Sunstone Hotel Investors Reports Results For Second Quarter 2012
Sunstone Hotel Investors Reports Results For Second Quarter 2012
COMPLETES ACQUISITION OF THE 357-ROOM HILTON GARDEN INN CHICAGO DOWNTOWN/MAGNIFICENT MILE
ALISO VIEJO, Calif., Aug. 2, 2012 - Sunstone Hotel Investors, Inc. (the “Company”) (NYSE: SHO) today announced results for the second quarter ended June 30, 2012.
Second Quarter 2012 Operational Results (as compared to Second Quarter 2011)((1)):
— Comparable Hotel RevPAR increased 7.6% to $142.82.
— Comparable Hotel EBITDA Margin increased by 110 basis points to 32.6%.
— Adjusted EBITDA increased by 11.7% to $71.1 million.
— Adjusted FFO per diluted share increased by 16.7% to $0.35.
— Income available to common stockholders was $4.1 million (vs. $31.1
million in 2011).
— Income available to common stockholders per diluted share was $0.03 (vs.
$0.27 in 2011).
Ken Cruse, President and Chief Executive Officer, stated, “Our team continued to execute on our balanced business plan during the second quarter. Proactive asset management helped to drive strong results, including a 7.6% increase in our Comparable Hotel RevPAR, a 110-basis-point improvement in our Comparable Hotel EBITDA Margins and a 16.7% increase in our Adjusted FFO per share. Additionally, we took several steps toward our goal of gradually delevering our balance sheet while improving the quality and scale of our portfolio. During the quarter, we repaid one mortgage, and we announced the pending sale of a highly levered hotel as well as the equity-funded acquisitions of two high-quality, unlevered urban hotels. We will continue to pursue high-quality acquisitions using our shares as currency when such acquisitions can be executed at attractive relative valuations.”
Mr. Cruse continued, “Looking ahead, we continue to build a solid base for future growth. On a same-store basis, our managers booked more group room nights in the second quarter 2012 than in any other second quarter over the past five years. In spite of difficult macroeconomic conditions, lodging industry fundamentals remain highly constructive, with capital costs and supply trends at record lows, and demand for lodging approaching record highs. Accordingly, we continue to believe the U.S. lodging industry is in the first half of a prolonged growth phase and we remain focused on delivering industry leading stockholder returns through the continued execution of our balanced business plan.”
(1) Comparable Hotel RevPAR and
Comparable Hotel EBITDA Margin
information presented reflect the
Company’s Comparable 31 Hotel
Portfolio, which includes all
hotels in which the Company has
interests as of June 30, 2012,
excluding the Marriott Del Mar,
which has been classified as held
for sale and included in
discontinued operations due to its
probable sale within the next
year, and the Hyatt Chicago
Magnificent Mile, which is
currently experiencing material
and prolonged business
interruption due to rebranding and
renovation. Comparable Hotel
EBITDA Margin information excludes
current and prior year real estate
tax credits or assessments. The
Comparable 31 Hotel Portfolio also
includes prior ownership results
as applicable in 2011 for the
Doubletree Guest Suites Times
Square acquired by the Company in
January 2011, the JW Marriott New
Orleans acquired by the Company in
February 2011 and the Hilton San
Diego Bayfront acquired by the
Company in April 2011.
