Sunstone Hotel Investors reports results of operation for Fourth Quarter and Full Year 2008
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Sunstone Hotel Investors reports results of operation for Fourth Quarter and Full Year 2008
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Catégorie : Monde - Économie du secteur
- Chiffres et études
Ceci est un communiqué de presse sélectionné par notre comité éditorial et mis en ligne gratuitement le 13-02-2009
Maintains $220.2 million in cash, including restricted cash
Continues to focus on liquidity and conservative balance sheet
Sunstone Hotel Investors, Inc. (the “Company”) (NYSE:
SHO) today announced results of operations for the fourth quarter and year ended December 31, 2008.
Fourth Quarter 2008 Operational Statistics:
• Total revenue was $256.0 million.
• Total portfolio RevPAR was $107.16.
• Loss attributable to common stockholders was $11.5 million.
• Adjusted EBITDA was $70.0 million.
• Adjusted FFO available to common stockholders was $39.4 million.
• Adjusted FFO available to common stockholders per diluted share was $0.76.
• Total hotel operating profit margin was 26.5%.
Full Year 2008 Operational Statistics:
• Total revenue was $969.2 million.
• Total portfolio RevPAR was $119.45.
• Income available to common stockholders was $53.9 million.
• Adjusted EBITDA was $285.1 million.
• Adjusted FFO available to common stockholders was $161.1 million.
• Adjusted FFO available to common stockholders per diluted share was $2.79.
• Total hotel operating profit margin was 28.3%.
Art Buser, Chief Executive Officer, stated, “Within the context of a deteriorating operating environment,
our fourth quarter and full year results reflect focused efforts from our team and operators. In 2008, we
worked diligently with our operators to eliminate costs from our hotels resulting in impressive margin
preservation. In December, we and our operators re-evaluated our cost structure and implemented
additional expense reductions at both the hotel and corporate level. Our balance sheet is solid with no nearterm
debt maturities and more than $220 million of cash, including restricted cash. Our near-term focus is
to preserve liquidity and prepare to capitalize on opportunities that may arise out of distress. We believe we
have the portfolio, the balance sheet and the team to weather the current economic storm.”
SELECTED FINANCIAL DATA
($ in millions, except RevPAR and per share amounts)
(unaudited)
Three Months Ended December 31, Year Ended December 31,
2008 2007 % Change 2008 2007 % Change
Total Revenue $ 256.0 $ 276.5 (7.4)% $ 969.2 $ 961.7 0.8%
Total RevPAR (1) $ 107.16 $ 121.01 (11.4)% $ 119.45 $ 122.09 (2.2)%
Comparable RevPAR (2) $ 107.91 $ 120.71 (10.6)% $ 119.18 $ 122.01 (2.3)%
Income available (loss attributable) to
common stockholders $ (11.5) $ 24.3 (147.4)% $ 53.9 $ 103.3 (47.9)%
Income available (loss attributable) to
common stockholders per diluted share $ (0.24) $ 0.41 (158.5)% $ 1.00 $ 1.75 (42.9)%
EBITDA $ 51.0 $ 96.1 (47.0)% $ 308.2 $ 371.5 (17.1)%
Adjusted EBITDA $ 70.0 $ 86.2 (18.9)% $ 285.1 $ 310.1 (8.1)%
FFO available to common stockholders $ 36.4 $ 53.9 (32.4)% $ 158.2 $ 174.4 (9.3)%
Adjusted FFO available to common
stockholders $ 39.4 $ 54.6 (27.9)% $ 161.1 $ 180.6 (10.8)%
FFO available to common stockholders per
diluted share (3) $ 0.70 $ 0.86 (18.6)% $ 2.74 $ 2.76 (0.7)%
Adjusted FFO available to common
stockholders per diluted share (3) $ 0.76 $ 0.87 (12.6)% $ 2.79 $ 2.86 (2.4)%
Total Hotel Operating Profit Margin (1) 26.5% 29.4% (290) bps 28.3% 29.2% (90) bps
Comparable Hotel Operating Profit Margin
(2) 26.4% 29.9% (350) bps 28.4% 29.7% (130)bps
(1) Includes our ownership and prior ownership results (for the 2007 period) for the 43 hotels we owned as of December 31, 2008.
