ALISO
VIEJO, Calif., Feb. 19, 2013--
Sunstone Hotel Investors, Inc. (the "Company" or "Sunstone") (NYSE: SHO) today announced results for the fourth
quarter and year ended December 31, 2012.
Fourth Quarter 2012 Operational
Results (as compared to Fourth Quarter 2011) (1):
- Comparable Hotel RevPAR increased 3.6% to $137.02.
- Comparable Hotel EBITDA Margin increased by 120 basis
points to 30.2%.
- Adjusted EBITDA increased by 6.6% to $68.2
million.
- Adjusted FFO per diluted share increased by 3.4% to $0.30.
- Income available to common stockholders was $3.6 million (vs. $43,000
in 2011).
- Income available to common stockholders per diluted share
was $0.03 (vs. zero in 2011).
Full Year 2012 Operational Results
(as compared to Full Year 2011) (1):
- Comparable Hotel RevPAR increased 5.6% to $139.22.
- Comparable Hotel EBITDA Margin increased by 110 basis
points to 28.9%.
- Adjusted EBITDA increased by 14.1% to $242.5 million.
- Adjusted FFO per diluted share increased by 16.1% to $1.01.
- Income available to common stockholders was $17.8 million (vs. $53.0
million in 2011).
- Income available to common stockholders per diluted share
was $0.14 (vs. $0.45
in 2011).
Ken Cruse,
Chief Executive Officer, stated, "In 2012 and thus far in 2013, we have
made solid progress against our plan to create significant shareholder
value while improving the quality and scale of our portfolio and
gradually deleveraging our balance sheet. We are currently working to
further improve the quality and competitiveness of our portfolio
through a number of high-quality renovations, and earlier this year we
completed the sale of our low RevPAR Rochester hotel and laundry
portfolio at an attractive valuation. Also in January, we continued to
improve our balance sheet by repaying our final $58
million of exchangeable senior notes and by initiating the par
redemption of our $176 million 8% Series
A Preferred securities. Upon completion of the Series A redemption, we
will have eliminated approximately $420 million
of balance sheet leverage over the past year, which puts us on a clear
path to achieve our long-term credit targets."
Mr. Cruse continued, "Our portfolio is
now comprised primarily of institutional grade hotels, well located
within key growth markets. Moreover, we now hold approximately $300 million of investable cash, a significant
portion of which we intend to deploy toward quality hotel acquisitions,
further improving the competitiveness and scale of our portfolio. With
the U.S. demand-to-supply ratio well above historical norms and our
portfolio running at nearly 80% occupancy, industry fundamentals are
constructive. We expect to see material growth in Hotel EBITDA as the
recovery in the lodging cycle continues."
(1)
|
Comparable
Hotel RevPAR and Comparable Hotel EBITDA Margin information presented
reflect the Company's Comparable 26 Hotel Portfolio, which includes all
hotels held for investment by the Company as of December 31, 2012, and
also includes prior ownership results as applicable in 2012 and 2011
for the Doubletree Guest Suites Times Square acquired by the Company in
January 2011, the JW Marriott New Orleans acquired by the Company in
February 2011, the Hilton San Diego Bayfront acquired by the Company in
April 2011, the Hyatt Chicago Magnificent Mile acquired by the Company
in June 2012 and the Hilton Garden Inn Chicago Downtown/Magnificent
Mile acquired by the Company in July 2012. Comparable Hotel EBITDA
Margin information excludes current and prior year net property tax and
CAM adjustments.
|
SELECTED
FINANCIAL DATA
|
($
in millions, except RevPAR, ADR and per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Three
Months Ended December 31,
|
|
Years
Ended December 31,
|
|
2012
|
2011
|
%
Change
|
|
2012
|
2011
|
%
Change
|
Total
Revenue
|
$ 233.0
|
$ 215.6
|
8.0%
|
|
$ 829.1
|
$ 721.8
|
14.9%
|
Comparable
Hotel RevPAR
|
$
137.02
|
$
132.28
|
3.6%
|
|
$
139.22
|
$
131.89
|
5.6%
|
Comparable
Hotel Occupancy
|
75.4%
|
74.5%
|
90
bps
|
|
79.2%
|
76.4%
|
280 bps
|
Comparable
Hotel ADR
|
$
181.73
|
$
177.56
|
2.3%
|
|
$
175.78
|
$
172.63
|
1.8%
|
|
|
|
|
|
|
|
|
Comparable
Hotel EBITDA Margin
|
30.2%
|
29.0%
|
120
bps
|
|
28.9%
|
27.8%
|
110 bps
|
|
|
|
|
|
|
|
|
Net
income
|
$ 11.1
|
$ 7.6
|
|
|
$ 49.6
|
$ 81.3
|
|
Income
available to common stockholders
|
$ 3.6
|
$ 0.0
|
|
|
$ 17.8
|
$ 53.0
|
|
Income
available to common stockholders per diluted share
|
$ 0.03
|
$ 0.00
|
|
|
$ 0.14
|
$ 0.45
|
|
EBITDA
|
$ 66.9
|
$ 63.7
|
|
|
$ 272.5
|
$ 292.7
|
|
Adjusted
EBITDA
|
$ 68.2
|
$ 63.9
|
|
|
$ 242.5
|
$ 212.5
|
|
FFO
|
$ 39.5
|
$ 33.3
|
|
|
$ 121.3
|
$ 167.4
|
|
Adjusted
FFO
|
$ 41.3
|
$ 34.6
|
|
|
$ 128.6
|
$ 102.1
|
|
FFO
per diluted share (1)
|
$ 0.29
|
$ 0.28
|
|
|
$ 0.95
|
$ 1.43
|
|
Adjusted
FFO per diluted share (1)
|
$ 0.30
|
$ 0.29
|
|
|
$ 1.01
|
$ 0.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflects
the Series C convertible preferred stock on a "non-converted" basis. On
an "as-converted" basis, FFO per diluted share is $0.29 and $0.30,
respectively, for the three months ended December 31, 2012 and 2011,
and $0.97 and $1.43, respectively, for the years ended December 31,
2012 and 2011. On an "as-converted" basis, Adjusted FFO per diluted
share is $0.31 for both the three months ended December 31, 2012 and
2011, and $1.02 and $0.89, respectively, for the years ended December
31, 2012 and 2011.
|
Disclosure regarding the non-GAAP
financial measures in this release is included on page 7.
Reconciliations of non-GAAP financial measures to the most comparable
GAAP measure for each of the periods presented are included on pages 10
through 14 of this release.
The Company's actual results for the
quarter and year ended December 31, 2012
compare to its guidance provided on November 2,
2012 as follows:
Metric
(unaudited)
|
Quarter
Ended December 31, 2012 Guidance (1)
|
Quarter
Ended December 31, 2012 Actual Results
|
Performance
Relative to Prior Guidance Midpoint
|
Comparable
Hotel RevPAR
|
+1.5%
- 3.0%
|
3.6%
|
+1.35%
|
Net
Income (Loss) ($ millions) (2)
|
$(1)
- $4
|
$11
|
$10
|
Adjusted
EBITDA ($ millions)
|
$58
- $63
|
$68
|
$8
|
Adjusted
FFO ($ millions)
|
$31
- $36
|
$41
|
$8
|
Adjusted
FFO per diluted share
|
$0.23
- $0.27
|
$0.30
|
$0.05
|
Diluted
Weighted Average Shares Outstanding
|
135,700,000
|
135,622,000
|
(78,000)
|
|
|
|
|
|
|
|
|
|
|
Metric
(unaudited)
|
FY
2012 Guidance (1)
|
FY
2012 Actual Results
|
Performance
Relative to Prior Guidance Midpoint
|
Comparable
Hotel RevPAR
|
+4.5%
- 5.0%
|
5.6%
|
+0.85%
|
Net
Income ($ millions) (2)
|
$45
- $50
|
$50
|
$3
|
Adjusted
EBITDA ($ millions)
|
$232
- $237
|
$243
|
$9
|
Adjusted
FFO ($ millions)
|
$118
- $123
|
$129
|
$9
|
Adjusted
FFO per diluted share
|
$0.93
- $0.97
|
$1.01
|
$0.06
|
Diluted
Weighted Average Shares Outstanding
|
127,500,000
|
127,301,000
|
(199,000)
|
|
|
|
|
|
(1)
|
Reflects
guidance presented on November 2, 2012, including anticipated Hurricane
Sandy hotel revenue and EBITDA disruption of $3.0 million to $6.0
million and $2.0 million to $4.0 million, respectively, for the fourth
quarter and full year, which were higher than actual disruption.
