Sunstone Hotel Investors (SHO) 2019年年度報告「NYSE」.pdf

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1、2019 Annual Report2019 Annual Report12MAR202010063917Before reviewing our 2019 results and providing animprovements.For example,we are confident thatupdate on the current environment,I would like toour Wailea Beach Resort and Hyatt Regency Sanshare with you our strategy,which is regularlyFrancisco m

2、ay change in form over time yet willreviewed,challenged and approved by our Board ofremain highly coveted destinations for generations toDe and that the long-term value of properties suchas these will eventually be a multiple of ourinvestment in the assets today.This is our StrategyWe create long-te

3、rm stakeholder value through theWe refrain from owning or acquiring commodity oractive ownership of Long-Term Relevant Real Estate?pedestrian hotels in secondary and tertiary markets,(LTRR?)within the hospitality sector.despite their siren song of higher initial cash flowyields.We also avoid hotels

4、that are subject toground leases.Since most ground leases willThis is a straight-forward concept,yet added coloreventually revert to another party,and the long-termmay be worthwhile.optionality related to these hotels is owned bysomeone else,we have materially reduced,and overWe own Long-Term Releva

5、nt Real Estate.That is,wetime,expect to continue to reduce,our hotels thatown hotels at which we believe travelers will want toare subject to ground leases.stay,rather than have to stay,for decades tocome.For example,we are highly confident thatNot all of our hotels would currently be consideredloca

6、tions such as the Boston Public Gardens andLong-Term Relevant Real Estate.An ever-shrinkingLong Wharf in Boston,Wailea Beach in Maui,portion of the overall value of our portfolio is madeDowntown San Diego adjacent to the Bay andup of hotels we view to be commodity hotels.Theconvention center,Washing

7、ton,D.C.next to thepercentage of our asset value attributed toconvention center and within walking distance to thecommodity hotels has declined materially over theWhite House,and the Embarcadero Center in Sanpast several years and should be eliminated in theFrancisco are,and will continue to be,rele

8、vant to aforeseeable future.We view these few remainingvariety of travelers for generations.We believecommodity hotels as a bank of value that will beowning Long-Term Relevant Real Estateif wellmethodically monetized and used to fund futuremaintainedreduces the risk of waning demand as isinvestments

9、,including the disciplined acquisition ofgenerally the case with commodity or pedestrianLong-Term Relevant Real Estate,including throughassets that lose their earnings power over time asthe acquisition of LTRR by purchasing our owntheir improvements age,as hotel brands mandatecommon stock.This proce

10、ss is likely to take time anduneconomic improvements,and as these hotels facemay occasionally result in higher-than-normal cashcompetition from newer products.We believe thatbalances and short-term earnings dilution as hasLong-Term Relevant Real Estate takes many forms,been the case over the past ye

11、ars.We areshapes and sizes,but the appeal of the hotel iscomfortable capital recycling these assets,generally in its unique attributes,the difficulty inparticularly if we can harvest them at strongreplicating the product,and most of all,thevaluations,as we believe our strategy will result inlong-ter

12、m desirability of its location.Most of thesuperior long-term returns for our stakeholders.time,the lasting value is in the dirt rather than theT O T H E S T O C K H O L D E R S O FS U N S T O N E H O T E L I N V E S T O R S,I N C.:We take a long-term view of our business,even at theEstate at long-te

13、rm uneconomic prices may feel goodexpense of short-term disruption or cyclical volatility.and be applauded in the short term,but is moreWhile some in the investment community arelikely than not to result in value destructionfocused on near-term results measured in terms ofnonetheless.As a result,the

14、re are likely to bedays,months and quarters,our focus is on asset valueperiods during which,despite significant efforts bygrowth over years and decades.Yes,decades.It isour investment team,we acquire very little.This hasthis long-term focus that gives us the confidence tobeen the case recently and n

15、ot everyone has agreedacquire and reposition hotels despite the inherentwith our measured approach to hotel acquisitions.short-term disruption to earnings.The acquisitionToo often in the investment environment,motion isand extensive renovation of a few large hotels earlierconfused with progress and

16、patience is not asin the operating cycle have been tremendouslypracticed as it should be.I believe strongly that thissuccessful and have created substantial stockholderhas been the case over the past three years,and if Ivalue.We will continue to look for,and invest in,am right,recent prices paid by

17、others for high-qualitysimilar opportunities as we believe we are skilled inhotels may prove to generate unsatisfactory returns.creating value through such endeavors.We employ a low-leveraged capital structure.AWe believe in active ownership.As a hotel Reallow-leveraged capital structure is unlikely

18、 toEstate Investment Trust(REIT),we are precludedmaximize short-term levered earnings in good times,from operating our hotels,and therefore,we rely onbut in our view,will result in higher earnings andskilled third-party operators for the day-to-dayvalue over longer periods of time.The hotel business

19、management of the properties.That said,our assetis operationally intensive,capital intensive andmanagement,design&construction,engineering,economically sensitive.Combining these attributeslegal and finance teams work actively andwith high financial leverage is simply not prudent ifcollaboratively wi

20、th our hotel operators to driveone wants to be a long-term investor,or at least aprofitability,to enhance guest and hotel associatesuccessful long-term investor.History is on our sidesatisfaction,to reduce our environmental impact andof this argument.Our low leverage provides us withto maintain and

21、enhance the long-term value of ourmore durability in the event of a large cyclicalportfolio.This is our day job and I think we are gooddownturn and more optionality to take advantage ofat it.various investments over time without beingbeholden to the often-fickle equity markets.This isthe reason we h

22、ave proactively built up our financialWe own hotels that generate a superior level offlexibility and strength and remain one of the lowest-economic earnings such that they can support theirlevered institutional hotel owners.long-term capital needs while also providing anattractive unlevered return o

23、n our investment.This isnot always the case with hotels,particularly olderWe believe in,and actively employ,stockholder-full-service,branded hotels that have low roomfriendly corporate governance,a strong alignmentratesjust the type of hotels we have sold over thebetween management and stockholder i

24、nterests,paypast several years.Furthermore,we keep our hotelspractices based on stockholder outcomes and robustin good condition in order to maximize theirstakeholder disclosure.We know that stockholderslong-term appeal to guests.We routinely makenot only own the company but also have the finalsigni

25、ficant investments in non-guest-facing areas anddetermination of the companys future.In terms ofbuilding systems that short-term hotel owners arecorporate governance,we elect all directors annually,often unwilling to make.These investments can beallow bylaws to be amended by stockholders,restrictcos

26、tly,but in our view,are the right long-termthe Boards ability to classify directors,allow Proxybusiness decisions.After all,if an owner doesnt takeAccess,pay executives and team members basedcare of the hotel associates and the building,howlargely on stockholder returns and operating results,should

27、one expect the hotel associates and thehave a compensation clawback policy,and requirebuilding to take care of the guests that are vital toexecutives and directors to hold a meaningfulour long-term success?ownership interest in the company.Furthermore,providing robust and honest disclosure allows us

28、 tohave direct conversations with our stockholdersWe believe the initial cost basis of our investments isregarding the business they own.as important as the quality of the real estate weacquire.Investing in Long-Term Relevant Real2019 ANNUAL REPORTThis is our strategy and our approach to ourlargely

29、sat on the acquisition sidelines waiting for ourbusiness.Not everyone will agree with this strategytime.nor invest in Sunstone.That is fine by us,as we wonttry to be all things to all investors nor change ourThat said,given the disconnect in pricing for realstrategy to suit the whims of the day.esta

30、te on Main Street(i.e.,the private market valueof hotels)and the pricing of hotels on Wall StreetA Review of Recent Events(i.e.,the public market value of our hotels implied byour share price),we acquired more LTRR throughDespite increasing headwinds,Sunstone had athe purchase of our own common shar

31、es.In 2019,weproductive 2019.Here are the highlights.acquired 1.7%of our outstanding common stock for$50 million.That is,we sold the Courtyard byMarriott Los Angeles,one of the lowest qualityOur comparable portfolio of 20 hotels owned at theassets in our portfolio,at an estimated 5.8%yield onend of

32、2019 generated a 1.2%increase in hotelforecasted 2019 net operating income and boughtAdjusted EBITDA as a result of a 2.9%increase inback our shares at an implied comparable unleveredcomparable revenues and a 3.6%increase inyield of approximately 8.0%.Collectively,these twocomparable property expens

33、es.Food&beveragetransactions increase the quality and long-termrevenue and other hotel revenues,which collectivelyearnings growth of our portfolio while creating valuemade up 31%of our hotel revenues,wereby arbitraging the pricing between the public andsurprisingly strong and helped offset some of t

34、heprivate markets.We will endeavor to sell ourimpact of rising expenses at our hotels,particularly inremaining non-core hotels to fund incremental stockwages&benefits,property insurance and propertyrepurchases if this pricing arbitrage continues even iftaxes.Overall,our operating results again excee

35、dedit results in a smaller portfolio.both our expectations and the results of many of ourhotel REIT peers.Over the course of the year,we further delevered ouralready low-leveraged balance sheet and further grewWe advanced our strategy of creating value throughour already sizable investment capacity.

