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SAN CLEMENTE, Calif., Jan. 27, 1999 - Sunstone Hotel
Investors, Inc. (NYSE: SSI), a real estate investment trust (REIT), today
announced financial and operating results for the year and fourth quarter
ended Dec. 31, 1998. Sunstone reported FFO of $57.2 million
for the year ended Dec. 31, 1998, or $1.40 per share, an increase of 4.5%
per share over 1997, and, for the fourth quarter of 1998, reported FFO
of $8.5 million, or $.22 per share. FFO per share for the fourth
quarter ended Dec. 31, 1998 includes charges of $1.5 million, related to
expenses associated with debt and equity offerings that were withdrawn
due to market conditions, in addition to rental abatement to the lessee
which resulted from delays in renovation caused by weather and other factors.
FFO per share for the year ended Dec. 31, 1998 also includes a third quarter
charge of $553,000 of expenses associated with the termination of a significant
hotel portfolio acquisition. FFO per share for the fourth quarter
and year ended Dec. 31, 1998, excluding these charges and abatement of
rent, would have been $0.27 and $1.46, respectively.
Total revenues for 1998 were $99.2 million representing an increase of 119% over revenues of $45.2 million for 1997. Total revenues for the fourth quarter of 1998 were $21.5 million representing an increase of 24.3% over the $17.3 million for the corresponding quarter of 1997. REVPAR in the fourth quarter of 1998 for the non-renovation hotels increased by 6.5% from $47.34, in the fourth quarter of 1997, to $50.40 in the fourth quarter of 1998 and was driven by a 4.8% increase in average daily rate and a one percentage point increase in occupancy. Alter continued, "Management believes it is well-positioned for 1999." Operating Results During the fourth quarter of 1998, the Company experienced a greater
than anticipated impact from renovation due to weather and other factors.
In addition, the western United States and specific markets in which the
Company owns properties experienced an increase in supply and reduced demand.
Markets which were affected included Colorado and Utah due to poor weather
and ski conditions, where the Company owns 12 seasonally-affected hotels;
the Pacific Northwest which suffered from soft demand; the Phoenix, Ariz.
market which suffered from softer than anticipated demand in the Scottsdale
market which created greater competition for the Company's Sheraton resort
in Chandler, Ariz.; and the Anaheim, Calif. market which experienced a
5.0% decline in demand due to reduced convention volume, poor attendance
at Disneyland and major road reconstruction of the I-5 freeway.
Additionally, strong revenue performance was achieved by those non-renovation
hotels flagged under the Marriott, Residence Inn by Marriott and Courtyard
by Marriott brands, posting a 12.2% average REVPAR gain for the quarter.
Hotels owned by Sunstone under Marriott franchises represent 34.9% of the
Company's fourth quarter 1998 lease revenues. Sunstone's non-renovation
Holiday Inn brands, which represent 20.0% of the Company's lease revenues
for the fourth quarter 1998 posted REVPAR gains of 7.7%.
The Courtyard by Marriott-LAX posted a major turn-around in occupancy following the July 1998 conversion from an independent hotel to a Marriott brand. The Rochester Marriott was also another significant success of branding independent hotels posting a significant increase in rate. These two hotels achieved REVPAR increases in the fourth quarter of 92.1% and 34.5%, respectively. Franchise Branding and Upgrades Marriott Conversions. During 1998, the Company continued to execute its branding and repositioning
strategy. In March 1998, Sunstone branded the previously independent
194-room Kahler Plaza hotel as the full-service Marriott Rochester.
The hotel underwent a $1.7 million renovation, which included upgraded
guestroom soft goods, furniture and guest baths, and extensive renovation
of the lobby and restaurant. The Marriott Rochester was the first
of five hotels from the Kahler portfolio to be branded as a full-service
Marriott. In April 1998, the 333-room Provo Park Hotel in Utah was
also flagged as a luxury, full-service Marriott, after undergoing a $4.6
million renovation upgrading the lobby, guest rooms and baths, restaurant,
meeting rooms and the hotel's exterior.
1998 Acquisitions Sunstone reported that it acquired ten hotels in 1998 in strong markets
in which it believes there are significant barriers to new competition
for a total purchase price of $133.9 million as follows:
(B) Newly built (C) The Company anticipates reflagging the hotel as a full service Marriott after the completion of certain renovations. Sale of Non-Core Hotel Assets During 1998, Sunstone executed its plan to reposition its portfolio
of hotels towards the luxury and upscale markets by disposing non-core
hotel assets. Alter added, "We continue to consider certain non-core
hotel assets for disposition, primarily limited service hotels, in order
to redeploy capital to acquire full-service hotels which can better benefit
from
During the third quarter, the Company sold six hotels for which the locations and sizes were inconsistent with the Company's strategy of renovating and rebranding luxury, upscale and mid-price hotels in large metropolitan areas, downtown and airport hotel markets. Four of the hotels, comprising 651 rooms, were sold to Cavanaughs Hospitality Corporation (NYSE: CVH) and included the Boise Park Suite Hotel in Boise, Idaho; the Pocatello Park Quality Inn in Pocatello, Idaho; the Best Western Canyon Springs Park Hotel in Twin Falls, Idaho and the Best Western Colonial Inn in Helena, Mont. Two additional hotels sold included the 187-room Lakeview Resort & Conference Center in Morgantown, W.Va. and the 284-room Green Oaks Park Hotel in Fort Worth, Texas. These six hotels were acquired by Sunstone as part of the Kahler Realty Corporation in October 1997. As of Jan. 1999, the Company entered into an agreement to sell the 131-room Hampton Inn in Arcadia, Calif. The sale is expected to close in the first quarter of 1999. Renovations and Development During 1998, Sunstone continued to implement its strategy of renovating, rebranding and repositioning its acquired hotels. In 1998, the Company expended $68.2 million redeveloping and renovating 20 of the 57 hotels owned during the year as compared to completing $48.8 million in renovations to 19 of its 51 hotels owned in 1997. Sunstone is currently redeveloping or renovating another eight hotels for an additional estimated aggregate cost of $32 million, all of which are expected to be completed by the second quarter of 1999. Award Winning Properties from Sunstone's Renovation
and Repositioning Strategy
(B) Excludes the six hotels which were sold during the third quarter of 1998. (C) Includes the nine hotels undergoing renovation in the fourth quarter of 1998 and eleven hotels undergoing renovation in the fourth quarter of 1997. Sunstone Hotel Investors, Inc. is a leading self-administered real estate
investment trust whose portfolio consists of luxury, upscale and mid-price
hotels located primarily in the Pacific and Mountain regions of the western
United States. The Company's growth strategy is to maximize shareholder
value by (i) acquiring underperforming and undercapitalized hotels that
management believes are in attractive locations with significant barriers
to entry and
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Also See: | Sunstone Hotel Investors, Inc. Named 'Developer of the Year' by Marriott Hotels / Dec 1998 |