Service Properties Trust (SVC) 2010 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Hospitality Properties Trust Third Quarter 2010 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions) I would now like to turn the conference over to Carlynn Finn, Manager of Investor Relations. Please go ahead.

Thank you Mary, and good afternoon. Joining me on today's call are John Murray, President, and Mark Kleifges, Chief Financial Officer. John and Mark will make a short presentation, which will be followed by a question-and-answer session. I would also note that the recording and retransmission of today's conference call is strictly prohibited without the prior written consent of HPT.

Before we begin today's call, I would like to read our Safe Harbor Statement. Today's call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Federal Securities Laws. These forward-looking statements are based on HPT's present beliefs and expectations as of today, November 8, 2010.

The Company undertakes no obligation to revise or publicly release the results of any revisions to the forward-looking statements made in today's conference call, other than through filings with the Securities and Exchange Commission, or SEC. In addition, this call may contain non-GAAP numbers, including funds from operations, or FFO. A reconciliation of FFO to net income, as well as components to calculate AFFO, CAD or FAD are available in our Supplemental Package found in the Investor Relations section of our Company's web site. Actual results may differ materially from those projected in these forward-looking statements.

Additional information concerning factors that could cause those differences is contained in our Forms 10-Q and 10-K, filed with the Securities and Exchange Commission, in our third quarter Supplemental Operating and Financial Data, found on our website, at www.HPTREIT.com. Investors are cautioned not to place undue reliance upon any forward-looking statements. Now I would like to turn the call over to John Murray.

Thank you, Carlynn. Good afternoon, and welcome to our third quarter 2010 earnings call. Today HPT reported third quarter FFO per share of $0.82. Focusing first on HPT's hotel investments, third quarter RevPAR increased 6.7% across our 289 hotels, driven by a 6.2 percentage point increase in average occupancy, 74.4%, that was partially offset by a 2.2% decline in average daily rate, to $89.43. Compared with the 2009 third quarter, RevPAR increased in all regions except the West Central and Mountain regions, which were negatively impacted by weakness in Texas, Arizona, Missouri, and Kansas. RevPAR at our SpringHill Suites, Country Inn and Suites, and Candlewood Suites Hotels gained 15%, 9.3%, and 8.7%, respectively this quarter, demonstrating the appeal of all Suite, Select Service, and Extended Stay Hotels.

HPT's hotels are primarily in suburban locations and are diversified across all Hotel segments, except Economy, with a concentration in the Upscale and Mid-Priced Without Food and Beverage Industry segments. The average RevPAR increase at our Mid-Scale without F&B Hotels was 8.3%, slightly above that segment's average. However, in the Upscale segment, RevPAR at our Hotels increased 5.2%, whereas the segment was up 8.9% this quarter. HPT's hotels underperformance versus the segment as a whole reflects that our Upscale Hotels are primarily Select Service suburban assets.

As lodging recovers from the great recession, Urban Full-Service Upscale Hotels have achieved stronger improvement because they are more severely impacted on the way down. Nonetheless, our trends in occupancy rate and RevPAR continue to improve, and most indications are that the positive momentum will continue. Growing rate remains challenging. Despite strong occupancy growth and mid 70s average occupancy across our 289 hotels, ADR only increased five of our 11 hotel portfolios this quarter versus last year. Our managers continue to work on balancing guest mix to reduce discounted business, but the legacy impact of previously negotiated special rates will remain an issue through year end. Also, while our Extended Stay Hotels are successful in selling stays of 30 days or more, rates for longer term stays are lower.

Finally, 15 of our hotels, including 12 of the Courtyards, were being renovated during the quarter, causing some displacement. The mix in relative significance of each of these factors varies greatly by market and by hotel. We have seen consistent RevPAR improvement each month, and great efforts are being made to better manage rate.

