Welcome to the Sunstone Hotel Investors first quarter earnings call. At this time all participants are in listen only mode. (Operator Instructions) I would now like to turn the conference over to Mr. Bryan Giglia, Senior Vice President Finance. Please go ahead, Sir.

Thank you. Good afternoon everyone and thank you for joining us today. By now you should have all received a copy of our earnings release which was distributed this morning. If you do not yet have a copy you can access it on the investor relations section of our website at www.SunstoneHotels.com. Before we begin this conference I would like to remind everyone that this call contains forward-looking statements that are subject to risks and uncertainties including those described in our prospectuses, 10Qs, 10Ks and other filings with the SEC which could cause actual results to differ materially from those projected. We caution you to consider those factors in evaluating our forward-looking statements. We also note that this call may contain non-GAAP financial information including EBITDA, adjusted EBITDA, FFO, adjusted FFO and hotel EBITDA margins. We are providing that information as a supplement to information prepared in accordance with generally accepted accounting principles. With us today are Art Buser, President and Chief Executive Officer; Ken Cruse, Chief Financial Officer. Mark Hoffman, Chief Operating Officer, will also be available to answer questions during the Q&A portion of this call. I would like to turn the call over to Art. Art please go ahead.

Thanks Bryan. Good morning and/or good afternoon everybody and thank you for joining us today. Since we already provided an update detailing first quarter operating results on our business update call three weeks ago, during today’s call I will recap the highlights of the quarter. Following that I will provide an update on current operating trends and examples of how we are doing with our managers to build on this positive momentum and maximizing cash flow. Last, I will provide an update on both internal and external investment opportunities and the results of our RFP process. Finally, Ken will provide additional detail on our finance initiatives including the acquisition of two pieces of debt. Looking at reviewing current operations for our 29 hotel portfolio adjusted EBITDA for the first quarter was $27.3 million and adjusted FFO and adjusted FFO per share were $4.2 million and $0.04 respectively. Reconciliations for adjusted EBITDA and adjusted FFO to net income can be found on our earnings release filed today. Again, all RevPAR stats discussed on today’s call are pro forma for our 29 hotel portfolio unless we note otherwise. For the first quarter our total portfolio RevPAR was down 6.5% to prior year. Occupancy was up1.4 points and rate was down 8.4%. Excluding our two D.C. assets both of which benefited from the Presidential Inauguration in 2009 our total portfolio RevPAR was down 4% to the prior year. Occupancy increased by 2.1 points while rate was down 7%. New York City and Boston continue to be leading indicator markets. Our Hilton Times Square generated 14 sell-out nights during the first quarter compared to two sell-out nights last year. Additionally, during the first quarter our Hilton Times Square realized 35 nights with a higher average daily rate than the same day in 2009. This…

Thanks a lot Art. Thank you to everyone joining us today. As we updated you on recent finance transactions during our April intra-quarter update my comments today will be fairly brief. We ended the quarter with approximately $374 million in cash and cash equivalents including restricted cash and pro forma for the repayment on the mortgage of our Times Square Hilton, 11 of our hotels will be unencumbered with debt. With just over $1 billion of well-staggered, flexible debt and only $100 million of debt maturities through May of 2015 we feel our capital structure is appropriately balanced at this time. With that in mind and in light of the continued economic stabilization and improving fundamentals in the lodging industry one of our key 2010 finance goals is to reduce our excess cash balance to a more appropriate level through disciplined investments. As previously disclosed subsequent to the end of the quarter we invested $83 million to release three assets from the $246 million cross-collateralized mortgage pool. These assets were the Courtyard Los Angeles Airport, the Kahler Suites in Rochester, Minnesota and the Marriott also in Rochester, Minnesota. We are in the process of conveying the remaining 8 assets in this loan pool to the lender in satisfaction of the remaining debt balance. We expect to complete this process during the second quarter. We continue to work with the lenders representative on the prepayment of the $81 million Hilton Times Square mortgage which matures at the end of this year and we intend to complete this prepayment which will eliminate nearly $5 million of annual interest expense during the second or third quarter of this year. Also on the finance front we recently purchased a package of two hotel loans with a combined principle value of $32.5 million plus approximately…

