Sunstone Hotel Investors Reports Results for Fourth Quarter and Full Year 2009
Sunstone Hotel Investors Reports Results for Fourth Quarter and Full Year 2009
Drives strong margin performance through expense controls Looks to expand portfolio size and quality through disciplined acquisitions Maintains substantial cash balance
SAN CLEMENTE, Calif., Feb. 23 - Sunstone Hotel Investors, Inc. (the “Company”) (NYSE:SHO) today announced results for the fourth quarter and year ended December 31, 2009.
RevPAR and hotel EBITDA margin information presented reflect the 29 hotel portfolio on a pro forma basis. The 29 hotel portfolio excludes the W San Diego which was conveyed to a receiver in September 2009, the Renaissance Westchester, which was conveyed to a receiver in December 2009, and the Marriott Ontario Airport and eight of the 11 hotels securing the Company’s non-recourse loan with Massachusetts Mutual Life Insurance Company (the “Mass Mutual eight hotels”), which are in the process of being conveyed to receivers..
Fourth Quarter 2009 Operational Results:
— Total revenue was $192.6 million.
— Pro forma RevPAR was $97.31.
— Loss attributable to common stockholders was $133.2 million.
— Loss attributable to common stockholders per diluted share was $1.45.
— Adjusted EBITDA was $44.8 million.
— Adjusted FFO available to common stockholders was $16.2 million.
— Adjusted FFO available to common stockholders per diluted share was
$0.18.
— Pro forma hotel EBITDA margin was 23.8%.
Full Year 2009 Operational Results:
— Total revenue was $717.8 million.
— Pro forma RevPAR was $102.09.
— Loss attributable to common stockholders was $290.8 million.
— Loss attributable to common stockholders per diluted share was $4.17.
— Adjusted EBITDA was $168.6 million.
— Adjusted FFO available to common stockholders was $47.3 million.
— Adjusted FFO available to common stockholders per diluted share was
$0.68.
— Pro forma hotel EBITDA margin was 24.8%.
Art Buser, President and Chief Executive Officer, stated, “2009 was a transformational year for Sunstone. During 2009, to establish a strong foundation for future growth and stability, we took a number of critical steps to improve our liquidity and capital structure. During the year we retooled our hotel and corporate operations, creating a new, more efficient operating model. At the same time, we refined our portfolio by divesting of 14 non-core hotels. We took advantage of a dislocated credit market by opportunistically repurchasing a significant portion of our debt at a discount to par, and we enhanced our balance sheet by eliminating significant near-term debt maturities while meaningfully increasing our equity base. In spite of the turbulent conditions, we reflect back on the year with a sense of accomplishment and, more importantly, we look ahead with confidence and optimism. With almost $400 million of cash on hand, we have more than double the cash required to repay our debt maturing over the next five years, and we are well positioned for acquisition opportunities.”
SELECTED FINANCIAL DATA
($ in millions, except RevPAR and per share amounts)
(unaudited)
Three Months Ended Year Ended
December 31, December 31,
——— ———
2009 2008 % Change 2009 2008 % Change
——— ———
Total Revenue $192.6 $235.1 (18.1)% $717.8 $881.5 (18.6)%
Pro forma
RevPAR(1) $97.31 $112.89 (13.8)% $102.09 $124.85 (18.2)%
Pro forma hotel
EBITDA margin(1) 23.8% 28.4% (460) bps 24.8% 29.5% (470) bps
Income available
(loss attributable)
to common
stockholders $(133.2) $(12.5) $(290.8) $49.5
Income available
(loss attributable)
to common
stockholders per
diluted share $(1.45) $(0.26) $(4.17) $0.92
EBITDA $(75.9) $50.3 $(51.3) $304.2
Adjusted EBITDA $44.8 $70.0 $168.6 $285.1
FFO available to
common
stockholders $(106.4) $35.6 $(162.1) $154.7
Adjusted FFO
available to
common
stockholders $16.2 $38.5 $47.3 $157.6
FFO available to
common
stockholders per
diluted share(2) $(1.15) $0.68 $(2.32) $2.68
Adjusted FFO
available to
common
stockholders per
diluted share(2) $0.18 $0.74 $0.68 $2.73
(1) Includes the 29 hotels we owned as of December 31, 2009, excluding
the Marriott Ontario Airport and the Mass Mutual eight hotels
reclassified as “Operations Held for Non-Sale Disposition” on our
balance sheets and statements of operations, and the W San Diego and
the Renaissance Westchester reclassified as discontinued operations
on our balance sheets and statements of operations.