SELECTED FINANCIAL DATA
($ in millions, except RevPAR and per share amounts)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
——— ——
2012 2011 % Change 2012 2011 % Change
—— —— - —— —— -
Total Revenue $237.8 $214.6 10.8% $438.9 $369.9 18.6%
Comparable Hotel
RevPAR $142.82 $132.77 7.6% $130.37 $122.30 6.6%
Comparable Hotel
Occupancy 80.7% 77.9% 280 bps 77.3% 73.8% 350 bps
Comparable Hotel
ADR $176.98 $170.44 3.8% $168.66 $165.72 1.8%
Comparable Hotel
EBITDA Margin 32.6% 31.5% 110 bps 28.9% 27.7% 120 bps
Net income (loss) $11.9 $38.9 $(1.1) $90.3
Income available
(loss
attributable) to
common
stockholders $4.1 $31.1 $(16.9) $76.8
Income available
(loss
attributable) to
common
stockholders per
diluted share $0.03 $0.27 $(0.14) $0.66
EBITDA $67.4 $92.2 $109.1 $190.3
Adjusted EBITDA $71.1 $63.7 $114.3 $96.1
FFO $38.7 $49.7 $51.6 $124.5
Adjusted FFO $42.1 $35.3 $55.8 $43.9
FFO per diluted
share (1) $0.32 $0.42 $0.43 $1.06
Adjusted FFO per
diluted share
(1) $0.35 $0.30 $0.47 $0.37
(1) Reflects the Series C
convertible preferred stock on
a “non-converted” basis. On an
“as-converted” basis, FFO per
diluted share is $0.32 and
$0.42, respectively, for the
three months ended June 30,
2012 and 2011, and $0.44 and
$1.05, respectively, for the
six months ended June 30, 2012
and 2011. On an “as-converted”
basis, Adjusted FFO per diluted
share is $0.35 and $0.30,
respectively, for the three
months ended June 30, 2012 and
2011, and $0.48 and $0.39,
respectively, for the six
months ended June 30, 2012 and
2011.
Disclosure regarding the non-GAAP financial measures in this release is included on pages 5 and 6. Reconciliations of non-GAAP financial measures to the most comparable GAAP measure for each of the periods presented are included on pages 9 through 13 of this release.
The Company’s actual results for the quarter ended June 30, 2012 compare to its prior guidance as follows:
Metric Quarter Ended June 30, 2012 Impact of Acquisition /Equity Adjusted Quarter Ended June 30, Quarter Ended June 30, 2012 Actual Performance Relative to Adjusted
Guidance (1) Issuances (2) 2012 Guidance(3) Guidance Midpoint
——— ——— -—-—————
Comparable Hotel
RevPAR +5.5% - 7.5% - +5.5% - 7.5% +7.6% +1.1%
Net Income ($
millions) $8 - $11 $0.6 $9 - $12 $11..9 +$1.4
Adjusted EBITDA
($ millions) $65 - $68 $0.9 $66 - $69 $71..1 +$3.6
Adjusted FFO ($
millions) $36 - $39 $0.9 $37 - $40 $42..1 +$3.6
Adjusted FFO per
diluted share $0.30 - $0.33 - $0.30 - $0.33 $0.35 +$0.04
Diluted Weighted
Average Shares
Outstanding 117,600,000 2,200,000 119,800,000 120,257,000 +457,000
— —— — —— —— -
(1) Reflects
guidance
presented on
May 2, 2012.
Reflects
supplemental
financial
data
presented in
transaction
press
releases
dated June
6, 2012 and
June 19,
(2) 2012.
Reflects
guidance
presented on
May 2, 2012
adjusted for
acquisition
and equity
(3) issuances.
Acquisitions Update
On July 19, 2012, the Company completed the previously announced acquisition of the 357-room Hilton Garden Inn Chicago Downtown/Magnificent Mile for a gross purchase price of $91.75 million. The acquisition was funded with a portion of the proceeds received from the Company’s public offering of 12.1 million shares of its common stock (including the underwriter’s exercise of its overallotment option).
On June 4, 2012, the Company completed the previously announced acquisition of the 417-room Wyndham Chicago, which the Company rebranded the Hyatt Chicago Magnificent Mile. The contractual purchase price of $88.425 million consisted of a combination of cash and 5.5 million shares of the Company’s common stock initially valued at $58.425 million ($10.71/share). Based on the $9.38 closing price of the Company’s common stock on the NYSE on June 4, 2012, the total purchase price of the Wyndham Chicago hotel for accounting purposes was $81.16 million, which was funded with $29.7 million of cash on hand (including $0.3 million of proration credits) and the Company’s common stock valued at $51.16 million, issued directly to the seller, the Blackstone Group.
