Investors - JUNE 23, 2014

IN-DEPTH: Sunstone Hotel buys Hawaiian resort for $326m

by Andrea Waitrovich

Sunstone Hotel Investors has acquired the 544-room Wailea Beach Marriott & Spa, located on 22 fee-simple acres in Kihei, Hawaii, for a net purchase price of $325.7 million, or $598,600 per room. The seller is an affiliate of The Blackstone Group.



Sunstone expects to fund the acquisition, in part, with $60 million of common stock issued directly to the seller, an affiliate of Blackstone Real Estate Partners IV. The transaction is expected to close in the third quarter. 

The purchase price represents a 16.9x multiple on 2014 forecasted hotel EBITDA of $19.3 million and a 5.2 percent capitalization rate on 2014 forecasted hotel net operating income.

Sunstone expects to fund the balance of the purchase price with proceeds from the issuance of common stock. Additionally, Sunstone expects to receive operational support from Marriott International, the hotel manager, during a planned renovation of the hotel in 2015 and 2016.



The Wailea Beach Marriott Resort & Spa is located on 22 acres of fee-simple, oceanfront land in the heart of Wailea, Maui. The full-service hotel was built in 1976 and underwent renovations in 2008.



The Hawaiian hotel sector has seen transaction activity skyrocket during first quarter 2014, completing $2.05 billion in sales volume. The first quarter 2014 has had the most transaction volume to date, according to data from Real Capital Analytics. The fourth quarter 2013 had $65 million in completed transactions, a drop compared to the previous quarters, ($774 million during the first quarter 2013, $472 million during the second quarter 2013 and $502 million during the third quarter 2013).

Other large transactions completed this year were the 526-room Royal Hawaiian Hotel, selling for $333.5 million; the 510-room Sheraton Maui, selling for $433.1 million; the1,152-room Sheraton Princess Kaiulani, selling for  $730.5 million; and the 1,636-room Sheraton-Waikiki, selling for $1.1 billion. These transactions were completed in February.



Sunstone Hotel Investors is a REIT that, as of the completion of the acquisition, will have interests in 30 hotels comprising 14,304 rooms. 

The Blackstone Group has approximately $81 billion in real estate assets globally.


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