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Sunstone Hotel Investors Reports a 2nd Qtr 2010 Net Loss Attributable to
 Common Stockholders of $4.9 million; RevPAR Increases 6.8%
 in Second Quarter 2010 vs. Second Quarter 2009



ALISO VIEJO, Calif., Aug. 6, 2010 -- Sunstone Hotel Investors, Inc. (the "Company") (NYSE: SHO) today announced results for the second quarter ended June 30, 2010.

RevPAR and hotel EBITDA margin information presented reflect the Company's core 30 hotel portfolio on a pro forma basis.

Second Quarter 2010 Operational Results:

  • Total revenue was $181.0 million.
  • Pro forma RevPAR was $111.91.
  • Loss attributable to common stockholders was $4.9 million.
  • Loss attributable to common stockholders per diluted share was $0.05.
  • Adjusted EBITDA was $43.2 million.
  • Pro forma Adjusted EBITDA for the 30 hotel portfolio was $39.9 million.
  • Adjusted FFO available to common stockholders was $17.8 million.
  • Adjusted FFO available to common stockholders per diluted share was $0.18.
  • Pro forma Adjusted FFO available to common stockholders per diluted share was $0.18.
  • Pro forma hotel EBITDA margin was 26.9%.

Art Buser, President and Chief Executive Officer, stated, "We continue to see increasing signs of a cyclical recovery. Occupancies increased to levels that enabled our hotels to increase rates. During the quarter we were impressed with our hotel operators' ability to drive improved RevPAR and margin performance. We are focusing our efforts on maximizing the performance of our existing high quality portfolio and selectively analyzing acquisition opportunities to increase the long term value of our portfolio."

SELECTED FINANCIAL DATA


($ in millions, except RevPAR and per share amounts)


(unaudited)












Three Months Ended June 30,


Six Months Ended June 30,



2010

2009

% Change


2010

2009

% Change


Total Revenue

$  181.0

$  176.1

2.8%


$  341.8

$  347.5

(1.6)%


Pro forma RevPAR (1)

$  111.91

$  104.83

6.8%


$  103.09

$  102.79

0.3%


Pro forma hotel EBITDA margin (1)

26.9%

26.2%

70 bps


24.3%

24.9%

(60) bps











Loss attributable to common stockholders

$  (4.9 )

$  (135.4)



$  (31.2)

$  (134.5)



Loss attributable to common stockholders per diluted share

$  (0.05)

$  (2.23)



$  (0.32)

$  (2.38  )



EBITDA

$  47.3

$  (74.8)



$  77.3

$  (12.5  )



Adjusted EBITDA

$  43.2

$  44.8



$  74.2

$  83.7



FFO available to common stockholders

$  19.9

$  (92.0)



$  18.9

$  (60.7  )



Adjusted FFO available to common stockholders

$  17.8

$  13.7



$  21.7

$  20.7



FFO available to common stockholders per diluted share (2)

$  0.20

$  (1.51)



$  0.19

$  (1.07  )



Adjusted FFO available to common stockholders per diluted share (2)

$  0.18

$  0.22



$  0.22

$  0.37



(1) Includes the 30 hotels held for investment by the Company as of June 30, 2010, excluding the Mass Mutual 
eight hotels reclassified as “Operations Held for Non-Sale Disposition” on the Company’s balance sheets and statements 
of operations, and the W San Diego and Marriott Ontario Airport reclassified as discontinued operations on the Company’s 
balance sheets and statements of operations.


(2) Reflects Series C convertible preferred stock on a “non-converted” basis. On an “as-converted” basis, FFO available to 
common stockholders per diluted share is $0.21 and $(1.38), respectively, for the three months ended June 30, 2010 and 
2009, and $0.22 and $(0.94), respectively, for the six months ended June 30, 2010 and 2009. On an “as-converted” basis, 
Adjusted FFO available to common stockholders per diluted share is $0.19 and $0.23, respectively, for the three months 
ended June 30, 2010 and 2009, and $0.25 and $0.39, respectively, for the six months ended June 30, 2010 and 2009.












The Company has filed with the Securities and Exchange Commission its Quarterly Report on Form 10-Q for the quarter endedJune 30, 2010.  

Disclosure regarding the non-GAAP financial measures in this release is included on pages 3 and 4. Reconciliations of non-GAAP financial measures to the most comparable GAAP measure for each of the periods presented are included on pages 7 through 12 of this release.  

Finance Update

W San Diego – As part of the Company's secured debt restructuring program, the Company completed the previously announced deed back of the W San Diego on July 2, 2010. The Company will record a gain on extinguishment of debt to discontinued operations in the third quarter of 2010, and the net assets and liabilities will be removed from its balance sheets.

Balance Sheet/Liquidity Update

As of June 30, 2010, the Company had approximately $274.5 million of cash and cash equivalents, including restricted cash of$70.2 million. The Company intends to use a portion of its cash balance for acquisition opportunities.

On June 30, 2010, total assets were $2.4 billion, including $1.9 billion of net investments in hotel properties, total debt excluding debt in the Company's secured debt restructuring program was $1.1 billion and stockholders' equity was $0.9 billion.

Financial Covenants

The Company is subject to compliance with various covenants under its Series C preferred stock and its 4.6% Exchangeable Senior Notes due 2027 (the "Senior Notes"). As of June 30, 2010, the Company was in compliance with all covenants related to its Series C preferred stock and its Senior Notes.  

Capital Improvements

During the second quarter of 2010, the Company invested $8.5 million in capital improvements to its portfolio.  In light of the industry recovery and in order to position its portfolio for growth, the Company has expanded its 2010/2011 capital investment plan and currently intends to invest approximately $70.0 million into capital improvements projects during 2010. The Company's capital improvements program is aimed at value-adding renovation and repositioning projects, including the following:

Embassy Suites Chicago – Guest suites, corridors and lobby to be renovated beginning in the fourth quarter 2010.

Renaissance Washington D.C. – Guest rooms and certain meeting space to be renovated beginning in the third quarter 2010.

Kahler Grand Rochester – Deluxe rooms, meeting space and certain public areas to be renovated, and new energy efficient windows to be installed beginning in late 2010.  

Marriott Tysons Corner – Renovation of guestrooms and exterior started late in second quarter 2010.

