Sunstone Hotel Investors (SHO) 2012年年度報告「NYSE」.pdf

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1、231Embassy Suites ChicagoHyatt Chicago Magnificent MileAcquired June 4,2012Hilton Garden Inn Chicago Magnificent MileAcquired July 19,2012In 2012,we assembled a strategic concentration of hotels within Chicago s Magnificent Mile district by acquiring the Hyatt Chicago Magnificent Mile and the Hilton

2、 Garden Inn Chicago Magnificent Mile.312Located blocks from the Navy Pier and the Magnificent Mile shops along Michigan Avenue,the 368-room Embassy Suites Chicago is steps away from many of downtown Chicago s tourist attractions,theaters,parks,museums and restaurants.1EMBASSY SUITES Chicago1Followin

3、g a comprehensive$12 million renovation,the Embassy Suites Chicago has all new suites,lobby and public areas.The all-suite hotel offers food&beverage options ranging from Italian specialties at Osteria Via Stato to custom burgers at MBurger to coffee&drinks at Starbucks.EMBASSY SUITES ChicagoS U N S

4、 T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 52HYATT Chicago Magnificent MileS U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 7We acquired the 417-room Hyatt Chicago Magnificent Mile on June 4,2012,and we are currently

5、underway with a comprehensive$25 million renovation which will transform the entire hotel into a showcase of modern design with inviting public spaces,contemporary rooms and exceptional food&beverage.DISCIPLINED EXTERNAL GROWTHDuring 2012 we took several steps to improve the quality and scale of our

6、 portfolio.2HYATT Chicago Magnificent MileBEFOREUpon completion in late spring 2013,we will have transformed the Hyatt Chicago Magnificent Mile within the first nine months of our ownership.AFTERCALIFORNIACourtyard by Marriott Los AngelesEmbassy Suites La JollaFairmont Newport BeachHilton San Diego

7、BayfrontHyatt Regency Newport BeachRenaissance Long BeachRenaissance Los Angeles AirportSheraton CerritosOREGONMarriott PortlandUTAHMarriott Park CityILLINOISEmbassy Suites Chicago Hilton Garden Inn Chicago Magnificent MileHyatt Chicago Magnificent MileTEXASHilton HoustonNorthMarriott HoustonLOUISIA

8、NAJW Marriott New OrleansMASSACHUSETTSMarriott Boston Long WharfMarriott QuincyNEW YORKDoubletree Guest Suites Times SquareHilton Times SquareRenaissance WestchesterPENNSYLVANIAMarriott PhiladelphiaMD/DC/VARenaissance BaltimoreHarborplaceRenaissance Washington DCMarriott Tysons CornerFLORIDARenaissa

9、nce Orlando at SeaWorld43%Our portfolio is comprised of 26 institutional-quality,primarily upper-upscale hotels with 11,632 rooms with concentrations in the top lodging markets across the country.3We acquired the 357-room Hilton Garden Inn Chicago Magnificent Mile on July 19,2012.Located across the

10、street from our Embassy Suites Chicago,the 23-story hotel offers exceptional skyline views of downtown Chicago,as it neighbors Magnificent Mile and many of downtown Chicago s attractions.HILTON GARDEN INN Chicago Magnificent Mile*Percentages reflect 100%ownership of the Hilton San Diego Bayfront.14%

11、9%34%2012 EBITDA by Region*PROACTIVE PORTFOLIO MANAGEMENTRenovation Plan for the JW Marriott New OrleansThis copy is not intended to be read.It is merely a of what the text of this piece may look like set in this type size and style.The criteria for quality typography have not changed with the appli

12、cation of computers and state of the art technology.3Hyatt Chicago Magnificent MileS U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 1 92 0 1 2 A N N U A L R E P O R T /P A G E 1 9FROM here.Prior to embarking on our$5 million renovation of the JW Marriott New

13、 Orleans,the public spaces were dated and compartmentalized.With our renovation complete,the JW Marriott New Orleans provides guests with a welcoming environment to relax after spending time amidst the activity along Canal Street.TO hereS U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N

14、 U A L R E P O R T /P A G E 2 1To Our SUNSTONE Shareholders,We defined a new Sunstone back in 2011.Looking back to 2011,we retooled our team,enhanced our corporate governance,estab-lished a new long-term vision,redefined our core values and developed a new,cycle-appropriate strategy aimed at creatin

15、g signif-icant shareholder value while improving the quality and scale of our portfolio and gradually deleveraging our balance sheet.Our strategy would be predicated on the following:?Proactive portfolio management;?Intensive asset management;?Disciplined external growth;and?Measured balance sheet i

16、mprovement.The new Sunstone delivered strong returns in its first year2012.By remaining focused on our long-term vision,embracing our core values and adhering to our balanced strategy,we delivered total shareholder returns of greater than 31%in 2012,more than double the average returns generated by

17、other comparable upper-upscale lodging REIT peers.At the same time,we materially improved our portfolio quality and deleveraged our balance sheet through a series of value-creating transactions.In short,dur-ing 2012 we advanced a number of our key corporate objectives through solid execution on each

18、 of Sunstone s disciplines.First,with respect to proactive portfolio management,during 2012 we made in excess of$109 million of value-adding investments throughout our portfolio.For example,we completed a$23 million full guestroom and bathroom renovation of our 807-room Renaissance Washington DC.Alt

19、hough the renovation resulted in short-term displacement while the work was underway,the renovation is already driving material outperformance at this hotel in 2013.We expect to see similarly strong year-over-year performance among all the other hotels we renovated in 2012.In addition to our capital

20、 investment program,during 2012 we also divested of four legacy hotels that no longer fit our investment param-eters,based on the hotels market locations,relatively small scale and low average RevPAR.2012 dispositions included the 284-room Marriott Del Mar,the 229-room Doubletree Guest Suites Minnea

21、polis,the 257-room Hilton Del Mar and the 350-room Marriott Troy for a gross sale price of$173.2 million,including the elimination of approximately$122.7 million in mortgage debt.Second,with respect to intensive asset man-agement,our team continued to execute on a wide array of initiatives designed

22、to improve the competitiveness and long-term value of our individual hotels.During the year we ini-tiated a comprehensive,portfolio-wide energy management program to materially improve the efficiency of our portfolio.Additionally,we continued to streamline our food and bev-erage operations by redefi

23、ning restaurant concepts and consolidating outlets into seam-less lobby,bar,restaurant venues.We also made solid inroads in terms of refining our housekeeping and laundry functions.All of these initiatives have helped to make our hotels more efficient,which we expect will lead to significant margin

24、improvement for years to come.Third,with respect to disciplined external growth,during 2012 we took several steps to improve the quality and scale of our portfolio.First,we acquired the 417-room Hyatt Chicago Magnificent Mile for a contractual purchase price of$88.4 million.We are in the process of

25、investing approximately$25 million on a complete repositioning of this well-located hotel aimed at elevating the physical appearance and amenities of the hotel to a sophisticated destination catering to high-rated business transient and group travelers.Additionally,we acquired the 357-room Hilton Ga

26、rden Inn Chicago Downtown/Magnificent Mile for a gross purchase price of$91.8 million.Finally,with respect to measured balance sheet improvement,we reduced our indebt-edness by over$180 million and reduced our net debt 11 points from 53.6%to 42.8%.Additionally,we completed a favorable amendment and

27、extension of our$150 mil-lion credit facility.As a result of the concerted execution of our strategy by each of our core disciplines,strengthen ing industry-wide demand trends and below-average supply growth,we achieved strong outputs,including:?comparable RevPAR improved by 5.6%to$139.22,?comparabl

28、e hotel EBITDA margins improved by 110 basis points to 28.9%,?adjusted Corporate EBITDA improved by 14.1%to$242.5 million,?adjusted FFO/diluted share improved by approximately 16.1%to$1.01,and?consolidated debt to total book capitalization improved by over 13 points from 53.6%to 42.8%.S U N S T O N

29、E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 2 3The lodging industry is cyclical.We are now entering the fourth year of what we believe will be a prolonged,albeit moderate growth recovery phase for the lodging industry.Value in our business is primarily created during

30、 the peaks and troughs of the lodging cycle.Our mid-term objective is to approach the next cyclical peak with significant liquidity and a materially improved balance sheet,so that we may enter the next cyclical trough in a position of strength with the capacity to capitalize on opportunities.Accordi

31、ngly,we will continue to adjust the prominence of each of our strategic pillars based on our assessment of where we are in the lodging cycle.For example,we will be more focused on acquisitions during the first half of the lodging cycle and more focused on har-vesting gains through the sale of non-st

32、rategic assets during the late phase of the cycle.We are building a corporate-wide disciplinebased on rigorous quantitative analysis,cross-departmental communication and accountability.We have an abiding com-mitment to learn from the mistakes that we and others in our industry have made in the past.

33、We will continue to monitor external factors and make course corrections based on changes in market dynamics in order to maximize value through all phases of the lodging cycle.Our goal is to make decisions and structure transactions based on what we fear could happen,rather than what we hope will ha

34、ppen.While we are proud of the progress we made during 2012,we understand that positive track records are not built over the course of just one year.We are driven to unlock Sunstone s considerable potential by adher-ing to our stated strategy and building a reputation of outperformance.Accordingly,w

35、e as a team remain focused on the daily execution of our long-term strategy in order to create lasting value and to earn your ongoing support and commitment.Our team,vision and strategic plan are fully in place,and in connection with the continued development of our senior lead-ership team,we announ

36、ced a number of highly deserved promotions earlier in 2013 which largely cements the leadership structure of the new Sunstone.Continued strength in business trends throughout our portfolio,especially among the hotels we recently renovated,is driving meaningful growth in hotel revenues and profitabil

37、ity.Looking ahead,fundamentals for Sunstone s portfolio are compelling:we now hold focused investments in key growth markets,and we continue to improve our portfolio s competitiveness through high-quality reno-vations.With the U.S.demand-to-supply ratio well above historical norms and our portfolio

38、running at nearly 80%occupancy,our pricing power continues to improve.Accordingly,we expect our portfolio s prof-itability to accelerate over the next several years.We could not be more enthusiastic about Sunstone s future.Thank you again for your commitment to Sunstone.Sincerely,Ken Cruse Chief Exe

39、cutive OfficerIn short,2012 marked the first of what we expect to be many years of solid execution of our strategy and strong returns for our shareholders,and through March 1,2013,we ve continued on this path.To date in 2013,we ve eliminated$27 million of debt through the sale of four non-core hotel

40、s and a commercial laundry facility at an attractive valuation,and we ve continued to reduce our financial leverage through the repay ment of the remaining$58 million of exchangeable Senior Notes and the full redemp tion of our 8%Series A preferred security totaling$176 million.We will build value i

41、n 2013 and beyond.We believe that equal measures of vision,strategic focus,discipline and drive are the keys to sustained business success.We as a team are aligned around our vision to become the premier hotel investor.While that may seem like a lofty goal,we believe that without high aspirations,no

