Sunstone Hotel Investors, Inc.: Form 10-Q for the period ended Mar 31, 2026

Overview

Sunstone Hotel Investors, Inc. (the “Company,” “we,” “our” or “us”) is a Maryland corporation. We operate as a self-managed and self-administered real estate investment trust (“REIT”). A REIT is a corporation that directly or indirectly owns real estate assets and has elected to be taxable as a real estate investment trust for federal income tax purposes. To qualify for taxation as a REIT, the REIT must meet certain requirements, including regarding the composition of its assets and the sources of its income. REITs generally are not subject to federal income taxes at the corporate level as long as they pay stockholder dividends equivalent to 100% of their taxable income. REITs are required to distribute to stockholders at least 90% of their REIT taxable income. We own, directly or indirectly, 100% of the interests of Sunstone Hotel Partnership, LLC (the “Operating Partnership”), which is the entity that directly or indirectly owns our hotels. We also own 100% of the interests of our taxable REIT subsidiary, Sunstone Hotel TRS Lessee, Inc. (the “TRS Lessee”), which, directly or indirectly, leases all of our hotels from the Operating Partnership, and engages independent third parties to manage our hotels.

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.

Maui Storms

During the first quarter of 2026, the Hawaiian Islands experienced multiple severe storms that impacted our Wailea Beach Resort. The resort remained open during and following the storms that occurred in March but sustained wind and water damage in some of the guestrooms, public areas, and portions of the resort’s roofs. We maintain customary property, casualty, environmental, flood, and business interruption insurance at all of our hotels; however, such coverage is subject to certain limitations, conditions, and deductibles.

We are continuing to assess the extent of the damage; however, based on currently available information and the preliminary nature of this assessment, we are not able to reasonably estimate the loss associated with the damaged assets at this time. We are working with our insurers to identify and pursue relevant insurance recoveries related to repair and restoration costs. In addition, we are pursuing and expect to receive recoveries for business interruption on estimated lost profits associated with the storm-related damage. Storm-related costs will be recognized as incurred, to the extent determinable. Any insurance recoveries for business interruption, if realized, are expected to generally be recognized in the period or periods in which they are received.

Operating Activities

Revenues. Substantially all of our revenues are derived from the operation of our hotels. Specifically, our revenues consist of the following:

• Room revenue, which is comprised of revenue realized from the sale of rooms at our hotels;
• Food and beverage revenue, which is comprised of revenue realized in the hotel food and beverage outlets as well as banquet and catering events; and
• Other operating revenue, which includes ancillary hotel revenue and other items primarily driven by occupancy such as telephone/internet, parking, spa, destination and resort fees, entertainment, and other guest services. Additionally, this category includes, among other things, attrition and cancellation revenue, tenant revenue derived from hotel space and marina slips leased by third parties, winery revenue, any business interruption proceeds and any performance guarantee or reimbursements to offset net losses.

Expenses. Our expenses consist of the following:

• Room expense, which is primarily driven by occupancy and, therefore, has a significant correlation with room revenue;
• Food and beverage expense, which is primarily driven by hotel food and beverage sales and banquet and catering bookings and, therefore, has a significant correlation with food and beverage revenue;
• Other operating expense, which includes the corresponding expense of other operating revenue, advertising and promotion, repairs and maintenance, utilities, and franchise costs;
• Property tax, ground lease and insurance expense, which includes the expenses associated with property tax, ground lease and insurance payments, each of which is primarily a fixed expense, however property tax is subject to regular revaluations based on the specific tax regulations and practices of each municipality, along with our cash and noncash operating lease expenses, general excise tax assessed by Hawaii and taxes assessed on commercial rents by San Francisco and Texas;
• Other property-level expenses, which includes our property-level general and administrative expenses, such as payroll, benefits, and other employee-related expenses, contract and professional fees, credit and collection expenses, employee recruitment, relocation and training expenses, labor dispute expenses, consulting fees, management fees, and other expenses;
• Corporate overhead expense, which includes our corporate-level expenses, such as payroll, benefits, and other employee-related expenses, amortization of deferred stock compensation, business acquisition and due diligence expenses, legal expenses, contract and professional fees, board of director expenses, entity-level state franchise and minimum taxes, travel expenses, office rent, and other customary expenses; and
• Depreciation and amortization expense, which includes depreciation on our hotel buildings, improvements, furniture, fixtures and equipment (“FF&E”), along with amortization on our franchise fees and certain intangibles. Additionally, this category includes depreciation and amortization related to FF&E for our corporate office.

