Good morning ladies and gentlemen and thank you for standing by. Welcome to the Sunstone Hotel Investors fourth quarter earnings call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will be given at that time. I would like to remind everyone that this conference is being recorded today February 27th 2026 at 12 p.m. Eastern Time. I will now turn the call over to Mr. Aaron Reyes, Chief Financial Officer. Please go ahead, sir.

Thank you, Operator. Before we begin, I would like to remind everyone that this call contains forward-looking statements that are subject to risks and uncertainties, including those described in our filings with the SEC, which could cause actual results to differ materially from those projected. We caution you to consider these factors in evaluating our forward-looking statements. We also note that the commentary on this call will contain non-GAAP financial information including Adjusted EBIT.RE, Adjusted FFO, and Hotel Adjusted EBIT.RE. We are providing this information as a supplement to information prepared in accordance with generally accepted accounts. Additional details on our quarterly results have been provided in our earnings release and supplemental, which are available in the Investor Relations section. With us on the call today are Brian Giglia, Chief Executive Officer, and Robert Springer, President and Chief Investment Officer. After our remarks, the team will be available to answer your questions. With that, I would like to turn the call over to Brian. Please go ahead.

Thank you, Aaron, and good morning, everyone. Despite the various headwinds that impacted our industry in 2025, our portfolio finished the year on a high note with fourth-quarter operating results that exceeded our expectations, driven by broad-based strength across the portfolio. The fourth quarter capped off a productive year at Sunstone, where we made further progress on our three strategic objectives, which include recycling capital, investing in our portfolio, and returning capital to our shareholders. Earlier in the year, we completed the sale of the Hilton New Orleans at a mid-6% cap rate inclusive of required near-term capital and fully recycled the proceeds into the repurchase of our stock at a compelling discount and a higher implied yield. In addition, we completed several capital projects, including the debut of the Onda's Miami Beach, which, despite its later opening, had a solid festive period and good momentum heading into this year. Lastly, we returned more than $170 million of capital to our shareholders through a well-covered dividend and accretive share repurchases. These strategic accomplishments will drive growth in per-share earnings and NAV in the years to come. We will share additional details on our outlook and our expectations for 2026 shortly, but I'll start with a quick recap on the fourth quarter results. As I noted at the top of the call, our results came in better than expected with total rev par growth of 7.4% in the quarter, or 12.5%, including the contribution from Ondas. Our resorts led the portfolio, driven by solid performance at the Waialea Beach Resort. As we shared with you on our recent calls, our results in Maui were hampered through much of last year as market demand normalized. We were pleased to see the green shoots we witnessed at the resort in the fall continue into year-end, leading to 19% Red Park growth in the quarter. On the opposite side of the country, Onda's Miami Beach delivered year-end results that were ahead of expectations, and the outperformance has carried into the early parts of this year, positioning the resort well to deliver on our expectations for 2026. We are pleased with the demand our renovated resort is attracting, including high-profile business around some key events in the market that should help the resort further build awareness. Performance at our wine country resorts was also stronger than expected, with Montage Hedelsberg capping off a better year with 15% total RevPar growth in the quarter and just over 9% for the year. Overall, our resorts were our strongest performing segment in Q4, and we expect that to continue into 2026, but now with the added benefit of a full-year contribution from Onda's Miami Beach. At our urban hotels, we were pleased with our quarterly performance at Marriott Long Beach Downtown, which continued to benefit from its brand conversion in 2024 and generated total red par growth of 12%. Similarly, the Portland market continues to recover with the Bidwell Marriott turning in nearly 13% growth. This strength was partially offset by a softer market and tougher comps in Boston and New Orleans. While top-line growth was less robust at our urban hotels, we continued to work with our operators to control costs and managed to grow margins during the quarter. our convention hotels turned in better than expected performance with rev park growth of 2.8 percent even with some headwinds from the meeting space renovations that we had underway in san antonio and san diego excluding these two hotels our convention hotel rev park growth was 5.3 during the quarter san francisco was once again a standout performer which added to solid top-line results in the first three quarters of the year to generate more than 12% total REVPAR growth for the year. We continue to be encouraged by how the market and our hotel are setting up for additional growth this year, with group pace up in the low double-digit range and a strong start with good group activity in January and the Super Bowl in February. The Renaissance Orlando at SeaWorld also had a solid quarter, with total RevPar growth of more than 10% on a better mix of business. Group revenue production for the current and future periods in Orlando increased over 10% last year, and the hotel is pacing for better performance in 2026. Operating results in San Antonio were softer in 2025 on a lighter group event calendar and some displacement from our completed meeting space renovation. But 2026 should benefit from increased production and the renovation. As we shared with you on prior calls, performance last year in Washington, D.C. was less robust than initially anticipated and was impacted by government spending cuts, changes in policies, and the government shutdown. Similarly, our results in San Diego were hampered by softer transient demand and a less constructive backdrop for international travel. On the expense side, we were pleased with our operators' ability to drive efficiencies in response to continued cost pressures. We knew coming into the year that 2025 would be particularly tough on margins as contractual cost escalations at certain of our larger hotels were adding to general inflationary pressures across the portfolio. I am pleased to report that we made significant progress in managing costs and delivered comparable portfolio margin growth of 40 basis points during the year on total REVPAR growth of 3.5%. This was a much better cost management outcome than we expected at the start of the year. While some of the efficiency measures that were additive in 2025 will be harder to sustain as we move into this year, we will continue to work with our hotel teams to manage costs, increase productivity, and defend margins. As we look into 2026, we see some reasons to be optimistic about the year ahead. Onda's Miami Beach is starting off well, with impressive year-to-date occupancy above 80% at a mid-$500 rate. In addition, the resort has nearly 8,000 group room nights already on the books, representing more than half of our budgeted room nights for the year, which is very strong for a market with a shorter-term booking window. The property is building momentum, which will continue this year with the opening of Bazaar Meet and our membership beach club. We are seeing additional positive signs as market recovery continues in Northern California. Fundamentals in Violaia are more constructive, and there is the potential for industry-wide lift from special events, such as F1 in Miami, which we missed last year, America 250 celebrations, and the World Cup. At the same time, our focus portfolio will experience headwinds from softer transient demand in San Diego and continued uncertainty in D.C., two of our larger markets, which will offset some growth. That said, both hotels had better than anticipated transient demand in January and February, which, if current trends continue, could result in a better than anticipated year. While there are many encouraging signs, the industry and Sunstone have been disappointed by various headwinds over the past two years, making us more cautious. That said, we are excited about our prospects this year, and if costs remain controlled and some of these events produce more than our modest expectations, we could be positioned to see performance accelerate as the year progresses. The guidance that Aaron will share with you later attempts to balance these factors and reflect an outlook that we believe is reasonable and achievable based on how we see things today. As we move through 2026, we will continue to execute on the three components of our strategy, recycling capital, investing in our portfolio, and returning capital to shareholders. While the transaction market has been quiet the last couple years, we are clearly seeing some incremental activity, and we are looking for ways to thoughtfully demonstrate the value of our portfolio. In the meantime, we are focused on delivering profitability growth from operations and realizing the benefits of our investment projects. We expect these actions will support our capital return objectives in the coming year. And with that, I'll turn the call over to Robert to give some additional details on recent capital investment activity and our plans for 2026.

