8-K/A
SOTHERLY HOTELS LP (SOHOB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 10, 2022
SOTHERLY HOTELS INC.
SOTHERLY HOTELS LP
(Exact name of Registrant as Specified in Its Charter)
| Maryland (Sotherly Hotels Inc.)<br><br>Delaware (Sotherly Hotels LP) | 001-32379 (Sotherly Hotels Inc.)<br><br>001-36091 (Sotherly Hotels LP) | 20-1531029 (Sotherly Hotels Inc.)<br><br>20-1965427 (Sotherly Hotels LP) |
|---|---|---|
| (State or Other Jurisdiction<br><br>of Incorporation) | (Commission File Number) | (IRS Employer<br><br>Identification No.) |
| 306 South Henry Street, Suite 100<br><br>Williamsburg, Virginia | 23185 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (757) 229-5648
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Sotherly Hotels Inc. ☐ Sotherly Hotels LP ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Sotherly Hotels Inc. ☐ Sotherly Hotels LP ☐
Securities registered or to be registered pursuant to Section 12(b) of the Act.
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value | SOHO | The NASDAQ Stock Market LLC |
| 8.0% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value | SOHOB | The NASDAQ Stock Market LLC |
| 7.875% Series C Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value | SOHOO | The NASDAQ Stock Market LLC |
| 8.25% Series D Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value | SOHON | The NASDAQ Stock Market LLC |
Explanatory Note.
On June 10, 2022, Sotherly Hotels Inc. (“Sotherly” or the “Company”), a Maryland corporation and the sole general partner of Sotherly Hotels LP, a Delaware limited partnership (the “Operating Partnership”), completed the sale of the DoubleTree by Hilton Raleigh-Brownstone University hotel (the “Disposition”).
On June 14, 2022, the Company and the Operating Partnership filed a Current Report on Form 8-K with the Securities and Exchange Commission (the “Initial Form 8-K”) reporting the completion of the Disposition. The Company and the Operating Partnership are filing this Amendment No. 1 to the Initial Form 8-K on Form 8-K/A (the “Amendment”) to include certain pro forma financial information related to the Disposition required by Item 9.01(b) of Form 8-K.
The pro forma financial information attached hereto should be read in conjunction with the Initial Form 8-K and this Amendment, and is incorporated by reference as though fully set forth herein.
Item 9.01 Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
Unaudited pro forma financial information of Sotherly required to be filed in connection with the Disposition is filed as Exhibit 99.1 to this Amendment, and is incorporated by reference as though fully set forth herein.
(d) Exhibits.
| Exhibit<br><br>Number | Description |
|---|---|
| 99.1 | Unaudited pro forma financial information of Sotherly Hotels Inc. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.
| Date: October 5, 2022 | SOTHERLY HOTELS INC. | |
|---|---|---|
| By: | /s/ Anthony E. Domalski | |
| Anthony E. Domalski | ||
| Chief Financial Officer | ||
| SOTHERLY HOTELS LP | ||
| by its General Partner, | ||
| SOTHERLY HOTELS INC. | ||
| By: | /s/ Anthony E. Domalski | |
| Anthony E. Domalski | ||
| Chief Financial Officer |
EX-99.1
Exhibit 99.1
Overview
On February 10, 2022 and June 10, 2022, we closed on the sales of the Sheraton Louisville Riverside hotel and the DoubleTree by Hilton Raleigh-Brownstone University hotel, respectively. The following table presents the audited consolidated balance sheet and consolidated statement of operations as of December 31, 2021 of the Company, unaudited pro forma financial adjustments of the Sheraton Louisville Riverside hotel and the DoubleTree by Hilton Raleigh-Brownstone University hotel, unaudited pro forma balance sheet, as if the hotels had been disposed on December 31, 2021 and unaudited pro forma statement of income, as if the Sheraton Louisville Riverside hotel and the DoubleTree by Hilton Raleigh-Brownstone University hotel had been disposed on January 1, 2021. Accordingly, the unaudited pro forma balance sheet and unaudited pro forma income statement are not necessarily indicative of future consolidated financial position or results of operations.
