8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 2, 2021

Sunstone Hotel Investors, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	001-32319	20-1296886
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(I.R.S. Employer Identification Number)
200 Spectrum Center Drive, 21st Floor Irvine, California		92618
(Address of Principal Executive Offices)		(Zip Code)

(949) 330-4000

(Registrant’s telephone number including area code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value	SHO	New York Stock Exchange
Series F Cumulative Redeemable Preferred Stock, $0.01 par value	SHO.PRF	New York Stock Exchange
Series H Cumulative Redeemable Preferred Stock, $0.01 par value	SHO.PRH	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.  ☐

Item 1.01Entry Into a Material Definitive Agreement

On July 2, 2021, Sunstone Hotel Investors, Inc. (the “Company”), as parent guarantor, Sunstone Hotel Partnership, LLC, as borrower and issuer (the “Operating Partnership”) and certain subsidiaries of the Operating Partnership as guarantors, amended the Operating Partnership’s term and revolving credit agreement and note purchase and guarantee agreement. The amendments and their changes to material terms of the agreements are described below.

Third Amendment to the Credit Agreement

On July 2, 2021, the Company, as parent guarantor, the Operating Partnership, as borrower, and certain subsidiaries of the Operating Partnership as guarantors, entered into a Third Amendment to Amended and Restated Credit Agreement (the “Third Credit Agreement Amendment”) to the Amended and Restated Credit Agreement dated October 17, 2018 (the “Existing Credit Agreement” and as so amended by the Third Amendment, the “Amended Credit Agreement”), with Wells Fargo Bank, National Association, Bank of America, N.A., JPMorgan Chase Bank, N.A., PNC Bank, National Association, U.S. Bank National Association and certain other lenders named therein. Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith, Incorporated, JPMorgan Chase Bank, N.A., PNC Capital Markets LLC and U.S. Bank National Association are joint lead arrangers, Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith, Incorporated and JPMorgan Chase Bank, N.A. are joint bookrunners, Bank of America, N.A. and JPMorgan Chase Bank, N.A. are syndications agents and Citibank, N.A., PNC Bank, National Association and U.S. Bank National Association are documentation agents of the Amended Credit Agreement.

As previously disclosed, the Amended Credit Agreement provides for a $500 million unsecured revolving credit facility, which matures on April 14, 2023, an $85 million unsecured term loan, which matures on September 3, 2022 and a $100 million unsecured term loan that matures January 31, 2023 (collectively the “Amended Term Loans”). The Company may extend the maturity date of the unsecured revolving credit facility, exercisable two times, by six (6) months for each extension, to April 2024, upon the payment of applicable fees and satisfaction of certain customary conditions.

Also, as previously disclosed, the Existing Credit Agreement extended the suspension of all original financial covenants from June 30, 2021 through the required financial covenant test for the period ended March 31, 2022 (“Covenant Relief Period”). Following the Covenant Relief Period, original financial covenants will be phased-in over the following four quarters (“Ratio Adjustment Period”). The Covenant Relief Period may be terminated, at the option of the Operating Partnership, subject to meeting the original financial covenants at the end of any quarterly measurement period.

The Third Credit Agreement Amendment makes the following two modifications to the following covenants in the Existing Credit Agreement that exist during the Covenant Relief Period and, so long as the Notes (defined below) remain outstanding, the Ratio Adjustment Period: (a) prior to the Third Credit Agreement Amendment, the Existing Credit Agreement required that a certain amount of net cash proceeds from certain incurrences of indebtedness, equity issuances or asset dispositions be applied to pay down the Amended Term Loans; now, no such requirement exists unless an Event of Default (as defined in the Amended Credit Agreement) has occurred and is continuing; and (b) prior to the Third Credit Agreement Amendment, the Existing Credit Agreement limited investments in acquisitions up to $250 million; now, this limitation no longer applies so long as such acquisitions are in Eligible Properties that will become Unencumbered Pool Properties (both as defined in the Amended Credit Agreement).

As of July 2, 2021, there was $0 outstanding under the revolving credit facility and $185 million of term loans were outstanding under the Amended Credit Agreement.

The foregoing description of the Amended Credit Agreement and Amended Term Loans is qualified in its entirety by the full terms and conditions of the Third Credit Agreement Amendment which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.

Third Amendment to the Note and Guarantee Agreement

On July 2, 2021, the Company, as parent guarantor, the Operating Partnership, as issuer, and certain subsidiaries of the Operating Partnership as guarantors, entered into the Third Amendment of the Note and Guarantee Agreement (the “Third Note Agreement Amendment”) to the Note and Guarantee Agreement dated December 20, 2016 (the “Existing Note Agreement” and as so amended to date, the “Amended Note Agreement”) with the various purchasers named therein (the “Purchasers”) which provided for the private placement of $205 million of senior unsecured notes of the Operating Partnership, of which (i) $90 million are designated as 4.69% Series A Guaranteed Senior Notes due January 10, 2026 (the “Series A Notes”) and (ii) $115 million are designated as 4.79% Series B Guaranteed Senior Notes due January 10, 2028 (the “Series B Notes” and, together with the Series A Notes, the “Notes”).

