ALISO
VIEJO, Calif., Nov. 1, 2012--
Sunstone Hotel Investors, Inc. (the "Company") (NYSE: SHO) today announced results for the third
quarter ended September 30, 2012.
Third Quarter 2012 Operational
Results (as compared to Third Quarter 2011) (1):
- Comparable Hotel RevPAR increased 5.1% to $138.01.
- Comparable Hotel EBITDA Margin increased by 130 basis
points to 28.8%.
- Adjusted EBITDA increased by 14.6% to $60.1 million.
- Adjusted FFO per diluted share increased by 15.0% to $0.23.
- Income available to common stockholders was $30.9 million (vs. a loss attributable to
common stockholders of $24.0 million in
2011).
- Income available to common stockholders per diluted
share was $0.23 (vs. a loss attributable
to common stockholders per diluted share of $0.20
in 2011).
Ken Cruse,
President and Chief Executive Officer, stated, "During the third
quarter our portfolio benefitted from solid demand trends and continued
improvements in operational efficiency, which helped drive a
130-basis-point increase in our Comparable Hotel EBITDA Margin and a
15% increase in our Adjusted FFO per diluted share. Also during the
third quarter we continued to improve our portfolio quality while
deleveraging our balance sheet by acquiring an unlevered primary-market
hotel and divesting of four highly levered, low-RevPAR secondary-market
hotels."
Mr. Cruse continued, "We continue
to make value-adding investments into our portfolio. We recently
completed a $25 million full guestroom
and bathroom renovation of our 807-room Renaissance Washington DC.
While the renovation resulted in short-term displacement – negatively
impacting our portfolio's Comparable Hotel RevPAR by 170 basis points
and Hotel EBITDA Margins by 60 basis points in the third quarter – we
believe the project will drive material outperformance at this hotel
going forward. To this point, our 2013 group booking pace at the
Renaissance Washington DC is now up more than 22% year-over-year, and
the hotel now has more group rooms on the books for 2013 than in any
year since 2007."
Mr. Cruse added, "In spite of
solid industry fundamentals, with any cyclical recovery there will be
periods of softer-than-anticipated growth in select markets.
Accordingly, we have moderated our guidance for RevPAR and
profitability growth for the remainder of 2012. With 2013 group booking
pace up 8.1%, muted supply trends, and continued growth in transient
demand, we remain positive in our outlook for 2013 and beyond."
(1)
|
Comparable
Hotel RevPAR and Comparable Hotel EBITDA Margin information presented
reflect the Company's Comparable 30 Hotel Portfolio, which includes all
hotels in which the Company has interests as of September 30, 2012, and
also includes prior ownership results as applicable in 2012 and 2011
for the Doubletree Guest Suites Times Square acquired by the Company in
January 2011, the JW Marriott New Orleans acquired by the Company in
February 2011, the Hilton San Diego Bayfront acquired by the Company in
April 2011, the Hyatt Chicago Magnificent Mile acquired by the Company
in June 2012 and the Hilton Garden Inn Chicago Downtown/Magnificent
Mile acquired by the Company in July 2012. Comparable Hotel EBITDA
Margin information excludes current and prior year net property tax and
CAM adjustments.
|
SELECTED
FINANCIAL DATA
|
($
in millions, except RevPAR and per share amounts)
|
(unaudited)
|
|
|
|
Three
Months Ended September 30,
|
|
Nine
Months Ended September 30,
|
|
2012
|
2011
|
%
Change
|
|
2012
|
2011
|
%
Change
|
Total
Revenue
|
$ 221.1
|
$ 197.5
|
11.9%
|
|
$ 642.8
|
$ 551.1
|
16.6%
|
Comparable
Hotel RevPAR
|
$
138.01
|
$
131.36
|
5.1%
|
|
$
134.36
|
$
126.51
|
6.2%
|
Comparable
Hotel Occupancy
|
80.7%
|
78.4%
|
230
bps
|
|
78.9%
|
75.6%
|
330 bps
|
Comparable
Hotel ADR
|
$
171.02
|
$
167.55
|
2.1%
|
|
$
170.29
|
$
167.34
|
1.8%
|
|
|
|
|
|
|
|
|
Comparable
Hotel EBITDA Margin
|
28.8%
|
27.5%
|
130
bps
|
|
28.8%
|
27.6%
|
120 bps
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
$ 39.6
|
$
(16.6 )
|
|
|
$ 38.4
|
$ 73.7
|
|
Income
available (loss attributable) to common stockholders
|
$ 30.9
|
$
(24.0 )
|
|
|
$ 14.3
|
$ 53.0
|
|
Income
available (loss attributable) to common stockholders per diluted share
|
$ 0.23
|
$
(0.20 )
|
|
|
$ 0.11
|
$ 0.45
|
|
EBITDA
|
$ 96.5
|
$ 38.6
|
|
|
$ 205.6
|
$ 229.0
|
|
Adjusted
EBITDA
|
$ 60.1
|
$ 52.4
|
|
|
$ 174.3
|
$ 148.5
|
|
FFO
|
$ 30.1
|
$ 9.6
|
|
|
$ 81.7
|
$ 134.1
|
|
Adjusted
FFO
|
$ 31.6
|
$ 23.7
|
|
|
$ 87.4
|
$ 67.6
|
|
FFO
per diluted share (1)
|
$ 0.22
|
$ 0.08
|
|
|
$ 0.66
|
$ 1.14
|
|
Adjusted
FFO per diluted share (1)
|
$ 0.23
|
$ 0.20
|
|
|
$ 0.70
|
$ 0.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflects
the Series C convertible preferred stock on a "non-converted" basis. On
an "as-converted" basis, FFO per diluted share is $0.23 and $0.09,
respectively, for the three months ended September 30, 2012 and 2011,
and $0.67 and $1.14, respectively, for the nine months ended September
30, 2012 and 2011. On an "as-converted" basis, Adjusted FFO per diluted
share is $0.24 and $0.21, respectively, for the three months ended
September 30, 2012 and 2011, and $0.71 and $0.59, respectively, for the
nine months ended September 30, 2012 and 2011.
|
Disclosure regarding the non-GAAP
financial measures in this release is included on page 6.
Reconciliations of non-GAAP financial measures to the most comparable
GAAP measure for each of the periods presented are included on pages 9
through 13 of this release.