Other Revenue and Expense. Other revenue and expense consists of the following:

• Interest and other income, which includes interest we have earned on our restricted and unrestricted cash accounts, as well as any energy or other rebates, net property insurance proceeds we have received, miscellaneous income, and any gains or losses we have recognized on sales or redemptions of assets other than real estate investments;
• Interest expense, which includes interest expense incurred on our outstanding fixed and variable rate debt, gains or losses on interest rate derivatives, amortization of deferred financing costs, and any loan fees incurred on our debt, net of any capitalized interest;
• Gain (loss) on sale of assets, net, which includes the gains or losses we recognized on our hotel sales, including the net gains related to the resolution of contingencies, that do not qualify as discontinued operations;
• Gain (loss) on extinguishment of debt, which includes gains related to the resolution of contingencies on extinguished debt and losses recognized on amendments or early repayments of mortgages or other debt obligations from the accelerated amortization of deferred financing costs, along with any other costs;
• Income tax (provision) benefit, net, which includes federal and state income taxes charged to us net of any refundable credits or refunds received, any adjustments to deferred tax assets, liabilities or valuation allowances, and any adjustments to unrecognized tax positions, along with any related interest and penalties incurred; and
• Preferred stock dividends, net of gain on repurchases, which includes dividends accrued on our Series G Cumulative Redeemable Preferred Stock (“Series G preferred stock”), Series H Cumulative Redeemable Preferred Stock (“Series H preferred stock”) and Series I Cumulative Redeemable Preferred Stock (“Series I preferred stock”), net of any preferred stock repurchased at a discount to its carrying value, along with the related write-off of any original issuance costs previously included in additional paid in capital.

Operating Performance Indicators. The following performance indicators are commonly used in the hotel industry:

• Occupancy, which is the quotient of total rooms sold divided by total rooms available;
• Average daily room rate, or ADR, which is the quotient of room revenue divided by total rooms sold;
• Revenue per available room, or RevPAR, which is the product of occupancy and ADR, and does not include food and beverage revenue, or other operating revenue;
• RevPAR index, which is the quotient of a hotel’s RevPAR divided by the average RevPAR of its competitors, multiplied by 100. A RevPAR index in excess of 100 indicates a hotel is achieving higher RevPAR than the average of its competitors. In addition to absolute RevPAR index, we monitor changes in RevPAR index;
• EBITDAre, which is net income excluding: interest expense; benefit or provision for income taxes, including any changes to deferred tax assets, liabilities or valuation allowances and income taxes applicable to the sale of assets; depreciation and amortization; gains or losses on disposition of depreciated property (including gains or losses on change in control); and any impairment write-downs of depreciated property;
• Adjusted EBITDAre, which is EBITDAre adjusted to exclude: amortization of deferred stock compensation; amortization of contract intangibles; amortization of right-of-use assets and obligations; the impact of any gain or loss from undepreciated asset sales or property damage from natural disasters; any lawsuit settlement costs; the write-off of development costs associated with abandoned projects; property-level restructuring, severance, and management transition costs; pre-opening costs associated with extensive renovation projects; debt resolution costs; and any other nonrecurring identified adjustments;
• Funds from operations (“FFO”) attributable to common stockholders, which is net income and preferred stock dividends, including any gains or losses on the redemptions or repurchases of preferred stock, excluding: gains and losses from sales of property; real estate-related depreciation and amortization (excluding amortization of deferred financing costs and right-of-use assets and obligations); and any real estate-related impairment losses; and
• Adjusted FFO attributable to common stockholders, which is FFO attributable to common stockholders adjusted to exclude: amortization of deferred stock compensation; amortization of contract intangibles; real estate-related amortization of right-of-use assets and obligations; noncash interest on our derivatives; income tax benefits or provisions associated with any changes to deferred tax assets, liabilities or valuation allowances, the application of net operating loss carryforwards, uncertain tax positions or with the sale of assets; gains or losses due to property damage from natural disasters; any lawsuit settlement costs; the write-off of development costs associated with abandoned projects; non-real estate-related impairment losses; property-level restructuring, severance, and management transition costs; pre-opening costs associated with extensive renovation projects; debt resolution costs; gains or losses on the redemptions or repurchases of preferred stock; and any other nonrecurring identified adjustments.