(2) Includes 41 “Comparable” hotels (including prior ownership for the 2007 period). Excludes two “Non-comparable” hotels that
experienced material and prolonged business interruption during either 2008 or 2007 (Renaissance Baltimore and Renaissance
Orlando).
(3) Reflects Series C convertible preferred stock on an “as-converted” basis.
Contemporaneously with this press release, the Company has filed its Annual Report on Form 10-K for the
fiscal year ended December 31, 2008 with the Securities and Exchange Commission.
Disclosure regarding the non-GAAP financial measures in this release is included on page 5. Disclosure
regarding the Comparable Portfolio is included on page 6 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.
Performance Relative to Guidance
The following table compares our guidance for the full year 2008 to our actual results.
Guidance Actual Full Year 2008
Total Portfolio RevPAR Change (1.0)% to (4.0)% (2.2)%
Income available to common stockholders $60.6 million to $70.6 million $53.9 million
Adjusted EBITDA $275.0 million to $285.0 million $285.1 million
Adjusted FFO available to common stockholders $149.5 million to $159.5 million $161.1 million
Adjusted FFO available to common stockholders
per diluted share $2.58 to $2.75 $2.79
For the full year 2008, total portfolio RevPAR decreased 2.2% as compared to the full year 2007, driven by
a 250 basis point decrease in occupancy partially offset by a 1.1% increase in average daily room rate.
Fourth quarter and full year 2008 were negatively impacted by approximately $1.1 million of severance
expense related to property level and corporate office staff restructurings.
Acquisitions, Dispositions, Investments and Financings
As part of a strategic plan to dispose of non-core hotel assets, the Company sold the Crowne Plaza Grand
Rapids on December 10, 2008 for gross proceeds of $4.3 million.
On December 11, 2008, the Company’s board of directors declared a dividend of $0.75 per share of
common stock. The dividend was payable in cash and/or shares of common stock at the election of the
stockholder, and was subject to a cash limitation of 20% of the total value of the dividend. This fourth
quarter dividend was paid on January 15, 2009 to stockholders of record at the close of business on
December 19, 2008. Based on stockholder elections, the dividend consisted of approximately $7.3 million
in cash and approximately 5.0 million shares of the Company's common stock. The number of shares
included in the distribution was calculated based on the $5.74 average closing price per share of the
Company's common stock on the New York Stock Exchange on January 8 and 9, 2009.
Balance Sheet/Liquidity Update
As of December 31, 2008, the Company had approximately $220.2 million of cash and cash equivalents,
including restricted cash. The Company is currently maintaining a higher than historical cash balance in
light of the current economic downturn. As of December 31, 2008, the Company had no outstanding
indebtedness under its $200 million credit facility, and had $3.5 million in outstanding irrevocable letters of
credit backed by the credit facility. The Company is subject to compliance with various covenants under
both the credit facility and the Series C preferred stock. If the Company fails to meet the credit facility’s
covenants, it will be in default of the credit facility, which may result in a reduction in, or the elimination
of, funds available under the credit facility. If the Company fails to meet certain financial covenants with
respect to its Series C preferred stock, among other things, the Company would be restricted from paying
dividends on its common stock. The Company believes if economic trends continue to negatively affect the
demand for its hotels, the Company may fail to meet its financial covenants under the credit facility within
the next 12 months. As described in our Form 10-K filed today, the Company may pursue a range of
alternatives, including but not limited to, seeking to renegotiate the terms of, or terminating, the credit
facility, although there is no assurance that the Company would be successful in such negotiations. The
Company believes it could obtain mortgages on, or pledge to a secured facility, one or more of its ten
unencumbered hotels, comprising 3,119 rooms. On December 31, 2008, total assets were $2.8 billion,
including $2.5 billion of net investments in hotel properties, total debt was $1.7 billion and stockholders’
equity was $0.9 billion.
Hotel Renovations
During the fourth quarter 2008, the Company invested $14.1 million in capital projects. For the full year
2008, the Company invested $94.7 million in capital projects.
Outlook
Considering the current economic uncertainty, the Company has elected not to provide 2009 outlook at this
time. The Company intends to continue to provide periodic operations updates between its earnings calls
during 2009.
