SHO 10-K & 10-Q changes, risk factors and insider trading

We own upper upscale and luxury hotels located in urbanconvention, urban, and resort destinations in an industry that is highly competitive.

The lodging industry is highly competitive. Our hotels compete with other hotels and alternative lodging options such as timeshares, vacation rentals or sharing services such as Airbnb based on location, price, physical attributes, service levels, brand affiliationaffiliation, and reputation, among many other factors. New hotels may be constructed, creating additional competition, in some cases without corresponding increases in demand for hotel rooms. Some of our competitors may have hotels that are better located, have a stronger reputation, or possess superior physical attributes than our hotels. This competition could reduce occupancy levels and revenue at our hotels, which would harm our operations and limit or slow our future growth. In addition, in periods of low demand, profitability is negatively affected by the relatively high fixed costs of operating upper upscale and luxury hotels when compared to other classes of hotels.

In addition, our business strategy is predicated on a lifecycle approach to hotel acquisitions and dispositions, and we may not be successful in identifying or completing acquisitions or dispositions that are consistent with our strategy. We compete with institutional pension funds, sovereign wealth funds, private equity investors, high net worth individuals, other REITs and numerous local, regional, national and international owners who are engaged in the acquisition of hotels. We also rely on the foregoing entities as potential purchasers of hotels we seek to sell. These competitors may affect the supply/demand dynamics and, accordingly, increase the price we must pay for hotels or hotel companies we seek to acquire, and these competitors may succeed in acquiring those hotels or hotel companies themselves. Furthermore, owners of our potential acquisition targets may find our competitors to be more attractive suitors because they may have greater financial resources, may be willing to pay more, or may have a more compatible operating philosophy.

We believe that both new hotel construction and new hotel openings were delayed or even cancelled over the past several years due to the negative effects of the COVID-19 pandemic on the economy and the lodging industry. In addition, we believe construction supply constraints, the cost and availability of financing, economic uncertainty, and inflationary pressures on the cost of building materials which made new hotel development less financially feasible. We believe that many of these same factors combined with the recent imposition of tariffs, will continue to discourage new hotel supply in many markets although some markets willmay experience new hotel openings at or greater than historical levels. We are unable to predict certain market changeschanges, including changes in the supply of, or demand for, similar real properties in a particular area. If we pay higher prices for hotels, our profitability may be reduced. Also, future acquisitions of hotels or hotel companies may not yield the returns we expect and, if financed using our equity, may result in stockholder dilution. In addition, our profitability may suffer because of acquisition-related costs, and the integration of such acquisitions may cause disruptions to our business and may strain management resources.

Events beyond our control, including economic slowdowns or recessions, pandemics,uncertainty surrounding certain international economic and political relationships, including political disputes, government shutdowns, and the imposition of tariffs, natural disasters, civil unrestunrest, and terrorism may harm the operating performance of the hotel industry generally and the performance of our hotels.

The operating and financial performance of the lodging industry has traditionally been closely linked with the performance of the general economy. Our hotels are classified as either upper upscale or luxury hotels. In periods of economic difficulties, including those caused by pandemics,inflation or recession, these types of hotels may be more susceptible to a decrease in revenue, as compared to hotels in other categories that have lower room rates in part because upper upscale and luxury hotels generally target business and leisure travelers,travelers at higher price points, and these groups may reduceseek travelto costscurtail byspending limitingin travelperiods orof byeconomic using lower cost accommodations.decline. In addition, operating results at our hotels in resort markets may be negatively affected by reduced demand from domestic travelers and by changes in the value of the U.S. dollar in relationrelative to other currencies, whichcurrencies may makeimpact the demand for our hotels by making international travel more affordable;or whereasless affordable. Also, operating results at our hotels in gateway markets may be negatively affected by reduceduncertainty demandsurrounding fromcertain international travelerseconomic dueand topolitical financialrelationships, conditionsincluding inpolitical theirdisputes homeand countriesunfavorable or a material strengtheningperceptions of the U.S. dollar in relation to other currencies which makes travel to the U.S.U.S., lesswhich affordable.could further reduce international travel demand. Also, volatility in transportation fuel costs, increases in air and ground travel costs, decreases in airline capacity, government shutdowns, the imposition of tariffs, and prolonged periods of inclement weather in our markets may reduce the demand for our hotels.

Natural disasters, civil unrest and terrorism may also negatively impact our operations. We own hotels located in wildfire-prone or seismically active areas of California and hotels located in areas that have an increased potential to experience hurricanes. In addition, we own hotels that are located in concentrated business sectors in major cities that may be subject to higher-than-normalan elevated risk of terrorist attacks. We have acquired and intend to maintain comprehensive insurance on each of our hotels, including liability, terrorism, fire and extended coverage, of the type and amount that we believe are customarily obtained for or by hotel owners. We cannot guarantee that such coverage will continue to be available at reasonable coverage levels, at reasonable rates or at reasonable deductible levels.

Additionally, deductible levels are typically higher for earthquakes, floodsfloods, and named windstorms, and there remains considerable uncertainty regarding the extent and adequacy of terrorism coverage that will be available to protect our interests in the event of future terrorist attacks that impact our hotels. Accordingly, our financial results may be harmed if any of our hotels are damaged by natural disasters or terrorist attacks resulting in losses (either insured or uninsured) or causing a decrease in average daily room rates and/or occupancy. Even in the absence of direct physical damage to our hotels, the occurrence of any natural disasters, terrorist attacks, military actions, outbreaks of diseases, or other casualty events, may have a material adverse effect on our business, the impact of which could result in a material adverse effect on our financial condition, results of operationsoperations, and our ability to make distributions to our stockholders.

Before moderating in 2023 and 2024, inflationInflation in the United States, EuropeEurope, and other geographiesregions rose in 2022 to levels not experienced in recent decades.decades before moderating in 2023 and remaining relatively stable through 2025. Future increases in inflation could adversely affect consumer confidence, which could reduce consumer purchasing power and demand for lodging. Additionally, inflation affects our expenses, including, without limitation, by increasing such costs as wages, employee-related benefits, food costs, commodity costs, including those used to renovate or reposition our hotels, property taxes, property and liability insurance, utilities, and borrowing costs. 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.revenue and our expenses may not decrease if revenue decreases.

System security risks, data protection breaches, cyber-attackscyber-attacks, and systems integration issues could disrupt the information technology network and systems used by us, our suppliers, our third-party managers or our franchisors, and any such disruption could reduce our expected revenue, increase our expenses, compromise confidential information, damage our reputation, increase our potential liability and adversely affect our common stock price.