Factors Affecting Our Operating Results. The primary factors affecting our operating results include overall demand for hotel rooms, the pace of new hotel development, or supply, and the relative performance of our operators in increasing revenue and controlling hotel operating expenses.

• Demand. The demand for lodging has traditionally been closely linked with the performance of the general economy. Our hotels are classified as either upper upscale or luxury hotels. In periods of economic difficulties, including those caused by inflation or recession, these types of hotels may be more susceptible to a decrease in revenue, as compared to hotels in other categories that have lower room rates in part because upper upscale and luxury hotels generally target business and leisure travelers at higher price points, and these groups may seek to curtail spending in periods of economic decline. In addition, changes in the value of the U.S. dollar relative to other currencies may impact the demand for our hotels by making international travel more or less affordable. Also, operating results at our hotels may be negatively affected by uncertainty surrounding certain international economic and political relationships, including political disputes and unfavorable perceptions of travel to the U.S., which could further reduce international travel demand. The economic impacts arising from geopolitical instability in key energy producing regions, including volatility in transportation fuel costs and increases in air and ground travel costs, along with decreases in airline capacity, government shutdowns, the imposition of tariffs, and prolonged periods of inclement weather in our markets may reduce the demand for our hotels.
• Supply. The addition of new competitive hotels affects the ability of existing hotels to attract demand for lodging and, therefore, impacts the ability to generate growth in RevPAR and profits. The development of new hotels is largely driven by construction costs, the cost and availability of financing, and the expected performance of existing hotels. We believe that both new hotel construction and new hotel openings were delayed or even cancelled over the past several years due to construction supply constraints, the cost and availability of financing, and inflationary pressures on the cost of building materials, which made new hotel development less financially feasible. We believe that many of these same factors combined with the imposition of tariffs will continue to discourage new hotel supply in many markets, although some markets may experience new hotel openings at or greater than historical levels. Separate from the development of new hotels, an increase in the supply of vacation rental or sharing services such as Airbnb may negatively affect the ability of existing hotels to generate growth in RevPAR and profits.
• Revenues and expenses. We believe that marginal improvements in RevPAR index, even in the face of declining revenues, are a good indicator of the relative quality and appeal of our hotels, and our operators’ effectiveness in maximizing revenues. Similarly, we also evaluate our operators’ effectiveness in minimizing incremental operating expenses in the context of increasing revenues or, conversely, in reducing operating expenses in the context of declining revenues.

Inflationary pressures could increase operating costs, which could limit our operators’ effectiveness in minimizing expenses.

Operating Results. The following table presents our unaudited operating results for the three months ended March 31, 2026 and 2025, including the amount and percentage change in the results between the two periods.

(in thousands, except statistical data)

Summary of Operating Results. The following items significantly impact the year-over-year comparability of our operations:

• Hotel Renovation: In March 2024, we closed The Confidante Miami Beach to allow the extensive renovation work to be performed more efficiently as it transitioned to Andaz Miami Beach. The resort reopened as Andaz Miami Beach in May 2025. As a result of this renovation, our revenues and operating expenses in the first quarter of 2026 are not comparable to the same period in 2025.
• Hotel Disposition: In June 2025, we sold the Hilton New Orleans St. Charles. As a result, our revenues, operating expenses, and depreciation expense in the first quarter of 2026 are not comparable to the same period in 2025.

