Q4 2025 Sunstone Hotel Investors Inc Earnings Call

February 27, 2026

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sunstone Hotel Investors Q4 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. I would like to remind everyone that this conference is being recorded today, 27 February 2026, at 12:00 PM Eastern Time. I will now turn the call over to Mr. Aaron Reyes, Chief Financial Officer. Please go ahead, sir.

Speaker #2: Later, we will conduct a question-and-answer session, and instructions will be given at that time. I would like to remind everyone that this conference is being recorded today, February 27, 2026, at 12:00 PM Eastern Time.

Speaker #2: I will now turn the call over to Mr. Aaron Reyes, Chief Financial Officer. Please go ahead, sir. Thank you, operator. Before we begin, I would like to remind everyone that this call contains forward-looking statements that are subject to risks and uncertainties.

Aaron Reyes: Thank you, operator. 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. We caution you to consider these factors in evaluating our forward-looking statements. We also note that the commentary on this call will contain non-GAAP financial information, including adjusted EBITDARE, adjusted FFO, and hotel-adjusted EBITDARE. 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. With us on the call today are Bryan A. Giglia, Chief Executive Officer, and Robert C. Springer, President and Chief Investment Officer.

Speaker #2: 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 #2: We also note that the commentary on this call will contain non-GAAP financial information, including adjusted EBITDA-RE, adjusted FFO, and hotel-adjusted EBITDA-RE. We are providing this information as a supplement to information prepared in accordance with generally accepted accounting principles.

Speaker #2: 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 #2: With us on the call today are Bryan Giglia, Chief Executive Officer, and Robert Springer, President and Chief Investment Officer. After our remarks, the team will be available to answer your questions.

Aaron Reyes: After our remarks, the team will be available to answer your questions. With that, I would like to turn the call over to Bryan. Please go ahead.

Speaker #2: With that, I would like to turn the call over to Bryan. Please go ahead.

Speaker #3: Thank you, Aaron, and good morning, everyone. Despite the various headwinds that impacted our industry in 2025, our portfolio finished the year on a high note, with fourth-quarter operating results that exceeded our expectations, driven by broad-based strength across the portfolio.

Bryan A. Giglia: Thank you, Aaron. Good morning, everyone. Despite the various headwinds that impacted our industry in 2025, our portfolio finished the year on a high note with Q4 operating results that exceeded our expectations, driven by broad-based strength across the portfolio. The Q4 capped off a productive year at Sunstone, where we made further progress on our three strategic objectives, which include recycling capital, investing in our portfolio, and returning capital to our shareholders. Earlier in the year, we completed the sale of the Hilton New Orleans at a mid 6% cap rate, inclusive of required near-term capital, and fully recycled the proceeds into the repurchase of our stock at a compelling discount and a higher implied yield.

Speaker #3: The fourth quarter capped off a productive year at Sunstone, where we made further progress on our three strategic objectives, which include recycling capital, investing in our portfolio, and returning capital to our shareholders.

Speaker #3: Earlier in the year, we completed the sale of the Hilton New Orleans at a mid-6% cap rate, inclusive of required near-term capital, and fully recycled the proceeds into the repurchase of our stock at a compelling discount and a higher implied yield.

Speaker #3: In addition, we completed several capital projects, including the debut of the Andaz Miami Beach, which, despite its later opening, had a solid festive period and good momentum heading into this year.

Bryan A. Giglia: We completed several capital projects, including the debut of the Andaz Miami Beach, which, despite its later opening, had a solid festive period and good momentum heading into this year. Lastly, we returned more than $170 million of capital to our shareholders through a well-covered dividend and accretive share repurchases. These strategic accomplishments will drive growth in per share earnings and NAV in the years to come. We will share additional details on our outlook and our expectations for 2026 shortly. I'll start with a quick recap on the Q4 results. As I noted at the top of the call, our results came in better than expected, with total RevPAR growth of 7.4% in the quarter or 12.5% including the contribution from Andaz. Our resorts led the portfolio, driven by solid performance at the Wailea Beach Resort.

Speaker #3: Lastly, we returned more than $170 million of capital to our shareholders through a well-covered dividend and accretive share repurchases. These strategic accomplishments will drive growth in per-share earnings and NAV in the years to come.

Speaker #3: We will share additional details on our outlook and our expectations for 2026 shortly, but I'll start with a quick recap of the fourth-quarter results.

Speaker #3: As I noted at the top of the call, our results came in better than expected, with total RevPAR growth of 7.4% in the quarter, or 12.5% including the contribution from Andaz.

Speaker #3: Our results led the portfolio, driven by solid performance at the YLAA Beach Resort. As we shared with you on our recent calls, our results in Maui were hampered through much of last year as market demand normalized.

Bryan A. Giglia: As we shared with you on our recent calls, our results in Maui were hampered through much of last year as market demand normalized. We were pleased to see the green shoots we witnessed at the resort in the fall continue into year-end, leading to 19% RevPAR growth in the quarter. On the opposite side of the country, Andaz Miami Beach delivered year-end results that were ahead of expectations, and the outperformance has carried into the early parts of this year, positioning the resort well to deliver on our expectations for 2026. We are pleased with the demand our renovated resort is attracting, including high-profile business around some key events in the market that should help the resort further build awareness.

Speaker #3: We were pleased to see the green shoots we witnessed at the resort in the fall continue into year-end, leading to 19% RevPAR growth in the quarter.

Speaker #3: On the opposite side of the country, Andaz Miami Beach delivered year-end results that were ahead of expectations, and the outperformance has carried into the early parts of this year, positioning the resort well to deliver on our expectations for 2026.

Speaker #3: We are pleased with the demand our renovated resort is attracting, including high-profile business around some key events in the market that should help the resort further build awareness.

Bryan A. Giglia: Performance at our wine country resorts was also stronger than expected, with Montage Healdsburg capping off a better year with 15% total RevPAR growth in the quarter and just over 9% for the year. Overall, our resorts were our strongest performing segment in Q4, and we expect that to continue into 2026. Now with the added benefit of a full year contribution from Andaz Miami Beach. At our urban hotels, we were pleased with our quarterly performance at Marriott Long Beach Downtown, which continued to benefit from its brand conversion in 2024 and generated total RevPAR growth of 12%. Similarly, the Portland market continues to recover, with the Bidwell Marriott turning in nearly 13% growth. This strength was partially offset by a softer market and tougher comps in Boston and New Orleans.

Speaker #3: Performance at our wine country resorts was also stronger than expected, with Montage Healdsburg capping off a better year with 15% total RevPAR growth in the quarter and just over 9% for the year.

Speaker #3: Overall, our resorts were our strongest performing segment in Q4, and we expect that to continue into 2026, but now with the added benefit of a full-year contribution from Andaz Miami Beach.

Speaker #3: At our urban hotels, we were pleased with our quarterly performance at Marriott Long Beach Downtown, which continued to benefit from its brand conversion in 2024 and generated total RevPAR growth of 12%.

Speaker #3: Similarly, the Portland market continues to recover, with a bid-well Marriott turning in nearly 13% growth. This strength was partially offset by a softer market and tougher comps in Boston and New Orleans.

Speaker #3: While top-line growth was less robust at our urban hotels, we continued to work with our operators to control costs and managed to grow margins during the quarter.

Bryan A. Giglia: While top line growth was less robust at our urban hotels, we continued to work with our operators to control costs and manage to grow margins during the quarter. Our convention hotels turned in better than expected performance with RevPAR growth of 2.8%, even with some headwinds from the meeting space renovations that we had underway in San Antonio and San Diego. Excluding these 2 hotels, our convention hotel RevPAR growth was 5.3% during the quarter. San Francisco was once again a standout performer, which added to solid top-line results in the first 3 quarters of the year to generate more than 12% total RevPAR growth for the year.

Speaker #3: Our convention hotels turned in better-than-expected performance, with RevPAR growth of 2.8%, even with some headwinds from the meeting space renovations that we had underway in San Antonio and San Diego.

Speaker #3: Excluding these two hotels, our convention hotel RevPAR growth was 5.3% during the quarter. San Francisco was once again a standout performer, which added to solid top-line results in the first three quarters of the year to generate more than 12% total RevPAR growth for the year.

Speaker #3: We continue to be encouraged by how the market and our hotel are setting up for additional growth this year, with group pace up in the low double-digit range and a strong start with good group activity in January and the Super Bowl in February.

