Sunstone Hotel Investors Reports Operating Results For First Quarter 2012
Sunstone Hotel Investors Reports Operating Results For First Quarter 2012
Announces the Acquisition of 417-room Hotel to be Rebranded the Hyatt Chicago
Magnificent Mile; and The Blackstone Group, as Seller, to Attain Approximately
5% Ownership Position in Sunstone
PR Newswire
ALISO VIEJO, Calif., May 2, 2012
ALISO VIEJO, Calif., May 2, 2012 /PRNewswire/ -- Sunstone Hotel Investors,
Inc. (the "Company") (NYSE: SHO) today announced results for the first quarter
ended March 31, 2012.
First Quarter 2012 Operational Results (as compared to First Quarter
2011)^(1):
o Comparable Hotel RevPAR increased 5.5% to $117.45.
o Comparable Hotel EBITDA Margin increased by 120 basis points to 24.5%.
o Adjusted EBITDA increased by 32.9% to $43.1 million.
o Adjusted FFO available to common stockholders per diluted share increased
by 71.4% to $0.12.
o Loss attributable to common stockholders was $21.0 million (vs. income
available to common stockholders of $45.7 million in 2011).
o Loss attributable to common stockholders per diluted share was $0.18 (vs.
income available to common stockholders per diluted share of $0.39 in
2011).
Ken Cruse, President and Chief Executive Officer, stated, "Our portfolio's
solid operating performance during the quarter and the earnings from recently
acquired hotels drove a 33% year-over-year improvement in Adjusted EBITDA, and
a 71% year-over-year improvement in Adjusted FFO per diluted share. Lodging
demand trends continue to improve and industry fundamentals are very
positive. First quarter group booking productivity for our portfolio was at
its highest level since 2006. As a result, our 2012 group booking pace is now
up over 8% and our 2013 group pace is now up over 20% as compared to the same
time last year. Accordingly, we have increased our full-year 2012 guidance."
Mr. Cruse continued, "We remain focused on improving our portfolio quality and
scale while gradually deleveraging our balance sheet through creatively
sourced, attractively valued transactions. To this end, today we announced
our acquisition of the 417-room Wyndham Chicago for a net acquisition price of
$88.4 million, or $212,000 per key. The acquisition will be funded using a
portion of our sizeable cash balance and by issuing $58.4 million of common
shares directly to the seller, an affiliate of The Blackstone Group, at a net
price of $10.71 per share. We are excited to have Blackstone as a significant
investor in Sunstone, and we look forward to deepening our relationship. We
are also pleased to expand our relationship with Hyatt Hotels Corporation. We
believe Hyatt is the most attractive brand for this hotel due to Hyatt's
ability to attract high-end business travel and corporate groups, including
the vast number of medical meetings generated within walking distance of the
hotel. Given the hotel's unique upside opportunities and the mutual benefits
of the transaction, Hyatt provided us with an attractive package of franchise
and economic terms. After rebranding the hotel as the Hyatt Chicago
Magnificent Mile, and completing a comprehensive renovation and repositioning
program aimed at making the hotel one of Chicago's top business destinations,
we anticipate our all-in investment will be approximately $250,000 per key,
which we believe will lead to attractive post-renovation returns. There will
be no debt incurred in connection with this acquisition."
Comparable Hotel RevPAR and Comparable Hotel EBITDA Margin information
presented reflect the Company's Comparable 32 Hotel Portfolio, which
includes all hotels in which the Company has interests as of March 31,
2012. Comparable Hotel EBITDA Margin information excludes current and
(1) prior year real estate tax credits or assessments. The Comparable 32 Hotel
Portfolio also includes prior ownership results as applicable in 2011 for
the Doubletree Guest Suites Times Square acquired by the Company in
January 2011, the JW Marriott New Orleans acquired by the Company in
February 2011, and the Hilton San Diego Bayfront acquired by the Company
in April 2011.
