Sunstone Hotel Investors, Inc. Leases Disclosure
9. Leases
As of both December 31, 2025 and 2024, the Company had operating leases for ground, office, equipment, and airspace leases with maturity dates ranging from 2026 through 2097, excluding renewal options. Including renewal options available to the Company, the lease maturity date extends to 2147.
Operating leases were included on the Company’s consolidated balance sheets as follows (in thousands):
December 31, | |||||||
2025 | 2024 | ||||||
Right-of-use assets, net | $ | 4,418 | $ | 8,464 | |||
Lease obligations | $ | 7,348 | $ | 12,019 | |||
Weighted average remaining lease term | 5 years | ||||||
Weighted average discount rate | 5.8 | % | |||||
Lease Expense
The components of lease expense, as well as supplemental cash flow information for operating leases, were as follows (in thousands):
2025 | 2024 | 2023 | |||||||
Operating lease cost | $ | 5,497 | $ | 5,368 | $ | 5,427 | |||
Variable lease cost (1) | 8,134 | 7,824 | 8,438 | ||||||
Sublease income (2) | (1,187) | (1,187) | (1,187) | ||||||
Total lease cost | $ | 12,444 | $ | 12,005 | $ | 12,678 | |||
Operating cash flows for operating leases | $ | 6,099 | $ | 5,783 | $ | 5,527 | |||
| (1) | Several of the Company’s hotels pay percentage rent, which is calculated on operating revenues above certain thresholds. |
| (2) | Sublease income is included in corporate overhead in the accompanying consolidated statements of operations for the years ended December 31, 2025, 2024 and 2023. |
At December 31, 2025, future maturities of the Company’s operating lease obligations were as follows (in thousands):
2026 | $ | 2,563 | |
2027 | 2,628 | ||
2028 | 2,077 | ||
2029 | 450 | ||
2030 | 53 | ||
Thereafter | 961 | ||
Total lease payments (1) | 8,732 | ||
Less: interest (2) | (1,384) | ||
Present value of lease obligations | $ | 7,348 |
| (1) | Total lease payments do not include a total of $3.3 million in sublease income the Company expects to recognize in 2026 through August 2028. Operating lease obligations also do not include a ground lease that expires in 2071 and requires a reassessment of rent payments due after 2025, agreed upon by both the Company and the lessor. The reassessment was not finalized as of December 31, 2025. |
| (2) | Calculated using the respective discount rate for each lease. |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 12, 2021 | |
| 2019 | Feb 19, 2020 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.