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Sunstone Hotel Investors Inc. (NYSE:SHO)

Q1 2008 Earnings Call

May 8, 2008 5:00 pm ET

Executives

Bryan Giglia - VP Corporate Finance

Robert Alter - Interim CEO

Ken Cruse - CFO

Analysts

Jeff Donnelly - Wachovia Securities

Michelle Ko - UBS

David Loeb - Robert Baird

Michael Salinsky - RBC

Operator

Good afternoon, ladies and gentlemen, and welcome to the Sunstone Hotel Investors’ first quarter 2008 Earnings Call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded today, Thursday, May 8, 2008.

I would now like to turn the conference over to Mr. Bryan Giglia, Vice President of Corporate Finance of Sunstone Hotel Investors. Please go ahead, sir.

Bryan Giglia

Thank you. Good afternoon, everyone, and thank you for joining us today. By now you should have received a copy of the corresponding press release. If you do not yet have a copy, you can access it on the investor relations tab of our website at www.sunstonehotels.com.

Before we begin this conference, I'd like to remind everyone that this call contains forward-looking statements that are subject to risks and uncertainties, including those contained in our prospectuses, 10-Ks, 10-Qs, and other filings with the SEC, which could cause actual results to differ materially from those projected. We caution you to consider those matters in evaluating our forward-looking statements.

We also note that this call contains non-GAAP financial information, including EBITDA, adjusted EBITDA, FFO, adjusted FFO and hotel operating margins. We are providing that information as a supplement to information prepared in accordance with Generally Accepted Accounting Principles. Explanations of such non-GAAP items and reconciliations to net income are contained in our earnings release that we issued earlier today.

With us today are Bob Alter, Executive Chairman, and Ken Cruse, Chief Financial Officer. Bob will go over the highlights from the quarter and provide a status update on the CEO search. Ken will provide an in-depth review of the quarter and discuss our capital structure and credit ratios, as well as second quarter and updated full-year guidance. Following the remarks, the team will be available to answer questions.

To begin management's discussion, I would like to turn the call over to Bob. Bob, please go ahead.

Bob Alter

Thank you, Brian. Good afternoon, everyone, and welcome to the Sunstone Hotel Investors first quarter earnings conference call. As many of you know, on March 4, I was appointed as interim CEO to fill the vacancy created by Steve Goldman's departure, and on March 14, the Board formed a search committee to provide for a replacement CEO. That search has gone forward, and I will give you more progress on that as the call progresses.

As you know, it's been over a year since I've been on one of these earnings calls, and as much as I enjoy these calls, I don't expect this to become a recurring event. I will provide an update, as I said, later on this call.

Let's review the recent quarter. Our team continues to execute on Sunstone's business plan and we are pleased with our portfolio's performance during the quarter. With our hotels posting positive year-over-year growth in total portfolio RevPAR and hotel operating margins. We continue to get strong lift from the $275 million renovation program we completed last year, as our renovated hotels continue to ramp up.

The hotels we renovated in 2006 and 2007 continue to deliver strong year-over-year RevPAR growth, and it can take over two years for a hotel to stabilize after a major renovation. The Hyatt Regency Century Plaza and the Fairmont Newport Beach are two examples of hotels where we completed renovations in 2006 and which continued to produce double digit RevPAR growth during the first quarter.

Adjusted EBITDA during the quarter was $61 million, up slightly from last year, and adjusted FFO per share was flat to last year at $0.48. The first quarter 2008 total hotel portfolio RevPAR increased by 3.1%, driven by a 4.8% increase in ADR, which was offset by 120 basis points decline in occupancy. The result was slightly above the midpoint of our range, and compares favorably to total U.S. upper up scale RevPAR, which increased 0.9 in quarter one, according to Smith Travel Research.

Comparable portfolio RevPAR, excluding the Renaissance Baltimore and the Renaissance Orlando, our two non-comparable hotels from the previous period, they both experienced material and prolonged business interruption during 2007. They increased 1.6%; also well above the U.S. upper up scale average.

Both total and comparable RevPAR were negatively impacted by recently completed renovations at Marriott Boston Long Wharf. The renovation, which was commenced during the fourth quarter of 2007 and was completed this March, did not cause sufficient displacement to qualify the hotel as non-comparable. That said, total and comparable hotel RevPAR would have been 100 basis points higher had we excluded that hotel.