There is a clear disparity between the top and bottom performing markets among Smith Travel's Top 25 Markets, and in the top 25 markets versus all other markets. More HPT Hotels are located in this quarter's less well-performing markets of Houston, Dallas, and Phoenix, than in this quarter's top three RevPAR markets of New York, New Orleans, or Denver. In any case, it is difficult to draw useful comparisons and conclusions between HPT's performance and average national revenue statistics.

As the economic recovery continues, updated projections by our managers generally indicate slightly positive RevPAR for the full year 2010, roughly 2%. However, there is continued uncertainty, because booking windows remain short, and it's difficult for our operators to accurately project monthly revenue until that month. There is optimism as a result of steady increases in demand, but it is coupled with frustration that rate improvement takes more time and effort to implement for the reasons previously noted.

Flow through of increases in revenue to hotel level cash flow is improving each quarter, but is still anemic. Incremental cost savings are difficult for our operators to achieve, especially when revenue growth is primarily demand driven. As we noted last quarter, there is growing cost pressure in the areas of wages and benefits, both in rooms and G&A expenses. Full year 2010 Hotel net operating income is expected to decline versus 2009, as expense increases more than offset revenue gains.

Our hotels are recovering. In fact, this the is first quarter since the recession began where year-over-year hotel cash flow available to pay our minimum returns in rents has increased. We remain optimistic about the future growth in cash flow because of our hotels' attractive locations, high quality, and recognized brands.

We continue to be paid less than the required periodic minimum return in rents amounts required under the Marriott Number Three and Marriott Number Four Agreements, and have drawn on the related security deposits for the deficient amounts. Based on the projected performance, the existing deposits will carry us well into 2011. Recently, we have restarted discussions with Marriott about these two portfolios, because we would like to invest capital to keep them as competitive as possible, but also want to be paid our returns.

Last quarter, we announced plans to sell four hotels. The hotels have been marketed over the past quarter, and calls for offers are expected soon. Investor interest has been very strong, so we are optimistic about how the process may turn out, and minimum returns due to HPT from IHG will be reduced as the hotels are sold, based on the net proceeds. The benefits are expected to be better performing portfolios and improved coverage of our returns. We are also in discussions with IHG about the portfolios of remaining hotels, focusing on a capital plan over the next several years to ensure we are offering guests great hotels and attractive value.

Despite improving revenues and stabilizing cash flow available to pay our rents and returns, we expect less than one time's coverage of our hotel rent and returns in 2010. Our Hotel Portfolio security deposits and guarantees enabled us to weather the storm so far, but these features were not designed to last indefinitely. If economic growth does not pick up pace, or if increased lodging demand does not also lead to meaningful AVR growth, some of our security features maybe exhausted.

We are confident that the existing guarantees and deposits will be sufficient to offset minimum return and rent shortfalls in 2010 for all of our agreements. Because we are just now starting the 2011 capital and operations budget process, we will not provide our outlook for 2011 coverage until our fourth quarter 2010 conference call.

Turning to our TravelCenter investments, this morning, TA reported third quarter 2010 financial performance, which reflects continued improvement in the US economy, which enabled further improvement in fuel volume and non-fuel sales trends. Fuel volumes this quarter were up 5.3% quarter over quarter, across HPT's 185 TravelCenters, increasing for the fourth consecutive quarter. Per gallon diesel margins increased 21% over the 2009 third quarter, and non-fuel revenues grew by 8.5% this quarter. Together, these factors led to 29% growth in property level cash flow versus the third quarter 2009.

We believe that TA is heading down the road to recovery, but we realize that the best two quarter for this year are now behind us. Despite the 5.3% quarter over quarter volume increase in the third quarter, volumes remain 14.7% below third quarter 2007 levels. Also as economic growth has moderated, so to have the size of TA's year over year fuel volume increases.

TA's ability to pay us the full contractual rent beginning in 2011 remains dependent on continued economic recovery, and it is not clear that they will have the capacity to repay the deferred rent amounts due on July 1, 2011. As TA noted on their earnings call this morning, they plan to engage us in discussions about these matters. While no such discussions have taken place to date, we expect that a committee comprised of HPT independent trustees will meet with TA's management and independent directors before year end.

