Sunstone Hotel Investors, Inc 10-Q for FY2025 Q2

Sunstone Hotel Investors, Inc. (SHO)

10-Q 2025-08-06 For: 2025-06-30

Added on April 05, 2026

About this 10-Q

Sunstone Hotel Investors, Inc filed this 10-Q on August 6, 2025, covering the quarter ended June 30, 2025 (FY2025 Q2).

Headline figures

Quarter ended June 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $259.77M; up 5.0% from $247.48M a year earlier
Net income: $10.77M; down 58.8% from net income of $26.14M a year earlier
Diluted EPS: $0.03; down 72.7% from $0.11 a year earlier

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Maryland		20-1296886
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

15 Enterprise, Suite 200 Aliso Viejo, California		92656
(Address of Principal Executive Offices)		(Zip Code)


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	New York Stock Exchange
Series I Cumulative Redeemable Preferred Stock, $0.01 par value	SHO.PRI	New York Stock Exchange


Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐		Smaller reporting company ☐

		Emerging growth company ☐


		Page
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements	2

	Consolidated Balance Sheets as of June 30, 2025 (unaudited) and December 31, 2024	2

	Unaudited Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2025 and 2024	3

	Unaudited Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2025 and 2024	4

	Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 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	22

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38

Item 4.	Controls and Procedures	38

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Mine Safety Disclosures	39

Item 5.	Other Information	39

Item 6.	Exhibits	40

SIGNATURES		41



	June 30,		December 31,
	2025		2024
	(unaudited)
ASSETS
Investment in hotel properties, net	$	2,788,498	$	2,856,032
Operating lease right-of-use assets, net		6,575		8,464
Cash and cash equivalents		73,555		107,199
Restricted cash		71,366		73,078
Accounts receivable, net		42,779		34,109
Prepaid expenses and other assets, net		28,214		27,757
Total assets	$	3,010,987	$	3,106,639

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Debt, net of unamortized deferred financing costs	$	868,695	$	841,047
Operating lease obligations		9,830		12,019
Accounts payable and accrued expenses		56,749		52,722
Dividends and distributions payable		22,314		24,137
Other liabilities		73,413		72,694
Total liabilities		1,031,001		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 June 30, 2025 and December 31, 2024, stated at liquidation preference of $25.00 per share		66,250		66,250
6.125% Series H Cumulative Redeemable Preferred Stock, 4,600,000 shares issued and outstanding at both June 30, 2025 and December 31, 2024, stated at liquidation preference of $25.00 per share		115,000		115,000
5.70% Series I Cumulative Redeemable Preferred Stock, 4,000,000 shares issued and outstanding at both June 30, 2025 and December 31, 2024, stated at liquidation preference of $25.00 per share		100,000		100,000
Common stock, $0.01 par value, 500,000,000 shares authorized, 190,170,664 shares issued and outstanding at June 30, 2025 and 200,824,993 shares issued and outstanding at December 31, 2024		1,902		2,008
Additional paid in capital		2,298,245		2,395,702
Distributions in excess of retained earnings		(601,411)		(574,940)
Total stockholders’ equity		1,979,986		2,104,020

Total liabilities and stockholders' equity	$	3,010,987	$	3,106,639



	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
REVENUES
Room	$	156,048	$	151,296	$	300,969	$	287,111
Food and beverage		78,026		71,367		145,154		132,706
Other operating		25,698		24,818		47,714		44,830
Total revenues		259,772		247,481		493,837		464,647
OPERATING EXPENSES
Room		40,859		37,345		79,969		72,896
Food and beverage		53,028		47,742		101,849		92,057
Other operating		6,510		6,394		12,370		12,338
Advertising and promotion		14,222		12,974		27,338		25,106
Repairs and maintenance		9,875		8,979		19,560		17,689
Utilities		7,051		6,295		13,792		12,239
Franchise costs		4,843		4,819		9,302		9,024
Property tax, ground lease and insurance		18,954		19,984		37,851		38,909
Other property-level expenses		31,533		28,120		61,258		55,743
Corporate overhead		8,346		8,168		17,251		15,686
Depreciation and amortization		34,125		31,112		66,400		60,152
Total operating expenses		229,346		211,932		446,940		411,839
Interest and other income		2,300		3,503		3,864		8,956
Interest expense		(13,164)		(12,693)		(25,846)		(23,703)
(Loss) gain on sale of assets, net		(8,751)		—		(8,751)		457
Gain on extinguishment of debt		—		38		—		59
Income before income taxes		10,811		26,397		16,164		38,577
Income tax (provision) benefit, net		(37)		(255)		(135)		600
NET INCOME		10,774		26,142		16,029		39,177
Preferred stock dividends		(3,932)		(3,683)		(7,863)		(7,366)
INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	6,842	$	22,459	$	8,166	$	31,811

