Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Sunstone Hotel Investors, Inc. | d8k.htm |
 Company Presentation
June 2011
Exhibit 99.1 |
 1
Forward-Looking Statements
This
presentation
contains
forward-looking
statements
that
have
been made pursuant to
the
provisions
of
the
Private
Securities
Litigation Reform
Act
of
1995.
These
statements
relate
to
future
events
or
our
future
financial
performance.
In
some
cases,
you
can
identify
forward-looking
statements
by
terminology
such
as
“anticipate,”
“believe,”
“continue,”
“could,”
“estimate,”
“expect,”
“intend,”
“may,”
“plan,”
“predict,”
“project,”
“should,”
“will”
or
the
negative
of
such
terms
and
other
comparable
terminology.
These
statements
are
only
predictions.
Actual
events
or
results
may
differ
materially
from
those
expressed
or
implied
by
these
forward-looking
statements.
In
evaluating
these
statements,
you
should
specifically
consider
the
risks
outlined
in
detail
under
the
heading
“Risk
Factors”
in
our
Annual
Report
on
Form
10-K,
filed
with
the
Securities
and
Exchange
Commission
(“SEC”)
on
February
23,
2010,
as
revised
by
the
filing
of
our
Current
Report
on
Form
8-K
on
January
14,
2011,
and
under
the
heading
“Risk
Factors”
on
page
2
of
our
Registration
Statement
on
Form
S-3,
filed
with
the
SEC
on
March
30,
2011,
including,
but
not
limited
to,
the
following
factors:
general
economic
and
business
conditions
affecting
the
lodging
and
travel
industry,
both
nationally
and
locally,
including
a
prolonged
U.S.
recession;
the
need
to
operate
as
a
REIT
and
comply
with
other
applicable
laws
and
regulations;
rising
operating
expenses;
relationships
with
and
requirements
of
franchisors
and
hotel
brands;
relationships
with
and
the
performance
of
the
managers
of
our
hotels;
the
ground
or
air
leases
for
7
of
the
33
hotels;
our
ability
to
complete
acquisitions
and
dispositions;
and
competition
for
the
acquisition
of
hotels.
These
factors
may
cause
our
actual
events
to
differ
materially
from
the
expectations
expressed
or
implied
by
any
forward-looking
statement.
We
do
not
undertake
to
update
any
forward-looking statement.
This
presentation
includes
non-GAAP
financial
information
that
the
issuer
considers
useful
to
investors
as
a
key
measure
of
operating
performance.
A
reconciliation
to
U.S.
GAAP
can
be
found
in
the
Investor
Relations
section
of
the
company’s
website
at
www.sunstonehotels.com. |
 2
Sunstone Mission and Investment Strategy
Sunstone is focused on generating superior, risk-adjusted
shareholder returns through acquiring, asset managing and
capital recycling institutional-quality hotels.
Investment Highlights
High-quality portfolio
of institutional-quality, upper upscale hotels located in the top
U.S. lodging markets
Recently
redefined
management
team
comprised
of
industry
professionals
with
average industry tenure in excess of 20 years
Balanced
and
simple
strategy
focused
on
driving
long-term
shareholder
value
by:
Maximizing portfolio profitability through intensive asset management
Reducing risk through measured improvements in credit statistics
Enhancing portfolio quality through value-adding renovations
Improving portfolio quality, growth potential and scale through disciplined
acquisitions and select dispositions at attractive spreads to our WACC
|
 3
Sunstone Portfolio –
We own…
460-room Hilton Times Square
807-room Renaissance Washington D.C.
494-room Renaissance Orlando
412-room Marriott Long Wharf Boston
460-room Doubletree Guest
Suites Times Square
…thirty-three institutional-quality, primarily upper-upscale
hotels. 1,190-room Hilton San Diego Bayfront
|
 4
Sunstone Portfolio –
We own…
…a geographically diverse portfolio located primarily in coastal,
urban markets.
2010 Total Revenue by Region
(number of hotels in parentheses) |
 5
Sunstone Portfolio –
We own…
Hotel
Rooms
Northeast Region
Marriott Boston Long Wharf
412
Marriott Boston Quincy
464
Doubletree Guest Suites Times Square (Hilton Suites)
(1)
460
Hilton Times Square
460
Renaissance Westchester
347
Marriott West Philadelphia
289
Renaissance Washington, D.C.
