On November 12, 2024, Sotherly Hotels Inc (SOHO, Financial) released its 8-K filing detailing the financial results for the third quarter ended September 30, 2024. Sotherly Hotels Inc is a self-managed and self-administered lodging real estate investment trust (REIT) focused on owning, acquiring, renovating, and repositioning upscale hotel properties in the mid-Atlantic and southern United States. The company generates revenue through rooms, food, beverage, and other services, with a presence in Florida, Georgia, Indiana, Maryland, North Carolina, Pennsylvania, Texas, and Virginia.
Performance Overview
For the third quarter of 2024, Sotherly Hotels Inc reported a total revenue increase to approximately $40.7 million, up from $39.2 million in the same period of 2023. Despite this growth, the company faced a net loss attributable to common stockholders of approximately $5.6 million, an increase from the $3.9 million loss reported in the third quarter of 2023. This increase in net loss highlights ongoing challenges in managing operational costs and market conditions.
Financial Achievements and Challenges
The company's Hotel EBITDA rose to approximately $8.1 million, compared to $7.6 million in the previous year, indicating improved operational efficiency at the property level. However, the Adjusted Funds From Operations (FFO) attributable to common stockholders and unitholders decreased significantly by 791.7% to a loss of approximately $0.3 million, reflecting the impact of increased expenses and market volatility.
Key Financial Metrics
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Total Revenue | $40.7 million | $39.2 million |
| Net Loss Attributable to Common Stockholders | $(5.6) million | $(3.9) million |
| Hotel EBITDA | $8.1 million | $7.6 million |
| Adjusted FFO | $(0.3) million | $0.1 million |
Operational Insights
Room revenue per available room (RevPAR) for the company's composite portfolio increased by 4.1% to $107.02, driven by a 7.8% rise in occupancy to 66.3%. However, the average daily rate (ADR) decreased by 3.4% to $161.37, indicating pricing pressures in the market. The company's ability to maintain occupancy levels while managing ADR will be crucial for future profitability.
Balance Sheet and Liquidity
As of September 30, 2024, Sotherly Hotels Inc reported approximately $32.5 million in available cash and cash equivalents, with $18.5 million reserved for specific expenses. The company had outstanding debt of approximately $321.3 million at a weighted average interest rate of 5.95%, highlighting the importance of effective debt management in the current economic climate.
Management Commentary
Dave Folsom, President and Chief Executive Officer of Sotherly Hotels Inc., commented, "In the third quarter, Sotherly’s portfolio continued to experience year-over-year growth in both total revenues and Hotel EBITDA, compared to the same period in 2023. Our refinancing of the mortgage at our Jacksonville Doubletree location was a major milestone and highlight for the Company in the quarter, given the current tough conditions in the mortgage and lending markets for commercial properties."
Conclusion
Sotherly Hotels Inc's third-quarter results reflect a mixed performance with revenue growth but increased net losses. The company's ability to navigate market challenges, manage operational costs, and leverage its refinancing efforts will be critical in achieving sustainable growth. Investors and stakeholders will be keenly observing how Sotherly Hotels Inc adapts to these challenges in the coming quarters.
Explore the complete 8-K earnings release (here) from Sotherly Hotels Inc for further details.
