Chatham Lodging Trust (CLDT) Q3 2012 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, thank you for standing by. Welcome to the Chatham Lodging Trust Third Quarter Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Wednesday, November 7, 2012. I would now like to turn the conference over to Jerry Daly of Daly Gray. Please go ahead, sir.

Thank you, Damian, and good morning everyone, and welcome to Chatham Lodging Trust third quarter 2012 results conference call. Yesterday after the close of the market, Chatham released results for the third quarter ended September 30, 2012, and I hope you’ve had a chance to review the press release. If you did not receive a copy of the release, or you would like a copy, please call my office at (703) 435-6293, and we’ll be happy to e-mail one to you or you may view the release online at Chatham’s website, www.lodgingtrust.com (sic) [www.chathamlodgingtrust.com]. Today’s conference call is being transmitted live via telephone and by a webcast over Chatham’s website and streetevents.com. A recording of the call will be available by telephone until midnight on Wednesday, November 14, 2012, by dialing 1 (800) 406-7325, with a reference number of 4569457 followed by the # sign. A replay of the conference call will be posted on Chatham’s website. As a reminder, this conference call is the property of Chatham Lodging Trust and any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Chatham is prohibited. Before we begin, management has asked me to remind you that in keeping with the SEC’s Safe Harbor guidelines, today’s conference call may contain forward-looking statements about Chatham Lodging Trust, including statements regarding future operating results and the timing and composition of revenues among others. Except for historical information, these forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, including the volatility of the national economy, economic conditions generally, and the hotel and real estate markets specifically, international and geo-political difficulties or health concerns, government actions, legislative and regulatory changes, availability of debt and equity capital, interest rates, competition, weather conditions or natural disasters, supply and demand for lodging facilities in our current and proposed market areas and the company’s ability to manage integration and growth. Additional risks are discussed in the company’s filings with the Securities and Exchange Commission. All information in this call is as of November 6, 2012 unless otherwise noted and the company undertakes no obligation to update any forward-looking statements to conform the statements to actual results or changes in the company’s expectations. During this call, we may refer to certain non-GAAP financial measures, such as EBITDA and adjusted EBITDA, which we believe to be common in the industry and helpful indications of our performance. In keeping with SEC regulations, we have provided and encourage you to refer to the reconciliations of these measures to GAAP results in our earnings release. Now to provide you with some insights into Chatham’s 2012 third quarter results, I’d like to introduce Jeff Fisher, Chairman, President and Chief Executive Officer; and Dennis Craven, Executive Vice President and Chief Financial Officer. Jeff?

