IRVINE, Calif., April 28, 2021 /PRNewswire/ -- Sunstone
Hotel Investors, Inc. (the "Company" or "Sunstone") (NYSE: SHO),
the owner of Long-Term Relevant Real Estate® in the hospitality
sector, today announced the acquisition of the fee-simple interest
in the 130-room Montage Healdsburg (the "Resort"). The newly
constructed luxury Resort, which was completed in December 2020, was acquired for a gross purchase
price of $265 million. The
acquisition was funded from cash on hand and through the direct
issuance of $66 million of perpetual
preferred equity (the "Series G Preferred Equity") to the seller,
affiliates of Ohana Real Estate Investors ("Ohana" or the
"Seller"). Upon stabilization, the Company expects the Resort
to generate a 6.0% to 7.0% net operating income yield on total
invested capital. The acquisition of the Resort further advances
Sunstone's strategy of owning a portfolio of Long-Term Relevant
Real Estate®.
John Arabia, President and CEO,
stated, "Montage Healdsburg is a spectacular resort, ideally
located in one of the most sought-after and highest-rated leisure
destinations in the U.S. The Resort, which took over 15 years to
develop, is a perfect example of Long-Term Relevant Real Estate and
its addition elevates the overall quality and growth prospects of
our portfolio. Leveraging our industry relationships, we acquired
the Resort on an off-market basis and at a discount to what it
would cost to develop today. The acquisition is consistent
with our stated tactics of acquiring LTRR in the early phases of a
cyclical recovery and putting to work a portion of our excess
liquidity, all while maintaining financial flexibility and access
to capital to fund incremental external growth. Additionally,
we are funding 25% of the transaction with attractively structured
perpetual preferred equity that is being issued directly to the
Seller that aligns our interests and gives us additional
optionality."
Montage Healdsburg
Tucked away among oak trees and sprawling vineyards in the hills
of Sonoma County, Montage
Healdsburg offers a secluded and serene retreat with convenient
access to the world-renowned wineries and amenities of the
country's premier wine region. Built within the contours of the
natural landscape, the transformative hideaway offers 130
bungalow-style rooms and suites, each with an outdoor fireplace and
many with their own outdoor shower. The expansive 117-acre
luxury Resort includes 16 acres of vineyards, an 11,500-square-foot
spa, separate adult and family pools both of which overlook the
vineyard, multiple signature dining experiences, over 12,000 square
feet of purpose-built meeting space and various event lawns.
The Resort will continue to be managed by Montage Hotels &
Resorts.
Montage Healdsburg sits
adjacent to the separately owned Montage Residences Healdsburg,
which together with the Resort, comprise a 258-acre
destination. Montage Residences Healdsburg will feature 40
to-be-built luxury homes that will be eligible to participate in
the optional turn-key resort rental program. Ohana will continue to
own and be responsible for the development and sales of Montage
Residences Healdsburg.
For more information about the Resort, follow @montagehealdsburg
or visit www.montagehotels.com/healdsburg.
Series G Preferred Equity
The acquisition is being partially funded through the issuance
of $66.25 million of Series G
Preferred Equity directly to the Seller of the Resort.
The Series G Preferred Equity, which is callable at liquidation
value by the Company at any time, will pay an initial dividend rate
equal to the Resort's annual net operating income yield on the
Company's investment in the Resort.
Transaction Rationale and Corporate Implications
The Company highlights the following rationale and corporate
implications of the Montage Healdsburg transaction.
The Montage Healdsburg transaction:
- Is directly on strategy and increases the Company's
concentration of Long-Term Relevant Real Estate®.
- Is expected to generate a 6.0% to 7.0% net operating income
yield upon stabilization.
- Increases the concentration of portfolio leisure demand by over
250 basis points to nearly 30% of pro forma rooms revenue.
- Is consistent with the Company's stated tactic of being more
acquisitive in the early years of a cyclical recovery following
several years of well-timed, late-cycle divestitures of commodity
hotels.
- Is in-line with the intention of increasing financial leverage
through external growth in the early years of a cyclical recovery,
while maintaining relative balance sheet strength.
- Deploys a portion of our outsized liquidity while maintaining
access to capital to fund future investments.
