INVESTOR PRESENTATION REITWeek 2019 ABOUT ABOUT SOTHERLY HOTELS - - PowerPoint PPT Presentation

INVESTOR PRESENTATION REITWeek 2019

ABOUT

ABOUT SOTHERLY HOTELS

At Sotherly Hotels, we believe guests are the heart of every hotel—so we make true Southern hospitality the heart of everything we do. Every Sotherly Hotel delivers a uniquely authentic local experience that lets guests see, feel, taste and enjoy our cities to their fullest. Generations of experience have taught us that guests want their hotel to feel like a natural extension of the city — to seamlessly blend like a front porch into a Southern night sky. They want to feel like “locals,” not

• visitors. And that's exactly what we do. From first

hellos to fond farewells, our trademark Southern charm is woven into every experience, making guests feel so connected to and refreshed by our cities’ cultures that they’ll feel right at home. Because they are. Our guests are like family, and our passion for turning moments into memories is the promise we make that keeps them coming back time and time again. And at the end of the day, we believe happy guests make for happy shareholders.

NON-GAAP FINANCIAL MEASURES

BOARD & BARREL @ HOTEL BALLAST WILMINGTON PART & PARCEL @ THE WHITEHALL HOUSTON

This presentation included disclosure of non-GAAP measures, including funds from

• perations

(“FFO”), adjusted FFO (“AFFO”), earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA and hotel EDITDA. The Company considers FFO, AFFO, EBITDA, adjusted EBITDA and hotel EBITDA to be key supplemental measures of the Company’s performance, and they should be considered along with, but not as alternatives to, net income as a measure of the Company’s

• perating

performance. None

• f

FFO, AFFO, EBITDA, adjusted EBITDA and hotel EBITDA represent cash generated from operating activities determined by GAAP and should not be considered as alternatives to net income, cash flow from operations or any other operating performance measure prescribed by GAAP. None of FFO, AFFO, EBITDA, adjusted EBITDA and hotel EBITDA are measures of the Company’s liquidity, nor are FFO, AFFO, EBITDA, adjusted EBITDA and hotel EBITDA indicative

• f

funds available to fund the Company’s cash needs, including its ability to make cash

• distributions. Please refer to the Company’s filings with the SEC

and its earnings releases, which are available at www.sotherlyhotels.com, for disclosure of the Company’s net income, for reconciliations of FFO, AFFO, EBITDA, adjusted EBITDA and hotel EBITDA to net income and for additional detail on the Company’s use of non-GAAP measures.

FORWARD-LOOKING STATEMENTS

DOUBLETREE RESORT HOLLYWOOD BEACH HYDE RESORT & RESIDENCES

This presentation includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Although the Company believes that the expectations and assumptions reflected in the forward- looking statements are reasonable, these statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond the Company’s control. Therefore, actual outcomes and results may differ materially from what is expressed, forecasted or implied in such forward-looking statements. Economic conditions generally and the real estate market specifically, management and performance of the Company’s hotels, plans for hotel renovations, financing plans, supply and demand for hotel rooms in the Company’s current and proposed market areas, the Company’s ability to acquire additional properties and the risk that potential acquisitions may not perform in accordance with expectations, legislative/regulatory changes, including changes to laws governing taxation of real estate investment trust and competitions, and

• ther factors may affect the Company’s future results, performance and
• achievements. These risks and uncertainties are described in greater

detail under “Risk Factors” in the Company’s Annual Report on Form 10-K and subsequent reports filed with the Securities and Exchange

• Commission. The Company undertakes no obligation and does not

intend to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Although we believe our current expectations to be based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that actual results will not differ materially.