(2) Reflects Series C convertible preferred stock on an “as-converted”
basis if such treatment is dilutive.
The Company has filed with the Securities and Exchange Commission its Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
Disclosure regarding the non-GAAP financial measures in this release is included on pages 4 and 5. Disclosure regarding the Pro forma hotel EBITDA Margin is included on page 5 of this release. Reconciliations of non-GAAP financial measures to the most comparable GAAP measure for each of the periods presented are included on pages 9, 10 and 11 of this release.
Acquisitions
The Company continues to analyze a variety of investment opportunities aimed at enhancing its portfolio quality and growth prospects. The Company expects to see an increasing number of discount acquisition opportunities over the next three years as the number of hotels facing mortgage maturity defaults - and which consequently may face inadvertent changes in ownership - will continue to increase through the end of 2012. As the lodging industry is in the early stage of this credit-driven acquisitions opportunity, seller price expectations currently remain relatively high. The Company believes that the optimal conditions for discount hotel acquisitions may not fully develop until the volume of maturity defaults begins to crest later in 2010 and into 2011. During the early stage of this opportunity, the Company is exploring alternative structured investments, such as hotel debt or portfolio transactions, which may ultimately lead to opportunities to acquire quality hotel assets at meaningful discounts to warranted value.
Independent Hotel Management RFP
During December 2009, the Company issued a request for proposal (“RFP”) to hotel management companies interested in managing certain of its hotels currently managed by Sunstone Hotel Properties, Inc., a division of Interstate Hotels & Resorts, Inc. The purpose of the RFP is to ensure that the Company has the most highly qualified management companies operating its hotels in order to consistently deliver best in class results. The Company anticipates completing the RFP process during the first half of 2010.
Balance Sheet/Liquidity Update
Ken Cruse, Chief Financial Officer stated, “During 2009 we executed on a comprehensive, well-timed finance plan designed to improve our credit profile and financial flexibility, reduce our debt levels and enhance our corporate liquidity. We accomplished all of these objectives. As a result, we finished the year with a substantial equity base, significant excess cash, and just $180.8 million of debt maturities through 2014. We are very well positioned to capitalize on growth opportunities going forward.”
As of December 31, 2009, the Company had approximately $397.8 million of cash and cash equivalents, including restricted cash of $39.1 million. The Company intends to use a portion of its higher than historical cash balance for acquisition opportunities.
On December 31, 2009, total assets were $2.5 billion, including $1.9 billion of net investments in hotel properties, total debt, excluding debt in the Company’s secured debt restructuring program, was $1.1 billion and stockholders’ equity was $0.9 billion.
The Company continues to negotiate with Mass Mutual regarding the resolution of the 11 hotels comprising the collateral pool for a $246.0 million mortgage loan. The Company has offered to make a partial payment on the mortgage loan in an effort to secure the release of three of the 11 hotels: Courtyard by Marriott Los Angeles, Kahler Inn & Suites Rochester and Marriott Rochester, representing a total of 653 rooms. Accordingly, the Company has included these three hotels in operations held for investment. If the Company and Mass Mutual reach agreement on this proposal, the Company has offered to deed back the remaining eight hotels to Mass Mutual in satisfaction of the debt balance that will remain after the payment of the release price. If the Company and Mass Mutual are unable to reach agreement on this proposal, the Company intends to deed back all 11 hotels in satisfaction of the entire debt balance and without making a cash payment to Mass Mutual. The Company hopes to complete this process in the first quarter, but no assurance can be given that either the partial release or the deed-in-lieu transaction will be consummated, or upon their timing or terms.
On February 23, 2010, the Company elected to terminate its $85.0 million senior secured credit facility. The decision to terminate the credit facility was made in view of the Company’s strong liquidity position and the restrictive terms of the existing credit facility. The credit facility, which had been secured by mortgages on five of the Company’s hotels, had no outstanding borrowings and backed $2.9 million in outstanding irrevocable letters of credit. The Company’s business plan does not contemplate the use of revolving credit during 2010. The termination of the credit facility will eliminate approximately $0.6 million in fees and associated costs per annum, and will further improve the Company’s financial flexibility by eliminating restrictive covenants and encumbrances. The Company expects to enter into a new, appropriately sized and structured credit facility in the future when its business plan contemplates the use of revolving credit.
