Operator: Good day, and welcome to the Hospitality Properties Trust Fourth Quarter and Year End Results Conference Call. This call is being recorded.
At this time, for opening remarks and introductions, I would like to turn the call over to Senior Manager of Investor Relations, Carlynn Finn. Please go ahead.
Carlynn Finn - VP, IR: Thank you, and good morning. Joining me on today's call are John Murray, President; and Mark Kleifges, Chief Financial Officer. John and Mark will make a short presentation, which will be followed by a question-and-answer session. The recording and retransmission of today's call is strictly prohibited without the prior written consent of HPT.
Before we begin today's call, I would like to read our Safe Harbor statement and set some ground rules concerning certain questions. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws.
These forward-looking statements are based on HPT's present beliefs and expectations as of today, March 1, 2013. The Company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call other than through filings within the Securities and Exchange Commission or SEC.
In addition, this call may contain non-GAAP financial measures, including normalized funds from operations or normalized FFO. A reconciliation of normalized FFO and adjusted EBITDA to net income, as well as components to calculate AFFO, CAD, or FAD are available in our supplemental package found in the Investor Relations section of the Company's website.
Actual results may differ materially from those projected in these forward-looking statements. Additional information containing factors that could cause those differences is contained in our Form 10-K filed with the SEC and in our Q4 Supplemental Operating and Financial Data found on our website at www.hptreit.com. Investors are cautioned not to place undue reliance upon any forward-looking statements.
Before I turn the call over to John and Mark, you should be aware that Travel Centers of America has not completed its yearend reporting and accordingly the Company's remarks today will not refer to TA's fourth quarter or full year 2012 results and we will be unable to take questions related to TA's fourth quarter or full year 2012 performance.
Now, I would like to turn the call over to John Murray.
John G. Murray - President and COO: Thank you, Carlynn. Good morning and welcome to our fourth quarter 2012 earnings call. At the outset I'd like to apologize for changing our call from Wednesday to today. Appreciate your joining us.
Today, HPT reported fourth quarter normalized FFO of $0.76 per share. As Carlynn mentioned, we are not yet able to update you on TA's performance for the fourth quarter or full year. Because TA has considered in accelerated filer under SEC reporting rules, it has until March 15 to report. As you may recall, TA's performance is very strong through the first three quarters of 2012 with EBITDA up $16.9 million or 8% year-over-year. Year-to-date through September, TA's business had reflected modest declines in fuel volumes due to the slow growth economy, driver conservation efforts, and fuel lane renovations. But the negative effect of the volume decline was more than offset by strong per gallon diesel margins.
As a result, TA's fuel margins had increased almost 10% year-to-date through September compared to 2011. Non-fuel revenues and gross margin were up 5.9% and 3.1% respectively year-to-date through September compared to 2011.
Focusing on HPT's hotel investments, our fourth quarter was negatively impacted by 33 hotels that were being renovated causing rooms to be out of service. Also, although Wyndham and Sonesta have been working to gain back occupancy and rate at their rebranded hotels, the rebrandings continue to negatively impact our RevPAR performance. RevPAR growth for our 2014 comparable hotels, not under renovation and not rebranded in 2012, increased 8.4%, the result of a 1.5 percentage point increase in occupancy to 68.8% and a 6.1% increase in ADR to $101.
Our expectation is that operations will not fully stabilize at the rebranded hotels until after renovations are completed in 2013 and early 2014. Please remember these rebranded hotels account for only about 9% of HPT's minimum return and we have credit support for the Wyndham branded component of that.
We expect 43 hotels will be under renovation during all or part of the first quarter and 39 in the second quarter of 2013. Renovation activity is expected to continue throughout 2013, principally at Sonesta and Wyndham hotels, but also to a lesser extent in our Marriott 234 and IHG portfolios.
Also, during the second half of 2013, a greater percentage of the hotels being renovated will be large or full service hotels, so the impact of renovations will continue to be significant throughout 2013. We have tried to schedule renovation projects for periods when they may create the least disruption to our hotel performance.
