Sunstone Announces Sale of Six Non-core Hotels
Continues Portfolio Transformation
JULY 2, 2007. Sunstone Hotel Investors, Inc. (NYSE:SHO) announced that on June 29, 2007, it completed the sale of six non-core hotels for gross proceeds of $150.5 million, or approximately 10.7x projected 2007 EBITDA (reconciliation to net income below), to affiliates of DLJ Real Estate Partners.
Steve Goldman, Chief Executive Officer, stated, "The sale of these six hotels is consistent with our strategy of recycling capital from smaller, slower growth assets located in secondary and tertiary markets, into larger scale hotels with higher long term yield potential. This transaction will allow management to concentrate its efforts on a core group of large assets, which will more directly impact cash flows. By employing a 'like-kind exchange' structure with assets we acquired earlier this year, we were able to defer substantial gains on the sale of these assets."
Goldman added, "Over the past two years, Sunstone has sold 26 hotels with an average of 194 rooms per hotel, and has acquired 100% ownership in 16 hotels with an average of 462 rooms per hotel. Additionally, by the end of 2007, we will have invested approximately $300 million into our existing portfolio. As a result, we have transformed Sunstone's portfolio from a collection of mid-level suburban assets into a collection of institutional quality hotels located in urban markets with high barriers to entry. We believe this strategy has positioned the Company for superior long-term growth."
Use of Proceeds
Net proceeds of approximately $141 million from this sale will be used to repay amounts outstanding under the Company's revolving credit facility and the balance of the net proceeds will be used for general corporate purposes. The Company's net proceeds may be affected by customary post-closing proration adjustments.
Impact on Third & Fourth Quarter 2007
The impact of this sale on the Company's projected earnings was contemplated in the full year guidance provided in the Company's earnings release dated May 2, 2007. For the quarter ending September 30, 2007, the six hotels represent approximately $3.9 million of projected EBITDA (reconciliation to net income below). For the quarter ending December 31, 2007, the six hotels represent approximately $3.4 million of projected EBITDA (reconciliation to net income below). The Company plans to give third quarter guidance and update full year guidance during its second quarter earnings call.
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