Financial Data and Key Metrics Changes - The second quarter RevPAR increased by 2.2% compared to last year, while total RevPAR grew by 3.7% [29] - Adjusted EBITDAre for the second quarter was $73 million, and adjusted FFO was $0.28 per diluted share [29] - The company has a net leverage of 3.5 times trailing earnings or 4.8 times including preferred equity [29] Business Line Data and Key Metrics Changes - Urban hotels led the portfolio with RevPAR growth of over 9%, driven by strong corporate group and business travel demand [7] - The Marriott Long Beach Downtown saw RevPAR increase nearly 70% due to recent investments and brand conversion [7] - The Renaissance Orlando at SeaWorld reported a year-to-date production increase of 16% in room nights and over 30% in revenue [11] Market Data and Key Metrics Changes - The company experienced mixed performance across various markets, with San Francisco showing RevPAR growth of 6.5% and total RevPAR growth of over 16% [9] - Washington DC faced challenges due to government cancellations, impacting performance negatively [10] - Wailea and Key West saw increased price sensitivity, contributing to lower than expected growth [12] Company Strategy and Development Direction - The company is taking a cautious approach to fourth quarter expectations due to heightened uncertainty and limited visibility [6] - There is a focus on capital recycling, with the sale of Hilton New Orleans St. Charles and $100 million in share repurchases planned [18] - The company aims to drive earnings growth through renovations and strategic investments in existing properties [92] Management's Comments on Operating Environment and Future Outlook - Management noted a more cautious outlook for the remainder of the year, primarily due to continued weakness in government demand and softer leisure demand [19] - There are encouraging signs in leisure bookings in Miami and Wailea, which could lead to better-than-anticipated fourth quarter results [6] - The company expects total portfolio RevPAR growth to range from 3% to 5% compared to 2024, with adjusted EBITDAre projected between $226 million to $240 million [31][32] Other Important Information - The company has nearly $145 million in total cash and cash equivalents, equating to over $600 million in total liquidity [30] - The updated guidance reflects a more cautious expectation for the remainder of the year, particularly for Andaz Miami Beach [31] - The company has repurchased over 11 million shares this year, contributing to an estimated 6% accretion in earnings per share [34] Q&A Session Summary Question: Recent booking trends in Maui - Management noted that occupancy in Kaanapali has improved, which positively impacts Wailea's performance, leading to increased leisure bookings [40][41][44] Question: Change in outlook and EBITDA reduction - The reduction in outlook is attributed to softness in Wailea and Washington DC, along with a slower ramp-up at Andaz Miami Beach [50][54] Question: Comfortable leverage and buyback strategy - The company is comfortable with its current leverage and sees ample capacity for additional share repurchases, balancing this with other capital allocation opportunities [58][60] Question: Group business outlook for 2026 - Management indicated that DC, Miami, and New Orleans are expected to be stronger markets, with good growth anticipated in San Francisco and wine country [65][66] Question: Impact of renovations and future growth - Renovations in various properties are expected to contribute to future growth, with specific focus on improving transient bookings and group business [92][94]

Core Viewpoint - Sunstone Hotel Investors reported quarterly funds from operations (FFO) of $0.28 per share, exceeding the Zacks Consensus Estimate of $0.26 per share, with a year-over-year comparison showing no change in FFO [1] Group 1: Financial Performance - The company posted revenues of $259.77 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.92%, compared to $247.48 million in the same quarter last year [2] - Over the last four quarters, Sunstone Hotel has exceeded consensus FFO estimates three times [2] - The current consensus FFO estimate for the upcoming quarter is $0.20 on revenues of $235.57 million, and for the current fiscal year, it is $0.88 on revenues of $958.01 million [7] Group 2: Market Performance - Sunstone Hotel shares have declined approximately 25.9% since the beginning of the year, while the S&P 500 has gained 7.1% [3] - The company currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [6] Group 3: Industry Context - The REIT and Equity Trust - Other industry, to which Sunstone Hotel belongs, is currently in the top 40% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in estimate revisions, which can be tracked by investors [5]

