Good morning, ladies and gentlemen and thank you for standing by. Welcome to the Sunstone Hotel Investors Second Quarter 2018 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference is being recorded today, Tuesday, July 31, 2018 at 12:00 p.m. Eastern Time. I will now turn the presentation over to Aaron Reyes, Vice President of Corporate Finance. Please go ahead, sir.

Thank you, Jonathan and good morning everyone. By now, you should have all received a copy of our second quarter earnings release and supplemental, which were made available yesterday. If you do not yet have a copy, you can access them on our website. Before we begin, 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 adjusted EBITDA, adjusted FFO and hotel-adjusted EBITDA margins. We are providing that information as a supplement to information prepared in accordance with Generally Accepted Accounting Principles. With us on the call today are John Arabia, President and Chief Executive Officer; Bryan Giglia, Chief Financial Officer; and Marc Hoffman, Chief Operating Officer. After our remarks, we will be available to answer your questions. With that, I would like to turn the call over to John. Please go ahead.

Thanks, Aaron. Good morning everybody and thank you for joining us today. I will start the call today with the review of our second quarter operating results as well as an update on the current operating environment. I will then provide an overview of our value-enhancing transactions we have completed to-date and finally I will provide an update on both our completed and soon to be completed capital projects that we expect will provide additional growth in 2019. Afterwards, Bryan will recap our significant investment capacity, highlight our balance sheet flexibility and provide the specifics of our updated 2018 guidance. During the second quarter, our portfolio delivered operating results that were near or exceeded the high-end of our previous expectations for RevPAR, total hotel revenues and overall hotel profitability as we experienced acceleration in various parts of our business, particularly with room rates and non-rooms revenue. The second quarter comparable portfolio RevPAR increase of 2% came in towards the high-end of our guidance range, with a 3.8% increase in average daily rate and a 150 basis point decline in occupancy. Keep in mind, that our second quarter occupancy and RevPAR were negatively impacted by various rooms renovations, which are now complete at our Marriott Boston Long Wharf and Renaissance LAX as well as the ongoing renovation of all guest rooms at the JW New Orleans. Adjusting for the impact of displacement, our second quarter RevPAR growth is estimated to have been 3.6%. So, let’s talk about the details of our operating results beginning with group trends. As expected, group demand was down 100 basis points in the second quarter due to fewer citywide conventions in Boston, San Diego and Chicago, along with the loss of a multiyear group training function at our Houston hotels that concluded in the second quarter…

Thank you, John and good morning everyone. As of the end of the second quarter, we have approximately $1.2 billion of consolidated debt and preferred securities outstanding and our current in place debt has a weighted average term to maturity of over 5 years and a weighted average interest rate of 4.2%. Our variable rate debt as a percentage of total debt stands at 22% and 43% of our debt is unsecured. We have 19 unencumbered hotels that collectively generated approximately $230 million of EBITDA over a trailing 12 month period and nearly 68% of our EBITDA is now unencumbered. In addition to cash on hand, we have an un-drawn $400 million credit facility and no debt maturities before November 2020. We ended the second quarter with nearly $545 million of unrestricted cash on hand taking into consideration the transactions which closed subsequent to the end of the quarter. Our adjusted unrestricted cash balance was approximately $600 million. Our meaningful cash balance represents future earnings that will materialize when we deploy this capital. Now turning to third quarter and full year 2018 guidance, a full reconciliation can be found on Page 25 of our supplemental as well as in our earnings release. As John mentioned our third quarter and full year 2018 guidance continued to be negatively impacted by the short-term disruption at our renovation hotel. The good news is that the majority of this displacement is behind us and we expect only minimal impact in the third quarter and we will now look to see the benefit of this work as we move forward into 2019. For the third quarter, we expect total portfolio RevPAR to increase between 1.25% and 3.25% which includes approximately 35 basis points of renovation related disruption. We expect third quarter adjusted EBITDA to be…

Thank you. Ladies and gentlemen, at this time we will open the floor for questions. [Operator Instructions] Our first question comes from Shaun Kelly with Bank of America.

