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What changed in Sunstone Hotel Investors, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Sunstone Hotel Investors, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+455 added−505 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-23)

Top changes in Sunstone Hotel Investors, Inc.'s 2024 10-K

455 paragraphs added · 505 removed · 379 edited across 2 sections

Item 1. Business

Business — how the company describes what it does

154 edited+9 added−22 removed233 unchanged
Biggest changeAn increase in market interest rates, or a decrease in our distributions to stockholders, may lead prospective purchasers of our stock to demand a higher annual yield, which could reduce the market price of our equity securities. ​ In addition, other factors that could affect the market price of our equity securities include the following: ● the impact of a pandemic on our hotel operations and future earnings; ● inflation causing our expenses to increase at higher rates than our revenue; ● a U.S. recession impacting the market for common equity generally ; ● actual or anticipated variations in our quarterly or annual results of operations; ● changes in market valuations or investment return requirements of companies in the hotel or real estate industries; ● changes in expectations of our future financial performance, changes in our estimates by securities analysts or failures to achieve those expectations or estimates; ● the trading volumes of our stock; ● additional issuances or repurchases of our common stock or other securities, including the issuance or repurchase of our preferred stock; ● the addition or departure of board members or senior management; ● disputes with any of our lenders or managers or franchisors; and ● announcements by us, our competitors or other industry participants of acquisitions, investments or strategic alliances. ​ Distributions to our common stockholders may vary. ​ We reinstated our common stock quarterly dividend in the third quarter of 2022, after its suspension in 2020 to preserve liquidity during the COVID-19 pandemic.
Biggest changeAn increase in market interest rates, or a decrease in our distributions to stockholders, may lead prospective purchasers of our stock to demand a higher annual yield, which could reduce the market price of our equity securities. ​ In addition, other factors that could affect the market price of our equity securities include the following: ● periods of economic difficulties, including those caused by pandemics, which negatively impact our hotel operations and future earnings; ● inflation causing our expenses to increase at higher rates than our revenue; ● a U.S. recession impacting the market for common equity generally ; ● actual or anticipated variations in our quarterly or annual results of operations; ● changes in market valuations or investment return requirements of companies in the hotel or real estate industries; ● changes in expectations of our future financial performance, changes in our estimates by securities analysts, or failures to achieve those expectations or estimates; ● the trading volumes of our stock; ● additional issuances or repurchases of our common stock or other securities, including the issuance or repurchase of our preferred stock; ● the addition or departure of board members or senior management; ● disputes with any of our lenders, managers, or franchisors; and ● announcements by us, our competitors, or other industry participants of acquisitions, investments, or strategic alliances. ​ Distributions to our common stockholders may vary. ​ 28 Table of Contents During the past three years, we paid quarterly cash dividends on our common stock as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2023 ​ 2024 ​ 2025 January $ 0.00 ​ $ 0.05 ​ $ 0.13 ​ $ 0.09 April $ 0.00 ​ $ 0.05 ​ $ 0.07 ​ ​ ​ July $ 0.00 ​ $ 0.05 ​ $ 0.09 ​ ​ ​ October $ 0.05 ​ $ 0.07 ​ $ 0.09 ​ ​ ​ ​ We reinstated our common stock quarterly dividend in the third quarter of 2022, after its suspension in 2020 to preserve liquidity during the COVID-19 pandemic.
The following is a summary of the material risks to our business, all of which are described in more detail below: ​ 10 Table of Contents Risks Related to Our Business and Industry: ● we own upper upscale and luxury hotels located in urban and resort destinations in an industry that is highly competitive; ● events beyond our control, including economic slowdowns or recessions, pandemics, natural disasters, civil unrest and terrorism may harm the operating performance of the hotel industry generally and the performance of our hotels; ● inflation may adversely affect our financial condition and results of operations; ● system security risks, data protection breaches, cyber-attacks and systems integration issues could disrupt the information technology network and systems used by us, our suppliers, our third-party managers or our franchisors; ● a significant portion of our hotels are geographically concentrated and, accordingly, we could be disproportionately harmed by economic conditions, competition, new hotel supply, real and personal property tax rates, or natural disasters in these areas of the country; ● we face possible risks associated with the physical and transitional effects of climate change; ● uninsured or underinsured losses could harm our financial condition; ● the operating results of some of our hotels are significantly reliant upon group and transient business generated by large corporate customers, and the loss of such customers for any reason could harm our operating results; ● the increased use of virtual meetings and other similar technologies could lessen the need for business-related travel, and, therefore, demand for rooms in our hotels may be adversely affected; ● our hotels require ongoing capital investment and we may incur significant capital expenditures in connection with acquisitions, repositionings and other improvements, some of which are mandated by applicable laws or regulations or agreements with third parties, and the costs of such renovations, repositionings or improvements may exceed our expectations or cause other problems; ● delays in the acquisition, renovation or repositioning of hotel properties may have adverse effects on our results of operations and returns to our stockholders; ● accounting for the acquisition of a hotel property or other entity involves assumptions and estimations to determine fair value that could differ materially from the actual results achieved in future periods; ● volatility in the debt and equity markets may adversely affect our ability to acquire, renovate, refinance or sell our hotels; ● we may pursue joint venture investments that could be adversely affected by our lack of sole decision-making authority, our reliance on a co-venturer’s financial condition and disputes between us and our co-venturer; ● we may be subject to unknown or contingent liabilities related to recently sold or acquired hotels, as well as hotels we may sell or acquire in the future; ● we may seek to acquire a portfolio of hotels or a company, which could present more risks to our business and financial results than the acquisition of a single hotel; ● the sale of a hotel or portfolio of hotels is typically subject to contingencies, risks and uncertainties, any of which may cause us to be unsuccessful in completing the disposition; ● the illiquidity of real estate investments and the lack of alternative uses of hotel properties could significantly limit our ability to respond to adverse changes in the performance of our hotels; ● we may issue or invest in hotel loans, including subordinated or mezzanine loans, which could involve greater risks of loss than senior loans secured by income-producing real properties; ● if we make or invest in mortgage loans with the intent of gaining ownership of the hotel secured by or pledged to the loan, our ability to perfect an ownership interest in the hotel is subject to the sponsor’s willingness to forfeit the property in lieu of the debt; ● one of our hotels is subject to a ground lease with an unaffiliated party, the termination of which by the lessor for any reason, including due to our default on the lease, could cause us to lose the ability to operate the hotel altogether and may adversely affect our results of operations; ● because we are a REIT, we depend on third parties to operate our hotels; ● we are subject to risks associated with our operators’ employment of hotel personnel; ● most of our hotels operate under a brand owned by Marriott, Hilton, Hyatt, Four Seasons or Montage.
The following is a summary of the material risks to our business, all of which are described in more detail below: ​ Risks Related to Our Business and Industry: ● we own upper upscale and luxury hotels located in urban and resort destinations in an industry that is highly competitive; ● events beyond our control, including economic slowdowns or recessions, pandemics, natural disasters, civil unrest and terrorism may harm the operating performance of the hotel industry generally and the performance of our hotels; ● inflation may adversely affect our financial condition and results of operations; ● system security risks, data protection breaches, cyber-attacks and systems integration issues could disrupt the information technology network and systems used by us, our suppliers, our third-party managers or our franchisors; ● a significant portion of our hotels are geographically concentrated and, accordingly, we could be disproportionately harmed by economic conditions, competition, new hotel supply, real and personal property tax rates, or natural disasters in these areas of the country; ● we face possible risks associated with the physical and transitional effects of climate change; ● uninsured or underinsured losses could harm our financial condition; ● the operating results of some of our hotels are significantly reliant upon group and transient business generated by large corporate customers, and the loss of such customers for any reason could harm our operating results; ● the increased use of virtual meetings and other similar technologies could lessen the need for business-related travel, and, therefore, demand for rooms in our hotels may be adversely affected; ● our hotels require ongoing capital investment and we may incur significant capital expenditures in connection with acquisitions, repositionings and other improvements, some of which are mandated by applicable laws or regulations or agreements with third parties, and the costs of such renovations, repositionings or improvements may exceed our expectations or cause other problems; ● delays in the acquisition, renovation or repositioning of hotel properties may have adverse effects on our results of operations and returns to our stockholders; 10 Table of Contents ● accounting for the acquisition of a hotel property or other entity involves assumptions and estimations to determine fair value that could differ materially from the actual results achieved in future periods; ● volatility in the debt and equity markets may adversely affect our ability to acquire, renovate, refinance or sell our hotels; ● we may pursue joint venture investments that could be adversely affected by our lack of sole decision-making authority, our reliance on a co-venturer’s financial condition and disputes between us and our co-venturer; ● we may be subject to unknown or contingent liabilities related to recently sold or acquired hotels, as well as hotels we may sell or acquire in the future; ● we may seek to acquire a portfolio of hotels or a company, which could present more risks to our business and financial results than the acquisition of a single hotel; ● the sale of a hotel or portfolio of hotels is typically subject to contingencies, risks and uncertainties, any of which may cause us to be unsuccessful in completing the disposition; ● the illiquidity of real estate investments and the lack of alternative uses of hotel properties could significantly limit our ability to respond to adverse changes in the performance of our hotels; ● we may issue or invest in hotel loans, including subordinated or mezzanine loans, which could involve greater risks of loss than senior loans secured by income-producing real properties; ● if we make or invest in mortgage loans with the intent of gaining ownership of the hotel secured by or pledged to the loan, our ability to perfect an ownership interest in the hotel is subject to the sponsor’s willingness to forfeit the property in lieu of the debt; ● one of our hotels is subject to a ground lease with an unaffiliated party, the termination of which by the lessor for any reason, including due to our default on the lease, could cause us to lose the ability to operate the hotel altogether and may adversely affect our results of operations; ● because we are a REIT, we depend on third parties to operate our hotels; ● we are subject to risks associated with our operators’ employment of hotel personnel; ● most of our hotels operate under a brand owned by Marriott, Hyatt, Hilton, Four Seasons or Montage.
We rely on our hotel operators to adjust room rates and pricing for hotel services to reflect the effects of inflation. However, previously contracted rates, competitive pressures or other factors may limit the ability of our operators to respond to inflation.
We rely on our hotel operators to adjust room rates and pricing for hotel services to reflect the effects of inflation. However, previously contracted rates, competitive pressures or other factors may limit the ability of our operators to respond to inflation.
In addition to the systems operated by our third-party managers and franchisors, we have our own corporate technologies and systems to support our corporate business. ​ Certain of our third-party managers and their service providers have been subject to, and previously publicly released statements disclosing, cyber-attacks and/or unauthorized access to their guest reservation, point-of-sale systems and other sensitive databases, some of which have or may have impacted our hotels and guests who have used our hotels’ services or amenities.
In addition to the systems operated by our third-party managers and franchisors, we have our own technologies and systems to support our corporate business. ​ Certain of our third-party managers and their service providers have been subject to, and previously publicly released statements disclosing, cyber-attacks and/or unauthorized access to their guest reservation, point-of-sale systems and other sensitive databases, some of which have or may have impacted our hotels and guests who have used our hotels’ services or amenities.
Should the IRS disallow our future use of cash/common stock dividends, the distribution would not qualify for purposes of meeting our distribution requirements, and we would need to make additional all cash distributions to satisfy the distribution requirement through the use of the deficiency dividend procedures outlined in the Code. ​ Shares of our common stock that are or become available for sale could affect the stock price. ​ We have in the past, and may in the future, issue additional shares of common stock to raise the capital necessary to finance hotel acquisitions, fund capital expenditures, redeem our preferred stock, repay indebtedness or for other corporate purposes.
Should the IRS disallow our future use of cash/common stock dividends, the distribution would not qualify for purposes of meeting our distribution requirements, and we would need to make additional all cash distributions to satisfy the distribution requirement through the use of the deficiency dividend procedures outlined in the Code. ​ Shares of our common stock that are or become available for sale could affect the stock price. ​ We have in the past, and may in the future, issue additional shares of common stock to raise capital to finance hotel acquisitions, fund capital expenditures, redeem our preferred stock, repay indebtedness or for other corporate purposes.
As our board of directors recognizes the importance of an effective corporate responsibility strategy on our operations and returns, the board of directors has assigned the board’s Nominating and Corporate Governance Committee with overseeing the strategy, policies and implementation of our ESG program. ​ As an owner of real estate, we are subject to the risks associated with the physical effects of climate change, which can include more frequent or severe storms, hurricanes, flooding, droughts and wildfires, any of which could have a material adverse effect on our hotels.
As our board of directors recognizes the importance of an effective corporate responsibility strategy on our operations and returns, the board of directors has assigned the board’s Nominating and Corporate Governance Committee with overseeing the strategy, policies and implementation of our Corporate Responsibility program. ​ As an owner of real estate, we are subject to the risks associated with the physical effects of climate change, which can include more frequent or severe storms, hurricanes, flooding, droughts and wildfires, any of which could have a material adverse effect on our hotels.
Adverse developments in these locales could harm our revenue or increase our operating expenses. ​ We face possible risks associated with the physical and transitional effects of climate change. ​ We are subject to the risks associated with the physical effects of climate change, which can include more frequent or severe storms, hurricanes, flooding, extreme temperatures, droughts and wildfires, any of which could have a material adverse effect on our hotels, operating results and cash flows.
Adverse developments in these locales could harm our revenue or increase our operating expenses. ​ We face possible risks associated with the physical and transitional effects of climate change. ​ We are subject to the risks associated with the physical effects of climate change, which can include more frequent or severe storms, hurricanes, flooding, tornados, extreme temperatures, droughts and wildfires, any of which could have a material adverse effect on our hotels, operating results and cash flows.
If any of the foregoing occurs at franchised hotels, our relationships with the franchisors may be damaged, and we may be in breach of one or more of our franchise or management agreements. ​ We are subject to risks associated with our operator’s employment of hotel personnel, which could increase our expenses or expose us to additional liabilities. ​ Our third-party managers are responsible for hiring and maintaining the labor force at each of our hotels.
If any of the foregoing occurs at franchised hotels, our relationships with the franchisors may be damaged, and we may be in breach of one or more of our franchise agreements. ​ We are subject to risks associated with our operator’s employment of hotel personnel, which could increase our expenses or expose us to additional liabilities. ​ Our third-party managers are responsible for hiring and maintaining the labor force at each of our hotels.
We may have to restore the premises if a material casualty, such as a fire or an act of nature, occurs and the cost thereof may exceed available insurance proceeds. ​ Because we are a REIT, we depend on third parties to operate our hotels, which could harm our results of operations. ​ In order to qualify as a REIT, we cannot directly operate our hotels.
We may have to restore the premises if a material casualty, such as a fire or an act of nature, occurs and the cost thereof may exceed available insurance proceeds. ​ Because we are a REIT, we depend on third parties to operate our hotels, which could harm our results of operations. ​ In order to qualify as a REIT, we cannot directly or indirectly operate our hotels.
In addition, the management companies may operate other hotels that may compete with our hotels or divert attention away from the management of our hotels. ​ While our management agreements typically provide for limited contractual penalties in the event that we terminate the applicable management agreement upon an event of default, such terminations could result in significant disruptions at the affected hotels.
In addition, the management companies may operate other hotels that may compete with our hotels or divert attention away from the management of our hotels. ​ While our management agreements typically provide for contractual penalties in the event that we terminate the applicable management agreement upon an event of default, such terminations could result in significant disruptions at the affected hotels.
Additionally, we have a cyber insurance policy to cover breaches of our corporate infrastructure and systems and to provide supplemental coverage above the coverage carried by our third-party managers and franchisors. We cannot guarantee that such coverage will continue to be available at reasonable coverage levels, at reasonable rates or at reasonable deductible levels.
Additionally, we have a cyber insurance policy to cover breaches of our corporate infrastructure and systems and to provide supplemental coverage above that carried by our third-party managers and franchisors. We cannot guarantee that such coverage will continue to be available at reasonable coverage levels, at reasonable rates or at reasonable deductible levels.
Cybersecurity ​ Cybersecurity Risk Management and Strategy ​ Due to our structure as a REIT, the cybersecurity program, processes and strategy described in this section are limited to the corporate systems, information and service providers belonging to or supporting the REIT. In order to maintain REIT status, the Company does not operate or manage its hotels.
Cybersecurity ​ Cybersecurity Risk Management and Strategy ​ Due to our structure as a REIT, the cybersecurity program, processes, and strategy described in this section are limited to the corporate systems, service providers, and information services belonging to or supporting the REIT. In order to maintain REIT status, the Company does not operate or manage its hotels.
To the extent that such technologies, or new technologies, play an increased role in business interactions and the need for business-related travel decreases, demand for hotel rooms may decrease and our hotels could be adversely affected. ​ Our hotels require ongoing capital investment and we may incur significant capital expenditures in connection with acquisitions, repositionings and other improvements, some of which are mandated by applicable laws or regulations or agreements with third parties, and the costs of such renovations, repositionings or improvements may exceed our expectations or cause other problems. ​ In addition to capital expenditures required by our management, franchise and loan agreements, from time to time we will need to make capital expenditures to comply with applicable laws and regulations, to remain competitive with other hotels and to maintain the economic value of our hotels.
To the extent that such technologies, or new technologies, play an increased role in business interactions and the need for business-related travel decreases, demand for hotel rooms may decrease and our hotels could be adversely affected. ​ Our hotels require ongoing capital investment and we may incur significant capital expenditures in connection with acquisitions, repositionings, and other improvements, some of which are mandated by applicable laws or regulations or agreements with third parties, and the costs of such renovations, repositionings, or improvements may exceed our expectations or cause other problems. ​ In addition to capital expenditures required by our management and franchise agreements, from time to time we need to make capital expenditures to comply with applicable laws and regulations, to remain competitive with other hotels and to maintain the economic value of our hotels.
Similar factors could also adversely affect the ability of others to obtain capital and therefore could make it more difficult for us to sell hotel assets. ​ We may pursue joint venture investments that could be adversely affected by our lack of sole decision-making authority, our reliance on a co-venturer’s financial condition and disputes between us and our co-venturer. ​ We have co-invested, and may co-invest in the future, with third parties through partnerships, joint ventures or other entities, acquiring noncontrolling interests in or sharing responsibility for managing the affairs of a property, partnership, joint venture or other entity.
