EX-99 2 dex99.htm PRESS RELEASE Press Release

EXHIBIT 99

 

[GRAPHIC OF SUNSTONE HOTEL INVESTORS, INC.]

 

FOR IMMEDIATE RELEASE

 

For Additional Information:

 

Investor Relations

   Amy Cozamanis   Laurie Berman

Sunstone Hotel Investors, Inc.

   Investor/Analyst Information   General Information

(949) 369-4204

   Financial Relations Board   Financial Relations Board
    (310) 854-8314   (310) 854-8315

 

SUNSTONE HOTEL INVESTORS REPORTS RESULTS OF OPERATIONS FOR THIRD QUARTER 2004

 

Issues Earnings Guidance for Fourth Quarter and Full Year 2004

 

SAN CLEMENTE, CA; December 1, 2004 – Sunstone Hotel Investors, Inc. (the “Company”) (NYSE: SHO) today announced results of operations for the third quarter ended September 30, 2004.

 

On October 26, 2004, Sunstone Hotel Investors, Inc. closed its initial public offering. As defined in the prospectus, the following are highlights of the Formation and Structuring Transactions (see page 46 of the Company’s Prospectus dated October 20, 2004 for a detailed description) that took place:

 

  • Sold 24,459,737 shares of common stock for gross proceeds of $415.8 million including the 3,165,000 shares of common stock sold in connection with the full exercise of the underwriters’ over-allotment option.

 

  • Entered into a management contract with Interstate Hotels and Resorts (NYSE: IHR) to manage 49 properties.

 

  • Entered into a $150.0 million senior secured revolving credit facility.

 

  • Entered into a $75.0 million subordinate term loan facility.

 

  • Paid down $210.1 million of existing, pre-payable first-mortgage debt.

 

  • Modified a $308.4 million floating-rate first-mortgage loan by converting $250.0 million of the floating rate loan to a fixed rate of 5.95% and reducing the floating rate from LIBOR + 335 bps to LIBOR + 225 bps on the balance of the loan.

 

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Robert A. Alter, Chief Executive Officer, stated, “We are very pleased to have successfully completed our initial public offering along with a number of other important transactions that will allow our hotels to continue to prosper and provide us with the financial flexibility to grow our company. We believe that it is a very exciting time in the hotel cycle and we will seek to take advantage of the opportunity to deliver attractive returns to our shareholders.”

 

Third Quarter Pro Forma Highlights:

 

The Company has filed contemporaneously with this press release the Form 10-Q with the SEC for the period ending September 30, 2004. In addition to the required historical financial statements for the quarter and nine-months ended September 30, 2004 and the comparable periods ended September 30, 2003 included in the filing, the Company has also included pro forma income statements that include the Formation and Structuring Transactions for the same periods and a pro forma balance sheet at September 30, 2004. We believe that the pro forma income statements are useful to understand the effect of those transactions on our operations and financial performance during the periods.

 

Jon D. Kline, Chief Financial Officer, stated, “We are pleased to be reporting such strong results in our first release since our initial public offering. Operating trends have been positive as demonstrated by our results.”

 

Listed below are certain highlights from the pro forma and historical financial statements.

 

  • Total pro forma revenue was $129.3 million and $366.2 million for the quarter and nine-month period ending September 30, 2004, respectively, compared to $120.2 million and $339.1 million for the quarter and nine-month period ending September 30, 2003, respectively.

 

  • Historical revenue was $134.8 million and $377.4 million for the quarter and nine-month period ending September 30, respectively, compared to $122.1 million and $341.7 million for the quarter and nine-month period ending September 30, respectively.

 

  • Pro forma income from continuing operations was $7.4 million and $9.7 million for the quarter and nine-month period ending September 30, 2004, respectively, as compared to $3.8 million and $1.8 million for the quarter and nine-month period ending September 30, 2003, respectively.

 

  • Historical income (loss) from continuing operations was $5.9 million and $3.5 million for the quarter and year nine-month period ending September 30, 2004, respectively, as compared to $0.3 million and ($5.2) million for the quarter and year nine-month period ending September 30, 2003, respectively.

