SUNSTONE HOTEL INVESTORS REPORTS RESULTS FOR THIRD QUARTER 2022

Returns Capital to Shareholders Through Additional Share Repurchases and Dividends

IRVINE, Calif., Nov. 8, 2022 /PRNewswire/ — Sunstone Hotel Investors, Inc. (the “Company” or “Sunstone”) (NYSE: SHO), the proprietor of Long-Term Relevant Real Estate® within the lodging business, right now introduced outcomes for the third quarter ended September 30, 2022.

Third Quarter 2022 Operational Results (as in comparison with Third Quarter 2021):

• Net Income (Loss): Net earnings was $20.5 million as in comparison with a web lack of $22.1 million.
• Comparable Portfolio RevPAR: RevPAR on the comparable 12 resorts the Company owned throughout each 2022 and 2021 plus The Confidante Miami Beach (the “Comparable Portfolio”), elevated 49.0% to $207.18. The common day by day price was $287.75 and occupancy was 72.0%.
• Total Portfolio RevPAR: RevPAR on the 15 resorts, which incorporates the Comparable Portfolio, the Montage Healdsburg and the Four Seasons Resort Napa Valley (the “Total Portfolio”), was $222.50. The common day by day price was $311.62 and occupancy was 71.4%.
• Adjusted EBITDAre: Adjusted EBITDAre, excluding noncontrolling curiosity elevated 80.6% to $63.8 million.
• Adjusted FFO: Adjusted FFO attributable to frequent stockholders per diluted share elevated 118.2% to $0.24. In 2022, the Company modified its presentation of Adjusted FFO attributable to frequent stockholders to exclude the noncash amortization expense related to deferred inventory compensation. Adjusted FFO attributable to frequent stockholders for the prior durations introduced on this launch have additionally been adjusted to exclude this expense. The per share affect of this transformation as in comparison with the Company’s prior presentation is $0.01 for each of the third quarters of 2022 and 2021.

Information concerning the non-GAAP monetary measures disclosed on this launch is supplied beneath in “Non-GAAP Financial Measures.” Reconciliations of non-GAAP monetary measures to probably the most comparable GAAP measure for every of the durations introduced are included later on this launch.

Bryan A. Giglia, Chief Executive Officer, said, “We are pleased with our operating results in the third quarter which reflect continued strength in leisure travel and incremental growth in corporate and group demand. During the quarter, our operators aggressively grew room rates and delivered operating margins that were near pre-pandemic levels, despite rising costs. We are particularly encouraged by the increasing business volume we saw in September at our urban and group-oriented hotels which contributed to comparable portfolio monthly RevPAR that was above 2019 levels for the first time since the pandemic began. These positive trends have continued into October with our portfolio maintaining strong rates as occupancy continues to rebuild.”

Mr. Giglia continued, “During the third quarter, we successfully allocated capital by making strategic investments in our portfolio, initiating a value enhancing repositioning of our recently acquired resort in Miami and returning additional capital to our shareholders. We recently completed the guestroom renovation at the Hyatt Regency San Francisco and continued to advance the Westin conversion at our hotel in Washington, DC. These internal investments are expected to provide strong returns by enabling the hotels to better capture additional business as corporate and group events increasingly return to these markets. We are pleased with the initial performance of our recently acquired hotel in Miami, which is pacing ahead of expectations leading up to the start of its transformation to Andaz Miami Beach next year. Additionally, we continue to return capital to our shareholders through quarterly dividends and additional share repurchases. Our balance sheet retains capacity for additional capital deployment, and we continue to explore ways to recycle capital into higher growth opportunities.”                 

