Related Party Transactions	6 Months Ended
Jun. 30, 2022
Related Party Transactions [Abstract]
Related Party Transactions	. Related Party Transactions Our Town Hospitality. Our Town is currently the management company for each of our ten wholly owned hotels, as well as the manager of our rental programs at the Hyde Resort & Residences and the Hyde Beach House Resort & Residences. Prior to February 25, 2022, our Town was a majority-owned subsidiary of Newport Hospitality Group, Inc. (“Newport”). As of June 30, 2022, Andrew M. Sims, our Chairman, and David R. Folsom, our President and Chief Executive Officer, beneficially owned approximately 94.3% and 5.7%, respectively, of the total outstanding ownership interests in Our Town. The following is a summary of the transactions with Our Town: Accounts Receivable – At June 30, 2022 and 2021, we were due approximately $0.2 million and $0.5 million, respectively, from Our Town. Management Agreements – On September 6, 2019, the Company entered into a master agreement with Newport and Our Town related to the management of ten of our hotels. On December 13, 2019, we entered into an amendment to the master agreement (as amended, the “OTH Master Agreement”), as well as a series of individual hotel management agreements for the management of those ten of our hotels. On April 1, 2020, Our Town became the manager of our DoubleTree Resort by Hilton Hollywood Beach hotel, as well as the manager for our rental programs at the Hyde Resort & Residences and the Hyde Beach House Resort & Residences. On November 15, 2020, Our Town became the manager of our Hyatt Centric Arlington hotel. The hotel management agreements for each of our ten wholly-owned hotels and the two rental programs are referred to as, individually an “OTH Hotel Management Agreement” and, together the “OTH Hotel Management Agreements”. The term of the OTH Hotel Management Agreements extends through March 31, 2035, and may be extended for two periods of five years each. The OTH Master Agreement provides for an adjustment to the fees payable by us under the OTH Hotel Management Agreements in the event the net operating income of Our Town falls below $250,000 for any calendar year beginning on or after January 1, 2021. The OTH Master Agreement expires on March 31, 2035 but shall be extended beyond 2035 for such additional periods as an OTH Hotel Management Agreement remains in effect. The base management fees for each hotel under management with Our Town is 2.50%. For any new individual hotel management agreements, Our Town will receive a base management fee of 2.00% of gross revenues for the first full year from the commencement date through the anniversary date, 2.25% of gross revenues the second full year, and 2.50% of gross revenues for every year thereafter. Base management and administrative fees earned by Our Town for our properties were approximately $1.0 million and $0.9 million, for the three months ended June 30, 2022 and 2021, respectively, and for the six months ended June 30, 2022 and 2022, were approximately $2.1 million and $1.5 million, respectively. Each OTH Hotel Management Agreement sets an incentive management fee equal to 10.0% of the amount by which gross operating profit, as defined in the relevant management agreement, for a given year exceeds the budgeted gross operating profit for such year; provided, however, that the incentive management fee payable in respect of any such year shall not exceed 0.25% of the gross revenues of the hotel included in such calculation. Incentive management fees earned for the three months ending June 30, 2022 and 2021, were $56,135 and $82,427, respectively and for the six months ending June 30, 2022, were $314,673 and $332,594, respectively. Each OTH Hotel Management Agreement provides for the payment of a termination fee upon the sale of the hotel equal to the lesser of the management fee paid with respect to the prior twelve months or the management fees paid for the number of months prior to the closing date of the hotel sale equal to the number of months remaining on the current term of the management agreement. Coincident with the sale of the Sheraton Louisville Riverside and the DoubleTree by Hilton Raleigh Brownstone – University, Our Town was due $260,272 in termination fees, which amount has been paid. Sublease – On December 13, 2019, we entered into a sublease agreement with Our Town pursuant to which Our Town subleases 2,245 square feet of office space from Sotherly for a period of 5 years, with a 5 year renewal subject to approval by Sotherly, on terms and conditions similar to the terms of the prime lease entered into by Sotherly and the third-party owner of the property. Lease payments due to the Company were $211,117 and $147,217, as of June 30, 2022 and 2021, respectively. Employee Medical Benefits – We purchase employee medical coverage for eligible employees that are employed by Our Town and who work exclusively for our properties and elect to participate in Our Town’s self-insured plan. Gross premiums for employee medical benefits paid by the Company (before offset of employee co-payments) were approximately $0.9 million and $0.7 million for the three months ended June 30, 2022 and 2021, respectively, and for the six months ended June 30, 2021 and 2020, were approximately $1.8 million and $1.3 million, respectively. Others. We employed Ashley S. Kirkland, the daughter of our Chairman, as Corporate Counsel and Compliance Officer until her departure in January, 2022 and continue to employ Robert E. Kirkland IV, her husband, as our General Counsel. We also employ Andrew M. Sims Jr., the son of our Chairman, as Vice President – Operations & Investor Relations. Total compensation for all three individuals, including salary and benefits, for the three months ended June 30, 2022 and 2021, totaled $119,926 and $107,115, respectively, and for the six months ended June 30, 2022 and 2021, were $252,624 and $212,984, respectively.

