Core Insights - Sunstone Hotel Investors (SHO) reported revenue of $234.07 million for the quarter ended March 2025, reflecting a year-over-year increase of 7.8% [1] - The company's EPS was $0.21, significantly higher than $0.05 in the same quarter last year, indicating strong earnings growth [1] - Revenue fell short of the Zacks Consensus Estimate of $237.58 million by 1.48%, while EPS exceeded the consensus estimate of $0.18 by 16.67% [1] Revenue Breakdown - Room revenue was reported at $144.92 million, slightly below the estimated $147.44 million, but still showing a year-over-year increase of 6.7% [4] - Other operating revenues reached $22.02 million, surpassing the average estimate of $21.56 million, with a year-over-year growth of 10% [4] - Food and beverage revenues totaled $67.13 million, exceeding the estimated $65.67 million, and reflecting a 9.4% increase compared to the previous year [4] Stock Performance - Over the past month, shares of Sunstone Hotel have returned +7.3%, underperforming the Zacks S&P 500 composite's +11.5% change [3] - The stock currently holds a Zacks Rank 5 (Strong Sell), suggesting potential underperformance relative to the broader market in the near term [3]

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 [25] - 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, equating to a compelling multiple on earnings [15][16] 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][7] - The recently renovated Marriott Long Beach Downtown posted a solid 145% increase in RevPAR [12] - Group production at Wailea was up nearly 20% in the first quarter relative to the prior year, indicating optimism for future growth [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 [8][9] - San Francisco generated RevPAR growth of 9% due to increased commercial activity [9] - The company noted softer performance in Wailea, but expects recovery as the Kaanapali submarket normalizes [11][12] Company Strategy and Development Direction - The company is focused on 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 [7][17] - Capital investment activity for the year is expected to be in the range of $80 to $100 million, with ongoing renovations and upgrades across various properties [21] - The company aims to recycle capital and return value to shareholders through share repurchases and potential asset sales [16][66] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased macroeconomic uncertainty and declining business and consumer confidence, leading to a more cautious outlook for the year [14] - The updated outlook reflects expectations of total portfolio RevPAR growth ranging from 4% to 7% compared to 2024, with adjusted EBITDAre estimated between $235 million to $260 million [27][28] - Management remains optimistic about the long-term recovery in markets like San Francisco and Wailea, despite short-term challenges [10][56] Other Important Information - The company has nearly $150 million in total cash and cash equivalents, equating to approximately $650 million in total liquidity [26] - The Board of Directors authorized a $0.09 per share common dividend for the second quarter [29] 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 to $7 million for the resort this year, primarily in the fourth quarter [34][37] Question: Can you elaborate on the updated outlook and changes in Wailea? - The revised expectation for Andaz is $6 million to $7 million, with a $4 million forecast revision for Wailea due to a challenging operating environment [43][44] Question: What held back performance in Maui and how does it compare to peers? - Management noted that Wailea's luxury market is recovering, and as Kaanapali normalizes, they expect to benefit from increased demand [50][52] Question: What is the strategy regarding non-core assets and potential sales? - Management indicated a focus on recycling capital and remains open to divesting non-core assets when appropriate, with a current inclination to repurchase shares [62][66] Question: What are the expectations for luxury assets in the current market? - Management highlighted ongoing conversations regarding luxury assets, noting that while transaction volumes are slower, they remain focused on capital recycling [74][75]

Sunstone Hotel Investors (SHO) came out with quarterly funds from operations (FFO) of $0.21 per share, beating the Zacks Consensus Estimate of $0.18 per share. This compares to FFO of $0.18 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an FFO surprise of 16.67%. A quarter ago, it was expected that this hotel real estate investment trust would post FFO of $0.14 per share when it actually produced FFO of $0.16, delivering a surprise of 14.29%. Over ...