Dividend Update

On August 5, 2010, the Company's board of directors declared a cash dividend of $0.50 per share payable to its Series A cumulative redeemable preferred stockholders and a cash dividend of $0.393 per share payable to its Series C cumulative convertible redeemable preferred stockholders. The dividends will be paid on October 15, 2010 to stockholders of record onSeptember 30, 2010.  No dividend was declared on the Company's common stock.

The Company intends to make dividends on its stock in amounts equivalent to 100% of its annual taxable income. The level of any future dividends will be determined by the Company's board of directors after considering taxable income projections, expected capital requirements, and risks affecting the Company's business.  In light of the Company's intent to distribute 100% of its annual taxable income, future dividends may be reduced from past levels, or eliminated entirely.  Dividends may be made in the form of cash or a combination of cash and stock consistent with Internal Revenue Code regulations.

Earnings Call

The Company will host a conference call to discuss second quarter results on August 6, 2010, at 12:00 p.m. EDT (9:00 a.m. PDT). A live web cast of the call will be available via the Investor Relations section of the Company's website.  Alternatively, investors may dial 1-866-225-8754 (for domestic callers) or 1-480-629-9692 (for international callers) with passcode #4323202. A replay of the web cast will also be archived on the website.

About Sunstone Hotel Investors, Inc.

Sunstone Hotel Investors, Inc. ("Sunstone") is a lodging real estate investment trust ("REIT") that owns 30 hotels comprised of 11,313 rooms.  Sunstone's hotels are primarily in the upper upscale segment and are generally operated under nationally recognized brands, such as Marriott, Fairmont, Hilton and Hyatt. For further information, please visit Sunstone's website atwww.sunstonehotels.com.

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," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "will" and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: volatility in the debt or equity markets affecting our ability to acquire or sell hotel assets; national and local economic and business conditions, including the likelihood of a prolonged U.S. recession; the ability to maintain sufficient liquidity and our access to capital markets; potential terrorist attacks, which would affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt and equity agreements; relationships with property managers and franchisors; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations, which influence or determine wages, prices, construction procedures and costs; our ability to identify, successfully compete for and complete acquisitions; the performance of hotels after they are acquired; necessary capital expenditures and our ability to fund them and complete them with minimum disruption; our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes; and other risks and uncertainties associated with our business described in the Company's filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All forward-looking information in this release is as of August 6, 2010, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

This release should be read in conjunction with the consolidated financial statements and notes thereto included in our most recent reports on Form 10-K and Form 10-Q. Copies of these reports are available on our website at www.sunstonehotels.comand through the SEC's Electronic Data Gathering Analysis and Retrieval System ("EDGAR") at www.sec.gov.

Non-GAAP Financial Measures

We present the following non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: (1) Earnings Before Interest Expense, Taxes, Depreciation and Amortization, or EBITDA; (2) Adjusted EBITDA (as defined below); (3) Funds From Operations, or FFO; (4) Adjusted FFO (as defined below); and (5) adjusted pro forma hotel EBITDA and pro forma hotel EBITDA margin for the purpose of our operating margins.

EBITDA represents income available (loss attributable) to common stockholders excluding: (1) preferred stock dividends; (2) interest expense (including prepayment penalties, if any); (3) provision for income taxes, including income taxes applicable to sale of assets; and (4) depreciation and amortization. In addition, we have presented Adjusted EBITDA, which excludes: (1) amortization of deferred stock compensation; (2) the impact of any gain or loss from asset sales; (3) impairment charges; and (4) other adjustments we have identified in this release. We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating our operating performance because these measures help investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest expense and preferred stock dividends) and our asset base (primarily depreciation and amortization) from our operating results. We also use EBITDA and Adjusted EBITDA as measures in determining the value of hotel acquisitions and dispositions. Reconciliations of income available (loss attributable) to common stockholders to EBITDA and Adjusted EBITDA are set forth on pages 7, 8, 9 and 10.  Reconciliations and the components of adjusted pro forma hotel EBITDA and pro forma hotel EBITDA margin are set forth on pages 11 and 12. We believe adjusted pro forma hotel EBITDA and pro forma hotel EBITDA margin are also useful to investors in evaluating our property-level operating performance.

We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group. The Board of Governors of NAREIT in its March 1995 White Paper (as clarified in November 1999 and April 2002) defines FFO to mean income available (loss attributable) to common stockholders (computed in accordance with GAAP), excluding gains and losses from sales of property, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), and after adjustment for unconsolidated partnerships and joint ventures. We also present Adjusted FFO, which excludes prepayment penalties, written-off deferred financing costs, impairment losses and other adjustments we have identified in this release. We believe that the presentation of FFO and Adjusted FFO provide useful information to investors regarding our operating performance because they are measures of our operations without regard to specified non-cash items such as real estate depreciation and amortization, gain or loss on sale of assets and certain other items which we believe are not indicative of the performance of our underlying hotel properties.  We believe that these items are more representative of our asset base and our acquisition and disposition activities than our ongoing operations. We also use FFO as one measure in determining our results after taking into account the impact of our capital structure.  Reconciliations of income available (loss attributable) to common stockholders to FFO and Adjusted FFO are set forth on pages 7, 8, 9 and 10.

The revenue and expense items associated with our two commercial laundry facilities and the eight hotel properties held for non-sale disposition, any guaranty payments, and other miscellaneous non-hotel items have been shown below the adjusted pro forma hotel EBITDA line in presenting pro forma hotel EBITDA margins. Management believes the calculation of adjusted pro forma hotel EBITDA results in a more accurate presentation of hotel EBITDA margins of the Company's 30 hotel portfolio. See pages 11 and 12 for reconciliations of adjusted pro forma hotel EBITDA to the comparable GAAP measure.

We caution investors that amounts presented in accordance with our definitions of EBITDA, Adjusted EBITDA, FFO, Adjusted FFO, adjusted pro forma hotel EBITDA and pro forma hotel EBITDA margin may not be comparable to similar measures disclosed by other companies, because not all companies calculate these non-GAAP measures in the same manner. EBITDA, Adjusted EBITDA, FFO, Adjusted FFO, adjusted pro forma hotel EBITDA and pro forma hotel EBITDA margin should not be considered as an alternative measure of our net income (loss), operating performance, cash flow or liquidity. EBITDA, Adjusted EBITDA, FFO, Adjusted FFO, adjusted pro forma hotel EBITDA and pro forma hotel EBITDA margin may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions and other commitments and uncertainties. Although we believe that EBITDA, Adjusted EBITDA, FFO, Adjusted FFO, adjusted pro forma hotel EBITDA and pro forma hotel EBITDA margin can enhance an investor's understanding of our results of operations, these non-GAAP financial measures, when viewed individually, are not necessarily a better indicator of any trend as compared to GAAP measures such as net income (loss) or cash flow from operations. In addition, you should be aware that adverse economic and market conditions may harm our cash flow.

