Sunstone Hotel Investors (SHO) 2015年年度報告「NYSE」.pdf

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1、2015 Annual Report120 Vantis,Suite 350 Aliso Viejo,CA cov16-2608-1_v1.indd 13/3/16 11:09 PM2015 Annual Report120 Vantis,Suite 350 Aliso Viejo,CA cov16-2608-1_v1.indd 13/3/16 11:09 PM42715 Merrill_Cov.indd 33/8/16 1:05 PMSUNSTONE HOTEL INVESTORS,INC.2015 ANNUAL REPORTLouisianaIllinoisMassachusettsPen

2、nsylvaniaFloridaMD/DC/VAMD/DC/VANew YorkOregonCaliforniaUtahHawaiiTexasOregonMarriott Portland,Portland,249UtahMarriott Park City,Park City,199CaliforniaCourtyard by Marriott Los Angeles Airport,Los Angeles,187Embassy Suites La Jolla,La Jolla,340Fairmont Newport Beach,Newport Beach,444Hilton San Die

3、go Bayfront,San Diego,1,190Hyatt Regency Newport Beach,Newport Beach,407Hyatt Regency San Francisco,San Francisco,804Renaissance Long Beach,Long Beach,374Renaissance Los Angeles Airport,Los Angeles,501Sheraton Cerritos,Cerritos,203HawaiiWailea Beach Marriott Resort and Spa,Wailea-Maui,543TexasHilton

4、 Houston North,Houston,480Marriott Houston North,Houston,390LouisianaJW Marriott New Orleans,New Orleans,501Hilton New Orleans St.Charles,New Orleans,252FloridaRenaissance Orlando at SeaWorld,Orlando,781MD/DC/VAMarriott Tysons Corner,Tysons Corner,396Renaissance BaltimoreHarborplace,Baltimore,622Ren

5、aissance Washington,D.C.807PennsylvaniaMarriott Philadelphia,West Conshohocken,289New YorkHilton Times Square,New York City,460Renaissance Westchester,Westchester,348MassachusettsBoston Park Plaza,Boston,1,054Marriott Boston Long Wharf,Boston,412Marriott Quincy,Quincy,464IllinoisEmbassy Suites Chica

6、go Downtown,Chicago,368Hilton Garden Inn Chicago Downtown/Magnificent Mile,Chicago,361Hyatt Chicago Magnificent Mile,Chicago,419Property Locationscov16-2608-1_v1.indd 23/3/16 11:09 PM42715 Merrill_Cov.indd 43/8/16 1:05 PM11FEB201600460395It was a productive year for Sunstone despite varioushotels in

7、 New York City would face declining revenuesheadwinds in our industry.Throughout the year,ourand profits in 2015.Unfortunately,they were right.team made progress on several fronts,setting upHotels in New York City,which generally operate atSunstone to create value no matter if these industryvery hig

8、h occupancy levels but also with high operatingheadwinds subside,remain,or intensify,as our companycosts,got hit by the trifecta of oversupply,new shadowhas never been stronger.Before I talk about oursupply through companies such as AirBnB,and weakerlong-term strategy and outlook,let me give you ani

9、nternational visitation as a result of the strong USoverview of recent developments.Dollar.Unfortunately,these same headwinds continueto blow in the Big Apple,and we have a dim view of thenear-term prospects for hotels located there.The goodIn 2015,news is we sold one of our two New York City hotels

10、our 29-hotel portfolio performed well,exceeding ourduring 2015,reducing our total exposure to the marketexpectations and generating same-property EBITDAto only 4%of our 2015 same-property EBITDA.Ill talkgrowth of nearly 10%,on average,as a result of a 6%a bit about this important sale below.Separate

11、ly,ourincrease in comparable hotel revenues.Our measure ofhotels in Houston were challenged as they do a fairlevered earningsFunds From Operationsincreasedamount of business with companies in the Oil&Gas12%on a per share basis from 2014 to 2015 despiteIndustry,which obviously has taken its lumps.sig

12、nificant deleveraging of our balance sheetwhich inNevertheless,our leaders far outpaced our laggards asand of itself generally weighs on levered earningsevidenced by strong growth at our hotels ingrowth.San Francisco,Los Angeles,San Diego,Chicago andPortland.Group business,which makes up about a thi

13、rd of our total room nightsOver theand had lagged commercial transient and leisure travelpast three years,we have made sizable bets on threein much of this six-year cyclical expansion,continued tomajor hotels in three high quality markets.Thesegain strength in 2015.Group customers increased theinclu

14、de:the 804-room Hyatt Regency San Francisco,number of overall meetings,increased the overallwhich is attached to the vibrant Embarcadero Center;attendance at those meetings,and increased the amountthe 1,060-room Boston Park Plaza Hotel,once the pridethey spent on each meetingall trends we started to

15、of New England that had lost its luster after decades ofexperience in mid-to-late 2014.In 2015,we booked aneglect;and the 543-room Wailea Beach Marriottrecord 1.4 million group room nights for the current andResort&Spa in Maui,which we acquired under theall future years in our portfolioa very health

16、y numberinvestment thesis that it was the worst house on theof which the benefits will be felt for some time to come.best street in Hawaii.(By the way,we are good atFurthermore,our group room revenues at this point forfixing the house,but thus far,we have not figured outall of 2016 are up over 12%fr

17、om where they were ahow to move a house to a better street!)year ago for all of 2015,and our operating partnerscontinue to drive higher banquet and audio visual sales.This is high quality business with good margins.While the Hyatt Regency required a routine,yet fairlyheavy renovation,we acquired the

18、 other two hotels withthe investment thesis that we could generate attractiveNot everyrisk-adjusted returns by completely repositioning andmarket was strong.Marc Hoffman,our Chief Operatingreinventing the assets.This work is not for the faint ofOfficer,and several of the professionals on our Assethe

19、art and requires a great deal of capital,creativity,Management team made the call very early that our twopatience,teamwork and skill.Thanks to Guy Lindsey,T O T H E S H A R E 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.:Earnings Growth Exceeded our Expectations:Group Business

20、Continues to Improve:Short-Term Pain Turns Into Long-Term Gain:The Reason We Own a Diversified Portfolio:our Senior Vice President of Design&Construction,When completed,we will have invested approximatelyMarc Hoffman and an army of talented women and$1.1 billion into these three hotels,or roughly on

21、emen,we are at various stages of completing these threequarter of our undepreciated book value.We have bigmajor projects and we could not be happier.expectations for these investments and,thus far,theyare meeting or exceeding such expectations.We alsoremain confident that,collectively,these hotels w

22、illHere are a few of the details:generate outsized earnings growth and value for ourshareholders in years to come.We feel very comfortable The$47 million renovation at the Hyatt Regencymaking such big bets as the long-term outlook for theseSan Francisco was substantially completed just beforemarkets

23、 is strong.the Super Bowl in February,and despite ongoingrenovation disruption last year,the hotel generated anearly 50%increase in profit over 2014.This hotelIt became increasinglyhas materially outperformed our expectations,andapparent in early 2015 that too much money waswe believe its best days

24、are ahead of it as roughlychasing too few hotel acquisitions,and the returnthree million square feet of high-end office buildingsexpectations that some investors were acceptingare being developed in our part of town.More peopleappeared too low.While we looked at several hotelin office buildings mean

25、 more people that will needinvestments,we were unable to find any that we thoughthotel rooms.made sense for our shareholders.As the yearprogressed,our higher cost of capitalthat is,our lower Most of the common areas of the Boston Park Plazashare pricemade it far more difficult to justify makingwere

26、completed in mid-2015,and all of the 1,060any additional hotel investments.So,we explored theguestrooms are on schedule to be completed by whatalternative through dispositions.These factors remainis expected to be a very busy summer season in Newpresent today,even if you assume that hotel values hav

27、eEngland.Our total investment in this hotel,includingdeclined a bit from their peaks this past summer.Saidthe$110 million repositioning,will equate todifferently,we are more likely than not to continue toapproximately$340,000 per room,which we believedispose of hotels if the arbitrage between hotel

28、values infalls well short of the market value of the asset.Guestthe public markets(our share price)and the privateresponse has been extraordinary,and the hotel ismarket(what we can sell our hotels for)continues.booking group business with corporations andassociations that previously would not have e

29、venconsidered the property.Its While most of the work in San Francisco and Bostonnice to own high-end hotels in world-class locations.Itsis in the rear-view mirror,the renovation work insubstantially better to make a great deal of money forWailea is building steam,and the hotel will beour shareholde