On the acquisitions front, we continue to analyze potential deals, but have not seen anything compelling opportunities at this time. That said, the markets are dynamic, and we will continue to evaluate potential investments and be ready to act when the time is right. We continue to look to improve the overall quality of our portfolio and target asset dispositions on a case by case basis.

With respect to supply trends, we continue to keep a close eye on San Diego and Baltimore, as both markets are currently assimilating new supply. We do believe that the prolonged dislocation of the credits markets will delay future supply growth, especially in the high barrier to entry urban markets, where the majority of our earnings are generated.

Our continued focus in 2008 is to maximize the performance of our portfolio. To this end, the asset management team has identified considerable cost reductions throughout our portfolio. Our asset management team continues to work closely with our third party operators to ensure that appropriate cost management measures have been taken, and that the hotels continue their focus and their sales efforts in revenue management strategy to maximize the hotel's top line performance.

We remain cautious about 2008 and are closely monitoring our bookings for the balance of the year. While our transient demand is softening, our other segments, especially group, remain strong. Group pace continues to be strong, up approximately 6% in revenue versus this time last year. We will have more clarity over the coming months, but in the interim, we will continue to execute on our plan and run our business to maximize the long term value to our shareholders.

Before I turn the call over to Ken, let me update you on our CEO search process. The search committee has been working diligently and has had a list, an initial field of 20 potential candidates. We've reduced that down to a smaller group, have interviewed a significant number of people, and are now evaluating our final few choices. We expect to have an announcement very shortly on a new CEO for the company.

With that, I'd like to turn the call over to Ken to take you through additional details on the quarter, and to review our capital structure, credit ratios, as well as second quarter and updated full year guidance.

Ken Cruse

Thanks Bob, and good afternoon, everyone, and thank you for joining us today. First, let me spend a few minutes drilling down on our RevPAR performance during the first quarter. As Bob said, total RevPAR was up 3.1% for the quarter, and comparable RevPAR was up 1.6%. Both of which were significantly above the U.S. upper upscale average according to Smith Travel.

Our California properties generated 3.5% growth in comparable RevPAR during the quarter. Total Los Angeles and Orange County area hotels posted an impressive 9% RevPAR increase over Q1 2007, while our San Diego hotels continue to struggle with a 7.9% RevPAR decline in Q1. This decline was primarily due to the lobby renovation in the W hotel, and bathroom renovation at our Holiday Inn San Diego downtown, as well as new luxury supply in the San Diego market. San Diego citywide's are expected to pick up, beginning in Q2, and we would expect the demand trends to improve as a result.

During the quarter, we wrote yet another page in our Rochester, Minnesota, success story, as the portfolio continues to realize double digit RevPAR growth, driven in part by increased demand for our high end hotel within a hotel, known as the International at the Kahler Grand. We are currently converting 40 regular rooms within the Kahler Grand into 19 international rooms. We expect to have these new luxury rooms online in the fourth quarter.

Going forward, we may consider the conversion of additional regular rooms into international rooms, as well as other highest and best used conversions within the approximately one million square feet of building area comprising the Kahler Grand property. Our middle Atlantic region was flat for the quarter. Our Marriott Boston Long Wharf was responsible for much of the underperformance in the middle Atlantic region, as renovation displacement and seasonal market softness impacted this hotel.

RevPAR at our D.C. properties was also down by about 4%, primarily due to a shift in group business from Q1 to Q3 of 2008, and typical election year softness in that market. On the positive side, our New York hotels posted double digit RevPAR growth for the quarter. Our 2007 renovation hotels have begun to ramp-up.

In Q1, RevPAR in Orlando was up over 30% to the prior year, and although Baltimore has not performed as well as Orlando in terms of absolute RevPAR increase, considering the Baltimore Comp Set RevPAR was down 14% in Q1, while our hotel was up slightly, relative to the set, our hotel significantly out-performed.

Comparable hotel operating margins for the quarter decreased 30 basis points, slightly better than we had anticipated due to successful cost containment measures developed by our asset management team and implemented by our managers. For example, we've introduced operational efficiencies at our Renaissance Orlando by permanently eliminating 11 manager positions from a pool of 64 managers, which represent a 17% reduction in manager head count, and meaningful permanent cost reductions at this hotel. We've also made across the board reductions in overtime costs at the majority of our hotels.

