % 69.1 %

Includes operating results under previous ownership. Results for periods(1 ) prior to the Company?s ownership were provided by prior owners of the hotel and have not been audited or confirmed by the Company.(2 ) Reflects only those condominium units participating in our rental program for the period.

ADR

Q4 2020 Q4 2019 Q4 2018 YTD YTD YTD The DeSoto $ 134.31 $ 169.52 $ 173.37 Savannah, Georgia $ 150.24 $ 174.75 $ 177.19 DoubleTree by Hilton Jacksonville Riverfront $ 122.35 $ 137.96 $ 134.76 Jacksonville, Florida $ 135.19 $ 139.53 $ 139.84 DoubleTree by Hilton Laurel $ 84.16 $ 103.73 $ 104.12 Laurel, Maryland $ 89.92 $ 107.34 $ 107.98 DoubleTree by Hilton Philadelphia Airport $ 100.27 $ 145.10 $ 139.61 Philadelphia, Pennsylvania $ 110.37 $ 143.95 $ 139.25 DoubleTree by Hilton Raleigh Brownstone ?University $ 80.44 $ 140.45 $ 134.17 Raleigh, North Carolina $ 113.86 $ 139.73 $ 134.26 DoubleTree Resort by Hilton Hollywood Beach $ 90.64 $ 159.34 $ 168.37 Hollywood, Florida $ 162.97 $ 173.25 $ 175.18 Georgian Terrace $ 166.36 $ 193.56 $ 193.65 Atlanta, Georgia $ 186.04 $ 204.60 $ 186.28 Hotel Alba Tampa, Tapestry Collection byHilton $ 110.27 $ 124.16 $ 116.92 Tampa, Florida $ 137.75 $ 129.91 $ 124.72 Hotel Ballast Wilmington, TapestryCollection by Hilton $ 133.55 $ 157.48 $ 158.77 Wilmington, North Carolina $ 148.48 $ 161.50 $ 153.04 Hyatt Centric Arlington ^(1) $ 82.12 $ 176.80 $ 170.31 Arlington, Virginia $ 133.75 $ 188.15 $ 181.38 Sheraton Louisville Riverside $ 91.15 $ 106.39 $ 112.16 Jeffersonville, Indiana $ 96.84 $ 114.92 $ 122.62 The Whitehall $ 108.50 $ 142.79 $ 147.60 Houston, Texas $ 132.01 $ 143.33 $ 146.01 Hyde Resort & Residences ^(2) $ 341.56 $ 284.03 $ 299.46 Hollywood Beach, Florida $ 332.86 $ 295.49 $ 299.30 Hyde Beach House Resort & Residences ^(2) $ 341.76 $ 341.58 $ - Hollywood Beach, Florida $ 330.14 $ 341.58 $ - All properties weighted average ^(1) $ 123.89 $ 155.57 $ 154.60 $ 144.88 $ 161.17 $ 158.02

Includes operating results under previous ownership. Results for periods(1 ) prior to the Company?s ownership were provided by prior owners of the hotel and have not been audited or confirmed by the Company.(2 ) Reflects only those condominium units participating in our rental program for the period.

