Sotherly Hotels Inc. is a self-managed and self-administered lodging real estate investment trust that focuses on owning, acquiring, renovating and repositioning full-service, primarily upscale and upper-upscale hotel properties located in primary markets in the mid-Atlantic and southern United States. As of December 31, 2024, the company owned 10 hotels with an aggregate of 2,786 rooms spread across 7 states and held interests in 2 condominium hotels and their associated rental programs. All hotel properties are wholly-owned subsidiaries of the Operating Partnership and are managed on a day-to-day basis by Our Town Hospitality LLC.

The company generates revenue primarily by leasing its wholly-owned hotel properties to TRS Lessees, which are wholly-owned subsidiaries of MHI Hospitality TRS Holding Inc., in exchange for fixed annual base rent plus percentage rent calculated as a share of gross room revenues exceeding certain thresholds. The TRS Lessees engage Our Town Hospitality LLC to manage day-to-day hotel operations, paying base and incentive management fees as outlined in the management agreements. Additionally, the company earns income from its condominium hotel rental programs through agreements that allow Our Town to manage the rental of individually owned condominium units and to oversee associated services such as parking and cabana management. These lease payments and related operating income constitute the company’s principal sources of revenue.

The company operates in the highly competitive full-service upscale and upper-upscale hotel sector, where brand recognition, location, quality, service consistency, and price are the principal competitive factors. Sotherly Hotels Inc. differentiates itself by targeting markets with multiple demand generators and significant barriers to entry, which it believes support strong risk-adjusted returns. Its internal management structure via Our Town Hospitality LLC is designed to optimize operating expenses and enhance guest service, providing a competitive edge over third-party franchisor-managed properties. While the company faces competition from larger national hotel chains and other lodging REITs, it seeks to leverage its focused acquisition strategy and expertise in repositioning underperforming assets to maintain a favorable position within the industry.

The company serves primarily business and leisure travelers staying at its full-service upscale and upper-upscale hotels, as well as guests of its condominium hotel properties. Its customer base includes individual tourists, corporate groups, convention attendees, and other visitors who utilize the hotels’ rooms, meeting spaces, restaurants, and ancillary amenities such as parking facilities. Specific customer names are not disclosed in the filing.