36、Our ratio ofthe ownership of Long-Term Relevant Real Estate bynet debt plus preferred equity to 2019 Adjusteddisposing of one commodity hotel,which was one ofEBITDA after adjusting for our fourth quarterour few remaining hotels subject to a ground lease.dividend stands at roughly 1.4 times,which is

37、belowThe hotel sold,the Courtyard by Marriott Losthe 2.5 to 3.0 times we had targeted for the latterAngeles,generated prior year EBITDA perpart of an operating cycle.Similarly,our unrestrictedguestroom 36%lower than the remainder of ourcash balance at year end,after adjusting for ourportfolio and wa

38、s sold for gross proceeds ofsizable fourth quarter dividends,was approximately$50 million.This sale brings our total disposition of$680 million,or nearly$3.00 per common share.Ouroff-strategy hotels to over$1.1 billion in the past fivefortress balance sheet gives us incredible durabilityyears and ha

39、s concentrated the value of ourand optionality in the event of an economicremaining portfolio into Long-Term Relevant Realdownturn and represents significant investmentEstate.Only a handful of these off-strategy hotelscapacity and unrealized earnings when attractiveremain in our portfolio,and we exp

40、ect toinvestments present themselves.As of year end,wemethodically cull these assets in the foreseeablecould acquire approximately$600million offuture.on-strategy hotels or buy back approximately$500 million of our common stock and remain at orDespite underwriting billions of dollars of potentialbel

41、ow our 3.0 times target ratio of net debt andinvestments and bidding on several LTRR hotelspreferred equity to Adjusted EBITDA,assuming nobeing sold,we did not acquire a single hotel in 2019.changes to our existing earnings.Either investment,In fact,we have not acquired a hotel since 2017,asif imple

42、mented,would add meaningfully to ourgoing-in yields on potential investments,in general,earnings per share.continue to decline even in the face of what is likely acyclical slowdown in hotel earnings.We believe thatOur Income Attributable to Common Stockholdersthe market pricing on recent hotel trans

43、actionsper diluted share was$0.54 in 2019.Our Adjustedwould not provide an adequate risk-adjusted returnEBITDA of$320 million decreased 3.5%versuscompared to our cost of capital,therefore,we have2018.Similarly,our Adjusted Funds FromSUNSTONE HOTEL INVESTORS,INC.13MAR201622162810Operations per dilute

44、d share declined 4.3%from thecircumstances.We remain mindful that the industryprior year to$1.12.These unlevered and leveredis likely in the latter part of an operating cycle,andearnings metrics declined as lost earnings from assetswhile the hotel industry may continue to grow slowlysold in the past

45、 two years offset hotel profit growthfor extra innings,history has proven thatand stock repurchases.eventually cyclical industries weather cyclicaldeclines.In any event,we are well positioned andprepared from a financial and human capitalOur total stockholder return in 2019 was 12.7%,standpoint to s

46、uccessfully navigate nearly anybringing our trailing three-year and five-year totalscenario that may come.annualized stockholder returns to 1.8%and 2.6%,respectively.Our one-year and three-year returnseffectively matched those of our defined lodging peer*group,while our five-year total stockholder r

47、eturnshave materially exceeded the average total return ofIn closing,I would like to thank Sunstones Board ofour primary peers.Our primary peers generatedDirectors and our 46 employees for their significantaverage stockholder returns of 14.0%,1.7%andtalents and tireless focus and efforts to create?4

48、.2%,respectively,over these time periods,as ofstakeholder value.I want to thank the hotel teamsthe end of 2019.some of the most talented,caring and hardworkingpeople I have ever metfor their constantOur Outlookdedication to serving our guests and making theirdays better.I would also like to thank ou

49、r brand,In general,our business seems to be demonstratingoperating,investment and capital partners for theirthe characteristics witnessed in the latter parts of theenergy,talents,ongoing support and collaborationoperating cycle.That is,hotel revenue growth haswe could not be successful without them.

50、And finally,been moderating while expense growth acceleratesI would like to thank our stockholdersthe ownersdue to rising costs such as wages&benefits andof our companyfor their support and trust,forproperty taxes.investing in us,and for giving us the opportunity torun this great business.We are lik

51、ely to continue to sell the few remainingpedestrian hotels within our portfolio,and tomethodically reinvest our sizeable investmentWarmest regards,capacity if and when we find the right investments atthe right price.Given the significant level ofcompetition for quality hotels,it may continue to bead

52、visable to sell assets at this time which maycontinue to result in higher-than-normal cash levelsin the interim.We will also continue to monitor ourstock price and may buy back our shares in the right2019 ANNUAL REPORTJOHN V.ARABIAPRESIDENT&CHIEF EXECUTIVE OFFICER UNITED STATES SECURITIES AND EXCHAN

53、GE COMMISSION Washington,D.C.20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31,2019 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Com

54、mission file number 001-32319 Sunstone Hotel Investors,Inc.(Exact Name of Registrant as Specified in Its Charter)Maryland 20-1296886(State or Other Jurisdiction of (I.R.S.Employer Incorporation or Organization)Identification Number)200 Spectrum Center Drive,21st Floor Irvine,California 92618(Address

55、 of Principal Executive Offices)(Zip Code)Registrants telephone number,including area code:(949)330-4000 Securities registered pursuant to Section 12(b)of the Act:Title of Each Class Trading Symbol(s)Name of Each Exchange on Which Registered Common Stock,$0.01 par value SHO New York Stock Exchange S

56、eries E Cumulative Redeemable Preferred Stock,$0.01 par value SHO.PRE New York Stock Exchange Series F Cumulative Redeemable Preferred Stock,$0.01 par value SHO.PRF New York Stock Exchange Securities registered pursuant to Section 12(g)of the Act:None Indicate by check mark if the registrant is a we

57、ll-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes No Indicate by check mark whether the registrant(1)has filed all reports required to be filed by

58、 Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has

59、 submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the reg

60、istrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.La

61、rge accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting stan

62、dards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No The aggregate market value of the voting stock held by non-affiliates of the registrant based upon the closing sale price

63、of the registrants common stock on June 28,2019 as reported on the New York Stock Exchange(“NYSE”)was approximately$3.1 billion.The number of shares of the registrants common stock outstanding as of February 13,2020 was 225,115,704.Documents Incorporated by Reference Part III of this Report incorpor

64、ates by reference information from the definitive Proxy Statement for the registrants 2020 Annual Meeting of Stockholders.Table of Contents 2 SUNSTONE HOTEL INVESTORS,INC.ANNUAL REPORT ON FORM 10-K For the Year Ended December 31,2019 TABLE OF CONTENTS Page PART I Item 1 Business 3Item 1A Risk Factor

65、s 12Item 1B Unresolved Staff Comments 34Item 2 Properties 35Item 3 Legal Proceedings 35Item 4 Mine Safety Disclosures 35 PART II Item 5 Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities 35Item 6 Selected Financial Data 37Item 7 Managements Dis

66、cussion and Analysis of Financial Condition and Results of Operations 38Item 7A Quantitative and Qualitative Disclosures About Market Risk 60Item 8 Financial Statements and Supplementary Data 60Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 61Item 9A Cont

67、rols and Procedures 61Item 9B Other Information 63 PART III Item 10 Directors,Executive Officers and Corporate Governance 63Item 11 Executive Compensation 63Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 63Item 13 Certain Relationships and Rela

68、ted Transactions,and Director Independence 63Item 14 Principal Accounting Fees and Services 63 PART IV Item 15 Exhibits,Financial Statement Schedules 64Item 16 Form 10-K Summary 67 SIGNATURES 68 Table of Contents 3 The“Company,”“we,”“our,”and“us”refer to Sunstone Hotel Investors,Inc.,a Maryland corp

69、oration,and one or more of our subsidiaries,including Sunstone Hotel Partnership,LLC,or the Operating Partnership,and Sunstone Hotel TRS Lessee,Inc.,or the TRS Lessee,and,as the context may require,Sunstone Hotel Investors only or the Operating Partnership only.SPECIAL NOTE REGARDING FORWARD-LOOKING

70、 STATEMENTS This report,together with other statements and information publicly disseminated by the Company,contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,as amended,and Section 21E of the Exchange Act.The Company intends such forward-look

71、ing statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions.Forward-looking statements,which are based on certain as

72、sumptions and describe the Companys future plans,strategies and expectations,are generally identifiable by use of the words“believe,”“expect,”“intend,”“anticipate,”“estimate,”“project”or similar expressions.You should not rely on forward-looking statements because they involve known and unknown risk

73、s,uncertainties and other factors that are,in some cases,beyond the Companys control and which could materially affect actual results,performances or achievements.Factors that may cause actual results to differ materially from current expectations include,but are not limited to the risk factors disc

74、ussed in this Annual Report on Form 10-K.Accordingly,there is no assurance that the Companys expectations will be realized.Except as otherwise required by the federal securities laws,the Company disclaims any obligations or undertaking to publicly release any updates or revisions to any forward-look

75、ing statement contained herein(or elsewhere)to reflect any change in the Companys expectations with regard thereto or any change in events,conditions or circumstances on which any such statement is based.Item 1.Business Our Company We were incorporated in Maryland on June 28,2004.We are a real estat

76、e investment trust(“REIT”),under the Internal Revenue Code of 1986,as amended(the“Code”).As of December 31,2019,we had interests in 20 hotels(the“20 Hotels”).The 20 Hotels are comprised of 10,610 rooms,located in 9 states and in Washington,DC.We are the premier steward of Long-Term Relevant Real Est

77、ate(“LTRR”)in the lodging industry.Our business is to acquire,own,asset manage and renovate or reposition hotels that we consider to be LTRR in the United States,specifically hotels in urban and resort locations that benefit from barriers to entry and diverse economic drivers.As part of our ongoing

78、portfolio management strategy and on an opportunistic basis,we may also selectively sell hotel properties that we do not believe meet our criteria of LTRR.All but two(the Boston Park Plaza and the Oceans Edge Resort&Marina)of the 20 Hotels are operated under nationally recognized brands such as Marr

79、iott,Hilton and Hyatt,which are among the most respected and widely recognized brands in the lodging industry.Our two unbranded hotels are located in top urban and resort markets that have enabled them to establish awareness with both group and transient customers.Our portfolio primarily consists of

80、 upper upscale hotels located in major convention,resort and urban markets.Our hotels are operated by third-party managers under long-term management agreements with the TRS Lessee or its subsidiaries.As of December 31,2019,our third-party managers included:subsidiaries of Marriott International,Inc

