Good morning, all, and thank you for joining us for the Sutherly Hotels Q1 2025 conference call and webcast. My name is Carly, and I'll be coordinating the call today. If you'd like to register a question during the call, you can do so by pressing star followed by 1 on your telephone keypad, and to remove yourself with any questioning, we'll be star followed by 2. And then I'll hand over to our host, Scott Kiginski, Chief Operating Officer of Sutherly Hotels. The floor is yours.

Thank you, and good morning, everyone. If you do not receive a copy of the earnings release, you may access it on our website at southerlyhotels.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 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 said, I'll start off today's call with a review of our portfolio's key operating metrics for the first quarter. Looking at the first quarter results for the actual portfolio compared to 2024, REVPAR increased 6.4%, driven by a 6.4% increase in occupancy, with ADR flat prior year. Stripping out Tampa from the results due to continued impact of the property from Hurricane Helene, which struck Tampa in late September 2024. The first quarter's actual portfolio, RevPar, increased a healthy 7.3 percent compared to prior year, driven by a 7.5 percent increase in occupancy. Overall, we delivered a solid first quarter with results ahead of our internal expectations. The outperformance was largely driven by strong year-over-year occupancy growth, which reflects continued momentum across the portfolio. Importantly, we saw the most pronounced gains in our urban markets, many of which have been slower to rebound post-pandemic. That strength is a clear indication that lodging fundamentals have stabilized and demand patterns have normalized across segments and markets. In addition to growth in the group segment, our urban markets were buoyed by special events during the quarter, including the presidential inauguration in Arlington, NFL playoffs in Philadelphia, and the College Football National Championship in Atlanta. Turning to rate, we're encouraged by the stabilization we saw during the first quarter. After experiencing multiple quarters of sequential rate declines, ADR held steady across most of the portfolio, particularly in our top performing business travel and group markets. As previously noted, Hotel Alba in Tampa continue to experience operational disruption from Hurricane Helene during the first quarter as the hotel's elevators remain impaired from flood damage. They anticipate the elevator restoration to take several months to complete. Therefore, that impact will continue through at lease at the end of the second quarter. From a reporting standpoint, our headline operating metrics, ADR, occupancy, and RevPAR, reflect the storm-related disruption at Hotel Alba on a pre-insurance basis. However, our reported revenue and profitability metrics do include business interruption insurance proceeds, which helps offset the financial impact during the quarter. We'll get some highlights from a few key assets in the portfolio during the quarter. Starting with the Doubletree Resort in Hollywood, Florida, the property delivered strong year-over-year results with REVPAR up 11.9%. This growth was primarily driven by an 11.8% increase in occupancy, supported by healthy weekend transient demand, better-than-expected banquet performance, and solid group bookings. The hotel gained significant ground on its comp set, posting a 12.9% increase in REVPAR index, driven by a 9.5% gain in occupancy share. Hotel Ballast in Wilmington posted another strong quarter, outperforming both budgeted and prior year results. The hotel achieved REVPAR growth of 6.5% year-over-year, supported by a 3.5% increase in occupancy and a 2.9% increase in rate. Continued strength in group business, along with robust banquet and catering revenue, contributed to the outperformance. Hotel Ballast maintained a strong position against this comp set, with a REVPAR index of 115.3%. Turning to the Whitehall in Houston. The property continued its recovery with first quarter RevPAR increasing 19.4% year-over-year, driven by a 20.5% gain in occupancy. Strong citywide demand, business transient volume, and healthy group bookings all support the hotel's performance. The Whitehall took meaningful share from its competitive set during the quarter, gaining more than 6% RevPAR share, fueled by strong occupancy share improvement of 12.6%. Finally, the Doubletree Philadelphia Airport saw significant momentum in the quarter, with RevPAR up 34.3%, driven by a 38.7% increase in occupancy. Although rate declined 3.1%, the overall result reflects strong demand improvement across the sub-market, including increased air traffic and citywide events. Notably, group business increased nearly 158% over prior year, a testament to the recharged sales efforts at the hotel that capitalized on a number of short-term bookings during the quarter. As a result of these efforts, the hotel significantly outperformed its comp set with an impressive 25.2% gain in occupancy share. Looking at portfolio profitability, hotel EBITDA across our entire portfolio increased 4.5% over prior year. However, when stripping out the one-time benefit of a $550,000 COVID-related grant received in Savannah in Q1 2024, hotel EBITDA increased a healthy 9.4% over prior year. This translates to a strong 100 basis point increase in hotel EBITDA margins. Occupancy growth across the portfolio has enabled our operators to drive incremental ancillary revenue and benefit from operating efficiencies, especially in our urban markets that are still in the recovery phase. This has helped support margin expansion and solid flow-through performance. Looking ahead, we expect margin trends to remain relatively stable as staffing levels and amenities have normalized and wage pressures continue to ease across the portfolio. Turning to corporate activity, as previously disclosed, the company continues to advance planning and preparation for two upcoming PIP renovations. In Philadelphia, we have signed a new 10-year franchise agreement with Hilton to retain the Doubletree flag. The associated PIP carries a total budget of $11.5 million and is expected to be completed by May 1, 2026. In Jacksonville, the company has entered into a new 10-year franchise agreement with Hilton to reposition the hotel under a soft-branded concept, Hotel Bellamy. The planned renovation has a total budget of $14.6 million and is expected to be completed by January 1, 2027. Turning to our balance sheet, two of our larger assets located in Atlanta and Hollywood have debt maturities coming up this year. While we recognize the broader uncertainty in the debt markets, we remain confident in our ability to work constructively with our lending partners to address these upcoming maturities. Additionally, the potential for Fed easing could serve as a tailwind for our near-term financing efforts across the portfolio. Looking ahead, we will continue to take a disciplined and conservative approach to managing our capital structure. Our remaining near-term maturities are well staggered, which provides us with flexibility as we navigate the current financing environment. I will now turn the call over to Tony. Thank you, Scott.

