(By Balaseshan) Sunstone Hotel Investors Inc. (NYSE:SHO
), a real estate investment trust (REIT), said it has priced its public follow-on offering of 11 million shares of its common stock at $10.45 per share, a 2.2% discount to Tuesday's closing stock price.
The underwriter will be granted a 30-day option to purchase up to an additional 1.65 million shares of common stock. Citigroup is serving as the sole book-running manager for the offering.
The company expects gross proceeds from the offering of $114.95 million ($132.193 million if the underwriter's option is exercised in full).
The company will contribute the net proceeds that it receives from this offering to Sunstone Hotel Partnership, LLC, its subsidiary (Operating Partnership) in exchange for additional membership units in the Operating Partnership.
The Operating Partnership will subsequently use the net proceeds from this offering to acquire the Hilton Garden Inn Chicago Downtown/Magnificent Mile, for potential future acquisitions and for other general corporate purposes, including working capital and capital investment in the company's portfolio, including the renovation of the Hyatt Chicago Magnificent Mile hotel.
To maintain its qualification as a REIT, the company plans to make distributions to its stockholders of at least 90% of REIT taxable income, which excludes net capital gains and does not necessarily equal net income as calculated in accordance with generally accepted accounting principles.
Sunstone's distributions may entail cash, or a combination of cash and stock as permitted by the Internal Revenue Code of 1986, as amended.
SHO is trading down 1.50% at $10.52 on Wednesday. The stock has been trading between $4.79 and $11.14 for the past 52 weeks.