Good morning, ladies and gentlemen, and welcome to the Sunstone Hotel Investors Second Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, Monday, August 8. I would now like to turn the conference over to Mr. Bryan Giglia, Senior Vice President of Corporate Finance of the Sunstone Hotel Investors. Please go ahead, sir.

Thank you, Camille. Good morning, everyone, and thank you for joining us today. By now you should have all received a copy of our second quarter earnings release, which was released this morning. If you do not yet have a copy, you can access it on our website at www.sunstonehotels.com. As you may have noticed, in addition to our scheduled quarterly release, we are also providing additional disclosures including property-level operating statistics. This additional disclosure can be found in the Investor Relations section of our website also. Before we begin this call, 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, 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. With us today are Ken Cruse, President and Chief Executive Officer; John Arabia, Chief Financial Officer; and Marc Hoffman, Chief Financial Officer. After our prepared remarks, the team will be available to answer your questions. I will now turn the call over to Ken. Ken, please go ahead

Thank you, Brian. And thank you, all, for joining us. Today, I'll cover 3 topics including our second quarter performance, our outlook for the remainder of the year and Sunstone's now completed leadership transition. After that, Marc will cover our operational details, and John will review our finance initiatives, as well as our new supplemental disclosures. I will then conclude our prepared remarks before opening up the call for your questions. Obviously, increasing global economic concerns, as well as the recently highlighted need for near-term stimulus and meaningful long-term fiscal reform in the U.S. have generated significant turbulence in the markets. While these macroeconomic concerns have taken their toll on individual stock values, we have not seen a direct translation into slower business trends in our hotels. In fact, as evidenced by our second quarter performance in our July results, we continue to see robust demand trends across our portfolio. Moreover, our liquidity position remains very strong, our debt maturities are well staggered and our business plan is oriented towards fiscal discipline and operational excellence. Accordingly, we are well-positioned for the current environment. Moving to our second quarter results. For our comparable portfolio, second quarter RevPAR rose to nearly $132, an increase of 7.2% over the second quarter a year ago. Our solid RevPAR growth was driven by a 4.1 increase in rate and a 3.1 increase in occupancy. Transient business trends, in particular, were strong during the quarter and generally offset isolated instances of weakness in group demand. Our Q2 performance was further enhanced by strong growth in our recently renovated hotels and a corresponding decline in renovation disruption as we completed the majority of our 2011 renovation projects, including rooms renovations at 9 of our hotels during the first or second quarter of this year, leaving only a…

Thank you, Ken. And good morning, everyone. Thank you for joining us. Today, we will review our portfolio second quarter operating performance, an update on our recently completed and our in-process renovations, and finally, review some of our new asset management initiatives. All hotel information discussed today, unless otherwise noted, is for our 32 Hotel portfolio, which includes on a pro forma basis, all 2011 acquisitions, the Doubletree Guest Suites Time Square, the JW Marriott New Orleans, the Hilton San Diego Bayfront and excludes the Royal Palm and Eugene Valley River Inn. As indicated, pro forma RevPAR increased 7.2% in the second quarter, comprised of 4.1% increase in average room rates and a 3.1% increase in rooms sold. Our ADR growth is a result of increases in premium, corporate and leisure room revenue and the reduction of discount segments. In this quarter, 28 of our 38 -- 32 hotels had positive RevPAR with 15 of those hotels generating double-digit growth. For more detailed information, please reference Pages 25 and 26 of the enhanced supplemental information provided in addition to this quarter's release. We saw positive in many regions, including the Northeast, Midwest and Southern California. Looking forward, at our group business, our current booking pace for 2011 is up 6.3% over 2010 levels. This trend represents a 3.6% increase in occupancy and a 2.6% increase in rate as compared to 2010. Full year 2012 group pace is down almost 3.5%, driven by a decline in room nights resulting from a weak convention calendar in Washington, D.C. due to the election year, as well as a weak calendar in Baltimore. 2012 full year pace, without D.C. and Baltimore Renaissance Hotels, is actually up 6.4% with a 3.8% growth in rooms and a 2.5% growth in ADR. We are focusing closely with…