 

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  • Pro forma income from continuing operations per diluted share was $0.23 and $0.31 for the quarter and nine-month period ending September 30, 2004, respectively, compared to $0.12 and $0.06 for the quarter and nine-month period ending September 30, 2003, respectively.

 

  • Pro forma EBITDA, which is earnings (loss) from continuing operations before interest expense, income taxes, depreciation and amortization, was $33.4 million and $84.8 million for the quarter and nine-month period ending September 30, 2004, respectively, compared to $29.0 million and $74.9 million for the comparable periods in 2003, respectively. Pro forma EBITDA includes a non-cash impairment loss of $7.4 million for the nine-month period ending September 30, 2004.

 

  • Historical EBITDA, which is net income before interest expense, income taxes, depreciation and amortization, was $33.7 million and $69.5 million for the quarter and nine-month period ending September 30, 2004, respectively, compared to $35.7 million and $89.5 million for the comparable periods in 2003, respectively. Historical EBITDA includes the following non-cash items: gain on sale of $3.1 million for the quarter and nine-month period ending September 30, 2003; a loss on sale of $0.8 million for the third quarter 2004; a loss on sale of $1.2 million, impairment loss on continuing operations of $7.4 million and an impairment loss on discontinued operations of $17.0 million for the nine-month period ending September 30, 2004.

 

  • Pro forma Funds from Operations (FFO) to common stockholders was $18.8 million and $42.9 million for the quarter and nine-month period ending September 30, 2004, respectively, compared to $14.3 million and $33.3 million for the quarter and nine-month period ending September 30, 2003, respectively. Pro forma Funds from Operations (FFO) to common stockholders includes a non-cash impairment loss from continuing operations of $7.4 million for the nine-month period ending September 30, 2004.

 

  • Historical Funds from Operations (FFO) to common stockholders was $20.0 million and $27.8 million for the quarter and nine-month period ending September 30, 2004, respectively, compared to $14.7 million and $38.1 million for the quarter and nine-month period ending September 30, 2003, respectively. Historical Funds from Operations (FFO) to

 

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     common stockholders includes the following non-cash items: an impairment loss from continuing operations of $7.4 million and an impairment loss from discontinued operations of $17.0 million for the nine-month period ending September 30, 2004.

 

  • Pro forma Funds from Operations (FFO) per diluted share was $0.59 and $1.36 for the quarter and nine-month period ending September 30, 2004, respectively, compared to $0.45 and $1.05 for the quarter and nine-month period ending September 30, 2003, respectively.

 

Disclosure regarding the non-GAAP financial measures EBITDA and FFO is included as an attachment to this release, along with reconciliation to net income (loss) or pro forma income (loss) from continuing operations.

 

Comparable pro forma hotel revenue per available room (“RevPAR”) for the 53 hotels (excludes Residence Inn by Marriott located in Rochester, Minnesota which opened June 2004) during the third quarter increased 6.6% as compared to the third quarter of 2003, driven by an increase in occupancy of 2.4 percentage points and a 3.2% increase in average room rate. Comparable pro forma hotel adjusted operating profit margins for the third quarter increased 140 basis points. Year-to-date, comparable hotel RevPAR increased 6.3%.

 

Acquisitions and Dispositions

 

In the third quarter 2004, the Company sold two hotels, the Four Points by Sheraton located in Silverthorne, Colorado and the Concord Hotel and Conference Center located in Concord, California, with an aggregate total of 484 rooms and gross sale proceeds of $8.4 million. Subsequent to September 30, 2004, the Company sold two additional hotels, the Holiday Inn located in Flagstaff, Arizona and the San Marcos Resort and Conference Center located in Chandler, Arizona, with an aggregate total of 451 rooms and gross sales proceeds of $21.3 million.

 

Gary Stougaard, Chief Investment Officer, commented “We continue to execute our strategy of upgrading the overall quality of the portfolio and selling non-core hotels.”

