Hello, and welcome to the Sotherly Hotels First Quarter 2023 Earnings Call and Webcast. My name is Alex, and I will be coordinating the call today. I will now hand over to your host, Mack Sims, Vice President of Operations. Please go ahead.

Thank you, and good morning, everyone. If you did not receive a copy of the earnings release, you may access our website at sotherlyhotels.com. In the release, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. Any statements made during this conference call which are not historical may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will be attained. Factors and risks that can cause actual results to differ materially from those expressed or implied by forward-looking statements are detailed in today's press release and from time to time in the company's filings with the SEC. The company does not undertake a duty to update or revise any forward-looking statements. With that, I'll turn the call over to Scott.

Thanks, Mack. Good morning, everyone. I'll start off today's call with a review of our portfolio's key operating metrics for the quarter. Looking at the first quarter results for the same-store composite portfolio, RevPAR was $116.80 driven by an occupancy of 60.5% and an ADR of $193.03. First quarter RevPAR performance represents an increase of 16.3% over the same period in 2022, driven by a 10.8% increase in occupancy and a 5.6% increase in rate. Overall, we are pleased with our portfolio's first quarter results as we continue to transition to a more normalized mix of group, corporate, and leisure demand. During the first quarter, RevPAR was up by 8.7% compared to the first quarter 2019, although 2019 was a difficult comp that included the Super Bowl in Atlanta. Even with this one-time event, rates outpaced 2019 by 7.5% during the quarter. Stripping out Atlanta in the comparison, the remaining portfolio's RevPAR performance returned to 2019 levels, a notable milestone in the post-pandemic recovery. Our portfolio's recent booking trends for business and group travel demonstrate that demand from these segments continues to grow. For the group segment, our portfolio produced 58% more group business in the first quarter of 2023 compared to the same period in 2022. In addition, our portfolio produced 33% more business travel than the first quarter of last year. These gains in group and business travel demand came across the entire portfolio but were especially meaningful at our urban properties in Washington, D.C. and Houston, which posted the best year-over-year improvements in RevPAR performance for our portfolio at 96.5% and 51.3%, respectively. Notably, the Hyatt Centric and Arlington exceeded pre-pandemic levels of business travel revenue for the first time during the first quarter, capping off a remarkable recovery for the property. While this property is now fully recovered, we continue to have plenty of opportunities in other urban markets like Houston, Philadelphia, and Atlanta, which are continuing their road to recovery. Overall, we expect our urban markets to continue to improve as return-to-office rates, business travel, and international travel demand increase, which should help close the gap to pre-pandemic occupancy for those hotels. Our portfolio's overall leisure demand continued to perform well during the first quarter despite a slight moderation in demand for the South Florida market. Our portfolio's leisure demand growth was primarily driven by strong results in our leisure-focused coastal destinations such as Savannah, Tampa, and Wilmington, and was bolstered by improved leisure demand in our urban locations. During the first quarter, our hotels benefited from a number of citywide events, which have finally returned to pre-pandemic tenant levels. For example, the NCAA Men's Final Four in Houston and the Cherry Blossom Festival in Washington, D.C. boosted the results of our hotels in those markets during the quarter. Looking ahead, we continue to see encouraging booking trends with strong rates in the leisure segment. Looking at some highlights across the portfolio. The Hyatt Centric Arlington posted another solid quarter performance, showing steady sequential improvement relative to 2019, fueled by the improvement in group and business demand. This property reached an important milestone during the first quarter, exceeding pre-pandemic RevPAR for the first time, outpacing Q1 2019 RevPAR by 5.6%. Rate, which was up 9.7% compared to the first quarter of 2019, was a driver of this improvement. The property continues to outperform its competitive set, and during the quarter, the hotel achieved a RevPAR index of over 122%, gaining 10.6% RevPAR share. The DoubleTree Jacksonville Riverfront recorded excellent results during the quarter, exceeding prior year RevPAR by nearly 20%, fueled by a 10.1% improvement in occupancy and an 8.3% increase in rate. Results were driven by significant improvements in the corporate group and transient business traveler segments, which hovered near pre-pandemic levels during the quarter. The hotel outperformed its competitive set during the quarter, posting a RevPAR index of 113%. The DeSoto Savannah continues to be a standout performer for our portfolio, executing a strategy of a well-balanced mix of leisure and group business. During the quarter, the property easily outpaced 2019 metrics with an 18.7% gain in RevPAR, fueled by significant rate growth of 17.6%. Occupancy continues to ramp up with this property, providing a significant opportunity moving forward. Our management team achieved commendable profitability metrics during the first quarter by controlling variable costs and executing revenue management strategies aimed at driving higher rates. Hotel EBITDA margins for the first quarter of 2023 were flat to 2019. However, stripping out Atlanta due to the Super Bowl in 2019, our portfolio's hotel EBITDA margin expanded 550 basis points during the first quarter. We are pleased with these metrics, especially considering increased expense pressures from restaffing our hotels, higher utility rates, increased insurance costs, and the additional amenities that have been layered back into our properties. As expense pressures continue, margin control and effective revenue management will remain key areas of focus for our managers.

