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 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.

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 June 30, 2026, we owned 14 hotels, one of which, Hyatt Regency San Francisco, was classified as held for sale because it was under contract for sale and met all held-for-sale criteria. The hotel sale subsequently closed in July 2026. All of our hotels are operated under nationally recognized brands, including Oceans Edge Resort & Marina, which was rebranded as Hilton Key West Resort & Marina on July 1, 2026. Excluding Hyatt Regency San Francisco, our hotels average 475 rooms in size.

Previous 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:

Current wording

Room revenue. Room revenue increased $12.2 million, or 7.8%, in the second quarter of 2026 as compared to the second quarter of 2025 as follows:

Previous 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:

Current wording

Food and beverage revenue*.* Food and beverage revenue increased $0.9 million, or 1.1%, in the second quarter of 2026 as compared to the second quarter of 2025, as follows:

Previous 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:

Current wording

Other operating revenue. Other operating revenue increased $4.2 million, or 16.5%, in the second quarter of 2026 as compared to the second 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 $10.8 million, or 7.4%, in the first quarter of 2026 as compared to the first quarter of 2025 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 $8.0 million, or 5.1%, in the second quarter of 2026 as compared to the second quarter of 2025 as follows:

Previous 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:

Current wording

Other property-level expenses*.*Other property-level expenses increased $3.4 million, or 10.8%, in the second quarter of 2026 as compared to the second quarter of 2025 as follows:

Previous 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.

Current wording

Corporate overhead expense*.*Corporate overhead expense increased $0.4 million, or 5.0%, in the second quarter of 2026 as compared to the second quarter of 2025, due to increased payroll and related expenses and deferred stock amortization expense due to the restructuring of our executive team which included one-time costs incurred in connection with the elimination of the general counsel position in the second quarter of 2026. These increased expenses were partially offset by decreased professional fees.

Previous 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:

Current wording

Depreciation and amortization expense*.*Depreciation and amortization expense increased $0.1 million, or 0.4%, in the second quarter of 2026 as compared to the second quarter of 2025 as follows:

Previous 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.

Current wording

Interest and other income*.*Interest and other income totaled $3.8 million and $2.3 million in the second quarters of 2026 and 2025, respectively, and $5.3 million and $3.9 million in the six months ended June 30, 2026 and 2025, respectively.

Previous 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.

Current wording

During the second quarters of 2026 and 2025, we recognized interest income of $1.3 million and $1.4 million, respectively. Interest income decreased in the second quarter of 2026 as compared to the second quarter of 2025 due to lower interest rates. In addition, during the second quarter of 2026, we recognized property insurance recoveries of $2.4 million for storm-related damage

Previous wording

Interest expense decreased $1.4 million, or 11.1%, in the first quarter of 2026 as compared to the same period in 2025.

Current wording

Interest expense decreased $1.4 million, or 10.5%, in the second quarter of 2026 as compared to the same period in 2025, and decreased $2.8 million, or 10.8%, in the six months ended June 30, 2026 as compared to the same period in 2025.

Previous 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.

Current wording

The decreases in interest expense during the second quarter of 2026 and the six months ended June 30, 2026 as compared to the same periods in 2025 were primarily due to a noncash change of $2.1 million and $5.2 million, respectively, in the fair market value of our derivatives. These decreases in interest expense were partially offset by reductions in capitalized interest of $0.4 million and $1.4 million in the second quarter and the six months ended June 30, 2026, respectively, as compared to the same periods in 2025. Capitalized interest in 2025 was related to the extensive renovation work at Andaz Miami Beach, and there was no corresponding capitalization of interest in the second quarter and the six months ended June 30, 2026.

Previous wording

The decrease in total interest expense during the first quarter of 2026 as compared to the same period in 2025 was partially offset by a $0.5 million increase in interest expense on our debt primarily due to higher average debt balances, partially offset by lower average interest rates on our term loans. In addition, interest expense during the first quarter of 2026 increased $0.2 million as compared to the same period in 2025, due to higher amortization of deferred financing costs related to costs associated with the execution of the Third Amended and Restated Credit Agreement entered into in September 2025.

Current wording

The decreases in total interest expense during the second quarter of 2026 and the six months ended June 30, 2026 as compared to the same periods in 2025 were partially offset by increases of $0.3 million and $0.8 million, respectively, in interest expense on our debt primarily due to higher average debt balances, partially offset by lower average interest rates on our term loans. In addition, interest expense during the second quarter and the six months ended June 30, 2026 increased by $0.1 million and $0.3 million, respectively, as compared to the same periods in 2025, due to higher amortization of deferred financing costs related to costs associated with the execution of the Third Amended and Restated Credit Agreement entered into in September 2025.

Previous 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.

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 June 30, 2026 and 2025, respectively. Approximately 59.2% and 51.0% of our outstanding debt had fixed interest rates or had been swapped to fixed interest rates at June 30, 2026 and 2025, respectively.

