Good evening, ladies and gentlemen, and welcome to the Sunstone Hotel Investors Fourth Quarter and Full Year 2010 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Mr. Bryan Giglia, Senior Vice President of Corporate Finance of Sunstone Hotel Investors. Please go ahead, sir.

Thank you. And good evening everyone, and thank you for joining us tonight. By now you should have all received a copy of our earnings release, which was filed this evening. If you do not yet have a copy, you can access it on our website at www.sunstonehotels.com. Before we begin this conference, I'd like to remind everyone that this call contains forward-looking statements that are subject to risks and uncertainties, including those described in our prospectuses, 10-Qs, 10-Ks 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. Unless stated otherwise, all RevPAR and margin figures discussed on today's call will be pro forma for the 30 hotel portfolio, which we owned at the end of the fourth quarter, excluding the Royal Palm Miami Beach, which we acquired during the third quarter 2010 and which is undergoing a major renovation and repositioning. In some instances, we refer to our 32 hotel portfolio, which excludes the Royal Palm, but includes the two hotels which we acquired earlier this year, the Doubletree Guest Suites Times Square and the JW Marriott New Orleans. These properties are included on a pro forma basis as if we own those properties for the entire 2010. Pro forma adjusted EBITDA and pro forma adjusted FFO per share reflect the operation to the Royal Palm, for our period of ownership and excludes the hotels that we disposed off in 2010 of as reported in our earnings release. Please refer to our earnings release for reconciliation to pro forma, adjusted EBITDA and adjusted FFO and adjusted FFO per share to income available to common stockholders. With us today are Ken Cruse, President, Chief Financial Officer; Marc Hoffman, Chief Operating Officer; Bob Alter, Executive Chairman, is also the call and will be available during the question-and-answer portion. To begin our discussion, I'd like to turn the call over to Ken.

Good afternoon, everyone, and thank you for joining us today. During today's call, I'll review Sunstone's fourth quarter and full-year results. Our year-to-date acquisitions activity and changes we've made in our leadership team. Marc will then provide operating details for our hotels and provide some insights into 2011 pace. And finally, I'll wrap up with a review of our liquidity and leverage target as well as a touch on our 2011 business plan. Fourth quarter results. Pro forma for adjusted EBITDA for the fourth quarter was $43.3 million, and adjusted FFO per share was $0.19, both of which were ahead of Street consensus. For the fourth quarter, our comparable portfolio produced RevPAR of 5.7% above the prior year. Occupancy was up slightly at 66.3% and average daily rate was up $8.07 to $154.51, an increase of 5.5% over the prior year. Comparable fourth quarter RevPAR for the 32 hotel portfolio, which as Bryan noted, includes our two recent acquisitions on a pro forma basis was up 7.1% in the fourth quarter 2010 versus the fourth quarter of 2009. Fourth quarter margins for our comparable 30 hotel portfolio were up 250 basis points from last year. Adjusting for property tax credits, received at several of our hotels fourth quarter margins would have been up 170 basis points. And if you will include the two recent acquisition hotels on a pro forma basis, fourth quarter margins for our 32 hotel portfolio were up 300 basis points in Q4 on an absolute basis or 230 basis points after adjusting for the property tax credit I just mentioned. The solid margin performance our portfolio generated in the fourth quarter is a product of the great job our asset management team and operators have done, reengineering our hotels for improved efficiency and more flexible operations.…

Thank you, Ken. In terms of the regional performance for our fourth quarter, the year-over-year growth in RevPAR of our Los Angeles Orange County hotels was up 6.4%, led by a double-digit growth at the Renaissance Long Beach. Our La Jolla and Del Mar hotels grew by 2.8% over last year for RevPAR. For full year, our Los Angeles and Orange County hotels were up just slightly 1.6% led by high growth at the Hyatt Newport Beach and LAX Courtyard, but were hindered by flat to slightly negative growth at the Renaissance Long Beach and the Newport Fairmont. For Q4, our other West Coast region was down 11.8% compared to last year. Our Portland Marriott was up 9.2% in Q4, our other step was offset significantly by the two Houston hotels in Eugene. For a full year this region was down 9%, with strong growth at Portland Marriott, but again offset by those same three hotels. We expect continued weakness at our Houston properties in the first half of 2011 due to the loss of the significant piece of annual government business, we've spoken about before. However, we have seen better RevPAR growth in January and February than expected and believe that our year-over-year Houston RevPAR comp will get much easier earlier than we expected. Our Midwest region was up 5.9% to last year in the fourth quarter, driven by double-digit growth in Minneapolis and positive ADR growth in Chicago and Troy. During the full year, our Midwest region was up 3.8%, again led by double-digit growth in Minneapolis and mild growth at Troy and our Rochester portfolio. Finally, our East region in the comparable portfolio for the 32 hotels was up 10.1% for the fourth quarter. This was led by double-digit RevPAR growth in Orlando, Baltimore and Boston with…