Basic and diluted per share amounts:
Basic income attributable to common stockholders per common share	$	0.03	$	0.11	$	0.04	$	0.16
Diluted income attributable to common stockholders per common share	$	0.03	$	0.11	$	0.04	$	0.16

Basic weighted average common shares outstanding		195,791		202,758		198,087		202,695
Diluted weighted average common shares outstanding		196,304		203,455		198,859		203,227


									Distributions
	Preferred Stock			Common Stock					in Excess of
	Number of			Number of			Additional		Retained
	Shares	Amount		Shares	Amount		Paid in Capital		Earnings		Total Equity
Balance at December 31, 2024 (audited)	11,250,000	$	281,250	200,824,993	$	2,008	$	2,395,702	$	(574,940)	$	2,104,020
Amortization of deferred stock compensation	—		—	—		—		2,236		—		2,236
Issuance of restricted common stock, net	—		—	367,149		4		(4,282)		—		(4,278)
Forfeiture of restricted common stock	—		—	(861)		—		—		—		—
Common stock distributions declared at $0.09 per share	—		—	—		—		—		(17,778)		(17,778)
Series G preferred stock dividends declared at $0.281250 per share	—		—	—		—		—		(745)		(745)
Series H preferred stock dividends declared at $0.382813 per share	—		—	—		—		—		(1,761)		(1,761)
Series I preferred stock dividends declared at $0.356250 per share	—		—	—		—		—		(1,425)		(1,425)
Repurchases of outstanding common stock	—		—	(821,771)		(8)		(8,008)		—		(8,016)
Net income	—		—	—		—		—		5,255		5,255
Balance at March 31, 2025	11,250,000	$	281,250	200,369,510	$	2,004	$	2,385,648	$	(591,394)	$	2,077,508
Amortization of deferred stock compensation	—		—	—		—		2,949		—		2,949
Issuance of restricted common stock	—		—	102,244		1		(1)		—		—
Common stock distributions declared at $0.09 per share	—		—	—		—		—		(16,859)		(16,859)
Series G preferred stock dividends declared at $0.281250 per share	—		—	—		—		—		(746)		(746)
Series H preferred stock dividends declared at $0.382813 per share	—		—	—		—		—		(1,761)		(1,761)
Series I preferred stock dividends declared at $0.356250 per share	—		—	—		—		—		(1,425)		(1,425)
Repurchases of outstanding common stock	—		—	(10,301,090)		(103)		(90,351)		—		(90,454)
Net income	—		—	—		—		—		10,774		10,774
Balance at June 30, 2025	11,250,000	$	281,250	190,170,664	$	1,902	$	2,298,245	$	(601,411)	$	1,979,986


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.


	June 30, 2025				December 31, 2024
	Carrying Amount (1)		Fair Value (2)		Carrying Amount (1)		Fair Value (2)
Debt	$	872,000	$	867,757	$	845,000	$	841,027


									Estimated Fair Value of Assets (Liabilities) (1)
					Effective	Maturity	Notional		June 30,		December 31,
Hedged Debt	Type	Fixed Rate		Index	Date	Date	Amount		2025		2024
Term Loan 1	Swap	3.675	%	CME Term SOFR	March 17, 2023	March 17, 2026	$	75,000	$	168	$	370
Term Loan 1	Swap	3.931	%	CME Term SOFR	September 14, 2023	September 14, 2026	$	100,000		(270)		186
Term Loan 4	Swap	4.020	%	CME Term SOFR	January 31, 2025	November 7, 2026	$	100,000		(505)		—
									$	(607)	$	556


						Balance Outstanding as of
	June 30, 2025					June 30,		December 31,
	Rate Type		Interest Rate		Maturity Date	2025		2024
						(unaudited)
Unsecured Corporate Credit Facilities (1)
Term Loan 1	Fixed	(2)	5.32	%	July 25, 2027	$	175,000	$	175,000
Term Loan 2	Variable		5.83	%	January 25, 2028		175,000		175,000
Term Loan 3	Variable	(3)	5.92	%	May 1, 2026		225,000		225,000
Term Loan 4	Fixed	(4)	5.52	%	November 7, 2025		100,000		100,000
Draw on credit facility	Variable		5.86	%	July 25, 2026		27,000		—
Total unsecured corporate credit facilities						$	702,000	$	675,000

Unsecured Senior Notes
Series A	Fixed		4.69	%	January 10, 2026	$	65,000	$	65,000
Series B	Fixed		4.79	%	January 10, 2028		105,000		105,000
Total unsecured senior notes						$	170,000	$	170,000

