INVESTOR PRESENTATION - REITWeek 2018
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
INVESTOR PRESENTATION
REITWeek 2018
ABOUT
ABOUT SOTHERLY HOTELS
At Sotherly Hotels, we believe guests are the heart of
every hotel—so we make true Southern hospitality the
heart of everything we do. Every Sotherly Hotel
delivers a uniquely authentic local experience that lets
guests see, feel, taste and enjoy our cities to their
fullest.
Generations of experience have taught us that guests
want their hotel to feel like a natural extension of the
city — to seamlessly blend like a front porch into a
Southern night sky. They want to feel like “locals,” not
visitors. And that's exactly what we do. From first
hellos to fond farewells, our trademark Southern
charm is woven into every experience, making guests
feel so connected to and refreshed by our cities’
cultures that they’ll feel right at home. Because they
are.
Our guests are like family, and our passion for turning
moments into memories is the promise we make that
keeps them coming back time and time again. And at
the end of the day, we believe happy guests make for
happy shareholders.
| 3
NON-GAAP FINANCIAL MEASURES
This presentation included disclosure of non-GAAP measures,
including funds from operations (“FFO”), adjusted FFO
(“AFFO”), earnings before interest, taxes, depreciation and
amortization (“EBITDA”), adjusted EBITDA and hotel EDITDA.
The Company considers FFO, AFFO, EBITDA, adjusted
EBITDA and hotel EBITDA to be key supplemental measures of
the Company’s performance, and they should be considered along
with, but not as alternatives to, net income as a measure of the
Company’s operating performance. None of FFO, AFFO,
EBITDA, adjusted EBITDA and hotel EBITDA represent cash
generated from operating activities determined by GAAP and BOARD & BARREL @ HOTEL BALLAST WILMINGTON
should not be considered as alternatives to net income, cash flow
from operations or any other operating performance measure
prescribed by GAAP. None of FFO, AFFO, EBITDA, adjusted
EBITDA and hotel EBITDA are measures of the Company’s
liquidity, nor are FFO, AFFO, EBITDA, adjusted EBITDA and
hotel EBITDA indicative of funds available to fund the
Company’s cash needs, including its ability to make cash
distributions. Please refer to the Company’s filings with the SEC
and its earnings releases, which are available at
www.sotherlyhotels.com, for disclosure of the Company’s net
income, for reconciliations of FFO, AFFO, EBITDA, adjusted
EBITDA and hotel EBITDA to net income and for additional PART & PARCEL @ THE WHITEHALL HOUSTON
detail on the Company’s use of non-GAAP measures.
| 4
FORWARD-LOOKING STATEMENTS
This presentation includes “forward-looking statements” within the
meaning of Section 21E of the Securities Exchange Act of 1934 and
Section 27A of the Securities Act of 1933. Although the Company
believes that the expectations and assumptions reflected in the forward-
looking statements are reasonable, these statements are not guarantees of
future performance and involve certain risks, uncertainties and
assumptions, which are difficult to predict and many of which are
beyond the Company’s control. Therefore, actual outcomes and results
may differ materially from what is expressed, forecasted or implied in
such forward-looking statements. Economic conditions generally and the
real estate market specifically, management and performance of the
Company’s hotels, plans for hotel renovations, financing plans, supply
and demand for hotel rooms in the Company’s current and proposed
HYDE RESORT & RESIDENCES
market areas, the Company’s ability to acquire additional properties and
the risk that potential acquisitions may not perform in accordance with
expectations, legislative/regulatory changes, including changes to laws
governing taxation of real estate investment trust and competitions, and
other factors may affect the Company’s future results, performance and
achievements. These risks and uncertainties are described in greater
detail under “Risk Factors” in the Company’s Annual Report on Form
10-K and subsequent reports filed with the Securities and Exchange
Commission. The Company undertakes no obligation and does not
intend to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise.
