Increases cash to $240.0 million, including restricted cash
Executes on broad finance plan aimed at improving liquidity and
reducing leverage Sells three non-core assets for gross proceeds of
$63.8 million SAN CLEMENTE, Calif., Aug. 5 /PRNewswire-FirstCall/
-- Sunstone Hotel Investors, Inc. (the "Company") (NYSE:SHO) today
announced results for the second quarter ended June 30, 2009.
Second Quarter 2009 Operational Results: -- Total revenue was
$186.8 million. -- Total RevPAR was $101.03. -- Loss attributable
to common stockholders was $135.4 million. -- Loss attributable to
common stockholders per diluted share was $2.23. -- Adjusted EBITDA
was $44.8 million. -- Adjusted FFO available to common stockholders
was $13.7 million. -- Adjusted FFO available to common stockholders
per diluted share was $0.22. -- Hotel operating margin was 25.7%.
Art Buser, President and Chief Executive Officer, stated, "As
expected, we faced continuing softness in demand for lodging in the
second quarter. In this challenging operating environment, our
focus is on maximizing the profitability of our portfolio and
enhancing our liquidity and financial flexibility. With these goals
in mind, we have executed on a number of finance transactions,
divested several non-core hotels, and continued to direct our asset
management efforts toward lasting efficiency measures, rather than
short-term cost cuts." SELECTED FINANCIAL DATA ($ in millions,
except RevPAR and per share amounts) (unaudited) Three Months Ended
June 30, Six Months Ended June 30, 2009 2008 % Change 2009 2008 %
Change ---- ---- -------- ---- ---- -------- Total Revenue $186.8
$241.9 (22.8)% $368.4 $455.1 (19.1)% Total RevPAR (1) $101.03
$132.28 (23.6)% $99.36 $123.66 (19.7)% Income available (loss
attributable) to common stockholders $(135.4) $59.7 (326.8)%
$(134.5) $56.3 (338.9)% Income available (loss attributable) to
common stockholders per diluted share $(2.23) $1.02 (318.6)%
$(2.38) $0.96 (347.9)% EBITDA $(73.6) $127.3 (157.8)% $(10.1)
$188.7 (105.4)% Adjusted EBITDA $44.8 $85.2 (47.4)% $83.7 $146.6
(42.9)% FFO available to common stockholders $(92.0) $53.3 (272.6)%
$(60.7) $82.6 (173.5)% Adjusted FFO available to common
stockholders $13.7 $53.3 (74.3)% $20.7 $82.6 (74.9)% FFO available
to common stockholders per diluted share (2) $(1.51) $0.85 (277.6)%
$(1.07) $1.32 (181.1)% Adjusted FFO available to common
stockholders per diluted share (2) $0.22 $0.85 (74.1)% $0.37 $1.32
(72.0)% Hotel operating margin (1) 25.7% 32.1% (640) bps 24.7%
29.4% (470) bps (1) Includes the 39 hotels we owned as of June 30,
2009, excluding the Hyatt Suites Atlanta Northwest reclassified as
"Held for Sale," and the W San Diego Hotel reclassified as
"Operations Held for Non-Sale Disposition." (2) Reflects Series C
convertible preferred stock on an "as-converted" basis if such
treatment is dilutive. Second quarter operating results were
negatively impacted by $133.8 million of one-time and other items,
which included (i) $131.9 million of goodwill and other impairment
losses; (ii) $0.8 million of severance expense related to a
corporate reorganization; and (iii) $1.1 million of hotel operating
expense, comprised of a $0.9 million charge for supplemental tax
assessments for tax years dating from 2004 through 2008, and $0.2
million of severance expense related to property level staffing
reductions. Adjusted EBITDA and Adjusted FFO available to common
stockholders were only affected by items (ii) and (iii) above.
Contemporaneously with this press release, the Company has filed
with the Securities and Exchange Commission its Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2009. Disclosure
regarding the non-GAAP financial measures in this release is
included on pages 4 and 5. Disclosure regarding the Hotel Operating
Profit Margin is included on page 5 of this release.
Reconciliations of non-GAAP financial measures to the most
comparable GAAP measure for each of the periods presented are
included on pages 9 and 10 of this release. Transactions Sales of
Hotel Properties. In May 2009, the Company sold the 274-room
Marriott Napa Valley for gross proceeds of $36.0 million. In June
2009, the Company sold the 292-room Marriott Riverside for gross
proceeds of $19.3 million. On July 31, 2009, the Company sold the
202-room Hyatt Suites Atlanta Northwest for gross proceeds of $8.5
million, which equates to 22.7x projected 2009 EBITDA. The Company
retained the proceeds from these sales as additional cash.
