IRVINE, Calif., June 1, 2022 /PRNewswire/ — Sunstone Hotel Investors, Inc. (the “Company” or “Sunstone”) (NYSE: SHO), the owner of Long-Term Relevant Real Estate® in the lodging industry, announced that it has entered into a definitive agreement with an affiliate of Park Hotels & Resorts Inc. (“Park”) to acquire Park’s 25% interest in the joint venture that owns the leasehold interest in the Hilton San Diego Bayfront of 1 190 rooms (the “Hotel”). As part of the transaction, Sunstone will pay Park $102 million in cash and will actually bear the costs of Park’s $55 million part of the existing mortgage on the hotel, which is already fully consolidated as part of Sunstone’s financial statements. After the acquisition, Sunstone will own 100% of the company’s interest in the hotel.
The purchase price, including debt in place, involves a $628 million value for the Hotel, or $527,700 per key, and represents a multiple of 13.2x on the Hotel’s 2022 forecast EBITDA and a capitalization rate of 6.6% on the 2022 forecast net operating income. The Company currently expects to close the transaction by the end of the second quarter of 2022 and expects to finance the acquisition primarily by borrowing against the Company’s revolving credit facility.
Bryan GigliaChairman and CEO, said, “We are pleased to announce our acquisition of the remaining 25% interest in the Hilton San Diego Bayfront joint venture. This is a high quality asset very well located in a premier convention and leisure market. The hotel is in excellent physical condition, and with the recent addition of new meeting space, a refreshed lobby and improved food and beverage offering, the hotel is well placed to benefit from strong leisure tourism and the recovery in demand from business travelers and corporate groups. thank our Park partners for their collaboration over the years and believe that this transaction, which consolidates ownership of Sunstone and provides Park with a fair valuation of their stake, is a mutually beneficial outcome for both parties. »
The acquisition is subject to the satisfaction of customary closing conditions, and the Company cannot guarantee that the transaction will be completed. The forecast amounts mentioned in this press release are based on the Company’s operating performance assumptions and the Company cannot guarantee that the forecasts will be achieved.
About Sunstone Hotel Investors
Sunstone Hotel Investors, Inc. is a real estate investment trust (“REIT”). Sunstone’s strategy is to create long-term stakeholder value through the acquisition, active ownership and disposition of hotels that qualify as Long-Term Relevant Real Estate®. For more information, please visit Sunstone’s website at www.sunstonehotels.com.
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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 words and phrases such as “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend” , “may”, “plan”, “predict”, “project”, “should”, “shall” and other similar terms and expressions, including opinions, 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 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: the impact of the COVID-19 pandemic on the Company’s business and economy, as well as the response of governments and the Company to the pandemic, and the speed and the success with which vaccines and therapies are distributed and administered; increased employee business risks, including increased employment litigation and demands for severance or other benefits related to termination or furloughs as a result of temporary job suspensions hotels or reduced hotel operations due to COVID-19; general economic and business conditions, including a U.S. recession or rising inflation, trade and tariff disputes, regional or global economic downturns, and any type of flu or disease-related pandemic that impacts travel or the ability to travel, including COVID-19; the need for business travel, including increased use of business-related technology; increased hotel operating costs due to labor costs, workers’ compensation and health care costs, utility costs, property insurance costs and liability, unforeseen costs such as acts of nature and their consequences and other costs that may not be offset by increased room rates; the land or air leases of two of the hotels in which the Company holds interests as of the date of this press release; the need for renovations, repositioning and other capital expenditures for the Company’s hotels; the impact, including any delays, of renovations and repositionings on hotel operations; new hotel offerings, or alternative accommodation options such as timeshares, vacation rentals or sharing services such as Airbnb, in the Company’s markets, which could adversely affect its occupancy levels and revenues of its hotels; competition from non-Company owned hotels; relationships with, requirements, performance and reputation of the managers of the Company’s hotels; relationships with, requirements and reputation of the Company’s franchisors and hotel brands; the Company’s hotels could become depreciated, or its hotels that have already been depreciated could become depreciated further in the future, which could adversely affect its financial condition and results of operations; competition for hotel acquisitions and the Company’s ability to complete acquisitions and divestitures; performance of hotels after their acquisition; changes in the Company’s business strategy or planned acquisitions or divestitures; the Company’s level of indebtedness, including secured, unsecured, fixed and floating rate debt; financial and other commitments in debt and preferred stock of the Company; the impact on the Company’s business of the Company’s potential defaults on its debt agreements or leases; financial market volatility and the effect on demand for accommodation or the Company’s ability to obtain capital on favorable terms or not at all; the Company’s need to operate as a REIT and to comply with other applicable laws and regulations, including new laws, interpretations or court rulings that may change federal or state tax laws or federal or state tax consequences the qualification of the Company as an REIT; the potential adverse tax consequences in the event that the Company’s operating leases with its taxable REIT subsidiaries are not considered to have been entered into at arm’s length; systems security risks, data protection breaches, cyberattacks and systems integration issues, including those affecting the Company’s suppliers, hotel managers or franchisors; other events beyond the Company’s control, including but not limited to climate change, natural disasters, terrorist attacks or civil unrest; and other risks and uncertainties associated with the Company’s business described in its filings with the Securities and Exchange Commission. Although the Company believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions, it cannot guarantee that the expectations will be achieved or that any deviations will not be material. All forward-looking information provided herein is as of the date of this release, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or to changes in the Company’s expectations.
This release should be read in conjunction with the consolidated financial statements and accompanying notes 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 Analysis and Retrieval System (“EDGAR”) at www.sec.gov.
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