ALISO VIEJO, Calif., May 4, 2015 /PRNewswire/ -- Sunstone Hotel Investors, Inc. (the "Company" or "Sunstone") (NYSE: SHO) today announced results for the first quarter ended March 31, 2015.

First Quarter 2015 Operational Results (as compared to First Quarter 2014) ((1)):


    --  Adjusted Comparable Hotel RevPAR increased 7.0% to $150.12.
    --  Adjusted Comparable Hotel EBITDA Margins increased 220 basis points to
        26.2%.
    --  Adjusted EBITDA increased 33.1% to $65.7 million.
    --  Adjusted FFO available to common stockholders per diluted share
        increased 46.7% to $0.22.
    --  Loss attributable to common stockholders decreased 59.2% to $3.3
        million.
    --  Loss attributable to common stockholders per diluted share decreased
        50.0% to $0.02.

John Arabia, President and Chief Executive Officer, stated, "Our portfolio exceeded our first quarter expectations driven by a combination of stronger than anticipated group demand, continued gains in food and beverage, increased ancillary income, solid expense control and margin expansion. With the exception of the New York City market, which continues to lag other U.S. major markets, our portfolio continues to demonstrate strong revenue growth, resulting in an increase to the midpoint of our 2015 Adjusted EBITDA and Adjusted FFO guidance."

Mr. Arabia continued, "We recently completed the renovation of the lobby, common areas, meeting space and various retail spaces at the Boston Park Plaza and are very excited about the hotel's prospects. Furthermore, our other two most recent acquisitions - the Hyatt Regency San Francisco and the Marriott Wailea Beach Resort - are on track to materially outperform our underwriting for 2015 results. Our portfolio is in great shape and is well positioned, our balance sheet provides us with substantial financial flexibility and investment capacity, and our team is highly focused on creating shareholder value from both internal and external sources."

(1) Comparable Hotel RevPAR and Comparable Hotel EBITDA Margin information presented reflect the Company's Comparable 30 Hotel Portfolio, which includes all hotels held for investment by the Company as of March 31, 2015, and also includes prior ownership results as applicable for the Marriott Wailea acquired in July 2014. Adjusted Comparable Hotel RevPAR and Adjusted Comparable Hotel EBITDA Margin information include the Comparable Portfolio for the three months ended March 31, 2014 adjusted to conform to the industry's Uniform System of Accounts for the Lodging Industry, Eleventh Revised Edition, which became effective in January 2015. Comparable Hotel EBITDA Margin and Adjusted Comparable Hotel EBITDA Margin information exclude non-current year net property tax related adjustments, but include the full impact of current year property tax related adjustments in the quarter such adjustments are realized.



                                                                             SELECTED STATISTICAL AND FINANCIAL DATA

                                                                    ($ in millions, except RevPAR, ADR and per share amounts)

                                                                                           (unaudited)



                                                                                                       Three Months Ended March 31,
                                                                                                       ----------------------------

                                                                                                        2015                           2014          Change
                                                                                                        ----                           ----          ------


    Comparable Hotel RevPAR                                                                                                    $150.12       $140.70         6.7%

    Adjusted Comparable Hotel RevPAR (1)                                                                                                     140.24         7.0%


    Comparable Hotel Occupancy                                                                                                   79.6%        78.3%         130   bps

    Comparable Hotel ADR                                                                                                       $188.59       $179.69         5.0%

    Adjusted Comparable Hotel ADR (1)                                                                                                       $179.10         5.3%


    Comparable Hotel EBITDA Margin                                                                                               26.2%        24.4%         180   bps

    Adjusted Comparable Hotel EBITDA Margin (1)                                                                                               24.0%         220   bps


    Net Income (Loss)                                                                                                             $1.2        $(3.5)

    Loss Attributable to Common Stockholders per Diluted Share                                                                 $(0.02)      $(0.04)

    Adjusted EBITDA                                                                                                              $65.7         $49.4

    Adjusted FFO Available to Common Stockholders                                                                                $45.1         $27.6

    Adjusted FFO Available to Common Stockholders per Diluted Share                                                              $0.22         $0.15

(1) Presentation conforms to the industry's Uniform System of Accounts for the Lodging Industry, Eleventh Revised Edition, which became effective in January 2015.

Disclosure regarding the non-GAAP financial measures in this release is included on pages 6 through 8. Reconciliations of non-GAAP financial measures to the most comparable GAAP measure for each of the periods presented are included on pages 11 through 16 of this release.

The Company's actual results for the quarter ended March 31, 2015 compare to its guidance originally provided as follows:




    Metric                                            Quarter Ended                Quarter Ended              Performance Relative
                                                      March 31, 2015               March 31, 2015                    to Prior
                                                       Guidance (1)                Actual Results               Guidance Midpoint
                                                                                     (unaudited)
    ---                                                                              ----------

    Adjusted Comparable Hotel RevPAR Growth                           +5.0% - 6.5%                     7.0%                        +1.2%

    Net Income ($ millions) (2)                                            $2 - $5                        $1                          ($3)

    Adjusted EBITDA ($ millions)                                         $58 - $61                       $66                           +$6

    Adjusted FFO Available to Common Stockholders ($                     $37 - $40                       $45                           +$6
    millions)

    Adjusted FFO Available to Common Stockholders per                $0.18 - $0.19                     $0.22                        +$0.03
    Diluted Share

    Diluted Weighted Average Shares Outstanding                        206,600,000                207,000,000                       400,000

(1) Represents guidance presented on February 17, 2015.

