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LaSalle Hotel Properties (NYSE:LHO)

Q4 2012 Earnings Call

February 21, 2013 8:30 am ET

Executives

Kenneth G. Fuller - Treasurer

Michael D. Barnello - Chief Executive Officer, President and Trustee

Bruce A. Riggins - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Secretary

Analysts

Eli Hackel - Goldman Sachs Group Inc., Research Division

Joshua Attie - Citigroup Inc, Research Division

David Loeb - Robert W. Baird & Co. Incorporated, Research Division

Ryan Meliker - MLV & Co LLC, Research Division

Andrew G. Didora - BofA Merrill Lynch, Research Division

William A. Crow - Raymond James & Associates, Inc., Research Division

James W. Sullivan - Cowen and Company, LLC, Research Division

Lukas Hartwich - Green Street Advisors, Inc., Research Division

Wes Golladay - RBC Capital Markets, LLC, Research Division

Operator

Good day and welcome to the LaSalle Hotel Properties Fourth Quarter 2012 Earnings Call. As a reminder, this call is being recorded. At this time, let me turn the call to the Treasurer, Ken Fuller. Please go ahead.

Kenneth G. Fuller

Thank you, Jim. Good morning, everyone and welcome to the Fourth Quarter and year-end 2012 earnings call and webcast for LaSalle Hotel Properties. We're here today with Mike Barnello, our President and Chief Executive Officer; and Bruce Riggins, our Chief Financial Officer. Mike will provide an overview of our results and activities for 2012 and specifically, the fourth quarter. As well as an update on our progress at Park Central in New York. I'll also provide our 2013 full year outlook. Bruce will provide additional details on our performance and outlook, including our first quarter outlook and he'll discuss our balance sheet and capital markets activities. Then we'll open the call for Q&A.

Before we start, please take note of the following. Any statements that we make today about future results and performance or plans and objectives are forward-looking statements. Actual results may differ as a result of factors, risks and uncertainties, over which the company may have no control. Factors that may cause actual results to differ materially are discussed in the company's 10-K for 2012, quarterly reports and its other reports filed with the SEC. The company disclaims any obligation or undertaking to update or revise any forward-looking statements. Our SEC reports, as well as our press releases, are available at our website, www.lasallehotels.com. Our most recent 8-K and yesterday's press release include reconciliations of non-GAAP measures to the most comparable GAAP measures. And with that, I'll turn the call over to Mike Barnello. Mike?

Michael D. Barnello

Thanks, Ken, and good morning, everyone. As Ken mentioned, I'd like to start with an overview of our activities and results in 2012 and the fourth quarter. We're pleased with the results of our portfolio and in particular, the strength we experienced in our occupancy levels, ADR growth and margin growth. For 2012, our portfolio delivered occupancy of 79.1%, which is the highest nominal occupancy we ever recorded for a full year. This is a function of our focus on the urban core of the top U.S. markets and of the acquisitions that we've made since early 2010. The occupancy metric is significant because it enables us to drive ADR within our portfolio, which contributes to our ability to generate strong margins and, ultimately, strong growth in corporate EBITDA. In 2012, we achieved our highest ever recorded average rate, which was $203. The average rate increase was 4% with occupancy up 0.5%. Our full year portfolio RevPAR growth was 4.6%. These results are displaying a large concentration in Washington, D.C., a mark which has experienced widely publicized softness in 2012. Excluding D.C., our RevPAR for 2012 increased 6%, comprised of a 5.3% ADR improvement and 0.7% occupancy growth.

We had another year of outstanding margin performance, thanks to the efforts of our operators, our best practices program and our asset management team's relentless pursuit of efficiency and profit improvement. Expense growth was held at only 1.6% for the entire year. Our hotel EBITDA margin expanded 113 basis points to 32.1%, which is our highest ever reported annual margin. While we're pleased with our progress, there's still plenty of opportunity for improvement, given our pro forma peak margin of 35.4%.

The strong flow-through we experienced in the hotel level translates into tremendous growth for our shareholders with corporate adjusted EBITDA of 29% for the year and AFFO per share up 32% for the year.

These results are particularly impressive when considered within the context of the macroeconomic uncertainty we saw in 2012, evidenced by mixed economic indicators. We'll discuss a bit more when we walk through our outlook, but the year was characterized by moderate GDP growth and volatile consumer confidence, despite record corporate profits and stubbornly high unemployment.

Again, we're pleased with the results that our portfolio delivered for our shareholders and we're also able to add to our portfolio with the very high quality acquisitions throughout the year.

During 2012, we invested $458 million to acquire 3 hotels and the mezzanine loan. The hotels are located in firm locations within the Washington DC and Boston markets, as well as Del Mar in Southern California. The mezzanine loan is secured by 2 extraordinary hotels in Santa Monica, California. The hotel acquisitions upgrade our already high-quality portfolio and each of them has a higher average rate than our previously existing portfolio.

Our success in being acquisitive during 2012 was made possible by our strong industry relationships, as well as our balance sheet, which enables us act optimistically. We further strengthened our balance sheet during 2012, taking advantage of the low interest rate environment to lock in rates for a portion of our debt at very attractive pricing, while extending our maturities at the same time. We've fixed our seven-year term loan at a rate of 3.87%, which is approximately half of the rate of the preferred equity we paid off, thereby, reducing our overall cost of capital. Our five-year term loan was similarly fixed, this time at an even lower rate of 2.68%. These initiatives resulted in the reduction of our weighted average cost of debt from 5.2% to 4.3%, and our weighted average cost of debt and preferred from 6% to 4.9%. We feel great about these results and activities for 2012 and now, I'll provide some insight into the industry and our fourth quarter performance.

Fourth quarter demand grew 3.1%, rebounding from 1.8% in Q3 to finish the year at 3% growth, which is above the long-term demand average of 2%. ADR improved 4% in Q4, continuing this trend of contributing majority of RevPAR growth, which was 6.5%. Again, these results are particularly refreshing given widespread concern that our industry's growth will be stunted by Superstorm Sandy, which happened at the end October. While this devastating storm wreaked havoc on the East Coast, and our D.C., Boston and Philadelphia markets were negatively impacted, New York, though impacted, experienced quite a recovery given the clean up efforts that took place after the storm dissipated.

Our portfolio RevPAR grew 3.8% in the fourth quarter, with an ADR increase of 3.4% and occupancy growth of 0.3%. Excluding Washington D.C., where we experienced the most impact from Sandy, our portfolio RevPAR increased 5.8%, with ADR improvement of 4.9% and occupancy growth of 0.9%.

During the quarter, our RevPAR growth was led by strong group performance. With group rooms increasing 2.9% and ADR growth of 3.4%. Transient rooms were up slightly and the average rate increased 3.3%. Our group transient mix was 30% group and 70% transient in the fourth quarter and for the full year 2012, as well.