|
(2)
|
Reflects
net income (loss) adjusted for the impact of income tax expense
associated with the application of net operating loss carryforwards.
|
Balance Sheet/Liquidity Update
On January 22,
2013, the Company's operating partnership, Sunstone Hotel
Partnership, LLC, completed the previously announced repurchase and
redemption of the remaining $58.0 million
balance of its 4.60% Exchangeable Senior Notes due 2027 (the "Senior
Notes") for a price of $58.0 million,
including accrued interest of approximately $23,000.
On January 28,
2013, the Company announced its intention to redeem all
7,050,000 shares of its 8% Series A Cumulative Redeemable Preferred
Stock (the "Series A Preferred Stock") for $176.3
million, plus accrued dividends to and including the date of
redemption totaling $2.3 million. The
Company will redeem the Series A Preferred Stock on March 1, 2013, using cash received from the
common stock offering announced on January 28,
2013. After the redemption date, the Company will have no
outstanding shares of Series A Preferred Stock, and all rights of the
holders of such shares will be terminated. Because the redemption of
the Series A Preferred Stock is a redemption in full, trading of the
Series A Preferred Stock on the New York Stock Exchange will cease
after the redemption date.
On February 1,
2013, the Company issued 22,000,000 shares of its common stock
and received approximately $256.7 million
in proceeds (the "Offering"). The Company will use a portion of these
proceeds to redeem all of its Series A Preferred Stock (as described
above), and will use the remaining proceeds for potential future
acquisitions, and for other general corporate purposes, including
working capital and capital investment in its portfolio. The
underwriter has an option to purchase up to 3,300,000 additional
shares, which expires on February 28, 2013.
As of December
31, 2012, the Company had approximately $235.6
million of cash and cash equivalents, including restricted cash
of $78.4 million. At the completion of
the previously announced portfolio sale of four hotels and a commercial
laundry facility in Rochester, Minnesota (the "Rochester Portfolio
Sale"), the Company received approximately $20.0
million of cash and deposited approximately $145.0 million with a 1031 exchange
accommodator to facilitate a potential future like-kind exchange.
Adjusting for the funds received from the Rochester Portfolio Sale and
the Offering, the defeasance and prepayment of the debt secured by the
Kahler Grand and the commercial laundry, the repurchase of the
remaining $58.0 million of the Senior
Notes and the pending redemption of the Series A Preferred Stock, the
Company's pro forma cash balance as of December
31, 2012 was approximately $420.0 million
of cash and cash equivalents, including restricted cash of
approximately $80.0 million.
As of December
31, 2012, the Company had total assets of approximately $3.1 billion, including $2.7
billion of net investments in hotel properties, total
consolidated debt included in continuing operations of $1.4 billion and stockholders' equity of $1.5 billion.
Dispositions Update
On January 25,
2013, the Company completed the Rochester Portfolio Sale for a
gross sales price of $230.0 million. The
four hotels included the 660-room Kahler Grand, the 271-room Kahler Inn
& Suites, the 202-room Marriott Rochester
and the 89-room Residence Inn by Marriott
Rochester. The Company has retained a $25.0
million 11% dividend yield preferred equity investment in the
entity that owns the four hotels. In addition, as previously announced,
the Company defeased the outstanding $26.7
million mortgage secured by the Kahler Grand for a total cost of
approximately $30.0 million, and prepaid
the $0.4 million loan secured by the
laundry facility. Though the Company intends to reinvest $145.0 million of the net proceeds from the
sale through a like-kind exchange, no assurances can be given as to the
timing or likelihood of such reinvestment.
Capital Improvements
The Company invested $32.7 million into capital improvements of its
portfolio during the fourth quarter of 2012, and $109.3
million during the year ended December
31, 2012.
The Company began renovating several of
its hotels in the fourth quarter 2012 and will continue these
renovations during 2013. The Company incurred approximately $3.4 million of revenue disruption during full
year 2012 and expects to incur approximately $8.0
million to $10.0 million of revenue disruption during full year
2013. The Company's estimates for full-year renovation-related revenue
disruption have been increased from the previously announced range of $6.0 million to $8.0 million in part due to
the acceleration of the rooms renovations at the Renaissance Long Beach
and the Renaissance Orlando, both now scheduled to commence during the
fourth quarter of 2013. The majority of the 2013 displacement is
expected to occur during the first half of 2013. Significant
renovations in-process as of the first quarter 2013 include:
- Hilton Times Square: The Company expects to invest
approximately $15.0 million to fully
renovate all guestrooms, guest bathrooms and corridors of the 460-room
Hilton Times Square, creating a rich and appealing new rooms product.
The renovation commenced in January 2013
and is expected to be completed during the second quarter 2013.
- Hyatt Chicago Magnificent Mile: The Company expects
to invest approximately $25.0 million on
a complete renovation and repositioning of the 417-room Hyatt Chicago
Magnificent Mile. The complete renovation will include all public
spaces and guestrooms/bathrooms, elevating the hotel to a sophisticated
destination catering to high-rated business transient and group
travelers. The renovation commenced during the fourth quarter 2012 and
is expected to be completed during the third quarter 2013.
- Hyatt Regency Newport Beach: The Company expects to
invest approximately $12.0 million to
renovate all guestrooms and recreation facilities, as well as certain
public spaces of the 403-room Hyatt Regency Newport Beach, establishing
the hotel as a high quality resort destination catering to a broad
range of business, leisure and group travelers. The renovation
commenced during the fourth quarter 2012 and is expected to be
completed during the second quarter 2013.
- Renaissance Westchester:
The Company expects to invest approximately $12.0
million to renovate all guestrooms and public spaces of the
347-room Renaissance Westchester, transforming the rooms and public
spaces into stylish yet functional meeting, socializing and relaxing
venues. The renovation commenced during the fourth quarter 2012 and is
expected to be completed during the second quarter 2013.
2013 Outlook
The Company is providing guidance at
this time, but does not undertake to make updates for any developments
in its business or changes in the operating environment. Achievement of
the anticipated results is subject to risks and uncertainties,
including those disclosed in the Company's filings with the Securities
and Exchange Commission. The Company's guidance does not take into
account the impact of any future hotel acquisitions, dispositions,
re-brandings, management changes, transition costs, prior-year property
tax assessments and/or credits, debt repurchases or financings during
2013. The Company expects to apply its remaining net operating loss
carryforwards to reduce taxable income in 2013. The application of the
net operating loss carryforwards is viewed as a non-recurring event and
therefore the Company has treated any state and federal taxes
associated with the application of net operating loss carryforwards as
one-time expenses and added them back to Adjusted FFO.