Third Quarter 2022 Highlights

• Completed the beforehand introduced Second Amended and Restated Credit Agreement (the “Amended Credit Agreement”) which expanded the Company’s unsecured borrowing capability and prolonged the maturity of the in-place time period loans. The Amended Credit Agreement continues to supply for a $500.0 million revolving credit score facility and elevated the mixture quantity of the Company’s two time period loans from $108.3 million to $350.0 million. The amenities bear curiosity pursuant to a leverage-based pricing grid starting from 1.35% to 2.25% over the relevant adjusted time period SOFR. The $500.0 million revolving credit score facility has two six-month extension choices, which might end in an prolonged maturity of July 2027. The two time period mortgage amenities every have a steadiness of $175.0 million and mature in July 2027 and January 2028. The Company utilized the proceeds obtained from the incremental borrowing on the time period loans to totally repay the $230.0 million that was excellent on its revolving credit score facility.
• Repurchased $20.0 million of the Company’s frequent inventory as of November 4, 2022 (together with $11.3 million repurchased subsequent to the top of the third quarter) at a mean buy value of $9.73 per share. The common buy value per share represents a considerable low cost to consensus estimates of NAV and implies a extremely engaging valuation a number of on the Company’s stabilized money circulate.
• Completed the renovation on the Hyatt Regency San Francisco. As a part of the mission, the guestrooms and loos have been renovated together with the alternative of casegoods and softgoods and the conversion of most bathtubs to showers.

Recent Developments

Stock Repurchase Program: During the primary 9 months of 2022, the Company repurchased 7,995,560 shares of its frequent inventory at a mean buy value of $10.82 per share. Year to this point by way of November 4, 2022, the Company has repurchased a complete of 9,166,351 shares of its frequent inventory at a mean value per share of $10.67 for a complete repurchase quantity earlier than bills of $97.8 million, leaving $402.2 million of licensed capability remaining underneath the Company’s inventory repurchase program.

Capital Investments: The Company invested $34.9 million and $97.5 million into its portfolio through the third quarter and first 9 months of 2022, respectively. The majority of the funding consisted primarily of extra progress on the renovation of the Renaissance Washington DC in preparation for its conversion to the Westin model in 2023, and a rooms renovation on the Hyatt Regency San Francisco which has now been accomplished. These tasks are anticipated to drive incremental development upon completion and can additional improve the earnings potential and worth of those well-located resorts. In 2022, the Company expects to take a position roughly $130 million to $140 million into its portfolio.

Corporate Responsibility Report: In November, the Company printed its up to date Corporate Responsibility Report. The report consists of particulars on Sunstone’s progress on its Environmental, Social and Governance (“ESG”) initiatives throughout 2021 and its dedication to boost its ESG program into 2022. A duplicate of the report could be discovered on the Corporate Responsibility web page of the Company’s web site.

Balance Sheet and Liquidity Update

As of September 30, 2022, the Company had $167.8 million of money and money equivalents, together with restricted money of $50.3 million, whole property of $3.1 billion, together with $2.9 billion of web investments in lodge properties, whole debt of $816.6 million and stockholders’ fairness of $2.1 billion.

Operations Update

Dividend Update

On November 7, 2022, the Company’s Board of Directors declared a money dividend of $0.05 per share of frequent inventory, in addition to money dividends of $0.124162 per share payable to its Series G cumulative redeemable most popular stockholder, $0.382813 per share payable to its Series H cumulative redeemable most popular stockholders and $0.356250 per share payable to its Series I cumulative redeemable most popular stockholders. The dividends will likely be paid on January 17, 2023 to stockholders of report as of December 30, 2022.

Supplemental Disclosures

Contemporaneous with this launch, the Company has furnished a Form 8-Ok with unaudited monetary data. This extra data is being supplied as a complement to the data on this launch and different filings with the SEC. The Company has no obligation to replace any of the data supplied to evolve to precise outcomes or modifications within the Company’s portfolio, capital construction or future expectations.

Earnings Call

The Company will host a convention name to debate third quarter 2022 monetary outcomes on November 8, 2022, at 12:00 p.m. Eastern Time (9:00 a.m. Pacific Time). A dwell webcast of the decision will likely be out there by way of the Investor Relations part of the Company’s web site at www.sunstonehotels.com. Alternatively, events might dial 1-888-330-3573 and reference convention ID 4831656 to take heed to the dwell name. A replay of the webcast may also be archived on the web site.

About Sunstone Hotel Investors, Inc.

Sunstone Hotel Investors, Inc. is a lodging actual property funding belief (“REIT”) that as of the date of this launch owns 15 resorts comprised of seven,735 rooms, the vast majority of that are operated underneath nationally acknowledged manufacturers. Sunstone’s technique is to create long-term stakeholder worth by way of the acquisition, lively possession and disposition of resorts thought of to be Long-Term Relevant Real Estate®. For additional data, please go to Sunstone’s web site at www.sunstonehotels.com. The Company’s web site is supplied as a reference solely and any data on the web site just isn’t integrated by reference on this launch.