Sunstone Hotel Investors, Inc.


Consolidated Balance Sheets


(In thousands, except share data)













June 30,


December 31,




2010


2009




(unaudited)




Assets





Current assets:






Cash and cash equivalents

$                      204,299


$                      353,255



Restricted cash

70,237


36,858



Accounts receivable, net

26,484


22,624



Due from affiliates

34


62



Inventories

2,282


2,446



Prepaid expenses

5,330


7,423



Investment in hotel property of discontinued operations, net

-


16,471



Other current assets of discontinued operations, net

-


1,739



Investment in hotel properties of operations held for non-sale disposition, net

99,527


102,343



Other current assets of operations held for non-sale disposition, net

29,443


14,140


Total current assets

437,636


557,361








Investment in hotel properties, net

1,919,125


1,923,392


Other real estate, net

12,058


14,044


Investments in unconsolidated joint ventures

543


542


Deferred financing fees, net

4,920


7,300


Goodwill

4,673


4,673


Other assets, net

9,427


6,218








Total assets

$                   2,388,382


$                   2,513,530








Liabilities and Stockholders' Equity





Current liabilities:






Accounts payable and accrued expenses

$                        12,673


$                        12,425



Accrued payroll and employee benefits

9,497


9,092



Due to Third Party Managers

9,761


9,817



Dividends payable

5,137


5,137



Other current liabilities

21,907


21,910



Current portion of notes payable

93,401


153,778



Note payable of discontinued operations

-


25,499



Notes payable of operations held for non-sale disposition

162,972


184,121



Other current liabilities of discontinued operations, net

43,904


41,449



Other current liabilities of operations held for non-sale disposition

20,455


6,364


Total current liabilities

379,707


469,592








Notes payable, less current portion

1,043,622


1,050,019


Other liabilities

7,692


7,256


Total liabilities

1,431,021


1,526,867








Commitments and contingencies

-


-








Preferred stock, Series C Cumulative Convertible Redeemable Preferred






Stock, $0.01 par value, 4,102,564 shares authorized, issued and






outstanding at June 30, 2010 and December 31, 2009, liquidation






preference of $24.375 per share

99,996


99,896








Stockholders' equity:






Preferred stock, $0.01 par value, 100,000,000 shares authorized.






    8.0% Series A Cumulative Redeemable Preferred Stock,






    7,050,000 shares issued and outstanding at June 30, 2010 and






    December 31, 2009, stated at liquidation preference of $25.00 per share

176,250


176,250



Common stock, $0.01 par value, 500,000,000 shares authorized,






     97,216,527 shares issued and outstanding at June 30, 2010 and






     96,904,075 shares issued and outstanding at December 31, 2009

972


969



Additional paid in capital

1,120,657


1,119,005



Retained earnings (deficit)

(29,732)


(8,949)



Cumulative dividends

(407,801)


(397,527)



Accumulated other comprehensive loss

(2,981)


(2,981)


Total stockholders' equity

857,365


886,767








Total liabilities and stockholders' equity

$                   2,388,382


$                   2,513,530









Sunstone Hotel Investors, Inc.


Unaudited Consolidated Statements of Operations


(In thousands, except per share data)
























Three Months Ended June 30,


Six Months Ended June 30,




2010


2009


2010


2009












Revenues










Room


$ 108,323


$  101,214


$ 198,701


$  197,897


Food and beverage


40,543


40,220


78,751


81,257


Other operating


12,008


13,086


24,321


25,412


Revenues of operations held for non-sale disposition


20,158


21,575


39,992


42,922


Total revenues


181,032


176,095


341,765


347,488


Operating expenses










Room


25,669


24,073


48,961


46,814


Food and beverage


29,095


29,046


56,783


58,422


Other operating


6,379


6,376


13,117


13,334


Advertising and promotion


8,903


8,728


17,225


17,903


Repairs and maintenance


6,614


6,582


13,077


13,301


Utilities


5,530


5,588


11,359


12,148


Franchise costs


5,636


5,104


10,151


9,799


Property tax, ground lease and insurance


10,663


10,096


20,970


20,055


Property general and administrative


18,876


17,867


36,021


35,896


Corporate overhead


5,135


4,785


9,715


10,492


Depreciation and amortization


23,264


23,765


46,822


47,289


Operating expenses of operations held for non-sale disposition


17,912


20,400


35,950


39,260


Property and goodwill impairment losses


1,943


27,237


1,943


28,643


Goodwill impairment losses of operations held for non-sale disposition


-


697


-


3,007


Total operating expenses


165,619


190,344


322,094


356,363


Operating income (loss)


15,413


(14,249)


19,671


(8,875)


Equity in earnings (losses) of unconsolidated joint ventures


163


(584)


275


(2,101)


Interest and other income


99


252


270


872


Interest expense


(17,015)


(19,498)


(37,056)


(39,513)


Interest expense of operations held for non-sale disposition


(4,986)


(2,892)


(10,397)


(5,787)


Gain on extinguishment of debt


-


26,559


-


54,579


Loss from continuing operations


(6,326)


(10,412)


(27,237)


(825)


Income (loss) from discontinued operations


6,634


(119,793)


6,454


(122,870)


Net income (loss)


308


(130,205)


(20,783)


(123,695)


Dividends paid on unvested restricted stock compensation


-


-


-


(447)


Preferred stock dividends and accretion


(5,187)


(5,188)


(10,374)


(10,375)


Loss attributable to common stockholders


$   (4,879)


$ (135,393)


$ (31,157)


$ (134,517)












Basic per share amounts:










       Loss from continuing operations attributable to common stockholders


$     (0.12)


$       (0.26)


$     (0.39)


$       (0.21)


       Income (loss) from discontinued operations


0.07


(1.97)


0.07


(2.17)


Basic loss attributable to common stockholders per common share


$     (0.05)


$       (2.23)


$     (0.32)


$       (2.38)












Diluted per share amounts:










       Loss from continuing operations attributable to common stockholders


$     (0.12)


$       (0.26)


$     (0.39)


$       (0.21)


       Income (loss) from discontinued operations


0.07


(1.97)


0.07


(2.17)


Diluted loss attributable to common stockholders per common share


$     (0.05)


$       (2.23)


$     (0.32)


$       (2.38)












Weighted average common shares outstanding:










      Basic


97,188


60,845


97,118


56,549


      Diluted


97,188


60,845


97,118


56,549












Dividends declared per common share


$           -


$            -


$           -


$            -













Sunstone Hotel Investors, Inc.