Our manager’s 2013 RevPAR forecast for our hotels are generally in the 5% to 7% increase range with Sonesta expecting flat RevPAR due to renovation activity and IHG expecting growth in the teens following some substantial completion of renovations.
GOP margin percentage increases are generally forecast to be in the 100 to 200 basis point improvement range, but the Wyndham and IHG portfolios are more than twice the high end of that range. On average across the portfolio, GOP margin percentages are expected to increase by 310 basis points. These may sound like drop of the expectations given the soft RevPAR and margin performance during most of the renovation and conversion late in 2012. However, hotels renovated in 2011 and in the first three quarters of 2012 had fourth quarter RevPAR and gross margin percentage growth of 8.1% and 330 basis points and 12.5% and 430 basis points respectively.
In addition, in January of 2013 our comparable hotels excluding the 30 under renovation grew RevPAR 11.7% and excluding renovations and conversion hotels grew RevPAR by 16.2%. There is modest optimism about the lodging cycle due to continued room supply growth and steady demand.
This allows for increases in room rates and expansion of GOP margins particularly as we move towards the fully renovated hotel portfolio.
In terms of acquisitions on November 1, 2012 we closed on the acquisition of 348 rooms Hotel 71 in Chicago for $85 million, which we discussed on our third quarter call. It was added to our Wyndham portfolio management agreement.
On December 19, 2012 we acquired the leased fee interest in the 372 rooms Clift Hotel in San Francisco for $120 million. The Clift is long term leased to Morgans Hotel Group under triple-net lease that runs through 2103.
Current rent is approximately $6 million annually there are CPI based increases every five years subject to certain limits. The next scheduled rent increase is in 2014 when a rent will increase by a minimum of 20% and a maximum of 40%.
Well-known for its classic elegance since its development in 1915, the Clift Hotel is a luxury 372 room lifestyle hotel in Union Square section of San Francisco.
On January 17, we signed a purchase agreement to buy the 426 room (indiscernible) Marriott place for $31 million. We are currently in the midst of completing our diligence procedures. Assuming the acquisition closes it is our plan to rebrand this hotel as Sonesta place and combine this hotel with the existing 20 hotel Sonesta portfolio.
On Wednesday this week HPT announced it reached agreement of letter of intent with NH Hoteles of Spain for hotel investments in Latin America, Europe, and New York totaling approximately $375 million. There are three components to the terms outlined in the letter of intent, including the purchase of five hotels in Latin America from NH for $17 million. The mortgage financing of four NH owned and managed hotels in Europe for EUR170 million and a joint venture to acquire and renovate our hotel in New York for up to $80 million.
The Latin American hotels are located in Mexico, Chile, Uruguay and Colombia. European hotels are in Spain, Belgium and the Netherlands. The New York hotel is located in Midtown in Madison Avenue. HPT's minimum return in Latin America and interest rate on the European mortgage loans is 10% of its investment. Its return in New York is 8%. NH Hoteles will continue to manage the hotels in Europe and Latin America and Sonesta and NH will jointly brand and operate the New York hotel. We've agreed to a letter of intent. The binding of transaction agreements remains to be negotiated and the entire transaction is subject to diligence. Assuming these steps are completed without issue, the closing of the three components are expected to occur later in 2013.
We are hopeful this becomes a long-term strategic relationship that enables us to enhance our growth especially in South and North America. We continue to see a healthy pipeline of hotel acquisition opportunities and are looking at both single property transaction and portfolios. We faced a competitive landscape with other REITs and institutional investors also seeking acquisitions, but we are optimistic that we will continue to generate steady acquisition growth to our existing and new portfolio relationships in 2013. We are also optimistic about anticipated 2013 operating results as a large and growing number of renovations are completed at our hotels.
I'll now turn the presentation over to Mark to provide further detail on our financial results.
Mark L. Kleifges - Treasurer and CFO: Thanks John. In the fourth quarter operating results for our hotel properties continued to be negatively affected by a renovation and rebranding efforts. As John discussed, we had 33 of our hotels under renovation for all the part of the fourth quarter. In addition results of the 39 hotels we've rebranded during 2012 were down substantially versus last year's fourth quarter.