The Company's actual results for
the quarter ended September 30, 2012
compare to its prior guidance, adjusted for dispositions completed in
the third quarter 2012, as follows:
Metric
|
Quarter
Ended September 30, 2012 Guidance (1)
|
Impact
of Dispositions (2)
|
Adjusted
Prior Quarter Ended September 30, 2012 Guidance
|
Quarter
Ended September 30, 2012 Actual Results (3)
|
Performance
Relative to Adjusted Prior Guidance Midpoint
|
Comparable
Hotel RevPAR
|
+3% -
5%
|
|
+3% -
5%
|
5.1%
|
+1.1%
|
Net
Income ($ millions)
|
$1 - $4
|
|
$1 - $4
|
$2.0
|
($0.5)
|
Adjusted
EBITDA ($ millions)
|
$57 -
$60
|
($0.3)
|
$57 -
$60
|
$60.1
|
+$1.6
|
Adjusted
FFO ($ millions)
|
$28 -
$31
|
($0.2)
|
$28 -
$31
|
$31.6
|
+$2.1
|
Adjusted
FFO per diluted share
|
$0.20
- $0.23
|
|
$0.20
- $0.23
|
$0.23
|
+$0.02
|
Diluted
Weighted Average Shares Outstanding
|
135,700,000
|
|
135,700,000
|
135,554,000
|
(146,000)
|
(1)
Reflects guidance presented on August 2, 2012.
|
|
|
|
(2)
Reflects supplemental financial data presented in the transaction press
release dated September 10, 2012.
|
(3)
Reflects net income adjusted to exclude gain on sale of assets and
closing costs - completed acquisition.
|
Acquisitions / Dispositions
Update
On July
19, 2012, the Company completed the previously announced
acquisition of the 357-room Hilton Garden Inn Chicago
Downtown/Magnificent Mile for a gross purchase price of $91.75 million. The acquisition was funded
with a portion of the proceeds received from the Company's public
offering of 12.1 million shares of its common stock (including the
underwriter's exercise of its overallotment option).
On August
23, 2012, the Company completed the previously announced sale of
the 284-room Marriott Del Mar for a
gross sales price of $66.0 million. The
Company received net proceeds of $17.7 million
after proration adjustments and closing costs, including the assumption
of the existing mortgage secured by the hotel which totaled $47.1 million on the date of sale, and
recognized a gain on the sale of $25.5 million
during the third quarter 2012.
On September
14, 2012, the Company completed the previously announced
portfolio sale of the 229-room Doubletree Guest Suites Minneapolis, the
257-room Hilton Del Mar, the 350-room
Marriott Troy and an office building next to the Marriott Troy (the
"Portfolio Sale") for an adjusted gross sales price of $107.2 million, including the assumption of
approximately $75.6 million in mortgage
debt and approximately $2.2 million of
deferred management fees. The Company received net proceeds from the
Portfolio Sale of $28.6 million after
proration adjustments, closing costs and the debt and deferred
management fee assumptions, and recognized a $12.7
million gain on the sale during the third quarter 2012.
Balance Sheet/Liquidity Update
In September
2012, the Company amended and restated its $150.0 million senior unsecured revolving
credit facility, which was scheduled to mature in November 2013. The pricing on the amended
revolving credit facility was reduced and the 1% LIBOR floor was
eliminated. The maturity of the credit facility was extended by two
years to November 2015 with an option to
extend to November 2016. The amended
credit facility's interest rate is based on a pricing grid with a range
of 175 to 350 basis points, which represents a reduction from the
previous grid that ranged from 325 to 425 basis points over LIBOR
depending on the Company's leverage ratio. The credit facility also
includes an accordion option that allows the Company to request
additional lender commitments up to a total of $350.0
million.
As of September
30, 2012, the Company had approximately $241.3
million of cash and cash equivalents, including restricted cash
of $76.8 million.
As of September
30, 2012, the Company had total assets of approximately $3.1 billion, including $2.8
billion of net investments in hotel properties, total
consolidated debt of $1.4 billion and
stockholders' equity of $1.5 billion.
John Arabia,
Chief Financial Officer, stated, "We continue to methodically execute
on our balanced business plan and patiently de-lever our balance sheet
in a shareholder friendly manner. Since the end of 2011, we have
decreased total leverage by approximately $190
million, reducing our net debt plus preferred to Adjusted
EBITDA, from approximately 8.2 times to approximately 6.8 times. We
will continue to look for opportunities to grow the Company through
highly-equitized acquisitions, but only when such acquisitions may be
executed at attractive valuations relative to our cost of equity.
Accordingly, given the recent softness in the value of our shares, we
do not see equity-funded acquisitions as an attractive option at this
time. The recent amendment to our undrawn credit facility provides us
with incremental access to capital at a lower cost and with less
restrictive covenants. That said, we do not currently expect to use our
credit facility to fund acquisitions."
Capital Improvements
The Company invested $28.2 million in capital improvements into its
portfolio during the third quarter of 2012, and $76.6
million during the nine months ended September
30, 2012.
The Company will begin renovating
several of its hotels beginning in the fourth quarter 2012 and
continuing into 2013. The Company expects approximately $2 million of
revenue disruption during the fourth quarter 2012 and $6.0 - $8.0 million of revenue disruption
during full-year 2013, the majority of which is expected to occur
during the first quarter 2013. Significant near term renovations
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 is
expected to commence in January 2013 and
is expected to be completed by April 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 is expected to commence 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
is expected to commence during the fourth quarter 2012 and is expected
to be completed during the second quarter 2013.
- Renaissance Westchester:
The Company expects to invest approximately $12.0
million to renovate all guestrooms and public spaces of the
347-room Renaissance Westchester, transforming the rooms and public
spaces into stylish yet functional meeting, socializing and relaxing
venues. The renovation is expected to commence during the fourth
quarter 2012 and is expected to be completed during the second quarter
2013.
Hurricane Sandy Update
Following a preliminary physical
inspection of its hotels, the Company is pleased to report that none of
its hotels have reported any material damage related to Hurricane
Sandy. The Company is assessing the short-term earnings impact of
Hurricane Sandy and has included preliminary expectations for fourth
quarter disruption in its 2012 Outlook.
2012 Outlook
Achievement of the Company's
anticipated results is subject to risks and uncertainties, including
those disclosed in the Company's filings with the Securities and
Exchange Commission. The Company's guidance includes the Company's
ownership period for all 2012 acquisitions and dispositions, as well as
preliminary expected disruption resulting from Hurricane Sandy subject
to further review, and does not take into account the impact of any
future hotel acquisitions, dispositions, re-brandings, management
changes, transition costs, prior-year property tax assessments and/or
credits, debt repurchases or financings during 2012. Assuming no
additional capital transactions are completed in 2012, the Company
expects to apply net operating loss carryforwards to reduce taxable
income in 2012. The application of the net operating loss carryforwards
is viewed as a non-recurring event and therefore the Company will treat
any state and federal taxes associated with the application of net
operating loss carryforwards as a one-time expense and add them back to
Adjusted EBITDA and Adjusted FFO.
