ALISO VIEJO, Calif., Aug. 8, 2016 — Sunstone Hotel Investors, Inc. (the "Company" or "Sunstone") (NYSE: SHO) today announced results for the second quarter ended June 30, 2016.
Second Quarter 2016 Operational Results (as compared to Second Quarter 2015):
- Net income increased 22.5% to $65.7 million.
- Income attributable to common stockholders per diluted share increased 13.0% to $0.26.
- Comparable Hotel RevPAR increased 1.3% to $179.65.
- Comparable Hotel Adjusted EBITDA Margin, excluding prior year property taxes, net decreased 70 basis points to 34.2%. 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, net would have decreased by 20 basis points.
- Adjusted EBITDA decreased 8.4% to $101.1 million.
- Adjusted FFO attributable to common stockholders per diluted share decreased 9.3% to $0.39.
John Arabia, President and Chief Executive Officer, stated, "In a continuation of first quarter operating trends, RevPAR growth in the second quarter was subdued. Despite achieving a record-high 87.1% comparable hotel occupancy in the quarter, room rate growth remained elusive as premium corporate transient business declined and as operators backfilled rooms through discounted channels. That said, group trends generally remain healthy. During the second quarter, actual group attendance as a percentage of negotiated group room blocks materialized within a historic range, and our group revenues increased by 5.5%. More importantly, our Net Income, Adjusted EBITDA and Adjusted FFO per share notably exceeded the top end of our guidance due to property-level cost controls and lower corporate expenses." Mr. Arabia continued, "We have adjusted our full year outlook assuming that the recent weakness in corporate transient room rates continues and, perhaps conservatively, that group attendance as a percentage of their group blocks falls below historic norm."
UNAUDITED SELECTED STATISTICAL AND FINANCIAL DATA
($ in millions, except RevPAR, ADR and per share amounts)
Three Months Ended June 30,
Six Months Ended June 30,
2016
2015
Change
2016
2015
Change
Net Income
$
65.7
$
53.7
22.5
%
$
67.0
$
54.9
22.0
%
Income Attributable to Common Stockholders per Diluted Share
$
0.26
$
0.23
13.0
%
$
0.25
$
0.22
13.6
%
Total Portfolio Hotel RevPAR
$
179.79
$
179.18
0.3
%
$
164.30
$
163.47
0.5
%
Comparable Hotel RevPAR
$
179.65
$
177.33
1.3
%
$
161.69
$
159.65
1.3
%
Comparable Hotel Occupancy
87.1
%
86.4
%
70
bps
82.1
%
82.3
%
(20)
bps
Comparable Hotel ADR
$
206.26
$
205.24
0.5
%
$
196.94
$
193.98
1.5
%
Comparable Hotel Adjusted EBITDA Margin
34.2
%
34.9
%
(70)
bps
29.9
%
30.8
%
(90)
bps
Adjusted EBITDA
$
101.1
$
110.4
(8.4)
%
$
163.0
$
176.1
(7.5)
%
Adjusted FFO Attributable to Common Stockholders
$
83.2
$
89.6
(7.1)
%
$
127.4
$
134.6
(5.3)
%
Adjusted FFO Attributable to Common Stockholders per Diluted Share
$
0.39
$
0.43
(9.3)
%
$
0.59
$
0.65
(9.2)
%
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, net.
The Company's actual results for the quarter ended June 30, 2016 compare to its guidance originally provided as follows:
Metric
Quarter Ended June 30, 2016 Guidance (1)
Adjustments (2)
Adjusted Prior Second Quarter 2016 Guidance
Quarter Ended June 30, 2016 Actual Results (unaudited)
Performance Relative to Adjusted Prior Guidance Midpoint
Net Income ($ millions)
$42 – $45
+$18.2
$60 – $63
$66
+$4
Total Portfolio Hotel RevPAR Growth
+ 0.0% – 2.0%
̶
+ 0.0% – 2.0%
0.3%
-0.7%
Comparable Hotel RevPAR Growth (3)
+ 2.0% – 4.0%
̶
+ 2.0% – 4.0%
1.3%
-1.7%
Adjusted EBITDA ($ millions)
$96 – $99
-$0.7
$95 – $98
$101
+$4
Adjusted FFO Attributable to Common Stockholders ($ millions)
$78 – $81
-$0.7
$78 – $81
$83
+$3
Adjusted FFO Attributable to Common Stockholders per Diluted Share
$0.36 – $0.38
̶
$0.36 – $0.38
$0.39
+$0.02
Diluted Weighted Average Shares Outstanding
215,600,000
̶
215,600,000
215,500,000
-100,000
(1)
Represents guidance presented on May 2, 2016.
(2)
Adjustments include the effects of the Company's sale of the Sheraton Cerritos, which occurred in May 2016.
(3)
Comparable Hotel RevPAR Growth excludes the Wailea Beach Marriott Resort & Spa due to the hotel's repositioning during 2016.
Balance Sheet/Liquidity Update
As of June 30, 2016, the Company had approximately $417.0 million of cash and cash equivalents, including restricted cash of $62.3 million.
As of June 30, 2016, the Company had total assets of $3.7 billion, including $3.2 billion of net investments in hotel properties, total consolidated debt of $1.0 billion and stockholders' equity of $2.5 billion.
Capital Improvements
The Company invested $51.2 million into capital improvements of its portfolio during the three months ended June 30, 2016. During the second quarter 2016, the Company incurred total revenue displacement of approximately $5.5 million between the Boston Park Plaza and the Wailea Beach Marriott Resort & Spa, which was better than 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 $10.0 million to $12.0 million of revenue displacement, and $8.5 million to $10.5 million of EBITDA displacement in 2016, resulting from the completion of the Wailea Beach Marriott Resort & Spa repositioning, which reflects less displacement than previously estimated. 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.
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