[Corporate Profile and Non-GAAP Financial Measures Disclosures](index=3&type=section&id=Corporate%20Profile%20And%20Disclosures%20Regarding%20Non-GAAP%20Financial%20Measures) This section introduces Sunstone Hotel Investors, Inc. as a lodging REIT and details the non-GAAP financial measures used for performance evaluation [About Sunstone](index=4&type=section&id=About%20Sunstone) Sunstone Hotel Investors, Inc. is a lodging real estate investment trust (REIT) that, as of August 6, 2025, owns 14 hotels with 6,999 rooms, predominantly under nationally recognized brands - Sunstone Hotel Investors, Inc. (NYSE: SHO) is a lodging REIT[8](index=8&type=chunk) - As of August 6, 2025, the company owns 14 hotels comprising 6,999 rooms, with the majority operated under nationally recognized brands[8](index=8&type=chunk) - Sunstone's strategy focuses on creating long-term stakeholder value through the acquisition, active ownership, and disposition of well-located hotel and resort real estate[8](index=8&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) This section outlines the non-GAAP financial measures used by Sunstone, including EBITDAre, Adjusted EBITDAre, FFO attributable to common stockholders, Adjusted FFO attributable to common stockholders, hotel Adjusted EBITDAre, and hotel Adjusted EBITDAre margins - The company presents non-GAAP financial measures such as EBITDAre, Adjusted EBITDAre, FFO attributable to common stockholders, Adjusted FFO attributable to common stockholders, hotel Adjusted EBITDAre, and hotel Adjusted EBITDAre margins, which are considered useful supplemental measures of operating performance[12](index=12&type=chunk) - EBITDAre is presented in accordance with Nareit guidelines, defined as net income plus interest expense, income tax expense, depreciation and amortization, gains or losses on disposition of depreciated property, impairment write-downs, and adjustments for unconsolidated affiliates' EBITDAre[13](index=13&type=chunk) - Adjustments to EBITDAre and FFO include the exclusion of amortization of deferred stock compensation, amortization of contract intangibles, gains or losses from debt transactions, cumulative effect of changes in accounting principles, and other non-ordinary course adjustments like lawsuit settlement costs or pre-opening costs[18](index=18&type=chunk)[19](index=19&type=chunk)[21](index=21&type=chunk) [Comparable Corporate Financial Information](index=7&type=section&id=Comparable%20Corporate%20Financial%20Information) This section presents consolidated financial statements and reconciliations of net income to key non-GAAP metrics like EBITDAre, Adjusted EBITDAre, FFO, and Adjusted FFO across recent periods [Comparable Consolidated Statements of Operations](index=8&type=section&id=Comparable%20Consolidated%20Statements%20of%20Operations) This section provides a consolidated statement of operations for the quarter ended June 30, 2025, and prior quarters, along with trailing 12-month data Comparable Consolidated Statements of Operations (in thousands) | Metric | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | Trailing 12 Months Ended June 30, 2025 | | :-------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------------------------------ | | Total revenues | $257,412 | $228,980 | $210,653 | $224,080 | $921,125 | | Total operating expenses | $227,204 | $214,279 | $202,262 | $207,380 | $851,125 | | Net income (loss) | $19,307 | $3,485 | $(159) | $2,969 | $25,602 | [Comparable Reconciliation of Net Income to EBITDAre, Adjusted EBITDAre, and Total Portfolio Hotel Adjusted EBITDAre](index=9&type=section&id=Comparable%20Reconciliation%20of%20Net%20Income%20to%20EBITDAre%2C%20Adjusted%20EBITDAre%2C%20and%20Total%20Portfolio%20Hotel%20Adjusted%20EBITDAre) This section reconciles net income to EBITDAre, Adjusted EBITDAre, and Total Portfolio Hotel Adjusted EBITDAre across recent quarters and the trailing 12 months Reconciliation of Net Income to EBITDAre and Adjusted EBITDAre (in thousands) | Metric | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | Trailing 12 Months Ended June 30, 2025 | | :-------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------------------------------ | | Net income | $10,774 | $5,255 | $836 | $3,249 | $20,114 | | EBITDAre | $66,851 | $50,310 | $43,925 | $50,437 | $211,523 | | Adjusted EBITDAre | $72,682 | $57,256 | $48,093 | $53,567 | $231,598 | | Total Portfolio Hotel Adjusted EBITDAre | $75,284 | $58,400 | $48,349 | $56,126 | $238,159 | [Comparable Reconciliation of Net Income to FFO and Adjusted FFO Attributable to Common Stockholders](index=10&type=section&id=Comparable%20Reconciliation%20of%20Net%20Income%20to%20FFO%20and%20Adjusted%20FFO%20Attributable%20to%20Common%20Stockholders) This section details the reconciliation of net income to FFO and Adjusted FFO attributable to common stockholders, including per share data and equity transactions Reconciliation of Net Income to FFO and Adjusted FFO (in thousands, except per share data) | Metric | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | Trailing 12 Months Ended June 30, 2025 | | :-------------------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------------------------------ | | Net income | $10,774 | $5,255 | $836 | $3,249 | $20,114 | | FFO attributable to common stockholders | $49,372 | $33,242 | $29,155 | $30,638 | $142,407 | | Adjusted FFO attributable to common stockholders | $55,723 | $41,500 | $32,020 | $36,851 | $166,094 | | Comparable Adjusted FFO per diluted share | $0.29 | $0.21 | $0.16 | $0.19 | $0.85 | - Equity transactions include pro forma adjustments for common stock repurchases made during the first and second quarters of 2025 and the third and fourth quarters of 2024, as if they occurred on July 1, 2024[30](index=30&type=chunk) [Capitalization](index=12&type=section&id=Capitalization) This section provides a comparative analysis of the company's capitalization structure, including debt and preferred stock, across recent quarters [Comparative Capitalization](index=13&type=section&id=Comparative%20Capitalization) This section provides a comparative overview of the company's capitalization from Q2 2024 to Q2 2025, highlighting changes in common shares outstanding and debt ratios Comparative Capitalization (in thousands, except per share data) | Metric | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :-------------------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Common share price (end of quarter) | $8.68 | $9.41 | $11.84 | $10.32 | $10.46 | | Common dividends per share | $0.09 | $0.09 | $0.09 | $0.09 | $0.09 | | Common shares outstanding | 190,171 | 200,370 | 200,825 | 200,919 | 203,390 | | Market value of common equity | $1,650,681 | $1,885,477 | $2,377,768 | $2,073,489 | $2,127,464 | | Total debt | $872,000 | $845,000 | $845,000 | $817,437 | $817,978 | | Total capitalization | $2,803,931 | $3,011,727 | $3,504,018 | $3,172,176 | $3,226,692 | | Total debt to total capitalization | 31.1% | 28.1% | 24.1% | 25.8% | 25.4% | [Debt and Preferred Stock Summary Schedule](index=14&type=section&id=Debt%20and%20Preferred%20Stock%20Summary%20Schedule) This section provides a detailed breakdown of the company's unsecured debt and preferred stock as of June 30, 2025, including interest rates, maturities, and balances Unsecured Debt Summary (as of June 30, 2025, in thousands) | Unsecured Debt | Interest Rate / Spread | Maturity Date | Balance | | :------------- | :--------------------- | :------------ | :------ | | Series A Senior Notes | 4.69% | 01/10/2026 | $65,000 | | Term Loan 3 | 5.92% | 05/01/2026 | $225,000 | | Term Loan 4 | 5.52% | 11/07/2026 | $100,000 | | Term Loan 1 | 5.32% | 07/25/2027 | $175,000 | | Revolving Line of Credit | 5.86% | 07/25/2027 | $27,000 | | Series B Senior Notes | 4.79% | 01/10/2028 | $105,000 | | Term Loan 2 | 5.83% | 01/25/2028 | $175,000 | | **Total Unsecured Debt** | | | **$872,000** | Preferred Stock Summary (as of June 30, 2025, in thousands) | Preferred Stock | Dividend Rate | Maturity | Balance | | :-------------- | :------------ | :------- | :------ | | Series G | 4.500% | Perpetual | $66,250 | | Series H | 6.125% | Perpetual | $115,000 | | Series I | 5.700% | Perpetual | $100,000 | | **Total Preferred Stock** | | | **$281,250** | - The weighted average maturity of debt is **1.7 years**, and the average interest rate is **5.51%**[37](index=37&type=chunk) [Property-Level Data and Operating Statistics](index=15&type=section&id=Property-Level%20Data%20And%20Operating%20Statistics) This section details the company's hotel portfolio, including brand affiliations and key operating statistics such as ADR, Occupancy, RevPAR, and TRevPAR [Hotel Information as of August 6, 2025](index=16&type=section&id=Hotel%20Information%20as%20of%20August%206%2C%202025) As of August 6, 2025, Sunstone's portfolio consists of 14 hotels totaling 6,999 rooms, featuring properties under major brands like Hilton, Hyatt, Marriott, Montage, and Four Seasons across various U.S. locations - As of August 6, 2025, the company's portfolio includes **14 hotels** with a total of **6,999 rooms**[44](index=44&type=chunk) - The hotels are operated under nationally recognized brands such as Hilton, Hyatt, Marriott, Montage, and Four Seasons[44](index=44&type=chunk) - Andaz Miami Beach debuted in May 2025, following a transformative renovation and conversion from The Confidante Miami Beach[45](index=45&type=chunk) [Property-Level Operating Statistics (ADR, Occupancy, RevPAR and Total RevPAR (TRevPAR))](index=17&type=section&id=Property-Level%20Operating%20Statistics%20(ADR%2C%20Occupancy%2C%20RevPAR%20and%20Total%20RevPAR%20(TRevPAR))) This section presents property-level operating statistics, including ADR, Occupancy, RevPAR, and TRevPAR, for Q2 and YTD 2025 compared to 2024, highlighting impacts from renovation activities Total Portfolio Operating Statistics (Excluding Renovation Hotel) - Q2 2025 vs. Q2 2024 | Metric | Q2 2025 | Q2 2024 | YoY Change | | :------- | :------ | :------ | :--------- | | ADR | $323 | $328 | (1.3)% | | Occupancy | 77.2% | 75.1% | +210 bps | | RevPAR | $250 | $246 | +1.4% | | TRevPAR | $417 | $405 | +2.8% | Total Portfolio Operating Statistics (Excluding Renovation Hotel) - YTD 2025 vs. YTD 2024 | Metric | YTD 2025 | YTD 2024 | YoY Change | | :------- | :------- | :------- | :--------- | | ADR | $321 | $324 | (1.1)% | | Occupancy | 75.0% | 72.5% | +250 bps | | RevPAR | $241 | $235 | +2.3% | | TRevPAR | $397 | $384 | +3.4% | - Operating statistics for Q2 and YTD 2025 and 2024 were impacted by renovation activity at Marriott Long Beach Downtown and Andaz Miami Beach, with Andaz Miami Beach resuming operations in May 2025 after suspending them in March 2024 for renovation[53](index=53&type=chunk) [Property-Level Revenues, Adjusted EBITDAre & Adjusted EBITDAre Margins](index=20&type=section&id=Property-Level%20Revenues%2C%20Adjusted%20EBITDAre%20%26%20Adjusted%20EBITDAre%20Margins) This section analyzes property-level revenues, Adjusted EBITDAre, and corresponding margins for the total portfolio, highlighting performance for Q2 and YTD 2025 compared to 2024 [Q2 2025/2024](index=21&type=section&id=Q2%202025%2F2024) For Q2 2025, the total portfolio (excluding renovation hotels) generated **$255.08 million** in revenues and **$77.61 million** in Hotel Adjusted EBITDAre, with a margin of **30.4%**, a slight decrease of **50 bps** from Q2 2024 Total Portfolio (Excluding Renovation Hotel) Performance - Q2 2025 vs. Q2 2024 (in thousands) | Metric | Q2 2025 | Q2 2024 | Margin Change (bps) | | :-------------------- | :------ | :------ | :------------------ | | Total Revenues | $255,083 | $248,070 | | | Hotel Adjusted EBITDAre | $77,613 | $76,673 | | | Hotel Adjusted EBITDAre Margins | 30.4% | 30.9% | (50) bps | - Andaz Miami Beach, impacted by renovation, reported Total Revenues of **$2,329 thousand** and Hotel Adjusted EBITDAre of **$(2,329) thousand**, resulting in a **(100.0)% margin** for Q2 2025[56](index=56&type=chunk) - Marriott Long Beach Downtown experienced a significant increase in Hotel Adjusted EBITDAre margin from **(0.2)%** in Q2 2024 to **31.7%** in Q2 2025, a change of **3,190 bps**, likely reflecting recovery from prior renovation impacts[56](index=56&type=chunk) [Q2 YTD 2025/2024](index=22&type=section&id=Q2%20YTD%202025%2F2024) For the first six months of 2025, the total portfolio (excluding renovation hotels) achieved **$483.93 million** in revenues and **$136.49 million** in Hotel Adjusted EBITDAre, maintaining a **28.2%** margin, consistent with YTD 2024 Total Portfolio (Excluding Renovation Hotel) Performance - YTD 2025 vs. YTD 2024 (in thousands) | Metric | YTD 2025 | YTD 2024 | Margin Change (bps) | | :-------------------- | :------- | :------- | :------------------ | | Total Revenues | $483,931 | $470,531 | | | Hotel Adjusted EBITDAre | $136,488 | $132,701 | | | Hotel Adjusted EBITDAre Margins | 28.2% | 28.2% | — bps | Actual Portfolio Performance - YTD 2025 vs. YTD 2024 (in thousands) | Metric | YTD 2025 | YTD 2024 | | :-------------------- | :------- | :------- | | Total Revenues | $493,837 | $464,647 | | Hotel Adjusted EBITDAre | $136,680 | $127,489 | | Hotel Adjusted EBITDAre Margins | 27.7% | 27.4% | - Renovation activities at Andaz Miami Beach and Marriott Long Beach Downtown continued to impact YTD results, with Andaz Miami Beach showing a negative Hotel Adjusted EBITDAre margin of **(113.9)%** for YTD 2025[59](index=59&type=chunk)