Bryan A. Giglia: We continue to be encouraged by how the market and our hotel are setting up for additional growth this year, with group pace up in the low double-digit range and a strong start with good group activity in January and the Super Bowl in February. The Renaissance Orlando at SeaWorld also had a solid quarter, with total RevPAR growth of more than 10% on a better mix of business. Group revenue production for the current and future periods in Orlando increased over 10% last year, the hotel is pacing for better performance in 2026. Operating results in San Antonio were softer in 2025 on a lighter group event calendar and some displacement from our completed meeting space renovation. 2026 should benefit from increased production and the renovation.

Speaker #3: The Renaissance Orlando at SeaWorld also had a solid quarter with total RevPAR growth of more than 10% on a better mix of business.

Speaker #3: Group revenue production for the current and future periods in Orlando increased over 10% last year, and the hotel is pacing for better performance in 2026.

Speaker #3: Operating results in San Antonio were softer in 2025 on a lighter group event calendar and some displacement from our completed meeting space renovation. But 2026 should benefit from increased production and the renovation.

Speaker #3: As we shared with you on prior calls, performance last year in Washington, D.C. was less robust than initially anticipated and was impacted by government spending cuts, changes in policies, and the government shutdown.

Bryan A. Giglia: As we shared with you on prior calls, performance last year in Washington, DC, was less robust than initially anticipated and was impacted by government spending cuts, changes in policies, and the government shutdown. Similarly, our results in San Diego were hampered by softer transient demand and a less constructive backdrop for international travel. On the expense side, we were pleased with our operators' ability to drive efficiencies in response to continued cost pressures. We knew coming into the year that 2025 would be particularly tough on margins as contractual cost escalations at certain of our larger hotels were adding to general inflationary pressures across the portfolio. I am pleased to report that we made significant progress in managing costs and delivered comparable portfolio margin growth of 40 basis points during the year on total RevPAR growth of 3.5%.

Speaker #3: Similarly, our results in San Diego were hampered by softer transient demand and a less constructive backdrop for international travel. On the expense side, we were pleased with our operators' ability to drive efficiencies in response to continued cost pressures.

Speaker #3: We knew coming into the year that 2025 would be particularly tough on margins, as contractual cost escalations at certain of our larger hotels were adding to general inflationary pressures across the portfolio.

Speaker #3: I am pleased to report that we made significant progress in managing costs and delivered comparable portfolio margin growth of 40 basis points during the year on total RevPAR growth of 3.5%.

Speaker #3: This was a much better cost management outcome than we expected at the start of the year. While some of the efficiency measures that were additive in 2025 will be harder to sustain as we move into this year, we will continue to work with our hotel teams to manage costs, increase productivity, and defend margins.

Bryan A. Giglia: This was a much better cost management outcome than we expected at the start of the year. While some of the efficiency measures that were additive in 2025 will be harder to sustain as we move into this year, we will continue to work with our hotel teams to manage costs, increase productivity, and defend margins. As we look into 2026, we see some reasons to be optimistic about the year ahead. Andaz Miami Beach is starting off well with impressive year-to-date occupancy above 80% at a mid-five hundred dollar rate. In addition, the resort has nearly 8,000 group room nights already on the books, representing more than half of our budgeted room nights for the year, which is very strong for a market with a shorter term booking window.

Speaker #3: As we look into 2026, we see some reasons to be optimistic about the year ahead. Andaz Miami Beach is starting off well, with impressive year-to-date occupancy above 80% at a mid-$500 rate.

Speaker #3: In addition, the resort has nearly 8,000 group room nights already on the books, representing more than half of our budgeted room nights for the year, which is very strong for a market with a shorter-term booking window.

Speaker #3: The property is building momentum, which will continue this year with the opening of Bizarre Meat and our membership beach club. We are seeing additional positive signs as market recovery continues in Northern California; fundamentals in Violea are more constructive, and there is the potential for industry-wide lift from special events such as F1 in Miami—which we missed last year—America 250 celebrations, and the World Cup.

Bryan A. Giglia: The property is building momentum, which will continue this year with the opening of Bazaar Meat and our membership Beach Club. We are seeing additional positive signs as market recovery continues in Northern California. Fundamentals in Wailea are more constructive, and there is the potential for industry-wide lift from special events such as F1 in Miami, which we missed last year, America250 celebrations, and the World Cup. At the same time, our focus portfolio will experience headwinds from softer transient demand in San Diego and continued uncertainty in DC, two of our larger markets, which will offset some growth. That said, both hotels had better than anticipated transient demand in January and February, which, if current trends continue, could result in a better than anticipated year.

Speaker #3: At the same time, our focused portfolio will experience headwinds from softer transient demand in San Diego and continued uncertainty in D.C., two of our larger markets, which will offset some growth.

Speaker #3: That said, both hotels had better-than-anticipated transient demand in January and February which, if current trends continue, could result in a better-than-anticipated year.

Speaker #3: While there are many encouraging signs, the industry and Sunstone have been disappointed by various headwinds over the past two years, making us more cautious.

Bryan A. Giglia: While there are many encouraging signs, the industry and Sunstone have been disappointed by various headwinds over the past two years, making us more cautious. That said, we are excited about our prospects this year, and if costs remain controlled and some of these events produce more than our modest expectations, we could be positioned to see performance accelerate as the year progresses. The guidance that Aaron will share with you later attempts to balance these factors and reflect an outlook that we believe is reasonable and achievable based on how we see things today. As we move through 2026, we will continue to execute on the three components of our strategy: recycling capital, investing in our portfolio, and returning capital to shareholders.

Speaker #3: That said, we are excited about our prospects this year, and if costs remain controlled and some of these events produce more than our modest expectations, we could be positioned to see performance accelerate as the year progresses.

Speaker #3: The guidance that Aaron will share with you later attempts to balance these factors and reflect an outlook that we believe is reasonable and achievable based on how we see things today.

Speaker #3: As we move through 2026, we will continue to execute on the three components of our strategy: recycling capital, investing in our portfolio, and returning capital to shareholders.

Speaker #3: While the transaction market has been quiet the last couple of years, we are clearly seeing some incremental activity, and we are looking for ways to thoughtfully demonstrate the value of our portfolio.

Bryan A. Giglia: While the transaction market has been quiet the last couple of years, we are clearly seeing some incremental activity, we are looking for ways to thoughtfully demonstrate the value of our portfolio. In the meantime, we are focused on delivering profitability growth from operations and realizing the benefits of our investment projects. We expect these actions will support our capital return objectives in the coming year. With that, I'll turn the call over to Robert to give some additional details on recent capital investment activity and our plans for 2026.

Speaker #3: In the meantime, we are focused on delivering profitability growth from operations and realizing the benefits of our investment projects. We expect these actions will support our capital return objectives in the coming year.

Speaker #3: And with that, I'll turn the call over to Robert to give some additional details on recent capital investment activity and our plans for 2026.

Speaker #3: Thanks, Bryan. 2025 was a busy year for us on the operations and investment front. We debuted Andaz Miami Beach in the second quarter, and the fully renovated resort looks great and is gaining traction.

Robert C. Springer: Thanks, Bryan. 2025 was a busy year for us on the operations and investment front. We debuted Andaz Miami Beach in Q2, and the fully renovated resort looks great and is gaining traction. We have been pleased with recent transient booking velocity and the progress we have made attracting high-quality group business. We will round out the resort this year with the addition of the Beach Club and the introduction of Bazaar Meat, the resort's signature dining destination. Performance in the initial weeks of 2026 has been encouraging, with year-to-date RevPAR of nearly $475, and the resort is well positioned to deliver earnings growth this year and into 2027. Earlier in 2025, we completed a rooms renovation at Wailea Beach Resort and are happy to see the demand backdrop turning a corner on the island.

Speaker #3: We have been pleased with recent transient booking velocity and the progress we have made attracting high-quality group business. We will round out the resort this year with the addition of the beach club and the introduction of Bizarre, the resort's signature dining destination.

Speaker #3: Performance in the initial weeks of 2026 has been encouraging, with year-to-date RevPAR of nearly $475, and the resort is well positioned to deliver earnings growth this year and into 2027.

Speaker #3: Earlier in 2025, we completed a rooms renovation at Violea Beach Resort and are happy to see the demand backdrop turning a quarter on the island.

Speaker #3: We have the opportunity for meaningful growth at the property as occupancy rebounds and we benefit from our recent investment. We are seeing good progress with RevPAR index increasing 17%.

Robert C. Springer: We have the opportunity for meaningful growth at the property as occupancy rebounds, and we benefit from our recent investment. We are seeing good progress with RevPAR Index increasing 17 points sequentially into Q4 as the market normalizes and the resort reestablishes its competitive positioning. In Q4, we completed a renovation of the meeting space in San Antonio, which complements the room renovation done just prior to our acquisition, and the hotel now looks great from top to bottom. In San Diego, we are putting the finishing touches on a renovation of the meeting space there as well, which should allow the hotel to maintain its leading position in this premier group event destination. We are completing this work in phases to minimize disruption but will have a modest amount of earnings headwinds in Q1. The project remains on schedule and on budget.

