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What changed in Sotherly Hotels Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Sotherly Hotels Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+416 added−394 removedSource: 10-K (2026-04-15) vs 10-K (2025-03-31)

Top changes in Sotherly Hotels Inc.'s 2025 10-K

416 paragraphs added · 394 removed · 271 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

53 edited+45 added−7 removed47 unchanged
Biggest changeEmployees and Human Capital As of December 31, 2024, we employed nine full-time persons, all of whom work at our corporate office in Williamsburg, Virginia. We believe relations with our employees are positive. Our human capital resources objectives include attracting and 13 retaining talented and well-qualified employees.
Biggest changeFollowing the Merger, we have three full-time employees in the Williamsburg office. We believe relations with our employees are positive. Our human capital resources objectives include attracting and retaining talented and well-qualified employees. Our compensation program, including competitive salaries and other benefits, are designed to attract, hire, retain and motivate highly qualified employees and executives.
Our investment criteria are further detailed below: • Geographic Growth Markets: Our growth strategy focuses on the major markets in the Southern region of the United States. Our management team remains confident in the long-term growth potential associated with this part of the United States.
Our investment criteria are further detailed below: Our investment criteria are further detailed below: • Geographic Growth Markets: Our growth strategy focuses on the major markets in the Southern region of the United States. Our management team remains confident in the long-term growth potential associated with this part of the United States.
Typically, in our experience, a deep-turn opportunity takes a total of approximately four years from the initial acquisition of a property until it achieves full post-renovation stabilization.
In our experience, a deep-turn opportunity typically takes a total of approximately four years from the initial acquisition of a property until it achieves full post-renovation stabilization.
Sotherly may also opportunistically acquire hotels outside of the full-service, upscale or upper-upscale category. • Significant Barriers to Entry: We intend to execute a strategy that focuses on the acquisition of hotels in prime locations with significant barriers to entry. • Proximity to Demand Generators: We seek to acquire hotel properties located in central business districts for both leisure and business travelers within the respective markets, including large state universities, airports, convention centers, corporate headquarters, sports venues and office buildings.
Sotherly may also opportunistically acquire hotels outside of the full-service, upscale or upper-upscale category. 8 • Significant Barriers to Entry: We intend to execute a strategy that focuses on the acquisition of hotels in prime locations with significant barriers to entry. • Proximity to Demand Generators: We seek to acquire hotel properties located in central business districts for both leisure and business travelers within the respective markets, including large state universities, airports, convention centers, corporate headquarters, sports venues and office buildings.
Positive competitive factors affecting our position include geographic location, markets with growth potential and strong franchise partners, while certain disadvantages to our position include limited geographic diversity and smaller size in relation to larger competitors. 12 Seasonality The operations of our hotel properties have historically been seasonal. The months of April and May are traditionally strong, as is October.
Positive competitive factors affecting our position include geographic location, markets with growth potential and strong franchise partners, while certain disadvantages to our position include limited geographic diversity and smaller size in relation to larger competitors. Seasonality The operations of our hotel properties have historically been seasonal. The months of April and May are traditionally strong, as is October.
We look for ancillary forms of revenues, such as leasing roof-top space for cellular towers and other communication devices and also look to lease space to third parties in our hotels, which may include, but are not limited to, gift shops or restaurants. We have and will continue to engage parking management companies to maximize parking revenue.
We look for ancillary forms of revenue, such as leasing roof-top space for cellular towers and other communication devices and also look to lease space to third parties in our hotels, which may include, but are not limited to, gift shops or restaurants. We have and will continue to engage parking management companies to maximize parking revenue.
Our full-service hotels fall primarily under the upscale to upper-upscale categories and include such brands as Doubletree by Hilton, Tapestry 7 Collection by Hilton, and Hyatt Centric, as well as independent hotels. We may also acquire commercial unit(s) within upscale to upper-upscale condominium hotel projects, allowing us to establish and operate unit rental programs.
Our full-service hotels fall primarily under the upscale to upper-upscale categories and include such brands as Doubletree by Hilton, Tapestry Collection by Hilton, and Hyatt Centric, as well as independent hotels. We may also acquire commercial unit(s) within upscale to upper-upscale condominium hotel projects, allowing us to establish and operate unit rental programs.
We seek to be in walking locations that are proximate to the markets’ major demand generators. We generally have a bias toward acquiring underperforming hotels, which we typically define as those that are poorly managed, suffer from significant deferred maintenance and capital investment and that are not properly positioned in their respective markets.
We seek to be in walking locations that are proximate to the markets’ major demand generators. We generally have a bias to acquiring underperforming hotels, which we typically define as those that are poorly managed, suffer from significant deferred maintenance and capital investment and that are not properly positioned in their respective markets.
We do not have a policy limiting our ability to invest in loans secured by properties or to make loans to other persons. We may consider offering purchase money financing in connection with the sale of properties where the provision of that financing will increase the value to be 8 received by us for the property sold.
We do not have a policy limiting our ability to invest in loans secured by properties or to make loans to other persons. We may consider offering purchase money financing in connection with the sale of properties where the provision of that financing will increase the value to be received by us for the property sold.
We have also entered into an Association Sub Management and Assignment Agreement with Our Town for the management and operation of the condominium association responsible for the operation of the Hyde Beach House Resort & Residences, and a Rental Sales Management Agreement pursuant to which Our Town agreed to manage the marketing and negotiation of rental agreements with individual condominium unit owners.
We also entered into an Association Sub Management and Assignment Agreement with Our Town for the management and operation of the condominium association responsible for the operation of the Hyde Beach House Resort & Residences, and a Rental Sales Management Agreement pursuant to which Our Town agreed to manage the marketing and negotiation of rental agreements with individual condominium unit owners.
In these projects, we may choose to structure such acquisitions as a joint venture, or mezzanine lending program, in order to avoid severe short-term dilution and loss of current income commonly referred to as the “negative carry” associated with such extensive renovation programs.
In these projects, we may choose to structure such acquisitions as a joint venture, or mezzanine lending program, to avoid severe short-term dilution and loss of current income commonly referred to as the “negative carry” associated with such extensive renovation programs.
Portfolio and Asset Management Strategy We intend to ensure that the management of our hotel properties maximizes market share, as evidenced by revenue per available room (“RevPAR”) penetration indices, and that our market share yields the optimum level of revenues for our hotels in their respective markets.
Portfolio and Asset Management Strategy 9 We intend to ensure that the management of our hotel properties maximizes market share, as evidenced by revenue per available room (“RevPAR”) penetration indices, and that our market share yields the optimum level of revenues for our hotels in their respective markets.
The applicable percentages of gross revenue for the base management fee for each of our wholly-owned hotels and our condominium hotel rental programs are shown below: 9 Hotel Name Commencement Date Expiration Date Percentage Fee Hotel Ballast Wilmington, Tapestry Collection by Hilton January 1, 2020 March 31, 2035 2.50% The DeSoto January 1, 2020 March 31, 2035 2.50% DoubleTree by Hilton Philadelphia Airport January 1, 2020 March 31, 2035 2.50% Hotel Alba Tampa, Tapestry Collection by Hilton January 1, 2020 March 31, 2035 2.50% DoubleTree by Hilton Jacksonville Riverfront January 1, 2020 March 31, 2035 2.50% DoubleTree by Hilton Laurel January 1, 2020 March 31, 2035 2.50% Georgian Terrace January 1, 2020 March 31, 2035 2.50% The Whitehall January 1, 2020 March 31, 2035 2.50% DoubleTree Resort by Hilton Hollywood Beach April 1, 2020 March 31, 2035 2.50% Lyfe Resort & Residences April 1, 2020 March 31, 2035 2.50% Hyde Beach House Resort & Residences April 1, 2020 March 31, 2035 2.50% Hyatt Centric Arlington November 15, 2020 March 31, 2035 2.50% Agreements with Our Town .
The applicable percentages of gross revenue for the base management fee for each of our wholly-owned hotels and our condominium hotel rental programs are shown below: 10 Hotel Name Commencement Date Expiration Date Percentage Fee Hotel Ballast Wilmington, Tapestry Collection by Hilton January 1, 2020 March 31, 2035 2.50% The DeSoto January 1, 2020 March 31, 2035 2.50% DoubleTree by Hilton Philadelphia Airport January 1, 2020 March 31, 2035 2.50% Hotel Alba Tampa, Tapestry Collection by Hilton January 1, 2020 March 31, 2035 2.50% DoubleTree by Hilton Jacksonville Riverfront January 1, 2020 March 31, 2035 2.50% DoubleTree by Hilton Laurel January 1, 2020 March 31, 2035 2.50% Georgian Terrace January 1, 2020 March 31, 2035 2.50% The Whitehall January 1, 2020 March 31, 2035 2.50% DoubleTree Resort by Hilton Hollywood Beach April 1, 2020 March 31, 2035 2.50% Lyfe Resort & Residences April 1, 2020 March 31, 2035 2.50% Hyde Beach House Resort & Residences April 1, 2020 March 31, 2035 2.50% Hyatt Centric Arlington November 15, 2020 March 31, 2035 2.50% Agreements with Our Town .
In connection with a termination upon the sale of the hotel, Our Town will be entitled to receive a termination fee equal to the lesser of the management fee paid with respect to the prior twelve months or the management fees paid for that number of months prior to the closing date of the hotel sale equal to the number of months remaining on the current term of the OTH Hotel Management Agreement.
In connection with a termination upon the sale of the hotel, Our Town would be entitled to receive a termination fee equal to the lesser of the management fee paid with respect to the prior twelve months or the management fees paid for that number of months prior to the closing date of the hotel sale equal to the number of months remaining on the current term of the OTH Hotel Management Agreement.
The base management fee for each of our hotels is a percentage of the gross revenues of the hotel and is due monthly.
The base management fee for each of our hotels was a percentage of the gross revenues of the hotel and is due monthly.
As of December 31, 2024, our portfolio consisted of ten full-service, primarily upscale and upper-upscale hotels located in seven states with an aggregate of 2,786 hotel rooms, and interests in two condominium hotels and their associated rental programs.
As of December 31, 2025, our portfolio consisted of ten full-service, primarily upscale and upper-upscale hotels located in seven states with an aggregate of 2,786 hotel rooms, and interests in two condominium hotels and their associated rental programs.
We will not pursue joint venture or mezzanine programs in which we would become a “de facto” lender to the real estate community. • Investments in Mortgages, Structured Financings and Other Lending Policies: In sourcing acquisitions for our core turnaround growth strategy, we may pursue investments in debt instruments that are collateralized by underperforming hotel properties.
We do not intend to pursue joint venture or mezzanine programs in which we would become a “de facto” lender to the real estate community. • Investments in Mortgages, Structured Financings and Other Lending Policies: In sourcing acquisitions for our core turnaround growth strategy, we may pursue investments in debt instruments that are collateralized by underperforming hotel properties.
We also require detailed and refined reporting data from our hotel manager, which includes detailed accounts of revenues, revenue segments, expenses and forecasts based on current and historic booking patterns. We also believe we optimize and successfully manage capital costs at our hotels while ensuring that adequate product standards are maintained to provide a positive guest experience.
We also require detailed and refined reporting data from our hotel manager, which includes detailed accounts of revenues, revenue segments, expenses and forecasts based on current and historic booking patterns. We also believe we optimize and successfully manage capital costs at our hotels while ensuring that adequate product standards are maintained to provide positive guest experiences.
Pursuant to the management agreements for the Lyfe Resort & Residences and the Hyde Beach House Resort & Residences, Our Town manages the rental of individually owned condominium units pursuant to rental agreements entered into with individual condominium unit owners.
Pursuant to the management agreements for the Lyfe Resort & Residences and the Hyde Beach House Resort & Residences, Our Town managed the rental of individually owned condominium units pursuant to rental agreements entered into with individual condominium unit owners.
Each of the OTH Hotel Management Agreements may be extended for up to two additional periods of five years subject to the approval of both parties with respect to any such extension.
Each of the OTH Hotel Management Agreements could be extended for up to two additional periods of five years subject to the approval of both parties with respect to any such extension.
The following table sets forth certain information for the franchise licenses of our wholly-owned hotel properties as of December 31, 2024: 11 Franchise/Royalty Expiration Fee (1) Date Hotel Alba Tampa, Tapestry Collection by Hilton 5.0 % June 2029 DoubleTree by Hilton Jacksonville Riverfront 5.0 % September 2025 DoubleTree by Hilton Laurel (2) 5.0 % October 2030 DoubleTree by Hilton Philadelphia – Airport 5.0 % October 2024 DoubleTree Resort by Hilton Hollywood Beach 5.0 % October 2027 Hotel Ballast Wilmington, Tapestry Collection by Hilton 5.0 % April 2028 Hyatt Centric Arlington 5.0 % March 2038 (1) Percentage of room revenues payable to the franchisor.
The following table sets forth certain information for the franchise licenses of our wholly-owned hotel properties as of December 31, 2025: 13 Franchise/Royalty Expiration Fee (1) Date Hotel Alba Tampa, Tapestry Collection by Hilton 5.0 % June 2029 DoubleTree by Hilton Jacksonville Riverfront 5.0 % September 2035 DoubleTree by Hilton Laurel (2) 5.0 % October 2030 DoubleTree by Hilton Philadelphia – Airport 5.0 % October 2034 DoubleTree Resort by Hilton Hollywood Beach 5.0 % October 2027 Hotel Ballast Wilmington, Tapestry Collection by Hilton 5.0 % April 2028 Hyatt Centric Arlington 5.0 % March 2038 (1) Percentage of room revenues payable to the franchisor.
Our Town is required to qualify as an eligible independent contractor in order to permit the Company to continue to operate as a real estate investment trust.
Our Town was required to qualify as an eligible independent contractor in order to permit the Company to continue to operate as a real estate investment trust.
Neither the Company nor MHI Holding has incurred federal income taxes since its formation. With the onset of the COVID-19 pandemic and the anticipation of significant losses to MHI Holding, we reduced our deferred tax asset through the establishment of a 100% valuation allowance. As of December 31, 2024, we have a valuation allowance of approximately $14.3 million.
Neither the Company nor MHI Holding has incurred federal income taxes since its formation. With the onset of the COVID-19 pandemic and the anticipation of significant losses to MHI Holding, we reduced our deferred tax asset through the establishment of a 100% valuation allowance. As of December 31, 2025, we have a valuation allowance of approximately $14.5 million.
Item 1. B usiness Organization Sotherly Hotels Inc. (the “Company”) is a self-managed and self-administered lodging real estate investment trust, or REIT, that was formed in August 2004 to own, acquire, renovate and reposition full-service, primarily upscale and upper-upscale hotel properties located in primary markets in the mid-Atlantic and southern United States.
Item 1. Business Organization Sotherly Hotels Inc. (the “Company”) is a lodging real estate investment trust, or REIT, that was formed in August 2004 to own, acquire, renovate and reposition full-service, primarily upscale and upper-upscale hotel properties located in primary markets in the mid-Atlantic and southern United States.
The agreements provide that Our Town will be the sole and exclusive manager of the hotels as the agent of the respective TRS Lessee, at the sole cost and expense of the TRS Lessee, and subject to certain operating standards. Each OTH Hotel Management Agreement may be terminated in connection with a sale of the related hotel.
The agreements provided that Our Town would be the sole and exclusive manager of the hotels as the agent of the respective TRS Lessee, at the sole cost and expense of the TRS Lessee, and subject to certain operating standards. Each OTH Hotel Management Agreement could be terminated in connection with a sale of the related hotel.
(2) The Franchise/Royalty Fee is reduced to 4.0% from December 2023 through November 2025, and 5.0% thereafter. Lease Agreements TRS Leases In order for the Company to maintain qualification as a REIT, neither the Company nor the Operating Partnership or its subsidiaries can operate our hotels directly.
(2) The Franchise/Royalty Fee was temporarily reduced to 4.0% from December 2023 through November 2025. Lease Agreements TRS Leases In order for the Company to maintain qualification as a REIT, neither the Company nor the Operating Partnership nor its subsidiaries can operate our hotels directly.
Upon the sale of a hotel, no termination fee will be due in the event the Company elects to provide Our Town with the opportunity to manage another comparable hotel and Our Town is not precluded from accepting such opportunity.
Upon the sale of a hotel, no termination fee would be due in the event the Company elected to provide Our Town with the opportunity to manage another comparable hotel and Our Town was not precluded from accepting such opportunity.
As of March 14, 2025, an affiliate of Andrew M. Sims, our Chairman, an affiliate of David R. Folsom, our President and Chief Executive Officer, and Andrew M. Sims Jr., our Vice President - Operations & Investor Relations, beneficially owned approximately 62.77%, 6.21%, and 15.0%, respectively, of the total outstanding ownership interests in Our Town. Mr. Sims, Mr.
As of December 31, 2025, an affiliate of Andrew M. Sims, our Chairman, an affiliate of David R. Folsom, our President and Chief Executive Officer, and Andrew M. Sims Jr., our Vice President - Operations & Investor Relations, beneficially owned approximately 58.5%, 6.5%, and 15.0%, respectively, of the total outstanding ownership interests in Our Town. Mr. Sims, Mr.
MHI Holding is subject to federal, state and local income taxes. MHI Holding has operated at a cumulative taxable loss, through December 31, 2024, of approximately $56.1 million and deferred timing differences of approximately $4.2 million attributable to accrued, but not currently deductible, vacation and sick pay amounts, business interest, depreciation and other miscellaneous differences.
MHI Holding is subject to federal, state and local income taxes. MHI Holding has operated at a cumulative taxable loss, through December 31, 2025, of approximately $57.0 million and deferred timing differences of approximately $3.7 million attributable to accrued, but not currently deductible, vacation and sick pay amounts, business interest, depreciation and other miscellaneous differences.
We intend to grow our portfolio through disciplined acquisitions of hotel properties and believe that we will be able to source significant external growth opportunities through our management team’s extensive network of industry, corporate and institutional relationships.
In the event of growth, we expect our portfolio will expand through disciplined acquisitions of hotel properties, and we believe that we will be able to source significant external growth opportunities through our management team’s extensive network of industry, corporate and institutional relationships.
Our Strategy and Investment Criteria Our strategy is to grow through acquisitions of full-service, upscale and upper-upscale hotel properties located in the primary markets of the southern United States. The Company may also opportunistically acquire hotels throughout other regions of the United States.
We may grow through acquisitions of full-service, upscale and upper-upscale hotel properties located in the primary markets of the southern United States. The Company may also opportunistically acquire hotels throughout other regions of the United States.
The OTH Master Agreement shall be extended beyond 2035 for such additional periods as an OTH Hotel Management Agreement remains in effect; • sets an incentive management fee for each of the hotels managed by Our Town, and any future hotels, equal to 10% of the amount by which gross operating profit, as defined in the OTH Hotel Management Agreements, for a given year exceeds the budgeted gross operating profit for such year; provided, however, that the incentive management fee payable in respect of any such year shall not exceed 0.25% of the gross revenues of the hotel included in such calculation; • provides a mechanism and establishes conditions on which the Company will offer Our Town the opportunity to manage hotels acquired by the Company in the future, pursuant to a negotiated form of single facility management agreement, with the caveat that the Company is not required to offer the management of future hotels to Our Town; and • sets a base management fee for future hotels of 2.00% for the first year of the term, 2.25% for the second year of the term, and 2.50% for the third and any additional years of the term. 10 Each of the OTH Hotel Management Agreements has an initial term ending March 31, 2035.
