EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO

 

For Additional Information:

 

Bryan Giglia

   Amy Cozamanis   Laurie Berman

Director of Finance

   Investor/Analyst Information   General Information

Sunstone Hotel Investors, Inc.

   Financial Relations Board   Financial Relations Board

(949) 369-4204

   (310) 854-8314   (310) 854-8315

 

SUNSTONE HOTEL INVESTORS REPORTS RESULTS OF OPERATIONS FOR

FOURTH QUARTER AND FULL YEAR 2005

 

Completes Over $1 Billion of Hotel Investment in 2005

 

SAN CLEMENTE, CA – February 15, 2006 – Sunstone Hotel Investors, Inc. (the “Company”) (NYSE: SHO) today announced results of operations for the fourth quarter and year ended December 31, 2005.

 

FOURTH QUARTER 2005 HIGHLIGHTS:

 

  •   Same-store revenue per available room (“RevPAR”) growth of 10.3%, excluding three assets under renovation, and 8.0% overall over fourth quarter 2004;

 

  •   Adjusted EBITDA of $53.2 million (116.2% increase over fourth quarter 2004);

 

  •   Adjusted Funds From Operations (“Adjusted FFO”) to common stockholders of $31.3 million (184.8% increase over fourth quarter 2004); and

 

  •   Adjusted FFO per diluted share of $0.56.

 

ANNUAL 2005 HIGHLIGHTS:

 

  •   Same-store RevPAR growth of 9.4%, excluding three assets under renovation, and 8.4% overall over annual 2004;

 

  •   Adjusted EBITDA of $167.4 million (39.8% increase over annual 2004);

 

  •   Adjusted FFO to common stockholders of $97.9 million (54.9% increase over annual 2004); and

 

  •   Adjusted FFO per diluted share of $2.12.

 

Robert A. Alter, Chief Executive Officer, stated “2005 was a defining year for Sunstone. We started out the year focused on capitalizing on our well positioned portfolio, acquiring quality assets in high barrier to entry markets, improving our balance sheet and completing the orderly sale of the Westbrook position. Looking back at 2005, our hotels performed strongly as evidenced by our year over year RevPAR gains, we acquired nine hotels including the Hyatt Regency Century Plaza, the Renaissance Washington D.C. and the Fairmont Newport Beach, we fixed 94% of our debt at an average rate under 6% and the Westbrook shares were completely sold. In 2006, we have continued to improve the overall quality and long term cash flow growth rate of our portfolio with the acquisition of the Marriott San Diego Del Mar and the announcement of the purchase agreement for the Hilton New York Times Square. We look forward to 2006 as we believe that hotel industry fundamentals will continue to show strong growth in demand and modest new competitive supply.”

 

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SELECTED FINANCIAL DATA

($ in millions, except RevPAR and per share amounts)

 

     Three Months Ended
December 31,
     Year Ended December 31,
  
     2005
     2004
     % Change
     2005
     2004
     % Change
  

Revenues

    $ 225.9     $ 121.0     86.7 %   $ 651.1     $ 484.5     34.4 %

RevPAR (1)

    $ 81.74     $ 75.69     8.0 %   $ 84.22     $ 77.66     8.4 %

Income (loss) available to common stockholders (including OP unit holders) (2)

    $ 8.6     $ (21.8 )   N/A     $ 21.0     $ (38.9 )   N/A  

Income (loss) per diluted share available to common stockholders (including OP unit holders) (3)

    $ 0.16       N/A           $ 0.47       N/A        

FFO available to common stockholders (4) (5)

    $ 33.0     $ (6.0 )   N/A     $ 93.9     $ 21.8     330.3 %

Adjusted FFO available to common stockholders (including OP unit holders) (4) (5)

    $ 31.3     $ 11.0     184.8 %   $ 97.9     $ 63.2     54.9 %

FFO per fully diluted share available to common stockholders (including OP unit holders) (4) (5)

    $ 0.59       N/A           $ 2.03       N/A        

Adjusted FFO per fully diluted share available to common stockholders (including OP unit holders) (4) (5)

    $ 0.56       N/A           $ 2.12       N/A        

EBITDA (4)

    $ 55.3     $ 20.0     175.8 %   $ 169.8     $ 89.6     89.5 %

Adjusted EBITDA (4)

    $ 53.2     $ 24.6     116.2 %   $ 167.4     $ 119.7     39.8 %

Hotel Operating Margin (6)

      25.7 %     23.8 %   190 bps       28.0 %     26.3 %   170 bps  
(1) Same store for 59 hotels owned during all of Q4 2005 (including prior ownership periods). Excluding 3 hotels under renovation, RevPAR increased 10.3% in Q4 2005 over Q4 2004 and 9.4% in annual 2005 over annual 2004.
(2) 2005 income available to common stockholders includes the affect of the series C preferred dividends.
(3) 2005 income per share available to common stockholders does not assume conversion of the series C convertible preferred stock as the effect of the conversion would not be as dilutive as the current presentation.
(4) Please refer to the definitions of Funds from Operations (“FFO”), Adjusted FFO, EBITDA, Adjusted EBITDA and Hotel Operating Margin on page 9 and to the reconciliation schedules on pages 10 through 13 for a tabular presentation of our results and a reconciliation to GAAP measures.
(5) Reflects series C convertible preferred stock on an “as-converted” basis.
(6) Please refer to page 13 for hotel operation margin results.

 

The Company has filed contemporaneously with this press release the Form 10-K with the SEC for the year ended December 31, 2005. In addition to the required financial information included in the Form 10-K, the Company has included an unaudited pro forma balance sheet as of December 31, 2005 and pro forma income statements for the quarter and year ended December 31, 2005 that include the impact of the acquisitions of the six Renaissance Hotels, the Sheraton Cerritos, the Fairmont Newport Beach, the Hyatt Regency Century Plaza and the Del Mar Marriott, as well as their related financings, as if they had occurred as of the beginning of the respective quarter and full year periods.

 

Disclosure regarding the non-GAAP financial measures in this release is included as an attachment to this release, along with a reconciliation to the most comparable GAAP measure during each of the periods presented.

 

Fourth Quarter 2005 Highlights:

 

Listed below are certain highlights from the Company’s unaudited financial statements. Please refer to the reconciliation schedule on page 10 for a tabular presentation of our results.

