Sandler O'Neill & Partners LP analyst initiated coverage of SotherlyHotels Inc. with a rating of "hold," and a price targetof $5.75.
The analyst wrote in a research report: "All smallcompanies that are looking to grow face similar challenges in maximizingcapital options with minimal impediments to growth. We believe SOHO shouldcreate a pool of unencumbered assets to allow financial flexibility, especiallyas it seeks to rebrand hotels as flags burn off, and delever the balance sheet.We understand that the process of creating an unencumbered pool takes time, butbelieve it is in the long-term interest of shareholders to create financialflexibility. Though the use of JV capital is always an option, we think itfurther dilutes existing shareholders rather than enhancing their position,especially if the market believes that SOHO will eventually issue equity to buyout its partner's stake. While management wants to grow the portfolio, webelieve using any disposition proceeds to unencumber assets will be valued morehighly than continuing its levered path."