Thanks, Jerry. Good morning, everyone. Before we get into the details of our third quarter results, I’d like to express our best wishes for many of you who have been impacted by Superstorm Sandy. I’d also like to commend the efforts of many of our employees and employees of our hotels in the Northeast who remain dedicated to serving our guests in the best possible way during these difficult times. We thank all of you for your commitment. With large exposure to the Northeast, approximately 20 of our hotels within Chatham and the JV were affected by Sandy and without power for a period of time. Having said that, we are thankful to say that damage was relatively minor and as of today, power has been restored to all hotels and we are open for business in all markets including Atlantic City and Long Island. From an operations perspective, we expect Superstorm Sandy to adversely impact Chatham’s fourth quarter RevPAR by 100 basis points to 200 basis points. From a profit perspective, our hotels will be incurring additional expenses to repair the damage made to the hotels and we will have to make capital expenditures as well. Despite the drop in revenue and increased expenses, cash flow will not materially be impacted, since insurance will cover these items. We do not yet have a sense of what our claims will total at this time, but we’re busy working on that. As the Northeast gets its relief and rebuilding efforts get underway, our hotels may, in fact, benefit. Of course, most of our hotels in the Northeast and elsewhere are extended-stay hotels and as many of you know, our extended-stay hotels have rooms with kitchens, which make them very attractive for long-term guests. Additionally, most of these hotels provide free breakfast and an evening meal or reception. These perks are attractive for the guests in need of a place to stay while away from their home or in the area to assist the rebuilding efforts. Time will tell as to how much FEMA or other insurance business will come to these hotels in this fourth quarter, but I will tell you, from historic operating precedent that Residence Inns and Homewood Suites have always benefited due to these kind of unfortunate events. So although initially we’re calling for some kind of adverse impact here, particularly on RevPAR, we are working in each market and in each hotel to book business that in some cases, perhaps will allow us to exceed the last year’s results, certainly substantially for those hotels in that area. As you’ve seen in the release, we are pleased to announce the completion of the amendment to our line of credit, which improves our capital structure while decreasing costs. We continue to improve the earnings power of the company to aggressive asset management that is driving strong operating performance as you’ve seen in the release and disciplined capital decision making. Dennis will talk more to this in detail, but, again, wherever we can improve our FFO, and improve our ability to pay dividends and increase shareholder return is where our efforts are devoted. This translates to a well-diversified portfolio, properly capitalized, that produces industry leading cash flow and dividends. The cash flow is the result of strong margins and our premium RevPAR and enhances our ability to pay meaningful dividend and grow these dividends as these metrics also grow. Dividends drive total returns over time and our dividend is strong, our cash flow is growing and our dividends will continue to grow. Shifting gears to our third quarter results, we generated adjusted FFO per share of $0.46, in line with consensus estimates, up almost 40% over the third quarter 2011. We were able to drive FFO through strong operating results at our 18 hotels, as well as great returns from our Innkeepers joint venture that we closed in the fourth quarter of 2011. RevPAR growth was 5.8% in the quarter, one of the top performers of all lodging REITs with rate increases making up more than half of the growth. ADR was up 3.6% to $132 and occupancy was up 2.1% to 86%. We expect that rates will be the primary driver of RevPAR growth as we move through 2013. Occupancy in the competitive sets of our 18 hotels is now 75%, which ultimately allows us to drive rates and continue growing our already strong margins. Speaking of which, third quarter GOP margins were up 180 basis points and hotel EBITDA margins were up 110 basis points to 46.2% and 39% respectively. Our operating model is very efficient at driving revenue growth to the bottom line. We refer to that as operating leverage. In the third quarter, we were able to drive an increase in comparable hotel EBITDA of 9.7% for the 18 hotels on RevPAR growth of 5.8%. This equates to a very strong 1.7x flow-through multiple for the quarter. Year-to-date is much the same with 1.7x flow-through on an increase in hotel EBITDA of 14.1% on RevPAR growth of 8.1%. As the cycle matures and as a larger component of the RevPAR increase is driven by ADR increases, our ability to generate excess cash flow and increase our dividend increases. Interestingly, we just passed the one-year anniversary of closing our joint venture investment with Cerberus to acquire the Innkeepers hotels out of bankruptcy. It has been an eventful and very profitable first year to say the least. The JV has returned over half of our initial investment through a major refinancing, asset sales and strong cash flow from operations as a result of excellent performance in the portfolio. Asset sales are progressing as planned and proceeds are within the range we expected when we closed the transaction in the 2011 fourth quarter. On the operation side, RevPAR growth in the JV’s core 51 hotels was 9.7% for the quarter and 10.7% year-to-date. So obviously, those are industry-leading numbers and we are very excited about those results in the JV. Looking inside the JV portfolio, most of you will recall from our Innkeepers’ days that we have a significant presence in Silicon Valley with 8 extended-stay hotels in fantastic, irreplaceable locations. RevPAR in the Valley continues to significantly outperform national growth for the last 3 years with RevPAR up almost 50% since 2009 in those hotels. Budgets preliminarily look good for 2013. Rising demand will continue to drive premium RevPAR growth through ADR increases in 2013. Within the JV hotel, EBITDA margins were up 300 basis points in the quarter and for the year, are up 330 basis points to almost 39%. But peak EBITDA margins were in the mid-40%, so there’s still plenty of room for growth in that portfolio. Certainly, that investment has proven to be a fantastic investment and opportunity for Chatham to participate in. Before I turn it over to Dennis, I’d like to confirm that management of all 6 hotels previously operated by Hilton, the Homewood Suites have been moved to Island Hospitality and Island is managing these hotels under the same general fee structure as Hilton. RevPAR at the 6 transitioned hotels was up 6.3% for the third quarter, so the transaction is not negatively impacting performance and we look forward to further enhancement as Island gets their arms around those hotels. With that, I’d like to turn it over to Dennis for more details.