- Is expected to provide additional earnings to help resume
compliance with our unsecured debt covenants which will provide
greater financial and capital allocation flexibility.
For additional information on the acquisition, please refer to
the Montage Healdsburg Acquisition presentation located in
the Investor Relations section of the Company's website.
About Sunstone Hotel Investors, Inc.
Sunstone Hotel Investors, Inc. is a lodging real estate
investment trust ("REIT") that as of the date of this release has
interests in 18 hotels comprised of 9,147 rooms, the majority of
which are operated under nationally recognized brands. Sunstone's
business is to acquire, own, asset manage and renovate or
reposition hotels considered to be Long-Term Relevant Real Estate®.
For further information, please visit Sunstone's website at
www.sunstonehotels.com.
Forward-Looking Statements
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 opinions, references to assumptions and forecasts of
future results. Forward-looking statements are not guarantees of
future performance and involve known and unknown risks,
uncertainties and other factors that may cause 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: the impact the COVID-19 pandemic has on the
Company's business and the economy, as well as the response of
governments and the Company to the pandemic, and how quickly and
successfully effective vaccines and therapies are distributed and
administered; increased risks related to employee matters,
including increased employment litigation and claims for severance
or other benefits tied to termination or furloughs as a result of
temporary hotel suspensions or reduced hotel operations due to
COVID-19; general economic and business conditions, including a
U.S. recession, trade conflicts and tariffs, regional or global
economic slowdowns and any type of flu or disease-related pandemic
that impacts travel or the ability to travel, including COVID-19;
the need for business-related travel, including the increased use
of business-related technology; rising hotel operating costs due to
labor costs, workers' compensation and health-care related costs,
utility costs, property and liability insurance costs,
unanticipated costs such as acts of nature and their consequences
and other costs that may not be offset by increased room rates; the
ground, building or airspace leases for three of the hotels the
Company has interests in as of the date of this release; the need
for renovations, repositionings and other capital expenditures for
the Company's hotels; the impact, including any delays, of
renovations and repositionings on hotel operations; new hotel
supply, or alternative lodging options such as timeshare, vacation
rentals or sharing services such as Airbnb, in the Company's
markets, which could harm its occupancy levels and revenue at its
hotels; competition from hotels not owned by the Company;
relationships with, and the requirements, performance and
reputation of, the managers of the Company's hotels; relationships
with, and the requirements and reputation of, the Company's
franchisors and hotel brands; the Company's hotels may become
impaired, or its hotels which have previously become impaired may
become further impaired in the future, which may adversely affect
its financial condition and results of operations; competition for
the acquisition of hotels, and the Company's ability to complete
acquisitions and dispositions; performance of hotels after they are
acquired; changes in the Company's business strategy or acquisition
or disposition plans; the Company's level of debt, including
secured, unsecured, fixed and variable rate debt; financial and
other covenants in the Company's debt and preferred stock; the
impact on the Company's business of potential defaults by the
Company on its debt agreements or leases; volatility in the capital
markets and the effect on lodging demand or the Company's ability
to obtain capital on favorable terms or at all; the Company's need
to operate as a REIT and comply with other applicable laws and
regulations, including new laws, interpretations or court decisions
that may change the federal or state tax laws or the federal or
state income tax consequences of the Company's qualification as a
REIT; potential adverse tax consequences in the event that the
Company's operating leases with its taxable REIT subsidiaries are
not held to have been made on an arm's-length basis; system
security risks, data protection breaches, cyber-attacks, including
those impacting the Company's hotel managers or other third
parties, and systems integration issues; other events beyond the
Company's control, including climate change, natural disasters,
terrorist attacks or civil unrest; and other risks and
uncertainties associated with the Company's business described in
its filings with the Securities and Exchange Commission. Although
the Company believes 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 provided herein is as of the date of this release, and
the Company undertakes no obligation to update any forward-looking
statement to conform the statement to actual results or changes in
the Company's expectations.
This release should be read together 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:
Bryan Giglia
Sunstone Hotel Investors, Inc.
(949) 382-3036
Aaron Reyes
Sunstone Hotel Investors, Inc.
(949) 382-3018
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SOURCE Sunstone Hotel Investors, Inc.