The following pro forma information has been prepared for comparative purposes only and are based upon the historical financial statements and operating results for the Company, adjusted to reflect the sales:
SOTHERLY HOTELS INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2021
| Pro Forma Adjustments | Proforma Adjustments | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| of Sheraton Louisville | of DoubleTree Raleigh | Pro Forma | |||||||||||
| Riverside Sale | Brownstone Sale | Balance Sheet | |||||||||||
| (unaudited) | (unaudited) | (unaudited) | |||||||||||
| ASSETS | |||||||||||||
| Investment in hotel properties, net | 375,885,224 | $ | - | $ | - | $ | 375,885,224 | ||||||
| Investment in hotel properties held for sale, net | 22,870,487 | (11,063,952 | ) | (c) | (11,806,535 | ) | (c) | — | |||||
| Cash and cash equivalents | 13,166,883 | 161,816 | (j) | 22,659,907 | (j) | 35,988,606 | |||||||
| Restricted cash | 12,411,654 | — | (318,562 | ) | (c) | 12,093,092 | |||||||
| Accounts receivable, net | 4,822,187 | (697,877 | ) | (c) | (143,762 | ) | (c) | 3,980,548 | |||||
| Prepaid expenses, inventory and other assets | 6,894,228 | (150,471 | ) | (c) | (107,697 | ) | (c) | 6,636,060 | |||||
| TOTAL ASSETS | 436,050,663 | $ | (11,750,484 | ) | $ | 10,283,351 | $ | 434,583,530 | |||||
| LIABILITIES | |||||||||||||
| Mortgage loans, net | 351,170,883 | $ | (10,860,762 | ) | (c) | $ | (18,147,658 | ) | (c) | $ | 322,162,463 | ||
| Secured notes, net | 19,128,330 | — | — | 19,128,330 | |||||||||
| Unsecured notes, net | 7,609,934 | — | — | 7,609,934 | |||||||||
| Accounts payable and accrued liabilities | 35,960,293 | (975,770 | ) | (c) | (1,432,415 | ) | (c) | 33,552,108 | |||||
| Advance deposits | 1,552,942 | — | (28,759 | ) | (c) | 1,524,183 | |||||||
| Dividends and distributions payable | 4,125,351 | — | — | 4,125,351 | |||||||||
| TOTAL LIABILITIES | 419,547,733 | $ | (11,836,532 | ) | $ | (19,608,832 | ) | $ | 388,102,369 | ||||
| Commitments and contingencies (See Note 6) | — | — | — | — | |||||||||
| EQUITY | |||||||||||||
| Sotherly Hotels Inc. stockholders’ equity | |||||||||||||
| Preferred stock, 0.01 par value, 11,000,000 shares authorized: | |||||||||||||
| 8.0% Series B cumulative redeemable perpetual preferred stock, 1,510,000 shares issued and outstanding; aggregate liquidation preference 43,035,000, at December 31, 2021. | 15,100 | — | — | 15,100 | |||||||||
| 7.875% Series C cumulative redeemable perpetual preferred stock, 1,384,610 shares issued and outstanding; aggregate liquidation preference 39,385,669, at December 31, 2021. | 13,846 | — | — | 13,846 | |||||||||
| 8.25% Series D cumulative redeemable perpetual preferred stock, 1,165,000 shares issued and outstanding; aggregate liquidation preference 33,329,922, at December 31, 2021. | 11,650 | — | — | 11,650 | |||||||||
| Common stock, par value 0.01, 69,000,000 shares authorized, 17,441,058 shares issued and outstanding at December 31, 2021. | 174,410 | — | — | 174,410 | |||||||||
| Additional paid-in capital | 177,651,954 | — | — | 177,651,954 | |||||||||
| Unearned ESOP shares | (3,083,398 | ) | — | — | (3,083,398 | ) | |||||||
| Distributions in excess of retained earnings | (153,521,704 | ) | 80,455 | (d) | 28,067,700 | (d) | (125,373,549 | ) | |||||
| Total Sotherly Hotels Inc. stockholders’ equity | 21,261,858 | 80,455 | 28,067,700 | 49,410,013 | |||||||||
| Noncontrolling interest | (4,758,928 | ) | 5,593 | (k) | 1,824,483 | (k) | (2,928,852 | ) | |||||
| TOTAL EQUITY | 16,502,930 | 86,048 | 29,892,183 | 46,481,161 | |||||||||
| TOTAL LIABILITIES AND EQUITY | 436,050,663 | $ | (11,750,484 | ) | $ | 10,283,351 | $ | 434,583,530 |
All values are in US Dollars.