Dividend Update
On February 12, 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 April 15, 2009 to stockholders of record on March 31, 2009. No dividend was declared on the
Company’s common stock.
Art Buser stated, “While we believe we have sufficient cash reserves, the decision not to pay a first quarter
common dividend was made after considering the highly uncertain economic environment, and after
balancing our liquidity and capital preservation goals with our goal of distributing out 100% of our taxable
income to our investors. We believe this decision is what is best for Sunstone and is in the long-term
interest of our stockholders.”
3
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 fourth quarter and year-end results on February 13,
2009, at 9 a.m. PST. A live web cast of the call will be available via the Investor Relations section of the
Company’s website at www.sunstonehotels.com. Alternatively, investors may dial 1-800-219-6110 (for
domestic callers) or 303-262-2143 (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 the date hereof,
has interests in 44 hotels comprised of 15,029 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 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 February 12, 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.
4
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 estaterelated
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.
5
6
Comparable Portfolio Information
The Company’s definition of “Comparable Portfolio” includes those hotels owned as of the reporting date
which have not experienced material and prolonged business interruption due to renovations, re-branding
or property damage during either the most recent calendar year presented or the calendar year immediately
preceding it. For the first quarter and full year 2009, all of our hotels are expected to be included in the
Comparable Portfolio. Also, the revenue and expense items associated with the Company’s two
commercial laundry facilities, any guaranty payments, and other miscellaneous non-hotel items have been
shown below the hotel operating income line in presenting comparable hotel operating margins.
Management believes the definition of Comparable Portfolio as well as the calculation of hotel operating
income results in a more accurate presentation of the trends in RevPAR and comparable hotel operating
margins of the Company’s stabilized portfolio of hotels. See page 10 for a reconciliation of hotel operating
income to the comparable GAAP measure.
Sunstone Hotel Investors, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
December 31, December 31,
2008 2007
Assets
Current assets:
Cash and cash equivalents $ 1 79,042 $ 66,088
Restricted cash 41,176 45,515
Accounts receivable, net 35,428 32,723
Due from affiliates 109 932
Inventories 3,183 3,005
Prepaid expenses 7,431 8,709
Investment in hotel properties of discontinued operations, net - 336,093
Other current assets of discontinued operations, net - 9,010
Total current assets 266,369 502,075
Investment in hotel properties, net 2,452,811 2,450,728
Other real estate, net 14,640 14,526
Investments in unconsolidated joint ventures 28,770 35,816
Deferred financing costs, net 11,379 12,964
Goodwill 13,404 16,251
Other assets, net 18,238 16,792
Total assets $ 2 ,805,611 $ 3 ,049,152
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 18,396 $ 26,376
Accrued payroll and employee benefits 8,878 15,026
Due to Interstate SHP 16,088 16,236
Dividends payable 12,499 25,995
Other current liabilities 32,439 35,220
Current portion of notes payable 13,002 9,815
Other current liabilities of discontinued operations - 9,908
Total current liabilities 101,302 138,576
Notes payable, less current portion 1,699,763 1,712,336
Other liabilities 6,545 5,994
Total liabilities 1,807,610 1,856,906