MANAGEMENT TEAM

TONY DOMALSKI

Chief Financial Officer

• CFO & Vice President – Sotherly Hotels Inc.
• CFO of SwissFone, Inc. (2001–2005)
• Spent several years in public accounting firm
• 30 years as a Certified Public Accountant
• Bachelor of Science in Finance and Accounting from the University of Maryland

ANDREW SIMS

Chairman & CEO

DAVE FOLSOM

President & COO

• President, COO & Director – Sotherly Hotels Inc.
• Vice President of Paragon Real Estate (2005)
• Investment Banker, BB&T Capital Markets (2001–2005); lead underwriter on

SOHO’s IPO in 2004

• Commissioned officer in the U.S. Marine Corps
• Bachelor of Science from U.S. Naval Academy
• M.B.A. – Georgetown University
• Chairman & CEO – Sotherly Hotels Inc.
• Served as Chairman & CEO since IPO in 2004
• President of MHI Hotel Services from 1995–2004
• VP of Finance and Development for MHI Hotel Services from 1988–1995
• Father, Edgar Sims Jr., founded company as Maryland Hospitality in 1957
• Bachelor of Science in Commerce from Washington & Lee University

INDEPENDENT BOARD OF DIRECTORS

• GEN. ANTHONY ZINNI
• Former Commanding General, First Marine Expeditionary Force with the U.S. Marine Corps from 1994 - 1996; 39-y
• Commander in Chief, U.S. Central Command from 1997 – 2000
• Former Chairman, BAE Systems
• Consultant in areas of defense, military, national security and foreign policy

HERSCHEL J. WALKER

• Founder & CEO of H. Walker Enterprises, a manufacturer and distributer of meat products
• Owner of Herschel’s Chicken and Ribs Kitchen
• Former NFL player and college standout and winner of the Heisman Trophy

EDWARD S. STEIN

• Lead Independent Director and Chairman of the Nominating, Corporate Governance and Comp. Committee
• Founding Partner of Weinberg & Stein
• Harvard College (A.B. 1968) and the University of Virginia School of Law (J.D. 1974)
• G. SCOTT GIBSON IV
• Zollinger Professor of Finance at the William and Mary Mason School of Business
• Former professor at the Cornell University School of Hotel Administration
• Serves on editorial board of Cornell Hotel and Restaurant Administration Quarterly
• Published academic research in leading hospitality, real estate, and finance journals and press
• Bachelor of science and doctor of philosophy in finance from Boston College
• Chief Legal Office and Director of Compliance Services of the National Association of State Boards of Accountancy

(NASBA)

• Served as the general counsel for Sirrom Capital Corporation from 1996 – 1999
• Practiced law with Bass, Berry & Sims and Gibson, Dunn & Crutcher
• Juris Doctor Degree from Duke University School of Law and bachelor of arts degree from Fairfield University

MARIA L. CALDWELL

PORTFOLIO

The Whitehall Houston, TX

1 11 7 10 2 1

DoubleTree by Hilton Resort Hollywood Beach (Miami, FL MSA)

PORTFOLIO OVERVIEW

DoubleTree by Hilton Philadelphia Airport

8

Hotel Ballast Wilmington, NC

4 7 2

The Georgian Terrace Atlanta, GA Hyde Resort & Residences (Miami, FL MSA)*

3

The DeSoto Savannah, GA

9

DoubleTree by Hilton Raleigh Brownstone DoubleTree by Hilton Laurel (Washington, DC MSA)

13 10

DoubleTree by Hilton Jacksonville Riverfront

5 1 12 1

Hyatt Centric Arlington (Washington, DC MSA)

14

Hyde Beach House (Under Development)

4 14 3 4 1 8 9

Source: Filings of Sotherly Hotels Inc.

