Sunstone Hotel Investors, Inc. · NYSE:SHO
Sunstone Hotel Investors — Investor Day (April 2014)
99 slides from Sunstone Hotel Investors's investor day presentation, Apr 9, 2014
Slide 1: Staying the Course – Investor Day Presentation April 2014
[staying the course] INVESTOR DAY PRESENTATION APRIL 2014
Slide 2: Forward-Looking Statements
/ This presentation contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by
Slide 3: Table of Contents
/ Company Overview Sunstone Strategy Strategic Pillars - Portfolio Management - Asset Management - Capital Allocation - Cost of Capital Management 2014 & Beyond Questions & Answers [Table of Contents] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 3
Slide 4: Company Overview: Who we are
[Company Overview] Who we are.
Slide 5: Our Profile
/ Our Profile We own 29 institutional-quality hotels (13,753 rooms). Our enterprise value is approximately $4 billion. [Company Overview] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 5 High-Quality Diversified Portfolio EBITDA Concentrated in Top 25 MSAs Appropriately Levered
Slide 6: Our Portfolio
/ Our Portfolio [Company Overview] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 6 West (11) 35.6% • Portland 2.2% (1) • San Francisco 5.8% (1) • Los Angeles 6.1% (4) • Orange County 3.2% (2) • San Diego 17.6% (2) • Park City, UT 0.7% (1) Midwest (3) 6.8% • Chicago 6.8% (3) Sou
Slide 7: How We Stack-up
/ How We Stack-up Sunstone’s recently upgraded, high-quality portfolio compares favorably to its closest peers, while Sunstone’s valuation implies upside. [Company Overview] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 7 Company Average Hotel Size 2013 RevPAR Enterprise Value
Slide 8: The Types of Hotels We Own
/ The Types of Hotels We Own Our portfolio is comprised entirely of institutional-quality, upper-upscale hotels yet is diversified in terms of asset size, geography and business mix. [Company Overview] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 8 802-room Hyatt San Francisco
Slide 9: Urban Transient Hotels
/ The Types of Hotels We Own [Company Overview] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 9 Urban Transient Hotels Number of Hotels 17 Rooms 7,332 2013 RevPAR $168.71 2013 EBITDA ($ Million) $169.0 2013 EBITDA / Key $23,000 % of Portfolio EBITDA 57.7% 802-room Hyatt Regency
Slide 10: Urban Group Hotels
/ The Types of Hotels We Own [Company Overview] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 10 Urban Group Hotels Number of Hotels 4 Rooms 3,400 2013 RevPAR $144.64 2013 EBITDA ($ Million) $90.8 2013 EBITDA / Key $26,700 % of Portfolio EBITDA 31.0% * Data as provided in suppl
Slide 11: Resort & Suburban Hotels
/ The Types of Hotels We Own [Company Overview] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 11 Resort & Suburban Hotels Number of Hotels 8 Rooms 3,021 2013 RevPAR $98.95 2013 EBITDA ($ Million) $33.2 2013 EBITDA / Key $11,000 % of Portfolio EBITDA 11.3% 444-room Fairmont Newp
Slide 12: Our Team
/ Our Team [Company Overview] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 12 Ken Cruse Chief Executive Officer Marc Hoffman, EVP Chief Operating Officer John Arabia President Bryan Giglia SVP, Chief Financial Officer Lindsay Monge SVP, Treasurer & CAO David Sloan SVP, General
Slide 13: Our Mission & Values
/ Our Mission & Values [Company Overview] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 13 Our Mission is to be the Premier Hotel Owner Transparency Trust Ethical Conduct Discipline Sunstone Values
Slide 14: Sunstone Strategy: How we compete
[Sunstone Strategy] How we compete.
