Sunstone Hotel Investors Reports Results For Fourth Quarter And Full Year 2013

Feb 20, 2014, 16:04 ET from Sunstone Hotel Investors, Inc.

ALISO VIEJO, Calif., Feb. 20, 2014 /PRNewswire/ -- Sunstone Hotel Investors, Inc. (the "Company" or "Sunstone") (NYSE: SHO) today announced results for the fourth quarter and year ended December 31, 2013.

Fourth Quarter 2013 Operational Results (With the exception of Comparable Hotel RevPAR, year-over-year comparisons for the fourth quarter 2013 are not meaningful due to a 20-day reduction in the Marriott fourth quarter 2013 reporting calendar) (1):

  • Comparable Hotel RevPAR increased 3.5% to $145.33 (as compared to fourth quarter 2012).
  • Comparable Hotel EBITDA Margins were 28.2%.
  • Adjusted EBITDA was $62.3 million.
  • Pro Forma Adjusted EBITDA was $66.2 million. (2)
  • Adjusted FFO per diluted share was $0.23.
  • Income available to common stockholders was $2.1 million.
  • Income available to common stockholders per diluted share was $0.01.

Full Year 2013 Operational Results (as compared to Full Year 2012) (1):

  • Comparable Hotel RevPAR increased 4.5% to $148.20.
  • Comparable Hotel EBITDA Margins increased 40 basis points to 28.4%.
  • Adjusted EBITDA was $240.8 million (vs. $242.5 million in 2012).
  • Pro Forma Adjusted EBITDA was $267.5 million (vs. $253.7 million in 2012). (2)
  • Adjusted FFO per diluted share was $0.93 (vs. $1.01 in 2012).
  • Income available to common stockholders was $46.5 million (vs. $17.8 million in 2012).
  • Income available to common stockholders per diluted share was $0.29 (vs. $0.14 in 2012).

Ken Cruse, Chief Executive Officer, stated, "Our operations continued to grow in the fourth quarter. Ongoing broad-based improvements in demand helped to drive our Adjusted EBITDA and Adjusted FFO per diluted share to the high end of our guidance range. Our portfolio is now operating above 80% occupancy, and leading indicators for our business - such as group booking trends – currently point toward continued positive growth over the next several years. Accordingly, the mid-point of our 2014 guidance implies an 18% increase in our Adjusted FFO per diluted share."

(1)

Comparable Hotel RevPAR and Comparable Hotel EBITDA Margin information  presented reflect the Company's Comparable 28 Hotel Portfolio, which includes all hotels held for investment by the Company as of December 31, 2013 except the Boston Park Plaza, and which also includes prior ownership results as applicable in 2013 and 2012 for the Hilton New Orleans St. Charles acquired in May 2013, and the Hyatt Regency San Francisco acquired in December 2013, along with prior ownership results as applicable in 2012 for the Hyatt Chicago Magnificent Mile acquired in June 2012, and the Hilton Garden Inn Chicago Downtown/Magnificent Mile acquired in July 2012. Comparable Hotel RevPAR includes the effects of converting the operating statistics for the Company's ten Marriott-managed hotels from a 13-period basis as reported in 2012 to a standard 12-month calendar basis. Comparable Hotel EBITDA Margin information excludes non-current year net property tax related adjustments, but includes the full impact of current-year property tax related adjustments in the quarter such adjustments are realized.

(2)

Pro forma Adjusted EBITDA information presented reflects the Company's 29 Hotel Portfolio plus prior ownership results for hotels acquired during the periods represented. Also includes pro forma adjustments related to the 11% dividend yield on the $25 million preferred equity investment retained on the four-hotel portfolio sold in January 2013.

 

SELECTED STATISTICAL AND FINANCIAL DATA

($ in millions, except RevPAR, ADR and per share amounts)

(unaudited)

Three Months Ended December 31,

Years Ended December 31,

2013

2012

Change

2013

2012

Change

Comparable Hotel RevPAR (1)

$ 145.33

$ 140.39

3.5%

$ 148.20

$ 141.84

4.5%

Comparable Hotel Occupancy (1)

77.3%

75.8%

150

bps

80.2%

79.4%

80

bps

Comparable Hotel ADR (1)

$ 188.01

$ 185.21

1.5%

$ 184.79

$ 178.64

3.4%

Comparable Hotel EBITDA Margin (2)

28.2%

N/A

28.4%

28.0%

40

bps

Net Income (2)

$       5.2

N/A

$     70.0

$     49.6

Adjusted EBITDA  (2)

$     62.3

N/A

$   240.8

$   242.5

Adjusted FFO (2)

$     40.5

N/A

$   151.2

$   128.6

Adjusted FFO per diluted share (2)

$     0.23

N/A

$     0.93

$     1.01

(1)

2012 Comparable Hotel RevPAR, Occupancy and ADR for the Company's ten Marriott-managed hotels include the effects of converting the operating statistics for the Company's ten Marriott-managed hotels from a 13-period basis as reported in 2012 to a standard 12-month calendar basis.

(2)

Fourth quarter 2013 Comparable Hotel EBITDA Margin, Net Income, Adjusted EBITDA, Adjusted FFO and Adjusted FFO per diluted share year-over-year comparisons are not meaningful due to a 20-day reduction in the Marriott fourth quarter 2013 reporting calendar as compared to the fourth quarter 2012.

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 11 through 15 of this release. 

The Company's actual results for the quarter and year ended December 31, 2013 compare to its guidance originally provided on November 11, 2013 as follows:

Metric

Quarter Ended December 31, 2013 Guidance (1)

Quarter Ended December 31, 2013 Actual Results (unaudited)

Performance Relative to Prior Guidance Midpoint

Comparable Hotel RevPAR Growth (2)

+3.0% - 4.0%

3.5%

0.0%

Net Income ($ millions)

$6 - $10

$5

($3)

Adjusted EBITDA ($ millions)

$59 - $63

$62

$1

Adjusted FFO ($ millions)

$36 - $40

$40

$2

Adjusted FFO per diluted share

$0.21 - $0.23

$0.23

$0.01

Diluted Weighted Average Shares Outstanding

174,660,000

174,758,000

98,000

(1)     Reflects guidance presented on November 11, 2013.

(2)     Comparable Hotel RevPAR statistics include the effects of converting the Company's ten Marriott-managed

          hotels from a 13-period basis as reported in 2012 to a standard 12-month calendar basis.

