1、200 Spectrum Center Drive 21st FloorIrvine,CA 2020 Annual Report2020 Annual Report200 Spectrum Center Drive 21st FloorIrvine,CA 2020 Annual ReportSUNSTONE HOTEL INVESTORS,INC.2020 ANNUAL REPORTCaliforniaEmbassy Suites La Jolla,340Hilton San Diego Bayfront,1,190Hyatt Regency San Francisco,821Renaissa
2、nce Long Beach,374OregonThe Bidwell Marriott Portland,258HawaiiWailea Beach Resort,Maui,547LouisianaHilton New Orleans St.Charles,252JW Marriott New Orleans,501IllinoisEmbassy Suites Chicago,368Hilton Garden Inn Chicago Downtown/Magnificent Mile,361Hyatt Centric Chicago Magnificent Mile,419FloridaOc
3、eans Edge Resort&Marina,Key West,175Renaissance Orlando at SeaWorld,781MassachusettsBoston Park Plaza,1,060Marriott Boston Long Wharf,415New YorkRenaissance Westchester,West Harrison,348Washington DCRenaissance Washington DC,807Property Locations and Room CountsCORPORATEInformationBOARD OF DIRECTORS
4、EXECUTIVE OFFICERSCommon Stock of the Company is a i ba rA.VnhoJa i ba rA.VnhoJDirector and President&President&Chief Executive Ofcertraded on the New York Stock ExchangeChief Executive Ofcerunder the symbol SHO.Marc A.HofmanExecutive Vice President&Series E Preferred Stock is traded on the W.Blake
5、BairdChief Operating OfcerNew York Stock Exchange under the Directorsymbol“SHO PR E”.Bryan A.GigliaMonica S.DigilioExecutive Vice President&INDEPENDENTr e c i f fOl a i cnaniFf e i hCr o t c e r iDREGISTERED PUBLICACCOUNTANTSr egn i rpS.Ct r eboRTomas A.Lewis,Jr.Ernst&Young LLP&tned i s e rPe c iVev
6、i t u c exEDirectorChief Investment OfcerFORM 10-K ANDDavid M.KleinOTHER MATERIALSExecutive Vice President&General CounselA copy of the Companys Annual Reporton Form 10-K as fled with theSecurities and Exchange Commission,isavailable free of charge to itsstockholders.Such requests should bemade to:M
7、urray J.McCabeDirectorDouglas M.PasqualeChairmanKeith P.RussellDirectorINVESTOR RELATIONSSunstone Hotel Investors,Inc.200 Spectrum Center Drive21st FloorIrvine,CA 92618(949)330-CEO AND CFOCERTIFICATIONSANNUAL MEETING OFSTOCKHOLDERSTe Annual Meeting will be heldat 12:30 P.M.Pacifc Time onApril 29,202
8、1.As part of ourprecautions regarding thecoronavirus and to support thehealth and well-being of ourstockholders,the Annual Meetingwill be held exclusively online.To be admitted to the AnnualMeeting must enter thecontrol number on your proxy card,voting instruction form,or Notice ofInternet Availabil
9、ity.TRANSFER AGENTAmerican Stock Transfer&Trust Co.LLC6201 15th AvenueBrooklyn,NY 11219(800)937-In 2020,the Companys Chief ExecutiveOfcer(CEO)provided to the NewYork Stock Exchange the annual CEOcertifcation regarding the Companyscompliance with the New York StockExchanges corporate governance listi
10、ngstandards.In addition,all requiredcertifcations by the Companys CEOand Chief Financial Ofcer regarding thequality of the Companys publicdisclosures in its fscal 2020 reports werefled with the U.S.Securities andExchange Commission.Series F Preferred Stock is traded on the New York Stock Exchange un
11、der the symbol“SHO PR F”.STOCK LISTINGAndrew BatinovichDirector49469 Merrill Sunstone_A 438302.indd 4-62/23/21 8:35 AM12MAR202010063917Before reviewing our 2020 results and providing anour Wailea Beach Resort and Hyatt Regency Sanupdate on the current environment,I would like toFrancisco may change
12、in form over time yet willshare with you our strategy,which is regularlyremain highly coveted destinations for generations toreviewed,challenged and approved by our Board ofcome and that the long-term value of properties suchDirectors.as these will eventually be a multiple of ourinvestment in the as
13、sets today.This is Our StrategyWe refrain from owning or acquiring commodity orWe create long-term stakeholder value through thepedestrian hotels in secondary and tertiary markets,active ownership of Long-Term Relevant Real Estate?despite their siren song of higher initial cash flow(LTRR?)within the
14、 hospitality sector.yields.We also avoid hotels that are subject toground leases.Since most ground leases willeventually revert to another party,and the long-termThis is a straight-forward concept,yet added coloroptionality related to these hotels is owned bymay be worthwhile.someone else,we have ma
15、terially reduced,and overtime,expect to continue to reduce,our hotels thatWe own Long-Term Relevant Real Estate.That is,weare subject to ground leases.own hotels at which we believe travelers will want tostay,rather than have to stay,for decades toNot all of our hotels would currently be consideredc
16、ome.For example,we are highly confident thatLong-Term Relevant Real Estate.An ever-shrinkinglocations such as the Boston Public Gardens andportion of the overall value of our portfolio is madeLong Wharf in Boston,Wailea Beach in Maui,up of assets we view to be commodity hotels.TheDowntown San Diego
17、adjacent to the Bay andpercentage of our asset value attributed toconvention center,Washington,D.C.next to thecommodity hotels has declined materially over theconvention center and within walking distance to thepast several years and should be eliminated in theWhite House,and the Embarcadero Center
18、in Sanforeseeable future.We view these few remainingFrancisco are,and will continue to be,relevant to acommodity hotels as a bank of value that will bevariety of travelers for generations.We believegradually monetized and used to fund futureowning Long-Term Relevant Real Estateif wellinvestments,inc
19、luding the disciplined acquisition ofmaintainedreduces the risk of waning demand as isLong-Term Relevant Real Estate.We aregenerally the case with commodity or pedestriancomfortable capital recycling these assets,assets that lose their earnings power over time asparticularly if we can harvest them a
20、t strongtheir improvements age,as hotel brands mandatevaluations,as we believe our strategy will result inuneconomic improvements,and as these hotels facesuperior long-term returns for our petition from newer products.We believe thatLong-Term Relevant Real Estate takes many forms,shapes and sizes,bu
21、t the appeal of the hotel isWe take a long-term view of our business,even at thegenerally in its unique attributes,the difficulty inexpense of short-term disruption or cyclical volatility.replicating the product,and most of all,theWhile some in the investment community arelong-term desirability of i
22、ts location.Most of thefocused on near-term results measured in terms oftime,the lasting value is in the dirt rather than thedays,months and quarters,our focus is on asset valueimprovements.For example,we are confident thatgrowth over years and decades.Yes,decades.It isT O T H E S T O C K H O L D E
23、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.:this long-term focus that gives us the confidence toduring which we acquire very little.This has been theacquire and reposition hotels despite the inherentcase recently and not everyone has agreed with ourshort-term disruption to earnings.The
24、 acquisitionmeasured approach to hotel acquisitionsalthoughand extensive renovation of a few large hotels in theour recent disciplined approach to acquisitions latelast operating cycle have been tremendouslyin the last operating cycle appears to have been thesuccessful and have created substantial s
25、tockholderright decision.As we start a new operating cycle,wevalue.We will continue to look for,and invest in,expect to be far more active acquiring LTRR.similar opportunities as we believe we are skilled increating value through such endeavors.We employ a low-leveraged capital structure.Alow-levera
26、ged capital structure is unlikely toWe believe in active ownership.As a hotel Realmaximize short-term levered earnings in good times,Estate Investment Trust(REIT),we are precludedbut in our view,will result in higher earnings andfrom operating our hotels,and therefore,we rely onvalue over longer per
27、iods of time.The hotel businessskilled third-party operators for the day-to-dayis operationally intensive,capital intensive andmanagement of the properties.That said,our asseteconomically sensitive.Combining these attributesmanagement,design&construction,engineering,with high financial leverage is s
28、imply not prudent iflegal and finance teams work actively andone wants to be a long-term investor,or at least acollaboratively with our hotel operators to drivesuccessful long-term investor.History is on our sideprofitability,to enhance guest and hotel associateof this argument.Our low leverage prov
29、ides us withsatisfaction,to reduce our environmental impact andmore durability in the event of a large cyclicalto maintain and enhance the long-term value of ourdownturnas has been the case throughout theportfolio.This is our day job and I think we are goodCOVID-19 pandemicand provides us with morea
30、t it.optionality to take advantage of various investmentsover time without being beholden to the often-fickleequity markets.We would expect our leverage levelsWe own hotels that generate a superior level ofto increasealbeit within a prudent rangeearly ineconomic earnings such that they can support t
31、heirthe operating cycle,particularly as we become morelong-term capital needs while also providing anacquisitive.We expect our leverage levels to declineattractive unlevered return on our investment.This islater in the operating cycle as we build up morenot always the case with hotels,particularly o
32、lder,financial capacity.full-service,branded hotels that garner low roomratesjust the type of hotels we have sold over thepast several years.Furthermore,we keep our hotelsWe believe in,and actively employ,stockholder-in good condition in order to maximize theirfriendly corporate governance,a strong
33、alignmentlong-term appeal to guests.We routinely makebetween management and stockholder interests,paysignificant investments in non-guest-facing areas andpractices based on stockholder outcomes,and robustbuilding systems that short-term hotel owners arestakeholder disclosure.We know that stockholder
34、soften unwilling to undertake.These investments cannot only own the company but also have the finalbe costly,but in our view,are the right long-termdetermination of the companys future.In terms ofbusiness decisions.After all,if an owner doesnt takecorporate governance,we elect all directors annually
