ALISO VIEJO, Calif., May 3, 2016 — Sunstone Hotel Investors, Inc. (the "Company" or "Sunstone") (NYSE: SHO) today announced results for the first quarter ended March 31, 2016.
First Quarter 2016 Operational Results (as compared to First Quarter 2015):
- Comparable Hotel RevPAR increased 1.5% to $143.67.
- Comparable Hotel Adjusted EBITDA Margin, excluding prior year property taxes and fees decreased 120 basis points to 24.7%. Excluding the impact related to the end of the ground lease abatement at the Hilton San Diego Bayfront, Comparable Hotel Adjusted EBITDA Margin, excluding prior year property taxes and fees would have decreased by 70 basis points.
- Adjusted EBITDA decreased 5.9% to $61.8 million.
- Adjusted FFO attributable to common stockholders per diluted share decreased 4.5% to $0.21.
- Loss attributable to common stockholders decreased 2.4% to $3.2 million.
- Loss attributable to common stockholders per diluted share remained flat at $0.02.
John Arabia, President and Chief Executive Officer, stated, "Our first quarter total portfolio RevPAR growth exceeded the low end of our guidance despite holiday calendar shifts and weak convention patterns in various markets that resulted in elevated levels of transient room rate discounting. However, Adjusted EBITDA and Adjusted FFO per share met or exceeded the top end of our guidance as a result of property-level cost controls and lower-than-anticipated corporate expenses. Looking forward, we continue to see mixed signals regarding hotel demand, and as a result, there is a higher level of uncertainty than is normally the case. While transient demand has been soft in several markets, our group trends generally remain healthy and point to a reacceleration of RevPAR growth in the second half of the year. Separately, we remain excited about the 2017 earnings contribution from our Boston Park Plaza and Marriott Wailea hotels, which are scheduled to complete their substantial repositionings by the end of the second and fourth quarters of 2016, respectively."
UNAUDITED SELECTED STATISTICAL AND FINANCIAL DATA ($ in millions, except RevPAR, ADR and per share amounts)
Three Months Ended March 31,
2016
2015
Change
Total Portfolio Hotel RevPAR
$
148.54
$
147.54
0.7 %
Comparable Hotel RevPAR
$
143.67
$
141.58
1.5 %
Comparable Hotel Occupancy
77.4 %
78.4 %
(100)bps
Comparable Hotel ADR
$
185.62
$
180.59
2.8 %
Comparable Hotel Adjusted EBITDA Margin
24.7 %
25.9 %
(120)bps
Net Income
$
1.2
$
1.2
Loss Attributable to Common Stockholders per Diluted Share
$
(0.02)
$
(0.02)
Adjusted EBITDA
$
61.8
$
65.7
Adjusted FFO Attributable to Common Stockholders
$
44.2
$
45.1
Adjusted FFO Attributable to Common Stockholders er Diluted Share
$
0.21
$
0.22
Disclosures regarding the non-GAAP financial measures in this release are included on pages 5 through 7. Reconciliations of non-GAAP financial measures to the most comparable GAAP measure for each of the periods presented are included on pages 10 through 14 of this release. Comparable Hotel Adjusted EBITDA Margin excludes prior year property taxes and fees.
The Company's actual results for the quarter ended March 31, 2016 compare to its guidance originally provided as follows:
Metric
Quarter Ended March 31, 2016 Guidance (1)
Adjustments (2)
Adjusted Prior First Quarter 2016 Guidance
Quarter Ended March 31, 2016 Actual Results (unaudited)
Performance Relative to Adjusted Prior Guidance Midpoint
Total Portfolio Hotel RevPAR Growth
+ 0.5% – 2.5%
–
+ 0.5% – 2.5%
0.7%
-0.8%
Comparable Hotel RevPAR Growth (3)
+ 1.5% – 3.5%
–
+ 1.5% – 3.5%
1.5%
-1.0%
Net Income ($ millions)
$4 – $7
–
$4 – $7
$1
-$5
Adjusted EBITDA ($ millions)
$58 – $61
$0.6
$59 – $62
$62
+$2
Adjusted FFO Attributable to Common Stockholders ($ millions)
$41 – $44
-$0.5
$41 – $44
$44
+$2
Adjusted FFO Attributable to Common Stockholders per Diluted Share
$0.19 – $0.21
–
$0.19 – $0.21
$0.21
+$0.01
Diluted Weighted Average Shares Outstanding
213,000,000
–
213,000,000
213,000,000
̶
(1)
Represents guidance presented on February 22, 2016.
(2)
Adjustments include the effects of 100% of the Company's deferred stock amortization expense, as well as the Company's issuance of 6.95% Series E Cumulative Redeemable Preferred Stock in March 2016.
(3)
Comparable Hotel RevPAR Growth excludes the Wailea Beach Marriott Resort & Spa due to the hotel's repositioning during 2016.
Recent Developments
On April 6, 2016, the Company redeemed all 4,600,000 shares of its Series D Cumulative Redeemable Preferred Stock at a price equal to $25.00 per share plus accrued and unpaid dividends, using proceeds received from its March 2016 issuance of 4,600,000 shares of Series E preferred stock. After the redemption date, the Company has no outstanding shares of Series D preferred stock, and all rights of the holders of such shares were terminated. Because the redemption of the Series D preferred stock was a redemption in full, trading of the Series D preferred stock on the New York Stock Exchange ceased on the April 6, 2016 redemption date.
Balance Sheet/Liquidity Update
As of March 31, 2016, the Company had approximately $465.0 million of cash and cash equivalents, including restricted cash of $68.3 million. Adjusting for the redemption of the Company's Series D preferred stock in April 2016, total pro forma unrestricted cash as of March 31, 2016 would be approximately $282.0 million.
As of March 31, 2016, the Company had total assets of $3.8 billion, including $3.2 billion of net investments in hotel properties, total consolidated debt of $1.1 billion and stockholders' equity of $2.5 billion.
Capital Improvements
The Company invested $48.8 million into capital improvements of its portfolio during the three months ended March 31, 2016. During the first quarter 2016, the Company incurred total revenue displacement of approximately $3.0 million between the Boston Park Plaza and the Wailea Beach Marriott Resort & Spa, which was slightly below expectations. In 2016, the Company expects to invest approximately $165.0 million to $180.0 million into its portfolio, with the majority of that investment going to complete its two repositionings at the Boston Park Plaza and the Wailea Beach Marriott Resort & Spa. The Company expects $14.0 million to $16.0 million of revenue displacement, and $10.5 million to $12.5 million of EBITDA displacement resulting from the completion of the Wailea Beach Marriott Resort & Spa repositioning, which is in-line with previous estimates. In addition to displacement at the Wailea Beach Marriott Resort & Spa, the Company expects $2.5 million to $3.5 million of revenue displacement resulting from the completion of the Boston Park Plaza repositioning, which is in-line with previous estimates.
