Sunstone Hotel Investors Reports Results For Third Quarter 2020


Sunstone Hotel Inves

iCrowdNewswire   Nov 9, 202012:10 PM ET

Sunstone Hotel Investors, Inc., the owner of Long-Term Relevant Real Estate® in the hospitality sector, today announced results for the third quarter ended September 30, 2020.

Third Quarter 2020 Operational Results (as compared to Third Quarter 2019):

  • Resumption of Hotel Operations: Six of the Company’s 19 hotels were in operation for the entirety of the third quarter of 2020. Six additional hotels opened during the third quarter of 2020, largely in July and August. Four more have resumed operations during the fourth quarter of 2020, leaving 16 of 19 hotels open.
  • Net (Loss) Income: Net loss was $91.1 million as compared to net income of $33.5 million in the third quarter of 2019.
  • 19 Hotel Portfolio RevPAR: 19 Hotel Portfolio RevPAR decreased 91.5% to $17.58.
  • Six Hotel Portfolio RevPAR: RevPAR for the six hotels open for the entirety of the third quarter of 2020 decreased 80.5% to $37.37.
  • Adjusted EBITDAreAdjusted EBITDAre, excluding noncontrolling interest decreased 144.6% to $(36.2) million.
  • Adjusted FFO: Adjusted FFO attributable to common stockholders per diluted share decreased 189.7% to $(0.26).

Information regarding the non-GAAP financial measures disclosed in this release is provided below in “Non-GAAP Financial Measures.” Reconciliations of non-GAAP financial measures to the most comparable GAAP measure for each of the periods presented are included later in this release.

John Arabia, President and Chief Executive Officer, stated, “While uncertainty abounds, there are signs that the hotel recovery is gaining steam, and we believe better days lie ahead. We resumed operations at several hotels in the third quarter, and in October and November resumed operations at four additional hotels, including our sizable Renaissance Orlando, Hyatt Regency San Francisco and Wailea Beach Resort. The 16 hotels currently open make up 88% of our total rooms and generated 96% of our total 2019 property-level EBITDAre. Not only have more hotels resumed operations, but those hotels that have been open, in general, have posted sequential monthly RevPAR gains. The combination of more open hotels, increased RevPAR at open hotels, and continued aggressive cost containment has further reduced our cash burn rate. Assuming no change to current operating fundamentals, our cash burn rate has been reduced to between $16 million and $20 million per month before capital investment. We expect this figure to decline further, and eventually return to profitability, as recently reopened hotels ramp up and as portfolio occupancy and profits gradually increase.”

“Looking forward, we remain focused on minimizing near-term losses while continuing to restructure our operations and invest in our portfolio to maximize long-term hotel profitability. With significant liquidity, nothing outstanding on our sizable credit facility, manageable near-term debt maturities and low leverage, our balance sheet strength should allow us not only to avoid costly defensive measures, such as raising expensive capital to shore up liquidity, but also to go on offense with or without incremental borrowing. We are in an enviable position shared by few others, and we intend to take advantage of it.”

Unaudited Selected Statistical and Financial Data ($ in millions, except RevPAR, ADR and per share amounts)

 
 

Quarter Ended September 30,

   

Nine Months Ended September 30,

 
 

2020

 

2019

 

Change

   

2020

 

2019

 

Change

 
                                   

Net (Loss) Income

$

(91.1)

 

$

33.5

 

(371.6)

%

 

$

(371.1)

 

$

97.4

 

(481.1)

%

(Loss) Income Attributable to Common Stockholders
   per Diluted Share

$

(0.43)

 

$

0.12

 

(458.3)

%

 

$

(1.74)

 

$

0.36

 

(583.3)

%

                                   

19 Hotel Portfolio RevPAR (1)

$

17.58

 

$

207.24

 

(91.5)

%

 

$

52.44

 

$

203.76

 

(74.3)

%

                                   

19 Hotel Portfolio Occupancy (1)

 

12.1

%

 

86.7

%

(7,460)

bps

   

25.5

%

 

85.4

%

(5,990)

bps

19 Hotel Portfolio ADR (1)

$

145.33

 

$

239.03

 

(39.2)

%

 