Reviewing performance for the period ended March 31, 2025. For the first quarter, total revenue was approximately $48.3 million, representing an increase of 3.8% over the same quarter last year. Hotel EBITDA for the quarter was approximately $12.9 million, representing an increase of 4.5% over the same quarter last year. and for the quarter, adjusted FFO was approximately $4.5 million, representing a decrease of approximately $0.7 million from the same quarter last year. 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 excludes these charges as well as interest expense, interest income, corporate general and administrative expenses, realized gains and losses under derivative instruments, and 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 31st, 2025, the company had total cash of approximately $32.8 million, consisting of unrestricted cash and cash equivalents of approximately $11.5 million, as well as $21.3 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 $317.6 million in outstanding debt at a weighted average interest rate of 5.88%. Approximately 84.4% 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 will amount to approximately $7.2 million for calendar year 2025. A significant portion of our product improvement plans at the Doubletree by Hilton Philadelphia Airport and the Doubletree by Hilton Jacksonville Riverfront will occur during the year with anticipated capital expenditures related to these two projects totaling approximately $11.4 million this year. Turning to guidance, we are reiterating our full year guidance for 2025, accounting for current and expected performance within the portfolio and taking into account market conditions. We're projecting total revenue in the range of $183.4 to $188.2 million for full year 2025. At the midpoint of this guidance, it represents a 2.1% increase over the prior year. Hotel EBITDA is projected in the range of $48.8 to $49.6 million, and at the midpoint of this guidance, it represents a 5.2% increase over the prior year. Adjusted FFO is projected in the range of $11.5 to $12.3 million, or 57 to 61 cents a share. At the midpoint of this guidance, it represents a 16.4% decrease compared to the prior year. And I'll turn the call over to Dave.

