Sunstone Hotel Investors Company Presentation September 2017

Transcription

1 Sunstone Hotel Investors Company Presentation September 2017

2 Forward-Looking Statements This presentation contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are identified by their use of terms and phrases such as anticipate, believe, continue, could, estimate, expect, intend, may, plan, predict, project, should, will and other similar terms and phrases, including opinions, references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: volatility in the debt or equity markets affecting our ability to acquire or sell hotel assets; international, national and local economic and business conditions, including the likelihood of a U.S. recession or global economic slowdown, as well as any type of flu or disease-related pandemic, affecting the lodging and travel industry; the ability to maintain sufficient liquidity and our access to capital markets; potential terrorist attacks or civil unrest, which would affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt and equity agreements; relationships with property managers and franchisors; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations, which influence or determine wages, prices, construction procedures and costs; our ability to identify, successfully compete for and complete acquisitions; the performance of hotels after they are acquired; necessary capital expenditures and our ability to fund them and complete them with minimum disruption; our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes; and other risks and uncertainties associated with our business described in the Company s filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All forward-looking information in this presentation is as of September 2017, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company s expectations. 2

3 Company Overview Sunstone is a leading US lodging real estate investment trust ( REIT ) with interests in 27 hotels, primarily in the urban and resort, upper upscale segment, operated under nationally recognized brands Company Overview Headquarters Aliso Viejo, CA Equity market capitalization $3.6bn Ticker symbol NYSE: SHO Total pro rata capitalization $4.8bn Number of hotels 27 Net debt & pref. / Pro forma TTM EBITDA 2.2x Portfolio Distribution (by Hotel EBITDA) Florida Hawaii Louisiana New York 8% 6% 6% Other 4% 5% 26% Southern CA Number of rooms 13,202 Pro rata debt & pref. / Pro rata capitalization 24% Meeting space (sq. ft.) ~850,000 Fixed charge coverage ratio 4.2x Northern CA 8% Illinois 8% 13% 17% Mass. Dividend yield 4.2% Unencumbered hotel EBITDA $245mm Washington D.C. Area Hilton New Orleans St. Charles Boston Park Plaza JW Marriott New Orleans Note: EBITDA represents trailing twelve month performance ending June 30, Capitalization and market data as of June 30, Leverage metrics shown on a pro forma and pro rata basis. Dividend yield based on actual dividends distributed over trailing twelve month period. 3

4 Investment Highlights High Quality, Diversified Portfolio Key gateway, convention and resort market distribution representing 95% of LTM Hotel EBITDA Relationships with 9 different hotel managers to capture and ensure best practices across the Company Portfolio RevPAR index of 104% with approximately 35% of hotels >110% Strong, Consistent Portfolio Operating Performance with Continued Industry Growth Portfolio operating at record occupancy levels exceeding 82% in 2015, 2016 and YTD 2017 Robust RevPAR growth from with a 4.6% CAGR LTM Hotel EBITDA per key of over $27,000 is among the highest in sector and demonstrates the strength of Sunstone assets and operations Well Maintained Portfolio Proven Asset Management Capabilities Drive Organic Growth Conservative Balance Sheet and Financial Strategy Experienced and Dedicated Management Team Significant capital investment across the portfolio including major renovations and repositionings at Boston Park Plaza, Wailea Beach Resort and Hyatt Regency San Francisco Majority of investment in guest facing areas which has translated to strong guest satisfaction as measured by brands as well as multiple TripAdvisor and AAA Four Diamond awards Nearly all hotels rank within the top half of their respective market per TripAdvisor Seasoned and multi-disciplinary asset management team with strong experience in operational analysis, design and construction Completed several recent major projects that are serving as growth catalysts Rooms renovation and substantial public space reconfiguration of the Hyatt Regency San Francisco Acquisition & full renovation of 1,060 room Boston Park Plaza to redefine the asset s competitive positioning Full reconcepting of the 547 room Wailea Beach Resort located on 22 oceanfront acres in Maui Strong credit profile with very conservative covenant metrics Net debt + pref. / LTM Adjusted EBITDA of 2.2x and Pro rata debt + pref. / Total pro rata capitalization of 24% Well staggered maturity schedule with current weighted-average maturity of nearly 6 years Key executive team members have extensive industry experience Diverse backgrounds ensure well-rounded view and deep expertise across all key Company functions Strong track record and relationships with investors, lenders and analysts 4