6 6

Hotel Alba Tampa, FL Sheraton Louisville Riverside

11

Properties Number

• f Rooms

Location Date of Acquisition Chain/Class Designation Wholly-owned Hotels The Whitehall by Sotherly Hotels 259 Houston, TX 11/13/2013 Upper Upscale(1) The Georgian Terrace by Sotherly Hotels 326 Atlanta, GA 3/27/2014 Upper Upscale(1) The DeSoto by Sotherly Hotels 246 Savannah, GA 12/21/2004 Upper Upscale(1) Hotel Ballast Wilmington 272 Wilmington, NC 12/21/2004 Upscale Hyatt Centric Arlington 318 Arlington, VA 3/1/2018 Upper Upscale Sheraton Louisville Riverside 180 Jeffersonville, IN 9/20/2006 Upper Upscale DoubleTree by Hilton Philadelphia Airport 331 Philadelphia, PA 12/21/2004 Upscale DoubleTree by Hilton Raleigh Brownstone 190 Raleigh, NC 12/21/2004 Upscale DoubleTree by Hilton Jacksonville Riverfront 293 Jacksonville, FL 7/22/2005 Upscale Hotel Alba Tampa 222 Tampa, FL 10/29/2007 Upscale DoubleTree Resort by Hilton Hollywood Beach 311 Hollywood, FL 8/9/2007 (2) Upscale DoubleTree by Hilton Laurel 208 Laurel, MD 12/21/2004 Upscale Total Rooms in Wholly-owned Portfolio 3,156 Condominium Hotel Hyde Resort & Residences(3) 215 Hollywood, FL 1/30/2017 Luxury(1) Hyde Beach House (Under Development) (4) TBD (4) Hollywood, FL Q3 2019 (4) Luxury(1) Total Rooms in Composite Portfolio (5) 3,371 (1) Operated as an independent hotel. (2) Acquired remaining 75% JV interest on 7/31/2015. (3) 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, 2018. (4) Currently under contract to acquire upon completion. Final room count is TBD and actual completion date is an estimate. (5) Excludes Hyde Beach House currently under development.

31% 54% 5% 10%

Independent Hilton Marriott Hyatt

6% 40% 54%

L uxury Uppe r Upsc ale Upsc ale

PORTFOLIO OVERVIEW

Property Detail Key Operating Metrics (TTM 3/31/19) Portfolio Mix - Scale Portfolio Mix - Brands

Source: Filings of Sotherly Hotels Inc. *Calculated as % of total rooms; Information is as of December 31, 2018 unless otherwise noted

Properties Occupancy(1) ADR(2) Sotherly Composite Portfolio Totals/Weighted Average (4) 68.7% 154.40 $ United States Totals/Weighted Average (5) 66.2% 130.00 $

(1) Average Occupancy is calculated by dividing the number of rooms sold by the total number of rooms available. (2) ADR is calculated by dividing the total daily room revenue by total daily rooms sold. (3) RevPAR is calculated by multiplying ADR and average daily occupancy. (4) Represents all of the Company's wholly-owned properties and the participating condominium hotels rooms at the Hyde Resort & Residences. (5) Source: STR, Inc. data as of March 31, 2019

STRATEGY

Diversified Investment Strategy Pinpoint Geographic Focus Aggressive Asset Managers Value Creators

SOHO STRATEGY

• Focus on the top 25 markets of the Southern United States
• Management believes its target markets have been characterized by population growth,

economic expansion, growth in new businesses and growth in the resort, recreation and leisure segments

Geographic Growth Markets

• Focus on full-service hotels in the upscale to upper-upscale category
• Management believes that full-service hotels in the upscale and upper-upscale segments

will outperform the broader U.S. hotel industry

Full-Service Hotels

• Acquire properties in prime locations with significant barriers to entry
• Geographic exclusivity enhances and preserves hotel value

Significant Barriers to Entry

• Seek to acquire properties located in central business district markets near multiple

demand generators for both leisure and business travelers – the A location in each market

• These generators include large universities, convention centers, corporate headquarters,

sports and entertainment venues and office space

Proximity to Demand Generators

SOHO STRATEGY

Focused Investment Criteria Sotherly’s business model includes strategic growth through acquisitions of full-service, upscale and upper-upscale hotel properties located in the primary markets in the Southern United States, specifically focused on the following:

SOHO STRATEGY

Southern U.S. Demographic

• Our target markets are the beneficiary of those trends
• Plan for continued growth within these markets

Domestic migration indicates the Southern U.S. is experiencing the largest increase in demographic trends

• ver the last ten years, as well as the most recent

year-over-year comparison

• Larger skilled workforce
• Diversification of skill sets
• Institutional and government spending

Positive net migration brings many benefits to the local economy:

• Recent corporate relocation
• Newly built production plants/facilities
• Established Fortune 500 companies
• Non-service-dependent markets
• Growing demand for lodging

Focus on markets with strong employment drivers that demonstrate the following characteristics:

Target Markets Current Markets

*Source: census.gov

• Enhanced guest experience via services and product upgrades
• Renovation and repositioning of nearly 90% of portfolio in

last four years

• ADR growth and revenue quality
• Focus on direct sales and reservation cost management