For the first quarter of 2013, the
Company expects:
Metric
|
Quarter
Ended March 31, 2013 Guidance
|
Comparable
Hotel RevPAR
|
+2.0%
- 3.0%
|
Net
Loss ($ millions)
|
$(9)
- $(7)
|
Adjusted
EBITDA ($ millions)
|
$36
- $38
|
Adjusted
FFO ($ millions)
|
$11
- $13
|
Adjusted
FFO per diluted share
|
$0.07
- $0.09
|
Diluted
Weighted Average Shares Outstanding
|
151,000,000
|
|
|
For the full year 2013, the Company
expects:
|
|
Metric
|
Year
Ended December 31, 2013 Guidance
|
Comparable
Hotel RevPAR
|
+3.5%
- 5.5%
|
Net
Income ($ millions)
|
$40
- $52
|
Adjusted
EBITDA ($ millions)
|
$224
- $236
|
Adjusted
FFO ($ millions)
|
$132
- $144
|
Adjusted
FFO per diluted share
|
$0.84
- $0.92
|
Diluted
Weighted Average Shares Outstanding
|
157,000,000
|
First quarter and full year 2013
guidance is based in part on the following assumptions:
- No impact from the reinvestment of currently available
cash.
- While no assurances can be made as to the timing,
amount, valuation or nature of future hotel investments, the Company
plans to invest between $250.0 million and
$300.0 million of its current cash balance towards hotel
acquisitions during 2013. Assuming acquisitions are completed at
current market multiples (between 13.0x and 14.0x 2013 EBITDA), and
assuming such acquisitions are unencumbered of debt, such acquisitions
would be expected to generate between $18.0
million and $23.0 million of additional Adjusted EBITDA and
approximately $0.11 to $0.15 of
additional Adjusted FFO per diluted share on a full year, pro forma
basis. The Company will provide information regarding the timing and
current year earnings impact of any hotel investments when and if such
investments are consummated.
- The issuance of 22,000,000 shares of common stock on February 1, 2013.
- The redemption of all 7,050,000 shares of the Company's
Series A Preferred Stock on March 1, 2013.
- Full year capital investment of $100.0
million to $120.0 million.
- Hotel revenue disruption of $8.0
million to $10.0 million related to renovation projects, with
approximately $6.0 million to $7.0 million
of renovation disruption occurring in the first quarter (primarily
related to renovations at the Hilton Times Square and Hyatt Chicago
Magnificent Mile).
- First quarter renovation-related hotel RevPAR disruption of
approximately 475 to 500 basis points.
- Full year renovation-related hotel RevPAR disruption of
approximately 100 to 125 basis points.
- Full year comparable Hotel EBITDA Margin expansion of
approximately 50 to 100 basis points.
- Full year corporate overhead expense (excluding stock
amortization and one-time expenses related to future acquisition
closing costs) of $21.0 million to $22.0 million.
- Full year interest expense of approximately $70.0 million to $72.0 million, including $3.0 million in amortization of deferred
financing fees.
- Full year preferred dividends of approximately $18.0 million for the Series C cumulative
convertible redeemable preferred stock, the Series D cumulative
redeemable preferred stock and the Series A Preferred Stock through the
March 1, 2013 redemption date.
Executive Promotions
The Company has made the following
executive promotions effective as of February 15,
2013:
John Arabia
promoted from EVP of Corporate Strategy & Chief Financial Officer
to President. Mr. Arabia joined Sunstone in April of 2011 and has
provided strong leadership of Sunstone's finance function, while adding
depth and perspective to Sunstone's strategic planning process and
other disciplines. Mr. Arabia was instrumental in developing and
executing on Sunstone's long term financial plan which has resulted in
a material improvement in the Company's leverage profile and a
reduction in the Company's cost of capital. In his new role, Mr. Arabia
will continue to oversee Sunstone's finance, investor relations and
strategic planning functions. Additionally, Mr. Arabia will be
responsible for identifying and executing certain value-adding
transactions and will play a significant role in the Company's
Portfolio Management process. Mr. Arabia will serve as a member of the
Company's Portfolio Management and Investment Committees. Mr. Arabia
will report directly to Mr. Cruse.
Bryan Giglia
promoted from SVP Finance to SVP and Chief Financial Officer. Mr.
Giglia joined Sunstone in March of 2004 and has served as a key leader
in Sunstone's finance department for nine years. During that time Mr.
Giglia has exhibited solid command of all of Sunstone's finance-related
functions and has distinguished himself as a key member of Sunstone's
leadership team. In his new role, Mr. Giglia will be responsible for
overseeing all facets of the Company's corporate finance, accounting
and tax functions. Additionally, Mr. Giglia will serve as a member of
the Company's Portfolio Management and Investment Committees. Mr.
Giglia will report directly to Mr. Arabia.
Robert
Springer promoted from SVP Acquisitions to SVP and Chief
Investment Officer. Mr. Springer joined Sunstone in May of 2011 and
has materially enhanced Sunstone's acquisitions and dispositions
function by adding additional decision support tools, improving
Sunstone's screening process and incorporating a new multi-departmental
deal review process. In his new role, Mr. Springer will continue to
oversee all aspects of the Company's acquisitions and dispositions
process. Additionally, Mr. Springer will serve as a member of the
Company's Portfolio Management and Investment Committees. Mr. Springer
will report directly to Mr. Cruse.
Lindsay Monge
promoted from SVP and Corporate Treasurer to SVP and Chief
Administrative Officer, Secretary and Treasurer. Mr. Monge joined
Sunstone in July of 2000 and has served as a key leader at Sunstone for
over twelve years. Mr. Monge's role spans many disciplines, including
treasury, risk management, human resources and information technology.
In his new role, Mr. Monge will continue to oversee the Company's
treasury, risk management, human resources and information technology
departments. Additionally, Mr. Monge will serve as a member of the
Company's Portfolio Management and Investment Committees. Mr. Monge
will report directly to Mr. Arabia.
David Sloan
promoted from VP Legal to SVP and General Counsel. Mr. Sloan joined
Sunstone in February of 2007 and has served as a key leader in
Sunstone's legal department for over six years. During that time Mr.
Sloan has developed a solid command of all of Sunstone's legal and
transaction-related functions and has distinguished himself as a key
member of Sunstone's leadership team. In his new role, Mr. Sloan will
be responsible for managing third party legal advisors and overseeing
all legal aspects of Sunstone's transactional, contractual, corporate
and reporting functions. Additionally, Mr. Sloan will serve as a member
of the Company's Portfolio Management and Investment Committees. Mr.
Sloan will report directly to Mr. Cruse.
Mr. Cruse stated, "In 2011, we
redefined Sunstone. We added a number of talented new members to our
leadership team; we established a new long term vision and new core
values; and we fostered a new corporate culture rooted in teamwork,
collaboration, discipline and strategic focus. We also developed a new,
cycle-appropriate strategy aimed at creating significant shareholder
value while improving the quality and scale of our portfolio and
gradually deleveraging our balance sheet. Over the past two years, our
senior leadership team has evolved into a cohesive and
highly-productive unit. As part of Sunstone's continued evolution, it
gives me great pleasure to announce a number of senior leadership
promotions. Our team, vision and strategic plan are now fully in place,
and I could not be more enthusiastic about Sunstone's future, nor could
I be more proud to be part of such a deep and talented organization."
Dividend Update
On February 15,
2013, the Company's Board of Directors declared a cash dividend
of $0.50 per share payable to its Series
D 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 or before April 15, 2013
to stockholders of record on March 31,
2013. No dividend was declared on the Company's common stock, as the
Company intends to deploy excess cash flow from operations toward
internal renovation investments and gradual deleveraging.
Subject to certain limitations, the
Company intends to make dividends on its stock in amounts equivalent to
100% of its annual taxable income. The Company expects to apply its
remaining net operating loss carryforwards to reduce its taxable income
in 2013, which will affect the level of potential common stock
dividends declared for 2013. The level of any future dividends will be
determined by the Company's Board of Directors after considering
taxable income projections, expected capital requirements, risks
affecting the Company's business and in context of the Company's
leverage-reduction initiatives. As a result, common stock dividends may
be made in the form of cash or a combination of cash and stock
consistent with Internal Revenue Service guidelines.
Supplemental Disclosures
Contemporaneous with this release, the
Company has furnished a Form 8-K with unaudited financial information.