 

  •   Total revenue was $225.9 million for the three months ended December 31, 2005 compared to $121.0 million for the three months ended December 31, 2004.

 

  •   Income (loss) available to common stockholders (including OP unit holders) was $8.6 million for the three months ended December 31, 2005 compared to $(21.8) million for the three months ended December 31, 2004.

 

  •   Income available to common stockholders (including OP unit holders) per diluted share was $0.16 for the three months ended December 31, 2005.

 

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  •   EBITDA was $55.3 million for the three months ended December 31, 2005, compared to $20.0 million for the three months ended December 31, 2004.

 

  •   Adjusted EBITDA was $53.2 million for the three months ended December 31, 2005, compared to $24.6 million for the three months ended December 31, 2004.

 

  •   FFO available to common stockholders (including OP unit holders) was $33.0 million for the three months ended December 31, 2005, compared to a negative $6.0 million for the three months ended December 31, 2004.

 

  •   Adjusted FFO available to common stockholders (including OP unit holders) was $31.3 million for the three months ended December 31, 2005, compared to $11.0 million for the three months ended December 31, 2004.

 

  •   FFO per diluted share available to common stockholders (including OP unit holders) was $0.59 for the three months ended December 31, 2005.

 

  •   Adjusted FFO per diluted share available to common stockholders (including OP unit holders) was $0.56 for the three months ended December 31, 2005.

 

  •   Total capital expenditures were $29.2 million for the three months ended December 31, 2005.

 

  •   In November 2005, the Company favorably resolved the contract interpretation issue with a customer resulting in the complete reversal of a $2.1 million reserve previously recorded in the second quarter of 2005.

 

Performance Relative to Guidance:

 

The following table reflects our prior guidance for the fourth quarter 2005 compared to our actual results.

 

   

Guidance

  

Actual Fourth Quarter 2005

RevPAR Growth

   8.0% to 10.0%   10.3% excluding 3 hotels under
renovation and 8.0% overall

Adjusted EBITDA

   $52.1 million to $54.2 million   $53.2 million

Adjusted FFO per diluted share

   $0.54 to $0.58   $0.56

Hotel Operating Margin

   +150 bps to 200 bps   +190 bps

 

Comparable pro forma hotel RevPAR for the 59 hotels owned for the entire fourth quarter 2005 (including prior ownership periods for acquisitions that closed during 2005 prior to the fourth quarter) increased 8.0% as compared to the pro forma fourth quarter of 2004, driven entirely by an increase of 8.0% in average daily room rate. RevPAR performance, while strong, was negatively impacted by significant renovations at three of the Company’s hotels. Excluding these hotels, RevPAR increased 10.3%. Comparable hotel operating profit margins for the fourth quarter increased 190 basis points (from 23.8% to 25.7%) (see page 13 for a reconciliation of hotel operating income to the comparable GAAP measure).

 

Annual 2005 Highlights:

 

Listed below are certain highlights from the Company’s audited historical financial statements. Please refer to the reconciliation schedule on page 10 for a tabular presentation of our results.

 

  •   Total revenue was $651.1 million for the year ended December 31, 2005, compared to total revenue of $484.5 million for the year ended December 31, 2004.

 

  •   Income (loss) available to common stockholders (including OP unit holders) was $21.0 million for the year ended December 31, 2005 compared to $(38.9) million for the year ended December 31, 2004.

 

  •   Income available to common stockholders (including OP unit holders) per diluted share was $0.47 for the year ended December 31, 2005.

 

  •   EBITDA was $169.8 million for the year ended December 31, 2005, compared to $89.6 million for the year ended December 31, 2004.

 

  •   Adjusted EBITDA was $167.4 million for the year ended December 31, 2005, compared to $119.7 million for the year ended December 31, 2004.

 

  •   FFO available to common stockholders (including OP unit holders) was $93.9 million for the year ended December 31, 2005, compared to $21.8 million for the year ended December 31, 2004.

 

  •   Adjusted FFO available to common stockholders (including OP unit holders) was $97.9 million for the year ended December 31, 2005, compared to $63.2 million for the year ended December 31, 2004.

 

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  •   FFO per diluted share available to common stockholders (including OP unit holders) was $2.03 for the year ended December 31, 2005.

 

  •   Adjusted FFO per diluted share available to common stockholders (including OP unit holders) was $2.12 for the year ended December 31, 2005.

 

  •   Total capital expenditures were $71.6 million for the year ended December 31, 2005.

 

Comparable pro forma hotel RevPar for the year ended December 31, 2005 for the 59 hotels owned during the entire fourth quarter 2005 (including prior ownership periods for hotels that were acquired during 2005 prior to the fourth quarter) increased 8.4% as compared to the year ended December 31, 2005, driven by an increase in occupancy of 0.4 percentage points and an 8.0% increase in average room rate. RevPAR performance, while strong, was negatively impacted by significant renovations at three of the Company’s hotels. Excluding these hotels, RevPAR increased 9.4%. Comparable hotel operating profit margins for the year ended December 31, 2005 increased 170 basis points (from 26.3% to 28.0%). Please refer to page 13 for a reconciliation of hotel operating income to the comparable GAAP measure.

 

Pro Forma Fourth Quarter 2005 Highlights:

 

Due to the materiality of its acquisitions, dispositions and financings, the Company has provided pro forma highlights for the quarter ended December 31, 2005 that reflect the 2005 acquisitions and the first quarter 2006 acquisition of the Del Mar Marriott and related financing transactions as well as assets sold during 2005 and the sale of the Hollywood Holiday Inn located in Los Angeles, California that is expected to close in February 2006 as if they occurred as of the beginning of the period. The Company estimates that for the pro forma quarter ended December 31, 2005:

 

  •   Pro forma income available to common stockholders would have been approximately $9.1 million;

 

  •   Pro forma Adjusted EBITDA would have been approximately $54.1 million;

 

  •   Pro forma Adjusted FFO available to common stockholders would have been approximately $31.7 million; and

 

  •   Pro forma Adjusted FFO per diluted share available to common stockholders would have been approximately $0.56.

 

Disclosure regarding the non-GAAP financial measures included in this press release is included as an attachment to this release, along with the reconciliation to the most comparable GAAP measure. Please refer to the reconciliation schedule on page 11 for a tabular presentation of our results.

