Ashford Hospitality Trust Inc (AHT) 2012 Q1 法說會逐字稿

Good morning ladies and gentlemen, thank you for standing by. Welcome to the Ashford Hospitality Trust first quarter 2012 conference call. (Operator Instructions). This conference is being recorded today, Thursday, April 26, 2012. At this time I'd like to turn the call over to Scott Eckstein with the Financial Relations Board. Please go ahead, sir.

Good day, everyone and welcome to the Ashford Hospitality Trust conference call to review the Company's results for the first quarter of 2012. On the call will be Monty Bennett , CEO, Douglas Kessler, President, and David Kimichik, CFO. The results, as well as notice of the accessibility on a listen only basis over the internet, were distributed yesterday afternoon in a press release that has been covered by the financial media.

At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made being made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform act of 1995. Such forward-looking statements are subject to numerous assumptions, uncertainties, and known or unknown risks which could cause actual results to differ materially from those anticipated.

These risk factors are more fully discussed in the section titled risk factors [inaudible] statement on form S3 and other filings with the Securties and Exchange Commission. The forward looking statement concluded in this conference call are only made as of the date of this call and the Company is notobligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP financial measures are consolidations of which are provided in the Company's financial release and the Company's tables or schedules which have been file on form 8k with the FCC April 25, 2012 and may also be accessed through the company's website at www.ahtreit.com.

Each listener is encouraged to review those reconciliations provided in the earnings releasetogether with all of our information provided in the release. I will now turn the call over to Monty Bennett. Please go ahead, sir.

Thank you, and good morning. The first quarter this year continues to reflect the early state benefits from the hotel cycle recovery and as a result our reporting metrics are positive. It should be recognized, however, that until the recovery gains a more sustained footing, progress could be uneven at times. We continue to make headway in certain key areas such as operating margin improvement, in RevPAR growth, and risk mitigation. We are focused on how best to create near term and long term shareholder value within an environment where we continue to see improving trends in the lodging sector and grid resiliency in the US economy as a whole.

We remain bullish on the hotel outlook and are confident that our initiatives are adding value. Since our last conference call in February, US hotel demands continued to improve with RevPAR growth still well above average growth rates. In 2011 US market achieved annual RevPAR growth of 8.2% in 2012 and 2013 the US hotel industry is expected to report steady RevPAR increases of 5.8% and 6.6% respectively according to the recent forecast from PKF.

For the first quarter Ashford's RevPAR growth was 3.1%. The legacy portfolio registered a RevPAR growth of 3.6% where as the Highland Portfolio was 1.3%. This performance reflects our heavy concentration in Washington D.C., Dallas Ft. Worth, certain airport locations, as well as some impact from capital expenditures. Approximately 15% of our EBITDA comes from the Washington D.C. area.

While D.C. has under performed other gateway cities, we remain confident in this excellent long term market and expect to see improved performance particularly following the 2012 election. Some factors that affected the quarters RevPAR in D.C. were related to the Pentagon's base realignment and closure program particularly in the Crystal City area where several of our assets are located.

Also affecting our RevPAR for the quarter is the fact that our second largest market, Dallas, hosted the Super Bowl during the first quarter last year which makes year-over-year comparisons challenging. Lastly, airport markets generally and our airport markets in particular, experienced better weather by comparison to last year resulting in fewer standing passengers needing hotel rooms.

In January and February of 2011, the nation experienced 45,000 canceled flights compared to 12,000 this year. Clearly, compared to our peers, we have one of the most diversified geographic portfolios which we believe mitigates risk. The pace of the economic recovery in certain markets could at times contribute to RevPAR variations. However, we continue to see the hotel RevPAR recovery as broad based in our industry and the top performing markets for the first quarter were Nashville, New Orleans, and Waikiki.

While the top performing segments was highway locations. Additionally, we've implemented an aggressive CapEX program which is having an impact on RevPAR. We believe these capital expenditures will result in future strong market share gains. We are targeted to spend $120 million to $135 million for 2012 and during the first quarter we spent $29.5 million in 32 hotels.

By comparison to our historical experience with CapEX initiatives in other quarters, we are seeing an impact on RevPAR from the acceleration of our work and the scope of the refurbishments. If we were to exclude those assets in a renovation, our RevPAR would have reflected 4.8% growth.

In terms of new hotel room supply the limited availability of construction financing continues to constrain new development to levels well below historical averages for the foreseeable future. Recent estimates from PCF anticipate new supply growth for 2012, 2013 and 2014 will be.6%, 1.0% and and 1.6% respectively.