Metric

FY 2013 Guidance (1)

FY 2013 Actual Results (unaudited, except Net Income)

Performance Relative to Prior Guidance Midpoint

Comparable Hotel RevPAR Growth (2)

+3.5% - 5.5%

4.5%

0.0%

Net Income ($ millions)

$73 - $77

$70

($5)

Adjusted EBITDA ($ millions)

$238 - $242

$241

$1

Adjusted FFO ($ millions)

$147 - $151

$151

$2

Adjusted FFO per diluted share

$0.90 - $0.93

$0.93

$0.02

Diluted Weighted Average Shares Outstanding

162,440,000

162,251,000

(189,000)

(1)     Reflects guidance presented on November 11, 2013.

(2)     Comparable Hotel RevPAR statistics include the effects of converting the Company's ten Marriott-managed

           hotels from a 13-period basis as reported in 2012 to a standard 12-month calendar basis.

Full Year 2013 Transaction Highlights

Acquisitions and Dispositions - The Company completed several acquisition and disposition transactions in 2013 resulting in a material improvement in the quality, scale and geographic footprint of its portfolio. The Company's 2013 acquisitions and dispositions include the following:

  • In January, the Company sold a four hotel, 1,222-room portfolio and a commercial laundry facility in Rochester, Minnesota ("Rochester Portfolio") for a net sale price of $230.0 million ($172,000/key based on the allocated purchase price for the four hotels).
  • In May, the Company acquired the fee simple interest in the 250-room Hilton New Orleans St. Charles for a net purchase price of $59.1 million ($236,000/key).
  • In July, the Company acquired the fee simple interest in the 1,053-room Boston Park Plaza hotel for a net purchase price of $248.0 million ($236,000/key).
  • In December, the Company acquired the fee simple interest in the 802-room Hyatt Regency San Francisco for a net purchase price of $262.5 million ($327,000/key).

Finance: The Company completed several finance transactions in 2013 resulting in a material reduction in overall leverage and a significant increase in financial flexibility. The Company's 2013 finance transactions include the following:

  • In January, the Company retained a $25.0 million, 11% dividend yield preferred equity investment in conjunction with the Rochester Portfolio disposition.
  • In January, the Company extinguished $27.1 million of mortgage debt in conjunction with the Rochester Portfolio disposition.
  • In January, the Company redeemed the remaining $58.0 million outstanding of its 4.60% Exchangeable Senior Notes.
  • In February, the Company issued 25.3 million shares of its common stock, including the underwriters' over-allotment of 3.3 million shares, for net proceeds of $294.9 million.
  • In March, the Company redeemed all 7,050,000 shares outstanding of its 8% Series A Cumulative Redeemable Preferred Stock with a face value of $176.3 million.
  • In May, the Company redeemed all 4,102,564 shares of its 6.45% Series C Cumulative Convertible Redeemable Preferred Stock with a face value of $100.0 million.
  • In July, the Company assumed a $119.2 million mortgage secured by the Boston Park Plaza with a fixed interest rate of 4.402% and a maturity date in February 2018.
  • In November, the Company issued 20 million shares of its common stock for net proceeds of $270.9 million.

Recent Developments

On February 19, 2014, the Company's Board of Directors authorized a share repurchase program to acquire up to $100.0 million of the Company's common and preferred stock. Future purchases will depend on various factors, including the Company's capital needs as well as the Company's common and preferred stock price.

On February 20, 2014, the Company entered into separate Equity Distribution Agreements (the "Agreements") with Wells Fargo Securities, LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Managers"). Under the terms of the Agreements, the Company may issue and sell from time to time through or to the Managers, as sales agents and/or principals, the Company's common shares of beneficial interest having an aggregate offering price of up to $150.0 million. Future sales will depend on various factors, including the Company's capital needs, as well as the Company's common stock price.

John V. Arabia, the Company's President, has been appointed to the Company's Board of Directors. Mr. Arabia joined the Company in April 2011 as Chief Financial Officer and Executive Vice President of Corporate Strategy, was promoted to President in February 2012 and was appointed to the Company's Board of Directors effective February 19, 2014.

Ken Cruse added, "We are pleased to announce the appointment of John Arabia to our Board of Directors. This appointment will deepen our already strong Board of Directors and improve our best-in-class corporate governance."

Balance Sheet/Liquidity Update

As of December 31, 2013, the Company had approximately $193.7 million of cash and cash equivalents, including restricted cash of $89.3 million.  

As of December 31, 2013, the Company had total assets of $3.5 billion, including $3.2 billion of net investments in hotel properties, total consolidated debt of $1.4 billion and stockholders' equity of $1.9 billion.

Capital Improvements

The Company invested $26.0 million into capital improvements of its portfolio during the fourth quarter of 2013. During 2013, the Company invested $117.7 million into capital improvements of its portfolio, including significant renovations at the Hilton Times Square, Hyatt Chicago Magnificent Mile, Hyatt Regency Newport Beach and the Renaissance Westchester.

The Company expects to invest approximately $120 million to $140 million into its portfolio during 2014. Several of the 2014 projects began in the fourth quarter of 2013 and are expected to be completed during the first quarter of 2014. Included in the Company's expected capital investments are approximately $15 million to $20 million of energy investments throughout the portfolio that are expected to generate substantial returns on investment. Based on the scope and timing of 2014 scheduled renovations, the Company expects $2.0 million to $4.0 million of renovation revenue displacement in 2014. A selection of 2014 scheduled renovations includes:

  • Boston Park Plaza:  The Company expects to invest approximately $18 million to $19 million in 2014 to upgrade the hotel's infrastructure; including elevators, façade, roof and HVAC, as well as the preparation of approximately 30,000 square feet of unoccupied retail space to rent to third-party tenants. The Company has executed new leases with Hermes of Paris, Inc., who will occupy a 5,500 square foot retail store on the first floor, and with Strega Restaurant Group, a local operator of high-end restaurants, who will occupy a 5,900 square foot restaurant on the first floor. Both tenants are expected to occupy their respective spaces during the second half of 2014. The Company is in the process of finalizing lease terms with a national fitness facility operator to occupy the additional leasable space on the first floor and basement level of the hotel. The Company expects approximately $1.0 million to $1.5 million of renovation revenue displacement in the second half of 2014, largely from the HVAC systems upgrade. A full guestroom and corridor renovation is scheduled to begin in the fourth quarter 2015, which is expected to be a seasonally slow demand period for the hotel. 
  • Hyatt Regency San Francisco:  The Company is currently investing approximately $17 million to renovate all 802 guestrooms and suites, bathrooms and corridors as previously announced at the time of the acquisition. The guestroom renovation began in January 2014 and is expected to be completed during the second quarter 2014. The Company expects $1.0 million to $2.0 million of renovation revenue displacement in 2014, which was previously incorporated in the Company's 2014 hotel forecast provided at the time of the acquisition.
  • Doubletree Guest Suites Times Square:  The Company is currently investing approximately $5 million to renovate the hotel lobby and fitness center, and to install a new digital revenue-generating marquee sign.  This work began in December 2013, and will be substantially completed during the first quarter 2014 with no expected material disruption to operations. Additionally, the Company expects to invest approximately $10 million to order FF&E for the anticipated first quarter 2015 rooms and corridor renovation. The Company does not anticipate meaningful renovation disruption in 2014.
  • Ordinary Course Rooms & Public Space Renovations:  During 2014, the Company expects to invest approximately $40 million to complete routine guestroom/bath and public space renovations, many of which began during the fourth quarter 2013 and are expected to be substantially completed during the first quarter 2014. Rooms and public space renovations at the Hilton Garden Inn Chicago ($8 million), Renaissance Long Beach ($5 million), and Renaissance Orlando ($8 million) are expected to be substantially completed during the first quarter. A full hotel renovation at the Hilton New Orleans ($7 million) and guest bathroom renovation at the Renaissance Harborplace ($3 million) will commence during the third and fourth quarters to minimize disruption. The Hilton San Diego Bayfront ($4 million) and Renaissance Washington DC ($5 million) will renovate meeting space during lower seasonal demand periods, resulting in no expected material disruption to operations. Taken as a whole, the Company expects approximately $1 million of renovation revenue disruption from these ordinary course renovations in 2014.
  • Energy Investments: The Company expects to invest approximately $15 million to $20 million throughout its portfolio in 2014 on return-focused energy and system investments. Investments range from LED light bulb replacements to complete chiller/boiler system overhauls. The Company expects to realize a return in the 10% to 30% range on these energy related investments.

2014 Outlook

The Company's achievement of the 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 does not take into account the impact of any unanticipated developments in its business or changes in its operating environment, nor does it take into account any unannounced hotel acquisitions, dispositions, re-brandings, management changes, transition costs, prior-year property tax assessments and/or credits, debt repurchases or unannounced financings during 2014.   

For the first quarter and full year 2014, the Company expects:

Metric

Quarter Ended March 31, 2014 Guidance

Full Year 2014 Guidance

Comparable Hotel RevPAR Growth (2)

+5.5% - 7.5%

4.0% - 6.5%

Net Income (Loss) ($ millions) 

$(11) - $(8)

$57 - $77

Adjusted EBITDA ($ millions)

$44 - $47

$275 - $295

Adjusted FFO ($ millions)

$23 - $26

$190 - $210

Adjusted FFO per diluted share

$0.12 - $0.14

$1.04 - $1.15

Diluted Weighted Average Shares Outstanding

181,600,000

182,100,000

First quarter and full year 2014 guidance are based in part on the following assumptions:

  • Full year comparable hotel EBITDA margin expansion of approximately 25 to 125 basis points.
  • Full year corporate overhead expense (excluding stock amortization and one-time expenses related to future acquisition closing costs) of approximately $21 million to $22 million.
  • Full year interest expense of approximately $69 million, including $3 million in amortization of deferred financing fees.
  • Full year preferred dividends of $9.2 million for the Series D cumulative redeemable preferred stock.

Dividend Update

On February 19, 2014, the Company's Board of Directors declared a cash dividend of $0.05 per share payable to its common stockholders. The Company's Board of Directors also declared a cash dividend of $0.50 per share payable to its Series D cumulative redeemable preferred stockholders. The dividends will be paid on or before April 15, 2014 to common and preferred stockholders of record on March 31, 2014. 

Subject to certain limitations, the Company intends to make dividends on its stock in amounts equivalent to 100% of its annual taxable income.  Based on the guidance provided herein, the Company expects full year 2014 taxable income to result in required distributions of $0.50 - $0.60 per share. The level and composition 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, any future common stock dividends may be comprised of cash only, 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 fourth quarter and full year 2013 financial results on February 21, 2014, at 12:00 p.m. Eastern Time (9:00 a.m. Pacific Time). 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. is a lodging real estate investment trust ("REIT") that as of February 20, 2014 has interests in 29 hotels comprised of 13,753 rooms. Sunstone's hotels are primarily in the upper upscale segment and are 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.  Our goal is to improve the quality and scale of our portfolio while gradually deleveraging our balance sheet. As demand for lodging generally fluctuates with the overall economy (we refer to these changes in demand as the lodging cycle), 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 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 February 20, 2014, 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. These measures should not be considered in isolation or as a substitute for measures of performance in accordance with GAAP. EBITDA, Adjusted EBITDA, FFO, Adjusted FFO, comparable hotel EBITDA and comparable hotel EBITDA margin as calculated by us, may not be comparable to other companies that do not define such terms exactly as the Company. These non-GAAP measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.

EBITDA is a commonly used measure of performance in many industries. We believe EBITDA is useful to investors in evaluating our operating performance because this measure helps 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 believe the use of EBITDA facilitates comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital-intensive companies. In addition, certain covenants included in our indebtedness use EBITDA as a measure of financial compliance. We also use EBITDA as a measure in determining the value of hotel acquisitions and dispositions.

Historically, we have adjusted EBITDA when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful information to investors regarding our operating performance and that the presentation of Adjusted EBITDA, when combined with the primary GAAP presentation of net income, is beneficial to an investor's complete understanding of our operating performance.

We believe that the presentation of FFO provides useful information to investors regarding our operating performance because it is a measure of our operations without regard to specified non-cash items such as real estate depreciation and amortization, amortization of lease intangibles, any real estate impairment loss and any gain or loss on sale of real estate assets, all of which are based on historical cost accounting and may be of lesser significance in evaluating our current performance. We believe the use of FFO facilitates comparisons between us and other lodging REITs.

We also present Adjusted FFO when evaluating our operating performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance, and may facilitate comparisons of operating performance between periods and our peer companies.