Core Viewpoint - Sunstone Hotel Investors, Inc. reported its second quarter results for 2025, highlighting a mixed performance with solid corporate group and business travel demand, but facing challenges from price-sensitive leisure travelers and weaker government volume [3][4]. Financial Performance - Net income for Q2 2025 was $10.8 million, a decrease of 58.8% from $26.1 million in Q2 2024 [4][9]. - Income attributable to common stockholders per diluted share was $0.03, down 72.7% from $0.11 in the same quarter last year [4][9]. - Total revenues increased to $259.8 million in Q2 2025 from $247.5 million in Q2 2024, reflecting a growth in room and food and beverage revenues [34]. Portfolio Operating Statistics - RevPAR (Revenue per Available Room) increased by 2.2% to $241.22 in Q2 2025 compared to $235.97 in Q2 2024 [4][9]. - Occupancy rates improved to 74.6%, up 260 basis points from 72.0% in the previous year [4][9]. - Average Daily Rate (ADR) decreased by 1.3% to $323.35 from $327.73 in Q2 2024 [4][9]. Capital Management - The company repurchased approximately $100 million of its common stock at an average price of $8.83 per share in 2025, representing nearly 14% of shares outstanding since the start of 2022 [3][7]. - The Hilton New Orleans St. Charles was sold for $47 million, with proceeds used for share repurchases [6][7]. Investment and Outlook - The company plans to invest $80 million to $100 million in its portfolio in 2025, focusing on renovations and improvements at various properties [10]. - The updated guidance for full-year 2025 includes a net income expectation of $14 million to $28 million, down from previous estimates [11][12]. Balance Sheet and Liquidity - As of June 30, 2025, the company had total assets of $3.0 billion, total debt of $872 million, and stockholders' equity of $2.0 billion [8][34]. - Cash and cash equivalents stood at $144.9 million, including $71.4 million in restricted cash [8].

Core Viewpoint - Sunstone Hotel Investors, Inc. will report its financial results for the second quarter of 2025 on August 6, 2025, before market opening [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, Inc. (SHO) sold the Hilton New Orleans St. Charles for a gross sale price of $47 million, equating to approximately $187,000 per room [1][8] Financial Metrics - The sale price reflects a multiple of 10.1 times the 2024 Hotel Adjusted EBITDAre and an 8.7% cap rate on 2024 Hotel Net Operating Income (NOI) [2] - Including estimated near-term capital expenditures, the gross sale price reflects a multiple of 13.4 times the Hotel Adjusted EBITDAre and a 6.6% cap rate on 2024 Hotel NOI [2] Capital Allocation - Proceeds from the hotel sale were fully reinvested into share repurchases, taking advantage of favorable market conditions [3][8] - From early 2025 to June 6, the company repurchased 6.8 million shares at an average price of $8.84 per share, totaling $60 million before expenses [4] - Since the start of 2022, the company has allocated $252 million to repurchase 25.8 million shares, representing nearly 12% of shares outstanding at the beginning of the period, at an average price of $9.77 per share [4] Shareholder Value - The repurchase activity has resulted in an accretive allocation of capital, creating significant value for shareholders through an implied cash flow multiple and discount to net asset value [5] - The company anticipates that the hotel will require periodic renovations to maintain its competitive position and earnings level [5] Management Commentary - CEO Bryan Giglia stated that the company divested the hotel at attractive pricing, eliminated near-term capital expenditures, and reinvested proceeds into higher-yielding investments through stock repurchases [6] - The company continues to view New Orleans as an attractive lodging market for group events and leisure travel, maintaining exposure through ownership of the JW Marriott [6] Company Strategy - Sunstone's strategy focuses on creating long-term shareholder value through the acquisition, active ownership, and disposition of well-located hotel and resort real estate [7] - Despite a challenging macroeconomic environment, the company remains engaged in capital allocation opportunities [7]

Group 1 - The focus is on Sunstone Hotel Investors, Inc. (NYSE: SHO), recognized as one of the most stable companies in the REIT sector [1] - Sunstone Hotel Investors has two publicly traded preferred shares [1] - The investing group Trade With Beta offers features such as frequent picks for mispriced preferred stocks and baby bonds, weekly reviews of over 1200 equities, IPO previews, and hedging strategies [1] Group 2 - The article emphasizes the importance of active investor participation and offers a free trial for interested parties [1] - The analyst has a beneficial long position in the shares of SHO.PR.H through various financial instruments [1]