Hey, good morning guys. John I just wanted to start with a little question about Marriott, I didn’t catch it anywhere in the script, but some other operators or some other owners have called out some disruption primarily at more Starwood branded properties during the quarter around some of the kind of integration activity that Marriott is undergoing. Could you see that in any of them, I know you are primarily Marriott branded in your portfolio, but did you see that in any of your properties, did that cause you any disruption in the portfolio during the quarter?

Yes, good afternoon, Shaun. First and foremost, we didn’t or don’t own any hotels that were Starwood managed that converted over to Marriott in the merger. So, that’s one area that we don’t have a lot of insight on. We do believe that there is some temporary sales reorganization impact. We have also seen that in certain markets like Boston we have heard similar commentary from the owners of a couple of large box hotels there that they just were not grouped up as much as they should have been which I think is weighing a little bit on that specific market. Long-term though Marriott has incredible resources and Marriott will get this figured out. I think this is probably some short-term disruption, but I have no concern of long-term.

Got it, great. And the other question for me is sort of the obvious one given that I guess the post asset sale cash number that Brian mentioned of $600 million, your net leverage I think is the lowest of probably all of the publicly traded hotel rates at this point. So, what’s the kind of the M&A landscape for you right now and I mean, what’s kind of your prognosis for being able to deploy some of this into something that you might get a little bit more credit for on the earnings lines?

Yes, obviously to that too, Shaun, we access capital on our ATM during the quarter. During the quarter, we have the opportunity to raise a relatively small amount of equity now what in retrospect appears to be just pennies below the high share price for the quarter and the 52-week high. We think that the equity issuance and the sale of the Hyatt Newport Beach add to our already sizable cash position and will leave us in what we think is an enviable place to have significant investment capacity. It’s that investment capacity that allows us to continue to underwrite potential investments and also puts us in a far better position when negotiating with potential sellers as we don’t need a financing contingency, which we have found in intent to be a significant negotiating point with potential sellers. I think we remain opportunistic we have been incredibly busy in underwriting assets, particularly those assets where we believe that we can add through capital investment and asset management. Obviously, the investment environment remains competitive, but we feel good about our prospects of being able to put to work some of our significant investment capacity. What we don’t feel as confident about is just the timing of that and whether or not the equity markets will be there for us in lining up the timing of both the investment and the capital raise. So effectively, what we have done Shaun is we have pre-funded an acquisition or two, I think it’s also worthwhile to note that some of the investments that we are looking at, these are large investments. And as evidence of our more recent transactions, we typically don’t look at $50 million or $60 million investments we look at multiple hundreds of millions of dollar investments. So, we feel pretty good about where we stand from the investment perspective and we will be patient, fully recognized that this has a modest impact of short-term FFO dilution, but that we think is prudent given the investment capacity that gives us, which in my mind, just represents significant unrecognized earnings potential.

Got it. Very clear. Thank you very much, John.

Thanks, Shaun.

Thank you. Our next question comes from Jeff Donnelly with Wells Fargo.

Good morning, guys. Just continuing that question, John, I mean do you have an appetite or I guess maybe how could you characterize your appetite for your portfolio or even platform purchase versus a single asset, I guess would you rollout large scale investments for the company?

In the past 12months we have looked at all of those single asset portfolio and platforms. So I wouldn’t say that we have been dissuaded from any of that. It really just comes down to whether or not first and foremost, it’s a fit for our strategy. Look I don’t want to just get bigger for the sake of getting bigger. First and foremost, it has to fit our strategy. Now, that doesn’t mean that in a portfolio type deal that we won’t take on a few assets that aren’t on strategy and there might be more commodity or pedestrian that we really want. But it has to have enough long-term relative real estate in it for us to weed through that opportunity. And second while the price needs to make sense. So we have – I think as you know Jeff we have been very active in competing for transactions of weight, but I think we have demonstrated a fair amount of discipline and but at the same time I think our day is coming.