30、rs.Late in 2015,we sold the leaseholdcompletely transformed in time for the beautifulinterest in the 468-room Doubletree Guest Suites Timesand profitableholiday season.The family pools andSquare,a phenomenally located hotel in the heart ofmeeting spaces have already been transformed andTimes Square

31、in New York City,for gross proceeds ofwe are incredibly excited to start work on what we$540 million,or nearly$1.2 million per guestroom.Thebelieve will be the most exciting water slides andsales price is estimated to be$200 million tochildrens adventure pool in Maui.$250 million higher than the val

32、ue most institutionalinvestors and Wall Street analysts thought it was worth.Not only was the price attractive,but the sale,combinedwith paying off the hotels$175 million mortgage,hit on2015 ANNUAL REPORTStill a Net Seller of Hotels:Sale of a Trophy Asset,for All the Right Reasons:almost every impor

33、tant metric.That is,the transactionlodging REITs.We achieved this goal throughincreased our expectations for our portfolios near-termnumerous steps,but without,in our opinion,dilutingrevenue growth(see what I said above about hotels inthe intrinsic value per share(or Net Asset Value)to ourNew York C

34、ity),reduced our leverage,reduced ourshareholders.hotels subject to ground leases,increased our liquidity,reduced our near-term renovation needs andAt this point,a distinction is worthwhile.Our primarycontributed significantly to a$1.26 per sharegoal is not to have the lowest leverage;rather,ourdist

35、ribution to our shareholders for the fourth quarterprimary goal is to maximize long-term shareholderof 2015.It is difficult for an acquisition or disposition tovalue.However,we fundamentally believe thathit all the right spots.We believe this one did,and thatmaintaining the discipline of low leverag

36、e in the goodthe sale put us in an even greater position within ourtimes and using our financial strength and optionality inindustry.My hat is off to our team,but most notably tothe bad timesmost likely by taking on more leverageRobert Springer,our Chief Investment Officer,forbut within reasonable r

37、angesis the right capitalnavigating the most complex transaction that our teamallocation strategy,the right balance sheet strategy andhas ever encountered.the best way to create long-term shareholder value inthis business.Our strategy,which is regularly reviewed,challenged and approved by our Board

38、of Directors,isWhen I joined Sunstone roughly five yearslikely to be underappreciated by those with short-termago,it was readily apparent that our leverage wasinvestment horizons,or those focused on short-termdangerously high and that we needed a plan to fix it.earnings.And thats okay,as we cant be,

39、nor do weAfter all,one of the shortest lists ever read was the listaspire to be,all things to all people.of companies that have been successful combining highoperating leverage in a cyclical business with highfinancial leverage over a long period of time.BryanGiglia,then our Senior Vice President of

40、 Finance andWhen I was a kid,I lovednow our Chief Financial Officer,and I came up with awatching the Robinson family navigate their way as theylofty goal of taking our leverage ratio(we like to use thewere Lost in Space.Their ever-on-guard robot wouldratio of Net Debt Plus Preferred Equity to EBITDA

41、)routinely detect danger and then alert the spacefrom nearly 9 times to approximately 2.5 to 3.0 timestravelers regarding whatever calamity was about towithin one operating cycle.The theory went,andoccur.It seems that similar alerts are going off inremains today,that at such a seemingly low leverage

42、various financial markets and in parts of the broadlevel later in an operating cycle,we could not onlyeconomy.For example,recent weakness insustain a material decline in cyclical earnings withoutcommodities,emerging markets,high-yield bonds,incurring defensive costssuch as not being able to payvario

43、us currencies and energy does not give oneour mortgage payments or fund our renovationsbutconfidence that the economy is firing on all cylinders.also maximize our ability to make hotel investments inWhile some of these changes are likely to benefit ourthe most difficult times.After all,it is in such

44、 difficulthotels(e.g.,it is much more affordable for travelers totimes that the most profitable deals are generally made.fly these days),these relatively weak economicunderpinnings may slow or reduce hotel demand in thefuture.As a result,our current outlook has a healthyI am very happy to report tha

45、t Sunstone achieved thisdose of conservatism despite numerous positive signalslofty leverage goal at the end of 2015,and we now have,from our hotels that all is well.we believe,the lowest levered balance sheet of theSUNSTONE HOTEL INVESTORS,INC.Lowest Levered Balance Sheet Gives Us SignificantOption

46、ality:WHATS NEXT.Danger,Will Robinson:17MAR201504370004Whether these recenthardworking people I have ever metfor their constanteconomic headwinds turn into something more ominousdedication to serving our guests and making their daysor shift to our back,we believe that Sunstone is verybetter.I would

47、also like to thank our brand,operatingwell positioned to take advantage of most situations andand capital partners for their ongoing support andto create value for our shareholders.Our high-qualitycollaborationwe could not be successful withoutportfolio is well positioned in markets with dynamicthem

48、.And finally,I would like to thank ourhotel demand,and the hotels themselves are in goodshareholdersthe owners of our companyforphysical shape.Our soon-to-be-completed hotelinvesting with us and giving us the opportunity to runrepositionings in Boston and Wailea are expected tothis great business.bo

49、ost earnings growth in the near-future.Ourlow-levered balance sheet,significant cash position andstrong banking relationships give us plenty of financialWarmest regards,flexibility to not only fund our business plan withoutsourcing new capital,but also to take advantage ofwhatever opportunities aris

50、e.In closing,I would like to thank Sunstones Board ofDirectors and our 50 employees for their tireless effortsto build shareholder value.I want to thank the hotelemployeessome of the most talented,caring and2015 ANNUAL REPORTHeads We Win,Tails We Win:JOHN V.ARABIAPRESIDENT&CHIEF EXECUTIVE OFFICER UN

51、ITED STATES SECURITIES AND EXCHANGE 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 31,2015 OR?TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For

52、the transition period from to Commission file number 001-32319 Sunstone Hotel Investors,Inc.(Exact Name of Registrant as Specified in Its Charter)Maryland 20-1296886(State or Other Jurisdiction of (I.R.S.Employer Incorporation or Organization)Identification Number)120 Vantis,Suite 350 Aliso Viejo,Ca

53、lifornia 92656(Address 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 Name of Each Exchange on Which Registered Common Stock,$0.01 par value New York Stock Exchange

54、Series D Cumulative Redeemable Preferred Stock,$0.01 par value New York Stock Exchange Securities registered pursuant to Section 12(g)of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes?No?Indicate by check mark if

55、 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 Section 13 or 15(d)of the Securities Exchange Act of 1934,as amended(the“Exchange Act”),during the pr

56、eceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes?No?Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,if any,ev

57、ery Interactive Data File required to be submitted and posted 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 and post such files).Yes?No?Indicate by check mark if disclosure of delinq

58、uent filers pursuant to Item 405 of Regulation S-K is not contained herein,and will not be contained,to the best of registrants knowledge,in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.?Indicate by check mark w

59、hether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or a smaller reporting company(as defined in Rule 12b-2 of the Exchange Act).Large accelerated filer?Accelerated filer?Non-accelerated filer?Smaller reporting company?Indicate by check mark whether the re

60、gistrant 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 of the registrants common stock on June 30,2015 as reported on the New York Stock Exchange(“NYSE”

61、)was approximately$3.1 billion.The number of shares of the registrants common stock outstanding as of February 12,2016 was 216,000,821.Documents Incorporated by Reference Part III of this Report incorporates by reference information from the definitive Proxy Statement for the registrants 2016 Annual

62、 Meeting of Stockholders.2 SUNSTONE HOTEL INVESTORS,INC.ANNUAL REPORT ON FORM 10-K For the Year Ended December 31,2015 TABLE OF CONTENTS Page PART I Item 1 Business 3 Item 1A Risk Factors 11 Item 1B Unresolved Staff Comments 31 Item 2 Properties 31 Item 3 Legal Proceedings 33 Item 4 Mine Safety Disc

63、losures 33 PART II Item 5 Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities 34 Item 6 Selected Financial Data 35 Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations 36 Item 7A Quantitative and Qualitativ

64、e Disclosures About Market Risk 69 Item 8 Financial Statements and Supplementary Data 69 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 69 Item 9A Controls and Procedures 69 Item 9B Other Information 72 PART III Item 10 Directors,Executive Officers and Co

65、rporate Governance 72 Item 11 Executive Compensation 72 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 72 Item 13 Certain Relationships and Related Transactions,and Director Independence 72 Item 14 Principal Accounting Fees and Services 72 PART

66、 IV Item 15 Exhibits,Financial Statement Schedules 73 SIGNATURES 77 3 The“Company”means Sunstone Hotel Investors,Inc.,a Maryland corporation,and one or more of its subsidiaries,including Sunstone Hotel Partnership,LLC,or the Operating Partnership,and Sunstone Hotel TRS Lessee,Inc.,or the TRS Lessee,