42、thing of signifi-cance can be accomplished.I am confident that we have the team,the tools and the plan to accomplish our vision.This won t happen overnightwe will achieve our vision by adhering to our plan and by taking one smart,shareholder-friendly step at a time.Our strategic focus remains on cre

43、ating sig-nificant shareholder value while improving the quality and scale of our portfolio and gradually deleveraging our balance sheet through proactive portfolio management,intensive asset management,disciplined external growth and measured balance sheet improvement.$FINANCIAL ReviewSelected Fina

44、ncial Data25Management s Discussion and Analysis of Financial Condition and Results of Operations26Reports of Independent Registered Public Accounting Firm52Consolidated Balance Sheets54Consolidated Statements of Operations and Comprehensive Income55Consolidated Statements of Equity56Consolidated St

45、atements of Cash Flows57Notes to Consolidated Financial Statements59Stock Information85Corporate Information86S U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 2 5SELECTED Financial DataThe following table sets forth selected financial information for the Com

46、pany that has been derived from the consolidated financial statements and notes.This information should be read in conjunction with“Management s Discussion and Analysis of Financial Condition and Results of Operations”and our consolidated financial statements and related notes included elsewhere in

47、this Annual Report.Year Ended December 31,2012Year Ended December 31,2011Year Ended December 31,2010Year Ended December 31,2009Year Ended December 31,2008($in thousands)OPERATING DATA:REVENUES:Room$576,146$501,183$351,039$336,981$417,785Food and beverage200,810175,103138,188134,319167,549Other opera

48、ting52,12845,50826,37330,24134,825Total revenues829,084721,794515,600501,541620,159OPERATING EXPENSES:Room147,932128,22592,10185,87998,606Food and beverage139,106126,13998,88996,755119,310Other operating16,16214,00411,53511,78614,217Advertising and promotion42,47437,22627,32626,40427,550Repairs and

49、maintenance32,04229,06722,60822,43724,353Utilities25,59625,53719,11718,87921,890Franchise costs30,06725,59518,03217,43520,520Property tax,ground lease and insurance66,83058,01035,28037,05838,976Property general and administrative94,64285,29361,75358,67570,439Corporate overhead24,31625,45321,75125,07

50、221,346Depreciation and amortization130,907113,70879,63378,79078,503Impairment loss10,8622,82357Total operating expenses750,074679,119488,025481,993535,767Operating income79,01042,67527,57519,54884,392Equity in net earnings(losses)of unconsolidated joint ventures21555(27,801)(1,445)Interest and othe

51、r income2973,1151121,3783,590Interest expense(76,821)(74,195)(58,931)(62,137)(69,203)Gain(loss)on extinguishment of debt(191)54,506Gain on remeasurement of equity interests69,230Income(loss)before income taxes and discontinued operations2,29540,846(30,689)(14,506)17,334Income tax provision(1,148)Inc

52、ome(loss)from continuing operations1,14740,846(30,689)(14,506)17,334Income(loss)from discontinued operations48,41040,45369,231(255,102)53,904Net income(loss)49,55781,29938,542(269,608)71,238Income from consolidated joint venture attributable to non-controlling interest(1,761)(312)Distributions to no

53、n-controlling interest(31)(30)Dividends paid on unvested restricted stock compensation(447)(814)Preferred stock dividends and accretion(29,748)(27,321)(20,652)(20,749)(20,884)Undistributed income allocated to unvested restricted stock compensation(203)(636)(102)Income available(loss attributable)to

54、common stockholders$17,814$53,000$17,788$(290,804)$49,540Income(loss)from continuing operations available(attributable)to common stockholders per diluted common share$(0.24)$0.11$(0.52)$(0.51)$(0.08)Cash dividends declared per common share(1)$0.00$0.00$0.00$0.00$1.20BALANCE SHEET DATA:Investment in

55、hotel properties,net(2)$2,681,877$2,532,232$1,666,180$1,670,164$1,716,814Total assets$3,136,675$3,101,240$2,436,106$2,513,530$2,805,611Total debt(2)$1,363,389$1,416,890$973,810$968,816$1,150,837Total liabilities$1,517,362$1,675,946$1,236,807$1,526,867$1,791,103Equity$1,519,313$1,325,294$1,099,299$88

56、6,767$914,812(1)Does not include non-cash common stock dividend of$0.60 per share declared in 2008.(2)Does not include hotels or debt which have been reclassified to discontinued operations,or which have been classified as held for sale.S U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N

57、 U A L R E P O R T /P A G E 2 6The following discussion should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report.OVERVIEWSunstone Hotel Investors,Inc.is a Maryland corporation.We operate as a self-managed and self-administered real

58、estate investment trust,or REIT.A REIT is a legal entity that directly or indirectly owns real estate assets.REITs generally are not subject to federal income taxes at the corporate level as long as they pay stockholder dividends equivalent to 100%of their taxable income.REITs are required to distri

59、bute to stockholders at least 90%of their taxable income.We own,directly or indirectly,100%of the interests of Sunstone Hotel Partnership,LLC(the“Operating Partnership”),which is the entity that directly or indirectly owns our hotel properties.We also own 100%of the interests of our taxable REIT sub

60、sidiary,Sunstone Hotel TRS Lessee,Inc.,which leases all of our hotels from the Operating Partnership,and engages independent third-parties to manage our hotels.In addition,we own 100%of BuyEfficient,LLC(“BuyEfficient”),an electronic purchasing platform that allows members to procure food,operating s

61、upplies,furniture,fixtures and equipment.As of December 31,2012,we also owned 100%of a commercial laundry facility located in Rochester,Minnesota,which we have classified as held for sale as of December 31,2012 and included in discontinued operations due to its sale in January 2013.We own primarily

62、upper upscale hotels in the United States.As of December 31,2012,we had interests in 30 hotels,including four hotels which we have classified as held for sale and included in discontinued operations due to their sale in January 2013,leaving 26 hotels currently held for investment(the“26 hotels”).Of

63、the 26 hotels,we classify 24 as upscale or upper upscale and two as luxury as defined by Smith Travel Research,Inc.All of our 26 hotels are operated under nationally recognized brands such as Marriott,Hilton,Hyatt,Fairmont and Sheraton,which are among the most respected and widely recognized brands

64、in the lodging industry.We believe the largest and most stable segment of travelers prefer the consistent service and quality associated with nationally recognized brands.We seek to own hotels in urban locations that benefit from significant barriers to entry by competitors.All of our 26 hotels are

65、considered business,convention,or airport hotels,as opposed to resort or leisure hotels.The hotels comprising our 26 hotel portfolio average 447 rooms in size.Our mission is to create meaningful value for our stockholders by becoming the premier hotel owner.Our values include transparency,trust,ethi

66、cal conduct,communication and discipline.Our goal is to improve the quality and scale of our portfolio while deleveraging our balance sheet.As demand for lodging generally fluctuates with the overall economy(we refer to these changes in demand as the lodging cycle),we seek to employ a balanced,cycle

67、-appropriate corporate strategy that encompasses proactive portfolio management,intensive asset management,disciplined external growth and measured balance sheet improvement as detailed below:?The leaders of each of our core disciplines function as a portfolio management team.The portfolio managemen

68、t team s purpose is to strategically maximize the long-term value of our assets by enhancing our portfolio quality and scale,optimizing our exposure to key markets,and improving the effectiveness and efficiency of our decision making.Accordingly,the team is responsible for developing a portfolio-wid

69、e strategy related to brand and operator relationships,asset quality and scale,target markets,capital investments,and portfolio capitalizations.Our portfolio strategy may also include the disposition of certain hotels.?Through all phases of the lodging cycle,our strategy emphasizes internal growth a

70、nd value enhancements through proactive asset management,which entails working closely with our third-party hotel operators to develop and implement long-term strategic plans for each hotel designed to enhance revenues,minimize operational expenses and asset risk,maximize the appeal of our hotels to

71、 travelers and maximize our return on invested capital.We also focus on improving the appeal and growth potential of our existing hotels through internally-managed hotel renovations.?By gradually increasing the scale and quality of our portfolio,we may provide our stockholders with greater exposure

72、to key growth markets,improved liquidity and broader access to value-adding transactions.Accordingly,our strategy emphasizes disciplined external growth during the recovery phase of the lodging cycle.Our external growth plan is oriented around investing in institutional-quality hotels that generate

73、returns in excess of our cost of capital,that are additive to the quality of our portfolio,that have attractive growth potential and that may benefit from our asset management competencies.We endeavor to structure our acquisitions in ways that will not only increase the value of our shares of common

74、 stock,but also will advance our other corporate objectives,such as improving our financial flexibility and reducing our leverage.During periods of cyclical decline,our strategy may emphasize opportunistically investing in distressed assets and the repurchase of our equity or debt securities.In addi

75、tion to hotel acquisitions,we may seek to grow our portfolio by making investments in defaulted and/or distressed debt positions in loan-to-own hotel transactions,utilizing our REIT structure to effect strategic combinations with select property owners,effecting portfolio purchases from institutiona

76、l and other owners seeking portfolio liquidity,and by providing capital solutions to illiquid owners facing debt maturities or capital requirements.MANAGEMENT S DISCUSSION AND ANALYSIS of Financial Condition and Results of OperationsS U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A

77、 L R E P O R T /P A G E 2 7?We believe that a low overall cost of capital and significant financial flexibility are very important to the successful execution of our strategy.Our balance sheet strategy is oriented toward maximizing financial flexibility especially during cyclical declines.Accordingl

78、y,our financial objectives include the measured improvement of our credit ratios,maintenance of appropriate levels of liquidity,and a gradual reduction in our financial leverage throughout the cyclical recovery phase.Our financial objectives are integral to our overall corporate strategy and,accordi

79、ngly,we have developed our financial objectives in conjunction with our portfolio management and growth objectives.The lodging industry is economically sensitive.Therefore,our financial objectives are aimed at reducing the potentially negative impact of combining high operating leverage with high fi

80、nancial leverage,while preserving access to multiple capital sources and minimizing our weighted-average cost of capital.We seek to capitalize our acquisitions in a way that will advance our financial objectives.For example,as the measured reduction of our financial leverage is currently a key objec

81、tive,we expect to fund our acquisitions with a greater proportion of equity capital than debt capital.During the mature phase of the lodging cycle,our financial objectives may include increasing our liquidity position as a means to enhance financial flexibility in the event of a subsequent period of

82、 cyclical decline.Our liquidity improvement objective may be accomplished through selective hotel dispositions,capital raises or by retaining excess cash generated by our operations.During the past three years and continuing into 2013,demand for lodging in the U.S.has increased,which has resulted in

83、 improved hotel revenues and profits.In light of increasing demand for lodging and generally muted supply of new hotel development,we believe we are cur-rently in the first half of a recovery phase of the lodging cycle.Hotels acquired during the early stages of past cyclical recoveries have benefite

