Table of Contents
UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-32319
Sunstone Hotel Investors, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Maryland
20-1296886
(State or Other Jurisdiction ofIncorporation or Organization)
(I.R.S. EmployerIdentification Number)
15 Enterprise, Suite 200Aliso Viejo, California
92656
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code: (949) 330-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value
SHO
New York Stock Exchange
Series H Cumulative Redeemable Preferred Stock, $0.01 par value
SHO.PRH
Series I Cumulative Redeemable Preferred Stock, $0.01 par value
SHO.PRI
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of November 3, 2025, there were 189,903,149 shares of Sunstone Hotel Investors, Inc.’s common stock, $0.01 par value per share, outstanding.
SUNSTONE HOTEL INVESTORS, INC.
QUARTERLY REPORT ON
For the Quarterly Period Ended September 30, 2025
TABLE OF CONTENTS
Page
PART I—FINANCIAL INFORMATION
Item 1.
Financial Statements
2
Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024
Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2025 and 2024
3
Unaudited Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2025 and 2024
4
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024
6
Notes to Unaudited Consolidated Financial Statements
8
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
23
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
40
Item 4.
Controls and Procedures
PART II—OTHER INFORMATION
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
41
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
42
SIGNATURES
43
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
September 30,
December 31,
2025
2024
(unaudited)
ASSETS
Investment in hotel properties, net
$
2,779,057
2,856,032
Operating lease right-of-use assets, net
5,477
8,464
Cash and cash equivalents
121,136
107,199
Restricted cash
76,433
73,078
Accounts receivable, net
29,444
34,109
Prepaid expenses and other assets, net
37,942
27,757
Total assets
3,049,489
3,106,639
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Debt, net of unamortized deferred financing costs
917,452
841,047
Operating lease obligations
8,574
12,019
Accounts payable and accrued expenses
63,942
52,722
Dividends and distributions payable
22,060
24,137
Other liabilities
77,866
72,694
Total liabilities
1,089,894
1,002,619
Commitments and contingencies (Note 13)
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value, 100,000,000 shares authorized:
Series G Cumulative Redeemable Preferred Stock, 2,650,000 shares issued and outstanding at both September 30, 2025 and December 31, 2024, stated at liquidation preference of $25.00 per share
66,250
6.125% Series H Cumulative Redeemable Preferred Stock, 4,600,000 shares issued and outstanding at both September 30, 2025 and December 31, 2024, stated at liquidation preference of $25.00 per share
115,000
5.70% Series I Cumulative Redeemable Preferred Stock, 4,000,000 shares issued and outstanding at both September 30, 2025 and December 31, 2024, stated at liquidation preference of $25.00 per share
100,000
Common stock, $0.01 par value, 500,000,000 shares authorized, 189,911,794 shares issued and outstanding at September 30, 2025 and 200,824,993 shares issued and outstanding at December 31, 2024
1,899
2,008
Additional paid in capital
2,298,073
2,395,702
Distributions in excess of retained earnings
(621,627)
(574,940)
Total stockholders’ equity
1,959,595
2,104,020
Total liabilities and stockholders' equity
See accompanying notes to unaudited consolidated financial statements.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended September 30,
Nine Months Ended September 30,
REVENUES
Room
139,523
138,759
440,492
425,870
Food and beverage
64,419
63,866
209,573
196,572
Other operating
25,381
23,767
73,095
68,597
Total revenues
229,323
226,392
723,160
691,039
OPERATING EXPENSES
39,303
37,453
119,272
110,349
48,717
46,286
150,566
138,343
6,337
5,815
18,707
18,153
Advertising and promotion
13,420
13,220
40,758
38,326
Repairs and maintenance
9,954
9,094
29,514
26,783
Utilities
7,832
7,670
21,624
19,909
Franchise costs
4,471
4,711
13,773
13,735
Property tax, ground lease and insurance
19,574
19,777
57,425
58,686
Other property-level expenses
26,926
26,702
88,184
82,445
Corporate overhead
6,970
7,577
24,221
23,263
Depreciation and amortization
33,928
31,689
100,328
91,841
Total operating expenses
217,432
209,994
664,372
621,833
Interest and other income
3,160
2,350
7,024
11,306
Interest expense
(13,412)
(15,982)
(39,258)
(39,685)
(Loss) gain on sale of assets, net
—
(8,751)
457
(Loss) gain on extinguishment of debt
(180)
59
Income before income taxes
1,459
2,766
17,623
41,343
Income tax (provision) benefit, net
(137)
483
(272)
1,083
NET INCOME
1,322
3,249
17,351
42,426
Preferred stock dividends
(4,262)
(3,931)
(12,125)
(11,297)
(LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
(2,940)
(682)
5,226
31,129
Basic and diluted per share amounts:
Basic (loss) income attributable to common stockholders per common share
(0.02)
0.00
0.03
0.15
Diluted (loss) income attributable to common stockholders per common share
Basic weighted average common shares outstanding
189,253
201,402
195,110
202,261
Diluted weighted average common shares outstanding
195,866
202,857
UNAUDITED CONSOLIDATED STATEMENTS OF EQUITY
Distributions
Preferred Stock
Common Stock
in Excess of
Number of
Additional
Retained
Shares
Amount
Paid in Capital
Earnings
Total Equity
Balance at December 31, 2024 (audited)
11,250,000
281,250
200,824,993
Amortization of deferred stock compensation
2,236
Issuance of restricted common stock, net
367,149
(4,282)
(4,278)
Forfeiture of restricted common stock
(861)
Common stock distributions declared at $0.09 per share
(17,778)
Series G preferred stock dividends declared at $0.281250 per share
(745)
Series H preferred stock dividends declared at $0.382813 per share
(1,761)
Series I preferred stock dividends declared at $0.356250 per share
(1,425)
Repurchases of outstanding common stock
(821,771)
(8)
(8,008)
(8,016)
Net income
5,255
Balance at March 31, 2025
200,369,510
2,004
2,385,648
(591,394)
2,077,508
2,949
Issuance of restricted common stock
102,244
1
(1)
(16,859)
(746)
(10,301,090)
(103)
(90,351)
(90,454)
10,774
Balance at June 30, 2025
190,170,664
1,902
2,298,245
(601,411)
1,979,986
2,082
(17,276)
Series G preferred stock dividends declared at $0.406250 per share
(1,076)
(258,870)
(3)
(2,254)
(2,257)
Balance at September 30, 2025
189,911,794
Balance at December 31, 2023 (audited)
203,479,585
2,035
2,416,417
(533,064)
2,166,638
2,887
194,813
(3,219)
(3,217)
Common stock distributions declared at $0.07 per share
(14,364)
Series G preferred stock dividends declared at $0.187500 per share
(497)
13,035
Balance at March 31, 2024
203,674,398
2,037
2,416,085
(538,076)
2,161,296
3,298
75,002
(18,504)
(359,008)
(3,619)
(3,622)
26,142
Balance at June 30, 2024
203,390,392
2,034
2,415,764
(534,121)
2,164,927
2,351
Repurchases of common stock for employee tax obligations
(91,439)
(942)
(943)
(68,131)
(18,186)
(2,311,365)
(23)
(22,649)
(22,672)
Balance at September 30, 2024
200,919,457
2,009
2,394,525
(552,989)
2,124,795
5
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Adjustments to reconcile net income to net cash provided by operating activities:
Bad debt expense
330
319
Loss (gain) on sale of assets, net
8,751
(457)
Loss (gain) on extinguishment of debt
180
(59)
Noncash interest on derivatives, net
668
1,095
Depreciation
99,188
90,862
Amortization of franchise fees and other intangibles
1,140
979
Amortization of deferred financing costs
2,782
2,219
6,741
8,381
Gain on insurance recoveries, net
(773)
(314)
Changes in operating assets and liabilities:
4,344
(17)
Prepaid expenses and other assets
(3,975)
(5,555)
Accounts payable and other liabilities
8,864
275
Operating lease right-of-use assets and obligations
(458)
(271)
Net cash provided by operating activities
145,133
139,883
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of hotel property
46,348
Acquisition of hotel property and other assets
(1,269)
(229,330)
Acquisition-related key money proceeds
4,000
Proceeds from property insurance
875
314
Renovations and additions to hotel properties and other assets
(73,694)
(110,241)
Net cash used in investing activities
(23,740)
(339,257)
CASH FLOWS FROM FINANCING ACTIVITIES
(100,727)
(26,294)
(4,160)
Proceeds from credit facility
50,000
Payments on credit facility
(50,000)
Proceeds from notes payable
149,600
Payments on notes payable
(64,600)
(1,613)
Payments of deferred financing costs
(17,981)
Dividends and distributions paid
(66,115)
(69,697)
Net cash used in financing activities
(104,101)
(101,764)
Net increase (decrease) in cash and cash equivalents and restricted cash
17,292
(301,138)
Cash and cash equivalents and restricted cash, beginning of period
180,277
493,698
Cash and cash equivalents and restricted cash, end of period
197,569
192,560
Supplemental Disclosure of Cash Flow Information
115,542
77,018
Total cash and cash equivalents and restricted cash shown on the consolidated statements of cash flows
Cash paid for interest, net of capitalized interest
38,298
39,734
Cash (refunds) paid for income taxes, net
(1,222)
3,476