Slide 15: Strategic Pillars
/ Strategic Pillars Our goal is to carefully improve the quality and scale of our portfolio while maintaining balance sheet strength. We will accomplish this via: [Sunstone Strategy] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 15 Proactive Portfolio Management Aggressive Asse
Slide 16: Proactive Portfolio Management
/ Proactive Portfolio Management How we determine what we own, where we invest and with whom we partner. [Sunstone Strategy] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 16 • EBITDA Concentration • Geographic Diversity • Brand / Manager Relationships • Encumbrances / Optionali
Slide 17: Aggressive Asset Management
/ Aggressive Asset Management [Sunstone Strategy] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 17 Revenue Management • Optimizing Revenues Operational Efficiency • Minimizing Expenses Capital Investment • Maximizing Asset Value
Slide 18: Disciplined Capital Allocation
/ Disciplined Capital Allocation [Sunstone Strategy] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 18
Slide 19: Focused Cost of Capital Management
/ Focused Cost of Capital Management [Sunstone Strategy] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 19 Data as provided in supplemental financial information reported on Form 8-K, furnished 08/08/2011, 02/20/2012 and 02/25/2014. Adjusted EBITDA reconciliation for 2011 and 20
Slide 20: Superior Corporate Governance
/ Superior Corporate Governance [Sunstone Strategy] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 20 . Ranked 7th highest in corporate governance by Green Street Advisors . out of 86 REITs in the their coverage universe . ISS Quick Score of 1 . 1 = most shareholder friendly, 10
Slide 21: Execution
/ Execution [Sunstone Strategy] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 21 SHO Stock Price Source: SNL Financial, FactSet $7 $8 $9 $10 $11 $12 $13 $14 $15 New Sunstone team in-place (6/4) Acquired 417- room Hyatt Chicago (7/19) Acquired 357-room Hilton Garden Inn Chicago
Slide 22: Portfolio Management: Strategic Pillars
[Portfolio Management] Strategic Pillars. What we own, where we invest and with whom we partner
Slide 23: What, Where and With Whom
/ What, Where and With Whom [Portfolio Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 23 Our senior leadership team collectively oversees our portfolio management function. Portfolio management guides our capital allocation decisions in terms of market exposures, hot
Slide 24: Optimizing the Portfolio We Own
/ Optimizing the Portfolio We Own [Portfolio Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 24 Optimizing the impact that each asset has on our portfolio’s risk-reward characteristics. * Data as provided in supplemental financial information reported on Form 8-K, fur
Slide 25: Determining Desired Portfolio Characteristics
/ Determining Desired Portfolio Characteristics [Portfolio Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 25 Target hotel acquisition criteria: Criteria Measure Size > 300 keys RevPAR > $150 EBITDA / key > $21,500 Value Proposition Clear opportunities to add value th
Slide 26: Determining Where We Invest
/ Determining Where We Invest [Portfolio Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 26 Market Targeting: . Long-Term . Growth dynamics . Supply factors . Market Clusters . Complexing . Regulations . Environment . Labor . Taxes . Risk Mitigants . Liquidity . Diver
Slide 27: Managing with Whom We Partner
/ Managing with Whom We Partner Diversifying brand and operator relationships [Portfolio Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 27 * Data as provided in supplemental financial information reported on Form 8-K, furnished 02/21/2012 and 02/25/2014.
Slide 28: Creating Value in Chicago
/ Case Study: Creating Value in Chicago [Portfolio Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 28 Hilton Garden Inn Chicago - Key Stats Keys 357 (361 as of Q2 2014) Meeting Space 5,200 SF 2013 RevPAR $142 Date Acquired July 2012 Purchase Price $91.8M ($257k/key) A
Slide 29: Creating Value in Chicago
/ Case Study: Creating Value in Chicago [Portfolio Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 29 . We identified Chicago as a solid long-term market to which we were under-allocated. We targeted the River North sub-market to complement our existing investment in
Slide 30: Creating Value in Chicago – Market Complex
/ Case Study: Creating Value in Chicago – Market Complex [Portfolio Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 30 368-room Embassy Suites Chicago 419-room Hyatt Chicago Magnificent Mile 357-room Hilton Garden Inn Chicago Magnificent Mile