Thank you, Scott. Reviewing performance for the period ended March 31, 2023. For the first quarter, total revenue was approximately $43.5 million, representing an increase of 13.4% over the same quarter 2022. Comparing current performance to pre-pandemic levels, total revenue for the first quarter represented 91.8% of total revenue for the same period 2019. Hotel EBITDA for the quarter was approximately $12.1 million, representing an increase of 21.1% over the same quarter 2022. Comparing first quarter performance to pre-pandemic levels, hotel EBITDA represented 91.7% of hotel EBITDA for the same period in 2019. For the quarter, adjusted FFO was approximately $4.7 million, representing an increase of $3.4 million over the same quarter 2022. Comparing first quarter performance to pre-pandemic levels, adjusted FFO represented 94.2% of adjusted FFO for the same period in 2019. Please note that our adjusted FFO excludes charges related to the early extinguishment of debt, gains and losses on derivative instruments, charges related to aborted or abandoned securities offerings, ESOP and stock compensation expense, as well as other items. Hotel EBITDA excludes these charges as well as interest expense, interest income, corporate, general and administrative expenses, the current portion of our income tax provision, and other items as well. Please refer to our earnings release for additional detail. Looking at our balance sheet. As of March 31, 2023, the company had total cash of approximately $32 million, consisting of unrestricted cash and cash equivalents of approximately $23.4 million, as well as approximately $8.6 million which was reserved for real estate taxes, capital improvements, and certain other items. At the end of the quarter, we had principal balances of approximately $322.1 million and outstanding debt at a weighted average interest rate of 5.03%. Approximately 96% of the company's debt carried a fixed rate of interest after taking into account the company's interest rate swap agreements. In addition to the announcement made during the first quarter on the loan modification for our Houston hotel, last week, we announced the refinance of the mortgage on the DoubleTree by Hilton Hotel in Laurel, Maryland with Citi Real Estate Funding. The interest-only loan, which has a principal balance of $10 million, matures in May 2028 and maintains a fixed interest rate of 7.35%. As we enter a more normalized operating environment, we anticipate capital expenditures to be more in line with historical norms and estimate capital expenditures will be in the amount of approximately $7.3 million for calendar year 2023. We are resuming guidance with a forecast of anticipated results for the second quarter. Our guidance considers market conditions and accounts for current and expected performance within the portfolio. We're projecting total revenue in the range of $48.9 million to $51.3 million for the second quarter of 2023. At the midpoint of the range, this represents a 6.2% increase in total revenue in the same period a year ago. Hotel EBITDA is projected in the range of $15.6 million to $16.4 million, and at the midpoint of the range, this represents an 8.5% increase over hotel EBITDA in the same period last year. And adjusted FFO is projected in the range of $7.8 million to $8.5 million or $0.40 to $0.44 per share. At the midpoint of the range, this represents a 31.1% increase over adjusted FFO in the same period last year.

