Sunstone Hotel Investors Management Announces Senior Leadership Restructuring

Dec.20.10 | About: Sunstone Hotel (SHO)

Sunstone Hotel Investors, Inc. (NYSE:SHO)

Q4 2010 Earnings Conference Call

December 20, 2010 9:00 am ET

Executives

Robert A. Alter – Executive Vice President

Kenneth E. Cruse – President and CEO

Bryan Giglia – SVP, Finance

Marc A. Hoffman – EVP and COO

Lew Wolf – Co-Chairman of the Board

Lindsay Monge – SVP, Treasurer and Secretary

Guy Lindsey – Senior Vice President – Design & Construction

Analysts

Jeff Donnelly – Wells Fargo

Joe Greff – JPMorgan

Eli Hackel - Goldman Sachs

Shaun Kelley – Bank of America Merrill Lynch

David Loeb – Robert W. Baird

Dennis Forst – KeyBanc Capital Markets

Brian Maher - Citadel Securities

Lou Taylor [ph] – Halston [ph]

Rod Petrik - Stifel Nicolaus

Chris Woronka – Deutsche Bank

Josh Attie – Citigroup

Larry Raymond – Big 5 Asset Management

Operator

Good morning, ladies and gentlemen, and welcome to the Sunstone Hotel Investors Senior Leadership Restructuring call. (Operator Instructions). As a reminder, this conference is being recorded today, Monday December 20, 2010.

I would now like to turn the conference over to Bob Alter, Executive Chairman of Sunstone Hotel Investors. Please go ahead.

Bob Alter

Good morning, everyone and thank you for joining us today on this important announcement for Sunstone Hotel Investors. We felt it was important to have brief call today to answer any questions you may have regarding the Senior Leadership Restructuring we announced on Friday.

As you saw in Friday’s release, Ken Cruse has been named President and I along with other members of Sunstone Board of Directors believe that Ken possesses the right combination of judgment, discipline and integrity to lead Sunstones next growth phase. Ken, along with Marc Hoffman, our Chief Operating Officer and the members of Sunstones leadership team have been actively involved in all facets of Sunstone's business and have played integral roles in each of our major transactions over the last six years since Sunstone's IPO in 2004.

I intend to mentor Ken and help the team guide the day-to-day execution of the company's business plan, which is aimed at growing the portfolio and enhancing shareholder value.

As noted in Friday’s release, effective immediately Art Buser will no longer be President and Chief Executive Officer or member of the company's board of directors. The board and Art reached a mutual agreement on the separation. It has been speculated in a few of the analyst reports that the primary area of disagreement was acquisition pace. That is incorrect and there were multiple directors that took exception over a broad range of factors relating to Art's rule, style and conduct.

As I mentioned the board believes Sunstone is well positioned with its new leadership role to execute the company's growth strategy.

Before I turn the call over to Ken, I just want to say I'm very disappointed that it did not work out with Art Buser and the company wishes him well in his future. I'd like to say that I'm very happy to be back involved with this group of leaders at Sunstone, a company I funded in 1995 and a company whose growth I oversaw through 2007. Today Sunstone has a high quality portfolio, a solid balance sheet and a best in class team that has successfully navigated through the recent downturn and has positioned the company well for growth during the current recovery.

With that, let me turn it over to Ken.

Ken Cruse

Thanks a lot, Bob and thank you everyone on the call for joining us today. I'll be very brief. I'd like to thank the board of directors for providing me with this opportunity to expand my leadership role with Sunstone. It's an honor to be part of this talented and dedicated team.

As Bob indicated, this is an exciting time for Sunstone. Industry fundamentals are attractive and we have a solid platform for growth. We own 31 well-located hotels. We hold approximately 270 million in unrestricted cash. We have minimal debt maturities over the next five years and we have an undrawn $150 million credit facility.

While we have made good progress in a number of areas, we are not satisfied with where Sunstone is today. We can and will do a better job of smart, disciplined, value creation and as a result, we intend to make Sunstone a larger, stronger and more profitable company.

Sunstone has a great team with talented individuals overseeing all of the company's disciplines and we now have the right team in place to execute on the company's next growth phase.