SELECTED FINANCIAL DATA
($ in millions, except RevPAR and per share amounts)
(unaudited)
Three Months Ended March 31,
2012 2011 % Change
Total Revenue $ 205.2 $ 159.1 29.0%
Comparable Hotel RevPAR $ 117.45 $ 111.31 5.5%
Comparable Hotel Occupancy 73.8% 69.6% 420 bps
Comparable Hotel ADR $ 159.14 $ 159.93 (0.5)%
Comparable Hotel EBITDA Margin 24.5% 23.3% 120 bps
Income available (loss attributable) to $ (21.0 ) $ 45.7
common stockholders
Income available (loss attributable) to $ (0.18 ) $ 0.39
common stockholders per diluted share
EBITDA $ 41.7 $ 98.1
Adjusted EBITDA $ 43.1 $ 32.4
FFO available to common stockholders $ 12.9 $ 74.8
Adjusted FFO available to common $ 13.6 $ 8.6
stockholders
FFO available to common stockholders per $ 0.11 $ 0.64
diluted share (1)
Adjusted FFO available to common $ 0.12 $ 0.07
stockholders per diluted share (1)
Reflects the Series C convertible preferred stock on a "non-converted"
basis. On an "as-converted" basis, FFO available to common stockholders
(1) per diluted share is $0.12 and $0.63, respectively, for the three months
ended March 31, 2012 and 2011. On an "as-converted" basis, Adjusted FFO
available to common stockholders per diluted share is $0.12 and $0.08,
respectively, for the three months ended March 31, 2012 and 2011.
Disclosure regarding the non-GAAP financial measures in this release is
included on pages 5 and 6. Reconciliations of non-GAAP financial measures to
the most comparable GAAP measure for each of the periods presented are
included on pages 9 through 12 of this release.
The Company's actual results for the quarter ended March 31, 2012 compare to
its prior guidance as follows:
Q1 2012 Q1 2012 Performance
Metric Guidance ^(1) Actual Relative to
Midpoint
Comparable Hotel RevPAR +3% - 5% +5.5% +1.5%
Net Loss ($ millions) $(19) - $(17) ($13) +$5.0
Adjusted EBITDA ($ millions) $38 - $40 $43.1 +$4.1
Adjusted FFO ($ millions) $9 - $11 $13.6 +$3.6
Adjusted FFO per diluted share $0.07 - $0.09 $0.12 +$0.04
(1) Reflects guidance presented on 02/21/2012.
Acquisition Update
The Company has signed a purchase and sale agreement to acquire the 417-room
Wyndham Chicago from an affiliate of The Blackstone Group for a total purchase
price of $88.4 million (approximately $212,000 per key). The hotel is well
located one block east of Michigan Avenue on the corner of North St. Claire
Street in Chicago's famed Magnificent Mile district, and is adjacent to
Northwestern Medical Hospital, Chicago's Feinberg School of Medicine, and the
new 23-story, state-of-the-art, Ann & Robert Lurie Children's Memorial
Hospital that opens in June 2012. The hotel is subject to an 85-year building
lease. Upon closing, the Company will rebrand the hotel the Hyatt Chicago
Magnificent Mile and will immediately embark on a $25 million renovation
program (a portion of which will be funded by Hyatt). Following the scheduled
renovation and after the hotel reaches stabilization as a Hyatt-branded hotel,
the Company anticipates that its all-in investment will be roughly $250,000
per key, which the Company estimates will equate to a below 10.0x multiple on
anticipated stabilized EBITDA. The hotel will be funded with $30.0 million of
cash on hand and $58.4 million of the Company's common stock, which will be
issued to the seller at a price equivalent to $10.71 per share. The hotel
will be managed by Davidson Hotels & Resorts under a franchise agreement with
an affiliate of Hyatt Hotels Corporation. The Company expects the purchase of
the hotel to close during the second quarter of 2012.
Jonathan D. Gray, Global Head of Real Estate of The Blackstone Group stated,
"We are excited about this transaction with Sunstone. We believe the company
and its management are well positioned to take advantage of the continued
recovery in the lodging cycle and we look forward to building our relationship
with Sunstone."
Balance Sheet/Liquidity Update
As of March 31, 2012, the Company had approximately $198.2 million of cash and
cash equivalents, including restricted cash of $72.0 million, total assets of
$3.1 billion, including $2.8 billion of net investments in hotel properties,
total consolidated debt of $1.6 billion and stockholders' equity of $1.2
billion.
