Sunstone Hotel Investors Completes Acquisition of The Confidante Miami Beach For $232m
Main Photo: The Pool at The Confidante
Date: May 2022
Name: The Confidante Miami Beach, an Unbound Collection by Hyatt hotel…to become the Andaz Miami Beach
Location: 4041 Collins Avenue, Miami Beach, Florida, USA
Number of Keys: 339, although some reports suggest 354 to include 14 suites
Seller: Hyatt who purchased the hotel from Geolo Capital in 2016, when it traded as The Thompson Miami Beach Hotel
Buyer: Sunstone Hotel Investors
Sunstone Hotel Investors, Inc., the owner of Long-Term Relevant Real Estate in the lodging industry, announced that it has completed the previously announced acquisition of the 339-room The Confidante Miami Beach for a purchase price of $232 million, or $684,000 per key. Sunstone will 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, Sunstone will own a well-located, fully renovated, beachfront resort at a highly attractive all-in basis. Sunstone expects the Hotel will generate an 8% to 9% stabilised net operating income yield on the total investment in the hotel, including the planned repositioning. The renovation program will begin in phases, starting in the fourth quarter of 2022 with completion expected to occur in the first half of 2024 when the Hotel will debut as Andaz Miami Beach.
Sunstone expects the hotel will generate $3.5 to $4.0 million of EBITDA during its ownership period in 2022. The acquisition was funded from available cash and with $140 million of proceeds received from Sunstone’s previously undrawn revolving credit facility. Together with the expected funding for the previously announced acquisition of the remaining 25% joint venture interest in the Hilton San Diego Bayfront which is expected to close by the end of June, Sunstone anticipates having an outstanding credit facility balance at the end of the second quarter of approximately $240 million.
Sunstone’s operations for April and May 2022 reflect accelerating hotel demand as compared to the first quarter of 2022. While leisure travel continues to be robust, the greatest demand growth is occurring at Sunstone’s urban and group-oriented hotels which are experiencing an increase in near-term booking activity, higher than expected attendance at group events, and increased business transient volume.
- Occupancy at the comparable 12 hotels the Company owned during both 2022 and 2019 (the “12 Hotel Comparable Portfolio”) has improved from down more than 2,800 bps as compared to 2019 in the first quarter of 2022 to down only 1,240 bps in Q2 2022 QTD.
- Average Daily Rate at the 12 Hotel Comparable Portfolio has exceeded 2019 levels in each month of 2022 and is higher by 11.3% so far in Q2 2022 QTD.
- As of April 30, 2022, group revenue pace for the 12 Hotel Comparable Portfolio for Q2 through Q4 2022 was down only 15% as compared to the same time in 2019, with average rates approximately 5% higher than in 2019.
- As of mid-May, the 12 Hotel Comparable Portfolio had 87% of the total transient room nights on-the-books for June to December as compared to the same time in 2019, with average rates approximately 31% higher than in 2019.
- In the second quarter 2019, the 12 Hotel Comparable Portfolio generated RevPAR of $229.50. Based on stronger demand acceleration in April and May, the Company currently anticipates that RevPAR at the 12 Hotel Comparable Portfolio for the second quarter 2022 will be down only 6% to 8% as compared to the second quarter of 2019.
- The Portfolio comprises hotels such as Wailea Beach Resort, Montage Healdsburg, Four Seasons Napa Valley and Oceans Edge Resort & Marina
Price: US$232m
Price per Key: Between $655k and $684k
THPT Comment: Sunstone, already owner of some very tasty resort and urban branded hotels across the USA, has done well to secure this historical Miami Beach property, opened in 1940 as The Lord Tarleton.
First Seen: Sunstone press release
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