08.11.2016, 20:11
Sotherly Hotels Inc. Reports Financial Results for the Third Quarter Ended September 30, 2016
OREANDA-NEWS. 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 third quarter ended September 30, 2016.
HIGHLIGHTS:
RevPAR. Room revenue per available room ("RevPAR") for the Company’s wholly-owned properties during the third quarter 2016 increased 6.6% over the third quarter 2015 to $96.26 driven by a 1.5% increase in occupancy and a 5.0% increase in average daily rate ("ADR"). For the nine month period ending September 30, 2016, RevPAR increased 7.0% over the nine months ended September 30, 2015, to $101.69 driven by a 0.9% increase in occupancy and a 6.0% increase in ADR.
Common Dividends. As previously reported on October 25, 2016, the Company announced its quarterly dividend (distribution) on its common stock (and units) at $0.095 per share (and unit) to be paid on January 11, 2017 to stockholders (and unitholders) of record as of December 15, 2016.
Hotel EBITDA. The Company generated hotel EBITDA of approximately $9.1 million during the third quarter 2016, an increase of 14.1%, or approximately $1.1 million, over the third quarter 2015. For the nine month period ending September 30, 2016, hotel EBITDA increased 14.3%, or approximately $3.9 million, over the nine months ended September 30, 2015.
Adjusted EBITDA. The Company generated adjusted EBITDA of approximately $7.7 million during the third quarter 2016, a decrease of 39.4%, or approximately $5.0 million, over the third quarter 2015. Excluding the results from a one-time gain on change in control of approximately $6.6 million during the third quarter ended September 30, 2015, adjusted EBITDA for the third quarter 2016 increased 25.2%, or approximately $1.6 million, over the third quarter 2015. For the nine month period ending September 30, 2016, adjusted EBITDA decreased 11.4% or approximately $3.5 million over the nine months ended September 30, 2015. Excluding the results from a one-time gain on change in control of approximately $6.6 million during the nine months ended September 30, 2015, adjusted EBITDA for the nine month period ended September 30, 2016 increased 12.7%, or approximately $3.1 million, over the nine months ended September 30, 2015.
Adjusted FFO. The Company generated adjusted FFO of approximately $2.7 million during the third quarter 2016, an increase of 63.1% or approximately $1.1 million over the third quarter 2015. For the nine month period ending September 30, 2016, adjusted FFO increased 11.8% or approximately $1.4 million over the nine months ended September 30, 2015.
Andrew M. Sims, Chairman and Chief Executive Officer of Sotherly Hotels Inc., commented, "We posted solid quarterly results for the third quarter despite general headwinds in our region and negative market conditions in Houston and Miami. Year-to-date, we are pleased with the results given our relative peer group performance; however, Hurricane Matthew affected six of our hotels in early October, resulting in diminished results in a month that has historically been one of our strongest. Our outlook for the fourth quarter has been adjusted accordingly, which will require us to lower guidance for the year."
Balance Sheet/Liquidity
At September 30, 2016, the Company had approximately $32.3 million of available cash and cash equivalents, of which approximately $5.9 million was reserved for real estate taxes, insurance, capital improvements and certain other expenses or otherwise restricted. The Company had approximately $295.1 million in outstanding debt at a weighted average interest rate of approximately 4.83%.
On August 23, 2016, the Company sold 1,610,000 shares of 8% Series B Cumulative Redeemable Perpetual Preferred stock, for net proceeds after all expenses of approximately $37.8 million, which it contributed to the Operating Partnership for an equivalent number of preferred units.
On September 30, 2016, Sotherly Hotels LP redeemed the entire $27.6 million aggregate principal amount of its outstanding 8% Senior Unsecured Notes.
Portfolio Update
At the Company’s hotel in Atlanta, Georgia, an estimated $7.0 million guestroom renovation is complete. On September 24, 2015, the hotel became The Georgian Terrace by Sotherly, the first signature property of our premier boutique collection.
At the Company’s hotel in Savannah, Georgia, renovations of the guestrooms and public spaces totaling an estimated $8.2 million are underway. As of September 30, 2016, the Company had incurred costs totaling approximately $3.9 million toward this renovation. Renovations are expected to be complete in August 2017.
On September 14, 2016, we entered into a Commercial Unit Purchase Agreement and a related addendum to purchase the commercial unit of the Hyde Resort & Residences, a condominium hotel under development in the Hollywood, Florida market, for a price of $4.25 million from 4111 South Ocean Drive, LLC. The purchase agreement and addendum also includes the Company’s purchase of certain inventories consistent with the management and operation of the hotel and the related condominium association for an additional price of approximately $0.47 million. In connection with the closing, the Company intends to enter into a lease agreement for the 400-space parking garage and meeting rooms associated with the hotel, a management agreement relating to the operation and management of the hotel condominium association, and a pre-opening services agreement whereby the Seller will pay the Company a fee of $0.75 million for certain pre-opening preparations. The closing of the transaction is subject to various closing conditions.