Speaker #3: Sequentially into the fourth quarter as the market normalizes and the resort reestablishes its competitive positioning. In the fourth quarter, we completed a renovation of the meeting space in San Antonio, which complements the room renovation done just prior to our acquisition, and the hotel now looks great from top to bottom.

Speaker #3: In San Diego, we are putting the finishing touches on a renovation of the meeting space there as well, which should allow the hotel to maintain its leading position in this premier group event destination.

Speaker #3: We are completing this work in phases to minimize disruption, but will have a modest amount of earnings headwinds in the first quarter. The project remains on schedule and on budget.

Speaker #3: This year, we will also be performing some maintenance projects at our Renaissance Orlando facade work and a rooms refresh at Ocean's Edge Resort and Marina, as well as some smaller routine projects across the rest of the portfolio.

Robert C. Springer: This year, we will also be performing some maintenance projects at our Renaissance Orlando, façade work, and a rooms refresh at Oceans Edge Resort & Marina, as well as some smaller routine projects across the rest of the portfolio. As Bryan alluded to earlier, we are seeing some incremental signs of life in the transaction market. While we are hopeful this will provide a more constructive backdrop to execute on our capital recycling strategy, we expect to remain disciplined in our approach and mindful of other capital allocation opportunities available to us. With that, I'll turn it over to Aaron. Please go ahead.

Speaker #3: As Bryan alluded to earlier, we are seeing some incremental signs of life in the transaction market. While we are hopeful this will provide a more constructive backdrop to execute on our capital recycling strategy, we expect to remain disciplined in our approach and mindful of other capital allocation opportunities available to us.

Speaker #3: With that, I'll turn it over to Aaron. Please go ahead. Thanks, Robert. As we noted at the top of the call, our earnings results for the fourth quarter came in ahead of expectations.

Bryan A. Giglia: Thanks, Robert. As we noted at the top of the call, our earnings results for Q4 came in ahead of expectations as stronger leisure performance at our resort added to modestly better performance across most other hotels in the portfolio. Rooms RevPAR grew an impressive 9.6% in the quarter, including a 540 basis point benefit from Andaz Miami Beach. In a continuation of the trends we saw earlier this year, growth in ancillary spend outpaced rooms and contributed to total RevPAR growth of 12.5%.

Aaron Reyes: Thanks, Robert. As we noted at the top of the call, our earnings results for Q4 came in ahead of expectations as stronger leisure performance at our resort added to modestly better performance across most other hotels in the portfolio. Rooms RevPAR grew an impressive 9.6% in the quarter, including a 540 basis point benefit from Andaz Miami Beach. In a continuation of the trends we saw earlier this year, growth in ancillary spend outpaced rooms and contributed to total RevPAR growth of 12.5%.

Speaker #3: A stronger leisure performance at our resort added to modestly better performance across most other hotels in the portfolio. Rooms RevPAR grew an impressive 9.6% in the quarter, including a 540 basis point benefit from Andaz Miami Beach.

Speaker #3: In a continuation of the trends we saw earlier this year, growth in ancillary spend outpaced rooms and contributed to total RevPAR growth of 12.5%, including a 510 basis point benefit from Andaz.

Aaron Reyes: ... including a 510 basis point benefit from Andaz. This stronger top line performance and ongoing cost controls contributed to full year earnings that were ahead of the midpoint of our guidance range, including adjusted EBITDAre in Q4 of $57 million and adjusted FFO of $0.20 per diluted share. We continue to benefit from a strong balance sheet with net leverage of only 3.5x trailing earnings, or 4.7x, including our preferred equity. In early January, we drew the remaining $90 million balance from a previously arranged term loan and used a majority of the proceeds to repay our Series A notes at their scheduled maturity. Following this repayment, we have addressed all debt maturities through 2028.

Speaker #3: This stronger top-line performance and ongoing cost controls contributed to full-year earnings that were ahead of the midpoint of our guidance range. Including adjusted EBITDAre in the fourth quarter of $57 million and adjusted FFO of $0.20 per diluted share.

Speaker #3: We continue to benefit from a strong balance sheet, with net leverage of only 3.5 times trailing earnings, or 4.7 times including our preferred equity.

Speaker #3: In early January, we drew the remaining $90 million balance from a previously arranged term loan and used a majority of the proceeds to repay our Series A notes at their scheduled maturity.

Speaker #3: Following this repayment, we have addressed all debt maturities through 2028. As of the end of the quarter, and pro forma for the January payoff, we had over $200 million of total cash and cash equivalents, including our restricted cash.

Aaron Reyes: As of the end of the quarter and pro forma for the January payoff, we had over $200 million of total cash and cash equivalents, including our restricted cash. Together with full capacity available on our credit facility, this equates to over $700 million of total liquidity. Included in our press release this morning are the details of our outlook for 2026. As Bryan noted earlier, while we see reasons to be optimistic about the year ahead, we remain cautious while still in these initial months. Based on what we see today, we expect that rooms RevPAR for all hotels in the portfolio will increase between 4% and 7% to a range of $234 to 241.

Speaker #3: Together with full capacity available on our credit facility, this equates to over $700 million of total liquidity. Included in our press release this morning are the details of our outlook for 2026.

Speaker #3: As Bryan noted earlier, while we see reasons to be optimistic about the year ahead, we remain cautious while filling these initial months. Based on what we see today, we expect that rooms RevPAR for all hotels in the portfolio will increase between 4% and 7%, to a range of $234 to $241.

Speaker #3: This reflects the full-year benefit of Andaz Miami Beach, which is expected to contribute approximately 400 basis points of growth at the midpoint. For 2026, we are also introducing guidance for total RevPAR, which is expected to increase between 3.5% to 6.5%, and which would imply a range of $385 to $396, with a similar 400 basis point benefit from Andaz.

Aaron Reyes: This reflects the full year benefit of Andaz Miami Beach, which is expected to contribute approximately 400 basis points of growth at the midpoint. For 2026, we are also introducing guidance for total RevPAR, which is expected to increase between 3.5% to 6.5%, which would imply a range of $385 to $396, with a similar 400 basis point benefit from Andaz. We anticipate that our Q1 will be our strongest growth quarter of the year, as the contribution from Andaz and better performance in Maui will more than offset the challenging comp in DC from the inauguration and in New Orleans from the Super Bowl last year.

Speaker #3: We anticipate that our first quarter will be our strongest growth quarter of the year, as the contribution from Andaz and better performance in Maui will more than offset the challenging comp in D.C. from the inauguration and in New Orleans from the Super Bowl last year.

Speaker #3: This should result in first quarter RevPAR and total RevPAR growth being above the high ends of the full-year ranges just discussed, and then the subsequent quarters being between the lower end and the midpoint.

Aaron Reyes: This should result in Q1 RevPAR and total RevPAR growth being above the high ends of the full year ranges just discussed, and then the subsequent quarters being between the lower end and the midpoint. This revenue growth is expected to translate into adjusted EBITDARE in the range of $225 to 250 million. Excluding one-time items and an asset sale, which together contributed approximately $10 million to our 2025 results, the midpoint of our 2026 EBITDA range reflects 5% growth in earnings over last year. Based on where we sit today, we expect our FFO per diluted share to range from $0.81 to 0.94.

Speaker #3: This revenue growth is expected to translate into adjusted EBITDA RE in the range of $225 million to $250 million. Excluding one-time items and an asset sale, which together contributed approximately $10 million to our 2025 results, the midpoint of our 2026 EBITDA range reflects 5% growth in earnings over last year.

Speaker #3: Based on where we sit today, we expect our FFO per diluted share to range from $0.81 to $0.94. Adjusting for the same one-time items in the prior year, the midpoint of our FFO range reflects growth of 8% relative to 2025.

Aaron Reyes: Adjusting for the same one-time items in the prior year, the midpoint of our FFO range reflects growth of 8% relative to 2025, as the benefit of our share repurchase activity adds to the growth in hotel earnings. In terms of the distribution of our earnings by quarter, we anticipate that Q1 will represent approximately 25% of our full year projections at the midpoint. This is a bit higher than our historical run rate, reflects the added contribution from Andaz Miami Beach. As is typical for our portfolio, Q2 is expected to be our largest contributor at approximately 30%, with the balance split more or less evenly across Q3 and Q4. Moving to our return of capital.

