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What changed in Sotherly Hotels Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Sotherly Hotels Inc.'s 2023 and 2024 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 2024 report.

+302 added−271 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-22)

Top changes in Sotherly Hotels Inc.'s 2024 10-K

302 paragraphs added · 271 removed · 234 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

29 edited+5 added−0 removed73 unchanged
Biggest changeThe OTH Master Agreement shall be extended beyond 2035 for such additional periods as an OTH Hotel Management Agreement remains in effect; • requires Our Town to provide dedicated executive level support for our managed hotels pursuant to certain criteria; • sets an incentive management fee for each of the hotels managed by Our Town 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 for an adjustment to the fees payable by us under the OTH Hotel Management Agreements in the event the net operating income of Our Town falls below $250,000 for any calendar year beginning on or after January 1, 2021; • 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. 9 Each of the OTH Hotel Management Agreements has an initial term ending March 31, 2035.
Biggest changeThe 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.
If the Company fails to qualify for taxation as a REIT in any taxable year, and no relief provision applies, it will be subject to federal income taxes at regular corporate rates and it would be disqualified from re-electing treatment as a REIT until the fifth taxable year after the year in which it failed to 11 qualify as a REIT.
If the Company fails to qualify for taxation as a REIT in any taxable year, and no relief provision applies, it will be subject to federal income taxes at regular corporate rates and it would be disqualified from re-electing treatment as a REIT until the fifth taxable year after the year in which it failed to qualify as a REIT.
We also own the hotel commercial condominium units of the Hyde Resort & Residences and Hyde Beach House Resort & Residences condominium hotels. See Item 2 in Part I and Item 7 in Part II of this Form 10-K for additional detail on our properties.
We also own the hotel commercial condominium units of the Lyfe Resort & Residences and Hyde Beach House Resort & Residences condominium hotels. See Item 2 in Part I and Item 7 in Part II of this Form 10-K for additional detail on our properties.
The ground lease 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 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.
Pursuant to the management agreements for the Hyde 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 manages the rental of individually owned condominium units pursuant to rental agreements entered into with individual condominium unit owners.
The labor force in our hotels is predominately non-unionized, with only one property, the DoubleTree by Hilton Jacksonville Riverfront, having approximately 67 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. 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.
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 management company.
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.
Our full-service hotels fall primarily under the upscale to upper-upscale categories and include such brands as Doubletree by Hilton, Tapestry 6 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 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.
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 7 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 8 received by us for the property sold.
As of December 31, 2023, 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, 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.
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. Sotherly may also opportunistically acquire hotels throughout other regions of the United States.
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.
The MHI TRS Entities, in turn, have engaged Our Town, which is an eligible independent management company, 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 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 following table sets forth certain information for the franchise licenses of our wholly-owned hotel properties as of December 31, 2023: 10 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) 4.0 % 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, 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.
Our Properties As of December 31, 2023, 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 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.
Folsom, and Mr. Sims Jr. serve as directors of Our Town. Franchise Agreements As of December 31, 2023, all but three of our wholly-owned hotels operate under franchise licenses from national hotel companies.
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.
Employees and Human Capital As of December 31, 2023, 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 retaining talented and well-qualified employees.
Employees 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.
Information on the Company’s Internet site is neither part of nor incorporated into this Form 10-K. 12
Information on the Company’s Internet site is neither part of nor incorporated into this Form 10-K. 14
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, 2023, we have a valuation allowance of approximately $13.0 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, 2024, we have a valuation allowance of approximately $14.3 million.
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: 8 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% Hotel Name Commencement Date Expiration Date Year 1 Year 2 Year 3 Years 4-5 & Renewals DoubleTree Resort by Hilton Hollywood Beach April 1, 2020 March 31, 2035 2.00% 2.25% 2.50% 2.50% Hyde Resort & Residences April 1, 2020 March 31, 2035 2.00% 2.25% 2.50% 2.50% Hyde Beach House Resort & Residences April 1, 2020 March 31, 2035 2.00% 2.25% 2.50% 2.50% Hyatt Centric Arlington November 15, 2020 March 31, 2035 2.00% 2.25% 2.50% 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: 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 .
On September 6, 2019, we entered into a master agreement with Our Town and the former majority owner of Our Town related to the management of certain of our hotels, as amended on December 13, 2019 (as amended, the “OTH Master Agreement”).
On September 6, 2019, we entered into a master agreement with Our Town and the former majority owner of Our Town related to the management of certain of our hotels, as amended and restated on November 6, 2024 (as amended, the “OTH Master Agreement”).
(2) The Franchise/Royalty Fee is 4.0% for 2024 and 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 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.
As of the filing date, the Company owns approximately 98.2% of the general and limited partnership units in the Operating Partnership. Limited partners own the remaining 1.8% limited partnership units in the Operating Partnership.
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.
As of March 14, 2023, 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 71.0%, 7.0%, and 15.0%, respectively, of the total outstanding ownership interests in Our Town. Mr. Sims, Mr.
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.
Typically, in our experience, a deep turn opportunity takes a total of approximately four years from the initial acquisition of a property to achieving full post-renovation stabilization.
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.
MHI Holding is subject to federal, state and local income taxes. MHI Holding has operated at a cumulative taxable loss, through December 31, 2023, of approximately $48.6 million and deferred timing differences of approximately $2.2 million attributable to accrued, but not deductible, vacation and sick pay amounts, business interest, depreciation and other timing differences.
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.
Therefore, when evaluating future opportunities in underperforming hotels, we intend to focus on up-branding and shallow-turn opportunities, and to pursue deep-turn opportunities on a more limited basis and in joint venture partnerships, if possible. Investment Vehicles.
Therefore, when evaluating future opportunities in underperforming hotels, we intend to focus on up-branding and shallow-turn opportunities, and to pursue deep-turn opportunities on a more limited basis, preferably within the structure of joint venture or partnership. Investment Vehicles.
The annual rent was offset by a tenant improvement allowance of $200,000, applied against one-half of each monthly rent payment until the tenant improvement allowance was exhausted in 2021. Effective January 1, 2024, the landlord agreed to a reduction in rent of 1/3rd.
The annual rent was offset by a tenant improvement allowance of $200,000, applied against one-half of each monthly rent payment until the tenant improvement allowance was exhausted in 2021. In December 2023, we received a rent concession of $257,731 against accrued and unpaid rents, and effective January 1, 2024, the landlord agreed to a one-third reduction in future rents.
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.
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.
The ground lease contains a rent reset provision that will reset the rent in June 2025 to a fixed amount per annum equal to 8.0% of the land value, subject to an appraisal process. 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.
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
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
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.
Added
Our hotels currently compete primarily in the full-service upscale and upper-upscale segments of the market.
Added
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.
Added
The periods from mid-November through mid-February are traditionally slow with the exception of hotels located in certain markets, namely Florida and Texas, which typically experience significant room demand during this period.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

87 edited+20 added−3 removed278 unchanged
Biggest changeOn December 29, 2022, the IRS released proposed regulations under FIRPTA that, if finalized as proposed, include a new “look-through rule” in determining whether a REIT is considered to be “domestically controlled.” In determining ownership, the look-through rule would require a REIT to “look-through” any nonpublic domestic corporation if 25% or more of the corporation’s stock (by value) is owned by foreign persons.
Biggest changeEffective April 25, 2024, the IRS released final regulations under FIRPTA that require a new REIT to “look-through” any nonpublic domestic corporation if more than 50% of the corporation’s stock (by value) is owned (directly or indirectly) by foreign persons in determining whether such REIT is considered to be “domestically controlled.” The final regulations included a transition rule that exempts existing domestically controlled REITs from the “look-through” rule until April 24, 2034 (i.e., 10 years following the effective date of the final regulations) if the following conditions are met—(a) the aggregate value of U.S. real property interests acquired by the REIT after April 25, 2024 does not exceed 20% of the aggregate value of U.S. real property interest held by the REIT as of April 25, 2024, and (b) the REIT does not undergo what is essentially a more than 50% change in ownership (measured by value) by a “non-look-through person” following April 25, 2024.
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.
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.
Sims to the Company’s board of directors 26 or his involuntary removal from the Company’s board of directors, unless for cause or by vote of the stockholders), or if there is a change of control, each of these executives is entitled to the following: • any accrued but unpaid salary and bonuses; • vesting of any previously issued stock options and restricted stock; • payment of the executive’s life, health and disability insurance coverage for a period of five years following termination; • any unreimbursed expenses; and • a severance payment equal to three times for each executive’s respective combined salary and actual bonus compensation for the preceding fiscal year.
Sims to the Company’s board of directors or his involuntary removal from the Company’s board of directors, unless for cause or by vote of the stockholders), or if there is a change of control, each of these executives is entitled to the following: • any accrued but unpaid salary and bonuses; • vesting of any previously issued stock options and restricted stock; • payment of the executive’s life, health and disability insurance coverage for a period of five years following termination; • any unreimbursed expenses; and • a severance payment equal to three times for each executive’s respective combined salary and actual bonus compensation for the preceding fiscal year.
Incurring debt could subject us to many risks, including the risks that: • our cash flows from operations may be insufficient to make required payments of principal and interest; • our debt may increase our vulnerability to adverse economic and industry conditions; 28 • we may be required to dedicate a substantial portion of our cash flows from operations to payments on our debt, thereby reducing cash available for funds available for operations and capital expenditures, future business opportunities or other purposes; and • the terms of any refinancing may not be in the same amount or on terms as favorable as the terms of the existing debt being refinanced.