Disposition Update
On June 6, 2012, the Company announced it had entered into a purchase-and-sale agreement to sell the 284-room Marriott Del Mar for a contractual purchase price of $66.0 million ($232,000/key). The sale of the hotel is subject to the buyer’s assumption of the existing $47.2 million mortgage. The Company and the buyer are working to finalize the assumption with the loan’s special servicer and expect to finalize the sale and loan assumption during the third quarter of 2012.
Balance Sheet/Liquidity Update
On April 26, 2012, the Company used existing cash to repay its $32.2 million non-recourse mortgage secured by the Renaissance Long Beach, which was scheduled to mature on July 1, 2012.
On June 25, 2012, the Company completed a public offering of 12.1 million shares of its common stock (including the underwriter’s exercise of its overallotment option) for total net proceeds of approximately $126.2 million. A portion of the proceeds from this offering were used to acquire the Hilton Garden Inn Chicago Downtown/Magnificent Mile. The remaining proceeds will be used for potential future acquisitions, capital investment in the Company’s portfolio, including the renovation of the Hyatt Chicago Magnificent Mile, and other general corporate purposes, including working capital.
As of June 30, 2012, the Company had approximately $277.9 million of cash and cash equivalents, including restricted cash of $73.3 million. As noted above, the Company used approximately $91.75 million of its unrestricted cash to purchase the Hilton Garden Inn Chicago Downtown/Magnificent Mile on July 19, 2012.
As of June 30, 2012, the Company had total assets of approximately $3.2 billion, including $2.8 billion of net investments in hotel properties, total consolidated debt related to continuing operations of $1.5 billion and stockholders’ equity of $1.4 billion.
John Arabia, Chief Financial Officer, stated, “We continue to make meaningful progress towards our stated goals of reducing leverage in a shareholder friendly manner and maintaining strong liquidity, while, at the same time, growing our portfolio’s quality and scale. Since January 2011, we have improved our leverage ratio though a combination of highly equitized acquisitions and the repayment or elimination of approximately $221 million of debt, including debt secured by the Marriott Del Mar which will be eliminated upon the hotel’s anticipated sale during the third quarter of 2012. Our liquidity is strong, our near-term debt maturities are few, and we have several avenues in which to achieve our stated goals of reducing leverage and creating shareholder value.”
Capital Improvements
The Company invested $26.7 million in capital improvements into its portfolio during the second quarter of 2012, and $48.5 million during the six months ended June 30, 2012.
2012 Outlook
Achievement of the Company’s anticipated results is subject to risks and uncertainties, including those disclosed in the Company’s filings with the Securities and Exchange Commission. The Company’s guidance includes the Company’s ownership period for all 2012 acquisitions and dispositions and does not take into account the impact of any future hotel acquisitions, dispositions, re-brandings or management change transition costs, prior-year property tax assessments and/or credits, potential income tax expense if the Company elects to apply net operating loss carryforwards, debt repurchases or financings during 2012.
For the third quarter of 2012, the Company expects:
Metric Quarter Ended September 30, 2012
Guidance
——— ——
Comparable Hotel RevPAR +3% - 5%
Net Income ($ millions) $1 - $4
Adjusted EBITDA ($ millions) $57 - $60
Adjusted FFO ($ millions) $28 - $31
Adjusted FFO per diluted share $0.20 - $0.23
Diluted Weighted Average Shares
Outstanding 135,700,000
—- ——
For the full year 2012, the Company expects:
Metric Prior 2012 FY Guidance (1) Impact of Acquisitions /Dispositions Adjusted Prior 2012 FY Guidance (3) Current 2012 FY Guidance Change to Adjusted Guidance
/Equity Issuances (2) Midpoint
——— —— —- ———
Comparable Hotel
RevPAR +5% - 7% - +5% - 7% +5% - 7% +0%
Net Income ($
millions) $4 - $13 $3.9 $8 - $17 $15 - $22 +$6.0
Adjusted EBITDA
($ millions) $229 - $238 $5.5 $235 - $244 $239 - $245 +$2.5
Adjusted FFO ($
millions) $113 - $122 $6.8 $120 - $129 $123 - $130 +$2.0
Adjusted FFO per
diluted share $0.96 - $1.04 ($0.02) - ($0.03) $0.94 - $1.01 $0.97 - $1.02 +$0.02
Diluted Weighted
Average Shares
Outstanding 117,800,000 10,100,000 127,900,000 127,900,000 -
— —— —- —— —— —-
(1) Reflects guidance presented on
May 2, 2012.
