Sunstone Hotel Investors, Inc.

Previous wording

We own hotels in convention, urban, and resort destinations that benefit from significant barriers to entry by competitors and diverse economic drivers. As of September 30, 2025, we owned 14 hotels (the “14 Hotels”), which average 500 rooms in size. All of our hotels are operated under nationally recognized brands, except the Oceans Edge Resort & Marina, which operates independently.

Current wording

We own hotels in convention, urban, and resort destinations that benefit from significant barriers to entry by competitors and diverse economic drivers. As of March 31, 2026, we owned 14 hotels, which average 500 rooms in size. All of our hotels are operated under nationally recognized brands, except the Oceans Edge Resort & Marina, which operates independently.

Previous wording

Room revenue. Room revenue increased $0.8 million, or 0.6%, in the third quarter of 2025 as compared to the third quarter of 2024 as follows:

Current wording

Room revenue. Room revenue increased $16.1 million, or 11.1%, in the first quarter of 2026 as compared to the first quarter of 2025 as follows:

Previous wording

Food and beverage revenue*.* Food and beverage revenue increased $0.6 million, or 0.9%, in the third quarter of 2025 as compared to the third quarter of 2024, as follows:

Current wording

Food and beverage revenue*.* Food and beverage revenue increased $7.2 million, or 10.7%, in the first quarter of 2026 as compared to the first quarter of 2025, as follows:

Previous wording

Other operating revenue. Other operating revenue increased $1.6 million, or 6.8%, in the third quarter of 2025 as compared to the third quarter of 2024 as follows:

Current wording

Other operating revenue. Other operating revenue increased $2.4 million, or 10.7%, in the first quarter of 2026 as compared to the first quarter of 2025 as follows:

Previous wording

Hotel operating expenses*.*Hotel operating expenses, which are comprised of room, food and beverage, advertising and promotion, repairs and maintenance, utilities, franchise costs, property tax, ground lease and insurance, and other hotel operating expenses increased $5.6 million, or 3.9%, in the third quarter of 2025 as compared to the third quarter of 2024 as follows:

Current wording

Hotel operating expenses*.*Hotel operating expenses, which are comprised of room, food and beverage, advertising and promotion, repairs and maintenance, utilities, franchise costs, property tax, ground lease and insurance, and other hotel operating expenses increased $10.8 million, or 7.4%, in the first quarter of 2026 as compared to the first quarter of 2025 as follows:

Previous wording

Other property-level expenses*.*Other property-level expenses increased $0.2 million, or 0.8%, in the third quarter of 2025 as compared to the third quarter of 2024 as follows:

Current wording

Other property-level expenses*.*Other property-level expenses increased $3.0 million, or 10.2%, in the first quarter of 2026 as compared to the first quarter of 2025 as follows:

Previous wording

For the first nine months of 2025, corporate overhead increased $1.0 million, or 4.1%, as compared to the first nine months of 2024, primarily due to increased payroll and related expenses and deferred stock amortization expense in the first quarter of 2025 in connection with the restructuring of our executive team. The increase in corporate overhead expense was also due to increased professional fees, due diligence fees, board of director expenses, entity-level state franchise and minimum taxes, and employee recruitment expenses. These increased expenses were partially offset by decreased deferred stock amortization expense.

Current wording

Corporate overhead expense*.*Corporate overhead expense decreased $2.1 million, or 23.2%, in the first quarter of 2026 as compared to the first quarter of 2025, due to decreased payroll and related expenses and deferred stock amortization expense due to the restructuring of our executive team in the first quarter of 2025, and decreased entity-level state franchise and minimum taxes.

Previous wording

Depreciation and amortization expense*.*Depreciation and amortization expense increased $2.2 million, or 7.1%, in the third quarter of 2025 as compared to the third quarter of 2024 as follows:

Current wording

Depreciation and amortization expense*.*Depreciation and amortization expense increased $1.9 million, or 5.9%, in the first quarter of 2026 as compared to the first quarter of 2025 as follows:

Previous wording

Interest and other income*.*Interest and other income totaled $3.2 million and $2.4 million in the third quarters of 2025 and 2024, respectively, and $7.0 million and $11.3 million in the first nine months of 2025 and 2024, respectively.