Operating cash flows used for operating leases
4,546
4,288
Changes in operating lease right-of-use assets
3,636
3,425
Changes in operating lease obligations
(4,094)
(3,696)
Changes in operating lease right-of-use assets and lease obligations, net
Supplemental Disclosure of Noncash Investing and Financing Activities
Accrued renovations and additions to hotel properties and other assets
23,408
25,247
Operating lease right-of-use asset obtained in exchange for operating lease obligation
649
Amortization of deferred stock compensation — construction activities
526
155
22,619
7
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business
Sunstone Hotel Investors, Inc. (the “Company”) was incorporated in Maryland on June 28, 2004 in anticipation of an initial public offering of common stock, which was consummated on October 26, 2004. The Company elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes, commencing with its taxable year ended on December 31, 2004. The Company, through its 100% controlling interest in Sunstone Hotel Partnership, LLC (the “Operating Partnership”), of which the Company is the sole managing member, and the subsidiaries of the Operating Partnership, including Sunstone Hotel TRS Lessee, Inc. (the “TRS Lessee”) and its subsidiaries, invests in hotels where it can add value through capital investment, hotel repositioning, and asset management. In addition, the Company seeks to capitalize on its portfolio’s embedded value and balance sheet strength to actively recycle past investments into new growth and value creation opportunities in order to deliver strong stockholder returns and superior per share net asset value growth.
As a REIT, certain tax laws limit the amount of “non-qualifying” income the Company can earn, including income derived directly from the operation of hotels. The Company leases all of its hotels to its TRS Lessee, which in turn enters into long-term management agreements with third parties to manage the operations of the Company’s hotels, in transactions that are intended to generate qualifying income.
As of September 30, 2025, the Company owned 14 hotels.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
Principles of Consolidation
The accompanying consolidated financial statements as of September 30, 2025 and December 31, 2024, and for the three and nine months ended September 30, 2025 and 2024, 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. If the Company determines that it has an interest in a variable interest entity, the Company will consolidate the entity when it is determined to be the primary beneficiary of the entity.
The accompanying interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and in conformity with the rules and regulations of the Securities and Exchange Commission (“SEC”). In the Company’s opinion, the interim financial statements presented herein reflect all adjustments, consisting solely of normal and recurring adjustments, which are necessary to fairly present the interim financial statements. These financial statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 21, 2025. Operating results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.
The Company does not have any comprehensive income other than what is included in net income. If the Company has any comprehensive income in the future such that a statement of comprehensive income would be necessary, the Company will include such statement in one continuous consolidated statement of operations.
The Company has evaluated subsequent events through the date of issuance of these financial statements.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.
Summary of Significant Accounting Policies
The Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 21, 2025, contains a discussion of significant accounting policies. There have been no changes to our significant accounting policies since December 31, 2024.
New Accounting Standards and Accounting Changes
In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update No. 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”), to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, and amortization) in each income statement line item that contains those expenses. All entities are required to apply the guidance prospectively and may apply it retrospectively. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating ASU 2024-03’s additional disclosure requirements.
3. Investment in Hotel Properties
Investment in hotel properties, net consisted of the following (in thousands):
Land
641,918
645,884
Buildings and improvements
2,902,647
2,824,364
Furniture, fixtures and equipment
478,930
445,696
Intangible assets
43,938
44,063
Construction in progress
31,522
147,250
Investment in hotel properties, gross
4,098,955
4,107,257
Accumulated depreciation and amortization
(1,319,898)
(1,251,225)
In June 2025, the Company sold the Hilton New Orleans St. Charles, located in Louisiana for a gross sale price of $47.0 million and recorded a loss of $8.8 million. 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.
4. Fair Value Measurements and Interest Rate Derivatives
Fair Value Measurements
As of September 30, 2025 and December 31, 2024, 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. The hierarchy for inputs used in measuring fair value is as follows:
Level 1
Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2
Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3
Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
9
As of both September 30, 2025 and December 31, 2024, the Company measured its interest rate derivatives at fair value on a recurring basis. The Company estimated the fair value of its interest rate derivatives using Level 2 measurements based on quotes obtained from the counterparties, which are based upon the consideration that would be required to terminate the agreements.
Fair Value of Debt
As of September 30, 2025 and December 31, 2024, 70.4% and 40.8%, respectively, of the Company’s outstanding debt had fixed interest rates, including the effects of interest rate swap derivatives. The Company uses Level 3 measurements to estimate the fair value of its debt by discounting the future cash flows of each instrument at estimated market rates.
The Company’s principal balances and fair market values of its consolidated debt as of September 30, 2025 (unaudited) and December 31, 2024 were as follows (in thousands):
September 30, 2025
December 31, 2024
Carrying Amount (1)
Fair Value (2)
Debt
930,000
930,340
845,000
841,027
Interest Rate Derivatives
The Company’s interest rate swap derivatives, which are not designated as effective cash flow hedges, consisted of the following at September 30, 2025 (unaudited) and December 31, 2024 (in thousands):
Estimated Fair Value of Assets (Liabilities) (1)
Effective
Maturity
Notional
Hedged Debt (2)
Fixed Rate
Date
Term Loan 2
3.675
%
March 17, 2023
March 17, 2026
75,000
56
370
3.931
September 14, 2023
September 14, 2026
(309)
186
4.020
January 31, 2025
November 7, 2026
(512)
Term Loans 1 and 3
3.226
September 9, 2025
September 9, 2028
210,000
607
Term Loan 1
3.206
January 10, 2026
January 10, 2028
65,000
(4)
46
(112)
556
Noncash changes in the fair values of the Company’s interest rate derivatives resulted in (decreases) increases to interest expense for the three and nine months ended September 30, 2025 and 2024 as follows (unaudited and in thousands):
(495)
3,326
10
5. Prepaid Expenses and Other Assets
Prepaid expenses and other assets, net consisted of the following (in thousands):
Prepaid expenses
13,807
10,488
Inventory
11,488
10,497
Deferred financing costs
8,648
2,223
Property and equipment, net
1,719
2,267
Interest rate derivatives
709
Deferred rent on straight-lined third-party tenant leases
209
369
Liquor licenses
930
Other
432
427
Total prepaid expenses and other assets, net
6. Debt
In April 2025 and July 2025, the Company drew down $27.0 million and $23.0 million, respectively, on its $500.0 million credit facility.
In September 2025, the Company entered into the Amended Credit Agreement, which expanded its unsecured debt borrowing capacity and extended the maturity of its term loans. The Amended Credit Agreement continues to provide for a $500.0 million revolving credit facility and increases the aggregate amount of the Company’s term loan facilities from $675.0 million (on four existing term loans) to $850.0 million (on three new term loans). The following includes the details of the Amended Credit Agreement:
In connection with the Amended Credit Agreement, the Company incurred debt issuance costs of $17.5 million. A total of $7.7 million of the debt issuance costs were allocated to the revolving credit facility and the delayed draw portion of New Term Loan 1 and are included in prepaid expenses and other assets on the Company’s consolidated balance sheet as of September 30, 2025, and $9.9 million of the debt issuance costs were allocated to the funded New Terms Loans and are included in debt, net of unamortized deferred financing costs on the Company’s balance sheet as of September 30, 2025. In addition, the Company recorded a $0.2 million loss on extinguishment of debt related to the accelerated amortization of deferred financing costs.
