San Clemente-based hotel owner Sunstone Hotel Investors Inc. plans to sell up to 20 million shares of its stock to fund acquisitions.
The offering could raise some $200 million before fees based on Sunstone’s current share price of about $10.
The company’s shares were off about 6% in afterhours trading on the news as investors feared a watering down of profits reported on a per share basis.
Sunstone has a market value of about $1 billion.
The company owns all or part of 30 hotels across the country.
Sunstone has been looking to bolster its portfolio by acquiring stronger hotels.
In August, the company paid $126 million at a foreclosure auction for the Royal Palm Hotel in Miami Beach.
In June, the company reacquired the Renaissance Westchester Hotel, a 347-room hotel in White Plains, N.Y. that it had stopped making payments on in 2009.
It paid $24.8 million for the Renaissance Westchester in a deal that did away with the hotel’s prior $29.2 million mortgage.
The acquisitions are part of a two-prong strategy that saw Sunstone become the first publicly traded owner in the downturn to hand back a hotel that no longer was worth what was owed on it.
In 2009, Sunstone turned over the W Hotel in San Diego to its lender. It recently relinquished eight hotels to lender Massachusetts Mutual Life Insurance Co.
The givebacks were a way for Sunstone to shed weaker, indebted hotels.
The stock sale stands to be the second for Sunstone in the past year or so. Last fall, the company did a stock sale that raised $159 million for acquisitions.
Deals have been slow to come by because of a valuation gap between buyers such as Sunstone looking to acquire at a discount and owners who are holding out for higher prices as a hotel recovery gets under way, Chief Executive Art Buser told the Business Journal in September.
