Q1 2025 Sunstone Hotel Investors Inc Earnings Call
Operator: Good morning, ladies and gentlemen, and thank you for standing by.
Good morning, ladies and gentlemen, and thank you for standing by welcome to the Sunstone Hotel investors first quarter 2025 earnings call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time.
Operator: Welcome to the Sunstone Hotel Investors' first quarter 2025 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time.
Operator: I would like to remind everyone that this conference is being recorded today, May 6, 2025, at 10.30 a.m. Eastern Time.
Speaker Change: I'd like to remind everyone that this conference is being recorded today may six 2025 at 10 30, a M. Eastern time I will now turn the presentation over to Mr. Aaron Reyes Chief Financial Officer. Please go ahead Sir.
Aaron Reyes: I will now turn the presentation over to Mr. Aaron Reyes, Chief Financial Officer. Please go ahead, sir. Thank you, operator.
Speaker Change: Thank you operator.
Aaron Reyes: Before we begin, I would like to remind everyone that this call contains forward-looking statements that are subject to risks and uncertainty. including those described in our filings with the SEC, which could cause actual results to differ materially from those projected. We caution you to consider these factors in evaluating our forward-looking statements.
Speaker Change: Before we begin I would like to remind everyone that this call contains forward looking statements that are subject to risks and uncertainties, including those described in our filings with the SEC, which could cause actual results to differ materially from those projected.
Speaker Change: We caution you to consider these factors in evaluating our forward looking statements.
Aaron Reyes: We also note that the commentary on this call will contain non-GATT financial information.
Speaker Change: We also note that the commentary on this call will contain non-GAAP financial information, including adjusted EBITDA R E.
Aaron Reyes: including AdjustedEva.re Adjusted FFO, and HotelAdjustedIBA.re We are providing this information as a supplement to information prepared in accordance with generally accepted accounting principles. Additional details on our quarterly results have been provided in our earnings release and supplemental, which are available in the Investor Relations section of our website.
Speaker Change: Adjusted <unk> and hotel adjusted EBITDA R E.
Speaker Change: We are providing this information as a supplement to information prepared in accordance with generally accepted accounting principles.
Speaker Change: Additional details on our quarterly results have been provided in our earnings release and supplemental which are available in the Investor Relations section of our website.
Aaron Reyes: With us on the call today are Bryan Giglia, Chief Executive Officer, and Robert Springer, President and Chief Investment Officer. Bryan will start us off by providing some commentary on recent developments and our first quarter operations.
Speaker Change: With us on the call today are Bryan Giglia, Chief Executive Officer, and Robert Springer, President and Chief Investment Officer.
Speaker Change: Brian will start us off by providing some commentary on recent developments in our first quarter operations.
Aaron Reyes: Afterward, Robert will discuss our capital investment activity.
Speaker Change: Afterward.
Speaker Change: Robert will discuss our capital investment activity and finally, I will review, our first quarter earnings results and provide the details of our updated outlook for 2025.
Aaron Reyes: And finally, I will review our first quarter earnings results and provide the details of our updated outlook for 2025. After our remarks, the team will be available to answer your questions.
Speaker Change: After our remarks, the team will be available to answer your questions.
Bryan Giglia: With that, I would like to turn the call over to Bryan. Please go ahead. Thank you, Aaron, and good morning, everyone.
Brian: With that I would like to turn the call over to Brian. Please go ahead.
Brian: Thank you Aaron and good morning, everyone. It was an eventful quarter that began with stronger than expected performance in January and February driven by the Super Bowl in New Orleans, and the inauguration in D. C. And then was partially offset by a pullback in government and leisure demand.
Bryan Giglia: It was an eventful quarter that began with stronger-than-expected performance in January and February, driven by the Super Bowl in New Orleans and the inauguration in D.C., and then was partially offset by a pullback in government and leisure demand in select markets in March as the macroeconomic outlook became more mixed. Our first quarter EBITDA and FFO came in just above our expectations as better out-of-room spend, solid cost controls by our operators, and savings at the corporate office offset softer room revenue growth.
Brian: Select markets in March as the macroeconomic outlook became more mixed.
Brian: Our first quarter EBITDA in SFO came in just above our expectations as better out of room spend.
Brian: Solid cost controls by our operators and savings at the corporate office offset softer room revenue growth.
Bryan Giglia: I'll provide some additional details on our first quarter operation shortly, but first, I am happy to announce the next chapter of the Sunstone growth story with the debut of the Andaz Miami Beach, which began welcoming guests on May 3rd. While the road to opening was met with numerous permitting and approval delays, the doors are now open and guests can experience an exceptional Miami Beach resort. I was on property last week and the finished product looks great and is well positioned to deliver on our underwriting and provide earnings growth for the next several years.
Brian: I'll provide some additional details on our first quarter operation shortly but first I am happy to announce the next chapter of the Sunstone growth story with the debut of the Andaz Miami Beach, which began welcoming guests on may 3rd.
Brian: While the road to opening was met with numerous permitting and approval delays. The doors are now open and guess can experience an exception on Miami Beach resort.
Brian: I was on property last week and the finished product looks great and is well positioned to deliver on our underwriting and provide earnings growth for the next several years.
Bryan Giglia: This is a significant component of our layered approach to growth, which will add to the success we have experienced with the conversions of the Weston, D.C. downtown and the Marriott Long Beach downtown.
Brian: This is a significant component of our layered approach to growth.
Brian: <unk> will add to the success, we have experienced with the conversions at the Westin D C downtown and the Marriott long Beach downtown.
Bryan Giglia: The acquisition of the Hyatt Regency San Antonio Riverwalk. and the capital we have deployed into the purchase of our common stock. We expect to continue our balanced and nimble approach to capital allocation and to utilize our strong balance sheet and future asset recycling to drive growth in FFO and NAV per share.
Brian: The acquisition at the Hyatt Regency, San Antonio Riverwalk.
Brian: And the capital we have deployed into the purchase of our common stock.
Brian: We expect to continue our balanced and nimble approach to capital allocation.
Brian: To utilize our strong balance sheet and future asset recycling to drive growth in SFO and NAV per share.
Bryan Giglia: Now, shifting back to our quarterly results. We were pleased with how the portfolio performed relative to our expectations despite the incremental volatility we began to see later in the quarter. The inauguration drove out-sized growth in Washington, D.C., with our recently renovated hotel generating a 24% increase in RevPAR during the quarter. Additionally, in New Orleans, our two hotels grew RevPAR by a combined 25% on strong performance from the Super Bowl, even with the cancellation headwinds from a rare snowstorm that hit the city in January and negatively impacted what was slated to be a high-demand period in the city.
Brian: Now shifting back to our quarterly results. We were pleased with how the portfolio performed relative to our expectations. Despite the incremental volatility we began to see later in the quarter.
Brian: The inauguration drove outsized growth in Washington D C with our recently renovated hotel generating a 24% increase in revpar during the quarter <unk>.
Brian: Additionally, in New Orleans are two hotels grew revpar by a combined 25% on strong performance from the Super Bowl.
Brian: Even with the cancellation headwinds from a rare snow storm that hit the area in January and negatively impacted what was slated to be a high demand period in the city.
Brian: Okay.
Bryan Giglia: Outside of this event-driven business, we saw sustained strength in group demand and continued growth in business travel. In San Francisco, we generated REVPAR growth of 9% as the result of a better citywide calendar and increased levels of commercial activity in the downtown area. Our performance in San Francisco is encouraging as we have meaningful opportunity for additional earnings recovery there as growth in the city has lagged other major markets, but has an increasingly positive outlook for the coming years. After having a great 2024, trends in Boston remain strong into the first quarter with solid performance at our well-located Marriott Longmore.
Brian: Outside of this event driven business, we saw sustained strength in group demand and continued growth in business travel.
Brian: In San Francisco, we generated revpar growth of 9%.
Brian: As the result of a better citywide calendar and increased levels of commercial activity in the downtown area.
Brian: Our performance in San Francisco is encouraging as we have meaningful opportunity for additional earnings recovery there as growth in this city has lagged other major markets, but has an increasingly positive outlook for the coming years.