Total debt							872,000		845,000
Unamortized deferred financing costs							(3,305)		(3,953)
Debt, net of unamortized deferred financing costs						$	868,695	$	841,047


		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	(861)	$	11.27
Unvested at June 30, 2025	685,065	$	10.84


		Weighted-Average
	Target Number	Grant Date
	of Shares	Fair Value
Unvested at January 1, 2025	1,382,074	$	10.90
Granted	429,587	$	11.48
Vested (1)	(257,911)	$	12.44
Forfeited	(118,018)	$	11.29
Unvested at June 30, 2025	1,435,732	$	10.77


Expected volatility	30.0	%
Dividend yield (1)	—
Risk-free rate	4.47	%
Expected term	3 years


				Trailing 12-Month
		Percentage of		Total Consolidated
	Number of Hotels	Total Rooms		Revenue
Northern California	3	15	%	22	%
Southern California	2	22	%	22	%
Florida	3	18	%	12	%
Hawaii	1	8	%	14	%
Washington, DC	1	12	%	10	%



	June 30,		December 31,
	2025		2024
	(unaudited)
Land	$	640,649	$	645,884
Buildings and improvements		2,867,419		2,824,364
Furniture, fixtures and equipment		473,289		445,696
Intangible assets		43,938		44,063
Construction in progress		49,286		147,250
Investment in hotel properties, gross		4,074,581		4,107,257
Accumulated depreciation and amortization		(1,286,083)		(1,251,225)
Investment in hotel properties, net	$	2,788,498	$	2,856,032


	June 30,		December 31,
	2025		2024
	(unaudited)
Prepaid expenses	$	11,556	$	10,488
Inventory		11,387		10,497
Deferred financing costs		1,521		2,223
Property and equipment, net		1,889		2,267
Interest rate derivatives		168		556
Deferred rent on straight-lined third-party tenant leases		338		369
Liquor licenses		930		930
Other		425		427
Total prepaid expenses and other assets, net	$	28,214	$	27,757


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Interest expense on debt	$	12,417	$	12,304	$	24,282	$	24,617
Noncash interest on derivatives, net		181		(189)		1,163		(2,231)
Amortization of deferred financing costs		939		739		1,802		1,478
Capitalized interest		(373)		(161)		(1,401)		(161)
Total interest expense	$	13,164	$	12,693	$	25,846	$	23,703


	June 30,		December 31,
	2025		2024
	(unaudited)
Advance deposits	$	45,851	$	48,635
Property, sales and use taxes payable		12,919		10,088
Accrued interest		4,991		5,105
Deferred rent		880		1,433
Interest rate derivative		775		—
Management fees payable		591		1,168
Other		7,406		6,265
Total other liabilities	$	73,413	$	72,694


	Payment due by period
			Less Than		1 to 3		3 to 5		More than
	Total		1 year		years		years		5 years
Debt (1)	$	872,000	$	290,000	$	582,000	$	—	$	—
Interest obligations on debt (1) (2)		88,796		47,157		41,639		—		—
Operating lease obligations, including imputed interest (3)		11,410		4,250		5,046		1,148		966
Construction commitments		53,881		53,881		—		—		—
Total	$	1,026,087	$	395,288	$	628,685	$	1,148	$	966


					Maximum Number (or
				Total Number of	Appropriate Dollar
				Shares Purchased	Value) of Shares that
	Total Number			as Part of Publicly	May Yet Be Purchased
	of Shares	Average Price Paid		Announced Plans	Under the Plans or
Period	Purchased	per Share		or Programs	Programs
April 1, 2025 - April 30, 2025	1,510,549	$	8.44	1,510,549	$	406,754,207
May 1, 2025 - May 31, 2025	3,784,152	$	8.81	3,784,152	$	373,413,087
June 1, 2025 - June 30, 2025	5,006,389	$	8.82	5,006,389	$	329,263,171
Total	10,301,090	$	8.76	10,301,090	$	329,263,171


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).

3.4			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).

3.5			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). #

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 June 30, 2025 formatted in Inline XBRL (included in Exhibit 101).


*		Filed herewith.
#		Management contract or compensatory plan arrangement.


	Sunstone Hotel Investors, Inc.

Date: August 6, 2025	By:	/s/ Aaron R. Reyes
		Aaron R. Reyes (Chief Financial Officer and Duly Authorized Officer)

7
Date: August 6, 2025	/s/ Bryan A. Giglia
	Bryan A. Giglia
	Chief Executive Officer

7
Date: August 6, 2025	/s/ Aaron R. Reyes
	Aaron R. Reyes
	Chief Financial Officer