67、and,as the context may require,Sunstone Hotel Investors only or the Operating Partnership only.SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This report,together with other statements and information publicly disseminated by the Company,contains certain forward-looking statements within the mean

68、ing of Section 27A of the Securities Act of 1933,as amended,and Section 21E of the Exchange Act.The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include

69、s this statement for purposes of complying with these safe harbor provisions.Forward-looking statements,which are based on certain assumptions and describe the Companys future plans,strategies and expectations,are generally identifiable by use of the words“believe,”“expect,”“intend,”“anticipate,”“es

70、timate,”“project”or similar expressions.You should not rely on forward-looking statements because they involve known and unknown risks,uncertainties and other factors that are,in some cases,beyond the Companys control and which could materially affect actual results,performances or achievements.Fact

71、ors that may cause actual results to differ materially from current expectations include,but are not limited to the risk factors discussed 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

72、securities laws,the Company disclaims any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein(or elsewhere)to reflect any change in the Companys expectations with regard thereto or any change in events,conditions or circumstances

73、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 estate investment trust,or REIT,under the Internal Revenue Code of 1986,as amended(the“Code”).As of December 31,2015,we had interests in 29 hotels(the“29 hotels”).The 29 ho

74、tels are comprised of 13,845 rooms,located in 13 states and in Washington,DC.Our primary business is to acquire,own,asset manage and renovate full-service hotel and select focus-service hotel properties in the United States.As part of our ongoing portfolio management strategy,we may also sell hotel

75、properties from time to time.All but one(the Boston Park Plaza)of the 29 hotels are operated under nationally recognized brands such as Marriott,Hilton,Hyatt,Fairmont and Sheraton,which are among the most respected and widely recognized brands in the lodging industry.While independent hotels may do

76、well in strong market locations,we believe the largest and most stable segment of travelers prefer the consistent service and quality associated with nationally recognized brands and well-known independent hotels.Our portfolio primarily consists of urban,upper upscale hotels in the United States.As

77、of December 31,2015,our 29 hotels include two luxury hotels and 27 hotels classified as either upscale or upper upscale.The classifications luxury,upper upscale and upscale are defined by Smith Travel Research,an independent provider of lodging industry statistical data.Smith Travel Research classif

78、ies hotel chains into the following segments:luxury;upper upscale;upscale;upper midscale;midscale;economy;and independent.Our hotels are operated by third-party managers pursuant to long-term management agreements with our TRS Lessee or its subsidiaries.As of December 31,2015,our third-party manager

79、s included:subsidiaries of Marriott International,Inc.or Marriott Hotel Services,Inc.(collectively“Marriott”),managers of 11 of the Companys 29 hotels;Interstate Hotels&Resorts,Inc.(“IHR”),manager of six of the Companys 29 hotels;Highgate Hotels L.P.and an affiliate(“Highgate”),manager of three of t

80、he Companys 29 hotels;Crestline Hotels&Resorts(“Crestline”),Hilton Worldwide(“Hilton”)and Hyatt Corporation(“Hyatt”),each a manager of two of the Companys 29 hotels;and Davidson Hotels&Resorts(“Davidson”),Fairmont Hotels&Resorts(U.S.)(“Fairmont”)and HEI Hotels&Resorts(“HEI”),each a manager of one of

81、 the Companys 29 hotels.Competitive Strengths We believe the following competitive strengths distinguish us from other owners of lodging properties:?Significant Cash Position.As of December 31,2015,we had total cash of$575.2 million,including$76.2 million of restricted cash.Adjusting for payment of

82、our common and preferred dividends in January 2016,our 4 total pro forma cash including restricted cash as of December 31,2015 would be$388.9 million.By minimizing our need to access external capital by maintaining higher than typical cash balances,our financial security and flexibility are meaningf

83、ully enhanced because we are able to fund our business needs,debt maturities,specifically those occurring in 2016,and possibly acquisitions partially with cash on hand.?Flexible Capital Structure.We believe our capital structure provides us with appropriate financial flexibility to execute our strat

84、egy.As of December 31,2015,the weighted average term to maturity of our debt is approximately 4 years,and 79.5%of our debt is fixed rate with a weighted average interest rate of 4.95%,including the effects of our interest rate swap agreements.Including our variable-rate debt obligation based on vari

85、able rates at December 31,2015,the weighted average interest rate on our debt is 4.45%.Our mortgage debt is in the form of single asset non-recourse loans rather than in cross-collateralized multi-property pools.In addition to our mortgage debt,as of December 31,2015,we have an unsecured corporate-l

86、evel term loan,which matures in September 2022 and has an interest rate of 3.391%,including the effects of an interest rate swap agreement.We currently believe this structure is appropriate for the operating characteristics of our business as it isolates risk and provides flexibility for various por

87、tfolio management initiatives,including the sale of individual hotels subject to existing debt.?Low Leverage.Over the past four years,we have been committed to thoughtfully and methodically reducing our leverage while maintaining a focus on creating and protecting stockholder value.We believe that b

88、y achieving low leverage and high financial flexibility by the time the current cycle peaks,we will position the Company to create value during the next successive cyclical trough by acquiring distressed assets or securities.?Strong Access to Low Cost Capital.As a publicly traded REIT,over the long-

89、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 liquidity,professional management and por

90、tfolio diversification.?High Quality Portfolio.Presence in Key Markets.We believe that our hotels are located in desirable markets with major demand generators and significant barriers to entry for new supply.In 2015,approximately 87%of the revenues generated by the 29 hotels were earned by hotels l

91、ocated in key gateway markets such as Boston,New York,Washington,DC/Baltimore,Chicago,Orlando,New Orleans,San Francisco,Los Angeles,Orange County and San Diego.Over time,we expect the revenues of hotels located in key gateway markets to grow more quickly than the average for U.S.hotels as a result o

92、f stronger and more diverse economic drivers as well as higher levels of international travel.Upper Upscale and Upscale Concentration.The upper upscale and upscale segments,which represented approximately 94%of the hotel revenue generated by the 29 hotels during 2015,tend to outperform the lodging i

93、ndustry,particularly in the recovery phase of the lodging cycle.As of December 31,2015,the hotels comprising our 29 hotel portfolio averaged 477 rooms in size.Our total 29 hotel Comparable Portfolio RevPAR was$162.42 for the year ended December 31,2015.Nationally Recognized Brands.All but one(the Bo

94、ston Park Plaza)of the 29 hotels are operated under nationally recognized brands,including Marriott,Hilton,Hyatt,Fairmont and Sheraton.We believe that affiliations with strong brands improve the appeal of our hotels to a broad set of travelers and help to drive business to our hotels.Recently Renova

95、ted Hotels.From January 1,2011 through December 31,2015,we invested$556.9 million in capital renovations throughout the 29 hotels.We believe that these capital renovations have improved the competitiveness of our hotels and have helped to position our portfolio for future growth.?Seasoned Management

96、 Team.Each of our core disciplines,asset management,acquisitions and finance,are overseen by industry leaders with demonstrated track records.5 Asset Management.Our asset management team is responsible for maximizing the long-term value of our real estate investments by achieving above average reven

97、ue and profit performance through proactive oversight of hotel operations.Our asset management team leads property-level innovation,benchmarks best practices and aggressively oversees hotel management teams and property plans.We work with our operators to develop hotel-level“master plans,”which incl

98、ude positioning and capital renovation plans.We believe that a proactive asset management program can help grow the revenues of our hotel portfolio and maximize operational efficiency by leveraging best practices and innovations across our various hotels,and by initiating well-timed and focused capi

99、tal improvements aimed at improving the appeal of our hotels.Acquisitions.Our acquisitions team is responsible for enhancing our portfolio quality and scale by executing well-timed acquisitions and dispositions that maximize our risk-adjusted return on our investment dollars.We believe that our sign

100、ificant acquisition and disposition experience will allow us to continue to execute our cycle-appropriate strategy to redeploy capital from slower growth to higher growth hotels.From the date of our initial public offering through December 31,2015,we acquired interests in 26 hotel properties and sol

101、d 43 hotel properties.We plan to capitalize on acquisition opportunities that may arise in 2016,as we believe our industry relationships may create opportunities for us to acquire individual hotel assets,or hotel portfolios,provided these opportunities are at attractive values relative to our cost o

102、f capital.We will also focus on capital recycling,and may selectively sell hotels that we believe have lower growth prospects,have significant ongoing capital needs,or that we can sell at a substantial premium to our internal valuation of the asset,as evidenced by the sale of our interests in the Do

