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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
July 28, 1998
SUNSTONE ANNOUNCES SECOND QUARTER 1998 RESULTS
SECOND QUARTER HIGHLIGHTS:
* 31.0% INCREASE IN FFO PER SHARE TO $.38 PER SHARE * 215% INCREASE IN REVENUES
* 152% INCREASE IN FUNDS FROM OPERATIONS (FFO) * 4.3% INCREASE IN REVENUE PER
AVAILABLE ROOM (REVPAR) FOR ENTIRE PORTFOLIO * FOUR HOTELS ACQUIRED FOR $59.0
MILLION * $15.7 MILLION INVESTED IN RENOVATIONS * 2 FULL SERVICE HOTELS BRANDED
WITH MARRIOTT FLAG * TWELFTH CONSECUTIVE DIVIDEND DECLARED
SAN CLEMENTE, Calif., July 28 /PRNewswire/ -- Sunstone Hotel Investors, Inc.
(NYSE: SSI news), a real estate investment trust (REIT), today announced strong
financial and operating results for the quarter ended June 30, 1998. The strong
results are due to the continued success of the Company's acquisition,
renovation, rebranding and repositioning strategy.
Primarily due to Sunstone's rapid acquisition pace, the Company reported 215%
growth in revenues for the second quarter of 1998, to $24.9 million from $7.9
million for the second quarter of 1997. Additionally, the Company reported 4.3%
REVPAR growth for its entire hotel portfolio on a same-unit-sales basis in the
second quarter of 1998 over the corresponding quarter of 1997. Sunstone's
acquisition and renovation strategy resulted in FFO growth of 152% for the
second quarter of 1998 over the second quarter of 1997, to $15.6 million from
$6.2 million and, on a per share basis, to $.38 per share from $.29 per share, a
31.0% increase.
Robert Alter, Chairman and Chief Executive Officer, said, "We are very pleased
with our second quarter results. The Company continues to benefit from the
successful execution of our growth strategy. During this quarter, we acquired
four hotels for $59.0 million, invested $15.7 million renovating recently
acquired hotels and continued to improve the operations of our hotel portfolio.
These accomplishments and the imbedded value from our recently renovated hotels
cause us to maintain a positive operating outlook for the rest of 1998."
Strong Revenue Performance
Sunstone announced strong revenue growth for the second quarter of 1998. On a
same-unit-sales basis, the Company achieved a 4.3% increase in revenue per
available room ("REVPAR") for both non-renovation hotels and the entire hotel
portfolio, for the second quarter of 1998 over the corresponding quarter of
1997. While year-over-year increases in REVPAR for April and May were moderate,
consistent with the lodging industry as a whole, REVPAR growth for Sunstone's
entire portfolio for June was a strong 8.1%.
Alter continued, "We are very pleased with our revenue performance in the second
quarter, particularly from our newly branded Marriotts, which are posting
increases in REVPAR as high as 46.8% in June."
Sunstone announced that REVPAR for the non-renovation hotels increased by 4.3%,
from $54.21 to $56.56, over the second quarter of 1997. Non-renovation hotels
consist of 43 of the Company's 61 hotels that were not undergoing significant
renovation either in the second quarter of 1997 or 1998. The 4.3% increase in
REVPAR was driven by an increase in the average daily rate, from $74.11 to
$81.33, and offset by a decrease in occupancy, from 73.2% to 69.5%. Excluding
hotels identified for sale, REVPAR for non-renovation hotels increased 6.6% in
the second quarter of 1998 compared to the second quarter of 1997.
The strong revenue performance of the Company's hotel portfolio in the second
quarter of 1998 was not only due to the results from the Company's recently
redeveloped hotels, but also due to the internal growth of continuously owned
and recently acquired hotels as indicated in the following table:
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Selected REVPAR Performers for Second Quarter of 1998
REVPAR
----------------------------------------------
Rooms 1997(a) 1998 % Change
----- ------- ------ --------
Economy Inn & Executive
Suites by Kahler -
Rochester, Minnesota 266 $45.42 $57.92 27.5%
Marriott - Rochester,
Minnesota 194 97.02 124.55 28.4
Hampton Inn - Oakland,
California 152 48.61 61.35 26.2
Residence Inn - Provo,
Utah 114 43.55 50.54 16.1
Hampton Inn - Portland,
Oregon 114 34.57 44.74 29.4
(a) The Company did not own certain of these hotels for the entire period
presented.
