Sunstone Hotel Investors, Inc., the owner of Long-Term Relevant Real Estate® in the hospitality sector, today announced results for the third quarter ended September 30, 2020.
Third Quarter 2020 Operational Results (as compared to Third Quarter 2019):
Information regarding the non-GAAP financial measures disclosed in this release is provided below in “Non-GAAP Financial Measures.” Reconciliations of non-GAAP financial measures to the most comparable GAAP measure for each of the periods presented are included later in this release.
John Arabia, President and Chief Executive Officer, stated, “While uncertainty abounds, there are signs that the hotel recovery is gaining steam, and we believe better days lie ahead. We resumed operations at several hotels in the third quarter, and in October and November resumed operations at four additional hotels, including our sizable Renaissance Orlando, Hyatt Regency San Francisco and Wailea Beach Resort. The 16 hotels currently open make up 88% of our total rooms and generated 96% of our total 2019 property-level EBITDAre. Not only have more hotels resumed operations, but those hotels that have been open, in general, have posted sequential monthly RevPAR gains. The combination of more open hotels, increased RevPAR at open hotels, and continued aggressive cost containment has further reduced our cash burn rate. Assuming no change to current operating fundamentals, our cash burn rate has been reduced to between $16 million and $20 million per month before capital investment. We expect this figure to decline further, and eventually return to profitability, as recently reopened hotels ramp up and as portfolio occupancy and profits gradually increase.”
“Looking forward, we remain focused on minimizing near-term losses while continuing to restructure our operations and invest in our portfolio to maximize long-term hotel profitability. With significant liquidity, nothing outstanding on our sizable credit facility, manageable near-term debt maturities and low leverage, our balance sheet strength should allow us not only to avoid costly defensive measures, such as raising expensive capital to shore up liquidity, but also to go on offense with or without incremental borrowing. We are in an enviable position shared by few others, and we intend to take advantage of it.”
Unaudited Selected Statistical and Financial Data ($ in millions, except RevPAR, ADR and per share amounts) |
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Quarter Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||
2020 |
2019 |
Change |
2020 |
2019 |
Change |
||||||||||||
Net (Loss) Income |
$ |
(91.1) |
$ |
33.5 |
(371.6) |
% |
$ |
(371.1) |
$ |
97.4 |
(481.1) |
% |
|||||
(Loss) Income Attributable to Common Stockholders |
$ |
(0.43) |
$ |
0.12 |
(458.3) |
% |
$ |
(1.74) |
$ |
0.36 |
(583.3) |
% |
|||||
19 Hotel Portfolio RevPAR (1) |
$ |
17.58 |
$ |
207.24 |
(91.5) |
% |
$ |
52.44 |
$ |
203.76 |
(74.3) |
% |
|||||
19 Hotel Portfolio Occupancy (1) |
12.1 |
% |
86.7 |
% |
(7,460) |
bps |
25.5 |
% |
85.4 |
% |
(5,990) |
bps |
|||||
19 Hotel Portfolio ADR (1) |
$ |
145.33 |
$ |
239.03 |
(39.2) |
% |
$ |
205.64 |
$ |
238.59 |
(13.8) |
% |
|||||
19 Hotel Portfolio Adjusted EBITDAre Margin (1) (2) |
(154.5) |
% |
31.0 |
% |
(18,550) |
bps |
(27.8) |
% |
31.0 |
% |
(5,880) |
bps |
|||||
Adjusted EBITDAre, excluding noncontrolling interest |
$ |
(36.2) |
$ |
81.2 |
(144.6) |
% |
$ |
(69.1) |
$ |
244.8 |
(128.2) |
% |
|||||
Adjusted FFO Attributable to Common Stockholders |
$ |
(54.7) |
$ |
65.7 |
(183.2) |
% |
$ |
(121.7) |
$ |
195.0 |
(162.4) |
% |
|||||
Adjusted FFO Attributable to Common Stockholders |
$ |
(0.26) |
$ |
0.29 |
(189.7) |
% |
$ |
(0.56) |
$ |
0.86 |
(165.1) |
% |
|||||
(1) The 19 Hotel Portfolio (the “19 Hotels”) includes all hotels owned by the Company as of September 30, 2020. |
|||||||||||||||||
(2) The 19 Hotel Portfolio Adjusted EBITDAre Margins exclude any prior year property tax adjustments, net. |
Recent Developments
COVID-19: Due to the prevailing government mandated restrictions on travel and public gatherings since the outbreak of COVID-19, the Company temporarily suspended operations at 15 of the 19 Hotels during the first half of 2020. In response to this challenging environment, the Company, working with its operators, has developed and implemented protocols to safely and responsibly resume operations at its hotels, including frequent and enhanced cleaning and sanitation, contactless check in, and increased physical distancing throughout the hotels. As of the date of this release, the Company has resumed operations at 12 of its previously suspended hotels (see table below).
