Sunstone Hotel Investors, Inc. (NYSE:SHO) announced that on June 29, 2007, it completed the sale of six non-core hotels for gross proceeds of $150.5 million, or approximately 10.7x projected 2007 EBITDA (reconciliation to net income below), to affiliates of DLJ Real Estate Partners. The sold hotels include the following properties:
Property Location # of Rooms
Hilton Garden Inn Lake Oswego, OR 179
Courtyard Oxnard, CA 166
Residence Inn Oxnard, CA 251
Courtyard Riverside, CA 163
Residence Inn Sacramento, CA 126
Hawthorn Suites Sacramento, CA 272
Total Portfolio 1,157
Steve Goldman, Chief Executive Officer, stated, "The sale of these six hotels is consistent with our strategy of recycling capital from smaller, slower growth assets located in secondary and tertiary markets, into larger scale hotels with higher long term yield potential. This transaction will allow management to concentrate its efforts on a core group of large assets, which will more directly impact cash flows. By employing a 'like-kind exchange' structure with assets we acquired earlier this year, we were able to defer substantial gains on the sale of these assets."
Goldman added, "Over the past two years, Sunstone has sold 26 hotels with an average of 194 rooms per hotel, and has acquired 100% ownership in 16 hotels with an average of 462 rooms per hotel. Additionally, by the end of 2007, we will have invested approximately $300 million into our existing portfolio. As a result, we have transformed Sunstone's portfolio from a collection of mid-level suburban assets into a collection of institutional quality hotels located in urban markets with high barriers to entry. We believe this strategy has positioned the Company for superior long-term growth."
Advertisement
Room Statistics Comparison
2005-2007
6 Hotel Portfolio(1) Acquisitions(2) Difference
(1) Reflects 6 hotel portfolio sold June 29, 2007.
(2) Reflects the 16 hotels acquired in 2005 - 2007 excluding Doubletree
Times Square joint venture.
(3) Room statistics reflect the period ended March 31, 2007.
Use of Proceeds
Net proceeds of approximately $141 million from this sale will be used to repay amounts outstanding under the Company's revolving credit facility and the balance of the net proceeds will be used for general corporate purposes. The Company's net proceeds may be affected by customary post-closing proration adjustments.
Impact on Third & Fourth Quarter 2007
The impact of this sale on the Company's projected earnings was contemplated in the full year guidance provided in the Company's earnings release dated May 2, 2007. For the quarter ending September 30, 2007, the six hotels represent approximately $3.9 million of projected EBITDA (reconciliation to net income below). For the quarter ending December 31, 2007, the six hotels represent approximately $3.4 million of projected EBITDA (reconciliation to net income below). The Company plans to give third quarter guidance and update full year guidance during its second quarter earnings call.
About Sunstone Hotel Investors, Inc.
Sunstone Hotel Investors, Inc. is a Southern California-based lodging real estate investment trust (REIT). The Company has interests in 47 hotels with an aggregate of 16,426 rooms primarily in the luxury and upper-upscale segments operated under nationally recognized brands such as Marriott, Hyatt, Hilton, Starwood and Fairmont.
Logos, product and company names mentioned are the property of their respective owners.
Continues Portfolio Transformation
