ALISO VIEJO, Calif., May 6, 2013 -- Sunstone Hotel Investors, Inc.
(the "Company" or "Sunstone") (NYSE: SHO) today announced results for
the first quarter ended March 31, 2013.
- ACQUIRES THE 250-ROOM HILTON NEW ORLEANS ST. CHARLES
- ENTERS INTO AGREEMENT TO ACQUIRE THE 1,053-ROOM BOSTON PARK
PLAZA
First Quarter 2013 Operational Results (as compared to
First Quarter 2012) (1) :
- Comparable Hotel RevPAR increased 2.1% to $124.84.
- Comparable Hotel RevPAR increased 6.5% to $130.03, excluding the following hotels which
significant renovations were underway during the first quarter: Hilton
Times Square, Hyatt Chicago Magnificent Mile, Hyatt
Newport Beach and Renaissance Westchester (collectively, the
"Four Hotels").
- Comparable Hotel EBITDA Margins increased 10 basis points
to 23.3%.
- Comparable Hotel EBITDA Margins increased 160 basis
points to 27.5%, excluding the Four Hotels.
- Adjusted EBITDA decreased 10.9% to $38.4
million.
- Adjusted FFO per diluted share decreased 25.0% to $0.09.
- Income available to common stockholders was $17.5 million (vs. a loss of $21.0 million in 2012).
- Income available to common stockholders per diluted share
was $0.12 (vs. a loss of $0.18 in 2012).
Ken Cruse, Chief Executive
Officer, stated, "Our first quarter operating results met our
expectations as we traded short-term displacement for expected future
growth through the renovation of four of our hotels. Excluding the four
hotels under renovation, our portfolio generated 6.5% RevPAR growth and
achieved 160 basis points of margin expansion, driven by improving
demand trends and solid expense controls. Also, during the first
quarter, we continued to methodically improve our balance sheet by
eliminating nearly $261 million of
leverage through asset sales, and the retirement of senior debt and
preferred securities."
Mr. Cruse continued, "Today, we announced a series of
transactions that will complete our tax-efficient capital recycling of
the proceeds realized from the sale of non-core hotels and the issuance
of common equity earlier this year. Specifically, we have acquired the
250-room Hilton New Orleans, are in the
process of acquiring the 1,053-room Boston Park Plaza, and are
redeeming our 6.45% Series C convertible securities. These transactions
are consistent with our stated strategy of improving our portfolio
quality and scale while gradually reducing our leverage. With a
weighted average purchase multiple of 12.3x on 2013 projected EBITDA,
we believe these acquisitions are attractively priced relative to our
cost of capital and provide us with future value-added opportunities.
Moreover, the combined transactions will increase our hotel
concentrations in two high growth major markets, will reduce our
overall leverage and interest expense, and are expected to improve our
FFO per share. Accordingly, we have increased the midpoint of our full
year Adjusted EBITDA guidance by 4% to $240
million and we have increased the midpoint of our Adjusted FFO
per diluted share guidance by roughly 7% to $0.94
cents."
Mr. Cruse continued, "Looking ahead, industry occupancies are
now at or above prior peak levels in many markets, demand is gradually
improving and supply trends remain muted. With the substantial
completion of our 2013 renovation program, the continued improvement of
our balance sheet and the addition of two quality hotels with clear
long-term value-add opportunities, Sunstone is well positioned for
continued growth."
(1)
|
Comparable
Hotel RevPAR and Comparable Hotel EBITDA Margin information presented
reflect the Company's Comparable 26 Hotel Portfolio, which includes all
hotels held for investment by the Company as of March 31, 2013, and
also includes prior ownership results as applicable in 2012 for the
Hyatt Chicago Magnificent Mile acquired by the Company in June 2012 and
the Hilton Garden Inn Chicago Downtown/Magnificent Mile acquired by the
Company in July 2012. Comparable Hotel EBITDA Margin information
excludes prior year net property tax adjustments.
|
SELECTED
FINANCIAL DATA
|
($
in millions, except RevPAR, ADR and per share amounts)
|
(unaudited)
|
|
|
|
Three
Months Ended March 31,
|
|
2013
|
2012
|
%
Change
|
Total
Revenue
|
$ 194.9
|
$ 178.2
|
9.4%
|
Comparable
Hotel RevPAR
|
$
124.84
|
$
122.25
|
2.1%
|
Comparable
Hotel Occupancy
|
74.2%
|
75.6%
|
(140)
bps
|
Comparable
Hotel ADR
|
$
168.25
|
$
161.70
|
4.1%
|
|
|
|
|
Comparable
Hotel EBITDA Margin
|
23.3%
|
23.2%
|
10
bps
|
|
|
|
|
Net
income (loss)
|
$ 28.9
|
$
(13.0 )
|
|
Income
available (loss attributable) to common stockholders
|
$ 17.5
|
$
(21.0 )
|
|
Income
available (loss attributable) to common stockholders per diluted share
|
$ 0.12
|
$
(0.18 )
|
|
EBITDA
|
$ 85.3
|
$ 41.7
|
|
Adjusted
EBITDA
|
$ 38.4
|
$ 43.1
|
|
FFO
|
$ 0.0
|
$ 12.9
|
|
Adjusted
FFO
|
$ 14.0
|
$ 13.7
|
|
FFO
per diluted share(1)
|
$ 0.00
|
$ 0.11
|
|
Adjusted
FFO per diluted share(1)
|
$ 0.09
|
$ 0.12
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflects
the Series C convertible preferred stock on a "non-converted" basis. On
an "as-converted" basis, FFO per diluted share is $0.01 and $0.12,
respectively, for the three months ended March 31, 2013 and 2012. On an
"as-converted" basis, Adjusted FFO per diluted share is $0.10 and
$0.13, respectively, for the three months ended March 31, 2013 and 2012.
|
Disclosure regarding the non-GAAP financial measures in this
release is included on page 6. Reconciliations of non-GAAP financial
measures to the most comparable GAAP measure for each of the periods
presented are included on pages 11 through 14 of this release.