Similar factors could also adversely affect the ability of others to obtain capital and therefore could make it more difficult for us to sell hotel assets. ​ We may pursue joint venture investments that could be adversely affected by our lack of sole decision-making authority, our reliance on a co-venturer’s financial condition and disputes between us and our co-venturer. ​ We may co-invest in the future with third parties through partnerships, joint ventures or other entities, acquiring noncontrolling interests in or sharing responsibility for managing the affairs of a property, partnership, joint venture or other entity.
The costs to us to eliminate or alleviate cyber or other security problems could be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential business at our hotels.
The costs for us to eliminate or alleviate cyber or other security problems could be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential business at our hotels.
If we were to terminate a lease, we would then be required to find another lessee to lease the hotel or enter into a new lease with the TRS Lessee or its subsidiaries because we cannot operate hotel properties directly and remain qualified as a REIT.
If we were to terminate a lease, we would then be required to find another lessee to lease the hotel or enter into a new lease with the TRS Lessee or its subsidiaries because we cannot operate hotel properties directly or indirectly and remain qualified as a REIT.
Should any of these brands experience a negative event, or receive negative publicity, our operating results may be harmed; ● our franchisors and brand managers may adopt new policies or change existing policies, which could result in increased costs that could negatively impact our hotels; ● future adverse litigation judgments or settlements resulting from legal proceedings could have an adverse effect on our financial condition; ● claims by persons regarding our properties could affect the attractiveness of our hotels or cause us to incur additional expenses; ● the hotel business is seasonal and seasonal variations in business volume at our hotels will cause quarterly fluctuations in our revenue and operating results; ● changes in the debt and equity markets may adversely affect the value of our hotels; 11 Table of Contents ● certain of our hotels have in the past become impaired and additional hotels may become impaired in the future; ● laws and governmental regulations may restrict the ways in which we use our hotel properties and increase the cost of compliance with such regulations.
Should any of these brands experience a negative event, or receive negative publicity, our operating results may be harmed; ● our franchisors and brand managers may adopt new policies or change existing policies, which could result in increased costs that could negatively impact our hotels; ● future adverse litigation judgments or settlements resulting from legal proceedings could have an adverse effect on our financial condition; ● claims by persons regarding our properties could affect the attractiveness of our hotels or cause us to incur additional expenses; ● the hotel business is seasonal and seasonal variations in business volume at our hotels will cause quarterly fluctuations in our revenue and operating results; ● changes in the debt and equity markets may adversely affect the value of our hotels; ● certain of our hotels have in the past become impaired and additional hotels may become impaired in the future; ● laws and governmental regulations may restrict the ways in which we use our hotel properties and increase the cost of compliance with such regulations.
Failure to satisfy certain covenants on our unsecured debt without receiving a covenant waiver from our lenders would adversely affect our financial conditions and results from operations and may raise doubt about our ability to continue as a going concern.
Failure to satisfy certain covenants on our debt without receiving a covenant waiver from our lenders would adversely affect our financial conditions and results from operations and may raise doubt about our ability to continue as a going concern.
The IRS may successfully assert that the economic arrangements of any of our intercompany transactions, including the hotel leases, are not comparable to similar arrangements between unrelated parties. ​ Because we are a REIT, we depend on the TRS Lessee and its subsidiaries to make rent payments to us, and their inability to do so could harm our revenue and our ability to make distributions to our stockholders. ​ Due to certain federal income tax restrictions on hotel REITs, we cannot directly operate our hotel properties.
The IRS may successfully assert that the economic arrangements of any of our intercompany transactions, including the hotel leases, are not comparable to similar arrangements between unrelated parties. ​ Because we are a REIT, we depend on the TRS Lessee and its subsidiaries to make rent payments to us, and their inability to do so could harm our revenue and our ability to make distributions to our stockholders. ​ Due to certain federal income tax restrictions on hotel REITs, we cannot directly or indirectly operate our hotel properties.
As a result, we participate in the operations of our hotels only through our share of rent paid pursuant to the leases. ​ The ability of the TRS Lessee and its subsidiaries to pay rent may be affected by factors beyond its control, such as changes in general economic conditions, the level of demand for hotels and the related services of our hotels, competition in the lodging and hospitality industry, the ability to maintain and increase gross revenue at our hotels and other factors relating to the operations of our hotels. 27 Table of Contents Although failure on the part of the TRS Lessee or its subsidiaries to materially comply with the terms of a lease (including failure to pay rent when due) would give us the right to terminate the lease, repossess the hotel and enforce the payment obligations under the lease, such steps may not provide us with any substantive relief since the TRS Lessee is our subsidiary.
As a result, we participate in the operations of our hotels only through our share of rent paid pursuant to the leases. ​ The ability of the TRS Lessee and its subsidiaries to pay rent may be affected by factors beyond its control, such as changes in general economic conditions, the level of demand for hotels and the related services of our hotels, competition in the lodging and hospitality industry, the ability to maintain and increase gross revenue at our hotels and other factors relating to the operations of our hotels. ​ Although failure on the part of the TRS Lessee or its subsidiaries to materially comply with the terms of a lease (including failure to pay rent when due) would give us the right to terminate the lease, repossess the hotel and enforce the payment obligations under the lease, such steps may not provide us with any substantive relief since the TRS Lessee is our subsidiary.
Current and future dislocations in the debt markets may reduce the amount of capital that is available to finance real estate, which, in turn may limit our ability to finance the acquisition of hotels or the ability of purchasers to obtain financing for hotels that we wish to sell, either of which may have a material adverse impact on revenues, income and/or cash flow. ​ We have historically used capital obtained from debt and equity markets to acquire, renovate and refinance hotel assets.
Dislocations in the debt markets may reduce the amount of capital that is available to finance real estate, which, in turn may limit our ability to finance the acquisition of hotels or the ability of purchasers to obtain financing for hotels that we wish to sell, either of which may have a material adverse impact on revenues, income and/or cash flow. ​ We have historically used capital obtained from debt and equity markets to acquire, renovate and refinance hotel assets.
If that growth continues, it could both divert group and convention business away from our hotels, and it could also increase our cost of sales for group and convention business. ​ In an effort to lure business away from internet travel intermediaries and to drive business on their own websites, our managers and franchisors may discount the room rates available on their websites even further, which may also significantly impact our business and profitability. ​ 23 Table of Contents The failure of tenants in our hotels to make rent payments or otherwise comply with the material terms of our retail and restaurant leases may adversely affect our results of operations. ​ A portion of the space in many of our hotels is leased to third-party tenants for retail or restaurant purposes.
If that growth continues, it could both divert group and convention business away from our hotels, and it could also increase our cost of sales for group and convention business. ​ In an effort to lure business away from internet travel intermediaries and to drive business on their own websites, our managers and franchisors may discount the room rates available on their websites even further, which may also significantly impact our business and profitability. ​ The failure of tenants in our hotels to make rent payments or otherwise comply with the material terms of our retail and restaurant leases may adversely affect our results of operations. ​ A portion of the space in many of our hotels is leased to third-party tenants for retail or restaurant purposes.
In addition, it remains unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. ​ While some of the changes made by the TCJA may adversely affect the Company in one or more reporting periods and prospectively, other changes may be beneficial on a going forward basis. ​ 28 Table of Contents Risks Related to Our Common Stock and Corporate Structure ​ The market price of our equity securities may vary substantially. ​ The trading prices of equity securities issued by REITs may be affected by changes in market interest rates and other factors.
In addition, it remains unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. ​ While some of the changes made by the TCJA may adversely affect the Company in one or more reporting periods and prospectively, other changes may be beneficial on a going forward basis. ​ Risks Related to Our Common Stock and Corporate Structure ​ The market price of our equity securities may vary substantially. ​ The trading prices of equity securities issued by REITs may be affected by changes in market interest rates and other factors.
Our hotels compete with other hotels and alternative lodging options such as timeshare, vacation rentals or sharing services such as Airbnb based on location, price, physical attributes, service levels, brand affiliation and reputation, among many other factors. New hotels may be constructed, creating additional competition, in some cases without corresponding increases in demand for hotel rooms.
Our hotels compete with other hotels and alternative lodging options such as timeshares, vacation rentals or sharing services such as Airbnb based on location, price, physical attributes, service levels, brand affiliation and reputation, among many other factors. New hotels may be constructed, creating additional competition, in some cases without corresponding increases in demand for hotel rooms.
Should any of these brands experience a negative event, or receive negative publicity, our operating results may be harmed. ​ As of December 31, 2023, all of our hotels except the Oceans Edge Resort & Marina are operated under the following widely recognized lodging industry brands: Marriott, Hilton, Hyatt, Four Seasons and Montage.
Should any of these brands experience a negative event, or receive negative publicity, our operating results may be harmed. ​ As of December 31, 2024, all of our hotels except the Oceans Edge Resort & Marina are operated under the following widely recognized lodging industry brands: Marriott, Hyatt, Hilton, Four Seasons and Montage.
The 75% asset test generally requires that at least 75% of the value of our total assets be represented by real estate assets, cash or government securities. ​ The rent that we receive from a TRS attributable to leases of “qualified lodging facilities” qualifies as “rents from real property” as long as the property is operated on behalf of the TRS by a person who qualifies as an “independent contractor” and who is, or is 6 Table of Contents related to a person who is, actively engaged in the trade or business of operating “qualified lodging facilities” for any person unrelated to us and the TRS (an “eligible independent contractor”).
The 75% asset test generally requires that at least 75% of the value of our total assets be represented by real estate assets, cash or government securities. ​ The rent that we receive from a TRS attributable to leases of “qualified lodging facilities” qualifies as “rents from real property” as long as the property is operated on behalf of the TRS by a person who qualifies as an “independent contractor” and who is, or is related to a person who is, actively engaged in the trade or business of operating “qualified lodging facilities” for any person unrelated to us and the TRS (an “eligible independent contractor”).
Any of these events could adversely affect our financial results, common stock price and reputation, lead to unauthorized 14 Table of Contents disclosure of confidential information, result in delayed or misstated financial reports, monetary losses or regulatory penalties and subject us to potential litigation and liability. ​ Portions of our information technology infrastructure or that of our third-party managers and franchisors also may experience interruptions, delays or cessations of service or produce errors in connection with systems installation, integration or migration work that takes place from time to time.
Any of these events could adversely affect our financial results, common stock price and reputation, lead to unauthorized disclosure of confidential information, result in delayed or misstated financial reports, monetary losses or regulatory penalties and subject us to potential litigation and liability. ​ Portions of our information technology infrastructure or that of our third-party managers and franchisors also may experience interruptions, delays or cessations of service or produce errors in connection with systems installation, integration or migration work that takes place from time to time.
Moreover, legislation has been and could continue to be enacted that could modify or repeal the laws with respect to Section 1031 Exchanges, which could make it more difficult, or not possible, for us to dispose of properties on a tax deferred basis. ​ Legislative or other actions affecting REITs could have a negative effect on us. ​ The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S.
Moreover, legislation has been and could continue to be enacted that could modify or repeal the laws with respect to Section 1031 Exchanges, which could make it more difficult, or not possible, for us to dispose of properties on a tax deferred basis. ​ 27 Table of Contents Legislative or other actions affecting REITs could have a negative effect on us. ​ The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S.
There is generally no term or damage limitation on these indemnities; however, if an environmental matter arises, we could have recourse against other previous owners or a claim against its environmental insurance policies. ​ ADA Regulation ​ Our properties must comply with various laws and regulations, including Title III of the Americans with Disabilities Act (“ADA”) to the extent that such properties are “public accommodations” as defined by the ADA.
There is generally no term or damage limitation on these indemnities; however, if an environmental matter arises, we could have recourse against other previous owners or a claim against its environmental insurance policies. ​ 8 Table of Contents ADA Regulation ​ Our properties must comply with various laws and regulations, including Title III of the Americans with Disabilities Act (“ADA”) to the extent that such properties are “public accommodations” as defined by the ADA.
This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the ISO 27000, ISO 27001 and NIST CSF as guides to help us identify, assess, and manage cybersecurity risks relevant to our business. ​ Key elements of our cybersecurity risk management program are integrated into our overall enterprise risk management program, and share common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. ​ Our cybersecurity risk management program includes: ● risk assessments designed to help identify material cybersecurity risks to our critical systems and information; ​ ● an information technology team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; ​ ● the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls; ​ ● cybersecurity awareness training of our employees and senior management; and ​ ● a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents. ​ We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition.
This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the ISO 27000, ISO 27001 and NIST CSF as guides to help us identify, assess, and manage cybersecurity risks relevant to our business. ​ Key elements of our cybersecurity risk management program are integrated into our overall enterprise risk management program, and share common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. ​ Our cybersecurity risk management program includes: ● risk assessments designed to help identify material cybersecurity risks to our critical systems and information; ​ ● an information technology department principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; ​ ● the use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our security controls ; ​ ● cybersecurity awareness training of our employees and senior management; and ​ ● business continuity, contingency, and recovery plans, including a cybersecurity incident response plan with procedures for responding to cybersecurity incidents. ​ We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition.
Properties ​ The following table sets forth additional summary information with respect to our hotels as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Hotel ​ City ​ State ​ Chain Scale Segment ​ Rooms ​ Manager Four Seasons Resort Napa Valley ​ Calistoga ​ California ​ Luxury ​ 85 ​ Four Seasons Hilton New Orleans St.
Properties ​ The following table sets forth additional summary information with respect to our hotels as of December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Hotel ​ City ​ State ​ Chain Scale Segment ​ Rooms ​ Manager Four Seasons Resort Napa Valley ​ Calistoga ​ California ​ Luxury ​ 85 ​ Four Seasons Hilton New Orleans St.
In addition, natural disasters in these locales would disproportionately affect our hotel portfolio. The economies and tourism industries in these locales, in comparison to other parts of the country, are negatively affected to a greater extent by changes and downturns in certain industries, including the entertainment, high technology and financial industries.
In addition, natural disasters in these locales would disproportionately affect our hotel portfolio. The economies and tourism industries in these locales, in comparison to other parts of the country, are negatively affected to a greater extent by changes and downturns in certain industries, including the entertainment, high technology, financial industries, and governmental agencies.
In April 2013, however, we amended our charter to prohibit us from dividing directors into classes unless such action is first approved by the affirmative vote of a majority of the votes cast on the matter by stockholders entitled to vote generally in the election of directors. ​ 31 Table of Contents Our board of directors may change our significant corporate policies without the consent of our stockholders. ​ Our board of directors determines our significant corporate policies, including those related to acquisitions, financing, borrowing, qualification as a REIT and distributions to our stockholders.
In April 2013, however, we amended our charter to prohibit us from dividing directors into classes unless such action is first approved by the affirmative vote of a majority of the votes cast on the matter by stockholders entitled to vote generally in the election of directors. ​ Our board of directors may change our significant corporate policies without the consent of our stockholders. ​ Our board of directors determines our significant corporate policies, including those related to acquisitions, financing, borrowing, qualification as a REIT and distributions to our stockholders.
It is also possible that because of our California, Florida and Hawaii concentrations, a change in laws applicable to such hotels and the lodging industry may have a greater impact on us than a change in comparable laws in another geographical area in which we have hotels.
It is also possible that because of our California, Florida, Hawaii, and Washington DC concentrations, a change in laws applicable to such hotels and the lodging industry may have a greater impact on us than a change in comparable laws in another geographical area in which we have hotels.
In addition, certain policies, such as our third-party managers’ frequent guest programs, may be altered resulting in reduced revenue or increased costs to our hotels. ​ Future adverse litigation judgments or settlements resulting from legal proceedings could have an adverse effect on our financial condition. ​ In the normal course of our business, we are involved in various legal proceedings, including those involving our third-party managers that relate to the management of our hotels.
In addition, certain policies, such as our third-party managers’ frequent guest programs, may be altered resulting in reduced revenue or increased costs to our hotels. ​ 20 Table of Contents Future adverse litigation judgments or settlements resulting from legal proceedings could have an adverse effect on our financial condition. ​ In the normal course of our business, we are involved in various legal proceedings, including those involving our third-party managers that relate to the management of our hotels.
Under such environmental laws, courts and government agencies also have the authority to require that a person who sent waste to a waste disposal facility, such as a landfill or an incinerator, pay for the clean-up of that facility if it becomes contaminated and threatens human health or the environment. ​ Furthermore, various court decisions have established that third parties may recover damages for injury caused by property contamination.
Under such environmental laws, courts and government agencies also have the authority to require that a person who sent waste to a waste disposal facility, such as a landfill or an incinerator, pay for the clean-up of that facility if it becomes contaminated and threatens human health or the environment. ​ 21 Table of Contents Furthermore, various court decisions have established that third parties may recover damages for injury caused by property contamination.
If we cannot meet these goals fully or on time, our reputation may be damaged. ​ 22 Table of Contents Our franchisors and brand managers may require us to make capital expenditures pursuant to property improvement plans (“PIPs”) or to comply with brand standards, and the failure to make the required expenditures could cause the franchisors or hotel brands to terminate the franchise, management or operating lease agreements. ​ Our franchisors and brand managers may require that we make renovations to certain of our hotels in connection with revisions to our franchise, management or operating lease agreements.
If we cannot meet these goals fully or on time, our reputation may be damaged. ​ Our franchisors and brand managers may require us to make capital expenditures pursuant to property improvement plans (“PIPs”) or to comply with brand standards, and the failure to make the required expenditures could cause the franchisors or hotel brands to terminate the franchise, management or operating lease agreements. ​ Our franchisors and brand managers may require that we make renovations to certain of our hotels in connection with revisions to our franchise, management or operating lease agreements.
In addition, we believe construction supply constraints, the cost and availability of financing, and inflationary pressures on the cost of building materials will continue to discourage new hotel supply in many markets although some markets will experience new hotel openings at or greater than historic levels.
In addition, we believe construction supply constraints, the cost and availability of financing, and inflationary pressures on the cost of building materials will continue to discourage new hotel supply in many markets although some markets will experience new hotel openings at or greater than historical levels.