Although we believe our current expectations to be based upon
reasonable assumptions, we can give no assurance that our expectations
will be attained or that actual results will not differ materially. DOUBLETREE BY HILTON RESORT
HOLLYWOOD BEACH
| 5
MANAGEMENT TEAM
• Chairman & CEO – Sotherly Hotels Inc.
• Served as Chairman & CEO since IPO in 2004
ANDREW SIMS • President of MHI Hotel Services from 1995–2004
• VP of Finance and Development for MHI Hotel Services from 1988–1995
Chairman & CEO
• Father, Edgar Sims Jr., founded company as Maryland Hospitality in 1957
• Bachelor of Science in Commerce from Washington & Lee University
• President, COO & Director – Sotherly Hotels Inc.
• Vice President of Paragon Real Estate (2005)
• Investment Banker, BB&T Capital Markets (2001–2005); lead underwriter on
DAVE FOLSOM SOHO’s IPO in 2004
President & COO • Commissioned officer in the U.S. Marine Corps
• Bachelor of Science from U.S. Naval Academy
• M.B.A. – Georgetown University
• CFO & Vice President – Sotherly Hotels Inc.
• CFO of SwissFone, Inc. (2001–2005)
TONY DOMALSKI • Spent several years in public accounting firm
Chief Financial Officer • 30 years as a Certified Public Accountant
• Bachelor of Science in Finance and Accounting from the University of Maryland
| 6
INDEPENDENT BOARD OF DIRECTORS
• Former Commanding General, First Marine Expeditionary Force with the U.S. Marine Corps
from 1994 - 1996; 39-year career
• Commander in Chief, U.S. Central Command from 1997 – 2000
GEN. ANTHONY
ZINNI • Former Chairman, BAE Systems
• Consultant in areas of defense, military, national security and foreign policy
• Founder & CEO of H. Walker Enterprises, a manufacturer and distributer of meat products
• Owner of Herschel’s Chicken and Ribs Kitchen
HERSCHEL J.
WALKER • Former NFL player and college standout and winner of the Heisman Trophy
• Audit Committee Chairman
• Founder of Guest Quarters
• Former head of marketing operations for George Kaufman real estate development group
DAVID J. BEATTY • Founder of Essex Commercial Mortgage in 1987
• Bachelor in Economics from Georgetown University
• Master’s Degree in Finance and Marketing from the University of Virginia’s Darden School
• Lead Independent Director and Chairman of the Nominating, Corporate Governance and
Comp. Committee
EDWARD S. STEIN • Founding Partner of Weinberg & Stein
• Harvard College (A.B. 1968) and the University of Virginia School of Law (J.D. 1974)
• Zollinger Professor of Finance at the William and Mary Mason School of Business
• Former professor at the Cornell University School of Hotel Administration
• Serves on editorial board of Cornell Hotel and Restaurant Administration Quarterly
G. SCOTT GIBSON IV • Published academic research in leading hospitality, real estate, and finance journals and press
• Bachelor of science and doctor of philosophy in finance from Boston College
| 7
PORTFOLIO
PORTFOLIO OVERVIEW
1 5 9 13
The Whitehall
14
Hyde Resort & Residences DoubleTree by Hilton DoubleTree by Hilton Laurel Hyde Beach House
Houston, TX (Miami, FL MSA) Raleigh Brownstone (Washington, DC MSA) (Under Development)
2
The Georgian Terrace
Atlanta, GA
6 Hyatt Centric Arlington
(Washington, DC MSA) 10 DoubleTree by Hilton
Jacksonville Riverfront
8
13
6
7 9
3 11
Crowne Plaza
7
The DeSoto Sheraton Louisville
4
Savannah, GA Riverside Tampa Westshore