The Company experienced slow but steady improvements in hotel demand during the third quarter of 2020, most significantly in leisure travel, which benefited its hotels in drive-to leisure markets and certain urban markets. At this point, a majority of the Company’s group business for 2020 has cancelled. Of the group business that has cancelled to date, approximately 23% has rebooked into future periods. The extent of the effects of the pandemic on the Company’s business and the hotel industry at large, however, will ultimately depend on future developments, including, but not limited to, the duration and severity of the pandemic, the development, distribution, and administration of a successful vaccine or therapy, the length of time it takes for demand and pricing to return and normal economic and operating conditions to resume.
During the third quarter and first nine months of 2020, the Company incurred $11.3 million and $28.9 million, respectively, of additional wages and benefits for furloughed or laid off hotel employees, which included $6.8 million and $8.0 million in severance accrued in the third quarter and first nine months of 2020, respectively. Due to the temporary suspension of operations at certain hotels in the portfolio and the incurrence of various extraordinary and non-recurring items, comparisons between the financial results for the third quarter and first nine months of 2020 to the third quarter and first nine months of 2019 are not meaningful.
Capital Investments: During the third quarter of 2020, the Company completed its previously disclosed projects at the Renaissance Orlando at SeaWorld®, the Renaissance Washington DC, and The Bidwell Marriott Portland, all while adhering to the relevant government regulations and social distancing mandates aimed at both protecting those involved in the construction work and stemming the spread of COVID-19. The Company invested $11.2 million and $44.0 million into its portfolio during the third quarter and first nine months of 2020, respectively.
Debt: In July 2020, the Company completed amendments to the agreements governing its unsecured debt, consisting of its revolving credit facility, term loans, and senior notes, providing covenant relief through the first quarter of 2021, with the first quarterly covenant test as of the period ended June 30, 2021. In August 2020, the Company repaid the remaining $50.0 million outstanding on its credit facility. At September 30, 2020, the Company had no amount outstanding on the revolving portion of its amended credit facility, with $500.0 million of capacity available for additional borrowing under the agreement. The revolving portion of the amended credit facility matures on April 14, 2023, but may be extended for two six-month periods to April 14, 2024, upon the payment of applicable fees and satisfaction of certain customary conditions, including continued compliance with debt covenants. In September 2020, the Company repaid $35.0 million of its senior unsecured notes, using proceeds from a previously completed asset sale.
Balance Sheet/Liquidity Update
As of September 30, 2020, the Company had $503.6 million of cash and cash equivalents, including restricted cash of $42.3 million, total assets of $3.2 billion, including $2.6 billion of net investments in hotel properties, total consolidated debt of $934.7 million and stockholders’ equity of $2.1 billion.
