SAN CLEMENTE, Calif., April 29, 1999 -
-
5.0% Increase in Revenue Hotels
-
6.3% Increase in REVPAR for Non-Renovation Hotels
-
5.9% Increase in REVPAR for Entire Hotel Portfolio
-
$0.34 FFO per Share
-
$16.2 Million Invested Renovating Eight Hotels
Sunstone Hotel Investors, Inc. (NYSE: SSI), a real estate investment trust
(REIT), today announced financial and operating results for the quarter
ended March 31, 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.
Operating Results
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:
Selected REVPAR Performers for
First Quarter of 1999
Hotel
|
Rooms
|
REVPAR 1998 (A)
|
REVPAR 1999
|
% Change
|
Courtyard by Marriott -- Los
Angeles, (LAX) California |
178 |
$32.28 |
$72.26 |
123.9% |
Holiday Inn Old Town -- San
Diego, California |
151 |
$50.92 |
$73.62 |
44.6% |
Holiday Inn Select -- La Mirada, California |
289 |
$33.34 |
$47.32 |
41.9% |
Marriott -- Ogden, Utah |
288 |
$33.41 |
$47.07 |
40.9% |
Holiday Inn Suites --Price, Utah |
151 |
$25.39 |
$33.38 |
31.5% |
Marriott -- Provo, Utah |
333 |
$34.44 |
$44.95 |
30.5% |
Marriott -- Napa, California |
192 |
$60.46 |
$69.28 |
14.6% |
Marriott -- Santa Monica,
California (B) |
168 |
$75.72 |
$83.34 |
10.1% |
(A) The Company did not own certain hotels for the entire period presented.
(B) The Company has obtained approval for the indicated franchise license,
subject to completion of certain renovation or improvements.
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."
Acquisition Proposal
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.
Summary Operating
Data
Same-Unit-Sales Analysis
All Hotels(B): |
1st QTR 1999
|
1st QTR 1998
|
Occupancy |
65.5% |
64.1% |
ADR |
$86.96 |
$84.01 |
REVPAR |
$56.98 |
$53.82 |
REVPAR Growth |
5.9% |
|
Non-Renovation Hotels(B): |
|
|
Occupancy |
67.1% |
64.6% |
ADR |
$80.89 |
$79.02 |
REVPAR |
$54.30 |
$51.07 |
REVPAR Growth |
6.3% |
|
Renovation Hotels(C): |
|
|
Occupancy |
63.0% |
62.2% |
ADR |
$96.43 |
$89.66 |
REVPAR |
$60.78 |
$55.74 |
REVPAR Growth |
9.0% |
|
(A) FFO consists of income before minority interest (computed in accordance
with generally accepted accounting principles) excluding gains or losses
from debt restructurings and sales of property plus depreciation and amortization
of real property (including furniture and equipment but excluding amortization
of financing costs) and assumes conversion of preferred shares when the
effect is dilutive.
(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. |