Sunstone Hotel Investors (SHO) risk factors, FY2025 10-K

Sunstone Hotel Investors's FY2025 10-K, filed Feb 27, 2026, lists 62 risk factors in 4 groups. Against the prior year's 63: 7 new, 8 dropped, 16 substantially reworded.

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Risk factors listed
624 groups
New this year
7vs 63 last year
Dropped
8since the prior 10-K
Substantially reworded
16of those kept
Section length
18k wordsItem 1A

What the changes say

  • Increased focus on cybersecurity threats facing third-party hotel managers and cloud reservation systems.
  • Expanded disclosures on stock dividend IRS rules and activist stockholder proposals.
  • Updated inflation metrics reflecting stabilization through 2025.

What changed since the prior 10-K

New

  • NewRisks Related to Our Business and Industry

    facilities, including, for example, in a third-party hosted cloud environment. In addition to the systems operated by our third-party managers and franchisors, we have our own technologies and systems to support our corporate business

    Third-party managers and franchisors have experienced cyber-attacks and unauthorized access affecting guest reservation and point-of-sale systems.

  • NewRisks Related to Our Business and Industry

    As of December 31, 2025, we have no known instances of material cybersecurity incidents, including third-party incidents, during any of the prior three fiscal years

    IT infrastructure or software integration issues by third parties could disrupt hotel operations, guest safety, and financial reporting.

  • NewRisks Related to Our Business and Industry

    revenue from the hotel. In that event, we might nevertheless remain obligated for any notes payable or other financial obligations related to the property, in addition to obligations to our ground lessor, third-party managers and franchisors

    Hotels located in disaster-prone states face catastrophic weather risks where insurance proceeds may fail to cover full replacement costs.

  • NewRisks Related to Our Business and Industry

    of its management agreement, we may have to pay termination fees to the applicable management company, which payment could be substantial

    Unprofitable hotels may be difficult to convert or sell due to capital requirements, defects, or contractual lock-out provisions.

  • NewRisks Related to Our Business and Industry

    We may originate loans secured by a hotel in connection with its disposition, which would expose us to risk of non-repayment or may cause us to incur significant costs to exercise our remedies under such loan if the borrower were to default on their obligations

    Originating loans for hotel buyers creates non-repayment risks, and ground lease defaults could cause the loss of properties like the Hilton San Diego Bayfront.

  • NewRisks Related to Our Common Stock and Corporate Structure

    Distributions to our common 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 dividends to satisfy our distribution requirements

    Future common stock dividends may be paid in cash or stock, but the IRS might disallow stock dividends to meet REIT distribution requirements.

  • NewRisks Related to Our Common Stock and Corporate Structure

    We may be subject to actions or proposals from stockholders that do not align with our business strategies

    Stockholder proposals or activist actions not aligned with business strategies could divert management attention and increase stock volatility.

Dropped

  • DroppedRisks Related to Our Business and Industry

    Events beyond our control, including economic slowdowns or recessions, pandemics, natural disasters, civil unrest and terrorism may harm the operating performance of the hotel industry generally and the performance of our hotels

  • DroppedRisks Related to Our Business and Industry

    substantial capital expenditures and may give rise to substantial payments to our franchisors, management companies and other parties

    Pandemics, economic slowdowns, civil unrest, and terrorism harming luxury lodging demand.

  • DroppedRisks Related to Our Business and Industry

    We may issue or invest in hotel loans, including subordinated or mezzanine loans, which could involve greater risks of loss than senior loans secured by income-producing real properties

  • DroppedRisks Related to Our Business and Industry

    If we make or invest in mortgage loans with the intent of gaining ownership of the hotel secured by or pledged to the loan, our ability to perfect an ownership interest in the hotel is subject to the sponsor’s willingness to forfeit the property in lieu of the debt

  • DroppedRisks Related to Our Business and Industry

    One of our hotels is subject to a ground lease with an unaffiliated party, the termination of which by the lessor for any reason, including due to our default on the lease, could cause us to lose the ability to operate the hotel altogether and may adversely affect our results of operations