Brian: After having a great 2024 trends in Boston remains strong into the first quarter with solid performance at our well located and Marriott long wharf.
Bryan Giglia: The better-than-expected performance in most of our urban and convention markets was partially offset by more subdued market-wide transient demand in San Diego. While first quarter results in San Diego were less robust, the outlook for the remainder of the year is more encouraging, with solid growth expected in the second quarter, followed by the recapture of lost business from the labor activity that occurred in the third and fourth quarters of last year. Overall group and business transient demand was strong in the first Despite some pockets of softness primarily related to government business. Good first quarter production and positive group pace across the portfolio would point to stability in these trends for the remainder of the year.
Brian: The better than expected performance in most of our urban and convention markets was partially offset by more subdued market wide transient demand in San Diego.
Brian: While first quarter results and San Diego were less robust the outlook for the remainder of the year is more encouraging with solid growth expected in the second quarter, followed by the recapture of lost business from the labor activity that occurred in the third and fourth quarters of last year.
Brian: Overall group and business transient demand was strong in the first quarter.
Brian: Despite some pockets of softness primarily related to government business.
Brian: Good first quarter production and positive group pace across the portfolio would point to stability in these trends for the remainder of the year.
Bryan Giglia: On the transient side, we were encouraged by growth in midweek demand. This is an indicator that corporate America continues to travel, a trend that is supported by increased return to office and the greater levels of activity we are seeing in the business districts of our urban market. Within our resort portfolio, we saw softer-than-expected performance in Wailea as all inventory comes back online on the west side and the island continues to recover from the fire. Our Waialea Beach Resort's premier location as the closest property to the water on what is arguably the best strip of beachfront land in the country gives us confidence that we will navigate through this short-term choppiness and return to growth in the coming quarters.
Brian: On the transient side, we were encouraged by growth in midweek demand.
Brian: This is an indicator that corporate America continues to travel a trend that is supported by increased return to office and the greater levels of activity. We are seeing in the business districts of our urban markets.
Brian: Within our resort portfolio, we saw softer than expected performance from wild.
Brian: As all inventory comes back online on the West side and the island continues to recover from the fires.
Brian: Our wildfire beach resorts Premier location as the closest property to the water on what is arguably the best strip. It beachfront land in the country gives us confidence that we will navigate through this short term choppiness and returned to growth in the coming quarters.
Bryan Giglia: This period of transition as the Kanapali sub-market reopens will be a long-term positive for the island as it will ultimately bring the return of more guests and drive additional airlift into Maui. Our updated Outlook assumes that we face a softer demand environment in Wailea for the next couple orders as Kanapali returns to normalized operating levels. Group production at Waialea for all future periods was up nearly 20% in the first quarter relative to the prior year and gives us reason to be optimistic that sunnier days lay ahead for our resort.
Brian: This period of transition as the kind of Polish sub market reopens, we will be a long term positive for the island as it will ultimately bring the return of more guests and drive additional airlift into Maui.
Brian: Our updated outlook assumes that we faced a softer demand environment and wildly here for the next couple of quarters as kind of poly returns to normalized operating levels.
Brian: Group production at <unk> for all future periods was up nearly 20% in the first quarter relative to the prior year and gives us reason to be optimistic that Sunnier days lay ahead for our resort.
Bryan Giglia: As we have shared with you before, investing in our portfolio remains a key component of the Sunstone story. We saw the benefits of this in the first quarter with our recently renovated and converted Marriott Long Beach Downtown, which posted a solid 145% increase in Rev Park. while we expect to continue to benefit from outsized growth in Long Beach for the coming quarters.
Brian: As we have shared with you before investing in our portfolio remains a key component of the Sunstone story.
Brian: We saw the benefits of this in the first quarter with our recently renovated and converted Marriott long beach downtown which posted a solid 145% increase in revpar.
Brian: While we expect to continue to benefit from outsized growth in long beach for the coming quarters.
Bryan Giglia: We will now also see the contribution from the Andaz Miami Beach in the second half of the year, which will deliver our next layer of growth that will extend into 2026 and beyond. The growth generated from these conversions is not limited to the immediate year following completion. Inauguration aside, we continue to see the Westin D.C. downtown establish itself as a premier group and business transient hotel, driving incremental cash flow as it approaches its third year following renovation, despite a near-term slowdown in government demand.
Brian: We will now also see the contribution from the <unk> Miami Beach in the second half of the year, which will deliver our next layer of growth that will extend into 2026 and beyond.
Brian: The growth generated from these conversions is not limited to the immediate year following completion.
Brian: <unk> aside we continue to see the Westin DC downtown establish itself as a premier group and business transient hotel driving incremental cash flow as it approaches its third year following renovation despite a near term slowdown in government demand.
Bryan Giglia: While we were encouraged by many of the trends we saw in the early months of the year, Operating Fundamentals moderated as the quarter progressed, driven primarily by increasing macroeconomic uncertainty and declining business and consumer confidence. While this has led to lowered expectations in a few markets for the middle part of the year, we are seeing more stable trends in other areas and steady booking volumes across most of the portfolio for the latter part of the year. Given the increased volatility, the uncertainty regarding economic policy changes, and the greater variability in the range of possible economic outcomes for the year, our forward visibility has become more limited.
Brian: While we were encouraged by many of the trends we saw in the early months of the year operating fundamentals moderated as the quarter progressed, driven primarily by increasing macroeconomic uncertainty and declining business and consumer confidence.
Brian: While this has led to lowered expectations in a few markets for the middle part of the year.
Brian: We are seeing more stable trends in other areas and steady booking volumes across most of the portfolio for the latter part of the year.
Brian: Given the increased volatility.
Brian: The uncertainty regarding economic policy changes and the greater variability in the range of possible economic outcomes for the year.
Brian: Our forward visibility has become more limited.
Bryan Giglia: As a result of these factors, we are adjusting our full-year outlook to better align with current trends. The updated outlook that Aaron will discuss shortly is based on information available to us today, but is subject to change, both negatively or positively, based on how future macroeconomic developments impact lodging demands. Our current outlook reflects the revised opening date for the ONDAWs and assumes continued weakness in government-related business, no meaningful change to the imbalance of international travel, and a more subdued demand environment in Hualea for the coming quarters before resuming growth later this year. Given the lack of visibility and overall economic volatility, we are extrapolating these trends forward, which could prove to be a conservative approach if the environment stabilizes sooner than expected.
Brian: As a result of these factors we are adjusting our full year outlook to better align with current trends.
Brian: The updated outlook that Erin will discuss shortly is based on information available to us today, but is subject to change both negatively or positively based on how future macroeconomic developments impact lodging demand.
Brian: Our current outlook reflects the revised opening date for the <unk> and assumes continued weakness in government related business no meaningful change to the imbalance of international travel and a more subdued demand environment and wildly here for the coming quarters before resuming.
Brian: Road later this year.
Brian: Given the lack of visibility and overall economic volatility we are extrapolating these trends forward, which could prove to be a conservative approach if the environment stabilizes sooner than expected.
Bryan Giglia: That said, our capital recycling and investment efforts are still delivering sector-leading growth. This is a direct result of our layered approach to recycling capital, investing in our portfolio, and returning capital to our shareholders. As you saw in our earnings release this morning, we repurchased $21 million of stock at a blended repurchase price of $8.90 per share. Repurchasing our shares at these levels equates to a highly compelling multiple on our earnings and results in significant value creation. Given our strong balance sheet and the earnings contribution we anticipate from our recent investments, we are well positioned to generate incremental shareholder value by opportunistically repurchasing our shares.
Brian: That said, our capital recycling and investment efforts are still delivering sector leading growth.
Brian: This is a direct result of our layered approach to recycling capital investing in our portfolio and returning capital to our shareholders.
Brian: As you saw in our earnings release. This morning, we repurchased $21 million of stock at a blended repurchase price of $8 90 per share.
Brian: Repurchasing our shares at these levels equates to a highly compelling multiple on our earnings and results in significant value creation.
Brian: Given our strong balance sheet and the earnings contribution we anticipate from our recent investments we are well positioned to generate incremental shareholder value by opportunistically repurchasing our shares.
