Sunstone Hotel Investors, Inc. (
, a lodging real estate investment trust (REIT), recently penned an
agreement to sell three hotels - Doubletree Guest Suites
Minneapolis, Hilton Del Mar, and the Marriott Troy. The three
hotels are expected to fetch an adjusted price of $107.1 million.
The transaction is likely to close by third quarter of 2012,
subject to mandatory regulatory approvals and closing
The gross selling price signifies a forward capitalization rate
of around 8.2% on the company's estimated net operating income in
2012. The selling price includes the mortgage debt assumption and
deferred management fees worth $75.6 million and $2.1 million,
respectively. The company expects to receive gross proceeds of
$29.4 from the disposition of these hotels.
Doubletree Guest Suites Minneapolis, a 229-room hotel, is
located in the heart of downtown Minneapolis under the brand
Doubletree by Hilton. Hilton Del Mar is a 257-room hotel located in
San Diego, California under the brand Hilton Hotels & Resorts.
Both the hotels are operated by Hilton Worldwide. The Marriott
Troy, a 350-room hotel, is situated near downtown Detroit in
Michigan and is operated by
Marriott International, Inc. (
under its signature brand Marriott Hotels & Resorts.
In addition, Sunstone Hotel stated the completion of disposition
of another Marriott property - Marriott Del Mar - located in San
Diego. The hotel, comprising of 284 rooms, is located in California
and was sold for a gross price of $66.0 million. Sunstone received
the gross proceeds of $18.9 million for the disposition, which
excludes the assumption of the existing mortgage debt of $47.1
Sunstone expects the disposition to restructure its overall
portfolio. For the 12 months ended June 30, 2012, the four hotels
generated a combined RevPAR and EBITDA per key which was much lower
than 30% of the company's portfolio average revenue. The completed
asset sale, combined with the awaiting assets sale, marks the
achievement of company's planned disposition program for the year
The company also expects the hotels sales to reduce their
overall indebtedness by roughly $122.7 million and increase the
liquidity by $48.3 million. Also, recently the company stated the
amendment of a revolving credit facility worth $150 million which
was slated to mature in November 2013. The company announced the
removal of the 1% LIBOR floor and reduction of the interest rate
pricing grid. The pricing grid has been reduced to a range of 175
to 350 basis points (bps) from the earlier range of 325 to 425 bps.
The facility is now slated to mature in November 2015, with one
year extension option. This will likely boost the company's
strategy of strengthening its balance sheet position.
Aliso Viejo, California-based Sunstone owns, acquires, sells and
renovates luxury, upper upscale and upscale full-service hotels
across the United States. The company operates the hotels under
world class brands of Marriott,
Hyatt Hotels Corp. (
Starwood Hotels & Resorts Worldwide Inc. (
We maintain our Neutral recommendation on Sunstone. Also, the
company carries a Zacks #3 Rank (short-term Hold rating).
HYATT HOTELS CP (H): Free Stock Analysis Report
STARWOOD HOTELS (HOT): Free Stock Analysis
MARRIOTT INTL-A (MAR): Free Stock Analysis
SUNSTONE HOTEL (SHO): Free Stock Analysis
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