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Executives

John G. Murray - Principal Executive Officer, President, Chief Operating Officer, Assistant Secretary and Executive Vice President of Reit Management & Research LLC

Mark Lawrence Kleifges - Chief Financial Officer, Principal Accounting Officer, Treasurer and Executive Vice President of Reit Management & Research LLC

Timothy A. Bonang - Director of Investor Relations

Analysts

Daniel P. Donlan - Janney Montgomery Scott LLC, Research Division

Ryan Meliker - Morgan Stanley, Research Division

Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

Michael J. Salinsky - RBC Capital Markets, LLC, Research Division

Hospitality Properties Trust (HPT) Q3 2011 Earnings Call November 7, 2011 1:00 PM ET

Operator

Good day, and welcome to the Hospitality Properties Trust Third Quarter 2011 Financial 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 the Vice President of Investor Relations, Mr. Tim Bonang. Please go ahead, sir.

Timothy A. Bonang

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

Before we begin today’s call, I would like to read our Safe Harbor statement and set some ground rules concerning certain questions. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws.

These forward-looking statements are based on HPT's present beliefs and expectations as of today, November 7, 2011. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call other than through filings with the Securities and Exchange Commission or SEC.

In addition, this call may contain non-GAAP financial measures, including normalized funds from operations or normalized FFO. A reconciliation of normalized FFO and EBITDA to net income, as well as components to calculate AFFO, CAD or FAD, are available in our supplemental package found in the Investor Relations section of the company's website.

Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our Forms 10-Q and 10-K filed with the SEC and in our Q3 supplemental operating and financial data found on our website at www.hptreit.com. Investors are cautioned not to place undue reliance upon any forward-looking statements.

As you may know last week, HPT announced its plan to purchase 2 Royal Sonesta Hotels. These hotels are being purchased as part of a complex transaction from the merger of Sonesta International Hotels Corporation into Sonesta Acquisition Corporation. Sonesta International is a publicly owned company listed on the NASDAQ. A transaction which will result in HPT's acquisition of these hotels will be the subject of a proxy to be distributed to Sonesta international shareholders after this declared effective by the SEC.

HPT has been advised not to comment on any of the economics or other details of its acquisition of the 2 Royal Sonesta hotels beyond what is stated in HPT's press release. HPT does not intend its comments today to be a solicitation of votes for the merger. Such a solicitation can only be made by a proxy statement which has been declared effective by the SEC. For more information about the post-merger in HPT's acquisition of the Royal Sonesta Hotels, please refer to Sonesta International proxy statement and other documents, which have been or will be filed with the SEC by Sonesta International, Sonesta Acquisition Corporation or HPT. And now I would like to turn the call over to John Murray.

John G. Murray

Thank you, Tim. Good afternoon, and welcome to our third quarter 2011 earnings call. Today, HPT reported third quarter normalized FFO per share of $0.79, a 3.6% decrease from the 2010 third quarter normalized FFO per share of $0.82. Focusing first on our travel center investments. This morning TA reported strong quarterly results with third quarter 2011 net income of $20.7 million. This compares to net income of $4.5 million in the 2010 third quarter. TA's third quarter performance included a modest increase in fuel volume, continued strong per gallon fuel margins and significant increases in nonfuel sales and gross margin.

Property level rent coverage for HPT's TravelCenters was nearly 2x for the quarter. In addition to its strong results, TA's financial position remains sound with approximately $130 million of cash on hand at quarter end.

Turning to HPT's hotel investments. Third quarter RevPAR increased 7.7% across our 288 hotels driven by a 2.6 percentage point increase in average occupancy to 77% and a 4.1% increase in average daily rate to $93.24.

Compared with the 2010 third quarter, RevPAR increased in all regions with double-digit gains in the New England and Pacific regions, driven by strong revenue performance at our hotels in Massachusetts and California but only a modest improvement in the South Atlantic region driven by weaker performance in Virginia, Georgia and the Carolinas. Our Country Inn & Suites and Candlewood Suites both generated RevPAR growth in excess of 10% this quarter versus last year.