  • DroppedRisks Related to Our Common Stock and Corporate Structure

    Distributions to our common stockholders may vary

  • DroppedRisks Related to Our Common Stock and Corporate Structure

    Distributions on our common stock may be made in the form of cash, stock, or a combination of both

  • DroppedRisks Related to Our Common Stock and Corporate Structure

    The IRS may disallow our use of stock dividends to satisfy our distribution requirements

Reworded

  • 85% rewrittenRisks Related to Our Business and Industry

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

    Truncated the closing sentence regarding remaining obligations to ground lessors, franchisors, and managers after an uninsured loss.

  • 75% rewrittenRisks Related to Our Business and Industry

    Inflation may adversely affect our financial condition and results of operations

    Updated inflation commentary to note that high rates moderated in 2023 and remained relatively stable through 2025.

  • 58% rewrittenRisks Related to Our Business and Industry

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

    Added commas and minor punctuation adjustments in the description of brand affiliations and alternative lodging competitors like Airbnb.

    Was: We own upper upscale and luxury hotels located in urban and resort destinations in an industry that is highly competitive

  • 48% rewrittenRisks Related to Our Business and Industry

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

    Updated the property portfolio date to December 31, 2025, and reordered the list of hotel operators including Four Seasons, Hilton, Hyatt, Marriott, and Montage.

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

  • 44% rewrittenRisks Related to Our Business and Industry

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

    Removed historical COVID-19 pandemic references and added new text regarding capital expenditure cost increases from international tariffs and supply chain delays.

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

  • 41% rewrittenRisks Related to Our Business and Industry

    We could be harmed by inadvertent errors, misconduct or fraud that is difficult to detect

    Expanded cyber threat warnings to note that social engineering and fraud schemes may leverage AI and machine learning to become harder to detect.

  • 41% rewrittenRisks Related to Our Business and Industry

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

    Changed references from franchise, management, or operating lease agreements to management, franchise, or operating lease agreements.

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

  • 40% rewrittenRisks Related to Our Business and Industry

    Compliance with corporate responsibility initiatives and commitments, may impose additional costs and expose us to new risks that could adversely affect our results of operations, financial condition, and cash flows

    Replaced references of ESG initiatives with corporate responsibility initiatives throughout the risk factor.

    Was: Corporate responsibility, specifically related to ESG factors and commitments, may impose additional costs and expose us to new risks that could adversely affect our results of operations, financial condition and cash flows

  • 38% rewrittenRisks Related to Our Business and Industry

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

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

  • 35% rewrittenRisks Related to Our Business and Industry

    The illiquidity of real estate investments and the lack of alternative uses of hotel properties could significantly limit our ability to respond to adverse changes in the performance of our hotels and harm our financial condition

  • 33% rewrittenRisks Related to Our Status as a REIT

    Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends

  • 29% rewrittenRisks Related to Our Business and Industry

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

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

  • 28% rewrittenRisks Related to Our Status as a REIT

    Legislative or other actions affecting REITs could have a negative effect on us

  • 25% rewrittenRisks Related to Our Common Stock and Corporate Structure

    Shares of our common stock that are or become available for sale could affect the stock price

  • 21% rewrittenRisks Related to Our Business and Industry

    Because we are a REIT, we depend on third parties to operate our hotels, which could harm our results of operations

  • 20% rewrittenRisks Related to Our Debt and Financing

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

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

All 62 risk factors

Headings as the filing states them, in filing order.