During the fourth quarter, revenues at our 214 comparable hotels not under renovation and not rebranded during the year were up 8.4% versus the prior year quarter on strong ADR growth. On the other hand, we experienced quarter-over-quarter declines in revenue of 1.9% at hotels under renovation during the quarter and 17.8% at hotels rebranded during 2012. These declines were largely the result of lower occupancy. Our portfolios with the highest revenue growth this quarter were our Carlson and Marriott No. 1 portfolios with quarter-over-quarter revenue increases of 11.3% and 10.2% respectively. Although our renovation and rebranding activities also had a negative impact on hotel profitability this quarter, the positive results of recently renovated hotels more than offset these declines.
Gross operating profit for our 285 comparable hotels was up $5.8 million or 5.5% quarter-over-quarter and GOP margin percentage increased 80 basis points to 35%. Results were much stronger at our comparable hotels not under renovation during the quarter or rebranded during 2012, with gross operating profit up $15 million or 18.4% for the quarter and GOP margin percentage of 340 basis points to 41.3%.
Turning to 2012 fourth quarter coverage of our minimum returns and rents, despite the impact of our renovation and rebranding activities, cash flow available to pay our minimum returns and rents increased approximately $7 million or 10.4% from the 2011 fourth quarter.
Our Marriott 234 and IHG portfolios had fourth quarter coverage of 0.87 and 0.73 times, respectively. During the fourth quarter Marriott advanced $4.9 million under its guarantee resulting in the remaining balance of $26 million at year-end.
During the quarter we utilized $11.9 million of the IHG security deposit to cover cash flow short falls, resulting in an available security deposit balance of $26.5 million at the end of the quarter. Information regarding all our security deposit and guaranteed balances at the quarter end is included in our Form 10-K which will be filed later today.
At year-end our lease with Host for our Marriott No. 1 portfolio expired and effective January 1, these hotels are managed by Marriott under a combined management agreement. The agreement does not provide credit support as a result payment of our minimum returns going forward will be solely depended on hotel cash flow and will also be impacted by seasonality.
Our minimum return under the management agreement is a same amount as minimum rent was under the lease. The portfolio did have one times coverage in 2012 and therefore this change is not expected to have a material impact on our 2013 operating results.
Turning to HPTs consolidated operating results for the fourth quarter, this morning we reported normalized FFO of $93.9 million or $0.76 per share. This compares to fourth quarter of 2011 normalized FFO of $96.8 million or $0.78 per share. The decline in normalized FFO from the 2011 quarter is due primarily to the temporary elimination of the FF&E reserve for our Marriott agreement and lower returns earned from certain of our hotels that were rebranded during 2012.
These declines were partially offset by increased minimum returns and rents resulting from our funding of capital improvements to our hotels and travel centers. The impact of our 2012 acquisitions and lower income tax expense.
Adjusted EBITDA was $134.1 million in the fourth quarter and our adjusted EBITDA to total fixed charges coverage ratio for the quarter remained strong at 3.2 times. We paid $0.47 per share dividend in the quarter and our normalized FFO payout ratio was 62%.
On the renovation front I'd like to provide an update on where HPT stands at the end of the year with its capital funding commitments and liquidity. We have agreed to fund up to $123 million for renovations to the 68 hotels in our Marriott 234 agreement. As at the end of 2012 we have funded $78 million and we expect to fund the remaining $45 million in 2013.
We have agreed to fund up to $290 million for renovations to the 91 hotels in our intercontinental agreement, as at the end of 2012 we have funded $213 million and we expect to fund the remaining $77 million in 2013.
We have agreed to fund up to $93 million for renovations to 21 hotels in our Wyndham agreement, as of the end of 2012 we have funded $9 million and we expect to fund the remaining $84 million in 2013.
We have also agreed to fund up to $195 million for renovations to the 20 hotels included in our Sonesta No. 1 agreement. As of the end of 2012 we have funded $11 million. We expect to fund $127 million in 2013 and the balance in the first half of 2014. Finally we funded $77 million for improvements to our travel centers in 2012. We expect to fund approximately $80 million for improvements in 2013.