Exchangeable Senior Notes Tender Offer. In May 2009, pursuant to a
previously announced tender offer, the Company purchased a total of
$123.5 million in principal amount of the 4.60% exchangeable senior
notes due 2027 (the "Senior Notes") for $89.0 million, including
$2.0 million in interest, $1.9 million in related consents and $0.6
million in fees and costs. The repurchased Senior Notes were
cancelled. In addition, the Company paid $1.2 million, including
$0.3 million in fees and costs, for consents related to
non-tendered Senior Notes. The Company wrote off $2.7 million in
deferred financing fees and $7.3 million of the Senior Note
discount, and recognized a net gain of $26.6 million on this early
extinguishment of debt. The Company initially used available cash
to fund this repurchase of the Senior Notes, and subsequently
replaced such cash with proceeds from its equity offering completed
in May 2009. Equity Offering. In May 2009, the Company issued
20,700,000 shares of its common stock, including the underwriters'
over-allotment of 2,700,000 shares, for net proceeds of $98.7
million. The Company used the net proceeds from this equity
offering in part to replace cash used to repurchase its Senior
Notes in May 2009, and to bolster its liquidity position. Credit
Facility Restructure. In June 2009, the Company amended its credit
facility (the "amended credit facility"), reducing the facility's
size from $200.0 million to $85.0 million. In addition, the
amendment reduced the facility's minimum fixed charge coverage
covenant from 1.50:1.00 to 1.00:1.00, with added flexibility to
drop to 0.90:1.00 for up to four quarters, and eliminated the
facility's 65% maximum total leverage covenant, replacing it with a
9.50:1.00 maximum net debt to EBITDA covenant, which may be
increased to 10.50:1.00 for up to four quarters. The borrowing base
collateral was reduced from an equity pledge on 10 hotels to
secured mortgages on five hotels. The amended credit facility, has
an interest rate based on grid pricing ranging from 375 - 525 basis
points over LIBOR, and matures in 2012, assuming the exercise of a
one-year extension option. Secured Finance Initiatives. In June
2009, the Company ceased the subsidization of debt service on the
$65.0 million non-recourse mortgage secured by its W San Diego
hotel, which resulted in a default under the mortgage. The Company
does not expect further negotiation with the special servicer, and
the Company is prepared to convey the hotel to the lender in lieu
of repayment of the debt. In conjunction with this expected
conveyance, the Company has reclassified the assets, liabilities
and results of operations of the W San Diego to "operations held
for non-sale disposition" on its balance sheets, statements of
operations and statements of cash flows. The W San Diego is
expected to generate approximately $1.4 million of Hotel EBITDA in
2009, and 2009 scheduled debt service on the hotel's mortgage is
$4.0 million. Subsequent to the end of the second quarter, the
Company ceased the subsidization of debt service on the $29.5
million non-recourse mortgage for its Renaissance Westchester
hotel. The Renaissance Westchester is expected to generate
approximately $1.5 million of Hotel EBITDA in 2009, and 2009
scheduled debt service on the hotel's mortgage is $2.1 million. The
Company has engaged lender's representatives for several of the
Company's non-recourse loans, including the Westchester loan, in an
effort to negotiate certain modifications to the loans rather than
convey the subject hotels to the lenders, however no assurances can
be given that such negotiations will be successful. Balance
Sheet/Liquidity Update Ken Cruse, Chief Financial Officer, stated,
"During the second quarter, we meaningfully improved our capital
structure through a series of successful transactions, and as a
result, we believe we maintain adequate liquidity and financial
flexibility to emerge from the current downturn in a position of
strength. We recognize that our ability to maintain continued
access to the credit and equity markets is largely due to the
strength of our lender and investor relationships." As of June 30,
2009, the Company had approximately $240.0 million of cash and cash
equivalents, including restricted cash of $44.9 million. As of June
30, 2009, the Company had no outstanding indebtedness under its
$85.0 million amended credit facility, and had $3.5 million in
outstanding irrevocable letters of credit backed by the credit
facility. The Company continues to maintain a higher than
historical cash balance in light of the ongoing economic downturn.
On June 30, 2009, excluding the W San Diego, total assets were $2.5
billion, including $2.2 billion of net investments in hotel
properties, total debt was $1.5 billion and stockholders' equity
was $0.9 billion. Financial Covenants The Company is subject to
compliance with various covenants under both the amended credit
facility and the terms of its outstanding Series C preferred stock.
If the Company fails to meet certain of the amended credit
facility's covenants (as described above), a default may occur,
which may result in a reduction in, or the complete elimination of,
funds available under the amended credit facility. If the Company
fails to meet certain financial covenants for four consecutive
quarters with respect to the Company's Series C preferred stock, a
financial ratio violation will occur. If a financial ratio
violation occurs, among other things, the Company would be
restricted from paying dividends on its common stock, and may incur
a 50 basis point per quarter dividend increase on the Series C
preferred stock. Additionally, the Series C Preferred Stockholders
would gain the right to appoint one board member. While a financial
ratio violation does not currently exist, unless operations improve
from current levels, the Company believes it may incur a financial
ratio violation with respect to its Series C preferred stock during
the second half of 2010. Goodwill and Other Impairment Losses
During the second quarter of 2009, in light of the continuing
decline in the economic environment, the Company determined that an
intra-year impairment analysis should be performed as of June 30,
2009. In conjunction with this impairment evaluation and other
analysis, the Company incurred a total of $131.9 million of
goodwill and impairment losses. The goodwill and impairment losses
included: (i) the write off of $1.1 million of goodwill associated
with three hotels, including the Marriott Salt Lake City ($0.5
million), the Marriott Rochester Minnesota ($0.4 million), and the
Holiday Inn Express San Diego ($0.2 million); (ii) a $64.5 million
impairment loss on three hotels, including the Renaissance
Westchester ($30.2 million), the Marriott Del Mar ($25.4 million)
and the Marriott Ontario ($8.9 million); (iii) $64.9 million of
impairment losses related to discontinued operations or operations
held for non-sale disposition, including the Hyatt Suites Atlanta
Northwest ($4.9 million) and the W San Diego ($60.0 million),
respectively; and (iv) a $1.4 million impairment loss related to
the write-off of costs associated with a potential timeshare
development in Newport Beach, California. Corporate Overhead
Expenses During the second quarter, the Company made certain
changes to its corporate organizational structure, and as a result,
the Company's corporate workforce was reduced by approximately 40%.