Our portfolio produced a hotel EBITDA margin of 30.6% during the fourth quarter, slightly below our prior year margin.

We held expense growth to 2.2% and are pleased we were able to maintain an overall strong fourth quarter hotel EBITDA margin. As such, our portfolio delivered solid EBITDA, which led to strong corporate adjusted EBITDA and AFFO per share.

Corporate adjusted EBITDA increased 26%, to $62.2 million and AFFO per share increased 30% to $0.47 per share.

In late fourth quarter, we began the initial stages of our Park Central renovation project. We took the first rooms under service during the first couple days of 2013. Now we are a little less than 2 months into it, I can tell you we feel very good about our progress so far. Although we're still at fairly early stage of the project, I'm pleased to report that we're on schedule and on budget. We continue to project the renovation to go through at least the third quarter and possibly into the fourth quarter. Our project cost estimate remains $60 million to $70 million, and our estimate of $8 million to $12 million EBITDA displacement remains intact.

We're extremely excited about this project in unlocking the ADR potential of this extraordinarily well-located asset. During 2012, the hotel's ADR was about $35 below the average Manhattan hotel. Given the above average location of the hotel, we look for our renovation to enable Park Central to ramp up to the average Manhattan rate and looking for West House [ph] to deliver $50 to $100 more ADR than the Park Central when stabilized.

As a reminder, we purchased the asset for a little under $425,000 per key and the renovation will bring the investment total below $500,000 per key, even at the high end of the renovation range. This is a very attractive basis for the location of the hotel on 7th Avenue, between 55th and 56th Street near Central Park and Times Square, [indiscernible] level to which we're renovating the hotel. We're excited about the value we're creating and the impact it will have on our portfolio and performance once the renovation is complete.

Now let me turn to our outlook for 2013. I'll start with an overview of the 2012 industry results and of the economy, which is providing some mixed signals. The U.S. lodging industry had demand growth of 3% in 2012 and historically low supply, which grew 0.5%. Industry RevPAR grew 6.8% in the third year of this cycle's recovery.

With regard to the economy, GDP growth had been moderate throughout the third quarter, and for the fourth quarter, GDP declined slightly. This was a disappointing development casting concerns about an economy that was already shaky to begin with.

Unemployment also ticked up slightly in January. Consumer confidence has been bottled over the past year and took a negative dip at the end of January, as well, to its worst level since November 2011. Meanwhile, employment and core profits have held up pretty well, with the latter indicator achieving record levels in Q3. The majority of companies were to report on the fourth quarter thus far, exceeding industry expectations. And while the consensus estimates for 2013 are 1.8% GDP growth versus 2.2% in '12, consensus expectations' over 5.2% improvement in corporate profits.

When we zoom in, in our industry, we continue to benefit from historically low supply. We had supply at half a point in 2012 and the prognosticators are calling for growth at a point or lower for 2013, which is still well below the long-term average. This bodes extremely well for both the length of the recovery and the potential for continued strength and pricing power across the industry, and particularly, in our markets which tend to run the highest occupancies.

Demand growth has trailed off a bit but this is to be expected as demand and occupancy typically lead recoveries, before ADR takes over as the primary driver of RevPAR, which we're currently seeing. As I mentioned, industry observers were concerned about seeing a decline in demand growth for the third quarter of 2012, so the increase in demand growth we saw in the fourth quarter was encouraging.

Looking at our portfolio, I'll share some specifics that will provide some background regarding our outlook. Most of our operators completed the bulk of their 2013 corporate negotiations and we're pleased that our portfolio was able to contract for more than 8% rate increases on average.

Rates for the government segment are flat for the year, albeit at a very small portion of our business. For group pace, we looked at it excluding D.C.'s January comparison, which is positively skewed due to the inauguration.

Our group revenue pace is up 1% and transient pace up 5.4%, for a total revenue pace increase of 2.5%. Again, that is without D.C. hotels in January.

We expect the best market in 2013 to be San Francisco, L.A., San Diego and Seattle.

Turning to our outlook, we anticipate RevPAR growth of 3% to 6%, excluding Park Central. When we include Park Central, the growth is 0% to 3%. We anticipate our margins to be flat to 100 basis points improvement, excluding Park Central. For our entire portfolio, including Park Central, our outlook for adjusted EBITDA is $275 million to $295 million and AFFO per share is $2.03 to $2.23. Now, Bruce will provide some details of our fourth quarter performance and capital markets activities and update our balance sheet and our first quarter 2013 outlook. Bruce?

Bruce A. Riggins

Thank you, Mike and good morning, everyone. I'll start with more detail on our fourth quarter results. As mentioned, our fourth quarter RevPAR increase was 3.8%. Excluding D.C., which was the most impacted by Sandy and political uncertainty, our fourth quarter RevPAR grew 5.8%. RevPAR at our resorts increased 5.8% due mostly to occupancy, which grew 5%, while ADR improved 0.7%.

We have particularly strong performance at Chaminade in Santa Cruz, Paradise Point in San Diego and the Hotel Viking in Newport. Our urban portfolio grew 4.5% in RevPAR due entirely to ADR. I'll provide more detail on this shortly, but the performance was led by our L.A., New York and Seattle markets.

Our convention properties grew 0.7% in RevPAR, with ADR up 2.2% and occupancy down 1.4%. As I mentioned earlier, L.A. was strong in the quarter, with RevPAR up 12.2%, comprised of an 8.4% ADR improvement and a 3.5% increase in occupancy. New York RevPAR grew 11.1%, comprised of ADR improvement of 12.4%, partially offset by an occupancy decline of 1.2%. Seattle also had a strong quarter with an 8% increase in RevPAR as ADR grew 4.8% and occupancy improved 3%. Philadelphia RevPAR improved 5.5%, with occupancy driving most of the increase, growing 4.9%, while ADR improved 0.5%. San Francisco RevPAR grew 4.8% as ADR improved 6.4%, and was partially offset by 1.5% decline in occupancy. We are particularly pleased with these results given they include displacement from the room renovation, which was underway at Hotel Monaco and subsequently been completed.

San Diego RevPAR grew 4.8%, with occupancy improving 2.9% and ADR up 1.8%. Chicago had softer performance with RevPAR growth of 1.5%, ADR growth was 4.6%, but was partially offset by a 3% decline in occupancy. Boston had a RevPAR decline of 1.5% due to a 0.8% decline in occupancy and a 0.8% decrease in ADR. This market was also impacted by Sandy. Washington, D.C. was our weakest market overall, and was hit the hardest by Hurricane Sandy and unfortunately, did not experience any additional pickup like we saw in New York. Additionally, demand was impacted by a week of congressional meetings scheduled for the beginning of October being canceled last minute and the market was impacted by overall political uncertainty. As such, RevPAR declined 4.2%, down 2.2% in ADR and 2% in occupancy. During the quarter, our best performing properties were Le Montrose and Le Parc in L.A., Villa Florence in San Francisco and Park Central in New York. The Embassy Suites in Philadelphia and the Viceroy in Santa Monica also experienced relatively strong growth. Total revenue for the quarter improved 2%, food and beverage revenue declined 1.1%. Food and beverage revenue declined for the year due to our citywide mix of business. Citywides were up substantially during 2012 compared to 2011 and citywide group business does not typical generate as much food and beverage revenue.

