Group 1 - The article discusses a shift in investment strategy towards REIT preferred stocks due to improved spread conditions, making them more attractive for investment [1] - The investment group "Trade With Beta" offers services including frequent picks for mispriced preferred stocks and baby bonds, weekly reviews of over 1200 equities, IPO previews, and hedging strategies [1] - The analyst has disclosed a beneficial long position in specific preferred shares, indicating a personal investment interest in the discussed stocks [1]

Core Viewpoint - Sunstone Hotel Investors, Inc. will report its financial results for the first quarter of 2025 on May 6, 2025, before the market opens [1] Company Information - Sunstone Hotel Investors, Inc. is a lodging real estate investment trust (REIT) focused on creating long-term stakeholder value through the acquisition, active ownership, and disposition of well-located hotel and resort real estate [3]

Core Insights - Sunstone Hotel Investors (NYSE: SHO) is being evaluated for a credit score as it currently lacks one [1] Group 1 - The article discusses the features of the investment service Trade With Beta, which includes frequent picks for mispriced preferred stocks and baby bonds, weekly reviews of over 1200 equities, IPO previews, hedging strategies, and an actively managed portfolio [1] - The investing group is led by Denislav, who emphasizes the importance of active investor engagement and discussion within the community [1] - The article indicates that the author has a beneficial long position in SHO shares, either through stock ownership, options, or other derivatives [1]

Financial Data and Key Metrics Changes - The portfolio finished 2024 strong with full-year adjusted EBITDA at $230 million and adjusted FFO per diluted share at $0.80, both at the high end of guidance [33][36] - The company expects total portfolio RevPAR growth to range from 7% to 10% in 2025, with adjusted EBITDAre projected between $245 million to $270 million and adjusted FFO per diluted share between $0.86 to $0.98 [36][37] Business Line Data and Key Metrics Changes - Group business performed well, with the Westin Washington D.C. Downtown achieving 30% RevPAR growth driven by an 18% increase in group room nights [16] - The recently acquired Hyatt Regency San Antonio Riverwalk saw group room nights grow nearly 7% in the quarter, with an 18% increase in banquet contribution [17] Market Data and Key Metrics Changes - Urban markets showed strength, with New Orleans hotels experiencing a 23% increase in group room nights, resulting in nearly 20% combined RevPAR growth [18] - Boston hotels reported a 39% increase in group room nights, focusing on filling open patterns and driving occupancy [19] Company Strategy and Development Direction - The company is focused on three strategic objectives: recycling capital, investing in the portfolio, and returning capital to shareholders [8] - In 2024, nearly $100 million was returned to shareholders through dividends and share repurchases, with a disciplined approach to capital allocation expected to continue in 2025 [14][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2025, citing a compelling setup for total revenue growth and higher margins compared to the previous year [22] - The company anticipates continued strength in group business and a gradual recovery in leisure demand, particularly in markets like Maui [47][75] Other Important Information - The company invested $157 million into its portfolio in 2024, with ongoing renovations expected to enhance earnings [27][30] - The company maintains significant liquidity, with nearly $700 million in total liquidity and no debt maturities until 2026 [34][35] Q&A Session Summary Question: Underlying demand segment assumptions within the 7% to 10% RevPAR guide - Management expects solid group performance pacing above 10%, with continued strength in business transient and slight improvement in certain markets [46] Question: Pace of wages and benefits increase in 2024 and expectations for 2025 - Wages and benefits increased in the mid-fours in 2024, with expectations to be closer to the higher end of the 4% to 6% range in 2025 due to collective bargaining agreements [54] Question: Andaz EBITDA ramp expectations for 2026 - The ramp for Andaz is expected to start at around 20% in March, potentially doubling EBITDA in 2026 as occupancy increases [60] Question: Update on Napa assets and operational improvements - Good EBITDA growth was reported at Napa hotels, with a focus on optimizing group mix and cost management [66] Question: Recovery in Maui and guidance range - Solid group demand is expected, with a slight lift in leisure anticipated in the second half of the year [75] Question: Total expense growth baked into guidance - Total expense growth is expected in the range of 4% to 4.5%, with higher increases on the wage side [108]

Sunstone Hotel Investors, Inc. (NYSE:SHO) Q4 2024 Earnings Conference Call February 21, 2025 1:00 PM ET Company Participants Aaron Reyes - CFO Bryan Giglia - CEO Robert Springer - President and Chief Investment Officer Conference Call Participants Duane Pfennigwerth - Evercore ISI Smedes Rose - Citi Dori Kesten - Wells Fargo Michael Bellisario - Baird Chris Darling - Green Street Chris Woronka - Deutsche Bank Floris van Dijkum - Compass Point Patrick Scholes - Truist Securities Operator Good morning, ladies ...