2
3
10
4 8 1
DoubleTree by Hilton Resort
12
Hotel Ballast DoubleTree by Hilton
Wilmington, NC Philadelphia Airport 12 Hollywood Beach
(Miami, FL MSA)
11
5
14
| 9
PORTFOLIO OVERVIEW
Property Detail Key Operating Metrics (TTM 3/31/18)
Number Date of Chain/Class
(1) (2) (3)
Properties of Rooms Location Acquisition Designation Properties Occupancy ADR RevPAR
Wholly-owned Hotels Wholly-owned Hotels
The Whitehall by Sotherly Hotels 259 Houston, TX 11/13/2013 Upper Upscale(1) The Whitehall by Sotherly Hotels 56.1% $ 143.63 $ 80.65
The Georgian Terrace by Sotherly Hotels 326 Atlanta, GA 3/27/2014 Upper Upscale(1) The Georgian Terrace by Sotherly Hotels 67.9% $ 179.79 $ 122.11
The DeSoto by Sotherly Hotels 246 Savannah, GA 12/21/2004 Upper Upscale(1) The DeSoto by Sotherly Hotels 64.1% $ 163.03 $ 104.44
Hotel Ballast 272 Wilmington, NC 12/21/2004 Upscale Hotel Ballast 65.2% $ 150.66 $ 98.24
Hyatt Centric Arlington (2) 318 Rosslyn, VA 3/1/2018 Upper Upscale
Sheraton Louisville Riverside 180 Jeffersonville, IN 9/20/2006 Upper Upscale
Hyatt Centric Arlington(4) 88.4% $ 202.20 $ 178.77
DoubleTree by Hilton Philadelphia Airport 331 Philadelphia, PA 12/21/2004 Upscale Sheraton Louisville Riverside 62.4% $ 134.01 $ 83.61
DoubleTree by Hilton Brownstone-University 190 Raleigh, NC 12/21/2004 Upscale DoubleTree by Hilton Philadelphia Airport 76.0% $ 137.47 $ 104.47
DoubleTree by Hilton Jacksonville Riverfront 293 Jacksonville, FL 7/22/2005 Upscale DoubleTree by Hilton Brownstone-University 73.5% $ 132.74 $ 97.61
Crowne Plaza Tampa Westshore 222 Tampa, FL 10/29/2007 Upscale DoubleTree by Hilton Jacksonville Riverfront 80.7% $ 135.32 $ 109.20
DoubleTree Resort by Hilton Hollywood Beach 311 Hollywood, FL 7/31/2015 Upscale Crowne Plaza Tampa Westshore 80.3% $ 121.18 $ 97.31
DoubleTree by Hilton Laurel 208 Laurel, MD 12/21/2004 Upscale DoubleTree Resort by Hilton Hollywood Beach 70.8% $ 172.61 $ 122.22
Total Rooms in Wholly-owned Portfolio 3,156 DoubleTree by Hilton Laurel 65.0% $ 106.98 $ 69.53
Condominium Hotel Wholly-owned Portfolio Totals / Weighted Average 69.8% $ 146.14 $ 101.98
Hyde Resort & Residences(3) 215 Hollywood, FL 1/30/2017 Luxury(1) Condominium Hotel
(4) (5)
265 (4)
(4) Hyde Resort & Residences 39.8% $ 309.00 $ 122.91
Hyde Beach House (Under Development) Hollywood, FL Q2 2019 Luxury(1)
Total Rooms in Composite Portfolio
(5)
3,371 Composite Portfolio Totals / Weighted Average 67.8% $ 152.31 $ 103.33
(1) Operated as an independent hotel. (1) Average Occupancy is calculated by dividing the number of rooms sold by the total number of rooms available.
(2) Purchased March 1, 2018. (2) ADR is calculated by dividing the total daily room revenue by total daily rooms sold.
(3) We own the hotel commercial unit and operate a rental program. Reflects only those condominium units (3) RevPAR is calculated by multiplying ADR and average daily occupancy.
that were participating in the rental program as of December 31, 2017. (4) Purchased March 1, 2018
(4) Currently under contract to acquire upon completion. Final room count and actual completion date are (5) We own the hotel commercial unit and operate a rental program. Reflects only those condominium units that were
(5) Excludes Hyde Beach House currently under development. participating in the rental program as of December 31, 2017.
