Great day, ladies and gentlemen, and welcome to the Third Quarter 2013 DiamondRock Hospitality earnings conference call. My name is Lisa, and I will be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today, Mr. Mark Brugger, Chief Executive Officer. Please proceed.

Thanks, Lisa. Good morning, everyone, and welcome to DiamondRock's Third Quarter 2013 Earnings Conference Call. Today, I'm joined by Sean Mahoney, our Chief Financial Officer; and Rob Tanenbaum, our Chief Operating Officer. As usual, before we begin, I would like to remind everyone that many of our comments today are not historical facts and are considered forward-looking statements under federal securities law. They may not be updated in the future. These statements are subject to risk and uncertainties as described in our SEC filings. Moreover as we discuss certain non-GAAP financial measures, it may be helpful to review the reconciliation to GAAP set forth in our earnings press release. Let me start today's prepared remarks with a few general observations on industry fundamentals. The third quarter showed solid strength with the industry reporting its 14th consecutive quarter of RevPAR growth above 5%. The current lodging cycle remains strong, despite an overall economic recovery that is best characterized as modest to weak. We carefully track several major economic indicators that we believe best correlate to hotel demand. These economic indicators continue to show gradual improvement. A benefit of the slower than normal recovery is that it increases the likelihood for an elongated lodging cycle. Moreover, new hotel supply remains another favorable feature of this cycle. In the third quarter, supply was muted, with growth of less than 1%, which is less than half the historical average. And we expect overall supply growth to continue to be restrained over in the next few years. Overall, our outlook for U.S. lodging fundamentals is for several more years of solid growth, and we have positioned DiamondRock to take advantage of that environment. For DiamondRock, there are 5 key takeaways from today's earnings release: One, the portfolio is performing well, with approximately 6% year-to-date RevPAR…

Thanks, Mark. Before discussing our third quarter results, I want to emphasize that our third quarter prior year comparisons are significantly impacted by Marriott's reporting calendar change. The Marriott Hotel third quarter includes 20 fewer days than last year, which results in approximately 10% fewer room nights this quarter. Please note that this only impacts our quarterly comparisons and will not impact the full year comparisons since we have always reported annual results on a calendar year. Now let's turn to the third quarter numbers. Overall, it was another good quarter. The company reported hotel adjusted EBITDA of $54.5 million, corporate adjusted EBITDA of $51 million and adjusted FFO per share of $0.18. While overall results were in line with our expectations, there were a number of moving pieces. The results were negatively impacted by renovation disruption at the Lexington Hotel. In total, we now estimate full year renovation disruption of $17 million, which is $2 million above the high end of the previous range. However, this impact was mostly offset by outperformance at the Boston Westin, LAX Marriott and our 2 New York City Courtyards, which benefited from renovations completed earlier in the year. The third quarter reflected some exceptionally strong results at many of our hotels, with 5 hotels reporting double digit RevPAR growth. Excluding the Lexington Hotel, our portfolio generated strong comparable RevPAR growth of 5%. Our third quarter pro forma health profit margins expanded 40 basis points. However, hotel adjusted EBITDA margins contracted 32 basis points. EBITDA margins in the third quarter were held back by a total of 80 basis points from 3 specific drivers, namely: Property tax increases at our hotels in Chicago, Denver and San Diego; underperformance at our Washington, D.C. hotels; and the impact of ramping union conversion costs at the Boston…