103、ubletree Guest Suites Times Square in December 2015.Finance.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 m

104、aintaining a best in class disclosure and investor relations program.Accordingly,our financial objectives include the maintenance of appropriate levels of liquidity through the cyclical recovery phase,with liquidity levels maximized in advance of anticipated cyclical declines.During 2015,we reduced

105、our total mortgage debt by$22.1 million through amortization,and by an additional$304.8 million through repayments of six separate mortgages.We also refinanced one mortgage loan with an$85.0 million unsecured term loan,extending our term to maturity and reducing our average interest rate.In addition

106、,we entered into a$400.0 million senior unsecured credit facility,which replaced our prior$150.0 million senior unsecured credit facility.The credit facilitys interest rate is based on a pricing grid with a range of 155 to 230 basis points over LIBOR,depending on our leverage ratios,and represents a

107、 decline in pricing from the prior credit facility of approximately 30 to 60 basis points.Business Strategy Our mission is to create meaningful value for our stockholders by producing superior long-term returns.Our values include transparency,trust,ethical conduct,communication and discipline.As dem

108、and for lodging generally fluctuates with the overall economy,we seek to employ a balanced,cycle-appropriate corporate strategy.Our strategy over the next several years,during what we believe will be the mature phase of the lodging cycle,is to maximize stockholder value through disciplined capital r

109、ecycling,which is likely to include selective acquisitions and dispositions,while maintaining balance sheet flexibility and strength.Our goal is to maintain low leverage and high financial flexibility through the current cycle peak.We believe if we are successful in executing on this strategy,we wil

110、l position the Company to create value during the next cyclical trough.Our strategic plan encompasses several elements,including proactive portfolio management,focused asset management,disciplined external growth and continued balance sheet strength.Competition The hotel industry is highly competiti

111、ve.Our hotels compete with other hotels for guests in each of their markets.Competitive advantage is based on a number of factors,including location,quality of accommodations,convenience,brand affiliation,room rates,service levels and amenities,and level of customer service.Competition is often spec

112、ific to the individual markets in which our hotels are located and includes competition from existing and new hotels operated under 6 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 am

113、enity levels,which may reduce the profitability of our hotels.We believe that competition for the acquisition of hotels is fragmented.We face competition from institutional pension funds,private equity investors,other REITs and numerous local,regional,national and international owners,including fran

114、chisors,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 the recovery phase of the lodging cycle,when we seek to acquire hotels,competition among

115、potential buyers may increase 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 pote

116、ntial property buyers.Management Agreements All of our 29 hotels are managed by third parties pursuant to management agreements with our TRS Lessee or its subsidiaries.As of December 31,2015,Marriott managed 11 of our hotels,IHR managed six of our hotels,Highgate managed three of our hotels,Crestlin

117、e,Hilton and Hyatt each managed two of our hotels,and the remaining three hotels were individually managed by Davidson,Fairmont and HEI.The following is a general description of our third-party management agreements as of December 31,2015.Marriott.Our management agreements with Marriott require us t

118、o pay Marriott a base management fee equal to 3.0%of total revenue.Inclusive of renewal options and absent prior termination by either party,these management agreements expire between 2031 and 2078.Additionally,six of the aforementioned management agreements require payment of an incentive fee of 20

119、.0%of the excess of gross operating profit over a certain threshold;one management agreement requires payment of an incentive fee of 20%of the excess of gross operating profit over a certain threshold,however the total base and incentive fees were capped at 4.25%of gross revenue for 2012 and 2013,4.

120、5%of gross revenue for 2014,4.75%of gross revenue for 2015,and are capped at 5.0%of gross revenue for the first seven months of 2016,and 5.25%of gross revenue for the remaining term of the agreement;one management agreement requires payment of an incentive fee of 35.0%of the excess of gross operatin

121、g profit over a certain threshold;two management agreements require payment of a tiered incentive fee ranging from 15.0%to 20.0%of the excess 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

122、,limited to 3.0%of gross revenue.The management agreements with Marriott may be terminated earlier than the stated term if certain events occur,including the failure of Marriott to satisfy certain performance standards,a condemnation of,a casualty to,or force majeure event involving a hotel,the with

123、drawal or revocation of any license or permit required in connection with the operation of a hotel and upon a default by Marriott or us that 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 hotel

124、s,or to terminate the applicable management agreement in the event we sell the respective hotel.IHR.Our management agreements with IHR require us to pay a management fee ranging from 2.0%to 2.1%of gross revenue;plus an incentive fee of 10.0%of the excess of net operating income over a certain thresh

125、old.The incentive fee,however,may not exceed a range of 1.5%to 1.9%of the total revenue for all the hotels managed by IHR for any fiscal year.With the exception of the IHR management agreement at the Sheraton Cerritos(which agreement is subject to automatic two-year renewal terms,the first of which

126、commenced in 2012),the IHR management agreements expire in 2024 and provide us the right to renew each management agreement for up to two additional terms of five years each,absent a prior termination by either party.Highgate.Our Boston Park Plaza,Hilton Times Square and Renaissance Westchester hote

127、ls are operated under management agreements with Highgate.The management agreement at the Boston Park Plaza required us to pay Highgate a base management fee of 2.5%of gross revenue until July 1,2014.From July 2,2014 to July 1,2015,the base management fee increased to 2.75%of gross revenue,and there

128、after the base management fee is 3.0%of gross revenue.The agreement expires in 2023,absent a prior termination by either party.In addition,the management agreement at the Boston Park Plaza requires us to pay an incentive fee of 15.0%of the excess of net operating income over a certain threshold.7 Th

129、e management agreements at the Hilton Times Square and the Renaissance Westchester require us to pay Highgate a base management fee of 3.0%of gross revenue.The management agreement at the Hilton Times Square expires in 2021 and provides Highgate with the right to renew for two additional terms of fi

130、ve years upon the achievement of certain performance thresholds,absent a prior termination by either party.In addition,the management agreement at the Hilton Times Square requires us to pay an incentive fee of 50.0%of the excess of net operating income over a certain threshold,limited to 1.25%of tot

131、al revenue.The management agreement at the Renaissance Westchester expires in 2022,absent early termination by either party,and does not require payment of an incentive fee.Crestline.Our Embassy Suites Chicago and Hilton Garden Inn Chicago Downtown/Magnificent Mile hotels are operated under manageme

132、nt agreements with Crestline.The management agreement at the Embassy Suites Chicago expires in 2019(absent early termination by either party),and provides no renewal options.The agreement requires us to pay Crestline a base management fee of 1.5%of gross revenue through May 31,2016,and 2.0%of gross

133、revenue thereafter.The management agreement at the Hilton Garden Inn Chicago Downtown/Magnificent Mile expires in 2022(absent early termination by either party),and provides us with the right to renew for up to two additional terms of five years each.The agreement requires us to pay 2.0%of gross rev

134、enue as a base management fee,and requires us to pay an incentive fee of 10.0%of the excess of operating profit over a certain threshold.Hilton.Our Embassy Suites La Jolla and Hilton San Diego Bayfront hotels are operated under management agreements with Hilton.The management agreement at the Embass

135、y Suites La Jolla expires in 2016(absent early termination by either party),and provides no renewal options.The agreement requires us to pay a base management fee of 2.25%of gross revenue.The agreement includes an incentive fee of 15.0%of our net profit at the hotel in excess of certain net profit t

136、hresholds.The management agreement at the Hilton San Diego Bayfront expires in 2018 and provides Hilton with the right to renew for up to three additional terms of five years each,absent a prior termination by either party.The agreement requires us to pay a base fee of 2.5%of total revenue and an in

137、centive fee of 15.0%of the excess of operating cash flow over a certain percentage.Hyatt.Our Hyatt Regency Newport Beach hotel is operated under a management agreement with Hyatt.The agreement expires in 2019 and provides either party the right to renew for successive periods of 10 years(provided th

138、at the term of the agreement shall in no event extend beyond 2039),absent early termination by either party.The agreement requires us to pay 3.5%of total hotel revenue as a base management fee,with an additional 0.5%of total revenue payable to Hyatt based upon the hotel achieving specific operating

139、thresholds.The agreement also requires us to pay an incentive fee equal to 10.0%of the excess of adjusted profit over$2.0 million,and 5.0%of the excess of adjusted profit over$6.0 million.Our Hyatt Regency San Francisco hotel is operated by Hyatt under an operating lease with economics that follow a

140、 typical management fee structure.The lease expires in 2050,and provides no renewal options.Pursuant to the lease,Hyatt retains 3.0%of total revenue as a base management fee.The lease also provides Hyatt the opportunity to earn an incentive fee if gross operating profit exceeds certain thresholds.Da