(2) Net income for the first quarter ended March 31, 2015 includes the effects of $0.7 million in property-level restructuring costs, and $0.3 million in lease termination costs. Excluding these items, first quarter net income would have been $2 million, or $2 million below the prior guidance midpoint.

Recent Developments

On April 2, 2015, the Company entered into a new $400.0 million senior unsecured credit facility, which replaced its existing $150.0 million senior unsecured credit facility. The new credit facility's interest rate is based on a pricing grid with a range of 155 to 230 basis points over LIBOR, depending on the Company's leverage ratios, and represents a decline in pricing from the old credit facility of approximately 30 to 60 basis points. The term of the new credit facility is four years, expiring in April 2019, with an option to extend for an additional one year subject to the satisfaction of certain customary conditions. The new credit facility also includes an accordion option, which allows the Company to request additional lender commitments for up to a total capacity of $800.0 million.

On May 1, 2015, the Company repaid $99.1 million of debt secured by four of its hotels: the Marriott Houston, the Marriott Park City, the Marriott Philadelphia and the Marriott Tysons Corner. Following the repayment of the four mortgages, the Company has 18 unencumbered hotels.

Balance Sheet/Liquidity Update

As of March 31, 2015, the Company had approximately $244.2 million of cash and cash equivalents, including restricted cash of $87.3 million. Adjusting for $12.7 million of common and preferred dividends paid in April and the repayment of $99.1 million of debt secured by the four hotels, the Company's pro forma cash and cash equivalents totaled $132.4 million, including restricted cash of $87.3 million.

As of March 31, 2015, the Company had total assets of $3.9 billion, including $3.5 billion of net investments in hotel properties, total consolidated debt of $1.4 billion and stockholders' equity of $2.2 billion. Following the repayment of $99.1 million of debt secured by the four hotels, the Company's pro forma consolidated debt totaled $1.3 billion.

Capital Improvements

The Company invested $36.1 million into capital improvements of its portfolio during the three months ended March 31, 2015. The Company incurred approximately $1.3 million of room revenue disruption at the Boston Park Plaza during the three months ended March 31, 2015, in line with management's expectations. The Company expects to invest approximately $145 million to $160 million into its portfolio in 2015 - a reduction of $20.0 million due to the timing of fourth quarter projects - and expects $3.0 million to $5.0 million of room revenue displacement resulting from the renovations. Major 2015 renovations in process include:


    --  Boston Park Plaza:  The Company has substantially completed the
        repositioning of the hotel's first four floors, including the following:
        complete renovation of all public spaces and meeting rooms; the addition
        of 9,000 square feet of new meeting space; and the renovation and
        completion of approximately 30,000 square feet of formally unoccupied
        retail space, which has already been leased to third-party tenants.
        Additionally, the Company has substantially completed its investment to
        upgrade the hotel's infrastructure, including HVAC systems, elevators,
        building facade and roofing systems. During the seasonally slower fourth
        quarter 2015 and first quarter 2016, the Company will commence and
        substantially complete the final phase of the renovation program, which
        includes the hotel's guestrooms and suites, consistent with prior
        expectations.
    --  Marriott Wailea:  In 2015, the Company plans to complete renovations of
        both the guestrooms and meeting spaces. The Company anticipates minimal
        revenue disruption in 2015. In 2016, the Company expects to complete a
        renovation of the resort's public spaces, as well as the creation of
        comprehensive resort pool and recreation facilities.

2015 Outlook

The Company's achievement of the anticipated results is subject to risks and uncertainties, including those disclosed in the Company's filings with the Securities and Exchange Commission. The Company's guidance does not take into account the impact of any unanticipated developments in its business or changes in its operating environment, nor does it take into account any unannounced hotel acquisitions, dispositions, re-brandings, management changes, transition costs, early lease termination costs, prior year property tax assessments and/or credits, debt repurchases or unannounced financings during 2015. The guidance presented takes into account various accounting changes as stipulated by the industry's Uniform System of Accounts for the Lodging Industry, Eleventh Revised Edition (the "USALI Eleventh Revised Edition"), which became effective in January 2015. Guidance for 2015 Comparable Hotel RevPAR and Comparable Hotel EBITDA Margins has been presented to reflect growth rates compared to prior year as if these 2014 statistics included the USALI Eleventh Revised Edition changes. Actual Comparable Hotel RevPAR and Comparable Hotel EBITDA Margin change from prior year will differ slightly. The Company is presenting 2014 Comparable Hotel RevPAR and Comparable Hotel EBITDA Margins on an as reported basis and on a pro forma basis, which will include the USALI Eleventh Revised Edition changes.

For the second quarter of 2015, the Company expects:




                               Metric                 Quarter Ended
                                                      June 30, 2015
                                                        Guidance
    ---                                                 --------

    Comparable Hotel RevPAR Growth                    + 6.0% - 7.5%

    Net Income ($ millions)                               $47 - $51

    Adjusted EBITDA ($ millions)                        $103 - $107

    Adjusted FFO Available to Common Stockholders ($
     millions)                                            $83 - $87

    Adjusted FFO Available to Common Stockholders per
     Diluted Share                                    $0.40 - $0.42

    Diluted Weighted Average Shares Outstanding         207,800,000

For the full year of 2015, the Company expects:




    Metric                           Prior Full Year           Revised Full Year              Change in Full Year
                                                          2015                           2015      2015 Guidance
                                       Guidance (1)                 Guidance                        Midpoint
    ---                                -----------                  --------                        --------

    Comparable Hotel RevPAR Growth               + 5.0% - 7.0%                + 5.0% - 7.0%                       0.0%

    Net Income ($ millions)                        $117 - $139                   $109 - $123                       $(12)

    Adjusted EBITDA ($ millions)                   $336 - $356                   $344 - $356                         +$4

    Adjusted FFO Available to Common
     Stockholders ($ millions)                     $254 - $274                   $262 - $274                         +$4

    Adjusted FFO Available to Common
     Stockholders per Diluted Share              $1.22 - $1.32                 $1.26 - $1.32                      +$0.02

    Diluted Weighted Average Shares
     Outstanding                                   207,400,000                    207,700,000                      300,000

(1) Reflects guidance presented on February 17, 2015.

