The holder of the second-most Sunstone Hotel Investors stock has urged the company toward a sale or to liquidate assets to preserve value for shareholders.

Tarsadia Capital sent a letter to the REIT on Friday arguing the hotel investor's portfolio is undervalued and has led to persistent poor performance in its stock. Tarsadia, which is the public investment management arm of a family office, owns 3.4% of Sunstone, the largest share after Blackstone.

Tarsadia has called for the sale or liquidation of assets for the REIT after conversations with management and the board about how to navigate the company's future.

"Sunstone’s current trajectory as a subscale lodging REIT is simply not tenable," Tarsadia Capital Head of Research Michael Ching said in the letter. "The Board needs immediate refreshment and must commence a robust strategic alternatives process to unlock value for shareholders."

Tarsadia is also pushing for Sunstone to appoint new directors to the REIT's eight-member board, who would be vetted by Tarsadia.

The company said that Sunstone's portfolio, which consists of 14 properties — including the Boston Marriott Long Wharf, the Four Seasons Napa Valley, the Hilton San Diego Bayfront and the Wailea Beach Resort in Hawaii — is too small to attract public market investors.

The small portfolio also leaves Sunstone in a tight position when exposed to weather events, including storms and wildfires, or even hotel renovations, according to Tarsadia.

Tarsadia also said the portfolio unevenly brings in revenue, with the top seven properties raking in 85% of the earnings.