Current wording

Interest and other income*.*Interest and other income totaled $1.5 million and $1.6 million in the first quarters of 2026 and 2025, respectively.

Previous wording

During the third quarters of 2025 and 2024, we recognized interest income of $1.4 million and $2.3 million, respectively. Interest income decreased in the third quarter of 2025 as compared to the third quarter of 2024 due to decreased interest rates. In addition, during the third quarter of 2025, we recognized a $1.0 million settlement for certain property-related claims at Oceans Edge Resort & Marina and $0.7 million in net property insurance recoveries related to 2025 water damage at The Westin Washington, DC Downtown. During both of the third quarters of 2025 and 2024, we also recognized other miscellaneous income of $0.1 million.

Current wording

During the first quarters of 2026 and 2025, we recognized interest income of $1.3 million and $1.4 million, respectively. Interest income decreased in the first quarter of 2026 as compared to the first quarter of 2025 due to decreased interest rates. In addition, during the first quarters of both 2026 and 2025, we recognized property insurance recoveries of $0.1 million and other miscellaneous income of $0.1 million.

Previous wording

The decreases in interest expense during the third quarter and first nine months of 2025 as compared to the same periods in 2024 were primarily due to noncash changes of $3.8 million and $0.4 million, respectively, in the fair market value of our derivatives. In addition, interest expense decreased in the first nine months of 2025 as compared to the same period in 2024 due to a $0.8 million increase in capitalized interest related to the extensive renovation work at The Confidante Miami Beach as it transitioned to Andaz Miami Beach.

Current wording

The decrease in interest expense during the first quarter of 2026 as compared to the same period in 2025 was primarily due to a noncash change of $3.1 million in the fair market value of our derivatives. This decrease in interest expense was partially offset by a $1.0 million reduction in capitalized interest, which was related to the extensive renovation work at Andaz Miami Beach in 2025, as there was no corresponding capitalization of interest in the first quarter of 2026.

Previous wording

Our weighted average interest rate per annum, including our variable rate debt obligations and excluding capitalized interest, was approximately 5.2% and 5.7% at September 30, 2025 and 2024, respectively. Approximately 70.4% and 51.1% of our outstanding debt had fixed interest rates or had been swapped to fixed interest rates at September 30, 2025 and 2024, respectively.

Current wording

Our weighted average interest rate per annum, including our variable rate debt obligations and excluding capitalized interest, was approximately 5.0% and 5.5% at March 31, 2026 and 2025, respectively. Approximately 60.7% and 52.7% of our outstanding debt had fixed interest rates or had been swapped to fixed interest rates at March 31, 2026 and 2025, respectively.

Previous wording

Income tax (provision) benefit, net*.* We lease our hotels to the TRS Lessee and its subsidiaries, which are subject to federal and state income taxes. In addition, we and the Operating Partnership may also be subject to various state and local income taxes.

Current wording

Income tax provision, net*.* We lease our hotels to the TRS Lessee and its subsidiaries, which are subject to federal and state income taxes. In addition, we and the Operating Partnership may also be subject to various state and local income taxes.

Previous wording

In the third quarter and first nine months of 2024, we recognized net current income tax benefits of $0.5 million and $1.1 million, respectively, resulting from current state and federal income tax expenses, net of any refunds.

Current wording

For the first quarters of both 2026 and 2025, we recognized net current income tax provisions of $0.1 million, resulting from current state and federal income tax expenses, net of any refunds.

Previous wording

Preferred stock dividends*.*Preferred stock dividends were incurred as follows (in thousands):

Current wording

Preferred stock dividends, net of gain on repurchases*.*Preferred stock dividends, net of gain on repurchases were incurred as follows (in thousands):

Previous wording

The annual dividend rate on the Series G preferred stock increased in the third quarter of 2025 to the greater of 6.5% or the rate equal to the Montage Healdsburg’s annual net operating income yield on the Company’s total investment in the resort, resulting in a dividend rate of 6.5% for the third quarter of 2025. Prior to this increase, during the period from the third quarter of 2024 through the second quarter of 2025, the annual dividend rate on the Series G preferred stock was the greater of 4.5% or the rate equal to the Montage Healdsburg’s annual net operating income yield on the Company’s total investment in the resort, and during the period from the first quarter of 2024 through the second quarter of 2024, the annual dividend rate on the Series G preferred stock was the greater of 3.0% or the rate equal to the Montage Healdsburg’s annual net operating income yield on the Company’s total investment in the resort.