Thank you, Marc. Good morning, everyone. Today, I'll give you an overview of several topics including: first, our liquidity and access to capital; second, our near-term debt maturities and obligations including an update of the Doubletree Times Square refinancing; third, details regarding our earnings guidance; and finally, fourth, an overview of our new quarterly earnings supplemental and materially increased investor disclosure. Let's start with liquidity. Sunstone ended the second quarter with just over $205 million of cash including $144 million of unrestricted cash. We intend to use roughly $90 million to $100 million of our sizable cash balance to delever the Doubletree Times Square as part of its refinancing later this year. Despite the recent turbulence in the capital markets, we continue to receive significant lender interest in refinancing the hotel due to the property's superior location and room size. Following the refinancing of the Doubletree Times Square, Sunstone's near-term debt maturities will be very manageable. In 2012, '13 and '14, our debt maturities total roughly $95 million, which includes our only corporate debt, the $63 million of remaining exchangeable notes. Based on the company's market capitalization at the end of the quarter, the $95 million of maturities through 2014 represent less than 5% of our enterprise value. For more information, please refer to the new debt and debt maturity schedules on Pages 20 and 21 of our supplemental disclosure. In addition to our larger-than-normal cash position, we have an undrawn $150 million line of credit, and we have 11 unencumbered assets that, collectively, are expected to generate $34 million of EBITDA in 2011. As of the end of the quarter, Sunstone has $1.67 billion of consolidated debt, which includes 100% of the $240 million mortgage secured by the Hilton San Diego Bayfront. Adjusting for the debt attributed to our…

Okay. Thank you very much, John. Before we open up the call to questions, let me reiterate the new management team's core objectives, which include delivering superior operating results, measured balance sheet improvements and providing best-in-class investor disclosures and transparency. I want to take a minute to say thank you to the entire Sunstone team for their continued and intense efforts in advancing these core objectives. In spite of market challenges, Sunstone is clearly moving in the right direction. While our strong performance in the second quarter is a good start, it is clear to us that we must continue to execute on our business plan with discipline and consistency in order to build investor respect and unlock the potential value in our business. We, as a team, are confident in our ability to do just that. With that, let's open up the call to questions. Camille, please go ahead.

[Operator Instructions] Our first question is from the line of Eli Hackel with Goldman Sachs.

Just 2 questions. First, can you just talk a little bit more about the deleveraging strategy, especially in light of the recent equity prices? And if you were to buy an asset, how you would theoretically fund those? And then just a second question, just on the guidance, and you said more conservative on the group booking side. Is that -- do you expect group cancellations, or do you just expect fewer in-the-quarter, for-the-quarter bookings? Or what exactly -- what did you mean by softer group booking trends?

Great. Thanks a lot, Eli. Look, first of all, on your question about the deleveraging strategy, like while current market turbulence is obviously front and center in the minds of everyone on the call, we'll not be reactionary in our tactics. Our business plan does entail a measured and deliberate deleveraging of the company. So we'll execute on the deleveraging strategy in a way that's appropriate for market conditions and results in appropriate levels of liquidity as we go forward. So as far as funding acquisitions in today's environment, clearly, as we've talked about in the past, acquisitions would largely to be funded through equity denominated transactions. And in today's environment, equity is not attractively priced for such tactics. So I think you can assume that acquisitions will not be front and center in our business plan, at least for the near term. On the group trends that we're seeing for our portfolio. Our group base is actually up for the remainder of the year. It's up 6.3%, and it's been above a 3.6% increase in occupancy and a 2.6% increase in rate. So we are seeing positive group trends. I think that tempering in our full year projections is more a product of what we're seeing in the current environment. And given the high correlation between business trends and overall lodging demand, we think that caution is warranted in spite of the fact that the early indications on Q3, in particular, are very good.

So you haven't -- just to be clear, you actually have not seen flow through to your business yet, just -- you're just working to be more on the safe side just given what's going on in the headlines in the economy, et cetera?