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 December 31, 2008 and 2007, liquidation
preference of $24.375 per share 99,696 99,496
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 December 31, 2008 and
2007, stated at liquidation preference of $25.00 per share 176,250 176,250
Common stock, $0.01 par value, 500,000,000 shares authorized,
47,864,654 shares issued and outstanding at December 31, 2008 and
58,815,271 shares issued and outstanding at December 31, 2007 479 588
Additional paid in capital 807,475 987,554
Retained earnings 265,951 191,208
Cumulative dividends (347,922) (261,665)
Accumulated other comprehensive loss (3,928) (1,185)
Total stockholders' equity 898,305 1,092,750
Total liabilities and stockholders' equity $ 2 ,805,611 $ 3 ,049,152
7
2008 2007 2008 2007
Revenues
Room $ 1 60,959 $ 1 76,741 $ 6 40,762 $ 6 38,119
Food and beverage 7 3,769 8 2,068 2 58,655 2 59,124
Other operating 2 1,256 1 7,699 6 9,747 6 4,499
Total revenues 2 55,984 2 76,508 9 69,164 9 61,742
Operating expenses
Room 3 7,355 3 8,758 1 41,602 1 38,821
Food and beverage 5 1,440 5 6,890 1 85,610 1 86,102
Other operating 9,272 9,679 3 6,356 3 6,741
Advertising and promotion 1 3,993 1 4,533 5 2,496 5 0,889
Repairs and maintenance 1 0,838 1 0,654 3 8,049 3 6,751
Utilities 9,969 9,784 3 7,812 3 3,934
Franchise costs 9,002 9,686 3 6,479 3 5,893
Property tax, ground lease and insurance 1 4,604 1 4,646 5 5,539 5 3,352
Property general and administrative 2 9,669 3 1,231 1 10,419 1 10,177
Corporate overhead 4,561 5,293 2 1,678 2 8,048
Depreciation and amortization 2 8,941 3 2,604 1 15,710 1 11,326
Goodwill and other impairment losses 2,904 - 2,904 -
Total operating expenses 2 22,548 2 33,758 8 34,654 8 22,034
Operating income 3 3,436 4 2,750 1 34,510 1 39,708
Equity in net earnings (losses) of unconsolidated joint ventures 100 (1,361) (1,445) (3,588)
Interest and other income 717 6,913 3,761 9,101
Interest expense (24,519) (24,878) (98,289) (92,431)
Income from continuing operations 9,734 2 3,424 3 8,537 5 2,790
Income (loss) from discontinued operations (16,073) 6,372 3 6,206 7 2,873
Net income (loss) (6,339) 2 9,796 7 4,743 1 25,663
Preferred stock dividends and accretion (5,187) (5,233) (20,884) (20,795)
Undistributed income allocated to Series C preferred stock - (245) - (1,583)
Income available (loss attributable) to common stockholder $ (11,526) $ 2 4,318 $ 5 3,859 $ 1 03,285
Basic per share amounts:
Income from continuing operations available
to common stockholders $ 0.10 $ 0.31 $ 0.33 $ 0.54
Income (loss) from discontinued operations (0.34) 0.10 0.67 1.21
Basic income available (loss attributable) to common
stockholders per common share $ (0.24) $ 0.41 $ 1.00 $ 1.75
Diluted per share amounts:
Income from continuing operations available
to common stockholders $ 0.10 $ 0.30 $ 0.33 $ 0.51
Income (loss) from discontinued operations (0.34) 0.11 0.67 1.24
Diluted income available (loss attributable) to common
stockholders per common share $ (0.24) $ 0.41 $ 1.00 $ 1.75
Weighted average common shares outstanding:
Basic 4 7,853 5 8,802 5 3,633 5 8,998
Diluted 4 7,853 5 8,916 5 3,662 5 9,139
Dividends paid per common share $ 0.35 $ 0.32 $ 1.40 $ 1.28
Three Months Ended December 31, Year Ended December 31,
Sunstone Hotel Investors, Inc.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
8
2008 2007 2008 2007
Income available (loss attributable) to common stockholders $ ( 11,526) $ 24,318 $ 53,859 $ 103,285
Series A and C preferred stock dividends 5,187 5,233 20,884 20,795
Undistributed income allocated to Series C preferred stock - 245 - 1,583
Amortization of deferred stock compensation 720 1,037 3,975 5,168
Continuing operations:
Depreciation and amortization 28,941 32,604 115,710 111,326
Interest expense 24,093 24,048 96,587 90,625
Amortization of deferred financing fees 426 413 1,702 1,389
Write-off of deferred financing fees - 64 - 64
