Sunstone Hotel to Offer Shares

Sunstone Hotel Investors, Inc. ( SHO - Snapshot Report ) , a real estate investment trust (REIT), has recently priced a secondary offering of 11 million shares at $10.45 each.To cover any over-allotments, Sunstone Hotel also plans to offer a 30-day option to the underwriters for purchasing an additional 1.65 million shares.

The net proceeds from the offering will be contributed to its subsidiary Sunstone Hotel Partnership, LLC, in exchange for additional membership units in the operating partnership.

The operating partnership will eventually utilize the net proceeds to fund the acquisition of the Hilton Garden Inn Chicago Downtown/Magnificent Mile and other such potential future acquisitions, for renovation of the Hyatt Chicago Magnificent Mile hotel, and for other general corporate purposes.

Recently, Sunstone Hotel entered into an agreement to acquire the 357-room Hilton Garden Inn Chicago Downtown/Magnificent Mile for $91.75 million. Post acquisition, the hotel is expected to generate approximately $4.1 million of EBITDA and $3.7 million of net operating income in 2012.

As of March 31, 2012, the company had approximately $198.2 million of cash and cash equivalents, including restricted cash of $72.0 million and total consolidated debt of $1.6 billion.

California-based Sunstone Hotel owns, acquires and renovates luxury and upscale full-service hotels across the United States. The company operates the hotels under world class brands like Marriot, Hiton, Fairmont and Sheraton.

Sunstone Hotel currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We also have a long-term Neutral recommendation on the stock. One of its competitors, Host Hotels & Resorts Inc. ( HST - Analyst Report ) also holds a Zacks #2 Rank.