Eli, that's very safe to say. As we've talked about during the course of the year, we remain highly focused on the group productivity throughout our portfolio. Marc mentioned in his prepared remarks that the Marriott Sales Force One initiative, in particular, has drawn a lot of focus from our team and ensuring that, that initiative is employed in a way that's productive for our hotels is a key focus of our asset management team. So -- and the 2012 group trends are slightly down on a pace basis. So certainly, we're focused on ensuring that group trends and productivity in terms of rooms booked into our portfolio for all future years is continuing to increase. Right now, on a business transient side, in particular, we're not seeing a decline.

And our next question is from the line of Jeff Donnelly with Wells Fargo.

Actually, just have a single question, and I guess, can -- might be kind of a long one. I had a question about how you see the source of your future margin growth because if I look at the new disclosure, I think the top third of your hotels are running at substantially higher EBITDA margins and then the bottom 2/3 and I think -- I think group also grew your margins substantially more in 2010 and again year-to-date. Now I know every portfolio has subset of better assets and ones that are worse. But I'm wondering if in your case, you think maybe your margin potential and your better assets is closer to its peak, so any further margin improvement for Sunstone will more likely be found in your, call it the bottom 2/3 of your portfolio? Does that make sense?

This is Ken. I'll take that question initially, and then I'll shift it over to Marc. With respect to sources of margin growth, to put things into perspective, I'd like to talk about the new found efficiency throughout our portfolio from prior-cycle trough to the most recent cyclical trough. In 2003, the margins on a same-store basis for our hotels troughed at 22%. 2009, as a result of efficiency measures that our team deployed throughout the portfolio, the trough margins were 230 basis points higher at 24.3%. Peak margins for our portfolio, and this does not include the Hilton San Diego which didn't really exist during the prior peak, was about 30.3% in margins. Obviously, during the second quarter, we generated even stronger markets than that -- margins than that, but that is a cyclical phenomenon rather than what we would view as representative of that full year margin trend. Marc and his team, and certainly our operators, have been incredibly productive at finding new ways to drive profitability throughout our portfolio. And we're highly confident that continued innovation at the portfolio property level will continue. Marc, why don't I send it over to you to give some more specifics.

Jeff, thanks. I mean, Jeff, one of the key things, obviously, is that the high-rated markets, obviously, will drive a higher margin expansion. I think one of the things that we are counting on and certainly expect, is that the investment that we've made throughout our portfolio, and if you look at all the renovations that we've done throughout the portfolio, we think that there is room for solid rate growth, occupancy growth and margin expansion within that -- I wouldn't use the term lower tier, but the current lower amount of EBITDA margin in those hotels. And we expect to see nice growth from those moving forward, particularly the hotels, which as I said is a large amount of the ones that were renovated.

And just one follow up, Marc. I'm just curious as to subsequent to quarter end, have you guys detected anything in your portfolio that -- for example, have you seen the fall off in transient business or is it just too soon to be seeing that?

No, we haven't -- Jeff, I mean, it's 2 weeks of information. Now generically, we haven't seen anything in the last 2 weeks that shows us anything. I think as you well know, that's just too short a window. And I think we'll just have to wait and see what occurs as people make decisions.

Jeff, as I mentioned, our July RevPAR number was up over 11%. So clearly, we're not currently seeing the adjutant and the broader economic markets translate into slower business trends at our hotels.

And our next question is from the line Ian Weissman, ISI Group.

Just a couple of questions. Maybe you could give a little bit more color on refinancing Doubletree, where pricing is coming in and what the underwriting was like?

Sure. Let me shift that over to John.

Yes, sure. We started the process to refinance the Doubletree Times Square about 6 weeks ago or so and received a significant amount of interest in that asset given the location of that asset, the quality of that asset and some of our plans for that asset. We are whittling down the potential lenders that we are working with this. And then clearly, we're seeing a bit of turbulence in the CMBS market, and that turbulence has really been choppy over the past couple of weeks, particularly there's one large pool of loans that went into the market was pulled because of -- at least postponed, because of a rating agency issue. But we continue to monitor that. But I think it's safe to say that you're going to see an increase in inventory being warehoused in the near term, which is likely to cause some short-term disruption. But I will say that based on very, very recent conversations with CMBS lenders that several remain very committed to hotel lending, but particularly, to their high-quality assets. And that's why I feel comfortable refinancing the Doubletree Times Square. In addition to that, there is significant interest from the balance sheet lenders in this asset. Now the total pricing compared to where we executed on the Hilton Times Square, you're going to see probably something, call it, maybe in the range of 100 wide of where we were there. And so hopefully, that's helpful.