The OTH Master Agreement would have been extended beyond 2035 for such additional periods as an OTH Hotel Management Agreement remained in effect; • set an incentive management fee for each of the hotels managed by Our Town, and any future hotels, equal to 10% of the amount by which gross operating profit, as defined in the OTH Hotel Management Agreements, for a given year exceeded the budgeted gross operating profit for such year; provided, however, that the incentive management fee payable in respect of any such year could not exceed 0.25% of the gross revenues of the hotel included in such calculation; • provided a mechanism and established conditions on which the Company could offer Our Town the opportunity to manage hotels acquired by the Company in the future, pursuant to a negotiated form of single facility management agreement, with the caveat that the Company was not required to offer the management of future hotels to Our Town; and • set a base management fee for future hotels of 2.00% of gross revenue for the first year of the term, 2.25% of gross revenue for the second year of the term, and 2.50% of gross revenue for the third and any additional years of the term. 11 Each of the OTH Hotel Management Agreements had an initial term ending March 31, 2035.
Our Properties As of December 31, 2024, our hotels were located in Florida, Georgia, Maryland, Virginia, North Carolina, Pennsylvania and Texas. Seven of these hotels operate under franchise agreements with major hotel brands, and three are independent hotels.
Our telephone number is (901) 346-8800. 7 Our Properties As of December 31, 2025, our hotels were located in Florida, Georgia, Maryland, Virginia, North Carolina, Pennsylvania and Texas. Seven of these hotels operate under franchise agreements with major hotel brands, and three are independent hotels.
In exchange for rights to the parking and cabana revenue, we pay the condominium association an annual payment of $271,000 for the initial five years of the term, with 5.0% increases on every fifth year of the term.
In exchange for rights to the parking and cabana revenue, we paid the condominium association an annual payment of $271,000 for the initial five years of the term, which increases 5.0% every five years through the duration of the term.
The OTH Master Agreement: • expires on March 31, 2035, or earlier if all of the OTH Hotel Management Agreements expire or are terminated prior to that date.
As of December 31, 2025, the OTH Master Agreement: • was set to expire on March 31, 2035, or earlier if all of the OTH Hotel Management Agreements expired or were terminated prior to that date.
The ground lease initially requires us to make rental payments of $50,000 per year in base rent and percentage rent equal to 3.5% of gross room revenue in excess of certain thresholds, as defined in the ground lease agreement.
The initial term of the ground lease required us to make rental payments of $50,000 per year in base rent and percentage rent equal to 3.5% of gross room revenue in excess of certain thresholds, as defined in the ground lease agreement. The ground lease allowed for five additional rental periods of 10 years each.
Current market conditions and the terms of our loan agreements limit our ability to pursue our growth strategy, but as economic conditions improve and demand and consumer confidence increase, we intend to position the Company to execute on our growth strategy.
Current market conditions and the terms of our loan agreements limit our ability to pursue a growth strategy, but as economic conditions improve and demand and consumer confidence increase, we intend to position the Company to execute on our growth strategy. We are not subject to limitations on the concentration of investments in any one location or facility type.
Our Town is the management company for each of our ten wholly-owned hotels, as well as the manager for our two condominium rental programs.
Our Town was the management company for each of our ten wholly-owned hotels, as well as the manager for our two condominium rental programs as of December 31, 2025 and through February 11, 2026.
On December 21, 2004, the Company successfully completed its initial public offering and elected to be treated as a self-advised REIT for federal income tax purposes. The Company conducts its business through Sotherly Hotels LP, its operating partnership (the “Operating Partnership”), of which the Company is the general partner.
On December 21, 2004, the Company successfully completed its initial public offering and elected to be treated as a self-advised REIT for federal income tax purposes.
Where possible, we will seek to subsequently purchase a hotel in connection with the requirements of a tax-free exchange. Such a strategy may be deployed in order to mitigate the tax consequence that a direct sale may cause. Our Principal Agreements Management Agreements Our hotels are managed on a day-to-day basis by Our Town, an eligible independent contractor.
Such a strategy may be deployed in order to mitigate the tax consequence that a direct sale may cause. Our Principal Agreements Management Agreements As of December 31, 2025, our hotels were managed on a day-to-day basis by Our Town, an eligible independent contractor.
The MHI TRS Entities, in turn, have engaged Our Town, which is an eligible independent contractor, to manage the day-to-day operations at our hotels. MHI Holding is a taxable REIT subsidiary (“TRS”) for federal income tax purposes. Our corporate office is located at 306 South Henry Street, Suite 100, Williamsburg, Virginia 23185. Our telephone number is (757) 229-5648.
The MHI TRS Entities, in turn, have engaged Schulte, which is an eligible independent contractor, to manage the day-to-day operations at our hotels. MHI Holding is a taxable REIT subsidiary (“TRS”) for federal income tax purposes. Our corporate office is located at 20 Huling Avenue, Memphis, Tennessee 38103.
The labor force in our hotels is predominately non-unionized, with only one property, the DoubleTree by Hilton Jacksonville Riverfront, having approximately 94 employees electing to participate under a collective bargaining arrangement. Further, the employees at our hotels that are managed by Our Town are eligible to receive health and other insurance coverage through Our Town, which self-insures.
The labor force in our hotels is predominately non-unionized, with only one property, the DoubleTree by Hilton Jacksonville Riverfront, having approximately 94 employees electing to participate under a collective bargaining arrangement. Asset Disposition Strategy.
Our wholly-owned hotels are leased to our TRS Lessees, which have engaged Our Town to manage the hotels. Each lease has a non-cancelable term ranging from four to thirty years, subject to earlier termination upon the occurrence of certain contingencies described in the lease.
Our wholly-owned hotels are leased to our TRS Lessees, which have engaged Schulte to manage the hotels. As of December 31, 2025, each lease had a non-cancelable term ranging from four to thirty years.
The number of competitive hotel properties in a particular geographic area could have a material adverse effect on occupancy, ADR and RevPAR of our hotels or at hotel properties we acquire in the future. We believe that brand recognition, location, the quality of the hotel, consistency of services provided, and price are the principal competitive factors affecting our hotels.
Each of our hotels is located in a developed area that includes other hotel properties. The number of competitive hotel properties in a particular geographic area could have a material adverse effect on occupancy, ADR and RevPAR of our hotels or at hotel properties we acquire in the future.
The initial term of the ground lease expires in 2035 and may be extended by us for four additional renewal periods of 10 years each. In order to sell the Hyatt Centric Arlington hotel and assign our leasehold interest in the ground lease, we are required to obtain the consent of the third-party lessor.
In order to sell the Hyatt Centric Arlington hotel and assign our leasehold interest in the ground lease, we are required to obtain the consent of the third-party lessor.
We have not received written notice from any governmental authority of any material noncompliance, liability or claim relating to hazardous or toxic substances or other environmental matters in connection with any of our present hotel properties.
We have not received written notice from any governmental authority of any material noncompliance, liability or claim relating to hazardous or toxic substances or other environmental matters in connection with any of our present hotel properties. 16 Employees and Human Capital As of December 31, 2025, we employed seven full-time individuals, all of whom work at our corporate office in Williamsburg, Virginia.
Self-insuring has, in our opinion and experience, provided significant savings over traditional insurance company sponsored plans. Asset Disposition Strategy. When a property no longer fits with our investment objectives, we will pursue a direct sale of the property for cash so that our investment capital can be redeployed according to the investment strategies outlined above.
When a property no longer fits with our investment objectives, we plan to pursue a direct sale of the property for cash so that our investment capital can be redeployed according to the investment strategies outlined above. Where possible, we may seek to subsequently purchase a hotel in connection with the requirements of a tax-free exchange.
Information on the Company’s Internet site is neither part of nor incorporated into this Form 10-K. 14
We have also posted on this website the Company’s Code of Business Conduct. We intend to disclose on our website any changes to, or waivers from, the Company’s Code of Business Conduct. Information on the Company’s internet site is neither part of nor incorporated into this Form 10-K. 17
All of our hotels are wholly-owned by subsidiaries of the Operating Partnership and are managed on a day-to-day basis by Our Town Hospitality, LLC (“Our Town”).
All of our hotels are wholly-owned by subsidiaries of the Operating Partnership and are managed on a day-to-day basis by Schulte Hospitality Group, Inc. (“Schulte”) as of February 12, 2026 pursuant to hotel management agreements entered into in connection with the Merger (the “Schulte Management Agreements”).
Our hotels currently compete primarily in the full-service upscale and upper-upscale segments of the market.
We believe that brand recognition, location, the quality of the hotel, consistency of services provided, and price are the principal competitive factors affecting our hotels. 15 Our hotels currently compete primarily in the full-service upscale and upper-upscale segments of the market.
All persons employed in the day-to-day operations of each of our hotels are employees of our third-party hotel manager engaged by our TRS Lessees to operate such hotels. Available Information We maintain an Internet site, http://www.sotherlyhotels.com, which contains additional information concerning Sotherly Hotels Inc.
We are committed to enhancing our culture through efforts to promote and preserve inclusion and by providing and maintaining a safe work environment. All persons employed in the day-to-day operations of each of our hotels are employees of our third-party hotel manager engaged by our TRS Lessees to operate such hotels.
Folsom, and Mr. Sims Jr. serve as directors of Our Town. Franchise Agreements As of December 31, 2024, all but three of our wholly-owned hotels operate under franchise licenses from national hotel companies.
In addition to the base fee above, each Schulte Management Agreement includes an overhead fee of $4,500 per month and an incentive fee based on gross operating profits. Franchise Agreements As of December 31, 2025, all but three of our wholly-owned hotels operate under franchise licenses from national hotel companies.
As of the filing date, the Company owns approximately 98.2% of the general and limited partnership units in the Operating Partnership. Other individuals and entities own the remaining 1.8% limited partnership units in the Operating Partnership.
The Company conducts its business through Sotherly Hotels LP, its operating partnership (the “Operating Partnership”), of which the Company is the general partner. As of the filing date, the Company owns more than 99.9% of the general and limited partnership units in the Operating Partnership. Another individual owns the remaining limited partnership units in the Operating Partnership.
Removed
We are not subject to limitations on the amount or percentage of our total assets that may be invested in any one property. Additionally, no limits have been set on the concentration of investments in any one location or facility type. Our policy is to acquire assets primarily for income and long-term appreciation.
Added
On February 12, 2026, the Company, KW Kingfisher LLC, a Delaware limited liability company (“Parent”), and Sparrows Nest LLC, a Maryland limited liability company (“Merger Sub”), completed the transactions (the “Merger”) contemplated by the Agreement and Plan of Merger (the “Merger Agreement”), dated as of October 24, 2025, by and among the Company, Parent and Merger Sub.
Removed
None of our hotels are managed by a major national or global hotel franchise company.
Added
Defined terms used herein but not defined shall have the meaning set forth in the Merger Agreement. Pursuant to the Merger Agreement, at the closing, Merger Sub merged with and into the Company.
Removed
Through our long history in the lodging industry, we have found that management of our hotels by management companies other than franchisors is preferable to and more profitable than management services provided by the major franchise companies, specifically with respect to optimization of operating expenses and the delivery of guest service.
Added
Upon completion of the Merger, the Company survived as a wholly owned subsidiary of Parent (and the surviving entity, the “Surviving Company”), the separate existence of the Merger Sub ceased and Sotherly Hotels LP, a Delaware limited partnership (the “Operating Partnership”), became an indirect subsidiary of Parent.
Removed
The ground lease contains a rent reset provision that will reset the rent in June 2025, and each successive 10 year period, to a fixed amount per annum equal to 8.0% of the land value, subject to an appraisal process. The appraisal process was completed in 2024 and, beginning in July 2025, the rent will adjust to $149,333 per month.
Added
As contemplated by the Merger Agreement, the Articles of Merger were filed with the State Department of Assessments and Taxation of Maryland, and the Merger was effective at 8:45 am Eastern time on February 12, 2026 (the “Effective Time”).
Removed
Competition The hotel industry is highly competitive with various participants competing on the basis of price, level of service and geographic location. Each of our hotels is located in a developed area that includes other hotel properties.
Added
As a result of the Merger, in accordance with the terms and conditions of the Merger Agreement, at the Effective Time, each share of common stock, par value $0.01 per share of the Company (the “Company Common Stock”) issued and outstanding immediately before the Effective Time (other than Cancelled Shares) was automatically converted into the right to receive an amount in cash equal to $2.25 per share, without interest (the “Per Company Share Merger Consideration,” and in the aggregate, the “Merger Consideration”); (B) each share of the Company’s 8.0% Series B Cumulative Redeemable Perpetual Preferred Stock, 7.875% Series C Cumulative Redeemable Perpetual Preferred Stock, and 8.25% Series D Cumulative Redeemable Perpetual Preferred Stock (collectively, the “Company Preferred Stock”) issued and outstanding immediately before the Effective Time shall be entitled to receive the Merger Consideration if the holder thereof elects to convert, subject to the terms and conditions contained in the Company’s charter (including any articles supplementary) (the “Charter”), including the share cap as defined therein, their respective shares of Company Preferred Stock into Company Common Stock after the closing of the Merger; and (C) the Limited Partnership Interests held by the limited partners (other than the Company) were purchased by an affiliate of Parent for the same per share Merger Consideration that each share of Company Common Stock receives pursuant to the Merger Agreement.
Removed
Our compensation program, including competitive salaries and other benefits, are designed to attract, hire, retain and motivate highly qualified employees and executives. We are committed to enhancing our culture through efforts to promote and preserve inclusion and by providing and maintaining a safe work environment.
Added
In connection with the Merger, the Company’s common stock ceased trading on the NASDAQ ® Global Market (“Nasdaq”) Nasdaq on February 12, 2026, and Nasdaq filed a Form 25 on February 13, 2026, to affect the delisting and deregistration of the Company’s common stock under Section 12(b) of the Exchange Act.
Removed
We have also posted on this website the Company’s Code of Business Conduct and the charters of the Company’s Nominating, Corporate Governance and Compensation Committee (“NCGC Committee”) and Audit Committee of the Company’s board of directors. We intend to disclose on our website any changes to, or waivers from, the Company’s Code of Business Conduct.
Added
Due to the Company Preferred Stock, the Company will continue reporting with the SEC under the Exchange Act. Prior to the Merger, the Company was self-managed and administered. Following the Merger, the Company is externally managed and administered.
Added
Our Strategy and Investment Criteria Following the Merger, our strategy is focused on maximizing the performance of our existing portfolio of full-service, primarily upscale and upper-upscale hotels through disciplined operations, targeted capital investment and active balance sheet management.
Added
We believe our portfolio benefits from scale and diversification across Southeastern and Mid-Atlantic markets, and we intend to leverage these attributes to generate durable cash flow and improve long-term asset value. We have transitioned day-to-day hotel management to Schulte, a scaled national hotel operator, to work towards advancing operational discipline and enhancing property-level execution.
Added
We expect this transition to support improved cost controls and operating efficiencies through initiatives such as disciplined expense management, centralized systems and procurement strategies, including insurance procurement. We also believe that our post-Merger ownership and governance structure enables greater organizational efficiency and a more agile decision-making framework.
Added
Through these efforts, we hope to reduce overhead and redirect cash flow toward property-level initiatives and balance sheet priorities. A central component of our strategy is implementing a guest-facing capital reinvestment program designed to improve competitive positioning, address deferred maintenance and generate attractive returns on invested capital.
Added
We expect this program to include ROI-driven improvements across the portfolio, including renovations of guestrooms and public spaces and other projects intended to improve guest experience and support revenue growth. We also continually evaluate the Company with the objective of optimizing long-term performance and stockholder value.
Added
Where appropriate, we may seek to divest non-core or lower-contributing assets and redeploy proceeds to reduce leverage and fund value-enhancing reinvestment initiatives.
Added
Our reinvestment decisions are guided by a focus on return-driven capital allocation and disciplined underwriting, including (i) projects expected to enhance revenue, margins and asset value, (ii) maintenance of brand and franchise standards where applicable, (iii) initiatives that improve operational efficiency and (iv) maintaining appropriate liquidity and financial flexibility under our debt agreements.
Added
As of December 31, 2025, none of our hotels were managed by a major national or global hotel franchise company. Effective as of February 12, 2026, Schulte became the manager of the Hyde Beach House Resort & Residences and, pursuant to the Schulte Management Agreements, was engaged to manage the Company’s wholly-owned hotels.
Added
Folsom, and Mr. Sims Jr. served as directors of Our Town. In connection with the Merger, the Company terminated the OTH Master Agreement with Our Town and Our Town ceased acting as the Company’s property management company effective February 12, 2026.
Added
On February 12, 2026, the TRS lessee subsidiaries for the Company’s hotels entered into hotel management agreements with Schulte and certain of its affiliates.
Added
Under each Schulte Management Agreement, Schulte is appointed as the sole and exclusive operator and manager of the applicable hotel and is responsible for the supervision, direction, control, management and operation of the hotel, subject to certain third-party operations. Agreements with Schulte .
Added
Under each Schulte Management Agreement, Schulte is entitled to (i) a base management fee equal to 2.75% of total revenues (paid monthly in arrears), (ii) an overhead fee of $4,500 per month, and (iii) an incentive fee ranging from 0% to 10% of gross operating profits based on specified performance thresholds.
Added
The Schulte Management Agreements have an initial term of ten (10) years and automatically renew for one successive five (5)-year period unless earlier terminated in accordance with their terms.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

89 edited+50 added−69 removed227 unchanged
Biggest changeRisks Related to Our Organization and Structure • Risks related to changes of control. • Risks related to our executive employment agreements. • Risks related to our Nasdaq listing. • Risks related to ownership limitations on our common stock and preferred stock. • Risks related to our preferred stock. • Risks related to future indebtedness. • Risks related to our REIT status. • Risks related to our major corporate policies. • Risks related to key personnel.
Biggest changeRisks Related to Our Organization and Structure • Risks related to change of control. • Risks related to the delisting of our common stock and preferred stock from Nasdaq. • Risks related to ownership limitations on our preferred stock. • Risks related to litigation in connection with the execution of a merger agreement and the consummation of a merger • Risks related to our preferred stock. 18 • Risks related to future indebtedness. • Risks related to our REIT status. • Risks related to our major corporate policies. • Risks related to key personnel. • Risks related to conflict of interest and related party transactions Risks Related to Conflicts of Interest of Our Officers and Directors • Risks related to conflicts of interest of our officers and directors.
Our financial leverage could negatively affect our business and financial results, including the following: • require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, working capital, capital expenditures, future business opportunities, paying dividends or other purposes; • limit our ability to obtain additional financing for working capital, renovation, redevelopment and rebranding plans, acquisitions, debt service requirements and other purposes; • adversely affect our ability to satisfy our financial obligations, including those related to our loan covenants; • limit our ability to refinance existing debt; • require us to agree to additional restrictions and limitations on our business operations and capital structure to obtain financing or to modify the terms of existing obligations; • force us to dispose of one or more of our properties, possibly on unfavorable terms; • increase our vulnerability to adverse economic and industry conditions, and to interest rate fluctuations; • force us to issue additional equity, possibly on terms unfavorable to existing stockholders; • limit our flexibility to make, or react to, changes in our business and our industry; and • place us at a competitive disadvantage, compared to our competitors that have less debt.