Loss on early extinguishment of debt - 818 - 818
Write-off of loan premium - ( 465) - ( 465)
Unconsolidated joint ventures:
Depreciation and amortization 1,192 2,790 5,000 6,492
Interest expense 1,197 1,879 5,168 7,765
Amortization of deferred financing fees 494 333 1,547 1,323
Amortization of deferred stock compensation ( 30) - 47 -
Discontinued operations:
Depreciation and amortization 282 2,517 3,704 11,919
Interest expense - 245 - 8,568
Amortization of deferred financing fees - 8 - 108
Write-off of deferred financing fees - - - 362
Prepayment penalties - - 415
EBITDA 50,976 96,087 308,183 371,540
(Gain) loss on sale of assets 16,095 ( 10,081) ( 26,013) ( 66,019)
Impairment loss - continuing operations 2,904 - 2,904 -
Costs associated with CEO succession and executive officer severance - 241 - 4,540
18,999 ( 9,840) ( 23,109) ( 61,479)
Adjusted EBITDA $ 69,975 $ 86,247 $ 285,074 $ 310,061
Income available (loss attributable) to common stockholders $ ( 11,526) $ 24,318 $ 53,859 $ 103,285
Series C preferred stock dividends 1,662 1,707 6,784 6,694
Undistributed income allocated to Series C preferred stock - 245 - 1,583
Real estate depreciation and amortization - continuing operations 27,941 32,408 114,904 110,467
Real estate depreciation and amortization - unconsolidated joint ventures 1,165 2,790 4,949 6,492
Real estate depreciation and amortization - discontinued operations 1,112 2,517 3,704 11,919
Gain on sale of assets 16,095 ( 10,081) ( 26,013) ( 66,019)
FFO available to common stockholders 36,449 53,904 158,187 174,421
Continuing operations:
Write-off of deferred financing fees - 64 - 64
Loss on early extinguishment of debt - 818 - 818
Write-off of loan premium - ( 465) - ( 465)
Discontinued operations:
Write-off of deferred financing fees - - - 362
Prepayment penalties - - - 415
Impairment loss - continuing operations 2,904 - 2,904 -
Costs associated with CEO succession and executive officer severance - 241 - 4,540
Amortization of deferred stock compensation associated with executive officer severance - - - 437
2,904 658 2,904 6,171
Adjusted FFO available to common stockholders $ 39,353 $ 54,562 $ 161,091 $ 180,592
FFO available to common stockholders per diluted share $ 0.70 $ 0.86 $ 2.74 $ 2.76
Adjusted FFO available to common stockholders per diluted share $ 0.76 $ 0.87 $ 2.79 $ 2.86
Diluted weighted average shares outstanding (1) 51,956 63,019 57,765 63,242
(1) Diluted weighted average shares outstanding includes the Series C convertible preferred stock on an as-converted basis.
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
Reconciliation of Income Available (Loss Attributable) to Common Stockholders to FFO and Adjusted FFO
Year Ended
December 31, December 31,
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Actual Comparable Actual Comparable
December 31, Non-comparable December 31, December 31, Non-comparable December 31,
2008 (1) Hotels (2) 2008 (3) 2007 (4) Hotels (2) 2007 (3)
Number of Hotels 43 (2) 41 43 (2) 41
Number of Rooms 14,569 (1,403) 13,166 14,569 (1,403) 13,166
Hotel operating profit margin (6) 26.5% 27.0% 26.4% 29.4% 26.2% 29.9%
Hotel Revenues
Room revenue $ 160,959 $ (16,775) $ 144,184 $ 176,741 $ (19,186) $ 157,555
Food and beverage revenue 73,769 (11,494) 62,275 82,068 (13,053) 69,015
Other operating revenue 13,901 (1,842) 12,059 13,538 (1,483) 12,055
Total Hotel Revenues 248,629 (30,111) 218,518 272,347 (33,722) 238,625
Hotel Expenses
Room expense 37,572 (3,738) 33,834 39,032 (4,309) 34,723
Food and beverage expense 51,452 (7,364) 44,088 56,919 (8,660) 48,259
Other hotel expense 64,579 (7,289) 57,290 65,838 (8,358) 57,480
General and administrative expense 29,125 (3,577) 25,548 30,401 (3,551) 26,850
Total Hotel Expenses 182,728 (21,968) 160,760 192,190 (24,878) 167,312
Hotel Operating Income 65,901 (8,143) 57,758 80,157 (8,844) 71,313