The Company's actual results for the quarter ended March 31, 2013 compare to its guidance
provided on February 19, 2013 as follows:
Metric
|
Quarter
Ended
March 31, 2013
Guidance
|
Quarter
Ended
March 31, 2013
Actual Results
(unaudited)
|
Performance
Relative to Prior
Guidance Midpoint
|
Comparable
Hotel RevPAR
|
+2.0%
- 3.0%
|
2.1%
|
(0.40)%
|
Loss
Before Income Taxes and Discontinued Operations ($ millions)
|
$(9)
- $(7)
|
($13)
|
($5)
|
Adjusted
EBITDA ($ millions)
|
$36
- $38
|
$38
|
$1
|
Adjusted
FFO ($ millions)
|
$11
- $13
|
$14
|
$2
|
Adjusted
FFO per diluted share
|
$0.07
- $0.09
|
$0.09
|
$0.01
|
Diluted
Weighted Average Shares Outstanding
|
151,000,000
|
151,381,000
|
381,000
|
Acquisitions Update
On May 1, 2013, in an
off-market deal, the Company acquired the fee simple interest in the
250-room Hilton New Orleans St. Charles for a gross purchase price of $59.35 million ($237,400/key),
excluding closing costs and prorations. The gross purchase price
equates to an 11.4x multiple on 2013 forecasted hotel Adjusted EBITDA
of $5.2 million and a 7.9%
capitalization rate on 2013 forecasted hotel net operating income.
During the Company's anticipated 2013 ownership period, the Hilton New
Orleans St. Charles is expected to generate between $2.0 million and $2.5 million of hotel
Adjusted EBITDA and between $1.5 million and
$2.0 million of hotel net operating income. The acquisition,
which was structured as a tax-deferred exchange, was funded with a
portion of the proceeds received from the sale of the Company's
Rochester Portfolio in January 2013. The
Company expects to own this hotel unencumbered of debt. The hotel will
continue to be managed by its current manager, Dimension Development
Company.
The 250-room Hilton New Orleans St. Charles is located in the
heart of downtown New Orleans, one
block from the Company's JW Marriott New Orleans and proximate to the
Ernest N. Morial Convention Center, the Class-A office corridor,
Harrah's Casino and the New Orleans French Quarter. The Company expects
to complete a rooms renovation in 2014 to better position the hotel to
capture a greater share of the market's higher rated transient demand,
including Hilton-loyal business transient demand, as the Company did
with its JW Marriott hotel following its acquisition in 2011.
On April 26, 2013, the Company
entered into a purchase and sale agreement to acquire the fee simple
(subject to a condominium agreement with the adjacent office building)
interest in the 1,053-room Boston Park Plaza hotel for a gross purchase
price of $250.0 million ($237,400/key). The gross purchase price
equates to a 12.5x multiple on 2013 forecasted hotel Adjusted EBITDA of
$20.0 million and a 6.6 %
capitalization rate on 2013 forecasted hotel net operating income.
During the Company's anticipated 2013 ownership period, the Boston Park
Plaza is expected to generate between $8.0
million and $9.5 million of hotel Adjusted EBITDA and between $6.5 million and $8.0 million of hotel net
operating income. The acquisition will be structured as a tax-deferred
exchange and will be funded with a combination of the proceeds received
from the sale of the Company's Rochester Portfolio in January 2013, cash on hand and the assumption
of a non-recourse loan secured by the hotel with a fixed rate of 4.402%
and a maturity date in February 2018.
The Company expects the mortgage to have a balance of approximately $119.5 million as of the acquisition date. The
Company expects the purchase of the hotel to close during the third
quarter of 2013. The hotel will remain unbranded and will continue to
be managed by Highgate Hotels.
The historic 1,053-room Boston Park Plaza hotel is located in
the Back Bay neighborhood of Boston
and occupies a triangular block formed by Arlington Street, Park Plaza, and Columbus Avenue. The Boston
Park Plaza's central location allows it to benefit from convention,
leisure and business travel. The hotel currently generates significant
in-place cash flow and an attractive yield on the Company's initial
investment. The Company's immediate business plan for the hotel entails
the build-out and lease-up of nearly 43,000 square feet of ground level
and below-grade retail spaces, which predominately front Arlington
Street and Park Plaza. The Company also
plans to invest in certain upgrades to the hotel's physical
infrastructure, elevators, HVAC, facade and guest systems. Longer term,
the Company may undertake a more comprehensive capital repositioning
program to further enhance the hotel's competitive positioning, subject
to the development of a business case supporting such a repositioning
program.
The Company expects the purchase of the Boston Park Plaza to
close during the third quarter 2013; however, the purchase remains
subject to a broad range of risks and uncertainties, including
assumption of the associated mortgage. Accordingly, no assurances can
be given as to the timing or certainty of the closing.
Balance Sheet/Liquidity Update
On May 6, 2013, the Company
announced the redemption of all 4,102,564 shares of its 6.45% Series C
Cumulative Convertible Redeemable Preferred Stock ("Series C preferred
stock"), which have an aggregate principal liquidation preference of $100.0 million, excluding accrued and unpaid
dividends up to and including the May 31, 2013
redemption date.
The Series C preferred stock will be redeemed at a redemption
price of $24.375 per share, plus accrued
and unpaid dividends up to and including the redemption date. After the
redemption date, the Company will have no outstanding shares of Series
C preferred stock, and all rights of the holders of such shares will be
terminated.
As of March 31, 2013, the
Company had approximately $417.2 million
of cash and cash equivalents, including restricted cash of $69.4 million and $139.4
million held by the accommodator to facilitate the tax-deferred
exchanges noted above. Adjusting for the funds used to purchase both
the Hilton New Orleans St. Charles and the Boston Park Plaza, and to
redeem the Series C preferred stock, the Company's pro forma cash
balance as of March 31, 2013 was
approximately $127.3 million of cash and
cash equivalents, including restricted cash of $69.4
million.
As of March 31, 2013, the
Company had total assets of $3.2 billion,
including $2.7 billion of net
investments in hotel properties, total consolidated debt of $1.3 billion and stockholders' equity of $1.6 billion.
Capital Improvements
The Company invested $37.1 million
into capital improvements of its portfolio during the first quarter of
2013.
The Company began renovating several of its hotels in the
fourth quarter 2012 and continued these renovations during the first
quarter of 2013. The Company incurred approximately $7.0 million of revenue disruption during the
first quarter 2013 and expects to incur approximately $1.0 million to $3.0 million of revenue
disruption during the second quarter 2013. Significant renovations in
process as of the first quarter 2013 include:
- Hilton Times Square: The Company invested
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 was substantially completed in April 2013.
- Hyatt Chicago Magnificent Mile: The Company is
investing approximately $25.0 million in
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 substantially completed in July
2013. To date, the Company has invested approximately $14.0 million in this renovation.
- Hyatt Regency Newport Beach: The Company is
investing 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 in November 2012 and is
expected to be substantially completed in May
2013. To date, the Company has invested approximately $10.0 million in this renovation.
- 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 substantially completed in
May 2013. To date, the Company has invested approximately $9.0 million in this renovation.
