Chatham Lodging Trust (CLDT) 2013 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Chatham Lodging Trust fourth-quarter earnings conference call.

At this time all participants are in listen-only mode. Following the presentation we will conduct a question-and-answer session. (Operator Instructions).

I would like to remind everyone that this conference call is being recorded today, February 19, 2014. I will not turn the conference over to Mr. Chris Daly, President Daly Gray, Inc. Please go ahead.

Thank you, Sarah. Good morning, everyone and welcome to the Chatham Lodging Trust fourth-quarter full-year 2013 results conference call. Yesterday, after the close of market, Chatham released results for the fourth quarter and year ended December 31, 2013, and I hope you've all had a chance to review the press release.

If you do not receive a copy of the release or you would like a copy, please feel free to call my office at 703-435-6293 and we will be happy to email you a copy. Or, you can also take a look at the release on Chatham's website, www.chathamlodgingtrust.com.

Today's conference call is being transmitted live via telephone by webcast or at Chatham's website and at streetevents.com. A recording of the call will be available by telephone until midnight on Wednesday, February 26, 2014, by dialing 1-800-406-7325, reference number 4646993. The replay of the conference call will be posted on Chatham's website.

As a reminder, this conference call is the property of Chatham Lodging Trust and any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Chatham is prohibited. Before we begin management has asked me to remind you that keeping with the SEC Safe Harbor guidelines, today's conference call may contain forward-looking statements about Chatham including statements regarding future operating results and the timing and composition of revenues among others. Except for historical information these forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially including the volatility of the national economy, economic conditions generally and the hotel and real estate market specifically, international and geopolitical difficulties or health concerns, government actions, legislative and regulatory changes, availability of debt and equity capital, interest rates, competition, weather conditions or natural disasters, supply and demand for lodging facilities in our current proposed market areas, and the Company's ability to manage integration and growth.

Additional risks are discussed in the Company's filings with the Securities and Exchange Commission. All information in this call is as of February 17, 2014, unless otherwise noted, and the Company undertakes no obligation to update any forward-looking statements to conform to statements to actual results or changes in the Company's expectations.

During this call we may refer to certain non-GAAP financial measures such as EBITDA, and adjusted EBITDA, which we believe to be common in the industry and helpful indicators of our performance. In keeping with SEC regulations we have provided and encourage you to refer to the reconciliations of these measures to GAAP results in our earnings release.

Now, to provide you with some insight into Chatham's 2014, excuse me, 2013 fourth-quarter and full-year results, allow me to introduce Jeff Fisher, Chairman, President and CEO, and Dennis Craven, Executive VP and Chief Financial Officer. Let me turn the session over to Jeff. Jeff?

Thanks, Chris, good morning, everybody. Dennis and I are happy to be here again to talk with you this morning about 2013 and also give you a little guidance on 2014.

2013 was another great year for Chatham. I think our momentum continued to build very strongly and as we look at the metrics that the Company is reporting here for 2013 and in particular I am very pleased at the acquisitions that we made in 2013, clearly demonstrating our ability to selectively target certain hotels within certain very specific markets, our target markets, with high barriers to entry and growing demand generators, sometimes leisure, sometimes medical, all the time corporate really shows, I think when you look at RevPAR results, particularly RevPAR results and EBITDA growth for the hotels that we acquired.

So we really believe, again, in 2014, I don't see any reason why that momentum should not continue to build this year because fundamentally there is no difference in the supply-demand equation, of course assuming the GDP growth stays anywhere around where it was in 2013. And I know that we've got a pretty healthy pipe line of hotels and deals that we are working on.

So from that perspective I think, again, great internal growth and some possibilities for some substantial external growth for the Company as well. Speaking of great deals, we were able to make a couple in the fourth quarter as we expanded our portfolio with the off-market acquisition of two very high quality hotels comprising almost 400 rooms for approximately $112 million.