The Third Note Agreement Amendment conformed the Existing Note Agreement in substantially the same manner as the Amended Credit Agreement with respect to the removal of the $250 million cap in investments in acquisitions, so long as such acquisitions are Eligible Properties that will become Unencumbered Properties (both as defined in the Amended Note Agreement).

The foregoing description of the Amended Notes Agreement is qualified in its entirety by the full terms and conditions of the Third Note Agreement Amendment which is filed as Exhibit 10.2 to this Current Report on Form 8-K and incorporated herein by reference.

Item 2.03.Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth under Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 2.03.

Item 7.01.Regulation FD Disclosure.

On July 8, 2021, the Company issued a press release announcing the entry into the Third Credit Agreement Amendment and the Third Note Agreement Amendment. A copy of that press release is furnished as Exhibit 99.1 to this report.

The information contained in the press release attached as Exhibit 99.1 to this report shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Furthermore, the information contained in the press release attached as Exhibit 99.1 to this report shall not be deemed to be incorporated by reference in the filings of the registrant under the Securities Act of 1933, as amended.

Item 9.01Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
10.1	Third Amendment to Amended and Restated Credit Agreement, dated July 2, 2021.
10.2	Third Amendment to Note and Guarantee Agreement, dated July 2, 2021.
99.1	Press Release, dated July 8, 2021.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Sunstone Hotel Investors, Inc.
Date: July 8, 2021	By:	/s/ Bryan A. Giglia
		Bryan A. Giglia Principal Financial Officer and Duly Authorized Officer

EX-10.1

Exhibit 10.1

THIRD AMENDMENT

TO AMENDED AND RESTATED CREDIT AGREEMENT

Dated as of July 2, 2021

THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is made as of July 2, 2021 by and among SUNSTONE HOTEL PARTNERSHIP, LLC, a limited liability company formed under the laws of the State of Delaware (the “Borrower”), SUNSTONE HOTEL INVESTORS, INC., a corporation formed under the laws of the State of Maryland (the “Parent”), each of the entities set forth on Annex I hereto (together with Parent, collectively the “Guarantors”, and the Guarantors, together with the Borrower, collectively the “Loan Parties”), each of the Lenders party hereto (collectively, “Lenders”) and Wells Fargo Bank, National Association, as Administrative Agent (the “Administrative Agent”), under that certain Amended and Restated Credit Agreement dated as of October 17, 2018, by and among the Borrower, the Parent, the Lenders, the Administrative Agent and the other parties thereto (as amended, restated, supplemented or otherwise modified prior to the date hereof, the “Credit Agreement” and the Credit Agreement, as amended by this Amendment, the “Amended Credit Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Amended Credit Agreement.

WHEREAS, the Borrower has requested that the Lenders and the Administrative Agent agree to certain amendments to the Credit Agreement; and

WHEREAS, the Loan Parties, the Lenders party hereto and the Administrative Agent have so agreed on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Loan Parties, the Lenders party hereto and the Administrative Agent hereby agree as follows:

1.Amendments to the Credit Agreement.  Effective as of July 2, 2021 (the “Third Amendment Date”) but subject to the satisfaction of the conditions precedent set forth in Section 2 below, the parties hereto agree that the Credit Agreement is hereby amended as follows:

(a)Clause (b)(iv)(B) of Section 2.8. of the Credit Agreement is hereby amended by deleting the text thereof and substituting in lieu thereof the following:

“B.Amounts paid under the preceding subsections (b)(ii) and (iii) shall be allocated on a pro rata basis to (i) the Term Loans, the Revolving Loans, Swingline Loans and Reimbursement Obligations and Cash Collateralize the other Letter of Credit Liabilities (without a permanent reduction in the Revolving Commitments) and (ii) the Senior Notes.  Such pro rata amount allocable to the Obligations shall be calculated by dividing (1) the sum of the outstanding principal amount of the Loans

on such date plus the Letter of Credit Liabilities on such date, by (2) the sum of clause (1) and the outstanding principal amount of the Senior Notes on such date.  Amounts payable to the Obligations pursuant to this clause (B) shall be applied as follows: (i) unless an Event of Default has occurred and is continuing as described in clause (ii) below, all amounts so paid to the Obligations shall be applied to prepay the Revolving Loans, Swingline Loans and Reimbursement Obligations and, to the extent the other Letter of Credit Liabilities exceed $1,000,000, to Cash Collateralize the other Letter of Credit Liabilities (without a permanent reduction in the Revolving Commitments) until paid in full, then, shall be payable to (or retained by) the Borrower and (ii) if an Event of Default has occurred and is continuing on and as of the date of the Asset Sale, Equity Issuance, debt incurrence or other event or circumstance giving rise to the mandatory prepayment requirement under Section 2.8(b) (or results from such event or circumstance), all amounts so paid to the Obligations shall be applied to prepay the outstanding Term Loans on a pro rata basis until paid in full and then such amounts shall be applied to prepay any outstanding Revolving Loans, Swingline Loans and Reimbursement Obligations and, to the extent the other Letter of Credit Liabilities exceed $1,000,000, to Cash Collateralize the other Letter of Credit Liabilities (without a permanent reduction in the Revolving Commitments) until paid in full.”