As we look at the expense side of our operations, our asset management team and our operators continue to be very effective in the fourth quarter in controlling costs. As a result, the aggressive efforts of our asset management team and those of our operators our expense increase was held to an impressive 2.2% in the quarter. The portfolio-wide hotel EBITDA margin was 30.6% in the fourth quarter, a decline of 17 basis points from the prior year.

Our hotel EBITDA was $64.4 million, an increase of $0.9 million or 1.4%, compared to last year. Our corporate adjusted EBITDA increased $13 million or an impressive 26.3% compared to last year. Our adjusted AFFO per share was $0.47, an increase of 30.6%, compared to last year. When the capital markets ran in December, we raised $209 million from an equity offering that was used to fund the purchase of the Liberty Hotel in Boston. This capped off an active year for us in terms of capital markets. In total, we raised $273.1 million of equity through the overnight marketed transaction in December, as well as ATM activity throughout the year.

Mike mentioned in May we closed on a $178 million unsecured 7-year term loan, which we saw up to a fixed rate for the full 7-year term, which will be 3.87% when the company's leverage ratio is between 4x and 4.75x. We used these proceeds to redeem $167 million of preferred stock on which we paid an average coupon of 7.8%.

We also closed on a $300 million unsecured 5-year term loan, which we swapped to a fixed rate for the full 5-year term, 2.68% when the company's leverage ratio is between 4x and 4.75x. These transactions significantly reduced our weighted average cost of debt and they leave us in a strong balance sheet position.

At December 31, we had total debt outstanding of $1.25 billion and an average interest rate for the quarter of 4.3%. As of year end, total debt to trailing 12 month corporate EBITDA, as defined in our senior unsecured credit facility, was 4.2x, which translates to a current interest rate on our credit facility of LIBOR plus 200 basis points.

We have approximately $620 million of capacity on our credit facility and 33 of our 40 hotels are unencumbered. As such, we have substantial liquidity with which to execute our business plan and continue to be opportunistic from an acquisition perspective.

Now I'll provide some additional details regarding our outlook for 2013. To briefly reiterate what Mike shared, our outlook is based on portfolio RevPAR growth, excluding Park Central of 3% to 6%, and hotel EBITDA margins to be flat at the low end to a high-end outlook of 100 basis point of margin growth. Including Park Central, RevPAR would range from flat to an increase of 3% and margins would range from down 50 basis points, to up 50 basis points.

Our portfolio currently generates industry-leading hotel EBITDA margins and we continue to strive to keep expense growth at bay and run as efficiently as possible. We had another year of outstanding performance in this regard during 2012 and we expect to continue to perform in this manner during 2013. As such, the range for adjusted EBITDA is $275 million to $295 million and the range for adjusting AFFO per share is $2.03 to $2.23. We expect capital expenditures to total $130 million to $145 million, including the $60 million to $70 million Park Central renovation.

As for the first quarter of 2013, the portfolio was positively impacted by the inauguration in D.C., which provide a $1.8 million of incremental room revenue, contributing 30 basis points of RevPAR growth for 2013. Our January RevPAR increased 15.7%, with our D.C. hotels rising 40%. When we exclude Washington, D.C., our January RevPAR increased 10%.

Our Park Central renovation is well underway. We anticipate roughly a 250 basis point impact on the portfolio. Finally, the quarter was negatively impacted by the timing of Easter and Passover, which will impact March this year as compared with April during 2012. Based on these factors and the portfolio's performance so far, when we exclude Park Central, we expect first quarter RevPAR to increase 4% to 6%. We expect our entire portfolio, including Park Central, to generate adjusted EBITDA of $37 million to $39 million and adjusted AFFO per share of $0.24 to $0.26. With that, I'd like to turn it back over to Mike to close out our prepared remarks.

Michael D. Barnello

Thanks, Bruce. To sum it up, we're pleased with our growth our portfolio delivered to our shareholders in 2012. We had a very strong growth in both adjusted EBITDA and adjusted AFFO per share. Our portfolio achieved record levels of occupancy, ADR, RevPAR and EBITDA margins, levels of which we will continue to strive to improve upon.

We remain very encouraged by performance of the industry in the supply picture, and we believe we are in a positive and starting portion of this cycle. Over the past 3 years, we have consistently improved our portfolio having invested $1.5 billion, optimistically acquiring high-quality properties in key markets, many with upside potential which we work diligently to unlock. Our capital markets activities and balance sheet place us in great shape, positioned to continue to act opportunistically and make more growth-creating acquisitions like those we have made over the past few years. We expect our portfolio to deliver solid results in 2013. At the same time, we are performing a major renovation in project at Park Central, which will drive substantial growth beyond 2013. That completes our prepared remarks. Bruce and I would now be happy to answer any questions you may have. Jim?

Question-and-Answer Session

Operator

[Operator Instructions] And we'll take our first question from Eli Hackel from Goldman Sachs.

Eli Hackel - Goldman Sachs Group Inc., Research Division

Two questions. First, just -- I know you talked a little bit about the cycle, Mike. But you add anything about doing more acquisitions here, it seems like construction financing is finally starting to get a little bit easier. I know broadly, relative to history, supply is still low but over the next couple of years, it looks like we'll see some increases. So just wondering how you think about the cycle and how -- about doing deals? And then more specifically, with Sandy and natural events, just wondering what you're hearing in terms of insurance costs going up. And also separately related to that, just property taxes going up in '13 and beyond. If those will continue to be above inflation.

