Host Hotels & Resorts Inc (HST) 2010 Q4 法說會逐字稿

Good day, and welcome to the Host Hotels & Resorts, Inc. Fourth quarter earnings conference call. Today's call is being recorded.For opening remarks and introduction I would like to turn the call over to the Executive Vice-President, Mr. Greg Larson. Please go ahead, sir.

Thank you. Welcome to the Host Hotels & Resorts fourth-quarter earnings call. Before we begin, I'd like to remind everyone that many of the comments made today are considered to be forward-looking statements under federal securities laws.

These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these forward-looking statements. Additionally, on today's call, we will discuss certain non-GAAP financial information, such as FFO, adjusted EBITDA and comparable hotel results. You can find this information, together with reconciliations to the most directly comparable GAAP information, in today's earnings press release, in our 8K filed with the SEC and on our website at hosthotels.com.

This morning, Ed Walter, our President and Chief Executive Officer will provide a brief overview of our fourth-quarter results and then we'll discuss the current operating environment as well as the company's outlook for 2011. Larry Harvey, our Chief Financial Officer, will then provide greater detail on our fourth-quarter results including regional and market performance. Following their remarks, we will be available to respond to your questions. And now, here's Ed.

Thanks, Greg. Good morning, everyone. Looking back to our and the industry's outlook on 2010 last February, it is hard not to be pleased with how this year played out. We were able to accomplish some exciting transactions during the year, and while the economy presented challenges, especially in the first half of the year, we were happy to see that the lodging recovery happened faster and stronger than we originally expected.

However, before I get into the detail of our 2010 operating results, I'd like to highlight several of our accomplishment for the year. We closed approximately $500 million in acquisitions by purchasing the W New York, Union Square; Westin Chicago River North; Le Meridien Picadilly in London and the JW Marriot Hotel, Rio de Janeiro, and announced acquisitions in New York, New Zealand and San Diego, totalling more than an incremental $1 billion. History has demonstrated that early cycle acquisitions tend to add the best value, and we are acting on that premise.

In addition to the investments I just noted, we also reached an agreement to develop seven hotels in three major cities in India, through our Asian joint venture.We also purchased the junior tranches with a par value of approximately $64 million of a mortgage loan secured by a 1900-room portfolio of hotels in Europe. The notes were purchased at a meaningful discount. The underlying assets are performing above expectations.

For the year we invested a total of $114 million in return on investment capital projects, including the development of a new 26,000-square foot ball room and outdoor venue space at the Westin Kierland Resort and Spa, new meeting pace at the Miami Biscayne Bay Marriott, and new restaurants at the Hyatt Maui, Harbor Beach Marriott, Westin LAX and Tysons Ritz-Carlton Hotel. We continue to find construction pricing attractive and expect these investments to yield returns substantially in excess of our cost to capital.

We also continue to focus on strengthening our balance sheet. On that front, the combination of over $400 million equity issuance to fund our investment program, the repayment of several debt instruments in preferred stock, and the successful placement of $500 million senior notes bearing interest at 6%. We reduced our average interest rate by 0.4% to 6.2%, and increased our coverage ratio by more than 15%.

Now let's review the results for the quarter and the year.Fourth quarter RevPAR for our comparable hotels increased 6.2%, driven by an increase in average room rate of 2.8% and an increase in occupancy of 2.2 percentage points. For the full year, comparable RevPAR increased 5.8% to $120 as a result of a 3.8 percentage point increase in occupancy, and a slight increase in average rates. Our average rate for the year for our comparable hotels was $171 per night. Our average occupancy was 70%.

Food and beverage revenues of our comparable hotels increased 4.8% for the quarter, primarily because banquet revenues increased over 7% as groups upgraded their catering spend. For the year, food and beverage revenues increased 4.5%. Comparable hotel adjusting operating profit margins increased 110 basis points for the fourth quarter, and 20 basis points for the year, resulting in adjusted EBIT of $286 million for the quarter and $824 million for the full year.

Our FFO per diluted share was $0.26 for the fourth quarter and $0.68 for the full year. FFO per diluted share was negatively impacted by $0.02 for the quarter and $0.06 for the year by debt extinguishment and acquisition costs associated with successful transactions. Since our guidance in October did not foresee these costs in the fourth quarter, adjusting for these items indicate that our FFO results exceeded the high end of our guidance.

Consistent with the trends we've been seeing all year, we continue to benefit from positive demand growth in the fourth quarter as our number of rooms sold increased by more than 3%. More importantly, for the second quarter in a row, we recorded an overall increase in average rates, driven by both the shift to higher-rated transient business segments and actual rate increases. Similar to what we experienced in the third quarter, our transient revenue growth of 6.3% was driven by a nearly 5% increase in transient rate as transient room nights, which now exceed 2007 levels, increased slightly more than 1%.