On April 26, 2012, the Company used existing cash to repay its $32.2 million
non-recourse mortgage secured by the Renaissance Long Beach, which was
scheduled to mature on July 1, 2012. After this repayment, the Company's only
near-term debt maturity is the 4.60% Exchangeable Senior Notes outstanding
balance of $58.0 million, which is likely to be retired with a portion of the
Company's unrestricted cash balance on or before January 15, 2013, the first
optional repurchase date.
John Arabia, Chief Financial Officer stated, "Following the repayment of the
mortgage on our Renaissance Long Beach and upon closing our acquisition of the
Hyatt Chicago Magnificent Mile, we will hold 13 unencumbered hotels. Our
remaining mortgages have well-staggered maturities and, in aggregate, pay
below-market interest rates, and we have access to multiple forms of
liquidity. While we believe Sunstone is attractively capitalized for the
current phase of the lodging cycle, we remain committed to gradually
deleveraging over the next several years while building shareholder value. Our
acquisition of the Hyatt Chicago Magnificent Mile, which will have no debt,
and our repayment of the mortgage on the Renaissance Long Beach are highly
consistent with our stated plan."
Capital Improvements
The Company invested $21.8 million in capital improvements into its portfolio
during the first quarter of 2012.
2012 Outlook
Achievement of the Company's anticipated results is subject to risks and
uncertainties, including those disclosed in the Company's filings with the
Securities and Exchange Commission. The Company's guidance includes the
existing 32 Hotel Portfolio and does not take into account the impact of the
pending Hyatt Chicago Magnificent Mile acquisition or any future hotel
acquisitions, dispositions, re-brandings or management change transition
costs, debt repurchases or financings during 2012.
For the second quarter of 2012, the Company expects:
Quarter Ended
Metric June 30, 2012
Guidance
Comparable Hotel RevPAR +5.5% - 7.5%
Net Income ($ millions) $8 - $11
Adjusted EBITDA ($ millions) $65 - $68
Adjusted FFO ($ millions) $36 - $39
Adjusted FFO per diluted share $0.30 - $0.33
For the full year 2012, the Company expects:
Metric Prior 2012 FY Current 2012 FY Change to
Guidance ^(1) Guidance Prior Midpoint
Comparable Hotel RevPAR +4% - 6% +5% - 7% +1%
Net Income (Loss) ($ millions) $(4) - $8 $4 - $13 $6.5
Adjusted EBITDA ($ millions) $223 - $235 $229 - $238 $4.5
Adjusted FFO ($ millions) $105 - $117 $113 - $122 $6.5
Adjusted FFO per diluted share $0.90 - $1.00 $0.96 - $1.04 $0.05
(1) Reflects guidance presented on 02/21/2012.
Full-year 2012 guidance is also based on the following assumptions:
o Capital investment of $85 to $100 million, including the $25 million
renovation of the Renaissance Washington DC.
o Hotel revenue renovation disruption of $3 to $5 million.
o Comparable Hotel EBITDA Margins to increase by 75 to 125 basis points.
o Corporate overhead expense (excluding stock amortization and one-time
expenses related to future acquisition closing costs) of $19 to $20
million.
o Interest expense of approximately $81 to $83 million, including $4 million
in amortization of deferred financing fees.
o Preferred dividends (Series A, C and D) of approximately $30 million.
John Arabia continued, "We have increased our guidance based on our strong
first quarter operating results and our elevated confidence in business
trends. We expect the acceleration in group bookings and healthy transient
demand, combined with very low industry-wide supply trends to drive meaningful
RevPAR and margin growth for the next several years."
Dividend Update
On May 2, 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 July 15, 2012 to stockholders of record on
June 30, 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, which may be
reduced through the application of net operating losses. 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 results on
May 3, 2012, at 9:00 a.m. EDT (6:00 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 1-877-941-2333 (for domestic
callers) or 1-480-629-9724 (for international callers). A replay of the web
cast will also be archived on the website.