Thanks a lot, Marc. I'll just quickly run through our balance sheet and credit targets, and then I'll finish by touching on the high points from our business plans before we open up the call to questions. First, with respect to our credit profile, we ended the fourth quarter with approximately $334 million in cash and cash equivalents, including restricted cash. We pulled 12 unencumbered hotels and our debt maturity is at strength, with the exception of the Doubletree Times Square, which we intend to refinance during the second half of this year, through April of 2015, we have just $100 million of debt maturities. And we have a well staggered maturities schedule thereafter. And upon the anticipated refinancing of the Doubletree Times Square later this year, we expect our debt will have an average tenure of approximately seven years, one of the longest in our space. The Doubletree Times Square debt is our only floating rate loan. Other than that, 100% of our interest expense is fixed, including the new JW New Orleans loan that we assumed earlier this week, which is a floating rate loan that was [indiscernible]. And our weighted average cost of debt is just 5.5%. We continue to improve the credit profile of the company, and we are focused on achieving a leverage level that provides us with balance sheet capacity, capitalize on deals at all points in the cycle. Looking ahead, I'll spend a moment or two on our 2011 business plan. Sunstone has a solid platform for growth. We own a portfolio of 33 well-located institutional quality hotels, we have a great team aligned and focused on smartly driving software value. Our balance sheet and credit statistics are improving, and industry fundamentals are strong. Our 2011 business plan is primarily aimed at correcting the value deficit we've seen at Sunstone shares. We will achieve this by focusing on the following: First, we will improve the profitability of our portfolio through continued creative management efforts; second, we will enhance our corporate credit statistics through a measured approach to deleveraging; third, we will smartly increase our portfolio size and quality through accretive acquisitions such as the two deals we announced earlier this year; fourth, we will improve our communications and accessibility by continuing our inter-quarter calls; and fifth, we will build a stable and cohesive talent-based organization by selectively adding key players such as John Arabia, who we announced earlier this week. We believe that our business plan represents a balanced approach to creating stock holder value. And we are very optimistic about 2007, and while we are not providing guidance today, early indications from our hotels imply continued acceleration in RevPAR trends throughout the year. We will continue our Business Update Call to provide realtime data points on our business throughout the year as well. I'd like to thank you at this point for you for your interest in Sunstone and I will open up the call to questions. Operator, please go ahead.

[Operator Instructions] And our first question comes from the line of Shaun Kelley from Bank of America.

I just wanted to ask a couple of quick questions about the New Orleans asset to start. Could you just give us a sense for that hotel? I know it's going to be a little bit different with some of the issues that New Orleans has had, but can you give us a sense of how far off of peak EBITDA that is and maybe some of the other kind of cap rate and/or like a forecast what you think that asset can do this year?

Sure, we're not going to be able to give a forecast for this year other than by saying that we do see a fairly meaningful improvement in the productivity of the hotel over the prior year. The hotel is generating EBITDA in 2011 that was very strong. As we noted in the call, the RevPAR transfer to New Orleans market was the top growth market in 2010. So as the turns were very positive in '10. The hotel’s continued to improve in performance over the last several years. And once again, we expect that to continue to further improve going forward.

I guess just one on the projected CapEx. You guys gave a strong detail for how you thought all the different project level numbers. I mean is there, in terms of investment, I assume all that is being funded out of cash. So is there anything, or will the remainder of the cash balance really just be focused on kind of acquisition opportunities as they come up at this point?

That's right, we ended the year with a fairly sizeable cash balance, we deployed a portion of our cash for the Doubletree Times Square acquisition as well as a small amount of cash on the JW New Orleans deal, but both of them came with a debt, which is very attractive terms. And so at this point, there's a portion of our cash that will go to CapEx and we have a fairly considerable amount of dry powder for acquisition.

Our next question comes from the line of Dennis Forst with KeyBanc.

I was a little confused, Ken, about the occupancy ADR numbers for the full 31 properties, what was the RevPAR absolute number in the fourth quarter and the year?

It's actually for the 32 hotel portfolio, the RevPAR number was $114 for the full year.

But you didn't own that 32nd property, Doubletree, until early this year, right?

Yes. If you want just for the fourth quarter that was known at the end of the year?

Yes, what the actual fourth quarter RevPAR was for the 31 properties? In the release, it's got the comparable 30, excluding the Royal Palms, I wanted to know what it was including the Royal Palms?

Yes, the number in the release was for the fourth quarter, $102.44 and $104.18 and we do not break out the Royal Palm independently, that hotel is not in our comparable set as it's undergoing a considerable renovation.