Our financial leverage could negatively affect our business and financial results, including the following: • require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, working capital, capital expenditures, future business opportunities, paying dividends or other purposes; • limit our ability to obtain additional financing for working capital, renovation, redevelopment and rebranding plans, acquisitions, debt service requirements and other purposes; 30 • adversely affect our ability to satisfy our financial obligations, including those related to our loan covenants; • limit our ability to refinance existing debt; • require us to agree to additional restrictions and limitations on our business operations and capital structure to obtain financing or to modify the terms of existing obligations; • force us to dispose of one or more of our properties, possibly on unfavorable terms; • increase our vulnerability to adverse economic and industry conditions, and to interest rate fluctuations; • force us to issue additional equity, possibly on terms unfavorable to existing stockholders; • limit our flexibility to make, or react to, changes in our business and our industry; and • place us at a competitive disadvantage, compared to our competitors that have less debt.
This competition may also increase the bargaining power of property owners seeking to sell to us, making it more difficult for us to acquire new properties on attractive terms, or at all. If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud.
This competition may also increase the bargaining power of property owners seeking to sell to us, making it more difficult for us to acquire new properties on attractive terms, or at all. 23 If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud.
Although we and our hotel manager have taken steps we believe are necessary to protect the security of our information systems and the data maintained in 19 those systems, it is possible that the safety and security measures taken will not be able to prevent the systems’ improper functioning or damage, or the improper access or disclosure of personally identifiable information such as in the event of cyber-attacks.
Although we and our hotel manager have taken steps we believe are necessary to protect the security of our information systems and the data maintained in those systems, it is possible that the safety and security measures taken will not be able to prevent the systems’ improper functioning or damage, or the improper access or disclosure of personally identifiable information such as in the event of cyber-attacks.
In addition, the Company must pay dividends, as “qualifying distributions,” to its stockholders aggregating annually at least 90.0% of its REIT taxable income (determined without regard to the dividends-paid deduction and by excluding capital gains and also reduced by certain noncash items) and must satisfy specified asset tests on a quarterly basis.
In addition, the Company must pay dividends, as “qualifying distributions,” to its stockholders aggregating annually at least 90.0% of its REIT taxable income (determined without regard to the dividends-paid deduction and by excluding capital gains and reduced by certain noncash items) and must satisfy specified asset tests on a quarterly basis.
The Company and its stockholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation. We are not aware, however, of any pending tax legislation that would adversely affect the Company’s ability to qualify as a REIT. 32 Failure to make distributions could subject the Company to tax.
The Company and its stockholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation. We are not aware, however, of any pending tax legislation that would adversely affect the Company’s ability to qualify as a REIT. Failure to make distributions could subject the Company to tax.
In addition, holders of the Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock voting together as a separate class have the right to elect two additional directors to our board of directors whenever dividends on the preferred shares are in arrears in an aggregate amount equivalent to six or more quarterly dividends (whether or not consecutive).
In addition, holders of the Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock voting together as 33 a separate class have the right to elect two additional directors to our board of directors whenever dividends on the preferred shares are in arrears in an aggregate amount equivalent to six or more quarterly dividends (whether or not consecutive).
Business activities that could be restricted by applicable REIT laws include, but are not limited to, developing alternative uses of real estate and the ownership of hotels that are not leased to a TRS, including the development and/or sale of timeshare or condominium units or the related land parcels.
Business activities that could be restricted by applicable REIT laws include, but are not limited to, developing 24 alternative uses of real estate and the ownership of hotels that are not leased to a TRS, including the development and/or sale of timeshare or condominium units or the related land parcels.
In the event of a change of control of the Company, the limited partners of our Operating Partnership will have the right, for a period of 30 days following the change of control event, to cause the Operating Partnership to redeem all of the units held by the limited partners for a cash amount equal to the cash redemption amount otherwise payable upon redemption pursuant to the 27 partnership agreement.
In the event of a change of control of the Company, the limited partners of our Operating Partnership will have the right, for a period of 30 days following the change of control event, to cause the Operating Partnership to redeem all of the units held by the limited partners for a cash amount equal to the cash redemption amount otherwise payable upon redemption pursuant to the partnership agreement.
If the Company ceases to be a REIT, it would become subject to federal income tax on its taxable income and would no longer be required to distribute most of its taxable income to the Company’s stockholders, which may have adverse consequences on our total return to the Company’s stockholders.
If the Company ceases to be a REIT, it would become subject 34 to federal income tax on its taxable income and would no longer be required to distribute most of its taxable income to the Company’s stockholders, which may have adverse consequences on our total return to the Company’s stockholders.
The costs of all these capital improvements as well as future capital improvements could adversely affect our financial condition and amounts available for distribution to the Company’s stockholders. 21 Operating our hotels under franchise agreements could increase our operating costs and lower our net income.
The costs of all these capital improvements as well as future capital improvements could adversely affect our financial condition and amounts available for distribution to the Company’s stockholders. Operating our hotels under franchise agreements could increase our operating costs and lower our net income.
We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a hotel property. We may be required to expend funds to correct defects or to make improvements before a hotel property can be sold.
We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a hotel property. 29 We may be required to expend funds to correct defects or to make improvements before a hotel property can be sold.
Each holders of Series C Preferred Stock is entitled to receive a maximum of 8.50340 shares of our common stock per share of Series C Preferred Stock, which may result in the holder receiving value that is less than the liquidation preference of the Series C Preferred Stock.
Each holder of Series C Preferred Stock is entitled to receive a maximum of 8.50340 shares of our common stock per share of Series C Preferred Stock, which may result in the holder receiving value that is less than the liquidation preference of the Series C Preferred Stock.
To the extent that the Company satisfies this distribution requirement, but distributes less than 100.0% of its taxable income (including its net capital gain), it will be subject to federal corporate income tax on its undistributed taxable income.
To the extent that the Company satisfies this distribution requirement but distributes less than 100.0% of its taxable income (including its net capital gain), it will be subject to federal corporate 35 income tax on its undistributed taxable income.
In addition, for the Company’s hotel management company to qualify as an “eligible independent contractor,” such company or a related person must be actively engaged in the trade or business of operating “qualified lodging facilities” (as defined below) for one or more persons not related to the REIT or its TRSs at each time that such company enters into a hotel management contract with a 35 TRS.
In addition, for the Company’s hotel management company to qualify as an “eligible independent contractor,” such company or a related person must be actively engaged in the trade or business of operating “qualified lodging facilities” (as defined below) for one or more persons not related to the REIT or its TRSs at each time that such company enters into a hotel management contract with a 38 TRS.
Furthermore, if competitors outperform the Company in such metrics, potential or current investors may elect to invest with the Company’s competitors, and employees, hotel brands, hotel management companies, vendors and guests may choose not to do business with the Company, which could have a material and adverse impact on the Company’s financial condition, the market price of its common shares and ability to raise capital.
Furthermore, if competitors outperform the Company in such expectations, potential or current investors may elect to invest with the Company’s competitors, and employees, hotel brands, hotel management companies, vendors and guests may choose not to do business with the Company, which could have a material and adverse impact on the Company’s financial condition, the market price of its common shares and ability to raise capital.
Under our bylaws, a committee consisting of only independent directors must approve any transaction between us and Our Town, or any interested director. However, there can be no assurance that these policies always will be successful in mitigating such conflicts, and decisions could be made that might not fully reflect the interests of all of the Company’s stockholders.
Under our bylaws, a committee consisting of only independent directors must approve any transaction between us and Our Town, or any interested director. However, there can be no assurance that these policies always will be successful in mitigating such conflicts, and decisions could be made that might not fully reflect the interests of all of the Company’s outstanding preferred stockholders.
We believe that our rent and other transactions with the TRS Lessees are based on arm’s-length amounts and reflect normal business practices, but there can be no assurance that the IRS will agree with our belief. 33 Even if the Company remains qualified as a REIT, it may face other tax liabilities that reduce its cash flow.
We believe that our rent and other transactions with the TRS Lessees are based on arm’s-length amounts and reflect normal business practices, but there can be no assurance that the IRS will agree with our belief. 36 Even if the Company remains qualified as a REIT, it may face other tax liabilities that reduce its cash flow.
General Risks Related to the Real Estate Industry • Risks related to illiquidity of real estate investments. • Risks related to future acquisitions. • Risks related to property damage including harmful mold. 15 • Risks related to increases in property taxes or insurance costs.
General Risks Related to the Real Estate Industry • Risks related to illiquidity of real estate investments. • Risks related to future acquisitions. • Risks related to property damage including harmful mold. • Risks related to increases in property taxes or insurance costs.
Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a hotel, as well as the anticipated future revenue from the hotel. In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property.
Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a hotel, as well as the anticipated future revenue from the hotel. In that event, we might nevertheless remain liable for any mortgage debt or other financial obligations related to the property.
For example: • it will be required to pay federal and state corporate income tax on undistributed REIT taxable income (including net capital gain); • if it has net income from the disposition of foreclosure property held primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, it must pay federal corporate income tax on such income; • if it (or the Operating Partnership or any subsidiary of the Operating Partnership other than MHI Holding) sells a property in a “prohibited transaction,” its gain, or its share of such gain, from the sale would be subject to a 100.0% penalty tax.
For example: • it will be required to pay federal and state corporate income tax on undistributed REIT taxable income (including net capital gain); • if it has net income from the disposition of foreclosure property held primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, it must pay federal corporate income tax on such income; • if it (or the Operating Partnership or any subsidiary of the Operating Partnership other than a TRS) sells a property in a “prohibited transaction,” its gain, or its share of such gain, from the sale would be subject to a 100.0% penalty tax.
This 30.0% withholding tax may be reduced by an applicable income tax treaty. The FATCA and nonresident withholding regulations are complex. Even if the 30.0% withholding is 37 reduced or eliminated by treaty for payments made to a foreign investor, FATCA withholding of 30.0% could apply depending upon the foreign investor’s FATCA status.
This 30.0% withholding tax may be reduced by an applicable income tax treaty. The FATCA and nonresident withholding regulations are complex. Even if the 30.0% withholding is 40 reduced or eliminated by treaty for payments made to a foreign investor, FATCA withholding of 30.0% could apply depending upon the foreign investor’s FATCA status.
We may not be able to fund capital improvements or acquisitions solely from cash provided from our operating activities because we must distribute at least 90.0% of our 22 REIT taxable income, excluding net capital gains, each year to maintain our REIT tax status.
We may not be able to fund capital improvements or acquisitions solely from cash provided by our operating activities because we must distribute at least 90.0% of our REIT taxable income, excluding net capital gains, each year to maintain our REIT tax status.
This cash redemption right may make it more unlikely or difficult for a third party to propose or consummate a change of control transaction, even if such transaction were in the best interests of the Company’s stockholders. Provisions of the Company’s charter may limit the ability of a third party to acquire control of the Company.
This cash redemption right may make it more unlikely or difficult for a third party to propose or consummate a change of control transaction, even if such transaction was in the best interests of the Company’s stockholders. Provisions of the Company’s charter may limit the ability of a third party to acquire control of the Company.
We have not paid any common stock dividend distributions following the payment of dividends in January 2020. Once the payment of all preferred dividends in arrears has been made, the Company may make the common stock dividend distribution that was declared in January 2020 to shareholders of record on March 13, 2020.
We have not paid any common stock dividend distributions following the payment of dividends in January 2020. Once the payment of all preferred dividends in arrears has been made, the Company may make the common stock dividend distribution that was declared in January 2020 to stockholders of record on March 13, 2020.
As of December 31, 2024, no risk from cybersecurity threats, including as a result of any previous cybersecurity incidents, has materially affected or is reasonably likely to materially affect the Company, including our business strategy, results of operations or financial condition.
As of December 31, 2025, no risk from cybersecurity threats, including as a result of any previous cybersecurity incidents, has materially affected or is reasonably likely to materially affect the Company, including our business strategy, results of operations or financial condition.
Accordingly, although the Company’s ownership of MHI Holding and the TRS Lessees will allow it to participate in the operating income from its hotels in 36 addition to receiving rent, that operating income will be fully subject to federal and state corporate income tax.
Accordingly, although the Company’s ownership of MHI Holding and the TRS Lessees will allow it to participate in the operating income from its hotels in 39 addition to receiving rent, that operating income will be fully subject to federal and state corporate income tax.
As a result, we may be required to liquidate otherwise attractive investments. 34 If the Operating Partnership fails to qualify as a partnership for federal income tax purposes, the Company could cease to qualify as a REIT and suffer other adverse consequences.
As a result, we may be required to liquidate otherwise attractive investments. 37 If the Operating Partnership fails to qualify as a partnership for federal income tax purposes, the Company could cease to qualify as a REIT and suffer other adverse consequences.
As of December 31, 2024, our portfolio consisted of ten wholly-owned hotels with a total of 2,786 rooms and the hotel commercial condominium units of the Lyfe Resort & Residences and the Hyde Beach House Resort & Residences condominium hotels.
As of December 31, 2025, our portfolio consisted of ten wholly-owned hotels with a total of 2,786 rooms and the hotel commercial condominium units of the Lyfe Resort & Residences and the Hyde Beach House Resort & Residences condominium hotels.
This loss of revenues could, therefore, also adversely affect our financial condition and results of operations, our ability to comply with the terms of the loan covenants and reduce our cash available for distribution to stockholders.
This loss of revenue could, therefore, also adversely affect our financial condition and results of operations, our ability to comply with the terms of the loan covenants and reduce our cash available for distribution to stockholders.
Certain provisions of the Maryland General Corporation Law ("MGCL") may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of the Company’s common stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including: • “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10.0% or more of the voting power of our shares or an affiliate thereof) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes special appraisal rights and special stockholder voting requirements on these combinations; and • “control share” provisions that provide that “control shares” of the Company (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by the Company’s stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
Certain provisions of the Maryland General Corporation Law ("MGCL") may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of the Company’s common stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including: • “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10.0% or more of the voting power of our shares or an affiliate thereof) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes special appraisal rights and special stockholder voting requirements on these combinations; and • “control share” provisions that provide that “control shares” of the Company (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by the Company’s stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares. 32 The Company has opted out of these provisions of the MGCL, in the case of the business combination provisions of the MGCL, by resolution of the Company’s board of directors, and in the case of the control share provisions of the MGCL pursuant to a provision in the Company’s bylaws.
If we are not able to come to reasonable terms with the lessor at the end of the term or if we are found to have breached certain obligations under the ground lease, the hotel may suffer a substantial decline in value and we may be forced to dispose of the hotel at a substantial loss.
If we cannot come to reasonable terms with the lessor at the end of the term or if we are found to have breached certain obligations under the ground lease, the hotel may suffer a substantial decline in value and we may be forced to dispose of the hotel at a substantial loss.
As a REIT, the Company is subject to various restrictions on the types of revenues it can earn, assets it can own and activities in which it can engage.
As a REIT, the Company is subject to various restrictions on the types of revenue it can earn, assets it can own and activities in which it can engage.
As of December 31, 2024, 1,464,100 shares of our Series B Preferred Stock were issued and outstanding, 1,346,110 shares of our Series C Preferred Stock were issued and outstanding, and 1,163,100 shares of our Series D Preferred Stock were issued and outstanding.
As of December 31, 2025, 1,464,100 shares of our Series B Preferred Stock were issued and outstanding, 1,346,110 shares of our Series C Preferred Stock were issued and outstanding, and 1,163,100 shares of our Series D Preferred Stock were issued and outstanding.
The aggregate liquidation preference with respect to the outstanding shares of Series D Preferred Stock is approximately $35.7 million, and annual dividends on our outstanding shares of Series D Preferred Stock are approximately $2.4 million. Holders of our Preferred Stock are entitled to cumulative dividends before any dividends may be declared or set aside on our common shares.
The aggregate liquidation preference with respect to the outstanding shares of Series D Preferred Stock is approximately $36.3 million, and annual dividends on our outstanding shares of Series D Preferred Stock are approximately $2.4 million. Holders of our Preferred Stock are entitled to cumulative dividends before any dividends may be declared or set aside on our common shares.
Failure to qualify as a REIT would subject the Company to federal income tax. If the Company fails to qualify as a REIT in any taxable year, it will be required to pay federal income tax on its taxable income at regular corporate rates.
If the Company fails to qualify as a REIT in any taxable year, it will be required to pay federal income tax on its taxable income at regular corporate rates.
Our ability to comply with the terms of our loan covenants, our ability to make distributions to the Company’s stockholders and the value of our hotels in general, may be adversely affected by factors in the lodging industry. 20 Operating Risks Our hotel properties are subject to various operating risks common to the lodging industry, many of which are beyond our control, including the following: • competition from other hotel properties in our markets; • over-building of hotels in our markets, which adversely affects occupancy and revenues at our hotels; • dependence on business and commercial travelers and tourism; • increases in energy costs and other expenses affecting travel, which may affect travel patterns and reduce the number of business and commercial travelers and tourists; • increases in operating costs due to inflation and other factors, including increases in labor costs, that may not be offset by increased room rates; • changes in interest rates and in the availability, cost and terms of debt financing; • changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances; • adverse effects of international, national, regional and local economic and market conditions; • adverse effects of a downturn in the lodging industry; and • risks generally associated with the ownership of hotel properties and real estate, as we discuss in detail below.
Operating Risks Our hotel properties are subject to various operating risks common to the lodging industry, many of which are beyond our control, including the following: • competition from other hotel properties in our markets; • over-building of hotels in our markets, which adversely affects occupancy and revenues at our hotels; • dependence on business and commercial travelers and tourism; • increases in energy costs and other expenses affecting travel, which may affect travel patterns and reduce the number of business and commercial travelers and tourists; • increases in operating costs due to inflation and other factors, including increases in labor costs, that may not be offset by increased room rates; • changes in interest rates and in the availability, cost and terms of debt financing; • changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances; • adverse effects of international, national, regional and local economic and market conditions; • adverse effects of a downturn in the lodging industry; and • risks generally associated with the ownership of hotel properties and real estate, as we discuss in detail below.
Aggregate Share and Common Share Ownership Limits The Company’s charter provides that no person may directly or indirectly own more than 9.9% of the value of the Company’s outstanding shares of capital stock or more than 9.9% of the number of the Company’s outstanding shares of common stock.
Aggregate Share Ownership Limits The Company’s charter provides that no person may directly or indirectly own more than 9.9% of the value of the Company’s outstanding shares of capital stock.
As of March 1, 2025, we owned one property that utilizes a brand owned by Hyatt. Our success is also dependent in part on the continued success, market recognition, and positive perception of these brands.
As of April 1, 2026, we owned one property that utilizes a brand owned by Hyatt. Our success is also dependent in part on the continued success, market recognition, and positive perception of these brands.
To preserve the Company’s REIT qualification, the Company’s charter contains a 9.9% aggregate share ownership limit and a 9.9% common share ownership limit.
To preserve the Company’s REIT qualification, the Company’s charter contains a 9.9% aggregate share ownership limit.
Since federal income tax laws restrict REITs and their subsidiaries from operating or managing hotels, we do not operate or manage our hotels. Instead, we lease all of our hotels to our TRS Lessees, and our TRS Lessees retain managers to operate our hotels pursuant to management agreements. All of our hotels currently are managed by Our Town.
Since federal income tax laws restrict REITs and their subsidiaries from operating or managing hotels, we do not operate or manage our hotels. Instead, we lease all of our hotels to our TRS Lessees, and our TRS Lessees retain managers to operate our hotels pursuant to management agreements.
We face risks related to pandemic diseases, including COVID-19 and its variants, which could materially and adversely affect travel and result in reduced demand for our hotels. Our business could be materially and adversely affected by the effect of a pandemic disease on the travel industry.
We face risks related to pandemic diseases, which could materially and adversely affect travel and result in reduced demand for our hotels. Our business could be materially and adversely affected by the effect of a pandemic disease on the travel industry.
