Sunstone Hotel Investors(SHO) - 2022 Q1 - Quarterly Report

PART I Financial Statements This section presents unaudited consolidated financial statements, detailing a significant financial turnaround with substantial revenue growth and improved net income Consolidated Balance Sheet Summary (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $214,905 | $120,483 | | Total Assets | $2,952,868 | $3,041,049 | | Total Liabilities | $744,859 | $801,275 | | Total Equity | $2,208,009 | $2,239,774 | Consolidated Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total Revenues | $172,315 | $50,633 | | Total Operating Expenses | $179,088 | $98,071 | | Net Income (Loss) | $15,123 | $(55,287) | | Income (Loss) Attributable to Common Stockholders | $10,216 | $(56,519) | | Basic and Diluted EPS | $0.05 | $(0.26) | Consolidated Statement of Cash Flows Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net Cash Provided By (Used In) Operating Activities | $13,148 | $(38,175) | | Net Cash Provided By (Used In) Investing Activities | $164,356 | $(6,526) | | Net Cash Used In Financing Activities | $(85,832) | $(6,181) | | Net Increase (Decrease) in Cash | $91,672 | $(50,882) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the operational recovery, strategic asset sales, share repurchases, and debt repayments, highlighting strong liquidity and future acquisition plans - Demand began to recover in February 2022 as Omicron-related case counts subsided, with corporate transient and group demand accelerating, reducing reliance on leisure demand which was dominant in 2021[130][131] - In Q1 2022, the company sold three hotels in Chicago for combined gross proceeds of $197.0 million ($67.5 million + $129.5 million), recording a total gain of $22.9 million[135] - The company repurchased 3.9 million shares of common stock for $43.5 million and repaid $35.0 million of its unsecured senior notes, also electing to early terminate the covenant relief period on its unsecured debt in March 2022[137][138][139] Existing Portfolio Performance (12 hotels owned during both periods) | Metric | Q1 2022 | Q1 2021 | Change | | :--- | :--- | :--- | :--- | | Occupancy | 53.1% | 23.4% | +2,970 bps | | ADR | $279.95 | $206.44 | +35.6% | | RevPAR | $148.65 | $48.31 | +207.7% | - As of March 31, 2022, the company had $214.9 million in unrestricted cash and $500.0 million of available capacity under its unsecured revolving credit facility[191] - Subsequent to the quarter end, in May 2022, the company entered into an agreement to acquire The Confidante Miami Beach for a purchase price of $232.0 million, with an expected closing by the end of Q2 2022[123] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate volatility on variable-rate debt, with a majority of debt fixed to mitigate this exposure - The company's main market risk is from adverse changes in interest rates on its variable-rate debt[213] - As of March 31, 2022, 61.8% of the company's debt obligations are fixed-rate, which mitigates interest rate risk[214] - A 100 basis point increase or decrease in market interest rates on variable-rate debt would change future consolidated earnings and cash flows by approximately $2.2 million annually[214] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - The CEO and CFO have concluded that as of the end of the period, the company's disclosure controls and procedures were effective[216][217] - There were no changes in internal control over financial reporting during the fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[218] PART II—OTHER INFORMATION Legal Proceedings The company reports no material legal proceedings for the period - The company reported no legal proceedings[220] Risk Factors The company reports no new or materially changed risk factors from those disclosed in its latest Annual Report on Form 10-K - There are no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K[221] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's stock repurchase activity, including shares repurchased and remaining authorization under its program Issuer Purchases of Equity Securities (Q1 2022) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Publicly Announced Program | | :--- | :--- | :--- | :--- | | Jan 2022 | — | — | — | | Feb 2022 | 219,823 | $11.69 | — | | Mar 2022 | 3,947,908 | $11.19 | 3,879,025 | | Total | 4,167,731 | $11.21 | 3,879,025 | - During Q1 2022, the Company repurchased 3,879,025 shares of its common stock for $43.5 million, leaving $456.6 million remaining under the stock repurchase program[222] Defaults Upon Senior Securities The company reports no defaults upon its senior securities - The company reported no defaults upon senior securities[225] Mine Safety Disclosures This item is not applicable to the company's business - This item is not applicable to the company's business[226] Other Information The company reports no other information for this period - The company reported no other information[227] Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, debt agreements, and required certifications - The report includes a list of filed exhibits, such as Articles of Amendment, Bylaws, debt agreements, incentive plans, and Sarbanes-Oxley certifications[228]