Thanks, Sean, and good morning, everyone. It's been a very exciting 7 months in asset management as we've been focused on implementing various initiatives in order to further unlock inherent value in the portfolio. It may be helpful to begin my remarks today with a quick overview of asset management's critical objectives for 2013. Our first objective was to get the right teams in place at both DiamondRock and at the hotels. In particular, there was a significant emphasis on putting the right leaders in our properties. We have been proactively working with the management companies to identify the best people to lead these efforts. And in this quarter alone, there have been 5 hotels with new general managers at key assets like the Chicago Marriott, the Boston Westin and Frenchman's Reef. By the end of 2013, approximately half of the GMs in our portfolio will be new. We have also replaced 4 directors of revenue management, 2 directors of finance and 1 director of sales and marketing this quarter. These new players are aligned with our strategic vision for their respective hotels and were selected due to their exceptional ability to drive future hotel operating results. We believe that these new teams, with our collaboration, are positioning our hotels to deliver strong operating results. Our second objective was to ensure that our $140 million capital initiative was executed on time and on budget. We are pleased with the tremendous progress on this initiative and through the end of the third quarter, we have spent approximately $75 million on this program and expect to spend approximately 2/3 of the remaining capital during the fourth quarter, which will result in minimal disruption. We completed the renovation of the 2 New York City Courtyards earlier this summer and the Lexington Hotel rebranding…

Thank you, Rob. Looking forward, we are excited about how DiamondRock is positioned for growth in 2014, 2015 and beyond. There are a number of near-term catalyst. First, our renovation program is set to begin pay off. We are just entering into a period of reaping the return from our $140 million capital investment program. Moreover, the renovation disruption is largely behind us, and we go into next year with tailwinds from easy comparisons. Second, 2014 should benefit from strong group performance, as our group pace for next year is up over 10%. And finally, our new asset management initiatives will begin to harvest both revenue and margin expansion opportunities starting next year. With that, we would now like to open up the call for your questions.

[Operator Instructions] Your first question comes from the line of Ryan Meliker with MLV & Co. Ryan Meliker - MLV & Co LLC, Research Division: Just a couple of quick questions here. First of all, I know you've got a few renovations that are trickling into the first quarter of next year. Are you expecting any material disruption in the first quarter or are you really expecting all the disruption to be played out through the end of this year?

Ryan, it's Mark. On the renovation structure and for the full year 2014, we don't expect material renovation disruption. There's always a little in every year, but we do not anticipate a significant disruption in Q1 of next year or in any quarter of next year. Ryan Meliker - MLV & Co LLC, Research Division: Okay, that's helpful. And then Rob, I'm wondering if you might be able to help us think a little bit about where you think this portfolio's margins can get to? I know I'm not looking for guidance for 2014, but just as you've now been there for a few months and you've been able to digest a lot of the portfolio and where the properties are running, where do you think that the margin should be on a stabilized basis across the portfolio?

Well, I think we have great opportunity throughout the portfolio, Ryan. And we believe there's great upside throughout.

Ryan, this is Sean. I think when you think through where our portfolio has performed so far this cycle, we're a couple of hundred basis points below where we think we should perform. I think when you look for the next couple of years, it's certainly not going to be a 1 year return, but over the next 2 to 3 years, we should expect to recoup that lost margin that we didn't get earlier in this cycle, and that's really what our -- both revenue enhancement opportunities in asset management, as well as the cost-containment initiatives are intended to accomplish. Ryan Meliker - MLV & Co LLC, Research Division: So basically, a couple hundred basis points above where you are today is what you would make sense from a today standpoint? I mean, margins could go up beyond that as this cycle continues to recover?

No, we would expect a couple of hundred basis points above where the market margins move, as we recoup those lost margins, is the best way to think about it. Ryan Meliker - MLV & Co LLC, Research Division: That's helpful. And then just real quickly, lastly, with regards to the Torrance Marriott sale, I'm not sure how much color you can give us, but can you give us an idea of who the buyer was or what the type of buyer and how the appetite was for that asset?

Sure, this is -- Ryan, it's Mark again. We went to market -- we engaged a national broker. We had numerous bids on the asset. The particular buyer that is under contract, we have a confidentiality agreement, but I can tell you, it's an offshore buyer and this is a strategic entrée into the U.S. market for them. Ryan Meliker - MLV & Co LLC, Research Division: Okay, and were there a lot of bids for the asset? Or was this really negotiated with 1 or 2 guys that were pretty focused on it?

No, there was aggressive competition for the asset. There were a lot of offers on the hotel. Ryan Meliker - MLV & Co LLC, Research Division: Great, and do you have anything you guys are looking to sell as non-core over the next 12 months or so?

