Sunstone Hotel Investors Inc. (SHO) acquired a 75.0% interest for $475.0 million in a joint venture that owns Hilton San Diego Bay front hotel in San Diego. Hilton Worldwide will remain as the 25.0% minority partner and continue with the managerial operations of the 1190- room hotel.
The transaction is expected to close in the second quarter of 2011. Following the acquisition, the partners are expected to enter into a $240 million non-recourse mortgage debt expected to mature in April 2016.
Sunstone owns premium quality upper scale and luxury hotels with nationally recognized brands like Marriott International, Inc (MAR), Hilton and Starwood Hotels & Resorts Worldwide Inc. (HOT). With this deal, Sunstone expects an annual increase in its first-quarter revenue per available room (RevPAR) of 5.4% compared with the prior year period and its RevPAR to increase by approximately 6.2% in March 2011 compared with March 2010.
The Bayfront hotel is the most recent waterfront hotel in San Diego. Standing at 30 stories tall, it has 165,000 square feet of meeting space and 4.3 acres of outdoor waterfront event space. The long term strategy of Sunstone through this transaction is to strengthen its portfolio quality and growth potential.
Sunstone is a real estate investment trust that engages in the acquisition, ownership and sale of luxury and upscale full-service hotels in the United States with nationally recognized brands and high barrier to entry markets. Sunstone currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating.
We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Host Hotel & Resorts Inc (HST), currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
STARWOOD HOTELS (HOT): Free Stock Analysis Report
HOST HOTEL&RSRT (HST): Free Stock Analysis Report
MARRIOTT INTL-A (MAR): Free Stock Analysis Report
SUNSTONE HOTEL (SHO): Free Stock Analysis Report
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