HPT is one of the most well capitalized Hotel REITs, and we have maintained our investment grade rating throughout this difficult economic environment. The availability of attractive hotel investment opportunities has been picking up during 2010. However, we believe some of the hotels which have traded recently traded at aggressive prices, given their performance and economic circumstances.

HPT is managed so that its common share total return is the mix of income and capital appreciation, and we with have a long-term investment perspective. We are not willing to justify investments based on five year IRR calculations with aggressive exit multiples. We intend to remain a disciplined, long-term investor, and we intend to continue to aggressively asset manage our real estate investments and maintain our strong capital base and liquidity. I'll now turn the presentation over to Mark.

Thanks, John. Third quarter revenues for our Hotel Portfolio increased $17.2 million, or 6.4%, versus the prior year. Our strongest performing portfolios were our IHG Number One and Number Two Portfolios, with revenue increases of 7.2%, and 8.5%, respectively, and our Marriott Number Four Portfolio, which had 7.7% increase. Our IHG Number Three, and Marriott Number Three Portfolios experienced the lowest growth, with revenues up only 1.7%, and 2.3%, respectively.

With the continued absence of ADR growth in our portfolio, GOP and cash flow margins declined again this quarter. While gross operating profit increased by $3.2 million, or 3.3% quarter over quarter, GOP margin percentage declined 100 basis points to 35.4%. Hotel level cash flow available to pay our minimum rents and returns was slightly better than flat versus last year, up $302,000, or about 0.5%. However, as a percentage of revenue, hotel level cash flow available to pay our minimum rents and returns declined 1.2 percentage points versus the 2009 third quarter, to 21.2%.

The continued decline in flow through percentage was due primarily to rising wage and benefit costs, resulting from both higher occupancy and wage rate increases, increased utilities costs, and increase in repair and maintenance expenses associated with previously deferred projects, and step ups in the FF&E reserve percentages for certain of our hotel portfolios in 2010.

Although hotel level cash flow increased only slightly this quarter, this was the first quarter over quarter increase since the 2008 first quarter. 2010 third quarter rolling 12-month coverage of our minimum returns in rents was below one times for all of our hotel agreements. On a quarter over quarter basis, coverage improved for four of our hotel agreements, was flat for one, and declined for six agreements. We expect coverage to be below one times for each of our agreements in the fourth quarter, but believe our available credit support is adequate to cover the shortfalls. Information regarding security deposit and guarantee balances at the end of the third quarter is included in Note 12 of our Form 10-Q, which we filed earlier today.

Turning to our TravelCenter Portfolio, performance was very strong this quarter, with cash flow available to pay rent up over $21 million, or 29%, versus the 2009 third quarter. Fuel volumes increased 5.3%, and non-fuel revenues increased 8.5%, quarter over quarter. Per gallon fuel margin was $0.02 higher in the third quarter of 2010 than last year, and non-fuel gross margin percentage increased by 11 basis points.

Site level operating expenses increased 4.8% compared to the prior year. Property level rent coverage for the 12 months ended September 30th was 1.22 times for our TA Centers, and 1.07 times for our Petro Centers. Both of these coverage amounts have been calculated based on contractual cash rents and exclude the impact of the Rent Deferral Agreement.

Earlier today, TA reported third quarter 2010 corporate EBITDAR of $79.8 million, and TA's EBITDAR coverage of contractual rents at the corporate level for the third quarter was 1.3 times. Adjusting rent for the Deferral Agreement, coverage of cash rents was 1.72 times for the third quarter. Year to date, coverage of contractual rents 1.03 times, and coverage of cash rents was 1.36 times.

Turning to HPT's operating results for the third quarter, this morning, we reported FFO of $101.1 million, or $0.82 per share. This compares to third quarter 2009 FFO of $91.1 million, or $0.77 per share, a 6.5% increase in FFO per share. This increase was driven primarily by higher rental income from our leases with TA, due to interest earned on the deferred rent balance and lower interest expense resulting from our repurchase of convertible notes earlier this year.

