Company Presentation November 2013 S U N S T O N E H O T E L I N V - PowerPoint PPT Presentation

S U N S T O N E H O T E L I N V E S T O R S , I N C Company Presentation November 2013

S U N S T O N E H O T E L I N V E S T O R S , I N C Forward ‐ Looking Statements This presentation contains forward ‐ looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward ‐ looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will” or the negative of such terms and other comparable terminology. These statements are only predictions. Actual events or results may differ materially from those expressed or implied by these forward ‐ looking statements. In evaluating these statements, you should specifically consider the risks outlined in detail under the heading “Risk Factors” in our Annual Report on Form 10 ‐ K, filed with the Securities and Exchange Commission (“SEC”) on May 6, 2013, including, but not limited to, the following factors: general economic and business conditions affecting the lodging and travel industry, both nationally and locally, including a prolonged U.S. recession; the need to operate as a REIT and comply with other applicable laws and regulations; rising operating expenses; relationships with and requirements of franchisors and hotel brands; relationships with and the performance of the managers of our hotels; the ground, operating or air leases for 10 of the 29 hotels (including the pending acquisition of the Hyatt Regency San Francisco); our ability to complete acquisitions and dispositions; and competition for the acquisition of hotels. These factors may cause our actual events to differ materially from the expectations expressed or implied by any forward ‐ looking statement. We do not undertake to update any forward ‐ looking statement. This presentation includes non ‐ GAAP financial information that the issuer considers useful to investors as a key measure of operating performance. A reconciliation to U.S. GAAP can be found in the Investor Relations section of the company’s website at www.sunstonehotels.com. Information and/or metrics provided on pages 5 and 16 of the presentation are as presented by the Company through either its earnings releases and/or press releases. C O M P A N Y P R E S E N T A T I O N • P A G E 2

S U N S T O N E H O T E L I N V E S T O R S , I N C Company Profile Sunstone is a leading hotel investment company with an enterprise value of approximately $3.8 billion. Capital Structure / Valuation Metrics Sunstone Portfolio Metrics Recent Stock Price 1 Pro Forma Hotels 3 $13.18 29 Pro Forma Shares (MM) 2 Pro Forma Rooms 3 182.9 13,744 2012 Pro Forma RevPAR 3 Equity Market Cap (MM) $2,410 $142.06 2013 Pro Forma RevPAR Guidance 4 Total Mortgage Debt (MM) $1,352 +3.5% ‐ 5.5% 2012 Pro Forma EBITDA (MM) 3 Total Corporate Debt + Preferred (MM) $1,467 $253 2013 Pro Forma EBITDA Guidance (MM) 4 Pro ‐ Forma Unrestricted Cash (MM) ($112) $250 ‐ $260 Total Enterprise Value (MM) $3,766 Implied Value per Key $274,000 Valuation Sensitivity A change of: Would result in a share price change of: 2014 Consensus SHO EBITDA Multiple 5 12.7x $10,000 / key $0.75 2014 Consensus Industry Peer EBITDA Multiple 5 13.9x 1.0x in EBITDA multiple $1.78 1 Last 50 ‐ day moving average as of November 11, 2013. 2 Reflects full ‐ year, pro ‐ forma share count based on 162.9 million shares outstanding as of the end of Q3, plus 20 million shares issued November 1, 2013. 3 2012 figures adjusted to reflect current 28 ‐ hotel portfolio, plus 802 ‐ room Hyatt Regency San Francisco, which is expected to close in early December 2013. 4 Based on Company guidance provided November 11, 2013. Includes the full ‐ year, pro ‐ forma EBITDA impact of the Hyatt Regency San Francisco. 5 Based Source: SNL Financial, FactSet. Median figures. Data for Industry Peer group includes DRH, RHP, HST, LHO, PEB, FCH, AHT, HT, BEE, RLJ, CHSP. C O M P A N Y P R E S E N T A T I O N • P A G E 3