Through 2016 it is expected that new supply will remain on average well below 2% annually which is less than the average annual change in the nations lodging supply from 1988 through 2011. The lack of new rooms coming on the market in the face of increase in demand is very good news for continued RevPar out performance in the years to come.

Given that significant amount of the RevPAR growth will be more heavily weighted in terms of gains of average daily rate, we expect to experience enhanced benefits to the bottom line given our success and improving margins. It is important to note that the industry is still in the early stages of this recovery. Perhaps just one third of the way to the next peak. We believe the majority of the growth has not been yet been realized. Our view is that it remains a very good time to invest in lodging [inaudible] as a whole.

For the first quarter of 2012, Ashford reported [inaudible] per diluted share of $0.20 compared to $0.40 a year ago. The main difference in our performance is due to the favorable impact we experienced from the interest rate hedges that we used to protect our cash flows during the economic downturn. With the economic recovery taking hold and the hedges burning off we expect to see declining impact from these risk management tools in our financial reporting.

Ashford continues to demonstrate solid EBITDA growth performance. In the first quarter we achieved EBITDA flows of 46% and margin improvement of 75 basis points for our legacy portfolio which had an impact on our flow through in margins. As we expect, our RevPAR performance to accelerate, we believe that our cost saving measures will facilitate even stronger bottom line performance.

In the Highland Portfolio , we achieved EBITDA flows of 215% and margin improvement of 288 basis points during the quarter. Aside from the impact of the 7 hotels that underwent renovations, we also saw the temporary affect of the conversion of the Hilton Boston of Back Bay, and Hyatt Regency Wind Watch, from brand managed assets to franchises. As we've stated previously, this management shift is part of the continuing integration of the Highland Portfolio.

We expect these newly franchised hotels to generate long term of value creation through enhanced revenue realization and additional cost savings. Hotel EBITDA for Highland increased a strong 15.6% for the quarter.

Since closing the Highland acquisition in March 2011 the portfolio has achieved a [trilling?] 12 month increase of 12% in EBITDA. This increase has come largely from cost savings. We expect increasing revenues to play a greater role in continued EBITDA improvement.

As previously announced, our board or directors declared a dividend of $0.11 per share for the first quarter 2012 which represents an annual rate of $0.44 per share. This cover dividend is well above our pure average. Based upon yesterdays closing price, the dividend yield is 4.9%. We think the combination of our high dividends and potential capital appreciation make for an attractive investment.

Looking ahead, we expect [inaudible] improvements will lead to strong RevPAR growth and higher hotel values. The global, economic, and political conditions remain fluid and as a result we continue to act conservatively with our shareholders capital.

At the same time the transaction market continues to accelerate as more attractive assets come to market. Therefore we will continue to strategically deploy capital and pursue accretive investment opportunities very selectively with both an eye on risk and shareholder return maximization. With that, I'd now like to turn the call over to David Kimichik to review our financial results.

Thanks, Monty. For the first quarter we reported a net loss to common shareholders of $29,549,000. Adjusted EBITDA of $70,846,000 and ASFO of $23,176000, or $0.28 per diluted share. At quarters end Ashford had total assets of $3.6 billion in continuing operations and $4.6 billion overall including the Highland Portfolio which is not consolidated.

We had $2.4 billion of mortgage debt in continuing operations and $3.1 billion overall including Highland. Our total combined debt currently has abundant average interest rate of 4.6% one of the lost among our peers. With the maturing of some of our swap positions, we currently have 62% fixed rate debt and 38% floating rate and the weighted average maturity is 3.8 years.

Since the length of the swap does not match the term of the underlying fixed rate debt, for GAAP purposes the swap is not considered an effective hedge. The result of this is that the changes in market value of these instruments must be run through our P&L each quarter as unrealized gains or losses on derivatives. These are non-cash entries that will affect our net income will be added back for purposes of calculating our AFFO.

The first quarter, the unrealized loss of derivatives was $9.9 million. At quarter's end our legacy portfolio consisted of 96 hotels in continuing operations containing 20,395 rooms. Additionally we owned 71.74% of the of the 28 Highland hotels containing 5,800 net rooms in a joint venture. All combined we currently own a total of 26,195 net rooms.

We also had a position in just one performing mezzanine loan. The Ritz Carlton in Key Biscayne, FL with an outstanding balance of $4 million. Hotel operating profit for all hotels including Highland was up by $6.7 million, or 8.8% for the quarter. Our quarter end adjusted EBITDA to fixed charge ration for our credit facility now stands at 1.58 times versus the required minimum of 1.35 times.