We continue to benefit from the lowest management fee structure among lodging REIT’s. Our management fee expenses, including incentive management fees, were 7.4 million in the quarter, or approximately 3% of gross revenues, which compares very favorably to our lodging RevPAR.

We ended the quarter with $1.7 billion of debt, 100% of which is fixed at an average rate of just 5.5%, or approximately 100 to 150 basis points below current market rate. The average term to maturity of our debt is seven years, assuming we redeem our 4.6% exchangeable notes on the first call date. While we continue to keep a close watch on any potential business effects of the ongoing tightness in the credit markets from a capital needs perspective, we believe we are well covered.

We have no significant debt maturities until 2010 and no immediate need for external financing. We have 12 hotels that are unencumbered of debt, including the Hyatt Regency Century Plaza, the Fairmont Newport Beach and the Marriott Boston Quincy, and these assets provide a means to access significant amount of mortgage capital, should the need arise. Finally, with a $200 million credit facility, which bears an interest rate of just LIBOR plus 90 basis points, and $70 million of cash on hand, we ended the quarter at a very strong liquidity position.

During the quarter we repurchased approximately 734,000 shares of our common stock at an average price of $16.11 or a discount of nearly 20% to our current market price for a total cost of $11.1 million. Our $150 million share repurchase authorization has approximately $138 million remaining for the balance of the year.

We will evaluate repurchasing our common stock, along with prepaying any existing debt and acquiring new hotels as a use for excess cash flow from operations, and/or any proceeds from potential asset sale. As a general rule, we will look to maintain significant financial flexibility in order to take advantage of opportunities as they arrive.

As for our credit ratios, we ended the quarter with pro forma net debt to EBITDA of approximately 5.5 times, which is within our long-term target of 5.0 to 5.5 times, and we ended the quarter with pro forma fixed charge coverage ratio of approximately 2.0 times, which is at our long term target level. We expect to see additional improvement in our credit ratios as our hotel operations improve and as we amortize our outstanding debt balance.

Based on our current forecasts, our common dividend pay outs will be below 70% of our cash available for distribution, or CAD. Going forward, we will continue to evaluate our dividend level and stock repurchase policies with an aim to maximize the return to our shareholders.

On to guidance. I want to point out that guidance we are providing at this time is based on the expected performance of our existing portfolio. Our guidance does not assume any additional acquisitions, dispositions, debt repayments or stock repurchases. Also, our Q2 and full year 2008 guidance reflect our current projections, which are based on the assumption of limited growth in the U.S. economy. Our expected results are subject to change as a result of, among other things, a decline in the U.S. GDP, which we would expect to negatively impact actual results.

As full detail on the guidance can be found on our earnings release, I'll just walk you through the high points at this point. For the second quarter, we expect total and comparable RevPAR to increase between 4% and 6% over the second quarter in 2007 and we expect both total hotel portfolio and comparable portfolio operating margins in the second quarter to be up approximately 50 to 100 basis points, as compared to the second quarter of 2007.

For the full year, we are maintaining our prior guidance for both total and comparable RevPAR, which we expect to increase between 2% and 5% over the year 2007. We are also maintaining our margin guidance as we continue to expect both total and comparable hotel portfolio operating margins to range between negative 25 basis points and positive 50 basis points over 2007, depending on revenue growth.

As a result of our stronger than expected Q1 performance and share repurchases, we are increasing the bottom end of our adjusted EBITDA guide and are increasing both the bottom and top end of our adjusted FFO guidance. We now expect full year adjusted EBITDA to be approximately $310 million to $323.5 million, and adjusted FFO per share to be approximately $2.93 to $3.14. This represents an increase of $0.05 on the bottom end and $0.02 on the top.

To wrap up my comments, I would like to say that we are very pleased with our performance during the first quarter of 2008. In spite of challenges in the economy and changes in our CEO suite, we have continued to execute on our plan. Through this continued focus we believe that we have positioned the company to produce solid results this year and beyond.

Thank you very much for your time today and for your continued interest in Sunstone. I'll now turn the call back over to Bob.

Bob Alter

Thanks, Ken. Even in these uncertain economic times, we believe the lodging sector is fundamentally sound and we remain focused on execution and improving our effectiveness at maximizing the value of our assets. We own a geographically diverse portfolio of high institutional quality from primarily upper upscale hotels. 80% of our EBITDA comes from our top 30 hotels in major markets. The implementation of increased levels of discipline and accountability has begun to bear fruit as our first quarter results demonstrate.

