Upscale Hotel Owner Sunstone Hotel Investors Sells a Preferred Issue
By: Tim McPartland,
Real Estate Investment Trust (REIT), Sunstone Hotel Investors (NYSE:SHO), has sold another preferred stock offering only 60 days after their last offering. SHO is an owner of luxury branded hotels.
The new issue being sold carries a coupon of just 6.45%, which is dramatically lower than the March new issue which carried a coupon of 6.95%. At the time of the last offering we wrote that the balance sheet of SHO is the envy of the REIT lodging sector, with $500 million of cash on hand at the end of 2015. Additionally the company carries the least debt of any lodging REIT with just a billion dollars worth of debt and $2.3 billion in shareholder equity. Investors realized the super high quality (although this issue is unrated) of Sunstone preferred issues and bid the price of the 6.95% issue up to $27/share shortly after issuance allowing for this new issue to come to market at the low coupon of 6.45%.
This new $25/share issue has the typical terms of REIT preferred issues being cumulative in respect to dividends and redeemable, at the issuers option, about 5 years after issuance.
The issue will have a permanent ticker symbol of SHO-F and has a OTC Grey market temporary ticker symbol of STNHP. The shares will trade immediately on the OTC exchange, but we don’t believe there will be much, if any, benefit to rush in to buy these shares as they will likely trade around $25 after issue. Our primer for OTC Grey market trading is here.