REVPAR for the second quarter of 1998 for the 1997-renovation hotels (eleven
hotels), which were undergoing renovation during the second quarter of 1997,
increased 35.1% over the corresponding quarter of 1997.
REVPAR for the second quarter of 1998 for the 1998-renovation hotels (seven
hotels), which were undergoing renovation during the second quarter of 1998,
decreased 17.2% over the corresponding quarter in 1997, a period during which
these hotels were not undergoing renovation. In the aggregate, REVPAR for the
second quarter of 1998 for the 1997- and 1998-renovation hotels (18 hotels)
increased 4.3% over the corresponding quarter of 1997.
Strong Acquisition Pace
Sunstone reported that its acquisition deal flow remains strong and continues to
include hotels that are acquired in strong markets with significant barriers to
new competition. During the quarter ended June 30, 1998, the Company acquired
the following hotels:
Purchase Price
Hotel Rooms (in millions)
Marriott Hotel - Napa
Valley, California 192 $21.4
Days Inn - Santa Clara,
California(a) 168 20.0
Hilton Inn - Oxnard,
California 160 9.3
Hampton Inn - Santa Clarita,
California 130 8.3
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650 $59.0
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(a) The Company anticipates reflagging the hotel as a Holiday Inn after the
completion of certain renovations.
Alter continued, "Our acquisition pipeline continues to be strong. We continue
to identify properties in strong markets which have significant potential for
high returns through renovations and franchise branding."
Franchise Rebranding and Upgrades
The Company continues to execute its branding and rebranding strategy and has
renovated and flagged hotels sooner than expected. On April 28, 1998, the
Company branded the previously independent 333-room Provo Park hotel located in
Provo, Utah, as a full-service Marriott after completing approximately $4.6
million in renovations. The extensive renovation upgraded substantially all
hotel areas including the lobby, guestrooms and baths, restaurant, meeting rooms
and the hotel's exterior.
On May 15, 1998, the Company also branded the previously independent University
Park hotel located in Salt Lake City, Utah, as a full-service Marriott hotel.
The hotel recently underwent a $4.1 million renovation, including lobby and
restaurant renovation as well as guest room soft goods, furniture and guest bath
upgrades. For the month of June 1998, REVPAR increased 22.6%, from $60.70 to
$74.43, driven by a 34.0% increase in ADR, from $81.26 to
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$108.89, while occupancy declined 8.6%, from 74.7% to 68.3%. The renamed Salt
Lake City Marriott University Park is the third of six hotels from the Kahler
portfolio to be branded as full-service Marriotts.
On July 15, 1998, Sunstone rebranded the former Ogden Park hotel in Ogden, Utah,
as a full-service Marriott after completing $5.8 million in renovations. The
Company expects two additional hotels from the Kahler portfolio, including the
Olympia Park hotel in Park City, Utah, to be branded as Marriotts. These hotels
are currently under development and will be completed and carry the Marriott
flag by the end of 1998.
In the prior quarter, the Company branded the previously independent 194-room
Kahler Plaza hotel located in Rochester, Minn., as a full-service Marriott after
completing $1.7 million in renovations. REVPAR for the month of June 1998
increased 46.8%, from $94.07 to $138.05, driven by a 44.2% increase in ADR, from
$118.96 to $171.49, and an increase in occupancy from 79.1% to 80.5%.
Alter added, "We expect to realize considerable value and upside from the
strength of these strong national franchises. The newly added advantages of
brand recognition and national reservation systems are expected to have a
significant increase in revenue for these hotels."