A discussion and analysis of the year ended December 31, 2022 as compared to the year ended December 31, 2021 is included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 23, 2023, under the caption “
A discussion and analysis of the year ended December 31, 2023 as compared to the year ended December 31, 2022 is included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 23, 2024, under the caption “
Our failure to meet our expectations or the market’s expectation with regard to future earnings and cash distributions would likely adversely affect the market price of our common stock. ​ Our stock repurchase program may not enhance long-term stockholder value, could cause volatility in the price of our common and preferred stock and could diminish our cash reserves. ​ Our board of directors has authorized a stock repurchase program up to an aggregate amount of $500 million of common and preferred stock.
Our failure to meet our expectations or the market’s expectation with regard to future earnings and cash distributions would likely adversely affect the market price of our common stock. ​ 29 Table of Contents Our stock repurchase program may not enhance long-term stockholder value, could cause volatility in the price of our common and preferred stock and could diminish our cash reserves. ​ Our board of directors has authorized a stock repurchase program up to an aggregate amount of $500 million of common and preferred stock.
As a result, our expenses may increase at higher rates than our revenue. ​ System security risks, data protection breaches, cyber-attacks and systems integration issues could disrupt the information technology network and systems used by us, our suppliers, our third-party managers or our franchisors, and any such disruption could reduce our expected revenue, increase our expenses, compromise confidential information, damage our reputation, increase our potential liability and adversely affect our common stock price. ​ We and our third-party managers and franchisors rely on information technology networks and systems, including the internet, to access, process, transmit and store electronic customer and financial information.
As a result, our expenses may increase at higher rates than our revenue. ​ 13 Table of Contents System security risks, data protection breaches, cyber-attacks and systems integration issues could disrupt the information technology network and systems used by us, our suppliers, our third-party managers or our franchisors, and any such disruption could reduce our expected revenue, increase our expenses, compromise confidential information, damage our reputation, increase our potential liability and adversely affect our common stock price. ​ We and our third-party managers and franchisors rely on information technology networks and systems, including the internet, to access, process, transmit and store electronic customer and financial information.
The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our information technology team has over 20 years of experience developing and implementing computer infrastructure, including cybersecurity and audit compliance.
The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel, our external information technology support, and our retained external cybersecurity consultants. Our information technology department has over 20 years of experience developing and implementing computer infrastructure, including cybersecurity and audit compliance.
Climate change may also affect our business by shifting consumer preferences to sustainable travel or by changing the comparative attractiveness of certain travel locations, and as a result, some of our hotels may be more or less in demand in the future.
Climate change may also affect our business by shifting consumer preferences to sustainable travel or by changing the relative attractiveness of certain travel locations, and as a result, some of our hotels may be more or less in demand in the future.
There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information. ​ 32 Table of Contents Cybersecurity Governance ​ Our board of directors (the “board”) considers cybersecurity risk as part of its risk oversight function and has delegated to the audit committee (the “committee”) oversight of cybersecurity and other information technology risks.
There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with, or effective in protecting our systems and information. ​ Cybersecurity Governance ​ Our board of directors (the “board”) considers cybersecurity risk as part of its risk oversight function and has delegated to the audit committee (the “committee”) oversight of cybersecurity and other information technology risks.
More recently, the IRS issued Revenue Procedure 2021-53, temporarily reducing the cash component of a REIT’s dividends to not less than 10%. However, we have no 29 Table of Contents assurance that the IRS will continue to provide such relief in the future; in which case, we may make cash/common stock distributions prior to receiving a private letter ruling.
More recently, the IRS issued Revenue Procedure 2021-53, temporarily reducing the cash component of a REIT’s dividends to not less than 10%. However, we have no assurance that the IRS will continue to provide such relief in the future; in which case, we may make cash/common stock distributions prior to receiving a private letter ruling.
We believe that all transactions between us and the TRS Lessee are conducted on an arm’s-length basis. ​ The TRS Lessee has engaged eligible independent contractors to manage the hotels it leases from the Operating Partnership. ​ Ground, Building and Airspace Lease Agreements ​ At December 31, 2023, the Hilton San Diego Bayfront was subject to a ground lease with an unaffiliated party, and the JW Marriott New Orleans was subject to an airspace lease that applies only to certain balcony space that is not integral to the hotel’s operations.
We believe that all transactions between us and the TRS Lessee are conducted on an arm’s-length basis. ​ The TRS Lessee has engaged eligible independent contractors to manage the hotels it leases from the Operating Partnership. ​ Ground, Office, and Airspace Lease Agreements ​ At December 31, 2024, the Hilton San Diego Bayfront was subject to a ground lease with an unaffiliated party, and the JW Marriott New Orleans was subject to an airspace lease that applies only to certain balcony space that is not integral to the hotel’s operations.
Klein is our Executive Vice President and General Counsel. Mr. Klein joined the Company in July 2016 as Senior Vice President and General Counsel, a position he held until February 2019 when he was appointed Executive Vice President and General Counsel. Prior to joining Sunstone, Mr.
Klein joined the Company in July 2016 as Senior Vice President and General Counsel, a position he held until February 2019 when he was appointed Executive Vice President and General Counsel. Prior to joining Sunstone, Mr.
Increasing inflation could adversely affect consumer confidence, which could reduce consumer purchasing power and demand for lodging. Additionally, inflation affects our expenses, including, without limitation, by increasing such costs as wages, employee-related benefits, food costs, commodity costs, including those used to renovate or reposition our hotels, property taxes, property and liability insurance, utilities, and borrowing costs.
Future increases in inflation could adversely affect consumer confidence, which could reduce consumer purchasing power and demand for lodging. Additionally, inflation affects our expenses, including, without limitation, by increasing such costs as wages, employee-related benefits, food costs, commodity costs, including those used to renovate or reposition our hotels, property taxes, property and liability insurance, utilities, and borrowing costs.
In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.
In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income 25 Table of Contents and 100% of our undistributed income from prior years.
Such disruptions could adversely impact the ability of our third-party managers and franchisors to fulfill reservations for guestrooms and other services offered at our hotels or to deliver to us timely and accurate financial information. ​ Although we have taken steps to protect the security of our information systems and the data maintained in these systems, there can be no assurance that the security measures we have taken will prevent failures, inadequacies, or interruptions in system services, or that system security will not be breached through physical or electronic break-ins, spoofed emails, phishing attacks, computer viruses, cyber extortionists or attacks by hackers.
Such disruptions could adversely impact the ability of our third-party managers and franchisors to fulfill reservations for guestrooms and other services offered at our hotels or to deliver to us timely and accurate financial information. ​ Although we have taken steps to protect the security of our information systems and the data maintained in these systems, there can be no assurance that the security measures we have taken will prevent failures, inadequacies, or interruptions in system services, or that system security will not be compromised through physical or electronic breaches, spoofed emails, phishing attacks, computer viruses, cyber extortionists or attacks by hackers.
The determination of fair value is subjective and is based in part on assumptions and estimates that could differ materially from the actual results in future periods. Should our allocations be incorrect, our assets and liabilities may be overstated or 17 Table of Contents understated, which may also affect depreciation expense on our consolidated statement of operations.
The determination of fair value is subjective and is based in part on assumptions and estimates that could differ materially from the actual results in future periods. Should our allocations be incorrect, our assets and liabilities may be overstated or understated, which may also affect depreciation expense on our consolidated statement of operations.
The sponsor may elect to file bankruptcy which could materially impact our ability to perfect our interest in the property and could result in a loss on our investment in the debt or note. 19 Table of Contents One of our hotels is subject to a ground lease with an unaffiliated party, the termination of which by the lessor for any reason, including due to our default on the lease, could cause us to lose the ability to operate the hotel altogether and may adversely affect our results of operations. ​ Our rights to use the underlying land at the Hilton San Diego Bayfront is based upon our interest under a long-term lease with an unaffiliated party.
The sponsor may elect to file bankruptcy which could materially impact our ability to perfect our interest in the property and could result in a loss on our investment in the debt or note. ​ One of our hotels is subject to a ground lease with an unaffiliated party, the termination of which by the lessor for any reason, including due to our default on the lease, could cause us to lose the ability to operate the hotel altogether and may adversely affect our results of operations. ​ Our rights to use the underlying land at the Hilton San Diego Bayfront is based upon our interest under a long-term lease with an unaffiliated party, which expires in 2071.
Our charter authorizes our board of directors to amend our charter without stockholder approval to increase or decrease the aggregate number of shares of stock or the number of shares of any class or series of 30 Table of Contents our stock that it has authority to issue, to classify or reclassify any unissued shares of our common stock or preferred stock and to set the preferences, rights and other terms of the classified or reclassified shares.
Our charter authorizes our board of directors to amend our charter without stockholder approval to increase or decrease the aggregate number of shares of stock or the number of shares of any class or series of our stock that it has authority to issue, to classify or reclassify any unissued shares of our common stock or preferred stock and to set the preferences, rights and other terms of the classified or reclassified shares.
This bylaw provision limits the ability of our stockholders to make nominations of persons for election as directors or to introduce other proposals unless we are notified and provided certain required information in a timely manner prior to the meeting. ​ Authority of our Board to Amend our Bylaws.
This bylaw provision limits the ability of our stockholders to make nominations of persons for election as directors or to introduce other proposals unless we are notified and provided certain required information in a timely manner prior to the meeting. 30 Table of Contents ​ Authority of our Board to Amend our Bylaws.
Climate change also may affect our business by increasing the cost 15 Table of Contents or limiting the availability of property insurance on terms we find acceptable in areas most vulnerable to such events, increasing operating costs at our hotels, such as the cost of water or energy, and requiring us to expend funds as we seek to mitigate, repair and protect our hotels against such risks. ​ We are subject to the climate change risks associated with the transitional effects to a low carbon scenario, which can include increased regulation for building efficiency and equipment specifications, increased regulations or investor requirements for Environmental and Social disclosures, increased cost of goods and raw materials and increased costs to manage the shift in consumer preferences.
Climate change also may affect our business by increasing the cost or limiting the availability of property insurance on terms we find acceptable in areas most vulnerable to such events, increasing operating costs at our hotels, such as the cost of water or energy, and requiring us to expend financial resources as we seek to mitigate, repair and protect our hotels against such risks. ​ We are subject to the climate change risks associated with the transitional effects to a low carbon scenario, which can include increased regulation for building efficiency and equipment specifications, increased regulations or investor requirements for environmental and social disclosures, increased cost of goods and raw materials and increased costs to manage the shift in consumer preferences.
Therefore, we lease our hotel properties to the TRS Lessee or one of its subsidiaries, which contracts with third-party hotel managers to manage our hotels. Our revenue and our ability to make distributions to our stockholders will depend solely upon the ability of the TRS Lessee and its subsidiaries to make rent payments under these leases.
Therefore, we lease our hotel properties to the TRS Lessee or one of its subsidiaries, which contracts with third-party hotel managers 26 Table of Contents to manage our hotels. Our revenue and our ability to make distributions to our stockholders will depend solely upon the ability of the TRS Lessee and its subsidiaries to make rent payments under these leases.
As a result, in the future, we may not be able to sell, assign, transfer or convey our lessee’s interest in a hotel subject to our remaining ground or airspace leases absent consent of such third parties even if such transactions may be in the best interest of our stockholders. ​ Corporate Office ​ Our headquarters are located at 15 Enterprise, Suite 200, Aliso Viejo, California 92656 under a lease with an unaffiliated party that terminates on April 30, 2029. ​ Human Capital Resources ​ As of February 23, 2024, we had 40 employees.
As a result, in the future, we may not be able to sell, assign, transfer or convey our lessee’s interest in a hotel subject to our remaining ground or airspace leases absent consent of such third parties even if such transactions may be in the best interest of our stockholders. ​ Corporate Office ​ Our headquarters are located at 15 Enterprise, Suite 200, Aliso Viejo, California 92656 under a lease with an unaffiliated party that terminates on April 30, 2029. ​ Human Capital Resources ​ As of February 21, 2025, we had 36 employees.
Should we decide to sell a hotel during the term of that hotel’s management agreement, we may have to pay termination fees to the applicable management company, which payment could be substantial. ​ In addition, hotels may not be readily converted to alternative uses if they were to become unprofitable due to competition, age of improvements, decreased demand or other factors.
Should we sell a hotel during the term of its management agreement, we may have to pay termination fees to the applicable management company, which payment could be substantial. ​ In addition, hotels may not be readily converted to alternative uses if they were to become unprofitable due to competition, age of improvements, decreased demand or other factors.
Springer worked in both the feasibility and acquisitions groups at Host Hotels & Resorts from 2004 to 2006 and was integral to the closing of several large lodging deals. Mr. Springer started his career with PricewaterhouseCoopers, LLP in the Hospitality Consulting Group from 1999 to 2004. Mr. Springer holds a B.S. degree in Hotel Administration from Cornell University. David M.
Springer worked in both the feasibility and acquisitions groups at Host Hotels & Resorts from 2004 to 2006 and was integral to the closing of several large lodging deals. Mr. Springer started his career with PricewaterhouseCoopers, LLP in the Hospitality Consulting Group from 1999 to 2004. Mr. Springer holds a B.S. degree in Hotel Administration from Cornell University. Aaron R.
The level of any future quarterly common stock dividends will be determined by our board of directors after considering long-term operating projections, expected capital requirements and risks affecting our business. ​ Securities Authorized for Issuance Under Equity Compensation Plan ​ Information relating to compensation plans under which our equity securities are authorized for issuance is set forth in Part III, Item 12 of this Annual Report on Form 10-K. ​ Sales of Unregistered Securities ​ None. ​ Issuer Purchases of Equity Securities ​ In February 2021, our board of directors reauthorized our existing stock purchase program, allowing us to acquire up to $500.0 million of our common and preferred stock (the “2021 Stock Repurchase Program”).
The level of any future quarterly common stock dividends will be determined by our board of directors after considering long-term operating projections, expected capital requirements and risks affecting our business. ​ Securities Authorized for Issuance Under Equity Compensation Plan ​ Information relating to compensation plans under which our equity securities are authorized for issuance is set forth in Part III, Item 12 of this Annual Report on Form 10-K. ​ Sales of Unregistered Securities ​ None. ​ Issuer Purchases of Equity Securities ​ In February 2023, our board of directors reauthorized and restored our existing stock repurchase program, allowing us to acquire up to $500.0 million of our aggregate common and preferred stock (the “Stock Repurchase Program”).
In those events, we expect to attempt to sell the hotels that do not meet our investment criteria, but may not be able to do so on acceptable terms, or if successful, the sales may be recharacterized by the IRS as dealer sales and subject to a 100% 18 Table of Contents “prohibited transactions” tax on any gain.
In those events, we expect to attempt to sell the hotels that do not meet our investment criteria but may not be able to do so on acceptable terms, or if successful, the sales may be recharacterized by the IRS as dealer sales and subject to a 100% “prohibited transactions” tax on any gain.
This discussion focuses on our financial condition and results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
This discussion focuses on our financial condition and results of operations for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Such services include: the development and operation of computer systems and reservation services; management and administrative services; marketing and sales services; human resources training services; and such additional services as may from time to time be more efficiently performed on a national, regional or group level. ​ Franchise Agreements ​ As of December 31, 2023, two of our hotels were operated subject to franchise agreements, The Bidwell Marriott Portland and the Hilton New Orleans St.
Such services include: the development and operation of computer systems and reservation services; management and administrative services; marketing and sales services; human resources training services; and such additional services as may from time to time be more efficiently performed on a national, regional or group level. ​ 5 Table of Contents Franchise Agreements ​ As of December 31, 2024, two of our hotels were operated subject to franchise agreements, The Bidwell Marriott Portland and the Hilton New Orleans St.
Springer's involvement with these funds included all aspects of hotel equity and debt investing, as well as asset management of numerous lodging portfolios. Mr. Springer joined Goldman in February 2006. Prior to joining Goldman, Mr.
Springer's involvement with these funds included all aspects of hotel equity and debt 9 Table of Contents investing, as well as asset management of numerous lodging portfolios. Mr. Springer joined Goldman in February 2006. Prior to joining Goldman, Mr.
We continuously seek opportunities to invest in initiatives intended to reduce energy, water and waste impacts; enhance the overall environment and health, safety and well-being of guests, hotel associates and our corporate employees; promote diversity, equity, inclusion and belonging; and improve the local communities in which we conduct business or own hotels.
We continuously seek opportunities to invest in initiatives intended to reduce energy, water and waste impacts; enhance the overall environment and health, safety and well-being of guests, hotel associates and our corporate employees; promote engagement and belonging; and improve the local communities in which we conduct business or own hotels.
Other markets may experience prolonged variations in temperature or precipitation that may limit access to the water needed to operate our hotels, increase the number or length of power outages, or significantly increase energy costs, which may subject those hotels to additional regulatory burdens, such as limitations on water usage or stricter energy efficiency standards.
Other markets may experience prolonged variations in temperature or precipitation that may limit access to the water needed to operate our hotels, increase the frequency or duration of power outages, or significantly increase energy costs, which may subject those hotels to additional regulatory burdens, such as limitations on water usage or stricter energy efficiency standards.
