Good day, everyone, and welcome to the Host Hotels & Resorts, Inc. Second Quarter 2013 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Gee Lingberg, Vice President. Please go ahead.

Thanks, April. Good morning, everyone. Welcome to the Host Hotels & Resorts second quarter earnings call. Before we begin, I'd like to remind everyone that many of the comments made today are considered to be forward-looking statements under federal securities law. 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. In addition, 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 and our 8-K filed with the SEC and on our website at hosthotels.com. With me on the call today is Ed Walter, our President and Chief Executive Officer; and Greg Larson, our Chief Financial Officer. This morning, Ed will provide a brief overview of our second quarter results and then will describe the current operating environment, as well as the company's outlook for 2013. Greg will then provide greater detail on our second quarter results, including regional and market performance. Following their remarks, we'll be available to respond to your questions. Before I turn the call over to Ed, I'd like to remind everyone that at the beginning of this year, we adopted calendar quarter reporting periods and to enable investors to better evaluate our performance, we have presented 2012 RevPAR and certain historical results on a calendar quarter basis we call the 2012 as-adjusted-results. The following discussion of quarterly and year-to-date operating performance will include a comparison between the 3 months and 6 months of operations ended June 30. And now, I'd like to turn the call over to Ed.

Thanks, Gee. Good morning, everyone. We are pleased to report another solid quarter of operating results, which were driven by strong rate growth and improvement in both transient and group demand. Strong F&D and other revenue growth combined with improved flow-through led to earnings results that exceeded consensus estimates. We continue to feel good about the fundamentals in the business and our outlook for the remainder of the year, which I will discuss in more detail in a few minutes. Let's review our results for the quarter. Our comparable hotel RevPAR for the second quarter increased 6.1% to $163 driven by an average rate improvement of 4.5% combined with an occupancy increase of 1.2 percentage points. This increase exceeded starts total U.S. industry RevPAR by 110 basis points. Our comparable average rate was $204. And our average occupancy was nearly 80%, our highest occupancy level since the third quarter of 2000. Comparable hotel food and beverage revenue grew 6.6% as banquet and AV rental increased by nearly 8%. And outlet revenue improved by more than 4.5%. Total comparable revenue growth for the quarter was 6.3%. Excellent flow-through across all departments led to 180-basis-point improvement in our comparable hotel adjusted operating profit margin for the quarter, resulting in adjusted EBITDA of $431 million, a 23% increase over the prior year. Our adjusted FFO per diluted share was $0.45 in the second quarter, an increase of more than 36%. On a year-to-date basis, comparable revenues grew 4.5% as hotel RevPAR increased 5.7% and F&B revenues increased by 3%. Operating profit margins increased 140 basis points, resulting in a year-to-date adjusted EBITDA of $714 million. This represented an increase of more than 17.5% and generated adjusted FFO per diluted share of $0.73, which exceeds last year's total by 28%. Overall, we are extremely…

Thank you, Ed. Let me start by giving some detail on our comparable hotel RevPAR results. Houston continued its strong growth, and was our top-performing market for the quarter with RevPAR gains of 16.1%. Occupancy improved 70 basis points. And ADR improved 15% due to the strategies implemented at the end of last year to shift out lower-rated contracting group business while pressing for aggressive special corporate rate increases. We expect Houston to continue with robust first half growth trends, as solid group and transient demand will continue to facilitate a shift in the mix of business to higher-rated segments. Likewise, our Seattle hotels had another great quarter with a RevPAR increase of 14.5%, driven by a 3.8 percentage point increase in occupancy and an improvement in ADR of 9%. Strengths in both group and transient bookings allowed our hotels to drive rate. As in Houston, we expect our Seattle hotels to have a good third quarter due to a solid group base on the books and strong transient demand, creating compressions that will drive group and transient ADR. Our Atlanta hotels also performed well in the quarter with RevPAR up 11.4% as ADR increased 7.8% and occupancy increased 2.3 percentage points. The increase in rate was primarily driven by the NCAA Final 4 in early April. We expect our hotels to continue to outperform in the third quarter due to a strong citywide calendar. Moving out West. As a result of driving rate, RevPAR at our San Francisco hotels increased 11.2%. Although occupancy decreased 1.2 percentage points, ADR increased at a very healthy 12.8%. This rate increase was mainly driven by business mix shift from contracts to higher-rated transient and group business, as well as the San Francisco Marriott Marquis taking advantage of a successful rooms renovation by increasing…

[Operator Instructions] And first, we'll hear from Joshua Attie of Citi.