RevPAR

Q4 2020 Q4 2019 Q4 2018 YTD YTD YTD The DeSoto $ 51.45 $ 106.56 $ 97.91 Savannah, Georgia $ 44.03 $ 114.34 $ 109.21 DoubleTree by Hilton Jacksonville Riverfront $ 46.95 $ 104.03 $ 105.33 Jacksonville, Florida $ 51.77 $ 109.53 $ 114.06 DoubleTree by Hilton Laurel $ 26.97 $ 67.67 $ 69.16 Laurel, Maryland $ 28.69 $ 75.06 $ 72.09 DoubleTree by Hilton Philadelphia Airport $ 35.37 $ 107.16 $ 103.34 Philadelphia, Pennsylvania $ 40.22 $ 110.20 $ 108.88 DoubleTree by Hilton Raleigh Brownstone ?University $ 20.79 $ 101.80 $ 95.29 Raleigh, North Carolina $ 30.69 $ 106.63 $ 100.36 DoubleTree Resort by Hilton Hollywood Beach $ 39.87 $ 110.76 $ 105.47 Hollywood, Florida $ 57.45 $ 122.22 $ 121.19 Georgian Terrace $ 49.64 $ 130.56 $ 123.79 Atlanta, Georgia $ 46.73 $ 143.15 $ 126.56 Hotel Alba Tampa, Tapestry Collection byHilton $ 40.71 $ 76.79 $ 75.68 Tampa, Florida $ 47.98 $ 85.97 $ 89.73 Hotel Ballast Wilmington, Tapestry Collectionby Hilton $ 33.44 $ 94.93 $ 101.94 Wilmington, North Carolina $ 49.19 $ 110.58 $ 97.75 Hyatt Centric Arlington ^(1) $ 16.96 $ 132.25 $ 127.39 Arlington, Virginia $ 34.91 $ 148.77 $ 152.04 Sheraton Louisville Riverside $ 39.02 $ 69.13 $ 65.60 Jeffersonville, Indiana $ 42.20 $ 78.02 $ 74.25 The Whitehall $ 17.10 $ 79.96 $ 80.55 Houston, Texas $ 28.81 $ 89.18 $ 83.95 Hyde Resort & Residences ^(2) $ 84.59 $ 126.79 $ 117.83 Hollywood Beach, Florida $ 80.10 $ 149.36 $ 149.15 Hyde Beach House Resort & Residences ^(2) $ 63.79 $ 51.36 $ - Hollywood Beach, Florida $ 38.67 $ 51.36 $ - All properties weighted average ^(1) $ 38.54 $ 102.27 $ 100.10 $ 44.28 $ 112.94 $ 109.20

Includes operating results under previous ownership. Results for periods(1 ) prior to the Company?s ownership were provided by prior owners of the hotel and have not been audited or confirmed by the Company.(2 ) Reflects only those condominium units participating in our rental program for the period.

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

Three Months Three Months Year Ended Year Ended Ended Ended December 31, December 31, December 31, December 31, 2020 2019 2020 2019Net lossattributable to $ (14,706,623 ) $ (3,418,950 ) $ (58,414,844 ) $ (5,911,251 )commonstockholdersAdd: Net lossattributable to (994,358 ) (422,235 ) (4,525,414 ) (733,876 )noncontrollinginterestDepreciationand 4,943,329 5,504,805 19,825,382 21,578,309 amortization -real estateGain oninvoluntary (139,731 ) (1,630 ) (179,856 ) (293,534 )conversion ofassets(Gain) loss ondisposal of (500 ) 91,650 136,063 123,739 assetsFFOattributable tocommon $ (10,897,883 ) $ 1,753,640 $ (43,158,669 ) $ 14,763,387 stockholdersand unitholdersDecrease(increase) in ? (733,074 ) 5,412,084 (280,905 )deferred incometaxesAmortization 17,710 15,233 71,390 59,007 Termination fee 53,251 291,841 (19,709 ) 291,841 (refund)Loss on earlyextinguishment ? ? ? 1,152,356 of debtUnrealized loss(gain) on 102,871 (377,053 ) 1,487,911 1,177,871 hedgingactivitiesAdjusted FFOattributable tocommon $ (10,724,051 ) $ 950,587 $ (36,206,993 ) $ 17,163,557 stockholdersand unitholders Weightedaverage numberof shares 14,366,399 13,695,964 14,312,049 13,642,573 outstanding,basic Weightedaverage numberof 1,166,501 1,728,140 1,199,343 1,765,537 non-controllingunits Weightedaverage numberof shares and 15,532,900 15,424,104 15,511,392 15,408,110 unitsoutstanding,basic FFO per common $ (0.70 ) $ 0.11 $ (2.78 ) $ 0.96 share and unit Adjusted FFOper common $ (0.69 ) $ 0.06 $ (2.33 ) $ 1.11 share and unit