(b)Clause (b) of Section 10.11. of the Credit Agreement is hereby amended by deleting the text thereof and substituting in lieu thereof the following:

“(b)Directly or indirectly make any Investment other than, so long as no Default or Event of Default then exists or would result therefrom and no portion of the cost of the acquisition thereof consists of the proceeds of Indebtedness (other than (x) Nonrecourse Indebtedness arising from the assumption of a mortgage on a Property existing at the time of the acquisition thereof and not created in contemplation of such acquisition, (y) Revolving Loans and (z) Swingline Loans), (i) acquisitions of Eligible Properties that will become Unencumbered Pool Properties within 20 Business Days following the acquisition thereof and (ii) acquisitions of other Properties and Senior Mortgage Receivables and other Mortgage Receivables and Secured Mezz Receivables in an aggregate amount during the Covenant Relief Period not to exceed $250,000,000 (plus, with respect to acquisitions of Mortgage Receivables and Secured Mezz Receivables, an amount equal to the proceeds received by the Borrower from the issuance of common Equity Interests which are not required to be applied as set forth in Section 2.8(b)(iii)).”

As so amended, the Credit Agreement shall continue in full force and effect.  

2.Conditions of Effectiveness.  The effectiveness of this Amendment is subject to the satisfaction or waiver of the following conditions precedent:

(a)Execution of Amendment and Loan Documents.  Receipt by the Administrative Agent of counterparts of this Amendment duly executed by the Loan Parties, the Lenders and the Administrative Agent.

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(b)Amendment to Senior Notes.  The Borrower, the Parent and the holders of the Senior Notes shall have entered into an amendment to the Senior Notes Agreement (and, if necessary, the Senior Notes) (the “Senior Notes Amendment”) which shall make such amendments to the terms of the Senior Notes as shall be necessary such that the terms of the Senior Notes after the Third Amendment Date shall be no more favorable to the holders thereof than the terms of the Amended Credit Agreement than before the Third Amendment Date; provided that the parties hereto acknowledge and agree that the Senior Notes Amendment will not contain amendments to the mandatory prepayment requirements set forth therein other than as may be necessary to account for the change in the application of proceeds as among the Obligations that is reflected in the Amended Credit Agreement.

(c)Absence of Legal Proceedings.  As of the date hereof, no litigation, action, suit, investigation or other arbitral, administrative or judicial proceeding is pending or threatened which could reasonably be expected to (i) result in a Material Adverse Effect or (ii) restrain or enjoin, impose materially burdensome conditions on, or otherwise materially and adversely affect, the ability of the Parent, the Borrower, any other Loan Party or the REIT to fulfill its obligations under this Amendment or the Loan Documents to which it is a party.

(d)[Reserved].

(e)Officer’s Certificate.  Receipt by the Administrative Agent of a certificate, in form and substance reasonably satisfactory to it, of a Responsible Officer (x) certifying that as of the Third Amendment Date, after giving effect to the transactions contemplated herein, (i) the Borrower and each of the other Loan Parties on a consolidated basis are Solvent, (ii) no Material Adverse Effect exists or would result from the consummation of this Amendment, (iii) no Default or Event of Default has occurred and is continuing and (iv) the representations set forth in Section 3 below are true and correct, and (y) attaching fully executed copies of the Senior Notes Amendment and all material documents executed in connection therewith.

(f)No Material Adverse Change.  Since December 31, 2020, there has been no material adverse change in the business, assets, liabilities, condition (financial or otherwise), results of operations or business prospects of Parent, the Borrower and their Subsidiaries (taken as a whole).

(g)Fees.  Receipt by the Administrative Agent and the Lenders of all fees and expenses, if any, then owing by the Borrower to the Lenders, the Administrative Agent and the Lead Arrangers.

(h)Know Your Customer Information.  The Borrower and each other Loan Party shall have provided all information reasonably requested by the Administrative Agent and each Lender (to the extent requested in writing (which may be by e-mail) at least 3 Business Days prior to the Third Amendment Date) in order to comply with applicable “know your customer” and Anti-Money Laundering Laws including without limitation, the Patriot Act.

(i)Additional Matters.  All other documents and legal matters required in connection with the transactions contemplated by this Amendment shall be reasonably satisfactory in form and substance to the Administrative Agent.

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For purposes of determining compliance with the conditions specified in this Section 2, each Lender that has signed this Amendment shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required under this Section 2 to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received written notice from such Lender prior to the date of this Amendment specifying its objections.  