81、.or Marriott Hotel Services,Inc.(collectively“Marriott”),managers of eight of the Companys hotels;Highgate Hotels L.P.and an affiliate(“Highgate”),managers of three of the Companys hotels;Crestline Hotels&Resorts(“Crestline”),Hilton Worldwide(“Hilton”)and Interstate Hotels&Resorts,Inc.(“IHR”),each a

82、 manager of two of the Companys hotels;and Davidson Hotels&Resorts(“Davidson”),Hyatt Corporation(“Hyatt”)and Singh Hospitality,LLC(“Singh”),each a manager of one of the Companys hotels.As is typical of the lodging industry,we experience some seasonality in our business.Information regarding the seas

83、onal patterns affecting our hotels is included in this Annual Report on Form 10-K under the caption“Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations.”Table of Contents 4 Competitive Strengths We believe the following competitive strengths distinguish us fro

84、m other owners of lodging properties:High Quality Portfolio of Long-Term Relevant Real Estate.Focus on Owning Long-Term Relevant Real Estate.We believe that we will create lasting stockholder value through the active ownership of LTRR.LTRR consists of hotels that we believe possess unique attributes

85、 that are difficult to replicate,and most of all,whose locations are highly desirable and are relevant today and whose relevance will stand the test of time for generations to come.We believe that owning LTRR provides superior long-term economics and reduces the risk of waning demand that often happ

86、ens to undercapitalized and pedestrian hotels.Presence in Key Markets.A cornerstone of LTRR is location.We believe that our hotels are located in many of the most desirable long-term relevant markets with major and diverse demand generators and significant barriers to entry for new supply.All of the

87、 20 Hotels are located in key gateway markets and unique resort locations such as Boston,Chicago,Key West,Los Angeles,Maui,New Orleans,New York,Orlando,Portland,San Diego,San Francisco and Washington DC/Baltimore.Over time,we expect the revenues of hotels located in key gateway markets and unique re

88、sort locations to generate superior long-term growth rates as compared to the average for U.S.hotels,as a result of stronger and more diverse economic drivers.Nationally Recognized Brands and Established Independents.As noted above,all but two of the 20 Hotels are operated under nationally recognize

89、d brands.We believe that affiliations with strong brands and established independents improve the appeal of our hotels to a broad set of travelers and help to drive business to our hotels.Recently Renovated Hotels.During the past five years,we invested$650.7 million in capital renovations throughout

90、 the 20 Hotels.We believe that these capital renovations have improved the competitiveness of our hotels and have helped to position our portfolio for future growth.Significant Cash Position.As of December 31,2019,we had total cash of$865.0 million,including$48.1 million of restricted cash.Adjusting

91、 for the January 2020 payment of$135.9 million for our common and preferred dividends,our total pro forma cash including restricted cash as of December 31,2019 would be$729.1 million.By minimizing our need to access external capital by maintaining higher than typical cash balances,our financial secu

92、rity and flexibility are meaningfully enhanced because we are able to fund our business needs(including payment of cash distributions on our common stock,when declared)and near-term debt maturities with our cash on hand.Flexible Capital Structure.We believe our capital structure provides us with sig

93、nificant financial flexibility to execute our strategy.As of December 31,2019,the weighted average term to maturity of our debt was approximately four years,and all of our outstanding debt had fixed interest rates or had been swapped to fixed interest rates,except the$220.0 million non-recourse mort

94、gage on the Hilton San Diego Bayfront.Including the effects of our interest rate swap agreements,our fixed-rate debt had a weighted average interest rate of 4.5%.Including our variable-rate debt on the Hilton San Diego Bayfront based on the variable rate at December 31,2019,the weighted average inte

95、rest rate on our debt was 4.1%.In addition to our mortgage debt,as of December 31,2019,we had two unsecured corporate-level term loans,and two series of senior unsecured corporate-level notes.We also have an undrawn$500.0 million credit facility,which may be increased to$800.0 million subject to len

96、der approval.We currently believe this structure is appropriate for the operating characteristics of our business as it isolates risk and provides flexibility for various portfolio management initiatives,including the sale of individual hotels subject to existing debt.Low Leverage.We believe that by

97、 maintaining appropriate debt levels,staggering maturity dates and maintaining a highly flexible capital structure,we will have lower capital costs than more highly leveraged companies,or companies with limited flexibility due to restrictive corporate-level financial covenants.Our low leverage capit

98、al structure not only minimizes the risk of potential value destructive consequences in Table of Contents 5 periods of economic recession,but also provides us with significant optionality to create stockholder value through all phases of the operating cycle.Strong Access to Low Cost Capital.As a pub

99、licly traded REIT,over the long-term,we may benefit from greater access to a variety of forms of capital as compared to non-public investment vehicles.In addition,over the long-term,we may benefit from a lower cost of capital as compared to non-public investment vehicles as a result of our investmen

100、t liquidity,balance sheet optionality,professional management and portfolio diversification.Seasoned Management Team.Each of our core disciplines,including asset management,acquisitions,finance and legal,are overseen by industry leaders with demonstrated track records.Asset Management.Our asset mana

101、gement team is responsible for maximizing the long-term value of our real estate investments by achieving above average revenue and profit performance through proactive oversight of hotel operations.Our asset management team works with our third-party managers to drive property-level innovation,benc

102、hmarks best practices and aggressively oversees hotel management teams and property plans.We work with our operators to develop hotel-level“business plans,”which include positioning and capital investment plans.We believe that a proactive asset management program can help grow the revenues of our ho

103、tel portfolio and maximize operational and environmental efficiency by leveraging best practices and innovations across our various hotels,and by initiating well-timed and focused capital improvements aimed at improving the appeal of our hotels.Acquisitions.Our acquisitions team is responsible for e

104、nhancing our portfolio quality and scale by executing well-timed acquisitions and dispositions that generate attractive risk-adjusted returns on our investment dollars.We believe that our significant acquisition and disposition experience will allow us to continue to execute our strategy to redeploy

105、 capital from slower growth assets to LTRR with higher long-term growth rates.Our primary focus is to acquire LTRR.Depending on availability,we select the branding and operating partners for our hotels that we believe will lead to the highest returns and greatest long-term value.We also focus on dis

106、ciplined capital recycling,and may selectively sell hotels that no longer fit our stated strategy,are unlikely to offer long-term returns in excess of our cost of capital,will achieve a sale price in excess of our internal valuation,or that have high risk relative to their anticipated returns.Financ

107、e.We have a highly experienced finance team focused on minimizing our cost of capital and maximizing our financial flexibility by proactively managing our capital structure and opportunistically sourcing appropriate capital for growth,while maintaining a best in class disclosure and investor relatio

108、ns program.Legal.Our legal team is responsible for overseeing and supporting all Company-wide legal matters,including all legal matters related to corporate(including corporate oversight and governance),investment,asset management,design and construction,finance initiatives and litigation.We believe

109、 active and direct oversight of legal matters allows the Company the flexibility to pursue opportunities while minimizing legal exposure,protecting corporate assets,and ultimately maximizing stockholder returns.Business Strategy As demand for lodging generally fluctuates with the overall economy,we

110、seek to own LTRR that will maintain a high appeal with lodging travelers over long periods of time and will generate superior economic earnings materially in excess of recurring capital requirements.Our strategy is to maximize stockholder value through focused asset management and disciplined capita

111、l recycling,which is likely to include selective acquisitions and dispositions,while maintaining balance sheet flexibility and strength.Our goal is to maintain appropriate leverage and financial flexibility to position the Company to create value throughout all phases of the operating and financial

112、cycles.Table of Contents 6 Competition The hotel industry is highly competitive.Our hotels compete with other hotels for guests in each of their markets.Competitive advantage is based on a number of factors,including location,physical attributes,service levels and reputation.Competition is often spe

113、cific to the individual markets in which our hotels are located and includes competition from existing and new hotels operated under brands in the luxury,upper upscale and upscale segments.Increased competition could harm our occupancy or revenues or may lead our operators to increase service or ame

114、nity levels,which may reduce the profitability of our hotels.We believe that competition for the acquisition of hotels is widespread.We face competition from institutional pension funds,private equity investors,high net worth individuals,other REITs and numerous local,regional,national and internati

115、onal owners in each of our markets.Some of these entities may have substantially greater financial resources than we do and may be able and willing to accept more risk than we believe we can prudently manage.During times when we seek to acquire hotels,competition among potential buyers may increase

116、the bargaining power of potential sellers,which may reduce the number of suitable investment opportunities available to us or increase pricing.Similarly,during times when we seek to sell hotels,competition from other sellers may increase the bargaining power of the potential property buyers.Manageme

117、nt Agreements All of the 20 Hotels are managed by third parties under management agreements with the TRS Lessee or its subsidiaries.The following is a general description of our third-party management agreements as of December 31,2019.Marriott.The following hotels are operated under management agree

118、ments with Marriott:JW Marriott New Orleans;Marriott Boston Long Wharf;Renaissance Harborplace;Renaissance Long Beach;Renaissance Los Angeles Airport;Renaissance Orlando at SeaWorld;Renaissance Washington DC;and Wailea Beach Resort.Our management agreements with Marriott require us to pay Marriott a

119、 base management fee equal to 3.0%of total revenue.Inclusive of renewal options and absent prior termination by either party,the Marriott management agreements expire between 2047 and 2078.Additionally,five of the aforementioned management agreements require payment of an incentive fee of 20.0%of th

120、e excess of gross operating profit over a certain threshold;one management agreement requires payment of an incentive fee of 35.0%of the excess of gross operating profit over a certain threshold;one management agreement requires payment of a tiered incentive fee ranging from 15.0%to 20.0%of the exce

