SCHEDULE: Rollins Capital Opposes Sotherly Hotels Merger

Rollins Capital Partners, holding a 9.3% stake in Sotherly Hotels, believes the announced merger undervalues the company and plans to explore alternative acquisition proposals.

Summary

• Rollins Capital Partners, LP and its affiliates (the "Reporting Persons") beneficially own 1,907,000 shares of Sotherly Hotels Inc. common stock, representing approximately 9.3% of the outstanding shares.
• The shares were acquired for investment purposes prior to December 31, 2024, at an aggregate cost of approximately $2,852,734.86, using working capital.
• The Reporting Persons believe the net value of Sotherly Hotels' property portfolio, if operated in a private context, is greater than the announced merger consideration.
• Sotherly Hotels Inc. entered into a Merger Agreement on October 24, 2025, with KW Kingfisher LLC and Sparrows Nest LLC, which would result in Sotherly becoming a wholly-owned subsidiary of KW Kingfisher LLC.
• The Reporting Persons intend to explore potential alternatives to the Merger, including formulating an alternative acquisition proposal (alone or with other hotel investor groups) or initiating discussions with other potential acquirers.
• They may also engage in discussions with Sotherly's or Parent's officers and directors, and other significant stockholders, regarding the Merger and potential alternatives.

Sentiment

Score: 3

Explanation: The sentiment is negative regarding the current merger proposal, as the Reporting Persons believe the company is undervalued. However, it's positive from an activist investor's perspective, as they see an opportunity to unlock greater value. The score reflects the negative view on the current deal but acknowledges the potential for a better outcome if their activism is successful.

Positives

• Reporting Persons believe the net value of Sotherly Hotels' property portfolio, if operated in a private context, is greater than the announced merger consideration.
• The Reporting Persons acquired the shares because they believed they represented an attractive long-term investment opportunity.

Negatives

• The announced merger consideration is believed to undervalue the Issuer's property portfolio.

Risks

• The current merger agreement may not be the optimal outcome for shareholders if the company's property portfolio is undervalued.
• Uncertainty regarding the outcome of the proposed merger due to potential alternative proposals.
• Market price levels of the Issuer's equity securities could be impacted by ongoing discussions or alternative proposals.
• General economic and industry conditions could affect the value of the Issuer's assets and potential alternative offers.

Future Outlook

The Reporting Persons intend to review their investment in Sotherly Hotels on an ongoing basis and may take various actions, including proposing changes to the Issuer's operations, management, board, governance, or capitalization, acquiring or disposing of securities, or submitting a competing acquisition proposal. Their actions will depend on factors such as the Issuer's financial position, the terms of the current Merger Agreement, potential superior offers, market conditions, and general economic and industry trends.

Management Comments

• The Reporting Persons acquired such securities because they believed that such securities, when purchased, represented an attractive long-term investment opportunity.
• The Reporting Persons believe that the net value of the Issuer's property portfolio, if operated in a private context, is greater than the announced merger consideration.

Industry Context

This filing highlights a common scenario in the hotel and real estate investment trust (REIT) sectors where activist investors identify perceived undervaluation, particularly in the context of a proposed take-private transaction. The belief that a property portfolio's private market value exceeds public market or merger consideration is a recurring theme, often leading to shareholder activism and potential bidding wars or revised merger terms.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to assess the valuation in the context of global benchmarks. It only states the Reporting Persons' belief that the net value of Sotherly Hotels' property portfolio, if operated privately, is greater than the announced merger consideration.

Stakeholder Impact

• Shareholders: Potential for increased value if the Reporting Persons' activism leads to a higher acquisition price or alternative transaction. Risk of uncertainty and potential delays to the current merger.
• Management/Board: May face pressure from the Reporting Persons to reconsider the current merger terms or explore other options.
• Acquirer (KW Kingfisher LLC): Faces potential competition or challenges to its proposed acquisition.

Next Steps

• Explore potential alternatives to the Merger.
• Formulate an alternative acquisition proposal (alone or in partnership with other hotel investor groups).
• Initiate discussions with other potential acquirers of the Issuer.
• Seek discussions with officers and directors of the Issuer or Parent.
• Seek discussions with other significant stockholders of the Issuer relating to the Merger and potential alternatives.
• Review their investment in the Issuer on a continuing basis.
• Potentially propose changes in the Issuer's operations, management, board of directors, governance, or capitalization.
• Potentially acquire additional securities of the Issuer or dispose of some or all beneficially owned securities.
• Potentially submit a competing proposal either alone or in combination with one or more other strategic partners or encourage others to do so.

Key Dates

Recommendation

Rollins Capital Partners, a significant shareholder, has publicly stated its belief that Sotherly Hotels is undervalued by the current merger agreement and intends to explore alternative proposals. This creates uncertainty around the existing deal but also presents a potential catalyst for a higher offer or a competing bid. Investors should hold to monitor the developments of this activist campaign, as it could lead to a more favorable outcome for shareholders, though the outcome is not guaranteed.

Keywords

Sotherly Hotels, Rollins Capital, Schedule 13D, Activist Investor, Merger, Acquisition, Hotel Industry, Shareholder Activism, Undervaluation, Real Estate, REIT