What exactly does that considerable renovation mean? How many rooms are you selling these days? Because there is a table in your release that shows that it had a positive cash flow in the fourth quarter?

Yes, it had a positive cash flow in the fourth quarter, it's at 409 keys, and currently all the keys are in the service, but the hotel itself is undergoing the early stages of a fairly, but significant renovation. So it missed our criteria for not including it in our comparable statistics.

Will it be shown as a single line item until the renovations are completed?

No. We typically don't break out individual hotels.

So it won't -- it'll be included in the income statement but not in the RevPAR numbers, is that right?

That is correct. It will not be in the comparable RevPAR numbers until we complete renovation.

The discontinued operations, do those go away after this fourth quarter?

Yes.

And our next question comes from the line of Joshua Attie from Citi.

I just want to follow up on Shaun's question. Can you talk about what the EBITDA of New Orleans has been historically so the $7.5 million that it did last year, how does that compare to maybe 2007 and then also 2000? And maybe talk about -- I know there was a renovation at the property that may have distorted some of the results?

Sure, happy to provide historical numbers. And as I mentioned, it's outperformed 2010 versus historical trends. It was a little over $5 million in 2007, $6.5 million in '08, $5.5 million in '09 and as we mentioned in the release, it was north of $7 million, 2010.

When did the renovation happen at that property?

That took place in 2005.

So the '07 number would have been fully reflective of the ramp-up of the renovation?

Yes. Post the conversion.

And as you think about acquisitions in general, there's a lot of very large assets in the market, how do you think about concentration risk and how large would you be willing to go with a specific asset given your size?

Good question, Josh. We have, for example, 920 keys in the Times Square submarket of Manhattan, and the EBITDA production of those assets represents about 20% of our portfolio RevPAR, our portfolio EBITDA. And we're very comfortable with that presence. I think once we push north of that 20% level that we certainly would want to look to diversify geographically.

[Operator Instructions] And the next question comes from the line of David Katz with Jefferies & Company. David Katz - Jefferies & Company, Inc.: I wanted to ask about the New Orleans acquisition and how that sort of came about? Was that a competitive bidding process? Or was that an off market or quasi off market transaction?

No, David, the Doubletree Times Square deal was conducted fully off market through relationships. David Katz - Jefferies & Company, Inc.: Obviously, it struck me as a relatively attractive price. Is there any color you can provide as to why the owner wanted to sell? Was this financially challenged in any way?

No, actually the opposite. I think the seller wanted to sell because this is an asset in a market that has performed quite well, and in fact they had a probably short term horizon on their investment and so they were looking to monetize this asset, where as we see this as a great long term market and a great long-term asset. And so, timing was right and obviously, based on the multiple we paid and the price per key we paid, the value was absolutely right. David Katz - Jefferies & Company, Inc.: So in that context, what I'm trying to perhaps draw a circle around is the population of opportunities like this that might be out there. Because I think most of The Street may be expecting that foreclosures and other financial challenges being the key driver of creating opportunities for you all, but this one wasn't in that category at all. And so, just trying to get a sense for how deep this reservoir is and how many more of these you could look at and/or handle?

Yes, I would tell you that we're certainly not going to sit here and promise that there will be hundreds and hundreds of these types of acquisitions, but we believe that the relationships that our team has, including, as I mentioned before, [indiscernible] and Bob Alter who are actively involved in our acquisitions process. I think we have a wealth of opportunities out there that are available through non-traditional marketed channels. David Katz - Jefferies & Company, Inc.: And did this one come through, Bob, from your management team, I assume?

No actually, this was a deal that Bob Alter brought to us.

Our next question comes from the line of Michael Salinsky from RBC Capital Markets.

First question relates to CapEx. You identified a number of projects that you worked on. But what is the total spend for '11 you guys are looking in terms of outlays, as we look at sources and uses of capitals over the next 12 months?

Consistent with our prior discussions on CapEx, we spent some time refining the programs for 2011 to make certain that the focus was absolutely on areas that were going to drive revenue and profitability with our hotels. So we have refined the program to be a little bit tighter program than what we had initially anticipated but the dollar amount at this point is somewhere between $100 million and $130 million in 2011. But a good portion of that would come from reserves.

Secondly as we look at the amount of renovations, obviously a lot of them are in the first quarter. Can you quantify how much -- since you're not providing RevPAR guidance for the full year, but can you quantify how much of a disruption impact you expect probably in the first quarter, I think, is the most relevant from renovations?

Sure. Actually it's not as much as you would think. The total disruption in the first quarter is probably not going to be more than about $350,000 in revenue.

That's a lot less than I thought. Interesting. Third, looking at your capital plans again for the year, is there -- you guys have talked about being aggressive in the acquisition markets. We're also hearing that there's quite a bit of people out there looking for quality assets, is there a thought to recycle any of your non-core assets at this point?