You highlighted that food and beverage and audiovisual revenue was a strong contributor to profitability. And I think you also said that you don't expect that to continue. Can you just talk about what were the drivers of that growth in the second quarter? Were they a couple of large meetings? And can you provide some commentary on why it's not sustainable or why you don't think it's the start of a broader trend?

Well, Josh, I think that the primary driver of the strong performance in food and beverage in the second quarter was the strong level of group that we had in that quarter. Our group room rates were up about 2.5%. And that obviously contributes to better F&B performance. As I mentioned in my prepared remarks, our banquets and AV revenue were up about 8%, which is really -- we didn't quite research this, but my sense is that's probably the best we've seen over the course of this recovery. On the other hand, because we also had some expansion on the transient side, our outlets did quite well, too. And that's been an area of focus over the last couple of years. So we were pleased to see that. Now as it relates to the second half of the year, here's how I would probably explain this. Our first half of the year, if you combine the first 2 quarters, food and beverage growth was about 3%. Now one of the things to remember is that 3% doesn't take into account the fact that last year had an extra day because of the leap year. If you adjust for that, food and beverage growth in the first half of the year was really more like 3.5%. As we look at the second half of the year, consistent with my comments, we see weaker business, group business in the third quarter and stronger group business in the fourth quarter. We would assume that food and beverage would probably -- performance would track those trends. We're estimating in our guidance that food and beverage could range from 2.5% to 3.5%. The midpoint of that is obviously 3%. So that would suggest that we'd be about equal with what we achieved in the first half of the year. But I wouldn't really rule out the fact that we could do better in the second half of the year than we did in the first. I wouldn't be expecting to do as well as we did in the second quarter. But if you compare the halves, I think there's an opportunity for upside. But as we commented in the past, food and beverage is notoriously difficult to predict. And consequently, we've gone with what we think is the realistic but hopefully conservative estimate.

That's helpful. And sort of a related question, your occupancy for the portfolio is running pretty high at close to 80% and that's even with group being slower. I know it was good in the second quarter, but generally your occupancy was pretty high and that's with even kind of weaker group. So you've been able to replace it with other segments. Can you kind of remind us what is group on a full year basis today versus what you think it should be at this point in the cycle? And then I don't know if you have this number handy, but can you kind of help us think about what's kind of the profit opportunity of closing that gap, of remixing toward greater group? And how much incremental profits do you think you can get just from that remixing from having greater food and beverage and ancillary revenue?

Yes. I don't know that we can really respond to the second part of your question other than we would obviously expect that as we close the gap on the group side that it's because that will help both with food and beverage revenue, as well as with driving better transient pricing because we will essentially shrunk the hotels. We would certainly expect that, that would be higher. To put where we are into context on group, at this point, as we've talked before, in the downturn, we lost about 19% of our group room nights overall. And at this stage, we're running about 9% or so behind where we were in 2007. So broadly speaking, over the course of the recovery so far, we've closed about half of the gap that developed in the 2008 and 2009 downturn. So obviously as we -- we're already back to the occupancy level that we had in 2007. So part of what would be happening as we continue to add group in future years is you'd be expecting both the prices on that group would go up. And as I mentioned in my comments, our pricing on group this quarter was already above where we were in '07. But that pricing should continue to improve. And just as importantly, transient pricing should also begin to accelerate further.

And next, we'll hear from Felicia Hendrix of Barclays.

Ed, your quarter and the outlook were relatively more optimistic than your peers. So you've already reported in general and on group even though that you've hedged some of the strength that you're seeing in group in your comment. Just wondering if you could talk us through what some of the differences are here?

Well, I think as it relates to the quarter what I'd like to think is it's a combination of us being -- earning the right assets in the right markets. Combined with the fact that, as we've commented previously, we've invested a fair amount of money in our hotels over the last 3 to 4 years. And we were expecting to begin to reap the benefits of that this year as our construction spending declines a bit. And therefore, we had less business interruption. So I think that's, in some ways, if I were look at the primary driver of it, it really ties into the fact that it's the right assets in the right condition and the right market.

Are you marketing to groups perhaps differently than your peers are?

I don't know that we would necessarily assume that. I mean, it depends on which peers we're talking about, of course. I mean, to the extent of the peers share the same operators that we do. I don't know that we would be marketing any differently to those groups. We have -- I think that part of this, again, ties back into some of the capital investments we've made. We have tried to wherever we could create more flexibility in our meeting space platforms. So as trends ebb and flow relative to the size of groups and the frequency of groups, we're in the best position possible to be able to track that business.