Thanks, Brian. 2025 was a busy year for us on the operations and investment front. We debuted Onda's Miami Beach in the second quarter and the fully renovated resort looks great and is gaining traction. We have been pleased with recent transient booking velocity and the progress we have made attracting high-quality group business. We will round out the resort this year with the addition of the Beast Club and the introduction of Bizarre Meat, the resort's signature dining destination. Performance in the initial weeks of 2026 has been encouraging with year-to-date REVPAR of nearly $475, and the resort is well-positioned to deliver earnings growth this year and into 2027. Earlier in 2025, we completed a rooms renovation at Wailea Beach Resort and are happy to see the demand backdrop turning a corner on the island. We have the opportunity for meaningful growth at the property as occupancy rebounds and we benefit from our recent investment. We are seeing good progress, with RevPAR index increasing 17 points sequentially into the fourth quarter as the market normalizes and the resort reestablishes its competitive positioning. In the fourth quarter, we completed a renovation of the meeting space in San Antonio, which complements the room renovation done just prior to our acquisition, and the hotel now looks great from top to bottom. In San Diego, we are putting the finishing touches on a renovation of the meeting space there as well, which should allow the hotel to maintain its leading position in this premier group event destination. We are completing this work in phases to minimize disruption, but we'll have a modest amount of earnings headwinds in the first quarter. The project remains on schedule and on budget. This year, we will also be performing some maintenance projects at our Renaissance Orlando, facade work, and a rooms refresh at Ocean's Edge Resort and Marina, as well as some smaller routine projects across the rest of the portfolio. As Brian alluded to earlier, we are seeing some incremental signs of life in the transaction market. While we are hopeful this will provide a more constructive backdrop to execute on our capital recycling strategy, we expect to remain disciplined in our approach and mindful of other capital allocation opportunities available to us. With that, I'll turn it over to Aaron. Please go ahead. Thanks, Robert.