84、d from multi-year increases in profitability,which in many cases created long-term value in excess of investment hurdles.Accordingly,during 2011 and 2012 we made selective acquisitions including:the purchase of the outside 62.0%equity interests in our Doubletree Guest Suites Times Square joint ventu

85、re in January 2011;the purchase of the outside 50.0%equity interest in our BuyEfficient joint venture in January 2011;the purchase of the JW Marriott New Orleans in February 2011;the purchase of a 75.0%majority interest in a joint venture that owns the Hilton San Diego Bayfront in April 2011;the pur

86、chase of the Wyndham Chicago in June 2012(which we immediately rebranded the Hyatt Chicago Magnificent Mile);and the purchase of the Hilton Garden Inn Downtown/Magnificent Mile in July 2012.Our acquisition program is aimed at generating attractive risk-adjusted returns on our investment dollars,and

87、therefore we may target lodging assets outside of the typical branded,urban,upper upscale profile represented by our existing portfolio in order to capitalize on opportunities which may arise.We intend to select the brands and operators for our hotels that we believe will lead to the highest returns

88、.On June 4,2012,we purchased the leasehold interest in the 417-room Wyndham Chicago located in Chicago,Illinois for a contractual pur-chase price of$88.425 million.The acquisition was funded with$29.7 million of cash on hand(including$0.3 million of proration credits)and the issuance of 5,454,164 sh

89、ares of our common stock,the“Wyndham stock consideration.”The Wyndham stock consideration was determined by dividing$58.425 million by the product of(1)the closing price of$10.40 on the NYSE of our common stock on May 2,2012 and(2)1.03.In connection with this acquisition,we entered into a registrati

90、on rights agreement requiring us to register the Wyndham stock consideration.We prepared the registration statement on Form S-3,which we filed with the SEC as required on June 4,2012.Based on the$9.38 closing price of the Company s common stock on the NYSE on June 4,2012,the date the acquisition clo

91、sed,the total purchase price of the Wyndham Chicago hotel for accounting purposes was$81.16 million,excluding proration adjustments and closing costs.Upon closing,we terminated the existing management agreement and entered into a new management agree-ment with Davidson Hotels&Resorts.We rebranded th

92、e hotel the Hyatt Chicago Magnificent Mile and have commenced planning for a$25.0 million renovation program.As an incentive to rebrand the hotel,Hyatt Franchising,L.L.C.will reimburse us for$6.5 million of our renovation costs once the renovation is complete.We expect to receive the$6.5 million dur

93、ing the third quarter of 2013,and will amortize the$6.5 million once received on a straight line basis over the remaining term of our franchise agreement with Hyatt,which term ends in 2039.On July 19,2012,we purchased the 357-room Hilton Garden Inn Chicago Downtown/Magnificent Mile located in Chicag

94、o,Illinois for a net purchase price of$90.3 million.The acquisition was funded with a portion of the$126.2 million net proceeds we received from the issuance of 12,143,273 shares of our common stock on June 25,2012.The scope of our acquisitions program may include large hotel portfolios or hotel loa

95、ns.Future acquisitions may be funded by our issuance of additional debt or equity securities,including our common and preferred OP units,or by draws on our$150.0 million senior corporate credit facility entered into in November 2010 and amended in September 2012.However,in light of our current finan

96、cial objectives,we expect to fund the majority of our near term acquisitions with a greater proportion of equity capital than debt capital.We have from time to time divested of assets that no longer fit our target profile,will not offer long-term returns in excess of our cost of capital,or that have

97、 a high risk profile relative to their anticipated return expectations.In connection with this strategy,during 2011 and 2012 we sold the following:the Royal Palm Miami Beach in April 2011;the Valley River Inn located in Eugene,Oregon in October 2011;the Marriott Del Mar in August 2012;and the Double

98、tree Guest Suites Minneapolis,the Hilton Del Mar,the Marriott Troy and an office building adjacent to the Marriott Troy in September 2012.In August 2012,we completed the sale of the Marriott Del Mar for a gross sales price of$66.0 million,and recognized a gain on the sale of$25.5 million.The buyer o

99、f the hotel assumed the$47.1 million mortgage secured by the hotel,resulting in our receipt of net proceeds totaling$17.7 million after proration adjustments and closing costs.In addition,we wrote off$48,000 in deferred financing fees in conjunction with the buyer s assumption of the debt secured by

100、 the Marriott Del Mar.S U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 2 8In September 2012,we completed the portfolio sale of the Doubletree Guest Suites Minneapolis,the Hilton Del Mar,the Marriott Troy and an office building adjacent to the Marriott Troy f

101、or a gross sales price of$105.0 million,and recognized a$12.7 million gain on the sale.The buyer of the portfolio assumed three separate mortgages secured by the hotels totaling$75.6 million,including:$16.9 million on the Doubletree Guest Suites Minneapolis;$24.4 million on the Hilton Del Mar;and$34

102、.3 million on the Marriott Troy.In addition,the buyer of the portfolio assumed a$2.2 million liability for deferred management fees payable to the Marriott Troy s independent third-party manager.We received net proceeds on the portfolio sale of$28.6 million after proration adjustments,closing costs

103、and the debt and deferred management fee assumptions.In addition,we wrote off$0.1 million in deferred financing fees in conjunction with the buyer s assumption of the debt secured by the three hotels.The mortgages secured by the Marriott Del Mar,Hilton Del Mar and Marriott Troy contain“cash trap”pro

104、visions that were triggered in prior years due to the decline in the performance of these hotels.Once triggered,substantially all of the excess cash flow from operations generated by the three hotels was deposited directly into lockbox accounts and then swept into cash management accounts for the be

105、nefit of the lenders.As of December 31,2012,a total of$8.2 million of our cash was held by the lenders of these three hotels.The cash will be returned to us once the lenders release the cash to the buyers according to the terms of the respective loan agreements,which is expected to occur within the

106、near term.In January 2013,we sold the Kahler Grand,the Kahler Inn&Suites,the Marriott Rochester,and the Residence Inn by Marriott Rochester in a portfolio sale that also included our commercial laundry facility in Rochester,Minnesota for a gross sales price of$230.0 million.We retained a$25.0 millio

107、n preferred equity investment in the four-hotel portfolio that yields an 11%dividend.In addition,we retained a$14.0 million liability related to the portfolio s pension plan,which could be triggered in certain circumstances,including termination of the pension plan.We also provided a$3.7 million wor

108、king cash advance to the buyer that will be repaid to us from the portfolio s available cash flow.In conjunction with the sale,we defeased the outstanding$26.7 million mortgage secured by the Kahler Grand for a total cost of approximately$30.0 million,prepaid the$0.4 million loan secured by the comm

109、ercial laundry facility,and wrote off$51,000 in deferred financing fees.We have classified the four hotels and commercial laundry facility as held for sale as of December 31,2012,and reclassified the results of operations for these assets to discontinued operations for all periods presented.In Febru

110、ary 2012,we repurchased$4.5 million in aggregate principal amount of our Senior Notes for$4.57 million,including$13,000 in interest,using our existing cash.After the repurchase,such Senior Notes were cancelled.We wrote off$47,000 in deferred financing fees and$0.1 million of the Senior Notes discoun

111、t,and recognized a loss of$0.2 million on this early extinguishment of debt.We repurchased the remaining$58.0 million balance of the Senior Notes at the first put date in January 2013 for$58.0 million plus approximately$23,000 in accrued interest using our existing cash.After the repurchase,such Sen

112、ior Notes were cancelled,leaving no amounts outstanding for the Senior Notes.In April 2012,we used our existing cash to repay the remaining balance on the$32.2 million non-recourse mortgage secured by the Renaissance Long Beach,which was originally scheduled to mature in July 2012.In September 2012,

113、we amended and restated our$150.0 million senior unsecured revolving credit facility,which was scheduled to mature in November 2013.The pricing on the amended revolving credit facility was reduced and the 1%LIBOR floor was eliminated.The maturity of the credit facility was extended to November 2015

114、with an option to extend to November 2016.The amended credit facility s interest rate is based on a pricing grid with a range of 175 to 350 basis points,which represents a reduction from the previous grid that ranged from 325 to 425 basis points over LIBOR depending on our leverage ratio.The credit

115、facility also includes an accordion option that allows us to request additional lender commitments up to a total of$350.0 million.We paid$1.3 million in deferred financing fees in conjunction with this amendment,which will be amortized over the term of the amended credit facility.The credit facility

116、 currently has no outstanding borrowings;however,as of December 31,2012,we have$3.8 million in outstanding irrevocable letters of credit backed by the credit facility.Of our total debt outstanding as of December 31,2012,approximately$605.6 million matures over the next four years($58.0 million in 20

117、13,none in 2014,$136.9 million in 2015 and$410.7 million in 2016).In January 2013,we repurchased the remaining$58.0 million balance of our Senior Notes for a price of$58.0 million plus accrued interest of approximately$23,000,leaving approximately$547.6 million of our debt maturing over the next fou

118、r years.The$547.6 million does not include$18.7 million of scheduled loan amortization payments due in 2013,$22.3 million due in 2014,$21.3 million due in 2015,or$12.9 million due in 2016.As of December 31,2012,the weighted average term to maturity of our debt is approximately five years,and 70.2%of

119、 our debt is fixed rate with a weighted average interest rate of 5.5%.The weighted average interest rate on all of our debt,which includes our variable-rate debt obligations based on variable rates at December 31,2012,is 4.9%.After our repurchase of the Senior Notes and the repayment of debt include

120、d in discontinued operations in January 2013,the weighted average term to maturity of our debt continues to be approximately five years,and 68.2%of our debt is fixed rate with a weighted average interest rate of 5.6%.The weighted average interest rate on all of our debt,which includes our variable-r

121、ate obligations based on variable rates at December 31,2012,continues to be 4.9%.S U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 2 9OPERATING ACTIVITIESOperating Performance Indicators.The following performance indicators are commonly used in the hotel indu

122、stry:?Occupancy;?Average daily room rate,or ADR;?Revenue per available room,or RevPAR,which is the product of occupancy and ADR,and does not include food and beverage revenue,or other operating revenue;?Comparable RevPAR,which we define as the RevPAR generated by hotels we owned as of the end of the

123、 reporting period,but excluding those hotels that we classified as held for sale.For hotels that were not owned for the entirety of the comparison periods,comparable RevPAR is calculated using RevPAR generated during periods of prior ownership.We refer to this subset of our hotels used to calculate

124、comparable RevPAR as our“Comparable Portfolio.”Currently our Comparable Portfolio includes all 26 hotels in which we have interests as of December 31,2012.In addition,our Comparable Portfolio includes prior ownership results for the Doubletree Guest Suites Times Square,the JW Marriott New Orleans,th

125、e Hilton San Diego Bayfront,the Hyatt Chicago Magnificent Mile and the Hilton Garden Inn Chicago Downtown/Magnificent Mile,as well as operating results for the Renaissance Westchester during the period in 2010 while it was held in receivership;?RevPAR index,which is the quotient of a hotel s RevPAR