Yes, as we mentioned in the prepared remarks, there's 2 other assets we've identified to sell in the next 18 months. We’re going to be disciplined about the exact timing of selling those to maximize the proceeds for our shareholders. But yes, there are other assets. As we mentioned last call, we had about $150 million in total asset value of non-core assets to monetize. Obviously, Torrance at $76 million represents about half of that.

Your next question comes from the line of Jordan Sadler with KeyBanc Capital Markets.

It's Austin Wurschmidt here with Jordan. Just wanted to touch on the F&B growth you guys experienced. You had mentioned it was better than you had anticipated. And I was just curious, is this due to a better group and banquet activity? Or is it something attributable that you guys are doing differently to generate additional business?

Austin, it's Rob. It's due to banquet activity from the groups.

But are you generally seeing people plan more types of banquet activity than you were before? And when you look into 2014 with the group business that you guys have already on the books, do you expect that should continue to grow?

Yes, we do. We are seeing some really great short-term group catering contribution in the quarter for the quarter. And so we do expect that to grow given the basis of our group booking pace for next year.

That's helpful. And then just -- it sounded like property tax -- property taxes impacted margins pretty materially at several of your properties. And you've talked about the upside that you've gotten margins. When you looked at 2014 without providing specific guidance, do you anticipate a material impact on margins from property taxes again next year?

No Austin, I think for 2014, when you look at where the reassessments are, there shouldn't be any big outliers in 2014. Our property taxes on '13 were driven by both Chicago, as well as Colorado's reassessment years. Chicago, is the triannual reassessment and the Colorado is biannual. And so that -- it just so happens that as the calendar hit this year, we are comparing to prior periods that were pretty low property tax years because of where we were in the economy. So we would expect for '14 to be normal inflationary increases to property taxes. The other thing on property taxes that I would note is that we are constantly appealing property taxes, about half of our portfolio today is under appeal. We do not record wins or losses on appeals until they get settled. So that's something that we are constantly working through.

And then just one last one. With all of the group business that you guys have on the books now, which quarters next year do you expect to have sort of the most compression from that additional group that's already on the books?

Sure, Austin, it's Rob. It's quarters 1, 3 and 4.

Your next question comes from the line of Steven Kent with Goldman Sachs.

This is Anto Savarirajan on for Steven Kent. The Marriott Suites in Bethesda is having a particularly difficult year on RevPAR and EBITDA. Apart from the weakness in D.C., are there other factors affecting performance at the property?

Yes, it's -- this is Rob. We've been working with the hotel quite diligently over the past quarter, in readjusting their sales strategy. And it really just comes from a change in how the market is shifting and the property is readjusting their approach to the market.

Understood. You mentioned the government shutdown in I think in your prepared remarks as in the press release, have you quantified the EBITDA or RevPAR impact of this shutdown for 4Q?

Yes, it's about $600,000 in both revenue, as well as EBITDA impact for the fourth quarter, primarily in our 2 Washington, D.C. assets.

Understand. The -- my last question, on the LAX, you didn't make some very constructive remarks on the $40 rate list and the good corporate rates. How is this tracking to your prior estimates? And I understand that it's still early days since the reopening, but can you talk about some of the corporate bookings you're seeing for 2014 and the property?

Yes, this is Mark. The Lexington we've had about 100 corporate accounts go through. We've been added to some of the best accounts in New York City through the Marriott programs already. We're not into RFP season -- we're not fully through the RFP season for next year, but we are tracking ahead of schedule with the corporate accounts. We've actually added more corporate accounts than we would have anticipated given the midyear entry into the brand conversion. So we're ahead of expectations on that front.

Your next question comes from the line of Thomas Allen with Morgan Stanley.

So you reaffirmed the annual guidance, despite higher renovation disruption. Where is the outperformance coming from? Is it all the F&B that you talked about? And yes, I guess, it's also surprising given that you -- I know you have some D.C. impact too even though it is small.