Current wording

The dividend rate on the Series G preferred stock increased to the greater of the rate equal to Montage Healdsburg’s annual net operating income yield on our total investment in the resort or 4.5%, and 6.5% in July 2024, and July 2025, respectively, resulting in dividend rates of 6.5% and 4.5% for the first quarters of 2026 and 2025, respectively. Beginning in the third quarter of 2026, the annual dividend rate will increase to the greater of 7.5% or the rate equal to Montage Healdsburg’s annual net operating income yield on our total investment in the resort.

Previous wording

Non-GAAP Financial Measures. We use the following “non-GAAP financial measures” that we believe are useful to investors as key supplemental measures of our operating performance: EBITDAre; Adjusted EBITDAre; FFO attributable to common stockholders; and Adjusted FFO attributable to common stockholders. These measures should not be considered in isolation or as a substitute for measures of performance in accordance with accounting principles generally accepted in the United States (“GAAP”). In addition, our calculation of these measures may not be comparable to other companies that do not define such terms exactly the same as the Company. These non-GAAP measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to net income (loss), cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.

Current wording

Non-GAAP Financial Measures. We use the following “non-GAAP financial measures” that we believe are useful to investors as key supplemental measures of our operating performance: EBITDAre; Adjusted EBITDAre; FFO attributable to common stockholders; and Adjusted FFO attributable to common stockholders. These measures should not be considered in isolation or as a substitute for measures of performance in accordance with accounting principles generally accepted in the United States (“GAAP”). In addition, our calculation of these measures may not be comparable to other companies that do not define such terms exactly the same as us. These non-GAAP measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to net income (loss), cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.

Previous wording

The following table reconciles our unaudited net income to EBITDAre and Adjusted EBITDAre for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Current wording

The following table reconciles our unaudited net income to EBITDAre and Adjusted EBITDAre for the three months ended March 31, 2026 and 2025 (in thousands):

Previous wording

The following table reconciles our unaudited net income to FFO attributable to common stockholders and Adjusted FFO attributable to common stockholders for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Current wording

The following table reconciles our unaudited net income to FFO attributable to common stockholders and Adjusted FFO attributable to common stockholders for the three months ended March 31, 2026 and 2025 (in thousands):

Previous wording

Adjusted FFO attributable to common stockholders decreased $5.1 million, or 13.9%, and decreased $2.0 million, or 1.5%, in the third quarter and first nine months of 2025, respectively, as compared to the same periods in 2024 primarily due to the same reasons noted in the discussion above regarding Adjusted EBITDAre.

Current wording

Adjusted FFO attributable to common stockholders increased $8.6 million, or 20.8%, in the first quarter of 2026 as compared to the same period in 2025 primarily due to the same reasons noted in the discussion above regarding Adjusted EBITDAre.

Previous wording

During the periods presented, our sources of cash included our operating activities and working capital, as well as proceeds from a hotel disposition, our credit facility and term loans, key money, and property insurance. Our primary uses of cash were for capital expenditures for hotels and other assets, the acquisition of a hotel and land adjacent to one of our hotels, operating expenses, repurchases of our common stock, repayments of our credit facility and notes payable, payments of deferred financing costs, and dividends and distributions on our preferred and common stock. We cannot be certain that the sources of funds we have relied on in the past will be available in the future.

Current wording

During the periods presented, our sources of cash included our operating activities and working capital, as well as proceeds from our term loans, key money, and property insurance. Our primary uses of cash were for capital expenditures for hotels and other assets, operating expenses, repurchases of our preferred and common stock, repayments of our senior notes, and dividends and distributions on our preferred and common stock. We cannot be certain that the sources of funds we have relied on in the past will be available in the future.