$

205.64

 

$

238.59

 

(13.8)

%

                                   

19 Hotel Portfolio Adjusted EBITDAre Margin (1) (2)

 

(154.5)

%

 

31.0

%

(18,550)

bps

   

(27.8)

%

 

31.0

%

(5,880)

bps

                                   

Adjusted EBITDAre, excluding noncontrolling interest

$

(36.2)

 

$

81.2

 

(144.6)

%

 

$

(69.1)

 

$

244.8

 

(128.2)

%

Adjusted FFO Attributable to Common Stockholders

$

(54.7)

 

$

65.7

 

(183.2)

%

 

$

(121.7)

 

$

195.0

 

(162.4)

%

Adjusted FFO Attributable to Common Stockholders
   per Diluted Share

$

(0.26)

 

$

0.29

 

(189.7)

%

 

$

(0.56)

 

$

0.86

 

(165.1)

%

 

(1)  The 19 Hotel Portfolio (the “19 Hotels”) includes all hotels owned by the Company as of September 30, 2020.

(2)  The 19 Hotel Portfolio Adjusted EBITDAre Margins exclude any prior year property tax adjustments, net.

Recent Developments

COVID-19:  Due to the prevailing government mandated restrictions on travel and public gatherings since the outbreak of COVID-19, the Company temporarily suspended operations at 15 of the 19 Hotels during the first half of 2020. In response to this challenging environment, the Company, working with its operators, has developed and implemented protocols to safely and responsibly resume operations at its hotels, including frequent and enhanced cleaning and sanitation, contactless check in, and increased physical distancing throughout the hotels. As of the date of this release, the Company has resumed operations at 12 of its previously suspended hotels (see table below).

The Company experienced slow but steady improvements in hotel demand during the third quarter of 2020, most significantly in leisure travel, which benefited its hotels in drive-to leisure markets and certain urban markets. At this point, a majority of the Company’s group business for 2020 has cancelled. Of the group business that has cancelled to date, approximately 23% has rebooked into future periods. The extent of the effects of the pandemic on the Company’s business and the hotel industry at large, however, will ultimately depend on future developments, including, but not limited to, the duration and severity of the pandemic, the development, distribution, and administration of a successful vaccine or therapy, the length of time it takes for demand and pricing to return and normal economic and operating conditions to resume.

During the third quarter and first nine months of 2020, the Company incurred $11.3 million and $28.9 million, respectively, of additional wages and benefits for furloughed or laid off hotel employees, which included $6.8 million and $8.0 million in severance accrued in the third quarter and first nine months of 2020, respectively. Due to the temporary suspension of operations at certain hotels in the portfolio and the incurrence of various extraordinary and non-recurring items, comparisons between the financial results for the third quarter and first nine months of 2020 to the third quarter and first nine months of 2019 are not meaningful.

Capital Investments:  During the third quarter of 2020, the Company completed its previously disclosed projects at the Renaissance Orlando at SeaWorld®, the Renaissance Washington DC, and The Bidwell Marriott Portland, all while adhering to the relevant government regulations and social distancing mandates aimed at both protecting those involved in the construction work and stemming the spread of COVID-19. The Company invested $11.2 million and $44.0 million into its portfolio during the third quarter and first nine months of 2020, respectively. 

Debt:  In July 2020, the Company completed amendments to the agreements governing its unsecured debt, consisting of its revolving credit facility, term loans, and senior notes, providing covenant relief through the first quarter of 2021, with the first quarterly covenant test as of the period ended June 30, 2021. In August 2020, the Company repaid the remaining $50.0 million outstanding on its credit facility. At September 30, 2020, the Company had no amount outstanding on the revolving portion of its amended credit facility, with $500.0 million of capacity available for additional borrowing under the agreement. The revolving portion of the amended credit facility matures on April 14, 2023, but may be extended for two six-month periods to April 14, 2024, upon the payment of applicable fees and satisfaction of certain customary conditions, including continued compliance with debt covenants. In September 2020, the Company repaid $35.0 million of its senior unsecured notes, using proceeds from a previously completed asset sale.