 

Capital Expenditures

 

In the third quarter 2004, the Company invested $13.8 million in capital expenditures across the portfolio. For the year-to-date 2004, the Company has invested $46.8 million in capital expenditures across the portfolio.

 

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Fourth Quarter 2004 Outlook

 

The Company expects comparable hotel RevPAR for the fourth quarter to increase approximately 5.0% to 7.0% over the fourth quarter 2003. Based upon this guidance, the Company estimates that for the fourth quarter 2004 its:

 

  • Pro forma income (loss) from continuing operations should be approximately ($0.6) million to $1.9 million;

 

  • Pro forma income (loss) from continuing operations per diluted share should be approximately ($0.02) to $0.06;

 

  • Pro forma EBITDA should be approximately $24.5 million to $27.5 million;

 

  • Pro forma Funds from Operations (FFO) to common stockholders should be approximately $10.9 million to $13.4 million;

 

  • Pro forma Funds from Operations (FFO) per diluted share should be approximately $0.35 to $0.42; and

 

  • Total capital expenditures for the portfolio should be $9.0 million to $11.0 million.

 

These figures do not take into account certain one-time expenses related to the Formation and Structuring Transactions.

 

Full Year 2004 Outlook

 

For the full year 2004, the Company expects RevPAR to increase approximately 6.0% to 7.0% over 2003. Based upon this guidance, the Company estimates that for the Year 2004 its:

 

  • Pro forma income from continuing operations should be approximately $9.1 million to $11.6 million;

 

  • Pro forma income from continuing operations per diluted share should be approximately $0.29 to $0.37;

 

  • Pro forma EBITDA should be approximately $109.3 million to $112.3 million;

 

  • Pro forma EBITDA includes a non-cash impairment loss of $7.4 million;

 

  • Pro forma Funds from Operations (FFO) to common stockholders should be approximately $53.8 million to $56.3 million;

 

  • Pro forma Funds from Operations (FFO) to common stockholders includes a non-cash impairment loss of $7.4 million; and

 

  • Pro forma Funds from Operations (FFO) per diluted share should be approximately $1.70 to $1.78; and

 

  • Total capital expenditures for the portfolio should be $55.8 million to $57.8 million.

 

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These figures do not take into account certain one-time expenses related to the Formation and Structuring Transactions.

 

Disclosure regarding the non-GAAP financial measures EBITDA and FFO is included as an attachment to this release, along with reconciliation to net income (loss) or pro forma income (loss) from continuing operations.

 

2005 Outlook

 

The Company expects comparable hotel RevPAR to increase approximately 5.0% to 7.0% over 2004. Management will revisit guidance for the 2005 year in its fourth quarter earnings release.

 

Earnings Call

 

The company will host a conference call to discuss third quarter results on Thursday, December 2, 2004 at 8:00 a.m. PST. To participate in the live call, investors are invited to dial 1-800-218-8862 (for domestic callers) or 303-262-2140 (for international callers). A live webcast of the call will be available via the Investor Relations section of the Sunstone Hotel Investors’ website at www.sunstonehotels.com.

 

Sunstone Hotel Investors, Inc. is a lodging real estate company that currently owns 54 primarily upper-upscale and upscale hotel properties primarily operated under nationally-recognized companies, such as Marriott, Hilton, InterContinental and Hyatt. For further information; please visit the Company’s website at www.sunstonehotels.com.

 

This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” “continue” and other similar terms and phrases, including references to assumption and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: national and local economic and business conditions, including the potential for additional terrorist attacks, that will affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; relationships with property managers; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which

 

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influence or determine wages, prices, construction procedures and costs; and our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes and other risks and uncertainties associated with our business described in the Company’s filings with the SEC. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of December 2, 2004, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

 

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Non-GAAP Financial Measures

 

We present the following two non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: (1) Earnings Before Interest Expense, Taxes, Depreciation and Amortization, or EBITDA; and (2) Funds From Operations, or FFO.

 

EBITDA represents net income (loss) excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it helps investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization) from our operating results. We also use EBITDA as one measure in determining the value of hotel acquisitions and dispositions.