Related Party Transactions

6 Months Ended

Jun. 30, 2022

. Related Party Transactions

Our Town Hospitality. Our Town is currently the management company for each of our ten wholly owned hotels, as well as the manager of our rental programs at the Hyde Resort & Residences and the Hyde Beach House Resort & Residences. Prior to February 25, 2022, our Town was a majority-owned subsidiary of Newport Hospitality Group, Inc. (“Newport”). As of June 30, 2022, Andrew M. Sims, our Chairman, and David R. Folsom, our President and Chief Executive Officer, beneficially owned approximately 94.3% and 5.7%, respectively, of the total outstanding ownership interests in Our Town. The following is a summary of the transactions with Our Town:

Accounts Receivable – At June 30, 2022 and 2021, we were due approximately $0.2 million and $0.5 million, respectively, from Our Town.

Management Agreements – On September 6, 2019, the Company entered into a master agreement with Newport and Our Town related to the management of ten of our hotels. On December 13, 2019, we entered into an amendment to the master agreement (as amended, the “OTH Master Agreement”), as well as a series of individual hotel management agreements for the management of those ten of our hotels. On April 1, 2020, Our Town became the manager of our DoubleTree Resort by Hilton Hollywood Beach hotel, as well as the manager for our rental programs at the Hyde Resort & Residences and the Hyde Beach House Resort & Residences. On November 15, 2020, Our Town became the manager of our Hyatt Centric Arlington hotel. The hotel management agreements for each of our ten wholly-owned hotels and the two rental programs are referred to as, individually an “OTH Hotel Management Agreement” and, together the “OTH Hotel Management Agreements”. The term of the OTH Hotel Management Agreements extends through March 31, 2035, and may be extended for two periods of five years each.

The OTH Master Agreement provides for an adjustment to the fees payable by us under the OTH Hotel Management Agreements in the event the net operating income of Our Town falls below $250,000 for any calendar year beginning on or after January 1, 2021. The OTH Master Agreement expires on March 31, 2035 but shall be extended beyond 2035 for such additional periods as an OTH Hotel Management Agreement remains in effect. The base management fees for each hotel under management with Our Town is 2.50%. For any new individual hotel management agreements, Our Town will receive a base management fee of 2.00% of gross revenues for the first full year from the commencement date through the anniversary date, 2.25% of gross revenues the second full year, and 2.50% of gross revenues for every year thereafter.

Base management and administrative fees earned by Our Town for our properties were approximately $1.0 million and $0.9 million, for the three months ended June 30, 2022 and 2021, respectively, and for the six months ended June 30, 2022 and 2022, were approximately $2.1 million and $1.5 million, respectively.

Each OTH Hotel Management Agreement sets an incentive management fee equal to 10.0% of the amount by which gross operating profit, as defined in the relevant management agreement, for a given year exceeds the budgeted gross operating profit for such year; provided, however, that the incentive management fee payable in respect of any such year shall not exceed 0.25% of the gross revenues of the hotel included in such calculation. Incentive management fees earned for the three months ending June 30, 2022 and 2021, were $56,135 and $82,427, respectively and for the six months ending June 30, 2022, were $314,673 and $332,594, respectively.

Each OTH Hotel Management Agreement provides for the payment of a termination fee upon the sale of the hotel equal to the lesser of the management fee paid with respect to the prior twelve months or the management fees paid for the number of months prior to the closing date of the hotel sale equal to the number of months remaining on the current term of the management agreement. Coincident with the sale of the Sheraton Louisville Riverside and the DoubleTree by Hilton Raleigh Brownstone – University, Our Town was due $260,272 in termination fees, which amount has been paid.

Sublease – On December 13, 2019, we entered into a sublease agreement with Our Town pursuant to which Our Town subleases 2,245 square feet of office space from Sotherly for a period of 5 years, with a 5 year renewal subject to approval by Sotherly, on terms and conditions similar to the terms of the prime lease entered into by Sotherly and the third-party owner of the property. Lease payments due to the Company were $211,117 and $147,217, as of June 30, 2022 and 2021, respectively.

Employee Medical Benefits – We purchase employee medical coverage for eligible employees that are employed by Our Town and who work exclusively for our properties and elect to participate in Our Town’s self-insured plan. Gross premiums for employee medical benefits paid by the Company (before offset of employee co-payments) were approximately $0.9 million and $0.7 million for the three months ended June 30, 2022 and 2021, respectively, and for the six months ended June 30, 2021 and 2020, were approximately $1.8 million and $1.3 million, respectively.

Others. We employed Ashley S. Kirkland, the daughter of our Chairman, as Corporate Counsel and Compliance Officer until her departure in January, 2022 and continue to employ Robert E. Kirkland IV, her husband, as our General Counsel. We also employ Andrew M. Sims Jr., the son of our Chairman, as Vice President – Operations & Investor Relations. Total compensation for all three individuals, including salary and benefits, for the three months ended June 30, 2022 and 2021, totaled $119,926 and $107,115, respectively, and for the six months ended June 30, 2022 and 2021, were $252,624 and $212,984, respectively.