We adjust EBITDA and FFO for the following items, which may occur in any period, and refer to these measures as either Adjusted EBITDA or Adjusted FFO:

  • Amortization of favorable and unfavorable contracts: we exclude the non-cash amortization of the favorable management contract asset recorded in conjunction with our acquisition of the Hilton Garden Inn Chicago Downtown/Magnificent Mile, along with the favorable tenant lease assets recorded in conjunction with our acquisitions of the Hilton New Orleans St. Charles and the Hyatt Regency San Francisco, and the unfavorable tenant lease liabilities recorded in conjunction with our acquisitions of the Boston Park Plaza, the Hilton Garden Inn Chicago Downtown/Magnificent Mile and the Hyatt Regency San Francisco. The amortization of favorable and unfavorable contracts does not reflect the underlying performance of our hotels.
  • Ground rent adjustments: we exclude the non-cash expense incurred from straightlining our ground lease obligations as this expense does not reflect the underlying performance of our hotels.
  • Gains or losses from debt transactions: we exclude the effect of finance charges and premiums associated with the extinguishment of debt, including the acceleration of deferred financing costs from the original issuance of the debt being redeemed or retired because, like interest expense, their removal helps investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure.
  • Acquisition costs: under GAAP, costs associated with completed acquisitions are expensed in the year incurred. We exclude the effect of these costs because we believe they are not reflective of the ongoing performance of the Company.
  • Consolidated partnership adjustments: we deduct the non-controlling partner's pro rata share of any EBITDA or FFO adjustments related to our consolidated Hilton San Diego Bayfront partnership.
  • Cumulative effect of a change in accounting principle: from time to time, the FASB promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle. We exclude these one-time adjustments because they do not reflect our actual performance for that period.
  • Impairment losses: we exclude the effect of impairment losses because we believe that including them in Adjusted EBITDA and Adjusted FFO is not consistent with reflecting the ongoing performance of our remaining assets.
  • Other adjustments: we exclude other adjustments such as lawsuit settlement costs (or the reversal of these costs), prior year property tax assessments and/or credits, management company transition costs, and departmental closing costs, including severance, because we do not believe these costs reflect our actual performance and/or the ongoing operations of our hotels.

In addition, to derive Adjusted EBITDA we exclude the non-cash expense incurred with the amortization of deferred stock compensation as this expense does not reflect the underlying performance of our hotels. We also include an adjustment for the cash ground lease expense recorded on the Hyatt Chicago Magnificent Mile's building lease. Upon acquisition of this hotel, we determined that the building lease was a capital lease, and, therefore, we include a portion of the capital lease payment each month in interest expense. We include an adjustment for ground lease expense on capital leases in order to more accurately reflect the operating performance of the Hyatt Chicago Magnificent Mile. We also exclude the effect of gains and losses on the disposition of depreciable assets because we believe that including them in Adjusted EBITDA is not consistent with reflecting the ongoing performance of our assets. In addition, material gains or losses from the depreciated value of the disposed assets could be less important to investors given that the depreciated asset value often does not reflect its market value.

To derive Adjusted FFO, we also exclude the non-cash gains or losses on our derivatives, as well as the original issuance costs associated with the redemption of preferred stock and any federal and state taxes associated with the application of net operating loss carryforwards. We believe that these items are not reflective of our ongoing finance costs.

In presenting comparable hotel EBITDA and comparable hotel EBITDA margins, the revenue and expense items associated with BuyEfficient and other miscellaneous non-hotel items have been excluded. We believe the calculation of comparable hotel EBITDA results in a more accurate presentation of the hotel EBITDA margins for the Company's 28 comparable hotels, and that these non-GAAP financial measures are useful to investors in evaluating our property-level operating performance. Our 28 comparable hotels include all hotels held for investment as of December 31, 2013 except the Boston Park Plaza, and also include prior ownership results as applicable in 2012 and 2013 for the Hilton New Orleans St. Charles acquired in May 2013, and the Hyatt Regency San Francisco acquired in December 2013, along with prior ownership results as applicable in 2012 for the Hyatt Chicago Magnificent Mile acquired in June 2012 and the Hilton Garden Inn Chicago Downtown/Magnificent Mile acquired in July 2012.

Our presentation of Comparable Hotel RevPAR, Comparable Hotel Occupancy and Comparable Hotel ADR include the effects of converting the operating statistics for the Company's ten Marriott-managed hotels from a 13-period basis as reported in 2012 to a standard 12-month calendar basis.

Reconciliations of net income to EBITDA, Adjusted EBITDA, FFO and Adjusted FFO are set forth on page 11.  Reconciliations and the components of comparable hotel EBITDA and comparable hotel EBITDA margin are set forth on pages 14 and 15.

For Additional Information: Bryan Giglia Sunstone Hotel Investors, Inc. (949) 382-3036

 

Sunstone Hotel Investors, Inc.

Consolidated Balance Sheets

(In thousands, except share data)

December 31,

December 31,

2013

2012

Assets

Current assets:

Cash and cash equivalents

$         104,363

$         157,217

Restricted cash

89,306

78,394

Accounts receivable, net

29,941

27,498

Inventories

1,464

1,377

Prepaid expenses

12,612

10,739

Assets held for sale, net

-

132,335

Total current assets

237,686

407,560

Investment in hotel properties, net

3,231,382

2,681,877

Deferred financing fees, net

9,219

11,931

Goodwill

9,405

9,405

Other assets, net

21,106

25,902

Total assets

$      3,508,798

$      3,136,675

Liabilities and Equity

Current liabilities:

Accounts payable and accrued expenses

$           25,116

$           22,646

Accrued payroll and employee benefits

29,933

26,738

Dividends payable

11,443

7,437

Other current liabilities

30,288

30,963

Current portion of notes payable

23,289

76,723

Notes payable of assets held for sale

-

27,270

Liabilities of assets held for sale

-

8,228

Total current liabilities

120,069

200,005

Notes payable, less current portion

1,380,786

1,286,666

Capital lease obligations, less current portion

15,586

15,621

Other liabilities

39,958

15,070

Total liabilities

1,556,399

1,517,362

Commitments and contingencies

-

-

Preferred stock, Series C Cumulative Convertible Redeemable Preferred Stock,

$0.01 par value, 4,102,564 shares authorized, zero shares issued and outstanding at December 31, 2013 and 4,102,564 shares issued and outstanding at December 31, 2012, liquidation preference of $24.375 per share

-

100,000

Equity:

Stockholders' equity:

Preferred stock, $0.01 par value, 100,000,000 shares authorized.

