The big risk is when they take private SOHO the preferreds may no longer trade on the open market (could they be delisted?).
The second issue I see is what if the take private group stops paying the dividends on the preferreds? They are still cumulative but no income to the preferred holder. Who supports the preferred share holders?
The preferred shareholders of Sotherly Hotels Inc. (SOHO) have the right to elect two directors to the Board of Directors upon a specific trigger event related to the non-payment of dividends.
This provision is a standard protective covenant found in the articles of incorporation for most cumulative preferred stock, including SOHO's Series B, Series C, and Series D preferred stock.
Specific Trigger for Preferred Shareholders to Elect Directors
To gain the right to elect two additional directors to the Board, the following event must occur:
The company must be in arrears (in default of payment) of all or part of the dividend on any series of preferred stock for six quarterly periods (or more), whether or not consecutive.
Specific Actions to Obtain the Seats
Once the trigger condition (six or more quarters of dividend default) is met:
- Special Meeting: The preferred stockholders become entitled to hold a special meeting to elect two new directors to the Board.
- Election: These two directors are elected by the holders of all outstanding series of preferred stock (Series B, C, and D) voting together as a single class.
- Duration of Right: This right to elect two directors continues until all accrued and unpaid dividends are paid in full. Once the dividends are current, the right to elect these two directors ceases, and the number of directors on the board reverts to the number otherwise provided in the company's bylaws.
Status Relevant to the Take-Private Deal
On October 27, 2025, Sotherly Hotels announced that its Board of Directors approved the deferral of the previously declared preferred stock dividends scheduled for payment in November 2025, and is suspending future preferred dividends.
This suspension means the company has started or will soon start the clock on the dividend non-payment period that could eventually trigger the preferred stockholders' right to elect directors if the default persists for six quarterly periods.
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This is the AI's response to amounts in arrears
Yes, the company (Sotherly Hotels Inc. - SOHO) is currently in arrears on its preferred dividend payments.
1 The company has a history of arrearage and a new deferral was just announced.
2 The current arrearage is for a total of 20 quarters across the three preferred series.
Current Dividend Arrearage Status
Sotherly Hotels' preferred stock (Series B, C, and D) is Cumulative, meaning the company owes all missed dividends before it can pay any dividend on its common stock.
| Dividend Period | Status | | Q2 2020 through Q3 2025 | 18 Quarters in Arrears | | Q4 2025 (Scheduled for Nov 20, 2025) | 1 Quarter Deferred (This payment has been announced as deferred and cancelled, which will soon add to the cumulative arrears). | | Total Quarters in Arrears | 19 Quarters | | Additional Deferred Quarter | +1 Quarter | | Cumulative Total | 20 Quarters |
This current arrearage stems from two distinct periods:
1. The COVID-19 Arrearage: 18 Quarters
The company deferred dividend payments beginning with the quarter ending March 31, 2020, and did not resume payments until the third quarter of 2024. This resulted in an arrearage of 18 quarters that has not been cured.
| Preferred Series | Quarterly Dividend Rate | Annual Rate | Amount Due Per Share (18 Quarters) | | Series B (SOHOB) | $0.5000 | $2.00 | $\$$9.00 | | Series C (SOHOO) | $0.4921875 | $1.96875 | $\$$8.86 | | Series D (SOHON) | $0.515625 | $2.0625 | $\$$9.28 |
2. The New Deferral: Q4 2025
On October 27, 2025 (today), in conjunction with announcing a proposed merger, the company announced it is:
- Deferring payment of the previously declared quarterly dividends for the Series B, C, and D Preferred Stock that were scheduled to be paid on November 20, 2025.3
- Suspending future preferred stock dividends.
This deferral adds the 4th quarter of 2025 to the cumulative arrearage, bringing the total number of missed payments to 19 quarters (plus any future quarters in which dividends are suspended).
Status Regarding Board Seats
Because the company is in arrears on preferred dividends for more than six quarterly periods (currently 19 quarters), the preferred shareholders already possess the right to elect two directors to the Board.
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This is not good and it looks like they announced that the Q3 dividend to be paid Nov 2025 has been suspended |