Thank you, Tony. Overall, our portfolio continued to perform well during the first quarter, and results were in line with our expectations, as sustained strength in leisure demand was coupled with accelerating demand from the group and business travel segments, especially in our urban locations. The demand growth in these urban markets was encouraging as these were the slowest to recover markets in our portfolio since the start of the pandemic. The Washington D.C. market has come back especially strong, with our hotel in Arlington, Virginia performing above pre-pandemic levels during the first quarter. Rate growth continues to be strong across the portfolio, particularly in our leisure-heavy markets such as Savannah, Wilmington, and Tampa. Thus far, this momentum in lodging fundamentals, which highlights a more normalized mix of business at our hotels, has been carried forward into the second quarter. Our ability to drive strong rates across the portfolio continues to be an important factor in both RevPAR growth and overall profitability. During the first quarter, the majority of our markets recorded significant rate growth over pre-pandemic levels, leading to excellent profitability metrics for our portfolio. Adjusted FFO, for example, finished at the high end of our guidance range. We were able to achieve these metrics despite higher costs associated with restaffing and reopening amenities at our hotels. In general, staffing at our fully recovered properties is hovering near pre-pandemic levels, while a few of our slower-to-recover urban properties are still staffed significantly lower. We have steadily been able to decrease the number of costly contract labor employees and fill those positions with full-time employees at our hotels, leading to overall improvement in our service levels and cost structure. As Tony mentioned, we recently announced the refinance of our DoubleTree Hotel located in Laurel, Maryland. We are pleased with that outcome, which allowed us to realize significant value created through the execution of a streamlined operating strategy. We view the favorable loan terms, which include payments nearly identical to the previous loan as well as considerable cash proceeds of approximately $2.7 million, as a positive for the company, particularly in light of the challenging lending environment. Previously, we announced the reinstatement of quarterly dividend payments for our preferred shareholders. This event represented a major milestone in the recovery of our operations. Additionally, reducing the amount of cumulative unpaid preferred dividends remains a top strategic priority for the company. Despite the uncertainties in the economy surrounding the banking crisis and a potential recession, we have not yet observed any material change in demand, although some of our markets have yet to fully recover to pre-pandemic levels. Our portfolio's outlook remains in line with our expectations from the beginning of the year, with 2023's group revenue pacing nearly 35% ahead of last year with a 12% rate premium. The business transient segment is steadily accelerating, pacing 22% ahead of last year. We believe this segment still has plenty of opportunity for growth in the back half of the year. Overall, we are pleased by the progress we are seeing in our operations so far this quarter with second quarter RevPAR forecasted to range between 97% and 101% of similar core RevPAR in 2019. We remain cautiously optimistic that these encouraging booking trends, as well as the tailwinds such as low supply growth and improved international travel, will continue to fuel our growth prospects moving forward. And with that, operator, we can open the call up for questions.

Our first question for today comes from a private investor.

Looks like a good quarter. Just a quick question. How are you guys thinking about asset, either dispositions or acquisitions? Kind of what are you seeing in the broader landscape for future transactions?

We disposed of a couple of assets in the recent past, which you're probably aware of, our hotel in Raleigh and Louisville. So we don't have any immediate plans for any dispositions. We obviously look at acquisition opportunities all the time, and we think that those opportunities might accelerate. How we fund those, how we finance those is really a function of the capital markets and our ability to attract capital. But to your point, I think there are going to be opportunities, and we obviously have a bias to grow the asset base of the company.

At this time, we currently have no further questions, so I will hand back to Dave Folsom, CEO for any further remarks.

Well, thank you, everyone, for joining us on the call, and we look forward to speaking with you again on our next quarterly review. Thank you very much.

Thank you for joining today's call. You may now disconnect your lines.