Second quarter and full year 2015 guidance are based in part on the following assumptions:


    --  Full year guarantee payment of $2 million related to the Marriott
        Wailea.
    --  Full year Comparable Hotel EBITDA Margin (as compared to 2014 adjusted
        for the USALI Eleventh Revised Edition) expansion of approximately 50 to
        100 basis points, which excludes any guarantee payments.
    --  Full year corporate overhead expense (excluding stock amortization and
        one-time expenses related to acquisition closing costs and severance
        charges) of approximately $22.5 million to $23.5 million.
    --  Full year interest expense of approximately $66 million to $67 million,
        including approximately $3 million in amortization of deferred financing
        fees.
    --  Full year expense of approximately $0.7 million in one-time costs
        related to the Boston Park Plaza retail, meeting space and lobby
        relaunch, and $0.3 million in one-time costs related to an early lease
        termination at the Boston Park Plaza.
    --  Full year hotel revenue disruption of $0.5 million to $1.0 million
        related to cancellations resulting from civil unrest in Baltimore,
        Maryland.
    --  Full year preferred dividends of $9.2 million for the Series D
        cumulative redeemable preferred stock.

Dividend Update

On May 1, 2015, the board of directors declared a cash dividend of $0.05 per share of common stock, as well as a cash dividend of $0.50 per share payable to its Series D cumulative redeemable preferred stockholders. The dividends will be paid on July 15, 2015 to common and preferred stockholders of record as of June 30, 2015.

The Company expects to continue to pay a regular quarterly dividend of $0.05 per share of common stock throughout 2015. To the extent that the expected regular quarterly dividends for 2015 do not satisfy the Company's annual distribution requirements, the Company expects to satisfy the annual distribution requirement by paying a "catch up" dividend in January 2016, which dividend may be paid in cash and/or a combination of cash and shares of common stock. However, the level of any future quarterly dividends will be determined by the Company's board of directors after considering long-term operating projections, expected capital requirements, and risks affecting the Company's business.

Corporate Governance

Effective May 1, 2015, Douglas M. Pasquale was appointed non-executive Chairman of the Board of Directors, as part of the Company's previously announced Chairman rotation. Mr. Pasquale succeeds Keith M. Locker, who will continue to serve as a Board member. Mr. Locker stated, "Doug has made a significant contribution to Sunstone since joining the Board in 2011. I am very confident that Sunstone, under Doug's leadership, will continue to drive shareholder value, maintain best-in-class corporate governance, and represent the best interests of our shareholders. I look forward to continuing to work with Doug, the rest of the Board and management in the future."

Mr. Pasquale added, "Under Keith's tenure as Independent Chairman, Sunstone has grown its assets by $1.1 billion, and generated total shareholder returns of roughly 141%. We thank Keith for his many contributions, and I personally look forward to continuing to work with Keith, John, and the entire Board and management team to create value for our shareholders."

Supplemental Disclosures

Contemporaneous with this release, the Company has furnished a Form 8-K with unaudited financial information. This additional information is being provided as a supplement to information prepared in accordance with generally accepted accounting principles. The Company has no obligation to update any of the information provided to conform to actual results or changes in the Company's portfolio, capital structure or future expectations.

Earnings Call

The Company will host a conference call to discuss first quarter 2015 financial results on May 5, 2015, at 12:00 p.m. Eastern Time (9:00 a.m. Pacific Time). A live web cast of the call will be available via the Investor Relations section of the Company's website. Alternatively, investors may dial 1-888-523-1225 (for domestic callers) or 1-719-457-2727 (for international callers). A replay of the web cast will also be archived on the website.

About Sunstone Hotel Investors, Inc.

Sunstone Hotel Investors, Inc. is a lodging real estate investment trust ("REIT") that as of May 4, 2015 has interests in 30 hotels comprised of 14,306 rooms. Sunstone's hotels are primarily in the upper upscale segment and are operated under nationally recognized brands, such as Marriott, Hilton, Hyatt, Fairmont and Sheraton. For further information, please visit Sunstone's website at www.sunstonehotels.com.

Sunstone's mission is to create meaningful value for our stockholders by becoming the premier hotel owner. Our values include transparency, trust, ethical conduct, communication and discipline. As demand for lodging generally fluctuates with the overall economy, we seek to employ a balanced, cycle-appropriate corporate strategy that encompasses the following:


    --  Proactive portfolio management;
    --  Intensive asset management;
    --  Disciplined external growth; and
    --  Continued balance sheet strength.

This press release 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 release is as of May 4, 2015, 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.

This release should be read in conjunction with the consolidated financial statements and notes thereto included in our most recent reports on Form 10-K and Form 10-Q. Copies of these reports are available on our website at www.sunstonehotels.com and through the SEC's Electronic Data Gathering Analysis and Retrieval System ("EDGAR") at www.sec.gov.