Our share count currently stands at 85.8 million fully diluted shares outstanding which were comprised of 68.2 million common shares and 17.6 million operating partnership [inaudible]. During the quarter we sold approximately 370,000 shares of our series A and series D preferred stock through our after market program, for total gross proceeds of $9 million. And now I'd like to turn it over to Douglas to discuss our capital market strategy.

Thank you, and good morning. We are encourage by improving trends in the debt markets and the increase in the number of investment opportunity opportunities. Even with these better market conditions , we remain both conservative and opportunistic in our approach.

We still recognize that market and political uncertainties exist. As a result, while we are looking for new investments we continue to maintain sufficient liquidity levels. As we discussed earlier, during the first quarter, we upsized our previous $105 million senior credit facility to $145 million with the option, subject to lender approval, to further expand the facility to an aggregate size of $225 million. We believed it makes sense to increase the revolver to better position us for investment opportunities as well as provide us with more liquidity if needed.

As part of the expansion, we added Deutsche Bank to our banking lineup, along with Key Bank, Morgan Stanley, UBS, and Credit Suisse. Regarding our $167.2 million non-recourse portfolio mortgage loan that matures this coming May, we completed a widely marketed effort to refinance the loan. We hope to announce our progress shortly. We would expect to use the $23 million currently held in our restricted cash balance to pay down the loan. Additionally we anticipate unencumbering one of the hotels as part of the portfolio refinacing.

Assuming that we subsequently sell or refinance this hotel, we expect the combined cash needs of the refinance will have been satisfied. In other words, at this time we are progressing as planned and do not expect any additional amount of cash needs from our balance sheet. This loan is the only loan maturing this year.

We continue to work to stay ahead of upcoming maturity dates. In fact, we are already engaged in discussions with lenders regarding our $102 million of loans set to mature in early 2013.

In early 2013. The debt yield on this high quality portfolio is currently in excess of 16% and there was a good amount of lender interest to refinance these loans with no expected pay down required. Admittedly, this transaction is some time off from now but again, it indicates our proactive approach. So at this time, we believe that we've addressed all near term maturity's and have no recourse debt aside from our senior credit facility which remains un-drawn. We also continue to strengthen our liquidity and financial resources.

This healthy capital positioning allows us to take a closer look at an increasing number of hotel investment opportunities. We have bid on a few transactions recently and admittedly have not been selected. I believe this shows discipline in our team focus on making sure our investments are accretive to shareholders. We have, and will remain methodical in our analysis, and due diligence of potential investments.

As we evaluate our current portfolio of assets and the best opportunities for growth in new assets, we're primarily focusing our attention on full service , upper-up scale hotels franchised with major brands and top markets. This is more targeted than our historical approach. However , we will remain opportunistic and will not restrict ourselves if there are other opportunities for shareholder returns.

Aside from our domestic interests, we're also seeing interesting market dynamics in Europe. With the financial and political changes, now is a unique time to consider hotels in such areas as the gateway cities given their low new room supply out look, international demand, and attractive long term fundamentals. We've been analysing and visiting markets for several months. We are well aware of the complexities, but also the opportunity.

The competitive landscape is different and the types of transactions are varied. Our ultimate investment decisions will remain consistent with our dedication to maximizing value and mitigating risk. That concludes our prepared remarks and we will now open it up to you for questions.

(Operator Instructions). Our first question is Robin Farley with UBS, please go ahead.

Hi, this is Max (inaudible) on the line for Robin. Thanks for taking my question. I know some [inaudible] with the Super Bowl and obviously [inaudible] but in further quarters and beyond to close the gap with RevPAR growth with the wider market in the relevent segments [inaudible].

This is Monty. We had designed our portfolio over time to try and track the overall market, the overall US industry. That has not happened over the past few quarters, and it didn't happen in this past quarter. Our markets were down. But, to be more specific , it wasn't our broad markets that were in, but the individual sub markets that were in. And when you look at the broader markets that were in, they all achieved in line with the national averages, on average. But our individual competitive sets didn't. And our RevPAR index for our individual assets was down about one point on average from our competitive sets, which is in the range of how we performed in the past. Sometimes we're down a point, sometimes we're up a point.

