SHO

• Overall Demand Performance

• Robust leisure demand from increased summer travel and special events, paired with sustained strength in group and corporate demand, drove Q2 RevPAR growth of 9.3% for the full portfolio (4.3% excluding ramping Ondas Miami Beach), exceeding internal expectations.
• Group booking pace is strong across the portfolio: year-to-date future group room night production is up 36% versus last year at Wailea Beach Resort, and 2027 group pace is up over 10% for the full portfolio. Transient pace for the next six months is up 22% portfolio-wide, with broad-based growth across all hotel types.

• Capital Recycling and Balance Sheet

• The company closed the sale of the low-yield Hyatt Regency San Francisco in late July 2026 at an implied multiple well above Sunstone's current public valuation, realizing attractive private market value and eliminating long-term earnings recovery risk for the asset.
• As of Q2 end, transaction-adjusted total cash was ~$430 million, net leverage was 2.6x trailing earnings (3.6x including preferred equity), there are no debt maturities prior to 2028, and the credit facility is fully available.
• Year-to-date 2026, the company has completed ~$70 million in accretive common and preferred stock repurchases: $40 million of common stock at a blended $9.24 per share, and $30 million of preferred stock at an 18% discount to liquidation value, both accretive to NAV and EPS.

• Completed and In-Progress Capital Projects

• Renovation of the Hilton San Diego Bayfront meeting space is complete, and the hotel achieved its highest ever Q2 group revenue booking with $26 million of new business booked in the quarter.
• Construction of Bazaar Meat signature restaurant at Ondas Miami Beach is complete; the company will delay opening until fall 2026 to capture peak high-season demand.
• Ocean's Edge Resort was converted to the Hilton Key West Resort and Marina on July 1, 2026, to leverage Hilton's stronger distribution and lower customer acquisition costs; a phased focused renovation of rooms and facades is underway through 2027, partially funded by the new operator.
• Most post-storm repair work at Wailea Beach Resort is complete; $6 million in insurance reimbursements have been received to date, including $1.2 million for business interruption, with additional recovery pending for remaining work.

• Cost Management

• The company maintains focused cost controls at both property and corporate levels, driving labor efficiency where possible and mitigating energy and G&A cost growth. Q2 2026 was the most difficult year-over-year cost comparison due to favorable prior-year tax appeals and a shift to higher transient mix at group-focused hotels; excluding San Diego, expense growth per occupied room was 120 basis points lower and margins expanded 10 basis points.

• Full-year 2026 guidance was updated to reflect the Hyatt Regency San Francisco sale and better-than-expected Q2 performance, with a modest upward revision to revenue and profitability while retaining caution around remaining macro uncertainty.
• Total portfolio RevPAR is now expected to grow 7% to 9%, with Ondas Miami Beach contributing ~450 basis points of growth at the midpoint, resulting in a RevPAR range of $239 to $244 for rooms and $404 to $411 for total RevPAR. This represents a 175 basis point increase at the midpoint from prior guidance.
• Adjusted EBITDA RE is projected to be between $245 million to $255 million, an $8 billion increase from prior guidance driven by Q2 outperformance, modest upside to H2 2026, and $1 million in lower expected corporate G&A.
• Adjusted FFO per diluted share is expected to range from $0.93 to $0.98, incorporating lower preferred dividends from repurchase activity.
• Full-year capital expenditure guidance was revised upward to a range of $105 million to $115 million, driven by additional storm repair work at Wailea Beach Resort; nearly all additional spending is expected to be reimbursed by insurance.
• The 2026 guidance does not assume any incremental benefit from future share repurchases, even though the company retains capacity and appetite for additional opportunistic repurchases.

The firm divides its hotel portfolio into three core segments: Resorts, Urban Hotels, and Convention Hotels.