5 Nationally Diversified Portfolio Strong US Gateway, Convention and Resort Market Exposure Sunstone has strong coastal distribution representing approximately 80% of LTM Hotel EBITDA Approximately 95% of LTM Hotel EBITDA generated by properties in major US gateway, convention and resort markets Oregon 1 Hotel 249 Rooms 2.1% Hotel EBITDA Marriott Portland Illinois 3 Hotels 1,148 Rooms 8.0% Hotel EBITDA Embassy Suites Chicago Downtown Hilton Garden Inn Magnificent Mile Hyatt Centric Chicago Magnificent Mile Massachusetts 3 Hotels 1,936 Rooms 16.6% Hotel EBITDA Marriott Boston Long Wharf Boston Park Plaza Marriott Quincy Northern California 1 Hotel 804 Rooms 7.8% Hotel EBITDA Hyatt Regency San Francisco New York 2 Hotels 826 Rooms 4.2% Hotel EBITDA Hilton Times Square Renaissance Westchester Texas NY008J6H (831484_1.WOR) 2 Hotels 870 Rooms 1.3% Hotel EBITDA NY008J6H (831484_1.WOR) Hilton North Houston Marriott Houston Note: Hotel EBITDA represents trailing twelve month performance ending June 30, 2017 for the total 27 property portfolio Major US gateway, convention and resort markets include Boston, New York, Washington DC, Baltimore, Chicago, Orlando, New Orleans, San Francisco, Los Angeles, Orange County, CA, San Diego, Hawaii and Key West. 5 Southern California 6 Hotels 2,999 Rooms 25.9% Hotel EBITDA Hilton San Diego Bayfront Renaissance Long Beach Renaissance Los Angeles Airport Hyatt Regency Newport Beach Embassy Suites Hotel La Jolla Courtyard by Marriott Los Angeles Hawaii 1 Hotel 547 Rooms 5.8% Hotel EBITDA Maui: Wailea Beach Resort Branded by: Marriott Hilton Hyatt Independent Pennsylvania 1 Hotel 289 Rooms 1.4% Hotel EBITDA Marriott Philadelphia DC / MD / VA 3 Hotels 1,825 Rooms 13.2% Hotel EBITDA Renaissance Washington, DC Renaissance Harborplace Marriott Tysons Corner Florida 2 Hotels 956 Rooms 7.9% Hotel EBITDA Renaissance Orlando at Sea World Oceans Edge Hotel & Marina Louisiana 2 Hotels 753 Rooms 5.7% Hotel EBITDA JW Marriott New Orleans Hilton New Orleans St. Charles

6 High Quality Assets Hyatt Chicago Magnificent Mile Hilton San Diego Bayfront Renaissance Washington DC Marriott Boston Long Wharf Renaissance Orlando at SeaWorld 6