Group 1 - The article discusses investment opportunities in Sunstone Hotel, identified as one of the safest Hotel REITs [1] - It emphasizes the importance of evaluating all possible investment avenues in a company's assets [1] - The article invites active investors to join a free trial and engage in discussions with experienced traders [1] Group 2 - There is a mention of potential future investment actions, including the possibility of initiating a long position in specific stock options [1]

Financial Position - The company had total cash of $180.3 million, including $73.1 million of restricted cash, and access to an undrawn $500.0 million credit facility[24]. - As of December 31, 2024, the company had $845.0 million of outstanding debt, with maturities scheduled over the next four years: $0 in 2025, $390.0 million in 2026, $175.0 million in 2027, and $280.0 million in 2028[148]. - The company anticipates that internally generated cash will only be adequate to repay a portion of its indebtedness prior to maturity, necessitating refinancing or additional debt[153]. - The company has no limitations on the amount of debt it can incur, which may lead to high leverage and reduced cash available for capital investments[154]. - The company may incur additional debt for future real estate acquisitions, which could include loans secured by some or all of the hotels acquired or existing unencumbered hotels[149]. Revenue and Performance - Revenue distribution for the Comparable Portfolio in 2024 was 24.9%, 27.5%, 24.7%, and 22.9% for the first, second, third, and fourth quarters, respectively[29]. - A significant portion of hotel revenue relies on large corporate customers, and loss of these clients could adversely affect results[69]. - The hotel business is seasonal, leading to quarterly fluctuations in revenue and operating results[71]. - The company relies heavily on group and transient business from large corporate customers, and the loss of such customers could adversely impact operating results[94]. - The increased use of virtual meetings may continue to reduce demand for business-related travel, affecting hotel occupancy rates[95]. Management and Strategy - The company aims to maintain appropriate leverage and financial flexibility to create value throughout all phases of the operating and financial cycles[26]. - The company focuses on disciplined capital recycling and may selectively sell hotels that no longer fit its strategy or have reached the end of their investment lifecycle[21]. - The company has a seasoned management team overseeing core disciplines such as asset management, acquisitions, finance, and legal[24]. - The company operates under long-term management agreements with third-party managers, including subsidiaries of Marriott and Hyatt[17]. - The company has engaged independent contractors to manage hotels leased from the TRS Lessee, ensuring that all transactions are conducted on an arm's-length basis[42]. Corporate Responsibility and Sustainability - The company is committed to corporate responsibility, focusing on environmental sustainability, social responsibility, and corporate governance, with initiatives aimed at reducing energy, water, and waste impacts[52]. - The company has set new environmental sustainability targets for 2035, which include reducing greenhouse gas emissions through various initiatives such as LED lighting retrofits and solar power installations[53]. - The company’s board of directors oversees the corporate responsibility strategy, recognizing its importance for operations and returns[52]. - The company’s hotels may face increased operating costs due to new regulations related to climate change and sustainability[88]. Risks and Challenges - Inflation has been affecting the company's expenses, including increased costs for wages, food, and utilities, which may lead to expenses rising faster than revenue[58]. - Economic slowdowns, pandemics, and natural disasters may negatively impact hotel performance[76]. - The company faces risks from system security breaches and cyber-attacks that could disrupt operations and harm revenue[80]. - The reliance on third-party operators for hotel management exposes the company to operational risks[71]. - The company may encounter unknown or contingent liabilities related to recently sold or acquired hotels, potentially impacting operating results and cash flows[106]. Market and Stock Performance - The common stock price fluctuated between $9.46 and $12.38 during 2024, indicating significant market volatility[174]. - The company reinstated its quarterly cash dividends in Q3 2022 after a suspension in 2020, with dividends of $0.05 in January and April 2023, and $0.07 in October 2023[176]. - The company’s market value is influenced by its owned real estate, capital structure, and cash distributions, which may affect stock prices if expectations are not met[180]. - The company’s charter limits stock ownership to 9.8% to maintain REIT status, potentially hindering third-party control acquisitions[182]. - The board of directors has authorized a stock repurchase program of up to $500 million, which may impact stock prices and cash reserves[181]. Cybersecurity - The cybersecurity risk management program is informed by ISO 27000, ISO 27001, and NIST CSF frameworks[197]. - The management team is responsible for assessing and managing material risks from cybersecurity threats, with over 20 years of experience in IT infrastructure[203]. - The audit committee oversees the implementation of the cybersecurity risk management program and receives quarterly reports from management[200]. - The company utilizes external service providers to assist with security controls and conducts cybersecurity awareness training for employees[204]. - The company has cyber insurance policies to mitigate potential costs from security breaches, but coverage may not be sufficient for all losses[84].