That is. Just 2 quick other questions. Obviously, you talked about deals being off the table given where your stock is and certainly given where pricing is in the markets you want to compete with. How do you think about using any excess liquidity that you have today in buying back your stock, given that you trade them and imply north of the 8.5 implied cap?

You broke a little bit on the question, but I understand it was related to our appetite for using access liquidity to buyback our shares?

Yes.

No disagreement from us that our shares are certainly trading at a level that's well below warranted value. And as I mentioned in my comments, we as a team, expect to execute on the strategy that will result in this -- in the shares trading much more in line with warranted value or above. But in the current environment, given the level of turbulence that we're seeing, as I mentioned before, we're not going to be reactionary in our tactics. And we believe that maintaining fairly significant amounts of liquidity in this environment are prudent. So at this point, we do not think that a stock buyback, as we sit here today, is warranted.

That's fair. And finally, just -- you said in your release that the promotions -- your promotion as CEO, congratulations, marks the end of a co-leadership with Bob. What is Bob's role going to be going forward?

Well, Bob is a member of our Board of Directors and, look, he's always served as an adviser and counsel to the team as needed. So Bob will revert back to that type of a role at this point. And we certainly, as I mentioned in my comments, do appreciate all the effort that he made during the course of this year to ensure stability and execution on our leadership build out.

But he will not be involved in day-to-day operations, is that what you mean by the end of the co-leadership, I guess?

That is correct, yes.

And our next question comes from the line of Enrique Torres of Green Street Advisors.

Question on the disposition. You did announce, okay, one property is now being held for sale. Can you give us an update on how far along the marketing process that is? And then just more generally, now that acquisitions are kind of off the table for leveraging strategy, are you expecting to kind of increase the pace of dispositions and use that as an avenue?

Yes. As I said in my prepared remarks, we've taken one asset into -- off the current roster and put it into held for sale. As has been our practice in the past, we'll comment on that sale when and if it closes. As far as examining our portfolio for additional sale candidates, we're certainly involved in that exercise. At this point, though, we have nothing identified, or at least nothing that we want to talk about on today's call.

And our next question comes from the line of Ryan Meliker of Morgan Stanley.

Most of my questions were answered. I was just hoping you could give us some color, some thoughts about being a little more conservative, perhaps prudently, in your approach to guidance in group bookings in the back half of the year. Maybe you could add some color in terms of where your group pace is for the back half of the year, and what percentage of your expected group volumes are currently on the books versus what you can totally expect for the back half.

Sure. As I mentioned, our group pace is up 6.3%. And that's made up of 3.6% increase in occupancy and a 2.6% increase in rate. Q3 pace is up about 4%. And it's flat in rooms and about -- so all of that is in rate. Q4 pace is up 1.6% at this point. And that's a one point improvement in rooms and, basically, just about a point in rate.

And what percentage of the total group that you had budgeted for the back half of the year is on the books?

We're in good shape now. We're actually ahead of where we were last year. As a percentage, I'd have to get back with you on that. But from a standpoint of comparable room nights to booked compared to previous years, we are below the average of the previous years of what we have to book.

Well, I guess maybe to ask another way then, what I'm trying to figure out is how much -- given what you have in the books right now, how much of an impact in forward group bookings for the back half of the year really impacted RevPAR for you?

Well, first of all, we're about 65% transient as a portfolio. So our 60% transient is a portfolio so we're -- our group never has comprised a meaningful percentage of our business, or the bulk of our business, I should say it a different way. As John -- as Marc mentioned, most of the group business that we've put into our forecast is on the books. 2Bs are very low. We think it's prudent at this point for our forecasting purposes to eliminate any speculative or 2B-type business. So you can assume that the bulk of the group business that we're counting on for the remainder of the year is already locked in.