Certain of our third-party managers and their service providers have been subject to, and previously publicly released statements disclosing, cyber-attacks and/or unauthorized access to their guest reservation, point-of-sale systemssystems, and other sensitive databases, some of which have or may have impacted our hotels and guests who have used our hotels’ services or amenities. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, nation-state affiliated actors and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world has increased. Our information network and systems and the information networks and systemsthose used by our third-party managers and franchisors can be vulnerable to threats such as: system, network or internet failures; computer hacking or business disruption, including through network- and email-based attacks; cyber-terrorism; viruses, worms, ransomware or other malicious software programs; social engineering; and employee error, negligence or fraud. The introduction of artificial intelligence (“AI”) technologies, including generative AI, may further increase the complexity of cyber threats, create new vulnerabilities, and expose us and our third-party managers and franchisors to regulatory scrutiny, intellectual property disputes, compliance challenges, and privacy concerns. If generative AI contributes to a security breach or other incident, we or our third-party managers and franchisors could lose confidential information or intellectual property, which may result in reputational harm. Any compromise of the function, securitysecurity, and availability of our network and systems or the networks and systemsthose of our third-party managers and franchisors could result in disruptions to operations, misappropriated or compromised confidential hotel or hotel guest information, systems disruptions, the shutdown of our hotels, exploited security vulnerability of our respective networks, delayed sales or bookings, lost guest reservations, damage to our reputation or the reputations of our third-party managers and franchisors, increased costs and lower margins. The costs for us to eliminate or alleviate cyber or other security problems could be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential business at our hotels. Any of these events could adversely affect our financial results, common stock priceprice, and reputation, lead to unauthorized disclosure of confidential information, result in delayed or misstated financial reports, monetary losses or regulatory penalties and subject us to potential litigation and liability.

Portions of our information technology infrastructure or that of our third-party managers and franchisors also may experience interruptions, delays or cessations of service or produce errors in connection with systems installation, integration or migration work that takes place from time to time. We or our third-party managers and franchisors may not be successful in implementing new systems and transitioning data,data or may procure hardware or operating system software and applications from third-party suppliers that may contain defects in design or manufacture, which could cause business disruptionsdisruptions, capital expenses, and be more expensive, time consuming and resource-intensive. Such disruptions could adversely impact the ability of our third-party managers and franchisors to fulfill reservations for guestroomsguestrooms, impact guest safety or hotel operations, and other services offered at our hotels or to deliver to us timely and accurate financial information.

Although we have taken steps to protect the security of our information systems and the data maintained in these systems, there can be no assurance that the security measures we have taken will prevent failures, inadequacies, or interruptions in system services, or that system security will not be compromised through physical or electronic breaches, spoofed emails, phishing attacks, computer viruses, cyber extortionists or attacks by hackers. In addition, we rely on the security systems of our third-party managers and franchisors to protect proprietary and customer information from these threats. We and our third-party managers and operatorsfranchisors may be unable to identify, investigate or remediate cyber events or incidents because attackers are increasingly using techniques and tools (including artificial intelligenceAI and machine learning) designed to avoid detection, circumvent security controls, and remove or obfuscate forensic evidence. Further, any adoption of artificial intelligenceAI by us or by third parties may pose new security challenges.

A significant portion of our hotels are geographically concentrated and, accordingly, we could be disproportionately harmed by economic conditions, competition, new hotel supply, real and personal property tax rates, civil unrest, or natural disasters in these areas of the country.

As of December 31, 2024,2025, most of our hotels were geographically concentrated in California, Florida, Hawaii, and WashingtonWashington, DC as follows:

The concentration of our hotels in California, Florida, Hawaii, and WashingtonWashington, DC exposes our business to economic conditions, competition, new hotel supply, and real and personal property tax rates unique to these locales. In addition, natural disasters in these locales would disproportionately affect our hotel portfolio. The economies and tourism industries in these locales, in comparison to other parts of the country, are negatively affected to a greater extent by changes and downturns in certain industries, including the entertainment, high technology, financial industries, and governmental agencies. It is also possible that because of our California, Florida, Hawaii, and WashingtonWashington, DC concentrations, a change in laws applicable to such hotels and the lodging industry may have a greater impact on us than a change in comparable laws in another geographical area in which we have hotels. Adverse developments in these locales could harm our revenue or increase our operating expenses.

We are subject to the risks associated with the physical effects of climate change, which can include more frequent or severe storms, hurricanes, flooding, tornados, extreme temperatures, droughtsdroughts, and wildfires, any of which could have a material adverse effect on our hotels, operating resultsresults, and cash flows. To the extent climate change causes changes in weather patterns, our coastal and high flood zone markets could experience increases in storm intensity and rising sea-levelssea-levels, causingwhile our hotels in drought-prone regions could encounter increased wildfire risk, potentially resulting in property damage toand ouroperational hotels.disruptions. As a result, we could become subject to significant losses and/or repair costs that may or may not be fully covered by insurance. Other markets may experience prolonged variations in temperature or precipitation that may limit access to the water needed to operate our hotels, increase the frequency or duration of power outages, or significantly increase energy costs, which may subject those hotels to additional regulatory burdens, such as limitations on water usage or stricter energy efficiency standards. Climate change also may affect our business by increasing the cost or limiting the availability of property insurance on terms we find acceptable in areas most vulnerable to such events, increasing operating costs at our hotels, such as the cost of water or energy, and requiring us to expend financial resources as we seek to mitigate, repair and protect our hotels against such risks.

We are subject to the climate change risks associated with the transitional effects to a low carbon scenario, which can include increased regulation for building efficiency and equipment specifications, increased regulations or investor requirements for environmental and social disclosures, increased cost of goods and raw materialsmaterials, and increased costs to manage the shift in consumer preferences. In an effort to mitigate the impact of climate change, our hotels could become subject to increased governmental laws and regulations mandating energy efficiency standards, the usage of sustainable energy sources and updated equipment specificationsspecifications, which may require additional capital investments or increased operating costs. Climate change may also affect our business by shifting consumer preferences to sustainable travel or by changing the relative attractiveness of certain travel locations, and as a result, some of our hotels may be more or less in demand in the future. Our hotels may be subject to additional costs to manage consumer expectations for sustainable buildings and hotel operations.

Uninsured or underinsured losses could harm our financial condition, results of operationsoperations, and ability to make distributions to our stockholders.

Various types of litigation losses and catastrophic losses, such as those due to wars, terrorist acts, earthquakes, floods, hurricanes, pollution, climate change or other environmental matters, generally are either uninsurable or not economically insurable, or may be subject to insurance coverage limitations, such as large deductibles or co-payments. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a hotel, as well as the anticipated future revenue from the hotel. In that event, we might nevertheless remain obligated for any notes payable or other financial obligations related to the property, in addition to obligations to our ground lessor, franchisorsthird-party managers and managers.franchisors.