If environmental contamination exists on our properties, we could become subject to strict, joint and several liability for the contamination by virtue of our ownership interest. The presence of hazardous substances on a property may adversely affect our ability to sell the property and we may incur substantial remediation costs.
There may be unknown environmental problems associated with our properties. If environmental contamination exists on our properties, we could become subject to strict, joint and several liability for the contamination by virtue of our ownership interest. The presence of hazardous substances on a property may adversely affect our ability to sell the property and we may incur substantial remediation costs.
If the Company fails to remain qualified as a REIT, it may have to reduce or eliminate any distributions to its stockholders in order to satisfy its income tax liabilities. Any distributions that the Company does make to its stockholders would be treated as taxable dividends to the extent of its current and accumulated earnings and profits.
If the Company fails to remain qualified as a REIT, it may have to reduce or eliminate any distributions to its stockholders in order to satisfy its income tax liabilities. Any distribution that the Company makes to its stockholders would be treated as a taxable dividend to the extent of its current and accumulated earnings and profits.
The aggregate liquidation preference with respect to the outstanding shares of Series B Preferred Stock is approximately $44.7 million, and annual dividends on our outstanding shares of Series B Preferred Stock are approximately $2.9 million.
The aggregate liquidation preference with respect to the outstanding shares of Series B Preferred Stock is approximately $45.4 million, and annual dividends on our outstanding shares of Series B Preferred Stock are approximately $2.9 million.
The aggregate liquidation preference with respect to the outstanding shares of Series C Preferred Stock is approximately $40.9 million, and annual dividends on our outstanding shares of Series C Preferred Stock are approximately $2.7 million.
The aggregate liquidation preference with respect to the outstanding shares of Series C Preferred Stock is approximately $41.6 million, and annual dividends on our outstanding shares of Series C Preferred Stock are approximately $2.7 million.
As of December 31, 2024, distributions on our Preferred Stock are in arrears for the last eleven quarterly payments.
As of December 31, 2025, distributions on our Preferred Stock are in arrears for the last thirteen quarterly payments.
SUMMARY Risks Related to Our Business and Properties • Risks related to the limited number of hotels that we own. • Risks related to increased hotel operating expenses and decreased hotel revenues. • Risks related to our investment strategy, and the acquisition, renovation, or repositioning of hotels. • Risks related to our management company. • Risks related to our ability to make distributions. • Risks related to the geographic concentration of our hotels. • Risks related to the concentration of our hotel franchise agreements. • Risks related to our ground lease for the Hyatt Centric Arlington. • Risks related to hedging against interest rate exposure. • Risks related to investment opportunities and growth prospects. • Risks related to internal controls. • Risks related to information technology. • Risks related to natural disasters and the physical effects of climate change. • Risks related to restrictions on our investments and business activities by the applicable REIT laws.
SUMMARY Risks Related to Our Business and Properties • Risks related to the Merger and the resulting change in control, ownership structure and delisting of our common stock. • Risks related to our recent refinancing transactions and new credit facilities. • Risks related to the limited number of hotels that we own. • Risks related to increased hotel operating expenses and decreased hotel revenues. • Risks related to our investment strategy, and the acquisition, renovation, or repositioning of hotels. • Risks related to our third-party hotel management company. • Risks related to our ability to make distributions. • Risks related to the geographic concentration of our hotels. • Risks related to the concentration of our hotel franchise agreements. • Risks related to our ground lease for the Hyatt Centric Arlington. • Risks related to hedging against interest rate exposure. • Risks related to investment opportunities and growth prospects. • Risks related to internal controls. • Risks related to information technology. • Risks related to natural disasters and the physical effects of climate change. • Risks related to restrictions on our investments and business activities by the applicable REIT laws.
The HIRE Act includes provisions known as the Foreign Account Tax Compliance Act (“FATCA”), that generally impose a 30.0% U.S. withholding tax on “withholdable payments,” which consist of (i) U.S.-source dividends, interest, rents and other “fixed or determinable annual or periodical income” paid after June 30, 2014 and (ii) certain U.S.-source gross proceeds paid after December 31, 2018 to (a) “foreign financial institutions” unless (x) they enter into an agreement with the IRS to collect and disclose to the IRS information regarding their direct and indirect U.S. owners or (y) they comply with the terms of any FATCA intergovernmental agreement executed between the authorities in their jurisdiction and the U.S., and (b) “non-financial foreign entities” (i.e., foreign entities that are not foreign financial institutions) unless they certify certain information regarding their direct and indirect U.S. owners.
Investors may be subject to U.S. withholding tax under the “Foreign Account Tax Compliance Act.” Under the Foreign Account Tax Compliance Act (“FATCA”), a 30.0% U.S. withholding tax generally is imposed on “withhold-able payments,” which consist of (i) U.S.-source dividends, interest, rents and other “fixed or determinable annual or periodical income” and (ii) certain U.S.-source gross proceeds paid to (a) “foreign financial institutions” unless (x) they enter into an agreement with the IRS to collect and disclose to the IRS information regarding their direct and indirect U.S. owners or (y) they comply with the terms of any FATCA intergovernmental agreement executed between the authorities in their jurisdiction and the U.S., and (b) “non-financial foreign entities” (i.e., foreign entities that are not foreign financial institutions) unless they certify certain information regarding their direct and indirect U.S. owners.
If we are required to make substantial modifications to our hotels, whether to comply with the ADA or other changes in governmental rules and regulations, our financial condition, results of operations and ability to comply with the terms of our loan covenants and to make distributions to the Company’s stockholders could be adversely affected. 23 Our hotels may be subject to unknown or contingent liabilities which could cause us to incur substantial costs.
If we are required to make substantial modifications to our hotels, whether to comply with the ADA or other changes in governmental rules and regulations, our financial condition, results of operations and ability to comply with the terms of our loan covenants and to make distributions to the Company’s stockholders could be adversely affected.
The Company urges stockholders and prospective stockholders to consult with their tax advisors with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in the Company's shares.
Changes to the tax laws, possibly with retroactive application, may adversely affect taxation of the Company or the Company's stockholders. The Company urges stockholders and prospective stockholders to consult with their tax advisors with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in the Company's shares.
In order to maintain the Company’s REIT qualification, it cannot be closely held (i.e., more than 50.0% in value of our outstanding stock cannot be owned, directly or indirectly, by five or fewer individuals during the last half of any taxable year).
Our ownership limitations may restrict or prevent you from engaging in certain transfers of the Company’s preferred stock. [2] In order to maintain the Company’s REIT qualification, it cannot be closely held (i.e., more than 50.0% in value of our outstanding stock cannot be owned, directly or indirectly, by five or fewer individuals during the last half of any taxable year).
Historically, we have incurred debt for acquisitions and to fund our renovation, redevelopment and rebranding programs. Limitations upon our access to additional debt could adversely affect our ability to fund these programs or acquire hotels in the future.
Historically, we have incurred debt for acquisitions and to fund our renovation, redevelopment and rebranding programs. Limitations upon our access to additional indebtedness or access capital markets following the Merger could adversely affect our ability to fund these programs or pursue future acquisitions.
Accordingly, the Company may be required to borrow money or sell assets to make distributions sufficient to enable it to pay out enough of its taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4.0% nondeductible excise tax in a particular year.
Accordingly, the Company may be required to borrow money or sell assets to make sufficient distributions to pay out enough of its taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4.0% non-deductible excise tax in a particular year. Failure to qualify as a REIT would subject the Company to federal income tax.
The hotel properties that we acquire may be subject to unknown or contingent liabilities for which we may have no recourse, or only limited recourse, against the sellers.
Our hotels may be subject to unknown or contingent liabilities which could cause us to incur substantial costs. The hotel properties that we acquire may be subject to unknown or contingent liabilities for which we may have no recourse, or only limited recourse, against the sellers.
In our portfolio, the majority of the hotels that we owned as of December 31, 2024, utilize brands owned by Hilton. As a result, our success is dependent in part on the continued success of Hilton and their respective brands.
We also own a hotel operated under the brand owned by Hyatt Hotels Corporation ("Hyatt"). In our portfolio, the majority of the hotels that we owned as of December 31, 2025, utilize brands owned by Hilton. As a result, our success is dependent in part on the continued success of Hilton and their respective brands.
The ground lease contains a rent reset provision that will reset the rent in June 2025, and each successive 10 year period, to a fixed amount per annum equal to 8.0% of the land value, subject to an appraisal 18 process.
The ground lease contains a rent reset provision that re-set the rent in June 2025 and will be re-set each successive 10-year period, to a fixed amount per annum equal to 8.0% of the land value, subject to an appraisal process. The appraisal process was completed in 2024 and, beginning in July 2025, the rent adjusted to $149,333 per month.
The Company’s board of directors may amend or revise these and other policies from time to time without the vote or consent of the Company’s stockholders. Our success depends on key personnel whose continued service is not guaranteed. We depend on the efforts and expertise of our Chairman, Andrew M. Sims; our President and Chief Executive Officer, David R.
The Company’s board of directors may amend or revise these and other policies from time to time without the vote or consent of the Company’s stockholders. Our success depends on key personnel whose continued service is not guaranteed.
Therefore, a downturn in the lodging industry, in general, and the full-service, upscale and upper-upscale segments in which we operate, in particular, will have a material adverse effect on the value of our hotels, our financial condition and the extent to which cash may be available for distribution to the Company’s stockholders.
Therefore, a downturn in the lodging industry, in general, and the full-service, upscale and upper-upscale segments in which we operate, in particular, will have a material adverse effect on the value of our hotels, our financial condition and the extent to which cash may be available for distribution to the Company’s stockholders. 25 Capital Expenditures Our hotel properties have an ongoing need for renovations and other capital improvements, including replacements, from time to time, of furniture, fixtures and equipment.
Inflation, changes in building codes and ordinances, environmental considerations and other factors might also keep us from using insurance proceeds to replace or renovate a hotel after it has been damaged or destroyed. Under those circumstances, the insurance proceeds we receive might be inadequate to restore our economic position on the damaged or destroyed property.
Inflation, changes in building codes and ordinances, environmental considerations and other factors might also keep us from using insurance proceeds to replace or renovate a hotel after it has been damaged or destroyed.
If the franchisor does not consent to the sale or financing of our hotels, we may be unable to consummate transactions that are in our best interests or the terms of those transactions may be less favorable to us, which could have a material adverse effect on our financial condition and the execution of our strategies.
If the franchisor does not consent to the sale or financing of our hotels, we may be unable to consummate transactions that are in our best interests or the terms of those transactions may be less favorable to us, which could have a material adverse effect on our financial condition and the execution of our strategies. 26 Hotel re-development is subject to timing, budgeting and other risks that would increase our operating costs and limit our ability to make distributions to stockholders.
Additionally, in the event that we need to replace the manager of one or more of our hotels, we may be required by the terms of the applicable management agreement to pay substantial termination fees and may experience significant disruptions at the affected hotels. 17 Our ability to make distributions to the Company’s stockholders is subject to fluctuations in our financial performance, operating results and capital improvement requirements.
Additionally, in the event that we need to replace the manager of one or more of our hotels, we may be required by the terms of the applicable management agreement to pay substantial termination fees and may experience significant disruptions at the affected hotels.
In addition, the presence of significant mold could expose us to liability from our guests, employees or the management company and others if property damage or health concerns arise and could harm our reputation. 25 Increases in property taxes or insurance costs would increase our operating costs, reduce our income and adversely affect our ability to make distributions to the Company’s stockholders.
In addition, the presence of significant mold could expose us to liability from our guests, employees or the management company and others if property damage or health concerns arise and could harm our reputation.
The focus on and activism around ESG and related matters may constrain business operations or cause the Company to incur additional costs. The Company may face reputational damage in the event the Company’s corporate responsibility initiatives do not meet the standards set by various constituencies, including those of third-party providers of corporate responsibility ratings and reports.
The Company may face reputational damage in the event the Company’s corporate responsibility initiatives do not meet the expectations set by various constituencies, including those of third-party providers of corporate responsibility ratings and reports.
In addition, adverse economic conditions could also cause the terms on which we borrow to be unfavorable. Risks Related to Our Organization and Structure Our ability to effect a merger or other business combination transaction may be restricted by our Operating Partnership agreement.
Risks Related to Our Organization and Structure Our ability to effect a merger or other business combination transaction may be restricted by our Operating Partnership agreement.
In addition, our organizational documents contain no limitations on the amount of debt that we may incur, and the Company’s board of directors may change our financing policy at any time. As a result, we may be able to incur substantial additional debt, including secured debt, in the future.
Our business strategy contemplates the use of both secured and unsecured debt to finance long-term growth. In addition, our organizational documents contain no limitations on the amount of debt that we may incur, and the Company’s board of directors may change our financing policy at any time.
We do not have the authority to require any hotel to be operated in a particular manner or to govern any particular aspect of the daily operations of any hotel and as a result, our returns are dependent on the management of our hotels by our hotel management company.
Unanticipated expenses and insufficient demand at new hotel properties, therefore, could adversely affect our financial performance and our ability to comply with loan covenants and to make distributions to the Company’s stockholders. 21 We do not have the authority to require any hotel to be operated in a particular manner or to govern any particular aspect of the daily operations of any hotel and as a result, our returns are dependent on the management of our hotels by our hotel management company.
Any resulting oversupply or reduced demand for hotels in the mid-Atlantic and southern United States and in our markets in particular would therefore have a disproportionate negative impact on our revenues and limit our ability to make distributions to stockholders.
Any resulting oversupply or reduced demand for hotels in the mid-Atlantic and southern United States and in our markets in particular would therefore have a disproportionate negative impact on our revenues and limit our ability to make distributions to stockholders. 22 A substantial number of our hotels operate under brands owned by Hilton Worldwide Holdings, Inc.("Hilton"); therefore, we are subject to risks associated with concentrating our portfolio in one brand.
Such attacks, or the threat of such attacks, could have a material adverse effect on our business, our ability to finance our business, our ability to insure our properties and/or our results of operations and financial condition, as a whole.
Previous terrorist attacks in the 28 United States and subsequent terrorism alerts have adversely affected the travel and hospitality industries in the past. Such attacks, or the threat of such attacks, could have a material adverse effect on our business, our ability to finance our business, our ability to insure our properties and/or our results of operations and financial condition.
Hotel re-development is subject to timing, budgeting and other risks that would increase our operating costs and limit our ability to make distributions to stockholders. We intend to acquire hotel properties from time to time as suitable opportunities arise, taking into consideration general economic conditions, and seek to re-develop or reposition these hotels.
We intend to acquire hotel properties from time to time as suitable opportunities arise, taking into consideration general economic conditions, and seek to re-develop or reposition these hotels.
Federal Income Tax Risks Related to the Company’s Status as a REIT. • Risks related to potential failure to qualify as a REIT. • Risks related to potential failure to make distributions. • Risks related to MHI Holding, including its TRS qualification and potential tax liability. • Risks related to potential tax liabilities. • Risks related to highly technical and complex REIT compliance requirements. • Risks related to Operating Partnership’s qualification as a partnership for federal income tax purposes. • Risks related to the qualification of our hotel manager as an “eligible independent contractor”. • Risks related to our TRS leases. • Risks related to taxation of dividend income and U.S. withholding tax. • Risks related to foreign investors. • Risks related to U.S. tax reform and related regulatory action. 16 DETAIL Risks Related to Our Business and Properties We own a limited number of hotels and significant adverse changes at one hotel could have a material adverse effect on our financial performance and may limit our ability to make distributions to stockholders.
Federal Income Tax Risks Related to the Company’s Status as a REIT. • Risks related to potential failure to qualify as a REIT. • Risks related to potential failure to make distributions. • Risks related to MHI Holding, including its TRS qualification and potential tax liability. • Risks related to potential tax liabilities. • Risks related to highly technical and complex REIT compliance requirements. • Risks related to Operating Partnership’s qualification as a partnership for federal income tax purposes. • Risks related to the qualification of our hotel manager as an “eligible independent contractor”. • Risks related to our TRS leases. • Risks related to taxation of dividend income and U.S. withholding tax. • Risks related to foreign investors. • Risks related to U.S. tax reform and related regulatory action. 19 DETAIL Risks Related to Our Business and Properties The completion of the merger with KW Kingfisher LLC has materially changed our ownership structure and capital profile, and the anticipated benefits of the transaction may not be realized.
The premiums we pay for insurance may increase significantly due to a number of factors, including natural disasters. If property taxes or insurance costs increase, our financial condition, results of operations and our ability to make distributions to the Company’s stockholders could be materially and adversely affected and the market price of the Company’s shares could decline.
If property taxes or insurance costs increase, our financial condition, results of operations and our ability to make distributions to the Company’s stockholders could be materially and adversely affected and the market price of the Company’s shares could decline. Risks Related to Our Debt We have substantial financial leverage, which could adversely affect our business, liquidity and results of operations.
Final regulations under FATCA were issued by the IRS on January 17, 2013 and have been subsequently supplemented by additional regulations and guidance. FATCA does not replace the existing U.S. withholding tax regime. However, the FATCA regulations contain coordination provisions to avoid double withholding on U.S.-source income.
FATCA does not replace the existing U.S. withholding tax regime. However, the FATCA regulations contain coordination provisions to avoid double withholding on U.S.-source income.
In addition, the SEC has issued new ESG disclosure and other requirements that would impact the Company, but such new regulations are currently voluntarily stayed by the SEC, pending resolution of certain legal challenges. 24 As the Company continues to invest and focus on ESG practices that the Company believes are appropriate for its business, the Company could also be criticized by ESG detractors for the scope or nature of its initiatives or goals.
As the Company continues to invest and focus on ESG practices that the Company believes are appropriate for its business, the Company could also be criticized by ESG detractors for the scope or nature of its initiatives or goals.
As a result, we could become subject to significant losses and/or repair costs that may or may not be fully covered by insurance.
Over time, our coastal markets are expected to experience increases in storm intensity and rising sea-levels causing damage to our properties. As a result, we could become subject to significant losses and/or repair costs that may or may not be fully covered by insurance.
Our organizational documents have no limitation on the amount of indebtedness we may incur. As a result, we may become highly leveraged in the future, which could materially and adversely affect us. Our business strategy contemplates the use of both secured and unsecured debt to finance long-term growth.
The Company designated March 20, 2026, as the Change in Control Conversion Date (as defined in the Articles). Our organizational documents have no limitation on the amount of indebtedness we may incur. As a result, we may become highly leveraged in the future, which could materially and adversely affect us.
Risks Related to Our Debt We have substantial financial leverage. As of December 31, 2024, the aggregate principal balances of our mortgages and unsecured debt amounted to approximately $319.3 million, not accounting for reductions of unamortized premiums or deferred financing costs as shown on our balance sheet.
As of December 31, 2025, the aggregate principal balances of our mortgages and unsecured debt amounted to approximately $324.8 million, not accounting for reductions of unamortized premiums or deferred financing costs as shown on our balance sheet. Giving effect to the indebtedness incurred in connection with the Merger, our total outstanding indebtedness has increased substantially.
Each of our hotel properties is subject to real and personal property taxes. These taxes may increase as tax rates change and as the properties are assessed or reassessed by taxing authorities. Additionally, we must procure property and casualty, general liability, and other lines of insurance for our hotels.
Increases in property taxes or insurance costs would increase our operating costs, reduce our income and adversely affect our ability to make distributions to the Company’s stockholders. Each of our hotel properties is subject to real and personal property taxes. These taxes may increase as tax rates change and as the properties are assessed or reassessed by taxing authorities.
