Lodging real estate investment trust (REIT) Sunstone Hotel Investors has finalised the sale of a Hilton hotel on St Charles Avenue in New Orleans, US.

Transaction for the 252-room property closed at a gross sale price of $47m, equating to approximately $187,000 per key.

This sale price is reflective of a 10.1× multiple on the hotel's projected 2024 adjusted earnings before interest, taxes, depreciation and amortisation for real estate (EBITDAre) and an 8.7% capitalisation rate based on the 2024 net operating income.

Sunstone Hotel anticipates that to maintain the hotel's competitive edge and preserve its current earnings level, a “cyclical renovation” will be necessary.

The gross sale price, including the expected near-term capital expenditures, equates to a 13.4× multiple on the adjusted EBITDAre and a 6.6% cap rate on the net operating income for 2024.

Further details on the sale's impact on Sunstone's 2025 outlook will be disclosed in the second quarter earnings release.

Sunstone Hotel Investors CEO Bryan Giglia said: "We are pleased to announce the disposition of the Hilton New Orleans St Charles.

“We were able to divest the hotel at attractive pricing, eliminate near-term defensive capital expenditures and recycle the proceeds into a higher-yielding investment through the repurchase of our stock at a compelling discount.”

In preparation for the hotel's sale, Sunstone capitalised on favourable market conditions to reinvest the proceeds through additional share repurchases.

As of 6 June, the company has acquired 6.8 million shares of its common stock at an average price of $8.84 per share, amounting to a total of $60m before expenses.

Since early 2022, Sunstone has invested $252m to repurchase 25.8 million shares, which is around 12% of the shares outstanding at the beginning of that period, at an average price of $9.77 per share.

The repurchase activity has resulted in an accretive capital allocation and substantial value creation for the shareholders, as indicated by the implied cash flow multiple and discount to net asset value (NAV).

Giglia added: “New Orleans remains an attractive lodging market for group events and leisure travel, and we will continue to benefit from exposure to the city through our ownership of the well-located JW Marriott.

“While we maintain the capacity to grow the portfolio and are evaluating hotel investment opportunities, the value we can realise through the repurchase of our stock near current levels will generally represent a more accretive allocation of capital for our shareholders."