This additional information is being provided as a supplement to
information prepared in accordance with generally accepted accounting
principles. The Company undertakes no obligation to update any of the
information provided to conform to actual results or changes in the
Company's portfolio, capital structure or future expectations.
Earnings Call
The Company will host a conference call
to discuss fourth quarter and full year 2012 on February
20, 2013, at 12:00 p.m. EST (9:00 a.m. PST). A live web cast of the call
will be available via the Investor Relations section of the Company's
website. Alternatively, investors may dial 1-888-549-7750 (for domestic
callers) or 1-480-629-9722 (for international callers). 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
has interests in 26 hotels comprised of 11,632 rooms. Sunstone's hotels
are primarily in the upper upscale segment and are operated under
nationally recognized brands, such as Marriott, Hilton, Hyatt, Fairmont
and Sheraton. For further information, please visit Sunstone's website
at www.sunstonehotels.com.
Sunstone's mission is to create
meaningful value for our stockholders by becoming the premier hotel
owner. Our values include transparency, trust, ethical conduct,
communication and discipline. Our goal is to improve the quality and
scale of our portfolio while methodically deleveraging our balance
sheet. As demand for lodging generally fluctuates with the overall
economy (we refer to these changes in demand as the lodging cycle), we
seek to employ a balanced, cycle-appropriate corporate strategy that
encompasses the following:
- Proactive portfolio management;
- Intensive asset management;
- Disciplined external growth; and
- Measured balance sheet improvement.
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; international, national and local economic and business
conditions, including the likelihood of a 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 February 19, 2013, 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.com and 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: Earnings Before Interest
Expense, Taxes, Depreciation and Amortization, or EBITDA; Adjusted
EBITDA (as defined below); Funds From Operations, or FFO; Adjusted FFO
(as defined below); and comparable hotel EBITDA and comparable hotel
EBITDA margin.
EBITDA represents net income (loss)
excluding: non-controlling interests; interest expense; provision for
income taxes, including income taxes applicable to sale of assets; and
depreciation and amortization. In addition, we have presented Adjusted
EBITDA, which includes EBITDA but excludes: amortization of deferred
stock compensation; the impact of any gain or loss from asset sales;
impairment charges; prior year property tax and other adjustments; and
any 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 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. A reconciliation of net income to EBITDA and Adjusted
EBITDA is set forth on page 10. Reconciliations and the components of
comparable hotel EBITDA and comparable hotel EBITDA margin are set
forth on pages 13 and 14. We believe comparable hotel EBITDA and
comparable 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 net
income (loss) (computed in accordance with GAAP), excluding
non-controlling interests, gains and losses from sales of property,
plus real estate-related depreciation and amortization (excluding
amortization of deferred financing costs) and real estate-related
impairment losses, and after adjustment for unconsolidated partnerships
and joint ventures. We also present Adjusted FFO, which includes FFO
but excludes penalties, written-off deferred financing costs, non-real
estate-related impairment losses, income tax provisions and any 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. A reconciliation of
net income to FFO and Adjusted FFO is set forth on page 10.
The revenue and expense items
associated with BuyEfficient and other miscellaneous non-hotel items
have been excluded in presenting comparable hotel EBITDA margins.
Management believes the calculation of comparable hotel EBITDA results
in a more accurate presentation of hotel EBITDA margins of the
Company's 26 comparable hotels. See pages 13 and 14 for reconciliations
of comparable hotel EBITDA to the most comparable GAAP measure. Our 26
comparable hotels include all hotels held for investment as of December 31, 2012, and also includes prior
ownership results as applicable in 2011 and 2012 for the Doubletree
Guest Suites Times Square acquired by the Company in January 2011, the JW Marriott New Orleans
acquired by the Company in February 2011,
the Hilton San Diego Bayfront acquired by the Company in April 2011, the Hyatt Chicago Magnificent Mile
acquired by the Company in June 2012 and
the Hilton Garden Inn Chicago Downtown/Magnificent Mile acquired by the
Company in July 2012.
We caution investors that amounts
presented in accordance with our definitions of EBITDA, Adjusted
EBITDA, FFO, Adjusted FFO, comparable hotel EBITDA and comparable 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, comparable hotel EBITDA and comparable 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, comparable hotel EBITDA and comparable 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, comparable hotel EBITDA and comparable 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 better indicators 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.
For Additional Information:
Bryan Giglia
Sunstone Hotel Investors, Inc.
(949) 382-3036
Sunstone
Hotel Investors, Inc.
|
Consolidated
Balance Sheets
|
(In
thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
2012
|
|
2011
|
|
|
|
|
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
|
Cash
and cash equivalents
|
$
157,217
|
|
$
149,198
|
|
Restricted
cash
|
78,394
|
|
55,359
|
|
Accounts
receivable, net
|
27,498
|
|
29,677
|
|
Inventories
|
1,377
|
|
1,210
|
|
Prepaid
expenses
|
10,739
|
|
9,834
|
|
Assets
held for sale, net
|
132,335
|
|
279,945
|
Total
current assets
|
407,560
|
|
525,223
|
|
|
|
|
|
Investment
in hotel properties, net
|
2,681,877
|
|
2,532,232
|
Deferred
financing fees, net
|
11,931
|
|
14,340
|
Goodwill
|
9,405
|
|
9,405
|
Other
assets, net
|
25,902
|
|
20,040
|
|
|
|
|
|
Total
assets
|
$
3,136,675
|
|
$
3,101,240
|
|
|
|
|
|
Liabilities
and Equity
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable and accrued expenses
|
$
22,646
|
|
$
24,848
|
|
Accrued
payroll and employee benefits
|
23,734
|
|
20,727
|
|
Due to
Third-Party Managers
|
3,663
|
|
3,378
|
|
Dividends
payable
|
7,437
|
|
7,437
|
|
Other
current liabilities
|
30,304
|
|
25,392
|
|
Current
portion of notes payable
|
76,723
|
|
49,505
|
|
Notes
payable of assets held for sale
|
27,270
|
|
153,587
|
|
Liabilities
of assets held for sale
|
8,228
|
|
11,064
|
Total
current liabilities
|
200,005
|
|
295,938
|
|
|
|
|
|
Notes
payable, less current portion
|
1,286,666
|
|
1,367,385
|
Capital
lease obligations, less current portion
|
15,621
|
|
-
|
Other
liabilities
|
15,070
|
|
12,623
|
Total
liabilities
|
1,517,362
|
|
1,675,946
|
|
|
|
|
|
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
December 31, 2012 and December 31, 2011, liquidation
|
|
|
|
|
preference
of $24.375 per share
|
100,000
|
|
100,000
|
|
|
|
|
|
Equity:
|
|
|
|
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 December 31, 2012 and December 31, 2011, stated at
liquidation preference of $25.00 per share
|
176,250
|
|
176,250
|
|
8.0%
Series D Cumulative Redeemable Preferred Stock, 4,600,000 shares issued
and outstanding at December 31, 2012 and December 31, 2011, stated at
liquidation preference of $25.00 per share
|
115,000
|
|
115,000
|
|
Common
stock, $0.01 par value, 500,000,000 shares authorized, 135,237,438
shares issued and outstanding at December 31, 2012 and 117,265,090
shares issued and outstanding at December 31, 2011
|
1,352
|
|
1,173
|
|
Additional
paid in capital
|
1,493,397
|
|
1,312,566
|
|
Retained
earnings
|
158,376
|
|
110,580
|
|
Cumulative
dividends
|
(475,144)
|
|
(445,396)
|
|
Accumulated
other comprehensive loss
|
(5,335)
|
|
(4,916)
|
Total
stockholders' equity
|
1,463,896
|
|
1,265,257
|
Non-controlling
interest in consolidated joint ventures
|
55,417
|
|
60,037
|
Total
equity
|
1,519,313
|
|
1,325,294
|
|
|
|
|
|
Total
liabilities and equity
|
$
3,136,675
|
|
$
3,101,240
|
|
|
|
|
|
Sunstone
Hotel Investors, Inc.