The improvement in ADR was driven by the premium and corporate segments, where rates increased by almost 7%. When combined with the demand increase of 6%, these segments saw a revenue increase of more than 13%. For the year, the premium and corporate segment saw a balanced combination of demand and rate growth leading to an 11% revenue improvement. Demand in our special corporate segment was significantly up for the year, leading to strong revenue growth of 27%.

Reflecting our operators' efforts to shift business out of lower rated segments, our discount room nights declined by more than 3% and revenues in this category fell slightly. This trend accelerated in the second half of the year as our operating environment improved. While our full year transient demand matches 2007 levels, ADR is still more than 16% below the prior peak, indicating a meaningful opportunity for additional rate growth in 2011 and beyond.

Turning to our group business, consistent with our comments last quarter, our group room nights were up more than 6%, as increases in our corporate and other segments more than offset a slight decline in association business. Average rate was slightly better than the fourth quarter of last year, resulting in an overall group revenue increase of 6.2%. We experienced a demand increase of over 11% in our higher rated corporate group business and a rates increase of more than 3%. Recovery in the luxury segment continues to gain moment as our luxury group room nights were up more than 15%. For the full year, our group bookings were up almost 7%, and rate was down 3%, although ADR did increase in the second half of the year. Compared to 2007, our group revenues are still down by 19%, and our corporate room nights are down by one third. We would expect to close both of these gaps over the next few years.

Looking at 2011, we would expect that revenue growth will be driven by a combination of both occupancy and rate increases. It is worth noting that despite the nearly 4-point increase in occupancy, we experienced this had year, we are still 4 points below our prior stabilized occupancy levels of 74%, so we expect to see increases in occupancy in both our group and transient segments. However, reflecting the trends we have enjoyed over the last six months, we would expect to see a meaningful portion of our RevPAR growth would be generated from ADR growth, due to both actual pricing increases and segment shifts.

Our booking activity in the fourth quarter was exceptionally strong, and we start the year in a far better position than 2010, as group bookings for the first three quarters of the year are up by more than 3.5%, versus roughly a decline of 6% last year. More importantly, our average rate for existing group bookings exceeds 2010 in every quarter. We expect we will see booking pace improve as the year progresses and as activity in the higher rated categories will increase.

On the investment front, as we announced this morning, we signed an agreement to purchase the 1625-room Manchester Grand Hyatt San Diego Hotel for $570 million. The hotel has a premier water-front location and is close to the city's central business district and convention center. The hotel has a premier meeting platform and in the market, providing approximately 125,000 square feet of meeting space, including a 34,000 square foot finished exhibit hall and a 30,000 square foot ball room. With its location adjacent to our San Diego Marriott Marina Hotel, we expect to see revenues and expense synergies from both of these hotels.

In January, we announced that we signed an agreement to purchase the 775-room New York Helmsley Hotel for approximately $313 million. The property will be managed by Starwood initially as an unbranded hotel. As part of a comprehensive renovation costing approximately $65 million, the guest rooms and guest baths will be completely renovated, a few rooms will be added to the inventory, and the meeting space will be upgraded. When the renovations are complete in early to mid 2012, the property will be branded as the Westin. This will only be the second Westin in Manhattan, and we believe the hotel will benefit greatly from both the brand change and from becoming part of the Starwood system.

While the hotel will benefit from Starwood's management and reservation system as an unbranded hotel, the EBIT it generated for this hotel in 2011, prior to its conversion, will likely be in the $5 million to $6 million range, as results will be negatively impacted during the renovation process. Once the renovations are complete and the hotel is converted to the Westin brand, we expect to see EBIT results in the low to mid $30 million range for the first full year of operations as a branded hotel.

This past quarter we also finalized our purchase agreement for hotels in New Zealand with over 1,200 rooms at a price of $145 million. The hotels are located in the country's main commercial and tourist centers, and will be operated by Accor Hotels, one of the largest operators in New Zealand. This is our first acquisition in New Zealand, and we expect the transaction to close in the very near term.

As you know, attractive acquisition opportunities increased in the second half of 2010, and we expect 2011 will continue to be an active environment. Given the strength of our balance sheet, we believe we are in a great position to take advantage of investment opportunities as they arrive. In the US and Europe, our goal is to acquire assets at a discount to replacement cost while achieving investment yields in excess of our cost to capital. We have a strong pipeline of acquisition opportunities and expect that we will purchase additional hotels during 2011. With that being said, recognizing the unpredictability of the timing of completing acquisitions, our guidance today does not assume any additional acquisitions beyond those we announced.

In 2011 we expect to spend $290 million to $310 million on ROI and repositioning investments. Some of this year's projects are a continuation of work started in 2010, including the San Diego Marriott Hotel and Marina where we are renovating all the guest rooms, the pool and fitness center, and developing an expanded new meeting space and exhibit hall platform.

At the Sheraton New York Hotel and Towers, we are continuing construction efforts that we started in December, which include major and mechanical and HVAC upgrades, as well as a comprehensive room renovation. This project will be done in two stages with a final completion date of mid-2012.