Previous wording

Operating activities*.* Our net cash provided by or used in operating activities fluctuates primarily as a result of changes in the net cash generated by our hotels, offset by the cash paid for corporate expenses. Our net cash provided by or used in operating activities may also be affected by changes in our portfolio resulting from hotel acquisitions, dispositions or renovations. Net cash provided by operating activities was $145.1 million in the first nine months of 2025 as compared to $139.9 million in the first nine months of 2024. The net increase in cash provided by operating activities during the first nine months of 2025 as compared to the same period in 2024 was primarily due to additional operating cash provided by the increase in travel demand benefiting our hotels, as well as the acquisition of the Hyatt Regency San Antonio Riverwalk and the post-renovation ramp-ups of Marriott Long Beach Downtown and Andaz Miami Beach. These increases were partially offset by decreases in interest income resulting from our lower cash balances and lower interest rates, along with increases in corporate-level expenses.

Current wording

activities may also be affected by changes in our portfolio resulting from hotel acquisitions, dispositions or renovations. Net cash provided by operating activities was $45.4 million in the first three months of 2026 as compared to $32.0 million in the first three months of 2025. The net increase in cash provided by operating activities during the first three months of 2026 as compared to the same period in 2025 was primarily due to additional operating cash provided by the increase in travel demand benefiting our hotels, decreased corporate-level expenses, and the continued post-renovation ramp-up of Andaz Miami Beach. These increases were partially offset by our sale of Hilton New Orleans St. Charles.

Previous wording

Investing activities. Our net cash provided by or used in investing activities fluctuates primarily as a result of acquisitions, dispositions and renovations of hotels and other assets. Net cash used in investing activities during the first nine months of 2025 as compared to the first nine months of 2024 was as follows (in thousands):

Current wording

Investing activities. Our net cash provided by or used in investing activities fluctuates primarily as a result of acquisitions, dispositions, and renovations of hotels and other assets. Net cash used in investing activities during the first three months of 2026 as compared to the first three months of 2025 was as follows (in thousands):

Previous wording

During the first nine months of 2025, we invested $73.7 million for renovations and additions to our portfolio and other assets, and we purchased land adjacent to the Oceans Edge Resort & Marina for $1.3 million. These cash outflows were partially offset by $46.3 million of proceeds received from the sale of the Hilton New Orleans St. Charles, $4.0 million in key money received from the manager of one of our hotels pursuant to the hotel’s management agreement, and $0.9 million in property insurance proceeds received related to 2025 water damage at The Westin Washington, DC Downtown and 2023 fire damage at Hilton San Diego Bayfront.

Current wording

During the first three months of 2026, we invested $31.0 million for renovations and additions to our portfolio and other assets. These cash outflows were partially offset by $4.0 million in key money received from the manager of one of our hotels pursuant to the hotel’s management agreement, and $0.1 million in property insurance proceeds received.

Previous wording

Financing activities. Our net cash provided by or used in financing activities fluctuates primarily as a result of our dividends and distributions paid, issuance and repurchase of common stock, issuance and repayment of debt, including draws on our credit facility and term loans, and issuance and redemption of other forms of capital, including preferred equity. Net cash used in financing activities during the first nine months of 2025 as compared to the first nine months of 2024 was as follows (in thousands):

Current wording

Financing activities. Our net cash provided by or used in financing activities fluctuates primarily as a result of our dividends and distributions paid, the issuance and repurchase of common stock, the issuance and repayment of debt, including draws on our credit facility and term loans, and the issuance, repurchase, and redemption of other forms of capital, including preferred equity. Net cash used in financing activities during the first three months of 2026 as compared to the first three months of 2025 was as follows (in thousands):

Previous wording

During the first nine months of 2025, we paid $100.7 million to repurchase 11,381,731 shares of our outstanding common stock, $4.3 million to repurchase common stock to satisfy the tax obligations in connection with the vesting of restricted common stock issued to employees, and $66.1 million in dividends and distributions to our preferred and common stockholders. In addition, in September 2025 we entered into the Amended Credit Agreement and received $149.6 million associated with additional borrowing on our term loans and repaid $64.6 million to lenders as a result of adjustments to their commitments in the Amended Credit Agreement. We used a portion of the proceeds received to repay the $50.0 million we drew down on our revolving credit facility in April 2025 and July 2025. During the first nine months of 2025, we also paid $18.0 million in deferred financing costs related to the extension of the previous Term Loan 3’s maturity and the Amended Credit Agreement.