Non-GAAP Financial Measures

We present the following non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: Earnings Before Interest Expense, Taxes, Depreciation and Amortization, or EBITDA; Adjusted EBITDA (as defined below); Funds From Operations, or FFO; Adjusted FFO Available to Common Stockholders (as defined below); hotel EBITDA; and hotel EBITDA margin. These measures should not be considered in isolation or as a substitute for measures of performance in accordance with GAAP. EBITDA, Adjusted EBITDA, FFO, Adjusted FFO Available to Common Stockholders, hotel EBITDA and hotel EBITDA margin as calculated by us, may not be comparable to other companies that do not define such terms exactly as the Company. These non-GAAP measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.

EBITDA is a commonly used measure of performance in many industries. We believe EBITDA is useful to investors in evaluating our operating performance because this measure helps investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization) from our operating results. We also believe the use of EBITDA facilitates comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital-intensive companies. In addition, certain covenants included in our indebtedness use EBITDA as a measure of financial compliance. We also use EBITDA as a measure in determining the value of hotel acquisitions and dispositions.

Historically, we have adjusted EBITDA when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful information to investors regarding our operating performance and that the presentation of Adjusted EBITDA, when combined with the primary GAAP presentation of net income, is beneficial to an investor's complete understanding of our operating performance.

We believe that the presentation of FFO provides useful information to investors regarding our operating performance because it is a measure of our operations without regard to specified non-cash items such as real estate depreciation and amortization, amortization of lease intangibles, any real estate impairment loss and any gain or loss on sale of real estate assets, all of which are based on historical cost accounting and may be of lesser significance in evaluating our current performance. Our presentation of FFO conforms to the National Association of Real Estate Investment Trusts' ("NAREIT") definition of FFO. This may not be comparable to FFO reported by other REITs that do not define the terms in accordance with the current NAREIT definition, or that interpret the current NAREIT definition differently than we do.

We also present Adjusted FFO Available to Common Stockholders when evaluating our operating performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance, and may facilitate comparisons of operating performance between periods and our peer companies.

We adjust EBITDA and FFO for the following items, which may occur in any period, and refer to these measures as either Adjusted EBITDA or Adjusted FFO Available to Common Stockholders:


    --  Amortization of favorable and unfavorable contracts: we exclude the
        non-cash amortization of the favorable management contract asset
        recorded in conjunction with our acquisition of the Hilton Garden Inn
        Chicago Downtown/Magnificent Mile, along with the favorable and
        unfavorable tenant lease contracts, as applicable, recorded in
        conjunction with our acquisitions of the Boston Park Plaza, the Hilton
        Garden Inn Chicago Downtown/Magnificent Mile, the Hilton New Orleans St.
        Charles, the Hyatt Regency San Francisco and the Marriott Wailea. The
        amortization of favorable and unfavorable contracts does not reflect the
        underlying performance of our hotels.
    --  Ground rent adjustments: we exclude the non-cash expense incurred from
        straightlining our ground lease obligations as this expense does not
        reflect the underlying performance of our hotels.
    --  Gains or losses from debt transactions: we exclude the effect of finance
        charges and premiums associated with the extinguishment of debt,
        including the acceleration of deferred financing costs from the original
        issuance of the debt being redeemed or retired because, like interest
        expense, their removal helps investors evaluate and compare the results
        of our operations from period to period by removing the impact of our
        capital structure.
    --  Acquisition costs: under GAAP, costs associated with completed
        acquisitions are expensed in the year incurred. We exclude the effect of
        these costs because we believe they are not reflective of the ongoing
        performance of the Company.
    --  Non-controlling interests: we deduct the non-controlling partner's pro
        rata share of any EBITDA or FFO adjustments related to our consolidated
        Hilton San Diego Bayfront partnership, as well as any preferred
        dividends earned by investors from an entity that owns the Doubletree
        Guest Suites Times Square, including related administrative fees.
    --  Cumulative effect of a change in accounting principle: from time to
        time, the FASB promulgates new accounting standards that require the
        consolidated statement of operations to reflect the cumulative effect of
        a change in accounting principle. We exclude these one-time adjustments
        because they do not reflect our actual performance for that period.
    --  Impairment losses: we exclude the effect of impairment losses because we
        believe that including them in Adjusted EBITDA and Adjusted FFO
        Available to Common Stockholders is not consistent with reflecting the
        ongoing performance of our remaining assets.
    --  Other adjustments: we exclude other adjustments such as executive
        severance costs, lawsuit settlement costs, prior year property tax
        assessments and/or credits, management company transition costs, lease
        buyouts, and restructurings and departmental closing costs, including
        severance, because we do not believe these costs reflect our actual
        performance for that period and/or the ongoing operations of our hotels.

In addition, to derive Adjusted EBITDA we exclude the non-cash expense incurred with the amortization of deferred stock compensation as this expense does not reflect the underlying performance of our hotels. We also include an adjustment for the cash ground lease expense recorded on the Hyatt Chicago Magnificent Mile's building lease. Upon acquisition of this hotel, we determined that the building lease was a capital lease, and, therefore, we include a portion of the capital lease payment each month in interest expense. We include an adjustment for ground lease expense on capital leases in order to more accurately reflect the operating performance of the Hyatt Chicago Magnificent Mile. We also exclude the effect of gains and losses on the disposition of depreciable assets because we believe that including them in Adjusted EBITDA is not consistent with reflecting the ongoing performance of our assets. In addition, material gains or losses from the depreciated value of the disposed assets could be less important to investors given that the depreciated asset value often does not reflect its market value.

To derive Adjusted FFO Available to Common Stockholders, we also exclude the non-cash gains or losses on our derivatives, as well as preferred stock dividends and any original issuance costs associated with the redemption of preferred stock, and any federal and state taxes associated with the application of net operating loss carryforwards. We believe that these items are not reflective of our ongoing finance costs.