And your answer actually is a good segue to my next question, which really is that you'd still have a fair amount of properties under renovation. So how should we think about the RevPAR impact of those as they roll off?

Well, certainly, as we continue -- as we work our way through this cycle as a particular hotel has been renovated, I would expect that you'd see better performance in the following year, both because the disruption; and secondarily, because we would have made the property better. Yes, if I were to look at this year though in the context of what we would call maintenance CapEx, we're talking about a range of $280 million to $300 million for this year. So that to me is a level that we would generally expect to sustain going forward. So -- and it could drop down in a particular year. But the reality is that, that's probably a relatively -- that would be what I would expect we would need to spend.

Joe Greff, JPMorgan. Joseph Greff - JP Morgan Chase & Co, Research Division: With regard to the non-room revenue performance in the second quarter, was there a noticeable divergence in performance between April and then May and June?

I think April was stronger in general, but in part because there was probably some better spending as it related to some of the group events in golf and spa and things like that. But a lot of the improvement that we saw in the first half of the year in other revenue was probably most affected by the fact that we're getting the benefit of the new retail deal that we have at the Marquis, which, of course, has significantly increased the rent that we are paid relative to the retail there. And that would apply across the quarter. That wouldn't be specific once a month. Joseph Greff - JP Morgan Chase & Co, Research Division: Great, that's helpful. And Greg, looking at the weighted average diluted share count contemplated in the guidance, it looks like -- you contemplated within the guidance additional ATM proceeds. Is that correct? And roughly how much do you have in there?

That is correct. In our forecast, if you look at it for the rest of the year, we're forecasting that we'll issue another 5 million shares for the rest of the year. But of course, as we've said in our comments, that's all really going to depend -- it depends on our outlook for acquisition. It clearly depends on our outlook for dispositions. And certainly, it also depends on our stock price. So look, that number could vary, but that's what we have in our forecast.

And next, we'll move on to Ryan Meliker of MLV & Co. Ryan Meliker - MLV & Co LLC, Research Division: Obviously, group has been kind of the big topic this week with regards to earnings in the lodging space. You gave us some good color on the quarter. Can you put some numbers behind where your group pace is looking for the rest of the year? I know you said that you're looking weak in 3Q and strong in 4Q. Last quarter, I think you had said that demand was pacing up 3%, and revenue up 6% for the year. How much is that falling off now?

I'm not certain it was quite that high as the last call. I think the numbers were a little bit lower than that, to be honest. But what I would tell you is that at this point for the year, we would be expecting that -- as we look at the second half of the year, I think we're going to find that room nights are probably about flat, but that we've got a pretty solid rate increase for the second half of the year. So we would expect revenues to be up, call it, 3% to 3.5%, but the room night element of it to be roughly flat. I think if you go back to look at where we were at the end of the first quarter, I think we were looking there -- we probably were thinking for the remainder of the year, we were higher. But that, of course, included what we knew was going to be a very strong second quarter. So that might be what you were remembering. Ryan Meliker - MLV & Co LLC, Research Division: Sure, that makes sense. And then do you feel like you guys have any material mix shift left in the portfolio that can help boost RevPAR without necessarily seeing like-for-like demand or like-for-like rates moving on it?

Yes, I think we do. We're still at a point where despite the fact that we've had, say, just to stick with group for a second, despite the fact that we had really strong corporate group improvement in the second quarter and in the first half of the year, we've only recovered about half of the decline that we saw in that area from '07 to '09. So I would really expect that as we continue to see the economy recover, and in our minds more importantly as we continue to see employment recover, that we will see continued growth in corporate group. And that will displace the discount group that we had taken in when that number had -- when the corporate group had declined. When you switch up to transient, certainly, what we're going to be attempting to do over the course of the next few years is continuing to try to drive all of our transient business into higher-priced segments. And so I would expect that we would see a continued mix shift. I'd also expect to see continued increases in rate within segments, too. Ryan Meliker - MLV & Co LLC, Research Division: Great, that's helpful. And then one last question, your margin assumptions for the back half of the year imply pretty material deceleration for the front half. I know 2Q was really strong in terms of margins. But is there anything else going on in the back half of the year that's going to limit margins? I know, Greg, you mentioned utilities being higher and lower F&B revenues in the back half of the year, and group not being quite as strong. Was there anything else we should think about that might limit margins?

