Sunstone Hotel Investors Inc. (NYSE:SHO) Q4 2018 Earnings Conference Call Transcript
Feb 13, 2019 • 02:00 pm ET
Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sunstone Hotel Investors Fourth Quarter and Full Year 2018 Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will be given at that time. I would like to remind everyone that this conference is being recorded today, February 13, 2019 at 12:00 PM Eastern Time.
I will now turn the presentation over to Aaron Reyes, Vice President of Corporate Finance. Please go ahead.
Thank you, Ryan, and good morning, everyone. By now, you should have all received a copy of our fourth quarter earnings release and supplemental, which were made available yesterday. If you do not yet have a copy, you can access them on our website.
Before we begin, I would like to remind everyone that this call contains forward-looking statements that are subject to risks and uncertainties, including those described in our prospectuses, 10-Qs, 10-Ks and other filings with the SEC, which could cause actual results to differ materially from those projected. We caution you to consider those factors in evaluating our forward-looking statements.
We also note that this call may contain non-GAAP financial information, including adjusted EBITDA, adjusted FFO and hotel-adjusted EBITDA margin. We are providing that information as a supplement to information prepared in accordance with Generally Accepted Accounting Principles.
With us on the call today are John Arabia, President and Chief Executive Officer; Bryan Giglia, Chief Financial Officer; and Marc Hoffman, Chief Operating Officer. After our remarks, we will be available to answer your questions.
With that, I would like to turn the call over to John. Please go ahead.
John V. Arabia
Thank you, Aaron. Good morning, everybody, and thank you for joining us this morning. I'd like to start off our call today with a recap of a successful 2018, which included a continued transformation of our portfolio, as well as better-than-expected fourth quarter and full-year operating results and earnings. I'll then provide our thoughts on the 2019 operating environment, an update on the transaction market, and our thoughts on deploying the significant capacity we have built. Afterwards, Bryan will recap our balance sheet strength and provide the specifics of our initial 2019 guidance.
Let's begin with a recap of a successful 2019, 2018, excuse me. In 2018, we continue to concentrate our portfolio into the ownership of long-term relevant real estate. While we were disappointed that we did not complete a hotel acquisition in 2018, we materially improved our portfolio through the sale of six primarily suburban non-core assets, as well as the acquisition of a ground lease and other lease spaces at two of our existing hotels. We sold these six hotels, including the sale of the Marriott Tysons Corner in December, for a combined $353 million at a blended trailing cap rate of 8.4%. This blended cap rate on the asset sold is not too dissimilar to the approximately 8% implied cap rate of our portfolio when we