Incurring debt could subject us to many risks, including the risks that: • our cash flows from operations may be insufficient to make required payments of principal and interest; • our debt may increase our vulnerability to adverse economic and industry conditions; • we may be required to dedicate a substantial portion of our cash flows from operations to payments on our debt, thereby reducing cash available for funds available for operations and capital expenditures, future business opportunities or other purposes; and • the terms of any refinancing may not be in the same amount or on terms as favorable as the terms of the existing debt being refinanced.
Contingent or unknown liabilities with respect to entities or properties acquired might include: • liabilities for environmental conditions; • losses in excess of our insured coverage; • accrued but unpaid liabilities incurred in the ordinary course of business; 21 • tax, legal and regulatory liabilities; • claims of customers, vendors or other persons dealing with the Company’s predecessors prior to our acquisition transactions that had not been asserted or were unknown prior to the Company’s acquisition transactions; and • claims for indemnification by the general partners, officers and directors and others indemnified by the former owners of our properties.
Contingent or unknown liabilities with respect to entities or properties acquired might include: • liabilities for environmental conditions; • losses in excess of our insured coverage; • accrued but unpaid liabilities incurred in the ordinary course of business; • tax, legal and regulatory liabilities; • claims of customers, vendors or other persons dealing with the Company’s predecessors prior to our acquisition transactions that had not been asserted or were unknown prior to the Company’s acquisition transactions; and • claims for indemnification by the general partners, officers and directors and others indemnified by the former owners of our properties.
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 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 35 TRS.
FIRPTA does not apply, however, to the disposition of stock in a REIT if the REIT is “domestically controlled” (i.e., less than 50.0% of the REIT’s capital stock, by value, has been owned directly or indirectly by 33 persons who are not qualifying U.S. persons during a continuous five-year period ending on the date of disposition or, if shorter, during the entire period of the REIT’s existence).
FIRPTA does not apply, however, to the disposition of stock in a REIT if the REIT is “domestically controlled” (i.e., less than 50.0% of the REIT’s capital stock, by value, has been owned directly or indirectly by persons who are not qualifying U.S. persons during a continuous five-year period ending on the date of disposition or, if shorter, during the entire period of the REIT’s existence).
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. 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. 33 Even if the Company remains qualified as a REIT, it may face other tax liabilities that reduce its cash flow.
The U.S. tax laws impose a 3.8% Medicare tax on the “net investment income” (i.e., interest, dividends, capital gains, annuities, and rents that are not derived in the ordinary course of a trade or business) of individuals with income exceeding $200,000 ($250,000 if married filing jointly or $125,000 if married filing separately), and of estates and trusts.
The U.S. tax laws impose a 3.8% Medicare surtax on the “net investment income” (i.e., interest, dividends, capital gains, annuities, and rents that are not derived in the ordinary course of a trade or business) of individuals with income exceeding $200,000 ($250,000 if married filing jointly or $125,000 if married filing separately), and of estates and trusts.
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.
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.
In addition, the Company must pay dividends, as “qualifying distributions,” to 32 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 also 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. 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. 32 Failure to make distributions could subject the Company to tax.
Thus, our stockholders bear the risk of our future securities issuances reducing the market price of our common shares and diluting their interest. 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.
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.
Sims and Mr. Folsom approve the budgets upon which the incentive management fee payable to Our Town is based. As owners of Our Town, which would receive any incentive management fees payable by us under the management agreements, Mr. 29 Sims or Mr. Folsom may influence the budget process, including the revenue and profitability targets set for each hotel.
Sims and Mr. Folsom approve the budgets upon which the incentive management fee payable to Our Town is based. As owners of Our Town, which would receive any incentive management fees payable by us under the management agreements, Mr. Sims or Mr. Folsom may influence the budget process, including the revenue and profitability targets set for each hotel.
As a 19 condition of continuing a franchise license, a franchisor may require us to make capital expenditures, even if we do not believe the capital improvements are necessary or desirable or will result in an acceptable return on our investment. Nonetheless, we may risk losing a franchise license if we do not make franchisor-required capital expenditures.
As a condition of continuing a franchise license, a franchisor may require us to make capital expenditures, even if we do not believe the capital improvements are necessary or desirable or will result in an acceptable return on our investment. Nonetheless, we may risk losing a franchise license if we do not make franchisor-required capital expenditures.
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. 14 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. 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.
Kucinski, our Executive Vice President and Chief Operating Officer, Robert E. Kirkland IV, our General Counsel, and Andrew M. Sims Jr., our Vice President - Operations & Investor Relations, contain provisions providing for substantial payments to these officers in the event of a change of control of the Company.
Kucinski, our Executive Vice President and Chief Operating Officer, Robert E. Kirkland IV, our General Counsel, and Andrew M. Sims Jr., our Vice President - Operations & 28 Investor Relations, contain provisions providing for substantial payments to these officers in the event of a change of control of the Company.
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 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 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.
If we are not able to come 16 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 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.
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. 25 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 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.
The Company’s board of directors has discretion to waive that ownership limit if, including other considerations, the board receives evidence that ownership in excess of the limit will not jeopardize the Company’s REIT status. 27 Holders of our outstanding preferred shares have dividend, liquidation and other rights that are senior to the rights of the holders of our common shares.
The Company’s board of directors has discretion to waive that ownership limit if, including other considerations, the board receives evidence that ownership in excess of the limit will not jeopardize the Company’s REIT status. Holders of our outstanding preferred shares have dividend, liquidation and other rights that are senior to the rights of the holders of our common shares.
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 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 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.
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.
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.
This would substantially reduce the Company’s earnings, cash available to pay distributions, and the value of common stock. 30 Failure to qualify as a REIT may cause the Company to reduce or eliminate distributions to its stockholders, and the Company may face increased difficulty in raising capital or obtaining financing.
This would substantially reduce the Company’s earnings, cash available to pay distributions, and the value of common stock. Failure to qualify as a REIT may cause the Company to reduce or eliminate distributions to its stockholders, and the Company may face increased difficulty in raising capital or obtaining financing.
However, we cannot assure you that we will be able to obtain additional equity or debt financing or that we will be able to obtain such financing on favorable terms. 20 Uninsured and underinsured losses could adversely affect our operating results and our ability to make distributions to the Company’s stockholders.
However, we cannot assure you that we will be able to obtain additional equity or debt financing or that we will be able to obtain such financing on favorable terms. Uninsured and underinsured losses could adversely affect our operating results and our ability to make distributions 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. 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. 21 Operating our hotels under franchise agreements could increase our operating costs and lower our net income.
At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws 35 may be amended or modified. Changes to the tax laws, possibly with retroactive application, may adversely affect taxation of the Company or the Company's stockholders.
At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be amended or modified. Changes to the tax laws, possibly with retroactive application, may adversely affect taxation of the Company or the Company's stockholders.
As a result, we may be required to liquidate otherwise attractive investments. 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. 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.
Various types of catastrophic losses, like hurricanes, earthquakes and floods, such as Hurricane Ian in September 2022, Hurricanes Harvey and Irma in August and September 2017, respectively, Hurricane Matthew in October 2016 and Hurricane Sandy in October 2012, losses from foreign terrorist activities, such as those on September 11, 2001, losses from power outages or losses from domestic terrorist activities, such as the Oklahoma City bombing on April 19, 1995, may not be insurable or may not be economically insurable.
Various types of catastrophic losses, like hurricanes, earthquakes and floods, such as Hurricane Helene in September 2024, Hurricane Ian in September 2022, Hurricanes Harvey and Irma in August and September 2017, respectively, Hurricane Matthew in October 2016 and Hurricane Sandy in October 2012, losses from foreign terrorist activities, such as those on September 11, 2001, losses from power outages or losses from domestic terrorist activities, such as the Oklahoma City bombing on April 19, 1995, may not be insurable or may not be economically insurable.
Security 17 breaches, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential information.
Security breaches, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential information.
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. 15 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. 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.
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. Increases in property taxes 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. 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.
Our borrowing costs are sensitive to fluctuations in interest rates. Higher interest rates could increase our debt service requirements and interest expense. Currently, our floating rate debt is limited to the mortgages on the DoubleTree by Hilton Philadelphia Airport and The Whitehall, in Houston, Texas.
Our borrowing costs are sensitive to fluctuations in interest rates. Higher interest rates could increase our debt service requirements and interest expense. Currently, our floating rate debt is limited to the mortgages on the DoubleTree by Hilton Jacksonville Riverfront, the DoubleTree by Hilton Philadelphia Airport, and The Whitehall, in Houston, Texas.
Dividends on the Company’s stock as well as gains from the disposition of the Company’s stock may be subject to the Medicare tax. Prospective investors should consult with their independent advisors as to the applicability of the Medicare tax to an investment in the Company’s stock in light of such investors’ particular circumstances.
Dividends on the Company’s stock as well as gains from the disposition of the Company’s stock may be subject to the Medicare surtax. Prospective investors should consult with their independent advisors as to the applicability of the Medicare surtax to an investment in the Company’s stock in light of such investors’ particular circumstances.
As of March 1, 2024, 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 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.
Risks Related to Our Organization and Structure • Risks related to changes of control. • Risks related to our executive employment agreements. • 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.
