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Executives

Tim Bonang – Director, IR

John Murray – President and COO

Mark Kleifges – Treasurer and CFO

Analysts

Nap Overton – Morgan Keegan

Jeff Donnelly – Wachovia

Mike Salinsky – RBC Capital Markets

Celeste Brown – Morgan Stanley

William Truelove – UBS

Hospitality Properties Trust (HPT) Q4 2008 Earnings Call Transcript March 3, 2009 11:00 AM ET

Operator

Good day and welcome to the Hospitality Properties Trust fourth quarter 2008 earnings results conference call. This call is being recorded. At this time for opening remarks and introductions I would like to turn the call over to Manager of Investor Relations, Tim Bonang. Please go ahead, sir.

Tim Bonang

Thank you and good morning, everyone. Joining 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.

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, March 03, 2009. The company undertakes no obligation to revise or publicly release the results of any revision for the forward-looking statements made in today's conference call other than through filings with the Securities and Exchange Commission.

In addition, this call may contain non-GAAP numbers including funds from operations or FFO. A reconciliation of FFO to net income is available in our supplemental package found in the Investor Relations section of the company's Web site. Actual results may differ materially from those projected in these forward-looking statements.

Additional information concerning factors that could cause those differences is contained in our Form 10-K filed with the SEC and in our Q4 supplemental operating and financial data found on our Web site at www.hptreit.com. Investors are cautioned to not place undue reliance upon forward-looking statements.

Now, I would like to turn the call over to John Murray.

John Murray

Thank you, Tim. Good morning and welcome to our fourth quarter 2008 earnings call. Yesterday, HPT reported FFO per share for the 2008 fourth quarter of $0.94. FFO this quarter reflects a rent deferral of $15 million or $0.16 per share in connection with the rent deferral agreement with TA, which we announced in August, and non-accrual of straight line rent of $3.5 million or $0.04 per share per quarter related to the TA lease for 145 travel centers.

Yesterday, TA again reported strong quarterly financial performance aided by generally declining fuel prices during the quarter. Despite fuel volumes, which were down about 13% quarter over quarter across the 184 comparable HPT-owned sites, fuel gross margin increased 98%. Non-fuel revenues and gross margins declined 6.9% and 5.7%, respectively, far less than fuel volumes dropped. We believe this is an indication of relative preference by professional truck drivers for the quality, diversity, and consistency of goods and services offered at TA locations and the availability of substantial parking, regardless of the need for fuel.

TA’s other property level operating expenses were down 6.7% compared to 2007 quarter. As a result, in the 2008 fourth quarter TA covered the rent due under its leases with HPT at both the property level and at the corporate adjusted EBITDA level. Factors that led to TA’s improved performance included successful fuel pricing strategies, greater expense control and the decline in the price of fuel during the quarter. These remain challenging times for TA and the trucking industry as fewer goods are being shipped due to the recessionary economy. Fleets and independent truckers also continue efforts to conserve fuel.

Some may look at TA's results these past two quarters and wonder if the rent deferral agreement was unnecessary. The deferred agreement was not made in response to a crisis at TA, rather it was intended to ensure they had sufficient liquidity available to withstand the prolonged economic downturn.

At December 31, TA had approximately $145 million of cash on hand, availability under its line of credit, access to additional capital reimbursement from HPT of about $17 million, and the ability to defer up to $5 million of rent per month though December 2010. We believe the actions taken by TA to improve their business combined with their current liquidity and the flexibility provided by the rent deferral agreement enhances TA’s ability to address liquidity risks that may arise during this recession.

Turning to our Hotel investments, fourth quarter 2008 RevPAR declined 9.7% across our 289 comparable hotels driven by a 5 percentage point decline in average occupancy to 63.7% and a decline in average daily rate of 2.6%. RevPAR was aided by improvement at our higher placed hotels, which increased 7.1% over the 2007 quarter. RevPAR at all other portfolios declined between 3.6% and 14.8%.

Obviously, we are concerned about the reduced business in leisure transient demand in this weak economy. We believe HPT's hotels are well positioned to compete regardless of the weak economic cycle based on their average RevPAR index, which increased 260 basis points in 2008 versus 2007 to 119.