For example, the outbreaks of SARS and avian flu in 2003 had a severe impact on the travel industry, the outbreaks of H1N1 flu in 2009 threatened to have a similar impact, the perceived threat of a Zika virus outbreak in 2016 had an impact on the south Florida market, and the COVID-19 pandemic had a severe impact on the travel industry.
For example, the perceived threat of a Zika virus outbreak in 2016 had an impact on the south Florida market, and the COVID-19 pandemic had a severe impact on the travel industry. A prolonged recurrence of COVID-19, Zika virus or another pandemic disease also may result in health or other government authorities imposing restrictions on travel.
Thus, our stockholders bear the risk of our future securities issuances reducing the market price of our common shares and diluting their interest. 30 The change of control conversion and redemption features of the Company’s preferred stock may make it more difficult for a party to take over our Company or discourage a party from taking over our Company.
No dividends may be paid on our common stock until such time as the Preferred Stock distributions are made current. The change of control conversion and redemption features of the Company’s preferred stock may make it more difficult for a party to take over our Company or discourage a party from taking over our Company.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+1 added−1 removed3 unchanged
Biggest changeThe Audit Committee reviews and discusses our cybersecurity risk and reviews the tests of controls performed by consultants that perform the Company’s internal audit function. The chair of the Audit Committee may, at his discretion, report to the Chairman of the Board or the full Board of Directors.
Biggest changeAt least annually, he discusses cybersecurity risk and the Company’s mitigation efforts and effectiveness of controls with the Board of Directors. The Board of Directors reviews and discusses our cybersecurity risk and reviews the tests of controls performed by consultants that perform the Company’s internal audit function.
We maintain cybersecurity insurance coverage to mitigate our financial 38 exposure to certain incidents, and we consult with our consultants that perform the Company’s internal audit function regarding opportunities and enhancements to strengthen our policies and procedures. We do not retain any confidential information from our customers.
We maintain cybersecurity insurance coverage to mitigate our financial exposure to certain incidents, and we consult with our consultants that perform the Company’s internal audit function regarding opportunities and enhancements to strengthen our policies and procedures. We do not retain any confidential information from our customers.
For elements of cybersecurity risk which fall outside the purview of the third-party technololgy and software providers, our Chief Financial Officer oversees the implementation of additional controls to reduce the likelihood of a cybersecurity incident occurring as well as to reduce the impact of any such incident, should it occur.
For elements of cybersecurity risk which fall outside the purview of the third-party technology and software providers, our Chief Financial Officer oversees the implementation of additional controls to reduce the likelihood of a cybersecurity incident occurring as well as to reduce the impact of any such incident, should it occur.
As of December 31, 2024, no risk from cybersecurity threats, including as a result of any previous cybersecurity incidents, has materially affected or is reasonably likely to materially affect the Company, including our business strategy, results of operations or financial condition.
As of December 31, 2025, no risk from cybersecurity threats, including as a result of any previous cybersecurity incidents, has materially affected or is reasonably likely to materially affect the Company, including our business strategy, results of operations or financial condition.
Risk Factors - We and our hotel manager rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our business.” 39
Risk Factors - We and our hotel manager rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our business.” 42
Our hotel manager maintains separate cybersecurity insurance coverage to offset a portion of potential costs incurred from a security breach. We currently do not have a cybersecurity incident response plan with respect to our data and information systems.
Our hotel managers maintain separate cybersecurity insurance coverage to offset a portion of potential costs incurred from a security breach. 41 We currently do not have a cybersecurity incident response plan with respect to our data and information systems.
Item 1C. Cyberse curity The Company’s management recognizes the critical importance of monitoring for and properly addressing cybersecurity threats. Our Chief Financial Officer is the executive primarily responsible for identifying and managing risks to the Company from cybersecurity threats .
Item 1C. Cyberse curity The Company’s management recognizes the critical importance of monitoring for and properly addressing cybersecurity threats. Our Chief Financial Officer is the executive primarily responsible for identifying and managing risks to the Company from cybersecurity threats and has over 13 years of experience providing oversight of information technology infrastructure, system and security.
While we have control over our information systems, we do not have control over the information systems of our hotel manager, Our Town, or of our franchisors. Although we set expectations for Our Town and our franchisors, we rely on them to manage the cybersecurity risk to which they are subject.
Although we set expectations for our hotel managers and our franchisors, we rely on them to manage the cybersecurity risk to which they are subject.
Removed
At least annually, he discusses cybersecurity risk and the Company’s mitigation efforts and effectiveness of controls with the Audit Committee of the Board of Directors, which is the committee that has primary responsibility for overseeing our risk assessment and is composed solely of independent directors.
Added
While we have control over our corporate information systems, we do not manage hotel operations and the day-to-day operation of our properties, including many of the information systems used at the hotels. Controls over these systems are maintained by our hotel managers and, where applicable, our franchisors.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics, for definitions of Occupancy, ADR, and RevPAR in Part II of this Annual Report on Form 10-K ): Number of Occupancy ADR RevPAR Occupancy ADR RevPAR Occupancy ADR RevPAR Wholly-Owned Properties Rooms 2024 2024 2024 2023 2023 2023 2022 2022 2022 The DeSoto, Savannah, Georgia 246 72.4% $ 209.24 $ 151.51 69.2% $ 211.26 $ 146.23 65.7% $ 211.49 $ 139.00 DoubleTree by Hilton Jacksonville Riverfront, Jacksonville, Florida 293 67.7% $ 140.85 $ 95.29 70.0% $ 148.42 $ 103.90 68.8% $ 146.53 $ 100.79 DoubleTree by Hilton Laurel, Laurel, Maryland 208 57.1% $ 128.94 $ 73.67 57.8% $ 127.29 $ 73.55 59.7% $ 117.20 $ 69.98 DoubleTree by Hilton Philadelphia Airport, Philadelphia, Pennsylvania 331 64.7% $ 139.27 $ 90.15 61.7% $ 141.15 $ 87.13 64.6% $ 140.94 $ 91.01 DoubleTree Resort by Hilton Hollywood Beach, Hollywood, Florida 311 67.9% $ 187.58 $ 127.35 59.9% $ 201.48 $ 120.70 60.6% $ 206.18 $ 124.93 Georgian Terrace, Atlanta, Georgia 326 57.8% $ 177.93 $ 102.85 52.2% $ 194.12 $ 101.33 51.8% $ 198.90 $ 103.09 Hotel Alba Tampa, Tapestry Collection by Hilton, Tampa, Florida 222 78.1% $ 175.16 $ 136.76 77.8% $ 177.00 $ 137.75 76.3% $ 165.11 $ 125.92 Hotel Ballast Wilmington, Tapestry Collection by Hilton, Wilmington, North Carolina 272 72.3% $ 185.96 $ 134.46 69.2% $ 186.91 $ 129.39 62.2% $ 183.90 $ 114.45 Hyatt Centric Arlington, Arlington, Virginia 318 77.0% $ 209.44 $ 161.35 74.5% $ 207.98 $ 154.99 64.3% $ 187.12 $ 120.33 The Whitehall, Houston, Texas 259 59.4% $ 153.50 $ 91.21 44.1% $ 159.13 $ 70.25 40.0% $ 150.17 $ 60.11 Wholly-Owned Properties Total 2,786 Condominium Hotels Hyde Resort & Residences 66 (1) 60.7% $ 297.70 $ 180.77 51.9% $ 345.39 $ 179.23 52.8% $ 420.53 $ 222.08 Hyde Beach House Resort & Residences 72 (1) 62.6% $ 271.51 $ 169.89 46.4% $ 305.56 $ 141.93 42.4% $ 381.07 $ 161.42 Total Hotel & Participating Condominium Hotel Rooms 2,924 (1) We own the hotel commercial unit and operate a rental program.
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics, for definitions of Occupancy, ADR, and RevPAR in Part II of this Annual Report on Form 10-K ): Number of Occupancy ADR RevPAR Occupancy ADR RevPAR Occupancy ADR RevPAR Wholly-Owned Properties Rooms 2025 2025 2025 2024 2024 2024 2023 2023 2023 The DeSoto, Savannah, Georgia 246 67.9 % $ 207.62 $ 141.05 72.4 % $ 209.24 $ 151.51 69.2 % $ 211.26 $ 146.23 DoubleTree by Hilton Jacksonville Riverfront, Jacksonville, Florida 293 63.7 % $ 136.69 $ 87.12 67.7 % $ 140.85 $ 95.29 70.0 % $ 148.42 $ 103.90 DoubleTree by Hilton Laurel, Laurel, Maryland 208 61.4 % $ 123.34 $ 75.72 57.1 % $ 128.94 $ 73.67 57.8 % $ 127.29 $ 73.55 DoubleTree by Hilton Philadelphia Airport, Philadelphia, Pennsylvania 331 66.1 % $ 131.98 $ 87.17 64.7 % $ 139.27 $ 90.15 61.7 % $ 141.15 $ 87.13 DoubleTree Resort by Hilton Hollywood Beach, Hollywood, Florida 311 67.5 % $ 190.35 $ 128.52 67.9 % $ 187.58 $ 127.35 59.9 % $ 201.48 $ 120.70 Georgian Terrace, Atlanta, Georgia 326 54.6 % $ 183.57 $ 100.32 57.8 % $ 177.93 $ 102.85 52.2 % $ 194.12 $ 101.33 Hotel Alba Tampa, Tapestry Collection by Hilton, Tampa, Florida 222 73.1 % $ 178.06 $ 130.22 78.1 % $ 175.16 $ 136.76 77.8 % $ 177.00 $ 137.75 Hotel Ballast Wilmington, Tapestry Collection by Hilton, Wilmington, North Carolina 272 71.7 % $ 187.39 $ 134.40 72.3 % $ 185.96 $ 134.46 69.2 % $ 186.91 $ 129.39 Hyatt Centric Arlington, Arlington, Virginia 318 73.3 % $ 204.11 $ 149.54 77.0 % $ 209.44 $ 161.35 74.5 % $ 207.98 $ 154.99 The Whitehall, Houston, Texas 259 59.4 % $ 148.86 $ 88.43 59.4 % $ 153.50 $ 91.21 44.1 % $ 159.13 $ 70.25 Wholly-Owned Properties Total 2,786 Condominium Hotels Lyfe Resort & Residences 47 (1) 58.5 % $ 281.76 $ 164.73 (1) 60.7 % $ 297.70 $ 180.77 (1) 51.9 % $ 345.39 $ 179.23 Hyde Beach House Resort & Residences 65 (1) 62.1 % $ 267.09 $ 165.85 (1) 62.6 % $ 271.51 $ 169.89 (1) 46.4 % $ 305.56 $ 141.93 Total Hotel & Participating Condominium Hotel Rooms 2,898 (1) We own the hotel commercial unit and operate a rental program.
Reflects only those condominium units that were participating in the rental program as of December 31, 2024. At any given time, some portion of the units participating in our rental program may be occupied by the unit owners and unavailable for rent to hotel guests. We sometimes refer to each participating condominium unit as a “room.”
Reflects only those condominium units that were participating in the rental program as of December 31, 2025. At any given time, some portion of the units participating in our rental program may be occupied by the unit owners and unavailable for rent to hotel guests. We sometimes refer to each participating condominium unit as a “room.”
Item 2. P roperties As of December 31, 2024, our portfolio consisted of the following properties ( see Item 7.
Item 2. P roperties As of December 31, 2025, our portfolio consisted of the following properties ( see Item 7.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeWe are involved in routine litigation arising out of the ordinary course of business, most of which is expected to be covered by insurance, and none of which is expected to have a material impact on our financial condition or results of operations. Item 4. Mine Sa fety Disclosure Not applicable. 40 PART II
Biggest changeWe are involved in routine litigation arising out of the ordinary course of business, most of which is expected to be covered by insurance, and none of which is expected to have a material impact on our financial condition or results of operations. Item 4. Mine Sa fety Disclosure Not applicable. 43 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

13 edited+2 added−2 removed2 unchanged
Biggest changeThe same table sets forth the Operating Partnership’s distributions per preferred partnership units for fiscal years 2023 and 2024: Dividend (Distribution) Payments - Series B Preferred Stock Date Declared For the Quarter Ended Date Paid Amount per Share and Unit Ordinary Income Return of Capital January 2023 March 31, 2020 March 15, 2023 $ 0.50 100.00% 0.00% April 2023 June 30, 2020 June 15, 2023 $ 0.50 100.00% 0.00% May 2023 September 30, 2020 July 14, 2023 $ 0.50 100.00% 0.00% July 2023 December 31, 2020 September 15, 2023 $ 0.50 100.00% 0.00% October 2023 March 31, 2021 December 15, 2023 $ 0.50 100.00% 0.00% March 2024 June 30, 2021 March 13, 2024 $ 0.50 100.00% 0.00% June 2024 September 30, 2021 June 13, 2024 $ 0.50 100.00% 0.00% September 2024 December 31, 2021 September 12, 2024 $ 0.50 100.00% 0.00% December 2024 March 31, 2022 December 13, 2024 $ 0.50 100.00% 0.00% Dividend (Distribution) Payments - Series C Preferred Stock Date Declared For the Quarter Ended Date Paid Amount per Share and Unit Ordinary Income Return of Capital January 2023 March 31, 2020 March 15, 2023 $ 0.492188 100.00% 0.00% April 2023 June 30, 2020 June 15, 2023 $ 0.492188 100.00% 0.00% May 2023 September 30, 2020 July 14, 2023 $ 0.492188 100.00% 0.00% July 2023 December 31, 2020 September 15, 2023 $ 0.492188 100.00% 0.00% October 2023 March 31, 2021 December 15, 2023 $ 0.492188 100.00% 0.00% March 2024 June 30, 2021 March 13, 2024 $ 0.492188 100.00% 0.00% June 2024 September 30, 2021 June 13, 2024 $ 0.492188 100.00% 0.00% September 2024 December 31, 2021 September 12, 2024 $ 0.492188 100.00% 0.00% December 2024 March 31, 2022 December 13, 2024 $ 0.492188 100.00% 0.00% Dividend (Distribution) Payments - Series D Preferred Stock Date Declared For the Quarter Ended Date Paid Amount per Share and Unit Ordinary Income Return of Capital January 2023 March 31, 2020 March 15, 2023 $ 0.515625 100.00% 0.00% April 2023 June 30, 2020 June 15, 2023 $ 0.515625 100.00% 0.00% May 2023 September 30, 2020 July 14, 2023 $ 0.515625 100.00% 0.00% July 2023 December 31, 2020 September 15, 2023 $ 0.515625 100.00% 0.00% October 2023 March 31, 2021 December 15, 2023 $ 0.515625 100.00% 0.00% March 2024 June 30, 2021 March 13, 2024 $ 0.515625 100.00% 0.00% June 2024 September 30, 2021 June 13, 2024 $ 0.515625 100.00% 0.00% September 2024 December 31, 2021 September 12, 2024 $ 0.515625 100.00% 0.00% December 2024 March 31, 2022 December 13, 2024 $ 0.515625 100.00% 0.00% The amount of future common stock distributions will be based upon quarterly operating results, general economic conditions, requirements for capital improvements, the availability of debt and equity capital, the Code’s annual distribution requirements, and other factors, which the Company’s board of directors deems relevant.
Biggest changeThe same table sets forth the Operating Partnership’s distributions per preferred partnership units for fiscal years 2023 and 2024: The amount of future common stock distributions will be based upon quarterly operating results, general economic conditions, requirements for capital improvements, the availability of debt and equity capital, the Code’s annual distribution requirements, and other factors, which the Company’s board of directors deems relevant.
To maintain qualification as a REIT, we are required to make annual distributions to the Company’s stockholders of at least 90.0% of our REIT taxable income, excluding net capital gain, which does not necessarily equal net income as calculated in accordance with generally 41 accepted accounting principles.
To maintain qualification as a REIT, we are required to make annual distributions to the Company’s stockholders of at least 90.0% of our REIT taxable income, excluding net capital gain, which does not necessarily equal net income as calculated in accordance with generally accepted accounting principles.
Distributions to the Company’s stockholders will generally be taxable to the Company’s stockholders as ordinary income; however, because a portion of our investments are equity ownership interests in hotels, which will result in depreciation and noncash charges against our income, a portion of our distributions may constitute a tax-free return of capital.
Distributions to the Company’s stockholders will generally be taxable to the Company’s stockholders as ordinary income; however, because a portion of our investments are equity ownership interests in hotels, which will result in depreciation and noncash charges against our income, a 44 portion of our distributions may constitute a tax-free return of capital.
There were no sales of unregistered securities in the Operating Partnership during 2024. Issuer Purchases of Equity Securities There were no issuer purchases of equity securities during 2024. Sotherly Hotels Inc. and Sotherly Hotels LP Dividend and Distribution Information The Company elected to be taxed as a REIT commencing with our taxable year ending December 31, 2004.
There were no sales of unregistered securities in the Operating Partnership during 2025. Issuer Purchases of Equity Securities There were no issuer purchases of equity securities during 2025. Sotherly Hotels Inc. and Sotherly Hotels LP Dividend and Distribution Information The Company elected to be taxed as a REIT commencing with our taxable year ending December 31, 2004.
In order to maintain our qualification as a REIT, we must make distributions to our stockholders each year in an amount equal to at least: • 90% of our REIT taxable income determined without regard to the dividends paid deduction and excluding net capital gains; plus • 90% of the excess of our net income from foreclosure property over the tax imposed on such income by the Code; minus • Any excess noncash income (as defined in the Code). 42 The Company did not pay any common stock dividends in 2024 or 2023.
In order to maintain our qualification as a REIT, we must make distributions to our stockholders each year in an amount equal to at least: • 90% of our REIT taxable income determined without regard to the dividends paid deduction and excluding net capital gains; plus • 90% of the excess of our net income from foreclosure property over the tax imposed on such income by the Code; minus • Any excess noncash income (as defined in the Code).
Partnership Unitholder Information As of March 1, 2025, there were 5 holders of the Operating Partnership’s partnership units, including Sotherly Hotels Inc., which owned approximately 98.2% of the outstanding general and limited partnership units as well as 100.0% of the preferred partnership units.
Partnership Unitholder Information As of April 1, 2026, there were two (2) holders of the Operating Partnership’s partnership units, including Sotherly Hotels Inc., which owned more than 99.9% of the outstanding general and limited partnership units as well as 100.0% of the preferred partnership units.
To the extent not inconsistent with maintaining our REIT status, our TRS Lessees may retain any after-tax earnings. As a result of the impact of COVID-19 on our business, our board of directors has suspended our common stock dividend. We anticipate that our board of directors will re-evaluate our current dividend policy on an ongoing basis.
To the extent not inconsistent with maintaining our REIT status, our TRS Lessees may retain any after-tax earnings. In March 2020, as a result of the impact of COVID-19 on our business, our board of directors suspended our common and preferred stock dividends.
The Operating Partnership does not currently propose to offer partnership units to the public and does not currently expect that a public market for those units will develop.
Sotherly Hotels LP Market Information There is no established trading market for partnership units of the Operating Partnership. The Operating Partnership does not currently propose offering partnership units to the public and does not currently expect that a public market for those units will develop.
As of December 31, 2024, there were unpaid common dividends and distributions to holders of record as of March 13, 2020 in the amount of $2,088,160. The following tables set forth information regarding the declaration, payment and income tax characterization of distributions by the Company on its preferred shares to the Company’s preferred stockholders for fiscal years 2023 and 2024.
The following tables set forth information regarding the declaration, payment and income tax characterization of distributions by the Company on its preferred shares to the Company’s preferred stockholders for fiscal years 2025 and 2024.
