Sunstone Hotel Profit Nearly Quadruples on Andaz Miami Strength
Sunstone Hotel Investors reported net income of $26.0 million in the second quarter, up from $6.8 million a year earlier, as it raised full-year guidance and closed the sale of the Hyatt Regency San Francisco.
Sunstone Hotel Investors (SHO), a real estate investment trust that owns upper-upscale hotels, reported second-quarter net income attributable to common stockholders of $26.0 million, or $0.14 a diluted share, up from $6.8 million, or $0.03 a diluted share, a year earlier, a 279.7% increase.
The gain was driven in large part by one property. RevPAR across the portfolio rose 9.3% to $263.61, but excluding the Andaz Miami Beach, RevPAR growth was 4.3%. Total RevPAR followed the same pattern, up 7.7% to $434.00 companywide versus 3.0% with the Andaz stripped out. Occupancy rose 300 basis points to 77.6% and average daily rate climbed 5.1% to $339.71; excluding the Andaz, ADR growth accounted for most of the gain, up 3.5%, while occupancy added only 60 basis points.
Adjusted EBITDAre rose 5.5% to $76.7 million, a slower pace than the 11.2% growth reported for the first six months of the year, pointing to a deceleration within the quarter itself. Hotel Adjusted EBITDAre margin excluding the Andaz Miami Beach contracted 100 basis points to 29.4%, even as the six-month margin expanded 10 basis points to 28.3%, indicating the margin pressure was concentrated in the second quarter rather than spread evenly across the first half. Adjusted funds from operations per diluted share nonetheless rose 14.3% to $0.32.
Sunstone closed the sale of the Hyatt Regency San Francisco on July 30 for $279 million, or $340,000 a key, a transaction first announced as a signed agreement on June 23 and now completed, trimming the portfolio to 13 hotels from 14. The company used proceeds from the sale to repay the $25.0 million outstanding on its revolver after quarter-end, bringing pro forma total debt to roughly $955.0 million from $980.0 million reported as of June 30.
Sunstone also converted the previously independently operated Oceans Edge Resort & Marina to the Hilton Key West Resort & Marina effective July 1, a rebranding expected to drive incremental earnings through Hilton's distribution network.
The company raised full-year 2026 guidance across its key metrics. Adjusted EBITDAre guidance rose to a midpoint of $250 million, from a prior range of $238 million to $252 million, an increase of $8.0 million at the midpoint. Adjusted FFO per share guidance rose to $0.93 to $0.98, up $0.06 at the midpoint, and RevPAR and Total RevPAR growth guidance rose to 7.0% to 9.0% from 5.0% to 7.5%, an increase of 175 basis points.
Capital investment guidance for 2026 was raised to $105 million to $115 million, reflecting incremental repair and restoration spending at the Wailea Beach Resort following severe weather damage in Hawaii in March, a cost not disclosed in prior-quarter materials.
Sunstone continued repurchasing stock through the quarter, spending $32.2 million on common and preferred shares in the second quarter alone, part of $70.1 million in combined repurchases through the first half of the year and into early August. Series H preferred shares outstanding fell to 3,974,703 from 4,545,903 at the end of 2025, and Series I fell to 3,181,182 from 3,990,973 over the same period. Common shares outstanding declined by roughly 3.77 million to 185,944,329 as of June 30.