The following table includes information related to the Wyndham Chicago, which
will be rebranded the Hyatt Chicago Magnificent Mile:
Wyndham Chicago / Hyatt Chicago Magnificent Mile (1) EBITDA Reconciliation
Plus: Equals: Hotel
(In Total Hotel EBITDA
thousands)
Revenues Net Income Depreciation (2) EBITDA Margins
$ $ $ $
FY 2012 16.4%
25,600 3,300
1,200 4,200
Post $ $ $ $
Renovation 26.3%
(3) 35,000 4,000
5,200 9,200
(1) 2012 forecast reflects anticipated prior ownership period of January - May
2012 when the hotel operated as the Wyndham Chicago, and June - December 2012
when the hotel will be re-branded the Hyatt Chicago Magnificent Mile.
(2) Depreciation calculated using an estimated purchase price of $88.4 million
allocated based on the hotel's 2011 property tax assessment. Post renovation
depreciation is increased to reflect capital invested.
(3) Reflects anticipated earnings for the subsequent twelve months following
the completion of the hotel's renovation program.
About Sunstone Hotel Investors, Inc.
Sunstone Hotel Investors, Inc. ("Sunstone") is a lodging real estate
investment trust ("REIT") that, as of March 31, 2012, has interests in 32
hotels comprised of 13,208 rooms. Sunstone's hotels are primarily in the
upper upscale segment and are generally operated under nationally recognized
brands, such as Marriott, Hilton, Fairmont, Hyatt 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:
o Proactive portfolio management;
o Intensive asset management;
o Disciplined external growth; and
o 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; 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 May
2, 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 excludes: amortization of deferred
stock compensation; the impact of any gain or loss from asset sales;
impairment charges; 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. A reconciliation
and the components of comparable hotel EBITDA and comparable hotel EBITDA
margin are set forth on page 12. 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 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 32 comparable hotels. See page 12 for
a reconciliation of comparable hotel EBITDA to the most comparable GAAP
measure. Our 32 comparable hotels include all hotels in which the Company has
interests as of March 31, 2012, plus prior ownership results as applicable in
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, and the Hilton San Diego Bayfront acquired by the Company in April 2011.
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 a better indicator 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.
Sunstone Hotel Investors, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
March 31, December 31,
2012 2011
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 126,199 $
150,533
Restricted cash 71,991 67,898
Accounts receivable, net 35,275 32,542
Inventories 2,638 2,608
Prepaid expenses 10,336 10,272
Total current assets 246,439 263,853
Investment in hotel properties, net 2,761,006 2,777,826
Other real estate, net 11,723 11,859
Deferred financing fees, net 13,637 14,651
Goodwill 13,088 13,088
Other assets, net 18,838 19,963
Total assets $ 3,064,731 $
3,101,240
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses $ 22,370 $
26,854
Accrued payroll and employee benefits 16,423 20,863
Due to Third-Party Managers 8,436 9,227
Dividends payable 7,437 7,437
Other current liabilities 31,164 28,465
Current portion of notes payable 111,346 53,935
Total current liabilities 197,176 146,781
Notes payable, less current portion 1,449,246 1,516,542
Other liabilities 13,284 12,623
Total liabilities 1,659,706 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 March 31, 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 March 31, 2012 and
December 31, 2011,
stated at liquidation 176,250 176,250
preference of $25.00 per share
8.0% Series D Cumulative
Redeemable Preferred Stock,
4,600,000 shares issued and
outstanding at March 31, 2012 and
December 31, 2011,
stated at liquidation 115,000 115,000
preference of $25.00 per share
Common stock, $0.01 par value,
500,000,000 shares authorized,
117,571,234 shares issued and
outstanding at March 31, 2012 and
117,265,090 shares issued and 1,176 1,173
outstanding at December 31, 2011
Additional paid in capital 1,313,581 1,312,566
Retained earnings 97,052 110,580
Cumulative dividends (452,833) (445,396)
Accumulated other comprehensive loss (4,916) (4,916)
Total stockholders' equity 1,245,310 1,265,257
Non-controlling interest in consolidated 59,715 60,037
joint ventures
Total equity 1,305,025 1,325,294
Total liabilities and equity $ 3,064,731 $
3,101,240
Sunstone Hotel Investors, Inc.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended March 31,
2012 2011
Revenues
Room $ $
136,538 106,480
Food and beverage 51,837 39,285
Other operating 16,846 13,293
Total revenues 205,221 159,058
Operating expenses
Room 37,449 29,051
Food and beverage 36,846 29,726
Other operating 6,890 5,959
Advertising and promotion 11,115 8,622
