Ended June 30, 2005, Compared to Pro Forma Income of $6.4 million
for the Quarter ended June 30, 2004; RevPAR for the 51 Hotels During
the 2nd Qtr Up 11.0% / Hotel Operating Statistics
|SAN CLEMENTE, Calif., Aug. 8, 2005 - Sunstone Hotel Investors, Inc.
(the "Company") (NYSE: SHO) today announced results of operations for the
second quarter and six months ended June 30, 2005.
Robert A. Alter, Chief Executive Officer, stated, "We are very pleased with the 11.0% year over year same-store RevPAR increase, led by our California hotels which realized a 15.1% RevPAR increase over the prior year period. In June and July, we closed approximately $660.0 million of acquisitions and are pleased to add high quality assets like the Renaissance Washington D.C., Renaissance Orlando at Sea World, Renaissance Baltimore Harborplace Hotel and the Fairmont Newport Beach to our existing portfolio. These acquisitions further migrate our portfolio upscale which I continue to believe will disproportionately benefit from the industry recovery."
The Company has filed contemporaneously with this press release the Form 10-Q with the SEC for the quarterly period ended June 30, 2005. In addition to the required financial information included in the Form 10-Q, the Company has included for the comparable periods (quarter and six months ended June 30, 2004) unaudited pro forma income statements that include the impact of the initial public offering and related formation and structuring transactions (as defined in the Company's prospectus dated October 20, 2004). The Company believes that these unaudited pro forma income statements are useful to enhance the comparability of the quarter and six months ended June 30, 2005 with prior periods. The Company has also included an unaudited pro forma balance sheet as of June 30, 2005 and pro forma income statements for the quarter and six months ended June 30, 2005 that include the impact of the recent acquisitions as well as the related financings of the six Renaissance Hotels, the Sheraton Cerritos and the Fairmont Newport Beach as if they incurred as of the beginning of the respective periods.
Disclosure regarding the non-GAAP financial measures included in this release is included as an attachment to this release, along with a reconciliation to the most comparable GAAP measure during each of the periods presented.
The Company has taken a $2.1 million reserve due to a contract interpretation issue with a customer relating to applicable contract rates during the period from early 2003 through May 2005. We have a continuing relationship with this customer and expect a resolution by year end.
Second Quarter Highlights:
Listed below are certain highlights from the Company's unaudited historical and pro forma financial statements. Please refer to the reconciliation schedule on page 13 for a tabular presentation of our results.
Comparable pro forma hotel RevPAR for the 51 hotels (excluding Residence Inn by Marriott located in Rochester, Minnesota which opened June 2004) owned during the entire second quarter increased 11.0% as compared to the second quarter of 2004, driven by an increase in occupancy of 1.5 percentage points and a 8.8% increase in average room rate. Comparable pro forma hotel adjusted operating profit margins for the second quarter increased 300 basis points (from 28.2% to 31.2%).
First Six Months Highlights:
Listed below are certain highlights from the Company's historical and unaudited pro forma financial statements. Please refer to the reconciliation schedule on page 13 for a tabular presentation of our results.
Comparable pro forma hotel RevPAR for the 51 hotels (excluding Residence Inn by Marriott located in Rochester, Minnesota which opened June 2004) owned during the entire first six months increased 9.8% as compared to the first six months of 2004, driven by an increase in occupancy of 1.8 percentage points and a 7.0% increase in average room rate. Comparable pro forma hotel adjusted operating profit margins for the second quarter increased 220 basis points (from 26.7% to 28.9%).
The Company is providing guidance at this time but does not undertake to update it for any developments in its business. Achievement of the anticipated results is subject to the risks disclosed in the Company's filings with the Securities and Exchange Commission. The Company has provided guidance for both the third quarter and full year 2005 as well as guidance for a pro forma full year 2005 which reflects all 2005 acquisition and financing transactions as if they occurred on January 1, 2005.
Third Quarter 2005 Outlook
The Company expects comparable hotel RevPAR for the third quarter of 2005 to increase approximately 7.0% to 9.0% over the third quarter of 2004. Based upon this guidance, the Company estimates that for the third quarter 2005 its:
The Company expects comparable hotel RevPAR for the full year 2005 to increase approximately 7.0% to 9.0% (which is an increase from 6.0% to 8.0% provided at the first quarter end earnings call in May) over the full year 2004. Based upon this guidance, the Company estimates that for the full year 2005 its:
The management agreement with Interstate Hotels and Resorts, which relates to 48 of the Company's hotels, has been amended to keep the management fee at 1.75% for the balance of 2005. In addition, the amended agreement provides that the management fee in 2006 will be 2.0%. Prior to the amendment, the management agreement had provided for the fee to increase to 1.85% on July 1, 2005 and 2.1% on January 1, 2006.