Defaulting on existing debt may limit our ability to access additional debt financing in the future; ● covenants in our debt instruments may restrict our operating, acquisition or disposition activities; ● our debt agreements contain “cash trap” and restricted payment provisions that, in certain circumstances, could limit our ability to use funds generated by our hotels for other corporate purposes or to make distributions to our stockholders; ● certain of our debt is subject to variable interest rates, which creates uncertainty in the amount of interest expense we will incur in the future and may negatively impact our operating results; ● we may not be able to refinance our debt on favorable terms or at all; and ● our organizational documents contain no limitations on the amount of debt we can incur so we may become too highly leveraged. ​ Risks Related to Our Status as a REIT: ● if we fail to qualify as a REIT, our distributions will not be deductible by us and our income will be subject to federal and state taxation; ● even as a REIT, we may become subject to federal, state or local taxes on our income or property; ● dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends; ● if the leases between our hotels and the TRS Lessee are not respected as true leases for federal income tax purposes, we would fail to qualify as a REIT; ● we may be subject to taxes in the event our operating leases are not held to be on an arm’s-length basis; ● the TRS Lessee is subject to special rules that may result in increased taxes; ● because we are a REIT, we depend on the TRS Lessee and its subsidiaries to make rent payments to us; ● we may be required to pay a penalty tax upon the sale of a hotel; ● we may be subject to corporate income tax on certain built-in gains; ● a transaction intended to qualify as a Section 1031 Exchange may later be determined to be taxable; and ● legislative or other actions affecting REITs could have a negative effect on us. ​ Risks Related to Our Common Stock and Corporate Structure: ● the market price of our equity securities may vary substantially; ● any future distributions to our common stockholders may vary, and distributions on our common stock may be made in the form of cash, stock or a combination of both; however, the IRS may disallow our use of stock dividends; ● shares of our common stock that are or become available for sale could affect the stock price; ● our earnings and cash distributions may affect the market price of our common stock; ● our stock repurchase program may not enhance long-term stockholder value, could cause volatility in the price of our common and preferred stock and could diminish our cash reserves; 12 Table of Contents ● provisions of Maryland law and our organizational documents may limit the ability of a third party to acquire control of the Company and may serve to limit our stock price; and ● our board of directors may change our significant corporate policies without the consent of our stockholders.
Defaulting on existing debt may limit our ability to access additional debt financing in the future; ● certain of our unsecured term loans are subject to variable interest rates, which creates uncertainty in the amount of interest expense we will incur in the future and may negatively impact our operating results; ● we may not be able to refinance our debt on favorable terms or at all; and ● our organizational documents contain no limitations on the amount of debt we can incur so we may become too highly leveraged. ​ Risks Related to Our Status as a REIT: ● if we fail to qualify as a REIT, our distributions will not be deductible by us and our income will be subject to federal and state taxation; ● even as a REIT, we may become subject to federal, state or local taxes on our income or property; ● dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends; ● if the leases between our hotels and the TRS Lessee are not respected as true leases for federal income tax purposes, we would fail to qualify as a REIT; ● we may be subject to taxes in the event our operating leases are not held to be on an arm’s-length basis; ● the TRS Lessee is subject to special rules that may result in increased taxes; ● because we are a REIT, we depend on the TRS Lessee and its subsidiaries to make rent payments to us; ● we may be required to pay a penalty tax upon the sale of a hotel; ● we may be subject to corporate income tax on certain built-in gains; ● a transaction intended to qualify as a Section 1031 Exchange may later be determined to be taxable; and ● legislative or other actions affecting REITs could have a negative effect on us. ​ Risks Related to Our Common Stock and Corporate Structure: ● the market price of our equity securities may vary substantially; ● any future distributions to our common stockholders may vary, and distributions on our common stock may be made in the form of cash, stock or a combination of both; however, the IRS may disallow our use of stock dividends; ● shares of our common stock that are or become available for sale could affect the stock price; ● our earnings and cash distributions may affect the market price of our common stock; ● our stock repurchase program may not enhance long-term stockholder value, could cause volatility in the price of our common and preferred stock and could diminish our cash reserves; ● provisions of Maryland law and our organizational documents may limit the ability of a third party to acquire control of the Company and may serve to limit our stock price; and ● our board of directors may change our significant corporate policies without the consent of our stockholders.
Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the partner or co-venturer would have full control over the partnership or joint venture.
Such 17 Table of Contents investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the partner or co-venturer would have full control over the partnership or joint venture.
Pursuant to the lease terms, the lease expires in 2071, and we are required to pay all rent due and comply with all other lessee obligations. Payments under the ground lease increase at regular intervals by the applicable Consumer Price Index.
Pursuant to the lease terms, we are required to pay all rent due and comply with all other lessee obligations. Payments under the ground lease increase at regular intervals by the applicable Consumer Price Index.
Although we do not directly employ or manage employees at our hotels, we are still subject to many of the costs and risks generally associated with the hotel labor force. Increases in minimum wages, or changes in work rules, could negatively impact our operating results.
Although we do not directly employ or manage employees at our hotels, we are still subject to many of the costs and risks generally associated with the hotel labor force. Increases in minimum wages, labor shortages, or changes in workplace rules and regulations could negatively impact our operating results.
There can be no assurance that future audits will not occur with increased 26 Table of Contents frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.
There can be no assurance that future audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.
As a result, a significant concentration of our success is dependent in part on the success of these companies and their respective brands.
As a result, a significant component of our success is dependent in part on the success of these companies and their respective brands.
Some of these contracts and events may also be cancelled, which could reduce our expectations for 16 Table of Contents future revenues or result in potential litigation in order to collect cancellation fees.
Some of these contracts and events may also be cancelled, which could reduce our expectations for future revenues or result in potential litigation in order to collect cancellation fees.
We frequently benchmark our compensation and benefits package against those in both our industry and in similar disciplines. ​ We are committed to maintaining a work culture that treats all employees fairly and with respect, promotes inclusivity and provides equal opportunities for advancement based on merit.
We frequently benchmark our compensation and benefits package against those in both our industry and in similar disciplines. ​ We are committed to maintaining a workplace culture that treats all employees fairly and with respect, promotes engagement and provides equal opportunities for advancement based on merit.
Although we have policies and procedures in place that seek to mitigate these risks, including risks related to wire transfers, we have experienced fraudulent and erroneous activity in our business operations and have incurred financial losses related to such activity, which was substantially mitigated by recoveries under insurance policies.
Although we have policies and procedures in place that seek to mitigate these risks, including risks related to wire transfers, we have experienced fraudulent and erroneous activity in our business operations and have incurred financial losses related to such activity, which was substantially mitigated by recoveries under insurance 23 Table of Contents policies.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ Market Information ​ Our common stock is traded on the New York Stock Exchange under the symbol “SHO.” ​ Stockholder Information ​ As of February 11, 2024, we had approximately 22 holders of record of our common stock.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ Market Information ​ Our common stock is traded on the New York Stock Exchange under the symbol “SHO.” ​ Stockholder Information ​ As of February 11, 2025, we had approximately 21 holders of record of our common stock.
Noncompliance with such regulations could subject us to penalties, loss of value of our properties or civil damages; ● corporate responsibility, specifically related to ESG factors and commitments, may impose additional costs and expose us to new risks that could adversely affect our results of operations, financial condition and cash flows; ● our franchisors and brand managers may require us to make capital expenditures pursuant to property improvement plans or to comply with brand standards, and the failure to make the required expenditures could cause the franchisors or hotel brands to terminate the franchise, management or operating lease agreements; ● termination of any of our franchise, management or operating lease agreements could cause us to lose business or lead to a default or acceleration of our obligations under certain of our debt instruments; ● the growth of alternative reservation channels could adversely affect our business and profitability; ● the failure of tenants in our hotels to make rent payments or otherwise comply with the material terms of our retail and restaurant leases may adversely affect our results of operations; ● we rely on our corporate and hotel senior management teams, the loss of whom may cause us to incur costs and harm our business; ● we could be harmed by inadvertent errors, misconduct or fraud that is difficult to detect; and ● if we fail to maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results or identify and prevent fraud. ​ Risks Related to Our Debt and Financing: ● we have outstanding debt which may restrict our financial flexibility; ● our debt agreements contain various covenants, and should we default, we may be required to pay additional fees, provide additional security, repay the debt or forfeit the hotel securing the debt.
Noncompliance with such regulations could subject us to penalties, loss of value of our properties or civil damages; ● corporate responsibility, specifically related to ESG factors and commitments, may impose additional costs and expose us to new risks that could adversely affect our results of operations, financial condition and cash flows; ● our franchisors and brand managers may require us to make capital expenditures pursuant to property improvement plans or to comply with brand standards, and the failure to make the required expenditures could cause the franchisors or hotel brands to terminate the franchise, management or operating lease agreements; ● termination of any of our franchise, management or operating lease agreements could cause us to lose business; ● the growth of alternative reservation channels could adversely affect our business and profitability; ● the failure of tenants in our hotels to make rent payments or otherwise comply with the material terms of our retail and restaurant leases may adversely affect our results of operations; ● we rely on our corporate and hotel senior management teams, the loss of whom may cause us to incur costs and harm our business; ● we could be harmed by inadvertent errors, misconduct or fraud that is difficult to detect; and ● if we fail to maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results or identify and prevent fraud. ​ 11 Table of Contents Risks Related to Our Debt and Financing: ● we have outstanding debt which may restrict our financial flexibility; ● our debt agreements contain various covenants, restrictions, requirements and other limitations, and should we default, we may be required to pay additional fees, provide additional security or repay the debt.
These capital improvements may give rise to the following additional risks, among others: ● construction cost overruns and delays, including inflationary increases to commodity costs and supply chain disruptions; ● a possible shortage of available cash to fund capital improvements and the related possibility that financing for these capital improvements may not be available to us on affordable terms; ● uncertainties as to market demand or a loss of market demand after capital improvements have begun; ● disruption in service and room availability causing reduced demand, occupancy and rates; ● possible environmental problems; and ● disputes with managers or franchisors regarding our compliance with the requirements under the relevant management, operating lease or franchise agreement. ​ Delays in the acquisition, renovation or repositioning of hotel properties may have adverse effects on our results of operations and returns to our stockholders . ​ Delays we encounter in the acquisition, renovation and repositioning of hotel properties could adversely affect investor returns.
These capital improvements may give rise to the following additional risks, among others: 16 Table of Contents ● construction cost overruns and delays, including commodity cost increases resulting from inflation or the implementation of tariffs, and delays due to supply chain disruptions; ● a possible shortage of available cash to fund capital improvements and the related possibility that financing for these capital improvements may not be available to us on affordable terms; ● uncertainties as to market demand or a loss of market demand after capital improvements have begun; ● disruption in service and room availability causing reduced demand, occupancy and rates; ● possible environmental problems; and ● disputes with managers or franchisors regarding our compliance with the requirements under the relevant management, operating lease or franchise agreement. ​ Delays in the acquisition, renovation or repositioning of hotel properties may have adverse effects on our results of operations and returns to our stockholders . ​ Delays we encounter in the acquisition, renovation and repositioning of hotel properties could adversely affect investor returns.
The renovation work and the cost of such expenditures required pursuant to PIPs or to comply with brand standards may negatively impact our results of operations while the work is performed and may not result in a positive economic return on the investment. ​ Because all but one of our hotels are operated under franchise agreements or are brand managed, termination of these franchise, management or operating lease agreements could cause us to lose business at our hotels or lead to a default or acceleration of our obligations under certain of our debt instruments. ​ As of December 31, 2023, all of our hotels except the Oceans Edge Resort & Marina were operated under franchise, management or operating lease agreements with the following franchisors or hotel management companies: Marriott, Hilton, Hyatt, Four Seasons, and Montage.
The renovation work and the cost of such expenditures required pursuant to PIPs or to comply with brand standards may negatively impact our results of operations while the work is performed and may not result in a positive economic return on the investment. ​ Because all but one of our hotels are operated under franchise agreements or are brand managed, termination of these franchise, management or operating lease agreements could cause us to lose business at our hotels. ​ As of December 31, 2024, all of our hotels except the Oceans Edge Resort & Marina were operated under franchise, management or operating lease agreements with the following franchisors or hotel management companies: Marriott, Hyatt, Hilton, Four Seasons, and Montage.
In addition, we have reserved 3.75 million shares of our common stock for issuance under the Company’s 2022 Incentive Award Plan, and 2,581,199 shares remained available for future issuance as of December 31, 2023. ​ Our earnings and cash distributions may affect the market price of our common stock. ​ We believe that the market value of a REIT’s equity securities is based primarily on the value of the REIT’s owned real estate, capital structure, debt levels and perception of the REIT’s growth potential and its current and potential future cash distributions, whether from operations, sales, acquisitions, development or refinancings.
In addition, we have reserved 3.75 million shares of our common stock for issuance under the Company’s 2022 Incentive Award Plan, and 1,332,223 shares remained available for future issuance as of December 31, 2024. ​ Our earnings and cash distributions may affect the market price of our common stock. ​ We believe that the market value of a REIT’s equity securities is based primarily on the value of the REIT’s owned real estate, capital structure, debt levels and perception of the REIT’s growth potential and its current and potential future cash distributions, whether from operations, sales, acquisitions, development or refinancings.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

225 edited+67 added−104 removed145 unchanged
Biggest changeCONSOLIDATED STATEMENTS OF EQUIT Y (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Distributions ​ Noncontrolling ​ ​ ​ ​ ​ Preferred Stock ​ Common Stock ​ ​ ​ in Excess of ​ Interest in ​ ​ ​ ​ Number of ​ ​ Number of ​ Additional Retained Consolidated ​ ​ ​ Shares ​ Amount ​ Shares ​ Amount ​ Paid in Capital ​ Earnings ​ Joint Venture ​ Total Equity Balance at December 31, 2020 ​ 7,600,000 ​ $ 190,000 ​ 215,593,401 ​ $ 2,156 ​ $ 2,586,108 ​ $ (729,620) ​ $ 40,735 ​ $ 2,089,379 ​ Amortization of deferred stock compensation — ​ ​ — ​ — ​ — ​ 13,278 ​ — ​ — ​ 13,278 ​ Issuance of restricted common stock, net ​ — ​ ​ — ​ 1,062,106 ​ ​ 10 ​ ​ (4,887) ​ ​ — ​ ​ — ​ ​ (4,877) ​ Forfeiture of restricted common stock ​ — ​ ​ — ​ (235,406) ​ ​ (2) ​ ​ 2 ​ ​ — ​ ​ — ​ ​ — ​ Net proceeds from issuance of common stock ​ — ​ ​ — ​ 2,913,682 ​ ​ 29 ​ ​ 37,630 ​ ​ — ​ ​ — ​ ​ 37,659 ​ Net issuance of Series G preferred stock in connection with hotel acquisition ​ 2,650,000 ​ ​ 66,250 ​ — ​ ​ — ​ ​ (142) ​ ​ — ​ ​ — ​ ​ 66,108 ​ Net proceeds from issuance of Series H preferred stock ​ 4,600,000 ​ ​ 115,000 ​ — ​ ​ — ​ ​ (3,801) ​ ​ — ​ ​ — ​ ​ 111,199 ​ Net proceeds from issuance of Series I preferred stock ​ 4,000,000 ​ ​ 100,000 ​ — ​ ​ — ​ ​ (3,344) ​ ​ — ​ ​ — ​ ​ 96,656 ​ Redemption of Series E preferred stock ​ (4,600,000) ​ ​ (115,000) ​ — ​ ​ — ​ ​ 4,016 ​ ​ (4,016) ​ ​ — ​ ​ (115,000) ​ Redemption of Series F preferred stock ​ (3,000,000) ​ ​ (75,000) ​ — ​ ​ — ​ ​ 2,624 ​ ​ (2,624) ​ ​ — ​ ​ (75,000) ​ Series E preferred stock dividends and dividends payable at $0.772222 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (3,552) ​ ​ — ​ ​ (3,552) ​ Series F preferred stock dividends and dividends payable at $0.989896 per share — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (2,969) ​ ​ — ​ (2,969) ​ Series G preferred stock dividends and dividends payable at $0.233685 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (619) ​ ​ — ​ ​ (619) ​ Series H preferred stock dividends and dividends payable at $0.923004 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (4,246) ​ ​ — ​ ​ (4,246) ​ Series I preferred stock dividends and dividends payable at $0.653125 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (2,612) ​ ​ — ​ ​ (2,612) ​ Contributions from noncontrolling interest ​ — ​ ​ — ​ — ​ — ​ — ​ — ​ 1,375 ​ 1,375 ​ Net income (loss) ​ — ​ ​ — ​ — ​ — ​ — ​ 34,298 ​ (1,303) ​ 32,995 ​ Balance at December 31, 2021 11,250,000 ​ ​ 281,250 ​ 219,333,783 ​ ​ 2,193 ​ ​ 2,631,484 ​ ​ (715,960) ​ ​ 40,807 ​ ​ 2,239,774 ​ Amortization of deferred stock compensation — ​ ​ — ​ — ​ ​ — ​ ​ 11,372 ​ ​ — ​ ​ — ​ 11,372 ​ Issuance of restricted common stock, net ​ — ​ ​ — ​ 266,795 ​ ​ 3 ​ ​ (3,445) ​ ​ — ​ ​ — ​ ​ (3,442) ​ Forfeiture of restricted common stock ​ — ​ ​ — ​ (34,807) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ Common stock distributions and distributions payable at $0.10 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (21,059) ​ ​ — ​ ​ (21,059) ​ Series G preferred stock dividends and dividends payable at $0.567112 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (1,503) ​ ​ — ​ ​ (1,503) ​ Series H preferred stock dividends and dividends payable at $1.531252 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (7,044) ​ ​ — ​ ​ (7,044) ​ Series I preferred stock dividends and dividends payable at $1.425000 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (5,700) ​ ​ — ​ ​ (5,700) ​ Repurchase of outstanding common stock — ​ ​ — ​ (10,245,324) ​ ​ (103) ​ ​ (108,339) ​ — ​ — ​ (108,442) ​ Distributions to noncontrolling interest — ​ ​ — ​ — ​ — ​ — ​ — ​ (5,500) ​ (5,500) ​ Acquisition of noncontrolling interest, net ​ — ​ ​ — ​ — ​ ​ — ​ ​ (65,477) ​ ​ — ​ ​ (38,784) ​ ​ (104,261) ​ Net income — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 87,289 ​ ​ 3,477 ​ 90,766 ​ Balance at December 31, 2022 11,250,000 ​ ​ 281,250 ​ 209,320,447 ​ 2,093 ​ 2,465,595 ​ (663,977) ​ — ​ 2,084,961 ​ Amortization of deferred stock compensation — ​ ​ — ​ — ​ ​ — ​ ​ 11,242 ​ ​ — ​ ​ — ​ 11,242 ​ Issuance of restricted common stock, net ​ — ​ ​ — ​ 138,522 ​ ​ 2 ​ ​ (3,778) ​ ​ — ​ ​ — ​ ​ (3,776) ​ Forfeiture of restricted common stock ​ — ​ ​ — ​ (8,192) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ Common stock distributions and distributions payable at $0.30 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (61,807) ​ ​ — ​ ​ (61,807) ​ Series G preferred stock dividends and dividends payable at $0.469437 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (1,244) ​ ​ — ​ ​ (1,244) ​ Series H preferred stock dividends and dividends payable at $1.531252 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (7,044) ​ ​ — ​ ​ (7,044) ​ Series I preferred stock dividends and dividends payable at $1.425000 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (5,700) ​ ​ — ​ ​ (5,700) ​ Repurchase of outstanding common stock — ​ ​ — ​ (5,971,192) ​ ​ (60) ​ ​ (56,343) ​ — ​ — ​ (56,403) ​ Acquisition of noncontrolling interest, net ​ — ​ ​ — ​ — ​ ​ — ​ ​ (299) ​ ​ — ​ ​ — ​ ​ (299) ​ Net income — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 206,708 ​ ​ — ​ 206,708 ​ Balance at December 31, 2023 11,250,000 ​ $ 281,250 ​ 203,479,585 ​ $ 2,035 ​ $ 2,416,417 ​ $ (533,064) ​ $ — ​ $ 2,166,638 ​ ​ ​ ​ ​ See accompanying notes to consolidated financial statements. ​ F-6 Table of Contents SUNSTONE HOTEL INVESTORS, INC.
