Acquires the Hyatt Regency San Antonio Riverwalk Increases Quarterly Dividend ALISO VIEJO, Calif., May 6, 2024 /PRNewswire/ -- Sunstone Hotel Investors, Inc. (the "Company" or "Sunstone") (NYSE:SHO) today announced results for the first quarter ended March 31, 2024. First Quarter 2024 Operational Results (as compared to First Quarter 2023): Net Income: Net income was $13.0 million as compared to $21.1 million. Comparable RevPAR: Comparable RevPAR decreased 5.1% to $223.06. The average daily rate was $325.16 and occupancy was 68.6%. Excluding The Confidante Miami Beach as it transitions to Andaz Miami Beach, RevPAR decreased 0.7%. Adjusted EBITDAre: Adjusted EBITDAre decreased 9.2% to $54.5 million. Adjusted FFO: Adjusted FFO attributable to common stockholders per diluted share decreased 14.3% to $0.18. Information regarding the non-GAAP financial measures disclosed in this release is provided below in "Non-GAAP Financial Measures." Reconciliations of non-GAAP financial measures to the most comparable GAAP measure for each of the periods presented are included later in this release. Bryan A. Giglia, Chief Executive Officer, stated, "We are pleased with our portfolio's performance during the first quarter, despite it being the most challenging quarterly comparison of the year relative to 2023, which benefited from highly compressed demand in the early part of the year. We expect our performance for the remainder of the year to accelerate, benefiting from a strong base of group business, and so we have reaffirmed the midpoint of our prior earnings guidance, as adjusted for our recent transaction activity. Following the end of the quarter, we announced the acquisition of the Hyatt Regency San Antonio Riverwalk, successfully redeploying a portion of the proceeds from the sale of Boston Park Plaza and providing an additional layer of earnings growth in addition to the successful performance of the recently rebranded The Westin Washington, DC Downtown, the expected growth from the rebranding of the Marriott Long Beach Downtown at the end of the first quarter and the expected completion of the transformation of Andaz Miami Beach at the end of the year. Our balanced approach to capital allocation is expected to provide meaningful growth into 2025 and beyond." Mr. Giglia continued, "Our Board of Directors has elected to increase our quarterly cash dividend, reflecting the incremental earnings from our recent acquisition and our intention to better calibrate the base quarterly distributions with our expected full-year taxable income. Together with the increase in our dividend from last year, our base quarterly dividend is now 80% higher than it was a year ago and is consistent with our strategy of returning incremental capital to stockholders." Unaudited Selected Statistical and Financial Data ($ in millions, except RevPAR, ADR and per share amounts) Quarter Ended March 31, 2024 2023 Change Net Income $ 13.0 $ 21.1 (38.2) % Income Attributable to Common Stockholders per Diluted Share $ 0.05 $ 0.08 (37.5) % Comparable Operating Statistics (1) RevPAR $ 223.06 $ 234.93 (5.1) % Occupancy 68.6 % 70.5 % (190) bps Average Daily Rate $ 325.16 $ 333.24 (2.4) % Comparable Operating Statistics, excluding The Confidante Miami Beach RevPAR $ 229.16 $ 230.81 (0.7) % Occupancy 70.1 % 69.7 % 40 bps Average Daily Rate $ 326.90 $ 331.15 (1.3) % Comparable Adjusted EBITDAre Margin, excluding The Confidante Miami Beach 24.6 % 27.9 % (330) bps Adjusted EBITDAre $ 54.5 $ 60.0 (9.2) % Adjusted FFO Attributable to Common Stockholders $ 37.5 $ 43.8 (14.4) % Adjusted FFO Attributable to Common Stockholders per Diluted Share $ 0.18 $ 0.21 (14.3) % (1) Comparable operating statistics presented in this release include all 14 hotels owned by the Company at March 31, 2024.   Recent Developments Hyatt Regency San Antonio Riverwalk Acquisition: In April 2024, the Company completed the previously announced acquisition of the 630-room Hyatt Regency San Antonio Riverwalk for a contractual purchase price of $230.0 million. The recently renovated, well-located hotel is situated directly between San Antonio's famous Riverwalk and the Alamo and with easy access to the convention center. Affiliates of Hyatt Hotels Corporation will continue to manage the hotel and will contribute $8.0 million of key money as part of the transaction, subject to certain terms and conditions. Inclusive of the incentives offered by Hyatt, the net purchase price implies a value of $352,000 per key and represents an 11.1x multiple and an 8.0% capitalization rate based on the midpoint of the Company's projected full year 2024 earnings for the hotel. The acquisition was funded from available cash and reflects the accretive redeployment of a portion of the proceeds received from the Company's sale of the Boston Park Plaza in October 2023. Andaz Miami Beach Conversion: The Confidante Miami Beach suspended its operations on March 25, 2024 to allow for extensive renovation work to be performed. The Company expects the resort to resume operations as Andaz Miami Beach in the fourth quarter of 2024 and that the renovated resort will contribute to meaningful earnings growth beginning in the first quarter of 2025. Marriott Long Beach Downtown Conversion: In March 2024, the Company converted the Renaissance Long Beach to the Marriott Long Beach Downtown in connection with a renovation of the hotel. The Company expects the renovation work to be completed in the second quarter with the hotel expected to generate incremental revenue and earnings in the second half of 2024. Balance Sheet and Liquidity Update As of March 31, 2024, the Company had $471.0 million of cash and cash equivalents, including restricted cash of $70.3 million, total assets of $3.1 billion, including $2.6 billion of net investments in hotel properties, total debt of $818.5 million and stockholders' equity of $2.2 billion. Following the acquisition of the Hyatt Regency San Antonio Riverwalk, the Company's pro forma cash and cash equivalents including restricted cash would be $241.0 million. Capital Investments Update During the first quarter of 2024, the Company invested $27.7 million into its portfolio. The majority of the investment consisted of the conversions of The Confidante Miami Beach to Andaz Miami Beach and the Renaissance Long Beach to the Marriott Long Beach Downtown. The Company currently expects to invest approximately $135 million to $155 million into its portfolio in 2024, with the majority of the investment relating to the conversions of Andaz Miami Beach and the Marriott Long Beach Downtown and a soft goods renovation at Wailea Beach Resort. The Company anticipates that it will incur approximately $13 million to $15 million of EBITDAre displacement in 2024 in connection with its planned capital investments. 