EBITDA was $143 million in the third quarter, and our EBITDA to total fixed charges coverage ratio for the quarter remains strong at 3.5 times. On August 25th, HPT paid a dividend on our common shares of $0.45 per share. Our FFO payout ratio was 55% for the 2010 third quarter.

With respect to our balance sheet and liquidity, at quarter end, we had cash and cash equivalents of $71.6 million, which included $66.8 million of cash escrowed for future improvements to our hotels, and had only $123 million of borrowings outstanding on our $750 million revolving credit facility.

Turning to our financing and investing activities, during the third quarter, $50 million of our outstanding senior notes matured, and we've redeemed these notes using borrowings under our revolver. Our next term debt maturity is in 2012.

As discussed on last quarter's call, 2010 capital spending for most of our hotel portfolios, has been limited to amounts available in the FF&E reserves. However, we are performing renovations this year at 27 Courtyards in our Marriott Number One Portfolio, and 11 Residence Inns in our Marriott Number Two Portfolio. As a result, we have made capital fundings in excess of FF&E reserves for these two portfolios of approximately $55 million through the third quarter, and expect to fund additional $43 million in the fourth quarter. In addition, under the terms of our lease with TA, we funded $3.5 million, of capital improvements to our TravelCenters in the third quarter, completing our $125 million commitment to TA.

In closing we are encouraged by the recent signs of increased demand at our hotels and TravelCenters and believe HPT is well positioned to manage through the remainder of this difficult period and take advantage of attractive growth opportunities. Operator we are ready to open it up for questions.

Thank you.

(Operator Instructions)

Our first question is from the line of David Loeb with Baird. Please go ahead. David Loeb, you may ask your question.

Sorry about that. I was mid-asking and realized I was still muted. John, can you just repeat what you said about TA? I think I missed part of that, and I think I have some follow ups.

The whole thing about TA?

No, just about the prospects for the future and what happens from here.

We think the prospects for the future are good. I didn't say anything about that really. But on their call this morning, TA indicated that they're going to engage us in discussions about the rent and the deferred rent balance. And we haven't started those discussions, or seen any sort of proposals, or made any sort of proposals, so we are just letting the market know that during this coming period between now and year end, those discussions are going to begin, and we are not really making any predictions on where they are going to turn out, since they haven't started yet.

Can you remind us of the terms, and when the deferred rent balance is due, when they have to stop deferring rent, things like that?

They can defer $5 million of rent per month through the end of the year, and the balance we are assuming they will defer for the next couple of months. And so at the end of December, the deferred balance will be $150 million, and that balance is due July 1 of 2011.

So TA will be heading into the first quarter of 2011, absent any changes they would be heading in without any rent deferral each month going forward, and with a deferred balance to repay in six months. That's what they want to talk about.

Do you think the scope of what they want to talk about includes a permanent change in the contractual rent, as well as how they handle that deferred rent balance that they owe you?

I would rather not say what I think they are thinking. I'm just going to wait until they tell us. I think you're smart enough to know what is on the table, and I wouldn't be surprised if any of that is discussed.

This may be the hardest question for you to answer. Can you give us a little read on what your Board may be open to or - - I don't want you to negotiate this on conference calls, it's not the right way to do it, but clearly your independent directors will have to get comfortable with any change in the contractual terms. I just wonder if you could just talk a little bit about what the attitude is?

The only thing I'm willing to say is that we are open to the discussion. And TA is a very significant tenant, and it's obviously a sensitive situation and we're not going to negotiate it on the conference call. So as soon, assuming there is some progress made, there will be announcements or updates provided to our investors.

Okay. I appreciate that, thank you.

Thank you. Our next question we go to the line of Bryan Maher from Citadel Securities. Please go ahead.

Good afternoon, John.

Hi Brian.