For the fourth quarter of 2012,
the Company expects:
Metric
|
Quarter
Ended December 31, 2012 Guidance
|
Comparable
Hotel RevPAR
|
+1.5%
- 3.0%
|
Net
Income (Loss) ($ millions) (1)
|
$(1)
- $4
|
Adjusted
EBITDA ($ millions)
|
$58
- $63
|
Adjusted
FFO ($ millions)
|
$31
- $36
|
Adjusted
FFO per diluted share
|
$0.23
- $0.27
|
Diluted
Weighted Average Shares Outstanding
|
135,700,000
|
(1)
Reflects net income adjusted for the impact of income tax expense
associated
|
with
the application of net operating loss carryforwards.
|
For the full year 2012, the Company
expects:
Metric
|
Prior
2012 FY Guidance (1)
|
Impact
of Dispositions (2)
|
Adjusted
Prior 2012 FY Guidance
|
Current
2012 FY Guidance (Prior to Hurricane Sandy Impact)
|
Change
to Adjusted Prior Guidance Midpoint
|
Current
2012 FY Guidance (Including Current Estimate of Hurricane Sandy Impact)
|
Change
to Adjusted Prior Guidance Midpoint
|
Comparable
Hotel RevPAR
|
+5% -
7%
|
|
+5% -
7%
|
+5% -
5.5%
|
(0.75%)
|
+4.5%
- 5.0%
|
(1.25%)
|
Net
Income ($ millions) (3)
|
$15 -
$22
|
($0.1)
|
$15 -
$22
|
$11 -
$14
|
($6.0)
|
$7 -
$12
|
($9.0)
|
Adjusted
EBITDA ($ millions)
|
$239 -
$245
|
($3.0)
|
$236 -
$242
|
$236 -
$239
|
($1.5)
|
$232 -
$237
|
($4.5)
|
Adjusted
FFO ($ millions)
|
$123 -
$130
|
($1.8)
|
$121 -
$128
|
$122 -
$125
|
($1.0)
|
$118 -
$123
|
($4.0)
|
Adjusted
FFO per diluted share
|
$0.97
- $1.02
|
($0.01)
|
$0.96
- $1.01
|
$0.96
- $0.98
|
($0.02)
|
$0.93
- $0.97
|
($0.04)
|
Diluted
Weighted Average Shares Outstanding
|
127,900,000
|
|
127,900,000
|
127,500,000
|
(400,000)
|
127,500,000
|
(400,000)
|
(1)
Reflects guidance presented on August 2, 2012.
|
|
|
|
|
(2)
Reflects supplemental financial data presented in the transaction press
release dated September 10, 2012.
|
|
(3)
Reflects net income adjusted for the impact of income tax expense
associated with the application of net operating loss carryforwards.
|
Fourth-quarter and full-year 2012
guidance is also based on the following assumptions:
- Full-year capital investment of $85
to $100 million, including the $25
million renovation of the Renaissance Washington DC. Hotel
revenue disruption of $3 to $5 million
related to renovation projects, with approximately $2 million of hotel revenue renovation
disruption in the fourth quarter.
- Fourth-quarter RevPAR guidance assumes that hotel
revenue renovation disruption will negatively impact fourth-quarter
RevPAR growth by 50 to 75 basis points
- Hotel revenue and EBITDA disruption of $3 to $4 million and $2
to $4 million, respectively, for the fourth-quarter and
full-year related to Hurricane Sandy, resulting in a reduction to
fourth-quarter and full-year RevPAR growth of 100 to 150 basis points
and 30 to 60 basis points, respectively.
- Full-year comparable Hotel EBITDA Margins to increase
by 50 to 100 basis points, which includes the impact of renovation
displacement and Hurricane Sandy disruption.
- Full-year corporate overhead expense (excluding stock
amortization and one-time expenses related to future acquisition
closing costs) of $19 to $20 million.
- Full-year interest expense of approximately $80 to $82 million, including $4 million in amortization of deferred
financing fees.
- Full-year preferred dividends (Series A, C and D) of
approximately $30 million.
Dividend Update
On October
31, 2012, the Company's Board of Directors declared a cash
dividend of $0.50 per share payable to
its Series A and 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 January 15, 2013 to stockholders of record on December 31, 2012. 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 net operating loss carryforwards to reduce its taxable income in
2012, which will affect the level of common stock dividends declared
for 2012. 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 third quarter results on November
2, 2012, at 12:00 p.m. EDT (9:00 a.m. PDT). A live web cast of the call
will be available via the Investor Relations section of the Company's
website. Alternatively, investors may dial 1-877-941-8609 (for domestic
callers) or 1-480-629-9645 (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 30 hotels comprised of 12,854 rooms. Sunstone's hotels
are primarily in the upper upscale segment and are generally 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. 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 prolonged U.S. recession; the
ability to maintain sufficient liquidity and our access to capital
markets; potential terrorist attacks, which would affect occupancy
rates at our hotels and the demand for hotel products and services;
operating risks associated with the hotel business; risks associated
with the level of our indebtedness and our ability to meet covenants in
our debt and equity agreements; relationships with property managers
and franchisors; our ability to maintain our properties in a
first-class manner, including meeting capital expenditure requirements;
our ability to compete effectively in areas such as access, location,
quality of accommodations and room rate structures; changes in travel
patterns, taxes and government regulations, which influence or
determine wages, prices, construction procedures and costs; our ability
to identify, successfully compete for and complete acquisitions; the
performance of hotels after they are acquired; necessary capital
expenditures and our ability to fund them and complete them with
minimum disruption; our ability to continue to satisfy complex rules in
order for us to qualify as a REIT for federal income tax purposes; and
other risks and uncertainties associated with our business described in
the Company's filings with the Securities and Exchange Commission.
Although the Company believes the expectations reflected in such
forward-looking statements are based upon reasonable assumptions, it
can give no assurance that the expectations will be attained or that
any deviation will not be material. All forward-looking information in
this release is as of November 1, 2012,
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 (loss) to
EBITDA and Adjusted EBITDA is set forth on page 9. Reconciliations and
the components of comparable hotel EBITDA and comparable hotel EBITDA
margin are set forth on pages 12 and 13. 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 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 (loss)
to FFO and Adjusted FFO is set forth on page 9.
The revenue and expense items
associated with our commercial laundry facility, 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 30 comparable hotels. See pages
12 and 13 for a reconciliation of comparable EBITDA to the most
comparable GAAP measure. Our 30 comparable hotels include all hotels in
which the Company has interests as of September
30, 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
Senior Vice President – Corporate Finance
Sunstone Hotel Investors, Inc.