|
Consolidated
Statements of Operations
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Years Ended December 31,
|
|
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Room
|
|
|
|
|
$
160,817
|
|
$
147,073
|
|
$
576,146
|
|
$
501,183
|
Food
and beverage
|
|
|
|
|
57,798
|
|
55,635
|
|
200,810
|
|
175,103
|
Other
operating
|
|
|
|
|
14,352
|
|
12,938
|
|
52,128
|
|
45,508
|
Total revenues
|
|
|
|
|
232,967
|
|
215,646
|
|
829,084
|
|
721,794
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
Room
|
|
|
|
|
40,910
|
|
37,338
|
|
147,932
|
|
128,225
|
Food
and beverage
|
|
|
|
|
39,333
|
|
37,702
|
|
139,106
|
|
126,139
|
Other
operating
|
|
|
|
|
4,391
|
|
4,007
|
|
16,162
|
|
14,004
|
Advertising and promotion
|
|
|
|
|
12,096
|
|
11,368
|
|
42,474
|
|
37,226
|
Repairs and maintenance
|
|
|
|
|
9,251
|
|
8,658
|
|
32,042
|
|
29,067
|
Utilities
|
|
|
|
|
6,760
|
|
7,153
|
|
25,596
|
|
25,537
|
Franchise costs
|
|
|
|
|
8,644
|
|
7,493
|
|
30,067
|
|
25,595
|
Property tax, ground lease and insurance
|
|
|
|
|
16,587
|
|
16,417
|
|
66,830
|
|
58,010
|
Property general and administrative
|
|
|
|
|
26,229
|
|
25,049
|
|
94,642
|
|
85,293
|
Corporate overhead
|
|
|
|
|
5,430
|
|
4,766
|
|
24,316
|
|
25,453
|
Depreciation and amortization
|
|
|
|
|
34,339
|
|
31,126
|
|
130,907
|
|
113,708
|
Impairment loss
|
|
|
|
|
-
|
|
-
|
|
-
|
|
10,862
|
Total operating expenses
|
|
|
|
|
203,970
|
|
191,077
|
|
750,074
|
|
679,119
|
Operating income
|
|
|
|
|
28,997
|
|
24,569
|
|
79,010
|
|
42,675
|
Equity in earnings of unconsolidated joint ventures
|
|
|
|
|
-
|
|
-
|
|
-
|
|
21
|
Interest and other income
|
|
|
|
|
142
|
|
145
|
|
297
|
|
3,115
|
Interest expense
|
|
|
|
|
(18,721)
|
|
(20,051)
|
|
(76,821)
|
|
(74,195)
|
Loss
on extinguishment of debt
|
|
|
|
|
-
|
|
-
|
|
(191)
|
|
-
|
Gain
on remeasurement of equity interests
|
|
|
|
|
-
|
|
-
|
|
-
|
|
69,230
|
Income before income taxes and discontinued operations
|
|
|
|
|
10,418
|
|
4,663
|
|
2,295
|
|
40,846
|
Income tax provision
|
|
|
|
|
(1,148)
|
|
-
|
|
(1,148)
|
|
-
|
Income from continuing operations
|
|
|
|
|
9,270
|
|
4,663
|
|
1,147
|
|
40,846
|
Income from discontinued operations
|
|
|
|
|
1,844
|
|
2,925
|
|
48,410
|
|
40,453
|
Net income
|
|
|
|
|
11,114
|
|
7,588
|
|
49,557
|
|
81,299
|
Income from consolidated joint venture attributable to non-controlling
interest
|
|
|
|
|
(67)
|
|
(99)
|
|
(1,761)
|
|
(312)
|
Distributions to non-controlling interest
|
|
|
|
|
(7)
|
|
(8)
|
|
(31)
|
|
(30)
|
Preferred stock dividends
|
|
|
|
|
(7,437)
|
|
(7,437)
|
|
(29,748)
|
|
(27,321)
|
Undistributed income allocated to unvested restricted stock
compensation
|
|
|
|
|
(41)
|
|
(1)
|
|
(203)
|
|
(636)
|
Income available to common stockholders
|
|
|
|
|
$ 3,562
|
|
$ 43
|
|
$
17,814
|
|
$
53,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted per share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations available (attributable) to
common stockholders
|
|
$ 0.01
|
|
$
(0.02)
|
|
$
(0.24)
|
|
$ 0.11
|
Income from discontinued operations
|
|
|
|
|
0.02
|
|
0.02
|
|
0.38
|
|
0.34
|
Basic
and diluted income available to common stockholders per common share
|
|
|
|
|
$ 0.03
|
|
$ -
|
|
$ 0.14
|
|
$ 0.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted average common shares outstanding
|
|
|
|
|
135,237
|
|
117,265
|
|
127,027
|
|
117,206
|
|
|
|
|
|
|
|
|
|
|
|
|
Sunstone
Hotel Investors, Inc.
|
Reconciliation
of Net Income to Non-GAAP Financial Measures
|
(Unaudited
and in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Net Income to EBITDA and Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Years
Ended
|
|
December
31,
|
|
December
31,
|
|
2012
|
2011
|
|
2012
|
2011
|
|
|
|
|
|
|
Net
income
|
$
11,114
|
$ 7,588
|
|
$
49,557
|
$
81,299
|
Operations
held for investment:
|
|
|
|
|
|
Depreciation and amortization
|
34,339
|
31,126
|
|
130,907
|
113,708
|
Amortization of lease intangibles
|
1,143
|
1,029
|
|
4,319
|
3,979
|
Interest expense
|
17,757
|
18,252
|
|
71,664
|
67,319
|
Amortization of deferred financing fees
|
886
|
944
|
|
3,690
|
3,138
|
Write-off of deferred financing fees
|
-
|
21
|
|
3
|
21
|
Non-cash interest related to discount on Senior Notes
|
267
|
270
|
|
1,058
|
1,062
|
Non-cash interest related to (gain) loss on derivatives
|
(189)
|
564
|
|
406
|
2,655
|
Income tax provision
|
1,148
|
-
|
|
1,148
|
-
|
Non-controlling
interests:
|
|
|
|
|
|
Income from consolidated joint venture attributable to non-controlling
interest
|
(67)
|
(99)
|
|
(1,761)
|
(312)
|
Depreciation and amortization
|
(1,424)
|
(1,416)
|
|
(5,685)
|
(4,014)
|
Interest expense
|
(549)
|
(557)
|
|
(2,252)
|
(1,562)
|
Amortization of deferred financing fees
|
(56)
|
(57)
|
|
(224)
|
(160)
|
Non-cash interest related to gain (loss) on derivative
|
-
|
1
|
|
(1)
|
(31)
|
Unconsolidated
joint ventures:
|
|
|
|
|
|
Depreciation and amortization
|
-
|
-
|
|
-
|
3
|
Discontinued
operations:
|
|
|
|
|
|
Depreciation and amortization
|
2,182
|
3,762
|
|
13,164
|
16,188
|
Amortization of lease intangibles
|
-
|
7
|
|
14
|
28
|
Interest expense
|
380
|
2,205
|
|
6,231
|
9,191
|
Amortization of deferred financing fees
|
7
|
24
|
|
74
|
104
|
Write-off of deferred financing fees
|
-
|
42
|
|
185
|
42
|
EBITDA
|
66,938
|
63,706
|
|
272,497
|
292,658
|
|
|
|
|
|
|
Operations
held for investment:
|
|
|
|
|
|
Amortization of deferred stock compensation
|
812
|
575
|
|
3,466
|
2,745
|
Non-cash straightline lease expense
|
694
|
696
|
|
2,777
|
2,398
|
Capital lease obligation interest - cash ground rent
|
(351)
|
-
|
|
(819)
|
-
|
(Gain) loss on sale of assets
|
(4)
|
(10)
|
|
18
|
(83)
|
Gain
on remeasurement of equity interests
|
-
|
-
|
|
-
|
(69,230)
|
Loss
on extinguishment of debt
|
-
|
-
|
|
191
|
-
|
Closing costs - completed acquisitions