During the quarter, there were 12 hotels under renovation including 9 courtyards in our Marriott No. 1 portfolio and 3 Hyatt Place hotels. In addition, renovation planning and project scope meetings are ongoing and orders have been placed so that additional renovation projects can begin in the fourth quarter and early 2012 in our Marriott 234 and IHG portfolios. Average daily rate growth was 4.1% in the third quarter of 2011 and has increased in each hotel portfolio and each brand this quarter compared to last year as our operators continue to manage guest mix to reduce discounted business. Despite an unsteady economic environment, we have seen consistent occupancy rate and RevPAR improvement each month in 2011 compared to 2010, and we continue to press our managers to focus on revenue management.

Our managers' fourth quarter 2011 RevPAR forecast for our hotels are in the range of 6% to 7%. There is cautious optimism about ongoing lodging recovery as a result of constraints, supply growth and continued steady increases in demand, average daily rate and GOP margins. Although sluggish economic growth has intensified uncertainty about the pace of lodging recovery, we have yet to see indications of a decline in hotel room demand. The 2012 capital and operating budget process is underway currently so it's too early to comment on expectations other than to say our 2012 results are likely to be choppy due to substantial innovation and the timing of hotels sales.

However, with the economy recovering at a modest pace, it seems like the right time to complete renovations and position ourselves well as economic momentum returns. In fact, RevPAR and GOP margin growth for the 40 HPT hotels that have completed renovations in 2010 or the first half of 2011 have exceeded HPT's portfolio as a whole. As we have previously communicated, for most of 2010 and the first half of 2011, we were focused on amending our relationships with TA, Marriott and IHG. Since then our focus has been on the renovations to 50 Marriott, 88 IHG branded hotels, the sale and rebranding efforts related to hotels being removed from our Marriott and IHG agreements and on growth of our hotel portfolio.

On November 3, HPT announced plans to acquire the entities that own the Royal Sonesta Hotel in Cambridge, Massachusetts and the leasehold interest in the Royal Sonesta Hotel in New Orleans, Louisiana for approximately $150 million. The Royal Sonesta Cambridge is a 400-room hotel with 2 restaurants and approximately 22,000 square feet of meeting space that sits on the banks of the Charles River at the start of Memorial Drive.

The Royal Sonesta New Orleans is a 483-room hotel with 5 food and beverage and entertainment outlet and approximately 20,000 square feet of meeting space. HPT expects to prepay an existing mortgage encumbering the Cambridge Hotel and the mortgage amount is included in the purchase price I just mentioned. The hotel is managed by Sonesta International Hotels Corporation. The acquisition of these 2 hotels is part of a larger transaction in which an affiliate of our manager will acquire Sonesta. HPT will acquire the entities that own the Cambridge and New Orleans hotels.

Sonesta will continue to management of the Cambridge and New Orleans hotel for HPT. Completion of the transaction, which is expected to occur in the first quarter of 2012 is subject to approval of Sonesta's common stockholders and certain other customary closing conditions. Following the closing of this transaction, the Sonesta management team will be available to operate other hotels for HPT, including certain hotels HPT now owns and is considering rebranding and hotels it may acquire the future.

Before I turn the call over to Mark I want to provide an update on the Marriott and IHG properties that will be removed from those portfolios in connection with the contract amendments we completed earlier this year. On the 20 select service Marriott Hotels, offers are due this week and we hope to select a buyer and enter a sale agreement by year end and complete the sale during the first half of 2012.

Offers on the full-service Marriott will be due in early December. The timing to close is expected to be the first half of 2012 as well. With respect to the IHG hotels, we are in discussions with about rebranding some of the hotels with a hotel company that would mark another new manager relationship for HPT. We're also considering rebranding some of the IHG hotels with Sonesta. Currently none of the IHG hotels are listed for sale. I will now turn the presentation over to Mark to provide further detail on our financial results.

Mark Lawrence Kleifges

Thanks, John. First let's review the third quarter operating results for our hotel properties. Revenues for our hotel portfolio increased $20.5 million or 7.1% versus the prior year. Our strongest performing portfolios were our Carlson and Marriott No. 1 portfolios with RevPAR increases of 12.4% and 7.8%, respectively. RevPAR for our recently amended Marriott 234 and IHG portfolios increased 7.3% and 7.2%, respectively, quarter-over-quarter.

With all of our hotel portfolios experiencing gains in both occupancy and ADR this quarter, GOP and cash flow margins each increased. Gross operating profit increased by $13 million or 12.7% quarter-over-quarter. And our GOP margin percentage increased 185 basis points to 37.4%. More importantly, net cash flow available to pay our minimum rents and returns increased by approximately $18.7 million or 30.5% versus last year.