As a result of the changes, the Company incurred one-time charges
of approximately $0.8 million in its second quarter. The changes
are expected to result in approximately $2.0 million to $3.0
million of annual reductions to corporate overhead expense. Hotel
Renovations During the second quarter of 2009, the Company invested
$12.3 million in capital projects. Dividend Update On August 5,
2009, the Company's board of directors declared a cash dividend of
$0.50 per share payable to its Series A 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 October 15, 2009 to
stockholders of record on September 30, 2009. No dividend was
declared on the Company's common stock. The Company intends to make
dividends on its common stock in amounts equivalent to 100% of its
annual taxable income. The level of any future dividends will be
determined by the Company's board of directors after considering
taxable income projections, expected capital requirements, and
risks affecting the Company's business. In light of the Company's
intent to distribute 100% of its annual taxable income, future
dividends may be reduced from past levels, or eliminated entirely.
Dividends may be made in the form of cash or a combination of cash
and stock consistent with Internal Revenue Code regulations.
Earnings Call The Company will host a conference call to discuss
second quarter results on August 5, 2009, at 2:00 p.m. PDT. A live
web cast of the call will be available via the Investor Relations
section of the Company's website at http://www.sunstonehotels.com/.
Alternatively, investors may dial 1-888-549-7880 (for domestic
callers) or 1-480-629-9869 (for international callers) with
passcode #4125846. 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 the date hereof, has interests in 41 hotels comprised
of 14,264 rooms primarily in the upper-upscale segment operated
under nationally recognized brands, such as Marriott, Hyatt,
Fairmont, Hilton, and Starwood. For further information, please
visit the Company's website at http://www.sunstonehotels.com/. 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 5, 2009, 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
http://www.sunstonehotels.com/ and through the SEC's Electronic
Data Gathering Analysis and Retrieval System ("EDGAR") at
http://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: (1)
Earnings Before Interest Expense, Taxes, Depreciation and
Amortization, or EBITDA; (2) Adjusted EBITDA (as defined below);
(3) Funds From Operations, or FFO; (4) Adjusted FFO (as defined
below); and (5) hotel operating income and hotel operating profit
margin for the purpose of our operating margins. EBITDA represents
income available to common stockholders excluding: (1) preferred
stock dividends; (2) amortization of deferred stock compensation;
(3) interest expense (including prepayment penalties, if any); (4)
provision for income taxes, including income taxes applicable to
sale of assets; and (5) depreciation and amortization. In addition,
we have presented Adjusted EBITDA, which excludes: (1) the impact
of any gain or loss from asset sales; (2) impairment charges; and
(3) 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 preferred stock dividends) 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 income available to common
stockholders to EBITDA and Adjusted EBITDA is set forth on page 9.
A reconciliation and the components of hotel operating income and
hotel operating profit margin are set forth on page 10. We believe
hotel operating income and hotel operating profit 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 gains and losses from
sales of property, plus real estate-related depreciation and
amortization (excluding amortization of deferred financing costs),
and after adjustment for unconsolidated partnerships and joint
ventures. We also present Adjusted FFO, which excludes prepayment
penalties, written-off deferred financing costs, impairment losses
and 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 income
available to common stockholders to FFO and Adjusted FFO is set
forth on page 9. We caution investors that amounts presented in
accordance with our definitions of EBITDA, Adjusted EBITDA, FFO,
Adjusted FFO, hotel operating income and hotel operating profit
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, hotel operating income and hotel operating profit 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, hotel operating income
and hotel operating profit 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, hotel
operating income and hotel operating profit 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. Hotel Operating Margin
Information The revenue and expense items associated with the
Company's two commercial laundry facilities and the one hotel
property held for non-sale disposition, any guaranty payments, and
other miscellaneous non-hotel items have been shown below the
adjusted hotel EBITDA line in presenting hotel operating margins.
