Sunstone Hotel Investors, Inc. (NYSE:SHO) Q2 2019 Earnings Conference Call August 2, 2019 12:00 PM ET Company Participants Aaron Reyes - VP, Corporate Finance & Treasurer John Arabia - President, CEO & Director Bryan Giglia - EVP & CFO Marc Hoffman - EVP & COO Robert Springer - EVP & CIO Conference Call Participants Anthony Powell - Barclays Bank Michael Bellisario - Robert W. Baird & Co. Chris Woronka - Deutsche Bank Bennett Rose - Citigroup Richard Hightower - Evercore ISI David Katz - Jefferies Stephen G ...

Sunstone Hotel Investors, Inc. (NYSE:SHO) Q1 2019 Results Conference Call May 7, 2019 12:00 PM ET Company Participants Aaron Reyes - VP, Corporate Finance John Arabia - President and CEO Bryan Giglia - CFO Robert Springer - CIO Marc Hoffman - COO Conference Call Participants Lukas Hartwich - Green Street Advisors Jeff Donnelly - Wells Fargo Anthony Powell - Barclays Smedes Rose - Citi Chris Woronka - Deutsche Bank Dany Asad - Bank of America Michael Bellisario - Baird Operator Good morning, ladies and gentl ...

Financial Data and Key Metrics Changes - In 2018, the company achieved better than expected operating results and earnings, with RevPAR and comparable property level revenues for 21 hotels increasing by 5.6% in Q4, and full year RevPAR growth at 2.8% [22][23] - Adjusted EBITDA and adjusted FFO per diluted share exceeded the high end of guidance for both Q4 and the full year [24] - The company ended 2018 with over $680 million in total adjusted unrestricted cash and a $500 million undrawn revolving credit facility [37] Business Line Data and Key Metrics Changes - The company sold six non-core hotels for a total of $353 million, improving portfolio quality and providing financial flexibility [11][13] - Comparable hotel EBITDA growth increased by 7% in Q4 and by 2% for the full year, despite cost pressures in wages, benefits, and property taxes [23][25] - The company completed over $150 million in capital improvements across its portfolio, enhancing long-term earnings prospects [16] Market Data and Key Metrics Changes - The company expects modest growth in portfolio RevPAR and total hotel revenues in 2019, with specific markets like Boston, Chicago, and Washington, D.C. facing headwinds [28][30] - The group pace for 2019 was up nearly 1%, with 76% of group rooms already booked [30] Company Strategy and Development Direction - The company aims to concentrate its portfolio on long-term relevant real estate, with plans to methodically dispose of non-core assets while seeking strategic acquisitions [10][35] - The management is cautious about current pricing expectations for high-quality assets, indicating a preference for patience in investment decisions [32][34] Management's Comments on Operating Environment and Future Outlook - The management anticipates continued cost pressures in wages and benefits, making it challenging to maintain hotel EBITDA margins [27] - The company expects to see strong performance in markets like San Francisco and Wailea, while facing challenges in others [28][30] Other Important Information - The company declared a $0.05 per common share dividend for Q1 2019, with an annual dividend yield of approximately 4.8% for 2018 [43][44] - The company invested over $4 million in environmental and sustainability projects in 2018, with plans for further investments in 2019 [20][21] Q&A Session Summary Question: Can you provide specifics on the assumptions made in the 2019 budget regarding payroll costs and RevPAR growth? - The company expects salary and wages to increase by 3% to 5%, with benefits slightly higher, and anticipates strong performance in Q1 driven by San Francisco [48][49] Question: What drove the stronger performance in San Francisco? - The first quarter is expected to be particularly strong due to group bookings and a favorable market environment [51] Question: Can you elaborate on the wage adjustments made in 2018? - Wage adjustments were broad-based, driven by market conditions and the need to retain quality staff, with increases of about 4% to 5% in 2018 [60][64] Question: How has the government shutdown impacted the company? - The company experienced several hundred thousand dollars in revenue loss due to the shutdown, which has been factored into the Q1 guidance [112] Question: What is the company's view on buybacks in the current cycle? - The management sees buybacks as an important capital allocation tool and is considering it as part of their strategy [76] Question: How does the company view its position for potential M&A? - The company believes it is well-positioned for M&A opportunities, but any acquisition must align with its strategic objectives [127][128]