2013 Outlook
The Company is providing guidance at this time, but does not
undertake to make updates for any developments in its business or
changes in the operating environment. Achievement of the anticipated
results is subject to risks and uncertainties, including those
disclosed in the Company's filings with the Securities and Exchange
Commission. The Company's guidance does not take into account the
impact of any unannounced hotel acquisitions, dispositions,
re-brandings, management changes, transition costs, prior-year property
tax assessments and/or credits, debt repurchases or unannounced
financings during 2013. The Company expects to apply its remaining net
operating loss carryforwards to reduce taxable income in 2013. The
application of the net operating loss carryforwards is viewed as a
non-recurring event and therefore the Company has treated any state and
federal taxes associated with the application of net operating loss
carryforwards as one-time expenses and added them back to Adjusted FFO.
For the second quarter of 2013, the Company expects:
Metric
|
Quarter
Ended
June 30, 2013
Guidance (1)
|
Comparable
Hotel RevPAR
|
+2.5%
- 4.5%
|
Net
Income ($ millions)
|
$18
- $20
|
Adjusted
EBITDA ($ millions)
|
$69
- $71
|
Adjusted
FFO ($ millions)
|
$47
- $49
|
Adjusted
FFO per diluted share
|
$0.29
- $0.30
|
Diluted
Weighted Average Shares Outstanding
|
161,500,000
|
(1)
|
Reflects
the Company's ownership period for the Hilton New Orleans St. Charles
acquired on May 1, 2013.
|
For the full year 2013, the Company expects:
Metric
|
Prior
2013 FY
Guidance (1)
|
Impact
of
Announced
Acquisitions (2)
|
Impact
of
Reforecast &
Capital
Transactions (3)
|
Current
2013 FY
Guidance
|
Change
to Prior
2013 FY Guidance
Midpoint
|
Comparable
Hotel RevPAR
|
+3.5%
- 5.5%
|
(0.5)%
|
-
|
+3.0%
- 5.0%
|
(0.5)%
|
Net
Income ($ millions)
|
$40
- $52
|
$28
- $30
|
-
|
$68
- $82
|
$29
|
Adjusted
EBITDA ($ millions)
|
$224
- $236
|
$10
- $12
|
$(1)
|
$233
- $247
|
$10
|
Adjusted
FFO ($ millions)
|
$132
- $144
|
$8
- $10
|
$2
|
$142
- $156
|
$11
|
Adjusted
FFO per diluted share
|
$0.84
- $0.92
|
$0.05
|
$0.01
|
$0.90
- $0.98
|
$0.06
|
Diluted
Weighted Average Shares Outstanding
|
157,000,000
|
-
|
2,100,000
|
159,100,000
|
2,100,000
|
(1)
|
Reflects
guidance presented on February 19, 2013.
|
(2)
|
Reflects
the Company's ownership period for the Hilton New Orleans St. Charles
acquired on May 1, 2013, and the Boston Park Plaza which the Company
expects to acquire in or before July 2013.
|
(3)
|
Reflects
the expected redemption of the Series C preferred stock on May 31,
2013, and the impact of changes to the Hilton Honors redemption program
at the Hilton Times Square and Doubletree Guest Suites Times Square,
along with additional shares from the exercise of the underwriters'
over-allotment option.
|
Second quarter and full year 2013 guidance is based in part on
the following assumptions:
- Announced transactions are included as of their actual or
expected closing date.
- Hilton New Orleans St. Charles – May
1, 2013.
- Boston Park Plaza – July 24, 2013 (expected closing date).
- Series C preferred stock redemption – May 31, 2013.
- Full year capital investment of $110.0
million to $120.0 million.
- Hotel revenue disruption of $8.0
million to $10.0 million related to renovation projects, with
approximately $1.0 million to $3.0 million
of renovation disruption occurring in the second quarter (primarily
related to renovations at the Hilton Times Square and Hyatt Chicago
Magnificent Mile).
- Second quarter renovation-related hotel RevPAR disruption
of approximately 75 to 100 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 $72.0 million to $74.0 million, including $3.0 million in amortization of deferred
financing fees.
- Full year preferred dividends of approximately $15.0 million for the Series D cumulative
redeemable preferred stock, the Series A cumulative redeemable
preferred stock through the March 1, 2013
redemption date and the Series C preferred stock through the May 31, 2013 redemption date.
Dividend Update
On May 2, 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 up to $0.393
per share, to be prorated based on the final redemption date, payable
to its Series C cumulative convertible redeemable preferred
stockholders. The dividends for the Series D cumulative redeemable
preferred stockholders will be paid on or before July
15, 2013 to stockholders of record on June
30, 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 first
quarter 2013 on May 7, 2013, at 12:00 p.m. Eastern (9:00
a.m. Pacific). 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. is a lodging real estate
investment trust ("REIT") that as of May 6, 2013
has interests in 27 hotels comprised of 11,882 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
gradually 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 May 6, 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.
The following tables include financial and statistical details
for both the Hilton New Orleans St. Charles and the Boston Park Plaza:
|
|
|
|
|
|
|
|
|
|
|
Hilton
New Orleans St. Charles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus:
|
Plus:
|
Equals:
|
Hotel
|
|
(In
thousands)
|
Total
|
|
|
|
Hotel
|
EBITDA
|
FFO
|
|
|
Revenues
|
Net
Income
|
Depreciation
|
Interest
Expense
|
EBITDA
|
Margin
|
Contribution
(3)
|
Sunstone
2013 Expected Ownership Period (1)
|
$ 7,900
|
$700
- $1,200
|
$ 1,300
|
$ -
|
$2,000 - $2,500
|
25.3%
- 31.6%
|
$2,000 - $2,500
|
|
|
|
|
|
|
|
|
|
Full
Year 2013 (2)
|
$
13,000
|
$ 3,200
|
$ 2,000
|
$ -
|
$ 5,200
|
40.0%
|
$ 5,200
|
2013
EBITDA Multiple
|
|
|
|
|
11.4x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boston
Park Plaza
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus:
|
Plus:
|
Equals:
|
Hotel
|
|
(In
thousands)
|
Total
|
|
|
|
Hotel
|
EBITDA
|
FFO
|
|
|
Revenues
|
Net
Income
|
Depreciation
|
Interest
Expense
|
EBITDA
|
Margin
|
Contribution
(3)
|
Sunstone
2013 Expected Ownership Period (4)
|
$
30,000
|
$2,500 - $4,000
|
$ 3,200
|
$ 2,300
|
$8,000 - $9,500
|
26.7%
- 31.7%
|
$5,700 - $7,200
|
|
|
|
|
|
|
|
|
|
Full
Year 2013 (2)
|
$
70,000
|
$ 7,300
|
$ 7,400
|
$ 5,300
|
$
20,000
|
28.6%
|
$
14,700
|
2013
EBITDA Multiple
|
|
|
|
|
12.5x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Sunstone
2013 Expected Ownership Period for the Hilton New Orleans St. Charles
reflects forecast results from May 1, 2013 through December 31, 2013.
|
(2)
|
Full
Year 2013 for the Hilton New Orleans St. Charles and the Boston Park
Plaza reflect actual prior ownership results from January 1, 2013
through March 31, 2013, plus forecast results from April 1, 2013
through December 31, 2013. Full Year 2013 amounts include the impact of
the Company's new management and franchise agreement terms.
|
(3)
|
FFO
Contribution calculated as Hotel EBITDA less Interest Expense.
|
(4)
|
Sunstone
2013 Expected Ownership Period for the Boston Park Plaza reflects
forecast results from the expected acquisition date of July 24, 2013
through December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hilton
New Orleans St. Charles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADR
|
|
Occupancy
|
|
RevPAR
|
|
|
2013
|
2012
|
Variance
|
|
2013
|
2012
|
Variance
|
|
2013
|
2012
|
Variance
|
May 1
- December 31, 2013 and 2012 (1)
|
$
150.52
|
$
146.52
|
2.7%
|
|
81.4%
|
75.8%
|
7.4%
|
|
$
122.52
|
$
111.06
|
10.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full
Year 2013 and 2012 (2)
|
$
160.87
|
$
158.36
|
1.6%
|
|
83.1%
|
78.2%
|
6.3%
|
|
$
133.68
|
$
123.84
|
8.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boston
Park Plaza (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADR
|
|
Occupancy
|
|
RevPAR
|
|
|
2013
|
2012
|
Variance
|
|
2013
|
2012
|
Variance
|
|
2013
|
2012
|
Variance
|
July
24 - December 31, 2013 and 2012 (1)
|
$
173.49
|
$
171.80
|
1.0%
|
|
88.2%
|
84.9%
|
3.9%
|
|
$
153.02
|
$
145.86
|
4.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full
Year 2013 and 2012 (2)
|
$
170.55
|
$
169.11
|
0.9%
|
|
83.7%
|
84.9%
|
-1.4%
|
|
$
142.75
|
$
143.57
|
-0.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents
forecast results for Sunstone's expected ownership period in 2013 and
prior ownership results during the same periods in 2012.
|
(2)
|
Full
Year reflects prior ownership results from January 1, 2012 through
March 31, 2013, plus forecast results from April 1, 2013 through
December 31, 2013.
|
(3)
|
The
Boston Park Plaza added 12 rooms in September 2012, and an additional
100 rooms in January 2013.
|
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 and
pro forma comparable hotel EBITDA and comparable and pro forma
comparable hotel EBITDA margin. These measures should not be considered
in isolation or as a substitute for measures of performance in
accordance with GAAP. EBITDA, Adjusted EBITDA, FFO, Adjusted FFO,
comparable and pro forma comparable hotel EBITDA and comparable and pro
forma comparable hotel EBITDA margin as calculated by us, may not be
comparable to other companies that do not define such terms exactly as
the Company. These non-GAAP measures are used in addition to and in
conjunction with results presented in accordance with GAAP. They should
not be considered as alternatives to operating profit, cash flow from
operations, or any other operating performance measure prescribed by
GAAP. These non-GAAP financial measures reflect additional ways of
viewing our operations that we believe, when viewed with our GAAP
results and the reconciliations to the corresponding GAAP financial
measures, provide a more complete understanding of factors and trends
affecting our business than could be obtained absent this disclosure.
We strongly encourage investors to review our financial information in
its entirety and not to rely on a single financial measure.
EBITDA is a commonly used measure of performance in many
industries. We believe EBITDA is useful to investors in evaluating our
operating performance because this measure helps 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 believe the use of EBITDA facilitates
comparisons between us and other lodging REITs, hotel owners who are
not REITs and other capital-intensive companies. In addition, certain
covenants included in our indebtedness use EBITDA as a measure of
financial compliance. We also use EBITDA as a measure in determining
the value of hotel acquisitions and dispositions.
Historically, we have adjusted EBITDA when evaluating our
performance because we believe that the exclusion of certain additional
items described below provides useful information to investors
regarding our operating performance and that the presentation of
Adjusted EBITDA, when combined with the primary GAAP presentation of
net income, is beneficial to an investor's complete understanding of
our operating performance.
We believe that the presentation of FFO provides useful
information to investors regarding our operating performance because it
is a measure of our operations without regard to specified non-cash
items such as real estate depreciation and amortization, amortization
of lease intangibles, any real estate impairment loss and any gain or
loss on sale of real estate assets, all of which are based on
historical cost accounting and may be of lesser significance in
evaluating our current performance. We believe the use of FFO
facilitates comparisons between us and other lodging REITs.
We also present Adjusted FFO when evaluating our operating
performance because we believe that the exclusion of certain additional
items described below provides useful supplemental information to
investors regarding our ongoing operating performance, and may
facilitate comparisons of operating performance between periods and our
peer companies.
We adjust EBITDA and FFO for the following items, which may
occur in any period, and refer to these measures as either Adjusted
EBITDA or Adjusted FFO:
- Amortization of favorable and unfavorable contracts:
we exclude the non-cash amortization of the favorable management
contract asset and the unfavorable tenant lease liability recorded in
conjunction with our acquisition of the Hilton Garden Inn Chicago
Downtown/Magnificent Mile. The amortization of favorable and
unfavorable contracts does not reflect the underlying performance of
our hotels.
- Ground rent adjustments: we exclude the non-cash
expense incurred from straightlining our ground lease obligations as
this expense does not reflect the underlying performance of our hotels.
- Gains or losses from extinguishment of debt: we
exclude the effect of finance charges and premiums associated with the
extinguishment of debt, including the acceleration of deferred
financing costs from the original issuance of the debt being redeemed
or retired because their removal helps investors evaluate and compare
the results of our operations from period to period by removing the
impact of our capital structure.
