After consequential delays, the Andaz Miami Beach has reopened after sweeping renovations to the 287-key hotel — and Sunstone Hotel Investors is betting big on the hotel delivering nominal returns.
The real estate investment trust reported on its first-quarter earnings call Tuesday that the Miami resort opened on Saturday. Sunstone CEO Bryan Giglia said this year the Andaz Miami Beach will produce $6 million to $7 million in earnings before interest, taxes, depreciation and amortization — driven mostly by the fourth quarter.
"While the road to opening was met with numerous permitting and approval delays, the doors are now open, and guests can experience an exceptional Miami Beach resort," Giglia said. "I was on property last week, and the finished product looks great and is well-positioned to deliver on our underwriting and provide earnings growth for the next several years."
Promising returns from conversions, renovations
While the Andaz isn't the only property Giglia said is expected to drive revenue this year, it's likely the most lucrative. Sunstone also recently converted The Westin Washington, DC Downtown and the Marriott Long Beach Downtown,
"The growth generated from these conversions is not limited to the immediate year following completion," Giglia said.
Sunstone acquired the Hyatt Regency San Antonio Riverwalk last year, and the property will begin renovations in the third quarter.
"We expect to move efficiently through this project and be complete by the end of the year," said Aaron Reyes, executive vice president and chief financial officer at Sunstone. "Part of what appealed to us in acquiring this hotel is the opportunity to reprogram the lower lobby level to take advantage of the new development activity happening next door at the Alamo Visitor Center and Museum."
Later this year, the Hilton San Diego Bayfront is expected to begin renovations on the property's meeting spaces as corporate meetings are central to the hotel, Reyes said.
"Our capital recycling and investment efforts are still delivering sector-leading growth. This is a direct result of our layered approach to recycling capital investing in our portfolio and returning capital to our shareholders," Giglia said of Sunstone's ongoing projects.
While Sunstone has adjusted its 2025 forecast, Reyes said the potential threat of tariffs affecting construction costs is minimal.
"The largest components of our spend for this year related to projects that were already underway at the start of the year and for which materials had largely been procured," he said. "While this certainly does not mean we are not at risk for cost inflation in certain areas, based on what we know today, we expect to be able to complete our planned activities for this year within our prior estimated range."
Adjusted 2025 forecast
Several fluctuating factors led Sunstone to assess its expectations for the rest of the year. In general, current economic concerns and softening demand are motivating Sunstone to be a bit more conservative on outlook.
"Given the increased volatility, the uncertainty regarding economic policy changes and the greater variability in the range of possible economic outcomes for the year, our forward visibility has become more limited," Giglia said. "As a result of these factors, we are adjusting our full-year outlook to better align with current trends."
But specifically, Reyes called attention to three properties. In February, Sunstone reported the Andaz's opening was just a few weeks away. Factoring in the nearly two-month delay, the hotel's projected EBITDA dropped by $2 million for the year. Meanwhile in Maui, the Wailea Beach Resort is facing slower-than-expected recovery from last year's wildfires, and San Diego is seeing unexpected headwinds, which affected Sunstone's outlook by $4 million and $2 million, respectively.
Sunstone lowered its outlook across most metrics. Full-year net income was revised to be $33 million to $58 million for the year, down $13 million. Revenue per available room growth, originally forecasted to be within 7% to 10% , is now predicted to be between 4% and 7%. Adjusted EBITDAre fell $10 million to the $235 million to $260 million range.
By the numbers
In the first quarter, Sunstone reported net income of $5.3 million, a 59.7% year-over-year decrease compared to $13 million, according to the company's earnings release.
Adjusted EBITDAre increased 5% to $57.3 million and adjusted funds from operations attributable to common stockholders per diluted share increased 16.7% to $0.21.
Sunstone's total portfolio RevPAR for the quarter increased 2.2% to $221.63, average daily rate was $316.16 and occupancy was 70.1%. Excluding Andaz Miami Beach, which was closed due to renovations, RevPAR increased 3.8%.
During the first quarter of 2025, Sunstone repurchased 821,771 shares of its common stock at an average purchase price of $9.74 per share for a total repurchase amount before expenses of $8 million. Year-to-date through May 5, the company has repurchased a total of more than 2.3 million shares of its common stock at an average purchase price of $8.90 per share for a total repurchase amount before expenses of $20.8 million. The company currently has $406.8 million remaining under its existing stock repurchase program authorization.
On April 1, 2025, Sunstone exercised its option to extend the maturity of a $225 million term loan to May 1, 2026. Inclusive of extension options, the company has no debt maturities prior to 2026.
As of publication time, Sunstone's stock was trading at $8.34 per share, down 29.5% year to date. The NYSE Composite was up 0.5% for the same period.