In past downturns, our hotels have generally performed well versus their direct competitors and we believe the management and brand strengths behind our hotels today is as good as it has ever been. Despite the efforts of our operators to reign in expenses in response to declining revenue, operating costs continued to increase. As a result, hotel gross margins dropped 240 basis points in the 2008 fourth quarter versus 2007. While the accelerated drop off in hotel performance in the fourth quarter 2008 was reminiscent of 2001, HPT’s hotel annual minimum return and rent coverage ratios remained positive, except in Kauai where a major hotel renovation began last month.

Lodging performance dramatically declined simultaneously with completion of our annual budget process. Each of our operators delayed its budget process into January in the hopes of gaining visibility as to the duration and extent of the impact the current recession may have on hotel performance.

Our managers have significantly reduced their projections for RevPAR performance in 2009 due to the weak economy and reduced visibility. Most are now expecting full year 2009 RevPAR to decline in excess of 10% with steeper drops in the first two quarters followed by some improvement in the second half. Each of our operators has implemented contingency plans in an effort to increase demand, maintain existing business, and control costs while continuing to focus on the guest experience.

Every year we reinvest significant sums in our hotels, both through the FF&E reserve and by additional HPT investments to which our minimum rent returns have generally increased. In 2008, HPT made improvements totaling approximately $135 million to our hotels, including approximately $34 million of HPT funded investments. In the next 12 to 18 months, further investment is planned at approximately 40 Marriott select service hotels and at our Kauai Marriott. We believe these investments will ensure that HPT’s hotels remain the local market choice not only during this current period of economic weakness, but also as the cycle turns.

All of HPT's hotel management agreements and leases require that we be paid rents or returns monthly, and there are corporate guarantees, security deposits and other features which are intended to secure the performance obligations of our tenants and operators.

The structure of our agreement aligns HPT’s interests with those of our tenants and operators. HPT's operators and tenants are not small unknown enterprises, rather all properties are operated by large well-known managers like Marriott, IHG, Hyatt, and Carlson. However, given the severity of the current economic downturn the effectiveness of these various security features may be tested.

In fact this past Friday the amounts paid to us by Marriott for the Marriott No. 3 managed portfolio and the Marriott No. 4 leased portfolio were less than the required periodic minimum return and base rent amounts in our agreements. The shortfall from the managed portfolio is approximately $1.4 million and the shortfall from the leased portfolio was approximately $900,000.

We have sent required notices to Marriott and our tenant, Barcelo Crestline, which start a 10-day cure period. The minimum return payments to us for the Marriott No. 3 portfolio were also deficient in periods 1 and 2, but in each case the deficiency was paid during the cure period. If the period 3 deficiencies are not paid in the 10-day cure period, among other things we can draw on the security deposits we have in connection with each portfolio, which total $36.2 million and $28.5 million, respectively. If this recession continues for a substantial period of time, the security deposits might turn out to be insufficient to offset the cash flow shortfall. But based on the projections we have received from Marriott we believe the deposits will be sufficient.

In the meantime, we are and have been in discussions with both Marriott and Barcelo Crestline concerning this situation. It is too early to determine what if anything in our agreements might be modified as a result of these discussions.

HPT remains one of the most secure hotel REITs in the industry and we have maintained our investment grade rating throughout this difficult economic environment. Also HPT has one of the strongest balance sheets in the industry with $6.4 billion of un-incumbent property and no significant debt maturities until 2011.

Nevertheless, this is the most challenging economic environment we have faced since HPT was formed. For commercial real estate companies, the debt capital markets are illiquid at best and extremely volatile, with hotels the most challenged asset class.

As you know, the 2008 fourth quarter common dividend was paid in February and HPT remains one of only two lodging REITs that has not reduced or eliminated its common share dividend since its IPO. That said, these are unprecedented economic times and our Board of Trustees will review all options regarding the 2009 dividend in order to maintain our strong capital base and liquidity.

I will now turn the presentation over to Mark Kleifges, our CFO.

Mark Kleifges

Thanks, John. During the 2008 fourth quarter, RevPAR for our hotel portfolio decreased 9.7% with increases at our Hyatt portfolio, offsets by declines at each of our other portfolios, most in excess of 10%. Hotel gross margins declined for the quarter dropping 240 basis points to 40.8%.

Consistent with hotel revenue and gross margins, cash flow available to pay our minimum returns and rents also declined quarter over quarter. Although our Hyatt turned in strong performance with cash flow increasing over 44% in the quarter, each of our other hotel portfolios experienced quarter-over-quarter declines in cash flow resulting in a combined 17% decrease in cash flow available to pay our minimum rents and returns.