141、vidson.Our Hyatt Chicago Magnificent Mile hotel is operated under a management agreement with Davidson.The management agreement at the Hyatt Chicago Magnificent Mile expires in 2019,and provides us with the right to renew for up to two additional terms of five years each,absent a prior termination b

142、y either party.The agreement requires us to pay 2.5%of total revenue as a base management fee and calls for an incentive fee of 10.0%of the excess of net operating income over a certain threshold(capped at 1.5%of total revenue).The base and incentive management fees payable to Davidson under the Hya

143、tt Chicago Magnificent Mile management agreement have an aggregate cap of 4.0%of total revenue.In addition to the base and incentive management fees,the Hyatt Chicago Magnificent Mile management agreement required us to pay Davidson a development fee for their assistance in converting the hotel to a

144、 Hyatt equal to the lesser of 2.0%of the total development costs we incurred,or$0.5 million.The development fee,which totaled$0.5 million,was paid in full during 2013.Fairmont.Our Fairmont Newport Beach hotel is operated under a management agreement with Fairmont.Commencing in July 2016,the manageme

145、nt agreement is terminable upon sale of the hotel with sixty days advance notice to Fairmont;and,commencing in September 2016,the management agreement is terminable for any reason upon sixty days 8 advance notice to Fairmont.The agreement requires us to pay 3.0%of total revenue as a base management

146、fee and calls for payment of incentive fees ranging from 20.0%to 30.0%of the hotels net profit above certain net profit thresholds.The base and incentive management fees payable to Fairmont under the management agreement have an aggregate cap of 6.0%of total revenue.HEI.Our Hilton New Orleans St.Cha

147、rles hotel is operated under a management agreement with HEI.The agreement expires in 2017(absent early termination by either party),and provides for automatic month-to-month renewals thereafter.The agreement requires us to pay 2.0%of gross revenue as a base management fee and calls for an incentive

148、 fee of 20.0%of the excess of adjusted gross operating profit over a certain threshold.The existing management agreements with Marriott,Hilton,Hyatt and Fairmont require the manager to furnish chain services that are generally made available to other hotels managed by that operator.Costs for these c

149、hain services are reimbursed by us.Such services include:(1)the development and operation of computer systems and reservation services;(2)management and administrative services;(3)marketing and sales services;(4)human resources training services;and(5)such additional services as may from time to tim

150、e be more efficiently performed on a national,regional or group level.Franchise Agreements As of December 31,2015,14 of the 29 hotels were operated subject to franchise agreements.Franchisors provide a variety of benefits to franchisees,including nationally recognized brands,centralized reservation

151、systems,national advertising,marketing programs and publicity designed to increase brand awareness,training 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

152、marketing standards and procedures with which our subsidiary,as the franchisee,must comply.The franchise agreements obligate the subsidiary to comply with the franchisors standards and requirements with respect to training of operational personnel,safety,maintaining specified insurance,the types of

153、services and products ancillary to guest room services that may be provided by the subsidiary,display of signage and the type,quality and age of furniture,fixtures and equipment included in guest rooms,lobbies and other common areas.The franchise agreements for our hotels require that we reserve up

154、to 5.0%of the gross revenues of the hotels into a reserve fund for capital expenditures.The franchise agreements also provide for termination at the franchisors option upon the occurrence of certain events,including failure to pay royalties and fees or to perform other obligations under the franchis

155、e license,bankruptcy and abandonment of the franchise or a change in control.The subsidiary that is the franchisee is responsible for making all payments under the franchise agreements to the franchisors;however,the Company guaranties certain obligations under a majority of the franchise agreements.

156、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 December 31,2004.Under current federal income tax laws,we are required to distribute at least 90%of our net taxable income to our stockholders in order to satisfy the RE

157、IT distribution requirement.While REITs enjoy certain tax benefits relative to C corporations,as a REIT we may,however,be 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 Subsi

158、diary Subject to certain limitations,a REIT is permitted to own,directly or indirectly,up to 100%of the stock of a taxable REIT subsidiary,or TRS.The TRS may engage in businesses and earn income that are prohibited to a REIT.In particular,a hotel REIT is permitted to own a TRS that leases hotels fro

159、m the REIT,rather than requiring the lessee to be an unaffiliated third party.However,a hotel leased to a TRS still must be managed by an unaffiliated third party in the business of managing hotels.The TRS provisions are complex and impose certain conditions on the use of TRSs.This is to assure that

160、 TRSs are subject to an appropriate level of federal corporate taxation.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.However,a TRS may

161、not directly or indirectly operate or manage any hotels or provide rights to any brand name under which any hotel is operated.9 We and the TRS Lessee must make a joint election with the IRS for the TRS Lessee to be treated as a TRS.A corporation of which a qualifying TRS owns,directly or indirectly,

162、more than 35%of the voting power or value of the corporations stock will automatically be treated as a TRS.Overall,no more than 25%(20%beginning after 2017)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 securi

163、ties of TRSs and other assets that are not qualifying assets for purposes of the 75%asset test.The 75%asset test generally requires that at least 75%of the value of our total assets be represented by real estate assets,cash,or government securities.The rent that we receive from a TRS qualifies as“re

164、nts from real property”as long as the property is operated on behalf of the TRS by a person who qualifies as an“independent contractor”and who is,or is related to a person who is,actively engaged in the trade or business of operating“qualified lodging facilities”for any person unrelated to us and th

165、e TRS(an“eligible independent contractor”).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“qualifi

166、ed lodging facility”includes customary amenities 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 wh

167、olly owned TRS.We lease each of our hotels 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 revenues.These leases must contain economic terms which are similar to a lease between unrelated parties.If they do

168、 not,the IRS could impose a 100%excise tax on certain transactions between our TRS 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.Further,the TRS rules limit the deductibility o

169、f interest paid or accrued by a TRS to us to assure that the TRS is subject to an appropriate level of corporate taxation.The TRS Lessee has engaged eligible independent contractors to manage the hotels it leases from Sunstone Hotel Partnership,LLC.Ground,Building and Air Lease Agreements At Decembe

170、r 31,2015,eight of the 29 hotels are subject to ground,building and/or air leases with unaffiliated parties that cover either all or portions of their respective properties.As of December 31,2015,the remaining terms of these ground,building and air leases(including renewal options)range from approxi

171、mately 28 to 82 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 associated with the leased property.Any proposed sale of a property that is subject to a ground,bu

172、ilding or air lease or any proposed assignment of our leasehold interest as lessee under the ground,building or air lease may require the consent of the applicable lessor.As a result,we may not be able to sell,assign,transfer or convey our interest in any such property in the future absent the conse

173、nt of the ground,building or air lessor,even if such transaction may be in the best interests of our stockholders.Two of the eight leases prohibit the sale or conveyance of the hotel and assignment of the lease by us to another party without first offering the lessor the opportunity to acquire our i

174、nterest in the associated hotel and property upon the same terms and conditions as offered by us to the third party.Two of the eight leases allow us the option to acquire the ground or building lessors interest in the ground or building lease subject to certain exercisability provisions.From time to

175、 time,we evaluate our options to purchase the lessors interests in the leases.Offices We lease our headquarters located at 120 Vantis,Suite 350,Aliso Viejo,California 92656 from an unaffiliated third party.We occupy our headquarters under a lease that terminates on August 30,2018.Employees At Februa

176、ry 1,2016,we had 50 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 Lessee or its subsidiaries to operate such hotels.10 Environmental Environmental re

177、views have been conducted on all of our hotels.Environmental consultants retained by our lenders have conducted Phase I environmental site assessments on many of our properties.In certain instances,these Phase I assessments relied on older environmental assessments prepared in connection with prior

178、financings.Phase I assessments are designed to evaluate the potential for environmental contamination of properties based generally upon site inspections,facility personnel interviews,historical information and certain publicly available databases.Phase I assessments will not necessarily reveal the

179、existence or extent of all environmental conditions,liabilities or compliance concerns at the properties.In addition,material environmental conditions,liabilities or compliance concerns may arise after the Phase I assessments are completed,or may arise in the future,and future laws,ordinances or reg

180、ulations may impose material additional environmental liabilities.Under various federal,state and local laws and regulations,an owner or operator of 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

181、 liability without regard to whether the owner knew of,or was responsible for,the presence of hazardous or toxic substances.Furthermore,a person that 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

182、or remediation of hazardous substances released into the environment at that property.The costs of remediation or removal of such substances may be substantial,and the presence of such substances,or the failure to promptly remediate such substances,may adversely affect the owners ability to sell suc

183、h 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,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