Company Overview - Sunstone Hotel Investors, Inc. (SHO) is a hotel Real Estate Investment Trust (REIT) that owns 15 high-end hotels and resorts [1] - The company has a common equity valuation of $1.7 billion [1] Investment Strategy - Binary Tree Analytics (BTA) focuses on providing transparency and analytics for capital market instruments and trades, particularly in Closed-End Funds (CEFs), Exchange-Traded Funds (ETFs), and Special Situations [1] - BTA aims to deliver high annualized returns with a low volatility profile, leveraging over 20 years of investment experience [1]

Financial Performance - Total revenues for Q1 2025 were $234.1 million, an increase of $16.9 million or 7.8% compared to Q1 2024[108]. - Net income for Q1 2025 was $5.3 million, a decrease of $7.8 million or 59.7% compared to Q1 2024[108]. - Income attributable to common stockholders was $1.3 million in Q1 2025, down $8.0 million or 85.8% from Q1 2024[108]. - Adjusted EBITDAre increased by $2.7 million, or 5.0%, in Q1 2025 compared to Q1 2024, reaching $57.3 million[138]. - FFO attributable to common stockholders decreased to $33.2 million in Q1 2025 from $37.7 million in Q1 2024[144]. - Adjusted FFO attributable to common stockholders increased by $4.0 million, or 10.6%, in Q1 2025 compared to Q1 2024, totaling $41.5 million[144]. Revenue Breakdown - Room revenue increased by $9.1 million, or 6.7%, in Q1 2025, primarily due to the acquisition of the Hyatt Regency San Antonio Riverwalk, which contributed $7.7 million[109]. - Food and beverage revenue increased by $5.8 million, or 9.4%, compared to the first quarter of 2024[113]. - Other operating revenue rose by $2.0 million, or 10.0%, in the first quarter of 2025 compared to the same period in 2024[114]. - Room revenue for the Comparable Portfolio increased by $1.3 million, with occupancy up 70 basis points and average daily room rate up 1.0%, resulting in a 2.0% increase in RevPAR[111]. Operating Expenses - Total operating expenses for Q1 2025 were $217.6 million, an increase of $17.7 million or 8.8% compared to Q1 2024[108]. - Hotel operating expenses increased by $11.0 million, or 8.1%, primarily due to the acquisition of the Hyatt Regency San Antonio Riverwalk, which added $6.8 million in expenses[114]. - Corporate overhead expenses increased by $1.4 million, or 18.4%, in Q1 2025 compared to Q1 2024[108]. - Depreciation and amortization expenses rose by $3.2 million, or 11.1%, in Q1 2025 compared to the same period in 2024[108]. - Interest expense increased by $1.7 million, or 15.2%, in Q1 2025 compared to Q1 2024[108]. Cash Flow and Investments - Net cash provided by operating activities was $32.0 million in Q1 2025, down from $38.5 million in Q1 2024[148]. - Net cash used in investing activities was $28.1 million in Q1 2025, compared to $27.7 million in Q1 2024[149]. - Net cash used in financing activities increased to $35.4 million in Q1 2025 from $33.5 million in Q1 2024[151]. - The company invested $28.2 million for renovations and additions to its portfolio in Q1 2025[149]. - The company invested $28.2 million in capital expenditures during the first three months of 2025, compared to $27.7 million in the same period of 2024[163]. Debt and Financial Position - As of March 31, 2025, the company had an unrestricted cash balance of $72.3 million and total assets of $3.1 billion[156][157]. - The company's total debt was $845.0 million, with $148.8 million in cash and cash equivalents[157]. - 52.7% of the company's outstanding debt had fixed interest rates or had been swapped to fixed rates, mitigating interest rate risks[158][173]. - Contractual obligations totaled $1,005.7 million as of March 31, 2025, with $167.4 million due within one year[161]. - The company has $51.3 million in contractual construction commitments for ongoing renovations as of March 31, 2025[163]. Future Outlook and Risks - The company expects future cash sources to include operating activities, working capital, and debt issuances, but acknowledges potential challenges due to inflation and interest rates[153]. - The company may seek to obtain mortgages on its 15 unencumbered hotels, which could affect available capital through credit facilities[160]. - The company relies on hotel operators to adjust room rates to reflect inflation, but competitive pressures may limit this ability[165]. - If variable interest rates increase or decrease by 50 basis points, the annual interest expense would change by approximately $2.0 million[173]. - The company entered into an interest rate swap fixing the SOFR rate at 4.02% for Term Loan 4, effective January 31, 2025[158].