Despite this decline, rent and return coverage ratios for the year were above one times for all of our hotel portfolios. Only our Marriott Kauai lease had coverage below one times for 2008.

The Kauai lease, which is subject to a Marriott guarantee, is not expected to show significant improvement until after its renovation is completed in late 2009 or early 2010. As you would expect, with the exception of the Hyatt portfolio each of our hotel portfolios experienced declining coverage in the 2008 fourth quarter versus the 2007 fourth quarter.

Turning to our TravelCenters portfolio, TA followed an outstanding third quarter with continued strong performance in the fourth quarter. Cash flow available to pay rent at our 184 comparable travel centers increased $43.8 million or approximately 93% over the 2007 fourth quarter. For the year, cash flow available to pay rent increased $61.7 million or approximately 23%.

Property level coverage for the year was 1.4 times for our 145 property lease and 1.5 times for our 40 property lease. Both of these coverage amounts have been calculated based on contractual cash rents and exclude the impact of the rent deferral agreement. In the fourth quarter, TA produced corporate level adjusted EBITDA of $77.2 million, a 176% increase over the 2007 fourth quarter. TA's adjusted EBITDA coverage of cash rent at the corporate level for the quarter was 1.7 times. Adding back the $15 million rent deferral during the quarter, coverage of rent would have been 1.3 times.

HPT's EBITDA in the fourth quarter of 2008 was $132.8 million which is a 14% decline from 2007 fourth quarter EBITDA of $154.3 million. This decline is due primarily to the $15 million rent deferral by TA, non-accrual of straight-line rent of $3.5 million, and a $6.2 million decline in additional returns and percentage rents compared to 2007.

Minimum returns and rents were $127.9 million in the 2008 fourth quarter, 11% decrease from the 2007 fourth quarter. Again, this decline resulted primarily due to the TA rent deferral and straight-line rent.

FFO for the fourth quarter includes negative net additional returns and percentage rent of approximately $1.2 million, or $0.01 per share. This compares to approximately $5 million or $0.05 per share of additional returns in percentage rents earned in the 2007 fourth quarter. The negative 2008 amount resulted from our refund at year end of certain additional returns paid to HPT during the first three quarters of 2008. As you know, additional returns are paid to us each quarter but are subject to adjustment at year-end based on annual calculations of hotel profitability.

During the fourth quarter, we experienced quarter-over-quarter declines in additional returns and percentage rents at all of our portfolios and we expect this trend to continue in 2009.

In January, we declared a $0.77 per share common dividend related to the fourth quarter. Our FFO payout ratio was 82% in the fourth quarter and we generated cash flow available for distribution in the quarter sufficient to cover our common dividend.

Turning to our balance sheet and liquidity, cash and cash equivalents totaled $54.5 million at December 31, which includes $32 million of cash escrowed for future improvements to our hotels.

HPT's debt to total capital on a book basis was approximately 50% at year-end, and our EBITDA to total fixed charges coverage ratio remained strong at 3 times in the 2008 fourth quarter. At year-end, we had $354 million available under our revolving credit agreement and only one debt maturities of $50 million between now and 2011.

We currently expect to fund between $100 million to $120 million of capital improvements in 2009 in excess of the amount funded with FF&E reserves. Although some portion of this funding may get pushed out to 2010. In February 2009, we repurchased approximately $113 million of our 3.8% convertible senior notes for $82 million, representing a 27% discount to face value.

Operator, that concludes our prepared remarks. We are ready to open it up for questions.

Question-and-Answer Session

Operator

(Operator instructions) And our first question is from Nap Overton, Morgan Keegan.

Nap Overton – Morgan Keegan

Good morning. So on one specific portfolio, the Marriott No. 2, has Residence Inns, that I believe expires at the end of 2010 and you’ve received notice that that will not be renewed. The question is, are those Gen 1 Residence Inns and what are your plans for that group of properties?

John Murray

Thanks for the question. Those are not Gen 1 Residence Inns. We don't have any Gen 1 Residence Inns. I believe our oldest Residence Inns are Gen 4 [ph]. Our current expectation obviously it’s couple of years away, but our current expectation is that we would set up a TRS to become the tenant on that portfolio and we would have a management agreement – management relationship directly with Marriott International. It’s an existing management contract on that portfolio that runs I think until 2019. So the owner’s priority in a lot of those features would remain unchanged.