     8.0% Series A Cumulative Redeemable Preferred Stock, zero shares issued and outstanding at December 31, 2013 and 7,050,000 shares issued and outstanding at December 31, 2012, stated at liquidation preference of $25.00 per share

-

176,250

     8.0% Series D Cumulative Redeemable Preferred Stock, 4,600,000 shares issued and outstanding at December 31, 2013 and December 31, 2012, stated at liquidation preference of $25.00 per share

115,000

115,000

Common stock, $0.01 par value, 500,000,000 shares authorized, 180,858,699 shares issued and outstanding at December 31, 2013 and 135,237,438 shares issued and outstanding at December 31, 2012

1,809

1,352

Additional paid in capital

2,068,721

1,493,397

Retained earnings

224,364

158,376

Cumulative dividends

(511,444)

(475,144)

Accumulated other comprehensive loss

-

(5,335)

Total stockholders' equity

1,898,450

1,463,896

Non-controlling interest in consolidated joint ventures

53,949

55,417

Total equity

1,952,399

1,519,313

Total liabilities and equity

$      3,508,798

$      3,136,675

 

 

Sunstone Hotel Investors, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

 Three Months Ended December 31, 

 Years Ended December 31, 

2013

2012

2013

2012

 Revenues 

 Room 

$   171,364

$   160,817

$   653,955

$   576,146

 Food and beverage 

57,796

57,798

213,346

200,810

 Other operating 

14,735

14,352

56,523

52,128

 Total revenues 

243,895

232,967

923,824

829,084

 Operating expenses 

 Room 

46,023

40,910

170,361

147,932

 Food and beverage 

39,646

39,333

147,713

139,106

 Other operating 

4,406

4,391

16,819

16,162

 Advertising and promotion 

12,540

12,096

47,306

42,474

 Repairs and maintenance 

9,841

9,251

35,884

32,042

 Utilities 

6,799

6,760

27,006

25,596

 Franchise costs 

8,913

8,644

32,932

30,067

 Property tax, ground lease and insurance 

20,804

16,587

79,004

66,830

 Property general and administrative 

27,493

26,229

103,454

94,642

 Corporate overhead 

6,555

5,430

26,671

24,316

 Depreciation and amortization 

36,235

34,339

137,476

130,907

 Total operating expenses 

219,255

203,970

824,626

750,074

 Operating income 

24,640

28,997

99,198

79,010

 Interest and other income 

743

142

2,821

297

 Interest expense 

(18,699)

(18,721)

(72,239)

(76,821)

 Loss on extinguishment of debt 

-

-

(44)

(191)

 Income before income taxes and discontinued operations 

6,684

10,418

29,736

2,295

 Income tax provision 

(1,435)

(1,148)

(8,145)

(1,148)

 Income from continuing operations 

5,249

9,270

21,591

1,147

 Income from discontinued operations 

-

1,844

48,410

48,410

 Net income 

5,249

11,114

70,001

49,557

 Income from consolidated joint venture attributable to non-controlling interest 

(722)

(67)

(4,013)

(1,761)

 Distributions to non-controlling interest 

(8)

(7)

(32)

(31)

 Dividends paid on unvested restricted stock compensation 

(100)

-

(201)

-

 Preferred stock dividends and redemption charges 

(2,300)

(7,437)

(19,013)

(29,748)

 Undistributed income allocated to unvested restricted stock compensation 

-

(41)

(235)

(203)

 Income available to common stockholders 

$       2,119

$       3,562

$     46,507

$     17,814

Basic and diluted per share amounts:

        Income (loss) from continuing operations available (attributable) to common stockholders

$         0.01

$         0.01

$       (0.01)

$       (0.24)

        Income from discontinued operations

-

0.02

0.30

0.38

Basic and diluted income available (loss attributable) to common stockholders per common share

$         0.01

$         0.03

$         0.29

$         0.14

Basic and diluted weighted average common shares outstanding

174,119

135,237

161,784

127,027

Dividends declared per common share

$         0.05

$            -

$         0.10

$            -

 

 

Sunstone Hotel Investors, Inc.

Reconciliation of Net Income to Non-GAAP Financial Measures

(Unaudited and in thousands, except per share amounts)

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

Three Months Ended

Years Ended

December 31,

December 31,

2013

2012

2013

2012

Net income

$     5,249

$   11,114

$     70,001

$     49,557

Operations held for investment:

   Depreciation and amortization

36,235

34,339

137,476

130,907

   Amortization of lease intangibles

1,028

1,029

4,112

4,113

   Interest expense

18,699

18,721

72,239

76,821

   Income tax provision

1,435

1,148

8,145

1,148

Non-controlling interests:

   Income from consolidated joint venture attributable to non-controlling interest

(722)

(67)

(4,013)

(1,761)

   Depreciation and amortization

(807)

(1,424)

(3,956)

(5,685)

   Interest expense

(582)

(605)

(2,341)

(2,477)

Discontinued operations:

   Depreciation and amortization

-

2,182

-

13,164

   Amortization of lease intangibles

-

-

-

14

   Interest expense

-

387

99

6,490

EBITDA

60,535

66,824

281,762

272,291

Operations held for investment:

   Amortization of deferred stock compensation

1,280

812

4,858

3,466

   Amortization of favorable and unfavorable contracts, net

45

114

320

206

   Non-cash straightline lease expense

507

694

2,055

2,777

   Capital lease obligation interest - cash ground rent

(351)

(351)

(1,404)

(819)

   (Gain) loss on sale of assets, net

(7)

(4)

(12)

18

   Loss on extinguishment of debt

-

-

44

191

   Closing costs - completed acquisitions

395

-

1,678

1,965

   Lawsuit settlement costs, net

-

-

358

158

   Prior year property tax and CAM adjustments, net

-

-

106

621

   Hotel laundry closing costs

-

199

-

623

Non-controlling interests:

   Non-cash straightline lease expense

(112)

(111)

(450)

(450)

   Prior year property tax adjustments, net

-

-

-

(202)

Discontinued operations:

   Gain on sale of assets, net

-

-

(51,620)

(38,292)

   Loss on extinguishment of debt

-

-

3,115

-

   Lawsuit settlement costs reversal

-

-

-

(48)

1,757

1,353

(40,952)

(29,786)

Adjusted EBITDA

$   62,292

$   68,177

$   240,810

$   242,505

Reconciliation of Net Income to FFO and Adjusted FFO

Net income

$     5,249

$   11,114

$     70,001

$     49,557

Preferred stock dividends and redemption charges

(2,300)

(7,437)

(19,013)

(29,748)

Operations held for investment:

   Real estate depreciation and amortization

35,850

34,005

136,047

129,668

   Amortization of lease intangibles

1,028

1,029

4,112

4,113

   (Gain) loss on sale of assets, net

(7)