Financial Covenants
The Company is subject to compliance with various covenants under its Series C preferred stock and its 4.6% Exchangeable Senior Notes due 2027 (the “Senior Notes”). As of December 31, 2009, the Company was in compliance with all covenants related to its Series C preferred stock and its Senior Notes.
Impairments and Other Charges
In conjunction with the Company’s annual year-end impairment evaluation, the Company recorded an impairment loss of $88.2 million in order to reduce the carrying values of six of the Mass Mutual portfolio hotels to their fair values as of December 31, 2009. The six hotels are currently held for non-sale disposition in advance of being deeded-back to Mass Mutual, along with two additional hotels, in satisfaction of their associated debt. The six hotels and their respective impairment charges were: Marriott Provo $11.2 million; Holiday Inn Downtown San Diego $7.2 million; Holiday Inn Express San Diego (Old Town) $1.4 million; Marriott Salt Lake City (University Park) $6.8 million; Hilton Huntington $41.1 million; and Renaissance Atlanta Concourse $20.5 million.
During the fourth quarter of 2009, the Company’s Doubletree Guest Suites Times Square joint venture recorded an impairment loss in order to reduce the carrying value of the hotel to its fair value. This impairment reduced the partners’ equity in the joint venture to a deficit. The Company has no guaranteed obligations to fund any losses of the partnership, therefore the Company’s impairment loss was limited to its remaining $26.0 million investment in the partnership. The impairment charge was taken against equity in net losses of unconsolidated joint ventures, effectively reducing the Company’s investment in the partnership to zero on its balance sheet as of December 31, 2009.
In December 2009, the Company determined that a $5.6 million note received from the buyer of 13 hotels the Company sold in 2006, along with the related interest accrued on the note may be uncollectible. As such, the Company recorded an allowance for bad debt of $5.6 million to reserve both the discounted note and the related interest receivable in full as of December 31, 2009.
Capital Improvements
During the fourth quarter of 2009, the Company invested $10.6 million in capital improvements to its portfolio. The Company’s 2009 capital improvement investments totaled $44.1 million.
Dividend Update
On February 18, 2010, the Company’s board of directors declared a cash dividend of $0.50 per share payable to its Series A cumulative redeemable preferred stockholders and a cash dividend of $0.393 per share payable to its Series C cumulative convertible redeemable preferred stockholders. The dividends will be paid on April 15, 2010 to stockholders of record on March 31, 2010. No dividend was declared on the Company’s common stock.
The Company intends to make dividends on its stock in amounts equivalent to 100% of its annual taxable income. The level of any future dividends will be determined by the Company’s board of directors after considering taxable income projections, expected capital requirements, and risks affecting the Company’s business. In light of the Company’s intent to distribute 100% of its annual taxable income, future dividends may be reduced from past levels, or eliminated entirely. Dividends may be made in the form of cash or a combination of cash and stock consistent with Internal Revenue Code regulations.
Earnings Call
The Company will host a conference call to discuss fourth quarter and year-end results on February 23, 2010, at 2:00 p.m. PST. A live web cast of the call will be available via the Investor Relations section of the Company’s website at http://www.sunstonehotels.com. Alternatively, investors may dial 1-877-941-8631 (for domestic callers) or 1-480-629-9821 (for international callers) with passcode #4218080. A replay of the web cast will also be archived on the website.
About Sunstone Hotel Investors, Inc.
Sunstone Hotel Investors, Inc. is a lodging real estate investment trust (“REIT”) that, as of the date hereof, has interests in 38 hotels comprised of 13,199 rooms primarily in the upper upscale segment. Sunstone’s hotels are generally operated under nationally recognized brands, such as Marriott, Fairmont, Hilton and Hyatt. Upon the completion of the appointment of a receiver for the Marriott Ontario Airport and the eight hotels remaining in the Mass Mutual portfolio, the Company will own 29 hotels comprised of 10,966 rooms. For further information, please visit the Company’s website at http://www.sunstonehotels.com.
This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will” and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: volatility in the debt or equity markets affecting our ability to acquire or sell hotel assets; national and local economic and business conditions, including the likelihood of a prolonged U.S. recession; the ability to maintain sufficient liquidity and our access to capital markets; potential terrorist attacks, which would affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt and equity agreements; relationships with property managers and franchisors; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations, which influence or determine wages, prices, construction procedures and costs; our ability to identify, successfully compete for and complete acquisitions; the performance of hotels after they are acquired; necessary capital expenditures and our ability to fund them and complete them with minimum disruption; our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes; and other risks and uncertainties associated with our business described in the Company’s filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All forward-looking information in this release is as of February 23, 2010, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.
