Service Properties Trust (SVC) 2010 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Hospitality Properties Trust fourth-quarter 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). As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Tim Bonang. Please go ahead.

Thank you and good afternoon. Joining us 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 prior written consent of HPT.

Before we begin today's call, I would like to read our Safe Harbor statement. Today's conference 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, February 18, 2011.

The Company undertakes no obligations to revise or publicly release the results of any revisions of the forward-looking statements made in today's conference call other than through filings with the Securities and Exchange Commission, or SEC, regarding this reporting period.

In addition, this call may contain non-GAAP financial measures including Funds From Operations or FFO. 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 the Company's website.

I would like to note that this morning we had a technical issue posting a supplemental to the website and we apologize for any inconvenience this caused.

Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our Form 10-Q and 10-K filed with the Securities and Exchange Commission and in our Q-4 Supplemental Operating and Financial Data Package found on our website at www.HPTREIT.com.

Investors are cautioned not to place undue reliance upon any forward-looking statements. And with that, I would like to turn the call over to John Murray.

Thank you, Tim. Good afternoon and welcome to our fourth-quarter 2010 earnings call. Today, HPT reported fourth-quarter FFO per share of $0.85. Reported FFO excludes a non-cash net loss on impairment of $147.3 million or $1.19 per share, which Mark will discuss in more detail later.

Focusing first on HPT's hotel investments, fourth quarter RevPAR increased 5.3% across our 289 hotels, driven by a four percentage point increase in average occupancy to 66% that was partially offset by a 1.1% decline in average daily rate to $90.03.

Compared with the 2009 fourth quarter, RevPAR increased in all regions, but was weakest in the Mountain, Mid-Atlantic, and West Central regions. Our SpringHill Suites, Marriott full-service, Country Inn & Suites, Candlewood Suites, and TownePlace Suites hotels all generated RevPAR growth in excess of 10% this quarter versus last year.

HPT's hotels are concentrated within the upscale and midscale without food and beverage industry segments in suburban locations. The average RevPAR increase of our midscale without F&B hotels was 12.2%, approximately 3% above industry average for that segment.

However, RevPAR at our upscale hotels increased only 3.4% compared to the industry segment average of 9.3% this quarter. HPT's upscale hotels underperformance versus the segment as a whole reflects that our hotels are primarily select service suburban assets and also that 32 of our hotels or 17% of our upscale assets were being renovated this quarter.

During initial stages of the lodging recovery, we expected urban full-service upscale hotels to achieve stronger initial improvement because they tended to be more severely impacted by the recent recession.

Growing average daily rate remained challenging in the fourth quarter. Despite strong occupancy growth, ADR increased in only five of our 11 hotel portfolios this quarter compared to last year. Our operators continue to manage guest mix to reduce discounted business, but previously negotiated rates set in 2009 remained an issue in the fourth quarter.

Approximately 45% of our hotels are extended stay hotels and demand growth in 2010 has been strongest in the over-30 day category. As our extended stay hotels increased average length of stay, rates for longer stays are generally lower, also negatively impacting RevPAR growth.

Finally, as I just mentioned, 32 of our hotels including 21 Courtyards, 10 Residence Inns, and our LAX Crowne Plaza were being renovated during the quarter, negatively impacting performance. Despite these factors, we have seen consistent RevPAR growth each month compared to last year, and great efforts are being made to better manage rate.

As the economic and lodging industry recoveries continue, forecast by our managers indicate positive RevPAR for 2011. The forecast average across all of our hotel portfolios is in the range of 6% to 7%. There is growing optimism about this recovery as a result of the steady increases in demand which we saw throughout 2010 and the expectation we will see rate and [GOP] margin improvement during 2011, especially in the second half of the year.

Flow-through of increases and revenue to hotel level cash flow available to pay our minimum returns and rents remained elusive again this quarter, partially because revenue growth continued to be demand-driven. As we noted in previous quarters, there has been cost pressure during 2010 in the areas of wages and benefits both in departmental and G&A expenses.

Also, food and beverage expense growth exceeded the industry -- I'm sorry. Also, food and beverage expense growth exceeded the increase in food and beverage revenues this quarter as a result of various trading costs associated with Marriott's latest Courtyard lobby concept. As a result, full year 2010 hotel net operating income declined versus 2009 as expense increases more than offset occupancy-driven revenue gains.

