SoTHERLY's Busy Month (So Far)

WILLIAMSBURG, VA—One week into April locally-based SoTHERLY Hotels has already had a very busy month. The REIT just announced it has amended a mortgage secured by a hotel in Philadelphia. At the start of the month it acquired a hotel in Atlanta for $61 million, entering the market for the first time. Indeed, the company can chalk up the entire last twelve months as busy, dating back to its rebranding in April 2013. Formerly it was called MHI Hospitality.

On April 1, SoTHERLY Hotels announced it had acquired the Georgian Terrace Hotel in Atlanta, an adjacent 698-space parking structure and a 0.6-acre development parcel for $61 million. The 326-room independent, full-service hotel is located in the city's revitalized Midtown business district. Chesapeake Hospitality has been named its manager.

As a part of the transaction, the REIT also closed on a $41.5 million loan with Bank of the Ozarks collateralized by a first mortgage on the hotel. The loan carries a floating interest rate of the 3-month LIBOR rate plus 3.75% with a 4% interest rate floor and amortizes on a 25-year schedule following a 12-month interest only period. Also as part of the transaction, the company closed on a $19 million loan with Richmond Hill Partners and Essex Equity Joint Investment Vehicle, LLC. This loan carries a fixed interest rate of 10% and a one-year term.

It was a significant deal for the hotel company, says CEO Drew Sims in a prepared statement. For starters, it is a landmark property in the second largest MSA in the Southern United States. "Atlanta also serves as a primary feeder market to our existing hotel portfolio and therefore it has been a high priority for us.

 SoTHERLY has also announced it amended the original $30 million mortgage secured by its Hilton Philadelphia Airport hotel with its existing lender, TD Bank, N.A. The loan's principal amount is increased to approximately $34.1 million and its maturity is extended until April 1, 2019. The mortgage's interest rate will remain set at 30-day LIBOR rate plus 3%, with a 50 basis point floor on LIBOR.

In addition, the REIT also announced that it has entered into a 10-year franchise agreement with Hilton Worldwide and will convert the Hotel to the DoubleTree by Hilton brand in November 2014.

Along with its rebranding the REIT completely restructured its balance sheet and decided to expand its footprint in the southern states, Sims told NAREIT last year. The company decided it would shore up its foothold in Atlanta and then focus on such markets as Houston, Charleston and Charlotte.

Sims also told NAREIT that the lack of new supply in the sector will help to ensure continued growth.

"We're not seeing a lot of new product and as a result of increased demand we're actually in a very good position for extended growth," he said. "Our belief is that in the next two or three years we should see a continued growth in rates, and occupancy has already stabilized at a very healthy level."