Balance Sheet/Liquidity Update

As of September 30, 2020, the Company had $503.6 million of cash and cash equivalents, including restricted cash of $42.3 million, total assets of $3.2 billion, including $2.6 billion of net investments in hotel properties, total consolidated debt of $934.7 million and stockholders’ equity of $2.1 billion

2020 Operations Update

As of September 30, 2020 and November 5, 2020, the status of the Company’s 19 Hotels is as follows:

 

Hotel

 

Number of Rooms

 

% of Total Rooms

 

Suspension Date

 

Resumption Date

Boston Park Plaza (1)

 

1,060

 

10.6%

 

N/A

 

N/A

Embassy Suites La Jolla (1)

 

340

 

3.4%

 

N/A

 

N/A

Renaissance Long Beach (1)

 

374

 

3.7%

 

N/A

 

N/A

Renaissance Los Angeles Airport (1)

 

502

 

5.0%

 

N/A

 

N/A

Oceans Edge Resort & Marina

 

175

 

1.8%

 

March 22, 2020

 

June 4, 2020

Embassy Suites Chicago

 

368

 

3.7%

 

April 1, 2020

 

July 1, 2020

Marriott Boston Long Wharf

 

415

 

4.2%

 

March 12, 2020

 

July 7, 2020

Hilton New Orleans St. Charles

 

252

 

2.5%

 

March 28, 2020

 

July 13, 2020

Hyatt Centric Chicago Magnificent Mile

 

419

 

4.2%

 

April 6, 2020

 

July 13, 2020

JW Marriott New Orleans

 

501

 

5.0%

 

March 28, 2020

 

July 14, 2020

Hilton San Diego Bayfront

 

1,190

 

11.9%

 

March 23, 2020

 

August 11, 2020

Renaissance Washington DC

 

807

 

8.1%

 

March 26, 2020

 

August 24, 2020

Total of Twelve Hotels Open as of September 30, 2020

 

6,403

 

64.0%

       
                 

Hyatt Regency San Francisco

 

821

 

8.2%

 

March 22, 2020

 

October 1, 2020

Renaissance Orlando at SeaWorld®

 

781

 

7.8%

 

March 20, 2020

 

October 1, 2020

The Bidwell Marriott Portland

 

258

 

2.6%

 

March 27, 2020

 

October 5, 2020

Wailea Beach Resort

 

547

 

5.5%

 

March 25, 2020

 

November 1, 2020

Total of Sixteen Hotels Open as of November 5, 2020

 

8,810

 

88.1%

       
                 

Hilton Garden Inn Chicago Downtown/Magnificent Mile

 

361

 

3.6%

 

March 27, 2020

   

Hilton Times Square

 

478

 

4.8%

 

June 30, 2020

   

Renaissance Westchester

 

348

 

3.5%

 

April 4, 2020

   

Total of Three Hotels with Suspended Operations as of
   November 5, 2020

 

1,187

 

11.9%

       
 

(1)  The Boston Park Plaza, Embassy Suites La Jolla, Renaissance Long Beach, and Renaissance Los Angeles Airport have remained
       in operation throughout the first nine months of 2020.

Operating statistics for the hotels that were open all or part of the third quarter of 2020 are as follows:

 
   

July

 

August

 

September

 

Third Quarter

   

2020

 

2020

 

2020

 

2020

6 Hotels Open the Entire Third Quarter of 2020

                               

Number of Hotels (1)

   

6

     

6

     

6

     

6

 

Number of Rooms

   

2,819

     

2,819

     

2,819

     

2,819

 

RevPAR

 

$

32.78

   

$

37.84

   

$

41.76

   

$

37.37

 

Occupancy

   

22.5

%

   

28.6

%

   

30.1

%

   

27.0

%

Average Daily Rate

 

$

145.69

   

$

132.31

   

$

138.75

   

$

138.40

 
                                 

4 Hotels That Resumed Operations in July 2020

                               

Number of Hotels (1)

   

4

     

4

     

4

     

4

 

Number of Rooms

   

1,587

     

1,587

     

1,587

     

1,587

 

RevPAR

 

$

12.43

   

$

22.41

   

$

30.84

   

$

21.82

 

Occupancy

   

6.6

%

   

13.2

%

   

21.2

%

   

