company presentation september 2016 pre

COMPANY

PRESENTATION

SEPTEMBER 2016

COMPANY

PRESENTATION

SUNSTONE HOTEL INVESTORS, INC. 1

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This presentation 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 presentation is as of September 2016, 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.

Forward-Looking Statements COMPANY

PRESENTATION


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Hotel Portfolio

Sunstone Strategy

Value Creation

Table of Contents COMPANY

PRESENTATION


412-room Hilton Garden Inn Chicago Downtown / Magnificent Mile

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Our Properties Hotel Portfolio


West: 45.2%

• San Diego (17.8%)

• Wailea (6.0%)

• Los Angeles (5.6%)

• San Francisco (7.8%)

• Orange County (5.0%)

• Portland (2.4%)

• Park City (0.6%)

Midwest: 7.4% • Chicago (7.4%)

Northeast: 33.2% • Boston (15.4%)

• NYC (3.9%)

• DC/Baltimore (11.2%)

• Philadelphia (1.5%)

• Westchester (1.1%)

South: 14.2% • New Orleans (5.5%)

• Orlando (5.8%)

• Houston (2.9%)

We own 28 institutional-quality hotels (13,648 rooms)

COMPANY

PRESENTATION

Note: Percent distribution based on 2015 hotel adjusted EBITDA data as provided in supplemental financial information reported on Form 8-K, furnished 02/22/2016 and is shown pro forma for asset sold subsequent to year end.

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Strategic Pillars

Our long-term strategy has remained simple and consistent,

create shareholder value by investing in high-quality hotel real

estate at an anticipated return premium to our cost of capital.

We are able to realize that return through:

Sunstone Strategy


412-room Marriott Boston Long Wharf

COMPANY

PRESENTATION

Disciplined Capital Allocation

Aggressive Asset Management

Focused Cost of Capital Management

Superior Corporate Governance

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Key Developments Over the Last Year

Two asset dispositions resulting in lower leverage and a substantial return

of capital to shareholders.

Disciplined Capital Allocation


COMPANY

PRESENTATION

Note: Multiple and cap rate based on 2015 actual or estimated EBITDA and NOI.

Doubletree Guest Suites Times Square, New York, NY

Gross Sale Price $540 million

Gross Sale per Key $1,154,000

EBITDA Multiple on Sale 25.4x

Cap Rate 3.4%

Gain on Sale $215 million

Debt Repaid $175 million

Sheraton Cerritos, Cerritos, CA

Gross Sale Price $42 million

Gross Sale per Key $206,900

EBITDA Multiple on Sale 10.5x

Cap Rate 8.2%

Gain on Sale $18 million

Debt Repaid N/A

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Operational Strategies Aggressive Asset Management

COMPANY

PRESENTATION


Asset Managers contribution in sales strategy, revenue management, and cost controls

Strong relationships with our hotel brands and operators

Energy initiatives including comprehensive audits and implementation of energy investments

Focus on asset highest and best use including high end tenants to drive incremental revenue

F&B outperformance through operational best practices and disciplined capital investments

Highly focused and balanced Asset Management initiatives to drive

revenues and profits from our assets while increasing shareholder value.

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Acquisition Summary Boston Park Plaza

COMPANY

PRESENTATION


Acquisition Rationale

• Opportunity to acquire a desirable

independent hotel on fee-simple basis

in the high barrier-to-entry Boston

lodging market.

• Attractive valuation at substantial

discount to replacement cost with

significant in-place cash flow

generation.

• Meaningful value creation

opportunities possible through

renovation and repositioning.

• Situated in highly desirable Back Bay

submarket and proximate to multiple

demand generators including key

business, convention, tourism and

retail destinations.

• Significant strategic optionality

resulting from lack of brand or

management encumbrances.

• Ability to execute acquisition on a tax-

efficient basis using like-kind

exchange proceeds from prior

completed asset sales.

• Further increases portfolio quality and

enhances brand and geographic

distribution.

Property Overview Property Operating

Location Back Bay, Boston, MA

Brand Independent

Chain Scale Upper Upscale

Service Level Full Service

Number of Rooms 1,060

Square Feet of Meeting Space 50,000

Square Feet of Retail Space 50,000

Ownership Type Fee Simple

Acquisition Overview

Date Closed July 2013

Purchase Price $250 million

Purchase Price per Key $237,400

Multiple on 2013E EBITDA at Acquisition 12.5x

Cap. Rate on 2013E NOI at Acquisition 6.6%

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Renovation and Reposition Overview Boston Park Plaza

COMPANY

PRESENTATION


GRAND DAME IS BACK “The historic Boston Park Plaza is reborn with a $100 million top-to-bottom makeover”

Front Desk Before Front Desk After

Main Lobby Before Main Lobby After Renovation and Reposition Overview

• Comprehensive renovation designed to reposition the hotel and

redefine its long-term earnings potential.