Forward-Looking Statements

This press launch comprises forward-looking statements throughout the that means of federal securities legal guidelines and rules. These forward-looking statements are recognized by their use of phrases and phrases similar to “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will” and different related phrases and phrases, together with opinions, references to assumptions and forecasts of future outcomes. Forward-looking statements will not be ensures of future efficiency and contain identified and unknown dangers, uncertainties and different components which will trigger the precise outcomes to vary materially from these anticipated on the time the forward-looking statements are made. These dangers embrace, however will not be restricted to: the affect the COVID-19 pandemic has on the Company’s business and the economy, in addition to the response of governments and the Company to the pandemic, and the way rapidly and efficiently efficient vaccines and therapies are distributed and administered; elevated dangers associated to worker issues, together with elevated employment litigation and claims for severance or different advantages tied to termination or furloughs because of momentary lodge suspensions or lowered lodge operations as a result of COVID-19; basic financial and business circumstances, together with a U.S. recession or elevated inflation, commerce conflicts and tariffs, regional or world financial slowdowns and any sort of flu or disease-related pandemic that impacts journey or the flexibility to journey, together with COVID-19; the necessity for business-related journey, together with the elevated use of business-related expertise; rising lodge working prices as a result of labor prices, staff’ compensation and health-care associated prices, utility prices, property and legal responsibility insurance prices, unanticipated prices similar to acts of nature and their penalties and different prices that will not be offset by elevated room charges; the bottom lease for one of many Company’s resorts; the necessity for renovations, repositionings and different capital expenditures for the Company’s resorts; the affect, together with any delays, of renovations and repositionings on lodge operations; new lodge provide, or different lodging choices similar to timeshare, trip leases or sharing companies similar to Airbnb, within the Company’s markets, which may hurt its occupancy ranges and income at its resorts; competitors from resorts not owned by the Company; relationships with, and the necessities, efficiency and fame of, the managers of the Company’s resorts; relationships with, and the necessities and fame of, the Company’s franchisors and lodge manufacturers; the Company’s resorts might develop into impaired, which can adversely have an effect on its monetary situation and outcomes of operations; competitors for the acquisition of resorts, and the Company’s capability to finish acquisitions and inclinations; efficiency of resorts after they’re acquired; modifications within the Company’s business technique or acquisition or disposition plans; the Company’s stage of debt, together with secured, unsecured, fastened and variable price debt; monetary and different covenants within the Company’s debt and most popular inventory; the affect on the Company’s business of potential defaults by the Company on its debt agreements or leases; volatility within the capital markets and the impact on lodging demand or the Company’s capability to acquire capital on favorable phrases or in any respect; the Company’s must function as a REIT and adjust to different relevant legal guidelines and rules, together with new legal guidelines, interpretations or court docket choices which will change the federal or state tax legal guidelines or the federal or state earnings tax penalties of the Company’s qualification as a REIT; potential adversarial tax penalties within the occasion that the Company’s working leases with its taxable REIT subsidiaries will not be held to have been made on an arm’s-length foundation; system safety dangers, knowledge safety breaches, cyber-attacks and techniques integration points, together with these impacting the Company’s suppliers, lodge managers or franchisors; different occasions past the Company’s management, together with local weather change, pure disasters, terrorist assaults or civil unrest; and different dangers and uncertainties related to the Company’s business described in its filings with the Securities and Exchange Commission. Although the Company believes the expectations mirrored in such forward-looking statements are based mostly upon cheap assumptions, it may give no assurance that the expectations will likely be attained or that any deviation won’t be materials. All forward-looking data supplied herein is as of the date of this launch, and the Company undertakes no obligation to replace any forward-looking assertion to evolve the assertion to precise outcomes or modifications within the Company’s expectations.

This launch must be learn along with the consolidated monetary statements and notes thereto included in our most up-to-date studies on Form 10-Ok and Form 10-Q. Copies of those studies can be found on our web site at www.sunstonehotels.com and thru the SEC’s Electronic Data Gathering Analysis and Retrieval System (“EDGAR”) at www.sec.gov.

