8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

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 28, 2022

SOTHERLY HOTELS INC.

SOTHERLY HOTELS LP

(Exact name of Registrant as Specified in Its Charter)

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:

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.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

On June 28, 2022, affiliates of Sotherly Hotels Inc. (the “Company”), the sole general partner of Sotherly Hotels LP (the “Operating Partnership”), entered into amended loan documents to modify the existing mortgage loan (as amended, the “Mortgage Loan”) on the Hotel Alba Tampa (the “Hotel”) with the existing lender, Fifth Third Bank. Pursuant to the amended loan documents, the Mortgage Loan:

• has an increased principal balance of $25.0 million;

• includes an extended maturity date of June 30, 2025, which may be further extended for two additional periods of one year each, subject to certain conditions;

• bears a floating interest rate of SOFR plus 2.75%, subject to a floor rate of 2.75%;

• amortizes on a 25-year schedule and requires payments of monthly interest plus $40,600 monthly amortization payments; and

• is guaranteed by the Operating Partnership up to $12.5 million, with the guaranty reducing to $6.25 million upon the successful achievement of certain performance milestones.

Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation.

Pursuant to the terms of the secured notes (the “KW Notes”) with KWHP SOHO, LLC and MIG SOHO, LLC (together, “KW”), we were required to use net cash proceeds received in connection with the refinance of the Hotel described in Item 2.03 above to make certain payments to KW as lenders under the KW Notes. On June 28, 2022, the Company used the proceeds from the refinance of the Hotel, along with approximately $0.21 million of cash on hand as well as the balance of the interest reserve under the KW Notes of approximately $0.53 million, to satisfy and pay in full the KW Notes. KW received approximately $8.27 million in satisfaction of the KW Notes, of which approximately $5.61 million was applied toward principal, approximately $2.64 million was applied toward the exit fee owed under the KW Notes, and approximately $0.02 million was applied toward accrued interest.

Concurrent with the cancellation of the KW Notes, the following agreements were also terminated in accordance with their terms: Note Purchase Agreement; (ii) Pledge and Security Agreement; (iv) Board Observer Agreement; and (v) other related ancillary agreements.

Item 7.01 Regulation FD Disclosure.

On June 29, 2022, the Company issued a press release announcing the transactions effected pursuant to the debt financing of the Hotel and the satisfaction of the KW secured notes. A copy of the press release is attached to the Current Report on Form 8-K as Exhibit 99.1 and incorporated by reference herein.

In accordance with General Instructions B.2 and B.6 of Form 8-K, the information included in this Item 7.01 (including Exhibit 99.1 hereto), shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

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.

EX-99.1

EXHIBIT 99.1

FOR IMMEDIATE RELEASE

WEDNESDAY, June 29, 2022

SOTHERLY HOTELS INC. COMPLETES REFINANCE OF TAMPA, FL HOTEL; PROCEEDS USED TO PAY OFF CORPORATE DEBT

Williamsburg, Virginia – June 29, 2022 – Sotherly Hotels Inc. (NASDAQ: SOHO) (the “Company”) announced that the Company has modified its existing mortgage loan with Fifth Third Bank secured by the Hotel Alba hotel in Tampa, Florida. The loan modification increased the principal balance to $25.0 million, extended the term by three years with two 1-year extension options, decreased the floating interest rate by 1.0% to SOFR plus 2.75%, and reduced the corporate guaranty. Proceeds from the loan, combined with existing corporate cash, were used to repay of the remainder of the Kemmons Wilson secured note. Including the payoff of the Kemmons Wilson secured note, the Company has reduced the debt obligations from its balance sheet by over $50.0 million during the first half of 2022.

“We are thrilled with the completion of this loan modification for Hotel Alba, which allowed us to realize significant value created through the successful execution of our repositioning strategy of this asset over the past three years. Further, it provided the necessary cash to fully payoff of the remaining balance of the secured note with Kemmons Wilson, which was taken out of necessity during the height of the pandemic,” noted Dave Folsom, Chief Executive Officer of Sotherly. “The payoff of this loan allows us to restructure our balance sheet by eliminating costly corporate debt that included high-interest current payments, onerous loan covenants, and a significant interest reserve. This event not only marks a major step forward in stabilizing the overall health of the Company, but also facilitates a clearer path toward paying off our preferred dividend obligations and allows us to concentrate on our core business strategies focused on long-term growth and returns for shareholder.”

About Sotherly Hotels Inc.

Sotherly Hotels Inc. is a self-managed and self-administered lodging REIT focused on the acquisition, renovation, upbranding and repositioning of upscale to upper-upscale full-service hotels in the Southern United States. Sotherly may also opportunistically acquire hotels throughout the United States. Currently, the Company’s portfolio consists of investments in ten hotel properties, comprising 2,786 rooms, as well as interests in two condominium hotels and their associated rental programs. The Company owns hotels that operate under the Hilton Worldwide and Hyatt Hotels Corporation brands, as well as independent hotels. Sotherly Hotels Inc. was organized in 2004 and is headquartered in Williamsburg, Virginia. For more information, please visit www.sotherlyhotels.com.

Contact at the Company:

Mack Sims

Sotherly Hotels Inc.

306 South Henry Street, Suite 100

Williamsburg, Virginia 23185

(757) 229-5648