Speaker #3: As the benefit of our share repurchase activity adds to the growth in hotel earnings, in terms of the distribution of our earnings by quarter, we anticipate that the first quarter will represent approximately 25% of our full-year projections at the midpoint.

Speaker #3: This is a bit higher than our historical run rate, but reflects the added contribution from Andaz Miami Beach. As is typical for our portfolio, the second quarter is expected to be our largest contributor at approximately 30%, with the balance split more or less evenly across the third and fourth quarters.

Speaker #3: Moving to our return of capital, since the start of 2025 up through the middle of this week, we have repurchased approximately 108 million dollars of common stock at a blended price of 8 dollars and 83 cents per share.

Aaron Reyes: Since the start of 2025, up to the middle of this week, we have repurchased approximately $108 million of common stock at a blended price of $8.83 per share. In addition, we have also purchased $3.1 million of our preferred stock at a blended price of $20.46 per share, or an 18% discount to its liquidation value. This common and preferred stock repurchase activity has been accretive to both NAV and earnings per share. As we noted in our press release this morning, our board of directors has reauthorized our repurchase program back up to $500 million. While we retain capacity and appetite for additional share repurchases, our 2026 outlook does not assume the benefit of additional common stock buyback activity.

Speaker #3: In addition, we have also purchased 3.1 million dollars of our preferred stock at a blended price of 20 dollars and 46 cents per share or an 18% discount to its liquidation value.

Speaker #3: This common and preferred stock repurchase activity has been accretive to both NAV and earnings per share. As we noted in our press release this morning, our board of directors has reauthorized our repurchase program back up to $500 million.

Speaker #3: And while we retain capacity and appetite for additional share repurchases, our 2026 outlook does not assume the benefit of additional common stock buyback activity.

Speaker #3: In addition to our share repurchases, our board of directors has also authorized a $0.09 per share common dividend for the first quarter and has also declared the routine distributions for our Series H and I preferred securities.

Aaron Reyes: In addition to our share repurchases, our board of directors has also authorized a $0.09 per share common dividend for Q1 and has also declared the routine distributions for our Series H and I preferred securities. Before we conclude our prepared remarks, I'll turn it back over to Bryan for some additional thoughts.

Speaker #3: Before we conclude our prepared remarks, I'll turn it back over to Bryan for some additional thoughts. Before we open the call to questions, I want to highlight that our 2026 board are focused on realizing the value of our portfolio.

Bryan A. Giglia: Before we open the call to questions, I want to highlight our 2026 objectives. The management team and board are focused on realizing the value of our portfolio. Over the past few years, we have actively sold hotels at what have proven to be attractive valuations and redeployed proceeds into the most accretive option available at the time. While most of the proceeds went to repurchase common or preferred stock at a discount, we also acquired assets when our cost of capital became more competitive. We will continue this practice in 2026 while evaluating other potential transactions to realize and return the value of this portfolio to our shareholders. As I mentioned last Q, the board and management remain committed to maximizing value for shareholders and are open to any alternative that would reasonably be expected to result in value creation.

Speaker #3: Over the past few years, we have actively sold hotels at what have proven to be attractive valuations and redeployed proceeds into the most accretive option available at the time.

Speaker #3: While most of the proceeds went to repurchase common or preferred stock at a discount, we also acquired assets when our cost of capital became more competitive.

Speaker #3: We will continue this practice in 2026 while evaluating other potential transactions to realize and return the value of this portfolio to our shareholders. As I mentioned last quarter, the Board and management remain committed to maximizing value for shareholders and are open to any alternative that would reasonably be expected to result in value creation.

Speaker #3: With that, we can now open the call to questions. Operator, please go ahead.

Bryan A. Giglia: With that, we can now open the call to questions. Operator, please go ahead.

Speaker #2: In order to ask a question at this time, simply press star followed by the number one on your telephone keypad. To withdraw your question, press star one again.

Operator: In order to ask a question at this time, simply press star followed by the number one on your key telephone keypad. To withdraw your question, press star one again. We do ask you to limit yourself to one question and one follow-up. Your first question comes from the line of Cooper Clark with Wells Fargo. Please go ahead.

Speaker #2: We do ask you to limit yourself to one question and one follow-up. And your first question comes from the line of Cooper Clark with Wells Fargo.

Speaker #2: Please go ahead.

Speaker #3: Great. Thanks for taking the question. Curious if you could walk through some of the puts and takes as we think about the one and a half percent midpoint of 26 RevPAR growth ex Andaz within the context of 2.1% growth last year and what should be a continued recovery in markets like Hawaii?

Cooper Clark: Great. Thanks for taking the question. Curious if you could walk through some of the puts and takes as we think about the 1.5% midpoint of 2026 RevPAR growth ex Andaz within the context of 2.1% growth last year, and what should be a continued recovery in markets like Hawaii.

Speaker #4: Sure. Morning, Cooper. When you look at the remainder of the portfolio ex-Andaz, you're absolutely right. Maui is a market where we are seeing growth.

Bryan A. Giglia: Sure. Morning, Cooper. When you look at the remainder of the portfolio ex Andaz, you're absolutely right. You know, Maui is a market where we are seeing growth. We talked about it last year, where we mentioned that, you know, for the hotel to get back to where it needs to be, the Kaanapali market needed to stabilize, which is something that we saw happening in kind of the late Q3, Q4 of last year. That continues to happen going forward. We went from, you know, the high, you know, mid to high 90s occupancy index to, at the end of the year, over 100%. We should stabilize around 110, that is absolutely moving in the right direction.

Speaker #4: We talked about it last year, where we mentioned that for the hotel to get back to where it needs to be, the Conepoly market needs to stabilize, which is something that we saw happening in kind of the late third quarter, fourth quarter of last year.

Speaker #4: And that continues to happen going forward. We went from the mid to high 90s occupancy index to, at the end of the year, over 100%.

Speaker #4: We should stabilize around 110. So that is absolutely moving in the right direction. As I said earlier, we're seeing continued transient demand as we recapture that index.

Bryan A. Giglia: As I said earlier, we're seeing continued transient demand as we recapture that RevPAR Index. So far, the first two months of the year have been a pleasant surprise to see that continue. The group business in Maui, the pace is down a little bit this year. We do have this one piece of business that is on for a couple of years and then off, and it's off island this year. We are seeing a transient pace is up about 53%, and that will help cover that shortfall.

Speaker #4: And so far, the first two months of the year have been a pleasant surprise to see that continue. The group business in Maui, the pace is down a little bit this year.

Speaker #4: We do have this one piece of business that is on for a couple of years and then off. And it's off-island this year.

Speaker #4: But we are seeing that transient pace is up about 53%, and that will help cover that shortfall. When we look at the rest of the portfolio, we see continued strength in San Francisco, in wine country, and other markets. One that we highlighted on the call—D.C.—is a market where we faced a lot of headwinds last year.

Bryan A. Giglia: You know, when we look at the rest of the portfolio, you have continued strength in San Francisco, in Wine Country, you know, other markets. One that we highlighted on the call, DC, is a market that we faced a lot of headwinds last year, not only with the government shutdown at the end of the year, also cutbacks and impacted a lot of the group business there. The amount, the percentage where groups would actually actualize, as compared to their blocks, was down to historic averages. While we anniversary that coming up shortly, the year-over-year comp will get easier. We are cautious.

Speaker #4: Not only with the government shutdown at the end of the year, but then also cutbacks impacted a lot of the group business there. Our amount, the percentage where groups would actually actualize as compared to their blocks, was down to historic averages.

Speaker #4: And so, while we have that anniversary coming up shortly, and so the year-over-year comp will get easier, we do—we are cautious. And then we are also seeing in D.C. a pickup in transient business that we were not seeing in the middle part of last year.

Bryan A. Giglia: Then we are also seeing in DC a pickup in transient business that we were not seeing in the middle part of last year. Like some of the, you know, government transient, we're starting to see that come back. Again, with what, you know, the impacts and the headwinds that we saw last year, we're approaching the DC market as, with, as cautious. If we continue to see these trends, we would expect that, you know, we could be in a position where that midpoint would move up a little bit. You know, DC is one of the markets right now that we're keeping an eye on and is, you know, pulling that average back.

Speaker #4: And so, if some of the government transient—we're starting to see that come back again. With the impacts and the headwinds that we saw last year, we're approaching the D.C. markets with caution.

Speaker #4: And if we continue to see these trends, we would expect that we could be in a position where that midpoint would move up a little bit.

Speaker #4: But DC is one of the markets right now that we're keeping an eye on, and pulling that average back.

Speaker #3: Okay, great, that's helpful. And then, could you talk through the expense growth implied in guide, both including and excluding the Andaz, and what are some of the key drivers there?