Thanks, Jeff, and thanks everyone for participating in the call. If you will be attending REITWorld next week, we’d love the opportunity to spend a few minutes with you. We’ll be reaching out to you directly this week, or if you want, please feel free to contact Jeff or I directly. For the quarter, we reported net income of $1.5 million or $0.10 per diluted share compared to a net loss of $1 million or $0.07 per diluted share. Property acquisition costs of $2.1 million were included in the 2011 third quarter expenses. Third quarter RevPAR was up 5.8% to $114 at our 18 comparable hotels, compared to our prior earnings guidance of plus 5% to 7%. As Jeff alluded to earlier, more than half of our RevPAR growth was attributable to rate increases as opposed to occupancy growth. We expect that this is a trend that will continue as we move forward into 2013. We continue to gain market share with our RevPAR Index up over 4% for the year, up in both occupancy and rate indices. Adjusted EBITDA increased $3.9 million or almost 50% to $12 million from $8.1 million in 2011, the jump being attributable to continued improvement in our operating results with 1.7x flow-through in the quarter, as well as the joint venture investment which closed in the 2011 fourth quarter. During the quarter, the JV contributed approximately $2.8 million of EBITDA to Chatham. Adjusted FFO jumped approximately 40% to $6.4 million from $4.5 million in 2011 and on a per share basis; adjusted FFO advanced to $0.46 a share from $0.33 a share in 2011. $0.46 was the mid-point of our guidance that we had provided on our last quarterly call. Jeff already provided key operating performance metrics for the joint venture, but I wanted to provide a little color on the investment activity within the JV during the third quarter. We sold 3 hotels for net proceeds of approximately $6 million, so you see that those hotels were very small, unbranded hotels; little contribution to EBITDA or FFO within the quarter or for the year. We subsequently sold one additional hotel to-date in the fourth quarter. And our original and joint venture investment was $37 million and through September we’ve received distributions of approximately $21 million or 56% of our original investments in less than one year of ownership. Of these distributions, we received approximately $12 million from the financing in the first quarter, $5 million from net proceeds of asset sales and $4 million from cash flow. Distributions to-date have been used to repay portions of our line of credit. Turning our attention to the balance sheet, net debt was $203 million at quarter end, comprised of debt of $209 million that’s incurred an average rate of 5.8% and approximately $6 million of cash. Debt includes $48.5 million outstanding on our $85 million line of credit at the time. And our ratio of net debt to investment in hotels at cost, including investment in the joint venture, was 48%. During the quarter, we were able to pay down an additional $5 million of debt outstanding on our line of credit. As we move through 2013 with very little capital obligations, we expect to be able to continue to use excess cash flow to pay down our line and free up capacity for additional investments. As Jeff spoke briefly earlier, we did close yesterday on a 3-year amendment with a 1-year extension to our line of credit. We would like to take the time to thank our Bank Group for the loyalty and dedication to Chatham. We are very pleased with the amendment and look forward to continuing the relationship with the Bank Group. The increased capacity will provide some added flexibility for Chatham to pursue additional hotel investments. It also reduces the LIBOR spreads and the elimination of the LIBOR floor will save us approximately 250 basis points. And when you factor in the borrowings outstanding of about $48 million on the line, it projects to an annualized savings of over $1 million in 2013. With this amendment complete, we have no other debt maturing, except for a small loan of approximately $5 million, which matures in 2015, so no significant debt issues within the portfolio. We are also looking at options surrounding the CMBS loans on the Five Sisters [ph] portfolio that we acquired out of the Innkeepers bankruptcy in 2011. When we acquired those hotels, we negotiated a feature to be able to repay those loans at any point in time without defeasance or prepayment penalties. This feature provides us with significant flexibility to look at potentially recycling any of those assets or to refinance those assets. Those loans currently carry a 6% interest rate. As we continue to pay down our line using free cash flow generated from operations within Chatham, as well as distributions from the joint venture and potential refinancing options or recycling of assets, we will look to potentially make an acquisition or investment. We have been evaluating acquisition opportunities and will consider recycling some of our assets through the disposition of those assets if the pricing is warranted and the ability to invest in real estate investments that will generate incremental returns without raising equity is available. With respect to our guidance; our initial guidance for the 2012 fourth quarter provides RevPAR to grow 3% to 5%, and FFO to range anywhere from $0.18 to $0.21. It doesn’t, in fact include the adverse impacts we’re currently projecting from Superstorm Sandy, as well as the renovations in New Rochelle, New York and Anaheim, California. We did estimate that Sandy will adversely impact RevPAR and margins by 100 basis points to 200 basis points in the short-term as a result of the massive power outages and miscellaneous repairs that we will incur. Having said that, we do believe that we will be able to hopefully, incrementally gain business over the longer term as we take on longer-term guests that are in need of that extended-stay hotel in those particular markets. Our guidance does assume no macroeconomic factors that are out there that are unknown at this point in time, which could have a negative effect on the industry. And as an update from our last call, the addition of the 3 rooms to our New Rochelle Hotel and one room to the White Plains Hotel will be completed in the first quarter of 2013. We were hoping to have them completed by the end of the year, but the permitting process is taking a little bit more time than originally expected. Operator, that concludes our remarks at this time and with that, we’ll turn it over for questions.