Thomas, this is Sean. The outperformance, F&B was clearly a big component of it, but it was -- that's really a subset of the outperformance in group. We've had very strong year-over-year in the year for the year bookings for group. So our Chicago Marriott, as well as our Boston Westin were big drivers of our outperformance. So I think the way to think about our results in our maintaining guidance is that the disruption was a couple million dollars higher than we thought, but that was essentially offset with outperformance on the group side, Boston and Chicago being the 2 drivers there.

And can you just give us your updated thoughts on kind of the current transaction environment?

Thomas, this is Mark. As I stated in our Investor Day in September, we're not actually actively looking in 2013 to do acquisitions, because we're focused on the internal growth opportunities. We are obviously looking at every deal that comes across our desk. The market, we can tell you, from the sales effort we had, is very robust. We actually got more offers than we anticipated on the Torrance Marriott when we brought it to the market. It seems like there's an imbalance between great opportunities and the amount of capital that's out there. So we're seeing valuations potentially going upwards from where they've been earlier this year.

Your next question comes from the line of Rich Hightower with ISI Group.

So a quick question on the Salt Lake City refi. Can you tell us what debt to gross asset value is pre- versus post-refi, really quickly?

That was a mid-60s LTV on the asset, Rich.

Okay, I mean, what about previously?

Our total investment in the asset in the low-50s. It's $53 million or $54 million. So we've taken more than our basis out of the asset, at this stage.

Okay, and I know, obviously, cash is fungible, but just a question on sources and uses. It does say that part of the excess proceeds from the refi could go towards the remaining funding needs for the Hilton Garden Inn. You've got an untapped revolver -- I think it's priced at less than 2%. Why not fund some of that off the revolver and just pay it down over time?

I think our view on the -- generally on funding the Times Square is that we wanted to make sure we maintained significant capacity for that funding, which we did through some of our earlier in the year financing, Salt Lake City, as well as the upcoming sale of Torrance. We're going to end the year with about $145 million in cash. The reason why we are -- we have a bias to keeping the line dry, is we get generally, as an organization, have a bias against corporate debt from a risk mitigation strategy. But also as we look forward towards our refinancing in 2015 and 2016, we want to keep that line dry as an option for funding those refinancings in the future.

Okay. That's helpful. And really lastly, just one quick question on the guidance for '13, I don't want to fixate too much on the fourth quarter, but just given what you know about the portfolio today, as far as we are into the quarter, it does seem like between the high and the low, there's a $10 million GAAP in terms of EBITDA. What uncertainty does that maybe reflect for the rest of the year, if any, if I'm reading that correctly?

Rich, this is Mark. We're still sitting here getting our October results in and finalizing those. They're in the quarter, for the quarter group business pick up, they exceeded their expectations last quarter. We're comfortable with the guidance range, so we reaffirm the guidance range. There are several million dollars of variability based on how the group plays out, how the ultimate government shutdown plays out. So we wanted to keep the range the way it was.

Your next question comes from the line of Chris Woronka with Deutsche Bank.

On the Courtyards, it came out of the renovation. I know they're running really high occupancy and I think you talked about rate lift you expect to get. I don't think a lot of it came through in the third quarter. Is that just the timing functions taking another quarter to ramp up or how should we look at those going forward?

Chris, it's Rob, it's a great question. I was just on the property on Wednesday for a very long meeting. We're spending an enormous amount of time on this sale strategy, and we're finding new opportunities there. So we see additional growth factors at both Q4 and well into 2014 as well. Just to give you one example, we went out, just to the neighborhood campus, found a new group -- new corporate account that can potentially bring us a thousand rooms on an annualized basis. I met with the meeting planner on Wednesday at the property and just said thank you for coming through and she just raved about the renovation, the room size of the hotel and just said she can't believe at what an incredible product there is like that in New York City. So we feel very good about the future for this -- for the rate growth of this asset.