We own hotels in states that have historically experienced a greater risk of certain catastrophic acts of nature, including wildfires, earthquakes, mudslides, strong winds, tropical storms, and hurricanes, than other states. In the event of a catastrophic loss, our insurance coverage may not be sufficient to cover the full current market value or replacement cost of our lost investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also keep us from using insurance proceeds to replace or renovate a hotel after it has been damaged or destroyed. Under those circumstances, the insurance proceeds we receive might be inadequate to restore our economic position on the damaged or destroyed hotel. Acts of nature that do not result in physical loss at our hotels could diminish the desirability or accessibility of our hotel’s location, resulting in less demand by travelers.

Property and casualty insurance, including coverage for terrorism, can be difficult or expensive to obtain. We carry, or in certain instances cause our third-party managers to carry, insurance with respect to all our hotels and other properties. When ourthe existing insurance policies expire, we or our third-party managers and franchisors may encounter difficulty in obtaining or renewing property or casualty insurance on our hotels at the same levels of coverage and under similar terms. Such insurance may be more limited and for some catastrophic risks (e.g., earthquake, fire, floodflood, and terrorism) may not be generally available at current levels. Even if we or our third-party managers are able to renew ourthe policies or to obtain new policies at levels and with limitations consistent with ourthe current policies, we cannot be sure that we or our third-party managers and franchisors will be able to obtain such insurance at premium rates that are commercially reasonable. If we or our third-party managers are unable to obtain adequate insurance on our hotels, it could cause us to be in default under certain covenants of our indebtedness or other contractual commitments we have to our ground lessor, franchisorsthird-party managers and managersfranchisors, which require us to maintain adequate insurance on our properties to protect against the risk of loss. If this were to occur, or if we or our third-party managers were unable to obtain adequate insurance and our properties experienced damages which would otherwise have been covered by insurance, it could harm our financial condition and results of operations.

The increased use of virtual meetings and other similar technologies could lessen the need for business-related travel,travel and, therefore, demand for rooms in our hotels may be adversely affected.

The COVID-19 pandemic caused a significant decrease in business-related travel as companies increasingly utilized virtual meetings in response to travel restrictions and to protect the health and safety of their employees. While business transient demand has improved, it remains below pre-pandemic levels at some of our hotels. The increased use of teleconferencing and video-conference technology by businesses may continue to increase in the future, which could result in a sustained reduction in business travel. To the extent that such technologies, or new technologies, play an increased role in business interactions and the need for business-related travel decreases, demand for hotel rooms may decrease and our hotels could be adversely affected.

Our hotels require ongoing capital investment and we may incur significant capital expenditures in connection with acquisitions, repositionings, and other improvements, some of which are mandated by applicable laws or regulations or agreements with third parties, and the costs of such renovations, repositionings, or improvementsimprovements, including cost increases resulting from inflation or the implementation of international tariffs, and delays due to supply chain disruptions, may exceed our expectations or cause other problems.

In addition to capital expenditures required by our management and franchise agreements, from time to time we need to make capital expenditures to comply with applicable laws and regulations, to remain competitive with other hotels and to maintain the economic value of our hotels. We also may need to make significant capital improvements to hotels that we acquire. During 20242025 and 2023,2024, we invested $157.4$103.0 million and $110.1$157.4 million into our hotels, respectively, which included substantial renovations and conversions of theThe Confidante Miami Beach and Renaissance Long Beach to Andaz Miami Beach and Renaissance Washington DC to Marriott Long Beach Downtown and The Westin Washington, DC Downtown, respectively, and a soft goodsrooms renovation at Wailea Beach Resort. In addition, in 2023, we began a substantial renovation of The Confidante Miami Beach in preparation of its conversion to Andaz Miami Beach. OccupancyResort, and ADRmeeting space renovations at Hyatt Regency San Antonio Riverwalk and Hilton San Diego Bayfront. Operating results are often affected by the maintenance and capital improvements at a hotel, especially if the maintenance or improvements are not completed on schedule or if the improvements result in significant disruption at the hotel. The costs of capital improvements we need or choose to make could harm our financial condition and reduce amounts available for distribution to our stockholders. These capital improvements may give rise to the following additional risks, among others:

Delays in the acquisition, renovation or repositioning of hotel properties may have adverse effects on our results of operations and returns to our stockholders.

Delays we encounter in the acquisition, renovation andor repositioning of hotel properties could adversely affect investor returns. Our ability to purchase assets and complete renovation and repositioning projects will depend, in part, on the amount of our available cash. Renovation or repositioning projects may take longer, cost more than initially expected, and negatively impact the amount of operating cash distributions we receive from such hotels. If our projections are inaccurate, we may not achieve our anticipated returns.

We have historically used capital obtained from debt and equity markets to acquire, renovaterenovate, and refinance hotel assets. If these markets become difficult to access as a result of low demand for debt or equity securities, higher capital costs and interest rates, a low value for capital securities (including our common or preferred stock) and more restrictive lending standards, our business could be adversely affected. In particular, increases in interest rates could make it more difficult or expensive for us to obtain debt or equity capital. Similar factors could also adversely affect the ability of others to obtain capital and therefore could make it more difficult for us to sell hotel assets.

In addition, hotels may not be readily converted to alternative uses if they were to become unprofitable due to competition, age of improvements, decreased demand or other factors. The conversion of a hotel to alternative uses would also generally require substantial capital expenditures and may give rise to substantial payments to our third-party managers, franchisors, management companies and other parties.

Our rights to use the underlying land at the Hilton San Diego Bayfront is based upon our interest under a long-term lease with an unaffiliated party, which expires in 2071. Pursuant to the lease terms, we are required to pay all rent due and comply with all other lessee obligations. Payments under the ground lease increase at regular intervals by the applicable Consumer Price Index. The lease requires a reassessment of the rent payments for 2026 and thereafter, agreed upon by both us and the lessor.

In order to qualify as a REIT, we cannot directly or indirectly operate our hotels. Accordingly, we must enter into management or operating lease agreements (together, “management agreements”) with eligible independent contractors to manage our hotels. As of December 31, 2024,2025, our third-party managers consisted of Four Seasons, Hilton, Hyatt, IHR, Marriott, Montage, Sage and Singh. These independent management companies control the daily operations of our hotelshotels, and we rely on them to operate our hotels as provided in the applicable management agreements.

We are subject to risks associated with our operator’soperators’ employment of hotel personnel, which could increase our expenses or expose us to additional liabilities.

Our third-party managers are responsible for hiring and maintaining the labor force at each of our hotels. Although we do not directly employ or manage employees at our hotels, we are still subject to many of the costs and risks generally associated with the hotel labor force. Increases in minimum wages, inflation related labor shortages,cost orpressures, changes in workplace rules and regulationsregulations, or labor shortages, including those resulting from immigration policies or other factors, could negatively impact our operating results. Additionally, from time to time, hotel operations may be disrupted as a result of strikes, lockouts, public demonstrations, or other negative actions and publicity. For example, during the third and fourth quarters of 2024 the Hilton San Diego Bayfront was impacted by labor activity which led to the cancellation of certain group events and overall lower business volume at the hotel. We also have incurred and may in the future incur increased legal costs and indirect labor costs as a result of contract disputes involving our third-party managers and their labor force or other events. The resolution of labor disputes or re-negotiated labor contracts could lead to increased labor costs, a significant component of our costs, either by increases in wages or benefits or by changes in work rules that raise hotel operating costs. We do not have the ability to determine the outcome of these negotiations.

