WORLD PROPERTY CHANNEL ®

Art Buser

Art Buser, president and CEO of Sunstone Hotel Investors Inc. of Aliso Viejo, CA, knew his timing was right.  He wasn't about to let the strategically located 409-room Royal Palm Hotel on trendy Collins Avenue in Miami Beach, get away from him.

So at a court-sanctioned foreclosure auction, Buser outbid his rivals and acquired the fee-simple interest in the eight-year-old hotel located on a 1.9-acre ocean-front lot.

The gross purchase price was approximately $126.1 million or about $308,000 per key before transaction costs.

Prior to the auction, Buser purchased a portion of the outstanding debt at a discount to par resulting in an economic gross purchase price of about $117million or about $286,000 per key.

Royal Palm Oceanfront Resort, South Beach

The transaction is expected to close in the third quarter.

"This is the right time in the cycle to undertake deep turnarounds as redevelopment costs are low and displacement will be minimized," Buser said in a prepared statement.

"While the 409-key Royal Palm may not be a typical REIT acquisition, it fits squarely within our target criteria -- excellent real estate, well located within a perennially strong market, with significant upside potential through a full renovation and repositioning program."

He says the acquisition represents "an irreplaceable asset in one of the world's most desirable tourist markets."

As of June 2010, Buser says Miami has recorded the fourth strongest RevPAR of the Top 25 markets, according to Smith Travel Research, with 11.0% growth in RevPAR YTD, driven by occupancy and rate growth of 8.1% and 2.8%, respectively.

Buser says Sunstone seeks "unique opportunities to acquire exceptionally well-located hotel real estate at discount valuations.

"Additionally we seek to acquire assets where we may create meaningful value via comprehensive renovation and repositioning programs that will take about two years to complete.

Miami Beach skyline

To achieve optimal positioning, Buser says Sunstone has "initiated a request for proposals ("RFP") process to select the appropriate manager to capitalize on the unique attributes and superior location of the hotel."

Upon completion of the RFP, Sunstone plans to begin a comprehensive renovation program "with the aim of transforming the hotel into one of the premier destinations on South Beach," Buser says.

Upon completion of the announced acquisition, the Company will own 31 hotels comprised of 11,722 rooms.

Sunstone's hotels are primarily in the upper upscale segment and are generally operated under nationally recognized brands, such as Marriott, Hilton, Hyatt, Fairmont and Starwood, according to Buser.

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