IRVINE, Calif., June 6, 2022— Sunstone Hotel Investors, Inc. (the “Company” or “Sunstone”) (NYSE: SHO), the owner of Long-Term Relevant Real Estate® in the lodging industry, today announced that it has completed the previously announced acquisition of the 339-room The Confidante Miami Beach (the “Hotel”) for a purchase price of $232 million, or $684,000 per key. The Company will invest approximately $60 million to reposition the Hotel into a premiere beachfront resort under Hyatt’s luxury, lifestyle Andaz brand. Upon completion of the renovation, Sunstone will own a well-located, fully renovated, beachfront resort at a highly attractive all-in basis. The Company expects the Hotel will generate an 8% to 9% stabilized net operating income yield on the total investment in the Hotel, including the planned repositioning. The renovation program will begin in phases, starting in the fourth quarter of 2022 with completion expected to occur in the first half of 2024 when the Hotel will debut as Andaz Miami Beach.
The Company expects the Hotel will generate $3.5 to $4.0 million of EBITDA during its ownership period in 2022. The acquisition was funded from available cash and with $140 million of proceeds received from the Company’s previously undrawn revolving credit facility. Together with the expected funding for the previously announced acquisition of the remaining 25% joint venture interest in the Hilton San Diego Bayfront which is expected to close by the end of June, the Company anticipates having an outstanding credit facility balance at the end of the second quarter of approximately $240 million. Based on the Company’s anticipated leverage ratio as of the end of the second quarter, borrowings on the credit facility are expected to bear interest at the rate of one-month LIBOR plus 1.50%.
Operations Update
The Company’s operations for April and May 2022 reflect accelerating hotel demand as compared to the first quarter of 2022. While leisure travel continues to be robust, the greatest demand growth is occurring at the Company’s urban and group-oriented hotels which are experiencing an increase in near-term booking activity, higher than expected attendance at group events, and increased business transient volume.
- Occupancy at the comparable 12 hotels the Company owned during both 2022 and 2019 (the “12 Hotel Comparable Portfolio”) has improved from down more than 2,800 bps as compared to 2019 in the first quarter of 2022 to down only 1,240 bps in Q2 2022 QTD.
- Average Daily Rate at the 12 Hotel Comparable Portfolio has exceeded 2019 levels in each month of 2022 and is higher by 11.3% so far in Q2 2022 QTD.
- As of April 30, 2022, group revenue pace for the 12 Hotel Comparable Portfolio for Q2 through Q4 2022 was down only 15% as compared to the same time in 2019, with average rates approximately 5% higher than in 2019.
- As of mid-May, the 12 Hotel Comparable Portfolio had 87% of the total transient room nights on-the-books for June to December as compared to the same time in 2019, with average rates approximately 31% higher than in 2019.
- In the second quarter 2019, the 12 Hotel Comparable Portfolio generated RevPAR of $229.50. Based on stronger demand acceleration in April and May, the Company currently anticipates that RevPAR at the 12 Hotel Comparable Portfolio for the second quarter 2022 will be down only 6% to 8% as compared to the second quarter of 2019.
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Operating statistics for the 12 Hotel Comparable Portfolio as of May 31, 2022 were as follows: |
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Occupancy |
ADR |
RevPAR |
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|
2022 |
Change vs. 2019 |
2022 |
Change vs. 2019 |
2022 |
Change vs. 2019 |
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|
April |
75.7 % |
(1,290) bps |
$ |
296.52 |
13.1 % |
$ |
224.47 |
(3.3) % |
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|
May (1) |
73.4 % |
(1,180) bps |
$ |
286.73 |
9.4 % |
$ |
210.46 |
(5.8) % |
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|
Q2 2022 QTD (1) |
74.5 % |
(1,240) bps |
$ |
291.62 |
11.3 % |
$ |
217.26 |
(4.6) % |
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|
2022 YTD (1) |
61.8 % |
(2,170) bps |
$ |
285.64 |
10.7 % |
$ |
176.53 |
(18.0) % |
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Operating statistics for all 14 hotels owned by the Company as of May 31, 2022 were as follows: |
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April 2022 |
May 2022 (1) |
Q2 2022 QTD (1) |
2022 YTD (1) |
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|
Occupancy |
75.3 % |
73.1 % |
74.2 % |
61.5 % |
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|
ADR |
$ |
319.81 |
$ |
314.41 |
$ |
317.11 |
$ |
309.07 |
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|
RevPAR |
$ |
240.82 |
$ |
229.83 |
$ |
235.30 |
$ |
190.08 |
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(1) Results for May 2022 are preliminary and may be adjusted during the month end closing process. Preliminary Q2 2022 QTD |
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Share Repurchase Update
Since the beginning of April through June 1, 2022, the Company has repurchased 1.9 million shares of its common stock at an average price of $11.01 per share for a total purchase price of $21.2 million. Year to date, the Company has repurchased 5.8 million shares of its common stock at an average price of $11.13 per share for a total purchase price of $64.6 million. The Company has $435.4 million remaining under its existing share repurchase authorization. The authorization has no stated expiration date and future repurchases will depend on various factors, including the Company’s capital availability and the price of the Company’s common stock. The Company will provide the details of future stock repurchase activity, if any, as part of its quarterly financial reporting.