(949) 382-3036
Sunstone
Hotel Investors, Inc.
|
Consolidated
Balance Sheets
|
(In
thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
2012
|
|
2011
|
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
|
Cash
and cash equivalents
|
$
164,469
|
|
$
149,852
|
|
Restricted
cash
|
76,790
|
|
55,778
|
|
Accounts
receivable, net
|
28,534
|
|
31,182
|
|
Inventories
|
2,664
|
|
2,517
|
|
Prepaid
expenses
|
9,554
|
|
10,008
|
|
Assets
held for sale, net
|
0
|
|
144,479
|
Total
current assets
|
282,011
|
|
393,816
|
|
|
|
|
|
Investment
in hotel properties, net
|
2,800,682
|
|
2,650,258
|
Other
real estate, net
|
9,855
|
|
9,754
|
Deferred
financing fees, net
|
12,865
|
|
14,421
|
Goodwill
|
13,088
|
|
13,088
|
Other
assets, net
|
26,441
|
|
19,903
|
|
|
|
|
|
Total
assets
|
$
3,144,942
|
|
$
3,101,240
|
|
|
|
|
|
Liabilities
and Equity
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable and accrued expenses
|
$
25,267
|
|
$
26,310
|
|
Accrued
payroll and employee benefits
|
22,326
|
|
20,727
|
|
Due to
Third-Party Managers
|
9,050
|
|
9,039
|
|
Dividends
payable
|
7,437
|
|
7,437
|
|
Other
current liabilities
|
37,829
|
|
25,979
|
|
Current
portion of notes payable
|
77,579
|
|
51,279
|
|
Notes
payable of assets held for sale
|
0
|
|
124,543
|
|
Liabilities
of assets held for sale
|
0
|
|
3,354
|
Total
current liabilities
|
179,488
|
|
268,668
|
|
|
|
|
|
Notes
payable, less current portion
|
1,318,102
|
|
1,394,655
|
Capital
lease obligations, less current portion
|
15,630
|
|
-
|
Other
liabilities
|
14,789
|
|
12,623
|
Total
liabilities
|
1,528,009
|
|
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
September 30, 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 September 30, 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 September 30, 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 September 30, 2012 and 117,265,090
shares issued and outstanding at December 31, 2011
|
|
|
|
|
|
|
|
|
1,352
|
|
1,173
|
|
Additional
paid in capital
|
1,492,528
|
|
1,312,566
|
|
Retained
earnings
|
147,329
|
|
110,580
|
|
Cumulative
dividends
|
(467,707)
|
|
(445,396)
|
|
Accumulated
other comprehensive loss
|
(4,740)
|
|
(4,916)
|
Total
stockholders' equity
|
1,460,012
|
|
1,265,257
|
Non-controlling
interest in consolidated joint ventures
|
56,921
|
|
60,037
|
Total
equity
|
1,516,933
|
|
1,325,294
|
|
|
|
|
|
Total
liabilities and equity
|
$
3,144,942
|
|
$
3,101,240
|
Sunstone
Hotel Investors, Inc.
|
Unaudited
Consolidated Statements of Operations and Comprehensive Income (Loss)
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
Room
|
|
$
156,725
|
|
$
139,824
|
|
$
443,022
|
|
$
380,826
|
Food
and beverage
|
|
46,191
|
|
40,920
|
|
148,574
|
|
124,838
|
Other
operating
|
|
18,163
|
|
16,743
|
|
51,243
|
|
45,454
|
Total revenues
|
|
221,079
|
|
197,487
|
|
642,839
|
|
551,118
|
Operating expenses
|
|
|
|
|
|
|
|
|
Room
|
|
39,911
|
|
35,325
|
|
112,566
|
|
96,160
|
Food
and beverage
|
|
34,616
|
|
32,366
|
|
104,426
|
|
93,165
|
Other
operating
|
|
6,986
|
|
6,506
|
|
20,074
|
|
18,112
|
Advertising and promotion
|
|
10,740
|
|
9,669
|
|
31,760
|
|
27,250
|
Repairs and maintenance
|
|
8,299
|
|
7,775
|
|
24,561
|
|
22,094
|
Utilities
|
|
7,686
|
|
7,867
|
|
21,039
|
|
20,914
|
Franchise costs
|
|
8,306
|
|
7,282
|
|
22,443
|
|
19,046
|
Property tax, ground lease and insurance
|
|
18,102
|
|
16,484
|
|
52,237
|
|
43,641
|
Property general and administrative
|
|
24,493
|
|
22,881
|
|
73,202
|
|
64,595
|
Corporate overhead
|
|
6,148
|
|
6,852
|
|
18,975
|
|
20,771
|
Depreciation and amortization
|
|
36,529
|
|
32,490
|
|
102,899
|
|
88,241
|
Impairment loss
|
|
-
|
|
10,862
|
|
-
|
|
10,862
|
Total operating expenses
|
|
201,816
|
|
196,359
|
|
584,182
|
|
524,851
|
Operating income
|
|
19,263
|
|
1,128
|
|
58,657
|
|
26,267
|
Equity in earnings of unconsolidated joint ventures
|
|
-
|
|
-
|
|
-
|
|
21
|
Interest and other income
|
|
18
|
|
1,543
|
|
155
|
|
2,970
|
Interest expense
|
|
(19,709)
|
|
(20,021)
|
|
(59,309)
|
|
(55,449)
|
Loss
on extinguishment of debt
|
|
-
|
|
-
|
|
(191)
|
|
-
|
Gain
on remeasurement of equity interests
|
|
-
|
|
-
|
|
-
|
|
69,230
|
Income (loss) from continuing operations
|
|
(428)
|
|
(17,350)
|
|
(688)
|
|
43,039
|
Income from discontinued operations
|
|
39,984
|
|
797
|
|
39,131
|
|
30,672
|
Net income (loss)
|
|
39,556
|
|
(16,553)
|
|
38,443
|
|
73,711
|
(Income) loss from consolidated joint venture attributable to
non-controlling interest
|
(827)
|
|
31
|
|
(1,694)
|
|
(213)
|
Distributions to non-controlling interest
|
|
(8)
|
|
(8)
|
|
(24)
|
|
(22)
|
Preferred stock dividends
|
|
(7,437)
|
|
(7,437)
|
|
(22,311)
|
|
(19,884)
|
Undistributed income allocated to unvested restricted stock
