10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

SOTHERLY HOTELS INC.

(Exact name of registrant as specified in its charter)

Maryland	001-32379	20-1531029
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

SOTHERLY HOTELS LP

(Exact name of registrant as specified in its charter)

Delaware	001-36091	20-1965427
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

306 South Henry Street, Suite 100

Williamsburg, Virginia 23185

(757) 229-5648

(Address and Telephone Number of Principal Executive Offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Sotherly Hotels Inc. Yes ☒ No ☐ Sotherly Hotels LP Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)

Sotherly Hotels Inc. Yes ☒ No ☐ Sotherly Hotels LP Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act.

Sotherly Hotels Inc.

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-accelerated Filer	☒	Smaller Reporting Company	☒
Emerging Growth Company	☐

Sotherly Hotels LP

Large Accelerated Filer ☐ Accelerated Filer ☐

Non-accelerated Filer	☒	Smaller Reporting Company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Sotherly Hotels Inc. Yes ☐ No ☒ Sotherly Hotels LP Yes ☐ No ☒

As of May 5, 2023, there were 19,310,803 shares of Sotherly Hotels Inc.’s common stock issued and outstanding.

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	SOHO	The NASDAQ Stock Market LLC
8.0% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value	SOHOB	The NASDAQ Stock Market LLC
7.875% Series C Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value	SOHOO	The NASDAQ Stock Market LLC
8.25% Series D Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value	SOHON	The NASDAQ Stock Market LLC

EXPLANATORY NOTE

We refer to Sotherly Hotels Inc. as the “Company,” Sotherly Hotels LP as the “Operating Partnership,” the Company’s common stock as “common stock,” the Company’s preferred stock as “preferred stock,” and the Operating Partnership’s common partnership interest as “partnership units,” and the Operating Partnership’s preferred interest as the “preferred units.” References to “we” and “our” mean the Company, its Operating Partnership and its subsidiaries and predecessors, collectively, unless the context otherwise requires or where otherwise indicated.

The Company conducts virtually all of its activities through the Operating Partnership and is its sole general partner. The partnership agreement provides that the Operating Partnership will assume and pay when due, or reimburse the Company for payment of, all costs and expenses relating to the ownership and operations of, or for the benefit of, the Operating Partnership. The partnership agreement further provides that all expenses of the Company are deemed to be incurred for the benefit of the Operating Partnership.

This report combines the Quarterly Reports on Form 10-Q for the period ended March 31, 2023 of the Company and the Operating Partnership. We believe combining the quarterly reports into this single report results in the following benefits:

•combined reports better reflect how management and investors view the business as a single operating unit;

•combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;

•combined reports are more efficient for the Company and the Operating Partnership and result in savings of time, effort and expense; and

•combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.

To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:

•Consolidated Financial Statements;

•the following Notes to Consolidated Financial Statements:

•Note 6 – Preferred Stock and Units;

•Note 7 – Common Stock and Units;

•Note 12 – Income (Loss) Per Share and Per Unit; and

•Part I, Item 4 - Controls and Procedures; and

•Part II, Item 6 - Certifications of CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act.

3

SOTHERLY HOTELS INC.

SOTHERLY HOTELS LP

INDEX

		Page
PART I
Item 1.	Consolidated Financial Statements	5
	Sotherly Hotels Inc.
	Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	5
	Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2023 and 2022	6
	Consolidated Statements of Changes in Equity (unaudited) for the Three Months Ended March 31, 2023 and 2022	7
	Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2023 and 2022	9
	Sotherly Hotels LP
	Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	10
	Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2023 and 2022	11
	Consolidated Statements of Changes in Partners’ Capital (unaudited) for the Three Months Ended March 31, 2023 and 2022	12
	Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2023 and 2022	14
	Notes to Consolidated Financial Statements	15
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4	Controls and Procedures	42
PART II
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45

4

PART I

Item 1. Consolidated Financial Statements

SOTHERLY HOTELS INC.

CONSOLIDATED BALANCE SHEETS

	March 31, 2023			December 31, 2022
	(unaudited)
ASSETS
Investment in hotel properties, net	$	362,900,039		$	365,070,725
Cash and cash equivalents		23,429,595			21,918,680
Restricted cash		8,556,641			5,422,950
Accounts receivable, net		4,316,649			5,844,904
Prepaid expenses, inventory and other assets		8,015,602			8,311,862
TOTAL ASSETS	$	407,218,526		$	406,569,121
LIABILITIES
Mortgage loans, net	$	318,555,434		$	320,482,103
Unsecured notes		2,135,164			2,545,975
Accounts payable and accrued liabilities		27,738,428			25,704,835
Advance deposits		3,532,639			2,233,013
Dividends and distributions payable		2,088,160			4,082,472
TOTAL LIABILITIES	$	354,049,825		$	355,048,398
Commitments and contingencies (See Note 5)		—			—
EQUITY
Sotherly Hotels Inc. stockholders’ equity
Preferred stock, $0.01 par value, 11,000,000 shares authorized:
8.0% Series B cumulative redeemable perpetual preferred stock,    1,464,100 and 1,464,100 shares issued and outstanding; aggregate liquidation     preference $45,387,100 and $44,655,050, at March 31, 2023 and     December 31, 2022, respectively.		14,641			14,641
7.875% Series C cumulative redeemable perpetual preferred stock,     1,346,110 and 1,346,110 shares issued and outstanding; aggregate liquidation     preference $41,603,220 and $40,940,681, at March 31, 2023 and     December 31, 2022, respectively.		13,461			13,461
8.25% Series D cumulative redeemable perpetual preferred stock,    1,163,100 and 1,163,100 shares issued and outstanding; aggregate liquidation    preference $36,274,181 and $35,674,458, at March 31, 2023 and    December 31, 2022, respectively.		11,631			11,631
Common stock, par value $0.01, 69,000,000 shares authorized, 19,235,803    shares issued and outstanding at March 31, 2023 and 18,951,525     shares issued and outstanding at December 31, 2022.		192,358			189,515
Additional paid-in capital		175,823,357			175,611,370
Unearned ESOP shares		(2,555,500	)		(2,601,134	)
Distributions in excess of retained earnings		(119,572,709	)		(120,985,183	)
Total Sotherly Hotels Inc. stockholders’ equity		53,927,239			52,254,301
Noncontrolling interest		(758,538	)		(733,578	)
TOTAL EQUITY		53,168,701			51,520,723
TOTAL LIABILITIES AND EQUITY	$	407,218,526		$	406,569,121

The accompanying notes are an integral part of these consolidated financial statements.

5

SOTHERLY HOTELS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
REVENUE
Rooms department	$	28,401,688		$	24,853,385
Food and beverage department		8,748,726			5,617,736
Other operating departments		6,340,863			7,881,482
Total revenue		43,491,277			38,352,603
EXPENSES
Hotel operating expenses
Rooms department		6,413,094			5,949,757
Food and beverage department		5,935,560			3,880,617
Other operating departments		2,315,848			2,484,107
Indirect		16,747,577			16,063,361
Total hotel operating expenses		31,412,079			28,377,842
Depreciation and amortization		4,578,311			4,565,072
Gain on disposal of assets		—			(29,542	)
Corporate general and administrative		1,980,765			1,514,027
Total operating expenses		37,971,155			34,427,399
NET OPERATING INCOME		5,520,122			3,925,204
Other income (expense)
Interest expense		(4,113,597	)		(5,713,205	)
Interest income		146,665			24,448
Unrealized (loss) gain on hedging activities		(442,464	)		962,263
PPP loan forgiveness		275,494			—
Gain on involuntary conversion of assets		16,476			—
Net income (loss) before income taxes		1,402,696			(801,290	)
Income tax provision		(15,182	)		(9,654	)
Net income (loss)		1,387,514			(810,944	)
Add: Net loss attributable to noncontrolling interest		24,960			161,621
Net income (loss) attributable to the Company		1,412,474			(649,323	)
Undeclared distributions to preferred stockholders		(1,994,312	)		(1,936,617	)
Gain on extinguishment of preferred stock		—			78,175
Net loss attributable to common stockholders	$	(581,838	)	$	(2,507,765	)
Net loss per share attributable to common stockholders:
Basic	$	(0.03	)	$	(0.15	)
Weighted average number of common shares outstanding
Basic		18,635,004			17,107,820

The accompanying notes are an integral part of these consolidated financial statements.

6

SOTHERLY HOTELS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

									Additional			Unearned			Distributions
	Preferred Stock				Common Stock				Paid-			ESOP			in Excess of			Noncontrolling
	Shares		Par Value		Shares		Par Value		In Capital			Shares			Retained Earnings			Interest			Total
Balances at December 31, 2022		3,973,310	$	39,733		18,951,525	$	189,515	$	175,611,370		$	(2,601,134	)	$	(120,985,183	)	$	(733,578	)	$	51,520,723
Net income		—		—		—		—		—			—			1,412,474			(24,960	)		1,387,514
Issuance of common stock		—		—		64,278		643		120,842			—			—			—			121,485
Issuance of restricted    common stock awards		—		—		220,000		2,200		101,701			—			—			—			103,901
Amortization of ESOP shares		—		—		—		—		(33,439	)		45,634			—			—			12,195
Amortization of restricted    stock awards		—		—		—		—		22,883			—			—			—			22,883
Balances at March 31, 2023      (unaudited)		3,973,310	$	39,733		19,235,803	$	192,358	$	175,823,357		$	(2,555,500	)	$	(119,572,709	)	$	(758,538	)	$	53,168,701

The accompanying notes are an integral part of these consolidated financial statements.

7

SOTHERLY HOTELS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

											Additional			Unearned			Distributions
	Preferred Stock						Common Stock				Paid-			ESOP			in Excess of			Noncontrolling
	Shares			Par Value			Shares		Par Value		In Capital			Shares			Retained Earnings			Interest			Total
Balances at December 31, 2021		4,059,610		$	40,596			17,441,058	$	174,410	$	177,651,954		$	(3,083,398	)	$	(153,521,704	)	$	(4,758,928	)	$	16,502,930
Net loss		—			—			—		—		—			—			(649,323	)		(161,621	)		(810,944	)
Issuance of common stock		—			—			175,268		1,752		355,760			—			—			—			357,512
Issuance of restricted    common stock awards		—			—			15,000		151		30,149			—			—			—			30,300
Amortization of ESOP shares		—			—			—		—		(36,391	)		50,547			—			—			14,156
Amortization of restricted    stock awards		—			—			—		—		18,195			—			—			—			18,195
Extinguishment of preferred stock		(22,500	)		(225	)		217,775		2,178		9,222			—			—			—			11,175
Balances at March 31, 2022      (unaudited)		4,037,110		$	40,371			17,849,101	$	178,491	$	178,028,889		$	(3,032,851	)	$	(154,171,027	)	$	(4,920,549	)	$	16,123,324

The accompanying notes are an integral part of these consolidated financial statements.

8

SOTHERLY HOTELS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
Cash flows from operating activities:
Net Income (loss)	$	1,387,514		$	(810,944	)
Adjustments to reconcile net income (loss) to net cash       provided by operating activities:
Depreciation and amortization		4,578,311			4,565,072
Amortization of deferred financing costs		157,434			461,537
Amortization of mortgage premium		(6,170	)		(6,170	)
Gain on involuntary conversion of assets		(16,476	)		—
Unrealized (gain) loss on hedging activities		442,464			(962,263	)
PPP loan forgiveness		(275,494	)		—
Gain on disposal of assets		—			(30,722	)
ESOP and stock - based compensation		260,463			420,161
Changes in assets and liabilities:
Accounts receivable		1,119,628			862,972
Prepaid expenses, inventory and other assets		259,438			(320,020	)
Accounts payable and other accrued liabilities		761,332			2,984,566
Advance deposits		1,299,626			289,692
Net cash provided by operating activities		9,968,070			7,453,881
Cash flows from investing activities:
Proceeds from sale of hotel properties		—			11,063,952
Improvements and additions to hotel properties		(1,533,821	)		(1,123,798	)
Proceeds from involuntary conversion		425,104			—
Proceeds from sale of assets		—			35,000
Net cash (used in) provided by investing activities		(1,108,717	)		9,975,154
Cash flows from financing activities:
Payments on mortgage loans		(1,945,624	)		(12,685,793	)
Payments on unsecured notes		(142,502	)		—
Payments of deferred financing costs		(132,309	)		—
Preferred dividends paid		(1,994,312	)		—
Net cash used in financing activities		(4,214,747	)		(12,685,793	)
Net increase in cash, cash equivalents and restricted cash		4,644,606			4,743,242
Cash, cash equivalents and restricted cash at the beginning of the period		27,341,630			25,578,537
Cash, cash equivalents and restricted cash at the end of the period	$	31,986,236		$	30,321,779
Supplemental disclosures:
Cash paid during the period for interest	$	4,042,426		$	4,049,577
Cash paid (received) during the period for income taxes	$	-		$	-
Non-cash investing and financing activities:
Change in amount of improvements to hotel property    in accounts payable and accrued liabilities	$	858,120		$	(163,699	)

The accompanying notes are an integral part of these consolidated financial statements.

9

SOTHERLY HOTELS LP

CONSOLIDATED BALANCE SHEETS

	March 31, 2023			December 31, 2022
	(unaudited)
ASSETS
Investment in hotel properties, net	$	362,900,039		$	365,070,725
Cash and cash equivalents		23,429,595			21,918,680
Restricted cash		8,556,641			5,422,950
Accounts receivable, net		4,316,649			5,844,904
Loan receivable - affiliate		2,598,582			2,650,526
Prepaid expenses, inventory and other assets		8,015,602			8,311,862
TOTAL ASSETS	$	409,817,108		$	409,219,647
LIABILITIES
Mortgage loans, net	$	318,555,434		$	320,482,103
Unsecured notes, net		2,135,164			2,545,975
Accounts payable and other accrued liabilities		27,738,428			25,704,835
Advance deposits		3,532,639			2,233,013
Dividends and distributions payable		2,088,160			4,082,472
TOTAL LIABILITIES	$	354,049,825		$	355,048,398
Commitments and contingencies (see Note 5)		—			—
PARTNERS’ CAPITAL
Preferred units, 11,000,000 units authorized;
8.0% Series B cumulative redeemable perpetual preferred unit;    1,464,100 and 1,464,100 units issued and outstanding; aggregate liquidation    preference $45,387,100 and $44,655,050, at March 31, 2023 and    December 31, 2022, respectively.	$	34,344,086		$	34,344,086
7.875% Series C cumulative redeemable perpetual preferred units,    1,346,110 and 1,346,110 units issued and outstanding; aggregate liquidation    preference $41,603,220 and $40,940,681, each at March 31, 2023 and    December 31, 2022, respectively.		31,571,778			31,571,778
8.25% Series D cumulative redeemable perpetual preferred units,    1,163,100 and 1,163,100 units issued and outstanding; aggregate liquidation    preference $36,274,181 and $35,674,458, each at March 31, 2023 and    December 31, 2022, respectively.		27,504,901			27,504,901
General Partner: 200,610 units and 197,767 units issued and outstanding as of    March 31, 2023 and December 31, 2022, respectively.		(90,061	)		(106,022	)
Limited Partners: 19,860,381 units and 19,578,946 units issued and outstanding as    of March 31, 2023 and December 31, 2022, respectively.		(37,563,421	)		(39,143,494	)
TOTAL PARTNERS’ CAPITAL		55,767,283			54,171,249
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	409,817,108		$	409,219,647

The accompanying notes are an integral part of these consolidated financial statements.

10

SOTHERLY HOTELS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
REVENUE
Rooms department	$	28,401,688		$	24,853,385
Food and beverage department		8,748,726			5,617,736
Other operating departments		6,340,863			7,881,482
Total revenue		43,491,277			38,352,603
EXPENSES
Hotel operating expenses
Rooms department		6,413,094			5,949,757
Food and beverage department		5,935,560			3,880,617
Other operating departments		2,315,848			2,484,107
Indirect		16,747,577			16,063,361
Total hotel operating expenses		31,412,079			28,377,842
Depreciation and amortization		4,578,311			4,565,072
Gain on disposal of assets		—			(29,542	)
Corporate general and administrative		1,980,765			1,514,027
Total operating expenses		37,971,155			34,427,399
NET OPERATING INCOME		5,520,122			3,925,204
Other income (expense)
Interest expense		(4,113,597	)		(5,713,205	)
Interest income		146,665			24,448
Unrealized (loss) gain on hedging activities		(442,464	)		962,263
PPP loan forgiveness		275,494			—
Gain on involuntary conversion of assets		16,476			—
Net income (loss) before income taxes		1,402,696			(801,290	)
Income tax provision		(15,182	)		(9,654	)
Net income (loss)		1,387,514			(810,944	)
Undeclared distributions to preferred unit holders		(1,994,312	)		(1,936,617	)
Gain on extinguishment of preferred units		—			78,175
Net loss attributable to general and limited partnership unit holders	$	(606,798	)	$	(2,669,386	)
Net loss attributable per general and limited partner unit:
Basic	$	(0.03	)	$	(0.14	)
Weighted average number of general and limited partner units    outstanding
Basic		19,832,279			18,667,969

The accompanying notes are an integral part of these consolidated financial statements.

11

SOTHERLY HOTELS LP

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

	Preferred Units								General Partner					Limited Partner
	Units		Series B Amounts		Series C Amounts		Series D Amounts		Units		Amounts			Units		Amounts			Total
Balances at December 31, 2022		3,973,310	$	34,344,086	$	31,571,778	$	27,504,901		197,767	$	(106,022	)		19,578,946	$	(39,143,494	)	$	54,171,249
Amortization of restricted    unit awards		—		—		—		—		—		229			—		22,654			22,883
Unit based compensation		—		—		—		—		2,843		1,857			281,435		183,780			185,637
Net income		—		—		—		—		—		13,875			—		1,373,639			1,387,514
Balances at March 31, 2023    (unaudited)		3,973,310	$	34,344,086	$	31,571,778	$	27,504,901		200,610	$	(90,061	)		19,860,381	$	(37,563,421	)	$	55,767,283

The accompanying notes are an integral part of these consolidated financial statements.

12

SOTHERLY HOTELS LP

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

	Preferred Units											General Partner					Limited Partner
	Units			Series B Amounts			Series C Amounts			Series D Amounts		Units		Amounts			Units		Amounts			Total
Balances at December 31, 2021		4,059,610		$	35,420,784		$	32,474,760		$	27,549,832		185,748	$	(469,805	)		18,389,030	$	(75,315,469	)	$	19,660,102
Amortization of restricted    unit awards		—			—			—			—		—		182			—		18,013			18,195
Unit based compensation		—			—			—			—		1,903		2,227			188,365		343,194			345,421
Extinguishment of preferred units		(22,500	)		(302,602	)		(225,159	)		—		2,178		5,389			215,597		533,548			11,177
Net loss		—			—			—			—		—		(8,109	)		—		(802,835	)		(810,944	)
Balances at March 31, 2022    (unaudited)		4,037,110		$	35,118,182		$	32,249,601		$	27,549,832		189,829	$	(470,116	)		18,792,992	$	(75,223,549	)	$	19,223,950

The accompanying notes are an integral part of these consolidated financial statements.

13

SOTHERLY HOTELS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
Cash flows from operating activities:
Net income (loss)	$	1,387,514		$	(810,944	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		4,578,311			4,565,072
Amortization of deferred financing costs		157,434			461,537
Amortization of mortgage premium		(6,170	)		(6,170	)
Gain on involuntary conversion of assets		(16,476	)		—
Unrealized (gain) loss on hedging activities		442,464			(962,263	)
PPP loan forgiveness		(275,494	)		—
Gain on disposal of assets		—			(30,722	)
ESOP and unit - based compensation		208,519			363,615
Changes in assets and liabilities:
Accounts receivable		1,119,628			862,972
Prepaid expenses, inventory and other assets		259,438			(320,020	)
Accounts payable and other accrued liabilities		761,332			2,984,566
Advance deposits		1,299,626			289,692
Net cash provided by operating activities		9,916,126			7,397,335
Cash flows from investing activities:
Proceeds from sale of hotel properties		—			11,063,952
Improvements and additions to hotel properties		(1,533,821	)		(1,123,798	)
ESOP loan payments received		51,944			56,546
Proceeds from involuntary conversion		425,104			—
Proceeds from sale of assets		—			35,000
Net cash (used in) provided by investing activities		(1,056,773	)		10,031,700
Cash flows from financing activities:
Payments on mortgage loans		(1,945,624	)		(12,685,793	)
Payments on unsecured notes		(142,502	)		—
Payments of deferred financing costs		(132,309	)		—
Preferred dividends paid		(1,994,312	)		—
Net cash used in financing activities		(4,214,747	)		(12,685,793	)
Net increase in cash, cash equivalents and restricted cash		4,644,606			4,743,242
Cash, cash equivalents and restricted cash at the beginning of the period		27,341,630			25,578,537
Cash, cash equivalents and restricted cash at the end of the period	$	31,986,236		$	30,321,779
Supplemental disclosures:
Cash paid during the period for interest	$	4,113,442		$	4,029,710
Cash paid (received) during the period for income taxes	$	-		$	-
Non-cash investing and financing activities:
Change in amount of improvements to hotel property in    accounts payable and accrued liabilities	$	858,120		$	(163,699	)

The accompanying notes are an integral part of these consolidated financial statements.

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SOTHERLY HOTELS INC.

SOTHERLY HOTELS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Description of Business

Sotherly Hotels Inc. (the “Company”) is a self-managed and self-administered lodging real estate investment trust (“REIT”) that was incorporated in Maryland on August 20, 2004. The Company historically has focused on the acquisition, renovation, upbranding and repositioning of upscale to upper-upscale full-service hotels in the southern United States. The Company’s portfolio, as of March 31, 2023, consisted of investments in ten hotel properties, comprising 2,786 rooms and two hotel commercial condominium units and their associated rental programs. Seven of our hotels operated under the Hilton, DoubleTree, and Hyatt brands, and three are independent hotels.

The Company commenced operations on December 21, 2004 when it completed its initial public offering and thereafter consummated the acquisition of six hotel properties (the “Initial Properties”). Substantially all of the Company’s assets are held by, and all of its operations are conducted through, Sotherly Hotels LP (the “Operating Partnership”).

Pursuant to the terms of the Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”) of the Operating Partnership, the Company, as general partner, is not entitled to compensation for its services to the Operating Partnership. The Company, as general partner, conducts substantially all of its operations through the Operating Partnership and the Company’s administrative expenses are the obligations of the Operating Partnership. Additionally, the Company is entitled to reimbursement for any expenditure incurred by it on the Operating Partnership’s behalf.

For the Company to qualify as a REIT, it cannot operate hotels. Therefore, the Operating Partnership, which at March 31, 2023 was approximately 95.9% owned by the Company, and its subsidiaries, lease its hotels to direct and indirect subsidiaries of MHI Hospitality TRS Holding, Inc., MHI Hospitality TRS, LLC and certain of its subsidiaries (collectively, “MHI TRS Entities”), each of which is a wholly-owned subsidiary of the Operating Partnership. The MHI TRS Entities have engaged Our Town Hospitality, LLC (“Our Town”), an eligible independent management company, to operate the hotels under management contracts. MHI Hospitality TRS Holding, Inc. (“MHI TRS”) is treated as a taxable REIT subsidiary for federal income tax purposes.

All references in these “Notes to Consolidated Financial Statements” to “we”, “us”, “our” and “Sotherly” refer to the Company, its Operating Partnership and its subsidiaries and predecessors, collectively, unless the context otherwise requires or where otherwise indicated.

Overview of Significant Transactions

Significant transactions occurring during the current period and prior fiscal year include the following:

On February 10, 2022, Louisville Hotel Associates, LLC, a Delaware limited liability company and an affiliate of the Company, closed on the sale of the Sheraton Louisville Riverside hotel located in Jeffersonville, Indiana to Riverside Hotel, LLC, an Indiana limited liability company, for a purchase price of $11.5 million, including the assumption by the buyer of the mortgage loan on the hotel.

On June 10, 2022, we closed the sale of the DoubleTree by Hilton Raleigh-Brownstone University hotel. The Company used approximately $18.6 million of the net cash proceeds from the sale of the hotel to repay the existing mortgage on the property and approximately $19.8 million of the net cash proceeds to repay a portion of the secured notes (the “Secured Notes”) with KWHP SOHO, LLC and MIG SOHO, LLC (together, the “Investors”) as required by the terms of the Secured Notes. The Company used the remaining net cash proceeds for general corporate purposes. The Investors received approximately $19.8 million of the proceeds from the sale of the hotel, of which approximately $13.3 million was applied toward principal, approximately $6.3 million was applied toward the exit fee owed under the Secured Notes, and approximately $0.2 million was applied toward accrued interest. Additionally, the terms of the Secured Notes allowed for the release of a portion of the interest reserves in the amount of approximately $1.6 million, of which approximately $1.1 million was applied toward principal and approximately $0.5 million was applied toward the exit fee.

On June 28, 2022, affiliates of the Company entered into amended loan documents to modify the existing mortgage loan on the Hotel Alba Tampa with the existing lender, Fifth Third Bank. Pursuant to the amended loan documents, the amended mortgage loan: (i) has an increased principal balance of $25.0 million; (ii) includes an extended maturity date of June 30, 2025, which may be further extended for two additional periods of one year each, subject to certain conditions; (iii) bears a floating interest rate of SOFR plus 2.75%, subject to a floor rate of 2.75%; (iv) amortizes on a 25-year schedule and requires payments of monthly interest plus $40,600

15

monthly amortization payments; and (v) is guaranteed by the Operating Partnership up to $12.5 million, with the guaranty reducing to $6.25 million upon the successful achievement of certain performance milestones.

On June 29, 2022, the Company used the proceeds from the refinance of the Hotel Alba Tampa, along with approximately $0.2 million of cash on hand as well as the balance of the interest reserve under the Secured Notes of approximately $0.5 million, to satisfy and pay in full the Secured Notes. The Investors received approximately $8.3 million in satisfaction of the Secured Notes, of which approximately $5.6 million was applied toward principal, approximately $2.6 million was applied toward the exit fee owed under the Secured Notes, and approximately $0.02 million was applied toward accrued interest. Concurrent with the cancellation of the Secured Notes, the following agreements were also terminated in accordance with their terms: (i) Note Purchase Agreement; (ii) Pledge and Security Agreement; (iii) Board Observer Agreement; and (iv) other related ancillary agreements.

From March 24, 2022 through August 24, 2022, the Company entered into various privately-negotiated share exchange agreements with holders of its Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, in reliance on Section 3(a)(9) of the Securities Act. Pursuant to those share exchange agreements, the Company has exchanged an aggregate of 806,849 shares of its common stock for 45,900 shares of the Series B Preferred Stock, 38,500 shares of the Series C Preferred Stock, and 1,900 shares of the Series D Preferred Stock, together with all of the holder’s rights to receive accrued and unpaid dividends on those shares of Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock. The common stock was issued in reliance on the exemption from registration set forth in Section 3(a)(9) of the Securities Act, as amended, for securities exchanged by an issuer with an existing security holder in a transaction where no commission or other remuneration was be paid or given directly or indirectly for soliciting such an exchange.

On February 26, 2023, the Company entered into amended loan documents to modify the mortgage loan on The Whitehall hotel located in Houston, TX with the lender, International Bank of Commerce. The amendment (i) extends the maturity date to February 26, 2028; (ii) maintains a floating interest rate of New York Prime Rate plus 1.25%; and (iii) subjects the interest rate to a floor rate of 7.50%. The mortgage loan continues to be guaranteed by the Operating Partnership. The amendment also required us to establish a real estate tax reserve as well as a debt service reserve that approximates the aggregate amount of one year's debt service, which was initially established at approximately $1.5 million.

2. Summary of Significant Accounting Policies

Basis of Presentation – The consolidated financial statements of the Company presented herein include all of the accounts of Sotherly Hotels Inc., the Operating Partnership, MHI TRS and subsidiaries. All significant inter-company balances and transactions have been eliminated. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The consolidated financial statements of the Operating Partnership presented herein include all of the accounts of Sotherly Hotels LP, MHI TRS and subsidiaries. All significant inter-company balances and transactions have been eliminated. Additionally, all administrative expenses of the Company and those expenditures made by the Company on behalf of the Operating Partnership are reflected as the administrative expenses, expenditures and obligations thereto of the Operating Partnership, pursuant to the terms of the Partnership Agreement.

Variable Interest Entities – The Operating Partnership is a variable interest entity. The Company’s only significant asset is its investment in the Operating Partnership, and consequently, substantially all of the Company’s assets and liabilities represent those assets and liabilities of the Operating Partnership and its subsidiaries. All of the Company’s debt is an obligation of the Operating Partnership and its subsidiaries.

Investment in Hotel Properties – Investments in hotel properties include investments in operating properties which are recorded at fair value on acquisition date and allocated to land, property and equipment and identifiable intangible assets. If substantially all the fair value of the gross assets acquired are concentrated in a single identifiable asset, the asset is not considered a business. When we conclude that an acquisition meets this threshold, acquisition costs will be capitalized as part of our allocation of the purchase price of the acquired asset. We capitalize the costs of significant additions and improvements that materially upgrade, increase the value of or extend the useful life of the property. These costs may include refurbishment, renovation, and remodeling expenditures, as well as certain direct internal costs related to construction projects. Upon the sale or retirement of a fixed asset, the cost and related accumulated depreciation are removed from our accounts and any resulting gain or loss is included in the statements of operations.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 7 to 39 years for buildings and building improvements and 3 to 10 years for furniture, fixtures and equipment. Leasehold improvements are amortized over the shorter of the lease term or the useful lives of the related assets.

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The Company assesses the carrying values of its investments in hotel properties whenever events or changes in circumstances indicate that the carrying value of the hotel properties may not be recoverable. Events or circumstances that may cause a review include, but are not limited to, adverse permanent changes in the demand for lodging at the properties due to declining national or local economic conditions and/or new hotel construction in markets where the hotels are located. When such conditions exist, management performs an analysis to determine if the estimated undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel property exceeds its carrying value. If the estimated undiscounted future cash flows are found to be less than the carrying amount of the asset, an adjustment to reduce the carrying amount to the related hotel property’s estimated fair market value would be recorded and an impairment loss recognized.

The Company recognized no impairment losses for the three months ended March 31, 2023 or 2022.

Cash and Cash Equivalents – We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Restricted Cash – Restricted cash includes real estate tax escrows, insurance escrows, mortgage servicing and reserves for replacements of furniture, fixtures and equipment pursuant to certain requirements in our various mortgage agreements.

	As of		As of
	March 31, 2023		March 31, 2022
Cash and cash equivalents	$	23,429,595	$	20,184,327
Restricted cash		8,556,641		10,137,452
Cash, cash equivalents and restricted cash at the end of the period	$	31,986,236	$	30,321,779

Concentration of Credit Risk – We hold cash accounts at several institutions in excess of the Federal Deposit Insurance Corporation (the “FDIC”) protection limits of $250,000. Our exposure to credit loss in the event of the failure of these institutions is represented by the difference between the FDIC protection limit and the total amounts on deposit. Management monitors, on a regular basis, the financial condition of the financial institutions along with the balances there on deposit to minimize our potential risk.

Accounts Receivable – Accounts receivable consists primarily of hotel guest and banqueting receivables. With ongoing evaluations of our trade receivables, credit customer's risk assessment and limiting credit to only a few larger companies or organizations, our potential for expected credit losses is insignificant. Our revenue is mainly based on cash or credit card sales as of the date of service, with limited trade receivables. An allowance for potential credit losses is provided against the portion of accounts receivable that is estimated to be uncollectible.

Inventories – Inventories, consisting primarily of food and beverages, are stated at the lower of cost or net realizable value, with cost determined on a method that approximates first-in, first-out basis.

Franchise License Fees – Fees expended to obtain or renew a franchise license are amortized over the life of the license or renewal. The unamortized franchise fees as of March 31, 2023 and December 31, 2022 were $229,164 and $241,038, respectively. Amortization expense for the three-month periods ended March 31, 2023 and 2022, totaled $11,874 and $12,007, respectively.

Deferred Financing Costs – Deferred financing costs are recorded at cost and consist of loan fees and other costs incurred in issuing debt and are reflected in mortgage loans, net and unsecured notes, net on the consolidated balance sheets. Deferred offering costs are recorded at cost and consist of offering fees and other costs incurred in advance of issuing equity and are reflected in prepaid expenses, inventory and other assets on the consolidated balance sheets. Amortization of deferred financing costs is computed using a method that approximates the effective interest method over the term of the related debt and is included in interest expense in the consolidated statements of operations.

Derivative Instruments – Our derivative instruments are reflected as assets or liabilities on the consolidated balance sheets and measured at fair value. Derivative instruments used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as an interest rate risk, are considered fair value hedges. Derivative instruments used to hedge exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For a derivative instrument designated as a cash flow hedge, the change in fair value each period is reported in accumulated other comprehensive income in stockholders’ equity and partners’ capital to the extent the hedge is effective. For a derivative instrument designated as a fair value hedge, the change in fair value each period is reported in earnings along with the change in fair value of the hedged item attributable to the risk being hedged. For a derivative instrument that does not qualify for hedge accounting or is not designated as a hedge, the change in fair value each period is reported in earnings.

