|SAN CLEMENTE, Calif., April 29, 1999 -
Total revenue rose 5.0% to $24.9 million for the first quarter of 1999 from $23.7 million for the corresponding quarter of 1998. Revenue per available room ("REVPAR") for the non-renovation hotels increased by 6.3% to $54.30 for the first quarter of 1999 from $51.07 for the first quarter of 1998. Non-renovation hotels include 38 of the Company's 56 hotels which were not under renovation in either the first quarter of 1998 or 1999. The 6.3% growth in REVPAR was driven by an increase in the average daily rate from $79.02 to $80.89 and an increase in occupancy from 64.6% to 67.1%. REVPAR for the entire hotel portfolio increased by 5.9%. Despite the REVPAR growth, Funds from Operation ("FFO") decreased by 6.0% to $14.0 million from $14.9 million, and on a per share basis, to $0.34 from $0.38. During the prior twelve months, the Company acquired four hotels for $59.7 million and invested approximately $60.0 million renovating recently acquired hotels. The acquisitions and renovations were funded with borrowings and the issuance of common stock. As a result, for the quarter ended March 31, 1999, the Company incurred additional interest expense and had more shares of common stock outstanding resulting in a decrease in FFO and FFO per share.
Within the portfolio of non-renovation hotels, those hotels branded with Marriott franchises achieved 14.9% REVPAR growth for the first quarter of 1999 over the corresponding quarter of 1998. These Marriott hotels represent 34.0% of non-renovation hotel rooms available and 36.8% of non-renovation hotels (14 of 38 hotels). Additionally, the non-renovation hotels located in the Pacific region achieved 8.9% REVPAR growth for the first quarter. The Pacific region hotels represent 50.5% of non-renovation hotel rooms available and 55.3% of total non-renovation hotels (21 of 38 hotels).
President and Chief Executive Officer, Robert A. Alter, commented on the quarter, "We are encouraged by these results as we anticipate acquiring two newly built hotels located in California and completing the construction of a third hotel located in the Seattle area during the second quarter of 1999. These hotels will be flagged as a Residence Inn by Marriott, Hilton Garden Inn and Courtyard by Marriott."
The revenue performance of the Company's hotel portfolio in the first
quarter of 1999 was due to the results from the Company's recently redeveloped
hotels and internal growth of continuously owned and recently acquired
hotels as indicated in the following table:
(A) The Company did not own certain hotels for the entire period presented.
REVPAR for the first quarter of 1999 for the ten hotels, which were undergoing renovation during the first quarter of 1998, increased 24.3% over the corresponding quarter of 1998. REVPAR for the first quarter of 1999 for the six hotels, which were undergoing renovation during the first quarter of 1999, decreased 18.0% over the corresponding quarter of 1998, a period during which these hotels were not undergoing renovation. The renovation hotels for the first quarter of 1998 and 1999 each exclude two hotels that were under renovation during both the first quarter of 1998 and 1999. In the aggregate, REVPAR for the first quarter of 1999 for the renovation hotels (16 hotels) increased 9.0% over the corresponding quarter of 1998.
Sale of Non-Core Hotel Assets
During the first quarter of 1999, the Company sold the limited serviceHampton Inn located in Arcadia, Calif. Alter added, "We continue to consider certain non-core hotel assets, primarily limited service hotels, for disposition, in order to redeploy capital for other strategic purposes."
On April 5, 1999, the Company received an offer by SHP Acquisition, LLC, formed by Robert A. Alter, certain management personnel of Sunstone Hotel Properties, Inc. and Westbrook Funds III. The SHP Acquisition, LLC proposal is for all of the common stock of the Company at $9.50 to $10.00 in cash per share. Under this proposal, the holders of outstanding partnership units in Sunstone Hotel Investors, L.P. (other than Sunstone) would receive, at their option, either cash in an amount per partnership unit equal to the cash price per common share or redeemable perpetual preferred units in Sunstone OP having a face value equal to the cash price. The Company's 7.9% Class A Cumulative Convertible Preferred Stock would be redeemed in accordance with its term for a cash amount equal to its liquidation preference plus accrued and unpaid dividends.
The Company formed a Special Committee of the Board of Directors, chaired
by Laurence S. Geller, to study the proposal and consider the Company's
alternatives. The Special Committee has appointed Goldman, Sachs Co. to
act as its independent financial advisor to evaluate the proposal made
by SHP Acquisition, LLC and to review the Company's strategic alternatives.
The Special Committee also appointed the law firm of Altheimer Gray to
act as its independent legal advisor.
(B) Excludes the Hampton Inn located in Arcadia, Calif. which was sold during the first quarter of 1999.
(C) Includes six hotels undergoing renovation in the first quarter of 1999 and ten hotels undergoing renovation in the first quarter of 1998. Two hotels that were under renovation during the first quarter of both 1999 and 1998 have been excluded.
Sunstone Hotel Properties, Inc. leases and operates each of the Company's 56 hotels and is owned by Robert A. Alter, the Company's Chairman, President and CEO, and Charles L. Biederman, the Company's Vice Chairman and Executive Vice President. Westbrook Partners is a New York based real estate opportunity fund, which is a 9.6% shareholder in the Company, whose managing principal, Paul Kazilionis, is a director of the Company. Sunstone Hotel Investors, Inc. is a 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 (ii) improving such hotels' financial performance by renovating, redeveloping, rebranding and repositioning the hotels and through the implementation of focused sales and marketing programs. Sunstone Hotel Investors, Inc. is the only hotel REIT that currently focuses its acquisition strategy primarily in the western United States. Through Sunstone Hotel Investors, L.P., the Company owns 56 hotels comprising 10,086 rooms.
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results and the timing of certain events could differ materially from those set forth in the forward-looking statements.
|Also See:||Sunstone Hotel Investors, Inc. Named 'Developer of the Year' by Marriott Hotels / Dec 1998|