As of September 30, 2025, the Company had no amount outstanding on its credit facility, with $500.0 million of capacity available for borrowing under the facility. The Company’s ability to draw on the credit facility is subject to the Company’s compliance with various financial covenants.
11
Debt consisted of the following (in thousands):
Balance Outstanding as of
Rate Type
Interest Rate
Maturity Date
Unsecured Corporate Credit Facilities (1)
(2)
Fixed
4.68
January 24, 2029
185,000
175,000
5.34
January 24, 2030
275,000
Term Loan 3
Floating
5.53
January 24, 2031
300,000
225,000
Term Loan 4
(5)
N/A
Total unsecured corporate credit facilities
760,000
675,000
Unsecured Senior Notes
Series A
4.69
Series B
4.79
105,000
Total unsecured senior notes
170,000
Total debt
Unamortized deferred financing costs
(12,548)
(3,953)
Interest Expense
Total interest incurred and expensed on the Company’s debt was as follows (unaudited and in thousands):
Interest expense on debt
12,927
12,395
37,209
37,012
980
741
Capitalized interest
(480)
(1,401)
(641)
Total interest expense
13,412
15,982
39,258
39,685
12
7. Other Liabilities
Other liabilities consisted of the following (in thousands):
Advance deposits
49,010
48,635
Property, sales and use taxes payable
16,808
10,088
Accrued interest
2,615
5,105
Deferred rent
894
1,433
821
Management fees payable
575
1,168
7,143
6,265
Total other liabilities
During both the three months ended September 30, 2025 and 2024, the Company recognized approximately $4.6 million in revenue related to its outstanding contract liabilities. During the nine months ended September 30, 2025 and 2024, the Company recognized approximately $42.6 million and $38.3 million, respectively, in revenue related to its outstanding contract liabilities.
8. Leases
As of both September 30, 2025 and December 31, 2024, the Company had operating leases for ground, office, equipment, and airspace leases with maturity dates ranging from 2025 through 2097, excluding renewal options. Including renewal options available to the Company, the lease maturity date extends to 2147.
Operating leases were included on the Company’s consolidated balance sheets as follows (in thousands):
Right-of-use assets, net
Lease obligations
Weighted average remaining lease term
11 years
Weighted average discount rate
5.7
The components of lease expense were as follows (unaudited and in thousands):
Operating lease cost
1,380
1,334
4,108
4,024
Variable lease cost (1)
2,459
2,015
6,712
6,521
Sublease income (2)
(296)
(890)
Total lease cost
3,543
3,053
9,930
9,655
9. Stockholders’ Equity
Series G Cumulative Redeemable Preferred Stock
The Series G preferred stock, which is callable at its $25.00 redemption price plus accrued and unpaid dividends by the Company at any time, initially accrued dividends at a rate equal to the Montage Healdsburg’s annual net operating income yield on the Company’s total investment in the resort. In January 2024, the annual dividend rate increased to the greater of 3.0% or the rate equal to the Montage Healdsburg’s annual net operating income yield on the Company’s total investment in the resort. Beginning with the
13
third quarter of 2024, the annual dividend rate increased to the greater of 4.5% or the rate equal to the Montage Healdsburg’s annual net operating income yield on the Company’s total investment in the resort. Beginning with the third quarter of 2025, the annual dividend rate increased to the greater of 6.5% or the rate equal to the Montage Healdsburg’s annual net operating income yield on the Company’s total investment in the resort, resulting in a dividend rate of 6.5% for the third quarter of 2025. Beginning in the third quarter of 2026, the annual dividend rate will increase to the greater of 7.5% or the rate equal to the Montage Healdsburg’s annual net operating income yield on the Company’s total investment in the resort. The Series G preferred stock is not convertible into any other security.
Series H Cumulative Redeemable Preferred Stock
On or after May 24, 2026, the Series H preferred stock, which has an annual dividend rate of 6.125%, will be redeemable at the Company’s option, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus accrued and unpaid dividends up to, but not including, the redemption date. Upon the occurrence of a change of control, as defined by the Articles Supplementary for Series H preferred stock, the Company may at its option redeem the Series H preferred stock for cash at a redemption price of $25.00 per share, plus accrued and unpaid dividends up to, but not including, the redemption date. 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
On or after July 16, 2026, the Series I preferred stock, which has an annual dividend rate of 5.70%, will be redeemable at the Company’s option, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus accrued and unpaid dividends up to, but not including, the redemption date. Upon the occurrence of a change of control, as defined by the Articles Supplementary for Series I preferred stock, the Company may at its option redeem the Series I preferred stock for cash at a redemption price of $25.00 per share, plus accrued and unpaid dividends up to, but not including, the redemption date. If the Company chooses not to redeem the Series I preferred stock upon the occurrence of a change of control, holders of the Series I preferred stock may convert their preferred shares into shares of the Company’s common stock.
Stock Repurchase Program. In February 2023, the Company’s board of directors reauthorized and restored the Company’s existing stock repurchase program, allowing the Company to acquire up to an aggregate of $500.0 million of its common and preferred stock. The stock repurchase program has no stated expiration date.
Details of the Company’s repurchases were as follows (dollars in thousands):
Number of common shares repurchased
258,870
2,311,365
11,381,731
2,670,373
Cost, including fees and commissions
2,257
22,672
100,727
26,294
Number of preferred shares repurchased
As of September 30, 2025, $327.0 million remains available for repurchase under the stock repurchase program. 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 (see Note 14).
ATM Agreements. In March 2023, the Company entered into separate “At the Market” Agreements (the “ATM Agreements”) with several financial institutions. In accordance with the terms of the ATM Agreements, the Company may from time to time offer and sell shares of its common stock having an aggregate offering price of up to $300.0 million. No common stock was issued under the ATM Agreements during the three and nine months ended September 30, 2025 or 2024, leaving $300.0 million available for sale.
10. Incentive Award Plan
The Company’s Incentive Award Plan (the “Plan”) provides for granting discretionary awards to employees, consultants, and non-employee directors. The awards may be made in the form of options, restricted stock awards, dividend equivalents, stock payments, restricted stock units, other incentive awards, LTIP units, or share appreciation rights.
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Should a stock grant be forfeited prior to its vesting, the shares covered by the stock grant are added back to the Plan and remain available for future issuance. Shares of common stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligations upon the vesting of a stock grant are not added back to the Plan.
Restricted shares and units are measured at fair value on the date of grant and amortized as compensation expense over the relevant requisite service period or derived service period. The Company has elected to account for forfeitures as they occur.
As of both September 30, 2025 and 2024, the Company’s issued and outstanding awards consisted of both time-based and performance-based restricted stock grants. The Company’s amortization expense, including forfeitures related to restricted shares was as follows (unaudited and in thousands):
Amortization expense, including forfeitures
1,905
2,430
Capitalized compensation cost (1)
177
(79)
Restricted Stock Awards
The Company’s restricted stock awards are time-based restricted shares that generally vest over periods ranging from three years to five years from the date of grant. The following is a summary of non-vested restricted stock award activity:
Weighted-Average
Grant Date
Number of Shares
Fair Value
Unvested at January 1, 2025
688,288
10.70
Granted
411,809
10.57
Vested
(414,171)
10.34
Forfeited
11.27
Unvested at September 30, 2025
685,065
10.84
Restricted Stock Units
The Company’s restricted stock units are performance-based restricted shares that generally vest based on the Company’s total relative shareholder return (“RSR”) or the achievement of pre-determined stock price targets during performance periods ranging from three years to five years. The following is a summary of non-vested restricted stock unit activity at target performance:
Target Number
of Shares
1,382,074
10.90
429,587
11.48
Vested (1)
(257,911)
12.44
(118,018)
11.29
1,435,732
10.77
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The restricted stock units granted during the first nine months of 2025 vest based on the Company’s total relative shareholder return following a three-year performance period. The number of shares that may become vested ranges from zero to 200% of the amount granted. The grant date fair values of the restricted stock units were determined using a Monte Carlo simulation model with the following assumptions:
Expected volatility
30.0
Dividend yield (1)
Risk-free rate
4.47
Expected term
3 years
11. Earnings Per Share
The Company applies the two-class method when computing its earnings per share. Net income per share for each class of stock is calculated assuming all of the Company’s net income is distributed as dividends to each class of stock based on their contractual rights.
Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid), which include the Company’s time-based restricted stock awards, are considered participating securities and are included in the computation of earnings per share.
Basic earnings attributable to common stockholders per common share is computed based on the weighted average number of shares of common stock outstanding during each period, including shares of the Company’s performance-based restricted stock units for which all necessary conditions have been satisfied except for the passage of time. Diluted earnings attributable to common stockholders per common share is computed based on the weighted average number of shares of common stock outstanding during each period, plus potential common shares considered outstanding during the period, as long as the inclusion of such awards is not anti-dilutive. Potential common shares consist of time-based unvested restricted stock awards and performance-based restricted stock units, using the more dilutive of either the two-class method or the treasury stock method. The Company’s performance-based restricted stock units are considered for computing diluted net income per common share as of the beginning of the period in which all necessary conditions have been satisfied and the only remaining vesting condition is a service vesting condition.
The following table sets forth the computation of basic and diluted earnings per common share (unaudited and in thousands, except per share data):
Numerator:
Distributions paid to participating securities
(62)
(185)
(211)
Numerator for basic and diluted (loss) income attributable to common stockholders
(3,002)
(744)
5,041
30,918
Denominator:
Weighted average basic common shares outstanding
Unvested restricted stock units
756
596
Weighted average diluted common shares outstanding
In its calculation of diluted earnings per share, the Company excluded 685,065 and 688,288 anti-dilutive unvested time-based restricted stock awards for the three and nine months ended September 30, 2025 and 2024, respectively (see Note 10).
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The Company also had 1,435,732 and 1,382,074 unvested performance-based restricted stock units as of September 30, 2025 and 2024, respectively, that are not considered participating securities as the awards contain forfeitable rights to dividends or dividend equivalents. The performance-based restricted stock units were granted based on either target market condition thresholds or pre-determined stock price targets (see Note 10). Due to the Company’s loss attributable to common stockholders for both the third quarters of 2025 and 2024, the Company excluded all 1,435,732 and 1,382,074 anti-dilutive performance-based restricted stock units from its calculation of diluted earnings per share for the three months ended September 30, 2025 and 2024, respectively. Based on the Company’s total relative shareholder return and the Company’s common stock performance, the Company excluded 617,591 anti-dilutive performance-based restricted stock units from its calculation of diluted earnings per share for the nine months ended September 30, 2025. Based on the Company’s common stock performance, the Company excluded 188,004 anti-dilutive performance-based restricted stock units from its calculation of diluted earnings per share for the nine months ended September 30, 2024.
12. Segment Information
The Company considers each of its hotels to be an operating segment and allocates resources and assesses the operating performance for each hotel individually. The Company has aggregated its hotels into a single reportable segment, Hotel Ownership, based on the following aggregation criteria:
The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer. The CODM reviews and makes decisions on all facets of the Company’s business using all available financial and non-financial data for each hotel individually. Capital allocation decisions to acquire, sell, enhance, redevelop, or perform renewal and replacement expenditures are determined on a hotel-by-hotel basis. Specifically, the CODM reviews the results of each hotel to assess the hotel’s profitability. The CODM does not use aggregated data by brand, property type, or geography to formulate the Company’s operating and investment strategy, to manage its business, or to make decisions about resource allocation. The key measure the CODM uses to allocate resources and assess performance is individual hotel net income (loss) before interest expense, income taxes, depreciation, and amortization for REITs, adjusted to exclude the following items that are not reflective of its ongoing operating performance or incurred in the normal course of business (“Hotel Adjusted EBITDAre”):
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The following tables include revenues, significant hotel operating expenses, and Hotel Adjusted EBITDAre for the Company’s hotels, reconciled to the consolidated amounts included in the Company’s consolidated statements of operations, which the CODM uses to manage its business, such as how to allocate capital to its hotels and how to determine the Company’s acquisition and disposition strategies (in thousands):
Revenues
Operating Expenses
37,342
117,333
110,145
46,155
148,731
138,170
5,797
18,430
18,126
12,940
39,593
37,873
29,203
26,764
19,665
19,868
57,855
59,190
Other property-level expenses (1)
26,389
87,240
83,212
176,625
169,966
533,782
507,124
Hotel Adjusted EBITDAre
52,698
56,426
189,378
183,915
Reconciliation of Hotel Adjusted EBITDAre to Net Income
Non-hotel operating expenses, net (2)
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100
Pre-opening expenses (3)
(853)
(6,471)
(1,452)
Property-level COVID-19 relief grant (3)
1,343
Taxes assessed on commercial rents (3)
(189)
(215)
(541)
(376)
Amortization of right-of-use assets and obligations
288
871
(6,970)
(7,577)
(24,221)
(23,263)
(33,928)
(31,689)
(100,328)
(91,841)
The CODM does not receive asset information by segment. Assets reported to the CODM are consistent with those included on the Company’s consolidated balance sheets, with particular emphasis on the Company’s cash and cash equivalents, restricted cash, and debt.
13. Commitments and Contingencies
Management Agreements
Management agreements with the Company’s third-party hotel managers currently require the Company to pay between 2.5% and 3.0% of total revenue of the managed hotels to the third-party managers each month as a basic management fee. In addition to basic management fees, provided that certain operating thresholds are met, the Company may also be required to pay incentive management fees to certain of its third-party managers.
Total basic management and incentive management fees were included in other property-level expenses on the Company’s consolidated statements of operations as follows (unaudited and in thousands):
Basic management fees
6,301
6,022
19,815
18,635
Incentive management fees
(933)
2,378
2,603
Total basic and incentive management fees
5,368
5,278
22,193
21,238
License and Franchise Agreements
The Company has entered into license and franchise agreements related to certain of its hotels. The license and franchise agreements require the Company to, among other things, pay monthly fees that are calculated based on specified percentages of certain revenues. The license and franchise agreements generally contain specific standards for, and restrictions and limitations on, the operation and maintenance of the hotels which are established by the franchisors to maintain uniformity in the system created by each such franchisor. Such standards generally regulate the appearance of the hotel, quality and type of goods and services offered, signage, and protection of trademarks. Compliance with such standards may from time to time require the Company to make significant expenditures for capital improvements.
Total license and franchise fees were included in franchise costs on the Company’s consolidated statements of operations as follows (unaudited and in thousands):
Franchise assessments (1)
4,265
4,411
12,867
12,781
Franchise royalties
206
300
906
954
Total franchise costs
Renovation and Construction Commitments
At September 30, 2025, the Company had various contracts outstanding with third parties in connection with the ongoing renovations of certain of its hotels. The remaining commitments under these contracts at September 30, 2025 totaled $60.5 million.
Concentration of Risk
The concentration of the Company’s hotels in California, Florida, Hawaii, and Washington, DC exposes the Company’s business to economic and severe weather conditions, competition, and real and personal property tax rates unique to these locales.
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As of September 30, 2025, the Company’s hotels were geographically concentrated as follows (unaudited):
Trailing 12-Month
Percentage of
Total Consolidated
Number of Hotels
Total Rooms
Revenue
Northern California
22
Southern California
Florida
Hawaii
Washington, DC
The Company has provided customary unsecured indemnities to certain lenders, including in particular, environmental indemnities. The Company has performed due diligence on the potential environmental risks, including obtaining an independent environmental review from outside environmental consultants. These indemnities obligate the Company to reimburse the indemnified parties for damages related to certain environmental matters. 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 September 30, 2025, 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 beneficiaries of these letters of credit may draw upon the letters of credit in the event of a contractual default by the Company relating to each respective obligation. No draws have been made through September 30, 2025.