The beautiful 231 room Residence Inn in downtown Bellevue, Washington, a very strong and fast growing market, and 160 room SpringHill Suites in the historic Savannah, Georgia, downtown waterfront district, both really exemplify in our focus in buying when possible in those downtown markets that are not necessarily New York City or Washington, DC where some of our other brethren claim that's the only place to make deals. We see value and a lot of value in markets like Bellevue or certainly even in the historic district in Savannah where it is hard to build hotels or build with structured parking and garages underneath and all the good stuff that you want to see in a growing market like that with very high land costs.

These two acquisitions capped off a run of incredible portfolio acquisitions and additions, as I said, since late 2012 acquiring seven hotels comprising 1,179 rooms for approximately $260 million. We have grown our rooms owned approximately 50% from 2,412 rooms to 3,591 rooms.

We continue to target off-market transactions in our targeted markets that provide enhanced RevPAR growth above both national averages and our current owned portfolio. We have one of the highest, I believe, quality select service and upscale extended-stay investment portfolios in the REIT space. And we will continue to acquire assets that meet our very strict acquisition criteria, which will increase our current earnings stream, cash flow and ultimately dividend.

Looking at RevPAR for our portfolio, despite a tough year-over-year comparison due to Super Storm Sandy in the 2012 fourth quarter, RevPAR grew 4.4% for the entire portfolio to $103. Sandy business aided our fourth-quarter 2012 portfolio RevPAR growth by approximately 200 basis points, so accounting for that tough comp our portfolio RevPAR growth would have been approximately 6.5%, well above industry averages.

Our 2013 acquisitions have produced phenomenal results with RevPAR up over 8% in the fourth quarter and 10% double-digit RevPAR growth for those assets. During the quarter one-third of our portfolio saw RevPAR growth over 10%, strong growth markets for Houston, Boston, Villa Rica, Nashville, Brentwood, Minneapolis, Bloomington, Portland, Maine, San Antonio and Savannah.

Our markets remain on solid footing with fourth-quarter RevPAR growth of approximately 4% for the quarter and approximately 6% for the year. This portfolio is showing really consistent strong RevPAR growth and we have been able to make some great acquisitions for this year in markets that not only command high absolute RevPAR but exhibit strong growth characteristics.

The converted DC Residence Inn is gaining traction in brand-driven reservations as well as our own direct sales effort but I have to point out like everybody else that the DC area and surrounding areas is a tough place to be. RevPAR still is currently trending down as much as 3% to 5% as compared to the prior year, yet our hotel, as I said is gaining first what you want to see is occupancy index in terms of its STAR and Smith Travel reports because first we put the face of business in the hotel, develop our upscale extended-stay business that, of course will be a attracted by us and our direct sales effort and the Residence Inn brand.

In February our occupancy index was 138.4%, which is very strong, getting close to the point now where we can start pushing on rate, start moving the ADR index up and therefore the RevPAR index. The RevPAR index for this year just to give you a little idea for DC, downtown that conversion is budgeted to be around 120%. It looks like we will track close to that number.

And as a comparison was the hotel for the full year was a DoubleTree Guest Suites. It's RevPAR index was 106%, that's with the same competitive set.

So again our return on investment particularly on our incremental dollars here. And I think as we move through the year into next year, we're going to see some, on a relative basis, pretty strong numbers coming onto this hotel.

But when you look at our Tysons Corner Residence Inn, which has traditionally always been a very strong asset, again without some of the per diem government business that has in that area very highly rated government per diem business that went away and that per diem is about $184.00 for downtown. Then we have got still facing an uphill battle as we try to gain RevPAR in those markets.

But as we start lapping over, of course it's not great consolation but it is some, as we start lapping over last year's numbers, of course on a comp basis. And with dealing with the sequester impacts, things will get better as we move through the year.

Looking at the supply and demand equation up there, with the exception of downtown Portland, Maine, where we knew at the outset and at the purchase, and that's why we were able to make such a great going in cap rate deal there, there is some new supply coming downtown Portland into the waterfront district but the market is very healthy. Little new supply other than that is really affecting our portfolio in 2014, so we think the portfolio is well positioned for healthy RevPAR gains this year.