 

Pro Forma Annual 2005 Highlights:

 

Due to the materiality of its acquisitions, dispositions and financings, the Company has provided pro forma highlights for the year ended December 31, 2005 that reflect the 2005 acquisitions and the first quarter 2006 acquisition of the Del Mar Marriott and related financing transactions as well as assets sold during 2005 and the sale of the Hollywood Holiday Inn located in Los Angeles, California that is expected to close in February 2006 as if they occurred as of the beginning of the period. The Company estimates that for the pro forma year ended December 31, 2005:

 

  •   Pro forma income available to common stockholders would have been approximately $32.8 million;

 

  •   Pro forma Adjusted EBITDA would have been approximately $216.0 million;

 

  •   Pro forma Adjusted FFO available to common stockholders would have been approximately $126.4 million; and

 

  •   Pro forma Adjusted FFO per diluted share available to common stockholders would have been approximately $2.23.

 

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Disclosure regarding the non-GAAP financial measures included in this press release is included as an attachment to this release, along with the reconciliation to the most comparable GAAP measure. Please refer to the reconciliation schedule on page 11 for a tabular presentation of our results.

 

Outlook

 

The Company is providing guidance at this time but does not undertake to update it for any developments in its business. Achievement of the anticipated results is subject to risks and uncertainties, including those disclosed in the Company’s filings with the Securities and Exchange Commission. The Company has provided guidance for both the first quarter of 2006 as well as full year 2006. The Company’s guidance does not include the impact of any possible future asset sales, including the Hollywood Holiday Inn, which is expected to generate approximately $2 million in 2006 EBITDA. The guidance also assumes a March 1, 2006, closing on the acquisition of the Hilton Times Square.

 

First Quarter 2006 Outlook

 

The Company expects comparable hotel RevPAR for the first quarter of 2006 to increase approximately 6.0% to 8.0% over the first quarter of 2005. Based upon this guidance, the Company estimates that for the first quarter of 2006:

 

  •   Income (loss) available to common stockholders should be approximately $(13.3) million to $(11.3) million;

 

  •   Income (loss) available to common stockholders per diluted share should be approximately $(0.22) to $(0.19);

 

  •   Adjusted EBITDA should be approximately $50 million to $52 million;

 

  •   Adjusted FFO available to common stockholders should be approximately $26.4 million to $28.4 million;

 

  •   Adjusted FFO per diluted share available to common stockholders should be approximately $0.44 to $0.47;

 

  •   Hotel operating margins should increase approximately 150 basis points to 200 basis points over the first quarter of 2005; and

 

  •   Total capital expenditures for the portfolio should be $20 million to $25 million.

 

Annual 2006 Outlook

 

The Company reiterates the previously provided guidance that it expects comparable hotel RevPAR for the full year 2006 to increase approximately 7% to 9% over the full year 2005. Based upon this guidance, the Company estimates that for the full year 2006:

 

  •   Income available to common stockholders should be approximately $31.2 million to $39.2 million;

 

  •   Income available to common stockholders per diluted share should be approximately $0.51 to $0.64;

 

  •   Adjusted EBITDA should be approximately $254.3 million to $262.3 million;

 

  •   Adjusted FFO available to common stockholders should be approximately $155.5 million to $163.5 million;

 

  •   Adjusted FFO per diluted share available to common stockholders should be approximately $2.52 to $2.65;

 

  •   Hotel operating margins should increase approximately 150 basis points to 200 basis points over the full year 2005; and

 

  •   Total capital expenditures should be $108 million to $125 million consisting of:

 

  •   Fairmont Newport Beach - $18 - $20 million;

 

  •   Hyatt Regency Century Plaza - $20 - $25 million;

 

  •   Acquired Renaissance Properties - $40 - $45 million; and

 

  •   Core portfolio - $30 - $35 million.

 

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Recent Developments – Acquisitions and Dispositions

 

In October 2005, the Company completed the acquisition of the 728-room Hyatt Regency Century Plaza located in Century City, California for $293.0 million. The Company has commenced the renovation of the hotel’s guestrooms and the planning for improvements to the public areas.

 

In December 2005, the Company closed the sale of the 78-room Holiday Inn located in Provo, Utah for gross sale proceeds of $3.7 million.

 

In January 2006, the Company completed the acquisition of the 284-room Marriott Del Mar located in San Diego, California for approximately $69.0 million.

 

In January 2006, the Company entered into an agreement to acquire the 444-room Hilton Times Square Hotel located in New York, New York for approximately $242.5 million. The Company expects the closing to occur on March 1, 2006. The Hilton Times Square Hotel is part of a mixed-use complex developed by Forest City Ratner. The hotel, which opened in 2000, is surrounded by Broadway theatres, fashion houses, nightclubs, shopping, fine New York restaurants and a number of corporate headquarters. The Hilton Times Square occupies the 21st thru 44th floors of the mixed-use entertainment/retail complex and offers oversized guest rooms (330 sq. ft standard room) with panoramic views. The Company will finance the acquisition primarily through the assumption of $81.0 million of debt due in 2010 with a rate of 5.9% per annum and proceeds from its recently completed equity offering.

 

In January 2006, the Company entered into a purchase and sale agreement with an unrelated third party to sell the Hollywood Holiday Inn located in Los Angeles, California for approximately $26.0 million. The sale is expected to close in the first quarter of 2006.

 

Balance Sheet/Liquidity Update

 

As of December 31, 2005, the Company had approximately $71.8 million of cash and cash equivalents (including restricted cash). The Company also had availability under its $150 million credit line (subject to compliance with applicable loan ratios) and has 13 unencumbered assets. Total assets were $2.2 billion, including $2.1 billion of net investments in hotel properties, total debt of $1.2 billion and stockholders’ equity of approximately $860.0 million.

 

In November 2005, the Company announced that affiliates of Westbrook Real Estate Partners, LLC priced an offering of 3,699,572 shares of the Company’s common stock, representing all of the remaining shares of the Company’s common stock held by affiliates of Westbrook Real Estate Partners, LLC. The offering consisted only of secondary shares being sold by affiliates of Westbrook Real Estate Partners, LLC.

 

In December 2005, the Company completed the previously announced sale of 599,355 shares of common stock to Security Capital Preferred Growth Incorporated for gross proceeds of $14.3 million.

