Sunstone Hotel Investors Inc. has acquired the fee-simple interest in the 175-room Oceans Edge Hotel & Marina in Key West, FL. The purchase price was $175 million.
In addition, the company revealed that it had recently completed the disposition of the 199-room Marriott Park City in Park City, UT for a gross sale price of $27.6 million.
John Arabia, president and CEO, says that the acquisition of demonstrates “a continuation of our strategy to recycle capital into higher quality, long-term relevant real estate while maintaining an industry leading balance sheet with ample investment capacity.”
Arabia explains that over the past 19 months, the REIT has sold nearly $735 million of real estate and used a portion of those proceeds to return capital to its shareholders, to strengthen its “already low-levered balance sheet and to redeploy proceeds into exceptional real estate.”
The Oceans Edge Hotel & Marina is a brand new, purpose-built hotel and marina that is of significantly higher quality than the majority of the Key West hotel supply, Arabia explains. “The luxury resort and marina, which opened in January 2017, is expected to provide meaningful growth in the near term as it reaches stabilization, and over the long term due to the supply restrictions in the Key West market.”
The Oceans Edge purchase price represents an estimated 14.1x multiple on the midpoint of the 2018 forecasted Hotel Adjusted EBITDA range of $11.5 million to $13.3 million and an estimated 6.5% capitalization rate on the midpoint of 2018 forecasted Hotel net operating income. Sunstone expects the stabilized yield on the purchase price of the Hotel to be between 8.0% and 9.0%.
The company funded the acquisition from available cash on hand including proceeds from the recent sale of the Marriott Park City and Fairmont Newport Beach, as well as net proceeds received from the company’s recent equity issuance under its “At the Market” equity distribution program.
The Hotel will operate as an independent property and be managed by Singh Hospitality.