[Operator Instructions] Our first question comes from the line of Will Marks with JMP Securities.

I guess I want to just first start on -- a few people have asked this on the various REIT calls, but Marriott did give some guidance for next year of 4% to 7%, and are you thinking that you could be within that range somewhere?

Yes. Will, this is Jeff. We purposely did not want to put any formal guidance at this time as we finish our budgets for 2013. But I think that, in a range that is as wide as that I would think that we would confirm probably that seems like a reasonable approach for next year.

Great. Okay. Secondly, I just to want ask, you made some comments, I think, in your press release, I don’t know if you mentioned on the call, but about kind of referring to your precious equity and that -- are there other things you can do in terms of maybe some other JVs? I know you are generating cash through the JVs, have you thought about asset sales outside the JV? Just any thoughts on these lines and actually did you ever run into this situation with Innkeepers as well?

Yes. We definitely had moments and time during Innkeepers where the multiple just was such as now where it didn’t make any sense to be raising equity and any acquisition that you could make unless it was an unusual opportunity or a turnaround deal -- was really not going to be accretive. So I think we learned during those days that the most important attribute to have, but it’s very difficult to have it, is patience. And I think that as long as you know that what you own is good or as you look at what you own, there’s opportunities to make things better such as capital recycling, such as maybe looking at an opportunity or two to sell a hotel and to replace it, sell it at a low cap, replace it at with something that’s going to give you, let’s say, 200 basis points or 300 basis points a pop, that can be pretty accretive to our FFO and ought to raise share price over time and enhance the quality of the portfolio. So, we’re doing and looking at doing a few things like that. JVs, and I still don’t think people have the proper view on how great a deal, the Innkeepers deal is for us to be involved in. I mean, not only is the cash flow from operations way in excess of what we had projected and told folks from the beginning, but the asset sales and the refinancings have all, as you said, allowed us to return the substantial portion of our equity with more to come. So, with that money in the bank, so to speak, I think we are going to look at other JV opportunities, because while the time period exists that we don’t have a multiple to perhaps make accretive acquisitions, we can utilize the JV structure to continue to enhance returns for shareholders and create a quiet pipeline of hotels that when, and it will, the multiple turns around, we are able to have a great competitive advantage in rolling those assets up in a JV with a cooperative partner that will allow the company to grow and double and triple and quadruple its size over time. So I think that is a good formula for success.

Okay. That’s really helpful. I just had one other quick question, any change -- maybe it’s not quick, but cap rate in your markets for your types of assets, any meaningful change up or down in the last few months?

No, I don’t -- you generally don’t see, for example, as lodging multiples have contracted in the last 45 days or so, I mean there’s just not that kind of relation if that’s what you’re thinking about to street corner deals.

Our next question comes from the line of Nikhil Bhalla with FBR Capital Markets.

Let me just ask you about the hotels that were renovated earlier this year. How has the performance been for those hotels in the third quarter?

Yes. I mean, if you look at some of the hotels that were renovated earlier this year, whether it’s White Plains, which was under renovation, there was only a public space. You also have Altoona, Washington, a couple of the Houston hotels. But Houston, just to give you a little color, Houston has been up double-digits for the last 6 months coming out of renovation. The White Plains Hotel, like I said, was public space, but it’s still seeing positive improvements, not to a double-digit standard, but certainly mid-single digits. And when you look at our Altoona and Washington hotels for the year, on average, those are both up on a RevPAR perspective, about 6% for those 2 hotels. So I think coming out of there those are doing very well. If you want to look at for the year on the 6 original Homewoods that we renovated in 2011 at any point in time, those are all up for the year well over double-digits.

Got it. Okay. And moving into next year, basically the first half of the year, up until what point will these be sort of easier comparisons?

I think those renovations -- anything that was done earlier this year was finished in the first quarter. So, after you get past the first quarter, you’ll have 2 or 3 quarters of fairly comparable performance.