Marc Hoffman, our Chief Operating Officer and the members of Sunstones leadership team, including Bryan Giglia, SVP of Acquisitions and Finance, Lindsey Monge, SVP, Treasurer and Secretary, Guy Lindsey, SVP and Head of Design and Construction and David Sloan, our Head of Legal, have been actively involved in all facets of Sunstones business and have played integral roles in each of our major transactions in the six years since our IPO.

As a team, our focus will remain on maximizing stockholder value through a comprehensive cycle appropriative approach to portfolio management. Our fundamental values, discipline and goals have not changed. Our strategy is well established and proven.

First, we intend to meaningfully increase the size and quality of our portfolio over the next several years through smart acquisitions. We will not be reckless. We have learned from the past and we will maintain the high level of discipline we have developed over the last several years.

Second, we will optimize the performance of our portfolio through aggressive asset management and by partnering with our operators.

Third, we will enhance the value of our portfolio through select capital projects and repositioning.

Fourth, we will effectively recycle capital through opportunistic dispositions of non-core assets.

Fifth, we will minimize our cost of capital and corporate risk while maximizing financial flexibility through continued proactive balance sheet management.

And finally and most importantly, our team will be known for conducting business with discipline, honor and integrity. In short, our objectives are clear and our strategy is simple. We will remain disciplined and we will execute.

Thank you very much for your time today. We look forward to meeting with you all in the very near future and with that, we'd like to open up the call to questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we'll now begin the question and answer session. (Operator Instructions) And our first question is from the line of Jeff Donnelly with Wells Fargo. Please go ahead.

Jeff Donnelly – Wells Fargo

Good morning, guys. I guess for Bob and Ken. Can you talk about what the process is going to be for capital raising and capital allocation just because in this new state of management I guess for you Bob is in sort of acquisitions and I guess I'll say it kind of quasi CEO and on the board, it's almost like it's a little bit of the old West where you're sort of Sheriff judge and jury if you will? I just want to be sure that, because there are folks that I think who are concerned that there won't be a governor on acquisitions activity and want to know how you guys are going to think about that?

Bob Alter

God, I wish I knew I was going to be promoted to sheriff but I will tell you, look, Ken came to Sunstone in 2005 from Host. Marc Hoffman came from Marriott in 2006 and both of those two gentlemen have been around through a lot of meetings, discussions over acquisitions.

They were involved with many of the acquisitions we made across the period of time from '05 and '06 and early '07 and I will tell you that I think that it's not going to be the old West but I think it's going to be a group of very smart individuals who will work with the brokerage community, will work with the ownership community and make sure that Sunstone acquires some of the best assets as we have in the past.

And one of the things that hasn't been said about Sunstone's previous strategy was the recycling of capital. We did across the period of time from the time we came in public in '04 to the time I departed in '07 dispose of some 50 assets during that period of time. A lot of limited service assets.

We acquired the Century Plaza and then disposed of it in a, we think very strategy transaction that earned the company a 20% IRR. And I believe that this group has the experience to execute and to stay focused on doing the right things to strategically grow the company.

Jeff Donnelly – Wells Fargo

I know it wasn't spelled out in your release but is there a timeline that you or Mr. Wolf, sort of contemplate for maybe Ken, eventually ascending to CEO and hiring a CFO and you step back from day-to-day operations? I mean is it sort of, would it surprise you if you were in the split role longer than one or two years or how do you think about that?

Bob Alter

First of all, I think that we will name a CFO very quickly. We wanted to make sure that we vetted that process with our audit committee and board and that will take a few weeks right after the holidays and that announcement will be made. I don't have a specific time line but the one to two years doesn't sound unreasonable.

Certainly we want to make sure that Ken and the rest of the team have solid footing and we just feel that as a board and I will tell you I'm very proud of the board and the behavior of the last few months because we were very active in discussions about what needed to be done and I think it clearly showed the strength of all six of us individuals who are members of the non management, were members of the non management group. So we don't have a specific timeline but we clearly will keep the public informed as we move forward.

Jeff Donnelly – Wells Fargo

Great. Thank you.