Cooper Clark: Okay, great. That's helpful. Then could you talk through the expense growth implied in guide, both including and excluding the Andaz, and what are some of the key drivers there?

Speaker #4: Sure. I mean, I think roughly, on expenses, we're right around 3% total. Labor over the last couple of years has been sort of in that 4%-ish range.

Bryan A. Giglia: Sure. I mean, I think roughly we're on expenses, we're, you know, right around, you know, 3% total. You know, labor over the last couple of years has been, you know, sort of that 4-ish range. It's coming down a little bit this year into the 3s. Energy prices are up a bit this year. Then there are a couple of the larger fixed expenses that, you know, will unfold as the year goes on. Our insurance renews in June, and that's something that we had good renewals with last year. There were not, you know, any major, you know, cat hits in our portfolio, so that should be helpful. We go into the year, and we expect there to be some growth in those rates.

Speaker #4: It's coming down a little bit this year into the threes. Energy prices are up a bit this year, and then there are a couple of the larger fixed expenses that will unfold as the year goes on.

Speaker #4: Our insurance renews in June, and that's something that we had good renewals with last year. There were not any major CAT hits in our portfolio.

Speaker #4: So that should be helpful. But we go into the year, and we expect there to be some growth in those rates. And so if we get a year like last year, that could be a benefit.

Bryan A. Giglia: If we get a year like last year, that could be a benefit. Property taxes have been down, you know, over the last few years. We're kind of assuming that those are gonna normalize. On the Andaz side, you know, overall, I don't think it's going to make, you know, a material difference in that overall percentage.

Speaker #4: And then property taxes have been down over the last few years. We're kind of assuming that those are going to normalize. And then on the Andaz side, overall, I don't think it's going to make a material difference in that overall percentage.

Speaker #3: Yeah. Hey, Cooper, it's Aaron. I'm just, maybe to add to what Bryan was saying. So as we move through last year, as we noted in the prepared remarks, we were much more successful in managing costs relative to where we thought that they would be at the beginning of the year.

Aaron Reyes: Yeah. Hey, Cooper, it's Aaron. I'm just maybe to add to what Bryan was saying. You know, as we moved through last year, as we noted in the prepared remarks, you know, we were, you know, much more successful in managing costs relative to where we thought that they would be at the beginning of the year. We ended up with

Speaker #3: And so we ended up with margin expansion to the tune of about 40 basis points on RevPAR growth of about 3.5%.

Bryan A. Giglia: you know, margin expansion to the tune of about 40 basis points on RevPAR growth of about 3.5%. you know, from a cost growth perspective for the comparable portfolio, so the 13 hotels, ex-Andaz, you know, expense growth is in that kind of that 3-ish percent or so area. What we'll feel a bit differently this year is just that, as you noted, the blended RevPAR growth rate for that comp set is for that set of hotels is a bit lower. We'll expect some margin headwinds for the comp portfolio in 2026.

Aaron Reyes: you know, margin expansion to the tune of about 40 basis points on RevPAR growth of about 3.5%. you know, from a cost growth perspective for the comparable portfolio, so the 13 hotels, ex-Andaz, you know, expense growth is in that kind of that 3-ish percent or so area. What we'll feel a bit differently this year is just that, as you noted, the blended RevPAR growth rate for that comp set is for that set of hotels is a bit lower. We'll expect some margin headwinds for the comp portfolio in 2026.

Speaker #3: From a cost growth perspective for the comparable portfolio, so the 13 hotels ex Andaz, expense growth isn't that kind of that 3-ish percent or so area.

Speaker #3: What we’ll feel a bit differently this year is just that, as you noted, the blended RevPAR growth rate for that comp set of hotels is a bit lower.

Speaker #3: So, we'll expect some margin headwinds for the comp portfolio in '26. If we add in Andaz, things obviously do get a little bit noisier, given that it was only opened up part of the year last year and will be open all of the year this year.

Bryan A. Giglia: If we add in Andaz, things obviously do get a little bit noisier given that it was, you know, only open up part of the year last year, will be open all of the year this year. We'd look at probably a total overall expense growth rate of around 5% or so, which starts to then align with where the midpoint of the RevPAR range is for the total portfolio. A good chance of, you know, being able to defend margins as we move from 2025 to 2026 for the total portfolio. We'll be hopeful that we have an outcome like we had last year, where as the year went on, we were a bit more successful on the cost side.

Aaron Reyes: If we add in Andaz, things obviously do get a little bit noisier given that it was, you know, only open up part of the year last year, will be open all of the year this year. We'd look at probably a total overall expense growth rate of around 5% or so, which starts to then align with where the midpoint of the RevPAR range is for the total portfolio. A good chance of, you know, being able to defend margins as we move from 2025 to 2026 for the total portfolio. We'll be hopeful that we have an outcome like we had last year, where as the year went on, we were a bit more successful on the cost side.

Speaker #3: We’d look at probably a total overall expense growth rate of around 5% or so, which then starts to align with where the midpoint of the RevPAR ranges for the total portfolio.

Speaker #3: So, a good chance of being able to defend margins as we move from '25 to '26 for the total portfolio. And we'll hopefully be hopeful that we have an outcome like we had last year, where as the year went on, we were a bit more successful on the cost side.

Speaker #3: Great. Thank you. Appreciate the color.

Aaron Reyes: Great. Thank you. Appreciate the color.

Cooper Clark: Great. Thank you. Appreciate the color.

Speaker #5: Your next question comes from the line of Dwayne Fennigworth with Evercore ISI. Please go ahead.

Operator: Your next question comes from the line of Duane Pfennigwerth with Evercore ISI. Please go ahead.

Speaker #3: Hey, thank you. Good morning. A call earlier today talked about the expectation for being a net seller of assets. I wonder if that's your expectation as well.

Duane Pfennigwerth: Hey, thank you. Good morning. You know, a call earlier today, talked about the expectation for being a net seller of assets. I wonder if that's your expectation as well, and if you have any update on the marketing process around the Wine Country assets.

Speaker #3: And if you have any update on the marketing process around the wine country assets.

Speaker #4: Sure. Good morning, Dwayne. In the fourth quarter, we started to see a pickup in transactions, either closed transactions or announced transactions. And I think as we have more clarity into this year, and debt markets continue to be strong, I think that we'll continue to see an uptick in transactions.

Bryan A. Giglia: Sure. Good morning, Duane. You know, in Q4, we started to see a pickup in transactions, either closed transactions or announced transactions. I think as we have more clarity into this year, we and, you know, debt markets continue to be strong, I think that we'll continue to see an uptick in transactions. I think thematically it will be similar. I think that there is a lot of demand for luxury assets. I think there's a lot of demand for cash flowing assets. Those obviously can support the highest debt balance. You know, we're still seeing, you know, for mid-sized transactions, enough equity out there. As you start to get to larger assets, the bidder pool is still, you know, thinner. I do think we're seeing that improve.

Speaker #4: I think thematically it will be similar. I think that there is a lot of demand for luxury assets. I think there's a lot of demand for cash-flowing assets.

Speaker #4: And so, those obviously can support the highest debt balance. And we're still seeing, for mid-sized transactions, enough equity out there as you start to get to larger assets.

Speaker #4: The bidder pool is still thinner. I do think we're seeing that improve. And view is really no different than what we were doing last year.

Bryan A. Giglia: You know, our view is really no different than what we were doing last year when we sold New Orleans at a very attractive cap rate, and then redeployed those proceeds into our common stock. You know, we're gonna look to realize private market values where we can, you know, for those, you know, for hotels and resorts that we have where we see the biggest gap between the public and private market values. Basically, you know, we'll continue to try to unlock value where we can and then go and deploy that in the most accretive manner.

Speaker #4: And when we sold New Orleans at a very attractive cap rate and then redeployed those proceeds into our common stock, we're going to look to realize private market values where we can for those hotels and resorts that we have, where we see the biggest gap between the public and private market values.

Speaker #4: And basically, we'll continue to try to unlock value where we can, and then go and deploy that in the most accretive manner. We don't comment on transactions prior to announcement, but we have been clear—and I think our actions have been very clear—that a major pillar of our strategy is recycling assets.

Bryan A. Giglia: You know, we don't comment on transactions prior to announcement, but, you know, we have been clear, and I think our actions have been very clear, is that, you know, our major pillar of our strategy is recycling assets. There's always gonna be a point in time where we'll have one or more assets that in some form of marketing or discussion with potential buyers. We don't think that this year will be any different. The question then comes is what is that most accretive allocation of that or redeployment of that capital? That depends on a lot of factors.

