Sunstone for the past two years has been selling off noncore assets and buying more upscale properties in what Steve Goldman, the company's chief executive officer, describes as a strategy designed to transform the REIT's portfolio "from a collection of mid-level suburban assets into a collection of institutional quality hotels located in urban markets with high barriers to entry." For example, the company in January acquired the Los Angeles Renaissance Hotel from Chicago-based Walton Street Capital for $65 million, a price that is one of the highest paid per room in the Los Angeles International Airport submarket but still well below replacement cost, according to Irvine-based Atlas Hospitality Group.
In pursuing its strategy of dispositions and acquisitions thus far, Sunstone has sold 26 hotels with an average of 194 rooms per hotel and has acquired 100% ownership in 16 hotels with an average of 462 rooms per hotel. Additionally, by the end of 2007, it expects to have invested approximately $300 million in its existing portfolio.
The six properties in the sale to DLJ Real Estate were the 179-room Hilton Garden Inn in Lake Oswego, OR and five hotels in California. The California properties were a 166-room Courtyard and a 251-room Residence Inn in Oxnard, a 126-room Residence Inn and a 272-room Hawthorn Suites in Sacramento and a 163-room Courtyard in Riverside.
Sunstone expects to reap net proceeds of approximately $141 million from the sale of the six hotels. It plans to apply the proceeds toward repaying the company's revolving credit line as well as for general corporate purposes.
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