No. I think that, yes, when we looked across the board, most of the difference relates to the fact that -- and I mentioned previously that we were benefiting in the first half of the year from the significant increase in rental that we were receiving relative to the retail project on the Marquis. We began to receive that increased rental in the third quarter of last year. So when we -- as we look at the second half of the year, we're generally expecting lower levels of other income than what we saw in the first half of the year in terms of -- or lower levels of growth in other income compared to what we saw in the first half of the year. And that's a primary driver because of that. On the food and beverage side, we have been both, I think, trying to be conservative relative to the level of revenue. We've also been conservative relative to the level of flow-through on that revenue. So that makes the difference. And then as Greg mentioned, we've been pleased to see utility expenses down in the first half of the year. We have forecast modest increases for the second half. I'll be honest. That's hard to predict exactly what's going to happen because it's not -- it's both rate and how hot or cold it is. So both of those have an effect. So I think we've gone with a more conservative estimate there. But that could turn out differently. So I don't know that there's -- certainly, we're incredibly pleased with how well we did in Q2. And we're going to strive our best to try to continue that type of success. But we didn't -- we're not going to predict that it's going to stay that strong for the second half.

And next, we'll hear from David Loeb of Baird. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: Could you give us a little color on your return expectations for Waikiki and what kind of cap rate you achieved in the sale of the Ritz-Carlton San Francisco?

Yes. Our return expectations for Waikiki would to be -- we think we're going to generate a fairly significant premium to our cost of capital. And I think in terms of unlevered ROI, we'll be expecting to be in the 9.5 to 10 range for that asset. And then, Greg, what have we ended up -- what have we disclosed relative to the Ritz?

The Ritz, look, I think the cap rate, David, on the Hyatt property was north of 6%. And I'd say on the Ritz, it was probably the cap rate was half that. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: That's a nice spread. Ed, to follow up on the renovation question. You have finished some major projects. You've really put the portfolio in a very good position. Are you seeing -- do you think you're seeing some RevPAR tailwinds now from those renovations? And how long do you think those continue?

I think we are seeing some tailwinds from that. And I think that would account for the outperformance in the second quarter. I would expect that, that should continue through the year, to be honest. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: Okay. And can you comment a little bit on transaction markets in Europe and Australia? Do you see portfolio deals coming together? Is there financing for that? Is there a lot of competition for assets in those markets?

There's more -- speaking of Europe first, we're not -- I haven't really seen much in the way of portfolio transactions there or at least one set had a realistic chance of happening. There were a few portfolios that were on the market because there were some challenging financial circumstances, but it does not look as if it was possible for anyone to structure a deal that would work, that would appease the lender. So generally, what we're looking at there is more single-asset transactions. And we are certainly looking at a couple of transactions over there right now. In Australia, I'm aware of 1, maybe 2 smaller portfolios that are on the market. But our sense is that those portfolios will probably end up being broken up and sold in 1s and 2s as opposed to in 5s and 6s. The market there is fairly healthy and fairly rational, which is good to see. And while we have some concern in Australia about the impact of lower demand for commodities, overall, we still feel pretty good about economic growth in Australia. So that continues to be a market we are interested in acquiring in. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: Okay. And one final housekeeping. Was there any onetime charge related to severance with Larry's departure?

Yes. There was -- there would be a normal severance charge related to that, which is incorporated in our...

Corporate expense.

Corporate expenses for the second quarter.

And next, we'll hear from Bill Crow of Raymond James. William A. Crow - Raymond James & Associates, Inc., Research Division: A couple of questions here. Ed, can you just remind us, is group, what, 40% of your total demand? Is that a fair number?

Just a little bit less than that, Bill. I say right now, we would probably expect on a full year basis, it's about 37%. But you're right, in the past, it had been more along the lines of 40% to 41%.

And I think at the peak of the last cycle, we were as high as 42%. William A. Crow - Raymond James & Associates, Inc., Research Division: Okay. And then if you look at how you typically enter a year, you typically have, what, 80% of it on the books and 20% is in the year for the year? Is that a good way to think about it?

I would say it's probably more of a 70% to 75% at the beginning of the year. And then you fill in during the course of the year. At this point, as we look at the full year, we have gotten 95% of the group rooms we would expect to do on the books at this point. William A. Crow - Raymond James & Associates, Inc., Research Division: So how does next year look from a percentage of your expected total, as well as the pace?

We are over 50% of the rooms that we would expect to do in '14 are on the books. And we're continuing to trend ahead of where we were at this time last year for 2014. William A. Crow - Raymond James & Associates, Inc., Research Division: And so your pace is up?