Current wording

During the first three months of 2026, we paid $29.1 million to repurchase 3,184,768 shares of our common stock and $7.3 million to repurchase 242,762 shares and 122,333 shares of our Series H preferred stock and Series I preferred stock, respectively. We also paid $3.2 million to repurchase common stock to satisfy the tax obligations in connection with the vesting of restricted common stock issued to employees, $0.2 million in costs associated with our automatic shelf registration statement, and $22.7 million in dividends and distributions to our preferred and common stockholders. In January 2026, we drew down the $90.0 million available under the Term Loan 1 delayed draw and used a portion of the proceeds to repay the $65.0 million Series A Senior Notes at their scheduled maturity in January 2026.

Previous wording

During the first nine months of 2024, we paid $26.3 million to repurchase 2,670,373 shares of our common stock, $4.2 million to repurchase common stock to satisfy the tax obligations in connection with the vesting of restricted common stock issued to employees, $1.6 million in scheduled principal payments on the loan secured by the JW Marriott New Orleans, and $69.7 million in dividends and distributions to our preferred and common stockholders.

Current wording

During the first three months of 2025, we paid $8.0 million to repurchase 821,771 shares of our common stock, $4.3 million to repurchase common stock to satisfy the tax obligations in connection with the vesting of restricted common stock issued to employees and $23.1 million in dividends and distributions to our preferred and common stockholders.

Previous wording

While inflation began to decrease in 2024, the recent uncertainty in the market in connection with certain international economic and political relationships, including political disputes and the imposition of tariffs affecting commodity costs, has had a negative effect on our operations. Prior to the recently announced tariffs, we experienced increases in wages, employee-related benefits, food costs, commodity costs, including those used to renovate or reposition our hotels, property taxes, liability insurance, utilities, and borrowing costs. The imposition of recently announced tariffs could exacerbate existing cost pressures and create additional inflationary pressures that could further impact our results of operations. The ability of our hotel operators to adjust rates has historically mitigated the impact of increased operating costs on our financial position and results of operations.

Current wording

While inflation moderated and remained relatively stable in 2025, inflation increased in March 2026, primarily driven by higher energy costs due to the war in Iran. The uncertainty surrounding certain international economic and political relationships, including political disputes and unfavorable perceptions of travel to the U.S., the economic impact arising from geopolitical instability in key energy‑producing regions, including volatility in transportation fuel costs and increases in air and ground travel costs, decreases in airline capacity, government shutdowns, and the imposition of tariffs affecting commodity costs, has had, or has the potential to have, a negative effect on our operations. We have experienced increases in wages, employee-related benefits, food costs, commodity costs, including those used to renovate or reposition our hotels, property taxes, liability insurance, utilities, and borrowing costs, and such pressures may persist. The imposition of tariffs could exacerbate existing cost pressures and create additional inflationary pressures that could further impact our results of operations. The ability of our hotel operators to adjust rates has historically mitigated the impact of increased operating costs on our financial position and results of operations.

Previous wording

Cash Balance. As of September 30, 2025, our unrestricted cash balance was $121.1 million. We believe that our current unrestricted cash balance and our ability to draw the $500.0 million capacity available for borrowing under the unsecured revolving credit facility will enable us to successfully manage our Company.

Current wording

Cash Balance. As of March 31, 2026, our unrestricted cash balance was $91.1 million. We believe that our current unrestricted cash balance and our ability to draw the $500.0 million capacity available for borrowing under the unsecured revolving credit facility will enable us to successfully manage our Company.

Previous wording

Debt. As of September 30, 2025, we had $930.0 million of debt, $197.6 million of cash and cash equivalents, including restricted cash, and total assets of $3.0 billion. We believe that by maintaining appropriate debt levels, staggering maturity dates, and maintaining a highly flexible structure, we will have lower capital costs than more highly leveraged companies, or companies with limited flexibility due to restrictive covenants.

Current wording

Debt. As of March 31, 2026, we had $955.0 million of unsecured corporate-level debt, $166.7 million of cash and cash equivalents, including restricted cash, and total assets of $3.0 billion. We believe that by maintaining appropriate debt levels, staggering maturity dates, and maintaining a highly flexible structure, we will have lower capital costs than more highly leveraged companies, or companies with limited flexibility due to restrictive covenants.

Previous wording

As of September 30, 2025, 70.4% of our outstanding debt had fixed interest rates or had been swapped to fixed interest rates, including our unsecured corporate-level New Term Loan 1, New Term Loan 2, and $25.0 million of New Term Loan 3, which totaled $485.0 million, and our two unsecured corporate-level senior notes, which totaled $170.0 million.

Current wording

As of March 31, 2026, 60.7% of our outstanding debt had fixed interest rates or had been swapped to fixed interest rates, including our $275.0 million Term Loan 1, $200.0 million of our Term Loan 2, and our $105.0 million Series B Senior Notes.

Previous wording

Our floating rate debt as of September 30, 2025 included $275.0 million of our unsecured corporate-level New Term Loan 3.

Current wording

Our floating rate debt as of March 31, 2026 included $75.0 million of our Term Loan 2 and our $300.0 million Term Loan 3.

Previous wording

In July 2025, we drew down $23.0 million on our credit facility and used the proceeds for general corporate purposes.

Current wording

In April 2026, we drew down $25.0 million on our credit facility. We intend to use the proceeds for general corporate purposes and to repay the draw using cash from future operations.

Previous wording

We may in the future seek to obtain mortgages on one or more of our 14 unencumbered hotels (subject to certain provisions under our unsecured term loans and senior notes), all of which were held by subsidiaries whose interests were pledged to our credit facilities as of September 30, 2025. Should we obtain secured financing on any or all of our unencumbered hotels, the amount of capital available through our credit facility or future unsecured borrowings may be reduced.

Current wording

We may in the future seek to obtain mortgages on one or more of our 14 unencumbered hotels (subject to certain stipulations under our unsecured term loans and senior notes), all of which were held by subsidiaries whose interests were pledged to our credit facilities as of March 31, 2026. Should we obtain secured financing on any or all of our unencumbered hotels, the amount of capital available through our credit facilities or future unsecured borrowings may be reduced.

Previous wording

We believe we maintain each of our hotels in good repair and condition and in general conformity with applicable franchise and management agreements, ground lease, laws, and regulations. Our capital expenditures primarily relate to the ongoing maintenance of our hotels and are budgeted in the reserve accounts described in the following paragraph. We also incur capital expenditures for cyclical renovations, hotel repositionings, and development. We invested $73.7 million and $110.2 million in our portfolio and other assets during the first nine months of 2025 and 2024, respectively. As of September 30, 2025, we have contractual construction commitments totaling $60.5 million for ongoing renovations. If we renovate additional hotels in the future, our capital expenditures will likely increase.

Current wording

We believe we maintain each of our hotels in good repair and condition and in general conformity with applicable franchise and management agreements, ground lease, laws, and regulations. Our capital expenditures primarily relate to the ongoing maintenance of our hotels and are budgeted in the reserve accounts described in the following paragraph. We also incur capital expenditures for cyclical renovations, hotel repositionings, and development. We invested $31.0 million and $28.2 million in our portfolio and other assets during the first three months of 2026 and 2025, respectively. As of March 31, 2026, we have contractual construction commitments totaling $49.1 million for ongoing renovations. If we renovate additional hotels in the future, our capital expenditures will likely increase.

Previous wording

With respect to our hotels that are operated under management or franchise agreements with certain hotel brands, we are obligated to maintain an FF&E reserve account for future planned and emergency-related capital expenditures at these hotels. The amount funded into each of these reserve accounts is determined pursuant to the management and franchise agreements for each of the respective hotels, ranging between 3.0% and 5.5% of the respective hotel’s applicable annual revenue. As of September 30, 2025, our balance sheet includes restricted cash of $76.3 million, which was held in FF&E reserve accounts for future capital expenditures at the majority of our hotels. According to certain management agreements, reserve funds are to be held by the managers in restricted cash accounts, and we are not required to spend the entire amount in such reserve accounts each year.