compensation
|
|
(352)
|
|
-
|
|
(162)
|
|
(638)
|
Income available (loss attributable) to common stockholders
|
|
$
30,932
|
|
$
(23,967)
|
|
$
14,252
|
|
$
52,954
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
39,615
|
|
$
(16,553)
|
|
$
38,619
|
|
$
73,711
|
|
|
|
|
|
|
|
|
|
Basic
per share amounts:
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations available (attributable) to
common stockholders
|
$
(0.07)
|
|
$
(0.21)
|
|
$
(0.20)
|
|
$ 0.19
|
Income from discontinued operations
|
|
0.30
|
|
0.01
|
|
0.31
|
|
0.26
|
Basic
income available (loss attributable) to common stockholders per common
share
|
$ 0.23
|
|
$
(0.20)
|
|
$ 0.11
|
|
$ 0.45
|
|
|
|
|
|
|
|
|
|
Diluted
per share amounts:
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations available (attributable) to
common stockholders
|
$
(0.07)
|
|
$
(0.21)
|
|
$
(0.20)
|
|
$ 0.19
|
Income from discontinued operations
|
|
0.30
|
|
0.01
|
|
0.31
|
|
0.26
|
Diluted
income available (loss attributable) to common stockholders per common
share
|
$ 0.23
|
|
$
(0.20)
|
|
$ 0.11
|
|
$ 0.45
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
135,236
|
|
117,254
|
|
124,271
|
|
117,186
|
Diluted
|
|
135,236
|
|
117,254
|
|
124,271
|
|
117,186
|
|
|
|
|
|
|
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
|
|
Nine
Months Ended
|
|
September
30,
|
|
September
30,
|
|
2012
|
2011
|
|
2012
|
2011
|
|
|
|
|
|
|
Net
income (loss)
|
$
39,556
|
$
(16,553)
|
|
$
38,443
|
$
73,711
|
Operations
held for investment:
|
|
|
|
|
|
Depreciation and amortization
|
36,529
|
32,490
|
|
102,899
|
88,241
|
Amortization of lease intangibles
|
1,120
|
1,028
|
|
3,176
|
2,950
|
Interest expense
|
18,417
|
17,841
|
|
55,095
|
50,351
|
Amortization of deferred financing fees
|
929
|
823
|
|
2,825
|
2,215
|
Write-off of deferred financing fees
|
-
|
-
|
|
3
|
-
|
Non-cash interest related to discount on Senior Notes
|
267
|
270
|
|
791
|
792
|
Non-cash interest related to loss on derivatives
|
96
|
1,087
|
|
595
|
2,091
|
Non-controlling
interests:
|
|
|
|
|
|
(Income) loss from consolidated joint venture attributable to
non-controlling interest
|
(827)
|
31
|
|
(1,694)
|
(213)
|
Depreciation and amortization
|
(1,422)
|
(1,414)
|
|
(4,261)
|
(2,598)
|
Interest expense
|
(566)
|
(549)
|
|
(1,703)
|
(1,005)
|
Amortization of deferred financing fees
|
(56)
|
(56)
|
|
(168)
|
(103)
|
Non-cash interest related to loss on derivative
|
-
|
(4)
|
|
(1)
|
(32)
|
Unconsolidated
joint ventures:
|
|
|
|
|
|
Depreciation and amortization
|
-
|
-
|
|
-
|
3
|
Discontinued
operations:
|
|
|
|
|
|
Depreciation and amortization
|
977
|
1,686
|
|
4,651
|
6,767
|
Amortization of lease intangibles
|
-
|
7
|
|
14
|
21
|
Interest expense
|
1,237
|
1,912
|
|
4,663
|
5,702
|
Amortization of deferred financing fees
|
13
|
20
|
|
46
|
59
|
Write-off of deferred financing fees
|
185
|
-
|
|
185
|
-
|
EBITDA
|
96,455
|
38,619
|
|
205,559
|
228,952
|
|
|
|
|
|
|
Operations
held for investment:
|
|
|
|
|
|
Amortization of deferred stock compensation
|
812
|
697
|
|
2,654
|
2,170
|
Non-cash straightline lease expense
|
694
|
696
|
|
2,083
|
1,702
|
Capital lease obligation interest - cash ground rent
|
(351)
|
-
|
|
(468)
|
-
|
(Gain) loss on sale of assets
|
33
|
(17)
|
|
22
|
(73)
|
Loss
on extinguishment of debt
|
-
|
-
|
|
191
|
-
|
Gain
on remeasurement of equity interests
|
-
|
-
|
|
-
|
(69,230)
|
Lawsuit settlement costs, net
|
-
|
1,620
|
|
110
|
1,620
|
Closing costs - completed acquisitions
|
590
|
-
|
|
1,965
|
3,372
|
Prior
year property tax and CAM adjustments, net
|
(440)
|
-
|
|
621
|
-
|
Hotel
laundry closing costs
|
424
|
-
|
|
424
|
-
|
Impairment loss
|
-
|
10,862
|
|
-
|
10,862
|
Non-controlling
interests:
|
|
|
|
|
|
Non-cash straightline lease expense
|
(113)
|
(114)
|
|
(339)
|
(243)
|
Prior
year property tax adjustments, net
|
63
|
-
|
|
(202)
|
-
|
Unconsolidated
joint ventures:
|
|
|
|
|
|
Amortization of deferred stock compensation
|
-
|
-
|
|
-
|
2
|
Discontinued
operations:
|
|
|
|
|
|
(Gain) loss on sale of assets
|
(38,115)
|
52
|
|
(38,292)
|
(13,966)
|
Impairment loss
|
-
|
-
|
|
-
|
1,495
|
Gain
on extinguishment of debt
|
-
|
-
|
|
-
|
(18,145)
|
|
(36,403)
|
13,796
|
|
(31,231)
|
(80,434)
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
60,052
|
$
52,415
|
|
$
174,328
|
$
148,518
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Net Income (Loss) to FFO and Adjusted FFO
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
$
39,556
|
$
(16,553)
|
|
$
38,443
|
$
73,711
|
Preferred
stock dividends
|
(7,437)
|
(7,437)
|
|
(22,311)
|
(19,884)
|
Operations
held for investment:
|
|
|
|
|
|
Real
estate depreciation and amortization
|
36,230
|
32,196