Risks Related to Our Business and Industry

  1. 01We own upper upscale and luxury hotels located in convention, urban, and resort destinations in an industry that is highly competitive58% rewritten
  2. 02Inflation may adversely affect our financial condition and results of operations75% rewritten
  3. 03facilities, including, for example, in a third-party hosted cloud environment. In addition to the systems operated by our third-party managers and franchisors, we have our own technologies and systems to support our corporate businessNew
  4. 04As of December 31, 2025, we have no known instances of material cybersecurity incidents, including third-party incidents, during any of the prior three fiscal yearsNew
  5. 05A significant portion of our hotels are geographically concentrated and, accordingly, we could be disproportionately harmed by economic conditions, competition, new hotel supply, real and personal property tax rates, civil unrest, or natural disasters in these areas of the country
  6. 06We face possible risks associated with the physical and transitional effects of climate change
  7. 07Uninsured or underinsured losses could harm our financial condition, results of operations, and ability to make distributions to our stockholders85% rewritten
  8. 08revenue from the hotel. In that event, we might nevertheless remain obligated for any notes payable or other financial obligations related to the property, in addition to obligations to our ground lessor, third-party managers and franchisorsNew
  9. 09The operating results of some of our hotels are significantly reliant upon group and transient business generated by large corporate customers, and the loss of such customers for any reason could harm our operating results
  10. 10The increased use of virtual meetings and similar technologies could lessen the need for business-related travel and, therefore, demand for rooms in our hotels may be adversely affected44% rewritten
  11. 11Delays in the renovation or repositioning of hotel properties may have adverse effects on our results of operations and returns to our stockholders29% rewritten
  12. 12Accounting for the acquisition of a hotel property or other entity involves assumptions and estimations to determine fair value that could differ materially from the actual results achieved in future periods
  13. 13Volatility in the debt and equity markets may adversely affect our ability to acquire, renovate, refinance or sell our hotels
  14. 14We may pursue joint venture investments that could be adversely affected by our lack of sole decision-making authority, our reliance on a co-venturer’s financial condition and disputes between us and our co-venturer
  15. 15We may be subject to unknown or contingent liabilities related to recently sold or acquired hotels, as well as hotels we may sell or acquire in the future
  16. 16We may seek to acquire a portfolio of hotels or a company, which could present more risks to our business and financial results than the acquisition of a single hotel
  17. 17The sale of a hotel or portfolio of hotels is typically subject to contingencies, risks and uncertainties, any of which may cause us to be unsuccessful in completing the disposition
  18. 18The illiquidity of real estate investments and the lack of alternative uses of hotel properties could significantly limit our ability to respond to adverse changes in the performance of our hotels and harm our financial condition35% rewritten
  19. 19of its management agreement, we may have to pay termination fees to the applicable management company, which payment could be substantialNew
  20. 20We may originate loans secured by a hotel in connection with its disposition, which would expose us to risk of non-repayment or may cause us to incur significant costs to exercise our remedies under such loan if the borrower were to default on their obligationsNew
  21. 21Any pledge of our interest in the ground lease requires the consent of the lessor. As a result, in the future, we may not be able to sell, assign, transfer or convey our lessee’s interest in the hotel absent the lessor’s consent even if the transaction may be in the best interest of our stockholders
  22. 22Because we are a REIT, we depend on third parties to operate our hotels, which could harm our results of operations21% rewritten
  23. 23If a management company violates the terms of its applicable management agreement or fails to meet performance objectives set forth in the applicable management agreement, we can seek redress but our remedies may be limited by the terms of the management agreement
  24. 24We are subject to risks associated with our operators’ employment of hotel personnel, which could increase our expenses or expose us to additional liabilities38% rewritten
  25. 25Most of our hotels operate under a brand owned by Four Seasons, Hilton, Hyatt, Marriott, or Montage. Should any of these brands experience a negative event, or receive negative publicity, our operating results may be harmed
  26. 26Our brand managers and franchisors may adopt new policies or change existing policies, which could result in increased costs that could negatively impact our hotels41% rewritten
  27. 27Future adverse litigation judgments or settlements resulting from legal proceedings could have an adverse effect on our financial condition
  28. 28Claims by persons regarding our properties could affect the attractiveness of our hotels or cause us to incur additional expenses
  29. 29The hotel business is seasonal and seasonal variations in business volume at our hotels will cause quarterly fluctuations in our revenue and operating results
  30. 30Changes in the debt and equity markets may adversely affect the value of our hotels
  31. 31Certain of our hotels have in the past become impaired and additional hotels may become impaired in the future
  32. 32Laws and governmental regulations may restrict the ways in which we use our hotel properties and increase the cost of compliance with such regulations. Noncompliance with such regulations could subject us to penalties, loss of value of our properties or civil damages
  33. 33Compliance with corporate responsibility initiatives and commitments, may impose additional costs and expose us to new risks that could adversely affect our results of operations, financial condition, and cash flows40% rewritten
  34. 34Because all but one of our hotels are brand managed or operated under a franchise agreement, termination of these management, franchise, or operating lease agreements could cause us to lose business at our hotels48% rewritten
  35. 35The growth of alternative reservation channels could adversely affect our business and profitability
  36. 36The failure of tenants in our hotels to make rent payments or comply with the material terms of our retail and restaurant leases may adversely affect our results of operations
  37. 37We rely on our corporate and hotel senior management teams, the loss of whom may cause us to incur costs and harm our business
  38. 38We could be harmed by inadvertent errors, misconduct or fraud that is difficult to detect41% rewritten
  39. 39If we fail to maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results or identify and prevent fraud

