Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - Sunstone Hotel Investors, Inc. | a14-3226_18ka.htm |
| EX-23.1 - EX-23.1 - Sunstone Hotel Investors, Inc. | a14-3226_1ex23d1.htm |
| EX-99.1 - EX-99.1 - Sunstone Hotel Investors, Inc. | a14-3226_1ex99d1.htm |
Exhibit 99.2
Sunstone Hotel Investors, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated financial statements as of September 30, 2013 and for the nine months ended September 30, 2013 and the year ended December 31, 2012 give effect to the acquisition of the Hyatt Regency San Francisco on December 2, 2013, as well as the issuance of common stock on November 1, 2013, which proceeds were used to acquire the hotel.
For purposes of the unaudited pro forma consolidated balance sheet as of September 30, 2013, the acquisition and issuance of common stock are treated as if the transactions occurred on September 30, 2013. For purposes of the unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2013 and the year ended December 31, 2012, the transactions are treated as if they occurred on January 1, 2012.
In the opinion of Sunstone’s management, all significant adjustments necessary to reflect the effects of the transactions that can be factually supported within the SEC regulations covering the preparation of pro forma financial statements have been made.
The unaudited pro forma condensed consolidated financial statements and related notes are presented for informational purposes only and do not purport to represent our financial position or results of operations as if the transactions had occurred on the dates discussed above. They also do not project or forecast our consolidated financial position or results of operations for any future date or period.
The unaudited pro forma condensed consolidated financial statements should be read together with our historical consolidated financial statements and related notes included in our Quarterly Report on Form 10-Q for the nine months ended September 30, 2013, filed with the SEC on November 12, 2013, as well as our Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on February 25, 2013. The pro forma adjustments are based on available information and upon assumptions that we believe are reasonable; however, we cannot assure you that actual results will not differ from the pro forma information and perhaps in material and adverse ways.
SUNSTONE HOTEL INVESTORS, INC.
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2013
(In thousands, except share data)
|
|
|
Sunstone Hotel |
|
Dune/DiNapoli |
|
Pro Forma |
|
Sunstone Hotel |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
ASSETS |
|
|
|
|
|
|
|
|
| ||||
|
Current assets: |
|
|
|
|
|
|
|
|
| ||||
|
Cash and cash equivalents |
|
$ |
100,225 |
|
$ |
5,578 |
|
$ |
(3,247 |
)(C) |
$ |
102,556 |
|
|
Restricted cash |
|
84,139 |
|
4,419 |
|
1,042 |
(C) |
89,600 |
| ||||
|
Accounts receivable, net |
|
41,223 |
|
2,236 |
|
(2,236 |
)(D) |
41,223 |
| ||||
|
Inventories |
|
1,288 |
|
— |
|
— |
|
1,288 |
| ||||
|
Prepaid expenses |
|
10,815 |
|
175 |
|
27 |
(E) |
11,017 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Total current assets |
|
237,690 |
|
12,408 |
|
(4,414 |
) |
245,684 |
| ||||
|
Investment in hotel properties, net |
|
2,977,049 |
|
153,299 |
|
109,377 |
(F) |
3,239,725 |
| ||||
|
Deferred financing fees, net |
|
9,955 |
|
330 |
|
(330 |
)(D) |
9,955 |
| ||||
|
Goodwill |
|
9,405 |
|
— |
|
— |
|
9,405 |
| ||||
|
Other assets, net |
|
21,587 |
|
1,669 |
|
(1,669 |
)(D) |
21,587 |
| ||||
|
Total assets |
|
$ |
3,255,686 |
|
$ |
167,706 |
|
$ |
102,964 |
|
$ |
3,526,356 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
| ||||
|
Current liabilities: |
|
|
|
|
|
|
|
|
| ||||
|