We are also completely renovating and repositioning three hotels. The Chicago O'Hare Marriott, the Sheraton Indianapolis and the Atlanta Perimeter Marriott. In each instance, we are completing comprehensive room renovations, materially reconstructing the lobby and food and beverage outlets, and reducing the room count with the goal of generating significant improvement in operating results. In the case of the Sheraton we expect to convert a tower of the rooms to rental apartment, and in the case of the Atlanta Perimeter Marriott, the room count reduction is necessitated by a condemnation proceeding which generated more than $11 million, and which will be deployed to fund a material part of the renovation.

In terms of maintenance capital expenditures, we spend $195 million in 2010 and expect to spend $260 million to $280 million in 2011. 2011 plan includes room renovations at the New York Marriott Marquis, the Philadelphia Marriott and the JW Desert Springs Marriott, as well as meeting space renovations at the Hyatt Washington, Sheraton Boston, New York Marquis and New Orleans Marriott.

While the disposition market has improved, we are seeing challenges for buyers obtaining debt, especially in the secondary and tertiary market as lenders are more apt to focus on lending in primary markets. While we are actively reviewing our portfolio for likely sale candidates, we expect the volume of our asset sales to be light in 2011. However, we will be monitoring the pricing of transactions in the market and hope to accelerate our dispositions later in the year. At this point, our guidance does not assume any dispositions.

Now let me elaborate on our outlook for 2011. In general, economic indicators present a favorable picture for 2011, especially compared to where we were a year ago. Business investment, a key indicator for our industry, is expected to increase 9% this year and GDP growth is expected to be over 3% both in 2011 and 2012. These factors, combined with some improvement in employment, bode well for lodging demand. As managers more actively focus on increasing rate and shifting business mix away from the lower rated segments to higher rated group and transient demand, RevPAR growth will be increasingly driven by rate growth, which better drops to the bottom line.

With all this in mind, we are expecting comparable hotel RevPAR to increase 6% to 8% for the year, with adjusted margins increasing to 100 to 140 basis points. This operating forecast, combined with our recent acquisition activity, will result in adjusted EBIT of $1 billion to $1.035 billion and FFO per share of $0.87 to $0.92. Turning to our dividends, we are forecasting our first quarter common dividend to be $0.02 per share. As our operations continue to improve, we expect to modestly increase the common dividend through the year, with the expectation of a full year common dividend of $0.10 to $0.15 per share.

I'm pleased to say that the lodging recovery is continuing to progress well. We remain in the early stages at this point and believe this positive cycle will continue to main momentum. The business travelers returning in greater numbers and supply over last coupe of years-- and supply over the next couple of years will be at a historically low level, and well below demand growth. The combination of strong demand and low supply should lead to a solid and sustained recovery.

Thank you, and now let me turn the call every to Larry Harvey, our Chief Financial Officer, who will discuss our operating and financial performance in more detail.

Thank you, Ed. Let me start by giving you some detail on our comparable RevPAR results.

Our top-performing market for the fourth quarter was Atlanta, with a RevPAR increase of 22.5%. Strong city-wide and transient business contributed to an occupancy increase of over 9 percentage points. The incremental demand and related compression led to a 5% improvement in ADR. We expect RevPAR in Atlanta to underperform our portfolio in 2011 even with an overall improvement in group business and special corporate pricing, as well as a positive mix shift. As expected, our San Diego hotels had a great quarter with a RevPAR increase of 16.8%, driven by an occupancy improvement of over 9 percentage points as both transient and group demand improved significantly and ADR increased slightly. For 2011 we expect our San Diego hotels to outperform the portfolio, due to overall improvements in transient and group demand and ADR growth.

The Chicago market continued to perform well, with a 12.1% improvement in RevPAR. Although city-wide events were flat to last year, the timing of the events in 2010, and good business transient demand, facilitated the strong RevPAR growth. Occupancy increased over 4 percentage points and ADR improved over 5% as our hotels benefited from a positive mix in our transient mix of business. We expect the Chicago market to outperform the portfolio in 2011, due to strong group and transient demand, as well as a further positive shift in mix, which will increase ADR.

Our San Francisco hotels had another excellent quarter with a RevPAR increase of 11.5%, as ADR increased over 7% and occupancy increased nearly 3 percentage points. Both group and transient demand were strong, allowing the hotels to yield rate. We expect the San Francisco market to perform inline with our portfolio in 2011, due to improvements in city-wide and corporate group demand, and ADR gains due to the related compression.

Our San Antonio hotels had a very good quarter with RevPAR increasing 9.8% as rate increased over 5% and occupancy improved 2.5 percentage points. The out-performance was due to strong city-wide and corporate group demands. We were expecting even better performance, but the San Antonio Marriott River Center was undergoing a rooms renovation that was more disruptive than anticipated. We expect our San Antonio hotels to outperform the portfolio in 2011 because of improvements in overall demand.

