Sunstone Hotel Investors, Inc.

Participants are in 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 this conference is being recorded today, February 21, 2025, at 1 p.m. Eastern Time. I will now turn the presentation 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, 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 EBITDA RE, adjusted FFO, and property level adjusted EBITDA 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. With us on the call today are Brian Giulia, Chief Executive Officer, and Robert Springer, President and Chief Investment Officer. Brian will start us off with some highlights from last year, followed by commentary on our fourth quarter operations and recent trends. Afterward, Robert will discuss our capital investment activity, and finally, I will provide a summary of our fourth quarter earnings results, review our current liquidity position, and provide the details of our outlook for 2025. After our remarks, the team will be available to answer your questions. With that, I would like to turn the call over to Brian. Please go ahead.

Thank you, Aaron, and good morning, everyone. Despite several headwinds during the fourth quarter, the portfolio finished 2024 strong with full year adjusted EBITDA and full year adjusted FFO per share at the high end of our guidance. The fourth quarter caps off a productive year at Sunstone, in which we made further progress on our three strategic objectives, which include recycling capital, investing in our portfolio, and returning capital to our shareholders. All of these benefited the company and its shareholders in 2024 and will provide additional growth in 2025. During the first half of 2024, we successfully recycled proceeds from the sale of the Boston Park Plaza into the 630-room Hyatt Regency San Antonio Riverwalk for a net purchase price of $222 million after incentives, reflecting an attractive 9% capitalization rate on 2024 earnings. In addition to the compelling initial yield, we have identified several value enhancing opportunities that we will capitalize on in the near term. The hotel has an ideal location situated between two of the state's biggest leisure demand drivers, the Riverwalk and the Alamo, and the hotel is within walking distance to the convention center. This year, we are updating the meeting space to better align it with the quality level of the already renovated guest rooms. Additionally, leading up to the opening of the new $500 million Alamo Visitor Center and Museum in 2027, we will enhance the ground floor retail spaces as we expect this area will be a primary access point to the new Alamo grounds and offers the opportunity to drive additional lease revenue. Overall, we have been very pleased with this investment and we see considerable potential to grow group and transient business. Building on the success of our conversion of the Westin Washington DC downtown, we continue to invest in our future growth and in 2024 we completed the conversion of the Marriott Long Beach downtown. which began its ramp up at the end of last year and which will continue into this year. We also advanced the transformation of the Ondas Miami Beach, which is opening in the next few weeks. While the Ondas has taken a bit longer than anticipated due to a very challenging permitting and approval process in Miami Beach, the resort is moving through final inspections and will begin welcoming guests mid-March. The resort looks phenomenal and we are very excited to demonstrate its earnings power as it ramps up in 2025 and 2026. Shortly, Robert will share some additional details on our work in Miami and our other capital investment activity. The last element of our strategy is the return of capital to our shareholders. In 2024, we return nearly 100 million to shareholders through our quarterly dividend and share repurchases at a meaningful discount to NAV. While our share repurchase activity will remain opportunistic, our common dividend will continue to provide a more consistent return of capital. That said, over the last three years, we have repurchased nearly 190 million of common stock, or almost 9% of shares outstanding at the start of that period. Our strong balance sheet and liquidity position gives us the ability to enhance our capital returns as we move into 2025. Now shifting to our quarterly and four-year results, we were pleased with how the portfolio performed relative to our expectations. During the fourth quarter, excluding San Diego, which experienced lingering disruption due to the labor strike, Group business performed well, corporate travel continued to move higher, and leisure demand showed some acceleration in wine country and in Maui during the festive period. Convention business at the Westin Washington, D.C. downtown had a banner year, leading our group hotels with 30% Red Park growth, driven by an 18% increase in full-year group room nights on a 6% increase in rate. Out of room spend at the Westin was up over 16% for the full year at $213 per group room. Group business remains strong at the recently acquired Hyatt Regency San Antonio Riverwalk, which grew room nights nearly 7% in the quarter and generated an impressive 18% increase in banquet contribution. For the full year, San Antonio group room nights were up 3%, rate was up 2%, and out of room spend was up 20%. Given the upgrades we are making to the meeting space this year, we expect the hotel to continue to build and improve the overall quality of its group base. We also saw strength in our urban markets. where at many of our hotels we strategically increased our group base, allowing our operators to compress transient rates. At our New Orleans hotels, fourth quarter group room nights were up 23%, compressing transient rates and resulting in a combined rev par growth of nearly 20%. We saw similar results in Boston with fourth quarter group room nights up 39%, as the hotel focused on filling open patterns and driving occupancy in shoulder periods. Our recently converted Marriott Long Beach downtown had a solid quarter with rep are up 45% compared to a renovation impacted fourth quarter of 2023. We are pleased with the early performance of this recently converted Marriott and together with the success we have seen from the contribution of the Westin DC it reinforces our thesis on the value created from better brand alignment. On the expense side, we continue to work with our managers to offset rising costs through efficiency measures and increased productivity. Our margin performance in the prior year was impacted by renovation activity in Long Beach and the strike in San Diego. Excluding these two hotels, and Ondaw's Miami Beach, our margins were down only 70 basis points, even with minimal top line growth, which speaks to the effort of our operators to be disciplined in their cost management efforts. While our 2025 budgets incorporate contractual wage rate increases at certain hotels, our expectation is that our operators will seek to drive efficiencies, higher rates, and incremental ancillary revenues to help mitigate these rising costs. Based on what we see today, we have a compelling setup to drive total revenue growth this year, which should translate into higher margins relative to last year. Looking forward to 2025, we are encouraged about the outlook for the year. The portfolio continues to benefit from recent investments, which should provide a tailwind for us in 2025 and 2026. Root Pace is up approximately 10% with broad-based strength throughout the portfolio and across quarters, with Q3 being the softest of the year. In addition to growth from our completed conversions at Long Beach and Miami, the portfolio will benefit from the easy comparison in the second half of the year in San Diego which was impacted by the labor strike in 2024 and from continued growth in wine country. We maintain significant liquidity and look to recycle existing investments into new opportunities to grow our earnings and value per share. Despite being faced with a challenging transaction market in 2024, we were able to execute and inquire a high quality asset in San Antonio at a great current yield and with opportunity to add value. We expect to continue our disciplined approach to capital allocation in 2025, which could include asset sales, acquisitions, or additional share repurchases. To sum things up, we executed our three strategic objectives in 2024, and while the path was not as smooth as we would have liked, we are now well positioned to outperform in 2025 and 2026. We are focused on delivering profitability growth from our operations and realizing the benefits of our investment projects. We will further advance our capital recycling strategy by utilizing our available liquidity and balance sheet capacity to thoughtfully grow the portfolio. These actions, should further support our capital return objectives in the coming years. And with that, I'd like to turn the call over to Robert to give some additional thoughts on our renovation progress and upcoming capital investments. Robert, please go ahead.