In presenting hotel EBITDA and hotel EBITDA margins, the revenue and expense items associated with BuyEfficient and other miscellaneous non-hotel items have been excluded. We believe the calculation of hotel EBITDA results in a more accurate presentation of the hotel EBITDA margins for our hotels, and that these non-GAAP financial measures are useful to investors in evaluating our property-level operating performance.

Our 30 comparable hotels include all hotels held for investment as of March 31, 2015, and also include prior ownership results for the Marriott Wailea acquired in July 2014.

Reconciliations of net income (loss) to EBITDA, Adjusted EBITDA, FFO and Adjusted FFO Available to Common Stockholders are set forth on pages 11 and 12. Reconciliations and the components of hotel EBITDA and hotel EBITDA margin are set forth on pages 15 and 16.





                                                                                                   Sunstone Hotel Investors, Inc.

                                                                                                    Consolidated Balance Sheets

                                                                                                 (In thousands, except share data)



                                                                                                                                   March 31,              December 31,

                                                                                                                                          2015                     2014
                                                                                                                                          ----                     ----

                                                                                                                                   (unaudited)

    Assets

    Current assets:

    Cash and cash equivalents                                                                                                                    $156,972                 $222,096

    Restricted cash                                                                                                                                87,260                   82,074

    Accounts receivable, net                                                                                                                       50,907                   34,227

    Inventories                                                                                                                                     1,371                    1,439

    Prepaid expenses                                                                                                                               15,890                   14,909
                                                                                                                                                   ------                   ------

    Total current assets                                                                                                                          312,400                  354,745


    Investment in hotel properties, net                                                                                                         3,537,125                3,538,129

    Deferred financing fees, net                                                                                                                    7,572                    8,201

    Goodwill                                                                                                                                        9,405                    9,405

    Other assets, net                                                                                                                              14,855                   14,485
                                                                                                                                                   ------                   ------


    Total assets                                                                                                                               $3,881,357               $3,924,965
                                                                                                                                               ==========               ==========


    Liabilities and Equity

    Current liabilities:

    Accounts payable and accrued expenses                                                                                                         $35,811                  $32,577

    Accrued payroll and employee benefits                                                                                                          22,964                   31,919

    Dividends payable                                                                                                                              12,734                   76,694

    Other current liabilities                                                                                                                      44,159                   36,466

    Current portion of notes payable                                                                                                              235,970                  121,328
                                                                                                                                                  -------                  -------

    Total current liabilities                                                                                                                     351,638                  298,984


    Notes payable, less current portion                                                                                                         1,187,447                1,307,964

    Capital lease obligations, less current portion                                                                                                15,576                   15,576

    Other liabilities                                                                                                                              34,670                   33,607
                                                                                                                                                   ------                   ------

    Total liabilities                                                                                                                           1,589,331                1,656,131


    Commitments and contingencies                                                                                                                       -                       -


    Equity:

    Stockholders' equity:

    Preferred stock, $0.01 par value, 100,000,000 shares authorized.

    8.0% Series D Cumulative Redeemable Preferred Stock, 4,600,000 shares issued and                                                              115,000                  115,000
    outstanding at March 31, 2015 and December 31, 2014, stated at liquidation preference
    of $25.00 per share

    Common stock, $0.01 par value, 500,000,000 shares authorized, 207,518,510 shares issued and                                                     2,075                    2,048
         outstanding at March 31, 2015 and 204,766,718 shares issued and outstanding at December
         31, 2014

    Additional paid in capital                                                                                                                  2,454,720                2,418,567

    Retained earnings                                                                                                                             304,525                  305,503

    Cumulative dividends                                                                                                                        (637,279)               (624,545)
                                                                                                                                                 --------                 --------

    Total stockholders' equity                                                                                                                  2,239,041                2,216,573

    Non-controlling interests in consolidated joint ventures                                                                                       52,985                   52,261
                                                                                                                                                   ------                   ------

    Total equity                                                                                                                                2,292,026                2,268,834
                                                                                                                                                ---------                ---------


    Total liabilities and equity                                                                                                               $3,881,357               $3,924,965
                                                                                                                                               ==========               ==========




                                           Sunstone Hotel Investors, Inc.

                                        Consolidated Statements of Operations

                                        (In thousands, except per share data)



                                 Three Months Ended March 31,
                                 ----------------------------

                                                         2015                          2014
                                                         ----                          ----

                                          (unaudited)

    Revenues

    Room                                                                      $193,291       $167,529

    Food and beverage                                                           72,184         64,429

    Other operating                                                             18,910         15,473
                                                                                ------         ------

    Total revenues                                                             284,385        247,431
                                                                               -------        -------

    Operating expenses

    Room                                                                        53,842         48,321

    Food and beverage                                                           50,219         47,539

    Other operating                                                              5,131          5,023

    Advertising and promotion                                                   15,360         12,971

    Repairs and maintenance                                                     11,558         10,881

    Utilities                                                                    8,985          8,289

    Franchise costs                                                              8,600          8,077

    Property tax, ground lease
     and insurance                                                              23,613         19,052

    Property general and
     administrative                                                             34,449         28,809

    Corporate overhead                                                          14,253          6,559

    Depreciation and
     amortization                                                               40,707         37,615
                                                                                ------         ------

    Total operating expenses                                                   266,717        233,136
                                                                               -------        -------

    Operating income                                                            17,668         14,295

    Interest and other income                                                      946            716

    Interest expense                                                          (17,326)      (18,283)
                                                                               -------        -------

