Good day, and welcome to the Host Hotels & Resorts, Inc. First Quarter 2014 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Gee Lingberg, Vice President of Investor Relations. Please go ahead, ma'am.

Thanks, Jessica. Good morning, everyone. Welcome to Host Hotels & Resorts' first quarter 2014 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 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. 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, in 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 first quarter results and then will describe the current operating environment, as well as the company's outlook for 2014. Greg will then provide greater detail on our first quarter performance by markets and our balance sheet. Following their remarks, we will be available to respond to your questions. And now, here is Ed.

Thanks, Gee. Good morning, everyone. Before I get started, I'd just like to say that we appreciate this opportunity to see many of you in our Investor Day 3 weeks ago, as we shared our insights on the industry and, hopefully, provided you with a better understanding of both our company and our management team. So in terms of the first quarter, we are pleased to report that 2014 is off to a strong start with another quarter of outstanding results for the company. Consistent with our commentary on the year-end call in February, hotel demand continues to grow, particularly in our group business, allowing us to drive rates across all segments. In addition, the solid group demand we experienced this quarter drove exceptional growth in food and beverage. We continue to feel good about industry fundamentals that contribute to our improved outlook for the remainder of the year, which I will discuss in more detail in a few minutes. First, let's review our results for the quarter. Adjusted EBITDA for the quarter was $308 million, which reflected an increase of 8.8% over last year. Our first quarter adjusted FFO per diluted share was $0.33, which exceeded consensus estimates and reflects an 18% increase over last year. These strong results were driven by several factors. First, RevPAR for our comparable hotels on a constant-currency basis increased 6.8% for the quarter, as our hotels benefited from strong rate growth and an occupancy increase of 1.5 percentage points. Our group business was exceptionally strong as our group revenues increased by 11%, as demand increased by more than 6% and average rate improved by nearly 4.5%. All segments of our group business benefited from rate increases, and our corporate demand was up by more than 10%. While the calendar change of Easter to…

Thank you, Ed. We are very excited about another impressive quarter. Our overall strong performance was predominantly driven by the outperformance of our properties on the West Coast, which increased the RevPAR by nearly 14%. This was achieved with a 4.5 percentage point increase in occupancy and a 7.2% growth in average rate. Our San Francisco, Denver, Seattle and San Diego hotels all achieved high-double-digit RevPAR growth. The outstanding results were due to robust market demand and a benefit for renovation activity at the San Francisco Marriott Marquis in the prior year. Our 5 hotels in the San Francisco market grew RevPAR by over 25%, outperforming the STAR upper upscale market RevPAR by 10 percentage points. Group and transient room nights increased 16% and 8.5%, respectively, while contract room nights decreased over 30%. This mix shift allowed the properties to drive ADR, and ADR increased in all segments by almost 16% in the quarter. We expect our hotels in the San Francisco market to continue to outperform the portfolio for the rest of the year. The hotels in Denver grew RevPAR in the quarter by 19.3%, benefiting from excellent city-wide, which allowed the properties to shift transient to higher-rated segments. The Seattle hotels increased RevPAR by 18.5%, driven equally by occupancy and ADR gains. The increase in RevPAR for these hotels exceeded the STAR upper upscale market RevPAR by 7 percentage points. The Seattle hotels also have an impressive food and beverage revenue increase of 31%. The restaurant renovation at the Westin Seattle and the leading space renovation at the W Seattle Hotel contributed to the outstanding growth in food and beverage revenues. The San Diego hotels' RevPAR increase of approximately 16% exceeded the STAR upper upscale market RevPAR by almost 6 percentage points. The strong results were due to…

[Operator Instructions] Our first question is going to come from Andrew Didora.

Ed, I guess, the recovery of group has obviously been a common theme out there over the past few months. I'm just wanting to get your thoughts on some of the deeper trends here. I guess, when you look at your future bookings, are you seeing group strength spread outside of the top gateway markets into more resort locations or areas, like Arizona and Hawaii? And if so, do you see any difference outside the room spend between these locations and the -- maybe some of the top gateway markets?