Focused Asset Management Balance Sheet Management

• Access the capital markets in prudent fashion for a specific

purpose when conditions permit

• Lock in favorable interest rates and extend maturities –

refinanced over $110 million in mortgage debt in 2018

Capital Allocation

• In QI 2018 completed the acquisition of the Hyatt Centric

Arlington in Rosslyn, Virginia

• Hyde Resort & Residences acquisition closed Jan. 2017
• Hyde House purchase agreement executed in June 2017 for

closing in late-2019

• Target markets include: Charleston (S.C.), New Orleans,

Nashville, Charlotte, Dallas, among others

• Attempt to source off-market deals when possible

Grow Portfolio Through Acquisitions

• Steady growth consistent with portfolio performance and

balance sheet improvement – increased 3 times in 2018

Dividend Growth

STRATEGIC INITIATIVES

DOUBLETREE BY HILTON RALEIGH BROWNSTONE THE DESOTO SAVANNAH

• Improve quality of existing portfolio – approximately $17.75

million in capital improvements completed in 2018

• Share buy-back execution during market lag
• Dispose of non-core assets if and when market conditions

permit

PERFORMANCE

YEARLY OPERATING PERFORMANCE

Revenue Per Available Room (RevPAR) 4.31% CAGR from 2014-2018 with continued growth expected in 2019

Source: Filings of Sotherly Hotels Inc.

$88.42 $93.80 $98.18 $101.70 $109.20 $110.05

$60.00 $70.00 $80.00 $90.00 $100.00 $110.00 $120.00 ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL GUIDANCE 2014 2015 2016 2017 2018 2019

$32,113 $36,447 $40,013 $40,989 $47,684 $49,705

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL GUIDANCE 2014 2015 2016 2017 2018 2019

YEARLY OPERATING PERFORMANCE

Hotel EBITDA (000’s)

Source: Filings of Sotherly Hotels Inc.

8.23% CAGR from 2014-2018 with continued growth expected in 2019

YEARLY OPERATING PERFORMANCE

Hotel EBITDA Margin Margin expansion continued in 2018

Source: Filings of Sotherly Hotels Inc.

26.1% 26.3% 26.2% 26.6% 26.8% 26.8%

25.6% 25.8% 26.0% 26.2% 26.4% 26.6% 26.8% 27.0% ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL GUIDANCE 2014 2015 2016 2017 2018 2019

YEARLY OPERATING PERFORMANCE

3.62% CAGR from 2013-2018 with continued growth expected in 2019

Source: Filings of Sotherly Hotels Inc.

AFFO per share

$0.84 $1.09 $1.00 $0.90 $1.00 $1.04 $1.05

$0.50 $0.60 $0.70 $0.80 $0.90 $1.00 $1.10 $1.20 ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL GUIDANCE 2013 2014 2015 2016 2017 2018 2019

(1) The Company presents AFFO, including adjusted FFO per share and unit, which adjusts for certain additional items including changes in deferred income taxes, any unrealized gain (loss) on hedging instruments or warrant derivative, loan impairment losses, losses on early extinguishment of debt, aborted offering costs, loan modification fees, franchise termination costs, costs associated with the departure of executive officers, litigation settlement, over-assessed real estate taxes on appeal, change in control gains or losses and acquisition transaction costs.

THE GEORGIAN TERRACE HOTEL BALLAST

SOTHERLY PORTFOLIO STRENTHENING INITIATIVES

INVESTED $65.0m REPOSITIONED 10 HOTELS, OR 90% OF WHOLLY- OWNED PORTFOLIO* 17 NEW OR REPOSITIONED FOOD & BEVERAGE OUTLETS 2786 GUEST ROOMS RENOVATED Over the Past 4 years

Source: Filings of Sotherly Hotels Inc. *By % of Guest Rooms

ORGANIC VALUE CREATION – CONVERSION RESULTS

ORGANIC VALUE CREATION – CONVERSION RESULTS

Jacksonville

STRATEGIC RATIONALE AND CURRENT RESULTS

• Converted from Crowne Plaza to DoubleTree by Hilton Jacksonville Riverfront on September 9,

2015 following complete property renovation

• $7.2 million renovation included significant upgrades to hotel public areas, exterior, meeting rooms

and banquet space, restaurant, fitness center, pool area, and guest rooms

• Operating metric improvements to date (YE 2015 – YE 2018):
• RevPAR: + 56.5%
• Fair Share: + 29.6%
• Hotel EBITDA: + 125.9%

