SHO-PI — Sunstone Hotel Investors, Inc.

Summary of Sunstone Hotel Investors (SHO-PI) Q4 2025 Earnings Call

1. Key Financial Results and Metrics:

• Total RevPAR Growth: 7.4% for Q4, 12.5% including Andaz Miami Beach.
• Rooms RevPAR: Grew 9.6% in Q4, benefiting from Andaz.
• Adjusted EBITDAre: $57 million for Q4.
• Adjusted FFO: $0.20 per diluted share.
• Net Leverage: 3.5x trailing earnings, 4.7x including preferred equity.
• Liquidity: Over $700 million available, including cash and credit facility.
• Capital Returned to Shareholders: Over $170 million through dividends and share repurchases.

2. Strategic Updates and Business Highlights:

• Strategic Objectives: Focus on recycling capital, investing in the portfolio, and returning capital to shareholders.
• Asset Sales: Completed the sale of Hilton New Orleans at a mid-6% cap rate, with proceeds used for stock repurchases.
• New Openings: Andaz Miami Beach opened successfully, contributing positively to performance.
• Capital Projects: Renovations at Wailea Beach Resort and meeting spaces in San Antonio and San Diego completed.

3. Forward Guidance and Outlook:

• 2026 RevPAR Guidance: Expected to increase between 4% and 7%, with total RevPAR growth projected between 3.5% and 6.5%.
• Adjusted EBITDAre for 2026: Expected in the range of $225 million to $250 million.
• FFO per Diluted Share: Projected between $0.81 and $0.94, reflecting 8% growth from 2025.
• First Quarter Outlook: Anticipated to be the strongest growth quarter due to Andaz and improved performance in Maui.

4. Bad News, Challenges, or Points of Concern:

• Market Headwinds: Ongoing softness in transient demand in San Diego and uncertainty in Washington, D.C. could offset growth.
• Cost Pressures: Anticipated expense growth of around 5%, with challenges in maintaining margins due to inflation and rising labor costs.
• Group Business: Weaker group business in D.C. and San Diego, with concerns about the impact of government-related events on performance.

5. Notable Q&A Insights:

• Market Recovery: Positive trends in Maui and D.C. were highlighted, with expectations of improved transient demand.
• Expense Management: Cost growth is expected to be managed effectively, but margin pressures are anticipated due to lower RevPAR growth.
• Asset Dispositions: Management indicated a willingness to sell assets at attractive valuations while being cautious about capital allocation.
• San Diego Market: Signs of recovery in transient demand were noted, but the impact of government contractors remains a concern.

Overall, Sunstone Hotel Investors reported a strong finish to 2025, with positive operational metrics and strategic initiatives aimed at enhancing shareholder value. However, the company remains cautious about potential headwinds in key markets and ongoing cost pressures as it looks ahead to 2026.