Biggest changeCONSOLIDATED STATEMENTS OF EQUIT Y (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Distributions ​ Noncontrolling ​ ​ ​ ​ ​ Preferred Stock ​ Common Stock ​ ​ ​ in Excess of ​ Interest in ​ ​ ​ ​ Number of ​ ​ Number of ​ Additional Retained Consolidated ​ ​ ​ Shares ​ Amount ​ Shares ​ Amount ​ Paid in Capital ​ Earnings ​ Joint Venture ​ Total Equity Balance at December 31, 2021 ​ 11,250,000 ​ $ 281,250 ​ 219,333,783 ​ $ 2,193 ​ $ 2,631,484 ​ $ (715,960) ​ $ 40,807 ​ $ 2,239,774 ​ Amortization of deferred stock compensation — ​ ​ — ​ — ​ — ​ 11,372 ​ — ​ — ​ 11,372 ​ Issuance of restricted common stock, net ​ — ​ ​ — ​ 266,795 ​ ​ 3 ​ ​ (3,445) ​ ​ — ​ ​ — ​ ​ (3,442) ​ Forfeiture of restricted common stock ​ — ​ ​ — ​ (34,807) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ Common stock distributions and distributions payable at $0.10 per share — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (21,059) ​ ​ — ​ (21,059) ​ Series G preferred stock dividends and dividends payable at $0.567112 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (1,503) ​ ​ — ​ ​ (1,503) ​ Series H preferred stock dividends and dividends payable at $1.531252 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (7,044) ​ ​ — ​ ​ (7,044) ​ Series I preferred stock dividends and dividends payable at $1.425000 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (5,700) ​ ​ — ​ ​ (5,700) ​ Repurchase of outstanding common stock ​ — ​ ​ — ​ (10,245,324) ​ ​ (103) ​ ​ (108,339) ​ ​ — ​ ​ — ​ ​ (108,442) ​ Distributions to noncontrolling interest ​ — ​ ​ — ​ — ​ — ​ — ​ — ​ (5,500) ​ (5,500) ​ Acquisition of noncontrolling interest, net ​ — ​ ​ — ​ — ​ ​ — ​ ​ (65,477) ​ ​ — ​ ​ (38,784) ​ ​ (104,261) ​ Net income ​ — ​ ​ — ​ — ​ — ​ — ​ 87,289 ​ 3,477 ​ 90,766 ​ Balance at December 31, 2022 11,250,000 ​ ​ 281,250 ​ 209,320,447 ​ ​ 2,093 ​ ​ 2,465,595 ​ ​ (663,977) ​ ​ — ​ ​ 2,084,961 ​ Amortization of deferred stock compensation — ​ ​ — ​ — ​ ​ — ​ ​ 11,242 ​ ​ — ​ ​ — ​ 11,242 ​ Issuance of restricted common stock, net ​ — ​ ​ — ​ 138,522 ​ ​ 2 ​ ​ (3,778) ​ ​ — ​ ​ — ​ ​ (3,776) ​ Forfeiture of restricted common stock ​ — ​ ​ — ​ (8,192) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ Common stock distributions and distributions payable at $0.30 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (61,807) ​ ​ — ​ ​ (61,807) ​ Series G preferred stock dividends and dividends payable at $0.469437 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (1,244) ​ ​ — ​ ​ (1,244) ​ Series H preferred stock dividends and dividends payable at $1.531252 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (7,044) ​ ​ — ​ ​ (7,044) ​ Series I preferred stock dividends and dividends payable at $1.425000 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (5,700) ​ ​ — ​ ​ (5,700) ​ Repurchase of outstanding common stock — ​ ​ — ​ (5,971,192) ​ ​ (60) ​ ​ (56,343) ​ — ​ — ​ (56,403) ​ Acquisition of noncontrolling interest, net ​ — ​ ​ — ​ — ​ ​ — ​ ​ (299) ​ ​ — ​ ​ — ​ ​ (299) ​ Net income — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 206,708 ​ ​ — ​ 206,708 ​ Balance at December 31, 2023 11,250,000 ​ ​ 281,250 ​ 203,479,585 ​ 2,035 ​ 2,416,417 ​ (533,064) ​ — ​ 2,166,638 ​ Amortization of deferred stock compensation — ​ ​ — ​ — ​ ​ — ​ ​ 10,656 ​ ​ — ​ ​ — ​ 10,656 ​ Issuance of restricted common stock, net ​ — ​ ​ — ​ 178,376 ​ ​ 1 ​ ​ (4,161) ​ ​ — ​ ​ — ​ ​ (4,160) ​ Forfeiture of restricted common stock ​ — ​ ​ — ​ (68,131) ​ ​ (1) ​ ​ 1 ​ ​ — ​ ​ — ​ ​ — ​ Common stock distributions and distributions payable at $0.34 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (69,910) ​ ​ — ​ ​ (69,910) ​ Series G preferred stock dividends and dividends payable at $0.937500 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (2,484) ​ ​ — ​ ​ (2,484) ​ Series H preferred stock dividends and dividends payable at $1.531252 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (7,044) ​ ​ — ​ ​ (7,044) ​ Series I preferred stock dividends and dividends payable at $1.425000 per share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (5,700) ​ ​ — ​ ​ (5,700) ​ Repurchase of outstanding common stock — ​ ​ — ​ (2,764,837) ​ ​ (27) ​ ​ (27,211) ​ — ​ — ​ (27,238) ​ Net income — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 43,262 ​ ​ — ​ 43,262 ​ Balance at December 31, 2024 11,250,000 ​ $ 281,250 ​ 200,824,993 ​ $ 2,008 ​ $ 2,395,702 ​ $ (574,940) ​ $ — ​ $ 2,104,020 ​ ​ ​ ​ See accompanying notes to consolidated financial statements. ​ F-6 Table of Contents SUNSTONE HOTEL INVESTORS, INC.
As a result, our expenses may increase at higher rates than revenue. ​ Seasonality and Volatility ​ As is typical of the lodging industry, we experience seasonality in our business.
As a result, our expenses may increase at higher rates than our revenue. ​ Seasonality and Volatility ​ As is typical of the lodging industry, we experience seasonality in our business.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. ​ We evaluate our estimates on an ongoing basis.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and the related disclosure of contingent assets and liabilities. ​ We evaluate our estimates on an ongoing basis.
If an asset’s carrying value is not recoverable through those cash flows, the asset is considered to be impaired. The impairment is measured by the difference between the asset’s carrying amount and its fair value.
If an asset’s carrying value is not recoverable through those cash flows, the asset is considered to be impaired. The impairment is measured by the difference between the asset’s carrying amount and its fair value.
Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and for net operating loss, capital loss and tax credit carryforwards.
Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and for net operating loss, capital loss and tax credit carryforwards.
The deferred tax assets and liabilities are measured using the enacted income tax rates in effect for the year in which those temporary differences are expected to be realized or settled. The effect on the deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period when the new rate is enacted.
The deferred tax assets and liabilities are measured using the enacted income tax rates in effect for the year in which those temporary differences are expected to be realized or settled. The effect on the deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period when the new rate is enacted.
However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of all available evidence, including the future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies.
However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of all available evidence, including the future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies.
Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year.
Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year.
In April 2022, the Company began to recognize revenue associated with the residential program agreement at the Four Seasons Resort Napa Valley, amortizing the agreement using the straight-line method over the life of the related remaining 20-year management agreement.
The Company began to recognize revenue associated with the residential program agreement at the Four Seasons Resort Napa Valley in April 2022, amortizing the agreement using the straight-line method over the life of the related remaining 20-year management agreement.
Directors, Executive Officers and Corporate Governance ​ The information required by this Item is set forth under the captions “Proposal 1: Election of Directors,” and “Company Information” in our definitive Proxy Statement, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act and is incorporated herein by reference. ​ Certain other information concerning executive officers of the Company is included in Part I, Item 1 of this Annual Report on Form 10-K under the caption “ Information about our Executive Officers .” ​ ​ Item 1 1.
Directors, Executive Officers and Corporate Governance ​ The information required by this Item is set forth under the captions “Proposal 1: Election of Directors” and “Company Information” in our definitive Proxy Statement, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act and is incorporated herein by reference. ​ Certain other information concerning executive officers of the Company is included in Part I, Item 1 of this Annual Report on Form 10-K under the caption “ Information about our Executive Officers .” ​ ​ Item 1 1.
(incorporated by reference to Exhibit 4.1 to the registration statement on Form 8-A, filed by the Company on July 15, 2021). ​ ​ ​ 10.1 ​ Form of Master Agreement with Management Company (incorporated by reference to Exhibit 10.2 to the registration statement on Form S-11 (File No. 333-117141) filed by the Company). ​ ​ ​ 54 Table of Contents 10.2 ​ Form of Hotel Management Agreement (incorporated by reference to Exhibit 10.3 to the registration statement on Form S-11 (File No. 333-117141) filed by the Company). ​ ​ ​ 10.3 ​ Management Agreement Amendment dated as of July 1, 2005 (incorporated by reference to Exhibit 10.10.1 to Form 10-K, filed by the Company on February 15, 2006). ​ ​ ​ 10.3.1 ​ Management Agreement Amendment dated as of January 1, 2006 (incorporated by reference to Exhibit 10.3.2 to Form 10-K, filed by the Company on February 12, 2009). ​ ​ ​ 10.3.2 ​ Management Agreement Letter Amendment dated as of June 1, 2006 (incorporated by reference to Exhibit 10.3.3 to Form 10-K, filed by the Company on February 23, 2010). ​ ​ ​ 10.4 ​ Form of TRS Lease (incorporated by reference to Exhibit 10.9 to Form 10-K, filed by the Company on February 19, 2015). # ​ ​ ​ 10.5 ​ Eighth Amended and Restated Limited liability Agreement of Sunstone Hotel Partnership LLC (incorporated by reference to Exhibit 3.2 to Form 8-K, filed by the Company on July 16, 2021). ​ ​ ​ 10.6 ​ Sunstone Hotel Investors, Inc.
(incorporated by reference to Exhibit 4.1 to the registration statement on Form 8-A, filed by the Company on July 15, 2021). ​ ​ ​ 10.1 ​ Form of Master Agreement with Management Company (incorporated by reference to Exhibit 10.2 to the registration statement on Form S-11 (File No. 333-117141) filed by the Company). ​ ​ ​ 53 Table of Contents 10.2 ​ Form of Hotel Management Agreement (incorporated by reference to Exhibit 10.3 to the registration statement on Form S-11 (File No. 333-117141) filed by the Company). ​ ​ ​ 10.3 ​ Management Agreement Amendment dated as of July 1, 2005 (incorporated by reference to Exhibit 10.10.1 to Form 10-K, filed by the Company on February 15, 2006). ​ ​ ​ 10.3.1 ​ Management Agreement Amendment dated as of January 1, 2006 (incorporated by reference to Exhibit 10.3.2 to Form 10-K, filed by the Company on February 12, 2009). ​ ​ ​ 10.3.2 ​ Management Agreement Letter Amendment dated as of June 1, 2006 (incorporated by reference to Exhibit 10.3.3 to Form 10-K, filed by the Company on February 23, 2010). ​ ​ ​ 10.4 ​ Form of TRS Lease (incorporated by reference to Exhibit 10.9 to Form 10-K, filed by the Company on February 19, 2015). # ​ ​ ​ 10.5 ​ Eighth Amended and Restated Limited liability Agreement of Sunstone Hotel Partnership LLC (incorporated by reference to Exhibit 3.2 to Form 8-K, filed by the Company on July 16, 2021). ​ ​ ​ 10.6 ​ Sunstone Hotel Investors, Inc.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .” ​ Overview ​ Sunstone Hotel Investors, Inc. is a Maryland corporation. We operate as a self-managed and self-administered real estate investment trust.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .” ​ Overview ​ Sunstone Hotel Investors, Inc. is a Maryland corporation. We operate as a self-managed and self-administered real estate investment trust (“REIT”).
In addition, operating lease obligations include a ground lease that expires in 2071 and requires a reassessment of rent payments due after 2025, agreed upon by both us and the lessor; therefore, no amounts are included in the above table for this ground lease after 2025. ​ 48 Table of Contents Capital Expenditures and Reserve Funds ​ We believe we maintain all of our hotels in good repair and condition and in general conformity with applicable franchise and management agreements, ground lease, laws and regulations.
In addition, operating lease obligations include a ground lease that expires in 2071 and requires a reassessment of rent payments due after 2025, agreed upon by both us and the lessor; therefore, no amounts are included in the above table for this ground lease after 2025. ​ Capital Expenditures and Reserve Funds ​ We believe we maintain all of our hotels in good repair and condition and in general conformity with applicable franchise and management agreements, ground lease, laws, and regulations.
In February 2021, the Company’s board of directors reauthorized the Company’s existing stock repurchase program, allowing the Company to acquire up to $500.0 million of the Company’s common and preferred stock. The stock repurchase program has no stated expiration date.
In February 2021, the Company’s board of directors reauthorized the Company’s existing stock repurchase program, allowing the Company to acquire up to $500.0 million of the Company’s aggregate common and preferred stock. The stock repurchase program has no stated expiration date.
According to certain loan and management agreements, reserve funds are to be held by the lenders or managers in restricted cash accounts, and we are not required to spend the entire amount in such reserve accounts each year. ​ Inflation ​ Inflation affects our expenses, including, without limitation, by increasing such costs as wages, employee-related benefits, food costs, commodity costs, including those used to renovate or reposition our hotels, property taxes, property and liability insurance, utilities and borrowing costs.
According to certain management agreements, reserve funds are to be held by the managers in restricted cash accounts, and we are not required to spend the entire amount in such reserve accounts each year. ​ Inflation ​ Inflation affects our expenses, including, without limitation, by increasing such costs as wages, employee-related benefits, food costs, commodity costs, including those used to renovate or reposition our hotels, property taxes, property and liability insurance, utilities and borrowing costs.
There is no term or damage limitation on these indemnities; however, if an environmental matter arises, the Company could have recourse against other previous owners or a claim against its environmental insurance policies. ​ At December 31, 2023, the Company had $0.2 million of outstanding irrevocable letters of credit to guarantee the Company’s financial obligations related to workers’ compensation insurance programs from prior policy years.
There is no term or damage limitation on these indemnities; however, if an environmental matter arises, the Company could have recourse against other previous owners or a claim against its environmental insurance policies. ​ At December 31, 2024, the Company had $0.2 million of outstanding irrevocable letters of credit to guarantee the Company’s financial obligations related to workers’ compensation insurance programs from prior policy years.
The letters of credit are collateralized with $0.2 million held in a restricted bank account owned by the Company, which is included in restricted cash on the accompanying consolidated balance sheets as of both December 31, 2023 and 2022. ​ The Company is subject to various claims, lawsuits and legal proceedings, including routine litigation arising in the ordinary course of business, regarding the operation of its hotels, its managers and other Company matters.
The letters of credit are collateralized with $0.2 million held in a restricted bank account owned by the Company, which is included in restricted cash on the accompanying consolidated balance sheets as of both December 31, 2024 and 2023. ​ The Company is subject to various claims, lawsuits and legal proceedings, including routine litigation arising in the ordinary course of business, regarding the operation of its hotels, its managers, and other Company matters.
For the year ended December 31, 2023, no hotels were impaired. ​ Auditing management’s impairment assessment of investment in hotel properties was challenging because determining whether events or changes in circumstances indicate that the investment may not be recoverable is judgmental due to the subjectivity in evaluating management’s identification of indicators of impairment, specifically related to a change in the hold period and disposition strategy of a hotel investment.
For the year ended December 31, 2024, no hotels were impaired. ​ Auditing management’s impairment assessment of investment in hotel properties was challenging because determining whether events or changes in circumstances indicate that the investment may not be recoverable is judgmental due to the subjectivity in evaluating management’s identification of indicators of impairment, specifically related to a change in the hotel disposition strategy and hold period.