Previous 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.

Current wording

In the second quarter and the six months ended June 30, 2025, we recognized net current income tax provisions of $37,000 and $0.1 million, respectively, resulting from current state and federal income tax expenses, net of any refunds.

Previous 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.

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 both the second quarters and the six months ended June 30, 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

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):

Current wording

The following table reconciles our unaudited net income to EBITDAre and Adjusted EBITDAre for the three and six months ended June 30, 2026 and 2025 (in thousands):

Previous wording

Adjusted EBITDAre increased $10.5 million, or 18.3%, in the first quarter of 2026 as compared to the first quarter of 2025, primarily due to the following:

Current wording

Adjusted EBITDAre increased $4.0 million, or 5.5%, in the second quarter of 2026 as compared to the second quarter of 2025, and increased $14.5 million, or 11.2%, in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to the following:

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 months ended March 31, 2026 and 2025 (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 and six months ended June 30, 2026 and 2025 (in thousands):

Previous 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.

Current wording

Adjusted FFO attributable to common stockholders increased $3.3 million, or 6.0%, and increased $11.9 million, or 12.3%, in the second quarter and the six months ended June 30, 2026, respectively, as compared to the same periods 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 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.

Current 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 term loans, our credit facility, 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

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.

Current 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 $107.4 million in the six months ended June 30, 2026, as compared to $90.8 million in the six months ended June 30, 2025. The net increase in cash provided by operating activities during the six months ended June 30, 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 three months of 2026 as compared to the first three months of 2025 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 six months ended June 30, 2026, as compared to the six months ended June 30, 2025, was as follows (in thousands):

Previous 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.

Current wording

During the six months ended June 30, 2025, we invested $56.0 million for renovations and additions to our portfolio and other assets. This cash outflow was partially offset by $46.3 million of proceeds received from the sale of 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 $0.1 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, 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):

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 six months ended June 30, 2026, as compared to the six months ended June 30, 2025, was as follows (in thousands):

Previous 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.

Current wording

During the six months ended June 30, 2026, we paid $40.6 million to repurchase 4,380,093 shares of our common stock and $28.2 million to repurchase 571,200 shares and 809,791 shares of our Series H preferred stock and Series I preferred stock, respectively. We also paid $3.7 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 $42.6 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. Additionally, during the six months ended June 30, 2026, we drew down $25.0 million on our credit facility.

Previous 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.

Current wording

During the six months ended June 30, 2025, we paid $98.5 million to repurchase 11,122,861 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, $0.5 million in deferred financing costs related to the extension of the maturity of our previous Term Loan 3, and $44.3 million in dividends and distributions to our preferred and common stockholders. These cash outflows were partially offset by a $27.0 million draw on our credit facility.

Previous 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.

Current wording

While inflation moderated and remained relatively stable in 2025, inflation increased during the first half of 2026 before moderating in June, reflecting continued volatility in energy prices and broader economic conditions. 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

Previous 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.

Current wording

Cash Balance. As of June 30, 2026, our unrestricted cash balance was $94.4 million. We believe that our current unrestricted cash balance and our ability to draw the $475.0 million capacity available for borrowing under the unsecured revolving credit facility will enable us to successfully manage our Company.

Previous wording

Debt. As of 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.

Current wording

Debt. As of June 30, 2026, we had $980.0 million of unsecured corporate-level debt, $203.7 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

In January 2026, we drew down the $90.0 million available under the Term Loan 1 delayed draw and used the proceeds to repay the $65.0 million Series A Senior Notes at their scheduled maturity in January 2026 and for general corporate purposes.

Current wording

In January 2026, we drew down the $90.0 million available under the Term Loan 1 delayed draw and used the proceeds to repay the $65.0 million Series A Senior Notes at their scheduled maturity in January 2026, and for general corporate purposes. In addition, in April 2026, we drew down $25.0 million on our credit facility and used the proceeds for general corporate purposes.

Previous 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.

Current wording

As of June 30, 2026, 59.2% 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 March 31, 2026 included $75.0 million of our Term Loan 2 and our $300.0 million Term Loan 3.

Current wording

Our floating rate debt as of June 30, 2026 included $75.0 million of our Term Loan 2, our $300.0 million Term Loan 3, and $25.0 million outstanding under our credit facility.

Previous 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.

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 June 30, 2026. Following the sale of the Hyatt Regency San Francisco in July 2026, we will have 13 unencumbered hotels. 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 $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.

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 $53.4 million and $56.0 million in our portfolio and other assets during the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, we have contractual construction commitments totaling $38.1 million for ongoing renovations. If we renovate additional hotels in the future, our capital expenditures will likely increase.

Previous 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.

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 June 30, 2026, our balance sheet includes restricted cash of $84.1 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

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.

Current wording

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.