7 Oceans Edge Hotel & Marina Acquisition Summary Property Overview Location Key West, FL Number of Rooms 175 Number of Wet & Dry Boat Slips 52 Ownership Type Fee Simple Acquisition Overview Transaction Closed July 2017 Purchase Price $175 million Purchase Price per Key (1) $925,000 Multiple on 2018E EBITDA at Acquisition (2) 13.1x 15.2x Cap. Rate on Estimated Stabilized NOI (2) 8.0% - 9.0% Acquisition Rationale Further increases portfolio quality and enhances exposure to long-term relevant real estate Opportunity to acquire a newly constructed, purpose-built, oceanfront hotel on a fee simple basis in the desirable and high barrier-to-entry Key West lodging market. Key West has the highest RevPAR of any U.S. market and benefits from some of the most restrictive ordinances limiting the development of new hotel supply New room product and other amenities at Oceans Edge are of substantially higher quality than majority of existing hotel supply in the market. Half of the hotel s rooms are suites and all rooms feature private balconies and views of the ocean. The hotel boasts six swimming pools and an attached boat marina which offers direct deep channel access to one of the most sought after fishing destination in the country Ability to employ asset management best practices to increase topline growth and profitability as the asset ramps-up and stabilizes which will provide accelerated near-term corporate earnings growth Acquisition Rationale Opportunity to acquire a high quality property situated in a prime, fee simple location in San Francisco's financial district Hotel located next to numerous corporate and leisure demand generators with additional uplift expected from the construction of 3 million square feet of new office space in immediate vicinity Substantial upside opportunities available through renovation, streamlining of F&B offerings and more intensive asset management 7 (1) Assumes approximately $13 million of value is attributable to the marina wet and dry boat slips and other non-hotel assets. (2) Reflects estimated cash flow range as disclosed on press release dated July 26, 2017.

8 Oceans Edge Hotel & Marina Newly Constructed, Oceanfront Hotel 8

9 Wailea Beach Resort Acquisition Summary Acquisition Rationale and Value Creation Opportunity Opportunity to acquire irreplaceable, long-term relevant oceanfront real estate on a fee simple basis Ability to enter the desirable and high-barrier-to-entry Maui lodging market which is one of the most sought after vacation destinations in the world Ability to generate meaningful upside from renovation and repositioning of the property Undermanaged asset operating below less desirable properties in Kaanapli with substantial ability to increase post-renovation RevPAR levels closer to that of more competitive and higher quality Wailea hotels Substantial opportunities to implement operational efficiencies and employ asset management best practices to drive incremental cash flow Continued positive operating momentum will provide earnings tailwind into 2018 Property Overview Acquisition Overview Location Wailea, Maui, HI Transaction Closed July 2014 Current Number of Rooms 547 (1) Purchase Price $326 million Purchase Price per Key $598,400 Square Feet of Meeting Space 41,000 Multiple / Cap. Rate on 2014E Cash Flow at Acquisition 16.9x / 5.2% Total Property Size 22 acres 14.3x 15.3x Est. Multiple / Cap. Rate Range on 2017E Cash Flow (2) 5.8% 6.2% Ownership Type Fee Simple 12.4x 14.0x Est. Stabilized Multiple / Cap. Rate Range 9 6.4% 7.3% (1) At the time of acquisition, the hotel comprised 543 rooms. Four additional rooms were subsequently added during renovation. (2) Multiple and cap rate metrics calculated based on initial purchase price plus $110 million in repositioning related capital investment. (3) Stabilized cash flow per investor presentation furnished on Form 8-K on June 24, 2015.

10 Wailea Beach Resort Significant Property and Guest Experience Improvements Before After Pool Restaurant at Acquisition Kapa Bar & Grill Post Renovation Guest Room at Acquisition Guest Room Post Renovation 10