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:

• Andaz Miami Beach caused room revenue to increase by $12.6 million. For the first quarter of 2026, occupancy was 86.4% and the ADR was $564.30, resulting in RevPAR of $487.56. Andaz Miami Beach was closed during the first quarter of 2025.
• Room revenue at the 13 hotels we owned during the entirety of the first quarters of both 2026 and 2025, excluding Andaz Miami Beach (the “Comparable Portfolio”), increased $8.0 million. Occupancy increased 70 basis points and the ADR increased 4.7%, resulting in a 5.7% increase in RevPAR. The Comparable Portfolio’s room revenue was positively impacted by strong transient performance at Hyatt Regency San Francisco due to increased demand in the market from stronger group event attendance and the Super Bowl in February 2026, and stronger leisure demand at Wailea Beach Resort in January and February prior to the severe weather that impacted the area in March. The increase in room revenue at Wailea Beach Resort also included a benefit from revised estimates of loyalty point utilization based on updated data, for which we do not expect to have a similar impact in future periods. In addition, both transient and group demand increased at Hilton San Diego Bayfront, Montage Healdsburg, and Four Seasons Resort Napa Valley as compared to the first quarter of 2025. These positive impacts were partially offset by lower room revenue at JW Marriott New Orleans and The Westin Washington, DC Downtown, as demand at each property normalized following the February 2025 Super Bowl and the January 2025 presidential inauguration, respectively. Additionally, room revenue during the quarter was negatively impacted by a series of severe winter storms that disrupted travel to certain of our hotels in the eastern U.S. and by the negative impact of the storms at Wailea Beach Resort.

• The sale of the Hilton New Orleans St. Charles caused room revenue to decrease by $4.4 million.

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:

• Andaz Miami Beach caused food and beverage revenue to increase by $4.3 million.
• Food and beverage revenue at the Comparable Portfolio increased $2.9 million due to increased outlet revenue and a modest increase in banquet revenue. The increase in outlet revenue was primarily due to higher transient occupancy at Wailea Beach Resort and Hyatt Regency San Francisco, as well as increased retention of hotel guests and higher average checks at Hilton San Diego Bayfront. Banquet revenue increased across a majority of the Comparable Portfolio driven by incremental group spending despite lower group occupancy. These increases were partially offset by a decline in banquet revenue at Hilton San Diego Bayfront primarily due to meetings space renovations.
• The sale of the Hilton New Orleans St. Charles caused a nominal decrease in food and beverage revenue.

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:

• Andaz Miami Beach caused other operating revenue to increase by $1.7 million.
• Other operating revenue at the Comparable Portfolio increased $1.3 million, primarily due to increased destination and resort fees, and other ancillary revenues. These increases were partially offset by decreased cancellation and attrition fees and other operating revenues.
• The sale of the Hilton New Orleans St. Charles caused other operating revenue to decrease by $0.6 million.

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:

• Andaz Miami Beach caused hotel operating expenses to increase by $7.0 million.
• Hotel operating expenses at the Comparable Portfolio increased $6.0 million, primarily corresponding to the increases in the Comparable Portfolio’s revenues and occupancy rates, as well as higher repairs and maintenance expenses driven by severe weather-related repairs and restoration at The Westin Washington, DC Downtown and Renaissance Orlando at SeaWorld®. In addition, hotel operating expenses increased due to higher payroll and related expenses at Wailea Beach Resort due to significantly higher occupancy relative to the first quarter of 2025, as well as increased advertising and promotion costs and utilities.
• The sale of the Hilton New Orleans St. Charles caused hotel operating expenses to decrease by $2.2 million.

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:

• Other property-level expenses at the Comparable Portfolio increased $2.1 million, primarily due to increased information and technology expenses, credit card commissions, management fees, and payroll and related expenses.
• Andaz Miami Beach caused other property-level expenses to increase by $1.3 million.
• The sale of the Hilton New Orleans St. Charles caused other property-level expenses to decrease by $0.4 million.

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.