Michael D. Barnello

First part of the question on acquisition, not much has changed in terms of how we look at new acquisitions. We are still excited about the opportunity to buy more hotels, but it's not a board-driven mandate. It's not a management-driven mandate to actually add properties. It'll only make sense for us to do so if we think that they're great deals for the shareholders. And so when we think about that, we underwrite lots of deals, many of which we don't do. But the deals that we focus on, we underwrite to those specifics that you mentioned. So we are looking at what the supply-and-demand metrics look like in that particular market, in a particular comp set for whatever asset we're underwriting. And we have to make a decision as to whether that, ultimately, returns that we think we can get, offset the risk that we may or not be taking relative to the supply-and-demand metrics in that market. So sometimes we're very comfortable with the risk returns tradeoff, and then we actually do the acquisition. And many times, we're not, and we pass on deals. So I don't think that's going to change. Our underwriting criteria hasn't really changed. We're still looking at deals on a 5 year on leverage basis with the -- a heavier focus on the cash on cash because we're traditionally not sellers, but we do look at both pieces. So that's how we look at acquisitions. On the insurance side, we just started our discussions with our property insurance carriers. Our renewal happens to be in April unlike a lot of companies actually have a year-end renewal. The -- as you imagine, there was a little bit of a stiffening up of the pricing at year end, but what we're told earlier was that the pricing was actually going a little softer before Sandy. So they're encouraged that this may not -- it may not result in actual savings, but it may not have as big of an increase as they -- you might have think -- might have thought solely focused on Sandy. So we've been somewhat fortunate by the fact that we've had April renewals because it does seem like a lot of the natural disasters that you talk about seem to happen in late summer or early fall.

Eli Hackel - Goldman Sachs Group Inc., Research Division

And just on property taxes for the year?

Michael D. Barnello

Oh, property taxes, the property taxes are the hardest line item for us to underwrite. The reason is, is that a lot of them have different cycles, but even with the cycles they're supposed to have, a lot of them are late, with actually giving us their assessments. And then once the assessments come out, a lot times, their appealed. In fact, I think we have about 29 tax years, not hotels, tax years that are still being appealed, and they have been going on for some time. So because of that, we don't know what we'll win, and we don't know what the new assessments are going to look like. And so traditionally, we have underwritten to the -- in the 3% range for the year, and traditionally, over the course of the year, that's been pretty close, but quarter-to-quarter, it can be fairly lumpy. But otherwise, we haven't figured out a better way to thoroughly guesstimate those. But at the same time, we're not expecting huge savings or huge increases up from what we know now, Eli.

Operator

Moving on, we'll take our next question from Joshua Attie from Citi.

Joshua Attie - Citigroup Inc, Research Division

Mike, can you explain the low end of guidance? The 3% seems considerably below the recent run rate, and are you seeing anything in the business today that would indicate the deceleration of that magnitude?

Michael D. Barnello

When we look at the outlook, the things that we're focused on are the metrics that may have changed from 1 year to the other. So we felt very comfortable with where a lot of the metrics were in 2012, and I think when you examine a number of those metrics, they're a touch worse than they were in '12. Before I get into that, I guess, I should say -- I should reiterate, we feel very good about where we are in the cycle, so we're very optimistic about the overall supply-and-demand trends, but there are some things that are a touch worse than they were in '12. So when you drill down, those pieces are a couple of things. Supply, which was about 0.5 point in '12 is, by lots of predictions, going to be basically 0.7% up to 1%, so anywhere from 50% to 100% higher than it was in 2012. Demand, which ticked up a little bit in the fourth quarter after being down in the third quarter, has started to -- the demand growth has started to trend down over the last 3 years. That's normal as we get into the middle part of the cycle and demand recovery is not as strong. It's still higher than the long-term average, but it's trending to be below the growth that we saw in 2012. When we also look at citywides, citywides in most places are actually down and in some places, considering the -- especially the East Coast, are down fairly considerably. Now that is down from '12, which was, in many places, a record year, and by comparison, the citywides in '13 are, in many cities, higher than '11. But again, compared to '12, they're down. The other thing we think about is that government rates, when we look at government per diems, they were 5% to 6% in '12, and you guys all know that they're flat for this year and that's not a big piece of our business. It's about 3%. But it's a big piece of somebody's business, and those rates affect the -- all the markets we're in. So those are some metrics that we look at that are just really factual. When we also look at what's happening in one of our biggest markets in Washington D.C., it will be a little irresponsible of us not to be at least concerned about what's going to happen over the next couple of weeks with the fiscal cliff, debt ceiling, sequestration. I mean a lot of people have different predictions about this, but it's pretty clear that what our government's been up to has been -- has taken longer than we thought, and the solutions have not been generally as satisfactory as a lot of folks would like. So when we boil all that together, our thoughts are that we think that the 3% to 6% is a sound range to be in. And if the things that we're worried about in D.C. don't materialize, well, then we'll all be better off. But that's how we've -- that's how we cook it all together.

Joshua Attie - Citigroup Inc, Research Division

And also some of the positives, I know you previously mentioned tailwinds from renovations that weighed on 2012 results, like at the Roger and the Le Montrose that, that should help in 2013. To what extent is that factored into the 3% to 6%?

Michael D. Barnello

That is factored in. We obviously will get some tailwinds from the Roger and Le Montrose. When we look at -- there are definitely some positive look in our portfolio, inauguration. Inauguration was, on a simple comparison, a great event for us to have relative to last year. However, relative to the prior inauguration, it was not very good at all. And we had -- I've mentioned that, that was a worry in our October call, and then we thought that was a possibility if Obama was reelected because the second term for a president's inauguration doesn't tend to be as strong, and that turned out to be the case this time. So inauguration was a windfall for D.C., it was almost an exact wash of what we had in similar to last year, Josh. So even though it was a great benefit, it really just makes up for the fact Super Bowl is not repeating in Indianapolis as it was last year. We do have some benefit from Roger and Le Montrose, that's true, in Q2. And we do have other renovations that are going on. They're not significant. We just finished up the Deca, the Hotel Monaco in San Francisco. We're pretty close to being done with the Madera room renovation, and later on in the year, we'll start the Hilton Hotel.

Joshua Attie - Citigroup Inc, Research Division

Just looking at the first -- that all makes sense. just looking at the first quarter, you mentioned that January was up 10%, and the guidance for the first quarter was up 4% to 6% and that implies around 2% for February and March. And I understand that there is a holiday calendar shift in March. But is that, what you've seen to date in February, around 2%?

Michael D. Barnello

Our concern for Q1 is entirely what you just mentioned. It's the holiday in March. The Easter shifted from April last year to March, and it's 1 week out of 4 and it's material. And so -- and March did very well for us last year. Our March was up over 7%, and the comparison is tough. When we take out a week, it's just -- it's a bit of a wildcard. So that's the concern for us, and unfortunately, we're not going to know those results for another 6 weeks but of course, not trending poorly.

Joshua Attie - Citigroup Inc, Research Division

Just -- can you just give us some sense of how -- I don't know if you have final numbers for it, but qualitatively, how is February trending? Are you seeing any negative...

Michael D. Barnello

No, we don't have final numbers for February. But we're not -- it's not negative. It's actually -- it's trending fine.

Bruce A. Riggins

You do have the Super Bowl comparison. It's February, so that does impact the month.

Joshua Attie - Citigroup Inc, Research Division

But are you seeing any of the negative things that you spoke about earlier like uncertainty related to sequestration, things like that? Or any of those issues weighing on the February results aside from the Super Bowl?