35、,care of the hotel associates and the building,howallow bylaws to be amended by stockholders,restrictshould one expect the hotel associates and thethe Boards ability to classify directors,allow Proxybuilding to take care of the guests that are vital toAccess,pay executives and team members basedour
36、long-term success?largely on stockholder returns and operating results,have a compensation clawback policy,and requireexecutives and directors to hold a meaningfulWe believe the initial cost basis of our investments isownership interest in the company.Furthermore,as important as the quality of the r
37、eal estate weproviding robust and honest disclosure allows us toacquire.Investing in Long-Term Relevant Realhave direct conversations with our stockholdersEstate at long-term uneconomic prices may feel goodregarding the business they own.and be applauded in the short term,but is morelikely than not
38、to result in sub-optimal returnsnonetheless.We are likely to be more acquisitiveThis is our strategy and our approach to ourearly in the operating cycle and less so in later stages.business.Not everyone will agree with this strategyAs a result,there may be extended periods of timenor invest in Sunst
39、one.That is fine by us,as we wont2020 ANNUAL REPORTtry to be all things to all investors nor change ourwith only two ground-leased assets in the portfolio,strategy to suit the whims of the day.which we believe compares among the best across allpublicly traded hotel REITs.A Review of Recent EventsWhi
40、le no one could have predicted a downturn ofWithout a doubt,2020 was the most challenging yearthis magnitude,and we will not come out of thisthe hotel industry has ever faced because of theexperience completely unscathed,we held up muchCOVID-19 pandemic,and we were forced to dobetter than most hotel
41、 owners because of thethings we never thought we would have to do.Thatstrength of our balance sheet and significant liquiditysaid,in rising to the occasion,we and others,workingposition heading into the pandemic.Unlike many oftogether,also accomplished things we never thoughtour peers,we were not fo
42、rced to access expensivepossible.Travel came to an abrupt standstill informs of capital to shore up liquidity.Conversely,weMarch 2020 and,despite gradual improvements,actually reduced our overall debt levels thoughremained at historically low levels through much ofattractively priced asset sales and
43、 retained a sizeablethe year.In order to preserve liquidity and minimizecash balance earmarked for new investment.That is,losses,we and our operators took unprecedentedwe have the ability to fund one or more acquisitionsaction and temporarily suspended operations at thewith cash on hand and without
44、the need to sourcemajority of our hotels,and we postponed roughlyincremental capital.As we start a new operatinghalf of our capital projects.Despite herculean effortscycle,we plan on putting this excess capital to workto reduce expenses and capital outlays,our companyinto LTRR.This is an enviable po
45、sition and one wehad to deploy a portion of our excess cash balance toexpect to use to our benefit.support the operating costs of our hotels.The directand indirect impacts of COVID-19 have taken a veryOur total stockholder return in 2020 was negativeheavy toll on so many,including the hotel associat
46、es18.1%,bringing our trailing three-year and five-yearand managersmany of whom were furloughed fortotal annualized stockholder returns to negativemuch of the yearour operating and brand partners,8.6%and positive 2.0%,respectively.While theseour team members,and the communities we serve.returns are d
47、isappointing,we were the topperforming hotel REIT in 2020 and our three-yearOur 2020 results drive home the severity of theand five-year total stockholder returns were in thedownturn.Our comparable portfolio of 17 hotels62nd percentile and 75th percentile,respectively.owned at the end of 2020 witnes
48、sed a 76%decline incomparable revenues,and,despite a 56%reductionOur Outlookin comparable property expenses,recorded a hotelAdjusted EBITDA loss of$64 million.By contrast,As we stand here today,we are more optimisticprevious downturns witnessed comparable revenueabout the speed and strength of the h
49、otel recoverydeclines of no more than 19%.Only three of ourthan at any point in the past year.We see significanthotels generated positive earnings during the year.evidence of pent-up demand for all forms of travelAgain,unprecedented.and remain hopeful that,as the COVID-19 vaccine isbroadly distribut
50、ed,travel will resume more quicklyDespite the challenges of the year,we advanced ourthan in past recoveries.Should inflation increase asstrategy of creating value through the ownership ofmany currently forecast,we are well suited toLong-Term Relevant Real Estate by disposing ofrespond with price adj
51、ustments more quickly thanthree commodity hotels,the Renaissanceother forms of real estate and would likely benefit asHarborplace Baltimore,the Renaissance Losa result.Angeles Airport and the Hilton Times Square.Thedeparture of these three hotels in 2020 furtherAs we begin a new operating cycle,we a
52、re activelyconsolidates our portfolio into Long-Term Relevantpursuing acquisitions of Long-Term Relevant RealReal Estate and further reduces our ground leaseEstate and expect to meaningfully grow the portfolioexposure.It is worthwhile to note that the combinedover the next few years.If past is prolo
53、gue and hotel2019 RevPAR and EBITDA per key for the threeREITs are afforded an advantageous cost of capitalhotels,in aggregate,was approximately 19%lowerin the early stages of the operating recovery,we areand 54%lower,respectively,than the remainder oflikely to be very active on this front.At the sa
54、meour portfolio.Additionally,the dispositions leave usSUNSTONE HOTEL INVESTORS,INC.13MAR201622162810time,we will continue to methodically capital recycleand bright days lie ahead.I would also like to thankthose hotels in our portfolio that do not fit ourour brand,operating,investment and capital par
55、tnersstrategy,balancing the speed of execution with thefor their energy,talents,ongoing support andproceeds received.collaborationwe could not be successful withoutthem.And finally,I would like to thank ourstockholdersthe owners of our companyfor their*support and trust,for investing in us,and for g
56、ivingus the opportunity to run this great business.In closing,I would like to thank Sunstones Board ofDirectors and our 40 employees for workingcollaboratively to not only protect the companyWarmest regards,through our most challenging time,but also formaintaining a focus on our long-term strategy a
57、ndgrowth prospects despite the difficult operatingenvironment.I want to thank the hotel teamssomeof the most talented,caring and hardworking peopleI have ever metfor helping us to navigate throughthe incredible challengeswe are turning the corner2020 ANNUAL REPORTJOHN V.ARABIAPRESIDENT&CHIEF EXECUTI
58、VE OFFICERUNITED 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 31,2020 OR?TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT
59、OF1934 For the transition period from to Commission file number 001-32319 Sunstone Hotel Investors,Inc.(Exact Name of Registrant as Specified in Its Charter)Maryland 20-1296886(State or Other Jurisdiction of(I.R.S.Employer Incorporation or Organization)Identification Number)200 Spectrum Center Drive
60、,21st Floor Irvine,California 92618(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 Trading Symbol(s)Name of Each Exchange on Which Registered Common Stock,$0
61、.01 par value SHO New York Stock Exchange Series E Cumulative Redeemable Preferred Stock,$0.01 par value SHO.PRE New York Stock Exchange Series F Cumulative Redeemable Preferred Stock,$0.01 par value SHO.PRF New York Stock Exchange Securities registered pursuant to Section 12(g)of the Act:None Indic
62、ate 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 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)ha
63、s filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes?No?Indica
64、te by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Ye
65、s?No?Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth c
66、ompany”in Rule 12b-2 of the Exchange Act.Large accelerated filer?Accelerated filer?Non-accelerated filer?Smaller reporting company?Emerging growth company?If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with a
67、ny new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.?Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Sectio
68、n 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its audit report.?Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes?No?The aggregate market value of the voting stock he
69、ld by non-affiliates of the registrant based upon the closing sale price of the registrants common stock on June 30,2020 as reported on the New York Stock Exchange was approximately$1.7 billion.The number of shares of the registrants common stock outstanding as of February 5,2021 was 215,593,401.Doc
70、uments Incorporated by Reference Part III of this Report incorporates by reference information from the definitive Proxy Statement for the registrants 2021 Annual Meeting of Stockholders.2 SUNSTONE HOTEL INVESTORS,INC.ANNUAL REPORT ON FORM 10-K For the Year Ended December 31,2020 TABLE OF CONTENTS P
71、age PART IItem 1 Business 3Item 1A Risk Factors 13Item 1B Unresolved Staff Comments 36Item 2 Properties 37Item 3 Legal Proceedings 37Item 4 Mine Safety Disclosures 37PART IIItem 5 Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities 37Item 6 Sele
72、cted Financial Data 39Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations 40Item 7A Quantitative and Qualitative Disclosures About Market Risk60Item 8 Financial Statements and Supplementary Data 60Item 9 Changes in and Disagreements with Accountants on Account
73、ing and Financial Disclosure 61Item 9A Controls and Procedures 61Item 9B Other Information 63PART III Item 10 Directors,Executive Officers and Corporate Governance 63Item 11 Executive Compensation 63Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matter
74、s 63Item 13 Certain Relationships and Related Transactions,and Director Independence 63Item 14 Principal Accountant Fees and Services 63PART IV Item 15 Exhibits,Financial Statement Schedules 64Item 16 Form 10-K Summary 67SIGNATURES 683 The“Company,”“we,”“our,”and“us”refer to Sunstone Hotel Investors