Portfolio Mix - Brands Portfolio Mix - Scale
9% 7%
6%
5% Independent
31% 40% Luxury
Hilton 54%
Upper Upscale
Marriott
48% Upscale
Hyatt
IHG
Source: Filings of Sotherly Hotels Inc.
| 10STRATEGY
SOHO STRATEGY
Diversified Investment Strategy Pinpoint Geographic Focus
Aggressive Asset Managers Value Creators
| 12SOHO STRATEGY
Focused Investment Criteria
Sotherly’s business model includes strategic growth through acquisitions of full-service, upscale and upper-upscale
hotel properties located in the primary markets in the Southern United States, specifically focused on the following:
• Focus on the top 25 markets of the Southern United States
• Management believes its target markets have been characterized by population growth,
Geographic Growth Markets economic expansion, growth in new businesses and growth in the resort, recreation and
leisure segments
• Focus on full-service hotels in the upscale to upper-upscale category
Full-Service Hotels • Management believes that full-service hotels in the upscale and upper-upscale segments
will outperform the broader U.S. hotel industry
Significant Barriers • Acquire properties in prime locations with significant barriers to entry
to Entry • Geographic exclusivity enhances and preserves hotel value
• Seek to acquire properties located in central business district markets near multiple
Proximity to Demand demand generators for both leisure and business travelers – the A location in each market
Generators • These generators include large universities, convention centers, corporate headquarters,
sports and entertainment venues and office space
| 13SOHO STRATEGY
Southern U.S. Demographic
Domestic migration indicates the Southern U.S. is
experiencing the largest increase in demographic trends
over the last ten years, as well as the most recent
year-over-year comparison
•Our target markets are the beneficiary of those trends
•Plan for continued growth within these markets
Positive net migration brings many benefits to the
local economy:
• Larger skilled workforce
• Diversification of skill sets
• Institutional and government spending
Focus on markets with strong employment drivers
that demonstrate the following characteristics:
• Recent corporate relocation
• Newly built production plants/facilities
• Established Fortune 500 companies
• Non-service-dependent markets
Current Markets
• Growing demand for lodging
Target Markets
| 14STRATEGIC INITIATIVES
• Enhanced guest experience via services and product upgrades
Focused Asset • Upbranding and planned repositioning of nearly 70% of
portfolio in last two years
Management • ADR growth and revenue quality
• Focus on direct sales and reservation cost management
• Access the capital markets in prudent fashion for a specific
Balance Sheet purpose when conditions permit – 2017 Perpetual Preferred
Management Stock offering to redeem Senior Unsecured Notes
• Lock in favorable interest rates and extend maturities
DOUBLETREE BY HILTON
RALEIGH BROWNSTONE
• Improve quality of existing portfolio – approximately $23.3
million in capital improvements completed in 2017
Capital Allocation • Share buy-back execution during market lag
• Dispose of non-core assets if and when market conditions
permit
• In QI 2018 completed the acquisition of the Hyatt Centric
Arlington in Rosslyn, Virginia
• Hyde Resort & Residences acquisition closed Jan. 2017
Grow Por tfolio • Hyde House purchase agreement executed in June 2017 for
Through Acquisitions closing in mid-2019
• Target markets include: Charleston (S.C.), New Orleans,
Nashville, Charlotte, Dallas, among others
• Attempt to source off-market deals when possible
Dividend Growth • Steady growth consistent with portfolio performance and
balance sheet improvement – increased 3 times in 2017 THE DESOTO SAVANNAH
| 15PERFORMANCE
YEARLY OPERATING PERFORMANCE
Revenue Per Available Room (RevPAR)
6.13% CAGR from 2013-2017 with continued g rowth in 2018
$110.00
$106.66
$105.00
$101.70
$100.00 $98.18
$95.00 $93.80
$90.00 $88.42
$85.00 $80.16
$80.00
$75.00
$70.00
$65.00
$60.00
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL GUIDANCE
2013 2014 2015 2016 2017 2018
Source: Filings of Sotherly Hotels Inc.
