Taking Stock of Sotherly Hotels’ Risk Factors

Sotherly Hotels Inc. (SOHO) is a self-managed and self-administered lodging real estate investment trust (REIT). Recently, the company delivered better-than-expected Q2 performance with a five-fold jump in revenue.

Let’s have a look at SOHO’s recent financials, as well as what has changed in its key risk factors that investors should know.

In Q2, SOHO’s revenue jumped 549.5% year-over-year to $34.4 million, beating analysts’ estimates by $3.73 million. A key metric of the company’s unit performance is RevPAR (room revenue per available room) which increased to $94.93 from $12.91 a year ago. This substantial increase was attributable to a higher average daily rates, and substantially increased occupancy levels during the quarter.

Dave Folsom, president and CEO of Sotherly Hotels, commented, “We witnessed significant demand increases, reflecting strong occupancy gains and rate expansion. Leisure travel continued to be the main driver across our portfolio, although we have also seen some return of group and business travel at certain hotels.

“We expect markets that are more dependent on business travel and corporate group business to lag, but we are seeing indications of increased bookings in these segments in 2022.”

Along with the higher top line, SOHO’s total hotel operating expenses also increased to $24.7 million from $10.5 million a year ago. Net loss per share of $0.19, was ahead of analysts’ estimates by $0.20. The company had incurred a net loss per share of $1.20 a year ago. (See Sotherly Hotels stock charts on TipRanks)

For Q3 fiscal 2021, SOHO estimates composite RevPAR to be down between 5% to 10% as compared to Q3 fiscal 2019.

On September 1, Piper Sandler analyst Alexander Goldfarb reiterated a Hold rating on the stock, but decreased his price target to $2.60 from $3.75, implying a 2.3% potential downside for the stock.

Shares are up 8.1% over the past month.

Risk Factors

According to the new TipRanks Risk Factors tool, SOHO’s main risk category is Finance & Corporate, accounting for 51% of the total 70 risks identified. Since June, the company has added one key risk factor under the Finance & Corporate risk category.

SOHO noted that as of June 30, 2021, distributions on its preferred stock are in arrears for the previous six quarterly payments. As a consequence, the holders of its Series B, Series C, and Series D preferred shares are entitled to vote for electing two additional directors of SOHO until the full distributions for past unpaid periods are made or declared, or a sufficient sum for this payment in cash is set aside.

The sector average Finance & Corporate risk factor of 59%.