We expect most of the RevPAR growth in 2014 and 2015, of course, to be driven by growth in rates. And we all know that our operating model is very efficient in driving, and our operating team, is very efficient in driving that incremental revenue to the bottom line.

I think some of our margin gains that we would like to emphasize here as compared to the peer group, and I am looking and reading different all the earnings releases that have come out to date and looking at other folks' numbers, I am pretty pleased to see that our fourth-quarter operating margins expanded pretty significantly up 170 basis points to 43.6%. The increase is attributable not only to the acquired hotels where margins increased 220 basis points to 44.5%, again, a testament to Island Hospitality and their ability to immediately go in, I am talking within the first quarter after acquiring an asset, and make changes and really grow margin in hotels that we acquire.

But also, aside from acquiring hotels, the portfolio owned for greater than one year has strong margin growth in that those margins were up 100 basis points to 43.4%. And our flow through in those assets was roughly 80% and the operating leverage in those assets as we like to measure it is 2.1 times. So again I have to commend any of our operating folks that are listening to this call, and frankly I think our shareholders ought to be pretty pleased with that kind of flow through.

It just shows our commitment and our ability not only to underwrite deals and understand and identify immediately where the opportunities are and if there aren't any value-add opportunities whether it's margin or topline, most likely we won't make the acquisition. So with that, and identifying those opportunities and then executing on those opportunities, that's what you want to look for and therefore you've got to look at these metrics that I am talking about in order to tell the story.

We think we've got a unique hotel platform here at Chatham owning premium branded both extended-stay and select service hotels and employing our managers, as I said we think drives enhanced returns. And we think that is a unique benefit that accrues for the shareholders of Chatham.

As an emphasis, since our IPO we've increased our hotel EBITDA margins by approximately 31% in 2010 to now 38%, a pretty strong improvement of 700 basis points in the span of just three years. With strong topline revenue growth and continued margin expansion combined with a significant reduction in borrowing costs we have been able to significantly expand FFO, up 160% to $7.6 million and FFO per share rising 40% to $0.29, which came in at the upper end of our guidance range.

Since our IPO and including our 2014 guidance, FFO per share has grown approximately 25% which is quite strong. And with capacity on a balance sheet to make additional acquisitions through more leverage, the potential earnings growth above our guidance range is meaningful.

Before turning it over to Dennis I would like to touch on a few items of particular interest that are ongoing. The Innkeepers portfolio sale, the BlueMountain unsolicited offer and the proposed slate of three directors posed by HG Vora.

Most already know that along with Cerberus we decided to market the 51-hotel Innkeepers portfolio earlier this year. The marketing process really has just begun. At this point confidentially agreements are being executed, calls for offers are still out there and just as a reminder, we acquired that portfolio with Cerberus for just over $1 billion in late 2011 out of bankruptcy and sold and pruned 13 hotels from the original portfolio.

The portfolio is in very good shape and the deferred maintenance for the bankruptcy date have been addressed and the portfolio has performed exceptionally well since then as evidenced by distributions that have been made to the partners. So we expect the interest in the portfolio should be pretty high and Chatham's shareholders stand to benefit handsomely if there is a transaction from the monetization of our promote that we retained in that deal.

And on December 4, we received an unsolicited conditional proposal from BlueMountain Capital to acquire the Company for $21.50 per share. Ultimately, our Board of Trustees evaluated the proposal and publicly rejected the offer.

On December 12, 2013, HG Vora proposed a slate of three directors to run for nomination to the Board of Trustees at our next annual meeting. HG Vora has not withdrawn its slate at this time.

With that I will turn it over to Dennis. Dennis?

Thanks, Jeff. Good morning.

For the fourth quarter we reported a net loss of $0.1 million, or $0.01 per diluted share compared to a net loss of $2.4 million or $0.17 per diluted share in the 2012 fourth quarter. Acquisitions, reduced interest expense and margin growth contributed to the overall improvement year-over-year.

Third-quarter RevPAR was up 4.4% to $103.00 for the 25 hotels we own for the entire quarter compared to our prior earnings target of plus 2% to 3%. The generalized performance was really across our intolerant portfolio that led to the bead on the RevPAR side, and that Jeff alluded to, the DC hotel was beginning to ramp up a little bit more significantly as we moved through the quarter.