| 17YEARLY OPERATING PERFORMANCE
Hotel EBITDA (000’s)
15.19% CAGR from 2013-2017 with forecasted g rowth of 15.37% for 2018 Guidance
$50,000
$47,289
$45,000
$40,989
$40,013
$40,000
$36,447
$35,000
$32,113
$30,000
$25,000 $23,280
$20,000
$15,000
$10,000
$5,000
$0
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL GUIDANCE
2013 2014 2015 2016 2017 2018
Source: Filings of Sotherly Hotels Inc.
| 18YEARLY OPERATING PERFORMANCE
Hotel EBITDA Margin
Margin expansion expected to accelerate in 2018 due to rate g rowth in por tfolio
28.5%
28.1%
28.0%
27.5%
27.0%
26.6%
26.5% 26.3%
26.1%
26.2%
26.0%
26.0%
25.5%
25.0%
24.5%
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL GUIDANCE
2013 2014 2015 2016 2017 2018
Source: Filings of Sotherly Hotels Inc.
| 19YEARLY OPERATING PERFORMANCE
Total AFFO (000’s)
9.49% CAGR from 2013-2017 with continued g rowth in 2018
$17,000
$16,183
$15,664
$14,905 $15,100
$15,000
$14,254
$13,000
$10,898
$11,000
$9,000
$7,000
$5,000
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL GUIDANCE
2013 2014 2015 2016 2017 2018
Source: Filings of Sotherly Hotels Inc.
| 20YEARLY OPERATING PERFORMANCE
Total Shareholder Retur n
Outperfor med the industr y with 162.2% Total Retur n since beginning of 2013
vs. 53.8% for SNL US REIT Index
100.0%
85.6%
80.0%
60.0%
40.0%
32.0%
27.79%
18.8%
20.0%
10.18% 9.37%
6.1%
2.28% 1.39% 1.5%
0.0%
2013 2014 2015 2016 2017 YTD 2018
-2.75%
-20.0% -15.4%
-40.0% SOHO SNL REIT Index
Source: Filings of Sotherly Hotels Inc. & SNL Financial
| 21ORGANIC VALUE CREATION
Repositioning Summary
SOTHERLY PORTFOLIO STRENTHENING INITIATIVES
Over the Past 30 Months
$50.0m INVESTED +/- $50.0 M OVER PAST 30 MONTHS
THE GEORGIAN TERRACE
REPOSITIONED 7 HOTELS REPRESENTING +/-
70% 70% OF WHOLLY-OWNED PORTFOLIO*
1915 RENOVATED 1915 GUEST ROOMS
NEWLY DEVELOPED OR RECONCEPTED
15
FOOD & BEVERAGE OUTLETS
HOTEL BALLAST
Source: Filings of Sotherly Hotels Inc.