Operator

Thank you. The next question is from the line of Joe Greff with JPMorgan. Please go ahead.

Joe Greff - JPMorgan

Hey guys. Three relatively quick questions. Bob, it sounds to me that it's not so much the strategy that you want to change but rather the execution of what was the current or previous strategy? And then my other two questions, is that the CFO that you're going to name and it's fairly quickly, presumably that's an internal candidate? And then the title of Chief Executive Officer, you touched upon that in the prior question, I mean who will assume that title in sort of the near to intermediate term?

Bob Alter

Yes. Let me take those in reverse order. We intend to operate with both President and Executive Chairman positions and not name a Chief Executive Officer. Under Maryland and New York Stock Exchange, rules we can do that and Ken will assume the principal officer role for New York Stock Exchange and will be actively handling the role of overseeing the management day to day.

In terms of the CFO, that will be probably an internal candidate. That's our direction at this point. And I'm sorry what, the strategy, I think this execution issue versus what we accomplish is more about having the team as a group work on decisions, make the right decisions, make a decision and then move forward. And I think that one of the things I saw when I interviewed most of the management members was a frustration with lack of decisions quickly and lack of staying with those decisions. So we're clearly going to analyze the side and move forward.

Joe Greff - JPMorgan

Thank you.

Operator

Thank you. The next question is from the line of Eli Hackel with Goldman Sachs.

Eli Hackel - Goldman Sachs

Thank you. Just more of a broad based question. Can you just maybe give us reminders or some idea of terms of where you want to grow aggressively? What type of markets and also in terms of maybe some of the markets you want to get out of? How do you see if you are planning on redirecting some of your portfolio going forward? Thanks.

Ken Cruse

Morning Eli. This is Ken. I'll take that one briefly. Look we are somewhat agnostic as to where we grow. It's more asset types of location and good growth markets. So we've got a good presence in key gateway markets in the East, including Boston, New York, DC, et cetera. We very much like those markets and we certainly think it would be complimentary to our strategy to grow with additional assets in those markets. But we will be as Sunstone has been all along, opportunistic and we'll focus on growth with markets with strong growth and high quality assets where we as a team can add value to those assets.

Eli Hackel - Goldman Sachs

Okay. Thanks.

Ken Cruse

You’re welcome.

Operator

Thank you and the next question is from the line of Shaun Kelley with Bank of America Merrill Lynch. Please go ahead.

Shaun Kelley - Bank of America Merrill Lynch

Hi, good morning guys. Bob and Ken, just to go back to the acquisition strategy front for a little bit. Could you just talk maybe a little bit more about maybe the prior decisions that were made on the acquisition front, is there anything that in retrospect you would do differently then kind of where you are today? Or are you very happy with the comfortable, comfortable with the decisions that have been made?

Bob Alter

I mean, Sunstone hasn't made a lot of acquisitions over the last couple of years. We acquired the Royal Palms in Miami. I think everybody on the management team was very involved with that process and have no concerns about it. I think that there were a number of other transactions that the company worked on that didn't come together for lots of reasons and one of the things that I think this management group would really like to do is to make sure that some of these transactions in the future do happen and I think that to some extent we would like to make sure that we continue to what I would say rebuild our relationships with the brokerage community and the ownership group out there in the hotel space.

Shaun Kelley - Bank of America Merrill Lynch

And then I guess maybe given that you have an extra, feels like an extra seat, if the CEO and CFO were all either goes unfilled or filled internally, do you think there's a chance or opportunity to maybe add to the acquisition team or kind of on the execution front to help in that effort? Is that something that is part of the opportunity or are there any other holes in the organization that you'd look at filling to kind of round out the team at this point? Thank you.

Ken Cruse

Hey Shaun. I'll take that one. This is Ken. We're going to continue to evaluate talents and we want to make sure we maintain the best team in the industry so we're certainly not going to on today's call say that we are not going to consider brining on additional talent but the group that we've got in place at this point is very cohesive, very capable and we've got great chemistry. And so we don't feel that there's a burning need to add additional talent but we'll certainly consider opportunistically adding late players to the team.

Operator

And the next question is from the line of David Loeb with Robert W. Baird. Please go ahead.

