Sotherly Hotels Selling New Preferred Issue

Small hotel REIT Sotherly Hotels (NASDAQ:SOHO) is selling a new perpetual preferred stock issue. This issue will be perpetual. Dividends are not qualified, but are cumulative. The issue will be unrated.

The company already has 2 perpetual preferreds outstanding. The SOHOB 8% issue is trading at $25.10 and can be seen here. The SOHOO 7.875% issue is trading at $25.02 and can be seen here. Neither of these issues is presently redeemable.

Additionally the company has a 7.25% baby bond issue trading under ticker SOHOK which matures in 2021 (see note below)


NOTE THAT THE COMPANY INTENDS TO CALL THIS BABY BOND ISSUE WITH THE PROCEEDS OF THIS PREFERRED ISSUE. It became callable in 2/2019.

Preliminary details of the new offering can be found here.

34 thoughts on “Sotherly Hotels Selling New Preferred Issue”

  1. Price at 8.25 after 3 days beating the bushes. Can’t believe the company is thrilled with that.

  2. I have a general question about trading activity. As a way to stash some cash short term, I’ve bot some SOHOK today at 25.58. Thru TDA I bot 1000 in 2 trades, one of 400, one of 600. In each case, the printed activity shows mirrored transactions happening simultaneously with 600 trading at 25.582 and 400 @ 25.5834. Anyone know why this happens so frequently? My cost is a flat 25.58, but it looks like maybe my broker is taking a slight loss in order to sell me these shares… Could that be a correct assumption, with their motive being to show their abilities to execute? Just wondering.

    1. 2whiteroses. Are you buying sohok to capture some quick a quick gain? They are calling at 101%, which is $25.25. So a .12 gain if they redeem at the end of this month?

      1. I was wondering when the redemption would/could happen. Since the new preferred isn’t issued yet, it seems really unlikely that they could call the bonds before the end of April? May or June seems much more likely.

        It the bond is selling at 25.58 now, and would be redeemed at 25.25, how do you calculate a .12 gain? Must be something obvious that I don’t see.

        1. .45 dividend. They are assuming you will get all of it because they need to give 30 days notice on a call. You could actually get more than that depending on call date.

      2. Mr. Lucky – I think I calculated using the worst case scenario of a call on 4/11 which is highly improbable. It will be later than that. Using that date a purchase at 25.58 = approx a 5% annualized yield once you collect the accrued… As long as SOHO completes the transaction, I’m buying a riskless 30 day piece of paper for 5% annualzed… It’s a pick up pennies kind of trade, but I’ve got way too much cash sitting around doing next to nothing and not enough conviction on doing anything else with it, so I’ll accept 5% annualized in an IRA. Also, I’ve seen some situations where the 30 day period to call begins with the official pricing of the refunding but more frequently than not, I think it’s aligns with the settlement date of the new issue…. So I’m guessing they’re aiming to call on the next interest payment date. BTW, since SOHOK actually came down in price when the anticipated refunding was announced, I’m guessing I have very little downside if they can’t successfully refund.

  3. Just an update; the pricing of the Sotherly Hotels preferred “D” will be tomorrow April 11th mid-day. Please note that yield talk is still 8.25%-8.50% and the deal looks to be in “good shape”. There should be a release/announcement of a Grey Sheet symbol tomorrow as well and eventually this IPO will trade by SOHON.
    Wishing you profitable investing, Nomad

  4. Sotherly Hotels Inc. Schedules First Quarter 2019 Earnings Release and Conference Call

    GlobeNewswire•April 9, 2019
    WILLIAMSBURG, Va., April 09, 2019 (GLOBE NEWSWIRE) — Sotherly Hotels Inc. (SOHO) (the “Company”) announced that the Company will report financial results for the first quarter 2019 prior to the market opening on Tuesday, May 7, 2019. A conference call for investors and other interested parties is scheduled for 10:00 a.m. Eastern Time (ET) that same day, at which time management will discuss the Company’s first quarter 2019 results. The information to be discussed on the call will be contained in the Company’s earnings release, which will be available via the Company’s website at http://www.sotherlyhotels.com in the Investors section under Financial Information.

    The conference call will be accessible by telephone and through the Internet. Interested individuals are invited to listen to the call by telephone at 888-339-0107 (United States), 855-669-9657 (Canada) or +1 412-902-4188 (International). To participate on the webcast, log on to http://www.sotherlyhotels.com at least 15 minutes before the call to download the necessary software. For those unable to listen to the call live, a taped rebroadcast will be available approximately one hour after completion of the live call through May 6, 2020. To access the rebroadcast, dial 877-344-7529 and enter conference number 10130519. A replay of the call will also be available on the Internet at http://www.sotherlyhotels.com through May 6, 2020.

    About Sotherly Hotels Inc.

    Sotherly Hotels Inc. is a self-managed and self-administered lodging REIT focused on the acquisition, renovation, upbranding and repositioning of upscale to upper-upscale full-service hotels in the Southern United States. Currently, the Company’s portfolio consists of investments in twelve hotel properties, comprising 3,156 rooms, and an interest in the Hyde Resort & Residences, a luxury condo hotel. Most of the Company’s properties operate under the Hilton Worldwide, Hyatt Hotels Corporation, InterContinental Hotels Group and Marriott International, Inc. brands. Sotherly Hotels Inc. was organized in 2004 and is headquartered in Williamsburg, Virginia. For more information, please visit http://www.sotherlyhotels.com.