Over the longer term we're up, but we've got that fluctuation going. It wasn't an under performance of our assets within our competitive sets, it was the under performance of the competitive set to their broader markets. And so the question I think you're asking, which we've asked ourselves, is why have those individual competitive sets, why have our sub sub markets not performed as well as the larger markets that we're in. The challenge that we have is that when you go back through each quarter in many regards it's a different reason and it's not a consistent reason.

It's a string of bad luck in many regards. The only thing that's more consistent is our portfolio is made of upper up scale and up scale assets. That has just very modestly under performed the broad industry maybe about 50 or 80 bit, so not much. But then our D.C. exposure. And D.C. has been rough going for awhile.

The market itself they say should be better for the rest of the year and then better next year. But when I say better for the rest of this year , not much better. It really won't gain traction until next year. So, we have some clarity for D.C. and it's not fantastic but it's a great long term market and we're there. As far as everywhere else , it's frustrating because we can't put our finger on a specific trend.

Again when you look at the metrics of our own properties, and how our affiliates Remington performed, it was very good. Our RevPAR was right in line despite all of the many transitions we've had in the Highland Portfolio, that is our RevPAR yield penetration and we expect that to improve over time. And our flows were as good or better than anybody in the industry and our margins were great , so we're very happy with those things that we've been able to control but it's just of the question that you ask about these other factors that are driving it and again the frustrating. One point that affected us in Nashville which was of the strongest performing market nationwide last year, just as kind of an aside here. Is that our exposure in Nashville is downtown.

Last year, we had the floods in Nashville in the fourth quarter and some in the first quarter. Well those floods negatively affected most of the outlying areas, not the downtown area, that's where our asset is. So as the market improved , most of the improvement were in those sub markets , not the downtown market , although the downtown market was up as well. So again that's kind of an anomaly and we'll have several of those each quarter and it's a bit frustrating. Let me add one more point here which I think is very important.

Overall , our EBITDA growth was 9% for the whole portfolio. We have a more leveraged platform and that net platformplatform has advantages in some parts of the cycle. Great advantages and disadvantages during others. We're in the part of the cycle where it's a great advantage. And if you look at our leverage level compared to say the average of our peers, our 9% EBITDA growth should mean more to our stock price growth than 14% EBITDA growth for our peers because of their lower leverage.

So I think that the market needs to understand that and go through the math on that because that's a great advantage of ours. So while our competitive sets, for reasons that seem to change, aren't doing as well as the overall industry average , number one we can't see any identical patterns why that will continue to be the case, other than D.C., and secondly, secondly even with 9% EBITDA growth, that's strong performance compared to how it should affect our stock price. So a short question and a long answer but I hope that was helpful.

That's very helpful. If I could get a quick follow up?

Go ahead with your follow up.

Could you possibly update the last quarter how long the impact or renovations are going to be a drag on RevPAR or legacy in the Highland?

We find that overall renovation impact affects or portfolio between 100 and 200 basis points on RevPAR when you average it in. For this quarter , it was about 150 basis point. So it affected us this quarter. It wasn't a big factor in this performance. In future quarters it's still going to be between those two numbers in our overall RevPAR performance , we don't see that changing much this year but again that's really not much different than our historical performance despite the fact that we've got relatively more renovation nowbecause of all the Highland assets.

Okay. Thanks so much.

Thank you. Our next question comes from the line of Smedes Rose with KBW.

Thanks. Monty I wanted to ask you your views , do you think it's possible that given how strong the industry is recovery recovering that we might see lenders and regional banks get back into lending sooner for development then maybe we think now? Or do you think that is that still off of the table I'm just curious if we're going to get a negative surprise?

Sure , I was just in New York meeting with a bunch of my industry colleagues that are a lot of the top lenders and owners and et cetera in the industry. This very question came up. A struggle that a number of the banks have is that the amount of their lending is just not what they used to have. They are shrinking their balance sheets on balance. While the big banks have started to recover, the smaller regional banks are still having trouble in that regard and on a net basis are reducing their balance sheet so that makes lending overall harder.

Also , the C M B S market is not what it used to be, it's so far behind it. So that means that just regular refinancings are going to absorb more of the bank lending which used to be more relatively dominant in the new construction side. Right? You can't get a CMBS loan for a new build property. So there are some head winds in the new construction arena that didn't exist as much in the last cycle . It probably existed back in the early 90s because of the S&L problems that we had but it didn't exist so much in the last cycle. It's hard to say. We certainly see new supply growth really low right now. The number of properties under construction are still very low. So we don't see moving up quickly , but there does seem to be some natural head winds on the lending side.