I could tell you that we, certainly, are seeing growth across all of our markets. This particular quarter, it was centered more in New York and the West Coast, but we also saw some pretty solid group growth down in Florida, in both Orlando and in Naples. That's a big part of what drove the activity at those hotels that I commented on. And so I feel comfortable that we're seeing it across different price points. As it relates to the spend, we've been encouraged that -- for the catering contribution. So that's the amount of F&B per group room. It has been up for the last 2 quarters. I think that still is something that tends to jump around a little bit, but I've been encouraged by the fact that, that grew as aggressively as it did in the last quarter. And then maybe, at least an early signal that companies -- I think the bigger swing here is in the corporate group activity. The companies are getting a bit more comfortable in spending more associated with their group event.

Great. And then my second question. We'd certainly like to get your thoughts here on New York. I know Greg gave some of the statistics in his prepared remarks. You guys obviously helped perform the market nicely in 1Q. What are you seeing in terms of both the high growth this year in the market? And how are your group and transient bookings looking for the rest of the year in New York?

I mean, I feel -- certainly, there is no secret that supply in New York is pretty heavy this year. I think the numbers that we're looking at across all segments are in the mid-7% range. And unfortunately, it looks like 2015 is also going to be fairly strong on the group side. I think our current estimate now is somewhere north of 5%. I would say that group activity in New York continues to be solid. I wouldn't say it stands out one way or the other compared to the other markets that we're involved with. It's obviously in the first quarter because the Super Bowl did quite well. But I think looking longer-term, I think in our portfolio, it seems to be consistent with the rest of the portfolio. As I -- it was going to be -- the problem with that much supply is that despite the fact that New York is one of the most exciting, strong demand-generating markets in the country, probably in the world, that's a lot of supply to overcome. And I think we're all going to be struggling a little bit to generate rate growth in that environment.

And our next question comes from Joe Greff with JPMorgan. Joseph Greff - JP Morgan Chase & Co, Research Division: Ed, you've mentioned earlier that there really is not much to report from a transaction side of things. Maybe you can just talk about why do you think the transaction market has been relatively quite ablated by the seller or buyer issue, waiting on playing the cycle a little bit longer before putting more stuff out for sale? And then I have a follow-up.

Yes. It's -- that's a very good question. I think pricing is slowly but surely working its way back up, not quite to the levels that we saw during the last cycles but, certainly, has been improving. So you would think that, that would start to draw more sellers out. I think the fundamental problem, perhaps, is the fact that there is a universal perception that this cycle has a fair amount of time left to run. You've got low supply for the next week, the next 2 years, and I would still be guessing that 2016 supply will be below demand. So as -- and again, I think that's fairly well-known. So there -- I think the desire on the part of people to sell is probably driven more by strategic reasons than a sense that they -- the time is to -- now is the time to act in order to get out before the cycle starts to go the other direction. So you haven't seen -- just not seeing that impetus behind that higher activity. Overall, though, I think we've been seeing each year. We've been seeing the amount of transaction activity slowly creep up. My general sense from conversations with the brokerage community in the beginning of the year is that they expect activity in 2014 to exceed the activity that we saw in 2013. And so I think we'll probably have a little bit better clue on that as we work our way through the summer because there seems to be the way the cycles work the last couple of years. That activity begins to heat up as we get into some of that NYU conferences and some of the others that tends to be a focal point for folks to put assets on a market with the desire of closing those transactions before the end of the year. Joseph Greff - JP Morgan Chase & Co, Research Division: Great. And then, Greg, with respect to your '14 guidance -- and you gave some great commentary on the group trends. With regard to your food and beverage revenue guidance or increase, does that also incorporate an increase in F&B revenues in the 2Q through 4Q? Or are you just kind of adding back in the increase with the better-than-expected results in the 1Q?

Yes. I think, primarily, it's because of our great results in the first quarter. Right, we obviously incorporated those great results in our full year guidance. And then so I'd say that was the main part of increasing our F&B guidance for the full year. But I think we also feel because of that business success that we had in the first quarter, I think we also feel just a little bit better for the rest of the year as well.