Risks 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.
In our portfolio, the majority of the hotels that we owned as of December 31, 2023, utilize brands owned by Hilton. As a result, our success is dependent in part on the continued success of Hilton and their respective brands.
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.
Moreover, there is no assurance that we will always distribute ordinary income dividends, or that Congress will not repeal such legislation. 34 Investors may be subject to a 3.8% Medicare tax in connection with an investment in the Company’s stock.
Moreover, there is no assurance that we will always distribute ordinary income dividends, or that Congress will not repeal such legislation. Investors may be subject to a 3.8% Medicare surtax in connection with an investment in the Company’s stock.
Currently, “qualified dividends,” which include dividends from domestic C corporations that are paid to non-corporate stockholders, are subject to a reduced maximum U.S. federal income tax rate of 20.0%, plus a 3.8% "Medicare tax" discussed below.
Currently, “qualified dividends,” which include dividends from domestic C corporations that are paid to non-corporate stockholders, are subject to a reduced maximum U.S. federal income tax rate of 20.0%, plus a 3.8% “Medicare surtax” discussed below.
Individuals, trusts and estates whose income exceeds certain thresholds are also subject to a 3.8% Medicare tax on dividends received from the Company.
Individuals, trusts and estates whose income exceeds certain thresholds are also subject to a 3.8% Medicare surtax on dividends received from the Company.
As of December 31, 2023, 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, 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, 2023, our portfolio consisted of ten wholly-owned hotels with a total of 2,786 rooms and the hotel commercial condominium units of the Hyde Resort & Residences and the Hyde Beach House Resort & Residences condominium hotels.
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, 2023, distributions on our Preferred Stock are in arrears for the last eleven quarterly payments.
As of December 31, 2024, distributions on our Preferred Stock are in arrears for the last eleven quarterly payments.
For example: • it will be required to pay 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 tax on that income at the highest corporate rate; • 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 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.
These factors and any others that would impede our ability to respond to adverse changes in the performance of our properties could have a material adverse effect on our operating results and financial condition, as well as our ability to comply with the terms of the indenture and to pay distributions to stockholders.
These factors and any others that would impede our ability to respond to adverse changes in the performance of our properties could have a material adverse effect on our operating results and financial condition, as well as our ability to pay distributions to stockholders.
Risks Related to the Lodging Industry • Risks related to the overall economy and our financial performance. • Risks related to operating risks, seasonality of the hotel business, investment concentration in particular segments of a single industry, and capital expenditures. • Risks related to operating hotels with franchise agreements. • Risks related to restrictive covenants in certain of our franchise agreements. • Risks related to hotel re-development. • Risks related to obtaining financing. • Risks related to uninsured and underinsured losses. • Risks related to governmental regulations, including regulations covering environmental matters or the Americans with Disabilities Act. • Risks related to unknown or contingent liabilities. • Risks related to future terrorist activities.
Risks Related to the Lodging Industry • Risks related to the overall economy and our financial performance. • Risks related to operating risks, seasonality of the hotel business, investment concentration in particular segments of a single industry, and capital expenditures. • Risks related to operating hotels with franchise agreements. • Risks related to restrictive covenants in certain of our franchise agreements. • Risks related to hotel re-development. • Risks related to obtaining financing. • Risks related to uninsured and underinsured losses. • Risks related to governmental regulations, including regulations covering environmental matters or the Americans with Disabilities Act. • Risks related to unknown or contingent liabilities. • Risks related to future terrorist activities. • Risks related to pandemic diseases. • Risks related to heightened focus on corporate responsibility.
U.S. tax reform and related regulatory action could adversely affect you and the Company. Because our operations are governed to a significant extent by the federal tax laws, new legislative or regulatory action could adversely affect investors in Company stock.
U.S. tax reform and related regulatory action could adversely affect you and the Company. Because our operations are governed to a significant extent by the federal tax laws, new legislative or regulatory action could adversely affect investors in Company stock. The TCJA made significant changes to the U.S. federal tax system.
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; 18 • 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.
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.
The mortgage on the DoubleTree by Hilton Philadelphia Airport bears interest at a rate tied to SOFR. The mortgage on The Whitehall, in Houston, Texas bears interest at a rate tied to the New York Prime Rate. Each mortgage provides for a substitute rate and minimum rates of interest.
The mortgages on the DoubleTree by Hilton Jacksonville Riverfront and the DoubleTree by Hilton Philadelphia Airport bear interest at a rate tied to SOFR. The mortgage on The Whitehall, in Houston, Texas bears interest at a rate tied to the New York Prime Rate. Each mortgage provides for a substitute rate and minimum rates of interest.
In addition, several of our mortgage lenders require that we set aside amounts for capital improvements to the secured properties on a monthly basis. For the years ended December 31, 2023 and 2022, we spent approximately $8.2 million and approximately $8.0 million, respectively, on capital improvements to our hotels.
In addition, several of our mortgage lenders require that we set aside amounts for capital improvements to the secured properties on a monthly basis. For the years ended December 31, 2024 and 2023, we spent approximately $14.6 million and approximately $8.2 million, respectively, on capital improvements to our hotels.
We are uncertain whether we will be able to refinance these obligations or if refinancing terms will be favorable. 24 We have four mortgage debt obligations maturing in 2024 and 2025 and if we are not successful in extending the terms of this indebtedness or in refinancing this debt on acceptable economic terms or at all, our overall financial condition could be materially and adversely affected.
We are uncertain whether we will be able to refinance these obligations or if refinancing terms will be favorable. 26 We have five mortgage debt obligations maturing in 2025 and 2026 and if we are not successful in extending the terms of this indebtedness or in refinancing this debt on acceptable economic terms or at all, our overall financial condition could be materially and adversely affected.
In this case, we will be required to dispose of the assets causing the failure within six months after the last day of the quarter in which the failure occurred, and we will be required to pay an additional tax of the greater of $50,000 or the product of the highest applicable tax rate multiplied by the net income generated on those assets.
In this case, we will be required to dispose of the assets causing the failure within six months after the last day of the quarter in which the failure occurred, and we will be required to pay an additional tax of the greater of $50,000 or the product of the net income generated on those assets multiplied by the federal corporate income tax rate of 21.0%.
Sims Jr., our Vice President - Operations & Investor Relations, together own an interest of approximately 93.0%, as of March 15, 2023, in Our Town. Mr. Sims, Mr. Folsom, and Mr. Sims Jr. serve as directors of Our Town. Our management agreements with Our Town establish the terms of Our Town’s management of our hotels covered by those agreements.
Sims Jr., our Vice President - Operations & Investor Relations, together own an interest of approximately 84.0%, as of March 14, 2025, in Our Town. Mr. Sims, Mr. Folsom, and Mr. Sims Jr. serve as directors of Our Town. Our management agreements with Our Town establish the terms of Our Town’s management of our hotels covered by those agreements.
A “prohibited transaction” would be a sale of property, other than a foreclosure property, held primarily for sale to customers in the ordinary course of business; • it may, in certain circumstances, be required to pay an excise or penalty tax (which could be significant in amount) in order to utilize one or more relief provisions under the Code to maintain its qualification as a REIT; • MHI Holding is a fully taxable corporation and is required to pay federal and state taxes on its taxable income; and • it may experience increases in its state and/or local income tax burdens as states and localities continue to look to modify their tax laws in order to raise revenues, including by (among other things) changing from a net taxable income-based regime to a gross receipts-based regime, suspending and/or limiting the use of net operating losses ("NOL"), increasing tax rates and fees, imposing surcharges and subjecting partnerships to an entity-level tax, and limiting or disallowing certain U.S. federal deductions such as the dividends-paid deduction. 31 Complying with REIT requirements may cause the Company to forgo attractive opportunities that could otherwise generate strong risk-adjusted returns and instead pursue less attractive opportunities, or none at all.
A “prohibited transaction” would be a sale of property, other than a foreclosure property, held primarily for sale to customers in the ordinary course of business; • it may, in certain circumstances, be required to pay an excise or penalty tax (which could be significant in amount) in order to utilize one or more relief provisions under the Code to maintain its qualification as a REIT; • MHI Holding is a fully taxable corporation and is required to pay federal and state taxes on its taxable income; and • it may experience increases in its state and/or local income tax burdens as states and localities continue to look to modify their tax laws in order to raise revenues, including by (among other things) changing from a net taxable income-based regime to a gross receipts-based regime, suspending and/or limiting the use of net operating losses ("NOL"), increasing tax rates and fees, imposing surcharges and subjecting partnerships to an entity-level tax, and limiting or disallowing certain U.S. federal deductions such as the dividends-paid deduction.
The ground lease contains a rent reset provision that will reset the rent in June 2025 to a fixed amount per annum equal to 8.0% of the land value, subject to an appraisal process.
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.
For the years ended 2022 and 2023, we received a rebate from Our Town equal to 70% of the annual surplus for the respective year. There can be no assurance that provisions in our bylaws will always be successful in mitigating conflicts of interest.
For the year ended December 31, 2023, we received a rebate from Our Town equal to 70% of the annual surplus for the respective year. For the year ended December 31, 2024, no annual surplus was deemed to exist. There can be no assurance that provisions in our bylaws will always be successful in mitigating conflicts of interest.
We believe that the Operating Partnership will continue to qualify to be treated as a partnership for U.S. federal income tax purposes. As a partnership, the Operating Partnership is not subject to federal income tax on its income.