We use derivative instruments to add stability to interest expense and to manage our exposure to interest-rate movements. To accomplish this objective, we currently use interest rate swaps which act as cash flow hedges and are not designated as hedges. We

17

value our interest rate swaps at fair value, which we define as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We do not enter into contracts to purchase or sell derivative instruments for speculative trading purposes.

Fair Value Measurements –

We classify the inputs used to measure fair value into the following hierarchy:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2	Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
Level 3	Unobservable inputs for the asset or liability.

We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table represents our assets and liabilities measured at fair value and the basis for that measurement (our interest rate swaps are the only assets or liabilities measured at fair value on a recurring basis, there were no non-recurring assets or liabilities for fair value measurements as of March 31, 2023 and December 31, 2022, respectively):

	Level 1		Level 2			Level 3
December 31, 2022
Interest rate swaps (1)	$	—	$	1,308,503		$	—
Mortgage loans (2)	$	—	$	(306,300,855	)	$	—
March 31, 2023
Interest rate swaps (1)	$	—	$	886,381		$	—
Mortgage loans (2)	$	—	$	(305,519,476	)	$	—

(1)Interest rate swaps, one of which swaps the Loan Rate for a fixed interest rate of 5.237% for the DoubleTree by Hilton Philadelphia Airport mortgage and is valued at March 31, 2023 and December 31, 2022, and the other which swaps the Loan Rate for a fixed rate of 5.576% for the Hotel Alba Tampa mortgage and is valued only at March 31, 2023 and December 31, 2022. Notional amounts of the swaps approximate the declining balance of the loan.

(2)Mortgage loans had a carrying value on our Consolidated Balance Sheets of $318,555,434 and $320,482,103 as of March 31, 2023 and December 31, 2022, respectively.

Noncontrolling Interest in Operating Partnership – Certain hotel properties were acquired, in part, by the Operating Partnership through the issuance of limited partnership units of the Operating Partnership. The noncontrolling interest in the Operating Partnership is: (i) increased or decreased by the limited partners’ pro-rata share of the Operating Partnership’s net income or net loss, respectively; (ii) decreased by distributions; (iii) decreased by redemption of partnership units for the Company’s common stock; and (iv) adjusted to equal the net equity of the Operating Partnership multiplied by the limited partners’ ownership percentage immediately after each issuance of units of the Operating Partnership and/or the Company’s common stock through an adjustment to additional paid-in capital. Net income or net loss is allocated to the noncontrolling interest in the Operating Partnership based on the weighted average percentage ownership throughout the period.

Revenue Recognition – Revenue consists of amounts derived from hotel operations, including the sales of rooms, food and beverage, and other ancillary services. Room revenue is recognized over a customer’s hotel stay. Revenue from food and beverage and other ancillary services is generated when a customer chooses to purchase goods or services separately from a hotel room and revenue is recognized on these distinct goods and services at the point in time or over the time period that goods or services are provided to the customer. Some contracts for rooms or food and beverage services require an upfront deposit which is recorded as advanced deposits (or contract liabilities) shown on our consolidated balance sheets and recognized once the performance obligations are satisfied.

Certain ancillary services are provided by third parties and the Company assesses whether it is the principal or agent in these arrangements. If the Company is the agent, revenue is recognized based upon the gross commission earned from the third party. If the Company is the principal, the Company recognizes revenue based upon the gross sales price. With respect to the hotel condominium rental programs that the Company operates at the Hyde Resort and Hyde Beach House, the Company has determined that it is an agent and recognizes revenue based on its share of revenue earned under the rental agency agreement.

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Certain of the Company’s hotels have retail spaces, restaurants or other spaces which the Company leases to third parties. Lease revenue is recognized on a straight-line basis over the life of the lease and included in other operating revenues in the Company’s consolidated statements of operations.

The Company collects sales, use, occupancy and similar taxes at its hotels which are presented on a net basis on the consolidated statements of operations.

Lease Revenue – Several of our properties generate revenue from leasing commercial space adjacent to the hotel, the restaurant space within the hotel, apartment units and space on the roofs of our hotels for antennas and satellite dishes. We account for the lease income as revenue from other operating departments within the consolidated statements of operations pursuant to the terms of each lease. Lease revenue was approximately $0.3 million and $0.4 million, for the three months ended March 31, 2023 and 2022, respectively.

A schedule of minimum future lease payments receivable for the remaining nine and twelve-month periods is as follows:

For the remaining nine months ending December 31, 2023	$	644,324
December 31, 2024		837,589
December 31, 2025		1,334,430
December 31, 2026		748,994
December 31, 2027		735,964
December 31, 2028 and thereafter		9,430,066
Total	$	13,731,367

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. MHI TRS, our wholly owned taxable REIT subsidiary which leases our hotels from subsidiaries of the Operating Partnership, is subject to federal and state income taxes.

We account for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is required for deferred tax assets if, based on all available evidence, it is “more-likely-than-not” that all or a portion of the deferred tax asset will or will not be realized due to the inability to generate sufficient taxable income in certain financial statement periods. The “more-likely-than-not” analysis means the likelihood of realization is greater than 50%, that we either will or will not be able to fully utilize the deferred tax assets against future taxable income. The net amount of deferred tax assets that are recorded on the financial statements must reflect the tax benefits that are expected to be realized using these criteria. As of March 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 March 31, 2023 and December 31, 2022, deferred tax assets each totaled $0, respectively.

As of March 31, 2023 and December 31, 2022, 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 March 31, 2023, the tax years that remain subject to examination by the major tax jurisdictions to which the Company is subject generally include 2014 through 2022. In addition, as of March 31, 2023, the tax years that remain subject to examination by the major tax jurisdictions to which MHI TRS is subject, because of open NOL carryforwards, generally include 2014 through 2022.

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.

Stock-based Compensation – The Company’s 2022 Long-Term Incentive Plan (the “2022 Plan”), which the Company’s stockholders approved in April 2022, permits the grant of stock options, restricted stock, unrestricted stock and service/performance share compensation awards to its employees and directors for up to 2,000,000 shares of common stock. The Company believes that such awards better align the interests of its employees with those of its stockholders.

Under the 2022 Plan, the Company may issue a variety of service or performance-based stock awards, including nonqualified stock options. The value of the awards is charged to compensation expense on a straight-line basis over the vesting or service period based on the value of the award as determined by the Company’s stock price on the date of grant or issuance. As of March 31, 2023, 451,668 service-based stock awards have been granted.

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The Company’s 2013 Long-Term Incentive Plan (the “2013 Plan”), which the Company’s stockholders approved in April 2013, permits the grant of stock options, restricted stock, unrestricted stock and service or performance share compensation awards to its employees and directors for up to 750,000 shares of common stock. All future awards will be made under the 2022 Plan.

As of March 31, 2023, under the 2013 Plan, the Company has made cumulative service-based stock awards totaling 745,160 shares, including 700,160 unrestricted shares and 45,000 restricted shares issued to certain executives and employees and to its independent directors. All awards have vested except for 45,000 shares issued to certain employees, which will vest over the next two years. The remaining 4,840 shares have been deregistered.

Under the 2013 Plan, the Company was able to issue a variety of performance-based stock awards, including nonqualified stock options. The value of the awards is charged to compensation expense on a straight-line basis over the vesting or service period based on the value of the award as determined by the Company’s stock price on the date of grant or issuance. As of March 31, 2023, no performance-based stock awards have been granted. Total compensation cost recognized under the 2013 Plan for the three months ended March 31, 2023 and 2022 was $22,883 and $406,007, respectively.

Additionally, the Company sponsors and maintains an Employee Stock Ownership Plan (“ESOP”) and related trust for the benefit of its eligible employees. We reflect unearned ESOP shares as a reduction of stockholders’ equity. Dividends on unearned ESOP shares, when paid, are considered compensation expense. The Company recognizes compensation expense equal to the fair value of the Company’s ESOP shares during the periods in which they are committed to be released. For the three months ended March 31, 2023 and 2022, the ESOP compensation cost was $12,195 and $14,154, respectively. To the extent that the fair value of the Company’s ESOP shares differs from the cost of such shares, the differential is recognized as additional paid in capital. Because the ESOP is internally leveraged through a loan from the Company to the ESOP, the loan receivable by the Company from the ESOP is not reported as an asset nor is the debt of the ESOP shown as a liability in the consolidated financial statements.

Advertising – Advertising costs, including internet advertising, were $705,703, and $622,684 for the three months ended March 31, 2023 and 2022, respectively. Advertising costs are expensed as incurred.

Involuntary Conversion of Assets – We record gains or losses on involuntary conversions of assets due to recovered insurance proceeds to the extent the undepreciated cost of a nonmonetary asset differs from the amount of monetary proceeds received. The gain on involuntary conversion of assets, is reflected in the consolidated statements of operations.

Comprehensive Income – Comprehensive income as defined, includes all changes in equity during a period from non-owner sources. We do not have any items of comprehensive income other than net income.

Segment Information – We have determined that our business is conducted in one reportable segment: hotel ownership.

Use of Estimates – The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

New Accounting Pronouncements –In June 2016, the FASB issued ASU 2016-13, Financial Instruments -Credit Losses(Topic 326), which replaced the existing "incurred loss" approach with an "expected loss" model for financial instruments measured at amortized cost. For trade and other receivables, the forward looking "expected loss" model will generally result in the earlier recognition of allowances for losses. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments -Credit Losses, which clarified that operating lease receivables accounted for under ASC 842 are not in the scope of ASU 2016-13. With the adoption of this standard on January 1, 2023, we have determined there is no significant impact on the Company's consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the existing guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). The update provides guidance in accounting for changes in contracts, hedging relationships, and other transactions as a result of this reference rate reform. The option expedients and exceptions contained within this update, in general, only apply to contract amendments and modifications entered into prior to January 1, 2023. The provisions of this update will most likely affect our financial reporting process relating to modifications of contracts with lenders and the hedging contracts associated with each respective modified borrowing contract. In general, the provision of the update would benefit us by allowing modifications of debt contracts with lenders that fall under the guidance of ASC Topic 740 to be accounted for as a non-substantial modification and

20

not be considered debt extinguishment. As of December 31, 2022, we have not entered into any contract modification as it directly relates to reference rate reform, with the exception of a modification to the mortgages on The Whitehall in Houston, Texas, which changed the reference rate from LIBOR to the New York Prime Rate, and on Hotel Alba Tampa, Tapestry Collection in Tampa, Florida, which changed the reference rate from LIBOR to SOFR. On March 14, 2023, the Company modified the floating-rate mortgage on the DoubleTree by Hilton Philadelphia Airport to change the reference rate from 1-month LIBOR to SOFR. The Company anticipates no additional loan modifications will be required. With the adoption of this standard on January 1, 2023, we have determined there is no significant impact on the Company's consolidated financial statements.

3. Investment in Hotel Properties, Net

Investment in hotel properties, net as of March 31, 2023 and December 31, 2022 consisted of the following:

	March 31, 2023			December 31, 2022
Land and land improvements	$	61,042,514		$	60,934,859
Buildings and improvements		414,578,225			412,717,919
Right of use assets		5,083,882			5,199,845
Furniture, fixtures and equipment		51,233,242			51,292,107
		531,937,863			530,144,730
Less: accumulated depreciation and impairment		(169,037,824	)		(165,074,005	)
Investment in Hotel Properties, Net	$	362,900,039		$	365,070,725

4. Debt

Mortgage Loans, Net. As of March 31, 2023 and December 31, 2022, we had approximately $318.6 million and approximately $320.5 million of outstanding mortgage debt, respectively. The following table sets forth our mortgage debt obligations on our hotels.

	Balance Outstanding as of
	March 31,			December 31,			Prepayment	Maturity	Amortization	Interest
Property	2023			2022			Penalties	Date	Provisions	Rate
The DeSoto (1)	$	30,980,343		$	31,219,022		Yes	7/1/2026	25 years	4.25%
DoubleTree by Hilton Jacksonville    Riverfront (2)		32,247,511			32,416,570		Yes	7/11/2024	30 years	4.88%
DoubleTree by Hilton Laurel (3)		7,315,564			7,412,107		None	5/5/2023	25 years	5.25%
DoubleTree by Hilton Philadelphia Airport (4)		39,224,659			39,413,672		None	10/31/2023	30 years	LIBOR plus 2.27%
DoubleTree Resort by Hilton Hollywood    Beach (5)		52,414,063			52,724,475		(6)	10/1/2025	30 years	4.913%
Georgian Terrace (6)		40,231,417			40,492,622		(7)	6/1/2025	30 years	4.42%
Hotel Alba Tampa, Tapestry Collection by Hilton (7)		24,634,600			24,756,400		None	6/30/2025	(8)	SOFR plus 2.75%
Hotel Ballast Wilmington, Tapestry Collection by    Hilton (8)		31,467,418			31,699,775		Yes	1/1/2027	25 years	4.25%
Hyatt Centric Arlington (9)		47,269,977			47,534,606		Yes	10/1/2028	30 years	5.25%
The Whitehall (10)		14,164,141			14,226,067		None	2/26/2028	25 years	PRIME plus 1.25%
Total Mortgage Principal Balance	$	319,949,693		$	321,895,316
Deferred financing costs, net		(1,455,654	)		(1,480,779	)
Unamortized premium on loan		61,395			67,566
Total Mortgage Loans, Net	$	318,555,434		$	320,482,103

(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.
(2)	The note is subject to a pre-payment penalty until March 2024. Prepayment can be made without penalty thereafter.
(3)	On May 4, 2023, affiliates of the Company entered into loan documents to secure a $10.0 million mortgage loan on the DoubleTree by Hilton Laurel hotel located in Laurel, MD with Citi Real Estate Funding Inc. Pursuant to the loan documents, the mortgage loan: (i) has a principal balance of $10.0 million; (ii) has a maturity date of May 6, 2028; (iii) carries a fixed interest rate of 7.35%; (iv) requires payments of interest only; (v) cannot be prepaid until the last 4 months of the loan term; and (vi) contains customary representations, warranties, covenants and events of default for a mortgage loan.
(4)	The note bears a floating interest rate of 1-month LIBOR plus 2.27%, but we entered into a swap agreement to fix the rate at 5.237% through July 31, 2023. Under the swap agreement, notional amounts approximate the declining balance of the loan and we are responsible for any potential termination fees associated with early termination of the swap agreement.
(5)	With limited exception, the note may not be prepaid prior to June 2025.
(6)	With limited exception, the note may not be prepaid prior to February 2025.
(7)	The note bears a floating interest rate of SOFR plus 2.75% subject to a floor rate of 2.75%; with monthly principal payments of $40,600; the note provides that the mortgage can be extended for two additional periods of one year each, subject to certain conditions. On July 11, 2022, we entered into a swap agreement to fix the rate at 5.576%. The swap agreement reflects notional amounts approximate to the declining balance of the loan and we are responsible for any potential termination fees associated with early termination of the swap agreement.

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(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.
(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%.

The mortgage on the DoubleTree by Hilton Philadelphia Airport hotel matures in 2023 and as of March 31, 2023, the Company failed to meet certain financial covenants under that mortgage. We intend to work with the lender to receive a waiver and to amend, refinance, or extend the term of the loan prior to maturity in July 2023. On May 4, 2023, the Company refinanced the mortgage on the DoubleTree by Hilton Laurel hotel that was scheduled to mature in May 2023 as described in Note 13 below.

Total future mortgage debt maturities for the remaining nine and twelve-month periods, without respect to any extension of loan maturity or loan modification after March 31, 2023, were as follows:

For the remaining nine months ended December 31, 2023	$	51,594,623
December 31, 2024		38,069,573
December 31, 2025		116,078,656
December 31, 2026		58,588,969
December 31, 2027		1,757,220
December 31, 2028 and thereafter		53,860,652
Total future maturities	$	319,949,693

PPP Loans. The Operating Partnership and certain of its subsidiaries have received PPP Loans administered by the U.S. Small Business Administration pursuant to the CARES Act. Each PPP Loan has a term of two years, which may be extended to five years and carries an interest rate of 1.00%. Equal payments of principal and interest begin no later than 10 months following origination of the loan and are amortized over the remaining term of the loan. Pursuant to the terms of the CARES Act, the proceeds of each PPP Loan may be used for payroll costs, mortgage interest, rent or utility costs. The promissory note for each PPP Loan contains customary events of default relating to, among other things, payment defaults and breach of representations and warranties or of provisions of the relevant promissory note. Under the terms of the CARES Act, each borrower can apply for and be granted forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds in accordance with the terms of the CARES Act. No assurance is provided that any borrower will obtain forgiveness under any relevant PPP Loan in whole or in part.

On April 16, 2020, our Operating Partnership entered into a promissory note with Village Bank in connection with a PPP Loan and received proceeds of $333,500.

On April 28, 2020, we entered into a promissory note and received proceeds of $9,432,900 under a PPP Loan from Fifth Third Bank, National Association.

On May 6, 2020, we entered into a second promissory note with Fifth Third Bank, National Association and received proceeds of $952,700 under a PPP Loan.

As of March 31, 2023, applications for loan forgiveness totaling approximately $0.3 million have been filed and are still pending. At March 31, 2023, the PPP loans had a cumulative balance of approximately $2.1 million.

5. Commitments and Contingencies

Ground, Building, Parking and Land Leases – We lease 2,086 square feet of commercial space next to The DeSoto for use as an office, retail or conference space, or for any related or ancillary purposes for the hotel and/or atrium space. In December 2007, we signed an amendment to the lease to include rights to the outdoor esplanade adjacent to the leased commercial space. The areas are leased under a six-year operating lease, which expired October 31, 2006 and has been renewed for the fourth of five optional five-year renewal periods expiring October 31, 2026. Rent expense for this operating lease for the three months ended March 31, 2023 and 2022, each totaled $20,983, respectively.

We lease, as landlord, the entire fourteenth floor of The DeSoto hotel property to The Chatham Club, Inc. under a ninety-nine year lease expiring July 31, 2086. This lease was assumed upon the purchase of the building under the terms and conditions agreed to by the previous owner of the property. No rental income is recognized under the terms of this lease as the original lump sum rent payment of $990 was received by the previous owner and not prorated over the life of the lease.

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We lease land adjacent to the Hotel Alba Tampa for use as parking under a five-year renewable agreement with the Florida Department of Transportation that commenced in July 2009. In May 2014, we extended the agreement for an additional five years. We signed a new agreement in April 2019, which commenced in July 2019, goes for five years and can be renewed for an additional five years. The new agreement expires in July 2024, requires annual payments of $2,432, plus tax, and may be renewed for an additional five years. Rent expense for the three months ended March 31, 2023 and 2022, totaled $651 and $653, respectively,

We lease approximately 8,500 square feet of commercial office space in Williamsburg, Virginia under an agreement with a ten-year term beginning January 1, 2020. The initial annual rent under the agreement was $218,875, with the rent for each successive annual period increasing by 3.0% over the prior annual period’s rent. The annual rent will be offset by a tenant improvement allowance of $200,000, to be applied against one-half of each monthly rent payment until such time as the tenant improvement allowance is exhausted. Rent expense for the three months ended March 31, 2023 and 2022, each totaled $55,902, respectively.

We lease the land underlying all of the Hyatt Centric Arlington hotel pursuant to a ground lease. 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 initial term of the ground lease expires in 2025 and may be extended for five additional renewal periods of 10 years each. Rent expense for the three months ended March 31, 2023 and 2022, was $139,101 and $72,013, respectively.

We lease the parking garage and poolside cabanas associated with the Hyde Beach House. The parking and cabana lease requires us to make rental payments of $270,100 per year with increases of 5% every five years and has an initial term that expires in 2034 and which may be extended for four additional renewal periods of 5 years each. Rent expense for the three months ended March 31, 2023 and 2022, each totaled $67,750, respectively.

We also lease certain storage facilities, furniture and equipment under agreements expiring between December 2023 and June 2026.

A schedule of minimum future lease payments for the following nine and twelve-month periods is as follows:

For the remaining nine months ended December 31, 2023	$	507,069
December 31, 2024		678,300
December 31, 2025		684,672
December 31, 2026		673,413
December 31, 2027		342,503
December 31, 2028 and thereafter		13,521,694
Total	$	16,407,651

Employment Agreements - The Company has entered into various employment contracts with employees that could result in obligations to the Company in the event of a change in control or termination without cause.

Management Agreements – As of March 31, 2023, our ten wholly-owned hotels, and our two condo-hotel rental programs, operated under management agreements with Our Town (see Note 8). The management agreements expire on March 31, 2035 and may be extended for up to two additional periods of five years each, subject to the approval of both parties. Each of the individual hotel management agreements may be terminated earlier than the stated term upon the sale of the hotel covered by the respective management agreement, in which case we may incur early termination fees.

Franchise Agreements – As of March 31, 2023, seven of our hotels operate under franchise licenses from national hotel companies. Under the franchise agreements, we are required to pay a franchise fee generally between 3.0% and 5.0% of room revenues, plus additional fees for marketing, central reservation systems, and other franchisor programs and services that amount to between 3.0% and 4.0% of gross revenues from the hotels. The franchise agreements currently in force expire between October 2024 and March 2038. Each of our franchise agreements provides for early termination fees in the event the agreement is terminated before the stated term.

Restricted Cash Reserves – Each month, we are required to escrow with the lenders on the Hotel Ballast, The DeSoto, the DoubleTree by Hilton Jacksonville Riverside, the DoubleTree Resort by Hilton Hollywood Beach, the Hyatt Centric Arlington and the Georgian Terrace an amount equal to one-twelfth (1/12) of the annual real estate taxes due for the properties. Several of our lenders also required us to establish individual property improvement funds to cover the cost of replacing capital assets at our properties. Each month, those contributions equal 4.0% of gross revenues for the Hotel Ballast, The DeSoto, the DoubleTree by Hilton Jacksonville Riverside, the DoubleTree Resort by Hilton Hollywood Beach, The Whitehall and the Georgian Terrace and equal 4.0% of room

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revenues for the DoubleTree by Hilton Philadelphia Airport and the Hyatt Centric Arlington. We are also required by some lenders to have a debt service reserve that approximates the aggregate amount of one year's debt service, which was initially established at approximately $1.5 million, in 2022.

ESOP Loan Commitment – The Company’s board of directors approved the ESOP on November 29, 2016, which was adopted by the Company in December 2016 and effective January 1, 2016. The ESOP is a non-contributory defined contribution plan covering all employees of the Company. The ESOP is a leveraged ESOP, meaning funds are loaned to the ESOP from the Company. The Company entered into a loan agreement with the ESOP on December 29, 2016, pursuant to which the ESOP may borrow up to $5.0 million to purchase shares of the Company’s common stock on the open market. Under the loan agreement, the aggregate principal amount outstanding at any time may not exceed $5.0 million and the ESOP may borrow additional funds up to that limit in the future, until December 29, 2036. At March 31, 2023, the balance on the loan was approximately $2.6 million leaving capacity for additional borrowing of approximately $2.4 million under the commitment.

Litigation –We are involved in routine litigation arising out of the ordinary course of business, all of which we expect to be covered by insurance and we believe it is not reasonably possible such matters will have a material adverse impact on our financial condition or results of operations or cash flows.

6. Preferred Stock and Units

Preferred Stock - The Company is authorized to issue up to 11,000,000 shares of preferred stock. The following table sets forth our Cumulative Redeemable Perpetual Preferred Stock by series:

	Per					Number of Shares				Quarterly
	Annum			Liquidation		Issued and Outstanding as of				Distributions
Preferred Stock - Series	Rate			Preference		March 31, 2023		December 31, 2022		Per Share
Series B Preferred Stock		8.000	%	$	25.00		1,464,100		1,464,100	$	0.500000
Series C Preferred Stock		7.875	%	$	25.00		1,346,110		1,346,110	$	0.492188
Series D Preferred Stock		8.250	%	$	25.00		1,163,100		1,163,100	$	0.515625

The Company is obligated to pay cumulative cash distributions on the preferred stock at rates in the above table per annum of the $25.00 liquidation preference per share. Holders of the Company’s preferred stock are entitled to receive distributions when authorized by the Company’s board of directors out of assets legally available for the payment of distributions. The preferred stock is not redeemable by the holders, has no maturity date and is not convertible into any other security of the Company or its affiliates.

On March 15, 2023, the Company paid preferred dividends, declared in March 2020, in the amount of approximately $2.0 million. No distributions have been declared for the Company’s Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock for the three month period ending March 31, 2023.

The total undeclared and unpaid cash dividends due on the Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock through March 31, 2023, are $8,784,600, $7,950,470 and $7,196,681, respectively. Undeclared preferred cumulative dividends are reported on the statements of operations but are not considered payable until declared. As of March 31, 2023, the undeclared cumulative preferred dividends were approximately $23.9 million.

Preferred Units - The Company is the holder of the Operating Partnership’s preferred partnership units and is entitled to receive distributions when authorized by the general partner of the Operating Partnership out of assets legally available for the payment of distributions. The following table sets forth our Cumulative Redeemable Perpetual Preferred Units by series:

	Per					Number of Units				Quarterly
	Annum			Liquidation		Issued and Outstanding as of				Distributions
Preferred Units - Series	Rate			Preference		March 31, 2023		December 31, 2022		Per Unit
Series B Preferred Units		8.000	%	$	25.00		1,464,100		1,464,100	$	0.500000
Series C Preferred Units		7.875	%	$	25.00		1,346,110		1,346,110	$	0.492188
Series D Preferred Units		8.250	%	$	25.00		1,163,100		1,163,100	$	0.515625

The Operating Partnership pays cumulative cash distributions on the preferred units at rates in the above table per annum of the $25.00 liquidation preference per unit. The Company, which is the holder of the Operating Partnership’s preferred units, is entitled to receive distributions when authorized by the Operating Partnership’s general partner out of assets legally available for the payment of distributions. The preferred units are not redeemable by the holder, have no maturity date and are not convertible into any other security of the Operating Partnership or its affiliates.

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The total undeclared and unpaid cash dividends due on the Series B Preferred Units, Series C Preferred Units and Series D Preferred Units through March 31, 2023, is $8,784,600, $7,950,470 and $7,196,681, respectively. Undeclared preferred cumulative dividends are reported on the statements of operations but are not considered payable until declared. As of March 31, 2023, the undeclared cumulative preferred dividends were approximately $23.9 million.

7. Common Stock and Units

Common Stock – As of March 31, 2023, the Company was authorized to issue up to 69,000,000 shares of common stock, $0.01 par value per share. Each outstanding share of common stock entitles the holder to one vote on all matters submitted to a vote of stockholders. Holders of the Company’s common stock are entitled to receive distributions when authorized by the Company’s board of directors out of assets legally available for the payment of distributions.

The following is a schedule of issuances, since January 1, 2022, of the Company’s common stock and related partnership units of the Operating Partnership:

On January 21, 2022 and February 15, 2022, the Company was issued 175,268 partnership units in the Operating Partnership and awarded an equivalent number of shares of unrestricted stock to its employees.

On January 21, 2022, the Company was issued 15,000 partnership units in the Operating Partnership and awarded an equivalent number of shares of restricted stock to its independent directors.

On March 24, 2022, we entered into a privately-negotiated share exchange agreement. Pursuant to the share exchange agreement, the Company agreed to exchange 7,000 shares of the Company’s Series B Preferred Stock and 3,000 shares of the Company’s Series C Preferred Stock, together with all of the rights to receive accrued and unpaid dividends on those preferred shares, for 96,900 shares of the Company’s common stock. We closed the transaction and issued the common stock on March 25, 2022.

On March 31, 2022, we entered into a privately-negotiated share exchange agreement. Pursuant to the share exchange agreement, the Company agreed to exchange 5,900 shares of the Company’s Series B Preferred Stock and 6,600 shares of the Company’s Series C Preferred Stock, together with all of the rights to receive accrued and unpaid dividends on those preferred shares, for 120,875 shares of the Company’s common stock. We closed the transaction and issued the common stock on March 31, 2022.

On April 11, 2022, we entered into a privately-negotiated share exchange agreement. Pursuant to the share exchange agreement, the Company agreed to exchange 4,000 shares of the Company's Series B Preferred Stock and 8,000 shares of the Company's Series C Preferred Stock, together with all of the holder’s rights to receive accrued and unpaid dividends on those preferred shares, for 116,640 shares of the Company's common stock. We closed the transaction and issued the common stock on April 12, 2022.

On April 19, 2022, we entered into a privately-negotiated share exchange agreement. Pursuant to the share exchange agreement, the Company agreed to exchange 5,000 shares of the Company's Series B Preferred Stock and 10,600 shares of the Company's Series C Preferred Stock, together with all of the holder’s rights to receive accrued and unpaid dividends on those preferred shares, for 153,504 shares of the Company's common stock. We closed the transaction and issued the common stock on April 19, 2022.

On May 19, 2022, one holder of partnership units in the Operating Partnership converted 50,000 units for an equivalent number of shares in the Company’s common stock.

On May 23, 2022, the Company was issued 37,428 partnership units in the Operating Partnership and awarded an equivalent number of shares of unrestricted stock to its employees.

On July 1, 2022, one holder of partnership units in the Operating Partnership converted 40,687 units for an equivalent number of shares in the Company’s common stock.

On July 21, 2022, the Company was issued 167,390 partnership units in the Operating Partnership and awarded an equivalent number of shares of unrestricted stock to its employees.

On August 18, 2022, we entered into a privately-negotiated share exchange agreement. Pursuant to the share exchange agreement, the Company agreed to exchange 11,000 shares of the Company's Series B Preferred Stock, 7,100 shares of the Company's Series C Preferred Stock, and 1,900 shares of the Company's Series D Preferred Stock, together with all of the holder’s rights to

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receive accrued and unpaid dividends on those preferred shares, for 178,800 shares of the Company's common stock. We closed the transaction and issued the common stock on August 18, 2022.

On August 23, 2022, we entered into a privately-negotiated share exchange agreement. Pursuant to the share exchange agreement, the Company agreed to exchange 13,000 shares of the Company's Series B Preferred Stock and 3,200 shares of the Company's Series C Preferred Stock, together with all of the holder’s rights to receive accrued and unpaid dividends on those preferred shares, for 140,130 shares of the Company's common stock. We closed the transaction and issued the common stock on August 24, 2022.

On November 1, 2022, one holder of partnership units in the Operating Partnership converted 217,845 units for an equivalent number of shares in the Company’s common stock.

On January 12, 2023, the Company issued 15,000 restricted shares of common stock to its independent directors and 64,278 vested shares of common stock to its independent directors and one officer.

On January 23, 2023, the Company issued 205,000 restricted shares of common stock to certain its officers and employees pursuant to their employment agreements.

As of March 31, 2023 and December 31, 2022, the Company had 19,235,803 and 18,951,525 shares of common stock outstanding, respectively.

Operating Partnership Units – Holders of Operating Partnership units, other than the Company as general partner, have certain redemption rights, which enable them to cause the Operating Partnership to redeem their units in exchange for shares of the Company’s common stock on a one-for-one basis or, at the option of the Company, cash per unit equal to the average of the market price of the Company’s common stock for the 10 trading days immediately preceding the notice date of such redemption. The number of shares issuable upon exercise of the redemption rights will be adjusted upon the occurrence of stock splits, mergers, consolidations or similar pro-rata share transactions, which otherwise would have the effect of diluting the ownership interests of the limited partners or the stockholders of the Company.

Since January 1, 2022, there have been no issuances or redemptions, of partnership units in the Operating Partnership other than the issuances of partnership units in the Operating Partnership to the Company described above. In connection with the exchange agreements described in this section, an equivalent number of preferred units held by the Company were exchanged for partnership units in the Operating Partnership.

As of March 31, 2023 and December 31, 2022, the total number of Operating Partnership units outstanding was 20,060,991 and 19,776,713, respectively.

As of March 31, 2023 and December 31, 2022, the total number of outstanding Operating Partnership units not owned by the Company was 825,188 and 825,188, respectively, with a fair market value of approximately $1.6 million and $1.5 million, respectively, based on the price per share of the common stock on such respective dates.

As of March 31, 2023, there were unpaid common dividends and distributions to holders of record as of March 13, 2020, in the amount of approximately $2.1 million.

8. Related Party Transactions

Our Town Hospitality. Our Town is currently the management company for each of our ten wholly-owned hotels, as well as the manager of our rental programs at the Hyde Resort & Residences and the Hyde Beach House Resort & Residences. As of March 31, 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 63.0%, 7.0%, and 15.0%, respectively, of the total outstanding ownership interests of Our Town. Mr. Sims, Mr. Folsom, and Mr. Sims Jr. serve as directors of Our Town. The following is a summary of the transactions between Our Town and us:

Accounts Receivable – At March 31, 2023 and December 31, 2022, we were due approximately $0.3 million and $0.3 million, respectively, from Our Town.

Accounts Payable – At March 31, 2023 and December 31, 2022, we owed Our Town approximately $1.1 million and $1.3 million, respectively.

