SHO
Sunstone Hotel Investors, Inc.
$11.06
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Moderate
·
Conviction
Undervalued
Trading 27.3% below fair value
You pay
$11.06
Bear
$12.59
Fair
$15.22
Bull
$17.86
Bear
$12.59
+13.8%
$0.85 FFO × 18x
Fair
$15.22
+37.6%
$0.85 FFO × 22x
Bull
$17.86
+61.4%
$0.85 FFO × 26x
Adjust Assumptions
22.1x
$
Key Value Driver
FFO/share ($0.85) × default P/FFO multiple
Implied Market Multiple
13.0x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (28 analysts)
$13.00
Divergence from AlphaVal
17%
Summary
At $0.85 FFO/share with a 22x default REIT multiple, the base-case value is $15.22 per share. Dividend yield: 3.3%. DDM cross-check: $6.71.
Warnings
Standard profit figures are misleading for real estate companies — large non-cash accounting charges make profits look artificially low. Dividend yield and funds from operations are better measures.
Dividend-based valuation: $6.71 (56% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Key Risks
- P/E and EV/EBITDA are structurally wrong for REITs — use P/FFO and NAV
- Interest rate sensitivity: REIT multiples compress when rates rise
- FFO approximation (NI + D&A) may include gains on property sales — verify