Distributions on our preferred stock are in arrears for the last eleven quarterly payments. On January 24, 2023, the Company resumed quarterly distributions to holders of its preferred stock. No dividends may be paid on our common stock until such time as the preferred stock distributions are made current. We did not pay any common dividends in 2023 or 2024.
As of April 1, 2026, distributions on our preferred stock are in arrears for the last fourteen quarterly payments. No dividends may be paid on our common stock until such time as the preferred stock distributions are made current.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Sotherly Hotels Inc. Market Information The Company’s common stock trades on the NASDAQ ® Global Market under the symbol “SOHO”. The closing price of the Company’s common stock on the NASDAQ ® Global Market on March 3, 2025 was $0.8101 per share.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Sotherly Hotels Inc. Market Information The Company’s common stock traded on Nasdaq under the symbol “SOHO”. In connection with the consummation of the Merger, the final day of trading of the Company’s common stock was February 12, 2026.
The amount, timing and frequency of distributions will be authorized by the Company’s board of directors and declared by us based upon a variety of factors deemed relevant by our directors, and no assurance can be given that our distribution policy will not change in the future. Item 6. [Reserved] 43
The amount, timing and frequency of distributions will be authorized by the Company’s board of directors and declared by us based upon a variety of factors deemed relevant by our directors, and no assurance can be given that our distribution policy will not change in the future. 45 Dividend (Distribution) Payments - Series B Preferred Stock Date Declared For the Quarter Ended Date Paid Amount per Share and Unit Ordinary Income Return of Capital March 2024 June 30, 2021 March 13, 2024 $ 0.500000 100.00% 0.00% June 2024 September 30, 2021 June 13, 2024 $ 0.500000 100.00% 0.00% September 2024 December 31, 2021 September 12, 2024 $ 0.500000 100.00% 0.00% December 2024 March 31, 2022 December 13, 2024 $ 0.500000 100.00% 0.00% March 2025 June 30, 2022 March 14, 2025 $ 0.500000 100.00% 0.00% June 2025 September 30, 2022 June 16, 2025 $ 0.500000 100.00% 0.00% Dividend (Distribution) Payments - Series C Preferred Stock Date Declared For the Quarter Ended Date Paid Amount per Share and Unit Ordinary Income Return of Capital March 2024 June 30, 2021 March 13, 2024 $ 0.492188 100.00% 0.00% June 2024 September 30, 2021 June 13, 2024 $ 0.492188 100.00% 0.00% September 2024 December 31, 2021 September 12, 2024 $ 0.492188 100.00% 0.00% December 2024 March 31, 2022 December 13, 2024 $ 0.492188 100.00% 0.00% March 2025 June 30, 2022 March 14, 2025 $ 0.492188 100.00% 0.00% June 2025 September 30, 2022 June 16, 2025 $ 0.492188 100.00% 0.00% Dividend (Distribution) Payments - Series D Preferred Stock Date Declared For the Quarter Ended Date Paid Amount per Share and Unit Ordinary Income Return of Capital March 2024 June 30, 2021 March 13, 2024 $ 0.515625 100.00% 0.00% June 2024 September 30, 2021 June 13, 2024 $ 0.515625 100.00% 0.00% September 2024 December 31, 2021 September 12, 2024 $ 0.515625 100.00% 0.00% December 2024 March 31, 2022 December 13, 2024 $ 0.515625 100.00% 0.00% March 2025 June 30, 2022 March 14, 2025 $ 0.515625 100.00% 0.00% June 2025 September 30, 2022 June 16, 2025 $ 0.515625 100.00% 0.00% Item 6. [Reserved] 46
Recent Sales of Unregistered Securities There were no sales of unregistered securities in the Company during 2024. Issuer Purchases of Equity Securities There were no issuer purchases of equity securities during 2024. Sotherly Hotels LP Market Information There is no established trading market for partnership units of the Operating Partnership.
Stockholder Information As of April 1, 2026, there was one holder of record of the Company’s common stock. Recent Sales of Unregistered Securities There were no sales of unregistered securities in the Company during 2025. Issuer Purchases of Equity Securities There were no issuer purchases of equity securities during 2025.
Removed
Stockholder Information As of March 3, 2025, there were approximately 51 holders of record of the Company’s common stock. Because many of the Company's common shares are held by brokers and other institutions on behalf of shareholders, the Company believe there are substantially more beneficial holders of its common shares than record holders.
Added
On January 24, 2023, the Company resumed quarterly distributions to holders of its preferred stock with five payments made in 2023, four payments made in 2024 and two payments made in 2025. We anticipate that our board of directors will re-evaluate our dividend policy on an ongoing basis.
Removed
In order to comply with certain requirements related to the Company’s qualification as a REIT, the Company’s charter, subject to certain exceptions, limits the number of common shares that may be owned by any single person or affiliated group to 9.9% of the outstanding common shares.
Added
The Company did not pay any common stock dividends in 2025 or 2024. As of December 31, 2025, there were unpaid common dividends and distributions to holders of record as of March 13, 2020 in the amount of approximately $2.1 million.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

96 edited+47 added−43 removed76 unchanged
Biggest changeYear Ended Year Ended Year Ended December 31, December 31, December 31, 2024 2023 2022 Net income $ 1,179,854 $ 3,809,711 $ 33,959,848 Depreciation and amortization - real estate 19,321,684 18,735,804 18,593,359 Loss (gain) on disposal of assets (4,400 ) (4,700 ) 636,198 Gain on sale of hotel properties — — (30,053,977 ) Distributions to preferred stockholders (7,977,250 ) (7,977,250 ) (7,634,219 ) Gain on involuntary conversion of asset (502,808 ) (1,371,041 ) (1,763,320 ) FFO attributable to common stockholders and unitholders $ 12,017,080 $ 13,192,524 $ 13,737,889 Amortization 59,222 52,944 56,977 ESOP and stock - based compensation 497,500 559,220 998,424 Unrealized loss (gain) on hedging activities 937,783 737,682 (2,918,207 ) Negative lease amortization 536,758 — — Loss on early debt extinguishment 241,878 — 5,944,881 Adjusted FFO attributable to common stockholders and unitholders $ 14,290,221 $ 14,542,370 $ 17,819,964 Hotel EBITDA .
Biggest changeThe following is a reconciliation of net income (loss) to FFO and Adjusted FFO for the years ended December 31, 2025, 2024, and 2023. 60 Year Ended Year Ended Year Ended December 31, December 31, December 31, 2025 2024 2023 Net (loss) income $ (7,779,133 ) $ 1,179,854 $ 3,809,711 Depreciation and amortization - real estate 19,600,615 19,321,684 18,735,804 Impairment of investment in hotel properties held for sale 1,310,308 — - Gain on disposal of assets — (4,400 ) (4,700 ) Distributions to preferred stockholders (7,977,251 ) (7,977,250 ) (7,977,250 ) Net gain on involuntary conversion of assets (3,985,417 ) (502,808 ) (1,371,041 ) FFO attributable to common stockholders and unitholders $ 1,169,122 $ 12,017,080 $ 13,192,524 Amortization 58,287 59,222 52,944 ESOP and stock - based compensation 424,117 497,500 559,220 Unrealized loss (gain) on hedging activities (131,803 ) 937,783 737,682 Negative lease amortization 830,373 536,758 — Loss on early debt extinguishment 463,195 241,878 — Acquisition costs 2,059,731 — — Adjusted FFO attributable to common stockholders and unitholders $ 4,873,022 $ 14,290,221 $ 14,542,370 Hotel EBITDA .
The decrease in corporate general and administrative expenses was mainly due to decreases in professional fees and legal fees offset by an increase audit fees. Interest Expense .
The decrease in corporate general and administrative expenses was mainly due to decreases in professional fees and legal fees offset by an increase in audit fees. Interest Expense .
We define Hotel EBITDA as net income or loss excluding: (1) interest expense, (2) interest income, (3) income tax provision or benefit, (4) depreciation and amortization, (5) impairment of long-lived assets or investments, (6) gains and losses on disposal and/or sale of assets, (7) gains and losses on involuntary conversions of assets, (8) realized and unrealized gains and losses on derivative instruments not included in other comprehensive income, (9) other income at the properties, (10) loss on early debt extinguishment, (11) Paycheck Protection Program (PPP) debt forgiveness, (12) gain on exercise of development right, (13) corporate general and administrative expense, and (14) other income.
We define Hotel EBITDA as net income or loss excluding: (1) interest expense, (2) interest income, (3) income tax expense or benefit, (4) depreciation and amortization, (5) impairment of long-lived assets or investments, (6) gains and losses on disposal and/or sale of assets, (7) gains and losses on involuntary conversions of assets, (8) realized and unrealized gains and losses on derivative instruments not included in other comprehensive income, (9) other income at the properties, (10) loss on early debt extinguishment, (11) Paycheck Protection Program (PPP) debt forgiveness, (12) gain on exercise of development right, (13) corporate general and administrative expense, and (14) other income.
FFO, as defined by NAREIT, represents net income or loss determined in accordance with GAAP, excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated operating real estate assets, gains or losses from involuntary conversion of assets, plus certain non-cash items such as real estate asset 56 depreciation and amortization or impairment and after adjustment for any noncontrolling interest from unconsolidated partnerships and joint ventures.
FFO, as defined by NAREIT, represents net income or loss determined in accordance with GAAP, excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated operating real estate assets, gains or losses from involuntary conversion of assets, plus certain non-cash items such as real estate asset depreciation and amortization or impairment and after adjustment for any noncontrolling interest from unconsolidated partnerships and joint ventures.
In accordance with generally accepted accounting principles, the controlling interests in hotels comprising our accounting predecessor, MHI Hotels Services Group, and noncontrolling interests held by the controlling holders of our accounting predecessor in 55 hotels, which were acquired from third parties contributed to us in connection with the Company’s initial public offering, are recorded at historical cost basis.
In accordance with generally accepted accounting principles, the controlling interests in hotels comprising our accounting predecessor, MHI Hotels Services Group, and noncontrolling interests held by the controlling holders of our accounting predecessor in hotels, which were acquired from third parties contributed to us in connection with the Company’s initial public offering, are recorded at historical cost basis.
Critical Accounting Policies Our consolidated financial statements, prepared in conformity with U.S. GAAP, require management to make estimates and assumptions that affect the reported amount of assets and liability at the date of our financial statements, the reported amounts of revenue and expenses during the reporting periods and the related disclosures in the consolidated financial statements and accompanying footnotes.
Critical Accounting Policies Our consolidated financial statements, prepared in conformity with U.S. GAAP, require management to make estimates and assumptions that affect the reported amount of assets and liability at the date of our financial statements, the reported amounts of revenue and expenses during the reporting periods and the related disclosures in the consolidated financial statements and 58 accompanying footnotes.
Distributions to Preferred Stockholders and Holder of Preferred Partnership Units in the Operating Partnership. On January 24, 2023, the Company announced that it will resume quarterly distribution to holders of our preferred stock and set a record date of February 28, 2023 with a payment date of March 15, 2023.
Distributions to Preferred Stockholders and Holders of Preferred Partnership Units in the Operating Partnership. On January 24, 2023, the Company announced that it will resume quarterly distribution to holders of our preferred stock and set a record date of February 28, 2023 with a payment date of March 15, 2023.
Pursuant to the loan documents, the loan has a maturity date of March 6, 2029; carries a fixed rate of interest of 8.49%; requires monthly payments of interest only; and cannot be prepaid until the last four months of the loan term.
Pursuant to the loan documents, the loan has a maturity date of March 6, 2029; carries a fixed rate of interest of 53 8.49%; requires monthly payments of interest only; and cannot be prepaid until the last four months of the loan term.
We further adjust FFO attributable to common stockholders and unitholders for certain additional items that are not in NAREIT’s definition of FFO, including changes in deferred income taxes, any unrealized gain (loss) on hedging instruments, losses on early extinguishment of debt, gains on extinguishment of preferred stock, aborted offering costs, loan modification fees, franchise termination costs, costs associated with the departure of executive officers, litigation settlement, management contract termination costs, operating asset depreciation and amortization, gain or loss on a change in control, ESOP and stock compensation expenses and negative lease amortization on our finance ground lease obligation.
We further adjust FFO attributable to common stockholders and unitholders for certain additional items that are not in NAREIT’s definition of FFO, including changes in deferred income taxes, any unrealized gain (loss) on hedging instruments, loss on early extinguishment of debt, gain on extinguishment of preferred stock, aborted offering costs, loan modification fees, franchise termination costs, costs associated with the departure of executive officers, litigation settlement, management contract termination costs, operating asset depreciation and amortization, gain or loss on a change in control, ESOP and stock compensation expenses, negative lease amortization on our finance ground lease obligation and acquisition costs.
For example, an increase in occupancy at a hotel would lead to additional variable operating costs (such as housekeeping services, laundry, utilities, room supplies, franchise fees, management fees, credit card commissions and reservations expense), but could also result in increased non-room revenue from the hotel’s restaurant, banquet or parking facilities.
For example, an increase in occupancy at a hotel would lead to additional variable operating costs (such as housekeeping services, laundry, utilities, room supplies, franchise fees, management fees, credit card commissions and reservations expenses), but could also result in increased non-room revenue from the hotel’s restaurant, banquet or parking facilities.
Results of Operations Comparison of Year Ended December 31, 2024 to Year Ended December 31, 2023 The following table illustrates the key operating metrics for the years ended December 31, 2024 and 2023 for our wholly-owned hotels and the condominium hotel units, during each respective reporting period (“composite portfolio” properties), as well as the key operating metrics for the ten wholly-owned hotel properties that were under our control during all of 2024 (“actual” properties).
Results of Operations Comparison of Year Ended December 31, 2025 to Year Ended December 31, 2024 The following table illustrates the key operating metrics for the years ended December 31, 2025 and 2024 for our wholly-owned hotels and the condominium hotel units, during each respective reporting period (“composite portfolio” properties), as well as the key operating metrics for the ten wholly-owned hotel properties that were under our control during all of 2025 (“actual” properties).
Comparison of Year Ended December 31, 2023 to Year Ended December 31, 2022 The following table illustrates the key operating metrics for the years ended December 31, 2023 and 2022 for our wholly-owned hotels and the condominium hotel units, during each respective reporting period (“composite portfolio” properties), as well as the key operating metrics for the ten wholly-owned hotel properties that were under our control during all of 2023 (“actual” properties).
Comparison of Year Ended December 31, 2024 to Year Ended December 31, 2023 The following table illustrates the key operating metrics for the years ended December 31, 2024 and 2023 for our wholly-owned hotels and the condominium hotel units, during each respective reporting period (“composite portfolio” properties), as well as the key operating metrics for the ten wholly-owned hotel properties that were under our control during all of 2024 (“actual” properties).
We received a redemption payment from the interest rate swap on the refinance of the Hotel Alba mortgage loan for approximately $1.0 million. We also paid distributions to preferred stockholders in the amount of approximately $8.0 million. Our cash used in financing activities for the year ended December 31, 2023, was approximately $15.8 million.
We received a redemption payment from the interest rate swap on the refinance of the Hotel Alba mortgage loan for approximately $1.0 million. We also paid distributions to preferred stockholders in the amount of approximately $8.0 million. During the year ended December 31, 2023, cash used in financing activities was approximately $15.8 million.
We believe this provides a more complete understanding of the operating results over which our wholly-owned hotels and its operators have direct control. We believe Hotel EBITDA provides investors with supplemental information on the on-going operational performance of our hotels and the effectiveness of third-party management companies operating our business on a property-level basis.
We believe this provides a more complete understanding of the operating results over which our wholly-owned hotels and their operators have direct control. We believe Hotel EBITDA provides investors with supplemental information on the on-going operational performance of our hotels and the effectiveness of third-party management companies operating our business on a property-level basis.
As of December 31, 2024, we have determined that it is more-likely-than-not that we will not be able to fully utilize our deferred tax assets for future tax consequences, therefore a 100% valuation allowance is required. As of December 31, 2024 and 2023, deferred tax assets each totaled $0, respectively.
As of December 31, 2025, we have determined that it is more-likely-than-not that we will not be able to fully utilize our deferred tax assets for future tax consequences, therefore a 100% valuation allowance is required. As of December 31, 2025 and 2024, deferred tax assets each totaled $0, respectively.
On October 29, 2024, we announced the declaration of a quarterly distribution to holders of our preferred stock with a record date of November 29, 2024 and a payment date of December 16, 2024 . 54 On January 28, 2025, we announced the declaration of a quarterly distribution to holders of our preferred stock with a record date of February 28, 2025 and a payment date of March 14, 2025 .
On October 29, 2024, we announced the declaration of a quarterly distribution to holders of our preferred stock with a record date of November 29, 2024 and a payment date of December 16, 2024 . 57 On January 28, 2025, we announced the declaration of a quarterly distribution to holders of our preferred stock with a record date of February 28, 2025 and a payment date of March 14, 2025 .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview The Company is a self-managed and self-administered lodging REIT incorporated in Maryland in August 2004 to pursue opportunities in the full-service, primarily upscale and upper-upscale segments of the hotel industry located in primary and secondary markets in the mid-Atlantic and southern United States.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview The Company is a lodging REIT incorporated in Maryland in August 2004 to pursue opportunities in the full-service, primarily upscale and upper-upscale segments of the hotel industry located in primary and secondary markets in the mid-Atlantic and southern United States.
Other operating revenues for the year ended December 31, 2024 increased approximately $2.3 million, or 9.8%, to approximately $26.2 million compared to other operating revenues for the year ended December 31, 2023 of approximately $23.9 45 million.
Other operating revenues for the year ended December 31, 2024 increased approximately $2.3 million, or 9.8%, to approximately $26.2 million compared to other operating revenues for the year ended December 31, 2023 of approximately $23.9 50 million.
As of December 31, 2024, our portfolio consisted of the following hotel properties: Number Property of Rooms Location Date of Acquisition Chain/Class Designation Wholly-owned Hotels The DeSoto 246 Savannah, GA December 21, 2004 Upper Upscale (1) DoubleTree by Hilton Jacksonville Riverfront 293 Jacksonville, FL July 22, 2005 Upscale DoubleTree by Hilton Laurel 208 Laurel, MD December 21, 2004 Upscale DoubleTree by Hilton Philadelphia Airport 331 Philadelphia, PA December 21, 2004 Upscale DoubleTree Resort by Hilton Hollywood Beach 311 Hollywood, FL August 9, 2007 Upscale Georgian Terrace 326 Atlanta, GA March 27, 2014 Upper Upscale (1) Hotel Alba Tampa, Tapestry Collection by Hilton 222 Tampa, FL October 29, 2007 Upscale Hotel Ballast Wilmington, Tapestry Collection by Hilton 272 Wilmington, NC December 21, 2004 Upscale Hyatt Centric Arlington 318 Arlington, VA March 1, 2018 Upper Upscale The Whitehall 259 Houston, TX November 13, 2013 Upper Upscale (1) Hotel Rooms Subtotal 2,786 Condominium Hotels Lyfe Resort & Residences 66 (2) Hollywood, FL January 30, 2017 Luxury (1) Hyde Beach House Resort & Residences 72 (2) Hollywood, FL September 27, 2019 Luxury (1) Total Hotel & Participating Condominium Hotel Rooms 2,924 (1) Operated as an independent hotel.