*By % of Guest Rooms; Excludes Arlington asset | 22ORGANIC VALUE CREATION – CONVERSION RESULTS
Jacksonville
CROWNE PLAZA
JACKSONVILLE RIVERFRONT
STRATEGIC RATIONALE AND CURRENT RESULTS
• Converted from Crowne Plaza to DoubleTree by Hilton Jacksonville
Riverfront on September 10, 2015 following complete property renovation
• $5.0 million renovation included significant upgrades to hotel public areas,
exterior, meeting rooms and banquet space, restaurant, fitness center, pool
area, and guest rooms
• Operating metric improvements to date (YE 2017):
• RevPAR – 44.1% increase from 2015 to 2017
• Fair Share – 32.6% increase from 2015 to 2017
• Hotel EBITDA – 116.9% increase from 2015 to 2017
Source: Filings of Sotherly Hotels Inc. & STR Global
| 23ORGANIC VALUE CREATION – CONVERSION RESULTS
Laurel
HOLIDAY INN LAUREL WEST
STRATEGIC RATIONALE AND CURRENT RESULTS
• Converted from Holiday Inn to DoubleTree by Hilton Laurel on October 22,
2015 following complete property renovation
• $4.5 million renovation included significant upgrades to hotel public areas,
exterior, meeting rooms and banquet space, restaurant, fitness center, and
guest rooms
• Fair Share - Operating metric improvements to date (YE 2017 to 2015):
• RevPAR – 52.7% increase from 2015 to 2017
• Fair Share 51.0% increase from 2015 to 2017
• Hotel EBITDA – 218.7% increase from 2015 to 2017
Source: Filings of Sotherly Hotels Inc. & STR Global
| 24ORGANIC VALUE CREATION – CONVERSION RESULTS
Atlanta
THE GEORGIAN TERRACE
STRATEGIC RATIONALE AND CURRENT RESULTS
• Converted to The Georgian Terrace by Sotherly on September 24, 2015 following a $6.89
million property renovation which included significant upgrades to hotel public areas and
guest rooms
• Since acquiring property, TripAdvisor ranking has steadily climbed from #75 to #14 of
175 hotels in Atlanta, allowing the hotel to take share by driving rate
• From first full year of ownership in 2015 to 2017, property has substantially improved
year-over-year results:
• RevPAR - 13.8% increase from 2015 to 2017
• Fair share - 7.9% increase from 2015 to 2017
• Hotel EBITDA – 13.3% increase from 2015 to 2017
Source: Filings of Sotherly Hotels Inc. & STR Global
| 25ORGANIC VALUE CREATION – CONVERSION RESULTS
Houston
CROWNE PLAZA
HOUSTON DOWNTOWN
STRATEGIC RATIONALE AND CURRENT RESULTS
• Converted from Crowne Plaza to The Whitehall by Sotherly on April 14, 2016
following complete property renovation
• $5.0 million renovation included the addition of an outdoor dining venue and
upgrades to hotel’s public areas, exterior, meeting rooms and banquet space,
restaurant, fitness center, pool area, and guest rooms
• Despite soft market conditions, property continues to see improved financial results:
• RevPAR – 17.4% increase between 2016 and 2017
• Fair Share 4.2% increase between 2016 and 2017
• Since converting to an independent, TripAdvisor ranking has steadily climbed from
#270 to #13 of 525 hotels in Houston
Source: Filings of Sotherly Hotels Inc. & STR Global
| 26ORGANIC VALUE CREATION – CONVERSION RESULTS
Savannah
HILTON SAVANNAH DESOTO
STRATEGIC RATIONALE AND CURRENT RESULTS
• Converted from Hilton Savannah DeSoto to The DeSoto by Sotherly on
August 1, 2017 following complete property renovation
• The $9.4 million renovation included substantial upgrades to hotel public
areas, exterior, meeting rooms and banquet space, restaurants, fitness center,
pool area, and guest rooms
• Hotel has been repositioned to outperform the market by driving ADR as
well as improved F&B revenue performance from two all-new signature
restaurants: 1540 Room and Edgar’s Proof & Provision
Source: Filings of Sotherly Hotels Inc.
| 27ORGANIC VALUE CREATION – CONVERSION RESULTS
Hollywood
CROWNE PLAZA HOLLYWOOD
BEACH RESORT
STRATEGIC RATIONALE AND CURRENT RESULTS
• Converted from Crowne Plaza to DoubleTree by Hilton Hollywood Beach
on October 26, 2017 following complete property renovation
• $7.0 million renovation included significant upgrades to hotel public areas,
exterior, meeting rooms and banquet space, restaurant, fitness center, pool
area, and guest rooms
• Following ramp up period, property is expected to outperform the market by
driving rate based on results experienced in other Crowne Plaza to
DoubleTree conversions
Source: Filings of Sotherly Hotels Inc.