Financial Data and Key Metrics Changes - The first quarter adjusted EBITDA was $57 million, and adjusted FFO was $0.21 per diluted share, reflecting a 17% increase from the prior year [24] - Comparable rooms RevPAR increased by 3.8% in the first quarter, while total RevPAR grew by 4.3%, contributing to an 80 basis point expansion in hotel margins [24] - The company repurchased $21 million of stock at a blended repurchase price of $8.9 per share, indicating a strong capital return strategy [15] Business Line Data and Key Metrics Changes - The Andaz Miami Beach opened on May 3, 2025, and is expected to contribute significantly to earnings growth in the coming years [6][8] - The renovated Marriott Long Beach Downtown posted a solid 145% increase in RevPAR, showcasing the benefits of recent investments [12] - Group production at Wailea increased nearly 20% in the first quarter compared to the prior year, indicating positive trends in group demand [12] Market Data and Key Metrics Changes - Washington DC saw a 24% increase in RevPAR due to the inauguration, while New Orleans hotels grew RevPAR by 25% driven by the Super Bowl [9] - San Francisco experienced a 9% increase in RevPAR, supported by increased commercial activity in the downtown area [9] - The company noted softer performance in San Diego but expects solid growth in the second quarter as the market recovers [10] Company Strategy and Development Direction - The company aims to continue a balanced and nimble approach to capital allocation, utilizing a strong balance sheet and future asset recycling to drive growth in FFO and NAV per share [8][16] - The strategy includes capital investment activities ranging from $80 million to $100 million for the year, focusing on enhancing existing properties [20] - The company is looking to recycle additional capital into share repurchases, potentially through asset sales, to enhance shareholder value [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about increased macroeconomic uncertainty and declining business and consumer confidence, leading to a more cautious outlook for the year [14] - The updated outlook for total portfolio RevPAR growth is projected to range from 4% to 7% compared to 2024, reflecting a more moderated view [26] - Despite headwinds, the midpoints of the updated outlook for EBITDA and FFO still equate to healthy annual growth rates of 8-10% [27] Other Important Information - The company has nearly $150 million in total cash and cash equivalents, providing significant liquidity for future investments [25] - The opening of the Andaz Miami Beach is expected to drive substantial earnings growth, particularly in the fourth quarter [39] - The company is focused on maintaining a strong balance sheet with net leverage of only 4.5 times trailing EBITDA [24] Q&A Session Summary Question: Can you discuss the underwriting trajectory for the Andaz Miami Beach? - Management expressed confidence in the Andaz's market positioning and expected EBITDA of $6-7 million for the year, primarily in the fourth quarter [39] Question: Can you elaborate on the updated outlook and changes in Wailea? - The revised expectations for Andaz are $6-7 million, with a $4 million forecast revision for Wailea due to a challenging operating environment [45] Question: What held back performance in Maui during the first quarter? - Management noted that the luxury market in Wailea faced competition from Kaanapali, which is recovering faster, impacting occupancy [56] Question: What is the strategy regarding non-core assets? - The company is focused on recycling capital and will consider divesting non-core assets when appropriate, but no immediate sales are planned [68] Question: What are the expectations for luxury assets in the current market? - Management indicated that luxury assets have a focused group of investors, and while transaction volumes are slower, they remain open to capital recycling opportunities [79]