With respect to our balance sheet and liquidity, at quarter end we had cash of approximatley $20 million, which excludes $41 million of cash escrowed for improvements to our hotels and had $430 million available under our $750 million revolving credit facility to fund our capital commitments and future acquisitions.
In closing, we remain optimistic about the prospect of continued strong operating results at our travel centers as well as the positive impact our extensive renovation program will have on the long-term performance of our hotels.
Operator, we're ready to open it up for questions.
Operator: Jeffrey Donnelly, Wells Fargo.
Jeffrey Donnelly - Wells Fargo: A few questions on the NH transaction you guys did. Is the decision to invest more aggressively I guess outside the U.S. a sign that you feel that asset prices in the U.S. are no longer as attractive as they may be once were for investment?
John G. Murray - President and COO: Well, first I want to say that it's just the letter of intent; we haven't documented the deal or closed any part of it. So, there's a lot of diligence and work to be done. But it's not a sign that we're losing faith or unhappy with pricing in the U.S. We bought – in the fourth quarter we bought a couple of hotels in Chicago and San Francisco and agreed to buy one in the Atlanta area. So we are finding hotels that we think are attractively priced here. But we think there are opportunities to establish strategic relationships with other companies and sort of pave the way for enhanced growth opportunities down the road. So that's – we think that NH opportunity gives us some growth here with the joint venture in New York, but also opportunities in Latin America and possibly Europe going forward.
Jeffrey Donnelly - Wells Fargo: I recognize that these aren't closed, but just as it relates to the loan that you contemplate on the European hotels, can you talk about or are you able to talk about what the agreed values are on the hotels and maybe what their earnings performance is, because I am just trying to understand how that EUR170 million loan pencils out on maybe like a loan-to-value or debt yield basis?
John G. Murray - President and COO: Yeah, right now, we are in the diligence period and we are subject to a confidentiality agreement. So unfortunately, I can't talk about those sort of metrics at this point. Once we hopefully get through the documentation and close, then we will be able to provide full disclosure of that sort of information.
Jeffrey Donnelly - Wells Fargo: Because like you said, you had mentioned getting a little more active on acquisitions in the fourth quarter if – does that lead you think I guess, if would be activities in picking up, we've been hearing this from brokers out there. Does that lead you to think that you might end up revisiting bringing some of the non-core assets that you had contemplated in selling in 2011 back to end market as we move through 2013, and you begin to finish up some renovations?
John G. Murray - President and COO: Right now, we are not contemplating brining any hotels to the market. The ones that we had on the market, they were Marriott branded properties. We are in the throes of renovating and we are expecting – we've seen some pretty good post-renovation growth coming out of the hotels we have renovated and we are expecting to see the same out of those 18 hotels. So, it's not our plan at this juncture to look to sale anything.
Jeffrey Donnelly - Wells Fargo: Just one last question. I know I recognize this pertains to a guess I call a sister company, but given the corporate action that you have given, you are reading about a Commonwealth, there is I guess scenario out of many where the Board at Commonwealth could be compelled to explore. I will turn this to avoid their only go risk. I know this doesn’t involve HPT directly but have you guys consider that maybe an outcome on that side could have implications on governance for HPT down the road or is it too premature to make those sort of decisions.
Mark L. Kleifges - Treasurer and CFO: I don't want to really comment on that whole chain of events that transpired this week with our, one of our affiliates. I’d just say that we think we have good corporate governance at HPT and we are not at all fearful of challenges to it.
Operator: David Loeb, R.W. Baird.
David Loeb - R.W. Baird: Few kind of follow-up to Jeff’s questions. John, given that you are holding in letter of intent and you are not willing to talk about too much detail about the NHH deal. Why did you announce it, was NHH going to announce it anyway?
John G. Murray - President and COO: Yes, so our agreement with them is part of the larger series of transactions for NH, in particular NH reached the agreement with Chinese company that’s in the airline and tourism business called HNA. And HNA group was making a 20% investment in the equity of NH. So, the combination of the HNA transaction and the HPT transaction taken together relatively transformative for NH at this stage and they needed to make an announcement. So we were concerned that if they announced, there'll be selective disclosure. So typically we would not have announced this transaction we would have agreed to letter of intent and then work on our diligence and documentation and then announced it once we had a binding agreement. But because NH had to announce we felt compelled to do so as well. That’s principally the reason why our conference call was delayed a couple of days.