| 28ORGANIC VALUE CREATION – CONVERSION RESULTS
Wilmington
HILTON WILMINGTON
RIVERSIDE
STRATEGIC RATIONALE AND CURRENT RESULTS
• Converted from Hilton Wilmington Riverside to Hotel Ballast, Tapestry by
Hilton on April 1, 2018 following complete property renovation
• $10.0 million renovation included significant upgrades to hotel public areas,
exterior, meeting rooms and banquet space, restaurant, fitness center, pool
area, and guest rooms
• Tapestry by Hilton flag will allow property to capture upscale clientele by
operating as the only boutique concept in the downtown Wilmington market
• As part of conversion, the F&B outlets have been repositioned with the
creation of Board & Barrel: A Coastal Kitchen and Buffalo Bayou Coffee
Source: Filings of Sotherly Hotels Inc. & STR Global
| 29ORGANIC VALUE CREATION – CONVERSION RESULTS
Tampa
CROWNE PLAZA TAMPA
WESTSHORE
STRATEGIC RATIONALE AND CURRENT RESULTS
• Plan to convert from Crowne Plaza to Hotel Alba, Tapestry by Hilton by
June 2019 following complete property renovation
• $11.0 million renovation to include a complete lobby reconfiguration and
significant upgrades to hotel public areas, exterior, meeting rooms and
banquet space, restaurant, fitness center, pool area, and guest rooms
• Crowne Plaza to Tapestry by Hilton conversion presents strong opportunity
to increase performance by driving ADR
• Branding strategy will fulfill need for a boutique property in the immediate
Westshore market
Source: Filings of Sotherly Hotels Inc.
| 30CAPITAL ALLOCATION - ACQUISITION ACTIVITY
Hyde Resort & Residences - Commercial Unit
DATE ACQUIRED: January 30, 2017
PURCHASE PRICE: $4.25 million
ELEMENTS OF DEAL: • Commercial Unit
• Lease on 400-space parking
garage and various meeting
spaces
• agreement to manage HOA for
fee
STRATEGIC RATIONALE AND CURRENT RESULTS
• Uniquely positioned to effectively underwrite and acquire the asset from
developer; SOHO Management has experience and understands condo-hotel
model - attractive opportunity to create outsized returns on modest
investment
• Hotel opened for business in late February 2017 with partial inventory as
developer continued to complete construction and close on condo sales;
process completed July 2017
• SOHO experienced a slow ramp-up during 2017 with 2018 being first full
year of performance and results for shareholders
• Close proximity to DoubleTree by Hilton Resort Hollywood Beach provides
for operational efficiencies and sales and marketing synergies
Source: Filings of Sotherly Hotels Inc.
| 31CAPITAL ALLOCATION - ACQUISITION ACTIVITY
Hyde Beach House Resort & Residences - Commercial Unit
PURCHASE
CONTRACT
June 2017
EXECUTED:
TARGET CLOSING: July 2019
PURCHASE PRICE: $5.1 million
ELEMENTS OF • Commercial Unit
DEAL:
• Lease on 700-
space parking
garage, meeting
spaces, front desk,
pool bar
• Agreement to
manage HOA for
fee
Source: Filings of Sotherly Hotels Inc.
| 32HOLLYWOOD SYNERGIES – CREATING LONG-TERM VALUE
OPPORTUNITIES UNVEILED
• By adding Hyde Resort & Residences to our portfolio, we
now have a complex encompassing over 500 guest rooms
in the South Florida market; once complete, the Hyde
Beach House will bring the total complex to over 700 guest
rooms.