121、ss of gross operating profit over certain thresholds;and one management agreement requires payment of an incentive fee of 10.0%of adjusted gross operating profit,capped at 3.0%of gross revenue.The management agreements with Marriott may be terminated earlier than the stated term if certain events oc

122、cur,including the failure of Marriott to satisfy certain performance thresholds,a condemnation of,a casualty to,or force majeure event involving a hotel,the withdrawal or revocation of any license or permit required in connection with the operation of a hotel and upon a default by Marriott or us tha

123、t is not cured prior to the expiration of any applicable cure periods.In certain instances,Marriott has rights of first refusal to either purchase or lease hotels,or to terminate the applicable management agreement in the event we sell the respective hotel.Highgate.Our Boston Park Plaza,Hilton Times

124、 Square and Renaissance Westchester hotels are operated under management agreements with Highgate.The management agreements with Highgate require us to pay Highgate a base management fee equal to 3.0%of gross revenue.Additionally,one of the management agreements requires us to pay an incentive fee o

125、f 50.0%of the excess of net operating income over a certain threshold,limited to 1.25%of total revenue;one of the management agreements requires us to pay an incentive fee of 15.0%of the excess of net operating income over a certain threshold;and one of the management agreements does not require pay

126、ment of an incentive fee.Inclusive of renewal options and absent prior termination by either party,the Highgate management agreements expire between 2022 and 2031.Crestline.Our Embassy Suites Chicago and Hilton Garden Inn Chicago Downtown/Magnificent Mile hotels are operated under management agreeme

127、nts with Crestline.The management agreements with Crestline require us to pay Crestline a base management fee of 2.0%of gross revenue.Additionally,one of the management agreements requires us to pay an incentive fee of 10.0%of the excess of operating profit over a certain threshold,and the other man

128、agement agreement does not require payment of an incentive fee.Inclusive of renewal options and absent prior termination by either party,both of the Crestline management agreements expire in 2032.Table of Contents 7 Hilton.Our Embassy Suites La Jolla and Hilton San Diego Bayfront hotels are operated

129、 under management agreements with Hilton.One of the management agreements with Hilton requires us to pay Hilton a base management fee of 1.75%of gross revenue,and the other management agreement requires us to pay Hilton a base management fee of 2.5%of total revenue.Additionally,one of the management

130、 agreements requires us to pay an incentive fee of 15.0%of the excess of operating cash flow over a certain percentage,and the other management agreement does not require payment of an incentive fee.The management agreements with Hilton do not include renewal options,and expire in 2026 and 2046,abse

131、nt prior termination by either party.IHR.Our Hilton New Orleans St.Charles and Marriott Portland hotels are operated under management agreements with IHR.The management agreements with IHR require us to pay IHR a base management fee of 2.0%of gross revenue or total revenue,as applicable.Additionally

132、,one of the management agreements provides IHR the opportunity to earn an incentive fee if certain operating thresholds are achieved,limited to 1.0%of the hotels total revenue,and one of the management agreements requires an incentive fee of 10.0%of the excess of net operating income over a certain

133、threshold,limited to 1.5%of the total revenue for all the hotels managed by IHR for any fiscal year.Inclusive of renewal options and absent prior termination by either party,the IHR management agreements expire between 2033 and 2034;provided,however,we have the unilateral ability to terminate the IH

134、R management agreements upon 60 days(Hilton New Orleans St.Charles)and 30 days(Marriott Portland)prior written notice.Davidson.Our Hyatt Centric Chicago Magnificent Mile hotel is operated under a management agreement with Davidson.The management agreement with Davidson requires us to pay Davidson a

135、base management fee of 2.5%of total revenue,and an incentive fee of 10.0%of the excess of net operating income over a certain threshold,limited to 1.5%of total revenue.The base and incentive management fees have an aggregate cap of 4.0%of total revenue.Inclusive of renewal options and absent prior t

136、ermination by either party,the Davidson management agreement expires in 2029.Hyatt.Our Hyatt Regency San Francisco hotel is operated by Hyatt under an operating lease with economics that follow a typical management fee structure.Pursuant to the lease,Hyatt retains 3.0%of total revenue as a base mana

137、gement fee.The lease also provides Hyatt the opportunity to earn an incentive fee if gross operating profit exceeds certain thresholds.The lease expires in 2050,and provides no renewal options.Singh.Our Oceans Edge Resort&Marina hotel is operated under a management agreement with Singh.The managemen

138、t agreement with Singh requires us to pay Singh a base management fee of 3.0%of gross revenue,and an incentive fee of 10.0%of adjusted net operating income,capped at 1.5%of gross revenue.The Singh management agreement provides no renewal options,and expires in 2027,absent prior termination by either

139、 party.The existing management agreements with Marriott,Hilton and Hyatt require the manager to furnish chain services that are generally made available to other hotels managed by that operator.Costs for these chain services are reimbursed by us.Such services include:the development and operation of

140、 computer systems and reservation services;management and administrative services;marketing and sales services;human resources training services;and such additional services as may from time to time be more efficiently performed on a national,regional or group level.Franchise Agreements As of Decemb

141、er 31,2019,eight of the 20 Hotels were operated subject to franchise agreements.Franchisors provide a variety of benefits to franchisees,including nationally recognized brands,centralized reservation systems,national advertising,marketing programs and publicity designed to increase brand awareness,t

142、raining of personnel and maintenance of operational quality at hotels across the brand system.The franchise agreements generally specify management,operational,record-keeping,accounting,reporting and marketing standards and procedures with which our subsidiary,as the franchisee,must comply.The franc

143、hise agreements obligate the subsidiary to comply with the franchisors brand standards and requirements with respect to training of operational personnel,safety,insurance coverages,services and products ancillary to guest room services,display of signage and the type,quality and age of furniture,fix

144、tures and equipment(“FF&E”)included in guest rooms,lobbies and other common areas.The franchise agreements for our hotels require that we reserve up to 5.0%of the gross revenues of the hotels into a reserve fund for capital expenditures.Table of Contents 8 The franchise agreements also provide for t

145、ermination at the franchisors option upon the occurrence of certain events,including failure to pay royalties and fees,failure to perform other obligations under the franchise license,bankruptcy,abandonment of the franchise or a change in control.The subsidiary that is the franchisee is responsible

146、for making all payments under the franchise agreements to the franchisors;however,the Company guaranties certain obligations under a majority of the franchise agreements.Tax Status We have elected to be taxed as a REIT under Sections 856 through 859 of the Code,commencing with our taxable year ended

147、 December 31,2004.Under current federal income tax laws,we are required to distribute at least 90%of our REIT taxable income to our stockholders each year in order to satisfy the REIT distribution requirement.While REITs enjoy certain tax benefits relative to C corporations,as a REIT we may still be

148、 subject to certain federal,state and local taxes on our income and property.We may also be subject to federal income and excise tax on our undistributed income.Taxable REIT Subsidiary Subject to certain limitations,a REIT is permitted to own,directly or indirectly,up to 100%of the stock of a taxabl

149、e REIT subsidiary,or TRS.A TRS is a fully taxable corporation that may earn income that would not be qualifying income if earned directly by us.A TRS may perform activities such as development,and other independent business activities that may be prohibited to a REIT.A hotel REIT is permitted to own

150、 a TRS that leases hotels from the REIT,rather than requiring the lessee to be an unaffiliated third party,provided certain conditions are satisfied.However,a hotel leased to a TRS still must be managed by an unaffiliated third party in the business of managing hotels because a TRS may not directly

151、or indirectly operate or manage any hotels or provide rights to any brand name under which any hotel is operated.The TRS provisions are complex and impose certain conditions on the use of TRSs to assure that TRSs are subject to an appropriate level of federal corporate taxation.We and the TRS Lessee

152、 have made a joint election with the Internal Revenue Service(“IRS”)for the TRS Lessee to be treated as a TRS.A corporation of which a qualifying TRS owns,directly or indirectly,more than 35%of the voting power or value of the corporations stock will automatically be treated as a TRS.Overall,for tax

153、able years beginning after December 31,2017,no more than 20%of the value of our assets may consist of securities of one or more TRS,and no more than 25%of the value of our assets may consist of the securities of TRSs and other assets that are not qualifying assets for purposes of the 75%asset test.T

154、he 75%asset test generally requires that at least 75%of the value of our total assets be represented by real estate assets,cash,or government securities.The rent that we receive from a TRS attributable to leases of“qualified lodging facilities”qualifies as“rents from real property”as long as the pro

155、perty is operated on behalf of the TRS by a person who qualifies as an“independent contractor”and who is,or is related to a person who is,actively engaged in the trade or business of operating“qualified lodging facilities”for any person unrelated to us and the TRS(an“eligible independent contractor”

156、).A“qualified lodging facility”is a hotel,motel or other establishment in which more than one-half of the dwelling units are used on a transient basis.A“qualified lodging facility”does not include any facility where wagering activities are conducted.A“qualified lodging facility”includes customary am

157、enities and facilities operated as part of,or associated with,the lodging facility as long as such amenities and facilities are customary for other properties of a comparable size and class owned by other unrelated owners.We have formed the TRS Lessee as a wholly owned TRS.We lease each of our hotel

158、s to the TRS Lessee or one of its subsidiaries.These leases provide for a base rent plus variable rent based on occupied rooms and departmental gross revenues.These leases must contain economic terms which are similar to a lease between unrelated parties.If they do not,the IRS could impose a 100%exc

159、ise tax on certain transactions between the TRS Lessee and us or our tenants that are not conducted on an arms-length basis.We believe that all transactions between us and the TRS Lessee are conducted on an arms-length basis.The TRS Lessee has engaged eligible independent contractors to manage the h

160、otels it leases from the Operating Partnership.Table of Contents 9 Ground,Building and Airspace Lease Agreements At December 31,2019,four of the 20 Hotels are subject to ground(the Hilton Times Square and the Hilton San Diego Bayfront),building(the Hyatt Centric Chicago Magnificent Mile)or airspace(

