WILLIAMSBURG, VA—Sotherly Hotels Inc. has reported its consolidated results for the second quarter ended June 30, 2020, revealing RevPAR and revenue declines for the company.
Highlights:
- RevPAR for the company’s composite portfolio, which includes the Hyatt Centric Arlington and the rooms participating in its rental programs at the Hyde Resort & Residences and the Hyde Beach House Resort and Residences, during the three-month period ending June 30, 2020, decreased 89.9% over the three months ended June 30, 2019, to $12.91 reflecting a 86.2% decrease in occupancy and a 27.0% decrease in ADR. For the six-month period ending June 30, 2020, RevPAR decreased 59.6% over the six months ended June 30, 2019, to $50.50 driven by a 57.0% decrease in occupancy and a 6.0% decrease in ADR.
- Total revenue for the three-month period ending June 30, 2020, decreased 89.7% over the three-month period ending June 30, 2019. For the six-month period ending June 30, 2020, total revenue decreased 57.0% or by approximately $56.4 million to approximately $42.5 million, as compared to approximately $98.9 million for the six-month period ending June 30, 2019.
Dave Folsom, president/CEO of Sotherly Hotels Inc., said, “While March saw the pandemic unfold and impact both our company and the industry, the second quarter witnessed much broader effects and resulted in the worst financial operating quarter in the 63-year history of the company. The environment was characterized by mass cancellations and little to no pickup in reservations, while many of our markets were concurrently coming under siege from massive civil protests and disruptions. At the end of the first quarter we made difficult, but nonetheless needed, changes to staffing levels throughout the portfolio and at the corporate headquarters. Reduced staffing remains in effect and is expected to continue until demand resumes. In addition, we continue to seek extended payment terms and covenant waivers with our mortgage lenders. We have begun to see signs of demand returning, particularly with respect to the leisure segment at our properties. The pace of net cancellations has declined, and we believe this points to better booking trends in the future. New or expanded government assistance programs and policies, as well as prospective vaccine introduction, would have the potential to materially change the outlook for our industry moving forward. In the interim, challenges will remain for our portfolio and we will continue to take measures to address them.”
Additional Highlights:
- Hotel EBITDA: The company generated hotel EBITDA of approximately $(5.2) million during the three-month period ending June 30, 2020. Hotel EBITDA decreased 133.4%, or approximately ($20.8) million, over the three months ended June 30, 2019. For the six-month period ending June 30, 2020, hotel EBITDA decreased 100.5%, or approximately $(28.9) million, over the six months ended June 30, 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 June 30, 2020. The board of directors will continue to monitor the situation and assess future quarterly common dividend declarations. Per the terms of the company’s 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.
- Adjusted FFO available to common stockholders and unitholders: For the three-month period ending June 30, 2020, adjusted FFO available to common stockholders and unitholders decreased 285.3%, or approximately $(20.5) million, over the three months ended June 30, 2019. For the six-month period ending June 30, 2020, adjusted FFO available to common stockholders and unitholders decreased 241.6% or approximately $(28.9) million over the six months ended June 30, 2019.
“We effectively managed property staffing levels by implementing cross training programs and layering on personnel relative to the growth in demand. We believe our stay open strategy proves successful as revenue exceeds variable expenses for the quarter, and it enabled a quicker ramp up process, as demand grew in the latter part of the quarter,” Folsom said.
“In addition, we bolstered our balance sheet during the quarter by securing proceeds through the SBA’s Paycheck Protection Program. We continue to evaluate alternative sources of capital whether through government-sponsored programs or private equity partners to provide immediate liquidity to the company.”
Balance Sheet/Liquidity
As of June 30, 2020, the company had approximately $24.9 million of available cash and cash equivalents, of which approximately $6.4 million was reserved for real estate taxes, insurance, capital improvements and certain other expenses or otherwise restricted. The company had principal balances of approximately $369.9 million in outstanding debt, net, at a weighted average interest rate of approximately 4.59%.
Other Developments
Sotherly has entered into various forbearance and loan modification agreements with its lenders for the mortgage loans secured by its hotels located in Laurel, MD; Savannah, GA; Wilmington, NC; Philadelphia; Houston; Jacksonville, FL; Jeffersonville, IN; Raleigh, NC; Tampa, FL; and Arlington, VA. These agreements generally allow Sotherly to defer payments of principal and interest for periods beginning in April 2020 and extending through to various dates ending between June 2020 and March 2021. Sotherly is currently in negotiations with the lenders for the mortgage loans secured by its remaining hotels, including two 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 its 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.