David Loeb - R.W. Baird: If you can't talk about the specifics of the deal can you talk a little bit about what your return hurdles in different scenarios and what, how you balance return hurdles and credit or corporate support?
Mark L. Kleifges - Treasurer and CFO: Well I think I mentioned in the remarks that the returns in Latin America and Europe are expected to be 10%, the returns in New York expected to be 8%. When you do business outside of the U.S. there are taxes that you have to consider and foreign currency issues. We think that, we've found ways to mitigate those so that our returns on this transaction will be as good as the returns we are getting on other transactions. But I guess I am reluctant to go further than that at this point.
David Loeb - R.W. Baird: I won't get any more about risk or credit or that side of the equation?
Mark L. Kleifges - Treasurer and CFO: We'll be willing to talk in much greater depth on this transaction once it, if and when it becomes final.
John G. Murray - President and COO: I would say, that these are all, all of these hotels are in the capital cities of the countries where they're located with the exception of one hotel in Mexico, which is in a market for the likes that maybe, they are Houston, it's where their largest state-owned petrochemical company Pemex is based. It's a major port city and so we think that all of these locations are very strong locations.
David Loeb - R.W. Baird: Just kind of a broader general question. Mark, you mentioned you had ample room on the line to fund upcoming transactions and CapEx the recent and future acquisitions alone is something you close were on the order of, I guess, $0.5 billion dollars, $526 million. Is your intention to fund all of that on the line or do you have a different idea about long-term funding? And kind of a follow-up on that is, what's the impact that all of this would have on your distribution requirement and on the dividend?
Mark L. Kleifges - Treasurer and CFO: There a few questions in there. Let's, I guess, step back first and kind of look at where we are from a commitment standpoint. As I outlined in my prepared remarks, we have got $450 million of funding requirements this year under our hotel in TA agreements. We've also got the $31 million (Guenette) Marriott acquisition. So, I guess firm commitments there, call it $445 million and we have the possible NH transaction for $375 million, so that brings us to total possible commitments of about $820 million. As we disclosed in the press release, the EUR170 million loan would be funded with a euro borrowing by us, so that takes, call the $225 million of the $820 million off the table leaves us with $595 million. Let's say we generate $95 million of free cash flow during the year that leaves us with $0.5 billion of funding and we've got $430 million available under the revolver at the end of the year. So under that scenario, we're short. So I think it's pretty clear in that aspect that we are going to have to go and visit the capital markets at some point during 2013. If you look at our balance sheet and leverage, at year-end we are at about a 50% debt to total book capitalization, which is the high-end of where we like to operate the Company. We like to be in that 40% to 50% debt to total book capitalization. So I think it's fair to say that we'll in all likelihood assuming the NH transaction take place that during 2013 we'll be accessing both the debt and most likely the equity markets.
David Loeb - R.W. Baird: So that could become an all preferred or you really mean coming?
Mark L. Kleifges - Treasurer and CFO: It could be either.
David Loeb - R.W. Baird: And impact on the dividend?
Mark L. Kleifges - Treasurer and CFO: Yeah, in terms of our distribution requirements, we haven't worked through all of that yet. I think coming into the year we have some cushion on our payout requirements. So I don’t think that the tax side of it will drive our need to make distributions. However, we are in the business of making distribution, so our Board will continue to evaluate the distribution level each quarter and as our renovation activity gets closer to its end game and if we continue with our successful acquisition pace than dividend increase would be something I can see them consider it.
David Loeb - R.W. Baird: But that seem like if you did the NH transaction that’s a big increment to taxable income, am I missing something on that. Is there a disproportion on kind of – on a full-year basis?
Mark L. Kleifges - Treasurer and CFO: No. We always evaluate the ability to make a distribution based on cash flow and the tax requirements are based on taxable income where you get the large benefit in the real estate industry of depreciation. So, just because you are earning a lot of money doesn’t mean you are creating a lot of taxable income if you structure things right.