Most of our hotels operate under a brand owned by Marriott,Four Seasons, Hilton, Hyatt, Hilton, Four SeasonsMarriott, or Montage. Should any of these brands experience a negative event, or receive negative publicity, our operating results may be harmed.

As of December 31, 2024,2025, all of our hotels except the Oceans Edge Resort & Marina are operated under the following widely recognized lodging industry brands: Marriott,Four Seasons, Hilton, Hyatt, Hilton, Four SeasonsMarriott, and Montage. As a result, a significant component of our success is dependent in part on the success of these companies and their respective brands. Consequently, if market recognition or the positive perception of any of these companies is reduced or compromised, the goodwill associated with their respective brands on our hotels may be adversely affected, which may have an adverse effect on our results of operations, as well as our ability to make distributions to our stockholders. Additionally, any negative perceptions or negative impact to operating results from any proposed or future consolidations between nationally recognized brands could have an adverse effect on our results of operations, as well as our ability to make distributions to our stockholders.

Our franchisors and brand managers and franchisors may adopt new policies or change existing policies, which could result in increased costs that could negatively impact our hotels.

Our franchisors and brand managers and franchisors incur certain costs that are allocated to our hotels subject to our management, franchise, management, or operating lease agreements. Those costs may increase over timetime, or our franchisorsbrand managers and brand managersfranchisors may elect to introduce new programs that could increase costs allocated to our hotels. In addition, certain policies, such as our third-party managers’ frequent guest programs, may be altered resulting in reduced revenue or increased costs to our hotels.

In general, the value of hotel real estate has an inverse correlation to the capital costs of hotel investors. If capital costs increase, real estate values may decrease. Capital costs are generally a function of the perceived risks associated with our assets, interest rates on debt and return expectations of equity investors. Interest rate volatility, including volatility due to the 2022 and 2023 interest rate increases implemented by the Board of Governors of the Federal Reserve System (the “Federal Reserve”), could reduce our access to capital markets or increase the cost of funding our debt requirements. Although the Federal Reserve reduced interest rates in 2024 and may continue to decrease interest rates in 2025, any future decisions to decrease, hold steady or increase interest rates and the timing of such decision is unknown. If the income generated by our hotels does not increase by amounts sufficient to cover such higher capital costs, the market value of our hotel real estate may decline.

We periodically review the fair value of each of our hotels for possible impairment. In the past, certain of our hotels were determined to be impaired. Such impairment may be the result of deteriorating profitability, physical damage, or when a sold hotel’s fair value, less hotel sale costs, wasis lower than the hotel’s carrying value. In the future, additional hotels may become impaired, which may adversely affect our financial condition and results of operations.

Our hotel properties are subject to various federal, state and local laws relating to the environment, fire and safetysafety, and access and use by disabled persons. Under these laws, courts and government agencies have the authority to require us, if we are the owner of a contaminated property, to clean up the property, even if we did not know of or were not responsible for the contamination. These laws also apply to persons who owned a property at the time it became contaminated. In addition to the costs of cleanup, environmental contamination can affect the value of a property and, therefore, an owner’s ability to borrow funds using the property as collateral or to sell the property. Under such environmental laws, courts and government agencies also have the authority to require that a person who sent waste to a waste disposal facility, such as a landfill or an incinerator, pay for the clean-up of that facility if it becomes contaminated and threatens human health or the environment.

CorporateCompliance responsibility,with specificallycorporate relatedresponsibility to ESG factorsinitiatives and commitments, may impose additional costs and expose us to new risks that could adversely affect our results of operations, financial conditioncondition, and cash flows.

We incorporate ESGcorporate responsibility initiatives into our operating and investment strategies. Some investors may useconsider ESGcorporate responsibility factors when making their investment decisions, and potential and current employees, business partners and vendors may consideruse these factors when considering relationships with us. In addition, potential hotel guests may consider ESGthese factors when deciding whether to stay at our hotels. Certain organizations that provide corporate governance and other corporate risk information to investors and stockholders have developed scores and ratings to evaluate companies based upon ESGcorporate responsibility or “sustainability” metrics. Investors may use these scores as a basis to engage with companies to require improved ESG disclosure or performance. We may face reputational damage or additional costs in the event our corporate responsibility procedures or standards do not meet the standards set by various constituencies. In addition, the criteria by which companies are rated may change, which could cause us to receive lower scores than in previous years. A low sustainability score could result in a negative perception of the Company, or exclusion of our common stock from consideration by certain investors, or potential guests may choose to stay at other hotels. We could also incur additional costs and devote additional resources to monitor, report and implement various ESGcorporate responsibility practices. In addition, as part of our corporate responsibility, we have adopted certain ESGenvironmental goals, including greenhouse gas emissions reduction targets and other sustainability initiatives. If we cannot meet these goals fully or on time, our reputation may be damaged.

Our franchisors and brand managers and franchisors may require us to make capital expenditures pursuant to property improvement plans (“PIPs”) or to comply with brand standards, and the failure to make the required expenditures could cause the franchisorshotel brands or hotel brandsfranchisors to terminate the management, franchise, management or operating lease agreements.

Our franchisors and brand managers and franchisors may require that we make renovations to certain of our hotels in connection with revisions to our management, franchise, management or operating lease agreements. In addition, upon regular inspection of our hotels, our franchisorshotel brands and hotel brandsfranchisors may determine that additional renovations are required to bring the physical condition of our hotels into compliance with the specifications and standards each franchisorhotel brand or hotel brandfranchisor has developed. In connection with the acquisitions of hotels, franchisorshotel brands and hotel brandsfranchisors may also require PIPs, which set forth their renovation requirements. If we do not satisfy the PIP renovation requirements, the franchisorhotel brand or hotel brandfranchisor may have the right to terminate the applicable agreement. In addition, in the event that we are in default under any franchise agreement as a result of our failure to comply with the PIP requirements, in general, we will be required to pay the franchisor liquidated damages. The renovation work and the cost of such expenditures required pursuant to PIPs or to comply with brand standards may negatively impact our results of operations while the work is performed and may not result in a positive economic return on the investment.

Because all but one of our hotels are brand managed or operated under a franchise agreements or are brand managed,agreement, termination of these management, franchise, management or operating lease agreements could cause us to lose business at our hotels.

