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Sunstone Disposes Hilton New Orleans St. Charles Hotel for $47M
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Key Takeaways
SHO sold the 252-room Hilton New Orleans St. Charles for $47M, or about $187K per key.
Disposition proceeds were fully reinvested into accretive share repurchases amid favorable market conditions.
SHO will provide more details on the sale's impact on its 2025 outlook in the Q2 earnings release.
Sunstone Hotel Investors, Inc. (SHO - Free Report) recently sold Hilton New Orleans St. Charles, encompassing 252 rooms for a gross sale price of $47 million, or approximately $187,000 per key.
The sale price of the hotel reflects a multiple of 10.1 times of the 2024 Hotel Adjusted EBITDAre and an 8.7% cap rate on 2024 Hotel Net Operating Income (NOI). Including the company's estimate of required near-term capital expenditures, the gross sale price reflects a multiple of 13.4 times of the Hotel Adjusted EBITDAre and a 6.6% cap rate on 2024 Hotel NOI.
To prepare for the sale of the hotel, the company utilized favorable market conditions to completely reinvest the proceeds from the disposition into additional share repurchases.
From the beginning of 2025 through June 6, Sunstone has repurchased 6.8 million shares of its common stock at an average price of $8.84 per share, resulting in a total repurchase amount of $60 million before expenses. Since the start of 2022, the company has allocated $252 million to repurchase 25.8 million shares of its common stock, which accounts for nearly 12% of the shares outstanding at the beginning of the period, at an average price of $9.77 per share.
The repurchase activity resulted in an accretive allocation of capital and created significant value for the company's shareholders through the implied cash flow multiple and discount to net asset value.
Sunstone expects that the hotel will need periodic renovation to uphold its competitive standing and sustain its current earnings level. The company intends to share more details about the sale, including its effect on the previously issued 2025 outlook, during the release of its second quarter earnings.
Management Commentary
Per Bryan Giglia, CEO of Sunstone, "We were able to divest the hotel at attractive pricing, eliminate near-term defensive capital expenditures and recycle the proceeds into a higher-yielding investment through the repurchase of our stock at a compelling discount. New Orleans remains an attractive lodging market for group events and leisure travel, and we will continue to benefit from exposure to the city through our ownership of the well-located JW Marriott."
SHO: In a Snapshot
Sunstone’s strategy is to create long-term shareholder value through the acquisition, active ownership, and disposition of well-located hotel and resort real estate. The company remains engaged in capital allocation opportunities despite the uncertain macroeconomic environment.
In the past month, shares of this Zacks Rank #3 (Hold) company have declined 1.1% against the industry's upside of 1.3%.
Image: Bigstock
Sunstone Disposes Hilton New Orleans St. Charles Hotel for $47M
Key Takeaways
Sunstone Hotel Investors, Inc. (SHO - Free Report) recently sold Hilton New Orleans St. Charles, encompassing 252 rooms for a gross sale price of $47 million, or approximately $187,000 per key.
The sale price of the hotel reflects a multiple of 10.1 times of the 2024 Hotel Adjusted EBITDAre and an 8.7% cap rate on 2024 Hotel Net Operating Income (NOI). Including the company's estimate of required near-term capital expenditures, the gross sale price reflects a multiple of 13.4 times of the Hotel Adjusted EBITDAre and a 6.6% cap rate on 2024 Hotel NOI.
To prepare for the sale of the hotel, the company utilized favorable market conditions to completely reinvest the proceeds from the disposition into additional share repurchases.
From the beginning of 2025 through June 6, Sunstone has repurchased 6.8 million shares of its common stock at an average price of $8.84 per share, resulting in a total repurchase amount of $60 million before expenses. Since the start of 2022, the company has allocated $252 million to repurchase 25.8 million shares of its common stock, which accounts for nearly 12% of the shares outstanding at the beginning of the period, at an average price of $9.77 per share.
The repurchase activity resulted in an accretive allocation of capital and created significant value for the company's shareholders through the implied cash flow multiple and discount to net asset value.
Sunstone expects that the hotel will need periodic renovation to uphold its competitive standing and sustain its current earnings level. The company intends to share more details about the sale, including its effect on the previously issued 2025 outlook, during the release of its second quarter earnings.
Management Commentary
Per Bryan Giglia, CEO of Sunstone, "We were able to divest the hotel at attractive pricing, eliminate near-term defensive capital expenditures and recycle the proceeds into a higher-yielding investment through the repurchase of our stock at a compelling discount. New Orleans remains an attractive lodging market for group events and leisure travel, and we will continue to benefit from exposure to the city through our ownership of the well-located JW Marriott."
SHO: In a Snapshot
Sunstone’s strategy is to create long-term shareholder value through the acquisition, active ownership, and disposition of well-located hotel and resort real estate. The company remains engaged in capital allocation opportunities despite the uncertain macroeconomic environment.
In the past month, shares of this Zacks Rank #3 (Hold) company have declined 1.1% against the industry's upside of 1.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are VICI Properties (VICI - Free Report) and W.P. Carey (WPC - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for VICI’s 2025 FFO per share has moved one cent northward to $2.34 over the past two months.
The consensus estimate for WPC’s 2025 FFO per share has been revised upward by 1.2% to $4.88 over the past two months.
Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.