Item 1.01 | Entry Into a Material Definitive Agreement. |
On September 24, 2025, Sunstone Hotel Investors, Inc. (the “Company”) entered into a Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”) by and among the Company; Sunstone Hotel Partnership, LLC; the lenders party thereto; Wells Fargo Bank, National Association, as administrative agent; Wells Fargo Securities, LLC, BofA Securities, Inc., JPMorgan Chase Bank, N.A., PNC Capital Markets LLC, U.S. Bank National Association, Truist Securities, Inc., Regions Capital Markets and The Huntington National Bank, as joint lead arrangers; Wells Fargo Securities, LLC, BofA Securities, Inc. and JPMorgan Chase Bank, N.A., as joint bookrunners; Bank of America, N.A. and JPMorgan Chase Bank, N.A., as syndication agents; and Capital One, National Association and Manufacturers and Traders Trust Company, as documentation agents. The Amended Credit Agreement provides for a $500 million unsecured revolving credit facility and three unsecured term loan facilities in the aggregate amount of $850 million. The Company’s operating partnership, Sunstone Hotel Partnership, LLC, is the borrower under the Amended Credit Agreement and certain of the Company’s subsidiaries guarantee its obligations under the Amended Credit Agreement.
The revolving credit facility under the Amended Credit Agreement matures on September 24, 2029. The Company may extend the maturity date of the revolving credit facility under the Amended Credit Agreement, exercisable two (2) times, by six (6) months for each extension, to September 24, 2030, upon the payment of applicable fees and satisfaction of certain customary conditions.
As part of the Amended Credit Agreement, the Company increased the aggregate amount of its two existing unsecured term loans from $350 million to $550 million ($275 million (the “Term 1 Loan”) and $275 million (the “Term 2 Loan”), respectively) and added a new unsecured term loan in the aggregate amount of $300 million (“Term 3 Loan”). The Term 1 Loan is available on a delayed draw basis, of which only $185 million was drawn at closing and remainder of which is available for a period of 150 days post-closing. The Term 1 Loan matures on January 24, 2029; the Term 2 Loan matures on January 24, 2030; and the Term 3 Loan matures on January 24, 2031. The Company may extend (x) the maturity date of the Term 1 Loan under the Amended Credit Agreement, exercisable two (2) times, by twelve (12) months for each extension, to January 24, 2031, and (y) the maturity date of the Term 2 Loan under the Amended Credit Agreement, exercisable one (1) time, by twelve (12) months, to January 24, 2031, in each case, upon the payment of applicable fees and satisfaction of certain customary conditions.
The Company also has the right to increase the revolving portion of the Amended Credit Agreement, or to add term loans, in an amount up to $300 million, for an aggregate facility of $1.65 billion, from lenders that are willing to provide such increase or such additional term loans.
Interest is paid on the periodic advances on the revolving facility and amounts outstanding on the term loans at varying rates, based upon adjusted term SOFR as defined in the Amended Credit Agreement plus an applicable margin. The applicable margin is based upon the Company’s ratio of net indebtedness to EBITDA, as follows:
| | | | | |
Level | Leverage Ratio | Applicable Margin for Revolving Loans that are SOFR Loans | Applicable Margin for Revolving Loans that are
Base Rate Loans | Applicable Margin for Term Loans that are
SOFR Loans | Applicable Margin for Term Loans that are
Base Rate Loans |
1 | Less than
3.00 to 1.00 | 1.40% | 0.40% | 1.35% | 0.35% |
2 | Greater than or equal to
3.00 to 1.00
but less than
3.50 to 1.00 | 1.45% | 0.45% | 1.40% | 0.40% |
3 | Greater than or equal to
3.50 to 1.00
but less than
4.00 to 1.00 | 1.50% | 0.50% | 1.45% | 0.45% |
4 | Greater than or equal to
4.00 to 1.00
but less than
5.00 to 1.00 | 1.60% | 0.60% | 1.55% | 0.55% |
5 | Greater than or equal to
5.00 to 1.00
but less than
5.50 to 1.00 | 1.80% | 0.80% | 1.75% | 0.75% |
6 | Greater than or equal to
5.50 to 1.00
but less than
6.00 to 1.00 | 1.95% | 0.95% | 1.85% | 0.85% |
7 | Greater than or equal to
6.00 to 1.00 | 2.25% | 1.25% | 2.20% | 1.20% |
