Trinity makes bid for Sunstone REIT: report

ALISO VIEJO, California – Sunstone Hotel Investors stock closed up just over 10% on Tuesday after Bloomberg speculating that acquisitive PE firm Trinity Investments discussed paying about $13 a share (a 21% premium from Monday’s close) for the REIT. Bloomberg, which cited confidential sources, added that the two groups currently are not in active discussions.

Analysts suggest lodging REITs could rally on this news with analysts at Stifel suggesting Chatham Lodging Trust could be a possible takeout candidate, given the company’s select-service and non-brand managed portfolio.

J.P. Morgan analyst Joseph Greff said the proposed price aligns with a 12.5x EV/EBITDA multiple based on 2025 estimates, which is in between Sunstone Hotel’s current valuation multiples for 2024 and 2025. He said these factors contribute to the decision to maintain a Hold rating on Sunstone, indicating that the stock is expected to perform in line with the market average, considering both the opportunities and uncertainties involved.

R.W. Baird analyst Michael Bellisario wrote that Sunstone’s portfolio offers prospective buyers “several high-value hotels with idiosyncratic drivers for potential value creation. A catalyst is needed for an NAV discount to close/narrow, and this report is likely that catalyst, in our view.”

Bellisario added that equity is not an issue; debt is not an issue either; the debate is pricing and the board’s willingness to transact. “For a deal to get done, take-private pricing would need to be $13.50/share or higher, and perhaps as high as $15/share, in our opinion.”

Sunstone, which last year cut its full-year guidance, has a market cap of $2.17 billion and until Tuesday its shares were largely unchanged this year.

Sunstone, led by CEO Bryan Giglia, has a portfolio that includes the Montage Healdsburg in California, the Wailea Beach Resort in Hawaii, the Four Seasons Napa Valley and the Confidante Miami Beach, which is set to reopen as the Andaz Miami Beach. The Aliso Viejo, California-based company was founded by Robert Alter in 1985.

Trinity recently acquired the Standard London and includes the Hilton Los Cabos Beach & Golf Resort and the Westin Maui Resort & Spa among its holdings. It sold a minority stake to Partners Group Holding AG in April.

The last public-to-private lodging REIT transaction was November 2023, when KSL Capital Partners purchased Hersha Hospitality Trust.