161、the JW Marriott New Orleans)leases with unaffiliated parties that cover either all or portions of their respective properties.The airspace lease at the JW Marriott New Orleans applies only to certain balcony space that is not integral to the hotels operations.As of December 31,2019,the remaining ter

162、ms of these ground,building and airspace leases(including renewal options)range from approximately 24 to 78 years.These leases generally require us to make rental payments and payments for all or portions of costs and expenses,including real and personal property taxes,insurance and utilities associ

163、ated with the leased property.Any proposed sale of a property that is subject to a ground,building or airspace lease or any proposed assignment of our leasehold interest as lessee under the ground,building or airspace lease may require the consent of the applicable lessor.As a result,we may not be a

164、ble to sell,assign,transfer or convey our interest in any such property in the future absent the consent of the ground,building or airspace lessor,even if such transaction may be in the best interests of our stockholders.One of the four leases prohibits the sale or conveyance of the hotel by us to a

165、nother party without first offering the lessor the opportunity to acquire our interest in the associated hotel upon the same terms and conditions as offered by us to the third party.The same lease also allows us the option to acquire the building lessors interest in the building lease subject to cer

166、tain notice and process provisions.From time to time,we evaluate our options to purchase the lessors interests in the leases.Corporate Office We currently lease our headquarters located at 200 Spectrum Center Drive,21st Floor,Irvine,California 92618 from an unaffiliated third party.We occupy our hea

167、dquarters under a lease that terminates on August 31,2028.Employees As of February 1,2020,we had 47 employees.We believe that our relations with our employees are positive.All persons employed in the day-to-day operations of the hotels are employees of the management companies engaged by the TRS Les

168、see or its subsidiaries to operate such hotels.Environmental,Social and Governance Matters(“ESG”)We are committed to ensuring environmental and social initiatives are part of our operating and investment strategies.We continuously seek opportunities to invest in renovations;implement initiatives int

169、ended to reduce energy,water and waste impacts;enhance the overall environment and well-being of guests and employees at our properties;and improve the local communities in which we conduct business or own hotels.As owners of LTRR,we take a holistic view in investing in our assets;balancing the best

170、 interests of our stockholders,the environment,our employees,the hotel associates and the communities in which we operate.As our board of directors recognizes the importance of an effective sustainability strategy on our operations and returns,the board of directors oversees the strategy,policies an

171、d implementation of our ESG program.As an owner of real estate,we are subject to the risks associated with the physical effects of climate change,which can include more frequent or severe storms,hurricanes,flooding,droughts and fires,any of which could have a material adverse effect on our hotels.Wh

172、ile we are not directly involved in the operation of our properties or other activities that could produce meaningful levels of greenhouse gas emissions,we do control the capital invested in our hotels and have invested in initiatives aimed at reducing the levels of greenhouse gas emissions at our p

173、roperties,such as LED lighting retrofits,low-flow plumbing fixture installations and building system upgrades.We have also installed bulk amenity dispensers in our hotels to reduce waste.Additionally,in 2018,we initiated an environmental and sustainability report to monitor the carbon footprint and

174、emissions at our hotels,and to set goals to reduce those over time.Environmental Reviews Environmental reviews have been conducted on all of our hotels.From time to time,our secured lenders have requested environmental consultants to conduct Phase I environmental site assessments on many of our prop

175、erties.In Table of Contents 10 certain instances,these Phase I assessments relied on older environmental assessments prepared in connection with prior financings.Phase I assessments are designed to evaluate the potential for environmental contamination of properties based generally upon site inspect

176、ions,facility personnel interviews,historical information and certain publicly available databases.Phase I assessments will not necessarily reveal the existence or extent of all environmental conditions,liabilities or compliance concerns at the properties.In addition,material environmental condition

177、s,liabilities or compliance concerns may arise after the Phase I assessments are completed,or may arise in the future,and future laws,ordinances or regulations may impose material additional environmental liabilities.Under various federal,state and local laws and regulations,an owner or operator of

178、real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on the property.These laws often impose such liability without regard to whether the owner knew of,or was responsible for,the presence of hazardous or toxic substances.Furthermore,a person that

179、 arranges for the disposal or transports for disposal or treatment of a hazardous substance at another property may be liable for the costs of removal or remediation of hazardous substances released into the environment at that property.The costs of remediation or removal of such substances may be s

180、ubstantial,and the presence of such substances,or the failure to promptly remediate such substances,may adversely affect the owners ability to sell such real estate or to borrow using such real estate as collateral.In connection with the ownership and operation of our properties,we or the TRS Lessee

181、,as the case may be,may be potentially liable for such costs.Although we have tried to mitigate environmental risk through insurance,this insurance may not cover all or any of the environmental risks we encounter.We have provided customary unsecured indemnities to certain lenders and buyers of our p

182、roperties,including in particular,environmental indemnities.We have performed due diligence on the potential environmental risks,including obtaining an independent environmental review from outside environmental consultants.These indemnities obligate us to reimburse the indemnified parties for damag

183、es related to environmental matters.There is generally no term or damage limitation on these indemnities;however,if an environmental matter arises,we could have recourse against other previous owners or a claim against its environmental insurance policies.ADA Regulation Our properties must comply wi

184、th various laws and regulations,including Title III of the Americans with Disabilities Act(“ADA”)to the extent that such properties are“public accommodations”as defined by the ADA.The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our

185、 properties where such removal is readily achievable.We believe that our properties are in substantial compliance with the ADA;however,noncompliance with the ADA could result in capital expenditures,the imposition of fines or an award of damages to private litigants.The obligation to make readily ac

186、hievable accommodations is an ongoing one,and we will continue to assess our properties and to make alterations as appropriate in this respect.Inflation Inflation may affect our expenses,including,without limitation,by increasing costs such as labor,food,taxes,property and casualty insurance,borrowi

187、ng costs and utilities.Securities Exchange Act Reports Our internet address is .Periodic and current Securities and Exchange Commission(“SEC”)reports and amendments to those reports,such as our annual proxy statement,our annual reports on Form 10-K,quarterly reports on Form 10-Q and current reports

188、on Form 8-K,are available,free of charge,through links displayed on our website as soon as reasonably practicable after we file such material with,or furnish it to,the SEC.In addition,the SEC maintains a website that contains these reports at www.sec.gov.Our website and the SEC website and the infor

189、mation on our and the SECs website is not a part of this Annual Report on Form 10-K.Information relating to revenue,operating profit and total assets is set forth in Part II,Item 6 of this Annual Report on Form 10-K.Table of Contents 11 Executive Officers of the Registrant The following table sets f

190、orth certain information regarding the executive officers of the Company at January 1,2020.All officers serve at the discretion of the board of directors(subject to,in the case of officers who have entered into employment agreements with the Company,the terms of such employment agreements).Name Age

191、Position John V.Arabia 50 Director,President and Chief Executive Officer Bryan A.Giglia 43 Executive Vice President and Chief Financial Officer Marc A.Hoffman 62 Executive Vice President and Chief Operating Officer Robert C.Springer 42 Executive Vice President and Chief Investment Officer David M.Kl

192、ein 50 Executive Vice President and General Counsel The following is additional information with respect to the above-named officers.John V.Arabia is our President and Chief Executive Officer and a director.In April 2011,Mr.Arabia began serving as our Executive Vice President of Corporate Strategy a

193、nd Chief Financial Officer.In February 2013,he was promoted to President,in February 2014,he was appointed to serve as a member of our board of directors,and in January 2015 he was promoted to President and Chief Executive Officer.Prior to joining Sunstone,Mr.Arabia served as Managing Director of Gr

194、een Street Advisors(“Green Street”)real estate research team.Mr.Arabia joined Green Street in 1997 and created and managed the firms lodging research platform.Prior to joining Green Street,Mr.Arabia was a Consulting Manager at EY Kenneth Leventhal in the firms west coast lodging consulting practice.

195、Mr.Arabia also served on the board of directors of Education Realty Trust,Inc.(NYSE:EDR)until its privatization in September 2018.Mr.Arabia served as chair of the nominating and corporate governance committee and as a member of the investment and oversight committee of the board of directors of EDR.

196、He also serves as a director of the American Hotel&Lodging Association(AH&LA)and is a member of the Real Estate Finance Advisory Council.Mr.Arabia,who earned a CPA certificate from the state of Illinois,holds an M.B.A.degree in Real Estate/Accounting from the University of Southern California and a

197、B.S.degree in Hotel Administration from Cornell University.Bryan A.Giglia is our Executive Vice President and Chief Financial Officer.Mr.Giglia joined the Company in March 2004 as a financial analyst,serving in the capacity of Director of Finance from October 2005 through February 2007.In March 2007

198、,he was appointed Vice President Corporate Finance,and in March 2010 he was appointed Senior Vice President Corporate Finance,a position he held until February 2013,where he oversaw capital market transactions,corporate financial planning and analysis,and investor relations.In February 2013,Mr.Gigli

199、a was appointed Senior Vice President and Chief Financial Officer,a position he held until February 2016 when he was promoted to Executive Vice President and Chief Financial Officer.Prior to joining Sunstone,Mr.Giglia served in a variety of accounting positions for Hilton Hotels Corporation.Mr.Gigli

200、a attended the Marshall School of Business at the University of Southern California,where he earned an M.B.A.degree.Mr.Giglia earned his B.S.degree in Business Administration from the University of Arizona.Marc A.Hoffman is our Executive Vice President and Chief Operating Officer.Mr.Hoffman joined t

201、he Company in June 2006 as Vice President Asset Management,and was appointed Senior Vice President Asset Management in January 2007,a position he held until February 2010 when he was promoted to Executive Vice President and Chief Operating Officer.Prior to joining Sunstone,Mr.Hoffman served in vario