And our next question comes from Ryan Meliker with MLV & Company. Ryan Meliker - MLV & Co LLC, Research Division: Just to talk a little bit more about the acquisition environment out there. Obviously, we're seeing a lot of private equity capital being raised. Leverage seems to be plentiful for private equity. So I'm just wondering, as you guys are eyeing acquisitions right now, are you looking at things that maybe there aren't a lot of institutional buyers interested in right now, whether that be one-off select service assets, similar to what you did in Nashville with White Lodging or whether that'd be resorts in the Caribbean that, maybe, don't appeal to as many others? Or more international, et cetera? Just help us understand where you guys are focusing your efforts on the acquisition strategy.

Well, I'd say we are certainly looking internationally, although its competitive in that environment too. I think as we look -- start to think about the United States. We are looking -- we'd love to do some more transactions that might set up similar to the Powell Hotel acquisition in San Francisco. We'd be open to more limited service. I don't know how much more limited service development we would end up doing, but I think in a few select markets, we would be open to that. So one thing I would say is we have no particular plans to be buying in the Caribbean. There may be opportunities there, but our past experience in that market would suggest that, that's a market better avoided. Ryan Meliker - MLV & Co LLC, Research Division: Okay, that's helpful. And then, with regards to things like the Powell or one-off development opportunities that become available, at what point in the cycle do you decide that those types of investments don't make a lot of sense, just given the remaining duration of the up cycle?

That decision ends up being a market-by-market analysis. I think that, certainly, in the timeframe that we're in today with some of the commentary that I gave and the answer to a prior question, I would certainly feel comfortable about pursuing and repositioning in those markets in the U.S. And there are, I think, markets that show really good demand growth, you could see an opportunity to do new development, although, again, I don't want to suggest at all that, that's the priority for us. So I think for a select service development, there is an opportunity to move forward with something in that area and feel comfortable that you're delivering still at -- in a point in the cycle when it's trending positive.

[Operator Instructions] And our next question comes from Michael Bilerman from Citi.

This is Kevin Varin with Michael. You mentioned last call that 1Q EBITDA would account for around 21% of full year EBITDA. So just based on that commentary, it would imply you beat internal expectation by roughly $20 million. So just considering that EBITDA guidance was only raised $10 million at the midpoint, is it fair to say that Host is tracking at the high end of the ranges where we stand today or is there something else that we should be looking for with -- in the remainder of the year?

[Audio Gap] and multiply it by -- I think where the consensus runs for the year, I think, that would suggest that we're really beat by about $17 million to $18 million, so close to your $20 million, but a little bit lower. The other thing that I would add is when you look in the income statement, you'll notice that we had $3 million gain, insurance gain, which we had -- we had forecasted that gain, but not in the first quarter, right? So I -- that sort of takes your $17 million to $18 million down to $14 million or $15 million. And then, as you correctly pointed out, we increased our full year guidance by $10 million. So it's a little bit maybe left on the table. And then, that's one of the reasons why I think when we look at our RevPAR guidance for the year today of 5% to 6%, we do feel a little bit more comfortable at the mid- to high-end of that range than we did a quarter go.

Okay. And then just one last question. Can you guys quantify the benefit of the holiday calendar shift in 1Q and maybe how much of an impact it will have on -- as we think about 2Q?

I don't know that we've really run that specifically on that. I think we've been suggesting that we would expect the second quarter to be weaker than the first quarter primarily because of the holiday shift. I don't know that I have a specific percentage to give you, though, for -- to quantify the impact of it.

And up next, we'll take Steven Kent with Goldman Sachs.

Maybe if you could just talk about the balance of dividend versus opportunity to buy assets. And could we look for -- what would -- what is the gaining issues that keep you from maybe raising that dividend over the next -- for the next 12 to 24 months? And then, separately, you've given some color on RevPAR strength, but maybe talk a little bit about brands and location, more on brands. Are there certain brands where you're seeing greater strength? I know you don't normally talk about that, but maybe give us some sense on that.