126、divided by the average RevPAR of its competitors,multiplied by 100.A RevPAR index in excess of 100 indicates a hotel is achieving higher RevPAR than its competitors.In addition to absolute RevPAR index,we monitor changes in RevPAR index;?Operating flow through,which is the quotient of operating inco

127、me divided by revenues;?EBITDA,which is net income(loss)excluding:non-controlling interests;interest expense;provision for income taxes,including income taxes applicable to sale of assets;and depreciation and amortization;?Adjusted EBITDA,which includes EBITDA but excludes:amortization of deferred s

128、tock compensation;the impact of any gain or loss from asset sales;impairment charges;prior year property tax and other adjustments;and any other identified adjustments;?Funds from operations,or FFO,which includes net income(loss),excluding non-controlling interests,gains and losses from sales of pro

129、p-erty,plus real estate-related depreciation and amortization(excluding amortization of deferred financing costs)and real estate-related impairment losses,and after adjustment for unconsolidated partnerships and joint ventures;and?Adjusted FFO,which includes FFO but excludes penalties,written-off de

130、ferred financing costs,non-real estate-related impairment losses,income tax provisions,and any other identified adjustments.Revenues.Substantially all of our revenues are derived from the operation of our hotels.Specifically,our revenues consist of the following:?Room revenue,which is the product of

131、 the number of rooms sold and the ADR;?Food and beverage revenue,which is comprised of revenue realized in the hotel food and beverage outlets as well as banquet and catering events;and?Other operating revenue,which includes ancillary hotel revenue and other items primarily driven by occupancy such

132、as telephone,transportation,parking,spa,entertainment and other guest services.Additionally,this category includes,among other things,operating revenue from BuyEfficient(subsequent to our purchase of the outside 50.0%equity interest in January 2011),and hotel space leased by third parties.Expenses.O

133、ur expenses consist of the following:?Room expense,which is primarily driven by occupancy and,therefore,has a significant correlation with room revenue;?Food and beverage expense,which is primarily driven by food and beverage sales and banquet and catering bookings and,therefore,has a significant co

134、rrelation with food and beverage revenue;?Other operating expense,which includes the corresponding expense of other operating revenue,advertising and promotion,repairs and maintenance,utilities,and franchise costs;?Property tax,ground lease and insurance expense,which includes the expenses associate

135、d with property tax,ground lease and insurance payments,each of which is primarily a fixed expense,but property tax is subject to regular revaluations based on the specific tax regulations and practices of each municipality;?Property general and administrative expense,which includes our property-lev

136、el general and administrative expenses,such as payroll and related costs,contract and professional fees,credit and collection expenses,employee recruitment,relocation and training expenses,travel expenses,and management fees.Additionally,this category includes general and administrative expense from

137、 BuyEfficient(subsequent to our purchase of the outside 50.0%equity interest in January 2011);?Corporate overhead expense,which includes our corporate-level expenses,such as payroll and related costs,amortization of deferred stock compensation,acquisition and due diligence costs,legal expenses,contr

138、act and professional fees,bad debt,relocation,entity level state franchise and minimum tax payments,travel expenses and office rent;?Depreciation and amortization expense,which includes depreciation on our hotel buildings,improvements,furniture,fixtures and equipment,along with amortization on our f

139、ranchise fees and certain intangibles.Additionally,this category includes depreciation and amortization related to both our corporate office and BuyEfficient s fixtures,equipment and intangibles(subsequent to our purchase of the outside 50.0%equity interest in January 2011);and?Impairment loss,which

140、 includes the charges we have recognized to reduce the carrying value of assets on our balance sheets to their fair value.S U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 3 0Other Revenue and Expense.Other revenue and expense consists of the following:?Equit

141、y in earnings of unconsolidated joint ventures,which includes our portion of earnings from our two joint ventures,BuyEfficient and Doubletree Guest Suites Times Square,prior to our acquisitions of the outside interests in both joint ventures in January 2011.Subsequent to these acquisitions,both enti

142、ties are now presented on a consolidated basis;?Interest and other income,which includes interest income we have earned on our restricted and unrestricted cash accounts and the Royal Palm note,as well as any gains or losses we have recognized on sales of assets other than hotels;?Interest expense,wh

143、ich includes interest expense incurred on our outstanding fixed and variable-rate debt,capital lease obligation,accretion of the Senior Notes,amortization of deferred financing fees,any write-offs of deferred financing fees,gains or losses on derivatives and any loan penalties and fees incurred on o

144、ur debt;?Loss on extinguishment of debt,which includes the loss we recognized on the repurchase and cancellation of the Senior Notes;?Gain on remeasurement of equity interests,which includes the gain we recognized to mark up the equity interests in our BuyEfficient and Doubletree Guest Suites Times

145、Square joint ventures to fair market value upon our purchases of the outside equity interests in these joint ventures,as well as our gain to mark up the mezzanine loan to its fair value in connection with the acquisition of the outside equity interest in the Doubletree Guest Suites Times Square join

146、t venture;?Income tax provision,which includes federal and state income taxes charged to the Company;?Income from consolidated joint venture attributable to non-controlling interest,which includes net income attributable to the outside 25.0%interest in the joint venture that owns the Hilton San Dieg

147、o Bayfront;?Distributions to non-controlling interest,which includes preferred dividends earned by investors from an entity that owns the Doubletree Guest Suites Times Square,including related administrative fees;?Preferred stock dividends and accretion,which includes dividends earned on our 8.0%Ser

148、ies A Cumulative Redeemable Preferred Stock(“Series A preferred stock”),Series C Cumulative Convertible Redeemable Preferred Stock(“Series C preferred stock”)and 8.0%Series D Cumulative Redeemable Preferred Stock(“Series D preferred stock”),as well as redemption value accretion on our Series C prefe

149、rred stock;and?Undistributed income allocated to unvested restricted stock compensation,which includes undistributed income allocated to unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents(whether paid or unpaid)pursuant to the two-class method

150、.Factors Affecting Our Operating Results.The primary factors affecting our operating results include overall demand for hotel rooms,the pace of new hotel development,or supply,and the relative performance of our operators in increasing revenue and controlling hotel operating expenses.?Demand.The dem

151、and for lodging generally fluctuates with the overall economy.In 2010,following a two-year cyclical trough,we began to see signs of improving demand trends,and Comparable Portfolio RevPAR increased 5.5%as compared to 2009,with a 230 basis point increase in portfolio occupancy.These improving demand

152、trends continued in 2011 and 2012.As a result,our Comparable Portfolio RevPAR increased 7.4%in 2011 as compared to 2010,and 5.6%in 2012 as compared to 2011.Comparable Portfolio occupancy increased 280 basis points in 2011 as compared to 2010,and increased an additional 280 basis points in 2012 as co

153、mpared to 2011.Consistent with prior trends,we anticipate that lodging demand will continue to improve as the U.S.economy continues to strengthen.Historically,cyclical troughs are followed by extended periods of relatively strong demand,resulting in a cyclical lodging growth phase.While growth is no

154、t expected to be uniform,we expect hotel demand to remain strong over the next several quarters if the U.S.economy continues to grow and employment levels improve.?Supply.The addition of new competitive hotels affects the ability of existing hotels to drive RevPAR and profits.The development of new

155、hotels is largely driven by construction costs and expected performance of existing hotels.The recession and credit crisis which occurred in 2008 and 2009,served to restrict credit and tighten lending standards,which resulted in a curtailment of funding for new hotel construction projects.Moreover,w

156、ith same-property hotel profitability still below peak levels and hotel trading values generally well below replacement cost,new supply in many markets is difficult to justify economically.Accordingly,we believe hotel development will be constrained until such time as the construction financing mark

157、ets recover,and operating trends and trading values of existing hotels improve to levels where developer return targets can be achieved.Given the one-to-three-year timeline needed to construct a typical hotel that would compete with our hotels,we expect a window of at least two to four years during

158、which aggregate U.S.hotel supply,as indicated by the number of new hotel openings,will be below historical levels.On a market-by-market basis,some markets may experience new hotel room openings at or greater than historic levels,including in New York City where there is currently a higher-than-avera

159、ge supply of new hotel room openings.In addition,lenders are seeking higher yielding instruments,which may lead to riskier lending practices,including lending on new hotel construction.?Revenues and expenses.We believe that marginal improvements in RevPAR index,even in the face of declining revenues

160、,are a good indicator of the relative quality and appeal of our hotels,and our operators effectiveness in maximizing revenues.Similarly,we also evaluate our operators effectiveness in minimizing incremental operating expenses in the context of increasing revenues or,conversely,in reducing operating

161、expenses in the context of declining revenues.With respect to improving RevPAR index,we continue to work with our hotel operators to optimize revenue management initiatives while taking into consideration market demand trends and the pricing strategies of competitor hotels in our markets.We also dev

162、elop capital investment programs designed to ensure each of our hotels is well renovated and positioned to appeal to groups and individual travelers fitting target guest profiles.Increased capital investment in our properties may lead to short-term revenue disruption and negatively impact RevPAR ind

163、ex.Our revenue management initiatives are generally oriented towards maximizing ADR even if the result may be lower S U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 3 1occupancy than may be achieved through lower ADR.Increases in RevPAR attributable to incre

164、ases in ADR may be accompanied by minimal additional expenses,while increases in RevPAR attributable to higher occupancy may result in higher variable expenses such as housekeeping,labor and utilities expense.Thus,increases in RevPAR associated with higher ADR may result in higher hotel EBITDA margi

165、ns.Increases in RevPAR associated with higher occupancy may result in more muted hotel EBITDA margin improvement.Our Comparable Portfolio RevPAR index was 110.7 in 2010,improving approximately 80 basis points in 2011 to 111.5.Our Comparable Portfolio RevPAR index,which was negatively impacted by sev

166、eral capital investment programs at our hotels,decreased 20 basis points in 2012 to 111.3.With respect to maximizing operating flow through,we continue to work with our operators to identify operational efficiencies designed to reduce expenses while minimally affecting guest experience.Key asset man

167、agement initiatives include optimizing hotel staffing levels,increasing the efficiency of the hotels,such as installing energy efficient management and inventory control systems,and selectively combining food and beverage outlets.Our operational efficiency initiatives may be difficult to implement,a

168、s most categories of variable operating expenses,such as utilities and housekeeping labor costs,fluctuate with changes in occupancy.Furthermore,our hotels operate with significant fixed costs,such as general and administrative expense,insurance,property taxes,and other expenses associated with ownin

169、g hotels,over which our operators have little control.We have experienced either currently or in the past,increases in hourly wages,employee benefits(especially health insurance),utility costs and property insurance,which have negatively affected our operating margins.Moreover,there are limits to ho

170、w far our operators can reduce expenses without affecting brand standards or the competitiveness of our hotels.Our Comparable Portfolio operating flow through was 33%in 2011 as compared to 2010,and 50%in 2012 as compared to 2011.Operating Results.The following table presents our operating results fo