Thank Ken. You know, we end these calls by telling you we continue to run our business with a single focus we exist to outperform. As you might ask, what exactly is Sunstone going to focus on to outperform? Well in the 1/3 of the year behind us we remain focused on four things; growth, rate, expense creep and our people. Let me speak to those first about growth. It is not news we are chasing acquisitions and a lot of others are too. I am optimistic we will transact the right deals for the company. To answer the question we are always asked, are you getting close on any deals? Let me simply say we cannot get any closer than we have without closing on one. We have pointed to CapEx as an area to get returns that could be superior to some acquisitions and it appears now is the right time both in terms of minimizing cost and minimizing displacement. Fundamentals suggest we are at a point in the cycle that a company should grow and will do so with well timed and matched capital be it common, preferred to debt. Over-equitizing, while arguably is not a word, is something we don’t aspire to. Let’s talk about rate. I am optimistic about the prospects of our managers to increase rate and well I should be. Sunstone and many of our peers ranked close to 70% occupancy last year and with higher occupancy trends this year rate compression ought to be happening right now. While 2010 rate is pretty well baked particularly for group and corporate negotiating segments the opportunity this year is probably mostly in mix. Now granted corporate negotiated volume is up a lot for some hotels, as much as 20%, but at the same time most…

(Operator Instructions) The first question comes from the line of Chris Woronka – Deutsche Bank Securities. Chris Woronka – Deutsche Bank Securities: I wonder if you could talk about the rate strategy. Do you feel as if you are differentiated there and what is the operator reaction so far in terms of being able to push rate down? I think some of the other weaker players might still be having some ground to make up on occupancy. What has your reaction been from the operators?

Sure. Mostly great. Again, because many management contracts have incentive fees they have a financial incentive to be aggressive. Like I mentioned because there is more clarity in how any market competitors are pricing I think hotels simply can watch. If the hotel next door is charging more and having success at the asset management level, Mark Hoffman is on the phone within a day or a week saying why aren’t we doing the same or why aren’t we leading in that regard. I think the information flow helps there. So it has been mostly good. In terms of the first question on do we differentiate ourselves. We are a REIT. We don’t manage the hotels so we are simply asking and directing. It is difficult to say we have this special sauce that is going to allow people. We are being possibly more aggressive and we are telling our managers take risks. As we have mentioned if we see falls in occ index but increases in rate that is the right thing to do. So nothing secret about that. Probably more of a point of view in style than anything in particular. Chris Woronka – Deutsche Bank Securities: On the loan purchases I think the two you have done are pretty straight forward. Are you finding a lot less competition for these kinds of things relative to stand-alone hotel assets?

No, what we have really observed is as there is increased competition for single assets people were having a tough time getting deals done but a lot of money was shifting into debt as well. Again it depends on the size. The larger the loan probably the less competition but we see equal competition in that space.

The next question comes from the line of Kevin Milota – JP Morgan. Kevin Milota – JP Morgan : I was hoping you could provide some trajectory in terms of your pro forma expenses going forward and where you see some of the inflationary pressure. Also just upward pressure as occupancy continues to claw its way back?

I can tell you thus far we have been surprised. At the beginning of the year if I would have seen where our first quarter numbers would have ended up I would have guessed that our margins would have been far worse because when occupancy increases and rate declines you certainly would have seen that. To have us take 3% of our costs out when occupancy went up that wasn’t anticipated. So difficult to project because we haven’t given guidance on how it is going to look going forward but certainly if we continue to deliver that I think the outside risks are taxes, utilities and of course in the long run healthcare. That probably reaches out beyond 2010 but if you look 2-3 years out and the healthcare bill expands that is something we look at.

The next question comes from the line of Patrick Scholes – FBR Capital Markets. Patrick Scholes – FBR Capital Markets: I wonder if you could give a little more color on in your prepared remarks you talked about the rates for next year for certain segments being up high single digits. A little bit of color you could provide on what types of customers at this point are booking those rates. Are we talking groups or corporate customers? You also mentioned about mix shift. Can you give a little more color on who is sort of being mixed out and who is being mixed in at those higher prices?

