10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2016

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.)

410 West Francis Street

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  x    No  ¨Sotherly Hotels LP    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files.)

Sotherly Hotels Inc.    Yes  x    No  ¨Sotherly Hotels LP    Yes  x    No  ¨

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

Sotherly Hotels Inc.

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-accelerated Filer	¨	Smaller Reporting Company	x

Sotherly Hotels LP

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-accelerated Filer	x	Smaller Reporting Company	¨

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  xSotherly Hotels LP    Yes  ¨    No  x

As of May 10, 2016, there were 14,949,651 shares of Sotherly Hotels Inc.’s common stock issued and outstanding.  

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 preferred interest as the “Preferred Interest.”  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, 2016 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 in 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 – Equity; and

· Note 12 – Income Per Share and Per Unit;

· Item 4 - Controls and Procedures; and

· Item 6 - Certifications of CEO and CFO Pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act.

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SOTHERLY HOTELS INC.

SOTHERLY HOTELS LP

INDEX

		Page
PART I
Item 1.	Consolidated Financial Statements	4
	Sotherly Hotels Inc.	4
	Consolidated Balance Sheets as of March 31, 2016 (unaudited) and December 31, 2015	4
	Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2016 and 2015	5
	Consolidated Statement of Changes in Equity (unaudited) for the Three Months Ended March 31, 2016	6
	Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2016 and 2015	7
	Sotherly Hotels LP	8
	Consolidated Balance Sheets as of March 31, 2016 (unaudited) and December 31, 2015	8
	Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2016 and 2015	9
	Consolidated Statement of Changes in Partners’ Capital (unaudited) for the Three Months Ended March 31, 2016	10
	Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2016 and 2015	11
	Notes to Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4	Controls and Procedures	38
PART II
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41

3

PART I

Item 1. Consolidated Financial Statements

SOTHERLY HOTELS INC.

CONSOLIDATED BALANCE SHEETS

	March 31, 2016			December 31, 2015
	(unaudited)
ASSETS
Investment in hotel properties, net	$	356,277,837		$	354,963,242
Cash and cash equivalents		14,985,925			11,493,914
Restricted cash		3,630,274			5,793,840
Accounts receivable, net		3,848,461			4,071,175
Accounts receivable-affiliate		208,726			226,552
Loan proceeds receivable		—			2,600,711
Prepaid expenses, inventory and other assets		4,704,666			4,432,432
Deferred income taxes		5,877,844			5,390,374
TOTAL ASSETS	$	389,533,733		$	388,972,240
LIABILITIES
Mortgage loans, net	$	266,473,174		$	267,891,830
Unsecured notes		52,900,000			52,900,000
Accounts payable and accrued expenses		14,234,813			12,334,879
Advance deposits		2,321,530			1,651,840
Dividends and distributions payable		1,421,862			1,335,323
TOTAL LIABILITIES	$	337,351,379		$	336,113,872
Commitments and contingencies (See Note 5)		—			—
EQUITY
Sotherly Hotels Inc. stockholders’ equity
Preferred stock, par value $0.01, 972,350 shares authorized, 0 shares issued    and outstanding		—			—
Common stock, par value $0.01, 49,000,000 shares authorized, 14,949,651    shares and 14,490,714 shares issued and outstanding at March 31, 2016    and December 31, 2015, respectively		149,496			144,907
Additional paid in capital		83,788,906			82,749,058
Distributions in excess of retained earnings		(34,675,230	)		(33,890,834	)
Total Sotherly Hotels Inc. stockholders’ equity		49,263,172			49,003,131
Noncontrolling interest		2,919,182			3,855,237
TOTAL EQUITY		52,182,354			52,858,368
TOTAL LIABILITIES AND OWNERS' EQUITY	$	389,533,733		$	388,972,240

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

4

SOTHERLY HOTELS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended			Three Months Ended
	March 31, 2016			March 31, 2015
REVENUE
Rooms department	$	27,322,413		$	21,336,414
Food and beverage department		8,249,679			7,726,807
Other operating departments		2,238,052			1,912,409
Total revenue		37,810,144			30,975,630
EXPENSES
Hotel operating expenses
Rooms department		7,080,633			5,842,940
Food and beverage department		5,939,861			5,405,385
Other operating departments		593,969			338,179
Indirect		14,135,595			11,468,343
Total hotel operating expenses		27,750,058			23,054,847
Depreciation and amortization		3,668,638			2,904,391
Corporate general and administrative		1,607,294			1,451,224
Total operating expenses		33,025,990			27,410,462
NET OPERATING INCOME		4,784,154			3,565,168
Other income (expense)
Interest expense		(4,632,632	)		(3,774,535	)
Interest income		8,830			10,102
Equity income in joint venture		—			474,349
Unrealized loss on hedging activities		(50,557	)		—
Net income before income taxes		109,795			275,084
Income tax benefit		436,079			438,775
Net income		545,874			713,859
Less: Net (income) attributable to the noncontrolling interest		(62,779	)		(138,523	)
Net income attributable to the Company	$	483,095		$	575,336
Net income per share attributable to the Company
Basic and diluted	$	0.03		$	0.05
Weighted average number of shares outstanding
Basic and diluted		14,792,911			10,595,801

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

5

SOTHERLY HOTELS INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

					Additional		Distributions
	Common Stock				Paid-		in Excess of			Noncontrolling
	Shares		Par Value		In Capital		Retained Earnings			Interest			Total
Balances at December 31, 2015		14,490,714	$	144,907	$	82,749,058	$	(33,890,834	)	$	3,855,237		$	52,858,368
Net income		—		—		—		483,095			62,779			545,874
Issuance of unrestricted common stock    awards		24,250		242		128,040		—			—			128,282
Issuance of restricted common stock awards		12,000		120		63,360		—			—			63,480
Conversion of Operating Partnership units    into shares of common stock		422,687		4,227		843,468		—			(847,695	)		-
Amortization of restricted stock award		—		—		4,980		—			—			4,980
Dividends and distributions declared		—		—		—		(1,267,491	)		(151,139	)		(1,418,630	)
Balances at March 31, 2016 (unaudited)		14,949,651	$	149,496	$	83,788,906	$	(34,675,230	)	$	2,919,182		$	52,182,354

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

6

SOTHERLY HOTELS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three Months Ended			Three Months Ended
	March 31, 2016			March 31, 2015
Cash flows from operating activities:
Net income	$	545,874		$	713,859
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,668,638			2,904,391
Equity income in joint venture		—			(474,349	)
Amortization of deferred financing costs		313,410			350,396
Amortization of mortgage premium		(6,479	)		—
Unrealized loss on derivative instrument		50,557			—
Charges related to equity-based compensation		196,742			271,036
Changes in assets and liabilities:
Restricted cash		(120,693	)		(223,492	)
Accounts receivable		222,714			(1,808,004	)
Prepaid expenses, inventory and other assets		(342,455	)		(835,566	)
Deferred income taxes		(487,469	)		(496,454	)
Accounts payable and other accrued liabilities		1,892,725			2,428,633
Advance deposits		669,690			551,491
Accounts receivable - affiliate		17,826			(44,540	)
Net cash provided by operating activities		6,621,080			3,337,401
Cash flows from investing activities:
Improvements and additions to hotel properties		(4,956,359	)		(4,485,857	)
Distributions from joint venture		—			600,000
Funding of restricted cash reserves		(1,674,236	)		(777,597	)
Proceeds of restricted cash reserves		3,958,496			3,404,730
Net cash used in investing activities		(2,672,099	)		(1,258,724	)
Cash flows from financing activities:
Proceeds from mortgage loan receivable		2,600,711			—
Payments on mortgage debt and loans		(1,446,688	)		(1,159,671	)
Payment of deferred financing costs		(278,899	)		(617,500	)
Dividends and distributions paid		(1,332,094	)		(852,914	)
Net cash used in financing activities		(456,970	)		(2,630,085	)
Net (decrease) increase in cash and cash equivalents		3,492,011			(551,408	)
Cash and cash equivalents at the beginning of the period		11,493,914			16,634,499
Cash and cash equivalents at the end of the period	$	14,985,925		$	16,083,091
Supplemental disclosures:
Cash paid during the period for interest	$	3,606,752		$	3,223,308
Cash paid during the period for income taxes	$	9,165		$	200
Non-cash investing and financing activities:
Change in amount of deferred financing and deferred offering cost in accounts    payable and accrued liabilities	$	—		$	(624,117	)
Change in amount of hotel property improvements in accounts payable and accrued    liabilities	$	(7,209	)	$	(664,159	)

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

7

SOTHERLY HOTELS LP

CONSOLIDATED BALANCE SHEETS

	March 31, 2016		December 31, 2015
	(unaudited)
ASSETS
Investment in hotel properties, net	$	356,277,837	$	354,963,242
Cash and cash equivalents		14,985,925		11,493,914
Restricted cash		3,630,274		5,793,840
Accounts receivable, net		3,848,461		4,071,175
Accounts receivable-affiliate		208,726		226,552
Loan proceeds receivable		—		2,600,711
Prepaid expenses, inventory and other assets		4,704,666		4,432,432
Deferred income taxes		5,877,844		5,390,374
TOTAL ASSETS	$	389,533,733	$	388,972,240
LIABILITIES
Mortgage loans, net	$	266,473,174	$	267,891,830
Unsecured notes		52,900,000		52,900,000
Accounts payable and other accrued liabilities		14,234,813		12,334,879
Advance deposits		2,321,530		1,651,840
Dividends and distributions payable		1,421,862		1,335,323
TOTAL LIABILITIES	$	337,351,379	$	336,113,872
Commitments and contingencies (see Note 5)		—		—
PARTNERS’ CAPITAL
General Partner: 167,278 and 166,915 units issued and outstanding as of    March 31, 2016 and December 31, 2015, respectively		767,535		774,295
Limited Partners: 16,560,513 and 16,524,626 units issued and outstanding as    of March 31, 2016 and December 31, 2015, respectively		51,414,819		52,084,073
TOTAL PARTNERS’ CAPITAL		52,182,354		52,858,368
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	389,533,733	$	388,972,240

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

8

SOTHERLY HOTELS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended			Three Months Ended
	March 31, 2016			March 31, 2015
REVENUE
Rooms department	$	27,322,413		$	21,336,414
Food and beverage department		8,249,679			7,726,807
Other operating departments		2,238,052			1,912,409
Total revenue		37,810,144			30,975,630
EXPENSES
Hotel operating expenses
Rooms department		7,080,633			5,842,940
Food and beverage department		5,939,861			5,405,385
Other operating departments		593,969			338,179
Indirect		14,135,595			11,468,343
Total hotel operating expenses		27,750,058			23,054,847
Depreciation and amortization		3,668,638			2,904,391
Corporate general and administrative		1,607,294			1,451,224
Total operating expenses		33,025,990			27,410,462
NET OPERATING INCOME		4,784,154			3,565,168
Other income (expense)
Interest expense		(4,632,632	)		(3,774,535	)
Interest income		8,830			10,102
Equity income in joint venture		—			474,349
Unrealized loss on hedging activities		(50,557	)		—
Net income before income taxes		109,795			275,084
Income tax benefit		436,079			438,775
Net income	$	545,874		$	713,859
Net income per unit
Basic and diluted	$	0.03		$	0.05
Weighted average number of units outstanding
Basic and diluted		16,715,044			13,146,628

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

9

SOTHERLY HOTELS LP

CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS’ CAPITAL

	General Partner					Limited Partner
	Units		Amount			Units		Amounts			Total
Balances at December 31, 2015		166,915	$	774,295			16,524,626	$	52,084,073		$	52,858,368
Issuance of partnership units		363		1,918			35,887		189,844			191,762
Amortization of restricted units award		—		50			—		4,930			4,980
Distributions declared		—		(14,187	)		—		(1,404,443	)		(1,418,630	)
Net income		—		5,459			—		540,415			545,874
Balances at March 31, 2016 (unaudited)		167,278	$	767,535			16,560,513	$	51,414,819		$	52,182,354

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

10

SOTHERLY HOTELS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three Months Ended			Three Months Ended
	March 31, 2016			March 31, 2015
Cash flows from operating activities:
Net income	$	545,874		$	713,859
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,668,638			2,904,391
Equity income in joint venture		—			(474,349	)
Amortization of deferred financing costs		313,410			350,396
Amortization of mortgage premium		(6,479	)		—
Unrealized loss on derivative instrument		50,557			—
Charges related to equity-based compensation		196,742			271,036
Changes in assets and liabilities:
Restricted cash		(120,693	)		(223,492	)
Accounts receivable		222,714			(1,808,004	)
Prepaid expenses, inventory and other assets		(342,455	)		(835,566	)
Deferred income taxes		(487,469	)		(496,454	)
Accounts payable and other accrued liabilities		1,892,725			2,428,633
Advance deposits		669,690			551,491
Accounts receivable - affiliate		17,826			(44,540	)
Net cash provided by operating activities		6,621,080			3,337,401
Cash flows from investing activities:
Improvements and additions to hotel properties		(4,956,359	)		(4,485,857	)
Distributions from joint venture		—			600,000
Funding of restricted cash reserves		(1,674,236	)		(777,597	)
Proceeds of restricted cash reserves		3,958,496			3,404,730
Net cash used in investing activities		(2,672,099	)		(1,258,724	)
Cash flows from financing activities:
Proceeds from mortgage loan receivable		2,600,711			—
Payments on mortgage debt and loans		(1,446,688	)		(1,159,671	)
Payment of deferred financing costs		(278,899	)		(617,500	)
Distributions paid		(1,332,094	)		(852,914	)
Net cash used in financing activities		(456,970	)		(2,630,085	)
Net (decrease) increase in cash and cash equivalents		3,492,011			(551,408	)
Cash and cash equivalents at the beginning of the period		11,493,914			16,634,499
Cash and cash equivalents at the end of the period	$	14,985,925		$	16,083,091
Supplemental disclosures:
Cash paid during the period for interest	$	3,606,752		$	3,223,308
Cash paid during the period for income taxes	$	9,165		$	200
Non-cash investing and financing activities:
Change in amount of deferred financing and deferred offering cost in accounts payable    and accrued liabilities	$	—		$	(624,117	)
Change in amount of hotel property improvements in accounts payable and accrued    liabilities	$	(7,209	)	$	(664,159	)

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

11

SOTHERLY HOTELS INC.

SOTHERLY HOTELS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Description of Business

Sotherly Hotels Inc., formerly MHI Hospitality Corporation (the “Company”), is a self-managed and self-administered lodging real estate investment trust (“REIT”) that was incorporated in Maryland on August 20, 2004 to own full-service, primarily upscale and upper-upscale hotels located in primary and secondary markets in the mid-Atlantic and southern United States.  Currently, the Company is 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 consists of investments in twelve hotel properties, comprising 3,011 rooms.  All of the Company’s hotels, except for the Georgian Terrace and The Whitehall, operate under the Hilton, Crowne Plaza, DoubleTree, and Sheraton brands.

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, formerly MHI Hospitality, L.P. (the “Operating Partnership”).  The Company and the Operating Partnership through July 30, 2015, also owned a 25.0% noncontrolling interest in the Crowne Plaza Hollywood Beach Resort through a joint venture with CRP/MHI Holdings, LLC, an affiliate of both Carlyle Realty Partners V, L.P. and The Carlyle Group (“Carlyle”).  As of July 31, 2015, we own 100% of the entities that own the Crowne Plaza Hollywood Beach Resort.

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, 2016, was approximately 89.4% owned by the Company, and its subsidiaries, lease the hotels to a subsidiary of MHI Hospitality TRS Holding, Inc., MHI Hospitality TRS, LLC, (collectively, “MHI TRS”), a wholly-owned subsidiary of the Operating Partnership. MHI TRS then engages an eligible independent hotel management company, MHI Hotels Services, LLC, which does business as Chesapeake Hospitality (“Chesapeake Hospitality”), to operate the hotels under a management contract. MHI TRS is treated as a taxable REIT subsidiary for federal income tax purposes.

All references in this report to “we”, “us” and “our” refer to the Company, its Operating Partnership and its subsidiaries and predecessors, collectively, unless the context otherwise requires or where otherwise indicated.

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

On May 5, 2015, the Company obtained a $47.0 million mortgage with Bank of America N.A. on the Georgian Terrace in Atlanta, Georgia.  The mortgage bears interest at a fixed rate of 4.42% and provides for level payments of principal and interest on a monthly basis under a 30-year amortization schedule.  The maturity date is June 1, 2025.  The Company used the proceeds of the mortgage to repay the existing first mortgage and to pay closing costs, and will use the balance of the proceeds to partially fund ongoing renovations at the Georgian Terrace and for general corporate purposes.

During June 2015, the Company sold 98,682 shares of common stock for net proceeds of approximately $0.7 million, which it contributed to the Operating Partnership for an equivalent number of units.

On July 1, 2015, the Company sold 3,000,000 shares of common stock for net proceeds of approximately $19.8 million, which it contributed to the Operating Partnership for an equivalent number of units.  

On July 7, 2015, we entered into a loan agreement and other loan documents to secure an $18.5 million mortgage with Bank of the Ozarks collateralized by a first mortgage on the DoubleTree by Hilton Jacksonville Riverfront. The $18.5 million mortgage was received in two parts. We received $18.0 million on July 7, 2015 and the remainder of $0.5 million on October 20, 2015.  The $0.5 million was included with the additional earn-out provision of $1.5 million, for a total of $2.0 million additional proceeds, as described below.  The mortgage term is four years maturing July 7, 2019 and may be extended for one additional period of one year, subject to certain criteria. The mortgage bears a floating interest rate of the 30-day LIBOR plus 3.5%, subject to a floor rate of 4.0%.  The mortgage amortizes on a 25-year schedule; and has a prepayment penalty if prepaid during the initial two years. The

12

Company used the proceeds from the mortgage to repay the existing first mortgage on the DoubleTree by Hilton Jacksonville Riverfront, to pay closing costs, to partially fund ongoing renovations at the DoubleTree by Hilton Jacksonville Riverfront and for general corporate purposes.

On July 17, 2015, the Company sold 435,000 shares of common stock for net proceeds of approximately $2.8 million, which it contributed to the Operating Partnership for an equivalent number of units.

On July 31, 2015, we acquired the remaining 75% interest in (i) the entity that owns the Crowne Plaza Hollywood Beach Resort, and (ii) the entity that leases the Crowne Plaza Hollywood Beach Resort.  As a result, the Operating Partnership now has a 100% indirect ownership interest in the entities that own the Crowne Plaza Hollywood Beach Resort.

On September 2, 2015, we closed on the sale of a 0.3 acre parcel of excess land adjacent to our Atlanta, Georgia property for $2.2 million.  The parcel was included in the acquisition of the Georgian Terrace in March 2014.  We used the proceeds of the sale for general corporate purposes.

On September 28, 2015, we entered into a loan agreement to secure a $60.0 million mortgage on the Crowne Plaza Hollywood Beach Resort with Bank of America, N.A.  The mortgage term is ten years maturing October 1, 2025, subject to certain criteria. The mortgage bears a fixed interest rate of 4.913%.  The mortgage amortizes on a 30-year schedule. The Company used the proceeds from the mortgage to repay the existing first mortgage on the Crowne Plaza Hollywood Beach Resort and to pay closing costs, and will use the balance of the proceeds for general corporate purposes.

On October 20, 2015, we secured $2.0 million additional proceeds on the mortgage loan on the DoubleTree by Hilton Jacksonville Riverfront as part of an earn-out pursuant to the terms of the loan agreement.

On December 31, 2015, we entered into an amendment to the existing mortgage loan on the DoubleTree by Hilton Laurel which generated additional net proceeds of approximately $2.6 million and received the loan proceeds on January 4, 2016.

On March 21, 2016, we entered into an agreement with the existing lender to extend the maturity of the mortgage on The Whitehall until November 2017.

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.

Investment in Hotel Properties – Investments in hotel properties include investments in operating properties which are recorded at acquisition cost and allocated to land, property and equipment and identifiable intangible assets. Replacements and improvements are capitalized, while repairs and maintenance are expensed as incurred. 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. Expenditures under a renovation project which constitute additions or improvements that extend the life of the property are capitalized.

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.

We review our investments in hotel properties for impairment 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 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

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property exceed 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.

At December 31, 2015, our review of possible impairment at one of our hotel properties revealed an excess of current carrying cost over the estimated undiscounted future cash flows, which was triggered by a combination of a change in anticipated use and future branding of the property and a re-evaluation of future revenues based on anticipated market conditions, market penetration and costs necessary to achieve such market penetration, resulting in an impairment of approximately $0.5 million.

Assets Held For Sale – The Company records assets as held for sale when management has committed to a plan to sell the assets, actively seeks a buyer for the assets, and the consummation of the sale is considered probable and is expected within one year.

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

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.

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

Accounts Receivable – Accounts receivable consists primarily of hotel guest and banqueting receivables. Ongoing evaluations of collectability are performed and 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 market, 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, 2016 and December 31, 2015 were $326,459 and $339,542, respectively. Amortization expense for the three month periods ended March 31, 2016 and 2015 totaled $15,131 and $14,459, respectively.

Deferred Financing and Offering 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 on the consolidated balance sheets. Deferred offering costs are recorded at cost and consist of offering fees and other costs incurred in 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.

Amortization of deferred offering costs occurs when the equity offering is complete, whereby the costs are offset against the equity funds raised in the future and included in additional paid in capital on the consolidated balance sheets, or if the offering expires and the offering costs exceed the funds raised in the offering then the excess will be included in corporate general and administrative expenses in the consolidated statements of operations.

Derivative Instruments – Our derivative instruments are reflected as assets or liabilities on the balance sheet 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 primarily are using an interest rate cap which acts as a cash flow hedge. We value our interest-rate cap 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 also have used derivative instruments in the Company’s stock to

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obtain more favorable terms on our financing. 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 investment in hotel property, net, interest rate cap, mortgage loans and unsecured notes measured at fair value and the basis for that measurement:

	Level 1			Level 2			Level 3
December 31, 2015
Investment in hotel property, net(1)	$	—		$	—		$	5,700,000
Interest Rate Cap(4)	$	—		$	70,981		$	—
Mortgage loans(2)	$	—		$	(272,933,327	)	$	—
Unsecured notes(3)	$	(54,238,600	)	$	—		$	—
March 31, 2016
Investment in hotel property, net(1)	$	—		$	—		$	—
Interest Rate Cap(4)	$	—		$	20,424		$	—
Mortgage loans(2)	$	—		$	(271,175,967	)	$	—
Unsecured notes(3)	$	(54,212,840	)	$	—		$	—

(1) A non-recurring fair value measurement was conducted in 2015 for our investment in hotel property, which resulted in impairment charges for the year ended December 31, 2015, which represent the amount by which the carrying value of the asset group exceeded its fair value.

(2) Mortgage loans are reflected at outstanding principal balance net of deferred financing costs on our Consolidated Balance Sheet as of March 31, 2016 and December 31, 2015.

(3) Unsecured notes are recorded at outstanding principal balance on our Consolidated Balance Sheet as of March 31, 2016 and December 31, 2015.

(4) Interest rate cap for our loan on DoubleTree by Hilton Jacksonville Riverfront, which caps the 1-month LIBOR rate at 2.5%.

Noncontrolling Interest in Operating Partnership – Certain hotel properties have been 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 – Revenues from operations of the hotels are recognized when the services are provided. Revenues consist of room sales, food and beverage sales, and other hotel department revenues, such as telephone, parking, gift shop sales and rentals from restaurant tenants, rooftop leases and gift shop operators. Revenues are reported net of occupancy and other taxes collected from customers and remitted to governmental authorities.