Core Insights - Sunstone Hotel Investors (SHO) reported a revenue of $214.77 million for the quarter ended December 2024, which is a 2% decrease compared to the same period last year [1] - The earnings per share (EPS) for the quarter was $0.16, down from $0.60 in the year-ago quarter, but exceeded the consensus estimate of $0.14, resulting in a surprise of +14.29% [1] - The reported revenue surpassed the Zacks Consensus Estimate of $205.65 million, indicating a surprise of +4.44% [1] Financial Performance Metrics - Comparable Average Daily Rate (ADR) was $304.85, slightly below the two-analyst average estimate of $305.31 [4] - Comparable Occupancy rate was 65.3%, exceeding the two-analyst average estimate of 64.7% [4] - The number of hotels operated was 15, compared to the average estimate of 16 by two analysts [4] - The total number of rooms was 7,253, slightly below the two-analyst average estimate of 7,255 [4] - Comparable Revenue Per Available Room (RevPAR) was $199.07, above the estimated $197.35 by two analysts [4] - Room revenue was reported at $133.19 million, exceeding the average estimate of $126.66 million by four analysts, representing a year-over-year increase of +4.8% [4] - Other operating revenues were $21.93 million, surpassing the average estimate of $16.66 million based on three analysts, reflecting a year-over-year change of +10.9% [4] - Food and beverage revenues were $59.65 million, above the three-analyst average estimate of $56.34 million, but showed a year-over-year decline of -2.7% [4] - The diluted net earnings per share was -$0.02, compared to the average estimate of -$0.03 based on four analysts [4] Stock Performance - Over the past month, shares of Sunstone Hotel have returned -3.4%, while the Zacks S&P 500 composite has increased by +2.2% [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Core Viewpoint - Sunstone Hotel Investors reported quarterly funds from operations (FFO) of $0.16 per share, exceeding the Zacks Consensus Estimate of $0.14 per share, but down from $0.19 per share a year ago, indicating a 15.79% year-over-year decline in FFO [1][2] Financial Performance - The company achieved revenues of $214.77 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 4.44%, although this represents a decrease from $219.23 million in the same quarter last year [2] - Over the last four quarters, Sunstone Hotel has exceeded consensus FFO estimates three times and has also topped consensus revenue estimates three times [2] Stock Performance and Outlook - Sunstone Hotel shares have declined approximately 4.6% since the beginning of the year, contrasting with the S&P 500's gain of 4% [3] - The current consensus FFO estimate for the upcoming quarter is $0.22 on revenues of $240.75 million, and for the current fiscal year, it is $0.97 on revenues of $980.97 million [7] Industry Context - The REIT and Equity Trust - Other industry, to which Sunstone Hotel belongs, is currently ranked in the bottom 36% of over 250 Zacks industries, suggesting potential challenges for stock performance [8]

