Sunstone to Acquire 544-Key Maui Resort for $326M

Sunstone Hotel Investors has entered into a definitive agreement to acquire the 544-key Wailea Beach Marriott Resort & Spa for $326 million, or $598,600 per key, from an affiliate of Blackstone Real Estate Partners IV.

Sunstone Hotel Investors, Inc. has entered into a definitive agreement to acquire the 544-key Wailea Beach Marriott Resort & Spa for $325.7 million, or $598,600 per key, from an affiliate of Blackstone Real Estate Partners IV.

The deal, Sunstone’s first lodging investment in Hawaii, is expected to close in the third quarter.

“We are pleased to announce our planned acquisition of the 544-room Wailea Beach Marriott Resort & Spa, our first acquisition in the strong Hawaiian market,” Ken Cruse, Sunstone’s CEO, said in a company statement. “This acquisition fits squarely within our strategy of increasing our portfolio quality and scale while improving our financial flexibility.”

Sunstone Hotel Investors also announced it will issue 18 million shares of common stock in a public offering. The company will use the proceeds from the offering to pay for a portion of the resort acquisition. The proceeds will also be used for other potential future acquisitions and general corporate purposes.

According to Maui Real Estate Advisor, the Maui lodging market is the state’s strongest lodging market, consistently maintaining the highest ADR of all the Hawaiian Islands, and historically being one of the quickest markets to recover given its convenient and increasing airlift capacity.

Following the recent economic downturn, the Maui lodging market has demonstrated robust health, with compounded average annual RevPAR growth of 7.1 percent. Year-to-date through April 2014, RevPAR growth across the Maui lodging market is accelerating, and is up 7.6 percent over the same period in 2013.

The fee-simple property is on 22 waterfront acres on Wailea Beach Marriott adjacent to the Shops at Wailea. Cruse said the company plans a renovation of the hotel in 2015 and 2016 and it will receive operational support during the planned renovation from Marriott International, the hotel’s manager.

At an average size of nearly 450 square feet, the hotel provides some of the largest standard guestrooms on Maui. It offers 45,000 square feet of flexible meeting facilities featuring three ballrooms, 21 meeting rooms, and significant outdoor oceanfront space that may be entitled for future development.

“While the hotel currently produces superior RevPAR relative to our portfolio average, we believe the hotel’s market penetration, cash flows and long-term value will materially benefit from our asset management process and a carefully planned and executed repositioning program,” Cruse said. “Accordingly, we intend to optimize the Hotel’s 22-acre footprint within this exceptional market by creating a more well-defined, cohesive destination resort experience.  This project is highly consistent with our skill set, as our team has deep experience in the development and oversight of comprehensive resort hotel repositioning programs.”