Thank you, Tony. Good morning. We were very pleased with our first quarter results, which came in ahead of expectations, even as macroeconomic uncertainty began to emerge in March. Performance was driven in large part by continued occupancy recovery in our urban markets where demand was supported by both group business and a steady improvement in corporate transient travel. Our coastal leisure-focused assets also delivered strong results, benefiting from healthy weekend leisure demand complemented by consistent weekday group bookings. While rate growth remains a broader industry challenge, we were encouraged to see our average rate hold flat year over year. Importantly, our operators were able to maintain rate discipline while driving meaningful occupancy gains, which translated into healthy margin performance and outperformance versus the prior year. Before we move on, I want to touch briefly on the potential impact of recent developments in the macroeconomic environment. Policy changes at the federal level have introduced a level of uncertainty that is impacting near-term visibility in the lodging industry. Given the current backdrop, consumer sentiment has weakened, which likely will result in increased price sensitivity and compressed booking windows among our transient guests. Meanwhile, demand from the government segment, particularly in the Washington, D.C. submarket, has experienced a pullback. That said, our group booking pace remains solid, and importantly, we haven't seen the kind of widespread cancellations that typically accompany more severe downturns. We did, however, experience a pause in group lead conversions in late March and into April, guiding a more cautious view on our operating fundamentals for the back half of the year. We will continue to closely monitor the shifting operating environment and remain confident in our managers' ability to adapt our sales and revenue management strategies as needed to effectively navigate the current landscape. Despite such uncertainty, our portfolio performed well in the first quarter, continuing to benefit from strong occupancy growth in the group segment, particularly in several of our urban markets. In Houston, the Whitehall stood out as a top performer, with occupancy up 20.5% year-over-year, driven by a healthy mix of group business, which increased a noteworthy 64% over prior year, as well as strong citywide demand. The Georgian Terrace in Atlanta, meanwhile, performed well during the first quarter, with strong citywide demand and special events supporting rate growth, driving higher than expected profitability. We also saw continued momentum at our Doubletree Hotel at the Philadelphia Airport, which posted a 38.7% occupancy increase over the prior year, supported by strong group sales and elevated demand from professional sporting events. Another highlight in this quarter was the strong performance of our Doubletree Resort in Hollywood, one of our largest contributors to portfolio profitability. The hotel delivered nearly 37% growth in Hotel EBITDA year over year, fueled by a more than 41% increase in group revenue, a very encouraging sign for this hotel. Looking towards the second half of the year, while we remain optimistic about the overall outlook for the industry, we're taking a more measured view on the pace of hotel demand. That said, we believe our portfolio is well-positioned with upscale and upper upscale assets expected to outperform the broader market. We are maintaining our full-year guidance as first and second quarter performances are expected to offset one another on a relative basis. Booking trends remain healthy, and we currently forecast full-year 2025 REVPAR for the actual portfolio to range between 103% and 105% of 2024 levels. We're confident that our portfolio of well-located, high-quality hotels supported by continued occupancy growth will continue to deliver strong relative performance. And with that, operator, we can open the call for questions.

Thank you very much. We'd now like to open the lines for Q&A.

If you'd like to ask a question, please press star followed by one on your telephone keypad now if you'd like to remove yourself and learn questioning will be star followed by two as a reminder to raise a question will be star followed by one our first question comes from alexander goldfard of piper sandler alexander your line is now open hey uh morning morning down there uh and if i think i heard you correctly you guys are renovating the philly hotel which is it's it's great definitely in need of of some uh of some updates but certainly a great hotel um so a few things and forgive my list uh just going down one reverse split timing last quarter you guys mentioned a drop dead date of august 11th is it your intent to go

up until that date or you may do something sooner um we'll probably do it close to that date or relatively sooner we're working on it now it's it's a little more complicated than just reverse splitting the stock there are q-sips and other legal documentation that has to be done and board resolutions so we'll get all that done here in the next 60 days and we'll execute a reverse split I think probably in July or August up to the up to the point where it's due okay you mentioned business interruption insurance for Alba what's the Delta between what you're actually booking in

actual uh you know revenue from alba versus what the insurance is covering just trying to figure out is is insurance cover is the hotel currently like half of what it should be and insurance is picking up the other half or just trying to get some metrics on that you're talking about from a revenue perspective or a profitability yeah uh well you have business interruption insurance you mentioned that is flowing through gap so it's in ffo i think you said uh and just trying to understand and the delta between?

So, we're seeing a decrease in room revenue, you know, as we have fewer guests, but it's, you know, the room profitability is made up on a net basis, and so we're seeing the bottom line or the, you know, Hotel EBITDA pretty much made whole. I mean, that's a debate with our insurance carriers as to whether we're, you know, they think we're 100% whole, we think we're 95% whole, but it's pretty much made whole. But it's the top line room revenue that suffers there when you try to do your comparability metrics from quarter to quarter.