|
|
101,994
|
87,370
|
Amortization of lease intangibles
|
1,120
|
1,028
|
|
3,176
|
2,950
|
(Gain) loss on sale of assets
|
33
|
(17)
|
|
22
|
(73)
|
Non-controlling
interests:
|
|
|
|
|
|
(Income) loss from consolidated joint venture attributable to
non-controlling interest
|
(827)
|
31
|
|
(1,694)
|
(213)
|
Real
estate depreciation and amortization
|
(1,422)
|
(1,414)
|
|
(4,261)
|
(2,598)
|
Discontinued
operations:
|
|
|
|
|
|
Real
estate depreciation and amortization
|
977
|
1,686
|
|
4,651
|
6,767
|
Amortization of lease intangibles
|
-
|
7
|
|
14
|
21
|
(Gain) loss on sale of assets
|
(38,115)
|
52
|
|
(38,292)
|
(13,966)
|
FFO
|
30,115
|
9,579
|
|
81,742
|
134,085
|
|
|
|
|
|
|
Operations
held for investment:
|
|
|
|
|
|
Non-cash straightline lease expense
|
694
|
696
|
|
2,083
|
1,702
|
Write-off of deferred financing fees
|
-
|
-
|
|
3
|
-
|
Non-cash interest related to loss on derivatives
|
96
|
1,087
|
|
595
|
2,091
|
Loss
on extinguishment of debt
|
-
|
-
|
|
191
|
-
|
Gain
on remeasurement of equity interests
|
-
|
-
|
|
-
|
(69,230)
|
Lawsuit settlement costs, net
|
-
|
1,620
|
|
110
|
1,620
|
Closing costs - completed acquisitions
|
590
|
-
|
|
1,965
|
3,372
|
Prior
year property tax and CAM adjustments, net
|
(440)
|
-
|
|
621
|
-
|
Hotel
laundry closing costs
|
424
|
-
|
|
424
|
-
|
Impairment loss
|
-
|
10,862
|
|
-
|
10,862
|
Non-controlling
interests:
|
|
|
|
|
|
Non-cash straightline lease expense
|
(113)
|
(114)
|
|
(339)
|
(243)
|
Non-cash interest related to loss on derivative
|
-
|
(4)
|
|
(1)
|
(32)
|
Prior
year property tax adjustments, net
|
63
|
-
|
|
(202)
|
-
|
Discontinued
operations:
|
|
|
|
|
|
Write-off of deferred financing fees
|
185
|
-
|
|
185
|
-
|
Impairment loss
|
-
|
-
|
|
-
|
1,495
|
Gain
on extinguishment of debt
|
-
|
-
|
|
-
|
(18,145)
|
|
1,499
|
14,147
|
|
5,635
|
(66,508)
|
|
|
|
|
|
|
Adjusted
FFO
|
$
31,614
|
$
23,726
|
|
$
87,377
|
$
67,577
|
|
|
|
|
|
|
FFO
per diluted share
|
$ 0.22
|
$ 0.08
|
|
$ 0.66
|
$ 1.14
|
|
|
|
|
|
|
Adjusted
FFO per diluted share
|
$ 0.23
|
$ 0.20
|
|
$ 0.70
|
$ 0.58
|
|
|
|
|
|
|
Basic
weighted average shares outstanding
|
135,236
|
117,254
|
|
124,271
|
117,186
|
Shares
associated with unvested restricted stock awards
|
318
|
-
|
|
235
|
82
|
Diluted
weighted average shares outstanding (1)
|
135,554
|
117,254
|
|
124,506
|
117,268
|
(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 $0.23 and $0.09, respectively, for the three months ended September 30, 2012 and
2011, and $0.67 and $1.14, respectively, for the nine months ended
September 30, 2012 and 2011. On an "as-converted" basis, Adjusted FFO
per diluted share is $0.24 and $0.21,
respectively, for the three months ended September 30, 2012 and 2011,
and $0.71 and $0.59, respectively, for the nine months ended September
30, 2012 and 2011.
|
|
|
|
Sunstone
Hotel Investors, Inc.
|
Reconciliation
of Net Income (Loss) to Non-GAAP Financial Measures
|
Guidance
for Fourth Quarter 2012
|
(Unaudited
and in thousands except per share amounts)
|
|
|
|
|
|
|
Reconciliation
of Net Income (Loss) to Adjusted EBITDA
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
December
31, 2012
|
|
Low
|
High
|
|
|
|
Net
income (loss) (1)
|
$ (420)
|
$ 4,380
|
Depreciation and amortization
|
37,000
|
37,000
|
Amortization of lease intangibles
|
1,200
|
1,200
|
Interest expense
|
17,770
|
17,770
|
Amortization of deferred financing fees
|
1,000
|
1,000
|
Non-controlling interests
|
(2,200)
|
(2,500)
|
Non-cash interest related to discount on Senior Notes
|
300
|
300
|
Amortization of deferred stock compensation
|
900
|
900
|
Income tax expense associated with the application of net operating
loss carryforwards
|
2,000
|
2,500
|
Capital lease obligation interest - cash ground rent
|
(300)
|
(300)
|
Non-cash straightline lease expense
|
750
|
750
|
Adjusted
EBITDA
|
$
58,000
|
$
63,000
|
|
|
|
|
|
|
Reconciliation
of Net Income (Loss) to Adjusted FFO
|
|
|
|
|
|
|
Net
income (loss) (1)
|
$ (420)
|
$ 4,380
|
Preferred stock dividends
|
(7,500)
|
(7,500)
|
Real
estate depreciation and amortization
|
36,700
|
36,700
|
Non-controlling interests
|
(1,700)
|
(2,000)
|
Amortization of lease intangibles
|
1,200
|
1,200
|
Income tax expense associated with the application of net operating
loss carryforwards
|
2,000
|
2,500
|
Non-cash straightline lease expense
|
750
|
750
|
Adjusted
FFO
|
$
31,030
|
$
36,030
|
|
|
|
|
|
|
Adjusted
FFO per diluted share
|
$ 0.23
|
$ 0.27
|
|
|
|
Diluted
weighted average shares outstanding
|
135,700
|
135,700
|
|
|
|
(1)
Reflects net income adjusted for the impact of income tax expense
associated with the application of net operating loss carryforwards.
|
|
|
|
Sunstone
Hotel Investors, Inc.