It is worth noting that although the quarters year-over-year hotel cash flow available to pay our minimum returns and rents decreased slightly, we did have 32 hotels under renovation.

During the fourth quarter, we continued to be paid less than the required periodic minimum return and rent amounts required under the Marriott No. 3 and No. 4 agreements and have drawn on the related security deposits for the deficient amounts. As we told you last quarter, we have restarted discussions with Marriott about these two portfolios and also the Marriott II portfolio of 18 Residence Inns. These discussions are ongoing and it is too early to say if we will reach a resolution or exactly what that resolution may be.

In the second quarter, we announced plans to sell four IHG-branded hotels. The hotels have been marketed over the past two quarters and we have received offers, subject to buyer diligence on two of the properties and we continue to market the other two. The minimum returns due to HPT from IHG will be reduced as the hotels are sold, based on the net proceeds.

We are also in discussions with IHG about recasting the management agreements for the four portfolios of hotels they manage for us. These discussions are ongoing and it is too early to say if we will reach an agreement or what the details of an agreement may be.

However, as disclosed in a recent SEC filing, in connection with these negotiations, we did amend our security deposit agreement so that the deposit provides security for all four portfolios, not just three. This is important because the guarantee covering all four portfolios was exhausted in January; and in February, the minimum payments we received from IHG were $8.1 million less than the minimum amounts due to us and we drew on the security deposit for the deficiency.

Despite improving revenues and stabilizing cash flow available to pay our returns and rents, coverage in 2010 was less than one times for each of our portfolios and will likely be less than one times in 2011 as well. As we have said before, our hotel portfolio security deposits and guarantees enabled us to weather a severe recession, but these features are not designed to last indefinitely.

We continue to believe the strategy of balancing security of cash flow to HPT from our hotels, with increased participation in hotel performance improvement to our operators and our portfolio approach are well-conceived.

Turning to our TravelCenter investments, this morning, TA reported fourth-quarter 2010 financial performance which reflects continued improvement in the US economy which enabled further improvement in fuel volume and non fuel sales trends. Full fuel volumes this quarter were up 2% quarter over quarter across HPT's 185 TravelCenters, increasing for the fifth consecutive quarter.

Per gallon diesel margins increased 17.6% over the 2009 fourth quarter and nonfuel revenues in gross margin grew by 7.6% and 8.2%, respectively. The growth in nonfuel business is encouraging as it may reflect improving conditions for professional truck drivers such that they are reinvesting in their vehicles and spending money on themselves. Together, these factors led to 35.3% growth in property level cash flow versus fourth-quarter 2009.

Despite these positive points, the trend over the course of 2010 has been that the amount of year-over-year increases in fuel volume has been decreasing in our sights. For the year, diesel volumes were up 5.5% versus 1.2% for the fourth quarter.

Also 2010 diesel fuel volume remains 16.4% below 2007 levels. While our contractual rents due to us under the leases were covered by site level cash flow in 2010, TA also has corporate level costs and capital needs to keep our properties in competitive condition. So while TA's financial results improved significantly in 2010 and further improvement is expected in 2011, TA's financial condition and operating results today are below what we expected when we entered these leases.

Accordingly with the previous rent deferral agreement expiring at the end of 2010, with TA not fully recovered, HPT entered into a lease amendment agreement with TA in January 2011 which reduced the monthly rent amounts due to HPT and delayed maturity of previously deferred amounts to 2022 and 2024.

The lower rent amounts should allow TA to meet its obligations to us throughout economic cycles and eliminate uncertainty regarding TA's viability. We believe both of these are positives for HPT.

HPT is one of the most well-capitalized hotel REITs and we have maintained our investment grade credit rating throughout this difficult economic environment. The availability of attractive hotel investment opportunities has been picking up.

However during much of 2010 and early 2011, our primary focus has been on the TA lease amendments and negotiations with IHG and Marriott, which I mentioned earlier.

We have also been developing relationships with other lodging companies that may be strategic for our growth later this year and in the future. We don't feel that we have missed out on an opportunity in 2010 because we were internally focused. We were evaluating opportunities and none of the more notable 2010 margin transactions would have been appropriate for HPT, because we pay an attractive dividend and therefore focus on opportunities where in place cash returns cover our capital costs.

We intend to remain disciplined in our investment focus and maintain our strong balance sheet liquidity. I will now turn the presentation over to Mark.