Reconciliation of Loss Attributable to Common Stockholders to Non-GAAP Financial Measures


(Unaudited and in thousands except per share amounts)











Reconciliation of Loss Attributable to Common Stockholders to EBITDA and Adjusted EBITDA

















Three Months Ended


Six Months Ended



June 30,


June 30,



2010

2009


2010

2009









Loss attributable to common stockholders

$ (4,879)

$ (135,393)


$ (31,157)

$ (134,517)


Dividends paid on unvested restricted stock compensation

-

-


-

447


Series A and C preferred stock dividends

5,187

5,188


10,374

10,375


Operations held for investment:







  Depreciation and amortization

23,264

23,765


46,822

47,289


  Amortization of lease intangibles

150

-


150

-


  Interest expense

16,185

18,198


33,123

37,255


  Interest expense - default rate

120

-


884

-


  Amortization of deferred financing fees

306

361


799

635


  Write-off of deferred financing fees

123

284


1,585

284


  Loan penalties and fees

36

-


174

-


  Non-cash interest related to discount on Senior Notes

245

655


491

1,339


Unconsolidated joint ventures:







  Depreciation and amortization

13

1,282


27

2,554


  Interest expense

-

663


-

1,348


  Amortization of deferred financing fees

-

46


-

92


Operations held for non-sale disposition:







  Depreciation and amortization

1,544

2,727


3,237

5,434


  Interest expense

2,473

2,760


5,182

5,523


  Interest expense - default rate

2,078

-


4,354

-


  Amortization of deferred financing fees

132

132


264

264


  Loan penalties and fees

303

-


597

-


Discontinued operations:







  Depreciation and amortization

-

2,770


124

5,753


  Interest expense

-

1,727


225

3,439


  Amortization of deferred financing fees

-

10


2

21


  Loan penalties and fees

-

-


48

-


EBITDA

47,280

(74,825)


77,305

(12,465)









Operations held for investment:







  Amortization of deferred stock compensation

686

1,220


1,648

2,348


  Gain on sale of assets

-

(35)


-

(354)


  Gain on extinguishment of debt

-

(26,559)


-

(54,579)


  Impairment loss

1,943

27,237


1,943

28,643


Unconsolidated joint ventures:







  Amortization of deferred stock compensation

7

11


17

16


Operations held for non-sale disposition:







  Impairment loss

-

697


-

3,007


Discontinued operations:







  Loss on sale of assets

-

13,070


-

13,070


  Gain on extinguishment of debt

(6,747)

-


(6,747)

-


  Impairment loss

-

104,007


-

104,007



(4,111)

119,648


(3,139)

96,158









Adjusted EBITDA

$ 43,169

$    44,823


$  74,166

$    83,693
















Reconciliation of Loss Attributable to Common Stockholders to FFO and Adjusted FFO
















Loss attributable to common stockholders

$ (4,879)

$ (135,393)


$ (31,157)

$ (134,517)


Dividends paid on unvested restricted stock compensation

-

-


-

447


Operations held for investment:







  Real estate depreciation and amortization

23,133

23,611


46,553

46,972


  Amortization of lease intangibles

150

-


150

-


  Gain on sale of assets

-

(35)


-

(354)


Unconsolidated joint ventures:







  Real estate depreciation and amortization

-

1,264


-

2,518


Operations held for non-sale disposition:







  Real estate depreciation and amortization

1,544

2,727


3,237

5,434


Discontinued operations:







  Real estate depreciation and amortization

-

2,770


124

5,753


  Loss on sale of assets

-

13,070


-

13,070


FFO available to common stockholders

19,948

(91,986)


18,907

(60,677)









Operations held for investment:







  Interest expense - default rate

120

-


884

-


  Write-off of deferred financing fees

123

284


1,585

284


  Loan penalties and fees

36

-


174

-


  Gain on extinguishment of debt

-

(26,559)


-

(54,579)


  Impairment loss

1,943

27,237


1,943

28,643


Operations held for non-sale disposition:







  Interest expense - default rate

2,078

-


4,354

-


  Loan penalties and fees

303

-


597

-


  Impairment loss

-

697


-

3,007


Discontinued operations:







  Loan penalties and fees

-

-


48

-


  Gain on extinguishment of debt

(6,747)

-


(6,747)

-


  Impairment loss

-

104,007


-

104,007



(2,144)

105,666


2,838

81,362









Adjusted FFO available to common stockholders

$ 17,804

$    13,680


$  21,745

$    20,685









FFO available to common stockholders per diluted share

$     0.20

$       (1.51)


$      0.19

$       (1.07)









Adjusted FFO available to common stockholders per diluted share

$     0.18

$        0.22


$      0.22

$        0.37









Basic weighted average shares outstanding

97,188

60,845


97,118

56,549


Shares associated with unvested restricted stock awards

421

-


379

-


Diluted weighted average shares outstanding (1)

97,609

60,845


97,497

56,549









(1) Diluted weighted average shares outstanding includes the Series C convertible preferred stock on a "non-converted" basis. On an 
"as-converted" basis, FFO available to common stockholders per diluted share is $0.21 and $(1.38), respectively, for the three months 
ended June 30, 2010 and 2009, and $0.22 and $(0.94), respectively, for the six months ended June 30, 2010 and 2009. On an "as- 
converted" basis, Adjusted FFO available to common stockholders per diluted share is $0.19 and $0.23, respectively, for the three 
months ended June 30, 2010 and 2009, and $0.25 and $0.39, respectively, for the six months ended June 30, 2010 and 2009.










Sunstone Hotel Investors, Inc.


