ALISO VIEJO, CA—Sunstone Hotel Investors, Inc. has reported its first quarter results, indicating a 2.1% boost in revnue, while recapping the progress of its acquisition activities.

"Our first quarter operating results met our expectations as we traded short-term displacement for expected future growth through the renovation of four of our hotels,” said CEO Ken Cruse. “Excluding the four hotels under renovation, our portfolio generated 6.5% RevPAR growth and achieved 160 basis points of margin expansion, driven by improving demand trends and solid expense controls.Also, during the first quarter, we continued to methodically improve our balance sheet by eliminating nearly $261 million of leverage through asset sales, and the retirement of senior debt and preferred securities.”

Some first quarter results include: 

Comparable Hotel RevPAR increased 2.1% to $124.84.
Comparable Hotel RevPAR increased 6.5% to $130.03, excluding four hotels undergoing renovations.
Comparable Hotel EBITDA Margins increased 10 basis points to 23.3%.

“Looking ahead, industry occupancies are now at or above prior peak levels in many markets, demand is gradually improving and supply trends remain muted,” Cruse said. “With the substantial completion of our 2013 renovation program, the continued improvement of our balance sheet and the addition of two quality hotels with clear long-term value-add opportunities, Sunstone is well positioned for continued growth.”

Acquisitions Update

On May 1, 2013, in an off-market deal, the company acquired the fee simple interest in the 250-room Hilton New Orleans St. Charles for a gross purchase price of $59.35 million ($237,400/key), excluding closing costs and prorations. The gross purchase price equates to an 11.4x multiple on 2013 forecasted hotel Adjusted EBITDA of $5.2 million and a 7.9% capitalization rate on 2013 forecasted hotel net operating income.

On April 26, 2013, the company entered into a purchase and sale agreement to acquire the fee simple (subject to a condominium agreement with the adjacent office building) interest in the 1,053-room Boston Park Plaza hotel for a gross purchase price of $250.0 million ($237,400/key). The gross purchase price equates to a 12.5x multiple on 2013 forecasted hotel Adjusted EBITDA of $20.0 million and a 6.6 % capitalization rate on 2013 forecasted hotel net operating income. During the Company's anticipated 2013 ownership period, the Boston Park Plaza is expected to generate between $8.0 million and $9.5 million of hotel Adjusted EBITDA and between $6.5 million and $8.0 million of hotel net operating income.
The company expects the purchase of the Boston Park Plaza to close during the third quarter 2013; however, the purchase remains subject to a broad range of risks and uncertainties, including assumption of the associated mortgage. Accordingly, no assurances can be given as to the timing or certainty of the closing.