ALISO
VIEJO, Calif., Oct. 26,
2023 /PRNewswire/ -- Sunstone Hotel Investors, Inc.
(the "Company" or "Sunstone") (NYSE: SHO) today announced that it
has completed the sale of the 1,060-room Boston Park Plaza (the
"Hotel") for a gross sale price of $370
million, or approximately $350,000 per key. The sale price represents a
12.1x multiple on Hotel Adjusted EBITDAre and a 7.1% cap
rate on Hotel Net Operating Income for the trailing four quarter
period ended June 30, 2023. The
Company acquired the Hotel in 2013 and successfully executed a
business plan to reinvigorate the well-located historic hotel. Over
the course of the Company's ownership period, the Hotel's annual
earnings nearly doubled and the Hotel generated cumulative Hotel
Adjusted EBITDAre of approximately $210 million. Based on the timing of the prior
renovation, the Company anticipates that the Hotel will require
significant additional investment to maintain its competitive
position and sustain its current level of earnings. Inclusive of
the Company's estimate of required near-term capital expenditures,
the gross sale price presents a 14.1x multiple on Hotel Adjusted
EBITDAre and a 6.1% cap rate on Hotel Net Operating Income
for the trailing four quarter period ended June 30, 2023. The Company is evaluating
opportunities to reinvest the net proceeds from the sale through a
tax deferred exchange. If an exchange is not completed, the Company
can utilize existing tax attributes to offset the gain resulting
from the sale and retain the net proceeds for future investment.
The Company will provide additional details regarding the
disposition, including the expected impact on the Company's fourth
quarter operating results, as part of its upcoming quarterly
earnings release in early November.
Bryan Giglia, Chief Executive
Officer, stated, "We are pleased to announce the disposition of
Boston Park Plaza. This has been a successful allocation of capital
for Sunstone and the sale is consistent with our strategy to
actively harvest value and recycle proceeds into new opportunities
that will provide superior risk-adjusted returns. Our completed
investment in Boston Park Plaza further demonstrates our ability to
create value from repositioning and to realize that value through
the disposition and ultimately, the redeployment of those proceeds.
Boston remains a dynamic and
attractive lodging market and we will continue to benefit from
exposure to the city through our ownership of the Marriott Boston
Long Wharf. Consistent with our strategy to actively recycle
capital based on our investment lifecycle approach, we are
currently evaluating opportunities to reinvest the sales proceeds
into assets that will provide our investors with higher growth,
superior returns, and greater per-share NAV growth."
About Sunstone Hotel Investors
Sunstone Hotel Investors, Inc. is a lodging real estate
investment trust ("REIT"). Sunstone's strategy is to create
long-term stakeholder value through the acquisition, active
ownership, and disposition of hotels considered to be Long-Term
Relevant Real Estate®. For further information, please visit
Sunstone's website at www.sunstonehotels.com. The Company's website
is provided as a reference only and any information on the website
is not incorporated by reference in this release.
For Additional Information
Aaron Reyes
Chief Financial Officer
Sunstone Hotel Investors, Inc.
(949) 382-3018
Forward-Looking Statements
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 opinions, 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: we own upper upscale and luxury hotels in an
industry that is highly competitive; events beyond our control,
including economic slowdowns or recessions, pandemics such as those
caused by COVID-19 and its variants, natural disasters, civil
unrest and terrorism; rising hotel operating costs, including
wages, employee-related benefits, food costs, commodity costs,
including those used to renovate or reposition our hotels, property
taxes, property and liability insurance and utilities may not be
offset by increased room rates; system security risks, data
protection breaches, cyber-attacks and systems integration issues,
including those impacting the Company's suppliers, hotel managers
or franchisors; a significant portion of our hotels are
geographically concentrated so we may be harmed by economic
downturns or natural disasters in these areas of the country; we
face possible risks associated with the physical and transitional
effects of climate change; uninsured or underinsured losses could
harm our financial condition; the operating results of some of our
hotels are significantly reliant upon group and transient business
generated by large corporate customers, and the loss of such
customers for any reason could harm our operating results; the
increased use of virtual meetings and other similar technologies
could lessen the need for business-related travel, and, therefore,
demand for rooms in our hotels may be adversely affected; our
hotels have an ongoing need for capital investment and we may incur
significant capital expenditures in connection with acquisitions,
repositionings and other improvements, some of which are mandated
by applicable laws or regulations or agreements with third parties,
and the costs of such renovations, repositionings or improvements
may exceed our expectations or cause other problems; delays in the
acquisition, renovation or repositioning of hotel properties may
have adverse effects on our results of operations and returns to
our stockholders; accounting for the acquisition of a hotel
property or other entity involves assumptions and estimations to
