Lodging real estate investment trust (REIT), Sunstone Hotel Investors, Inc. SHO has disclosed the sale of its leasehold interest in a Times Square hotel for $540 million.
The stake sale of this 468-room Doubletree Guest Suites reflects a price of $1.15 million per room. The company also disclosed a fourth-quarter dividend of $1.26 per share, which includes its distribution of gain from the sale.
Specifically, Sunstone Hotel announced that it has sold “100% of the membership interests” in its subsidiary, the “indirect holder of the leasehold interest” through which the hotel is operated.
As a result of this disposition, the company’s fourth-quarter and full-year 2015 adjusted EBITDA is estimated to decrease by about $2.3 million and adjusted FFO by around $2.0 million. Notably, simultaneous to the sale, Sunstone Hotel paid back the remaining $175 million of present balance of the mortgage secured by the Times Square hotel.
The company has also repaid $30.7 million of debt secured by Hilton North Houston. The amount was paid with cash on hand as well as proceeds reaped through the sale of BuyEfficient. Moreover, the company entered into a term loan agreement that allows it a six-month period to borrow up to $100 million. With this term loan, the company plans to repay the loan secured by Boston Park Plaza. These repayments are strategic for the company as they would result in Sunstone’s ownership of 21 unencumbered hotels.
The latest transaction is a strategic fit as well, given the company’s plan to unlock value through selective disposition of assets. It strengths the company’s balance sheet with substantial liquidity and lowers its ground lease exposure. Moreover, a reduction of leverage and extension of debt maturities are encouraging.
Sunstone Hotel currently has a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider stocks like Crown Castle International Corp. CCI, RLJ Lodging Trust RLJ and Hospitality Properties Trust HPT. All these stocks have a Zacks Rank #2 (Buy).
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