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Sunburst Hospitality Completes Long-Term Disposition Plan, Reduces Debt, Improves Year-Over-Year RevPAR

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Silver Spring, MD – June 1, 2004 – Sunburst Hospitality announced today that the company has completed its long-term strategic disposition plan with sale this month of the beach-front Comfort Inn, Miami Beach, Florida, to a regional condominium developer. As a result, Sunburst has reduced debt to $76 million, down from $301 million which financed management’s leveraged buy-out of the public company in January 2001. 

“This is an exciting time for us as a private company and for the hospitality industry as a whole,” said CEO James MacCutcheon in making the announcement. “We have not only significantly reduced debt but improved profitability.

“Our remaining core portfolio of properties has experienced excellent operating improvement,” said Mr. MacCutcheon. “RevPAR is up nearly 12% and we anticipate a great summer season.”

As a result of the company’s strong position, Mr. MacCutcheon says the firm’s senior management team is exploring development and acquisition opportunities and investments in related businesses.

Over the past three years, Sunburst’s debt to EBITDA has been reduced from over 6:1 to about 3.5:1, in spite of declining same store revenues from mid 2001 through mid 2003, according to Mr. MacCutcheon.

“Rapid debt reduction subsequent to the leveraged buy-out was the principal strategic and tactical objective of our management team. We are pleased to achieve this goal ahead of schedule as well as weathering the challenging operating environments of 2001 and 2002.”

Sunburst’s total debt in January 2001, following management’s $370 million leveraged buy-out of the company, was $301 million. When the company recapitalized and bought out public shareholders in January 2001, the future sale of assets not deemed to be long-term strategic fit was critical to management’s plan, according to Mr. MacCutcheon, as was the company’s reduction of corporate overhead and operational efficiencies. The company has succeeded on all fronts. 

Currently Sunburst’s portfolio is trimmed to 30 core hotels.

“Our remaining portfolio is geographically focused, with hotels on excellent sites located in strong markets,” said Mr. MacCutcheon. 

Sunburst’s properties are concentrated in the Baltimore/Washington corridor and urban and resort markets in Florida, the Northeast and West Coast.

"By every measurement, we have significantly reduced our debt leverage, strengthening our balance sheet to facilitate the pursuit of opportunities as they arise,” said Mr. MacCutcheon. "As a private company, we optimize our flexibility in pursuing attractive opportunities, with little need to focus on growth for growth's sake or the next quarter's earnings per share."

About Sunburst Hospitality

Sunburst Hospitality Corporation is a leading hotel owner and manager of nationally recognized hotels and operates in 24 states. Sunburst's hotels are branded as Best Western, Clarion Hotels, Comfort Inns and Suites, Holiday Inn Express, Quality Inn, and Sleep Inn. 

James A. MacCutcheon, the company's president and CEO, has been with the company and its predecessor organizations since 1987. Sunburst grew from a portfolio of 11 hotels to 89 hotels, and achieved $210 million annual revenue at its peak.

Sunburst is committed to developing and successfully implementing strategies to maximize the value of its operating hotels. Mr. MacCutcheon and the executive management team have a successful record of managing ahead of industry cycles.
Prior to the most recent hospitality industry downturn, the Company was able to liquidate a substantial portion of its existing hotel portfolio. The Company capitalized on the distressed real estate and capital markets in the early 1990s by opportunistically acquiring hotels at significant discounts to replacement cost. In 1995, the Company responded to changing industry cycles by shifting its growth strategy to construction of mid-market, all-suite extended-stay MainStay Suites hotels. In January 2001, management completed a leveraged buy-out of the Company, which formerly traded on the New York Stock Exchange. Sunburst Hospitality remains one of the largest private owners and operators of hotel properties in the U.S.
Sunburst recognizes that its best investments are those that it makes in its people. The Company is a recognized industry leader in developing and implementing best practices in the human resources area. Innovative compensation and benefit programs are in place at all levels of the company. Sunburst remains committed to developing opportunities for the career advancement of its associates while maximizing the value of assets in its portfolio.

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Contact:

Sunburst Hospitality Corporation
10770 Columbia Pike
Silver Spring, MD 20901-4448
301.592.3800 Fax 301.592.3830 
www.sunbursthospitality.com

Sharon Lemon
Zest Communications
651.324.8469

Also See: Sunburst Hospitality Completes $6.5 million Renovation on the Former Quality Hotel MainGate; Converts Property to Clarion Anaheim Resort / Mar 2003
Sunburst Hospitality Amends Bank Credit Facility, Pays Down Debt Early in Wake of Leveraged Buy-out / Sept 2002


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