And I am just curious in your search for long-term relevant real state obviously the situations, where you have sort of an iconic asset in an un-replaceable location are always the tough ones to unlock, but how you weigh situations or maybe the physical land site or location versus what is built upon it because clearly it’s more common out there and I guess I am wondering how it speaks to whether or not you would see value in the physical structure for its unique location or conversely being willing to take on a large scale redevelopment because it’s the right land but maybe the wrong building on it?

I think most of the time, but not all of the time Jeff, it really comes down to where the hotel is located and those barriers of entry of really replicating us. And then also it’s not only difficult in replicating it’s how relevant to the consumer will it be for long periods of time. And when I take a look at what we have in Wailea, I think that those 23 plus or minus acres will always be relevant to travelers and they doesn’t mean it’s not going to be cyclical, but I think it’s always going to be a destination where people aspire it to go. And it also happens to be a market does and credibly difficult to build it. So it’s those types of attributes. Two, to your question about whether or not we would take on a project that will require capital and asset management initiative, sure I think that’s the core strength of ours. I think we can get attractive returns in that space and if the pricing is right and we think that we have the right opportunity to invest right amount of capital to materially improve the earnings power of that asset over time, I am less concerned about the timing of the cycle for that.

And just one last question, I am just curious as we sit here today, how do you rank the major demand segments for the back half of ‘18 and say ‘19 in terms of group leisure and corporate transient I was thinking about where you guys are seeing the strength and where you expect to see it?

Group is up for the back half of the year, it’s up about 3% in total pace and our transient pace is actually doing well as well, so we are hoping we are more. We believe that there will be – continue to believe that these levels of occupancy will be more transient rate compression.

Okay. Thanks guys.

Thanks Jeff.

Thank you. Our next question comes from Bill Crow with Raymond James.

Hey, good morning guys, Bryan maybe one for you, did the sale of the Hyatt Newport have any impact on the RevPAR guidance for the year?

Good morning Bill. It had a very minimal impact. The growth for Hyatt was roughly around what the portfolio was doing. So the real – the only impact that we saw or the impact to our guidance was the lost EBITDA for the second half of the year.

Sure. Thanks. John, maybe I missed this from your remarks, any commentary on bookings in Hawaii on a forward basis with all the volcano news out there?

Sure. Wailea remains incredibly strong so there has been – we understand anecdotal we don’t own anything on the Big Island that we understand that there has been an impact to group bookings on the Big Island. We have not seen it at all Bill any negative. Wailea continues to chug long. I think in the second quarter the market was up 5% to 6% in RevPAR growth. There we have continued to expand. Southwest is talking about flights from the Mainland into various markets, including Maui. [indiscernible] continues to live. Group bookings for next year remain strong. We have seen no impact. We are not – thus far, we have not had any impact to air quality, air lift anything in Wailea considering it’s, I don’t know 150 miles away give or take probably off on that number a little bit, but we feel very good about what’s going on in Wailea.

Okay, great. And then you talked about trying to align the land and the building and you still have some leased hotels and I am just curious your thoughts on, for example, the Hyatt Chicago or the Hilton Times Square that are both under leases?

Yes, I would say that it’s those two hotels, very good hotels in great locations we would love some way to own the dirt under most of our hotels. The one I will – you didn’t ask a question, but as I will point out, for example, our Courtyard LAX, it’s also under ground lease, but we have contractual right to purchase that ground lease at a very compelling price to us in several years, but that’s one that we look at – it is a ground lease, but we put on asterisk next to it.

Alright. Thanks, guys.

Thanks, Bill.

Thank you. Our next question comes from Smedes Rose with Citi.

Hi, thanks. John, I just wanted to ask you just kind of based on your opening remarks and your thoughts as the back half of the year should improve. So, I mean, would you be pretty I guess comfortable with higher end of your guidance range at this point, if you didn’t really take up the whole year more than just the kind of beat in the quarter, but it sounds like you feel fairly good about the trends now through the back half of the year?