RevPAR at our Hawaiian hotels increased 5.2%, which is well below our expectations as the renovations at two of our hotels affected operating results, particularly at the Fairmont Kea Lani. Occupancy improved more than 9 percentage points; however, ADR fell 9%. The bulk of the demand increase was in discount transient and group business. Airline capacity continues to increase and we expect Hawaii to be one of our top performing markets in 2011, due to improvements in both group and transient demand, which should also drive some pricing power.

RevPAR for our Boston hotels only increased 2.3% due to a significant decrease in city-wide demand, and the renovations of meeting space at the Sheraton Boston. Occupancy declined nearly 2 percentage points while rate increased almost 5%. Our Boston hotels are expected to underperform the portfolio in 2011 due to less city-wide demand.

Our Phoenix hotels have struggled since 2007. Fourth quarter RevPAR increased only slightly due to the construction of a new ballroom at the Westin Kierland, which was completed in early January. However, we expect our Phoenix hotels to turn the corner in 2011 and outperform our portfolio. Both group and transient demand are expected to increase significantly.

Lastly, our two worst markets for the fourth quarter were Philadelphia and Orlando. Philadelphia's RevPAR fell 7.2%, primarily due to a decrease in city-wide events and the disruption from the renovation of the ballroom and rooms at the Philadelphia Downtown Marriott. City-wide demand for 2011 is strong and improvement in ADR is expected, but the renovation will limit available capacity, and as a result, the hotel will underperform the portfolio.

RevPAR for the Orlando world center Marriott fell 2.1% in the quarter primarily due to displacement from a rooms renovation and a difficult comparison to the fourth quarter of 2009, when the hotel significantly outperformed the portfolio due to higher levels of group demand. That hotel is expected to slightly underperform the portfolio in 2011.

For the year, our top three markets were Boston, with a RevPAR increase of 11.6%, New Orleans with a RevPAR improvement of 11.2%, and New York with a RevPAR increase of 9.5%. The Phoenix market where RevPAR declined 3.9%, and the Tampa market with a decrease of 1.6%, were our weakest performers.

For our European joint venture, RevPAR calculated in constant Euros increased 13.1% for the quarter as eight of the 11 hotels had double-digit RevPAR increases. For the year, RevPAR calculated in constant Euros increased 8.5%. We expect the European joint venture portfolio will have RevPAR growth of 5% to 7% for 2011.

For the quarter, adjusted operating profit margins for our comparable hotels increased 110 basis points, which were reduced by 50 basis points for incremental property level bonus expense. Rooms flow-through was strong for the quarter at nearly 76% due to benefits from the ADR increase and productivity improvements, which resulted a relatively low 1.2% increase in wages and benefits on a per-occupied-room basis. Food and beverage flow through was excellent at over 53% and much better than expected due to an increase in higher margin banquet and audio-visual revenues, good cost control and improvements in productivity.

Unallocated costs increased 4.7% for the quarter. This increase was primarily driven by expenses that is are variable with revenues, including credit card commissions, reward programs and cluster and shared service allocations. Utility costs increased only 1.4% and property taxes declined 8.4%.

Looking forward to 2011, we expect a RevPAR increase to be driven more by rate growth and occupancy. The additional rate growth should lead to strong rooms flow through, even with growth in wage and benefit cost above inflation. We expect some increase in group demand, as well as higher quality groups, which should to drive growth in banquet and audio visual revenues, and solid F&B flow through.

We expect unallocated costs to increase more than inflation, particularly for utilities, which we expect higher growth to an increase in rates and volume and as well in sales and marketing costs. We also expect property taxes to rise in excess of inflation. As a result, we expect comparable hotel adjusted operating profit margins to increase 100 basis points at the low end of the RevPAR range and increase 140 basis points at the high end of the range.

During the quarter we raised approximately $248 million under our continuous equity operating program to fund future acquisitions. We also issued $500 million of senior notes that bear interest at 6% and have a 10-year maturity. These notes have the lowest coupon of any bond we have ever issued. We used some of the bond proceeds to redeem $250 million of our 7.125% Series K senior notes.

During the quarter, we repaid the $115 million mortgage on the W Union Square, the $71 million mortgage on the JW Marriott Desert Springs, and $54 million of the $300 million mortgage on the Orlando World Center Marriott, which allowed us to extend the maturity date by two years to July of 2013.

Of our 113 consolidated hotels, 102 of them do not have mortgage debt. At this point, we have only one maturity in 2011, the $129 million mortgage loan on our four Canadian hotels. Our credit facility matures in September of this year, but we have the right to extend the facility to September of 2012, as long as our leverage level is below 6.75 times, a standard we are more than comfortable that we will achieve. We ended the quarter with over $1.1 billion in cash and cash equivalents. After closing on all of the acquisitions that Ed detailed, we will have in excess of $200 million in cash and $542 million of available capacity in our credit facility.