We will continue to focus on our core competencies as we drive internal growth, while evaluating acquisition opportunities that will enhance our earnings, thereby allowing us to build long term shareholder value. Historically, the greatest opportunities are found during this phase of the cycle, and we have positioned the company well to take advantage of these opportunities as they arise. We appreciate your time today as well as your continued support of Sunstone. I am very proud of what this team has accomplished to date and look forward to talking to you again in the coming months. Thank you.

With that, I'd like to open up the call to questions. Operator, please go ahead.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). First question comes from the line of Jeff Donnelly with Wachovia. Please go ahead.

Jeff Donnelly - Wachovia Securities

Good afternoon, guys.

Bob Alter

Hi, Jeff. How are you?

Jeff Donnelly - Wachovia Securities

How are you doing, Bob. It's like The Godfather. You get dragged back in.

Bob Alter

And you were the first person to make that comment.

Jeff Donnelly - Wachovia Securities

I'm sure. I'm just curious actually, concerning the candidates you mentioned for replacement of CEO. We've seen a lot of hotel company leaders exit the business the past few years. Any chance we see someone come back out of retirement from a company that maybe went private recently?

Bob Alter

I actually haven't even focused on that as a possibility. In the list, we had a diverse group, and the candidates that we are selecting are all experienced in our field. We are not going outside the industry. So I think it's a name that you probably will have had some experience with, and I think you'll have fabulous confidence in his ability or her ability to execute the game plan that this management team has set out in the past.

Jeff Donnelly - Wachovia Securities

So meaning more like a hotel person than necessarily a real estate person, per se?

Bob Alter

Well, you mean when you say hotel, I think.

Jeff Donnelly - Wachovia Securities

When you say industry. I wonder.

Bob Alter

Industry being the hotel industry.

Jeff Donnelly - Wachovia Securities

Okay. And then, I'm just curious more on the business itself. I know you had strong RevPAR in the Los Angeles Orange County area but given all the press that we've been seeing about the impact of job losses in Orange County from subprime and what have you, was there any impact that you guys could discern in Orange County for your hotels?

Bob Alter

It's interesting, because we have, obviously every day you read all the papers and all the office vacancy in Orange County and I think McGuire's Portfolio has really been negatively affected in the marketplace as a result of the credit crunch and the mortgage companies going out of business. So earlier in the year, we told both of our two hotels in Orange County, the Fairmont and Hyatt Newport Beach, to really keep their antenna up and be proactive.

In fact, both hotels were very proactive in terms of opening up the faucets on various other channels and had successful, successful quarter, very impressive quarters, and in fact we've actually dialed back some of the channels because we were basically increasing room quantity and occupancy so much that we were worried about our rate integrity.

So we actually are dialing that back a little bit. But we are actually predicting both of those hotels a very successful 2008, and we are surprised at how strong the economy has stayed when it comes to transient demand as well as group demand in those two markets, in that market with those two hotels.

Jeff Donnelly - Wachovia Securities

Are you guys willing to share with us what you guys are looking for full year EBITDA from the Fairmont as well as the Century Plaza asset?

Bob Alter

No, I don't think it's useful to do individual hotels. There's too many competitive influences with other brands, other hotel owners involved in this public information.

Jeff Donnelly - Wachovia Securities

Last question then, I guess is, what is the market out there like for asset sales? And maybe you can talk about the financing market, where people are finding debt, and what kind of leverage they can get, and how underwriting has changed on asset sales.

Bob Alter

Well, I think the answer is, in the hotel space below kind of $45 million or $50 million, I'd say asset sales in the $10 million to $45 million market. The brokers, they tell me and tell our group that businesses remains brisk and they continue to execute on numerous deals in the private market placement. They have not felt that underwriting has changed or cap rates have changed that dramatically, and the people that are doing it, in many cases are getting local debt from local banking institutions in the kind of 65% range, as they had in the past. The pricing is a little bit steeper as we know spreads have gone up.

The refinance market has been much more difficult and the market from kind of $50 million to $150 million on asset sales, I think, has slowed down, and I would probably guess there's been some cap rate erosion in that area based on what we hear from the brokers. In terms of the credit markets, in terms of refinancing hotels, I think people are getting a lot less proceeds. People are underwriting them based on actual cash flow as opposed to projected cash flow. And occasionally you still see new builds and new starts, we just recently saw a new start under construction in Long Beach of a boutique hotel that has been in the making for a number of years and apparently they kept their financing together.

