ALISO VIEJO, Calif. - Sunstone Hotel (NYSE:SHO) Investors, Inc., a lodging real estate investment trust, has entered into a definitive agreement to purchase the Hyatt Regency San Antonio Riverwalk for $230 million. The acquisition, expected to close in late April, includes a 630-room hotel, nearly two acres of riverfront land, and a 516-space parking garage adjacent to the developing Alamo Visitor Center and Museum.
The Hotel, which has recently undergone a $37 million renovation, is strategically located between Texas' two most visited tourist sites, the Riverwalk and the Alamo. Sunstone's purchase price equates to approximately $352,000 per key, reflecting an 11.1x multiple on the estimated 2024 hotel EBITDA and an 8.0% capitalization rate.
Hyatt Hotels (NYSE:H) Corporation will continue to manage the property under the Hyatt Regency brand and will contribute around $8 million of key money as part of the transaction. The acquisition is part of Sunstone's strategy to reinvest capital for higher long-term returns following the sale of the Boston Park Plaza in October 2023.
The Company projects the hotel will contribute $12 to $13 million of hotel EBITDA and approximately $0.06 of adjusted FFO per diluted share for 2024.
Sunstone CEO Bryan Giglia expressed confidence in the acquisition, citing the Hotel's prime location and the potential for earnings growth driven by the surrounding area's positive demographic shifts and business-friendly environment. The transaction is anticipated to support Sunstone's earnings growth into 2025, alongside two recent brand conversions and the forthcoming completion of the Andaz Miami Beach investment.
The Company aims to use the remaining sale proceeds from Boston Park Plaza for further accretive acquisitions or share repurchases. The acquisition is subject to customary closing conditions, and no assurance can be given that it will be finalized as planned.
This news is based on a press release statement from Sunstone Hotel Investors, Inc. and does not include any speculative content regarding potential future outcomes or broader industry trends.
InvestingPro Insights
Sunstone Hotel Investors, Inc.'s strategic acquisition of the Hyatt Regency San Antonio Riverwalk aligns with the company's robust financial performance and investor-friendly actions. With a market capitalization of $2.2 billion and a notable P/E ratio of 11.62, Sunstone demonstrates its commitment to shareholder value. Adjusted metrics from the last twelve months as of Q4 2023 indicate a P/E ratio of 33.81, suggesting a forward-looking market sentiment.
Incorporating InvestingPro Tips, it's evident that Sunstone's management has been focused on enhancing shareholder value, as indicated by their aggressive share buyback program. Moreover, the company is trading at a low EBITDA valuation multiple, which could signal an attractive entry point for investors considering the company's recent profitable performance and analysts' predictions of continued profitability this year.
InvestingPro Data further reveals that Sunstone's revenue growth over the last twelve months stood at 8.22%, showcasing a steady financial expansion. The EBITDA growth of 9.95% during the same period highlights operational efficiency and potential for earnings improvement. However, investors should note the quarterly revenue decline of -10.21% in Q4 2023, which may warrant further analysis.
For investors seeking a deeper dive into Sunstone's financial health and future prospects, additional InvestingPro Tips are available, including insights on earnings multiples, revenue valuation, and debt levels. To access these tips and more, visit https://www.investing.com/pro/SHO and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 9 additional InvestingPro Tips listed for Sunstone Hotel Investors, Inc., providing a comprehensive view of the company's investment potential.
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