A couple of quick questions. The capital improvements that are being made at those Courtyards and Residence Inns that you talked about, it seems like a fairly large amount of money. Is that a situation whereby there would be rent increases associated with those capital investments?

Yes. The improvements that we're making in our Marriott One and Two Portfolios, which are 53 Courtyards and 18 Residence Inns, are in some of the hotels they're complete room renovations, and in others they're just the lobby, but in both cases as HPT funds the capital for the improvements, our returns are increased.

And in light of what has been going on with Marriott, how comfortable are you making investments, relative to the hardball they have been playing for the last 18 months?

Those two portfolios where we are making investments host hotels and resorts is our tenant and those have been couple of our best performing hotel portfolios, and they are recovering at least as quickly as any other hotels that we own. So, I think we're very comfortable, or we wouldn't really be making the investments. We are less comfortable on the other two Marriott portfolios, and that's why to date we haven't agreed to make similar renovations in those portfolios.

I mean I'm guessing if for some reason those were to - - the other ones that are not paying in full, were to become something else, you would want to reserve that money for brand conversion, wouldn't that be correct?

I wouldn't say that that's the way we're looking at it, because we don't today have that right to re-brand. But we just - - the hotels are in good condition, they've been kept up well. It's just more of a question in those hotels with whether we want to have the "refreshing lobby" in those Courtyards, or if we want to continue with the more standard lobby that guests have come to know over the years, but which are in very good condition.

So, if we can reach agreement with Marriott on our way forward, we do the renovations and we get paid, then we'll do it; otherwise, the lobby's are going to stay the way they are for the time being.

Shifting gears, can you characterize how you look at your acquisition activity this year? I guess we're all, I think fairly pleased that you're not chasing some of these assets with some of the pretty high multiples we've seen, but can you give us a little bit of color on what you are looking at, and if you've put any bids in, and is the product more Select Serve or more Full Service?

Sure. We've been trying to nurture a couple of potential new relationships, and in connection with those, we've submitted a couple of letters of intent to acquire hotels. One of those is still outstanding, and it's an off-the-market transaction that, if it moves forward, will probably move slowly.

And we've been looking at other potential transactions, ranging from small groups of Full Service Urban Properties, to larger portfolios of 20 or more Select Service assets. But so far we've not been successful, because either our price has not been sufficiently high, or because of the terms of our agreement are a little more structured than the typical hotel owner. I would add that a number of the hotels that we've bid on just haven't traded, so I'm not sure that we're necessarily under-bidding, maybe that everybody is on the same page as us for the pricing, and the hotel's just aren't going to trade.

One then just last thing and I'll hand it off to someone else. Regarding TA and not to beat a dead horse, but having been on the call this morning with them, it didn't seem like there is any real sense of urgency, either on their part or your part to get to the table early, and I'm just wondering why that is? I mean, December will be upon us quickly, and next June, July will be here pretty quickly too, and these deals seem to take a decent amount of time once you get to the table to actually iron everything out. Can you characterize why that might be?

I would say I think that's a misperception. I think if we told you we were going to meet tomorrow, which we're not, then everybody would be calling us on Wednesday asking us how things turned out. So we've decided to let you know that discussions are going to begin, and as soon as we have a resolution or not, we we'll let everybody know.

But we just didn't want it to take on any added pressure from third parties beyond the importance of the matter. We recognize and TA recognizes that this is very, very important to both sides, and it is a matter of significant focus.

Thanks a lot.

Thank you. Our next question, we go to the line of Jeff Donnelly from Wells Fargo. Please go ahead.

Good morning, John. I guess I will just be sure to call you Wednesday then instead of tomorrow. Question about IHG and your desire to sell some assets. I guess first off, mechanically, can you just remind me how the rent is adjusted as you sell either low or no EBITDA-producing assets in the pools? Is it adjusted by the book value of the asset, or of more on a per key basis?

I tried to say that in the script. The way it works, without going into too much detail, is the returns due to us are reduced based on a formula that works off of the net proceeds.