Chris, this is Sean. The other thing worth noting is our third quarter because of the 20 less days is not really comparable for our Marriott assets. When you think of how they -- how both those assets performed relative to our expectations at the beginning of the quarter, they both outperformed. So we're pretty -- we're pleased with the direction that they're going. Clearly, Rob is going to a spend a lot of time to maximize the operations of those hotels. But the third quarter, it's just -- it's very noisy on a year-over-year comps, so I would caution you against reading anything into the third quarter on a standalone basis.

Okay, that's great. And then on the sales you talked about 2 more planned within the next 18 months. I guess -- I thought maybe it might be -- a number a little bit higher than that. Are those 2 pretty firm and then there are others that you're just kind of looking at opportunistically? Or do you think you're not likely to sell more than 2?

Chris, we really like our portfolio today. There are a couple of assets that we consider monetizing, but we're trying to be very careful about not rushing the market when we think that there is increased value in the assets. So we're being very thoughtful. There's 2 that are teed up if we move through those 2, then there might be 1 or 2 behind that. But we don't want to -- generally we love our assets. In fact, there's a huge pool to monetize here.

And then just finally, on the -- I know you talked a lot about group pick up kind of in the quarter, for the quarter. Do you think -- 2 part question. I mean, do you think group behavior is changing at all in terms of waiting, which, I guess, intuitively wouldn't make much sense given the high occupancy levels? But also, do you think that's a function of just kind of things getting better? Or was there some catch up there from some of the things that didn't come through earlier in the year?

I think it's that things are getting a bit better, I don't believe it was catch-up. It was just companies are realizing the importance of having meetings and we're just seeing the short-term side of it growing every quarter, which is very encouraging to us.

Your next question comes from the line of Nikhil Bhalla with FBR. Nikhil Bhalla - FBR Capital Markets & Co., Research Division: Mark, I just wanted to ask you a little bit about the flow-through as you expect for about 2/3 of the EBITDA that's not been renovated this year into next year. What do you think we could get -- I mean, would it be kind of a 1.5x flow-through or 50% flow-through, or would it be something more? Any color on that would be appreciated.

Sure, let me just -- a couple of things. Let me clear up that -- we have 1/3 of our portfolio, but it does get renovated from this $140 million capital program. A lot of our other assets have been renovated in the prior 3 years. So it's not like they're -- we're going in with the balance that's all in need of capital most of it is in fantastic shape. As far as flow-through, we're right now in the midst of budget season and rolling up. The group, obviously, will be good, and that will help flow-through next year, but I think it's too early for us to give you an evaluation of what the flow-through is going to be until we get through the budgets. Nikhil Bhalla - FBR Capital Markets & Co., Research Division: Okay, and just in terms of Washington, D.C. as it impacts your portfolio, it seems like your pace is very strong for D.C. next year. Would you -- how would you characterize your portfolio to maybe do a little bit better than what the rest of the market does next year?

For Washington, D.C., yes, we do. Nikhil Bhalla - FBR Capital Markets & Co., Research Division: Okay. And you mentioned a couple of assets that are in asset sale process right now. Any sense of, like, what that might fetch?

We don't have anything else that's eminent right now. We usually don't talk -- our policy is not to talk until we have something under binding contract or already sold. As we said on our last earnings call, there is about $150 million of assets we're looking to recycle, so we've done about half of that with the Torrance Marriott sale. The other 2 that were identified, we're not in a rush to sell them for a price that doesn't make sense. So we're trying to be very thoughtful about what we bring to market and what the best time is to sell those assets. But again, I think the 18 month timeframe is the right timeframe. Nikhil Bhalla - FBR Capital Markets & Co., Research Division: And these additional 2 assets, where they contemplated in your remarks in the last quarter?

Yes.

Your next question comes from the line of David Loeb with Baird. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: Can I just go back to the guidance for a minute? Not to beat a dead horse, but pretty much everyone else has decreased fourth quarter guidance. You guys kept it the same, but increased the disruption, which is sort of a net increase. Can you just give us a little more color about your confidence? Or perhaps some color on the government shutdown, maybe that was less impactful for your guys?