184、 not cover all or any of the environmental risks we encounter.As an owner of real estate,we are not directly involved in the operation of our properties or other activities that could produce meaningful levels of greenhouse gas emissions.As a result,we have not implemented a formal program to measur

185、e or manage emissions associated with our corporate office or hotels.Although we do not believe that climate change represents a direct material risk to our business,we could be indirectly affected by climate change and other environmental issues to the extent these issues negatively affect the broa

186、der economy,result in increased regulation or costs,or have a negative impact on travel.We have provided unsecured environmental indemnities to certain lenders and buyers of our properties.We have performed due diligence on the potential environmental risks including obtaining an independent environ

187、mental review from outside environmental consultants.These indemnities obligate us to reimburse the guaranteed parties for damages 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 ag

188、ainst other previous owners.ADA Regulation Our properties must comply with various laws and regulations,including Title III of the Americans with Disabilities Act(“ADA”)to the extent that such properties are“public accommodations”as defined by the ADA.The ADA may require removal of structural barrie

189、rs to access by persons with disabilities in certain public areas of our 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

190、 award of damages to private litigants.The obligation to make readily achievable 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 increasin

191、g costs such as labor,food,taxes,property and casualty insurance,borrowing 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

192、reports on Form 10-K,quarterly 11 reports on Form 10-Q and current reports on Form 8-K,are available,free of charge,through links displayed on our web site 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 contain

193、s these reports at www.sec.gov.Our website and the SEC website and the information on our and the SECs website is not a part of this Annual Report on Form 10-K.Item 1A.Risk Factors The statements in this section describe some of the significant risks to our business and should be considered carefull

194、y in evaluating our business and the other information in this Form 10-K.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 slow

195、downs,civil unrest and terrorism,harmed the operating performance 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 performance of

196、 the lodging industry has traditionally 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 categor

197、ies that have lower room rates 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 resul

198、ts at our hotels in key gateway 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 i

199、n air and ground travel costs and decreases in airline capacity may reduce the demand for our hotel rooms.Accordingly,our financial results may be harmed if economic conditions worsen,or if travel-associated costs,such as transportation fuel costs,increase.For example,the civil unrest which occurred

200、 in Baltimore during the spring of 2015 resulted in group cancellations at our Renaissance Harborplace,causing decreases in both our average daily room rates and our occupancy.Also,the terrorist attacks of September 11,2001 had a dramatic adverse effect on business and leisure travel,and on the occu

201、pancy and average daily rate,or ADR,of our hotels.Future terrorist activities and civil unrest could have a harmful effect on both the industry and us.Volatility in the debt and equity markets may adversely affect our ability to acquire,renovate,refinance or sell hotel assets.Volatility in the globa

202、l 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 which have exerted downward pressure on stock

203、 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 may limit our ability to finance the acquisitio

204、n 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,including both secured mortgage debt and unsecur

205、ed 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 common or preferred stock),and more restrictiv

206、e lending standards,our business could be adversely affected.In particular,rising interest rates as a result of actions by the Federal Reserve Board or otherwise,could make it more difficult or expensive for us to obtain debt or equity capital in the future.Similar factors could also adversely affec

207、t the ability of others 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 ca

208、pital costs increase,real estate values may decrease.Capital costs are generally a function of the perceived risks associated with our assets,12 interest rates on debt and return expectations of equity investors.Interest rates for hotel mortgages had increased by several percentage points from 2007

209、to 2009 before moderating in 2010 and then decreasing from 2011 to 2015.The Federal Reserve Board,however,has recently raised interest rates and may continue to do so in the future,while other countries have recently adopted,or indicated that they may adopt,a negative interest rate policy.Interest r

210、ate 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 costs,the market value of our hotel real estate may

211、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.As of December 31,2015,we had approximately$1.1 billion of consolidated outstanding debt,and carrying such d

212、ebt may impair our financial flexibility or harm our business and financial results by imposing requirements on our business.Of our total debt outstanding as of December 31,2015,approximately$637.5 million matures over the next four years($72.4 million in 2016,$241.8 million in 2017,$109.8 million i

213、n 2018 and$213.5 million in 2019).In December 2015,we entered into a term loan agreement,which provided us with a six month period within which we had the option to borrow up to$100.0 million.On January 29,2016,we drew the total available funds of$100.0 million.We used the proceeds on February 1,201

214、6,combined with cash on hand,to repay the loan secured by the Boston Park Plaza,which had a balance of$114.2 million as of December 31,2015,and which was scheduled to mature in February 2018.After repayment of the loan secured by the Boston Park Plaza,$527.7 million of our debt will mature over the

215、next four years.The new$100.0 million term loan will mature in January 2023.The$527.7 million in debt maturities due over the next four years does not include$12.4 million of scheduled loan amortization payments due in 2016,$10.7 million due in 2017,$11.0 million due in 2018,or$10.4 million due in 2

216、019.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 interest,which will reduce the amount of cash available to us for our operations and capital

217、 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 to changing business and economic conditions;?limiting our ability to undertake refinanc

218、ings 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 payments of interest and principal.We also may incur additional debt in connection with fu

219、ture 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 31,2015,we had$0.6 million in outstanding letters of credit.We anticipate that we will refinance our indebtedness from time

220、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 portion of our indebtedness prior to maturity,we expect that we will be required to repay

221、 debt from time to time through refinancings of our indebtedness and/or offerings of equity or debt.The amount of our existing indebtedness may impede our ability to repay our debt through refinancings.If we are unable to refinance our indebtedness with property secured debt or corporate debt on acc

222、eptable 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 might increase our borrowing costs,result in losses to us and reduce the amount of cash available to us for

223、 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 potential proceeds we would be able to secure from future debt refinancings may decrease,which would har

224、m our operating results.13 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 debt,excluding letters of credit and term loans,at December 31,2015 is secured by first deeds of tru

225、st on our properties.Using our properties as collateral increases our risk of property losses because defaults on indebtedness secured by properties may result in foreclosure actions initiated by lenders and ultimately our loss of the property that secures any loan under which we are in default.Addi

226、tionally,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 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 ex

227、ceeds our tax basis in the property,we would recognize taxable income on foreclosure but would not necessarily receive any cash proceeds.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 dist

228、ribution requirements.Financial covenants in our debt instruments may restrict our operating or acquisition activities.Both our credit facility and unsecured term loan contain,and other potential financings that we may incur or assume in the future may contain,restrictions,requirements and other lim

229、itations on our ability to incur additional debt and make distributions to our stockholders,as well as financial 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 unab

230、le to engage in activities that we believe would benefit our hotel properties or we are unable to incur debt 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 cos

231、ts.Many of our existing mortgage debt agreements contain“cash trap”provisions 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 th

232、e hotels securing the loans decline.If these provisions are triggered,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.As of December 31,2015,no cash trap provis

233、ions were triggered at any of our hotels.Cash generated by our hotels that secure our existing mortgage debt agreements is distributed to us only after the related debt service and certain impound amounts are paid,which could affect our liquidity and limit our ability to use funds for other corporat

234、e purposes or to make distributions to our stockholders.Cash generated by our hotels that secure our existing mortgage debt agreements is distributed to us only after certain items are paid,including,but not limited to,deposits into leasing and maintenance reserves and the payment of debt service,in

235、surance,taxes,operating expenses,and extraordinary capital expenditures and leasing expenses.This limit on distributions could affect our liquidity and our ability to use cash generated by those hotels for other corporate purposes or to make distributions to our stockholders.Our organizational docum

236、ents 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 increase the level of our borrowings,then the resulting increase in cash flow that must be used fo

237、r 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.One of our directors has direct and active economic interests in hotels,which may result in conflicts and comp

238、eting demands on his time.One of our directors,Lewis N.Wolff,is actively involved in the management of entities that invest in hotels.Accordingly,this director may have a conflict of interest in owning hotels that operate in similar markets or in evaluating hotel acquisition opportunities in which w

239、e and Mr.Wolff both have a potential interest.Our Code of Business Conduct and Ethics requires Mr.Wolff to obtain approval from our in-house counsel and/or the chair of our Nominating and 14 Corporate Governance Committee prior to engaging in any transaction or relationship that could reasonably be

240、expected to give rise to a potential conflict of interest.We cannot assure you that these procedures will prevent any conflicts or mitigate the impact of such conflicts if they arise.We face competition for hotel acquisitions and dispositions,and we may not be successful in completing hotel acquisit

241、ions 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 not be successful in identifying or completing acquisitions or dispositions that are consistent with ou

242、r strategy.We compete with institutional pension funds,private equity investors,other REITs,and numerous local,regional,national and international owners,including franchisors,who are engaged in the acquisition of hotels,and we rely on such entities as purchasers of hotels we seek to sell.These comp