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Management Agreements – On September 6, 2019, the Company entered into a master agreement with Our Town related to the management of certain of our hotels, as amended on December 13, 2019 (as amended, the “OTH Master Agreement”). On December 13, 2019, and subsequent dates we entered into a series of individual hotel management agreements for the management of our hotels. The hotel management agreements for each of our ten wholly-owned hotels and the two rental programs are referred to as, individually an “OTH Hotel Management Agreement” and, together the “OTH Hotel Management Agreements”. The term of the OTH Hotel Management Agreements extends through March 31, 2035, and may be extended for two periods of five years each.

The OTH Master Agreement 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. The OTH Master Agreement expires on March 31, 2035 but shall be extended beyond 2035 for such additional periods as an OTH Hotel Management Agreement remains in effect. The base management fees for each hotel under management with Our Town is 2.50%. For any new individual hotel management agreements, Our Town will receive a base management fee of 2.00% of gross revenues for the first full year from the commencement date through the anniversary date, 2.25% of gross revenues the second full year, and 2.50% of gross revenues for every year thereafter.

Base management and administrative fees earned by Our Town for our properties were approximately $1.1 million and $1.0 million, for the three months ended March 31, 2023 and 2022, respectively.

Each OTH Hotel Management Agreement sets an incentive management fee equal to 10.0% of the amount by which gross operating profit, as defined in the relevant management agreement, 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. Incentive management fees earned for the three months ending March 31, 2023 and 2022, were $222,958 and $258,538, respectively.

Each OTH Hotel Management Agreement provides for the payment of a termination fee upon the sale of the hotel equal to the lesser of the management fee paid with respect to the prior twelve months or the management fees paid for the number of months prior to the closing date of the hotel sale equal to the number of months remaining on the current term of the management agreement.

Sublease – On December 13, 2019, we entered into a sublease agreement with Our Town pursuant to which Our Town subleases 2,245 square feet of office space from Sotherly for a period of 5 years, with a 5-year renewal subject to approval by Sotherly, on terms and conditions similar to the terms of the prime lease entered into by Sotherly and the third-party owner of the property. Lease payments due to the Company were $284,549 and $184,620, as of March 31, 2023 and March 31, 2022, respectively.

Employee Medical Benefits – We purchase employee medical coverage for eligible employees that are employed by Our Town and who work exclusively for our properties and elect to participate in Our Town’s self-insured plan. Gross premiums for employee medical benefits paid by the Company (before offset of employee co-payments) were approximately $0.5 million and $0.9 million for the three months ended March 31, 2023 and 2022, respectively. Additionally, Our Town's policy is to rebate 70% of our pro rata share of any annual surplus in its self-insured health plan back to the Company and retain the remaining 30%.

Others. We employed Ashley S. Kirkland, the daughter of our Chairman, as Corporate Counsel and Compliance Officer until her departure in January 2022 and continue to employ Robert E. Kirkland IV, her husband, as our General Counsel. We also employ Andrew M. Sims Jr., the son of our Chairman, as Vice President – Operations & Investor Relations. Total compensation for all three individuals, including salary and benefits, for the three months ended March 31, 2023 and 2022, totaled $186,135 and $132,699, respectively.

9. Retirement Plans

401(k) Plan - We maintain a 401(k) plan for qualified employees which is subject to “safe harbor” provisions. Those provisions include a matching employer contribution consisting of 100.0% of the first 3.0% of employee contributions and 50.0% of the next 2.0% of employee contributions. In addition, all employer matching funds vest immediately. Contributions to the plan totaled $34,009 and $23,139, for the three months ended March 31, 2023 and 2022, respectively.

Employee Stock Ownership Plan - The Company adopted an Employee Stock Ownership Plan in December 2016, effective January 1, 2016, which is a non-contributory defined contribution plan covering all employees of the Company. The Company sponsors and maintains the ESOP and related trust for the benefit of its eligible employees. The ESOP is a leveraged ESOP, meaning funds are loaned to the ESOP from the Company. The Company entered into a loan agreement with the ESOP on December 29, 2016, pursuant to which the ESOP may borrow up to $5.0 million to purchase shares of the Company’s common stock on the open market, which serve as collateral for the loan.

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Between January 3, and February 28, 2017, the Company’s ESOP had purchased 682,500 shares of the Company’s common stock in the open market at a cost of approximately $4.9 million. Shares purchased by the ESOP are held in a suspense account for allocation among participants as contributions are made to the ESOP by the Company. The share allocations will be accounted for at fair value at the date of allocation.

A total of 308,035 shares with a fair value of $614,530 remained allocated or committed to be released from the suspense account, as of March 31, 2023. We recognized as compensation cost $12,195 and $14,154, during the three months ended March 31, 2023 and 2022, respectively. The remaining 357,788 unallocated shares have an approximate fair value of $713,787, as of March 31, 2023. As of March 31, 2023, the ESOP held a total of 301,646 allocated shares, 6,389 committed-to-be-released shares and 357,788 suspense shares. Dividends on allocated and unallocated shares are used to pay down the ESOP loan from the Operating Partnership.

The share allocations are accounted for at fair value on the date of allocation as follows:

	March 31, 2023				December 31, 2022
	Number of Shares		Fair Value		Number of Shares		Fair Value
Allocated shares		301,646	$	601,784		301,646	$	545,979
Committed to be released shares		6,389		12,746		—		—
Total Allocated and Committed-to-be-Released		308,035	$	614,530		301,646	$	545,979
Unallocated shares		357,788		713,787		364,177		659,160
Total ESOP Shares		665,823	$	1,328,317		665,823	$	1,205,139

10. Indirect Hotel Operating Expenses

Indirect hotel operating expenses consists of the following expenses incurred by the hotels:

	Three Months Ended		Three Months Ended
	March 31, 2023		March 31, 2022
	(unaudited)		(unaudited)
Sales and marketing	$	4,209,770	$	3,563,962
General and administrative		3,463,800		3,240,579
Repairs and maintenance		2,219,568		2,115,327
Utilities		1,332,715		1,315,349
Property taxes		999,521		1,626,939
Management fees, including incentive		1,359,040		1,274,760
Franchise fees		1,071,519		908,035
Insurance		947,660		946,277
Information and telecommunications		922,779		929,106
Other		221,205		143,027
Total indirect hotel operating expenses	$	16,747,577	$	16,063,361

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11. Income Taxes

The components of the income tax provision for the three months ended March 31, 2023 and 2022 are as follows:

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
Current:
Federal	$	—		$	—
State		15,182			9,654
		15,182			9,654
Deferred:
Federal		(259,952	)		(506,356	)
State		131,230			77,362
Subtotals		(128,722	)		(428,994	)
Change in deferred tax valuation allowance		128,722			428,994
		—			—
	$	15,182		$	9,654

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
Statutory federal income tax provision (benefit)	$	294,566		$	(168,271	)
Federal tax impact of REIT election		(303,786	)		(252,786	)
Statutory federal income tax provision at TRS		(9,220	)		(421,057	)
Federal impact of PPP loan forgiveness		(56,470	)		—
State income tax provision (benefit), net of federal provision (benefit)		(47,850	)		1,717
Change in valuation allowance		128,722			428,994
	$	15,182		$	9,654

12. Loss Per Share and Per Unit

Loss per Share. The limited partners’ outstanding limited partnership units in the Operating Partnership (which may be redeemed for common stock upon notice from the limited partner and following our election to redeem the units for stock rather than cash) have been excluded from the diluted earnings per share calculation as there would be no effect on the amounts since the limited partners’ share of income or loss would also be added back to net income or loss. The shares of the Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock are not convertible into or exchangeable for any other property or securities of the Company, except upon the occurrence of a change of control, and have been excluded from the diluted earnings per share calculation as there would be no impact on the current controlling stockholders. The non-committed, unearned ESOP shares are treated as reducing the number of issued and outstanding common shares and similarly reducing the weighted average number of common shares outstanding. The unallocated ESOP shares have been excluded in the weighted average for the basic and diluted earnings per share computation. The computation of basic net loss per share is presented below:

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	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
Numerator
Net income (loss)	$	1,387,514		$	(810,944	)
Less: Net income allocated to participating share awards		(12,857	)		—		(1)
Net loss attributable to non-controlling interest		24,960			161,621
Undeclared distributions to preferred stockholders		(1,994,312	)		(1,936,617	)
Gain on extinguishment of preferred stock		—			78,175
Net loss attributable to common stockholders for EPS computation	$	(594,695	)	$	(2,507,765	)
Denominator
Weighted average number common shares outstanding for basic EPS computation		18,635,004			17,107,820
Basic net loss per common share:
Undistributed loss	$	(0.03	)	$	(0.15	)
Total basic	$	(0.03	)	$	(0.15	)

(1) Anti-dilutive, therefore not included.

The accounting for unvested share-based payment awards included in the calculation of earnings per share changed. Share-based awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are now participating securities and included in the computation of both basic and diluted earnings per share. Our grants of restricted stock awards to our employees and directors are considered participating securities, and we have prepared our earnings per share calculations to include outstanding unvested restricted stock awards in the basic and diluted weighted average shares outstanding calculation.

Loss Per Unit – The computation of basic net loss per unit is presented below:

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
Numerator
Net income (loss)	$	1,387,514		$	(810,944	)
Less: Net income allocated to participating unit awards		(12,857	)		—		(1)
Undeclared distributions to preferred unitholders		(1,994,312	)		(1,936,617	)
Gain on extinguishment of preferred units		—			78,175
Net loss attributable to unitholders for EPU computation	$	(619,655	)	$	(2,669,386	)
Denominator
Weighted average number of units outstanding for basic EPU computation		19,832,279			18,667,969
Basic net loss per unit:
Undistributed loss	$	(0.03	)	$	(0.14	)
Total basic	$	(0.03	)	$	(0.14	)

(1) Anti-dilutive, therefore not included.

13. Subsequent Events

On April 24, 2023, we authorized payment of a quarterly distribution of $0.50 per share (and unit) of Series B Preferred Stock (and Series B Preferred Units) to holders of the Series B Preferred Stock (and Series B Preferred Units) of record as of May 31, 2023, to be paid on June 15, 2023.

On April 24, 2023, we authorized payment of a quarterly distribution of $0.4921875 per share (and unit) of Series C Preferred Stock (and Series C Preferred Units) to holders of the Series C Preferred Stock (and Series C Preferred Units) of record as of May 31, 2023, to be paid on June 15, 2023.

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On April 24, 2023, we authorized payment of a quarterly distribution of $0.515625 per share (and unit) of Series D Preferred Stock (and Series D Preferred Units) to holders of the Series D Preferred Stock (and Series D Preferred Units) of record as of May 31, 2023, to be paid on June 15, 2023.

On April 28, 2023, one holder of partnership units in the Operating Partnership redeemed 75,000 units for an equivalent number of shares in the Company’s common stock

On May 4, 2023, affiliates of the Company entered into loan documents to secure a $10.0 million mortgage loan on the DoubleTree by Hilton Laurel hotel located in Laurel, MD with Citi Real Estate Funding Inc. Pursuant to the loan documents, the mortgage loan: (i) has a principal balance of $10.0 million; (ii) has a maturity date of May 6, 2028; (iii) carries a fixed interest rate of 7.35%; (iv) requires payments of interest only; (v) cannot be prepaid until the last 4 months of the loan term; and (vi) contains customary representations, warranties, covenants and events of default for a mortgage loan.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward Looking Statements

Information included and incorporated by reference in this Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as such may involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe our current strategies, expectations, and future plans, are generally identified by our use of words, such as “intend,” “plan,” “may,” “should,” “will,” “project,” “estimate,” “anticipate,” “believe,” “expect,” “continue,” “potential,” “opportunity,” and similar expressions, whether in the negative or affirmative, but the absence of these words does not necessarily mean that a statement is not forward-looking. All statements regarding our expected financial position, business and financing plans are forward-looking statements.

Factors which could have a material adverse effect on the Company’s future operations, performance and prospects include, but are not limited to:

•national and local economic and business conditions that affect occupancy rates and revenues at our hotels and the demand for hotel products and services;

•risks associated with the hotel industry, including competition and new supply of hotel rooms, increases in wages, energy costs and other operating costs;

•risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements, and, as necessary, to refinance or seek an extension of the maturity of such indebtedness or further modification of such debt agreements;

•risks associated with adverse weather conditions, including hurricanes;

•impacts on the travel industry from pandemic diseases, including COVID-19;

•the availability and terms of financing and capital and the general volatility of the securities markets;

•management and performance of our hotels;

•risks associated with maintaining our system of internal controls;

•risks associated with the conflicts of interest of the Company’s officers and directors;

•risks associated with redevelopment and repositioning projects, including delays and cost overruns;

•supply and demand for hotel rooms in our current and proposed market areas;

•risks associated with our ability to maintain our franchise agreements with our third party franchisors;

•our ability to acquire additional properties and the risk that potential acquisitions may not perform in accordance with expectations;

•our ability to successfully expand into new markets;

•legislative/regulatory changes, including changes to laws governing taxation of real estate investment trusts (“REITs”);

•the Company’s ability to maintain its qualification as a REIT and the limitations imposed on the Company's business due to such maintenance; and

•our ability to maintain adequate insurance coverage.

Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the results or conditions described in such statements or the objectives and plans of the Company will be achieved.

Additional factors that could cause actual results to vary from our forward-looking statements are set forth under the section titled “Risk Factors” in our Annual Report on Form 10-K.

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These risks and uncertainties should be considered in evaluating any forward-looking statement contained in this report or incorporated by reference herein. All forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this section. We undertake no obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report, except as required by law. In addition, our past results are not necessarily indicative of our future results.

Overview

Sotherly Hotels Inc. is a self-managed and self-administered lodging REIT incorporated in Maryland in August 2004 and focused on the acquisition, renovation, up-branding and repositioning of upscale to upper-upscale full-service hotels in the southern United States. Sotherly may also opportunistically acquire hotels throughout the United States. Substantially all of the assets of Sotherly Hotels Inc. are held by, and all of its operations are conducted through, Sotherly Hotels LP. We commenced operations in December 2004 when we completed our initial public offering and thereafter consummated the acquisition of the Initial Properties.

Our hotel portfolio currently consists of ten full-service, primarily upscale and upper-upscale hotels, comprising 2,786 rooms, as well as interests in two condominium hotels and their associated rental programs. The Company owns hotels that operate under well-known brands such as DoubleTree by Hilton, Tapestry Collection by Hilton, and Hyatt Centric, as well as independent hotels. We sometimes refer to our independent and soft-branded properties as our collection of boutique hotels. As of March 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		77	(2)	Hollywood, FL	January 30, 2017	Luxury(1)
Hyde Beach House Resort & Residences		82	(2)	Hollywood, FL	September 27, 2019	Luxury(1)
Total Hotel & Participating Condominium Hotel Rooms		2,945

(1)Operated as an independent hotel.

(2)Reflects only those condominium units that were participating in the rental program, as of March 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. We sometimes refer to each participating condominium unit as a “room.”

We conduct substantially all our business through our Operating Partnership. We are the sole general partner of our Operating Partnership, and we own an approximate 95.9% interest in our Operating Partnership, as of the date of this report, with the remaining interest being held by limited partners who were the contributors of our Initial Properties and related assets.

To qualify as a REIT, neither the Company nor the Operating Partnership can operate our hotels. Therefore, our wholly-owned hotel properties are leased to our MHI TRS Entities, which are indirect wholly-owned subsidiaries of the Operating Partnership. Our MHI TRS Entities then engage eligible independent hotel management companies to operate the hotels under a management

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agreement. Our MHI TRS Entities have engaged Our Town to manage our hotels. Our MHI TRS Entities, and their parent, MHI Hospitality TRS Holding, Inc., are consolidated into each of our financial statements for accounting purposes. The earnings of MHI Hospitality TRS Holding, Inc. are subject to taxation similar to other C corporations.

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. There are three key performance indicators used in the hotel industry to measure room revenues:

•Occupancy, or the number of rooms sold, usually expressed as a percentage of total rooms available;

•Average daily rate, or ADR, which is total room revenue divided by the number of rooms sold; and

•Revenue per available room, or RevPAR, which is total room revenue divided by the total number of available rooms.

RevPAR changes that are primarily driven by changes in occupancy have different implications for overall revenues and profitability than changes that are driven primarily by changes in ADR. For example, an increase in occupancy at a hotel would lead to additional variable operating costs (such as housekeeping services, laundry, utilities, room supplies, franchise fees, management fees, credit card commissions and reservations expense), but could also result in increased non-room revenue from the hotel’s restaurant, banquet or parking facilities. 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 of the additional variable operating costs associated with higher occupancy.

When calculating composite portfolio metrics, we include available rooms at the Hyde Resort & Residences and the Hyde Beach House Resort & Residences that participate in our rental programs and are not reserved for owner-occupancy.

We also use FFO, Adjusted FFO and Hotel EBITDA as measures of our operating performance. See “Non-GAAP Financial Measures.”

Results of Operations

The following tables illustrate the key operating metrics for the three months ended March 31, 2023, 2022 and 2019, respectively, for the Company’s wholly-owned properties (“actual” portfolio metrics). Accordingly, the actual data does not include the participating condominium hotel rooms of the Hyde Resort & Residences and the Hyde Beach House Resort & Residences. The ten wholly-owned properties in the portfolio that were under the Company’s control during the three months ended March 31, 2023 and the corresponding periods in 2022 and 2019 are considered same-store properties (“same-store” portfolio metrics). Accordingly, the same-store data does not reflect the performance of the Sheraton Louisville Riverside which was sold in February 2022, or the DoubleTree by Hilton Raleigh-Brownstone University which was sold in June 2022. The composite portfolio metrics represent the Company’s wholly-owned properties and the participating condominium hotel rooms at the Hyde Resort & Residences and the Hyde Beach House Resort & Residences, during the three months ended March 31, 2023 and the corresponding periods in 2022 and 2019. The same-store (composite) portfolio metrics includes all properties with the exceptions of the Sheraton Louisville Riverside, DoubleTree by Hilton Raleigh-Brownstone University and the Hyde Beach House Resort & Residences, during the three months ended March 31, 2023, and the corresponding periods in 2022 and 2019.

Given the drastic and unprecedented impact of the COVID-19 pandemic on our operating results in 2021 and 2020, we believe that a comparison of our results through the three-month periods ending March 31, 2023, to both the March 31, 2022 and March 31,

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2019 comparable periods in this overview section, allows for a better understanding of the full impact of the COVID-19 pandemic and the progress of our recovery.

	Three Months Ended			Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022			March 31, 2019
Actual Portfolio Metrics
Occupancy %		60.5	%		53.7	%		70.1	%
ADR	$	187.19		$	168.12		$	165.57
RevPAR	$	113.27		$	90.36		$	116.01
Same-Store Portfolio Metrics
Occupancy %		60.5	%		54.3	%		71.0	%
ADR	$	187.19		$	171.72		$	170.18
RevPAR	$	113.27		$	93.29		$	120.79
Composite Portfolio Metrics
Occupancy %		60.4	%		53.9	%		69.9	%
ADR	$	197.07		$	187.23		$	174.24
RevPAR	$	119.06		$	100.89		$	121.86
Same-Store (Composite) Portfolio Metrics
Occupancy %		60.5	%		54.6	%		70.8	%
ADR	$	193.03		$	182.87		$	179.55
RevPAR	$	116.80		$	99.77		$	127.08

Comparison of the Three Months Ended March 31, 2023 to the Three Months Ended March 31, 2022

Revenue. Total revenue for the three months ended March 31, 2023 increased approximately $5.1 million, or 13.4%, to approximately $43.5 million compared to total revenue of approximately $38.4 million for the three months ended March 31, 2022. There was an aggregate increase in total revenue of approximately $7.9 million from our ten wholly-owned properties, offset by decreases of approximately $0.6 million, at our Hyde Resort & Residences and at our Hyde Beach House & Resort, both in Hollywood Beach, Florida and a decrease of approximately $2.2 million as a result of the disposition of the Sheraton Louisville Riverside in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in June 2022. There were increases in leisure, small group and corporate business travel demand in the first quarter 2023 while demand in the same period in 2022 was negatively impacted by the Omicron variant of COVID-19.

Room revenue increased approximately $3.5 million, or 14.3%, to approximately $28.4 million for the three months ended March 31, 2023 compared to room revenue of approximately $24.9 million for the three months ended March 31, 2022. The increase in room revenue for the three months ended March 31, 2023 resulted from an aggregate increase of approximately $5.0 million from ten of our properties, offset by a decrease of approximately $1.5 million as a result of the sale of the Sheraton Louisville Riverside in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in June 2022. The improvement was mainly due to an increase in occupancy from 53.9% to 60.4% coupled with an increase in ADR from $187.23 to $197.07 resulting in an increase in RevPAR from $100.89 to $119.06. These improvements are mainly due to increases in leisure, small group and corporate business travel demand while demand in the same period in the prior year was negatively impacted by the Omicron variant of COVID-19.

Food and beverage revenues increased approximately $3.1 million, or 55.7%, to approximately $8.7 million for the three months ended March 31, 2023 compared to food and beverage revenues of approximately $5.6 million for the three months ended March 31, 2022. The increase in food and beverage revenues for the three months ended March 31, 2023, resulted from an aggregate increase of approximately $3.4 million from eight of our properties, offset by decreases of approximately $0.2 million, at two of our hotel properties and by the loss of food and beverage revenue of approximately $0.1 million during the quarter following the sale of the Sheraton Louisville Riverside in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in June 2022.

Revenue from other operating departments decreased approximately $1.5 million, or 19.5%, to approximately $6.3 million for the three months ended March 31, 2023 compared to revenue from other operating departments of approximately $7.8 million for the three months ended March 31, 2022. Moderate increases across our portfolio were offset by a decrease of approximately $0.6 million at our Hyde Resort and Residences and Hyde Beach House properties in Hollywood, Florida. Additionally, we received a one-time grant from the state of North Carolina of $1.0 million in the prior year period. The remainder of the decrease was the result of the disposition of the Sheraton Louisville Riverside in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in June 2022.

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 $3.0 million, or 10.7%, to approximately $31.4 million for

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the three months ended March 31, 2023, compared to total hotel operating expenses of approximately $28.4 million for the three months ended March 31, 2022. The increase in hotel operating expenses for the three months ended March 31, 2023, resulted from an aggregate increase in total hotel operating expenses of approximately $4.6 million, offset by decreases of approximately $1.6 million as a result of the sales of the Sheraton Louisville Riverside in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in June 2022. This increase in hotel operating expenses was directly related to the increase in revenue.

Rooms expense for the three months ended March 31, 2023 increased slightly by approximately 7.8%, to approximately $6.4 million, compared to rooms expense for the three months ended March 31, 2022 of approximately $5.9 million. The increase in rooms expense for the three months ended March 31, 2023, resulted from an aggregate increase of approximately $0.9 million from ten of our hotel properties, offset by a decrease of approximately $0.4 million mostly as a result of the sales of the Sheraton Louisville Riverside in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in June 2022.

Food and beverage expenses for the three months ended March 31, 2023 increased approximately $2.0 million, or 53.0%, to approximately $5.9 million, compared to food and beverage expenses of approximately $3.9 million, for the three months ended March 31, 2022. The net increase in food and beverage expenses for the three months ended March 31, 2023, resulted from an aggregate increase of approximately $2.1 million, offset by a decrease of approximately $0.1 million as a result of the sales of the Sheraton Louisville Riverside in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in June 2022. The increase was directly related to the increase in food and beverage revenue.

Expenses from other operating departments for the three months ended March 31, 2023 slightly decreased approximately $0.2 million or 6.8%, to approximately $2.3 million, compared to other operating departments expense for the three months ended March 31, 2022 of approximately $2.5 million. The decrease in other operating departments expense for the three months ended March 31, 2023, resulted from an aggregate decrease of approximately $0.3 million from seven of our properties, offset by an increase of approximately $0.1 million from seven of our properties, including the two disposed properties.

Indirect expenses at our wholly-owned properties for the three months ended March 31, 2023 increased approximately $0.7 million, or 4.3%, to approximately $16.8 million, compared to indirect expenses of approximately $16.1 million for the three months ended March 31, 2022. The increase in indirect expenses for the three months ended March 31, 2023, resulted from an aggregate increase in total indirect expenses of approximately $1.7 million, offset by a decrease of approximately $1.0 million as a result of the disposition of the Sheraton Louisville Riverside in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in June 2022.

Corporate General and Administrative. Corporate general and administrative expenses for the three months ended March 31, 2023 increased approximately $0.5 million, or 30.8%, to approximately $2.0 million compared to corporate general and administrative expenses of approximately $1.5 million, for the three months ended March 31, 2022. The increase in corporate general and administrative expenses was mainly due to increased salaries, audit, legal and other professional fees of approximately $0.5 million.

Interest Expense. Interest expense for the three months ended March 31, 2023 decreased approximately $1.6 million, or 28.0%, to approximately $4.1 million, as compared to interest expense of approximately $5.7 million, for the three months ended March 31, 2022. The decrease in interest expense for the three months ended March 31, 2023, was substantially related to decreases in the amount of corporate debt especially attributable to the sales of the Sheraton Louisville Riverside in February 2022 and the DoubleTree by Hilton Raleigh Brownstone University in June 2022 and the extinguishment of the Secured Notes in June 2022.

Unrealized (Loss)/Gain on Hedging Activities. As of March 31, 2023, the fair market value of our interest rate swap assets are approximately $0.9 million. The unrealized loss on hedging activities during the three months ended March 31, 2023, was approximately ($0.4) million and was approximately a $1.0 million gain during the three months ended March 31, 2022, the unrealized loss on hedging activities was driven by changes in expectation of short-term rates over the term of the hedging instruments.

Income Taxes. We had an income tax provision of $15,182 for the three months ended March 31, 2023 compared to an income tax provision of $9,654, for the three months ended March 31, 2022. MHI TRS realized operating losses for each of the three months ended March 31, 2023 and 2022.

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Net Income (Loss). We realized a net income for the three months ended March 31, 2023 of approximately $1.4 million, compared to a net loss of approximately $0.8 million, for the three months ended March 31, 2022, because of the operating results discussed above.

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. These measures do not represent cash generated from operating activities determined by generally accepted accounting principles (“GAAP”) or amounts available for the Company’s discretionary use and should not be considered alternative measures of net income, cash flows from operations or any other operating performance measure prescribed by GAAP.

FFO and Adjusted FFO. Industry analysts and investors use Funds from Operations (“FFO”), as a supplemental operating performance measure of an equity REIT. FFO is calculated in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). 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 conversions of assets, plus certain non-cash items such as real estate asset depreciation and amortization or impairment, stock compensation costs and after adjustment for any noncontrolling interest from unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by itself.

We consider FFO to be a useful measure of adjusted net income (loss) for reviewing comparative operating and financial performance because we believe FFO is most directly comparable to net income (loss), which remains the primary measure of performance, because by excluding gains or losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization, FFO assists in comparing the operating performance of a company’s real estate between periods or as compared to different companies. Although FFO is intended to be a REIT industry standard, other companies may not calculate FFO in the same manner as we do, and investors should not assume that FFO as reported by us is comparable to FFO as reported by other REITs.

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 derivative, 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, 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 exclude these items as we believe it allows for meaningful comparisons between periods and among other REITs and is more

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indicative than FFO of the on-going performance of our business and assets. Our calculation of adjusted FFO may be different from similar measures calculated by other REITs.

The following is a reconciliation of net income (loss) to FFO and Adjusted FFO, for the three months ended March 31, 2023 and 2022:

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
Net income (loss)	$	1,387,514		$	(810,944	)
Depreciation and amortization - real estate		4,564,625			4,550,376
Distributions to preferred stockholders		(1,994,312	)		(1,936,617	)
Gain on disposal of assets		—			(29,542	)
Gain on involuntary conversion of assets		(16,476	)		—
FFO attributable to common stockholders and unitholders		3,941,351			1,773,273
Amortization		13,686			14,696
ESOP and stock - based compensation		260,463			420,161
Unrealized loss (gain) on hedging activities		442,464			(962,263	)
Adjusted FFO attributable to common stockholders and unitholders	$	4,657,964		$	1,245,867
Weighted average number of shares outstanding, basic		18,635,004			17,107,820
Weighted average number of non-controlling units		825,188			1,133,720
Weighted average number of shares and units outstanding, basic		19,460,192			18,241,540
FFO per common share and unit	$	0.20		$	0.10
Adjusted FFO per common share and unit	$	0.24		$	0.07

EBITDA. We believe that excluding the effect of non-operating expenses and non-cash charges, and the portion of those items related to unconsolidated entities, all of which are also based on historical cost accounting and may be of limited significance in evaluating current performance, can help eliminate the accounting effects of depreciation and financing decisions and facilitate comparisons of core operating profitability between periods and between REITs, even though EBITDA also does not represent an amount that accrued directly to shareholders.

Hotel EBITDA. 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) loss on early debt extinguishment, (10) Paycheck Protection Program (PPP) debt forgiveness, (11) gain on exercise of development right, (12) corporate general and administrative expense, and (13) other operating revenue not related to our wholly-owned portfolio. We believe this provides a more complete understanding of the operating results over which our wholly-owned hotels and its operators have direct control. We believe Hotel EBITDA provides investors with supplemental information on the on-going operational performance of our hotels and the effectiveness of third-party management companies operating our business on a property-level basis.

The following is a reconciliation of net income (loss) to Hotel EBITDA for the three months ended March 31, 2023 and 2022:

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
Net income (loss)	$	1,387,514		$	(810,944	)
Interest expense		4,113,597			5,713,205
Interest income		(146,665	)		(24,448	)
Income tax provision		15,182			9,654
Depreciation and amortization		4,578,311			4,565,072
EBITDA		9,947,939			9,452,539
PPP loan forgiveness		(275,494	)		—
Gain on disposal of assets		—			(29,542	)
Gain on involuntary conversion of assets		(16,476	)		—
Subtotal		9,655,969			9,422,997
Corporate general and administrative		1,980,765			1,514,027
Unrealized loss (gain) on hedging activities		442,464			(962,263	)
Hotel EBITDA	$	12,079,198		$	9,974,761

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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 and other debt and hotel property sales. 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 March 31, 2023, we had approximately $23.4 million of unrestricted cash and $8.6 million of restricted cash.

Operating Activities. Our net cash flow provided by operating activities for the three months ended March 31, 2023 was approximately $10.0 million generally consisting of net cash flow provided by hotel operations. The positive cash flow from operations during the quarter and increase from the prior year was due to the increase in occupancy at our hotels as a result of increases in leisure transient, small group and corporate business travel. 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 three months ended March 31, 2023, was approximately $1.1 million. Of this amount approximately $1.5 million was related to capital expenditures for improvements and additions to hotel properties. There were also insurance proceeds related to involuntary conversions of approximately $0.4 million.

Financing Activities. During the three months ended March 31, 2023, the Company and Operating Partnership made principal payments on its mortgages of approximately $1.9 million, payments on its unsecured notes of approximately $0.1 million, payments on deferred financing costs of approximately $0.1 million and paid preferred dividends of approximately $2.0 million.

Capital Expenditures

We intend to maintain all our hotels, including any hotel we acquire in the future, in good repair and condition, in conformity with applicable laws and regulations and, when applicable, with franchisor’s standards. 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.

From time to time, certain of our hotel properties may undergo renovations as a result of our decision to upgrade portions of the hotel, such as guestrooms, meeting space and restaurants, in order to better compete with other hotels in our markets. 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 renovations and improvements out of working capital, including restricted cash, proceeds of mortgage debt or equity offerings.

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. In 2020, we postponed all major non-essential capital expenditures. As travel demand returned and occupancy, and RevPAR gradually increased, we increased the level of capital expenditures. We expect total capital expenditures for 2023 to be approximately $7.3 million.

We 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. Reserve accounts are escrowed accounts with funds deposited monthly and reserved for capital improvements or expenditures with respect to all of our hotels. Except as temporarily provided through loan modifications and forbearance agreements, we deposit an amount equal to 4.0% of gross revenue for The DeSoto, the Hotel Ballast Wilmington, Tapestry Collection by Hilton, the DoubleTree Resort by Hilton Hollywood Beach, the DoubleTree by Hilton Jacksonville Riverside, the DoubleTree by Hilton Laurel, The Whitehall and the Georgian Terrace as well as 4.0% of room revenues for the DoubleTree by Hilton Philadelphia Airport on a monthly basis.

Liquidity and Capital Resources

As of March 31, 2023, we had total cash of approximately $32.0 million. During the three months ended March 31, 2023, we generated cash, cash equivalents and restricted cash of approximately $4.6 million. We expect that our cash on hand combined with our cash flow from our hotels should be adequate to fund continuing operations, recurring capital expenditures for the refurbishment and replacement of furniture, fixtures and equipment, and monthly scheduled payments of principal and interest (excluding any balloon payments due upon maturity of our mortgage debt).

On May 4, 2023, we secured a $10.0 million mortgage loan on the DoubleTree by Hilton Laurel hotel with Citi Real Estate Funding Inc. Pursuant to the loan documents, the loan has a maturity date of May 6, 2028; carries a fixed rate of interest of 7.35%;

39

required monthly payments of interest only; and cannot be prepaid until the last four months of the loan term. 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.

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. We were in compliance with all loan covenants except the Debt Service Coverage Requirement (“DSCR”) covenant under the mortgage secured by the DoubleTree by Hilton Philadelphia Airport. We anticipate receiving a waiver from the lender of the mortgage on the DoubleTree by Hilton Philadelphia Airport. If we are unable to obtain a waiver, we may be required to reduce the outstanding balance with a prepayment of up to approximately $1.6 million per the terms of the loan agreement.