Yes, we feel comfortable with the trends. It’s the same our forecast for the third and fourth quarter really have not changed whether or not that’s conservative, I will leave up to everybody on this call in the investment community to figure out or to determine, but we just feel comfortable with where our guidance is.

Okay. And then you might have covered this in your opening remarks, sorry if I make you repeat yourself, but for the Hyatt Regency in Newport, if you had been able to renegotiate or buyout the ground lease, is that an asset that you would have liked to retain or are you sort of exiting that market from a more strategic perspective?

Smedes, just a great question, the sale of the Hyatt Newport Beach to me was actually very bittersweet. This was a piece of dirt that we aggressively pursued with the owners, the family that owns it for the better portion of 5 years. They are probably about the same amount of time that we pursued the dirt under the JW New Orleans, owning 22 acres of fee simple land in the Back Bay of Newport Beach and a very short walk to Balboa Island is by its own definition long-term relevant real estate. The improvements there eventually will need to be changed, but it’s one that I think that we could redevelop over time. Bittersweet part of that was our inability to acquire the land maybe others will have better luck, but it’s something that we faced and said, we now have a 30-year lease left on this asset and it has certain requirements and we thought if we could not buy in the dirt that we would have to effectively cut ways with the asset and redeploy those proceeds into on strategy assets.

Okay. And John just to help educate myself maybe, I mean, it’s 30 years just about sort of the tipping point and a lease for the assets sort of starts just to become sort of diminishing and value if there is no extension beyond that or what sort of [indiscernible]?

I think that’s fair to debate clearly 30 years shorter than most, I know that at certain points, it starts to become more and more difficult to finance shorter term ground leases. But I think we have a fundamental view that with our strategy of owning long-term relevant real estate, but it’s on definition ground leases, it’s hard to fit those into that strategy.

Okay. And then if I can just ask one last one, on your last call and we have heard this from others as well that kind of one of the biggest competitors if you will to buying assets, it’s the owner’s ability to refinance at very favorable rates, are you seeing any changes in that, is that something that you will still continued to encounter?

Absolutely continued to encounter that, we have underwritten – we underwrote one asset in kind of the first quarter, beginning of the second quarter that the refinancing market was just too strong. Great asset, but I think we could do really well with, but the pricing expectations were just so robust considering private equity could do a take at refinancing and effectively play with other people’s money so to speak. Another asset recently that we have looked at, it’s been a lot of time looking at we believe eventually will be refinanced, so that continues.

Okay, alright. Thank you very much.

Thanks.

Thank you. Our next question comes from Lukas Hartwich with Green Street Advisors.

Thank you. Good morning guys.

Good morning Lukas.

Good morning, so when you are looking at acquisitions, how close are you guys to the winning bidder. And then kind of second on that, can you give us a sense of what the underwriting differences are that would close the gap between you and that winning bidder?

It’s tough to generalize Lukas. But I would say in some cases it’s been mid single-digits, in other cases it’s been clearly into the double digits. We obviously don’t have a lens [ph] into how people are underwriting or what type of return that we are looking for or whether or not they have a weighted capital issue that they have to get capital out of the door. So I think in this environment as Smedes just brought up the debt markets are robust and there is little wall of capital out there looking for homes. And I do think in this environment certain private equity groups who are willing to take on more leverage and are generally short-term holders could be looking at just capital stacks different which may benefit them.

That’s helpful. And then just the second quick one and then I know it’s early, but can you talk about the reception of the Long Wharf renovation, do you still think you have good odds in moving that property up market?

Yes. The product looks spectacular, it just looks spectacular. You folks are probably tired, fair we say this, but I continue to think that’s one of the best located hotels in Boston and we thought it was basically pedestrian Marriott room and it’s beautiful. Materially enhanced the bathroom experience, it was a heavy renovation not for the faint of heart, but we believe that we can move over time we will be able to move RevPAR penetration there. We feel very good about it.

And can you remind us do you have a rough target of what you are looking for in terms of RevPAR index to move that property here?