Yes. Steve, let me answer these in reverse order. I think we're going to shy away from any specific commentary on brands within our portfolio. Yes, I think that they all report on their own, but I don't -- so you get a good sense as to how they're performing on a relative basis, but I don't -- we've not provided disclosure on that in the past, but I don't think this would be the time to change. On your question on the dividend, I'd say, broadly speaking, we would be expecting, as EBITDA continues to grow, we would be expecting in general for our taxable income to continue to increase. And so that in and of itself should require that our dividend continue to grow. So then the second part of the question becomes what to do with the free cash flow that we're generating, which, as we've talked about in the past, is north of $300 million a year, and how do we think about applying those proceeds going forward. And I think the question is you sort of identify, kind of comes down a bit to what do the acquisition market look like and what are the opportunities and whether it's acquiring properties or whether it's investing in the properties that we already have. That -- I think to the extent that we can find investments of either type that meet our return the parameters, and I'd say that at this stage of the cycle, that would still be our first choice in a lot of ways, but to the extent that we do not identify those opportunities or to the extent that the sales [indiscernible] we generate from asset sales exceed the amount of the investment opportunities, then we're going to look at ways to return that capital to our shareholders. I think certainly one way to do that is an increase in the dividend. And at some point, another alternative would be to repurchase stocks. But I think we're open to looking at each of those as we work our way through the year and into 2015. But I'd still say that given -- we still want to continue to grow through investment if we can, but if not, we'll look to return capital.

And up next, we have Robin Farley with UBS.

So just looking at the outperformance in Q1 RevPAR, I'm just curious why full year RevPAR guidance wouldn't move up to -- are there factors that you think won't recur because it sounds like the group trends -- and I know you were cautious about Q2, but just overall for the year, group tends are positive, so I guess why not higher RevPAR growth for the year?

I think, Greg sort of answered that question to some degree. And I think, you're also right that we're -- we'd probably feel more comfortable raising that after we get -- the halfway point in the year. But we certainly, given the strength of our Q1 performance, which was better than what we had anticipated in February, we certainly feel more comfortable in the higher end of the range of RevPAR that we provided. We'll look at that when we get into July for our next call.

Okay. And then, just looking at the outperformance, I had expected that maybe it was other markets that was made up for Washington, D.C., given that the market was weak, but you outperformed the market so much in D.C., and just kind of what was behind that.

I think that what ended up happening in Washington is that there was just better overall transient activity and some group strength, especially in March, that helped Washington do better than we had expected at the beginning of the year. Yes, the other thing too is inauguration, while a bit of a hill to climb, was not as beneficial in '13 as we would have hoped. So it's still a challenge for the market for this year, but perhaps not as big as in the historical context.

And up next, we have Thomas Allen with Morgan Stanley.

Can you help us think about what your banquet in F&B revenue per room is versus prior peak and just how we should think about the trajectory of the segment growth longer term?

To be honest, I don't have -- some of this is -- our reporting and our statistical analysis has really improved significantly since the prior peak, so I -- that's a good -- that's something we should look into a little bit more directly. I don't really have an answer for you on where our banquet revenue would match compared to the prior peak. On food and beverage overall, we're still -- we finished the year running about 10% behind where we had been at the prior peak. So I would be expecting -- for this particular quarter, I'm sure we were beginning to approach where we had been before for the full year. Given the guidance that we've given, we probably are still -- we are still looking to be 5% to 6% behind our prior peak level food and beverage activity.

Yes, I think another way to look at food and beverage, especially if you look at it through the end of last year, typically, food and beverage growth is about -- the growth rate is about 50 basis points lower than our RevPAR growth. And what we've seen so far during this recovery is that food and beverage growth, about 150 basis points lower than our RevPAR growth. So obviously, food and beverage really underperformed with groups so far during this recovery, and then, except for, obviously, in the fourth quarter of last year and the first quarter of this year when group really performed, because of that our food and beverage growth was quite strong.

And our next question will come from Anthony Powell from Barclays.

The result of Seattle and Denver were very impressive. Can you talk about the availability of assets in those markets? Are hotels for sale there and are there any new development opportunities in those markets for you?

We have looked at a couple of transactions in Seattle. I don't know that we have looked at anything in particular in Denver in the last 12 months. There are a few new developments being contemplated in Seattle, probably, the largest of those is the convention center hotel that a local developer is attempting to finance and get off the ground. So I think -- but overall level of activity in both markets is probably about market average right now. I wouldn't say that there's been a big surge in activity there.

