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Sunstone Hotel Investors, the hotel REIT, is being shopped to potential bidders by Bear Stearns, sources with knowledge of the situation told dealReporter. One of the sources said the company expects bidders to pay around USD 28 per share.
Repeated calls to the company were not returned. Bear Stearns and JPMorgan declined to comment.
Sunstone, based in San Clemente, California, owns 45 hotels, comprised of 15,625 rooms. One source said because there was no leverage in the current financing market a deal would be difficult to get done at the current price expectation. A second source said he had heard of the marketing efforts for Sunstone beginning in early April but felt USD 28 per share was expensive given there was almost no cash on the balance sheet. This source however said that if strategic buyers decide to pursue this acquisition, he was 60% confident the deal is likely.
Both sources named HOST Hotels & Resorts as a potential buyer for Sunstone Hotels. At the same time, the second source said Boston Properties, USD 12.4bn real estate investment trust is gearing up to take advantage of disounted valuations in the sector and is likely to be interested in Sunstone.
Blackstone has looked at the company and passed, the second source said.
The second source said bidders were looking for USD 700-800m in financing commitments because in this market a 50% equity check is needed. Therefore the source said “I would be surprised if anyone wanted to pay above USD 25” per share.
The first source said because many of the properties were not in areas which were benefiting from the Dollar-Euro difference outside Sunstone’s Southern California properties he did not see much earning potential. The second source said the two Marriot Hotels in Boston and Sunstone’s equity stake in Doubletree Times Square could make this company more attractive.
Sunstone Hotel Investors is trading at USD 19.07 per share and has USD 1.12bn in the market cap.
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