|By Sandi Cain - Orange County Business Journal Staff
Laguna Beach CA - March 20, 2006 - Bob Alter turned a small Colorado condominium and hotel management company into one of the nation’s largest real estate investment trusts. San Clemente-based Sunstone Hotel Investors Inc., where Alter is chief executive, owns 61 hotels from Newport Beach to New York. Last week, the company counted a market value of nearly $1.7 billion.
Along the way, Alter has taken Sunstone public not once but twice, including in 2004, when the company raised $413 million in the largest Orange County stock debut of that year.
“It’s all about the timing of public markets,” Alter said.
Alter, who originally planned to go into the restaurant business after studying at Cornell University’s School of Hotel Management, was honored at last week’s Excellence in Entrepreneurship Awards luncheon put on by the Business Journal. The awards luncheon was held at the Hyatt Regency in Irvine.
“I decided the hotel business had better prospects,” he said.
Fresh out of Cornell, Alter went to work for a hotel company in Colorado, living in the hotels and saving his money.
After three years, he and a partner started Mountain Resorts Inc., buying a 28-room hotel with $50,000 down and what Alter called “creative financing.”
About a decade later, he formed Colorado Hotel Management to run the 10 hotels owned by Mountain Resorts.
By the late 1980s, business in Colorado was softening. Projects in California brought Alter west, where his business began operating as Capstone Properties.
The company became Sunstone in 1995, when Alter first went public as a real estate investment trust. Turns out the Capstone name already was taken.
After four years as a publicly traded REIT, Alter said he felt the market turning.
REITs suffered from a poor image of hotels on Wall Street as investors became enamored with dot-coms.
“Our stock became undervalued,” Alter said. So Alter led the company through a management buyout backed by SHP Acquisition LLC, an affiliate of New York-based Westbrook Partners LLC.
While private, Sunstone expanded east of the Rockies by buying 15 hotels from Dallas-based Wyndham Worldwide in 2002.
“What makes Sunstone successful is Bob’s eye for good investment opportunities and his ability to predict which markets will grow,” said Alan Reay, president of Irvine-based hotel brokerage Atlas Hospitality Group.
In 2004, when real estate picked up steam, Sunstone again went public. The timing proved good: REITs fared better than the overall market in 2004.
Today, Sunstone is one of the top five U.S. hotel REITs by market value, behind Starwood Hotels & Resorts Inc. of White Plains, N.Y., Bethesda, Md.-based Host Marriott Corp. and Newton, Mass.-based Hospitality Properties Trust.
This year, analysts expect Sunstone to post sales of $880 million, up 35% from 2005.
Alter’s strategy has been to buy underperforming hotels and then fix them up. In the past few years, Sunstone has gone after more high-profile hotels, including last year’s $293 million buy of the Century Plaza Hotel & Spa in Century City and January’s $242 million buy of Hilton Times Square hotel.
For a while, Sunstone operated only in the West. In 1997, Alter ventured east with the buy of Rochester, Minn.-based Kahler Realty Corp. and its 17 hotels for $372 million.
The deal marked his move into upscale hotels.
Now Alter is eyeing even more upscale and luxury hotels. “We want to continue to improve the quality of our properties, recycle equity in major markets, sell those in smaller markets and move toward the more upper upscale and luxury market,” he said.
Toward that end, Sunstone last week sold a Holiday Inn in Hollywood for $26 million.
In 2005, the company bought nine hotels, including the $72 million purchase of the Fairmont Newport Beach, formerly Sutton Place. The company also bought the Renaissance Washington, D.C., as part of a six-hotel deal for $420 million from Hong Kong’s CTF Holdings Ltd. The Long Beach Renaissance also was part of the deal.
Hotels are building on a comeback. In 2004 and 2005, the industry got a $21 billion boost in profitability, according to Hendersonville, Tenn.-based Smith Travel Research. The trend is to set to continue.
One challenge for Alter could be in shedding middle-of-the-road hotels. “Secondary hotels” are languishing on the market, he said in a November interview with Hotel Motel Management magazine.
“You get into that midsize, what I call a $10 million to $20 million deal that’s the wrong brand in the wrong market, and there are not many folks out there who want to buy it,” Alter said.
Sunstone still owns a number of hotels in that segment.
Alter has taken to life as a public company. He and his executives spend time with analysts to spread the word about the company and the hotel industry.
“I believe that being open is better than not,” said Alter, who’s engaged to Joni Simpkins, sales and marketing director at Laguna Cliffs Marriott.
To fill management positions, Alter said he looks for strong business morals, a good work ethic and a passion for the job.
“If you get that, you can teach them any piece of the business,” he said.
Sunstone’s chief financial officer, Jon Kline, is a lawyer. Chief Investment Officer Gary Stougaard is an accountant.
“It’s usually the other way around,” Alter said of the two executives.
|Also See:||Sunstone Hotel Investors, Which Owns 77 Hotels, Files Plans for $400 Million; IPO Will Pay Off $80 million of its Debt with Part of Proceeds / Sandi Cain / October 2004|
|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|