3.Representations and Warranties of the Loan Parties.  The Loan Parties hereby represent and warrant as follows:

(a)The Parent, the Borrower and each other Loan Party has the right and power, and has taken all necessary action to authorize it, to execute, deliver and perform this Amendment in connection herewith in accordance with its respective terms and to consummate the transactions contemplated hereby.  This Amendment has been duly executed and delivered by the duly authorized officers of the Parent, the Borrower and each other Loan Party and each is a legal, valid and binding obligation of such Person enforceable against such Person in accordance with its respective terms, except as the same may be limited by bankruptcy, insolvency, and other similar laws affecting the rights of creditors generally and the availability of equitable remedies for the enforcement of certain obligations (other than the payment of principal) contained herein or therein and as may be limited by equitable principles generally.

(b)The execution, delivery and performance of this Amendment in accordance with its respective terms do not and will not, by the passage of time, the giving of notice, or both:  (i) require any Governmental Approval or violate any Applicable Law (including all Environmental Laws) relating to the Parent, the Borrower or any other Loan Party; (ii) conflict with, result in a breach of or constitute a default under the organizational documents of any Loan Party, or any material indenture, material agreement or other material instrument to which the Parent, the Borrower or any other Loan Party is a party or by which it or any of its respective properties may be bound; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by any Loan Party other than in favor of the Administrative Agent for its benefit and the benefit of the other Lender Parties.

(c)As of the date hereof and after giving effect to the terms of this Amendment, no Default or Event of Default has occurred and is continuing.

(d)The representations and warranties made by the Borrower in the Amended Credit Agreement or any other Loan Document or which are contained in any certificate furnished in connection therewith are true and correct in all material respects (or in the case of a representation or warranty qualified by materiality, true and correct in all respects) on and as of the date hereof as if made on and as of such date (except for those which expressly relate to an earlier date in which case such representations and warranties shall be true and correct as of such earlier date).

4.Reaffirmation.  (i) Each Guarantor hereby reaffirms its continuing obligations to the Administrative Agent, the Lenders, the Issuing Bank and the Specified Derivatives Providers under the Guaranty and agrees that the transactions contemplated by this Amendment, including

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the effectiveness of the Amended Credit Agreement, shall not in any way affect the validity and enforceability of the Guaranty, or reduce, impair or discharge the obligations of such Guarantor thereunder; and (ii) each of the Borrower and each Guarantor hereby reaffirms its acceptance of the non-exclusive jurisdiction of the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York and any appellate court from any thereof, as provided in Section 13.4(b) of the Credit Agreement.

5.Reference to and Effect on the Credit Agreement.

(a)Upon the effectiveness hereof, each reference to the Credit Agreement in the Credit Agreement (including any reference to “this  Agreement,” “hereunder,” “herein” or words of like import referring thereto) or in any other Loan Document shall mean and be a reference to the Amended Credit Agreement.

(b)Each Loan Document and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

(c)The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement, the Notes, any of the other Loan Documents or any other documents, instruments and agreements executed and/or delivered in connection therewith or herewith.

(d)This Amendment is a “Loan Document” under (and as defined in) the Amended Credit Agreement.

(e)Except as expressly herein amended, the terms and conditions of the Credit Agreement and the other Loan Documents remain in full force and effect. The amendments contained herein shall be deemed to have prospective application only from the date as of which this Amendment is dated.

6.Expenses.  The Loan Parties jointly and severally agree to pay or reimburse the Administrative Agent and the Lead Arrangers for all their reasonable out-of-pocket costs and expenses incurred in connection with the preparation, due diligence, negotiation, printing and execution of, this Amendment, and any other documents prepared in connection herewith, and the consummation and administration of the transactions contemplated hereby and thereby, together with the reasonable fees and disbursements of one outside counsel to the Administrative Agent and the Lead Arrangers.

7.Governing Law.  THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,

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THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

8.Headings.  Section and subsection headings herein are intended for convenience only and shall be ignored in construing this Amendment.

9.Release.  In consideration of the amendments and agreements contained herein, each Loan Party hereby waives and releases the Administrative Agent, each Lender, the Swingline Lender and the Issuing Bank from any and all claims and defenses, whether known or unknown, with respect to the Credit Agreement and the other Loan Documents and the transactions contemplated thereby to the extent any such claims and defenses have arisen on or prior to the date hereof.

10.Counterparts.  This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.  Delivery of an executed counterpart of a signature page of this Amendment by facsimile, e-mailed pdf or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed original counterpart of this Amendment.

[remainder of page intentionally left blank; signature pages follow]

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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Third Amendment to Amended and Restated Credit Agreement to be duly executed and delivered as of the date first above written.

sunstone hotel partnership, llc,

a Delaware limited liability company

By:	/s/ John V. Arabia
Name:	John V. Arabia
Title:	President and Chief Executive Officer

sunstone hotel investors, inc.,

a Maryland corporation

By:	/s/ John V. Arabia
Name:	John V. Arabia
Title:	President and Chief Executive Officer

[Signatures Continued on Next Page]