|
-
|
31
|
|
1,965
|
3,403
|
Impairment loss
|
-
|
-
|
|
-
|
10,862
|
Lawsuit settlement costs, net
|
-
|
-
|
|
158
|
1,553
|
Prior
year property tax and CAM adjustments, net
|
-
|
-
|
|
621
|
-
|
Hotel
laundry closing costs
|
199
|
-
|
|
623
|
-
|
Non-controlling
interests:
|
|
|
|
|
|
Non-cash straightline lease expense
|
(111)
|
(111)
|
|
(450)
|
(354)
|
Prior
year property tax adjustments, net
|
-
|
-
|
|
(202)
|
-
|
Unconsolidated
joint ventures:
|
|
|
|
|
|
Amortization of deferred stock compensation
|
-
|
-
|
|
-
|
2
|
Discontinued
operations:
|
|
|
|
|
|
Gain
on sale of assets, net
|
-
|
(946)
|
|
(38,292)
|
(14,912)
|
Impairment loss
|
-
|
-
|
|
-
|
1,495
|
Gain
on extinguishment of debt
|
-
|
-
|
|
-
|
(18,145)
|
Lawsuit settlement (reversal) costs
|
-
|
-
|
|
(48)
|
67
|
|
1,239
|
235
|
|
(29,992)
|
(80,199)
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
68,177
|
$
63,941
|
|
$
242,505
|
$
212,459
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Net Income to FFO and Adjusted FFO
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
11,114
|
$ 7,588
|
|
$
49,557
|
$
81,299
|
Preferred
stock dividends
|
(7,437)
|
(7,437)
|
|
(29,748)
|
(27,321)
|
Operations
held for investment:
|
|
|
|
|
|
Real
estate depreciation and amortization
|
34,005
|
30,828
|
|
129,668
|
112,539
|
Amortization of lease intangibles
|
1,143
|
1,029
|
|
4,319
|
3,979
|
(Gain) loss on sale of assets
|
(4)
|
(10)
|
|
18
|
(83)
|
Non-controlling
interests:
|
|
|
|
|
|
Income from consolidated joint venture attributable to non-controlling
interest
|
(67)
|
(99)
|
|
(1,761)
|
(312)
|
Real
estate depreciation and amortization
|
(1,424)
|
(1,416)
|
|
(5,685)
|
(4,014)
|
Discontinued
operations:
|
|
|
|
|
|
Real
estate depreciation and amortization
|
2,182
|
3,762
|
|
13,164
|
16,188
|
Amortization of lease intangibles
|
-
|
7
|
|
14
|
28
|
Gain
on sale of assets, net
|
-
|
(946)
|
|
(38,292)
|
(14,912)
|
FFO
|
39,512
|
33,306
|
|
121,254
|
167,391
|
|
|
|
|
|
|
Operations
held for investment:
|
|
|
|
|
|
Non-cash straightline lease expense
|
694
|
696
|
|
2,777
|
2,398
|
Write-off of deferred financing fees
|
-
|
21
|
|
3
|
21
|
Non-cash interest related to (gain) loss on derivatives
|
(189)
|
564
|
|
406
|
2,655
|
Gain
on remeasurement of equity interests
|
-
|
-
|
|
-
|
(69,230)
|
Loss
on extinguishment of debt
|
-
|
-
|
|
191
|
-
|
Closing costs - completed acquisitions
|
-
|
31
|
|
1,965
|
3,403
|
Impairment loss
|
-
|
-
|
|
-
|
10,862
|
Lawsuit settlement costs, net
|
-
|
-
|
|
158
|
1,553
|
Prior
year property tax and CAM adjustments, net
|
-
|
-
|
|
621
|
-
|
Hotel
laundry closing costs
|
199
|
-
|
|
623
|
-
|
Income tax provision
|
1,148
|
-
|
|
1,148
|
-
|
Non-controlling
interests:
|
|
|
|
|
|
Non-cash straightline lease expense
|
(111)
|
(111)
|
|
(450)
|
(354)
|
Non-cash interest related to gain (loss) on derivative
|
-
|
1
|
|
(1)
|
(31)
|
Prior
year property tax adjustments, net
|
-
|
-
|
|
(202)
|
-
|
Discontinued
operations:
|
|
|
|
|
|
Write-off of deferred financing fees
|
-
|
42
|
|
185
|
42
|
Impairment loss
|
-
|
-
|
|
-
|
1,495
|
Gain
on extinguishment of debt
|
-
|
-
|
|
-
|
(18,145)
|
Lawsuit settlement (reversal) costs
|
-
|
-
|
|
(48)
|
67
|
|
1,741
|
1,244
|
|
7,376
|
(65,264)
|
|
|
|
|
|
|
Adjusted
FFO
|
$
41,253
|
$
34,550
|
|
$
128,630
|
$
102,127
|
|
|
|
|
|
|
FFO
per diluted share
|
$ 0.29
|
$ 0.28
|
|
$ 0.95
|
$ 1.43
|
|
|
|
|
|
|
Adjusted
FFO per diluted share
|
$ 0.30
|
$ 0.29
|
|
$ 1.01
|
$ 0.87
|
|
|
|
|
|
|
Basic
weighted average shares outstanding
|
135,237
|
117,265
|
|
127,027
|
117,206
|
Shares
associated with unvested restricted stock awards
|
385
|
-
|
|
274
|
84
|
Diluted
weighted average shares outstanding (1)
|
135,622
|
117,265
|
|
127,301
|
117,290
|
|
|
|
|
|
|
(1)
Diluted weighted average shares outstanding includes the Series C
convertible preferred stock on a "non-converted" basis. On an
"as-converted" basis, FFO per diluted share is $0.29 and $0.30,
respectively, for the three months ended December 31, 2012 and 2011,
and $0.97 and $1.43, respectively, for the years ended December 31,
2012 and 2011. On an "as-converted" basis, Adjusted FFO per diluted
share is $0.31 for both the three months ended December 31, 2012 and
2011, and $1.02 and $0.89, respectively, for the years ended December
31, 2012 and 2011.
|
|
|
|
|
|
|
Sunstone
Hotel Investors, Inc.
|
Reconciliation
of Net Loss to Non-GAAP Financial Measures
|
Guidance
for First Quarter 2013
|
(Unaudited
and in thousands except per share amounts)
|
|
|
|
|
|
|
Reconciliation
of Net Loss to Adjusted EBITDA
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
March
31, 2013
|
|
Low
|
High
|
|
|
|
Net
loss (1)
|
$
(9,100)
|
$
(7,100)
|
Depreciation and amortization
|
27,500
|
27,500
|
Amortization of lease intangibles
|
1,200
|
1,200
|
Interest expense
|
16,450
|
16,450
|
Amortization of deferred financing fees
|
800
|
800
|
Non-controlling interests
|
(3,000)
|
(3,000)
|
Amortization of deferred stock compensation
|
1,300
|
1,300
|
Capital lease obligation interest - cash ground rent
|
(350)
|
(350)
|
Non-cash straightline lease expense
|
700
|
700
|
Adjusted
EBITDA
|
$
35,500
|
$
37,500
|
|
|
|
|
|
|
Reconciliation
of Net Loss to Adjusted FFO
|
|
|
|
|
|
|
Net
loss (1)
|
$
(9,100)
|
$
(7,100)
|
Preferred stock dividends
|
(6,300)
|
(6,300)
|
Real
estate depreciation and amortization
|
27,200
|
27,200
|
Non-controlling interests
|
(2,500)
|
(2,500)
|
Amortization of lease intangibles
|
1,200
|
1,200
|
Non-cash straightline lease expense
|
700
|
700
|
Adjusted
FFO
|
$
11,200
|
$
13,200
|
|
|
|
|
|
|
Adjusted
FFO per diluted share
|
$ 0.07
|
$ 0.09
|
|
|
|
Diluted
weighted average shares outstanding
|
151,000
|
151,000
|
|
|
|
(1)
Net loss does not include the gain on sale from the Rochester portfolio.