Three Months Three Months Year Ended Year Ended Ended Ended December 31, December 31, December 31, December 31, 2020 2019 2020 2019Net lossattributable $ (14,706,623 ) $ (3,418,950 ) $ (58,414,844 ) $ (5,911,251 )to commonstockholdersAdd: Net lossattributableto (994,358 ) (422,235 ) (4,525,414 ) (733,876 )noncontrollinginterestInterest 4,537,372 4,652,502 18,056,874 19,768,193 expenseInterest (31,943 ) (86,883 ) (210,426 ) (444,459 )incomeIncome taxbenefit (63,721 ) (688,803 ) 5,280,443 (249,480 )(provision)Depreciationand 4,961,039 5,520,038 19,896,772 21,637,316 amortizationDistributionsto preferred 2,188,910 2,188,897 8,755,642 7,820,695 stockholdersEBITDA (4,109,324 ) 7,744,566 (11,160,953 ) 41,887,138 (Gain) loss ondisposal of (500 ) 91,650 136,063 123,739 assetsLoss on earlyextinguishment ? ? ? 1,152,356 of debtGain onexercise of ? ? ? (3,940,000 )developmentrightGain oninvoluntary (139,731 ) (1,630 ) (179,856 ) (293,534 )conversion ofassetsSubtotal (4,249,555 ) 7,834,586 (11,204,746 ) 38,929,699 Corporategeneral and 2,225,386 1,822,063 6,492,526 6,830,354 administrativeUnrealizedloss (gain) on 102,871 (377,053 ) 1,487,911 1,177,871 hedgingactivitiesHotel EBITDA $ (1,921,298 ) $ 9,279,596 $ (3,224,309 ) $ 46,937,924

Non-GAAP Financial Measures

The Company considers the non-GAAP financial measures of FFO (including FFO per share), Adjusted FFO, EBITDA and hotel EBITDA to be key supplemental measures of the Companys performance and could be considered along with, not alternatives to, net income (loss) as a measure of the Companys performance. These measures do not represent cash generated from operating activities determined by generally accepted accounting principles (GAAP) or amounts available for the Companys 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 companys 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.

Adjusted FFO

The Company presents adjusted FFO, including adjusted FFO per share and unit, which adjusts for certain additional items that are not in NAREITs definition of FFO including changes in deferred income taxes, any unrealized gain (loss) on hedging instruments or warrant derivative, loan impairment losses, losses on early extinguishment of debt, aborted offering costs, loan modification fees, franchise termination costs, costs associated with the departure of executive officers, litigation settlement, over-assessed real estate taxes on appeal, management contract termination costs, operating asset depreciation and amortization, change in control gains or losses, and acquisition transaction costs. We exclude these items as we believe it allows for meaningful comparisons between periods and among other REITs and is more indicative than FFO of the on-going performance of our business and assets. Our calculation of adjusted FFO may be different from similar measures calculated 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) income tax provision or benefit, (4) equity in the income or loss of equity investees, (5) unrealized gains and losses on derivative instruments not included in other comprehensive income, (6) gains and losses on disposal of assets, (7) realized gains and losses on investments, (8) impairment of long-lived assets or investments, (9) loss on early debt extinguishment, (10) gains or losses on change in control, (11) gain on exercise of development right, (12) corporate general and administrative expense, (13) depreciation and amortization, (14) gains and losses on involuntary conversions of assets, (15) distributions to preferred stockholders and (16) other operating revenue not related to our wholly-owned portfolio. We believe this provides a more complete understanding of the operating results over which our 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 our hotels and the effectiveness of third-party management companies operating our business on a property-level basis. The Companys calculation of hotel EBITDA may be different from similar measures calculated by other REITs.