David Loeb - R.W. Baird: And one final question maybe more for John. On the RevPAR responses to the rebranding in the fourth quarter, what do you think the prospects are once those assets stabilized? Do you think you grow some of that back or are these just – are the new brands just different RevPAR kinds of hotel?
John G. Murray - President and COO: Our current expectation is we grow with that. They are heading in that direction, they have ways to go, but that is definitely the expectations we can see. Grow back to where we were before there rebranding and continue to grow from there. and I’m optimistic that will happen.
David Loeb - R.W. Baird: Think that’s a one year trend or does that take a couple of years.
John G. Murray - President and COO: I think it takes a couple because most of the hotels are going to be under renovation for a decent part of this year some of the full-service hotels for both Wyndham and Sonesta will be renovated towards the end of this year or beginning of 2014. Then there will be a ramp-up period after that. So obviously Wyndham is a stronger better known brand, so I would expect that their pace would be a little bit faster than Sonesta's which is a smaller perhaps less well-known brand today.
Operator: Ryan Meliker, MLV & Co.
Ryan Meliker - MLV & Co.: Just I guess a quick question little bit of a follow-up from what David mentioned and Mark you indicated that you might have to tap in to the capital market at some point this year just what's your leverage levels at the high end of the current range. Can you give us an idea of a, where you are comfortable and where you'd like to see that level be, after you tap into the capital markets. Then B, if there are more acquisition opportunities that maybe when you tap into the capital markets. You might want to build in some; I guess some buffer into that level. Just to give us an idea of what we could expect across the year?
Mark L. Kleifges - Treasurer and CFO: Well, I guess first off I'd say that we are in though – we don’t have gun to our head to do anything in the near term. Given what we have available to us under the revolver. As I said I think many times in the past we like to operate the company with debt to total book capitalization between 40% and 50%. Where we end up within that range is going to be influenced by the strength of the capital markets themselves our view of where the capital markets are going in the near term. As well as what we think the horizon looks like in terms of additional acquisition opportunity. So, I'm not really in a position here to lock in to where we want to end up 2013 except to say within that range of 40% to 50%. I think if you pull back in time, we've been pretty consisting of running the Company along those metrics.
Ryan Meliker - MLV & Co.: Sure. I guess what I'm trying to get at is are you guys more inclined to do one large equity raise or maybe do one equity raise near-term to get you to within the range that you are looking for if these acquisitions close, but then be forced to do more equity raises if you guys do move forward with more acquisitions?
Mark L. Kleifges - Treasurer and CFO: Ryan, I think decisions on capital market transactions are driven by the facts that at the time you decide to execute on one and whether its – whether there even is an equity offering something that will be determined down the line.
Ryan Meliker - MLV & Co.: Then the second question and I apologize if I missed this, but you sounded like you said that the Clift Hotel was a $6 million lease payment that will have CPI step-ups. That seems to be on the $120 million acquisition price of 5% yield on your investment, what's going to get that to your target investment hurdles that I guess you look at? I'm assuming 5% is way below what you guys are looking at certainly given your cost of equity?
John G. Murray - President and COO: That is the return that's currently below where we would like it to be, but there are built-in adjustments to the rental rates and in particular in 2014 there will be a minimum increase of at least 20% which will move the return closer to from 5 to 6, and then there will be subsequent increases after that. We feel like it's a good investment in terms of cost per key and it's a good investment in a very strong market in San Francisco. We think we got it in an attractive price and with interest rates low, we are willing to go a little bit below our normal hurdle rates to get our hotel this quality. We think that it’s being well operated by Morgans today.
Ryan Meliker - MLV & Co.: I guess you did mention it going up from a 5% in yield to a 6% yield, but still seems drastically below what you are generally looking at from a yield perspective and certainly where your cost of equity is. I understand that it can be an attractive market and it can be a good deal, I guess so to speak, but at the same time, if your cost of funds outweighs your yield on those funds, I question how you guys think about whether that's a prudent investment for your shareholders, and if you are going to be doing anything, that would get that yield higher than the 5% to 6% that we just talked about.
