Sunstone Hotel Investors, Inc. (NYSE: SHO), the owner of Long-Term Relevant Real Estate® in the lodging industry, announced that it has entered into a definitive agreement with an affiliate of Hyatt Hotels Corporation to acquire the 339-room The Confidante Miami Beach, located on 1.5 acres of fee-simple, oceanfront land in Miami Beach for a purchase price of $232 million, or $684,000 per key. Following the acquisition, the Company expects to pursue a full transformation of the property and a rebranding of the Hotel to Andaz Miami Beach.
The purchase price represents a 17.3x multiple on 2022 forecasted hotel EBITDA and a 5.0% capitalization rate on 2022 forecasted hotel net operating income. In addition to the purchase price, Sunstone expects to invest approximately $60 million to reposition the Hotel into a premiere beachfront resort under Hyatt’s luxury, lifestyle Andaz brand. Upon completion of the renovation, the Company expects the Hotel to generate an 8% to 9% stabilized net operating income yield on the total investment in the Hotel, including the planned repositioning. The acquisition will be funded through a combination of cash on hand and from borrowing on the Company’s currently undrawn revolving credit facility.
Bryan Giglia, Chief Executive Officer, stated, “We are excited to announce our planned acquisition of The Confidante Miami Beach where we expect to generate significant value through an extensive renovation and rebranding of the Hotel to Andaz Miami Beach. Upon completion of the planned renovation, we will have transformed the earnings potential of the Hotel and we will own a premier Miami Beach luxury resort at a highly attractive all-in basis in a resilient, supply-constrained market that has continued to demonstrate meaningful rate growth. We are also excited to further our relationship with Hyatt, one of the world’s premier hotel companies, and be part of the growth of Hyatt’s luxury Andaz brand.”
Mr. Giglia continued, “The acquisition of The Confidante Miami Beach allows us to recycle capital from our recent sales of three Chicago hotels into this higher growth and better NAV enhancing investment. This transaction draws upon our significant in-house expertise and proven track record of creating value through successful renovations and repositionings, and returns Sunstone to some of what it does best.”