The RevPAR gain was attributable to about a 50-50 split in both occupancy and ADR gains, with occupancy up to 77% and ADR up to $139.00. 1 percentage point of RevPAR growth translates to approximately $0.2 million of revenue so despite the significant bead on the RevPAR side it doesn't meaningfully impact FFO for the quarter.

Super Storm Sandy impacted our portfolio RevPAR growth approximately 200 basis points in the quarter as our hotels in New Rochelle, New York, White Plains, New York and most significantly Holtsville, New York on Long Island gained business in the fourth quarter. The Holtsville Hotel alone, the impact from that hotel impacted RevPAR by about 150 basis points in the quarter. In the 2013 fourth-quarter RevPAR for Holtsville Residence Inn was down about 12%, all attributable to Sandy gains in the fourth quarter of 2012.

Our hotels, mostly extended-stay and select service hotels, run high occupancies due to their locations in markets that command high rates in occupancy. And the fact that basically the upscale extended-stay segment we believe is becoming the segment of choice for many travelers.

Even at the occupancy levels that we operated in 2013, we still see room for occupancy growth in 2014. The key is allowing therein is the fact that occupancy in our markets is primed to almost 75% and given that our hotels have a significant market share premium of 120%, an index of 120%, we should be able to drive rates higher while maintaining or raising our occupancy levels.

With respect to the Innkeepers joint venture RevPAR grew 2.7% for the quarter to $90 and an increase in ADR of 4.5% to $132 and a decline in occupancy to 72% as occupancy is impacted by renovations in some of our Seattle hotels. For the full year RevPAR grew 5.6% to $99.00.

Adjusted EBITDA for the Company rose 52% to $12.7 million for the quarter. In the quarter the joint ventures between both the Innkeepers joint venture and our Torrance joint venture, contributed approximately $2.2 million of adjusted EBITDA to our results compared to approximately $2.0 million in the 2012 fourth quarter.

The Savannah acquisition, which is not included in our original guidance, contributed $0.1 million at EBITDA in the quarter. We closed that hotel in the first week of December, and for FFO purposes was entirely offset by [interests soft] at $0.1 million attributable to the $40 million borrowed on our revolving credit facility to close the acquisition in early December.

Adjusted FFO jumped almost 160% to $7.6 million, up $4.7 million from the 2012 fourth quarter, and on a per-share basis FFO per share rose almost 40% to $0.29 compared to $0.21 in 2012. The joint venture contributed approximately $0.03 of FFO per share to the consolidated results basically flat to the 2012 fourth quarter.

Net debt was approximately $268 million at the end of the quarter comprised of debt of $272 million offset by approximately $4 million of available cash. At September 30, net debt was $105 million lower at $163 million. In the fourth quarter we basically used debt and available cash on our balance sheet to acquire the Residence Inn Seattle Bellevue Downtown for $72 million and the SpringHill Suites Savannah for $40 million.

At December 31, our leverage ratio calculated the net debt divided by our hotel investments at cost was 36% and our debt to EBITDA of 5.7 times was in line with the average for all lodging REITs. Our 2014 debt ratios are very healthy with the debt service coverage ratio of approximately 3.3 times after corporate G&A and after FF&E reserve our net debt to hotel EBITDA of approximately 4.6 times on a standalone basis and 5.4 times including our share of the joint ventures debt to EBITDA. Very healthy ratios moving forward into 2014.

As we have emphasized many times, we are comfortable operating at levels a little higher than our long term stated goals of 35% given our confidence in the lodging industry and the fact that borrowing rates are historically very attractive even today. During the fourth quarter we upsized our revolving line of credit from a maximum capacity of $115 million to $225 million while maintaining our very attractive credit spreads.

Our all-in borrowing costs were approximately 4.5% at December 31, and the weighted average rate on our fixed-rate debt was just under 5% at 4.99%. We will continue to utilize our balance sheet to fund our growth as opportunities arise.