As of December 31, 2024,2025, all of our hotels except the Oceans Edge Resort & Marina were operated under management, franchise, management or operating lease agreements with the following franchisors or hotel management or franchisor companies: Marriott, Hyatt, Hilton, Four Seasons, Hilton, Hyatt, Marriott, and Montage. In general, under these arrangements, the franchisorbrand manager or brand managerfranchisor provides marketing services andservices, room reservationsreservations, and certain other operating assistance but requires us to pay significant fees to it and to maintain the hotel in a required condition. If we fail to maintain these required standards, then the franchisorhotel brand or hotel brandfranchisor may terminate its agreement with us and obtain damages for any liability we may have caused. Moreover, from time to time, we may receive notices from franchisors or the hotel brands or franchisors regarding our alleged non-compliance with the franchisebrand agreementsstandard or brandfranchise standards,agreements, and we may disagree with these claims that we are not in compliance. Any disputes arising under these agreements could also lead to a termination of a management, franchise, management or operating lease agreement and a payment of liquidated damages. In addition, as our management, franchise, management or operating lease agreements expire, we may not be able to renew them on favorable terms or at all. If we were to lose a franchisehotel brand or hotel brandfranchise for a particular hotel, it could harm the operation, financing or value of that hotel due to the loss of the franchisehotel brand or hotel brandfranchise name, marketing support and centralized reservation system. Any loss of revenue at a hotel could harm the ability of the TRS Lessee, to whom we have leased our hotels, to pay rent to the Operating Partnership and could harm our ability to pay dividends on our common stock or preferred stock.

A significant percentage of hotel rooms for individual guests is booked through internet travel intermediaries. Many of our managers and franchisors contract with such intermediaries and pay them various commissions and transaction fees for sales of our rooms through their systems. If such bookings increase, these intermediaries may be able to obtain higher commissions, reduced room rates or other significant concessions from us or our franchisees.managers and franchisors. Although our managers and franchisors may have established agreements with many of these intermediaries that limit transaction fees for hotels, there can be no assurance that our managers and franchisors will be able to renegotiate such agreements upon their expiration with terms as favorable as the provisions that exist today. Moreover, hospitality intermediaries generally employ aggressive marketing strategies, including expending significant resources for advertising campaigns to drive consumers to their websites. AsThe arapid result,adoption of generative AI tools is also changing how consumers search for and book travel, which may further increase the influence of intermediaries and other technology-driven platforms. If our operators do not keep pace with these changes, consumers may develop brand loyalties to the intermediaries’ offered brands, websiteswebsites, and reservations systems rather than to the brands of our managers and franchisors. If this happens, our business and profitability may be significantly negatively impacted.

The failure of tenants in our hotels to make rent payments or otherwise comply with the material terms of our retail and restaurant leases may adversely affect our results of operations.

OurWe employeescould andbe subject to financial losses or claims against us should any of our employees, the employees of our third-party managersmanagers, andor any contractors we use may make inadvertent errors or fall prey to increasingly sophisticated cyber threats, including social engineering attacks or otherand fraud schemes that couldmay subjectleverage usAI and machine learning to financialmake lossessuch orattacks claimsmore againstconvincing us.and harder to detect. These types of errors could include, but are not limited to, mistakes in executing, recording, or reporting transactions or mistakes related to settling payment or funding obligations, including with respect to wire transfers. Although we have policies and procedures in place that seek to mitigate these risks, including risks related to wire transfers, we have experienced fraudulent and erroneous activity in our business operations and have incurred financial losses related to such activity, which was substantially mitigated by recoveries under insurance policies. This type of misconduct can be difficult to detect and if not prevented or detected could result in financial losses or claims against us. Our controls may not be effective in preventing or detecting this type of activity.

As of December 31, 2024,2025, we had $845.0$930.0 million of outstanding debtdebt, and carrying such debt may restrict our financial flexibility or harm our business and financial results by imposing requirements on our business.

All ourOur debt outstanding as of December 31, 20242025 matures over the next foursix years, including extension options which we expect to exercise (zero in 2025, $390.0$65.0 million in 2026, $175.0$0 in 2027, $105.0 million in 2027,2028, and $280.0$760.0 million in 20282031). We have no scheduled amortization payments currently due infrom 20252026 through 20282031; however, this may be subject to change if we refinance our existing debt or incur additional debt. Carrying our outstanding debt may adversely impact our business and financial results by:

Sunstone Hotel Investors, Inc. 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-partiesthird 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 December 31, 2024,2025, we owned 1514 hotels (the “15 Hotels”).hotels. All of our hotels are operated under nationally recognized brands, except the Oceans Edge Resort & Marina, which hasoperates established itself in a resort destination market.independently.

Demand. Excluding The Confidante Miami Beach and the Renaissance Long Beach (the “Two Renovation Hotels”) due to their significant renovations as they transitioned to Andaz Miami Beach and the Marriott Long Beach Downtown, respectively, occupancy at the 1211 hotels we owned during the entirety of 20232024 and 20242025 (the “Comparable Portfolio”) improved as follows:

For more details on our 2024 debt transactions, see disclosures under the Debt caption included in “Liquidity and Capital Resources” below.

Capital Transactions. During 2024, we repurchased 2,764,837 shares of our common stock under our stock repurchase program at an average purchase price of $9.83 per share. As of December 31, 2024,2025, approximately $427.5$323.9 million of authorized capacity remained under our stock repurchase program.

Room Revenue. Room revenue decreasedincreased $60.2$23.6 million, or 9.7%,4.2%, in 20242025 as compared to 20232024 as follows:

Food and Beverage Revenue. Food and beverage revenue decreasedincreased $21.3$22.5 million, or 7.7%,8.8%, in 20242025 as compared to 20232024 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 decreasedincreased $26.3$38.1 million, or 4.5%,6.8%, in 20242025 as compared to 20232024 as follows:

Other Property-Level Expenses. Other property-level expenses decreasedincreased $9.4$6.5 million, or 7.8%,5.9%, in 20242025 as compared to 20232024 as follows:

Corporate Overhead Expense. Corporate overhead expense decreasedincreased $2.4$2.5 million, or 7.5%,8.7%, in 20242025 as compared to 2023,2024, primarily due to decreasedincreased 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, and entity-level state franchise and minimum taxes, deferred stock amortization expense, and due diligence expenses.taxes. These decreasedincreased expenses were partially offset by increaseddecreased professionaldeferred fees.stock amortization expense.