CROWNE PLAZA JACKSONVILLE RIVERFRONT Source: Filings of Sotherly Hotels Inc. & STR Global

ORGANIC VALUE CREATION – CONVERSION RESULTS

Laurel

STRATEGIC RATIONALE AND CURRENT RESULTS

• Converted from Holiday Inn to DoubleTree by Hilton Laurel on October 22, 2015 following

complete property renovation

• $4.5 million renovation included significant upgrades to hotel public areas, exterior, meeting

rooms and banquet space, restaurant, fitness center, and guest rooms

• Operating metric improvements to date (YE 2015 – YE 2018):
• RevPAR: + 57.8%
• Fair Share: + 58.0%
• Hotel EBITDA: + 356.9%

HOLIDAY INN LAUREL WEST Source: Filings of Sotherly Hotels Inc. & STR Global

ORGANIC VALUE CREATION – CONVERSION RESULTS

Atlanta

STRATEGIC RATIONALE AND CURRENT RESULTS

• Converted to The Georgian Terrace by Sotherly on September 24, 2015 following a $6.89 million property

renovation which included significant upgrades to hotel public areas and guest rooms

• Since acquiring property, TripAdvisor ranking has steadily climbed from #75 to #13 of 175 hotels in

Atlanta, allowing the hotel to take share by driving rate

• Operating metric improvements from first full year of ownership to date (YE 2015 – YE 2018):
• RevPAR: + 16.4%
• Fair Share: + 9.3%
• Hotel EBITDA: + 17.3%

THE GEORGIAN TERRACE Source: Filings of Sotherly Hotels Inc. & STR Global

ORGANIC VALUE CREATION – CONVERSION RESULTS

Houston

STRATEGIC RATIONALE AND CURRENT RESULTS

• Converted from Crowne Plaza to The Whitehall by Sotherly on April 14, 2016 following complete

property renovation

• $5.0 million renovation included the addition of an outdoor dining venue and upgrades to hotel’s public

areas, exterior, meeting rooms and banquet space, restaurant, fitness center, pool area, and guest rooms

• Despite soft market conditions, RevPAR has increased 9.6% from YE 2015 to YE 2018.
• Since conversion, TripAdvisor ranking has steadily climbed from #270 to #13 of 525 hotels in Houston

CROWNE PLAZA HOUSTON DOWNTOWN Source: Filings of Sotherly Hotels Inc. & STR Global

ORGANIC VALUE CREATION – CONVERSION RESULTS

Savannah

STRATEGIC RATIONALE AND CURRENT RESULTS

• Converted from Hilton Savannah DeSoto to The DeSoto by Sotherly on August 1, 2017 following

complete property renovation

• The $9.4 million renovation included substantial upgrades to hotel public areas, exterior, meeting

rooms and banquet space, restaurants, fitness center, pool area, and guest rooms

• Hotel has been repositioned to outperform the market by driving ADR as well as improved F&B

revenue performance from two all-new signature restaurants: 1540 Room and Edgar’s Proof & Provision

HILTON SAVANNAH DESOTO Source: Filings of Sotherly Hotels Inc.

ORGANIC VALUE CREATION – CONVERSION RESULTS

Hollywood

STRATEGIC RATIONALE AND CURRENT RESULTS

• Converted from Crowne Plaza to DoubleTree by Hilton Hollywood Beach on October 26,

2017 following complete property renovation

• $7.0 million renovation included significant upgrades to hotel public areas, exterior, meeting

rooms and banquet space, restaurant, fitness center, pool area, and guest rooms

• Following ramp up period, property is expected to outperform the market by driving rate based
• n results experienced in other Crowne Plaza to DoubleTree conversions

CROWNE PLAZA HOLLYWOOD BEACH RESORT Source: Filings of Sotherly Hotels Inc.