- Acquisition costs: under GAAP, costs associated with
completed acquisitions are expensed in the year incurred. We exclude
the effect of these costs because we believe they are not reflective of
the ongoing performance of the Company.
- Consolidated partnership adjustments: we deduct the
non-controlling partner's pro rata share of any EBITDA or FFO
adjustments related to our consolidated Hilton San Diego Bayfront
partnership.
- Cumulative effect of a change in accounting principal:
infrequently, the FASB promulgates new accounting standards that
require the consolidated statement of operations to reflect the
cumulative effect of a change in accounting principal. We exclude these
one-time adjustments because they do not reflect our actual performance
for that period.
- Impairment losses: we exclude the effect of
impairment losses because we believe that including them in Adjusted
EBITDA and Adjusted FFO is not consistent with reflecting the ongoing
performance of our remaining assets.
- Other adjustments: we exclude other adjustments such
as lawsuit settlement costs, prior year property tax assessments,
management company transition costs, and departmental closing costs,
including severance, because we do not believe these costs reflect the
ongoing operations of our hotels.
In addition, to derive Adjusted EBITDA we exclude the non-cash
expense incurred with the amortization of deferred stock compensation
as this expense does not reflect the underlying performance of our
hotels. We also include an adjustment for the cash ground lease expense
recorded on the Hyatt Chicago Magnificent Mile's building lease. Upon
acquisition of this hotel, we determined that the building lease was a
capital lease, and, therefore, we include a portion of the capital
lease payment each month in interest expense. We include an adjustment
for ground lease expense on capital leases in order to more accurately
reflect the operating performance of the Hyatt Chicago Magnificent
Mile. We also exclude the effect of gains and losses on the disposition
of depreciable assets because we believe that including them in
Adjusted EBITDA is not consistent with reflecting the ongoing
performance of our assets. In addition, material gains or losses from
the depreciated value of the disposed assets could be less important to
investors given that the depreciated asset value often does not reflect
its market value.
To derive Adjusted FFO, we also exclude the non-cash gains or
losses on our derivatives, as well as the original issuance costs
associated with the redemption of preferred stock. We believe that
these items are not reflective of our ongoing finance costs.
In presenting comparable and pro forma comparable hotel EBITDA
and hotel EBITDA margins, the revenue and expense items associated with
BuyEfficient and other miscellaneous non-hotel items have been
excluded. We believe the calculation of comparable and pro forma
comparable hotel EBITDA results in a more accurate presentation of
hotel EBITDA margins of the Company's 26 comparable hotels and 28 pro
forma comparable hotels, and that these non-GAAP financial measures are
useful to investors in evaluating our property-level operating
performance. Our 26 comparable hotels include all hotels held for
investment as of March 31, 2013, and
also include prior ownership results as applicable in 2012 for the
Hyatt Chicago Magnificent Mile acquired in June
2012 and the Hilton Garden Inn Chicago Downtown/Magnificent Mile
acquired in July 2012. Our 28 pro forma
comparable hotels include our comparable portfolio, plus two hotels
either acquired or to be acquired after March
31, 2013: the Hilton New Orleans St. Charles acquired on May 1, 2013; and the Boston Park Plaza which
is expected to be acquired in or before July
2013.
Reconciliations of net income to EBITDA, Adjusted EBITDA, FFO
and Adjusted FFO are set forth on page 11. A reconciliation and the
components of comparable and pro forma comparable hotel EBITDA and
comparable and pro forma comparable hotel EBITDA margin are set forth
on page 14.
For Additional Information:
Bryan Giglia
Sunstone Hotel Investors, Inc.
(949) 382-3036
Sunstone
Hotel Investors, Inc.
|
Consolidated
Balance Sheets
|
(In
thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
2013
|
|
2012
|
|
|
|
|
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
|
Cash
and cash equivalents
|
$
208,313
|
|
$
157,217
|
|
Cash
proceeds held by accommodator
|
139,434
|
|
-
|
|
Restricted
cash
|
69,423
|
|
78,394
|
|
Accounts
receivable, net
|
33,490
|
|
27,498
|
|
Inventories
|
1,235
|
|
1,377
|
|
Prepaid
expenses
|
10,183
|
|
10,739
|
|
Assets
held for sale, net
|
-
|
|
132,335
|
Total
current assets
|
462,078
|
|
407,560
|
|
|
|
|
|
Investment
in hotel properties, net
|
2,689,283
|
|
2,681,877
|
Deferred
financing fees, net
|
11,173
|
|
11,931
|
Goodwill
|
9,405
|
|
9,405
|
Other
assets, net
|
31,709
|
|
25,902
|
|
|
|
|
|
Total
assets
|
$
3,203,648
|
|
$
3,136,675
|
|
|
|
|
|
Liabilities
and Equity
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable and accrued expenses
|
$
29,801
|
|
$
22,646
|
|
Accrued
payroll and employee benefits
|
19,027
|
|
26,738
|
|
Dividends
payable
|
3,912
|
|
7,437
|
|
Other
current liabilities
|
35,193
|
|
30,963
|
|
Current
portion of notes payable
|
19,757
|
|
76,723
|
|
Notes
payable of assets held for sale
|
-
|
|
27,270
|
|
Liabilities
of assets held for sale
|
-
|
|
8,228
|
Total
current liabilities
|
107,690
|
|
200,005
|
|
|
|
|
|
Notes
payable, less current portion
|
1,281,112
|
|
1,286,666
|
Capital
lease obligations, less current portion
|
15,615
|
|
15,621
|
Other
liabilities
|
32,583
|
|
15,070
|
Total
liabilities
|
1,437,000
|
|
1,517,362
|
|
|
|
|
|
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
March 31, 2013 and December 31, 2012, 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,
|
|
|
|
|
zero
shares issued and outstanding at March 31, 2013 and 7,050,000 shares
issued and
|
|
|
|
|
outstanding at December 31, 2012, stated at liquidation preference of
$25.00 per share
|
-
|
|
176,250
|
|
8.0%
Series D Cumulative Redeemable Preferred Stock,
|
|
|
|
|
4,600,000 shares issued and outstanding at March 31, 2013 and December
31, 2012,
|
|
|
|
|
stated at liquidation preference of $25.00 per share
|
115,000
|
|
115,000
|
|
Common
stock, $0.01 par value, 500,000,000 shares authorized,
|
|
|
|
|
160,815,933 shares issued and outstanding at March 31, 2013 and
135,237,438 shares
|
|
|
|
|
issued and outstanding at December 31, 2012
|
1,608
|
|
1,352
|
|
Additional
paid in capital
|
1,793,825
|
|
1,493,397
|
|
Retained
earnings
|
187,005
|
|
158,376
|
|
Cumulative
dividends
|
(486,047)
|
|
(475,144)
|
|
Accumulated
other comprehensive loss
|
-
|
|
(5,335)
|
Total
stockholders' equity
|
1,611,391
|
|
1,463,896
|
Non-controlling
interest in consolidated joint ventures
|
55,257
|
|
55,417
|
Total
equity
|
1,666,648
|
|
1,519,313
|
|
|
|
|
|
Total
liabilities and equity
|
$
3,203,648
|
|
$
3,136,675
|
|
|
|
|
|
Sunstone
Hotel Investors, Inc.