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. While it is not possible to ascertain the ultimate outcome of such matters, the Company believes that the aggregate identifiable amount of such liabilities, if any, in excess of amounts covered by insurance will not have a material adverse impact on its financial condition or results of operations. The outcome of claims, lawsuits and legal proceedings brought against the Company, however, is subject to significant uncertainties.
14. Subsequent Events
Subsequent to the end of the third quarter of 2025 and through the date of issuance of these financial statements, the Company repurchased 11,145 shares of its common stock for $0.1 million, including fees and commissions, leaving $326.9 million remaining for repurchase under the Company’s stock repurchase program.
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Cautionary Statement
This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. The Company intends such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company’s future plans, strategies and expectations, are generally identifiable by use of the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “project,” or similar expressions. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company’s control, and which could materially affect actual results, performances or achievements. Accordingly, there is no assurance that the Company’s expectations will be realized. In evaluating these statements, you should specifically consider the risks outlined in detail in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 21, 2025, under the caption “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, including but not limited to the following factors:
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These factors may cause our actual events to differ materially from the expectations expressed or implied by any forward-looking statement. Except as otherwise required by federal securities laws, the Company disclaims any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in the
Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Sunstone Hotel Investors, Inc. (the “Company,” “we,” “our” or “us”) is a Maryland corporation. We operate as a self-managed and self-administered real estate investment trust (“REIT”). A REIT is a corporation that directly or indirectly owns real estate assets and has elected to be taxable as a real estate investment trust for federal income tax purposes. To qualify for taxation as a REIT, the REIT must meet certain requirements, including regarding the composition of its assets and the sources of its income. REITs generally are not subject to federal income taxes at the corporate level as long as they pay stockholder dividends equivalent to 100% of their taxable income. REITs are required to distribute to stockholders at least 90% of their REIT taxable income. We own, directly or indirectly, 100% of the interests of Sunstone Hotel Partnership, LLC (the “Operating Partnership”), which is the entity that directly or indirectly owns our hotels. We also own 100% of the interests of our taxable REIT subsidiary, Sunstone Hotel TRS Lessee, Inc. (the “TRS Lessee”), which, directly or indirectly, leases all of our hotels from the Operating Partnership, and engages independent third-parties to manage our hotels.
We own hotels in convention, urban, and resort destinations that benefit from significant barriers to entry by competitors and diverse economic drivers. As of September 30, 2025, we owned 14 hotels (the “14 Hotels”), which average 500 rooms in size. All of our hotels are operated under nationally recognized brands, except the Oceans Edge Resort & Marina, which operates independently.
Operating Activities
Revenues. Substantially all of our revenues are derived from the operation of our hotels. Specifically, our revenues consist of the following:
Expenses. Our expenses consist of the following:
Other Revenue and Expense. Other revenue and expense consists of the following:
Operating Performance Indicators. The following performance indicators are commonly used in the hotel industry:
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Factors Affecting Our Operating Results. The primary factors affecting our operating results include overall demand for hotel rooms, the pace of new hotel development, or supply, and the relative performance of our operators in increasing revenue and controlling hotel operating expenses.
25
Operating Results. The following table presents our unaudited operating results for the three months ended September 30, 2025 and 2024, including the amount and percentage change in the results between the two periods.
Change $
Change %
(in thousands, except statistical data)
764
0.6
553
0.9
1,614
6.8
2,931
1.3
Hotel operating
149,608
144,026
5,582
3.9
224
0.8
(607)
(8.0)
2,239
7.1
7,438
3.5
810
34.5
2,570
16.1
Loss on extinguishment of debt
(100.0)
(1,307)
(47.3)
(620)
(128.4)
(1,927)
(59.3)
(331)
(8.4)
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
(2,258)
(331.1)
The following table presents our unaudited operating results for the nine months ended September 30, 2025 and 2024, including the amount and percentage change in the results between the two periods.
14,622
3.4
13,001
6.6
4,498
32,121
4.6
451,639
424,284
27,355
6.4
5,739
7.0
958
4.1
8,487
9.2
42,539
(37.9)
1.1
(9,208)
(2,014.9)
(239)
(405.1)
(23,720)
(57.4)
(1,355)
(125.1)
(25,075)
(59.1)
(828)
(7.3)
INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
(25,903)
(83.2)
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Summary of Operating Results. The following items significantly impact the year-over-year comparability of our operations:
Room revenue. Room revenue increased $0.8 million, or 0.6%, in the third quarter of 2025 as compared to the third quarter of 2024 as follows:
Change
Occ%
ADR
RevPAR
Two Renovation Hotels
58.0
254.85
147.81
39.6
219.50
86.92
1,840
bps
70.1
Third Quarter Comparable Portfolio
71.6
311.88
223.31
72.3
311.26
225.04
(70)
0.2
(0.8)
For the nine months ended September 30, 2025, room revenue increased $14.6 million, or 3.4%, as compared to the nine months ended September 30, 2024 as follows:
51.0
249.74
127.37
34.8
234.41
81.57
1,620
6.5
56.1
27
Comparable Portfolio
74.9
333.42
249.73
73.9
335.53
247.96
(0.6)
0.7
Food and beverage revenue. Food and beverage revenue increased $0.6 million, or 0.9%, in the third quarter of 2025 as compared to the third quarter of 2024, as follows:
For the first nine months of 2025, food and beverage revenue increased $13.0 million, or 6.6%, as compared to the first nine months of 2024 as follows:
Other operating revenue. Other operating revenue increased $1.6 million, or 6.8%, in the third quarter of 2025 as compared to the third quarter of 2024 as follows:
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For the first nine months of 2025, other operating revenue increased $4.5 million, or 6.6%, as compared to the first nine months of 2024 as follows:
Hotel operating expenses. Hotel operating expenses, which are comprised of room, food and beverage, advertising and promotion, repairs and maintenance, utilities, franchise costs, property tax, ground lease and insurance, and other hotel operating expenses increased $5.6 million, or 3.9%, in the third quarter of 2025 as compared to the third quarter of 2024 as follows:
For the first nine months of 2025, hotel operating expenses increased $27.4 million, or 6.4%, as compared to the first nine months of 2024 as follows:
Other property-level expenses. Other property-level expenses increased $0.2 million, or 0.8%, in the third quarter of 2025 as compared to the third quarter of 2024 as follows:
For the first nine months of 2025, other property-level expenses increased $5.7 million, or 7.0%, as compared to the first nine months of 2024 as follows:
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Corporate overhead expense. Corporate overhead expense decreased $0.6 million, or 8.0%, in the third quarter of 2025 as compared to the third quarter of 2024, primarily due to decreased payroll and related expenses and deferred stock amortization expense, partially offset by increased professional fees.
For the first nine months of 2025, corporate overhead increased $1.0 million, or 4.1%, as compared to the first nine months of 2024, primarily due to increased payroll and related expenses and deferred stock amortization expense in the first quarter of 2025 in connection with the restructuring of our executive team. The increase in corporate overhead expense was also due to increased professional fees, due diligence fees, board of director expenses, entity-level state franchise and minimum taxes, and employee recruitment expenses. These increased expenses were partially offset by decreased deferred stock amortization expense.
Depreciation and amortization expense. Depreciation and amortization expense increased $2.2 million, or 7.1%, in the third quarter of 2025 as compared to the third quarter of 2024 as follows:
For the first nine months of 2025, depreciation and amortization expense increased $8.5 million, or 9.2%, as compared to the first nine months of 2024 as follows:
Interest and other income. Interest and other income totaled $3.2 million and $2.4 million in the third quarters of 2025 and 2024, respectively, and $7.0 million and $11.3 million in the first nine months of 2025 and 2024, respectively.
During the third quarters of 2025 and 2024, we recognized interest income of $1.4 million and $2.3 million, respectively. Interest income decreased in the third quarter of 2025 as compared to the third quarter of 2024 due to decreased interest rates. In addition, during the third quarter of 2025, we recognized a $1.0 million settlement for certain property-related claims at Oceans Edge Resort & Marina and $0.7 million in net property insurance recoveries related to 2025 water damage at The Westin Washington, DC Downtown. During both of the third quarters of 2025 and 2024, we also recognized other miscellaneous income of $0.1 million.