2020 Operations Update
As of September 30, 2020 and November 5, 2020, the status of the Company’s 19 Hotels is as follows:
Hotel |
Number of Rooms |
% of Total Rooms |
Suspension Date |
Resumption Date |
||||
Boston Park Plaza (1) |
1,060 |
10.6% |
N/A |
N/A |
||||
Embassy Suites La Jolla (1) |
340 |
3.4% |
N/A |
N/A |
||||
Renaissance Long Beach (1) |
374 |
3.7% |
N/A |
N/A |
||||
Renaissance Los Angeles Airport (1) |
502 |
5.0% |
N/A |
N/A |
||||
Oceans Edge Resort & Marina |
175 |
1.8% |
March 22, 2020 |
June 4, 2020 |
||||
Embassy Suites Chicago |
368 |
3.7% |
April 1, 2020 |
July 1, 2020 |
||||
Marriott Boston Long Wharf |
415 |
4.2% |
March 12, 2020 |
July 7, 2020 |
||||
Hilton New Orleans St. Charles |
252 |
2.5% |
March 28, 2020 |
July 13, 2020 |
||||
Hyatt Centric Chicago Magnificent Mile |
419 |
4.2% |
April 6, 2020 |
July 13, 2020 |
||||
JW Marriott New Orleans |
501 |
5.0% |
March 28, 2020 |
July 14, 2020 |
||||
Hilton San Diego Bayfront |
1,190 |
11.9% |
March 23, 2020 |
August 11, 2020 |
||||
Renaissance Washington DC |
807 |
8.1% |
March 26, 2020 |
August 24, 2020 |
||||
Total of Twelve Hotels Open as of September 30, 2020 |
6,403 |
64.0% |
||||||
Hyatt Regency San Francisco |
821 |
8.2% |
March 22, 2020 |
October 1, 2020 |
||||
Renaissance Orlando at SeaWorld® |
781 |
7.8% |
March 20, 2020 |
October 1, 2020 |
||||
The Bidwell Marriott Portland |
258 |
2.6% |
March 27, 2020 |
October 5, 2020 |
||||
Wailea Beach Resort |
547 |
5.5% |
March 25, 2020 |
November 1, 2020 |
||||
Total of Sixteen Hotels Open as of November 5, 2020 |
8,810 |
88.1% |
||||||
Hilton Garden Inn Chicago Downtown/Magnificent Mile |
361 |
3.6% |
March 27, 2020 |
|||||
Hilton Times Square |
478 |
4.8% |
June 30, 2020 |
|||||
Renaissance Westchester |
348 |
3.5% |
April 4, 2020 |
|||||
Total of Three Hotels with Suspended Operations as of |
1,187 |
11.9% |
||||||
(1) The Boston Park Plaza, Embassy Suites La Jolla, Renaissance Long Beach, and Renaissance Los Angeles Airport have remained |
Operating statistics for the hotels that were open all or part of the third quarter of 2020 are as follows:
July |
August |
September |
Third Quarter |
|||||||||||||
2020 |
2020 |
2020 |
2020 |
|||||||||||||
6 Hotels Open the Entire Third Quarter of 2020 |
||||||||||||||||
Number of Hotels (1) |
6 |
6 |
6 |
6 |
||||||||||||
Number of Rooms |
2,819 |
2,819 |
2,819 |
2,819 |
||||||||||||
RevPAR |
$ |
32.78 |
$ |
37.84 |
$ |
41.76 |
$ |
37.37 |
||||||||
Occupancy |
22.5 |
% |
28.6 |
% |
30.1 |
% |
27.0 |
% |
||||||||
Average Daily Rate |
$ |
145.69 |
$ |
132.31 |
$ |
138.75 |
$ |
138.40 |
||||||||
4 Hotels That Resumed Operations in July 2020 |
||||||||||||||||
Number of Hotels (1) |
4 |
4 |
4 |
4 |
||||||||||||
Number of Rooms |
1,587 |
1,587 |
1,587 |
1,587 |
||||||||||||
RevPAR |
$ |
12.43 |
$ |
22.41 |
$ |
30.84 |
$ |
21.82 |
||||||||
Occupancy |
6.6 |
% |
13.2 |
% |
21.2 |
% |
13.6 |
% |
||||||||
Average Daily Rate |
$ |
188.33 |
$ |
169.78 |
$ |
145.45 |
$ |
160.42 |
||||||||
2 Hotels That Resumed Operations in August 2020 |
||||||||||||||||
Number of Hotels |
— |
2 |
2 |
2 |
||||||||||||
Number of Rooms |
— |
1,997 |
1,997 |
1,997 |
||||||||||||
RevPAR |
$ |
— |
$ |
15.19 |
$ |
38.79 |
$ |
17.85 |
||||||||
Occupancy |
— |
% |
8.9 |
% |
26.6 |
% |
11.7 |
% |
||||||||
Average Daily Rate |
$ |
— |
$ |
170.72 |
$ |
145.83 |
$ |
152.54 |
||||||||
12 Hotels Open All or Part of the Third Quarter of 2020 |
||||||||||||||||
Number of Hotels |
10 |
12 |
12 |
12 |
||||||||||||
Number of Rooms |
4,406 |
6,403 |
6,403 |
6,403 |
||||||||||||