807
Marriott Tysons Corner
396
Renaissance Baltimore Harborplace
622
Northeast Total
4,257
Mid-West Region
Embassy Suites Chicago
367
Marriott Troy
350
Doubletree Guest Suites Minneapolis
229
Kahler Grand Rochester
668
Marriott Rochester
203
Kahler Inn & Suites
271
Residence Inn by Marriott Rochester
89
Mid-West Total
2,177
Hotel
Rooms
West Region
Renaissance Long Beach
374
Renaissance Los Angeles Airport
499
Courtyard by Marriott Los Angeles Airport
179
Sheraton Cerritos
203
Hyatt Regency Newport Beach
403
Fairmont Newport Beach
444
Hilton San Diego Bayfront
1,190
Embassy Suites La Jolla
340
Marriott Del Mar
284
Hilton Del Mar
257
Marriott Park City
199
Marriott Portland
249
Valley River Inn
257
West Total
4,878
South Region
Renaissance Orlando at SeaWorld®
781
JW Marriott New Orleans
494
Hilton Houston
480
Marriott Houston
390
South Total
2,145
Total
13,457
(1) Conversion to Hilton Suites is expected to be completed in 2012.
…a geographically diverse portfolio located primarily in coastal,
urban markets. |
 6
Sunstone Portfolio –
We own…
(1) Pro forma Hotel EBITDA and pro forma metrics includes prior ownership of
acquired hotels and 100% ownership of the Hilton San Diego Bayfront.
…a geographically diverse portfolio located primarily in coastal,
urban markets.
Top-10 EBITDA Producing Hotels
(1)
Rooms
1
Hilton San Diego Bayfront
1,190
2
Doubletree Guest Suites Times Square
460
3
Renaissance Washington, D.C.
807
4
Marriott Boston Long Wharf
412
5
Renaissance Orlando
781
6
Hilton Times Square
460
7
Renaissance Baltimore
622
8
Embassy Suites Chicago
367
9
JW Marriott New Orleans
494
10
Embassy Suites La Jolla
340
% of pro forma 2010
(1)
Rooms
44%
Hotel revenue
58%
Hotel EBITDA
67% |
 7
Sunstone Corporate Profile –
We are…
…a top quality lodging REIT with an enterprise value of over $3
billion.
Valuation Sensitivity
A change of:
Would result in a share
price change of:
$10,000 per key
$1.10
1.0x in EBITDA multiple
$1.75
25 bps in capitalization rate
$1.15
2010 Pro Forma & 2011 Guidance
(4)
2010 Pro Forma RevPAR
$114.39
2011 Pro Forma RevPAR Guidance (%)
6.0 -
8.0%
2011 Pro Forma RevPAR Guidance ($)
$121.25 -
$123.50
2010 Pro Forma Adjusted EBITDA
(4)
$203.4M
2011 Adjusted EBITDA Guidance
(4)
$204.0 -
$215.4M
2011 Pro Forma EBITDA Guidance
(5)
$211.1 -
$222.5M
Capital Structure / Valuation Metrics
Shares
117.2 M
Stock Price (June 2, 2011)
$9.81
Equity Market Cap
$1,150 M
Total Mortgage Debt
$1,632 M
Total Corporate Debt
$63 M
Total Preferreds
$391 M
Pro Forma Cash
(1)
($213 M)
TEV
$3,022.2 M
TEV/key
$230,000
2010 pro forma EBITDA Multiple
14.9x
Implied 2011 pro forma EBITDA Multiple
(2)
13.6x -
14.3x
2010 pro forma Cap Rate
(2) (3)
5.7%
Implied 2011 pro forma Cap Rate
(2) (3)
5.9% -
6.3% |
 8
Sunstone Corporate Profile –
We are…
…
increasing our cash flow through disciplined internal and
external investments and proactive asset management.
Pro Forma Adjusted Corporate EBITDA Buildup |
 9
Ken Cruse
President
(1)
Marc Hoffman
EVP & COO
Lindsay Monge
SVP –
Treasury &
Administration
Guy Lindsey
SVP –
Design &
Construction
Bryan Giglia
SVP –
Finance
John Arabia
EVP & CFO
Robert Springer
SVP –
Acquisitions
Experienced Management Team –
We are…
…a cohesive management team singularly focused on
driving shareholder value.