75、,Inc.,a Maryland corporation,and one or more of our subsidiaries,including Sunstone Hotel Partnership,LLC,or the Operating Partnership,and Sunstone Hotel TRS Lessee,Inc.,or the TRS Lessee,and,as the context may require,Sunstone Hotel Investors only or the Operating Partnership only.SPECIAL NOTE REGA
76、RDING FORWARD-LOOKING STATEMENTS This report,together with other statements and information publicly disseminated by the Company,contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,as amended,and Section 21E of the Exchange Act.The Company inte
77、nds such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions.Forward-looking statements,which ar
78、e 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,”“estimate,”“project”or similar expressions.You should not rely on forward-looking statements because they involve k
79、nown 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.Factors that may cause actual results to differ materially from current expectations include,but are not limited to
80、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 securities laws,the Company disclaims any obligations or undertaking to publicly release any updates or revision
81、s 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 on which any such statement is based.Item 1.Business Our Company We were incorporated in Maryland on June 28,200
82、4.We are a real estate investment trust(“REIT”),under the Internal Revenue Code of 1986,as amended(the“Code”).As of December 31,2020,we had interests in 17 hotels(the“17 Hotels”).The 17 Hotels are comprised of 9,017 rooms,located in 8 states and in Washington,DC.We are the premier steward of Long-Te
83、rm Relevant Real Estate(“LTRR”)in the lodging industry.Our business is to acquire,own,asset manage and renovate or reposition hotels that we consider to be LTRR in the United States,specifically hotels in urban,resort and destination locations that benefit from significant barriers to entry by compe
84、titors and diverse economic drivers.As part of our ongoing portfolio management strategy,on an opportunistic basis,we may also selectively sell hotel properties that we do not believe meet our criteria of LTRR.All but two(the Boston Park Plaza and the Oceans Edge Resort&Marina)of the 17 Hotels are o
85、perated under nationally recognized brands such as Marriott,Hilton and Hyatt,which are among the most respected and widely recognized brands in the lodging industry.Our two unbranded hotels are located in top urban and resort markets that have enabled them to establish awareness with both group and
86、transient customers.Our portfolio primarily consists of upper upscale hotels located in major convention,resort,destination and urban markets.Our hotels are operated by third-party managers under long-term management agreements with the TRS Lessee or its subsidiaries.As of December 31,2020,our third
87、-party managers included:subsidiaries of Marriott International,Inc.or Marriott Hotel Services,Inc.(collectively“Marriott”),managers of six of the Companys hotels;Crestline Hotels&Resorts(“Crestline”),Highgate Hotels L.P.and an affiliate(“Highgate”),Hilton Worldwide(“Hilton”)and Interstate Hotels&Re
88、sorts,Inc.(“IHR”),each a manager of two of the Companys hotels;and Davidson Hotels&Resorts(“Davidson”),Hyatt Corporation(“Hyatt”)and Singh Hospitality,LLC(“Singh”),each a manager of one of the Companys hotels.As is typical of the lodging industry,we experience some seasonality in our business.Inform
89、ation regarding the seasonal patterns affecting our hotels is included in this Annual Report on Form 10-K under the caption“Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations.”Impact of the COVID-19 Pandemic on our Business In March 2020,the COVID-19 pandemic
90、 was declared a National Public Health Emergency,which led to significant cancellations,corporate and government travel restrictions and an unprecedented decline in hotel demand.As a result of these cancellations,restrictions and the health concerns related to COVID-19,we determined that it was in t
91、he best interest of our hotel employees and the communities in which our hotels operate to temporarily suspend operations at the majority of our hotels.4 In response to the COVID-19 pandemic,we temporarily suspended operations at 14 of the 17 Hotels during the first half of 2020,12 of which have sin
92、ce resumed operations as of December 31,2020:Hotel Suspension Date Resumption Date Oceans Edge Resort&Marina March 22,2020 June 4,2020 Embassy Suites Chicago April 1,2020 July 1,2020 Marriott Boston Long Wharf March 12,2020 July 7,2020 Hilton New Orleans St.Charles March 28,2020 July 13,2020 Hyatt C
93、entric Chicago Magnificent Mile April 6,2020 July 13,2020 JW Marriott New Orleans March 28,2020 July 14,2020 Hilton San Diego Bayfront March 23,2020 August 11,2020 Renaissance Washington DC March 26,2020 August 24,2020 Hyatt Regency San Francisco March 22,2020 October 1,2020 Renaissance Orlando at S
94、eaWorld March 20,2020 October 1,2020 The Bidwell Marriott Portland March 27,2020 October 5,2020 Wailea Beach Resort March 25,2020 November 1,2020 Hilton Garden Inn Chicago Downtown/Magnificent Mile March 27,2020 Renaissance Westchester April 4,2020 Three of the 17 Hotels remained open throughout 202
95、0:the Boston Park Plaza;the Embassy Suites La Jolla;and the Renaissance Long Beach.The hotels in operation during 2020 experienced a significant decrease in occupancy due to the COVID-19 pandemic.As a result,we,in conjunction with our third-party managers,reduced operating expenses to preserve liqui
96、dity by implementing stringent operational cost containment measures,including significantly reduced staffing levels,limited food and beverage offerings,elimination of non-essential hotel services and the temporary closure of various parts of the hotels.In addition,enhanced cleaning procedures and r
97、evised operating standards were developed and implemented.To preserve additional liquidity,we temporarily suspended both our stock repurchase program and our common stock quarterly dividend,and deferred a portion of our portfolios planned 2020 non-essential capital improvements.While demand for our
98、hotels remained stable during the first two months of 2020,COVID-19 and the related government and health official mandates in many markets in March through December virtually eliminated demand across our portfolio,resulting in a significant net loss recognized in 2020.While a recovery timeline is h
99、ighly uncertain,we expect to resume operations at our two remaining suspended hotels when there is sufficient market demand,which we anticipate may not occur until the second half of 2021.The extent of the effects of the pandemic on our business and the hotel industry at large,however,will ultimatel
100、y depend on future developments,including,but not limited to,the duration and severity of the pandemic,how quickly and successfully effective vaccines and therapies are distributed and administered,as well as the length of time it takes for demand and pricing to return and normal economic and operat
101、ing conditions to resume.Competitive Strengths We believe the following competitive strengths distinguish us from other owners of lodging properties:High Quality Portfolio of Long-Term Relevant Real Estate.Focus on Owning Long-Term Relevant Real Estate.We believe that we will create lasting stockhol
102、der value through the active ownership of LTRR.LTRR consists of hotels that we believe possess unique attributes that are difficult to replicate,and most of all,whose locations are highly desirable and are relevant today and whose relevance will stand the test of time for generations to come.We beli
103、eve that owning LTRR provides superior long-term economics and reduces the risk of waning demand that often happens to undercapitalized and pedestrian hotels.Presence in Key Markets.A cornerstone of LTRR is location.We believe that our hotels are located in many of the most desirable long-term relev
104、ant markets with major and diverse demand generators and significant barriers to entry for new supply.All of the 17 Hotels are located in key gateway markets and unique resort and destination locations such as Boston,Chicago,Key West,Maui,New Orleans,Orlando,Portland,San Diego,San Francisco and Wash
105、ington DC.Over time,we expect the revenues of hotels located in key gateway markets and unique resort 5 and destination locations to generate superior long-term growth rates as compared to the average for U.S.hotels,as a result of stronger and more diverse economic drivers.Nationally Recognized Bran
106、ds and Established Independents.As noted above,all but two of the 17 Hotels are operated under nationally recognized brands.We believe that affiliations with strong brands and established independents improve the appeal of our hotels to a broad set of travelers and help to drive business to our hote
107、ls.Recently Renovated Hotels.During the past five years,we invested$493.8 million in capital renovations throughout the 17 Hotels.We believe that these capital renovations have improved the competitiveness of our hotels and have helped to position our portfolio for future growth.Significant Cash Pos
108、ition.As of December 31,2020,we had total cash of$416.1 million,including$47.7 million of restricted cash.While the COVID-19 pandemic materially affected our hotels ability to generate cash from operations,our history of maintaining higher than typical cash balances enabled us to fund our business n
109、eeds without raising additional capital through equity or debt issuances.Depending on the duration of the COVID-19 pandemic and any negative long-term impact it may have on travel,our cash position may further decline.Flexible Capital Structure.We believe our capital structure provides us with signi
110、ficant financial flexibility to execute our strategy.As of December 31,2020,the weighted average term to maturity of our debt was approximately four years,and all of our outstanding debt had fixed interest rates or had been swapped to fixed interest rates,except the$220.0 million non-recourse mortga
111、ge on the Hilton San Diego Bayfront.Including the effects of our interest rate swap agreements and the temporary increases in interest rates on our unsecured debt as stipulated in the unsecured debt amendments we entered into during 2020,our fixed-rate debt had a weighted average interest rate of 4.