Bryan Giglia: Given the current discount to NAV, we will look to recycle additional capital into share repurchase, potentially through additional asset sales.
Brian: Given the current discount to NAV.
Brian: We will look to recycle additional capital into share repurchase potentially through additional asset sales.
Bryan Giglia: To sum things up, despite a more volatile operating environment than we expected at the start of the year, we continued to execute on our strategic objectives in the first quarter. We are advancing the page in the Sunstone growth story with the opening of the Ondas Miami Beach and the continued growth from our other recent investments in Long Beach and Washington, D.C. We will further advance our capital recycling strategy by utilizing our available balance sheet capacity and future asset sales to thoughtfully grow our FFO and NAV per share as we move further into the year.
Brian: To sum things up despite a more volatile operating environment than we expected at the start of the year.
Brian: We continued to execute on our strategic objectives in the first quarter.
Brian: We are advancing the page in the sunstone growth story with the opening of the Andaz Miami Beach and the continued growth from our other recent investments in long Beach, and Washington DC.
Brian: We will further advance our capital recycling strategy by utilizing our available balance sheet capacity and future asset sales to thoughtfully grow our <unk> and NAV per share as we move further into the year.
Robert Springer: And with that, I'd like to turn the call over to Robert to give some additional thoughts on our capital investment. Robert, please go ahead. Thanks, Bryan. We are very pleased to have the Andaz Miami Beach open and expect the resort will be a fitting addition to MidBeach, which is defining itself as the more elevated and sought-after destination of Miami Beach. In addition to the amenities that are available today, over the coming months, we will introduce Olazul, a members-only beach club which will operate from a historic home in the resort's Later, the resort will also debut The Bazaar by José Andrés, which we expect will further increase the appeal of the property and serve as a dining destination for local residents and guests from nearby hotels.
Speaker Change: And with that I'd like to turn the call over to Robert to give some additional thoughts on our capital investments Robert Please go ahead.
Robert Springer: Thanks, Brian.
Speaker Change: We're very pleased to have the Andaz Miami Beach open and expect the resort will be a fitting addition to mid beach, which is defining itself as the more elevated and sought after destination of Miami Beach.
Speaker Change: In addition to the amenities that are available today over the coming months, we will introduce OLED rule a members only beach club, which will operate from a historic home in the resorts backyard.
Speaker Change: Later, the resort will also debut the bizarre by Jose Andres, which we expect will further increase the appeal of the property and serve as a dining destination for local residents and guests from nearby hotels.
Robert Springer: Elsewhere across the portfolio, we have recently completed a rooms renovation and lobby refresh at the Wileya Beach Resort and are in the process of creating two additional residential-style oceanfront villa units following the positive reception we received from those that came online at the end of last year. In San Antonio, we will begin renovating the meeting space in the third quarter. We expect to move efficiently through this project and be complete by the end of the year. Part of what appealed to us in acquiring this hotel is the opportunity to reprogram the lower lobby level to take advantage of the new development activity happening next door at the Alamo Visitor Center and Museum.
Speaker Change: Elsewhere across the portfolio, we have recently completed a rooms renovation in lobby refresh at the widely a beach resort and are in the process of creating two additional residential style Ocean front Billy units. Following the positive reception. We received from those that came online at the end of last year.
Speaker Change: In San Antonio, we will begin renovating the meeting space in the third quarter.
Speaker Change: We expect to move efficiently through this project and be complete by the end of the year.
Speaker Change: Part of what appealed to us in acquiring this hotel is the opportunity to reprogram the lower lobby level to take advantage of the new development activity happening next door at the Alamo Visitor Center and museum.
Robert Springer: We are still in the planning stages of this effort, but look forward to updating you as we progress.
Speaker Change: We are still in the planning stages of this effort, but look forward to updating you as we progress.
Robert Springer: In San Diego, we are in the final planning stages for a renovation of the meeting space at our Hilton Bayfront and expect to be in a position to begin work late in the year. We will complete the meeting space update in phases, resulting in minimal disruption, which is included in our outlook. Corporate meetings are the core business of this very productive hotel, and by upgrading the space, we will enhance its ability to attract the best groups in the market.
Speaker Change: In San Diego, we are in the final planning stages for a renovation of the meeting space at our Hilton Bayfront and expect to be in a position to begin work late in the year.
Speaker Change: We will complete the meeting space update in phases, resulting in minimal disruption, which is included in our outlook.
Speaker Change: Corporate meetings or the core business of this very productive hotel and by upgrading the space, we will enhance its ability to attract the best groups in the market.
Robert Springer: As we shared with you last quarter, we expect our capital investment activity for this year will be in the range of $80 to $100 million. While there is still too much uncertainty to accurately assess the impact of the recent tariff announcements on our future capital projects, the largest components of our spend for this year relate to projects that were already underway at the start of the year and for which materials had largely been procured. While this certainly does not mean we are not at risk for cost inflation in certain areas, based on what we know today, we expect to be able to complete our planned activities for this year within our prior estimated range.
Speaker Change: As we shared with you last quarter, we expect our capital investment activity for this year will be in the range of $80 million to $100 million.
While there is still too much uncertainty to accurately assess the impact of the recent tariff announcements on our future capital projects the largest components of our spend for this year relate to projects that were already underway at the start of the year and for which materials had largely been procured.
Speaker Change: While this certainly does not mean, we are not at risk for cost inflation in certain areas based on what we know today, we expect to be able to complete our planned activities for this year within our prior estimated range.
Robert Springer: Now turning to the transaction market.
Speaker Change: Now turning to the transaction market.
Robert Springer: As we moved into 2025, we had higher hopes that the setup for the year would support a more robust transaction market. However, the uncertainty that has permeated the environment since that time makes finding and getting deals done much more challenging. As Bryan noted, recycling capital is a primary component of our strategy. And so, despite the recent volatility, we continue to seek out opportunities to drive growth and create value through accretive transaction activity. We hope to have more to share with you on this front as the year progresses.
Speaker Change: As we moved into 2025, we had higher hopes that the setup for the year would support a more robust transaction market. However, the uncertainty that has permeated the environment since that time makes finding and getting deals done much more challenging.
Speaker Change: As Brian noted recycling capital is a primary component of our strategy and so despite the recent volatility we continue to seek out opportunities to drive growth and create value through accretive transaction activity.
Speaker Change: We hope to have more to share with you on this front as the year progresses with that I'll turn it over to Aaron. Please go ahead.
Aaron Reyes: With that, I'll turn it over to Aaron. Please go ahead. Thanks, Robert. As we noted at the top of the call, our earning results for the first quarter came in ahead of expectations, as stronger ancillary revenue, better hotel expense management, and savings at the corporate level offset lower rooms revenue growth, which was driven primarily by a more challenging top-line performance in March. Comparable rooms REV PAR increased 3.8% in the first quarter, and total REV PAR grew 4.3%. contributing to an 80-basis point expansion in hotel margins. Adjusted EBITDA in the first quarter was $57 million, and adjusted FFO was $0.21 per diluted share.
Aaron Reyes: Thanks, Robert as we noted at the top of the call our earning results for the first quarter came in ahead of expectations as stronger anti revenue better hotel expense management and savings at the corporate level offset lower rooms revenue growth, which was driven primarily by them.
Speaker Change: More challenging topline performance in March.
Speaker Change: Comparable room's Revpar increased three 8% in the first quarter and total Revpar grew four 3%.
Speaker Change: Contributing to an 80 basis point expansion in hotel margins.
Speaker Change: Adjusted EBITDA in the first quarter was $57 million and.
Speaker Change: And adjusted <unk> was 21 per diluted share.
Aaron Reyes: which reflects a 17% increase from the prior year, given a contribution from our recent investments in the portfolio, with the added benefit of our creative share repurchase activity. Our balance sheet remains strong, with net leverage, including our preferred equity, of only 4.5 times trailing EBITDA. While our outlook has moderated, we still expect our leverage and balance sheet capacity to improve as we move through the year and benefit from the embedded growth in the portfolio. Subsequent to the end of the quarter, we exercised the extension option on our $225 million terminal. Together with the extension options we have in place on other debt, we don't have any maturities for the remainder of the year.