During the first nine months of 2025 and 2024, we recognized interest income of $4.2 million and $10.9 million, respectively. Interest income decreased in the first nine months of 2025 as compared to the same period in 2024 due to decreases in our cash balances following our acquisition of the Hyatt Regency San Antonio Riverwalk in April 2024, as well as decreased interest rates. In addition, during the first nine months of 2025, we recognized settlement proceeds of $1.9 million for certain property-related claims at the Oceans Edge Resort & Marina, net property insurance recoveries of $0.8 million related to 2023 fire damage at the Hilton San Diego Bayfront and 2025 water damage at The Westin Washington, DC Downtown, and other miscellaneous income of $0.1 million. During the first nine months of 2024, we also recognized $0.3 million in property insurance recoveries related to 2023 fire damage at the Hilton San Diego Bayfront and $0.1 million in other miscellaneous income.
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Interest expense. We incurred interest expense as follows (in thousands):
Interest expense decreased $2.6 million, or 16.1%, in the third quarter of 2025 as compared to the same period in 2024, and decreased $0.4 million, or 1.1%, in the first nine months of 2025 as compared to the same period in 2024.
The decreases in interest expense during the third quarter and first nine months of 2025 as compared to the same periods in 2024 were primarily due to noncash changes of $3.8 million and $0.4 million, respectively, in the fair market value of our derivatives. In addition, interest expense decreased in the first nine months of 2025 as compared to the same period in 2024 due to a $0.8 million increase in capitalized interest related to the extensive renovation work at The Confidante Miami Beach as it transitioned to Andaz Miami Beach.
The decreases in interest expense during the third quarter and first nine months of 2025 as compared to the same periods in 2024 were partially offset by increased interest on our debt of $0.5 million and $0.2 million, respectively, primarily due to the $50.0 million in total draws on our credit facility in April 2025 and July 2025 and our draw of the $100.0 million available under Term Loan 4 in December 2024, partially offset by our December 2024 repayment of the $72.1 million loan secured by the JW Marriott New Orleans. In addition, interest expense increased $0.2 million and $0.6 million during the third quarter and first nine months of 2025 as compared to the same periods in 2024, respectively, due to increased amortization of deferred financing costs related to costs incurred to extend the maturity of Term Loan 3 in April 2025, on the issuance of Term Loan 4 in December 2024, and related to the Third Amended and Restated Credit Agreement entered into in September 2025 (the “Amended Credit Agreement”). Interest expense during the third quarter of 2025 also increased $0.5 million as compared to the third quarter of 2024 due to a decrease in capitalized interest related to the extensive renovation work at The Confidante Miami Beach as it transitioned to Andaz Miami Beach.
Our weighted average interest rate per annum, including our variable rate debt obligations and excluding capitalized interest, was approximately 5.2% and 5.7% at September 30, 2025 and 2024, respectively. Approximately 70.4% and 51.1% of our outstanding debt had fixed interest rates or had been swapped to fixed interest rates at September 30, 2025 and 2024, respectively.
(Loss) gain on sale of assets, net. (Loss) gain on sale of assets, net totaled zero for both the third quarters of 2025 and 2024, and a loss of $8.8 million and a net gain of $0.5 million for the first nine months of 2025 and 2024, respectively. In the first nine months of 2025, we recognized an $8.8 million loss on our sale of the Hilton New Orleans St. Charles. In the first nine months of 2024, we recognized an additional $0.5 million net gain related to a contingency resolution at a hotel sold in a prior year.
(Loss) gain on extinguishment of debt. (Loss) gain on extinguishment of debt totaled a loss of $0.2 million and zero for the third quarters of 2025 and 2024, respectively, and a loss of $0.2 million and a gain of $0.1 million for the first nine months of 2025 and 2024, respectively. In the third quarter and first nine months of 2025, we recorded a loss of $0.2 million related to the write-off of unamortized deferred financing costs in connection with the recast of our credit facilities. In the first nine months of 2024, we recorded a $0.1 million gain associated with reassessments of the remaining potential employee-related obligations held in escrow associated with our assignment of a hotel to the hotel’s mortgage holder in 2020.
Income tax (provision) benefit, net. We lease our hotels to the TRS Lessee and its subsidiaries, which are subject to federal and state income taxes. In addition, we and the Operating Partnership may also be subject to various state and local income taxes.
In the third quarter and first nine months of 2025, we recognized net current income tax provisions of $0.1 million and $0.3 million, respectively, resulting from current state and federal income tax expenses.
In the third quarter and first nine months of 2024, we recognized net current income tax benefits of $0.5 million and $1.1 million, respectively, resulting from current state and federal income tax expenses, net of any refunds.
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Preferred stock dividends. Preferred stock dividends were incurred as follows (in thousands):
Series G preferred stock
1,076
745
2,567
1,739
Series H preferred stock
1,761
5,283
Series I preferred stock
1,425
4,275
Total preferred stock dividends
4,262
3,931
12,125
11,297
The annual dividend rate on the Series G preferred stock increased in the third quarter of 2025 to the greater of 6.5% or the rate equal to the Montage Healdsburg’s annual net operating income yield on the Company’s total investment in the resort, resulting in a dividend rate of 6.5% for the third quarter of 2025. Prior to this increase, during the period from the third quarter of 2024 through the second quarter of 2025, the annual dividend rate on the Series G preferred stock was the greater of 4.5% or the rate equal to the Montage Healdsburg’s annual net operating income yield on the Company’s total investment in the resort, and during the period from the first quarter of 2024 through the second quarter of 2024, the annual dividend rate on the Series G preferred stock was the greater of 3.0% or the rate equal to the Montage Healdsburg’s annual net operating income yield on the Company’s total investment in the resort.
Non-GAAP Financial Measures. We use the following “non-GAAP financial measures” that we believe are useful to investors as key supplemental measures of our operating performance: EBITDAre; Adjusted EBITDAre; FFO attributable to common stockholders; and Adjusted FFO attributable to common stockholders. These measures should not be considered in isolation or as a substitute for measures of performance in accordance with accounting principles generally accepted in the United States (“GAAP”). In addition, our calculation of these measures may not be comparable to other companies that do not define such terms exactly the same as the Company. These non-GAAP measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to net income (loss), cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.
We present EBITDAre in accordance with guidelines established by the National Association of Real Estate Investment Trusts (“Nareit”), as defined in its September 2017 white paper “Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate.” We believe EBITDAre is a useful performance measure to help investors evaluate and compare the results of our operations from period to period in comparison to our peers. Nareit defines EBITDAre 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 EBITDAre of unconsolidated affiliates.
We make additional adjustments to EBITDAre 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 EBITDAre, when combined with the primary GAAP presentation of net income, is beneficial to an investor’s complete understanding of our operating performance. In addition, we use both EBITDAre and Adjusted EBITDAre as measures in determining the value of hotel acquisitions and dispositions.
We adjust EBITDAre for the following items, which may occur in any period, and refer to this measure as Adjusted EBITDAre:
32
The following table reconciles our unaudited net income to EBITDAre and Adjusted EBITDAre for the three and nine months ended September 30, 2025 and 2024 (in thousands):
Income tax provision (benefit), net
137
(483)
272
(1,083)
EBITDAre
48,799
50,437
165,960
172,412
(158)
(153)
(674)
Pre-opening costs
853
6,471
1,452
Management transition costs
1,869
Adjustments to EBITDAre, net
1,253
3,130
14,030
9,189
Adjusted EBITDAre
50,052
53,567
179,990
181,601
Adjusted EBITDAre decreased $3.5 million, or 6.6%, in the third quarter of 2025 as compared to the third quarter of 2024, and decreased $1.6 million, or 0.9%, in the first nine months of 2025 as compared to the first nine months of 2024 primarily due to the following:
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We believe that the presentation of FFO attributable to common stockholders provides useful information to investors regarding our operating performance because it is a measure of our operations without regard to specified noncash items such as real estate depreciation and amortization, any real estate impairment loss and any gain or loss on sale of real estate assets, all of which are based on historical cost accounting and may be of lesser significance in evaluating our current performance. Our presentation of FFO attributable to common stockholders conforms to the Nareit definition of “FFO applicable to common shares.” Our presentation may not be comparable to FFO reported by other REITs that do not define the terms in accordance with the current Nareit definition, or that interpret the current Nareit definition differently than we do.
