Welcome to the Host Hotels and Resorts, Incorporated third quarter earnings conference call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Executive Vice-President, Mr. Greg Larson. Please go ahead, sir.

Thank you. Welcome to the Host Hotels and Resorts third quarter earnings call. Before we begin, I would like to remind everyone that many of the comments made today are considered to be forward-looking statements under federal securities laws. As described in our filings with the SEC these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed and we are not obligated to publicly update or revise these forward-looking statements. Additionally, on today's call we will discuss certain non-GAAP financial information such as FFO, adjusted EBITDA and comparable hotel results. You can find this information together with reconciliations to the most directly comparable GAAP information in today's earnings press release, in our 8-K filed with the SEC and on our website at hosthotels.com. This morning, Ed Walter, our President and Chief Executive Officer, will provide a brief overview of our third quarter results and then we will describe the current operating environment as well as the company's outlook for the remainder of 2009. Larry Harvey, our Chief Financial Officer, will then provide greater detail on our third quarter results including regional and market performance. Following their remarks, we will be available to respond to your questions. Now, here's Ed.

Thanks, Greg. Good morning everyone. While the financial results I will discuss shortly reflect the exceptionally challenging operating environment we have been facing, I should note that our performance this quarter exceeded our expectations and we are seeing some favorable trends begin to develop which I will discuss in a few minutes. Before I get to that, let me first talk about our results for the third quarter. Our comparable hotel rev par for the third quarter decreased 21.3% as a result of a 16.2% decrease in average rate and a decline in occupancy of 4.6 percentage points. Our average rate was $155 per night and our average occupancy was 70%. Food and beverage revenues at comparable hotels decreased 20% for the quarter as banquet business declined as a result of lower food volumes and outlet revenue declined due to lower occupancy and more conservative spending patterns. Third quarter comparable hotel adjusted operating profit margin decreased 685 basis points and resulted in adjusted EBITDA for the quarter of $139 million. Our FFO per diluted share for the quarter was $0.11. On a year-to-date basis comparable rev par decreased 22.3% and adjusted profit margin declined 560 basis points. Year-to-date adjusted EBITDA was $570 million. Year-to-date FFO per diluted share was $0.33 and that includes a reduction of $0.24 per share related primarily to year-to-date non-cash impairment and interest charges. While overall demand continues to be weak compared to pre-downturn levels and this weakness is translating into much softer room rates across all segments, we did see several positive trends develop this quarter. Starting with our transient business, for the first time in seven quarters we did not experience a significant decline in transient room nights as the number of room nights sold this quarter matched the prior-year total. Demand in our…

Thank you Ed. Let me start by giving you some details on our comparable hotel rev par results. Looking at the portfolio based on property types, our urban hotels performed the best during the third quarter with a rev par decline of 19.6%. Rev par for our airport hotels decreased 23.1% while rev par at our resort conference and suburban hotels fell 24.6%. Turning to our regional results, the south-central region performed the best with a rev par decline of 7.8%. As expected the out performance was driven by flat rev par for our San Antonio properties and continued strength at the New Orleans Marriott where rev par only fell 4.2%. The San Antonio market benefited from an increase in city-wide activity and the third quarter 2008 lobby renovation at the San Antonio Marriott Riverwalk. The New Orleans Marriott benefited from strong leader business. We expect the New Orleans Marriott to have another good quarter while the San Antonio market will underperform the overall portfolio in the fourth quarter due to a year-over-year drop in city-wide activity. The D.C. metro region continued to perform better than the overall portfolio with a rev par decline of 10.5%. Our downtown properties benefited from strong government and government related demand as well as solid leader business. We expect the D.C. metro region to continue to outperform on a relative basis in the fourth quarter. The Atlanta region outperformed the overall portfolio with a rev par decline of 18.1%. The decline was driven by reduced group and city-wide demand. We expect the Atlanta region to underperform the portfolio in the fourth quarter due to lower group and transient demand and a more significant decline in rate. As we anticipated, the New England region rebounded in the third quarter with a rev par decline of…