Pro Forma Reconciliation of Loss Attributable to Common Stockholders to Non-GAAP Financial Measures


(Unaudited and in thousands except per share amounts)












Pro Forma Reconciliation of Loss Attributable to Common Stockholders to EBITDA and Adjusted EBITDA



















Three Months Ended June 30, 2010




Held for

Reacquired

Non-Sale

Discontinued




Actual (1)

Investment (2)

Hotel (3)

Disposition (4)

Operations (5)

Pro Forma (6)










Loss attributable to common stockholders

$   (4,879)

$                 427

$           197

$              2,740

$            (6,634)

$          (8,149)


Series A and C preferred stock dividends

5,187

-

-

-

-

5,187


Operations held for investment:








  Depreciation and amortization

23,264

-

255

-

-

23,519


  Amortization of lease intangibles

150

-

-

-

-

150


  Interest expense

16,185

(143)

-

-

-

16,042


  Interest expense - default rate

120

(120)

-

-

-

-


  Amortization of deferred financing fees

306

(5)

-

-

-

301


  Write-off of deferred financing fees

123

(123)

-

-

-

-


  Loan penalties and fees

36

(36)

-

-

-

-


  Non-cash interest related to discount on Senior Notes

245

-

-

-

-

245


Unconsolidated joint ventures:








  Depreciation and amortization

13

-

-

-

-

13


Operations held for non-sale disposition:








  Depreciation and amortization

1,544

-

-

(1,544)

-

-


  Interest expense

2,473

-

-

(2,473)

-

-


  Interest expense - default rate

2,078

-

-

(2,078)

-

-


  Amortization of deferred financing fees

132

-

-

(132)

-

-


  Loan penalties and fees

303

-

-

(303)

-

-


EBITDA

47,280

-

452

(3,790)

(6,634)

37,308










Operations held for investment:








  Amortization of deferred stock compensation

686

-

-

-

-

686


  Impairment loss

1,943

-

-

-

-

1,943


Unconsolidated joint ventures:








  Amortization of deferred stock compensation

7

-

-

-

-

7


Discontinued operations:








  Gain on extinguishment of debt

(6,747)

-

-

-

6,747

-











(4,111)

-

-

-

6,747

2,636










Adjusted EBITDA

$  43,169

$                    -

$           452

$            (3,790)

$                113

$          39,944


















Pro Forma Reconciliation of Loss Attributable to Common Stockholders to FFO and Adjusted FFO


















Loss attributable to common stockholders

$   (4,879)

$                 427

$           197

$              2,740

$            (6,634)

$          (8,149)


Operations held for investment:








  Real estate depreciation and amortization

23,133

-

255

-

-

23,388


  Amortization of lease intangibles

150

-

-

-

-

150


Operations held for non-sale disposition:








  Real estate depreciation and amortization

1,544

-

-

(1,544)

-

-


FFO available to common stockholders

19,948

427

452

1,196

(6,634)

15,389










Operations held for investment:








  Interest expense - default rate

120

(120)

-

-

-

-


  Write-off of deferred financing fees

123

(123)

-

-

-

-


  Loan penalties and fees

36

(36)

-

-

-

-


  Impairment loss

1,943

-

-

-

-

1,943


Operations held for non-sale disposition:








  Interest expense - default rate

2,078

-

-

(2,078)

-

-


  Loan penalties and fees

303

-

-

(303)

-

-


Discontinued operations:








  Gain on extinguishment of debt

(6,747)

-

-

-

6,747

-



(2,144)

(279)

-

(2,381)

6,747

1,943










Adjusted FFO available to common stockholders

$  17,804

$                 148

$           452

$            (1,185)

$                113

$          17,332










FFO available to common stockholders per diluted share

$      0.20





$              0.16










Adjusted FFO available to common stockholders per diluted share

$      0.18





$              0.18










Basic weighted average shares outstanding

97,188





97,188


Shares associated with unvested restricted stock awards

421





421


Diluted weighted average shares outstanding (7)

97,609





97,609










(1) Actual includes results for the 30 hotels held for investment, eight hotels held for non-sale disposition and two hotels held in receivership at June 30, 2010.


(2) Held for Investment includes only the interest and penalties associated with the Three Released Mass Mutual hotels. Hotel operations for these three hotels
are included in the "Actual" column.


(3) Reacquired Hotel includes only the hotel operations and excludes interest and penalties associated with the Renaissance Westchester while it was in
receivership prior to being reacquired by the Company on June 14, 2010.


(4) Non-Sale Disposition includes all hotel operations, interest and penalties for the Eight Mass Mutual hotels that are in the process of being transferred to a receiver.


(5) Discontinued Operations includes the W San Diego and Marriott Ontario Airport hotels that have been transferred to a receiver as of June 30, 2010.
It also includes the ownership expenses of Renaissance Westchester prior to June 14, 2010 when it was reacquired by the Company.


(6) Pro forma includes the 30 hotels held for investment by the Company at June 30, 2010.


(7) Diluted weighted average shares outstanding includes the Series C convertible preferred stock on a "non-converted" basis since such treatment is dilutive.











Sunstone Hotel Investors, Inc.


Pro Forma Reconciliation of Loss Attributable to Common Stockholders to Non-GAAP Financial Measures


(Unaudited and in thousands except per share amounts)












Pro Forma Reconciliation of Loss Attributable to Common Stockholders to EBITDA and Adjusted EBITDA



















Six Months Ended June 30, 2010




Held for

Reacquired

Non-Sale

Discontinued




Actual (1)

Investment (2)

Hotel (3)

Disposition (4)

Operations (5)

Pro Forma (6)










Loss attributable to common stockholders

$ (31,157)

$              2,229

$           346

$              6,355

$            (6,454)

$        (28,681)


Series A and C preferred stock dividends

10,374

-

-

-

-

10,374


Operations held for investment:








  Depreciation and amortization

46,822

-

561

-

-

47,383


  Amortization of lease intangibles

150

-

-

-

-

150


  Interest expense

33,123

(1,053)

-

-

-

32,070


  Interest expense - default rate

884

(884)

-

-

-

-


  Amortization of deferred financing fees

799

(34)

-

-

-

765


  Write-off of deferred financing fees

1,585

(123)

-

-

-

1,462


  Loan penalties and fees

174

(135)

-

-

-

39


  Non-cash interest related to discount on Senior Notes

491

-

-

-

-

491


Unconsolidated joint ventures:








  Depreciation and amortization

27

-

-

-

-

27


Operations held for non-sale disposition:








  Depreciation and amortization

3,237

-

-

(3,237)

-

-


  Interest expense

5,182

-

-

(5,182)