I wanted to mention two more items prior to starting the question-and-answer session. The first is the change to our income taxes for 2011. Due to the significance of the downturn, our taxable rate subsidiary incurred a substantial book loss, primarily due to negative lease leakage which resulted in our recording a $32 million tax benefit in 2010. The anticipated significant improvement in operating results should lead to a substantial improvement in lease leakage and, as a result, we are projecting a tax provision for 2011. This translates until roughly a $0.04 per share reduction in FFO for 2011.

Finally, starting in 2011 we are modifying our definition of adjusted EBITDA to no longer deduct acquisition costs for successful transactions. Prior to January 1, 2009, the accounting rules allowed companies to capitalize such costs and depreciate them over the life of the asset. Under the current accounting rules, these costs must be expensed as incurred. We believe that these costs should not be deducted from adjusted EBITDA because it would not reflect the ongoing performance of our portfolio. For 2010, we incurred $10 million of successful acquisition costs that decreased our adjusted EBITDA to arrive at the $824 million number.

This completes our prepared remarks. We are now interested in answering any questions you may have.

Our first question today will come from Felicia Hendrix with Barclay's Capital.

Hi, good morning guys.

Good morning.

On your guidance, I'm just wondering on your RevPAR guidance, you talked in the prepared remarks about renovations and repositionings having an effect on the results in 2010. I'm wondering if your RevPAR guidance assumes future impacts from renovations and repositioning, and if it does, is there any way to quantify for us how that is affecting RevPAR?

Let me -- I guess let's start by answering the question whether our guidance has taken into account the renovation work that we have going on this year, and the short answer is we have. We certainly think we've -- it's always tricky to try to calculate exactly what the disruption from these sorts of projects is going to be. Frankly, we were a little surprised by the level of disruption that we experienced in the fourth quarter and feel like that probably cut our RevPAR growth in Q4 of 2010 by 1 point to 1.5 points.As we think more about it more though in the context of 2011, we've done the best job that we could to anticipate what the impact would be. I think that some of the spend asking a little more concentrated this year in some of our larger hotels, but we hopefully have it occurring during times of the year where it will be less impactful.

Okay. So, assumption is less than that 1 point, 1.5 point you saw in 2010?

I guess it may end up being as impactful in terms of it being 1 point worth impact in 2011, but we recognized that in the guidance we've given.

Great. And then just, there was a -- there's always a difference between your comparable and your Company-wide RevPAR growth for obvious reasons, but the delta this quarter was a lot bigger than it has been in the past and I'm assuming it has to do with having new properties added in 2010, are performing relatively to your portfolio. I was just wondering, if that's the case, if you could touch on that and perhaps give us some idea of what properties are mainly driving that difference?

I think the answer is that the properties that we bought this year, the four properties that we have acquired, are generally operating at higher RevPAR levels than the overall portfolio, so, that's the reason why you're seeing the difference in the numbers. They're just propelling our average RevPAR for the portfolio higher.

Okay. So it's all four of them. I didn't know if it was a few.

Yes, I think all four of them are contributing to that.

That's great. My final question is on the San Diego Hyatt, once the acquisition was completed, I was wondering if you could quantify for us your CapEx plan there?

I would say we're still in the process of developing that. One of the -- the original tower in the hotel, which was built in 1992, is in need of a significant renovation. I think what we're looking at doing there is doing both the rooms and probably renovating the bathrooms.

The other tower, which was completed in 2003, is not surprisingly in much better physical condition, so I don't think we need to do anywhere near as comprehensive a renovation in that particular tower. So, yes, we will -- we would expect, and our analysis on the deal assumes that we'll have to spend some amounts incremental to the amount that would be in the FF&E reserve, but it's certainly nowhere near like the type of plan that we have for the Helmsley, where we really intend to reinvent the hotel as part of the conversion to the Westin brand.

Okay. Very helpful. Thank you so much.

Thank you.

Our next question will come from Shaun Kelley with Bank of America.

Hi, good morning, guys. Just wanted to, I guess maybe sticking with the Manchester for a second, you give us some -- a very helpful sense on maybe the underwriting for the Helmsley. Could you give us like a similar sense for the Manchester, maybe either what it did in peak or what you think that could contribute going forward?

I guess what I would probably say as it relates to the Hyatt, is that generally we've been able to complete that acquisition at this pricing sort of in line with the deals that we did in 2010, which is right around a 14 EBITDA multiple, based on 2010 numbers. This hotel, like many others, did fall meaningfully from its peak operating history in 2006 and 2007. I think that we're probably -- we're below a 10 multiple, if you go back to peak EBITDA, in terms of our acquisition price.

That's helpful. And also on the Helmsley since you didn't give that perspective, Ed, just kind of thoughts on where that is, like how far off peak that hotel is?

Shaun, to be honest, as it relates to the Helmsley, it's just not a meaningful comparison because the hotel during the last cycle was really not run as effectively as it had been in the past, so I think that's part of the reason why we threw out the number that we threw out in my comments, is that it really -- to get a better indication of what we think is the potential of the hotel, you really do need to look forward under a new management and under a more powerful brand, as opposed to backwards under the Helmsley brand.