 

We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group. The Board of Governors of NAREIT in its March 1995 White Paper (as amended in November 1999 and April 2002) defines FFO to mean net income (loss) (computed in accordance with GAAP), excluding gains and losses from debt restructuring and sales of property, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), and after adjustment for unconsolidated partnerships and joint ventures. We believe that the presentation of FFO provides useful information to investors regarding our operating performance because it is a measure of our operations without regard to specified non-cash items, such as real estate depreciation and amortization and gain or loss on sale of assets. We believe that these items are more representative of our asset base and our acquisition and disposition activities than our ongoing operations. We also use FFO as one measure in determining our results after taking into account the impact of our capital structure.

 

We caution investors that amounts presented in accordance with our definitions of EBITDA and FFO may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP measures in the same manner. EBITDA and FFO should not be considered as an alternative measure of our net income (loss), operating performance, cash flow or liquidity. EBITDA and FFO may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions and other commitments and uncertainties. Although we believe that EBITDA and FFO can enhance your understanding of our results of operations, these non-GAAP financial measures, when viewed individually, are not necessarily a better indicator of any trend as compared to GAAP measures such as net income (loss) or cash flow from operations. In addition, you should be aware that adverse economic and market conditions may harm our cash flow.

 

*** financial tables follow ***

 

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SUNSTONE HOTEL INVESTORS, INC.

Reconciliation of Net Income (Loss) to Non-GAAP Financial Measures

(Unaudited)

 

Reconciliation of Net Income (Loss) to EBITDA

 

     Quarter Ended September 30,
     Nine Months Ended September 30,
  
     Pro Forma
2004
    2004
     Pro Forma
2003
    2003
     Pro Forma
2004
    2004
     Pro Forma
2003
    2003
  

Net income (loss)

    $ 7,416    $ 4,520     $ 3,751    $ 3,215     $ 9,740    $ (16,970 )   $ 1,842    $ (3,450 )

Minority interest

      1,624      39       822      16       2,133      (127 )     403      16  

Depreciation and amortization—
continuing operations

      14,104      14,742       12,912      13,205       41,483      43,014       38,840      39,432  

Depreciation and amortization—discontinued operations

      —        183       —        1,483       —        1,700       —        5,748  

Interest expense—continuing operations

      10,244      13,762       11,555      15,864       31,448      40,226       33,859      41,954  

Interest expense—discontinued operations

      —        454       —        1,789       —        1,854       —        5,007  

Income taxes—continuing operations

      —        415       —        76       —        280       —        435  

Income taxes—discontinued operations

      —        (432 )     —        90       —        (436 )     —        309  
    
  
 
  
 
  
 
  

EBITDA

    $ 33,388    $ 33,683     $ 29,040    $ 35,738     $ 84,804    $ 69,541     $ 74,944    $ 89,451  
    
  
 
  
 
  
 
  

Gain/loss on sale of assets

    $ —      $ 838     $ —      $ (3,118 )   $ —      $ 1,220     $ —      $ (3,118 )

Impairment loss—continuing operations

      —        —         —        —         7,439      7,439       —        —    

Impairment loss—discontinued operations

      —        —         —        —         —        16,954       —        —    
    
  
 
  
 
  
 
  
     $ —      $ 838     $ —      $ (3,118 )   $ 7,439    $ 25,613     $ —      $ (3,118 )
    
  
 
  
 
  
 
  

Reconciliation of Net Income (Loss) to FFO to Common Stockholders

 

 

Net income (loss)

    $ 7,416    $ 4,520     $ 3,751    $ 3,215     $ 9,740    $ (16,970 )   $ 1,842    $ (3,450 )

Real estate depreciation and amortization—continuing operations

      11,344      14,410       10,511      13,097       33,199      41,882       31,418      38,881  

Real estate depreciation and amortization— discontinued operations

      —        183       —        1,483       —        1,700       —        5,748  

Gain/loss on sale of assets

      —        838       —        (3,118 )     —        1,220       —        (3,118 )
    
  
 
  
 
  
 
  