|
Reconciliation
of Net Income to Non-GAAP Financial Measures
|
Guidance
for Full Year 2012
|
(Unaudited
and in thousands except per share amounts)
|
|
|
|
|
|
|
Reconciliation
of Net Income to Adjusted EBITDA
|
|
|
|
|
|
|
|
Year
Ended
|
|
December
31, 2012
|
|
Low
|
High
|
|
|
|
Net
income (1)
|
$ 6,550
|
$
12,250
|
Depreciation and amortization
|
140,000
|
140,000
|
Amortization of lease intangibles
|
4,300
|
4,300
|
Interest expense
|
78,000
|
78,000
|
Amortization of deferred financing fees
|
3,700
|
3,700
|
Non-controlling interests
|
(9,000)
|
(10,200)
|
Non-cash interest related to discount on Senior Notes
|
1,000
|
1,000
|
Amortization of deferred stock compensation
|
3,400
|
3,400
|
Income tax expense associated with the application of net operating
loss carryforwards
|
2,000
|
2,500
|
Capital lease obligation interest - cash ground rent
|
(950)
|
(950)
|
Non-cash straightline lease expense
|
3,000
|
3,000
|
Adjusted
EBITDA
|
$
232,000
|
$
237,000
|
|
|
|
|
|
|
Reconciliation
of Net Income to Adjusted FFO
|
|
|
|
|
|
|
Net
income (1)
|
$ 6,550
|
$
12,250
|
Preferred stock dividends
|
(30,000)
|
(30,000)
|
Real
estate depreciation and amortization
|
138,900
|
138,900
|
Non-controlling interests
|
(6,300)
|
(7,500)
|
Amortization of lease intangibles
|
4,300
|
4,300
|
Income tax expense associated with the application of net operating
loss carryforwards
|
2,000
|
2,500
|
Non-cash straightline lease expense
|
3,000
|
3,000
|
Adjusted
FFO
|
$
118,450
|
$
123,450
|
|
|
|
|
|
|
Adjusted
FFO per diluted share
|
$ 0.93
|
$ 0.97
|
|
|
|
Diluted
weighted average shares outstanding
|
127,500
|
127,500
|
|
|
|
(1)
Reflects net income adjusted for the impact of income tax expense
associated with the application of net operating loss carryforwards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sunstone
Hotel Investors, Inc.
|
Comparable
Hotel EBITDA and Margins
|
(Unaudited
and in thousands except hotels and rooms)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended September 30, 2012
|
|
Three
Months Ended September 30, 2011
|
|
|
Actual
(1)
|
|
Prior
Ownership
Adjustments (2)
|
|
Comparable
(3)
|
|
Actual
(4)
|
|
Prior
Ownership
Adjustments (5)
|
|
Comparable
(6)
|
Number
of Hotels
|
30
|
|
|
|
30
|
|
28
|
|
2
|
|
30
|
Number
of Rooms
|
12,854
|
|
|
|
12,854
|
|
12,080
|
|
774
|
|
12,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
EBITDA Margin (7)
|
29.0%
|
|
40.2%
|
|
29.0%
|
|
27.0%
|
|
35.6%
|
|
27.5%
|
Hotel
EBITDA Margin adjusted for prior year property tax and CAM adjustments
(8)
|
28.8%
|
|
|
|
28.8%
|
|
27.0%
|
|
|
|
27.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Room
revenue
|
$
156,725
|
|
$ 805
|
|
$
157,530
|
|
$
139,824
|
|
$ 9,762
|
|
$
149,586
|
Food
and beverage revenue
|
46,191
|
|
59
|
|
46,250
|
|
40,920
|
|
1,711
|
|
42,631
|
Other
operating revenue
|
13,126
|
|
49
|
|
13,175
|
|
11,902
|
|
689
|
|
12,591
|
Total
Hotel Revenues
|
216,042
|
|
913
|
|
216,955
|
|
192,646
|
|
12,162
|
|
204,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Room
expense
|
39,672
|
|
243
|
|
39,915
|
|
35,528
|
|
2,181
|
|
37,709
|
Food
and beverage expense
|
34,654
|
|
55
|
|
34,709
|
|
32,405
|
|
911
|
|
33,316
|
Other
hotel expense
|
56,095
|
|
146
|
|
56,241
|
|
51,147
|
|
3,621
|
|
54,768
|
General and administrative expense
|
23,008
|
|
102
|
|
23,110
|
|
21,559
|
|
1,116
|
|
22,675
|
Total
Hotel Expenses
|
153,429
|
|
546
|
|
153,975
|
|
140,639
|
|
7,829
|
|
148,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
EBITDA
|
62,613
|
|
367
|
|
62,980
|
|
52,007
|
|
4,333
|
|
56,340
|
Prior
year property tax and CAM adjustments
|
(440)
|
|
-
|
|
(440)
|
|
-
|
|
-
|
|
-
|
Hotel
EBITDA adjusted for prior year property tax and CAM adjustments
|
62,173
|
|
367
|
|
62,540
|
|
52,007
|
|
4,333
|
|
56,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-hotel
operating income
|
1,246
|
|
-
|
|
1,246
|
|
1,049
|
|
-
|
|
1,049
|
Amortization
of lease intangibles
|
(1,120)
|
|
-
|
|
(1,120)
|
|
(1,028)
|
|
-
|
|
(1,028)
|
Non-cash
straightline lease expense
|
(694)
|
|
-
|
|
(694)
|
|
(696)
|
|
-
|
|
(696)
|
Capital
lease obligation interest - cash ground rent
|
351
|
|
-
|
|
351
|
|
-
|
|
351
|
|
351
|
Hotel
laundry closing costs
|
(424)
|
|
-
|
|
(424)
|
|
-
|
|
-
|
|
-
|
Management
company transition costs
|
(32)
|
|
-
|
|
(32)
|
|
-
|
|
-
|
|
-
|
Prior
year property tax and CAM adjustments
|
440
|
|
-
|
|
440
|
|
-
|
|
-
|
|
-
|
Corporate
overhead
|
(6,148)
|
|
-
|
|
(6,148)
|
|
(6,852)
|
|
-
|
|
(6,852)
|
Depreciation
and amortization
|
(36,529)
|
|
-
|
|
(36,529)
|
|
(32,490)
|
|
(3,060)
|
|
(35,550)
|
Impairment
loss
|
-
|
|
-
|
|
-
|
|
(10,862)
|
|
-
|
|
(10,862)
|
Operating
Income
|
19,263
|
|
367
|
|
19,630
|
|
1,128
|
|
1,624
|
|
2,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and other income
|
18
|
|
-
|
|
18
|
|
1,543
|
|
-
|
|
1,543
|
Interest
expense
|
(19,709)
|
|
-
|
|
(19,709)
|
|
(20,021)
|
|
(351)
|
|
(20,372)
|
Income
from discontinued operations
|
39,984
|
|
-
|
|
39,984
|
|
797
|
|
-
|
|
797
|
Net
Income (Loss)
|
$
39,556
|
|
$ 367
|
|
$
39,923
|
|
$
(16,553)
|
|
$ 1,273
|
|
$
(15,280)
|
(1)
|
Actual
represents the Company's ownership results for the 30 hotels held for
investment as of September 30, 2012.
|
(2)
|
Prior
Ownership Adjustments represent prior ownership results for the Hilton
Garden Inn Chicago Downtown/Magnificent Mile acquired by the Company on
July 19, 2012.
|
(3)
|
Comparable
represents the Company's ownership results and prior ownership results
as applicable for the 30 hotels held for investment as of September 30,
2012.
|
(4)
|
Actual
represents the Company's ownership results for the 28 hotels held for
investment as of September 30, 2011.
|
(5)
|
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.
|
(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 30 hotels held
for investment as of September 30, 2012.
