Aliso Viejo, Calif. (July 26, 2017) – Sunstone Hotel Investors, Inc. (the “Company” or “Sunstone”) (NYSE: SHO) announced that it has acquired the fee-simple interest in the 175-room Oceans Edge Hotel & Marina in Key West, Florida for $175 million. In addition, the Company announced that it had recently completed the disposition of the 199-room Marriott Park City in Park City, Utah for a gross sale price of $27.6 million.
John Arabia, President and Chief Executive Officer stated, “The acquisition of Oceans Edge Hotel & Marina demonstrates a continuation of our strategy to recycle capital into higher quality, long-term relevant real estate while maintaining an industry leading balance sheet with ample investment capacity. Over the past 19 months, we have sold nearly $735 million of real estate and used a portion of those proceeds to return capital to our shareholders, to strengthen our already low-levered balance sheet and to redeploy proceeds into exceptional real estate. The Oceans Edge Hotel & Marina is a brand new, purpose-built hotel and marina that is of significantly higher quality than the majority of the Key West hotel supply. The luxury resort and marina, which opened in January 2017, is expected to provide meaningful growth in the near term as it reaches stabilization, and over the long term due to the supply restrictions in the Key West market.”
The Company will provide an update to its 2017 guidance to incorporate the impact of these transactions with its second quarter earnings release on August 1, 2017.
Oceans Edge Hotel & Marina (“Oceans Edge” or the “Hotel”) is a newly constructed, purpose-built oceanfront hotel and marina complex that opened in January 2017. The property is situated across 20 land and water acres on Stock Island and is the largest purpose-built luxury resort and marina in Key West. The Hotel is comprised of 175 waterfront rooms, including 86 suites, all of which have private balconies and sweeping views of the Atlantic Ocean. The Hotel’s rooms are spread across four buildings designed with signature Key West conch style architecture and have an average size of 470 square feet—some of the largest rooms available in the market. The Hotel also boasts six swimming pools, a full-service restaurant, waterfront bar, on-site water sports and paddle shop and a fitness facility.
Described by the New York Times as the “new old Key West”, Stock Island offers an authentic Florida Keys vibe and is home to the Key West Symphony Orchestra, Tennessee Williams Theatre, numerous art galleries, a golf course and outstanding bars and restaurants.
As part of the transaction, Sunstone also acquired a combined 52 wet and dry boat slips and amenities in the attached marina which offers direct deep channel access to one of the most sought after fishing destinations in the country.
The Oceans Edge purchase price represents an estimated 14.1x multiple on the midpoint of the 2018 forecasted Hotel Adjusted EBITDA range of $11.5 million to $13.3 million and an estimated 6.5% capitalization rate on the midpoint of 2018 forecasted Hotel net operating income. Sunstone expects the stabilized yield on the purchase price of the Hotel to be between 8.0% and 9.0%.
The Company funded the acquisition from available cash on hand including proceeds from the recent sale of the Marriott Park City and Fairmont Newport Beach, as well as net proceeds received from the Company’s recent equity issuance under its “At the Market” (“ATM”) equity distribution program. A definition of Hotel Adjusted EBITDA and a reconciliation to net operating income is set forth at the end of this release.
Oceans Edge is Sunstone’s first acquisition in the highly desirable Key West market which boasts the highest RevPAR of any market in the United States. Key West’s favorable climate, diverse entertainment and recreational offerings and scenic beauty, make it a favorite year-round destination among travelers. In addition, local rate of growth ordinances which limit development in the area create significant barriers to entry for new hotel supply.
The Hotel will operate as an independent property and be managed by Singh Hospitality which has expertise in the local hotel market.
Additional details about the Hotel can be found on the property’s website at www.oceansedgekeywest.com.
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