This release should be read in conjunction with the consolidated financial statements and notes thereto included in our most recent reports on Form 10-K and Form 10-Q. Copies of these reports are available on our website at http://www.sunstonehotels.com and through the SEC’s Electronic Data Gathering Analysis and Retrieval System (“EDGAR”) at http://www.sec.gov.
Non-GAAP Financial Measures
We present the following non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: (1) Earnings Before Interest Expense, Taxes, Depreciation and Amortization, or EBITDA; (2) Adjusted EBITDA (as defined below); (3) Funds From Operations, or FFO; (4) Adjusted FFO (as defined below); and (5) adjusted pro forma hotel EBITDA and pro forma hotel EBITDA margin for the purpose of our operating margins.
EBITDA represents income available (loss attributable) to common stockholders excluding: (1) preferred stock dividends; (2) interest expense (including prepayment penalties, if any); (3) provision for income taxes, including income taxes applicable to sale of assets; and (4) depreciation and amortization. In addition, we have presented Adjusted EBITDA, which excludes: (1) amortization of deferred stock compensation; (2) the impact of any gain or loss from asset sales; (3) impairment charges; and (4) other adjustments we have identified in this release. We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating our operating performance because these measures help investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest expense and preferred stock dividends) and our asset base (primarily depreciation and amortization) from our operating results. We also use EBITDA and Adjusted EBITDA as measures in determining the value of hotel acquisitions and dispositions. Reconciliations of income available (loss attributable) to common stockholders to EBITDA and Adjusted EBITDA are set forth on pages 9 and 10. A reconciliation and the components of adjusted pro forma hotel EBITDA and pro forma hotel EBITDA margin are set forth on page 11. We believe adjusted pro forma hotel EBITDA and pro forma hotel EBITDA margin are also useful to investors in evaluating our property-level operating performance.
We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group. The Board of Governors of NAREIT in its March 1995 White Paper (as clarified in November 1999 and April 2002) defines FFO to mean income available (loss attributable) to common stockholders (computed in accordance with GAAP), excluding gains and losses from sales of property, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), and after adjustment for unconsolidated partnerships and joint ventures. We also present Adjusted FFO, which excludes prepayment penalties, written-off deferred financing costs, impairment losses and other adjustments we have identified in this release. We believe that the presentation of FFO and Adjusted FFO provide useful information to investors regarding our operating performance because they are measures of our operations without regard to specified non-cash items such as real estate depreciation and amortization, gain or loss on sale of assets and certain other items which we believe are not indicative of the performance of our underlying hotel properties. We believe that these items are more representative of our asset base and our acquisition and disposition activities than our ongoing operations. We also use FFO as one measure in determining our results after taking into account the impact of our capital structure. Reconciliations of income available (loss attributable) to common stockholders to FFO and Adjusted FFO are set forth on pages 9 and 10.
We caution investors that amounts presented in accordance with our definitions of EBITDA, Adjusted EBITDA, FFO, Adjusted FFO, adjusted pro forma hotel EBITDA and pro forma hotel EBITDA margin may not be comparable to similar measures disclosed by other companies, because not all companies calculate these non-GAAP measures in the same manner. EBITDA, Adjusted EBITDA, FFO, Adjusted FFO, adjusted pro forma hotel EBITDA and pro forma hotel EBITDA margin should not be considered as an alternative measure of our net income (loss), operating performance, cash flow or liquidity. EBITDA, Adjusted EBITDA, FFO, Adjusted FFO, adjusted pro forma hotel EBITDA and pro forma hotel EBITDA margin may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions and other commitments and uncertainties. Although we believe that EBITDA, Adjusted EBITDA, FFO, Adjusted FFO, adjusted pro forma hotel EBITDA and pro forma hotel EBITDA margin can enhance an investor’s understanding of our results of operations, these non-GAAP financial measures, when viewed individually, are not necessarily a better indicator of any trend as compared to GAAP measures such as net income (loss) or cash flow from operations. In addition, you should be aware that adverse economic and market conditions may harm our cash flow.