Michael D. Barnello

Actually, that's a good point. No, we're not seeing anything relative to the concerns about sequestration today, so there's been nobody -- we talk to our D.C. properties quite a bit. It's on everybody's minds, but then we haven't heard of meeting planners canceling anything at this time because of it. They are concerned about what's going to happen, obviously, in the next couple of weeks and whether that translates into some cancellations or reluctance to book. That's harder to say, but so far, no, we're not seeing anything from that.

Joshua Attie - Citigroup Inc, Research Division

If I could just -- one more question. I know I've taken a lot of your time, but if I can just tie everything together. I just want to make sure I understand what you're saying. It sounds like the business today is running toward the high end of the 3% to 6% range. And it sounds like you're not seeing anything that is weighing that down today, but the low end of the range is just kind of reflects the possibility that some of those negative things could impact future results. Is that kind of a fair characterization of the guidance and the current trends?

Michael D. Barnello

Well, I mean, we gave a range because we're -- we see the possibility of being at both sides of it. So I don't want to characterize our range for the year as being towards one end or the other. I think I'm close to characterizing it the way you're saying is that there are circumstances, which would cause us to be at both ends, and that's -- we're trying to walk through with all those pieces. Obviously, look, we're hopeful that everything's resolved in D.C. in a couple of weeks. We don't have an issue. There's no sequestration. They get the debt ceiling lifted, and demand is robust, and there's no issues with the government travel. That'll be fantastic, but until we see that, we're just being a bit cautious. Does that make sense?

Operator

We will now take our next question from David Loeb from Baird.

David Loeb - Robert W. Baird & Co. Incorporated, Research Division

I want to follow up on Eli's acquisition question. Mike, can you just give a little color on where you think better price opportunities are today? Are they more likely to be, for example, in resorts than in the coastal urban markets, particularly private equity bidding fairly aggressively these days?

Michael D. Barnello

We haven't seen it -- that any particular segment or market has "special deals" in any particular time. What we've seen is that there are sometimes when there is either a slight dislocation in the market in terms of whether there's a gap between most buyers and sellers or there's some tax-driven sales that may have happened at the end of '12 that have created special pricing opportunities or somebody was under the gun. But I wouldn't characterize that we think there's a whole sector that we think there'll be deals at, meaning resorts are cheap or conventional hotels are cheap or the East Coast is cheap. Now we haven't seen that. Our focus has been on sticking to the types of hotels that we are looking to buy in the markets that we're focused on, our top core markets. And then when we find a hotel that has the characteristics that we're comfortable with, then we'll, of course -- the biggest step for us is to make sure the pricing makes sense relative to what we can do with it long term. So when we think about that, to add a little bit more color, our perspective was that when we did Liberty transaction at the end of December, there was a bit of a dislocation in the markets and that we were able to buy a hotel at the highest cap rate that we've bought in the last 3 years, a 6.8% cap rate on trailing for an asset of that quality and a great location in a major market because the seller was interested in getting something done by year end to preserve their tax position. So when those things come about, we're very happy to be ready to take advantage of that, but again, I don't know if there's buckets of opportunities in just sectors.

David Loeb - Robert W. Baird & Co. Incorporated, Research Division

Okay. And then following on that, are there -- pricing and competition aside, which markets are the most attractive to you for acquisitions? And are those, by definition, the most expensive today?

Michael D. Barnello

Well, I mean, when w you look at it, if we can perfectly script things, we would like to have more balance in our portfolio just in terms of percentages of where -- of the weighting of EBITDA from our top A markets. So if we only had hotels in the top A markets, there'll be 12% of EBITDA in every market. Now it's never going to happen that way, but we look at what's available, David, and we price it accordingly. So the things I mentioned earlier about the supply and demand, we have to focus on that. Just because we want hotels in one market that may have the best of factors, doesn't mean that anybody just wants to sell it to us. At the same time, there may be markets that are going through periods of distress or some people think that there's high supply or there's a problem with demand and maybe opportunities that may be available for relatively lower pricing now because there's going to be some short-term disruption, but long term, it might be a great place to invest. So it's hard to answer your question like that. We're looking at -- in our core markets. We're looking at all the hotels that were for sale there and if we -- if things happen to meet those criteria, then we'll buy it, and if we don't, we'll pass.

Operator

Moving on to the next question from Ryan Meliker from MLV Company.

Ryan Meliker - MLV & Co LLC, Research Division

Just a couple of quick things. First of all, can you give us any -- can you quantify at all what the positive impact or just the negative impact in February is on the Super Bowl comp in Indianapolis?

Michael D. Barnello

It's almost exactly the same offsetting the inauguration. The inauguration's in January, obviously, about $1.8 million was the delta in our room renovation, Ryan, and that's almost exactly what we benefited on the room side in Indianapolis. And we did more -- a lot more food and beverage in Indianapolis because not only do we have the Giants. The Giants won the Super Bowl, and so they had some parties that we couldn't possibly have projected and so the beverage spend was terrific.

Ryan Meliker - MLV & Co LLC, Research Division

Got you. So that -- I guess that 10% January RevPAR growth trending doesn't really seem to have too much of an impact, negative downside in February that you've seen then from the Super Bowl. That's correct?

Michael D. Barnello

Yes, our January results were actually 15.7%.

Ryan Meliker - MLV & Co LLC, Research Division

Right, but excluding D.C., it would have been 10%, so I'm just thinking, if I exclude Indy in February, if trends are similar, you'd still be seeing somewhere along the lines of 10% growth. I mean, the 2 should washout. Sounds -- does that make sense?

Michael D. Barnello

Well, the 2 washout, when you compare the event to the events, I'm not so sure that it washes out the month to the month exactly because numbers -- each month has a different amount of RevPAR, as well as different days, and there's different strengths in different months.

Bruce A. Riggins

Ryan, as well some soft disturb [ph] during the blizzard mainly in Boston but to a certain extent, up some of the East Coast cities as well, so that did have some impact in February.

Ryan Meliker - MLV & Co LLC, Research Division

Okay. And then -- that's helpful. And then moving onto group booking pace. If I heard you correctly, it sounds like your group pace for 2013 is up 1%. Is that where you guys thought you'd be? Are you happy with that? Are you trying to not book too much in the form of group and trying to focus more on transient given where your occupancy levels are?

