Sotherly Hotels Inc. Completes Sale of Raleigh, NC Hotel, Partially Repays Corporate Debt

Rhea-AI Summary

Sotherly Hotels Inc. (NASDAQ: SOHO) has successfully closed the sale of the DoubleTree by Hilton Raleigh Brownstone for $42 million. This transaction, which achieved a 14.0x EBITDA multiple and a 6.2% cap rate based on 2019 results, will significantly improve the company's financial position. Proceeds will help repay existing mortgage debt and address preferred stock distributions necessary for maintaining REIT status. This sale is a transformative milestone for Sotherly as it focuses on recovery from the pandemic, bolstering its balance sheet and strategic goals moving forward.

Positive

• Sale of DoubleTree by Hilton Raleigh Brownstone for $42 million marks a significant achievement.
• Transaction completed at a premium valuation of 14.0x EBITDA multiple.
• Proceeds will reduce mortgage debt and improve overall leverage.
• Removal of near-term capex requirements allows focus on post-COVID recovery.
• Sale enhances optimism for company's future growth and financial health.

Negative

• None.

WILLIAMSBURG, Va., June 14, 2022 (GLOBE NEWSWIRE) -- Sotherly Hotels Inc. (NASDAQ: SOHO) (the “Company”) announced that the Company has closed on the sale of the DoubleTree by Hilton Raleigh Brownstone in Raleigh, North Carolina for $42.0 million. A portion of the proceeds from the sale were used to repay the first mortgage and repay a majority of the Kemmons Wilson secured note. Remaining proceeds will be used to make any required distribution on the Company’s preferred stock related to maintaining the Company’s REIT status and for general corporate purposes.

“We are extremely pleased to complete the sale of the DoubleTree by Hilton Raleigh Brownstone,” noted Dave Folsom, Chief Executive Officer of Sotherly. “The $42.0M above-market price equaled approximately a 14.0x EBITDA multiple and a 6.2% cap rate on 2019 results. The sale represents a transformative event for the Company, as it significantly reduces mortgage debt, repays expensive corporate leverage, while simultaneously removing near term capex required for life cycle improvements at the hotel. These events are all major milestones in restructuring our balance sheet, as our portfolio continues its recovery from the pandemic. Further, in making these important balance sheet improvements, and by removing significant near-term capital outlays, the Company can focus on additional post-COVID efforts, including its accrued and unpaid preferred dividends. The completion of this transaction brings renewed optimism for Sotherly, and we look forward to the ongoing lodging recovery, its effect on our business, and improvements to the health of our balance sheet.”

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 was the sale price of the DoubleTree by Hilton Raleigh Brownstone by Sotherly Hotels?

Sotherly Hotels sold the DoubleTree by Hilton Raleigh Brownstone for $42 million.

What EBITDA multiple did Sotherly Hotels achieve from the hotel sale?

The sale achieved a 14.0x EBITDA multiple.

What will the proceeds from the hotel sale be used for?

Proceeds will be used to repay mortgage debt and cover preferred stock distributions.

How does this hotel sale impact Sotherly Hotels' balance sheet?

The sale significantly improves Sotherly's balance sheet by reducing debt and eliminating near-term capital expenditures.

What is the cap rate associated with the sale of the hotel?

The cap rate for the sale was 6.2% based on 2019 results.