The largest increases were in our IHG and Carlson portfolios, which produced net cash flow increases of 51% and 28%, respectively, quarter-over-quarter. About 1/2 of the improvement in net cash flow for the IHG portfolio was due to the temporary elimination of the requirement to escrow FF&E reserves under the amended agreement. With the improvement in hotel net cash flow, coverage of our minimum returns and rents on a rolling 12-month basis improved from the prior quarter for all of our portfolios.

In the third quarter, our IHG portfolio had 0.97x coverage and our Marriott No. 1 portfolio, 0.96x coverage. During the third quarter, we applied the security deposits we hold in connection with our Marriott 234 and IHG agreements to cover payment shortfalls of $2.8 million and $355,000, respectively. We currently expect the IHG security deposits to be sufficient to cover any additional payment shortfalls before the portfolio returns to 1x coverage. The remaining security deposit for our combined Marriott portfolio will be fully utilized in the 2011 fourth quarter. Thereafter, if cash flow is less than our minimum returns, Marriott will fund the difference up to 90% of our minimum return subject to a cumulative capital of $40 million.

We currently expect this guarantee to be sufficient to cover up to 90% of any additional payment shortfalls before the portfolio returns to 1x coverage. At quarter end, all other payments due under our hotel operating agreements were current. Information regarding our security deposit and guarantee balances at quarter end is included in our Form 10-Q, which will be filed tomorrow.

Turning to our TravelCenters portfolio. Performance continued to improve this quarter with property level EBITDAR up $3.7 million or 3.9% versus the 2010 third quarter. Both fuel volume and per gallon fuel margin increased this quarter resulting in a 4.8% increase in fuel gross margins compared to the 2010 quarter. Nonfuel revenue and gross margin increased 8.1% and 5.8%, respectively quarter-over-quarter. Property level rent coverage for the quarter was 1.99x for our TA centers and 1.89x for our petro centers.

Earlier today, TA reported third quarter 2011 corporate level EBITDAR of $83.1 million, a 4.1% increase from the 2010 third quarter. TA's EBITDAR coverage of total cash rents at the corporate level for the third quarter was 1.6x and based on the amended lease terms would have been 1.25x for the trailing 12 months.

Turning to HPT's operating results for the third quarter. This morning, we reported normalized FFO of $98 million or $0.79 per share. This compares to third quarter 2010 normalized FFO of $101.1 million or $0.82 per share. The decrease in normalized FFO was primarily the result of the loss of income from the temporary elimination of FF&E reserves for the IHG portfolio, partially offset by increase minimum rents and returns for certain of our portfolios.

IHG FF&E reserves included a net income and normalized FFO in the 2010 third quarter were $6.5 million or $0.05 per share. For fourth quarter modeling purposes, you should note that IHG FF&E reserves were $6.1 million in the 2010 fourth quarter. EBITDA was $139.6 million in the third quarter and our EBITDA to total fixed charges coverage ratio for the quarter remained strong at 3.4x. In August 2011, HPT paid a cash dividend on our common shares of $0.45 per share. Our normalized FFO payout ratio was 56.7% for the 2011 third quarter.

With respect to our balance sheet and liquidity, at quarter end, we had cash and cash equivalents of $48.2 million, which included $41.7 million of cash escrowed for improvements to our hotels and had only $115 million of borrowings outstanding on our revolving credit facility. In September, we closed on a new $750 million unsecured revolving credit facility, which matures in September 2015 and includes an option for HPT to extend the facility for one year. Interest paid on drawings under the new facility are at LIBOR plus 130 basis points.

During the third quarter of 2011, we made capital fundings in excess of FF&E reserves of $4.9 million to fund the ongoing renovations at certain Courtyard hotels included in our Marriott No. 1 portfolio and expect to fund an additional $8 million in the fourth quarter. In connection with the planned renovations at our IHG and Marriott 234 hotels, we made no fundings in the third quarter and expect to fund approximately $54 million and $11 million, respectively, in the fourth quarter.

During the third quarter, we also made capital fundings under our leases with TA, totaling $9.7 million and expect to fund between $10 million and $20 million in the fourth quarter. In closing, we remain optimistic about the prospect of continued improvement in the operating results at our hotels and travel centers and are excited about our renewed focus on growing our business. Operator, we're ready to open it up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Dan Donlan, Janney Capital Markets.