As of December 31, 2025, our portfolio consisted of the following hotel properties: Number Chain/Class Property of Rooms Location Date of Acquisition Designation Wholly-owned Hotels The DeSoto 246 Savannah, GA December 21, 2004 Upper Upscale (1) DoubleTree by Hilton Jacksonville Riverfront 293 Jacksonville, FL July 22, 2005 Upscale DoubleTree by Hilton Laurel 208 Laurel, MD December 21, 2004 Upscale DoubleTree by Hilton Philadelphia Airport 331 Philadelphia, PA December 21, 2004 Upscale DoubleTree Resort by Hilton Hollywood Beach 311 Hollywood, FL August 9, 2007 Upscale Georgian Terrace 326 Atlanta, GA March 27, 2014 Upper Upscale (1) Hotel Alba Tampa, Tapestry Collection by Hilton 222 Tampa, FL October 29, 2007 Upscale Hotel Ballast Wilmington, Tapestry Collection by Hilton 272 Wilmington, NC December 21, 2004 Upscale Hyatt Centric Arlington 318 Arlington, VA March 1, 2018 Upper Upscale The Whitehall 259 Houston, TX November 13, 2013 Upper Upscale (1) Hotel Rooms Subtotal 2,786 Condominium Hotels Lyfe Resort & Residences (2) 47 (3) Hollywood, FL January 30, 2017 Luxury (1) Hyde Beach House Resort & Residences 65 (3) Hollywood, FL September 27, 2019 Luxury (1) Total Hotel & Participating Condominium Hotel Rooms 2,898 (1) Operated as an independent hotel.
We review our hotel properties for impairment whenever events or changes in circumstances indicate the carrying value of the hotel properties may not be recoverable.
We review our hotel properties for impairment whenever events or changes in circumstances indicate the carrying value of a hotel property may not be recoverable.
Our calculation of Hotel EBITDA may be different from similar measures calculated by other REITs. 57 The following is a reconciliation of net income to Hotel EBITDA for the years ended December 31, 2024, 2023, and 2022.
Our calculation of Hotel EBITDA may be different from similar measures calculated by other REITs. The following is a reconciliation of net income to Hotel EBITDA for the years ended December 31, 2025, 2024, and 2023.
Distributions to Stockholders and Holders of Units in the Operating Partnership The Company may not make distributions with respect to any shares of its common stock, unless and until full cumulative distributions on the outstanding preferred stock for all past unpaid periods are paid or declared and a sum sufficient for the payment thereof in cash is set aside.
The Company may not make distributions with respect to any shares of its common stock, unless and until full cumulative distributions on the outstanding preferred stock for all past unpaid periods are paid or declared and a sum sufficient for the payment thereof in cash is set aside.
No impairment loss was recognized for the years ended December 31, 2024 and December 31, 2023, respectively. Income Taxes. The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. As a REIT, the Company generally will not be subject to federal income tax.
No impairment loss was recognized for the year ended December 31, 2024. Income Taxes. The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. As a REIT, the Company generally will not be subject to federal income tax.
As of December 31, 2024, we had no uncertain tax positions. Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2024, the tax years that remain subject to examination by the major tax jurisdictions to which the Company is subject generally include 2014 through 2023.
As of December 31, 2025, we had no uncertain tax positions. Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2025, the tax years that remain subject to examination by the major tax jurisdictions to which the Company is subject generally include 2011 through 2025.
Seven of our hotels operate under well-known brands such as DoubleTree by Hilton, Tapestry Collection by Hilton, and Hyatt Centric, and three are independent hotels.
Seven (7) of our hotels operate under well-known brands such as DoubleTree by Hilton, Tapestry Collection by Hilton, and Hyatt Centric, and three (3) operate as independent hotels.
Cash used in or provided by operating activities generally consists of the cash flow from hotel operations, offset by the interest portion of our debt service, corporate expenses and positive or negative changes in working capital. Investing Activities. Our cash used in investing activities for the year ended December 31, 2024 was approximately $14.1 million.
Cash used in or provided by operating activities generally consists of the cash flow from hotel operations, offset by the interest portion of our debt service, corporate expenses and positive or negative changes in working capital. Investing Activities. Our cash used in investing activities for the year ended December 31, 2025 was approximately $10.7 million.
During the year ended December 31, 2023, the Company and Operating Partnership received proceeds of $2.7 million from the refinance of the DoubleTree by Hilton Laurel mortgage loan, made scheduled principal payments on its mortgages of approximately $7.3 million, paid approximately $0.5 million in deferred financing costs, and made scheduled principal payments of approximately $0.7 million on its unsecured notes.
The Company and Operating Partnership received proceeds of $2.7 million from the refinance of the DoubleTree by Hilton Laurel mortgage loan, made scheduled principal payments on its mortgages of approximately $7.3 million, paid approximately $0.5 million in deferred financing costs, and made scheduled principal payments of approximately $0.7 million on its unsecured notes.
We expect total capital expenditures for 2025 to be approximately $7.2 million. We expect a substantial portion of our capital expenditures for the routine replacement or refurbishment of furniture, fixtures and equipment at our properties will be funded by our replacement reserve accounts, other than costs that we incur to make capital improvements required by our franchisors.
We expect a substantial portion of our capital expenditures for the routine replacement or refurbishment of furniture, fixtures and equipment at our properties will be funded by our replacement reserve accounts, other than costs that we incur to make capital improvements required by our franchisors.
Liquidity and Capital Resources As of December 31, 2024, we had cash, cash equivalents and restricted cash of approximately $28.7 million, of which approximately $21.4 million was in restricted reserve accounts for cash collateral, capital improvements, real estate tax and insurance escrows.
Liquidity and Capital Resources As of December 31, 2025, we had cash, cash equivalents and restricted cash of approximately $28.5 million, of which approximately $21.5 million was in restricted reserve accounts for cash collateral, capital improvements, real estate tax and insurance escrows.
During the year ended December 31, 2024, the Company and Operating Partnership received proceeds of $66.3 million from the refinance of the DoubleTree by Hilton Philadelphia and the Hotel Alba mortgage loans, made scheduled principal payments on its mortgages of approximately $65.0 million, paid approximately $1.7 million in deferred financing costs, and made scheduled principal payments of approximately $0.9 million on its unsecured notes.
The Company and Operating Partnership received proceeds of $66.3 million from the refinance of the DoubleTree by Hilton Philadelphia and the Hotel 52 Alba mortgage loans, made scheduled principal payments on its mortgages of approximately $65.0 million, paid approximately $1.7 million in deferred financing costs, and made scheduled principal payments of approximately $0.9 million on its unsecured notes.
Our principal uses of cash are acquisitions of hotel properties, capital expenditures, debt service and balloon maturities, operating costs, corporate expenses and dividends. As of December 31, 2024, we had unrestricted cash of approximately $7.3 million and restricted cash of approximately $21.4 million.
Our principal uses of cash are acquisitions of hotel properties, capital expenditures, debt service and balloon maturities, operating costs, corporate expenses and dividends. As of December 31, 2025, we had unrestricted cash of approximately $7.0 million and restricted cash of approximately $21.5 million.
The Company is the sole general partner of the Operating Partnership and currently owns an approximate 98.2% interest in the Operating Partnership, with the remaining interest being held by limited partners who were contributors of our initial hotel properties and related assets. To qualify as a REIT, neither the Company nor the Operating Partnership can operate our hotels.
The Company is the sole general partner of the Operating Partnership and currently owns more than a 99.9% interest in the Operating Partnership, with the remaining interest being held by limited partners who were contributors of our initial hotel properties and related assets. To qualify as a REIT, neither the Company nor the Operating Partnership can operate our hotels.
We deposit an amount equal to 4.0% of gross revenue for The DeSoto, the Hotel Ballast Wilmington, the DoubleTree by Hilton Laurel, the DoubleTree Resort by Hilton Hollywood Beach, The Whitehall, Hotel Alba, and the Georgian Terrace, as well as 4.0% of room revenues for the DoubleTree by Hilton Philadelphia Airport and the Hyatt Centric Arlington on a monthly basis.
Under the mortgages to which we were subject on December 31, 2025, we were required to deposit an amount equal to 4.0% of gross revenue for The DeSoto, the Hotel Ballast Wilmington, the DoubleTree by Hilton Laurel, the DoubleTree Resort by Hilton Hollywood Beach, The Whitehall, Hotel Alba, and the Georgian Terrace, as well as 4.0% of room revenues for the DoubleTree by Hilton Philadelphia Airport and the Hyatt Centric Arlington on a monthly basis.
Therefore, we rely primarily on the performance of the individual properties and the ability of the management company to increase revenues and to keep pace with inflation. Operators of hotels, in general, possess the ability to adjust room rates daily to keep pace with inflation.
Therefore, we rely primarily on the financial performance of properties in our portfolio and the ability of the management company to increase revenue and to keep pace with inflation. Operators of hotels, in general, possess the ability to adjust room rates daily to keep pace with inflation.
We received approximately $0.3 million PPP loan forgiveness, which includes principal forgiveness and the accrued interest on that portion of the loans.
We received approximately $0.3 million PPP loan forgiveness, which includes principal forgiveness and the accrued interest on that portion of the loans. Net Gain on Involuntary Conversion of Assets.
Of this amount approximately $8.2 million was used for capital expenditures, including the replacement and refurbishment of furniture, fixtures and equipment offset by insurance proceeds of approximately $1.3 million. Cash provided by investing activities for the year ended December 31, 2022, was approximately $46.7 million.
Of this amount approximately $8.2 million was used for capital expenditures, including the replacement and refurbishment of furniture, fixtures and equipment offset by insurance proceeds of approximately $1.3 million. Financing Activities . Our cash provided by financing activities for the year ended December 31, 2025, was approximately $0.2 million.
In October 2024, we renewed the franchise license for the DoubleTree by Hilton Philadelphia Airport, subject to a product improvement plan. We expect total capital expenditures related to the renovation of that property of approximately $11.5 million as a condition to the renewal of our franchise license.
In October 2024, we renewed the franchise license for the DoubleTree by Hilton Philadelphia Airport, subject to a product improvement plan. We expect total capital expenditures related to the renovation of that property of approximately $11.8 million as a condition to the renewal of our franchise license. As of December 31, 2025, we had incurred costs totaling approximately $5.3 million.
During the year ended December 31, 2023, we accounted for undeclared distributions to preferred stockholders of approximately $8.0 million, compared to undeclared distributions to preferred stockholders of approximately $7.6 million for the year ended December 31, 2022.
During the year ended December 31, 2025, we accounted for undeclared distributions to preferred stockholders of approximately $8.0 million, compared to undeclared distributions to preferred stockholders of approximately $8.0 million for the year ended December 31, 2024.
The remainder of the capital expenditures will be funded out of working capital. As of December 31, 2024, we had incurred costs totaling approximately $2.7 million. We expect total capital expenditures related to the renovation of our property in Jacksonville, Florida of approximately $14.6 million, as a condition to the renewal of our franchise license.
We expect total capital expenditures related to the renovation of our property in Jacksonville, Florida of approximately $14.6 million, as a condition to the renewal of our franchise license. As of December 31, 2025, we had incurred costs totaling approximately $2.3 million.
In addition, as of December 31, 2024, the tax years that remain subject to examination by the major tax jurisdictions to which the MHI TRS Entities are subject, because of open NOL carryforwards, generally include 2017 and 2019 through 2023.
In addition, as of December 31, 2025, the tax years that remain subject to examination by the major tax jurisdictions to which the MHI TRS Entities are subject, because of available NOL carryforwards, generally include 2014 through 2025.
Our cash provided by operating activities for the year ended December 31, 2023 was approximately $21.4 million. Our cash provided by operating activities for the year ended December 31, 2022 was approximately $6.7 million.
Our cash provided by operating activities for the year ended December 31, 2024, was approximately $25.9 million. Our cash provided by operating activities for the year ended December 31, 2023, was approximately $21.4 million.
We had an income tax benefit of approximately $0.3 million for the year ended December 31, 2023, compared to an income tax provision of approximately $0.5 million, for the year ended 2022. MHI TRS realized an operating loss for the year ended December 31, 2023 and an operating gain for the year ended December 31, 2022. Net Income.
We had income tax expense of approximately $0.1 million for the year ended December 31, 2024, compared to an income tax benefit of approximately $0.3 million, for the year ended 2023. MHI TRS realized an operating loss for each of the years ended December 31, 2024 and 2023, respectively. Net Income.
Depreciation and Amortization . Depreciation and amortization for the year ended December 31, 2023 increased by approximately $0.1 million or 0.7%, to approximately $18.8 million, compared to depreciation and amortization expense of approximately $18.7 million for the year ended December 31, 2022. Corporate General and Administrative .
Depreciation and amortization for the year ended December 31, 2025 increased by approximately $0.3 million or 1.4%, to approximately $19.7 million, compared to depreciation and amortization expense of approximately $19.4 million for the year ended December 31, 2024. Corporate General and Administrative .
Expenses from other operating departments decreased approximately $0.3 million, or 2.8%, to approximately $9.0 million for the year ended December 31, 2023, compared to expenses from other operating departments of approximately $9.3 million for the year ended December 31, 2022.
Expenses from other operating departments decreased approximately $0.2 million, or 2.6%, to approximately $9.2 million for the year ended December 31, 2025, compared to expenses from other operating departments of approximately $9.4 million for the year ended December 31, 2024.
We also paid approximately $0.5 million to reduce the principal balance outstanding of unsecured notes. 50 Capital Expenditures We intend to maintain all our hotels, including any hotel we acquire in the future, in good repair and condition, in conformity with applicable laws and regulations and, when applicable, with franchisor’s standards.
We also paid distributions to preferred stockholders in the amount of approximately $10.0 million. Capital Expenditures We intend to maintain all our hotels, including any hotel we acquire in the future, in good repair and condition, in conformity with applicable laws and regulations and, when applicable, with franchisor’s standards.
The realized gain on hedging activities during the twelve months ended December 31, 2024, was approximately $1.0 million, due to termination of the Hotel Alba Tampa, Tapestry Collection by Hilton interest rate swap. 46 Unrealized Loss on Hedging Activities.
The realized gain on hedging activities during the twelve months ended December 31, 2024, was approximately $1.0 million, due to termination of the Hotel Alba Tampa, Tapestry Collection by Hilton interest rate swap. 51 PPP Loan Forgiveness. During the year ended December 31, 2024, there were no other notifications of PPP Loan Forgiveness.
Financial Covenants Mortgage Loans Our mortgage loan agreements contain various financial covenants directly related to the financial performance of the collateralized properties. Failure to comply with these financial covenants could result from, among other things, changes in the local competitive environment, disruption caused by renovation activity, major weather disturbances, as well as general economic conditions.
Failure to comply with these financial covenants could result from, among other things, changes in the local competitive environment, disruption caused by renovation activity, major weather disturbances, as well as general economic conditions.
Therefore, our wholly-owned hotel properties are leased to our TRS Lessees that are wholly-owned subsidiaries of the Operating Partnership, which then engage an eligible independent contractor to operate the hotels under a management agreement. Our TRS Lessees have engaged Our Town to manage our hotels.
Therefore, our wholly-owned hotel properties are leased to our TRS Lessees that are wholly-owned subsidiaries of the Operating Partnership, which then engage an 47 eligible independent contractor to operate the hotels under a management agreement. For the years ended December 31, 2025, 2024 and 2023, Our Town was engaged by our TRS Lessees to operate our hotels.
We used a portion of the proceeds to repay the existing first mortgage on the hotel and will use the balance of the proceeds for general corporate purposes. 51 On February 7, 2024, we secured a $35.0 million mortgage loan on the Hotel Alba located in Tampa, Florida with Citi Real Estate Funding Inc.
We used a portion of the proceeds to repay the existing first mortgage on the hotel and will use the balance of the proceeds for general corporate purposes. On September 12, 2025, we secured a $42.0 million mortgage loan on The DeSoto hotel located in Savannah, Georgia with Citi Real Estate Funding Inc.
Gain on involuntary conversion of assets decreased approximately $0.4 million, to approximately $1.4 million for the year ended December 31, 2023 from approximately $1.8 million, for the year ended December 31, 2022. The gains were related to casualties at our properties in Savannah, Georgia, Houston, Texas and Atlanta, Georgia. Income Tax Benefit (Provision) .
The net gain on involuntary conversion of assets decreased approximately $0.9 million, to approximately $0.5 million for the year ended December 31, 2024 from approximately $1.4 million, for the year ended December 31, 2023. The gains were related to casualties at our properties in Savannah, Georgia, Arlington, Virginia, Jacksonville and Hollywood, Florida. Income Tax (Expense) Benefit .
Food and beverage expenses at our properties for the year ended December 31, 2023 increased approximately $4.5 million, or 22.7%, to approximately $24.2 million compared to food and beverage expense of approximately $19.7 million for the year ended December 31, 2022.
Food and beverage expenses at our properties for the year ended December 31, 2025 increased approximately $0.2 million, or 0.7%, to approximately $25.6 million compared to food and beverage expense of approximately $25.4 million for the year ended December 31, 2024.
To the extent not inconsistent with maintaining the Company’s REIT status, our TRS Lessees may retain any after-tax earnings.
To the extent not inconsistent with maintaining the Company’s REIT status, our TRS Lessees may retain any after-tax earnings. Distributions to Stockholders and Holders of Units in the Operating Partnership.
As described in “Liquidity and Capital Resources,” as of December 31, 2024, we were in compliance with all debt covenants, current on all loan payments and not otherwise in default under any of our mortgage loans, with the exception of a covenant default under the mortgage on the DoubleTree by Hilton Jacksonville Riverfront for which we have received a waiver.
As described in “Liquidity and Capital Resources,” as of December 31, 2025, we were in compliance with all debt covenants, current on all loan payments and not otherwise in default under any of our mortgage loans, with the exception (i) a payment at maturity default on the non-recourse mortgage on the Georgian Terrace; (2) a payment at maturity default on the mortgage the on the DoubleTree Resort by Hilton Hollywood Beach ; and (iii) a covenant default on the mortgage on the DoubleTree by Hilton Jacksonville Riverfront.
We also paid distributions to preferred stockholders in the amount of approximately $10.0 million. Our cash used in financing activities for the year ended December 31, 2022, was approximately $51.6 million.
We also paid distributions to preferred stockholders of approximately $4.0 million. During the year ended December 31, 2024, cash used in financing activities was approximately $9.3 million.
Rooms expense at our properties for the year ended December 31, 2023 increased approximately $0.4 million, or 1.5%, to approximately $26.2 million compared to rooms expense of approximately $25.8 million for the year ended December 31, 2022.
Rooms expense at our properties for the year ended December 31, 2025 decreased approximately $0.7 million, or 2.4%, to approximately $26.7 million compared to rooms expense of approximately $27.4 million for the year ended December 31, 2024.
At December 31, 2024, we continued to meet the provisions under the mortgage secured by the DoubleTree Resort by Hilton Hollywood Beach, which require substantially all the revenue generated by the hotel to be deposited directly into a lockbox account and swept into a cash management account for the benefit of the lender until the property meets the criteria in the loan agreement for exiting the “cash trap”. 53 Contractual Obligations The following table outlines our contractual obligations as of December 31, 2024, and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands).
At December 31, 2025, we continued to meet the provisions under the mortgage secured by the DoubleTree Resort by Hilton Hollywood Beach as well as the mortgage secured by The Georgian Terrace, which required substantially all the revenue generated by these hotels to be deposited directly into a lockbox account and swept into a cash management account for the benefit of the lender until the property meets the criteria in the loan agreement for exiting the “cash trap”.
Corporate general and administrative expenses for the year ended December 31, 2023 increased approximately $0.5 million, or 6.9%, to approximately $7.1 million compared to corporate general and administrative expenses of approximately $6.6 million for the year ended December 31, 2022.