|
|
|
|
Sunstone
Hotel Investors, Inc.
|
Reconciliation
of Net Income to Non-GAAP Financial Measures
|
Guidance
for Full Year 2013
|
(Unaudited
and in thousands except per share amounts)
|
|
|
|
|
|
|
Reconciliation
of Net Income to Adjusted EBITDA
|
|
|
|
|
|
|
|
Year
Ended
|
|
December
31, 2013
|
|
Low
|
High
|
|
|
|
Net
income (1)
|
$
40,400
|
$
52,400
|
Depreciation and amortization
|
110,000
|
110,000
|
Amortization of lease intangibles
|
5,000
|
5,000
|
Interest expense
|
68,000
|
68,000
|
Amortization of deferred financing fees
|
3,000
|
3,000
|
Non-controlling interests
|
(11,000)
|
(11,000)
|
Amortization of deferred stock compensation
|
5,000
|
5,000
|
Income tax provision
|
2,000
|
2,000
|
Capital lease obligation interest - cash ground rent
|
(1,400)
|
(1,400)
|
Non-cash straightline lease expense
|
3,000
|
3,000
|
Adjusted
EBITDA
|
$
224,000
|
$
236,000
|
|
|
|
|
|
|
Reconciliation
of Net Income to Adjusted FFO
|
|
|
|
|
|
|
Net
income (1)
|
$
40,400
|
$
52,400
|
Preferred stock dividends
|
(18,000)
|
(18,000)
|
Real
estate depreciation and amortization
|
108,600
|
108,600
|
Non-controlling interests
|
(8,700)
|
(8,700)
|
Amortization of lease intangibles
|
5,000
|
5,000
|
Income tax provision
|
2,000
|
2,000
|
Non-cash straightline lease expense
|
3,000
|
3,000
|
Adjusted
FFO
|
$
132,300
|
$
144,300
|
|
|
|
|
|
|
Adjusted
FFO per diluted share
|
$ 0.84
|
$ 0.92
|
|
|
|
Diluted
weighted average shares outstanding
|
157,000
|
157,000
|
|
|
|
(1)
Net income does not include the gain on sale from the Rochester
portfolio.
|
Sunstone
Hotel Investors, Inc.
|
Comparable
Hotel EBITDA Margins
|
(Unaudited
and in thousands except hotels and rooms)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended December 31, 2012
|
|
|
Three
Months Ended December 31, 2011
|
|
|
Actual
(1)
|
|
|
Actual
(2)
|
|
Prior
Ownership Adjustments (3)
|
|
Comparable
(4)
|
Number
of Hotels
|
26
|
|
|
24
|
|
2
|
|
26
|
Number
of Rooms
|
11,632
|
|
|
10,858
|
|
774
|
|
11,632
|
|
|
|
|
|
|
|
|
|
|
Hotel
EBITDA Margin (5)
|
30.3%
|
|
|
28.8%
|
|
31.8%
|
|
29.0%
|
Hotel
EBITDA Margin adjusted for prior year property tax (6)
|
30.2%
|
|
|
28.8%
|
|
|
|
29.0%
|
|
|
|
|
|
|
|
|
|
|
Hotel
Revenues
|
|
|
|
|
|
|
|
|
Room
revenue
|
$
160,817
|
|
|
$
147,073
|
|
$ 9,073
|
|
$
156,146
|
Food
and beverage revenue
|
57,798
|
|
|
55,635
|
|
1,433
|
|
57,068
|
Other
operating revenue
|
12,879
|
|
|
11,524
|
|
584
|
|
12,108
|
Total
Hotel Revenues
|
231,494
|
|
|
214,232
|
|
11,090
|
|
225,322
|
|
|
|
|
|
|
|
|
|
|
Hotel
Expenses
|
|
|
|
|
|
|
|
|
Room
expense
|
40,711
|
|
|
37,338
|
|
2,077
|
|
39,415
|
Food
and beverage expense
|
39,333
|
|
|
37,702
|
|
892
|
|
38,594
|
Other
hotel expense
|
56,342
|
|
|
53,436
|
|
3,345
|
|
56,781
|
General and administrative expense
|
25,024
|
|
|
24,010
|
|
1,253
|
|
25,263
|
Total
Hotel Expenses
|
161,410
|
|
|
152,486
|
|
7,567
|
|
160,053
|
|
|
|
|
|
|
|
|
|
|
Hotel
EBITDA
|
70,084
|
|
|
61,746
|
|
3,523
|
|
65,269
|
Prior
year property tax
|
(208)
|
|
|
-
|
|
-
|
|
-
|
Hotel
EBITDA adjusted for prior year property tax
|
69,876
|
|
|
61,746
|
|
3,523
|
|
65,269
|
|
|
|
|
|
|
|
|
|
|
Non-hotel
operating income
|
367
|
|
|
440
|
|
-
|
|
440
|
Amortization
of lease intangibles
|
(1,143)
|
|
|
(1,029)
|
|
-
|
|
(1,029)
|
Non-cash
straightline lease expense
|
(694)
|
|
|
(696)
|
|
-
|
|
(696)
|
Capital
lease obligation interest - cash ground rent
|
351
|
|
|
-
|
|
351
|
|
351
|
Hotel
laundry closing costs
|
(199)
|
|
|
-
|
|
-
|
|
-
|
Prior
year property tax and CAM adjustments
|
208
|
|
|
-
|
|
-
|
|
-
|
Corporate
overhead
|
(5,430)
|
|
|
(4,766)
|
|
-
|
|
(4,766)
|
Depreciation
and amortization
|
(34,339)
|
|
|
(31,126)
|
|
(3,059)
|
|
(34,185)
|
Operating
Income
|
28,997
|
|
|
24,569
|
|
815
|
|
25,384
|
|
|
|
|
|
|
|
|
|
|
Interest
and other income
|
142
|
|
|
145
|
|
-
|
|
145
|
Interest
expense
|
(18,721)
|
|
|
(20,051)
|
|
(351)
|
|
(20,402)
|
Income
tax provision
|
(1,148)
|
|
|
-
|
|
-
|
|
-
|
Income
from discontinued operations
|
1,844
|
|
|
2,925
|
|
-
|
|
2,925
|
Net
Income
|
$
11,114
|
|
|
$ 7,588
|
|
$ 464
|
|
$ 8,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Actual
represents the Company's ownership results for the 26 hotels held for
investment as of December 31, 2012.
|
(2)
|
Actual
represents the Company's ownership results for the 24 hotels held for
investment as of December 31, 2011.
|
(3)
|
Prior
Ownership Adjustments represent prior ownership results for the Hyatt
Chicago Magnificent Mile acquired by the Company on June 4, 2012 and
the Hilton Garden Inn Chicago Downtown/Magnificent Mile acquired by the
Company on July 19, 2012, along with the Company's pro forma
adjustments for capital lease obligation interest and depreciation
expense.
|
(4)
|
Comparable
represents the Company's ownership results, prior ownership results and
the Company's pro forma adjustments for capital lease obligation
interest and depreciation expense as applicable for the 26 hotels held
for investment as of December 31, 2012.
|
(5)
|
Hotel
EBITDA Margin is calculated as Hotel EBITDA divided by total hotel
revenues.
|
(6)
|
Hotel
EBITDA Margin for the three months ended December 31, 2012 includes the
additional benefit of $0.2 million in prior year property tax credits.
