Good morning, everyone. Thank you for being with us for the Sotherly Hotels' Q3 2024 Conference Call and Webcast. My name is Carly and I will be coordinating the call today. Now, I will hand it over to your host Mack Sims, Vice President of Operations.

Thank you, and good morning, everyone. If you did not receive a copy of the earnings release, you may access it on 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 obtained. 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 third quarter. Looking at the third quarter results for the Composite portfolio compared to 2023, RevPAR increased 4.1%, driven by a 7.8% increase in occupancy and a 3.4% decrease in ADR. Looking at the third quarter results for the Composite portfolio relative to 2019, RevPAR increased 6.4%, driven by ADR growth of 10.9%, while occupancy was down 3.6%. Year-to-date, RevPAR performance represents an increase of 4.6% over the same period in 2023, driven by a 6.9% increase in occupancy and a 2.2% decrease in rate. Moving to the year-to-date results for the composite portfolio relative to 2019, RevPAR was up 5.3%, driven by ADR growth of 10.6% and occupancy decline of 4.9%. Overall, our portfolio's third quarter results driven by strong occupancy growth were in line with our expectations. Our portfolio's continued occupancy growth, highlighted by our slower to recover urban markets, is an encouraging sign that lodging fundamentals for our portfolio have stabilized. The quarter's notable occupancy gains were partially offset by a 3% decline in ADR as leisure travelers demonstrated price sensitivity due to signs of slowing economic growth. Two major storms occurred during the third quarter, affecting our operations in Florida and Georgia. Hurricane Debby, which occurred in early August, caused no significant damage to our hotels, but moderately impacted our operations in Tampa, Savannah, and Jacksonville. The more impactful storm during the third quarter, Hurricane Helene, which occurred during the last week of September, caused physical damage to our Tampa asset as well as substantial operational impact in Tampa, Jacksonville, and Savannah. The bulk of Hurricane Helene's financial impact on our Tampa asset will occur during the fourth quarter. I will detail this impact as well as the recovery process later in my remarks. Looking at some highlights across the portfolio. Despite the hurricane-related impact during the third quarter, Hotel Alba in Tampa posted commendable results, growing RevPAR by 13.6%, fueled by a 14.5% occupancy gain over the prior year. Hotel Alba continued its well-balanced approach during the third quarter with a mix of group, which grew by an impressive 54% year-over-year, along with growth from business travel and high-rated contracts. Driven by a 19.4% increase in occupancy share, Hotel Alba easily outperformed its competitive set during the quarter, growing its RevPAR index by 18.4%. As noted, the improved performance during the first half of the year at our urban locations continued during the third quarter. Our DoubleTree Hotel in Philadelphia grew RevPAR by 11% during the quarter, driven by a 15.7% gain in occupancy. The hotel's strong occupancy growth driven by increased business travel and a more robust citywide calendar led to a 220 basis point RevPAR share gain during the third quarter. The Whitehall in Houston built on strong second-quarter results, growing occupancy by 60.4%, resulting in a 51.9% growth in RevPAR over the prior year. The Whitehall's occupancy improvement was predominantly driven by growth in the transient business segment as well as improved citywide demand, an encouraging sign for the property's continued growth prospects. The Whitehall easily outperformed the competitive set during the quarter, improving its RevPAR share index by nearly 42%, driven by a 47.3% increase in occupancy share. The Hyatt Centric in Arlington continues to perform at a high level, growing RevPAR by 3.7% and outperforming budgeted expectations despite a slight rate decline during the quarter. The hotel achieved a strong 4.2% occupancy gain, drawing business from a number of diverse demand drivers in the market, especially group and transient business travelers. Looking at profitability metrics for the portfolio, Hotel EBITDA margins have stabilized with third quarter hotel EBITDA margin improving by 55 basis points over the prior year despite the moderate decline in rate for the quarter. The improvement in occupancy at our hotels in Houston, Philadelphia, and Atlanta balanced out the portfolio as rates declined, driving down the portfolio's average cost per occupied room while allowing for additional high-margin non-room revenue. Going forward, we expect normalized staffing and amenity levels along with stabilized wage costs, which are positively impacted by a decline in contract labor, to result in relatively stable margins. While Hurricane Helene occurred during the third quarter, the majority of its operational impact will take place during the fourth quarter of this year. The Category 4 hurricane caused the Tampa Bay area's largest storm surge on record, eclipsing the previous record by over 2 feet. Despite the storm's sizable impact, our operating team did a commendable job keeping the property open to residents seeking shelter from the storm. As a result of the storm surge, Hotel Alba sustained water intrusion on the first floor of the hotel, causing damage to furniture, finishes, and equipment in public areas and guest rooms as well as some building systems. Despite this damage, the hotel has remained open due to an expeditious effort to clean up and mitigate the damage, and full restoration is currently progressing at a good pace. We expect impact to operations at Hotel Alba as a result of Hurricane Helene through the first quarter of 2025. The physical impact to the hotel as well as the resultant business interruption are fully insurable events. A second major storm, Hurricane Milton, struck Florida just two weeks after Helene, causing major wind damage in the Tampa Bay area. As a result of the city's mandatory evacuation, Hotel Alba closed for approximately 48 hours before welcoming back displaced residents and first responders to the property. Fortunately, during Hurricane Milton, Hotel Alba did not sustain any additional damage to report. Turning now to corporate activity. In July, we announced that the company executed a secured loan on the DoubleTree by Hilton Jacksonville Riverfront hotel in Jacksonville, Florida. The loan, which carried a floating interest rate based on SOFR plus 3%, has an initial principal balance of $26.25 million with an additional $9.5 million available to fund the product improvement plan at the hotels. The company also announced that it has entered into a new 10-year franchise agreement with Hilton Worldwide to relicense our Jacksonville Hotel, 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 transformation of its guest rooms, public spaces, building exterior, pooling sundeck, existing food and beverage offerings, as well as the addition of a new Riverfront dining concept.