Speaker Change: Which reflects a 17% increase from the prior year given the contribution from our recent investments in our portfolio with the added benefit of our accretive share repurchase activity.
Speaker Change: Our balance sheet remains strong with net leverage including our preferred equity of only four five times trailing EBITDA.
Speaker Change: While our outlook has moderated we still expect our leverage and balance sheet capacity to improve as we move through the year and benefit from the embedded growth in our portfolio.
Speaker Change: Subsequent to the end of the quarter, we exercised the extension option on our $225 million term loan.
Speaker Change: Together with the extension options, we have in place and other debt.
Speaker Change: Don't have any maturities for the remainder of the year.
Aaron Reyes: As of the end of the quarter, we had nearly $150 million of total cash and cash equivalents, including our restricted cash. Together with capacity on our credit facility, this equates to nearly $650 million of total liquidity.
Speaker Change: As at the end of the quarter, we had nearly $150 million of total cash and cash equivalents, including our restricted cash.
Speaker Change: Together with capacity on our credit facility.
Speaker Change: This equates to nearly $650 million of total liquidity.
Aaron Reyes: Included in our earnings release this morning are the details of our updated outlook for 2025. As Bryan noted earlier, this revised projection is based on expectations and the information we have available today. that could be impacted either positively or negatively. based on how the macroeconomic environment and business and consumer sentiment evolved from here. Based on what we see today, we expect that our total portfolio REV PAR growth will range from 4% to 7% as compared to 2024. This range reflects the early May opening of Ontop Miami Beach, which is a few weeks later than what was assumed in our prior outlook.
Speaker Change: Included in our earnings release. This morning are the details of our updated outlook for 2025.
Speaker Change: As Brian noted earlier this revised projection is based on expectations and the information we have available today.
Speaker Change: Could be impacted either positively or negatively based on how the macroeconomic environment and business and consumer sentiment evolve from here.
Speaker Change: Okay.
Speaker Change: Based on what we see today, we expect that our total portfolio of Revpar growth will range from 4% to 7% as compared to 2024.
Speaker Change: This range reflects the early may opening of Andaz, Miami Beach, which is a few weeks later than what was assumed in our prior outlook.
Aaron Reyes: For the balance of the portfolio, excluding ONDAS, we now anticipate that REVPAR will increase between 1% and 4%. With these revised top-line growth projections, we now estimate that full-year adjusted EBITDA RE will range from $235 million to $260 million, and our adjusted FFO per diluted share will range from $0.82 to $0.94. Despite the headwinds from the more volatile operating environment, the midpoints of our updated outlook for EBITDA and FFO would still equate to healthy annual growth rates of 8% and 10% respectively. and as a direct result of our recent portfolio investment.
Speaker Change: For the balance of the portfolio excluding onto us.
Speaker Change: Now anticipate that Revpar will increase between 1% and 4%.
Speaker Change: With these revised topline growth projections, we now estimate that full year, adjusted EBITDA will range from $235 million to $260 million and our adjusted <unk> per diluted share will range from 82 to 94.
Speaker Change: Despite the headwinds from the more volatile operating environment.
Speaker Change: Mid point of our updated outlook for EBITDA, and <unk> were still equate to healthy annual growth rates of 8% and 10% respectively.
Speaker Change: And as a direct result of our recent portfolio investments.
Aaron Reyes: As it relates to some of the quarterly assumptions that comprise our updated full-year outlook, we would expect our total portfolio REVPAR growth to remain in the low single-digit range for the second quarter before increasing more meaningfully in the third and fourth quarters. Driven by increased contribution from ONDOT Miami Beach. Continued growth in Long Beach and the easier comparison from the impact of the strike in San Diego. In terms of the distribution of our EBITDA by quarter, Based on the midpoint of our revised outlook, the first quarter contributed 23% of our expected full year total. As is typical for our portfolio, we expect the second quarter to be the largest contributor of the year at approximately 28% and the third quarter to comprise nearly 23%.
Speaker Change: As it relates to some of the quarterly assumptions that comprise our updated full year outlook. We would expect our total portfolio revpar growth to remain in the low single digit range for the second quarter before increasing more meaningfully in the third and fourth quarters.
Speaker Change: Driven by increased contribution from Andaz Miami Beach.
Speaker Change: <unk> growth in long beach, and the easier comparison from the impact of the strike in San Diego.
Speaker Change: In terms of the distribution of our EBITDA by quarter.
Speaker Change: Based on the midpoint of our revised outlook. The first quarter contributed 23% of our expected full year total.
Speaker Change: As is typical for our portfolio.
Speaker Change: We expect our second quarter to be the largest contributor of the year at approximately 28% in the third quarter to comprise nearly 23%.
Aaron Reyes: This would leave the balance, or approximately 26%, in the fourth quarter. which is a bit higher for us than usual, but is when we expect to generate the bulk of the current year earnings from OnDos.
Speaker Change: This would leave the balance or approximately 26% in the fourth quarter.
Speaker Change: Which is a bit higher forest unusual but is when we expect to generate the bulk of the current year earnings remind us.
Aaron Reyes: As we noted in the 2025 Outlook section of our press release, The remaining components of our four-year projections remain unchanged from the prior quarter.
Speaker Change: As we noted in the 2025 outlook section of our press release the.
Speaker Change: The remaining components of our full year projections remain unchanged from the prior quarter.
Aaron Reyes: Now, shifting to our return of capital, in addition to the accretive share repurchase activity we have completed so far this year, our Board of Directors has authorized a $0.09 per share common dividend for the second quarter and has also declared the routine distributions for our Series G, H, and I preferred security. While we retain ample capacity for additional capital return, the full-year outlook that was discussed earlier does not assume the benefit of any additional share repurchase activity.
Speaker Change: Now shifting to our return of capital.
Speaker Change: In addition to the accretive share repurchase activity, we have completed so far this year.
Speaker Change: Our board of directors has authorized a nine <unk> per share common dividend for the second quarter and is also declared the routine distributions for our series G. H Ni preferred securities.
Speaker Change: While we retain ample capacity for additional capital return to full year outlook that was discussed earlier does not assume the benefit of any additional share repurchase activity.
Operator: And with that, we can now open the call to questions. so that we are able to speak with as many participants as possible. We ask that you please limit yourself to one question.
Speaker Change: And with that we can now open the call to questions.
Speaker Change: So that we are able to speak with as many participants as possible. We ask that you. Please limit yourself to one question.
Operator: Operator, please go ahead. Thank you.
Speaker Change: Operator, Please go ahead.
Speaker Change: Thank you we will now begin the question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad you raise your hand and joined the queue. If you would like to withdraw your question simply press Star One again as a reminder, please limit yourself to one question only your first question comes from the line of David Katz from Jefferies. Your line is open.
Operator: We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.
Operator: As a reminder, please limit yourself to one question only.
David Katz: Your first question comes from a line of David Katz from Jeffreys. Your line is open.
Bryan Giglia: Morning. Thanks for taking my questions. Morning. I wanted to just go back to the confidant. You know, it has, you know, obviously, the world has maybe changed just a little bit since, you know, it was conceived and executed and now open. Now, I wonder if you could just talk about what your, you know, underwriting trajectory looks like today versus where, you know, may have been 12 or 18 months ago or 24 months ago and, you know, what we can sort of reasonably, you know, expect in terms of returns, let's say, you know, next year. and What's Realistic.
David Katz: Good morning, Thanks for taking my questions.
Speaker Change: David.
Speaker Change: I wanted to just go back to the confidante.
Speaker Change: It has.
Speaker Change: Obviously, the world has maybe changed just a little bit.
Speaker Change: It was conceived and executed and now open.
Speaker Change: I Wonder if you could just talk about what your.
Speaker Change: Underwriting trajectory looks like today versus where it may have been 12, or 18 months ago or 24 months ago.
Speaker Change: And what we can reasonably.
Speaker Change: We expect in terms of returns let's say.
Speaker Change: Next year.
Speaker Change: And what's realistic.
Bryan Giglia: I'm happy to do that, David.
Speaker Change: Yes.
