Sotherly Hotels Inc.

Gentlemen, this lovely hotel's G2 2025 company call and webcast will begin shortly with your host, Mike Simms. We appreciate your patience as we repay your sessions today. During the call, we encourage participants to raise any questions they may have. You can raise a question by pressing star followed by 1 on the telephone keypad, and to move yourself along with questioning, we'll be star followed by 2. As a reminder, to raise a question, we'll be star followed by 1. We will begin shortly. Good morning all and thank you for joining us in this lovely hotel. My name is Carly and I'll be coordinating your call today. If you have a question during the call, you can do so by pressing start or by 1 on the telephone keypad to move yourself around the question. Please start the device here. I'd like to hand over to our host, Maxine, who is our president of operations. The floor is yours.

Thank you. Good morning, everyone. If you did 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 measures in accordance with Reg. 2 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 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 FDC. The company does not undertake the duty to update or revise any forward-looking statements. With that, I'll turn the call over to Scott.

Thanks, Mac. I'll start off today's call with a review of our portfolio's key operating measures for the second quarter. Looking at the second quarter results of the composite portfolio compared to 2024, WebCorp decreased 5.4%, driven by a 3.5% decrease in occupancy and a 1.9% decrease in ADR. stripping out Tampa from the results due to continued impact of the property from Hurricane Helene, which struck Tampa in late September 2024. The second quarter composite portfolio of REVPAR decreased slightly better 5% compared to prior year, driven by a 2.3% decrease in occupancy and a 2.8% decrease in ADR. Year-to-date REVPAR performance for the composite portfolio represents a decrease of 0.5% from the same period in 2024, driven by a 0.9% increase in occupancy and a 1.5% decrease in rate. Once again, stripping out Tampa from the results, composite portfolio delivered slightly better results, decreasing 0.1% compared to prior year, driven by a 2.1% increase in occupancy and a 2.1% decrease in rates. During the second quarter, our portfolio of hotels underperformed expectations against the backdrop of growing economic uncertainty and softening demand. While certain leisure destinations shared pockets of stability, overall performance was impacted by pullback in government-related travel due to Doge program spending cuts, as well as more cautious consumer behavior in the face of persistent inflation and economic unease. Doge-related spending cuts had a notable impact on group and business traveler demand at our Washington, D.C., MFA properties in Arlington and Laurel. Our hotels in Savannah and Atlanta, where association business represents a meaningful share of groups and nights, were also adversely affected. Additionally, uncertainty around national tariff policies contributed hesitancy among business travelers, particularly in several of our secondary and drive-thru markets. These factors created a more challenging operating environment than we had anticipated, and we remained focused on disciplined cost management and targeted revenue strategies as we navigated the remainder of the year. Despite these macroeconomic headwinds, our portfolio's ADR remained resilient, reflecting the strength of higher-end travelers as well as our overall pricing strategy. As previously noted, Hotel Alba and Tampa continue to experience some operational disruption in the second quarter due to elevator repairs following flood damage from Hurricane Helene. While restoration is ongoing, we are making steady progress and anticipate a full return to normal operations later this month. Importantly, our headline operating metrics, Occupancy, ADR, and Redcar, reflect a temporary impact on a pre-insurance basis, while our reported revenue and profitability benefited from business interruption insurance proceeds. helping to mitigate financial effects during the quarter. Looking at some highlights from a few key assets in the portfolio during the quarter, Hotel Ballast in Wilmington posted another solid performance in the quarter, exceeding budgeted expectations. The rev part increased 1.3% year-over-year, driven by a 2.7% gain in average rate, partially offset by a modest 1.3% decline in occupancy. The hotel benefited from continued strength in group demand, along with strong bank and catering revenue. Hotel Dallas remained a market leader, finishing the quarter with a red card index of 119.6% versus contended set. The Doubletree Philadelphia airport delivered a solid second quarter performance, surpassing budget expectations despite ongoing softness in market ADR. While red card declined 5.3% year-over-year, driven by a 6% decrease in ADR, this decline primarily reflects the absence of several one-time events that boosted results in the prior year. Looking ahead, we remain optimistic about the hotel's outlook, supported by improving group bookings and strengthening citywide demand drivers. The Hyde Beach house delivered strong results in the second quarter, outperforming both budgeted and prior year expectations. Revpar increased 12.7%, driven by an 18.5% gain in occupancy, partially offset by a 4.9% decline in ADR. Performance was bolstered by robust spring break leisure demand and increased demand related to the FIFA Club World Cup. Profitability remains solid, supported by diversified revenue streams, including centralized housekeeping and parking operations. Looking at portfolio profitability, hotel EBITDA margin declined by 2.5% year-over-year for the quarter, primarily due to the Red Park softness in Savannah, Atlanta, and Jacksonville. While these results came in below our expectations, we believe the outside impact on those related spending cuts and tariff policies is temporary in nature. Encouragingly, our operators were able to maintain rate discipline despite these headwinds, signaling that demand among higher income customers remains resilient. Looking ahead, we expect margin trends to remain relatively stable, supported by normalized staffing levels, steady Mendi offerings, and easing wage pressures across the portfolio. Turning to corporate activity, we are proactively managing upcoming debt maturities tied to our assets in Atlanta and Hollywood. While broader debt market conditions remain uncertain, we are confident in our ability to work constructively with our lending partners. As disclosed in early July, we engaged a consultant that is in the process of helping us negotiate a loan extension with a special servicer for the Georgian Terrace Hotel in Atlanta. Looking ahead, we are also confident in our ability to address the upcoming maturity of the mortgage loan secured by the Double Street in Hollywood, Florida. We remain committed to a disciplined, conservative approach to capital management, supported by a well-staggered maturity schedule that offers meaningful flexibility in the current financing environment. With that, I'll now turn the call over to Tony.