Daniel P. Donlan - Janney Montgomery Scott LLC, Research Division

Just a quick question on the Marriotts. The 21 that you guys are looking to sell, how many rooms is that in total?

Mark Lawrence Kleifges

It's 2,923.

Daniel P. Donlan - Janney Montgomery Scott LLC, Research Division

Okay, and then how many rooms for the IHG?

Mark Lawrence Kleifges

Well, the 42 hotels that we're considering either selling or rebranding have 6,757 rooms.

Daniel P. Donlan - Janney Montgomery Scott LLC, Research Division

Okay. And then the contracts with Marriott 1, it looks like that expires in 2012 but Marriott has renewed that agreement to operate those hotels for another 12 years, I believe, through 2024. What's the intention or is there any ability for the agreement there to look similar to 2, 3 and 4? In other words, will there be some type of security deposit place on those assets once host does not renew?

John G. Murray

At the present time the existing contract is the contracts so they have elected to extend it. So absent some other reason for negotiating alternate terms, I think it's -- you should just assume that, that contract will not change.

Daniel P. Donlan - Janney Montgomery Scott LLC, Research Division

Okay. So it will just -- the cash flows will just flow directly from that -- from the portfolio into the REITs?

Mark Lawrence Kleifges

Right, and the terms are the minimum return under the management agreement will be the same amount that the minimum rents is today under the lease with -- lease with host and banks fee will continue to be subordinated to the payment of our minimum. But there won't be any credit support.

Daniel P. Donlan - Janney Montgomery Scott LLC, Research Division

Perfect. Sorry, Going back to the potential asset sales, would you anticipate a special dividend or something like that if you do get done what you'd like to get done?

John G. Murray

I think the plan, we have described in the past and which is still the plan would be to use even though the timing may differ but to the extent those proceeds from the sales of properties will be to pay down the borrowings under the revolving credit facility or use those funds for anticipated capital improvements to the hotels we're holding on to.

Daniel P. Donlan - Janney Montgomery Scott LLC, Research Division

Okay. Then lastly, on Sonesta, you mentioned that you might use them to, as an operator, on some of the hotels that you could potentially rebrand. I'm just curious and looking at their portfolio, it looks like more resort type of properties as well as cruise ships, what type of 3 assets in North America, what type of -- are you comfortable with their experience level and kind of the assets that you would potentially rebrand? Because it doesn't seem like they have any limited select service experience in the U.S.

John G. Murray

Well, I guess before I answer that question I just want to say that we made some opening comments about what we can and can't say. And it's unusual for HPT to discuss transactions before they close. And so it does put some limit on what we can say here. But I guess I would say in the hotels that currently IHG flagged that we have the opportunity to either sell or rebrand, there's a mix of full-service and select service hotels and we're still in the process of deciding, which ones we may rebrand with the Sonesta, which ones we may rebrand with another company we're in discussions with. So I think once we've made those decisions, I think we'll be -- and once our 8-K and Sonesta's proxy roll out in the public for everybody to read and interpret, we'll be able to provide more details on those decisions. But the good news about Sonesta is -- you point out it’s relatively small size in the U.S. that provides a lot of flexibility for us. So I think I'll just leave it at that.

Operator

Next question from the line of Jeff Donnelly, Wells Fargo.

Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

I'll start, actually, I understood the dispositions front. I mean, John, in your last -- I think in the last conference call you said you're expecting a call for offers in Q3 with, hopefully, closings in Q4 in the Marriott properties. And maybe, just my own interpret interpretation, but it sounds like you're hopeful for Q1 closing. Is it fair to say that the hiccup in the capital markets were really kind of interrupted the plans to sell assets? I guess I'm trying to understand did you have buyers lined up and they tried to re-trade or did you just not see buyers or kind of curious of the state of the things are right now?

John G. Murray

We did have some discussions with a particular buyer on the 20 full-service hotels. And decided we're not to go forward with them so we had delayed the timing of a call for offers. And it was around that same time that the capital markets were fairly volatile. Anyway, we think this is a good time to be calling for the offers, and we're optimistic that there'll be a number of portfolio bidders.

Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

So that was actually like a transaction that might have been the portfolio in entirety rather than many portfolios or single asset sales?