Repairs and maintenance 8,614 7,272
Utilities 7,286 6,845
Franchise costs 6,731 5,250
Property tax, ground lease and 16,766 13,992
insurance
Property general and administrative 25,247 20,020
Corporate overhead 5,300 7,657
Depreciation and amortization 34,756 26,222
Total operating expenses 197,000 160,616
Operating income (loss) 8,221 (1,558)
Equity in earnings of unconsolidated - 21
joint ventures
Interest and other income 63 109
Interest expense (21,503) (17,784)
Loss on extinguishment of debt (191) -
Gain on remeasurement of equity - 69,230
interests
Income (loss) from continuing (13,410) 50,018
operations
Income from discontinued operations 442 1,317
Net income (loss) (12,968) 51,335
Income from consolidated joint
venture attributable to (560) -
non-controlling interest
Distributions to non-controlling (8) (7)
interest
Preferred stock dividends (7,437) (5,137)
Undistributed income allocated to
unvested restricted stock - (302)
compensation
Undistributed income allocated to - (209)
Series C preferred stock
Income available (loss attributable) $ $
to common stockholders (20,973) 45,680
Basic per share amounts:
Income (loss) from continuing $ $
operations available (attributable) to (0.18) 0.38
common stockholders
Income from discontinued - 0.01
operations
Basic income available (loss $ $
attributable) to common stockholders per (0.18) 0.39
common share
Diluted per share amounts:
Income (loss) from continuing $ $
operations available (attributable) to (0.18) 0.38
common stockholders
Income from discontinued - 0.01
operations
Diluted income available (loss $ $
attributable) to common stockholders per (0.18) 0.39
common share
Weighted average common shares
outstanding:
Basic 117,426 117,074
Diluted 117,426 117,074
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,
2012 2011
Net income (loss) $ $
(12,968) 51,335
Operations held for investment:
Depreciation and amortization 34,756 26,222
Amortization of lease intangibles 1,035 937
Interest expense 20,194 16,866
Amortization of deferred financing 967 613
fees
Non-cash interest related to 266 261
discount on Senior Notes
Non-cash interest related to loss 76 44
on derivatives, net
Non-controlling interests:
Income from consolidated joint
venture attributable to (560) -
non-controlling interest
Depreciation and amortization (1,419) -
Interest expense (570) -
Amortization of deferred financing (56) -
fees
Non-cash interest related to loss (1) -
on derivative
Unconsolidated joint ventures:
Depreciation and amortization - 3
Discontinued operations:
Depreciation and amortization - 1,693
Interest expense - 157
Amortization of deferred financing - 3
fees
EBITDA 41,720 98,134
Operations held for investment:
Amortization of deferred stock 946 544
compensation
Non-cash straightline lease expense 696 240
Gain on sale of assets (11) -
Loss on extinguishment of debt 191 -
Gain on remeasurement of equity - (69,230)
interests
Lawsuit settlement reversal of (145) -
costs
Closing costs - completed - 2,739
acquisitions
Non-controlling interests:
Non-cash straightline lease expense (113) -
Unconsolidated joint ventures:
Amortization of deferred stock - 2
compensation
Discontinued operations:
Gain on sale of assets (177) -
1,387 (65,705)
Adjusted EBITDA $ $
43,107 32,429
Reconciliation of Net Income (Loss) to FFO and Adjusted FFO
Net income (loss) $ $
(12,968) 51,335
Preferred stock dividends (7,437) (5,137)
Operations held for investment:
Real estate depreciation and 34,449 25,945
amortization
Amortization of lease intangibles 1,035 937
Gain on sale of assets (11) -
Non-controlling interests:
Income from consolidated joint
venture attributable to (560) -
non-controlling interest
Real estate depreciation and (1,419) -
amortization
Discontinued operations:
Real estate depreciation and - 1,693
amortization
Gain on sale of assets (177) -
FFO available to common stockholders 12,912 74,773
Operations held for investment:
Non-cash straightline lease expense 696 240
Non-cash interest related to loss 76 44
on derivatives, net
Loss on extinguishment of debt 191 -
Gain on remeasurement of equity - (69,230)
interests
Lawsuit settlement reversal of (145) -
costs
Closing costs - completed - 2,739
acquisitions
Non-controlling interests:
Non-cash straightline lease expense (113) -
Non-cash interest related to loss (1) -
on derivative
704 (66,207)
Adjusted FFO available to common $ $
stockholders 13,616 8,566
FFO available to common stockholders $ $
per diluted share 0.11 0.64
Adjusted FFO available to common $ $
stockholders per diluted share 0.12 0.07
Basic weighted average shares 117,426 117,074
outstanding
Shares associated with unvested 155 137
restricted stock awards
Diluted weighted average shares 117,581 117,211
outstanding (1)
(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 $0.12 and
$0.63, respectively, for the three months ended March 31, 2012 and 2011. On
an
"as-converted" basis, Adjusted FFO available to common stockholders per
diluted share is $0.12 and $0.08, respectively, for the three months ended
March 31, 2012 and 2011.