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:

• Andaz Miami Beach caused a $1.8 million increase in depreciation and amortization expense primarily due to new assets placed in service as part of the renovation.
• Depreciation and amortization expense related to the Comparable Portfolio increased $0.7 million as increased expense at our recently renovated hotels was partially offset by reduced expense due to fully depreciated assets.
• The sale of the Hilton New Orleans St. Charles caused depreciation and amortization expense to decrease by $0.6 million.

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.

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.

Interest expense. We incurred interest expense as follows (in thousands):

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

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.

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.

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.

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.

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.

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

(1) Includes net gains of $0.8 million and $0.7 million on the repurchases of the Series H preferred stock and the Series I preferred stock, respectively, repurchased at a discount to their carrying values, along with the related write-off of the original issuance costs previously included in additional paid in capital on our consolidated balance sheets.

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.

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.

We present EBITDAre in accordance with guidelines established by the National Association of Real Estate Investment Trusts (“Nareit”), as defined in its September 2017 white paper “Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate.” We believe EBITDAre is a useful performance measure to help investors evaluate and compare the results of our operations from period to period in comparison to our peers. Nareit defines EBITDAre as net income (calculated in accordance with GAAP) plus interest expense, income tax expense, depreciation and amortization, gains or losses on the disposition of depreciated property (including gains or losses on change in control), impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in the value of depreciated property in the affiliate, and adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates.

We make additional adjustments to EBITDAre when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful information to investors regarding our operating performance, and that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income, is beneficial to an investor’s complete understanding of our operating performance. In addition, we use both EBITDAre and Adjusted EBITDAre as measures in determining the value of hotel acquisitions and dispositions.

We adjust EBITDAre for the following items, which may occur in any period, and refer to this measure as Adjusted EBITDAre:

• Amortization of deferred stock compensation: we exclude the noncash expense incurred with the amortization of deferred stock compensation as this expense is based on historical stock prices at the date of grant to our corporate employees and does not reflect the underlying performance of our hotels.
• Amortization of contract intangibles: we exclude the noncash amortization of any favorable or unfavorable contract intangibles recorded in conjunction with our hotel acquisitions. We exclude the noncash amortization of contract intangibles because it is based on historical cost accounting and is of lesser significance in evaluating our actual performance for the current period.
• Amortization of right-of-use assets and obligations: we exclude the amortization of our right-of-use assets and related lease obligations, as these expenses are based on historical cost accounting and do not reflect the actual rent amounts due to the respective lessors or the underlying performance of our hotels.
• Undepreciated asset transactions: we exclude the effect of gains and losses on the disposition of undepreciated assets because we believe that including them in Adjusted EBITDAre is not consistent with reflecting the ongoing performance of our assets.
• Gains or losses from debt transactions: we exclude the effect of finance charges and premiums associated with the extinguishment of debt, including the acceleration of deferred financing costs from the original issuance of the debt being redeemed or retired because, like interest expense, their removal helps investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure.
• Cumulative effect of a change in accounting principle: from time to time, the Financial Accounting Standards Board (“FASB”) promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle. We exclude these one-time adjustments, which include the accounting impact from prior periods, because they do not reflect our actual performance for that period.
• Other adjustments: we exclude other adjustments that we believe are outside the ordinary course of business because we do not believe these costs reflect our actual performance for the period and/or the ongoing operations of our hotels. Such items may include: lawsuit settlement costs; the write-off of development costs associated with abandoned projects; property-level restructuring, severance, and management transition costs; pre-opening costs associated with extensive renovation projects; debt resolution costs; lease terminations; property insurance restoration proceeds or uninsured losses; and other nonrecurring identified adjustments.

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):

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:

• Adjusted EBITDAre at Andaz Miami Beach increased $7.0 million in the first quarter of 2026 as compared to the same period in 2025 primarily due to the changes in Andaz Miami Beach’s revenues and expenses included in the discussion above regarding the operating results for the first quarter of 2026.
• Adjusted EBITDAre at the Comparable Portfolio increased $6.4 million, or 10.9%, in the first quarter of 2026 as compared to the same period in 2025 due to the changes in the Comparable Portfolio’s revenues and expenses included in the discussion above regarding the operating results for the first quarter of 2026.
• The Hilton New Orleans St. Charles recorded Adjusted EBITDAre of $2.4 million in the first quarter of 2025.