Michael D. Barnello

Well, we're happy with it relative to where we were when we gave you guys pace in October. So if we look at that movement, it was significant. We're actually downpaced for '13. The thing that we have -- we've always tried to caveat when we talk about our group pace is that, just keep in mind we're 30% group house and of that, really about 5 or 6 hotels make up all of the group business. So while it's totally accurate for our portfolio, I don't know that it is indicative of broader trends at all, and when you think about it, we can make -- most of our group businesses, Westin Michigan Avenue, the Marriott Indianapolis, Westin Copley Place, Paradise Point, Lansdowne, et cetera. If you're asking if we're pleased with it, we're pleased with where we've moved to. Would we rather have it be higher? Sure, of course we would. Part of that is down because we're not able to book much into Park Central because Park Central's under renovation, so we're actually not taking a lot of group business because we can't take them during renovations, so part of it's affected by that [ph] hotel by itself. If you're asking if we're more focused on transient, well, the transient is, obviously, our bread and butter. It's the majority of our business, and we're happy that we have pricing power right now. And as I mentioned in the prepared remarks, we're up over 8% on our corporate negotiated rates for '13, so we feel good about that. At the same time, look, are we pushing the group rates? Absolutely, we're pushing where we think it's appropriate.

Ryan Meliker - MLV & Co LLC, Research Division

That's helpful. Do you guys have -- can you guys break down what group pace would be for 2013 excluding the Park Central? Or do you not have that data available?

Michael D. Barnello

No, we do. Take that Park Central out completely, the group pace would be up about 1.6%.

Ryan Meliker - MLV & Co LLC, Research Division

Okay. So it's not a huge number, but it does impact you to some extent. And then last question, with regards to the Park Central, can we assume that your 0% to 3% RevPAR growth is going to be higher, maybe even above that high end in 4Q as Park Central comes online, and you're going to actually start to see growth benefiting from the renovation plus lack of renovation disruption. Is that reasonable as I think about the seasonality of the quarters, how we go through the year?

Michael D. Barnello

Well, what we said before is the renovation should be largely done by Q3. Now we don't [indiscernible] the possibility that it goes into Q4. So that's one thing to think about in terms of when we actually get it finished. When we think about the Park Central, we think the Park Central Hotel component itself, will have a pretty -- I won't say easy but easier time ramping up because that hotel exists. The harder part to answer for you, Ryan, is the West House. We're spending a lot of time right now making sure that we can ramp up as quickly and efficiently as possible with West House, but that's that the wildcard of that. It's like we haven't given out quarterly breakdowns, and I hate to do that for you right now. We need to do that for you right now. But that's our concern relative to Park Central. We feel good about it, but we just don't have any answer for you right now.

Ryan Meliker - MLV & Co LLC, Research Division

Okay, but then without quantifying it, is it reasonable for me to assume that your 0% to 3% guidance including the Park Central takes into account some, I guess, lower renovation disruption and stronger RevPAR growth in 4Q, assuming the property comes in line in 4Q, at some point in 4Q, that is?

Michael D. Barnello

In general, it would be a good assumption. The only thing that I would caution you on is that Q4 at the Park Central was really strong. The reason that it was really strong is because of something we hope does not repeat again, so we had a lot of FEMA business. We had a lot of business that was just in town for insurance, and so -- all because of Super Storm Sandy. So in some respects, that rev up could be stronger, but obviously, we're not going to get that repeat again.

Ryan Meliker - MLV & Co LLC, Research Division

Okay, okay. That make sense. And then should we expect profit margins towards the back half of the year to, I guess, growth -- year-over-year growth to get impacted as you start to ramp the Park Central and start to boost those sales up with the renovation coming -- increment online? Or is that going to be really minimal relative to your total portfolio?

Michael D. Barnello

I think it's fairly minimal relative to the total portfolio, and it's a quarter, it is -- now even though it's a big hotel, it's just -- it's not quite 10% of our portfolio, it is a quarter. And, we've built that into projections so far, so I would not think that will be meaningful.

Operator

Moving on to your next question from Andrew Didora from Bank of America.

Andrew G. Didora - BofA Merrill Lynch, Research Division

Just wanted to touch upon your outlook. It seems like in 2012, D.C. impacted your RevPAR by about 140 basis points. I'm just wondering whether you guys anticipate the drag in D.C. to be brought at the high-end and low-end of your 3% to 6% RevPAR outlook for the year?

Michael D. Barnello

That's a very hard question for us to answer, Andrew. I mean, we're as anxious as you are to see what happens in D.C. But until we get some more resolution on that, it's harder for us to answer that with any certainty. When you think about big picture, obviously, inauguration, even though that was a relative disappointment to the last inauguration, it was a great boon relative to last year. So that helped things year-over-year. When we think about supply and demand in D.C., we feel generally very good about it. There's no real supply coming into this market in 2013, and demand, even though it was down just a touch in 2012, it was down from the peak levels in 2011. So we feel very good about that. The bigger -- and other things we have is we do have IMF, which generally isn't in Washington D.C., which left Washington last year and is coming back into D.C. in October. So that's a good thing. But it's harder for us to guess the rest of the year until we see what happens with our heroes in Congress.

Andrew G. Didora - BofA Merrill Lynch, Research Division

Got it. And I guess when you think about your other markets, you mentioned in your prepared remarks, it seems like the West Coast is going to be one of your stronger areas in 2013. Just curious relative to your 3% to 6% outlook, how would you view some of your other big markets like New York, Boston and Chicago in '13?

Michael D. Barnello

So we think about the year, our thinking hasn't changed much since really the comments made on the October call. We do think the West Coast has an easier story for sales in '13. You have demand at peak levels in those -- all four of those markets, so San Francisco, Seattle, San Diego and L.A. You have really no supply coming online in any of those markets, that's great. Citywides are up in Seattle. They're up slowly in San Francisco. They're not really meaningful in LA but we only have one citywide and it doesn't really affect our submarkets. And San Diego's down a little bit. But I think when you look at that relative to the East Coast, I think that overall, the West Coast should do on the higher side. When you move across the country, you do have the citywides that are down in the East Coast. So when you think about what's going on with citywide, Boston is down about 30%, D.C. is down about 25%, New York is down 30%. These are citywides, not us. So that makes it just a tougher go, but... Chicago is down just a touch, basically flat, but not as much of a concern. At the same time, we look at where we see supply in our markets, it is primarily in the East Coast. So you do have a big uptick in supply in New York, a little less so in Philadelphia and you still have over 2% coming online in Chicago. So that's how we've kind of moved across the country. We think that it'll be just tougher sledding in the East Coast and best picture should be in the West Coast.

Andrew G. Didora - BofA Merrill Lynch, Research Division

Okay that's helpful, Mike. And then one last question, I guess just following what Ryan was asking earlier with the Park Central. Once you get the hotel up fully online, how should we think about the ramp at the hotel. And I guess, in your underwriting, how long do you think it could take for you to close that $55 rate gap between the hotel and the market?