Thanks, John. Fourth-quarter revenues for our hotel portfolio increased $13.7 million or 4.9% versus the prior year. Our strongest performing portfolios were our IHG No. 2 and Marriott No. 2 portfolios with revenue increases of 11.9% and 9%, respectively. And our Marriott Hawaii had a 25.7% revenue increase.

Our Carlton and Marriott No. 1 portfolios were our weakest performing portfolios this quarter with a 50 basis point increase and a 30 basis point decrease in revenues, respectively. As John noted, 21 of the 53 hotels in our Marriott No. 1 portfolio were being renovated this quarter.

With the continued absence of ADR growth in our portfolio and the significant renovation activity, GOP cash flow margins declined again this quarter. Gross operating profit decreased by $1.1 million or 1.1% quarter over quarter and GOP margin percentage declined 200 basis points to 32.4%.

Hotel level cash flow available to pay our minimum rents and returns was down approximately $106,000 or about 20 basis points versus last year. Excluding the results of our Marriott No. 1 portfolio which had over half of its hotels under renovation this quarter, cash flow available to pay our minimum returns and rents increased $4 million or 10.3% versus the 2009 quarter.

2010 full-year coverage of our minimum returns and rents was below one times for all of our hotel agreements. On a quarter-over-quarter basis, coverage improve for six of our hotel agreements and declined for five agreements. As John noted, our guarantee from IHG was fully exhausted in January 2011 and we applied the security deposit we hold for these agreements to cover the February 2011 IHG payment shortfall.

In addition, we continue to apply the related security deposits to cover payment shortfalls in 2010 under our Marriott No. 3 and No. 4 agreements.

In the absence of an agreement or other action modifying the terms of our contracts with IHG and Marriott, the two Marriott security deposits may be fully utilized in 2011 and the IHG 2011 payment shortfalls may approximate the security deposit balance. Information regarding security deposit and guarantee balances at year end will be included in our Form 10-K, which we expect to file early next week.

Turning to our TravelCenters portfolio, performance was very strong this quarter with cash flow available to pay rent up over $16 million or 35% versus the 2009 fourth quarter. Fuel volumes increased 2% and nonfuel revenues increased 7.6% quarter over quarter. Per gallon fuel margin was $1.8 cents higher in the fourth quarter of 2010 than last year and non fuel gross margin percentage increased by 30 basis points. Site level operating expenses increased 3.4% compared to the prior year.

Based on the new modified lease terms, property level coverage for the full year 2010 would have been 1.55 times for our TA centers and 1.4 times for our Petro centers.

Earlier today, TA reported fourth-quarter 2010 corporate level EBITDAR of $48.3 million and TA's EBITDAR coverage of contractual rents at the corporate level for the quarter was 0.82 times. Adjusting rent for the lease amendment, coverage of cash rents would have been 0.95 times for the fourth quarter and 1.16 times for the full year 2010.

Turning to HPT's operating results for the fourth quarter, this morning we reported FFO of $104.5 million or $0.85 per share. This compares to fourth-quarter 2009 FFO of $86 million or $0.70 per share, a 21% increase in FFO per share. This quarter's reported FFO excludes a net impairment charge of $147.3 million or $1.19 per share.

The FFO increase was driven primarily by higher rental income from our leases with TA due to interest earned on the deferred rent balance, rent increases that resulted from HPT funding capital improvements at certain of our Marriott hotels and lower income tax expense.

The net loss on asset impairment incurred in the fourth quarter is a result of our decision when performing our periodic evaluation of real estate impairment at year end to revise our assumptions regarding our expected ownership period for 53 of our hotels because, as part of our negotiations with Marriott and IHG, we are considering the sale of these hotels. As a result of this change in assumption, we recorded a $157.2 million non-cash charge to reduce the carrying value of 45 of the 53 hotels to their estimated fair value.

As John previously noted, discussions with Marriott and IHG are ongoing; but there can be no assurance that any modified agreements will be reached or that we will sell any of these hotels.

The impairment charge was reduced by a $9.9 million increase to the estimated fair value of the four IHG-branded hotels we were in the process of selling.

EBITDA was $143.6 million in the fourth quarter and our EBITDA to total fixed charges coverage ratio for the quarter remained strong at 3.5 times. In November 2010, HPT paid a dividend on our common shares of $0.45 per share. Our FFO payout ratio was 53% for the 2010 fourth quarter.