Pro Forma Hotel EBITDA Margin Information
The revenue and expense items associated with the Company’s two commercial laundry facilities and the nine hotel properties held for non-sale disposition, any guaranty payments, and other miscellaneous non-hotel items have been shown below the adjusted pro forma hotel EBITDA line in presenting pro forma hotel EBITDA margins. Management believes the calculation of adjusted pro forma hotel EBITDA results in a more accurate presentation of hotel EBITDA margins of the Company’s 29 hotel portfolio. See page 11 for a reconciliation of adjusted pro forma hotel EBITDA to the comparable GAAP measure.
The following tables include the Company’s 29 Hotel Portfolio, excluding W San Diego, Renaissance Westchester, Marriott Ontario Airport, and the Mass Mutual Eight Hotels (dollars in thousands, except ADR and RevPAR):
Operating Statistics:
Occupancy % ADR RevPAR
—
Q1 2008 71.8% $165.23 $118.64
Q2 2008 80.0% $173.01 $138.41
Q3 2008 80.0% $164.61 $131.69
Q4 2008 67.5% $167.25 $112.89
FY 2008 74.5% $167.58 $124.85
Q1 2009 65.6% $154.32 $101.23
Q2 2009 70.7% $148.96 $105.31
Q3 2009 74.9% $140.53 $105.26
Q4 2009 66.4% $146.55 $97.31
FY 2009 69.3% $147.32 $102.09
Available Rooms: Seasonality:
2008: 2008:
Q1 960,271 Q1 $169,686 22.8%
Q2 960,981 Q2 194,817 26.1%
Q3 966,396 Q3 182,023 24.4%
Q4 1,151,021 Q4 199,346 26.7%
— ——
FY 2008 4,038,669 FY 2008 $745,872 100.0%
========= ======== =====
2009: 2009:
Q1 955,020 Q1 $146,029 24.1%
Q2 960,932 Q2 150,623 24.9%
Q3 966,648 Q3 145,215 24.0%
Q4 1,114,432 Q4 163,543 27.0%
— ——
FY 2009 3,997,032 FY 2009 $605,410 100.0%
========= ======== =====
Sunstone Hotel Investors, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
December 31, December 31,
2009 2008
—— ——
Assets
Current assets:
Cash and cash equivalents $358,610 $176,102
Restricted cash 39,147 36,485
Accounts receivable, net 22,624 31,335
Due from affiliates 62 109
Inventories 2,446 2,490
Prepaid expenses 7,423 7,113
Investment in hotel properties of
discontinued operations, net - 225,165
Other current assets of discontinued
operations, net - 7,524
Investment in hotel properties of
operations held for non-sale disposition,
net 118,814 -
Other current assets of operations held for
non-sale disposition, net 8,235 5,459
——- ——-
Total current assets 557,361 491,782
Investment in hotel properties, net 1,923,392 2,004,914
Investment in hotel properties of operations
held for non-sale disposition, net - 222,732
Other real estate, net 14,044 14,640
Investments in unconsolidated joint ventures 542 28,770
Deferred financing costs, net 7,300 9,913
Goodwill 4,673 8,621
Other assets, net 6,218 17,991
Other assets of operations held for non-sale
disposition, net - 6,248
—- ——-
Total assets $2,513,530 $2,805,611
========== ==========
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses $12,425 $15,519
Accrued payroll and employee benefits 9,092 8,096
Due to Interstate SHP 9,817 13,785
Dividends payable 5,137 12,499
Other current liabilities 21,910 27,498
Current portion of notes payable 153,778 11,840
Current portion of notes payable of
operations held for non-sale disposition 209,620 550
Other current liabilities of discontinued
operations, net 40,451 100,052
Other current liabilities of operations
held for non-sale disposition 7,362 5,766
——- ——-
Total current liabilities 469,592 195,605
Notes payable, less current portion 1,050,019 1,377,943
Notes payable, less current portion of
operations held for non-sale disposition - 211,167
Other liabilities 7,256 6,334
Other liabilities of operations held for non-
sale disposition - 54
—- —-
Total liabilities 1,526,867 1,791,103
Commitments and contingencies - -
Preferred stock, Series C Cumulative Convertible
Redeemable Preferred Stock, $0.01 par value,
4,102,564 shares authorized, issued and
outstanding at December 31, 2009 and 2008,
liquidation preference of $24.375 per share 99,896 99,696
Stockholders’ equity:
Preferred stock, $0.01 par value, 100,000,000