Management believes the calculation of adjusted hotel EBITDA
results in a more accurate presentation of hotel operating margins
of the Company's portfolio of hotels. See page 10 for a
reconciliation of adjusted hotel EBITDA to the comparable GAAP
measure. Hyatt Suites Atlanta Northwest Hyatt Suites Atlanta
Northwest Reconciliation of Net Income Reconciliation of Net Income
to EBITDA - Full Year 2009 to EBITDA - Full Year 2009 Forecast -
Low Forecast - High (in millions) (in millions) Net Income ($0.6)
Net Income ($0.5) Depreciation expense $0.9 Depreciation expense
$0.9 ---- ---- EBITDA $0.3 EBITDA $0.4 W San Diego Hotel W San
Diego Hotel Reconciliation of Net Income Reconciliation of Net
Income to EBITDA - Full Year 2009 to EBITDA - Full Year 2009
Forecast - Low Forecast - High (in millions) (in millions) Net
Income ($6.9) Net Income ($6.5) Interest Expense $4.0 Interest
Expense $4.0 Depreciation expense $4.0 Depreciation expense $4.0
---- ---- EBITDA $1.1 EBITDA $1.5 Renaissance Westchester
Renaissance Westchester Reconciliation of Net Income Reconciliation
of Net Income to EBITDA - Full Year 2009 to EBITDA - Full Year 2009
Forecast - Low Forecast - High (in millions) (in millions) Net
Income ($2.5) Net Income ($2.1) Interest Expense $1.5 Interest
Expense $1.5 Depreciation expense $2.3 Depreciation expense $2.3
---- ---- EBITDA $1.3 EBITDA $1.7 **Tables to Follow*** For
Additional Information: Bryan Giglia Vice President - Corporate
Finance Sunstone Hotel Investors, Inc. (949) 369-4236 Sunstone
Hotel Investors, Inc. Consolidated Balance Sheets (In thousands,
except share data) June 30, December 31, 2009 2008 ---- ----
(unaudited) Assets Current assets: Cash and cash equivalents
$195,073 $176,898 Restricted cash 44,925 40,536 Accounts
receivable, net 29,475 34,198 Due from affiliates 92 109
Inventories 2,553 2,781 Prepaid expenses 6,436 7,245 Investment in
hotel properties of discontinued operations, net 7,745 78,646
Investment in hotel property of operations held for non-sale
disposition, net 29,303 - Other current assets of discontinued
operations, net 870 2,000 Other current assets of operations held
for non-sale disposition, net 3,620 2,790 ----- ----- Total current
assets 320,092 345,203 Investment in hotel properties, net
2,190,619 2,282,963 Investment in hotel property of operations held
for non-sale disposition, net - 91,202 Other real estate, net
14,176 14,640 Investments in unconsolidated joint ventures 26,693
28,770 Deferred financing costs, net 9,153 11,291 Goodwill 8,659
13,404 Other assets, net 12,833 18,138 ------ ------ Total assets
$2,582,225 $2,805,611 ========== ========== Liabilities and
Stockholders' Equity Current liabilities: Accounts payable and
accrued expenses $20,936 $17,104 Accrued payroll and employee
benefits 7,382 7,472 Due to Interstate SHP 14,876 16,088 Dividends
payable 5,138 12,499 Other current liabilities 27,722 30,194
Current portion of notes payable 18,668 13,002 Current portion of
note payable of operations held for non-sale disposition 65,000 -
Other current liabilities of discontinued operations 564 2,980
Other current liabilities of operations held for non-sale
disposition 2,504 2,120 ----- ----- Total current liabilities
162,790 101,459 Notes payable, less current portion 1,431,149
1,618,256 Note payable, less current portion of operations held for
non-sale disposition - 65,000 Other liabilities 6,562 6,388 -----
----- Total liabilities 1,600,501 1,791,103 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 June 30, 2009 and December
31, 2008, liquidation preference of $24.375 per share 99,796 99,696
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 June 30, 2009 and
December 31, 2008, stated at liquidation preference of $25.00 per
share 176,250 176,250 Common stock, $0.01 par value, 500,000,000
shares authorized, 73,841,451 shares issued and outstanding at June
30, 2009 and 47,864,654 shares issued and outstanding at December
31, 2008 738 479 Additional paid in capital 959,157 829,274
Retained earnings 136,964 260,659 Cumulative dividends (387,253)
(347,922) Accumulated other comprehensive loss (3,928) (3,928)
------ ------ Total stockholders' equity 881,928 914,812 -------
------- Total liabilities and stockholders' equity $2,582,225
$2,805,611 ========== ========== Sunstone Hotel Investors, Inc.
Unaudited Consolidated Statements of Operations (In thousands,
except per share data) Three Months Ended Six Months Ended June 30,
June 30, ------------------ ---------------- 2009 2008 2009 2008
---- ---- ---- ---- Revenues Room $120,325 $157,589 $235,898
$294,272 Food and beverage 48,173 62,882 97,046 118,838 Other
operating 14,303 14,736 27,772 29,720 Total revenues of operations
held for non-sale disposition 4,013 6,644 7,703 12,247 ----- -----