Speaker #4: So there's always going to be a point in time where we'll have one or more assets that, in some form of marketing or discussion with potential buyers, and we don't think that this year will be any different.

Speaker #4: The question then comes, what is the most accretive allocation or redeployment of that capital? And that depends on a lot of factors.

Speaker #4: It depends on where the stock is, where our cost of capital is, where our stock's trading, and on a risk-adjusted basis, whether it makes more sense to repurchase stock or prefer.

Bryan A. Giglia: It depends on where the stock is, you know, where our cost of capital is, where our stock's trading, what, you know, and on a risk-adjusted basis, what is, you know, is it to make more sense to repurchase stock or preferred? Does it make more sense to acquire an asset? Over the last few years, I think we've demonstrated that, you know, we've been able to, you know, pivot between those, sometimes in shorter time periods, but we've been able to effectively deploy that capital, whether it be through the acquisitions-

Speaker #4: Does it make more sense to acquire an asset? And over the last few years, I think we've demonstrated that we've been able to pivot between those, sometimes in shorter time periods, but we've been able to effectively deploy that capital, whether it be through the acquisitions.

Duane Pfennigwerth: And then just-

Speaker #3: And then just.

Bryan A. Giglia: Tonio or buying back stock.

Speaker #4: Antonio or buying back stock.

Speaker #5: Your next question comes from the line of Smead Rose with Citi. Please go ahead.

Operator: Your next question comes from the line of Smedes Rose with Citi. Please go ahead.

Smedes Rose: Hi. Thank you. I had another question about your guidance, just in terms of total RevPAR being a little bit lower than your RevPAR outlook. Usually, they're sort of at least in line or maybe total RevPAR would be a little bit higher. I was just wondering if you could just speak to that for a moment.

Speaker #3: Hi, thank you. I had another question about your guidance, just in terms of total RevPAR being a little bit lower than your RevPAR outlook. Usually, they're at least in line, or maybe total RevPAR would be a little bit higher.

Speaker #3: So I was just wondering if you could just speak to that for a moment.

Speaker #4: Sure, Smeads. Good morning, or good afternoon. Having a focused portfolio with some larger assets, DC being one of them—I spoke about that—and then San Diego also, where we finished up a pretty substantial meeting space renovation, or we finished a portion of it and we'll finish the rest of it in the quarter.

Bryan A. Giglia: Sure, Smead. Good morning, or good afternoon. You know, having a focused portfolio with some larger assets, DC being one of them, I spoke about, and then San Diego also that had a, you know, we finish up a pretty substantial meeting space renovation, or we finish a portion of it and we'll finish it the rest of it in the quarter. That's impacted on those two big hotels. On the group side, that's gonna impact some of our ancillary spend. You know, getting some of that back in Andaz, and quite honestly, I would expect a increase in our total RevPAR if we continue to see the, you know, the transient trends in DC somewhat.

Speaker #4: That's impacted on those two big hotels on the group side. That's going to impact some of our ancillary spend. Getting some of that back in Andaz and, quite honestly, I would expect an increase in our total RevPAR if we continue to see the transient trends in DC somewhat, but more importantly, the transient trends we're seeing in YLA. With the additional spend that comes from the transient rooms, that will help buoy our total RevPAR.

Bryan A. Giglia: More importantly, the transient trends we're seeing in Wailea with the additional spend that comes from the transient rooms, you know, that will help buoy our total RevPAR. Right now, it's more a function of some of the, you know, limited displacement in Q1 in San Diego, then a slower group pace in DC. It's more of that mix shift, anything.

Speaker #4: But right now, it's more a function of some of the limited displacement in the first quarter in San Diego, and then a slower group pace in D.C.

Speaker #4: And it's more that mixture—anything.

Speaker #3: Okay. And then I was just wondering if you could talk a little bit more—you mentioned in your opening remarks some transient weakness in San Diego.

Smedes Rose: Okay. I was just wondering if you could talk a little bit more. You mentioned in your opening remarks some transient weakness in San Diego. Is that specifically to your hotel? Are you seeing that kind of market wide? Maybe just if you could just speak to kind of just the broader market in San Diego, what you're seeing just, you know, maybe on the group side, what's happening with the convention calendar there, et cetera.

Speaker #3: Is that specifically to your hotel? Are you saying that kind of market-wide? And maybe just if you could just speak to kind of just the broader market in San Diego, what you're seeing just maybe on the group side, what's happening with the convention calendar there, etc.?

Bryan A. Giglia: Yeah. you know, in San Diego, we saw some ups and downs last year, some of it government-related. There's a lot of defense contractors. We saw it slow down last year. We've seen that pick up, you know, towards the end of the year, the leisure time period, you know, whether it's some international travel not coming in. some of the, you know, some, you know, Canadian markets, you know, are, you know, come to that area. What we're seeing now, you know, the first two months have been pretty promising in San Diego, DC too, we mentioned.

Speaker #4: Yeah. In San Diego, we saw some ups and downs last year. Some of it was government-related. There are a lot of defense contractors, so we saw it slow down last year.

Speaker #4: We've seen that pick up. Towards the end of the year, the leisure time period—whether it's some international travel not coming in, or some Canadian markets are coming to that area.

Speaker #4: What we're seeing now—the first two months have been pretty promising in San Diego. D.C. too, we mentioned. And so I think we're starting to see government transient come back, and part of that might just be certain segments. And what San Diego pulls from is the defense contractors.

Bryan A. Giglia: You know, I think we're starting to see government transient come back, and, you know, part of that might just be certain segments and, what San Diego pulls from is the defense contractors, that can be a positive for the market. Like, we'll see over the next few months, but we are seeing positive signs, as the year goes on right now in San Diego on the transient side.

Speaker #4: And so that can be a positive for the market. And so we'll see over the next few months, but we are seeing positive signs as the year goes on right now in San Diego on the transient side.

Speaker #3: Great. Thank you. Thank you.

Smedes Rose: Great. Thank you. Thank you.

Speaker #5: Your next question comes from the line of Michael Bellisario with Baird. Please go ahead.

Operator: Your next question comes from the line of Michael Bellisario with Baird. Please go ahead.

Speaker #6: Thanks. Good morning, guys.

Michael Bellisario: Thanks. Good morning, guys.

Speaker #4: Good morning, everyone.

Bryan A. Giglia: Morning, Mike.

Michael Bellisario: First one for Aaron, just on this Ohana preferred, can you just remind us, like what are the mechanisms there for you to take that out? The when and by how much does that coupon ratchet? Just on capital allocation, is this a potential use of capital if you were successful with dispositions?

Speaker #6: The first one for Aaron. Just on this Ohana preferred, can you just remind us what are the mechanisms there for you to take that out?

Speaker #6: When and by how much does that coupon ratchet? And then, just on capital allocation, is this a potential use of capital if you were successful with these positions?

Speaker #4: Yeah, thanks for the question. So, the Ohana you're referring to is our Series G Preferred, which was issued in connection with our acquisition of Montage.

Aaron Reyes: Yeah, Mike, man, thanks for the question. The Ohana is referring to is our Series G Preferred, which is issued in connection with our acquisition of Montage. That one does have a mechanism where the yield there is tied to a greater of the hotel yield or a fixed rate, which is currently now 6.5%. Overall, it's even at $66 million in size, it's a manageable amount of capital. We kind of view our preferred, I would say, as a total bucket, they all end at $280 million at a, you know, at a pretty attractive blended price of just around 5% or so.

Speaker #4: That one does have a mechanism where the yield there is tied to the greater of the hotel yield or a fixed rate, which is currently now 6.5%.

Speaker #4: So overall, I mean, it's $66 million in size, so it's a manageable amount of capital. We kind of view our preferred, I would say, as a total bucket.

Speaker #4: So the all-in is the $280 million, out at a pretty attractive blended price of just around 5% or so. But as you saw in our results for the quarter, we did take the opportunity to look at some buyback on the preferred side.

Aaron Reyes: As you saw in our results for the quarter, and we did take the opportunity to look at, you know, some buyback on the preferred side, and we'll continue to do that as a way to kind of just manage the overall preferred dividend exposure and ensure that we're mindful of that, of the mechanism on the Series G, which does step up. I think as we think about this year, I wouldn't expect that our preferred dividend would increase in 2026 relative to where it was in 2025, even with the escalation on the Series G, just given that we'll manage the overall outstanding balance. You know, we'll take another look at it as we move through the year.

Speaker #4: And we'll continue to do that as a way to kind of just manage the overall preferred dividend exposure and ensure that we're mindful of the mechanism on the Series G, which does step up.