In October 2023, the mortgage on the DoubleTree by Hilton Philadelphia Airport matures. We intend to refinance the mortgage at the level of the existing indebtedness or request an extension at existing terms.

We intend to continue to invest in hotel properties as suitable opportunities arise. The success of our acquisition strategy depends, in part, on our ability to access additional capital through other sources, which we expect to be limited as a result of the continuing impact of the COVID-19 pandemic. There can be no assurance that we will continue to make investments in properties that meet our investment criteria or have access to capital during this period. Additionally, we may choose to dispose of certain hotels as a means to provide liquidity.

Over the long term, we expect to meet our liquidity requirements for hotel property acquisitions, property redevelopment, investments in new joint ventures and debt maturities, and the retirement of maturing mortgage debt, through net proceeds from additional issuances of common shares, additional issuances of preferred shares, issuances of units of limited partnership interest in our Operating Partnership, secured and unsecured borrowings, the selective disposition of non-core assets, and cash on hand. We remain committed to a flexible capital structure and strive to maintain prudent debt leverage.

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, general economic conditions as well as the effects of the ongoing global pandemic.

As described in “Liquidity and Capital Resources”, as of March 31, 2023, we failed to meet certain financial covenants under the mortgage secured by the DoubleTree by Hilton Philadelphia Airport. We anticipate receiving a waiver from the lender of the mortgage on the DoubleTree by Hilton Philadelphia Airport.

Certain of our loan agreements also include financial covenants that trigger a “cash trap” 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”.

Dividend Policy

In March 2020, with the onset of the COVID-19 pandemic, we announced that the record date for the dividends on the Company’s Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, originally set for March 31, 2020, with a payment date of April 15, 2020, had been indefinitely deferred. We may not make distributions with respect to any shares of our common stock, unless and until full cumulate distributions on the outstanding preferred stock for all past unpaid periods are paid or declared and a sum sufficient for the payment thereof in cash is set aside.

On January 24, 2023, we announced that we will resume quarterly distributions to holders of our preferred stock and set a record date of February 28, 2023 with a payment date of March 15, 2023 for the preferred distribution declared in January 2020.

On April 24, 2023, we announced the declaration of another quarterly distribution to holders of our preferred stock with a record date of May 31, 2023 and a payment date of June 15, 2023.

As of March 31, 2023, the amount of cumulative unpaid dividends on our outstanding preferred shares as approximately $23.9 million. We expect that any reduction in the level of cumulative unpaid distributions will be made in the form of a series of special distributions. The amount, timing and frequency of distributions will be authorized by our board of directors and based upon a variety of factors deemed relevant by the directors. No assurance can be given that the distribution policy will not change in the future.

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Off-Balance Sheet Arrangements

None.

Inflation

We generate revenues primarily from lease payments from our MHI TRS Entities and net income from the operations of our MHI TRS Entities. Therefore, we rely primarily on the performance of the individual properties and the ability of the management company to increase revenues and to keep pace with inflation. Operators of hotels, in general, possess the ability to adjust room rates daily to keep pace with inflation. However, competitive pressures at some or all of our hotels may limit the ability of the management company to raise room rates.

Our expenses, including hotel operating expenses, administrative expenses, real estate taxes and property and casualty insurance are subject to inflation. These expenses are expected to grow with the general rate of inflation, except for energy, liability insurance, property and casualty insurance, property tax rates, employee benefits, and some wages, which are expected to increase at rates that differ from the general rate of inflation.

Geographic Concentration and Seasonality

Our hotels are located in Florida, Georgia, Maryland, North Carolina, Pennsylvania, Texas and Virginia. As a result, we are particularly susceptible to adverse market conditions in these geographic areas, including industry downturns, relocation of businesses, local stay-at-home and business closure orders, and any oversupply of hotel rooms or a reduction in lodging demand. Adverse economic developments in the markets in which we have a concentration of hotels, or in any of the other markets in which we operate, or any increase in hotel supply or decrease in lodging demand resulting from the local, regional or national business climate, could materially and adversely affect us.

The operations of our hotel properties have historically been seasonal. The months of April and May are traditionally strong, as is October. 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.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liability at the date of our financial statements and the reported amounts of revenue and expenses during the reporting period. It is possible that the actual amounts may differ significantly from these estimates and assumptions. It is also possible that actual amounts may differ significantly from these estimates and assumptions. We evaluate our estimates, assumptions and judgment on an ongoing basis, based on information that is available to us, our business and industry experience, and various other matters that we believe are reasonable and appropriate for consideration under the circumstances. All of our significant accounting policies, including certain critical accounting policies, are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes in these critical accounting policies or the methods or assumptions we apply.

Recent Accounting Pronouncements

For a summary of recently adopted and newly issued accounting pronouncements, please refer to the New Accounting Pronouncements section of Note 2, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The effects of potential changes in interest rates are discussed below. Our market risk discussion includes “forward-looking statements” and represents an estimate of possible changes in fair value or future earnings that could occur assuming hypothetical future movements in 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.

To meet in part our long-term liquidity requirements, we will borrow funds at a combination of fixed and variable rates. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. From time to time we may enter into interest rate hedge contracts such as collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We do not intend to hold or issue derivative contracts for trading or speculative purposes.

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As of March 31, 2023, we had approximately $307.9 million of fixed-rate debt, including the mortgage on our Philadelphia, Pennsylvania hotel, which is fixed by an interest rate swap to 5.237%, mortgage on our Tampa, Florida hotel, which is fixed by an interest rate swap to 5.576%, and the PPP Loan of $2.1 million, with a fixed rate of 1.0% and approximately $14.2 million of variable-rate debt. The weighted-average interest rate on the fixed-rate debt was 4.84%. 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. Our variable-rate debt is exposed to changes in interest rates, specifically the changes in the Prime Rate. Assuming that the aggregate amount outstanding on the mortgage on The Whitehall remains at approximately $14.2 million, the balance at March 31, 2023, the impact on our annual interest incurred and cash flows of a one percent increase in the Prime Rate, would be approximately $0.1 million.

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. 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. Our variable-rate debt is exposed to changes in interest rates, specifically the changes in 1-month LIBOR, SOFR, and in Prime Rate. 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 4. Controls and Procedures

Sotherly Hotels Inc.

Disclosure Controls and Procedures

The Company’s management, under the supervision and participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act), as of March 31, 2023. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2023, its disclosure controls and procedures were effective and designed to ensure that (i) information required to be disclosed in its reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and instructions, and (ii) information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures or its internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of the controls can provide absolute assurance that all control issues and instances of fraud, if any, within Sotherly Hotels Inc. have been detected.

Changes in Internal Control over Financial Reporting

There was no change in Sotherly Hotels Inc.’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act during Sotherly Hotels Inc.’s last fiscal quarter that materially affected, or is reasonably likely to materially affect, Sotherly Hotels Inc.’s internal control over financial reporting.

Sotherly Hotels LP

Disclosure Controls and Procedures

The Operating Partnership’s management, under the supervision and participation of the Chief Executive Officer and Chief Financial Officer of Sotherly Hotels Inc., as general partner, has evaluated the effectiveness of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act), as of March 31, 2023. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2023, the disclosure controls and procedures were effective and designed to ensure that (i) information required to be disclosed in the reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and instructions, and (ii) information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

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The Operating Partnership’s management, including the Chief Executive Officer and Chief Financial Officer of Sotherly Hotels Inc., as general partner, does not expect that the disclosure controls and procedures or the internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of the controls can provide absolute assurance that all control issues and instances of fraud, if any, within Sotherly Hotels LP have been detected.

Changes in Internal Control over Financial Reporting

There was no change in Sotherly Hotels LP’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act during Sotherly Hotels LP’s last fiscal quarter that materially affected, or is reasonably likely to materially affect, Sotherly Hotels LP’s internal control over financial reporting.

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PART II

Item 1. Legal Proceedings

We are not involved in any material legal proceedings, nor to our knowledge, is any material litigation threatened against us. We are involved in routine legal proceedings 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 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in our annual report on Form 10-K for the year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

From time to time, the Operating Partnership issues limited partnership units to the Company, as required by the Partnership Agreement, to mirror the capital structure of the Company to reflect additional issuances by the Company and to preserve equitable ownership ratios.

Item 3. Defaults upon Senior Securities

Preferred Stock

The Company’s distribution on the shares of the Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock are in arrears for nine quarterly periods. When distributions on any shares of the Company’s Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock are in arrears for six or more quarterly periods, whether or not consecutive, the holders of the Company’s preferred stock shall be entitled to vote for the election of a total of two additional directors of the Company, at a special meeting or at the next annual meeting of stockholders and at each subsequent annual meeting of the stockholders until full cumulative distributions for all past unpaid periods are paid or declared and a sum sufficient for the payment thereof in cash is set aside. In addition, the Company may not make distributions with respect to any shares of its common stock, unless and until full cumulative distributions on the preferred stock for all past unpaid periods are paid or declared and a sum sufficient for the payment thereof in cash is set aside.

As of May 12, 2023, the Company has deferred payment and is in arrears on dividends for the Company's Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock for the periods ending June 30, 2020, September 30, 2020, December 31, 2020, March 31, 2021, June 30, 2021, September 30, 2021, December 31, 2021, March 31, 2022, June 30, 2022, September 30, 2022, December 31, 2022, March 31, 2023, and June 30, 2023. The relevant distributions were as follows:

•A regular quarterly cash dividend of $0.50 per share of beneficial interest of the Series B Preferred Stock;

•A regular quarterly cash dividend of $0.4921875 per share of beneficial interest of the Series C Preferred Stock; and

•A regular quarterly cash dividend of $0.515625 per share of beneficial interest of the Series D Preferred Stock.

The Company has declared dividends in the respective amounts shown above for each of the Series B, Series C, and Series D Preferred Stock, for the distribution period ending June 30, 2020, payable on June 15, 2023. The total arrearage of unpaid cash dividends undeclared on each of the Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock through May 12, 2023, are $8,784,600, $7,950,470, and $7,196,681, respectively.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

The following exhibits are filed as part of this Form 10-Q:

Exhibit
Number	Description of Exhibit
10.1	Amendment to Employment Agreement between Sotherly Hotels Inc. and Andrew M. Sims, dated January 23, 2023 (incorporated by reference to the document previously filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 24, 2023). *
10.2	Amendment to Employment Agreement between Sotherly Hotels Inc. and David R. Folsom, dated January 23, 2023 (incorporated by reference to the document previously filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 24, 2023). *
10.3	Amendment to Employment Agreement between Sotherly Hotels Inc. and Scott M. Kucinski, dated January 23, 2023 (incorporated by reference to the document previously filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 24, 2023). *
10.4	Amendment to Employment Agreement between Sotherly Hotels Inc. and Anthony E. Domalski, dated January 23, 2023 (incorporated by reference to the document previously filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 24, 2023). *
10.5	Second Amendment to Employment Agreement between Sotherly Hotels Inc. and Robert E. Kirkland IV, dated January 23, 2023 (incorporated by reference to the document previously filed as Exhibit 10.5 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 24, 2023). *
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13(a)-14 and 15(d)-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the Company. **
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13(a)-14 and 15(d)-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the Company. **
31.3	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13(a)-14 and 15(d)-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the Operating Partnership. **
31.4	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13(a)-14 and 15(d)-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the Operating Partnership. **
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Company. **
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Company. **
32.3	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Operating Partnership. **
32.4	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Operating Partnership. **
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document (+)
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document (+)
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document (+)
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document (+)
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document (+)
104	Cover Page Interactive Data File (embedded within the Inline XBRL document) (+)

45

* Denotes management contract and/or compensatory plan/arrangement.

** Filed herewith

(+) Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement for purposes of Section 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.

46

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SOTHERLY HOTELS INC.
Date: May 12, 2023	By:	/s/ David R. Folsom
		David R. Folsom
		President and Chief Executive Officer
	By:	/s/ Anthony E. Domalski
		Anthony E. Domalski
		Chief Financial Officer

47

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SOTHERLY HOTELS LP
	By:	SOTHERLY HOTELS INC.
		Its General Partner
Date: May 12, 2023	By:	/s/ David R. Folsom
		David R. Folsom
		President and Chief Executive Officer
	By:	/s/ Anthony E. Domalski
		Anthony E. Domalski
		Chief Financial Officer

48

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

FOR THE CHIEF EXECUTIVE OFFICER

I, David R. Folsom, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Sotherly Hotels Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2023
	By:	/s/ David R. Folsom
	Name:	David R. Folsom
	Title:	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

FOR THE CHIEF FINANCIAL OFFICER

I, Anthony E. Domalski, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Sotherly Hotels Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2023
	By:	/s/ Anthony E. Domalski
	Name:	Anthony E. Domalski
	Title:	Chief Financial Officer

EX-31.3

EXHIBIT 31.3

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

FOR THE CHIEF EXECUTIVE OFFICER

I, David R. Folsom, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Sotherly Hotels LP;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2023
	By:	/s/ David R. Folsom
	Name:	David R. Folsom
	Title:	President and Chief Executive Officer
		Sotherly Hotels, Inc., sole general partner of Sotherly Hotels LP

EX-31.4

EXHIBIT 31.4

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

FOR THE CHIEF FINANCIAL OFFICER

I, Anthony E. Domalski, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Sotherly Hotels LP;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2023
	By:	/s/ Anthony E. Domalski
	Name:	Anthony E. Domalski
	Title:	Chief Financial Officer
		Sotherly Hotels, Inc., sole general partner of Sotherly Hotels LP

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Sotherly Hotels Inc. (the “Corporation”) on Form 10-Q for the period ending March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David R. Folsom, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: May 12, 2023
	By:	/s/ David R. Folsom
	Name:	David R. Folsom
	Title:	President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Sotherly Hotels Inc. (the “Corporation”) on Form 10-Q for the period ending March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anthony E. Domalski, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: May 12, 2023
	By:	/s/ Anthony E. Domalski
	Name:	Anthony E. Domalski
	Title:	Chief Financial Officer

EX-32.3

EXHIBIT 32.3

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Sotherly Hotels LP (the “Operating Partnership”) on Form 10-Q for the period ending March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David R. Folsom, Chief Executive Officer of the Sotherly Hotels Inc., sole general partner of the Operating Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.

Date: May 12, 2023
	By:	/s/ David R. Folsom
	Name:	David R. Folsom
	Title:	President and Chief Executive Officer
		Sotherly Hotels Inc., sole general partner of Sotherly Hotels LP

EX-32.4

EXHIBIT 32.4

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Sotherly Hotels LP (the “Operating Partnership”) on Form 10-Q for the period ending March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anthony E. Domalski, Chief Financial Officer of Sotherly Hotels Inc., sole general partner of the Operating Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.

Date: May 12, 2023
	By:	/s/ Anthony E. Domalski
	Name:	Anthony E. Domalski
	Title:	Chief Financial Officer
		Sotherly Hotels, Inc., sole general partner of Sotherly Hotels LP

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2023	May 05, 2023
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2023
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Document Quarterly Report	true
Entity Registrant Name	SOTHERLY HOTELS INC.
Entity Central Index Key	0001301236
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Interactive Data Current	Yes
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false
Entity Incorporation, State or Country Code	MD
Entity File Number	001-32379
Entity Tax Identification Number	20-1531029
Entity Address, Address Line One	306 South Henry Street, Suite 100
Entity Address, City or Town	Williamsburg
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	23185
City Area Code	757
Local Phone Number	229-5648
Document Transition Report	false
Entity Common Stock, Shares Outstanding		19,310,803
Common Stock [Member]
Document Information [Line Items]
Title of each class	Common Stock, $0.01 par value
Trading Symbol	SOHO
Name of each exchange on which registered	NASDAQ
8.0% Series B Cumulative Redeemable Perpetual Preferred Stock [Member]
Document Information [Line Items]
Title of each class	8.0% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value
Trading Symbol	SOHOB
Name of each exchange on which registered	NASDAQ
7.875% Series B Cumulative Redeemable Perpetual Preferred Stock [Member]
Document Information [Line Items]
Title of each class	7.875% Series C Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value
Trading Symbol	SOHOO
Name of each exchange on which registered	NASDAQ
8.25% Series D Cumulative Redeemable Perpetual Preferred Stock [Member]
Document Information [Line Items]
Title of each class	8.25% Series D Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value
Trading Symbol	SOHON
Name of each exchange on which registered	NASDAQ
Sotherly Hotels LP [Member]
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2023
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Document Quarterly Report	true
Entity Registrant Name	SOTHERLY HOTELS LP
Entity Central Index Key	0001301236
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Interactive Data Current	Yes
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Shell Company	false
Entity Incorporation, State or Country Code	DE
Entity File Number	001-36091
Entity Tax Identification Number	20-1965427
Entity Address, Address Line One	306 South Henry Street, Suite 100
Entity Address, City or Town	Williamsburg
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	23185
City Area Code	757
Local Phone Number	229-5648
Document Transition Report	false

XML

Consolidated Balance Sheets - USD ($)	Mar. 31, 2023	Dec. 31, 2022
ASSETS
Investment in hotel properties, net	$ 362,900,039	$ 365,070,725
Cash and cash equivalents	23,429,595	21,918,680
Restricted cash	8,556,641	5,422,950
Accounts receivable, net	4,316,649	5,844,904
Prepaid expenses, inventory and other assets	8,015,602	8,311,862
TOTAL ASSETS	407,218,526	406,569,121
LIABILITIES
Mortgage loans, net	318,555,434	320,482,103
Unsecured notes, net	2,135,164	2,545,975
Accounts payable and accrued liabilities	27,738,428	25,704,835
Advance deposits	3,532,639	2,233,013
Dividends and distributions payable	2,088,160	4,082,472
TOTAL LIABILITIES	354,049,825	355,048,398
Commitments and contingencies (See Note 5)
Sotherly Hotels Inc. stockholders’ equity
Common stock, par value $0.01, 69,000,000 shares authorized, 19,235,803 shares issued and outstanding at March 31, 2023 and 18,951,525 shares issued and outstanding at December 31, 2022.	192,358	189,515
Additional paid-in capital	175,823,357	175,611,370
Unearned ESOP shares	(2,555,500)	(2,601,134)
Distributions in excess of retained earnings	(119,572,709)	(120,985,183)
Total Sotherly Hotels Inc. stockholders’ equity	53,927,239	52,254,301
Noncontrolling interest	(758,538)	(733,578)
TOTAL EQUITY	53,168,701	51,520,723
TOTAL LIABILITIES AND EQUITY	407,218,526	406,569,121
7.875% Series C Cumulative Redeemable Perpetual Preferred Stock [Member]
Sotherly Hotels Inc. stockholders’ equity
Preferred stock, $0.01 par value, 11,000,000 shares authorized:	13,461	13,461
8.25% Series D Cumulative Redeemable Perpetual Preferred Stock [Member]
Sotherly Hotels Inc. stockholders’ equity
Preferred stock, $0.01 par value, 11,000,000 shares authorized:	11,631	11,631
8.0% Series B Cumulative Redeemable Perpetual Preferred Units [Member]
Sotherly Hotels Inc. stockholders’ equity
Preferred stock, $0.01 par value, 11,000,000 shares authorized:	14,641	14,641
Sotherly Hotels LP [Member]
ASSETS
Investment in hotel properties, net	362,900,039	365,070,725
Cash and cash equivalents	23,429,595	21,918,680
Restricted cash	8,556,641	5,422,950
Accounts receivable, net	4,316,649	5,844,904
Loan receivable - affiliate	2,598,582	2,650,526
Prepaid expenses, inventory and other assets	8,015,602	8,311,862
TOTAL ASSETS	409,817,108	409,219,647
LIABILITIES
Mortgage loans, net	318,555,434	320,482,103
Unsecured notes, net	2,135,164	2,545,975
Accounts payable and accrued liabilities	27,738,428	25,704,835
Advance deposits	3,532,639	2,233,013
Dividends and distributions payable	2,088,160	4,082,472
TOTAL LIABILITIES	354,049,825	355,048,398
Commitments and contingencies (See Note 5)
PARTNERS' CAPITAL
General Partner: 200,610 units and 197,767 units issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.	(90,061)	(106,022)
Limited Partners: 19,860,381 units and 19,578,946 units issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.	(37,563,421)	(39,143,494)
TOTAL PARTNERS' CAPITAL	55,767,283	54,171,249
Sotherly Hotels Inc. stockholders’ equity
TOTAL LIABILITIES AND EQUITY	409,817,108	409,219,647
Sotherly Hotels LP [Member] | 7.875% Series C Cumulative Redeemable Perpetual Preferred Stock [Member]
PARTNERS' CAPITAL
Preferred units, 11,000,000 units authorized;	31,571,778	31,571,778
Sotherly Hotels LP [Member] | 8.25% Series D Cumulative Redeemable Perpetual Preferred Stock [Member]
PARTNERS' CAPITAL
Preferred units, 11,000,000 units authorized;	27,504,901	27,504,901
Sotherly Hotels LP [Member] | 8.0% Series B Cumulative Redeemable Perpetual Preferred Units [Member]
PARTNERS' CAPITAL
Preferred units, 11,000,000 units authorized;	$ 34,344,086	$ 34,344,086

XML

Consolidated Balance Sheets (Parenthetical) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Preferred stock, shares authorized	11,000,000	11,000,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	69,000,000	69,000,000
Common stock, shares issued	19,235,803	18,951,525
Common stock, shares outstanding	19,235,803	18,951,525
7.875% Series C Cumulative Redeemable Perpetual Preferred Stock [Member]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	11,000,000	11,000,000
Preferred stock, dividend rate percentage	7.875%	7.875%
Preferred stock, shares issued	1,346,110	1,346,110
Preferred stock, shares outstanding	1,346,110	1,346,110
Preferred stock, aggregate liquidation preference	$ 41,603,220	$ 40,940,681
8.25% Series D Cumulative Redeemable Perpetual Preferred Stock [Member]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	11,000,000	11,000,000
Preferred stock, dividend rate percentage	8.25%	8.25%
Preferred stock, shares issued	1,163,100	1,163,100
Preferred stock, shares outstanding	1,163,100	1,163,100
Preferred stock, aggregate liquidation preference	$ 36,274,181	$ 35,674,458
8.0% Series B Cumulative Redeemable Perpetual Preferred Units [Member]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	11,000,000	11,000,000
Preferred stock, dividend rate percentage	8.00%	8.00%
Preferred stock, shares issued	1,464,100	1,464,100
Preferred stock, shares outstanding	1,464,100	1,464,100
Preferred stock, aggregate liquidation preference	$ 45,387,100	$ 44,655,050
Sotherly Hotels LP [Member]
General Partner, units issued	200,610	197,767
General Partner, units outstanding	200,610	197,767
Limited Partner, units issued	19,860,381	19,578,946
Limited Partner, units outstanding	19,860,381	19,578,946
Sotherly Hotels LP [Member] | 7.875% Series C Cumulative Redeemable Perpetual Preferred Stock [Member]
Preferred units, authorized	11,000,000	11,000,000
Preferred units, dividend rate percentage	7.875%	7.875%
Preferred units, issued	1,346,110
Preferred units, outstanding	1,346,110	1,346,110
Preferred units, aggregate liquidation preference	$ 41,603,220	$ 40,940,681
Sotherly Hotels LP [Member] | 8.25% Series D Cumulative Redeemable Perpetual Preferred Stock [Member]
Preferred units, authorized	11,000,000	11,000,000
Preferred units, dividend rate percentage	8.25%	8.25%
Preferred units, issued	1,163,100	1,163,100
Preferred units, outstanding	1,163,100	1,163,100
Preferred units, aggregate liquidation preference	$ 36,274,181	$ 35,674,458
Sotherly Hotels LP [Member] | 8.0% Series B Cumulative Redeemable Perpetual Preferred Units [Member]
Preferred units, authorized	11,000,000	11,000,000
Preferred units, dividend rate percentage	8.00%	8.00%
Preferred units, issued	1,464,100	1,464,100
Preferred units, outstanding	1,464,100	1,464,100
Preferred units, aggregate liquidation preference	$ 45,387,100	$ 44,655,050

XML

Consolidated Statements of Operations - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
REVENUE
Total revenue	$ 43,491,277	$ 38,352,603
Hotel operating expenses
Total hotel operating expenses	31,412,079	28,377,842
Depreciation and amortization	4,578,311	4,565,072
Gain on disposal of assets		(29,542)
Corporate general and administrative	1,980,765	1,514,027
Total operating expenses	37,971,155	34,427,399
NET OPERATING INCOME	5,520,122	3,925,204
Other income (expense)
Interest expense	(4,113,597)	(5,713,205)
Interest income	146,665	24,448
Unrealized (loss) gain on hedging activities	(442,464)	962,263
PPP loan forgiveness	275,494
Gain on involuntary conversion of assets	16,476
Net income (loss) before income taxes	1,402,696	(801,290)
Income tax provision	(15,182)	(9,654)
Net income (loss)	1,387,514	(810,944)
Add: Net loss attributable to noncontrolling interest	24,960	161,621
Net income (loss) attributable to the Company	1,412,474	(649,323)
Undeclared distributions to preferred stockholders	(1,994,312)	(1,936,617)
Gain on extinguishment of preferred stock/ units		78,175
Net loss attributable to common stockholders	$ (581,838)	$ (2,507,765)
Net loss per share attributable to common stockholders/general and limited partner unit:
Basic	$ (0.03)	$ (0.15)
Weighted average number of common shares/general and limited partner units outstanding
Basic	18,635,004	17,107,820
Sotherly Hotels LP [Member]
REVENUE
Total revenue	$ 43,491,277	$ 38,352,603
Hotel operating expenses
Total hotel operating expenses	31,412,079	28,377,842
Depreciation and amortization	4,578,311	4,565,072
Gain on disposal of assets		(29,542)
Corporate general and administrative	1,980,765	1,514,027
Total operating expenses	37,971,155	34,427,399
NET OPERATING INCOME	5,520,122	3,925,204
Other income (expense)
Interest expense	(4,113,597)	(5,713,205)
Interest income	146,665	24,448
Unrealized (loss) gain on hedging activities	(442,464)	962,263
PPP loan forgiveness	275,494
Gain on involuntary conversion of assets	16,476
Net income (loss) before income taxes	1,402,696	(801,290)
Income tax provision	(15,182)	(9,654)
Net income (loss)	1,387,514	(810,944)
Undeclared distributions to preferred unit holders	(1,994,312)	(1,936,617)
Undeclared distributions to preferred stockholders	(1,994,312)	(1,936,617)
Gain on extinguishment of preferred stock/ units		78,175
Net loss attributable to general and limited partnership unit holders	$ (606,798)	$ (2,669,386)
Net loss per share attributable to common stockholders/general and limited partner unit:
Basic	$ (0.03)	$ (0.14)
Weighted average number of common shares/general and limited partner units outstanding
Basic	19,832,279	18,667,969
Rooms Department [Member]
REVENUE
Total revenue	$ 28,401,688	$ 24,853,385
Hotel operating expenses
Total hotel operating expenses	6,413,094	5,949,757
Rooms Department [Member] | Sotherly Hotels LP [Member]
REVENUE
Total revenue	28,401,688	24,853,385
Hotel operating expenses
Total hotel operating expenses	6,413,094	5,949,757
Food and Beverage Department [Member]
REVENUE
Total revenue	8,748,726	5,617,736
Hotel operating expenses
Total hotel operating expenses	5,935,560	3,880,617
Food and Beverage Department [Member] | Sotherly Hotels LP [Member]
REVENUE
Total revenue	8,748,726	5,617,736
Hotel operating expenses
Total hotel operating expenses	5,935,560	3,880,617
Other Operating Departments [Member]
REVENUE
Total revenue	6,340,863	7,881,482
Hotel operating expenses
Total hotel operating expenses	2,315,848	2,484,107
Other Operating Departments [Member] | Sotherly Hotels LP [Member]
REVENUE
Total revenue	6,340,863	7,881,482
Hotel operating expenses
Total hotel operating expenses	2,315,848	2,484,107
Indirect [Member]
Hotel operating expenses
Total hotel operating expenses	16,747,577	16,063,361
Indirect [Member] | Sotherly Hotels LP [Member]
Hotel operating expenses
Total hotel operating expenses	$ 16,747,577	$ 16,063,361

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Consolidated Statements of Changes in Equity - USD ($)	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-In Capital [Member]	Unearned ESOP Shares [Member]	Distributions in Excess of Retained Earnings [Member]	Noncontrolling Interest [Member]
Balances, beginning at Dec. 31, 2021		$ 40,596	$ 174,410	$ 177,651,954	$ (3,083,398)	$ (153,521,704)	$ (4,758,928)
Balances, shares, beginning at Dec. 31, 2021	16,502,930	4,059,610	17,441,058
Net income (loss)	$ (810,944)					(649,323)	(161,621)
Issuance of common stock	$ 357,512		$ 1,752	355,760
Issuance of common stock, shares			175,268
Issuance of restricted common stock awards			$ 151	30,149
Issuance of restricted common stock awards, shares	30,300		15,000
Amortization of ESOP shares	$ 14,156			(36,391)	50,547
Amortization of restricted stock awards	$ 18,195			18,195
Extinguishment of preferred stock		$ (225)	$ 2,178	9,222
Extinguishment of preferred stock, shares	11,175	(22,500)	217,775
Balances, ending at Mar. 31, 2022		$ 40,371	$ 178,491	178,028,889	(3,032,851)	(154,171,027)	(4,920,549)
Balances, shares, ending at Mar. 31, 2022	16,123,324	4,037,110	17,849,101
Balances, beginning at Dec. 31, 2022	$ 51,520,723	$ 39,733	$ 189,515	175,611,370	(2,601,134)	(120,985,183)	(733,578)
Balances, shares, beginning at Dec. 31, 2022		3,973,310	18,951,525
Net income (loss)	1,387,514					1,412,474	(24,960)
Issuance of common stock	121,485		$ 643	120,842
Issuance of common stock, shares			64,278
Issuance of restricted common stock awards	103,901		$ 2,200	101,701
Issuance of restricted common stock awards, shares			220,000
Amortization of ESOP shares	12,195			(33,439)	45,634
Amortization of restricted stock awards	22,883			22,883
Balances, ending at Mar. 31, 2023	$ 53,168,701	$ 39,733	$ 192,358	$ 175,823,357	$ (2,555,500)	$ (119,572,709)	$ (758,538)
Balances, shares, ending at Mar. 31, 2023		3,973,310	19,235,803

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Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash flows from operating activities:
Net income (loss)	$ 1,387,514	$ (810,944)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	4,578,311	4,565,072
Amortization of deferred financing costs	157,434	461,537
Amortization of mortgage premium	(6,170)	(6,170)
Gain on involuntary conversion of assets	(16,476)
Unrealized (gain) loss on hedging activities	442,464	(962,263)
PPP loan forgiveness	(275,494)
Gain on disposal of assets		(30,722)
ESOP and stock / unit - based compensation	260,463	420,161
Changes in assets and liabilities:
Accounts receivable	1,119,628	862,972
Prepaid expenses, inventory and other assets	259,438	(320,020)
Accounts payable and other accrued liabilities	761,332	2,984,566
Advance deposits	1,299,626	289,692
Net cash provided by operating activities	9,968,070	7,453,881
Cash flows from investing activities:
Proceeds from sale of hotel properties		11,063,952
Improvements and additions to hotel properties	(1,533,821)	(1,123,798)
Proceeds from involuntary conversion	425,104
Proceeds from sale of assets		35,000
Net cash provided by (used in) investing activities	(1,108,717)	9,975,154
Cash flows from financing activities:
Payments on mortgage loans	(1,945,624)	(12,685,793)
Payments on unsecured notes	(142,502)
Payments of deferred financing costs	(132,309)
Preferred dividends paid	(1,994,312)
Net cash used in financing activities	(4,214,747)	(12,685,793)
Net increase in cash, cash equivalents and restricted cash	4,644,606	4,743,242
Cash, cash equivalents and restricted cash at the beginning of the period	27,341,630	25,578,537
Cash, cash equivalents and restricted cash at the end of the period	31,986,236	30,321,779
Supplemental disclosures:
Cash paid during the period for interest	4,042,426	4,049,577
Non-cash investing and financing activities:
Change in amount of improvements to hotel property in accounts payable and accrued liabilities	858,120	(163,699)
Sotherly Hotels LP [Member]
Cash flows from operating activities:
Net income (loss)	1,387,514	(810,944)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	4,578,311	4,565,072
Amortization of deferred financing costs	157,434	461,537
Amortization of mortgage premium	(6,170)	(6,170)
Gain on involuntary conversion of assets	(16,476)
Unrealized (gain) loss on hedging activities	442,464	(962,263)
PPP loan forgiveness	(275,494)
Gain on disposal of assets		(30,722)
ESOP and stock / unit - based compensation	208,519	363,615
Changes in assets and liabilities:
Accounts receivable	1,119,628	862,972
Prepaid expenses, inventory and other assets	259,438	(320,020)
Accounts payable and other accrued liabilities	761,332	2,984,566
Advance deposits	1,299,626	289,692
Net cash provided by operating activities	9,916,126	7,397,335
Cash flows from investing activities:
Proceeds from sale of hotel properties		11,063,952
Improvements and additions to hotel properties	(1,533,821)	(1,123,798)
ESOP loan payments received	51,944	56,546
Proceeds from involuntary conversion	425,104
Proceeds from sale of assets		35,000
Net cash provided by (used in) investing activities	(1,056,773)	10,031,700
Cash flows from financing activities:
Payments on mortgage loans	(1,945,624)	(12,685,793)
Payments on unsecured notes	(142,502)
Payments of deferred financing costs	(132,309)
Preferred dividends paid	(1,994,312)
Net cash used in financing activities	(4,214,747)	(12,685,793)
Net increase in cash, cash equivalents and restricted cash	4,644,606	4,743,242
Cash, cash equivalents and restricted cash at the end of the period	31,986,236	30,321,779
Supplemental disclosures:
Cash paid during the period for interest	4,113,442	4,029,710
Non-cash investing and financing activities:
Change in amount of improvements to hotel property in accounts payable and accrued liabilities	$ 858,120	$ (163,699)

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Consolidated Statements of Changes in Partners' Capital - USD ($)	Total	Sotherly Hotels LP [Member]	Sotherly Hotels LP [Member] General Partner [Member]	Sotherly Hotels LP [Member] Limited Partner [Member]	Sotherly Hotels LP [Member] Preferred Units [Member]	Sotherly Hotels LP [Member] Preferred Units [Member] Series B Preferred Units [Member]	Sotherly Hotels LP [Member] Preferred Units [Member] Series C Preferred Units [Member]	Sotherly Hotels LP [Member] Preferred Units [Member] Series D Preferred Units [Member]
Balances, beginning at Dec. 31, 2021		$ 19,660,102	$ (469,805)	$ (75,315,469)		$ 35,420,784	$ 32,474,760	$ 27,549,832
Balances, units, beginning at Dec. 31, 2021			185,748	18,389,030	4,059,610
Amortization of restricted unit awards	$ 18,195	18,195	$ 182	$ 18,013
Unit based compensation		345,421	$ 2,227	$ 343,194
Unit based compensation, number of units			1,903	188,365
Extinguishment of preferred units		11,177	$ 5,389	$ 533,548		(302,602)	(225,159)
Extinguishment of preferred units, shares	11,175		2,178	215,597	(22,500)
Net income (loss)	$ (810,944)	(810,944)	$ (8,109)	$ (802,835)
Balances, ending at Mar. 31, 2022		19,223,950	$ (470,116)	$ (75,223,549)		35,118,182	32,249,601	27,549,832
Balances, units, ending at Mar. 31, 2022			189,829	18,792,992	4,037,110
Balances, beginning at Dec. 31, 2022		54,171,249	$ (106,022)	$ (39,143,494)		34,344,086	31,571,778	$ 3,973,310
Balances, units, beginning at Dec. 31, 2022			197,767	19,578,946				27,504,901
Amortization of restricted unit awards	22,883	22,883	$ 229	$ 22,654
Unit based compensation		185,637	$ 1,857	$ 183,780
Unit based compensation, number of units			2,843	281,435
Net income (loss)	$ 1,387,514	1,387,514	$ 13,875	$ 1,373,639
Balances, ending at Mar. 31, 2023		$ 55,767,283	$ (90,061)	$ (37,563,421)		$ 34,344,086	$ 31,571,778	$ 3,973,310
Balances, units, ending at Mar. 31, 2023			200,610	19,860,381				27,504,901

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Organization and Description of Business

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Organization and Description of Business

1. Organization and Description of Business

Sotherly Hotels Inc. (the “Company”) is a self-managed and self-administered lodging real estate investment trust (“REIT”) that was incorporated in Maryland on August 20, 2004. The Company historically has focused on the acquisition, renovation, upbranding and repositioning of upscale to upper-upscale full-service hotels in the southern United States. The Company’s portfolio, as of March 31, 2023, consisted of investments in ten hotel properties, comprising 2,786 rooms and two hotel commercial condominium units and their associated rental programs. Seven of our hotels operated under the Hilton, DoubleTree, and Hyatt brands, and three are independent hotels.