112、8%.Including our variable-rate debt on the Hilton San Diego Bayfront based on the variable rate at December 31,2020,the weighted average interest rate on our debt was 3.8%.For more information on the unsecured debt amendments we entered into during 2020,see Item 7.Managements Discussion and Analysis
113、 of Financial Condition and Results of Operations.In addition to our mortgage debt,as of December 31,2020,we had two unsecured corporate-level term loans,and two series of senior unsecured corporate-level notes.We also have an undrawn$500.0 million credit facility.We currently believe this structure
114、 is appropriate for the operating characteristics of our business as it isolates risk and provides flexibility for various portfolio management initiatives,including the sale of individual hotels subject to existing debt.Low Leverage.We believe that by maintaining appropriate debt levels,staggering
115、maturity dates and maintaining a highly flexible capital structure,we will have lower capital costs than more highly leveraged companies,or companies with limited flexibility due to restrictive corporate-level financial covenants.Our low leverage capital structure not only minimizes the risk of pote
116、ntial value destructive consequences in periods of economic recession or global pandemics,but also provides us with significant optionality to create stockholder value through all phases of the operating cycle.Strong Access to Low Cost Capital.As a publicly traded REIT,over the long-term,we may bene
117、fit 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 investment liquidity,balance sheet optionality,profession
118、al management and portfolio diversification.Seasoned Management Team.Each of our core disciplines,including asset management,acquisitions,finance and legal,are overseen by industry leaders with demonstrated track records.Asset Management.Our asset management team is responsible for maximizing the lo
119、ng-term value of our real estate investments by achieving above average revenue and profit performance through proactive oversight of hotel operations.Our asset management team works with our third-party managers to drive property-level innovation,benchmarks best practices and aggressively oversees
120、hotel management teams and property plans.We work with our operators to develop hotel-level“business plans,”which include positioning and capital investment plans.We believe that a proactive asset management program can help grow the revenues of our hotel portfolio and maximize operational and envir
121、onmental efficiency by leveraging best practices and innovations across our various hotels,and by initiating well-timed and focused capital improvements aimed at improving the appeal of our hotels.Acquisitions.Our acquisitions team is responsible for enhancing our portfolio quality and scale by exec
122、uting well-timed acquisitions and dispositions that generate attractive risk-adjusted returns on our investment dollars.We believe that our significant acquisition and disposition experience will allow us to continue to execute our strategy to redeploy capital from slower growth assets to LTRR with
123、higher long-term growth rates.Our primary focus is 6 to acquire LTRR.Depending on availability,we select the branding and operating partners for our hotels that we believe will lead to the highest returns and greatest long-term value.We also focus on disciplined capital recycling,and may selectively
124、 sell hotels that no longer fit our stated strategy,are unlikely to offer long-term returns in excess of our cost of capital,will achieve a sale price in excess of our internal valuation,or that have high risk relative to their anticipated returns.Finance.We have a highly experienced finance team fo
125、cused on minimizing our cost of capital and maximizing our financial flexibility by proactively managing our capital structure and opportunistically sourcing appropriate capital for growth,while maintaining a best in class disclosure and investor relations program.Legal.Our legal team is responsible
126、 for overseeing and supporting all Company-wide legal matters,including all legal matters related to corporate(including corporate oversight and governance),investment,asset management,design and construction,finance initiatives and litigation.We believe active and direct oversight of legal matters
127、allows the Company the flexibility to pursue opportunities while minimizing legal exposure,protecting corporate assets,and ultimately maximizing stockholder returns.Business Strategy As demand for lodging generally fluctuates with the overall economy,we seek to own LTRR that will maintain a high app
128、eal with lodging travelers over long periods of time and will generate superior economic earnings materially in excess of recurring capital requirements.Our strategy is to maximize stockholder value through focused asset management and disciplined capital recycling,which is likely to include selecti
129、ve acquisitions and dispositions,while maintaining balance sheet flexibility and strength.Our goal is to maintain appropriate leverage and financial flexibility to position the Company to create value throughout all phases of the operating and financial cycles.Competition The hotel industry is highl
130、y competitive.Our hotels compete with other hotels for guests in each of their markets.Competitive advantage is based on a number of factors,including location,physical attributes,service levels and reputation.Competition is often specific to the individual markets in which our hotels are located an
131、d includes competition from existing and new hotels operated under brands in the luxury,upper upscale and upscale segments.Increased competition could harm our occupancy or revenues or may lead our operators to increase service or amenity levels,which may reduce the profitability of our hotels.We be
132、lieve that competition for the acquisition of hotels is widespread.We face competition from institutional pension funds,private equity investors,high net worth individuals,other REITs and numerous local,regional,national and international owners in each of our markets.Some of these entities may have
133、 substantially greater financial resources than we do and may be able and willing to accept more risk than we believe we can prudently manage.During times when we seek to acquire hotels,competition among potential buyers may increase the bargaining power of potential sellers,which may reduce the num
134、ber of suitable investment opportunities available to us or increase pricing.Similarly,during times when we seek to sell hotels,competition from other sellers may increase the bargaining power of the potential property buyers.Management Agreements All of the 17 Hotels are managed by third parties un
135、der management agreements with the TRS Lessee or its subsidiaries.The following is a general description of our third-party management agreements as of December 31,2020.Marriott.The following hotels are operated under management agreements with Marriott:JW Marriott New Orleans;Marriott Boston Long W
136、harf;Renaissance Long Beach;Renaissance Orlando at SeaWorld;Renaissance Washington DC;and Wailea Beach Resort.Our management agreements with Marriott require us to pay Marriott a base management fee equal to 3.0%of total revenue.Inclusive of renewal options and absent prior termination by either par
137、ty,the Marriott management agreements expire between 2047 and 2078.Additionally,three of the management agreements require payment of an incentive fee of 20.0%of the excess of gross operating profit over a certain threshold;one management agreement requires payment of an incentive fee of 35.0%of the
138、 excess of gross operating profit over a certain threshold;one management agreement requires payment of a tiered incentive fee ranging from 15.0%to 20.0%of the excess of gross operating profit over certain thresholds;and one management agreement requires payment of an incentive fee of 10.0%of adjust
139、ed gross operating profit,capped at 3.0%of gross revenue.The management agreements with Marriott may be terminated earlier than the stated term if certain events occur,including the failure of Marriott to satisfy certain performance thresholds,a condemnation of,a casualty to,or force majeure event i
140、nvolving a hotel,the withdrawal or revocation of any license or permit required in connection with the operation of a hotel and upon a default by Marriott or us that is not cured prior to 7 the expiration of any applicable cure periods.In certain instances,Marriott has rights of first refusal to eit
141、her purchase or lease hotels,or to terminate the applicable management agreement in the event we sell the respective hotel.Crestline.Our Embassy Suites Chicago and Hilton Garden Inn Chicago Downtown/Magnificent Mile hotels are operated under management agreements with Crestline.The management agreem
142、ents with Crestline require us to pay Crestline a base management fee of 2.0%of gross revenue.Additionally,one of the management agreements requires us to pay an incentive fee of 10.0%of the excess of operating profit over a certain threshold,and the other management agreement does not require payme
143、nt of an incentive fee.Inclusive of renewal options and absent prior termination by either party,both of the Crestline management agreements expire in 2032;however,we have the ability to terminate the Embassy Suites Chicago agreement without a termination fee at any time upon 60 days prior notice,an
144、d the Hilton Garden Inn Chicago Downtown/Magnificent Mile management agreement without a termination fee upon sale of the hotel,performance test failure or Crestline default.Highgate.Our Boston Park Plaza and Renaissance Westchester hotels are operated under management agreements with Highgate.The m
145、anagement agreements with Highgate require us to pay Highgate a base management fee equal to 3.0%of gross revenue.Additionally,one of the management agreements requires us to pay an incentive fee of 15.0%of the excess of net operating income over a certain threshold;and one of the management agreeme
146、nts does not require payment of an incentive fee.The management agreements with Highgate do not include renewal options,and expire in 2022 and 2023,absent prior termination by either party.Hilton.Our Embassy Suites La Jolla and Hilton San Diego Bayfront hotels are operated under management agreement
147、s with Hilton.One of the management agreements with Hilton requires us to pay Hilton a base management fee of 1.75%of gross revenue,and the other management agreement requires us to pay Hilton a base management fee of 2.5%of total revenue.Additionally,one of the management agreements requires us to
148、pay an incentive fee of 15.0%of the excess of operating cash flow over a certain percentage,and the other management agreement does not require payment of an incentive fee.The management agreements with Hilton do not include renewal options,and expire in 2026 and 2046,absent prior termination by eit
149、her party.IHR.Our Hilton New Orleans St.Charles and The Bidwell Marriott Portland hotels are operated under management agreements with IHR.The management agreements with IHR require us to pay IHR a base management fee of 2.0%of gross revenue or total revenue,as applicable.Additionally,one of the man
150、agement agreements provides IHR the opportunity to earn an incentive fee if certain operating thresholds are achieved,limited to 1.0%of the hotels total revenue,and one of the management agreements requires an incentive fee of 10.0%of the excess of net operating income over a certain threshold,limit
151、ed to 1.5%of the total revenue for all the hotels managed by IHR for any fiscal year.Inclusive of renewal options and absent prior termination by either party,the IHR management agreements expire in 2033 and 2034;provided,however,we have the unilateral ability to terminate the IHR management agreeme
152、nts upon 60 days(Hilton New Orleans St.Charles)and 30 days(The Bidwell Marriott Portland)prior written notice.Davidson.Our Hyatt Centric Chicago Magnificent Mile hotel is operated under a management agreement with Davidson.The management agreement with Davidson requires us to pay Davidson a base man
153、agement fee of 2.5%of total revenue,and an incentive fee of 10.0%of the excess of net operating income over a certain threshold,limited to 1.5%of total revenue.The base and incentive management fees have an aggregate cap of 4.0%of total revenue.Inclusive of renewal options and absent prior terminati
154、on by either party,the Davidson management agreement expires in 2029;however,we have the ability to terminate the agreement at any time without a termination fee upon 90 days prior written notice.Hyatt.Our Hyatt Regency San Francisco hotel is operated by Hyatt under an operating lease with economics