Thank you, Scott. Reviewing performance for the period ended September 30. For the third quarter, total revenue was approximately $40.7 million, representing an increase of 3.9% over the same quarter in 2023. Year-to-date, total revenue was approximately $137.9 million, representing an increase of 4.7% over the same period last year. Hotel EBITDA for the quarter was approximately $8.1 million, representing an increase of 6.8% from the same quarter in 2023, and year-to-date, hotel EBITDA was approximately $36.1 million, representing an increase of 4.8% over the same period last year. For the quarter, adjusted FFO was a deficit of approximately $350,000, representing a decrease of approximately $400,000 from the same quarter last year. Year-to-date, adjusted FFO was approximately $12.3 million, representing an increase of 5% over the same period in 2023. Please note that our adjusted FFO excludes charges related to the early extinguishment of debt, unrealized 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 also excludes these charges as well as interest expense, interest income, corporate, general and administrative expenses, realized gains and losses on derivative instruments, 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 September 30, the company had total cash of approximately $32.5 million, consisting of unrestricted cash and cash equivalents of approximately $14 million as well as $18.5 million, which was reserved for real estate taxes, insurance, capital improvements, and certain other items. At the end of the quarter, we had principal balances of approximately $321.3 million in outstanding debt at a weighted average interest rate of 5.95%. Approximately 84.5% of the company's debt carried a fixed rate of interest when taking into account the company's interest rate hedges. We anticipate routine capital expenditures for the replacement and refurbishment of furniture, fixtures, and equipment to be approximately $7.2 million for the calendar year 2024. As previously announced, we anticipate beginning a product improvement plan at the DoubleTree by Hilton, Philadelphia Airport this year, with anticipated capital expenditures related to this project to total approximately $3 million for the year. Turning to guidance. We're updating our previous guidance for 2024, accounting for current and expected performance within the portfolio, taking into account market conditions, the refinance of the mortgage on the DoubleTree by Hilton Jacksonville Riverfront, the second trust on the DeSoto Hotel in Savannah, and weather-related events, including Hurricane Helene. We're projecting total revenue in the range of $177.8 million to $180.1 million for the full year '24. At the midpoint of the guidance, this represents a 3% increase over the prior year. Hotel EBITDA is projected in the range of $45 million to $45.6 million. At the midpoint of the guidance, this represents a 1.1% increase over last year. Lastly, adjusted FFO is projected in the range of $12.8 million and $13.4 million or $0.65 to $0.68 a share. At the midpoint of this guidance, it represents a 9.8% decrease over the prior year. And I'll now turn the call over to Dave.