(4)

(12)

18

Non-controlling interests:

   Income from consolidated joint venture attributable to non-controlling interest

(722)

(67)

(4,013)

(1,761)

   Real estate depreciation and amortization

(807)

(1,424)

(3,956)

(5,685)

Discontinued operations:

   Real estate depreciation and amortization

-

2,182

-

13,164

   Amortization of lease intangibles

-

-

-

14

   Gain on sale of assets

-

-

(51,620)

(38,292)

FFO

38,291

39,398

131,546

121,048

Operations held for investment:

   Amortization of favorable and unfavorable contracts, net

45

114

320

206

   Non-cash straightline lease expense

507

694

2,055

2,777

   Write-off of deferred financing fees

-

-

-

3

   Non-cash interest related to (gain) loss on derivatives, net

(96)

(189)

(525)

406

   Loss on extinguishment of debt

-

-

44

191

   Closing costs - completed acquisitions

395

-

1,678

1,965

   Lawsuit settlement costs, net

-

-

358

158

   Prior year property tax and CAM adjustments, net

-

-

106

621

   Hotel laundry closing costs

-

199

-

623

   Income tax provision

1,435

1,148

8,145

1,148

   Preferred stock redemption charges

-

-

4,770

-

Non-controlling interests:

   Non-cash straightline lease expense

(112)

(111)

(450)

(450)

   Non-cash interest related to loss on derivative, net

(1)

-

(3)

(1)

   Prior year property tax adjustments, net

-

-

-

(202)

Discontinued operations:

   Loss on extinguishment of debt

-

-

3,115

-

   Write-off of deferred financing fees

-

-

-

185

   Lawsuit settlement costs reversal

-

-

-

(48)

2,173

1,855

19,613

7,582

Adjusted FFO

$   40,464

$   41,253

$   151,159

$   128,630

FFO per diluted share

$       0.22

$       0.29

$         0.81

$         0.95

Adjusted FFO per diluted share

$       0.23

$       0.30

$         0.93

$         1.01

Basic weighted average shares outstanding

174,119

135,237

161,784

127,027

Shares associated with unvested restricted stock awards

639

385

467

274

Diluted weighted average shares outstanding

174,758

135,622

162,251

127,301

 

 

Sunstone Hotel Investors, Inc.

Reconciliation of Net Loss to Non-GAAP Financial Measures

Guidance for First Quarter 2014

(Unaudited and in thousands except per share amounts)

Reconciliation of Net Loss to Adjusted EBITDA

Quarter Ended

March 31, 2014

Low

High

Net loss

$(10,550)

$ (7,550)

   Depreciation and amortization

37,000

37,000

   Amortization of lease intangibles

1,000

1,000

   Interest expense

17,700

17,700

   Income tax provision

300

300

   Non-controlling interests

(3,000)

(3,000)

   Amortization of deferred stock compensation

1,300

1,300

   Non-cash straightline lease expense

600

600

   Capital lease obligation interest - cash ground rent

(350)

(350)

Adjusted EBITDA

$  44,000

$ 47,000

Reconciliation of Net Loss to Adjusted FFO

Net loss

$(10,550)

$ (7,550)

   Preferred stock dividends

(2,300)

(2,300)

   Real estate depreciation and amortization

36,450

36,450

   Non-controlling interests

(2,600)

(2,600)

   Amortization of lease intangibles

1,000

1,000

   Non-cash straightline lease expense

600

600

Adjusted FFO

$  22,600

$ 25,600

Adjusted FFO per diluted share

$      0.12

$     0.14

Diluted weighted average shares outstanding

181,600

181,600

 

 

Sunstone Hotel Investors, Inc.

Reconciliation of Net Income to Non-GAAP Financial Measures

Guidance for Full Year 2014

(Unaudited and in thousands except per share amounts)

Reconciliation of Net Income to Adjusted EBITDA

Year Ended

December 31, 2014

Low

High

Net income

$   56,650

$   76,650

   Depreciation and amortization

148,000

148,000

   Amortization of lease intangibles

4,000

4,000

   Interest expense

69,500

69,500

   Income tax provision

1,000

1,000

   Non-controlling interests

(11,550)

(11,550)

   Amortization of deferred stock compensation

6,000

6,000

   Non-cash straightline lease expense

2,800

2,800

   Capital lease obligation interest - cash ground rent

(1,400)

(1,400)

Adjusted EBITDA

$ 275,000

$ 295,000

Reconciliation of Net Income to Adjusted FFO

Net income

$   56,650

$   76,650

   Preferred stock dividends

(9,200)

(9,200)

   Real estate depreciation and amortization

146,000

146,000

   Non-controlling interests

(10,000)

(10,000)

   Amortization of lease intangibles

4,000

4,000

   Non-cash straightline lease expense

2,800

2,800

Adjusted FFO

$ 190,250

$ 210,250

Adjusted FFO per diluted share

$       1.04

$       1.15

Diluted weighted average shares outstanding

182,100

182,100

 

 

Sunstone Hotel Investors, Inc.

Comparable Hotel EBITDA and Margins

(Unaudited and in thousands except hotels and rooms)

Three Months Ended December 31, 2013

Three Months Ended December 31, 2012

Actual (1)

Prior Ownership Adjustments (2)

Pro Forma Comparable (3)

Non-Comparable Hotel (4)

Comparable (5)

Actual (6)

Prior Ownership Adjustments (7)

Pro Forma Comparable (3)

Non-Comparable Hotel (4)

Comparable (5)

Number of Hotels

29

29

(1)

28

26

3

29

(1)

28

Number of Rooms

13,744

13,744

(1,053)

12,691

11,639

2,105

13,744

(1,053)

12,691

Hotel EBITDA Margin (8)

28.1%

22.7%

27.8%

23.5%

28.1%

30.3%

20.4%

28.8%

23.1%

29.2%

Hotel EBITDA Margin adjusted for non-current year property tax related adjustments (9)

28.3%

22.7%

27.9%

28.2%

30.2%

28.8%

29.1%

Hotel Revenues

     Room revenue

$                          171,364

$                            11,744

$                          183,108

$                          (13,462)

$                          169,646

$                          160,817

$                            28,269

$                          189,086

$                          (11,605)

$                  177,481

     Food and beverage revenue

57,796

4,544

62,340

(3,468)

58,872

57,798

9,053

66,851

(3,695)

63,156

     Other operating revenue

13,074

704

13,778

(652)

13,126

12,879

2,157

15,036

(774)