We believe that the Operating Partnership will continue to qualify to be treated as a partnership for U.S. federal income tax purposes for so long as the Operating Partnership has more than one partner. As a partnership, the Operating Partnership is not subject to federal income tax on its income.
There can be no assurance that we will be able to obtain future financings on acceptable terms, if at all. In April 2024, the mortgage on the DoubleTree by Hilton Philadelphia Airport matures. In July 2024 the mortgage on the DoubleTree by Hilton Jacksonville Riverfront matures. In June 2025, the mortgage on the Georgian Terrace matures.
There can be no assurance that we will be able to obtain future financings on acceptable terms, if at all. In June 2025, the mortgage on the Georgian Terrace matures. In October 2025, the mortgage on the DoubleTree Resort by Hilton Hollywood Beach matures. In April 2026, the mortgage on the DoubleTree by Hilton Philadelphia Airport matures.
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.
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 the common stock price is less than $2.94, subject to adjustment, holders will receive a maximum of 8.50340 shares of our common stock per share of Series C Preferred Stock, which may result in a holder receiving value that is less than the liquidation preference of the Series C Preferred Stock.
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.
Also, the failure of the Operating Partnership to qualify as a partnership would cause the Operating Partnership to become subject to federal and state corporate income tax, which would reduce significantly the amount of cash available for debt service and for distribution to its partners, including the Company.
Also, if the Operating Partnership were to be classified as a corporation for federal income tax purposes, the Operating Partnership would become subject to federal and state corporate income tax, which would reduce significantly the amount of cash available for debt service and for distribution to its partners, including the Company.
The total aggregate amount of our debt obligations scheduled to mature in 2026, inclusive of monthly principal amortization of all our mortgage indebtedness, is approximately $58.6 million, which represents approximately 15.5% of our total debt obligations outstanding as of December 31, 2023.
The total aggregate amount of our debt obligations scheduled to mature in 2026, inclusive of monthly principal and interest amortization of all our mortgage indebtedness, is approximately $111.5 million, which represents approximately 30.5% of our total debt obligations outstanding as of December 31, 2024.
The total aggregate amount of our debt obligations scheduled to mature in 2024, inclusive of monthly principal and interest amortization of all our indebtedness, not including lease obligations, is approximately $71.9 million, which represents approximately 19.1% of our total debt obligations outstanding as of December 31, 2023.
The total aggregate amount of our debt obligations scheduled to mature in 2025, inclusive of monthly principal and interest amortization of all our indebtedness, not including lease obligations, is approximately $110.5 million, which represents approximately 30.2% of our total debt obligations outstanding as of December 31, 2024.
If the common stock price is less than $3.015, subject to adjustment, holders will receive a maximum of 8.29187 shares of our common stock per share of Series B Preferred Stock, which may result in a holder receiving value that is less than the liquidation preference of the Series B Preferred Stock.
Each holder of Series B Preferred Stock is entitled to receive a maximum of 8.29187 shares of our common stock per share of Series B Preferred Stock, which may result in the holder receiving value that is less than the liquidation preference of the Series B Preferred Stock.
If the common stock price is less than $3.38, subject to adjustment, holders will receive a maximum of 7.39645 shares of our common stock per share of Series D Preferred Stock, which may result in a holder receiving value that is less than the liquidation preference of the Series D Preferred Stock.
Each holder of Series D Preferred Stock is entitled to receive a maximum of 7.39645 shares of our common stock per share of Series D Preferred Stock, which may result in the holder receiving value that is less than the liquidation preference of the Series D Preferred Stock.
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.
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.
Those systems may be hacked or subject to denial of service attacks which in turn may result in losses at our properties. We face possible risks associated with natural disasters and the physical effects of climate change.
We also rely on the reservation systems of our brand partners and others to transmit and manage customer and payment information. Those systems may be hacked or subject to denial of service attacks which in turn may result in losses at our properties. We face possible risks associated with natural disasters and the physical effects of climate change.
We cannot be sure that the Company will qualify as a “domestically controlled” REIT.
The final regulations are complex and we cannot be sure that the Company will qualify as a “domestically controlled” REIT.
In addition, the SEC is currently evaluating potential new ESG disclosure and other requirements that would impact the Company. 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.
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.
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.
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.
Risks Related to Conflicts of Interest of Our Officers and Directors Conflicts of interest could result in our executive officers and certain of our directors acting in a manner other than in the Company’s stockholders’ best interest.
The loss of any of their services could have an adverse effect on our operations. 31 Risks Related to Conflicts of Interest of Our Officers and Directors Conflicts of interest could result in our executive officers and certain of our directors acting in a manner other than in the Company’s stockholders’ best interest.
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 addition to receiving rent, that operating income will be fully subject to income tax. The after-tax net income of MHI Holding, if any, will be available for distribution to the Company via the Operating Partnership.
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.
The Company could be subjected to negative responses of governmental actors (such as anti-ESG legislation or retaliatory legislative treatment), hotel brands, hotel management companies and hotel guests, that could have a material adverse effect on the Company’s reputation, financial condition and results of operations. 22 General Risks Related to the Real Estate Industry Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties and harm our financial condition.
The Company could be subjected to negative responses of governmental actors (such as anti-ESG legislation or retaliatory legislative treatment), hotel brands, hotel management companies and hotel guests, that could have a material adverse effect on the Company’s reputation, financial condition and results of operations.
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 debt could adversely affect our ability to fund these programs or acquire hotels in the future.
The total aggregate amount of our debt obligations scheduled to mature in 2025, inclusive of monthly principal amortization of all our mortgage indebtedness, is approximately $91.4 million, which represents approximately 24.2% of our total debt obligations outstanding as of December 31, 2023.
The total aggregate amount of our debt obligations scheduled to mature in 2027, inclusive of monthly principal and interest amortization of all our mortgage indebtedness, is approximately $10.9 million, which represents approximately 3.0% of our total debt obligations outstanding as of December 31, 2024.
Folsom; our Executive Vice President and Chief Operating Officer, Scott M. Kucinski; and our Secretary and Chief Financial Officer, Anthony E. Domalski, to manage our day-to-day operations and strategic business direction. The loss of any of their services could have an adverse effect on our operations.
Folsom; our Executive Vice President and Chief Operating Officer, Scott M. Kucinski; and our Secretary and Chief Financial Officer, Anthony E. Domalski, to manage our day-to-day operations and strategic business direction.
If the Company does not so qualify, gain realized by foreign investors on a sale of the Company’s stock would be subject to U.S. income and withholding tax under FIRPTA, unless the Company’s stock were traded on an established securities market and a foreign investor did not at any time during a specified testing period directly or indirectly own more than 10.0% of the value of the Company’s outstanding stock.
If the Company does not so qualify, gain realized by foreign investors on a sale of the Company’s stock would be subject to U.S. income and withholding tax under FIRPTA, unless the Company’s stock were traded on an established securities market.
As of December 31, 2023, the aggregate principal balances of our mortgages and unsecured debt amounted to approximately $318.9 million, not accounting for reductions of unamortized premiums or deferred financing costs as shown on our balance sheet. Historically, we have incurred debt for acquisitions and to fund our renovation, redevelopment and rebranding programs.
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.
The Company will incur a 100.0% excise tax on its transactions with MHI Holding and the TRS Lessees that are not conducted on an arm’s-length basis. For example, to the extent that the rent paid by the TRS Lessees exceeds an arm’s-length rental amount, such amount potentially will be subject to this excise tax.
For example, to the extent that the rent paid by the TRS Lessees exceeds an arm’s-length rental amount, such amount potentially will be subject to this excise tax.
These factors could reduce the net income of our TRS Lessees, which in turn could adversely affect the value of our hotels and our ability to comply with the terms of the indenture and to make distributions to the Company’s stockholders.
These factors could reduce the net income of our TRS Lessees, which in turn could adversely affect the value of our hotels and our ability to make distributions to the Company’s stockholders. Seasonality of the Hotel Business The lodging industry is seasonal in nature, which can be expected to cause quarterly fluctuations in our revenues.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAlthough we set expectations for Our Town and our franchisors, we rely on them to manage the cybersecurity risk to which they are subject. Our hotel manager maintains separate cybersecurity insurance coverage to offset a portion of potential costs incurred from a security breach.
Biggest changeWhile 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.
The Audit Committee reviews and discusses our cybersecurity risk and reviews the tests of controls performed by consultants that perform the 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.
The 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.
Risk Factors - We and our manager rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our business.” 36
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
We currently do not have a cybersecurity incident response plan with respect to our data and information systems. We rely on Our Town and their cybersecurity consultants as well as our franchisors, to maintain cybersecurity incident response plans applicable to their systems and hotel-level systems they manage on our behalf. For additional information about cybersecurity risk, see “Item 1A.
We rely on our hotel manager and their cybersecurity consultants as well as our franchisors, to maintain cybersecurity incident response plans applicable to their systems and hotel-level systems they manage on our behalf. For additional information about cybersecurity risk, see “Item 1A.
As of December 31, 2023, no risk from cybersecurity threats, including as a result of any previous cybersecurity incident, has materially affected our business, results of operations or financial condition.
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.
Item 1C. Cyberse curity Our Chief Financial Officer is responsible for managing cybersecurity risk. With the assistance of outside consultants, he develops mitigation strategies and implements 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 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.