Sure, David. A couple of things to consider. So our disruption went up about $2 million, but as we mentioned, as Sean just commented in the Q&A, we had outperformance, particularly in the group side in the quarter. So some of that's already been offset in the third quarter. For the fourth quarter, we have about 8% of our portfolio with D.C. exposure, so it's not a huge part of our business. We've put in the government disruption to the best we can in our forecast. But we have a pretty good handle on how the properties are going to do and feel comfortable with our current guidance and where we're going as a company. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: So you didn't see any government-related weakness in other markets?

There was sporadic. There was sporadic impact in some of the other markets, but generally, those markets had strong enough transient demand to offset that. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: Okay, and just to shift to acquisitions, what's your thought, your appetite for acquisitions and your view of the acquisition market here? You did sound pretty bullish on where we are in the cycle and on owning hotels at this point in the cycle. So are you thinking of owning more?

That's a great question, David. Well, as you know, and as we mentioned on our Investor Day, 2013 has really been a focus on the capital program and internal opportunities. As we move into 2014, we'll carefully evaluate our cost of capital and the opportunities that are in the marketplace. But I would say that we are increasingly discerning as we move through the cycle. But, of course, if we find a great deal that adds value for our shareholders, we're going to carefully consider it.

Your next question comes from the line of Lukas Hartwich with Green Street.

Can you remind us of the -- what the ADR gap was at the Lexington pre-renovation? And what are you guys targeting for that?

The ADR gap from the closest competitor, the Marriott East side?

Either that or just the local competition.

The ADR gap from the local competition, the hotel ran around 80% of the ADR RevPAR penetration pre-renovation. We expect the hotel to be able to make up that and be probably at parity, if not a little above parity, as we get fully ramped up as in autograph.

Lukas, it's Mark. This is another benchmark. The closest competitor, a block away, and really the one that we used for underwriting an analysis. There was pre-renovation about a $90 ADR gap. We were running at higher occupancy, but that $90 ADR gap for every dollar we can close, that's about $250,000 of incremental revenue. And we've underwrote to close about half of that.

Great, and then the -- on the Hilton Garden Inn, I'm just curious if there are signage opportunities there. And if there are, what that is -- what that means for DiamondRock?

Yes, so our deal, we bought this from a joint venture, and so, as you may recall, this is a joint venture where they bought a distressed -- with that deal, there were a couple of players. One of those players controls the retail and the signage for both -- really the Knickerbocker and this site. So they're going to retain those rights. So really, it's the hotel. And that's one of the reasons our cost basis is so attractive at this kind of the simple location is for a hotel at $450,000 a key at this location, we think we're getting a terrific bargain. But we do not have the signage or the retail rights.

Your next question comes from the line of Anthony Powell with Barclays.

I had a question on the group pace for next year. It's pretty strong. I wanted to ask how much of that group pace was related to citywide conventions and new markets? And if so, are those city lines going to be recurring in '15 and beyond?

Anthony, it's Rob Tanenbaum. A lot of the group pace is due to city-wides. Boston in particular has a very, very strong year. And Boston has a strong year going into '15 as well.

Great. And just also, just on the supply situation in New York. There's a lot of supply coming on, including from your own hotels. How do you expect that to impact your current booking pace and your current -- and your ADR outlook for New York.

Our outlook for New York is strong. We're spending quite a bit of time with our respective teams and analyzing these supply impact and how we're marketing and adjusting our marketing strategies with that.

But, Anthony, on the group side and the pace side, we don't really own group hotels in New York. So the group and -- pace is not really going to be impacted by a New York portfolio. That's really our Boston, Chicago and Minneapolis are the big drivers of our group pace.

Your next question comes from the line of Wes Golladay with RBC Capital Markets.

As we look to 2014, looks like you guys have a lot of momentum going into the year. I just wondered if there's any difficult comps due to onetime events that we should be on the lookout for.

There's no specific onetime event that we think is going to be a major headwind going into next year.

Okay. And would that apply to the margin front too, or do you guys expect taxes or wages or anything, just plain run rate for next year?