    Contact at the Company:
    Scott Kucinski
    Sotherly Hotels Inc.
    410 West Francis Street
    Williamsburg, Virginia 23185
    (757) 229-5648

  5. I am new to this so please indulge me if this question is ignorant. Why would the company call the baby bond that they can have at the lower interest rate of 7.25% until maturity and replace it with a perpetual that is at a higher rate, over 8%? Wouldn’t they prefer the lower rate until 2021?

    1. I’m taking a guess here, but there was a hint in the announcement. They want some capital left over after retiring SOHOK to acquire more properties, thereby expanding their cash flow. And it looks as though they are willing to pay a higher interest differential to do it.

    2. Speculation at this point, but this smells like they are working to reduce their near-term debt and extend it out into the future – where they believe rates will be higher. They also stated that they intend to use any ‘left over’ proceeds for potential future acquisitions of hotel properties. I think they are more interested in the latter – buying more properties while rates are low. Getting rid of the short term debt at a time when rates have cratered (inverted) and pushing it out – makes sense – especially if the election goes a certain way next year.

    3. Skg, Im a simpleton….So I call it hiding debt on the capital side of the ledger. Wanna get rid of some debt? Issue some preferred stock and magically the debt has become capitalized. Accounting is magic!

      1. Grid, shhhhhh that’s an account”secret”. Look at the king of hidden dent LTS; they are chocking on their preferred and seem to issue more of this 8% fixed perpetual when they need to make monthly payments.
        Unreal just unreal, Nomad

        1. Sorry for the typo’s; I’m on my cell phone and trying to type after running on the beach…Wish there was a way I could correct the above.

        2. Nomad, I still got a modest mortgage at 3.5% Im unwilling to payoff early. Im thinking about issuing some preferred stock somehow to turn this debt into capital, lol. I would probably delist it and suspend payments forever, so dont buy into my IPO! 🙂

          1. That’s a great idea Grid. Throw a solar panel on the roof, overstate the tax credits and we’ll sell it as a QDI issue. For an extra $199 we can slap on an Egan-Jones AAA. It’ll sell like hotcakes. I’d write more, but having a hard time balancing on my roof.

          2. Grid and Alpha, I’m watching the NCAA Basketball game with some buddies and just laughed so hard after reading your posts, I partially spit out my drink… Bahhhhh
            If you get Rida to write (hype) about your mortgage backed “monthly” paying 8% coupon preferred we could leverage your home like it was the class A preferred shares of LTS. This could give you a HUGE piggy bank all through retirement…

        3. LTS-A closed at 24.98 this afternoon…returning to par like a homing pigeon. There’s nothing to fear from this 8% perennial monthly payer, especially if you buy it on sale and sell it at a premium.

    4. One idea is that if you default on a bond, that is serious. You can suspend traditional preferred. It could be a way of managing future risk. Coupons are too high for me. I personally won’t invest in this small company.

      1. Mr. Lucky, that’s exactly my thought. I’m surprised that the usual suspects haven’t noted that SOHO is only $104M market cap and is issuing preferred with coupons in the 8% range which puts them in the league with the Greek shipping companies. Doesn’t it?

  6. Bought SOHOO at $24.90. Got a couple of years of Call protection and a 7.75% yield – figure retiring the bond and issuing new shares won’t add to the debt load and the new one will probably price under this yield. SOHOO had been on my watchlist for a while.

    1. timdman, the IPO SOHON (the Preferred D) is yield talk 8.25%-8.50%; remember the SOHOK that is being redeemed is a short 2021 note and this IPO is a perpetual preferred.
      Wishing you profitable investing, Nomad

      1. Thanks Nomad. I didn’t think it would yield so much…there I go thinking again, always gets me in trouble : ). If it does come out at a good rate and I can get some under par, I may have to do that, too. Thanks again – for that and for all the good info you provide.

      2. So the talk is a higher interest rate than the issue they are calling in? Plus, they pay a 1% call premium (25.25) as they go from short term note to longer term.

        In other words, they plan on more debt for a longer period from a starting position of rather high debt.

        If you cannot guess, I will be passing

          1. Larry, this is just SOHO extending out maturities term verses short limit) and/or they are working with their bankers and looked at the debt covenants (buying back debt and issuing a preferred stock).
            Not all those who wander are lost, Noamad

    1. TNTowanda–this has not been announced, but we will have it as soon as it is released (OTC Grey market ticker).

      1. Tim, my contact at Sandler O’Neill told me the deal still looks like 8.25%-8.50%, there is no Grey Sheet (there will be a Grey Sheet symbol) until it “hits Bloomberg” and that it should price Wednesday or Thursday evening.
        Hope that helps, Nomad

        1. Nomad – Sandler O’Neill brings back memories… I turned down a job with them probably in 1994 strictly because getting up to their WTC offices would add 10 minutes to my already ridiculously long commute…. that and I didn’t feel as though I’d get along well with Jimmy Dunne.. I probably would not have stayed around long enough to have been there for 9/11 (they knew I was aiming toward early retirement), but it still makes me stop and wonder could have been…and to try to always remember what’s truly important.

          1. 2whiteroses, I want to thank you for your post ^^^ “and always try to remember what’s truly important” those are very powerful words my friend…
            All the very best to all reading this, Nomad

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