Got it. And then just a follow-up on, trying to fill in some color around what’s happening in New York; with FEMA crews and some other government agencies who are working there right now, are your hotels benefiting from that? As I understand, I think FEMA has some people based in Brooklyn and some other areas in Long Island?

Yes. We’ve got, matter of fact we just sat down, every Monday we do kind of a forecast meeting and company-wide call and we are, number one, from Holtsville, Long Island and from one or 2 others, were unable to even finish up stats for October, because the front desk systems were down. And therefore looking at forward bookings is a little bit challenging too, but I will tell you that there’s been some conversations, and some negotiations going on in the Westchester County area, so you look at White Plains and you look at our New Rochelle Hotel and I think there’s some FEMA business being talked about in at least one of those. Right Dennis?

Yes.

We didn’t purposely want to get too far out here today, it being Wednesday, because frankly the information coming back from the properties is kind of spotty here only because systems are not what they ought to be. We do have our CEO and chief guy out on the road as we speak driving the entire Northeast, going to every single hotel between the joint venture and Chatham and not only kind of passing and hopefully improving morale and thanking folks for what they live through, Atlantic City, the Courtyard there on the Boardwalk Block with the GM and our maintenance chief in the hotel through that whole mess kind of riding the storm out. I mean, there’s people like that -- that have really done great jobs for us. So, at the same time, talking about what’s important and what’s important is, where is the revenue going to come from and looking at opportunities in a seasonally slow period of time obviously, because this is the slower period of time in the Northeast, we’ve got the perfect hotels to be able to do this kind of business. And so you’re looking at Holtsville, we’re looking at -- we’re looking carefully at White Plains, although occupancy rates in White Plains and New Rochelle are already high. So in some cases, it’s tough to book large groups, for example, of 40 or 50 rooms that demand seems to be there for. So, you know what, talk to us perhaps in a week or two, we’re going to know a lot more.

That’s great color. And then just a final question on the potential asset sale at some point; is something kind of far along from the core portfolio that you are able to talk about?

We don’t want to talk about that, because until we really have the money in the bank. It seems like the world we live in today could be characterized on the deal side as a re-trade world. So we’re cautious of saying anything about those kind of things other than we got some efforts going in that regard and we have not abandoned them and we think there’s an opportunity to trade out one particular hotel that is kind of a high-profile hotel for Chatham and enhance returns pretty substantially, making a fast profit from when we bought that hotel.

Our next question comes from the line of Matthew Dodson with Edmunds White Partners.

I just have 2 quick questions on your RevPAR guidance for the fourth quarter, you [indiscernible] rate and then occupancy in that number?

Can you repeat the question because we just only heard the last 4 words?

Yes, no problem. I’m sorry. For your fourth quarter guidance on RevPAR, can you talk a little bit about, is it going to be driven more by rate, is it going to be driven by occupancy? A little more color on that would be great.

Yes. I mean, I think at this point in time, I think what we would tell you it’s a little bit slightly 60-40, rate versus occupancy. All that being said, though, as we just were talking with Nikhil, and that’s what we baked into our guidance is kind of a 60-40 split between rate and occupancy. I think the one outlier that we’ll know here in the next couple of weeks is from an occupancy perspective, do we have the ability to juice the occupancy in those hotels such as Holtsville, New Rochelle and White Plains because of the displacement of guests, not of guests, but hopefully of potential guests from Superstorm Sandy. So I think at this point within the 3 to 5, I think we’ve got a 60-40 split and certainly, we -- that may get more to a 50-50 split if we are able to take some occupancy in those hotels.

And then you kind of talked about next year more of the RevPAR is going to be driven by rate, is it going to change to like maybe 80-20, 70-30, can you help us understand that a little better?

Yes, I think that’s a good assumption, whether it’s 75-25, 80-20 that’s pretty reasonable.

We’ve got very, very high occupancy rate hotels here. As you can tell from the overall stats probably higher than most hotel rates. Certainly part of that’s, we’ve always said, attributable to the nature of our business, which is upscale extended-stay. But nonetheless, what happens is, the upscale extended-stay hotels get out ahead of the rest of the competitive set. Because of the kind of business we do, you need to have the competitive set catch up. That’s why we made the comment about occupancy in the competitive sets being 75% roughly, which usually historically is a number where with -- even you’ve got to have the rest of the set driving ADR in order to drive ADR in your hotel, no matter how high your occupancy rate is. So we think 2013 is much more of an opportunity to do that than 2012 turned out to be.