Good question. I will run through the segments. The good news is on the group side where we have continued to have better production we are booking next year’s rates and out-year rates at better rates than this year. I think Art talked about that being roughly about 9% for our three big hotels. We are seeing that consistently. As it relates to the mix management piece what we are seeing aggressively being mixed out is what you want to see mixed out. Priceline is going away. Hotwire is going away. Lower end of the spectrum of discounts are going away. As it relates to corporate negotiated, the managers are in that mix right now today and certainly the messages we have gotten back from them and have given to them is to be one very simple four-letter word and that is “bold”. We think boldness is the right approach. I think what we will end up seeing is through 2009 and 2010 and 2008, 2009 and 2010 what we saw is the hotels ended up giving value adds they gave internet and those types of things, they will continue to keep those value adds but they will build rate above the value adds. Our hope is that we will see in the high single digits increases in corporate negotiated. Particularly what will happen there is you will start to see the lower rated corporate negotiated companies who are providing lower numbers of rooms being swept out or even higher number of rooms and you will mix to a higher corporate negotiated.

The next question comes from the line of Andrew Whitman – Robert W. Baird & Co., Inc. Andrew Whitman – Robert W. Baird & Co., Inc. : I wanted to dig in a little bit on the two debt purchases here. In the past Art you mentioned you might do some debt repurchases with a partner. Was there anybody who brought you this deal that is helping to advise at all in either of these deals?

No and in particular because on with Doubletree Times Square we were the previous owner this is probably the one marked exception where we had great knowledge of both the asset and the instrument. Andrew Whitman – Robert W. Baird & Co., Inc. : The same thing goes for Atlanta?

We were not the previous owner of it but given that it was a $250,000 investment the risk/reward felt asymmetric. Andrew Whitman – Robert W. Baird & Co., Inc. : A question on Times Square. Is there an option here to take out your partner? I have to assume the venture is obviously you wrote down the equity. Is there an option to take them out and get this thing totally onto your balance sheet before the maturity in 2017?

I wouldn’t say there is an explicit option. What we have invested in though is the first loss debt position in the capital stack. There is $270 million of senior debt in front of us. As I noted in my comments we feel this is a pretty good strategic investment for Sunstone but it does not come with an explicit option to buy out or take out any of the partnership equity. Andrew Whitman – Robert W. Baird & Co., Inc. : But this transaction is being kind of the mezzanine position doesn’t get you consolidated today? This will still remain an unconsolidated venture going forward?

Correct. It will still remain unconsolidated. Andrew Whitman – Robert W. Baird & Co., Inc. : So in Atlanta I am hoping for a little bit more color here. Maybe you have mentioned this and I missed the note but could you give us kind of what your last dollar is on maybe a per key basis or maybe a little bit of color on what the capital structure looked like when the original deal was transacted whenever that was?

Sure we can give you a little bit of additional detail on that one. Again this was thrown in as part of a package with the Doubletree Times Square deal which we felt had much greater strategic significance for the company. The Atlanta deal has $17 million of senior debt in front of it and our $2.5 million fee note position is [inaudible] with a second side of the same B note so there is $5 million of B financing. Total capital stack of $22 million. Andrew Whitman – Robert W. Baird & Co., Inc. : When was it last sold? Do you know when this was kind of lined up?

It was a new build and this was lined up I believe in 2006. Andrew Whitman – Robert W. Baird & Co., Inc. : Now that you are beating your internal forecasts to me that is some indication visibility is improving. What is your outlook for providing guidance?

When we get numbers I can rely on I will look forward to sharing them. As I mentioned, opposite of last year…last year we were getting numbers that 30 days later proved to be wrong in the wrong direction. Now we are getting numbers 30 days later that prove to be wrong in the right direction. Just to give you some comment on that, when you look at we are mostly a transient hotel company; 70% of our business. I had heard of a stat that was more countrywide but the group of hotels said their transient pace was 4% above last year a week out but after the actual was realized they were up 11%. So hotels are realizing more business even a week out a lot more. So while it is great we are having misses to the up we are still not getting numbers we can rely on and we pass them along to you and ask you to rely on them. The good news is we are wrong in this direction and the marketing team does a great job of managing costs. We just need to find a way to deposit the cash quicker. So that is a good business challenge to have.

There are no further questions at this time. Please continue.

We appreciate everybody’s time today particularly on a Monday morning or afternoon as well as your continued interest in Sunstone. We look forward to speaking with you on our second quarter intra-quarter update later this summer. Thank you.

Ladies and gentlemen this concludes the conference call for today. Thank you for your participation. You may now disconnect your lines.