Speaker #4: So, I think as we think about this year, I wouldn't expect that our preferred dividend would increase in '26 relative to where it was in '25, even with the escalation on the Series G, just given that we'll manage the overall outstanding balance.

Speaker #4: So we'll take another look at it as we move through the year. I mean, certainly as we noted, we have $200 million of cash that we could readily put to use to address that Series G.

Aaron Reyes: I mean, certainly, as we noted, we have, you know, $200 million of cash that we could readily put to use to address that Series G. The function there is it's callable, solely in our discretion.

Speaker #4: And the function there is it's callable, solely at our discretion. And it doesn't have to be in the total amount, either. So we can take out pieces of it at a time.

Bryan A. Giglia: It doesn't have to be in the total amount either. We can take out pieces of it at a time.

Speaker #6: Got it, that's helpful. And then just two little bottling follow-ups. Maybe I missed them. What's your EBITDA expectation for Miami this year? And then, what are some of those one-time items that you mentioned that's impacting the year-over-year growth rate?

Michael Bellisario: Got it. That's helpful. Just two little modeling follow-ups, and maybe I missed them. What's your EBITDA expectation for Miami this year? What are some of those one-time items that you mentioned that's impacting the year-over-year growth rate? I think it's about like $7 million net of the New Orleans sales, if that's right.

Speaker #6: I think it's about, like, $7 million net of the New Orleans sales, if my math's right.

Speaker #4: Okay. I'll start with—so on Miami, our expectation is consistent with where we were before. We think it's low- to mid-teens EBITDA this year.

Bryan A. Giglia: Okay. I'll start with. In Miami, our expectation is consistent with where we were before. We think it's, you know, low to mid-teens EBITDA this year. What we've seen, you know, starting in kind of really in December and, you know, December, we hit close to 70% occupancy. The comp set was right around 70. Our rate, granted, was lower than the comp than our luxury set. We were in the $500s. They were in the $900+. We have plenty of room to grow. We're building a very good base. Our group room nights have doubled quarter-over-quarter.

Speaker #4: And our what we've seen starting in kind of really in December and December, we we hit close to 70% occupancy. The comp set was right around 70.

Speaker #4: Our rate granted was lower than the comp, than our luxury set. We were in the 500s; they were in the 900-plus. So we have plenty of room to grow.

Speaker #4: We're building a very good base. Our group room nights have doubled quarter over quarter. We've got a lot of good momentum going into F1, and FIFA later in the summer, which is a great time for that piece of business to be there.

Bryan A. Giglia: We've got a lot of good momentum going into F1, and FIFA later in the summer, which is a great time for that piece of business to be there. Our expectations are consistent with where we were last quarter with Miami. You know, if we have a strong summer, I, my expectation is that we are at the, you know, upper end of that. Mike, just on the second part of your question as it relates to the one-time items that we called out for 25. It's a total of around $10 million or so, and the components would be, about $3 million contribution from the Hilton New Orleans, which we sold last year, so I won't repeat this year.

Speaker #4: So our expectations are consistent with where we were last quarter with Miami. And if we have a strong summer, my expectation is that we are at the upper end of that.

Speaker #6: And then, Mike, just on the second part of your question as it relates to the one-time items that we called out for '25, it's a total of around $10 million or so, and the components would be about $3 million contribution from the Hilton New Orleans, which we sold last year.

Speaker #6: So, I won’t repeat this year—a cost recovery that we had in connection with one of our settlements at one of our properties. And then just some incremental interest income that we generated last year, given where deposit rates were and where our cash balance was at the time, that we wouldn’t expect to repeat in ’26.

Bryan A. Giglia: A cost recovery that we had in connection with one of a settlement at one of our properties, and then just some incremental interest income that we generated last year, given where deposit rates were and where our cash balance was at the time, that we wouldn't expect to repeat in 2026.

Speaker #6: Got it. Understood. Thank you.

Operator: Got it. Understood. Thank you.

Michael Bellisario: Got it. Understood. Thank you.

Speaker #5: Your next question comes from the line of Chris Waranka with Deutsche Bank. Please go ahead.

Operator: Your next question comes from the line of Chris Woronka with Deutsche Bank. Please go ahead.

Speaker #7: Hey, guys. Good morning. Thanks for taking the question. So, I understood everything you said, Bryan, about any potential transactions in wine country. My question on it is, do you think any sale process is having any kind of impact on operations right now?

Chris Woronka: Hey, guys. Good morning. Thanks for taking the questions. Understood everything you said, Bryan, about, you know, any potential transactions in Wine Country. My question on it is kind of, do you think, you know, any sale process is having any kind of impact on operations right now? It looks like in 2025 you had pretty good results at the Montage. It looks like Four Seasons, maybe a little bit less so. Is there anything to, you know, to draw from that? What's kind of embedded in your guidance as to how those perform this year?

Speaker #7: It looks like in '25, you had pretty good results at the Montage. The Four Seasons maybe a little bit less so. So is there anything to draw from that, and what's kind of embedded in your guidance as to how those perform this year?

Speaker #4: Yeah. I mean, both resorts were on pace to have very good years. As you probably remember, there was a fire close to Four Seasons that impacted the third quarter last year.

Bryan A. Giglia: Yeah, I mean, both resorts were on pace to have very good years. As you probably remember, there was a fire close to Four Seasons that impacted Q3 last year, and a little bit trickled into Q4. Adjusting for that was probably about $1 million of EBITDA. Adjusting for that, one, your question, you know, not commenting on a sale process, but typically for a managed hotel, the management contracts are long term and stay in place, so that doesn't really impact the day-to-day operations of the hotel. Four Seasons has fantastic group pace for this year. I think group pace is up about 22%. We have really great expectations for that.

Speaker #4: And a little bit trickled into the fourth quarter. So, adjusting for that, that was probably about a million dollars of EBITDA. So, adjusting for that—one, your question, not commenting on a sale process—but typically, for a managed hotel, the management contracts are long-term and stay in place.

Speaker #4: So that doesn't really impact the day-to-day operations of the hotel. Four Seasons has fantastic group pace for this year. I think group pace is up about 22%.

Speaker #4: And so, we have really great expectations for that. Again, the San Francisco market has been doing better, which then leads to more weekend trips or extensions of convention trips out to wine country.

Bryan A. Giglia: The San Francisco market has been doing better, which then leads to more weekend trips or extensions of convention trips out to Wine Country. The high-end luxury traveler continues to be very strong and spend quite a bit. On the other side of the valley, you know, we had, you know, we've had great success with group at Montage. Group is not as strong as Four Seasons this year, but they're moving from a much larger base, and our transient demand over at Montage has been phenomenal. I think transient pace is up 25% year-over-year. Just like San Francisco, a lot to look forward to in the Bay Area and Wine Country.

Speaker #4: The high-end luxury traveler continues to be very strong and spend quite a bit. And then, on the other side of the valley, we have had great success with group at Montage.

Speaker #4: Group is not as strong as Four Seasons this year, but they're moving from a much larger base. And our transient demand over at Montage has been phenomenal.

Speaker #4: So I think transient pace is up 25% year over year. So just like San Francisco, a lot to look forward to in the Bay Area and wine country.

Bryan A. Giglia: There, you know, again, with the, you know, with the impact of the fire last year was sort of a, you know, a unique impact to Four Seasons. Both hotels should have very good years.

Speaker #4: And so, there again, the impact of the fire last year was sort of a unique impact to Four Seasons. Both hotels should have very good years.

Speaker #7: Okay, appreciate all that color, Bryan. Maybe to kind of keep it in the San Francisco area, at the Hyatt, I know there was probably a Super Bowl benefit back in January.

Chris Woronka: Okay. Appreciate all that color, Bryan. Maybe to kind of keep it in the San Francisco area, at the Hyatt, I know there was probably a Super Bowl benefit back in January. You know, this hotel is running in single digit margin, 24 to 25. Is there any expectation this year that whether it's, you know, again, outside of Super Bowl, but with AI and big back to office and other group things that are happening in San Francisco, is there a hope or an expectation on your part that that hotel, you know, starts meaningfully improving margins?

Speaker #7: This hotel is running, I think, single-digit margins in '24 and '25. Is there any expectation this year that—whether it's, again, outside of Super Bowl, but with AI and feedback, office, and other group things that are happening in San Francisco—is there a hope or an expectation on your part that that hotel starts meaningfully improving margins?

Speaker #4: Yeah, I mean, our location in that market has become the primary location. And so basically, with the office that surrounds it, the inflows of new tenants—AI-based—but really, the center of San Francisco has moved into the Embarcadero Financial area.