During the fourth quarter we closed on an approximate $48 million loan on the Downtown Bellevue Residence Inn a rate of approximately 4.97% culminating again with the issued about $165 million of 10-year debt at an average rate of 4.7%. We believe we can make at least another $200 million in acquisitions and still be comfortable using our balance sheet to take advantage of those opportunities if they arise. And looking at fixed-rate loans, when we look at fixed-rate loans and be able to lock in rates on a yen-year basis, it certainly provides a stable flow of cash that allows us to either pay down debt, invest in additional assets or return cash to our shareholders by incremental dividends.

Spending a few minutes on guidance for the year for 2014, obviously the hospitality industry is forecast to continue to improve based on modest GDP of approximately 3%. The quality growth remaining fairly moderate at 1.2% and obviously resulting in a net increase in lodging demand.

Starwood and Marriott are forecasting RevPAR growth in a range of 4% to 7%. Smith Travel, PwC and PKF are all projecting RevPAR growth 5.3%, 6.6% and 6% respectively in 2014. Smith Travel and PKF have also put out 2015 RevPAR guidance of 4.7% and 7.5% respectively.

Our guidance assumes the renovation of the Residence Inn in White Plains, New York in the first quarter and the Hilton Garden Inn in the second quarter and we do not sell the Innkeepers joint venture. On a full-year basis the two joint ventures, that being the Innkeepers joint venture and the joint venture with Cerberus, where we own the single Residence Inn in Torrance, California, are expected to contribute approximately $10.6 million of EBITDA and $4.9 million of FFO, or $0.18 per share in 2014.

We are projecting RevPAR growth of 5% to 6% in 2014 to a range of $114 to $115 with ADR growth expected to comprise approximately 90% of that increase. The rebranding of the Residence Inn in downtown DC is aiding our entire 25-hotel portfolio by a little over 100 basis points on a full-year basis.

Our acquisitions continue to fuel our RevPAR growth with most of the acquisitions expected to see RevPAR growth anywhere from 7% to 10%. Soft markets [for CAD] in 2014 really are isolated to the Holtsville Hotel, which is again, has a tough comp due to Super Storm Sandy, as well as the Portland, Maine hotel, which we knew we were going to have a challenging 2014 due to the new supply, which is also expected to see RevPAR decline in 2014.

On a comparable same-store basis 2013 hotel quarter-by-quarter RevPAR was $97 in the first quarter, $115 in the second quarter, $121 in the third quarter and $103 in the fourth quarter. Total revenue is expected in the range of $159 million to $161 million, up approximately 28% over 2013. Other revenue is approximately 6% of total revenue for our portfolio, a little bit up as compared to our original 2013 portfolio due to the acquisitions, specifically the Hilton Garden Inn and the Courtyard, which had a higher F&B component to the revenue mix.

With increased rates comprising 90% of our room revenue growth, our operating platform and quality of assets enables us to drive margins higher. Accordingly we project hotel EBITDA margins to rise 200 to 270 basis points to a range of 39.8% to 40.5%, up from 37.8% in 2013.

On a same-store basis margins are expected to rise approximately 120 basis points on a flow of approximately 65% to 70% and operating leverage of 1.6 times. As we look back at the last cycle, our hotel EBITDA margins were in the mid-40%s and that was with a portfolio that had a lower absolute RevPAR level as compared to our existing portfolio.

So when you look at the Chatham 25-hotel portfolio, it should ultimately operate at higher margins, so we have plenty of room to grow there.

From a corporate perspective we anticipate corporate cash administrative expenses to be approximately $6.4 million, up slightly from $6.1 million in 2013. Corporate non-cash administrative expenses, which represents [geo-based] amortization for the Board and for the executives of Chatham is expected to be $2.4 million, up from $2.1 million in 2013, with the increase attributable to the incentive compensation awards granted to employees in January of this year.

Interest expense is projected to be approximately $12.8 million in 2014, up from $10.5 million in 2013. Our average volumes are up approximately $50 million over 2013, as we issued new debt to fund a portion of the $260 million of acquisitions in 2013. We are forecasting LIBOR growth approximately 30 basis points over the course of 2014.