202、us positions at Marriott International,Inc.,including General Manager of The Vail Marriott,General Manager of Marriotts Harbor Beach Resort and Spa,Marriott Market Manager for Fort Lauderdale,General Manager of The Ritz-Carlton Palm Beach(where under Mr.Hoffmans leadership,the hotel obtained the Mob

203、il 5 Star Award),and most recently as Vice President and Managing Director of Grande Lakes Orlando,which included the 1,000-room JW Marriott,the 584-room Ritz-Carlton Resort and Spa and The Ritz-Carlton Golf Club.Mr.Hoffman holds an A.O.S.degree from The Culinary Institute of America and a B.A.degre

204、e from Florida International University.Robert C.Springer is our Executive Vice President and Chief Investment Officer.Mr.Springer joined the Company in May 2011 as Senior Vice President Acquisitions,and in February 2013,he was appointed Senior Vice President and Chief Investment Officer,a position

205、he held until February 2016 when he was promoted to Executive Vice President and Chief Investment Officer.Prior to joining Sunstone,Mr.Springer served as a Vice President in the Merchant Banking Division of Goldman,Sachs&Co.(Goldman)and in the firms principal lodging investing activity,which investm

206、ents Table of Contents 12 were primarily placed through the Whitehall Street Real Estate series of private equity funds,as well as the Goldman Sachs Real Estate Mezzanine Partners fund.Mr.Springers involvement with these funds included all aspects of hotel equity and debt investing,as well as asset

207、management of numerous lodging portfolios.Mr.Springer joined Goldman in February 2006.Prior to joining Goldman,Mr.Springer worked in both the feasibility and acquisitions groups at Host Hotels&Resorts from 2004 to 2006 and was integral to the closing of several large lodging deals.Mr.Springer starte

208、d his career with PricewaterhouseCoopers,LLP in the Hospitality Consulting Group from 1999 to 2004.Mr.Springer holds a B.S.degree in Hotel Administration from Cornell University.David M.Klein is our Executive Vice President and General Counsel.Mr.Klein joined the Company in July 2016 as Senior Vice

209、President and General Counsel,a position he held until February 2019 when he was promoted to Executive Vice President and General Counsel.Prior to joining Sunstone,Mr.Klein was a Partner in the Hospitality&Leisure group of Dentons,LLP,one of the worlds largest law firms,where his practice focused so

210、lely on the hospitality and leisure industry.Prior to joining Dentons,Mr.Klein held the position of co-founding Principal,Chief Administrative Officer and General Counsel of NYLO Hotels and Advaya Hospitality.At NYLO,Mr.Klein spearheaded the companys joint venture capitalization with Lehman Brothers

211、,as well as multiple debt facilities for all company-owned hotel properties.He also led the structuring of the joint venture capitalization of Advaya with Auromatrix,a large private Indian conglomerate based in Chennai,India.Additionally,he oversaw all corporate and legal matters related to both com

212、panies ongoing franchise,management,development,financing and corporate affairs.Prior to his roles with NYLO and Advaya,Mr.Klein was a partner in the Hospitality&Leisure group of Squire Sanders(Squire Patton Boggs).Mr.Klein received his J.D.degree from the Sandra Day OConnor College of Law at Arizon

213、a State University and his B.A.degree from the University of California at Los Angeles.Item 1A.Risk Factors The statements in this section describe some of the significant risks to our business and should be considered carefully in evaluating our business and the other information in this Form 10-K.

214、In addition,these statements constitute our cautionary statements under the Private Securities Litigation Reform Act of 1995,as amended.Risks Related to Our Business In the past,events beyond our control,including economic slowdowns,natural disasters,civil unrest and terrorism,harmed the operating p

215、erformance of the hotel industry generally and the performance of our hotels,and if these or similar events occur again,our operating and financial results may be harmed by declines in average daily room rates and/or occupancy.The operating and financial performance of the lodging industry has tradi

216、tionally been closely linked with the performance of the general economy.The majority of our hotels are classified as upper upscale hotels.In an economic downturn,this type of hotel may be more susceptible to a decrease in revenue,as compared to hotels in other categories that have lower room rates

217、in part because upper upscale hotels generally target business and high-end leisure travelers.In periods of economic difficulties,business and leisure travelers may reduce travel costs by limiting travel or by using lower cost accommodations.In addition,operating results at our hotels in key gateway

218、 markets may be negatively affected by reduced demand from international travelers due to financial conditions in their home countries or a material strengthening of the U.S.dollar in relation to other currencies.Also,volatility in transportation fuel costs,increases in air and ground travel costs a

219、nd decreases in airline capacity may reduce the demand for our hotel rooms.In addition,we own five hotels located in seismically active areas of California and five hotels located in areas that have an increased potential to experience hurricanes(Florida,Hawaii and Louisiana).We have acquired and in

220、tend 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 l

221、evels,at reasonable rates or at reasonable deductible levels.Additionally,deductible levels are typically higher for earthquakes,floods and named windstorms.Accordingly,our financial results may be harmed if any of our hotels are damaged by natural disasters resulting in losses(either insured or uni

222、nsured)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 bu

223、siness,the impact of which could result in a material adverse effect on our financial condition,results of operations and our ability to make distributions to our stockholders.Table of Contents 13 Volatility in the debt and equity markets may adversely affect our ability to acquire,renovate,refinanc

224、e or sell hotel assets.Volatility in the global financial markets may have a material adverse effect on our financial condition or results of operations.Among other things,over time,the capital markets have experienced periods of extreme price volatility,dislocations and liquidity disruptions,all of

225、 which have exerted downward pressure on stock prices,widened credit spreads on debt financing and led to declines in the market values of U.S.and foreign stock exchanges.Future dislocations in the debt markets may reduce the amount of capital that is available to finance real estate,which,in turn m

226、ay limit our ability to finance the acquisition of hotels or the ability of purchasers to obtain financing for hotels that we wish to sell,either of which may have a material adverse impact on revenues,income and/or cash flow.We have historically used capital obtained from debt and equity markets,in

227、cluding both secured mortgage debt and unsecured corporate debt,to acquire,renovate 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

228、common or preferred stock),and more restrictive lending standards,our business could be adversely affected.In particular,rising interest rates could make it more difficult or expensive for us to obtain debt or equity capital in the future.Similar factors could also adversely affect the ability of ot

229、hers to obtain capital and therefore could make it more difficult for us to sell hotel assets.Changes in the debt and equity markets may adversely affect the value of our hotels.The value of hotel real estate has an inverse correlation to the capital costs of hotel investors.If capital costs increas

230、e,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.While interest rates may have increased from cyclical lows,they remain low relative to historic averages,but m

231、ay continue to increase in the future.Interest rate volatility,both in the U.S.and globally,could reduce our access to capital markets or increase the cost of funding our debt requirements.If the income generated by our hotels does not increase by amounts sufficient to cover such higher capital cost

232、s,the market value of our hotel real estate may decline.In some cases,the value of our hotel real estate has previously declined,and may in the future decline,to levels below the principal amount of the debt securing such hotel real estate.Any replacement of LIBOR as the basis on which interest on o

233、ur variable-rate debt is calculated may harm our financial results,profitability and cash flows.As of December 31,2019,all of our outstanding debt had fixed interest rates or had been swapped to fixed interest rates except the$220.0 million non-recourse mortgage on the Hilton San Diego Bayfront.Inte

234、rest on the Hilton San Diego Bayfront loan is calculated using the London Inter-bank Offered Rate(“LIBOR”),at a blended rate of one-month LIBOR plus 105 basis points,subject to an interest rate cap agreement that caps the interest rate at 6.0%until December 2020.The LIBOR interest rate swaps associa

235、ted with our$85.0 million unsecured term loan maturing in September 2022 and our$100.0 million unsecured term loan maturing in January 2023 have been fixed to a LIBOR rate of 1.591%and 1.853%,respectively.In addition,while we currently have no amounts outstanding on our credit facility,should we dra

236、w upon the credit facility in the future,amounts outstanding will be subject to interest at a rate ranging from 140 to 225 basis points over LIBOR.Any replacement of LIBOR as the basis on which interest on our variable-rate debt,amounts outstanding under our credit facility or interest rate swaps is

237、 calculated may harm our financial results,profitability and cash flows.In 2017,the United Kingdom Financial Conduct Authority,which regulates LIBOR,announced that LIBOR is to be replaced by the end of 2021 with“a more reliable alternative.”In addition,the Board of Governors of the Federal Reserve S

238、ystem and the Federal Reserve Bank of New York convened the Alternative Reference Rates Committee(“ARRC”)in order to identify best practices for alternative reference rates,identify best practices for contract robustness,develop an adoption plan,and create an implementation plan with metrics of succ

239、ess and a timeline.The ARCC accomplished its first set of objectives and has identified the Secured Overnight Financing Rate(“SOFR”)as the rate that represents best practice for use in certain new U.S.dollar derivatives and other financial contracts.The Hilton San Diego Bayfront loan,our interest ra

240、te swaps associated with our unsecured term loans and our credit facility provide for alternative methods of calculating the interest rate payable by us if LIBOR is not reported,including using a floating rate index that is both commonly accepted as an alternative to LIBOR and that is publicly recog

241、nized by the International Swaps and Derivatives Association as an alternative to LIBOR.The method and rate used to calculate our variable-rate debt in the future may result in interest rates and/or payments that are higher than,lower than,or that do not Table of Contents 14 otherwise correlate over

242、 time with the interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current form.As of December 31,2019,we had approximately$974.9 million of consolidated outstanding debt,and carrying such debt may impair our financial flexibility or harm our bus

243、iness and financial results by imposing requirements on our business.Of our total debt outstanding as of December 31,2019,approximately$588.0 million matures over the next four years($76.1 million in 2020(assuming we exercise all three of our available one-year options to extend the maturity date of

