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Sunstone CFO Aids REIT’s Reinvention

Bryan Giglia has helped Sunstone Hotel Investors Inc. complete a corporate makeover as extensive as any redevelopment the company has undertaken for one of its portfolio hotels.

The Aliso Viejo-based real estate investment trust, which owns 30 hotels across the U.S., shrank its holdings in the last downturn and then reinvented itself as opportunistic investor when other hotel properties became available at discounted prices.

Now the company, which has a $3.5 billion market value, has a portfolio—and balance sheet—designed to prosper as hotel values and occupancy rates rise, as well as designed to survive the next down cycle.

That’s due in large part to the efforts of Giglia, a Sunstone employee since 2004, according to other current and former executives at the REIT.

He “has done a fantastic job in recent years accessing attractively priced capital, reducing leverage, opportunistically staggering debt maturities, and providing us the financial flexibility and liquidity needed to implement our business plan,” said John Arabia, Sunstone’s chief executive and a former CFO at the company.

Giglia, who oversees Sunstone’s corporate finance, accounting and tax functions, won the award in the public-company category at the Business Journal’s CFO of the Year Awards on Feb. 4 at the Hotel Irvine (see related stories, pages 1, 4, 9 and 10).

Wild Ride

“Getting to where we are today definitely was not easy,” Giglia told the crowd of about 600 at the awards dinner.

The company has had a wild ride since going public a few months after he joined the company as a financial analyst.

Sunstone became the first publicly traded hotel owner in the downturn to hand back keys to a lender, with the W Hotel in San Diego in 2009.

It relinquished eight other hotels to lender Massachusetts Mutual Life Insurance Co. in 2010.

Sunstone parlayed the handover of the hotels, along with some fundraising, into the acquisition of other properties at discounted prices, and by 2011 it had settled into what company executives described at the time as “a more disciplined approach” to growth.

Plenty of work remained at the time for Giglia, who prior to becoming CFO served as senior vice president of the corporate finance department.

As of 2011, “Sunstone had too much debt and too small of an asset base,” said Ken Cruse, a former Sunstone chief executive who nominated Giglia for the CFO award.

Giglia’s short-term goals since 2011 included debt reduction, while the company’s executive team made more selective buys involving larger, branded hotels in prime locations.

He worked with the company’s finance team for the first part of that equation, developing a long-term capital plan that included specific annual credit milestones, according to Cruse, who like Arabia previously served as Sunstone’s CFO before being promoted to chief executive.

Achievements

The finance team’s notable achievements over the past three years have included the company’s leverage ratio dropping from more than nine times earnings before interest, taxes, depreciation, and amortization to less than four times EBITDA, Sunstone said.

That was accomplished “through a series of well-timed, investor friendly” financial transactions, company officials said.

Over the past three years, Giglia, who was promoted to CFO in 2013, “has overseen a greater degree of balance sheet deleveraging than any other lodging REIT while ensuring Sunstone’s total shareholder returns have remained near the top of our industry,” said Cruse, who left the company last month to start a hotel investment fund in Orange County.

Sunstone has built its portfolio to 14,303 rooms. Its OC holdings are the Fairmont Newport Beach and the Hyatt Regency Newport Beach.

The company made its largest acquisition in nearly three years in mid-2014 when it agreed to pay $325.7 million for the 544-room Wailea Beach Marriott Resort & Spa in Maui. An estimated $65 million renovation of the property is under way.

Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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