David Loeb - Robert W. Baird

Over the step, that you guys went through and good morning, of course. Ken and Bob, I missed most of the prepared remarks because it took forever to get into the call but Bob, I just want to come back to something you said about decisiveness and quick decisions. I think a lot of the investment community got to know Art pretty well. Thought he was a pretty decisive guy. Was that not really the case?

Bob Alter

Look I, you might have missed it. I think that what I said in the opening remarks was that there were multiple factors that the directors took exception to relating to Art's role, style and conduct. I think that the issue of whether he was decisive or not decisive is not something I think we should get into here. I just would tell you that going forward that the management team here, I didn't say quickly, I said the group would analyze and then decide and then execute.

And I think that those three steps are critical deciding what you work on and how you move forward and I think if there was anything that differed kind of the acquisition strategy during the time that I was CEO and maybe the last few years I think Sunstone has been working in many different directions on lots and lots of deals over the last couple of years and our strategy during the time I was CEO was much more focused on choosing a few fields that we felt like we could execute and then moving forward on those.

David Loeb - Robert W. Baird

Perhaps as a case study, you could give us a little more insight into the Manchester Grand Hyatt transaction that was publicly reported by the San Diego Port that there was an agreement in principal to [indiscernible]. Basically, a stock deal. Is that the kind of transaction that perhaps you would have pursued through this different execution style?

Bob Alter

I believe the company's position on that possible transaction was we had no comment. The newspaper released through some public filings with the port but I don't believe the company ever commented on that transaction. And I think it's always been our policy not to comment on transactions until they're either executed and closed or they are with substantial non-refundable money.

David Loeb - Robert W. Baird

Okay, fair enough and I guess finally, as you look to grow and both you and Ken have talked about growing the asset base. Have you looked, are you considering things including portfolio transactions or perhaps merger of acquisition of another public hotel owner?

Ken Cruse

David, this is Ken. I'll take that one. We're going to, as Bob said, be very focused on what we're acquiring, in terms of quality assets in, that are well located in strong markets but that certainly could include portfolio transactions or major and strategic initiatives up to, and including merger deals. That's certainly not plan A on our strategy right now but we're focused on driving stockholder value and if the right answer is a major portfolio transaction then we'll be focused on executing on that.

David Loeb - Robert W. Baird

Okay and maybe one more follow-up. I apologize but just again on the timing. It sounds like CFO timing is imminent within the next, lets call it month and Bob I heard your answer about Executive Chairman until a CEO is appointed but what's kind of the likelihood for when either Ken gets the CEO title or you have somebody else in that role? Is it likely to be one to two years or is it likely to be less than that?

Bob Alter

I'd just say go back to the comment about Executive Chairman. In '07, I took the job, the position as Executive Chairman when I stepped down as CEO. I've maintained that position straight through so there was no gap in that. In terms of my company involvement, I will be much more involved until we name a CEO which I think is appropriate and we do not have a timeline on it.

So you've mentioned one to two years, I would like to say that we don't have a timeline and I don't want to get caught in the situation of having to pin that down. We think that the two of us and I will be very actively involved with Ken in this transition but I would like to say that when he is ready to be CEO, he will be.

David Loeb - Robert W. Baird

Great. I really do appreciate your candor on all of this. Thank you, Bob and Ken.

Bob Alter

Thanks, David.

Operator

Thank you. The next question is from the line of Dennis Forst with KeyBanc. Please go ahead.

Dennis Forst - KeyBanc Capital Markets

My questions already been answered. Thank you.

Operator

Our next question is from the line of Brian Maher with Citadel Securities. Please go ahead.

Brian Maher - Citadel Securities

Good morning, Bob and Ken. On the acquisition front and really not to beat a dead horse but to kind of drill down a little bit deeper. I mean, suffice it to say are you still looking at gateway and urban markets with a focus on luxury and upscale or are you going to be looking at other chain scales as well? It seems to be like that's getting to be a pretty crowded trade in the lives of the low hanging (inaudible) has been kind of flushed out so far?