Accounts payable and accrued expenses |
|
$ |
25,806 |
|
$ |
1,873 |
|
$ |
(1,873 |
)(D) |
$ |
25,806 |
|
|
Accrued payroll and employee benefits |
|
28,650 |
|
— |
|
— |
|
28,650 |
| ||||
|
Dividends payable |
|
10,444 |
|
— |
|
— |
|
10,444 |
| ||||
|
Other current liabilities |
|
36,097 |
|
24 |
|
329 |
(E) |
36,450 |
| ||||
|
Current portion of notes payable |
|
23,351 |
|
— |
|
— |
|
23,351 |
| ||||
|
Total current liabilities |
|
124,348 |
|
1,897 |
|
(1,544 |
) |
124,701 |
| ||||
|
Notes payable, less current portion |
|
1,387,006 |
|
130,000 |
|
(130,000 |
)(D) |
1,387,006 |
| ||||
|
Capital lease obligations, less current portion |
|
15,594 |
|
— |
|
— |
|
15,594 |
| ||||
|
Other liabilities |
|
39,901 |
|
— |
|
— |
|
39,901 |
| ||||
|
Total liabilities |
|
1,566,849 |
|
131,897 |
|
(131,544 |
) |
1,567,202 |
| ||||
|
Commitments and contingencies |
|
— |
|
— |
|
— |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Equity: |
|
|
|
|
|
|
|
|
| ||||
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
| ||||
|
Preferred stock, $0.01 par value, 100,000,000 shares authorized. 8.0% Series D Cumulative Redeemable Preferred Stock, 4,600,000 shares issued and outstanding at September 30, 2013, stated at liquidation preference of $25.00 per share |
|
115,000 |
|
— |
|
— |
|
115,000 |
| ||||
|
Common stock, $0.01 par value, 500,000,000 shares authorized, 160,855,950 shares issued and outstanding at September 30, 2013, 180,855,950 pro forma issued and outstanding at September 30, 2013 |
|
1,609 |
|
— |
|
200 |
(G) |
1,809 |
| ||||
|
Additional paid in capital |
|
1,796,656 |
|
— |
|
270,499 |
(G) |
2,067,155 |
| ||||
|
Retained earnings |
|
219,837 |
|
— |
|
(382 |
)(H) |
219,455 |
| ||||
|
Cumulative dividends |
|
(500,001 |
) |
— |
|
— |
|
(500,001 |
) | ||||
|
Members’ equity |
|
— |
|
35,809 |
|
(35,809 |
)(I) |
— |
| ||||
|
Total stockholders’ equity |
|
1,633,101 |
|
35,809 |
|
234,508 |
|
1,903,418 |
| ||||
|
Non-controlling interest in consolidated joint ventures |
|
55,736 |
|
— |
|
— |
|
55,736 |
| ||||
|
Total equity |
|
1,688,837 |
|
35,809 |
|
234,508 |
|
1,959,154 |
| ||||
|
Total liabilities and equity |
|
$ |
3,255,686 |
|
$ |
167,706 |
|
$ |
102,964 |
|
$ |
3,526,356 |
|
See accompanying notes to pro forma unaudited condensed consolidated financial statements.
SUNSTONE HOTEL INVESTORS, INC.
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013
(In thousands, except per share data)
|
|
|
Sunstone Hotel |
|
Dune/DiNapoli |
|
Pro Forma |
|
Sunstone Hotel |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
REVENUES |
|
|
|
|
|
|
|
|
| ||||
|
Room |
|
$ |
482,591 |
|
$ |
46,321 |
|
$ |
— |
|
$ |
528,912 |
|
|
Food and beverage |
|
155,550 |
|
14,961 |
|
— |
|
170,511 |
| ||||
|
Other operating |
|
41,788 |
|
3,103 |
|
— |
|
44,891 |
| ||||
|
Total revenues |
|
679,929 |
|
64,385 |
|
— |
|
744,314 |
| ||||
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
| ||||
|
Room |
|
124,338 |
|
15,235 |
|
— |
|
139,573 |
| ||||
|
Food and beverage |
|
108,067 |
|
14,630 |
|
— |
|
122,697 |
| ||||
|
Other operating |
|
12,413 |
|
1,857 |
|
— |
|
14,270 |
| ||||
|
Advertising and promotion |
|
34,766 |
|
3,956 |
|
— |
|
38,722 |
| ||||
|
Repairs and maintenance |
|
26,043 |
|
3,408 |
|
— |
|
29,451 |
| ||||
|
Utilities |
|
20,207 |
|
1,666 |
|
— |
|
21,873 |
| ||||
|
Franchise costs |
|
24,019 |
|
— |
|
— |
|
24,019 |
| ||||
|
Property tax, ground lease and insurance |
|
58,200 |
|
3,720 |
|
— |
|
61,920 |
| ||||
|
Property general and administrative |
|
75,961 |
|
7,497 |
|
(346 |
)(J) |
83,112 |
| ||||
|
Corporate overhead |
|
20,116 |
|
— |
|
— |
|
20,116 |
| ||||
|
Depreciation and amortization |
|
101,241 |
|
5,852 |
|
2,356 |
(K) |
109,449 |
| ||||
|