244、 the$220.0 million loan secured by the Hilton San Diego Bayfront from December 2020 to December 2023),$106.9 million in 2021,$85.0 million in 2022 and$320.0 million in 2023).The$588.0 million in debt maturities due over the next four years does not include$7.8 million of scheduled amortization payme

245、nts due in 2020,$4.4 million due in 2021,$3.4 million due in 2022 or$3.6 million due in 2023.Carrying our outstanding debt may adversely impact our business and financial results by:requiring us to use a substantial portion of our funds from operations to make required payments on principal and inte

246、rest,which will reduce the amount of cash available to us for our operations and capital expenditures,future business opportunities and other purposes,including distributions to our stockholders;making us more vulnerable to economic and industry downturns and reducing our flexibility in responding t

247、o changing business and economic conditions;limiting our ability to undertake refinancings of debt or borrow more money for operations or capital expenditures or to finance acquisitions;and compelling us to sell or deed back properties,possibly on disadvantageous terms,in order to make required paym

248、ents of interest and principal.We also may incur additional debt in connection with future acquisitions of real estate,which may include loans secured by some or all of the hotels we acquire or our existing hotels.In addition to our outstanding debt,at December 31,2019,we had$0.4 million in outstand

249、ing letters of credit.We anticipate that we will refinance our indebtedness from time to time to repay our debt,and our inability to refinance on favorable terms,or at all,could impact our operating results.Because we anticipate that our internally generated cash will be adequate to repay only a por

250、tion of our indebtedness prior to maturity,we expect that we will be required to repay debt from time to time through refinancings of our indebtedness and/or offerings of equity,preferred equity or debt.The amount of our existing indebtedness may impede our ability to repay our debt through refinanc

251、ings.If we are unable to refinance our indebtedness with property secured debt or corporate debt on acceptable terms,or at all,and are unable to negotiate an extension with the lender,we may be in default or forced to sell one or more of our properties on potentially disadvantageous terms,which migh

252、t increase our borrowing costs,result in losses to us and reduce the amount of cash available to us for distributions to our stockholders.If prevailing interest rates or other factors at the time of any refinancing result in higher interest rates on new debt,our interest expense would increase,and p

253、otential proceeds we would be able to secure from future debt refinancings may decrease,which would harm our operating results.If we were to default on our secured debt in the future,the loss of our property securing the debt may negatively affect our ability to satisfy other obligations.All of our

254、mortgage debt,excluding letters of credit,unsecured term loans and unsecured senior notes,as of December 31,2019 is secured by first deeds of trust on our properties.Using our properties as collateral increases our risk of property losses because defaults on indebtedness secured by properties may re

255、sult in foreclosure actions initiated by lenders and ultimately our loss of the property that secures any loan under which we are in default.Additionally,defaulting on indebtedness may damage our reputation as a borrower,and may limit our ability to secure financing in the future.For tax purposes,a

256、foreclosure on any of our properties would be treated as a sale of the property.If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property,we would recognize taxable income on foreclosure Table of Contents 15 but would not necessarily receive any cash procee

257、ds.As a result,we may be required to identify and utilize other sources of cash or employ a partial cash and partial stock dividend to satisfy our taxable income distribution requirements as a REIT.Financial covenants in our debt instruments may restrict our operating or acquisition activities.Our c

258、redit facility,unsecured term loans and unsecured senior notes contain,and other potential financings that we may incur or assume in the future may contain,restrictions,requirements and other limitations on our ability to incur additional debt and make distributions to our stockholders,as well as fi

259、nancial covenants relating to the performance of our hotel properties.Our ability to borrow under these agreements is subject to compliance with these financial and other covenants.If we are unable to engage in activities that we believe would benefit our hotel properties or we are unable to incur d

260、ebt to pursue those activities,our growth may be limited.Obtaining consents or waivers from compliance with these covenants may not be possible,or if possible,may cause us to incur additional costs or result in additional limitations.Many of our existing mortgage debt agreements contain“cash trap”pr

261、ovisions that could limit our ability to use funds for other corporate purposes or to make distributions to our stockholders.Certain of our loan agreements contain cash trap provisions that may be triggered if the performance of the hotels securing the loans decline.If these provisions are triggered

262、,substantially all of the profit generated by the secured hotel would be deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of the lender.During 2019,these provisions were triggered for the loan secured by the Hilton Times Square,and,as of December

263、31,2019,$1.0 million in excess cash generated by the hotel was held in a lockbox account for the benefit of the lender and included in restricted cash on our consolidated balance sheet.Cash generated by our hotels that secure our existing mortgage debt agreements is distributed to us only after the

264、related debt service and certain impound amounts are paid,which could affect our liquidity and limit our ability to use funds for other corporate purposes or to make distributions to our stockholders.Cash generated by our hotels that secure our existing mortgage debt agreements is distributed to us

265、only after certain items are paid,including,but not limited to,deposits into maintenance reserves and the payment of debt service,insurance,taxes,operating expenses,and capital expenditures.This limit on distributions could affect our liquidity and our ability to use cash generated by those hotels f

266、or other corporate purposes or to make distributions to our stockholders.Our organizational documents contain no limitations on the amount of debt we may incur,so we may become too highly leveraged.Our organizational documents do not limit the amount of indebtedness that we may incur.If we were to i

267、ncrease the level of our borrowings,then the resulting increase in cash flow that must be used for debt service would reduce cash available for capital investments or external growth,and could harm our ability to make payments on our outstanding indebtedness and our financial condition.We face compe

268、tition for hotel acquisitions and dispositions,and we may not be successful in completing hotel acquisitions or dispositions that meet our criteria,which may impede our business strategy.Our business strategy is predicated on a cycle-appropriate approach to hotel acquisitions and dispositions.We may

269、 not be successful in identifying or completing acquisitions or dispositions that are consistent with our strategy of owning LTRR.For example,we have not acquired a hotel since 2017.We compete with institutional pension funds,private equity investors,high net worth individuals,other REITs,and numero

270、us local,regional,national and international owners who are engaged in the acquisition of hotels,and we rely on such entities as 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 w

271、e seek to acquire,and these competitors may succeed in acquiring those hotels or hotel companies themselves.Furthermore,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

272、more compatible operating philosophy.In addition,the number of entities competing for suitable hotels may increase in the future,which would increase demand for these hotels and the prices we must pay to acquire them,which,although beneficial to dispositions of hotels,may materially impact our abili

273、ty to acquire new properties.We are also unable to predict certain market changes including changes in 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 no

274、t yield the returns we expect and,if financed Table of Contents 16 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 managemen

275、t resources.Delays in the acquisition and 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 selection,acquisition,renovation,repositioning and development of real properties could adversely

276、 affect investor returns.Our ability to commit to purchase specific assets will depend,in part,on the amount of our available cash at a given time.Renovation or repositioning programs may take longer and cost more than initially expected.Therefore,we may experience delays in receiving cash distribut

277、ions from such hotels.If our projections are inaccurate,we may not achieve our anticipated returns.Accounting for the acquisition of a hotel property or other entity requires an allocation of the purchase price to the assets acquired and the liabilities assumed in the transaction at their respective

278、 relative or estimated fair values.Should the allocation be incorrect,our assets and liabilities may be overstated or understated,which may also affect depreciation expense on our statement of operations.Accounting for the acquisition of a hotel property or other entity requires an allocation of the

279、 purchase price to the assets acquired and the liabilities assumed in the transaction at their respective relative fair values for an asset acquisition or at their estimated fair values for a business combination.The most difficult estimations of individual fair values are those involving long-lived

280、 assets,such as property,equipment and intangible assets,together with any finance or operating lease right-of-use assets and their related obligations.As with previous acquisitions,should we acquire a hotel property or other entity in the future,we will use all available information to make these f

281、air value determinations,and engage independent valuation specialists to assist in the fair value determinations of the long-lived assets acquired and the liabilities assumed.Should any of these allocations be incorrect,our assets and liabilities may be overstated or understated,which may also affec

282、t depreciation expense on our statement of operations.In addition,should any of our allocations overstate our assets,we may be at risk of incurring an impairment charge.The acquisition of a hotel property or other entity requires an analysis of the transaction to determine if it qualifies as the pur

283、chase of a business or an asset.The result of this analysis will affect both our balance sheet and our statement of operations as transaction costs associated with asset acquisitions will be capitalized and subsequently depreciated over the life of the related asset,while the same costs associated w

284、ith a business combination will be expensed as incurred and included in corporate overhead.Also,asset acquisitions will not be subject to a measurement period,as are business combinations.Should our conclusion of the transaction as the purchase of a business or an asset be incorrect,our assets and o

285、ur expenses may be overstated or understated.The acquisition of a portfolio of hotels or a company presents more risks to our business and financial results than the acquisition of a single hotel.We have acquired in the past,and may acquire in the future,multiple hotels in single transactions.We may

286、 also evaluate acquiring companies that own hotels.Multiple hotel and company acquisitions,however,are generally more complex than single hotel acquisitions and,as a result,the risk that they will not be completed is greater.These acquisitions may also result in our owning hotels in new markets,whic

287、h places additional demands on our ability to actively asset manage the hotels.In addition,we may be required by a seller to purchase a group of hotels as a package,even though one or more of the hotels in the package do not meet our investment criteria.In those events,we expect to attempt to sell t

288、he hotels that do not meet our investment criteria,but may not be able to do so on acceptable terms,or if successful,the sales may be recharacterized by the IRS as dealer sales and subject to a 100%“prohibited transactions”tax on any gain.These hotels may harm our operating results if they operate b

289、elow our underwriting or if we sell them at a loss.Also,a portfolio of hotels may be more difficult to integrate with our existing hotels than a single hotel,may strain our management resources and may make it more difficult to find one or more management companies to operate the hotels.Any of these