Great. And on Chicago, it's kind of underperformed, I think, the market over -- U.S. overall. What do you think has driven that result and how do you view your booking trends there both this year and next?

As we mentioned during the quarter, I mean, obviously winters in Chicago are never great, but this year, I think, with the polar vortex and 50 degrees below 0, the weather was quite extreme. And so I think that explains some of the weakness in Chicago for the first quarter. I think we think that, that will -- Chicago will perform better as we move throughout the year.

Yes, I think generally though, in Chicago for this year we are -- we're not seeing as -- this is not a strong of a convention year [indiscernible]. This market tends to move a bit in the cycle. This is not one of the [indiscernible] Chicago. And so we probably expect lower levels of performance there for the full year.

And our next question will come from Chris Woronka.

You guys noted a pretty good benefit from renovations completed, I guess, last year at several of your larger West Coast hotels. If we look out a bit, I mean, how does your renovation pipeline look, if you will? Is there a drop-off in that benefit at some point or does it remain pretty constant?

My guess is that, well, certainly, we'd get a benefit as we enhance the hotel in terms of both one part as you get a little bit of a year-over-year benefit from not having a disruption, but more importantly, you get a benefit from having enhanced the asset. I think we're looking at relatively consistent levels of maintenance level spending over the next couple of years. It should -- we should see a surge in disruption other than at particular hotels. And we hope we continue to spend intelligently on those hotels, we should continue to see lift. But I don't know that I would expect anything remarkable one way or the other for the next couple of years.

Okay, fair enough. And then, maybe you could contrast a little bit for us the international and domestic markets in terms of the transaction market and how the buyers and sellers differ and what they're looking for and also maybe how much time you guys spend internally looking at international versus domestic deals.

The latter really tend -- we have distinct team so we have a European team that's focused on Europe. We have a Latin America team that's focused on Latin America. And then, of course, we have our office in Singapore that focuses on Asia investments. And then, in the States, everything right now has been out of assessment. So I'd say from a standpoint of time, each of the offices is pretty -- is 100% focused on activity within their region. And then, as that bubbles up, Greg and I and Struan and the other folks that are on our investment committee, that tends to vary based on the month depending upon what's hot in a particular jurisdiction. Overall, I would say, we'd still find that we've spent the majority of our time talking about investments in the U.S., but the international piece of it is a meaningful component of what we're looking at. In terms of the buyers internationally, yes, I'd say that our world is becoming more and more of a global marketplace from investments. And so capital from Asia is interested in the U.S. Capital from the Middle East is interested in the U.S. and Europe. Certainly, the Asian markets are very active with Asian capital directly. So we run into different types of investors in different markets, but certainly, some of the larger players, especially some of the sovereign wealth funds, are active across really in every jurisdictions and we will -- we run up against them on transactions on a consistent basis.

And our next question will come from David Loeb with Baird Investment Banking. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: This is really for Greg. On the gain on sale, which must be Philadelphia, can you talk about why there was such a large gain, why the tax effect on that was relatively small? Do you have some plans related to that 10/31, whatever, or will you need to have some dividend related to that?

Yes, David, you're right on Philadelphia. But when we think about our dividend for this year, the gain associated with that asset is sort of already baked in to our philosophies for the dividend this year. So when we talk about increasing dividends, and Ed talked about it earlier, it's really going to come from 3 things. Obviously, as our EBITDA increases and taxable income increases, our dividends certainly will increase. I also think that with subsequent asset sales we will expect to have gains, and those gains will, we don't like kind of exchange, will obviously be added to our dividend and could increase the growth of our dividend. And then, as Ed also mentioned, if we're not -- we can't find acquisitions, then our free cash flow -- if you look at our free cash flow today before we make a dividend payment or before we make investments, that's actually over $750 million. So again, if we can't find investments, that will go towards an increased dividend as well. So all those things matter, but Philly, there's really not much to talk about from the gain on Philly. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: Okay. So no plans to defer that one, no temporary arrangements?