• Full guestroom renovation and conversion of select room size

formats to maximize rate capture and enhance position of asset

among competitive set.

• Full revitalization of lobby, meeting spaces and common areas.

• Retail tenant mix upgraded and service offerings enhanced to better

align with repositioned asset profile.

• Numerous asset management initiatives implemented to drive

operational efficiencies, cost reductions and incremental profit.

• Renovation completed in the second quarter of 2016 with the hotel

subsequently being awarded a coveted AAA Four Diamond Rating in

September 2016.

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Performance Exceeding Initial Expectations Boston Park Plaza

COMPANY

PRESENTATION


Strega Restaurant

Library

Guestroom

Actual and Forecast RevPAR and EBITDA

Hotel Outperforming Expectations

• Repositioned property has been well received. New room product and

reinvigorated meeting spaces are attracting a desirable and high quality mix of

business.

• Property outperforming initial underwriting and has generated cumulative EBITDA

above budget since acquisition with expected continued outperformance in 2016.

Note: Assumes $3.0 million of revenue and $2.15 million of EBITDA lost due to displacement in 2016.

$130

$140

$150

$160

$170

16,000

18,000

20,000

22,000

24,000

26,000

2013A 2014A 2015A 2016F 2016F Excl. Displacement

EBITDA ($000s) - Actual / Forecast (L) RevPAR - Actual / Forecast (R) EBITDA ($000s) - Underwritten (L)

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Fully Reinvigorated Asset Boston Park Plaza

COMPANY

PRESENTATION


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Acquisition Summary Wailea Beach Resort & Spa

COMPANY

PRESENTATION


Property Overview Acquisition Overview Property Operating

Location Wailea, Maui, HI Date Closed July 2014

Number of Rooms 547 Purchase Price $326 million

Square Feet of Meeting Space 47,500 Purchase Price per Key $598,300

Total Property Size 22 acres Multiple on 2014E EBITDA at Acquisition 16.9x

Ownership Type Fee Simple Cap. Rate on 2014E NOI at Acquisition 5.2%

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Wailea is Maui’s Premier Resort Destination Wailea Beach Resort & Spa


COMPANY

PRESENTATION

Andaz Maui at Wailea Resort Wailea Beach Resort & Spa Grand Wailea Resort Four Seasons Resort Maui Fairmont Kea Lani

297 Rooms 547 Rooms 780 Rooms 305 Rooms 450 Rooms

50,000 SF of Meeting Space 47,500 SF of Meeting Space 100,000 SF of Meeting Space 45,000 SF of Meeting Space 60,000 SF of Meeting Space

With its exceptional weather, pristine beachfront location, high-end amenities and the greatest

collection of luxury resorts on the island, Wailea is Maui’s most sought after vacation destination.

Hotels in Wailea generated an average RevPAR of $450, nearly six times that of the national average.

Note: Reflects running 12-month RevPAR as of July 2016 per STR.

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$175

$225

$275

$325

$375

Wailea BeachResort

PremiumKaanapali

Hotels

Wailea BeachResort

Opportunity

OtherWailea Hotels

Compelling Strategic Opportunity Wailea Beach Resort & Spa


COMPANY

PRESENTATION

Substantial Opportunity to Grow RevPAR (1) Acquisition Rationale and Value Creation Opportunity

• Opportunity to acquire irreplaceable, long-term relevant

ocean-front real estate on a fee-simple basis.

• Ability to enter the desirable and high-barrier-to-entry Maui

lodging market which is one of the most sought-after vacation

destinations in the world.

• Further enhances the quality and geographic distribution of

the overall portfolio while further minimizing ground lease

exposure.

• Achieves increased scale for the Company in a deleveraging

manner.

• Ability to generate meaningful upside from renovation and

repositioning of the property.

• Undermanaged asset operating below less desirable

properties in Kaanapli with substantial ability to

increase post-renovation RevPAR levels closer to that

of more competitive and higher quality Wailea hotels.

• Capitalize on strong relationship with Marriott to obtain

cash flow guarantee from brand during renovation.

• Substantial opportunities to implement operational

efficiencies and more aggressive asset management to drive

incremental cash flow.

The hotel should

command a

RevPAR

premium relative

to the Kaanapali

market due to its

more desirable

location . . .

. . . And post-

renovation, the

hotel will offer a

guest

experience that

more closely

resembles that

of its Wailea

peers, and

should garner a

more

competitive

RevPAR index

4

(1) Chart data reflects running 12-month RevPAR as of July 2016 per STR.