I don’t believe we would say that, but let me see if we can find that Lukas.

Great. Thank you.

Thank you. Our next question comes from Anthony Powell with Barclays.

Hi, good morning everyone, just one more question on the second half outlook, you say it should be stronger in the second half and the first half, that’s a bit different than one of the larger companies said last week, what markets do you expect to improve in the second half and how do you expect the holiday shifts in July, September and the tough fourth quarter comps impact the numbers?

Good morning Anthony. Looking at the second half several hotels we have that and remember when you compare us to the brands they have a much wider representation of hotels across country where we are obviously more concentrated. So specifically in our markets Wailea is one that will continue to drive performance. San Diego is a strong market for us and also Boston on a relative basis as we start to get to ramp back up in Long Wharf and then the new meeting space in our plaza will help the portfolio.

And Anthony, we also keep our hope that those trends that we have seen in the first half of the year will remain in New York. New York Chicago have really been – Wailea really been some of the surprise positive to the upside this year. We hope that continues.

Got it. And what should be higher in terms of the RevPAR growth, the third quarter or the fourth quarter?

Fourth quarter slightly, but they are about pretty close to each other.

Got it, thanks. And John you mentioned you will remain an active seller of the few commodity hotels remaining in the portfolio, what is the total amount of proceeds you expect to receive from those after sales and over what timeline could they be sold?

We will take a little time to continue to work through those as evidenced by it’s taking us about 3 years to sum up $1 billion in assets knowing that half of that was one hotel in – one leasehold hotel in New York. So, I think we are not going to fire so these assets. I think first off, we don’t need the liquidity, but I think over time I am trying to find the right time to exit out of those hotels off strategy. I think it makes a lot of sense to us particularly given the strength of the capital markets and the debt markets that we just talked about. So, it will take a little bit of time, but there is still I would say a handful of hotels in our portfolio, but it makes up – clearly, it makes up far more number of rooms than it does value.

Got it. And what could that value be if you can provide that?

Yes, I prefer not to be so specific on value, but it’s hundreds of millions of dollars.

Alright, thank you.

Thank you.

Thank you. Our next question comes from Stephen Grambling with Goldman Sachs.

Hey, thanks for the questions. I guess a quick follow-up for the others you have mentioned the elevated seller expectations ability to take on leverage maybe being partially what’s driving that a couple of times. I guess how would you weigh consolidation within the public hotel REIT as an opportunity to deploy capital relative to individual assets and how does the response to some of your peers, proposed transaction factor into your thinking if at all?

Well, the M&A is difficult. In M&A, it takes an incredible amount of time. We are lucky enough to have the capacity and the portfolio to be invited into generally into M&A discussions, but really only if it shoots us a strategy perspective. So, I think it’s something that we are generally invited to the dance so to speak. It is incredibly difficult to get done and takes an enormous amount of time, so I would not hold out hopes for that in the near-term, but it’s always something that is discussed.

Thanks. And then maybe one that I may have missed, I don’t think I heard anything on 2019 kind of group trends right now and how maybe that’s been evolving over the past couple of quarters? Thanks?

Yes, we generally wait until later in the year to provide what our pace is. I think it’s been well documented just reading research notes that a couple of markets are strong in pace next year. San Francisco is one. Wailea, which is often discussed, but group pace in Wailea is very strong next year. There are other markets that just aren’t that strong in ‘19 but are stronger in ‘20 I think that, that’s going to be a general theme that people will digest. What we have done is those markets that don’t have work as convention pace we are focusing heavily on in-house group markets side like DC for example, where the convention center is relatively weak next year, but for example, our group pace is strong. So, it’s a mix and as the year progresses we will be able to provide more detail on that.

Thanks. Appreciate the color.

Thank you. Our next question comes from Michael Bellisario with Baird.

Good morning everyone.

Good morning.

John, how are you guys thinking about development today and development opportunities out there, are you seeing more of them and then kind of this is category moving up or down here with the potential uses of cash?

Our development?

Yes.