Nap Overton – Morgan Keegan

Okay. And then did you say there were two or three of the Marriott portfolios under which the recent payments had fell short of the base minimum rent?

John Murray

There are currently two portfolios, the Marriott No. 3 and Marriott No. 4 portfolio were we received payments equal to the expected cash flow for the Marriott's four week period, rather than the contractual amount.

Nap Overton – Morgan Keegan

Okay. And did you make an additional comment about the agreement No. 10? Or did I misunderstand that?

John Murray

I think you misunderstood.

Nap Overton – Morgan Keegan

Okay, all right. And then do know how much funding to TravelCenters of America do you expect to fund in 2009?

Mark Kleifges

Nap, this is Mark. There is about $16.5 million, $17 million of funding obligations that remain under the initial $125 million we committed to TA. And my best guess is that we will make that funding in 2009. Other than that I'm not currently expecting any additional funding.

Nap Overton – Morgan Keegan

Okay, all right. And then based on your taxable income, or reasonable estimate of that what kind of flexibility, do you think you have in terms of the dividend payment to be able to maintain REIT status, if the Board were to decide to reduce the dividend.

Mark Kleifges

Well, Nap, it's difficult to give guidance on taxable income without giving earnings guidance. So, I guess all I can do is point you to last year's dividend allocation for tax purposes and about 86% of last year's dividend was ordinary income with the remaining 14% return to capital. So that will give you a snapshot of how much flexibility we would have had last year and then you can work from there with your current earnings model to figure out how much flexibility we may have this year.

Nap Overton – Morgan Keegan

Okay. While I note you are not the Board of Directors, what would be your judgment on the use of stock dividends as opposed to just a dividend reduction in terms of making any adjustments to the dividend.

John Murray

Well, this is John. As I mentioned, I think our Board is going to consider a variety of options, or it’s going to consider all its options. I think the only thing that I can comfortably say is probably off the table would be a dividend increase. But beyond that they are going to consider probably everything from continuing the dividend as we have since our IPO, or on the other end of the spectrum could be just paying one dividend at the end of 2009 based on taxable income, which could be paid partially in shares. So there is a wide spectrum of choices for the Board to consider, and they're going to, I'm sure, diligently consider all those choices and that won’t happen until sometime in April.

Nap Overton – Morgan Keegan

Okay. Thanks.

Operator

Our next question comes from Jeff Donnelly, Wachovia.

Jeff Donnelly – Wachovia

Good morning guys. You know I know I’m looking ahead a little bit, but certainly you learned today that Host intends to terminate its obligation in the Marriott 2, I guess what is that, the end of 2010, but Marriott 1's lease is similar in that it has Host on the hook through 2012. Is there any discussion with them around what their plans are there or is that just too far into the future to call at this point?

John Murray

No, we haven't had any discussions with them. We really haven't had any discussions with them about the 18 Residence Inns either. We sort of sense that this was going to happen back when Host elected REIT status, and had to bring Crestline in as a subtenant. We never released Host from either of those leases at that time. This wasn't really a surprise. We didn't really think it represents a material change to our business in any way. If Host decides to continue and renew the lease on the 53 Courtyard, that's fine, if they don’t we’ve historically had pretty strong coverage there. And that might be an opportunity for us to have increased upside in that portfolio coming to HPT instead of to a tenant. But we haven't had any discussions about it.

Jeff Donnelly – Wachovia

And I think – continuing with, I think it was Nap's question, on Marriott No. 3 and No. 4, you mentioned they were sending in the cash flow to hotels that they produced only and not the basement on rent. I guess, there as well, I mean have you spoken with Marriott International live on this? You think they are trying to send you a message they would like to renegotiate, or is it just miscommunication?

John Murray

It's not miscommunication. These are unprecedented economic times for Marriott as much as it is for HPT and the rest of industry. And Marriott's a large well managed company, and I think that they may have misinterpreted current industry conditions and HPT's balance sheet strength and liquidity to think that we might be open to some negotiations. But we are in discussions with them and I don’t really want to go into more than that. We are in discussions with Marriott and with Barcelo Crestline. And we have a number of options available to us, including drawing on the security deposit as I mentioned.

