After a year of selling of assets and investing in renovations to owned hotels, executives at Sunstone Hotel Investors said they plan to be buyers this year.
During the company's fourth-quarter and full-year 2023 earnings call, CEO Bryan Giglia said the company has a very specific type of hotel asset it's chasing with the proceeds from the $370 million sale of the Boston Park Plaza.
"We are targeting a group-centric hotel that has an attractive going-in yield, that has limited near-term capital needs, but with longer-term, value-add opportunities," he said. "While this sounds like an ambitious wish list, we are confident that we can execute in the near term."
Sunstone closed on the Boston Park Plaza sale in late 2023, noting the property "needed significant additional investment," and the company is seeking to buy properties with better growth prospects.
The company has shown a willingness to invest within its own portfolio, most notably with conversion projects in Washington, D.C.; Long Beach, California; and Miami Beach, Florida.
Sunstone converted the Renaissance Washington DC to the Westin Washington DC Downtown in late 2023 following what executives described as "a comprehensive renovation," and Giglia said group pace at the property is already up 20% year over year.
"While the hotel has always been a productive group house, the conversion to the Westin brand is already driving incremental transient demand at higher rates," he said.
Giglia said the company is nearing completion of the conversion of the Renaissance Long Beach to the Marriott Long Beach Downtown, but work to convert the Confidante Miami Beach to the Andaz Miami Beach will take longer.
The Confidante is expected to close for a portion of the year to accommodate the wide-scale renovation work, reopening at some point in the fourth quarter.
President and Chief Investment Officer Robert Springer said the company expects to invest between $135 million and $155 million into its existing portfolio, with the majority of that money going into the Andaz project.
Quarterly Earnings
For full-year 2023, Sunstone's portfolio grew revenue per available room by 5.6% year over year to $226.56, according to a company news release.
Giglia said RevPAR performance was led by a 15.6% increase across its urban and convention hotels. RevPAR was down 2.2% year over year in the fourth quarter.
Net income for the year increased to $206.7 million, compared to $90.8 million in 2022, although executives said much of that increase can be tied back to the Boston Park Plaza sale.
Adjusted earnings before interest, taxes, depreciation and amortization for real estate was up 12.7% year over year to $263.4 million.
As of publication time, Sunstone's stock was trading at $11.11 per share, up 3.5% year to date. The NYSE composite was up 4.6% for the same period.