Yes. We have rather than repositioning, it’s starting to bring that up, Mike. We have actually had conversations about being a financial partner on one or two development opportunities, but it was one where the entitlements were already set. We eventually decided not to pursue that for various reasons, we just didn’t think we can get the financial returns on a risk adjusted basis, but it’s something that we have considered. I will tell you that I don’t think it will ever become a significant part of our business but for the right asset with the right partner mitigating development risk we would consider it. And then we have also occasionally taken a look at being the take outs or something is wrapping up construction and we have looked at the take out. So I would that those are on the table, but I wouldn’t expect them to be a significant part of our story or a significant deviation from a strategy.

Got it, that’s helpful. And then I know you mentioned you are more active in terms of underwriting, are you more active than or sorry that you are remaining active, are you more active today than maybe 90 days or 120 days ago and are you closer I know you mentioned some percentages you have been off on deals, but do you feel like you are getting closer to getting something across the finish line?

We have been, I would say, active to very active on the underwriting front for what it seems like 12 months to 15 months. That has not changed today and we continue to pursue a number of actionable items now, but also pursue a few glimmers of our eye so to speak of things that might take a significant amount of time that we are just trying to sow, lay out seeds for future pursuit so to speak. So I would say we remained very active. I am hopeful Mike that we are able to invest, but what’s most important to us is doing the right deal not just the next deal. And so I am pleased with the level of discretion we have had. We will see where this goes.

Got it, that’s helpful. And then kind of on the flip side but on Newport, can you maybe give us a little more detail on the sale process there, it’s widely marketed and then how would you describe the buyer pool for this particular asset as we think about potential sales of your other kind of non-long-term holds in the portfolio?

Yes. So it was broker, but it went out to a selective group the one element that we were cognizant of it would reduce the potential buyer pool was the 30 year of remaining lease. And but despite that we had I would say fairly robust interest number of confidentiality agreements signed and the amount of very quick inbound interest to express a high level of interest was high. And is evidenced by – it was taken out of the price that was higher than our internal whole evaluation and that of many people in the street had a value of that. So we feel good about it. We went with private equity player that we have a lot of respect for that is known to be a very good buyer and we are pleased to get it over the line [indiscernible].

That’s helpful color. Thank you.

Sure. Thank you.

Thank you. Our next comes from Chris Woronka with Deutsche Bank.

Hey, good morning guys.

Good morning.

Want to kind of ask on the expectation that I guess room rate growth accelerates a little bit from here, if you would kind of bucket that between a better group book position in terms of more compression nights and maybe just better overall transient demand and then maybe some of the initiatives that the brands of undertaking with cancellation policies and such. Is it possible to kind of narrow down as one having more impact than another or is it everything put together?

I think it’s everything put together. I mean, underlying our expectations is we have actually and I believe fairly conservative in our group’s slip for the second half of the year, meaning we have slipped our groups more than the historic normal, so that we are hopeful that, that provides some lift that does come in better than anticipated with already high occupancies, particularly in the third quarter. You could paint a picture that transient rate growth will be better than expected in certain markets. So I would say it’s a mixture of all.

Okay, fair enough. And then John, you mentioned selling the few kind of remaining commodity type hotels you have, obviously you want to own these unique assets, but do you think commoditization, do you think that’s kind of an issue for the industry more broadly?

Alright. Yes, absolutely. I think there are lot of commodity hotels and in the marketplace ones that relies solely on the brand that eventually their improvements deteriorate and in a lot of markets where there is ample ability to build and eventually the brand will find a nicer, cleaner hotel down the road. I think that is by its own very definition somewhat of a commodity market and something that we have taken significant time to proactively remove ourselves from that type of assets. I can’t sit here today and tell you Chris that every single one of our hotels is spot on in terms of long-term relevance, but when you take a look at our overall asset value and we give you all the information we can do property by property valuation, a significant portion of our asset value is squarely within that strategy. And I believe over the next this management team and board are highly focused that over longer periods of time, this isn’t a quarter-to-quarter thing, but over longer periods of time, we can distinguish ourselves with this strategy, because I fundamentally believe that it is the right strategy and I think it will lead to attractive shareholder returns over time.

