IRVINE,
Calif., May 4, 2022 /PRNewswire/ -- Sunstone Hotel
Investors, Inc. (the "Company" or "Sunstone") (NYSE: SHO), the
owner of Long-Term Relevant Real Estate® in the lodging industry,
announced that it has entered into a definitive agreement with an
affiliate of Hyatt Hotels Corporation to acquire the 339-room The
Confidante Miami Beach (the "Hotel"), located on 1.5 acres of
fee-simple, oceanfront land in Miami
Beach for a purchase price of $232
million, or $684,000 per key.
Following the acquisition, the Company expects to pursue a full
transformation of the property and a rebranding of the Hotel to
Andaz Miami Beach.
![The Confidante Miami Beach The Confidante Miami Beach](https://mma.prnewswire.com/media/1810470/Sunshine_Hotel_Confidante.jpg)
The purchase price represents a 17.3x multiple on 2022
forecasted hotel EBITDA and a 5.0% capitalization rate on 2022
forecasted hotel net operating income. In addition to the purchase
price, Sunstone expects to invest approximately $60 million to reposition the Hotel into a
premiere beachfront resort under Hyatt's luxury, lifestyle Andaz
brand. Upon completion of the renovation, the Company expects the
Hotel to generate an 8% to 9% stabilized net operating income yield
on the total investment in the Hotel, including the planned
repositioning. The acquisition will be funded through a combination
of cash on hand and from borrowing on the Company's currently
undrawn revolving credit facility.
Bryan Giglia, Chief Executive
Officer, stated, "We are excited to announce our planned
acquisition of The Confidante Miami Beach where we expect to
generate significant value through an extensive renovation and
rebranding of the Hotel to Andaz Miami Beach. Upon completion of
the planned renovation, we will have transformed the earnings
potential of the Hotel and we will own a premier Miami Beach luxury resort at a highly
attractive all-in basis in a resilient, supply-constrained market
that has continued to demonstrate meaningful rate growth. We are
also excited to further our relationship with Hyatt, one of the
world's premier hotel companies, and be part of the growth of
Hyatt's luxury Andaz brand."
Mr. Giglia continued, "The acquisition of The Confidante Miami
Beach allows us to recycle capital from our recent sales of three
Chicago hotels into this higher
growth and better NAV enhancing investment. This transaction draws
upon our significant in-house expertise and proven track record of
creating value through successful renovations and repositionings,
and returns Sunstone to some of what it does best."
Transaction Rationale
Sunstone believes the acquisition and renovation of the Hotel
will be additive to its stockholders in the following ways:
Value-Add Opportunity: Ability to meaningfully
increase the earnings potential and value of the Hotel through a
full repositioning of the property to create an immersive and
inspiring luxury lifestyle resort experience. Post rebranding, the
Company anticipates significant ADR growth as the property will be
able to better compete with nearby luxury hotels. Sunstone
currently anticipates investing approximately $60 million to renovate all aspects of the Hotel.
The renovation will include relocating the lobby to create a
distinctive oceanview check-in experience, reconcepting the food
& beverage outlets, reinvigorating the pool and backyard
recreation area, modernizing the guestrooms, expanding the suite
mix, and upgrading the meeting and event spaces. The renovation
work is expected to begin in phases, starting in the fourth quarter
of 2022 with completion and rebranding currently expected to occur
in the first half of 2024. The Hotel will remain in operation while
the renovation is completed and will continue to be managed by
Hyatt upon repositioning.
Increases Ownership of LTRR® and Improves Diversity and
Scale: Acquisition of highly desirable, well located
real estate that will grow the Company's portfolio and provide
entry into the attractive Miami
Beach market. Increases exposure to highly rated leisure
demand and provides more balance across the Company's portfolio of
leisure, group-oriented and urban hotels.
Enhances Long-Term Growth Profile: Provides
opportunity to recycle capital from lower growth recent
dispositions into an asset with meaningful earnings growth
potential upon completion of the repositioning. While Sunstone
expects to see significant earnings growth in 2022 and 2023 as
demand across its existing group-oriented and urban hotels return
to more normalized levels, Andaz Miami Beach will allow for
continued outsized growth for the Company in 2024 and beyond upon
the completion of the renovation and rebranding.
More Prudently Utilizes Balance Sheet
Capacity: The acquisition of the Hotel will be funded
with existing cash and from proceeds received from the Company's
currently undrawn revolving credit facility. The Company's balance
sheet maintains additional capacity for debt-funded acquisitions
that can further enhance per share NAV and earnings growth.
Compelling Valuation and Cash Flow
Yield: Upon completion of the repositioning program,
Sunstone anticipates having an all-in basis of approximately
$900,000 per key for a fully
renovated, oceanfront, luxury Miami
Beach resort where valuations for similar assets are well in
excess of $1 million per key. The
Company anticipates an attractive stabilized NOI yield of 8% to 9%
on the total investment in the Hotel including the planned
repositioning.
The Company currently anticipates closing the transaction by the
end of the second quarter 2022. The acquisition of the Hotel is
subject to the satisfaction of customary closing conditions, and
the Company can give no assurance that the acquisition of the Hotel
will close. The forecast amounts referenced in this release are
based on the Company's assumptions of operating performance and the
Company cannot assure you that the forecasts will be achieved.
The term "Hyatt" is used in this release for convenience to
refer to Hyatt Hotels Corporation and/or one or more of its
affiliates.
About Sunstone Hotel Investors:
Sunstone Hotel Investors, Inc. is a lodging real estate
investment trust ("REIT"). Sunstone's strategy is to create
long-term stakeholder value through the acquisition, active
ownership, and disposition of hotels considered to be Long-Term
Relevant Real Estate®. For further information, please visit
Sunstone's website at www.sunstonehotels.com.
For Additional Information:
Aaron Reyes
Chief Financial Officer
Sunstone Hotel Investors, Inc.
(949) 382-3018
View original content to download
multimedia:https://www.prnewswire.com/news-releases/sunstone-hotel-investors-to-acquire-the-confidante-miami-beach-and-reposition-as-andaz-miami-beach-301539949.html
SOURCE Sunstone Hotel Investors, Inc.