Repositioning Strategy to Luxury and Upscale Properties - Sale of Non-Core Hotel
Assets
As previously announced, the Company intends to sell certain non-core hotel
assets. Currently, six hotels have been slated for disposition as the locations
and sizes of these hotels are inconsistent with the Company's strategy of
renovating and rebranding luxury, upscale and mid-price hotels in large
metropolitan areas, as well as downtown and airport hotel markets. Four of the
hotels, comprising 651 rooms, are being sold to Cavanaughs Hospitality
Corporation (NYSE: CVH - news) and include the Boise Park Suite Hotel in Boise,
Idaho; the Pocatello Park Quality Inn in Pocatello, Idaho; the Best Western
Canyon Springs Park Hotel in Twin Falls, Idaho and the Best Western Colonial Inn
in Helena, Mont. The remaining two hotels are those which were previously
identified for sale and include the 187-room Lakeview Resort & Conference Center
in Morgantown, W.Va. and the 284-room Green Oaks Park hotel in Fort Worth,
Texas. These six hotels were acquired by Sunstone as part of the $372 million
purchase of Kahler Realty Corporation in October 1997.
Alter added, "We continue to consider certain non-core hotel assets for
disposition, primarily limited service hotels, in order to redeploy capital to
acquire full-service hotels which can benefit from rebranding and repositioning
and are in markets with greater barriers to entry."
Dividend Declaration
Consistent with the Company's policy to pay dividends 45 days after the end of
each quarter, Sunstone announced a quarterly dividend of $0.275 per share
declared payable on August 14, 1998 to shareholders of record on July 31, 1998.
This is the twelfth consecutive quarterly dividend paid by the Company.
Sunstone Hotel Investors, Inc. is a leading self-administered equity real estate
investment trust that owns and invests in luxury, upscale and mid-price hotels
located primarily in the Pacific and Mountain regions of the western United
States. The Company's growth strategy is to maximize shareholder value by (i)
acquiring underperforming and undercapitalized hotels that are in attractive
locations with significant barriers to entry and (ii) improving such hotels'
financial performance by renovating, redeveloping, rebranding and repositioning
the hotels and through the implementation of focused sales and marketing
programs. Sunstone Hotel Investors, Inc. is the only hotel REIT that currently
focuses its acquisition strategy primarily in the western United States. Through
Sunstone Hotel Investors, L.P., the Company owns or has invested in 61 hotels
comprising 11,005 rooms. Sunstone's business strategy is to own luxury, upscale
and mid-price hotels with revenue growth opportunities in strong U.S. markets.
This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results and the timing of certain events could
differ materially from those set forth in the forward-looking statements. For
information on Sunstone Hotel Investors' Dividend Reinvestment Program, please
call 888-261-6776.
For investor information on Sunstone Hotel Investors via facsimile at no cost,
simply call 1-800-PRO-INFO and dial client code SSI.
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SUNSTONE HOTEL INVESTORS, INC.