With respect to our balance sheet and liquidity, at quarter end we had cash and cash equivalents of $85.5 million which included $80.6 million of cash escrow for improvements to our hotels and had only $144 million of borrowings outstanding on our $750 million revolving credit facility. Our revolver matures in October of 2011, and later this year we will begin work on a replacement facility. We have no other debt maturities until 2012.

During 2010, we made capital fundings in excess of FF&E reserves of approximately $97.8 million including $42.8 million in the 2010 fourth quarter to fund property renovations. 2011 capital budgets for all of our hotel portfolios have not been finalized, pending completion of the ongoing Marriott and IHG discussions. However, at a minimum, we expect to fund an additional $25 million in 2011 to complete the renovation of the Courtyard and Residence Inn hotels started in 2010.

In closing, HPT remains a well-capitalized company, and we are optimistic about the prospect of improved operating results at our hotels and travel centers in 2011. Operator, we are ready to open it up for questions.

(Operator Instructions). Jeff Donnelly.

A few questions. Concerning the writedown, what impact does the writedown book value have on your G&A? If I'm not mistaken the fee that you paid RMR based on book value -- I am just trying to think about what run rate impact there could be in 2011?

There is no impact until we sell assets. So the writedown -- the fee is based on investment, not carrying value. So if and when we sell assets, for instance, the four IHG assets that are for sale, the fee will go down, once we sell those assets.

Okay. That's helpful. And then -- and concerning that book value writedown, I don't know if you are able to make this extrapolation, but if you had to run a similar analysis across the other assets in your portfolio, do you think that is indicative of what the mark to market would be on your hotel assets? Or would it vary widely from that?

I want to first answer that by just reminding you that we are still in discussions with Marriott and IHG about the contracts. We don't have a final agreement. We haven't made a final decision to sell the 53 hotels. But it wouldn't be a good extrapolation to answer that question.

The 53 hotels that we have identified are weighted fairly heavily towards midprice extended stay hotels and they are weighted also towards markets that have changed or have been impacted negatively by certain industry events. Like, for instance, we have a number of properties that are in suburban Michigan and suburban Illinois locations, where telecommunications was once far more robust than it is today.

So there, the value for key on the hotels that are being considered for sale is much less on a weighted average basis than that portfolio as a whole.

And just a final question. You might have just kind of touched on this with your answer, but I guess why the decision ultimately to sell these? Is it just because something's changed and this current state allows you the flexibility is to sell or is it that as part of the negotiation the brands might make you guys sort of [pip] the hotels, it's just not a -- you are not getting a good investment for your capital, given the marketing condition?

Yes and again, we haven't made a final decision to sell, but we are in negotiations about the best way forward on a number of these contracts for the long haul. And because of changes in the dynamics of certain markets and the fact that hotels are very capital-intensive real estate You know we -- in considering our many different factors and those negotiations, among the factors we've considered is whether it makes sense to -- whether we can generate a return from additional investments in some of those properties, given where the markets have gone since we have invested in them.

Great. Thank you.

Mike Salinsky from RBC Capital.

First question, so it sounds like you guys are not actively marketing any of the 53 properties at this point. Correct?

You are correct. We are not marketing. We have not made a formal decision to sell. So these are still considered assets held and used. They are not assets held for sale at this point.

Related to the four that are being essentially marketed in terms of held for sale. What is the timing on those in expected proceeds?

Well, we are negotiating contracts on two, Hilton Head [in] Memphis, and hopefully those will be wrapped up in the next month or two. The two properties in Dallas are still being marketed and it's still our hope that we will close that by the end of the second quarter, but you know there will still be a market (inaudible). I think we have a call for offers next week.

We had initially marketed the two together. One was a full service hotel and one was an adjacent select service extended stay hotel and we thought we may do better in the sales process if we market them separately rather than together which we had done the first time. So we are just taking a different approach to see if we might achieve better valuations.

In terms of your question, in terms of proceeds, the net or the adjusted carrying value, which is our estimate of fair value, is about $47 million for those hotels at the end of the year.

Okay and that is with the markup in there?

Right. The market -- well, that includes the markup we reported in the fourth quarter. So the adjusted carrying value as we said today is about $47 million.