Ken Cruse

Hey, Brian. Good morning. This is Ken. Look we're focusing on adding to the quality and growth profile of our portfolio. I don't think that that necessarily means specific assets type or brand quality level. But yes, typically we're going to be looking at the Marriott, Hyatt, Hilton, quality assets and above.

Brian Maher - Citadel Securities

And what would the role of, taking on repositioning have in this acquisition going forward?

Ken Cruse

Well we have a major repositioning underway with the Royal Palm. I don't believe any of us believe repositioning will make up a major percentage of our strategy but we will certainly do selective repositionings.

Brian Maher - Citadel Securities

Okay. Thanks.

Ken Cruse

You're welcome.

Operator

The next question is from the line of Bill Crow with Raymond & James. Please go ahead.

Bill Crow – Raymond & James

Hey, good morning guys. Ken, congratulations on the promotion.

Ken Cruse

Thank you.

Bill Crow – Raymond & James

Bob, maybe you could take me inside the boardroom for a second and just talk about whether there is a fiduciary duty to look for a CEO, the best available person if it could be and I think you agreed with the suggestion that I could be one to two years without a CEO. it seems like there's some sort of responsibility there to make sure that there's not somebody out there that would be at value added to the company?

Bob Alter

Let me take you inside the boardroom if you want to pose it that way. Look, you have a board that has a number of CEOs, a number of financial people. People that have been involved in the real estate community for a long time who all clearly understand what Sunstone is all about. Many of them have been on the board since it's IPO, a couple have been added since the IPO. They're clearly is a group that has been focused 100% on our fiduciary responsibility and making sure that the company is doing the right things which is I guess why we're on this call this morning.

In terms of the actual title of Chief Executive Officer, look since 2007 we've gone to the plate twice. We've struck out for various reasons twice and we clearly believe internal candidates is the way to go right now and that's the direction we want to go. Ken Cruse has been with the company a little over five years. He has clearly demonstrated the capacity to have this position.

The board wants to give him the time to make sure that it's under his belt. Having been the CEO for I guess 13 to 20 years in various phases of Sunstones history, I clearly can give him a lot of guidance and the two of us will work as a team and you'll see us a lot together getting there. And whether that is better or worse than actually having the title CEO, I think that the two of us can prove that we will be effective.

Bill Crow – Raymond & James

Bob, over the long-term, the stock has not been one of the better performers on a relative basis. Do you think that's, portfolio turnover at CEO leverage levels and what is kind of the strategy to regain the respect of the street or the multiple premium that I'm sure you feel like the company deserves?

Bob Alter

Well, I will tell you that I think my research shows that the company has been an excellent performer in various spaces. I would say over a longer period of time it's hard to kind of put this into comp. Certainly we had some strong years, we've had some weak years. We've had some issues with people believing our portfolio wasn't of the quality of some of the other portfolios.

I think the company has moved forward in a way to improve asset quality, move forward 100% in creating shareholder value through renovations and repositionings in rebranding. And now I think one of the things that the company has to take into this next growth phase is to really look at the number of shares outstanding and the number of the dollars of EBITDA and FFO and clearly make sure that the investors are well served in growing that so our multiple does increase.

I think that we have been viewed by the street as smart in doing a lot of strategic, strategically smart decisions. And I think that going forward that will continue.

Bill Crow – Raymond & James

It sounds like the pedal to the metal on growth, growing shareholder, growing shares outstanding, growing market presence. Sounds like that's a key as you think forward?

Ken Cruse

This is Ken. I'll jump in. Pedal to the metal is the wrong way to characterize our strategy. I walked through the six pillars of our strategy on the call so I won't reiterate those now. Smart, disciplined execution is what's ultimately going to drive our code of value and we're committed to that. We recognize it takes time. We recognize that running our business in a disciplined way with integrity and honor is the way to gain ground with the street. There's no shortcut here. But no, pedal to the metal is exactly the wrong way to describe the strategy. It's smart, disciplined growth.

Bill Crow – Raymond & James

Okay, I was just taking that response. Trying to re-characterize. Thank you.

Ken Cruse

You're welcome.

Operator

Thank you. The next question is from the line of Lou Taylor [ph] with Halston [ph]. Please go ahead.