shares authorized. 8.0% Series A Cumulative
Redeemable Preferred Stock, 7,050,000 shares
issued and outstanding at December 31, 2009 and
2008, stated at liquidation preference of
$25.00 per share 176,250 176,250
Common stock, $0.01 par value, 500,000,000
shares authorized, 96,904,075 shares issued
and outstanding at December 31, 2009 and
47,864,654 shares issued and outstanding at
December 31, 2008 969 479
Additional paid in capital 1,119,005 829,274
Retained earnings (deficit) (8,949) 260,659
Cumulative dividends (397,527) (347,922)
Accumulated other comprehensive loss (2,981) (3,928)
——— ———
Total stockholders’ equity 886,767 914,812
Total liabilities and stockholders’ equity $2,513,530 $2,805,611
========== ==========
Sunstone Hotel Investors, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
——- -
2009 2008 2009 2008
—— —— —— ——
Revenues
Room $108,502 $129,892 $408,150 $504,104
Food and beverage 46,037 58,251 161,963 201,952
Other operating 15,476 18,582 53,744 59,140
Revenues of operations held for
non-sale disposition 22,611 28,331 93,966 116,298
——— ——— ———
Total revenues 192,626 235,056 717,823 881,494
Operating expenses
Room 26,635 29,633 98,382 110,444
Food and beverage 32,994 40,788 118,629 145,576
Other operating 6,981 7,706 26,916 29,823
Advertising and promotion 9,775 10,654 35,693 39,219
Repairs and maintenance 7,657 8,537 27,360 29,579
Utilities 6,471 7,550 24,895 28,731
Franchise costs 5,574 6,260 20,656 24,658
Property tax, ground lease and
insurance 12,433 11,467 43,352 44,993
Property general and
administrative 19,695 23,565 72,823 86,797
Corporate overhead 10,418 4,527 25,242 21,511
Depreciation and amortization 22,976 23,333 93,795 93,759
Operating expenses of
operations held for non-sale
disposition 21,085 24,934 87,007 96,548
Property and goodwill
impairment losses - 57 30,852 57
Property and goodwill
impairment losses of operations
held for non-sale disposition 88,279 - 100,143 -
——— —- —-
Total operating expenses 270,973 199,011 805,745 751,695
Operating income (loss) (78,347) 36,045 (87,922) 129,799
Equity in net earnings (losses)
of unconsolidated joint
ventures (25,185) 100 (27,801) (1,445)
Interest and other income 286 695 1,388 3,639
Interest and other income of
operations held for non-sale
disposition - 15 9 69
Interest expense (18,833) (20,750) (76,539) (83,176)
Interest expense of operations
held for non-sale disposition (5,297) (3,253) (15,036) (13,016)
Gain (loss) on extinguishment
of debt (53) - 54,506 -
—- —- ——— —-
Income (loss) from continuing
operations (127,429) 12,852 (151,395) 35,870
Income (loss) from discontinued
operations (536) (20,081) (118,213) 35,368
—— - ———
Net income (loss) (127,965) (7,229) (269,608) 71,238
Dividends paid on unvested
restricted stock compensation - (73) (447) (814)
Preferred stock dividends and
accretion (5,187) (5,187) (20,749) (20,884)
——— ———
Income available (loss
attributable) to common
stockholders $(133,152) $(12,489) $(290,804) $49,540
========= ======== ========= =======
Basic per share amounts:
Income (loss) from continuing
operations available
(attributable) to common
stockholders $(1.44) $0.16 $(2.47) $0.26
Income (loss) from discontinued
operations (0.01) (0.42) (1.70) 0.66
——- ——- ——- ——
Basic income available (loss
attributable) to common
stockholders per common share $(1.45) $(0.26) $(4.17) $0.92
====== ====== ====== =====
Diluted per share amounts:
Income (loss) from continuing
operations available
(attributable) to common
stockholders $(1.44) $0.16 $(2.47) $0.26
Income (loss) from discontinued
operations (0.01) (0.42) (1.70) 0.66
——- ——- ——- ——
Diluted income available (loss
attributable) to common
stockholders per common share $(1.45) $(0.26) $(4.17) $0.92
====== ====== ====== =====
Weighted average common shares
outstanding:
Basic 91,892 47,853 69,820 53,633
====== ====== ====== ======
Diluted 91,892 47,853 69,820 53,662
====== ====== ====== ======
Dividends declared per common
share $- $0.75 $- $1.80
=== ===== === =====
Sunstone Hotel Investors, Inc.
Reconciliation of Income Available (Loss Attributable) to Common
Stockholders to Non-GAAP Financial Measures
(Unaudited and in thousands except per share amounts)
Reconciliation of Income Available (Loss Attributable) to Common
Stockholders to EBITDA and Adjusted EBITDA
Three Months Ended Year Ended
December 31, December 31,
——- ——-
2009 2008 2009 2008
—— —— —— ——
Income available (loss
attributable) to common
stockholders $(133,152) $(12,489) $(290,804) $49,540
Dividends paid on unvested
restricted stock compensation - 73 447 814
Series A and C preferred stock
dividends 5,187 5,187 20,749 20,884
Operations held for investment:
Depreciation and amortization 22,976 23,333 93,795 93,759
Interest expense 17,311 19,576 71,940 78,538
Interest expense - default
rate 472 - 472 -
Amortization of deferred
financing fees 606 284 1,823 1,133
Write-off of deferred
financing fees - - 284 -
Loan penalties and fees 207 - 207 -
Non-cash interest related to
discount on Senior Notes 237 890 1,813 3,505
Unconsolidated joint ventures:
Depreciation and amortization 1,271 1,192 5,131 5,000
Interest expense 628 1,197 2,614 5,168
Amortization of deferred
financing fees 55 494 192 1,547
Amortization of deferred stock
compensation 19 (30) 47 47
Operations held for non-sale
disposition:
Depreciation and amortization 2,161 2,955 11,157 11,561
Interest expense 3,117 3,118 12,428 12,474
Interest expense - default
rate 1,407 - 1,407 -
Amortization of deferred
financing fees 135 135 541 542
Loan penalties and fees 638 - 660 -
Discontinued operations:
Depreciation and amortization 420 2,935 6,108 14,094
Interest expense 374 1,399 4,513 5,575
Amortization of deferred
financing fees 4 7 25 27
Loan penalties and fees 53 - 3,124 -
———
EBITDA (75,874) 50,256 (51,327) 304,208
———
Amortization of deferred stock
compensation 769 720 4,055 3,975
(Gain) loss on sale of assets (21) 16,095 12,677 (26,013)
(Gain) loss on extinguishment
of debt 53 - (54,506) -
Impairment loss - operations
held for investment - 57 30,852 57
Impairment loss -
unconsolidated joint ventures 26,007 - 26,007 -
Impairment loss - operations
held for non-sale disposition 88,279 - 100,143 -
Impairment loss - discontinued
operations - 2,847 95,150 2,847
Bad debt expense on corporate
note receivable 5,557 - 5,557 -
——- —- ——- —-
120,644 19,719 219,935 (19,134)
———
Adjusted EBITDA $44,770 $69,975 $168,608 $285,074
======= ======= ======== ========
Reconciliation of Income Available (Loss Attributable) to Common
Stockholders to FFO and Adjusted FFO
Income available (loss
attributable) to common
stockholders $(133,152) $(12,489) $(290,804) $49,540
Dividends paid on unvested
restricted stock compensation - 73 447 814
Series C preferred stock
dividends - 1,662 - 6,784
Real estate depreciation and
amortization - operations held
for investment 22,890 23,163 93,248 92,953
Real estate depreciation and
amortization - unconsolidated
joint ventures 1,254 1,165 5,060 4,949
Real estate depreciation and
amortization - operations held
for non-sale disposition 2,161 2,955 11,157 11,561
Real estate depreciation and
amortization - discontinued
operations 420 2,935 6,108 14,094
(Gain) loss on sale of assets (21) 16,095 12,677 (26,013)
—- ——— ———
FFO available to common
stockholders (106,448) 35,559 (162,107) 154,682
- ——— -
Operations held for investment:
Interest expense - default
rate 472 - 472 -
Write-off of deferred
financing fees - - 284 -
Loan penalties and fees 207 - 207 -
Operations held for non-sale
disposition:
Interest expense - default
rate 1,407 - 1,407 -
Loan penalties and fees 638 - 660 -
Discontinued operations:
Loan penalties and fees 53 - 3,124 -
(Gain) loss on extinguishment
of debt 53 - (54,506) -
Impairment loss - operations
held for investment - 57 30,852 57
Impairment loss -
unconsolidated joint ventures 26,007 - 26,007 -
Impairment loss - operations
held for non-sale disposition 88,279 - 100,143 -
Impairment loss - discontinued
operations - 2,847 95,150 2,847