(2) Reflects supplemental financial
data presented in transaction
press releases dated June 6,
2012 and June 19, 2012.
(3) Reflects guidance presented on
May 2, 2012 adjusted for
acquisitions, dispositions, and
equity issuances.
Third-quarter and full-year 2012 guidance is also based on the following assumptions:
— Full-year capital investment of $85 to $100 million, including the $25
million renovation of the Renaissance Washington DC.
— Hotel revenue renovation disruption of $3 to $5 million, primarily in
the third and fourth quarters.
— Third-quarter RevPAR guidance assumes that hotel revenue renovation
disruption will negatively impact third-quarter RevPAR growth by 100 to
150 basis points.
— Full-year comparable Hotel EBITDA Margins to increase by 75 to 125 basis
points.
— Full-year corporate overhead expense (excluding stock amortization and
one-time expenses related to future acquisition closing costs) of $19 to
$20 million.
— Full-year interest expense of approximately $83 to $85 million,
including $4 million in amortization of deferred financing fees.
— Full-year preferred dividends (Series A, C and D) of approximately $30
million.
Dividend Update
On August 2, 2012, the Company’s Board of Directors declared a cash dividend of $0.50 per share payable to its Series A and Series D 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 or before October 15, 2012 to stockholders of record on September 30, 2012. No dividend was declared on the Company’s common stock, as the Company intends to deploy excess cash flow from operations toward internal renovation investments and gradual deleveraging.
Subject to certain limitations, the Company intends to make dividends on its stock in amounts equivalent to 100% of its annual taxable income, which may be reduced through the application of net operating loss carryforwards. The level of any future dividends will be determined by the Company’s Board of Directors after considering taxable income projections, expected capital requirements, risks affecting the Company’s business and in context of the Company’s leverage-reduction initiatives. As a result, common stock dividends may be made in the form of cash or a combination of cash and stock consistent with Internal Revenue Service guidelines.
Supplemental Disclosures
Contemporaneous with this release, the Company has furnished a Form 8-K with unaudited financial information. This additional information is being provided as a supplement to information prepared in accordance with generally accepted accounting principles. The Company undertakes no obligation to update any of the information provided to conform to actual results or changes in the Company’s portfolio, capital structure or future expectations.
Earnings Call
The Company will host a conference call to discuss second quarter results on August 3, 2012, at 12:00 p.m. EDT (9:00 a.m. PDT). A live web cast of the call will be available via the Investor Relations section of the Company’s website. Alternatively, investors may dial 1-800-762-8779 (for domestic callers) or 1-480-629-9645 (for international callers). A replay of the web cast will also be archived on the website.
About Sunstone Hotel Investors, Inc.
Sunstone Hotel Investors, Inc. (“Sunstone”) is a lodging real estate investment trust (“REIT”) that, as of August 2, 2012, has interests in 33 hotels held for investment comprised of 13,698 rooms. Sunstone’s hotels are primarily in the upper upscale segment and are generally operated under nationally recognized brands, such as Marriott, Hilton, Hyatt, Fairmont and Sheraton. For further information, please visit Sunstone’s website at http://www.sunstonehotels.com.
Sunstone’s mission is to create meaningful value for our stockholders by becoming the premier hotel owner. Our values include transparency, trust, ethical conduct, communication and discipline. We seek to employ a balanced, cycle-appropriate corporate strategy that encompasses the following:
— Proactive portfolio management;
— Intensive asset management;
— Disciplined external growth; and
— Measured balance sheet improvement.
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 August 2, 2012, 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: Earnings Before Interest Expense, Taxes, Depreciation and Amortization, or EBITDA; Adjusted EBITDA (as defined below); Funds From Operations, or FFO; Adjusted FFO (as defined below); and comparable and pro forma hotel EBITDA and comparable and pro forma hotel EBITDA margin.