 

In December 2005, the Company modified the existing $263.1 million, cross-collateralized secured financing with Mass Mutual. The Company substituted three hotels into the cross-collateralized pool in exchange for the release of twelve hotels. The Company also paid down the full $13.1 million balance on the floating rate portion of this financing.

 

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In February 2006, the Company closed a public offering of 5.5 million shares of common stock for net proceeds of $157.8 million. The proceeds from this offering will be used to fund a portion of the acquisition price of the Hilton Times Square Hotel.

 

In January 2006, the Company entered into rate lock agreements to refinance three existing mortgage loans that mature in 2008. The Company will incur a prepayment penalty and write-off of deferred financing fees of approximately $11.5 million to defease the loans. The Company expects to complete the refinancings in February or March. Key terms are as follows (dollars in millions):

 

     Existing Loan
    New Loan
     Amount
    Rate
     Maturity
    Amount
    Rate
     Maturity

D.C. Renaissance

    $ 53.4    7.5 %   2008    $ 135    5.95 %   2021

Houston Wyndham

    $ 36.0    8.25 %   2008    $ 34    5.65 %   2016

Chicago Embassy Suites

    $ 37.0    8.25 %   2008    $ 75    5.5 %   2017

 

Capital Expenditures

 

In the fourth quarter of 2005, the Company invested $29.2 million in capital expenditures across its portfolio, of which $8.2 million was spent on the Fairmont Newport Beach. For the full year 2005, capital expenditures totaled $71.6 million.

 

Dividend Update

 

In October 2005, the Company paid a dividend of $0.285 per share to its common stockholders (including OP unit holders), a dividend of $0.50 per share to its Series A cumulative redeemable preferred stockholders and a dividend of $0.393 per share to its Series C cumulative convertible redeemable preferred stockholders.

 

During the fourth quarter of 2005, the Board of Directors of the Company elected to increase the quarterly dividend payable to its common stockholders for the fourth quarter from $0.285 to $0.30 per share. The Company also declared a dividend of $0.50 per share payable to its Series A cumulative redeemable preferred stockholders and a dividend of $0.393 per share payable to its Series C cumulative convertible redeemable preferred stockholders. The dividends were paid on January 13, 2006 to stockholders of record on December 30, 2005. The level of future dividends will be determined by the Company’s quarterly operating results and expected capital requirements.

 

Earnings Call

 

The Company will host a conference call to discuss fourth quarter results on February 15, 2006, at 4:30 p.m. EST. A live web cast of the call will be available via the Investor Relations section of the Company’s website at www.sunstonehotels.com. Alternatively, investors may dial 1-800-240-4186 (for domestic callers) or 303-262-2140 (for international callers). A replay of the web cast 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 hereof, assuming the acquisition of the New York Hilton Times Square, owns 62 hotels with an aggregate of 18,069 rooms primarily in the upper-upscale segment operated under brands owned by nationally-recognized companies, such as Marriott, Hilton, Hyatt and Fairmont. For further information, please visit the Company’s website at www.sunstonehotels.com.

 

This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” “continue” and other similar terms and phrases, including references to assumptions and

 

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forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: national and local economic and business conditions, including the potential for additional terrorist attacks, that will affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; relationships with property managers; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages, prices, construction procedures and costs; our ability to identify, successfully compete for and complete acquisitions; the performance of acquired properties after they are acquired; necessary capital expenditures and our ability to fund them; and our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes; and other risks and uncertainties associated with our business described in the Company’s filings with the SEC. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of February 15, 2006, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

 

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Non-GAAP Financial Measures

 

We present the following non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: (1) Earnings Before Interest Expense, Taxes, Depreciation and Amortization, or EBITDA; (2) Adjusted EBITDA (as defined below); (3) Funds From Operations, or FFO; (4) Adjusted FFO (as defined below); and (5) Hotel Operating Income for the purpose of our operating margins.

 

EBITDA represents income (loss) available to common stockholders before minority interest excluding: (1) preferred stock dividends; (2) interest expense (including prepayment penalties, if any); (3) provision for income taxes, including income taxes applicable to sale of assets; and (4) depreciation and amortization. In addition, we have presented Adjusted EBITDA, which excludes: (1) the impact of any gain or loss from asset sales: (2) impairment charges; and (3) other adjustments we have identified in this release. We believe EBITDA and Adjusted EBITDA are useful to an investor in evaluating our operating performance because they help investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest expense and preferred stock dividends) and our asset base (primarily depreciation and amortization) from our operating results. We also use EBITDA and Adjusted EBITDA as measures in determining the value of hotel acquisitions and dispositions. A reconciliation and the components of hotel operating income are set forth on page 13. We believe hotel operating income is also useful to investors in evaluating our property level operating performance.

 

We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group. The Board of Governors of NAREIT in its March 1995 White Paper (as clarified in November 1999 and April 2002) defines FFO to mean net income (loss) (computed in accordance with GAAP), excluding gains and losses from sales of property, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), and after adjustment for unconsolidated partnerships and joint ventures. We also present Adjusted FFO which excludes prepayment penalties, written-off deferred financing costs, impairment losses and other adjustments we have identified in this release. We believe that the presentation of FFO and Adjusted FFO provide useful information to investors regarding our operating performance because they are a measure of our operations without regard to specified non-cash items such as real estate depreciation and amortization, gain or loss on sale of assets and certain other items which we believe are not indicative of the performance of our underlying hotel properties. A reconciliation of net income (loss) to FFO and Adjusted FFO is set forth on page 10. We believe that these items are more representative of our asset base and our acquisition and disposition activities than our ongoing operations. We also use FFO as one measure in determining our results after taking into account the impact of our capital structure.

 

We caution investors that amounts presented in accordance with our definitions of EBITDA, Adjusted EBITDA, FFO, Adjusted FFO and hotel operating income may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP measures in the same manner. EBITDA, Adjusted EBITDA, FFO, Adjusted FFO and hotel operating income should not be considered as an alternative measure of our net income (loss), operating performance, cash flow or liquidity. EBITDA, Adjusted EBITDA, FFO, Adjusted FFO and hotel operating income may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions and other commitments and uncertainties. Although we believe that EBITDA, Adjusted EBITDA, FFO, Adjusted FFO and hotel operating income can enhance an investor’s understanding of our results of operations, these non-GAAP financial measures, when viewed individually, are not necessarily a better indicator of any trend as compared to GAAP measures such as net income (loss) or cash flow from operations. In addition, you should be aware that adverse economic and market conditions may harm our cash flow.

