Sunstone Sells Embassy Suites Chicago and Hilton Garden Inn Chicago Downtown/Magnificent Mile for $129.5 Million

Sunstone Hotel Investors Completes Disposition of two Chicago Hotels, Provides Operations Update and Commences Share Repurchases

Sunstone Hotel Investors, Inc. (NYSE: SHO) today announced that it has completed the sale of the 368-room Embassy Suites Chicago and the 361-room Hilton Garden Inn Chicago Downtown/Magnificent Mile. The Chicago Hotels were sold for a combined gross sale price of $129.5 million, or $178,000 per key, which represents a 9.8x multiple on 2019 Hotel Adjusted EBITDAre and an 8.8% cap rate on 2019 Hotel Net Operating Income. The Chicago Hotels generated an IRR of approximately 9% for the Company over the life of the investment. The Company anticipates that the Chicago Hotels will generate a combined first quarter 2022 net loss before any gain on sale of $3.1 million to $3.6 million and Hotel Adjusted EBITDAre loss of approximately $2.0 million to $2.5 million through the date of sale.   

Bryan Giglia, Chief Executive Officer, stated, "We are pleased to announce the sale of these two hotels as it marks our exit from the Chicago market, which has been hindered by excess supply and an inability to drive meaningful rate and profitability growth. We expect to recycle the proceeds into higher growth and greater per-share NAV enhancing investments. With these sales, we have now largely completed our non-core disposition program and we are actively looking to grow the portfolio through the addition of Long-Term Relevant Real Estate."

The Company's operations for January and early February 2022 were impacted by group cancellations and lower business volumes as a result of a surge in Covid case counts associated with the Omicron variant.  Beginning in February, as case counts declined, the Company began to see an increase in portfolio occupancy and an acceleration of forward booking activity. Total portfolio occupancy as of mid-March 2022 is at the highest level since the onset of the pandemic.

• RevPAR at the comparable 12 hotels the Company owned during both 2022 and 2019 (the "12 Hotel Comparable Portfolio") increased from 54% of 2019 levels in January 2022 to 80% of 2019 levels for the first 14 days of March 2022.
• First quarter 2022 RevPAR for the Company's 12 Hotel Comparable Portfolio through March 14, 2022 was $134.14 which is 67% of the same time period in 2019.
• As of February 28, 2022, group revenue pace for the 12 Hotel Comparable Portfolio for Q2 through Q4 2022 was down only 17% as compared to the same time in 2019, with average rates approximately 5% higher than in 2019.
• Weekly transient booking activity for the next six months has continued to accelerate in March and is nearing pre-pandemic run rates.
• In the second quarter 2019, the 12 Hotel Comparable Portfolio generated RevPAR of $229.50. The Company currently anticipates that RevPAR at the 12 Hotel Comparable Portfolio for the second quarter 2022 will increase to approximately 80% of 2019 levels.

Share Repurchase Update

On March 7, 2022, the Company announced that it had elected to terminate the covenant relief period associated with the amended debt agreements governing its credit and term loan facilities and senior unsecured notes. Prior to the termination of the covenant relief period, the Company was restricted from repurchasing its own stock.  From March 8 through March 16, 2022, the Company repurchased 3.2 million shares of its common stock at an average price of $11.08 per share for a total repurchase price of $35.1 million. The Company has $464.9 million remaining under its existing share repurchase authorization. The authorization has no stated expiration date and future repurchases will depend on various factors, including the Company's capital availability and the price of the Company's common stock.