And our next question is from the line of Brian Maher with Citadel.

Most of my questions have been asked and answered. But if we could just circle back to kind of your comments on reactionary versus -- a word I would use would be optimistic. Can you talk about, should the shares drop meaningfully further in this down draft, if you have the authorization and kind of desire to actually buyback stock, if we see what we saw back in '08 and '09 when one of your competitors actually bought back about 50% of their flows at ridiculously low levels, is that something you would have an appetite for? And can you do that?

Yes, Brian, thanks for the question. Look, it's somewhat hypothetical, but I will tell you that Sunstone reflects back on some of the tactics that we employed during the last down cycle, and we recognize that there was value destruction in those tactics. So while we're not going to change our strategy based on one day or a couple of weeks of market that I would characterize as hysteria at this point, we absolutely [indiscernible] in current market conditions and adjust our tactics accordingly. But again, as I said, as we sit here today, a stock buyback is not front and center in our tactics. And let me shift over to John. He has some additional comments here.

Yes, Brian. It's a great question. Look, the share buybacks at the right time make a lot of sense, particularly if there's a big arbitrage between public and private pricing. I will say, though, that if we were to contemplate that -- and as Ken said, very theoretical question at this point, but if we were to contemplate something like that, we would have to come with a series of transactions that materially increased our liquidity, so we weren't putting our balance sheet at any incremental risk by buying back that stock. So we are highly focused on leverage reduction and liquidity at this point. And we are very confident that with the game plan in place, even with kind of fits and starts to the economic growth, that we will get to where we want to be. But doing a share buyback, given in the near term, we would have to be accompanied by a couple other transactions, including something like material asset sales.

Is there anything, though, legally or in your covenants with any of your lenders that would prohibit you from doing something?

No.

Your next question is from the line of Smedes Rose with KBW. Robert Simone - Keefe, Bruyette, & Woods, Inc.: This is Rob Simone stepping in for Smedes. Most of our questions have been answered so far. But I do have 2 follow-up questions. Firstly that now that you've been -- now that you've begun to disclose property level information, we were just looking at the Courtyard in Los Angeles with its EBITDA running down about 20% year-to-date. Is there -- can you guys comment on whether or not there's something specific going on at that property or -- that might be causing that relative underperformance?

Sure, Rob. Good question. We appreciate you having the disclosures. The Courtyard Los Angeles has been impacted directly as a result of a major renovation that we've had in place during the course of this year. And we expect to see a complete reversal of that trend post-renovation. If you get a chance, if you can fly through LAX, I encourage you to come and take a look at that property. It really came out great. Robert Simone - Keefe, Bruyette, & Woods, Inc.: Okay, great. That's helpful. And also secondly, you mentioned before that I believe your group pace on the books for 2012 is trending down about 3.5%, I believe, and that's due to negative impacts in D.C. and Baltimore. But I was wondering if you could maybe expand on markets where you're seeing more positive group bookings.

Sure, sure. Let me take some high-level comments there, and then I'll shift it over to Marc, who's really right in the middle of this. 2012 pace is down, a little over 3.5% at this point. Much of that is on the occupancy side. Current 2012 tentative booking pace is up, a little over 6%, so there's certainly a significant amount of tentative books -- tentative groups on the books that would flip that pace trend to positive if they were materialized. D.C. and Orlando and Baltimore, I think, comprise the biggest drag on 2012 performance. But other markets, if you look outside of D.C., San Diego, 2012 pace is up 14% with rooms up almost 10% and rate up 4.9%. Our Marriott portfolio x D.C. and Baltimore has paced up 3.2%, which is 5.5% in rooms, and a little over -- or a little bit -- about 2% down in average rate. So clearly, we've seen isolated incidents of same pace in 2012. The booking trend in terms of tentative rooms certainly does more than bridge the softness gap in 2012. And a number of our markets are showing very positive trends. Marc, do you have additional color?