Slide 31: Case Study: Hyatt Chicago Repositioning
/ [Portfolio Management] SUNSTONE HOTEL INVESTORS, INC. 31 Old second floor restaurant NEW second floor restaurant Case Study: Creating Value in Chicago - Hyatt Acquisition & Repositioning INVESTOR DAY PRESENTATION APRIL 2014
Slide 32: Case Study: Hyatt Chicago Repositioning
/ [Portfolio Management] SUNSTONE HOTEL INVESTORS, INC. 32 Old guestroom and suite parlor NEW guestroom and suite parlor Case Study: Creating Value in Chicago - Hyatt Acquisition & Repositioning INVESTOR DAY PRESENTATION APRIL 2014
Slide 33: Case Study: Hyatt Chicago Repositioning
/ [Portfolio Management] Old lobby and registration NEW guest reception areas NEW lobby and registration Case Study: Creating Value in Chicago - Hyatt Acquisition & Repositioning INVESTOR DAY PRESENTATION APRIL 2014 NEW guest reception areas
Slide 34: Hyatt Chicago Initial Results
/ [Portfolio Management] Initial Results: . Renovation completed on time and on budget . Physical transformation of the Hotel has exceeded our expectations (added retail, meeting space, etc.) . Management transition was very smooth 2011 2016 RevPAR: $115 Index: 86% EBITDA: $5.4M RevPAR: $190 - $200
Slide 35: Creating Value in Chicago
/ Case Study: Creating Value in Chicago [Portfolio Management] INVESTOR DAY PRESENTATION APRIL 2014 Quality & Scale Gateway MSA Level of Absolute RevPAR relative to porfolio average Potential RevPAR Growth relative to porfolio average Value Add Potential magnitude of EBITDA growth Capitalization Dea
Slide 36: Capital Recycling
/ Case Study: Capital Recycling [Portfolio Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 36 SOLD: Rochester Portfolio - Key Stats Keys 1,222 Meeting Space ±30,000 SF 2012 RevPAR $80.18 Date Sold January 2013 Sale Price $230M ($172k/key) Multiple 12.8x Cap Rate 6.9%
Slide 37: Capital Recycling
/ Case Study: Capital Recycling [Portfolio Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 37 . In 2013, we sold a portfolio of 4 hotels (and a commercial laundry facility) in Rochester, MN for 12.8x 2012 EBITDA (allocated value to hotels) . We exchanged the sale proc
Slide 38: Hilton New Orleans St. Charles
/ Case Study: Hilton New Orleans St. Charles [Portfolio Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 38 Property / Transaction Highlights: . Off-market transaction . Compelling valuation at 12.1x 2013 EBITDA . Proximate to Sunstone’s JW Marriott and bookended by th
Slide 39: Capital Recycling
/ Case Study: Capital Recycling [Portfolio Management] INVESTOR DAY PRESENTATION APRIL 2014 1,054-room Boston Park Plaza 250-room Hilton New Orleans SUNSTONE HOTEL INVESTORS, INC. 39 Quality & Scale Gateway MSA Level of Absolute RevPAR relative to porfolio average Potential RevPAR Growth relative to
Slide 40: Case Study: Capital Recycling
/ INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 40 • Avg. Size: 413 keys • RevPAR: $120.80 • EBITDA/key: $16,200 • Adj. EBITDA: $221.8M • Net Debt + Pref: $1.7B • Leverage: 8.4x 2011 • Rochester Portfolio • Doubletree Minneapolis • Marriott Troy • Marriott Del Mar • Hilton Del
Slide 41: Asset Management: Strategic Pillars
[Asset Management] Strategic Pillars. Maximizing the value of our individual hotels
Slide 42: Maximizing Hotel Values
/ Maximizing Hotel Values [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 42 Our asset management team brings together a sophisticated analytical framework with decades of practical experience to drive cash flows and maximize hotel values. Team Differentiation
Slide 43: Team Differentiation
/ Team Differentiation [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 43 Professional asset management team with deep hotel experience deployed across hotel types, markets and functions. Urban (17) +40 years collective experience running citycenter hotels; hea
Slide 44: Revenue Management
/ Revenue Management [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 44 Our hands-on approach to revenue management includes weekly calls with each hotel team to address: • Closing out lower-rated segments; mixing ADR higher in all other segments Dynamic Pricin
Slide 45: Revenue Management – Snapshots
/ Revenue Management – Snapshots [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 45 Marriott Long Wharf • Grew transient ADR index 3.1% over 2012 • Transient ADR index in 2013 set new peak for hotel • Hotel achieved 11.5% rate increase on special corporate segm
Slide 46: Operational Efficiency
/ Operational Efficiency [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 46 Maximizing profitability through property-level innovation. Rooms Productivity • 2011 - 1.12 (labor hours per occupied room (“POR”)) • 2012 - 1.10 (labor hours POR) • 2013 - 1.08 (labor
Slide 47: Operational Efficiency
/ Operational Efficiency [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 47 We expect our asset management strategies to drive margin improvements as we move deeper into the cycle. . F&B Consolidation: Combining bars, restaurants and lobbies to create highly fu
Slide 48: Capital Investment
/ Capital Investment [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 48 Our renovation projects are managed by a dedicated, in-house design and construction team. Disciplined Positioning Analysis • Rigorous market-based approach to optimize capital investments
Slide 49: Capital Investment – 2013 Renovations
/ Capital Investment – 2013 Renovations [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 49 JW Marriott New Orleans • Scope Statement: Entry, lobby, new social living spaces / bar and dining, all meeting spaces • 2012 YTD RevPAR Index: 106.3% • 2014 YTD RevPAR I
Slide 50: Capital Investment – Energy Program Background
/ Capital Investment – Energy Program Background [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 50 In 2009, we began an energy initiative with the goal of reducing expenses, improving guest comfort and limiting our carbon footprint. Our process began with a te
Slide 51: Capital Investment – Energy Program Highlights
/ Capital Investment – Energy Program Highlights [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 51 Hilton San Diego: In 2013 and 2014, we will have invested $1.2M in six energy efficiency measures. The hotel saved $326k in HLP in 2013, even with occupancy incr
Slide 52: Capital Investment – Energy Program Recognition
/ Capital Investment – Energy Program Recognition [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 52 Energy Awards - Hilton San Diego SDG&E Energy Showcase Energy Champion Award – January 2014 Lodging Energy Efficiency Program (LEEP) – February 2014 City of San
Slide 53: JW Marriott New Orleans
/ Case Study: JW Marriott New Orleans [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 53 JW Marriott New Orleans – Key Stats Keys 496 Meeting Space 19,000 SF 2013 RevPAR $148.82 Date Acquired February 2011 Purchase Price $93.8M ($190k/key) Acquisition Multiple
Slide 54: JW Marriott New Orleans
/ Case Study: JW Marriott New Orleans [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 54 We acquired the JW Marriott New Orleans at an attractive yield and saw material upside potential beyond market growth. Our asset management team designed a comprehensive pl
Slide 55: JW Marriott New Orleans – Performance Since Acquisition
/ Case Study: JW Marriott New Orleans [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 55 $80 $100 $120 $140 $160 $3,000 $5,000 $7,000 $9,000 $11,000 $13,000 $15,000 2010 2013 Hotel Performance Since Acquisition EBITDA ($000s) (L) RevPAR (R) Our investment in th
Slide 56: Hilton San Diego Bayfront
/ Case Study: Hilton San Diego Bayfront [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 56 Hilton San Diego – Key Stats Keys 1,190 Meeting Space 120,000 SF 2013 RevPAR $171.21 Date Acquired April 2011 Purchase Price $475M ($399k/key) (implied total value – acqu
Slide 57: Hilton San Diego Bayfront
/ Case Study: Hilton San Diego Bayfront [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 57 Our Asset Management team increased the profitability of the Hilton by (1) broadening the revenue management strategy, (2) optimizing the cost model and (3) carefully inv
Slide 58: Hilton San Diego Bayfront
/ Case Study: Hilton San Diego Bayfront [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 58 “Bayside” location was previously not optimized for resort experience
Slide 59: Hilton San Diego Bayfront
/ Case Study: Hilton San Diego Bayfront [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 59
Slide 60: Hilton San Diego Bayfront
/ Case Study: Hilton San Diego Bayfront [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 60
Slide 61: Hilton San Diego Bayfront – Performance Since Acquisition
/ Case Study: Hilton San Diego Bayfront [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 61 $120 $130 $140 $150 $160 $170 $180 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 2010 2013 Hotel Performance Since Acquisition EBITDA ($000s) (L) RevPAR (R) * Data as p
Slide 62: Boston Park Plaza
/ Case Study: Boston Park Plaza [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 62 Property Highlights: • Prime, fee-simple location in Boston’s Back Bay • Attractive in-place cash flow and strong market demand 2014 - 2016 • Favorable supply picture Property Op
Slide 63: Boston Park Plaza
/ Case Study: Boston Park Plaza [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 63 Opportunity Repositioning - Reposition the hotel through a complete, phased renovation, guestrooms, public spaces and complementary retail experience - Increase EBITDA by leasing
Slide 64: Boston Park Plaza – Renovation Plan
/ Case Study: Boston Park Plaza [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 64 . Our renovation plan is focused on improving the property from its current “2.5 Star” quality level to a “3.5 Star” quality level, while removing many negative cues that have ha
Slide 65: Boston Park Plaza – Revenue Displacement
/ Case Study: Boston Park Plaza [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 65 . The property will continue to operate normally and with limited guest impact throughout the renovation. . To be clear, we will not close the hotel at any time during our renova
Slide 66: Boston Park Plaza: Projections
/ Case Study: Boston Park Plaza [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 66 $100 $125 $150 $175 $200 $225 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 2013 Stabilized EBITDA Boston Park Plaza: Projections EBITDA (000s) (L) RevPAR (R) Expected Post-Ren
Slide 67: Boston Park Plaza – Existing Lobby
/ Case Study: Boston Park Plaza – Existing Lobby [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 67
Slide 68: Boston Park Plaza – New Lobby
/ Case Study: Boston Park Plaza – New Lobby [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 68
Slide 69: Boston Park Plaza – New Lobby Plan
/ Case Study: Boston Park Plaza – New Lobby Plan [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 69
Slide 70: Boston Park Plaza – Existing Pre Function Space
/ Case Study: Boston Park Plaza – Existing Pre Function Space [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 70
Slide 71: Boston Park Plaza – New Pre Function Space
/ Case Study: Boston Park Plaza – New Pre Function Space [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 71
Slide 72: Boston Park Plaza – New Pre Function Space
/ Case Study: Boston Park Plaza – New Pre Function Space [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 72
Slide 73: Boston Park Plaza – New Rooms (Standard King)
/ Case Study: Boston Park Plaza – New Rooms (Standard King) [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 73
Slide 74: Boston Park Plaza – New Rooms (Standard Double)
/ Case Study: Boston Park Plaza – New Rooms (Standard Double) [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 74
Slide 75: Boston Park Plaza – New Rooms (Queen)
/ Case Study: Boston Park Plaza – New Rooms (Queen) [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 75
Slide 76: Boston Park Plaza – New Rooms (Standard Double)
/ Case Study: Boston Park Plaza – New Rooms (Standard Double) [Asset Management] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 76
Slide 77: Capital Allocation: Strategic Pillars
[Capital Allocation] Strategic Pillars. Well-timed, attractively-priced acquisitions and dispositions
Slide 78: Acquisition Process
/ Acquisition Process [Capital Allocation] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 78 Sourcing • Target Hotel / Market Selection • Relationship-Based Sourcing Analysis • Rigorous Quantitative Underwriting • Cross-Departmental Collaboration Execution • Multi-Discipline Exe
Slide 79: Hyatt Regency San Francisco
/ Case Study: Hyatt Regency San Francisco [Capital Allocation] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 79 Property Highlights: • Prime, fee-simple location in San Francisco’s Financial District • 3 million sq. ft. of new office construction within 5 blocks • Favorable sup
Slide 80: Hyatt Regency San Francisco – Transbay Development
/ Case Study: Hyatt Regency San Francisco [Capital Allocation] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 80 The Transbay development could generate demand for upwards of 200,000 additional room nights annually. The Transbay Tower (101 1st Street) will be the tallest buildin
Slide 81: Hyatt Regency San Francisco
/ Case Study: Hyatt Regency San Francisco [Capital Allocation] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 81 We plan to capitalize on our exceptional location that will continue to improve as new office space is delivered. A routine rooms renovation will result in removing g
Slide 82: Hyatt Regency San Francisco – Renovation
/ Case Study: Hyatt Regency San Francisco [Capital Allocation] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 82 . Immediately upon our acquisition, we began a $17 million rooms renovation to reinvigorate the tired rooms product. The scope includes guestrooms, suites, bathrooms
Slide 83: Hyatt Regency San Francisco – Initial Results
/ Case Study: Hyatt Regency San Francisco [Capital Allocation] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 83 Initial Results: . Rooms renovation in process and will be completed on time and on budget . RevPAR and earnings growth are already exceeding our expectations . Hyatt
Slide 84: Finance: Focused cost of capital management
[Finance] Strategic Pillars. Focused cost of capital management
Slide 85: Focused Cost of Capital Management
/ Focused Cost of Capital Management [Finance] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 85 Enhance Financial Flexibility Eliminate Defensive Costs Capitalize on Opportunities 468-room Doubletree Times Square
Slide 86: Increasing Financial Flexibility
/ Increasing Financial Flexibility Over the past three years, we have strengthened our balance sheet, improved our financial flexibility and virtually eliminated the risk of future defensive costs. [Finance] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 86 3.0x 4.0x 5.0x 6.0x 7
Slide 87: Building Capacity
/ Building Capacity [Finance] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 87 $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 Q2 2011 Current ($ in thousands) Capital Stack Comparison Share Appreciation New Shares Common Equi
Slide 88: Execution
/ Execution [Finance] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 88 We have a track record of match-funding acquisitions with well-timed and appropriately priced equity raises. Source: SNL Financial, FactSet $8 $9 $10 $11 $12 $13 $14 $15 Equity Offering Execution Share Price
Slide 89: Unencumbered Asset Base
/ Unencumbered Asset Base [Finance] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 89 With 13 unencumbered hotels, collectively valued between $1.0 and $1.2 billion, we maintain strong financial flexibility. $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 Unencumbered Asset Base: Ra
Slide 90: NAV-Driven Tools
/ NAV-Driven Tools [Finance] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 90 We have tools in-place to capitalize on market opportunities. $150 Million ATM $100 Million Repurchase Authorization Finance Tools - NAV driven: • ATM issuances at or above NAV to fund capital investm
Slide 91: Dividend
/ Dividend [Finance] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 91 We expect to distribute between $0.50 and $0.60 per share in 2014. 7.3% 4.8% 4.0% 4.0% 1.5% 3.7% 3.2% 2.8% 2.8% 2.0% 1.0% 0.0% 2.4% 0% 1% 2% 3% 4% 5% 6% 7% 8% HPT RHP HT CHSP SHO LHO RLJ DRH HST PEB FCH BEE R
Slide 92: 2014 & Beyond: Poised to outperform
[2014 & Beyond] Poised to outperform
Slide 93: Compelling Investment Factors
/ Compelling Investment Factors [2014 & Beyond] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 93 Industry • Positive Fundamentals Portfolio • Strong Markets, Recently Renovated Balance Sheet • Attractive Capital Structure Team • Deep and Highly Aligned Leadership
Slide 94: We Expect U.S. RevPAR Growth to Accelerate
/ We expect U.S. RevPAR Growth to Accelerate [2014 & Beyond] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 94 5.4% 6.6% 7.0% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 2013 2014 2015 U.S. Upper-Upscale Hotels: RevPAR Growth Forecast Average = 6.3% Source: PKF Research, March 2014
Slide 95: Our Hotels Are Located in High-Growth Markets
/ Our hotels are located in high-growth markets [2014 & Beyond] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 95
Slide 96: We Are in the Middle Phase of a Prolonged Growth Cycle
/ We are in the Middle Phase of a Prolonged Growth Cycle [2014 & Beyond] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 96
Slide 97: Lodging Stocks Are Well Positioned for Significant Growth
/ Lodging Stocks are Well Positioned for Significant Growth [2014 & Beyond] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 97 Source: MLV Equity Research 0 50 100 150 200 250 1 13 25 37 49 61 73 85 97 109 121 Months from Prior Peak Stock Returns Peak to Peak 90's Cycle Stock Ind
Slide 98: 2014 Is Off to a Strong Start
/ 2014 is off to a Strong Start [2014 & Beyond] INVESTOR DAY PRESENTATION APRIL 2014 SUNSTONE HOTEL INVESTORS, INC. 98 • Initial Q1 RevPAR Guidance: + 5.5% to + 7.5% • Revised Q1 RevPAR Guidance: + 8.0% to + 8.5% Increasing Q1 2014 RevPAR Guidance • Initial 2014 Pace: + 3.8% • Revised 2014 Pace: + 5
Slide 99: Questions & Answers: Thank You
[Questions & Answers] Thank You.