243、etitors may affect the supply/demand dynamics and,accordingly,increase the price we must pay for hotels or hotel companies we seek to acquire,and these competitors may succeed in acquiring those hotels or hotel companies themselves.Furthermore,our potential acquisition targets may find our competito

244、rs to be more attractive suitors because they may have greater financial resources,may be willing to pay more,or may have a more compatible operating philosophy.In addition,the number of entities competing for suitable hotels may increase in the future,which would increase demand for these hotels an

245、d the prices we must pay to acquire them,which,although beneficial to dispositions of hotels,may materially impact our ability 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 w

246、e pay higher prices for hotels,our profitability may be reduced.Also,future acquisitions of hotels or hotel companies may not yield the returns we expect and,if financed using our equity,may result in stockholder dilution.In addition,our profitability may suffer because of acquisition-related costs

247、or amortization costs for acquired intangible assets,and the integration of such acquisitions may cause disruptions to our business and may strain management resources.Delays in the acquisition and renovation or repositioning of hotel properties may have adverse effects on our results of operations

248、and returns to our stockholders.Delays we encounter in the selection,acquisition,renovation,repositioning and development of real properties could adversely 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 ti

249、me.Renovation or repositioning programs may take longer and cost more than initially expected.Therefore,we may experience delays in receiving cash distributions from such hotels.If our projections are inaccurate,we may not achieve our anticipated returns.Accounting for the acquisition of a hotel pro

250、perty or other entity as a purchase transaction requires an allocation of the purchase price to the assets acquired and the liabilities assumed in the transaction at their estimated fair values.Should the allocation be incorrect,our assets and liabilities may be overstated or understated,which may a

251、lso affect depreciation expense on our statement of operations.Accounting for the acquisition of a hotel property or other entity as a purchase transaction requires an allocation of the purchase price to the assets acquired and the liabilities assumed in the transaction at their respective estimated

252、 fair values.The most difficult estimations of individual fair values are those involving long-lived assets,such as property and equipment,intangible assets and capital lease obligations that are assumed as part of the acquisition of a leasehold interest.During 2011,2012,2013 and 2014,we used all av

253、ailable information to make these fair value determinations,and engaged independent valuation specialists to assist in the fair value determinations of the long-lived assets acquired and liabilities assumed in all of our acquisitions.Should any of these allocations be incorrect,our assets and liabil

254、ities may be overstated or understated,which may also affect depreciation expense on our statement of operations.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

255、 acquire in the future,multiple hotels in single transactions to seek to reduce acquisition costs per hotel and enable us to expand our hotel portfolio more rapidly.We may also evaluate acquiring companies that own hotels.Multiple hotel and company acquisitions,however,are generally more complex tha

256、n 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,which places additional demands on our ability to actively asset manage the hotels.In addition,we may be required by a seller to purc

257、hase a group of hotels as a package,even though one or more of the hotels 15 in the package do not meet our investment criteria.In those events,we expect to attempt to sell the hotels that do not meet our investment criteria,but may not be able to do so on acceptable terms or may have to pay a 100%“

258、prohibited transactions”tax on any gain.These hotels may harm our operating results if they operate below 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 m

259、ay make it more difficult to find one or more management companies to operate the hotels.Any of these risks could harm our operating results.The sale of a hotel or a portfolio of hotels is typically subject to contingencies,risks and uncertainties,any of which may cause us to be unsuccessful in comp

260、leting the disposition.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 sales are typically subject to customary risks and uncertainties.In addition,there may be contingencies related to,among other items,sell

261、er 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 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 coul

262、d 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-venturers.We have co-invested,and may in the future co-invest,with third parties through partnerships,joint ventures or other entities,acquiring

263、 noncontrolling interests in or sharing responsibility for managing the affairs of a property,partnership,joint venture or other entity.For example,in April 2011,we acquired a 75.0%majority equity interest in One Park Boulevard,LLC,a Delaware limited liability company(“One Park”),the joint venture t

264、hat holds title to the 1,190-room Hilton San Diego Bayfront hotel located in San Diego,California.Hilton Worldwide,Inc.is the 25.0%minority equity partner in One Park.Accordingly,we are not in a position,and may not be in a position in the future to exercise sole decision-making authority regarding

265、a property,partnership,joint venture or other entity.Investments in partnerships,joint ventures 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 th

266、eir share of required capital contributions.Partners or co-venturers may have economic or 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 p

267、otential risk of impasses on decisions,such as a sale,because neither we nor the partner or co-venturer would have full control over the partnership or joint venture.Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent

268、our officers and/or trustees from focusing their time and effort on our business.Consequently,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

269、for the actions of our third party partners or co-venturers.The hotel loans in which we may 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 mezz

270、anine loans that take the form of subordinated loans secured by second mortgages on the underlying 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.The

271、se types of investments involve a higher degree of risk than direct hotel investments because 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 ful

272、l recourse to the assets of such entity,or the assets of the entity may not be sufficient 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

273、a result,we may not recover some or all of our investment.In addition,mezzanine loans may 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.16 If we make or invest in mortgage loans with the in

274、tent of gaining ownership of the hotel secured by or pledged to the loan,our ability to perfect an ownership interest in the hotel is subject to the 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 w

275、ith the intention of gaining ownership through the foreclosure process,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 ab

276、ility to perfect our interest in the property and could result in a loss on our investment in the debt or note.Certain of our long-lived assets and goodwill have in the past become impaired and may become impaired in the future.We periodically review the fair value of each of our hotels and related

277、goodwill for possible impairment.While we have not recognized any properties or other assets with indicators of impairment during the past four years,we have previously recognized impairment losses.In the future,our hotels and related goodwill may become impaired,or our hotels which have previously

278、become impaired may become further impaired,which may adversely affect our financial condition and results of operations.We own primarily upper upscale hotels,and the upper upscale segment of the lodging market is highly competitive and may be subject to greater volatility than other segments of the

279、 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 location,room rates and quality,service levels,reputation and reservations systems,among many other factors.There are many competitors in o

280、ur hotel chain scale segments,and many of these competitors have substantially greater marketing and financial resources than we have.This competition could reduce occupancy levels and room revenue at our hotels,which would harm our operations.Over-building in the hotel industry may increase the num

281、ber 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,profitability is negatively affected by the relatively high fixed costs of operating upper upsc

282、ale 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 buy in the future,are and will be subject to operating risks common to the lodging industry in gen

283、eral.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.In the future,our hotels will be subject to increases in real estate and other tax rates,utility costs,operating expenses,ins

284、urance costs,repairs and maintenance and administrative expenses,which could reduce our cash flow and funds available for future distributions.A significant portion of our hotels are geographically concentrated in California,Illinois,Massachusetts and the greater Washington DC area and,accordingly,w

285、e could be disproportionately harmed by economic downturns or natural disasters in these areas of the country.As of December 31,2015,nine of the 29 hotels are located in California,which is the largest concentration of our hotels in any state,representing 32%of our rooms and 36%of the revenue genera

286、ted by the 29 hotels during 2015.In addition,as of December 31,2015,three of the 29 hotels are located in each of the States of Illinois and Massachusetts,as well as in the greater Washington DC area.The three hotels located in Illinois represented 8%of our rooms and 8%of the revenue generated by th

287、e 29 hotels during 2015.The three hotels located in Massachusetts represented 14%of our rooms and 14%of the revenue generated by the 29 hotels during 2015.The three hotels located in the greater Washington DC area represented 13%of our rooms and 12%of the revenue generated by the 29 hotels during 20

288、15.The concentration of our hotels in California,Illinois,Massachusetts and the greater Washington DC area 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

289、affect our hotel portfolio.The economies and tourism industries in these locales,in comparison to other parts of the country,are negatively affected to a greater extent by changes and downturns in certain industries,including the entertainment,high technology,financial and government industries.It i

290、s also possible that because of our California,Illinois,Massachusetts and the greater Washington DC area concentrations,a change in laws 17 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 hav

291、e 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 such

292、customers for any reason could harm our operating results.Group contract business and room nights generated by other 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 tim

293、e.Such 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 revenu

294、es.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.A substantial number of our hotels operate under a brand owned by Marriott,Hilton or Hyatt.Should any of

295、these brands experience a negative event,or receive negative publicity,our operating results may be harmed.We believe the largest and most stable segment of travelers prefer the consistent service and quality associated with nationally recognized brands.As of December 31,2015,16 of our 29 hotels uti

296、lized brands owned by Marriott.In addition,seven and three of our 29 hotels were utilized by Hilton and Hyatt brands,respectively.As a result,a significant concentration of our success is dependent in part on the success of Marriott,Hilton and Hyatt,or their respective brands.Consequently,if market