GUARANTORS:SUNSTONE EAST GRAND, LLC

SUNSTONE ST. CHARLES, LLC

SUNSTONE SAINT CLAIR, LLC

WB SUNSTONE-PORTLAND, LLC

SUNSTONE OCEAN, LLC

SUNSTONE K9, LLC

SUNSTONE RED OAK, LLC

SUNSTONE EC5, LLC

SUNSTONE HAWAII 3-0, LLC

SUNSTONE HOLDCO 4, LLC

SUNSTONE HOLDCO 5, LLC

SUNSTONE HOLDCO 6, LLC

SUNSTONE HOLDCO 8, LLC

SUNSTONE HOLDCO 10, LLC

BOSTON 1927 OWNER, LLC

SUNSTONE WHARF, LLC

SUNSTONE SEA HARBOR, LLC

KEY WEST 2016, LLC

SUNSTONE SEA HARBOR HOLDCO, LLC

SWW NO. 1, LLC

OAKS & OLIVES, LLC

By:	/s/ John V. Arabia
Name:	John V. Arabia
Title:	President and Chief Executive Officer

[Signatures Continued on Next Page]

LENDERS: WELLS FARGO BANK, NATIONAL ASSOCIATION,

individually in its capacities as Administrative Agent, as Swingline Lender, as an Issuing Bank and as a Lender

By:	/s/ Mark F. Monahan
Name:	Mark F. Monahan
Title:	Director

[Signatures Continued on Next Page]

BANK OF AMERICA, N.A., as an Issuing Bank and a Lender

By:	/s/ Suzanne E. Pickett
Name:	Suzanne E. Pickett
Title:	Senior Vice President

[Signatures Continued on Next Page]

JPMORGAN CHASE BANK, N.A., as an Issuing Bank and a Lender

By:	/s/ Cody A. Canafax
Name:	Cody A. Canafax
Title:	Vice President

[Signatures Continued on Next Page]

PNC BANK, NATIONAL ASSOCIATION, as a Lender

By:	/s/ David C. Drouillard
Name:	David C. Drouillard
Title:	Senior Vice President

[Signatures Continued on Next Page]

U.S. BANK NATIONAL ASSOCIATION, as a Lender

By:	/s/ Michael Diemer
Name:	Michael Diemer
Title:	Senior Vice President

[Signatures Continued on Next Page]

CITIBANK, N.A., as a Lender

By:	/s/ Tina Lin
Name:	Tina Lin
Title:	Vice President

[Signatures Continued on Next Page]

BBVA USA, as a Lender

By:	/s/ Don Byerly
Name:	Don Byerly
Title:	Executive Vice President

[Signatures Continued on Next Page]

the Bank of nova scotia, as a Lender

By:	/s/ Ajit Goswami
Name:	Ajit Goswami
Title:	Managing Director & Industry Head

[Signatures Continued on Next Page]

TRUIST BANK, as a Lender

By:	/s/ Ryan Almond
Name:	Ryan Almond
Title:	Director

Annex I

Guarantors

See attached.

EX-10.2

Exhibit 10.2

EXECUTION VERSION​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​

Sunstone Hotel Partnership, LLC

Sunstone Hotel Investors, Inc.

Third AmendmentDated as of July 2, 2021



to



Note and Guarantee Agreement
Dated as of December 20, 2016

Re:$120,000,000 4.69% Series A Guaranteed Senior Notes due January 10, 2026

$120,000,000 4.79% Series B Guaranteed Senior Notes due January 10, 2028

Third Amendment

This Third Amendment dated as of July 2, 2021 (this “Amendment”) is entered into by and among Sunstone Hotel Partnership, LLC, a Delaware limited liability company (the “Issuer”), and Sunstone Hotel Investors, Inc., a Maryland corporation (the “Parent Guarantor” and, together with the Issuer, collectively the “Constituent Companies” and individually each a “Constituent Company”), and each of the institutional investors listed on the signature pages hereto (collectively, the “Noteholders”).

Recitals:

A.The Constituent Companies and the purchasers listed on the Purchaser Schedule thereto heretofore entered into that certain Note and Guarantee Agreement dated as of December 20, 2016 (as amended by the First Amendment dated as of July 15, 2020 and the Second Amendment dated as of December 21, 2020, the “Note Agreement”), pursuant to which the Issuer issued and sold $120,000,000 aggregate principal amount of its 4.69% Series A Guaranteed Senior Notes due January 10, 2026 (the “Series ANotes”) and $120,000,000 aggregate principal amount of its 4.79% Series B Guaranteed Senior Notes due January 10, 2028 (the “Series B Notes” and, together with the Series A Notes, collectively the “Notes”).

B.The Constituent Companies and the Noteholders now desire to further amend the Note Agreement in the respects, but only in the respects, hereinafter set forth.

C.Capitalized terms used herein shall have the respective meanings ascribed thereto in the Note Agreement unless herein defined or the context shall otherwise require.

D.All requirements of law have been fully complied with and all other acts and things necessary to make this Amendment a valid, legal and binding instrument according to its terms for the purposes herein expressed have been done or performed.

Now,therefore, upon the full and complete satisfaction of the conditions precedent to the effectiveness of this Amendment set forth in Section 3 below, and in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Constituent Companies and the Noteholders do hereby agree as follows:

SECTION 1.Amendment.