Depreciation and Amortization Expense. Depreciation and amortization expense decreasedincreased $2.6$10.0 million, or 2.0%,8.0%, in 20242025 as compared to 20232024 as follows:

Interest and Other Income. Interest and other income totaled $13.2$11.0 million and $10.5$13.2 million in 20242025 and 2023,2024, respectively. During 20242025 and 2023,2024, we recognized interest income of $12.6$5.8 million and $6.8$12.6 million, respectively. Interest income increaseddecreased in 20242025 as compared to 20232024 due to increasesdecreases in our cash balances following our acquisition of Hyatt Regency San Antonio Riverwalk in April 2024, as well as increaseddecreased interest rates. In addition, during 2025, we recognized settlement proceeds of $3.9 million for certain construction-related claims at Oceans Edge Resort & Marina, net property insurance recoveries of $0.4$1.1 million in 2024 related to 2023 fire damage at theHilton San Diego Bayfront and 2025 water damage at The Westin Washington, DC Downtown, and other miscellaneous income of $0.2 million. During 2024, we recognized $0.4 million in property insurance recoveries related to 2023 fire damage at Hilton San Diego Bayfront and wind-driven rain damage at Wailea Beach Resort and $3.7$0.1 million in 2023 related to property damage caused by Hurricane Ida at the Hilton New Orleans St. Charles. During 2024, we also recognized other miscellaneous income of $0.1 million.income.

Interest expense decreasedincreased $1.6$2.8 million, or 3.0%,5.7%, in 20242025 as compared to 20232024 as follows:

Our weighted average interest rate per annum, including our variable rate debt obligations and excluding capitalized interest, was approximately 5.6%5.0% and 5.8%5.6% at December 31, 20242025 and 2023,2024, respectively. Approximately 40.8%70.4% and 51.2%40.8% of our outstanding notes payable had fixed interest rates or had been swapped to fixed interest rates at December 31, 20242025 and 2023,2024, respectively. Following our purchase of an interest rate swap for Term Loan 4 in January 2025, 52.7% of our outstanding debt will have fixed interest rates or will have been swapped to fixed interest rates.

(Loss) Gain on Sale of Assets, net.Net. Gain(Loss) gain on sale of assets, net totaled $0.5a loss of $8.8 million and $123.8a net gain of $0.5 million in 20242025 and 2023,2024, respectively,respectively. bothIn 2025, we recognized an $8.8 million loss on our sale of which related to the BostonHilton ParkNew Plaza.Orleans St. Charles. In 2024, we recognized an additional $0.5 million net gain related to a contingency resolution at thea hotel,hotel andsold in 2023, we recognized a $123.8prior million gain on the sale of the hotel.year.

(Loss) Gain on Extinguishment of Debt. Gain(Loss) gain on extinguishment of debt totaled $0.1a loss of $0.2 million and $9.9a gain of $0.1 million in 20242025 and 2023,2024, respectively,respectively. bothIn 2025, we recorded a loss of which$0.2 weremillion related to the write-off of unamortized deferred financing costs in connection with the recast of our credit facilities. In 2024, we recorded a $0.1 million gain associated with reassessments of the remaining potential employeeemployee-related obligations held in escrow associated with our assignment of a hotel to the hotel’s mortgage holder in 2020. During 2024, we recognized $21,000 due to reassessments of the remaining potential obligations and $38,000 due to the release of the remaining potential obligations in conjunction with the termination of the escrow agreement during the second quarter of 2024.

Income Tax Benefit (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 2024, weWe recognized a net current income tax provision of $0.2 million in 2025 and a net current income tax benefit of $1.1 million in 2024, resulting from current state and federal income tax expenses, net of any refunds.

Preferred Stock Dividends.Dividends, Net of Gain on Repurchases. Preferred stock dividendsdividends, net of gain on repurchases were incurred as follows (in thousands):

The dividend rate on the Series G preferred stock initiallyincreased accruedto dividendsthe atgreater aof the rate equal to the Montage Healdsburg’s annual net operating income yield on our total investment in the resort.resort Inor 3.0%, 4.5%, and 6.5% in January 2024, July 2024, and July 2025, respectively, resulting in annual dividend rates of 5.5% and 3.75% for 2025 and 2024, respectively. Beginning in the first and third quartersquarter of 2024,2026, the annual dividend rate increasedwill increase to the greater of 3.0% and 4.5%, respectively,7.5% or the rate equal to the Montage Healdsburg’s annual net operating income yield on our total investment in the resort. In the third quarter of 2025, the dividend rate will increase 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.

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.us. 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.

Adjusted EBITDAre decreasedincreased $33.8$6.9 million, or 12.8%,3.0%, in 20242025 as compared to 20232024 primarily due to the following:

Adjusted FFO attributable to common stockholders decreasedincreased $33.5$4.8 million, or 17.0%,3.0%, in 20242025 as compared to 20232024 primarily due to the same reasons noted in the discussion above regarding Adjusted EBITDAre.

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, anthe acquisition of a hotel,hotel and land adjacent to one of our hotels, operating expenses, repurchases of our preferred and 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 $170.4$181.8 million in 20242025 as compared to $198.1$170.4 million in 2023.2024. The net decreaseincrease in cash provided by operating activities in 20242025 as compared to 20232024 was primarily due to decreases in operating cash at the Two Renovation Hotels, as well as decreases caused by our sale of the Boston Park Plaza, and higher interest payments on our variable rate debt. These decreases were partially offset by additional operating cash provided by the newly-acquired Hyatt Regency San Antonio Riverwalk, as well additional operating cash provided by the increase in travel demand benefiting our hotels.hotels, 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.

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) provided by investing activities in 20242025 and 20232024 was as follows (in thousands):

In 2024, we paid $229.3 million to acquire the Hyatt Regency San Antonio Riverwalk, including closing costs and prorations, and we invested $157.4 million for renovations and additions to our portfolio and other assets. These cash outflows were slightly offset by $0.4 million in property insurance proceeds received related to fire damageclaims at the Hilton San Diego Bayfront and wind-driven rain damage at Wailea Beach Resort.

Financing activities. Our net cash provided by or used in financing activities fluctuates primarily as a result of our dividends and distributions paid, the issuance and repurchase of common and restricted stock, the issuance and repayment of notes payable,debt, including draws on our credit facility and term loans, and issuancethe issuance, repurchase, and redemption of other forms of capital, including preferred equity. Net cash used in financing activities in 20242025 and 20232024 was as follows (in thousands):

During 2024, we paid $27.2 million to repurchase 2,764,837 shares of our outstanding 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, $74.1 million in principal payments on our loan secured by the JW Marriott New Orleans, including $2.0 million in scheduled principal payments and $72.1 million to repay the loan, and $91.0 million in dividends and distributions to our commonpreferred and preferredcommon stockholders. We also entered into Term Loan 4, receiving $100.0 million in proceeds and paying $1.1 million in related deferred financing costs. We utilized the proceeds received from Term Loan 4 to repay the loan secured by the JW Marriott New Orleans.

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 notes payable,debt, dispositions of hotel propertiesproperties, 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.

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 stockstock, and acquisitions of hotels or interests in hotels.