Jeff Donnelly – Wachovia

I don't want to reveal your hand, but I guess to step back just generally, not speaking about anything in specific, but to your point. We are I guess facing times that are really unlike anything most operators have faced in their careers and that’s causing them to take aggressive steps to secure their platforms. The past HPT has been very aggressive, I would say, with handling tenants who defaulted but in this environment I guess you probably don’t want to go through or you prefer not to go through the interruption in income that can come with rebranding name and the other disruptions. I guess so what happens if an operator comes to you today and says I want release, even if they are in the black on their leases? Do you try and convert them just to a traditional management agreement or is all that to be determined?

John Murray

Again, I don’t want to play out potential discussions between us and our managers or operators. I guess what I will tell you is that based on the current forecast that we have we expect – or Marriott has projected that they will be between $6 million and $7 million short in cash flow on the Marriott No. 3 portfolio, and between $4 million and $5 million short in cash flow on the Marriott No. 4 portfolio, both amounts which are substantially below where our security deposits are. So we sort of view this more as a timing difference, if you will, in that we will draw – we have the ability to draw on the security deposit during these difficult economic times. And the way the waterfall on our agreements works, when the cycle changes and cash flow improves the next step in the waterfall after paying us our contractual amount is for the security deposits to be replenished, and so there will be – assuming the cycle eventually changes, there will be cash payments from Marriott and/or Barcelo Crestline to make up these deficiencies at some point. It's possible, as in the first couple of periods that they will make it up in this 10-day cure period. We don’t know that.

Jeff Donnelly – Wachovia

Just one last question and I guess I'll yield the floor. I think you mentioned in your remarks that you had 40 select service hotels under renovation in 2009. Which lease or leases are those in?

John Murray

It cuts across all of our Marriott portfolios, but it’s more heavily weighted towards the Marriott No. 1 portfolio and a little bit into the Marriott No. 2. There may be one or two in the other portfolios. But I don't think there's much there. It’s mostly Courtyard 53 portfolio and a couple of the Residence Inns in the 18 Residence Inn portfolio.

Jeffrey Donnelly – Wachovia

Thank you.

John Murray

Yes.

Operator

(Operator instructions) Our next question comes from Mike Salinsky, RBC Capital.

Mike Salinsky – RBC Capital Markets

Good morning. John, with the gains you guys have on the converts you purchased in the first quarter, net of transaction costs what sort gains do you guys expect to record in the first quarter on those?

Mark Kleifges

That gain will be around $24 million, Mike.

Mike Salinsky – RBC Capital Markets

Okay. Secondly, several of your peers have indicated that January trends were worse than the fourth quarter. Have you seen that across your portfolio as well? Or has it held in a little bit better than some of your peers?

John Murray

I think we disclosed in our K that RevPAR continued to decline in January. And I think we were close to but maybe a few tenths of a point larger drop in RevPAR than the industry as a whole. And frankly, I attribute that to the fact that our average occupancy has always outperformed the industry as a whole by a substantial margin. And this downturn has been characterized by a pretty significant drop-off in demand. So we lost just a little bit more occupancy than the industry average. Our rate has held up a little bit better than the industry average. But we are down, January’s results were down between 15% to 16% on the RevPAR line. So it's difficult when you have 290 hotels to dramatically outperform – particularly when you cross a variety of price points, dramatically outperform the industry.

Mike Salinsky – RBC Capital Markets

So it's pretty safe to say then, beyond your minimum rents you are not expecting any significant amount of additional returns in 2009, correct?

Mark Kleifges

It’s probably a fair assumption.

Mike Salinsky – RBC Capital Markets

Okay. Next, your CapEx, I think you mentioned $125 million to $135 million of spend, I may be off on that. But how much of –

Mark Kleifges

It’s $100 million to $120 million.

Mike Salinsky – RBC Capital Markets

How much of those projects which are normal maintenance versus real property improvements, revenue-generating ROI type CapEx? How much of those projects , just assuming that the (inaudible) scenario can really be deferred, if times become even more difficult?