    Income (loss) before income
     taxes                                                                       1,288        (3,272)

    Income tax provision                                                          (85)         (224)
                                                                                   ---           ----

    Net income (loss)                                                            1,203        (3,496)

    Income from consolidated
     joint ventures attributable
     to non-                                                                   (2,181)       (2,234)
    controlling interests

    Preferred stock dividends                                                  (2,300)       (2,300)
                                                                                ------         ------

    Loss attributable to common
     stockholders                                                             $(3,278)      $(8,030)
                                                                               =======        =======


    Basic and diluted per share
     amounts:

    Basic and diluted loss
     attributable to common
     stockholders per                                                          $(0.02)       $(0.04)
    common share



    Basic and diluted weighted
     average common shares                                                     206,600        181,061
    outstanding



    Dividends declared per
     common share                                                                $0.05          $0.05
                                                                                 =====          =====



                                                       Sunstone Hotel Investors, Inc.

                                     Reconciliation of Net Income (Loss) to Non-GAAP Financial Measures

                                           (Unaudited and in thousands, except per share amounts)


                                      Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA



                                           Three Months Ended March 31,
                                           ----------------------------

                                                                   2015                                 2014
                                                                   ----                                 ----


    Net income (loss)                                                                     $1,203             $(3,496)

    Operations held for
     investment:

       Depreciation and amortization                                                      40,707               37,615

       Amortization of lease
        intangibles                                                                        1,028                1,028

       Interest expense                                                                   17,326               18,283

       Income tax provision                                                                   85                  224

    Non-controlling interests:

       Income from consolidated
        joint ventures attributable
        to non-controlling
        interests                                                                        (2,181)             (2,234)

       Depreciation and amortization                                                       (847)               (821)

       Interest expense                                                                    (378)               (567)
                                                                                            ----                 ----

    EBITDA                                                                                56,943               50,032
                                                                                          ------               ------


    Operations held for
     investment:

       Amortization of deferred
        stock compensation                                                                 2,895                1,372

       Amortization of favorable and
        unfavorable contracts, net                                                         (221)                  46

       Non-cash straightline lease
        expense                                                                              504                  512

       Capital lease obligation
        interest -cash ground rent                                                         (351)               (351)

       Gain on sale of assets                                                                  -                 (6)

       Closing costs -completed
        acquisitions                                                                           -                  56

       Prior year property tax
        adjustments, net                                                                   (188)             (2,878)

       Boston Park Plaza relaunch
        costs                                                                                683                    -

       Lease termination costs                                                               300                    -

       Costs associated with CEO
        severance                                                                          5,257                    -

    Non-controlling interests:

       Non-cash straightline lease
        expense                                                                            (113)               (113)

       Prior year property tax
        adjustments, net                                                                       -                 696
                                                                                             ---                 ---

                                                                                           8,766                (666)
                                                                                           -----                 ----


    Adjusted EBITDA                                                                      $65,709              $49,366
                                                                                         =======              =======




                                                                  Sunstone Hotel Investors, Inc.

                                                Reconciliation of Net Income (Loss) to Non-GAAP Financial Measures

                                                      (Unaudited and in thousands, except per share amounts)


                                   Reconciliation of Net Income (Loss) to FFO and Adjusted FFO Available to Common Stockholders


                                                    Three Months Ended March 31,
                                                    ----------------------------

                                                                            2015                                    2014
                                                                            ----                                    ----


    Net income (loss)                                                                                $1,203                     $(3,496)

    Operations held for
     investment:

       Real estate depreciation and
        amortization                                                                                 40,310                       37,226

       Amortization of lease
        intangibles                                                                                   1,028                        1,028

       Gain on sale of assets                                                                             -                         (6)

    Non-controlling interests:

       Income from consolidated
        joint ventures attributable
        to non-controlling
        interests                                                                                   (2,181)                     (2,234)

       Real estate depreciation and
        amortization                                                                                  (847)                       (821)
                                                                                                       ----                         ----

    FFO                                                                                              39,513                       31,697
                                                                                                     ------                       ------


    Operations held for
     investment:

       Preferred stock dividends                                                                    (2,300)                     (2,300)

       Amortization of favorable and
        unfavorable contracts, net                                                                    (221)                          46

       Non-cash straightline lease
        expense                                                                                         504                          512

       Non-cash interest related to
        gain on derivatives, net                                                                          -                       (109)

       Closing costs -completed
        acquisitions                                                                                      -                          56

       Prior year property tax
        adjustments, net                                                                              (188)                     (2,878)

       Boston Park Plaza relaunch
        costs                                                                                           683                            -

       Lease termination costs                                                                          300                            -

       Costs associated with CEO
        severance                                                                                     5,257                            -

       Amortization of deferred
        stock compensation
        associated with CEO
        severance                                                                                     1,623                            -

    Non-controlling interests:

       Non-cash straightline lease
        expense                                                                                       (113)                       (113)

       Prior year property tax
        adjustments, net                                                                                  -                         696
                                                                                                        ---                         ---

                                                                                                      5,545                      (4,090)
                                                                                                      -----                       ------


    Adjusted FFO available to
     common stockholders                                                                            $45,058                      $27,607
                                                                                                    =======                      =======


    FFO per diluted share                                                                             $0.19                        $0.17
                                                                                                      =====                        =====


    Adjusted FFO available to
     common stockholders per
     diluted share                                                                                    $0.22                        $0.15
                                                                                                      =====                        =====


    Basic weighted average shares
     outstanding                                                                                    206,600                      181,061

    Shares associated with
     unvested restricted stock
     awards                                                                                             398                          469
                                                                                                        ---                          ---

    Diluted weighted average
     shares outstanding                                                                             206,998                      181,530
                                                                                                    =======                      =======




                                                        Sunstone Hotel Investors, Inc.