----- ------ Total revenues 186,814 241,851 368,419 455,077 -------
------- ------- ------- Operating expenses Room 28,614 33,038
55,760 63,807 Food and beverage 34,871 42,984 69,793 84,566 Other
operating 7,066 8,159 14,779 16,502 Advertising and promotion
10,841 11,975 22,136 23,776 Repairs and maintenance 7,849 8,485
15,796 16,881 Utilities 6,995 8,188 15,179 16,532 Franchise costs
6,759 8,788 13,081 15,785 Property tax, ground lease and insurance
12,784 12,818 24,127 25,704 Property general and administrative
21,129 25,472 42,421 49,932 Corporate overhead 4,849 5,244 10,608
11,929 Depreciation and amortization 27,377 26,602 54,492 53,932
Total operating expenses of operations held for non-sale
disposition 4,660 5,786 9,350 11,512 Goodwill and other impairment
losses 66,977 - 70,693 - Impairment loss of operations held for
non-sale disposition 60,046 - 60,046 - ------ --- ------ --- Total
operating expenses 300,817 197,539 478,261 390,858 ------- -------
------- ------- Operating income (loss) (114,003) 44,312 (109,842)
64,219 Equity in net losses of unconsolidated joint ventures (584)
(56) (2,101) (1,522) Interest and other income 254 1,101 876 1,679
Interest expense (23,116) (24,429) (46,748) (48,761) Interest
expense of operations held for non-sale disposition (1,011) (1,012)
(2,012) (2,024) Gain on extinguishment of debt 26,559 - 54,579 -
------ --- ------ --- Income (loss) from continuing operations
(111,901) 19,916 (105,248) 13,591 Income (loss) from discontinued
operations (18,304) 48,439 (18,447) 54,957 ------- ------ -------
------ Net income (loss) (130,205) 68,355 (123,695) 68,548
Dividends paid on unvested restricted stock compensation - (224)
(447) (463) Preferred stock dividends and accretion (5,188) (5,232)
(10,375) (10,464) Undistributed income allocated to unvested
restricted stock compensation - (433) - (172) Undistributed income
allocated to Series C preferred stock - (2,772) - (1,101) ---
------ --- ------ Income available (loss attributable) to common
stockholders $(135,393) $59,694 $(134,517) $56,348 =========
======= ========= ======= Basic per share amounts: Income (loss)
from continuing operations available (attributable) to common
stockholders $(1.92) $0.19 $(2.05) $0.02 Income (loss) from
discontinued operations (0.31) 0.84 (0.33) 0.94 ----- ---- -----
---- Basic income available (loss attributable) to common
stockholders per common share $(2.23) $1.03 $(2.38) $0.96 ======
===== ====== ===== Diluted per share amounts: Income (loss) from
continuing operations available (attributable) to common
stockholders $(1.92) $0.19 $(2.05) $0.02 Income (loss) from
discontinued operations (0.31) 0.83 (0.33) 0.94 ----- ---- -----
---- Diluted income available (loss attributable) to common
stockholders per common share $(2.23) $1.02 $(2.38) $0.96 ======
===== ====== ===== Weighted average common shares outstanding:
Basic 60,845 58,186 56,549 58,452 ====== ====== ====== ======
Diluted 60,845 58,276 56,549 58,546 ====== ====== ====== ======
Dividends declared per common share $- $0.35 $- $0.70 === ===== ===
===== Sunstone Hotel Investors, Inc. Reconciliation of Income
Available (Loss Attributable) to Common Stockholders to Non-GAAP
Financial Measures (Unaudited and in thousands except per share
amounts) Reconciliation of Income Available (Loss Attributable) to
Common Stockholders to EBITDA and Adjusted EBITDA Three Months
Ended Six Months Ended June 30, June 30, -------- -------- 2009
2008 2009 2008 ---- ---- ---- ---- Income available (loss
attributable) to common stockholders $(135,393) $59,694 $(134,517)
$56,348 Dividends paid on unvested restricted stock compensation -
224 447 463 Series A and C preferred stock dividends 5,188 5,232
10,375 10,464 Undistributed income allocated to unvested restricted
stock compensation - 433 - 172 Undistributed income allocated to
Series C preferred stock - 2,772 - 1,101 Amortization of deferred
stock compensation 1,220 1,089 2,348 2,138 Continuing operations:
Depreciation and amortization 27,377 26,602 54,492 53,932 Interest
expense 21,676 23,150 44,210 46,203 Amortization of deferred
financing fees 501 416 915 833 Write-off of deferred financing fees
284 - 284 - Non-cash interest related to discount on Senior Notes
655 863 1,339 1,725 Unconsolidated joint ventures: Depreciation and
amortization 1,282 1,263 2,554 2,537 Interest expense 663 1,236
1,348 2,757 Amortization of deferred financing fees 46 327 92 725
Amortization of deferred stock compensation 11 64 16 64 Operations
held for non-sale disposition: Depreciation and amortization 1,011
960 2,020 1,914 Interest expense 1,009 1,009 2,007 2,019
Amortization of deferred financing fees 2 3 5 5 Discontinued
operations: Depreciation and amortization 874 2,010 1,964 5,301
------- ------- ------- ------- EBITDA (73,594) 127,347 (10,101)