Michael D. Barnello

Well, the way we've thought about it is in pieces. So it's -- the $55 rate gap that we've been using is really to describe the Park Central with the area of Manhattan hotels. And so, when we think about that, we're going to have 560 [ph] rooms in the Park Central that would be renovated and all the public places will be renovated at the same time. And so just isolating that part of the hotel, think about it as almost eliminating the lowest rate of business, and focusing on moving up the top rate of business and perhaps even getting some corporate business to the Park Central, which we think is an opportunity now. Which we don't have really in place today. So that should take -- it'll take a year to do that just to Park Central because we're moving out lower business and getting higher business. On the West house, the good news for us is our timing is actually pretty good. We have mall rooms done now, many of you guys have seen those. We're touring a lot of corporate business already through those mall rooms. And while the hotel won't be necessarily completely done until the end of third quarter, early fourth quarter, enough of the hotel will be done to showcase a lot of the corporate business to get corporate rates for '14 and beyond. That's really our game plan. So the question really for us is how much that we can lock into core business for '14 at generally, introductory rates, which will still be high rates, but introductory relative to our [indiscernible] position at West House because the trial -- and then, obviously, move those rates up over time. They'll take a little longer. We think it's a couple-year process to ramp up. But we feel good about it because not only do we have location of the product, but the West House hotel is not even going to be 200 rooms, it's 173 rooms. So it should be the right size that we can do all those things and create enough demand for local businesses to actually be successful. When you think about it, we have businesses like Alliance Bernstein, Barclays, right around the corner. We don't get any corp business at all at the hotel and that's why the opportunity.

Operator

Moving on, we'll take our next question from Bill Crow, Raymond James.

William A. Crow - Raymond James & Associates, Inc., Research Division

Mike, there's a flood of capital out there kind of chasing assets today. So the 2 questions that come out of that. One is, any competition shifting for assets when you're looking at acquisitions, do you see more private equity guys or anything different there? And then does that make you further contemplate asset sales? I know you sold your non-core properties. I know there was talks several years ago about selling 1 or 2 for example, in D.C. just to prove the value and prune the portfolio a little bit. What are your thoughts on those two?

Michael D. Barnello

As far as the competition shifting, Bill, over the last 3 years, from time to time, on different assets, we've seen different players, whether it's private equity or overseas players. Sometimes we've prevailed and we were the winner and sometimes those folks prevail and they're the winner. So I cannot tell you right now, we're seeing more of the shift. I mean it's a logical question you're asking as the capital becomes more abundant, becomes more -- priced more favorably for the borrower. Then, obviously, the other players can become more competitive. Will we see more of that in 2013? Hard to say. But our perspective is that if it's properties that we really think we have a strong desire to acquire and the underwriting makes sense, then hopefully we'll prevail. But there's been a number of times over the years where we haven't, and that's okay, too. There always is a price for us to pay for assets. It kind of makes sense both on the cash-on-cash and the IRR side. So it's harder to say. All we can do is stick to our knitting relative to underwriting criteria, make sure we get the right returns. On the asset sales, we don't really comment on selling or buying until we've generally done it. But I can tell you that when you think about our portfolio at its core, we have 90% of our EBITDA comes from our core markets plus Philadelphia. So there's not many hotels that we would really consider selling and we don't really have anything that we would really want to part with at this point. So down the road, you never know. And when somebody makes us an offer that we can't refuse, then clearly we'll sell the asset. But we feel very comfortable with the portfolio we have right now.

William A. Crow - Raymond James & Associates, Inc., Research Division

Alright. And then I appreciate the color on the citywides for this year. Any thoughts on '14 and in particular, in the markets facing some new supply?

Michael D. Barnello

Yes, the citywides are actually much better in '14. So if you look at Boston, Boston is up monstrously in '14. So right now, we have in our books about 60%, strong number. Chicago is up slightly by about 1%, D.C. is up about 16%, New York, 40%. And New York is as critical because there's not much other demand in New York, but up is up. And the opposite takes place a little bit. You see, some of the West Coast was off a little bit. San Diego's down a little bit, Seattle's down by about 20%, but again that's a small color of the demand and Seattle was -- not that many citywides. San Francisco is -- it continues to be up. So most of the markets are actually up in '14 relative to '13. That's a good sign.

William A. Crow - Raymond James & Associates, Inc., Research Division

Great. And then finally for me. Have you guys had any formal discussions with the owners of the 2 properties in the West Coast that you invested in through the debt?

Michael D. Barnello

There's really no update there. We're hoping that's just the mezzanine owner and that doesn't mature until May '14. They can prepay us at the end of January, I think, and '14 at the earliest. But nothing to report on that though, other than the properties are performing well.

Operator

Moving now to your next question from James Sullivan from Cowen and Company.

James W. Sullivan - Cowen and Company, LLC, Research Division

Mike, I want to follow-up a little bit with you on the D.C. market. Your portfolio in DC is kind of primarily CBD, as opposed to the D.C. Metro. And we talked about that differential last year when the market conditions were difficult. And I'm just curious, year-to-date, and I'm really thinking post the inauguration, we've had a few weeks here. But are we seeing that the D.C. CBD is running strongly ahead of the overall Metro?

Michael D. Barnello

If you look at January, Jim, the January CBD, you guys get the MSAs. The MSA for January was about 25% and the CBD was up 39%. So your sentiment is accurate. Turns out, that shakes out, which also isn't surprising when you think about it and people obviously want to stay as close as they can to the festivities at the inauguration. So that's a good thing. Last year, it was actually pretty close when you look at the markets overall, for D.C. the MSA and the CBD. We outperformed the CBD but the MSA did a little better. But if you look at the last couple of years, the MSA was behind the CBD. So it's not a perfect track, but in general, the CBD has done a little better. But last year was not the case. So if you think about what's going to happen this year, we're off to a better start than the MSA, but it is harder to gauge until we know what's going to happen in the last couple of weeks with congress.

James W. Sullivan - Cowen and Company, LLC, Research Division

Okay. When you talked about supply growth in D.C., you touched on 2013, I think your wording was virtually none. And I just wonder if you look out to 2014, does that change materially?

Michael D. Barnello

Yes, it does. As we look at '14, what you have is -- you have the new convention center hotel opening up. So we have an opening up in May. Now if that moves around a little bit, obviously it'll affect the numbers. But either way, it's going to be sliced into 2 years. So that's going to be some supply growth or it's going to add supply growth in cities for about 4% to 4.5% in '14 and about the same number into '15, Jim.

James W. Sullivan - Cowen and Company, LLC, Research Division

So 4.5%...

Michael D. Barnello

But it's really primarily that 1 hotel.

James W. Sullivan - Cowen and Company, LLC, Research Division

Okay, so 4.5% in 2014.

Michael D. Barnello

That's what we're tracking right now. Obviously, if that hotel moves up or back its date, then that'll shift things a little bit.

James W. Sullivan - Cowen and Company, LLC, Research Division

And you had touched on the supply growth outlook in New York. And I wonder with your assets being a different submarket, how do you think about the supply growth by submarket? I'm thinking kind of Midtown East versus downtown. And then in the market where Park Central is, I guess, you call it Central Park South, Columbus Circle, we're seeing different elements in terms of new supply in those submarkets. So I'm just wondering if you see much of a differential impact as a result?