14,262

Total Hotel Revenues

242,234

16,992

259,226

(17,582)

241,644

231,494

39,479

270,973

(16,074)

254,899

Hotel Expenses

     Room expense

46,023

4,055

50,078

(4,217)

45,861

40,910

9,668

50,578

(3,768)

46,810

     Food and beverage expense

39,646

3,663

43,309

(2,684)

40,625

39,333

7,733

47,066

(2,639)

44,427

     Other hotel expense

62,109

3,417

65,526

(4,643)

60,883

56,341

9,148

65,489

(3,702)

61,787

     General and administrative expense

26,311

1,992

28,303

(1,904)

26,399

24,826

4,882

29,708

(2,251)

27,457

Total Hotel Expenses

174,089

13,127

187,216

(13,448)

173,768

161,410

31,431

192,841

(12,360)

180,481

Hotel EBITDA

68,145

3,865

72,010

(4,134)

67,876

70,084

8,048

78,132

(3,714)

74,418

Non-current year property tax related adjustments

293

-

293

-

293

(208)

-

(208)

-

(208)

Hotel EBITDA adjusted for non-current year property tax related adjustments

68,438

3,865

72,303

(4,134)

68,169

69,876

8,048

77,924

(3,714)

74,210

Non-hotel operating income

515

-

515

-

515

366

-

366

-

366

Amortization of lease intangibles

(1,028)

-

(1,028)

-

(1,028)

(1,029)

-

(1,029)

-

(1,029)

Amortization of favorable and unfavorable contracts, net

(46)

-

(46)

-

(46)

(113)

-

(113)

-

(113)

Non-cash straightline lease expense

(507)

-

(507)

-

(507)

(694)

-

(694)

-

(694)

Capital lease obligation interest - cash ground rent

351

-

351

-

351

351

-

351

-

351

Non-current year property tax related adjustments

(293)

-

(293)

-

(293)

208

-

208

-

208

Hotel laundry closing costs

-

-

-

-

-

(199)

-

(199)

(199)

Corporate overhead

(6,555)

-

(6,555)

-

(6,555)

(5,430)

-

(5,430)

-

(5,430)

Depreciation and amortization 

(36,235)

(1,824)

(38,059)

2,854

(35,205)

(34,339)

(2,384)

(36,723)

1,849

(34,874)

Operating Income

24,640

2,041

26,681

(1,280)

25,401

28,997

5,664

34,661

(1,865)

32,796

Interest and other income

743

-

743

-

743

142

-

142

-

142

Interest expense 

(18,699)

-

(18,699)

1,347

(17,352)

(18,721)

(1,337)

(20,058)

1,337

(18,721)

Income tax provision

(1,435)

-

(1,435)

-

(1,435)

(1,148)

-

(1,148)

-

(1,148)

Income from discontinued operations

-

-

-

-

-

1,844

-

1,844

-

1,844

Net Income

$                              5,249

$                              2,041

$                              7,290

$                                   67

$                              7,357

$                            11,114

$                              4,327

$                            15,441

$                               (528)

$                    14,913

(1)

Actual represents the Company's ownership results for the 29 hotels held for investment as of December 31, 2013.

(2)

Prior Ownership Adjustments represent prior ownership results for the Hyatt Regency San Francisco acquired on December 2, 2013, along with the Company's pro forma adjustments for depreciation expense.

(3)

Pro Forma Comparable represents the Company's ownership results, prior ownership results and the Company's pro forma adjustments for interest and depreciation expense as applicable for the 29 hotels held for investment as of December 31, 2013.

(4)

Non-Comparable Hotel represents the Company's ownership results and prior ownership results for the Boston Park Plaza acquired on July 2, 2013, along with the Company's actual and pro forma adjustments for interest and depreciation expense.

(5)

Comparable represents the Company's ownership results, prior ownership results and the Company's pro forma adjustments for interest and depreciation expense as applicable for the 28 Comparable Hotels, which include the 29 hotels held for investment as of December 31, 2013, excluding the Boston Park Plaza.

(6)

Actual represents the Company's ownership results for the 26 hotels held for investment as of December 31, 2012.  The room count has been adjusted to include four rooms added by the Hyatt Regency Newport Beach during the second quarter of 2013, as well as one room added by the Renaissance Westchester and two rooms added by the Hyatt Chicago Magnificent Mile during the third quarter of 2013.

(7)

Prior Ownership Adjustments represent prior ownership results for the Hilton New Orleans St. Charles acquired on May 1, 2013, the Boston Park Plaza acquired on July 2, 2013, and the Hyatt Regency San Francisco acquired on December 2, 2013, along with the Company's pro forma adjustments for interest and depreciation expense.

(8)

Hotel EBITDA Margin is calculated as Hotel EBITDA divided by Total Hotel Revenues.

(9)

Hotel EBITDA Margin for the three months ended December 31, 2013 includes the additional expense of $0.3 million related to fees incurred for a successful real estate tax appeal at the Hilton New Orleans St. Charles, the benefit of which will not be recorded until 2014. Hotel EBITDA Margin for the three months ended December 31, 2012 includes the additional benefit of $0.2 million related to prior year property tax credits. Excluding these non-current year property tax items, Comparable Hotel EBITDA margin for the three months ended December 31, 2013 and 2012 would have been 28.2% and 29.1%, respectively.

 

 

Sunstone Hotel Investors, Inc.

Comparable Hotel EBITDA and Margins

(Unaudited and in thousands except hotels and rooms)

Year Ended December 31, 2013

Year Ended December 31, 2012

Actual (1)

Prior Ownership Adjustments (2)

Pro Forma Comparable (3)

Non-Comparable Hotel (4)

Comparable (5)

Actual (6)

Prior Ownership Adjustments (7)

Pro Forma Comparable (3)

Non-Comparable Hotel (4)

Comparable (5)

Number of Hotels

29

29

(1)

28

26

3

29

(1)

28

Number of Rooms

13,744

13,744

(1,053)

12,691

11,639

2,105

13,744

(1,053)

12,691

Hotel EBITDA Margin(8)

29.1%

22.2%

28.3%

26.4%

28.4%

29.2%

21.8%

27.9%

25.8%

28.0%

Hotel EBITDA Margin adjusted for non-current year property tax related and CAM adjustments, net (9)

29.1%

28.3%

28.4%

29.1%

27.8%

28.0%

Hotel Revenues

     Room revenue

$                          653,955

$                            87,027

$                          740,982

$                           (53,079)

$                 687,903

$                          576,146

$                          130,949

$                          707,095

$                          (49,646)