Hotel performance guaranty 3,493 - 3,493 - -
Non-hotel operating income 448 - 448 490 - 490
Corporate overhead (4,561) 24 (4,537) (5,293) 34 (5,259)
Depreciation and amortization (28,941) 3,639 (25,302) (32,604) 3,475 (29,129)
Goodwill and other impairment losses (2,904) - (2,904) - - -
Operating Income 33,436 (4,480) 28,956 42,750 (5,335) 37,415
Equity in net earnings (losses) of unconsolidated
joint ventures 100 - 100 (1,361) - (1,361)
Interest and other income 717 (24) 693 6,913 (34) 6,879
Interest expense (24,519) 1,239 (23,280) (24,878) 1,258 (23,620)
Income (loss) from discontinued operations (16,073) - (16,073) 6,372 - 6,372
Net Income (loss) $ ( 6,339) $ (3,265) $ (9,604) $ 29,796 $ (4,111) $ 25,685
Actual Comparable Actual Prior Comparable
December 31, Non-comparable December 31, December 31, Ownership Non-comparable December 31,
2008 (1) Hotels (2) 2008 (3) 2007 (4) Adjustments (5) Subtotal Hotels (2) 2007 (3)
Number of Hotels 43 (2) 41 43 43 (2) 41
Number of Rooms 14,569 (1,403) 13,166 14,569 14,569 (1,403) 13,166
Hotel operating profit margin (6) 28.3% 27.6% 28.4% 29.3% 21.2% 29.2% 25.0% 29.7%
Hotel Revenues
Room revenue $ 640,762 $ (63,824) $ 576,938 $ 638,119 $ 1 0,295 $ 648,414 $ (62,948) $ 585,466
Food and beverage revenue 258,655 (40,507) 218,148 259,124 5,213 264,337 (38,442) 225,895
Other operating revenue 50,611 (5,755) 44,856 48,046 981 49,027 (4,482) 44,545
Total Hotel Revenues 950,028 (110,086) 839,942 945,289 16,489 961,778 (105,872) 855,906
Hotel Expenses
Room expense 142,568 (13,931) 128,637 140,009 2,815 142,824 (14,232) 128,592
Food and beverage expense 185,659 (26,378) 159,281 186,220 3,743 189,963 (26,212) 163,751
Other hotel expense 243,959 (26,942) 217,017 235,034 4,257 239,291 (26,766) 212,525
General and administrative expense 108,581 (12,433) 96,148 106,924 2,178 109,102 (12,227) 96,875
Total Hotel Expenses 680,767 (79,684) 601,083 668,187 12,993 681,180 (79,437) 601,743
Hotel Operating Income 269,261 (30,402) 238,859 277,102 3,496 280,598 (26,435) 254,163
Hotel performance guaranty 3,493 - 3,493 - - - - -
Non-hotel operating income 2,048 - 2,048 1,980 - 1,980 - 1,980
Corporate overhead (21,678) 263 (21,415) (28,048) - (28,048) 135 (27,913)
Depreciation and amortization (115,710) 14,351 (101,359) (111,326) - (111,326) 13,060 (98,266)
Goodwill and other impairment losses (2,904) - (2,904) - - - - -
Operating Income 134,510 (15,788) 118,722 139,708 3,496 143,204 (13,240) 129,964
Equity in net losses of unconsolidated joint ventures (1,445) - (1,445) (3,588) - (3,588) - (3,588)
Interest and other income 3,761 (80) 3,681 9,101 - 9,101 (249) 8,852
Interest expense (98,289) 4,969 (93,320) (92,431) - (92,431) 4,987 (87,444)
Income from discontinued operations 36,206 - 36,206 72,873 - 72,873 - 72,873
Net Income $ 74,743 $ (10,899) $ 63,844 $ 125,663 $ 3,496 $ 129,159 $ (8,502) $ 120,657
(1) Represents our ownership results for the 43 hotels we owned as of the end of the period.
(2) Represents our ownership results for the 2 "non-comparable" hotels that experienced material and prolonged business interruption during either 2008 or 2007 (Renaissance Baltimore
and Renaissance Orlando).
(3) Represents our ownership and prior ownership results (for the 2007 period) for 41 "comparable" hotels we owned as of December 31, 2008, excluding the 2 "non-comparable" hotels that experienced
material and prolonged business interruption during either 2008 or 2007 (Renaissance Baltimore and Renaissance Orlando).
(4) Represents our ownership results for the 43 hotels we owned as of the end of the period.
(5) Represents prior ownership results for the 3 hotels acquired during the first six months of 2007 (Renaissance LAX, Marriott Long Wharf and Marriott Boston Quincy).
(6) Hotel operating profit margin is calculated as hotel operating income divided by total hotel revenues.