Financial Performance - For Q1 2025, total revenues reached $234.065 million, a 9% increase from $214.770 million in Q4 2024[25] - Room revenue for Q1 2025 was $144.921 million, up 8.0% from $133.191 million in Q4 2024[25] - Net income for Q1 2025 was $5.255 million, compared to $836,000 in Q4 2024, reflecting a significant increase[25] - Total operating expenses for Q1 2025 were $217.594 million, an increase from $205.384 million in Q4 2024[25] - Adjusted EBITDAre for Q1 2025 reached $57,256,000, up from $48,093,000 in Q4 2024, indicating a growth of approximately 18%[27] - Total Portfolio Hotel Adjusted EBITDAre for the trailing 12 months was $244,466,000, compared to $232,439,000 for the previous period, showing an increase of about 5.2%[27] - FFO attributable to common stockholders for Q1 2025 was $33,242,000, an increase from $29,155,000 in Q4 2024, representing a growth of approximately 14.3%[28] - Adjusted FFO attributable to common stockholders for Q1 2025 was $41,500,000, compared to $32,020,000 in Q4 2024, marking an increase of about 29.5%[28] - Total portfolio revenues for Q1 2025 reached $234.065 million, an increase from $230.703 million in Q1 2024, reflecting a growth of 1.0%[54] - Adjusted EBITDAre for the total portfolio in Q1 2025 was $60.772 million, compared to $57.399 million in Q1 2024, representing a year-over-year increase of 4.1%[54] - The overall adjusted EBITDAre margin for the total portfolio improved to 26.0% in Q1 2025, up from 24.9% in Q1 2024, indicating a margin expansion of 110 basis points[54] Debt and Equity - Interest expense for Q1 2025 was $12.682 million, compared to $10.440 million in Q4 2024, indicating increased borrowing costs[25] - The market value of common equity decreased to $1,885,477,000 as of March 31, 2025, down from $2,377,768,000 at the end of Q4 2024[34] - Total debt remained stable at $845,000,000 as of March 31, 2025, unchanged from the previous quarter[34] - The total debt to total capitalization ratio increased to 28.1% in Q1 2025, compared to 24.1% in Q4 2024[34] - The average interest rate on total debt was reported at 5.45% as of March 31, 2025[36] - The diluted weighted average shares outstanding for Q1 2025 was 201,624,000, slightly down from 202,233,000 in Q4 2024[28] - The annual dividend rate on Series G preferred stock increased from 3.0% to 4.5% in Q3 2024, and will further increase to 6.5% in Q3 2025[39] Hotel Operations - The company owns 15 hotels with a total of 7,253 rooms as of May 6, 2025[8] - The total portfolio consists of 7,253 rooms across various hotels, with Hilton San Diego Bayfront accounting for 16% of total rooms[44] - The average daily rate (ADR) for Hilton San Diego Bayfront was $288 in Q1 2025, a decrease of 0.7% compared to Q1 2024[49] - The occupancy rate for the total portfolio was 70.1% in Q1 2025, up from 68.9% in Q1 2024[51] - RevPAR for Hyatt Regency San Francisco increased by 8.6% to $232 in Q1 2025 compared to Q1 2024[49] - The Andaz Miami Beach, which reopened in May 2025 after renovation, had an ADR of $270, with a significant impact on overall portfolio statistics[51] - The total revenue per available room (TRevPAR) for the total portfolio increased by 3.2% to $358 in Q1 2025 compared to Q1 2024[51] - The occupancy rate for the Four Seasons Resort Napa Valley was 43.6% in Q1 2025, down from 60.0% in Q1 2024[49] - The company owns 100% of the Hilton San Diego Bayfront following the acquisition of the remaining 25% interest in June 2022[44] Acquisitions and Strategy - The company plans to continue its strategy of acquiring well-located hotel and resort real estate to enhance long-term stakeholder value[8] - The acquisition of the Hyatt Regency San Antonio Riverwalk in April 2024 is included in the financial results for Q1 2025[25] - The company acquired the Hyatt Regency San Antonio Riverwalk in April 2024, which included prior ownership results[51] - The total portfolio included results from 15 hotels in Q1 2025, compared to 14 hotels in Q1 2024, indicating a slight increase in the number of properties contributing to revenues[56] Performance Metrics - Adjusted EBITDAre and hotel Adjusted EBITDAre margins are used to evaluate ongoing performance, excluding certain nonrecurring items[20] - The Hilton San Diego Bayfront reported total revenues of $44.640 million in Q1 2025, with an adjusted EBITDAre of $13.426 million and a margin of 30.1%, down 80 basis points from the previous year[54] - The JW Marriott New Orleans achieved an impressive adjusted EBITDAre margin of 49.9% in Q1 2025, up 1,150 basis points from 38.4% in Q1 2024[54] - The Hyatt Regency San Francisco saw total revenues increase to $24.521 million in Q1 2025, with an adjusted EBITDAre margin of 10.7%, down 120 basis points year-over-year[54] - The total portfolio, excluding renovation hotels, generated revenues of $233.933 million in Q1 2025, with an adjusted EBITDAre of $61.247 million and a margin of 26.2%, up 80 basis points from the previous year[54] - The Andaz Miami Beach, which underwent extensive renovations, reported a significant negative adjusted EBITDAre of $(475,000) in Q1 2025, reflecting a margin decline of 359.8%[56]

Core Insights - Sunstone Hotel Investors, Inc. reported first quarter results for 2025, highlighting a slight earnings increase despite a challenging operating environment [1][3] - The company opened the Andaz Miami Beach after a significant renovation, which is expected to enhance its portfolio value [3][8] - Adjustments to the full-year outlook were made due to increased economic uncertainty and variability in operating trends [3][14] Financial Performance - Net income for Q1 2025 was $5.3 million, down 59.7% from $13.0 million in Q1 2024 [4][7] - Adjusted FFO attributable to common stockholders increased by 10.6% to $41.5 million, with per diluted share rising 16.7% to $0.21 [4][7] - Total Portfolio RevPAR increased by 2.2% to $221.63, with occupancy at 70.1% [4][7] Operational Highlights - The Andaz Miami Beach features 287 guestrooms, a full-service spa, and premium dining options, positioning it as a key asset for future revenue growth [8][9] - The company repurchased 821,771 shares at an average price of $9.74 per share during Q1 2025, totaling $8.0 million [9] - As of March 31, 2025, the company had $148.8 million in cash and cash equivalents, with total assets of $3.1 billion [11] Capital Investments - Sunstone invested $28.2 million in its portfolio during Q1 2025, primarily for the Andaz Miami Beach transformation [12][13] - The company anticipates investing approximately $80 million to $100 million in 2025, focusing on ongoing renovations and improvements [13] Updated Guidance - The updated guidance for 2025 reflects a decrease in expected net income to a range of $33 million to $58 million, down from the previous estimate of $46 million to $71 million [14] - Total Portfolio RevPAR growth expectations were adjusted to 4.0% to 7.0%, down from 7.0% to 10.0% [14] Dividend Information - The Board of Directors authorized a cash dividend of $0.09 per share for common stock, payable on July 15, 2025 [16][17] - The company plans to continue quarterly cash dividends throughout 2025, subject to Board approval [17]

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]

Analyst's Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Kindly note that our content on Seeking Alpha and other platforms doesn't constitute financial advice ...

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]