155、 that follow a typical management fee structure.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.Under the operating lease,we are entitled to t
156、he payment of net income generated by the hotel,whereas Hyatt is solely and exclusively responsible for the operation of the hotel,including all costs and liabilities arising from such operation.The lease expires in 2050,and provides no renewal options.Singh.Our Oceans Edge Resort&Marina hotel is op
157、erated under a management agreement with Singh.The management agreement with Singh requires us to pay Singh a base management fee of 3.0%of gross revenue,and an incentive fee of 10.0%of adjusted net operating income,capped at 1.5%of gross revenue.The Singh management agreement provides no renewal op
158、tions,and expires in 2027,absent prior termination by either party;however,we have the ability to terminate the agreement at any time without a termination fee upon 30 days prior written notice.The existing management agreements with Marriott,Hilton and Hyatt require the manager to furnish chain ser
159、vices that are generally made available to other hotels managed by that operator.Costs for these chain services are reimbursed by us.Such services include:the development and operation of computer systems and reservation services;management and administrative services;8 marketing and sales services;
160、human resources training services;and such additional services as may from time to time be more efficiently performed on a national,regional or group level.Franchise Agreements As of December 31,2020,seven of the 17 Hotels were operated subject to franchise agreements.Franchisors provide a variety o
161、f benefits to franchisees,including nationally recognized brands,centralized reservation 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 following tab
162、le sets forth the expiration dates of our hotel franchise agreements:Embassy Suites Chicago October 26,2024 The Bidwell Marriott PortlandOctober 26,2024 Embassy Suites La Jolla May 17,2026 Hilton Garden Inn Chicago Downtown/Magnificent Mile January 19,2027 Renaissance Westchester February 24,2027 Hi
163、lton New Orleans St.Charles May 31,2028 Hyatt Centric Chicago Magnificent Mile June 3,2039 The franchise agreements generally specify management,operational,record-keeping,accounting,reporting and marketing standards and procedures with which our subsidiary,as the franchisee,must comply.The franchis
164、e agreements obligate the subsidiary to comply with the franchisors brand standards and requirements with respect to training of operational personnel,safety,insurance coverages,services and products ancillary to guest room services,display of signage and the type,quality and age of furniture,fixtur
165、es and equipment(“FF&E”)included in guest rooms,lobbies and other common areas.The franchise agreements for our hotels require that we reserve up to 5.0%of the gross revenues of the hotels into a reserve fund for capital expenditures.The franchise agreements also provide for termination at the franc
166、hisors option upon the occurrence of certain events,including failure to pay royalties and fees,failure to perform other obligations under the franchise license,bankruptcy,abandonment of the franchise or a change in control.The subsidiary that is the franchisee is responsible for making all payments
167、 under the franchise agreements to the franchisors;however,the Company guaranties certain obligations under a majority of the franchise agreements.Tax Status We have elected to be taxed as a REIT under Sections 856 through 859 of the Code,commencing with our taxable year ended December 31,2004.Under
168、 current federal income tax laws,we are required to distribute at least 90%of our REIT taxable income to our stockholders each year in order to satisfy the REIT distribution requirement.While REITs enjoy certain tax benefits relative to C corporations,as a REIT we may still be subject to certain fed
169、eral,state and local taxes on our income and property.We may also be subject to federal income and excise tax on our undistributed income.Taxable REIT Subsidiary Subject to certain limitations,a REIT is permitted to own,directly or indirectly,up to 100%of the stock of a taxable REIT subsidiary,or TR
170、S.A TRS is a fully taxable corporation that may earn income that would not be qualifying income if earned directly by us.A TRS may perform activities such as development,and other independent business activities that may be prohibited to a REIT.A hotel REIT is permitted to own a TRS that leases hote
171、ls from the REIT,rather than requiring the lessee to be an unaffiliated third party,provided certain conditions are satisfied.However,a hotel leased to a TRS still must be managed by an unaffiliated third party in the business of managing hotels because a TRS may not directly or indirectly operate o
172、r manage any hotels or provide rights to any brand name under which any hotel is operated.The TRS provisions are complex and impose certain conditions on the use of TRSs to assure that TRSs are subject to an appropriate level of federal corporate taxation.We and the TRS Lessee have made a joint elec
173、tion with the Internal Revenue Service(“IRS”)for the TRS Lessee to be treated as a TRS.A corporation of which a qualifying TRS owns,directly or indirectly,more than 35%of the voting power or value of the corporations stock will automatically be treated as a TRS.Overall,for taxable years beginning af
174、ter December 31,2017,no more than 20%of the value of our assets may consist of securities of one or more TRS,and no more than 25%of the value of our assets may consist of the securities of TRSs and other assets that are not qualifying assets for purposes of the 75%asset test.The 75%asset test genera
175、lly requires that at least 75%of the value of our total assets be represented by real estate assets,cash,or government securities.9 The rent that we receive from a TRS attributable to leases of“qualified lodging facilities”qualifies as“rents from real property”as long as the property is operated on
176、behalf of the TRS by a person who qualifies as an“independent contractor”and who is,or is related to a person who is,actively engaged in the trade or business of operating“qualified lodging facilities”for any person unrelated to us and the TRS(an“eligible independent contractor”).A“qualified lodging
177、 facility”is a hotel,motel or other establishment in which more than one-half of the dwelling units are used on a transient basis.A“qualified lodging facility”does not include any facility where wagering activities are conducted.A“qualified lodging facility”includes customary amenities and facilitie
178、s operated as part of,or associated with,the lodging facility as long as such amenities and facilities are customary for other properties of a comparable size and class owned by other unrelated owners.We have formed the TRS Lessee as a wholly owned TRS.We lease each of our hotels to the TRS Lessee o
179、r one of its subsidiaries.These leases provide for a base rent plus variable rent based on occupied rooms and departmental gross revenues.These leases must contain economic terms which are similar to a lease between unrelated parties.If they do not,the IRS could impose a 100%excise tax on certain tr
180、ansactions between the TRS Lessee and us or our tenants that are not conducted on an arms-length basis.We believe that all transactions between us and the TRS Lessee are conducted on an arms-length basis.The TRS Lessee has engaged eligible independent contractors to manage the hotels it leases from
181、the Operating Partnership.Ground,Building and Airspace Lease Agreements At December 31,2020,two of the 17 Hotels are subject to ground(the Hilton San Diego Bayfront)and building(the Hyatt Centric Chicago Magnificent Mile)leases with unaffiliated parties that cover all of their respective properties.
182、The JW Marriott New Orleans is subject to an airspace lease that applies only to certain balcony space fronting Canal Street that is not integral to the hotels operations.As of December 31,2020,the remaining terms of these ground,building and airspace leases(including renewal options)range from appr
183、oximately 23 to 77 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
184、,building or airspace lease or any proposed assignment of our leasehold interest as lessee under the ground,building or airspace lease may require the consent of the applicable lessor.As a result,we may not be able to sell,assign,transfer or convey our interest in any such property in the future abs
185、ent the consent of the ground,building or airspace lessor,even if such transaction may be in the best interests of our stockholders.One of the leases prohibits the sale or conveyance of the hotel by us to another party without first offering the lessor the opportunity to acquire our interest in the
186、associated hotel upon the same terms and conditions as offered by us to the third party.The same lease also allows us the option to acquire the building lessors interest in the building lease subject to certain notice and process provisions.From time to time,we evaluate our options to purchase the l
187、essors interests in the leases.Corporate Office We currently lease our headquarters located at 200 Spectrum Center Drive,21st Floor,Irvine,California 92618 from an unaffiliated third party.We occupy our headquarters under a lease that terminates on August 31,2028.Human Capital Resources As of Februa
188、ry 1,2021,we had 40 employees.None of our employees are represented by a labor union or covered by a collective bargaining agreement.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
189、 hotels.In March 2020,we temporarily closed our corporate office due to the COVID-19 pandemic,and our employees began to work remotely.We provided various office supplies and resources to our employees as needed to allow them to perform their work remotely.While our office currently remains closed,o
190、ur employees may,at times,work from the office.We have implemented COVID-19 protection protocols in order to minimize the spread of COVID-19 in our corporate office.All of our employees have received training on these protocols,and are required to sign an acknowledgement of such protocols prior to r
191、eturning to the corporate office.Our employees are vital to the success of our Company.We place a very high emphasis on maintaining positive relations with all of our employees and strive to create an inspiring and inclusive work environment where our employees feel motivated and empowered to produc
192、e exceptional results for the Company.Our capital resource objectives include,as applicable,identifying,10 recruiting,retaining and incentivizing our employees.To attract and retain top talent,we have designed our compensation and benefits programs to provide a balanced and effective reward structur
193、e,including:Subsidized medical,dental and vision insurance;Life and disability insurance;Stock grant program;401(k)savings and retirement plan with Company Safe Harbor contribution;Profit sharing plan;andGym membership.We believe that our compensation and employee benefits are competitive and allow
194、us to attract and retain skilled employees throughout our Company.We frequently benchmark our compensation and benefits package against those in both our industry and in similar disciplines.We are committed to maintaining a work culture that treats all employees fairly and with respect,promotes incl
195、usivity and provides equal opportunities for advancement based on merit.At December 31,2020,females constituted approximately 40%of our workforce,and ethnic and racial minorities constituted approximately 15%of our workforce.We intend to continue using a combination of targeted recruiting,talent dev
196、elopment and internal promotion strategies to expand the diversity of our employee base across all roles and functions.We strive to maintain an inclusive environment free from discrimination of any kind,including sexual or other discriminatory harassment.Our employees have multiple avenues available
197、 through which concerns or inappropriate behavior can be reported,including a confidential hotline.All concerns or reports of inappropriate behavior are promptly investigated with appropriate action taken to address such concerns or behavior.Environmental,Social and Governance Matters(“ESG”)We are c
198、ommitted to ensuring environmental and social initiatives are part of our operating and investment strategies.We continuously seek opportunities to invest in renovations,implement initiatives intended to reduce energy,water and waste impacts,enhance the overall environment and well-being of guests a