Correct, correct.

And our next question will come from Nikhil Bhalla with FBR. Nikhil Bhalla - FBR Capital Markets & Co., Research Division: Just a question on your group pace for the rest of the year. Did I catch that right that your pace at around 5.5% is somewhat consistent from what it was about 2 months ago?

Yes, yes. I would say that we're generally consistent with where we've been. But I think we were pretty encouraged by the -- by what we saw on the group side kind of both activity in the quarter, for the quarter and looking forward. Our in-the-quarter, for-the-quarter activity was up about 19% compared to what we had experienced in 2013, so that was a good jump. As we look at the -- as I commented, as we look at the rest of the year, we saw an increase in activity of -- north of 4% in terms of room nights for the remainder of the year, but if you leave out April, where the -- where activity was down because of the Easter holiday, the activity after April was up nearly 10%. So I think, when we kind of watched what was happening in-the-year, for-the-year-type activity, we felt pretty good about that and that made us increasingly comfortable with how group will play out for the full year. Nikhil Bhalla - FBR Capital Markets & Co., Research Division: Got it. So it's fair to characterize, I guess, that just given that second quarter is so much bigger, the impact of Easter seems to have a little more disproportionate -- disproportionately larger impact other than have-it-fallen kind of the opposite reign in the first quarter.

Perhaps. I mean, there's sort of pluses and minuses of the holiday being in April. I mean, Mike, I'm not certain I would completely agree that the impact is disproportionate in the second quarter, because I think that the second quarter overall is a bigger quarter for us, and so the losing of the 2 weeks, and losing some group activity there is probably in some ways potentially less impactful in Q2 than it would be in Q1, which tends to run at a lower overall level of volume. The benefit of it being extended in a full year context is that it does tend to -- later Easter tends to extend the spring break season. And so again, it wont show up in a year-over-year number for the -- for April or for Q2, but in the long run, it stretches out the Easter -- or the spring break season, which tends to be a positive in Florida. So I think all in all, we'd rather see Easter occur in April if we had a chance to control the calendar.

And our next question will come from Harry Curtis with Nomura.

Just a quick follow-up. What percentage of your portfolio do you think needs more CapEx or return on investment CapEx spend? When -- sort of what inning are you in do you think?

Harry, I don't know that we -- I mean, if you -- when I think of that question, I think of that in the context of assets that might have some deferred CapEx, because of course, we're always in a situation where we are reinvesting in our hotels. I don't know that I have a real accurate specific number to give you, but I would say that I would view it, from a deferred CapEx perspective, as very small. And the bottom line is we've been consistently investing in our portfolio. As we've talked about in the past, we took advantage of low pricing back in 2010 and 2011 to accelerate our capital program in an effort to try to both improve the quality of our hotels, but more importantly, do it for less money. And I think we're still seeing the benefits of that in terms of our performance. So I'm sure if I sat down and looked at the list of our hotels that -- there's a half a dozen where you could say we've under invested. Some of that -- in general, if that situation exists today, it's because we didn't see an economic benefit from making the investment. And so typically, those are assets that we might be contemplating on selling while we don't think it's -- where we think the buyer would probably prefer to control that CapEx decision. On the ROI front. Those are the things that we are constantly looking at. Of course, we've spent some time at our Investor Day trying to highlight the fact that we felt that there are a lot of opportunities within the portfolio. So as you look at what we're -- this year, we've talked in terms of $70 million to $80 million. I would view that as a target in my own mind about what we should be trying to do on a consistent basis going forward.

Okay, fair enough. And then the second piece is, with that in mind over the last 12 months, the lodging sector -- or in the lodging, the 2 stocks that have returned the most capital to shareholders have been Hyatt and Marriott, and those are the 2 that have outperformed, while the 2 that have been more reluctant to increase shareholder returns, Starwood and Host, are up about half as much. And so Mike, what I'm wondering is, do you recognize that more capital return would lead to higher investor interest? And given that you have meaningful free cash flow, what gets you to move on this?

Ed, before you answer, I just want to correct one thing. From our last quarter call through today, Host has been the best performing lodging stock by far. Go ahead, Ed.