And our projections do not include any other changes to our capital stack or equity offerings throughout the year. We forecast non-cash and net amortization of deferred financing fees to be $1.4 million, up from $1.2 million in 2013 due primarily to the new loans and the franchise fees that we paid on acquisitions. Income taxes are minimal for us but are projected to be $0.2 million, up from $0.1 million in 2013.

Capital expenditures for Chatham are expected to be $16 million in 2014, up slightly from $15.3 million spent in 2013 with, as I break it down, the CapEx is going to be comprised of $6.3 million related to the two renovations, about $1 million in what I would term non-disruptive [spit tip] spending on acquisitions that we made. $3.5 million to replace the parking garage at our San Antonio, Texas Homewood Suites.

About $1.5 million for the replacing of roofs and mechanical items outside of the buildings in our portfolio. $0.8 million for mattress replacements and $0.8 million for the replacing of corridor carpet at the initial six Homewood Suites Hotels.

The balance of the CapEx really just pertains to miscellaneous and emergency type items. From dispositions perspective we don't expect any from the Chatham owned portfolio in 2014 and when you roll it all up key operating metrics for us are expected to grow significantly in 2014.

Adjusted EBITDA is projected up 33% from $51 million to $68.5 million using the midpoint of our range. We expect the quarterly contribution of EBITDA to be approximately 19% in the first quarter, 29% in the second quarter, 31% in the third quarter, and 21% in the fourth quarter.

Adjusted FFO is expected to rise approximately 45% to $45.8 million at the midpoint of our range, from $31.7 million in 2013. The quarterly contribution of FFO per share is expected to be approximately 16% in the first quarter, 31% in the second, 34% in the third and 19% in the fourth.

Resultantly adjusted FFO per share is expected to jump 16% to $1.73 at the midpoint from $1.49 in 2013. We've stated since our IPO that we would continue to grow our dividends in tandem with our earnings. As a percentage of FFO per share we paid out approximately 60% in 2012 and 56% in 2013.

Our confidence in the overall health of the hotel industry remains very positive and our Board of Trustees will reevaluate the 2014 dividend for the second quarter. We know that dividends make up the primary component of REIT returns over time and our goal is to continue to build a successful company that produces strong cash flow that will provide such dividends to our shareholders.

Just touching briefly on the first quarter, RevPAR growth is projected to be 3% to 4%. During most of the quarter we'll be completing a 18-year renovation at the White Plains hotel and its RevPAR is projected down 31% in the first quarter. And additionally our Holtsville Hotel will still be going up against the tough Sandy comparisons and is projected to be down approximately 23% in the quarter.

Excluding both of those hotels, RevPAR growth would have been 6% to 7% and FFO per share would have been $.01 to $.02 higher. Through February 14 RevPAR for the 25 hotels is up approximately 7% for the basically first 45 days of the quarter. And from a margin perspective we are expecting margins to increase 50 to 100 basis points in the quarter.

Operator, at this time that concludes our remarks. So we'll open it up for questions.

Ladies and gentlemen we will now conduct a question-and-answer session. (Operator Instructions). Patrick Scholes, SunTrust.

Couple of questions here for you. You noted in here your target leverage ratio was at the year end 36%, I'm sorry not target your actual leverage ratio was 36%, where do you see your target at for that leverage ratio?

I'll let Dennis take a whack at that.

Listen, Patrick, for the time being given where we believe we can buy assets and where we can finance them, I think we can certainly see ourselves moving that from 36% to where we were before when we did the Innkeepers deal, which was kind of in the low 50% range. We were very comfortable at that level and if you look at where we would be on kind of a pro forma basis at those types of levels it would still provide very sufficient coverages and overall value, loan-to-value ratios at that type of level. So it allows us to, we believe, do some more acquisitions.

Okay. Makes sense.

And then a couple of questions on the joint venture that is for sale. First, you are the minority partner. Let's say an attractive offer came in to the majority partner, what legal rights do you have there, would you be allowed to refuse it, what sort of say do you have in that?