199、nd associates at our properties,and improve the local communities in which we conduct business or own hotels.As owners of LTRR,we take a holistic view in investing in our assets,balancing the best interests of our stockholders,the environment,our employees,the hotel associates and the communities in
200、 which we operate.As our board of directors recognizes the importance of an effective sustainability strategy on our operations and returns,the board of directors has assigned the boards Nominating and Corporate Governance Committee with overseeing the strategy,policies and implementation of our ESG
201、 program.As an owner of real estate,we are subject to the risks associated with the physical effects of climate change,which can include more frequent or severe storms,hurricanes,flooding,droughts and fires,any of which could have a material adverse effect on our hotels.While we are not directly inv
202、olved in the operation of our properties or other activities that could produce meaningful levels of greenhouse gas emissions,we do control the capital invested in our hotels and have invested in initiatives aimed at reducing the levels of greenhouse gas emissions at our properties,such as LED light
203、ing retrofits,low-flow plumbing fixture installations and building system upgrades.We are also installing bulk amenity dispensers in our hotels to reduce waste.Additionally,on an annual basis,we publish an environmental and sustainability report to monitor the carbon footprint and emissions at our h
204、otels,and compare our energy,carbon,water and waste performance to the targets we announced in our 2019 Sustainability Report.Environmental Reviews Environmental reviews have been conducted on all of our hotels.From time to time,our secured lenders have requested environmental consultants to conduct
205、 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 financings.Phase I assessments are designed to evaluate the potential for environmental contamination of proper
206、ties based generally upon site inspections,facility personnel interviews,historical information and certain publicly available databases.Phase I assessments will not necessarily reveal the existence or extent of all environmental conditions,liabilities or compliance concerns at the properties.In add
207、ition,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 regulations may impose material additional environmental liabilities.Under various federal,state and local laws an
208、d 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 liability without regard to whether the owner knew of,or was responsible for,the presence of hazardous or toxi
209、c substances.Furthermore,a person that 11 arranges for the disposal or transports for disposal or treatment of a hazardous substance at another property may be liable for the costs of removal or remediation of hazardous substances released into the environment at that property.The costs of remediati
210、on 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 such real estate or to borrow using such real estate as collateral.In connection with the ownership and operati
211、on 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 not cover all or any of the environmental risks we encounter.We have provided customary unsecured indemniti
212、es to certain lenders and buyers of our properties,including in particular,environmental indemnities.We have performed due diligence on the potential environmental risks,including obtaining an independent environmental review from outside environmental consultants.These indemnities obligate us to re
213、imburse the indemnified 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 against other previous owners or a claim against its environmental insurance policies.ADA
214、 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 barriers to access by persons with di
215、sabilities 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 award of damages to private li
216、tigants.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 increasing costs such as labor,food,taxe
217、s,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 reports on Form 10-K,quarterly
218、reports on Form 10-Q and current reports on Form 8-K,are available,free of charge,through links displayed on our website as soon as reasonably practicable after we file such material with,or furnish it to,the SEC.In addition,the SEC maintains a website that contains these reports at www.sec.gov.Our
219、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.Information relating to revenue,operating profit and total assets is set forth in Part II,Item 6 of this Annual Report on Form 10-K.Information about our Executive Officers Th
220、e following table sets forth certain information regarding the executive officers of the Company at January 1,2021.All officers serve at the discretion of the board of directors subject to the terms of their respective employment agreements with the Company.Name Age Position John V.Arabia 51 Directo
221、r,President and Chief Executive Officer Bryan A.Giglia 44 Executive Vice President and Chief Financial Officer Marc A.Hoffman 63 Executive Vice President and Chief Operating Officer Robert C.Springer 43 Executive Vice President and Chief Investment Officer David M.Klein 51 Executive Vice President a
222、nd General Counsel 12 The following is additional information with respect to the above-named officers.John V.Arabia is our President and Chief Executive Officer and a director.In April 2011,Mr.Arabia began serving as our Executive Vice President of Corporate Strategy and Chief Financial Officer.In
223、February 2013,he was promoted to President,in February 2014,he was appointed to serve as a member of our board of directors,and in January 2015 he was promoted to President and Chief Executive Officer.Prior to joining Sunstone,Mr.Arabia served as Managing Director of Green Street Advisors(“Green Str
224、eet”)real estate research team.Mr.Arabia joined Green Street in 1997 and created and managed the firms lodging research platform.Prior to joining Green Street,Mr.Arabia was a Consulting Manager at EY Kenneth Leventhal in the firms west coast lodging consulting practice.Mr.Arabia also served on the b
225、oard of directors of Education Realty Trust,Inc.(NYSE:EDR)until its privatization in September 2018.Mr.Arabia served as chair of the nominating and corporate governance committee and as a member of the investment and oversight committee of the board of directors of EDR.He also serves as a director o
226、f the American Hotel&Lodging Association(AH&LA)and is a member of the Real Estate Finance Advisory Council.Mr.Arabia,who earned a CPA certificate from the state of Illinois,holds an M.B.A.degree in Real Estate/Accounting from the University of Southern California and a B.S.degree in Hotel Administra
227、tion from Cornell University.Bryan A.Giglia is our Executive Vice President and Chief Financial Officer.Mr.Giglia joined the Company in March 2004 as a financial analyst,serving in the capacity of Director of Finance from October 2005 through February 2007.In March 2007,he was appointed Vice Preside
228、nt Corporate Finance,and in March 2010 he was appointed Senior Vice President Corporate Finance,a position he held until February 2013,where he oversaw capital market transactions,corporate financial planning and analysis,and investor relations.In February 2013,Mr.Giglia was appointed Senior Vice Pr
229、esident and Chief Financial Officer,a position he held until February 2016 when he was promoted to Executive Vice President and Chief Financial Officer.Prior to joining Sunstone,Mr.Giglia served in a variety of accounting positions for Hilton Hotels Corporation.Mr.Giglia attended the Marshall School
230、 of Business at the University of Southern California,where he earned an M.B.A.degree.Mr.Giglia earned his B.S.degree in Business Administration from the University of Arizona.Marc A.Hoffman is our Executive Vice President and Chief Operating Officer.Mr.Hoffman joined the Company in June 2006 as Vic
231、e President Asset Management,and was appointed Senior Vice President Asset Management in January 2007,a position he held until February 2010 when he was promoted to Executive Vice President and Chief Operating Officer.Prior to joining Sunstone,Mr.Hoffman served in various positions at Marriott Inter
232、national,Inc.,including General Manager of The Vail Marriott,General Manager of Marriotts Harbor Beach Resort and Spa,Marriott Market Manager for Fort Lauderdale,General Manager of The Ritz-Carlton Palm Beach(where under Mr.Hoffmans leadership,the hotel obtained the Mobil 5 Star Award),and most rece
233、ntly as Vice President and Managing Director of Grande Lakes Orlando,which included the 1,000-room JW Marriott,the 584-room Ritz-Carlton Resort and Spa and The Ritz-Carlton Golf Club.Mr.Hoffman holds an A.O.S.degree from The Culinary Institute of America and a B.A.degree from Florida International U
234、niversity.Robert C.Springer is our Executive Vice President and Chief Investment Officer.Mr.Springer joined the Company in May 2011 as Senior Vice President Acquisitions,and in February 2013,he was appointed Senior Vice President and Chief Investment Officer,a position he held until February 2016 wh
235、en he was promoted to Executive Vice President and Chief Investment Officer.Prior to joining Sunstone,Mr.Springer served as a Vice President in the Merchant Banking Division of Goldman,Sachs&Co.(Goldman)and in the firms principal lodging investing activity,which investments were primarily placed thr
236、ough the Whitehall Street Real Estate series of private equity funds,as well as the Goldman Sachs Real Estate Mezzanine Partners fund.Mr.Springers involvement with these funds included all aspects of hotel equity and debt investing,as well as asset management of numerous lodging portfolios.Mr.Spring
237、er joined Goldman in February 2006.Prior to joining Goldman,Mr.Springer worked in both the feasibility and acquisitions groups at Host Hotels&Resorts from 2004 to 2006 and was integral to the closing of several large lodging deals.Mr.Springer started his career with PricewaterhouseCoopers,LLP in the
238、 Hospitality Consulting Group from 1999 to 2004.Mr.Springer holds a B.S.degree in Hotel Administration from Cornell University.David M.Klein is our Executive Vice President and General Counsel.Mr.Klein joined the Company in July 2016 as Senior Vice President and General Counsel,a position he held un
239、til February 2019 when he was promoted to Executive Vice President and General Counsel.Prior to joining Sunstone,Mr.Klein was a Partner in the Hospitality&Leisure group of Dentons,LLP,one of the worlds largest law firms,where his practice focused solely on the hospitality and leisure industry.Prior
240、to joining Dentons,Mr.Klein held the position of co-founding Principal,Chief Administrative Officer and General Counsel of NYLO Hotels and Advaya Hospitality.At NYLO,Mr.Klein spearheaded the companys joint venture capitalization with Lehman Brothers,as well as multiple debt facilities for all compan
241、y-owned hotel properties.He also led the structuring of the joint venture capitalization of Advaya with Auromatrix,a large private Indian conglomerate based in Chennai,India.Additionally,he oversaw all corporate and legal matters related to both companies ongoing franchise,management,development,fin
242、ancing and corporate affairs.Prior to his roles with NYLO and Advaya,Mr.Klein was a partner in the Hospitality&Leisure group of Squire Sanders(Squire Patton Boggs).Mr.Klein 13 received his J.D.degree from the Sandra Day OConnor College of Law at Arizona State University and his B.A.degree from the U
243、niversity of California at Los Angeles.Item 1A.Risk Factors The statements in this section describe some of the material risks to our business and should be considered carefully in evaluating our business and the other information in this Form 10-K.In addition,these statements constitute our caution
244、ary statements under the Private Securities Litigation Reform Act of 1995,as amended.The following is a summary of the material risks to our business,all of which are described in more detail below:Risks Related to our Business and Industry:general factors common to the lodging industry but beyond o
245、ur control,such as economic and business conditions,including a U.S.recession,trade conflicts and tariffs,changes impacting global travel,regional or global economicslowdowns,any flu or disease-related pandemic that impacts travel or the ability to travel,including COVID-19,theadverse effects of cli
246、mate change,the threat of terrorism,terrorist events,civil unrest,government shutdowns,events thatreduce the capacity or availability of air travel,volatility in the capital markets,increased competition from other hotels inour markets,new hotel supply or alternative lodging options,unexpected chang