Total operating expenses |
|
605,371 |
|
57,821 |
|
2,010 |
|
665,202 |
| ||||
|
Operating income (loss) |
|
74,558 |
|
6,564 |
|
(2,010 |
) |
79,112 |
| ||||
|
Interest and other income |
|
2,078 |
|
— |
|
— |
|
2,078 |
| ||||
|
Interest expense |
|
(53,540 |
) |
(8,145 |
) |
8,145 |
(L) |
(53,540 |
) | ||||
|
Loss on extinguishment of debt |
|
(44 |
) |
— |
|
— |
|
(44 |
) | ||||
|
Income (loss) before income taxes |
|
23,052 |
|
(1,581 |
) |
6,135 |
|
27,606 |
| ||||
|
Income tax provision |
|
(6,710 |
) |
— |
|
— |
|
(6,710 |
) | ||||
|
Income (loss) from continuing operations |
|
16,342 |
|
(1,581 |
) |
6,135 |
|
20,896 |
| ||||
|
Income from consolidated joint venture attributable to non-controlling interest |
|
(3,291 |
) |
— |
|
— |
|
(3,291 |
) | ||||
|
Distributions to non-controlling interest |
|
(24 |
) |
— |
|
— |
|
(24 |
) | ||||
|
Dividends paid on unvested restricted stock compensation |
|
(101 |
) |
— |
|
— |
|
(101 |
) | ||||
|
Preferred stock dividends and redemption charges |
|
(16,713 |
) |
— |
|
— |
|
(16,713 |
) | ||||
|
Undistributed income allocated to unvested restricted stock compensation |
|
(295 |
) |
— |
|
— |
|
(295 |
) | ||||
|
INCOME AVAILABLE (LOSS ATTRIBUTABLE) TO COMMON STOCKHOLDERS |
|
$ |
(4,082 |
) |
$ |
(1,581 |
) |
$ |
6,135 |
|
$ |
472 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic and diluted income available (loss attributable) to common stockholders per common share |
|
$ |
(0.02 |
) |
|
|
|
|
$ |
— |
| ||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic and diluted weighted average common shares outstanding |
|
157,628 |
|
|
|
20,000 |
(M) |
177,628 |
| ||||
See accompanying notes to pro forma unaudited condensed consolidated financial statements.
SUNSTONE HOTEL INVESTORS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2012
(In thousands, except per share data)
|
|
|
Sunstone Hotel |
|
Dune/DiNapoli |
|
Pro Forma |
|
Sunstone Hotel |
| ||||
|
|
|
|
|
|
|
(unaudited) |
|
(unaudited) |
| ||||
|
REVENUES |
|
|
|
|
|
|
|
|
| ||||
|
Room |
|
$ |
576,146 |
|
$ |
54,770 |
|
$ |
— |
|
$ |
630,916 |
|
|
Food and beverage |
|
200,810 |
|
19,409 |
|
— |
|
220,219 |
| ||||
|
Other operating |
|
52,128 |
|
7,034 |
|
— |
(N) |
59,162 |
| ||||
|
Total revenues |
|
829,084 |
|
81,213 |
|
— |
|
910,297 |
| ||||
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
| ||||
|
Room |
|
147,932 |
|
19,669 |
|
— |
|
167,601 |
| ||||
|
Food and beverage |
|
139,106 |
|
18,702 |
|
— |
|
157,808 |
| ||||
|
Other operating |
|
16,162 |
|
2,556 |
|
— |
|
18,718 |
| ||||
|
Advertising and promotion |
|
42,474 |
|
4,751 |
|
— |
|
47,225 |
| ||||
|
Repairs and maintenance |
|
32,042 |
|
4,432 |
|
— |
|
36,474 |
| ||||
|
Utilities |
|
25,596 |
|
2,267 |
|
— |
|
27,863 |
| ||||
|
Franchise costs |
|
30,067 |
|
— |
|
— |
|
30,067 |
| ||||
|
Property tax, ground lease and insurance |
|
66,830 |
|
4,400 |
|
— |
|
71,230 |
| ||||
|
Property general and administrative |
|
94,642 |
|
9,486 |
|
(471 |
)(J) |
103,657 |
| ||||
|
Corporate overhead |
|
24,316 |
|
— |
|
— |
|
24,316 |
| ||||
|
Depreciation and amortization |
|
130,907 |
|
7,403 |
|
3,541 |
(K) |
141,851 |
| ||||
|
Total operating expenses |
|
750,074 |
|
73,666 |
|
3,070 |
|
826,810 |
| ||||
|
Operating income (loss) |
|
79,010 |
|
7,547 |
|
(3,070 |
) |
83,487 |
| ||||
|
Interest and other income |
|
297 |
|
— |
|
— |
|
297 |
| ||||
|
Interest expense |
|
(76,821 |
) |
(10,948 |
) |
10,948 |
(L) |
(76,821 |
) | ||||
|
Loss on extinguishment of debt |
|
(191 |
) |
— |
|
— |
|
(191 |
) | ||||
|
Income (loss) before income taxes |
|
2,295 |
|
(3,401 |
) |
7,878 |
|
6,772 |
| ||||
|
Income tax provision |
|
(1,148 |
) |
— |
|
— |
|
(1,148 |
) | ||||
|
Income (loss) from continuing operations |