We maintain cybersecurity insurance coverage to mitigate our financial exposure to certain incidents, and we consult with external advisors regarding opportunities and enhancements to strengthen our policies and procedures. 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.
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.
Added
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 .
Added
With respect to the Company’s information systems, we rely on third-party technology and software providers to manage the cybersecurity risk to which those systems are subject.
Added
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.

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 2023 2023 2023 2022 2022 2022 2021 2021 2021 The DeSoto, Savannah, Georgia 246 69.2% $ 211.26 $ 146.23 65.7% $ 211.49 $ 139.00 59.3% $ 185.06 $ 109.76 DoubleTree by Hilton Jacksonville Riverfront, Jacksonville, Florida 293 70.0% $ 148.42 $ 103.90 68.8% $ 146.53 $ 100.79 65.7% $ 135.34 $ 88.96 DoubleTree by Hilton Laurel, Laurel, Maryland 208 57.8% $ 127.29 $ 73.55 59.7% $ 117.20 $ 69.98 48.0% $ 100.75 $ 48.41 DoubleTree by Hilton Philadelphia Airport, Philadelphia, Pennsylvania 331 61.7% $ 141.15 $ 87.13 64.6% $ 140.94 $ 91.01 58.9% $ 123.41 $ 72.71 DoubleTree Resort by Hilton Hollywood Beach, Hollywood, Florida 311 59.9% $ 201.48 $ 120.70 60.6% $ 206.18 $ 124.93 52.2% $ 186.73 $ 97.45 Georgian Terrace, Atlanta, Georgia 326 52.2% $ 194.12 $ 101.33 51.8% $ 198.90 $ 103.09 48.7% $ 183.53 $ 89.35 Hotel Alba Tampa, Tapestry Collection by Hilton, Tampa, Florida 222 77.8% $ 177.00 $ 137.75 76.3% $ 165.11 $ 125.92 72.8% $ 143.09 $ 104.15 Hotel Ballast Wilmington, Tapestry Collection by Hilton, Wilmington, North Carolina 272 69.2% $ 186.91 $ 129.39 62.2% $ 183.90 $ 114.45 54.3% $ 171.60 $ 93.18 Hyatt Centric Arlington, Arlington, Virginia 318 74.5% $ 207.98 $ 154.99 64.3% $ 187.12 $ 120.33 43.7% $ 125.47 $ 54.83 The Whitehall, Houston, Texas 259 44.1% $ 159.13 $ 70.25 40.0% $ 150.17 $ 60.11 29.5% $ 128.31 $ 37.91 Wholly-Owned Properties Total 2,786 Condominium Hotels Hyde Resort & Residences 65 (1) 51.9% $ 345.39 $ 179.23 52.8% $ 420.53 $ 222.08 54.2% $ 415.38 $ 225.21 Hyde Beach House Resort & Residences 75 (1) 46.4% $ 305.56 $ 141.93 42.4% $ 381.07 $ 161.42 40.1% $ 408.40 $ 163.93 Total Hotel & Participating Condominium Hotel Rooms 2,926 (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 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.
Reflects only those condominium units that were participating in the rental program as of December 31, 2023. 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, 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.”
Item 2. P roperties As of December 31, 2023, our portfolio consisted of the following properties ( see Item 7.
Item 2. P roperties As of December 31, 2024, 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. 37 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. 40 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

11 edited+1 added−3 removed5 unchanged
Biggest changeThe same table sets forth the Operating Partnership’s distributions per preferred partnership units for fiscal year 2023: 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 2020 March 31, 2020 March 15, 2023 $ 0.500000 $ 0.500000 $ 0.000000 April 2023 June 30, 2020 June 15, 2023 $ 0.500000 $ 0.500000 $ 0.000000 May 2023 September 30, 2020 July 14, 2023 $ 0.500000 $ 0.500000 $ 0.000000 July 2023 December 31, 2020 September 15, 2023 $ 0.500000 $ 0.500000 $ 0.000000 October 2023 March 31, 2021 December 15, 2023 $ 0.500000 $ 0.500000 $ 0.000000 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 2020 March 31, 2020 March 15, 2023 $ 0.492188 $ 0.492188 $ 0.000000 April 2023 June 30, 2020 June 15, 2023 $ 0.492188 $ 0.492188 $ 0.000000 May 2023 September 30, 2020 July 14, 2023 $ 0.492188 $ 0.492188 $ 0.000000 July 2023 December 31, 2020 September 15, 2023 $ 0.492188 $ 0.492188 $ 0.000000 October 2023 March 31, 2021 December 15, 2023 $ 0.492188 $ 0.492188 $ 0.000000 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 2020 March 31, 2020 March 15, 2023 $ 0.515625 $ 0.515625 $ 0.000000 April 2023 June 30, 2020 June 15, 2023 $ 0.515625 $ 0.515625 $ 0.000000 May 2023 September 30, 2020 July 14, 2023 $ 0.515625 $ 0.515625 $ 0.000000 July 2023 December 31, 2020 September 15, 2023 $ 0.515625 $ 0.515625 $ 0.000000 October 2023 March 31, 2021 December 15, 2023 $ 0.515625 $ 0.515625 $ 0.000000 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: 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.
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.
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.
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 2022 or 2023.
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.
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] 40
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
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). 39 The Company did not pay any common stock dividends in 2022 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). 42 The Company did not pay any common stock dividends in 2024 or 2023.
Partnership Unitholder Information As of March 1, 2024, 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% of the preferred partnership units.
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.
There were no sales of unregistered securities in the Operating Partnership during 2023. 38 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 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.
Stockholder Information As of March 1, 2024, there were approximately 85 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.
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.
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 1, 2024 was $1.37 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 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.
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 to offer partnership units to the public and does not currently expect that a public market for those units will develop.
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.
The Company did not pay any preferred stock dividends in 2022. 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 year 2023.
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.
Removed
Recent Sales of Unregistered Securities On April 28, 2023, a holder of units in the Operating Partnership redeemed 75,000 units for an equivalent number of shares of the Company's common stock. The shares of common stock were issued to the unitholder pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.
Added
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.
Removed
On August 18, 2023, a holder of units in the Operating Partnership redeemed 252,903 units for an equivalent number of shares of the Company's common stock. The shares of common stock were issued to the unitholder pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.
Removed
On August 30, 2023, a holder of units in the Operating Partnership redeemed 133,099 units for an equivalent number of shares of the Company's common stock. The shares of common stock were issued to the unitholder pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe following is a reconciliation of net income (loss) to FFO and Adjusted FFO for the years ended December 31, 2023, 2022, and 2021. 53 Year Ended Year Ended Year Ended December 31, December 31, December 31, 2023 2022 2021 Net income (loss) $ 3,809,711 $ 33,959,848 $ (28,539,640 ) Depreciation and amortization - real estate 18,735,804 18,593,359 19,838,017 Impairment of investment in hotel properties, net — — 12,201,461 Loss (gain) on disposal of assets (4,700 ) 636,198 (158,286 ) Gain on sale of hotel properties — (30,053,977 ) — Distributions to preferred stockholders (7,977,250 ) (7,634,219 ) (7,541,891 ) Gain on involuntary conversion of asset (1,371,041 ) (1,763,320 ) (588,586 ) FFO available to common stockholders and unitholders $ 13,192,524 $ 13,737,889 $ (4,788,925 ) Amortization 52,944 56,977 71,209 ESOP and stock - based compensation 559,220 998,424 689,547 Aborted offering costs — — 631,952 Unrealized (gain) loss on hedging activities 737,682 (2,918,207 ) (1,493,841 ) Loss on early debt extinguishment — 5,944,881 — Adjusted FFO available to common stockholders and unitholders $ 14,542,370 $ 17,819,964 $ (4,890,058 ) Hotel EBITDA .
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 .
We believe that of our significant accounting policies, which are described in Note 2, Summary of 51 Significant Accounting Policies , in the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K, the following accounting policies are critical because they require difficult, subjective and complex judgments and include estimates about matters that are inherently uncertain, involve various assumptions, require management judgment, and because they are important for understanding and evaluating our financial position, results of operations and related disclosures.
We believe that of our significant accounting policies, which are described in Note 2, Summary of Significant Accounting Policies , in the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K, the following accounting policies are critical because they require difficult, subjective and complex judgments and include estimates about matters that are inherently uncertain, involve various assumptions, require management judgment, and because they are important for understanding and evaluating our financial position, results of operations and related disclosures.
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.
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.
The increase in food and beverage revenues for the year ended December 31, 2023, resulted from an aggregate increase of approximately $6.0 million from nine of our properties, offset by a decrease in food and beverage revenue of approximately $0.2 million related to the sale of the Sheraton Louisville Riverside, in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in June 2022.
The increase in food and beverage revenues for the year ended December 31, 2023, resulted from an aggregate increase of approximately $6.0 million from nine of our properties, offset by a 47 decrease in food and beverage revenue of approximately $0.2 million related to the sale of the Sheraton Louisville Riverside, in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in June 2022.
The decrease in interest expense for the twelve months ended December 31, 2023, was substantially related to decreases in the amount of debt attributable to the mortgages on the hotel properties in Jeffersonville, Indiana and Raleigh, North Carolina, sold in 2022, as well as the extinguishment of the secured notes with KWHP SOHO, LLC ("KW") and MIG SOHO, LLC (the "Secured Notes") in June 2022.