188,701 ------- ------- ------- ------- (Gain) loss on sale of
assets 13,035 (42,108) 12,716 (42,108) Gain on extinguishment of
debt (26,559) - (54,579) - Impairment loss - continuing operations
66,977 - 70,693 - Impairment loss - operations held for non-sale
disposition 60,046 - 60,046 - Impairment loss - discontinued
operations 4,918 - 4,918 - ----- --- ----- --- 118,417 (42,108)
93,794 (42,108) ------- ------- ------ ------- Adjusted EBITDA
$44,823 $85,239 $83,693 $146,593 ======= ======= ======= ========
Reconciliation of Income Available (Loss Attributable) to Common
Stockholders to FFO and Adjusted FFO Income available (loss
attributable) to common stockholders $(135,393) $59,694 $(134,517)
$56,348 Dividends paid on unvested restricted stock compensation -
224 447 463 Series C preferred stock dividends - 1,707 - 3,414
Undistributed income allocated to unvested restricted stock
compensation - 433 - 172 Undistributed income allocated to Series C
preferred stock - 2,772 - 1,101 Real estate depreciation and
amortization - continuing operations 27,223 26,327 54,175 53,484
Real estate depreciation and amortization - operations held for
non-sale disposition 1,011 960 2,020 1,914 Real estate depreciation
and amortization - unconsolidated joint ventures 1,264 1,251 2,518
2,525 Real estate depreciation and amortization - discontinued
operations 874 2,010 1,964 5,301 (Gain) loss on sale of assets
13,035 (42,108) 12,716 (42,108) ------ ------- ------ ------- FFO
available to common stockholders (91,986) 53,270 (60,677) 82,614
------- ------ ------- ------ Continuing operations: Write-off of
deferred financing fees 284 - 284 - Gain on extinguishment of debt
(26,559) - (54,579) - Impairment loss - continuing operations
66,977 - 70,693 - Impairment loss - operations held for non-sale
disposition 60,046 - 60,046 - Impairment loss - discontinued
operations 4,918 - 4,918 - ----- --- ----- --- 105,666 - 81,362 -
------- --- ------ --- Adjusted FFO available to common
stockholders $13,680 $53,270 $20,685 $82,614 ======= =======
======= ======= FFO available to common stockholders per diluted
share $(1.51) $0.85 $(1.07) $1.32 ====== ===== ====== =====
Adjusted FFO available to common stockholders per diluted share
$0.22 $0.85 $0.37 $1.32 ===== ===== ===== ===== Diluted weighted
average shares outstanding before adjustments for Series C 60,845
58,276 56,549 58,546 Shares associated with Series C preferred
stock - 4,103 - 4,103 Diluted weighted average shares outstanding
(1) 60,845 62,379 56,549 62,649 ====== ====== ====== ====== 2008
restated due to stock dividend (2): FFO available to common
stockholders per diluted share $0.79 $1.22 ===== ===== Adjusted FFO
available to common stockholders per diluted share $0.79 $1.22
===== ===== Diluted weighted average shares outstanding 67,823
67,705 ====== ====== (1) Diluted weighted average shares
outstanding includes the Series C convertible preferred stock on an
"as-converted" basis if such treatment is dilutive. (2) Diluted
weighted average common shares and per share FFO and Adjusted FFO
for the three and six months ended June 30, 2008 have been
retroactively adjusted for the effect of shares of common stock
issued pursuant to the stock dividend paid in January 2009 on an
"as-converted" basis for the Series C convertible preferred stock.
Sunstone Hotel Investors, Inc. Hotel Operating Margins (Unaudited
and in thousands except hotels and rooms) Three Months Ended Six
Months Ended June 30, June 30, ------------------ ----------------
2009 (1) 2008 (1) 2009 (1) 2008 (1) -------- -------- --------
-------- Number of Hotels 39 39 39 39 Number of Rooms 13,546 13,546
13,546 13,546 ---- ---- ---- ---- Hotel operating margin (2) 25.7%
32.1% 24.7% 29.4% ==== ==== ==== ==== Hotel Revenues Room revenue
$120,325 $157,589 $235,898 $294,272 Food and beverage revenue
48,173 62,882 97,046 118,838 Other operating revenue 10,440 10,863
19,939 21,906 ------ ------ ------ ------ Total Hotel Revenues
178,938 231,334 352,883 435,016 Hotel Expenses Room expense 28,854
33,286 56,213 64,288 Food and beverage expense 34,882 42,996 69,815
84,591 Other hotel expense 48,465 55,724 98,095 109,227 General and
administrative expense 20,685 25,024 41,536 49,056 ------ ------
------ ------ Total Hotel Expenses 132,886 157,030 265,659 307,162
Adjusted Hotel EBITDA 46,052 74,304 87,224 127,854 W San Diego
Hotel: Total revenues of operations held for non-sale disposition
4,013 6,644 7,703 12,247 Total operating expenses of operations
held for non-sale disposition (4,660) (5,786) (9,350) (11,512)
Impairment loss of operations held for non-sale disposition
(60,046) - (60,046) - Non-hotel operating income 715 527 1,294
1,022 Prior year property tax supplementals and credits, net (874)