ORGANIC VALUE CREATION – CONVERSION RESULTS

Wilmington

STRATEGIC RATIONALE AND CURRENT RESULTS

• Converted from Hilton Wilmington Riverside to Hotel Ballast, Tapestry by Hilton on April 1, 2018

following complete property renovation

• $10.0 million renovation included significant upgrades to hotel public areas, exterior, meeting

rooms and banquet space, restaurant, fitness center, pool area, and guest rooms

• Tapestry by Hilton flag will allow property to capture upscale clientele by operating as the only

boutique concept in the downtown Wilmington market

• As part of conversion, the F&B outlets have been repositioned with the creation of Board & Barrel:

A Coastal Kitchen and Buffalo Bayou Coffee

HILTON WILMINGTON RIVERSIDE Source: Filings of Sotherly Hotels Inc. & STR Global

ORGANIC VALUE CREATION – CONVERSION RESULTS

Tampa

STRATEGIC RATIONALE AND CURRENT RESULTS

• Plan to convert to Hotel Alba Tampa, Tapestry by Hilton in June 2019 following complete

property renovation

• $11.3 million renovation to include a complete lobby reconfiguration and significant upgrades

to hotel public areas, exterior, meeting rooms and banquet space, restaurant, fitness center, pool area, and guest rooms

• Crowne Plaza to Tapestry by Hilton conversion presents strong opportunity to increase

performance by driving ADR

• Branding strategy will fulfill need for a boutique property in the immediate Westshore market

CROWNE PLAZA TAMPA WESTSHORE Source: Filings of Sotherly Hotels Inc.

CAPITAL ALLOCATION - ACQUISITION ACTIVITY

Hyde Resort & Residences - Commercial Unit STRATEGIC RATIONALE AND CURRENT RESULTS

• Uniquely positioned to effectively underwrite and acquire the asset from

developer; SOHO Management has experience and understands condo-hotel model - attractive opportunity to create outsized returns on modest investment

• Hotel opened for business in late February 2017 with partial inventory as

developer continued to complete construction and close on condo sales; process completed July 2017

• SOHO experienced a slow ramp-up during 2017 with 2018 being first full

year of performance and results for shareholders

• Close proximity to DoubleTree by Hilton Resort Hollywood Beach provides

for operational efficiencies and sales and marketing synergies

DATE ACQUIRED:

January 30, 2017

PURCHASE PRICE:

$4.25 million

ELEMENTS OF DEAL:

• Commercial Unit
• Lease on 400-space parking

garage and various meeting spaces

• agreement to manage HOA for

fee

Source: Filings of Sotherly Hotels Inc.

CAPITAL ALLOCATION - ACQUISITION ACTIVITY

Hyde Beach House Resort & Residences - Commercial Unit PURCHASE CONTRACT EXECUTED: June 2017 TARGET CLOSING: September 2019 PURCHASE PRICE: $4.5 million ELEMENTS OF DEAL:

• Commercial Unit
• Use Agreement on

700-space parking garage, meeting spaces, front desk, pool bar

• Agreement to

manage HOA for fee

Source: Filings of Sotherly Hotels Inc.

HOLLYWOOD SYNERGIES – CREATING LONG-TERM VALUE

Source: Filings of Sotherly Hotels Inc.

OPPORTUNITIES UNVEILED

• By adding our interest in the Hyde Resort & Residences to
• ur portfolio, we now have a complex encompassing over

500 guest rooms in the South Florida market; once complete, the Hyde Beach House is expected to bring the total complex to over 700 guest rooms, including fee simple hotel rooms and rental program condo-hotel rooms.

• Provided
• pportunity

to convert Crowne Plaza to DoubleTree and take advantage of strength of Hilton reservation system for primary investment while working with Preferred Hotels & Resorts on the Hyde to provide a luxury independent concept. The two properties can be positioned and marketed to complement each other, while benefitting from operational efficiencies and economies of scale.

• The amenities now available to all Sotherly guests includes

a luxury beach club, multiple F&B offerings, and spa services

• As part of the Hyde Beach House development, the

developer is obligated to build a new upscale ballroom on the site of the DoubleTree’s event tent, providing a waterfront venue and substantially increasing the hotel’s total meeting space

CAPITAL ALLOCATION - ACQUISITION ACTIVITY

Hyatt Centric – Arlington, VA

DATE ACQUIRED:

March 1, 2018

PURCHASE PRICE:

$79.7 million

Keys:

318

Price per Key:

$250,630 STRATEGIC RATIONALE AND CURRENT RESULTS

• Ideally located in Rosslyn submarket of the dynamic Washington, DC lodging market;

prominently positioned as Rosslyn premier lodging option, located steps from Rosslyn Metro station, 3 blocks from the Key Bridge, and surrounded by first class office space

• Rosslyn corridor is home to major corporations such as Carlyle Group, Raytheon, CEB,

Deloitte, BAE Systems, Grant Thornton and the new home to Nestle USA and Gerber’s North American Headquarters

• Hotel was fully renovated in 2016 to convert to new Hyatt Centric brand, which is focused
• n being the localized and experiential hub and catering to the next generation of travelers
• SOHO believes there is significant upside in the Rosslyn market as well as at the hotel-

level through additional rate growth, F&B and parking revenues, and operational efficiencies.

• Key operating metrics for YE 2018 were:
• Occupancy

83.8%

• ADR

$181.38

• RevPAR

$152.04

• Hotel EBITDA

$5.4 million

Source: Filings of Sotherly Hotels Inc.

DIVIDEND STRATEGY

Steady Dividend Growth

Increased dividend 11 out of past 15 quarters Sustainable payout with bias towards growth Strong yield ranked near top of all Lodging REITs

Source: Filings of Sotherly Hotels Inc. & SNL Financial

80 0.085 0.090 0.0950.095 0.100 0.105 0.1100.110 0.115 0.120 0.1250.125 0.130

Quarterly Dividend Payments Per Share ($0.00)

1.0 9.1 10.7 11.1 12.4 14.6 15.7 15.8 17.1 19.2 21.4 21.6 22.3 23.7 29.0 3

10 20 30 HT RLJ SHO PEB HPT HST APLE CHSP SNL U.S. REIT EQUITY INN PK AHT DRH SOHO XHR CDOR BHR Total Return (%) Q1 2019 All Lodging REITs

1.5 4.2 4.8 5.1 5.2 5.3 5.4 6.1 6.2 6.3 7.3 7.4 7.5 8.2 8.4 9.8

2 4 6 8 10 12 SHO HST DRH XHR PEB BHR CHSP INN PK HT SOHO RLJ APLE CDOR HPT AHT Dividend Yield (%) as of 5/29/2019

INVESTMENT HIGHLIGHTS

Longtime Relationships With Industry Leaders Diversified Investment Thesis and Proven Track Record Experienced Management Team Stable Portfolio of High-Quality, Unique Properties Strategic Focus on Select Southern Markets Prudent and Flexible Capital Structure

NON-GAAP RECONCILIATION

2015 2016 2017 2018 Net I ncome (Loss) A vailable to Common Stockholders 5,356,666 $ (218,173) $ (3,339,136) $ (5,719,978) $ Net I ncome A ttributable to Noncontrolling I nterest 1,040,987 (26,567) (413,014) (718,093) I nterest Expense 16,515,827 17,735,107 15,727,628 19,953,746 I nterest I ncome (50,461) (115,785) (218,656) (352,951) Distributions to Preferred Stockholders

• 1,144,889

3,781,639 5,829,914 I ncome Tax Provision (Benefit) (1,336,033) (1,367,634) 1,737,804 469,349 Depreciation and A mortization 13,591,495 15,019,071 16,999,619 20,884,643 Equity in (Earnings) Loss of JV (475,514)

• Loss (Gain) on Sale or A

sset Disposal (41,435) 365,319 1,413,659 511,749 Gain on I nvoluntary Convesion of A ssets

• (2,242,876)

(917,767) Realized and Unrealized Loss on Hedging A ctivities 108,819 37,384 28,384 808,958 Loss on Early Debt Extinguishment 772,907 1,417,905 1,178,348 753,133 I mpairment of I nvestment in Hotel Properties 500,000

• Corporate General and A

dministrative Expenses 7,268,256 6,021,065 6,335,926 6,180,962 Gain on Change in Control (6,603,148)

• Net Lease Rental I

ncome

• Other Fee I

ncome (200,976)

• Hotel EBI

TDA 36,447,390 $ 40,012,581 $ 40,989,325 $ 47,683,665 $ 2015 2016 2017 2018 Net I ncome (Loss) 5,356,666 $ (218,173) $ (3,339,136) $ (5,719,978) $ Net I ncome A ttributable to Noncontrolling I nterest 1,040,987 (26,567) (413,014) (718,093) Depreciation and A mortization 13,591,495 15,019,071 16,999,619 20,884,643 Equity in Depreciation and A mortization of JV 259,279