Okay. That's very helpful. And when you guys talked about potential accretive acquisition opportunities, for your portfolio is pretty wide and varied. But can you just talk about what kinds of markets you see those opportunities in? Are they the core market s that everybody seems to be jockeying for? Are they more regional, or airport, et cetera?

Not so much the top five gate way markets, the competition for those markets is very strong. We're actually in the top 25 markets and in fact the top 25 markets performed very well. This recovery is very broad based , so we're looking in the top 25 markets and generally what we would like to do in the next number of years is move from fewer brand managed and select service hotels to more full service and franchised hotels. That's just a broad statement and we will veer out of that from time to time but that's what we'd like to do over the course of the next few years. We'll be selling off some of our select service hotels, probably more of the brand managed select service hotels. We are taking a look over in Europe.

There is a lot of interesting dynamics going on over there. In those situations you have to look very carefully because on one hand there's some great pricing opportunities and on the other hand, no one knows how long their troubles are going to last. But it's one of those situations where we have made our marks and have really added value for our shareholders of buying when other people weren't buying. The pressure to buy over there is a lot less.

Most private equity funds can't buy because they can't get the amount of leverage that they need. Very few [inaudible] are involved over there, strategic is pulled out, host is a bit active but no one else is. And so there are just fewer buyers out there which makes a bit more attractive for an entry point. And again you got to be careful about where you go and we spend a lot of time analysing it over there, but aren't convinced that we're going to do anything yet but we're looking at it. So that's generally how we're looking at acquisitions.

Okay. Thanks, that's helpful.

Our next question comes from the line of Nikhil Bala with FBR, please go ahead.

Hi. Good morning. Just wanted to get some clarity. You mentioned the base closure around the Pentagon. Is that a secular event now or how is that impacting these hotels?

It is impacting the hotels in Crystal City and that is probably our softest sub markets in our portfolio. We have several assets in Crystal City,and on top of the [inaudible] closers, the (inaudible) alignment closures, there has been some new supplies that have come into that marketplace that is affecting us. So we've got a double whammy. Redemption, demand, and new supply, and that's still being absorbed.

The (inaudible) program was supposed to be completed, I believe in the fall of last year, but is still underway. Agencies are vacating I think up to 3 million square feet in the area. The good news is that will ultimately be back billed by private enterprise which should provide higher rates and better business for us, but it's just a process that needs to happen and it's underway and it's just frustratingly slow as everything in Washington seems to be.

And in terms of EBITDA exposure [inaudible] in that area is that about 4% or 5% of your total EBITDA?

I don't know offhand, for the greater D. C. area it's about 15%. I don't know what it is for those assets but we'll see if we can't get you that figure.

And one more follow up question on just your acquisition targets. What markets or types of assets are you targeting?

I'd say the more full services franchise type assets are the sweet spots. But you have to be careful. When you say you're going to get 20% leverage return on an acquisition, you have to issue 20% leveraged shares in order to go buy that property. So you've got to buy properties that you think are going to outperform your existing sets of assets to make it worthwhile. Unless you think your stock is mis-priced to the high side and you've got some arbitrage there. Or if you're shuffling around your portfolio , and the latter is mainly what we're focused on, it's more full service, more franchise, less brand brand managed, less select service, and that's kind of the target of our acquisition program.

And would it be fair to say that given the way the markets are right now across both continents, Europe and the US, your preference maybe more towards Europe because you might be able to get the kind of yields you're looking for?

It's hard to say. Also, when you look at Europe you've got such interesting dynamics. For example, if you buy a hotel in Nice, you're relying on the French economy and how well it's going to do. You buy a hotel in Paris , and you're relying on the international demand and the world economy. That's a different debt. That's a different investment. Same with London versus Manchester. So it's hard to say but that's generally the case.

Thank you.

Our next question comes from the line of Bob LaFleur with Cantor Fitzgerald.

Good afternoon, gentlemen. One , I know you guys aren't in the habit of giving guidance but I was wondering if we could look at this retrospectively. Were you surprised with the portfolio performance in the first quarter or is that pretty much in line with the expectations that you had going in? And then a related question is on the EBITDA flow for the legacy portfolio came in at 46% which is a bit below your 50% bench mark that you guys target as minimum. If we could talk about some of the reasons for that if it was just a function of the low level of RevPAR growth or there was some other extenuating circumstances there?