(Operator Instructions) The first question comes from the line of Joseph Greff – JP Morgan. Joseph Greff – JP Morgan : I have three questions; two are related to occupancy volume and one on CapEx. You mentioned in your earlier comments that occupancy would need to meaningfully improve to get pricing, I presume that is same store pricing, up and it is market by market, geography by geography. Can you maybe talk about are we 200-300 basis points away from getting pricing or 500-600 basis points and particularly with respect to New York we seem to look at New York as a leading indicator market. Another comment on occupancy you also mentioned was the first half of next year you expect demand to be weak. Do we interpret that comment on the first half of 2010 as occupancy down or occupancy up but still well below normalized thresholds or still kind of below on a 2-year basis? My final question is how are you thinking about 2010 CapEx? What is the minimum level of maintenance CapEx you can get away with do you think?

Let me start with speaking a little bit about occupancy. The question you raised about how much of an occupancy increase do we need to see is an interesting one. As carefully as we have tried to look at it, it really does come down to a market-by-market issue. Markets like New York and probably L.A. and D.C. where in New York we are running 90% right now and in L.A. and D.C. we are running close to 80%, I think there is an opportunity in a market like that as we start to see a little bit of improvement in demand it could fairly quickly translate into some pricing strength. We are not at that point quite yet but we are certainly approaching that. On the other hand if you have a market like Atlanta and Denver where we are running in the 60% range right now you are going to need occupancy to rebuild a lot more before you are going to really see any pricing power. As you know, it really does happen day by day because where we get pricing power ultimately comes about on the days when we have more demand than we have room. So when you get to that scenario that creates the opportunity to really drive pricing by trying to [raise] it. To talk about my comment relative to 2010 I think the way we were thinking about that on the demand side is we would probably start off, I think we expect a little bit lower occupancies in the beginning of the year in 2010 but I think the bigger issue for 2010 is really rate and rate is really the bigger challenge as we transition from where we are finishing this year and into next year we are concerned that…

The next question comes from the line of Mike Selinsky – RBC Capital Markets. Mike Selinsky – RBC Capital Markets: You talked a good deal about acquisitions and when you expect to begin making them. Can you talk a little bit how pricing is in the market right now, kind of what the expectations are out there among those properties that are on the market? Also where you stand right now with regard to your two funds and when you expect to be making acquisitions in those as well?

There is not a lot of detail on where pricing is right now because frankly not a lot of transactions have happened. I think we made some reference in the last call to the fact the one trend we were seeing is as people become more comfortable that we are either at the bottom or approaching the bottom in terms of operating results you are starting to see Cap rates decline and I think that is happening as a natural progression. As people become more comfortable that we are hitting the bottom you begin to build in the growth you expect to see come in the future into any acquisitions. If we look at where Cap rates have been on the properties we have sold what we are seeing is the cap rates on the ones we have sold have been in the 7.5-8% range on current year numbers but if you really add in the capital that we felt was necessary for the property you are probably starting to look at cap rates further into the 6-6.5% range. I think as you look across the market and look at different pricing segments you will probably find at the higher end where the damage has been greater cap rates have probably dropped lower than that, again depending upon an individual buyer’s expectation of the future. That is probably a fairly good proxy for where cap rates would be for a typical Marriott or typical Westin hotel. What was the second part of your question? Mike Selinsky – RBC Capital Markets: With regards to your [Q] fund, when you expect to begin deploying proceeds and what the opportunities look like both in Europe as well as Asia at this point?

I think in Europe, the Europe market at this point feels a lot like the U.S. and I would say there is even fewer properties in Europe on the market but we are in a wait and see mode there. It wouldn’t surprise me at all if we didn’t deploy capital in Europe next year. In Asia, I think you all know the Asian economies have recovered more quickly than in Western Europe or in the U.S. While we don’t have anything to announce in Asia at this time we are working fairly hard on a number of transactions. Our focus in Asia, as we have mentioned in the past, is not just on full service but it is also on select service opportunities and our sense of those types of opportunities is they continue to be attractive. Everything, however, it takes a little bit longer to get done than it has in the past so I wouldn’t expect in either case we would be announcing anything this year but at this stage I feel fairly confident we would be announcing at least some investment in Asia next year.