Year Ended December 31, 2008 Year Ended December 31, 2007
Sunstone Hotel Investors, Inc.
Comparable Hotel Operating Margins
(Unaudited and in thousands except hotels and rooms)
Three Months Ended December 31, 2008 Three Months Ended December 31, 2007
10
Percent
Three Months Ended December 31, 2008 Three Months Ended December 31, 2007 Change in
Number Number Occupancy Average Comparable Occupancy Average Comparable Comparable
Region of Hotels of Rooms Percentages Daily Rate RevPAR Percentages Daily Rate RevPAR RevPAR
California 17 4,803 70.1% $ 1 35.53 $ 9 5.01 75.5% $ 1 43.43 $ 1 08.29 -12.3%
Other West (1) 7 2,123 66.9% 1 19.33 79.83 72.1% 1 09.91 79.25 0.7%
Midwest (2) 7 2,177 60.9% 1 48.29 90.31 65.7% 1 50.35 98.78 -8.6%
Middle Atlantic (3) 8 3,474 70.8% 2 13.87 1 51.42 76.5% 2 29.55 1 75.61 -13.8%
South (4) 2 589 68.9% 1 17.41 80.90 74.6% 1 21.35 90.53 -10.6%
Total Comparable Portfolio 41 1 3,166 68.3% $ 158.00 $ 107.91 73.6% $ 1 64.01 $ 120.71 -10.6%
Percent
Year Ended December 31, 2008 Year Ended December 31, 2007 Change in
Number Number Occupancy Average Comparable Occupancy Average Comparable Comparable
Region of Hotels of Rooms Percentages Daily Rate RevPAR Percentages Daily Rate RevPAR RevPAR
California 17 4,803 77.5% $ 1 48.12 $ 1 14.79 79.3% $ 1 50.43 $ 1 19.29 -3.8%
Other West (1) 7 2,123 75.0% 1 20.37 90.28 78.7% 1 10.27 86.78 4.0%
Midwest (2) 7 2,177 67.0% 1 46.80 98.36 69.7% 1 43.72 1 00.17 -1.8%
Middle Atlantic (3) 8 3,474 75.4% 2 13.40 1 60.90 78.3% 2 11.57 1 65.66 -2.9%
South (4) 2 589 74.8% 1 17.03 87.54 79.7% 1 19.64 95.35 -8.2%
Total Comparable Portfolio 41 1 3,166 74.7% $ 159.54 $ 119.18 77.4% $ 1 57.63 $ 122.01 -2.3%
(1) Includes Oregon, Texas and Utah.
(2) Includes Illinois, Michigan and Minnesota.
(3) Includes Maryland, Massachusetts, New York, Pennsylvania, Virginia and District of Columbia. Excludes the Renaissance Baltimore which experienced material and prolonged business interruption during
either 2008 or 2007.
(4) Includes Florida and Georgia. Excludes the Renaissance Orlando which experienced material and prolonged business interruption during either 2008 or 2007.
Comparable Portfolio Operating Statistics by Region
Sunstone Hotel Investors, Inc.