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Fully Reimagined Destination Wailea Beach Resort & Spa


COMPANY

PRESENTATION

Renovation Scope and Overview

• Complete renovation of the property encompassing resort grounds, common areas, guestrooms, meeting spaces, food &

beverage outlets, systems and infrastructure, swimming pools and other guest amenities.

• Substantial upgrade of the facility and guest experience intended to reposition the hotel within its competitive set and attract a

higher-paying consumer.

• Addition of numerous high-quality resort amenities including an unmatched kid’s pool and waterslide and one-of-a-kind food

and beverage outlets designed to create a well-defined and cohesive destination resort.

• Expansion of the number of room types in order to better capture premium room demand. Added four additional keys as part

of renovation plan to further unlock property value.

• Optimized resort staffing and sales efforts. Renegotiated in-place vendor contracts and restructured resort fee to drive

incremental cash flow and profitability.

• Longer-term opportunity for further development of several unused and underutilized spaces to capture incremental value in

addition to current repositioning program.

Ohi Pool Guestroom Aulani Ballroom

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Significant Property and Guest Experience Improvements Wailea Beach Resort & Spa


COMPANY

PRESENTATION

Kapa Bar & Grill Pre Renovation Kapa Bar & Grill Post Renovation

Kid’s Pool Pre Renovation Kid’s Pool Post Renovation (Q4 2016)

/ SUNSTONE HOTEL INVESTORS, INC. 17

COMPANY

PRESENTATION Acquisition Summary Hyatt Regency San Francisco

• Opportunity to acquire a high quality hotel property

situated in a prime, fee-simple location in San

Francisco's financial district.

• Hotel located next to numerous corporate and leisure

demand generators with additional uplift expected

from the construction of 3 million square feet of new

office space in immediate vicinity.

• Substantial upside opportunities available through

renovation, streamlining of F&B offerings and more

intensive asset management.

Property Overview Property Operating

Location San Francisco, CA

Number of Rooms 804

Square Feet of Meeting Space 67,000

Ownership Type Fee Simple

Acquisition Overview

Date Closed December 2013

Purchase Price $263 million

Purchase Price per Key $327,300

Multiple on 2014E EBITDA at Acquisition 14.2x

Cap. Rate on 2014E NOI at Acquisition 6.0%

Acquisition Rationale

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Sustained EBITDA Growth and Outperformance Hyatt Regency San Francisco

COMPANY

PRESENTATION


Guestroom

Meeting Space

The Market

Actual and Forecast RevPAR and EBITDA

Constructive Market Fundamentals

• Hotel has captured outsized market share growth since acquisition benefitting

from recent capital investment and healthy market fundamentals.

• Given the hotel’s prime location and abundant meeting space, the asset is well

positioned to benefit from additional commercial development in the immediate

vicinity and a lack of competitive new hotel supply.

$200

$225

$250

$275

$300

15,000

20,000

25,000

30,000

35,000

2013A 2014A 2015A 2016F

EBITDA ($000s) - Actual / Forecast (L) RevPAR - Actual / Forecast (R) EBITDA ($000s) - Underwritten (L)

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Irreplaceable Asset in Prime Location Hyatt Regency San Francisco

COMPANY

PRESENTATION


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7.25x

8.12x

6.29x

5.07x

3.89x

2.52x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

2010 2011 2012 2013 2014 2015

Net Debt & Preferred to T12 EBITDA(As Reported)(1)

Leverage Overview Focused Cost of Capital Management

COMPANY

PRESENTATION

(1) Data presented is pro-rata share of 75% for the Hilton San Diego Bayfront.

(2) Cash and Cash Equivalents exclude the cash paid in January 2016 catch up dividend.

(3) Leverage (Net Debt plus Preferred to EBITDA). Data as provided in supplemental financial information reported on Form 8-K, furnished

February 17, 2011, February 21, 2012, February 19, 2013, February 20, 2014, February 17,2015, and February 22, 2016.

Transformed what was once one of the highest levered balance sheets

into one of the strongest in the sector. Deleveraging was completed in a

shareholder friendly way.

(2)


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Corporate Governance Superior Corporate Governance


Our priority is to maximize shareholder value. Our board structure,

corporate charter and culture of transparency place us at the top of the

REIT space in terms of Corporate Governance.

COMPANY

PRESENTATION

Ranked 3rd highest in corporate governance by Green Street Advisors • Out of 82 REITs in their coverage universe

ISS Quick Score of 2 • 1 = most shareholder friendly, 10 = least shareholder friendly

First in our space to opt-out of MUTA provision

Adopted 50% threshold to amend bylaws

Adopted limitations on Rights Plans

Best-in-class disclosures with quarterly supplemental

Culture of transparency

a a a a a a a

COMPANY

PRESENTATION


company presentation september 2016 pre

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