Lou Taylor [ph] - Halston [ph]

Thanks. Good morning. So Ken just kind of as a follow-up to that question. I mean those goals are certainly very admirable but they're very similar to a lot of a half dozen other company's that are in similar positions to yourselves so how do you expect to really achieve that goal without being perceived as someone that's just simply outbidding everyone else?

Ken Cruse

Yes. Good question, Lou. Thanks. First of all, this is not a complicated business. I think where some of our peers and even prior leadership has gotten into trouble is when we overcomplicate things. If you look at the transactions that we've executed on year-to-date, they've all been done through kind of channels that were non-mainstream.

We agree completely that contesting heavily marketed transactions is not the best way to create stockholder value. So leveraging Bob's and Lew's relationships and statesmanship in our industry I think is going to be a distinctive advantage for the company going forward. But it's going to come down to smart growth and doing what we have done all along which is indentify the right acquisitions in the right format that are additive to our company and in taking it one step further which is executing on the deals once we've identified them.

Lou Taylor [ph] - Halston [ph]

Okay. So should we expect the acquisitions pace to improve or not improve if you're going to maintain the same discipline you had in the past and resulted in a small number of transactions? I mean is that what we should expect going forward as well?

Ken Cruse

No, you should expect to see (inaudible) flow pickup. If we reflect back on the last two years we walked away from a number of transactions that we appropriately should have walked away from but there were also a number of transactions that we did not execute that in retrospect we should have. So going forward, what you're going to see is, we will still walk away from those deals we shouldn’t do and as Bob said, we're not going to cast our net as broadly as we have been in the past couple of years.

We're going to have a tight, focused approach to what we're underwriting and when we see those deals that do make sense for the company, in contrast to what we've done over the last two years, we will execute.

Lou Taylor [ph] - Halston [ph]

Okay. Thank you.

Ken Cruse

You're welcome.

Operator

Thank you. The next question is from the line of Rod Petrik with Stifel Nicolaus Please go ahead.

Rod Petrik - Stifel Nicolaus

Okay. Good morning. Ken, what's the fourth quarter charge going to be? I mean I saw the proxy but I don't know how much of that has been accrued year-to-date and is it going to be an FFO charge or is it going to be a one-time item and an adjusted FFO charge?

Ken Cruse

Yes, the total and it's split between stock and cash is, I think it's about 2.5 million in cash and then a comparable amount in stock. There will be a little bit of an offset because there's an accrued bonus this year, which is not being paid out. None of the deducts will be included in our adjusted FFO or our adjusted EBITDA. We'll call those out as one time.

Rod Petrik - Stifel Nicolaus

It'll be one time?

Ken Cruse

Yes.

Rod Petrik - Stifel Nicolaus

Bob, you mentioned that your relation, you want to rebuild you relationships with brokers. Is that relationships impaired?

Bob Alter

No I would tell you that over the last few years I have not been involved with most of the investment community and brokerage community or a regular basis and so I want to make sure that I get on the phone and get on in person and meet a bunch of the folks that I did business with for many, many years.

I also am going to enlist Lew Wolf whose been very active in our space and many of you have heard his name as the owner of the Oakland A's and owner of a number of hotel investment groups over the years. We're going to go out and make sure that all the people that we know in the industry remember that we have a company that has capital and is ready to go out and do some acquisitions that meet our criteria.

Rod Petrik - Stifel Nicolaus

So it's rebuilding your relationships with the brokers, not necessarily the company?

Bob Alter

Correct.

Rod Petrik - Stifel Nicolaus

You mentioned Lew. Is there any discussion at the board that you guys have this structure with two active executive co chairmen, that having that structure puts, doesn't necessarily put a CEO in the position to necessarily be successful?

Bob Alter

Well, I mean it's interesting. You view it as possibly detrimental. We view it as an asset. I would say that over the last couple of years, the two of us, who have both been active in our previous careers, have not necessarily got in the markets to interfere with what the CEO is trying to do. And specifically, we kind of stayed away from that so that the CEO's, both Goldman and Buser were able to execute.