• Provided opportunity to convert Crowne Plaza to
DoubleTree and take advantage of strength of Hilton
reservation system for primary investment while working
with Preferred Hotels & Resorts on the Hyde to provide a
luxury independent concept. The two properties can be
positioned and marketed to complement each other, while
operational efficiencies and economies of scale abound
• The amenities now available to all Sotherly guests includes
a luxury beach club, multiple F&B offerings, and spa
services
• As part of the Hyde Beach House development, the
developer is obligated to build a new upscale ballroom on
the site of the DoubleTree’s event tent, providing a
waterfront venue and substantially increasing the hotel’s
total meeting space
Source: Filings of Sotherly Hotels Inc.
| 33CAPITAL ALLOCATION - ACQUISITION ACTIVITY
Hyatt Centric – Arlington, VA
DATE ACQUIRED: March 1, 2018
PURCHASE PRICE: $79.7 million
Keys: 318
Price per Key: $250,630
STRATEGIC RATIONALE AND CURRENT RESULTS
• Ideally located in Rosslyn submarket of the dynamic Washington, DC lodging market;
prominently positioned as Rosslyn premier lodging option, located steps from Rosslyn
Metro station, 3 blocks from the Key Bridge, and surrounded by first class office space
• Rosslyn corridor is home to major corporations such as Carlyle Group, Raytheon, CEB,
Deloitte, BAE Systems, Grant Thornton and the new home to Nestle USA and Gerber’s
North American Headquarters
• Hotel was fully renovated in 2016 to convert to new Hyatt Centric brand, which is focused
on being the localized and experiential hub and catering to the next generation of travelers
• SOHO believes there is significant upside in the Rosslyn market as well as at the hotel-
level through additional rate growth, F&B and parking revenues, and operational
efficiencies.
• Key operating metrics for YE 2017 were:
• Occupancy 84%
• ADR $176.31
• RevPAR $148.13
• Hotel EBITDA $5.9 million
Source: Filings of Sotherly Hotels Inc.
| 34CAPITAL ALLOCATION
Share Buyback Program
DATE AUTHORIZED: December 2, 2016
CONCLUDES: December 31, 2018 (without
amendment)
SIZE AUTHORIZED: $10.0 million
SHARES REPURCHASED 882,820 (as of 12/31/17)
TO DATE:
TOTAL INVESTMENT: $5.9 million
STRATEGIC RATIONALE AND RESULTS
• The Company continues to view it’s stock as an attractive THE DESOTO SAVANNAH
investment opportunity and therefore has continued to manage
its capital allocation with that in mind.
• In 2017, after several acquisition opportunities did not
materialize, it was determined that utilizing the buyback
program was an appropriate use of cash on hand and executed
accordingly.
• Moving forward, the buyback program remains a viable option
for capital allocation at discounted prices, however
Management continues to believe that growth through
opportunistic acquisitions will produce the greatest returns for
shareholders over the long-term and will prioritize its
investment decisions with that in mind HYATT CENTRIC ARLINGTON
Source: Filings of Sotherly Hotels Inc.
| 35DIVIDEND STRATEGY
Steady Dividend Growth
Increased dividend by 16.4% over Sustainable payout with bias Strong yield ranked near top of all
prior year towards growth Lodging REITs
Quarterly Dividend Payments
Per Share ($0.00)
Dividend Yield (%)
0.120
0.115 as of 5/30/2018
0.1100.110
0.105 CDOR 7.8
0.100 HPT 7.3
0.0950.095
SOHO 7.1
0.090
0.085 AHT 6.5
0.0800.080 APLE 6.3
0.075
BHR 5.8
0.070
0.0650.065 RLJ 5.6
PK 5.4
HT 5.3
CHSP 5.0
INN 4.7
XHR 4.4
DRH 3.9
PEB 3.7
HST 3.7
LHO 2.6
SHO 1.2
0 2 4 6 8 10
Source: Filings of Sotherly Hotels Inc. & SNL Financial
| 36INVESTMENT HIGHLIGHTS
Longtime Relationships Strategic Focus on Select
With Industry Leaders Southern Markets
Stable Portfolio of
Experienced
High-Quality,
Management Team
Unique Properties
Diversified Investment
Prudent and Flexible
Thesis and Proven
Capital Structure
Track Record
| 37SOTHERLY HOTELS
410 West Francis Street
Williamsburg, Virginia 23185
(757) 229 – 5648
SOTHERLYHOTELS.COMYou can also read