Sunstone Hotel Investors, Inc.
Reconciliation of Net Income to Non-GAAP Financial Measures
Guidance for Second Quarter 2012
(Unaudited and in thousands except per share amounts)
Reconciliation of Net Income to Adjusted EBITDA
Quarter Ended
June 30, 2012
Low High
Net income $ $
8,350 11,350
Depreciation and amortization 35,000 35,000
Amortization of lease intangibles 1,000 1,000
Interest expense 20,250 20,250
Amortization of deferred financing 1,000 1,000
fees
Non-controlling interests (2,500) (2,500)
Non-cash interest related to 275 275
discount on Senior Notes
Amortization of deferred stock 875 875
compensation
Non-cash straightline lease expense 750 750
Adjusted EBITDA $ $
65,000 68,000
Reconciliation of Net Income to Adjusted FFO
Net income $ $
8,350 11,350
Preferred stock dividends (7,500) (7,500)
Real estate depreciation and 34,750 34,750
amortization
Non-controlling interests (1,750) (1,750)
Amortization of lease intangibles 1,000 1,000
Non-cash straightline lease expense 750 750
Adjusted FFO available to common $ $
stockholders 35,600 38,600
Adjusted FFO available to common $ $
stockholders per diluted share 0.30 0.33
Diluted weighted average shares 117,600 117,600
outstanding
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 $ $
4,400 13,400
Depreciation and amortization 140,000 140,000
Amortization of lease intangibles 4,000 4,000
Interest expense 79,000 79,000
Amortization of deferred 4,000 4,000
financing fees
Non-controlling interests (10,000) (10,000)
Non-cash interest related to 1,100 1,100
discount on Senior Notes
Amortization of deferred stock 3,500 3,500
compensation
Non-cash straightline lease 3,000 3,000
expense
Adjusted EBITDA $ $
229,000 238,000
Reconciliation of Net Income to Adjusted FFO
Net income $ $
4,400 13,400
Preferred stock dividends (30,000) (30,000)
Real estate depreciation and 138,800 138,800
amortization
Non-controlling interests (7,000) (7,000)
Amortization of lease intangibles 4,000 4,000
Non-cash straightline lease 3,000 3,000
expense
Adjusted FFO available to common $ $
stockholders 113,200 122,200
Adjusted FFO available to common $ $
stockholders per diluted share 0.96 1.04
Diluted weighted average shares 117,800 117,800
outstanding
Sunstone Hotel Investors, Inc.