Speaker Change: Happy to do that David first of all I'm not familiar with the confidence that I'd be happy to speak about the <unk>.
Bryan Giglia: First of all, I'm not familiar with the confidant, but I'd be happy to speak about the ondas. I apologize. No, it's okay.
Speaker Change: I apologize.
Speaker Change: Sure.
Bryan Giglia: First, we're very excited that the hotel, the resort, is now open. It was a long road to get there, and again, with the Miami... approval process. This is probably something that we would think twice about doing right now, but we are very happy to be where we are. And so when you look at the hotel and you look at the market... When we underwrote... are projections. Our expectations for the market, the Mid-Beach market and the luxury set that we will draft under compete with. was lower than what actually happened in going back.
Speaker Change: First we're very excited that we that the hotel the resort is now open.
Speaker Change: It was a long road.
Speaker Change: To get there and again with the Miami Beach.
Speaker Change: The approval process.
Speaker Change: Closing a hotel in Miami.
Speaker Change: In Miami Beach.
Speaker Change: And doing a major renovation is is probably something that we would think twice about doing.
Speaker Change: Right now, but we are very happy to be where we are.
Speaker Change: And so when you look at the hotel and you look at the market.
Speaker Change: When we underwrote the our projections are.
Speaker Change: Our expectations for the market the mid beach market and the luxury set that we will.
Speaker Change: We will draft under.
Speaker Change: And compete with.
Speaker Change: Was lower than what actually happened and going back to 2023, and then you saw a pull back in 2020 for that 2024 stack, we're still running at a rate that was much higher than where we initially thought in some kind of it.
Bryan Giglia: https://www.youtube.com.uk Again, said, are. Our success here is being able provide a product that is comparable to those hotels and having just The resort, it absolutely is. We have a luxury resort with luxury amenity. Luxury Food & Beverage The appropriate suite count, as you recall, we lowered the number of rooms. ...and so we were targeting somewhere in the... mid fives to $600 rate for us to be successful. that still completely holds the mark. well above that. And so we feel very confident that While the opening date was later than anticipated, the end result will be what we expect.
Speaker Change: 800 plus range.
Speaker Change: As we said are.
Speaker Change: Our success here is being able to two.
Speaker Change: Provide a product that is comparable to those hotels and having just been to the resort that kid absolutely as we have.
Speaker Change: We have we have a luxury resort with luxury amenities luxury and food and beverage.
Speaker Change: And the appropriate suite count as you recall, we lowered the number of rooms, two to increase rig count and so we were targeting somewhere in the.
Speaker Change: Mid fives to $600 right.
Speaker Change: For us to be successful there that still completely holds the market.
Speaker Change: Is still well above that and so we feel very confident that.
Speaker Change: While the opening date was later than anticipated <unk> and.
Speaker Change: And result will be what we expected.
Speaker Change: And.
Bryan Giglia: with the hotel open now and in sight. coming in.
Speaker Change: With the hotel opened now and and site.
Speaker Change: Site visits and groups coming in remember, we are just getting into and maybe a little bit.
Bryan Giglia: Remember, we are just For more information, visit www.FEMA.gov This is the booking window for the fourth quarter and the first quarter and this is the hotel that we'll do. 70% of its EBITDA in the fourth quarter and the first quarter of the year. We are ready and open right in time to book that business and the resort. Beverage with Jose Andres group concepts in there. We are we are very excited and very confident that we will be able to are marks for. The end of the year and into 2026, with the delayed open, we're looking at 6 to 7 million of EBITDA for the resort this year, the majority of that coming in the fourth quarter.
Speaker Change: Before but coming up quickly into the booking window for the fourth quarter and the first quarter and this is a hotel that we'll do.
Speaker Change: 60% to 70% of its EBITDA.
Speaker Change: Yes.
Speaker Change: Fourth quarter and the first quarter of the year. So we are we are ready and open rate and time to book that business.
Speaker Change: And.
Speaker Change: B.
Speaker Change: The resort with its food and beverage with Jose Andres Group.
Speaker Change: Concepts in there.
Speaker Change: We are we are very excited and very confident that we will be able to hit those.
Speaker Change: Our our marks for the.
Speaker Change: We ended the year and into 2026.
Speaker Change: With the delayed open we're looking at call it six.
Speaker Change: $7 million of EBITDA for the resort this year, most the majority of that coming in the fourth quarter and then as we get to next year.
Bryan Giglia: And then as we get to next year, There's no reason why we would not revert back. The Caden eBidder wrote that. and then growing from there into the third year, thinking that it would be. Understood.
Speaker Change: There's no reason why we would not revert back to the.
Speaker Change: The cadence of EBITDA growth that we were thinking.
Speaker Change: Earlier, this year, where that would be.
Speaker Change: The high teens to 20 ish EBITDA range, and then growing from there into the third year.
Speaker Change: Thinking that it would be about a three year ramp up here.
David Katz: Good luck with the Andaz. Thank you.
Speaker Change: Understood Good luck with your Andaz.
Speaker Change: Thank you.
Dany Asad: Your next question comes from a line of Dany Asad from Bank of America. Your line is open. Hi, good morning, everybody. Aaron, I just want to go back to your updated outlook that you kind of walked us through. Maybe can you just give us some buckets? Bryan just touched on the Andaz now going to $67 million.
Danny Assad: Our next question comes from the line of Danny Assad from Bank of America. Your line is open.
Danny Assad: Hi, good morning, everybody.
Speaker Change: Aaron I just want to go back to your updated outlook that you kind of walk us through maybe can you just.
Speaker Change: Give us some buckets, Brian just touched on beyond that is now going to $6 million to $7 million, but can you just maybe walk us through what is changing and.
Aaron Reyes: But can you just maybe walk us through what is changing from a more moderated view on YLEA and then the change in Andaz and then kind of what is left with the core of the portfolio? Thanks for the question. Happy to do that. So, certainly, I think when you look across the portfolio and you translate that back to the EBITDA and FFO revisions that we did in the quarter, they kind of discreetly fall into, I'd say, three buckets in total. So, the range that Bryan alluded to for the revised expectation for ONDAs of $6 to $7 million, that's about $2 million less than what we thought when we were thinking of the original opening date when we spoke in February.
Speaker Change: From a more moderated view on Wailea and then the change in non doesn't and kind of what is left with the core of the portfolio.
Speaker Change: Sure Dan Thanks for the question happy to do that so certainly I think when you look across the portfolio and translate that back to you.
Speaker Change: The EBITDA in <unk> revisions that we did in the quarter.
Speaker Change: Discreetly fall into three buckets in total so the range that Brian alluded to for the revised expectation for andaz of $6 million to $7 million.
Speaker Change: It's about $2 million less than what we thought when we were thinking of the original opening date and when we spoke in February. So that's the first two of it.
Aaron Reyes: So, that's the first two of it. And then the other relates to, you know, we've seen a more challenging operating environment in Maui as the – as Conoply reopens and the island kind of transitions and normalizes back to what it was before the fire. So, that's about $4 million of a forecast revision there. And then the last piece is about $2 million of headwinds from San Diego, and really that's just more of a – what we saw in Q1 and into the middle part of this year was just a lower – a less strong transient backdrop there in that market.
Speaker Change: And then the other relates to we've seen a more challenging operating environment in Maui as the kind of positive reopens in the island kind of transitioned to normalize back to what it was before the fire and so thats about $4 million of forecast revision there and then the last piece is about $2 million.
Speaker Change: Headwinds from San Diego and really that's just more of a what we saw in Q1 and into the middle part of this year, which just at a lower.
Speaker Change: Strong transient backdrop, there in that market.
Aaron Reyes: So, Dany, what we did is where we saw... Some of these, like in San Diego, we saw. and other markets. Thank you. We took what the hotels were giving us for their forecast and then extrapolated out. further into the year. So they would come back and normalize. So, that's something where we felt it was. Based on the information we had. to update the forecast that way. Again, there are so many. Unknowns at this point, if we start uh you know those change then that could have that could more conservative. And as we get into the summer, as $100,000, we're not anticipating.
Speaker Change: So Dan what we did is where we saw.
Speaker Change: Some of these I can San Diego, we saw some some transient weakness in the first quarter.
Speaker Change: Some other government weakness in other markets.
Speaker Change: We took with the with the hotels, we're giving us as for their forecast and then extrapolated out a little bit further into the year until until.
Speaker Change: Yes.
Speaker Change: Until they would come back and normalize so that's something where we felt it was based on the information. We had it was the appropriate decision and to update the forecast that way again there are so many.
Speaker Change: Unknowns at this point.
Speaker Change: If we start to see.
Speaker Change: Those change then that can that can prove to be.
Speaker Change: More conservative.
Speaker Change: And as we get into the summer.
Speaker Change: As you see the weaker dollar.
Speaker Change: We're not anticipating any sort of international travel increases that's something that we could benefit from from a weaker dollar.
Dany Asad: For more information, please visit www.sunstonehotel.com So, again, I think we tried to take a conservative, realistic approach. That said, in a quarter. There could be several changes, both to either the negative or the positive. Understood. Thank you, and congrats on the Anda's opening.
Speaker Change: And so again I think we tried to take a conservative realistic approach.
Speaker Change: That said in a quarter or two.
Speaker Change: There could be there could be several changes both to either the negative or the positive.
Speaker Change: Yes.
Speaker Change: Understood. Thank you and congrats on the Andaz openings.
Speaker Change: Okay. Thank you.
Duane Pfennigwerth: Your next question comes from a line of Duane Pfennigwerth from Evercore ISI. Your line is open. Hey, thanks. Just to follow up there, maybe two markets. Hawaii, what do you think held back the asset in the first quarter? And why do you think your, at least, near-term or one-cue commentary differs from one of the main peers with exposure to Maui? And then on San Francisco, obviously a strong first quarter. How do you see that playing out over the balance of the year? Thank you.
Speaker Change: Your next question comes from the line of Duane <unk> from Evercore ISI. Your line is open.
Duane: Hey, Thanks, just to follow up there maybe two markets.
Speaker Change: Hawaii.
Speaker Change: What do you think held back the asset in the first quarter and why do you think you're at least near term once your commentary differs.
Speaker Change: From one of the main peers with exposure to Maui.
Speaker Change: And then on San Francisco, obviously, a strong first quarter, how do you see that playing out over the balance of the year. Thank you.
Bryan Giglia: Morning, Duane. So in Maui, you know, when you look at R1 Hotel in Waialea, Wileya compared to Connapoli is the luxury. Error. We have a phenomenal value proposition. guest there to have a luxury resort experience that drafts under the luxury rate. And then the other competition to us would be the west side in Kanapali, which is more of a discount to Waialea, still a fantastic market as is all of Maui. but just a different experience and less lecture. So as Connapolli gets back to more normalized business, and we've seen good occupancy increases there, we've actually seen airlift increases.
Duane: Good morning, Duane so in Maui.
Duane: When you look at at our one hotel.
Duane: <unk>.
Duane: And we in mobile compared to kind of poly as the luxury market.
Duane: <unk>.
Duane: We've often said we've.
Duane: We have we have a phenomenal value proposition to guests there to have a.
Duane: A luxury resort experience that.
Duane: Draft sender the luxury rate a bit.
Duane: And then the other the other competition to us would be the west side and kind of poly, which is more of a.
Duane: As a discount to wildly as still a fantastic market as all of Maui is but but just a different experience and less luxury of an experience. So as kind of poly gets back to more normalized business.
Duane: And we've seen good occupancy increases there we've actually seen air lift increases we were down last year, 20% to 19 now we're now the market is down about 13%. So air lift is coming back kind of holly's filling <unk> filling and sometimes discounting their rate a little bit when <unk>.
Bryan Giglia: We were down, you know, last year, 20% to 19. Now the market's down about 13%. So airlift is coming back. Connapolli is filling. Connapolli is filling and sometimes discounting their rate a little bit. When that gap to our hotel in Guadalajara starts to get wide, we will see some trade down to the Connapolli market. This is all part of. natural growth. as the market recovers from the fire. You know, we look into later in the year. Our expectation is this growing pain will continue for a quarter or so. You know, and we have, we start to get.
Duane: That gap to our hotel and wildly starts to get wide.
Duane: We will see some trade down.
Duane: To the counterparty market. This is all part of just.
Duane: The natural growth as the market recovers from the fire. This is actually a very encouraging thing when we look into.
Duane: We look into later in the year. Our expectation is this growing pain will continue for a quarter or so.
Duane: And we have we start to get.
Bryan Giglia: better, you know, we have good group pace in the fourth quarter, our rooms renovation, which added a little bit of displacement during the beginning of the first quarter is done. We continue to do things to elevate our luxury experience. by far the best luxury pool experience in Maui, in Wailea. And, you know, the government is... The state is doing a good job of putting money in to promote Maui as a full market. And when we look into 2026, we have double-digit pace growth there. So everything is lining up for, as the year progresses, we are going to see our hotel get back to normal and be able to drive that occupation.
Duane: Better Arena, we have good group pace in the fourth quarter, our rooms renovation, which added a little bit of displacement during the beginning of the first quarter is done.
Duane: We continue to do things to elevate our luxury experience. Our Latino pool is.
Duane: By far the best luxury pool experience in Maui and wildfire.
Duane: And the government is.
Duane: The stage is doing a good job of putting money into promote.
Duane: Maui is a full market and when we look into 2026 are we have we had double digit pace growth. There. So everything is lining up for <unk>.
Duane: As the year progresses, we are going to see our hotel get back to normal.
Duane: We are able to be able to drive that occupancy up.
Bryan Giglia: probably about 10. When comparing to others, you know, everyone always has their gives and takes. Other competitors have large hotels in Canapoli. So that's obviously going to benefit and then rooms, hotels coming off of will always show up. coming quarter or to follow. That's the only difference. I think from a market, the good news is the luxury. https://www.kenhub.com as we've seen before, will disproportionately benefit compared.
Duane: Probably about 10 points is what we need there when comparing to others.
Duane: Everyone always has there gives and takes.
Duane: Other competitors have large hotels and kind of policies. So that's obviously going to benefit and then room hotels coming off of renovation.
Duane: We show a distorted view in that that coming quarter or two following the renovations so that.
Duane: That's the only difference I think from a market. The good news is the luxury demand there is strong and so as kind of poly fills we will then.
Duane: As we've seen before will disproportionately benefit compared to the while asset.
Bryan Giglia: When looking at San Francisco... of San Francisco. Again, it's one of those markets where it's taken a bit, but it's been a great story for the last year or so, and we continue. Additional demand coming, you know, we have. good pace in the hotel for the remainder of the year. Business transient has been very strong in our sub-market. You know, if you went back. Decade Ago The New York Square was where everyone wanted to be, and now Embarcadero Financial District is where especially... Monday through Thursday is where business travelers want to be. We're able to.
Duane: When looking at San Francisco.
Duane: San Francisco.
Duane: Again, it's one of those markets, where it's taken a bit but it's been a great story for the last year or so and we continue to see additional demand coming.
Duane: <unk>.
Duane: We have.
Duane: Good pace in the hotel for the remainder of the year business transient has been very strong in our sub market.
Duane: If you went back the.
Duane: A decade ago.
Duane: Union Square was where everyone wanted to be and now Embarcadero in financial district is where.
Duane: Especially.
Duane: Monday through Thursday is where where business travelers want to be we're able to two.
Duane Pfennigwerth: We're going to drive our in-house meeting space and be able to drive our own compression that way. And as we look forward... The sentiment for the city is improving, the office demand in the areas where we are, are improving, and we have very strong pace growth for next year. So our expectation positive story for us. Thanks for the detailed thoughts.
Drive our in house meeting space and be able to drive our own compression that way.
Duane: And as we look forward.
Duane: The sentiment for the city is improving.
Duane: The office demand in the areas, where we are improving and we have very strong pace growth for next year. So our expectation is that San Francisco is a is a positive story for us for the coming.
Duane: Several quarters into 2006, and most likely in the 2007.
Speaker Change: Thanks for the detailed thoughts.
Duane: Thanks Duane.