RevPAR |
$ |
25.49 |
$ |
26.90 |
$ |
38.13 |
$ |
27.41 |
||||||||
Occupancy |
16.8 |
% |
18.6 |
% |
26.8 |
% |
18.9 |
% |
||||||||
Average Daily Rate |
$ |
151.71 |
$ |
144.61 |
$ |
142.26 |
$ |
145.04 |
||||||||
(1) Embassy Suites Chicago resumed operations on July 1, 2020. Since the hotel was operating for the full third quarter of 2020, it is |
In addition to the 12 hotels noted above, two hotels resumed operations on October 1, 2020. Preliminary October results for the 14 hotels open during the entire month include the following ($ in millions, except RevPAR and ADR):
October |
|||||||||
2020 (1) |
2019 |
Change |
|||||||
14 Open Hotels Room Revenue |
$ |
7.2 |
$ |
55.2 |
(87.0) |
% |
|||
14 Open Hotels RevPAR |
$ |
28.95 |
$ |
222.89 |
(87.0) |
% |
|||
14 Open Hotels Occupancy |
19.9 |
% |
88.8 |
% |
(6,890) |
bps |
|||
14 Open Hotels ADR |
$ |
145.50 |
$ |
251.00 |
(42.0) |
% |
|||
(1) October 2020 results are preliminary and may be adjusted during the Company’s month-end close process. |
Due to continued uncertainty regarding the duration and extent of the COVID-19 pandemic, the Company cannot provide further assurances regarding the pandemic’s effect on the Company’s results, and the Company does not intend to provide further updates unless deemed appropriate.
Dividend Update
On November 4, 2020, the Company’s Board of Directors declared cash dividends of $0.434375 per share payable to its Series E cumulative redeemable preferred stockholders and $0.403125 per share payable to its Series F cumulative redeemable preferred stockholders. The dividends will be paid on January 15, 2021 to stockholders of record as of December 31, 2020.
The Company has suspended its quarterly common stock cash dividends. The resumption in quarterly common dividends will be determined by the Company’s Board of Directors after considering the Company’s obligations under its various financing agreements, projected taxable income, compliance with its debt covenants, long-term operating projections, expected capital requirements, and risks affecting the Company’s business.
Supplemental Disclosures
Contemporaneous with this release, the Company has furnished a Form 8-K with unaudited financial information. This additional information is being provided as a supplement to the information in this release and other filings with the SEC. The Company has no obligation to update any of the information provided to conform to actual results or changes in the Company’s portfolio, capital structure or future expectations.
Earnings Call
The Company will host a conference call to discuss third quarter 2020 financial results on November 6, 2020, at 12:00 p.m. Eastern Time (9:00 a.m. Pacific Time). A live webcast of the call will be available via the Investor Relations section of the Company’s website at www.sunstonehotels.com. Alternatively, interested parties may dial 1-323-289-6576 and reference confirmation code 1700254 to listen to the live call. A replay of the webcast will also be archived on the website.
About Sunstone Hotel Investors, Inc.
Sunstone Hotel Investors, Inc. is a lodging real estate investment trust (“REIT”) that as of the date of this release has interests in 19 hotels comprised of 9,997 rooms. Sunstone’s business is to acquire, own, asset manage and renovate or reposition hotels considered to be Long-Term Relevant Real Estate®, the majority of which are operated under nationally recognized brands, such as Marriott, Hilton and Hyatt. For further information, please visit Sunstone’s website at www.sunstonehotels.com.