Hotel/Real Estate: 20 years
Hotel/Real Estate: 34 years
Hotel/Real Estate: 24 years
Hotel/Real Estate: 27 years
Hotel/Real Estate: 12 years
Hotel/Real Estate: 15 years
Hotel/Real Estate: 15 years
(1) Formal transition to CEO expected during 2011. |
 10
Sunstone Corporate Profile –
We have…
…a significant opportunity to improve valuation by removing
overhang issues and unlocking our portfolio’s intrinsic value.
Management transition –
we will build investor confidence by completing
our leadership transition and consistently executing on our business plan
Improving operations –
we believe our recently completed or in-process
renovations combined with our redefined hotel operating models will produce
meaningful RevPAR index gains, margin expansion and cash flow growth
Credit enhancement –
by continuing to improve our credit statistics and
reducing our leverage, we will reduce corporate risk and provide
greater
flexibility
Dividend reintroduction –
improved cash flow from both internal and
external growth initiatives is likely to result in a reintroduction of our common
dividend beginning in 2011 |
 11
Sunstone Portfolio –
We expect…
…our portfolio to generate significant internal growth over
the next several years, driven by:
Cyclical recovery –
we are in the early stages of what we believe will be a
strong and prolonged recovery. PKF expects a 6 -
7% RevPAR CAGR (2010
–
2015)
Renovations
–
we expect our recently completed and in-process
renovations will result in RevPAR index gains and meaningful cash flow
growth
Asset management –
our redefined hotel operating model drove significant
margin expansion as compared to prior trough. We expect margins to
continue to benefit from new efficiencies resulting in margin expansion over
prior peak |
 12
Sunstone Portfolio –
We are…
Rebranding Doubletree Times Square to Hilton Suites Times Square
Capitalize on the strength of a higher-rated brand with international
draw Control of all Times Square Hilton branded product
Conversion expected following a renovation of the hotel (anticipated completion in
Q2 2012) Complexed Times Square Hotels under Highgate management
Maximize RevPAR and minimize overhead costs across our combined 920 rooms within
the Times Square sub-market
…enhancing the value of our portfolio. |
 13
Sunstone Portfolio –
We have…
…completed, or are about to complete, significant renovations
throughout our portfolio.
In 2011, we expect to invest approximately $100 –
115 million
renovating and repositioning our portfolio.
1Q 2011 completed projects include:
Embassy Suites Chicago –
guestrooms/bathrooms
Marriott Boston Quincy –
guestrooms/bathrooms/lobby
Marriott Tysons Corner –
guestrooms/bathrooms/exterior
Sheraton Cerritos –
guestrooms
Marriott Rochester –
guestrooms/bathrooms/lobby
Marriott Houston –
guestrooms/bathrooms
Kahler Grand –
guestrooms/bathrooms/meeting space
Doubletree Minneapolis –
guestrooms/bathrooms/lobby |
 14
Sunstone Portfolio –
Recent Renovations |
 15
Proven Acquisitions Execution –
We have acquired…
…major urban hotels at attractive spreads to our
WACC, primarily sourced in off-market deals: |
 16
460-key premier Times Square location
540 square foot standard rooms
Upscaling to Hilton Suites after renovation
Managed by Highgate Hotels
All-in acquisition cost of $286.0 million or
$622,000
per
key
(approximately
$500,000
per
key
net
of
signage
value)
Acquisition price effectively reduced by $27
million as a result of Sunstone’s acquisition of
mezzanine debt at a significant discount in 2010
14.7x multiple on 2010 EBITDA
Assumed $270.0 million, floating-rate non-
recourse senior mortgage at LIBOR + 115 bps
Strong market dynamics
Benefits from both business and leisure demand
generators resulting in high-90’s occupancy
Complexed with Sunstone’s Hilton Times Square
(both managed by Highgate)
Proven Acquisitions Execution –
We acquired…
…the Doubletree Guest Suites Times Square on January 14, 2011:
|
 17
494-key luxury hotel centrally located in
downtown New Orleans
Managed by Marriott
All-in acquisition cost of $94.3 million or
$190,000 per key
12.8x multiple on 2010 EBITDA
Assumed $42.2 million, fixed 5.45% non-
recourse senior mortgage
Strong Market Dynamics
New Orleans ranked first out of the top-25 US
markets in terms of 2010 RevPAR growth
Growth trends expected to outperform through
2014
Off-market transaction sourced through
industry relationship
Proven Acquisitions Execution –
We acquired…
…the JW Marriott New Orleans on February 15, 2011: |
 18
1,190-key upper-upscale hotel centrally
located in downtown San Diego
Top-quality convention property
Managed by Hilton
Acquisition value of $475.0 million (based
on 100%) or $399,000 per key
13.7x multiple on 2010 EBITDA
$240.0 million, non-recourse senior mortgage at
LIBOR + 325 bps
Strong Market Dynamics
San Diego ranks fourth out of 50 U.S. lodging
markets in terms of projected compounded
average
annual
RevPAR
growth
for
2010–2014
(1)
Provides balance to Sunstone’s large east
coast convention hotels
(1) Estimated at 8.4% according to PKF Hospitality Research.