|
Consolidated
Statements of Operations
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2013
|
|
2012
|
|
|
|
|
Revenues
|
|
|
|
Room
|
$
132,623
|
|
$
119,622
|
Food
and beverage
|
49,628
|
|
46,835
|
Other
operating
|
12,670
|
|
11,777
|
Total revenues
|
194,921
|
|
178,234
|
Operating expenses
|
|
|
|
Room
|
37,454
|
|
33,436
|
Food
and beverage
|
35,096
|
|
32,850
|
Other
operating
|
4,242
|
|
3,894
|
Advertising and promotion
|
11,265
|
|
9,901
|
Repairs and maintenance
|
8,374
|
|
7,483
|
Utilities
|
6,183
|
|
6,004
|
Franchise costs
|
6,478
|
|
5,971
|
Property tax, ground lease and insurance
|
18,468
|
|
15,554
|
Property general and administrative
|
23,606
|
|
21,910
|
Corporate overhead
|
6,171
|
|
5,198
|
Depreciation and amortization
|
34,016
|
|
30,882
|
Total operating expenses
|
191,353
|
|
173,083
|
Operating income
|
3,568
|
|
5,151
|
Interest and other income
|
563
|
|
63
|
Interest expense
|
(17,414)
|
|
(19,359)
|
Loss
on extinguishment of debt
|
(44)
|
|
(191)
|
Loss before income taxes and discontinued operations
|
(13,327)
|
|
(14,336)
|
Income tax provision
|
(6,157)
|
|
-
|
Loss from continuing operations
|
(19,484)
|
|
(14,336)
|
Income from discontinued operations
|
48,410
|
|
1,368
|
Net income (loss)
|
28,926
|
|
(12,968)
|
Income from consolidated joint venture attributable to non-controlling
interest
|
(297)
|
|
(560)
|
Distributions to non-controlling interest
|
(8)
|
|
(8)
|
Preferred stock dividends and redemption charge
|
(10,903)
|
|
(7,437)
|
Undistributed income allocated to unvested restricted stock
compensation
|
(218)
|
|
-
|
Income available (loss attributable) to common stockholders
|
$
17,500
|
|
$
(20,973)
|
|
|
|
|
Basic
and diluted per share amounts:
|
|
|
|
Loss
from continuing operations attributable to common stockholders
|
$
(0.20)
|
|
$
(0.19)
|
Income from discontinued operations
|
0.32
|
|
0.01
|
Basic
and diluted income available (loss attributable) to common stockholders
per common share
|
$ 0.12
|
|
$
(0.18)
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted average common shares outstanding:
|
151,076
|
|
117,426
|
|
|
|
|
|
|
|
Sunstone
Hotel Investors, Inc.
|
Reconciliation
of Net Income (Loss) to Non-GAAP Financial Measures
|
(Unaudited
and in thousands, except per share amounts)
|
|
|
|
|
|
|
Reconciliation
of Net Income (Loss) to EBITDA and Adjusted EBITDA
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
March
31,
|
|
2013
|
2012
|
|
|
|
Net
income (loss)
|
$
28,926
|
$
(12,968)
|
Operations
held for investment:
|
|
|
Depreciation and amortization
|
34,016
|
30,882
|
Amortization of lease intangibles
|
1,028
|
1,028
|
Interest expense
|
17,414
|
19,359
|
Income tax provision
|
6,157
|
-
|
Non-controlling
interests:
|
|
|
Income from consolidated joint venture attributable to non-controlling
interest
|
(297)
|
(560)
|
Depreciation and amortization
|
(1,435)
|
(1,419)
|
Interest expense
|
(577)
|
(627)
|
Discontinued
operations:
|
|
|
Depreciation and amortization
|
-
|
3,874
|
Amortization of lease intangibles
|
-
|
7
|
Interest expense
|
99
|
2,144
|
EBITDA
|
85,331
|
41,720
|
|
|
|
Operations
held for investment:
|
|
|
Amortization of deferred stock compensation
|
1,075
|
946
|
Amortization of favorable and unfavorable contracts, net
|
114
|
-
|
Non-cash straightline lease expense
|
693
|
696
|
Capital lease obligation interest - cash ground rent
|
(351)
|
-
|
Gain
on sale of assets
|
-
|
(11)
|
Loss
on extinguishment of debt
|
44
|
191
|
Closing costs - completed acquisitions
|
147
|
36
|
Lawsuit settlement reversal of costs
|
-
|
(97)
|
Non-controlling
interests:
|
|
|
Non-cash straightline lease expense
|
(113)
|
(113)
|
Discontinued
operations:
|
|
|
Gain
on sale of assets
|
(51,620)
|
(177)
|
Loss
on extinguishment of debt
|
3,115
|
-
|
Lawsuit settlement reversal of costs
|
-
|
(48)
|
|
(46,896)
|
1,423
|
|
|
|
Adjusted
EBITDA
|
$
38,435
|
$
43,143
|
|
|
|
|
|
|
Reconciliation
of Net Income (Loss) to FFO and Adjusted FFO
|
|
|
|
|
|
|
Net
income (loss)
|
$
28,926
|
$
(12,968)
|
Preferred
stock dividends and redemption charge
|
(10,903)
|
(7,437)
|
Operations
held for investment:
|
|
|
Real
estate depreciation and amortization
|
33,672
|
30,575
|
Amortization of lease intangibles
|
1,028
|
1,028
|
Gain
on sale of assets
|
-
|
(11)
|
Non-controlling
interests:
|
|
|
Income from consolidated joint venture attributable to non-controlling
interest
|
(297)
|
(560)
|
Real
estate depreciation and amortization
|
(1,435)
|
(1,419)
|
Discontinued
operations:
|
|
|
Real
estate depreciation and amortization
|
-
|
3,874
|
Amortization of lease intangibles
|
-
|
7
|
Gain
on sale of assets
|
(51,620)
|
(177)
|
FFO
|
(629)
|
12,912
|
|
|
|
Operations
held for investment:
|
|
|
Amortization of favorable and unfavorable contracts, net
|
114
|
-
|
Non-cash straightline lease expense
|
693
|
696
|
Non-cash interest related to (gain) loss on derivatives
|
(157)
|
76
|
Loss
on extinguishment of debt
|
44
|
191
|
Closing costs - completed acquisitions
|
147
|
36
|
Lawsuit settlement reversal of costs
|
-
|
(97)
|
Income tax provision
|
6,157
|
-
|
Preferred stock redemption charge
|
4,641
|
-
|
Non-controlling
interests:
|
|
|
Non-cash straightline lease expense
|
(113)
|
(113)
|
Non-cash interest related to loss on derivative
|
-
|
(1)
|
Discontinued
operations:
|
|
|
Loss
on extinguishment of debt
|
3,115
|
-
|
Lawsuit settlement reversal of costs
|
-
|
(48)
|
|
14,641
|
740
|
|
|
|
Adjusted
FFO
|
$
14,012
|
$
13,652
|
|
|
|
FFO
per diluted share
|
$ -
|
$ 0.11
|
|
|
|
Adjusted
FFO per diluted share
|
$ 0.09
|
$ 0.12
|
|
|
|
Basic
weighted average shares outstanding
|
151,076
|
117,426
|
Shares
associated with unvested restricted stock awards
|
305
|
155
|
Diluted
weighted average shares outstanding (1)
|
151,381
|
117,581
|
|
(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 $0.01 and
$0.12, respectively, for the three months ended March 31, 2013 and
2012. On an "as-converted" basis, Adjusted FFO available to common
stockholders per diluted share is $0.10 and $0.13, respectively, for
the three months ended March 31, 2013 and 2012.