Financial Performance - Total revenues for Q4 2024 were $214.77 million, a decrease of 5.5% compared to Q3 2024's $226.39 million[24] - Comparable Hotel Adjusted EBITDAre for Q4 2024 was $49.95 million, down 11.4% from Q3 2024's $56.43 million[24] - Net income for the year ended December 31, 2024, was $46.43 million, reflecting a decrease from $46.85 million in the previous year[24] - Comparable Adjusted FFO attributable to common stockholders for Q4 2024 was $32.02 million, a decline of 13.5% from Q3 2024's $36.85 million[24] - Room revenues for Q4 2024 were $133.19 million, a decrease of 4.5% from Q3 2024's $138.76 million[24] - Food and beverage revenues for Q4 2024 were $59.65 million, down 6.9% from Q3 2024's $63.87 million[24] - Total operating expenses for Q4 2024 were $205.38 million, a slight decrease from $209.99 million in Q3 2024[24] - Net income for Q4 2024 was $836,000, with a total net income of $43,262,000 for the full year 2024[27] - Adjusted EBITDAre for Q4 2024 was $48,093,000, contributing to a total of $229,694,000 for the full year 2024[27] - Comparable Adjusted FFO attributable to common stockholders for Q4 2024 was $32,020,000, with a total of $170,247,000 for the full year 2024[29] Debt and Capitalization - Total debt as of December 31, 2024, was $845,000,000, representing 24.1% of total capitalization[35] - The market value of common equity increased to $2,377,768,000 by December 31, 2024, compared to $2,073,489,000 at the end of Q3 2024[35] - Total capitalization increased to $3,504,018,000 by December 31, 2024, from $3,172,176,000 at the end of Q3 2024[35] - Total unsecured debt amounts to $845,000,000, with a weighted average interest rate of 5.49%[37] - The percentage of fixed-rate debt is 52.7%, while floating-rate debt accounts for 47.3%[37] - The weighted average maturity of debt increased from 1.8 years to 2.2 years due to the exercise of available extensions[37] Hotel Portfolio and Operations - The company owns 15 hotels with a total of 7,253 rooms as of February 21, 2025[7] - The total portfolio consists of 7,253 rooms across various hotels, with Hilton San Diego Bayfront representing 16% of total rooms[42] - The company owned 15 hotels as of December 31, 2024, including the Hyatt Regency San Antonio Riverwalk acquired in April 2024[26] - The company plans to debut Andaz Miami Beach in Q1 2025 following renovations[43] - The company expects The Confidante Miami Beach to resume operations as Andaz Miami Beach in Q1 2025 following extensive renovations[51] Revenue and Performance Metrics - Total property-level revenues for the actual portfolio in 2024 were $905.809 million, a decrease from $986.425 million in 2023[55] - Adjusted EBITDAre for the actual portfolio in 2024 was $233.861 million, down from $276.756 million in 2023, reflecting a margin of 25.8% compared to 28.1% in the previous year[55] - The comparable portfolio, excluding renovation hotels, generated revenues of $923.546 million in 2024, a decline from $941.742 million in 2023, with adjusted EBITDAre of $241.093 million, down from $265 million[55] - The overall comparable portfolio's adjusted EBITDA decreased by 10.0% to $49,946,000 in Q4 2024 compared to Q4 2023[54] - The total adjusted EBITDAre margin for the comparable portfolio, including renovation hotels, was 26.1% in 2024, down from 28.1% in 2023[55] - The actual portfolio's adjusted EBITDAre margin decreased by 210 bps year-over-year, indicating a need for strategic adjustments[55] Specific Hotel Performance - The average daily rate (ADR) for Hilton San Diego Bayfront increased by 1.4% to $257, while occupancy decreased by 630 basis points to 69.7%[47] - The Westin Washington, DC Downtown saw a 4.8% increase in ADR to $292, with occupancy improving by 370 basis points to 62.1%[47] - The Four Seasons Resort Napa Valley experienced a 17.2% decline in ADR to $1,229, with occupancy at 61.2%[47] - Hilton San Diego Bayfront's ADR increased by 0.9% to $278, while occupancy decreased by 360 bps to 79.2% in 2024 compared to 2023[49] - The Westin Washington, DC Downtown saw a significant RevPAR increase of 30.4% to $196, with occupancy rising by 1,270 bps to 69.4% in 2024[49] - Marriott Boston Long Wharf's RevPAR increased by 9.1% to $306, with occupancy improving by 690 bps to 80.5% in 2024[49] - Wailea Beach Resort's total revenues decreased by 18.2% to $30,122,000, with an adjusted EBITDA margin of 32.3% in Q4 2024[54] - The Confidante Miami Beach experienced a drastic decline in adjusted EBITDA, reporting $(684,000) in Q4 2024, a margin change of (402.4) bps[54] - Hyatt Regency San Antonio Riverwalk's adjusted EBITDA margin remained stable at 42.1%, with total revenues of $14,742,000 in Q4 2024[54] - Four Seasons Resort Napa Valley's adjusted EBITDA margin improved by 1,400 bps to 9.0%, with total revenues of $12,655,000 in Q4 2024[54] - The Confidante Miami Beach experienced a significant drop in adjusted EBITDAre, reporting $(1.965) million in 2024 compared to $5.881 million in 2023, marking a margin change of (6,210) bps[55] Strategic Actions - The strategy focuses on long-term stakeholder value through acquisition and active ownership of hotel and resort real estate[7] - The company repurchased common stock during the second, third, and fourth quarters of 2024, impacting pro forma adjustments[31] - The company sold the Boston Park Plaza in October 2023, which is reflected in the financial results for the actual portfolio[57] - The Westin Washington, DC Downtown's renovation affected adjusted EBITDAre results for both 2024 and 2023, highlighting the impact of renovation activities on financial performance[57]