Section 10.10(b) of the Note Agreement shall be and is hereby amended and restated in its entirety to read as follows:

(b)Directly or indirectly make any Investment other than, so long as no Default or Event of Default then exists or would result therefrom and no portion of the cost of acquisition thereof consists of the proceeds of Indebtedness (other than (x) Nonrecourse Indebtedness arising from the assumption of a mortgage on a Property existing at the time of the acquisition thereof and not created in

contemplation of such acquisition, (y) Revolving Loans (as defined in the Bank Credit Agreement) and (z) Swingline Loans (as defined in the Bank Credit Agreement)), (1) acquisitions of Eligible Properties that become Unencumbered Properties within 20 Business Days following the date of the acquisition thereof and (2) acquisitions of other Properties, Senior Mortgage Receivables, other Mortgage Receivables and Secured Mezz Receivables in an aggregate amount during the Covenant Relief Period not to exceed $250,000,000 (plus, with respect to acquisitions of Mortgage Receivables and Secured Mezz Receivables, an amount equal to the proceeds received by the Parent Guarantor from the issuance of common Equity Interests which are not required to be applied as set forth in Section 9.14).

SECTION 2.Representations and Warranties of the Constituent Companies.

To induce the Noteholders to execute and deliver this Amendment (which representations shall survive the execution and delivery of this Amendment), each Constituent Company represents and warrants to the Noteholders that:

(a)this Amendment has been duly authorized by all necessary limited liability company or corporate action on the part of such Constituent Company and executed and delivered by such Constituent Company, and this Amendment and the Note Agreement, as amended by this Amendment, constitute the legal, valid and binding obligations of such Constituent Company enforceable against such Constituent Company in accordance with its terms, except as such enforceability may be limited by (1) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (2) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law);

(b)the execution and delivery of this Amendment by such Constituent Company and performance by such Constituent Company of this Amendment and the Note Agreement, as amended by this Amendment, will not (1) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of such Constituent Company under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter, regulations or by-laws, shareholders agreement or any other agreement or instrument to which such Constituent Company is bound or by which such Constituent Company or any of its Subsidiaries or any of their respective properties may be bound or affected, (2) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority applicable to such Constituent Company or any of its Subsidiaries or (3) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to such Constituent Company or any of its Subsidiaries;

(c)no consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution and

- 2 -

delivery by such Constituent Company of this Amendment or the performance by such Constituent Company of this Amendment or the Note Agreement, as amended by this Amendment;

(d)neither such Constituent Company nor any other Person has paid or agreed to pay, and neither such Constituent Company nor any Subsidiary will pay or agree to pay, any amendment fees or similar consideration to any Person, in connection with amending of the Bank Credit Agreement in a manner consistent with the amendments set forth herein; and

(e)as of the date hereof and after giving effect to this Amendment, no Default or Event of Default has occurred which is continuing.

SECTION 3.Conditions to Effectiveness of this Amendment.

Upon satisfaction of each and every one of the following conditions, this Amendment shall become effective as of the date first written above:

(a)executed counterparts of this Amendment, duly executed by the Company and the Required Holders, shall have been delivered to each Noteholder or its special counsel;

(b)the representations and warranties of the Company set forth in Section 2 shall be true and correct on and with respect to the date hereof and each Noteholder shall have received an Officer’s Certificate to such effect;

(c)the Bank Credit Agreement shall have been amended in a manner such that the terms of the Note Agreement, after giving effect to this Amendment, shall be no less favorable to the Noteholders than the terms of the Bank Credit Agreement, as so amended;

(d)the Company shall have paid the fees and expenses of Schiff Hardin LLP, special counsel to the Noteholders, in connection with the negotiation, preparation, approval, execution and delivery of this Amendment to the extent invoiced by noon (New York time) on the date hereof.

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SECTION 4.Reaffirmation of Guaranty Agreement.

By their execution and delivery hereof, the undersigned Subsidiary Guarantors hereby acknowledge and agree to this Amendment, reaffirm the Subsidiary Guaranty Agreement given in favor of each Noteholder and their respective successors and assigns and acknowledge and agree that Excess Leverage Fees shall constitute additional obligations guaranteed under the Subsidiary Guaranty Agreement.

SECTION 5.Miscellaneous.

5.1.This Amendment shall be construed in connection with and as part of the Note Agreement, and except as modified and expressly amended by this Amendment, all terms, conditions and covenants contained in the Note Agreement and the Notes are hereby ratified and shall be and remain in full force and effect.  

5.2.Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Amendment may refer to the Note Agreement without making specific reference to this Amendment but nevertheless all such references shall include this Amendment unless the context otherwise requires.

5.3.The descriptive headings of the various Sections or parts of this Amendment are for convenience only and shall not affect the meaning or construction of any of the provisions hereof.

5.4.This Amendment shall be governed by and construed in accordance with the laws of the State of New York.

5.5.The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Amendment may be executed in any number of counterparts, each executed counterpart constituting an original, but all together only one agreement.

[Remainder of page intentionally left blank.]