As we noted at the top of the call, our earnings results for the fourth quarter came in ahead of expectations. A stronger leisure performance at our resorts added to modestly better performance across most other hotels in the portfolio. Rooms Rev Par grew an impressive 9.6% in the quarter, including a 540 basis point benefit from Onda's Miami Beach. In a continuation of the trends we saw earlier this year, growth in ancillary spend outpaced rooms and contributed to total REVPAR growth, including a 510 basis point benefit from ONDOGS. The stronger top line performance and ongoing cost controls contributed to full year earnings that were ahead of the midpoint of our guidance range, including adjusted EBITDA RE in the fourth quarter of $57 million and adjusted FFO of $0.20 per diluted share. We continue to benefit from a strong balance sheet, with net leverage of only 3.5 times 0.7 times, including our preferred equity. In early January, we drew the remaining $90 million balance from a previously arranged term loan and used a majority of the proceeds to repay our Series A notes at their scheduled maturity. Following this repayment, we have addressed all debt maturities through 2028. As of the end of the quarter and pro forma for the January payoff, we had over $200 million dollars of total cash and cash equivalents including our restricted together with full capacity available on our credit facility this equates to over 700 million dollars of total included in our press release this morning are the details of our outlook for 2026 as Brian noted earlier while we see reasons to be optimistic about the year ahead we remain cautious will fill in these initial months based on what we see today we expect that rooms rev park for all hotels in the portfolio will increase between 4% and 7% to a range of $234 to $241. This reflects the full-year benefit of Andaz Miami Beach, which is expected to contribute approximately 400 basis points of growth at the mid-year. For 2026, we are also introducing guidance for total RESPAR, which is expected to increase between 3.5% to 6.5%, and which would imply a range of $385 to $396, with a similar a 400 basis point benefit. We anticipate that our first quarter will be our strongest growth quarter of the year as the contribution from Andas and better performance in Maui will more than offset the challenging comp in D.C. from the inauguration and in New Orleans from the Super Bowl last This should result in first quarter REVPAR and total REVPAR growth being above the high ends of the full year ranges just discussed and then the subsequent quarters being between the lower end and the midpoint. This revenue growth is expected to translate into adjusted EBITDA in the range of $225 million to $250 million. Excluding one-time items and an asset sale, which together contributed approximately $10 million to our 2025 results, the midpoint of our 2026 EBITDA range reflects 5% growth in earnings over last year. Based on where we sit today, we expect our FFO per diluted share to range from $0.81 to $0.94. Adjusting for the same one-time items in the prior year, the midpoint of our FFO range reflects growth of 8% relative to 2025, as the benefit of our share repurchase activity adds to the growth in hotel earnings. In terms of the distribution of our earnings by quarter, we anticipate that the first quarter will represent approximately 25% of our full-year projections at the midpoint. This is a bit higher than our historical run rate, but reflects the added contribution from Ondaat's Miami Beach. As is typical for our portfolio, the second quarter is expected to be our largest contributor at approximately 30%, with the balance split more or less evenly across the- Moving to our return of capital. Since the start of 2025, up through the middle of this week, we have repurchased approximately $108 million of common stock at a blended price of $8.83 per share. In addition, we have also purchased $3.1 million of our preferred stock at a blended price of $20.46 per share, or an 18% discount to its liquidation value. This common and preferred stock repurchase activity has been accretive to both NAV and earnings per share. As we noted in our press release this morning, our Board of Directors has reauthorized our repurchase program back up to $500 million. And while we retain capacity and appetite for additional share repurchases, our 2026 outlook does not assume the benefit of additional common size. In addition to our share repurchases, our Board of Directors has also authorized a $0.09 per share common dividend for the first quarter and has also declared the routine distribution for our Series H and I preferred securities. Before we conclude our prepared remarks, I'll turn it back over to Brian for some additional thoughts.