171、r our total portfolio for 2012 and 2011,including the amount and percentage change in the results between the two periods.The table presents the results of operations included in the consolidated statements of operations,and includes the 26 hotels(11,632 rooms)as of December 31,2012 and 24 hotels(10

172、,857 rooms)as of December 31,2011,as well as discontinued operations for 8 hotels(2,342 rooms)as of December 31,2012 and 10 hotels(3,017 rooms)as of December 31,2011.These amounts can be found in our consolidated financial statements and related notes included elsewhere in this Annual Report.2012201

173、1Change$Change%(dollars in thousands,except statistical data)REVENUESRoom$576,146$501,183$74,96315.0%Food and beverage200,810175,10325,70714.7%Other operating52,12845,5086,62014.5%Total revenues829,084721,794107,29014.9%OPERATING EXPENSESHotel operating500,209443,80356,40612.7%Property general and a

174、dministrative94,64285,2939,34911.0%Corporate overhead24,31625,453(1,137)(4.5)%Depreciation and amortization130,907113,70817,19915.1%Impairment loss10,862(10,862)(100.0)%Total operating expenses750,074679,11970,95510.4%OPERATING INCOME79,01042,67536,33585.1%Equity in earnings of unconsolidated joint

175、ventures21(21)(100.0)%Interest and other income2973,115(2,818)(90.5)%Interest expense(76,821)(74,195)(2,626)(3.5)%Loss on extinguishment of debt(191)(191)(100.0)%Gain on remeasurement of equity interests69,230(69,230)(100.0)%Income before income taxes and discontinued operations2,29540,846(38,551)(9

176、4.4)%Income tax provision(1,148)(1,148)(100.0)%INCOME FROM CONTINUING OPERATIONS1,14740,846(39,699)(97.2)%Income from discontinued operations48,41040,4537,95719.7%NET INCOME49,55781,299(31,742)(39.0)%Income from consolidated joint venture attributable to non-controlling interest(1,761)(312)(1,449)(4

177、64.4)%Distributions to non-controlling interest(31)(30)(1)(3.3)%Preferred stock dividends(29,748)(27,321)(2,427)(8.9)%Undistributed income allocated to unvested restricted stock compensation(203)(636)43368.1%INCOME AVAILABLE TO COMMON STOCKHOLDERS$17,814$53,000$(35,186)(66.4)%S U N S T O N E H O T E

178、 L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 3 2The following table presents our operating results for our total portfolio for 2011 and 2010,including the amount and percentage change in the results between the two periods.The table presents the results of operations included

179、in the consolidated statements of operations,and includes continuing operations for 24 hotels(10,857 rooms)as of December 31,2011 and 21 hotels(8,705 rooms)as of December 31,2010,as well as discontinued operations for 10 hotels(3,017 rooms)as of December 31,2011 and 20 hotels(5,508 rooms)as of Decem

180、ber 31,2010.An additional 347 rooms are included in discontinued operations for the first six months of 2010 due to our disposal and subsequent reacquisition of the Renaissance Westchester in June 2010.These amounts can be found in our consolidated financial statements and related notes included els

181、ewhere in this Annual Report.20112010Change$Change%(dollars in thousands,except statistical data)REVENUESRoom$501,183$351,039$150,14442.8%Food and beverage175,103138,18836,91526.7%Other operating45,50826,37319,13572.6%Total revenues721,794515,600206,19440.0%OPERATING EXPENSESHotel operating443,80332

182、4,888118,91536.6%Property general and administrative85,29361,75323,54038.1%Corporate overhead25,45321,7513,70217.0%Depreciation and amortization113,70879,63334,07542.8%Impairment loss10,86210,862100.0%Total operating expenses679,119488,025191,09439.2%OPERATING INCOME42,67527,57515,10054.8%Equity in

183、earnings of unconsolidated joint ventures21555(534)(96.2)%Interest and other income3,1151123,0032,681.3%Interest expense(74,195)(58,931)(15,264)(25.9)%Gain on remeasurement of equity interests69,23069,230100.0%INCOME LOSS FROM CONTINUING OPERATIONS40,846(30,689)71,535233.1%Income from discontinued o

184、perations40,45369,231(28,778)(41.6)%NET INCOME81,29938,54242,757110.9%Income from consolidated joint venture attributable to non-controlling interest(312)(312)(100.0)%Distributions to non-controlling interest(30)(30)(100.0)%Preferred stock dividends and accretion(27,321)(20,652)(6,669)(32.3)%Undistr

185、ibuted income allocated to unvested restricted stock compensation(636)(102)(534)(523.5)%INCOME AVAILABLE TO COMMON STOCKHOLDERS$53,000$17,788$35,212198.0%Operating Statistics.Included in the following tables are comparisons of the key operating metrics for our 26 hotel Comparable Portfolio,which inc

186、ludes prior ownership results for the Hyatt Chicago Magnificent Mile,the Hilton Garden Inn Chicago Downtown/Magnificent Mile,the Doubletree Guest Suites Times Square,the JW Marriott New Orleans and the Hilton San Diego Bayfront,as well as operating results for the Renaissance Westchester during the

187、periods in 2010 while it was held in receivership.20122011ChangeOcc%ADRRevPAROcc%ADRRevPAROcc%ADRRevPAR79.2%$175.78$139.2276.4%$172.63$131.89280 bps1.8%5.6%20112010ChangeOcc%ADRRevPAROcc%ADRRevPAROcc%ADRRevPAR76.4%$172.63$131.8973.6%$166.84$122.79280 bps3.5%7.4%Non-GAAP Financial Measures.The follow

188、ing table reconciles net income to EBITDA and Adjusted EBITDA for our hotel portfolio for the years ended December 31,2012,2011 and 2010.We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating our operating performance because these measures help investors evaluate and compare th

189、e results of our operations from period to period by removing the impact of our capital structure(primarily interest expense)and our asset base(primarily depreciation and amortization)from our operating results.We also use EBITDA and Adjusted EBITDA as measures in determining the value of hotel acqu

190、isitions and disposi-tions.We caution investors that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by other companies,because not all companies calculate these non-GAAP measures in the same manner.EBITDA and Adj

191、usted EBITDA should not be considered as an alternative measure of our net income(loss),operating performance,cash flow or liquidity.EBITDA and Adjusted EBITDA may include funds that may not be available for our discretionary use S U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L

192、R E P O R T /P A G E 3 3to fund interest expense,capital expenditures or general corporate purposes.Although we believe that EBITDA and Adjusted EBITDA can enhance an investor s understanding of our results of operations,these non-GAAP financial measures,when viewed individually,are not necessarily

193、a better indicator of any trend as compared to GAAP measures such as net income(loss)or cash flow from operations.In addition,you should be aware that adverse economic and market conditions may harm our cash flow.201220112010(in thousands)Net income$49,557$81,299$38,542Operations held for investment

194、:Depreciation and amortization130,907113,70879,633Amortization of lease intangibles4,3193,979254Interest expense71,66467,31954,839Amortization of deferred financing fees3,6903,1381,457Write-off of deferred financing fees3211,462Loan penalties and fees177Non-cash interest related to discount on Senio

195、r Notes1,0581,062996Non-cash interest related to loss on derivatives4062,655Income tax provision1,148Non-controlling interests:Income from consolidated joint venture attributable to non-controlling interest(1,761)(312)Depreciation and amortization(5,685)(4,014)Interest expense(2,252)(1,562)Amortizat

196、ion of deferred financing fees(224)(160)Non-cash interest related to loss on derivative(1)(31)Unconsolidated joint ventures:Depreciation and amortization352Discontinued operations:Depreciation and amortization13,16416,18821,299Amortization of lease intangibles142827Interest expense6,2319,19119,257In

197、terest expensedefault rate7,955Amortization of deferred financing fees74104581Write-off of deferred financing fees18542123Loan penalties and fees1,155EBITDA272,497292,658227,809Operations held for investment:Amortization of deferred stock compensation3,4662,7453,942Non-cash straight-line lease expen

198、se2,7772,398944Capital lease obligation interestcash ground rent(819)(Gain)loss on sale of assets18(83)382Gain on remeasurement of equity interests(69,230)Loss on extinguishment of debt191Closing costscompleted acquisitions1,9653,403Due diligence costsabandoned project959Impairment loss10,862Lawsuit

199、 settlement costs,net1581,553Prior year property tax and CAM adjustments,net621Hotel laundry closing costs623Costs associated with CEO severance2,242Non-controlling interests:Non-cash straight-line lease expense(450)(354)Prior year property tax adjustments,net(202)Unconsolidated joint ventures:Amort

200、ization of deferred stock compensation232Discontinued operations:Gain on sale of assets,net(38,292)(14,912)Impairment loss1,4951,943Gain on extinguishment of debt(18,145)(86,235)Lawsuit settlement(reversal)costs(48)67Closing costscompleted acquisition6,796(29,992)(80,199)(68,995)Adjusted EBITDA$242,

201、505$212,459$158,814S U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 3 4Adjusted EBITDA was$242.5 million in 2012 as compared to$212.5 million in 2011 and$158.8 million in 2010.Adjusted EBITDA increased$30.0 million in 2012 as compared to 2011 due to addition

202、al earnings generated by the two hotels we acquired in 2012(the Hyatt Chicago Magnificent Mile and the Hilton Garden Inn Downtown/Magnificent Mile),and the three hotels we acquired or purchased interests in during 2011(the Doubletree Guest Suites Times Square,the JW Marriott New Orleans and the Hilt

203、on San Diego Bayfront),combined with increased earnings at our other hotels.Adjusted EBITDA increased$53.6 million in 2011 as compared to 2010 due to additional earnings generated by the three hotels we acquired or purchased interests in during 2011 and by the Renaissance Westchester,which we reacqu

204、ired from a court-appointed receiver in June 2010,combined with increased earnings at our other hotels.The following table reconciles net income to FFO and Adjusted FFO for our hotel portfolio for the years ended December 31,2012,2011 and 2010.We believe that the presentation of FFO and Adjusted FFO

205、 provides useful information to investors regarding our operating performance because they are measures of our operations without regard to specified non-cash items such as real estate depreciation and amortization,any real estate impairment loss,gain or loss on sale of assets and certain other item

206、s which we believe are not indicative of the performance of our underlying hotel properties.We believe that these items are more representative of our asset base and our acquisition and disposition activities than our ongoing operations.We also use FFO as one measure in determining our results after

207、 taking into account the impact of our capital structure.We caution investors that amounts presented in accordance with our definitions of FFO and Adjusted FFO may not be comparable to similar measures disclosed by other companies,because not all companies calculate these non-GAAP measures in the sa

208、me manner.FFO and Adjusted FFO should not be considered as an alternative measure of our net income(loss),operating performance,cash flow or liquidity.FFO and Adjusted FFO may include funds that may not be available for our discretionary use to fund interest expense,capital expenditures or general c

209、orporate purposes.Although we believe that FFO and Adjusted FFO can enhance an investor s understanding of our results of operations,these non-GAAP financial measures,when viewed individually,are not necessarily better indicators of any trend as compared to GAAP measures such as net income(loss)or c