S U N S T O N E H O T E L I N V E S T O R S , I N C Sunstone Investment Thesis High quality portfolio. Disciplined strategy. Near ‐ term Opportunities.  High Quality Urban Portfolio  29 institutional ‐ quality, upper ‐ upscale hotels comprising of 13,744 rooms (including the pending acquisition of the Hyatt Regency San Francisco)  Approximately 82% of hotel EBITDA generated from top U.S. markets (San Francisco, New York, DC/Baltimore, Boston, Chicago, San Diego, Los Angeles/Orange County)  Cycle ‐ Appropriate Strategy  Improving our portfolio quality and scale while gradually reducing our financial leverage  Unique quantitative approach to business management  Positioning Sunstone to capitalize on investment opportunities during the next cyclical trough  Near ‐ term Upside  Portfolio fundamentals remain highly constructive  Executing on focused capital plans to maximize competitiveness and long ‐ term value of each hotel  Upgrading portfolio by selling legacy hotels and reinvesting proceeds into high ‐ quality acquisitions  Building key market “complexes” and leveraging best practices across our portfolio  Low levered capital structure designed to maximize flexibility and minimize WACC  Meaningful exposure to San Francisco market (following the Hyatt Regency San Francisco acquisition) C O M P A N Y P R E S E N T A T I O N • P A G E 4

S U N S T O N E H O T E L I N V E S T O R S , I N C Sunstone Hotel Investors, Inc. Recent Highlights.  Acquisitions Hyatt Chicago Magnificent Mile (June 2012) and Hilton Garden Inn Chicago Downtown (July 2012) • Hilton St. Charles New Orleans (May 2013) • Boston Park Plaza (July 2013) • Hyatt Regency San Francisco (expected to close December 2013) •  Dispositions Marriott Del Mar (August 2012) • Hilton Del Mar, Marriott Troy & Minneapolis Doubletree (September 2012) • Rochester, Minnesota four ‐ hotel portfolio & commercial laundry (January 2013) •  Capital Markets Redemption of all $58 million outstanding 4.6% Senior Exchangeable Notes (January 2013) • Completion of follow ‐ on equity offering with $295 million of net proceeds (February 2013) • Redemption of all $176 million outstanding 8.00 % Series A Preferred Stock (March 2013) • Redemption of all $100 million outstanding 6.45 % Series C Preferred Stock (May 2013) • Completion of follow ‐ on equity offering with $271 million of net proceeds (November 2013) •  Balance Sheet Continued deleveraging with Net Debt+Preferred/EBITDA of 8.9x (Q2 2011) to 5.2x (Q3 2013) •  Capital Investment Investment of $109 million into the portfolio during 2012 • Forecast investment of $110 ‐ $120 million into the portfolio during 2013 • C O M P A N Y P R E S E N T A T I O N • P A G E 5

S U N S T O N E H O T E L I N V E S T O R S , I N C High ‐ Quality Urban Portfolio Geographically diverse portfolio located primarily in coastal urban markets. Northeast (10) 2013 Pro Forma Total EBITDA by Region 44.1% (number of hotels in parenthesis) Mid ‐ West (3) • Boston 15% (3) 7.5% • NYC 13% (3) • DC/Baltimore 14% (3) • Chicago 7% (3) • Philadelphia 2% (1) West (11) 35.1% • Portland 2% (1) South (5) • San Francisco 6% (1) • New Orleans 6% (2) 13.3% • Los Angeles 6% (4) • Houston 2% (2) • Orange County 3% (2) • Orlando 5% (1) • San Diego 18% (2) C O M P A N Y P R E S E N T A T I O N • P A G E 6 Includes pending acquisition of the Hyatt Regency San Francisco

S U N S T O N E H O T E L I N V E S T O R S , I N C Cycle ‐ Appropriate Strategy Unique quantitative approach to business management.  Lodging is Highly Cyclical. While each cycle is unique, historically the greatest opportunities for value creation – and the highest risks of value destruction – occur during cyclical downturns. Companies that take appropriate steps during the growth phase of the cycle stand to capitalize on opportunities during the subsequent cyclical trough.  What we know today: 1. Current State – The current cyclical recovery, which began in December of 2009, has been characterized by relatively strong growth in business transient demand, moderate growth in group demand and low overall supply trends. Industry occupancies are now at or above prior peak levels. Hotel supply additions have ticked up in certain markets, but remain well below historical averages. In general, industry fundamentals remain constructive. 2. Potential Duration – The average duration of prior ‘up ‐ cycles’ (trough ‐ to ‐ peak) has been approximately 70 – 90 months. We are now approximately 46 months into the contemporary recovery. The combination of moderate demand growth and muted supply trends implies a slower ‐ paced, longer ‐ term recovery.  Cycle ‐ Appropriate Strategy. Sunstone’s near ‐ term strategy is predicated on gradually reducing our financial leverage and increasing our financial flexibility while improving our portfolio quality and scale. We believe this strategy will: 1. Drive superior risk ‐ adjusted returns during the ongoing growth phase of the current cycle, and 2. Position Sunstone to capitalize on investment opportunities during the next cyclical trough. C O M P A N Y P R E S E N T A T I O N • P A G E 7