We also present Adjusted FFO attributable to common stockholders when evaluating our operating performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance and may facilitate comparisons of operating performance between periods and our peer companies.
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:
34
The following table reconciles our unaudited net income to FFO attributable to common stockholders and Adjusted FFO attributable to common stockholders for the three and nine months ended September 30, 2025 and 2024 (in thousands):
Real estate depreciation and amortization
33,581
31,320
99,278
90,846
FFO attributable to common stockholders
30,641
30,638
113,255
121,518
Real estate amortization of right-of-use assets and obligations
(130)
(129)
(390)
(381)
Amortization of contract intangibles, net
315
944
833
Prior year income tax benefit, net
(582)
(1,530)
Adjustments to FFO attributable to common stockholders, net
1,101
6,213
15,710
9,477
Adjusted FFO attributable to common stockholders
31,742
36,851
128,965
130,995
Adjusted FFO attributable to common stockholders decreased $5.1 million, or 13.9%, and decreased $2.0 million, or 1.5%, in the third quarter and first nine months of 2025, respectively, as compared to the same periods in 2024 primarily due to the same reasons noted in the discussion above regarding Adjusted EBITDAre.
Liquidity and Capital Resources
During the periods presented, our sources of cash included our operating activities and working capital, as well as proceeds from a hotel disposition, our credit facility and term loans, key money, and property insurance. Our primary uses of cash were for capital expenditures for hotels and other assets, the acquisition of a hotel and land adjacent to one of our hotels, operating expenses, repurchases of our common stock, repayments of our credit facility and notes payable, payments of deferred financing costs, and dividends and distributions on our preferred and common stock. 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. 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 $145.1 million in the first nine months of 2025 as compared to $139.9 million in the first nine months of 2024. The net increase in cash provided by operating activities during the first nine months of 2025 as compared to the same period in 2024 was primarily due to additional operating cash provided by the increase in travel demand benefiting our hotels, as well as the acquisition of the Hyatt Regency San Antonio Riverwalk and the post-renovation ramp-ups of Marriott Long Beach Downtown and Andaz Miami Beach. These increases were partially offset by decreases in interest income resulting from our lower cash balances and lower interest rates, along with increases in corporate-level expenses.
35
Investing activities. Our net cash provided by or used in investing activities fluctuates primarily as a result of acquisitions, dispositions and renovations of hotels and other assets. Net cash used in investing activities during the first nine months of 2025 as compared to the first nine months of 2024 was as follows (in thousands):
During the first nine months of 2025, we invested $73.7 million for renovations and additions to our portfolio and other assets, and we purchased land adjacent to the Oceans Edge Resort & Marina for $1.3 million. These cash outflows were partially offset by $46.3 million of proceeds received from the sale of the Hilton New Orleans St. Charles, $4.0 million in key money received from the manager of one of our hotels pursuant to the hotel’s management agreement, and $0.9 million in property insurance proceeds received related to 2025 water damage at The Westin Washington, DC Downtown and 2023 fire damage at Hilton San Diego Bayfront.
During the first nine months of 2024, we paid $229.3 million to acquire the Hyatt Regency San Antonio Riverwalk, including closing costs and prorations and we invested $110.2 million for renovations and additions to our portfolio and other assets. These cash outflows were slightly offset by $0.3 million in property insurance proceeds received related to 2023 fire damage at the Hilton San Diego Bayfront.
Financing activities. Our net cash provided by or used in financing activities fluctuates primarily as a result of our dividends and distributions paid, issuance and repurchase of common stock, issuance and repayment of debt, including draws on our credit facility and term loans, and issuance and redemption of other forms of capital, including preferred equity. Net cash used in financing activities during the first nine months of 2025 as compared to the first nine months of 2024 was as follows (in thousands):
During the first nine months of 2025, we paid $100.7 million to repurchase 11,381,731 shares of our outstanding common stock, $4.3 million to repurchase common stock to satisfy the tax obligations in connection with the vesting of restricted common stock issued to employees, and $66.1 million in dividends and distributions to our preferred and common stockholders. In addition, in September 2025 we entered into the Amended Credit Agreement and received $149.6 million associated with additional borrowing on our term loans and repaid $64.6 million to lenders as a result of adjustments to their commitments in the Amended Credit Agreement. We used a portion of the proceeds received to repay the $50.0 million we drew down on our revolving credit facility in April 2025 and July 2025. During the first nine months of 2025, we also paid $18.0 million in deferred financing costs related to the extension of the previous Term Loan 3’s maturity and the Amended Credit Agreement.
During the first nine months of 2024, we paid $26.3 million to repurchase 2,670,373 shares of our common stock, $4.2 million to repurchase common stock to satisfy the tax obligations in connection with the vesting of restricted common stock issued to employees, $1.6 million in scheduled principal payments on the loan secured by the JW Marriott New Orleans, and $69.7 million in dividends and distributions to our preferred and common stockholders.
Future. We expect our primary sources of cash will continue to be our operating activities, working capital, borrowing under our credit facility, additional issuances of debt, 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. As a result of potential increases in inflation rates and interest rates, as well as possible recessionary periods in the future, certain sources of capital may not be as readily available to us as they have in the past or may only be available at higher costs.
36
We expect our primary uses of cash to be for operating expenses, capital investments in our hotels, repayment of principal on our debt and credit facility, interest expense, repurchases of our common and preferred stock, distributions on our common stock, dividends on our preferred stock, and acquisitions of hotels or interests in hotels.
While inflation began to decrease in 2024, the recent uncertainty in the market in connection with certain international economic and political relationships, including political disputes and the imposition of tariffs affecting commodity costs, has had a negative effect on our operations. Prior to the recently announced tariffs, we experienced increases in wages, employee-related benefits, food costs, commodity costs, including those used to renovate or reposition our hotels, property taxes, liability insurance, utilities, and borrowing costs. The imposition of recently announced tariffs could exacerbate existing cost pressures and create additional inflationary pressures that could further impact our results of operations. The ability of our hotel operators to adjust rates has historically mitigated the impact of increased operating costs on our financial position and results of operations.
Cash Balance. As of September 30, 2025, our unrestricted cash balance was $121.1 million. 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. As of September 30, 2025, we had $930.0 million of debt, $197.6 million of cash and cash equivalents, including restricted cash, and total assets of $3.0 billion. We believe that by maintaining appropriate debt levels, staggering maturity dates, and maintaining a highly flexible structure, we will have lower capital costs than more highly leveraged companies, or companies with limited flexibility due to restrictive covenants.
In January 2025, we entered into an interest rate swap on Term Loan 4, which is effective January 31, 2025, expires November 7, 2026, and fixes the SOFR rate at 4.02%.
In April 2025, we exercised our option to extend the maturity date of the previous Term Loan 3 from May 2025 to May 2026. In addition, in April 2025, we drew down $27.0 million on our credit facility and used the proceeds for general corporate purposes.
In July 2025, we drew down $23.0 million on our credit facility and used the proceeds for general corporate purposes.
In September 2025, we entered into the Amended Credit Agreement, which expanded our unsecured debt borrowing capacity and extended the maturity of our term loans. The Amended Credit Agreement continues to provide for a $500.0 million revolving credit facility and increases the aggregate amount of our term loan facilities from $675.0 million (on four existing term loans) to $850.0 million (on three new term loans). The following includes the details of the Amended Credit Agreement:
In August 2025, we entered into an interest rate swap with a notional amount of $65.0 million and an effective date of January 10, 2026, which we intend to use to fix a portion of the interest rate on the New Term Loan 1 delayed draw. The swap agreement expires January 10, 2028 and fixes the SOFR rate at 3.206%. In addition, in September 2025, we entered into an interest rate swap with a notional amount of $210.0 million and an effective date of September 9, 2025, which fixes the SOFR rate at 3.226% on the current $185.0 million balance of New Term Loan 1 and $25.0 million of New Term Loan 3. The swap agreement expires on September 9, 2028.