290、 risks could harm our operating results.We may be subject to unknown or contingent liabilities related to recently sold or acquired hotels,as well as hotels that we may sell or acquire in the future.Our recently sold or acquired hotels,as well as hotels we may sell or acquire in the future,may be su

291、bject to unknown or contingent liabilities for which we may be liable to the buyers or for which we may have no recourse,or only Table of Contents 17 limited recourse,against the sellers.In general,the representations and warranties provided under our transaction agreements related to the sale or pu

292、rchase of a hotel may survive for a defined period of time after the completion of the transaction.Furthermore,indemnification under such agreements may be limited and subject to various materiality thresholds,a significant deductible,or an aggregate cap on losses.As a result,there is no guarantee t

293、hat we will not be obligated to reimburse buyers for their losses or that we will be able to recover any amounts with respect to losses due to breaches by sellers of their representations and warranties.In addition,the total amount of costs and expenses that may be incurred with respect to the unkno

294、wn or contingent liabilities may exceed our expectations,and we may experience other unanticipated adverse effects,all of which could materially and adversely affect our operating results and cash flows.The sale of a hotel or a portfolio of hotels is typically subject to contingencies,risks and unce

295、rtainties,any of which may cause us to be unsuccessful in completing the disposition.We have sold nine hotels since 2016,and may sell additional hotels in 2020.We may not be successful in completing the sale of a hotel or a portfolio of hotels,which may negatively impact our business strategy.Hotel

296、sales are typically subject to customary risks and uncertainties.In addition,there may be contingencies related to,among other items,seller financing,franchise agreements,ground leases and other agreements.As such,we can offer no assurances as to whether any closing conditions will be satisfied on a

297、 timely basis or at all,or whether the closing of a sale will fail to occur for these or any other reasons.Joint venture investments could be adversely affected by our lack of sole decision-making authority,our reliance on a co-venturers financial condition and disputes between us and our co-venture

298、rs.We have co-invested,and may in the future co-invest,with third parties through partnerships,joint ventures or other entities,acquiring noncontrolling interests in or sharing responsibility for managing the affairs of a property,partnership,joint venture or other entity.For example,in April 2011,w

299、e acquired a 75.0%majority equity interest in One Park Boulevard,LLC,a Delaware limited liability company(“One Park”),the joint venture that holds title to the 1,190-room Hilton San Diego Bayfront hotel located in San Diego,California.Park Hotels&Resorts,Inc.is the 25.0%minority equity partner in On

300、e Park.Accordingly,we are not in a position to exercise sole decision-making authority regarding One Park,and we may not be in a position in the future to exercise sole decision-making authority regarding another property,partnership,joint venture or other entity.Investments in partnerships,joint ve

301、ntures or other entities may,under certain circumstances,involve risks not present were a third party not involved,including the possibility that partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions.Partners or co-venturers may have economic or

302、 other business interests or goals which are inconsistent with our business interests or goals,and may be in a position to take actions contrary to our policies or objectives.Such investments may also have the potential risk of impasses on decisions,such as a sale,because neither we nor the partner

303、or co-venturer would have full control over the partnership or joint venture.Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or trustees from focusing their time and effort on our business.Conseque

304、ntly,actions by,or disputes with,partners or co-venturers might result in subjecting properties owned by the partnership or joint venture to additional risk.In addition,we may in certain circumstances be liable for the actions of our third-party partners or co-venturers.The hotel loans in which we m

305、ay invest in the future involve greater risks of loss than senior loans secured by income-producing real properties.We have invested in hotel loans,and may invest in additional loans in the future,including mezzanine loans that take the form of subordinated loans secured by second mortgages on the u

306、nderlying real property or loans secured by a pledge of the ownership interests of the entity owning the real property,the entity that owns the interest in the entity owning the real property or other assets.These types of investments involve a higher degree of risk than direct hotel investments bec

307、ause the investment may become unsecured as a result of foreclosure by the senior lender.In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security,we may not have full recourse to the assets of such entity,or the assets of the entity may not be sufficient

308、 to satisfy our mezzanine loan.If a borrower defaults on our mezzanine loan or debt senior to our loan,or in the event of a borrower bankruptcy,our mezzanine loan will be satisfied only after the senior debt.As a result,we may not recover some or all of our investment.In addition,mezzanine loans may

309、 have higher loan-to-value ratios than conventional mortgage loans,resulting in less equity in the real property and increasing the risk of loss of principal.Table of Contents 18 If we make or invest in mortgage loans with the intent of gaining ownership of the hotel secured by or pledged to the loa

310、n,our ability to perfect an ownership interest in the hotel is subject to the sponsors willingness to forfeit the property in lieu of the debt.If we invest in a mortgage loan or note secured by the equity interest in a property with the intention of gaining ownership through the foreclosure process,

311、the time it will take for us to perfect our interest in the property may depend on the sponsors willingness to cooperate during the foreclosure process.The sponsor may elect to file bankruptcy which could materially impact our ability to perfect our interest in the property and could result in a los

312、s on our investment in the debt or note.Certain of our long-lived assets have in the past become impaired and may become impaired in the future.We periodically review the fair value of each of our hotels for possible impairment.For example,in 2019 we identified indicators of impairment at the Renais

313、sance Harborplace associated with declining demand trends at both the hotel and in the Baltimore market,along with our plan for the hotels estimated hold period,resulting in us recording a$24.7 million impairment loss.In addition,before our 2018 sale of two hotels located in Houston,Texas,we identif

314、ied indicators of impairment in both 2018 and 2017 associated with continued operational declines due to weakness in the Houston market,combined with the effects of Hurricane Harvey on the two hotels.As such,we recorded total impairment charges of$1.4 million and$40.1 million on the two Houston hote

315、ls in 2018 and 2017,respectively.In the future,additional hotels may become impaired,or our hotels which have previously become impaired may become further impaired,which may adversely affect our financial condition and results of operations.We own primarily urban and resort upper upscale hotels,and

316、 the upper upscale segment of the lodging market is highly competitive and may be subject to greater volatility than other segments of the market,which could negatively affect our profitability.The upper upscale segment of the hotel business is highly competitive.Our hotels compete on the basis of l

317、ocation,physical attributes,service levels and reputation,among many other factors.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 room revenue at our

318、 hotels,which would harm our operations.Over-building in the hotel industry may increase the number of rooms available and may decrease occupancy and room rates.We may also face competition from nationally recognized hotel brands with which we are not associated.In addition,in periods of weak demand

319、,profitability is negatively affected by the relatively high fixed costs of operating upper upscale hotels when compared to other classes of hotels.Rising operating expenses or low occupancy rates could reduce our cash flow and funds available for future distributions.Our hotels,and any hotels we bu

320、y in the future,are and will be subject to operating risks common to the lodging industry in general.If any hotel is not occupied at a level sufficient to cover our operating expenses,then we could be required to spend additional funds for that hotels operating expenses.Our hotels have in the past b

321、een,and may in the future be,subject to increases in real estate and other tax rates,utility costs,operating expenses including labor and employee-related benefits,insurance costs,repairs and maintenance and administrative expenses,which could reduce our cash flow and funds available for future dist

322、ributions.A significant portion of our hotels are geographically concentrated and,accordingly,we could be disproportionately harmed by economic downturns or natural disasters in these areas of the country.As of December 31,2019,five of the 20 Hotels are located in California,which is the largest con

323、centration of our hotels in any state,representing 30%of our rooms and 33%of the revenue generated by the 20 Hotels during 2019.In addition,the following other areas include concentrations of our hotels as of December 31,2019:Florida,where two of the 20 Hotels represent 9%of our rooms and 10%of the

324、revenue generated by the 20 Hotels during 2019;the greater Washington DC area,where two of the 20 Hotels represent 13%of our rooms and 11%of the revenue generated by the 20 Hotels during 2019;Hawaii,where one of the 20 Hotels represents 5%of our rooms and 11%of the revenue generated by the 20 Hotels

325、;Illinois,where three of the 20 Hotels represent 11%of our rooms and 7%of the revenue generated by the 20 Hotels during 2019;and Massachusetts,where two of the 20 Hotels represent 14%of our rooms and 15%of the revenue generated by the 20 Hotels during 2019.The concentration of our hotels in Californ

326、ia,Florida,the greater Washington DC Table of Contents 19 area,Hawaii,Illinois and Massachusetts exposes our business to economic conditions,competition and real and personal property tax rates unique to these locales.In addition,natural disasters in these locales would disproportionately affect our

327、 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 and government industries.It is also pos

328、sible that because of our California,Florida,the greater Washington DC area,Hawaii,Illinois and Massachusetts 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 h

329、ave hotels.Adverse developments in these locales could harm our revenue or increase our operating expenses.The operating results of some of our individual hotels are significantly impacted by group contract business and room nights generated by large corporate transient customers,and the loss of suc

330、h customers for any reason could harm our operating results.Group contract business and room nights generated by large corporate transient customers can significantly impact the results of operations of our hotels.These contracts and customers vary from hotel to hotel and change from time to time.Su

331、ch group contracts are typically for a limited period of time after which they may be put up for competitive bidding.The impact and timing of large events are not always easy to predict.Some of these contracts and events may also be cancelled,which could reduce our expectations for future revenues o

332、r result in potential litigation in order to collect cancellation fees.As a result,the operating results for our individual hotels can fluctuate as a result of these factors,possibly in adverse ways,and these fluctuations can affect our overall operating results.The need for business-related travel,

333、and,therefore,demand for rooms in our hotels may be materially and adversely affected by the increased use of business-related technology.The increased use of teleconferencing and video-conference technology by businesses could result in decreased business travel as companies increase the use of technologies that allow multiple parties from different locations to participate in meetings without tr