469 (874) 469 Corporate overhead (4,849) (5,244) (10,608) (11,929)
Depreciation and amortization (27,377) (26,602) (54,492) (53,932)
Goodwill and other impairment losses (66,977) - (70,693) - -------
--- ------- --- Operating Income (Loss) (114,003) 44,312 (109,842)
64,219 Equity in net losses of unconsolidated joint ventures (584)
(56) (2,101) (1,522) Interest and other income 254 1,101 876 1,679
Interest expense (23,116) (24,429) (46,748) (48,761) Interest
expense of hotel properties to be disposed of other than by sale
(1,011) (1,012) (2,012) (2,024) Gain on extinguishment of debt
26,559 - 54,579 - Income (loss) from discontinued operations
(18,304) 48,439 (18,447) 54,957 ------- ------ ------- ------ Net
Income (Loss) $(130,205) $68,355 $(123,695) $68,548 =========
======= ========= ======= (1) Represents our ownership results for
the 39 hotels we owned as of the end of the period, excluding the
Hyatt Suites Atlanta Northwest reclassified as "Held for Sale" and
the W San Diego Hotel reclassified as "Operations Held for Non-Sale
Disposition." (2) Hotel operating margin is calculated as adjusted
hotel EBITDA divided by total hotel revenues. Sunstone Hotel
Investors, Inc. Operating Statistics by Region (Unaudited) Three
Months Ended June 30, 2009 -------------------------------- Number
Number Occupancy Average Comparable Region of Hotels of Rooms
Percentages Daily Rate RevPAR ------ --------- -------- -----------
---------- ------ California (1) 14 3,979 73.2% $120.93 $88.52
Other West (2) 7 2,123 61.0% 109.49 66.79 Midwest (3) 7 2,177 64.3%
133.91 86.10 Middle Atlantic (4) 9 4,099 76.1% 187.59 142.76 South
(5) 2 1,168 74.7% 127.54 95.27 --- ----- ---- ------ ----- Total 39
13,546 70.7% $142.90 $101.03 === ====== ==== ======= ======= Three
Months Ended June 30, 2008 Percent --------------------------------
Change in Occupancy Average Comparable Comparable Region
Percentages Daily Rate RevPAR RevPAR ------ ----------- ----------
------ ------ California (1) 81.6% $148.60 $121.26 -27.0% Other
West (2) 77.6% 116.98 90.78 -26.4% Midwest (3) 70.4% 152.27 107.20
-19.7% Middle Atlantic (4) 83.3% 220.47 183.65 -22.3% South (5)
80.9% 150.73 121.94 -21.9% ---- ------ ------ ----- Total 79.5%
$166.39 $132.28 -23.6% ==== ======= ======= ===== Six Months Ended
June 30, 2009 ------------------------------ Number Number
Occupancy Average Comparable Region of Hotels of Rooms Percentages
Daily Rate RevPAR ------ --------- -------- ----------- ----------
------ California (1) 14 3,979 71.8% $126.19 $90.60 Other West (2)
7 2,123 66.2% 117.68 77.90 Midwest (3) 7 2,177 60.5% 129.36 78.26
Middle Atlantic (4) 9 4,099 70.0% 188.95 132.27 South (5) 2 1,168
70.7% 138.57 97.97 --- ----- ---- ------ ----- Total 39 13,546
68.4% $145.27 $99.36 === ====== ==== ======= ====== Six Months
Ended June 30, 2008 Percent ------------------------------ Change
in Occupancy Average Comparable Comparable Region Percentages Daily
Rate RevPAR RevPAR ------ ----------- ---------- ------ ------
California (1) 80.5% $147.79 $118.97 -23.8% Other West (2) 77.1%
122.22 94.23 -17.3% Midwest (3) 66.6% 144.95 96.54 -18.9% Middle
Atlantic (4) 74.7% 212.36 158.63 -16.6% South (5) 79.4% 160.69
127.59 -23.2% ---- ------ ------ ----- Total 75.9% $162.92 $123.66
-19.7% ==== ======= ======= ===== (1) Does not include the W San
Diego Hotel, reclassifed as "Operations Held for Non-Sale
Disposition" at June 30, 2009. (2) Includes Oregon, Texas and Utah.
(3) Includes Illinois, Michigan and Minnesota. (4) Includes
Maryland, Massachusetts, New York, Pennsylvania, Virginia and
District of Columbia. (5) Includes Florida and Georgia. Does not
include the Hyatt Suites Atlanta Northwest, reclassified as "Held
for Sale" at June 30, 2009. Sunstone Hotel Investors, Inc.
Operating Statistics by Brand (Unaudited) Three Months Ended June
30, 2009 -------------------------------- Number Number Occupancy
Average Comparable Brand of Hotels of Rooms Percentages Daily Rate
RevPAR ----- --------- -------- ----------- ---------- ------
Marriott 24 8,520 70.9% $144.98 $102.79 Hilton 7 2,435 71.9% 168.46
121.12 InterContinental 2 345 72.2% 102.17 73.77 Hyatt (1) 1 403
75.9% 121.27 92.04 Other Brand Affiliations (2) 2 647 74.7% 121.76
90.95 Independent 3 1,196 62.8% 103.42 64.95 --- ----- ---- ------
----- Total 39 13,546 70.7% $142.90 $101.03 === ====== ==== =======
======= Three Months Ended June 30, 2008 Percent
-------------------------------- Change in Occupancy Average
Comparable Comparable Brand Percentages Daily Rate RevPAR RevPAR
----- ----------- ---------- ------ ------ Marriott 79.9% $166.33
$132.90 -22.7% Hilton 83.5% 203.94 170.29 -28.9% InterContinental
77.8% 139.68 108.67 -32.1% Hyatt (1) 76.2% 147.94 112.73 -18.4%
Other Brand Affiliations (2) 82.9% 147.59 122.35 -25.7% Independent