Got you. And then my last question based upon that is what -- will that 80% rate increase compared to your occupancy do to your flow through?

Yes. I mean, listen, I think you can safely assume kind of a 1.5x to 1.6x operating flow through of that. Yes, I think that’s a conservative way to look at it.

[Operator Instructions] Our next question comes from the line of Sule Sauvigne with Barclays.

I apologize if this was discussed already, but I joined the call a little late. I was wondering if you could talk about the supply outlook for your main markets over the next couple of years. We’ve heard that access to financing is starting to improve incrementally, so I was just wondering how you are thinking about that for your portfolio.

Yes, Sule, this is Jeff again. And clearly there seems to be certainly a little more opportunity for folks to get construction financing, than has existed in the last 2 or 3 years. We are looking at our marketing plans right now, very important part of those plans is looking at whatever is in a pipeline for any of our hotels in the market or what is even being rumored, although we take that with a grain of salt. Equity requirements are still obviously very high, the ability to get a construction loan was non-existent and now, in markets that have occupancy rates of 80% plus and that’s market wide, the lenders might look at your deal with the right sponsorship and the right brand. So we’ll report, as we finish out our marketing plans in a little more detail over the next few months on new supply. But I do know that in one market I can think of recently receiving a letter from Marriott, the brand sends you letters as you may or may not know, and allowing you the opportunity to object to a particular project. There was one in Anaheim that was supposed to come that was somewhat, I think, competitive to our Residence Inn in Garden Grove in Anaheim and we got a notice that that deal blew up, but they were all of -- but then again, a few weeks later, got another notice saying that something else was being considered by them, but that is far from a done deal. We lived with a prior notice for 12 to 18 months thinking that deal was going to go on the ground, it never occurred. Meanwhile, it is a market that runs over 80%, and so, frankly, we don’t worry about that one too much. I can’t think, Dennis, do you think of anything else?

One of the things we talked about in the past 1.5 years as well, in supplying Carlsbad that there has been some new supply in the market. They still plan some, but if you look at occupancy at that hotel for the year, through September our hotel is still running at 89% occupancy. RevPAR is up 6% in that market with 89% occupancy. So even though there is new supply in that market, the hotel has still been able to absorb it and with the strong brand, hopefully it’s been able to weather the storm a little bit.

We don’t see much else, though.

[Operator Instructions] Management, I show there are no further questions at this time. Please continue with any closing remarks.

Well, we want to thank everybody for being on the call today. Obviously it’s an interesting day in our world and I’m sure people have got other things on their mind perhaps after the election other than listening to our results. But nonetheless, as Matthew indicated [ph] , it was a great quarter and particularly compared to how other folks have fared in what they’ve reported for Q3 results. So we’re really pleased with the portfolio and how it continues to shape up here. We’re looking at ways, obviously to make as much money as we can. And as I described, I think selling a hotel or 2 and recycling that capital on the acquisition front, there are a few deals that are interesting. There are a few deals that would allow us to pick up 200 basis points or 300 basis points on that capital in return. I think we can’t underestimate the impact of the line of credit amendment. Dennis has done a great job there. Thank you, Dennis. The potential next year are picking up $0.05 to $0.07 of FFO as a result of lowering the interest cost on that. Well, for us and frankly for anybody, that’s pretty significant. So we get a nice pop, 2013 FFO from that. There’s opportunities within what we used to call the 5 Sister [ph] portfolio acquired from Innkeepers to refi those deals I think, and pick up, we won’t say yet how much money, but we think there’s substantial interest savings to be looking at on that front as well. So I think 2013 starts to shape up pretty well for us. The marketing plans are coming in and being, of course, having the ability to have Island Hospitality so close to us allows us a very, very detailed inside look at what expectations are. And I must say, for the most part, expectations are strong in these hotels. So we know we’ve made the right investments, we are in the right brands, we are in the right locations. We’ve got the right operators and we look forward to moving forward. Thank you.

Ladies and gentlemen, this concludes the Chatham Lodging Trust third quarter earnings conference call. If you would like to listen to a replay of today’s conference, please dial 1 (800) 406-7325 or (303) 590-3030 and entering the access code 4569457 followed by the # sign. Thank you for your participation. You may now disconnect.