On the EBITDA flow, that 46% was a little bit low. We have a harder time getting our brand managed properties to hit those flows than we do our franchise properties that are managed by our affiliates, Remington. That's one issue. Secondly, is that in the first quarter of 2011, we had some fantastic property tax reductions and we don't book property tax reductions until the actual cash comes in so we had a great benefit in the first quarter of last year. So that made it a little tougher this year.

If you look at the GOP level, we hit those 50% flow levels and we're very happy with that so it was that property tax that got us and again some of our brand managers just don't perform as well as Remington. As far as looking at the quarter, going into the quarter our forecasts were lower but that's always hard to rely on too much because many times you can be surprised on the upside and managers are naturally more conservative when they forecast. Especially when the forth quarter wasn't as robust as some of us had hoped.

So while the projection was there , it was hard for me to evaluate whether that was real lower projection or if it was because of a what they just went through. It was not unexpected by all of our managers and is what they had anticipated but in the end I didn't really believe if it was real or not and it turned out it was.

Okay. Thanks.

(Operator Instructions). And our next question is from the line from David Loeb of Robert W. Baird & Company, Inc.

Thanks first for the clarity on the margins and the revenue in the legacy non-renovated portfolio because that was one of my questions. I think you explained is it pretty well. On the acquisition front, in Europe in particular, are you looking at debt investments or loan to own or are you looking at fee simple ownership of equity of assets?

We're generally staying away from debt acquisitions at least right now. We've got a team that's world class on the debt acquisition here in the states. We've done more of that than anybody in buying debt in order to ultimately own the asset. That's not our specialty over there. We don't have experience in doing that. Not that we will never do it. But right now if we are going to be over there we are going to be to go over there more cautiously. And just buying fee simple, or as they say over there, free hold, ownership interest and just buying assets and not trying to do it this other way.

Okay. And Doug, I think, mentioned that you had bid on some assets but had not succeeded. Were those domestic, international or both? Were they assets that have since closed? Can you give us a little bit of an idea about whether this was pricing or due diligence and what kind of pricing metrics the assets ended up going for or an idea about your investment criteria?

David , these were domestic assets and they have not yet closed. So these are deals that went through multiple rounds of bidding but at some point it turns and you have a more aggressive buyer. The numbers aren't as accretive as we'd like them to be and we have thresholds and we're not going to surpass those thresholds just to get a deal done. We've never done that. We've always try to buy accretive hotels for the shareholder so when we reach our limit we stop and we let someone else pay more than we would.

So can you give us a little color as what those limit s are and it's great by the way that you stop because that means you're looking out for value.

Well , those limits are did dependent upon a variety of factors. We take into consideration a return requirement from an IR standpoint. We take into consideration the cost relative to replacement cost. We take into consideration the required CAPEX over time and what we think our forecast stock price might be over time and the source of those funds. We obviously, first and foremost take into account the amount of accretion for the capital expenditure and I mean just the initial outlay.

Weo take into account what we think the cost of debt might be for that particular investment and the availability of it. It's never one directional it's always multi dimensional with us and we're looking at every possible angle of an investment opportunity to make sure that number one , we're not riding on just one upside opportunity related to that asset , that there's multiple tools in the toolbox , but also number two, just checking all aspects of price , value , accretion , and cost of capital to make the determination of whether to proceed or not.

So most of those sound like they're variable from property to property is there a threshold IRR? What are you looking for is there a going in cap rate that you're looking for?

The easiest answer would be the greatest IR that we could achieve but generally speaking , it's high teen type IRR.

That's on a leverage basis. On an unleveraged basis it's 11, maybe ten , depending upon the asset.

Okay that actually makes a lot of sense and just one more topic briefly. Can you give us a little bit more insight on asset sales prospects and how are you coming along on those types of assets as what you're looking to buy?

We're looking to sell the El Conquistador property and the Double Tree, Columbus. The sales efforts are slow. They're coming along but they're slow , so we are still evaluating on whether to pull the trigger for the sale at a lower amount or to keep the asset and put some capital into them for the longer term. We'd like to sell them. We think that's better but we've got to the figure out what's best for our shareholders.

I'd like to turn the conference back over to you.

Thank you all for your participation of today 's conference call. We will be hosting our 2012 investor day in Tuesday, May 8th in New York at the Mandarin Oriental. If there are any institutional investors that have not registered for this event and you have an interest in attending, please contact our investor relations teams and we will be happy to assist you. We look forward to seeing many of you at our investor day and speaking with you again on our next call.

Thank you. If you'd like to listen to a replay of today 's conference call please dial 800-406-7325. Using the access code of 453-0722 followed by the pound key. Thisdoes conclude the conference call.