|
1,147 |
|
(3,401 |
) |
7,878 |
|
5,624 |
| ||||
|
Income from consolidated joint venture attributable to non-controlling interest |
|
(1,761 |
) |
— |
|
— |
|
(1,761 |
) | ||||
|
Distributions to non-controlling interest |
|
(31 |
) |
— |
|
— |
|
(31 |
) | ||||
|
Preferred stock dividends |
|
(29,748 |
) |
— |
|
— |
|
(29,748 |
) | ||||
|
Undistributed income allocated to unvested restricted stock compensation |
|
(203 |
) |
— |
|
— |
|
(203 |
) | ||||
|
INCOME AVAILABLE (LOSS ATTRIBUTABLE) TO COMMON STOCKHOLDERS |
|
$ |
(30,596 |
) |
$ |
(3,401 |
) |
$ |
7,878 |
|
$ |
(26,119 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic and diluted loss attributable to common stockholders per common share |
|
$ |
(0.24 |
) |
|
|
|
|
$ |
(0.18 |
) | ||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic and diluted weighted average common shares outstanding |
|
127,027 |
|
|
|
20,000 |
(M) |
147,027 |
| ||||
See accompanying notes to pro forma unaudited condensed consolidated financial statements.
SUNSTONE HOTEL INVESTORS, INC.
NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The pro forma unaudited condensed consolidated financial statements should be read in conjunction with the respective historical financial statements and the notes thereto of Sunstone Hotel Investors, Inc. (the “Company”) and Dune/DiNapoli SFHR LLC, Dune/DiNapoli SFHR Operator LLC and Subsidiaries (together the “Prior Owner”) as of September 30, 2013 and for the nine months ended September 30, 2013 and the year ended December 31, 2012 that are incorporated herein.
(A) Represents the Prior Owner’s historical combined financial statements of the Hyatt Regency San Francisco (the “Acquired Hotel”) as of September 30, 2013, and for the nine months ended September 30, 2013 and the year ended December 31, 2012, which have been presented based on the financial statement classification utilized by the Company.
(B) Represents the pro forma adjustments that are necessary to reflect the purchase and adjustment in the Company’s cost basis of the Acquired Hotel, as well as the Company’s issuance of 20,000,000 shares of its common stock. On December 2, 2013, the Company acquired the 802-room Hyatt Regency San Francisco for a gross purchase price of $262.5 million, excluding closing costs and prorations. The acquisition was funded with proceeds from the Company’s November 1, 2013 issuance of common stock. The calculation of the total net purchase price is as follows (in thousands):
|
Gross purchase price |
|
$ |
262,500 |
|
|
Purchase price adjustments, net |
|
5,486 |
| |
|
Total purchase price, net |
|
$ |
267,986 |
|
The fair values of the Acquired Hotel’s assets were allocated based on an independent third-party analysis. The allocation of the purchase price and adjustments are summarized below (in thousands):
|
Assets: |
|
|
| |
|
Restricted cash |
|
$ |
5,461 |
|
|
Prepaid expenses |
|
202 |
| |
|
Investment in hotel property |
|
262,676 |
| |
|
Total assets acquired |
|
268,339 |
| |
|
Liabilities: |
|
|
| |
|
Accounts payable and accrued expenses |
|
353 |
| |
|
Total liabilities assumed |
|
353 |
| |
|
Total purchase price, net |
|
$ |
267,986 |
|
Total fees and costs of the acquisition are as follows (in thousands):
|
Closing costs |
|
$ |
49 |
|
|
Legal, accounting and other fees and costs |
|
333 |
| |
|
Total fees and costs |
|
$ |
382 |
|
Total fees and costs of the acquisition include legal, accounting and other fees and costs that have been or will be expensed. These charges are directly attributable to the acquisition and represent non-recurring costs. The anticipated impact on the results of operations, therefore, was excluded from the pro forma unaudited statements of operations.