But going forward, while we kind of bring Ken aboard, Ken has been primarily in the financial side of the company and has got a great relationship with most of the banks and investment banks, but really hasn't been in the ownership and brokerage community as much. So that's where the two of us can really bring value in introducing Ken to those people.

Rod Petrik - Stifel Nicolaus

Thanks Bob.

Ken Cruse

Let me jump in on that one too. Look, my view is that I guess in certain circumstances that you described could be the case where there's some gridlock and there's some differences of opinion that ultimately work against progress. I think in our case our board has a wealth of experience in relationships and knowledge and I and the team, we all intend to leverage that. It's an incredible opportunity that we've got with Bob and Lew, both offering up their services in the execution of this company strategy and we absolutely intend to capitalize on that.

Operator

The next question is from the line of Chris Woronka with Deutsche Bank. Please go ahead.

Chris Woronka - Deutsche Bank

Hey, good morning guys.

Bob Alter

Morning Chris.

Chris Woronka - Deutsche Bank

Just want to ask how you think about, do you guys expect distress to play a big role in what you're going to do going forward with respect to acquisitions?

Ken Cruse

Hey Chris. This is Ken. I'll take that. Certainly going into 2011 and 2012, we are seeing a spike up in maturities, in potential maturity defaults. The idea that there was going to be a tidal wave of distressed opportunities in 2010 obviously didn't materialize. So distressed and inadvertent ownership channels will certainly be a part of our growth strategy but I don't know that it's going to ultimately result in this shooting fish in a barrel opportunity that people speculated would exist a year or so ago.

Chris Woronka - Deutsche Bank

Great. Okay and then in terms of the relationships with the brand operators, is there anything you're looking to change there or think that you need to change?

Ken Cruse

We've got very good relationships with all of our operators and brands and we continue to strengthen those relationships.

Chris Woronka - Deutsche Bank

Okay. Great. Thanks.

Ken Cruse

Thanks Chris.

Operator

Thank you. Our next question is from the line of Josh Attie with Citigroup. Please go ahead.

Josh Attie - Citigroup

Thanks. Bob, I just wanted to clarify something you said at the beginning of the call. That it was not the inability to execute on acquisitions that was the issue. Listening to the commentary the last half hour or so it sounds like acquisitions was a big part of what you were frustrated with? Am I not interpreting that correctly?

Bob Alter

I would say I think we've been asked a lot about acquisitions and so we've responded to that but as I said in the opening remarks there were a number of factors and that it was not primarily acquisition disagreement that led to the mutual decision between Mr. Buser and the board. There were multiple directors that had issues that all kind of came to a head over the last 30 days. And so yes, we've talked about acquisitions but that was in response to people wanting to know what are going forward strategy it so sorry if there was a misunderstanding there.

Josh Attie - Citigroup

Can you just talk broadly about what some of the other issues might have been just so that we can understand what will be different going forward aside from the acquisition strategy?

Bob Alter

I really don't think it's relevant. We have an agreement. It's pretty specific that we want to be cautious about what we say about either party, both on his part and our part and so I think it's better said that what we want to do in the future is run a company with 100% transparency with very solid fundamentals on the business we're in and make sure we do everything we do with the high level of integrity. And so going forward, I'm counting on this team and I think the directors are as well to really go forward in a way where it's a team effort. Everybody’s involved and we execute on a strategy with integrity, transparency and good communication.

Josh Attie - Citigroup

Okay. Thank you.

Bob Alter

Thanks Josh.

Operator

Thank you. Our next question is from the line of Larry Raymond with Big 5 Asset Management. Please go ahead.

Larry Raymond - Big 5 Asset Management

Good morning. Just a quick question. You all did an equity offering about a month and a half ago. Was this being contemplated at that time?

Ken Cruse

I'll take that one. No this was certainly not a factor at that time.

Larry Raymond - Big 5 Asset Management

Okay. Thanks.

Ken Cruse

You're welcome.

Operator

I'm showing no further questions at this time. Please continue with any closing remarks.

Bob Alter

Great. Thanks everybody for joining us on the call today. We really appreciate it and we look forward to speaking with you in January for our inter quarter update.

Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may not disconnect.

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