You know, I don't think we ought to get, you know, on this call or anytime too far into the legal document or whatever other than to say that we are a partner in the deal and I think that we will consider it together as the overall decision-making process goes, offers, sales, refinance, any of these kind of decisions that we have made in the past.

Okay. Just because I ask because I actually tried to research those documents.

I couldn't find anything. I don't know if you can point me to what date that would've come out as an SEC release?

Well, the JV agreement itself was filed with the 10-K, 2011 10-K.

Okay. I can go from there. Then, hypothetically, what would the ballpark proceeds be for -- be to you -- if Innkeepers was monetized and what hypothetically would you do with the proceeds?

You've got to pick a price.

Right, let's say $1.3 billion.

Well I think we have said, I'll turn it to Dennis, I think that altogether is around $80 million or $85 million, is that right, Dennis?

Yes. That's correct. It's around $80 million at $1.3 billion.

It includes both our promote and our capital.

Okay. And then lastly, is it fair to think that you would be a potentially an interested buyer in purchasing the JV either going back into it as a JV partner or possibly as full ownership?

Yes, you could do that two different ways. You could roll your promote. You could substantially obviously pick up your ownership interest in this thing with a new JV partner.

You could try to do it in other ways. We think that there is still legs left in the cycle and we still think that these assets exemplify in almost all respects, other than perhaps age, exactly what we've been buying in Chatham. So yes, we certainly are going to look at it and see how we can make some money for our shareholders.

Okay, so all options and possibilities are on the table in that regard it sounds like?

I think we need to.

Okay. Fair enough. I appreciate the color. Thanks.

Gaurav Mehta, Cantor Fitzgerald.

Couple of questions on your acquisition pipeline. So as you look into 2014 and compare back to 2013, can you comment on the volume that you have seen in the market and also on the pricing levels that you have seen?

I think the pricing levels really have not changed from 2013. Probably at the outset of the year there is a little bit less on the one-off basis, which is really what we have been specializing in, cherry picking assets, talking to individual owners.

But I would expect that will pick up a little bit as the year progresses. Of course there's a lot of large portfolios, select service portfolios on the market starting the year out, which did not exist in 2013.

Thank you, and one question on your 2014 guidance. I'm sorry I missed this, if I missed this, but did you talk about how much of RevPAR growth will be excluding the hotels in the renovations?

I think Dennis put in a bracket, right Dennis?

Yes, on the full-year basis the RevPAR excluding is going to be up about 100 basis points. For the first quarter alone it was a few hundred basis points, for the White Plains Hotel and for Holtsville. If you are talking purely just renovations for the White Plains hotel and the Hilton Garden Hotel, it is about 100 basis points, for the full year.

Okay, great. That's all I had.

(Operator Instructions). Nikhil Bhalla, FBR.

Just a question on the timeline for the asset sales. Any color you can provide us, Jeff, in terms of how long the process might take?

Will it extend to the end of the year? Do you think it could be a little bit sooner?

I don't think it will be ended the year. I would figure everybody would be burned out by then.

I would think that there is some typical normal call for offers and 30, 45 days later another call for offers filed, but all that stuff really hasn't started yet, as a mentioned. But I would suspect sometime around midway through the year somebody is going to know who's going to own this or not.

Got it. And typically the due diligence period after a contract signed is how long? Is it two to three months?

It varies. It could be anywhere from 30, 60 or 90 days in a portfolio this size.

Got it. That's all for me, thank you.

There are no further questions at this time.

Well, think to you all for listening. We appreciate the continued support and interest as we look forward, as I mentioned, to another strong year and hopefully some further strong appreciation in our share price. We still think we are undervalued.

We think the monetization of this promote interest should it occur will be a strong gainer for us together with the internal growth in our assets and possible other external growth primarily funded by debt. We think that what we are hearing and seeing are still very low interest rates as compared to, on a historic basis, as Dennis mentioned. So again we look forward to talking to everybody after this first quarter, thank you very much.

Ladies and gentlemen this concludes the conference call for today. Thank you for your participation. You may now disconnect your lines.