The 48 decrease in interest expense for the twelve months ended December 31, 2023, was substantially related to decreases in the amount of debt attributable to the mortgages on the hotel properties in Jeffersonville, Indiana and Raleigh, North Carolina, sold in 2022, as well as the extinguishment of the secured notes with KWHP SOHO, LLC ("KW") and MIG SOHO, LLC (the "Secured Notes") in June 2022.
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.
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.
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 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. 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.
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 loss 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 .
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 .
The 43 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 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.
In addition, we received non-recurring proceeds of $1.0 42 million received under the North Carolina Business Recovery Grant as well as approximately $1.0 million in other reimbursed expenses at the Georgian Terrace in Atlanta, Georgia in 2022.
In addition, we received non-recurring proceeds of $1.0 million received under the North Carolina Business Recovery Grant as well as approximately $1.0 million in other reimbursed expenses at the Georgian Terrace in Atlanta, Georgia in 2022.
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. 41 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 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.
Results of Operations 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).
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).
(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, 2023. 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.
(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.
Comparison of Year Ended December 31, 2022 to Year Ended December 31, 2021 The following table illustrates the key operating metrics for the years ended December 31, 2022 and 2021 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 2022 (“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).
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 DoubleTree by Hilton Jacksonville Riverfront, 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.
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.
Since January 1, 2021, 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, 2023, 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.
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.
The net increase in food and beverage expenses for the twelve months ended December 31, 2023, resulted from an aggregate increase 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 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.
As of December 31, 2023, 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, 2023 and 2022, deferred tax assets each totaled $0, respectively.
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.
Non-GAAP Financial Measures We consider the non-GAAP financial measures of FFO available to common stockholders and unitholders (including FFO per common share and unit), Adjusted FFO available to common stockholders and unitholders, EBITDA and Hotel EBITDA to be key supplemental measures of the Company’s performance and could be considered along with, not alternatives to, net income (loss) as a measure of the Company’s performance.
Non-GAAP Financial Measures We consider the non-GAAP financial measures of FFO attributable to common stockholders and unitholders (including FFO per common share and unit), Adjusted FFO attributable to common stockholders and unitholders, EBITDA and Hotel EBITDA to be key supplemental measures of the Company’s performance and could be considered along with, not alternatives to, net income (loss) as a measure of the Company’s performance.
Of this amount approximately $10.9 million came from the sale of Sheraton Louisville Riverside property and approximately $41.5 million came from the sale of the DoubleTree by Hilton Raleigh Brownstone University property and we used approximately $8.0 million on capital expenditures, which was offset by insurance proceeds of approximately $2.2 million.
Of this amount approximately $10.9 million came from the sale of Sheraton Louisville Riverside property and approximately $41.5 million came from the sale of the DoubleTree by Hilton Raleigh Brownstone University property and we used approximately $8.0 million on capital expenditures, which was offset by insurance proceeds of approximately $2.2 million. Financing Activities .
(9) Following a 5-year lockout, the note can be prepaid with penalty in years 6-10 and without penalty during the final 4 months of the term. (10) The note bears a floating interest rate of New York Prime Rate plus 1.25%, with a floor of 7.50%.
(10) Following a 5-year lockout, the note can be prepaid with penalty in years 6-10 and without penalty during the final 4 months of the term. (11) The note bears a floating interest rate of New York Prime Rate plus 1.25%, with a floor of 7.50%.
As of December 31, 2023, the amount of cumulative unpaid dividends on our outstanding preferred shares was approximately $21.9 million and the aggregate liquidation preference with respect to our outstanding preferred shares was approximately $121.3 million.
As of December 31, 2024, the amount of cumulative unpaid dividends on our outstanding preferred shares was approximately $21.9 million and the aggregate liquidation preference with respect to our outstanding preferred shares was approximately $121.3 million.
During the year ended December 31, 2023, we accounted for undeclared distributions to preferred stockholders of approximately $8.0 million, compared to declared and undeclared distributions to preferred stockholders of approximately $7.6 million for the year ended December 31, 2022.
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.
As of December 31, 2023, 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 Hyde Resort & Residences 65 (2) Hollywood, FL January 30, 2017 Luxury (1) Hyde Beach House Resort & Residences 75 (2) Hollywood, FL September 27, 2019 Luxury (1) Total Hotel & Participating Condominium Hotel Rooms 2,926 (1) Operated as an independent hotel.
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.
The aggregate increase of approximately $12.9 million in hotel operating expenses for the twelve months ended December 31, 2023, is directly related to the increase in hotel occupancy and gross revenue at ten of our properties, which was partially offset by approximately $2.4 million, with the sale of the Sheraton Louisville Riverside in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University, in June 2022; and reductions in hotel operating expenses at two properties of approximately $1.1 million.
The increases of approximately $12.9 million in hotel operating expenses for the twelve months ended December 31, 2023, are directly related to the increase in hotel occupancy and gross revenue at ten of our properties, which was partially offset by approximately $2.4 million of decreases, with the sale of the Sheraton Louisville Riverside in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University, in June 2022; and reductions in hotel operating expenses at two properties of approximately $1.1 million.
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) 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 not related to our wholly-owned portfolio.
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.
Reserve accounts are escrowed accounts with funds deposited monthly and reserved for capital improvements or expenditures with respect to all of our hotels.
Reserve accounts are escrowed accounts with funds deposited monthly and reserved for capital improvements or expenditures with respect to most of our hotels.
As of December 31, 2023, 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, 2023, the tax years that remain subject to examination by the major tax jurisdictions to which the Company is subject generally include 2015 through 2021.
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.
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, 2021 was approximately $2.3 million.
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.
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, 2023 was approximately $6.7 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, 2024 was approximately $14.1 million.
The increase in rooms expense for the year ended December 31, 2022, resulted from an aggregate increase of approximately $1.6 million from eight of our properties, offset by a decrease of approximately $0.6 million as a result of the sale of our properties in Jeffersonville, Indiana and Raleigh, North Carolina and decreases at the other two properties by approximately $0.6 million.
The net aggregate increase in rooms expense for the year ended December 31, 2023, resulted from increases of approximately $1.6 million from eight of our properties, offset by decreases of approximately $0.6 million as a result of the sale of our properties in Jeffersonville, Indiana and Raleigh, North Carolina and decreases at the other two properties by approximately $0.6 million.
Therefore, our wholly-owned hotel properties are leased to our TRS Lessees that are wholly-owned subsidiaries of the Operating Partnership, which then engage hotel management companies 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 eligible independent contractor to operate the hotels under a management agreement. Our TRS Lessees have engaged Our Town to manage our hotels.
Our calculation of Hotel EBITDA may be different from similar measures calculated by other REITs. The following is a reconciliation of net loss to Hotel EBITDA for the years ended December 31, 2023, 2022, and 2021.
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.
Hotel operating expenses, which consist of room expenses, food and beverage expenses, other direct expenses, indirect expenses, and management fees, increased 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, 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.
We expect total capital expenditures for 2024 to be approximately $7.0 million. We generally expect capital expenditures for the recurring 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 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 further adjust FFO Available 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 or warrant derivatives, loan impairment losses, 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, stock compensation costs, litigation settlement, over-assessed real estate taxes on appeal, management contract termination costs, operating asset depreciation and amortization, change in control gains or losses, ESOP and stock compensation expenses and acquisition transaction costs.
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.
(8) 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 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.
As described in “Liquidity and Capital Resources,” as of December 31, 2023, 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 Philadelphia Airport.
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.
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, 2023, we had unrestricted cash of approximately $17.1 million and restricted cash of approximately $9.1 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, 2024, we had unrestricted cash of approximately $7.3 million and restricted cash of approximately $21.4 million.
Our net decrease in cash for the year ended December 31, 2023 was approximately $1.1 million, generally consisting of net cash flow used in hotel operations.
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.
Corporate general and administrative expenses for the year ended December 31, 2022 decreased approximately $0.4 million, or 5.4%, to approximately $6.6 million compared to corporate general and administrative expenses of approximately $7.0 million for the year ended December 31, 2021.
Corporate general and administrative expenses for the year ended December 31, 2024 decreased approximately $0.3 million, or 4.1%, to approximately $6.8 million compared to corporate general and administrative expenses of approximately $7.1 million for the year ended December 31, 2023.
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. 50 On April 24, 2023, the Company announced the declaration of a quarterly distribution to holders of our preferred stock and with a record date of May 31, 2023 with a payment date of June 15, 2023.
On April 24, 2023, the Company announced the declaration of a quarterly distribution to holders of our preferred stock and with a record date of May 31, 2023 with a payment date of June 15, 2023.
Other operating revenues for the year ended December 31, 2022 increased approximately $3.8 million, or 16.5%, to approximately $26.9 million compared to other operating revenues for the year ended December 31, 2021 of approximately $23.1 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 45 million.
In addition, the Company extinguished debt on its Secured Notes of $20.0 million and paid approximately $0.4 million in deferred financing costs. We also paid approximately $0.5 million to reduce the principal balance outstanding of unsecured notes.
In addition, the Company extinguished debt on its Secured Notes of $20.0 million and paid approximately $0.4 million in deferred financing costs.
Expenses from other operating departments increased approximately $0.7 million, or 8.0%, to approximately $9.3 million for the year ended December 31, 2022, compared to expenses from other operating departments of approximately $8.6 million for the year ended December 31, 2021.