But I would believe that over the next year that the banks don't make that many new commitments. So I think what you are seeing is the tail end of people that already had commitments getting under way.

Jeff Donnelly - Wachovia Securities

That's helpful, thanks guys.

Bob Alter

Thank you.

Operator

Thank you. Our next question is from the line of Michelle Ko with UBS. Please go ahead.

Michelle Ko - UBS

Hi. Good quarter. I was wondering, in terms of, if you see attractive opportunities arise what markets do you think you need to increase your exposure?

Bob Alter

Sunstone is an opportunistic company and we believe that in an attempt to help continue to grow our business, we will look at opportunities in markets that we believe have growth in them, and we don't get specific because it's not as a branded owner of hotels that with somebody else owning the brand. It's not critical for us to have, quote, a Hilton in this location or a Marriott in this location. It's more about the opportunity and how we can continue to increase our earnings and our cash flow per share and dividends for our shareholders.

Michelle Ko - UBS

But are there any specific markets you think you are maybe under exposed to?

Bob Alter

There are markets that we would like to be in, like downtown San Francisco, downtown Seattle, and in both cases we have not been able to find values at levels. We've tried a number of times that we think is accretive to the shareholders. So we haven't done anything there. But short of those two markets, we are very comfortable with the markets that we have right now.

Michelle Ko - UBS

Okay. Thanks. Also I was just wondering, it seems like you are more optimistic on your full year outlook and your second quarter expectations. I know that 1Q outperformed your prior first quarter estimate by a penny, and you did repurchase some shares but have you gotten a little bit more optimistic in terms of the environment or what has changed?

Bob Alter

First of all, I think that one thing that is very difficult in the quarter to quarter calculations is, last year Easter was in the second quarter and this year Easter was in the first quarter, and the Easter week in most of our business hotels is a terrible time, spring break and Easter vacation hurts our hotels as opposed to helps them. So therefore, our April is a lot stronger just by the calendar than it was last year because we don't have that Easter week in it.

And we are continuing to see strong group pace and we are continuing to see demand holding up. So we are very optimistic and as it's now May, our April numbers we feel very comfortable with and our balance of our quarter we are certainly optimistic.

Michelle Ko - UBS

Okay, great. Thank you.

Operator

Thank you. Our next question is from the line of David Loeb with Robert Baird. Please go ahead.

David Loeb - Robert Baird

Hi, Bob, can I just ask you to, if you can, if you can quantify one thing that you said in the call. You said you expected an announcement shortly. Are we talking about days, weeks, a month, more for you?

Bob Alter

Let's say it will certainly be during the second quarter, before the next earnings call. I think we will have an announcement.

David Loeb - Robert Baird

It sounds like you've zeroed in on a candidate and you are just working through the details. Is that fair?

Bob Alter

No. Let me say that we have gotten it down to a final group, and we have discussed it at the Board level, and we are now ready to finish the process among the finalists.

David Loeb - Robert Baird

Got it, okay. A couple of questions about specific markets. Boston and San Diego, both are getting some supply later in the year. San Diego looks like it is going to be getting some supply for the next several years. Can you talk about what the outlook is in those markets and what your thoughts are on how your hotels will perform in that environment?

Bob Alter

Let's talk about San Diego first. San Diego has a 1,200 room Hilton opening at the convention center this fall. Concurrently with that, the convention center has a very, very strong calendar and so I expect that the absorption of that 1,200 rooms into the calendar will be solid, although there's also been a number of other hotels, specifically our W Hotel downtown has been impacted by the opening of the Hard Rock and the ID in the last 12 months.

We also have been affected at our Holiday Inn downtown by a major renovation. But we do see strong results coming through in the second quarter, and we are more optimistic about that market, and over the rest of the year and we certainly believe long term it's a fabulous market. The barriers to entry, even though they have had new supply, it's still very expensive and it has a lot of upward rate pressure that will benefit all of our properties in the San Diego area.

In the Boston area we've already had some new supply added to the market recently. There was a Renaissance Hotel that opened. There was an Independent hotel, upscale in the former jail that opened. There's been some other hotels in the makings in Boston. We also tore up the Long Wharf and did a major renovation during the first quarter. The product has come out very, very well. We are back on track and we project a very strong year-end finish for that hotel.

