Sunstone Hotel Investors Agrees to Sell Hyatt Regency San Francisco to Blackstone for $279 Million

Sunstone Hotel Investors (NYSE: SHO) has entered into a definitive agreement to sell the 821-room Hyatt Regency San Francisco to funds affiliated with Blackstone for a gross sale price of $279 million, or approximately $340,000 per key, the lodging real estate investment trust announced June 23.

The transaction values the hotel at a 21.4x multiple on Hotel Adjusted EBITDAre and a 3.5% cap rate on Hotel Net Operating Income for the trailing twelve-month period ending May 31, 2026. Sunstone expects the deal to close in late July or early August.

Deal Terms and Brokerage

Eastdil Secured marketed the Hyatt Regency San Francisco and served as exclusive broker for the sale. J.P. Morgan Securities LLC continues to serve as financial advisor to Sunstone.

According to the company's financial disclosures, the hotel generated trailing twelve-month total revenues of approximately $104.5 million through May 31, 2026. Hotel Adjusted EBITDAre for the same period was approximately $13.0 million, while Hotel Net Operating Income — calculated after a furniture, fixtures and equipment reserve — came in at approximately $9.9 million.

The Hyatt Regency San Francisco is located at 5 Embarcadero Center in San Francisco. The property originally opened in 1973.

Sunstone's Capital Recycling Strategy

Sunstone characterized the Hyatt Regency San Francisco as a "lower yielding asset" and framed the disposition as consistent with its broader strategy of actively managing its portfolio to capture private market valuations and redeploy proceeds into more accretive alternatives.

In anticipation of the closing, Sunstone pre-deployed nearly $70 million of expected sale proceeds into discounted repurchases of its common and preferred stock during 2026. The company repurchased 4.4 million shares of common stock at an average price of $9.24 per share, for an aggregate repurchase amount before expenses of $40.5 million. It also repurchased 1.4 million combined shares of Series H and Series I Cumulative Redeemable Preferred stock at an average price of $20.37 per share, for an aggregate repurchase amount before expenses of $27.8 million.

Bryan Giglia, Chief Executive Officer of Sunstone, said the company was "pleased to announce the disposition of Hyatt Regency San Francisco and our ability to realize an attractive private market value for a lower yielding asset."

"The sale is consistent with our strategy of more actively managing the portfolio to capitalize on higher private market values and recycle the proceeds into more accretive options on a risk-adjusted basis," Giglia said. "While we have already generated value by deploying a portion of the proceeds, the remaining liquidity increases our flexibility and facilitates our ability to reinvest in a manner that will provide our investors with superior returns and greater per-share NAV growth."

Giglia added that the company's board and management "remain committed to maximizing value for shareholders and pursuing any alternative that would reasonably be expected to result in value creation."

Use of Remaining Proceeds

Sunstone said it is evaluating additional opportunities to deploy the remaining proceeds from the sale in a manner that will provide shareholders with the best risk-adjusted return. The company said it will provide additional details regarding the disposition, including the expected impact on its full-year outlook, as part of its upcoming quarterly earnings release in early August.

The preferred stock repurchases were executed at an average price of $20.37 per share. Management described the buyback activity as accretive relative to net asset value and liquidation value.

Sunstone Hotel Investors is a lodging REIT whose strategy centers on the acquisition, active ownership, and disposition of well-located hotel and resort real estate. The company trades on the New York Stock Exchange under the ticker SHO.