SOTHERLY HOTELS INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 31, 2021
| Sotherly Hotels, Inc. | Pro Forma Adjustments | Proforma Adjustments | Pro Forma | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Twelve Months Ended | of Sheraton Louisville | of DoubleTree Raleigh | Statement of | |||||||||||
| December 31, 2021 (b) | Riverside Sale | Brownstone Sale | Operations | |||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||||
| REVENUE | ||||||||||||||
| Rooms department | $ | 88,625,659 | $ | (3,972,310 | ) | (e) | $ | (3,492,052 | ) | (e) | $ | 81,161,297 | ||
| Food and beverage department | 15,829,487 | (284,317 | ) | (e) | (360,004 | ) | (e) | 15,185,166 | ||||||
| Other operating departments | 23,132,778 | (281,162 | ) | (e) | (358,706 | ) | (e) | 22,492,910 | ||||||
| Total revenue | 127,587,924 | (4,537,789 | ) | (4,210,762 | ) | 118,839,373 | ||||||||
| EXPENSES | ||||||||||||||
| Hotel operating expenses | ||||||||||||||
| Rooms department | 22,688,063 | (1,714,831 | ) | (f) | (829,885 | ) | (f) | 20,143,347 | ||||||
| Food and beverage department | 10,297,461 | (222,930 | ) | (f) | (294,421 | ) | (f) | 9,780,110 | ||||||
| Other operating departments | 8,607,594 | (41,171 | ) | (f) | (11,725 | ) | (f) | 8,554,698 | ||||||
| Indirect | 55,100,245 | (2,587,696 | ) | (f) | (2,359,353 | ) | (f) | 50,153,196 | ||||||
| Total hotel operating expenses | 96,693,363 | (4,566,628 | ) | (3,495,384 | ) | 88,631,351 | ||||||||
| Depreciation and amortization | 19,909,226 | (797,617 | ) | (g) | (680,613 | ) | (g) | 18,430,996 | ||||||
| Impairment of investment in hotel properties, net | 12,201,461 | (4,329,028 | ) | (g) | — | 7,872,433 | ||||||||
| (Gain) loss on disposal of assets | (158,286 | ) | 200,763 | (g) | — | 42,477 | ||||||||
| Corporate general and administrative | 6,997,166 | — | — | 6,997,166 | ||||||||||
| Total operating expenses | 135,642,930 | (9,492,510 | ) | (4,175,997 | ) | 121,974,423 | ||||||||
| NET OPERATING (LOSS) INCOME | (8,055,006 | ) | 4,954,721 | (34,765 | ) | (3,135,050 | ) | |||||||
| Other income (expense) | ||||||||||||||
| Interest expense | (22,686,694 | ) | 479,319 | (h) | (1,031,167 | ) | (h) | (23,238,542 | ) | |||||
| Interest income | 147,025 | — | — | 147,025 | ||||||||||
| Unrealized gain on hedging activities | 1,493,841 | — | — | 1,493,841 | ||||||||||
| Gain on sale of assets | — | — | — | - | ||||||||||
| Gain on involuntary conversion of assets | 588,586 | — | — | 588,586 | ||||||||||
| Net (loss) income before income taxes | (28,512,248 | ) | 5,434,040 | (1,065,932 | ) | (24,144,140 | ) | |||||||
| Income tax provision | (27,392 | ) | — | — | (27,392 | ) | ||||||||
| Net (loss) income | (28,539,640 | ) | 5,434,040 | (1,065,932 | ) | (24,171,532 | ) | |||||||
| Less: Net loss attributable to noncontrolling interest | 2,318,166 | (441,386 | ) | (k) | 86,582 | (k) | 1,963,362 | |||||||
| Net (loss) income attributable to the Company | (26,221,474 | ) | 4,992,654 | (979,350 | ) | (22,208,170 | ) | |||||||
| Declared and undeclared distributions to preferred stockholders | (7,541,891 | ) | — | — | (7,541,891 | ) | ||||||||
| Gain on extinguishment of preferred stock | 361,476 | — | — | 361,476 | ||||||||||
| Net (loss) income attributable to common stockholders | $ | (33,401,889 | ) | $ | 4,992,654 | (d) | $ | (979,350 | ) | (l) | $ | (29,388,585 | ) | |