Sure, Ken. Again, in specific markets, again, Ken mentioned San Diego, our Hilton San Diego looks very strong. Boston, both our hotels in Boston and the one slightly outside city in Quincy is strong. Boston as a city is going to have probably one of the strongest convention calendar years in a decade with citywide up considerably and room nights up 15%. New York City is going to have a very strong citywide calendar next year with current attendance up 25%. Our Houston hotels look very solid next year. And our California hotels in our California corridor look reasonably solid for 2012 as well.

And our next question is from the line of Michael Salinsky with RBC Capital Markets.

You touched a little bit about on dispositions. But just curious, why aren't you guys looking to sell some -- as you talk about really being to drive growth at some of the -- some of your bigger boxes, why not sell off some more of the peripherals and pay up -- and pay down some debt? As we see -- specifically, some of your suburban properties as you've moved more inside the city maybe in San Diego, some of the ones that just doesn't make sense to put CapEx into them.

Michael, good question. And I should have been a little bit stronger in my prepared remarks with respect to dispositions. Clearly, assets sales at this point, especially at peripheral properties, is worth examining and is something that we are highly focused on at this point. So stayed tuned. We have nothing to report on asset sales, but we totally agree with you, that looking to call some of the assets from our portfolio in the current environment does make some sense.

Okay. Just looking where the share price is today, I would agree with that. Second of all, looking at -- you talked a decent amount about CapEx. Obviously, you had elevated renovations this year. Can you give us a sense as to what -- as you look at '12, what sources and uses could be on the CapEx front there?

Sure, I'll just give you a brief direction on 2012. We haven't talked specifically about our 2012 plan and, in fact, we're still continuing to refine our renovation projects for the year. So as I mentioned before in my broader comments, strategically, we'll look to maximize liquidity first and foremost. It's a very positive fact with respect to Sunstone that we have completed the bulk of our desired renovation work already thus far this year. So the 2012 program could be fairly low in terms of dollars expended for CapEx. But at this point, we're not prepared to provide any specifics.

Okay, that's helpful. And finally, no dividend again this quarter. Based upon the guidance that you gave, is there an expectation? Does that generate any taxable new income that would necessitate a dividend?

Yes. The guidance that we provided would result, based on our math in taxable income. And I'll shift it over to John to give you the specifics. We have a buildup of -- well it's not perfect, it helps the street to understand kind of what EBITDA level would generate taxable income for our portfolio. John?

Yes. The easy benchmark to consider Sunstone given where we are now, what the company looks now, is earnings over $190 million of EBITDA, which start to generate taxable income to the common shareholder. So based on our current new guidance today, you should assume that there will be some level of taxable income and, therefore, we'd be required to pay a dividend.

Our next question is from the line of David Loeb with Robert W. Baird. David Loeb - Robert W. Baird & Co. Incorporated: John, I missed a little bit of the dividend comment, and I just wonder if you could maybe go a little bit deeper into kind of what your thoughts are about the recurring common dividend? Are you really just planning to keep the common dividend as small as possible to keep within 100% payout of taxable income, or do you have other thoughts on that as you balance that with deleveraging?

Yes, I think that leveraging is clearly a goal, and we will evaluate the payment or the size of that dividend. Clearly, we have no interest in overpaying our dividend. And as a general rule, we just expect to distribute taxable income of 100% -- for 100% of our taxable income. Is that where you're going with that, David? David Loeb - Robert W. Baird & Co. Incorporated: Yes. And also just trying to figure out whether you do recurring cash every quarter, or what level you think is meaningful in terms of having an impact on the stock price. But it sounds like your focus is really on paying out the least amount possible as opposed to establishing a strong yield, for example?

David, this is Ken, let me jump in on this one. Our objective is to maximize stockholder returns while improving our financial flexibility and deleveraging the company. So if you're looking at the release today, we added a little bit language around the dividend. You're exactly right, that our goal here is to drive returns for the stockholders. If the returns can be maximized to a healthy cash dividend, you'll see us employ that type of a tactic. But there are other angles that we can take on a dividend that we believe will drive the best returns for our stockholders. You'll likely see us employ those types of tactics. So no dividend declared this quarter. Stay tuned for the -- for future declarations of dividends, as well as the composition on the dividends. But we're examining all alternatives there. David Loeb - Robert W. Baird & Co. Incorporated: Okay. And if I can take a third cut at the disposition question. Can you give us an idea about how far you go, how many assets, or, for example, what kind of pricing you might be hoping to gain from asset sales over the next couple of years?