The Company commenced operations on December 21, 2004 when it completed its initial public offering and thereafter consummated the acquisition of six hotel properties (the “Initial Properties”). Substantially all of the Company’s assets are held by, and all of its operations are conducted through, Sotherly Hotels LP (the “Operating Partnership”).

Pursuant to the terms of the Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”) of the Operating Partnership, the Company, as general partner, is not entitled to compensation for its services to the Operating Partnership. The Company, as general partner, conducts substantially all of its operations through the Operating Partnership and the Company’s administrative expenses are the obligations of the Operating Partnership. Additionally, the Company is entitled to reimbursement for any expenditure incurred by it on the Operating Partnership’s behalf.

For the Company to qualify as a REIT, it cannot operate hotels. Therefore, the Operating Partnership, which at March 31, 2023 was approximately 95.9% owned by the Company, and its subsidiaries, lease its hotels to direct and indirect subsidiaries of MHI Hospitality TRS Holding, Inc., MHI Hospitality TRS, LLC and certain of its subsidiaries (collectively, “MHI TRS Entities”), each of which is a wholly-owned subsidiary of the Operating Partnership. The MHI TRS Entities have engaged Our Town Hospitality, LLC (“Our Town”), an eligible independent management company, to operate the hotels under management contracts. MHI Hospitality TRS Holding, Inc. (“MHI TRS”) is treated as a taxable REIT subsidiary for federal income tax purposes.

All references in these “Notes to Consolidated Financial Statements” to “we”, “us”, “our” and “Sotherly” refer to the Company, its Operating Partnership and its subsidiaries and predecessors, collectively, unless the context otherwise requires or where otherwise indicated.

Overview of Significant Transactions

Significant transactions occurring during the current period and prior fiscal year include the following:

On February 10, 2022, Louisville Hotel Associates, LLC, a Delaware limited liability company and an affiliate of the Company, closed on the sale of the Sheraton Louisville Riverside hotel located in Jeffersonville, Indiana to Riverside Hotel, LLC, an Indiana limited liability company, for a purchase price of $11.5 million, including the assumption by the buyer of the mortgage loan on the hotel.

On June 10, 2022, we closed the sale of the DoubleTree by Hilton Raleigh-Brownstone University hotel. The Company used approximately $18.6 million of the net cash proceeds from the sale of the hotel to repay the existing mortgage on the property and approximately $19.8 million of the net cash proceeds to repay a portion of the secured notes (the “Secured Notes”) with KWHP SOHO, LLC and MIG SOHO, LLC (together, the “Investors”) as required by the terms of the Secured Notes. The Company used the remaining net cash proceeds for general corporate purposes. The Investors received approximately $19.8 million of the proceeds from the sale of the hotel, of which approximately $13.3 million was applied toward principal, approximately $6.3 million was applied toward the exit fee owed under the Secured Notes, and approximately $0.2 million was applied toward accrued interest. Additionally, the terms of the Secured Notes allowed for the release of a portion of the interest reserves in the amount of approximately $1.6 million, of which approximately $1.1 million was applied toward principal and approximately $0.5 million was applied toward the exit fee.

On June 28, 2022, affiliates of the Company entered into amended loan documents to modify the existing mortgage loan on the Hotel Alba Tampa with the existing lender, Fifth Third Bank. Pursuant to the amended loan documents, the amended mortgage loan: (i) has an increased principal balance of $25.0 million; (ii) includes an extended maturity date of June 30, 2025, which may be further extended for two additional periods of one year each, subject to certain conditions; (iii) bears a floating interest rate of SOFR plus 2.75%, subject to a floor rate of 2.75%; (iv) amortizes on a 25-year schedule and requires payments of monthly interest plus $40,600

monthly amortization payments; and (v) is guaranteed by the Operating Partnership up to $12.5 million, with the guaranty reducing to $6.25 million upon the successful achievement of certain performance milestones.

On June 29, 2022, the Company used the proceeds from the refinance of the Hotel Alba Tampa, along with approximately $0.2 million of cash on hand as well as the balance of the interest reserve under the Secured Notes of approximately $0.5 million, to satisfy and pay in full the Secured Notes. The Investors received approximately $8.3 million in satisfaction of the Secured Notes, of which approximately $5.6 million was applied toward principal, approximately $2.6 million was applied toward the exit fee owed under the Secured Notes, and approximately $0.02 million was applied toward accrued interest. Concurrent with the cancellation of the Secured Notes, the following agreements were also terminated in accordance with their terms: (i) Note Purchase Agreement; (ii) Pledge and Security Agreement; (iii) Board Observer Agreement; and (iv) other related ancillary agreements.

From March 24, 2022 through August 24, 2022, the Company entered into various privately-negotiated share exchange agreements with holders of its Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, in reliance on Section 3(a)(9) of the Securities Act. Pursuant to those share exchange agreements, the Company has exchanged an aggregate of 806,849 shares of its common stock for 45,900 shares of the Series B Preferred Stock, 38,500 shares of the Series C Preferred Stock, and 1,900 shares of the Series D Preferred Stock, together with all of the holder’s rights to receive accrued and unpaid dividends on those shares of Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock. The common stock was issued in reliance on the exemption from registration set forth in Section 3(a)(9) of the Securities Act, as amended, for securities exchanged by an issuer with an existing security holder in a transaction where no commission or other remuneration was be paid or given directly or indirectly for soliciting such an exchange.

On February 26, 2023, the Company entered into amended loan documents to modify the mortgage loan on The Whitehall hotel located in Houston, TX with the lender, International Bank of Commerce. The amendment (i) extends the maturity date to February 26, 2028; (ii) maintains a floating interest rate of New York Prime Rate plus 1.25%; and (iii) subjects the interest rate to a floor rate of 7.50%. The mortgage loan continues to be guaranteed by the Operating Partnership. The amendment also required us to establish a real estate tax reserve as well as a debt service reserve that approximates the aggregate amount of one year's debt service, which was initially established at approximately $1.5 million.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation – The consolidated financial statements of the Company presented herein include all of the accounts of Sotherly Hotels Inc., the Operating Partnership, MHI TRS and subsidiaries. All significant inter-company balances and transactions have been eliminated. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The consolidated financial statements of the Operating Partnership presented herein include all of the accounts of Sotherly Hotels LP, MHI TRS and subsidiaries. All significant inter-company balances and transactions have been eliminated. Additionally, all administrative expenses of the Company and those expenditures made by the Company on behalf of the Operating Partnership are reflected as the administrative expenses, expenditures and obligations thereto of the Operating Partnership, pursuant to the terms of the Partnership Agreement.

Variable Interest Entities – The Operating Partnership is a variable interest entity. The Company’s only significant asset is its investment in the Operating Partnership, and consequently, substantially all of the Company’s assets and liabilities represent those assets and liabilities of the Operating Partnership and its subsidiaries. All of the Company’s debt is an obligation of the Operating Partnership and its subsidiaries.

Investment in Hotel Properties – Investments in hotel properties include investments in operating properties which are recorded at fair value on acquisition date and allocated to land, property and equipment and identifiable intangible assets. If substantially all the fair value of the gross assets acquired are concentrated in a single identifiable asset, the asset is not considered a business. When we conclude that an acquisition meets this threshold, acquisition costs will be capitalized as part of our allocation of the purchase price of the acquired asset. We capitalize the costs of significant additions and improvements that materially upgrade, increase the value of or extend the useful life of the property. These costs may include refurbishment, renovation, and remodeling expenditures, as well as certain direct internal costs related to construction projects. Upon the sale or retirement of a fixed asset, the cost and related accumulated depreciation are removed from our accounts and any resulting gain or loss is included in the statements of operations.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 7 to 39 years for buildings and building improvements and 3 to 10 years for furniture, fixtures and equipment. Leasehold improvements are amortized over the shorter of the lease term or the useful lives of the related assets.

The Company assesses the carrying values of its investments in hotel properties whenever events or changes in circumstances indicate that the carrying value of the hotel properties may not be recoverable. Events or circumstances that may cause a review include, but are not limited to, adverse permanent changes in the demand for lodging at the properties due to declining national or local economic conditions and/or new hotel construction in markets where the hotels are located. When such conditions exist, management performs an analysis to determine if the estimated undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel property exceeds its carrying value. If the estimated undiscounted future cash flows are found to be less than the carrying amount of the asset, an adjustment to reduce the carrying amount to the related hotel property’s estimated fair market value would be recorded and an impairment loss recognized.

The Company recognized no impairment losses for the three months ended March 31, 2023 or 2022.

Cash and Cash Equivalents – We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Restricted Cash – Restricted cash includes real estate tax escrows, insurance escrows, mortgage servicing and reserves for replacements of furniture, fixtures and equipment pursuant to certain requirements in our various mortgage agreements.

	As of		As of
	March 31, 2023		March 31, 2022
Cash and cash equivalents	$	23,429,595	$	20,184,327
Restricted cash		8,556,641		10,137,452
Cash, cash equivalents and restricted cash at the end of the period	$	31,986,236	$	30,321,779

Concentration of Credit Risk – We hold cash accounts at several institutions in excess of the Federal Deposit Insurance Corporation (the “FDIC”) protection limits of $250,000. Our exposure to credit loss in the event of the failure of these institutions is represented by the difference between the FDIC protection limit and the total amounts on deposit. Management monitors, on a regular basis, the financial condition of the financial institutions along with the balances there on deposit to minimize our potential risk.

Accounts Receivable – Accounts receivable consists primarily of hotel guest and banqueting receivables. With ongoing evaluations of our trade receivables, credit customer's risk assessment and limiting credit to only a few larger companies or organizations, our potential for expected credit losses is insignificant. Our revenue is mainly based on cash or credit card sales as of the date of service, with limited trade receivables. An allowance for potential credit losses is provided against the portion of accounts receivable that is estimated to be uncollectible.

Inventories – Inventories, consisting primarily of food and beverages, are stated at the lower of cost or net realizable value, with cost determined on a method that approximates first-in, first-out basis.

Franchise License Fees – Fees expended to obtain or renew a franchise license are amortized over the life of the license or renewal. The unamortized franchise fees as of March 31, 2023 and December 31, 2022 were $229,164 and $241,038, respectively. Amortization expense for the three-month periods ended March 31, 2023 and 2022, totaled $11,874 and $12,007, respectively.

Deferred Financing Costs – Deferred financing costs are recorded at cost and consist of loan fees and other costs incurred in issuing debt and are reflected in mortgage loans, net and unsecured notes, net on the consolidated balance sheets. Deferred offering costs are recorded at cost and consist of offering fees and other costs incurred in advance of issuing equity and are reflected in prepaid expenses, inventory and other assets on the consolidated balance sheets. Amortization of deferred financing costs is computed using a method that approximates the effective interest method over the term of the related debt and is included in interest expense in the consolidated statements of operations.

Derivative Instruments – Our derivative instruments are reflected as assets or liabilities on the consolidated balance sheets and measured at fair value. Derivative instruments used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as an interest rate risk, are considered fair value hedges. Derivative instruments used to hedge exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For a derivative instrument designated as a cash flow hedge, the change in fair value each period is reported in accumulated other comprehensive income in stockholders’ equity and partners’ capital to the extent the hedge is effective. For a derivative instrument designated as a fair value hedge, the change in fair value each period is reported in earnings along with the change in fair value of the hedged item attributable to the risk being hedged. For a derivative instrument that does not qualify for hedge accounting or is not designated as a hedge, the change in fair value each period is reported in earnings.

We use derivative instruments to add stability to interest expense and to manage our exposure to interest-rate movements. To accomplish this objective, we currently use interest rate swaps which act as cash flow hedges and are not designated as hedges. We

value our interest rate swaps at fair value, which we define as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We do not enter into contracts to purchase or sell derivative instruments for speculative trading purposes.

Fair Value Measurements –

We classify the inputs used to measure fair value into the following hierarchy:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2	Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
Level 3	Unobservable inputs for the asset or liability.

We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table represents our assets and liabilities measured at fair value and the basis for that measurement (our interest rate swaps are the only assets or liabilities measured at fair value on a recurring basis, there were no non-recurring assets or liabilities for fair value measurements as of March 31, 2023 and December 31, 2022, respectively):

	Level 1		Level 2			Level 3
December 31, 2022
Interest rate swaps (1)	$	—	$	1,308,503		$	—
Mortgage loans (2)	$	—	$	(306,300,855	)	$	—
March 31, 2023
Interest rate swaps (1)	$	—	$	886,381		$	—
Mortgage loans (2)	$	—	$	(305,519,476	)	$	—

(1)Interest rate swaps, one of which swaps the Loan Rate for a fixed interest rate of 5.237% for the DoubleTree by Hilton Philadelphia Airport mortgage and is valued at March 31, 2023 and December 31, 2022, and the other which swaps the Loan Rate for a fixed rate of 5.576% for the Hotel Alba Tampa mortgage and is valued only at March 31, 2023 and December 31, 2022. Notional amounts of the swaps approximate the declining balance of the loan.

(2)Mortgage loans had a carrying value on our Consolidated Balance Sheets of $318,555,434 and $320,482,103 as of March 31, 2023 and December 31, 2022, respectively.

Noncontrolling Interest in Operating Partnership – Certain hotel properties were acquired, in part, by the Operating Partnership through the issuance of limited partnership units of the Operating Partnership. The noncontrolling interest in the Operating Partnership is: (i) increased or decreased by the limited partners’ pro-rata share of the Operating Partnership’s net income or net loss, respectively; (ii) decreased by distributions; (iii) decreased by redemption of partnership units for the Company’s common stock; and (iv) adjusted to equal the net equity of the Operating Partnership multiplied by the limited partners’ ownership percentage immediately after each issuance of units of the Operating Partnership and/or the Company’s common stock through an adjustment to additional paid-in capital. Net income or net loss is allocated to the noncontrolling interest in the Operating Partnership based on the weighted average percentage ownership throughout the period.

Revenue Recognition – Revenue consists of amounts derived from hotel operations, including the sales of rooms, food and beverage, and other ancillary services. Room revenue is recognized over a customer’s hotel stay. Revenue from food and beverage and other ancillary services is generated when a customer chooses to purchase goods or services separately from a hotel room and revenue is recognized on these distinct goods and services at the point in time or over the time period that goods or services are provided to the customer. Some contracts for rooms or food and beverage services require an upfront deposit which is recorded as advanced deposits (or contract liabilities) shown on our consolidated balance sheets and recognized once the performance obligations are satisfied.

Certain ancillary services are provided by third parties and the Company assesses whether it is the principal or agent in these arrangements. If the Company is the agent, revenue is recognized based upon the gross commission earned from the third party. If the Company is the principal, the Company recognizes revenue based upon the gross sales price. With respect to the hotel condominium rental programs that the Company operates at the Hyde Resort and Hyde Beach House, the Company has determined that it is an agent and recognizes revenue based on its share of revenue earned under the rental agency agreement.

Certain of the Company’s hotels have retail spaces, restaurants or other spaces which the Company leases to third parties. Lease revenue is recognized on a straight-line basis over the life of the lease and included in other operating revenues in the Company’s consolidated statements of operations.

The Company collects sales, use, occupancy and similar taxes at its hotels which are presented on a net basis on the consolidated statements of operations.

Lease Revenue – Several of our properties generate revenue from leasing commercial space adjacent to the hotel, the restaurant space within the hotel, apartment units and space on the roofs of our hotels for antennas and satellite dishes. We account for the lease income as revenue from other operating departments within the consolidated statements of operations pursuant to the terms of each lease. Lease revenue was approximately $0.3 million and $0.4 million, for the three months ended March 31, 2023 and 2022, respectively.

A schedule of minimum future lease payments receivable for the remaining nine and twelve-month periods is as follows:

For the remaining nine months ending December 31, 2023	$	644,324
December 31, 2024		837,589
December 31, 2025		1,334,430
December 31, 2026		748,994
December 31, 2027		735,964
December 31, 2028 and thereafter		9,430,066
Total	$	13,731,367

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. MHI TRS, our wholly owned taxable REIT subsidiary which leases our hotels from subsidiaries of the Operating Partnership, is subject to federal and state income taxes.

We account for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is required for deferred tax assets if, based on all available evidence, it is “more-likely-than-not” that all or a portion of the deferred tax asset will or will not be realized due to the inability to generate sufficient taxable income in certain financial statement periods. The “more-likely-than-not” analysis means the likelihood of realization is greater than 50%, that we either will or will not be able to fully utilize the deferred tax assets against future taxable income. The net amount of deferred tax assets that are recorded on the financial statements must reflect the tax benefits that are expected to be realized using these criteria. As of March 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 March 31, 2023 and December 31, 2022, deferred tax assets each totaled $0, respectively.

As of March 31, 2023 and December 31, 2022, 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 March 31, 2023, the tax years that remain subject to examination by the major tax jurisdictions to which the Company is subject generally include 2014 through 2022. In addition, as of March 31, 2023, the tax years that remain subject to examination by the major tax jurisdictions to which MHI TRS is subject, because of open NOL carryforwards, generally include 2014 through 2022.

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.

Stock-based Compensation – The Company’s 2022 Long-Term Incentive Plan (the “2022 Plan”), which the Company’s stockholders approved in April 2022, permits the grant of stock options, restricted stock, unrestricted stock and service/performance share compensation awards to its employees and directors for up to 2,000,000 shares of common stock. The Company believes that such awards better align the interests of its employees with those of its stockholders.

Under the 2022 Plan, the Company may issue a variety of service or performance-based stock awards, including nonqualified stock options. The value of the awards is charged to compensation expense on a straight-line basis over the vesting or service period based on the value of the award as determined by the Company’s stock price on the date of grant or issuance. As of March 31, 2023, 451,668 service-based stock awards have been granted.

The Company’s 2013 Long-Term Incentive Plan (the “2013 Plan”), which the Company’s stockholders approved in April 2013, permits the grant of stock options, restricted stock, unrestricted stock and service or performance share compensation awards to its employees and directors for up to 750,000 shares of common stock. All future awards will be made under the 2022 Plan.

As of March 31, 2023, under the 2013 Plan, the Company has made cumulative service-based stock awards totaling 745,160 shares, including 700,160 unrestricted shares and 45,000 restricted shares issued to certain executives and employees and to its independent directors. All awards have vested except for 45,000 shares issued to certain employees, which will vest over the next two years. The remaining 4,840 shares have been deregistered.

Under the 2013 Plan, the Company was able to issue a variety of performance-based stock awards, including nonqualified stock options. The value of the awards is charged to compensation expense on a straight-line basis over the vesting or service period based on the value of the award as determined by the Company’s stock price on the date of grant or issuance. As of March 31, 2023, no performance-based stock awards have been granted. Total compensation cost recognized under the 2013 Plan for the three months ended March 31, 2023 and 2022 was $22,883 and $406,007, respectively.

Additionally, the Company sponsors and maintains an Employee Stock Ownership Plan (“ESOP”) and related trust for the benefit of its eligible employees. We reflect unearned ESOP shares as a reduction of stockholders’ equity. Dividends on unearned ESOP shares, when paid, are considered compensation expense. The Company recognizes compensation expense equal to the fair value of the Company’s ESOP shares during the periods in which they are committed to be released. For the three months ended March 31, 2023 and 2022, the ESOP compensation cost was $12,195 and $14,154, respectively. To the extent that the fair value of the Company’s ESOP shares differs from the cost of such shares, the differential is recognized as additional paid in capital. Because the ESOP is internally leveraged through a loan from the Company to the ESOP, the loan receivable by the Company from the ESOP is not reported as an asset nor is the debt of the ESOP shown as a liability in the consolidated financial statements.

Advertising – Advertising costs, including internet advertising, were $705,703, and $622,684 for the three months ended March 31, 2023 and 2022, respectively. Advertising costs are expensed as incurred.

Involuntary Conversion of Assets – We record gains or losses on involuntary conversions of assets due to recovered insurance proceeds to the extent the undepreciated cost of a nonmonetary asset differs from the amount of monetary proceeds received. The gain on involuntary conversion of assets, is reflected in the consolidated statements of operations.

Comprehensive Income – Comprehensive income as defined, includes all changes in equity during a period from non-owner sources. We do not have any items of comprehensive income other than net income.

Segment Information – We have determined that our business is conducted in one reportable segment: hotel ownership.

Use of Estimates – The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

New Accounting Pronouncements –In June 2016, the FASB issued ASU 2016-13, Financial Instruments -Credit Losses(Topic 326), which replaced the existing "incurred loss" approach with an "expected loss" model for financial instruments measured at amortized cost. For trade and other receivables, the forward looking "expected loss" model will generally result in the earlier recognition of allowances for losses. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments -Credit Losses, which clarified that operating lease receivables accounted for under ASC 842 are not in the scope of ASU 2016-13. With the adoption of this standard on January 1, 2023, we have determined there is no significant impact on the Company's consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the existing guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). The update provides guidance in accounting for changes in contracts, hedging relationships, and other transactions as a result of this reference rate reform. The option expedients and exceptions contained within this update, in general, only apply to contract amendments and modifications entered into prior to January 1, 2023. The provisions of this update will most likely affect our financial reporting process relating to modifications of contracts with lenders and the hedging contracts associated with each respective modified borrowing contract. In general, the provision of the update would benefit us by allowing modifications of debt contracts with lenders that fall under the guidance of ASC Topic 740 to be accounted for as a non-substantial modification and

not be considered debt extinguishment. As of December 31, 2022, we have not entered into any contract modification as it directly relates to reference rate reform, with the exception of a modification to the mortgages on The Whitehall in Houston, Texas, which changed the reference rate from LIBOR to the New York Prime Rate, and on Hotel Alba Tampa, Tapestry Collection in Tampa, Florida, which changed the reference rate from LIBOR to SOFR. On March 14, 2023, the Company modified the floating-rate mortgage on the DoubleTree by Hilton Philadelphia Airport to change the reference rate from 1-month LIBOR to SOFR. The Company anticipates no additional loan modifications will be required. With the adoption of this standard on January 1, 2023, we have determined there is no significant impact on the Company's consolidated financial statements.

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Investment in Hotel Properties, Net

3 Months Ended

Mar. 31, 2023

Real Estate [Abstract]

Investment in Hotel Properties, Net

. Investment in Hotel Properties, Net

Investment in hotel properties, net as of March 31, 2023 and December 31, 2022 consisted of the following:

	March 31, 2023			December 31, 2022
Land and land improvements	$	61,042,514		$	60,934,859
Buildings and improvements		414,578,225			412,717,919
Right of use assets		5,083,882			5,199,845
Furniture, fixtures and equipment		51,233,242			51,292,107
		531,937,863			530,144,730
Less: accumulated depreciation and impairment		(169,037,824	)		(165,074,005	)
Investment in Hotel Properties, Net	$	362,900,039		$	365,070,725

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Debt

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Debt

4. Debt

Mortgage Loans, Net. As of March 31, 2023 and December 31, 2022, we had approximately $318.6 million and approximately $320.5 million of outstanding mortgage debt, respectively. The following table sets forth our mortgage debt obligations on our hotels.

	Balance Outstanding as of
	March 31,			December 31,			Prepayment	Maturity	Amortization	Interest
Property	2023			2022			Penalties	Date	Provisions	Rate
The DeSoto (1)	$	30,980,343		$	31,219,022		Yes	7/1/2026	25 years	4.25%
DoubleTree by Hilton Jacksonville    Riverfront (2)		32,247,511			32,416,570		Yes	7/11/2024	30 years	4.88%
DoubleTree by Hilton Laurel (3)		7,315,564			7,412,107		None	5/5/2023	25 years	5.25%
DoubleTree by Hilton Philadelphia Airport (4)		39,224,659			39,413,672		None	10/31/2023	30 years	LIBOR plus 2.27%
DoubleTree Resort by Hilton Hollywood    Beach (5)		52,414,063			52,724,475		(6)	10/1/2025	30 years	4.913%
Georgian Terrace (6)		40,231,417			40,492,622		(7)	6/1/2025	30 years	4.42%
Hotel Alba Tampa, Tapestry Collection by Hilton (7)		24,634,600			24,756,400		None	6/30/2025	(8)	SOFR plus 2.75%
Hotel Ballast Wilmington, Tapestry Collection by    Hilton (8)		31,467,418			31,699,775		Yes	1/1/2027	25 years	4.25%
Hyatt Centric Arlington (9)		47,269,977			47,534,606		Yes	10/1/2028	30 years	5.25%
The Whitehall (10)		14,164,141			14,226,067		None	2/26/2028	25 years	PRIME plus 1.25%
Total Mortgage Principal Balance	$	319,949,693		$	321,895,316
Deferred financing costs, net		(1,455,654	)		(1,480,779	)
Unamortized premium on loan		61,395			67,566
Total Mortgage Loans, Net	$	318,555,434		$	320,482,103

(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.
(2)	The note is subject to a pre-payment penalty until March 2024. Prepayment can be made without penalty thereafter.
(3)	On May 4, 2023, affiliates of the Company entered into loan documents to secure a $10.0 million mortgage loan on the DoubleTree by Hilton Laurel hotel located in Laurel, MD with Citi Real Estate Funding Inc. Pursuant to the loan documents, the mortgage loan: (i) has a principal balance of $10.0 million; (ii) has a maturity date of May 6, 2028; (iii) carries a fixed interest rate of 7.35%; (iv) requires payments of interest only; (v) cannot be prepaid until the last 4 months of the loan term; and (vi) contains customary representations, warranties, covenants and events of default for a mortgage loan.
(4)	The note bears a floating interest rate of 1-month LIBOR plus 2.27%, but we entered into a swap agreement to fix the rate at 5.237% through July 31, 2023. Under the swap agreement, notional amounts approximate the declining balance of the loan and we are responsible for any potential termination fees associated with early termination of the swap agreement.
(5)	With limited exception, the note may not be prepaid prior to June 2025.
(6)	With limited exception, the note may not be prepaid prior to February 2025.
(7)	The note bears a floating interest rate of SOFR plus 2.75% subject to a floor rate of 2.75%; with monthly principal payments of $40,600; the note provides that the mortgage can be extended for two additional periods of one year each, subject to certain conditions. On July 11, 2022, we entered into a swap agreement to fix the rate at 5.576%. The swap agreement reflects notional amounts approximate to the declining balance of the loan and we are responsible for any potential termination fees associated with early termination of the swap agreement.

(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.
(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%.

The mortgage on the DoubleTree by Hilton Philadelphia Airport hotel matures in 2023 and as of March 31, 2023, the Company failed to meet certain financial covenants under that mortgage. We intend to work with the lender to receive a waiver and to amend, refinance, or extend the term of the loan prior to maturity in July 2023. On May 4, 2023, the Company refinanced the mortgage on the DoubleTree by Hilton Laurel hotel that was scheduled to mature in May 2023 as described in Note 13 below.

Total future mortgage debt maturities for the remaining nine and twelve-month periods, without respect to any extension of loan maturity or loan modification after March 31, 2023, were as follows:

For the remaining nine months ended December 31, 2023	$	51,594,623
December 31, 2024		38,069,573
December 31, 2025		116,078,656
December 31, 2026		58,588,969
December 31, 2027		1,757,220
December 31, 2028 and thereafter		53,860,652
Total future maturities	$	319,949,693

PPP Loans. The Operating Partnership and certain of its subsidiaries have received PPP Loans administered by the U.S. Small Business Administration pursuant to the CARES Act. Each PPP Loan has a term of two years, which may be extended to five years and carries an interest rate of 1.00%. Equal payments of principal and interest begin no later than 10 months following origination of the loan and are amortized over the remaining term of the loan. Pursuant to the terms of the CARES Act, the proceeds of each PPP Loan may be used for payroll costs, mortgage interest, rent or utility costs. The promissory note for each PPP Loan contains customary events of default relating to, among other things, payment defaults and breach of representations and warranties or of provisions of the relevant promissory note. Under the terms of the CARES Act, each borrower can apply for and be granted forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds in accordance with the terms of the CARES Act. No assurance is provided that any borrower will obtain forgiveness under any relevant PPP Loan in whole or in part.

On April 16, 2020, our Operating Partnership entered into a promissory note with Village Bank in connection with a PPP Loan and received proceeds of $333,500.

On April 28, 2020, we entered into a promissory note and received proceeds of $9,432,900 under a PPP Loan from Fifth Third Bank, National Association.

On May 6, 2020, we entered into a second promissory note with Fifth Third Bank, National Association and received proceeds of $952,700 under a PPP Loan.

As of March 31, 2023, applications for loan forgiveness totaling approximately $0.3 million have been filed and are still pending. At March 31, 2023, the PPP loans had a cumulative balance of approximately $2.1 million.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

5. Commitments and Contingencies

Ground, Building, Parking and Land Leases – We lease 2,086 square feet of commercial space next to The DeSoto for use as an office, retail or conference space, or for any related or ancillary purposes for the hotel and/or atrium space. In December 2007, we signed an amendment to the lease to include rights to the outdoor esplanade adjacent to the leased commercial space. The areas are leased under a six-year operating lease, which expired October 31, 2006 and has been renewed for the fourth of five optional five-year renewal periods expiring October 31, 2026. Rent expense for this operating lease for the three months ended March 31, 2023 and 2022, each totaled $20,983, respectively.