David Loeb - Robert Baird

I must say I always aspired to avoid spending the night in the Charles Street jail, I am not sure anybody would want it. Generally on the environment, are you seeing any slowdown in group bookings, attrition, or are you expecting more attrition, or in the bookings that you are getting, are you noting any change in the food and beverage commitments? Are meeting planners choosing cheaper menus? Or does that lead you to expect less out of room spend?

Bob Alter

I'll just say that year over year at this point we are actually ahead on gross revenues on group bookings as of today versus a year ago. Ken, do you want to give him some more specifics?

Ken Cruse

Specifically, we are up 6% in pace this year and 90% of our groups are on the books in our big group houses. And right now we are really not seeing significant trade downs from the quality of menus. And I know that's something that we've been focused in on. And then some additional color on, in terms of attrition and cancellations, in the first quarter we monitored that fairly closely and there's really only a couple of groups that fell off the books.

A couple in Orlando that were related to a change in the leadership actually of a company so a meeting was cancelled, and then one or two pieces at our Fairmont actually in Newport Beach. Both non, really, economy related, much more related to the nature of the business of the company that had booked the business in the hotel. So we are really not seeing a meaningful increase in cancellations. And as Bob and I both mentioned, pace is up nicely.

David Loeb - Robert Baird

Great, thanks very much.

Operator

Thank you. Our next question is from the line of Michael Salinsky with RBC. Please go ahead.

Michael Salinsky - RBC

Good afternoon, guys.

Bob Alter

Hi, Michael.

Michael Salinsky - RBC

Your comments on group bookings for fiscal year '08 were very encouraging. Can you give us a sense of what preliminary pace for fiscal year '09 is looking like at this point?

Bob Alter

Ken’s got that.

Ken Cruse

Yes, '09 pace is up slightly. Still pretty early in the year but for our SHP portfolio actually it is up in the high single digits and then for our brand managed portfolio it's slightly up on a year-over-year basis.

Michael Salinsky - RBC

That's helpful. Secondly, on previous conference calls you talked about looking at the portfolio asset-by-asset all the way down, trying to sell some of the lower end hotels. Is there a portfolio or anything identified at this point? Or can you provide a little bit more color on what you are looking at in terms of dispositions this year?

Bob Alter

We have always had a policy that we do not talk about anything in terms of what we are planning until we actually have hard money and a firm commitment from a buyer. So at this point we have nothing to disclose.

Michael Salinsky - RBC

Would you expect to be selling assets though this year? Is that a fair question to ask?

Bob Alter

Absolutely. Our portfolio, our recycling of capital process has always gone on. As you know, since Sunstone went public in 2004, I think we've sold 26 assets and have acquired 17. So, yes. The answer is you can always expect to see announcements when they are firm and we are ready to make an announcement.

Michael Salinsky - RBC

Okay. Then finally, in terms of capital spend for the year, it looks like you completed one asset in Boston there. Are there other major projects that should be on the horizon?

Bob Alter

We have a conversion of a hotel in Houston to a Hilton and that conversion of that hotel should be complete by mid July. We also have a major renovation that will go on through the summer at the Holiday Inn downtown San Diego. As well as building of an additional floor of high end rooms at the International, which is our hotel within a hotel. And then we are completing renovation of the public space at the W Hotel in San Diego.

Michael Salinsky - RBC

Okay.

Bob Alter

So, all of those projects are going as we speak and will be completed during the second and third quarters.

Michael Salinsky - RBC

That's helpful, and finally, I don't know if you mentioned this, what was RevPAR performance if you exclude the Boston hotel that was under renovations during the first quarter?

Bob Alter

It was up 100 basis points over what we reported. So just add 100 basis points to the comparable numbers.

Michael Salinsky - RBC

Okay. Thanks guys.

Bob Alter

I think we reported 1.6. So it would be 2.6 total.

Operator

Thank you. At this time we have no further questions. Please continue with any closing remarks.

Bob Alter

Just again, I'd like to thank everyone for your participation and your further interest in Sunstone. I appreciate the market support during this period of time of transition where I've become interim CEO, and our shares have performed nicely and I appreciate that. So again, thanks for your interest and we continue to work for the shareholders. Thank you.

Operator

Ladies and gentlemen, this concludes the Sunstone Hotel Investors first quarter conference call. Thank you for your participation and you may now disconnect.

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