John G. Murray

Yes, we're -- just like we like to be portfolio investors. It's a lot easier to sell as a portfolio as long as your pricing is in the right range. And we expect that there'll be a number of portfolio bidders again this week.

Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

And I'm curious how are these folks financing this transaction I mean is it generally speaking pretty highly leveraged or how are they going about it? And I'm just curious, generally speaking, what's their source as well?

John G. Murray

I hate to count other people's money. And the folks who bid to the extent that they're, say, a private equity sources teaming with third-party managers, submit offer letters telling that they've got all the cash in their front-right pocket and there's no financing contingency, it doesn't matter where the capital markets are. But the reality is that most hotel buyers really, maybe with exception of HPT, use secured debt. And so that's a -- whether they use it immediately or a little bit later after a transaction closes, the state of the capital markets for mortgage financing plays an important role in those decisions for the buyers, I'm pretty certain.

Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

And to change gears on it, what happens if these, hypothetically, don't get sold? Are you under the -- I guess I'm curious are you under the gun to get the renovations of the core asset started at some point. I'm wondering if there's a scenario where you could be caught holding non-core assets for a long period of time and this is supposed to be the source of funding for renovations next year.

John G. Murray

We don't have any guns to our head. I guess I would -- if you look back when we were negotiating this transaction with Marriott and with the one with IHG, at the time, we had a revolver that was going to mature in October. And so while we -- we're very confident that we're going to be able to renew their revolver without any problem. We didn't want to have commitments for substantial renovations to IHG properties and substantial renovations to Marriott properties sort of hanging over our head during those negotiations with the banks on the new revolving credit facility. And that's why we identified hotels, we went through the list of hotels in each portfolio and identified a sufficient number of hotels that could be sold so that the estimated sales proceeds roughly equaled the amount of capital required for the rest. But it wasn't that we felt like we had some dogs in the portfolio that we had to dump. We think all the hotels are -- have good brands. So if we are unable to find an acceptable purchase price during this call for offers, then we do have the option of putting the capital into the properties ourselves and have them continue to be part of the portfolio with Marriott. So that's an option, I think, that we feel like we have as opposed to -- that we're willing to go forward with as necessary. But we don't -- it's not a gun to our head.

Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

And just last question on Sonesta, don't worry it won't be about financial terms. Just from your response before, it sounded like there's a possibility that some hotels -- full-service hotels in your portfolio could be rebranded to the Sonesta brand, I guess. And you mentioned I guess or maybe alluded to it, maybe some select service. Does that imply that a brand might be created for them under Sonesta? Or you're just not that far down the road yet?

John G. Murray

I would say it's safe to assume that -- or it's fair to assume that we may rebrand some hotels to Sonesta, but in terms of whether there's going to be new brands or anything I'd like to just leave that for another call.

Operator

The next question is from the line of Ryan Meliker, Morgan Stanley.

Ryan Meliker - Morgan Stanley, Research Division

Just a couple of quick follow-ups to Jeff's. I guess it looks like between the total CapEx that you guys have guaranteed IHG and Marriott to your contractual obligations, that's around $400 million, and then you got around $150 million in this acquisition of the 2 Sonesta properties. I am just wondering, is there a specific deadline that the $400 million in CapEx has to be completed by for IHG and Marriott?

Mark Lawrence Kleifges

There's not a specific deadline, Ryan. I mean, it's -- we're in the process of scheduling out all that CapEx. I think you'll see, as I mentioned, we're going to fund some of it in the fourth quarter. And then we'll fund each quarter in 2012 but some of these going to push into 2013 so the whole $400 million or so that we've committed to, it's not all going to be funded in the fourth quarter of 11 and 2012.

John G. Murray

Much of the timing, there are mutual discussions going on as you would expect between HPT and Marriott and IHG because there's certain times of the year when it's -- the better times to be renovating and other times when you don't want to suffer the displacement from the renovation. So the timing is very much sort of mutually agreed between HPT and its managers.

Mark Lawrence Kleifges

Yes. And I think it's important to point out we only had $115 million out on our $750 million revolver at quarter end. So we feel very good about our ability to meet our funding requirements.