We believe that the presentation of FFO attributable to common stockholders provides useful information to investors regarding our operating performance because it is a measure of our operations without regard to specified noncash items such as real estate depreciation and amortization, any real estate impairment loss and any gain or loss on sale of real estate assets, all of which are based on historical cost accounting and may be of lesser significance in evaluating our current performance. Our presentation of FFO attributable to common stockholders conforms to the Nareit definition of “FFO applicable to common shares.” Our presentation may not be comparable to FFO reported by other REITs that do not define the terms in accordance with the current Nareit definition, or that interpret the current Nareit definition differently than we do.

We also present Adjusted FFO attributable to common stockholders when evaluating our operating performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance and may facilitate comparisons of operating performance between periods and our peer companies.

We adjust FFO attributable to common stockholders for the following items, which may occur in any period, and refer to this measure as Adjusted FFO attributable to common stockholders:

• Amortization of deferred stock compensation: we exclude the noncash expense incurred with the amortization of deferred stock compensation as this expense is based on historical stock prices at the date of grant to our corporate employees and does not reflect the underlying performance of our hotels.
• Amortization of contract intangibles: we exclude the noncash amortization of any favorable or unfavorable contract intangibles recorded in conjunction with our hotel acquisitions. We exclude the noncash amortization of contract

intangibles because it is based on historical cost accounting and is of lesser significance in evaluating our actual performance for the current period.

• Real estate amortization of right-of-use assets and obligations: we exclude the amortization of our real estate right-of-use assets and related lease obligations (with the exception of our corporate operating lease) as these expenses are based on historical cost accounting and do not reflect the actual rent amounts due to the respective lessors or the underlying performance of our hotels.
• Gains or losses from debt transactions: we exclude the effect of finance charges and premiums associated with the extinguishment of debt, including the acceleration of deferred financing costs from the original issuance of the debt being redeemed or retired, as well as the noncash interest on our derivatives. We believe that these items are not reflective of our ongoing finance costs.
• Cumulative effect of a change in accounting principle: from time to time, the FASB promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle. We exclude these one-time adjustments, which include the accounting impact from prior periods, because they do not reflect our actual performance for that period.
• Other adjustments: we exclude other adjustments that we believe are outside the ordinary course of business because we do not believe these costs reflect our actual performance for that period and/or the ongoing operations of our hotels. Such items may include: lawsuit settlement costs; the write-off of development costs associated with abandoned projects; changes to deferred tax assets, liabilities or valuation allowances; property-level restructuring, severance, and management transition costs; pre-opening costs associated with extensive renovation projects; debt resolution costs; gains or losses on the redemptions or repurchases of preferred stock; lease terminations; property insurance restoration proceeds or uninsured losses; income tax benefits or provisions associated with the application of net operating loss carryforwards, uncertain tax positions or with the sale of assets; and other nonrecurring identified adjustments.

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):

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.

Liquidity and Capital Resources

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.

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 $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.

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):

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.

During the first three months of 2025, we invested $28.2 million for renovations and additions to our portfolio and other assets and received $0.1 million in property insurance proceeds.

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):

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.

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.

Future. We expect our primary sources of cash will continue to be our operating activities, working capital, borrowing under our credit facility, additional issuances of debt, dispositions of hotel properties, and proceeds from offerings of common and preferred stock. However, there can be no assurance that our future asset sales, debt issuances or equity offerings will be successfully completed. As a result of potential increases in inflation rates and interest rates, as well as possible recessionary periods in the future, certain sources of capital may not be as readily available to us as they have in the past or may only be available at higher costs.

We expect our primary uses of cash to be for operating expenses, capital investments in our hotels, repayment of principal on our debt and credit facility, interest expense, repurchases of our common and preferred stock, distributions on our common stock, dividends on our preferred stock, and acquisitions of hotels or interests in hotels.