Without this benefit, Actual Hotel EBITDA margin for the three months
ended December 31, 2012 would have been 30.2%.
|
|
|
|
|
|
|
|
|
|
|
Sunstone
Hotel Investors, Inc.
|
Comparable
Hotel EBITDA Margins
|
(Unaudited
and in thousands except hotels and rooms)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 31, 2012
|
|
Year
Ended December 31, 2011
|
|
|
Actual
(1)
|
|
Prior
Ownership Adjustments (2)
|
|
Comparable
(3)
|
|
Actual
(4)
|
|
Prior
Ownership Adjustments (5)
|
|
Comparable
(6)
|
Number
of Hotels
|
26
|
|
|
|
26
|
|
24
|
|
2
|
|
26
|
Number
of Rooms
|
11,632
|
|
|
|
11,632
|
|
10,858
|
|
774
|
|
11,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
EBITDA Margin(7)
|
29.2%
|
|
21.0%
|
|
29.0%
|
|
27.6%
|
|
30.1%
|
|
27.8%
|
Hotel
EBITDA Margin adjusted for prior year property tax and CAM adjustments,
net (8)
|
29.1%
|
|
|
|
28.9%
|
|
27.5%
|
|
|
|
27.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Room
revenue
|
$
576,146
|
|
$
15,204
|
|
$
591,350
|
|
$
501,183
|
|
$
57,921
|
|
$
559,104
|
Food
and beverage revenue
|
200,810
|
|
2,149
|
|
202,959
|
|
175,103
|
|
17,846
|
|
192,949
|
Other
operating revenue
|
46,134
|
|
1,046
|
|
47,180
|
|
40,143
|
|
5,260
|
|
45,403
|
Total
Hotel Revenues
|
823,090
|
|
18,399
|
|
841,489
|
|
716,429
|
|
81,027
|
|
797,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Room
expense
|
147,309
|
|
4,064
|
|
151,373
|
|
128,225
|
|
13,905
|
|
142,130
|
Food
and beverage expense
|
139,106
|
|
1,416
|
|
140,522
|
|
126,139
|
|
11,030
|
|
137,169
|
Other
hotel expense
|
207,003
|
|
7,144
|
|
214,147
|
|
182,943
|
|
23,913
|
|
206,856
|
General and administrative expense
|
89,480
|
|
1,904
|
|
91,384
|
|
81,500
|
|
7,766
|
|
89,266
|
Total
Hotel Expenses
|
582,898
|
|
14,528
|
|
597,426
|
|
518,807
|
|
56,614
|
|
575,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
EBITDA
|
240,192
|
|
3,871
|
|
244,063
|
|
197,622
|
|
24,413
|
|
222,035
|
Prior
year property tax and CAM adjustments, net
|
(704)
|
|
-
|
|
(704)
|
|
(600)
|
|
-
|
|
(600)
|
Hotel
EBITDA adjusted for prior year property tax and CAM adjustments, net
|
239,488
|
|
3,871
|
|
243,359
|
|
197,022
|
|
24,413
|
|
221,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-hotel
operating income
|
1,582
|
|
-
|
|
1,582
|
|
1,535
|
|
-
|
|
1,535
|
Amortization
of lease intangibles
|
(4,319)
|
|
-
|
|
(4,319)
|
|
(3,979)
|
|
(140)
|
|
(4,119)
|
Non-cash
straightline lease expense
|
(2,777)
|
|
-
|
|
(2,777)
|
|
(2,398)
|
|
(386)
|
|
(2,784)
|
Capital
lease obligation interest - cash ground rent
|
819
|
|
585
|
|
1,404
|
|
-
|
|
1,404
|
|
1,404
|
Hotel
laundry closing costs
|
(623)
|
|
-
|
|
(623)
|
|
-
|
|
-
|
|
-
|
Management
company transition costs
|
(641)
|
|
-
|
|
(641)
|
|
(82)
|
|
-
|
|
(82)
|
Prior
year property tax and CAM adjustments, net
|
704
|
|
-
|
|
704
|
|
600
|
|
-
|
|
600
|
Corporate
overhead
|
(24,316)
|
|
-
|
|
(24,316)
|
|
(25,453)
|
|
-
|
|
(25,453)
|
Depreciation
and amortization
|
(130,907)
|
|
(5,531)
|
|
(136,438)
|
|
(113,708)
|
|
(18,545)
|
|
(132,253)
|
Impairment
loss
|
-
|
|
-
|
|
-
|
|
(10,862)
|
|
-
|
|
(10,862)
|
Operating
Income
|
79,010
|
|
(1,075)
|
|
77,935
|
|
42,675
|
|
6,746
|
|
49,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
in earnings of unconsolidated joint ventures
|
-
|
|
-
|
|
-
|
|
21
|
|
-
|
|
21
|
Interest
and other income
|
297
|
|
-
|
|
297
|
|
3,115
|
|
-
|
|
3,115
|
Interest
expense
|
(76,821)
|
|
(585)
|
|
(77,406)
|
|
(74,195)
|
|
(4,412)
|
|
(78,607)
|
Loss
on extinguishment of debt
|
(191)
|
|
-
|
|
(191)
|
|
-
|
|
-
|
|
-
|
Gain
on remeasurement of equity interests
|
-
|
|
-
|
|
-
|
|
69,230
|
|
-
|
|
69,230
|
Income
tax provision
|
(1,148)
|
|
-
|
|
(1,148)
|
|
-
|
|
-
|
|
-
|
Income
from discontinued operations
|
48,410
|
|
-
|
|
48,410
|
|
40,453
|
|
-
|
|
40,453
|
Net
Income
|
$
49,557
|
|
$
(1,660)
|
|
$
47,897
|
|
$
81,299
|
|
$ 2,334
|
|
$
83,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Actual
represents the Company's ownership results for the 26 hotels held for
investment as of December 31, 2012.
|
(2)
|
Prior
Ownership Adjustments represent prior ownership results for the Hyatt
Chicago Magnificent Mile acquired by the Company on June 4, 2012 and
the Hilton Garden Inn Chicago Downtown/Magnificent Mile acquired by the
Company on July 19, 2012, along with the Company's pro forma
adjustments for capital lease obligation interest and depreciation
expense.
|
(3)
|
Comparable
represents the Company's ownership results, prior ownership results and
the Company's pro forma adjustments for capital lease obligation
interest and depreciation expense as applicable for the 26 hotels held
for investment as of December 31, 2012.
|
(4)
|
Actual
represents the Company's ownership results for the 24 hotels held for
investment as of December 31, 2011.
|
(5)
|
Prior
Ownership Adjustments represent prior ownership results for the
Doubletree Guest Suites Times Square acquired by the Company on January
14, 2011, the JW Marriott New Orleans acquired by the Company on
February 15, 2011, the Hilton San Diego Bayfront acquired by the
Company on April 15, 2011, the Hyatt Chicago Magnificent Mile acquired
by the Company on June 4, 2012 and the Hilton Garden Inn Chicago
Downtown/Magnificent Mile acquired by the Company on July 19, 2012,
along with the Company's pro forma adjustments for non-cash
amortization of lease intangibles, non-cash straightline lease expense,
capital lease obligation interest and depreciation expense.
|
(6)
|
Comparable
represents the Company's ownership results, prior ownership results and
the Company's pro forma adjustments for non-cash amortization of lease
intangibles, non-cash straightline lease expense, capital lease
obligation interest and depreciation expense as applicable for the 26
hotels held for investment as of December 31, 2012.
|
(7)
|
Hotel
EBITDA Margin is calculated as Hotel EBITDA divided by total hotel
revenues.
|
(8)
|
Hotel
EBITDA Margin for the year ended December 31, 2012 includes the
additional net benefit of $0.5 million in prior year property tax
credits and a $0.2 million prior year CAM refund. Hotel EBITDA Margin
for the year ended December 31, 2011 includes the additional net
benefit of $0.6 million due to prior year property tax credits and
assessments. Without these additional net benefits, Comparable Hotel
EBITDA margin for the years ended December 31, 2012 and 2011 would have
been 28.9% and 27.8%, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|