Ryan Meliker - Morgan Stanley, Research Division

So Mark, does that mean that if for one reason or another your dispositions get delayed a couple of quarters and you're looking at funding another $100 million to $200 million in 2012 before you can get the cash flows from your dispositions plus you've got the $150 million in investment in the Royal Sonesta properties, you'd be comfortable using your line to fund that for the short term?

Mark Lawrence Kleifges

Yes, for the short term.

Ryan Meliker - Morgan Stanley, Research Division

And how I guess, to ask another way, how comfortable -- what levers level is going to give you comfort even if it is just short term until you resolve the dispositions, and given the uncertainty in capital markets? Are you willing to max out the revolver go to 5x or 6x leverage for a short period of time while you're doing this.

Mark Lawrence Kleifges

Yes, we've always operated the company with debt total book capitalization in the 40% to 50% area. We're in the low 40s, probably 40%, 41% today. So we have some room to increase leverage. But ultimately we're going to finance the business consistent on a long-term basis with a mix of debt and equity as we always have.

Ryan Meliker - Morgan Stanley, Research Division

That's helpful. And then one other question with regards to the Sonesta acquisition and don't worry I won't ask any number question either. Just kind of big picture view John, I'm hoping you might be able to walk us through some of the discussions that might have taken place inside the board room as the board got together with this acquisition, given that it seems like and you can correct me if I'm wrong that RMR is the entity sponsoring the SAC acquisition company. So basically you're buying assets from RMR, which obviously some could consider a conflict of interest so I just wanted to see if -- could you walk us through kind of how that was thought through and why it's not an issue?

John G. Murray

Well I guess what I would just say there is that because there was an affiliate involved. We engaged third-party valuation experts that provided our independent trustees with information on where they thought values were up in hotels and transaction was reviewed by the independent trustees. And so I think at this point before the proxies filed, which goes into the whole IHG transaction that I'd like to sort of leave at that.

Operator

[Operator Instructions] You have a question from the line of Michael Salinsky, RBC Capital Markets.

Michael J. Salinsky - RBC Capital Markets, LLC, Research Division

Just going back to Ryan's question, we think about the $400 million of total outlays for the 2 renovations, what's kind of the CapEx plan as you're putting it together for 12, and just we're kind of looking at the sources and uses for next year?

Mark Lawrence Kleifges

Yes, we're still working through the final scheduling. I would say that the Marriott will be in the range of 50 to 70 probably next year and IHG 180 to 230 kind of range. We're still scheduling all that out.

Michael J. Salinsky - RBC Capital Markets, LLC, Research Division

Okay, that's helpful. Second of all, you guys have historically kind of used minimum returns guarantees to limit downside risk there, with the Sonesta transactions, are we -- should we expect a similar kind of lease structure there? Or is that one where you want to set up more like traditional restructure?

John G. Murray

I think what I'll say there is that I think tomorrow, we hope to file an 8-K that will have a lot more information regarding the management contract. But for now you should assume it will be a contract similar to a typical hotel industry management contracts and without credit support.

Michael J. Salinsky - RBC Capital Markets, LLC, Research Division

Okay. That's helpful. Third is in terms of financing you guys have in the line done. Can you give us a sense of where you're seeing in terms of financing right now, what you're hearing from the banks in terms of just spreads, LTVs, things of that nature? I know you guys don't do mortgages but I'm just curious as to what you're seeing in the bank and unsecured market?

Mark Lawrence Kleifges

The secured market, I can't give you a whole lot of color on because we don't really spend a whole lot of time monitoring that. But in the investment-grade unsecured public note market, you probably know the first investment-grade REIT transaction went off last week and went off well. That's the first transaction in about 3 months. It's probably too early to say the markets open for all REITs until you see a BBB, probably BBB- credit go out and do a $250 million, $300 million deal without large new issue concessions. On the bank term loan market I think that market is still relatively strong for the right credits. And I think HPT is one of those right credits so I think the bank term loan market is also open for us.

Operator

And there are no further questions in the queue. Back to you, Mr. Murray.

John G. Murray

All right. Well, thank you very much for joining us today. We're hopeful that between now and next week's NAREIT conference there will be some additional filings that are done to provide a little bit more color on this transaction between -- involving Sonesta, and we'll be able to provide more details when we meet up with you in Dallas. Thank you very much. Have a good day.

Operator

And that concludes our conference for today. Thank you for your participation and using AT&T Executive TeleConference Service. You may now disconnect.

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