• I

mpairment of I nvestment in Hotel Properties 500,000

• Gain on Change in Control

(6,603,148)

• Gain on I

nvoluntary Conversion of A ssets

• (2,242,876)

(917,767) Loss (Gain) on Sale or A sset Disposal (41,435) 365,319 1,413,659 511,749 FFO A vailable to Common Stockholders 14,103,844 $ 15,139,650 $ 12,418,252 $ 14,040,554 $ (I ncrease) Decrease in Deferred I ncome Taxes (1,780,571) (1,558,966) 1,498,222 319,939 A cquisition Costs 634,376

• Loss on Starwood Settlement

324,271

• Over-A

ssessed Real Estate Taxes Under A ppeal 497,733

• Loan M
• dification Fees

243,229 64,215

• Franchise Termination Fee
• Realized and Unrealized (Gain) Loss on Hedging A

ctivit 108,819 37,384 28,384 808,958 Loss on A borted Offering Costs

• 541,129
• Loss on Early Debt Extinguishment

772,907 1,417,905 1,178,348 753,133 A djusted FFO A vailable to Common Stockholders 14,904,608 $ 15,100,188 $ 15,664,335 $ 15,922,584 $ Year Ended December 31, Year Ended December 31,

FINANCIAL STATEMENTS

2015 2016 2017 2018 Statement of Operations Total Revenues 138,533,476 152,845,752 154,266,693 178,173,121 Total Operating Expens es excluding D&A (109,153,366) (118,854,236) (119,613,294) (136,670,418) Depreciation and A mortization (14,050,060) (15,384,390) (18,489,511) (21,396,392) Net Operating Income 15,330,050 18,607,126 16,163,888 20,106,311 Interes t Income 50,461 115,785 218,656 352,951 Interes t Expens e (16,515,827) (17,735,107) (15,727,628) (19,953,746) Other Income (Expens e) - Net 6,196,936 (1,455,289) 1,112,377 (644,324) Income Tax Benefit (Provis ion) 1,336,033 1,367,634 (1,737,804) (469,349) Net Income (Los s ) 6,397,653 900,149 29,489 (608,157) Net Income (Los s ) attributable to Noncontrolling Interes t (1,040,987) 26,567 413,014 718,093 Net Income (Los s ) attributable to the Company 5,356,666 926,716 442,503 109,936 Dis tributions to Preferred Stockholders

• (1,144,889)

(3,781,639) (5,829,914) Net Income (Los s ) A ttributable to Common Stockholders 5,356,666 (218,173) (3,339,136) (5,719,978) 2015 2016 2017 2018 Balance Sheet Inves tments in Hotel Properties , Net 354,963,242 348,593,912 357,799,512 435,725,814 Total A s s ets 388,972,239 406,019,564 409,953,340 493,482,847 M

• rtgage Loans

270,331,724 282,708,289 297,318,816 36,828,845 Uns ecured Notes 50,460,106 24,308,713

• 23,894,658

Total Liabilities 336,113,871 324,680,276 315,779,318 411,216,475 Total Stockholders ' Equity 49,003,131 79,010,113 93,020,255 81,824,666 Operating D ata A verage Number of A vailable Rooms 2,828 3,011 2,995 3,293 Total Number of A vailable Room Nights 1,032,353 1,102,026 1,096,170 1,202,025 Occupancy Percentage 69.9% 69.8% 68.8% 69.1% A verage Daily Rate (A DR) 134.2 140.6 147.8 158.0 RevPA R 109.2 101.7 98.2 93.8 Additional Financial D ata FFO 14,103,844 15,139,650 12,418,252 14,040,554 A djus ted FFO 14,904,608 15,100,188 15,664,335 15,922,584 Hotel EBITDA 36,447,390 40,012,581 40,989,325 47,683,665 Y ear Ended D ecember 31, Y ear Ended D ecember 31,

SOTHERLY HOTELS

410 West Francis Street Williamsburg, Virginia 23185 (757) 229-5648

SOTHERLYHOTELS.COM