John Murray

Well, you know, those are amounts that are over and above the FF&E reserve. I look at all of those projects as, you know, in the normal world we would think of most of those projects as revenue producing. For instance, a number of – a bunch of the projects at the Marriott properties were Courtyard lobby renovations, which we are going to sort reintroduce a great room that is a more current and comfortable gathering place, which a number of other brands like Hyatt Place and the aloft have been doing. But I think it will be a stretch for anybody to tell you that CapEx of any kind is going to be incremental revenue-generating in 2009. It’s just too hard to say. Many of those projects could be pushed back. But we do have a strong balance sheet. We do have a general feeling that, all other things being equal, when you have downturns, it's the best – and you have reduced occupancy, that’s the best time to do capital projects rather than waiting until the cycle changes and then putting all your properties under renovation. So, we are not – while we have the ability in a number of these cases to defer somewhat, that's not currently our plan.

Mark Kleifges

And I should point out Mike that of the $100 million to $120 million, $37 million relates to the Kauai property, and that is moving forward and in fact in February we funded $37 million for that project.

Mike Salinsky – RBC Capital Markets

Okay. That’s helpful. Then, finally, you touched on dividend in a couple of different ways. I guess what would be your bias right now to do, just given that there is a lot of shareholders out there that really bought into HPT for the dividend.

John Murray

I think, at this point, we don't have a particular bias. We are going to present the positives and negatives of a variety of options to our Trustees at a Board meeting in early April, and we haven't fully firmed up that presentation or reached a firm conclusion ourselves as to what the best course is at the present time.

Mike Salinsky – RBC Capital Markets

Thank you.

Operator

And our next question comes from Celeste Brown with Morgan Stanley.

Celeste Brown – Morgan Stanley

Hi, guys. Just one quick question. In terms of the accounting for drawing down on the security deposits, I would guess that the revenue and income would still show up, and the income statement is normal, and then there would just be, I guess, a shift out of the deposits on the balance sheet?

Mark Kleifges

You are correct.

Celeste Brown – Morgan Stanley

Okay. Thank you.

Operator

And our next question is from William Truelove with UBS.

William Truelove – UBS

Just a follow up on Celeste's question. First, what is the total amount of security deposits currently held for the delinquent Marriott portfolios?

Mark Kleifges

For the Marriott No. 3, it's $36.2 million and for Marriott No. 4, $28.5 million.

William Truelove – UBS

And then to go to Nap's question early on, when he talked about taxable net income and the dividend requirements, you suggested that we look at the earnings expectations and try to adjust that way. One of the earnings adjustments for 2009, Mark, was the change in the GAAP accounting rule relating to the convertible debt. Do we ignore that for tax purposes when we think about the taxable net income or do we include it?

Mark Kleifges

That should be ignored for tax purposes. That’s GAAP requirement only, not a internal revenue code requirement.

William Truelove – UBS

That's what I thought. Thanks so much.

Operator

And our next question comes from Jeff Donnelly with Wachovia.

Jeff Donnelly – Wachovia

Just to ask another question on the dividend, and I apologize if you touch on this and I just missed it, but what's your thinking on paying some portion of the dividend in stock. Is that on the table? And just curious, because I'm wondering if you'll look back a year from now of the way the economy and real estate move, are you going to be happy either way of looking for ways to retain cash?

John Murray

I think we did touch on it, in the context at least that everything is on the table. So that is something that in the past I don't know if that was an avenue that was – has always been available, or if it’s really just newly available, but that's an avenue that we have not previously considered, but we will consider this time around. There's obviously pluses and minuses to it.

Jeff Donnelly – Wachovia

And I know – I thought – maybe not thinking about acquisitions at this time, but certainly some of the public companies out there are seeing incredibly depressed stock prices, reflective of the fact that there is little if any equity there today, which tells me there's probably that situation certainly in the private market. Are you guys seeing any situations where HPT, perhaps in conjunction with a brand, can work with lenders to pick up properties or portfolios on the cheap, or is it still too early for that?

John Murray

I think it’s still too early for that. We expect that we will see those sorts of opportunities. We still have a – sort of a bias towards portfolio transactions, and so far we have seen distress in the individual properties but nothing that was exciting enough to call a portfolio, and be something we'd want to chase. And as you saw in February we repurchased some shares – I'm sorry, some convertible senior notes, and so far that sort of investment has seemed a better use of capital than any hotel transactions we’ve see.

Jeff Donnelly – Wachovia

Great. Thanks guys.

Operator

That concludes today’s question and answer session. At this time, I would like to turn the conference back over to John Murray for any additional or closing comments.

John Murray

Thank you very much for joining us today. Hope you have a nice day.

Operator

This concludes today’s conference. Thank you for your participation and have a nice day.

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