Yeah, but I think your question is, you know, without the insurance proceeds, what, you know, how far below expectations or, you know, normal operations would the hotel be performing? And And, again, our operating metrics don't include any insurance proceeds. So you just look at RevFAR for the quarter. You know, the hotel did $180 and 57 cents. That's 20 cents over prior year. So, really, I mean, the hotel is performing well. We're probably, you know, a little short on where we could be in the marketplace because the market is doing very well and, you know, probably missing a little bit of ancillary revenue in terms of, you know, banquet and food and beverage. But by and large, we're not getting a ton of business interruption proceeds at this point going forward. The hotel has been essentially operating normally since Christmas when we got an elevator back up and running. But there's still some impact just in terms of some givebacks for groups, probably a few groups that we should have in the building that don't want to stay there with one elevator versus all three. But for the most part, the hotel is operating pretty normally right now.

So it sounds like maybe it's $100,000 or $200,000 that you guys are getting an interruption versus where it actually is today.

For the quarter, yeah.

Okay, next question. You have Hollywood and ALBA loans coming due this year versus where the rates are now and the proceeds. How do you see the refinancing shaping up? Do you see similar proceeds, change in rate, just trying to get some perspective?

Yeah, it's actually Atlanta and Hollywood, not Tampa and Hollywood. And both of those are CMBS. Yeah, both of those are CMBS deals. We're actually working on that every day, looking at different options. The Atlanta maturity date is coming soon. Hollywood is in the third quarter, the early October. Right now, I think the most likely outcome is what is being seen throughout the CMBS universe, which is extensions and modifications. That seems to be the norm right now for near-term maturities. Rates are higher. Underwriting standards are tighter. DSCR coverages are higher. All that means is you get less proceeds when they underwrite an asset. And if you have the capital to make that up, you can. If not, then most borrowers are simply looking for one- to two-year extensions. There's usually a view from the special servicers to increase interest rates, maybe interest-only, maybe amortizing. That's sort of a negotiating tactic. And then you have special servicing fees, which amount to maybe a quarter of a point of the outstanding balance. So I think our preference right now, which seems to be the way we're headed on those loans, is to extend them out, which seems to be consistent with the rest of the market.

So, I mean, if we just look at your cash, you have $11.5 million of unrestricted cash. You mentioned $7 million of CapEx that you're planning to spend this year. And then there's whatever capital or increased interest expense that's going to be needed as part of refinancing, whether it's extension modification or whatever. So how are you thinking about the cash that you have on hand versus the needs between the refinancing activity and the CapEx?

Well, we have to see what the results are on these extensions. At the same time, we have other assets in the portfolio that have significant equity built into them, namely Savannah and Wilmington. And that financeable equity is probably in the $20 to $30 million range. And we can refinance those assets conventionally right now early, and we can draw a lot of cash out of those refinancings to buttress any cash impact that we would have in the refinancing or extensions of our hotels in Atlanta and Hollywood.

Okay, and which hotels have that $20 million to $30 million of excess?

Savannah and Wilmington.

Okay.

Those are hotels that have had...

Okay, go ahead. No, no, you said those are hotels that have had...

Yeah, they've got long-term life loans on them dating back to the 90s. And they were 10-year amortizing loans that come due next year and I think the year following. right, 2027. And we've paid down a lot of principal on those loans, and there's a lot of value that's been created at those assets that underwrites well, given the EBITDA profile of those hotels. So, there is a lot of cash available to be extracted from a conventional financing.

Okay. And then just finally, can you just remind us the accrued balance on the preferred dividends you know what what you know is still unpaid sure it's about 21.9 million dollars okay about two million one point nine we're 11 yeah we're we're 11 quarters behind okay but you are making current payments right yes okay listen thank you very much thank you alex thank you very much.

As a reminder, if you would like to raise a question, please press star followed by one on your telephone keypad now. We currently have no further questions, so I'd like to hand back to David Folsom for any further remarks.

Thank you very much for joining us on our quarterly call, and we'll reconvene next quarter. Thank you.

As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.