Expenses from other operating departments increased approximately $0.4 million, or 4.4%, to approximately $9.4 million for the year ended December 31, 2024, compared to expenses from other operating departments of approximately $9.0 million for the year ended December 31, 2023.
As of December 31, 2023, we had cash, cash equivalents and restricted cash of approximately $26.2 million, of which approximately $9.1 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, 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.
Year Ended Year Ended Year Ended December 31, December 31, December 31, 2023 2022 2021 Net (loss) income $ 3,809,711 $ 33,959,848 $ (28,539,640 ) Interest expense 17,588,091 19,772,802 22,686,694 Interest income (802,183 ) (189,291 ) (147,025 ) Income tax provision (304,947 ) 522,355 27,392 Depreciation and amortization 18,788,748 18,650,336 19,909,226 Impairment of investment in hotel properties, net — — 12,201,461 Unrealized (gain) loss on hedging activities 737,682 (2,918,207 ) (1,493,841 ) Loss on early debt extinguishment — 5,944,881 — Gain on sale of hotel properties — (30,053,977 ) — Loss (gain) on disposal of assets (4,700 ) 636,198 (158,286 ) PPP loan forgiveness (275,494 ) (4,720,278 ) — Other income (456,388 ) — — Gain on involuntary conversion of asset (1,371,041 ) (1,763,320 ) (588,586 ) Corporate general and administrative expenses 7,078,222 6,621,221 6,997,166 Hotel EBITDA $ 44,787,701 $ 46,462,568 $ 30,894,561
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
Hotel Operating Expenses. Hotel operating expenses, which consist of room expenses, food and beverage expenses, other direct expenses, indirect expenses, and management fees, increased approximately $22.9 million, or 23.7%, for the year ended December 31, 2022 to approximately $119.6 million compared to hotel operating expenses for the year ended December 31, 2021 of approximately $96.7 million.
Hotel operating expenses, which consist of room expenses, food and beverage expenses, other direct expenses, indirect expenses, and management fees, increased approximately $6.0 million, or 4.7%, for the year ended December 31, 2024 to approximately $135.1 million compared to hotel operating expenses for the year ended December 31, 2023 of approximately $129.0 million.
The increase in expenses from other operating departments for the twelve months ended December 31, 2021, resulted from aggregate increases in other operating expenses of approximately $1.3 million from ten of our properties. These increases were seen mainly from bringing back parking servicing contractors.
The increase in expenses from other operating departments for the twelve months ended December 31, 2024, resulted from aggregate increases at eight of our properties by approximately $0.6 million, which were offset by decreases in other operating expenses of approximately $0.2 million from four of our properties. These increases were seen mainly from bringing back parking servicing contractors.
Room revenues at our properties for the year ended December 31, 2023 increased approximately $5.1 million, or 4.7%, to approximately $114.7 million compared to room revenues for the year ended December 31, 2022 of approximately $109.6 million Eight of our properties experiencing increased room revenue offset by a decrease of approximately $2.3 million as a result of the sales of the Sheraton Louisville Riverside in Jeffersonville, Indiana, in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in Raleigh, North Carolina, in June 2022.
Eight of our properties experiencing increased room revenue offset by a decrease of approximately $2.3 million as a result of the sales of the Sheraton Louisville Riverside in Jeffersonville, Indiana, in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in Raleigh, North Carolina, in June 2022.
The positive cash flow from operations during the year was due to the increase in occupancy at our hotels as a result of increases in transient consumers, group business, and other business travel due to the lifting of restrictions on travel, social gatherings and business operations. Operating Activities .
The positive cash flow from operations during the year was due to the increase in occupancy at our hotels as a result of increases in transient consumers, group business, and other business travel. 49 Operating Activities . Our cash provided by operating activities for the year ended December 31, 2024, was approximately $25.9 million.
Changes in RevPAR that are primarily driven by changes in ADR typically have a greater impact on operating margins and profitability as they do not generate all the additional variable operating costs associated with higher occupancy. We also use Funds from Operations ("FFO"), Adjusted FFO and Hotel EBITDA as measures of our operating performance. See “Non-GAAP Financial Measures”.
Changes in RevPAR that are primarily driven by changes in ADR typically have a greater impact on operating margins and profitability as they do not generate all the additional variable operating costs associated with higher occupancy.
In addition, as of December 31, 2023, 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 2022. 52 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.
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.
December 31, Prepayment Maturity Amortization Property 2023 Penalties Date Provisions Interest Rate The DeSoto (1) $ 30,248,929 Yes 7/1/2026 25 years 4.25% DoubleTree by Hilton Jacksonville Riverfront (2) 31,749,695 Yes 7/11/2024 30 years 4.88% DoubleTree by Hilton Laurel (3) 10,000,000 (3) 5/6/2028 (3) 7.35% DoubleTree by Hilton Philadelphia Airport (4) 38,915,488 None 2/29/2024 30 years SOFR plus 2.27% DoubleTree Resort by Hilton Hollywood Beach (5) 51,495,662 (5) 10/1/2025 30 years 4.91% Georgian Terrace (6) 39,455,095 (6) 6/1/2025 30 years 4.42% Hotel Alba Tampa, Tapestry Collection by Hilton (7) 24,269,200 None 6/30/2025 (7) SOFR plus 2.75% Hotel Ballast Wilmington, Tapestry Collection by Hilton (8) 30,755,374 Yes 1/1/2027 25 years 4.25% Hyatt Centric Arlington (9) 46,454,972 Yes 10/1/2028 30 years 5.25% The Whitehall (10) 14,009,874 None 2/26/2028 25 years PRIME plus 1.25% Total Mortgage Principal Balance 317,354,289 Deferred financing costs, net (1,407,979 ) Unamortized premium on loan 42,884 Total Mortgage Loans, Net $ 315,989,194 (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 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.
Food and beverage expenses at our properties for the year ended December 31, 2022 increased approximately $9.4 million, or 91.5%, to approximately $19.7 million compared to food and beverage expense of approximately $10.3 million for the year ended December 31, 2021.
Food and beverage expenses at our properties for the year ended December 31, 2024 increased approximately $1.2 million, or 5.0%, to approximately $25.4 million compared to food and beverage expense of approximately $24.2 million for the year ended December 31, 2023.
The increase in rooms expense for the year ended December 31, 2022, resulted from an aggregate increase of approximately $5.0 million from all of our properties, offset by a decrease of approximately $1.9 million as a result of the sale of our properties in Jeffersonville, Indiana and Raleigh, North Carolina.
The increase in rooms expense for the year ended December 31, 2024, resulted from an aggregate increase of approximately $1.5 million from seven of our hotel properties, offset by a decrease of approximately $0.3 million from the remaining hotel 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, general economic conditions as well as the changes in business travel patterns and demand following the global pandemic.
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.
Rooms expense at our properties for the year ended December 31, 2022 increased approximately $3.1 million, or 13.6%, to approximately $25.8 million compared to rooms expense of approximately $22.7 million for the year ended December 31, 2021.
Rooms expense at our properties for the year ended December 31, 2024 increased approximately $1.2 million, or 4.6%, to approximately $27.4 million compared to rooms expense of approximately $26.2 million for the year ended December 31, 2023.
The net increase in food and beverage expenses for the twelve months ended December 31, 2022, resulted from an aggregate increase of approximately $9.7 million, offset by a decrease of approximately $0.3 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, 2024, resulted from an aggregate increase of approximately $1.4 million, offset by a decrease of approximately $0.2 million from the remaining hotel properties.
We used a 48 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. As of the date of this report, we were current on all loan payments on all other mortgages per the terms of our mortgage agreements, as amended.
The proceeds of the loan were used for working capital. As of the date of this report, we were current on all loan payments on all other mortgages per the terms of our mortgage agreements, as amended.
Room revenues at our properties for the year ended December 31, 2022 increased approximately $21.0 million, or 23.6%, to approximately $109.6 million compared to room revenues for the year ended December 31, 2021 of approximately $88.6 million with eleven of our properties experiencing increased occupancies.
Room revenues at our properties for the year ended December 31, 2023 increased approximately $5.1 million, or 4.7%, to approximately $114.7 million compared to room revenues for the year ended December 31, 2022 of approximately $109.6 million.
Net income for the year ended December 31, 2022 increased approximately $62.5 million, or 219.0%, to approximately $34.0 million, compared to a net loss of approximately $28.5 million for the year ended December 31, 2021, as a result of the operating results discussed above. Distributions to Preferred Stockholders .
Net income for the year ended December 31, 2024 decreased approximately $2.6 million, or 69.0%, to approximately $1.2 million, compared to a net income of approximately $3.8 million for the year ended December 31, 2023, as a result of the operating results discussed above. Distributions to Preferred Stockholders .
At December 31, 2023, we failed to meet the financial covenants under the mortgages secured by the DoubleTree Resort by Hilton Hollywood Beach as well as the Georgian Terrace, which trigger “cash traps” under the loan documents, requiring 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”.
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).
Indirect expenses at our properties for the year ended December 31, 2022 increased approximately $9.7 million, or 17.6%, to approximately $64.8 million compared to indirect expenses of approximately $55.1 million for the year ended December 31, 2021.
Indirect expenses at our properties for the year ended December 31, 2024 increased approximately $3.2 million, or 4.6%, to approximately $72.8 million compared to indirect expenses of approximately $69.6 million for the year ended December 31, 2023.