Michael Bellisario: Your next question comes from a line of Michael Bellisario from Baird. Your line is open. Thanks. Good morning, everyone.
Speaker Change: Your next question comes from the line of Michael Bellisario from Baird. Your line is open.
Michael Bellisario: Thanks, Good morning, everyone.
Speaker Change: Good morning, Michael.
Bryan Giglia: Bryan, just sort of big picture question for you on strategy and value creation, and it sounds like you're inclined to shrink the portfolio a bit more with at least one asset sale, at least sort of based on how you guys framed it in the prepared remarks. But sort of two parts here for, I guess, one, how many more non-core hotels do you have or have you identified? And then two, maybe when do you consider a more opportunistic or larger sale like Miami to just more meaningfully move the needle to repurchase even more stock? Thanks. Thanks, Michael.
Speaker Change: Brian just sort of big picture question for Ed on strategy and value creation and it sounded like youre inclined to shrink the portfolio a bit more with at least one asset sale is sort of based on how you guys framed it in the prepared remarks, but there are two parts of your fragrance one how many more non core hotels do you have or have you identified and then too.
Speaker Change: Two any when do you consider a more opportunistic or a larger sale like Miami to just more meaningfully move the needle to repurchase even more stock.
Michael Bellisario: Thanks, Michael.
Bryan Giglia: So, when looking at, to your first question, how many more non-core assets do we have, we have a... https://www.sunstonehotel.com had a several years of. Recycling and culling the portfolio down. You know, really fantastic cast. The question is, are there hotels that have to be sold? are absolutely no. We're more focused on where can we recycle capital, what is the right time. divest of an asset and redeploy those proceeds. When do our returns start? you know, taper off. Capital needs or just the growth isn't there for us. So that's how we identify what we want to recycle.
Michael Bellisario: So when looking at it to your first question, how many more noncore assets do we have it we have a we haven't.
Michael Bellisario: A pristine portfolio, where we're very happy with our portfolio and we've had a.
Michael Bellisario: Several years of of recycling and culling the portfolio down to.
Michael Bellisario: Really fantastic asset Soc.
Michael Bellisario: Question is are there hotels that have to be sold.
Michael Bellisario: Absolutely no.
Michael Bellisario: We're more focused on where can we recycle capital what is the right time to.
Michael Bellisario: Divest of an asset and redeploy those proceeds went to our returns start to to taper off and with future capital needs or just the growth isn't there for us. So thats, how we identify what we want to recycle I think at all times, we're going to be looking to recycle assets and that could be.
Bryan Giglia: I think at all times, we're going to be looking to recycle assets. our smallest asset or our largest. look at where the spot market value is compared to our internal NAV. arbitrage that in the in the private markets, then that's something that we will do and we have done. And with those proceeds, you know, one of the benefits of being a company our size is we can remain nimble. purchase shares as we've done in the past and we have from a small amount to a quarter to a larger amount. given range right now. As you saw, we've been active this year so far.
Michael Bellisario: Our smallest asset or our largest asset.
Michael Bellisario: We look at where the spot market value is compared to our internal NAV.
Michael Bellisario: If we can if we can arbitrage of that in the private markets and Thats something that we will do and we have done.
Michael Bellisario: And with those proceeds.
One of the benefits of being a company our size, we can remain nimble and we will repurchase shares as we've done in the past and we have.
Michael Bellisario: This range from a small amount to a quarter of a larger amount in a quarter in the given range right now as you saw we've been active.
Michael Bellisario: This year, so far we think that it's a very compelling.
Bryan Giglia: It's just very compelling. https://www.sunstonehotel.com And then, you know, when you look at, you go into last year. and there's an opportunity to... stock rebounds. There's opportunity to acquire assets. We go back to San Antonio and that was a point in time where it was a very good acquisition. https://www.sunstonehotel.com look in the market and see what the best allocation of that capital is. a little choppy right now, but I. debt markets sort of bounce back and that should. Um, you know, we would guess. I would think right now we would be at NETSHELLER.
Michael Bellisario: Value and we'll put our money, where our mouth is and continue to.
Michael Bellisario: To take advantage of that.
Michael Bellisario: And then when you look at igo into last year, and and when there is an opportunity to.
Michael Bellisario: The stock rebounds in.
Michael Bellisario: There is opportunity to acquire assets I still go back to San Antonio and that was appoint and time, where it was.
Michael Bellisario: Very good acquisition.
Michael Bellisario: And it was the right deployment of capital at that moment in time, but.
Michael Bellisario: And then a quarter later, we went back and where we are repurchasing shares. So we will continue to recycle assets and we will.
Michael Bellisario: <unk>.
Michael Bellisario: Look in the market and see what the best allocation of that capital is.
Michael Bellisario: Right now I don't think.
Michael Bellisario: Any mystery that our stock is that best allocation.
Michael Bellisario: But we'll we'll continue to do that and the expectation is that given the current market dynamics, yes, we would expect to be a net seller now the transaction market is a little choppy right now, but I think we're seeing the debt markets sort of bounce back and that should that should lead to additional future.
Michael Bellisario: Transactions, but.
Michael Bellisario: We would guess.
Michael Bellisario: I would think right now we would be a net seller and.
Smedes Rose: everything else equal where we are now that that capital would go back Your next question comes from the line of Smedes Rose from Citi. Your line is open. Hi, thanks. I wanted to maybe just follow up on that a little bit and kind of circle in on your NAPA assets. It looks like the losses accelerated year over year. Just wondering if you put that up to maybe the calendar shift that went on during the quarter, and maybe you could just talk to your overall expectations this year for those assets. And then certainly kind of, Bryan, I mean, you know, water cooler talk would suggest that those two properties would be on the short potentially for recycling capital.
Michael Bellisario: Everything else equal where we are now.
Michael Bellisario: That capital would go back into the purchase of our stock.
Michael Bellisario: Yes.
Speaker Change: Your next question comes from the line of Smedes Rose from Citi. Your line is open.
Smedes Rose: Hi, Thanks.
Smedes Rose: I wanted to just follow up on that a little bit and kind of.
Smedes Rose: Circle in on your Napa assets it looks like the.
Smedes Rose: Losses accelerated year over year, just wondering if you put that up to me that the calendar shift.
Smedes Rose: During the quarter and maybe you could just talk to your overall expectation this year for those assets and then certainly kind of brine water cooler talk would suggest that those two properties would be on the short list potentially for recycling capital and I'm, just wondering without addressing maybe potentially.
Bryan Giglia: And I'm just wondering, without addressing maybe potentially those, what are the conversations like for high-end luxury assets? I mean, are there buyers? Is there just big pricing discrepancy? Are buyers more on the sidelines at this point? Just any kind of discussion around that would be of interest.
Smedes Rose: What are the conversations like for high end luxury assets.
Smedes Rose: Are there buyers and Sir just big pricing discrepancy or buyers more on the sidelines at this point just any kind of discussion around that would be of interest.
Smedes Rose: Yes.
Bryan Giglia: morning speeds. So first quarter It will always be the weakest quarter. So, we're trying to break even as we can in that quarter, but that's not where the money is made. So, you know, shifts by a couple hundred thousand dollars from here to year to year is just, that could be the difference of one group. And so when we look at where we are with those two resorts, together they put off a couple million dollars more of EBITDA last year, they're gonna put off a couple million dollars more of EBITDA this year. And so we have, we continue to fine tune.
Smedes Rose: Good morning speeds, so first quarter in one country like any other.
Speaker Change: Kind of seasonal resort market is going to.
Smedes Rose: It will always be the weakest quarter.
Speaker Change: Our goal is at some point to probably.
Speaker Change: It is close to breakeven as we can in that quarter, but that's not where the money is made and so.
Speaker Change: Shift by a couple of hundred thousand dollars from here.
Speaker Change: Year to year is just that can be the difference of one group.
Speaker Change: <unk>.
Speaker Change: And so when we look at what where we are with those two resorts.
Speaker Change: Together, they put off a couple million dollars more of EBITDA last year Theyre going to put off a couple million dollars more in EBITDA. This year and so we have we continue to fine tune.