210、ash flow from operations.In addition,you should be aware that adverse economic and market conditions may harm our cash flow.201220112010(in thousands)Net income$49,557$81,299$38,542Preferred stock dividends(29,748)(27,321)(20,652)Operations held for investment:Real estate depreciation and amortizati

211、on129,668112,53979,083Amortization of lease intangibles4,3193,979254(Gain)loss on sale of other assets18(83)382Non-controlling interests:Income from consolidated joint venture attributable to non-controlling interest(1,761)(312)Real estate depreciation and amortization(5,685)(4,014)Discontinued oper

212、ations:Real estate depreciation and amortization13,16416,18821,299Amortization of lease intangibles142827Real estate impairment loss1,943Gain on sale of assets,net(38,292)(14,912)FFO121,254167,391120,878Operations held for investment:Non-cash straight-line lease expense2,7772,398944Write-off of defe

213、rred financing fees3211,462Loan penalties and fees177Non-cash interest related to loss on derivatives4062,655Gain on remeasurement of equity interests(69,230)Loss on extinguishment of debt191Closing costscompleted acquisitions1,9653,403Due diligence costsabandoned project959Prior year property tax a

214、nd CAM adjustments,net621Hotel laundry closing costs623Impairment loss10,862Lawsuit settlement costs,net1581,553Income tax provision1,148Costs associated with CEO severance2,242Amortization of deferred stock compensation associated with CEO severance1,074Non-controlling interests:Non-cash straight-l

215、ine lease expense(450)(354)Non-cash interest related to loss on derivative(1)(31)Prior year property tax adjustments,net(202)(continued)S U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 3 5201220112010(in thousands)Discontinued operations:Write-off of deferre

216、d financing fees$185$42$123Interest expensedefault rate7,955Loan penalties and fees1,155Impairment loss1,495Gain on extinguishment of debt(18,145)(86,235)Lawsuit settlement(reversal)costs(48)67Closing costscompleted acquisition6,7967,376(65,264)(63,348)Adjusted FFO$128,630$102,127$57,530Adjusted FFO

217、 was$128.6 million in 2012 as compared to$102.1 million in 2011 and$57.5 million in 2010.Adjusted FFO increased$26.5 million in 2012 as compared to 2011 due to additional earnings generated by the two hotels we acquired in 2012(the Hyatt Chicago Magnificent Mile and the Hilton Garden Inn Downtown/Ma

218、gnificent Mile),and the three hotels we acquired or purchased interests in during 2011(the Doubletree Guest Suites Times Square,the JW Marriott New Orleans and the Hilton San Diego Bayfront),combined with increased earnings at our other hotels.Adjusted EBITDA increased$44.6 million in 2011 as compar

219、ed to 2010 due to additional earnings generated by the three hotels we acquired or purchased interests in during 2011 and by the Renaissance Westchester,which we reacquired from a court-appointed receiver in June 2010,combined with increased earnings at our other hotels.Room revenue.Room revenue inc

220、reased$75.0 million,or 15.0%,for the year ended December 31,2012 as compared to the year ended December 31,2011.We acquired the Hyatt Chicago Magnificent Mile in June 2012 and the Hilton Garden Inn Downtown/Magnificent Mile in July 2012.In addition,we acquired the outside 62.0%equity interests in th

221、e Doubletree Guest Suites Times Square in January 2011(resulting in our 100%ownership of the hotel)and the JW Marriott New Orleans in February 2011.We also purchased a 75.0%majority interest in the joint venture that owns the Hilton San Diego Bayfront in April 2011.These five recently acquired hotel

222、s(the“five recently acquired hotels”)contributed additional room revenue of$57.4 million during the year ended December 31,2012.Room revenue in our five recently acquired hotels was negatively impacted in 2012 by Hurricane Sandy,which caused a loss in room revenue of approximately$0.3 million.Room r

223、evenue generated by the 21 hotels we owned prior to January 1,2011(our“existing portfolio”)increased$17.6 million during 2012 as compared to 2011 due to an increase in occupancy($14.8 million)combined with an increase in ADR ($2.8 million).The increase in occupancy was driven by an additional 22,641

224、 group room nights sold combined with an additional 72,391 transient room nights sold.Room revenue in our existing portfolio was impacted during 2012 by major room renovations at both the Renaissance Washington DC and the Hyatt Regency Newport Beach.The major room renovation at the Renaissance Washi

225、ngton DC caused 13,656 room nights to be out of service during the last six months of 2012,displacing approximately$2.9 million in room revenue based on the hotel achieving a potential 72.7%occupancy rate and RevPAR of$148.24 without the renovation.The major room renovation at the Hyatt Regency Newp

226、ort Beach caused 4,333 room nights to be out of service during the last two months of 2012,displacing approximately$0.5 million in room revenue based on the hotel achieving a potential 85.0%occupancy rate and RevPAR of$110.96 without the renovation.Room revenue in our existing portfolio was also neg

227、atively impacted in 2012 by Hurricane Sandy,which caused a loss in room revenue of approximately$1.4 million.Room revenue increased$150.1 million,or 42.8%,for the year ended December 31,2011 as compared to the year ended December 31,2010.We acquired the outside 62.0%equity interests in the Doubletre

228、e Guest Suites Times Square in January 2011(resulting in our 100%ownership of the hotel)and the JW Marriott New Orleans in February 2011.We also purchased a 75.0%majority interest in the joint venture that owns the Hilton San Diego Bayfront in April 2011,and reacquired possession and control of the

229、Renaissance Westchester in June 2010 from a court-appointed receiver.These three hotels acquired in 2011(the“three hotels acquired in 2011”)and the Renaissance Westchester contributed additional room revenue of$127.1 million.Room revenue generated by the 20 hotels we acquired prior to January 1,2010

230、(our“2011 existing portfolio”)increased$23.0 million in 2011 as compared to 2010 due to an increase in occupancy($13.4 million)combined with an increase in ADR($9.6 million).The increase in occupancy was driven by an additional 28,089 group room nights sold combined with an additional 57,518 transie

231、nt room nights sold.Room revenue at some of our northeast hotels was negatively impacted in 2011 by Hurricane Irene,which caused a loss in room revenue of approximately$0.9 million.Food and beverage revenue.Food and beverage revenue increased$25.7 million,or 14.7%,for the year ended December 31,2012

232、 as compared to the year ended December 31,2011.Our five recently acquired hotels contributed an additional$17.5 million to food and beverage revenue during 2012.Food and beverage revenue in our existing portfolio increased$8.2 million during 2012 as compared to 2011,primarily due to increased occup

233、ancy and group room nights in our hotels,which drove revenue growth in both outlets and banquets.In addition,outlet and banquet revenue increased during 2012 as compared to 2011 as many outlets and meeting spaces were under renovation during 2011.Food and beverage revenue in our existing portfolio w

234、as negatively impacted by a major room renovation at the Renaissance Washington DC,which caused 13,656 room nights to be out of service during the last six months of 2012,decreasing revenue in both outlets and banquets.Food and beverage revenue in our existing portfolio was also negatively impacted

235、in 2012 by Hurricane Sandy,which caused a loss in food and beverage revenue of approximately$0.8 million.S U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 3 6Food and beverage revenue increased$36.9 million,or 26.7%,for the year ended December 31,2011 as comp

236、ared to the year ended December 31,2010.The three hotels acquired in 2011 and the Renaissance Westchester contributed an additional$38.2 million.Food and beverage revenue in our 2011 existing portfolio decreased$1.3 million during 2011 as compared to 2010.This decrease is primarily due to a reductio

237、n in business at one of our Houston,Texas hotels with a customer who was operating under a contract with the United States government.In addition,our 2011 existing portfolio lost approximately$0.1 million during 2011 due to Hurricane Irene.Banquet revenue also decreased in our 2011 existing portfoli

238、o during 2011 as compared to 2010 as a few of our larger group-oriented hotels experienced higher traffic from transient demand than from group demand.These decreases were slightly offset by an increase in food and beverage revenue generated by our outlets due to increased transient occupancy at sev

239、eral of our hotels,as well as to increased volume from local businesses and residents at several of our recently renovated restaurants and lounges.Other operating revenue.Other operating revenue increased$6.6 million,or 14.5%,for the year ended December 31,2012 as compared to the year ended December

240、 31,2011.Our five recently acquired hotels contributed an additional$4.8 million to other operating revenue during 2012.In addition,other operating revenue increased$0.3 million in 2012 as compared to 2011 due to the consolidation of BuyEfficient with our operations due to the purchase of the outsid

241、e 50.0%equity interest in the joint venture in January 2011.Previously,our 50.0%portion of BuyEfficient s net income was included in equity in earnings of unconsolidated joint ventures.BuyEfficient contributed an additional$0.3 million in other operating revenue during 2012 as compared to 2011 due t

242、o increased transaction and development fees.In addition,other operating revenue in our existing portfolio increased$1.2 million during 2012 as compared to 2011,due to increased cancellation,attrition,parking,spa and lease rent revenue at our hotels,partially offset by decreased telephone revenue.Ot

243、her operating revenue increased$19.1 million,or 72.6%,for the year ended December 31,2011 as compared to the year ended December 31,2010.The three hotels acquired in 2011 and the Renaissance Westchester contributed an additional$12.8 million to other operating revenue during 2011.Other operating rev

244、enue also increased$5.4 million in 2011 as compared to 2010 due to the consolidation of BuyEfficient with our operations due to the purchase of the outside 50.0%equity interest in the joint venture in January 2011.Previously,our 50.0%portion of BuyEfficient s net income was included in equity in ear

245、nings of unconsolidated joint ventures.Other operating revenue in our 2011 existing portfolio increased$0.9 million in 2011 as compared to 2010,as increased parking and lease rent revenue was slightly offset by decreased telephone,cancellation,attrition,guest movies,lift ticket,spa and retail revenu

246、e.Hotel operating expenses.Hotel operating expenses increased$56.4 million,or 12.7%,during the year ended December 31,2012 as compared to the year ended December 31,2011.Our five recently acquired hotels contributed an additional$45.0 million to hotel operating expenses during 2012.Hotel operating e

247、xpenses in our existing portfolio increased$11.4 million during 2012 as compared to 2011.This increase in hotel operating expenses is primarily related to the corresponding increases in room,food and beverage,parking and spa revenue.In addition,hotel operating expenses in our existing portfolio incr

248、eased during 2012 as compared to 2011 due to increases in the following expenses:advertising and repairs and maintenance as the hotels increased spending due to the improved economy;franchise fees and assessments due to the increased revenue;property and liability insurance due to increased premiums

249、;and ground lease due to increased contingent rent resulting from the increased revenue at several of our hotels.These increases were partially offset by decreases in the following expenses:utilities due to reduced consumption and lower rates at many of our hotels during 2012;real estate property ta