Pasquale (incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the Company on September 13, 2021). # ​ ​ ​ 10.26 ​ Form of Letter Agreement with Named Executive Officers (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on October 1, 2021). # ​ ​ ​ 10.27 ​ Loan Agreement, dated as of April 15, 2011, among One Park Boulevard, LLC as Borrower, Sunstone Park Lessee, LLC as Operating Lessee, Aareal Capital Corporation as Agent for the Lenders, and Aareal Capital Corporation as Lender (incorporated by reference to Exhibit 10.3 to Form 10-Q, filed by the Company on May 6, 2011). ​ ​ ​ 10.27.1 ​ Second Amendment to Loan Agreement, dated as of August 8, 2014, among One Park Boulevard, LLC as Borrower, Sunstone Park Lessee, LLC as Operating Lessee, MUFG Union Bank, N.A. as Agent for the Lenders, and MUFG Union Bank, N.A., Compass Bank and CIBC Inc. as Lenders (incorporated by reference to Exhibit 10.1 to Form 10-Q, filed by the Company on November 4, 2014). ​ ​ ​ 10.28 ​ Credit Agreement, dated April 2, 2015, among Sunstone Hotel Investors, Inc., Sunstone Hotel Partnership, LLC, Wells Fargo Bank, National Association, Bank of America, N.A., JPMORGAN Chase Bank, N.A. and certain other lenders named therein (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on April 2, 2015). ​ ​ ​ 10.28.1 ​ Term Loan Supplement Agreement, dated September 3, 2015, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., Wells Fargo Bank, National Association and certain other lenders named therein (incorporated by reference to Exhibit 10.1 to Form 10-Q, filed by the Company on November 3, 2015). ​ ​ ​ 10.28.2 ​ Amended and Restated Credit Agreement, dated October 17, 2018, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., certain lenders party thereto and Wells Fargo Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on October 19, 2018). ​ ​ ​ 10.28.3 ​ First Amendment to Amended and Restated Credit Agreement, dated July 15, 2020, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., certain lenders party thereto and Wells Fargo Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on July 17, 2020). ​ ​ ​ 10.28.4 ​ Second Amendment to Amended and Restated Credit Agreement, dated December 21, 2020, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., certain lenders party thereto and Wells Fargo Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on December 23, 2020). ​ ​ ​ 56 Table of Contents 10.28.5 ​ Third Amendment to Amended and Restated Credit Agreement, dated July 2, 2021 by and among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., certain lenders party thereto and Wells Fargo Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 Form 8-K, filed by the Company on July 8, 2021). ​ ​ ​ 10.28.6 ​ Fourth Amendment to Amended and Restated Credit Agreement, dated November 22, 2021 by and among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., certain lenders party thereto and Wells Fargo Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 Form 8-K, filed by the Company on November 26, 2021). ​ ​ ​ 10.28.7 ​ Second Amended and Restated Credit Agreement, dated July 25, 2022, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., certain lenders party thereto and Wells Fargo Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on July 27, 2022). ​ ​ ​ 10.29 ​ Note and Guarantee Agreement, dated December 20, 2016, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., the Initial Subsidiary Guarantors named therein, and the Purchasers named therein (incorporated by reference to Exhibit 10.20 to Form 10-K, filed by the Company on February 23, 2017). ​ ​ ​ 10.30 ​ First Amendment to Note and Guarantee Agreement, dated July 15, 2020, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., the subsidiary guarantors from time to time party thereto, and the Purchasers named therein (incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the Company on July 17, 2020). ​ ​ ​ 10.30.1 ​ Second Amendment to Note and Guarantee Agreement, dated December 21, 2020, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., the subsidiary guarantors from time to time party thereto, and the Purchasers named therein (incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the Company on December 23, 2020). ​ ​ ​ 10.30.2 ​ Third Amendment to Note and Guarantee Agreement, dated July 2, 2021, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., the subsidiary guarantors from time to time party thereto, and the Purchasers named therein (incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the Company on July 8, 2021). ​ ​ ​ 10.30.3 ​ Fourth Amendment to Note and Guarantee Agreement, dated November 22, 2021, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., the subsidiary guarantors from time to time party thereto, and the Purchasers named therein (incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the Company on November 26, 2021). ​ ​ ​ 10.31 ​ Term Loan Agreement, dated May 1, 2023, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., Bank of America, N.A., and certain other lenders named therein (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on May 5, 2023). ​ ​ ​ 21.1 ​ List of subsidiaries. * ​ ​ ​ 23.1 ​ Consent of Ernst & Young LLP. * ​ ​ ​ 31.1 ​ Certification of Principal Executive Officer (Section 302 Certification). * ​ ​ ​ 31.2 ​ Certification of Principal Financial Officer (Section 302 Certification). * ​ ​ ​ 32.1 ​ Certification of Principal Executive Officer and Principal Financial Officer (Section 906 Certification). * ​ ​ ​ 97.1 ​ Policy for Recovery of Erroneously Awarded Compensation. * ​ ​ ​ 101.INS ​ Inline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. * ​ ​ ​ 101.SCH ​ Inline XBRL Taxonomy Extension Schema Document * ​ ​ ​ 101.CAL ​ Inline XBRL Taxonomy Extension Calculation Linkbase Document * ​ ​ ​ 101.LAB ​ Inline XBRL Taxonomy Extension Label Linkbase Document * ​ ​ ​ 57 Table of Contents 101.PRE ​ Inline XBRL Taxonomy Extension Presentation Linkbase Document * ​ ​ ​ 101.DEF ​ Inline XBRL Taxonomy Extension Definition Linkbase Document * ​ ​ ​ 104 ​ Cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 formatted in Inline XBRL (included in Exhibit 101). * Filed herewith. # Management contract or compensatory plan or arrangement.
Pasquale (incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the Company on September 13, 2021). # ​ ​ ​ 10.26 ​ Form of Letter Agreement with Named Executive Officers (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on October 1, 2021). # ​ ​ ​ 10.27 ​ Loan Agreement, dated as of April 15, 2011, among One Park Boulevard, LLC as Borrower, Sunstone Park Lessee, LLC as Operating Lessee, Aareal Capital Corporation as Agent for the Lenders, and Aareal Capital Corporation as Lender (incorporated by reference to Exhibit 10.3 to Form 10-Q, filed by the Company on May 6, 2011). ​ ​ ​ 10.27.1 ​ Second Amendment to Loan Agreement, dated as of August 8, 2014, among One Park Boulevard, LLC as Borrower, Sunstone Park Lessee, LLC as Operating Lessee, MUFG Union Bank, N.A. as Agent for the Lenders, and MUFG Union Bank, N.A., Compass Bank and CIBC Inc. as Lenders (incorporated by reference to Exhibit 10.1 to Form 10-Q, filed by the Company on November 4, 2014). ​ ​ ​ 10.28 ​ Credit Agreement, dated April 2, 2015, among Sunstone Hotel Investors, Inc., Sunstone Hotel Partnership, LLC, Wells Fargo Bank, National Association, Bank of America, N.A., JPMORGAN Chase Bank, N.A. and certain other lenders named therein (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on April 2, 2015). ​ ​ ​ 10.28.1 ​ Term Loan Supplement Agreement, dated September 3, 2015, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., Wells Fargo Bank, National Association and certain other lenders named therein (incorporated by reference to Exhibit 10.1 to Form 10-Q, filed by the Company on November 3, 2015). ​ ​ ​ 10.28.2 ​ Amended and Restated Credit Agreement, dated October 17, 2018, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., certain lenders party thereto and Wells Fargo Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on October 19, 2018). ​ ​ ​ 10.28.3 ​ First Amendment to Amended and Restated Credit Agreement, dated July 15, 2020, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., certain lenders party thereto and Wells Fargo Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on July 17, 2020). ​ ​ ​ 10.28.4 ​ Second Amendment to Amended and Restated Credit Agreement, dated December 21, 2020, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., certain lenders party thereto and Wells Fargo Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on December 23, 2020). ​ ​ ​ 55 Table of Contents 10.28.5 ​ Third Amendment to Amended and Restated Credit Agreement, dated July 2, 2021 by and among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., certain lenders party thereto and Wells Fargo Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 Form 8-K, filed by the Company on July 8, 2021). ​ ​ ​ 10.28.6 ​ Fourth Amendment to Amended and Restated Credit Agreement, dated November 22, 2021 by and among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., certain lenders party thereto and Wells Fargo Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 Form 8-K, filed by the Company on November 26, 2021). ​ ​ ​ 10.28.7 ​ Second Amended and Restated Credit Agreement, dated July 25, 2022, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., certain lenders party thereto and Wells Fargo Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on July 27, 2022). ​ ​ ​ 10.29 ​ Note and Guarantee Agreement, dated December 20, 2016, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., the Initial Subsidiary Guarantors named therein, and the Purchasers named therein (incorporated by reference to Exhibit 10.20 to Form 10-K, filed by the Company on February 23, 2017). ​ ​ ​ 10.30 ​ First Amendment to Note and Guarantee Agreement, dated July 15, 2020, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., the subsidiary guarantors from time to time party thereto, and the Purchasers named therein (incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the Company on July 17, 2020). ​ ​ ​ 10.30.1 ​ Second Amendment to Note and Guarantee Agreement, dated December 21, 2020, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., the subsidiary guarantors from time to time party thereto, and the Purchasers named therein (incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the Company on December 23, 2020). ​ ​ ​ 10.30.2 ​ Third Amendment to Note and Guarantee Agreement, dated July 2, 2021, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., the subsidiary guarantors from time to time party thereto, and the Purchasers named therein (incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the Company on July 8, 2021). ​ ​ ​ 10.30.3 ​ Fourth Amendment to Note and Guarantee Agreement, dated November 22, 2021, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., the subsidiary guarantors from time to time party thereto, and the Purchasers named therein (incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the Company on November 26, 2021). ​ ​ ​ 10.31 ​ Term Loan Agreement, dated May 1, 2023, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., Bank of America, N.A., and certain other lenders named therein (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on May 5, 2023). ​ ​ ​ 10.32 ​ Term Loan Agreement, dated November 7, 2024, among Sunstone Hotel Partnership, LLC, Sunstone Hotel Investors, Inc., Wells Fargo Bank, National Association, and certain other lenders named therein (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on November 12, 2024). ​ ​ ​ 19 ​ Insider Trading Policies and Procedures. * ​ ​ ​ 21.1 ​ List of subsidiaries. * ​ ​ ​ 23.1 ​ Consent of Ernst & Young LLP. * ​ ​ ​ 31.1 ​ Certification of Principal Executive Officer (Section 302 Certification). * ​ ​ ​ 31.2 ​ Certification of Principal Financial Officer (Section 302 Certification). * ​ ​ ​ 32.1 ​ Certification of Principal Executive Officer and Principal Financial Officer (Section 906 Certification). * ​ ​ ​ 97.1 ​ Policy for Recovery of Erroneously Awarded Compensation. * ​ ​ ​ 101.INS ​ Inline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. * ​ ​ ​ 56 Table of Contents 101.SCH ​ Inline XBRL Taxonomy Extension Schema Document * ​ ​ ​ 101.CAL ​ Inline XBRL Taxonomy Extension Calculation Linkbase Document * ​ ​ ​ 101.LAB ​ Inline XBRL Taxonomy Extension Label Linkbase Document * ​ ​ ​ 101.PRE ​ Inline XBRL Taxonomy Extension Presentation Linkbase Document * ​ ​ ​ 101.DEF ​ Inline XBRL Taxonomy Extension Definition Linkbase Document * ​ ​ ​ 104 ​ Cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 formatted in Inline XBRL (included in Exhibit 101). * Filed herewith. # Management contract or compensatory plan or arrangement.
Based on its evaluation, our management concluded that our internal control over financial reporting was effective to the reasonable assurance level as of December 31, 2023. ​ Ernst & Young LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K and, as part of its audit, has issued its report, included herein at page 52, on the effectiveness of our internal control over financial reporting. ​ (c) Changes in Internal Control over Financial Reporting ​ There was no change in our internal control over financial reporting that occurred during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ​ 51 Table of Contents Report of Independent Registered Public Accounting Firm ​ The Board of Directors and Stockholders of Sunstone Hotel Investors, Inc. ​ Opinion on Internal Control over Financial Reporting ​ We have audited Sunstone Hotel Investors, Inc.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria).
Based on its evaluation, our management concluded that our internal control over financial reporting was effective to the reasonable assurance level as of December 31, 2024. ​ Ernst & Young LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K and, as part of its audit, has issued its report, included herein at page 51, on the effectiveness of our internal control over financial reporting. ​ (c) Changes in Internal Control over Financial Reporting ​ There was no change in our internal control over financial reporting that occurred during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ​ 50 Table of Contents Report of Independent Registered Public Accounting Firm ​ To the Stockholders and the Board of Directors of Sunstone Hotel Investors, Inc. ​ Opinion on Internal Control Over Financial Reporting ​ We have audited Sunstone Hotel Investors, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
Specifically, our revenues consist of the following: ​ ● Room revenue , which is comprised of revenue realized from the sale of rooms at our hotels; ​ ● Food and beverage revenue , which is comprised of revenue realized in the hotel food and beverage outlets as well as banquet and catering events; and ​ ● Other operating revenue , which includes ancillary hotel revenue and other items primarily driven by occupancy such as telephone/internet, parking, spa, facility and resort fees, entertainment and other guest services.
Specifically, our revenues consist of the following: ​ ● Room revenue , which is comprised of revenue realized from the sale of rooms at our hotels; ​ ● Food and beverage revenue , which is comprised of revenue realized in the hotel food and beverage outlets as well as banquet and catering events; and ​ ● Other operating revenue , which includes ancillary hotel revenue and other items primarily driven by occupancy such as telephone/internet, parking, spa, destination and resort fees, entertainment, and other guest services.
Certain Relationships and Related Transactions, and Director Independence ​ The information required by this Item is set forth under the caption “Certain Relationships and Related Transactions” and “Company Information” in our definitive Proxy Statement, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act and is incorporated herein by reference. ​ 53 Table of Contents Item 1 4.
Certain Relationships and Related Transactions, and Director Independence ​ The information required by this Item is set forth under the caption “Certain Relationships and Related Transactions” and “Company Information” in our definitive Proxy Statement, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act and is incorporated herein by reference. ​ 52 Table of Contents Item 1 4.
Factors the Company considers when assessing whether impairment indicators exist include hotel disposition strategy and hold period, a significant decline in operating results not related to renovations or repositionings, significant changes in the manner in which the Company uses the asset, physical damage to the property due to unforeseen events such as natural disasters, and other market and economic conditions. ​ Recoverability of assets that will continue to be used is measured by comparing the carrying amount of the asset to the related total future undiscounted net cash flows.
Factors the Company considers when assessing whether impairment indicators exist include, but are not limited to, hotel disposition strategy and hold period, a significant decline in operating results not related to renovations or repositionings, significant changes in the manner in which the Company uses the asset, physical damage to the property due to unforeseen events such as natural disasters, and other market and economic conditions. ​ Recoverability of assets that will continue to be used is measured by comparing the carrying amount of the asset to the related total future undiscounted net cash flows.
Safe Harbor contributions made by the Company totaled $0.2 million in each of the years 2023, 2022 and 2021, and were included in corporate overhead expense on the Company’s consolidated statements of operations. ​ The Company is also responsible for funding various retirement plans at certain hotels operated by its management companies.
Safe Harbor contributions made by the Company totaled $0.2 million in each of the years 2024, 2023, and 2022, and were included in corporate overhead expense on the Company’s consolidated statements of operations. ​ The Company is also responsible for funding various retirement plans at certain hotels operated by its management companies.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. ​ We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 23, 2024 expressed an unqualified opinion thereon. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company's management.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. ​ We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 21, 2025 expressed an unqualified opinion thereon. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company's management.
Giglia (incorporated by reference to Exhibit 10.2 to Form 10-Q, filed by the Company on November 8, 2022). # ​ ​ ​ 55 Table of Contents 10.19 ​ Fourth Amended and Restated Employment Agreement, dated as of August 29, 2022, by and among Sunstone Hotel Investors, Inc., Sunstone Hotel Partnership, LLC and Robert C.
Giglia (incorporated by reference to Exhibit 10.2 to Form 10-Q, filed by the Company on November 8, 2022). # ​ ​ ​ 54 Table of Contents 10.19 ​ Fourth Amended and Restated Employment Agreement, dated as of August 29, 2022, by and among Sunstone Hotel Investors, Inc., Sunstone Hotel Partnership, LLC and Robert C.
We exclude the noncash amortization of contract intangibles because it is based on historical cost accounting and is of lesser significance in evaluating our actual performance for the current period. ​ ● Real estate amortization of right-of-use assets and obligations : we exclude the amortization of our real estate right-of-use assets and related lease obligations, which includes the amortization of both our finance and operating lease intangibles (with the exception of our corporate operating lease), as these expenses are based on historical cost accounting and do not reflect the actual rent amounts due to the respective lessors or the underlying performance of our hotels. ​ ● Gains or losses from debt transactions : we exclude the effect of finance charges and premiums associated with the extinguishment of debt, including the acceleration of deferred financing costs from the original issuance of the debt being redeemed or retired, as well as the noncash interest on our derivatives and finance lease obligation.
We exclude the noncash amortization of contract intangibles because it is based on historical cost accounting and is of lesser significance in evaluating our actual performance for the current period. ​ ● Real estate amortization of right-of-use assets and obligations : we exclude the amortization of our real estate right-of-use assets and related lease obligations (with the exception of our corporate operating lease) as these expenses are based on historical cost accounting and do not reflect the actual rent amounts due to the respective lessors or the underlying performance of our hotels. ​ ● Gains or losses from debt transactions : we exclude the effect of finance charges and premiums associated with the extinguishment of debt, including the acceleration of deferred financing costs from the original issuance of the debt being redeemed or retired, as well as the noncash interest on our derivatives.
We adjust FFO attributable to common stockholders for the following items, which may occur in any period, and refer to this measure as Adjusted FFO attributable to common stockholders: ● Amortization of deferred stock compensation : we exclude the noncash expense incurred with the amortization of deferred stock compensation as this expense is based on historical stock prices at the date of grant to our corporate employees and does not reflect the underlying performance of our hotels. 44 Table of Contents ● Amortization of contract intangibles : we exclude the noncash amortization of any favorable or unfavorable contract intangibles recorded in conjunction with our hotel acquisitions.
We adjust FFO attributable to common stockholders for the following items, which may occur in any period, and refer to this measure as Adjusted FFO attributable to common stockholders: ● Amortization of deferred stock compensation : we exclude the noncash expense incurred with the amortization of deferred stock compensation as this expense is based on historical stock prices at the date of grant to our corporate employees and does not reflect the underlying performance of our hotels. ● Amortization of contract intangibles : we exclude the noncash amortization of any favorable or unfavorable contract intangibles recorded in conjunction with our hotel acquisitions.
No hotels were considered held for sale as of either December 31, 2023 or 2022. ​ Deferred Financing Costs ​ Deferred financing costs consist of loan fees and other financing costs related to the Company’s outstanding indebtedness and credit facility commitments and are amortized to interest expense over the terms of the related debt or commitment.