Before we open the call to questions, I want to highlight our 2026 objectives. The management team and board are focused on realizing the value of our portfolio. Over the past few years, we have actively sold hotels at what have proven to be attractive valuations and redeployed proceeds into the most accretive option available at the time. While most of the proceeds went to repurchase common or preferred stock at a discount, we also acquired assets when our cost of capital became more competitive. We will continue this practice in 2026 while evaluating other potential transactions to realize and return the value of this portfolio to our shareholders. As I mentioned last quarter, the Board and management remain committed to maximizing value for shareholders and are open to any alternative that would reasonably be expected to result in value creation. with that we can now open the call to questions operator please go ahead in order to ask a question at this time simply press star followed by the number one on your key telephone keypad to withdraw your question press star one again we do ask you to limit yourself to one question and one follow-up and your first question comes from the line of cooper clark with walls fargo

Please go ahead.

Great. Thanks for taking the question. Curious if you could walk through some of the puts and takes as we think about the 1.5% midpoint of 26 REVPAR growth ex-ONDAS within the context of 2.1% growth last year and what should be a continued recovery in markets like Hawaii?

Sure. Morning, Cooper. When you look at the remainder of the portfolio ex-ONDAS, You're absolutely right. Maui is a market where we are seeing growth. We talked about it last year where we mentioned that for the hotel to get back to where it needs to be, the Kaanapali market needed to stabilize, which is something that we saw happening in kind of the late third quarter, fourth quarter of last year. and that continues to happen going forward we went from you know the high you know mid to high 90s occupancy index to at the end of the year over a hundred percent we should stabilize around 110 so that is absolutely moving in the right direction as I said earlier we're seeing continued transient demand as we recapture that index um and so so far the first two months of the year have been um have been a pleasant surprise to see that continue uh the the group business in maui is um the pace is down a little bit this year we do have this one piece of business that is on for a couple years and then off and it's off island this year but we are seeing a transient pace is up about 53 percent and that will help cover that shortfall um you know when we look at the rest of the portfolio uh you know continued strength in san francisco in wine country um you know other markets and and one that we highlighted on the call dc is is a market that we faced a lot of headwinds last year not only with the government shutdown at the end of the year but then also cutbacks and impacted a lot of the group business there are the amount the percentage where groups would actually actualize as compared to their blocks was down to historic averages and so while we anniversary that coming up shortly and so the year-over-year comp will get will get easier we do we are cautious and then we are also seeing in dc a pickup in transient business that we were not seeing in the middle part of last year and so like some of the the the government transient, we're starting to see that come back. Again, with what the impacts and the headwinds that we saw last year, we're approaching the D.C. market as cautious. And if we continue to see these trends, we would expect that we could be in a position where that midpoint would move up a little bit. But D.C. is one of the markets right now that we're keeping an eye on and is, you know, pulling that average back.

Okay, great. That's helpful. And then could you talk through the expense growth implied in guide, both including and excluding the Yandas, and what are some of the key drivers there?

Sure. I mean, I think roughly we're, on expenses, we're, you know, right around 3% total. You know, labor over the last couple years has been, you know, sort of at four-ish range. It's coming down a little bit this year into the threes. Energy prices are up a bit this year, and then there are a couple of the larger fixed expenses that, you know, will unfold as the year goes on. Our insurance renews in June, and that's something that we had good renewals with last year. There were not any major cat hits in our portfolio, so that should be helpful. But we go into the year, and we expect there to be some growth in those rates. And so if we get a year like last year, that could be a benefit. And then property taxes have been down over the last few years. we're kind of assuming that those are going to normalize. And then on the ONDAH side, you know, overall, I don't think it's going to make, you know, a material difference in that overall percentage.