We lease, as landlord, the entire fourteenth floor of The DeSoto hotel property to The Chatham Club, Inc. under a ninety-nine year lease expiring July 31, 2086. This lease was assumed upon the purchase of the building under the terms and conditions agreed to by the previous owner of the property. No rental income is recognized under the terms of this lease as the original lump sum rent payment of $990 was received by the previous owner and not prorated over the life of the lease.

We lease land adjacent to the Hotel Alba Tampa for use as parking under a five-year renewable agreement with the Florida Department of Transportation that commenced in July 2009. In May 2014, we extended the agreement for an additional five years. We signed a new agreement in April 2019, which commenced in July 2019, goes for five years and can be renewed for an additional five years. The new agreement expires in July 2024, requires annual payments of $2,432, plus tax, and may be renewed for an additional five years. Rent expense for the three months ended March 31, 2023 and 2022, totaled $651 and $653, respectively,

We lease approximately 8,500 square feet of commercial office space in Williamsburg, Virginia under an agreement with a ten-year term beginning January 1, 2020. The initial annual rent under the agreement was $218,875, with the rent for each successive annual period increasing by 3.0% over the prior annual period’s rent. The annual rent will be offset by a tenant improvement allowance of $200,000, to be applied against one-half of each monthly rent payment until such time as the tenant improvement allowance is exhausted. Rent expense for the three months ended March 31, 2023 and 2022, each totaled $55,902, respectively.

We lease the land underlying all of the Hyatt Centric Arlington hotel pursuant to a ground lease. 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 initial term of the ground lease expires in 2025 and may be extended for five additional renewal periods of 10 years each. Rent expense for the three months ended March 31, 2023 and 2022, was $139,101 and $72,013, respectively.

We lease the parking garage and poolside cabanas associated with the Hyde Beach House. The parking and cabana lease requires us to make rental payments of $270,100 per year with increases of 5% every five years and has an initial term that expires in 2034 and which may be extended for four additional renewal periods of 5 years each. Rent expense for the three months ended March 31, 2023 and 2022, each totaled $67,750, respectively.

We also lease certain storage facilities, furniture and equipment under agreements expiring between December 2023 and June 2026.

A schedule of minimum future lease payments for the following nine and twelve-month periods is as follows:

For the remaining nine months ended December 31, 2023	$	507,069
December 31, 2024		678,300
December 31, 2025		684,672
December 31, 2026		673,413
December 31, 2027		342,503
December 31, 2028 and thereafter		13,521,694
Total	$	16,407,651

Employment Agreements - The Company has entered into various employment contracts with employees that could result in obligations to the Company in the event of a change in control or termination without cause.

Management Agreements – As of March 31, 2023, our ten wholly-owned hotels, and our two condo-hotel rental programs, operated under management agreements with Our Town (see Note 8). The management agreements expire on March 31, 2035 and may be extended for up to two additional periods of five years each, subject to the approval of both parties. Each of the individual hotel management agreements may be terminated earlier than the stated term upon the sale of the hotel covered by the respective management agreement, in which case we may incur early termination fees.

Franchise Agreements – As of March 31, 2023, seven of our hotels operate under franchise licenses from national hotel companies. Under the franchise agreements, we are required to pay a franchise fee generally between 3.0% and 5.0% of room revenues, plus additional fees for marketing, central reservation systems, and other franchisor programs and services that amount to between 3.0% and 4.0% of gross revenues from the hotels. The franchise agreements currently in force expire between October 2024 and March 2038. Each of our franchise agreements provides for early termination fees in the event the agreement is terminated before the stated term.

Restricted Cash Reserves – Each month, we are required to escrow with the lenders on the Hotel Ballast, The DeSoto, the DoubleTree by Hilton Jacksonville Riverside, the DoubleTree Resort by Hilton Hollywood Beach, the Hyatt Centric Arlington and the Georgian Terrace an amount equal to one-twelfth (1/12) of the annual real estate taxes due for the properties. Several of our lenders also required us to establish individual property improvement funds to cover the cost of replacing capital assets at our properties. Each month, those contributions equal 4.0% of gross revenues for the Hotel Ballast, The DeSoto, the DoubleTree by Hilton Jacksonville Riverside, the DoubleTree Resort by Hilton Hollywood Beach, The Whitehall and the Georgian Terrace and equal 4.0% of room

revenues for the DoubleTree by Hilton Philadelphia Airport and the Hyatt Centric Arlington. We are also required by some lenders to have a debt service reserve that approximates the aggregate amount of one year's debt service, which was initially established at approximately $1.5 million, in 2022.

ESOP Loan Commitment – The Company’s board of directors approved the ESOP on November 29, 2016, which was adopted by the Company in December 2016 and effective January 1, 2016. The ESOP is a non-contributory defined contribution plan covering all employees of the Company. The ESOP is a leveraged ESOP, meaning funds are loaned to the ESOP from the Company. The Company entered into a loan agreement with the ESOP on December 29, 2016, pursuant to which the ESOP may borrow up to $5.0 million to purchase shares of the Company’s common stock on the open market. Under the loan agreement, the aggregate principal amount outstanding at any time may not exceed $5.0 million and the ESOP may borrow additional funds up to that limit in the future, until December 29, 2036. At March 31, 2023, the balance on the loan was approximately $2.6 million leaving capacity for additional borrowing of approximately $2.4 million under the commitment.

Litigation –We are involved in routine litigation arising out of the ordinary course of business, all of which we expect to be covered by insurance and we believe it is not reasonably possible such matters will have a material adverse impact on our financial condition or results of operations or cash flows.

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Preferred Stock and Units

3 Months Ended

Mar. 31, 2023

Preferred Stock And Units [Abstract]

Preferred Stock and Units

6. Preferred Stock and Units

Preferred Stock - The Company is authorized to issue up to 11,000,000 shares of preferred stock. The following table sets forth our Cumulative Redeemable Perpetual Preferred Stock by series:

	Per					Number of Shares				Quarterly
	Annum			Liquidation		Issued and Outstanding as of				Distributions
Preferred Stock - Series	Rate			Preference		March 31, 2023		December 31, 2022		Per Share
Series B Preferred Stock		8.000	%	$	25.00		1,464,100		1,464,100	$	0.500000
Series C Preferred Stock		7.875	%	$	25.00		1,346,110		1,346,110	$	0.492188
Series D Preferred Stock		8.250	%	$	25.00		1,163,100		1,163,100	$	0.515625

The Company is obligated to pay cumulative cash distributions on the preferred stock at rates in the above table per annum of the $25.00 liquidation preference per share. Holders of the Company’s preferred stock are entitled to receive distributions when authorized by the Company’s board of directors out of assets legally available for the payment of distributions. The preferred stock is not redeemable by the holders, has no maturity date and is not convertible into any other security of the Company or its affiliates.

On March 15, 2023, the Company paid preferred dividends, declared in March 2020, in the amount of approximately $2.0 million. No distributions have been declared for the Company’s Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock for the three month period ending March 31, 2023.

The total undeclared and unpaid cash dividends due on the Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock through March 31, 2023, are $8,784,600, $7,950,470 and $7,196,681, respectively. Undeclared preferred cumulative dividends are reported on the statements of operations but are not considered payable until declared. As of March 31, 2023, the undeclared cumulative preferred dividends were approximately $23.9 million.

Preferred Units - The Company is the holder of the Operating Partnership’s preferred partnership units and is entitled to receive distributions when authorized by the general partner of the Operating Partnership out of assets legally available for the payment of distributions. The following table sets forth our Cumulative Redeemable Perpetual Preferred Units by series:

	Per					Number of Units				Quarterly
	Annum			Liquidation		Issued and Outstanding as of				Distributions
Preferred Units - Series	Rate			Preference		March 31, 2023		December 31, 2022		Per Unit
Series B Preferred Units		8.000	%	$	25.00		1,464,100		1,464,100	$	0.500000
Series C Preferred Units		7.875	%	$	25.00		1,346,110		1,346,110	$	0.492188
Series D Preferred Units		8.250	%	$	25.00		1,163,100		1,163,100	$	0.515625

The Operating Partnership pays cumulative cash distributions on the preferred units at rates in the above table per annum of the $25.00 liquidation preference per unit. The Company, which is the holder of the Operating Partnership’s preferred units, is entitled to receive distributions when authorized by the Operating Partnership’s general partner out of assets legally available for the payment of distributions. The preferred units are not redeemable by the holder, have no maturity date and are not convertible into any other security of the Operating Partnership or its affiliates.

The total undeclared and unpaid cash dividends due on the Series B Preferred Units, Series C Preferred Units and Series D Preferred Units through March 31, 2023, is $8,784,600, $7,950,470 and $7,196,681, respectively. Undeclared preferred cumulative dividends are reported on the statements of operations but are not considered payable until declared. As of March 31, 2023, the undeclared cumulative preferred dividends were approximately $23.9 million.

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Common Stock and Units

3 Months Ended

Mar. 31, 2023

Equity [Abstract]

Common Stock and Units

7. Common Stock and Units

Common Stock – As of March 31, 2023, the Company was authorized to issue up to 69,000,000 shares of common stock, $0.01 par value per share. Each outstanding share of common stock entitles the holder to one vote on all matters submitted to a vote of stockholders. Holders of the Company’s common stock are entitled to receive distributions when authorized by the Company’s board of directors out of assets legally available for the payment of distributions.

The following is a schedule of issuances, since January 1, 2022, of the Company’s common stock and related partnership units of the Operating Partnership:

On January 21, 2022 and February 15, 2022, the Company was issued 175,268 partnership units in the Operating Partnership and awarded an equivalent number of shares of unrestricted stock to its employees.

On January 21, 2022, the Company was issued 15,000 partnership units in the Operating Partnership and awarded an equivalent number of shares of restricted stock to its independent directors.

On March 24, 2022, we entered into a privately-negotiated share exchange agreement. Pursuant to the share exchange agreement, the Company agreed to exchange 7,000 shares of the Company’s Series B Preferred Stock and 3,000 shares of the Company’s Series C Preferred Stock, together with all of the rights to receive accrued and unpaid dividends on those preferred shares, for 96,900 shares of the Company’s common stock. We closed the transaction and issued the common stock on March 25, 2022.

On March 31, 2022, we entered into a privately-negotiated share exchange agreement. Pursuant to the share exchange agreement, the Company agreed to exchange 5,900 shares of the Company’s Series B Preferred Stock and 6,600 shares of the Company’s Series C Preferred Stock, together with all of the rights to receive accrued and unpaid dividends on those preferred shares, for 120,875 shares of the Company’s common stock. We closed the transaction and issued the common stock on March 31, 2022.

On April 11, 2022, we entered into a privately-negotiated share exchange agreement. Pursuant to the share exchange agreement, the Company agreed to exchange 4,000 shares of the Company's Series B Preferred Stock and 8,000 shares of the Company's Series C Preferred Stock, together with all of the holder’s rights to receive accrued and unpaid dividends on those preferred shares, for 116,640 shares of the Company's common stock. We closed the transaction and issued the common stock on April 12, 2022.

On April 19, 2022, we entered into a privately-negotiated share exchange agreement. Pursuant to the share exchange agreement, the Company agreed to exchange 5,000 shares of the Company's Series B Preferred Stock and 10,600 shares of the Company's Series C Preferred Stock, together with all of the holder’s rights to receive accrued and unpaid dividends on those preferred shares, for 153,504 shares of the Company's common stock. We closed the transaction and issued the common stock on April 19, 2022.

On May 19, 2022, one holder of partnership units in the Operating Partnership converted 50,000 units for an equivalent number of shares in the Company’s common stock.

On May 23, 2022, the Company was issued 37,428 partnership units in the Operating Partnership and awarded an equivalent number of shares of unrestricted stock to its employees.

On July 1, 2022, one holder of partnership units in the Operating Partnership converted 40,687 units for an equivalent number of shares in the Company’s common stock.

On July 21, 2022, the Company was issued 167,390 partnership units in the Operating Partnership and awarded an equivalent number of shares of unrestricted stock to its employees.

On August 18, 2022, we entered into a privately-negotiated share exchange agreement. Pursuant to the share exchange agreement, the Company agreed to exchange 11,000 shares of the Company's Series B Preferred Stock, 7,100 shares of the Company's Series C Preferred Stock, and 1,900 shares of the Company's Series D Preferred Stock, together with all of the holder’s rights to

receive accrued and unpaid dividends on those preferred shares, for 178,800 shares of the Company's common stock. We closed the transaction and issued the common stock on August 18, 2022.

On August 23, 2022, we entered into a privately-negotiated share exchange agreement. Pursuant to the share exchange agreement, the Company agreed to exchange 13,000 shares of the Company's Series B Preferred Stock and 3,200 shares of the Company's Series C Preferred Stock, together with all of the holder’s rights to receive accrued and unpaid dividends on those preferred shares, for 140,130 shares of the Company's common stock. We closed the transaction and issued the common stock on August 24, 2022.

On November 1, 2022, one holder of partnership units in the Operating Partnership converted 217,845 units for an equivalent number of shares in the Company’s common stock.

On January 12, 2023, the Company issued 15,000 restricted shares of common stock to its independent directors and 64,278 vested shares of common stock to its independent directors and one officer.

On January 23, 2023, the Company issued 205,000 restricted shares of common stock to certain its officers and employees pursuant to their employment agreements.

As of March 31, 2023 and December 31, 2022, the Company had 19,235,803 and 18,951,525 shares of common stock outstanding, respectively.

Operating Partnership Units – Holders of Operating Partnership units, other than the Company as general partner, have certain redemption rights, which enable them to cause the Operating Partnership to redeem their units in exchange for shares of the Company’s common stock on a one-for-one basis or, at the option of the Company, cash per unit equal to the average of the market price of the Company’s common stock for the 10 trading days immediately preceding the notice date of such redemption. The number of shares issuable upon exercise of the redemption rights will be adjusted upon the occurrence of stock splits, mergers, consolidations or similar pro-rata share transactions, which otherwise would have the effect of diluting the ownership interests of the limited partners or the stockholders of the Company.

Since January 1, 2022, there have been no issuances or redemptions, of partnership units in the Operating Partnership other than the issuances of partnership units in the Operating Partnership to the Company described above. In connection with the exchange agreements described in this section, an equivalent number of preferred units held by the Company were exchanged for partnership units in the Operating Partnership.

As of March 31, 2023 and December 31, 2022, the total number of Operating Partnership units outstanding was 20,060,991 and 19,776,713, respectively.

As of March 31, 2023 and December 31, 2022, the total number of outstanding Operating Partnership units not owned by the Company was 825,188 and 825,188, respectively, with a fair market value of approximately $1.6 million and $1.5 million, respectively, based on the price per share of the common stock on such respective dates.

As of March 31, 2023, there were unpaid common dividends and distributions to holders of record as of March 13, 2020, in the amount of approximately $2.1 million.

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Related Party Transactions

3 Months Ended

Mar. 31, 2023

Related Party Transactions [Abstract]

Related Party Transactions

8. Related Party Transactions

Our Town Hospitality. Our Town is currently the management company for each of our ten wholly-owned hotels, as well as the manager of our rental programs at the Hyde Resort & Residences and the Hyde Beach House Resort & Residences. As of March 31, 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 63.0%, 7.0%, and 15.0%, respectively, of the total outstanding ownership interests of Our Town. Mr. Sims, Mr. Folsom, and Mr. Sims Jr. serve as directors of Our Town. The following is a summary of the transactions between Our Town and us:

Accounts Receivable – At March 31, 2023 and December 31, 2022, we were due approximately $0.3 million and $0.3 million, respectively, from Our Town.

Accounts Payable – At March 31, 2023 and December 31, 2022, we owed Our Town approximately $1.1 million and $1.3 million, respectively.

Management Agreements – On September 6, 2019, the Company entered into a master agreement with Our Town related to the management of certain of our hotels, as amended on December 13, 2019 (as amended, the “OTH Master Agreement”). On December 13, 2019, and subsequent dates we entered into a series of individual hotel management agreements for the management of our hotels. The hotel management agreements for each of our ten wholly-owned hotels and the two rental programs are referred to as, individually an “OTH Hotel Management Agreement” and, together the “OTH Hotel Management Agreements”. The term of the OTH Hotel Management Agreements extends through March 31, 2035, and may be extended for two periods of five years each.

The OTH Master Agreement 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. The OTH Master Agreement expires on March 31, 2035 but shall be extended beyond 2035 for such additional periods as an OTH Hotel Management Agreement remains in effect. The base management fees for each hotel under management with Our Town is 2.50%. For any new individual hotel management agreements, Our Town will receive a base management fee of 2.00% of gross revenues for the first full year from the commencement date through the anniversary date, 2.25% of gross revenues the second full year, and 2.50% of gross revenues for every year thereafter.

Base management and administrative fees earned by Our Town for our properties were approximately $1.1 million and $1.0 million, for the three months ended March 31, 2023 and 2022, respectively.

Each OTH Hotel Management Agreement sets an incentive management fee equal to 10.0% of the amount by which gross operating profit, as defined in the relevant management agreement, 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. Incentive management fees earned for the three months ending March 31, 2023 and 2022, were $222,958 and $258,538, respectively.

Each OTH Hotel Management Agreement provides for the payment of a termination fee upon the sale of the hotel equal to the lesser of the management fee paid with respect to the prior twelve months or the management fees paid for the number of months prior to the closing date of the hotel sale equal to the number of months remaining on the current term of the management agreement.

Sublease – On December 13, 2019, we entered into a sublease agreement with Our Town pursuant to which Our Town subleases 2,245 square feet of office space from Sotherly for a period of 5 years, with a 5-year renewal subject to approval by Sotherly, on terms and conditions similar to the terms of the prime lease entered into by Sotherly and the third-party owner of the property. Lease payments due to the Company were $284,549 and $184,620, as of March 31, 2023 and March 31, 2022, respectively.

Employee Medical Benefits – We purchase employee medical coverage for eligible employees that are employed by Our Town and who work exclusively for our properties and elect to participate in Our Town’s self-insured plan. Gross premiums for employee medical benefits paid by the Company (before offset of employee co-payments) were approximately $0.5 million and $0.9 million for the three months ended March 31, 2023 and 2022, respectively. Additionally, Our Town's policy is to rebate 70% of our pro rata share of any annual surplus in its self-insured health plan back to the Company and retain the remaining 30%.

Others. We employed Ashley S. Kirkland, the daughter of our Chairman, as Corporate Counsel and Compliance Officer until her departure in January 2022 and continue to employ Robert E. Kirkland IV, her husband, as our General Counsel. We also employ Andrew M. Sims Jr., the son of our Chairman, as Vice President – Operations & Investor Relations. Total compensation for all three individuals, including salary and benefits, for the three months ended March 31, 2023 and 2022, totaled $186,135 and $132,699, respectively.

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Retirement Plans

3 Months Ended

Mar. 31, 2023

Retirement Benefits [Abstract]

Retirement Plans

9. Retirement Plans

401(k) Plan - We maintain a 401(k) plan for qualified employees which is subject to “safe harbor” provisions. Those provisions include a matching employer contribution consisting of 100.0% of the first 3.0% of employee contributions and 50.0% of the next 2.0% of employee contributions. In addition, all employer matching funds vest immediately. Contributions to the plan totaled $34,009 and $23,139, for the three months ended March 31, 2023 and 2022, respectively.

Employee Stock Ownership Plan - The Company adopted an Employee Stock Ownership Plan in December 2016, effective January 1, 2016, which is a non-contributory defined contribution plan covering all employees of the Company. The Company sponsors and maintains the ESOP and related trust for the benefit of its eligible employees. The ESOP is a leveraged ESOP, meaning funds are loaned to the ESOP from the Company. The Company entered into a loan agreement with the ESOP on December 29, 2016, pursuant to which the ESOP may borrow up to $5.0 million to purchase shares of the Company’s common stock on the open market, which serve as collateral for the loan.

Between January 3, and February 28, 2017, the Company’s ESOP had purchased 682,500 shares of the Company’s common stock in the open market at a cost of approximately $4.9 million. Shares purchased by the ESOP are held in a suspense account for allocation among participants as contributions are made to the ESOP by the Company. The share allocations will be accounted for at fair value at the date of allocation.

A total of 308,035 shares with a fair value of $614,530 remained allocated or committed to be released from the suspense account, as of March 31, 2023. We recognized as compensation cost $12,195 and $14,154, during the three months ended March 31, 2023 and 2022, respectively. The remaining 357,788 unallocated shares have an approximate fair value of $713,787, as of March 31, 2023. As of March 31, 2023, the ESOP held a total of 301,646 allocated shares, 6,389 committed-to-be-released shares and 357,788 suspense shares. Dividends on allocated and unallocated shares are used to pay down the ESOP loan from the Operating Partnership.

The share allocations are accounted for at fair value on the date of allocation as follows:

	March 31, 2023				December 31, 2022
	Number of Shares		Fair Value		Number of Shares		Fair Value
Allocated shares		301,646	$	601,784		301,646	$	545,979
Committed to be released shares		6,389		12,746		—		—
Total Allocated and Committed-to-be-Released		308,035	$	614,530		301,646	$	545,979
Unallocated shares		357,788		713,787		364,177		659,160
Total ESOP Shares		665,823	$	1,328,317		665,823	$	1,205,139

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Indirect Hotel Operating Expenses

3 Months Ended

Mar. 31, 2023

Other Income and Expenses [Abstract]

Indirect Hotel Operating Expenses

10. Indirect Hotel Operating Expenses

Indirect hotel operating expenses consists of the following expenses incurred by the hotels:

	Three Months Ended		Three Months Ended
	March 31, 2023		March 31, 2022
	(unaudited)		(unaudited)
Sales and marketing	$	4,209,770	$	3,563,962
General and administrative		3,463,800		3,240,579
Repairs and maintenance		2,219,568		2,115,327
Utilities		1,332,715		1,315,349
Property taxes		999,521		1,626,939
Management fees, including incentive		1,359,040		1,274,760
Franchise fees		1,071,519		908,035
Insurance		947,660		946,277
Information and telecommunications		922,779		929,106
Other		221,205		143,027
Total indirect hotel operating expenses	$	16,747,577	$	16,063,361

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Income Taxes

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

The components of the income tax provision for the three months ended March 31, 2023 and 2022 are as follows:

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
Current:
Federal	$	—		$	—
State		15,182			9,654
		15,182			9,654
Deferred:
Federal		(259,952	)		(506,356	)
State		131,230			77,362
Subtotals		(128,722	)		(428,994	)
Change in deferred tax valuation allowance		128,722			428,994
		—			—
	$	15,182		$	9,654

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
Statutory federal income tax provision (benefit)	$	294,566		$	(168,271	)
Federal tax impact of REIT election		(303,786	)		(252,786	)
Statutory federal income tax provision at TRS		(9,220	)		(421,057	)
Federal impact of PPP loan forgiveness		(56,470	)		—
State income tax provision (benefit), net of federal provision (benefit)		(47,850	)		1,717
Change in valuation allowance		128,722			428,994
	$	15,182		$	9,654

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Loss Per Share and Per Unit

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Loss Per Share and Per Unit

12. Loss Per Share and Per Unit

Loss per Share. The limited partners’ outstanding limited partnership units in the Operating Partnership (which may be redeemed for common stock upon notice from the limited partner and following our election to redeem the units for stock rather than cash) have been excluded from the diluted earnings per share calculation as there would be no effect on the amounts since the limited partners’ share of income or loss would also be added back to net income or loss. The shares of the Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock are not convertible into or exchangeable for any other property or securities of the Company, except upon the occurrence of a change of control, and have been excluded from the diluted earnings per share calculation as there would be no impact on the current controlling stockholders. The non-committed, unearned ESOP shares are treated as reducing the number of issued and outstanding common shares and similarly reducing the weighted average number of common shares outstanding. The unallocated ESOP shares have been excluded in the weighted average for the basic and diluted earnings per share computation. The computation of basic net loss per share is presented below:

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
Numerator
Net income (loss)	$	1,387,514		$	(810,944	)
Less: Net income allocated to participating share awards		(12,857	)		—		(1)
Net loss attributable to non-controlling interest		24,960			161,621
Undeclared distributions to preferred stockholders		(1,994,312	)		(1,936,617	)
Gain on extinguishment of preferred stock		—			78,175
Net loss attributable to common stockholders for EPS computation	$	(594,695	)	$	(2,507,765	)
Denominator
Weighted average number common shares outstanding for basic EPS computation		18,635,004			17,107,820
Basic net loss per common share:
Undistributed loss	$	(0.03	)	$	(0.15	)
Total basic	$	(0.03	)	$	(0.15	)

(1) Anti-dilutive, therefore not included.

The accounting for unvested share-based payment awards included in the calculation of earnings per share changed. Share-based awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are now participating securities and included in the computation of both basic and diluted earnings per share. Our grants of restricted stock awards to our employees and directors are considered participating securities, and we have prepared our earnings per share calculations to include outstanding unvested restricted stock awards in the basic and diluted weighted average shares outstanding calculation.

Loss Per Unit – The computation of basic net loss per unit is presented below:

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
Numerator
Net income (loss)	$	1,387,514		$	(810,944	)
Less: Net income allocated to participating unit awards		(12,857	)		—		(1)
Undeclared distributions to preferred unitholders		(1,994,312	)		(1,936,617	)
Gain on extinguishment of preferred units		—			78,175
Net loss attributable to unitholders for EPU computation	$	(619,655	)	$	(2,669,386	)
Denominator
Weighted average number of units outstanding for basic EPU computation		19,832,279			18,667,969
Basic net loss per unit:
Undistributed loss	$	(0.03	)	$	(0.14	)
Total basic	$	(0.03	)	$	(0.14	)

(1) Anti-dilutive, therefore not included.

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Subsequent Events

3 Months Ended

Mar. 31, 2023

Subsequent Events [Abstract]

Subsequent Events

13. Subsequent Events

On April 24, 2023, we authorized payment of a quarterly distribution of $0.50 per share (and unit) of Series B Preferred Stock (and Series B Preferred Units) to holders of the Series B Preferred Stock (and Series B Preferred Units) of record as of May 31, 2023, to be paid on June 15, 2023.

On April 24, 2023, we authorized payment of a quarterly distribution of $0.4921875 per share (and unit) of Series C Preferred Stock (and Series C Preferred Units) to holders of the Series C Preferred Stock (and Series C Preferred Units) of record as of May 31, 2023, to be paid on June 15, 2023.

On April 24, 2023, we authorized payment of a quarterly distribution of $0.515625 per share (and unit) of Series D Preferred Stock (and Series D Preferred Units) to holders of the Series D Preferred Stock (and Series D Preferred Units) of record as of May 31, 2023, to be paid on June 15, 2023.

On April 28, 2023, one holder of partnership units in the Operating Partnership redeemed 75,000 units for an equivalent number of shares in the Company’s common stock

On May 4, 2023, affiliates of the Company entered into loan documents to secure a $10.0 million mortgage loan on the DoubleTree by Hilton Laurel hotel located in Laurel, MD with Citi Real Estate Funding Inc. Pursuant to the loan documents, the mortgage loan: (i) has a principal balance of $10.0 million; (ii) has a maturity date of May 6, 2028; (iii) carries a fixed interest rate of 7.35%; (iv) requires payments of interest only; (v) cannot be prepaid until the last 4 months of the loan term; and (vi) contains customary representations, warranties, covenants and events of default for a mortgage loan.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation – The consolidated financial statements of the Company presented herein include all of the accounts of Sotherly Hotels Inc., the Operating Partnership, MHI TRS and subsidiaries. All significant inter-company balances and transactions have been eliminated. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The consolidated financial statements of the Operating Partnership presented herein include all of the accounts of Sotherly Hotels LP, MHI TRS and subsidiaries. All significant inter-company balances and transactions have been eliminated. Additionally, all administrative expenses of the Company and those expenditures made by the Company on behalf of the Operating Partnership are reflected as the administrative expenses, expenditures and obligations thereto of the Operating Partnership, pursuant to the terms of the Partnership Agreement.

Variable Interest Entities

Variable Interest Entities – The Operating Partnership is a variable interest entity. The Company’s only significant asset is its investment in the Operating Partnership, and consequently, substantially all of the Company’s assets and liabilities represent those assets and liabilities of the Operating Partnership and its subsidiaries. All of the Company’s debt is an obligation of the Operating Partnership and its subsidiaries.

Investment in Hotel Properties

Investment in Hotel Properties – Investments in hotel properties include investments in operating properties which are recorded at fair value on acquisition date and allocated to land, property and equipment and identifiable intangible assets. If substantially all the fair value of the gross assets acquired are concentrated in a single identifiable asset, the asset is not considered a business. When we conclude that an acquisition meets this threshold, acquisition costs will be capitalized as part of our allocation of the purchase price of the acquired asset. We capitalize the costs of significant additions and improvements that materially upgrade, increase the value of or extend the useful life of the property. These costs may include refurbishment, renovation, and remodeling expenditures, as well as certain direct internal costs related to construction projects. Upon the sale or retirement of a fixed asset, the cost and related accumulated depreciation are removed from our accounts and any resulting gain or loss is included in the statements of operations.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 7 to 39 years for buildings and building improvements and 3 to 10 years for furniture, fixtures and equipment. Leasehold improvements are amortized over the shorter of the lease term or the useful lives of the related assets.

The Company assesses the carrying values of its investments in hotel properties whenever events or changes in circumstances indicate that the carrying value of the hotel properties may not be recoverable. Events or circumstances that may cause a review include, but are not limited to, adverse permanent changes in the demand for lodging at the properties due to declining national or local economic conditions and/or new hotel construction in markets where the hotels are located. When such conditions exist, management performs an analysis to determine if the estimated undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel property exceeds its carrying value. If the estimated undiscounted future cash flows are found to be less than the carrying amount of the asset, an adjustment to reduce the carrying amount to the related hotel property’s estimated fair market value would be recorded and an impairment loss recognized.

The Company recognized no impairment losses for the three months ended March 31, 2023 or 2022.

Cash and Cash Equivalents

Cash and Cash Equivalents – We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Restricted Cash

Restricted Cash – Restricted cash includes real estate tax escrows, insurance escrows, mortgage servicing and reserves for replacements of furniture, fixtures and equipment pursuant to certain requirements in our various mortgage agreements.

	As of		As of
	March 31, 2023		March 31, 2022
Cash and cash equivalents	$	23,429,595	$	20,184,327
Restricted cash		8,556,641		10,137,452
Cash, cash equivalents and restricted cash at the end of the period	$	31,986,236	$	30,321,779

Concentration of Credit Risk

Concentration of Credit Risk – We hold cash accounts at several institutions in excess of the Federal Deposit Insurance Corporation (the “FDIC”) protection limits of $250,000. Our exposure to credit loss in the event of the failure of these institutions is represented by the difference between the FDIC protection limit and the total amounts on deposit. Management monitors, on a regular basis, the financial condition of the financial institutions along with the balances there on deposit to minimize our potential risk.

Accounts Receivable

Accounts Receivable – Accounts receivable consists primarily of hotel guest and banqueting receivables. With ongoing evaluations of our trade receivables, credit customer's risk assessment and limiting credit to only a few larger companies or organizations, our potential for expected credit losses is insignificant. Our revenue is mainly based on cash or credit card sales as of the date of service, with limited trade receivables. An allowance for potential credit losses is provided against the portion of accounts receivable that is estimated to be uncollectible.

Inventories

Inventories – Inventories, consisting primarily of food and beverages, are stated at the lower of cost or net realizable value, with cost determined on a method that approximates first-in, first-out basis.

Franchise License Fees

Franchise License Fees – Fees expended to obtain or renew a franchise license are amortized over the life of the license or renewal. The unamortized franchise fees as of March 31, 2023 and December 31, 2022 were $229,164 and $241,038, respectively. Amortization expense for the three-month periods ended March 31, 2023 and 2022, totaled $11,874 and $12,007, respectively.

Deferred Financing Costs

Deferred Financing Costs – Deferred financing costs are recorded at cost and consist of loan fees and other costs incurred in issuing debt and are reflected in mortgage loans, net and unsecured notes, net on the consolidated balance sheets. Deferred offering costs are recorded at cost and consist of offering fees and other costs incurred in advance of issuing equity and are reflected in prepaid expenses, inventory and other assets on the consolidated balance sheets. Amortization of deferred financing costs is computed using a method that approximates the effective interest method over the term of the related debt and is included in interest expense in the consolidated statements of operations.

Derivative Instruments

Derivative Instruments – Our derivative instruments are reflected as assets or liabilities on the consolidated balance sheets and measured at fair value. Derivative instruments used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as an interest rate risk, are considered fair value hedges. Derivative instruments used to hedge exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For a derivative instrument designated as a cash flow hedge, the change in fair value each period is reported in accumulated other comprehensive income in stockholders’ equity and partners’ capital to the extent the hedge is effective. For a derivative instrument designated as a fair value hedge, the change in fair value each period is reported in earnings along with the change in fair value of the hedged item attributable to the risk being hedged. For a derivative instrument that does not qualify for hedge accounting or is not designated as a hedge, the change in fair value each period is reported in earnings.