The next question comes from the line of Jeffrey Donnelly – Wells Fargo Securities. Jeffrey Donnelly – Wells Fargo Securities: If I could go on your earlier response, I am just trying to reconcile your comments on cap rate. Maybe how we should be thinking about distressed asset pricing if and when you do see it. Several of the assets that recently have been back and other private companies handed back are on pace to deliver EBITDA for 2009 that was 60-70% below their peak. Do you think when we see someone such as Host make acquisitions that you will be using sort of those mid, single digit cap rates on those types of trough numbers or is it possible we could actually see assets that are even cash flow negative or much, much lower cap rates? Effectively even some earnings dilutive of any long-term might even be accretive?

I don’t know there would be too many assets I would see us buying where you would look at it where we would be buying negative cash flow. I wouldn’t concretely rule that out because you have to look at the specific circumstances surrounding an acquisition to see if that was merited. If there was a situation with mismanagement or the opportunity to change brands, something like that, that might create a situation where we would make that type of an acquisition. The way we are going to look at acquiring hotels this cycle is going to be pretty similar to the way we have looked at it in the past. That is we will underwrite a 10-year IRR on the asset to try to build in what we think a reasonable growth prospect over the life of that hold period. We are going to look to buy assets that will be at a premium to what we believe our cost of capital is that that time. Now if we were looking today we would probably be expecting depending upon the market, the quality of the property and things like that for properties that would deliver a return somewhere between 11-13% on an unleveraged IRR basis. If you think about the way that analysis and the way that valuation process works you could end up with, you would love to see properties that were bought in that 7 to 8 to 9 cap range but there may be other opportunities where you end up at a lower cap rate and that was simply because our evaluation of the recovery for those particular assets would be stronger than the assets that might be bought in the 7-9 range. Jeffrey Donnelly – Wells Fargo Securities: How are lenders right now? I know there is not a tremendous amount of activity but how are lenders looking at mortgage financing on these types of assets? Using an arbitrary example if an asset has $10 million of EBITDA and it sells at three it really couldn’t support that much leverage at the trough versus maybe it would over a typical period of time. So I guess how are you thinking about deploying it and I guess how are lenders offering for that?

I think for us we have typically not bought properties with property specific debt as part of the financing package. We typically have done our acquisitions on an all cash basis and then figured out the leverage either using corporate debt or in some cases secured debt sort of after the fact. I think you raise a good point which is one of the challenges that people that rely on secured debt for acquisitions are going to run into is that secured debt is still pricier than where it was during the last cycle even though those levels are getting a little bit better right now. I think what Larry has generally indicated in the past is it is hard to find leverage that is much above 50% loan to value. Even that value in that context is fairly conservatively underwritten. So my guess is in the equation you are playing out you would probably see, especially if you get a little bit more price discovery in the market, you should start to see lenders get comfortable with slightly lower cap rates for valuation purposes but those loan to value ratios are still going to be relatively low. Jeffrey Donnelly – Wells Fargo Securities: Marriott indicated on their call they expected to see owners would see points of operating expense growth going forward. How are you thinking about expense growth in 2010 and beyond now that we are beginning to anniversary the expense cuts? Is there much left to implement particularly as you think demand is going to be rising?

As we progress through each quarter this year we have seen in our results the margin comparisons get more difficult and as a result you have seen the margin deterioration each quarter become a little bit more significant. I think you are right to identify that as you look to both Q4 and into next year that scenario is going to get more challenging because there have been I think tremendous efforts that redesign the way we deliver services and how much that costs at our properties which is why we have been fairly happy with the margin results that we have had given the revenue decline we have experienced. That challenge, while I think there is still going to be opportunity to do better and take some costs out of the system and obviously there are some costs in a negative revenue environment that will go down such as fee based costs, there is a chance next year that utilities and taxes could be a little bit lower. Again, in the utility case that depends on a lot of external forces. Not everything about expenses next year is necessarily about an increase. Some things could be better. As we have thought a little bit about next year and we haven’t even started on a property level budget so these comments are incredibly directional because they are not really based on anything specific yet one way we have thought about it is if you go back to the last downturn and you look at the third year of the last downturn that being 2003 our rev par in 2003 was down 4-4.5 points and our margins were down around 300. If you think about what that may mean in a context of 2010 obviously if the rev par number is better than the margin number would have been better. I think there is some sense of guidance one could take from that as an estimate. Jeffrey Donnelly – Wells Fargo Securities: Do you think that period of time was as applicable because post 9/11 it seems like many operators and owners were very slow to cut costs because 9/11 wasn’t a planned event and its impact, people didn’t understand how long its impact would be felt for. It felt like expenses got cut late in that cycle, not early.