Risks Related to Our Debt and Financing

  1. 40As of December 31, 2025, we had $930.0 million of outstanding debt, and carrying such debt may restrict our financial flexibility or harm our business and financial results by imposing requirements on our business20% rewritten
  2. 41Certain of our loans are subject to variable interest rates, which creates uncertainty in the amount of interest expense we will incur in the future and may negatively impact our operating results
  3. 42We need to refinance our indebtedness from time to time, and our inability to refinance on favorable terms, or at all, could impact our financial condition
  4. 43Our organizational documents contain no limitations on the amount of debt we can incur, so we may become too highly leveraged

Risks Related to Our Status as a REIT

  1. 44If we fail to qualify as a REIT, our distributions will not be deductible by us and our income will be subject to federal and state taxation
  2. 45Even as a REIT, we may become subject to federal, state, or local taxes on our income or property
  3. 46Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends33% rewritten
  4. 47If the leases between our hotels and the TRS Lessee are not respected as true leases for federal income tax purposes, we would fail to qualify as a REIT
  5. 48We may be subject to taxes in the event our operating leases are not held to be on an arm’s-length basis
  6. 49The TRS Lessee is subject to special rules that may result in increased taxes
  7. 50Because we are a REIT, we depend on the TRS Lessee and its subsidiaries to make rent payments to us, and their inability to do so could harm our revenue and our ability to make distributions to our stockholders
  8. 51We may be required to pay a penalty tax upon the sale of a hotel
  9. 52We may be subject to corporate income tax on certain built-in gains
  10. 53If a transaction intended to qualify as a Section 1031 Exchange is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax deferred basis
  11. 54Legislative or other actions affecting REITs could have a negative effect on us28% rewritten

Risks Related to Our Common Stock and Corporate Structure

  1. 55The market price of our equity securities may vary substantially
  2. 56Distributions to our common 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 dividends to satisfy our distribution requirementsNew
  3. 57Shares of our common stock that are or become available for sale could affect the stock price25% rewritten
  4. 58Our earnings and cash distributions may affect the market price of our common stock
  5. 59Our stock repurchase program may not enhance long-term stockholder value, could cause volatility in the price of our common and preferred stock and could diminish our cash reserves
  6. 60Provisions of Maryland law and our organizational documents may limit the ability of a third party to acquire control of the Company and may serve to limit our stock price
  7. 61Our board of directors may change our significant corporate policies without the consent of our stockholders
  8. 62We may be subject to actions or proposals from stockholders that do not align with our business strategiesNew

Other Sunstone Hotel Investors 10-Ks

  • FY2024 10-K risk factors
    63 risks

    Sunstone Hotel Investors faces significant geographic concentration risk in California, Florida, Hawaii, and Washington DC. As a REIT, the company relies entirely on third-party operators like Marriott, Hyatt, and Hilton. Total outstanding debt stands at $845.0 million maturing over the next four years.

    Filed Feb 21, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.