Bryan A. Giglia: Yeah, I mean, our location in that market has become the primary location. Basic, you know, with the, with the office that surrounds it, the inflows of new tenants, AI based, really the center of San Francisco has moved into the Embarcadero financial area. We have, you know, we're benefiting from a recently renovated hotel that, while it still has quite a ways to go to get back to where we were, you know, we finished 2025 at, you know, 78% occupancy, which is, you know, 10 points of occupancy down from where we were. You know, we have a, you know, $300 rate. There's still quite a bit of room in the rate. We have, we have great pace this year.

Speaker #4: And so, we have—we're benefiting from a recently renovated hotel that, while it still has quite a ways to go to get back to where we were, we finished Q4 '25 at 78% occupancy.

Speaker #4: Which is 10 points of occupancy down from where we were. We have a $300 rate. There's still quite a bit of room in the rate.

Speaker #4: And so we have great pace this year. Transient pace continues to grow. The market had a great Super Bowl. World Cup is—we're just starting to see bookings for that.

Bryan A. Giglia: Transient pace continues to grow. You know, the market had a great Super Bowl. World Cup is, you know, we're just starting to see bookings for that, I, you know, and that's something that will help compress the summer as we get into it. Look, I think that given the continuing increase in health of the San Francisco market, our location, our product, our meeting space, we still have a very good run ahead of us and are very, you know, are looking forward to the next several years in this market.

Speaker #4: And that’s something that will help compress the summer as we get into it. So, look, I think that given the continuing increase in health of the San Francisco market—our location, our product, our meeting space—we still have a very good run ahead of us.

Speaker #4: And are very much looking forward to the next several years in this market.

Speaker #7: Okay, very good. Thanks, guys. Appreciate it.

Chris Woronka: Okay. Very good. Thanks. Thanks, guys. Appreciate it.

Speaker #5: Your next question comes from the line of Daniel Politzer with JPMorgan. Please go ahead.

Operator: Your next question comes from the line of Daniel Politzer with J.P. Morgan. Please go ahead.

Michael Hirsch: Hi, this is Michael Hirsch on for Dan today. Congrats on a nice quarter. For my question, you noted in the press release that the operating environment could be impacted both positively or negatively by events outside of your control. Could you speak to some of those events or macro environment that you contemplated for this year when putting together your guidance?

Speaker #8: Hi, this is Michael Hirsch on for Dan today. Congrats on a nice quarter. For my question, you noted in the press release that the operating environment could be impacted both positively or negatively by events outside of your control.

Speaker #8: Could you speak to some of those events or macro environment factors that you contemplated for this year when putting together your guidance?

Speaker #4: Yeah. Look, I mean, if you look over the last few years, starting each of the years, expectations were higher, and then there were various headwinds that popped up and went away and came back throughout that timeframe.

Bryan A. Giglia: Yeah, look, I mean, if you look over the last few years, starting each of the years, expectations were higher, and then, you know, there were various headwinds that popped up and went away and came back throughout that timeframe. I think DC is a good example of, you know, what are our expectations in DC? They're, like I said, they're cautious this year. You know, there was, you know, we did not expect the impact to government business, government shutdown, those things, you know, for a large 800-room hotel in our portfolio. Those were things that were not fully, you know, we weren't expecting last year and impacted operations. Could elements of that happen again? Sure. You know, if we look at 26 in DC, it's, you know, it's just starting off.

Speaker #4: I mean, I think DC is a good example of what are our expectations in DC. Like I said, they're cautious this year. We did not expect the impact—government business, government shutdown, those things—for a large 800-room hotel in our portfolio.

Speaker #4: Those were things that were not fully—we weren't expecting last year—and impacted operations. Could elements of that happen again? Sure. If we look at '26 in D.C., it's just starting off.

Speaker #4: It's a tough comp. You had inauguration the year before. We had storms in January, and you have midterms later in the year, which means Congress won't be in session a lot.

Bryan A. Giglia: It's a tough comp. You had inauguration the year before. We had storms in January. You have midterms later in the year, which means Congress won't be in session a lot, as much. Those are things that keep us cautious, especially from the framework of the prior year's experience. On the other side, you look at the positives there. You've got, you know, you've got the America250 celebrations. You have an Indy race that's was just scheduled for August that's happening. Our transient pickup for January and February has been stronger than we thought. You know, the negotiated transient demand for the next 6 months is up 11%. You know, part of that is still the benefit we're seeing from the conversion to Westin. Some of it is business that's coming back to the market.

Speaker #4: As much. So those are things that keep us cautious, especially from the framework of the prior year's experience. But then, on the other side, you look at the positives there.

Speaker #4: You've got the America 250 celebrations. You have an Indy race that was just scheduled for August that's happening. Our transient pickup for January and February has been stronger than we thought.

Speaker #4: The negotiated transient demand for the next six months is up 11%. Part of that is still the benefit we're seeing from the conversion to Westin.

Speaker #4: Some of it is business that's coming back to the market. When you look at our transient demand for January and February, and you put it against the backdrop of—we had the weather issues this January.

Bryan A. Giglia: You know, when you look at our transient demand for January and February, and you put it against the backdrop of, you know, we had weather issues this January. We didn't have an inauguration this year, but yet our transient demand is greater than what we had last year. That points to strength. That makes us very optimistic. The question is, you know, we probably need to see a few more months of this before we can, you know, have our outlook reflect that for the rest of the year.

Speaker #4: We didn't have an inauguration this year, but yet our transient demand is greater than what we had last year. That points to strength, and so that makes us very optimistic.

Speaker #4: The question is, we probably need to see a few more months of this before we can have our outlook reflect that for the rest of the year.

Speaker #8: Thank you. And then for my follow-up, more modeling-related, on your CapEx guidance for $95 to $115 million, could you speak to the timing and allocation of those dollars between the different projects?

Michael Hirsch: Thank you. For my follow-up, more modeling related, on your CapEx guidance for $95 to 115 million, could you speak to the timing and allocation of those dollars between the different projects?

Speaker #4: Yeah, let me start with that, and then Aaron can go through some more specifics. We are working through and finishing the meeting space in San Diego. Keep in mind that it's a 1,200-room hotel.

Bryan A. Giglia: Yeah. Let me start with that, and then Aaron can go through some more specifics. You know, we are working through and finishing the meeting space in San Diego. Keep in mind that it's a 1,200 room hotel. It's a lot of meeting space, so there's $25 million of that number right there. A portion of that does come from the FF&E reserve, and so that's a big piece of it. There's some, you know, there's some additional, you know, bills that are being paid and finish up work from Andaz. Then, you know, throughout the portfolio, we have various other projects, some HVAC projects, some roofing projects, some elevator modernizations. Those are spread out more throughout the year.

Speaker #4: It's a lot of meeting space. So there's $25 million of that number right there. A portion of that does come from the FF&E reserve.

Speaker #4: And so that's a big piece of it. There are some additional bills that are being paid and finish-up work from on-dos. And then, throughout the portfolio, we have various other projects—some HVAC projects, some roofing projects, some elevator modernizations.

Speaker #4: Those are spread out more throughout the year. The biggest chunk, single chunk, will come from the San Diego piece, which will be in the first and second quarter as it gets paid out.

Bryan A. Giglia: The biggest chunk, you know, single chunk will come from the San Diego piece, which, you know, will be in the Q1 and Q2 as it gets paid out. Aaron, do you...

Aaron Reyes: Yeah. Bryan basically got the punch line there. The largest projects will be front-loaded, so I'd expect about a third of it happens in Q1, but Q2 will be the second largest contributor, and then the rest will trickle into the back half. Work largely performed in Q1 and then the payments in Q1 and Q2.

Speaker #8: Yeah, and Bryan basically got the punchline there. The largest projects, we front-loaded. So I'd expect about a third of it happens in Q1.

Speaker #8: But then Q2 will be the second-largest contributor, and then the rest will trickle into the back half. But work was largely performed in Q1, and then the payments are in Q1 and Q2.

Speaker #8: Thank you.

Michael Hirsch: Thank you.

Operator: There are no further questions at this time. I'll now turn the call over to Bryan Giglia for closing remarks.

Speaker #5: There are no further questions at this time. I will now turn the call over to Bryan Giglia for closing remarks.

Speaker #4: Thank you, everyone, for your time and interest in the company. We look forward to seeing many of you at upcoming conferences and property tours that we have in our portfolio.

Bryan A. Giglia: Thank you everyone for your time and interest in the company. We look forward to seeing many of you in at upcoming conferences and property tours that we have in our portfolio. Thank you.

Speaker #4: Thank you.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Q4 2025 Sunstone Hotel Investors Inc Earnings Call

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