Okay. That makes sense. And then, I guess the last thing is just on the balance sheet, you guys are -- I think you've pretty much got like $100 million or so left on the ATM program at this point but you issued a lot during the quarter. You also mentioned that part of the funding for the Manchester would be, I think, through equity. So is the intention I guess to renew the ATM program? Is that going to continue to be a source of funding for you guys? And, then, was the equity issued in the fourth quarter what you're going to use to fund the Manchester, or is there kind of incremental, kind of incremental equity that you plan on issuing to finish that deal? And that's it for me.

I guess what I would say, first off, I don't think we're going to start a precedent right now of necessarily detailing our entire course of the uses for the Company on an earnings call. But, I guess Larry made some comments relative to what our cash position would be after acquiring the three different properties, and so after we acquire the assets in New Zealand, the Helmsley and the San Diego Hyatt, we will still have more than $200 million left of the cash that we started the quarter with, as well as we will have pretty full access to our credit facility.

As we look down the road, I think you should assume that we're going to be consistent with what we've said in the past, which is that we're going to continue to look to fund a significant portion of our acquisitions through the issuance of equity. I'm not going to have us get pinned down necessarily in how we're going to go about doing that, but we have found that the continuous equity offering plan has been a very cost-efficient way to do that. The actual amount of equity that we might issue and the actual amount of debt we will issue will obviously be dependent on just how active our pipeline becomes.

That's helpful. Thanks.

We'll now hear from Ryan Meliker with Morgan Stanley.

Good morning, guys. Just a couple quick questions regarding some of the acquisitions. The Manchester Grand obviously was -- the property that's been in the press and was rumored to be acquired by some other hotel companies; one of them was a fellow REIT.I was just wondering if you could give some color on how that process went through? It seems like we're six months past where it seems like that property was ready to be acquired, if anything changed in terms of your underwriting or your views on the property, et cetera.Also on the Westin and Helmsley, if you can give some color on whether you're getting any key money from Starwood, that might be helpful, with regards to that renovation.

And, then the New Zealand portfolio, is that a portfolio that's likely to go into your JV GIC or do you plan to keep it all to yourselves?And then lastly, at Alice, Ed talked about upscale hotels being a larger component of acquisitions going forward. Obviously everything to date that you've announced has really been comparable service with the exception of some of the things outside the US. Do you think the upscale properties that you're talking about potentially acquiring are going to be domestic or international, or a combination of the two? And are there any portfolios that you're looking at currently?Thanks.

Okay, I have to admit, some of -- you weren't coming through as clearly as I would have liked so I'm not certain I caught all of that. I guess the first thing as it relates to San Diego Hyatt, I think as it relates to the color around the transaction there, we had been -- we have probably looked at this hotel off and on for probably the last three or four years. The price that we've ended up acquiring it for is the lowest price that I think we've ever evaluated the hotel, certainly the lowest price that we've seen in the last several years. Certainly there were others that had made progress on a transaction, but ultimately did not close.

I think that there was a pretty active -- despite the size of the transaction, I think it was intriguing that there were a fair amount of people that were interested in buying the hotel because I think they, like us, recognized it was a great asset in a great location in a great market. We see San Diego as one of the great markets of the country going forward. I think they also recognized that at this price you're probably buying it at more than a 20% discount to what it would cost to replace the asset. I think there we were ultimately very happy with the acquisition that we were able to complete.

I will tell you that as you watch what happened with the hotel over the course of the year, we did find that while the San Diego market, like several others, had a little bit of a blip in the summer, especially the beginning part of the summer, and perhaps at one point it had fallen short of some of its initial projections and initial hopes, the reality is that the asset rallied strongly over the course of the fourth quarter, and so we were pleasantly surprised to see the numbers for the full year coming in better than what we had originally looked at when we first started to look at the asset.

The only other thing that I could hear was the domestic versus international.

I think you had -- as it relates to our focus on types of assets, I think generally the way we look at the world, is that we're probably looking primarily at upper upscale assets and luxury assets in Europe and in the US. We're also interested in upper upscale assets in some of the Asian markets, but we see a greater opportunity in general to look at more mid-market products in the broad Asia Pacific region, which is part of the -- one of the reasons why you're seeing our New Zealand acquisition,be primarily focused in on those mid-scale -- upscale and midscale price points.

In general, we feel that the bulk of the demand growth that we're going to see throughout Asia will probably be more in those price points than necessarily in the higher price points, and as a result, that's one of the reasons why the New Zealand acquisition is targeted in the way that it is. I think you did ask as it relates to the New Zealand acquisition whether or not that was going to be in the JV or whether that was going to be a consolidated asset and this will be a consolidated asset for us. This is not going into the JV.

Great. That's helpful. I think the only other thing, and can you hear me now? Is that better?

That's better.

