SOHO.Sotherly Hotels INC
10-K/A: Sotherly Hotels Files Amendment No. 1 to Form 10-K to Include Part III Information
Sentiment:
Form 10-K/A Amendment
Sotherly Hotels Inc. and Sotherly Hotels LP file an amendment to their Annual Report on Form 10-K for the fiscal year ended December 31, 2024, to include information required by Part III regarding directors, executive officers, and corporate governance.
Summary
- Sotherly Hotels Inc. and Sotherly Hotels LP are filing Amendment No. 1 to their Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
- The amendment includes information required by Part III of Form 10-K, which was not included in the original filing.
- The original filing was submitted on March 31, 2025.
- The company does not intend to file a definitive proxy statement for an annual meeting of shareholders within 120 days after the end of the fiscal year.
- The amendment includes updated certifications of the principal executive officer and principal financial officer of both Sotherly Hotels Inc. and Sotherly Hotels LP.
- No financial statements are included in this amendment, and no changes have been made to Items 307 and 308 of Regulation S-K.
- The amendment does not reflect subsequent events occurring after the original filing date or modify or update the financial statements or other disclosures made in the original filing.
- The document provides details on the company's directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, principal accountant fees, and exhibits.
- The Board currently consists of seven members, with each director's term expiring at the Company's 2025 annual meeting.
- The company's named executive officers are Andrew M. Sims, David R. Folsom, and Anthony E. Domalski.
- The NCGC Committee approved annual base salaries for Mr. Sims, Mr. Folsom, and Mr. Domalski of $577,494, $571,719, and $406,971, respectively, for 2025.
- The NCGC Committee approved cash bonuses for Mr. Sims, Mr. Folsom, and Mr. Domalski of $90,000, $70,000, and $47,500, respectively, for 2024.
- The company's CEO to median employee pay ratio for fiscal year 2024 is 2.21 to 1.00, with the CEO's compensation at $749,144 and the median employee's compensation at $338,905.
- Forvis Mazars, LLP billed $744,845 in audit fees and $60,425 in tax fees for the fiscal year ended December 31, 2024.
Sentiment
Score: 7
Explanation: The document is a routine regulatory filing, and the information presented is factual and objective. The sentiment is neutral to slightly positive, as the company is fulfilling its reporting obligations.
Positives
- The company has a comprehensive executive compensation plan designed to attract and retain outstanding managers.
- The NCGC Committee considers stockholder feedback on executive compensation.
- The company has an Employee Stock Ownership Plan (ESOP) to align the interests of executives with stockholders.
- The company has a code of business conduct and ethics in place.
- The company has an insider trading policy to promote compliance with insider trading laws.
- The company's Audit Committee pre-approves all audit and non-audit services.
Negatives
- The company's CEO to median employee pay ratio is 2.21 to 1.00, which may be a concern for some investors.
- The company's management agreements with Our Town Hospitality, LLC, which is affiliated with certain executive officers, could present potential conflicts of interest.
- The company's employment agreements with executive officers contain provisions providing for substantial payments in the event of a change of control, which could be costly to the company.
Risks
- Related party transactions with Our Town Hospitality, LLC, where key executives have ownership interests, could pose conflicts of interest.
- The company's reliance on management agreements with Our Town Hospitality, LLC could be a risk if the relationship were to deteriorate.
- The company's executive compensation plan could be subject to scrutiny if it is perceived as excessive or not aligned with performance.
- The company's ability to retain key executives could be impacted by the terms of their employment agreements, particularly in the event of a change in control.
Future Outlook
The NCGC Committee has determined that for 2025, the annual target bonus for which each of our named executive officers is eligible to receive will be an amount between 25%-35% of each such executive's base salary, pursuant to each executive's employment agreement.
Industry Context
This filing is a routine amendment to include Part III information in the 10-K, which is standard practice for companies that do not file a proxy statement within 120 days of the fiscal year-end. The details on executive compensation and related party transactions are typical disclosures for publicly traded companies.
Comparison to Industry Standards
- Executive compensation structures, including base salary, bonuses, stock awards, and ESOP allocations, are common in the hospitality industry.
- Peer group analysis is typically used to determine competitive compensation levels, though the specific peer group is not identified in this document.
- Related party transactions, such as management agreements with affiliated companies, are not uncommon but require careful scrutiny and independent approval to ensure fairness and transparency.
- CEO pay ratios vary widely across industries, and a ratio of 2.21 to 1 may be considered relatively low compared to some other sectors.
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Committee Charter Review | The NCGC Committee and Audit Committee charters were reviewed and approved on October 28, 2024. | 2024-10-28 | Ensures the committees are operating under current guidelines and best practices. |
Related Party Transactions
- Our Town Hospitality, LLC (Our Town) is currently the management company for each of our ten wholly-owned hotels, as well the manager of our rental programs at the Lyfe Resort & Residences and the Hyde Beach House Resort & Residences.
- As of March 15, 2025, an affiliate of Andrew M. Sims, our Chairman; an affiliate of David R. Folsom, our President and Chief Executive Officer; and Andrew M. Sims Jr., our Vice President Operations & Investor Relations, beneficially owned approximately 62.77%, 6.21%, and 15.0%, respectively, of the total outstanding ownership interests of Our Town.
- For the years ended December 31, 2024 and 2023, base management fees earned by Our Town under the contract were approximately $4.7 million and $4.5 million, respectively, and the incentive management fees earned by Our Town were approximately $0.1 million and $0.2 million, respectively.
- In December 2023, the Company granted Our Town a lease concession in the amount of $143,774 in proportion to the rent concession the Company received under the primary lease.
- For the years ended December 31, 2024 and 2023, the Company received rent income from Our Town of approximately $135,511 and $24,755, respectively.
- For the years ended December 31, 2024 and 2023, we paid approximately $3.9 million and $2.7 million, respectively, for the employer portion of the plan covering those employees that work exclusively for our properties under our management agreements with Our Town.
Stakeholder Impact
- Shareholders: The filing provides transparency regarding executive compensation, corporate governance, and related party transactions.
- Employees: The filing provides information about the company's ESOP and other compensation plans.
- Customers: The filing does not directly impact customers.
- Suppliers: The filing does not directly impact suppliers.
- Creditors: The filing provides information about the company's financial condition and obligations.
Next Steps
- The directors will stand for election at the 2025 annual meeting.
- The NCGC Committee will continue to review and approve executive compensation.
- The Audit Committee will continue to oversee the company's financial reporting and internal controls.
Key Dates
| Date | Description |
|---|---|
| 2004-08 | Inception of Sotherly Hotels Inc. |
| 2004-12-31 | Fiscal year end |
| 2011-01 | David R. Folsom appointed President of Sotherly Hotels Inc. |
| 2013-06-24 | Robert E. Kirkland IV hired as an employee of the Company. |
| 2014-09-30 | Andrew M. Sims Jr. hired as an employee of the Company. |
| 2016-08-19 | Effective date of Articles Supplementary designating the Series B Preferred Stock of the Company. |
| 2016-12-29 | Company entered into a loan agreement with the ESOP. |
| 2017-01-03 | ESOP purchased shares of the Company's common stock in the open market. |
| 2017-02-23 | ESOP purchased shares of the Company's common stock in the open market. |
| 2017-10-05 | Effective date of Articles Supplementary designating the Series C Preferred Stock of the Company. |
| 2018-08-30 | Articles Supplementary dated August 30, 2018. |
| 2019-04-15 | Effective date of Articles Supplementary designating the Series D Preferred Stock of the Company. |
| 2019-09-06 | Company entered into a master agreement with Our Town Hospitality, LLC. |
| 2019-12-13 | Company entered into a sublease agreement with Our Town Hospitality, LLC. |