Thank you, Tony, and good morning, everyone. Overall, we were pleased with our portfolio's third quarter results, which were characterized by healthy business fundamentals with further occupancy improvement, particularly in our urban markets. The nearly 8% occupancy improvement over the prior year was highlighted by strong performances in Philadelphia and Houston, two slower to recover urban hotels, which continue to stabilize during the period. Despite a slower-than-expected summer leisure travel season, which was negatively impacted by disruptions from major storms, this moderation of leisure business was offset by strong group demand at our coastal drive markets. While our portfolio experienced some softening from a rate perspective during the quarter, we were very pleased with our managers' ability to achieve solid margins and bottom line growth while gaining RevPAR share versus our competitive sets. As Scott mentioned, during the last week of the quarter, we experienced a major casualty at our hotel in Tampa as a result of Hurricane Helene. Despite our hotel experiencing flooding on its ground floor that resulted in a material casualty to interior spaces and systems, the hotel remained open and remediation and restoration commenced immediately. Our staff and partners should be recognized for their commendable efforts in handling this event in a streamlined manner, which minimized the impact on operations. The hotel remains open, and while the timing remains a moving target, the company expects to recover lost revenues through business interruption insurance. The occupancy improvement at our urban locations during the third quarter is an encouraging sign that these hotels are nearing stabilization, following an uneven recovery period. In fact, during the third quarter, our three slow-to-recover hotels in Houston, Philadelphia, and Atlanta delivered nearly $1 million in bottom line growth over the prior year, validating our prior assumptions regarding the recovery of these assets. The Whitehall's 60% year-over-year occupancy gain is a testament to the hotel's refocused sales strategy as well as the improved health of the Downtown Houston market. Importantly, the hotel's two most valuable clients, located adjacent to the hotel, being Chevron and Kellogg Brown & Root have normalized to pre-pandemic levels. Additionally, group business at the Whitehall showed tremendous growth, improving by 92% over the prior year. Like the Whitehall, our DoubleTree Hotel at the Philadelphia Airport experienced a nearly 16% year-over-year increase in occupancy during the quarter as strong business travel was coupled with a more active citywide calendar. While the City of Philadelphia will likely continue to follow an uneven growth trajectory, this market is showing real progress following a slow recovery period coming out of the pandemic. Despite the strong performances of these hotels, there's plenty of upside opportunity with Philadelphia still tracking 900 basis points below 2019's occupancy level and Houston tracking 450 basis points behind 2019's RevPAR. Though the Georgian Terrace in Atlanta experienced lower-than-expected ADR during the quarter, the hotel's management team was able to maintain solid flow and deliver excellent bottom line results. Contributing to the solid bottom line results for the Georgian Terrace was the group's segment at this hotel, which grew an impressive 19% over the prior year. Moving forward, we believe that Georgian Terrace has plenty of growth opportunities as its third quarter occupancy rate was still more than 1,400 basis points below the comparable period in 2019. Looking at the total portfolio, the group's picture remains solid for the balance of the year with full year bookings pacing 5.7% ahead of the prior year. On the balance sheet front, during the quarter, we were encouraged by the successful refinancing of our Jacksonville hotel, allowing us to meet our capital and funding needs for its life cycle improvement plan. We view the refinance terms with Fifth Third Bank as a favorable outcome, especially given the challenging conditions in the mortgage and lending markets for commercial properties. We believe our repositioning strategy to a lifestyle hotel will allow the hotel to become more competitive in the dynamic downtown Jacksonville market, which we believe is poised for significant growth over the next several years. This repositioning strategy will be similar to the recent strategy employed at the Hotel Alba in Tampa, which has created significant value. Looking ahead, we will continue to conservatively approach upcoming debt maturities for our portfolio, which are spread evenly over the next few years. As we look at the fourth quarter of 2024, we are cautiously optimistic regarding operating fundamentals for the balance of the year. Upscale and upper upscale hotels are expected to outperform the broader lodging market in the near term, an encouraging indicator for our portfolio. Preliminary October RevPAR shows a 6.1% improvement over the prior year, fueled by continued improvement at our urban hotels, coupled with solid group production across the portfolio. Full year 2024 RevPAR for our portfolio is forecasted to range between 102% and 104% of full year 2023 RevPAR. We believe that our portfolio of well-positioned hotels, lifted by continued growth in the group and business transient segments, will deliver strong returns for our shareholders. And with that, operator, we can open the call up for any questions.