Great. The only other thing that I was wondering about is if, I don't know if you can disclose it or not, if you can give any indication whether Starwood gave you any key money for the renovation to the Westin at the Helmsley, and, if so, how much?

They have given us some but we're currently not disclosing the amount of that key money.

Thanks a lot. I appreciate the color.

Our next question will come from Joe Greff with JPMorgan.

Good morning, guys. Ed, has your expectation for property level expenses changed over the last three months?And, my second question, which is hopefully fairly easy, within your 2011 adjusted EBITDA guidance, how much do you have related to the acquisitions that you've announced and completed? Thanks.

I don't think we've really seen any expense trends over the last, 30 -- 90 to 120 days that have led us to think differently about expenses than we have in the past. I think Larry gave you a sense in his prepared comments, but some of the areas where we thought expenses might trend above inflation -- our properties, the big focus this year on the whole expense side, is going to be try to minimize expense growth as we work our way through the recovery, and the bulk of that is going to happen by trying to very carefully manage head count.

We want to make certain that when people have started to take on multiple functions or when operators cut the number of managers that they might have had at individual hotels, that we only restore at the level that's required to support additional volume, meaning additional customers and additional room nights, as opposed to just because things just got better. I think, generally, we would be -- we generally see expenses as being in line.

There are some places where we're going to run higher than inflation, but overall, I think we've -- I think our margin guidance, frankly, suggests that we feel like this should be -- we should suffer some of the problems that we had in 2010 where you saw bonus expense coming back in and things like that, where you end up with less production or less benefit out of revenue growth then, because expenses are rising faster than they normally would. And then as it relates to the amount of EBITDA from those other assets, Greg or Larry, do you have a number for that we can give him, or can we get back to him later?

We can talk about that. I mean, Ed, as you mentioned, Helmsley, you talk about $35 million of EBITDA, once it becomes a Westin. This year, it's more like $5 million, so we have $5 million in our guidance. Hyatt, we are talking about a number that's around $30 million, and then there's some EBITDA from New Zealand, Larry, in that number as well.

Yes. That's roughly $18 million.

Thank you.

We'll now hear from Bill Crow with Raymond James Financial.

Good morning, guys. Two or three questions for me. On the CapEx front, you may have given the number, but what is maintenance CapEx forecast at for 2011? And, going along with that, what sort of pressure are you starting to feel, if any, from the brands to renovate assets that may have been put on the sideline over the past couple of years? That's the first question.

Bill, I think on maintenance CapEx we're looking at that being about $260 million to $280 million for this year. And, I would say that, as it relates to pressure from the brand, it is logical that, as we work our way back through the recovery, that the brands will be tougher about maintaining brand standards at hotels. I don't foresee that to be a huge issue for us, simply because we've continued to maintain our hotels throughout the entire downcycle.

And, while there will be occasional places where we find we need to invest more, perhaps because we've postponed some investments over the last couple of years, I don't see that as a huge concern for us.

All right. And, then from an acquisition perspective, perspectively are you comfortable with $200 million of cash on the balance sheet at this point? You had -- throughout this, kind of, downcycle and ultimate recovery, and when we go back to 2001, you had always padded with a little more cash. Are you okay with the level of cash now after these transactions?

Bill, I think the short answer to that question is yes. Liquidity -- part of the reason why we maintained higher amounts of cash before was, in part, because liquidity had become so uncertain in our industry that you just couldn't have the confidence that you could access the debt markets to the extent that you needed to raise capital. And, frankly, at some points in time over the course of the downturn, I had some concerns about whether or not -- you just didn't know when it was going to stop falling, and so you couldn't necessarily rely on your credit facility without running the risk of potentially seeing a covenant default.

Our world right now is a lot different. Access to capital is quite good, especially for a Company like Host; senior notes market is certainly an easy source of capital for us as we look to access additional debt capital; and our credit facility, as Larry detailed, has another -- we should easily qualify for the extension to take us into 2012, and I think our sense is that while pricing might turn out to be a bit more expensive than the deal we negotiated back in '06 or '07, which, where we had inside 100 basis points in terms of our cost to funds on the credit facility, we'll still be able to negotiate a new credit facility going forward.

So when you take all of that into play and sort of look at the general significant improvement in the liquidity situation, for us to have $200 million of capital available or $200 million of cash available, is more than enough.

Okay. And, then, finally for me, I think overnight InterContinental announced their intent to sell the Barclays in midtown. Is that sort of asset -- it seems very similar to the opportunity with the Helmsley. Is that something you would take a look at?

Certainly we like New York as a market, and so I could see that that would be an asset we would at least spend some time on. I would tell you in general that with the acquisitions that we've completed in New York at this point in time, we feel fairly good about our overall level of representation in that market, and certainly as it relates to the broad submarket that includes Barclays, we have -- we now have the Helmsley and we have the W on Lexington, so I would say that it's something we would take a look at, but not a huge priority.

Thank you, guys.