determine fair value that could differ materially from the actual
results achieved in future periods; volatility in the debt and
equity markets may adversely affect our ability to acquire,
renovate, refinance or sell our hotels; we may pursue joint venture
investments that could be adversely affected by our lack of sole
decision-making authority, our reliance on a co-venturer's
financial condition and disputes between us and our co-venturer; we
may be subject to unknown or contingent liabilities related to
recently sold or acquired hotels, as well as hotels we may sell or
acquire in the future; we may seek to acquire a portfolio of hotels
or a company, which could present more risks to our business and
financial results than the acquisition of a single hotel; the sale
of a hotel or portfolio of hotels is typically subject to
contingencies, risks and uncertainties, any of which may cause us
to be unsuccessful in completing the disposition; the illiquidity
of real estate investments and the lack of alternative uses of
hotel properties could significantly limit our ability to respond
to adverse changes in the performance of our hotels; we may issue
or invest in hotel loans, including subordinated or mezzanine
loans, which could involve greater risks of loss than senior loans
secured by income-producing real properties; if we make or invest
in mortgage loans with the intent of gaining ownership of the hotel
secured by or pledged to the loan, our ability to perfect an
ownership interest in the hotel is subject to the sponsor's
willingness to forfeit the property in lieu of the debt; one of our
hotels is subject to a ground lease with an unaffiliated party, the
termination of which by the lessor for any reason, including due to
our default on the lease, could cause us to lose the ability to
operate the hotel altogether and may adversely affect our results
of operations; because we are a REIT, we depend on third-parties to
operate our hotels; we are subject to risks associated with our
operators' employment of hotel personnel; most of our hotels
operate under a brand owned by Marriott, Hilton, Hyatt, Four
Seasons or Montage. Should any of these brands experience a
negative event, or receive negative publicity, our operating
results may be harmed; our franchisors and brand managers may adopt
new policies or change existing policies which could result in
increased costs that could negatively impact our hotels; future
adverse litigation judgments or settlements resulting from legal
proceedings could have an adverse effect on our financial
condition; claims by persons regarding our properties could affect
the attractiveness of our hotels or cause us to incur additional
expenses; the hotel business is seasonal and seasonal variations in
business volume at our hotels will cause quarterly fluctuations in
our revenue; changes in the debt and equity markets may adversely
affect the value of our hotels; certain of our hotels have in the
past become impaired and additional hotels may become impaired in
the future; laws and governmental regulations may restrict the ways
in which we use our hotel properties and increase the cost of
compliance with such regulations. Noncompliance with such
regulations could subject us to penalties, loss of value of our
properties or civil damages; corporate responsibility, specifically
related to ESG factors and commitments, may impose
additional costs and expose us to new risks that could adversely
affect our results of operations, financial condition and cash
flows; our franchisors and brand managers may require us to make
capital expenditures pursuant to property improvement plans or to
comply with brand standards; termination of any of our franchise,
management or operating lease agreements could cause us to lose
business or lead to a default or acceleration of our obligations
under certain of our debt instruments; the growth of alternative
reservation channels could adversely affect our business and
profitability; the failure of tenants in our hotels to make rent
payments under our retail and restaurant leases may adversely
affect our results of operations; we rely on our corporate and
hotel senior management teams, the loss of whom may cause us to
incur costs and harm our business; if we fail to maintain effective
internal control over financial reporting and disclosure controls
and procedures, we may not be able to accurately report our
financial results; we have outstanding debt which may restrict our
financial flexibility; certain of our debt is subject to variable
interest rates, which can create uncertainty in forecasting our
interest expense and may negatively impact our operating results;
and other risks and uncertainties associated with the Company's
business described in its 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 provided herein is as of
the date of this release, 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 together 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 www.sunstonehotels.com and through the
SEC's Electronic Data Gathering Analysis and Retrieval System
("EDGAR") at www.sec.gov.
Non-GAAP Financial Measures
In presenting Hotel Adjusted EBITDAre and Hotel Net
Operating Income, miscellaneous non-hotel items have been excluded.
In addition, Hotel Net Operating Income includes a deduction for
the hotel's contribution to its reserve for capital expenditures.
We believe the calculation of these non-GAAP financial measures
provides useful information to investors in determining the value
of hotel dispositions.
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SOURCE Sunstone Hotel Investors, Inc.