Sunstone Hotel Investors, Inc.
For the period ended Dec 31, 2025. Filed Feb 27, 2026.
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FY2025 · Filed Feb 27, 2026
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Item 8. Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Sunstone Hotel Investors, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Sunstone Hotel Investors, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations**,** equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 27, 2026, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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| | | Impairment of hotel properties |
| Description of the Matter | | The Company’s investment in hotel properties totaled $2.8 billion as of December 31, 2025. As more fully described in Note 2 to the consolidated financial statements, the Company records impairment losses for investments in hotel properties to be held and used by the Company whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Recoverability is measured by comparing the carrying amount of the asset to the related total future undiscounted net cash flows. If an asset is determined to be impaired, the Company performs an assessment to estimate the fair value of the hotel. For the year ended December 31, 2025, no hotels were impaired. Auditing management’s impairment assessment of investment in hotel properties was challenging because determining whether events or changes in circumstances indicate that the investment may be impaired and whether the investment is recoverable is judgmental due to the subjectivity in evaluating management’s identification of indicators of impairment, and assumptions used in determining whether investment in hotel properties is recoverable. In particular, judgment is required in evaluating the factors used to identify indicators of impairment, including, but not limited to, significant changes to the hotel disposition strategy and hold period and other market and economic conditions. The recoverability assessment includes subjective assumptions such as the probability assigned to each future cash flow scenario and the estimated holding period. Changes in these factors and |
| assumptions could have a significant effect on management’s determination of whether there is an indicator of impairment and whether the carrying value of the hotel is recoverable as of December 31, 2025. | ||
| How We Addressed the Matter in Our Audit | | We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls related to the impairment assessment of investment in hotel properties, including controls over management’s identification of indicators of impairment. Our audit procedures to test management’s impairment assessment included, among others, assessing the factors and assumptions described above and the underlying data used to develop such assumptions. We obtained evidence to corroborate management’s judgments and searched for contrary evidence such as significant declines in operating results, market and economic conditions, disposition strategies, or market effects. To test management’s recoverability assessment, we performed audit procedures that included, among others, comparing the factors considered and assumptions to current industry, market and economic trends using external sources. We evaluated whether the evidence obtained was contrary to the factors and assumptions in management’s assessment. We obtained and evaluated evidence of property specific business changes, including a change in disposition strategy. We also tested the probabilities assigned to the cash flows and performed analyses on these assumptions. As part of our evaluation of indicators of impairment and recoverability assessment, we considered management’s hotel disposition strategies and hold period and probabilities assigned. We assessed the appropriateness of management’s hold periods and disposition strategies through inquiries of management, inspection of board materials and other documentation of management’s plans to use the properties. |
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/s/Ernst & Young LLP
We have served as the Company’s auditor since 2004.
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| Irvine, California | |
| February 27, 2026 | |
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