1. Resorts: Combined RevPAR grew nearly 27% including Ondas Miami Beach. Wailea Beach Resort delivered ~15% RevPAR growth, with 18% higher EBITDA year-over-year. Wine country resorts generated 5% RevPAR growth driven by improved group business. Ondas Miami Beach reached 72% occupancy with a $470 ADR and produced $2.8 million in EBITDA, and contributed 500 basis points of total portfolio RevPAR growth in Q2. The resort segment led portfolio growth, representing approximately 45% of total Q2 adjusted EBITDA RE.
2. Urban Hotels: Combined RevPAR grew 5.2% driven primarily by rate growth, which delivered 50 basis points of margin expansion. JW New Orleans saw robust group demand with strong out-of-room spend, with double-digit group booking growth for the second half of 2026. Marriott Boston Long Wharf outperformed expectations across all demand segments, with meaningful booking growth for the remainder of 2026 and 2027. This segment accounts for approximately 25% of total Q2 adjusted EBITDA RE.
3. Convention Hotels: Overall performance was mixed. San Francisco delivered 16% Q2 RevPAR growth, though growth moderated 11 percentage points sequentially from Q1. Washington D.C. performance came in above expectations, with incremental transient demand offsetting a subdued group backdrop tied to lower government activity. Hilton San Diego Bayfront saw an 8.4% RevPAR decline, as 19% transient growth only partially offset a group business shortfall tied to a weaker citywide convention calendar and in-progress meeting space renovations. This segment accounts for approximately 30% of total Q2 adjusted EBITDA RE.

Total portfolio Q2 2026 adjusted EBITDA RE was $77 million, 6% higher than the prior year. Adjusted FFO per diluted share was $0.32, 14% higher year-over-year, with 4.4% absolute expense growth (3.6% per occupied room) for the comparable portfolio excluding Ondas Miami Beach.

• Ongoing macroeconomic uncertainty that impacted outlook earlier in 2026 has not abated, prompting management to retain a cautious stance despite stronger recent performance.
• San Francisco's RevPAR growth is expected to continue moderating through the remainder of 2026, consistent with historical trends during Sunstone's ownership.
• Cost pressure in San Francisco creates elongated timelines and additional risk for earnings recovery at low-yielding assets in the market, which motivated the sale of Hyatt Regency San Francisco.
• Higher transient mix at group-focused large hotels reduces operating efficiency, creating margin headwinds; this was particularly impactful at Hilton San Diego Bayfront during Q2 2026 alongside renovation headwinds and a weaker market convention calendar.
• Insurance reimbursement for remaining storm damage and additional business interruption at Wailea Beach Resort is still pending, with no additional recovery assumed in 2026 guidance.
• Current pricing for potential acquisition targets in the transaction market remains above where Sunstone is willing to transact, creating a disconnect between market pricing and Sunstone's underwriting requirements.

Q: An analyst asked about the expected pace of property-level expense growth for the rest of 2026 and into 2027, after the Q2 performance and with visibility into upcoming union contracts. / A: Management stated 2026 full-year expense growth is tracking between 3.5% and 4% total, or 2.5% on a per occupied room basis. As group contribution grows in the second half and into 2027, operating efficiency will improve, which will help moderate costs. Labor agreement expirations will bring lower annual wage increases in 2027, and insurance costs are also expected to decline, so management expects expense growth will moderate to the lower end of the current range or even slightly below. (297 characters)

Q: An analyst asked about the disconnect between room revenue and total revenue growth in the first half of 2026, and when this trend is expected to reverse, alongside an update on the Hilton Key West conversion. / A: The disconnect is entirely driven by San Diego, which has a large group focus but saw lower group business in the first half amid meeting space renovations, with lower out-of-room spend from the higher transient share. The flip to faster total revenue growth will happen in the second half, particularly Q4 2026 and 2027 as group business rebounds. Early results from the Key West conversion already show higher ADR and a longer booking window from Hilton's brand platform, plus early cost benefits from Hilton's group purchasing power. (418 characters)

Q: An analyst asked about the company's current outlook for investment opportunities and the balance between acquiring new assets and continuing share repurchases to close the NAV discount. / A: Transaction volume is picking up and broadening beyond luxury hotels, with more full-service assets in the $75 million to $150 million range coming to market. However, pricing in marketed processes remains elevated and disconnected from the company's underwriting requirements. At this time, repurchasing common and preferred stock at a discount to NAV still offers the best risk-adjusted return for shareholders from the available San Francisco sale proceeds, and management will remain disciplined on new acquisitions. (394 characters)

Q: An analyst asked if the implied Q4 2026 EBITDA guidance, which accounts for 22% of full-year EBITDA, is conservative given expected strength in San Diego and Ondas Miami Beach. / A: Management noted guidance implies full-year growth is front-loaded, with a shift to mid-single-digit RevPAR growth in the second half, which is a reasonable expectation as of today. July 2026 performance has already surprised to the upside, and if current strong booking and demand trends continue, there is clear upside to the guidance. Management chose to retain a modest level of conservatism to account for ongoing external macro headwinds after updating guidance to reflect Q2 outperformance. (382 characters)