Subsequent Events
On October 6, 2016, we entered into an agreement to sell the Crowne Plaza Hampton Marina to Marina Hotel, LLC for a price of $5.65 million. The Company may use the proceeds from the sale of the hotel to repay the existing first mortgage on the hotel and for general corporate purposes. The closing of the sale, which may occur in December 2016, is subject to various customary closing conditions.
On October 12, 2016, the Company entered into a loan agreement to secure a $20.5 million mortgage on The Whitehall with International Bank of Commerce. Pursuant to the loan documents, the loan: provides initial proceeds of $15.0 million, with an additional $5.5 million available upon the satisfaction of certain conditions, has a term of five years, bears a floating interest rate of the 30-day LIBOR plus 3.5%, subject to a floor rate of 4.0%, amortizes on an 18-year schedule after a 2-year interest only period, is subject to prepayment fees, and is guaranteed by Sotherly Hotels LP.
On November 3, 2016, the Company entered into a loan agreement to refinance the mortgage on the Sheraton Louisville Riverside with Symetra Life Insurance Company. Pursuant to the loan documents, the loan: provides proceeds of $12.0 million, has a maturity date of December 1, 2026, bears a fixed interest rate of 4.27% for the first 5 years of the loan with an option for the lender to reset that rate after 5 years, amortizes on a 25-year schedule, is subject to prepayment fees, and is guaranteed by Sotherly Hotels LP at 50% of the unpaid principal balance, interest, and other amounts owed.
On November 3, 2016, the Company entered into a loan agreement to modify and extend the $2.6 million mortgage on the Crowne Plaza Hampton Marina with TowneBank. Pursuant to the amended loan documents, the loan: continues to bear a fixed interest rate of 5.00%, has a maturity date of November 1, 2019, and beginning on December 1, 2016 requires monthly principal payments of $15,367 plus accrued unpaid interest.
2016 Outlook
The Company is updating its previously issued guidance for 2016, accounting for current and expected performance within its portfolio, taking into account (i) the impacts of hurricane Matthew, which affected our properties in Hampton, Virginia; Wilmington, North Carolina; Savannah, Georgia; and Jacksonville, Florida, and (ii) continued market weakness in Houston, Texas where the Company’s hotel was repositioned. The guidance is predicated on estimates of occupancy and ADR that are consistent with the most recent 2016 calendar year 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 2016, in thousands of dollars, except per share and RevPAR data:
HIGHLIGHTS:
RevPAR. Room revenue per available room ("RevPAR") for the Company’s wholly-owned properties during the third quarter 2016 increased 6.6% over the third quarter 2015 to $96.26 driven by a 1.5% increase in occupancy and a 5.0% increase in average daily rate ("ADR"). For the nine month period ending September 30, 2016, RevPAR increased 7.0% over the nine months ended September 30, 2015, to $101.69 driven by a 0.9% increase in occupancy and a 6.0% increase in ADR.
Common Dividends. As previously reported on October 25, 2016, the Company announced its quarterly dividend (distribution) on its common stock (and units) at $0.095 per share (and unit) to be paid on January 11, 2017 to stockholders (and unitholders) of record as of December 15, 2016.
Hotel EBITDA. The Company generated hotel EBITDA of approximately $9.1 million during the third quarter 2016, an increase of 14.1%, or approximately $1.1 million, over the third quarter 2015. For the nine month period ending September 30, 2016, hotel EBITDA increased 14.3%, or approximately $3.9 million, over the nine months ended September 30, 2015.
Adjusted EBITDA. The Company generated adjusted EBITDA of approximately $7.7 million during the third quarter 2016, a decrease of 39.4%, or approximately $5.0 million, over the third quarter 2015. Excluding the results from a one-time gain on change in control of approximately $6.6 million during the third quarter ended September 30, 2015, adjusted EBITDA for the third quarter 2016 increased 25.2%, or approximately $1.6 million, over the third quarter 2015. For the nine month period ending September 30, 2016, adjusted EBITDA decreased 11.4% or approximately $3.5 million over the nine months ended September 30, 2015. Excluding the results from a one-time gain on change in control of approximately $6.6 million during the nine months ended September 30, 2015, adjusted EBITDA for the nine month period ended September 30, 2016 increased 12.7%, or approximately $3.1 million, over the nine months ended September 30, 2015.
Adjusted FFO. The Company generated adjusted FFO of approximately $2.7 million during the third quarter 2016, an increase of 63.1% or approximately $1.1 million over the third quarter 2015. For the nine month period ending September 30, 2016, adjusted FFO increased 11.8% or approximately $1.4 million over the nine months ended September 30, 2015.