                                         Reconciliation of Net Income to Non-GAAP Financial Measures

                                                       Guidance for Second Quarter 2015

                                            (Unaudited and in thousands, except per share amounts)


                                               Reconciliation of Net Income to Adjusted EBITDA


                                                    Quarter Ended

                                                    June 30, 2015
                                                    -------------

                                                          Low                                     High
                                                          ---                                     ----


    Net income                                                                       $46,500                 $50,900

       Depreciation and amortization                                                  40,500                  40,500

       Amortization of lease
        intangibles                                                                    1,000                   1,000

       Interest expense                                                               16,300                  16,300

       Income tax provision                                                              100                     100

       Non-controlling interests                                                     (3,300)                (3,700)

       Amortization of deferred
        stock compensation                                                             1,900                   1,900

       Non-cash straightline lease
        expense                                                                          400                     400

       Capital lease obligation
        interest -cash ground rent                                                     (400)                  (400)
                                                                                        ----                    ----

    Adjusted EBITDA                                                                 $103,000                $107,000
                                                                                    ========                ========


                              Reconciliation of Net Income to Adjusted FFO Available to Common Stockholders


    Net income                                                                       $46,500                 $50,900

       Real estate depreciation and
        amortization                                                                  39,900                  39,900

       Amortization of lease
        intangibles                                                                    1,000                   1,000

       Non-controlling interests                                                     (2,900)                (3,200)

       Preferred stock dividends                                                     (2,300)                (2,300)

       Non-cash straightline lease
        expense                                                                          400                     400
                                                                                         ---                     ---

    Adjusted FFO available to
     common stockholders                                                             $82,600                 $86,700
                                                                                     =======                 =======


    Adjusted FFO available to
     common stockholders per
     diluted share                                                                     $0.40                   $0.42
                                                                                       =====                   =====


    Diluted weighted average
     shares outstanding                                                              207,800                 207,800
                                                                                     =======                 =======




                                                        Sunstone Hotel Investors, Inc.

                                         Reconciliation of Net Income to Non-GAAP Financial Measures

                                                         Guidance for Full Year 2015

                                            (Unaudited and in thousands, except per share amounts)


                                               Reconciliation of Net Income to Adjusted EBITDA


                                                        Year Ended

                                                    December 31, 2015
                                                    -----------------

                                                                                   Low                        High
                                                                                   ---                        ----


    Net income                                                                          $108,800                    $123,100

       Depreciation and amortization                                                     162,000                     162,000

       Amortization of lease
        intangibles                                                                        4,000                       4,000

       Interest expense                                                                   66,400                      66,700

       Income tax provision                                                                1,000                       1,000

       Non-controlling interests                                                        (11,700)                   (14,300)

       Amortization of deferred
        stock compensation                                                                 7,100                       7,100

       Non-cash straightline lease
        expense                                                                            1,700                       1,700

       Capital lease obligation
        interest -cash ground rent                                                       (1,400)                    (1,400)

       Prior year property tax
        adjustments, net                                                                   (200)                      (200)

       Boston Park Plaza relaunch
        costs                                                                                700                         700

       Lease termination costs                                                               300                         300

       Costs associated with CEO
        severance                                                                          5,300                       5,300
                                                                                           -----                       -----

    Adjusted EBITDA                                                                     $344,000                    $356,000
                                                                                        ========                    ========


                                Reconciliation of Net Income to Adjusted FFO Available to Common Stockholders


    Net income                                                                          $108,800                    $123,100

       Real estate depreciation and
        amortization                                                                     159,400                     159,400

       Amortization of lease
        intangibles                                                                        4,000                       4,000

       Non-controlling interests                                                        (10,400)                   (12,700)

       Preferred stock dividends                                                         (9,200)                    (9,200)

       Non-cash straightline lease
        expense                                                                            1,700                       1,700

       Prior year property tax
        adjustments, net                                                                   (200)                      (200)

       Boston Park Plaza relaunch
        costs                                                                                700                         700

       Lease termination costs                                                               300                         300

       Costs associated with CEO
        severance                                                                          5,300                       5,300

       Amortization of deferred
        stock compensation
        associated with CEO
        severance                                                                          1,600                       1,600
                                                                                           -----                       -----

    Adjusted FFO available to
     common stockholders                                                                $262,000                    $274,000
                                                                                        ========                    ========


    Adjusted FFO available to
     common stockholders per
     diluted share                                                                         $1.26                       $1.32
                                                                                           =====                       =====


    Diluted weighted average
     shares outstanding                                                                  207,700                     207,700
                                                                                         =======                     =======


                                                                                                                     Sunstone Hotel Investors, Inc.