$                          657,449

     Food and beverage revenue

213,346

26,926

240,272

(14,491)

225,781

200,810

35,171

235,981

(13,441)

222,540

     Other operating revenue

49,903

5,426

55,329

(2,927)

52,402

46,134

9,096

55,230

(3,047)

52,183

Total Hotel Revenues

917,204

119,379

1,036,583

(70,497)

966,086

823,090

175,216

998,306

(66,134)

932,172

Hotel Expenses

     Room expense

170,361

27,914

198,275

(16,308)

181,967

147,309

40,931

188,240

(14,724)

173,516

     Food and beverage expense

147,713

23,550

171,263

(10,606)

160,657

139,106

30,253

169,359

(10,026)

159,333

     Other hotel expense

234,089

27,685

261,774

(16,926)

244,848

207,003

45,084

252,087

(15,773)

236,314

     General and administrative expense

98,486

13,727

112,213

(8,021)

104,192

89,480

20,764

110,244

(8,534)

101,710

Total Hotel Expenses

650,649

92,876

743,525

(51,861)

691,664

582,898

137,032

719,930

(49,057)

670,873

Hotel EBITDA

266,555

26,503

293,058

(18,636)

274,422

240,192

38,184

278,376

(17,077)

261,299

Non-current year property tax related and CAM adjustments, net

399

-

399

-

399

(704)

-

(704)

-

(704)

Hotel EBITDA adjusted for non-current year property tax related and CAM adjustments, net

266,954

26,503

293,457

(18,636)

274,821

239,488

38,184

277,672

(17,077)

260,595

Non-hotel operating income

1,873

-

1,873

-

1,873

1,582

-

1,582

-

1,582

Amortization of lease intangibles

(4,112)

-

(4,112)

-

(4,112)

(4,113)

-

(4,113)

-

(4,113)

Amortization of favorable and unfavorable contracts, net

(320)

-

(320)

-

(320)

(206)

-

(206)

-

(206)

Non-cash straightline lease expense

(2,055)

-

(2,055)

-

(2,055)

(2,777)

-

(2,777)

-

(2,777)

Capital lease obligation interest - cash ground rent

1,404

-

1,404

-

1,404

819

585

1,404

-

1,404

Hotel laundry closing costs

-

-

-

-

-

(623)

-

(623)

-

(623)

Management company transition costs

-

-

-

-

-

(641)

-

(641)

-

(641)

Non-current year property tax related and CAM adjustments, net

(399)

-

(399)

-

(399)

704

-

704

-

704

Corporate overhead

(26,671)

-

(26,671)

-

(26,671)

(24,316)

-

(24,316)

-

(24,316)

Depreciation and amortization 

(137,476)

(14,444)

(151,920)

7,396

(144,524)

(130,907)

(24,585)

(155,492)

7,396

(148,096)

Operating Income

99,198

12,059

111,257

(11,240)

100,017

79,010

14,184

93,194

(9,681)

83,513

Interest and other income

2,821

-

2,821

-

2,821

297

-

297

-

297

Interest expense 

(72,239)

(2,647)

(74,886)

5,317

(69,569)

(76,821)

(4,569)

(81,390)

5,317

(76,073)

Loss on extinguishment of debt

(44)

-

(44)

-

(44)

(191)

-

(191)

-

(191)

Income tax provision

(8,145)

-

(8,145)

-

(8,145)

(1,148)

-

(1,148)

-

(1,148)

Income from discontinued operations

48,410

-

48,410

-

48,410

48,410

-

48,410

-

48,410

Net Income

$                            70,001

$                              9,412

$                            79,413

$                             (5,923)

$                   73,490

$                            49,557

$                              9,615

$                            59,172

$                            (4,364)

$                            54,808

(1)

Actual represents the Company's ownership results for the 29 hotels held for investment as of December 31, 2013.

(2)

Prior Ownership Adjustments represent prior ownership results for the Hilton New Orleans St. Charles acquired on May 1, 2013, the Boston Park Plaza acquired on July 2, 2013, and the Hyatt Regency San Francisco acquired on December 2, 2013, along with the Company's pro forma adjustments for interest and depreciation expense.

(3)

Pro Forma Comparable represents the Company's ownership results, prior ownership results and the Company's pro forma adjustments for interest and depreciation expense as applicable for the 29 hotels held for investment as of December 31, 2013.

(4)

Non-Comparable Hotel represents the Company's ownership results and prior ownership results for the Boston Park Plaza acquired on July 2, 2013, along with the Company's actual and pro forma adjustments for interest and depreciation expense.

(5)

Comparable represents the Company's ownership results, prior ownership results and the Company's pro forma adjustments for interest and depreciation expense as applicable for the 28 Comparable Hotels, which include the 29 hotels held for investment as of December 31, 2013, excluding the Boston Park Plaza.

(6)

Actual represents the Company's ownership results for the 26 hotels held for investment as of December 31, 2012.  The room count has been adjusted to include four rooms added by the Hyatt Regency Newport Beach during the second quarter of 2013, as well as one room added by the Renaissance Westchester and two rooms added by the Hyatt Chicago Magnificent Mile during the third quarter of 2013.

(7)

Prior Ownership Adjustments represent prior ownership results for the Hyatt Chicago Magnificent Mile acquired on June 4, 2012, the Hilton Garden Inn Chicago Downtown/Magnificent Mile acquired on July 19, 2012, the Hilton New Orleans St. Charles acquired on May 1, 2013, the Boston Park Plaza acquired on July 2, 2013, and the Hyatt Regency San Francisco acquired on December 2, 2013, along with the Company's pro forma adjustments for capital lease obligation interest, mortgage interest and depreciation expense.

(8)

Hotel EBITDA Margin is calculated as Hotel EBITDA divided by Total Hotel Revenues.

(9)

Hotel EBITDA Margin for the year ended December 31, 2013 includes the additional expense of $0.1 million in prior year property tax assessments and the additional expense of $0.3 million related to fees incurred for a successful real estate tax appeal at the Hilton New Orleans St. Charles, the benefit of which will not be recorded until 2014. Hotel EBITDA Margin for the year ended December 31, 2012 includes the additional benefit of $0.7 million in prior year property tax credits. Excluding these non-current year property tax items, Comparable Hotel EBITDA margin for the years ended December 31, 2013 and 2012 would have been 28.4% and 28.0%, respectively.

 

SOURCE Sunstone Hotel Investors, Inc.



RELATED LINKS

http://www.sunstonehotels.com