Sunstone Hotel Investors (SHO) Tops Q1 EPS by 5c, Revenues Beat



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Sunstone Hotel Investors (NYSE: SHO) reported Q1 EPS of ($0.26), $0.05 better than the analyst estimate of ($0.31). Revenue for the quarter came in at $50.63 million versus the consensus estimate of $47.82 million.

First Quarter 2021 Operational Results (as compared to First Quarter 2020):

  • Resumption of Hotel Operations: 15 of the Company’s 17 hotels were in operation for the entirety of the first quarter 2021.
  • Net Loss: Net loss was $55.3 million as compared to $162.5 million.
  • 17 Hotel Portfolio RevPAR: 17 Hotel Portfolio RevPAR decreased 69.5% to $42.19.
  • Adjusted EBITDAre: Adjusted EBITDAre, excluding noncontrolling interest decreased 203.7% to $(14.7) million.
  • Adjusted FFO: Adjusted FFO attributable to common stockholders per diluted share decreased 1,200.0% to $(0.13).

John Arabia, President and Chief Executive Officer, stated, “In the first quarter, our portfolio achieved sequential monthly growth in occupancy, ADR and RevPAR, and our March portfolio results materially exceeded our expectations and achieved breakeven EBITDA. Leisure demand is exceptionally strong and is expected to remain above pre-pandemic levels at many of our hotels for the foreseeable future. Furthermore, the nascent recovery in both commercial transient demand and traditional group business that started in the fourth quarter of 2020 is gaining steam and is expected to accelerate meaningfully in the second half of 2021 as vaccination distribution expands and state restrictions continue to ease. Several group functions have already transpired, and meeting planners remain confident that additional events will be held in the coming months at several of our hotels. The steady and robust increase in transient reservations and the material rebound in group production give us greater confidence that our portfolio is likely to experience rapid growth in revenues and profits as the year progresses.”

Mr. Arabia continued, “Consistent with our stated tactics, we have deployed a portion of our excess liquidity to fund the early-cycle acquisition of Montage Healdsburg, which is a spectacular resort, ideally located in one of the most sought-after and highest-rated leisure destinations in the U.S. The resort, which took over 15 years to develop, is a perfect example of Long-Term Relevant Real Estate, and its addition elevates the overall quality and growth prospects of our portfolio. Leveraging our industry relationships, we acquired the resort on an off-market basis and at a discount to what it would cost to develop today. Additionally, we funded 25% of the transaction with attractively structured perpetual preferred equity issued directly to the seller that aligns our interests and gives us additional optionality. With a strong balance sheet and a growing deal pipeline, we would expect Montage Healdsburg to be the first of several acquisitions of LTRR to be completed over the early stages of this new…



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