Proven Acquisitions Execution –
We acquired…
…75% ownership of the Hilton San Diego Bayfront on April 15, 2011:
|
 19
…maintaining our strong liquidity and access to capital,
increasing our financial flexibility and lowering our cost of
capital through a gradual and methodical reduction of our
leverage:
Balance Sheet Management –
We are focused on…
Highly equitized acquisitions that will enhance our growth profile
Debt reduction through capital recycling
Improving cash flow during the cyclical recovery
We will not issue equity at prices below our estimate of the
intrinsic value of our portfolio simply to achieve our balance
sheet objectives. |
 20
Measured improvement of leverage profile
•
Cyclical cash flow growth
•
Transactions structured with higher equity content
Long-term focus: build strength, flexibility, and positioning over several
years •
18-month credit target: 1.65x Fixed Charge Coverage, 6.0x Debt to EBITDA
Position
Sunstone
to
capitalize
on
opportunities
during
the
next
cyclical
trough
Balance Sheet Management –
We are focused on…
…achieving our credit objectives: |
 21
Balance Sheet Management –
We are focused on…
…maintaining a well staggered debt maturity schedule consisting of
low rated, primarily property-secured, non-recourse debt:
|
 22
Sunstone Mission and Investment Strategy
Sunstone is focused on generating superior, risk-adjusted
shareholder returns through acquiring, asset managing and
capital recycling institutional-quality hotels.
Investment Highlights
High-quality portfolio
of institutional-quality, upper upscale hotels located in the top
U.S. lodging markets
Recently
redefined
management
team
comprised
of
industry
professionals
with
average industry tenure in excess of 20 years
Balanced
and
simple
strategy
focused
on
driving
long-term
shareholder
value
by:
Maximizing portfolio profitability through intensive asset management
Reducing risk through measured improvements in credit statistics
Enhancing portfolio quality through value-adding renovations
Improving portfolio quality, growth potential and scale through disciplined
acquisitions and select dispositions at attractive spreads to our WACC
|
 Appendix |
 24
…likely to reintroduce common dividends in 2011.
Sunstone Corporate Profile –
We are…
2011 Taxable Income Projection
2011 Guidance
(1)
Midpoint of 2011 Adjusted EBITDA Guidance
(1)
$209,700
Interest expense
78,500
Amortization of deferred financing
2,400
Tax depreciation
(2)
92,000
Preferred dividends
27,400
Estimated 2011 Taxable Income to Common Shareholders
(3)
$9,400 |
 25
Sunstone 33-Hotel Portfolio
Hotel
State
Region
Chain
Scale
Service
Rooms
Manager
Segment
(1)
Category
West Region
Renaissance Long Beach
California
West
Upper Upscale
Full Service
374
Marriott
Renaissance Los Angeles Airport
California
West
Upper Upscale
Full Service
499
Marriott
Courtyard by Marriott Los Angeles Airport
California
West
Upscale
Select Service
179
Interstate SHP
Sheraton Cerritos
California
West
Upper Upscale
Full Service
203
Interstate SHP
Hyatt Regency Newport Beach
California
West
Upper Upscale
Full Service
403
Hyatt
Fairmont Newport Beach
California
West
Luxury
Full Service
444
Fairmont
Hilton San Diego Bayfront
California
West
Upper Upscale
Full Service
1,190
Hilton
Embassy Suites La Jolla
California
West
Upper Upscale
Extended Stay
340
Hilton
Marriott Del Mar
California
West
Upper
Upscale
Full
Service
284
Marriott
Hilton Del Mar
California
West
Upper Upscale
Full Service
257
Sage
Marriott Park City
Utah
West
Upper Upscale
Full Service
199
Interstate SHP
Marriott Portland
Oregon
West
Upper Upscale
Full Service
249
Interstate SHP
Valley River Inn
Oregon
West
Upscale
Full Service
257
Interstate SHP
West Total
West Total
4,878
Northeast Region
Marriott Boston Long Wharf
Massachusetts
Northeast
Upper Upscale
Full Service
412
Marriott
Marriott Boston Quincy
Massachusetts
Northeast
Upper Upscale
Full Service
464
Marriott
Doubletree Guest Suites Times Square (Hilton Suites)
(1)
New York
Northeast
Upscale
Full Service
460
Highgate
Hilton Times Square
New York
Northeast
Upper Upscale
Full Service
460
Highgate
Renaissance Westchester
New York
Northeast
Upper Upscale
Full Service
347
Marriott
Marriott West Philadelphia
Pennsylvania
Northeast
Upper Upscale
Full Service
289
Marriott
Renaissance Washington, D.C.