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Sunstone Hotel Partnership, LLC,

a Delaware limited liability company

By:	/s/ John V. Arabia
Name:	John V. Arabia
Title:	President and Chief Executive Officer

Sunstone Hotel Investors, Inc.,

a Maryland corporation

By:	/s/ John V. Arabia
Name:	John V. Arabia
Title:	President and Chief Executive Officer

Sunstone East Grand, LLC

Sunstone St. Charles, LLC

Sunstone Saint Clair, LLC

WB Sunstone -Portland, LLC

Sunstone Ocean, LLC

Sunstone K9, LLC

Sunstone Red Oak, LLC

Sunstone EC5, LLC

Sunstone Hawaii 3-0, LLC

Sunstone Holdco 4, LLC

Sunstone Holdco 5, LLC

Sunstone Holdco 6, LLC

Sunstone Holdco 8, LLC

Boston 1927 Owner, LLC

Sunstone Wharf, LLC

Sunstone Sea Harbor, LLC

Key West 2016, LLC

Sunstone Holdco 10, LLC

Sunstone Sea Harbor Holdco, LLC

SWW No. 1 LLC

Oaks & Olives, LLC

By:	/s/ John V. Arabia
Name:	John V. Arabia
Title:	President and Chief Executive Officer

Accepted and Agreed to:

USAA Life Insurance Company

USAA Casualty Insurance Company

United Services Automobile Association

By: BlackRock Financial Management, Inc., its investment manager

By:	/s/ Marshall Merriman
Name:	Marshall Merriman
Title:	Managing Director

Americo Financial Life & Annuity Insurance Company

By:

Name:

Title:

Travelers Casualty and Surety Company

By:	/s/ Peter Puster
Name:	Peter Puster
Title:	Senior Vice President

The Standard Fire Insurance Company

By:	/s/ Peter Puster
Name:	Peter Puster
Title:	Senior Vice President

Life Insurance Company of the Southwest

By:	/s/ Paul Koenig
Name:	Paul Koenig
Title:	Head of Portfolio Management

National Life Insurance Company

By:	/s/ Paul Koenig
Name:	Paul Koenig
Title:	Head of Portfolio Management

National Life Insurance Company (CLOSED BLOCK)

By:	/s/ Paul Koenig
Name:	Paul Koenig
Title:	Head of Portfolio Management

Pacific Life Insurance Company

By:	/s/ Kevin Liang
Name:	Kevin Liang
Title:	Senior Director

American Republic Insurance Company

Blue Cross and Blue Shield of Florida, Inc. Catholic United Financial

Catholic Financial Life

The Cincinnati Life Insurance Company

Farm Bureau Life Insurance Company of Michigan

Gleaner Life Insurance Society

Great Western Insurance Company

Minnesota Life Insurance Company

UnitedHealthcare Insurance Company

Trinity Universal Insurance Company

Western Fraternal Life Association

By:Securian Asset Management, Inc.

By:	/s/ Robin J. Lenarz
Name:	Robin J. Lenarz
Title:	Vice President

Equitable Financial Life Insurance Company

By:	/s/ Amy Judd
Name:	Amy Judd
Title:	Investment Officer

AB US Diversified Credit BM Fund

By: AllianceBernstein L.P., Its Investment Advisor

By:

Name:

Title:

Thrivent Financial for Lutherans

By:	/s/ Martin Rosacker
Name:	Martin Rosacker
Title:	Managing Director

Bankers Life and Casualty Company

Washington National Insurance Company

By: 40|86 Advisors, Inc., acting as Investment Advisor

By:

Name:

Title:

EX-99.1

Exhibit 99.1

For Additional Information:

Bryan Giglia

Sunstone Hotel Investors, Inc.

(949) 382-3036

Aaron Reyes

Sunstone Hotel Investors, Inc.

(949) 382-3018

SUNSTONE HOTEL INVESTORS SUCCESSFULLY AMENDS UNSECURED DEBT AGREEMENTS, PROVIDING ENHANCED ACQUISITION CAPACITY

IRVINE, CA – July 8, 2021 – Sunstone Hotel Investors, Inc. (the “Company” or “Sunstone”) (NYSE: SHO), the owner of Long-Term Relevant Real Estate® in the hospitality sector, announced that it has completed amendments to the agreements governing its in-place unsecured debt, including the Company’s $500 million revolving credit facility, $185 million of funded term loan facilities and $205 million of outstanding private placement senior notes. Pursuant to the terms of the amendments, certain restrictions limiting the aggregate value of unencumbered hotel acquisitions that the Company can complete during the covenant waiver period have been removed. Following the amendments, the Company is no longer subject to the restrictive covenant limiting non-equity funded acquisitions to a maximum of $250 million. Additionally, provided that an event of default has not occurred, the agreement governing Sunstone’s revolving credit facility and funded term loans no longer requires a mandatory prepayment from net proceeds received from asset sales or equity issuances. The amended unsecured debt agreements continue to provide for a waiver of the financial covenants through March 31, 2022, and require compliance with various other restrictions during the covenant waiver period, including the maintenance of a minimum liquidity threshold.