I was looking at that over the last 12 months.

I mean, I don't know that I have a lot to add these on what I said in -- I think I was responding to Steve's question before. I don't know that it's so much of a performance question that would drive us to do with. I mean, I think we've been pretty clear that we thought it was important to achieve certain balance sheet objectives before we start to contemplate any -- paying a dividend that would be larger than taxable income. As we've been indicating over the course of the different -- whether it's calls or investor presentations, during the first 4 months of this year, we have made great progress in strengthening our balance sheet and are feeling that we're going to be accomplishing our objectives in 2014 on that front, so that does provide us with the opportunity to think about deploying the free cash flow that we generate in different ways. As I said before, I still hope, because I think the cycle has got room to run, that we can find ways to invest that profitably in assets that will grow, that will generate a return in excess of our cost of capital and that will drive improve shareholder return. The extent that those opportunities don't present themselves, then we'll look at the alternatives.

Basically, from the -- reading between the lines, just given that you want to find assets to invest in, we really shouldn't be expecting any meaningful lift in the dividend. Is that fair?

I think the answer is -- unfortunately, it depends. I mean, we have -- I think one of the things that sets us apart in our industry has been our discipline in investing capital. And we try to highlight that at our Investor Day in terms of discussing our performance compared to our competitors. So it will come down to that decision, that opportunity. And I wouldn't -- it's just -- I think it's early in the year to try to reach a conclusion on that one way or the other.

Yes, I'd also add that right even -- if you look at it over the last couple years, right, just -- it depends on, I guess, your definition of significant dividend increase. But even just -- certainly, our dividend have increased with taxable income, which has been about $0.16 increase each year. And then, in addition, I would say, as we fill assets, we'll have further gains and that -- it certainly increase our dividend as well. So -- I think some of it depends on how much we invest in assets, but I think even if we find out what to invest in, certainly, our dividend is going higher.

And our next question will come from Patrick Scholes from SunTrust.

I wonder if you can break down by month how your group business faired as far as RevPAR for the first quarter. And then, how did April end up for you?

We don't know April yet. I mean, that's a month that have just ended yesterday, but we don't have the reporting for the first few days -- the last few days of the month nor do we have segmentation, but I'm sure it will be weaker than last year just because of the calendar shift. In general, if you look at the overall level of group -- increase in group activity that we had, which was really north of 6% group increase and group room nights, I would roughly say that January would probably been -- kind of was the weakest of that time period and really just reflected a small increase. February was slightly above 6%, and then, as you get to March, we were -- I think we were north -- we had double-digit group room night growth in March.

And our next question will come from Wes Golladay from RBC Capital Markets.

Looking at the transient rate growth in the quarter, just over 3%, and with group being so strong, did you leave money on the table there? Or is there weather-related low-rated business you were taking?

Yes, I think that's a great question. We spent some time trying to study that. I think you're right at one level, is that we did have some weather disruption and we had the weather disruption in some of our higher-priced markets, so that affected the statistics of it. I think the other factors that affected transient rate growth is if we actually look at the transient rate growth that we were seeing at individual hotels, it was stronger than the 3.5% that we've just discussed in our comments here, but part of what we saw happened in the quarter is that we had stronger group business in some of our higher-priced markets and we had -- we certified an increase in our transient level business in some of our lower priced markets. And so when you actually work your way through the math, it has the effect of understating our transient rate growth for the overall portfolio. But as I talked with our revenue management team about what was actually happening in market, they were seeing higher levels of growth than what we actually disclosed here.

Okay. And now turning to the balance sheet, you have a few 6% notes via the Vs and the Zs about $800 million, any of that prepayable?

Yes. We can call both of those notes in 2015. So that certainly -- if interest rates remain low, that's certainly something we will look at.

At this time, Mr. Ed Walter, I'd like to turn the conference back to you for any additional or closing remarks.

Great. Well, thank you, all, for joining us on the call today. We appreciate the opportunity to discuss our first quarter results and outlook with you. We look forward to providing you with more insight into how 2014 is playing out on our second quarter call this summer. Have a great rest of your day.

That concludes today's conference. Thank you for your participation.