Sunstone Hotel Investors(US:SHO)2023-02-23 19:40Financial Position - The company had total cash of $157.2 million, including $56.0 million of restricted cash, and access to an undrawn $500.0 million credit facility as of December 31, 2022[25]. - As of December 31, 2022, the company had approximately $816.1 million in outstanding debt, with $532.1 million maturing over the next five years[147]. - The weighted average interest rate on the company's total debt was 5.04% as of December 31, 2022, with 42.4% of outstanding debt at fixed rates[25]. - Total operating expenses for 2022 were $816.2 million, up from $597.3 million in 2021, primarily driven by increased operational activity[204]. - Interest expense for 2022 was $32.0 million, slightly higher than $30.9 million in 2021, reflecting ongoing debt obligations[204]. - The company may incur additional debt for future real estate acquisitions, which could restrict financial flexibility and increase vulnerability to economic downturns[148]. - The company is subject to various financial covenants on its unsecured and secured debt, and failure to meet these covenants could adversely affect financial conditions and operations[149]. Hotel Operations - As of December 31, 2022, the company owned 15 hotels with a total of 7,735 rooms located in 6 states and Washington, DC[15]. - The company owned 15 hotels at the end of 2022, down from 17 at the beginning of the year, with 1 acquisition and 3 dispositions during the year[210]. - The total number of rooms decreased to 7,735 in 2022 from 8,544 in 2021, with a net loss of 1,148 rooms due to dispositions[210]. - Average rooms per hotel increased to 516 in 2022 from 503 in 2021, indicating a more efficient portfolio[210]. - The company operates most of its hotels under brands owned by Marriott, Hilton, Hyatt, Four Seasons, and Montage, with only two hotels not under these brands[126]. - The company entered into a new management agreement with Sage for The Bidwell Marriott Portland, which began in October 2022 and expires in 2027[35]. - The company has engaged eligible independent contractors to manage its hotels, ensuring compliance with IRS regulations[45]. Market and Demand - Corporate transient and group demand accelerated during 2022, reducing reliance on leisure demand, with expectations for continued growth in business travel[20]. - The company expects continued growth in corporate business and transient demand, with a positive outlook for business travel recovery[214]. - The company relies on group and transient business generated by large corporate customers, and the loss of such customers could harm operating results[72]. - The COVID-19 pandemic significantly decreased business-related travel, leading to a sustained reduction in hotel room demand, with business transient demand in 2022 remaining below pre-pandemic levels[101]. ESG and Sustainability - The company is committed to ESG initiatives, focusing on reducing energy, water, and waste impacts, and enhancing the well-being of guests and employees[53]. - The company has invested in initiatives to reduce greenhouse gas emissions, including LED lighting retrofits and solar power installations[54]. - The company has conducted environmental reviews on all its hotels to assess potential contamination risks[55]. - The company has provided customary unsecured indemnities to lenders and buyers, including environmental indemnities, to mitigate risks[58]. - The company emphasizes maintaining a diverse workforce, with approximately 38% female employees and 30% from ethnic and racial minorities[51]. Risks and Challenges - Economic downturns, pandemics, and natural disasters may adversely affect the operating performance of the hotel industry and the company's hotels[79]. - Inflation has impacted the company's expenses, including increased costs for wages, food, and utilities, which may outpace hotel revenue growth[60]. - Cybersecurity risks have increased, with potential disruptions to operations and financial results due to data breaches or cyber-attacks[84]. - Climate change poses risks, including severe weather events that could materially affect hotel operations and cash flows[91]. - The company faces challenges in obtaining adequate property and casualty insurance, which may affect financial stability if significant losses occur[97]. - The company may incur liabilities from claims related to hotel properties, which could harm the reputation of its hotels and result in additional expenses[129]. Financial Performance - Total revenues for 2022 were $912.1 million, a 78.9% increase from $509.2 million in 2021[204]. - Net income attributable to common stockholders for 2022 was $73.0 million, compared to $13.7 million in 2021, reflecting a significant recovery from a loss of $417.5 million in 2020[204]. - The company reported a gain on the sale of assets of $22.9 million in 2022, compared to a gain of $152.5 million in 2021[204]. - The investment in hotel properties, net, increased to $2.84 billion in 2022 from $2.72 billion in 2021, indicating continued investment in the portfolio[204]. Corporate Governance and Shareholder Matters - The board of directors has reauthorized a stock repurchase program allowing the company to acquire up to $500 million of common and preferred stock, with $391.8 million remaining under the program as of December 31, 2022[199]. - The company has reserved 3.75 million shares for issuance under its 2022 Incentive Award Plan, with 3,731,191 shares available for future issuance as of December 31, 2022[179]. - The company suspended its common stock quarterly dividend in Q2 2020 due to COVID-19, reinstating it in Q3 2022 with a dividend of $0.05 per share[175]. - The common stock dividends paid over the past three years were $0.59 in January 2020, $0.05 in April 2020, and $0.05 in October 2022[176]. - The company must distribute at least 90% of its REIT taxable income to qualify as a REIT, and failure to do so could result in significant tax liabilities[157].