STATEMENTS OF INCOME
For the For the
Quarter Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
1998 1997(a) 1998 1997(a)
------------ ------------ ------------ ------------
(Unaudited)
REVENUE
Lease revenue $ 24,775,000 $ 7,775,000 $ 48,462,000 $ 15,347,000
Interest and other
income 83,000 124,000 140,000 321,000
24,858,000 7,899,000 48,602,000 15,668,000
EXPENSES
Real estate related
depreciation and
amortization 8,993,000 2,531,000 16,912,000 4,487,000
Interest expense and
amortization of
financing costs 5,513,000 717,000 10,108,000 1,557,000
Real estate and personal
property taxes and
insurance 2,883,000 684,000 5,662,000 1,360,000
General and
administrative 871,000 269,000 2,374,000 801,000
18,260,000 4,201,000 35,056,000 8,205,000
Income before
minority interest 6,598,000 3,698,000 13,546,000 7,463,000
Minority interest 324,000 403,000 675,000 892,000
NET INCOME 6,274,000 3,295,000 12,871,000 6,571,000
Dividends on
preferred shares 492,000 -- 979,000 --
INCOME AVAILABLE TO
COMMON
SHAREHOLDERS $ 5,782,000 $ 3,295,000 $ 11,892,000 $ 6,571,000
EBITDA(b) $ 21,104,000 $ 6,946,000 $ 40,566,000 $ 13,507,000
EBITDA PER DILUTED
SHARE/UNIT $ 0.51 $ 0.33 $ 1.00 $ 0.70
EARNINGS PER
DILUTED SHARE $ 0.15 $ 0.17 $ 0.32 $ 0.39
Weighted average
number of diluted
shares 37,667,998 18,950,983 36,645,365 16,971,900
FUNDS FROM
OPERATIONS $ 15,591,000 $ 6,229,000 $ 30,458,000 $ 11,950,000
FFO PER DILUTED
SHARE/UNIT $ 0.38 $ 0.29 $ 0.75 $ 0.62
Weighted average
number
of diluted
shares/units 41,467,962 21,250,057 40,413,782 19,229,952
SUMMARY OPERATING DATA
Same-Unit-Sales
Analysis
All Hotels:
Occupancy 65.9% 70.6% 64.7% 69.6%
ADR $ 80.31 $ 71.87 $ 80.96 $ 72.90
REVPAR $ 52.90 $ 50.73 $ 52.35 $ 50.73
REVPAR growth 4.3% 3.2%
Non-Renovation Hotels:
Occupancy 69.5% 73.2% 67.7% 69.8%
ADR $ 81.33 $ 74.11 $ 79.67 $ 72.36
REVPAR $ 56.56 $ 54.21 $ 53.97 $ 50.52
REVPAR growth 4.3% 6.8%
REVPAR growth (excluding
hotels identified
for sale) 6.6%
Renovation Hotels(c):
Occupancy 59.3% 65.9% 59.7% 69.2%
ADR $ 78.15 $ 67.41 $ 83.31 $ 73.8
REVPAR $ 46.35 $ 44.45 $ 49.75 $ 51.07
REVPAR growth 4.3% (2.6)%
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(a) Certain amounts have been restated to reflect the allocation of a fourth
quarter 1997 depreciation expense adjustment.
(b) Earnings Before Income Taxes, Depreciation and Amortization ("EBITDA") is
computed by adding income before minority interest, interest expense,
depreciation and amortization expense.
(c) Includes the seven hotels undergoing renovation in the second quarter of
1998 and eleven hotels undergoing renovation in the second quarter of 1997.
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SUNSTONE HOTEL INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1998 1997
------------ ------------
(Unaudited)
ASSETS:
Investments in hotel
properties, net $ 839,314,000 $ 704,323,000
Notes receivable 6,062,000 6,085,000
Cash and cash equivalents 192,000 3,584,000
Restricted cash 2,605,000 2,421,000
Rent receivable - Lessee 12,252,000 7,641,000
Other assets, net 17,999,000 15,523,000
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$ 878,424,000 $ 739,577,000
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Revolving line of credit $ 263,800,000 $ 179,800,000
Notes payable 106,152,000 116,671,000
Accounts payable and
other accrued expenses 12,563,000 10,937,000
Dividends payable to
preferred shareholders 492,000 422,000
383,007,000 307,830,000
Commitments and contingencies
Minority interest 26,677,000 33,860,000
Stockholders' equity:
7.9% Class A Cumulative
Convertible Preferred Stock,
$.01 par value, 10,000,000
authorized; 250,000 issued
and outstanding as of June 30,
1998 and December 31, 1997
(liquidation preference $100
per share aggregating $25,000,000) 3,000 3,000
Common stock, $.01 par value,
150,000,000 authorized;
37,534,319 and 32,284,103 issued
and outstanding as of June 30,
1998 and December 31, 1997,
respectively 376,000 323,000
Additional paid-in capital 479,402,000 401,098,000
Distributions in excess
of earnings (11,041,000) (3,537,000)
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468,740,000 397,887,000
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$ 878,424,000 $ 739,577,000
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