John Arabia, President and CEO, stated, "We are pleased to announce another favorable amendment of our unsecured debt agreements and appreciate the continued support from our long-standing lender and noteholder relationships. The amended agreements provide the Company with incremental capacity and enhanced flexibility to pursue additional Long-Term Relevant Real Estate acquisitions. In addition, this most recent amendment positions Sunstone to better take advantage of acquisition opportunities that may arise as the industry recovers, without having to solely rely on the need to sell existing assets or raise additional equity capital."

About Sunstone Hotel Investors, Inc.

Sunstone Hotel Investors, Inc. is a lodging real estate investment trust (“REIT”). Sunstone’s business is to acquire, own, asset manage and renovate or reposition hotels considered to be Long-Term Relevant Real Estate®. For further information, please visit Sunstone’s website at www.sunstonehotels.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will” and other similar terms and phrases, including opinions, references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: the impact the COVID-19 pandemic has on the Company’s business and the economy, as well as the response of governments and the Company to the pandemic, and how quickly and successfully effective vaccines and

therapies are distributed and administered; increased risks related to employee matters, including increased employment litigation and claims for severance or other benefits tied to termination or furloughs as a result of temporary hotel suspensions or reduced hotel operations due to COVID-19; general economic and business conditions, including a U.S. recession, trade conflicts and tariffs, regional or global economic slowdowns and any type of flu or disease-related pandemic that impacts travel or the ability to travel, including COVID-19; the need for business-related travel, including the increased use of business-related technology; rising hotel operating costs due to labor costs, workers’ compensation and health-care related costs, utility costs, property and liability insurance costs, unanticipated costs such as acts of nature and their consequences and other costs that may not be offset by increased room rates; the ground, building or airspace leases for three of the hotels the Company has interests in as of the date of this release; the need for renovations, repositionings and other capital expenditures for the Company’s hotels; the impact, including any delays, of renovations and repositionings on hotel operations; new hotel supply, or alternative lodging options such as timeshare, vacation rentals or sharing services such as Airbnb, in the Company’s markets, which could harm its occupancy levels and revenue at its hotels; competition from hotels not owned by the Company; relationships with, and the requirements, performance and reputation of, the managers of the Company’s hotels; relationships with, and the requirements and reputation of, the Company’s franchisors and hotel brands; the Company’s hotels may become impaired, or its hotels which have previously become impaired may become further impaired in the future, which may adversely affect its financial condition and results of operations; competition for the acquisition of hotels, and the Company’s ability to complete acquisitions and dispositions; performance of hotels after they are acquired; changes in the Company’s business strategy or acquisition or disposition plans; the Company’s level of debt, including secured, unsecured, fixed and variable rate debt; financial and other covenants in the Company’s debt and preferred stock; the impact on the Company’s business of potential defaults by the Company on its debt agreements or leases; volatility in the capital markets and the effect on lodging demand or the Company’s ability to obtain capital on favorable terms or at all; the Company’s need to operate as a REIT and comply with other applicable laws and regulations, including new laws, interpretations or court decisions that may change the federal or state tax laws or the federal or state income tax consequences of the Company’s qualification as a REIT; potential adverse tax consequences in the event that the Company’s operating leases with its taxable REIT subsidiaries are not held to have been made on an arm’s-length basis; system security risks, data protection breaches, cyber-attacks, including those impacting the Company’s hotel managers or other third parties, and systems integration issues; other events beyond the Company’s control, including climate change, natural disasters, terrorist attacks or civil unrest; and other risks and uncertainties associated with the Company’s business described in its filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All forward-looking information provided herein is as of the date of this release, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

This release should be read together with the consolidated financial statements and notes thereto included in our most recent reports on Form 10-K and Form 10-Q. Copies of these reports are available on our website at www.sunstonehotels.com and through the SEC’s Electronic Data Gathering Analysis and Retrieval System (“EDGAR”) at www.sec.gov.

XML

Document and Entity Information	Jul. 02, 2021
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jul. 02, 2021
Entity Registrant Name	Sunstone Hotel Investors, Inc.
Entity Central Index Key	0001295810
Entity Incorporation, State or Country Code	MD
Entity File Number	001-32319
Entity Tax Identification Number	20-1296886
Entity Address, Address Line One	200 Spectrum Center Drive
Entity Address, Adress Line Two	21st Floor
Entity Address, City or Town	Irvine
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92618
City Area Code	949
Local Phone Number	330-4000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Common Stock
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	SHO
Security Exchange Name	NYSE
Series F Cumulative Redeemable Preferred Stock
Title of 12(b) Security	Series F Cumulative Redeemable Preferred Stock, $0.01 par value
Trading Symbol	SHO.PRF
Security Exchange Name	NYSE
Series H Cumulative Redeemable Preferred Stock
Title of 12(b) Security	Series H Cumulative Redeemable Preferred Stock, $0.01 par value
Trading Symbol	SHO.PRH
Security Exchange Name	NYSE