Sunstone Hotel Investors Provides Business Update
Agrees to Acquire 100% interest in the 460-room Doubletree Guest Suites Times Square
Fourth Quarter RevPAR Increased 5.7%
ALISO VIEJO, Calif., Jan. 13, 2011 - Sunstone Hotel Investors, Inc. (the “Company”) (NYSE: SHO) today provided preliminary results for the fourth quarter ended December 31, 2010.
Operations Update
The financial information contained herein for the fiscal quarter ended December 31, 2010 reflects the Company’s preliminary expectations and is subject to customary adjustments that may arise during the completion of the financial statement closing process. Such adjustments could result in changes to these preliminary results. All RevPAR information presented reflects the Company’s 30 hotel comparable portfolio, which excludes the Royal Palm Miami Beach hotel due to ongoing rebranding and repositioning.
While the Company has not finalized its quarterly financial statement closing process, it currently expects to report the following for the fiscal quarter ended December 31, 2010:
— Fourth quarter 2010 comparable RevPAR is expected to increase
approximately 5.7% from fourth quarter 2009.
— Full year 2010 comparable RevPAR is expected to increase approximately
2.6% from full year 2009.
— The Company reaffirms its fourth quarter guidance for Adjusted EBITDA
and Adjusted FFO.
Marc Hoffman, Chief Operating Officer stated, “We are pleased with the rebound in growth trends. All of our primary markets generated meaningful RevPAR growth in the fourth quarter and we anticipate an acceleration in demand in 2011.”
Acquisition Update
The Company has reached a definitive agreement to acquire the outside 62% interests in its Doubletree Guest Suites Times Square joint venture for approximately $37.5 million and, as a result, will become the sole owner of the partnership that owns the 460-room Doubletree Guest Suites Times Square hotel in New York City. The Company previously acquired a $30.0 million mezzanine loan secured by the equity in the hotel for a net purchase price of approximately $3.5 million. Included in the acquisition price is approximately $25.0 million of cash and receivables. As a result, Sunstone’s net economic purchase price equates to approximately $286.0 million, or $622,000 per key. The Company’s preliminary estimates indicate that the hotel’s value includes approximately $100,000 per key associated with the revenues generated by the hotel’s Times Square signage. The hotel is encumbered by approximately $270.0 million of non-recourse senior mortgage and mezzanine debt that matures in January 2012 and bears a blended interest rate of LIBOR + 115 basis points. The Company expects to refinance this debt during 2011 and intends to fund any refinancing shortfall with existing cash. Highgate Hotels, Inc., one of the largest independent hotel operators in New York City, will continue to manage the hotel. The acquisition is expected to close in January 2011.
Built in 1990, the 43-story, 460-room all suite hotel is located in the heart of Times Square at 47th Street and Broadway. With each of the 460-rooms comprising 540 square feet, the Doubletree contains Midtown Manhattan’s largest standard guest rooms. In 2010, the hotel generated RevPAR of approximately $302.25 and Adjusted EBITDA per key in excess of $42,000.
Ken Cruse, President and CFO stated, “We are pleased to announce the acquisition of this irreplaceable hotel located in the strongest Manhattan submarket. With its exceptional RevPAR, Adjusted EBITDA per key and growth potential, the acquisition of the Doubletree Times Square is consistent with our plan to improve the size and quality of our portfolio by executing on disciplined acquisitions of high-quality hotels. We look forward to expanding our relationship with Highgate, whose performance as operator of this asset since 2007 has been exemplary.”
Business Update Call
The Company will hold a conference call on Thursday, January 13, 2011, at 4:30 p.m. EST (1:30 p.m. PST) to update stockholders on its preliminary fourth quarter results. A live webcast of the call will be available via the Investor Relations section of the Sunstone Hotel Investors website at http://www.sunstonehotels.com. A replay of the webcast will also be archived on the website. Alternatively, investors may dial 1-877-941-2332 (for domestic callers) or 1-480-629-9722 (for international callers) to listen to the live call.
2010 Pro-Forma
Sunstone Doubletree
31-Hotel Guest Suites Pro-Forma
Portfolio Times Square 32-Hotel
(1) (2) (3) Portfolio
-- ------ --
No. Keys 11,722 460 12,182
No. Hotels 31 1 32
Avg. Rooms per Hotel 378 460 381
Occupancy 69.6% 93.5% 70.5%
ADR $149.11 $323.17 $155.68
RevPAR $103.78 $302.25 $111.27
Adjusted EBITDA $142,400,000 $19,500,000 $161,900,000
Adjusted EBITDA per key $12,148 $42,393 $13,287
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Doubletree Guest Suites Times Square (amounts in thousands)
Forecast 2010
2007 2008 2009 (3)
Hotel Net Income (Loss) ($12,000) ($3,400) ($5,900) $5,600
Plus: Depreciation & Amortization
(4) $22,800 $16,700 $13,800 $5,800
Plus: Interest Expense (5) $20,500 $13,500 $6,900 $8,100
Hotel Adjusted EBITDA $31,300 $26,800 $14,800 $19,500
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(1) Room statistics reflect current estimate.
(2) Adjusted EBITDA reflects year-to-date as of September 30, 2010
and midpoint of guidance as provided on 11/4/10.
(3) Reflects 2010 estimate.
(4) Reflects actual depreciation for 2007 - 2009 and forecast for 2010.
(5) Reflects actual interest expense for 2007 -2009 and forecast for
2010.
SOURCE Sunstone Hotel Investors, Inc.
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