Total revenue for the year ended December 31, 2022 was approximately $166.1 million, an increase of approximately $38.5 million, or 30.2%, from total revenue for the year ended December 31, 2021 of approximately $127.6 million.
Total revenue for the year ended December 31, 2024 was approximately $181.9 million, an increase of approximately $8.1 million, or 4.6%, from total revenue for the year ended December 31, 2023 of approximately $173.8 million.
During the year ended December 31, 2022, we accounted for undeclared distributions to preferred stockholders of approximately $7.6 million, compared to declared and undeclared distributions to preferred stockholders of approximately $7.5 million for the year ended December 31, 2021. 46 Sources and Uses of Cash Our principal sources of cash are cash from hotel operations, proceeds from the sale of common and preferred stock, proceeds from the sale of secured and unsecured notes, proceeds of mortgage or other debt and hotel property sales.
Sources and Uses of Cash Our principal sources of cash are cash from hotel operations, proceeds from the sale of common and preferred stock, proceeds from the sale of secured and unsecured notes, proceeds of mortgage or other debt and hotel property sales.
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. The MHI TRS Entities which leases our hotels from subsidiaries of the Operating Partnership, are subject to federal and state income taxes.
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.
The increase in indirect expenses for the twelve months ended December 31, 2022, resulted from an aggregate increase in total indirect expenses of approximately $13.1 million, offset by a decrease of approximately $3.4 million as a result of the sale of our properties in Jeffersonville, Indiana and Raleigh, North Carolina.
The increase in indirect expenses for the twelve months ended December 31, 2024, resulted from an aggregate increase in total indirect expenses of approximately $3.9 million from ten of our properties, offset by decreases of approximately $0.7 million. Depreciation and Amortization .
Cash used for investing activities for the year ended December 31, 2021, was approximately $2.4 million which mostly consisted of capital expenditures of approximately $3.2 million offset by insurance proceeds of approximately $0.6 million. Financing Activities . Our cash used in financing activities for the year ended December 31, 2023, was approximately $15.8 million.
Of this amount approximately $14.6 million was used for capital expenditures, including the replacement and refurbishment of furniture, fixtures and equipment offset by insurance proceeds of approximately $0.5 million. Our cash used in investing activities for the year ended December 31, 2023 was approximately $6.7 million.
Cash used in financial activities for the year ended December 31, 2021, was approximately $9.7 million, which included approximately $6.5 million in scheduled payments of principal on our mortgage loans and approximately $3.1 million in payments of principal on our unsecured notes. 47 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 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.
Payments due by period (in thousands) Less than More than Contractual Obligations Total 1 year 1-3 years 3-5 years 5 years Mortgage loans, including interest $ 375,964 $ 91,263 $ 171,419 $ 77,745 $ 35,537 Unsecured Notes 1,552 1,552 - - - Ground, building, parking garage, office and equipment leases 13,938 607 1,221 1,274 10,836 Totals $ 391,454 $ 93,422 $ 172,640 $ 79,019 $ 46,373 Dividend Policy The Company has elected to be taxed as a REIT commencing with our taxable year ending December 31, 2004.
Payments due by period (in thousands) Less than More than Contractual Obligations Total 1 year 1-3 years 3-5 years 5 years Mortgage loans, including interest $ 364,947 $ 109,865 $ 122,359 $ 132,723 $ - Unsecured notes 659 659 - - - Ground, building, parking garage, office and equipment leases 13,187 631 1,185 1,139 10,232 Totals $ 378,793 $ 111,155 $ 123,544 $ 133,862 $ 10,232 Dividend Policy The Company has elected to be taxed as a REIT commencing with our taxable year ending December 31, 2004.
During the fourth quarter of 2022, we received notification from our banks and the Small Business Administration that we received partial forgiveness on our unsecured notes, relating to the original PPP Loans we received in 2020. We received approximately $4.7 million PPP loan forgiveness, which includes principal forgiveness and the accrued interest on that portion of the loans.
PPP Loan Forgiveness. During the year ended December 31, 2024, there were no other notifications of PPP Loan Forgiveness. During the year ended December 31, 2023, we received notification from our banks and the Small Business Administration that we received partial forgiveness on one of our unsecured notes, relating to the original PPP Loans we received in 2020.
Routine capital improvements are determined through the annual budget process over which we maintain approval rights, and which are implemented or administered by our management company.
Routine capital improvements are determined through the annual budget process over which we maintain approval rights, and which are implemented or administered by our management company. Historically, we have aimed to maintain overall capital expenditures, except for those required by our franchisors as a condition to a franchise license or license renewal, at 4.0% of gross revenue.
The increase in food and beverage revenues for the year ended December 31, 2022, resulted from an aggregate increase of approximately $14.2 million from ten of our properties, offset by the loss of food and beverage revenue of approximately $0.5 million following the sale of the Sheraton Louisville Riverside, in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in June 2022.
The increase in food and beverage revenues for the year ended December 31, 2024, resulted from an aggregate increase of approximately $2.5 million from six of our properties, offset by a decrease in food and beverage revenue of approximately $1.1 million at the other four properties.
Interest expense for the year ended December 31, 2022 decreased approximately $2.9 million, or 12.8%, to approximately $19.8 million, compared to approximately $22.7 million of interest expense for the year ended December 31, 2021.
Interest expense for the year ended December 31, 2024 increased approximately $3.3 million, or 18.7%, to approximately $20.9 million, compared to approximately $17.6 million of interest expense for the year ended December 31, 2023.
Gain on involuntary conversion of assets increased approximately $1.2 million, from approximately $0.6 million for the year ended December 31, 2021 to 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 (Provision) Benefit .
The gains were related to casualties at our properties in Savannah, Georgia, Arlington, Virginia, Jacksonville and Hollywood, Florida. Income Tax Benefit (Provision) . We had an income tax provision 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.
The aggregate increase of approximately $28.9 million in hotel operating expenses for the twelve months ended December 31, 2022, is directly related to the significant increase in hotel occupancy and gross revenue at all of our properties, which was mainly offset with the sale of the Sheraton Louisville Riverside in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in June 2022, reducing hotel operating expenses by approximately $5.7 million.
The aggregate increase of approximately $6.9 million in hotel operating expenses for the twelve months ended December 31, 2024, is directly related to the increase in hotel occupancy and gross revenue at ten of our properties, and reductions in hotel operating expenses at two properties of approximately $0.9 million.
Food and beverage revenues at our properties for the year ended December 31, 2022 increased approximately $13.7 million, or 86.7%, to approximately $29.5 million compared to food and beverage revenues of approximately $15.8 million for the year ended December 31, 2021, with most of our properties experiencing increased demand for food and beverage services as a result of increased occupancy.
Food and beverage revenues at our properties for the year ended December 31, 2024 increased approximately $1.4 million, or 4.0%, to approximately $36.6 million compared to food and beverage revenues of approximately $35.2 million for the year ended December 31, 2023, with a majority 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 from the group business segment.
In addition, we may be required by one or more of our franchisors to complete a property improvement program (“PIP”) in order to bring the hotel up to the franchisor’s standards. In October 2024, the DoubleTree by Hilton franchise license on our property in Philadelphia, Pennsylvania expires.
In addition, we may be required by one or more of our franchisors to complete a property improvement program (“PIP”) in order to bring the hotel up to the franchisor’s standards. Generally, we expect to fund such renovations and improvements out of working capital, including reserve accounts established by our lenders, and proceeds of mortgage debt or equity offerings.
Loss on Early Extinguishment of Debt . The 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 fiscal year 2024 loss relates to the refinancing of the Hotel Alba mortgage, resulting in a loss on early extinguishment of debt consisting of the unamortized origination costs, which totaled approximately $0.2 million for the twelve months ended December 31, 2024. No losses were recorded for the twelve months ended December 31, 2023. Realized Gain on Hedging Activities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−0 removed6 unchanged
Biggest changeOur variable-rate debt is exposed to changes in interest rates, specifically the changes in 1-month LIBOR, SOFR, and in Prime Rate.
Biggest changeOur 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%.
These disclosures are not precise indicators of expected future losses, but only indicators of 54 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 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.
Our variable-rate debt is exposed to changes in interest rates, specifically the changes in 1-month LIBOR, SOFR, and in Prime Rate.
Our variable-rate debt is exposed to changes in interest rates, specifically the changes in 1-month SOFR and in Prime Rate.
Financial Statemen ts and Supplementary Data See Index to Financial Statements and Financial Statement Schedules on page F-1. Item 9. Changes in and Disagreements with Acco untants on Accounting and Financial Disclosure None.
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.
The weighted-average interest rate on the fixed-rate debt was 4.83%. 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.
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.
As of December 31, 2022, we had approximately $310.2 million of fixed-rate debt, including the mortgage on our DoubleTree by Hilton Philadelphia Airport hotel, which is fixed by an interest rate swap to 5.237%, 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 $2.5 million, with a fixed rate of 1.0% and approximately $14.2 million of variable-rate debt.
As 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.
Assuming that the aggregate amount outstanding on the mortgage on The Whitehall remains at approximately $14.2 million, the balance at December 31, 2022, the impact on our annual interest incurred and cash flows of a one percent increase in 1-month LIBOR, SOFR, and in Prime Rate, would be approximately $0.1 million. Item 8.
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.

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