A strong hotel market has been a boon for San Clemente-based Sunstone Hotel Investors Inc.
The company had sales of $989 million for the 12 months ended June 30, up from $118.6 million for the same period in 2004.
Sunstone ranked No. 6 on our list of the fastest-growing public companies with a three-year sales gain of 734%.
The company didn’t make the list last year.
Acquisitions of upscale hotels and sales of more mid-level hotels have driven much of the growth.
The company, a real estate investment trust, owns 47 hotels across the U.S.
Since late 2004, Sunstone spent roughly $2 billion to acquire 17 upscale hotels in the top 10 U.S. markets,areas that have high-growth potential but aren’t easy to enter.
Current hotels include the Boston Marriott Long Wharf Hotel, Hilton Times Square in New York, the Hyatt Regency Century Plaza in Los Angeles, W Hotel in San Diego, the Hyatt Regency Newport Beach and Fairmont Newport Beach.
Sunstone’s $400 million initial public offering in 2004 was the largest ever in the hotel industry at that time.
It also was the biggest for Orange County that year.
The offering was the company’s second public offering under former chief executive Bob Alter, who’s now chairman.
Sunstone has a market value of about $1.6 billion, similar to that of Chicago-based Strategic Hotels & Resorts Inc., which owns the Ritz-Carlton Laguna Niguel.
The growth also resulted in a larger workforce, from 55 people last year to 68 today, up 24%.
“We needed nine people to replace (former CEO) Bob Alter,” Chief Executive Steven Goldman joked.
Sunstone named Goldman chief executive last spring.
He previously was executive vice president of acquisitions and development for Chicago-based Global Hyatt Corp.
Goldman expects to continue the company’s strategy in 2008.
“We have a definite strategy to move the quality and size of our assets up through buying and selling (hotels),” he said.
In the past two years, Sunstone sold 26 hotels with an average of 194 rooms per hotel and bought 16 hotels with an average of 462 rooms per hotel. The company also has invested roughly $300 million on renovations and expansions, including at its OC hotels.
Looking to 2008, Goldman said some hotel investors are concerned about the possibility of a recession. The current credit crunch impacts hotel real estate investment trusts, he said.
Credit has tightened for development as investors holding mortgage-backed securities have become more cautious during the housing market downturn.
“The business fundamentals are still good,” Goldman said, particularly in room rate and profitability.
“We haven’t cancelled any projects.”
The company now expects its 2007 profit to increase 7.5% to 9.5% from the previous year.
Analysts project Sunstone’s 2008 revenue to increase about 7% from the prior year to $1.13 billion.
Sunstone was formed in 1985 and first taken public in 1995. In 1999, it was taken private again in a buyout partnership with Westbrook Partners.
The moves have helped Sunstone turn its portfolio away from mid-level suburban hotels and into one holding company for quality hotels in urban markets.
Hotel analysts believe that 2007 may be the peak year for the industry in occupancy growth. But a falloff in development driven by the recent credit crunch may help existing hotel owners. –
THE NUMBERS
Three-year growth: 734%
Yearly sales through June 30: $988.8 million
Yearly profit: $45.4 million
Market value: $1.6 billion
Employees: 68, all in OC
Company: hotel owner
