Business Context and Reporting Period
This Form 8-K Current Report was filed by Sunstone Hotel Investors, Inc. on April 6, 2011, covering events occurring on April 1, 2011, and April 6, 2011. The filing details the issuance of a new series of preferred stock and corresponding preferred units in the Company's Operating Partnership.
Key Financial Metrics and Capital Structure
- Security Issued: 4,000,000 shares of 8.0% Series D Cumulative Redeemable Preferred Stock.
- Liquidation Preference: $25.00 per share.
- Dividend Rate: 8.00% per annum ($2.00 per share annually), payable quarterly in arrears starting July 15, 2011.
- Over-Allotment Option: Underwriters were granted an option to purchase up to 600,000 additional shares.
- Capital Structure: The Series D Preferred Stock ranks senior to Common Stock and on parity with Series A and Series C Preferred Stock.
Note: This filing does not provide specific revenue, profit, cash flow, or total debt figures for the Company.
Material Changes
The primary material change is the expansion of the Company's capital structure through the issuance of the Series D Preferred Stock. Concurrently, the Company amended the Limited Liability Company Agreement of its wholly-owned subsidiary, Sunstone Hotel Partnership, LLC, to create a corresponding series of preferred units (Series D Preferred Units) mirroring the rights of the stock. Proceeds from the offering were contributed to the Operating Partnership in exchange for these units.
Terms, Rights, and Contingencies
- Redemption: Generally not redeemable by the Company before April 6, 2016.
- Change of Control Conversion: Upon a "Change of Control" (defined as acquisition of >50% voting power and delisting from major exchanges), holders may convert shares into Common Stock. The conversion ratio is the lesser of the liquidation preference plus accrued dividends divided by the Common Share Price, or a "Share Cap" of 4.9068 shares per preferred share.
- Underwriters: J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Wells Fargo Securities, LLC acted as representatives.
Investor Verification Checklist
- Verify the total gross proceeds raised from the 4,000,000 shares issued and any exercise of the 600,000 share over-allotment option.
- Confirm the specific use of proceeds as detailed in the accompanying prospectus supplement (Form S-3).
- Review the Articles Supplementary (Exhibit 3.1) for detailed covenants and adjustment mechanisms regarding the Share Cap.
- Assess the impact of the new 8.0% dividend obligation on the Company's future cash flow and liquidity.