We use derivative instruments to add stability to interest expense and to manage our exposure to interest-rate movements. To accomplish this objective, we currently use interest rate swaps which act as cash flow hedges and are not designated as hedges. We

value our interest rate swaps at fair value, which we define as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We do not enter into contracts to purchase or sell derivative instruments for speculative trading purposes.

Fair Value Measurements

Fair Value Measurements –

We classify the inputs used to measure fair value into the following hierarchy:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2	Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
Level 3	Unobservable inputs for the asset or liability.

We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table represents our assets and liabilities measured at fair value and the basis for that measurement (our interest rate swaps are the only assets or liabilities measured at fair value on a recurring basis, there were no non-recurring assets or liabilities for fair value measurements as of March 31, 2023 and December 31, 2022, respectively):

	Level 1		Level 2			Level 3
December 31, 2022
Interest rate swaps (1)	$	—	$	1,308,503		$	—
Mortgage loans (2)	$	—	$	(306,300,855	)	$	—
March 31, 2023
Interest rate swaps (1)	$	—	$	886,381		$	—
Mortgage loans (2)	$	—	$	(305,519,476	)	$	—

(1)Interest rate swaps, one of which swaps the Loan Rate for a fixed interest rate of 5.237% for the DoubleTree by Hilton Philadelphia Airport mortgage and is valued at March 31, 2023 and December 31, 2022, and the other which swaps the Loan Rate for a fixed rate of 5.576% for the Hotel Alba Tampa mortgage and is valued only at March 31, 2023 and December 31, 2022. Notional amounts of the swaps approximate the declining balance of the loan.

(2)Mortgage loans had a carrying value on our Consolidated Balance Sheets of $318,555,434 and $320,482,103 as of March 31, 2023 and December 31, 2022, respectively.

Noncontrolling Interest in Operating Partnership

Noncontrolling Interest in Operating Partnership – Certain hotel properties were acquired, in part, by the Operating Partnership through the issuance of limited partnership units of the Operating Partnership. The noncontrolling interest in the Operating Partnership is: (i) increased or decreased by the limited partners’ pro-rata share of the Operating Partnership’s net income or net loss, respectively; (ii) decreased by distributions; (iii) decreased by redemption of partnership units for the Company’s common stock; and (iv) adjusted to equal the net equity of the Operating Partnership multiplied by the limited partners’ ownership percentage immediately after each issuance of units of the Operating Partnership and/or the Company’s common stock through an adjustment to additional paid-in capital. Net income or net loss is allocated to the noncontrolling interest in the Operating Partnership based on the weighted average percentage ownership throughout the period.

Revenue Recognition

Revenue Recognition – Revenue consists of amounts derived from hotel operations, including the sales of rooms, food and beverage, and other ancillary services. Room revenue is recognized over a customer’s hotel stay. Revenue from food and beverage and other ancillary services is generated when a customer chooses to purchase goods or services separately from a hotel room and revenue is recognized on these distinct goods and services at the point in time or over the time period that goods or services are provided to the customer. Some contracts for rooms or food and beverage services require an upfront deposit which is recorded as advanced deposits (or contract liabilities) shown on our consolidated balance sheets and recognized once the performance obligations are satisfied.

Certain ancillary services are provided by third parties and the Company assesses whether it is the principal or agent in these arrangements. If the Company is the agent, revenue is recognized based upon the gross commission earned from the third party. If the Company is the principal, the Company recognizes revenue based upon the gross sales price. With respect to the hotel condominium rental programs that the Company operates at the Hyde Resort and Hyde Beach House, the Company has determined that it is an agent and recognizes revenue based on its share of revenue earned under the rental agency agreement.

Certain of the Company’s hotels have retail spaces, restaurants or other spaces which the Company leases to third parties. Lease revenue is recognized on a straight-line basis over the life of the lease and included in other operating revenues in the Company’s consolidated statements of operations.

The Company collects sales, use, occupancy and similar taxes at its hotels which are presented on a net basis on the consolidated statements of operations.

Lease Revenue

Lease Revenue – Several of our properties generate revenue from leasing commercial space adjacent to the hotel, the restaurant space within the hotel, apartment units and space on the roofs of our hotels for antennas and satellite dishes. We account for the lease income as revenue from other operating departments within the consolidated statements of operations pursuant to the terms of each lease. Lease revenue was approximately $0.3 million and $0.4 million, for the three months ended March 31, 2023 and 2022, respectively.

A schedule of minimum future lease payments receivable for the remaining nine and twelve-month periods is as follows:

For the remaining nine months ending December 31, 2023	$	644,324
December 31, 2024		837,589
December 31, 2025		1,334,430
December 31, 2026		748,994
December 31, 2027		735,964
December 31, 2028 and thereafter		9,430,066
Total	$	13,731,367

Income Taxes

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. MHI TRS, our wholly owned taxable REIT subsidiary which leases our hotels from subsidiaries of the Operating Partnership, is subject to federal and state income taxes.

We account for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is required for deferred tax assets if, based on all available evidence, it is “more-likely-than-not” that all or a portion of the deferred tax asset will or will not be realized due to the inability to generate sufficient taxable income in certain financial statement periods. The “more-likely-than-not” analysis means the likelihood of realization is greater than 50%, that we either will or will not be able to fully utilize the deferred tax assets against future taxable income. The net amount of deferred tax assets that are recorded on the financial statements must reflect the tax benefits that are expected to be realized using these criteria. As of March 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 March 31, 2023 and December 31, 2022, deferred tax assets each totaled $0, respectively.

As of March 31, 2023 and December 31, 2022, 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 March 31, 2023, the tax years that remain subject to examination by the major tax jurisdictions to which the Company is subject generally include 2014 through 2022. In addition, as of March 31, 2023, the tax years that remain subject to examination by the major tax jurisdictions to which MHI TRS is subject, because of open NOL carryforwards, generally include 2014 through 2022.

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.

Stock-Based Compensation

Stock-based Compensation – The Company’s 2022 Long-Term Incentive Plan (the “2022 Plan”), which the Company’s stockholders approved in April 2022, permits the grant of stock options, restricted stock, unrestricted stock and service/performance share compensation awards to its employees and directors for up to 2,000,000 shares of common stock. The Company believes that such awards better align the interests of its employees with those of its stockholders.

Under the 2022 Plan, the Company may issue a variety of service or performance-based stock awards, including nonqualified stock options. The value of the awards is charged to compensation expense on a straight-line basis over the vesting or service period based on the value of the award as determined by the Company’s stock price on the date of grant or issuance. As of March 31, 2023, 451,668 service-based stock awards have been granted.

The Company’s 2013 Long-Term Incentive Plan (the “2013 Plan”), which the Company’s stockholders approved in April 2013, permits the grant of stock options, restricted stock, unrestricted stock and service or performance share compensation awards to its employees and directors for up to 750,000 shares of common stock. All future awards will be made under the 2022 Plan.

As of March 31, 2023, under the 2013 Plan, the Company has made cumulative service-based stock awards totaling 745,160 shares, including 700,160 unrestricted shares and 45,000 restricted shares issued to certain executives and employees and to its independent directors. All awards have vested except for 45,000 shares issued to certain employees, which will vest over the next two years. The remaining 4,840 shares have been deregistered.

Under the 2013 Plan, the Company was able to issue a variety of performance-based stock awards, including nonqualified stock options. The value of the awards is charged to compensation expense on a straight-line basis over the vesting or service period based on the value of the award as determined by the Company’s stock price on the date of grant or issuance. As of March 31, 2023, no performance-based stock awards have been granted. Total compensation cost recognized under the 2013 Plan for the three months ended March 31, 2023 and 2022 was $22,883 and $406,007, respectively.

Additionally, the Company sponsors and maintains an Employee Stock Ownership Plan (“ESOP”) and related trust for the benefit of its eligible employees. We reflect unearned ESOP shares as a reduction of stockholders’ equity. Dividends on unearned ESOP shares, when paid, are considered compensation expense. The Company recognizes compensation expense equal to the fair value of the Company’s ESOP shares during the periods in which they are committed to be released. For the three months ended March 31, 2023 and 2022, the ESOP compensation cost was $12,195 and $14,154, respectively. To the extent that the fair value of the Company’s ESOP shares differs from the cost of such shares, the differential is recognized as additional paid in capital. Because the ESOP is internally leveraged through a loan from the Company to the ESOP, the loan receivable by the Company from the ESOP is not reported as an asset nor is the debt of the ESOP shown as a liability in the consolidated financial statements.

Advertising

Advertising – Advertising costs, including internet advertising, were $705,703, and $622,684 for the three months ended March 31, 2023 and 2022, respectively. Advertising costs are expensed as incurred.

Involuntary Conversion of Assets

Involuntary Conversion of Assets – We record gains or losses on involuntary conversions of assets due to recovered insurance proceeds to the extent the undepreciated cost of a nonmonetary asset differs from the amount of monetary proceeds received. The gain on involuntary conversion of assets, is reflected in the consolidated statements of operations.

Comprehensive Income

Comprehensive Income – Comprehensive income as defined, includes all changes in equity during a period from non-owner sources. We do not have any items of comprehensive income other than net income.

Segment Information

Segment Information – We have determined that our business is conducted in one reportable segment: hotel ownership.

Use of Estimates

Use of Estimates – The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

New Accounting Pronouncements

New Accounting Pronouncements –In June 2016, the FASB issued ASU 2016-13, Financial Instruments -Credit Losses(Topic 326), which replaced the existing "incurred loss" approach with an "expected loss" model for financial instruments measured at amortized cost. For trade and other receivables, the forward looking "expected loss" model will generally result in the earlier recognition of allowances for losses. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments -Credit Losses, which clarified that operating lease receivables accounted for under ASC 842 are not in the scope of ASU 2016-13. With the adoption of this standard on January 1, 2023, we have determined there is no significant impact on the Company's consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the existing guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). The update provides guidance in accounting for changes in contracts, hedging relationships, and other transactions as a result of this reference rate reform. The option expedients and exceptions contained within this update, in general, only apply to contract amendments and modifications entered into prior to January 1, 2023. The provisions of this update will most likely affect our financial reporting process relating to modifications of contracts with lenders and the hedging contracts associated with each respective modified borrowing contract. In general, the provision of the update would benefit us by allowing modifications of debt contracts with lenders that fall under the guidance of ASC Topic 740 to be accounted for as a non-substantial modification and

not be considered debt extinguishment. As of December 31, 2022, we have not entered into any contract modification as it directly relates to reference rate reform, with the exception of a modification to the mortgages on The Whitehall in Houston, Texas, which changed the reference rate from LIBOR to the New York Prime Rate, and on Hotel Alba Tampa, Tapestry Collection in Tampa, Florida, which changed the reference rate from LIBOR to SOFR. On March 14, 2023, the Company modified the floating-rate mortgage on the DoubleTree by Hilton Philadelphia Airport to change the reference rate from 1-month LIBOR to SOFR. The Company anticipates no additional loan modifications will be required. With the adoption of this standard on January 1, 2023, we have determined there is no significant impact on the Company's consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Schedule of Cash, Cash Equivalents and Restricted Cash

	As of		As of
	March 31, 2023		March 31, 2022
Cash and cash equivalents	$	23,429,595	$	20,184,327
Restricted cash		8,556,641		10,137,452
Cash, cash equivalents and restricted cash at the end of the period	$	31,986,236	$	30,321,779

Schedule of Recurring Assets and Liabilities Measured at Fair Value

The following table represents our assets and liabilities measured at fair value and the basis for that measurement (our interest rate swaps are the only assets or liabilities measured at fair value on a recurring basis, there were no non-recurring assets or liabilities for fair value measurements as of March 31, 2023 and December 31, 2022, respectively):

	Level 1		Level 2			Level 3
December 31, 2022
Interest rate swaps (1)	$	—	$	1,308,503		$	—
Mortgage loans (2)	$	—	$	(306,300,855	)	$	—
March 31, 2023
Interest rate swaps (1)	$	—	$	886,381		$	—
Mortgage loans (2)	$	—	$	(305,519,476	)	$	—

(1)Interest rate swaps, one of which swaps the Loan Rate for a fixed interest rate of 5.237% for the DoubleTree by Hilton Philadelphia Airport mortgage and is valued at March 31, 2023 and December 31, 2022, and the other which swaps the Loan Rate for a fixed rate of 5.576% for the Hotel Alba Tampa mortgage and is valued only at March 31, 2023 and December 31, 2022. Notional amounts of the swaps approximate the declining balance of the loan.

(2)Mortgage loans had a carrying value on our Consolidated Balance Sheets of $318,555,434 and $320,482,103 as of March 31, 2023 and December 31, 2022, respectively.

Schedule of Minimum Future Lease Payments Receivable

A schedule of minimum future lease payments receivable for the remaining nine and twelve-month periods is as follows:

For the remaining nine months ending December 31, 2023	$	644,324
December 31, 2024		837,589
December 31, 2025		1,334,430
December 31, 2026		748,994
December 31, 2027		735,964
December 31, 2028 and thereafter		9,430,066
Total	$	13,731,367

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Investment in Hotel Properties, Net (Tables)

3 Months Ended

Mar. 31, 2023

Real Estate [Abstract]

Schedule of Investment in Hotel Properties, Net

Investment in hotel properties, net as of March 31, 2023 and December 31, 2022 consisted of the following:

	March 31, 2023			December 31, 2022
Land and land improvements	$	61,042,514		$	60,934,859
Buildings and improvements		414,578,225			412,717,919
Right of use assets		5,083,882			5,199,845
Furniture, fixtures and equipment		51,233,242			51,292,107
		531,937,863			530,144,730
Less: accumulated depreciation and impairment		(169,037,824	)		(165,074,005	)
Investment in Hotel Properties, Net	$	362,900,039		$	365,070,725

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Debt (Tables)

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Schedule of Mortgage Debt Obligations on Hotels

The following table sets forth our mortgage debt obligations on our hotels.

	Balance Outstanding as of
	March 31,			December 31,			Prepayment	Maturity	Amortization	Interest
Property	2023			2022			Penalties	Date	Provisions	Rate
The DeSoto (1)	$	30,980,343		$	31,219,022		Yes	7/1/2026	25 years	4.25%
DoubleTree by Hilton Jacksonville    Riverfront (2)		32,247,511			32,416,570		Yes	7/11/2024	30 years	4.88%
DoubleTree by Hilton Laurel (3)		7,315,564			7,412,107		None	5/5/2023	25 years	5.25%
DoubleTree by Hilton Philadelphia Airport (4)		39,224,659			39,413,672		None	10/31/2023	30 years	LIBOR plus 2.27%
DoubleTree Resort by Hilton Hollywood    Beach (5)		52,414,063			52,724,475		(6)	10/1/2025	30 years	4.913%
Georgian Terrace (6)		40,231,417			40,492,622		(7)	6/1/2025	30 years	4.42%
Hotel Alba Tampa, Tapestry Collection by Hilton (7)		24,634,600			24,756,400		None	6/30/2025	(8)	SOFR plus 2.75%
Hotel Ballast Wilmington, Tapestry Collection by    Hilton (8)		31,467,418			31,699,775		Yes	1/1/2027	25 years	4.25%
Hyatt Centric Arlington (9)		47,269,977			47,534,606		Yes	10/1/2028	30 years	5.25%
The Whitehall (10)		14,164,141			14,226,067		None	2/26/2028	25 years	PRIME plus 1.25%
Total Mortgage Principal Balance	$	319,949,693		$	321,895,316
Deferred financing costs, net		(1,455,654	)		(1,480,779	)
Unamortized premium on loan		61,395			67,566
Total Mortgage Loans, Net	$	318,555,434		$	320,482,103

(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.
(2)	The note is subject to a pre-payment penalty until March 2024. Prepayment can be made without penalty thereafter.
(3)	On May 4, 2023, affiliates of the Company entered into loan documents to secure a $10.0 million mortgage loan on the DoubleTree by Hilton Laurel hotel located in Laurel, MD with Citi Real Estate Funding Inc. Pursuant to the loan documents, the mortgage loan: (i) has a principal balance of $10.0 million; (ii) has a maturity date of May 6, 2028; (iii) carries a fixed interest rate of 7.35%; (iv) requires payments of interest only; (v) cannot be prepaid until the last 4 months of the loan term; and (vi) contains customary representations, warranties, covenants and events of default for a mortgage loan.
(4)	The note bears a floating interest rate of 1-month LIBOR plus 2.27%, but we entered into a swap agreement to fix the rate at 5.237% through July 31, 2023. Under the swap agreement, notional amounts approximate the declining balance of the loan and we are responsible for any potential termination fees associated with early termination of the swap agreement.
(5)	With limited exception, the note may not be prepaid prior to June 2025.
(6)	With limited exception, the note may not be prepaid prior to February 2025.
(7)	The note bears a floating interest rate of SOFR plus 2.75% subject to a floor rate of 2.75%; with monthly principal payments of $40,600; the note provides that the mortgage can be extended for two additional periods of one year each, subject to certain conditions. On July 11, 2022, we entered into a swap agreement to fix the rate at 5.576%. The swap agreement reflects notional amounts approximate to the declining balance of the loan and we are responsible for any potential termination fees associated with early termination of the swap agreement.

(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.
(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%.

Schedule of Future Mortgage Debt Maturities

Total future mortgage debt maturities for the remaining nine and twelve-month periods, without respect to any extension of loan maturity or loan modification after March 31, 2023, were as follows:

For the remaining nine months ended December 31, 2023	$	51,594,623
December 31, 2024		38,069,573
December 31, 2025		116,078,656
December 31, 2026		58,588,969
December 31, 2027		1,757,220
December 31, 2028 and thereafter		53,860,652
Total future maturities	$	319,949,693

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Schedule of Minimum Future Lease Payments

A schedule of minimum future lease payments for the following nine and twelve-month periods is as follows:

For the remaining nine months ended December 31, 2023	$	507,069
December 31, 2024		678,300
December 31, 2025		684,672
December 31, 2026		673,413
December 31, 2027		342,503
December 31, 2028 and thereafter		13,521,694
Total	$	16,407,651

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Preferred Stock and Units (Tables)

3 Months Ended

Mar. 31, 2023

Preferred Stock And Units [Abstract]

Schedule of Series of Cumulative Redeemable Perpetual Preferred Stock

The following table sets forth our Cumulative Redeemable Perpetual Preferred Stock by series:

	Per					Number of Shares				Quarterly
	Annum			Liquidation		Issued and Outstanding as of				Distributions
Preferred Stock - Series	Rate			Preference		March 31, 2023		December 31, 2022		Per Share
Series B Preferred Stock		8.000	%	$	25.00		1,464,100		1,464,100	$	0.500000
Series C Preferred Stock		7.875	%	$	25.00		1,346,110		1,346,110	$	0.492188
Series D Preferred Stock		8.250	%	$	25.00		1,163,100		1,163,100	$	0.515625

Schedule of Series of Cumulative Redeemable Perpetual Preferred Units

The following table sets forth our Cumulative Redeemable Perpetual Preferred Units by series:

	Per					Number of Units				Quarterly
	Annum			Liquidation		Issued and Outstanding as of				Distributions
Preferred Units - Series	Rate			Preference		March 31, 2023		December 31, 2022		Per Unit
Series B Preferred Units		8.000	%	$	25.00		1,464,100		1,464,100	$	0.500000
Series C Preferred Units		7.875	%	$	25.00		1,346,110		1,346,110	$	0.492188
Series D Preferred Units		8.250	%	$	25.00		1,163,100		1,163,100	$	0.515625

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Retirement Plans (Tables)

3 Months Ended

Mar. 31, 2023

Retirement Benefits [Abstract]

Summary of Shares Allocations are Accounted For Fair Value on The Date of Allocations

The share allocations are accounted for at fair value on the date of allocation as follows:

	March 31, 2023				December 31, 2022
	Number of Shares		Fair Value		Number of Shares		Fair Value
Allocated shares		301,646	$	601,784		301,646	$	545,979
Committed to be released shares		6,389		12,746		—		—
Total Allocated and Committed-to-be-Released		308,035	$	614,530		301,646	$	545,979
Unallocated shares		357,788		713,787		364,177		659,160
Total ESOP Shares		665,823	$	1,328,317		665,823	$	1,205,139

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Indirect Hotel Operating Expenses (Tables)

3 Months Ended

Mar. 31, 2023

Other Income and Expenses [Abstract]

Summary of Indirect Hotel Operating Expenses

Indirect hotel operating expenses consists of the following expenses incurred by the hotels:

	Three Months Ended		Three Months Ended
	March 31, 2023		March 31, 2022
	(unaudited)		(unaudited)
Sales and marketing	$	4,209,770	$	3,563,962
General and administrative		3,463,800		3,240,579
Repairs and maintenance		2,219,568		2,115,327
Utilities		1,332,715		1,315,349
Property taxes		999,521		1,626,939
Management fees, including incentive		1,359,040		1,274,760
Franchise fees		1,071,519		908,035
Insurance		947,660		946,277
Information and telecommunications		922,779		929,106
Other		221,205		143,027
Total indirect hotel operating expenses	$	16,747,577	$	16,063,361

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Components of Income Tax Provision

The components of the income tax provision for the three months ended March 31, 2023 and 2022 are as follows:

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
Current:
Federal	$	—		$	—
State		15,182			9,654
		15,182			9,654
Deferred:
Federal		(259,952	)		(506,356	)
State		131,230			77,362
Subtotals		(128,722	)		(428,994	)
Change in deferred tax valuation allowance		128,722			428,994
		—			—
	$	15,182		$	9,654

Reconciliation of Statutory Federal Income Tax Provision (Benefit)

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
Statutory federal income tax provision (benefit)	$	294,566		$	(168,271	)
Federal tax impact of REIT election		(303,786	)		(252,786	)
Statutory federal income tax provision at TRS		(9,220	)		(421,057	)
Federal impact of PPP loan forgiveness		(56,470	)		—
State income tax provision (benefit), net of federal provision (benefit)		(47,850	)		1,717
Change in valuation allowance		128,722			428,994
	$	15,182		$	9,654

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Loss Per Share and Per Unit (Tables)

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Computation of Basic Net Loss Per Share

The computation of basic net loss per share is presented below:

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
Numerator
Net income (loss)	$	1,387,514		$	(810,944	)
Less: Net income allocated to participating share awards		(12,857	)		—		(1)
Net loss attributable to non-controlling interest		24,960			161,621
Undeclared distributions to preferred stockholders		(1,994,312	)		(1,936,617	)
Gain on extinguishment of preferred stock		—			78,175
Net loss attributable to common stockholders for EPS computation	$	(594,695	)	$	(2,507,765	)
Denominator
Weighted average number common shares outstanding for basic EPS computation		18,635,004			17,107,820
Basic net loss per common share:
Undistributed loss	$	(0.03	)	$	(0.15	)
Total basic	$	(0.03	)	$	(0.15	)

(1) Anti-dilutive, therefore not included.

Computation of Basic Net Loss Per Unit

Loss Per Unit – The computation of basic net loss per unit is presented below:

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
	(unaudited)			(unaudited)
Numerator
Net income (loss)	$	1,387,514		$	(810,944	)
Less: Net income allocated to participating unit awards		(12,857	)		—		(1)
Undeclared distributions to preferred unitholders		(1,994,312	)		(1,936,617	)
Gain on extinguishment of preferred units		—			78,175
Net loss attributable to unitholders for EPU computation	$	(619,655	)	$	(2,669,386	)
Denominator
Weighted average number of units outstanding for basic EPU computation		19,832,279			18,667,969
Basic net loss per unit:
Undistributed loss	$	(0.03	)	$	(0.14	)
Total basic	$	(0.03	)	$	(0.14	)

(1) Anti-dilutive, therefore not included.

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Organization and Description of Business - Additional Information (Detail)					3 Months Ended			5 Months Ended
	Feb. 26, 2023 USD ($)	Jun. 29, 2022 USD ($)	Jun. 28, 2022 USD ($)	Jun. 10, 2022 USD ($)	Mar. 31, 2023 USD ($) Hotel Room $ / shares shares	Sep. 30, 2022 Hotel	Mar. 31, 2022 USD ($) shares	Aug. 24, 2022 shares	Dec. 31, 2022 USD ($) $ / shares	Feb. 10, 2022 USD ($)
Organization Consolidation and Presentation of Financial Statements [Line Items]
Date of incorporation					Aug. 20, 2004
Rooms in hotel | Room					2,786
Number of independent hotels | Hotel					3
Date of commencement of business					Dec. 21, 2004
Number of hotels acquired before commencement of business | Hotel					6
Cash and cash equivalents					$ 23,429,595		$ 20,184,327		$ 21,918,680
Restricted cash					$ 8,556,641		$ 10,137,452
Common stock, par value | $ / shares					$ 0.01				$ 0.01
Interest reserves					$ 1,600,000
Mortgage Loans [Member] | The Whitehall [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Extended maturity date	Feb. 26, 2028
Excess Interest rate on mortgage debt	1.25%
Fixed interest rate	7.50%
Amortization Period					25 years
Real estate tax reserve and debt service reserve	$ 1,500,000
Series B Preferred Stock [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Issuance of common stock, shares | shares								45,900
Series C Preferred Stock [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Issuance of common stock, shares | shares								38,500
Series D Preferred Stock [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Issuance of common stock, shares | shares								1,900
Secured Notes [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Exit fee		$ 2,600,000
Accrued interest paid		20,000.00
Interest reserves		500,000			$ 1,100,000
Payment of secured notes with cash in hand		200,000
Payment to investors		8,300,000
Principal payments		$ 5,600,000
Double Tree by Hilton Raleigh Brownstone University Hotel [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Proceeds from sale of hotel property				$ 18,600,000
Net proceeds from from sale of hotel property				19,800,000
Principal payment of preferred stock				13,300,000
Accrued interest paid				200,000
Double Tree by Hilton Raleigh Brownstone University Hotel [Member] | Secured Notes [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Exit fee				$ 6,300,000
Exit fee [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Interest reserves					$ 500,000
Sheraton Louisville Riverside [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Proceeds from sale of hotel property										$ 11,500,000
Common Stock [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Issuance of common stock, shares | shares					64,278		175,268	806,849
Note Modification Agreement [Member] | Mortgage Loans [Member] | SOFR [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Excess Interest rate on mortgage debt			2.75%
Note Modification Agreement [Member] | Mortgage Loans [Member] | Hotel Alba Tampa [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Extended maturity date			Jun. 30, 2025
Extended maturity period			2 years
Increased principal balance			$ 25,000,000.0
Fixed interest rate			2.75%
Amortization Period			25 years
Amortization payments			$ 40,600
Operating Partnership guaranteed			12,500,000
Change in guaranty due to performance milestones			$ 6,250,000
Operating Partnership [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Percentage of operating partnership owned					95.90%
Commercial Unit of Hyde Resort & Residences and Hyde Beach House Resort & Residences [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Investment in number of hotels | Hotel					2
Hilton, DoubleTree and Hyatt Brands [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Number of hotels | Hotel						7

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Summary of Significant Accounting Policies - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2023 USD ($) Segment shares	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)	Sep. 30, 2022 USD ($)	Dec. 31, 2021 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Impairment of hotel properties	$ 0	$ 0
Federal Deposit Insurance Corporation protection limits	250,000
Un-amortized franchise fees	229,164		$ 241,038
Amortization expense	$ 11,874	12,007
Deferred income taxes				$ 0	$ 0
Minimum percentage of likelihood of realization of deferred tax assets	50.00%
Deferred tax assets valuation allowance percent				100.00%
Uncertain tax positions	$ 0		0
Compensation cost recognized	260,463	420,161
Advertising cost	$ 705,703	622,684
Number of reportable segment | Segment	1
Mortgage loans, net	$ 318,555,434		$ 320,482,103
ESOP [Member]
Summary Of Significant Accounting Policies [Line Items]
Compensation cost recognized	$ 12,195	14,154
2013 Plan [Member]
Summary Of Significant Accounting Policies [Line Items]
Shares issued under plan | shares	745,160
Unrestricted shares issued under plan | shares	700,160
Number of shares deregistered | shares	4,840
Compensation cost recognized	$ 22,883	406,007
2013 Plan [Member] | Executives Employees and Independent Directors [Member]
Summary Of Significant Accounting Policies [Line Items]
Unrestricted shares issued under plan | shares	45,000
2013 Plan [Member] | Executives [Member]
Summary Of Significant Accounting Policies [Line Items]
Shares issued but not vested | shares	45,000
2022 Long Term Incentive Plan [Member]
Summary Of Significant Accounting Policies [Line Items]
Service based stock awards granted | shares	451,668
2022 Long Term Incentive Plan [Member] | Employees and Directors [Member]
Summary Of Significant Accounting Policies [Line Items]
Shares issued under plan | shares	2,000,000
Other Operating Departments [Member]
Summary Of Significant Accounting Policies [Line Items]
Lease revenue	$ 300,000	$ 400,000
Maximum [Member] | 2013 Plan [Member] | Employees and Directors [Member]
Summary Of Significant Accounting Policies [Line Items]
Restricted, unrestricted and performance stock awards permitted to grant to employees and directors | shares	750,000
Buildings and Building Improvements [Member] | Minimum [Member]
Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives of the assets	7 years
Buildings and Building Improvements [Member] | Maximum [Member]
Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives of the assets	39 years
Furniture, Fixtures and Equipment [Member] | Minimum [Member]
Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives of the assets	3 years
Furniture, Fixtures and Equipment [Member] | Maximum [Member]
Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives of the assets	10 years

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Summary of Significant Accounting Policies - Summary of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents [Abstract]
Cash and cash equivalents	$ 23,429,595	$ 21,918,680	$ 20,184,327
Restricted cash	8,556,641		10,137,452
Cash, cash equivalents and restricted cash at the end of the period	$ 31,986,236		$ 30,321,779

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Summary of Significant Accounting Policies - Schedule of Recurring Assets and Liabilities Measured at Fair Value (Detail) - USD ($)		Mar. 31, 2023	Dec. 31, 2022
Derivatives Fair Value [Line Items]
Investment in hotel properties, net		$ 362,900,039	$ 365,070,725
Level 2 [Member] | Interest Rate Swaps [Member]
Derivatives Fair Value [Line Items]
Interest rate cap	[1]	886,381	1,308,503
Level 2 [Member] | Mortgage Loans [Member]
Derivatives Fair Value [Line Items]
Debt instruments measured at fair value	[2]	$ (305,519,476)	$ (306,300,855)

[1] Interest rate swaps, one of which swaps the Loan Rate for a fixed interest rate of 5.237% for the DoubleTree by Hilton Philadelphia Airport mortgage and is valued at March 31, 2023 and December 31, 2022, and the other which swaps the Loan Rate for a fixed rate of 5.576% for the Hotel Alba Tampa mortgage and is valued only at March 31, 2023 and December 31, 2022. Notional amounts of the swaps approximate the declining balance of the loan

[2] Mortgage loans had a carrying value on our Consolidated Balance Sheets of $318,555,434 and $320,482,103 as of March 31, 2023 and December 31, 2022, respectively.

