Sunstone Prices Public Offering of 4M Shares

April 4, 2011
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user AMagill

Sunstone Hotel Investors Inc. anticipates pocketing $100 million in gross proceeds now that it has priced an underwritten public offering of 4 million shares of its 8.0 percent Series D Cumulative Redeemable Preferred Stock.

J.P. Morgan, BofA Merrill Lynch and Wells Fargo Securities are serving as joint book-running managers for the offering. Barclays Capital, Citi, Deutsche Bank Securities and Morgan Stanley are onboard as senior co-managers, while Baird, FBR Capital Markets, KeyBanc Capital Markets and Stifel Nicolaus Weisel are serving as junior co-managers. The offering allows underwriters a 30-day option to acquire as much as an additional 600,000 Series D Preferred Shares to cover any over-allotments.

Sunstone plans to contribute net proceeds from the offering to its wholly owned subsidiary, Sunstone Hotel Partnership L.L.C., in return for additional membership units in the operating partnership, which will utilize the funds for general corporate purposes, growth capital expenditures and acquisitions.

Sunstone has already made a couple of purchases this year. In late March, the hotel REIT entered into an agreement to acquire a 75 percent stake in the 1,190-room Hilton San Diego Hotel from One Park Boulevard L.L.C. Sunstone will purchase the majority stake in the 30-story, three-year-old convention center hotel from Henley Holding Co., the managing member of One Park Boulevard. As per terms of the agreement, Sunstone will fork over $176.3 million in cash and replace the property’s current $235.4 million construction loan with a new $250 million mortgage.

Additionally, during its fourth quarter 2010 earnings call in February, Sunstone’s $93.8 million acquisition of the 494-room JW Marriott in New Orleans was announced. The off-market transaction involved the company’s assumption of an existing $42.2 million loan. And in January, the REIT completed its $37.5 million purchase of a 62 percent stake in the 460-room Doubletree Guest Suite Times Square in New York City.

“On the acquisitions front, our focus in 2011 is to enhance the quality and scale of our portfolio by selectively acquiring institutional quality, upper upscale hotels, and strong market,” Kenneth Cruse, president of Sunstone, said during the earnings call. “Increasing our presence in the top long-term growth markets in the US is fundamental to our strategy.”