| 2020-01-01 | Executive Employment Agreements with Andrew M. Sims, David R. Folsom, Scott M. Kucinski, and Robert E. Kirkland IV, dated as of January 1, 2020. |
| 2020-04-16 | Promissory Note between Sotherly Hotels LP and Village Bank dated as of April 16, 2020. |
| 2020-04-28 | Promissory Note between MHI Hospitality TRS, LLC and Fifth Third Bank, National Association, dated as of April 28, 2020. |
| 2020-05-06 | Promissory Note between SOHO Arlington TRS LLC and Fifth Third Bank, National Association, dated as of May 6, 2020. |
| 2021-06-09 | Second Amendment to Master Agreement by and among Sotherly Hotels Inc., Sotherly Hotels LP, MHI Hospitality TRS, LLC, Newport Hospitality Group, Inc. and Our Town Hospitality. |
| 2022-02-08 | First Amendment to Employment Agreement between Sotherly Hotels Inc. and Robert E. Kirkland IV, dated February 8, 2022. |
| 2022-04-27 | Third Amendment to Master Agreement by and among Sotherly Hotels Inc., Sotherly Hotels LP, MHI Hospitality TRS, LLC, and Our Town Hospitality LLC. |
| 2022-04 | Stockholders approved the 2022 Long-Term Incentive Plan. |
| 2022-07-20 | Sotherly Hotels Inc. 2022 Long-Term Incentive Plan. |
| 2023-01-23 | Amendments to Employment Agreements between Sotherly Hotels Inc. and Andrew M. Sims, David R. Folsom, Scott M. Kucinski, Anthony E. Domalski, and Robert E. Kirkland IV, dated January 23, 2023. |
| 2023-07-31 | Third Amended and Restated Bylaws of the Company, effective as of July 31, 2023. |
| 2023-08-04 | Executive Officer Incentive Compensation Recovery Policy. |
| 2023-12 | The Company granted Our Town a lease concession in the amount of $143,774. |
| 2024-01-18 | Independent directors Caldwell, Gibson, Walker, and Zinni received an incentive stock award of 3,000 shares that became fully vested on December 31, 2024. |
| 2024-01-18 | Former director Stein received an incentive stock award of 750 shares that became fully vested on April 30, 2024. |
| 2024-03-31 | Vesting date for restricted common stock. |
| 2024-04-30 | Edward S. Stein's tenure as a director ended. |
| 2024-06-30 | The aggregate market value of common stock held by non-affiliates of Sotherly Hotels Inc. was approximately $22,826,540. |
| 2024-10-28 | The NCGC Committee and Audit Committee charters were reviewed and approved. |
| 2024-11-06 | Amended and Restated Master Agreement by and among Sotherly Hotels Inc., Sotherly Hotels LP, MHI Hospitality TRS, LLC, and Our Town Hospitality LLC, dated November 6, 2024. |
| 2024-11-12 | Rollins Capital Partners, LP filed an Amendment No. 4 to Schedule 13G with the Securities and Exchange Commission. |
| 2024-12-09 | Gator Capital Management, LLC filed a Schedule 13G with the Securities and Exchange Commission. |
| 2024-12-23 | The NCGC Committee approved stock awards of our Company's common stock of 60,000, 57,000, and 45,000 to Mr. Sims, Mr. Folsom, and Mr. Domalski respectively. |
| 2024-12-31 | Fiscal year end. |
| 2025-01-02 | Independent directors received an incentive stock award of 3,000 shares each that will vest on December 31, 2025. |
| 2025-01-02 | Director Robertson received an unrestricted stock award of 2,250 shares for his service in 2024. |
| 2025-03-15 | As of March 15, 2025, an affiliate of Andrew M. Sims, our Chairman; an affiliate of David R. Folsom, our President and Chief Executive Officer; and Andrew M. Sims Jr., our Vice President Operations & Investor Relations, beneficially owned approximately 62.77%, 6.21%, and 15.0%, respectively, of the total outstanding ownership interests of Our Town. |
| 2025-04-15 | As of April 15, 2025, there were 20,126,415 shares of Sotherly Hotels Inc.'s common stock issued and outstanding. |
| 2025-04-15 | Beneficial ownership of shares of each class of our preferred stock that is issued and outstanding for each director and named executive officer. |
| 2025-04-25 | As of April 25, 2025, there were 20,126,415 shares of Sotherly Hotels Inc.'s common stock issued and outstanding. |
| 2025-04-30 | Date of signatures for the report. |
Keywords
executive compensation, directors, corporate governance, Form 10-K, Sotherly Hotels, audit fees, stock awards, insider trading, related party transactions, hotel management
Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.