13.6

%

Average Daily Rate

 

$

188.33

   

$

169.78

   

$

145.45

   

$

160.42

 
                                 

2 Hotels That Resumed Operations in August 2020

                               

Number of Hotels

   

     

2

     

2

     

2

 

Number of Rooms

   

     

1,997

     

1,997

     

1,997

 

RevPAR

 

$

   

$

15.19

   

$

38.79

   

$

17.85

 

Occupancy

   

%

   

8.9

%

   

26.6

%

   

11.7

%

Average Daily Rate

 

$

   

$

170.72

   

$

145.83

   

$

152.54

 
                                 

12 Hotels Open All or Part of the Third Quarter of 2020

                               

Number of Hotels

   

10

     

12

     

12

     

12

 

Number of Rooms

   

4,406

     

6,403

     

6,403

     

6,403

 

RevPAR

 

$

25.49

   

$

26.90

   

$

38.13

   

$

27.41

 

Occupancy

   

16.8

%

   

18.6

%

   

26.8

%

   

18.9

%

Average Daily Rate

 

$

151.71

   

$

144.61

   

$

142.26

   

$

145.04

 
 

(1)  Embassy Suites Chicago resumed operations on July 1, 2020. Since the hotel was operating for the full third quarter of 2020, it is
       included with the 6 Hotels Open the Entire Third Quarter of 2020 rather than with the 4 Hotels that Resumed Operations in July
       2020.

In addition to the 12 hotels noted above, two hotels resumed operations on October 1, 2020. Preliminary October results for the 14 hotels open during the entire month include the following ($ in millions, except RevPAR and ADR):

 
 

October

 

2020 (1)

 

2019

 

Change

14 Open Hotels Room Revenue

$

7.2

 

$

55.2

   

(87.0)

%

                   

14 Open Hotels RevPAR

$

28.95

 

$

222.89

   

(87.0)

%

14 Open Hotels Occupancy

 

19.9

%

 

88.8

%

 

(6,890)

bps

14 Open Hotels ADR

$

145.50

 

$

251.00

   

(42.0)

%

 

(1)  October 2020 results are preliminary and may be adjusted during the Company’s month-end close process.

Due to continued uncertainty regarding the duration and extent of the COVID-19 pandemic, the Company cannot provide further assurances regarding the pandemic’s effect on the Company’s results, and the Company does not intend to provide further updates unless deemed appropriate.

Dividend Update

On November 4, 2020, the Company’s Board of Directors declared cash dividends of $0.434375 per share payable to its Series E cumulative redeemable preferred stockholders and $0.403125 per share payable to its Series F cumulative redeemable preferred stockholders. The dividends will be paid on January 15, 2021 to stockholders of record as of December 31, 2020.

The Company has suspended its quarterly common stock cash dividends. The resumption in quarterly common dividends will be determined by the Company’s Board of Directors after considering the Company’s obligations under its various financing agreements, projected taxable income, compliance with its debt covenants, long-term operating projections, expected capital requirements, and risks affecting the Company’s business.

Supplemental Disclosures

Contemporaneous with this release, the Company has furnished a Form 8-K with unaudited financial information. This additional information is being provided as a supplement to the information in this release and other filings with the SEC. The Company has no obligation to update any of the information provided to conform to actual results or changes in the Company’s portfolio, capital structure or future expectations.

Earnings Call

The Company will host a conference call to discuss third quarter 2020 financial results on November 6, 2020, at 12:00 p.m. Eastern Time (9:00 a.m. Pacific Time). A live webcast of the call will be available via the Investor Relations section of the Company’s website at www.sunstonehotels.com. Alternatively, interested parties may dial 1-323-289-6576 and reference confirmation code 1700254 to listen to the live call. A replay of the webcast 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 of this release has interests in 19 hotels comprised of 9,997 rooms. Sunstone’s business is to acquire, own, asset manage and renovate or reposition hotels considered to be Long-Term Relevant Real Estate®, the majority of which are operated under nationally recognized brands, such as Marriott, Hilton and Hyatt. For further information, please visit Sunstone’s website at www.sunstonehotels.com.

Contact Information:

www.sunstonehotels.com.


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