That's fair. Third, you talked about the Intercontinental guarantee exhausting there in January. Where do you stand right now with the Hyatt and Carlton ones?

We still have significant availability under those guarantees. Year end Hyatt was around $25.3 million and Carlton, $30.3 million.

That's helpful. And finally, I know you guys don't give guidance, but I think the industry is kind of -- the industry numbers have been thrown out there in the 6% to 9% range. You know based upon your budgets, based upon your expectations would you guys expect to perform in line above or below those kinds of levels in 2011?

I think I mentioned earlier we are expecting RevPAR in the 6% to 7% range based on the forecast budgets that we've seen. Those forecast factor in some consideration of renovations that we mentioned, we have some ongoing renovations in a couple of our Marriott portfolios. And as a result of the negotiations that are in with Marriott and IHG, it's more than likely there will be some renovations that come about as a result of that as well.

When do you expect to announce resolution with Marriott? I mean, is that something we should expect in the next couple of weeks? Or is this something that is going to be a bit more drawn out at this point?

I think I would just like to leave it at we are in discussions, they are going well, but I don't want to set any artificial deadlines or I think as much fun as they are, we'd all like to see them done sooner than later, but that's -- you know, I can't really handicap the timing.

Fair enough. Thanks.

(Operator Instructions). Bryan Maher from Citadel Securities.

Good afternoon. Circling back to TA for one second, can you tell me how it came about, if you would, that the deferred rent payment is 10 years and no interest? And then I have a follow-up.

Well, we had independent trustees on both sides for each company. And [advice from outside counsel is free] for those independent trustees and they weighed in on a lot of issues.

At the end of the day, what our independent trustee was trying to achieve was a situation where we have a long -- where we expected we have a long-term viable tenant that they will pay our rents, regardless of the business cycle. And I think we've settled on that in the rents that we are set. The economics of the rent that we were getting and the interests that were getting on deferred amounts we factored all that in in coming up with the adjusted numbers that we came up with.

And to that point, in the agreement, assuming that there is a robust economy and TA were to start to perform -- let's say better for lack of any other word -- is there any potential upside for you guys from the new agreement above and beyond the minimum rent that we can expect?

Well, each lease contains percentage rent provisions. The -- under the TA lease, percentage rents start in 2012; under the Petro lease they start in 2013. Under the terms of the leases [were] paid 3% of an increase in non-fuel revenues over the base year revenues and 0.3% of fuel revenues over the base year revenues. On the fuel side, it is capped at CPI given the volatility in fuel prices.

And as part of this lease amendment and the possible settlement of litigation, we agreed to waive the first $2.5 million of percentage rent due under the Petro lease.

Okay, but just to be clear, I think, so that everybody is on the same page, there's definitely upside from the new lower set level?

Yes. In the form of percentage rent. So assuming TA's business continues to grow, we will participate in that growth through percentage rents.

There's also one additional step, a $5 million increase in the base rent next year under the TA lease.

Dan Donlan from Janney Capital Markets.

Thank you. Just had a question on the Marriott 3 and 4. It looks like you guys had about $15.7 million for 3 and $11.4 million in 4 at November 7, 2010. And in reading the press release, it looks like both of those have moved down to $6.5 million. I guess I'm just wondering why do those decline by so much, relative to where they did last year?

What are you referring to specifically?

The security deposits.

The security deposit balances?

Yes.

Well, Marriott 3 at year end was about $10.1 million and Marriott 4 was about $8.3 million. So the utilization has been pretty consistent throughout the year. Obviously, the first and fourth quarters, it's greater given the seasonality of hotels, but I'm not sure if that answers your question or not.

Yes. No, it just seem like a lot more than it has been in the past. But maybe you're right on the seasonality there.

And then on your negotiations, I know you guys don't want to go into too specifics, but as it pertains to your margins, your margins have been kind of weak throughout this downturn. And I know part of that is the limited select service. But do you also think given the way your agreements are set up that sometimes the operators are not as [property] aligned but maybe your interest is maybe they are in a different type of hotel structure? And is that something that you're looking at as you are negotiating on a going-forward basis?

We think that the contrary is true. That, because we have fairly high minimum returns and because the managers' fees are subordinated, our contracts align our interests and the managers' interest better than any other contract in place in industry. So we think that it's partially a reflection on the type of hotels we are investing in.