| Net (loss) income per share attributable to common stockholders | ||||||||||||||
| Basic | $ | (2.15 | ) | $ | 0.32 | (i) | $ | (0.06 | ) | (i) | $ | (1.89 | ) | |
| Weighted average number of common shares outstanding | ||||||||||||||
| Basic | 15,531,684 | 15,531,684 | 15,531,684 | 15,531,684 |
SOTHERLY HOTELS INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
1) Basis of Presentation
The unaudited pro forma financial information is presented to reflect the sales of the Sheraton Louisville Riverside hotel and the DoubleTree by Hilton Raleigh-Brownstone University, as if the hotels assets and liabilities had been disposed on December 31, 2021 and unaudited pro forma statement of income, as if the hotels had been disposed on January 1, 2021 and the proforma adjustments are reflected in the unaudited pro forma balance sheet and unaudited pro forma statement of operations. The unaudited pro forma adjustments are included only to the extent that they are directly attributable and factually supportable assets and liabilities of the hotel as of December 31, 2021 and results of operations of the hotel, for the year ending December 31, 2021.
The unaudited pro forma consolidated financial statements are presented for illustrative purposes only and are not intended to represent or be indicative of our consolidated results of operations or financial position that would have been reported if the sale was completed as of the date presented, and should not be taken as representation of our future consolidated results of operations or financial position.
2) Pro Forma Adjustments
(a) Reflects the Company's consolidated balance as of December 31, 2021.
(b) Reflects the Company's consolidated statement of operations for the year ended December 31, 2021.
(c) Reflects the elimination of assets and liabilities of the Sheraton Louisville Riverside and the DoubleTree by Hilton Raleigh-Brownstone University hotels as of December 31, 2021.
(d) Reflects an adjustment of the net assets realized on the sale of the hotels offset by the gains resulting from the sale of the operations of the hotels.
(e) Reflects the elimination of revenues from: rooms department, food and beverage department and other operating departments of the hotels.
(f) Reflects the elimination of expenses from: rooms department, food and beverage department and other operating departments and indirect expenses of the hotels.
(g) Reflects the elimination of depreciation and amortization, impairment of the investment in hotel properties, net, loss on disposal of assets of the hotels and forfeiture of deposit on an earlier failed sale of hotels.
(h) Reflects the elimination of mortgage interest expense on the hotels' mortgages.
(i) Reflects the pro forma net income per share attributable to common shareholders, as if the sales had taken place on January 1, 2021, accordingly is not necessarily indicative of future results of operations.
(j) Reflects net change in cash arising from the close on the sales of the hotels, including closing costs, the repayment of all outstanding mortgage debt, the realization of all hotel accounts receivable, prepaid expenses and deposits, as well as the settlement of all other hotel obligations.
(k) Reflects the effect of pro forma net income attributable to non-controlling interests, as if the sales had taken place on January 1, 2021, accordingly is not necessarily indicative of future results of operations.