Corporate general and administrative expenses for the year ended December 31, 2025 increased approximately $2.0 million, or 29.4%, to approximately $8.8 million compared to corporate general and administrative expenses of approximately $6.8 million for the year ended December 31, 2024.
Year Ended Year Ended Year Ended December 31, December 31, December 31, 2024 2023 2022 Net income $ 1,179,854 $ 3,809,711 $ 33,959,848 Interest expense 20,882,681 17,588,091 19,772,802 Interest income (692,756 ) (802,183 ) (189,291 ) Income tax provision 132,491 (304,947 ) 522,355 Depreciation and amortization 19,380,906 18,788,748 18,650,336 Impairment of investment in hotel properties, net — — — Realized and unrealized (gain) loss on hedging activities (104,211 ) 737,682 (2,918,207 ) Loss on early debt extinguishment 241,878 — 5,944,881 Gain on sale of hotel properties — — (30,053,977 ) Loss (gain) on disposal of assets (4,400 ) (4,700 ) 636,198 PPP loan forgiveness — (275,494 ) (4,720,278 ) Other income (489,267 ) (456,388 ) — Gain on involuntary conversion of asset (502,808 ) (1,371,041 ) (1,763,320 ) Corporate general and administrative expenses 6,788,460 7,078,222 6,621,221 Hotel EBITDA $ 46,812,828 $ 44,787,701 $ 46,462,568
Year Ended Year Ended Year Ended December 31, December 31, December 31, 2025 2024 2023 Net (loss) income $ (7,779,133 ) $ 1,179,854 $ 3,809,711 Interest expense 24,799,871 20,882,681 17,588,091 Interest income (252,961 ) (692,756 ) (802,183 ) Income tax expense (benefit) 50,120 132,491 (304,947 ) Depreciation and amortization 19,658,902 19,380,906 18,788,748 Impairment of investment in hotel properties, net 1,310,308 - - Realized and unrealized (gain) loss on hedging activities (131,803 ) (104,211 ) 737,682 Loss on early debt extinguishment 463,195 241,878 — Gain on disposal of assets — (4,400 ) (4,700 ) PPP loan forgiveness — — (275,494 ) Other income (467,599 ) (489,267 ) (456,388 ) Net gain on involuntary conversion of assets (3,985,417 ) (502,808 ) (1,371,041 ) Corporate general and administrative expenses 8,786,311 6,788,460 7,078,222 Hotel EBITDA $ 42,451,794 $ 46,812,828 $ 44,787,701
Net income for the year ended December 31, 2023 decreased approximately $30.2 million, or 88.8%, to approximately $3.8 million, compared to a net income of approximately $34.0 million for the year ended December 31, 2022, as a result of the operating results discussed above. Distributions to Preferred Stockholders .
We realized a net loss for the year ended December 31, 2025 of approximately $7.8 million compared to net income of approximately $1.2 million for the year ended December 31, 2024, as a result of the operating results discussed above. Distributions to Preferred Stockholders .
The decrease in expenses from other operating departments for the twelve months ended December 31, 2023, resulted from aggregate decreases at five of our properties and the properties in Jeffersonville, Indiana and Raleigh, North Carolina, had decreases in other operating expenses aggregating to approximately $0.6 million, which were offset by increases in other operating expenses of approximately $0.3 million from seven of our properties.
The decrease in expenses from other operating departments for the twelve months ended December 31, 2025, resulted from aggregate decreases at six of our properties by approximately $0.4 million, which were offset by increases in other operating expenses of approximately $0.2 million from our remaining properties.
Hotel operating expenses, which consist of room expenses, food and beverage expenses, other direct expenses, indirect expenses, and management fees, with a net aggregate increase of approximately $9.4 million, or 7.9%, for the year ended December 31, 2023, to approximately $129.0 million compared to hotel operating expenses for the year ended December 31, 2022 of approximately $119.6 million.
Hotel operating expenses, which consist of room expenses, food and beverage expenses, other direct expenses, indirect expenses, and management fees, decreased approximately $1.2 million, or 0.8%, for the year ended December 31, 2025 to approximately $133.9 million compared to hotel operating expenses for the year ended December 31, 2024 of approximately $135.1 million.
(8) The note requires payments of interest only and cannot be prepaid until the last four months of the term. (9) The note amortizes on a 25-year schedule after an initial interest-only period of one year and is subject to a pre-payment penalty except for any pre-payments made within 120 days of the maturity date.
(8) The note amortizes on a 25-year schedule after an initial interest-only period of one year and cannot be prepaid without penalty until the last four months of the loan term. (9) The note cannot be prepaid without penalty until the final 4 months of the term.
Food and beverage revenues at our properties for the year ended December 31, 2023 increased approximately $5.7 million, or 19.2%, to approximately $35.2 million compared to food and beverage revenues of approximately $29.5 million for the year ended December 31, 2022, with most of our properties experiencing increased demand for food and beverage services as a result of increased occupancy as well as an increase in meetings, banqueting and catering.
Food and beverage revenues at our properties for the year ended December 31, 2025 decreased approximately $0.1 million, or 0.5%, to approximately $36.5 million compared to food and beverage revenues of approximately $36.6 million for the year ended December 31, 2024, with a majority of our properties experiencing decreased demand for food and beverage services as a result of decreased occupancy as well as a decrease in meetings, banqueting and catering from the group business segment.
The increase in interest income for the twelve months ended December 31, 2023, was substantially related to increases in the rates received on available cash balances we maintained during the year. Loss on Early Extinguishment of Debt.
The decrease in interest income for the twelve months ended December 31, 2025, was substantially related to decreases in cash balances in interest-bearing accounts. 49 Loss on Early Extinguishment of Debt.
MHI TRS realized an operating loss for each of the years ended December 31, 2024 and 2023, respectively. Net Income.
We had income tax expense of approximately $0.1 million for the year ended December 31, 2025, compared to an income tax provision of approximately $0.1 million, for the year ended 2024. MHI TRS realized an operating loss for each of the years ended December 31, 2025 and 2024, respectively. Net Income (Loss).
Other operating revenues for the year ended December 31, 2023 decreased approximately $3.1 million, or 11.5%, to approximately $23.9 million compared to other operating revenues for the year ended December 31, 2022 of approximately $27.0 million.
Other operating revenues for the year ended December 31, 2025 decreased approximately $0.7 million, or 2.5%, to approximately $25.5 million compared to other operating revenues for the year ended December 31, 2024 of approximately $26.2 million.
Pursuant to the loan documents, the loan has a maturity date of May 6, 2028; carries a fixed rate of interest of 7.35%; requires monthly payments of interest only; and cannot be prepaid until the last four months of the loan term.
The loan has a maturity date of October 6, 2030, carries a fixed rate of interest of 7.13% and requires monthly payments of interest only; and cannot be prepaid without penalty until the last four months of the loan term. We used a portion of the proceeds to repay the existing first and second mortgages on the hotel.
Our net increase in cash for the year ended December 31, 2024 was approximately $2.5 million, generally consisting of net cash flow used in hotel operations.
Our net decrease in cash for the year ended December 31, 2025, was approximately $0.2 million, generally consisting of net cash flow used in investing activities. Operating Activities . Our cash provided by operating activities for the year ended December 31, 2025, was approximately $10.3 million.
The earnings of MHI Holding are taxable as regular C corporations and are subject to federal, state, local, and, if applicable, foreign taxation on its taxable income. 44 Key Operating Metrics In the hotel industry, room revenue is considered the most important category of revenue and drives other revenue categories such as food, beverage, catering, parking and telephone.
Key Operating Metrics In the hotel industry, room revenue is considered the most important category of revenue and drives other revenue categories such as food, beverage, catering, parking and telephone.
The net aggregate increase in food and beverage expenses for the twelve months ended December 31, 2023, resulted from increases of approximately $4.7 million, offset by a decrease of approximately $0.2 million as a result of the sale of our properties in Jeffersonville, Indiana and Raleigh, North Carolina.
The net increase in food and beverage expenses for the twelve months ended December 31, 2025, resulted from an aggregate increase of approximately $0.9 million at four of our hotels, offset by a decrease of approximately $0.7million from the remaining hotel properties.
Recent Accounting Pronouncements For a summary of recently adopted and newly issued accounting pronouncements, please refer to the New Accounting Pronouncements section of Note 2, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements.
The Operating Partnership is generally not subject to federal and state income taxes as the unit holders of the Partnership are subject to tax on their respective shares of the Partnership’s taxable income. 59 Recent Accounting Pronouncements For a summary of recently adopted and newly issued accounting pronouncements, please refer to the New Accounting Pronouncements section of Note 2, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements.
Certain of our loan agreements contain “cash trap” provisions that may be triggered if the performance of our hotels declines below a certain threshold.
On February 12, 2026, each of these loans was repaid. Certain of our loan agreements, including our new loan agreement with affiliates of Apollo Global Management, Inc., contain “cash trap” provisions that may be triggered if the performance of our hotels declines below a certain threshold.
The preferred stock is not redeemable by the holders, has no maturity date and is not convertible into any other security of the Company or its affiliates, except in the event of a change of control. Inflation We generate revenues primarily from lease payments from our TRS Lessees and net income from the operations of our TRS Lessees.
The aggregate liquidation preference with respect to our outstanding preferred shares was approximately $123.3 million. The preferred stock is not redeemable by the holders, has no maturity date and is not convertible into any other security of the Company or its affiliates, except in the event of a change of control.
(2) We own the hotel commercial unit and operate a rental program. Reflects only those condominium units that were participating in the rental program as of December 31, 2024. At any given time, some portion of the units participating in our rental program may be occupied by the unit owner(s) and unavailable for rental to hotel guests.
At any given time, some portion of the units participating in our rental program may be occupied by the unit owner(s) and unavailable for rental to hotel guests. We sometimes refer to each participating hotel condominium unit as a “room.” We conduct substantially all our business through the Operating Partnership, Sotherly Hotels LP.
The following table sets forth our mortgage debt obligations on our hotels: December 31, Prepayment Maturity Amortization Property 2024 Penalties Date Provisions Interest Rate The DeSoto (1) $ 29,236,795 Yes 7/1/2026 25 years 4.25% The DeSoto (2) 4,982,794 Yes 7/1/2026 25 years 7.50% DoubleTree by Hilton Jacksonville Riverfront (3) 26,056,500 None 7/8/2029 25 years SOFR plus 3.00% DoubleTree by Hilton Laurel (4) 10,000,000 (4) 5/6/2028 (4) 7.35% DoubleTree by Hilton Philadelphia Airport (5) 35,915,488 None 4/29/2026 (5) SOFR plus 3.50% DoubleTree Resort by Hilton Hollywood Beach (6) 50,211,533 (6) 10/1/2025 30 years 4.91% Georgian Terrace (7) 38,375,095 (7) 6/1/2025 30 years 4.42% Hotel Alba Tampa, Tapestry Collection by Hilton (8) 35,000,000 (8) 3/6/2029 (8) 8.49% Hotel Ballast Wilmington, Tapestry Collection by Hilton (9) 29,770,045 Yes 1/1/2027 25 years 4.25% Hyatt Centric Arlington (10) 45,317,273 Yes 10/1/2028 30 years 5.25% The Whitehall (11) 13,777,078 None 2/26/2028 25 years PRIME plus 1.25% Total Mortgage Principal Balance 318,642,601 Deferred financing costs, net (2,144,656 ) Unamortized premium on loan 18,203 Total Mortgage Loans, Net $ 316,516,148 (1) The note amortizes on a 25-year schedule after an initial interest-only period of one year and is subject to a pre-payment penalty except for any pre-payments made within 120 days of the maturity date.
The following table sets forth our mortgage debt obligations on our hotels: December 31, Prepayment Maturity Amortization Property 2025 Penalties Date Provisions Interest Rate The DeSoto (1) $ 42,000,000 Yes 10/6/2030 (1) 7.13% DoubleTree by Hilton Jacksonville Riverfront (2) 25,592,100 None 7/8/2029 25 years SOFR plus 3.00% DoubleTree by Hilton Laurel (3) 10,000,000 (3) 5/6/2028 (3) 7.35% DoubleTree by Hilton Philadelphia Airport (4) 35,915,488 None 4/29/2026 (4) SOFR plus 3.50% DoubleTree Resort by Hilton Hollywood Beach (5) 48,966,397 None (5) 30 years 4.91% Georgian Terrace (6) 33,469,112 None 6/1/2026 30 years 4.42% (6) Hotel Alba Tampa, Tapestry Collection by Hilton (7) 35,000,000 (7) 3/6/2029 (7) 8.49% Hotel Ballast Wilmington, Tapestry Collection by Hilton (8) 28,742,014 Yes 1/1/2027 25 years 4.25% Hyatt Centric Arlington (9) 44,118,386 Yes 10/1/2028 30 years 5.25% The Whitehall (10) 13,486,401 None 2/26/2028 25 years PRIME plus 1.25% Total Mortgage Principal Balance 317,289,898 Deferred Financing Costs, Net (2,090,036 ) Total Mortgage Loans, Net $ 315,199,862 (1) The note requires payments of interest only and cannot be prepaid without penalty until the last four months of the loan term.
The fiscal year 2022 loss relates to the repayment and cancellation of the Secured Notes in June 2022 resulting in a loss on early extinguishment consisting of the unamortized exit fee as well as the unamortized origination costs, which totaled approximately $5.9 million for the twelve months ended December 31, 2022.
The loss for the year ended December 31, 2025 relates to the refinance of the mortgage on the DeSoto, resulting in a loss on early extinguishment of debt consisting of a prepayment penalty and the write-off of unamortized origination costs which totaled approximately $0.5 million.
Our TRS Lessees, and their parent, MHI Holding (MHI Hospitality TRS Holding, Inc.), are consolidated into each of our financial statements for accounting purposes.
Our TRS Lessees, and their parent, MHI Holding (MHI Hospitality TRS Holding, Inc.), are consolidated into each of our financial statements for accounting purposes. The earnings of MHI Holding are taxable as regular C corporations and are subject to federal, state, local, and, if applicable, foreign taxation on its taxable income.
Since January 1, 2022, we have completed the following acquisitions and dispositions: • On February 10, 2022, we sold the Sheraton Louisville Riverside hotel located in Jeffersonville, Indiana. • On June 10, 2022, we sold the DoubleTree by Hilton Raleigh-Brownstone University hotel located in Raleigh, North Carolina As of December 31, 2024, our hotel portfolio consisted of ten full-service, primarily upscale and upper-upscale hotels with an aggregate total of 2,786 rooms, as well as interests in two condominium hotels and their associated rental programs.
As of December 31, 2025, our hotel portfolio consisted of ten full-service, primarily upscale and upper-upscale hotels with an aggregate total of 2,786 rooms, as well as interests in two condominium hotels and their associated rental programs.
Interest Income. Interest income for the year ended December 31, 2023, increased approximately $0.6 million, or 323.8%, to approximately $0.8 million compared to approximately $0.2 million of interest income for the year ended December 31, 2022.
Interest income for the year ended December 31, 2025, decreased approximately $0.4 million, or 63.5%, to approximately $0.3 million compared to approximately $0.7 million of interest income for the year ended December 31, 2024.
On May 4, 2023, we secured a $10.0 million mortgage loan on the DoubleTree by Hilton Laurel located in Laurel, Maryland with Citi Real Estate Funding Inc.
On February 7, 2024, we secured a $35.0 million mortgage loan on the Hotel Alba located in Tampa, Florida with Citi Real Estate Funding Inc.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+0 added−1 removed4 unchanged
Biggest changeAs of December 31, 2024, we had approximately $243.6 million of fixed-rate debt, including the mortgage on our Hotel Alba Tampa, Tapestry Collection by Hilton, which is fixed by an interest rate swap to 8.49% and the PPP Loans of $0.7 million, with a fixed rate of 1.0% and approximately $75.7 million of variable-rate debt.
Biggest changeAs of December 31, 2024, had approximately $243.6 million of fixed-rate debt, including the PPP Loans of $0.7 million, with a fixed rate of 1.0% and approximately $75.7 million of variable-rate debt. The weighted-average interest rate on the fixed-rate debt was 5.39%.
These disclosures are not precise indicators of expected future losses, but only indicators of reasonably possible losses. As a result, actual future results may differ materially from those presented. The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates.
These disclosures are not precise indicators of expected future losses, but only indicators of 61 reasonably possible losses. As a result, actual future results may differ materially from those presented. The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates.
Assuming that the aggregate amount outstanding on the mortgages on our Philadelphia, Pennsylvania, Jacksonville, Florida and Houston, Texas hotels remains at approximately $75.7 million, the balance at December 31, 2024, the impact on our annual interest incurred and cash flows of a one percent increase in 1-month SOFR and the Prime Rate, would be approximately $0.5 million.
Assuming that the aggregate amount outstanding on the mortgages on our Philadelphia, Pennsylvania, Jacksonville, Florida and Houston, Texas hotels remains at approximately $75.7 million, the balance at December 31, 2024, the impact on our annual interest incurred and cash flows of a one percent increase in 1-month SOFR and in Prime Rate, would be approximately $0.5 million. Item 8.
The weighted-average interest rate on the fixed-rate debt was 5.39%. A change in market interest rates on the fixed portion of our debt would impact the fair value of the debt but have no impact on interest incurred or cash flows.
A change in market interest rates on the fixed portion of our debt would impact the fair value of the debt but have no impact on interest incurred or cash flows.
The weighted-average interest rate on the fixed-rate debt was 4.87%. A change in market interest rates on the fixed portion of our debt would impact the fair value of the debt but have no impact on interest incurred or cash flows.
As of December 31, 2025, we had approximately $242.3 million of fixed-rate debt with a weighted-average interest rate of 5.83%. A change in market interest rates on the fixed portion of our debt would impact the fair value of the debt but have no impact on interest incurred or cash flows.
Assuming that the aggregate amounts outstanding on the mortgage on The Whitehall remains at approximately $14.0 million and the mortgage on the DoubleTree by Hilton Philadelphia Airport remains at approximately $38.9 million, the balance at December 31, 2023, the impact on our annual interest incurred and cash flows of a one percent increase in 1-month SOFR and in Prime Rate, would be approximately $0.4 million.
Assuming that the aggregate amount outstanding on our line of credit and the mortgages on our Philadelphia, Pennsylvania, Jacksonville, Florida and Houston, Texas hotels remains at approximately $82.5 million, the balance at December 31, 2025, the impact on our annual interest incurred and cash flows of a one percent increase in 1-month SOFR and the Prime Rate, would be approximately $0.6 million.
Item 8. Financial Statemen ts and Supplementary Data See Index to Financial Statements and Financial Statement Schedules on page F-1. 58 Item 9. Changes in and Disagreements with Acco untants on Accounting and Financial Disclosure None.
Financial Statemen ts and Supplementary Data See Index to Financial Statements and Financial Statement Schedules on page F-1.
Our variable-rate debt is exposed to changes in interest rates, specifically the changes in 1-month SOFR and in Prime Rate.
Our variable-rate debt is exposed to changes in interest rates, specifically changes in the 1-month SOFR and in Prime Rate, except for a $26.0 million portion of the mortgage on the DoubleTree by Hilton Philadelphia which is subject to a cap on SOFR of 3.00%.
Removed
As of December 31, 2023, we had approximately $266.0 million of fixed-rate debt, including the mortgage on our Hotel Alba Tampa, Tapestry Collection by Hilton, which is fixed by an interest rate swap to 5.576% and the PPP Loans of $1.5 million, with a fixed rate of 1.0% and approximately $52.9 million of variable-rate debt.

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