For instance, when you have a Candlewood Hotel or a TownePlace Suites hotel where you -- where the select service is very -- there's very little in the way of service that is really provided and there is maybe 11 or 12 full-time equivalents at the hotel, there's only so much you can cut when times get bad. And then, you still need to clean rooms and you still need to have all the shifts covered. And so margins get squeezed.

But we also expect, as we mentioned that as RevPAR starts to pick up pace as the recovery improves, that we are going to start seeing much more rate growth as a percentage of the composition of RevPAR growth, and we will see margins improve as a result of that.

And then, I guess keeping with that discussion, do you think the minimum rent is the type of language -- will that language remain, do you think, on a going-forward basis in the new contracts?

I don't want to go there because we are in the middle of those discussions.

Okay. Thank you.

Ryan Meliker from Morgan Stanley.

Good afternoon. Just a quick question in terms of how you guys are calculating your marks. Obviously, you wrote down a substantial portion this quarter and you had marked up, you know, the four IHG hotels.

Can you take -- can you just walk through how you guys go about calculating those marks understanding what you believe market value for those assets is today? Thanks.

Well, we use typical -- it's a combination of typical valuation approach as such as discounted cash flow, comparable sales and the like. We also (multiple speakers) on each of the 53 assets that we evaluated this quarter, we also received input from brokers. So it was a combination of all that and then, obviously, applying some business judgment to that. On the hotels that we marked up this quarter, that's a little different situation there. They were either based on bids that we have accepted or bids we have received to date on properties and maybe not accepted.

That's helpful. So would you say that a decent portion of 53 assets that you marked down this quarter had comparable sales that you were able to use? Or really much more of a focus on kind of what brokers were telling you and your [DCF] analysis?

It was a mix. There weren't -- on the lower end product, there wasn't that much comparable sales. But there were comparable sales taken into consideration in all the broker analysis. So it was, I'd say, a healthy mix. But probably more discounted cash flow.

Great. That's helpful. Thanks a lot.

Bryan Maher from Citadel.

Just a follow-up. On the acquisition front, it seems like we are seeing hotels start to trade when maturities of debt are coming due and the seller is either unwilling or unable to put up fresh equity to get it refinanced. Are you seeing any of that on portfolios that might be a good fit for HPT?

We are looking at a portfolio right now that has that issue. And I think it is increasingly becoming an issue and we have a lot of -- we get a lot of communications from brokers and from services, especially over the last six months with portfolios of loans that they expect to get the deed in lieu, and they are looking for how to best exit. So I think that is a trend that is going to continue throughout 2011.

Do you think you would head down that road before you would do a series of one-off transactions?

Our preference is always to do a portfolio transaction, if we can, over a single property deal. It requires about the same amount of work and you get -- we feel like we have a more secure portfolio, a more secure transaction if we do a portfolio versus a one-off. But we are and have been looking at both.

Thanks.

Thank you.

Jeff Donnelly at Wells Fargo.

Yes, just a quick question. I know you didn't want to get pinned down on specific timing, John, but I will try and pin you down nonetheless. As it relates to resolution with Marriott and IHG, is it your expectation that Marriott will get resolved ahead of IHG? I'm just trying to think of a phasing, if you will, in your portfolio. And then I mean, do you think like Marriott is more of a first half of the year and IHG second half? Is it hard to -- I mean, even that at that level?

We are doing both at the same time. And you are not going to pin me down.

I thought I'd try. Thanks.

Dan Donlan from Janney Capital Markets.

Just wanted to talk about the dividend and when you think you might be able to increase that on a going-forward basis. Obviously you guys have done work -- good work with TA. After you get everything structured with Marriott and IHG, do you think then is a good time to revisit the dividend?

Well, we revisit the dividend each Board meeting that we have. So at least quarterly. But I think it would be -- I don't think investors should expect a dividend increase from HPT until after we've resolved our discussions with IHG and Marriott. And further I don't -- I think you know the expectation probably ought to be that we would want to have one times coverage in most of our portfolios before we took that step. But I mean, that is not a hard and fast rule, but certainly we want to get past the negotiations with Marriott and IHG and see how the industry is going.

We clearly want to see coverage start to improve versus decline or stay flat. Yes.

At this time, there are no further questions. Mr. Murray, please continue.

Thank you very much for joining us today and we look forward to speaking with you in the future.

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