Current wording

For our hotels that are operated under management or franchise agreements, we are generally obligated to maintain an FF&E reserve account for future planned and emergency-related capital expenditures at these hotels. The amount funded into each of these reserve accounts is determined pursuant to the management and franchise agreements for each of the respective hotels, ranging between 3.0% and 5.5% of the respective hotel’s applicable annual revenue. As of March 31, 2026, our balance sheet includes restricted cash of $75.4 million, which was held in FF&E reserve accounts for future capital expenditures. These reserve funds are held by the managers in restricted cash accounts, and we are not required to spend the entire amount in such reserve accounts each year.

Previous wording

Inflation affects our expenses, including, without limitation, by increasing such costs as wages, employee-related benefits, food costs, commodity costs, including those used to renovate or reposition our hotels, property taxes, property and liability insurance, utilities and borrowing costs. We rely on our hotel operators to adjust room rates and pricing for hotel services to reflect the effects of inflation. However, previously contracted rates, competitive pressures, or other factors may limit the ability of our operators to respond to inflation. As a result, our expenses may increase at higher rates than our revenue.

Current wording

Inflation affects our expenses, including, without limitation, by increasing such costs as wages, employee-related benefits, food costs, commodity costs, including those used to renovate or reposition our hotels, property taxes, property and liability insurance, utilities, and borrowing costs. We rely on our hotel operators to adjust room rates and pricing for hotel services to reflect the effects of inflation. However, previously contracted rates, competitive pressures or other factors may limit the ability of our operators to respond to inflation. As a result, our expenses may increase at higher rates than our revenue and our expenses may not decrease if revenue decreases.

Previous wording

Quarterly revenue also may be adversely affected by renovations and repositionings, our managers’ effectiveness in generating business and by events beyond our control, such as economic and business conditions, including a U.S. recession or increased inflation, trade conflicts and tariffs, changes impacting global travel, regional or global economic slowdowns, any flu or disease-related pandemic that impacts travel or the ability to travel, weather patterns, the adverse effects of climate change, the threat of terrorism, terrorist events, civil unrest, government shutdowns, events that reduce the capacity or availability of air travel, increased competition from other hotels in our markets, new hotel supply or alternative lodging options and unexpected changes in commercial or leisure travel.

Current wording

Quarterly revenue also may be adversely affected by renovations and repositionings, our managers’ effectiveness in generating business and by events beyond our control, such as economic and business conditions, including a U.S. recession or increased inflation, trade conflicts and tariffs, changes impacting global travel, regional or global economic slowdowns, the economic impact arising from geopolitical instability in key energy‑producing regions, any flu or disease-related outbreak that impacts travel or the ability to travel, weather patterns, the adverse effects of climate change, the threat of terrorism, terrorist events, civil unrest, government shutdowns, events that reduce the capacity or availability of air travel, increased competition from other hotels in our markets, new hotel supply or alternative lodging options, and unexpected changes in commercial or leisure travel.

Previous wording

Recoverability of assets that will continue to be used is measured by comparing the carrying amount of the asset to the related total future undiscounted net cash flows. If an asset’s carrying value is not recoverable through those cash flows, the asset is considered to be impaired. The impairment is measured by the difference between the asset’s carrying amount and its fair value. We perform a fair value assessment using valuation techniques such as discounted cash flows and comparable sales transactions in the market to estimate the fair value of the hotel and, if appropriate and available, current estimated net sales proceeds from pending offers. Our judgment is required in determining the discount rate, terminal capitalization rate, the estimated growth of revenues and expenses, revenue per available room and margins, as well as specific market and economic conditions.

Current wording

Recoverability of assets that will continue to be used is measured by comparing the carrying amount of the asset to the related total future undiscounted net cash flows. If an asset’s carrying value is not recoverable through those cash flows, the asset is considered to be impaired. The impairment is measured by the difference between the asset’s carrying amount and its fair value. We perform a fair value assessment using valuation techniques such as discounted cash flows and comparable sales transactions in the market to estimate the fair value of the hotel and, if appropriate and available, current estimated net sales proceeds from pending offers. The impairment assessment includes subjective assumptions such as determining the discount rate, terminal capitalization rate, the estimated growth of revenues and expenses, revenue per available room and margins, specific market and economic conditions, the estimated holding period, as well as the probability assigned to each future cash flow scenario.