No hotels were considered held for sale as of either December 31, 2024 or 2023. ​ Deferred Financing Costs ​ Deferred financing costs consist of loan fees and other financing costs related to the Company’s outstanding indebtedness and credit facility commitments and are amortized to interest expense over the terms of the related debt or commitment.
In particular, the evaluation of impairment indicators was based on qualitative and quantitative factors for the specific hotel properties as determined by management. Such factors included, but were not limited to, significant changes to the hotel disposition strategy and hold period, and other market and economic conditions.
In particular, the evaluation of impairment indicators was based on qualitative and quantitative factors for the specific hotel investment as determined by management. Such factors included, but were not limited to, significant changes to the hotel disposition strategy and hold period, and other market and economic conditions.
Summary of Significant Accounting Policies ​ Basis of Presentation ​ The accompanying consolidated financial statements as of December 31, 2023 and 2022, and for the years ended December 31, 2023, 2022 and 2021, include the accounts of the Company, the Operating Partnership, the TRS Lessee, and their controlled subsidiaries. All significant intercompany balances and transactions have been eliminated.
Summary of Significant Accounting Policies ​ Basis of Presentation ​ The accompanying consolidated financial statements as of December 31, 2024 and 2023, and for the years ended December 31, 2024, 2023 and 2022, include the accounts of the Company, the Operating Partnership, the TRS Lessee, and their controlled subsidiaries. All significant intercompany balances and transactions have been eliminated.
(3) Residential program agreements as of both December 31, 2023 and 2022 included $13.7 million and $7.3 million at the Montage Healdsburg and the Four Seasons Resort Napa Valley, respectively. The value of the agreements were determined based on each hotel’s purchase price allocation.
(3) Residential program agreements as of both December 31, 2024 and 2023 included $13.7 million and $7.3 million at the Montage Healdsburg and the Four Seasons Resort Napa Valley, respectively. The value of the agreements were determined based on each hotel’s purchase price allocation.
These assumptions are required to be consistent with market participant assumptions that are reasonably available. ​ As of both December 31, 2023 and 2022, the Company measured its interest rate derivatives at fair value on a recurring basis.
These assumptions are required to be consistent with market participant assumptions that are reasonably available. ​ As of both December 31, 2024 and 2023, the Company measured its interest rate derivatives at fair value on a recurring basis.
(2) Interest is calculated based on the loan balances and variable rates, as applicable, at December 31, 2023, and includes the effect of our interest rate derivatives. (3) Operating lease obligations include the lease on our current corporate headquarters and the sublease on our former corporate headquarters.
(2) Interest is calculated based on the loan balances and variable rates, as applicable, at December 31, 2024, and includes the effect of our interest rate derivatives. (3) Operating lease obligations include the lease on our current corporate headquarters and the sublease on our former corporate headquarters.
(incorporated by reference to Exhibit 4.1 to the registration statement on Form S-11 (File No. 333-117141) filed by the Company). ​ ​ ​ 4.2 ​ Letter furnished to Securities and Exchange Commission agreeing to furnish certain debt instruments (incorporated by reference to Exhibit 4.2 to the registration statement on Form S-11 (File No. 333-117141) filed by the Company). ​ ​ ​ 4.5 ​ Description of Securities of the Registrant. * ​ ​ ​ 4.6 ​ Articles Supplementary for Series G preferred stock (incorporated by reference to Exhibit 3.1 to Form 8-K, filed by the Company on April 28, 2021). ​ ​ ​ 4.7 ​ Articles Supplementary for Series H preferred stock (incorporated by reference to Exhibit 3.3 to the registration statement on Form 8-A, filed by the Company on May 20, 2021). ​ ​ ​ 4.8 ​ Articles Supplementary for Series I preferred stock (incorporated by reference to Exhibit 3.3 to the registration statement on Form 8-A, filed by the Company on July 15, 2021). ​ ​ ​ 4.9 ​ Form of Specimen Certificate of Series H Preferred Stock of Sunstone Hotel Investors, Inc.
(incorporated by reference to Exhibit 4.1 to the registration statement on Form S-11 (File No. 333-117141) filed by the Company). ​ ​ ​ 4.2 ​ Letter furnished to Securities and Exchange Commission agreeing to furnish certain debt instruments (incorporated by reference to Exhibit 4.2 to the registration statement on Form S-11 (File No. 333-117141) filed by the Company). ​ ​ ​ 4.5 ​ Description of Securities of the Registrant (incorporated by reference to Exhibit 4.5 to Form 10-K, filed by the Company on February 23, 2024. ​ ​ ​ 4.6 ​ Articles Supplementary for Series G preferred stock (incorporated by reference to Exhibit 3.1 to Form 8-K, filed by the Company on April 28, 2021). ​ ​ ​ 4.7 ​ Articles Supplementary for Series H preferred stock (incorporated by reference to Exhibit 3.3 to the registration statement on Form 8-A, filed by the Company on May 20, 2021). ​ ​ ​ 4.8 ​ Articles Supplementary for Series I preferred stock (incorporated by reference to Exhibit 3.3 to the registration statement on Form 8-A, filed by the Company on July 15, 2021). ​ ​ ​ 4.9 ​ Form of Specimen Certificate of Series H Preferred Stock of Sunstone Hotel Investors, Inc.
Nareit defines EBITDA re as net income (calculated in accordance with GAAP) plus interest expense, income tax expense, depreciation and amortization, gains or losses on the disposition of depreciated property (including gains or losses on change in control), impairment write-downs of depreciated property and of investments in 42 Table of Contents unconsolidated affiliates caused by a decrease in the value of depreciated property in the affiliate, and adjustments to reflect the entity’s share of EBITDA re of unconsolidated affiliates. ​ We make additional adjustments to EBITDA re when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful information to investors regarding our operating performance, and that the presentation of Adjusted EBITDA re , excluding noncontrolling interest, when combined with the primary GAAP presentation of net income, is beneficial to an investor’s complete understanding of our operating performance.
Nareit defines EBITDA re as net income (calculated in accordance with GAAP) plus interest expense, income tax expense, depreciation and amortization, gains or losses on the disposition of depreciated property (including gains or losses on change in control), impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in the value of depreciated property in the affiliate, and adjustments to reflect the entity’s share of EBITDA re of unconsolidated affiliates. ​ We make additional adjustments to EBITDA re when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful information to investors regarding our operating performance, and that the presentation of Adjusted EBITDA re , when combined with the primary GAAP presentation of net income, is beneficial to an investor’s complete understanding of our operating performance.
The following performance indicators are commonly used in the hotel industry: ​ ● Occupancy , which is the quotient of total rooms sold divided by total rooms available ; ​ 37 Table of Contents ● Average daily room rate , or ADR, which is the quotient of room revenue divided by total rooms sold; ​ ● Revenue per available room , or RevPAR, which is the product of occupancy and ADR, and does not include food and beverage revenue, or other operating revenue; ​ ● RevPAR index, which is the quotient of a hotel’s RevPAR divided by the average RevPAR of its competitors, multiplied by 100.
The following performance indicators are commonly used in the hotel industry: ​ ● Occupancy , which is the quotient of total rooms sold divided by total rooms available ; ​ ● Average daily room rate , or ADR, which is the quotient of room revenue divided by total rooms sold; ​ ● Revenue per available room , or RevPAR, which is the product of occupancy and ADR, and does not include food and beverage revenue, or other operating revenue; ​ ● RevPAR index, which is the quotient of a hotel’s RevPAR divided by the average RevPAR of its competitors, multiplied by 100.
If a loan is refinanced or paid before its maturity, any unamortized deferred financing costs will generally be expensed unless specific rules are met that would allow for the carryover of such costs to the refinanced debt. ​ F-11 Table of Contents Deferred financing costs related to the Company’s undrawn credit facility are included on the Company’s consolidated balance sheets as an asset and are amortized ratably over the term of the line of credit arrangement, regardless of whether there are any outstanding borrowings on the line of credit arrangement.
If a loan is refinanced or paid before its maturity, any unamortized deferred financing costs will generally be expensed unless specific rules are met that would allow for the carryover of such costs to the refinanced debt. ​ Deferred financing costs related to the Company’s undrawn credit facility are included on the Company’s consolidated balance sheets as an asset and are amortized ratably over the term of the line of credit arrangement, regardless of whether there are any outstanding borrowings on the line of credit arrangement.
Term Loan 3’s variable interest rate is based on a pricing grid with a range of 1.35% to 2.20%, depending on our leverage ratios, plus SOFR and a 0.10% adjustment.
Term Loan 4’s variable interest rate is based on a pricing grid with a range of 1.35% to 2.20%, depending on our leverage ratios, plus SOFR and a 0.10% adjustment.
Cancellation fees and attrition fees, which are charged to groups when they do not fulfill their contracted minimum number of room nights or minimum food and beverage spending requirements, are typically recognized as revenue in the period the Company determines it is probable that a significant reversal in the amount of revenue recognized will not occur, which is generally the period in which these fees are collected. ​ Food and beverage revenue and other ancillary services revenue are generated when a customer chooses to purchase goods or services.
Cancellation fees and attrition fees, which are charged to groups when they do not fulfill their contracted minimum number of room nights or minimum food and beverage spending requirements, are typically recognized as revenue in the period the Company determines it is probable that a significant reversal in the amount of revenue recognized will not occur, which is generally the period in which these fees are collected. ​ F-12 Table of Contents Food and beverage revenue and other ancillary services revenue are generated when a customer chooses to purchase goods or services.
Leases ​ As of both December 31, 2023 and 2022, the Company had operating leases for ground, office, equipment and airspace leases with maturity dates ranging from 2024 through 2097, excluding renewal options.
Leases ​ As of both December 31, 2024 and 2023, the Company had operating leases for ground, office, equipment, and airspace leases with maturity dates ranging from 2025 through 2097, excluding renewal options.
If the Company chooses not to redeem the Series H preferred stock upon the occurrence of a change of control, holders of the Series H preferred stock may convert their preferred shares into shares of the Company’s common stock. ​ Series I Cumulative Redeemable Preferred Stock ​ In July 2021, the Company issued 4,000,000 shares of its 5.70% Series I preferred stock with a liquidation preference of $25.00.
If the Company chooses not to redeem the Series H preferred stock upon the occurrence of a change of control, holders of the Series H preferred stock may convert their preferred shares into shares of the Company’s common stock. ​ F-25 Table of Contents Series I Cumulative Redeemable Preferred Stock ​ In July 2021, the Company issued 4,000,000 shares of its 5.70% Series I preferred stock with a liquidation preference of $25.00.
(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria. ​ We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and the financial statement schedule listed in the Index at Item 15 and our report dated February 23, 2024 expressed an unqualified opinion thereon. ​ Basis for Opinion ​ The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.
(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria. ​ We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations, equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated February 21, 2025 expressed an unqualified opinion thereon. ​ Basis for Opinion ​ The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.
The sale did not represent a strategic shift that had a major impact on the Company’s business plan or its primary markets; therefore, the hotel disposition did not qualify as a discontinued operation. ​ F-17 Table of Contents Disposals - 2022 ​ In February 2022, the Company sold the Hyatt Centric Chicago Magnificent Mile and in March 2022, the Company sold both the Embassy Suites Chicago and the Hilton Garden Inn Chicago Downtown/Magnificent Mile, all three of which are located in Illinois.
The sale did not represent a strategic shift that had a major impact on the Company’s business plan or its primary markets; therefore, the hotel disposition did not qualify as a discontinued operation. ​ Disposals - 2022 ​ In February 2022, the Company sold the Hyatt Centric Chicago Magnificent Mile and in March 2022, the Company sold both the Embassy Suites Chicago and the Hilton Garden Inn Chicago Downtown/Magnificent Mile, all three of which are located in Illinois.
The Company’s management is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which includes federal and certain states. ​ The Company recognizes any penalties and interest related to unrecognized tax benefits in income tax expense in its consolidated statements of operations. ​ Dividends ​ Under current federal income tax laws related to REITs, the Company is required to distribute at least 90% of its REIT taxable income to its stockholders.
The Company’s management is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which includes federal and certain states. ​ The Company recognizes any penalties and interest related to unrecognized tax benefits in income tax expense in its consolidated statements of operations. ​ F-13 Table of Contents Dividends ​ Under current federal income tax laws related to REITs, the Company is required to distribute at least 90% of its REIT taxable income to its stockholders.
The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. ​ ​ ​ ​ Impairment of hotel properties ​ ​ Description of the Matter ​ The Company’s investment in hotel properties totaled $2.6 billion as of December 31, 2023.
The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. ​ ​ ​ ​ Impairment of hotel properties ​ Description of the Matter ​ The Company’s investment in hotel properties totaled $2.9 billion as of December 31, 2024.
Factors we consider when assessing whether impairment indicators exist include hotel disposition strategy and hold period, a significant decline in operating results not related to renovations or repositionings, significant changes in the manner in which the Company uses the asset, physical damage to the property due to unforeseen events such as natural disasters, and other market and economic conditions. ​ 49 Table of Contents Recoverability of assets that will continue to be used is measured by comparing the carrying amount of the asset to the related total future undiscounted net cash flows.
Factors we consider when assessing whether impairment indicators exist include, but are not limited to, hotel disposition strategy and hold period, a significant decline in operating results not related to renovations or repositionings, significant changes in the manner in which the Company uses the asset, physical damage to the property due to unforeseen events such as natural disasters, and other market and economic conditions. ​ Recoverability of assets that will continue to be used is measured by comparing the carrying amount of the asset to the related total future undiscounted net cash flows.
At December 31, 2023 and 2022, the Company had amounts in banks that were in excess of federally insured amounts. ​ Restricted Cash ​ Restricted cash primarily includes reserves for operating expenses and capital expenditures required by certain of the Company’s management, franchise and debt agreements.
At December 31, 2024 and 2023, the Company had amounts in banks that were in excess of federally insured amounts. ​ Restricted Cash ​ Restricted cash primarily includes reserves for operating expenses and capital expenditures required by certain of the Company’s management and franchise agreements.
As part of our evaluation of indicators of impairment, we considered management’s disposition strategy and hold period, current industry and economic conditions and other relevant factors. ​ ​ ​ ​ /s/ Ernst & Young LLP ​ We have served as the Company’s auditor since 2004. ​ ​ ​ ​ Irvine, California ​ February 23, 2024 ​ ​ ​ ​ F-3 Table of Contents SUNSTONE HOTEL INVESTORS, INC.
As part of our evaluation of indicators of impairment, we considered management’s hotel disposition strategy and hold period, current industry and economic conditions and other relevant factors. ​ ​ ​ ​ /s/ Ernst & Young LLP ​ We have served as the Company’s auditor since 2004. ​ ​ ​ ​ Irvine, California ​ ​ February 21, 2025 ​ ​ ​ ​ F-3 Table of Contents SUNSTONE HOTEL INVESTORS, INC.
Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. ​ F-13 Table of Contents The Company reviews any uncertain tax positions and, if necessary, records the expected future tax consequences of uncertain tax positions in its consolidated financial statements.
Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. ​ The Company reviews any uncertain tax positions and, if necessary, records the expected future tax consequences of uncertain tax positions in its consolidated financial statements.
Other property-level expenses on the Company’s consolidated statements of operations includes matching contributions into these various retirement plans of $1.6 million in 2023, $1.4 million in 2022 and $1.0 million in 2021. ​ Collective Bargaining Agreements ​ The Company is subject to exposure to collective bargaining agreements at certain hotels operated by its management companies.
Other property-level expenses on the Company’s consolidated statements of operations includes matching contributions into these various retirement plans of $2.0 million, $1.6 million, and $1.4 million in 2024, 2023, and 2022, respectively. ​ Collective Bargaining Agreements ​ The Company is subject to exposure to collective bargaining agreements at certain hotels operated by its management companies.
We expect our primary sources of cash will continue to be our working capital, credit facility, additional issuances of notes payable, dispositions of hotel properties and proceeds from offerings of common and preferred stock. However, there can be no assurance that our future asset sales, debt issuances or equity offerings will be successfully completed.
We expect our primary sources of cash will continue to be our operating activities, working capital, borrowing under our credit facility, additional issuances of notes payable, dispositions of hotel properties and proceeds from offerings of common and preferred stock. However, there can be no assurance that our future asset sales, debt issuances or equity offerings will be successfully completed.
Intangible assets are amortized using the straight-line method over the shorter of their estimated useful life or over the length of the related agreement. ​ The Company’s investment in hotel properties, net also includes initial franchise fees which are recorded at cost and amortized using the straight-line method over the terms of the franchise agreements ranging from fifteen years to twenty years .
Intangible assets are amortized using the straight-line method over the shorter of their estimated useful life or over the length of the related agreement. ​ The Company’s investment in hotel properties, net also includes initial franchise fees which are recorded at cost and amortized using the straight-line method over the terms of the franchise agreements, which currently range from fifteen years to twenty-one years .
In addition, we use both EBITDA re and Adjusted EBITDA re , excluding noncontrolling interest as measures in determining the value of hotel acquisitions and dispositions. ​ We adjust EBITDA re for the following items, which may occur in any period, and refer to this measure as Adjusted EBITDA re , excluding noncontrolling interest: ​ ● Amortization of deferred stock compensation : we exclude the noncash expense incurred with the amortization of deferred stock compensation as this expense is based on historical stock prices at the date of grant to our corporate employees and does not reflect the underlying performance of our hotels. ​ ● Amortization of contract intangibles : we exclude the noncash amortization of any favorable or unfavorable contract intangibles recorded in conjunction with our hotel acquisitions.
In addition, we use both EBITDA re and Adjusted EBITDA re as measures in determining the value of hotel acquisitions and dispositions. ​ 42 Table of Contents We adjust EBITDA re for the following items, which may occur in any period, and refer to this measure as Adjusted EBITDA re : ​ ● Amortization of deferred stock compensation : we exclude the noncash expense incurred with the amortization of deferred stock compensation as this expense is based on historical stock prices at the date of grant to our corporate employees and does not reflect the underlying performance of our hotels. ​ ● Amortization of contract intangibles : we exclude the noncash amortization of any favorable or unfavorable contract intangibles recorded in conjunction with our hotel acquisitions.