250、xes due to lower assessments received at several of our hotels;and common area maintenance charges due to a settlement received at one of our hotels.Hotel operating expenses increased$118.9 million,or 36.6%,for the year ended December 31,2011 as compared to the year ended December 31,2010.The three

251、hotels acquired in 2011 and the Renaissance Westchester contributed an additional$109.3 million to hotel operating expenses during 2011.Hotel operating expenses in our 2011 existing portfolio increased$9.6 million during 2011 as compared to 2010.This increase in hotel operating expenses is primarily

252、 related to increased room expense,corresponding to the increased room revenue.In addition,hotel operating expenses in our 2011 existing portfolio increased in 2011 as compared to 2010 due to increases in the following expenses:advertising and repairs and maintenance as the hotels increased spending

253、 due to the improved economy;franchise fees and assessments due to the increased revenue;and property taxes due to increased assessments.In addition,hotel operating expenses increased in our 2011 existing portfolio during 2011 as compared to 2010 due to increased food and beverage expense,as many of

254、 our outlets which were under renovation during 2011 continued to incur labor expenses,including training on new menus and restaurant concepts,along with pre-opening costs.These increases were partially offset by decreased utilities due to reductions in gas rates and usage at several of our hotels a

255、nd by decreased property and liability insurance due to an actuarial adjustment.Property general and administrative expense.Property general and administrative expense increased$9.3 million,or 11.0%,during the year ended December 31,2012 as compared to the year ended December 31,2011.Our five recent

256、ly acquired hotels contributed an additional$7.1 million to property general and administrative expense during 2012.In addition,property general and administrative expense increased$0.2 million in 2012 as compared to 2011 due to the consolidation of BuyEfficient with our operations due to the purcha

257、se of the outside 50.0%equity interest in the joint venture in January 2011.Previously,our 50.0%portion of BuyEfficient s net income was included in equity in earnings of unconsolidated joint ventures.BuyEfficient contributed an additional$0.4 million in property general and administrative expense d

258、uring 2012 as compared to 2011 due to the corresponding increase in revenue.Property general and administrative expense in our existing portfolio increased$1.6 million during 2012 as compared to 2011,primarily due to increased payroll and related costs,management fees,and credit and collection expen

259、ses due to the increase in revenue,combined with increased computer hardware/software costs,employee relocation,recruitment and training,partially offset by decreased contract and professional fees.S U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 3 7Property

260、 general and administrative expense increased$23.5 million,or 38.1%,for the year ended December 31,2011 as compared to the year ended December 31,2010.The three hotels acquired in 2011 and the Renaissance Westchester contributed an additional$16.8 million to hotel operating expenses during 2011.Prop

261、erty general and administrative expense also increased$3.7 million in 2011 as compared to 2010 due to the consolidation of BuyEfficient with our operations due to the purchase of the outside 50.0%equity interest in the joint venture in January 2011.Property general and administrative expense in our

262、2011 existing portfolio increased$3.0 million during the year ended December 31,2011 as compared to the year ended December 31,2010,primarily due to increased payroll,management fees and credit and collection expenses due to the increase in revenue,combined with increased legal expenses,travel,train

263、ing and sales tax audit expense,partially offset by decreased contract and professional fees,employee recruitment expenses and computer hardware/software costs.Corporate overhead expense.Corporate overhead expense decreased$1.1 million,or 4.5%,during the year ended December 31,2012 as compared to th

264、e year ended December 31,2011,primarily due to decreased legal costs combined with decreased acquisition and due diligence costs.Legal costs decreased$1.5 million in 2012 as compared to 2011 primarily due to our accrual in 2011 of$1.6 million for settlement costs related to litigation involving thre

265、e separate claims by certain employees at three of the 26 hotels.As of December 31,2012,we have reached court-approved settlements on all three claims.Regarding acquisition and due diligence costs,during 2012 we incurred due diligence costs of$2.0 million related to our completed acquisitions,and an

266、 additional$0.9 million related to in-process or abandoned projects.During 2011 we incurred due diligence costs of$3.4 million related to our completed acquisitions,and an additional$0.3 million related to in-process or abandoned projects.Corporate overhead expense also decreased during 2012 as comp

267、ared to 2011 due to a$1.0 million decrease in entity-level state franchise and minimum tax expense and a$0.2 million decrease in relocation expenses.These decreases were partially offset by a$1.0 million increase in payroll and related costs,a$0.5 million increase in amortization of deferred stock c

268、ompensation,a$0.5 million increase in contract and professional fees,a$0.1 million increase in donations expense,a$0.1 million increase in employee relations,and a$0.2 million increase in bad debt expense.Bad debt expense increased in 2012 as compared to 2011 due to our reserving the entire$0.2 mill

269、ion outstanding balance of a subordinate note secured by a boutique hotel known as the Twelve Atlantic Station in Atlanta,Georgia,as the note is currently in default.We are currently working with the borrower and the special servicer to bring the note current,at which time we may reverse the bad deb

270、t expense we recorded in 2012.Corporate overhead expense increased$3.7 million,or 17.0%,during the year ended December 31,2011 as compared to the year ended December 31,2010,primarily due to increases of$0.4 million related to payroll and related costs,$0.3 million related to contract and profession

271、al fees,$0.2 million related to relocation,$0.2 million related to travel,$0.1 million related to bad debt,$1.5 million related to legal expenses and$2.4 million related to due diligence costs.In September 2011,we accrued$1.6 million in settlement costs related to litigation involving three separate

272、 claims by certain employees at three of the 24 hotels included in continuing operations.As of December 31,2012,we have reached court-approved settlements on all three claims.During 2011 we incurred due diligence costs of$3.4 million related to our completed acquisitions,and an additional$0.3 millio

273、n related to in-process or abandoned projects.During 2010,we incurred due diligence costs of$1.3 million related to in-process or abandoned projects.These increases in corporate overhead expense in 2011 as compared to 2010 were partially offset by decreases of$1.1 million related to deferred stock c

274、ompensation,$0.1 million related to corporate office rent and maintenance,and$0.2 million related to sales tax audit expenses.Depreciation and amortization expense.Depreciation and amortization increased$17.2 million,or 15.1%,for the year ended December 31,2012 as compared to the year ended December

275、 31,2011.Our five recently acquired hotels contributed an additional$15.2 million to depreciation and amortization expense during 2012.Depreciation and amortization expense in our existing portfolio increased$2.0 million during 2012 as compared to 2011 due to additional depreciation recognized on ho

276、tel renovations and purchases of furniture,fixtures and equipment(“FF&E”)for our hotel properties.Depreciation and amortization expense increased$34.1 million,or 42.8%,for the year ended December 31,2011 as compared to the year ended December 31,2010.The three hotels acquired in 2011 and the Renaiss

277、ance Westchester contributed an additional$31.0 million to depreciation and amortization expense during 2011.Depreciation and amortization in our 2011 existing portfolio increased$3.1 million during 2011 as compared to 2010 due to additional depreciation recognized on hotel renovations and purchases

278、 of FF&E for our hotel properties.Impairment loss.Impairment loss totaled zero for the year ended December 31,2012,$10.9 million for the year ended December 31,2011,and zero for the year ended December 31,2010.During 2011,we recognized an impairment loss of$10.9 million on our Royal Palm note due to

279、 its sale in October 2011.Equity in earnings of unconsolidated joint ventures.Equity in earnings of unconsolidated joint ventures totaled zero for the year ended December 31,2012,$21,000 for the year ended December 31,2011,and$0.6 million for the year ended December 31,2010.In January 2011,we acquir

280、ed 100%interests in both the Doubletree Guest Suites Times Square and BuyEfficient joint ventures.Post-acquisition,therefore,we present both of these investments on a consolidated basis.Prior to our January 14,2011 acquisition date,we did not recognize any earnings on our Doubletree Guest Suites Tim

281、es Square joint venture during either 2011 or 2010 because the joint venture had cumulative losses in excess of our investment,and we reduced our interest in this partnership to zero at December 31,2009.The excess cumulative losses resulted primarily from the hotel s fourth quarter 2009 impairment c

282、harge.Prior to our purchase of the outside 50.0%equity interest in the BuyEfficient joint venture on January 21,2011,we recognized income of$21,000 in 2011 and$0.6 million in 2010 on our BuyEfficient joint venture.S U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A

283、 G E 3 8Interest and other income.Interest and other income totaled$0.3 million for the year ended December 31,2012,$3.1 million for the year ended December 31,2011 and$0.1 million for the year ended December 31,2010.In 2012,we recognized$0.2 million in interest income,and$0.1 million in other misce

284、llaneous income.In 2011,we recognized$2.9 million in interest income,including$2.7 million related to the Royal Palm note.We sold this Royal Palm note in October 2011 for net proceeds of approximately$79.2 million.In anticipation of this sale,we recorded an impairment loss of$10.9 million in Septemb

285、er 2011.In addition,during 2011,we recognized income of$0.1 million on sales and dispositions of surplus FF&E located in several of our hotels and$0.1 million in other miscellaneous income.In 2010,we recognized$0.3 million in interest income and$0.1 million in other miscellaneous income,partially of

286、fset by a loss of$0.3 million on sales and dispositions of surplus FF&E located in several of our hotels and in our corporate office.Interest expense.Interest expense is as follows(in thousands):Year Ended December 31,2012Year Ended December 31,2011Year Ended December 31,2010Interest expense$71,664$

287、67,319$54,839Loss on derivatives4062,655Accretion of Senior Notes1,0581,062996Amortization of deferred financing fees3,6903,1381,457Write-off of deferred financing fees3211,462Loan penalties and fees177$76,821$74,195$58,931Interest expense increased$2.6 million,or 3.5%,during the year ended December

288、 31,2012 as compared to the year ended December 31,2011.Interest expense incurred on our debt and capital lease obligations increased$4.3 million during 2012 as compared to 2011 primarily due to increased loan balances as we assumed$270.0 million of non-recourse senior mortgage and mezzanine debt in

289、 connection with our acquisition of the outside 62.0%equity interests in our Doubletree Guest Suites Times Square joint venture in January 2011(which loan we refinanced in October 2011 with a new$180.0 million non-recourse loan),and a$42.2 million loan in connection with our acquisition of the JW Ma

290、rriott New Orleans.Our loan balances also increased due to a$240.0 million loan entered into by our Hilton San Diego Bayfront joint venture in April 2011.These increases in our loan balances were partially offset by our repayment in April 2012 of a$32.2 million loan secured by the Renaissance Long B

291、each.Interest expense on our debt obligations also increased due to increases in the variable interest rates on our non-recourse loans secured by the Doubletree Guest Suites Times Square and Hilton San Diego Bayfront.Interest expense on our capital lease obligation also increased during 2012 as comp

292、ared to 2011 due to our acquisition of the Hyatt Chicago Magnificent Mile,which included the assumption of a building lease that we determined should be accounted for as a capital lease.In addition,interest expense increased during 2012 as compared to 2011 due to a$0.5 million increase in amortizati