247、es in business,commercial and leisuretravel and tourism,increases in operating costs,changes in our relationships with,and the requirements,performance,andreputation of,our management companies and franchisors,and changes in government laws,regulations,fiscal policies,and zoning ordinances and the r
248、elated costs to comply;the impact on the economy and travel from the COVID-19 pandemic;our existing terrorism insurance may not fully cover any losses we incur related to terrorist acts,and in the future,we maynot be able to obtain terrorism insurance in adequate amounts or at acceptable premium lev
249、els;system security risks,data protection breaches,cyber-attacks and systems integration issues could disrupt our internaloperations or services provided to guests at our hotels;a significant portion of our hotels are geographically concentrated and,accordingly,we could be disproportionatelyharmed b
250、y economic downturns or natural disasters in these areas of the country;uninsured or underinsured losses;we own primarily urban,resort and destination upper upscale hotels,and the upper upscale segment of the lodging marketis highly competitive and may be subject to greater volatility than other seg
251、ments of the market;the hotel business is seasonal and seasonal variations in revenue at our hotels can be expected to cause quarterlyfluctuations in our revenue;the operating results of some of our individual hotels are significantly impacted by group contract business and roomnights generated by l
252、arge corporate customers,and the loss of any such customer for any reason could harm our results;the need for business-related travel,and,therefore,demand for rooms in our hotels may be materially and adverselyaffected by the increased use of business-related technology;the growth of alternative hot
253、el reservation channels that increases the supply and competition of traditional and alternativeaccommodations;rising operating expenses or low occupancy rates;the failure of tenants to make rent payments under our retail and restaurant leases;the ground,building or airspace leases with unaffiliated
254、 parties at three of the 17 Hotels;future adverse litigation judgments,including claims by persons relating to our properties,or settlements resulting fromlegal proceedings;certain of our long-lived assets have in the past become impaired and may become impaired in the future;our hotels have an ongo
255、ing need for renovations and potentially significant capital expenditures in connection withacquisitions,repositionings,and other capital improvements,some of which are mandated by applicable laws orregulations or agreements with third parties,and the costs of such renovations,repositionings or impr
256、ovements mayexceed our expectations or cause other problems;we face competition for hotel acquisitions and dispositions,and we may not be successful in completing hotel acquisitionsor dispositions that meet our criteria;delays in the acquisition and renovation or repositioning of hotel properties;ac
257、counting for the acquisition of a hotel property or other entity;the acquisition of a portfolio of hotels or a company presents more risks to our business and financial results than theacquisition of a single hotel;joint venture investments could be adversely affected by our lack of sole decision-ma
258、king authority,our reliance on a co-venturers financial condition,and disputes between us and our co-venturer;14 we may be subject to unknown or contingent liabilities related to recently sold or acquired hotels,as well as hotels we maysell or acquire in the future;the sale of a hotel or portfolio o
259、f hotels is typically subject to contingencies,risks,and uncertainties,any of which maycause us to be unsuccessful in completing the disposition;the illiquidity of real estate investments and the lack of alternative uses of hotel properties could significantly limit ourability to respond to adverse
260、changes in the performance of our hotels;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;if we make or invest in mortgage loans with the intent of gaining ownership of the hotel secured by or pledged to
261、the loan,our ability to perfect an ownership in the hotel is subject to the sponsors willingness to forfeit the property in lieu of thedebt;because we are a REIT,we depend on third-parties to operate our hotels;we are subject to risks associated with the employment of hotel personnel;a substantial n
262、umber of our hotels operate under a brand owned by Marriott,Hilton or Hyatt.Should any of these brandsexperience a negative event,or receive negative publicity,our operating results may be harmed;our franchisors and brand managers may change certain policies or cost allocations that could negatively
263、 impact ourhotels;our franchisors and brand managers may require us to make capital expenditures pursuant to property improvement plansin order to comply with brand standards;termination of any of our franchise,management or operating lease agreements could cause us to lose business or lead to adefa
264、ult or acceleration of our obligations under certain notes payable;we rely on our senior management team,the loss of whom may cause us to incur costs and harm our business;andif we fail to maintain effective internal control over financial controls and procedures,we may not be able to accuratelyrepo
265、rt our financial results.Risks Related to our Debt and Financing:the current amount of our debt may harm our financial flexibility;we are subject to various financial covenants,and should we default,we may be required to pay additional fees,provideadditional security,repay the debt or forfeit the ho
266、tel securing the debt;unsecured debt covenants may restrict our ability to invest in our assets or pay dividends;our financial covenants currently restrict,and may in the future restrict,our operating and acquisition activities;many of our existing mortgage debt agreements contain“cash trap”provisio
267、ns that could limit our ability to use fundsgenerated by our hotels;cash generated by our hotels that secure our existing mortgage debt agreements is distributed to us only after the relateddebt service and certain impound accounts are paid;we may not be able to refinance our debt on favorable terms
268、 or at all;our organizational documents do not limit the amount of debt we can incur;andany replacement of LIBOR as the basis on which our variable-rate debt is calculated may harm our results.Risks Related to our Status as a REIT:our failure to qualify as a REIT for any reason,including if the leas
269、es of our hotels to the TRS Lessee are not respected astrue leases or if they are held not to be on an arms length basis;even as a REIT,we may become subject to federal,state,or local taxes on our income or property,including a penalty taxupon the sale of a hotel or corporate level income tax on cer
270、tain built-in gains;dividends payable by REITS generally do not qualify for the reduced tax rates available for some dividends;the TRS Lessee is subject to special rules that may result in increased taxes;because we are a REIT,we depend on the TRS Lessee and its subsidiaries to make rent payments to
271、 us;states may not recognize the federal dividends paid deduction resulting in state income taxes due;a transaction intended to qualify as a Section 1031 Exchange may later be determined to be taxable;andlegislative or other actions affecting REITS could have a negative effect on us.Risks Related to
272、 our Common Stock and Corporate Culture:the market price of our equity securities may vary substantially;our distributions to stockholders may vary,and distributions on our common stock may be made in the form of cash,stock,or a combination of both;however,the IRS may disallow our use of stock divid
273、ends;shares of our common stock that are or become available for sale could affect the share price;15 our earnings and cash distributions will affect the market price of our common stock;provisions of Maryland law and our organizational documents may limit the ability of a third party to acquire con
274、trol of our Company and may serve to limit our stock price;and our board of directors may change our significant corporate policies with the consent of our stockholders.The following includes a more detailed discussion of our material risk factors:Risks Related to Our Business and Industry A number
275、of factors,many of which are common to the lodging industry and beyond our control,could affect our business,including the following:general economic and business conditions,including a U.S.recession,trade conflicts and tariffs between the U.S.and its trading partners,changes impacting global travel
276、,regional or global economic slowdowns,which may diminish the desire for leisure travel or the need for business travel,as well as any type of flu or disease-related pandemic that impacts travel or the ability to travel,including COVID-19,or the adverse effects of climate change,affecting the lodgin
277、g and travel industry,internationally,nationally,and locally;threat of terrorism,terrorist events,civil unrest,government shutdowns,events that reduce the capacity or availability of air travel or other factors that may affect travel patterns and reduce the number of business and commercial traveler
278、s and tourists;volatility in the capital markets and the effect on lodging demand or our ability to obtain capital on favorable terms or at all;increased competition from other hotels in our markets;new hotel supply,or alternative lodging options such as timeshare,vacation rentals or sharing service
279、s such as Airbnb,in our markets,which could harm our occupancy levels and revenue at our hotels;unexpected changes or government mandated restrictions in business,commercial and leisure travel and tourism;increases in operating costs due to inflation,labor costs,workers compensation,and health-care
280、related costs,utility costs,insurance,and unanticipated costs such as acts of nature and their consequences and other factors that may not be offset by increased room rates;changes in our relationships with,and the requirements,performance,and reputation of,our management companies and franchisors;a
281、nd changes in governmental laws and regulations,fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations,fiscal policies and zoning ordinances.These factors,many of which are discussed in more detail below,could harm our financial condition,results of opera
282、tions and ability to make distributions to our stockholders.COVID-19 has had,and is expected to continue to have,a significant impact on our financial condition and results of operations.The current,and uncertain future,impact of the COVID-19 pandemic,including its effect on the ability or desire of
283、 people to travel for leisure or for business,is expected to continue to impact our financial condition,results of operations,cash flows,liquidity,business plans,distributions to our common and preferred stockholders and their respective stock prices.The COVID-19 pandemic,along with federal,state an
284、d local government mandates have disrupted and are expected to continue to disrupt our business.In the United States,individuals are being encouraged to practice social distancing,are restricted from gathering in groups,and in some areas,either have been or are subject to mandatory shelter-in-place
285、orders,all of which have restricted or prohibited social gatherings,travel and non-essential activities outside of their homes.In response to the COVID-19 pandemic,during the first half of 2020,we temporarily suspended operations at 14 of the 17 Hotels.As of December 31,2020,we have resumed operatio
286、ns at 12 hotels,leaving two of the 17 Hotels with operations currently suspended.All operating hotels are currently running at limited capacity with significantly reduced staffing,limited food and beverage operations and materially reduced amenity offerings.We may determine in the future that it is
287、in the best interest of our Company,guests,and employees to temporarily suspend operations at some or all of our open hotels.With hotel operations temporarily suspended or reduced,we may be required to use a substantial portion of our available cash to pay hotel payroll expenses,maintenance expenses
288、,fixed hotel costs such as ground rent,insurance expenses,property taxes and scheduled debt payments.Use of the Companys cash will reduce the amount of cash available for hotel capital expenditures,future business opportunities and other purposes,including distributions to our common and preferred s
289、tockholders.We have suspended paying dividends on our common stock in order to conserve cash.We cannot predict how long the COVID-19 pandemic will last or what the long-term impact will be on hotel operations and our cash position.16 We incurred$29.1 million of additional expenses as a result of the