Pro forma Full Year 2005 Outlook
Due to the materiality of the recent acquisitions and financings, the Company has provided pro forma full year guidance that reflects all 2005 acquisition and financing transactions as if they occurred on January 1, 2005. Full year pro forma Adjusted EBITDA and Adjusted FFO guidance exclude a $2.4 million gain on sale of assets, $3.6 million of prepayment penalties and write-off of deferred financing costs associated with the early retirement of debt and a $2.1 million reserve taken due to a pending contract issue. Based upon this guidance, the Company estimates that for the pro forma full year 2005 its:
Recent Developments - Acquisitions
In July 2005, the Company completed the previously announced acquisition of the 444-room Sutton Place Hotel in Newport Beach, California for $72.3 million. The company has commenced on the complete renovation of the hotel's guestrooms and public areas. The hotel has been re-branded the Fairmont Newport Beach.
In July 2005, the Company also completed the previously announced acquisition of the remaining 75% interest in the Renaissance Washington, D.C. The Company had previously acquired 25% of the hotel as part of the Renaissance Portfolio acquisitions completed in June 2005.
Balance Sheet / Liquidity Update
As of June 30, 2005, the Company had $96.3 million of cash and cash equivalents (including restricted cash). Total assets were $1.8 billion, including $1.6 billion of net investments in hotel properties and unconsolidated joint ventures (25% interest in the Renaissance Washington, D.C.), total debt of $967.2 million, and stockholders' equity of $671.9 million.
In June 2005, the Company and selling stockholders closed its public offering of 12.2 million shares of common stock for gross proceeds of $285.0 million. In addition to the 3.0 million primary shares sold by the company, 9.2 million secondary shares were sold by affiliates of Westbrook Real Estate Partners, L.L.C., reducing their fully-diluted ownership interest in the Company to approximately 9.0%.
In June 2005, the Company also sold 4.0 million shares of common stock to an affiliate of GIC Real Estate, an investment arm of the Government of Singapore as well as 0.3 million shares of common stock to Security Capital Preferred Growth Incorporated, an investment vehicle advised by Security Capital Research & Management Incorporated. In July 2005, the Company also sold $100.0 million of Series C Convertible Redeemable Preferred Stock to Security Capital Preferred Growth Incorporated. The convertible preferred stock pays a base dividend of 6.45%, has a conversion price of $24.375 and is callable at par after five years.
In June 2005, concurrent with the closing of the six Renaissance Hotel portfolio, the Company closed on the financings of four individual fixed rate loans totaling $250.0 million. Two of the mortgages, totaling $65.0 million, mature in 2012 with a weighted average rate of 4.98%, and the remaining two mortgages, totaling $185.0 million, mature in 2016 with a weighted average rate of 5.20%.
In the second quarter of 2005, the Company invested $9.8 million in capital expenditures across its portfolio of which $2.0 million was spent on the Fairmont Newport Beach.
During the second quarter, the Company declared a dividend of $0.285
per share payable to its common stockholders (including OP unit holders)
and a dividend of $0.5778 per share payable to its Series A cumulative
redeemable preferred stockholders of record as of June 30, 2005. The dividend
was paid on July 15, 2005. The level of future dividends will be determined
by the Company's quarterly operating results and expected capital requirements.
Sunstone Hotel Investors, Inc. is a lodging real estate investment trust ("REIT") that, as of the date hereof, owns 60 hotels with an aggregate of 16,683 rooms primarily in the upper- upscale segment operated under brands owned by nationally- recognized companies, such as Marriott, Hilton, InterContinental, Hyatt and Fairmont.
This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "will," "continue" and other similar terms and phrases, including references to assumptions and forecasts of future results.
|Also See:||Name Dispute Prompts Former Owner of Sutton Place Hotel Newport Beach to File Lawsuit Against Sunstone Hotels Investors Inc. and Fairmont Hotels & Resorts / July 2005|
|Opened in 1962, the Hyatt Newporter Receives $13 million Remodel; Owner Sunstone Gives the 403 room Hotel New Name - Hyatt Regency Newport Beach / Sandi Cain / November 2004|