ALISO VIEJO, Calif., Aug. 16 /PRNewswire-FirstCall/ -- Sunstone Hotel Investors, Inc. (the "Company") (NYSE: SHO) today announced that it was the successful bidder at a foreclosure auction and acquired the fee-simple interest in the Royal Palm (the "Hotel") located on Collins Avenue in Miami Beach, Florida. The gross purchase price for the Hotel was approximately $126.1 million before transaction costs. Prior to the auction, the Company purchased a portion of the outstanding debt at a discount to par resulting in an economic gross purchase price of approximately $117.0 million or approximately $286,000 per key.
To achieve optimal positioning, the Company has initiated a request for proposals (“RFP”) process to select the appropriate manager to capitalize on the unique attributes and superior location of the Hotel. Upon completion of the RFP, the Company plans to commence a comprehensive renovation program with the aim of transforming the Hotel into one of the premier destinations on South Beach.
Additional material transaction components:
- Irreplaceable Location and Asset: Located on a 1.9-acre fee-simple beachfront lot in the heart of South Beach, the 409-room Royal Palm Hotel, built in 2002, is an irreplaceable asset in one of the world's most desirable tourist markets.
- Strong Growth Profile: As of June 2010, Miami has recorded the 4th strongest RevPAR of the Top 25 markets (according to Smith Travel Research), with 11.0% growth in RevPAR YTD, driven by occupancy and rate growth of 8.1% and 2.8%, respectively.
- Unencumbered of Flag and Manager: The Company has initiated a RFP targeted at selecting the appropriate manager for the Hotel. Sunstone has the opportunity to diversify brands in its portfolio and develop relationships with other management companies while repositioning the Hotel.
- Value-Add Opportunities: Sunstone plans to immediately commence a comprehensive renovation and redevelopment program that is scheduled to require approximately two years to complete. The renovation will entail replacing or refreshing virtually every aspect of the guest experience, including all furniture, fixtures, equipment, and operating supplies. Additionally, the F&B spaces will be expanded and completely redeveloped under this plan.
The transaction is expected to close in the third quarter.
Art Buser, President and Chief Executive Officer, stated, "We seek unique opportunities to acquire exceptionally well-located hotel real estate at discount valuations. Additionally we seek to acquire assets where we may create meaningful value via comprehensive renovation and repositioning programs. This is the right time in the cycle to undertake deep turnarounds as redevelopment costs are low and displacement will be minimized. While the 409-key Royal Palm may not be a typical REIT acquisition, it fits squarely within our target criteria - excellent real estate, well located within a perennially strong market, with significant upside potential through a full renovation and repositioning program."
About Sunstone Hotel Investors, Inc.
Sunstone Hotel Investors, Inc. ("Sunstone") is a lodging real estate investment trust ("REIT") that owns 30 hotels comprised of 11,313 rooms. Sunstone's hotels are primarily in the upper upscale segment and are generally operated under nationally recognized brands, such as Marriott, Hilton, Hyatt, Fairmont and Starwood. For further information, please visit Sunstone's website at www.sunstonehotels.com. Upon completion of the announced acquisition, the Company will own 31 hotels comprised of 11,722 rooms.
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 August 16, 2010, 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.
For Additional Information:
Senior Vice President – Corporate Finance
Sunstone Hotel Investors, Inc.
SOURCE Sunstone Hotel Investors, Inc.