John G. Murray - President and COO: We think that we take a long-term view of acquisitions and we expect that interest rates are going to be very low for the next, a couple of few years. We think that the returns on this hotel are going to grow and over the longer haul, it's going to have more impressive returns than what you are seeing today. What happens with the hotel going forward and what changes may occur; it'd just be a matter of subjectiveness. Right now, the hotel has triple-net leases for long-term to Morgans Hotel Group and they are current in their rent payments. and unless that changes there is some – how much that we are going to do to change what’s happening there.
Ryan Meliker - MLV & Co.: But if they weren’t current in their rent payment at some point in time, you might be interested in choosing another path for that property?
John G. Murray - President and COO: I think it's a very attractive hotel in a good location and that if there was – if there was ever a default that we would have various options without, I don't have much doubt about that.
Operator: William Marks, JMP Securities.
William Marks - JMP Securities: Just had some broad operating questions. I guess first I know you don't give guidance but any thoughts it seems like the range is kind of 5% to 7% for the industry and do you concur with that and will your redevelopments cause much for disparity from that?
John G. Murray - President and COO: As I mentioned most of our operators have come in, in the 5% to 7% range. And we are very comfortable with those ranges, I think if you ask me if I thought they were likely to come in towards the higher end or lower end. I think I will probably say that we expect that they might be more. If they miss they will miss towards the higher end because for instance IHG is expected to be much higher up in the teens for RevPAR growth. The only portfolio that is below the absolute 5% to 7% range is on the Sonesta brands where virtually every one of their hotels will be under renovation during 2013. So, they are expecting across the portfolio flat RevPAR, but otherwise, we are pretty optimistic, as I mentioned that January RevPAR growth has been very, very strong at the hotels that have been renovated and those that haven’t been rebranded. So we feel pretty good about where our numbers are going to come out this coming year. You never know, none of us has a crystal ball. So obviously there's changes going on in Washington and there's budget cuts happening. So that may have some modest impact on performance, but because of the renovations and because of lower supply growth and because the economy continues to chug along, which we expect will continue, we are optimistic.
William Marks - JMP Securities: Where do these types of ranges put your coverage?
John G. Murray - President and COO: We are expecting RevPAR to increase and margins to increase. So we are expecting (indiscernible). But we don't typically provide guidance on where we expect coverage to come out.
Mark L. Kleifges - Treasurer and CFO: But our expectation is that we'd see despite the continued renovation, disruptions that we'd see improved coverage across all of our portfolios in 2013.
Operator: Bryan Maher, Craig-Hallum Capital Group.
Bryan Maher - Craig-Hallum Capital Group: I think you might have answered my question earlier on, but I wanted to talk a little bit about TA. With what they are doing, they are seeking out underperforming, possibly distressed truck stops that they can renovate, reposition, rebrand as TA and get the EBITDA of those properties as they build out their portfolio. So my question would be to you, as they do that, is there any interest on HPTs part to buy one or a basket of more mature stabilized truck stops that TA has acquired on their own going forward or do you think that you are pretty filled out on the acquisition front on the hotel side?
John G. Murray - President and COO: Our primary focus is on hotel acquisitions, however, if TA were to come to us with one or more mature travel centers that they had ramped up and they had proven cash flows we would not be against acquiring those and adding those properties through existing leases or a new lease, but it's not really our focus right now. The properties that TA has bought, as you mentioned, have been sort of underperforming turnaround opportunities and so they got some work to do before that will become an issue for us.
Bryan Maher - Craig-Hallum Capital Group: Then secondarily, just on the NH Hoteles deal, can you tell us how that deal kind of came about, did they approach you, did you approach them, was it a brokered deal?
John G. Murray - President and COO: It came about over a long period of time and there have been bankers involved at various points, but I think that if I remember back that we approached them.
Operator: There are no further questions in the queue. I'd now like to turn the call back over to John Murray. Please go ahead.
John G. Murray - President and COO: Thank you all very much for joining us today and again I apologize for moving the date on and appreciate being with us.
Operator: That does conclude our conference for today. Thank you for your participation and using the AT&T Executive Teleconference. You may now disconnect.