Andrew M. Sims, Chairman and Chief Executive Officer of Sotherly Hotels Inc., commented, "We posted solid quarterly results for the third quarter despite general headwinds in our region and negative market conditions in Houston and Miami. Year-to-date, we are pleased with the results given our relative peer group performance; however, Hurricane Matthew affected six of our hotels in early October, resulting in diminished results in a month that has historically been one of our strongest. Our outlook for the fourth quarter has been adjusted accordingly, which will require us to lower guidance for the year."
Balance Sheet/Liquidity
At September 30, 2016, the Company had approximately $32.3 million of available cash and cash equivalents, of which approximately $5.9 million was reserved for real estate taxes, insurance, capital improvements and certain other expenses or otherwise restricted. The Company had approximately $295.1 million in outstanding debt at a weighted average interest rate of approximately 4.83%.
On August 23, 2016, the Company sold 1,610,000 shares of 8% Series B Cumulative Redeemable Perpetual Preferred stock, for net proceeds after all expenses of approximately $37.8 million, which it contributed to the Operating Partnership for an equivalent number of preferred units.
On September 30, 2016, Sotherly Hotels LP redeemed the entire $27.6 million aggregate principal amount of its outstanding 8% Senior Unsecured Notes.
Portfolio Update
At the Company’s hotel in Atlanta, Georgia, an estimated $7.0 million guestroom renovation is complete. On September 24, 2015, the hotel became The Georgian Terrace by Sotherly, the first signature property of our premier boutique collection.
At the Company’s hotel in Savannah, Georgia, renovations of the guestrooms and public spaces totaling an estimated $8.2 million are underway. As of September 30, 2016, the Company had incurred costs totaling approximately $3.9 million toward this renovation. Renovations are expected to be complete in August 2017.
On September 14, 2016, we entered into a Commercial Unit Purchase Agreement and a related addendum to purchase the commercial unit of the Hyde Resort & Residences, a condominium hotel under development in the Hollywood, Florida market, for a price of $4.25 million from 4111 South Ocean Drive, LLC. The purchase agreement and addendum also includes the Company’s purchase of certain inventories consistent with the management and operation of the hotel and the related condominium association for an additional price of approximately $0.47 million. In connection with the closing, the Company intends to enter into a lease agreement for the 400-space parking garage and meeting rooms associated with the hotel, a management agreement relating to the operation and management of the hotel condominium association, and a pre-opening services agreement whereby the Seller will pay the Company a fee of $0.75 million for certain pre-opening preparations. The closing of the transaction is subject to various closing conditions.
Subsequent Events
On October 6, 2016, we entered into an agreement to sell the Crowne Plaza Hampton Marina to Marina Hotel, LLC for a price of $5.65 million. The Company may use the proceeds from the sale of the hotel to repay the existing first mortgage on the hotel and for general corporate purposes. The closing of the sale, which may occur in December 2016, is subject to various customary closing conditions.
On October 12, 2016, the Company entered into a loan agreement to secure a $20.5 million mortgage on The Whitehall with International Bank of Commerce. Pursuant to the loan documents, the loan: provides initial proceeds of $15.0 million, with an additional $5.5 million available upon the satisfaction of certain conditions, has a term of five years, bears a floating interest rate of the 30-day LIBOR plus 3.5%, subject to a floor rate of 4.0%, amortizes on an 18-year schedule after a 2-year interest only period, is subject to prepayment fees, and is guaranteed by Sotherly Hotels LP.
On November 3, 2016, the Company entered into a loan agreement to refinance the mortgage on the Sheraton Louisville Riverside with Symetra Life Insurance Company. Pursuant to the loan documents, the loan: provides proceeds of $12.0 million, has a maturity date of December 1, 2026, bears a fixed interest rate of 4.27% for the first 5 years of the loan with an option for the lender to reset that rate after 5 years, amortizes on a 25-year schedule, is subject to prepayment fees, and is guaranteed by Sotherly Hotels LP at 50% of the unpaid principal balance, interest, and other amounts owed.
On November 3, 2016, the Company entered into a loan agreement to modify and extend the $2.6 million mortgage on the Crowne Plaza Hampton Marina with TowneBank. Pursuant to the amended loan documents, the loan: continues to bear a fixed interest rate of 5.00%, has a maturity date of November 1, 2019, and beginning on December 1, 2016 requires monthly principal payments of $15,367 plus accrued unpaid interest.
2016 Outlook
The Company is updating its previously issued guidance for 2016, accounting for current and expected performance within its portfolio, taking into account (i) the impacts of hurricane Matthew, which affected our properties in Hampton, Virginia; Wilmington, North Carolina; Savannah, Georgia; and Jacksonville, Florida, and (ii) continued market weakness in Houston, Texas where the Company’s hotel was repositioned. The guidance is predicated on estimates of occupancy and ADR that are consistent with the most recent 2016 calendar year 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 2016, in thousands of dollars, except per share and RevPAR data:
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