I would agree with you in part although by the time we got to 2003 if you remember the events of 9/11 sort of dwarf everybody’s recollection of what was happening in 2001 but we were already headed to a negative rev par year in 2001 before 9/11. That just exacerbated it. Then at least in the full service sector 2002 was negative and then obviously as we worked our way through the second half of 2002 we had that build up for the Iraq war that was present in everyone’s mind. As we look at what happened in our portfolio back then I think the margin results in 2001 were actually pretty good given the level of decline that we experienced in 2001. In 2002 we dropped around 5% in rev par and only 200 basis points in margin but as you got to 2003 I think they had pretty much exhausted their options and that is why you saw gross margin performance when actually a slightly better rev par decline. I think it is not perfect and there are a lot of factors that changed from market to market or year to year but I don’t think it is at least a place to start in terms of evaluating what might happen next year.

The next question comes from the line of Chris Woronka – Deutsche Bank Securities. Chris Woronka – Deutsche Bank Securities: I was hoping you could talk a little bit about we have heard some of the operators as they have gone back and tried to get group contracts finalized. Instead of additional rate cuts I think there has been a lot of talk of them throwing in some incremental items, ABC, parking, breakfast, things like that. How should we think about that impacting? Is that a meaningful impact on margins next year? I would have to think it is optimal to cutting rates, but how do we think about that? Is that even a blip on the radar or is it too insignificant?

I wouldn’t call it a blip on the radar because I think you are right in that has been happening to some degree with a variety of our different customers. Obviously it trends a little bit differently in different markets. I think it is hard to separate that effect out from the other issues. That may be one of the reasons you may see food and beverage revenues decline a bit more than what one might expect but I think you can kind of see that being captured in the overall margin results that are being delivered right now.

The next question comes from the line of Andrew Whitman – Robert W. Baird. Andrew Whitman – Robert W. Baird: I wanted to focus back in on the acquisition market and take a little bit different approach. I think we would agree as you look at the numbers of CMBS maturities, other bank debt and insurance debt maturities that the opportunities for distressed acquisitions is out there. I guess I wanted to get some color. Practically are you gaining any confidence with what lenders or special servicers are actually doing in the market place that suggests they are going to take action and not just delay and pray as the industry terminology goes today?

That is a great question. I would say right now the answer to that is relatively muddled. You are right, a lot of special servicers or lenders right now in part because they don’t have either confidence on the ability to exit if they take a property back or are concerned about the loss or the mark they might take if they act now, are in many cases sort of kicking the can down the road and wait and see what happens. Now in order for that to happen though the general theme we hear is that generally requires that the borrower is prepared to continue to cover debt service. In a sense if they are in a scenario where there is no real pain associated with taking action on the property then they are prepared to wait a little while. On the other hand obviously there have been a number of highly publicized instances of this. There are other scenarios where the owner is taking a look at funding a negative cash flow situation in order to cover debt services. In those sorts of situations if they are not prepared to fund I think we have begun to see lenders take stronger steps. It still takes awhile even in those situations for an asset to work its way through the process and I think that is why you haven’t seen too many properties come to market. Our sense is as we get a little bit further into next year and into 2011 as the shortfall to refinancing becomes a little bit more apparent and at some point as it starts to become more expensive for a borrower to subsidize a property where they don’t see a good outcome, you will probably start to see activity begin to accelerate. I…

In our transactions it has generally been domestic buyers and my sense is that they had the cash available to complete the acquisition and then they were planning on levering up at some point after that. I think some of the other transactions I am aware of involved some foreign money and some of that comes from Asia. I don’t know that you have seen a huge influx of foreign money that has actually closed on transactions. I think they are obviously in a little bit better of a position than some of the U.S. buyers from a capital perspective which is probably why they are looking here.