Sure, and again, let me lead in the comments with my discussion from earlier in the conversation that we recognize that the market turbulence and the economic -- macroeconomic concerns are kind of weighing on mindsets as we sit on the call today. We're not going to be reactionary in our tactics. But clearly, if we -- if sourcing liquidity and deleveraging the company is the goal, which both of them are, looking to source that liquidity through asset sales is definitely a viable strategy, and we'll continue to analyze it. And so you can take that to mean that, that is absolutely something that we're spending a lot of time analyzing, and that you'll probably hear more on that over the next couple of quarters. David Loeb - Robert W. Baird & Co. Incorporated: Okay. And then one specific on asset sales. It looks like you sold the Salt Lake City laundry. Can you give us a little more on order of magnitude of proceeds for that? And would you consider selling -- I guess that's a small laundry compared to Rochester. That seems like a big one. Would you consider selling that one as well?

Okay, on Salt Lake City, that laundry was kind of vestige of our prior portfolio that we owned in Utah, which at this point, we only own the Park City asset. And so that laundry was no longer core to the Utah market business. It was a breakeven operation, and we sold it for just barely nominal proceeds. As far as the Rochester Longview facility, that is integral to that portfolio. It's a highly profitable laundry operation. It does a lot of outside laundry for -- commercial laundry for the various entities in that market, including the Mayo Clinic. So no plan whatsoever to do anything other than continue to maximize the performance of that Rochester laundry. David Loeb - Robert W. Baird & Co. Incorporated: So other than the Rochester laundry, are there any other non-hotel real estate holdings in the portfolio?

Very little. We have one or 2 smaller office buildings throughout the portfolio. The only other non-real estate enterprise that we own is which is Buy Efficient, which is a successful procurements operation, which you may recall, we purchased the outside 50% from the entity earlier this year. So it's a wholly-owned subsidiary. David Loeb - Robert W. Baird & Co. Incorporated: And the office buildings, you're talking about 5,000 square feet or stuff that your occupy?

No, no. More of the former, 5,000-type square feet of offices. David Loeb - Robert W. Baird & Co. Incorporated: So that was sort of incidental by acquisitions?

That is correct. David Loeb - Robert W. Baird & Co. Incorporated: And how about the Royal Palm note, would you consider selling that as a way to pay off some [indiscernible]?

Certainly. The Royal Palm note, just to remind the callers, was what we believe is a very good piece of mortgage paper we took back on that sale. The spread is $500 over a 1 point floor on LIBOR, and that shifts up to 600 over in 2013. And it benefits from completion guarantees, et cetera, et cetera. We love the collateral. We think it's a good piece of paper. But certainly, we also think it's a monetizable piece of paper, and we would explore selling that one as part of our liquidity strategy.

Our next question is from the line of David Katz from Jefferies and Company. David Katz - Jefferies & Company, Inc.: I wanted to just go back to the issue of Sales Force One, and if you could just talk -- I'm recognizing that it's not the most prominent portion of your business, but if you could just put some detail around what challenges you've seen with it and what reactions and what you expect Marriott to change with it? That would be helpful.

Sure, David. Look, Sales Force One has taken on kind of a mythical status at this point with the launch of a -- a lot of people picking up on it. As I mentioned on my comments and Marc did as well, it's certainly is a focus of ours. But Marriott has been a very strong group business producer, and we believe that with some recalibration and some adjustments to the program, Sales Force One can be, and frankly in our experience with Marriott will be, a very successful initiative. Let me shift it over to Marc, specifically, to talk about some of the tactics we've employed to ensure that it's beneficial to our hotels.