(2) During 2022, the Company paid a total of $7.4 million in deferred financing costs related to its Amended Credit Agreement.
(3) During 2022, the Company paid a total of $7.4 million in deferred financing costs related to its Amended Credit Agreement.
Deferred financing costs related to the Company’s outstanding debt are included on the Company’s consolidated balance sheets as a contra-liability (see Note 7), and subsequently amortized ratably over the term of the related debt. ​ Interest Rate Derivatives ​ The Company’s objective in holding interest rate derivatives is to manage its exposure to the interest rate risks related to its floating rate debt.
Deferred financing costs related to the Company’s outstanding debt are included on the Company’s consolidated balance sheets as a contra-liability (see Note 7), and subsequently amortized ratably over the term of the related debt. ​ F-11 Table of Contents Interest Rate Derivatives ​ The Company’s objective in holding interest rate derivatives is to manage its exposure to the interest rate risks related to its floating rate debt.
Future repurchases will depend on various factors, including the Company’s capital needs and restrictions under its various financing agreements, as well as the price of the Company’s common and preferred stock. ​ F-28 Table of Contents ATM Agreements . In February 2017, the Company entered into separate “At the Market” Agreements (the “2017 ATM Agreements”) with several financial institutions.
Future repurchases will depend on various factors, including the Company’s capital needs and restrictions under its various financing agreements, as well as the price of the Company’s common and preferred stock. ​ ATM Agreements . In February 2017, the Company entered into separate “At the Market” Agreements (the “2017 ATM Agreements”) with several financial institutions.
We use the following “non-GAAP financial measures” that we believe are useful to investors as key supplemental measures of our operating performance: EBITDA re ; Adjusted EBITDA re , excluding noncontrolling interest; FFO attributable to common stockholders; and Adjusted FFO attributable to common stockholders.
We use the following “non-GAAP financial measures” that we believe are useful to investors as key supplemental measures of our operating performance: EBITDA re ; Adjusted EBITDA re ; FFO attributable to common stockholders; and Adjusted FFO attributable to common stockholders.
Actual results could differ materially from those estimates. ​ Cash and Cash Equivalents ​ Cash and cash equivalents includes cash on hand and in various bank accounts plus credit card receivables and all short-term investments with an original maturity of three months or less. ​ The Company maintains cash and cash equivalents with various financial institutions.
Actual results could differ materially from those estimates. ​ F-9 Table of Contents Cash and Cash Equivalents ​ Cash and cash equivalents includes cash on hand and in various bank accounts plus credit card receivables and all short-term investments with an original maturity of three months or less. ​ The Company maintains cash and cash equivalents with various financial institutions.
Similarly, we also evaluate our operators’ effectiveness in minimizing incremental operating expenses in the context of increasing revenues or, conversely, in reducing operating expenses in the context of declining revenues. Inflationary pressures could increase operating costs, which could limit our operators’ effectiveness in minimizing expenses. ​ Operating Results .
Similarly, we also evaluate our operators’ effectiveness in minimizing incremental operating expenses in the context of increasing revenues or, conversely, in reducing operating expenses in the context of declining revenues. Inflationary pressures could increase operating costs, which could limit our operators’ effectiveness in minimizing expenses. ​ 38 Table of Contents Operating Results .
How We Addressed the Matter in Our Audit ​ We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls related to the impairment assessment of investment in hotel properties, including controls over management’s identification of indicators of impairment. ​ We performed audit procedures to test management’s identification of events or changes in circumstances that might indicate that the carrying amount of a hotel might not be recoverable, that included, among others, obtaining evidence to corroborate management’s judgments and searching for contrary evidence such as significant declines in operating results, market and economic conditions, disposition strategies, or market effects.
F-2 Table of Contents How We Addressed the Matter in Our Audit ​ We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls related to the impairment assessment of investment in hotel properties, including controls over management’s identification of indicators of impairment. ​ We performed audit procedures to test management’s identification of events or changes in circumstances that might indicate that the carrying amount of a hotel might not be recoverable, that included, among others, obtained evidence to corroborate management’s judgments and searched for contrary evidence such as significant declines in operating results, market and economic conditions, disposition strategies, or market effects.
Based on the Company’s common stock performance, the Company excluded 188,004 anti-dilutive performance-based restricted stock units from its calculations of diluted earnings per share for the years ended December 31, 2023 and 2022 (see Note 12). ​ Segment Reporting ​ The Company considers each of its hotels to be an operating segment and allocates resources and assesses the operating performance for each hotel.
Based on the Company’s common stock performance, the Company excluded F-14 Table of Contents 188,004 anti-dilutive performance-based restricted stock units from its calculations of diluted earnings per share for the years ended December 31, 2024, 2023, and 2022 (see Note 12). ​ Segment Reporting ​ The Company considers each of its hotels to be an operating segment and allocates resources and assesses the operating performance for each hotel.
The amount funded into each of these reserve accounts is determined pursuant to the management, franchise and loan agreements for each of the respective hotels, ranging between 1.0% and 5.0% of the respective hotel’s applicable annual revenue.
The amount funded into each of these reserve accounts is determined pursuant to the management and franchise agreements for each of the respective hotels, ranging between 2.0% and 5.5% of the respective hotel’s applicable annual revenue.
Fair Value Measurements and Interest Rate Derivatives ​ Fair Value Measurements ​ As of December 31, 2023 and 2022, the carrying amount of certain financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, and accounts payable and accrued expenses were representative of their fair values due to the short-term maturity of these instruments. ​ F-18 Table of Contents A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability in an orderly transaction.
Fair Value Measurements and Interest Rate Derivatives ​ Fair Value Measurements ​ As of December 31, 2024 and 2023, the carrying amount of certain financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, and accounts payable and accrued expenses were representative of their fair values due to the short-term maturity of these instruments. ​ A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability in an orderly transaction.
Additionally, this category includes, among other things, attrition and cancellation revenue, tenant revenue derived from hotel space and marina slips leased by third parties, winery revenue, any business interruption proceeds and any performance guarantee or reimbursements to offset net losses. ​ 36 Table of Contents Expenses.
Additionally, this category includes, among other things, attrition and cancellation revenue, tenant revenue derived from hotel space and marina slips leased by third parties, winery revenue, any business interruption proceeds and any performance guarantee or reimbursements to offset net losses. ​ Expenses.
(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations , equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”).
(the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations , equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).
(2) Prior to the sale of the Hyatt Centric Chicago Magnificent Mile in February 2022 (see Note 4), franchise royalties included key money received from the hotel’s franchisor, which the Company was amortizing over the term of the hotel’s franchise agreement. ​ Renovation and Construction Commitments ​ At December 31, 2023, the Company had various contracts outstanding with third parties in connection with the ongoing renovations of certain of its hotel properties.
(2) Prior to the sale of the Hyatt Centric Chicago Magnificent Mile in February 2022 (see Note 4), franchise royalties included key money received from the hotel’s franchisor, which the Company was amortizing over the term of the hotel’s franchise agreement. ​ F-30 Table of Contents Renovation and Construction Commitments ​ At December 31, 2024, the Company had various contracts outstanding with third parties in connection with the ongoing renovations of certain of its hotel properties.
In February 2023, the Company was relieved of an additional $9.8 million of the potential obligation and the funds were released from escrow to the Company, resulting in a $9.8 million gain on extinguishment of debt.
In the first quarter of 2023, the Company was relieved of an additional $9.8 million of the potential obligation and the funds were released from escrow to the Company, resulting in a $9.8 million gain on extinguishment of debt.
As more fully described in Note 2 to the consolidated financial statements, the Company records impairment losses for investments in hotel properties whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.
As more fully described in Note 2 to the consolidated financial statements, the Company records impairment losses for investments in hotel properties to be held and used by the Company whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.
McCabe ​ ​ ​ ​ ​ ​ ​ ​ ​ /S/ VERETT MIMS ​ Director ​ February 23, 2024 Verett Mims ​ ​ ​ ​ ​ ​ ​ ​ 59 Table of Contents ​ INDEX TO FINANCIAL STATEMENTS AND SCHEDULE ​ ​ ​ ​ Sunstone Hotel Investors, Inc.: Page ​ ​ ​ Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) ​ F-2 ​ ​ ​ Consolidated Balance Sheets as of December 31, 2023 and 2022 ​ F-4 ​ ​ ​ Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021 ​ F-5 ​ ​ ​ Consolidated Statements of Equity for the years ended December 31, 2023, 2022 and 2021 ​ F-6 ​ ​ ​ Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 ​ F-7 ​ ​ ​ Notes to Consolidated Financial Statements ​ F-9 ​ ​ ​ Schedule III—Real Estate and Accumulated Depreciation ​ F-34 ​ ​ ​ F-1 Table of Contents Report of Independent Registered Public Accounting Firm ​ To the Board of Directors and Stockholders of Sunstone Hotel Investors, Inc. ​ Opinion on the Financial Statements ​ We have audited the accompanying consolidated balance sheets of Sunstone Hotel Investors, Inc.
McCabe ​ ​ ​ ​ ​ ​ ​ ​ ​ /S/ VERETT MIMS ​ Director ​ February 21, 2025 Verett Mims ​ ​ ​ ​ ​ ​ ​ ​ 58 Table of Contents ​ INDEX TO FINANCIAL STATEMENTS AND SCHEDULE ​ ​ ​ ​ Sunstone Hotel Investors, Inc.: Page ​ ​ ​ Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) ​ F-2 ​ ​ ​ Consolidated Balance Sheets as of December 31, 2024 and 2023 ​ F-4 ​ ​ ​ Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022 ​ F-5 ​ ​ ​ Consolidated Statements of Equity for the years ended December 31, 2024, 2023 and 2022 ​ F-6 ​ ​ ​ Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 ​ F-7 ​ ​ ​ Notes to Consolidated Financial Statements ​ F-9 ​ ​ ​ Schedule III—Real Estate and Accumulated Depreciation ​ F-33 ​ ​ ​ F-1 Table of Contents Report of Independent Registered Public Accounting Firm ​ To the Stockholders and the Board of Directors of Sunstone Hotel Investors, Inc. ​ Opinion on the Financial Statements ​ We have audited the accompanying consolidated balance sheets of Sunstone Hotel Investors, Inc.
If we renovate additional hotels in the future, our capital expenditures will likely increase. ​ With respect to our hotels that are operated under management or franchise agreements with major national hotel brands and our hotel subject to a first mortgage lien, we are obligated to maintain an FF&E reserve account for future planned and emergency-related capital expenditures at these hotels.
If we renovate additional hotels in the future, our capital expenditures will likely increase. ​ With respect to our hotels that are operated under management or franchise agreements with major national hotel brands, we are obligated to maintain an FF&E reserve account for future planned and emergency-related capital expenditures at these hotels.
We believe that our current unrestricted cash balance and our ability to draw the $500.0 million capacity available for borrowing under the unsecured revolving credit facility will enable us to successfully manage our Company. ​ Debt.
We believe that our current unrestricted cash balance and our ability to draw the $500.0 million capacity available for borrowing under the unsecured revolving credit facility will enable us to successfully manage our Company. ​ 46 Table of Contents Debt.
The $3.5 million impairment loss consisted of a $1.4 million write-down of the Company’s tenant improvements, net, which are included in prepaid expenses and other assets, net on the Company’s consolidated balance sheet at December 31, 2022 (see Note 6), and a $2.1 million write-down of the Company’s operating lease right-of-use assets, net related to the office lease at its former corporate headquarters (see Note 9). ​ In 2022, the Company determined that it could reduce its future operating expenses by relocating its corporate headquarters to decrease the amount of space the Company occupied and to secure a lower rental cost per square foot.
The $3.5 million impairment loss consisted of a $1.4 million write-down of the Company’s tenant improvements, net, which are included in prepaid expenses and other assets, net on the Company’s consolidated balance sheets, and a $2.1 million write-down of the Company’s operating lease right-of-use assets, net related to the office lease at its former corporate headquarters. ​ In 2022, the Company determined that it could reduce its future operating expenses by relocating its corporate headquarters to decrease the amount of space the Company occupied and to secure a lower rental cost per square foot.
Form 10-K Summary ​ None. ​ ​ ​ 58 Table of Contents SIGNATUR ES ​ Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ​ ​ ​ ​ Sunstone Hotel Investors, Inc. ​ ​ Date: February 23, 2024 /S/ AARON R.
Form 10-K Summary ​ None. ​ ​ ​ 57 Table of Contents SIGNATUR ES ​ Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ​ ​ ​ ​ Sunstone Hotel Investors, Inc. ​ ​ Date: February 21, 2025 /S/ AARON R.
Our net cash provided by or used in operating activities may also be affected by changes in our portfolio resulting from hotel acquisitions, dispositions or renovations. Net cash provided by operating activities was $198.1 million in 2023 as compared to $209.4 million in 2022.
Our net cash provided by or used in operating activities may also be affected by changes in our portfolio resulting from hotel acquisitions, dispositions or renovations. Net cash provided by operating activities was $170.4 million in 2024 as compared to $198.1 million in 2023.
(2) Contract liabilities consist of advance deposits and are included in other liabilities on the accompanying consolidated balance sheets. ​ During 2023 and 2022, the Company recognized approximately $43.7 million and $27.9 million, respectively, in revenue related to its outstanding contract liabilities. ​ Advertising and Promotion Costs ​ Advertising and promotion costs are expensed when incurred.
(2) Contract liabilities consist of advance deposits and are included in other liabilities on the accompanying consolidated balance sheets. ​ During 2024 and 2023, the Company recognized approximately $39.2 million and $43.7 million, respectively, in revenue related to its outstanding contract liabilities. ​ Advertising and Promotion Costs ​ Advertising and promotion costs are expensed when incurred.
Our expenses consist of the following: ​ ● Room expense , which is primarily driven by occupancy and, therefore, has a significant correlation with room revenue; ​ ● Food and beverage expense , which is primarily driven by hotel food and beverage sales and banquet and catering bookings and, therefore, has a significant correlation with food and beverage revenue; ​ ● Other operating expense , which includes the corresponding expense of other operating revenue, advertising and promotion, repairs and maintenance, utilities and franchise costs; ​ ● Property tax, ground lease and insurance expense , which includes the expenses associated with property tax, ground lease and insurance payments, each of which is primarily a fixed expense, however property tax is subject to regular revaluations based on the specific tax regulations and practices of each municipality, along with our cash and noncash operating lease expenses, general excise tax assessed by Hawaii and city taxes imposed by San Francisco; ​ ● Other property-level expenses , which includes our property-level general and administrative expenses, such as payroll, benefits and other employee-related expenses, contract and professional fees, credit and collection expenses, employee recruitment, relocation and training expenses, labor dispute expenses, consulting fees, management fees and other expenses; ​ ● Corporate overhead expense, which includes our corporate-level expenses, such as payroll, benefits and other employee-related expenses, amortization of deferred stock compensation, business acquisition and due diligence expenses, legal expenses, association, contract and professional fees, board of director expenses, entity-level state franchise and minimum taxes, travel expenses, office rent and other customary expenses; ​ ● Depreciation and amortization expense , which includes depreciation on our hotel buildings, improvements and FF&E, along with amortization on our finance lease right-of-use asset (prior to the related hotel’s sale in February 2022), franchise fees and certain intangibles.
Our expenses consist of the following: ​ ● Room expense , which is primarily driven by occupancy and, therefore, has a significant correlation with room revenue; ​ ● Food and beverage expense , which is primarily driven by hotel food and beverage sales and banquet and catering bookings and, therefore, has a significant correlation with food and beverage revenue; ​ ● Other operating expense , which includes the corresponding expense of other operating revenue, advertising and promotion, repairs and maintenance, utilities and franchise costs; ​ ● Property tax, ground lease and insurance expense , which includes the expenses associated with property tax, ground lease and insurance payments, each of which is primarily a fixed expense, however property tax is subject to regular revaluations based on the specific tax regulations and practices of each municipality, along with our cash and noncash operating lease expenses, general excise tax assessed by Hawaii and taxes assessed on commercial rents by San Francisco and Texas; ​ ● Other property-level expenses , which includes our property-level general and administrative expenses, such as payroll, benefits and other employee-related expenses, contract and professional fees, credit and collection expenses, employee recruitment, relocation and training expenses, labor dispute expenses, consulting fees, management fees, and other expenses; ​ ● Corporate overhead expense, which includes our corporate-level expenses, such as payroll, benefits, and other employee-related expenses, amortization of deferred stock compensation, business acquisition and due diligence expenses, legal expenses, contract and professional fees, board of director expenses, entity-level state franchise and minimum taxes, travel expenses, office rent, and other customary expenses; and ​ ● Depreciation and amortization expense , which includes depreciation on our hotel buildings, improvements and FF&E, along with amortization on our franchise fees and certain intangibles.
We cannot be certain that traditional sources of funds will be available in the future. ​ Operating activities. Our net cash provided by or used in operating activities fluctuates primarily as a result of changes in the net cash generated by our hotels, offset by the cash paid for corporate expenses.
We cannot be certain that the sources of funds we have relied on in the past will be available in the future. ​ Operating activities. Our net cash provided by or used in operating activities fluctuates primarily as a result of changes in the net cash generated by our hotels, offset by the cash paid for corporate expenses.
As of December 31, 2023, our balance sheet includes restricted cash of $66.9 million, which was held in FF&E reserve accounts for future capital expenditures at the majority of our hotels.
As of December 31, 2024, our balance sheet includes restricted cash of $72.9 million, which was held in FF&E reserve accounts for future capital expenditures at the majority of our hotels.
Judgment is involved in assessing indicators which may trigger an impairment assessment as indicators may be unique to each hotel F-2 Table of Contents investment. Changes in these factors could have a significant effect on management’s determination of whether there is an indication that the carrying value of the asset is recoverable as of December 31, 2023.
Judgment is involved in assessing indicators which may trigger an impairment assessment as indicators may be unique to each hotel investment. Changes in these factors could have a significant effect on management’s determination of whether there is an indication that the carrying value of the asset is recoverable as of December 31, 2024.

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