|
(7)
|
Hotel
EBITDA Margin is calculated as Hotel EBITDA divided by total hotel
revenues.
|
(8)
|
Hotel
EBITDA Margin for the three months ended September 30, 2012 includes
the additional benefit of $250,000 in prior year property tax credits
and a $190,000 prior year CAM refund. Without this benefit, Comparable
Hotel EBITDA margin for the three months ended September 30, 2012 would
have been 28.8%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sunstone
Hotel Investors, Inc.
|
Comparable
Hotel EBITDA and Margins
|
(Unaudited
and in thousands except hotels and rooms)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September 30, 2012
|
|
Nine
Months Ended September 30, 2011
|
|
|
Actual
(1)
|
|
Prior
Ownership
Adjustments (2)
|
|
Comparable
(3)
|
|
Actual
(4)
|
|
Prior
Ownership
Adjustments (5)
|
|
Comparable
(6)
|
Number
of Hotels
|
30
|
|
|
|
30
|
|
28
|
|
2
|
|
30
|
Number
of Rooms
|
12,854
|
|
|
|
12,854
|
|
12,080
|
|
774
|
|
12,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
EBITDA Margin(7)
|
29.1%
|
|
21.0%
|
|
28.9%
|
|
27.5%
|
|
29.9%
|
|
27.7%
|
Hotel
EBITDA Margin adjusted for prior year property tax and CAM adjustments,
net (8)
|
29.0%
|
|
|
|
28.8%
|
|
27.4%
|
|
|
|
27.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Room
revenue
|
$
443,022
|
|
$
15,204
|
|
$
458,226
|
|
$
380,826
|
|
$
48,848
|
|
$
429,674
|
Food
and beverage revenue
|
148,574
|
|
2,149
|
|
150,723
|
|
124,838
|
|
16,413
|
|
141,251
|
Other
operating revenue
|
36,553
|
|
1,046
|
|
37,599
|
|
31,801
|
|
4,676
|
|
36,477
|
Total
Hotel Revenues
|
628,149
|
|
18,399
|
|
646,548
|
|
537,465
|
|
69,937
|
|
607,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Room
expense
|
112,667
|
|
4,064
|
|
116,731
|
|
96,804
|
|
11,829
|
|
108,633
|
Food
and beverage expense
|
104,530
|
|
1,416
|
|
105,946
|
|
93,303
|
|
10,138
|
|
103,441
|
Other
hotel expense
|
159,667
|
|
7,144
|
|
166,811
|
|
138,763
|
|
20,567
|
|
159,330
|
General and administrative expense
|
68,311
|
|
1,904
|
|
70,215
|
|
60,965
|
|
6,513
|
|
67,478
|
Total
Hotel Expenses
|
445,175
|
|
14,528
|
|
459,703
|
|
389,835
|
|
49,047
|
|
438,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
EBITDA
|
182,974
|
|
3,871
|
|
186,845
|
|
147,630
|
|
20,890
|
|
168,520
|
Prior
year property tax and CAM adjustments, net
|
(565)
|
|
-
|
|
(565)
|
|
(600)
|
|
-
|
|
(600)
|
Hotel
EBITDA adjusted for prior year property tax and CAM adjustments, net
|
182,409
|
|
3,871
|
|
186,280
|
|
147,030
|
|
20,890
|
|
167,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-hotel
operating income
|
3,413
|
|
-
|
|
3,413
|
|
3,245
|
|
-
|
|
3,245
|
Amortization
of lease intangibles
|
(3,176)
|
|
-
|
|
(3,176)
|
|
(2,950)
|
|
(140)
|
|
(3,090)
|
Non-cash
straightline lease expense
|
(2,083)
|
|
-
|
|
(2,083)
|
|
(1,702)
|
|
(386)
|
|
(2,088)
|
Capital
lease obligation interest - cash ground rent
|
468
|
|
585
|
|
1,053
|
|
-
|
|
1,053
|
|
1,053
|
Hotel
laundry closing costs
|
(424)
|
|
-
|
|
(424)
|
|
-
|
|
-
|
|
-
|
Management
company transition costs
|
(641)
|
|
-
|
|
(641)
|
|
(82)
|
|
-
|
|
(82)
|
Prior
year property tax and CAM adjustments, net
|
565
|
|
-
|
|
565
|
|
600
|
|
-
|
|
600
|
Corporate
overhead
|
(18,975)
|
|
-
|
|
(18,975)
|
|
(20,771)
|
|
-
|
|
(20,771)
|
Depreciation
and amortization
|
(102,899)
|
|
(5,531)
|
|
(108,430)
|
|
(88,241)
|
|
(15,486)
|
|
(103,727)
|
Impairment
loss
|
-
|
|
-
|
|
-
|
|
(10,862)
|
|
-
|
|
(10,862)
|
Operating
Income
|
58,657
|
|
(1,075)
|
|
57,582
|
|
26,267
|
|
5,931
|
|
32,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
in earnings of unconsolidated joint ventures
|
-
|
|
-
|
|
-
|
|
21
|
|
-
|
|
21
|
Interest
and other income
|
155
|
|
-
|
|
155
|
|
2,970
|
|
-
|
|
2,970
|
Interest
expense
|
(59,309)
|
|
(585)
|
|
(59,894)
|
|
(55,449)
|
|
(4,061)
|
|
(59,510)
|
Loss
on extinguishment of debt
|
(191)
|
|
-
|
|
(191)
|
|
-
|
|
-
|
|
-
|
Gain
on remeasurement of equity interests
|
-
|
|
-
|
|
-
|
|
69,230
|
|
-
|
|
69,230
|
Income
from discontinued operations
|
39,131
|
|
-
|
|
39,131
|
|
30,672
|
|
-
|
|
30,672
|
Net
Income
|
$
38,443
|
|
$
(1,660)
|
|
$
36,783
|
|
$
73,711
|
|
$ 1,870
|
|
$
75,581
|
(1)
|
Actual
represents the Company's ownership results for the 30 hotels held for
investment as of September 30, 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 30 hotels held
for investment as of September 30, 2012.
|
(4)
|
Actual
represents the Company's ownership results for the 28 hotels held for
investment as of September 30, 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 30
hotels held for investment as of September 30, 2012.
|
(7)
|
Hotel
EBITDA Margin is calculated as Hotel EBITDA divided by total hotel
revenues.
|
(8)
|
Hotel
EBITDA Margin for the nine months ended September 30, 2012 includes the
additional net benefit of $0.4 million in prior year property tax
credits and a $0.2 million prior year CAM refund. Hotel EBITDA Margin
for the nine months ended September 30, 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 nine months ended September 30, 2012 and 2011
would have been 28.8% and 27.6%, respectively.
|
|