San Clemente-based hotel owner Sunstone Hotel Investors Inc. saw a first quarter loss but is starting to see life returning to the hospitality industry.
The hotel owner reported a loss of $26.3 million compared to a year earlier where it saw profit of $876,000.
Sunstone’s funds from operations, a measure of profitability for hotel and other real estate owners, came in at $3.9 million, down 87% from a year earlier.
The company owns all or part of 29 hotels after handing back 11 in the past year or so to lenders.
The company excludes those hotels from its numbers, including eight hotels that are in the process of being turned over to receivers.
Sunstone along with others hospitality industry have been among the worst hit during the downturn as tumbling occupancy and room rates hurt bottom lines.
The hotel industry is starting to rebound as business travelers are taking to the road and skies again, according to Sunstone.
“During the first quarter we saw a reversal of the negative trends our industry experienced over the last year as demand rebounded,” said Ken Cruse, chief financial officer in a conference call.
Revenue decreased 6% to $160.7 million.
Late last year, Chief Executive Art Buser said he’s spending about a third of my time looking at possible acquisitions.
The company said it purchased two hotel loans for about $3.7 million.
Sunstone said it bought a $30 million, 8.5% mezzanine loan secured by equity interests in its Double Tree Guest Suites Times Square joint venture in New York.
The company also bought a $2.5 million, 8.075% subordinate note secured by boutique-hotel Twelve Atlantic Station in Atlanta.
Like several buyers looking to buy assets at discounted prices, Sunstone has run up against a valuation gap where sellers are reluctant to sell, holding out instead for higher prices in anticipation of a recovery.
In an attempt to work around this, Sunstone is exploring hotel debt and portfolio transactions.
Shares closed up 10% on Monday on a market value of $1.2 billion.