District of Columbia
Northeast
Upper Upscale
Full Service
807
Marriott
Marriott Tysons Corner
Virginia
Northeast
Upper Upscale
Full Service
396
Marriott
Renaissance Baltimore Harborplace
Maryland
Northeast
Upper Upscale
Full Service
622
Marriott
Northeast Total
Northeast Total
4,257
Mid-West Region
Embassy Suites Chicago
Illinois
Mid-West
Upper Upscale
Extended Stay
367
Davidson
Marriott Troy
Michigan
Mid-West
Upper Upscale
Full Service
350
Marriott
Doubletree Guest Suites Minneapolis
Minnesota
Mid-West
Upscale
Full Service
229
Interstate SHP
Kahler Grand Rochester
Minnesota
Mid-West
Upscale
Full Service
668
Interstate SHP
Marriott Rochester
Minnesota
Mid-West
Upper Upscale
Full Service
203
Interstate SHP
Kahler Inn & Suites
Minnesota
Mid-West
Midscale
with
F/B
Extended Stay
271
Interstate SHP
Residence Inn by Marriott Rochester
Minnesota
Mid-West
Upscale
Extended Stay
89
Interstate SHP
Mid-West Total
Mid-West Total
2,177
South Region
Renaissance Orlando at SeaWorld®
Florida
South
Upper Upscale
Full Service
781
Marriott
JW Marriott New Orleans
Louisiana
South
Luxury
Full Service
494
Marriott
Hilton Houston
Texas
South
Upper Upscale
Full Service
480
Interstate SHP
Marriott Houston
Texas
South
Upper
Upscale
Full
Service
390
Interstate SHP
South Total
South Total
2,145
Total
13,457
(1) Conversion to Hilton Suites is expected to be completed in 2012.
|
 26
Sunstone Portfolio –
We have…
…completed, or are about to complete, significant renovations throughout our
portfolio. Marriott Boston Long Wharf lobby renderings:
|
 27
Sunstone Portfolio –
We have…
…completed, or are about to complete, significant renovations throughout our
portfolio. Renaissance Long Beach completed lobby renovation:
|
 28
Sunstone Portfolio –
We have…
…completed, or are about to complete, significant renovations throughout our
portfolio. Renaissance Washington D.C. completed lobby renovation:
|
 29
Sunstone Portfolio –
We have…
…completed, or are about to complete, significant renovations throughout our
portfolio. Philadelphia Marriott completed lobby renovation:
|
 30
Sunstone Portfolio –
We have…
…completed, or are about to complete, significant renovations throughout our
portfolio. Boston Marriott Quincy completed rooms and public space
renovation: |
 31
Sunstone Portfolio –
We have…
…completed, or are about to complete, significant renovations throughout our
portfolio. Embassy Suites Chicago completed rooms renovation:
|
 32
Sunstone Portfolio –
We have…
…completed, or are about to complete, significant renovations throughout our
portfolio. Doubletree Minneapolis completed rooms and public space
renovation: |
 33
Sunstone Portfolio –
We have…
…completed, or are about to complete, significant renovations throughout our
portfolio. Renaissance Orlando themed pool experience and 10,000
sq. ft. function
lawn -
2Q 2011 estimated completion date: |