293、on of deferred financing fees related to additional fees paid in 2011 in association with our Doubletree Guest Suites Times Square,JW Marriott New Orleans and Hilton San Diego Bayfront acquisitions,as well as to fees incurred on our refinancing of the Doubletree Guest Suites Times Square and to amen

294、d our line of credit.These increases were partially offset during 2012 as compared to 2011 by a$2.2 million decrease in interest expense related to our interest rate cap and swap agreements due to a$1.8 million reduction in loss on our interest rate swap agreement combined with a$0.4 million decreas

295、e in losses on our interest rate cap agreements.Interest expense increased$15.3 million,or 25.9%,during the year ended December 31,2011 as compared to the year ended December 31,2010.Mortgage interest expense increased$12.5 million during 2011 as compared to 2010 due to increased loan balances as we

296、 assumed$270.0 million of non-recourse senior mortgage and mezzanine debt in connection with our acquisition of the outside 62.0%equity interests in our Doubletree Guest Suites Times Square joint venture in January 2011(which loan we refinanced in October 2011 with a new$180.0 million non-recourse m

297、ortgage),and a$42.2 million loan in connection with our acquisition of the JW Marriott New Orleans in February 2011.Our loan balances also increased during 2011 as compared to 2010 due to a$240.0 million loan entered into by our Hilton San Diego Bayfront joint venture in April 2011.In addition,inter

298、est expense increased$2.7 million during 2011 as compared to 2010 related to losses recognized on interest rate cap agreements on the Doubletree Guest Suites Times Square and Hilton San Diego Bayfront loans,combined with a loss on an interest rate swap agreement on the JW Marriott New Orleans loan.I

299、nterest expense also increased during 2011 as compared to 2010 due to a$1.7 million increase in amortization of deferred financing fees related to additional fees paid in association with our Doubletree Guest Suites Times Square,JW Marriott New Orleans and Hilton San Diego Bayfront acquisitions,as w

300、ell as to fees incurred on our line of credit and on our refinancing of the Doubletree Guest Suites Times Square in October 2011 and the Hilton Times Square in November 2010.Accretion of Senior Notes also caused interest expense to increase by$0.1 million in 2011 as compared to 2010.These increases

301、were partially offset by additional interest expenses incurred in 2010 related to the termination of our credit facility in February 2010 and to our refinancing of the Hilton Times Square in November 2010,which caused an additional$0.2 million in penalties and fees during 2010.In addition,interest e

302、xpense for 2011 decreased as compared to 2010 as we incurred$1.5 million in 2010 related to the write-off of deferred financing fees in conjunction with the termination of our credit facility in February 2010.Our weighted average interest rate per annum on debt included in our continuing operations,

303、including our variable-rate debt obligations,was approximately 4.9%at December 31,2012,5.0%at December 31,2011 and 5.5%at December 31,2010.At December 31,2012,approximately 69.6%of the outstanding notes payable included in our continuing operations had fixed interest rates.At December 31,2011,S U N

304、S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 3 9approximately 70.5%of the outstanding notes payable included in our continuing operations had fixed interest rates.At December 31,2010,all of the outstanding notes payable included in our continuing operations ha

305、d fixed interest rates.Loss on extinguishment of debt.Loss on extinguishment of debt totaled$0.2 million for the year ended December 31,2012,and zero for both the years ended December 31,2011 and 2010.During 2012,we recognized a loss of$0.2 million due to the repurchase and cancellation of$4.5 milli

306、on in aggregate principal amount of the Senior Notes.Gain on remeasurement of equity interests.Gain on remeasurement of equity interests totaled zero for the year ended December 31,2012,$69.2 million for the year ended December 31,2011,and zero for the year ended December 31,2010.In January 2011,we

307、purchased the outside interests in both our Doubletree Guest Suites Times Square joint venture and our BuyEfficient joint venture,and became the sole owner of both entities.Previously,our investment in the Doubletree Guest Suites Times Square joint venture consisted of a 38.0%equity interest in the

308、hotel and a$30.0 million,8.5%mezzanine loan maturing in January 2017 secured by the equity interests in the hotel.During the fourth quarter of 2009,the Doubletree Guest Suites Times Square recorded an impairment loss,effectively reducing our investment in the partnership to zero as of December 31,20

309、09.In conjunction with the acquisition of the outside 62.0%equity interests in the Doubletree Guest Suites Times Square in January 2011,we adjusted both our investment in the Doubletree Guest Suites Times Square joint venture and the mezzanine loan to their fair market values,and recorded gains tota

310、ling$60.5 million on the remeasurement.In addition,in conjunction with the acquisition of the outside 50.0%equity interest in the BuyEfficient joint venture in January 2011,we adjusted our investment up to its fair market value,and recorded a gain of$8.7 million on the remeasurement.Income tax provi

311、sion.Income tax provision totaled$1.1 million for the year ended December 31,2012,and zero for both the years ended December 31,2011 and 2010.During 2012,our use of net operating loss carryforwards resulted in federal and state income tax expense totaling$1.1 million.Income from discontinued operati

312、ons.As described under“Investing ActivitiesDispositions”and in accordance with the Property,Plant and Equipment Topic of the FASB ASC,income from discontinued operations included the results of operations,along with any gains on extinguishment of debt,gains or losses on sales and impairments recogni

313、zed for the following properties:Properties:Rooms:Disposition Date:2012:Kahler Grand(1)660Held for sale as of December 31,2012Kahler Inn&Suites271Held for sale as of December 31,2012Marriott Rochester(1)202Held for sale as of December 31,2012Residence Inn by Marriott Rochester89Held for sale as of D

314、ecember 31,2012Textile Care Services RochesterHeld for sale as of December 31,2012Doubletree Guest Suites Minneapolis229September 2012Hilton Del Mar257September 2012Marriott Troy350September 2012Office building adjacent to the Marriott TroySeptember 2012Marriott Del Mar284August 20122011:Valley Rive

315、r Inn257October 2011Textile Care Services Salt Lake CityJuly 2011Royal Palm Miami Beach409April 201120102:Courtyard by Marriott,San Diego(Old Town)176November 2010Hilton Huntington302November 2010Holiday Inn Downtown San Diego220November 2010Holiday Inn Express,San Diego(Old Town)125November 2010Mar

316、riott Provo330November 2010Marriott Salt Lake City(University Park)218November 2010Renaissance Atlanta Concourse387November 2010Residence Inn by Marriott Manhattan Beach176November 2010Marriott Ontario Airport299August 2010W Hotel San Diego258July 2010Renaissance Westchester(3)347June 2010Total room

317、s5,846(1)During 2011,the Company subtracted eight rooms from the Kahler Grand and one room from the Marriott Rochester,bringing the hotel room counts to 660 and 202,respectively.(2)Hotels deeded back to the lenders,or sold by the receiver,pursuant to our 2009 secured debt restructuring program.(3)Ho

318、tel reacquired by the Company in June 2010.S U N S T O N E H O T E L I N V E S T O R S,I N C.2 0 1 2 A N N U A L R E P O R T /P A G E 4 0Income from discontinued operations for the year ended December 31,2012 includes activity for the four hotels and one office building sold during 2012 and the four

319、 hotels and one commercial laundry facility classified as held for sale as of December 31,2012 due to their sale in January 2013.Income from discontinued operations for the year ended December 31,2011 includes activity for the four hotels and one office building sold during 2012,the four hotels and

320、one commercial laundry facility classified as held for sale as of December 31,2012 and the two hotels and one commercial laundry facility sold in 2011.Income from discontinued operations for the year ended December 31,2010 includes activity for the four hotels and one office building sold during 201

321、2,the four hotels and one commercial laundry facility held for sale as of December 31,2012,the two hotels and one commercial laundry facility sold in 2011,and the 11 hotels disposed of during 2010 pursuant to our 2009 secured debt restructuring program.Income from discontinued operations for the yea

322、rs ended December 31,2012,2011 and 2010 is as follows(in thousands):Year Ended December 31,2012Year Ended December 31,2011Year Ended December 31,2010Operating revenues$100,861$130,997$198,595Operating expenses(71,089)(96,581)(163,286)Interest expense(6,490)(9,337)(29,071)Depreciation and amortizatio

323、n expense(13,164)(16,188)(21,299)Impairment loss(1,495)(1,943)Gain on extinguishment of debt18,14586,235Gain on sale of hotels and other assets,net38,29214,912Income from discontinued operations$48,410$40,453$69,231Income from consolidated joint venture attributable to non-controlling interest.Incom

324、e from consolidated joint venture attributable to non-controlling interest totaled$1.8 million for the year ended December 31,2012,$0.3 million for the year ended December 31,2011,and zero for the year ended December 31,2010.In April 2011 we purchased a 75.0%majority interest in the entity that owns

325、 the Hilton San Diego Bayfront.Consistent with the Presentation Topic of the FASB ASC,our net income for the years ended December 31,2012 and 2011 includes 100%of the net income generated during our ownership period by the entity that owns the Hilton San Diego Bayfront.The outside 25.0%interest in t

326、he entity that owns the Hilton San Diego Bayfront earned net income of$1.8 million and$0.3 million for the years ended December 31,2012 and 2011,respectively.Distributions to non-controlling interest.Distributions to non-controlling interest totaled$31,000 for the year ended December 31,2012,$30,000

327、 for the year ended December 31,2011,and zero for the year ended December 31,2010.We purchased the outside 62.0%common stock equity interest in our Doubletree Guest Suites Times Square joint venture in January 2011,and,as a result,we became the sole common stockholder of the captive REIT that owns t

328、he hotel.Preferred dividends earned by investors from the entity that owns the Doubletree Guest Suites Times Square,net of related administrative fees totaled$31,000 and$30,000 for the years ended December 31,2012 and 2011,respectively.Preferred stock dividends and accretion.Preferred stock dividend

329、s and accretion totaled$29.7 million for the year ended December 31,2012,$27.3 million for the year ended December 31,2011,and$20.7 million for the year ended December 31,2010.In April 2011,we issued 4,600,000 shares of Series D preferred stock,causing us to incur an additional$2.4 million in divide

330、nds during 2012 as compared to 2011,and an additional$6.8 million in dividends during 2011 as compared to 2010.This increase in 2011 was slightly offset by a reduction in preferred stock accretion due to the initial carrying value of our Series C preferred stock being fully accreted to its redemptio

331、n value during the third quarter of 2010.Undistributed income allocated to unvested restricted stock compensation.In accordance with the Earnings Per Share Topic of the FASB ASC,unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents(whether paid

332、or unpaid)are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method.As such,undistributed income of$0.2 million for 2012,$0.6 million for 2011 and$0.1 million for 2010 were allocated to the participating securities.INVESTING ACTIVITI

333、ESAcquisitions.We believe we are in the first half of a potentially prolonged cyclical lodging industry recovery.Accordingly,we further believe that hotels acquired over the next several quarters are likely to benefit from a multi-year recovery in hotel profitability,and may create long-term value in excess of our investment hurdles.During 2010,2011 and 2012,we made several selective acquisitions.