Yes. William A. Crow - Raymond James & Associates, Inc., Research Division: Right, right. And I think I've heard you say before that you could ultimately sell $2 billion worth of assets that you've identified, the portfolio that may not be core long-term for the company. Is there any sense of urgency given interest rates moving up, et cetera, getting further into the cycle to start accelerating the pace of those divestitures or maybe taking the place of ATM issuances therefore?

Well, certainly we -- as we highlighted in, I believe, both the press release and our comments, we are hopeful of completing at least a couple more sales over the course of this year. And we will be intending to put about a handful of properties on the market in the fall with the goal of selling all of them. So I think it's fair to say that we do have a goal of selling more properties. And while we feel good about the length of the cycle, and therefore don't feel as if we're running up against the deadline that where we need to push things out quickly. On the other hand, we also recognize that you got to start, and each of these deals tends to be a process. And we generally feel that we're at a point in the cycle where we can achieve for the assets we're selecting to sell, fair prices relative to the whole values we would assign to them. William A. Crow - Raymond James & Associates, Inc., Research Division: Great. And then finally for me, any update on your thoughts for next year for both D.C., which is obviously mired in some government issues and new supply, as well as New York?

As it relates to D.C., we're still not seeing group bookings or convention bookings picking up for '14. I think the general sense was that '14 would be relatively flat to '13. So I think what will be the driver for D.C. will not be group, but rather whether what happens with government and what happens on the Hill to the extent for the downtown hotels, that can drive business if there is an enhanced legislative activity. New York's a little bit harder call. I think most of the industry experts and certainly our analysis suggests that supply growth in New York will be fairly considerable next year. I think we're looking at numbers that approach 7%, which is a pretty big number, especially given the amount of supply that has hit over the course of the last 3 years there. New York market has been remarkably resilient in accommodating the new rooms. But as all of you have commented, it has been difficult to achieve rate growth in New York given the new supply. New York will get a little bit of a boost in the beginning of the year because they will be hosting the Super Bowl. And so I've noticed that our group bookings in New York are up meaningfully. And I think a lot of it relates to the Super Bowl event, which is especially when it hit the market during a nonpeak time, which is what will be happening here, can have a considerable impact. But I think unfortunately, we'll find that New York is still going to be not as strong as we'd like it to be because of the supply coming into the market.

Next, we'll hear from Jeff Donnelly of Wells Fargo.

I guess not to beat a dead horse on group demand, but Ed, do you think that ultimately we'll see group reclaim a historical share of industry revenue and profit? And I guess how long do you think that could take?

Well, first of all, that certainly is a very good question. And I know that I hope that it does. It's hard to tell right now whether it will. And certainly, this has been a topic throughout the industry over the course of the last couple of years. And I would say broadly speaking, we're probably all a little bit disappointed with the pace of the group recovery. I've probably, in terms of assessing this, the broader perspective that we have is in some areas, it does seem as if the sort of overall level of demand, and in this context, I'm thinking of association business, may have reset itself at a slightly different trajectory than where it was pre-downturn. And by that, I mean that in the course of the downturn, we have the sense that a number of the association shrunk their events by a day or so in an effort to reduce costs and continue to attract attendees. And it seems that those events were successful enough in the shorter form that we may have seen a reset in association demand. I'm not certain that, that necessarily applies as much to corporate level demand. As I commented earlier, corporate demand is still in our portfolio, and I'm going to assume for the industry, well behind where it was in the prior peak. But as I mentioned last year, or last quarter rather, we have often found a relatively close correlation between employment growth or employment and corporate demand. And I think that when you're still in the -- I think the stats today came out of, what was it, 7.4% unemployment. We're still at an area where companies are being very thoughtful about costs. And I'm not convinced that they're necessarily as focused on having events that are designed to retain employees. If we get back to 5%, 5.5% unemployment, and the employment markets become a bit more competitive, it seems logical to me that companies will have a different perspective about that. And so I'm probably more optimistic about the ability to recover this shortfall that we're seeing on the corporate side than I am necessarily the shortfall that we're seeing on the association side. So at the end of the day, I think it will take a while to get back to where we were before. In our case, we may have a better shot at getting to those levels in part because of the investments we've made in incremental meeting space. But clearly, it's been a slow recovery from what was an incredible downturn in '08 and '09.

And concerning the Grand Hyatt you purchased in D.C., I know Washington D.C. has probably been a little weaker than you guys originally underwrote. But I guess, I'm curious, how does that property perform maybe versus your original expectation? And did it cause you to maybe reset particularly with the Marriott coming online in the next year or 2, what your prospects are for that property?