 

***Tables to Follow***

 

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SUNSTONE HOTEL INVESTORS, INC.

Reconciliation of Net Income (Loss) to Non-GAAP Financial Measures

(Unaudited and in Thousands Except Per Share Amounts)

 

Reconciliation of Net Income (Loss) to EBITDA

 

     Three Months Ended
December 31,
     Twelve Months Ended
December 31,
  
     2005
     2004
     2005
     2004
  

Income (loss) available to common stockholders

    $ 7,904     $ (19,130 )   $ 19,232     $ (36,100 )

Minority interest (OP unit holders)

      646       (2,704 )     1,761       (2,831 )
    
 
 
 

Income (loss) available to common stockholders (including OP unit holders)

      8,550       (21,834 )     20,993       (38,931 )

Preferred stock dividends

      4,087       —         10,973       —    

Depreciation and amortization - continuing operations

      22,953       15,999       72,316       57,807  

Depreciation and amortization - discontinued operations

      130       609       842       3,515  

Amortization of deferred stock compensation

      512       287       1,992       287  

Interest expense - continuing operations

      17,982       11,431       55,327       47,561  

Interest expense - discontinued operations

      46       449       517       2,603  

Depreciation and amortization - deferred financing fees

      574       1,203       2,801       4,999  

Prepayment penalties

      9       6,753       2,843       6,753  

Write-off of deferred financing costs

      432       5,146       1,194       5,146  

Income taxes - continuing operations

      —         —         —         177  

Income taxes - discontinued operations

      —         —         —         (333 )
    
 
 
 

EBITDA

      55,275       20,043       169,798       89,584  
    
 
 
 

(Gain)/loss on sale of assets

      45       (561 )     (2,431 )     659  

One-time costs associated with the IPO:

                                 

Compensation/Severance/Professional Fees

      —         5,112       —         5,112  

Impairment loss - continuing operations

      —         —         —         7,439  

Impairment loss - discontinued operations

      —         —         —         16,954  

Reserve for contract interpretation issue

      (2,136 )     —         —         —    
    
 
 
 
       (2,091 )     4,551       (2,431 )     30,164  
    
 
 
 

Adjusted EBITDA

    $ 53,184     $ 24,594     $ 167,367     $ 119,748  
    
 
 
 

Reconciliation of Net Income (Loss) to FFO

 

 

Income (loss) available to common stockholders

    $ 7,904     $ (19,130 )   $ 19,232     $ (36,100 )

Minority interest (OP unit holders)

      646       (2,704 )     1,761       (2,831 )
    
 
 
 

Income (loss) available to common stockholders (including OP unit holders)

      8,550       (21,834 )     20,993       (38,931 )

Series C preferred stock dividends

      1,662       —         3,321       —    

Real estate depreciation and amortization - continuing operations

      22,645       15,777       71,145       56,570  

Real estate depreciation and amortization - discontinued operations

      130       609       842       3,515  

(Gain)/loss on sale of assets

      45       (561 )     (2,431 )     659  
    
 
 
 

FFO available to common stockholders (including OP unit holders)

      33,032       (6,009 )     93,870       21,813  
    
 
 
 

One-time costs associated with the IPO:

                                 

Compensation/Severance/Professional Fees

      —         5,112       —         5,112  

Prepayment penalties

      9       6,753       2,843       6,753  

Write-off of deferred financing costs

      432       5,146       1,194       5,146  

Impairment loss - continuing operations

      —         —         —         7,439  

Impairment loss - discontinued operations

      —         —         —         16,954  

Reserve for contract interpretation issue

      (2,136 )     —         —         —    
    
 
 
 
       (1,695 )     17,011       4,037       41,404  
    
 
 
 

Adjusted FFO available to common stockholders (including OP unit holders)

    $ 31,337     $ 11,002     $ 97,907     $ 63,217  
    
 
 
 

FFO available to common stockholders per diluted share

    $ 0.59             $ 2.03          
    
         
       

Adjusted FFO available to common stockholders per diluted share

    $ 0.56             $ 2.12          
    
         
       

Diluted weighted average shares outstanding, including OP units

      56,017               46,192          
    
         
       

 

10

SUNSTONE HOTEL INVESTORS, INC.

Reconciliation of Pro Forma Net Income (Loss) to Pro Forma Non-GAAP Financial Measures

(Unaudited and in Thousands Except Per Share Amounts)

 

Reconciliation of Pro Forma Net Income (Loss) to Pro Forma EBITDA and Pro Forma Adjusted EBITDA

 

    

Pro Forma
Quarter Ended
December 31,

2005

    

Pro Forma
Year Ended
December 31,

2005

Income (loss) available to common stockholders

    $ 9,052     $ 32,772

Minority interest (OP unit holders)

      —         —  
    
 

Income (loss) available to common stockholders (including OP unit holders)

      9,052       32,772

Preferred stock dividends

      4,087       16,344

Depreciation and amortization - continuing operations

      23,387       88,137

Depreciation and amortization - discontinued operations

      —         —  

Amortization of deferred stock compensation

      512       1,993

Interest expense - continuing operations

      18,613       74,453

Interest expense - discontinued operations

      —         —  

Depreciation and amortization - deferred financing fees

      586       2,343

Prepayment penalties

      —         —  

Write-off of deferred financing costs

      —         —  

Income taxes - continuing operations

      —         —  

Income taxes - discontinued operations

      —         —  
    
 

EBITDA

      56,237       216,042
    
 

(Gain)/loss on sale of assets

      —         —  

One-time costs associated with the IPO:

               

Compensation/Severance/Professional Fees

      —         —  

Impairment loss - continuing operations

      —         —  

Impairment loss - discontinued operations

      —         —  

Reserve for contract interpretation issue

      (2,136 )     —  
    
 
       (2,136 )     —  
    
 

Adjusted EBITDA

    $ 54,101     $ 216,042
    
 

 

Reconciliation of Pro Forma Net Income (Loss) to Pro Forma FFO and Pro Forma Adjusted FFO

 

Income (loss) available to common stockholders

    $ 9,052      $ 32,772

Minority interest (OP unit holders)