2024 Outlook For the full year 2024, the Company expects: Metric ($ in millions, except per share data) PriorFull Year 2024Guidance (1) Adjustments (2) Adjusted PriorFull Year 2024Guidance Current Full Year 2024 Guidance (3) Change inFull Year 2024Guidance Midpoint Net Income $46  to  $71 + $4 $50  to  $75 $56  to  $77 + $4 Total Portfolio RevPAR Growth (4)  + 2.5% to + 5.5% -  0.25 %  + 2.25% to + 5.25%  + 2.25% to + 5.25% 0.0 % Total Portfolio RevPAR Growth, excluding The Confidante Miami Beach (4) + 5.0% to + 8.0% -  0.25 % + 4.75% to + 7.75% + 4.75% to + 7.75% 0.0 % Adjusted EBITDAre $230  to  $255 + $10 $240  to  $265 $242  to  $263 $0 Adjusted FFO Attributable to Common Stockholders $159  to  $184 + $10 $169  to  $194 $171  to  $192 $0 Adjusted FFO Attributable to Common Stockholders per Diluted Share $0.78  to  $0.90 + $0.05 $0.83  to  $0.95 $0.84  to  $0.94 $0 Diluted Weighted Average Shares Outstanding 204,500,000 — 204,500,000 204,500,000 — (1) Reflects guidance presented on February 23, 2024. (2) Includes adjustments to reflect the impact of the recently completed acquisition of the Hyatt Regency San Antonio Riverwalk. (3) Detailed reconciliations of Net Income to non-GAAP financial measures are provided later in this release. (4) RevPAR Growth reflects comparison to full year 2023. Full year 2024 guidance is based in part on the following full year assumptions: Full year total Adjusted EBITDAre displacement of approximately $13 million to $15 million in connection with planned capital investments. Full year interest income of approximately $10 million to $11 million. Full year corporate overhead expense (excluding deferred stock amortization) of approximately $21 million to $22 million. Full year interest expense of approximately $50 million to $53 million, including approximately $3 million in amortization of deferred financing costs and $2 million of noncash reduction to interest expense from derivatives. Full year preferred stock dividends of approximately $15 million to $16 million, which includes the Series G, H and I cumulative redeemable preferred stock. The Confidante Miami Beach is expected to reopen as Andaz Miami Beach in the fourth quarter of 2024 and the Company currently anticipates that the resort will generate an EBITDAre loss of approximately $3 million to $5 million, excluding pre-opening and certain capitalized costs, in 2024 as the comprehensive transformation is completed. Dividend Update The Company's Board of Directors has declared a cash dividend of $0.09 per share of its common stock, an increase of $0.02 per share, or 29%, as compared to the Company's prior quarterly dividend. Together with the dividend increase declared in the third quarter of 2023, the Company's quarterly base dividend is now 80% higher than it was one year ago and better reflects the taxable income expected to be generated by the portfolio. The Company's Board of Directors also declared cash dividends of $0.375 per share payable to its Series G cumulative redeemable preferred stockholder, $0.382813 per share payable to its Series H cumulative redeemable preferred stockholders and $0.356250 per share payable to its Series I cumulative redeemable preferred stockholders. The dividends will be paid on July 15, 2024 to stockholders of record as of June 28, 2024. The Company currently expects to continue to pay a quarterly cash common dividend throughout 2024. Consistent with the Company's past practice, and to the extent that the expected regular quarterly dividends for 2024 do not satisfy its annual distribution requirements, the Company may pay an additional dividend amount in January 2025. The level of any future quarterly dividends will be determined by the Company's board of directors after considering long-term operating projections, expected capital requirements and risks affecting the Company's business. Supplemental Disclosures Contemporaneous with this release, the Company has furnished a Form 8-K with unaudited financial information. This additional information is being provided as a supplement to the information in this release and other filings with the SEC. The Company has no obligation to update any of the information provided to conform to actual results or changes in the Company's portfolio, capital structure or future expectations. Earnings Call The Company will host a conference call to discuss first quarter results on May 6, 2024, at 12:00 p.m. Eastern Time (9:00 a.m. Pacific Time). A live webcast of the call will be available via the Investor Relations section of the Company's website at www.sunstonehotels.com. Alternatively, interested parties may dial 1-800-715-9871 and reference conference ID 1026321 to listen to the live call. A replay of the webcast will also be archived on the website. About Sunstone Hotel Investors, Inc. Sunstone Hotel Investors, Inc. is a lodging real estate investment trust ("REIT") that as of the date of this release owns 15 hotels comprised of 7,307 rooms, the majority of which are operated under nationally recognized brands. Sunstone's strategy is to create long-term stakeholder value through the acquisition, active