Sotherly Hotels Inc. Announces Refinancing and Relaunch Plans for Jacksonville, FL Hotel

Rhea-AI Summary

Sotherly Hotels (NASDAQ: SOHO) has announced a secured loan with Fifth Third Bank for its DoubleTree by Hilton Jacksonville Riverfront hotel. The loan includes an initial principal balance of $26.25 million with an additional $9.49 million available for improvements. Additionally, Sotherly has signed a 10-year franchise agreement with Hilton Worldwide to rebrand the hotel as Hotel Bellamy. A complete renovation, costing $14.6 million, is planned, covering guest rooms, public spaces, and more, with completion expected by January 2027. CEO Dave Folsom highlighted that the refinance and relaunch will enhance the hotel's position in the Jacksonville market.

Positive

• Secured loan with Fifth Third Bank offers $26.25 million initial principal plus $9.49 million for improvements.
• 10-year franchise agreement with Hilton Worldwide.
• Comprehensive $14.6 million renovation to rebrand and upgrade the hotel.
• Strategic location and rebranding expected to strengthen market position.

Negative

• Renovation expected to complete only by January 2027, indicating a long-term investment period.

Insights

Financial Analyst

Sotherly Hotels Inc.'s recent execution of a secured loan and their refinancing plans for the Jacksonville Riverfront hotel bring several financial implications to light. The $26.25 million loan with additional funding capacity signals the Company's strategic move to leverage debt for substantial property enhancements. The loan's floating interest rate based on SOFR plus 3.0% introduces interest rate risk, which investors need to consider in the context of the current economic environment. The renovation cost of $14.6 million, funded partly through the loan, suggests a significant commitment to enhancing the property's value. This move could increase the hotel's competitive positioning and profitability, but it also increases the company's leverage. The 10-year franchise agreement with Hilton Worldwide offers stability and aligns with a reputable brand, potentially boosting occupancy rates. On balance, while the refinancing introduces some financial risk, it strategically positions the hotel for improved long-term performance.

Market Research Analyst

The relaunch and repositioning of the DoubleTree by Hilton Jacksonville Riverfront to Hotel Bellamy under a new 10-year franchise agreement with Hilton Worldwide is a significant strategic decision. The renovation plans, including a new riverfront dining concept and comprehensive upgrades to guestrooms and public spaces, are designed to appeal to both business and leisure travelers. With Jacksonville's market showing growth, particularly in tourism and business travel, the rebranding to a 'lifestyle' hotel aligns well with market trends. The strength of the Hilton reservation system will likely enhance the hotel's visibility and booking rates. However, the transformation's success depends on effective execution and local market dynamics. Investors should monitor occupancy rates and revenue per available room (RevPAR) post-renovation to gauge the relaunch's effectiveness.

Real Estate Expert

The complete renovation and rebranding of the DoubleTree by Hilton Jacksonville Riverfront indicate a strong commitment to revitalizing the property. The decision to invest $14.6 million in renovations, covering all key aspects from guestrooms to public spaces, is expected to significantly enhance the property’s market value. Jacksonville's downtown riverfront location is a prime spot and the addition of a new riverfront dining concept could attract both locals and tourists, potentially driving higher foot traffic and revenue. Such large-scale renovations typically increase property value and market appeal, making it a strategic long-term investment. However, investors should be aware of construction timelines and possible disruptions to current operations, which could temporarily impact revenue streams. The estimated completion by January 2027 marks a long-term vision, suggesting confidence in the area's growth potential.

WILLIAMSBURG, Va., July 09, 2024 (GLOBE NEWSWIRE) -- Sotherly Hotels Inc. (NASDAQ: SOHO) (the “Company”) today announced that the Company has executed a secured loan with Fifth Third Bank, collateralized by the DoubleTree by Hilton Jacksonville Riverfront hotel (the “Hotel”) in Jacksonville, FL. The loan, which carries a floating interest rate based on SOFR plus 3.0%, has an initial principal balance of approximately $26.25 million, with an additional $9.49 million available to fund a product improvement plan at the Hotel.

The Company also announced that it has entered into a new 10-year franchise agreement with Hilton Worldwide to relicense the Hotel as a soft-branded DoubleTree by Hilton under the name Hotel Bellamy. As part of its relaunch efforts for the Hotel, the Company will undertake a complete renovation of the property, with a cost of approximately $14.6 million and an estimated completion date of January 2027. Renovation plans for the property will include a complete reimagining of its guestrooms, public spaces, building exterior, pool and sun deck, existing food and beverage offerings, as well as the addition of a new riverfront dining concept.

“We are pleased to announce the completed refinance as well as the relaunch plans for our Jacksonville asset. Given the current lending environment, we view the completion of the refinancing of the mortgage loan for this Hotel with Fifth Third Bank as a positive outcome for the Company,” commented Dave Folsom, Chief Executive Officer of the Company. “The Hotel’s direct riverfront location is perfectly suited to reposition the Hotel as the first full-service lifestyle concept in the downtown Jacksonville market. We believe our repositioning strategy, coupled with the strength of the Hilton reservation system, will position the Hotel for success for years to come.”

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. Sotherly may also opportunistically acquire hotels throughout the United States. Currently, the Company’s portfolio consists of investments in ten hotel properties, comprising 2,786 rooms, as well as interests in two condominium hotels and their associated rental programs. The Company owns hotels that operate under the Hilton Worldwide and Hyatt Hotels Corporation 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.

FAQ

What recent financial move did Sotherly Hotels (SOHO) make for its Jacksonville hotel?

Sotherly Hotels secured a loan with Fifth Third Bank for its DoubleTree by Hilton Jacksonville Riverfront hotel, with an initial principal balance of $26.25 million and an additional $9.49 million for improvements.

What is the new franchise agreement for Sotherly Hotels' Jacksonville property?

Sotherly Hotels has entered into a new 10-year franchise agreement with Hilton Worldwide to rebrand the Jacksonville property as Hotel Bellamy.

How much will the renovation of Sotherly Hotels' Jacksonville property cost?

The renovation of the Jacksonville property will cost approximately $14.6 million.

When is the expected completion date for the renovation of Hotel Bellamy in Jacksonville?

The renovation is expected to be completed by January 2027.

What improvements are planned for the renovated Hotel Bellamy in Jacksonville?

Planned improvements include renovations to guestrooms, public spaces, the building exterior, pool and sun deck, existing food and beverage offerings, and a new riverfront dining concept.