290、 COVID-19 pandemic during 2020 related to wages and benefits for furloughed or laid off hotel employees,net of$5.2 million in employee retention tax credits and various industry grants received by our hotels.In addition to direct employee expenses related to COVID-19,we continue to use cash on hand
291、to support the operations of our hotels,debt service and corporate expenses.We may be subject to increased risks related to employee matters,including increased employment litigation and claims for severance or other benefits tied to termination or furloughs as a result of temporary hotel suspension
292、s or reduced hotel operations due to COVID-19.We are unable to predict when any of our hotels with temporarily suspended operations will resume operations,or if additional operational hotels will need to suspend operations.Moreover,once travel advisories and restrictions,which may be continued or re
293、instituted due to the continued outbreak or a resurgent outbreak of COVID-19(such as has occurred in many states in the U.S.in July 2020 and in the fall and winter of 2020),are lifted,travel demand may remain weak for a significant length of time as individuals may fear traveling,and we are unable t
294、o predict if and when occupancy and the average daily rate at each of the 17 Hotels will return to pre-pandemic levels.Additionally,our hotels may be negatively impacted by adverse changes in the economy,including higher unemployment rates,declines in income levels,loss of personal wealth and possib
295、ly a national and/or global recession resulting from the impact of COVID-19.Declines in demand trends,occupancy and the average daily rate at our hotels may indicate that one or more of our hotels is impaired,which would adversely affect our financial condition and results of operations.To preserve
296、additional liquidity,during 2020,we temporarily suspended both our stock repurchase program and our common stock quarterly dividend,and deferred a portion of our portfolios planned 2020 non-essential capital improvements.We expect to continue our cash preservation programs throughout 2021.We believe
297、 that the steps we have taken to increase our cash position and preserve our financial flexibility,combined with the amendments to our unsecured debt,our waiver to further extend our unsecured debts covenant relief period,our already strong balance sheet,and our low leverage,will be sufficient to al
298、low us to navigate through this crisis.Given the unprecedented impact of COVID-19 on the global market and our hotel operations,we cannot,however,assure you that our forecast or the assumptions we used to estimate our liquidity requirements will be correct.In addition,the magnitude and duration of t
299、he COVID-19 pandemic is uncertain.We cannot accurately estimate the impact on our business,financial condition,or operational results with reasonable certainty;however,we reported a significant net loss on our operations for the year ending December 31,2020,and it is possible that we may report a ne
300、t loss on our operations for the year ending December 31,2021.The market price of our common stock has been and may continue to be negatively affected by the impact of the COVID-19 pandemic on our hotel operations and future earnings.The extent of the effects of the pandemic on our business and the
301、hotel industry at large,however,will ultimately depend on future developments,including,but not limited to,the duration and severity of the pandemic,how quickly and successfully effective vaccines and therapies are distributed and administered,as well as the length of time it takes for demand and pr
302、icing to return and normal economic and operating conditions to resume.To the extent COVID-19 adversely affects our business,operations,financial condition and operating results,it may also have the effect of heightening many of the other risks described herein.In the past,events beyond our control,
303、including economic slowdowns,global pandemics,natural disasters,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 av
304、erage daily room rates and/or occupancy.The operating and financial performance of 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 b
305、e more susceptible to a decrease in revenue,as compared to hotels in other categories that have lower room rates in part because upper upscale hotels generally target business and high-end leisure travelers.In periods of economic difficulties,including those caused by global pandemics,business and l
306、eisure travelers may reduce travel costs by limiting travel or by using lower cost accommodations.In addition,operating results 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 mate
307、rial strengthening of the U.S.dollar in relation to other currencies.Also,volatility in transportation fuel costs,increases in air and ground travel costs,and decreases in airline capacity may reduce the demand for our hotel rooms.In addition,we own four hotels located in seismically active areas of
308、 California and five hotels located in areas that have an increased potential to experience hurricanes(Florida,Hawaii,and Louisiana).We have acquired and intend to maintain comprehensive insurance on each of our hotels,including liability,terrorism,fire,and extended coverage,of the type and amount t
309、hat we believe are customarily obtained for or by hotel owners.We cannot guarantee that such coverage will continue to be available at reasonable coverage levels,at reasonable rates or at reasonable deductible levels.Additionally,deductible levels are typically higher for earthquakes,floods and name
310、d windstorms.Accordingly,our financial results may be harmed if any of our hotels are damaged by natural disasters resulting in losses(either insured or uninsured)or causing a decrease in average daily room rates and/or occupancy.Even in the absence of direct physical damage to our hotels,the occurr
311、ence of any natural disasters,terrorist attacks,military actions,outbreaks of diseases,or other casualty events,may have a material adverse 17 effect on our business,the impact of which could result in a material adverse effect on our financial condition,results of operations and our ability to make
312、 distributions to our stockholders.Terrorist attacks and military conflicts may adversely affect the hospitality industry.The terrorist attacks on September 11,2001 and subsequent events underscore the possibility that large public facilities or economically important assets could become the target
313、of terrorist attacks in the future.In particular,properties that are well-known or are located in concentrated business sectors in major cities may be subject to higher-than-normal risk of terrorist attacks.The occurrence or the possibility of terrorist attacks or military conflicts could:cause dama
314、ge to one or more of our properties that may not be fully covered by insurance to the value of the damages;cause all or portions of affected properties to be shut down for prolonged periods,resulting in a loss of income;generally reduce travel to affected areas for tourism and business or adversely
315、affect the willingness of customers to stay inor avail themselves of the services of the affected properties;expose us to a risk of monetary claims arising out of death,injury or damage to property caused by any such attacks;andresult in higher costs for security and insurance premiums or diminish t
316、he availability of insurance coverage for lossesrelated to terrorist attacks,particularly for properties in target areas,all of which could adversely affect our results.We may not be able to recover fully under our existing terrorism insurance for losses caused by some types of terrorist acts,and fe
317、deral terrorism legislation does not ensure that we will be able to obtain terrorism insurance in adequate amounts or at acceptable premium levels in the future.We obtain terrorism insurance as part of our all-risk property insurance program.However,our all-risk policies have limitations such as per
318、 occurrence limits and sublimits that might have to be shared proportionally across participating hotels under certain loss scenarios.Also,all-risk insurers only have to provide terrorism coverage to the extent mandated by the Terrorism Risk Insurance Act(the“TRIA”)for“certified”acts of terrorism na
319、mely those which are committed on behalf of non-United States persons or interests.Furthermore,we may not have full replacement coverage for all of our properties for acts of terrorism committed on behalf of United States persons or interests(“noncertified”events),as well as for“certified”events,as
320、our terrorism coverage for such incidents is subject to sublimits and/or annual aggregate limits.In addition,property damage related to war and to nuclear,biological,and chemical incidents is excluded under our policies.To the extent we have property damage directly related to fire following a nucle
321、ar,biological,or chemical incident,however,our coverage may extend to reimburse us for our losses.While the TRIA provides for the reimbursement of insurers for losses resulting from nuclear,biological,and chemical perils,the TRIA does not require insurers to offer coverage for these perils and,to da
322、te,insurers are not willing to provide this coverage,even with government reinsurance.As a result of the above,there remains considerable uncertainty regarding the extent and adequacy of terrorism coverage that will be available to protect our interests in the event of future terrorist attacks that
323、impact our properties.System security risks,data protection breaches,cyber-attacks and systems integration issues could disrupt our internal operations or services provided to guests at our hotels,and any such disruption could reduce our expected revenue,increase our expenses,compromise confidential
324、 information,damage our reputation,and adversely affect our stock price.We and our third-party managers and franchisors rely on information technology networks and systems,including the internet,to access,process,transmit and store electronic and customer information.The systems operated by our thir
325、d-party managers and franchisors require the collection and retention of large volumes of our hotel guests personally identifiable information,including credit card numbers.In addition to the systems operated by our third-party managers and franchisors,we have our own corporate technologies and syst
326、ems to support our corporate business.Experienced computer programmers and hackers may be able to penetrate our network security 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
327、 disruptions or cause the shutdown of our hotels.Computer programmers and hackers also may be able to develop and deploy viruses,worms,ransomware and other malicious software programs that attack our computer systems or the computer systems operated by our third-party managers and franchisors,or oth
328、erwise exploit any security vulnerabilities of our respective networks.In addition,sophisticated hardware and operating system software 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”
329、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,ransomware,malicious software programs and security vulnerabilities could be significant,and
330、 our efforts to address these problems may not be successful and could result in interruptions,delays,cessation of service and loss of existing or potential business at our hotels.Any compromise of our third-party managers and franchisor information networks function,security and availability could
331、result in disruptions to operations,delayed sales or bookings,lost guest reservations,increased costs,and lower margins.Any of these events could adversely 18 affect our financial results,stock price and reputation,lead to unauthorized disclosure of confidential information,result in misstated finan
332、cial reports and subject us to potential litigation and liability.Portions of our information technology infrastructure or the information technology infrastructure of our third-party managers and franchisors also may experience interruptions,delays or cessations of service or produce errors in conn
333、ection with systems integration or migration work that takes place from time to time.We or our third-party managers and franchisors may not be successful in implementing new systems and transitioning data,which could cause business disruptions and be more expensive,time consuming,disruptive,and resource-intensive.Such disruptions could adversely impact the ability of our third-party managers and f
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