On an overall portfolio basis, we don't see anything that which should be a major headwind for us. Now if things would come up, but right now as we look forward, what we say about property taxes and support cost, wage models. Most of those factors, there's nothing that's imminent that we think is going to hold us back.

Okay. And then we look at the changes -- of the changing of the personnel at a lot of the hotels. Has this caused any short-term pain on the performance of these hotels?

No, we're working with the brands, and it has not -- in fact, what we're seeing is that change outs have created a huge upside from a -- both from an employee satisfaction standpoint and a guest satisfaction. So we're seeing positive results quite quickly with those changes.

[Operator Instructions] Your next question comes from the line of Jeff Donnelly with Wells Fargo.

Mark, there have been 2 unsolicited offers or hotel platforms in the past week, do you think we're going to see more consolidation activity in the industry in the near term? And, I guess, what role do you see, if any, for DiamondRock?

Okay, let me take that gently. There is -- there's kind of 2 phenomenons out there. There is the private to public, I'm on the side of the privates out there. There's a ton of money on the sidelines, that once again in lodging, because if you think about the various asset classes, lodging right now stacks up probably as the highest growth asset class. And the financing markets have continued to get much, much better and LTVs are going up in the -- they've got cheap meds and other financings for corporate transactions. It's really quite phenomenal. The deals that we've seen so far, there's usually something inherent in those deals that the market probably doesn't fully appreciate. So I think there'll be a lot of active capital in the sidelines. I don't know how many offers for public companies, the all-cash offers that are really going to mature and actually come to pass. But I think that people are watching. It's a very interesting asset class. I think a lot of these companies are trading below NAV and so that activity will remain. The public to public, that's something we don't like to comment on.

Maybe just related to this, how do you think about the discount to replacement cost? You're talking about the acquisition market before, but I'm curious if you think that gap is narrowing or if that gap is in fact, closing at all just because other property types, like multi-family or what not, are bidding up land prices and just construction inputs.

Yes, what we're watching now is obviously prices have increased in hospitality, but the appetite for development sites and for alternative uses, the cost of construction, all those have increased a lot in the last 12 months. So probably the discount to replacement cost is narrowed a little bit, but it's still pretty wide when you're looking at the prices or current assets in the marketplace.

So is it fair to say I think you touched on it, but do you think there's sufficient debt capital out there that to the extent there are private players out there looking for large portfolios, regardless of where they're held -- so the higher leverage options are available for them?

Yes, there's a lot of private equity for the -- on the equity side and there's a lot of debt capital that's available today and I would say in the last 6 to 12 months, the ability to get the higher leverage and lower-cost mezzanine debt has increased.

And just switching gears actually just to your hotels, how are you guys thinking about the Vail Marriott now that we're coming into season this year? And maybe as a follow-up, Vail is looking to expand its summer season offerings in '14 and '15. Have you guys been in talks with them about that initiative and maybe just curious of your thoughts on how that can impact? I'm just rounding out your year round demand and maybe how you think about valuation there.

Jeff, it's Rob. And we saw -- this past summer, we saw incredible demand during the summer season. Vail put out a, just quite a bit of work up on the top of their mountain. They've got to rub scores. They've got quite a bit going on there. So we're seeing incredible demand from just a leisure standpoint, as well as the group focus as well, utilizing our Marriott system. We had very strong group during the summer months. So we see the seasonality really being smoothed out. I had previously asked the manager's hotel for host when I was with them back in late '90s early 2000. It's incredible to see the difference over the last 10 years of how this market has truly become a much more year-round resort.

And actually, Rob, is there any update on your thinking around converting the -- I think it's the northeastern university space in Boston back in the rooms?

As we have 2 more years on that lease.

Given any firm decisions or...

No, not at this point.

There are no additional questions. I would now like to turn the presentation back over to Mr. Mark Brugger for closing remarks.

Thank you, Lisa. To everyone on the call, we appreciate your continued interest in DiamondRock, and we look forward to updating you next quarter with our full year 2013 results.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.