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Summary of Significant Accounting Policies - Schedule of Recurring Assets and Liabilities Measured at Fair Value (Parenthetical) (Detail) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Derivatives Fair Value [Line Items]
Mortgage loans, net	$ 318,555,434	$ 320,482,103
DoubleTree by Hilton Philadelphia Airport [Member]
Derivatives Fair Value [Line Items]
Loan rate swapped for fixed interest rate	5.237%
Hotel Alba Tampa [Member]
Derivatives Fair Value [Line Items]
Loan rate swapped for fixed interest rate	5.576%

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Summary of Significant Accounting Policies - Schedule of Minimum Future Lease Payments Receivable (Detail)	Mar. 31, 2023 USD ($)
Leases [Abstract]
For the reamaining nine months ending December 31,2023	$ 644,324
December 31, 2024	837,589
December 31, 2025	1,334,430
December 31, 2026	748,994
December 31, 2027	735,964
December 31, 2028 and thereafter	9,430,066
Total	$ 13,731,367

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Investment in Hotel Properties, Net - Schedule of Investment in Hotel Properties, Net (Detail) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Investment in Hotel Properties, Gross	$ 531,937,863	$ 530,144,730
Less: accumulated depreciation and impairment	(169,037,824)	(165,074,005)
Investment in Hotel Properties, Net	362,900,039	365,070,725
Land and Land Improvements [Member]
Property, Plant and Equipment [Line Items]
Investment in Hotel Properties, Gross	61,042,514	60,934,859
Buildings and Improvements [Member]
Property, Plant and Equipment [Line Items]
Investment in Hotel Properties, Gross	414,578,225	412,717,919
Right of Use Assets [Member]
Property, Plant and Equipment [Line Items]
Investment in Hotel Properties, Gross	5,083,882	5,199,845
Furniture, Fixtures and Equipment [Member]
Property, Plant and Equipment [Line Items]
Investment in Hotel Properties, Gross	$ 51,233,242	$ 51,292,107

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Debt - Additional Information (Detail) - USD ($)					3 Months Ended
	Jun. 10, 2022	May 06, 2020	Apr. 28, 2020	Apr. 16, 2020	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Mortgage loan outstanding balance					$ 318,600,000	$ 320,500,000
Double Tree By Hilton Raleigh Brownstone University Raleigh North Carolina [Member]
Debt Instrument [Line Items]
Net proceeds from from sale of hotel property	$ 19,800,000
Promissory Note [Member]
Debt Instrument [Line Items]
Paycheck protection program loan term					2 years
Paycheck protection program extension loan term					5 years
Paycheck protection program loan interest rate					1.00%
Paycheck protection program loan repayment terms					Equal payments of principal and interest begin no later than 10 months following origination of the loan and are amortized over the remaining term of the loan.
Paycheck protection program loan amount					$ 2,100,000
Applications for loan forgiveness amount filed					$ 300,000
Promissory Note [Member] | Fifth Third Bank [Member]
Debt Instrument [Line Items]
Paycheck protection program loan amount		$ 952,700	$ 9,432,900
Promissory Note [Member] | Operating Partnership [Member]
Debt Instrument [Line Items]
Paycheck protection program loan amount				$ 333,500

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Debt - Schedule of Mortgage Debt Obligations on Hotels (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Mortgage loans	$ 319,949,693	$ 321,895,316
Deferred financing costs, net	(1,455,654)	(1,480,779)
Unamortized premium on loan	61,395	67,566
Total Mortgage Loans, Net	318,555,434	320,482,103
The DeSoto [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Mortgage loans	$ 30,980,343	31,219,022
Prepayment Penalties	Yes
Maturity Date	Jul. 01, 2026
Amortization Provisions, Term	25 years
Interest rate applicable to the mortgage loan	4.25%
DoubleTree by Hilton Jacksonville Riverfront [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Mortgage loans	$ 32,247,511	32,416,570
Prepayment Penalties	Yes
Maturity Date	Jul. 11, 2024
Amortization Provisions, Term	30 years
Interest rate applicable to the mortgage loan	4.88%
Double Tree by Hilton Laurel [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Mortgage loans	$ 7,315,564	7,412,107
Prepayment Penalties	None
Maturity Date	May 05, 2023
Amortization Provisions, Term	25 years
Interest rate applicable to the mortgage loan	5.25%
DoubleTree by Hilton Philadelphia Airport [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Mortgage loans	$ 39,224,659	39,413,672
Prepayment Penalties	None
Maturity Date	Oct. 31, 2023
Amortization Provisions, Term	30 years
Interest rate applicable to the mortgage loan	2.27%
DoubleTree Resort by Hilton Hollywood Beach [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Mortgage loans	$ 52,414,063	52,724,475
Maturity Date	Oct. 01, 2025
Amortization Provisions, Term	30 years
Interest rate applicable to the mortgage loan	4.913%
Georgian Terrace [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Mortgage loans	$ 40,231,417	40,492,622
Maturity Date	Jun. 01, 2025
Amortization Provisions, Term	30 years
Interest rate applicable to the mortgage loan	4.42%
Hotel Alba Tampa, Tapestry Collection by Hilton [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Mortgage loans	$ 24,634,600	24,756,400
Prepayment Penalties	None
Maturity Date	Jun. 30, 2025
Interest rate applicable to the mortgage loan	2.75%
Hotel Ballast Wilmington,Tapestry Collection by Hilton [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Mortgage loans	$ 31,467,418	31,699,775
Prepayment Penalties	Yes
Maturity Date	Jan. 01, 2027
Amortization Provisions, Term	25 years
Interest rate applicable to the mortgage loan	4.25%
Hyatt Centric Arlington [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Mortgage loans	$ 47,269,977	47,534,606
Prepayment Penalties	Yes
Maturity Date	Oct. 01, 2028
Amortization Provisions, Term	30 years
Interest rate applicable to the mortgage loan	5.25%
The Whitehall [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Mortgage loans	$ 14,164,141	$ 14,226,067
Prepayment Penalties	None
Maturity Date	Feb. 26, 2028
Amortization Provisions, Term	25 years
Interest rate applicable to the mortgage loan	1.25%

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Debt - Schedule of Mortgage Debt Obligations on Hotels (Parenthetical) (Detail) - USD ($)			3 Months Ended	9 Months Ended
	May 04, 2023	Feb. 26, 2023	Mar. 31, 2023	Sep. 30, 2022	Dec. 31, 2022	Jul. 11, 2022
Debt Instrument [Line Items]
Principal amount of mortgage loan			$ 319,949,693		$ 321,895,316
DoubleTree by Hilton Philadelphia Airport [Member]
Debt Instrument [Line Items]
Loan rate swapped for fixed interest rate			5.237%
fixed interest rate			5.237%
Mortgage Loans [Member] | The DeSoto [Member]
Debt Instrument [Line Items]
Amortization Period			25 years
Interest-only payment period			1 year
Period before maturity in which prepayment is allowed with out penalty				120 days
Principal amount of mortgage loan			$ 30,980,343		31,219,022
Maturity Date			Jul. 01, 2026
Mortgage Loans [Member] | Double Tree by Hilton Laurel [Member]
Debt Instrument [Line Items]
Amortization Period			25 years
Principal amount of mortgage loan			$ 7,315,564		7,412,107
Maturity Date			May 05, 2023
Mortgage Loans [Member] | Double Tree by Hilton Laurel [Member] | Subsequent Events [Member]
Debt Instrument [Line Items]
Principal amount of mortgage loan	$ 10.0
Loan rate swapped for fixed interest rate	7.35%
Maturity Date	May 06, 2028
fixed interest rate	7.35%
Mortgage Loans [Member] | DoubleTree by Hilton Jacksonville Riverfront [Member]
Debt Instrument [Line Items]
Amortization Period			30 years
Prepayment date before maturity in which prepayment is allowed with penalty			2024-03
Principal amount of mortgage loan			$ 32,247,511		32,416,570
Maturity Date			Jul. 11, 2024
Mortgage Loans [Member] | DoubleTree by Hilton Philadelphia Airport [Member]
Debt Instrument [Line Items]
Amortization Period			30 years
Principal amount of mortgage loan			$ 39,224,659		39,413,672
Floating interest rate period			1 month
Maturity Date			Oct. 31, 2023
Mortgage Loans [Member] | DoubleTree by Hilton Philadelphia Airport [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Excess Interest rate on mortgage debt			2.27%
Mortgage Loans [Member] | DoubleTree by Hilton Philadelphia Airport [Member] | Swap [Member]
Debt Instrument [Line Items]
Loan rate swapped for fixed interest rate			5.237%
Maturity Date			Jul. 31, 2023
fixed interest rate			5.237%
Mortgage Loans [Member] | DoubleTree Resort by Hilton Hollywood Beach [Member]
Debt Instrument [Line Items]
Amortization Period			30 years
Principal amount of mortgage loan			$ 52,414,063		52,724,475
Prepayment date before maturity			2025-06
Maturity Date			Oct. 01, 2025
Mortgage Loans [Member] | Georgian Terrace [Member]
Debt Instrument [Line Items]
Amortization Period			30 years
Principal amount of mortgage loan			$ 40,231,417		40,492,622
Prepayment date before maturity			2025-02
Maturity Date			Jun. 01, 2025
Mortgage Loans [Member] | Hotel Alba Tampa, Tapestry Collection by Hilton [Member]
Debt Instrument [Line Items]
Principal amount of mortgage loan			$ 24,634,600		24,756,400
Loan rate swapped for fixed interest rate			2.75%
Maturity Date			Jun. 30, 2025
Debt instrument periodic payment			$ 40,600
fixed interest rate			2.75%
Mortgage Loans [Member] | Hotel Alba Tampa, Tapestry Collection by Hilton [Member] | SOFR [Member]
Debt Instrument [Line Items]
Excess Interest rate on mortgage debt			2.75%
Mortgage Loans [Member] | Hotel Alba Tampa, Tapestry Collection by Hilton [Member] | Swap [Member]
Debt Instrument [Line Items]
Loan rate swapped for fixed interest rate						5.576%
fixed interest rate						5.576%
Mortgage Loans [Member] | Hotel Ballast Wilmington,Tapestry Collection by Hilton [Member]
Debt Instrument [Line Items]
Amortization Period			25 years
Interest-only payment period			1 year
Period before maturity in which prepayment is allowed with out penalty			120 days
Principal amount of mortgage loan			$ 31,467,418		31,699,775
Maturity Date			Jan. 01, 2027
Mortgage Loans [Member] | Hyatt Centric Arlington [Member]
Debt Instrument [Line Items]
Amortization Period			30 years
Principal amount of mortgage loan			$ 47,269,977		47,534,606
Debt instrument prepayment lockout period			5 years
Maturity Date			Oct. 01, 2028
Debt instrument prepayment without penalty period during final term			4 months
Mortgage Loans [Member] | Hyatt Centric Arlington [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt instrument prepayment penalty period			6 years
Mortgage Loans [Member] | Hyatt Centric Arlington [Member] | Maximum [Member]
Debt Instrument [Line Items]
Debt instrument prepayment penalty period			10 years
Mortgage Loans [Member] | The Whitehall [Member]
Debt Instrument [Line Items]
Amortization Period			25 years
Principal amount of mortgage loan			$ 14,164,141		$ 14,226,067
Extended maturity date		Feb. 26, 2028
Excess Interest rate on mortgage debt		1.25%
Maturity Date			Feb. 26, 2028
Mortgage Loans [Member] | The Whitehall [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Excess Interest rate on mortgage debt			1.25%
Loan rate swapped for fixed interest rate			7.50%
fixed interest rate			7.50%

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Debt - Schedule of Future Mortgage Debt Maturities (Detail) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Debt Disclosure [Abstract]
For the remaining nine months ended December 31, 2023	$ 51,594,623
December 31, 2024	38,069,573
December 31, 2025	116,078,656
December 31, 2026	58,588,969
December 31, 2027	1,757,220
December 31, 2028 and thereafter	53,860,652
Total future maturities	$ 319,949,693	$ 321,895,316

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Commitments and Contingencies - Additional Information (Detail)			1 Months Ended			3 Months Ended		9 Months Ended
	Sep. 26, 2019 USD ($) RenewalPeriod	Mar. 01, 2018 USD ($) RenewalPeriod	Dec. 31, 2019 USD ($) ft²	Apr. 30, 2019	May 31, 2014	Mar. 31, 2023 USD ($) ft² Hotel	Mar. 31, 2022 USD ($)	Sep. 30, 2022 USD ($)	Dec. 29, 2016 USD ($)
Operating Leased Assets [Line Items]
Lease agreement				5 years
Number of hotels operate under franchise licenses | Hotel						7
Maximum amount allocated to purchase common stock under ESOP									$ 5,000,000.0
Balance on the ESOP loan commitment						$ 2,600,000
Leaving capacity for additional Borrowing on the ESOP loan commitment								$ 2,400,000
Debt service reserve							$ 1,500,000
Hotel Ballast [Member]
Operating Leased Assets [Line Items]
Monthly contribution of room revenues						4.00%
Restricted cash reserve						amount equal to one-twelfth (1/12) of the annual real estate taxes due for the properties
The DeSoto [Member]
Operating Leased Assets [Line Items]
Monthly contribution of room revenues						4.00%
Restricted cash reserve						amount equal to one-twelfth (1/12) of the annual real estate taxes due for the properties
Double Tree by Hilton Jacksonville Riverside [Member]
Operating Leased Assets [Line Items]
Monthly contribution of room revenues						4.00%
Restricted cash reserve						amount equal to one-twelfth (1/12) of the annual real estate taxes due for the properties
DoubleTree Resort by Hilton Hollywood Beach [Member]
Operating Leased Assets [Line Items]
Monthly contribution of room revenues						4.00%
Restricted cash reserve						amount equal to one-twelfth (1/12) of the annual real estate taxes due for the properties
Whitehall [Member]
Operating Leased Assets [Line Items]
Monthly contribution of room revenues						4.00%
Georgian Terrace [Member]
Operating Leased Assets [Line Items]
Monthly contribution of room revenues						4.00%
Restricted cash reserve						amount equal to one-twelfth (1/12) of the annual real estate taxes due for the properties
DoubleTree by Hilton Philadelphia Airport [Member]
Operating Leased Assets [Line Items]
Monthly contribution of room revenues						4.00%
Minimum [Member]
Operating Leased Assets [Line Items]
Franchise fees of room revenues						3.00%
Additional fees of gross revenues from the hotels						3.00%
Franchise agreement expiry date						2024-10
Maximum [Member]
Operating Leased Assets [Line Items]
Franchise fees of room revenues						5.00%
Additional fees of gross revenues from the hotels						4.00%
Franchise agreement expiry date						2038-03
Maximum [Member] | ESOP [Member]
Operating Leased Assets [Line Items]
Borrowed amount									$ 5,000,000.0
Chesapeake Hospitality [Member] | Individual Hotel Management Agreements [Member]
Operating Leased Assets [Line Items]
Number of wholly-owned hotels operated under master management agreement | Hotel						10
Expiry date of master management agreement						on March 31, 2035 and may be extended for up to two additional periods of five years each, subject to the approval of both parties.
Master management agreement expiration date						Mar. 31, 2035
Hyatt Centric Arlington [Member]
Operating Leased Assets [Line Items]
Monthly contribution of room revenues						4.00%
Hyatt Centric Arlington [Member] | Franchise Agreement with Affiliate of Hyatt Hotels Corporation Operating as Hyatt Centric Arlington [Member]
Operating Leased Assets [Line Items]
Rent expense						$ 139,101	72,013
Rental payments per year in base rent under ground lease		$ 50,000
Ground lease percentage rent on gross rooms revenues in excess of thresholds		3.50%
Initial term of ground lease expires year		2025
Number of additional renewal periods extended under ground lease | RenewalPeriod		5
Duration period under ground lease for each renewal periods extended		10 years
Hyde Beach House [Member] | Management Agreement for Parking Garage and Poolside [Member]
Operating Leased Assets [Line Items]
Rent expense						$ 67,750	67,750
Lessee, operating lease, option to extend						initial term that expires in 2034 and which may be extended for four additional renewal periods of 5 years each
Lessee, operating lease, existence of option to extend [true false]	true
Annual payment	$ 270,100
Rental payments, Percentage of increases per year	5.00%
Rental payments, Percentage of increases, Term	every five years
Lessee, operating lease expiration year	2034
Number of additional renewal periods | RenewalPeriod	4
Additional renewal of agreement	5 years
Williamsburg Virginia [Member]
Operating Leased Assets [Line Items]
Area of commercial space leased | ft²			8,500
Rent expense			$ 218,875			$ 55,902	55,902
Lease, agreement term			10 years
Lease rent increase each successive period percentage			3.00%
Tenant improvement allowance			$ 200,000
Commencement date of agreement						Jan. 01, 2020
The DeSoto Hotel Property [Member]
Operating Leased Assets [Line Items]
Area of commercial space leased | ft²						2,086
Operating lease, expiring date						Oct. 31, 2006
Duration period under renewal option second						5 years
Expiration date three under renewal option second						Oct. 31, 2026
Rent expense						$ 20,983	20,983
Hotel Alba Tampa [Member]
Operating Leased Assets [Line Items]
Rent expense						$ 651	$ 653
Lease agreement				5 years		5 years
Commencement date of agreement				2019-07		2009-07
Lessee, operating lease, option to extend						In May 2014, we extended the agreement for an additional five years. We signed a new agreement in April 2019, which commenced in July 2019, goes for five years and can be renewed for an additional five years. The new agreement expires in July 2024,
Lessee, operating lease, existence of option to extend [true false]				true	true
Operating lease, expiring date						2024-07
Annual payment						$ 2,432
Additional renewal of agreement				5 years	5 years	5 years
Furniture, Fixtures and Equipment [Member]
Operating Leased Assets [Line Items]
Financing arrangement expiration date						2023-12
Financing arrangement expiration date						2026-06
Six Year Operating Lease Property [Member] | The DeSoto Hotel Property [Member]
Operating Leased Assets [Line Items]
Duration of operating lease term						6 years
Ninety Nine Year Operating Lease Property [Member] | The DeSoto Hotel Property [Member]
Operating Leased Assets [Line Items]
Duration of operating lease term						99 years
Operating lease, expiring date						Jul. 31, 2086
Rental income recognized during period						$ 0
Original lump sum rent payment received						$ 990

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Commitments and Contingencies - Schedule of Minimum Future Lease Payments (Detail)	Mar. 31, 2023 USD ($)
Finance Lease, Liability, to be Paid [Abstract]
For the remaining nine months ended December 31, 2023	$ 507,069
December 31, 2024	678,300
December 31, 2025	684,672
December 31, 2026	673,413
December 31, 2027	342,503
December 31, 2028 and thereafter	13,521,694
Total	$ 16,407,651

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Preferred Stock and Units - Additional Information (Detail) - USD ($)		3 Months Ended
	Mar. 15, 2023	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Preferred Units [Line Items]
Preferred stock, shares authorized		11,000,000		11,000,000
Preferred stock, liquidation preference per share		$ 25.00		$ 25.00
Preferred dividends paid	$ 2,000,000.0	$ 1,994,312
Total declared and undeclared, unpaid cash dividends to preferred stockholders		1,994,312	$ 1,936,617
Preferred stock amount of undeclared and cumulative preferred dividends		23,900,000
Preferred stock amount of undeclared and cumulative preferred dividends		$ 23,900,000
Sotherly Hotels LP [Member]
Preferred Units [Line Items]
Preferred stock, liquidation preference per share		$ 25.00		$ 25.00
Preferred dividends paid		$ 1,994,312
Total declared and undeclared, unpaid cash dividends to preferred stockholders		$ 1,994,312	$ 1,936,617
8.0% Series B Cumulative Redeemable Perpetual Preferred Stock [Member]
Preferred Units [Line Items]
Preferred stock, liquidation preference per share		$ 25.00
Total undeclared and unpaid cash dividends		$ 8,784,600
7.875% Series C Cumulative Redeemable Perpetual Preferred Stock [Member]
Preferred Units [Line Items]
Preferred stock, shares authorized		11,000,000		11,000,000
Preferred stock, liquidation preference per share		$ 25.00
Total undeclared and unpaid cash dividends		$ 7,950,470
8.25% Series D Cumulative Redeemable Perpetual Preferred Stock [Member]
Preferred Units [Line Items]
Preferred stock, shares authorized		11,000,000		11,000,000
Preferred stock, liquidation preference per share		$ 25.00
Total undeclared and unpaid cash dividends		$ 7,196,681
8.0% Series B Cumulative Redeemable Perpetual Preferred Units [Member]
Preferred Units [Line Items]
Preferred stock, shares authorized		11,000,000		11,000,000
Total undeclared and unpaid cash dividends		$ 8,784,600
7.875% Series C Cumulative Redeemable Perpetual Preferred Units [Member]
Preferred Units [Line Items]
Total undeclared and unpaid cash dividends		7,950,470
8.25% Series D Cumulative Redeemable Perpetual Preferred Units [Member]
Preferred Units [Line Items]
Total undeclared and unpaid cash dividends		$ 7,196,681

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Preferred Stock and Units - Schedule of Series of Cumulative Redeemable Perpetual Preferred Stock (Detail) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Class Of Stock [Line Items]
Preferred Stock, Liquidation Preference	$ 25.00	$ 25.00
8.0% Series B Cumulative Redeemable Perpetual Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred Stock, Per Annum Rate	8.00%
Preferred Stock, Liquidation Preference	$ 25.00
Preferred Stock, Number of Shares Issued	1,464,100	1,464,100
Preferred Stock, Number of Shares Outstanding	1,464,100	1,464,100
Preferred Stock, Quarterly Distributions Per Share	$ 0.500000
7.875% Series C Cumulative Redeemable Perpetual Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred Stock, Per Annum Rate	7.875%	7.875%
Preferred Stock, Liquidation Preference	$ 25.00
Preferred Stock, Number of Shares Issued	1,346,110	1,346,110
Preferred Stock, Number of Shares Outstanding	1,346,110	1,346,110
Preferred Stock, Quarterly Distributions Per Share	$ 0.492188
8.25% Series D Cumulative Redeemable Perpetual Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred Stock, Per Annum Rate	8.25%	8.25%
Preferred Stock, Liquidation Preference	$ 25.00
Preferred Stock, Number of Shares Issued	1,163,100	1,163,100
Preferred Stock, Number of Shares Outstanding	1,163,100	1,163,100
Preferred Stock, Quarterly Distributions Per Share	$ 0.515625

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Preferred Stock and Units - Schedule of Series of Cumulative Redeemable Perpetual Preferred Units (Detail) - Sotherly Hotels LP [Member] - $ / shares	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
8.0% Series B Cumulative Redeemable Perpetual Preferred Units [Member]
Preferred Units [Line Items]
Preferred Units, Per Annum Rate	8.00%
Preferred Units, Liquidation Preference	$ 25.00
Preferred Units, Number of Units Issued	1,464,100	1,464,100
Preferred Units, Number of Units Outstanding	1,464,100	1,464,100
Preferred Units, Quarterly Distributions Per Unit	$ 0.500000
7.875% Series C Cumulative Redeemable Perpetual Preferred Units [Member]
Preferred Units [Line Items]
Preferred Units, Per Annum Rate	7.875%
Preferred Units, Liquidation Preference	$ 25.00
Preferred Units, Number of Units Issued	1,346,110	1,346,110
Preferred Units, Number of Units Outstanding	1,346,110	1,346,110
Preferred Units, Quarterly Distributions Per Unit	$ 0.492188
8.25% Series D Cumulative Redeemable Perpetual Preferred Units [Member]
Preferred Units [Line Items]
Preferred Units, Per Annum Rate	8.25%
Preferred Units, Liquidation Preference	$ 25.00
Preferred Units, Number of Units Issued	1,163,100	1,163,100
Preferred Units, Number of Units Outstanding	1,163,100	1,163,100
Preferred Units, Quarterly Distributions Per Unit	$ 0.515625

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Common Stock and Units - Additional Information (Detail) $ / shares in Units, $ in Millions													3 Months Ended		5 Months Ended	12 Months Ended
	Jan. 23, 2023 shares	Jan. 12, 2023 shares	Nov. 01, 2022 shares	Aug. 23, 2022 shares	Aug. 18, 2022 shares	Jul. 01, 2022 shares	May 19, 2022 shares	Apr. 19, 2022 shares	Apr. 11, 2022 shares	Mar. 31, 2022 shares	Mar. 24, 2022 shares	Jan. 21, 2022 shares	Mar. 31, 2023 USD ($) $ / shares shares	Mar. 31, 2022 USD ($) shares	Aug. 24, 2022 shares	Dec. 16, 2021 shares	Dec. 31, 2022 USD ($) $ / shares shares	Jul. 21, 2022 shares	May 23, 2022 shares	Feb. 15, 2022 shares
Class of Stock [Line Items]
Common stock, shares authorized													69,000,000				69,000,000
Common stock, par value | $ / shares													$ 0.01				$ 0.01
Voting right													Each outstanding share of common stock entitles the holder to one vote on all matters submitted to a vote of stockholders.
Common stock, shares outstanding													19,235,803				18,951,525
Common stock exchange ratio													1
Redemption of units in operating partnership																0
Operating partnership units converted			217,845			40,687	50,000
Operating Partnership common units outstanding													20,060,991				19,776,713
Operating Partnership common units not owned													825,188				825,188
Unpaid common dividends and distributions amount to holders | $													$ 2.1
Restricted shares issued														30,300
Debt service reserve | $														$ 1.5
Series B Preferred Stock
Class of Stock [Line Items]
Issuance of common stock, shares															45,900
Series C Preferred Stock
Class of Stock [Line Items]
Issuance of common stock, shares															38,500
Series D Preferred Stock
Class of Stock [Line Items]
Issuance of common stock, shares															1,900
Privately Negotiated Share Exchange Agreement [Member] | Series B Preferred Stock
Class of Stock [Line Items]
Issuance of common stock, shares				13,000	11,000			5,000	4,000	5,900	7,000
Privately Negotiated Share Exchange Agreement [Member] | Series C Preferred Stock
Class of Stock [Line Items]
Issuance of common stock, shares				3,200	7,100			10,600	8,000	6,600	3,000
Privately Negotiated Share Exchange Agreement [Member] | Series D Preferred Stock
Class of Stock [Line Items]
Issuance of common stock, shares					1,900
Sotherly Hotels LP [Member]
Class of Stock [Line Items]
Fair market value | $													$ 1.6				$ 1.5
Common Stock [Member]
Class of Stock [Line Items]
Unrestricted shares issued												175,268						167,390	37,428	175,268
Issuance of common stock, shares													64,278	175,268	806,849
Restricted shares issued													220,000	15,000
Common Stock [Member] | Director [Member]
Class of Stock [Line Items]
Restricted shares issued		15,000
Common Stock [Member] | Directors, Officers, and Employees [Member]
Class of Stock [Line Items]
Restricted shares issued	205,000
Issuance of unrestricted shares													64,278
Common Stock [Member] | Privately Negotiated Share Exchange Agreement [Member]
Class of Stock [Line Items]
Issuance of common stock, shares				140,130	178,800			153,504	116,640	120,875	96,900
Common Stock [Member] | Sotherly Hotels LP [Member]
Class of Stock [Line Items]
Number of issued unit in Operating Partnership												15,000

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Related Party Transactions - Additional Information (Detail)		3 Months Ended
	Dec. 13, 2019 ft² Resort	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2019
Related Party Transaction [Line Items]
Net operating income		$ 5,520,122	$ 3,925,204
Our Town Hospitality [Member]
Related Party Transaction [Line Items]
Accounts receivable - affiliate		300,000		$ 300,000
Accounts payable - affiliate		$ 1,100,000		$ 1,300,000
Our Town Hospitality [Member] | Master Agreement [Member]
Related Party Transaction [Line Items]
Number of rental programs | Resort	2
Andrew M. Sims [Member] | Our Town Hospitality [Member]
Related Party Transaction [Line Items]
Percentage of total outstanding ownership interests		63.00%
David R. Folsom [Member] | Our Town Hospitality [Member]
Related Party Transaction [Line Items]
Percentage of total outstanding ownership interests		7.00%
Andrew M. Sims Jr [Member] | Our Town Hospitality [Member]
Related Party Transaction [Line Items]
Percentage of total outstanding ownership interests		15.00%
Our Town Hospitality [Member]
Related Party Transaction [Line Items]
Area of office space subleased | ft²	2,245
Sublease term					5 years
Additional renewal of agreement					5 years
Lessee, operating lease, existence of option to extend [true false]		true
Lease payments due		$ 284,549	184,620
Employee medical benefits paid		500,000	900,000
Our Town Hospitality [Member] | Master Agreement [Member]
Related Party Transaction [Line Items]
Base management and administrative fees earned by related party		1,100,000	1,000,000.0
Our Town Hospitality [Member] | OTH Master Agreement [Member]
Related Party Transaction [Line Items]
Net operating income		$ 250,000
Percentage of management fee due		2.50%
Management fee of gross revenues for first full fiscal year		2.00%
Management fee of gross revenues for second full fiscal year		2.25%
Management fee of gross revenues for every year thereafter		2.50%
Incentive management fee equal to increase in gross operating profit percentage	10.00%
Maximum incentive management fee of gross revenues	0.25%
Incentive management fees expense by related party		$ 222,958	258,538
Immediate Family Members of Chairman [Member]
Related Party Transaction [Line Items]
Total compensation for related parties		$ 186,135	$ 132,699

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Retirement Plans - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022	Dec. 29, 2016
Defined Benefit Plan Disclosure [Line Items]
Employer contribution for first 3% of employee contributions	100.00%
Employer contribution for next 2% of employee contributions	50.00%
Percentage of first specified employee contributions	3.00%
Percentage of next specified employee contributions	2.00%
Contribution for retirement plan	$ 34,009	$ 23,139
Maximum amount allocated to purchase common stock under ESOP				$ 5,000,000.0
Total number of ESOP shares	308,035
Fair value of ESOP released from suspense account and recognized compensation cost	$ 614,530
Compensation cost recognized	$ 12,195	$ 14,154
Number of non committed, unearned ESOP shares	357,788		364,177
Fair value of unallocated ESOP shares	$ 713,787		$ 659,160
Number of ESOP shares allocated	301,646		301,646
Number of ESOP shares committed to be released	6,389
ESOP [Member]
Defined Benefit Plan Disclosure [Line Items]
Number of common stock, shares purchased	682,500
Purchased common stock, value	$ 4,900,000

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Retirement Plans - Summary of Shares Allocations are Accounted For Fair Value on The Date of Allocations (Detail) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Retirement Benefits [Abstract]
Number of ESOP shares allocated	301,646	301,646
Number of ESOP shares committed to be released	6,389
Total number of ESOP allocated and committed-to-be-released	308,035	301,646
Number of non committed, unearned ESOP shares	357,788	364,177
Total number of ESOP Shares	665,823	665,823
Fair value of ESOP allocated shares	$ 601,784	$ 545,979
Fair value of ESOP Committed-to-be released shares	12,746
Total fair value of ESOP allocated and committed-to-be-released	614,530	545,979
Fair value of ESOP unallocated shares	713,787	659,160
Total fair value of ESOP Shares	$ 1,328,317	$ 1,205,139

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Indirect Hotel Operating Expenses - Summary of Indirect Hotel Operating Expenses (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	$ 16,747,577	$ 16,063,361
Sales and Marketing [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	4,209,770	3,563,962
General and Administrative [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	3,463,800	3,240,579
Repairs and Maintenance [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	2,219,568	2,115,327
Utilities [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	1,332,715	1,315,349
Property Taxes [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	999,521	1,626,939
Management Fees, Including Incentive [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	1,359,040	1,274,760
Franchise Fees [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	1,071,519	908,035
Insurance [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	947,660	946,277
Information and Telecommunications [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	922,779	929,106
Other [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	$ 221,205	$ 143,027

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Income Taxes - Components of Income Tax Provision (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Current:
State	$ 15,182	$ 9,654
Total	15,182	9,654
Deferred:
Federal	(259,952)	(506,356)
State	131,230	77,362
Subtotals	(128,722)	(428,994)
Change in deferred tax valuation allowance	128,722	428,994
Income tax (benefit) provision	$ 15,182	$ 9,654

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Income Taxes - Reconciliation of Statutory Federal Income Tax Provision (Benefit) (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Effective Income Tax Rate Reconciliation, Amount [Abstract]
Statutory federal income tax provision	$ 294,566	$ (168,271)
Federal tax impact of REIT election	(303,786)	(252,786)
Federal impact of PPP loan forgiveness	(56,470)
State income tax provision (benefit), net of federal provision (benefit)	(47,850)	1,717
Change in valuation allowance	128,722	428,994
Income tax (benefit) provision	15,182	9,654
TRS [Member]
Effective Income Tax Rate Reconciliation, Amount [Abstract]
Statutory federal income tax provision	$ (9,220)	$ (421,057)

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Loss Per Share and Per Unit - Computation of Basic Net Loss Per Share (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Numerator
Net income (loss)	$ 1,387,514	$ (810,944)
Less: Net income allocated to participating share awards	(12,857)
Net loss attributable to non-controlling interest	24,960	161,621
Undeclared distributions to preferred stockholders	(1,994,312)	(1,936,617)
Gain on extinguishment of preferred stock		78,175
Net loss attributable to common stockholders for EPS computation	$ (594,695)	$ (2,507,765)
Denominator
Weighted average number common shares outstanding for basic EPS computation	18,635,004	17,107,820
Basic net loss per common share:
Undistributed loss	$ (0.03)	$ (0.15)
Total basic	$ (0.03)	$ (0.15)

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Loss Per Share and Per Unit - Computation of Basic Net Loss Per Unit (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Numerator
Net income (loss)	$ 1,387,514	$ (810,944)
Undeclared distributions to preferred stockholders	$ (1,994,312)	(1,936,617)
Gain on extinguishment of preferred units		$ 78,175
Basic net loss per unit:
Undistributed loss	$ (0.03)	$ (0.15)
Sotherly Hotels LP [Member]
Numerator
Net income (loss)	$ 1,387,514	$ (810,944)
Undeclared distributions to preferred stockholders	(1,994,312)	(1,936,617)
Gain on extinguishment of preferred units		78,175
Net loss attributable to unitholders for EPU computation	$ (619,655)	$ (2,669,386)
Denominator
Weighted average number of units outstanding for basic EPU computation	19,832,279	18,667,969
Basic net loss per unit:
Undistributed loss	$ (0.03)	$ (0.14)
Total basic	$ (0.03)	$ (0.14)

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Subsequent Events- Additional Information (Detail) - Subsequent Events [Member] - USD ($) $ / shares in Units, $ in Millions	May 04, 2023	Apr. 28, 2023	Apr. 24, 2023
Series B Preferred Stock [Member]
Subsequent Event [Line Items]
Dividend paid per share			$ 0.50
Series C Preferred Stock [Member]
Subsequent Event [Line Items]
Dividend paid per share			0.4921875
Series D Preferred Stock [Member]
Subsequent Event [Line Items]
Dividend paid per share			$ 0.515625
Common Stock [Member]
Subsequent Event [Line Items]
Conversion of units in Operating Partnership to shares of common stock, shares		75,000
Double Tree By Hilton Laurel [Member]
Subsequent Event [Line Items]
Mortgage Loan Related to Property Sales	$ 10.0
Mortgage loans of principal balance	$ 10.0
Maturity date of mortgage loan	May 06, 2028
Interest rate of mortgage loan	7.35%