297、recognition or the positive perception of Marriott,Hilton and/or Hyatt is reduced or compromised,the goodwill associated with our Marriott,Hilton and/or Hyatt branded hotels may be adversely affected,which may have an adverse affect on our results of operations,as well as our ability to make distrib

298、utions to our stockholders.Additionally,any negative perceptions or negative impact to operating results from any proposed or future consolidations between nationally recognized brands could have an adverse affect on our results of operations,as well as our ability to make distributions to our stock

299、holders.Because all but one of our hotels are operated under franchise agreements or are brand managed,termination of these franchise,management or operating lease agreements or circumstances that negatively affect the franchisor or the hotel brand could cause us to lose business at our hotels or le

300、ad to a default or acceleration of our obligations under certain of our notes payable.As of December 31,2015,all of the 29 hotels except the Boston Park Plaza were operated under franchise,management or operating lease agreements with franchisors or hotel management companies,such as Marriott,Hilton

301、,Hyatt,Fairmont and Sheraton.In general,under these arrangements,the franchisor or brand manager provides marketing services and room reservations and certain other operating assistance,but requires us to pay significant fees to it and to maintain the hotel in a required condition.If we fail to main

302、tain these required standards,then the franchisor or hotel brand may terminate its agreement with us and obtain damages for any liability we may have caused.Moreover,from time to time,we may receive notices from franchisors or the hotel brands regarding our alleged non-compliance with the franchise

303、agreements or brand standards,and we may disagree with these claims that we are not in compliance.Any disputes arising under these agreements could also lead to a termination of a franchise,management or operating lease agreement and a payment of liquidated damages.Such a termination may trigger a d

304、efault or acceleration of our obligations under some of our notes payable.In addition,as our franchise,management or operating lease agreements expire,we may not be able to renew them on favorable terms or at all.If we were to lose a franchise or hotel brand for a particular hotel,it could harm the

305、operation,financing,or value of that hotel due to the loss of the franchise or hotel brand name,marketing support and centralized reservation system.Moreover,negative publicity affecting a franchisor or hotel brand in general could reduce the revenue we receive from the hotels subject to that partic

306、ular franchise or brand.Any loss of revenue at a hotel could harm the ability of the TRS Lessee,to whom we have leased our hotels,to pay rent to the Operating Partnership and could harm our ability to pay dividends on our common stock or preferred stock.18 Our franchisors and brand managers may requ

307、ire us to make capital expenditures pursuant to property improvement plans,or PIPs,and the failure to make the expenditures required under the PIPs or to comply with brand standards could cause the franchisors or hotel brands to terminate the franchise,management or operating lease agreements.Our fr

308、anchisors and brand managers may require that we make renovations to certain of our hotels in connection with revisions to our franchise,management or operating lease agreements.In addition,upon regular inspection of our hotels,our franchisors and hotel brands may determine that additional renovatio

309、ns are required to bring the physical condition of our hotels into compliance with the specifications and standards each franchisor or hotel brand has developed.In connection with the acquisitions of hotels,franchisors and hotel brands may also require PIPs,which set forth their renovation requireme

310、nts.If we do not satisfy the PIP renovation requirements,the franchisor or hotel brand may have the right to terminate the applicable agreement.In addition,in the event that we are in default under any franchise agreement as a result of our failure to comply with the PIP requirements,in general,we w

311、ill be required to pay the franchisor liquidated damages,generally equal to a percentage of gross room revenue for the preceding two-,three-or five-year period for the hotel or a percentage of gross revenue for the preceding twelve-month period for all hotels operated under the franchised brand if t

312、he hotel has not been operating for at least two years.Our franchisors and brand managers may change certain policies or cost allocations that could negatively impact our hotels.Our franchisors and brand managers incur certain costs that are allocated to our hotels subject to our franchise,managemen

313、t or operating lease agreements.Those costs may increase over time or our franchisors and brand managers may elect to introduce new programs that could increase costs allocated to our hotels.In addition,certain policies,such as our third-party managers frequent traveler programs,may be altered resul

314、ting in reduced revenue or increased costs to our hotels.Because we are a REIT,we depend on third parties to operate our hotels,which could harm our results of operations.In order to qualify as a REIT,we cannot directly operate our hotels.Accordingly,we must enter into management or operating lease

315、agreements(together,“management agreements”)with eligible independent contractors to manage our hotels.Thus,independent management companies control the daily operations of our hotels.As of December 31,2015,our 29 hotels were managed as follows:Marriott 11 hotels;IHR six hotels;Highgate three hotels

316、;Crestline two hotels;Hilton two hotels;Hyatt two hotels;and Davidson,Fairmont and HEI one hotel each.We depend on these independent management companies to operate our hotels as provided in the applicable management agreements.Thus,even if we believe a hotel is being operated inefficiently or in a

317、manner that does not result in satisfactory ADR,occupancy rates or profitability,we may not necessarily have contractual rights to cause our independent management companies to change their method of operation at our hotels.We can only seek redress if a management company violates the terms of its a

318、pplicable management agreement with us or fails to meet performance objectives set forth in the applicable management agreement,and then our remedies may be limited by the terms of the management agreement.Additionally,while our management agreements typically provide for limited contractual penalti

319、es in the event that we terminate the applicable management agreement upon an event of default,such terminations could result in significant disruptions at the affected hotels.If any of the foregoing occurs at franchised hotels,our relationships with the franchisors may be damaged,and we may be in b

320、reach of one or more of our franchise or management agreements.Of these agreements,two were entered into during 2015,one was entered into during 2014,three were entered into during each of the years 2013 and 2012,and four of these agreements were entered into during 2011.If we were to terminate any

321、of these agreements and enter into new agreements with different hotel operators,the day to day operations of our hotels may be disrupted.In addition,we cannot assure you that any new management agreement would contain terms that are favorable to us,or that a new management company would be successf

322、ul in managing our hotels.We also cannot assure you that our existing management companies will successfully manage our hotels.A failure by our management companies to successfully manage our hotels could lead to an increase in our operating expenses or a decrease in our revenue,or both,which would

323、reduce the amount available for dividends on our common stock and our preferred stock.In addition,the management companies may operate other hotels that may compete with our hotels or divert attention away from the management of our hotels.19 We are subject to risks associated with the employment of

324、 hotel personnel,which could increase our expenses or expose us to additional liabilities.Our third-party managers are responsible for hiring and maintaining the labor force at each of our hotels.Although we do not directly employ or manage employees at our consolidated hotels,we are still subject t

325、o many of the costs and risks generally associated with the hotel labor force.From time to time,hotel operations may be disrupted as a result of strikes,lockouts,public demonstrations or other negative actions and publicity.We also may incur increased legal costs and indirect labor costs as a result

326、 of contract disputes involving our third-party managers and their labor force or other events.The resolution of labor disputes or re-negotiated labor contracts could lead to increased labor costs,a significant component of our costs,either by increases in wages or benefits or by changes in work rul

327、es that raise hotel operating costs.We generally do not have the ability to affect the outcome of these negotiations.The failure of tenants in our hotels to make rent payments under our retail and restaurant leases may adversely affect our results of operations.A portion of the space in many of our

328、hotels is leased to third-party tenants for retail or restaurant purposes.At times,we hold security deposits in connection with each lease,which may be applied in the event that a tenant under a lease fails or is unable to make its rent payments.In the event that a tenant continually fails to make r

329、ent payments,we may be able to apply the tenants security deposit to recover a portion of the rents due;however,we may not be able to recover all rents due to us,which may harm our operating results.System security risks,data protection breaches,cyber-attacks and systems integration issues could dis

330、rupt our internal operations or services provided to guests at our hotels,and any such disruption could reduce our expected revenue,increase our expenses,damage our reputation and adversely affect our stock price.Experienced computer programmers and hackers may be able to penetrate our network secur

331、ity or the network security of our third-party managers and franchisors,and misappropriate or compromise our confidential information or that of our hotel guests,create system disruptions or cause the shutdown of our hotels.Computer programmers and hackers also may be able to develop and deploy viru

332、ses,worms,and other malicious software programs that attack our computer systems or the computer systems operated by our third-party managers and franchisors,or otherwise exploit any security vulnerabilities of our respective networks.In addition,sophisticated hardware and operating system software

333、and applications that we and our third-party managers or franchisors may procure from outside companies may contain defects in design or manufacture,including“bugs”and other problems that could unexpectedly interfere with our internal operations or the operations at our hotels.The costs to us to eliminate or alleviate cyber or other security problems,bugs,viruses,worms,malicious software programs