So there is a yield factor - - that's a yield factor, that's applied to the proceeds from sale. And so if that was roughly 8%, say, and we sold the assets for $100 million, then the returns due to us would be reduced by $8 million. Obviously, I'm making those numbers up. It's just as an example.

Right,.

But that's how it works. Then the hotels go to whoever buys them.

Then, I guess since I'm assuming that you're selling from the under-performing assets, if you will, my experience is that traditionally, when those types of assets comes to market, they are less priced off of an EBITDA type number just because of their low earnings production and more on a discount to replacement cost on sort a per key basis. I guess I'm curious, is that your experience, and I know you can't speak for these assets, but as you look out in the market today, where do you think Select Service assets that are trading hands in the market are pricing versus replacement costs?

Well, I guess I would say a couple of things. First I would tell you that three of the four hotels that we are selling currently are Full Service assets. I don't want to predict where bids are going to come in, but I would say that my experience -- our experience selling assets has been reasonably good.

We've take a couple of write downs on sales in the past, but for the most part, we've had gains, I think. So based on prior experience, I'm not really sure that I can really comment on these four assets. But the multiples and the replacement costs that people have been using in justifying other acquisitions that have taken place this year leads me to believe that our expectation for pricing on these four assets is, I don't think we're going to be disappointed.

Okay, and just one final question on TA, or just more a point of curiosity, will you be employing advisors on either side, to look at comps in the marketplace for similar net lease arrangements or what have you, or is it really just a negotiation between the two entities?

Present expectation is that it will be a negotiation between the two entities. I think when we negotiated the current rent concession agreement, I think both sides engaged special counsel perhaps for the independent trustees, but I don't believe we engaged anybody else then, and I'm not even sure we need special counsel right now. Anyway, so we feel like we understand the business pretty well.

Okay, thank you.

(Operator Instructions)

We now go to the line of Michael Salinsky from RBC Capital Markets. Please go ahead.

Good afternoon, guys. John, I think in your comments you mentioned you were looking at discussions with Marriott right now, as well as a few of your operators. Just curious if there is any sense if you are willing to break into some of those minimum return agreements, maybe give up some of the minimum return currently for some of the upside in the future there, as you're working through those, looking at the capital funding, things of that nature? Is that on the table at all?

Just like I wouldn't want to negotiate the TA terms on our call, I wouldn't want to get into that on this call. Not that Bonnie [Sorenson] is listening in on our call or anything, but somebody, [where] it would get back to Marriott or IHG, or whoever, if we commented on that I think, so I think I'm just going to leave it alone. We are interested to have long-term, secure relationships with well maintained hotels, and I think we're open to any discussions that center around those facets.

Okay, fair enough. Second of all, in terms of acquisitions, can you give us a sense of what the pipeline looks like at this point? Is it all due to pricing that you're just not seeing a lot of opportunities, or is it really more product on the market? Just give us a sense of what you are seeing in the market currently?

We're seeing everything from luxury hotels in New York City, to economy hotels in every market across the country. There is loans, big loan portfolios being marketed by a number of groups that I'm sure you guys all know about. We've looked a little bit at some of those. I don't think that 500-plus room older, luxury property in New York City on a stand-alone basis really fits well with the rest of our portfolio. So, although we've seen those sort of assets we are not bidding as much on those as we are on portfolios in urban locations, in good markets, but not sort of New York City, because that's just not where our transaction structure works well.

In terms of pricing, as I mentioned earlier, it's hard for me to get a good sense. I think that we bid on a portfolio of Full Service hotels with well respected brand companies as the manager, and those hotels haven't traded yet, and I think I mentioned the same portfolio on the call last quarter. So I don't know, we may have been one of the top bidders, but the seller wasn't willing to sell it at a rational price. I'm not really sure, it could be that they didn't want to structure a deal the way - - with some of the deal terms that HPT requires in it's structure.

The third question here just is, you're in discussions with Marriott and InterContinental in terms of next year, and in terms of corporate rate increases, what's kind of the tone they are setting right now, what are you hearing in terms of rate increases?