EBITDA represents net income (loss) excluding: non-controlling interests; interest expense; provision for income taxes, including income taxes applicable to sale of assets; and depreciation and amortization. In addition, we have presented Adjusted EBITDA, which excludes: amortization of deferred stock compensation; the impact of any gain or loss from asset sales; impairment charges; and any 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 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. A reconciliation of net income (loss) to EBITDA and Adjusted EBITDA is set forth on page 9. A reconciliation and the components of comparable and pro forma hotel EBITDA and comparable and pro forma hotel EBITDA margin are set forth on pages 12 and 13. We believe comparable and pro forma hotel EBITDA and comparable 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 net income (loss) (computed in accordance with GAAP), excluding non-controlling interests, gains and losses from sales of property, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs) and real estate-related impairment losses, and after adjustment for unconsolidated partnerships and joint ventures. We also present Adjusted FFO, which excludes penalties, written-off deferred financing costs, non-real estate-related impairment losses and any 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. A reconciliation of net income (loss) to FFO and Adjusted FFO is set forth on page 9.
The revenue and expense items associated with our commercial laundry facility, BuyEfficient and other miscellaneous non-hotel items have been excluded in presenting comparable and pro forma hotel EBITDA margins. Management believes the calculation of comparable and pro forma hotel EBITDA results in a more accurate presentation of hotel EBITDA margins of the Company’s 31 comparable hotels and 33 pro forma hotels. See pages 12 and 13 for a reconciliation of comparable and pro forma hotel EBITDA to the most comparable GAAP measure. Our 31 comparable hotels include all hotels in which the Company has interests as of June 30, 2012, excluding the Marriott Del Mar, which has been classified as held for sale and included in discontinued operations due to its probable sale within the next year, and the Hyatt Chicago Magnificent Mile, which is currently experiencing material and prolonged business interruption due to rebranding and renovation, plus prior ownership results as applicable in 2011 for the Doubletree Guest Suites Times Square acquired by the Company in January 2011, the JW Marriott New Orleans acquired by the Company in February 2011, and the Hilton San Diego Bayfront acquired by the Company in April 2011. Our 33 pro forma hotels include the 31 comparable hotels, plus the Company’s ownership as applicable and prior ownership for the Hyatt Chicago Magnificent Mile acquired by the Company in June 2012 and the Hilton Garden Inn Chicago Downtown/Magnificent Mile acquired by the Company in July 2012.
We caution investors that amounts presented in accordance with our definitions of EBITDA, Adjusted EBITDA, FFO, Adjusted FFO, comparable and pro forma hotel EBITDA and comparable 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, comparable and pro forma hotel EBITDA and comparable 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, comparable and pro forma hotel EBITDA and comparable 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, comparable and pro forma hotel EBITDA and comparable 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.
For Additional Information:
Bryan Giglia
Senior Vice President - Corporate Finance
Sunstone Hotel Investors, Inc.