69.1% 102.40 70.76 -8.2% ---- ------ ----- ---- Total 79.5% $166.39
$132.28 -23.6% ==== ======= ======= ===== Six Months Ended June 30,
2009 ------------------------------ Number Number Occupancy Average
Comparable Brand of Hotels of Rooms Percentages Daily Rate RevPAR
----- --------- -------- ----------- ---------- ------ Marriott 24
8,520 68.7% $150.28 $103.24 Hilton 7 2,435 69.8% 161.23 112.54
InterContinental 2 345 70.8% 106.02 75.06 Hyatt (1) 1 403 70.3%
123.21 86.62 Other Brand Affiliations (2) 2 647 71.4% 128.93 92.06
Independent 3 1,196 60.9% 102.00 62.12 --- ----- ---- ------ -----
Total 39 13,546 68.4% $145.27 $99.36 === ====== ==== ======= ======
Six Months Ended June 30, 2008 Percent
------------------------------ Change in Occupancy Average
Comparable Comparable Brand Percentages Daily Rate RevPAR RevPAR
----- ----------- ---------- ------ ------ Marriott 76.0% $164.25
$124.83 -17.3% Hilton 79.1% 193.33 152.92 -26.4% InterContinental
72.3% 132.20 95.58 -21.5% Hyatt (1) 79.2% 148.75 117.81 -26.5%
Other Brand Affiliations (2) 80.3% 151.16 121.38 -24.2% Independent
66.0% 101.74 67.15 -7.5% ---- ------ ----- ---- Total 75.9% $162.92
$123.66 -19.7% ==== ======= ======= ===== (1) Does not include the
Hyatt Suites Atlanta Northwest, reclassified as "Held for Sale" at
June 30, 2009. (2) Includes a Fairmont and a Sheraton. Does not
include the W San Diego Hotel, reclassifed as "Operations Held for
Non-Sale Disposition" at June 30, 2009. Sunstone Hotel Investors,
Inc. Debt Summary (Unaudited - dollars in thousands) Interest June
30, Recent August 5, Rate / Maturity 2009 Events 2009 Debt
Collateral Spread Date Balance (1) Balance ---- ---------- ------
---- ------- ------ ------- Fixed Rate Debt --------- Secured
Hilton Times Mortgage Debt Square 5.92% 12/1/2010 $81,000 $81,000
Secured Mortgage Debt (2) 11 Hotels 5.95% 5/1/2011 247,441 247,441
Secured Renaissance Mortgage Debt Long Beach 4.98% 7/1/2012 34,362
34,362 Secured Renaissance Mortgage Debt Westchester 4.98% 7/1/2012
29,453 29,453 Rochester Secured laundry Mortgage Debt facility
9.88% 6/1/2013 3,729 3,729 Secured Doubletree Mortgage Debt
Minneapolis 5.34% 5/1/2015 18,226 18,226 Secured Hilton Mortgage
Debt Del Mar 5.34% 5/1/2015 26,432 26,432 Secured Marriott Mortgage
Debt Houston 5.34% 5/1/2015 24,263 24,263 Secured Marriott Mortgage
Debt Ontario 5.34% 5/1/2015 25,683 25,683 Secured Marriott Mortgage
Debt Park City 5.34% 5/1/2015 15,817 15,817 Secured Marriott
Mortgage Debt Philadelphia 5.34% 5/1/2015 28,658 28,658 Secured
Marriott Mortgage Debt Troy 5.34% 5/1/2015 37,104 37,104 Marriott
Secured Tysons Mortgage Debt Corner 5.34% 5/1/2015 47,345 47,345
Secured The Kahler Mortgage Debt Grand 5.34% 5/1/2015 29,186 29,186
Secured Valley Mortgage Debt River Inn 5.34% 5/1/2015 12,179 12,179
Secured Renaissance Mortgage Debt Harborplace 5.13% 1/1/2016
105,811 105,811 Secured Marriott Mortgage Debt Del Mar 5.69%
1/11/2016 48,000 48,000 Hilton Secured Houston Mortgage Debt North
5.66% 3/11/2016 33,902 33,902 Renaissance Orlando Secured Resort at
Mortgage Debt Sea World 5.52% 7/1/2016 86,530 86,530 Embassy
Secured Suites Mortgage Debt Chicago 5.58% 3/1/2017 75,000 75,000
Marriott Secured Boston Mortgage Debt Long Wharf 5.58% 4/11/2017
176,000 176,000 Secured W Hotel Mortgage Debt San Diego 6.14%
1/1/2018 65,000 65,000 Embassy Secured Suites Mortgage Debt La
Jolla 6.60% 6/1/2019 70,000 70,000 Secured Renaissance Mortgage
Debt Washington DC 5.95% 5/1/2021 134,864 134,864 Exchangeable
Senior Notes Guaranty 4.60% 7/15/2027 62,500 62,500 ------ ---
------ Total Fixed Rate Debt 1,518,485 - 1,518,485 L + Credit
3.75%- Facility 5 Hotels 5.25% 7/17/2011 - - --- --- --- TOTAL DEBT
$1,518,485 $- $1,518,485 ========== === ========== Preferred Stock
--------------- Series A cumulative redeemable preferred 8.00%
perpetual $176,250 $- $176,250 ======== === ======== Series C
cumulative convertible redeemable preferred 6.45% perpetual
$100,000 $- $100,000 ======== === ======== Debt Statistics
----------------- % Fixed Rate Debt 100.0% 100.0% % Floating Rate
Debt 0.0% 0.0% Average Interest Rate 5.64% 5.64% Weighted Average
Maturity of Debt (includes amounts outstanding on the Credit
Facility) (3) 6.6years 6.6years (1) Reflects net additional draws
and repayments on our credit facility. (2) Cross-collateralized
loan with life insurance company. (3) Assumes the exchangeable
senior notes remain outstanding to maturity. If the exchangeable
senior notes were redeemed upon the first call date, the weighted
average maturity would be approximately 6 years. DATASOURCE:
Sunstone Hotel Investors, Inc. CONTACT: Bryan Giglia, Vice
President - Corporate Finance of Sunstone Hotel Investors, Inc.,
+1-949-369-4236 Web Site: http://www.sunstonehotels.com/
Copyright
