Sunstone Hotel Investors, Inc.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sunstone Hotel Investors second quarter earnings call. At this time, all 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 that the conference is being recorded today, August 6, 2026, at 12 o'clock p.m. Eastern Time. I will now turn the presentation over to Mr. Aaron Reyes, Chief Financial Officer, please go ahead.

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 hotel 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 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. With that, I would like to turn the call over to Bryan. Please go ahead. Thank you, Aaron, and good morning, everyone.

We were pleased with our performance in the second quarter, which again exceeded our expectations. Our portfolio benefited from robust leisure demand as a result of increased summer travel and special events, which added to sustained strength in group and corporate demand. Overall, RevPar in the quarter grew a solid 9.3%. Excluding Onda's Miami Beach, which continues to ramp nicely, RevPar grew 4.3%. This stronger-than-expected revenue performance combined with continued focus on cost controls at the hotels and at the corporate level allowed us to deliver meaningful growth in earnings. The added benefit of our accretive common and preferred stock repurchase activity contributed to further growth in earnings per share with second quarter adjusted FFO over 14% higher than last year. Our resorts once again led the portfolio with combined REVPAR growth of nearly 27%, including the benefit of Ondas Miami Beach. Waialea Beach Resort delivered impressive performance as REVPAR grew nearly 15% in the quarter. The resort continues to regain its market position, growing year-to-date occupancy by 10 points and increasing EBITDA by nearly 18% relative to the prior year. We are encouraged by the sustained momentum we are seeing in Maui with year-to-date group room night production for all future periods up 36% versus last year and group pace for 2027 up over 10%. Our wine country resorts generated rev par growth of 5% in the second quarter, driven by better group business. We continue to see strong growth at Ondas Miami Beach, even with less occupancy compression than we were expecting from the World Cup. During the second quarter, the resort ran 72% occupancy at an average rate of $470 and produced $2.8 million in EBITDA. While the third quarter is seasonally the lowest in the market, our resort is gearing up for a solid fourth quarter which should benefit from market compression following the temporary closure of the W Hotel and the opening of our signature restaurant, Bazaar Meat. The restaurant is now complete, but we are waiting to open into the high season. Our renovated resort continues to gain traction with higher end group business and leisure travelers, and the addition of Bazaar should bring additional momentum as we move into 2027. are urban hotels benefited from strong group, corporate and leisure demand during the quarter. RevPar at these hotels grew a combined 5.2% driven primarily by rate, which drove a 50 basis point expansion in hotel margins. JW New Orleans benefited from robust group demand with strong out of room spend. We expect this trend to continue for the remainder of the year with second half group pace up double digits. At Marriott Boston Long Wharf, the quarterly performance benefited from strength across all demand segments. Going into the quarter, our hotel had a solid base of group business on the books, which then allowed our operators to compress leisure rates, especially during the World Cup. While we were pleased to see summer events drive more demand than anticipated in Boston, The strength we are seeing in the market is broader based with pace up meaningfully for the remainder of the year and into 2027 with the added benefit of a better citywide calendar. Performance at our convention hotels reflected a continuation of the same themes we saw earlier in the year. San Francisco continued to perform well with rate compression in June from the World Cup adding to what was already a strong setup for corporate transient demand throughout the quarter. REVPAR grew 16% in the quarter, which was impressive but down 11 points sequentially from the first quarter. Our expectation was that the pace of growth in San Francisco for the remainder of the year would continue to moderate, which is consistent with what we saw during our ownership period in July. Performance in Washington, DC came in better than expected as incremental transient demand offset what has been a more subdued group backdrop in the market due to lower government-related activity. As we noted at the start of the year, we expected that a weaker convention calendar in San Diego, along with our meeting space renovation, would present some headwinds for us with the biggest impact happening in the second quarter, which saw total rev par decline 8.4%. While transient demand increased 19% in the quarter, given the importance of group business to this hotel and its associated out-of-room contribution, the increased transient business was only able to offset a portion of the group shortfall. Looking ahead, The hotel is already seeing the benefit of our new meeting space. The sales team had a fantastic booking quarter, achieving the hotel's highest Q2 group revenue production on record, with 26 million of business booked in the quarter. We expect to see sequential improvement in San Diego for the remainder of the year, with particular strength in the fourth quarter. The setup in San Diego in 2027 is much better across the market with increased citywide nights and our hotel is also benefiting from better group patterns and our new meeting space which is contributing to a double digit increase in group pace for next year. On the expense side, we knew coming into the quarter that it would be our most challenging comparison of the year given our anticipated mix of business and the benefit of favorable tax appeals that were received in the prior year. Overall, our comparable portfolio, excluding ONDAs, saw expense growth for all costs increase 4.4% on an absolute basis during the quarter, or 3.6% per occupied room, which led to a 100 basis point headwind to margins. Our cost and margin performance was impacted by a shift to a higher transient mix at a couple of our larger group hotels, which kept them from running at peak efficiency. This was particularly the case at the Hilton San Diego Bayfront, which, as I noted earlier, also had meeting space under renovation for part of a quarter and had a softer backdrop across the market. If we exclude San Diego Our expense growth per occupied room was 120 basis points lower and margins expanded by 10 basis points. We continue to focus on driving labor efficiencies where possible and working with operators to mitigate growth in energy expenses and property level G&A costs. We have also been focused on minimizing expenses at the corporate level and ensuring that our G&A costs are aligned with the needs of the company. In late July, we closed on the previously announced sale of the Hyatt Regency San Francisco, realizing an attractive private market value for a low yielding asset. While we expect there will be incremental revenue growth at the hotel, we know that ongoing cost pressures in the market will elongate and create risk to the recovery in earnings. So, we took advantage of strong investor interest in the market and sold the hotel at an implied multiple that is well in excess of where we are trading and delivered to our shareholders the value of future growth today and with certainty. We have accretively deployed a portion of the sale proceeds into the discounted repurchase of common and preferred stock and expect to generate additional shareholder value and grow NAV per share through the redeployment of the remaining proceeds. We have adjusted our full year outlook to reflect a sale of our San Francisco hotel and the better than expected performance in the second quarter. While many of the factors that gave rise to macroeconomic uncertainty earlier in the year and warranted a cautious few have not abated, We believe that the strength of recent trends allows us to incorporate a modest amount of incremental revenue and profitability expectations for the second half of the year in our revised outlook. While we are optimistic that if trends continue, we can deliver stronger performance, we believe it remains prudent to retain a degree of caution. In terms of the transaction market, The interest we saw in our San Francisco sale process was encouraging and reflects continued momentum. The environment looks to be more conducive to further executing our capital recycling strategy and continuing to demonstrate the value of our portfolio. In the interim, we delivered value to shareholders through an additional $70 million of accretive common and preferred stock repurchase activity so far this year. We expect to continue opportunistic repurchase activity as pricing allows, while we focus on generating profitability growth from operations and realizing the benefits of our investment projects. And with that, I'll turn the call over to Robert to give some additional details on our capital investment activity.