11 Wailea Beach Resort Fully Reimagined Destination 11

12 Wailea Beach Resort Fully Reimagined Destination 12

13 Boston Park Plaza Acquisition Summary Location Brand Chain Scale Service Level Property Overview Back Bay, Boston, MA Independent Upper Upscale Full Service Number of Rooms (1) 1,060 Square Feet of Meeting Space 50,000 Square Feet of Retail Space 50,000 Ownership Fee Simple Acquisition Overview Transaction Closed July 2013 Purchase Price $250 million 13 (1) At the time of acquisition, the hotel comprised 1,053 rooms. Seven additional rooms were subsequently added during renovation (2) Multiple and cap rate metrics calculated based on initial purchase price plus $105 million in repositioning related capital investment. (3) Stabilized cash flow per investor presentation furnished on Form 8-K on June 24, Purchase Price per Key $237,400 Multiple / Cap. Rate on 2013E Cash Flow at Acquisition 12.5x / 6.6% Est. Multiple / Cap. Rate Range on 2017E Cash Flow (2) 11.7x 12.5x 6.9% 7.5% Est. Stabilized Multiple / Cap. Rate Range (3) 10.1x 11.1x 8.0% 8.8% Acquisition Rationale Opportunity to acquire a desirable independent hotel on a fee simple basis in the high barrier-to-entry Boston lodging market Meaningful value creation opportunities possible through renovation and repositioning Sustained outperformance at the hotel will bolster corporate earnings growth through the remainder of 2017 and into 2018

14 Boston Park Plaza Renovation and Reposition Overview GRAND DAME IS BACK The historic Boston Park Plaza is reborn with a $100 million top-to-bottom makeover Main Lobby Before Main Lobby After Front Desk Before Front Desk After 14

15 Boston Park Plaza Fully Reinvigorated Asset 15

16 Hyatt Regency San Francisco Acquisition Summary Property Overview Location San Francisco, CA Number of Rooms 804 Square Feet of Meeting Space 72,000 Ownership Type Fee Simple Acquisition Overview Transaction Closed December 2013 Purchase Price $263 million Purchase Price per Key $327,300 Multiple / Cap. Rate on 2014E Cash Flow at Acquisition 14.2x / 6.0% Est. Multiple / Cap. Rate Range on 2017E Cash Flow (1) 10.4x 11.2x 7.5% 8.1% Est. Stabilized Multiple / Cap. Rate Range (2) 8.3x 9.1x 10.0% 10.9% Acquisition Rationale Opportunity to acquire a high quality property situated in a prime, fee simple location in San Francisco's financial district Hotel located next to numerous corporate and leisure demand generators with additional uplift expected from the construction of 3 million square feet of new office space in immediate vicinity Substantial upside opportunities available through renovation, streamlining of F&B offerings and more intensive asset management 16 (1) Multiple and cap rate metrics calculated based on initial purchase price plus $46 million in repositioning related capital investment. (2) Stabilized cash flow per investor presentation furnished on Form 8-K on June 24, 2015.

17 Hyatt Regency San Francisco Irreplaceable Asset in Prime Location 17

18 Conservative Balance Sheet and Financial Strategy Substantial Deleveraging Completed Net Debt & Preferred to Trailing EBITDA Transformed what was once one of the highest levered balance sheets into one of the strongest in the sector. Deleveraging was completed in a shareholder friendly way. 10.0x 8.0x 8.2x 6.0x 6.0x 5.1x 4.0x 4.0x 2.0x 2.5x 2.2x 0.0x PF 18 Note: Data presented is shown at pro rata share of 75% for the loan secured by the Hilton San Diego Bayfront. Cash and Cash Equivalents are adjusted to reflect dividends paid out subsequent to year end. Data as provided in supplemental financial information reported on Form 8-K, furnished February 21, 2012, February 19, 2013, February 20, 2014, February 17,2015, February 22, 2016 and February 21, 2017.

19 Superior Corporate Governance Our priority is to maximize shareholder value. Our board structure, corporate charter and culture of transparency place us at the top of the REIT space in terms of Corporate Governance. a a a Ranked 5th highest in corporate governance by Green Street Advisors Out of 82 REITs in their coverage universe ISS Quick Score of 2 1 = most shareholder friendly, 10 = least shareholder friendly First in our space to opt-out of MUTA provision a Adopted 50% threshold to amend bylaws a Adopted limitations on Rights Plans a Best-in-class disclosures with quarterly supplemental a Culture of transparency 19

20 Sunstone Hotel Investors 120 Vantis, Suite 350, Aliso Viejo, CA