(949) 382-3036
Sunstone Hotel Investors, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
June 30, December 31,
2012 2011
—— ——
(unaudited)
Assets
Current assets:
Cash and cash equivalents $204,549 $150,533
Restricted cash 73,306 66,230
Accounts receivable, net 36,259 32,127
Inventories 2,666 2,608
Prepaid expenses 9,382 10,189
Investment in hotel property of discontinued operations, net 39,122 38,958
Other current assets of discontinued operations, net 2,861 2,223
Total current assets 368,145 302,868
Investment in hotel properties, net 2,810,409 2,738,868
Other real estate, net 12,057 11,859
Deferred financing fees, net 12,622 14,594
Goodwill 13,088 13,088
Other assets, net 20,083 19,963
Total assets $3,236,404 $3,101,240
========== ==========
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses $25,509 $26,800
Accrued payroll and employee benefits 18,662 20,863
Due to Third-Party Managers 9,252 9,227
Dividends payable 7,437 7,437
Other current liabilities 37,474 28,177
Current portion of notes payable 78,912 53,325
Note payable of discontinued operations 47,159 47,460
Other current liabilities of discontinued operations 224 342
Total current liabilities 224,629 193,631
Notes payable, less current portion 1,396,980 1,469,692
Capital lease obligations, less current portion 15,636 -
Other liabilities 13,810 12,623
Total liabilities 1,651,055 1,675,946
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 June 30, 2012 and December 31, 2011, liquidation
preference of $24.375 per share 100,000 100,000
Equity:
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 June 30, 2012 and December 31, 2011,
stated at liquidation preference of $25.00 per share 176,250 176,250
8.0% Series D Cumulative Redeemable Preferred Stock,
4,600,000 shares issued and outstanding at June 30, 2012 and December 31, 2011,
stated at liquidation preference of $25.00 per share 115,000 115,000
Common stock, $0.01 par value, 500,000,000 shares authorized,
135,229,303 shares issued and outstanding at June 30, 2012 and
117,265,090 shares issued and outstanding at December 31, 2011 1,352 1,173
Additional paid in capital 1,491,639 1,312,566
Retained earnings 108,600 110,580
Cumulative dividends (460,270) (445,396)
Accumulated other comprehensive loss (4,799) (4,916)
Total stockholders’ equity 1,427,772 1,265,257
Non-controlling interest in consolidated joint ventures 57,577 60,037
Total equity 1,485,349 1,325,294
— —
Total liabilities and equity $3,236,404 $3,101,240
========== ==========
Sunstone Hotel Investors, Inc.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
——— ——
2012 2011 2012 2011
—— —— —— ——
Revenues
Room $164,398 $148,140 $298,536 $252,451
Food and beverage 56,202 49,786 106,534 87,820
Other operating 17,240 16,648 33,803 29,654
Total revenues 237,840 214,574 438,873 369,925
Operating expenses
Room 38,958 35,296 75,806 63,809
Food and beverage 37,169 35,136 72,908 63,855
Other operating 6,618 6,101 13,412 11,943
Advertising and promotion 11,135 10,190 22,043 18,589
Repairs and maintenance 8,642 8,080 17,090 15,171
Utilities 6,845 7,089 13,998 13,797
Franchise costs 8,320 7,396 14,967 12,558
Property tax, ground lease and insurance 18,338 14,316 34,851 28,092
Property general and administrative 26,565 24,515 51,256 44,031
Corporate overhead 7,686 6,305 12,983 13,958
Depreciation and amortization 34,793 32,287 69,079 58,155
Total operating expenses 205,069 186,711 398,393 343,958
Operating income 32,771 27,863 40,480 25,967
Equity in earnings of unconsolidated joint ventures - - - 21
Interest and other income 74 1,319 137 1,427
Interest expense (20,873) (20,462) (41,691) (37,560)
Loss on extinguishment of debt - - (191) -
Gain on remeasurement of equity interests - - - 69,230
—- —- —- ———
Income (loss) from continuing operations 11,972 8,720 (1,265) 59,085
Income (loss) from discontinued operations (117) 30,209 152 31,179
Net income (loss) 11,855 38,929 (1,113) 90,264
Income from consolidated joint venture attributable to non-controlling interest (307) (244) (867) (244)
Distributions to non-controlling interest (8) (7) (16) (14)
Preferred stock dividends (7,437) (7,310) (14,874) (12,447)
Undistributed income allocated to unvested restricted stock compensation (47) (291) - (717)
Income available (loss attributable) to common stockholders $4,056 $31,077 $(16,870) $76,842
====== ======= ======== =======
Basic per share amounts:
Income (loss) from continuing operations available (attributable) to common stockholders $0.03 $0.01 $(0.14) $0.39
Income from discontinued operations - 0.26 - 0.27
—- —— —- ——
Basic income available (loss attributable) to common stockholders per common share $0.03 $0.27 $(0.14) $0.66
===== ===== ====== =====
Diluted per share amounts:
Income (loss) from continuing operations available (attributable) to common stockholders $0.03 $0.01 $(0.14) $0.39
Income from discontinued operations - 0.26 0.00 0.27
—- —— —— ——
Diluted income available (loss attributable) to common stockholders per common share $0.03 $0.27 $(0.14) $0.66
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Weighted average common shares outstanding:
Basic 120,029 117,227 118,728 117,151
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Diluted 120,029 117,227 118,728 117,151
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Sunstone Hotel Investors, Inc.