Yeah. Hey, Cooper, it's Erin. Just to maybe add to what Brian was saying. So, you know, as we move through last year, as we noted in the prepared remarks, you know, we were, much more successful in managing costs relative to where we thought that they would be at the beginning of the year and so we ended up with um you know margin expansion to the tune of about 40 basis points on rev par growth of about three and a half percent um you know from a cost growth perspective for the comparable portfolio so the 13 hotels um x on does um you know expense growth is in that kind of that 30-ish percent or so area um what will feel a bit differently this year is just that as you noted uh the blended rev par growth rate for that comp set is for that set of hotels is a bit is a bit lower so we'll expect some some margin headwinds for the comp portfolio in 26. um if we add in on does um things obviously do get a little bit noisier given that it was you know only only open up uh part of part of the year last year will be open um all of the year this year um we'd look at probably a total overall expense growth rate of around five percent or so which starts to then align with where the midpoint of the REVPAR range is for the total portfolio. So a good chance of, you know, margin, being able to defend margins as we move from 25 to 26 for the total portfolio. And we'll be hopeful that we have an outcome like we had last year, whereas the year went on, we were a bit more successful on the cost side.

Great. Thank you. Appreciate the color.

Your next question comes from the line of Dwayne Fenegworth with Evercore ISI. Please go ahead.

Hey, thank you. Good morning. You know, a call earlier today talked about the expectation for being a net seller of assets. I wonder if that's your expectation as well, and if you have any update on the marketing process around the wine country assets.

Sure. Good morning, Dwayne. You know, in the fourth quarter, we started to see a pickup in transactions, either closed transactions or announced transactions. And I think as we have more clarity into this year and debt markets continue to be strong, I think that we'll continue to see an uptick in transactions. I think thematically it will be similar. I think that there is a lot of demand for luxury assets. I think there's a lot of demand for cash flowing out. And so those obviously can support the highest debt balance. And, you know, we're still seeing, you know, for midsize transactions, enough equity out there as you start to get to a larger assets the bitter pool is still you know thinner I do think we're seeing that improve and so you know our view is is really no no different than what we were doing last year and when we sold New Orleans at a very attractive cap rate and and then redeployed those proceeds into our common stock um you know we're going to look to realize private market values for we can where we can um you know for those you know for hotels and resorts that we have where we see the biggest gap between the public and private market values um and basically you know we'll continue to try to unlock value where we can and then go and deploy that in the most a creative manner you know we we don't comment on transactions prior to announcement but you know we have been clear and I think our actions have been very clear is that you know our major pillar of our strategy is recycling assets so there's always going to be a point in time where we'll have one or more assets that in some form of marketing or discussion with potential buyers and we don't think that this this year will be any different the question then comes is what is that most secretive allocation of that redeployment of that capital and that depends on a lot of factors it depends on where the stock is you know where our cost of capital is where stocks trading what you You know, and on a risk-adjusted basis, what is, you know, does it make more sense to repurchase stock or prefer? Does it make more sense to acquire an asset? And over the last few years, I think we've demonstrated that, you know, we've been able to, you know, pivot between those sometimes in shorter time periods. but we've been able to effectively deploy that capital, whether it be through the acquisitions of Antonio or buying back stock.

Your next question comes from the line of Smead's Rose with Citi. Please go ahead.

Hi. Thank you. I just had another question about your guidance, just in terms of total RevPAR being a little bit lower than your RevPAR outlook. Usually they're sort of at least in line or maybe total REVPAR would be a little bit higher. So I'm just wondering if you could just speak to that for a moment.

Sure, Smeets. Good morning or good afternoon. You know, having a focused portfolio with some larger assets, D.C. being one of them I spoke about, and then san diego also that had a you know we finish up a pretty substantial meeting space renovation or we finish a portion of it and we'll finish it the rest of it in the quarter that's impacted on those two big hotels on the group side that's going to impact some of our ancillary spend you know getting some of that back in in on does and and quite honestly i would expect a increase in our total rev par if we continue to see the you know the transient trends in DC somewhat but more importantly the transient trends we're seeing in in Wailea with the additional spend that comes from the transient rooms you know, that will help buoy our total rev par. But right now it's more a function of some of the, you know, limited displacement in the first quarter in San Diego and then a slower group pace in D.C. It's more that makeshift anything.

Okay. And then I was just wondering if you could talk a little bit more. you mentioned your opening remarks and transient transient weakness in san diego is that specifically to your hotel are you seeing that kind of market wide and maybe just if you could just speak to kind of just the broader market in san diego what you what you're seeing just you know maybe on the group side what's happening with the convention calendar there yeah um you know in san diego we saw some we saw some ups and downs last year some of the government related there's a lot of defense contractors.