Michael D. Barnello

Well, we do look at it. Obviously, the hotels themselves look at their comp set [ph] to see what supplies to introduce. And in some respects, you're right. I mean supply in Battery Park, means more to Gild Hall than it does to Park Central. But what you've seen in the last couple of years, and you're going to see for the next couple of years, is a supply bulge of the whole city. Now thankfully, New York has been so strong that they want to offset that supply. And our thoughts in general is that will continue because the demand is so strong and I think there's still a lot of people who are staying elsewhere or not coming because they can't get the right product they want in Manhattan. But in a macro sense, Jim, we do look at supply is supply because it does affect where a lot of people will go that aren't as particular about where they stay. So there's an awful lot of demand when it comes to Manhattan that is just happy for a room in Manhattan. And then there's obviously an awful lot that want to be in Times Square or Central Park South or Midtown East, et cetera. And for those people, it's helpful for us. But obviously, the more a spot opens up, it creates less compression for us. So what we're seeing and what should -- a lot of folks are seeing is that there's still a lot of sell up days in Manhattan, but the number of times where you can jam the rates, where you might have been able to do that in the past gets harder as more supply is introduced. So that's a longer way of saying we're actually tracking both. What's happening in our neighborhoods, and what's happening in the island.

James W. Sullivan - Cowen and Company, LLC, Research Division

Okay. And then finally on West House [ph], can you just remind me whether there are separate F&B outlets for West House [ph] and where you are in terms of those if they exist?

Michael D. Barnello

When you think about West House [ph], West House [ph] will have its own entrance, it's own lobby. It will have its own food and beverage offering in terms of what we offer from a pantry or imagine a concierge's lounge, probably the easiest way to describe it, for folks. So they'll have an offering and they'll have obviously the room, maybe room service. As far as the main restaurant, they will share that with the Park Central. Right now, we have the restaurant called Cityhouse. That restaurant will be moved from its current location on the 56th and 7th to behind the lobby area. And that will be servicing not only the Park Central guest but the West House [ph] guest, should they choose to. So it's a little bit of both, Jim. They will have a full-service restaurant, but they will also have their own area to convene if they want to get something simpler than a full-service dining experience.

James W. Sullivan - Cowen and Company, LLC, Research Division

Is that lease restaurant operated by the hotel or a leased operation?

Michael D. Barnello

It's not. It's operated by the hotel.

Operator

Moving on to our next question from Lukas Hartwich from Green Street Advisors.

Lukas Hartwich - Green Street Advisors, Inc., Research Division

Bruce, can you provide some pricing color, maybe in terms of EBITDA multiple or cap rates on your San Diego acquisition?

Bruce A. Riggins

On our -- let's see. The Del Mar we bought at 6 cap on trailing. So we closed December 6 and that was trailing through end of November. And the story there, Lukas, is that the EBITDA margins were around 25%.

Michael D. Barnello

25.2% and the multiple is 13.9% on trailing.

Bruce A. Riggins

So the thing that we've been focused on with that is that, that's a hotel that runs a significantly higher rate than our entire portfolio, well over $100 higher. And their margins are 25% or soon to be lower than our average unit. Yes, no, our average is 32% for 2012. So our game plan, which is already on its way to being executed, is to eliminate that GAAP between where they are or they were performing than what our averages are, and we're well on our way to do that. That's the story with Del Mar.

Lukas Hartwich - Green Street Advisors, Inc., Research Division

Great. And then the $67 million you're spending at Park Central, have you broken out what portion of that is going towards the West House [ph]?

Bruce A. Riggins

Not really. I mean we do have it in the budget, but we're doing both lobbies and there's a lot of areas that are being worked on together. Obviously, you can break it on a per room basis, but it's not meaningful.

Operator

And we'll take our final question from Wes Golladay from RBC Capital Markets.

Wes Golladay - RBC Capital Markets, LLC, Research Division

Looking at the guidance at the high end, excluding Park Central, you have about 6% RevPAR growth and only 100 basis points of margin expansion. Just wondering, in light of the low expense growth in 2012, have you seen any, I guess, headwinds on the expense side in 2013?

Michael D. Barnello

When we think about expenses, Wes, we -- in general, it takes 3% of RevPAR to offset the expense growth we see year-over-year. Now it does depend on how RevPAR is -- comes in. Obviously, it comes in with more occupancy, it's a touch more expensive than if it's rate. We do think most of the growth will be rate as we've seen in the last couple of years, so this comparable is running basically 80% occupancy, so we have more opportunity on the rate side. The one thing to think about when we look at our expenses and we don't think there's really any anomalies per se. But when you look at what we have, which is 6%, we think that that's probably a safe level to be at relative to that kind of RevPAR increase. That make sense?

Wes Golladay - RBC Capital Markets, LLC, Research Division

I mean, I guess it does. I'm just wondering if there's like any -- I mean a kind of backed in about 4.5% expense growth. But I'm assuming this was ADR-driven, at the 6%. And I'm just wondering if there was any, I guess, issues -- not issues, but I guess tax headwinds with the acquisitions that might have been...

Michael D. Barnello

Well, you know, the only thing to think about is that over the last couple of years, the other income has not maintained the same pace as the RevPAR, Wes. And so, if the food and beverage is not growing at, in your case, 6%, then the margins on that are not as profitable. And so, we don't know exactly what food and beverage numbers are going to turn up this year. So if you look at our growth in '11, 2 of those numbers were great and we had such an enormous growth in 2011. If you look at what happened in 2012, what happened is we're actually down about 1% in food and beverage. And so, depending on how that shakes out, that will affect our margins overall. And so that is actually harder for us to forecast because even though we have minimums and we have a pace, people are entitled to those levels until very close out. And they can show up on the room side, but they don't initially have to have the same level of commitments on the food and beverage side.

Wes Golladay - RBC Capital Markets, LLC, Research Division

Excellent. And last one, with all the rebuilding activity in New York, are you experiencing any delays at the Park Central and the construction front?

Michael D. Barnello

No, we're not. We have permanent -- we have all the certificates that we need and our guys have been very proactive. And they started planning for this well before what happened with Sandy. It impacts any kind of delays that you might be referencing. So we haven't seen any slowdown and we feel good about where they are, and they feel good about the timing so far. So we feel -- we're very thankful for that.

Operator

And at this time, I'd like to turn the conference back over to our speakers for any additional or closing remarks.

Michael D. Barnello

Thanks, Jim. And thanks to all who are listening to our fourth quarter earnings call. We look forward to seeing many of you over the next month and we'll talk to you in April during our first quarter results call. Thanks, everyone.

Operator

Thank you. That will conclude today's conference. We thank you for your participation.

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