NEW YORK—An upswing in the operating performance of the Doubletree Guest Suites Times Square put Sunstone Hotel Investors in a good position to fully acquire the property.
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One of the 460 guestrooms inside Sunstone Hotel Investors' Doubletree Guest Suites Times Square (click to enlarge.) |
Sunstone Broadway LLC, a wholly owned subsidiary of Sunstone Hotel Partnership LLC, had a 38% interest in the joint venture owning the 460-room Doubletree. Sunstone Broadway acquired the remaining 62% for US$37.5 million on 14 January.
During a 13 January conference call with analysts, Sunstone president and CFO Ken Cruse credited the Doubletree’s impressive operating stats with playing an important part in Sunstone’s decision to fully acquire the hotel. He said the purchase price of the hotel, which currently posts revenue per available room of US$300.25, represents earnings before interest, taxes, depreciation and amortization of US$42,000 per room.
“(The hotel) is exceptionally well-located within the resurgent Times Square sub market,” he said.
The hotel joint venture includes approximately US$25 million of cash and receivables and approximately US$270 million of non-recourse senior mortgage and mezzanine debt, according to a United States Securities and Exchange Commission filing made 14 January. The mortgage debt totals approximately US$140 million (subject to a capped interest rate of 4.49% per year) and three mezzanine loans (subject to capped interest rates ranging from 3.3208% to 4.3208% per year) and maturing on 10 January 2012.
The interest rate on the US$270-million debt is set at LIBOR plus 115 basis points, which as of 13 January was equal to less than 1.5%, Cruse said. The REIT intends to refinance its debt in 2011 and will fund any refinancing shortfalls with cash, he added.
Sunstone might also use leverage in acquiring future properties, Cruse said.
Contact:
Bryan Giglia
Senior VP-corporate finance
Phone: 949-382-3036