While both inflation and interest rates began to decrease in 2024 and remained relatively stable through 2025, the thirduncertainty quartersurrounding certain international economic and political relationships, including political disputes and unfavorable perceptions of 2024,travel to the recentU.S., volatility in transportation fuel costs, increases in inflationair and interestground ratestravel havecosts, decreases in airline capacity, government shutdowns, and the imposition of tariffs affecting commodity costs, has had a negative effect on our operations. WePrior haveto the tariffs announced in 2025, we experienced increases in wages, employee-related benefits, food costs, commodity costs, including those used to renovate or reposition our hotels, property taxes, property and liability insurance, utilitiesutilities, and borrowing costs. The imposition of 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. However, the increases in interest rates negatively affected our variable rate debt, resulting in increased interest payments.

Debt. As of December 31, 2024,2025, we had $845.0$930.0 million of debt, $180.3$185.7 million of cash and cash equivalents, including restricted cash, and total assets of $3.1$3.0 billion. We believe that by maintaining appropriate debt levels, staggering maturity datesdates, 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.

We own hotels in convention, urban, and resort destinations that benefit from significant barriers to entry by competitors and diverse economic drivers. As of MarchJune 31,30, 2026, we owned 14 hotels, whichone averageof 500which, roomsHyatt Regency San Francisco, was classified as held for sale because it was under contract for sale and met all held-for-sale criteria. The hotel sale subsequently closed in size.July 2026. All of our hotels are operated under nationally recognized brands, except theincluding Oceans Edge Resort & Marina, which operateswas independently.rebranded as Hilton Key West Resort & Marina on July 1, 2026. Excluding Hyatt Regency San Francisco, our hotels average 475 rooms in size.

Operating Results. The following table presents our unaudited operating results for the three months ended MarchJune 31,30, 2026 and 2025, including the amount and percentage change in the results between the two periods.

Room revenue. Room revenue increased $16.1$12.2 million, or 11.1%,7.8%, in the firstsecond quarter of 2026 as compared to the firstsecond quarter of 2025 as follows:

OtherFor operatingthe revenue.six Othermonths operatingended June 30, 2026, room revenue increased $2.4$28.3 million, or 10.7%, in the first quarter of 20269.4%, as compared to the firstsix quartermonths ofended June 30, 2025 as follows:

DepreciationFood and amortizationbeverage expense.revenue. DepreciationFood and amortizationbeverage expenserevenue increased $1.9$0.9 million, or 5.9%,1.1%, in the firstsecond quarter of 2026 as compared to the firstsecond quarter of 20252025, as follows:

InterestOther andoperating otherrevenue. income.Other Interestoperating andrevenue otherincreased income$4.2 totaledmillion, $1.5or million and $1.6 million16.5%, in the firstsecond quartersquarter of 2026 andas 2025,compared respectively.to the second quarter of 2025 as follows:

During the firstsecond quarters of 2026 and 2025, we recognized interest income of $1.3 million and $1.4 million, respectively. Interest income decreased in the firstsecond quarter of 2026 as compared to the firstsecond quarter of 2025 due to decreasedlower interest rates. In addition, during the firstsecond quartersquarter of both 2026 and 2025,2026, we recognized property insurance recoveries of $0.1$2.4 million for storm-related damage claims at Wailea Beach Resort, and otherduring miscellaneousthe incomesecond quarter of $0.12025, million.we recognized a $0.9 million settlement for certain property-related claims at Oceans Edge Resort & Marina.

Interest expense decreased $1.4 million, or 11.1%,10.5%, in the firstsecond quarter of 2026 as compared to the same period in 2025, and decreased $2.8 million, or 10.8%, in the six months ended June 30, 2026 as compared to the same period in 2025.

The decreasedecreases in interest expense during the firstsecond quarter of 2026 and the six months ended June 30, 2026 as compared to the same periodperiods in 2025 waswere primarily due to a noncash change of $3.1$2.1 million and $5.2 million, respectively, in the fair market value of our derivatives. ThisThese decreasedecreases in interest expense waswere partially offset by a $1.0 million reductionreductions in capitalized interest,interest whichof $0.4 million and $1.4 million in the second quarter and the six months ended June 30, 2026, respectively, as compared to the same periods in 2025. Capitalized interest in 2025 was related to the extensive renovation work at Andaz Miami BeachBeach, in 2025, asand there was no corresponding capitalization of interest in the firstsecond quarter ofand the six months ended June 30, 2026.

The decreasedecreases in total interest expense during the firstsecond quarter of 2026 and the six months ended June 30, 2026 as compared to the same periodperiods in 2025 waswere partially offset by aincreases $0.5of $0.3 million increaseand $0.8 million, respectively, in interest expense on our debt primarily due to higher average debt balances, partially offset by lower average interest rates on our term loans. In addition, interest expense during the firstsecond quarter ofand the six months ended June 30, 2026 increased $0.2by $0.1 million and $0.3 million, respectively, as compared to the same periodperiods in 2025, due to higher amortization of deferred financing costs related to costs associated with the execution of the Third Amended and Restated Credit Agreement entered into in September 2025.

Our weighted average interest rate per annum, including our variable rate debt obligations and excluding capitalized interest, was approximately 5.0% and 5.5% at MarchJune 31,30, 2026 and 2025, respectively. Approximately 60.7%59.2% and 52.7%51.0% of our outstanding debt had fixed interest rates or had been swapped to fixed interest rates at MarchJune 31,30, 2026 and 2025, respectively.

For the firstsecond quarters of both 2026quarter and 2025,the six months ended June 30, 2026, we recognized net current income tax provisions of $0.1$0.2 million and $0.3 million, respectively, resulting from current state and federal income tax expenses, net of any refunds.expenses.

The dividend rate on the Series G preferred stock increased to the greater of the rate equal to Montage Healdsburg’s annual net operating income yield on our total investment in the resort or 4.5%, and 6.5% in July 2024, and July 2025, respectively, resulting in dividend rates of 6.5% and 4.5% for both the firstsecond quarters ofand the six months ended June 30, 2026 and 2025, respectively. Beginning in the third quarter of 2026, the annual dividend rate will increase to the greater of 7.5% or the rate equal to Montage Healdsburg’s annual net operating income yield on our total investment in the resort.

The following table reconciles our unaudited net income to EBITDAre and Adjusted EBITDAre for the three and six months ended MarchJune 31,30, 2026 and 2025 (in thousands):

Adjusted EBITDAre increased $10.5$4.0 million, or 18.3%,5.5%, in the firstsecond quarter of 2026 as compared to the firstsecond quarter of 2025, and increased $14.5 million, or 11.2%, in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to the following:

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 six months ended MarchJune 31,30, 2026 and 2025 (in thousands):

Adjusted FFO attributable to common stockholders increased $8.6$3.3 million, or 20.8%,6.0%, and increased $11.9 million, or 12.3%, in the firstsecond quarter ofand 2026the six months ended June 30, 2026, respectively, as compared to the same periodperiods in 2025 primarily due to the same reasons noted in the discussion above regarding Adjusted EBITDAre.