(Unaudited)
11
Percent
Three Months Ended December 31, 2008 Three Months Ended December 31, 2007 Change in
Number Number Occupancy Average Comparable Occupancy Average Comparable Comparable
Brand of Hotels of Rooms Percentages Daily Rate RevPAR Percentages Daily Rate RevPAR RevPAR
Marriott (1) 24 7,680 68.5% $ 1 55.58 $ 1 06.57 74.4% $ 1 59.95 $ 1 19.00 -10.4%
Hilton 7 2,435 72.1% 2 01.73 1 45.45 78.2% 2 15.19 1 68.28 -13.6%
InterContinental 2 345 74.8% 1 11.64 83.51 77.0% 1 16.95 90.05 -7.3%
Hyatt 2 605 66.8% 1 19.32 79.71 72.1% 1 31.66 94.93 -16.0%
Other Brand Affiliations (2) 3 905 66.7% 1 55.77 1 03.90 71.0% 1 70.29 1 20.91 -14.1%
Independent 3 1,196 59.1% 1 11.49 65.89 61.2% 98.84 60.49 8.9%
Total Comparable Portfolio 41 1 3,166 68.3% $ 158.00 $ 107.91 73.6% $ 1 64.01 $ 120.71 -10.6%
Percent
Year Ended December 31, 2008 Year Ended December 31, 2007 Change in
Number Number Occupancy Average Comparable Occupancy Average Comparable Comparable
Brand of Hotels of Rooms Percentages Daily Rate RevPAR Percentages Daily Rate RevPAR RevPAR
Marriott (1) 24 7,680 74.7% $ 1 56.55 $ 1 16.94 77.2% $ 1 54.78 $ 1 19.49 -2.1%
Hilton 7 2,435 78.3% 1 99.10 1 55.90 82.3% 1 93.04 1 58.87 -1.9%
InterContinental 2 345 73.5% 1 26.53 93.00 84.4% 1 23.46 1 04.20 -10.7%
Hyatt 2 605 75.6% 1 36.21 1 02.97 75.8% 1 45.97 1 10.65 -6.9%
Other Brand Affiliations (2) 3 905 75.6% 1 66.88 1 26.16 77.3% 1 75.92 1 35.99 -7.2%
Independent 3 1,196 66.3% 1 03.94 68.91 67.0% 94.74 63.48 8.6%
Total Comparable Portfolio 41 1 3,166 74.7% $ 159.54 $ 119.18 77.4% $ 1 57.63 $ 122.01 -2.3%
(1) Excludes the Renaissance Baltimore and Renaissance Orlando which experienced material and prolonged business interruption during either 2008 or 2007.
(2) Includes a Fairmont, a Sheraton, and a W Hotel.
Sunstone Hotel Investors, Inc.
Comparable Portfolio Operating Statistics by Brand
(Unaudited)
12
Interest Rate / Maturity December 31, 2008 Recent February 1, 2009
Debt Collateral Spread Date Balance Events (1) Balance
Fixed Rate Debt
Secured Mortgage Debt 1 hotel 5.92% 2010 $ 8 1,000 $ 8 1,000
Secured Mortgage Debt (2) 11 hotels 5.95% 2011 2 48,164 2 48,164
Secured Mortgage Debt (3) 2 hotels 4.98% 2012 6 4,475 64,475
Secured Mortgage Debt Rochester laundry facility 9.88% 2013 4,108 4,108
Secured Mortgage Debt (3) 10 hotels 5.34% 2015 2 67,710 2 67,710
Secured Mortgage Debt 1 hotel 5.13% 2016 1 06,957 1 06,957
Secured Mortgage Debt 1 hotel 5.52% 2016 8 7,351 87,351
Secured Mortgage Debt 1 hotel 5.69% 2016 4 8,000 48,000
Secured Mortgage Debt 1 hotel 5.66% 2016 3 4,000 34,000
Secured Mortgage Debt 1 hotel 5.58% 2017 7 5,000 75,000
Secured Mortgage Debt 1 hotel 5.58% 2017 1 76,000 1 76,000
Secured Mortgage Debt 1 hotel 6.14% 2018 6 5,000 65,000
Secured Mortgage Debt 1 hotel 6.60% 2019 7 0,000 70,000
Secured Mortgage Debt 1 hotel 5.95% 2021 1 35,000 1 35,000
Exchangeable Senior Notes Guaranty 4.60% 2027 2 50,000 2 50,000
Total Fixed Rate Debt 1,712,765 1,712,765
Credit Facility Unsecured L + 0.90% - 1.50% 2011 - -
TOTAL DEBT $ 1,712,765 $ - $ 1,712,765
Preferred Stock
Series A cumulative redeemable preferred 8.00% perpetual $ 176,250 - $ 176,250
Series C cumulative convertible redeemable preferred 6.45% perpetual $ 1 00,000 - $ 1 00,000
Debt Statistics
% Fixed Rate Debt 100.0% 100.0%
% Floating Rate Debt 0.0% 0.0%
Average Interest Rate 5.52% 5.52%
Weighted Average Maturity of Debt (includes amounts outstanding on the Credit Facility) (4) 8.4 years 8.4 years
(1) Reflects net additional draws and repayments on our credit facility.
(2) Cross-collateralized loan with life insurance company.
(3) Individual, non cross-collateralized loans.
(4) Assumes the exchangeable senior notes remain outstanding to maturity. If the exchangeable senior notes were redeemed upon the first call date, the weighted
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