NEWPORT BEACH, CALIF. — Sunstone Hotel Investors Inc. (NYSE: SHO) has sold Fairmont Newport Beach, a 444-room hotel in the Southern California city of Newport Beach, for $125 million.
Although the buyer was not disclosed, Marriott has added the hotel to its website as The Duke Hotel Newport Beach. Meanwhile, Visit Newport Beach, a nonprofit organization that promotes the city’s tourism, has also begun referring to the hotel as The Duke.
The hotel property features 22,000 square feet of indoor function space, a bamboo garden, 10,000 square feet of outdoor function space, water features and an outdoor fire pit.
Sunstone cited low revenue per available room (RevPAR) as the reason for the sale. The hotel earned a RevPAR that was 25 percent below the company’s average, according to Robert Springer, Sunstone’s chief investment officer. Per the company’s third-quarter report, the RevPAR for the hotel was $136.42 compared to a company average of $174.44.
The sales price equates to a 5.2 percent capitalization rate and results in $44 million of gains for Sunstone.
“The sale, which is consistent with our capital allocation strategy, monetizes an asset at an attractive valuation, increases our portfolio quality, RevPAR and near-term growth prospects, and reduces near-term capital needs,” says Springer
Eastdil Secured acted as exclusive advisor to Sunstone on the sale.
Sunstone Hotel Investors is a hotel-focused REIT based in Aliso Viejo, Calif. The company has interests in 27 hotels totaling 13,225 rooms, generally in the urban and resort upper upscale segment and operated under national brands such as Marriott, Hilton and Hyatt.
Sunstone’s stock price closed at $15.25 per share on Friday, Feb. 10, up from $11.68 one year ago.
— Jeff Shaw