      —          —  
    
  

Income (loss) available to common stockholders (including OP unit holders)

      9,052        32,772

Series C preferred stock dividends

      1,661        6,643

Real estate depreciation and amortization - continuing operations

      23,079        86,966

Real estate depreciation and amortization - discontinued operations

      —          —  

(Gain)/loss on sale of assets

      —          —  
    
  

FFO available to common stockholders (including OP unit holders)

      33,792        126,381
    
  

One-time costs associated with the IPO:

                

Compensation/Severance/Professional Fees

      —          —  

Prepayment penalties

      —          —  

Write-off of deferred financing costs

      —          —  

Impairment loss - continuing operations

      —          —  

Impairment loss - discontinued operations

      —          —  

Reserve for contract interpretation issue

      (2,136 )      —  
    
  
       (2,136 )      —  
    
  

Adjusted FFO available to common stockholders (including OP unit holders)

    $ 31,656      $ 126,381
    
  

FFO available to common stockholders per diluted share

    $ 0.60      $ 2.23
    
  

Adjusted FFO available to common stockholders per diluted share

    $ 0.56      $ 2.23
    
  

Diluted weighted average shares outstanding, including OP units

      56,614        56,614
    
  

 

11

SUNSTONE HOTEL INVESTORS, INC.

Reconciliation of Net Income to Non-GAAP Financial Measures

Guidance for Quarter Ended March 31, 2006 and Year Ended 2006

(Unaudited and in Millions Except Per Share Amounts)

 

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

 

     Quarter Ended March 31,
     Year Ended December 31,
     Low End of
Range
     High End of
Range
     Low End of
Range
    High End of
Range

Income available to common stockholders

    $ (13.3 )   $ (11.3 )   $ 31.2    $ 39.2

Series A preferred stock dividends

      2.4       2.4       9.7      9.7

Series C convertible preferred stock dividends

      1.6       1.6       6.5      6.5

Depreciation and amortization -

continuing operations

      26.8       26.8       107.2      107.2

Depreciation and amortization -

deferred financing fees

      0.6       0.6       2.4      2.4

Amortization of deferred stock compensation

      0.8       0.8       3.1      3.1

Interest expense - continuing operations

      19.6       19.6       82.7      82.7

Prepayment penalties, write-off of deferred financing costs

associated with the early retirement of debt

      11.5       11.5       11.5      11.5
    
 
 
  

EBITDA

      50.0       52.0       254.3      262.3
    
 
 
  

Adjusted EBITDA

    $ 50.0     $ 52.0     $ 254.3    $ 262.3
    
 
 
  

 

Reconciliation of Net Income to FFO and Adjusted FFO

 

Income available to common stockholders

    $ (13.3 )   $ (11.3 )   $ 31.2    $ 39.2

Series C convertible preferred stock dividends

      1.6       1.6       6.5      6.5

Real estate depreciation and amortization -

continuing operations

      26.6       26.6       106.3      106.3
    
 
 
  

FFO available to common stockholders

      14.9       16.9       144.0      152.0
    
 
 
  

Prepayment penalties, write-off of deferred financing costs

associated with the early retirement of debt

      11.5       11.5       11.5      11.5
    
 
 
  

Adjusted FFO available to common stockholders

    $ 26.4     $ 28.4     $ 155.5    $ 163.5
    
 
 
  

Diluted weighted average shares outstanding (1)

      60.3       60.3       61.7      61.7
    
 
 
  

Adjusted FFO available to common stockholders per diluted share

    $ 0.44     $ 0.47     $ 2.52    $ 2.65
    
 
 
  
(1) Diluted weighted average shares outstanding includes Series C Convertible Preferred on an as-converted basis.

 

12

SUNSTONE HOTEL INVESTORS, INC.

Hotel Operating Results

(Unaudited and In Thousands Except Hotels and Rooms)

 

     Quarter Ended
  
     Historical Properties (1)
December 31, 2005
     Acquired Properties (2)
December 31, 2005
    

Total

December 31, 2005

     Pro Forma (3)
December 31, 2004
  

Number of Hotels

    51     9     60     51  

Number of Rooms

    13,360     3,973     17,333     12,635  
    
 
 
 

Hotel operating profit margin (7) (8)

    25.7 %   23.6 %   24.8 %   23.8 %
    
 
 
 

Hotel Revenues

                         

Room revenue

    84,178     52,899     137,077     78,729  

Food and beverage revenue

    32,077     35,487     67,564     30,654  

Other operating revenue

    10,588     10,690     21,278     10,901  
    
 
 
 

Total Hotel Revenues

    126,843     99,076     225,919     120,284  

Hotel Expenses

                         

Room expense

    19,597     13,997     33,594     18,445  

Food and beverage expense

    21,300     25,501     46,801     20,815  

Other hotel expense

    40,028     23,789     63,817     37,407  

General and administrative expense (9)

    13,302     12,382     25,684     14,995  
    
 
 
 

Total Hotel Expenses

    94,227     75,669     169,896     91,662  
    
 
 
 

Hotel Operating Income

    32,616     23,407     56,023     28,622  
    
 
 
 

General and administrative - corporate

    3,678     25     3,703     7,950  

Depreciation and amortization

    14,590     8,363     22,953     15,823  

Deferred stock compensation

    512     —       512     —    

Impairment loss

    —       —       —       —    
    
 
 
 

Operating Income

    13,836     15,019     28,855     4,849  

Interest and other income

    433     32     465     197  

Interest expense

    (12,941 )   (6,021 )   (18,962 )   (22,375 )

Minority interest

    (646 )   —       (646 )   2,410  

Benefit from (provision for) income tax

    1     (1 )   —       —    

Gain from discontinued operations

    143     —       143     —    

Reserve for contract dispute (9)

    2,136     —       2,136     —    
    
 
 
 

NET INCOME (LOSS)

    2,962     9,029     11,991     (14,919 )(10)
     Year Ended
  
     Historical Properties (4)
December 31, 2005
     Acquired Properties (5)
December 31, 2005
    

Total

December 31, 2005

     Pro Forma (6)
December 31, 2004
  

Number of Hotels

    50     10     60     50  

Number of Rooms

    12,552     4,781     17,333     12,555  
    
 
 
 

Hotel operating profit margin (7) (8)