Bad debt expense on corporate
note receivable 5,557 - 5,557 -
——- —- ——- —-
122,673 2,904 209,357 2,904
——- ——-
Adjusted FFO available to
common stockholders $16,225 $38,463 $47,250 $157,586
======= ======= ======= ========
FFO available to common
stockholders per diluted share $(1.15) $0.68 $(2.32) $2.68
====== ===== ====== =====
Adjusted FFO available to
common stockholders per
diluted share $0.18 $0.74 $0.68 $2.73
===== ===== ===== =====
Basic weighted average shares
outstanding 91,892 47,853 69,820 53,633
Shares associated with
unvested restricted stock
awards 343 - - 29
—- —- —- —-
Diluted weighted average
shares outstanding before
adjustments for Series C 92,235 47,853 69,820 53,662
Shares associated with Series
C preferred stock - 4,103 - 4,103
—- ——- —- ——-
Diluted weighted average
shares outstanding (1) 92,235 51,956 69,820 57,765
====== ====== ====== ======
2008 restated due to stock
dividend (2):
FFO available to common
stockholders per diluted share $0.62 $2.45
===== =====
Adjusted FFO available to common
stockholders per diluted share $0.67 $2.50
===== =====
Diluted weighted average shares
outstanding 57,400 63,016
====== ======
(1) Diluted weighted average shares outstanding includes the Series C
convertible preferred stock on an “as-converted” basis if such
treatment is dilutive.
(2) Diluted weighted average common shares and per share FFO and
Adjusted FFO for the three months and year ended December 31, 2008
have been retroactively adjusted for the effect of shares of common
stock issued pursuant to the stock dividend paid in January 2009 on
an “as-converted” basis for the Series C convertible preferred stock..
Sunstone Hotel Investors, Inc.
Pro Forma Reconciliation of Loss Attributable to Common Stockholders to
Non-GAAP Financial Measures
(Unaudited and in thousands except per share amounts)
Pro Forma Reconciliation of Loss Attributable to Common Stockholders to
EBITDA and Adjusted EBITDA
Year Ended December 31, 2009
—-
Discontinued
Operations
Held for Non-Sale ——
Invest- Dispos- Receiver- Disp- Pro
Actual(1) ment(2) ition(3) ship(4) osals(5) Forma(6)
—-
Loss
attributable
to common
stockholders $(290,804) $4,504 $108,211 $99,698 $18,515 $(59,876)
Dividends paid
on unvested
restricted
stock
compensation 447 - - - - 447
Series A and C
preferred
stock
dividends 20,749 - - - - 20,749
Operations held
for investment:
Depreciation
and
amortization 93,795 - - - - 93,795
Interest
expense 71,940 (3,707) - - - 68,233
Interest
expense -
default rate 472 (472) - - - -
Amortization
of deferred
financing
fees 1,823 (118) - - - 1,705
Write-off of
deferred
financing
fees 284 - - - - 284
Loan penalties
and fees 207 (207) - - - -
Non-cash
interest
related to
discount on
Senior Notes 1,813 - - - - 1,813
Unconsolidated
joint ventures:
Depreciation
and
amortization 5,131 - - - - 5,131
Interest
expense 2,614 - - - - 2,614
Amortization
of deferred
financing
fees 192 - - - - 192
Amortization
of deferred
stock
compensation 47 - - - - 47
Operations held for
non-sale disposition:
Depreciation
and
amortization 11,157 - (11,157) - - -
Interest
expense 12,428 - (12,428) - - -
Interest
expense -
default rate 1,407 - (1,407) - - -
Amortization
of deferred
financing
fees 541 - (541) - - -
Loan penalties
and fees 660 - (660) - - -
Discontinued
operations:
Depreciation
and
amortization 6,108 - - (4,144) (1,964) -
Interest
expense 4,513 - - (4,513) - -
Amortization
of deferred
financing
fees 25 - - (25) - -
Loan penalties
and fees 3,124 - - (3,124) - -
—- ——— ——— ———
EBITDA (51,327) - 82,018 87,892 16,551 135,134
—- ——— ——— ———
Amortization
of deferred
stock
compensation 4,055 - - - - 4,055
(Gain) loss on
sale of assets 12,677 - - - (13,052) (375)
Gain on
extinguishment
of debt (54,506) - - - - (54,506)
Impairment
loss -
operations
held for
investment 30,852 - - - - 30,852
Impairment
loss -
unconsolidated
joint
ventures 26,007 - - - - 26,007
Impairment
loss -
operations
held for non-
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