Comparable Hotel EBITDA Margins
(Unaudited and in thousands except hotels and rooms)
Three
Months Three Months Ended March 31, 2011
Ended March
31, 2012
Prior
Actual Actual Ownership Acquired Comparable
(1) (2) Adjustments Hotel (4) (5)
(3)
Number of Hotels 32 31 1 32
Number of Rooms 13,208 12,018 1,190 13,208
Hotel EBITDA 24.7% 21.0% 16.7% 35.1% 23.1%
Margin (6)
Hotel EBITDA
Margin adjusted
for prior year 24.5% 21.2% 23.3%
property tax
credits and
assessment ^ (7)
Hotel Revenues
Room revenue $ $ $ 3,771 $ $
136,538 106,480 17,867 128,118
Food and 51,837 39,285 738 9,744 49,767
beverage revenue
Other 12,139 9,173 328 2,264 11,765
operating revenue
Total Hotel 200,514 154,938 4,837 29,875 189,650
Revenues
Hotel Expenses
Room expense 37,605 29,285 979 4,366 34,630
Food and 36,877 29,776 842 5,872 36,490
beverage expense
Other hotel 53,126 44,341 1,590 6,496 52,427
expense
General and
administrative 23,473 18,958 616 2,653 22,227
expense
Total Hotel 151,081 122,360 4,027 19,387 145,774
Expenses
Hotel EBITDA 49,433 32,578 810 10,488 43,876
Prior year
property tax (339) 315 - - 315
credits and
assessment
Hotel EBITDA
adjusted for prior
year property tax 49,094 32,893 810 10,488 44,191
credits and
assessment
Non-hotel 969 1,002 - - 1,002
operating income
Amortization of (1,035) (937) (140) - (1,077)
lease intangibles
Non-cash
straightline lease (696) (240) (6) (450) (696)
expense
Management company (394) (82) - - (82)
transition costs
Prior year
property tax 339 (315) - - (315)
assessment
Corporate overhead (5,300) (7,657) - - (7,657)
Depreciation and (34,756) (26,222) (523) (4,868) (31,613)
amortization
Operating Income 8,221 (1,558) 141 5,170 3,753
(Loss)
Equity in earnings
of unconsolidated - 21 - - 21
joint ventures
Interest and other 63 109 - - 109
income
Interest expense (21,503) (17,784) (425) (2,271) (20,480)
Loss on
extinguishment of (191) - - - -
debt
Gain on
remeasurement of - 69,230 - - 69,230
equity interests
Income from
discontinued 442 1,317 - - 1,317
operations
Net Income (Loss) $ $ $ $ $
(12,968) 51,335 (284) 2,899 53,950
(1) Actual represents the Company's ownership results for the 32
hotels held for investment as of March 31, 2012.
(2) Actual represents the Company's ownership results for the 31 hotels held
for investment as of March 31, 2011. Excludes the Royal Palm Miami Beach which
was sold in April 2011, and the Valley River Inn which was sold in October
2011. Room count as of March 31, 2011 has been adjusted by six additional
rooms which were added to the Courtyard by Marriott Los Angeles Airport during
the second quarter of 2011, and by two additional rooms which were added to
the JW Marriott New Orleans during the fourth quarter of 2011.
(3) Prior Ownership Adjustments represent prior ownership results for the
Doubletree Guest Suites Times Square acquired by the Company on January 14,
2011 and the JW Marriott New Orleans acquired by the Company on February 15,
2011, along with the Company's pro forma amortization of lease intangibles,
non-cash straightline lease expense, depreciation expense and interest
expense.
(4) Acquired Hotel represents prior ownership results for the Hilton San Diego
Bayfront acquired by the Company on April 15, 2011, along with the Company's
pro forma non-cash straightline lease expense, depreciation expense and
interest expense.
(5) Comparable represents the Company's ownership results for the 31 hotels
held for investment as of March 31, 2011, plus prior ownership results and the
Company's pro forma adjustments 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, and the Hilton San Diego
Bayfront acquired by the Company on April 15, 2011.
(6) Hotel EBITDA Margin is calculated as Hotel EBITDA divided by
total hotel revenues.
(7) Hotel EBITDA Margin for the three months ended March 31, 2012 includes the
benefit of $0.3 million due to prior year property tax credits. Hotel EBITDA
Margin for the three months ended March 31, 2011 includes additional expense
of $0.3 million due to a prior year property tax assessment. Without this
benefit and expense, Comparable Hotel EBITDA Margin for the three months ended
March 31, 2012 and 2011 would have been 24.5% and 23.3%, respectively.
For Additional Information:
Bryan Giglia
Senior Vice President – Corporate Finance
Sunstone Hotel Investors, Inc.
(949) 382-3036
SOURCE Sunstone Hotel Investors, Inc.
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