JP Morgan Comments On Sunstone Hotel Investors Following Mid Quarter Update

Yesterday, as part of Sunstone Hotel Investors SHO midquarter business update, it announced the acquisition of a 75% stake in the Hilton San Diego Bayfront for a total valuation of $475 million as well as the sale of the Royal Palm Miami Beach for $130 million. The company also stated that it expects 1Q11 comparable RevPAR growth of +5.4%. SHO also announced that it will consolidate the management of its 460-room Hilton Times Square with Highgate Hotels, the current manager of its 460-room Doubletree Guest Suites Times Square. SHO will also rebrand the Doubletree as the Hilton Suites Times Square following a renovation which it expects to complete in 2Q12. According to JP Morgan, for 1Q11, SHO expects comparable RevPAR growth of 5.4% and noted for the month of March, it expects RevPAR growth of 6.2%. Capital expenditures for 1Q11 totaled ~$30 million, comprised primarily of completion of renovation projects at the Embassy Suites Chicago, Marriott Tyson Corner, Marriott Quincy and the Kahler Grand. SHO also announced today that it intends to issue shares of cumulative redeemable preferred stock in the near term, subject to market conditions. JP Morgan has an Overweight rating on SHO SHO closed Tuesday at $10.21