Okay, that’s helpful. Thanks, John.

Thank you.

Thank you. Our next question comes from David Katz with Jefferies.

Hi, good morning everyone.

Hi David.

So I know as later down in the queue the prominent issue of how to use the available resources being the prominent topic, I think it’s been asked in number of different ways, but I am going to take one more cut at it, which is how do you think about the length of time, where resources pile up and I would not be critical of the choices or the discipline, but is there a point at which returning some capital becomes a more attractive item or alternative than sort of continuing to let it pile up?

Yes, so David taking from your comments just the question is why have such a significant amount of cash and build more cash and by the way there is a chance that we saw more assets and we will continue to build up. This late in the cycle, if that is our biggest sin of this cycle, that’s one I can easily live with, because it is incredibly easy to fix either through an acquisition, buyback a stock, dividend, what have you. So I like this level of optionality 9 years into a recovery in a economically sensitive business. So we are patiently continuing to have conversation with our largest shareholders and they continue to support as our board does to be prudent to getting the right transaction not just the next one. So I think we have time. We don’t have forever. It is a quantifiable impact to our short-term FFO dilution, but I would rather manage the business from a long-term value perspective than a short term earnings perspective. So, so far I think we have time that’s feedback we get from our largest shareholders and from our board and we are pleased with it.

Understood. I do think that, that’s a fair characterization. Some might argue that it’s a hike class problem or high class challenge, but challenge nonetheless, but it’s a better challenge to have than the other way around for sure?

Yes, no, totally agreed. This is, I think you said a high class problem, I agree it gives us significant optionality and we are comfortable with it.

Right. And if I may just follow-up on one of the prior questions, I recognized that M&A for acquiring other companies is a different curriculum than single assets or even groups of assets. Is there a point at which you might it sounds like you are not inclined to pursue those things, but is there a point at which or some boundaries around which you might reconsider?

No, I hope that didn’t come across that way. We have been – I am going to choose my words carefully. We have considered such opportunities with significant diligence and I think given our platform, given our quality of our portfolio, given our quality of our balance sheet and significant investment capacity, I think it would be odd if we were not invited into the 10 so to speak in any M&A discussion as long as it fits our strategy.

Okay. Thanks for clarifying. Appreciate it. Nice quarter.

Thank you.

Thank you. Our next question comes from Bill Crow with Raymond James.

Yes, just to follow-up and really just going back to David’s I guess the former question, John, I know you have got great dividend flexibility with the nickel a quarter, but I think if you didn’t match what you did in the fourth quarter this year, it would have been probably disappointing. So when you think about your capital allocation in that cash pile and maybe continued mismatch of selling versus buying, but how do you think about the dividend in that regard?

Yes, Bill, we have a fairly straightforward dividend policy. It’s non-conforming, but it’s straightforward and that is we just tried to distribute out what our taxable income is keeping in mind there is two sources of that taxable income being operating profits so to speak and also impact of transactions. And the second part of that makes dividend policy more difficult, because if you have a fair number of sales with gains in it, those that have a steady dividend policy end up having to eventually cut that dividend. So we really like the flexibility that this gives us. I think that dividends are a core barometer of measuring the valuation of the hotel company given the volatility of our cash flow strength and so we like this policy and we continue to use it. We obviously have a lot of flexibility in our dividend policy given the amount of cash we have, but nothing has been determined to be.

Alright. I will leave it there. Thanks.

Thanks, Bill.

Thank you. At this time, I would like to turn the conference over to John Arabia for closing remarks.

Thank you, Jonathan. Thank you all for joining us today. We are around the office if anybody has any follow-up questions or would like to discuss. Hope everybody has a wonderful rest of your summer and thanks again for your interest in Sunstone.

Thank you ladies and gentlemen. This concludes today’s teleconference. You may now disconnect.