FFO to common stockholders

    $ 18,760    $ 19,951     $ 14,262    $ 14,677     $ 42,939    $ 27,832     $ 33,260    $ 38,061  
    
  
 
  
 
  
 
  

Impairment loss—continuing operations

      —        —         —        —         7,439      7,439       —        —    

Impairment loss—discontinued operations

      —        —         —        —         —        16,954       —        —    
    
  
 
  
 
  
 
  
     $ —      $ —       $ —      $ —       $ 7,439    $ 24,393     $ —      $ —    
    
  
 
  
 
  
 
  

Common shares outstanding

      31,635              31,635              31,635              31,635         
    
          
          
          
        

 

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SUNSTONE HOTEL INVESTORS, INC.

Reconciliation of Projected Pro Forma Net Income (Loss) to Non-GAAP Financial Measures

Quarter Ended December 31, 2004 and Year Ended 2004

(Unaudited)

 

Reconciliation of Projected Pro Forma Net Income (Loss) to EBITDA

 

     Quarter Ended
December 31,
   

Year Ended

December 31,

     Low End
of Range
     High End
of Range
    Low End
of Range
    High End
of Range

Net income (loss)

    $ (600 )   $ 1,900    $ 9,140    $ 11,640

Minority interest

      (100 )     400      2,033      2,533

Depreciation and amortization—continuing operations

      14,100       14,100      55,583      55,583

Depreciation and amortization—discontinued operations

      —                —         

Interest expense—continuing operations

      11,100       11,100      42,548      42,548

Interest expense—discontinued operations

      —                —         

Income taxes—continuing operations

      —                —         

Income taxes—discontinued operations

      —                —         
    
 
  
  

EBITDA

    $ 24,500     $ 27,500    $ 109,304    $ 112,304
    
 
  
  

Gain/loss on sale of assets

    $ —       $ —      $ —      $ —  

Impairment loss—continuing operations

      —         —        7,439      7,439

Impairment loss—discontinued operations

      —         —        —        —  

Amortization of deferred stock compensation

      —         —        —        —  
    
 
  
  
     $ —     $ —    $ 7,439    $ 7,439
    
 
  
  
Reconciliation of Projected Pro Forma Net Income (Loss) to FFO to Common Stockholders

Net income (loss)

    $ (600 )   $ 1,900    $ 9,140    $ 11,640

Real estate depreciation and amortization—continuing operations

      11,500       11,500      44,699      44,699

Real estate depreciation and amortization—discontinued operations

      —                —         

Gain/loss on sale of assets

      —         —        —        —  
    
 
  
  

FFO to common stockholders

    $ 10,900     $ 13,400    $ 53,839    $ 56,339
    
 
  
  

Impairment loss—continuing operations

      —         —        7,439      7,439

Impairment loss—discontinued operations

      —         —        —        —  
    
 
  
  
     $ —       $ —      $ 7,439    $ 7,439
    
 
  
  

Common shares outstanding

      31,635       31,635      31,635      31,635
    
 
  
  

 

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SUNSTONE HOTEL INVESTORS, Inc.

Pro Forma Hotel Operating Results

(unaudited)

 

     Quarter ended
     Year-to-date ended
  
     September 30,
2004
     September 30,
2003
     September 30,
2004
     September 30,
2003
  

Number of Hotels

    54     54     54     54  

Number of Rooms

    13,183     13,183     13,183     13,183  

% change in pro forma hotel RevPAR

    6.6 %         6.3 %      
    
 
 
 

Pro forma hotel operating profit margin (1)

    27.5 %   26.1 %   27.1 %   24.2 %
    
 
 
 

Pro Forma Hotel Revenues

                         

Room revenue

    92,064     85,284     253,898     235,471  

Food and beverage revenue

    26,156     24,587     80,102     75,967  

Other operating revenue

    11,038     10,299     32,238     27,653  
    
 
 
 

Total Pro Forma Hotel Revenues

    129,258     120,170     366,238     339,091  

Pro Forma Hotel Expenses

                         