-

-


  Interest expense - default rate

4,354

-

-

(4,354)

-

-


  Amortization of deferred financing fees

264

-

-

(264)

-

-


  Loan penalties and fees

597

-

-

(597)

-

-


Discontinued operations:








  Depreciation and amortization

124

-

-

-

(124)

-


  Interest expense

225

-

-

-

(225)

-


  Amortization of deferred financing fees

2

-

-

-

(2)

-


  Loan penalties and fees

48

-

-

-

(48)

-


EBITDA

77,305

-

907

(7,279)

(6,853)

64,080










Operations held for investment:








  Amortization of deferred stock compensation

1,648

-

-

-

-

1,648


  Impairment loss

1,943

-

-

-

-

1,943


Unconsolidated joint ventures:








  Amortization of deferred stock compensation

17

-

-

-

-

17


Discontinued operations:








  Gain on extinguishment of debt

(6,747)

-

-

-

6,747

-



(3,139)

-

-

-

6,747

3,608










Adjusted EBITDA

$  74,166

$                    -

$           907

$            (7,279)

$               (106)

$          67,688


















Pro Forma Reconciliation of Loss Attributable to Common Stockholders to FFO and Adjusted FFO


















Loss attributable to common stockholders

$ (31,157)

$              2,229

$           346

$              6,355

$            (6,454)

$        (28,681)


Operations held for investment:








  Real estate depreciation and amortization

46,553

-

561

-

-

47,114


  Amortization of lease intangibles

150

-

-

-

-

150


Operations held for non-sale disposition:








  Real estate depreciation and amortization

3,237

-

-

(3,237)

-

-


Discontinued operations:








  Real estate depreciation and amortization

124

-

-

-

(124)

-


FFO available to common stockholders

18,907

2,229

907

3,118

(6,578)

18,583










Operations held for investment:








  Interest expense - default rate

884

(884)

-

-

-

-


  Write-off of deferred financing fees

1,585

(123)

-

-

-

1,462


  Loan penalties and fees

174

(135)

-

-

-

39


  Impairment loss

1,943

-

-

-

-

1,943


Operations held for non-sale disposition:








  Interest expense - default rate

4,354

-

-

(4,354)

-

-


  Loan penalties and fees

597

-

-

(597)

-

-


Discontinued operations:








  Loan penalties and fees

48

-

-

-

(48)

-


  Gain on extinguishment of debt

(6,747)

-

-

-

6,747

-



2,838

(1,142)

-

(4,951)

6,699

3,444










Adjusted FFO available to common stockholders

$  21,745

$              1,087

$           907

$            (1,833)

$                121

$          22,027










FFO available to common stockholders per diluted share

$      0.19





$              0.19










Adjusted FFO available to common stockholders per diluted share

$      0.22





$              0.23










Basic weighted average shares outstanding

97,118





97,118


Shares associated with unvested restricted stock awards

379





379


Diluted weighted average shares outstanding (7)

97,497





97,497


























(1) Actual includes results for the 30 hotels held for investment, eight hotels held for non-sale disposition and two hotels held in receivership at June 30, 2010.


(2) Held for Investment includes only the interest and penalties associated with the Three Released Mass Mutual hotels. Hotel operations for these three
hotels are included in the "Actual" column.


(3) Reacquired Hotel includes only the hotel operations and excludes interest and penalties associated with the Renaissance Westchester while it was
in receivership prior to being reacquired by the Company on June 14, 2010.


(4) Non-Sale Disposition includes all hotel operations, interest and penalties for the Eight Mass Mutual hotels that are in the process of being transferred to a receiver.


(5) Discontinued Operations includes the W San Diego and Marriott Ontario Airport hotels that have been transferred to a receiver as of June 30, 2010.
It also includes the ownership expenses of Renaissance Westchester prior to June 14, 2010 when it was reacquired by the Company.


(6) Pro forma includes the 30 hotels held for investment by the Company at June 30, 2010.


(7) Diluted weighted average shares outstanding includes the Series C convertible preferred stock on a "non-converted" basis since such treatment is dilutive.











Sunstone Hotel Investors, Inc.


Pro Forma Reconciliation of Loss Attributable to Common Stockholders to Non-GAAP Financial Measures


(Unaudited and in thousands except per share amounts)













Pro Forma Reconciliation of Loss Attributable to Common Stockholders to EBITDA and Adjusted EBITDA





















Year Ended December 31, 2009




Held for

Reacquired

Non-Sale

Discontinued Operations




Actual (1)

Investment (2)

Hotel (3)

Disposition (4)

Receivership (5)

Disposals (6)

Pro Forma (7)











Loss attributable to common stockholders

$ (290,804)

$              4,504

$    (30,662)

$            98,220

$             109,689

$         18,515

$        (90,538)


Dividends paid on unvested restricted stock compensation

447

-

-

-

-

-

447


Series A and C preferred stock dividends

20,749

-

-

-

-

-

20,749


Operations held for investment:





-




  Depreciation and amortization

93,795

-

1,810

-

-

-

95,605


  Interest expense

71,940

(3,707)

-

-

-

-

68,233


  Interest expense - default rate

472

(472)

-

-

-

-

-


  Amortization of deferred financing fees

1,823

(118)

-

-

-

-

1,705


  Write-off of deferred financing fees

284

-

-

-

-

-

284


  Loan penalties and fees

207

(207)

-

-

-

-

-


  Non-cash interest related to discount on Senior Notes

1,813

-

-

-

-

-

1,813


Unconsolidated joint ventures:





-




  Depreciation and amortization

5,131

-

-

-

-

-

5,131


  Interest expense

2,614

-

-

-

-

-

2,614


  Amortization of deferred financing fees

192

-

-

-

-

-

192


Operations held for non-sale disposition:





-




  Depreciation and amortization

10,245

-

-

(10,245)

-

-

-


  Interest expense

11,039

-

-

(11,039)

-

-

-


  Interest expense - default rate

1,407

-

-

(1,407)

-

-

-


  Amortization of deferred financing fees

527

-

-

(527)

-

-

-


  Loan penalties and fees

615

-

-

(615)

-

-

-


Discontinued operations:





-




  Depreciation and amortization

7,020

-

-

-

(5,056)

(1,964)

-


  Interest expense

5,902

-

-

-

(5,902)

-

-


  Amortization of deferred financing fees

39

-

-

-

(39)

