Sunstone Hotel Investors Inc. (NYSE: SHO) has relocated its headquarters from the top floor of one of the Irvine Spectrum areaโs newest office towers to a smaller spot in Aliso Viejo.
At the start of the year, the hotel and resort-focused real estate investment trust, which counts a market cap of $2.2 billion, moved its local base from the 21st floor of the 200 Spectrum Center office tower to one of the buildings at the Summit Office Campus in Aliso Viejo.
Sunstone previously occupied a 22,150-square-foot office spanning the entirety of the top floor of the 200 Spectrum Center tower, an Irvine Co. property across the street from the companyโs Spectrum shopping center.
When the 10-year lease for the tower was struck a few years ago, monthly rental rates for that buildingโs top floors were estimated to be in the $5 per square foot range, among the priciestยญ in Orange County.
Its new space at 15 Enterprise is smaller, and offers lower rates, according to Sunstone.
โIn the fourth quarter of 2022, we determined we could reduce our future operating expenses by relocating our corporate headquarters to decrease the amount of space we occupy and to secure a lower rental cost per square foot,โ the REIT said in its latest annual report, filed last month.
Sunstone has subleased its Irvine office to CalerieHealth, a provider of dietary supplements targeting weight loss and aging. Steve Flipse founded the company in Anaheim in 2017; the Irvine office serves as its new headquarters, according to the companyโs website.
CalerieHealth will occupy the space through the remainder of the lease that expires in 2028.
Sunstoneโs new lease in Aliso Viejo runs through April 2029.
Cost savings from the consolidation and the sublease transaction will total $1.1 million per year through 2028, Sunstone said.
Pre-Pandemic Goal
The streamlining efforts come as Sunstone nears a full return to pre-pandemic hotel metrics.
Average daily rates for the firmโs 15-hotel portfolio were $286 during the fourth quarter, a 12% increase from the year prior, and a 16% increase compared to 2019.
Revenue per available room, or RevPAR, was $326 for the total portfolio in 2022, slightly off from 2019 levels.
Occupancy rose to 68% in 2022, ahead of prior pandemic years but off from the 83% seen in 2019.
โLead volumes at the end of 2022 surpass 2019 levels, and we continue to see strength in short-term booking activity with higher contribution from corporate group events,โ Bryan Giglia, who was promoted to chief executive from CFO last year, said during a recent quarterly earnings call with analysts.
Sunstone recorded revenue of $912 million last year, up 79% from the year prior, but off 18% from 2019.
Long Beach Renovation
Sunstoneโs portfolio doesnโt include any local properties; it sold its last two OC-based hotels, the Fairmont Newport Beach and Hyatt Regency Newport Beach, in 2017 and 2018, respectively.
Close to home, Sunstone this year will โbegin and complete the rebranding for the Renaissance Long Beach to the Marriott Long Beach.โ The project will start next quarter and be completed by the end of the year.
โWe expect the investments to better enable the hotel to compete for business and grow earnings,โ President and Chief Information Officer Robert Springer said on the earnings call.
โThe hotel was approaching a cyclical renovation and does not require a meaningful incremental investment to secure the Marriott flag, which should drive higher group rate and transient occupancy,โ he said.
Parkline Project
The Aliso Viejo move marks a return to the city for the hotel investor, which relocated its headquarters to Irvine in 2017 from the Vantis office campus, less than a mile from Summit.
Sunstoneโs new office is currently undergoing a refresh and rebrand following its 2021 sale to Long Beach-based Harbor Associates LLC.
Chicago-basedย Singerman Real Estate and Harbor paid $92 million for 15 and 25 Enterprise, a pair of five-story offices totaling about 295,000 square feet alongside the San Joaquin Hills (73) Toll Road. The 15 Enterprise building is about 50% leased to a mix of tenants, according to CoStar Group.
The new owners late last year started a renovation to convert the buildings into a โwellness, work and community focused office campusโ called Parkline, according toย Allison Schneider Kelly, a senior vice president of advisory and transaction services in the Newport Beach office ofย CBRE, which handles leasing for the project.
Parkline will include new outdoor amenities and design, as well as upgraded lobbies, restrooms and innovative office space, while maintaining the same footprint within the 1.7 million-square-foot master-planned office campus.
The buildings are expected to finish upgrades by the second quarter of 2023.