We're not -- we had been fairly conservative in our underwriting for 2013 for the Hyatt. We had known that group would not be particularly strong. We also knew that we were going to be doing some renovation at the hotel, carrying over into the first quarter. So my guess is the only part that we were probably a bit disappointed in so far this year was that inauguration turned out to be less of an event that it typically was. And I think that probably happened for a variety of reasons. Other than that, I think we've actually been relatively pleased with how that property has done. We would still be of a mind that the completion of the Marriott and the enhanced positioning of D.C. from a convention perspective will be a good thing for the market. And while we are leery of having one other big competitor in the market, we would tend to view our hotels as better positioned for the leisure customer relative to the new Marquis just because of where we're located in the city. But we'll also be in a position that because they will be the primary convention hotel, it will afford us more flexibility of when events are held in town to be able to be maybe a little bit more aggressive in the pricing that we look for because we will not need to commit the same amount of group block that we did in the past in order to attract an event.

And maybe just 2 more questions. One is just to angle in a little differently, maybe the numbers you have on trends and asset prices. If you had to sell the Grand Hyatt again today, do you think you could sell it for more than you purchased it for?

Hard to say. My guess is the pricing would be about comparable where we are recognizing what's happened with the asset. But I would also say this, we obviously bought the property for less than what we had originally contracted for it. And I wouldn't be anxious to sell a lot of properties in DC right now. I think it's DC is the red letter, one of the red letter markets in the country. And so if anything, we still believe in the long run that Washington is going to continue to be an attractive market. The things that are happening in the city, if you leave out some of the challenges around the government side, the things that are happening in the city are making the city that much more attractive from a leisure perspective and, frankly, from a business perspective, too. So I -- we haven't really lost any confidence in Washington. We had assumed that this was going to be -- and recognized because of some of the weaknesses on the group side that it was going to be a more challenging market for the next 2 years. But as I think Arne commented in either his comments or in his answers to questions, we've lost so much government business already. There's not a lot more to lose. So at some point, you're going to start to see things turn around. And it's still a great place to visit.

Yes. And Jeff, despite the challenges that Ed mentioned, I mean that hotel this quarter, I mean its RevPAR growth is north of 5.5%.

That's helpful. And just one last question, I guess, certainly due respect to my friend, Greg, but can you talk about maybe what led to the decision to remove Larry as CFO because it's just from our perspective, it seemed rather abrupt. And I was just curious what color you're going to offer there?

Yes, I would -- I mean, I think, Jeff, it's only appropriate to really refer back to what we've said in the press release, that it was really just a decision to make some restructuring in terms of management. And that was -- in this case, that was -- Greg was the best answer in that role.

Next, we'll hear from Smedes Rose of Evercore.

I just wanted to ask you about your disposition of Ritz, that it looks like you have an operating guaranteed for payments of up to $4 million a year. Is that just sort of a special situation for this particular hotel? Or is that these kinds of guarantees is such what you need to offer to get deals done now? Or maybe just a little more color around that? And would you expect to fund that?

Smedes, I think this is a special circumstance. And as we talked about the cash flow, this property was quite low. And so I think we've realized early on that it was going to be difficult for a buyer to really put property level debt on this property. And so we felt comfortable putting up this 3.5-year guarantee where we're guaranteeing a certain level of cash flow each year. And as you point out, it's really capped at $4 million per year. And there's an overall cap of $11 million. And we think that when we look at our forecast for that property, we think we'll be out a small amount under the guarantee. So when we looked at everything, we thought that by offering the guarantee, we could really increase the price significantly. And so we thought it was worth it.

Robin Farley of UBS.

I think you had commented previously that you expect to see a net buyer of assets for the year. Is that still the case?

I would say that we still hope to be a net buyer. If I look at the number of assets that we are at least evaluating right now for purchase, I think that it's very conceivable that we could be a net buyer. But I would also say that we -- if we end up being a net seller at the end of year because we're getting attractive pricing for our sales, and we're not able to buy at levels that we're comfortable with, then that's also fine.

And that will conclude the question-and-answer session for today. At this time, I would like to turn the conference back over to our presenters.

Great. Well, thank you for joining us on the call today. And we appreciated the opportunity to discuss our second quarter results and outlook with you. We look forward to providing you with more insight in the remainder of 2013 on our third quarter call in the fall. Have a great weekend, and enjoy the rest of your summer.

And that does conclude today's conference. Thank you all for your participation.