-

-


  Loan penalties and fees

3,169

-

-

-

(3,169)

-

-


EBITDA

(51,374)

-

(28,852)

74,387

95,523

16,551

106,235











Operations held for investment:









  Amortization of deferred stock compensation

4,055

-

-

-

-

-

4,055


  Gain on sale of assets

(375)

-

-

-

-

-

(375)


  Gain on extinguishment of debt

(54,506)

-

-

-

-

-

(54,506)


  Impairment loss

30,852

-

30,186

-

-

-

61,038


  Bad debt expense on corporate note receivable

5,557

-

-

-

-

-

5,557


Unconsolidated joint ventures:









  Amortization of deferred stock compensation

47

-

-

-

-

-

47


  Impairment loss

26,007

-

-

-

-

-

26,007


Operations held for non-sale disposition:









  Impairment loss

91,286

-

-

(91,286)

-

-

-


Discontinued operations:









  Loss on sale of assets

13,052

-

-

-

-

(13,052)

-


  Impairment loss

104,007

-

-

-

(99,089)

(4,918)

-












219,982

-

30,186

(91,286)

(99,089)

(17,970)

41,823











Adjusted EBITDA

$  168,608

$                    -

$        1,334

$          (16,899)

$                (3,566)

$         (1,419)

$        148,058




















Pro Forma Reconciliation of Loss Attributable to Common Stockholders to FFO and Adjusted FFO




















Loss attributable to common stockholders

$ (290,804)

$              4,504

$    (30,662)

$            98,220

$             109,689

$         18,515

$        (90,538)


Dividends paid on unvested restricted stock compensation

447

-

-

-

-

-

447


Operations held for investment:









  Real estate depreciation and amortization

93,248

-

1,810

-

-

-

95,058


  Gain on sale of assets

(375)

-

-

-

-

-

(375)


Unconsolidated joint ventures:









  Real estate depreciation and amortization

5,060

-

-

-

-

-

5,060


Operations held for non-sale disposition:









  Real estate depreciation and amortization

10,245

-

-

(10,245)

-

-

-


Discontinued operations:









  Real estate depreciation and amortization

7,020

-

-

-

(5,056)

(1,964)

-


  Loss on sale of assets

13,052

-

-

-

-

(13,052)

-


FFO available to common stockholders

(162,107)

4,504

(28,852)

87,975

104,633

3,499

9,652











Operations held for investment:









  Interest expense - default rate

472

(472)

-

-

-

-

-


  Write-off of deferred financing fees

284

-

-

-

-

-

284


  Loan penalties and fees

207

(207)

-

-

-

-

-


  Gain on extinguishment of debt

(54,506)

-

-

-

-

-

(54,506)


  Impairment loss

30,852

-

30,186

-

-

-

61,038


  Bad debt expense on corporate note receivable

5,557

-

-

-

-

-

5,557


Unconsolidated joint ventures:









  Impairment loss

26,007

-

-

-

-

-

26,007


Operations held for non-sale disposition:







-


  Interest expense - default rate

1,407

-

-

(1,407)

-

-

-


  Loan penalties and fees

615

-

-

(615)

-

-

-


  Impairment loss

91,286

-

-

(91,286)

-

-

-


Discontinued operations:







-


  Loan penalties and fees

3,169

-

-

-

(3,169)

-

-


  Impairment loss

104,007

-

-

-

(99,089)

(4,918)

-



209,357

(679)

30,186

(93,308)

(102,258)

(4,918)

38,380











Adjusted FFO available to common stockholders

$    47,250

$              3,825

$        1,334

$            (5,333)

$                 2,375

$         (1,419)

$          48,032











FFO available to common stockholders per diluted share

$       (2.32)






$              0.14











Adjusted FFO available to common stockholders per diluted share

$        0.68






$              0.69











Diluted weighted average shares outstanding (8)

69,820






69,820





























(1) Actual includes results for the 29 hotels held for investment, eight hotels held for non-sale disposition, three hotels held in receivership and three hotels sold during 2009.


(2) Held for Investment includes only the interest and penalties associated with the Three Released Mass Mutual hotels. Hotel operations for these three hotels are included
in the "Actual" column.


(3) Reacquired Hotel includes only the hotel operations and excludes interest and penalties associated with the Renaissance Westchester that was transferred to a receiver
in 2009 and reacquired by the Company in 2010.


(4) Non-Sale Disposition includes all hotel operations, interest and penalties for the Eight Mass Mutual hotels that are in the process of being transferred to a receiver.


(5) Receivership includes the W San Diego and Renaissance Westchester hotels that were transferred to a receiver in 2009 and the Marriott Ontario Airport that was
transferred to a receiver in 2010.


(6) Disposals include the Marriott Napa Valley, Marriott Riverside and  Hyatt Suites Atlanta Northwest hotels that were sold in 2009.


(7) Pro forma includes the 30 hotels held for investment by the Company at June 30, 2010.


(8) Diluted weighted average shares outstanding includes the Series C convertible preferred stock on a "non-converted" basis since such treatment is dilutive.












Click to view table full screen

Sunstone Hotel Investors, Inc.


Pro Forma Hotel EBITDA Margins


(Unaudited and in thousands except hotels and rooms)


































Three Months Ended June 30, 2010


Three Months Ended June 30, 2009



Actual (1)


Reacquired Hotel (2)


Pro Forma Total (3)


Actual (4)


Reacquired Hotel (5)


Pro Forma Total (6)


Number of Hotels

30




30


29


1


30


Number of Rooms

11,313




11,313


10,966


347


11,313















Hotel Pro Forma EBITDA Margin (7)

27.4%


11.1%


26.9%


26.5%


15.1%


26.2%















Hotel Revenues













    Room revenue

$ 108,323


$                        2,482


$                  110,805


$  101,214


$                        2,620


$                  103,834


    Food and beverage revenue

40,543


1,477


42,020


40,220


1,469


41,689


    Other operating revenue

8,147


113


8,260


9,223


138


9,361


Total Hotel Revenues

157,013


4,072


161,085


150,657


4,227


154,884















Hotel Expenses













    Room expense

26,104


712


26,816


24,313


736


25,049


    Food and beverage expense

29,158


1,158


30,316


29,057


1,154


30,211


    Other hotel expense

40,443


1,151


41,594


39,969


1,116


41,085


    General and administrative expense

18,360


599


18,959


17,423


584


18,007


Total Hotel Expenses

114,065


3,620


117,685


110,762


3,590


114,352















Adjusted Pro Forma Hotel EBITDA

42,948


452


43,400


39,895


637


40,532















Mass Mutual Eight Hotels:













    Revenues of operations held for non-sale disposition

20,158


-


20,158


21,575


-


21,575


    Operating expenses of operations held for non-sale disposition

(17,912)


-


(17,912)


(20,400)


-


(20,400)


    Goodwill impairment losses of operations held for non-sale disposition

-


-


-


(697)


-


(697)


Non-hotel operating income

796


-


796


715


-


715


Amortization of lease related costs

(150)


-


(150)


-


-


-


Management company transition costs

(85)


-


(85)


-


-


-


Prior year property tax supplementals and credits, net

-


-


-


450


-


450


Corporate overhead

(5,135)


-


(5,135)


(4,785)


-


(4,785)


Depreciation and amortization

(23,264)


-


(23,264)


(23,765)


-


(23,765)


Property and goodwill impairment losses

(1,943)


-


(1,943)


(27,237)


-


(27,237)


Operating Income (loss)

15,413


452


15,865


(14,249)


637


(13,612)















Equity in net earnings (losses) of unconsolidated joint ventures

163


-


163


(584)


-


(584)


Interest and other income

99


-


99


252


-


252


Interest expense

(17,015)


-


(17,015)


(19,498)


-


(19,498)


Interest expense of operations held for non-sale disposition

(4,986)


-


(4,986)


(2,892)


-


(2,892)


Gain on extinguishment of debt

-


-


-


26,559


-


26,559


Income (loss) from discontinued operations

6,634


-


6,634


(119,793)


-


(119,793)


Net Income (Loss)

$        308


$                           452


$                         760


$ (130,205)


$                           637


$                 (129,568)




























(1) Represents our ownership results for the 30 hotels held for investment as of the end of the period, excluding eight hotels included in the Mass Mutual portfolio, which 
have been reclassified as "Operations Held for Non-Sale Disposition" on our balance sheets and statements of operations, and the W San Diego and Marriott Ontario 
Airport, which have been reclassified as discontinued operations on our balance sheets and statements of operations.


(2) Represents operating results for the Renaissance Westchester while it was in receivership prior to being reacquired by the Company on June 14, 2010.







(3) Represents our ownership results for the 30 hotels held for investment as of the end of the period, plus results for the Renaissance Westchester during the period it 
was held in receivership, excluding eight hotels included in the Mass Mutual portfolio, which have been reclassified as "Operations Held for Non-Sale Disposition" on our 
balance sheets and statements of operations, and the W San Diego and Marriott Ontario Airport, which have been reclassified as discontinued operations on our balance
sheets and statements of operations.


(4) Represents our ownership results for the 29 hotels held for investment as of the end of the period, excluding eight hotels included in the Mass Mutual portfolio, 
which have been reclassified as "Operations Held for Non-Sale Disposition" on our balance sheets and statements of operations, and the W San Diego, Renaissance 
Westchester and Marriott Ontario Airport, which have been reclassified as discontinued operations on our balance sheets and statements of operations.


(5) Represents our ownership results for the Renaissance Westchester for the entire reporting period.










(6) Represents our ownership results for the 29 hotels held for investment as of the end of the period plus the Renaissance Westchester, excluding eight hotels included 
in the Mass Mutual portfolio, which have been reclassified as "Operations Held for Non-Sale Disposition" on our balance sheets and statements of operations, and the 
W San Diego and Marriott Ontario Airport, which have been reclassified as discontinued operations on our balance sheets and statements of operations.


(7) Hotel Pro Forma EBITDA Margin is calculated as Adjusted Pro Forma Hotel EBITDA divided by total hotel revenues.
























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Sunstone Hotel Investors, Inc.


Pro Forma Hotel EBITDA Margins


(Unaudited and in thousands except hotels and rooms)


































Six Months Ended June 30, 2010


Six Months Ended June 30, 2009



Actual (1)


Reacquired Hotel (2)


Pro Forma Total (3)


Actual (4)


Reacquired Hotel (5)


Pro Forma Total (6)


Number of Hotels

30




30


29


1


30


Number of Rooms

11,313




11,313


10,966


347


11,313















Hotel Pro Forma EBITDA Margin (7)

24.7%


10.9%


24.3%


25.3%


10.7%


24.9%















Hotel Revenues













    Room revenue

$   198,701


$                              4,931


$                         203,632


$    197,897


$                              5,022


$                         202,919


    Food and beverage revenue

78,751


3,114


81,865


81,257


2,605


83,862


    Other operating revenue

16,507


240


16,747


17,579


228


17,807


Total Hotel Revenues

293,959


8,285


302,244


296,733


7,855


304,588















Hotel Expenses













    Room expense

49,908


1,417


51,325


47,267


1,385


48,652


    Food and beverage expense

56,865


2,355


59,220


58,444


2,105


60,549


    Other hotel expense

79,432


2,403


81,835


80,861


2,385


83,246


    General and administrative expense

35,087


1,203


36,290


35,011


1,136


36,147


Total Hotel Expenses

221,292


7,378


228,670


221,583


7,011


228,594















Adjusted Pro Forma Hotel EBITDA

72,667


907


73,574


75,150


844


75,994















Mass Mutual Eight Hotels:













    Revenues of operations held for non-sale disposition

39,992


-


39,992


42,922


-


42,922


    Operating expenses of operations held for non-sale disposition

(35,950)


-


(35,950)


(39,260)


-


(39,260)


    Goodwill impairment losses of operations held for non-sale disposition

-


-


-


(3,007)


-


(3,007)


Non-hotel operating income

1,677


-


1,677


1,294


-


1,294


Amortization of lease related costs

(150)


-


(150)


-


-


-


Management company transition costs

(85)


-


(85)


-


-


-


Prior year property tax supplementals and credits, net

-


-


-


450


-


450


Corporate overhead

(9,715)


-


(9,715)


(10,492)


-


(10,492)


Depreciation and amortization

(46,822)


-


(46,822)


(47,289)


-


(47,289)


Property and goodwill impairment losses

(1,943)


-


(1,943)


(28,643)


-


(28,643)


Operating Income (loss)

19,671


907


20,578


(8,875)


844


(8,031)















Equity in net earnings (losses) of unconsolidated joint ventures

2