ownership, and disposition of well-located hotel and resort real estate. For further information, please visit Sunstone's website at www.sunstonehotels.com. The Company's website is provided as a reference only and any information on the website is not incorporated by reference in this release. Forward-Looking Statements This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "will" and other similar terms and phrases, including opinions, references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: we own upper upscale and luxury hotels located in urban and resort destinations in an industry that is highly competitive; events beyond our control, including economic slowdowns or recessions, pandemics, natural disasters, civil unrest and terrorism; inflation adversely affecting our financial condition and results of operations; system security risks, data protection breaches, cyber-attacks and systems integration issues, including those impacting the Company's suppliers, hotel managers or franchisors; a significant portion of our hotels are geographically concentrated so we may be disproportionately harmed by economic conditions, competition, new hotel supply, real and personal property tax rates or natural disasters in these areas of the country; we face possible risks associated with the physical and transitional effects of climate change; uninsured or underinsured losses could harm our financial condition; the operating results of some of our hotels are significantly reliant upon group and transient business generated by large corporate customers, and the loss of such customers for any reason could harm our operating results; the increased use of virtual meetings and other similar technologies could lessen the need for business-related travel, and, therefore, demand for rooms in our hotels may be adversely affected; our hotels require ongoing capital investment and we may incur significant capital expenditures in connection with acquisitions, repositionings and other improvements, some of which are mandated by applicable laws or regulations or agreements with third parties, and the costs of such renovations, repositionings or improvements may exceed our expectations or cause other problems; delays in the acquisition, renovation or repositioning of hotel properties may have adverse effects on our results of operations and returns to our stockholders; accounting for the acquisition of a hotel property or other entity involves assumptions and estimations to determine fair value that could differ materially from the actual results achieved in future periods; volatility in the debt and equity markets may adversely affect our ability to acquire, renovate, refinance or sell our hotels; we may pursue joint venture investments that could be adversely affected by our lack of sole decision-making authority, our reliance on a co-venturer's financial condition and disputes between us and our co-venturer; we may be subject to unknown or contingent liabilities related to recently sold or acquired hotels, as well as hotels we may sell or acquire in the future; we may seek to acquire a portfolio of hotels or a company, which could present more risks to our business and financial results than the acquisition of a single hotel; the sale of a hotel or portfolio of hotels is typically subject to contingencies, risks and uncertainties, any of which may cause us to be unsuccessful in completing the disposition; the illiquidity of real estate investments and the lack of alternative uses of hotel properties could significantly limit our ability to respond to adverse changes in the performance of our hotels; we may issue or invest in hotel loans, including subordinated or mezzanine loans, which could involve greater risks of loss than senior loans secured by income-producing real properties; if we make or invest in mortgage loans with the intent of gaining ownership of the hotel secured by or pledged to the loan, our ability to perfect an ownership interest in the hotel is subject to the sponsor's willingness to forfeit the property in lieu of the debt; one of our hotels is subject to a ground lease with an unaffiliated party, the termination of which by the lessor for any reason, including due to our default on the lease, could cause us to lose the ability to operate the hotel altogether and may adversely affect our results of operations; because we are a REIT, we depend on third-parties to operate our hotels; we are subject to risks associated with our operators' employment of hotel personnel; most of our hotels operate under a brand owned by Marriott, Hyatt, Hilton, Four Seasons or Montage, and should any of these brands experience a negative event, or receive negative publicity, our operating results may be harmed; our franchisors and brand managers may adopt new policies or change existing policies which could result in increased costs that could negatively impact our hotels; future adverse litigation judgments or settlements resulting from legal proceedings could have an adverse effect on our financial condition; claims by persons regarding our properties could affect the attractiveness of our hotels or cause us to incur additional expenses; the hotel business is seasonal and seasonal variations in business volume at our hotels will cause quarterly fluctuations in our revenue and operating results; changes in the debt and equity markets may adversely affect the value of our hotels; certain of our hotels have in the past become impaired and additional hotels may become impaired in the future; laws and governmental regulations may restrict the ways in which we use our hotel properties and increase the cost of compliance with such regulations, and noncompliance with such regulations could subject us to penalties, loss of value of our properties or civil damages; corporate responsibility, specifically related to environmental sustainability, social responsibility and corporate governance, or ...