Room expense

    20,063     19,420     56,218     54,442  

Food and beverage expense

    18,768     18,116     55,942     55,098  

Other hotel expense

    40,016     38,030     113,654     107,694  

General and administrative expense

    12,530     11,436     35,082     34,308  

Management fee expense

    2,295     1,828     6,117     5,650  
    
 
 
 

Total Pro Forma Hotel Expenses

    93,672     88,830     267,013     257,192  
    
 
 
 

Pro Forma Hotel Operating Income

    35,586     31,340     99,225     81,899  
    
 
 
 

General and administrative—corporate

    2,500     2,500     7,500     7,500  

Depreciation and amortization

    14,104     12,912     41,483     38,840  

Impairment loss

    0     0     7,439     0  
    
 
 
 

Operating Income

    18,982     15,928     42,803     35,559  

Interest and other income

    302     200     518     545  

Interest expense

    (10,244 )   (11,555 )   (31,448 )   (33,859 )

Minority interest

    (1,624 )   (822 )   (2,133 )   (403 )

Provision for taxes

    —       0     0     0  
    
 
 
 

Income (loss) From Continuing Operations

    7,416     3,751     9,740     1,842  
(1) Pro forma hotel operating profit margin is calculated as the pro forma hotel operating income divided by the pro forma hotel revenues per the schedule above.

 

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SUNSTONE HOTEL INVESTORS, Inc.

Pro Forma Hotel Operating Statistics by Region

(unaudited)

 

              

Quarter ended

September 30, 2004

   

Quarter ended

September 30, 2003

    Percent
Change
in
RevPAR
  

REGION

    Number
of
Hotels
    Number
of
Rooms
    Occupancy
Percentages
     Average
Daily
Rate
    RevPar
    Occupancy
Percentages
     Average
Daily
Rate
    RevPar
   

California

    19    4,048    83.7 %   $ 106.68    $ 89.25    80.9 %   $ 100.57    $ 81.37    9.7 %

Other West (2)

    16    3,440    75.7 %   $ 79.23    $ 59.96    73.5 %   $ 78.16    $ 57.41    4.4 %

Midwest (1) (3)

    8    2,616    68.6 %   $ 111.00    $ 76.11    67.3 %   $ 108.11    $ 72.81    4.5 %

Middle Atlantic (4)

    3    782    77.2 %   $ 123.43    $ 95.27    76.9 %   $ 119.98    $ 92.22    3.3 %

South (5)

    3    895    73.1 %   $ 112.60    $ 82.34    72.1 %   $ 107.00    $ 77.19    6.7 %

Southwest (6)

    4    1,322    82.0 %   $ 76.42    $ 62.66    75.3 %   $ 77.79    $ 58.60    6.9 %
    
  
  
 
  
  
 
  
  

Total Portfolio

    53    13,103    77.3 %   $ 98.42    $ 76.09    74.9 %   $ 95.33    $ 71.37    6.6 %
    
  
  
 
  
  
 
  
  
              

Year-to-date ended

September 30, 2004

   

Year-to-date ended

September 30, 2003

    Percent
Change
in
RevPAR
  

REGION

    Number
of
Hotels
    Number
of
Rooms
    Occupancy
Percentages
     Average
Daily
Rate
    RevPar
    Occupancy
Percentages
     Average
Daily
Rate
    RevPar
   

California

    19    4,048    79.0 %   $ 101.66    $ 80.26    77.3 %   $ 98.00    $ 75.72    6.0 %

Other West (2)

    16    3,440    69.1 %   $ 80.05    $ 55.31    66.0 %   $ 79.00    $ 52.17    6.0 %

Midwest (1) (3)

    8    2,616    64.1 %   $ 109.44    $ 70.10    61.9 %   $ 109.41    $ 67.75    3.5 %

Middle Atlantic (4)

    3    782    75.8 %   $ 124.04    $ 94.03    67.8 %   $ 127.29    $ 86.27    9.0 %

South (5)

    3    895    67.2 %   $ 114.78    $ 77.09    66.8 %   $ 108.08    $ 72.16    6.8 %

Southwest (6)

    4    1,322    80.3 %   $ 80.80    $ 64.85    72.6 %   $ 80.34    $ 58.36    11.1 %
    
  
  
 
  
  
 
  
  

Total Portfolio

    53    13,103    72.6 %   $ 97.41    $ 70.68    69.5 %   $ 95.66    $ 66.51    6.3 %
(1) Does not include Residence Inn by Marriott located in Rochester, Minnesota (opened June 2004)

 

(2) Includes Colorado, Idaho, Oregon, Utah and Washington.