We're always looking to manage our portfolio and certainly there are several assets that we would classify as not long term haul, and so there could be some activity on the selling non-core assets later on this year.

Are you guys actively marketing anything right now?

We are not actively marketing anything.

And our next question comes from the line of Bill Crow with Raymond James. William Crow - Raymond James & Associates: I know you're not giving guidance, but I think most of us in the call can affect the industry this year as somewhere in the up six to eight or six to nine range, do you feel comfortable that your portfolio can be within that kind of broader range on a RevPAR growth perspective? Or are there still enough kind of nagging market specific issues where you might not be able to hit that industry growth until, say, 2012?

I would say the contrary. In 2010, our portfolio was impacted from renovation disruption and changes over in management and a variety of different factors that we've identified and we believe we've addressed. And so we certainly expect our portfolio in 2011 will perform at, or our expectation is above industry norms. William Crow - Raymond James & Associates: And then the hesitancy then to give guidance is...

The hesitancy to give guidance is that we much prefer to spend our time talking about what we have done rather than making prognostications about what we will do. William Crow - Raymond James & Associates: The market is just buying stocks based on futures as opposed to past, that's the only thing I would say.

That's why you have a job.

And our next question comes from the line of Smedes Rose from KBW Asset Management. Smedes Rose - Keefe, Bruyette, & Woods, Inc.: I just wanted to ask you again on possibly selling some assets in secondary markets. Is it your sense that -- we know there's a market to buy and sell assets in the top markets but is there a market emerging -- are banks going to lend to buyers and secondary markets even if there are buyers that are wanting to purchase those kinds of assets, like something like the Eugene Valley Inn? Could you dispose of stuff like that if you wanted to?

We have been very surprised about how quickly the securitinized market for lodging asset have recovered. And while the initial loans in our Hilton Times Square to set a good example of that, we've gone on major commercial grade assets in primary markets. We are seeing that lending market continue to evolve, and we do expect as this year progresses you'll see lending fixed back up in secondary market.

This is Bob Alter. As well, a number of our assets have, in place, long term debt that goes out to 15, 16, 17, 18. All of that debt is assumable and we specifically did that debt with certain assumable quantifiable numbers so that we can sell assets and have people pay us to the balance and assume those balances. Smedes Rose - Keefe, Bruyette, & Woods, Inc.: The other thing I wanted to ask you is looking at where the JW Marriott and New Orleans traded when Clearview bought it, I mean it looks like on the one hand good pricing but it's also significantly up over that trade. I mean was that just an unusual circumstance where the buyer was able to really get it for some particular reason it's way below what it really should have gone for? It just seems like a lot of appreciation for a three-year hold on their end.

We're very happy for the Clearview guys, we happen to know a few people over there and this was not a deal that we were looking to make a big profit for that group. But we're happy when we can create a win-win outcome. The reality is that the New Orleans market has recovered significantly in the post-Katrina aftermath. And there's been a great deal of infrastructure work done in that market, a great deal of attention paid on really resetting that market to where it should be. And so the assets performed very well and we believe the asset is going to perform much, much better over the next five years.

In tying that question back to a couple before, why is the seller a seller at this price? And really Clearview bought the asset then rode the "storm" and now are on the other side of it. So at this point, they're happy to take some money off the table and move on to the next transaction for them. So it is a win-win. I think that the seller here is happy and the buyer is happy, which we always believe is the way you continue to do relationships into the future. I also would like to correct for Marc, just stepped out in his number, the displacement of first quarter number we gave out is 350 it's actually 650 in the first quarter. We missed adding up the number, I'm sorry.

And your next question comes from the line of Michael Bellisario from Robert W. Baird.

I wanted to talk about something that was in the press release the other day, relating to John's hiring. This one might actually be for Bob, it mentions John becoming President in about a year. Can you just walk us through to that process and what it means for '10 in the next year?

We're kind of telegraphing his future. Actually, it's not the first time somebody asked that question. The way the agreement with John is, is that over a period of what's described as kind of 36 months, the company has committed to make him President upon achieving certain goals. And in fact, our progression of Ken and I running the company together, ultimately our goal would be to have Ken become CEO. And then our goal will then have as the company met those goals, and John has met those goals, then he would become President over -- I guess it's 24 months, and then be on the Board in 36 months.

And at this time, I am showing no further questions in my queue. I would like to turn the conference back to management for closing comments.

Thank you, all, for joining us today. We appreciate your interest in Sunstone. And we look forward to speaking with you during our inter-quarter call in April. Thank you.

Ladies and gentlemen, this does conclude our conference for today. We thank you for your participation. And at this time, you may now disconnect.