37
As of September 30, 2025, 70.4% of our outstanding debt had fixed interest rates or had been swapped to fixed interest rates, including our unsecured corporate-level New Term Loan 1, New Term Loan 2, and $25.0 million of New Term Loan 3, which totaled $485.0 million, and our two unsecured corporate-level senior notes, which totaled $170.0 million.
Our floating rate debt as of September 30, 2025 included $275.0 million of our unsecured corporate-level New Term Loan 3.
Contractual Obligations. The following table summarizes our payment obligations and commitments as of September 30, 2025 (in thousands):
Payment due by period
Less Than
1 to 3
3 to 5
More than
Total
1 year
years
5 years
Debt (1)
Interest obligations on debt (1) (2)
247,657
46,015
93,773
90,411
17,458
Operating lease obligations, including imputed interest (3)
10,050
3,384
4,990
713
963
Construction commitments
60,533
1,248,240
174,932
203,763
91,124
778,421
We may in the future seek to obtain mortgages on one or more of our 14 unencumbered hotels (subject to certain provisions under our unsecured term loans and senior notes), all of which were held by subsidiaries whose interests were pledged to our credit facilities as of September 30, 2025. Should we obtain secured financing on any or all of our unencumbered hotels, the amount of capital available through our credit facility or future unsecured borrowings may be reduced.
Capital Expenditures and Reserve Funds
We believe we maintain each of our hotels in good repair and condition and in general conformity with applicable franchise and management agreements, ground lease, laws, and regulations. Our capital expenditures primarily relate to the ongoing maintenance of our hotels and are budgeted in the reserve accounts described in the following paragraph. We also incur capital expenditures for cyclical renovations, hotel repositionings, and development. We invested $73.7 million and $110.2 million in our portfolio and other assets during the first nine months of 2025 and 2024, respectively. As of September 30, 2025, we have contractual construction commitments totaling $60.5 million for ongoing renovations. 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 certain hotel brands, we are obligated to maintain an FF&E reserve account for future planned and emergency-related capital expenditures at these hotels. 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 3.0% and 5.5% of the respective hotel’s applicable annual revenue. As of September 30, 2025, our balance sheet includes restricted cash of $76.3 million, which was held in FF&E reserve accounts for future capital expenditures at the majority of our hotels. 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.
38
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. 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. 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. Demand at certain of our hotels is affected by seasonal business patterns that can cause quarterly fluctuations in our revenues.
Quarterly revenue also may be adversely affected by renovations and repositionings, our managers’ effectiveness in generating business and by events beyond our control, such as economic and business conditions, including a U.S. recession or increased inflation, trade conflicts and tariffs, changes impacting global travel, regional or global economic slowdowns, any flu or disease-related pandemic that impacts travel or the ability to travel, weather patterns, the adverse effects of climate change, the threat of terrorism, terrorist events, civil unrest, government shutdowns, events that reduce the capacity or availability of air travel, increased competition from other hotels in our markets, new hotel supply or alternative lodging options and unexpected changes in commercial or leisure travel.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. 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. We base our estimates on historical experience, information that is currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect the most significant judgments and estimates used in the preparation of our consolidated financial statements.
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. 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. We perform a fair value assessment using valuation techniques such as discounted cash flows and comparable sales transactions in the market to estimate the fair value of the hotel and, if appropriate and available, current estimated net sales proceeds from pending offers. Our judgment is required in determining the discount rate, terminal capitalization rate, the estimated growth of revenues and expenses, revenue per available room and margins, as well as specific market and economic conditions.
39
We review any uncertain tax positions and, if necessary, we will record the expected future tax consequences of uncertain tax positions in the consolidated financial statements. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. We are required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which includes federal and certain states.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
To the extent that we incur debt with variable interest rates, our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We use interest rate derivatives to manage our exposure to the interest rate risks related to our floating rate debt. We have no derivative financial instruments held for trading purposes.
As of September 30, 2025, 70.4% of our debt obligations were fixed in nature or were subject to interest rate swap derivatives, which mitigates the effect of changes in interest rates on our cash interest payments. If the market rate of interest on our variable rate debt increases or decreases by 50 basis points, interest expense on an annualized basis would increase or decrease, respectively, by approximately $1.4 million based on the amount of variable rate debt outstanding at September 30, 2025.
Item 4. Controls and Procedures
Attached as exhibits to this Form 10-Q are the certifications required by Rule 13a-14 of the Securities Exchange Act of 1934, as amended. This section includes information concerning the controls and control evaluations referred to in the certifications.
Evaluation of Disclosure Controls and Procedures. Based upon an evaluation of the effectiveness of disclosure controls and procedures, our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission and is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting. During the three months ended September 30, 2025, the Company completed its implementation of a new enterprise resource planning (“ERP”) system. The new ERP system integrates various financial and operational processes to enhance accuracy, efficiency, and internal controls. A standardized internal control framework was used during the implementation and monitoring controls have been established. Management will continue to assess and monitor the new ERP system to ensure the ongoing effectiveness of internal controls.
Other than the ERP system implementation, there have been no material changes in the Company’s internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Maximum Number (or
Total Number of
Appropriate Dollar
Shares Purchased
Value) of Shares that
Total Number
as Part of Publicly
May Yet Be Purchased
Average Price Paid
Announced Plans
Under the Plans or
Period
Purchased
per Share
or Programs
Programs
July 1, 2025 - July 31, 2025
201,314
8.70
327,511,175
August 1, 2025 - August 31, 2025
57,556
8.69
327,011,181
September 1, 2025 - September 30, 2025
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
The following Exhibits are filed as a part of this report:
Exhibit Number
Description
3.1
Articles of Amendment and Restatement of Sunstone Hotel Investors, Inc. (incorporated by reference to Exhibit 3.1 to the registration statement on Form S-11 (File No. 333-117141) filed by the Company).
3.2
Third Amended and Restated Bylaws of Sunstone Hotel Investors, Inc. effective as of February 9, 2023 (incorporated by reference to Exhibit 3.1 to Form 8-K, filed by the Company on February 10, 2023).
3.3
Articles Supplementary Prohibiting the Company From Electing to be Subject to Section 3-803 of the Maryland General Corporation Law Absent Shareholder Approval (incorporated by reference to Exhibit 3.1 to Form 8-K, filed by the Company on April 29, 2013).
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).
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).
3.6
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).
3.7
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).
10.1
Fifth Amended and Restated Employment Agreement, dated February 18, 2025, by and among Sunstone Hotel Investors, Inc., Sunstone Hotel Partnership, LLC and Bryan A. Giglia (incorporated by reference to Exhibit 10.1 to Form 10-Q, filed by the Company on May 6, 2025). #
10.2
Amended and Restated Employment Agreement, dated February 18, 2025, by and among Sunstone Hotel Investors, Inc., Sunstone Hotel Partnership, LLC and Aaron Reyes (incorporated by reference to Exhibit 10.2 to Form 10-Q, filed by the Company on May 6, 2025). #
10.3
First Amendment to Sunstone Hotel Investors, Inc. and Sunstone Hotel Partnership, LLC 2022 Incentive Award Plan (incorporated by reference to Exhibit 10.1 to Form 8-K, filed by the Company on May 6, 2025). #
10.4
Third Amended and Restated Credit Agreement, dated September 24, 2025, 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 to Form 8-K filed by the Company on September 26, 2025).
31.1
Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2
Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32.1
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS
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. *
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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 formatted in Inline XBRL (included in Exhibit 101).
*
Filed herewith.
#
Management contract or compensatory plan arrangement.
Pursuant to the requirements 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.
Date: November 7, 2025
By:
/s/ Aaron R. Reyes
Aaron R. Reyes(Chief Financial Officer and Duly Authorized Officer)