 

(3) Includes Illinois, Michigan and Minnesota.

 

(4) Includes New Jersey, New York and Pennsylvania.

 

(5) Includes Georgia and Virginia

 

(6) Includes Arizona, New Mexico and Texas

 

Page 12 of 13

SUNSTONE HOTEL INVESTORS, Inc.

Pro Forma Hotel Operating Statistics by Brand

(unaudited)

 

              

Quarter ended

September 30, 2004

   

Quarter ended

September 30, 2003

    Percent
Change
in
RevPAR
  

Brand

    Number
of
Hotels
    Number
of
Rooms
    Occupancy
Percentages
     Average
Daily
Rate
    RevPar
    Occupancy
Percentages
     Average
Daily
Rate
    RevPar
   

Marriott (1)

    24    5,661    78.8 %   $ 105.19    $ 82.94    75.8 %   $ 101.64    $ 77.03    7.7 %

Hilton

    6    1,559    78.8 %   $ 128.45    $ 101.27    75.2 %   $ 124.12    $ 93.34    8.5 %

InterContinental

    12    2,288    75.9 %   $ 75.82    $ 57.55    73.9 %   $ 75.42    $ 55.73    3.2 %

Hyatt

    4    1,029    79.9 %   $ 107.43    $ 85.85    75.6 %   $ 101.63    $ 76.80    11.8 %

Other Franchise Affiliations (2)

    4    1,331    78.0 %   $ 80.39    $ 62.70    79.3 %   $ 80.20    $ 63.60    -1.4 %

Independent

    3    1,235    68.1 %   $ 79.40    $ 54.11    66.7 %   $ 76.62    $ 51.12    5.9 %
    
  
  
 
  
  
 
  
  

Total Portfolio

    53    13,103    77.3 %   $ 98.42    $ 76.09    74.9 %   $ 95.33    $ 71.37    6.6 %
    
  
  
 
  
  
 
  
  
              

Year-to-date ended

September 30, 2004

   

Year-to-date ended

September 30, 2003

    Percent
Change
in
RevPAR
  

Brand

    Number
of
Hotels
    Number
of
Rooms
    Occupancy
Percentages
     Average
Daily
Rate
    RevPar
    Occupancy
Percentages
     Average
Daily
Rate
    RevPar
   

Marriott (1)

    24    5,661    74.3 %   $ 106.05    $ 78.79    72.2 %   $ 102.46    $ 74.01    6.5 %

Hilton

    6    1,559    72.7 %   $ 121.48    $ 88.33    65.6 %   $ 122.75    $ 80.48    9.8 %

InterContinental

    12    2,288    71.8 %   $ 75.01    $ 53.89    69.7 %   $ 74.83    $ 52.12    3.4 %

Hyatt

    4    1,029    72.5 %   $ 102.58    $ 74.36    70.6 %   $ 100.59    $ 70.99    4.7 %

Other Franchise Affiliations (2)

    4    1,331    75.6 %   $ 81.94    $ 61.92    71.8 %   $ 82.36    $ 59.12    4.7 %

Independent

    3    1,235    62.7 %   $ 78.72    $ 49.33    58.7 %   $ 78.66    $ 46.21    6.8 %
    
  
  
 
  
  
 
  
  

Total Portfolio

    53    13,103    72.6 %   $ 97.41    $ 70.68    69.5 %   $ 95.66    $ 66.51    6.3 %
(1) Does not include Residence Inn by Marriott located in Rochester, Minnesota (opened June 2004)

 

(2) Includes Radisson, Sheraton and Wyndham

 

# # #

 

Page 13 of 13