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 statement of operations pursuant to the terms of each lease.  Lease revenue was approximately $0.5 million and $0.5 million, for the three months ended March 31, 2016 and 2015, respectively.

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A schedule of minimum future lease payments receivable for the remaining lease periods is as follows:

Remaining nine months ending December 31, 2016	$	1,059,658
December 31, 2017		935,715
December 31, 2018		428,617
December 31, 2019		317,339
December 31, 2020		278,450
December 31, 2021 and thereafter		1,227,684
Total	$	4,247,463

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. As of March 31, 2016 and December 31, 2015, 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, 2016, the tax years that remain subject to examination by the major tax jurisdictions to which the Company is subject generally include 2010 through 2015. In addition, as of March 31, 2016, the tax years that remain subject to examination by the major tax jurisdictions to which MHI TRS is subject generally include 2004 through 2015.

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 2004 Long Term Incentive Plan (the “2004 Plan”) and its 2013 Long-Term Incentive Plan (the “2013 Plan”), which the Company’s stockholders approved in April 2013, permit the grant of stock options, restricted stock and performance share compensation awards to its employees for up to 350,000 and 750,000 shares of common stock, respectively. The Company believes that such awards better align the interests of its employees with those of its stockholders.

Under the 2004 Plan, the Company has made restricted stock and deferred stock awards totaling 337,438 shares including 255,938 shares issued to certain executives and employees and 81,500 restricted shares issued to its independent directors. Of the 255,938 shares issued to certain of our executives and employees, all have vested except 12,000 shares issued to the Chief Financial Officer upon execution of his employment contract which will vest pro rata on each of the next three anniversaries of the effective date of his employment agreement. All of the 81,500 restricted shares issued to the Company’s independent directors have vested. The 2004 plan was terminated in 2013.

Under the 2013 Plan, the Company has made stock awards totaling 109,100 shares, including 72,350 non-restricted shares to certain executives and employees and 35,500 restricted shares issued to its independent directors.  All awards have vested except for 12,000 shares issued to the Company’s independent directors in January 2016, which will vest on December 31, 2016.  

Previously, under the 2004 Plan, and currently, under the 2013 Plan, the Company may 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, 2016, no performance-based stock awards have been granted. Consequently, stock-based compensation as determined under the fair-value method would be the same under the intrinsic-value method. Total compensation cost recognized under the 2013 Plan for the three months ended March 31, 2016 and 2015 was $196,742 and $271,036, respectively. The 2004 Plan was terminated in April 2013.

Advertising – Advertising costs were $74,063 and $52,856 for the three months ended March 31, 2016 and 2015, respectively. Advertising costs are expensed as incurred.

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.

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Use of Estimates – The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America 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.

Reclassifications – Certain reclassifications in the amount of $4.1 million, from deferred financing costs, net in total assets on the balance sheet, have been netted against mortgage loans on the December 31, 2015 balances to conform to the current period presentation. This presentation applies Accounting Standards Update (“ASU”) 2015-03, ““Simplifying the Presentation of Debt Issuance Costs.”

New Accounting Pronouncements – In April 2015, the FASB issued ASU 2015-03 related to“Simplifying the Presentation of Debt Issuance Costs,” as part of its simplification initiative. The ASU changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense.  The ASU specifies that “issue costs shall be reported in the balance sheet as a direct deduction from the face amount of the note” and that “amortization of debt issue costs shall also be reported as interest expense.” According to the ASU’s Basis for Conclusions, debt issuance costs incurred before the associated funding is received (i.e., the debt liability) should be reported on the balance sheet as deferred charges until that debt liability amount is recorded.  For public business entities, the guidance in the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 and is applicable for our interim periods within 2016. Early adoption is allowed for all entities for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted).  We adopted this ASU and it is being applied during our 2016 reporting.

In February 2015, the FASB issued ASU 2015-02 related to ASC Topic 810, Consolidation. The amendments in this update affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments: 1. Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities; 2. Eliminate the presumption that a general partner should consolidate a limited partnership; 3. Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; 4. Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds.  This guidance will be effective for annual reporting periods beginning after December 15, 2015.  We do not expect this ASU to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU 2014-09 related to ASC Topic 606, Revenue from Contracts with Customers. The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The guidance in this update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, this update supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this update.  As issued, this ASU is not effective until annual reporting periods beginning after December 15, 2016, however the FASB has deferred the effective date of ASU 2014-09 such that it would be effective for annual reporting periods beginning after December 15, 2017.  We do not expect this ASU to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

3. Investment in Hotel Properties, Net

Investment in hotel properties as of March 31, 2016 and December 31, 2015 consisted of the following:

	March 31, 2016			December 31, 2015
Land and land improvements	$	59,941,097		$	59,910,212
Buildings and improvements		336,275,927			333,720,421
Furniture, fixtures and equipment		44,622,512			42,245,334
		440,839,536			435,875,967
Less: accumulated depreciation and impairment		(84,561,699	)		(80,912,725	)
Investment in Hotel Properties, Net	$	356,277,837		$	354,963,242

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4. Debt

Mortgage Loans, Net. As of March 31, 2016 and December 31, 2015, we had approximately $266.5 million and approximately $267.9 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	2016			2015			Penalties		Date		Provisions			Rate
Crowne Plaza Hampton Marina	$	3,263,585		$	3,512,586		None		6/30/2016		$	83,000	(1)		5.00%	(2)
Crowne Plaza Hollywood Beach    Resort		59,647,289			59,795,743		n/a	(3)	10/1/2025		30 years				4.913%
Crowne Plaza Tampa Westshore		12,937,454			13,016,045		None		6/18/2017		25 years				5.60%
DoubleTree by Hilton Jacksonville    Riverfront		19,692,994			19,774,577		Yes	(4)	7/7/2019	(5)	25 years			LIBOR plus 3.50 %
DoubleTree by Hilton Laurel		9,467,956			9,500,000		Yes	(6)	8/5/2021		25 years				5.25%	(7)
DoubleTree by Hilton Philadelphia    Airport		32,120,179			32,376,795		None		4/1/2019		25 years			LIBOR plus 3.00 %		(8)
DoubleTree by Hilton Raleigh    Brownstone –University		14,985,459			15,029,121		n/a	(9)	8/1/2018		30 years				4.78%
Georgian Terrace		46,450,174			46,579,011		n/a	(10)	6/1/2025		30 years				4.42%
Hilton Savannah DeSoto		20,431,819			20,522,836		Yes	(11)	9/1/2017		25 years				6.06%
Hilton Wilmington Riverside		19,679,345			19,825,772		Yes	(11)	4/1/2017		25 years				6.21%
Sheraton Louisville Riverside		11,283,324			11,345,866		n/a	(9)	1/6/2017		25 years				6.24%
The Whitehall		20,331,342			20,459,256		None		11/13/2017	(12)	25 years				4.50%
Total Mortgage Principal Balance	$	270,290,920		$	271,737,608
Deferred financing costs, net		(4,051,603	)		(4,086,114	)
Unamortized premium on loan		233,857			240,336
Total Mortgage Loans, Net	$	266,473,174		$	267,891,830

(1)	The Operating Partnership is required to make monthly principal payments of $83,000.
(2)	The note rate was changed to a fixed rate of 5.00%, effective June 27, 2014.
(3)	With limited exception, the note may not be prepaid until June 2025.
(4)	The note is subject to a pre-payment penalty until July 2017. Prepayment can be made without penalty thereafter.
(5)	The note provides that the mortgage can be extended until July 2020 if certain conditions have been satisfied.
(6)	The note is subject to a pre-payment penalty except for any pre-payments made either between April 2017 and August 2017, or from April 2021 through maturity of the note.
(7)	The note provides that after five years, the rate of interest will adjust to a rate of 3.00% per annum plus the then-current five-year U.S. Treasury rate of interest, with a floor of 5.25%.
(8)	The note bears a minimum interest rate of 3.50%.
(9)	With limited exception, the note may not be prepaid until two months before maturity.
(10)	With limited exception, the note may not be prepaid until February 2025.
(11)	The notes may not be prepaid during the first six years of the terms. Prepayment can be made with penalty thereafter until 90 days before maturity.
(12)	The note was extended in March 2016 and provides that the mortgage can be extended until November 2018 if certain conditions have been satisfied.

We were in compliance with all debt covenants, current on all loan payments and not otherwise in default under any of our mortgage loans, as of March 31, 2016.

Total future mortgage debt maturities, without respect to any extension of loan maturity, as of March 31, 2016 were as follows:

For the remaining nine months ended December 31, 2016	$	7,690,171
December 31, 2017		86,680,710
December 31, 2018		18,078,266
December 31, 2019		31,732,731
December 31, 2020		19,841,299
December 31, 2021 and thereafter		106,267,743
Total future maturities	$	270,290,920

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7.0% Unsecured Notes. On November 21, 2014, the Operating Partnership issued 7.0% senior unsecured notes in the aggregate amount of $25.3 million (the “7% Notes”). The indenture requires quarterly payments of interest and matures on November 15, 2019. The 7% Notes are callable after November 15, 2017 at 101% of face value.

8.0% Unsecured Notes. On September 30, 2013, the Operating Partnership issued 8.0% senior unsecured notes in the aggregate amount of $27.6 million (the “8% Notes”). The indenture requires quarterly payments of interest and matures on September 30, 2018. The 8% Notes are callable after September 30, 2016 at 101% of face value.

5. Commitments and Contingencies

Ground, Building and Submerged Land Leases – We lease 2,086 square feet of commercial space next to the Hilton Savannah 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 second of three optional five-year renewal periods expiring October 31, 2011, October 31, 2016 and October 31, 2021, respectively. Rent expense for this operating lease for the three months ended March 31, 2016 and 2015 each totaled $18,245 and $15,866, respectively.

We lease, as landlord, the entire fourteenth floor of the Savannah 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 a parking lot adjacent to the DoubleTree by Hilton Brownstone-University in Raleigh, North Carolina. The land is leased under a second amendment, dated April 28, 1998, to a ground lease originally dated May 25, 1966. The original lease is a 50-year operating lease, which expires August 31, 2016. We exercised a renewal option for the first of three additional ten-year periods expiring August 31, 2026, August 31, 2036, and August 31, 2046, respectively. We hold an exclusive and irrevocable option to purchase the leased land at fair market value at August 1, 2018, or at the end of any 10-year renewal period, subject to the payment of an annual fee of $9,000, and other conditions. Rent expense for the three months ended March 31, 2016 and 2015, each totaled $23,871.

We lease land adjacent to the Crowne Plaza Tampa Westshore for use as parking under a five-year agreement with the Florida Department of Transportation that commenced in July 2009.  In May 2014, we extended the agreement for an additional five years.  The agreement expires in July 2019. The agreement 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, 2016 and 2015, each totaled $651.

We lease certain submerged land in the Saint Johns River in front of the Crowne Plaza Jacksonville Riverfront from the Board of Trustees of the Internal Improvement Trust Fund of the State of Florida. The submerged land was leased under a five-year operating lease requiring annual payments of $4,961, which expired September 18, 2012. A new operating lease was executed requiring annual payments of $6,020 and expires September 18, 2017. Rent expense for the three months ended March 31, 2016 and 2015, each totaled $1,505.

We lease 5,216 square feet of commercial office space in Williamsburg, Virginia under an agreement, as amended, that commenced September 1, 2009 and expires August 31, 2018.  Rent expense for the three months ended March 31, 2016 and 2015 totaled $23,871 and $20,920.

We also lease certain furniture and equipment under financing arrangements expiring between April 2016 and March 2019.

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

For the remaining nine months ended December 31, 2016	$	215,295
December 31, 2017		228,793
December 31, 2018		176,740
December 31, 2019		100,480
December 31, 2020		95,482
December 31, 2021 and thereafter		541,065
Total	$	1,357,855

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.

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Management Agreements – At March 31, 2016, each of our wholly-owned operating hotels was operated under a management agreement with Chesapeake Hospitality.  Effective January 1, 2015, each of our wholly-owned hotels operated under a new master agreement as well as an individual hotel management agreement (see Note 7).  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, 2016, most 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 2.5% and 5.0% of room revenues, plus additional fees for marketing, central reservation systems, and other franchisor programs and services that amount to between 2.5% and 6.0% of room revenues from the hotels. The franchise agreements expire between July 2017 and September 2025.    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 Hilton Wilmington Riverside, the Hilton Savannah DeSoto, the DoubleTree by Hilton Brownstone-University, the Sheraton Louisville Riverside and the Georgian Terrace an amount equal to ^1/12 of the annual real estate taxes due for the properties. We are also required by several of our lenders 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 Hilton Savannah DeSoto, the Hilton Wilmington Riverside, the Sheraton Louisville Riverside, DoubleTree by Hilton Raleigh Brownstone–University, The Whitehall, Crowne Plaza Hampton Marina and the Georgian Terrace and equal 4.0% of room revenues for the DoubleTree by Hilton Philadelphia Airport.

Litigation –To our knowledge, we are not involved in any material litigation threatened against us. 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. Equity

Preferred Stock – The Company has authorized 1,000,000 shares of preferred stock, of which 27,650 shares were issued as Series A Cumulative Redeemable Preferred Stock, and subsequently redeemed in 2013.  None of the remaining authorized shares have been issued.

Common Stock – The Company is authorized to issue up to 49,000,000 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, 2015, of the Company’s common stock:

On February 2, 2016, the Company was issued 36,250 units in the Operating Partnership and awarded an aggregate of 22,000 shares of unrestricted stock to certain executives and employees as well as 12,000 shares of restricted stock and 2,250 shares of unrestricted stock to certain of its independent directors.

On February 1, 2016, two holders of units in the Operating Partnership redeemed 422,687 units for an equivalent number of shares of the Company’s common stock.

On September 16, 2015, one holder of units in the Operating Partnership redeemed a total of 200,000 units for an equivalent number of shares of the Company’s common stock.

On July 17, 2015, the Company sold 435,000 shares of common stock for net proceeds of approximately $2.8 million, which it contributed to the Operating Partnership for an equivalent number of units.

On July 1, 2015, the Company sold 3,000,000 shares of common stock, for net proceeds of approximately $19.8 million, which it contributed to the Operating Partnership for an equivalent number of units.  

During June 2015, the Company sold 98,682 shares of common stock for net proceeds of approximately $0.7 million, which it contributed to the Operating Partnership for an equivalent number of units.

On May 1, 2015, one holder of units in the Operating Partnership redeemed a total of 50,000 units for an equivalent number of shares of the Company’s common stock.

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On April 1, 2015, one holder of units in the Operating Partnership redeemed 100,000 units for an equivalent number of shares of the Company’s common stock.

On January 29, 2015, the Company was issued 36,100 units in the Operating Partnership and awarded an aggregate of 26,350 shares of unrestricted stock to certain executives and employees as well as 9,750 shares of restricted stock to certain of its independent directors.

As of March 31, 2016 and December 31, 2015, the Company had 14,949,651 and 14,490,714 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.

There were no issuances or redemptions, since January 1, 2015, of units in the Operating Partnership other than the issuances of units in the Operating Partnership to the Company described above.

As of March 31, 2016 and December 31, 2015, the total number of Operating Partnership units outstanding was 16,727,791 and 16,691,541, respectively.

As of March 31, 2016 and December 31, 2015, the total number of outstanding Operating Partnership units not owned by the Company was 1,778,140 and 2,200,827, respectively, with a fair market value of approximately $9.1 million and $15.0 million, based on the price per share of the common stock on such respective dates.

7. Related Party Transactions

Chesapeake Hospitality. As of March 31, 2016, the members of Chesapeake Hospitality (a company that is majority-owned and controlled by the Company’s chief executive officer, its former chief financial officer, a member of its Board of Directors and a former member of its Board of Directors) owned 1,760,001 shares, approximately 11.8%, of the Company’s outstanding common stock as well as 870,271 Operating Partnership units. The indirect equity owners of Chesapeake Hospitality include the Company’s chief executive officer, Andrew M. Sims, and a member of the Company’s board of directors, Kim E. Sims.  The following is a summary of the transactions between Chesapeake Hospitality and us:

Accounts Receivable – At March 31, 2016 and December 31, 2015, we were due $55,919 and $0, respectively, from Chesapeake Hospitality.

Management Agreements – Each of the hotels that we wholly-owned at March 31, 2016 were operated by Chesapeake Hospitality under various management agreements that were to expire between December 2014 and March 2019.  Under those now terminated agreements, Chesapeake Hospitality received a base management fee of 2.0% of gross revenues for the first full fiscal year and partial fiscal year from the commencement date through December 31 of that year, 2.5% of gross revenues the second full fiscal year, and 3.0% of gross revenues for every year thereafter. The agreements also provided for an incentive management fee due annually in arrears within 90 days of the end of the fiscal year equal to 10.0% of the amount by which the gross operating profit of the hotels, on an aggregate basis for eight hotels and on an individual basis for two other hotels, for a given year exceeds the gross operating profit for the same hotel(s), for the prior year. The incentive management fee may not exceed 0.25% of gross revenues of all of the hotel(s) included in the incentive fee calculation.  The management agreement for The Whitehall did not provide for any incentive management fee.  Additionally, the management agreement for the Georgian Terrace provided for an administrative fee of $30,000 per year for as long as the adjacent parking garage is managed by a third party.

On December 15, 2014, we entered into a new master agreement and a series of individual hotel management agreements that became effective on January 1, 2015.  The master agreement has a five-year term, but may be extended for such additional periods as long as an individual management agreement remains in effect. The base management fee for The Whitehall and the Georgian Terrace will remain at 2.00% through 2015, increases to 2.25% in 2016 and increases to 2.50% thereafter.  The base management fees for the remaining properties in the current portfolio will be 2.65% through 2017 and decreases to 2.50% thereafter.  For new individual hotel management agreements, Chesapeake Hospitality 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.  On July 31, 2015, we entered into a new

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management agreement for the management of the Crowne Plaza Hollywood Beach Resort, with a base management fee of 2.00% for the first full year from the commencement date through the anniversary date, 2.25% for the second full year, and 2.50% for every year thereafter.

Base management and administrative fees earned by Chesapeake Hospitality for our wholly owned properties totaled $932,386 and $753,898 for the three months ended March 31, 2016 and 2015, respectively.  In addition, estimated incentive management fees of $13,698 and $35,349 were accrued for the three months ended March 31, 2016 and 2015, respectively.  

Employee Medical Benefits – We purchase employee medical benefits through Maryland Hospitality, Inc. (d/b/a MHI Health), an affiliate of Chesapeake Hospitality for our employees as well as those employees that are employed by Chesapeake Hospitality that work exclusively for our hotel properties. Gross premiums for employee medical benefits paid by the Company (before offset of employee co-payments) were approximately $1,326,154 and $1,118,556 for the three months ended March 31, 2016 and 2015, respectively.

Crowne Plaza Hollywood Beach Resort JV.  Since July 31, 2015, we own 100% of the Crowne Plaza Hollywood Beach Resort, which is no longer considered a related party and has a new management agreement as of July 31, 2015.  However, through July 30, 2015 we owned a 25.0% indirect interest in (i) the entity that owns the Crowne Plaza Hollywood Beach Resort and (ii) the entity that leases the hotel and has engaged Chesapeake Hospitality to operate the hotel under a management contract. The following is a summary of the transactions between Crowne Plaza Hollywood Beach Resort and us:

Management Agreement – Crowne Plaza Hollywood Beach Resort was operated by Chesapeake Hospitality under a management agreement that was set to expire August 2017.  Under this agreement Chesapeake Hospitality received a base management fee of 3.0% of gross revenues. Base management fees earned by Chesapeake Hospitality totaled $211,259 for the three months ended March 31, 2015.         

Asset Management Fee – Also, under an asset management agreement that terminated on July 31, 2015, MHI Hospitality TRS II, LLC, an indirect subsidiary of the Company, received a fee of 1.50% of total revenue which was due on a quarterly basis for services rendered. Asset management fees totaled $105,629 for the three months ended March 31, 2015.

Sotherly Foundation – During 2015, the Company loaned $180,000 to the Sotherly Foundation, a non-profit organization to benefit wounded warriors.  As of March 31, 2016 and December 31, 2015, the balance of the loan was $130,000 and $160,000, respectively.

Others. On June 24, 2013 we hired Ashley S. Kirkland, the daughter of our Chief Executive Officer as a legal analyst and Robert E. Kirkland IV, her husband, as our compliance officer. On October 2, 2014, we hired Andrew M. Sims Jr., the son of our Chief Executive Officer, as a brand manager. Compensation for the three months ended March 31, 2016 and 2015 totaled approximately $85,521 and $62,972, respectively, for the three individuals.  

During the three month period ending March 31, 2016 and 2015, the Company reimbursed $28,802  and $0, respectively, to a partnership controlled by the Chief Executive Officer for business-related air travel pursuant to the Company’s travel reimbursement policy.

8. Retirement Plan

We maintain a 401(k) plan for qualified employees which is subject to “safe harbor” provisions and which requires that we match 100.0% of the first 3.0% of employee contributions and 50.0% of the next 2.0% of employee contributions. All employer matching funds vest immediately in accordance with the “safe harbor” provision.  Contributions to the plan totaled $29,231 and $12,787 for the three months ended March 31, 2016 and 2015, respectively.

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9. Unconsolidated Joint Venture

As of March 31, 2016 and December 31, 2015, we own 100% of the Crowne Plaza Hollywood Beach Resort and it is consolidated within the financial statements presented.  However through July 30, 2015 we owned only a 25.0% indirect interest in (i) the entity that owns the Crowne Plaza Hollywood Beach Resort and (ii) the entity that leases the hotel and has engaged Chesapeake Hospitality to operate the hotel under a management contract. Carlyle owned a 75.0% indirect controlling interest in these entities through July 30, 2015. The joint venture purchased the property on August 8, 2007 and began operations on September 18, 2007. Summarized financial information for this investment through March 31, 2015, which is accounted for under the equity method, is as follows:

	Three Months Ended
	March 31, 2015
	(unaudited)
Revenue
Rooms department	$	5,744,329
Food and beverage department		871,287
Other operating departments		426,343
Total revenue		7,041,959
Expenses
Hotel operating expenses
Rooms department		952,598
Food and beverage department		637,728
Other operating departments		166,908
Indirect		2,169,747
Total hotel operating expenses		3,926,981
Depreciation and amortization		444,576
General and administrative		127,145
Total operating expenses		4,498,702
Operating income		2,543,257
Interest expense		(645,860	)
Net income	$	1,897,397

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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, 2016		March 31, 2015
	(unaudited)		(unaudited)
General and administrative	$	3,142,543	$	2,574,104
Sales and marketing		3,511,030		2,645,062
Repairs and maintenance		1,854,619		1,606,670
Utilities		1,528,962		1,422,778
Franchise fees		1,087,921		884,764
Management fees, including incentive		946,083		789,246
Property taxes		1,293,355		952,642
Insurance		694,202		543,386
Other		76,880		49,691
Total indirect hotel operating expenses	$	14,135,595	$	11,468,343

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11. Income Taxes

The components of the income tax benefit for the three months ended March 31, 2016 and 2015 are as follows:

	Three Months Ended			Three Months Ended
	March 31, 2016			March 31, 2015
	(unaudited)			(unaudited)
Current:
Federal	$	—		$	—
State		51,390			57,679
		51,390			57,679
Deferred:
Federal		(395,225	)		(425,159	)
State		(92,244	)		(71,295	)
		(487,469	)		(496,454	)
	$	(436,079	)	$	(438,775	)

A reconciliation of the statutory federal income tax benefit to the Company’s income tax benefit is as follows:

	Three Months Ended			Three Months Ended
	March 31, 2016			March 31, 2015
	(unaudited)			(unaudited)
Statutory federal income tax expense	$	37,330		$	93,528
Effect of non-taxable REIT income		(514,263	)		(518,687	)
State income tax benefit		40,854			(13,616	)
	$	(436,079	)	$	(438,775	)

As of March 31, 2016 and December 31, 2015, we had a net deferred tax asset of approximately $5.9 million and $5.4 million, respectively, of which, approximately $5.1 million and $4.5 million, respectively, are due to accumulated net operating losses. These loss carryforwards will begin to expire in 2028 if not utilized by such time.  As of both March 31, 2016 and December 31, 2015, approximately $0.2 million of the net deferred tax asset is attributable to our share of start-up expenses related to the Crowne Plaza Hollywood Beach Resort, start-up expenses related to the opening of the Sheraton Louisville Riverside and the Crowne Plaza Tampa Westshore that were not deductible in the year incurred, but are being amortized over 15 years.  The remainder of the net deferred tax asset is attributable to year-to-year timing differences including accrued, but not deductible, employee performance awards, vacation and sick pay, bad debt allowance and depreciation.  We believe that it is more likely than not that the deferred tax asset will be realized and that no valuation allowance is required.

12. Income Per Share and Per Unit

Income 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 partners 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 would also be added back to net income. The computation of basic and diluted earnings per share is presented below.

	Three Months Ended		Three Months Ended
	March 31, 2016		March 31, 2015
	(unaudited)		(unaudited)
Numerator
Net income attributable to the Company for basic computation	$	483,095	$	575,336
Denominator
Weighted average number of common shares outstanding for basic    computation		14,792,911		10,595,801
Basic and diluted net income per share	$	0.03	$	0.05

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Income Per Unit – The computation of basic and diluted earnings per unit is presented below.

	Three Months Ended		Three Months Ended
	March 31, 2016		March 31, 2015
	(unaudited)		(unaudited)
Numerator
Net income	$	545,874	$	713,859
Denominator
Weighted average number of units outstanding		16,715,044		13,146,628
Basic and diluted net income per unit	$	0.03	$	0.05

13. Subsequent Events

On April 11, 2016, we paid a quarterly dividend (distribution) of $0.085 per common share (and unit) to those stockholders (and unitholders of the Operating Partnership) of record on March 15, 2016.

On April 27, 2016, we authorized payment of a quarterly dividend (distribution) of $0.09 per common share (and unit) to the stockholders (and unitholders of the Operating Partnership) of record as of June 15, 2016. The dividend (distribution) is to be paid on July 11, 2016.

On April 29, 2016, we entered into a purchase and sale agreement to sell the Crowne Plaza Hampton Marina hotel to Three Capital Hotels, Inc. for a price of $5.8 million.  The closing of the sale is subject to various customary closing conditions, including the satisfactory completion of a diligence review of the hotel, the accuracy of representations and warranties through closing, and conditions related to the operation and maintenance of the hotel.

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

Overview

Sotherly Hotels Inc. is a self-managed and self-administered lodging REIT incorporated in Maryland in August 2004 to pursue opportunities in the full-service, primarily upscale and upper-upscale segments of the hotel industry located in primary and secondary markets in the mid-Atlantic and southern United States.  Substantially all of the assets of Sotherly Hotels Inc. are held by, and all of its operations are conducted through, Sotherly Hotels LP, formerly MHI Hospitality, L.P. 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 twelve full-service, primarily upscale and upper-upscale hotels, comprising 3,011 rooms. All of our properties, except for the Georgian Terrace and The Whitehall, operate under well-known brands such as Hilton, Crowne Plaza, DoubleTree and Sheraton.   As of March 31, 2016, we owned the following hotel properties:

	Number
Property	of Rooms		Location	Date of Acquisition	ChainDesignation
Wholly-owned
Crowne Plaza Hampton Marina		173	Hampton, VA	April 24, 2008	Upscale
Crowne Plaza Hollywood Beach Resort		311	Hollywood, FL	August 9, 2007	Upscale
Crowne Plaza Tampa Westshore		222	Tampa, FL	October 29, 2007	Upscale
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 by Hilton Raleigh Brownstone-University		190	Raleigh, NC	December 21, 2004	Upscale
Georgian Terrace		326	Atlanta, GA	March 27, 2014	Independent(1)
Hilton Savannah DeSoto		246	Savannah, GA	December 21, 2004	Upper Upscale
Hilton Wilmington Riverside		272	Wilmington, NC	December 21, 2004	Upper Upscale
Sheraton Louisville Riverside		180	Jeffersonville, IN	September 20, 2006	Upper Upscale
The Whitehall		259	Houston, TX	November 13, 2013	Independent(1)
Total		3,011

(1) We believe that the Georgian Terrace and The Whitehall would each carry a chain scale designation of upper upscale if they were branded hotels.

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 89.1% interest in our Operating Partnership, as of the date of this filing, 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, we cannot operate hotels. Therefore, our wholly-owned hotel properties are leased to our TRS Lessees, which are wholly owned subsidiaries of the Operating Partnership.  Our TRS Lessees then engage an eligible independent hotel management company to operate the hotels under a management agreement.  Our TRS Lessee has engaged Chesapeake Hospitality to manage our wholly-owned hotels.  Our TRS Lessees, and their parent, MHI Hospitality TRS Holding, Inc., are consolidated into 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 reservation expenses), but could also result in increased non-room revenue from the hotel’s restaurant,

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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.

We also use FFO, Adjusted FFO and Hotel EBITDA as a measure 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, 2016 and 2015, respectively, for the Company’s wholly-owned properties, during each respective reporting period (“actual” portfolio metrics), as well as the eleven wholly-owned properties in the portfolio that were under the Company’s control during the three months ended March 31, 2016 and the corresponding period in 2015 (“same-store” portfolio metrics). Accordingly, the same-store data does not reflect the performance for the Crowne Plaza Hollywood Beach Resort, which was acquired through a joint venture in August 2007 and in which the Company had a 25.0% indirect interest prior to its acquisition of the remaining 75.0% interest in July 2015.

	Three Months Ended			Three Months Ended
	March 31, 2016			March 31, 2015
Actual Portfolio Metrics
Occupancy %		68.6	%		68.3	%
ADR	$	145.37		$	128.65
RevPAR	$	99.72		$	87.87
Same-Store Portfolio Metrics
Occupancy %		66.3	%		68.3	%
ADR	$	133.66		$	128.65
RevPAR	$	88.61		$	87.87

Comparison of the Three Months Ended March 31, 2016 to the Three Months Ended March 31, 2015

Revenue.  Total revenue for the three months ended March 31, 2016 increased approximately $6.8 million, or 22.1%, to approximately $37.8 million compared to total revenue of approximately $31.0 million for the three months ended March 31, 2015. Approximately $6.8 million of the increase relates to the acquisition of our property in Hollywood Beach, Florida in July 2015.  Increases in revenues at our properties in Savannah, Georgia; Laurel, Maryland; Jacksonville, Florida; Tampa, Florida; Hampton, Virginia were offset by decreases in revenue at our property impacted by renovation activities in Houston, Texas and other revenue decreases at properties in Wilmington, North Carolina; Raleigh, North Carolina; Philadelphia, Pennsylvania, Jeffersonville, Indiana and Atlanta, Georgia.

Room revenue increased approximately $6.0 million, or 28.1%, to approximately $27.3 million for the three months ended March 31, 2016 compared to room revenue of approximately $21.3 million for the three months ended March 31, 2015.  The increase in room revenue for the three months ended March 31, 2016 resulted mainly from the acquired property in Hollywood Beach, Florida, accounting for an increase of approximately $5.5 million for the period.  In addition, the increase in room revenue for the three months ended March 31, 2016 resulted from favorable results of a 0.4% increase in occupancy, a 13.0% increase in ADR and a 13.5% increase in RevPAR, as compared to the same period in 2015.  

Food and beverage revenues increased approximately $0.5 million, or 6.8%, to approximately $8.2 million for the three months ended March 31, 2016 compared to food and beverage revenues of approximately $7.7 million for the three months ended March 31, 2015.   The increase in food and beverage revenues for the three months ended March 31, 2016 resulted mainly from the acquired property in Hollywood Beach, Florida, accounting for an increase of approximately $0.9 million for the period.  The increases in food and beverage revenues were offset by decreases in revenue at our property impacted by renovation activities in Houston, Texas and other revenue decreases at properties in Wilmington, North Carolina; Raleigh, North Carolina; Philadelphia, Pennsylvania; Jeffersonville, Indiana and Atlanta, Georgia.

Revenue from other operating departments increased approximately $0.3 million, or 17.0%, to approximately $2.2 million for the three months ended March 31, 2016 compared to revenue from other operating departments of approximately $1.9 million for the three months ended March 31, 2015.  The increase in revenue from other operating departments for the three months ended March 31, 2016 resulted mainly from the acquired property in Hollywood Beach, Florida, accounting for an increase of approximately $0.3 million for the period.

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Hotel Operating Expenses.  Hotel operating expenses, which consist of room expenses, food and beverage expenses, other direct expenses, indirect expenses and management fees, were approximately $27.8 million for the three months ended March 31, 2016, an increase of approximately $4.7 million, or 20.4%, compared to total hotel operating expenses of approximately $23.1 million for the three months ended March 31, 2015.  The increase in hotel operating expenses for the three months ended March 31, 2016 was substantially related to increasesfrom the acquired property in Hollywood Beach, Florida, accounting for increases in hotel operating expenses of approximately $5.5 million for the period, which was offset by reductions in hotel operating expenses at our properties in Wilmington, North Carolina; Philadelphia, Pennsylvania andHouston, Texas.

Rooms expense for the three months ended March 31, 2016 increased approximately $1.3 million, or 21.2%, to approximately $7.1 million compared to rooms expense for the three months ended March 31, 2015 of approximately $5.8 million. The increase in rooms expense for the three months ended March 31, 2016 was substantially related to the acquired property in Hollywood Beach, Florida, accounting for increases in rooms expense of approximately $1.1 million for the period.

Food and beverage expenses for the three months ended March 31, 2016 increased approximately $0.5 million, or 9.9%, to approximately $5.9 million compared to food and beverage expenses of approximately $5.4 million for the three months ended March 31, 2015.  The increase in food and beverage expenses for the three months ended March 31, 2016 was substantially related to the acquired property in Hollywood Beach, Florida, accounting for increases in food and beverage expenses of approximately $0.7 million for the period.

Indirect expenses at our wholly-owned properties for the three months ended March 31, 2016 increased approximately $2.6 million, or 23.3%, to approximately $14.1 million compared to indirect expenses of approximately $11.5 million for the three months ended March 31, 2015.  The increase in indirect expenses for the three months ended March 31, 2016 was substantially related to the acquired property in Hollywood Beach, Florida, accounting for increases in indirect expenses of approximately $2.1 million for the period, and approximately $0.2 million in property tax costs compared with the three months ended March 31, 2015.

Depreciation and Amortization.  Depreciation and amortization expense for the three months ended March 31, 2016 increased approximately $0.8 million, or 26.3%, to $3.7 million compared to depreciation and amortization of approximately $2.9 million for the three months ended March 31, 2015.  The increase was mostly attributable to increases in the depreciation related to our acquired property in Hollywood Beach, Florida, accounting for increases of approximately $0.5 million for the period.

Corporate General and Administrative.  Corporate general and administrative expenses for the three months ended March 31, 2016 increased approximately $0.2 million, or 10.8% to approximately $1.6 million compared to corporate general and administrative expenses of approximately $1.4 million for the three months ended March 31, 2015.  The increase in corporate general and administrative expenses was mainly due to an increase in additional staffing and related salary increase of approximately $0.1 million, and increased professional fees of approximately $0.1 million.

Interest Expense.  Interest expense for the three months ended March 31, 2016 increased approximately $0.8 million, or 22.7%, to approximately $4.6 million compared to interest expense of approximately $3.8 million for the three months ended March 31, 2015.  The increase in interest expense for the three months ended March 31, 2016 was substantially related to the assumed mortgage loan for the acquired property in Hollywood Beach, Florida, accounting for an increase in interest expense of approximately $0.7 million for the period.

Equity Income (Loss) in Joint Venture.  Equity income in joint venture for the three months ended March 31, 2015 represented our 25.0% share of the net income of the Crowne Plaza Hollywood Beach Resort.  For the three months ended March 31, 2016 and 2015, we realized approximately $0 and $0.5 million net income, respectively.  

Unrealized Loss on Hedging Activities.  As of March 31, 2016 the fair market value of the interest rate cap is $20,424.  The unrealized loss on hedging activities during the three months ended March 31, 2016 and 2015, was $50,557 and $0, respectively.

Income Taxes.  We had an income tax benefit of approximately $0.4 million for the three months ended March 31, 2016 compared to an income tax benefit of approximately $0.4 million for the three months ended March 31, 2015.  The income tax provision is primarily derived from the operations of our TRS Lessees.  Our TRS Lessees realized an operating loss for the three months ended March 31, 2016 and for the three months ended March 31, 2015.

Net Income.  We realized net income for the three months ended March 31, 2016 of approximately $0.5 million compared to net income of approximately $0.7 million for the three months ended March 31, 2015 as a result of the operating results discussed above.

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Non-GAAP Financial Measures

We consider FFO, Adjusted FFO and Hotel EBITDA, all of which are non-GAAP financial measures, to be key supplemental measures of our performance and could be considered along with, not alternatives to, net income (loss) as a measure of our performance.  These measures do not represent cash generated from operating activities determined by generally accepted accounting principles (“GAAP”) or amounts available for our 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 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, plus certain non-cash items such as real estate asset depreciation and amortization, 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 for certain additional items that are not in NAREIT’s definition of FFO, including changes in deferred income taxes, any unrealized gain (loss) on its hedging instruments or warrant derivative, loan impairment losses, losses on early extinguishment of debt, aborted offering costs, franchise termination costs, loan modification fees, costs associated with the departure of executive officers, litigation settlement, over-assessed real estate taxes on appeal, change in control gains or losses and acquisition transaction costs.

We exclude these items as we believe it allows for meaningful comparisons between periods and among other REITs and is more indicative 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.

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The following is a reconciliation of net income to FFO and Adjusted FFO for the three months ended March 31, 2016 and 2015:

	Three Months Ended			Three Months Ended
	March 31, 2016			March 31, 2015
Net income	$	545,874		$	713,859
Depreciation and amortization		3,668,638			2,904,391
Equity in depreciation and amortization of    joint venture		—			111,144
FFO	$	4,214,512		$	3,729,394
Increase in deferred income taxes		(487,469	)		(496,454	)
Loss on hedging activities		50,557			—
Adjusted FFO	$	3,777,600		$	3,232,940
Weighted average number of shares    outstanding, basic and diluted		14,792,911			10,595,801
Weighted average number of non-controlling    units		1,922,133			2,550,827
Weighted average number of shares and units    outstanding, basic and diluted		16,715,044			13,146,628
FFO per share and unit	$	0.25		$	0.28
Adjusted FFO per share and unit	$	0.23		$	0.25

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) equity in the income or loss of equity investees, (5) unrealized gains and losses on derivative instruments not included in other comprehensive income, (6) gains and losses on disposal of assets, (7) realized gains and losses on investments, (8) impairment of long-lived assets or investments, (9) loss on early debt extinguishment, (10) gains or losses on change in control, (11) corporate general and administrative expense, (12) depreciation and amortization, (13) gains and losses on involuntary conversions of assets and (14) 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.

Our calculation of Hotel EBITDA may be different from similar measures calculated by other REITs.

The following is a reconciliation of net income to Hotel EBITDA for the three months ended March 31, 2016 and 2015:

	Three Months Ended			Three Months Ended
	March 31, 2016			March 31, 2015
Net income	$	545,874		$	713,859
Interest expense		4,632,632			3,774,535
Interest income		(8,830	)		(10,102	)
Income tax provision (benefit)		(436,079	)		(438,775	)
Depreciation and amortization		3,668,638			2,904,391
Equity in interest, depreciation and amortization    of joint venture		—			272,609
EBITDA and Adjusted EBITDA		8,402,235			7,216,517
Corporate general and administrative		1,607,294			1,451,224
Equity in Adjusted EBITDA of joint venture		—			(746,958	)
Unrealized loss on hedging activities		50,557			—
Other fee income		—			(105,629	)
Hotel EBITDA	$	10,060,086		$	7,815,154

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Sources and Uses of Cash

Operating Activities. Our principal source of cash to meet our operating requirements, including distributions to unitholders and stockholders as well as debt service (excluding debt maturities), is the operations of our hotels.  Cash flow provided by operating activities for the three months ended March 31, 2016 was approximately $6.6 million.  We had an increase in cash provided by operating activities for the three months ended March 31, 2016 of approximately $3.3 million, compared to the three months ended March 31, 2015.  The increase is mainly attributable to a net increase of changes in assets and liabilities of approximately $2.8 million, a decrease in net income of approximately $0.7 million which was offset by an approximate $1.2 million increase in other adjustments to reconcile net income to net cash provided by operating activities.  We expect that cash on hand and the net cash provided by operations will be adequate to fund our continuing operations, monthly and quarterly scheduled payments of principal and interest (excluding any balloon payments due upon maturity of a debt) and the payment of dividends (distributions) to the Company’s stockholders (and unitholders of the Operating Partnership) in accordance with federal income tax laws which require us to make annual distributions, as “qualifying distributions,” to the Company’s stockholders of at least 90% of its REIT taxable income (determined without regard to the dividends-paid deduction and by excluding its net capital gains, and reduced by certain non-cash items).

Investing Activities.  During the three months ended March 31, 2016, we used approximately $5.0 million on capital expenditures, of which, approximately $1.5 million related to the routine replacement of furniture, fixtures and equipment and $3.5 million related to renovation of our properties in Atlanta, Georgia; Houston, Texas; and Savannah, Georgia.  We also contributed approximately $1.7 million during the three months ended March 31, 2016 into reserves required by the lenders for ten of our hotels according to the provisions of their respective loan agreements.  During the three months ended March 31, 2016, we received reimbursements from those reserves of approximately $4.0 million for capital expenditures related to those properties.

Financing Activities. Cash flow used by financing activities for the three months ended March 31, 2016 was approximately $0.5 million.  This outflow was mainly used for mortgage payments of $1.4 million, dividend and distribution payments of $1.3 million and payments of deferred financing costs of $0.3 million, offset by loan proceeds received of $2.6 million.

Capital Expenditures

We anticipate that our need for recurring capital expenditures for the replacement and refurbishment of furniture, fixtures and equipment over the next 12 to 24 months will be at historical norms for our properties and the industry.  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.  Below is a description of capital expenditures by property:

· At the Company’s hotel in Houston, Texas, renovations of the guestrooms and public spaces totaling an estimated $5.0 million are complete.  As of March 31, 2016, the Company had incurred costs totaling approximately $4.6 million toward this renovation.  Renovations were completed in April 2016.

· At the Company’s hotel in Atlanta, Georgia, an estimated $7.0 million guestroom renovation is underway.  As of March 31, 2016, the Company had incurred costs totaling approximately $5.9 million toward this renovation.  Renovations are expected to be completed in November 2016.

· At the Company’s hotel in Savannah, Georgia, renovations of the guestrooms and public spaces totaling an estimated $8.1 million are underway.  As of March 31, 2016, the Company had incurred costs totaling approximately $1.9 million toward this renovation.  Renovations are expected to be completed in August 2017.  

Given our desire to complete the renovation activities at our properties in Houston, Texas and Atlanta, Georgia and to continue such activities in Savannah, Georgia, we aim to restrict all other capital expenditures at these hotels during the renovation period to the replacement of broken or damaged furniture and equipment and the acquisition of items mandated by our licensor that is necessary to maintain our brand affiliation in Savannah, Georgia.  We anticipate that capital expenditures for the replacement and refurbishment of furniture, fixtures and equipment that are not related to these renovation activities to total 2.50% to 3.00% of gross revenues in 2016.

We expect a substantial portion of our 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.  We currently deposit an amount equal to 4.0% of gross revenue for the Hilton Savannah DeSoto, the Hilton Wilmington Riverside, the Crowne Plaza Hampton Marina, the DoubleTree by Hilton Raleigh Brownstone-University, the Sheraton Louisville Riverside, The Whitehall, the DoubleTree by Hilton Jacksonville Riverfront, the Crowne Plaza Hollywood Beach Resort and the Georgian Terrace as well as 4.0% of room revenues for the DoubleTree by Hilton Philadelphia Airport on a monthly basis.

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Liquidity and Capital Resources

As of March 31, 2016, we had total cash of approximately $18.6 million, of which approximately $15.0 million was in cash and cash equivalents and approximately $3.6 million was restricted for real estate taxes, insurance, capital improvement and certain other expenses, or otherwise restricted.  We expect that our cash on hand combined with our cash flow from the operations of our hotels should be adequate to fund continuing operations, recurring capital expenditures for the refurbishment and replacement of furniture, fixtures and equipment, and monthly and quarterly scheduled payments of principal and interest (excluding any balloon payments due upon maturity of the indentures or mortgage debt).

On March 21, 2016, we entered into an agreement to extend the maturity of the mortgage on The Whitehall until November 2017.

We are in negotiations to refinance the mortgage indebtedness on the Hilton Savannah DeSoto.  We hope to secure approximately $15.0M in additional proceeds at a lower rate of interest than the existing mortgage.  We anticipate that a portion of the proceeds will fund anticipated renovations at the property and that the balance will be available for general corporate purposes.

On June 30, 2016, the mortgage on the Crowne Plaza Hampton Marina matures.  On April 29, 2016, we entered into a purchase and sale agreement to sell the property.  If the sale does not close before the maturity date, or at all, we anticipate that we will either seek an extension of the mortgage with the existing lender or satisfy the outstanding balance out of working capital.

During the first half of 2017, the mortgages on the Sheraton Louisville Riverside, the Hilton Wilmington Riverside and the Crowne Plaza Tampa Westshore mature.  These mortgages contain no extension provisions.  We anticipate refinancing the indebtedness on each property prior to their respective maturity dates.

We will need to, and plan to, renew, replace or extend our existing indebtedness prior to their respective maturity dates.  We are uncertain whether we will be able to refinance these obligations or if refinancing terms will be favorable.  If we are unable to obtain alternative or additional financing arrangements in the future, or if we cannot obtain financing on acceptable terms, we may be forced to dispose of hotel properties on disadvantageous terms.  To the extent we cannot repay our outstanding debt, we risk losing some or all of these properties to foreclosure and we could be required to invoke insolvency proceedings including, but not limited to, commencing a voluntary case under the U.S. Bankruptcy Code.

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. There can be no assurance that we will continue to make investments in properties that meet our investment criteria. Additionally, we may choose to dispose of certain hotels as a means to provide liquidity.

We expect to meet our liquidity requirements for hotel property acquisitions, property redevelopment, investments in new joint ventures and debt maturities, which include the repayment of the Notes (which are callable after September 30, 2016, with respect to the 8% Notes, and November 15, 2017, with respect to the 7% Notes) 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, as well as the selective disposition of non-core assets.  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.  Failure to comply with these financial covenants could result from, among other things, changes in the local competitive environment, general economic conditions and disruption caused by renovation activity or major weather disturbances.

If we violate the financial covenants contained in these agreements, we may attempt to negotiate waivers of the violations or amend the terms of the applicable mortgage loan agreement with the lender; however, we can make no assurance that we would be successful in any such negotiation or that, if successful in obtaining waivers or amendments, such waivers or amendments would be on attractive terms.  Some mortgage loan agreements provide alternate cure provisions which may allow us to otherwise comply with the financial covenants by obtaining an appraisal of the hotel, prepaying a portion of the outstanding indebtedness or by providing cash collateral until such time as the financial covenants are met by the collateralized property without consideration of the cash collateral.  Alternate cure provisions which include prepaying a portion of the outstanding indebtedness or providing cash collateral may have a material impact on our liquidity.

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If we are unable to negotiate a waiver or amendment or satisfy alternate cure provisions, if any, or unable to meet any alternate cure requirements and a default were to occur, we would possibly have to refinance the debt through additional debt financing, private or public offerings of debt securities, or additional equity financing.

Under the terms of our non-recourse secured mortgage loan agreements, failure to comply with the financial covenants in the loan agreement triggers cash flows from the property to be directed to the lender, which may limit our overall liquidity as that cash flow would not be available to us.

As of March 31, 2016, we were in compliance with all debt covenants, current on all loan payments and not otherwise in default under any of our mortgage loans.

Unsecured Notes

The indentures for the Notes contains certain covenants and restrictions that require us to meet certain financial ratios.  We are not permitted to incur any Debt (other than intercompany Debt), as defined in the indentures, if, immediately after giving effect to the incurrence of such Debt and to the application of the proceeds thereof, the ratio of the aggregate principal amount of all outstanding Debt to Adjusted Total Asset Value, as defined in the indentures, would be greater than 0.65 to 1.0.  In addition, we are not permitted to incur any Debt if the ratio of Stabilized Consolidated Income Available for Debt Service to Stabilized Consolidated Interest Expense, both as defined in the indentures, on the date on which such additional Debt is to be incurred, on a pro-forma basis, after giving effect to the incurrence of such Debt and to the application of the proceeds thereof, would be less than 1.50 to 1.0.

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These financial measures are not calculated in accordance with GAAP and are presented below for the sole purpose of evaluating our compliance with the key financial covenants as they were applicable at March 31, 2016 and December 31, 2015, respectively.

	March 31,			December 31,
	2016			2015
Ratio of Stabilized Consolidated Income Available    for Debt Service to Stabilized Consolidated    Interest Expense
Net income(1)	$	6,229,669		$	6,397,653
Interest expense(1)		17,373,927			16,515,827
Loss on early debt extinguishment		772,907			772,907
Unrealized loss on hedging activities		159,376			108,819
Gain on change in control		(6,603,148	)		(6,603,148	)
Gain on disposal of assets		(41,435	)		(41,435	)
Provision for taxes(1)		(1,333,337	)		(1,336,033	)
Equity in income of joint venture(1)		(1,165	)		(475,514	)
Impairment of investment in hotel properties, net(1)		500,000			500,000
Depreciation and amortization(1)		14,355,742			13,591,495
Corporate general and administrative expenses(1)		7,424,326			7,268,256
Consolidated income available for debt service(1)		38,836,862			36,698,827
Less: income of non-stabilized assets(1)		(19,008,163	)		(16,284,975	)
Stabilized Consolidated Income Available for    Debt Service(1)	$	19,828,699		$	20,413,852
Interest expense(1)	$	17,373,927		$	16,515,827
Amortization of issuance costs(1)		(1,263,045	)		(1,300,032	)
Consolidated interest expense(1)		16,110,882			15,215,795
Less: interest expense of non-stabilized assets(1)		(5,963,364	)		(5,295,224	)
Stabilized Consolidated Interest Expense(1)	$	10,147,518		$	9,920,571
Ratio of Stabilized Consolidated Income Available    for Debt Service to Stabilized Consolidated    Interest Expense		1.95			2.06
Threshold Ratio Minimum		1.50			1.50
Ratio of Debt to Adjusted Total Asset Value:
Mortgage loans	$	270,290,920		$	271,977,944
Unsecured notes		52,900,000			52,900,000
Total debt	$	323,190,920		$	324,877,944
Stabilized Consolidated Income Available for    Debt Service(1)	$	19,828,699		$	20,413,852
Capitalization rate		7.5	%		7.5	%
		264,382,653			272,184,693
Non-stabilized assets		299,150,000			305,255,698
Total cash		18,616,199			17,287,754
Adjusted Total Asset Value	$	582,148,852		$	594,728,145
Ratio of Debt to Adjusted Total Asset Value		0.56			0.55
Threshold Ratio Maximum		0.65			0.65

(1) Represents the four preceding calendar quarters.

(2) As permitted by the indentures, the DoubleTree by Hilton Philadelphia Airport, DoubleTree by Hilton Laurel, DoubleTree by Hilton Jacksonville Riverfront and Crowne Plaza Hollywood Beach Resort, for the period ended March 31, 2016, and the DoubleTree by Hilton Philadelphia Airport, DoubleTree by Hilton Laurel, DoubleTree by Hilton Jacksonville Riverfront, Crowne Plaza Hollywood Beach Resort, and the Georgian Terrace, for the period ended December 31, 2015, are considered non-stabilized assets for purposes of the financial covenants.

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Dividend Policy

We intend to continue to declare quarterly distributions to our stockholders.  The amount of future common stock (and Operating Partnership unit) distributions will be based upon quarterly operating results, general economic conditions, requirements for capital improvements, the availability of debt and equity capital, the Internal Revenue Code’s annual distribution requirements and other factors, which the Company’s board of directors deems relevant.  The amount, timing and frequency of distributions will be authorized by the Company’s board of directors and declared by us based upon a variety of factors deemed relevant by our directors, and no assurance can be given that our distribution policy will not change in the future.

In January 2016, we increased the quarterly dividend (distribution) to $0.085 per common share (and unit).

In April 2016, we increased the quarterly dividend (distribution) to $0.09 per common share (and unit).

Off-Balance Sheet Arrangements

Through a joint venture with a Carlyle subsidiary, until July 30, 2015 we owned a 25.0% indirect, noncontrolling interest in an entity that acquired the 311-room Crowne Plaza Hollywood Beach Resort in Hollywood Beach, Florida in 2007.  Pursuant to the joint venture, we had the right to receive a pro rata share of operating surpluses and we had an obligation to fund our pro rata share of operating shortfalls.  We also had the opportunity to earn an incentive participation in the net proceeds realized from the sale of the hotel based upon the achievement of certain overall investment returns, in addition to our pro rata share of net sale proceeds.  The Crowne Plaza Hollywood Beach Resort was leased to another entity in which we also owned a 25.0% indirect, noncontrolling interest.

Carlyle owned a 75.0% controlling interest in the entities that own and lease the Crowne Plaza Hollywood Beach Resort.  Carlyle had the right to dispose of the Crowne Plaza Hollywood Beach Resort without our consent.  We accounted for our noncontrolling 25.0% interest in all of these entities under the equity method of accounting.

On July 31, 2015, indirect subsidiaries of the Operating Partnership acquired from Carlyle the remaining 75.0% interest in the entities that own and lease the Crowne Plaza Hollywood Beach Resort.  As a result, the Operating Partnership now has a 100% indirect ownership interest in the entities that own the Crowne Plaza Hollywood Beach Resort.  The property was refinanced on September 28, 2015 and is encumbered by a $60.0 million mortgage which matures in September 2025 and requires monthly payments of interest at a rate of 4.913%. The Crowne Plaza Hollywood Beach Resort secures the mortgage.

Inflation

We generate revenues primarily from lease payments from our TRS Lessees and net income from the operations of our TRS Lessees. 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 higher than inflation.

Geographic Concentration and Seasonality

Our hotels are located in Florida, Georgia, Indiana, 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 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 experience significant room demand during this period.

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Critical Accounting Policies

The critical accounting policies are described below.  We consider these policies critical because they involve difficult management judgments and assumptions, are subject to material change from external factors or are pervasive, and are significant to fully understand and evaluate our reported financial results.

Investment in Hotel Properties. Hotel properties are stated at cost, net of any impairment charges, and are depreciated using the straight-line method over an estimated useful life of 7-39 years for buildings and improvements and 3-10 years for furniture and equipment.  In accordance with generally accepted accounting principles, the controlling interests in hotels comprising our accounting predecessor, MHI Hotels Services Group, and noncontrolling interests held by the controlling holders of our accounting predecessor in hotels acquired from third parties, which were contributed to us in connection with the Company’s initial public offering, are recorded at historical cost basis.  Noncontrolling interests in those entities that comprise our accounting predecessor and the interests in hotels, other than those held by the controlling members of our accounting predecessor, acquired from third parties are recorded at fair value at the time of acquisition.

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

There were no charges for impairment of hotel properties recorded for the three months ended March 31, 2016.

In performing the recoverability analysis, we project future operating cash flows based upon significant assumptions regarding growth rates, occupancy, room rates, economic trends, property-specific operating costs and future capital expenditures required to maintain the hotel in its current operating condition.  We also project cash flows from the eventual disposition of the hotel based upon various factors including property-specific capitalization rates, ratio of selling price to gross hotel revenues and the selling price per room.

Revenue Recognition.  Hotel revenues, including room, food, beverage and other hotel revenues, are recognized as the related services are delivered. We generally consider accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts is required. If we determine that amounts are uncollectible, which would generally be the result of a customer’s bankruptcy or other economic downturn, such amounts will be charged against operations when that determination is made.  Revenues are reported net of occupancy and other taxes collected from customers and remitted to governmental authorities. Receivables for amounts earned under various contracts are subject to audit.

Income Taxes. We record a valuation allowance to reduce deferred tax assets to an amount that we believe is more likely than not to be realized.  Because of expected future taxable income of our TRS Lessees, we have not recorded a valuation allowance to reduce our net deferred tax asset as of March 31, 2016.  Should our estimate of future taxable income be less than expected, we would record an adjustment to the net deferred tax asset in the period such determination was made.

Recent Accounting Pronouncements

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

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 and Section 21E of the Securities Exchange Act of 1934, 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

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regarding our expected financial position, business and financing plans are forward-looking statements. Factors which could have a material adverse effect on our operations and future 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, increases in wages, energy costs and other operating costs;

· the magnitude and sustainability of the economic recovery in the hospitality industry and in the markets in which we operate;

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

· risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements and, if necessary, to refinance or seek an extension of the maturity of such indebtedness or modify such debt agreements;

· 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 REITs;

· the Company’s ability to maintain its qualification as a REIT; and

· our ability to maintain adequate insurance coverage.

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 and subsequent reports filed with the Securities and Exchange Commission.

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.

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.

As of March 31, 2016, we had approximately $271.4 million of fixed-rate debt and approximately $51.8 million of variable-rate debt.  The weighted-average interest rate on the fixed-rate debt was 5.58%.  A change in market interest rates on the fixed portion of

37

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.  However, to the extent that 1-month LIBOR does not exceed the 1-month LIBOR floor on the mortgage on the DoubleTree by Hilton Philadelphia Airport of 0.50%, a portion of our variable-rate debt would not be exposed to changes in interest rates.   Assuming that the aggregate amount outstanding on the mortgage on the DoubleTree by Hilton Philadelphia Airport and the mortgage on the DoubleTree by Hilton Jacksonville Riverfront remains at approximately $51.8 million, the balance at March 31, 2016, the impact on our annual interest incurred and cash flows of a one percent increase in 1-month LIBOR would be approximately $0.5 million.

As of December 31, 2015, we had approximately $272.6 million of fixed-rate debt and approximately $52.3 million of variable-rate debt.  The weighted-average interest rate on the fixed-rate debt was 5.58%.  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.  However, to the extent that 1-month LIBOR does not exceed the 1-month LIBOR floor on the mortgage on the DoubleTree by Hilton Philadelphia Airport of 0.50%, a portion of our variable-rate debt would not be exposed to changes in interest rates.   Assuming that the aggregate amount outstanding on the mortgage on the DoubleTree by Hilton Philadelphia Airport and the mortgage on the DoubleTree by Hilton Jacksonville Riverfront remains at approximately $52.2 million, the balance at December 31, 2015, the impact on our annual interest incurred and cash flows of a one percent increase in 1-month LIBOR would be approximately $0.5 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”), as required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act), as of March 31, 2016. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2016, 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 with 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, 2016. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2016, 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 with 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.

38

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.

39

PART II

Item 1. Legal Proceedings

We are not involved in any legal proceedings other than routine legal proceedings occurring in the ordinary course of business. We believe that these routine legal proceedings, in the aggregate, are not material to our financial condition and 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, 2015.

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.

On February 1, 2016, Andrew M. Sims and Kim E. Sims, holders of units in the Operating Partnership, redeemed 322,687 and 100,000 units, respectively, for an equivalent number of shares of the Company’s common stock.  The shares were issued to the unitholders pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

40

Item 6. Exhibits

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

Exhibit
Number	Description of Exhibit
3.1	Articles of Amendment and Restatement of the Company (incorporated by reference to the document previously filed as Exhibit 3.1 to the Company’s Pre-Effective Amendment No. 1 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on October 20, 2004 (File No. 333-118873)).
3.3	Amended and Restated Agreement of Limited Partnership of Sotherly Hotels LP (incorporated by reference to the document previously filed as Exhibit 3.3 to the Company’s Pre-Effective Amendment No. 5 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on December 13, 2004 (File No. 333-118873)).
3.4	Articles Supplementary of the Company (incorporated by reference to the document previously filed as Exhibit 3.4 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 18, 2011).
3.6	Amendment No. 1 to the Amended and Restated Agreement of Limited Partnership of Sotherly Hotels LP (incorporated by reference to the document previously filed as Exhibit 3.6 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 18, 2011).
3.7	Articles of Amendment to the Articles of Amendment and Restatement of the Company, effective as of April 16, 2013 (incorporated by reference to the document previously filed as Exhibit 3.7 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2013).
3.8	Second Amended and Restated Bylaws of the Company, effective as of April 16, 2013 (incorporated by reference to the document previously filed as Exhibit 3.8 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2013).
3.9	Amendment No. 2 to the Amended and Restated Agreement of Limited Partnership of Sotherly Hotels LP (incorporated by reference to the document previously filed as Exhibit 3.3 to the Operating Partnership’s Pre-Effective Amendment No. 1 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on August 9, 2013 (File No. 333-189821)).
4.0	Form of Common Stock Certificate (incorporated by reference to the document previously filed as Exhibit 4.0 to the Company’s Pre-Effective Amendment No. 5 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on December 13, 2004 (File No. 333-118873)).
4.6	Senior Unsecured Note issued by Sotherly Hotels LP (incorporated by reference to the document previously filed as Exhibit 4.6 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013, filed with the Securities and Exchange Commission on November 7, 2013).
4.7	Indenture between Sotherly Hotels LP and Wilmington Trust, National Association, as trustee (incorporated by reference to the document previously filed as Exhibit 4.7 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013, filed with the Securities and Exchange Commission on November 7, 2013).
4.8	Indenture by and among Sotherly Hotels Inc., Sotherly Hotels LP and Wilmington Trust, National Association, as trustee, dated November 21, 2014 (incorporated by reference to the document previously filed as Exhibit 4.8 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on November 21, 2014).
4.9	First Supplemental Indenture by and among Sotherly Hotels Inc., Sotherly Hotels LP and Wilmington Trust, National Association, as trustee, dated November 21, 2014 (incorporated by reference to the document previously filed as Exhibit 4.9 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on November 21, 2014).
4.10	7.00% Senior Unsecured Note due 2019, issued by Sotherly Hotels LP (incorporated by reference to the document previously filed as Exhibit 4.10 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the Securities and Exchange Commission on April 14, 2015).
10.20A	Executive Employment Agreement, dated as of January 1, 2016, between Sotherly Hotels Inc. and David R. Folsom (incorporated by reference to the document previously filed as Exhibit 10.20A to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 4, 2016). *
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rules Rule 13(a)-14 and 15(d)-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the Company.

41

Exhibit
Number	Description of Exhibit
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rules Rule 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 Rule 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 Rule 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	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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

42

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 11, 2016	By:	/s/ Andrew M. Sims
		Andrew M. Sims
		Chief Executive Officer
	By:	/s/ Anthony E. Domalski
		Anthony E. Domalski
		Chief Financial Officer

43

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 11, 2016	By:	/s/ Andrew M. Sims
		Andrew M. Sims
		Chief Executive Officer
	By:	/s/ Anthony E. Domalski
		Anthony E. Domalski
		Chief Financial Officer

44

EXHIBIT INDEX

Exhibit
Number	Description of Exhibit
3.1	Articles of Amendment and Restatement of the Company (incorporated by reference to the document previously filed as Exhibit 3.1 to the Company’s Pre-Effective Amendment No. 1 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on October 20, 2004 (File No. 333-118873)).
3.3	Amended and Restated Agreement of Limited Partnership of Sotherly Hotels LP (incorporated by reference to the document previously filed as Exhibit 3.3 to the Company’s Pre-Effective Amendment No. 5 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on December 13, 2004 (File No. 333-118873)).
3.4	Articles Supplementary of the Company (incorporated by reference to the document previously filed as Exhibit 3.4 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 18, 2011).
3.6	Amendment No. 1 to the Amended and Restated Agreement of Limited Partnership of Sotherly Hotels LP (incorporated by reference to the document previously filed as Exhibit 3.6 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 18, 2011).
3.7	Articles of Amendment to the Articles of Amendment and Restatement of the Company, effective as of April 16, 2013 (incorporated by reference to the document previously filed as Exhibit 3.7 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2013).
3.8	Second Amended and Restated Bylaws of the Company, effective as of April 16, 2013 (incorporated by reference to the document previously filed as Exhibit 3.8 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2013).
3.9	Amendment No. 2 to the Amended and Restated Agreement of Limited Partnership of Sotherly Hotels LP (incorporated by reference to the document previously filed as Exhibit 3.3 to the Operating Partnership’s Pre-Effective Amendment No. 1 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on August 9, 2013 (File No. 333-189821)).
4.0	Form of Common Stock Certificate (incorporated by reference to the document previously filed as Exhibit 4.0 to the Company’s Pre-Effective Amendment No. 5 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on December 13, 2004 (File No. 333-118873)).
4.6	Senior Unsecured Note issued by Sotherly Hotels LP (incorporated by reference to the document previously filed as Exhibit 4.6 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013, filed with the Securities and Exchange Commission on November 7, 2013).
4.7	Indenture between Sotherly Hotels LP and Wilmington Trust, National Association, as trustee (incorporated by reference to the document previously filed as Exhibit 4.7 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013, filed with the Securities and Exchange Commission on November 7, 2013).
4.8	Indenture by and among Sotherly Hotels Inc., Sotherly Hotels LP and Wilmington Trust, National Association, as trustee, dated November 21, 2014 (incorporated by reference to the document previously filed as Exhibit 4.8 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on November 21, 2014).
4.9	First Supplemental Indenture by and among Sotherly Hotels Inc., Sotherly Hotels LP and Wilmington Trust, National Association, as trustee, dated November 21, 2014 (incorporated by reference to the document previously filed as Exhibit 4.9 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on November 21, 2014).
4.10	7.00% Senior Unsecured Note due 2019, issued by Sotherly Hotels LP (incorporated by reference to the document previously filed as Exhibit 4.10 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the Securities and Exchange Commission on April 14, 2015).
10.20A	Executive Employment Agreement, dated as of January 1, 2016, between Sotherly Hotels Inc. and David R. Folsom (incorporated by reference to the document previously filed as Exhibit 10.20A to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 4, 2016). *
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rules Rule 13(a)-14 and 15(d)-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the Company.

45

Exhibit
Number	Description of Exhibit
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rules Rule 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 Rule 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 Rule 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	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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

46

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

FOR THE CHIEF EXECUTIVE OFFICER

I, Andrew M. Sims, 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 11, 2016
	By:	/s/ Andrew M. Sims
	Name:	Andrew M. Sims
	Title:	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 11, 2016
	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, Andrew M. Sims, 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 11, 2016
	By:	/s/ Andrew M. Sims
	Name:	Andrew M. Sims
	Title:	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 11, 2016
	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, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrew M. Sims, 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 11, 2016
	By:	/s/ Andrew M. Sims
	Name:	Andrew M. Sims
	Title:	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, 2016 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 11, 2016
	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, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrew M. Sims, 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 11, 2016
	By:	/s/ Andrew M. Sims
	Name:	Andrew M. Sims
	Title:	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, 2016 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 11, 2016
	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, 2016	May. 10, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Trading Symbol	SOHO
Entity Registrant Name	SOTHERLY HOTELS INC.
Entity Central Index Key	0001301236
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		14,949,651
Sotherly Hotels LP [Member]
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Entity Registrant Name	SOTHERLY HOTELS LP
Entity Central Index Key	0001301236
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer

XML

Consolidated Balance Sheets - USD ($)	Mar. 31, 2016	Dec. 31, 2015
ASSETS
Investment in hotel properties, net	$ 356,277,837	$ 354,963,242
Cash and cash equivalents	14,985,925	11,493,914
Restricted cash	3,630,274	5,793,840
Accounts receivable, net	3,848,461	4,071,175
Accounts receivable-affiliate	208,726	226,552
Loan proceeds receivable		2,600,711
Prepaid expenses, inventory and other assets	4,704,666	4,432,432
Deferred income taxes	5,877,844	5,390,374
TOTAL ASSETS	389,533,733	388,972,240
LIABILITIES
Mortgage loans, net	266,473,174	267,891,830
Unsecured notes	52,900,000	52,900,000
Accounts payable and accrued expenses	14,234,813	12,334,879
Advance deposits	2,321,530	1,651,840
Dividends and distributions payable	1,421,862	1,335,323
TOTAL LIABILITIES	$ 337,351,379	$ 336,113,872
Commitments and contingencies (See Note 5)
Sotherly Hotels Inc. stockholders’ equity
Preferred stock, par value $0.01, 972,350 shares authorized, 0 shares issued and outstanding
Common stock, par value $0.01, 49,000,000 shares authorized, 14,949,651 shares and 14,490,714 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively	$ 149,496	$ 144,907
Additional paid in capital	83,788,906	82,749,058
Distributions in excess of retained earnings	(34,675,230)	(33,890,834)
Total Sotherly Hotels Inc. stockholders’ equity	49,263,172	49,003,131
Noncontrolling interest	2,919,182	3,855,237
TOTAL EQUITY	52,182,354	52,858,368
TOTAL LIABILITIES AND OWNERS' EQUITY	389,533,733	388,972,240
Sotherly Hotels LP [Member]
ASSETS
Investment in hotel properties, net	356,277,837	354,963,242
Cash and cash equivalents	14,985,925	11,493,914
Restricted cash	3,630,274	5,793,840
Accounts receivable, net	3,848,461	4,071,175
Accounts receivable-affiliate	208,726	226,552
Loan proceeds receivable		2,600,711
Prepaid expenses, inventory and other assets	4,704,666	4,432,432
Deferred income taxes	5,877,844	5,390,374
TOTAL ASSETS	389,533,733	388,972,240
LIABILITIES
Mortgage loans, net	266,473,174	267,891,830
Unsecured notes	52,900,000	52,900,000
Accounts payable and accrued expenses	14,234,813	12,334,879
Advance deposits	2,321,530	1,651,840
Dividends and distributions payable	1,421,862	1,335,323
TOTAL LIABILITIES	$ 337,351,379	$ 336,113,872
Commitments and contingencies (See Note 5)
Sotherly Hotels Inc. stockholders’ equity
TOTAL LIABILITIES AND OWNERS' EQUITY	$ 389,533,733	$ 388,972,240
PARTNERS’ CAPITAL
General Partner: 167,278 and 166,915 units issued and outstanding as of March 31, 2016 and December 31, 2015, respectively	767,535	774,295
Limited Partners: 16,560,513 and 16,524,626 units issued and outstanding as of March 31, 2016 and December 31, 2015, respectively	51,414,819	52,084,073
TOTAL PARTNERS’ CAPITAL	$ 52,182,354	$ 52,858,368

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	972,350	972,350
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	49,000,000	49,000,000
Common stock, shares issued	14,949,651	14,490,714
Common stock, shares outstanding	14,949,651	14,490,714
Sotherly Hotels LP [Member]
General Partner, units issued	167,278	166,915
General Partner, units outstanding	167,278	166,915
Limited Partner, units issued	16,560,513	16,524,626
Limited Partner, units outstanding	16,560,513	16,524,626

XML

Consolidated Statements of Operations - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
REVENUE
Rooms department	$ 27,322,413	$ 21,336,414
Food and beverage department	8,249,679	7,726,807
Other operating departments	2,238,052	1,912,409
Total revenue	37,810,144	30,975,630
Hotel operating expenses
Rooms department	7,080,633	5,842,940
Food and beverage department	5,939,861	5,405,385
Other operating departments	593,969	338,179
Indirect	14,135,595	11,468,343
Total hotel operating expenses	27,750,058	23,054,847
Depreciation and amortization	3,668,638	2,904,391
Corporate general and administrative	1,607,294	1,451,224
Total operating expenses	33,025,990	27,410,462
NET OPERATING INCOME	4,784,154	3,565,168
Other income (expense)
Interest expense	(4,632,632)	(3,774,535)
Interest income	8,830	10,102
Equity income in joint venture		474,349
Unrealized loss on hedging activities	(50,557)
Net income before income taxes	109,795	275,084
Income tax benefit	436,079	438,775
Net income	545,874	713,859
Less: Net (income) attributable to the noncontrolling interest	(62,779)	(138,523)
Net income attributable to the Company	$ 483,095	$ 575,336
Net income per share attributable to the Company
Basic and diluted	$ 0.03	$ 0.05
Weighted average number of shares outstanding
Basic and diluted	14,792,911	10,595,801
Sotherly Hotels LP [Member]
REVENUE
Rooms department	$ 27,322,413	$ 21,336,414
Food and beverage department	8,249,679	7,726,807
Other operating departments	2,238,052	1,912,409
Total revenue	37,810,144	30,975,630
Hotel operating expenses
Rooms department	7,080,633	5,842,940
Food and beverage department	5,939,861	5,405,385
Other operating departments	593,969	338,179
Indirect	14,135,595	11,468,343
Total hotel operating expenses	27,750,058	23,054,847
Depreciation and amortization	3,668,638	2,904,391
Corporate general and administrative	1,607,294	1,451,224
Total operating expenses	33,025,990	27,410,462
NET OPERATING INCOME	4,784,154	3,565,168
Other income (expense)
Interest expense	(4,632,632)	(3,774,535)
Interest income	8,830	10,102
Equity income in joint venture		474,349
Unrealized loss on hedging activities	(50,557)
Net income before income taxes	109,795	275,084
Income tax benefit	436,079	438,775
Net income	$ 545,874	$ 713,859
Net income per share attributable to the Company
Basic and diluted	$ 0.03	$ 0.05
Weighted average number of shares outstanding
Basic and diluted	16,715,044	13,146,628

XML

Consolidated Statement of Changes in Equity - 3 months ended Mar. 31, 2016 - USD ($)	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Distributions in Excess of Retained Earnings [Member]	Noncontrolling Interest [Member]
Balances, beginning at Dec. 31, 2015	$ 52,858,368	$ 144,907	$ 82,749,058	$ (33,890,834)	$ 3,855,237
Balances, shares, beginning at Dec. 31, 2015		14,490,714
Net income	545,874			483,095	62,779
Issuance of unrestricted common stock awards	128,282	$ 242	128,040
Issuance of unrestricted common stock awards, shares		24,250
Issuance of restricted common stock awards	63,480	$ 120	63,360
Issuance of restricted common stock awards, shares		12,000
Conversion of Operating Partnership units into shares of common stock		$ 4,227	843,468		(847,695)
Conversion of Operating Partnership units into shares of common stock, shares		422,687
Amortization of restricted stock award	4,980		4,980
Dividends and distributions declared	(1,418,630)			(1,267,491)	(151,139)
Balances, ending at Mar. 31, 2016	$ 52,182,354	$ 149,496	$ 83,788,906	$ (34,675,230)	$ 2,919,182
Balances, shares, ending at Mar. 31, 2016		14,949,651

XML

Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities:
Net income	$ 545,874	$ 713,859
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,668,638	2,904,391
Equity income in joint venture		(474,349)
Amortization of deferred financing costs	313,410	350,396
Amortization of mortgage premium	(6,479)
Unrealized loss on derivative instrument	50,557
Charges related to equity-based compensation	196,742	271,036
Changes in assets and liabilities:
Restricted cash	(120,693)	(223,492)
Accounts receivable	222,714	(1,808,004)
Prepaid expenses, inventory and other assets	(342,455)	(835,566)
Deferred income taxes	(487,469)	(496,454)
Accounts payable and other accrued liabilities	1,892,725	2,428,633
Advance deposits	669,690	551,491
Accounts receivable - affiliate	17,826	(44,540)
Net cash provided by operating activities	6,621,080	3,337,401
Cash flows from investing activities:
Improvements and additions to hotel properties	(4,956,359)	(4,485,857)
Distributions from joint venture		600,000
Funding of restricted cash reserves	(1,674,236)	(777,597)
Proceeds of restricted cash reserves	3,958,496	3,404,730
Net cash used in investing activities	(2,672,099)	(1,258,724)
Cash flows from financing activities:
Proceeds from mortgage loan receivable	2,600,711
Payments on mortgage debt and loans	(1,446,688)	(1,159,671)
Payment of deferred financing costs	(278,899)	(617,500)
Dividends and distributions paid	(1,332,094)	(852,914)
Net cash used in financing activities	(456,970)	(2,630,085)
Net (decrease) increase in cash and cash equivalents	3,492,011	(551,408)
Cash and cash equivalents at the beginning of the period	11,493,914	16,634,499
Cash and cash equivalents at the end of the period	14,985,925	16,083,091
Supplemental disclosures:
Cash paid during the period for interest	3,606,752	3,223,308
Cash paid during the period for income taxes	9,165	200
Non-cash investing and financing activities:
Change in amount of deferred financing and deferred offering cost in accounts payable and accrued liabilities		(624,117)
Change in amount of hotel property improvements in accounts payable and accrued liabilities	(7,209)	(664,159)
Sotherly Hotels LP [Member]
Cash flows from operating activities:
Net income	545,874	713,859
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,668,638	2,904,391
Equity income in joint venture		(474,349)
Amortization of deferred financing costs	313,410	350,396
Amortization of mortgage premium	(6,479)
Unrealized loss on derivative instrument	50,557
Charges related to equity-based compensation	196,742	271,036
Changes in assets and liabilities:
Restricted cash	(120,693)	(223,492)
Accounts receivable	222,714	(1,808,004)
Prepaid expenses, inventory and other assets	(342,455)	(835,566)
Deferred income taxes	(487,469)	(496,454)
Accounts payable and other accrued liabilities	1,892,725	2,428,633
Advance deposits	669,690	551,491
Accounts receivable - affiliate	17,826	(44,540)
Net cash provided by operating activities	6,621,080	3,337,401
Cash flows from investing activities:
Improvements and additions to hotel properties	(4,956,359)	(4,485,857)
Distributions from joint venture		600,000
Funding of restricted cash reserves	(1,674,236)	(777,597)
Proceeds of restricted cash reserves	3,958,496	3,404,730
Net cash used in investing activities	(2,672,099)	(1,258,724)
Cash flows from financing activities:
Proceeds from mortgage loan receivable	2,600,711
Payments on mortgage debt and loans	(1,446,688)	(1,159,671)
Payment of deferred financing costs	(278,899)	(617,500)
Dividends and distributions paid	(1,332,094)	(852,914)
Net cash used in financing activities	(456,970)	(2,630,085)
Net (decrease) increase in cash and cash equivalents	3,492,011	(551,408)
Cash and cash equivalents at the beginning of the period	11,493,914	16,634,499
Cash and cash equivalents at the end of the period	14,985,925	16,083,091
Supplemental disclosures:
Cash paid during the period for interest	3,606,752	3,223,308
Cash paid during the period for income taxes	9,165	200
Non-cash investing and financing activities:
Change in amount of deferred financing and deferred offering cost in accounts payable and accrued liabilities		(624,117)
Change in amount of hotel property improvements in accounts payable and accrued liabilities	$ (7,209)	$ (664,159)

XML

Consolidated Statement of Changes in Partners' Capital - 3 months ended Mar. 31, 2016 - USD ($)	Total	Sotherly Hotels LP [Member]	Sotherly Hotels LP [Member] General Partner [Member]	Sotherly Hotels LP [Member] Limited Partner [Member]
Balances, beginning at Dec. 31, 2015		$ 52,858,368	$ 774,295	$ 52,084,073
Balances, units, beginning at Dec. 31, 2015			166,915	16,524,626
Issuance of partnership units		191,762	$ 1,918	$ 189,844
Issuance of partnership units, number of units			363	35,887
Amortization of restricted units award	$ 4,980	4,980	$ 50	$ 4,930
Distributions declared		(1,418,630)	(14,187)	(1,404,443)
Net income	$ 545,874	545,874	5,459	540,415
Balances, ending at Mar. 31, 2016		$ 52,182,354	$ 767,535	$ 51,414,819
Balances, units, ending at Mar. 31, 2016			167,278	16,560,513

XML

Organization and Description of Business

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Organization and Description of Business

1. Organization and Description of Business

Sotherly Hotels Inc., formerly MHI Hospitality Corporation (the “Company”), is a self-managed and self-administered lodging real estate investment trust (“REIT”) that was incorporated in Maryland on August 20, 2004 to own full-service, primarily upscale and upper-upscale hotels located in primary and secondary markets in the mid-Atlantic and southern United States.  Currently, the Company is 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 consists of investments in twelve hotel properties, comprising 3,011 rooms.  All of the Company’s hotels, except for the Georgian Terrace and The Whitehall, operate under the Hilton, Crowne Plaza, DoubleTree, and Sheraton brands.

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, formerly MHI Hospitality, L.P. (the “Operating Partnership”).  The Company and the Operating Partnership through July 30, 2015, also owned a 25.0% noncontrolling interest in the Crowne Plaza Hollywood Beach Resort through a joint venture with CRP/MHI Holdings, LLC, an affiliate of both Carlyle Realty Partners V, L.P. and The Carlyle Group (“Carlyle”).  As of July 31, 2015, we own 100% of the entities that own the Crowne Plaza Hollywood Beach Resort.

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, 2016, was approximately 89.4% owned by the Company, and its subsidiaries, lease the hotels to a subsidiary of MHI Hospitality TRS Holding, Inc., MHI Hospitality TRS, LLC, (collectively, “MHI TRS”), a wholly-owned subsidiary of the Operating Partnership. MHI TRS then engages an eligible independent hotel management company, MHI Hotels Services, LLC, which does business as Chesapeake Hospitality (“Chesapeake Hospitality”), to operate the hotels under a management contract. MHI TRS is treated as a taxable REIT subsidiary for federal income tax purposes.

All references in this report to “we”, “us” and “our” refer to the Company, its Operating Partnership and its subsidiaries and predecessors, collectively, unless the context otherwise requires or where otherwise indicated.

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

On May 5, 2015, the Company obtained a $47.0 million mortgage with Bank of America N.A. on the Georgian Terrace in Atlanta, Georgia.  The mortgage bears interest at a fixed rate of 4.42% and provides for level payments of principal and interest on a monthly basis under a 30-year amortization schedule.  The maturity date is June 1, 2025.  The Company used the proceeds of the mortgage to repay the existing first mortgage and to pay closing costs, and will use the balance of the proceeds to partially fund ongoing renovations at the Georgian Terrace and for general corporate purposes.

During June 2015, the Company sold 98,682 shares of common stock for net proceeds of approximately $0.7 million, which it contributed to the Operating Partnership for an equivalent number of units.

On July 1, 2015, the Company sold 3,000,000 shares of common stock for net proceeds of approximately $19.8 million, which it contributed to the Operating Partnership for an equivalent number of units.  

On July 7, 2015, we entered into a loan agreement and other loan documents to secure an $18.5 million mortgage with Bank of the Ozarks collateralized by a first mortgage on the DoubleTree by Hilton Jacksonville Riverfront. The $18.5 million mortgage was received in two parts. We received $18.0 million on July 7, 2015 and the remainder of $0.5 million on October 20, 2015.  The $0.5 million was included with the additional earn-out provision of $1.5 million, for a total of $2.0 million additional proceeds, as described below.  The mortgage term is four years maturing July 7, 2019 and may be extended for one additional period of one year, subject to certain criteria. The mortgage bears a floating interest rate of the 30-day LIBOR plus 3.5%, subject to a floor rate of 4.0%.  The mortgage amortizes on a 25-year schedule; and has a prepayment penalty if prepaid during the initial two years. The Company used the proceeds from the mortgage to repay the existing first mortgage on the DoubleTree by Hilton Jacksonville Riverfront, to pay closing costs, to partially fund ongoing renovations at the DoubleTree by Hilton Jacksonville Riverfront and for general corporate purposes.

On July 17, 2015, the Company sold 435,000 shares of common stock for net proceeds of approximately $2.8 million, which it contributed to the Operating Partnership for an equivalent number of units.

On July 31, 2015, we acquired the remaining 75% interest in (i) the entity that owns the Crowne Plaza Hollywood Beach Resort, and (ii) the entity that leases the Crowne Plaza Hollywood Beach Resort.  As a result, the Operating Partnership now has a 100% indirect ownership interest in the entities that own the Crowne Plaza Hollywood Beach Resort.

On September 2, 2015, we closed on the sale of a 0.3 acre parcel of excess land adjacent to our Atlanta, Georgia property for $2.2 million.  The parcel was included in the acquisition of the Georgian Terrace in March 2014.  We used the proceeds of the sale for general corporate purposes.

On September 28, 2015, we entered into a loan agreement to secure a $60.0 million mortgage on the Crowne Plaza Hollywood Beach Resort with Bank of America, N.A.  The mortgage term is ten years maturing October 1, 2025, subject to certain criteria. The mortgage bears a fixed interest rate of 4.913%.  The mortgage amortizes on a 30-year schedule. The Company used the proceeds from the mortgage to repay the existing first mortgage on the Crowne Plaza Hollywood Beach Resort and to pay closing costs, and will use the balance of the proceeds for general corporate purposes.

On October 20, 2015, we secured $2.0 million additional proceeds on the mortgage loan on the DoubleTree by Hilton Jacksonville Riverfront as part of an earn-out pursuant to the terms of the loan agreement.

On December 31, 2015, we entered into an amendment to the existing mortgage loan on the DoubleTree by Hilton Laurel which generated additional net proceeds of approximately $2.6 million and received the loan proceeds on January 4, 2016.

On March 21, 2016, we entered into an agreement with the existing lender to extend the maturity of the mortgage on The Whitehall until November 2017.

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

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.

Investment in Hotel Properties – Investments in hotel properties include investments in operating properties which are recorded at acquisition cost and allocated to land, property and equipment and identifiable intangible assets. Replacements and improvements are capitalized, while repairs and maintenance are expensed as incurred. 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. Expenditures under a renovation project which constitute additions or improvements that extend the life of the property are capitalized.

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.

We review our investments in hotel properties for impairment 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 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 exceed 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.

At December 31, 2015, our review of possible impairment at one of our hotel properties revealed an excess of current carrying cost over the estimated undiscounted future cash flows, which was triggered by a combination of a change in anticipated use and future branding of the property and a re-evaluation of future revenues based on anticipated market conditions, market penetration and costs necessary to achieve such market penetration, resulting in an impairment of approximately $0.5 million.

Assets Held For Sale – The Company records assets as held for sale when management has committed to a plan to sell the assets, actively seeks a buyer for the assets, and the consummation of the sale is considered probable and is expected within one year.

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

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.

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

Accounts Receivable – Accounts receivable consists primarily of hotel guest and banqueting receivables. Ongoing evaluations of collectability are performed and 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 market, 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, 2016 and December 31, 2015 were $326,459 and $339,542, respectively. Amortization expense for the three month periods ended March 31, 2016 and 2015 totaled $15,131 and $14,459, respectively.

Deferred Financing and Offering 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 on the consolidated balance sheets. Deferred offering costs are recorded at cost and consist of offering fees and other costs incurred in 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.

Amortization of deferred offering costs occurs when the equity offering is complete, whereby the costs are offset against the equity funds raised in the future and included in additional paid in capital on the consolidated balance sheets, or if the offering expires and the offering costs exceed the funds raised in the offering then the excess will be included in corporate general and administrative expenses in the consolidated statements of operations.

Derivative Instruments – Our derivative instruments are reflected as assets or liabilities on the balance sheet 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 primarily are using an interest rate cap which acts as a cash flow hedge. We value our interest-rate cap 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 also have used derivative instruments in the Company’s stock to obtain more favorable terms on our financing. 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 investment in hotel property, net, interest rate cap, mortgage loans and unsecured notes measured at fair value and the basis for that measurement:

	Level 1			Level 2			Level 3
December 31, 2015
Investment in hotel property, net(1)	$	—		$	—		$	5,700,000
Interest Rate Cap(4)	$	—		$	70,981		$	—
Mortgage loans(2)	$	—		$	(272,933,327	)	$	—
Unsecured notes(3)	$	(54,238,600	)	$	—		$	—
March 31, 2016
Investment in hotel property, net(1)	$	—		$	—		$	—
Interest Rate Cap(4)	$	—		$	20,424		$	—
Mortgage loans(2)	$	—		$	(271,175,967	)	$	—
Unsecured notes(3)	$	(54,212,840	)	$	—		$	—

(1) A non-recurring fair value measurement was conducted in 2015 for our investment in hotel property, which resulted in impairment charges for the year ended December 31, 2015, which represent the amount by which the carrying value of the asset group exceeded its fair value.

(2) Mortgage loans are reflected at outstanding principal balance net of deferred financing costs on our Consolidated Balance Sheet as of March 31, 2016 and December 31, 2015.

(3) Unsecured notes are recorded at outstanding principal balance on our Consolidated Balance Sheet as of March 31, 2016 and December 31, 2015.

(4) Interest rate cap for our loan on DoubleTree by Hilton Jacksonville Riverfront, which caps the 1-month LIBOR rate at 2.5%.

Noncontrolling Interest in Operating Partnership – Certain hotel properties have been 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 – Revenues from operations of the hotels are recognized when the services are provided. Revenues consist of room sales, food and beverage sales, and other hotel department revenues, such as telephone, parking, gift shop sales and rentals from restaurant tenants, rooftop leases and gift shop operators. Revenues are reported net of occupancy and other taxes collected from customers and remitted to governmental authorities.

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 statement of operations pursuant to the terms of each lease.  Lease revenue was approximately $0.5 million and $0.5 million, for the three months ended March 31, 2016 and 2015, respectively.

A schedule of minimum future lease payments receivable for the remaining lease periods is as follows:

Remaining nine months ending December 31, 2016	$	1,059,658
December 31, 2017		935,715
December 31, 2018		428,617
December 31, 2019		317,339
December 31, 2020		278,450
December 31, 2021 and thereafter		1,227,684
Total	$	4,247,463

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. As of March 31, 2016 and December 31, 2015, 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, 2016, the tax years that remain subject to examination by the major tax jurisdictions to which the Company is subject generally include 2010 through 2015. In addition, as of March 31, 2016, the tax years that remain subject to examination by the major tax jurisdictions to which MHI TRS is subject generally include 2004 through 2015.

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 2004 Long Term Incentive Plan (the “2004 Plan”) and its 2013 Long-Term Incentive Plan (the “2013 Plan”), which the Company’s stockholders approved in April 2013, permit the grant of stock options, restricted stock and performance share compensation awards to its employees for up to 350,000 and 750,000 shares of common stock, respectively. The Company believes that such awards better align the interests of its employees with those of its stockholders.

Under the 2004 Plan, the Company has made restricted stock and deferred stock awards totaling 337,438 shares including 255,938 shares issued to certain executives and employees and 81,500 restricted shares issued to its independent directors. Of the 255,938 shares issued to certain of our executives and employees, all have vested except 12,000 shares issued to the Chief Financial Officer upon execution of his employment contract which will vest pro rata on each of the next three anniversaries of the effective date of his employment agreement. All of the 81,500 restricted shares issued to the Company’s independent directors have vested. The 2004 plan was terminated in 2013.

Under the 2013 Plan, the Company has made stock awards totaling 109,100 shares, including 72,350 non-restricted shares to certain executives and employees and 35,500 restricted shares issued to its independent directors.  All awards have vested except for 12,000 shares issued to the Company’s independent directors in January 2016, which will vest on December 31, 2016.  

Previously, under the 2004 Plan, and currently, under the 2013 Plan, the Company may 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, 2016, no performance-based stock awards have been granted. Consequently, stock-based compensation as determined under the fair-value method would be the same under the intrinsic-value method. Total compensation cost recognized under the 2013 Plan for the three months ended March 31, 2016 and 2015 was $196,742 and $271,036, respectively. The 2004 Plan was terminated in April 2013.

Advertising – Advertising costs were $74,063 and $52,856 for the three months ended March 31, 2016 and 2015, respectively. Advertising costs are expensed as incurred.

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 accounting principles generally accepted in the United States of America 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.

Reclassifications – Certain reclassifications in the amount of $4.1 million, from deferred financing costs, net in total assets on the balance sheet, have been netted against mortgage loans on the December 31, 2015 balances to conform to the current period presentation. This presentation applies Accounting Standards Update (“ASU”) 2015-03, ““Simplifying the Presentation of Debt Issuance Costs.”

New Accounting Pronouncements – In April 2015, the FASB issued ASU 2015-03 related to“Simplifying the Presentation of Debt Issuance Costs,” as part of its simplification initiative. The ASU changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense.  The ASU specifies that “issue costs shall be reported in the balance sheet as a direct deduction from the face amount of the note” and that “amortization of debt issue costs shall also be reported as interest expense.” According to the ASU’s Basis for Conclusions, debt issuance costs incurred before the associated funding is received (i.e., the debt liability) should be reported on the balance sheet as deferred charges until that debt liability amount is recorded.  For public business entities, the guidance in the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 and is applicable for our interim periods within 2016. Early adoption is allowed for all entities for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted).  We adopted this ASU and it is being applied during our 2016 reporting.

In February 2015, the FASB issued ASU 2015-02 related to ASC Topic 810, Consolidation. The amendments in this update affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments: 1. Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities; 2. Eliminate the presumption that a general partner should consolidate a limited partnership; 3. Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; 4. Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds.  This guidance will be effective for annual reporting periods beginning after December 15, 2015.  We do not expect this ASU to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU 2014-09 related to ASC Topic 606, Revenue from Contracts with Customers. The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The guidance in this update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, this update supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this update.  As issued, this ASU is not effective until annual reporting periods beginning after December 15, 2016, however the FASB has deferred the effective date of ASU 2014-09 such that it would be effective for annual reporting periods beginning after December 15, 2017.  We do not expect this ASU to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

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Investment in Hotel Properties

3 Months Ended

Mar. 31, 2016

Real Estate [Abstract]

Investment in Hotel Properties

3. Investment in Hotel Properties, Net

Investment in hotel properties as of March 31, 2016 and December 31, 2015 consisted of the following:

	March 31, 2016			December 31, 2015
Land and land improvements	$	59,941,097		$	59,910,212
Buildings and improvements		336,275,927			333,720,421
Furniture, fixtures and equipment		44,622,512			42,245,334
		440,839,536			435,875,967
Less: accumulated depreciation and impairment		(84,561,699	)		(80,912,725	)
Investment in Hotel Properties, Net	$	356,277,837		$	354,963,242

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Debt

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Debt

4. Debt

Mortgage Loans, Net. As of March 31, 2016 and December 31, 2015, we had approximately $266.5 million and approximately $267.9 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	2016			2015			Penalties		Date		Provisions			Rate
Crowne Plaza Hampton Marina	$	3,263,585		$	3,512,586		None		6/30/2016		$	83,000	(1)		5.00%	(2)
Crowne Plaza Hollywood Beach    Resort		59,647,289			59,795,743		n/a	(3)	10/1/2025		30 years				4.913%
Crowne Plaza Tampa Westshore		12,937,454			13,016,045		None		6/18/2017		25 years				5.60%
DoubleTree by Hilton Jacksonville    Riverfront		19,692,994			19,774,577		Yes	(4)	7/7/2019	(5)	25 years			LIBOR plus 3.50 %
DoubleTree by Hilton Laurel		9,467,956			9,500,000		Yes	(6)	8/5/2021		25 years				5.25%	(7)
DoubleTree by Hilton Philadelphia    Airport		32,120,179			32,376,795		None		4/1/2019		25 years			LIBOR plus 3.00 %		(8)
DoubleTree by Hilton Raleigh    Brownstone –University		14,985,459			15,029,121		n/a	(9)	8/1/2018		30 years				4.78%
Georgian Terrace		46,450,174			46,579,011		n/a	(10)	6/1/2025		30 years				4.42%
Hilton Savannah DeSoto		20,431,819			20,522,836		Yes	(11)	9/1/2017		25 years				6.06%
Hilton Wilmington Riverside		19,679,345			19,825,772		Yes	(11)	4/1/2017		25 years				6.21%
Sheraton Louisville Riverside		11,283,324			11,345,866		n/a	(9)	1/6/2017		25 years				6.24%
The Whitehall		20,331,342			20,459,256		None		11/13/2017	(12)	25 years				4.50%
Total Mortgage Principal Balance	$	270,290,920		$	271,737,608
Deferred financing costs, net		(4,051,603	)		(4,086,114	)
Unamortized premium on loan		233,857			240,336
Total Mortgage Loans, Net	$	266,473,174		$	267,891,830

(1)	The Operating Partnership is required to make monthly principal payments of $83,000.
(2)	The note rate was changed to a fixed rate of 5.00%, effective June 27, 2014.
(3)	With limited exception, the note may not be prepaid until June 2025.
(4)	The note is subject to a pre-payment penalty until July 2017. Prepayment can be made without penalty thereafter.
(5)	The note provides that the mortgage can be extended until July 2020 if certain conditions have been satisfied.
(6)	The note is subject to a pre-payment penalty except for any pre-payments made either between April 2017 and August 2017, or from April 2021 through maturity of the note.
(7)	The note provides that after five years, the rate of interest will adjust to a rate of 3.00% per annum plus the then-current five-year U.S. Treasury rate of interest, with a floor of 5.25%.
(8)	The note bears a minimum interest rate of 3.50%.
(9)	With limited exception, the note may not be prepaid until two months before maturity.
(10)	With limited exception, the note may not be prepaid until February 2025.
(11)	The notes may not be prepaid during the first six years of the terms. Prepayment can be made with penalty thereafter until 90 days before maturity.
(12)	The note was extended in March 2016 and provides that the mortgage can be extended until November 2018 if certain conditions have been satisfied.

We were in compliance with all debt covenants, current on all loan payments and not otherwise in default under any of our mortgage loans, as of March 31, 2016.

Total future mortgage debt maturities, without respect to any extension of loan maturity, as of March 31, 2016 were as follows:

For the remaining nine months ended December 31, 2016	$	7,690,171
December 31, 2017		86,680,710
December 31, 2018		18,078,266
December 31, 2019		31,732,731
December 31, 2020		19,841,299
December 31, 2021 and thereafter		106,267,743
Total future maturities	$	270,290,920

7.0% Unsecured Notes. On November 21, 2014, the Operating Partnership issued 7.0% senior unsecured notes in the aggregate amount of $25.3 million (the “7% Notes”). The indenture requires quarterly payments of interest and matures on November 15, 2019. The 7% Notes are callable after November 15, 2017 at 101% of face value.

8.0% Unsecured Notes. On September 30, 2013, the Operating Partnership issued 8.0% senior unsecured notes in the aggregate amount of $27.6 million (the “8% Notes”). The indenture requires quarterly payments of interest and matures on September 30, 2018. The 8% Notes are callable after September 30, 2016 at 101% of face value.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

5. Commitments and Contingencies

Ground, Building and Submerged Land Leases – We lease 2,086 square feet of commercial space next to the Hilton Savannah 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 second of three optional five-year renewal periods expiring October 31, 2011, October 31, 2016 and October 31, 2021, respectively. Rent expense for this operating lease for the three months ended March 31, 2016 and 2015 each totaled $18,245 and $15,866, respectively.

We lease, as landlord, the entire fourteenth floor of the Savannah 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 a parking lot adjacent to the DoubleTree by Hilton Brownstone-University in Raleigh, North Carolina. The land is leased under a second amendment, dated April 28, 1998, to a ground lease originally dated May 25, 1966. The original lease is a 50-year operating lease, which expires August 31, 2016. We exercised a renewal option for the first of three additional ten-year periods expiring August 31, 2026, August 31, 2036, and August 31, 2046, respectively. We hold an exclusive and irrevocable option to purchase the leased land at fair market value at August 1, 2018, or at the end of any 10-year renewal period, subject to the payment of an annual fee of $9,000, and other conditions. Rent expense for the three months ended March 31, 2016 and 2015, each totaled $23,871.

We lease land adjacent to the Crowne Plaza Tampa Westshore for use as parking under a five-year agreement with the Florida Department of Transportation that commenced in July 2009.  In May 2014, we extended the agreement for an additional five years.  The agreement expires in July 2019. The agreement 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, 2016 and 2015, each totaled $651.

We lease certain submerged land in the Saint Johns River in front of the Crowne Plaza Jacksonville Riverfront from the Board of Trustees of the Internal Improvement Trust Fund of the State of Florida. The submerged land was leased under a five-year operating lease requiring annual payments of $4,961, which expired September 18, 2012. A new operating lease was executed requiring annual payments of $6,020 and expires September 18, 2017. Rent expense for the three months ended March 31, 2016 and 2015, each totaled $1,505.

We lease 5,216 square feet of commercial office space in Williamsburg, Virginia under an agreement, as amended, that commenced September 1, 2009 and expires August 31, 2018.  Rent expense for the three months ended March 31, 2016 and 2015 totaled $23,871 and $20,920.

We also lease certain furniture and equipment under financing arrangements expiring between April 2016 and March 2019.

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

For the remaining nine months ended December 31, 2016	$	215,295
December 31, 2017		228,793
December 31, 2018		176,740
December 31, 2019		100,480
December 31, 2020		95,482
December 31, 2021 and thereafter		541,065
Total	$	1,357,855

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 – At March 31, 2016, each of our wholly-owned operating hotels was operated under a management agreement with Chesapeake Hospitality.  Effective January 1, 2015, each of our wholly-owned hotels operated under a new master agreement as well as an individual hotel management agreement (see Note 7).  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, 2016, most 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 2.5% and 5.0% of room revenues, plus additional fees for marketing, central reservation systems, and other franchisor programs and services that amount to between 2.5% and 6.0% of room revenues from the hotels. The franchise agreements expire between July 2017 and September 2025.    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 Hilton Wilmington Riverside, the Hilton Savannah DeSoto, the DoubleTree by Hilton Brownstone-University, the Sheraton Louisville Riverside and the Georgian Terrace an amount equal to ^1/12 of the annual real estate taxes due for the properties. We are also required by several of our lenders 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 Hilton Savannah DeSoto, the Hilton Wilmington Riverside, the Sheraton Louisville Riverside, DoubleTree by Hilton Raleigh Brownstone–University, The Whitehall, Crowne Plaza Hampton Marina and the Georgian Terrace and equal 4.0% of room revenues for the DoubleTree by Hilton Philadelphia Airport.

Litigation –To our knowledge, we are not involved in any material litigation threatened against us. 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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Equity

3 Months Ended

Mar. 31, 2016

Equity [Abstract]

Equity

6. Equity

Preferred Stock – The Company has authorized 1,000,000 shares of preferred stock, of which 27,650 shares were issued as Series A Cumulative Redeemable Preferred Stock, and subsequently redeemed in 2013.  None of the remaining authorized shares have been issued.

Common Stock – The Company is authorized to issue up to 49,000,000 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, 2015, of the Company’s common stock:

On February 2, 2016, the Company was issued 36,250 units in the Operating Partnership and awarded an aggregate of 22,000 shares of unrestricted stock to certain executives and employees as well as 12,000 shares of restricted stock and 2,250 shares of unrestricted stock to certain of its independent directors.

On February 1, 2016, two holders of units in the Operating Partnership redeemed 422,687 units for an equivalent number of shares of the Company’s common stock.

On September 16, 2015, one holder of units in the Operating Partnership redeemed a total of 200,000 units for an equivalent number of shares of the Company’s common stock.

On July 17, 2015, the Company sold 435,000 shares of common stock for net proceeds of approximately $2.8 million, which it contributed to the Operating Partnership for an equivalent number of units.

On July 1, 2015, the Company sold 3,000,000 shares of common stock, for net proceeds of approximately $19.8 million, which it contributed to the Operating Partnership for an equivalent number of units.  

During June 2015, the Company sold 98,682 shares of common stock for net proceeds of approximately $0.7 million, which it contributed to the Operating Partnership for an equivalent number of units.

On May 1, 2015, one holder of units in the Operating Partnership redeemed a total of 50,000 units for an equivalent number of shares of the Company’s common stock.

On April 1, 2015, one holder of units in the Operating Partnership redeemed 100,000 units for an equivalent number of shares of the Company’s common stock.

On January 29, 2015, the Company was issued 36,100 units in the Operating Partnership and awarded an aggregate of 26,350 shares of unrestricted stock to certain executives and employees as well as 9,750 shares of restricted stock to certain of its independent directors.

As of March 31, 2016 and December 31, 2015, the Company had 14,949,651 and 14,490,714 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.

There were no issuances or redemptions, since January 1, 2015, of units in the Operating Partnership other than the issuances of units in the Operating Partnership to the Company described above.

As of March 31, 2016 and December 31, 2015, the total number of Operating Partnership units outstanding was 16,727,791 and 16,691,541, respectively.

As of March 31, 2016 and December 31, 2015, the total number of outstanding Operating Partnership units not owned by the Company was 1,778,140 and 2,200,827, respectively, with a fair market value of approximately $9.1 million and $15.0 million, based on the price per share of the common stock on such respective dates.

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Related Party Transactions

3 Months Ended

Mar. 31, 2016

Related Party Transactions [Abstract]

Related Party Transactions

7. Related Party Transactions

Chesapeake Hospitality. As of March 31, 2016, the members of Chesapeake Hospitality (a company that is majority-owned and controlled by the Company’s chief executive officer, its former chief financial officer, a member of its Board of Directors and a former member of its Board of Directors) owned 1,760,001 shares, approximately 11.8%, of the Company’s outstanding common stock as well as 870,271 Operating Partnership units. The indirect equity owners of Chesapeake Hospitality include the Company’s chief executive officer, Andrew M. Sims, and a member of the Company’s board of directors, Kim E. Sims.  The following is a summary of the transactions between Chesapeake Hospitality and us:

Accounts Receivable – At March 31, 2016 and December 31, 2015, we were due $55,919 and $0, respectively, from Chesapeake Hospitality.

Management Agreements – Each of the hotels that we wholly-owned at March 31, 2016 were operated by Chesapeake Hospitality under various management agreements that were to expire between December 2014 and March 2019.  Under those now terminated agreements, Chesapeake Hospitality received a base management fee of 2.0% of gross revenues for the first full fiscal year and partial fiscal year from the commencement date through December 31 of that year, 2.5% of gross revenues the second full fiscal year, and 3.0% of gross revenues for every year thereafter. The agreements also provided for an incentive management fee due annually in arrears within 90 days of the end of the fiscal year equal to 10.0% of the amount by which the gross operating profit of the hotels, on an aggregate basis for eight hotels and on an individual basis for two other hotels, for a given year exceeds the gross operating profit for the same hotel(s), for the prior year. The incentive management fee may not exceed 0.25% of gross revenues of all of the hotel(s) included in the incentive fee calculation.  The management agreement for The Whitehall did not provide for any incentive management fee.  Additionally, the management agreement for the Georgian Terrace provided for an administrative fee of $30,000 per year for as long as the adjacent parking garage is managed by a third party.

On December 15, 2014, we entered into a new master agreement and a series of individual hotel management agreements that became effective on January 1, 2015.  The master agreement has a five-year term, but may be extended for such additional periods as long as an individual management agreement remains in effect. The base management fee for The Whitehall and the Georgian Terrace will remain at 2.00% through 2015, increases to 2.25% in 2016 and increases to 2.50% thereafter.  The base management fees for the remaining properties in the current portfolio will be 2.65% through 2017 and decreases to 2.50% thereafter.  For new individual hotel management agreements, Chesapeake Hospitality 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.  On July 31, 2015, we entered into a new management agreement for the management of the Crowne Plaza Hollywood Beach Resort, with a base management fee of 2.00% for the first full year from the commencement date through the anniversary date, 2.25% for the second full year, and 2.50% for every year thereafter.

Base management and administrative fees earned by Chesapeake Hospitality for our wholly owned properties totaled $932,386 and $753,898 for the three months ended March 31, 2016 and 2015, respectively.  In addition, estimated incentive management fees of $13,698 and $35,349 were accrued for the three months ended March 31, 2016 and 2015, respectively.  

Employee Medical Benefits – We purchase employee medical benefits through Maryland Hospitality, Inc. (d/b/a MHI Health), an affiliate of Chesapeake Hospitality for our employees as well as those employees that are employed by Chesapeake Hospitality that work exclusively for our hotel properties. Gross premiums for employee medical benefits paid by the Company (before offset of employee co-payments) were approximately $1,326,154 and $1,118,556 for the three months ended March 31, 2016 and 2015, respectively.

Crowne Plaza Hollywood Beach Resort JV.  Since July 31, 2015, we own 100% of the Crowne Plaza Hollywood Beach Resort, which is no longer considered a related party and has a new management agreement as of July 31, 2015.  However, through July 30, 2015 we owned a 25.0% indirect interest in (i) the entity that owns the Crowne Plaza Hollywood Beach Resort and (ii) the entity that leases the hotel and has engaged Chesapeake Hospitality to operate the hotel under a management contract. The following is a summary of the transactions between Crowne Plaza Hollywood Beach Resort and us:

Management Agreement – Crowne Plaza Hollywood Beach Resort was operated by Chesapeake Hospitality under a management agreement that was set to expire August 2017.  Under this agreement Chesapeake Hospitality received a base management fee of 3.0% of gross revenues. Base management fees earned by Chesapeake Hospitality totaled $211,259 for the three months ended March 31, 2015.         

Asset Management Fee – Also, under an asset management agreement that terminated on July 31, 2015, MHI Hospitality TRS II, LLC, an indirect subsidiary of the Company, received a fee of 1.50% of total revenue which was due on a quarterly basis for services rendered. Asset management fees totaled $105,629 for the three months ended March 31, 2015.

Sotherly Foundation – During 2015, the Company loaned $180,000 to the Sotherly Foundation, a non-profit organization to benefit wounded warriors.  As of March 31, 2016 and December 31, 2015, the balance of the loan was $130,000 and $160,000, respectively.

Others. On June 24, 2013 we hired Ashley S. Kirkland, the daughter of our Chief Executive Officer as a legal analyst and Robert E. Kirkland IV, her husband, as our compliance officer. On October 2, 2014, we hired Andrew M. Sims Jr., the son of our Chief Executive Officer, as a brand manager. Compensation for the three months ended March 31, 2016 and 2015 totaled approximately $85,521 and $62,972, respectively, for the three individuals.  

During the three month period ending March 31, 2016 and 2015, the Company reimbursed $28,802  and $0, respectively, to a partnership controlled by the Chief Executive Officer for business-related air travel pursuant to the Company’s travel reimbursement policy.

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Retirement Plan

3 Months Ended

Mar. 31, 2016

Compensation And Retirement Disclosure [Abstract]

Retirement Plan

8. Retirement Plan

We maintain a 401(k) plan for qualified employees which is subject to “safe harbor” provisions and which requires that we match 100.0% of the first 3.0% of employee contributions and 50.0% of the next 2.0% of employee contributions. All employer matching funds vest immediately in accordance with the “safe harbor” provision.  Contributions to the plan totaled $29,231 and $12,787 for the three months ended March 31, 2016 and 2015, respectively.

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Unconsolidated Joint Venture

3 Months Ended

Mar. 31, 2016

Unconsolidated Joint Venture [Member]

Schedule Of Equity Method Investments [Line Items]

Unconsolidated Joint Venture

9. Unconsolidated Joint Venture

As of March 31, 2016 and December 31, 2015, we own 100% of the Crowne Plaza Hollywood Beach Resort and it is consolidated within the financial statements presented.  However through July 30, 2015 we owned only a 25.0% indirect interest in (i) the entity that owns the Crowne Plaza Hollywood Beach Resort and (ii) the entity that leases the hotel and has engaged Chesapeake Hospitality to operate the hotel under a management contract. Carlyle owned a 75.0% indirect controlling interest in these entities through July 30, 2015. The joint venture purchased the property on August 8, 2007 and began operations on September 18, 2007. Summarized financial information for this investment through March 31, 2015, which is accounted for under the equity method, is as follows:

	Three Months Ended
	March 31, 2015
	(unaudited)
Revenue
Rooms department	$	5,744,329
Food and beverage department		871,287
Other operating departments		426,343
Total revenue		7,041,959
Expenses
Hotel operating expenses
Rooms department		952,598
Food and beverage department		637,728
Other operating departments		166,908
Indirect		2,169,747
Total hotel operating expenses		3,926,981
Depreciation and amortization		444,576
General and administrative		127,145
Total operating expenses		4,498,702
Operating income		2,543,257
Interest expense		(645,860	)
Net income	$	1,897,397

.

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Indirect Hotel Operating Expenses

3 Months Ended

Mar. 31, 2016

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, 2016		March 31, 2015
	(unaudited)		(unaudited)
General and administrative	$	3,142,543	$	2,574,104
Sales and marketing		3,511,030		2,645,062
Repairs and maintenance		1,854,619		1,606,670
Utilities		1,528,962		1,422,778
Franchise fees		1,087,921		884,764
Management fees, including incentive		946,083		789,246
Property taxes		1,293,355		952,642
Insurance		694,202		543,386
Other		76,880		49,691
Total indirect hotel operating expenses	$	14,135,595	$	11,468,343

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Income Taxes

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

The components of the income tax benefit for the three months ended March 31, 2016 and 2015 are as follows:

	Three Months Ended			Three Months Ended
	March 31, 2016			March 31, 2015
	(unaudited)			(unaudited)
Current:
Federal	$	—		$	—
State		51,390			57,679
		51,390			57,679
Deferred:
Federal		(395,225	)		(425,159	)
State		(92,244	)		(71,295	)
		(487,469	)		(496,454	)
	$	(436,079	)	$	(438,775	)

A reconciliation of the statutory federal income tax benefit to the Company’s income tax benefit is as follows:

	Three Months Ended			Three Months Ended
	March 31, 2016			March 31, 2015
	(unaudited)			(unaudited)
Statutory federal income tax expense	$	37,330		$	93,528
Effect of non-taxable REIT income		(514,263	)		(518,687	)
State income tax benefit		40,854			(13,616	)
	$	(436,079	)	$	(438,775	)

As of March 31, 2016 and December 31, 2015, we had a net deferred tax asset of approximately $5.9 million and $5.4 million, respectively, of which, approximately $5.1 million and $4.5 million, respectively, are due to accumulated net operating losses. These loss carryforwards will begin to expire in 2028 if not utilized by such time.  As of both March 31, 2016 and December 31, 2015, approximately $0.2 million of the net deferred tax asset is attributable to our share of start-up expenses related to the Crowne Plaza Hollywood Beach Resort, start-up expenses related to the opening of the Sheraton Louisville Riverside and the Crowne Plaza Tampa Westshore that were not deductible in the year incurred, but are being amortized over 15 years.  The remainder of the net deferred tax asset is attributable to year-to-year timing differences including accrued, but not deductible, employee performance awards, vacation and sick pay, bad debt allowance and depreciation.  We believe that it is more likely than not that the deferred tax asset will be realized and that no valuation allowance is required.

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Income Per Share and Per Unit

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Income Per Share and Per Unit

12. Income Per Share and Per Unit

Income 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 partners 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 would also be added back to net income. The computation of basic and diluted earnings per share is presented below.

	Three Months Ended		Three Months Ended
	March 31, 2016		March 31, 2015
	(unaudited)		(unaudited)
Numerator
Net income attributable to the Company for basic computation	$	483,095	$	575,336
Denominator
Weighted average number of common shares outstanding for basic    computation		14,792,911		10,595,801
Basic and diluted net income per share	$	0.03	$	0.05

Income Per Unit – The computation of basic and diluted earnings per unit is presented below.

	Three Months Ended		Three Months Ended
	March 31, 2016		March 31, 2015
	(unaudited)		(unaudited)
Numerator
Net income	$	545,874	$	713,859
Denominator
Weighted average number of units outstanding		16,715,044		13,146,628
Basic and diluted net income per unit	$	0.03	$	0.05

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Subsequent Events

3 Months Ended

Mar. 31, 2016

Subsequent Events [Abstract]

Subsequent Events

13. Subsequent Events

On April 11, 2016, we paid a quarterly dividend (distribution) of $0.085 per common share (and unit) to those stockholders (and unitholders of the Operating Partnership) of record on March 15, 2016.

On April 27, 2016, we authorized payment of a quarterly dividend (distribution) of $0.09 per common share (and unit) to the stockholders (and unitholders of the Operating Partnership) of record as of June 15, 2016. The dividend (distribution) is to be paid on July 11, 2016.

On April 29, 2016, we entered into a purchase and sale agreement to sell the Crowne Plaza Hampton Marina hotel to Three Capital Hotels, Inc. for a price of $5.8 million.  The closing of the sale is subject to various customary closing conditions, including the satisfactory completion of a diligence review of the hotel, the accuracy of representations and warranties through closing, and conditions related to the operation and maintenance of the hotel.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

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.

Investment in Hotel Properties

Investment in Hotel Properties – Investments in hotel properties include investments in operating properties which are recorded at acquisition cost and allocated to land, property and equipment and identifiable intangible assets. Replacements and improvements are capitalized, while repairs and maintenance are expensed as incurred. 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. Expenditures under a renovation project which constitute additions or improvements that extend the life of the property are capitalized.

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.

We review our investments in hotel properties for impairment 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 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 exceed 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.

At December 31, 2015, our review of possible impairment at one of our hotel properties revealed an excess of current carrying cost over the estimated undiscounted future cash flows, which was triggered by a combination of a change in anticipated use and future branding of the property and a re-evaluation of future revenues based on anticipated market conditions, market penetration and costs necessary to achieve such market penetration, resulting in an impairment of approximately $0.5 million.

Assets Held For Sale

Assets Held For Sale – The Company records assets as held for sale when management has committed to a plan to sell the assets, actively seeks a buyer for the assets, and the consummation of the sale is considered probable and is expected within one year.

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.

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.

Restricted Cash

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

Accounts Receivable

Accounts Receivable – Accounts receivable consists primarily of hotel guest and banqueting receivables. Ongoing evaluations of collectability are performed and 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 market, 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, 2016 and December 31, 2015 were $326,459 and $339,542, respectively. Amortization expense for the three month periods ended March 31, 2016 and 2015 totaled $15,131 and $14,459, respectively.

Deferred Financing and Offering Costs

Deferred Financing and Offering 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 on the consolidated balance sheets. Deferred offering costs are recorded at cost and consist of offering fees and other costs incurred in 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.

Amortization of deferred offering costs occurs when the equity offering is complete, whereby the costs are offset against the equity funds raised in the future and included in additional paid in capital on the consolidated balance sheets, or if the offering expires and the offering costs exceed the funds raised in the offering then the excess will be included in corporate general and administrative expenses in the consolidated statements of operations.

Derivative Instruments

Derivative Instruments – Our derivative instruments are reflected as assets or liabilities on the balance sheet 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 primarily are using an interest rate cap which acts as a cash flow hedge. We value our interest-rate cap 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 also have used derivative instruments in the Company’s stock to obtain more favorable terms on our financing. 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 investment in hotel property, net, interest rate cap, mortgage loans and unsecured notes measured at fair value and the basis for that measurement:

	Level 1			Level 2			Level 3
December 31, 2015
Investment in hotel property, net(1)	$	—		$	—		$	5,700,000
Interest Rate Cap(4)	$	—		$	70,981		$	—
Mortgage loans(2)	$	—		$	(272,933,327	)	$	—
Unsecured notes(3)	$	(54,238,600	)	$	—		$	—
March 31, 2016
Investment in hotel property, net(1)	$	—		$	—		$	—
Interest Rate Cap(4)	$	—		$	20,424		$	—
Mortgage loans(2)	$	—		$	(271,175,967	)	$	—
Unsecured notes(3)	$	(54,212,840	)	$	—		$	—

(1) A non-recurring fair value measurement was conducted in 2015 for our investment in hotel property, which resulted in impairment charges for the year ended December 31, 2015, which represent the amount by which the carrying value of the asset group exceeded its fair value.

(2) Mortgage loans are reflected at outstanding principal balance net of deferred financing costs on our Consolidated Balance Sheet as of March 31, 2016 and December 31, 2015.

(3) Unsecured notes are recorded at outstanding principal balance on our Consolidated Balance Sheet as of March 31, 2016 and December 31, 2015.

(4) Interest rate cap for our loan on DoubleTree by Hilton Jacksonville Riverfront, which caps the 1-month LIBOR rate at 2.5%.

Noncontrolling Interest in Operating Partnership

Noncontrolling Interest in Operating Partnership – Certain hotel properties have been 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 – Revenues from operations of the hotels are recognized when the services are provided. Revenues consist of room sales, food and beverage sales, and other hotel department revenues, such as telephone, parking, gift shop sales and rentals from restaurant tenants, rooftop leases and gift shop operators. Revenues are reported net of occupancy and other taxes collected from customers and remitted to governmental authorities.

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 statement of operations pursuant to the terms of each lease.  Lease revenue was approximately $0.5 million and $0.5 million, for the three months ended March 31, 2016 and 2015, respectively.

A schedule of minimum future lease payments receivable for the remaining lease periods is as follows:

Remaining nine months ending December 31, 2016	$	1,059,658
December 31, 2017		935,715
December 31, 2018		428,617
December 31, 2019		317,339
December 31, 2020		278,450
December 31, 2021 and thereafter		1,227,684
Total	$	4,247,463

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. As of March 31, 2016 and December 31, 2015, 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, 2016, the tax years that remain subject to examination by the major tax jurisdictions to which the Company is subject generally include 2010 through 2015. In addition, as of March 31, 2016, the tax years that remain subject to examination by the major tax jurisdictions to which MHI TRS is subject generally include 2004 through 2015.

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 2004 Long Term Incentive Plan (the “2004 Plan”) and its 2013 Long-Term Incentive Plan (the “2013 Plan”), which the Company’s stockholders approved in April 2013, permit the grant of stock options, restricted stock and performance share compensation awards to its employees for up to 350,000 and 750,000 shares of common stock, respectively. The Company believes that such awards better align the interests of its employees with those of its stockholders.

Under the 2004 Plan, the Company has made restricted stock and deferred stock awards totaling 337,438 shares including 255,938 shares issued to certain executives and employees and 81,500 restricted shares issued to its independent directors. Of the 255,938 shares issued to certain of our executives and employees, all have vested except 12,000 shares issued to the Chief Financial Officer upon execution of his employment contract which will vest pro rata on each of the next three anniversaries of the effective date of his employment agreement. All of the 81,500 restricted shares issued to the Company’s independent directors have vested. The 2004 plan was terminated in 2013.

Under the 2013 Plan, the Company has made stock awards totaling 109,100 shares, including 72,350 non-restricted shares to certain executives and employees and 35,500 restricted shares issued to its independent directors.  All awards have vested except for 12,000 shares issued to the Company’s independent directors in January 2016, which will vest on December 31, 2016.  

Previously, under the 2004 Plan, and currently, under the 2013 Plan, the Company may 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, 2016, no performance-based stock awards have been granted. Consequently, stock-based compensation as determined under the fair-value method would be the same under the intrinsic-value method. Total compensation cost recognized under the 2013 Plan for the three months ended March 31, 2016 and 2015 was $196,742 and $271,036, respectively. The 2004 Plan was terminated in April 2013.

Advertising

Advertising – Advertising costs were $74,063 and $52,856 for the three months ended March 31, 2016 and 2015, respectively. Advertising costs are expensed as incurred.

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 accounting principles generally accepted in the United States of America 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.

Reclassifications

Reclassifications – Certain reclassifications in the amount of $4.1 million, from deferred financing costs, net in total assets on the balance sheet, have been netted against mortgage loans on the December 31, 2015 balances to conform to the current period presentation. This presentation applies Accounting Standards Update (“ASU”) 2015-03, ““Simplifying the Presentation of Debt Issuance Costs.”

New Accounting Pronouncements

New Accounting Pronouncements – In April 2015, the FASB issued ASU 2015-03 related to“Simplifying the Presentation of Debt Issuance Costs,” as part of its simplification initiative. The ASU changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense.  The ASU specifies that “issue costs shall be reported in the balance sheet as a direct deduction from the face amount of the note” and that “amortization of debt issue costs shall also be reported as interest expense.” According to the ASU’s Basis for Conclusions, debt issuance costs incurred before the associated funding is received (i.e., the debt liability) should be reported on the balance sheet as deferred charges until that debt liability amount is recorded.  For public business entities, the guidance in the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 and is applicable for our interim periods within 2016. Early adoption is allowed for all entities for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted).  We adopted this ASU and it is being applied during our 2016 reporting.

In February 2015, the FASB issued ASU 2015-02 related to ASC Topic 810, Consolidation. The amendments in this update affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments: 1. Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities; 2. Eliminate the presumption that a general partner should consolidate a limited partnership; 3. Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; 4. Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds.  This guidance will be effective for annual reporting periods beginning after December 15, 2015.  We do not expect this ASU to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU 2014-09 related to ASC Topic 606, Revenue from Contracts with Customers. The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The guidance in this update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, this update supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this update.  As issued, this ASU is not effective until annual reporting periods beginning after December 15, 2016, however the FASB has deferred the effective date of ASU 2014-09 such that it would be effective for annual reporting periods beginning after December 15, 2017.  We do not expect this ASU to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Derivative Instruments and Mortgage Debt Measured at Fair Value

The following table represents our investment in hotel property, net, interest rate cap, mortgage loans and unsecured notes measured at fair value and the basis for that measurement:

	Level 1			Level 2			Level 3
December 31, 2015
Investment in hotel property, net(1)	$	—		$	—		$	5,700,000
Interest Rate Cap(4)	$	—		$	70,981		$	—
Mortgage loans(2)	$	—		$	(272,933,327	)	$	—
Unsecured notes(3)	$	(54,238,600	)	$	—		$	—
March 31, 2016
Investment in hotel property, net(1)	$	—		$	—		$	—
Interest Rate Cap(4)	$	—		$	20,424		$	—
Mortgage loans(2)	$	—		$	(271,175,967	)	$	—
Unsecured notes(3)	$	(54,212,840	)	$	—		$	—

(1) A non-recurring fair value measurement was conducted in 2015 for our investment in hotel property, which resulted in impairment charges for the year ended December 31, 2015, which represent the amount by which the carrying value of the asset group exceeded its fair value.

(2) Mortgage loans are reflected at outstanding principal balance net of deferred financing costs on our Consolidated Balance Sheet as of March 31, 2016 and December 31, 2015.

(3) Unsecured notes are recorded at outstanding principal balance on our Consolidated Balance Sheet as of March 31, 2016 and December 31, 2015.

(4) Interest rate cap for our loan on DoubleTree by Hilton Jacksonville Riverfront, which caps the 1-month LIBOR rate at 2.5%.

Schedule of Minimum Future Lease Payments Receivable

A schedule of minimum future lease payments receivable for the remaining lease periods is as follows:

Remaining nine months ending December 31, 2016	$	1,059,658
December 31, 2017		935,715
December 31, 2018		428,617
December 31, 2019		317,339
December 31, 2020		278,450
December 31, 2021 and thereafter		1,227,684
Total	$	4,247,463

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Investment in Hotel Properties (Tables)

3 Months Ended

Mar. 31, 2016

Real Estate [Abstract]

Schedule of Hotel Properties

Investment in hotel properties as of March 31, 2016 and December 31, 2015 consisted of the following:

	March 31, 2016			December 31, 2015
Land and land improvements	$	59,941,097		$	59,910,212
Buildings and improvements		336,275,927			333,720,421
Furniture, fixtures and equipment		44,622,512			42,245,334
		440,839,536			435,875,967
Less: accumulated depreciation and impairment		(84,561,699	)		(80,912,725	)
Investment in Hotel Properties, Net	$	356,277,837		$	354,963,242

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Debt (Tables)

3 Months Ended

Mar. 31, 2016

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	2016			2015			Penalties		Date		Provisions			Rate
Crowne Plaza Hampton Marina	$	3,263,585		$	3,512,586		None		6/30/2016		$	83,000	(1)		5.00%	(2)
Crowne Plaza Hollywood Beach    Resort		59,647,289			59,795,743		n/a	(3)	10/1/2025		30 years				4.913%
Crowne Plaza Tampa Westshore		12,937,454			13,016,045		None		6/18/2017		25 years				5.60%
DoubleTree by Hilton Jacksonville    Riverfront		19,692,994			19,774,577		Yes	(4)	7/7/2019	(5)	25 years			LIBOR plus 3.50 %
DoubleTree by Hilton Laurel		9,467,956			9,500,000		Yes	(6)	8/5/2021		25 years				5.25%	(7)
DoubleTree by Hilton Philadelphia    Airport		32,120,179			32,376,795		None		4/1/2019		25 years			LIBOR plus 3.00 %		(8)
DoubleTree by Hilton Raleigh    Brownstone –University		14,985,459			15,029,121		n/a	(9)	8/1/2018		30 years				4.78%
Georgian Terrace		46,450,174			46,579,011		n/a	(10)	6/1/2025		30 years				4.42%
Hilton Savannah DeSoto		20,431,819			20,522,836		Yes	(11)	9/1/2017		25 years				6.06%
Hilton Wilmington Riverside		19,679,345			19,825,772		Yes	(11)	4/1/2017		25 years				6.21%
Sheraton Louisville Riverside		11,283,324			11,345,866		n/a	(9)	1/6/2017		25 years				6.24%
The Whitehall		20,331,342			20,459,256		None		11/13/2017	(12)	25 years				4.50%
Total Mortgage Principal Balance	$	270,290,920		$	271,737,608
Deferred financing costs, net		(4,051,603	)		(4,086,114	)
Unamortized premium on loan		233,857			240,336
Total Mortgage Loans, Net	$	266,473,174		$	267,891,830

(1)	The Operating Partnership is required to make monthly principal payments of $83,000.
(2)	The note rate was changed to a fixed rate of 5.00%, effective June 27, 2014.
(3)	With limited exception, the note may not be prepaid until June 2025.
(4)	The note is subject to a pre-payment penalty until July 2017. Prepayment can be made without penalty thereafter.
(5)	The note provides that the mortgage can be extended until July 2020 if certain conditions have been satisfied.
(6)	The note is subject to a pre-payment penalty except for any pre-payments made either between April 2017 and August 2017, or from April 2021 through maturity of the note.
(7)	The note provides that after five years, the rate of interest will adjust to a rate of 3.00% per annum plus the then-current five-year U.S. Treasury rate of interest, with a floor of 5.25%.
(8)	The note bears a minimum interest rate of 3.50%.
(9)	With limited exception, the note may not be prepaid until two months before maturity.
(10)	With limited exception, the note may not be prepaid until February 2025.
(11)	The notes may not be prepaid during the first six years of the terms. Prepayment can be made with penalty thereafter until 90 days before maturity.
(12)	The note was extended in March 2016 and provides that the mortgage can be extended until November 2018 if certain conditions have been satisfied.

Schedule of Future Mortgage Debt Maturities

Total future mortgage debt maturities, without respect to any extension of loan maturity, as of March 31, 2016 were as follows:

For the remaining nine months ended December 31, 2016	$	7,690,171
December 31, 2017		86,680,710
December 31, 2018		18,078,266
December 31, 2019		31,732,731
December 31, 2020		19,841,299
December 31, 2021 and thereafter		106,267,743
Total future maturities	$	270,290,920

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2016

Commitments And Contingencies Disclosure [Abstract]

Schedule of Minimum Future Lease Payments

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

For the remaining nine months ended December 31, 2016	$	215,295
December 31, 2017		228,793
December 31, 2018		176,740
December 31, 2019		100,480
December 31, 2020		95,482
December 31, 2021 and thereafter		541,065
Total	$	1,357,855

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Unconsolidated Joint Venture (Tables)

3 Months Ended

Mar. 31, 2016

Equity Method Investments And Joint Ventures [Abstract]

Summarized Financial Information of Investment

Summarized financial information for this investment through March 31, 2015, which is accounted for under the equity method, is as follows:

	Three Months Ended
	March 31, 2015
	(unaudited)
Revenue
Rooms department	$	5,744,329
Food and beverage department		871,287
Other operating departments		426,343
Total revenue		7,041,959
Expenses
Hotel operating expenses
Rooms department		952,598
Food and beverage department		637,728
Other operating departments		166,908
Indirect		2,169,747
Total hotel operating expenses		3,926,981
Depreciation and amortization		444,576
General and administrative		127,145
Total operating expenses		4,498,702
Operating income		2,543,257
Interest expense		(645,860	)
Net income	$	1,897,397

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Indirect Hotel Operating Expenses (Tables)

3 Months Ended

Mar. 31, 2016

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, 2016		March 31, 2015
	(unaudited)		(unaudited)
General and administrative	$	3,142,543	$	2,574,104
Sales and marketing		3,511,030		2,645,062
Repairs and maintenance		1,854,619		1,606,670
Utilities		1,528,962		1,422,778
Franchise fees		1,087,921		884,764
Management fees, including incentive		946,083		789,246
Property taxes		1,293,355		952,642
Insurance		694,202		543,386
Other		76,880		49,691
Total indirect hotel operating expenses	$	14,135,595	$	11,468,343

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Components of Income Tax Benefit

The components of the income tax benefit for the three months ended March 31, 2016 and 2015 are as follows:

	Three Months Ended			Three Months Ended
	March 31, 2016			March 31, 2015
	(unaudited)			(unaudited)
Current:
Federal	$	—		$	—
State		51,390			57,679
		51,390			57,679
Deferred:
Federal		(395,225	)		(425,159	)
State		(92,244	)		(71,295	)
		(487,469	)		(496,454	)
	$	(436,079	)	$	(438,775	)

Reconciliation of Statutory Federal Income Tax Benefit

A reconciliation of the statutory federal income tax benefit to the Company’s income tax benefit is as follows:

	Three Months Ended			Three Months Ended
	March 31, 2016			March 31, 2015
	(unaudited)			(unaudited)
Statutory federal income tax expense	$	37,330		$	93,528
Effect of non-taxable REIT income		(514,263	)		(518,687	)
State income tax benefit		40,854			(13,616	)
	$	(436,079	)	$	(438,775	)

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Income Per Share and Per Unit (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings Per Share

The computation of basic and diluted earnings per share is presented below.

	Three Months Ended		Three Months Ended
	March 31, 2016		March 31, 2015
	(unaudited)		(unaudited)
Numerator
Net income attributable to the Company for basic computation	$	483,095	$	575,336
Denominator
Weighted average number of common shares outstanding for basic    computation		14,792,911		10,595,801
Basic and diluted net income per share	$	0.03	$	0.05

Computation of Basic and Diluted Earnings Per Unit

Income Per Unit – The computation of basic and diluted earnings per unit is presented below.

	Three Months Ended		Three Months Ended
	March 31, 2016		March 31, 2015
	(unaudited)		(unaudited)
Numerator
Net income	$	545,874	$	713,859
Denominator
Weighted average number of units outstanding		16,715,044		13,146,628
Basic and diluted net income per unit	$	0.03	$	0.05

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Organization and Description of Business - Additional Information (Detail)										1 Months Ended	3 Months Ended
	Mar. 21, 2016	Jan. 04, 2016 USD ($)	Oct. 20, 2015 USD ($)	Sep. 28, 2015 USD ($)	Sep. 02, 2015 USD ($) a	Jul. 17, 2015 USD ($) shares	Jul. 07, 2015 USD ($) mortgage	Jul. 02, 2015 USD ($)	May. 05, 2015 USD ($)	Jun. 30, 2015 USD ($) shares	Mar. 31, 2016 USD ($) Hotel Room shares	Dec. 31, 2015 USD ($) shares	Jul. 31, 2015	Jul. 30, 2015	Jul. 01, 2015 shares
Organization Consolidation and Presentation of Financial Statements [Line Items]
Date of incorporation											Aug. 20, 2004
Investment in number of hotels | Hotel											12
Rooms in hotel | Room											3,011
Date of commencement of business											Dec. 21, 2004
Number of hotels acquired before commencement of business | Hotel											6
Debt instrument maturity date	Nov. 13, 2017						Jul. 07, 2019
Common stock, shares issued | shares						435,000					14,949,651	14,490,714			3,000,000
Proceeds from the sale of common stock						$ 2,800,000		$ 19,800,000		$ 700,000
Mortgage loans							$ 18,500,000				$ 270,290,920	$ 271,737,608
Mortgage loan additional earn-out provision											1,500,000
Proceeds from mortgage loans											2,000,000
Mortgage loan term period							4 years
Period subject to certain terms and conditions							1 year
Floating interest rate period							30 days
Floating rate of interest rate							3.50%
Fixed interest rate							4.00%
Amortization Period							25 years
Number of parts mortgage loan issued | mortgage							2
Business acquisition percentage of voting interests acquired													75.00%
Proceeds from mortgage loan receivable											$ 2,600,711
Double Tree by Hilton Jacksonville Riverfront [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Additional proceeds on mortgage loan			$ 2,000,000
Double Tree by Hilton Laurel [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Additional proceeds on mortgage loan		$ 2,600,000
First Installment [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Mortgage loans							$ 18,000,000
Second Installment [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Mortgage loans			$ 500,000
Common Stock [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Common stock, shares issued | shares										98,682
Georgian Terrace [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Development parcel | a					0.3
Proceeds from sale of real estate					$ 2,200,000
Georgian Terrace [Member] | Bank Of America [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Carrying amount									$ 47,000,000
Interest rate									4.42%
Amortization schedule									30 years
Debt instrument maturity date											Jun. 01, 2025
Operating Partnership [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Percentage of operating partnership owned											89.40%
Crowne Plaza Hollywood Beach Resort [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Percentage of noncontrolling interest														25.00%
Percentage of operating partnership owned													100.00%
Crowne Plaza Hollywood Beach Resort [Member] | Bank Of America [Member]
Organization Consolidation and Presentation of Financial Statements [Line Items]
Interest rate				4.913%
Amortization schedule				30 years
Debt instrument maturity date											Oct. 01, 2025
Mortgage loan term period				10 years
Proceeds from mortgage loan receivable				$ 60,000,000

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Summary of Significant Accounting Policies - Additional Information (Detail)	3 Months Ended		12 Months Ended
	Mar. 31, 2016 USD ($) Segment shares	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Impairment of hotel properties | $			$ 500,000
Federal Deposit Insurance Corporation protection limits | $	$ 250,000
Un-amortized franchise fees | $	326,459		339,542
Amortization expense | $	15,131	$ 14,459
Lease revenue | $	500,000	500,000
Uncertain tax positions | $	0		$ 0
Compensation cost recognized | $	196,742	271,036
Advertising cost | $	$ 74,063	52,856
Number of reportable segment | Segment	1
Deferred financing costs reclassifications | $	$ 4,100,000
Executives and Employees [Member]
Summary Of Significant Accounting Policies [Line Items]
Shares issued under plan	72,350
Director [Member]
Summary Of Significant Accounting Policies [Line Items]
Shares issued but not vested	12,000
2004 Plan [Member]
Summary Of Significant Accounting Policies [Line Items]
Shares issued under plan	337,438
Termination year of stock based compensation plan	2013
Stock based compensation plan termination date	Apr. 30, 2013
2004 Plan [Member] | Executives and Employees [Member]
Summary Of Significant Accounting Policies [Line Items]
Shares issued under plan	255,938
Vesting period of employment contract	3 years
2004 Plan [Member] | Director [Member]
Summary Of Significant Accounting Policies [Line Items]
Shares issued under plan	81,500
Stock-based Compensation , Number of Shares, Vested	81,500
2004 Plan [Member] | Chief Financial Officer [Member]
Summary Of Significant Accounting Policies [Line Items]
Shares issued but not vested	12,000
2013 Plan [Member]
Summary Of Significant Accounting Policies [Line Items]
Shares issued under plan	109,100
Performance-based stock awards granted	0
Compensation cost recognized | $	$ 196,742	$ 271,036
2013 Plan [Member] | Director [Member]
Summary Of Significant Accounting Policies [Line Items]
Shares issued under plan	35,500
Maximum [Member] | 2004 Plan [Member]
Summary Of Significant Accounting Policies [Line Items]
Restricted and performance stock awards permitted to grant to employees	350,000
Maximum [Member] | 2013 Plan [Member]
Summary Of Significant Accounting Policies [Line Items]
Restricted and performance stock awards permitted to grant to employees	750,000
Buildings and Improvements [Member] | Minimum [Member]
Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives of the assets	7 years
Buildings and 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 - Derivative Instruments and Mortgage Debt Measured at Fair Value (Detail) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Level 1 [Member] | Unsecured Notes [Member]
Derivatives Fair Value [Line Items]
Debt instruments measured at fair value	$ (54,212,840)	$ (54,238,600)
Level 2 [Member] | Interest Rate Cap [Member]
Derivatives Fair Value [Line Items]
Interest rate cap	20,424	70,981
Level 2 [Member] | Mortgage Loans [Member]
Derivatives Fair Value [Line Items]
Debt instruments measured at fair value	$ (271,175,967)	(272,933,327)
Investment In Hotel Property, Net [Member] | Level 3 [Member]
Derivatives Fair Value [Line Items]
Investment in hotel property, net		$ 5,700,000