Non-GAAP Financial Measures

We current the next non-GAAP monetary measures that we imagine are helpful to traders as key supplemental measures of our working efficiency: earnings earlier than curiosity expense, taxes, depreciation and amortization for actual property, or EBITDAre; Adjusted EBITDAre, excluding noncontrolling curiosity (as outlined beneath); funds from operations attributable to frequent stockholders, or FFO attributable to frequent stockholders; Adjusted FFO attributable to frequent stockholders (as outlined beneath); lodge Adjusted EBITDAre; and lodge Adjusted EBITDAre margins. These measures shouldn’t be thought of in isolation or as an alternative to measures of efficiency in accordance with GAAP. In addition, our calculation of those measures will not be akin to different corporations that don’t outline such phrases precisely the identical because the Company. These non-GAAP measures are used along with and together with outcomes introduced in accordance with GAAP. They shouldn’t be thought of as alternate options to web earnings (loss), money circulate from operations, or some other working efficiency measure prescribed by GAAP. These non-GAAP monetary measures mirror extra methods of viewing our operations that we imagine, when seen with our GAAP outcomes and the reconciliations to the corresponding GAAP monetary measures, present a extra full understanding of things and traits affecting our business than may very well be obtained absent this disclosure. We strongly encourage traders to overview our monetary data in its entirety and to not depend on a single monetary measure.

We current EBITDAre in accordance with tips established by the National Association of Real Estate Investment Trusts (“NAREIT”), as outlined in its September 2017 white paper “Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate.” We imagine EBITDAre is a helpful efficiency measure to assist traders consider and evaluate the outcomes of our operations from interval to interval compared to our friends. NAREIT defines EBITDAre as web earnings (calculated in accordance with GAAP) plus curiosity expense, earnings tax expense, depreciation and amortization, good points or losses on the disposition of depreciated property (together with good points or losses on change in management), impairment write-downs of depreciated property and of investments in unconsolidated associates attributable to a lower within the worth of depreciated property within the affiliate, and changes to mirror the entity’s share of EBITDAre of unconsolidated associates.

We make extra changes to EBITDAre when evaluating our efficiency as a result of we imagine that the exclusion of sure extra objects described beneath offers helpful data to traders concerning our working efficiency, and that the presentation of Adjusted EBITDAre, excluding noncontrolling curiosity, when mixed with the first GAAP presentation of web earnings, is helpful to an investor’s full understanding of our working efficiency. In addition, we use each EBITDAre and Adjusted EBITDAre, excluding noncontrolling curiosity as measures in figuring out the worth of lodge acquisitions and inclinations.

We imagine that the presentation of FFO attributable to frequent stockholders offers helpful data to traders concerning our working efficiency as a result of it’s a measure of our operations with out regard to specified noncash objects similar to actual property depreciation and amortization, any actual property impairment loss and any acquire or loss on sale of actual property property, all of that are based mostly on historic price accounting and could also be of lesser significance in evaluating our present efficiency. Our presentation of FFO attributable to frequent stockholders conforms to NAREIT’s definition of “FFO applicable to common shares.” Our presentation will not be akin to FFO reported by different REITs that don’t outline the phrases in accordance with the present NAREIT definition, or that interpret the present NAREIT definition in another way than we do.

We additionally current Adjusted FFO attributable to frequent stockholders when evaluating our working efficiency as a result of we imagine that the exclusion of sure extra objects described beneath offers helpful supplemental data to traders concerning our ongoing working efficiency, and should facilitate comparisons of working efficiency between durations and our peer corporations.

We alter EBITDAre and FFO attributable to frequent stockholders for the next objects, which can happen in any interval, and refer to those measures as both Adjusted EBITDAre, excluding noncontrolling curiosity or Adjusted FFO attributable to frequent stockholders:

• Amortization of deferred inventory compensation: we exclude the noncash expense incurred with the amortization of deferred inventory compensation as this expense is predicated on historic inventory costs on the date of grant to our company workers and doesn’t mirror the underlying efficiency of our resorts.
• Amortization of contract intangibles: we exclude the noncash amortization of any favorable or unfavorable contract intangibles recorded together with our lodge acquisitions. We exclude the noncash amortization of contract intangibles as a result of it’s based mostly on historic price accounting and is of lesser significance in evaluating our precise efficiency for the present interval.
• Gains or losses from debt transactions: we exclude the impact of finance costs and premiums related to the extinguishment of debt, together with the acceleration of deferred financing prices from the unique issuance of the debt being redeemed or retired as a result of, like curiosity expense, their removing helps traders consider and evaluate the outcomes of our operations from interval to interval by eradicating the affect of our capital construction.
• Acquisition prices: underneath GAAP, prices related to acquisitions that meet the definition of a business are expensed within the 12 months incurred. We exclude the impact of those prices as a result of we imagine they don’t seem to be reflective of the continued efficiency of the Company or our resorts.
• Cumulative impact of a change in accounting precept: every so often, the FASB promulgates new accounting requirements that require the consolidated assertion of operations to mirror the cumulative impact of a change in accounting precept. We exclude these one-time changes, which embrace the accounting affect from prior durations, as a result of they don’t mirror our precise efficiency for that interval.
• Other changes: we exclude different changes that we imagine are outdoors the atypical course of business as a result of we don’t imagine these prices mirror our precise efficiency for the interval and/or the continued operations of our resorts. Such objects might embrace: lawsuit settlement prices; prior 12 months property tax assessments or credit; the write-off of growth prices related to deserted tasks; property-level restructuring, severance and administration transition prices; debt decision prices; lease terminations; property insurance restoration proceeds or uninsured losses; and different nonrecurring recognized changes.

In addition, to derive Adjusted EBITDAre, excluding noncontrolling curiosity we exclude the noncontrolling associate’s professional rata share of the online (earnings) loss allotted to the Hilton San Diego Bayfront partnership, in addition to the noncontrolling associate’s professional rata share of any EBITDAre and Adjusted EBITDAre elements (previous to our acquisition of the noncontrolling associate’s fairness curiosity within the partnership in June 2022). We additionally exclude the amortization of our right-of-use property and associated lease obligations as these bills are based mostly on historic price accounting and don’t mirror the precise lease quantities as a result of respective lessors or the underlying efficiency of our resorts. Additionally, we embrace an adjustment for the money finance lease expense recorded on the constructing lease on the Hyatt Centric Chicago Magnificent Mile (previous to the lodge’s sale in February 2022). We decided that the constructing lease is a finance lease, and, subsequently, we embrace a portion of the lease fee every month in curiosity expense. We alter EBITDAre for the finance lease to be able to extra precisely mirror the precise lease as a result of lodge’s lessor within the present interval, in addition to the working efficiency of the lodge. We additionally exclude the impact of good points and losses on the disposition of undepreciated property as a result of we imagine that together with them in Adjusted EBITDAre, excluding noncontrolling curiosity just isn’t in keeping with reflecting the continued efficiency of our property.

To derive Adjusted FFO attributable to frequent stockholders, we additionally exclude the noncash curiosity on our derivatives and finance lease obligation as we imagine that these things will not be reflective of our ongoing finance prices. Additionally, we exclude the noncontrolling associate’s professional rata share of any FFO changes associated to our consolidated Hilton San Diego Bayfront partnership elements (previous to our acquisition of the noncontrolling associate’s fairness curiosity within the partnership in June 2022). We additionally exclude the true property amortization of our right-of-use property and associated lease obligations, which incorporates the amortization of each our finance and working lease intangibles (except for our company working lease), as these bills are based mostly on historic price accounting and don’t mirror the precise lease quantities as a result of respective lessors or the underlying efficiency of our resorts. In addition, we exclude most popular inventory redemption costs, modifications to deferred tax property, liabilities or valuation allowances, and earnings tax advantages or provisions related to the appliance of web working loss carryforwards, unsure tax positions or with the sale of property apart from actual property investments.

In presenting lodge Adjusted EBITDAre and lodge Adjusted EBITDAre margins, miscellaneous non-hotel objects have been excluded. We imagine the calculation of lodge Adjusted EBITDAre leads to a extra correct presentation of the lodge Adjusted EBITDAre margins for our resorts, and that these non-GAAP monetary measures are helpful to traders in evaluating our property-level working efficiency.

Reconciliations of web earnings (loss) to EBITDAre, Adjusted EBITDAre, excluding noncontrolling curiosity, FFO attributable to frequent stockholders, Adjusted FFO attributable to frequent stockholders, lodge Adjusted EBITDAre and lodge Adjusted EBITDAre margins are set forth within the following pages of this launch.

For Additional Information:
Aaron Reyes
Sunstone Hotel Investors, Inc.
(949) 382-3018