So we saw it slow down last year. We've seen that pick up. Towards the end of the year, the leisure time period, whether it's some international travel not coming in, some Canadian markets come to that area. What we're seeing now, the first two months have been pretty promising in San Diego, D.C. too, we mentioned, and so I think we're starting to see government transient come back, and part of that might just be certain segments, and what San Diego pulls from is the defense contractors, and so that can be a positive for the market. And so we'll see over the next few months but we are um we are seeing positive signs uh as as the year goes on right now in san diego on the transient side great thank you thank you your next question comes from the line of michael belisario with baird please go ahead thanks good morning guys uh first one for aaron just on this ohana preferred please remind us like what are the mechanisms there for you to take that out?

When and by how much does that coupon ratchets? And then just on capital allocation, is this a potential use of capital if you were successful with dispositions?

Yeah, Mike, thanks for the question. So the OHANA is referring to as our series you preferred, which is issued in connection with our acquisition of montage. That one does have a mechanism where the yield there is tied to a greater of the hotel yield or or a fixed rate, which is currently now 6.5%. So overall, it's even at $66 million in size, so it's manageable. We kind of view our preferred, I would say, as a total bucket, so they all end at $280 million at a pretty attractive blended price of just around 5% or so. But as you saw in our results for the quarter, and we did take the opportunity to look at, we'll continue to do that as a way to kind of just manage the overall preferred dividend exposure of the mechanism on the Series G, which does step up. So I think as we think about this year, I wouldn't expect that our preferred dividend would increase in 26 relative to where it was in 25, even with the escalation on the Series G, just given that we'll manage the overall outstanding balance. So we'll take another look at it as we move through the year. I mean, certainly, as we noted, we have $200 million of cash that we could readily put to use to address that Series G. And the function there is it's callable.

We can take out pieces of that.

That's helpful. And then just two little modeling follow-ups. Maybe I missed them. What's your EBITDA expectation for Miami this year? And then what are some of those one-time items that you mentioned that's impacting the year-over-year growth rate? I think it's like $7 million net of the New Orleans sales, if I'm that's right.

Start with, so in Miami, our expectation is consistent with where we were before. we think it's you know low to mid teens EBITDA this year and you know are what we've seen you know starting in kind of really in December and you know December we hit close to 70% occupancy the comp set was right around 70 our rate granted was lower than the comp then our our luxury set we were in the in the 500s they were in the 900 plus um so we have plenty of room to grow we're building a very good base our group room nights have doubled quarter over quarter we've got a lot of good momentum going into f1 um and and fifa later in the summer which is a great time for that piece of business to be there um so our expectations are consistent with where we were last quarter with miami and you know if we have a strong summer i my expectation is that we are are at the you know upper end of that and then mike just on the second part of your question as it relates to the one-time items that we called out for 25. um it's a total of around 10 million dollars or so um and the

components would be about $3 million contribution from the Hilton New Orleans, which we sold last year so it won't repeat this year, a cost recovery that we had in connection with one of our settlement at one of our properties, and then just some incremental interest income that we generated last year given where deposit rates were and where our cash balance was at the time that we wouldn't expect to repeat in 26.

Got it. Understood. Thank you.

Your next question comes from the line of chris waranka with deutsche bank please go ahead hey guys good good morning thanks for taking the questions um you know so understood everything you said ryan about um you know any potential transactions in um in wine country my question on it is kind of do you think you know any sale process is having any kind of impact on operations right now it looks like in 25 you had um pretty good results of the montage of four seasons, maybe a little bit less so. So, is there anything to draw from that and what's kind of embedded in your guidance as to how those perform this year?

Yeah.

I mean, both resorts were on pace to have very good years. As you probably remember, there was a fire close to four seasons that impacted the third quarter last year and a little bit trickled into the fourth quarter. So adjusting for that, that was probably about a million dollars of EBITDA. So adjusting for that, one, your question, not commenting on a sale process, but typically for a managed hotel, the management contracts are long-term and stay in place, so that doesn't really impact the day-to-day operations of the hotel. Four Seasons has fantastic group pace for this year. I think group pace is up about 22 percent, and so we have really great expectations for that. Again, the San Francisco market has been doing better, which then leads to more weekend trips or extensions of convention trips out to to wine country the high-end luxury traveler continues to to be very strong and spend quite a bit and then on the other side of the valley um you know we have you know we've had great success with group at montage group is is not as strong as four seasons this year but they're moving from a much larger base and our transient demand over at montage has been phenomenal so I think transient pace is up 25% year-over-year so I just like San Francisco a lot to look forward to in in in the Bay Area and wine country um and so they're you know again with the you know with the impact of the fire last year was sort of a you know the unique impact to four seasons um both hotels should have very good years okay uh appreciate all that color brian uh maybe maybe to kind of keep keep it in the san francisco area at the Hyatt I know there was probably a Super Bowl benefit back in January you know this