|
|
|
|
Sunstone
Hotel Investors, Inc.
|
Reconciliation
of Net Income to Non-GAAP Financial Measures
|
Guidance
for Second Quarter 2013
|
(Unaudited
and in thousands except per share amounts)
|
|
|
|
|
|
|
Reconciliation
of Net Income to Adjusted EBITDA
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
June
30, 2013
|
|
Low
|
High
|
|
|
|
Net
income
|
$
18,000
|
$
20,000
|
Depreciation and amortization
|
34,000
|
34,000
|
Amortization of lease intangibles
|
1,100
|
1,100
|
Interest expense
|
17,000
|
17,000
|
Non-controlling interests
|
(2,700)
|
(2,700)
|
Amortization of deferred stock compensation
|
1,250
|
1,250
|
Capital lease obligation interest - cash ground rent
|
(350)
|
(350)
|
Non-cash straightline lease expense
|
700
|
700
|
Adjusted
EBITDA
|
$
69,000
|
$
71,000
|
|
|
|
|
|
|
Reconciliation
of Net Income to Adjusted FFO
|
|
|
|
|
|
|
Net
income
|
$
18,000
|
$
20,000
|
Preferred stock dividends
|
(3,900)
|
(3,900)
|
Real
estate depreciation and amortization
|
33,000
|
33,000
|
Non-controlling interests
|
(2,200)
|
(2,200)
|
Amortization of lease intangibles
|
1,100
|
1,100
|
Non-cash straightline lease expense
|
700
|
700
|
Adjusted
FFO
|
$
46,700
|
$
48,700
|
|
|
|
|
|
|
Adjusted
FFO per diluted share
|
$ 0.29
|
$ 0.30
|
|
|
|
Diluted
weighted average shares outstanding
|
161,500
|
161,500
|
|
|
|
|
|
|
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
|
$
68,000
|
$
82,000
|
Depreciation and amortization
|
135,000
|
135,000
|
Amortization of lease intangibles
|
4,000
|
4,000
|
Interest expense
|
73,200
|
73,200
|
Non-controlling interests
|
(11,000)
|
(11,000)
|
Amortization of deferred stock compensation
|
4,600
|
4,600
|
Income tax provision
|
6,200
|
6,200
|
Capital lease obligation interest - cash ground rent
|
(1,400)
|
(1,400)
|
Non-cash straightline lease expense
|
2,800
|
2,800
|
Gain
on sale of assets
|
(51,600)
|
(51,600)
|
Loss
on extinguishment of debt
|
3,200
|
3,200
|
Adjusted
EBITDA
|
$
233,000
|
$
247,000
|
|
|
|
|
|
|
Reconciliation
of Net Income to Adjusted FFO
|
|
|
|
|
|
|
Net
income
|
$
68,000
|
$
82,000
|
Preferred stock dividends
|
(15,000)
|
(15,000)
|
Real
estate depreciation and amortization
|
133,500
|
133,500
|
Non-controlling interests
|
(8,700)
|
(8,700)
|
Amortization of lease intangibles
|
4,000
|
4,000
|
Income tax provision
|
6,200
|
6,200
|
Non-cash straightline lease expense
|
2,800
|
2,800
|
Gain
on sale of assets
|
(51,600)
|
(51,600)
|
Loss
on extinguishment of debt
|
3,200
|
3,200
|
Adjusted
FFO
|
$
142,400
|
$
156,400
|
|
|
|
|
|
|
Adjusted
FFO per diluted share
|
$ 0.90
|
$ 0.98
|
|
|
|
Diluted
weighted average shares outstanding
|
159,100
|
159,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sunstone
Hotel Investors, Inc.