Thank you. We will now begin the Q&A session. Our first question comes from Alexander Goldfarb of Piper Sandler. Alexander, you may now ask your question.

Hey, good morning, down there. Dave, it sounds like everything is sort of back to 2019. I think that's what you guys said, good improvement in urban, business group, everything. So, is that a fair statement? Do you think that the portfolio overall is back to 2019? Or do you think it's maybe even exceeding where you were performing in 2019?

Well, I think one of the things that I mentioned, and so did Scott and maybe Tony as well, was we still have a lot of room left in the occupancy column, and that's where the growth is going to be for our portfolio as we continue to get additional group bookings, additional business transient bookings, and continue to round out what was once the RevPAR. So I think throughout the portfolio, we're seeing the opportunity to get our occupancy back online. It's still far underperforming compared to 2019.

Okay. And then can you just go back through the hurricane damage? I think, Scott, you mentioned it's more of an impact in the fourth quarter. Can you just explain how that works as far as what we'll see in earnings? And also what's in earnings versus what's on the back end, meaning insurance recovery that doesn't flow through earnings, but that you'll be reimbursed?

Yeah. I'll let Scott give you the blow by blow, but the short answer is we're going to report the P&L for the hotel into our earnings, and at the same time, as the quarters unfold, we're going to have business interruption that will be a payment that will also appear at the corporate level. There might be a lag of two to three months depending on how the carriers respond to true everything up. But the short answer is we're going to have some impairment at the hotel because of the casualty, and you will see that impairment recovered in the form of business interruption insurance at a later time. It's not going to be a year from now, it might be 30 or 60 or 90 days. And if it all happens in the same quarter, then it will be transparent to everybody.

But can you provide some specific numbers? Is it around $0.01, $0.02, or $0.03, just so we have a clear idea?

We had two hurricanes in the third quarter that impacted several properties in our portfolio. Aside from Tampa, these incidents were not insured, resulting in lost business during the storms. This translates to about $0.01 in lost AFFO for the company in the third quarter, which is not recoverable and solely a result of the storms. Regarding Tampa, we do not expect to factor the damage from Hurricane Helene into our guidance, as we anticipate receiving business interruption proceeds by the end of the third quarter to account for that. When we report the fourth quarter, we expect those proceeds to cover any lost income, essentially making us whole. If this does not occur, we will provide a detailed explanation of the variances and our expectations. Currently, we are not adjusting our guidance based on the ongoing impact of the hurricane in Tampa.

This is Tony, and I think where you might see a little bit of impact is on the top line because when you get reimbursed for business interruption, you don't get reimbursed for the revenue, you get reimbursed for the net profit. And we're expecting by the time we report earnings in late February, maybe the first of March, then we'll have gone through that process with our carriers, and we'll have a good picture as to what that amount of recovery was for the fourth quarter. We do expect that it will be approximately what we had expected to earn. I don't think this fourth quarter would have been an aberration to the last year's financial performance for the property. So I think we'll be able to get the carriers on board for that. So, as Scott said, we really don't expect to see any impact on hotel EBITDA. We don't expect to see any impact on FFO. We don't expect to see any impact on adjusted FFO for Hurricane Helene and the resultant loss of business.

Okay. That's helpful. And then just the final question. Can you walk through the reasoning behind the second mortgage on the DeSoto? This has been a topic we've discussed for quite some time, but I would think the goal would be to gradually reduce leverage. I'm curious about the $5 million second mortgage and whether this is related to an improvement package or the thoughts behind it.

Yeah, it's directly related to some improvements to the property. We had an exterior restoration project that's been going on for a couple of years now at that property, essentially replacing all the brick facade of the building, which was due for a major restoration project. So ultimately, we worked with the lender to increase the leverage a little bit on that to help fund that project. That hotel has a ton of equity built up in it, and it's still a low leverage point on the asset. But ultimately, it was solely tied to that restoration project. So the dollars we pulled out from financing went back into the asset.

Okay. Thank you.

Thanks, Alex.

Thank you. We currently have no further questions. So I would like to hand back to Dave Folsom, CEO, for any closing remarks.

Thank you, operator, and thanks to everyone for listening today, and we'll talk to you next quarter.

This concludes today's call. Thank you to everyone for joining. You may now disconnect your lines.