this hotel is running I think single digit margin 24-25 is there any expectation this year that whether it's you know again outside of Super Bowl but with AI and feedback to office and other other group things that are happening in San Francisco is there a hope and expectation on your part that that hotel you know starts meaningfully improving margins yeah I mean our our location in that market has become the primary location and so our basic you know with the with the office that surrounds it the inflows of new

tenants AI based but really the center of San Francisco has moved into the Embarcadero financial area and so we have you know we're benefiting from a recently renovated hotel that while it still has a quite a ways to go to get back to where we were you know we finished 25 you know 78% occupancy which is you know 10 points of occupancy down from where we were you know we have a $300 rate there's still quite a bit of room in in the rate and so you know we have we have great pace this year transient pace continues to grow you know the market had a great Super Bowl World Cup is you know we're just starting to see bookings for that you know and that's something that will will help compress the summer as we get into it um so so look i i think that that given the the the continuing increase in health of the san francisco market our location our product our meeting space we still have a very good run ahead of us and and are very you know

are looking forward to the next several years in this market okay very good thanks thanks guys appreciate it your next question comes from the line of daniel politzer with jp morgan please go ahead hi this is michael hirsch on for dan today uh congrats on a nice quarter um for my question you noted in the press release that the operating environment could be impacted both positively or negatively by events outside of your control could you speak to some of those events or macro environment that you contemplated for this year when putting together your guidance yeah I look I mean if you look

over the last few years starting the each of the years expectations were higher and then there were various headwinds that popped up and went away and came back throughout that time frame. I think D.C. is a good example of, you know, what are our expectations in D.C.? Like I said, they're cautious this year. You know, there was, you know, we did not expect the impact to government business, government shutdown, those things, you know, for a large 800-room hotel in our portfolio. those were things that were not fully you know we weren't expecting last year and impacted operations could elements of that happen again sure you know if we look at 26 in DC it's you know it's just starting off it's a tough comp you haven't yet inauguration the year before we had storms in January's you have midterms later in the year which means Congress won't be in session a lot as much so those are things that keep us cautious especially from the framework of the prior year's experience but then on the other side you look at the positives there you've got you know you've got the america 250 celebrations you have a indie race that was just scheduled for august that's happening um our transient pickup for january and february has been stronger than we thought you know the negotiated transient demand for the next six months is up 11 percent you know part of that is still the benefit we're seeing from the conversion to Westin some of it is this business that's coming back to the market you know when you look at our transient demand for January and February and you put it against the backdrop of you know we had weather issues this january we didn't have an inauguration this year but yet our transient demand is greater than what we had last year that points to strength and so that makes us very optimistic um the question is is you know we probably need to see a few more months of this before our you know before we can you know have our outlook reflect that for the rest of the year thank you and then for my follow-up more modeling related on your capex guidance for 95 to 115 million could you speak to the timing and allocation of those dollars between the different projects yeah let me let me start with that and then eric can go through some more specifics um you know we are working through and finishing the meeting space in san diego keep in mind that it's a 1200 room hotel it's a lot of meeting space so there's 25 million of that number right there a portion of that does come from the ff and you reserve and so that's that's a big piece of it there's some you know there's some additional you know bills that are being paid and finish up work from uh on daws and then you know throughout the portfolio we have various other projects some hvac projects some roofing projects some elevator modernizations those are probably those are spread out more throughout the year the biggest chunk you know single chunk will come from the san diego piece which you know will be in first and second quarter as it gets paid out there in Q1.

Yeah, and Brian basically got the punchline there. The largest projects will be front-loaded, so I'd expect about a third of it happens in Q1, but then Q2 will be the second largest contributor and then the rest will trickle into the back half, but work largely performed in Q1 and then the payments in Q1 and Q2.

Thank you.

There are no further questions at this time. I'll now turn the call over to Brian Gileo for closing remarks.

Thank you, everyone, for your time and interest in the company. We look forward to seeing many of you at upcoming conferences and property tours that we have in our portfolio. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.