During the periods presented, our sources of cash included our operating activities and working capital, as well as proceeds from a hotel disposition, our term loans, our credit facility, key money, and property insurance. Our primary uses of cash were for capital expenditures for hotels and other assets, operating expenses, repurchases of our preferred and common stock, repayments of our senior notes, 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 $45.4$107.4 million in the first threesix months ofended 2026June 30, 2026, as compared to $32.0$90.8 million in the first threesix months ofended June 30, 2025. The net increase in cash provided by operating activities during the first threesix months ofended 2026June 30, 2026, as compared to the same period in 2025 was primarily due to additional operating cash provided by the increase in travel demand benefiting our hotels, decreased corporate-level expenses, and the continued post-renovation ramp-up of Andaz Miami Beach. These increases were partially offset by our sale of Hilton New Orleans St. Charles.

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 threesix months ofended 2026June 30, 2026, as compared to the first threesix months ofended 2025June 30, 2025, was as follows (in thousands):

During the first threesix months ofended June 30, 2026, we invested $31.0$53.4 million for renovations and additions to our portfolio and other assets. TheseThis cash outflowsoutflow werewas partially offset by a $25.0 million deposit received from the potential buyer of Hyatt Regency San Francisco, $4.0 million in key money received from the manager of one of our hotels pursuant to the hotel’s management agreement, and $0.1$0.2 million in property insurance proceeds received.

During the first threesix months ofended June 30, 2025, we invested $28.2$56.0 million for renovations and additions to our portfolio and other assetsassets. This cash outflow was partially offset by $46.3 million of proceeds received from the sale of 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 received $0.1 million in property insurance proceeds.proceeds received.

Financing activities. Our net cash provided by or used in financing activities fluctuates primarily as a result of our dividends and distributions paid, the issuance and repurchase of common stock, the issuance and repayment of debt, including draws on our credit facility and term loans, and the issuance, repurchase, and redemption of other forms of capital, including preferred equity. Net cash used in financing activities during the first threesix months ofended 2026June 30, 2026, as compared to the first threesix months ofended 2025June 30, 2025, was as follows (in thousands):

During the first threesix months ofended June 30, 2026, we paid $29.1$40.6 million to repurchase 3,184,7684,380,093 shares of our common stock and $7.3$28.2 million to repurchase 242,762571,200 shares and 122,333809,791 shares of our Series H preferred stock and Series I preferred stock, respectively. We also paid $3.2$3.7 million to repurchase common stock to satisfy the tax obligations in connection with the vesting of restricted common stock issued to employees, $0.2 million in costs associated with our automatic shelf registration statement, and $22.7$42.6 million in dividends and distributions to our preferred and common stockholders. In January 2026, we drew down the $90.0 million available under the Term Loan 1 delayed draw and used a portion of the proceeds to repay the $65.0 million Series A Senior Notes at their scheduled maturity in January 2026. Additionally, during the six months ended June 30, 2026, we drew down $25.0 million on our credit facility.

During the first threesix months ofended June 30, 2025, we paid $8.0$98.5 million to repurchase 821,77111,122,861 shares of our 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 employeesemployees, $0.5 million in deferred financing costs related to the extension of the maturity of our previous Term Loan 3, and $23.1$44.3 million in dividends and distributions to our preferred and common stockholders. These cash outflows were partially offset by a $27.0 million draw on our credit facility.

While inflation moderated and remained relatively stable in 2025, inflation increased during the first half of 2026 before moderating in MarchJune, 2026,reflecting primarilycontinued drivenvolatility by higherin energy costsprices dueand tobroader theeconomic war in Iran.conditions. The uncertainty surrounding certain international economic and political relationships, including political disputes and unfavorable perceptions of travel to the U.S., the economic impact arising from geopolitical instability in key energy‑producing regions, including volatility in transportation fuel costs and increases in air and ground travel costs, decreases in airline capacity, government shutdowns, and the imposition of tariffs affecting commodity costs, has had, or has the potential to have, a negative effect on our operations. We have 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, and such pressures may persist. The imposition of 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 MarchJune 31,30, 2026, our unrestricted cash balance was $91.1$94.4 million. We believe that our current unrestricted cash balance and our ability to draw the $500.0$475.0 million capacity available for borrowing under the unsecured revolving credit facility will enable us to successfully manage our Company.

Debt. As of MarchJune 31,30, 2026, we had $955.0$980.0 million of unsecured corporate-level debt, $166.7$203.7 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 2026, we drew down the $90.0 million available under the Term Loan 1 delayed draw and used the proceeds to repay the $65.0 million Series A Senior Notes at their scheduled maturity in January 20262026, and for general corporate purposes. In addition, in April 2026, we drew down $25.0 million on our credit facility and used the proceeds for general corporate purposes.

As of MarchJune 31,30, 2026, 60.7%59.2% of our outstanding debt had fixed interest rates or had been swapped to fixed interest rates, including our $275.0 million Term Loan 1, $200.0 million of our Term Loan 2, and our $105.0 million Series B Senior Notes.

Our floating rate debt as of MarchJune 31,30, 2026 included $75.0 million of our Term Loan 2 and2, our $300.0 million Term Loan 3.3, and $25.0 million outstanding under our credit facility.

In AprilJuly 2026, we drewrepaid downthe $25.0 million that was outstanding on our $500.0 million credit facility.facility Weutilizing intendproceeds to usefrom the proceedssale of Hyatt Regency San Francisco. Following the repayment, we have the full capacity available for general corporate purposes and to repay the draw using cash from future operations.borrowing.

Contractual Obligations. The following table summarizes our payment obligations and commitments as of MarchJune 31,30, 2026 (in thousands):

We may in the future seek to obtain mortgages on one or more of our 14 unencumbered hotels (subject to certain stipulations 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 MarchJune 31,30, 2026. Following the sale of the Hyatt Regency San Francisco in July 2026, we will have 13 unencumbered hotels. Should we obtain secured financing on any or all of our unencumbered hotels, the amount of capital available through our credit facilities or future unsecured borrowings may be reduced.

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 $31.0$53.4 million and $28.2$56.0 million in our portfolio and other assets during the first threesix months ofended June 30, 2026 and 2025, respectively. As of MarchJune 31,30, 2026, we have contractual construction commitments totaling $49.1$38.1 million for ongoing renovations. If we renovate additional hotels in the future, our capital expenditures will likely increase.

For our hotels that are operated under management or franchise agreements, we are generally 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 MarchJune 31,30, 2026, our balance sheet includes restricted cash of $75.4$84.1 million, which was held in FF&E reserve accounts for future capital expenditures. These reserve funds are held by the managers in restricted cash accounts, and we are not required to spend the entire amount in such reserve accounts each year.