                                                                                                                  Comparable Hotel EBITDA and Margins

                                                                                                         (Unaudited and in thousands, except hotels and rooms)



                                                                                      Three Months Ended                                                          Three Months Ended March 31, 2014

                                                                                        March 31, 2015
                                                                                        --------------

                                                                                     Actual/Comparable (1)                                                     Actual (2)                           Acquisition (3)           Comparable (4)
                                                                                     ---------------------                                                     ---------                            --------------             -------------

    Number of Hotels                                                                                                   30                                                       29                                          1                         30

    Number of Rooms                                                                                                14,306                                                   13,765                                        541                     14,306


    Hotel EBITDA Margin (5)                                                                                         26.3%                                                   24.1%                                     39.0%                     25.1%
                                                                                                                     ====                                                     ====                                       ====                       ====

    Hotel EBITDA Margin adjusted for non-current year property tax related
     adjustments, net (6)                                                                                           26.2%                                                   23.0%                                                               24.0%
                                                                                                                     ====                                                     ====                                                                 ====


    Hotel Revenues

         Room revenue                                                                                            $193,291                                                 $167,529                                    $12,877                   $180,406

         Food and beverage revenue                                                                                 72,184                                                   64,429                                      3,235                     67,664

         Other operating revenue                                                                                   16,813                                                   13,852                                      1,392                     15,244
                                                                                                                   ------                                                   ------                                      -----                     ------

    Total Hotel Revenues                                                                                          282,288                                                  245,810                                     17,504                    263,314


    Hotel Expenses

         Room expense                                                                                              53,794                                                   48,321                                      2,973                     51,294

         Food and beverage expense                                                                                 49,835                                                   47,539                                      2,363                     49,902

         Other hotel expense                                                                                       71,898                                                   63,085                                      3,784                     66,869

         General and administrative expense                                                                        32,532                                                   27,554                                      1,563                     29,117
                                                                                                                   ------                                                   ------                                      -----                     ------

    Total Hotel Expenses                                                                                          208,059                                                  186,499                                     10,683                    197,182


    Hotel EBITDA                                                                                                   74,229                                                   59,311                                      6,821                     66,132

    Non-current year property tax related adjustments, net                                                          (188)                                                 (2,878)                                         -                   (2,878)
                                                                                                                     ----                                                   ------                                        ---                    ------

    Hotel EBITDA adjusted for non-current year property tax related adjustments, net                               74,041                                                   56,433                                      6,821                     63,254
                                                                                                                   ------                                                   ------                                      -----                     ------


    Non-hotel operating income                                                                                        342                                                      393                                          -                       393

    Amortization of lease intangibles                                                                             (1,028)                                                 (1,028)                                         -                   (1,028)

    Amortization of favorable and unfavorable contracts, net                                                          221                                                     (46)                                         -                      (46)

    Non-cash straightline lease expense                                                                             (504)                                                   (512)                                         -                     (512)

    Capital lease obligation interest - cash ground rent                                                              351                                                      351                                          -                       351

    Non-current year property tax related adjustments, net                                                            188                                                    2,878                                          -                     2,878

    Boston Park Plaza relaunch costs                                                                                (683)                                                       -                                         -                         -

    Lease termination costs                                                                                         (300)                                                       -                                         -                         -

    Corporate overhead                                                                                           (14,253)                                                 (6,559)                                         -                   (6,559)

    Depreciation and amortization                                                                                (40,707)                                                (37,615)                                   (2,130)                  (39,745)
                                                                                                                  -------                                                  -------                                     ------                    -------

    Operating Income                                                                                               17,668                                                   14,295                                      4,691                     18,986


    Interest and other income                                                                                         946                                                      716                                          -                       716

    Interest expense                                                                                             (17,326)                                                (18,283)                                         -                  (18,283)

    Income tax provision                                                                                             (85)                                                   (224)                                         -                     (224)
                                                                                                                      ---                                                     ----                                        ---                      ----

    Net Income (Loss)                                                                                              $1,203                                                 $(3,496)                                    $4,691                     $1,195
                                                                                                                   ======                                                  =======                                     ======                     ======

* Footnotes on page 16

(1) Actual/Comparable represents the Company's ownership results for the 30 hotels held for investment as of March 31, 2015.
(2) Actual represents the Company's ownership results for the 29 hotels held for investment as of March 31, 2014, adjusted to conform to the industry's Uniform System of Accounts for the Lodging Industry, Eleventh Revised Edition, which became effective January 1, 2015. In addition, the room count has been adjusted to include four rooms, two rooms and one room added by the Hilton Garden Inn Chicago Downtown/Magnificent Mile, the Courtyard by Marriott Los Angeles and the Hyatt Regency San Francisco, respectively, during the second quarter of 2014, two rooms added by the Renaissance Los Angeles Airport during the third quarter of 2014, and two rooms and one room added by the Hilton New Orleans and the Hyatt Regency San Francisco, respectively, during the first quarter of 2015.
(3) Acquisition for the three months ended March 31, 2014 represents prior ownership results for the Marriott Wailea acquired July 17, 2014, along with the Company's pro forma adjustment for depreciation expense. The room count has been adjusted to temporarily remove three rooms from the Marriott Wailea during the third quarter of 2014.
(4) Comparable represents the Company's ownership results, prior ownership results and the Company's pro forma adjustment for depreciation expense as applicable for the 30 Comparable Hotels.
(5) Hotel EBITDA Margin is calculated as Hotel EBITDA divided by Total Hotel Revenues.
(6) Hotel EBITDA Margin for the three months ended March 31, 2015 includes the additional net benefit of $0.2 million related to prior year property tax related adjustments. Excluding these non-current year adjustments, Actual/Comparable Hotel EBITDA margin for the three months ended March 31, 2015 would have been 26.2%. Hotel EBITDA Margin for the three months ended March 31, 2014 includes the additional net benefit of $2.9 million related to prior year property tax related adjustments. Excluding these non-current year adjustments, Actual and Comparable Hotel EBITDA margins for the three months ended March 31, 2014 would have been 23.0% and 24.0%, respectively.

For Additional Information:
Bryan Giglia
Sunstone Hotel Investors, Inc.
(949) 382-3036

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/sunstone-hotel-investors-reports-results-for-first-quarter-2015-300076992.html

SOURCE Sunstone Hotel Investors, Inc.