    28.0 %   21.9 %   26.6 %   26.3 %
    
 
 
 

Hotel Revenues

                         

Room revenue

    347,408     85,806     433,214     324,151  

Food and beverage revenue

    112,519     50,909     163,428     108,814  

Other operating revenue

    41,942     12,484     54,426     42,628  
    
 
 
 

Total Hotel Revenues

    501,869     149,199     651,068     475,593  

Hotel Expenses

                         

Room expense

    75,531     22,472     98,003     72,592  

Food and beverage expense

    77,773     37,902     115,675     75,389  

Other hotel expense

    153,583     37,463     191,046     147,370  

General and administrative expense (9)

    54,292     18,747     73,039     55,026  
    
 
 
 

Total Hotel Expenses

    361,179     116,584     477,763     350,377  
    
 
 
 

Hotel Operating Income

    140,690     32,615     173,305     125,216  
    
 
 
 

General and administrative - corporate

    12,544     (36 )   12,508     15,450  

Depreciation and amortization

    56,765     15,551     72,316     56,081  

Deferred stock compensation

    1,992     —       1,992        

Impairment loss

    —       —       —       7,439  
    
 
 
 

Operating Income

    69,389     17,100     86,489     46,246  

Interest and other income

    3,035     44     3,079     715  

Interest expense

    (51,367 )   (10,615 )   (61,982 )   (52,979 )

Minority interest

    (1,761 )   —       (1,761 )   1,271  

Benefit from (provision for) income tax

    3     (3 )   —       —    

Gain from discontinued operations

    4,380     —       4,380     —    

Reserve for contract dispute (9)

    —       —       —       —    
    
 
 
 

NET INCOME (LOSS)

    23,679     6,526     30,205     (4,747 )(10)
(1) Represents 51 hotels owned for both the entire quarters ended December 31, 2005 and 2004.

 

(2) Represents our ownership period of the 9 hotels acquired during 2005.

 

(3) Represents 51 hotels owned for the entire quarter ended December 31, 2004. Excludes 3 hotels that were sold in 2005.

 

(4) Represents 50 hotels owned for both the entire years ended December 31, 2005 and December 31 2004.

 

(5) Represents 1 hotel which opened in June 2004 and 9 hotels acquired during 2005.

 

(6) Represents 50 hotels owned for the entire year ended December 31, 2004. Excludes 3 hotels that were sold in 2005 and 1 hotel that was opened in June 2004.

 

(7) Quarter and year ended December 31, 2005 hotel operating profit margin is calculated as the hotel adjusted operating income divided by the hotel revenues per the schedule above. We use hotel operating income for the same reasons as EBITDA, which are more fully set forth on page 10 of this release.

 

(8) Quarter and year ended December 31, 2004 Pro forma hotel operating profit margin is calculated as the pro forma hotel adjusted operating income divided by the pro forma hotel revenues per the schedule above. We use hotel operating income for the same reasons as EBITDA, which are more fully set forth on page 11 of this release.

 

(9) The effect of the reversal of the reserve of $2.1 million that was recorded in Q2 of 2005 has been excluded from the quarter ended December 31, 2005.

 

(10) Pro forma income from continuing operations.

 

13

SUNSTONE HOTEL INVESTORS, INC.

Hotel Operating Statistics by Region

(Unaudited)

 

               Quarter ended December 31, 2005
    Quarter ended December 31, 2004
    Percent
Change in
RevPAR
  

REGION

    Number of
Hotels
    Number of
Rooms
    Occupancy
Percentages
     Average
Daily
Rate
    RevPar
    Occupancy
Percentages
     Average
Daily
Rate
    RevPar
   

California

    21    4,844    68.2 %   $ 111.47    $ 76.07    72.3 %   $ 102.57    $ 74.15    2.6 %

Other West (1)

    15    3,362    63.2 %   $ 83.48    $ 52.74    59.6 %   $ 77.59    $ 46.26    14.0 %

Midwest (2)

    9    2,694    57.8 %   $ 125.71    $ 72.67    60.2 %   $ 120.03    $ 72.20    0.6 %

Middle Atlantic (3)

    6    2,568    74.5 %   $ 176.46    $ 131.42    70.1 %   $ 162.00    $ 113.54    15.8 %

South (4)

    5    2,062    67.1 %   $ 130.99    $ 87.86    67.4 %   $ 124.38    $ 83.79    4.9 %

Southwest (5)

    3    1,075    77.5 %   $ 89.41    $ 69.32    75.8 %   $ 78.78    $ 59.70    16.1 %
    
  
  
 
  
  
 
  
  

Total Portfolio

    59    16,605    67.1 %   $ 121.83    $ 81.74    67.1 %   $ 112.78    $ 75.69    8.0 %
    
  
  
 
  
  
 
  
  
               Year ended December 31, 2005
    Year ended December 31, 2004
    Percent
Change in
RevPAR
  

REGION

    Number of
Hotels
    Number of
Rooms
    Occupancy
Percentages
     Average
Daily
Rate
    RevPar
    Occupancy
Percentages
     Average
Daily
Rate
    RevPar
   

California

    21    4,844    76.5 %   $ 112.21    $ 85.87    76.4 %   $ 104.13    $ 79.53    8.0 %

Other West (1)

    15    3,362    69.7 %   $ 84.72    $ 59.03    66.5 %   $ 79.95    $ 53.16    11.0 %

Midwest (2)

    9    2,694    62.2 %   $ 120.73    $ 75.04    62.9 %   $ 112.10    $ 70.52    6.4 %

Middle Atlantic (3)

    6    2,568    73.6 %   $ 168.67    $ 124.19    73.2 %   $ 154.09    $ 112.76    10.1 %

South (4)

    5    2,062    70.5 %   $ 129.05    $ 90.95    69.8 %   $ 120.81    $ 84.27    7.9 %

Southwest (5)

    3    1,075    78.1 %   $ 90.23    $ 70.51    82.2 %   $ 82.28    $ 67.65    4.2 %
    
  
  
 
  
  
 
  
  

Total Portfolio

    59    16,605    71.7 %   $ 117.39    $ 84.22    71.3 %   $ 108.97    $ 77.66    8.4 %
    
  
  
 
  
  
 
  
  
(1) Includes Colorado, Idaho, Oregon, Utah and Washington

 

(2) Includes Illinois, Michigan and Minnesota

 

(3) Includes New Jersey, Maryland, New York, Pennsylvania and Washington D.C.