Look, in some specifics, we have worked with Marriott to actually add back a position called the Destination Sales Manager that we've now put back in 10 of our 13 hotels. That job allows for there to be greater clarity to review funnels and the leads that are coming in. And to really make sure that for our hotels that, that potential group business is getting closed and the right people are being talked to. In addition to that, in some of our -- in our 3 larger hotel, we're actually in the process of also adding back one or 2 individual sales managers in those hotels to be more proactive on new markets from that standpoint. Look, we continue to work with Marriott and have found Marriott to be very open as the manager. And, look, at the end of the day, they benefit just as much as we do from having this win and having revenues grow. David Katz - Jefferies & Company, Inc.: All right. That -- just if I can follow that up, does that cost you more? Or is that a reallocation of a resource?

I think at this point, it's both a reallocation and, I guess in theory, a potential slightly more cost. But remember, if we grow revenues and continue to grow it, the costs really are just at the same percentage as they would exist for the -- for normal additional group room nights.

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

I just didn't have any new questions. I just wanted a little more granularity on some of the questions already asked. First, on transient, Ken, I think you said it was about 60% of your overall business?

Yes.

And can you break that down between business transient, leisure transient?

Sure. Let me shift you over to Marc, he's got a very detailed table in front of him right now. Most of our transient business is business in orientation. As you know, our portfolio is primarily urban-branded hotels which cater to the business travelers. But we break it down not only between business transient and leisure, we spend a lot more time focusing on premium bookings throughout the segmentation and within the business transient sector. So Marc, do you want to give Dennis some detail?

Sure. For Q2 2011, Group made up 30.9% of our business. Transient made up 64.5%. Business made up 30.7%. Leisure made up 16.1%. Government made up 3.4% and Contract made up 4.6%. And again, you saw what you would expect to see, Contract business declined, Government declined, Leisure Premium was up, and Corporate Premium and Benchmark was up as well.

Okay, good. The next one, on the Royal Palms, you're talking about taking back the paper. Who is the current owner? Who's the debtor on that?

So, we sold the hotel to KSL. And the asset itself, it's a secured mortgage, so secured by the asset. It benefits from a completion guarantee on the renovation. The non-recourse guarantor on the loan are certain entities within the KSL portfolio.

And then lastly, you said that production was down 4.7% in the second quarter versus second quarter 2010. Can you give us a little more color on that?

Sure, Dennis. I'll shift it over to Marc for that but I'm glad you asked the question because we spent a lot of time talking about pace, which is kind of a popular term. Marc has appropriately shifted our focus to production, which is less about what's on the books for the remainder of the current year or the subsequent year, but more importantly, about what are the sales teams producing for all future periods. So let me shift it over to Marc to talk a little bit about the production trends that we're seeing and how we're focused -- focusing our asset management efforts to make sure that those production trends improve.

Great. Just as Ken talked about, again, pace particularly over the last several years, because of the movement, the big swings can sometimes be disguised. And so for us, we look at what is the machine producing for both the current year and future years. And so actually, our production outside of 2 hotels, D.C. and Orlando, for Q2 was actually up 7.3%. Orlando had a basically very tough year-over-year comp with a particular piece of business that they booked last year that was a multi-year. And D.C. is soft currently, with the 30% decline next year, and most of the production decline there was really in '12. The good news is that in D.C., our current production and our booking pace in D.C. reflects that hotel returning to peak and beyond peak performance in 2013. And actually, our Orlando hotel is actually ahead of pace for 2012. So it's an interesting dichotomy that their production is down, but their pace is ahead 6% in group room nights.

Okay. Now I'm more confused. What did -- give me a layman's definition of production and pace?

Production is basically what the sales offices or sales teams book for all -- for the current year and all future years. And pace is only a reflection of how a specific hotel fits compared to the same time last year for the year it's in or the following year.

There are no further questions at this time. I would now like to turn the call over to Mr. Cruse for closing remarks.

Thanks, Camille. And thank you, all, again, for your time today. While these are clearly challenging times, Sunstone is moving in the right direction. Our business plan is structured well for the current environment, and our team is focused on operational excellence and fiscal discipline. We look forward to speaking to you in the coming weeks. Thank you.

Ladies and gentlemen, this concludes the Sunstone Hotel Investors Second Quarter of 2011 Earnings Conference Call. You may now disconnect. Thank you for using ACT Conferencing.