Sunstone Buys Florida Oceanfront Hotel in $175M Deal

The Oceans Edge Hotel & Marina is the largest luxury resort and marina in Key West. Its waterfront rooms are spread across four buildings, with 86 suites having private balconies that offer views of the Atlantic Ocean.

Oceans Edge Hotel & Marina
Oceans Edge Hotel & Marina

Sunstone Hotel Investors Inc., has acquired the fee-simple interest in Oceans Edge Hotel & Marina, a 175-key hotel in Key West, Fla., for $175 million. Additionally, Sunstone acquired a combined 52 wet and dry boat slips and amenities in the attached marina which offers direct deep channel access to one of the most sought after fishing destinations in the country. 

“The acquisition of Oceans Edge Hotel & Marina demonstrates a continuation of our strategy to recycle capital into higher quality, long-term relevant real estate while maintaining an industry leading balance sheet with ample investment capacity,” John Arabia, Sunstone’s president and CEO, said in a prepared release. “Over the past 19 months, we have sold nearly $735 million of real estate and used a portion of those proceeds to return capital to our shareholders, to strengthen our already low-levered balance sheet and to redeploy proceeds into exceptional real estate.”

The Oceans Edge Hotel & Marina fits that description, as it’s a brand new, purpose-built hotel and marina that is a higher quality than much of the current Key West hotel supply.   

“The luxury resort and marina, which opened in January 2017, is expected to provide meaningful growth in the near term as it reaches stabilization, and over the long term due to the supply restrictions in the Key West market,” Arabia added.

The waterfront rooms are spread out among four buildings, with 86 suites having private balconies that offer views of the Atlantic Ocean. The units are designed in Key West conch style architecture and each room averages 470 square feet. Amenities include six swimming pools, a full-service restaurant, waterfront bar, on-site water sports and paddle shop and a fitness facility. 

The property is situated across 20 land and water acres on Stock Island and is the largest purpose-built luxury resort and marina in the area. Stock Island is home to the Key West Symphony Orchestra, Tennessee Williams Theatre, numerous art galleries, a golf course and outstanding bars and restaurants.

Investment Details

The Oceans Edge purchase price represents an estimated 14.1x multiple on the midpoint of the 2018 forecasted Hotel Adjusted EBITDA range of $11.5 million to $13.3 million and an estimated 6.5 percent capitalization rate on the midpoint of 2018 forecasted hotel net operating income. 

Sunstone also completed the disposition of Marriott Park City, a 199-key hotel in Park City, Utah for $27.6 million. Proceeds from this sale, as well as its recent sale of Fairmont Newport Beach, helped to fund this acquisition. Additionally, the company sold an Orange County hotel earlier this year, in Newport Beach, Calif.

The company now has interests in 27 hotels comprised of 13,202 keys.