November 16, 2018
VIA EDGAR
Division of Corporation Finance
Office of Real Estate and Commodities
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: | Sotherly Hotels Inc. |
Sotherly Hotels LP
Form10-K for the fiscal year ended December 31, 2017
Filed March 16, 2018
FileNo. 001-32379 (Inc.)
FileNo. 001-36091 (LP)
Form8-K
Filed November 6, 2018
To Whom It May Concern:
In connection with the above-captioned Form10-K (the “Form10-K”) and Form8-K (the “Form8-K”) of Sotherly Hotels Inc. and Sotherly Hotels LP (together, the “Company”, “we”, “us” and “our”), we set forth below our responses to the comments of the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) provided in the comment letter dated November 7, 2018 (the “Comment Letter”), relating to the Form8-K.
We have included the Staff’s comments in the order presented in the Comment Letter and numbered according to the numbering scheme employed in the Comment Letter. Page numbers included in our responses refer to pages in the Form8-K.
Form8-K filed November 6, 2018
Exhibit 99.1, page 1
1. | We note your presentation of guidance ranges for 2018. Given the lack of quantitative reconciliation between the GAAP andnon-GAAP information, please clarify how your presentation satisfies the requirements outlined within Item 10(e)(1)(i)(A) of RegulationS-K. Reference is also made to Question 102.10 of the Compliance & Disclosure Interpretations forNon-GAAP Financial Measures. |
RESPONSE:The Company acknowledges the Staff’s comment and advises the Staff that the omission of quantitative reconciliation between the GAAP andnon-GAAP information pursuant to Item 10(e)(1)(i)(A) of RegulationS-K was inadvertent. Corrected guidance, to comply with Comment #3 below, as well as the reconciliations are attached hereto as Exhibit A.
In its future Form8-K reports where guidance is included, the Company will provide the reconciliation fornon-GAAP guidance ranges pursuant to Item 10(e)(1)(i)(A) of RegulationS-K.
2. | In arriving at Funds from operations, you start with Net income available to common stockholders. As a result, it appears Funds from operations is actually Funds from operations attributable to just common stockholders instead of all equity stockholders. In future periodic filings pleasere-title “Funds from operations” to the more appropriate “Funds from operations attributable to common stockholders”. |
RESPONSE: The Company acknowledges the Staff’s comment and advises the Staff that it will comply in all future filings.
3. | We note your calculation of EBITDA contains adjustments for items other than interest, taxes, depreciation and amortization. Please revise in future filings to ensure that measures calculated differently from EBITDA are not characterized as EBITDA and have titles that are distinguished from “EBITDA”, such as “Adjusted EBITDA”. Reference is made to Question 103.01 of the Compliance & Disclosure Interpretations forNon-GAAP Financial Measures. |
RESPONSE: The Company acknowledges the Staff’s comment and advises the Staff that it will comply in all future filings.
* * *
If you have any questions or comments regarding the foregoing, please contact the undersigned by phone at (757)229-5648, by facsimile transmission at757-564-8801 or bye-mail attonydomalski@sotherlyhotels.com.
Very truly yours,
/s/ Anthony E. Domalski
Anthony E. Domalski
Chief Financial Officer
cc: | Andrew M. Sims |
David R. Folsom
Sotherly Hotels Inc.
Sotherly Hotels LP
Thomas J. Egan, Jr., Esq.
Baker & McKenzie LLP
EXHIBIT A
Prior 2018 Guidance | Revised 2018 Guidance | |||||||||||||||
Low Range | High Range | Low Range | High Range | |||||||||||||
Total revenue | 172,308 | 175,187 | 175,702 | 178,103 | ||||||||||||
Net loss | (1,397 | ) | (931 | ) | (2,166 | ) | (1,754 | ) | ||||||||
Net loss attributable to common stockholders and unitholders | (7,177 | ) | (6,711 | ) | (7,995 | ) | (7,583 | ) | ||||||||
EBITDA | 42,353 | 42,934 | 41,223 | 41,795 | ||||||||||||
Hotel EBITDA | 47,498 | 48,179 | 47,023 | 47,695 | ||||||||||||
FFO available to common stockholders and unitholders | 15,259 | 15,725 | 14,441 | 14,853 | ||||||||||||
Adjusted FFO available to common stockholders and unitholders | 15,874 | 16,490 | 15,444 | 16,056 | ||||||||||||
Net loss per share attributable to the common stockholders | $ | (0.47 | ) | $ | (0.44 | ) | $ | (0.52 | ) | $ | (0.50 | ) | ||||
FFO per share and unit | 1.00 | 1.03 | 0.94 | 0.97 | ||||||||||||
Adjusted FFO per share and unit | 1.04 | 1.08 | 1.01 | 1.05 | ||||||||||||
RevPAR | 104.74 | 105.59 | 103.44 | 104.27 | ||||||||||||
Hotel EBITDA margin | 27.5 | % | 27.6 | % | 26.8 | % | 26.8 | % |
Reconciliation of Outlook of Net Loss to EBITDA and Hotel EBITDA
Prior 2018 Guidance | Revised 2018 Guidance | |||||||||||||||
Low Range | High Range | Low Range | High Range | |||||||||||||
Net loss | (1,397 | ) | (931 | ) | (2,166 | ) | (1,754 | ) | ||||||||
Interest expense | 19,354 | 19,309 | 19,285 | 19,225 | ||||||||||||
Interest income | 265 | 300 | 340 | 360 | ||||||||||||
Income tax (benefit) provision | 800 | 925 | 425 | 625 | ||||||||||||
Depreciation and amortization | 23,331 | 23,331 | 23,339 | 23,339 | ||||||||||||
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EBITDA | 42,353 | 42,934 | 41,223 | 41,795 | ||||||||||||
Loss on early extinguishment of debt | 40 | 40 | 753 | 753 | ||||||||||||
(Gain) loss on disposal of assets | 4 | 4 | (4 | ) | (4 | ) | ||||||||||
Gain on involuntary conversion of assets | (899 | ) | (899 | ) | (899 | ) | (899 | ) | ||||||||
Corporate general and administrative | 6,000 | 6,100 | 5,950 | 6,050 | ||||||||||||
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Hotel EBITDA | 47,498 | 48,179 | 47,023 | 47,695 | ||||||||||||
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Reconciliation of Outlook of Net Loss to FFO and Adjusted FFO
Prior 2018 Guidance | Revised 2018 Guidance | |||||||||||||||
Low Range | High Range | Low Range | High Range | |||||||||||||
Net loss | (1,397 | ) | (931 | ) | (2,166 | ) | (1,754 | ) | ||||||||
Depreciation and amortization | 23,331 | 23,331 | 23,339 | 23,339 | ||||||||||||
(Gain) loss on disposal of assets | 4 | 4 | (4 | ) | (4 | ) | ||||||||||
Gain on involuntary conversion of assets | (899 | ) | (899 | ) | (899 | ) | (899 | ) | ||||||||
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FFO | 21,039 | 21,505 | 20,270 | 20,682 | ||||||||||||
Distributions to preferred stockholders | (5,780 | ) | (5,780 | ) | (5,829 | ) | (5,829 | ) | ||||||||
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FFO available to common stockholders and unitholders | 15,259 | 15,725 | 14,441 | 14,853 | ||||||||||||
(Increase) decrease in deferred income taxes | 575 | 725 | 250 | 450 | ||||||||||||
Loss on early extinguishment of debt | 40 | 40 | 753 | 753 | ||||||||||||
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Adjusted FFO available to common stockholders and unitholders | 15,874 | 16,490 | 15,444 | 16,056 | ||||||||||||
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