Reconciliation of Net Income (Loss) to Non-GAAP Financial Measures
(Unaudited and in thousands, except per share amounts)
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
Three Months Ended Six Months Ended
June 30, June 30,
- -
2012 2011 2012 2011
—— —— —— ——
Net income (loss) $11,855 $38,929 $(1,113) $90,264
Operations held for investment:
Depreciation and amortization 34,793 32,287 69,079 58,155
Amortization of lease intangibles 1,028 992 2,056 1,922
Interest expense 19,230 18,432 38,743 34,616
Amortization of deferred financing fees 959 809 1,922 1,418
Write-off of deferred financing fees 3 - 3 -
Non-cash interest related to discount on Senior Notes 258 261 524 522
Non-cash interest related to loss on derivatives 423 960 499 1,004
Non-controlling interests:
Income from consolidated joint venture attributable (307) (244) (867) (244)
to non-controlling interest
Depreciation and amortization (1,420) (1,184) (2,839) (1,184)
Interest expense (567) (456) (1,137) (456)
Amortization of deferred financing fees (56) (47) (112) (47)
Non-cash interest related to loss on derivative - (28) (1) (28)
Unconsolidated joint ventures:
Depreciation and amortization - - - 3
Discontinued operations:
Depreciation and amortization 495 630 965 2,677
Amortization of lease intangibles 7 7 14 14
Interest expense 680 845 1,361 1,684
Amortization of deferred financing fees 3 6 7 13
EBITDA 67,384 92,199 109,104 190,333
——— ———
Operations held for investment:
Amortization of deferred stock compensation 896 929 1,842 1,473
Non-cash straightline lease expense 693 766 1,389 1,006
Capital lease obligation interest - cash ground rent (117) - (117) -
Gain on sale of assets - (56) (11) (56)
Loss on extinguishment of debt - - 191 -
Gain on remeasurement of equity interests - - - (69,230)
Lawsuit settlement costs 255 - 110 -
Closing costs - completed acquisitions 1,339 633 1,375 3,372
Prior year property tax assessments 1,061 - 1,061 -
Non-controlling interests:
Non-cash straightline lease expense (113) (129) (226) (129)
Prior year property tax assessments (265) - (265) -
Unconsolidated joint ventures:
Amortization of deferred stock compensation - - - 2
Discontinued operations:
Gain on sale of assets - (14,018) (177) (14,018)
Impairment loss - 1,495 - 1,495
Gain on extinguishment of debt - (18,145) - (18,145)
3,749 (28,525) 5,172 (94,230)
——- ——-
Adjusted EBITDA $71,133 $63,674 $114,276 $96,103
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Reconciliation of Net Income (Loss) to FFO and Adjusted FFO
Net income (loss) $11,855 $38,929 $(1,113) $90,264
Preferred stock dividends (7,437) (7,310) (14,874) (12,447)
Operations held for investment:
Real estate depreciation and amortization 34,494 31,987 68,473 57,578
Amortization of lease intangibles 1,028 992 2,056 1,922
Gain on sale of assets - (56) (11) (56)
Non-controlling interests:
Income from consolidated joint venture attributable to non-controlling interest (307) (244) (867) (244)
Real estate depreciation and amortization (1,420) (1,184) (2,839) (1,184)
Discontinued operations:
Real estate depreciation and amortization 495 630 965 2,677
Amortization of lease intangibles 7 7 14 14
Gain on sale of assets - (14,018) (177) (14,018)
FFO 38,715 49,733 51,627 124,506
——— ——— ———
Operations held for investment:
Non-cash straightline lease expense 693 766 1,389 1,006
Write-off of deferred financing fees 3 - 3 -
Non-cash interest related to loss on derivatives 423 960 499 1,004
Loss on extinguishment of debt - - 191 -