Everybody wants to get rate increases. And when you hear Marriott or IHG talk about it, or Hyatt or Carlson, the further up the chain of command you go, the more conviction there is that they're going to get it, and the further down towards the hotel level you go, the less certainty there is about it. And so every market is different. If you're in Boston, New York, Washington DC, I think you have a lot more backbone about, or San Francisco or LA, and if you're in Dallas or Houston or Phoenix, you don't have as much backbone about rates, because there's a lot of supply, and it's been a particularly tough couple of years.

So it's -- it just varies tremendously, but on average, I think everybody is expecting that they are going to get rate increases next year, at least in the sort of mid single digits, and it ranges up to nearly double digits, depending on the markets and the brands. But it's really all over the board, and even within hotel -- like hotels, whether it's across InterContinentals or across Courtyards, it's all over the board.

Fair enough, thank you.

Thank you. Our next question, we go to the line of Dan Donlan from Janney Capital. Please go ahead.

Thank you. Just had a question on the preferreds, the B's, they look to be trading above pars. Do you guys consider maybe retiring those and trying to reissue at a lower price or just taking them down with your line of credit?

Dan, this is Mark. We monitor that, you're right, the B's are callable, and they're at a fairly high coupon, and as we get in to evaluating our capital raising plan for 2011, that's one of the things that we'll obviously consider.

Okay. And then I guess you touched on a little bit with Marriott Three and Four, but what should we be modeling for 2011 in terms of capital improvements above the FF&E reserve?

I think it's too early to say. I mean I think we've averaged probably over $100 million of HPT funded capital over the past number of years, and I think it's safe to assume that that's going to be the same going forward, it will be in that at least $50 million to $100 million. But we're just literally getting started on next year's CapEx plans, so I don't have a good answer for you.

Okay. Alright, that's it for me, thank you.

Thank you, and we have a follow up from the line of Bryan Maher from Citadel. Please go ahead.

Hi John, just circling back to the acquisition topic that keeps coming up. Is there a sweet spot size wise for a deal that you would look at either by number of assets, given your size or a dollar amount, what level of comfort do you have spending $200 million to $1 billion dollars to take down a portfolio of assets? Can you just give us some comfort level there?

I mean we have great capital access. We have $750 million credit facility with only 125-ish out on it. We've done transactions -- we like to do transactions of at least $100 million, and I think we have done them up to in excess of $1 billion.

So we prefer portfolios, we prefer ten or more hotels for our structure, which is a little more income focused than some of the other REITs. We find that Upscale Select Service hotels have a P&L volatility that matches better with our structure. So I would say if I had to say there's a perfect style hotel, we like Hyatt Place, and we like Courtyard, and we like Residence Inns, and we like Staybridge Suites, and those sorts of assets work well with our structure, but we've been bidding on larger full service hotels and smaller hotels as well.

I mean there's very few, historically, hotel companies that have your level of capital availability to deploy at any one time. I guess with the private funds that have been raised there is probably a little bit more today than there has been historically. Do you find yourself bumping into some of the usual suspects, or are there new players out there that you are seeing?

Well, as you know, there are a few new REITs, and I think some of them had some incentives to get their capital invested quickly, so I think -- and several of them did so. So I think maybe the edge is off on that. But otherwise, I don't feel like we are really running into anybody who is anybody different.

I think it's the same, there's some private equity for certain types of deals, there's REITs, and there are some other buyers, there is Middle Eastern and some Asian money in certain markets. But I would say that we feel like the -- even with the newer REITs frankly, the faces haven't changed; it's just the new name, same group of people. So it doesn't feel like the playing field has changed that much.

Thanks.

Thank you. And we would now like to turn the conference back to John Murray.

Thank you all for joining us today. We look forward to hopefully seeing you at Marriott in a couple of weeks. Thanks.

Thank you. Ladies and gentlemen, that does conclude our the conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect