Sunstone Hotel Investors, Inc. · NYSE:SHO
Sunstone Hotel Investors — Investor Presentation (November 2014)
40 slides from Sunstone Hotel Investors's investor presentation, Nov 3, 2014
Slide 1: Company Presentation November 2014: Staying the Course
[staying the course] COMPANY PRESENTATION NOVEMBER 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 Update Hotel Portfolio Sunstone Strategy Value Creation 2015 & Beyond Exhibits [Table of Contents] COMPANY PRESENTATION SUNSTONE HOTEL INVESTORS, INC. 3
Slide 4: [ ]
[Company Update]
Slide 5: Our Profile
/ Our Profile We own 30 institutional-quality hotels (14,303 rooms). Our enterprise value is approximately $4.5 billion. [Company Update] SUNSTONE HOTEL INVESTORS, INC. 5 High-Quality Diversified Portfolio EBITDA Concentrated in Top 25 MSAs Significant Balance Sheet Capacity Consistent Execution of
Slide 6: Valuation
/ Valuation Our portfolio quality, growth prospects and discount valuation imply meaningful upside in our share price. [Company Update] SUNSTONE HOTEL INVESTORS, INC. 6 COMPANY PRESENTATION Capital Structure / Valuation Metrics Sunstone Portfolio Metrics Recent Stock Price 1 $15.00 Hotels 30 Shares
Slide 7: Recent Earnings Highlights
/ Recent Earnings Highlights [Company Update] SUNSTONE HOTEL INVESTORS, INC. 7 • Q3 RevPAR Growth Guidance: 4.0% - 5.5% • Actual Q3 RevPAR Growth: 7.7% Q3 2014 RevPAR • Q3 Adjusted EBITDA Guidance: $83 - $86M • Actual Q3 Adjusted EBITDA: $91M Q3 2014 EBITDA • Q3 FFO per share Guidance (1): $0.30 - $
Slide 8: Full Year Expectations
/ Full Year Expectations [Company Update] SUNSTONE HOTEL INVESTORS, INC. 8 Our full year expectations imply significant FFO growth despite a meaningfully strengthened balance sheet. COMPANY PRESENTATION $210 $230 $250 $270 $290 $310 $330 2013 2014 Guidance (1) Adjusted EBITDA ($MM) (1) Represents mi
Slide 9: Continued Execution
/ Continued Execution [Company Update] SUNSTONE HOTEL INVESTORS, INC. 9 SHO Stock Price Source: SNL Financial, FactSet COMPANY PRESENTATION New Sunstone Established $6 $7 $8 $9 $10 $11 $12 $13 $14 $15 $16 (6/4) Acquired 417- room Hyatt Chicago (7/19) Acquired 357-room Hilton Garden Inn Chicago (8/23
Slide 10: Hotel Portfolio
QW, “ay SUNSTONE [Hotel Portfolio]
Slide 11: Our Properties
/ Our Properties [Hotel Portfolio] SUNSTONE HOTEL INVESTORS, INC. 11 West: 40% • San Diego (16%) • Maui (6%) • Los Angeles (6%) • San Francisco (5%) • Orange County (3%) • Portland (2%) • Park City (1%) Midwest: 6% • Chicago (6%) Northeast: 41% • Boston (15%) • NYC (13%) • DC/Baltimore (13%) • Phila
Slide 12: The Types of Hotels We Own
/ The Types of Hotels We Own Our portfolio is comprised of institutional-quality, upperupscale hotels, yet is diversified in terms of asset size, geography and business mix. [Hotel Portfolio] SUNSTONE HOTEL INVESTORS, INC. 12 Data as provided in supplemental financial information reported on Form 8-
Slide 13: Urban Transient Hotels
/ Urban Transient Hotels [Hotel Portfolio] SUNSTONE HOTEL INVESTORS, INC. 13 803-room Hyatt Regency San Francisco Our Growth is Fueled by Strength in Business Transient . 13 hotels achieved double-digit RevPAR growth in Q3. . On a same-store basis, our Q3 occupancy was 130 basis points above prior Q
Slide 14: Urban Group Hotels
/ Urban Group Hotels [Hotel Portfolio] SUNSTONE HOTEL INVESTORS, INC. 14 1,190-room Hilton San Diego Bayfront Group Recovery is Increasing Our Compression Base . Our current 2014 group pace, for all 30 hotels is up +5.5%, driven by growth in occupied room nights. . Q3 group production increased 14.9
Slide 15: Resort & Suburban Hotels
/ Resort & Suburban Hotels [Hotel Portfolio] SUNSTONE HOTEL INVESTORS, INC. 15 544-room Wailea Beach Marriott Resort & Spa Resort & Suburban Hotels Diversify Our Demand Mix . The Hyatt Regency Newport Beach and Renaissance Westchester are coming off major renovations in 2013 and are delivering stron
Slide 16: Sunstone Strategy
wn SUNSTONE [Sunstone Strategy]
Slide 17: Strategic Pillars
/ Strategic Pillars During the ongoing growth phase of the cycle, our plan is to drive meaningful returns for our shareholders by improving the quality and scale of our portfolio while maintaining balance sheet strength. We will continue to deliver on our plan by executing on a five-pillar strategy:
Slide 18: Proactive Portfolio Management
/ Proactive Portfolio Management Refining what we own, where we invest, and with whom we partner. [Sunstone Strategy] SUNSTONE HOTEL INVESTORS, INC. 18 • EBITDA Concentration • Geographic Diversity • Brand / Manager Relationships • Encumbrances / Optionality Quality Scale Growth Profile Risk & Relat
Slide 19: Disciplined Capital Allocation
/ Disciplined Capital Allocation [Sunstone Strategy] SUNSTONE HOTEL INVESTORS, INC. 19 COMPANY PRESENTATION Improving portfolio quality through disciplined acquisitions and dispositions. $30 $20 $10 $0 $10 $20 $30 $40 $50 San Diego Maui New Orleans Chicago Boston San Francisco Minneapolis Troy, MI R
Slide 20: Aggressive Asset Management
/ Aggressive Asset Management [Sunstone Strategy] SUNSTONE HOTEL INVESTORS, INC. 20 Revenue Management • Optimizing Revenues Operational Efficiency • Controlling Expenses Capital Investment • Maximizing Asset Value COMPANY PRESENTATION Maximizing the value of our individual hotels.
Slide 21: Aggressive Asset Management - 2013 Renovations Highlights
/ Aggressive Asset Management - 2013 Renovations Highlights [Sunstone Strategy] SUNSTONE HOTEL INVESTORS, INC. 21 JW Marriott New Orleans • Scope: Entry, lobby, new social living spaces / bar and dining, all meeting spaces • 2012 YTD September RevPAR Index: 111.1% • 2014 YTD September RevPAR Index:
Slide 22: Focused Cost of Capital Management
/ Focused Cost of Capital Management [Sunstone Strategy] SUNSTONE HOTEL INVESTORS, INC. 22 COMPANY PRESENTATION Source: SNL Financial, FactSet Total Return calculated from 12/31/2011 to 10/27/2014 Leverage (Net Debt plus Preferred to EBITDA) as of 12/31/2011 and 6/30/2014. 2014 Median Consensus EBIT
Slide 23: Value Creation
QW, Fas SUNSTONE [Value Creation]
Slide 24: Returns on Current Cycle Acquisitions
/ Returns on Current Cycle Acquisitions [Value Creation] SUNSTONE HOTEL INVESTORS, INC. 25 COMPANY PRESENTATION Our recent investments are providing compelling returns. JW Marriott New Orleans 496 rooms Hilton San Diego Bayfront 1,190 rooms Hyatt Chicago Mag Mile 419 rooms Hilton New Orleans St. Cha
Slide 25: Thoughtful Capital Investment
/ Thoughtful Capital Investment [Value Creation] SUNSTONE HOTEL INVESTORS, INC. 26 Boston Park Plaza • Scope: Complete hotel repositioning including new retail space • Status: Two of three phases to be largely complete by 1Q15 Wailea Beach Marriott Resort & Spa • Scope: Complete resort re-imaging &
Slide 26: Boston Park Plaza
/ Boston Park Plaza [Value Creation] SUNSTONE HOTEL INVESTORS, INC. 27 Our minimally disruptive, phased renovation of the Boston Park Plaza is proceeding according to plan. 2014 2015 2016 • Retail: Hermes is already open; additional retail strategies in the works for new found lobby spaces (e.g. Sta
Slide 27: Boston Park Plaza
/ Boston Park Plaza [Value Creation] SUNSTONE HOTEL INVESTORS, INC. 28 Post-renovation, we expect performance at the Boston Park Plaza to increase meaningfully. In the near-term, our asset management initiatives continue to drive incremental upside despite heavy capital investment at the property. R
Slide 28: Wailea Beach Marriott Resort & Spa
/ Wailea Beach Marriott Resort & Spa [Value Creation] SUNSTONE HOTEL INVESTORS, INC. 29 We have begun the Master Planning Process to transform the Wailea Beach Marriott Resort & Spa into the top Marriott property in Hawaii. 2014 2015 2016 • Resort Talent: We have identified specific talent changes a
Slide 29: Wailea Beach Marriott Resort & Spa
/ Wailea Beach Marriott Resort & Spa [Value Creation] SUNSTONE HOTEL INVESTORS, INC. 30 Our comprehensive plan will reposition the Marriott as a highly competitive destination resort. Post-renovation, we expect performance at the Wailea Beach Marriott Resort & Spa to increase meaningfully. RevPAR Op
Slide 30: Hyatt Regency San Francisco
/ Hyatt Regency San Francisco [Value Creation] SUNSTONE HOTEL INVESTORS, INC. 31 2014 2015 2016 • Standard Guestrooms: Clean up all 660 standard guestrooms with a complete soft goods and select case goods renovation of guestrooms, baths and corridors (Complete Q2 2014). • Suites: Update existing sui
Slide 31: Hyatt Regency San Francisco
/ Hyatt Regency San Francisco [Value Creation] SUNSTONE HOTEL INVESTORS, INC. 32 Performance at the Hyatt Regency San Francisco is improving markedly following the completion of the rooms renovation in Q1 2014. We expect near-term performance to continue to exceed our initial underwriting. RevPAR Op
Slide 32: 2015 & Beyond
ay SUNSTONE [2015 & Beyond]
Slide 33: Compelling Investment Factors
/ Compelling Investment Factors [2015 & Beyond] SUNSTONE HOTEL INVESTORS, INC. 34 Industry • Positive Fundamentals Portfolio • Strong Markets, Renovation Upside Balance Sheet • Appropriately Geared Capital Structure COMPANY PRESENTATION
Slide 34: We Expect Years of Healthy RevPAR Growth to Persist
/ We Expect Years of Healthy RevPAR Growth to Persist [2015 & Beyond] SUNSTONE HOTEL INVESTORS, INC. 35 Source: PKF Research, September 2014 COMPANY PRESENTATION 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 2015 2016 2017 Top 25 U.S. Markets - RevPAR Growth Average = 5.8%
Slide 35: Our Hotels are Located in Prime Growth Markets
/ Our Hotels are Located in Prime Growth Markets [2015 & Beyond] SUNSTONE HOTEL INVESTORS, INC. 36 COMPANY PRESENTATION (1) Oahu is used as a proxy for Maui in calculating the SHO Average. (2) Salt Lake City is used as a proxy for Park City in calculating the SHO Average. Source: PKF Research, Septe
Slide 36: If History is a Guide, Lodging Stocks are Well Positioned for Growth
/ If History is a Guide, Lodging Stocks are Well Positioned for Growth [2015 & Beyond] SUNSTONE HOTEL INVESTORS, INC. 37 Source: MLV Equity Research COMPANY PRESENTATION 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 Index 20
Slide 37: Exhibits
[Exhibits]
Slide 38: Boston Park Plaza – Positioning Statement
/ Boston Park Plaza – Positioning Statement [Exhibit A] SUNSTONE HOTEL INVESTORS, INC. 39 Product – Our total hotel renovation will: • Remove the current negatives associated with the product’s age and engage the guest with sensible design and modern comforts from arrival to departure. . • Allow the
Slide 39: Wailea Beach Marriott Resort & Spa – Positioning Statement
/ Wailea Beach Marriott Resort & Spa – Positioning Statement [Exhibit B] SUNSTONE HOTEL INVESTORS, INC. 40 Product – Our total hotel renovation will: • Enable us to capitalize on the hotel’s exceptional location by creating a well-defined, cohesive destination resort experience. • Create a dramatic
Slide 40: Hyatt Regency San Francisco – Positioning Statement
/ Hyatt Regency San Francisco – Positioning Statement [Exhibit C] SUNSTONE HOTEL INVESTORS, INC. 41 Product – Our total hotel renovation will: • Remove the negatives of the hotel’s dated look and engage the guest with sensible design and modern comforts from arrival to departure. • Allow the propert
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