The next question comes from the line of Smedes Rose – Keefe Bruyette & Woods. Smedes Rose – Keefe Bruyette & Woods: You mentioned that in the quarter for the quarter group bookings in New York picked up. I wasn’t sure if it was for the third quarter or fourth quarter and I just wonder if you could talk a little bit more about the makeup of those group bookings. Is it your traditional sort of customers that are just having shorter lead times or is it coming from new areas? What is behind that?

I don’t think…I know I said in our comments we saw an increase in the quarter for the quarter bookings. We didn’t necessarily attribute that to New York. My comment on New York was more about the fact that the occupancies in New York are fairly strong. I would say in terms of where the customers have come from, the bulk of the business was probably more in the discount category than anywhere else. There certainly were some bookings that happened on the corporate side but by and large those bookings were dwarfed by the overall decline we experienced in corporate business. That has been the weakest segment in the corporate group side. Where we saw a relative uptick appears to be more in the discount area which probably isn’t surprising given the environment. Smedes Rose – Keefe Bruyette & Woods: It looks like the guidance for the corporate expense line item went up by about $10 million for the year. Was there anything specifically behind that?

The bulk of it is basically our stock compensation getting back to more normalized levels. Smedes Rose – Keefe Bruyette & Woods: On the disposition front are there still more non-core assets that you would like to sell in the near-term or are you kind of done for now?

There certainly are over the next 2-3 years a number of additional non-core assets that we would look to sell. Our sense is that we probably would not be that active over the next 12 months. We never rule out there might be something that happens on an opportunistic basis where there is a buyer that finds some additional sources of cash and we can facilitate a deal because of that. By and large at least as we think about 2010 right now I would expect that our disposition pace would probably be a bit lower than what we saw this year.

The next question comes from the line of Steven Kent – Goldman Sachs. Steven Kent – Goldman Sachs: Just to go back to the question I think two ago about essentially inadvertent owners I don’t think I have heard you talk about since Chris and Terry were running the company. That was different. That was the RTC and others. I just want to understand the logistics of how quickly you can buy something. The other thing I always struggle with your company is you are inherently net buyers. If you look out over two years are you going to be bigger or the same size or smaller? Because I guess there is also an opportunity for you to start to sell some of the assets.

Answering the second question first, I think you are right. Ultimately over time we have been a net buyer. I would say looking out over the next few years I would expect that will happen again. I think that we are in a good position from a capital perspective and from a management infrastructure position to be able to take on more assets and create value through those acquisitions. While I would project as we think about the next several years we would probably see an additional sales velocity to what we did over the last 7-9 years I still think over time we will have grown in terms of size and we will be a net buyer. On the inadvertent owner side, I am thinking a little bit more how that process works. It is interesting that I would guess this time around it is going to be a lot more complex than what we faced in the 90’s. That is because in a number of transactions there are so many different layers of debt that you have to work through with the different players of debt in order to actually get to an ultimate resolution. An example of that might be the infamous St. Regis at Monarch Beach where I think at this point as I understand it there has been one level of a foreclosure where Citi Bank has stepped in and taken control of the asset and now they are trying to decide what they are going to do. Below them there is both a senior piece of debt and a junior piece of debt and Citi was the mezzanine piece of debt. So it is depending upon where value on that asset ultimately falls out. You could have to work your way through a couple of different foreclosures and proceedings before you actually get to an entity who could be a seller. I do think at the end of the day whether it is through that course of steps, whether it is a special servicer ultimately selling an asset or it is a traditional commercial bank lender who ends up with the title to the property we are going to find different than what we found say after the 2001 to 2003 downturn, we are going to find more financial entities or institutions that are owning hotels that don’t want to and they will end up having to be a seller of those.

Ladies and gentlemen at this time that is all the time we do have for your questions today. I would now like to turn the conference over to W. Edward Walter for closing remarks.

Thank you everybody for joining us on this call today. We appreciate the opportunity to discuss our third quarter results and outlook with you and look forward to talking with you following the close of 2009 with more detailed insight into 2010. Have a good remainder of the week and do us all a favor; travel a little bit this winter. We could use it. Thanks everybody.

That concludes today’s conference call. We thank you for your participation.