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Summary of Significant Accounting Policies - Derivative Instruments and Mortgage Debt Measured at Fair Value (Parenthetical) (Detail)	Mar. 31, 2016
1-Month LIBOR | Double Tree by Hilton Jacksonville Riverfront [Member]
Derivatives Fair Value [Line Items]
Interest rate cap for loan	2.50%

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Summary of Significant Accounting Policies - Schedule of Minimum Future Lease Payments Receivable (Detail)	Mar. 31, 2016 USD ($)
Leases [Abstract]
Remaining nine months ending December 31, 2016	$ 1,059,658
December 31, 2017	935,715
December 31, 2018	428,617
December 31, 2019	317,339
December 31, 2020	278,450
December 31, 2021 and thereafter	1,227,684
Total	$ 4,247,463

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Investment in Hotel Properties - Schedule of Hotel Properties (Detail) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Total Gross	$ 440,839,536	$ 435,875,967
Less: accumulated depreciation and impairment	(84,561,699)	(80,912,725)
Total Net	356,277,837	354,963,242
Land and Land Improvements [Member]
Property, Plant and Equipment [Line Items]
Total Gross	59,941,097	59,910,212
Buildings and Improvements [Member]
Property, Plant and Equipment [Line Items]
Total Gross	336,275,927	333,720,421
Furniture, Fixtures and Equipment [Member]
Property, Plant and Equipment [Line Items]
Total Gross	$ 44,622,512	$ 42,245,334

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Debt - Additional Information (Detail) - USD ($) $ in Millions					3 Months Ended
	Mar. 21, 2016	Jul. 07, 2015	Nov. 21, 2014	Sep. 30, 2013	Mar. 31, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Mortgage loan outstanding balance					$ 266.5	$ 267.9
Debt instrument maturity date	Nov. 13, 2017	Jul. 07, 2019
7.0% Senior Unsecured Notes [Member]
Debt Instrument [Line Items]
Interest rate on loan			7.00%
Borrowed amount			$ 25.3
Debt instrument maturity date					Nov. 15, 2019
Debt instrument callable date					Nov. 15, 2017
Notes face value			101.00%
8.0% Senior Unsecured Notes [Member]
Debt Instrument [Line Items]
Interest rate on loan				8.00%
Borrowed amount				$ 27.6
Debt instrument maturity date					Sep. 30, 2018
Debt instrument callable date					Sep. 30, 2016
Notes face value				101.00%

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Debt - Schedule of Mortgage Debt Obligations on Hotels (Detail) - USD ($)			3 Months Ended
	Mar. 21, 2016	Jul. 07, 2015	Mar. 31, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Maturity Date	Nov. 13, 2017	Jul. 07, 2019
Excess Interest rate over LIBOR on mortgage debt		3.50%
Mortgage loans		$ 18,500,000	$ 270,290,920	$ 271,737,608
Deferred financing costs, net			(4,051,603)	(4,086,114)
Unamortized premium on loan			233,857	240,336
Total Mortgage Loans, Net			$ 266,473,174	267,891,830
Crowne Plaza Hampton Marina [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Maturity Date			Jun. 30, 2016
Amortization Provisions			$ 83,000
Excess Interest rate over LIBOR on mortgage debt			5.00%
Prepayment Penalties			None
Mortgage loans			$ 3,263,585	3,512,586
Crowne Plaza Hollywood Beach Resort [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Maturity Date			Oct. 01, 2025
Amortization schedule for level payments of principal and interest			30 years
Interest rate applicable to the mortgage loan			4.913%
Prepayment Penalties			n/a
Mortgage loans			$ 59,647,289	59,795,743
Crowne Plaza Tampa Westshore [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Maturity Date			Jun. 18, 2017
Amortization schedule for level payments of principal and interest			25 years
Interest rate applicable to the mortgage loan			5.60%
Prepayment Penalties			None
Mortgage loans			$ 12,937,454	13,016,045
Double Tree by Hilton Jacksonville Riverfront [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Maturity Date			Jul. 07, 2019
Amortization schedule for level payments of principal and interest			25 years
Excess Interest rate over LIBOR on mortgage debt			3.50%
Prepayment Penalties			Yes
Mortgage loans			$ 19,692,994	19,774,577
Double Tree by Hilton Laurel [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Maturity Date			Aug. 05, 2021
Amortization schedule for level payments of principal and interest			25 years
Interest rate applicable to the mortgage loan			5.25%
Prepayment Penalties			Yes
Mortgage loans			$ 9,467,956	9,500,000
Double Tree By Hilton Philadelphia Airport [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Maturity Date			Apr. 01, 2019
Amortization schedule for level payments of principal and interest			25 years
Excess Interest rate over LIBOR on mortgage debt			3.00%
Prepayment Penalties			None
Mortgage loans			$ 32,120,179	32,376,795
Doubletree By Hilton Raleigh Brownstone - University [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Maturity Date			Aug. 01, 2018
Amortization schedule for level payments of principal and interest			30 years
Interest rate applicable to the mortgage loan			4.78%
Prepayment Penalties			n/a
Mortgage loans			$ 14,985,459	15,029,121
Georgian Terrace [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Maturity Date			Jun. 01, 2025
Amortization schedule for level payments of principal and interest			30 years
Interest rate applicable to the mortgage loan			4.42%
Prepayment Penalties			n/a
Mortgage loans			$ 46,450,174	46,579,011
Hilton Savannah DeSoto [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Maturity Date			Sep. 01, 2017
Amortization schedule for level payments of principal and interest			25 years
Interest rate applicable to the mortgage loan			6.06%
Prepayment Penalties			Yes
Mortgage loans			$ 20,431,819	20,522,836
Hilton Wilmington Riverside [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Maturity Date			Apr. 01, 2017
Amortization schedule for level payments of principal and interest			25 years
Interest rate applicable to the mortgage loan			6.21%
Prepayment Penalties			Yes
Mortgage loans			$ 19,679,345	19,825,772
Sheraton Louisville Riverside [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Maturity Date			Jan. 06, 2017
Amortization schedule for level payments of principal and interest			25 years
Interest rate applicable to the mortgage loan			6.24%
Prepayment Penalties			n/a
Mortgage loans			$ 11,283,324	11,345,866
The Whitehall [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Maturity Date			Nov. 13, 2017
Amortization schedule for level payments of principal and interest			25 years
Interest rate applicable to the mortgage loan			4.50%
Prepayment Penalties			None
Mortgage loans			$ 20,331,342	$ 20,459,256

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Debt - Schedule of Mortgage Debt Obligations on Hotels (Parenthetical) (Detail) - Mortgage Loans [Member] - USD ($)	3 Months Ended
	Mar. 31, 2016	Jun. 27, 2014
Crowne Plaza Hampton Marina [Member]
Debt Instrument [Line Items]
Debt instrument periodic payment	$ 83,000
Interest rate		5.00%
Crowne Plaza Hollywood Beach Resort [Member]
Debt Instrument [Line Items]
Prepayment date before maturity	Jun. 30, 2025
Double Tree by Hilton Jacksonville Riverfront [Member]
Debt Instrument [Line Items]
Prepayment date before maturity in which prepayment is allowed with penalty	Jul. 31, 2017
Extended maturity date	Jul. 31, 2020
Double Tree by Hilton Laurel [Member]
Debt Instrument [Line Items]
Prepayment date before maturity in which prepayment is allowed without penalty	Apr. 30, 2021
Interest rate	3.00%
Treasury floor rate of interest	5.25%
Double Tree by Hilton Laurel [Member] | Minimum [Member]
Debt Instrument [Line Items]
Prepayment date before maturity in which prepayment is allowed without penalty	Apr. 30, 2017
Double Tree by Hilton Laurel [Member] | Maximum [Member]
Debt Instrument [Line Items]
Prepayment date before maturity in which prepayment is allowed without penalty	Aug. 30, 2017
Double Tree By Hilton Philadelphia Airport [Member]
Debt Instrument [Line Items]
Interest rate	3.50%
Doubletree By Hilton Raleigh Brownstone - University [Member]
Debt Instrument [Line Items]
Number of months for prepayment before maturity	2 months
Sheraton Louisville Riverside [Member]
Debt Instrument [Line Items]
Number of months for prepayment before maturity	2 months
Georgian Terrace [Member]
Debt Instrument [Line Items]
Prepayment date before maturity	Feb. 28, 2025
Hilton Savannah DeSoto [Member]
Debt Instrument [Line Items]
Period in which prepayment not allowed	6 years
Period before maturity in which prepayment is allowed with penalty	90 days
Hilton Wilmington Riverside [Member]
Debt Instrument [Line Items]
Period in which prepayment not allowed	6 years
Period before maturity in which prepayment is allowed with penalty	90 days
The Whitehall [Member]
Debt Instrument [Line Items]
Extended maturity date	Nov. 30, 2018
Note extended date	2016-03

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Debt - Schedule of Future Mortgage Debt Maturities (Detail) - USD ($)	Mar. 31, 2016	Dec. 31, 2015	Jul. 07, 2015
Debt Disclosure [Abstract]
For the remaining nine months ended December 31, 2016	$ 7,690,171
December 31, 2017	86,680,710
December 31, 2018	18,078,266
December 31, 2019	31,732,731
December 31, 2020	19,841,299
December 31, 2021 and thereafter	106,267,743
Total future maturities	$ 270,290,920	$ 271,737,608	$ 18,500,000

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Commitments and Contingencies - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2016 USD ($) ft²	Mar. 31, 2015 USD ($)
Hilton Savannah DeSoto [Member]
Operating Leased Assets [Line Items]
Monthly contribution of room revenues	4.00%
Restricted cash reserve	amount equal to 1/12 of the annual real estate taxes due for the properties
Hilton Wilmington Riverside [Member]
Operating Leased Assets [Line Items]
Monthly contribution of room revenues	4.00%
Restricted cash reserve	amount equal to 1/12 of the annual real estate taxes due for the properties
Crowne Plaza Hollywood Beach Resort [Member]
Operating Leased Assets [Line Items]
Monthly contribution of room revenues	4.00%
Restricted cash reserve	amount equal to 1/12 of the annual real estate taxes due for the properties
Sheraton Louisville Riverside [Member]
Operating Leased Assets [Line Items]
Monthly contribution of room revenues	4.00%
Restricted cash reserve	amount equal to 1/12 of the annual real estate taxes due for the properties
DoubleTree by Hilton Brownstone-University [Member]
Operating Leased Assets [Line Items]
Monthly contribution of room revenues	4.00%
Restricted cash reserve	amount equal to 1/12 of the annual real estate taxes due for the properties
The Whitehall [Member]
Operating Leased Assets [Line Items]
Monthly contribution of room revenues	4.00%
Crowne Plaza Hampton Marina [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 1/12 of the annual real estate taxes due for the properties
Double Tree 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	2.50%
Additional fees of room revenues	2.50%
Franchise agreement expiry date	2017-07
Maximum [Member]
Operating Leased Assets [Line Items]
Franchise fees of room revenues	5.00%
Additional fees of room revenues	6.00%
Franchise agreement expiry date	2025-09
Savannah 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 one under renewal option second	Oct. 31, 2011
Expiration date two under renewal option second	Oct. 31, 2016
Expiration date three under renewal option second	Oct. 31, 2021
Rent expense	$ 18,245	$ 15,866
Doubletree By Hilton Raleigh Brownstone - University [Member]
Operating Leased Assets [Line Items]
Duration of operating lease term	50 years
Operating lease, expiring date	Aug. 31, 2016
Duration period under renewal option second	10 years
Expiration date one under renewal option second	Aug. 31, 2026
Expiration date two under renewal option second	Aug. 31, 2036
Expiration date three under renewal option second	Aug. 31, 2046
Rent expense	$ 23,871	23,871
Option to purchase leased land, date	Aug. 01, 2018
Land leased under second amendment dated	Apr. 28, 1998
Land lease originally dated	May 25, 1966
Purchase of leased land at fair market value subject to annual fee payment	$ 9,000
Crowne Plaza Tampa Westshore [Member]
Operating Leased Assets [Line Items]
Operating lease, expiring date	Jul. 31, 2019
Rent expense	$ 651	651
Lease agreement	5 years
Commencement date of agreement	Jul. 31, 2009
Annual payment	$ 2,432
Additional renewal of agreement	5 years
Crowne Plaza Jacksonville Riverfront [Member]
Operating Leased Assets [Line Items]
Operating lease, expiring date	Sep. 18, 2012
Rent expense	$ 1,505	1,505
Lease agreement	5 years
Annual payment	$ 4,961
New operating lease annual payment	$ 6,020
Lease renewable expiration date	Sep. 18, 2017
Commercial Office Space In Williamsburg, Virginia [Member]
Operating Leased Assets [Line Items]
Area of commercial space leased | ft²	5,216
Rent expense	$ 23,871	$ 20,920
Commencement date of agreement	Sep. 01, 2009
Lease renewable expiration date	Aug. 31, 2018
Furniture, Fixtures and Equipment [Member]
Operating Leased Assets [Line Items]
Financing arrangement expiration date	2016-04
Financing arrangement expiration date	2019-03
Six Year Operating Lease Property [Member] | Savannah Hotel Property [Member]
Operating Leased Assets [Line Items]
Duration of operating lease term	6 years
Ninety Nine Year Operating Lease Property [Member] | Savannah 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, 2016 USD ($)
Operating Leases Future Minimum Payments Due [Abstract]
For the remaining nine months ended December 31, 2016	$ 215,295
December 31, 2017	228,793
December 31, 2018	176,740
December 31, 2019	100,480
December 31, 2020	95,482
December 31, 2021 and thereafter	541,065
Total	$ 1,357,855

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Equity - Additional Information (Detail) $ / shares in Units, $ in Millions									1 Months Ended	3 Months Ended
	Feb. 02, 2016 shares	Jan. 29, 2016 shares	Sep. 16, 2015 shares	Jul. 17, 2015 USD ($) shares	Jul. 02, 2015 USD ($)	May. 01, 2015 shares	Apr. 01, 2015 shares	Jan. 01, 2015 shares	Jun. 30, 2015 USD ($) shares	Mar. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2015 USD ($) $ / shares shares	Jul. 01, 2015 shares
Class of Stock [Line Items]
Preferred stock, shares authorized										972,350	972,350
Common stock, shares authorized										49,000,000	49,000,000
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 issued				435,000						14,949,651	14,490,714	3,000,000
Proceeds from the sale of common stock | $				$ 2.8	$ 19.8				$ 0.7
Common stock, shares outstanding										14,949,651	14,490,714
Common stock exchange ratio										1
Redemption of units in operating partnership								0
Operating Partnership units not owned										1,778,140	2,200,827
Sotherly Hotels LP [Member]
Class of Stock [Line Items]
Operating Partnership units outstanding										16,727,791	16,691,541
Fair market value | $										$ 9.1	$ 15.0
Common Stock [Member]
Class of Stock [Line Items]
Restricted shares issued										12,000
Conversion of units in Operating Partnership to shares of common stock, shares	422,687		200,000			50,000	100,000			422,687
Common stock, shares issued									98,682
Common stock, shares issued									98,682
Common Stock [Member] | Sotherly Hotels LP [Member]
Class of Stock [Line Items]
Number of issued unit in Operating Partnership	36,250	36,100
Common Stock [Member] | Executive Officer [Member]
Class of Stock [Line Items]
Non-restricted shares issued	22,000	26,350
Common Stock [Member] | Director [Member]
Class of Stock [Line Items]
Non-restricted shares issued	2,250
Restricted shares issued	12,000	9,750
Series A Cumulative Redeemable Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares authorized										27,650

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Related Party Transactions - Additional Information (Detail)	3 Months Ended		12 Months Ended
	Mar. 31, 2016 USD ($) Hotel shares	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($)	Jul. 31, 2015	Jul. 30, 2015
Related Party Transaction [Line Items]
Due from Chesapeake Hospitality	$ 208,726		$ 226,552
Crowne Plaza Hollywood Beach Resort [Member]
Related Party Transaction [Line Items]
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%
Percentage of ownership interest	100.00%		100.00%
Percentage of operating partnership owned					25.00%
Chesapeake Hospitality [Member]
Related Party Transaction [Line Items]
Company's outstanding common stock owned by members of Chesapeake Hospitality	11.80%
Operating Partnership units owned by members of Chesapeake Hospitality | shares	870,271
Company's common stock shares owned by members of Chesapeake Hospitality | shares	1,760,001
Due from Chesapeake Hospitality	$ 55,919		$ 0
Management fee of gross revenues for first full fiscal year	2.00%
Management fee of gross revenues for second full fiscal year	2.50%
Management fee of gross revenues for every year thereafter	3.00%
Period of incentive management fee due within end of the fiscal year	90 days
Incentive management of increase in gross operating profit	10.00%
Maximum incentive management fee of gross revenues	0.25%
Agreement term	5 years
Percentage of management fees due thereafter	2.50%
Percentage of management fee due through 2017	2.65%
Base management and administrative fees earned by related party	$ 932,386	$ 753,898
Incentive management fees earned by related party	13,698	35,349
Employee medical benefits paid	$ 1,326,154	1,118,556
Expiry date of management agreement	Aug. 30, 2017
Management fee	3.00%
Base management fees		211,259
Chesapeake Hospitality [Member] | Georgian Terrace [Member]
Related Party Transaction [Line Items]
Administrative fee per year	$ 30,000
Chesapeake Hospitality [Member] | Crowne Plaza Houston Downtown and Georgian Terrace Hotel [Member]
Related Party Transaction [Line Items]
Percentage of management fee due through 2015	2.00%
Percentage of management fee due in 2016	2.25%
Percentage of management fees due thereafter	2.50%
Chesapeake Hospitality [Member] | Aggregate Basis [Member]
Related Party Transaction [Line Items]
Number of hotels | Hotel	8
Chesapeake Hospitality [Member] | Individual Basis [Member]
Related Party Transaction [Line Items]
Number of hotels | Hotel	2
Chesapeake Hospitality [Member] | Individual Hotel Management Agreements [Member]
Related Party Transaction [Line Items]
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%
Chesapeake Hospitality [Member] | Minimum [Member]
Related Party Transaction [Line Items]
Expiry date of master management agreement	2014-12
Chesapeake Hospitality [Member] | Maximum [Member]
Related Party Transaction [Line Items]
Expiry date of master management agreement	2019-03
Affiliated Entity [Member] | Crowne Plaza Hollywood Beach Resort [Member]
Related Party Transaction [Line Items]
Percentage of operating partnership owned					25.00%
MHI Hospitality TRS II, LLC [Member]
Related Party Transaction [Line Items]
Asset management fee as percentage of revenue	1.50%
Asset management fee paid		105,629
Sotherly Foundation [Member]
Related Party Transaction [Line Items]
Amount loaned to related party			180,000
Loan receivable outstanding	$ 130,000		$ 160,000
Daughter of Chief Executive Officer and Her Husband [Member]
Related Party Transaction [Line Items]
Total compensation for related parties	85,521	62,972
Partnership controlled by Chief Executive Officer [Member]
Related Party Transaction [Line Items]
Business-related air travel expense reimbursed to partnership	$ 28,802	$ 0

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Retirement Plans - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Compensation And Retirement Disclosure [Abstract]
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	$ 29,231	$ 12,787

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Unconsolidated Joint Venture - Additional Information (Detail)	Mar. 31, 2016	Dec. 31, 2015	Jul. 30, 2015
Crowne Plaza Hollywood Beach Resort [Member]
Schedule Of Equity Method Investments [Line Items]
Percentage of direct ownership	100.00%	100.00%
Percentage of operating partnership owned			25.00%
Carlyle [Member]
Schedule Of Equity Method Investments [Line Items]
Percentage of indirect interest owned			75.00%

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Unconsolidated Joint Venture - Summarized Financial Information of Investment (Detail) - Crowne Plaza Hollywood Beach Resort [Member]	3 Months Ended
	Mar. 31, 2015 USD ($)
Revenue
Rooms department	$ 5,744,329
Food and beverage department	871,287
Other operating departments	426,343
Total revenue	7,041,959
Hotel operating expenses
Rooms department	952,598
Food and beverage department	637,728
Other operating departments	166,908
Indirect	2,169,747
Total hotel operating expenses	3,926,981
Depreciation and amortization	444,576
General and administrative	127,145
Total operating expenses	4,498,702
Operating income	2,543,257
Interest expense	(645,860)
Net income	$ 1,897,397

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Indirect Hotel Operating Expenses - Summary of Indirect Hotel Operating Expenses (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	$ 14,135,595	$ 11,468,343
General and Administrative [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	3,142,543	2,574,104
Sales and Marketing [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	3,511,030	2,645,062
Repairs and Maintenance [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	1,854,619	1,606,670
Utilities [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	1,528,962	1,422,778
Franchise Fees [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	1,087,921	884,764
Management Fees, Including Incentive [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	946,083	789,246
Property Taxes [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	1,293,355	952,642
Insurance [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	694,202	543,386
Other [Member]
Component Of Operating Cost And Expense [Line Items]
Total indirect hotel operating expenses	$ 76,880	$ 49,691

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Income Taxes - Components of Income Tax Benefit (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Current:
State	$ 51,390	$ 57,679
Total	51,390	57,679
Deferred:
Federal	(395,225)	(425,159)
State	(92,244)	(71,295)
Total	(487,469)	(496,454)
Income tax benefit	$ (436,079)	$ (438,775)

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Income Taxes - Reconciliation of Statutory Federal Income Tax Benefit (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Effective Income Tax Rate Reconciliation, Amount [Abstract]
Statutory federal income tax expense	$ 37,330	$ 93,528
Effect of non-taxable REIT income	(514,263)	(518,687)
State income tax benefit	40,854	(13,616)
Income tax benefit	$ (436,079)	$ (438,775)

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Income Taxes - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Deferred tax asset	$ 5,877,844	$ 5,390,374
Accumulated net operating losses	5,100,000	4,500,000
Start-up expense related to company	$ 200,000	$ 200,000
Amortized period	15 years
Loss carryforwards, expired	2028
Valuation allowance	$ 0

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Income Per Share and Per Unit - Computation of Basic and Diluted Earnings Per Share (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Numerator
Net income attributable to the Company for basic computation	$ 483,095	$ 575,336
Denominator
Weighted average number of common shares outstanding for basic computation	14,792,911	10,595,801
Basic and diluted net income per share	$ 0.03	$ 0.05

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Income Per Share and Per Unit - Computation of Basic and Diluted Earnings Per Unit (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Schedule Of Computation Of Basic And Diluted Earnings Per Common Share [Line Items]
Net income	$ 545,874	$ 713,859
Basic and diluted net income per unit	$ 0.03	$ 0.05
Sotherly Hotels LP [Member]
Schedule Of Computation Of Basic And Diluted Earnings Per Common Share [Line Items]
Net income	$ 545,874	$ 713,859
Weighted average number of units outstanding	16,715,044	13,146,628
Basic and diluted net income per unit	$ 0.03	$ 0.05

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Subsequent Events - Additional Information (Detail) - Subsequent Event [Member] - USD ($) $ / shares in Units, $ in Millions	Apr. 29, 2016	Apr. 27, 2016	Apr. 11, 2016
Subsequent Event [Line Items]
Dividend paid			$ 0.085
Dividend record date		Jun. 15, 2016	Mar. 15, 2016
Dividend distributed		$ 0.09
Dividend payment date		Jul. 11, 2016
Crowne Plaza Hampton Marina [Member]
Subsequent Event [Line Items]
Expected proceeds from sale of business	$ 5.8