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SoTHERLY Hotels Picks Up Pace of Acquisitions

06/26/2014 | By Sarah Borchersen-Keto

Drew Sims, chairman and CEO of SoTHERLY Hotels Inc. (NASDAQ: SOHO), joined REIT.com for a CEO Spotlight video interview during REITWeek 2014: NAREIT’s Investor Forum, held in New York.

Following a quiet period for acquisitions in the period from 2008 until late 2013, the company recently closed on two transactions. Sims was asked how those deals came about and whether they are a sign of more activity to come.

“It’s really good to be back on offense after five years of playing defense,” Sims responded. He explained that SoTHERLY completed its balance sheet restructuring in the third quarter of 2013 through a bond offering that enabled the company to begin expanding. The hotel REIT quickly purchased the Crowne Plaza Houston Downtown in a deal that had been in the works for about a year, he said.

SoTHERLY bought the Georgian Terrace hotel on Peachtree Street in Atlanta for $60 million in March. Sims described the property as his company’s “flagship” going forward.

Sims said the company intends to make one more purchase in 2014. Geographic markets under consideration include Nashville, Charlotte and Charleston, S.C.

Sims also discussed the rebranding and renaming of the company, formerly known as MHI Hospitality.

“We’ve had a very good reception. I think the investment community likes what we did,” Sims said.

He stressed that SoTHERLY is now focusing on trying to build a collection of full-service, upper- upscale hotels located in central business districts in every major market in the South. The firm is seeking out properties “that specialize in giving Southern hospitality.”

Turning to fundamentals in the REIT’s core markets, Sims said the lodging industry is “really in a sweet spot right now.” In addition to muted supply growth and steady demand, pricing power has also started to emerge, according to Sims. SoTHERLY has moved its rates and changed it customer mix a little bit, Sims said. Additionally, he noted that the company is doing less Internet-related business and more group business.

“Group business has come back,” he said. “We feel like we’re in a very good position right now as we go forward.”