(C) Adjustments to cash and cash equivalents include the following (in thousands):
|
Cash paid for the Acquired Hotel |
|
$ |
(267,986 |
) |
|
Closing costs |
|
(49 |
) | |
|
Legal, accounting and other fees and costs |
|
(333 |
) | |
|
Cash not acquired in the transaction |
|
(5,578 |
) | |
|
Net proceeds received from November 2013 common stock offering |
|
270,699 |
| |
|
Total adjustments to cash and cash equivalents |
|
$ |
(3,247 |
) |
SUNSTONE HOTEL INVESTORS, INC.
NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Adjustments to restricted cash include the following (in thousands):
|
Purchase price adjustment — cash held for future capital expenditures |
|
$ |
2,180 |
|
|
Purchase price adjustment — cash held for potential transfer tax |
|
3,281 |
| |
|
Restricted cash not acquired in the transaction |
|
(4,419 |
) | |
|
Total adjustments to restricted cash |
|
$ |
1,042 |
|
(D) The following adjustments are due to the Company not acquiring or assuming the Prior Owner’s assets and liabilities (in thousands):
|
Accounts receivable, net |
|
$ |
(2,236 |
) |
|
|
|
|
| |
|
Deferred financing fees, net |
|
$ |
(330 |
) |
|
|
|
|
| |
|
Other assets, net |
|
$ |
(1,669 |
) |
|
|
|
|
| |
|
Accounts payable and accrued expenses |
|
$ |
(1,873 |
) |
|
|
|
|
| |
|
Notes payable, less current portion |
|
$ |
(130,000 |
) |
(E) Other adjustments to the Company’s balance sheet include the following (in thousands):
Prepaid expenses:
|
Purchase price adjustment — property taxes prepaid by Prior Owner |
|
$ |
202 |
|
|
Prepaid expenses not acquired in the transaction |
|
(175 |
) | |
|
Total adjustments to prepaid expenses |
|
$ |
27 |
|
Other current liabilities:
|
Purchase price adjustment — Prior Owner’s portion of sales tax accrued at acquisition |
|
$ |
177 |
|
|
Company’s portion of sales tax accrued at acquisition |
|
176 |
| |
|
Other current liabilities not assumed in the transaction |
|
(24 |
) | |
|
Total adjustments to other current liabilities |
|
$ |
329 |
|
(F) Adjustment to investment in hotel properties, net includes an addition of $109.4 million to reflect the step up to fair value of the hotel assets acquired.
(G) The acquisition of the Acquired Hotel was funded by the Company’s issuance of 20,000,000 shares of its common stock on November 1, 2013. Details of this stock issuance are as follows (in thousands):
|
20,000,000 shares of $0.01 par value common stock |
|
$ |
200 |
|
|
Adjustment to additional paid in capital |
|
270,499 |
| |
|
Net proceeds received from issuance of common stock |
|
$ |
270,699 |
|
(H) Reflects total fees and costs of the acquisition including legal, accounting and other fees and costs which are not already reflected in the historical financial statements. These charges are directly attributable to the acquisition and represent non-recurring costs.
SUNSTONE HOTEL INVESTORS, INC.
NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(I) Reflects the elimination of all components of the historical equity of the Prior Owner as of September 30, 2013.
(J) During the nine months ended September 30, 2013 and the year ended December 31, 2012, the Prior Owner incurred $0.3 million and $0.5 million, respectively, related to asset management fees. As these charges represent non-recurring costs, the anticipated impact on the results of operations during both the nine months ended September 30, 2013 and the year ended December 31, 2012 were excluded from the pro forma unaudited financial statements.
(K) Reflects estimates of additional depreciation of $2.4 million for the nine months ended September 30, 2013, and $3.5 million for the year ended December 31, 2012, related to the fair value adjustment of the Acquired Hotel. The Company calculates depreciation using the straight-line method over estimated useful lives primarily ranging from five to 35 years for buildings and improvements and three to 12 years for furniture, fixtures and equipment.
(L) Reflects the reversal of interest expense recorded by the Prior Owner during the nine months ended September 30, 2013 and the year ended December 31, 2012 as the Company intends to own the Acquired Hotel unencumbered of debt.
(M) Reflects 20,000,000 shares of common stock issued by the Company on November 1, 2013.
(N) Other operating revenue presented in the Prior Owner’s historical 2012 statement of operations includes non-recurring income of $2.8 million related to certain litigation as well as a prior year tax refund, which has not been eliminated from the pro forma unaudited financial statements.