 

(4) Includes Florida, Georgia and Virginia

 

(5) Includes New Mexico and Texas

 

14

SUNSTONE HOTEL INVESTORS, INC.

Hotel Operating Statistics by Brand

(Unaudited)

 

               Quarter ended December 31, 2005
    Quarter ended December 31, 2004
    Percent
Change in RevPAR
  

Brand

    Number of
Hotels
    Number of
Rooms
    Occupancy
Percentages
     Average
Daily Rate
    RevPar
    Occupancy
Percentages
     Average
Daily Rate
    RevPar
   

Marriott

    31    9,066    69.2 %   $ 136.58    $ 94.48    68.2 %   $ 126.56    $ 86.37    9.4 %

Hilton

    5    1,333    65.6 %   $ 147.24    $ 96.55    67.0 %   $ 135.94    $ 91.13    5.9 %

InterContinental

    12    2,461    65.2 %   $ 81.52    $ 53.11    64.3 %   $ 76.92    $ 49.44    7.4 %

Hyatt

    4    1,029    67.1 %   $ 113.49    $ 76.14    65.7 %   $ 100.35    $ 65.93    15.5 %

Other Franchise Affiliations (1)

    4    1,481    68.0 %   $ 92.83    $ 63.14    73.5 %   $ 86.30    $ 63.40    -0.4 %

Independent

    3    1,235    54.7 %   $ 85.15    $ 46.55    57.3 %   $ 83.39    $ 47.80    -2.6 %
    
  
  
 
  
  
 
  
  

Total Portfolio

    59    16,605    67.1 %   $ 121.83    $ 81.74    67.1 %   $ 112.78    $ 75.69    8.0 %
    
  
  
 
  
  
 
  
  
               Year ended December 31, 2005
    Year ended December 31, 2004
    Percent
Change in RevPAR
  

Brand

    Number of
Hotels
    Number of
Rooms
    Occupancy
Percentages
     Average
Daily Rate
    RevPar
    Occupancy
Percentages
     Average
Daily Rate
    RevPar
   

Marriott

    31    9,066    73.1 %   $ 130.97    $ 95.77    72.3 %   $ 121.60    $ 87.94    8.9 %

Hilton

    5    1,333    72.2 %   $ 141.90    $ 102.43    70.9 %   $ 130.82    $ 92.72    10.5 %

InterContinental

    12    2,461    69.3 %   $ 83.06    $ 57.59    69.1 %   $ 77.55    $ 53.58    7.5 %

Hyatt

    4    1,029    74.2 %   $ 113.19    $ 83.98    70.8 %   $ 102.06    $ 72.24    16.3 %

Other Franchise Affiliations (1)

    4    1,481    74.8 %   $ 94.48    $ 70.69    77.5 %   $ 89.51    $ 69.39    1.9 %

Independent

    3    1,235    60.0 %   $ 84.29    $ 50.55    61.3 %   $ 79.82    $ 48.94    3.3 %
    
  
  
 
  
  
 
  
  

Total Portfolio

    59    16,605    71.7 %   $ 117.39    $ 84.22    71.3 %   $ 108.97    $ 77.66    8.4 %
    
  
  
 
  
  
 
  
  
(1) Includes Sheraton and Wyndham

 

15

SUNSTONE HOTEL INVESTORS, INC.

Debt Summary

(Unaudited)

 

Debt

    Collateral
    Interest Rate /
Spread
    Maturity
Date
   

Q4 2005

Ending Balance

   

Recent

Events (1)

   

January 31,

2006 Balance

Fixed Rate Debt

                                    

Secured Mortgage Debt

    1 hotel    8.51%    2007    $ 13,703,080           $ 13,703,080

Secured Mortgage Debt (2)

    1 hotel    7.50%    2008      53,369,908             53,369,908

Secured Mortgage Debt (2)

    1 hotel    8.25%    2008      37,021,138             37,021,138

Secured Mortgage Debt (2)

    1 hotel    8.25%    2008      35,972,886             35,972,886

Secured Mortgage Debt

    1 hotel    8.78%    2009      9,081,380             9,081,380

Secured Mortgage Debt (3)

    17 hotels    5.95%    2011      250,000,000             250,000,000

Secured Mortgage Debt

    2 hotels (4)    4.98%    2012      65,000,000             65,000,000

Secured Mortgage Debt

    Rochester laundry facility    9.88%    2013      6,029,167             6,029,167

Secured Mortgage Debt

    1 hotel    6.12%    2014      175,000,000             175,000,000

Secured Mortgage Debt

    10 hotels (4)    5.34%    2015      276,000,000             276,000,000

Secured Mortgage Debt

    2 hotels (4)    5.20%    2016      185,000,000             185,000,000

Secured Mortgage Debt

    1 hotel    5.69%    2016           $ 48,000,000      48,000,000
                   
  
  

Total Fixed Rate Debt

                     1,106,177,559             1,154,177,559

Floating Rate Debt

                                    

Unsecured Term Loan Facility

    No mortgages    L + 2.25%    2008      75,000,000             75,000,000
                   
  
  

Total Floating Rate Debt

                     75,000,000             75,000,000

TOTAL MORTGAGE DEBT

                     1,181,177,559             1,229,177,559

Secured Revolving Credit Facility

    8 hotels    L + 1.50% - 2.00%    2007      —               —  
                   
         

TOTAL DEBT

                   $ 1,181,177,559           $ 1,229,177,559
                   
         

Preferred / Convertible Stock

                                    

Series A

         8.00%    perpetual    $ 121,250,000           $ 121,250,000

Series C

         6.45%    perpetual    $ 100,000,000           $ 100,000,000

% Fixed Rate Debt

                     93.7%             93.9%

% Floating Rate Debt

                     6.3%             6.1%

Average Interest Rate (5)

                     6.00%             5.98%

Weighted Average Maturity of Debt

                     7.65 years             7.78 years
(1) Reflects acquisition debt on the Marriott Del Mar

 

(2) Debt will be refinanced during Q1 2006

 

(3) Cross-collateralized loan with life insurance company

 

(4) Individual, non cross-collateralized loans

 

(5) Assumes LIBOR of 4.51%

 

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