|
Comparable
and Pro Forma Comparable Hotel EBITDA and Margins
|
(Unaudited
and in thousands except hotels and rooms)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31, 2013
|
|
Three
Months Ended March 31, 2012
|
|
|
Actual
(1)
|
|
2013
Acquisitions (2)
|
|
Pro
Forma (3)
|
|
Actual
(4)
|
|
2012
Acquisitions (5)
|
|
Comparable
(6)
|
|
2013
Acquisitions (2)
|
|
Pro
Forma (3)
|
Number
of Hotels
|
26
|
|
2
|
|
28
|
|
24
|
|
2
|
|
26
|
|
2
|
|
28
|
Number
of Rooms
|
11,632
|
|
1,303
|
|
12,935
|
|
10,858
|
|
774
|
|
11,632
|
|
1,303
|
|
12,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
EBITDA Margin (7)
|
23.3%
|
|
5.8%
|
|
22.1%
|
|
24.3%
|
|
-3.3%
|
|
23.3%
|
|
10.1%
|
|
22.3%
|
Hotel
EBITDA Margin adjusted for prior year property tax (8)
|
23.3%
|
|
|
|
22.1%
|
|
24.2%
|
|
|
|
23.2%
|
|
|
|
22.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room
revenue
|
$
132,623
|
|
$
11,021
|
|
$
143,644
|
|
$
119,622
|
|
$ 5,497
|
|
$
125,119
|
|
$
11,462
|
|
$
136,581
|
Food
and beverage revenue
|
49,628
|
|
2,636
|
|
52,264
|
|
46,835
|
|
926
|
|
47,761
|
|
2,454
|
|
50,215
|
Other
operating revenue
|
11,182
|
|
791
|
|
11,973
|
|
10,394
|
|
531
|
|
10,925
|
|
835
|
|
11,760
|
Total
Hotel Revenues
|
193,433
|
|
14,448
|
|
207,881
|
|
176,851
|
|
6,954
|
|
183,805
|
|
14,751
|
|
198,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room
expense
|
37,454
|
|
3,976
|
|
41,430
|
|
33,436
|
|
1,868
|
|
35,304
|
|
3,646
|
|
38,950
|
Food
and beverage expense
|
35,096
|
|
2,257
|
|
37,353
|
|
32,850
|
|
673
|
|
33,523
|
|
2,317
|
|
35,840
|
Other
hotel expense
|
53,618
|
|
5,220
|
|
58,838
|
|
47,059
|
|
3,788
|
|
50,847
|
|
5,173
|
|
56,020
|
General and administrative expense
|
22,258
|
|
2,154
|
|
24,412
|
|
20,458
|
|
853
|
|
21,311
|
|
2,128
|
|
23,439
|
Total
Hotel Expenses
|
148,426
|
|
13,607
|
|
162,033
|
|
133,803
|
|
7,182
|
|
140,985
|
|
13,264
|
|
154,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
EBITDA
|
45,007
|
|
841
|
|
45,848
|
|
43,048
|
|
(228)
|
|
42,820
|
|
1,487
|
|
44,307
|
Prior
year property tax
|
-
|
|
-
|
|
-
|
|
(205)
|
|
-
|
|
(205)
|
|
-
|
|
(205)
|
Hotel
EBITDA adjusted for prior year property tax
|
45,007
|
|
841
|
|
45,848
|
|
42,843
|
|
(228)
|
|
42,615
|
|
1,487
|
|
44,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-hotel
operating income
|
232
|
|
-
|
|
232
|
|
301
|
|
-
|
|
301
|
|
-
|
|
301
|
Amortization
of lease intangibles
|
(1,028)
|
|
-
|
|
(1,028)
|
|
(1,028)
|
|
-
|
|
(1,028)
|
|
-
|
|
(1,028)
|
Amortization
of favorable and unfavorable contracts, net
|
(114)
|
|
-
|
|
(114)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Non-cash
straightline lease expense
|
(693)
|
|
-
|
|
(693)
|
|
(696)
|
|
-
|
|
(696)
|
|
-
|
|
(696)
|
Capital
lease obligation interest - cash ground rent
|
351
|
|
-
|
|
351
|
|
-
|
|
351
|
|
351
|
|
-
|
|
351
|
Management
company transition costs
|
-
|
|
-
|
|
-
|
|
(394)
|
|
-
|
|
(394)
|
|
-
|
|
(394)
|
Prior
year property tax
|
-
|
|
-
|
|
-
|
|
205
|
|
-
|
|
205
|
|
-
|
|
205
|
Corporate
overhead
|
(6,171)
|
|
-
|
|
(6,171)
|
|
(5,198)
|
|
-
|
|
(5,198)
|
|
-
|
|
(5,198)
|
Depreciation
and amortization
|
(34,016)
|
|
(2,353)
|
|
(36,369)
|
|
(30,882)
|
|
(3,059)
|
|
(33,941)
|
|
(2,353)
|
|
(36,294)
|
Operating
Income
|
3,568
|
|
(1,512)
|
|
2,056
|
|
5,151
|
|
(2,936)
|
|
2,215
|
|
(866)
|
|
1,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and other income
|
563
|
|
-
|
|
563
|
|
63
|
|
-
|
|
63
|
|
-
|
|
63
|
Interest
expense
|
(17,414)
|
|
(1,319)
|
|
(18,733)
|
|
(19,359)
|
|
(351)
|
|
(19,710)
|
|
(1,319)
|
|
(21,029)
|
Loss
on extinguishment of debt
|
(44)
|
|
-
|
|
(44)
|
|
(191)
|
|
-
|
|
(191)
|
|
-
|
|
(191)
|
Income
tax provision
|
(6,157)
|
|
-
|
|
(6,157)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Income
from discontinued operations
|
48,410
|
|
-
|
|
48,410
|
|
1,368
|
|
-
|
|
1,368
|
|
-
|
|
1,368
|
Net
Income (Loss)
|
$
28,926
|
|
$
(2,831)
|
|
$
26,095
|
|
$
(12,968)
|
|
$
(3,287)
|
|
$
(16,255)
|
|
$
(2,185)
|
|
$
(18,440)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Actual
represents the Company's ownership results for the 26 hotels held for
investment as of March 31, 2013.
|
(2)
|
2013
Acquisitions represents prior ownership results for the Hilton New
Orleans St. Charles acquired by the Company on May 1, 2013, and the
Boston Park Plaza which the Company expects to acquire in or before
July 2013, along with the Company's pro forma adjustments for interest
and depreciation expense.
|
(3)
|
Pro
Forma represents the Company's ownership results, prior ownership
results and pro forma adjustments for the 26 hotels held for investment
as of March 31, 2013, plus the Hilton New Orleans St. Charles acquired
by the Company on May 1, 2013, and the Boston Park Plaza which the
Company expects to acquire in or before July 2013.
|
(4)
|
Actual
represents the Company's ownership results for the 24 hotels held for
investment as of March 31, 2012.
|
(5)
|
2012
Acquisitions 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.
|
(6)
|
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 March 31, 2013.
|
(7)
|
Hotel
EBITDA Margin is calculated as Hotel EBITDA divided by total hotel
revenues.
|
(8)
|
Hotel
EBITDA Margin for the three months ended March 31, 2012 includes the
additional benefit of $0.2 million in prior year property tax credits.
Without this benefit, Comparable Hotel EBITDA margin for the three
months ended March 31, 2012 would have been 23.2%, and Pro Forma
Comparable Hotel EBITDA margin would have been 22.2%.
|
|