Bryan Giglia: Get them to the right group mix. I think we've made tremendous progress there. We have worked with the brands and some third party consultants to get costs down while keeping guest satisfaction at the same level. So all of those things are working in http://TheBusinessProfessor.com Luxury assets tend to be a smaller, more focused group of investors. They tend to own that type of asset, understand the scarcity value of that asset, and have a little bit of a longer horizon when it comes to... and Acer Performance. So that's, you know, those are conversations that. We have, we continue to have, we always have, I mean I think at any given time we probably having some form of conversation or another on a good portion of our portfolio.
Speaker Change: Get them to the right group mix I think we've made tremendous progress there we have.
Speaker Change: Work with the brands and some third party consultants to get costs down while keeping guest satisfaction.
Speaker Change: At the same level. So all of those things are working in the right direction. When it comes to the disposition of those assets or any assets in our portfolio.
Speaker Change: Luxury assets tend to be smaller.
Speaker Change: More focused group of.
Speaker Change: Investors.
Speaker Change: They tend to own that type of asset understand the scarcity value of that asset and have.
Speaker Change: A little bit of a longer horizon when it comes to.
Speaker Change: <unk>.
Speaker Change: Their whole periods.
Speaker Change: Asset performance, so thats those are conversations that.
Speaker Change: Sure.
Speaker Change: We have we continue to have we always have I think at any given time, we probably.
Speaker Change: Having some form of conversation or another on a good portion of our portfolio.
Bryan Giglia: That's what, you know, that's what happens when you have assets that are, are... great performers in high demand. So... You know, the luxury buyer is not immune from debt markets is not, you know, immune from Cost of Debt And so while it might not be a driving factor, it is another factor when it comes to valuation. So when you have slower transaction volumes across all asset types, it tends to slow this down too. But as I said on the question before, I think we're focused. We are focused on recycling capital, and so that includes our highest-end luxury assets that...
Speaker Change: But that's what happens when you have assets that R. R.
Speaker Change: Great performers in high demand so.
Speaker Change: The luxury buyer is not immune from that market does not.
Speaker Change: <unk> from.
Speaker Change: The cost of debt and and that and so while it might not be a driving factor. It is another factor when it comes to valuation. So when you have slower transaction volumes across all asset types. It tends to slow this down too.
Speaker Change: But as I said on the question before I think we're focused.
Speaker Change: We are focused on recycling capital and so.
Speaker Change: That includes our highest end luxury assets.
Bryan Giglia: All changes to every asset in our portfolio. Thank you.
Speaker Change: Ranges to every asset in our portfolio. So it's it's something we're focused on is something that when we have the ability to do take advantage of the private market values, we will especially when our stock is trading where it is.
Speaker Change: Pretty compelling trade.
Speaker Change: Yes.
Speaker Change: Thank you.
Chris Woronka: And your next question comes from a line of Chris Woronka from Deutsche Bank. Your line is open. Hey, good morning, guys. Morning.
Speaker Change: And your next question comes from the line of Chris <unk> from Deutsche Bank. Your line is open.
Chris: Hey, good morning, guys.
Bryan Giglia: This will be kind of a follow up on the Andaz Miami. So I assume kind of your revised outlook with the EBITDA includes any kind of, I don't know, I know there were some customers that had to be, I think, rebooked, and I don't know how that may work with Hyatt. But the question really relates more toward the rest of the year, especially Q4, given your expectation. Is there any – what kind of visibility do you think you have? Maybe give us a little bit of a sense on what you expect at that asset in terms of booking window.
Speaker Change: Hi, Chris.
Speaker Change: Good morning.
Speaker Change: It would be kind of a follow up.
Speaker Change: Andaz Miami, So I assume kind of your revised outlook with you.
Speaker Change: EBITDA includes any kind of.
Speaker Change: No.
Speaker Change: I know there were some customers that had to be I think we booked an iron mountain work may work with Hyatt.
Speaker Change: But the question really relates more towards the rest of the year, especially in Q4.
Speaker Change: Your expectation is there any kind of visibility do you think you have heard me give us a little bit of a sense on what you expect that that asset in terms of.
Bryan Giglia: Is it going to be – if we think about it compared to other luxury resorts, which typically book a little longer out, just how you expect that to kind of unfold over this year and then beyond. Yeah. Thanks, Chris. To answer the first part of your question, yes, that there were, you know, when We had to walk and move some customers. That's absolutely incorporated in all of our costs that you'll see in our... EBITDA, FFO Reconciliation. So that's all included in there. The booking window is actually not, you know, at the end of the day, this is a $287,000 And so the booking window, even for group, is...
Speaker Change: Booking window is going to be if we think about it compared to other luxury resorts, which typically book a little longer out just how you expect that to kind of unfold over this year and beyond.
Speaker Change: Thanks.
Speaker Change: Yes.
Speaker Change: Thanks, Chris.
Speaker Change: To answer the first part of your question, Yes, there were.
Speaker Change: We had to work and move some some customers that's absolutely incorporated in all of our of all of our costs that you'll see an R. R.
Speaker Change: Thank you Jerry.
Speaker Change: EBITDA <unk> reconciliation. So that's all included in there.
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Speaker Change: The booking window is actually not.
Speaker Change: At the end of the day. This is a 287 restored and so the booking window even for group is.
Bryan Giglia: You know, it's not like San Diego. And so we are opening right now and being able to do site visits. You know, for for corporate events. And again, this is going after financials and automotive and luxury apparel, you know, pharmaceutical, that type of A lot of social business, the hotel is already booking weddings for the end of the year. quarter, that booking window is just opening now. our opening date is not impacting our ability to have a successful fourth quarter and first quarter into next year. So, you know, when we look at the cadence of, like, you know, just occupancy and rate, you know, we'll obviously run, you know, in May and June and probably in the 30s and 40s percent.
Speaker Change: It's not like San Diego.
Speaker Change: And so we are opening right now and being able to do site visits and.
Speaker Change: For for.
Speaker Change: For corporate events and again this is going after financials in automotive and luxury apparel.
Speaker Change: Pharmaceutical that type of business.
Speaker Change: A lot of social business hotels already booking weddings for the end of the year.
Speaker Change: And so.
Speaker Change: For the fourth quarter that booking window is just opening now and so while.
Speaker Change: Net.
Speaker Change: Our opening date is not impacting our ability to have a successful fourth quarter and first quarter into next year. So.
Speaker Change: When we look at the cadence of of like just occupancy.
Speaker Change: Occupancy and rate will obviously run in May and June and probably in the 30%, 40% and then when we get to November and December were probably up in the 70% in the rate.
Bryan Giglia: And then when we get to November and December, we're probably up in the 70 percent. And the rate, you know, the summertime rate in the market is $300 or $400 a night. And in the fourth quarter, it's six, seven, eight hundred dollars a night. And so I think we are in the prime spot to be able to book that business and to be able to really yield the hotel for the fourth quarter.
Speaker Change: Summertime right and the market is three or $400 a night in the fourth quarter, It's six 700 $800 a night.
Speaker Change: And so I think we are in the prime spot to be able to be able to book that business and to be able to.
Speaker Change: Really yield the hotel.
Speaker Change: For the fourth quarter and most of the site visits and everything that people that are going through the resort right now theyre looking for third and fourth quarter, right now and a little bit in the first quarter.
Bryan Giglia: And most of the site visits and everything, the people that are going through the resort right now, they're looking for third and fourth quarter right now and a little bit Okay, very good. Thanks, Bryan.
Speaker Change: Okay very good thanks, Brian.
Bryan Giglia: And that concludes our question and answer session.
Speaker Change: And that concludes our question and answer session I will now turn the call back over to Brian Julia for closing remarks.
Bryan Giglia: I will now turn the call back over to Bryan Giglia for closing remarks. Thank you, everyone. We look forward to meeting with many of you at upcoming conferences, and for those that were able to see the ondas during construction, we look forward to having everyone back and being able to tour the resort and see the finished product. Thank you.
Speaker Change: Thank you everyone. We look forward to meeting with many of you at upcoming conferences and.
Speaker Change: For those that were able to see the on does during construction.
Speaker Change: Look forward to having everyone back and being able to tour the resorts and see the finished product. Thank you.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
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