Our next question comes from Jeffrey Donnelly with Wells Fargo.

Good morning, guys. A follow-up to the earlier question on key money, with development still on the sidelines, and the brands seem more willing and in some cases desperate to find unit growth, I'm curious, Ed, what changes have you seen in their willingness to provide those incentives, and in what form do they typically prefer to give them? Is it key money or will they relax other terms and conditions?

Yes, Jeff, it depends on the individual operator. I think it -- the discussion points on these sorts of issues start with key money, but they also go to contract terms. That can either be the structure of the fees, in some cases you may look for a ramp-up of fees. It obviously can go to where the priority would be above what you might be paying instead of management fees.

And, then the other issue is the term of the agreement and the ability to terminate that agreement in connection with the sale or convert it to a franchise. So, there are a variety of different ways to address the value of the management contract, and the value of the management contribution, with a deal. I will tell that you while we're always interested in key money, we probably put a greater focus on attractive contract terms because we would -- we tend to view that as a better contributor to overall value in the long run.

That's helpful. And, then on the Hyatt, if we could circle back to that, someone else mentioned that other REITS had looked into that transaction as well, and we heard it was fairly complicated; there's a ground lease in the port district and potentially Doug Manchester's involvement. Are you able to share with us any terms of the ground lease or details of the ownership structure that might make it a little less straightforward of a transaction?

I think that as that deal worked its ways through the various twists and turns in the last 12 months, I'm sure that there were a variety of different structures that were being considered by the Manchester Group and by others that they might have been negotiating with. Ours is relatively straightforward from the standpoint that we bought the asset, and we own 100% of the asset. There is no residual interest in the property or in the transaction for Manchester.

The structure of our consideration does include some level, relatively small, level of common and preferred operating partnership units, which are part of just some tax structuring that the Manchester group is doing, but it doesn't involve any continued ownership in the asset. So, it ultimately in our case it came out as a fairly straightforward transaction.

That's helpful.I'm curious, now that you own basically every major convention hotel in San Diego except for the new Hilton, I recognize there are different flags. Are there any efficiencies that you guys can gain by running these hotels that are almost nearly adjoining?

We think that there are some opportunities to find efficiencies in owning the two hotels -- owning the Hyatt and the Marriott next to each other. I think some of it -- there are probably some areas where, by soliciting vendors and presenting that opportunity to very efficiently serve two large hotels, I mean, when you put these two hotels together, we're looking at 3,000 rooms, there should be some abilities to attract some better pricing. I think that in some ways where we see the bigger opportunity will come on the revenue side.

Not dissimilar from what we've been able to work out in Boston, where we own both the Marriott and the Sheraton at the Hynes Center, that sort of bracket the Hynes Center, we have found that once you have common ownership, that while they're still going to run themselves, they're still going to market themselves independently because they're run by different operators, the reality is that putting an umbrella of common ownership over two large great hotels like this will allow them to better coordinate some of their activities.

So, I think what we'll get out of that is both -- we'll have that ability to compete, again, with 3,000 rooms, we can compete with anybody, including Vegas, so we'll have that ability to compete for business in maybe a more direct manner than we had in the past. And I also think what you just get is a higher level of cooperation between the hotels as they're dealing with an opportunity with a group on either side, there's probably a little bit more of a willingness to share that, recognizing that ultimately it's a common owner that's going to benefit from it.

I think it was a -- it was one of the unique opportunities that this asset presented to us because, as I said before, we really like the market, and we think we've significantly strengthened our position in that market.

Just one last question, then. How do you think about some of the other domestic asset clusters that you have? I mean, you own some fairly iconic assets in Orlando and Atlanta and even San Antonio, maybe less cluster there, but they don't have the same high barrier qualities as San Diego, and maybe you don't need to own as many of those assets. Do you think that over the next few years you might look to pair assets in those markets, or even nearer term, given how frothy it is for -- the demand is for high quality assets right now?

Certainly I think some of those markets that you just referenced are markets where we are -- we do not feel that we necessarily need to continue to own those assets forever. We talked a bit about the fact that we're tending to focus our portfolio a bit more on the Coast than in Chicago. Atlanta is a market that we have had a significant representation in for a number of years, and we've generally been trying to reduce our representation there. I probably would put San Antonio in that same category.

So, the short answer is I think you're right. We would -- we're not in a rush to sell those hotels. What we would be looking to do is to try to time it in a way where we thought we were getting appropriate price and appropriate value, for, in each case, assets that are in great physical condition and are well known in their marketplace.

Thank you.

Ladies and gentlemen, that concludes today's question-and-answer session. I'd now like to turn the call over to Mr. Walter for any closing comments.

Thank you, everybody. We appreciate you having on the call to discuss the end of last year and the beginning of 2011. We are optimistic about what this year holds for us. We look forward to speaking with you in our first quarter call at the end of April to update you on how the year is going. Thank you, everybody.

That does conclude today's conference call. We thank you for your participation.