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.

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.

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.

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.

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.

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.

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.

Contractual Obligations. The following table summarizes our payment obligations and commitments as of March 31, 2026 (in thousands):

(1) Debt and interest obligations on debt assume we will exercise all available extension options on our revolving credit facility and Term Loans, upon payment of applicable fees and the satisfaction of certain customary conditions.

(2) Interest is calculated based on the loan balances and variable rates, as applicable, at March 31, 2026, and includes the effect of our interest rate derivatives.

(3) Operating lease obligations include the lease on our current corporate headquarters and the sublease on our former corporate headquarters. In addition, our operating lease obligations include a ground lease that expires in 2071 and requires a reassessment of rent payments for periods subsequent to 2025, agreed upon by both us and the lessor. As of March 31, 2026, the reassessment had not been finalized; therefore, no amounts related to this ground lease are included in the table above. We recorded lease expense of approximately $3.3 million during the three months ended March 31, 2026, based on the contractual rent in effect as of December 31, 2025.

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.

Capital Expenditures and Reserve Funds

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.

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.

Inflation

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.

Seasonality and Volatility

As is typical of the lodging industry, we experience seasonality in our business. Demand at certain of our hotels is affected by seasonal business patterns that can cause quarterly fluctuations in our revenues.

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.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and related disclosure of contingent assets and liabilities.

We evaluate our estimates on an ongoing basis. We base our estimates on historical experience, information that is currently available to us, and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect the most significant judgments and estimates used in the preparation of our consolidated financial statements.

• Impairment of investments in hotel properties. Impairment losses are recorded on investments in hotel properties to be held and used by us whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Factors we consider when assessing whether impairment indicators exist include, but are not limited to, hotel

disposition strategy and hold period, a significant decline in operating results not related to renovations or repositionings, significant changes in the manner in which the Company uses the asset, physical damage to the property due to unforeseen events such as natural disasters, and other market and economic conditions.

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.

• Income taxes. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we currently distribute at least 90% of our REIT taxable income (determined without regard to the deduction for dividends paid and excluding net capital gains) to our stockholders. As a REIT, we generally will not be subject to federal corporate income tax on that portion of our taxable income that is currently distributed to stockholders. We are subject to certain state and local taxes on our income and property, and to federal income and excise taxes on our undistributed taxable income. In addition, our wholly owned TRS, which leases our hotels from the Operating Partnership, is subject to federal and state income taxes. We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and for net operating loss, capital loss and tax credit carryforwards. The deferred tax assets and liabilities are measured using the enacted income tax rates in effect for the year in which those temporary differences are expected to be realized or settled. The effect on the deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period when the new rate is enacted. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of all available evidence, including the future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies. Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

We review any uncertain tax positions and, if necessary, we will record the expected future tax consequences of uncertain tax positions in the consolidated financial statements. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. We are required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which includes federal and certain states.

To the extent that we incur debt with variable interest rates, our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We use interest rate derivatives to manage our exposure to the interest rate risks related to our floating rate debt. We have no derivative financial instruments held for trading purposes.

As of March 31, 2026, 60.7% of our debt obligations were fixed in nature or were subject to interest rate swap derivatives, which mitigates the effect of changes in interest rates on our cash interest payments. If the market rate of interest on our variable rate debt increases or decreases by 50 basis points, interest expense on an annualized basis would increase or decrease, respectively, by approximately $1.9 million based on the amount of variable rate debt outstanding at March 31, 2026.

Attached as exhibits to this Form 10-Q are the certifications required by Rule 13a-14 of the Securities Exchange Act of 1934, as amended. This section includes information concerning the controls and control evaluations referred to in the certifications.

Evaluation of Disclosure Controls and Procedures. Based upon an evaluation of the effectiveness of disclosure controls and procedures, our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) were effective to provide reasonable assurance that information required to be disclosed in our

Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission and is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting. During our fiscal quarter to which this Quarterly Report on Form 10-Q relates, there has not occurred any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission on February 27, 2026.