Sotherly Hotels Inc.

Any statements made during this conference call, which are not historical, they 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 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 to the property from Hurricane Helene, which struck Tampa in late September 2024, The first quarter's actual portfolio rev par increased a healthy 7.3% compared to prior year, driven by a 7.5% 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, ABR held steady across most of the portfolio, particularly in our top performing business travel and group markets. As previously noted, Hotel Alba in Tampa continued to experience operational disruption from Hurricane Helene during the first quarter, as the hotel's elevators remained impaired from flood damage. We anticipate the elevator restoration to take several months to complete. Therefore, that impact will continue through at least 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 helped offset the financial impact during the quarter. Looking at 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 rev par 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 rev par 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 its comp set, with a REVPAR index of 115.3%. Turning to the White Hall 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 supported 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 decline 3.1%, the overall result reflects strong demand improvement across the submarket, 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 insurities 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 31st, 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 on our 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 31, 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 Jackson Dole 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 $2.2 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 now 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 and 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're 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 rev par 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.