Welcome to the Host Hotels & Resorts Third 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 third quarter results and then will describe our current operating environment, as well as the Company's outlook for 2014. Greg will then provide greater detail on our third quarter performance by markets. Following their remarks, we will be available to respond to your questions. And now, here is Ed.

Thanks, Gee and good morning, everyone. We are very pleased to report another quarter of outstanding operating results driven by strong rate in demand growth especially in group business. Strong F&B and other revenue growth, combined with improved flow-through and better than expected margin performance led to earnings results that exceeded our expectations and which allow us to improve our full year guidance. We continue to feel quite good about the fundamentals in the business and our outlook, which I will discuss in more detail in a few minutes. First let's review our results for the quarter. Adjusted EBITDA was $331 million for the quarter and $1.05 billion year-to-date. Our adjusted EBITDA for the quarter increased 23% and exceeded a consensus estimate and our forecast for the quarter. Our adjusted FFO per diluted share grew 36% to $0.34 per share for the quarter and stands at $1.10 year-to-date. These strong results were driven by several factors. First, our portfolio continued to achieve high occupancy levels of nearly 80% this quarter, our highest third quarter occupancy level since 2000. The strong demand allowed our hotels to drive rate increases of 6.4% resulting in an improvement in comparable hotel RevPAR on a constant currency basis of 7.9%. Looking at our total portfolio, pro forma RevPAR growth for the quarter was 9.2%. As Greg will describe in greater detail, our consolidated comparable international hotels continue to perform quite well, generating RevPAR growth of 11% in constant dollars in the quarter. Our growth in the third quarter was driven primarily by strong demand in all of our group segments, especially our highly rated associated association group business, which increased nearly 14%. Our corporate business also performed well with a demand increase of more than 3.5%, complemented by a rate increase of better than 4.5%.…

Thank you, Ed. I am pleased with our impressive quarter, which was highlighted by the strongest quarterly RevPAR growth in the last three years and outperformance in comparable hotel adjusted margin growth and an exceptional increase of 305 basis points. Let me now provide our market results. Consistent with the last quarter, our Latin America hotel were the best performing hotels in the quarter with a 26% RevPAR increase. The World Cup final and the JW Mexico post-renovation lift continued to boost RevPAR for this region. Based on certain group business in Mexico, that will not repeat in the fourth quarter and the interruptions of business during elections in Brazil this month, we do not expect the outperformance to continue into the fourth quarter. The West region continues to outperform the portfolio with RevPAR growth of 8.9%, entirely driven by average rate and primarily a result of strong group business. Group revenues for the hotels in the West grew 11.4% enabling the hotels to drive rate improvement of 9.3%. Seattle, San Francisco, Denver and Los Angeles performed the best with double-digit RevPAR increases. On a combined basis, these hotels grew RevPAR 13% with a combined rate increase of over 13.5%. Solid group business create a compression that allowed our managers to shift our mix into premium segment by limiting special corporate and discounted rooms. This allowed them to drive rates in these markets. In the fourth quarter, we expect the hotels in San Francisco to continue to outperform our portfolio. We expect Seattle and Los Angeles to perform in line with our portfolio for the quarter and anticipate Denver will underperform the portfolio. Phoenix also had high RevPAR growth of 8.7%, resulting from their successful strategy to drive transient occupancy that summer. Transient occupancy increased 7.4% and rate increased 5.1%…

Thank you. (Operator Instructions) And we'll now take our first question from Andrew Didora from Bank of America Merrill Lynch.

Hi. Good morning, everyone. Ed, maybe digging into your commentary a bit on the independent hotels, I guess why the shift right now in direction? Is this the right point in the cycle to do this? And my second question around that is, I know you see some conversions within your current portfolio. But do you see the ability to maybe acquire and roll up more of these assets over the next 12 months or so? Thanks.

As it relates to the shift to -- to look to purchase more of these, I think that sort of it ties in with our notion that we're trying to focus on a more limited number of markets, but then penetrate those markets more deeply. As we look to execute on that strategy in many of those markets we already owned some of the best convention oriented hotels, or larger group hotels, so it's sort of a natural consequence of expanding our presence in those markets to look for hotels that might be in different segments of the business whether that be the urban select service or lifestyle boutique type hotel. So I think that's really what's driving that. From a standpoint of future acquisitions and I think there is certainly given that as you can tell based on our recent history we're investing more in this area. We would certainly hope that we would be able to complete more acquisitions of this nature. It's not the easiest market to buy in right now. So we'll have to see what actually happens.

Understood. That's helpful. And then, maybe my second question for Greg, after the strong group results thus far, this year, where does your group currently stand as a percentage of your revenue mix? And how does that compare to last cycle?

Andrew, if you look at our group business over a long period of time, it's usually right around 40%. At the peak of the last cycle, it was closer to 43% of our overall business and today it's closer to 37% of our business.

Okay. Great. Thanks a lot guys.

And we'll now take our next question from Jeff Donnelly from Wells Fargo.

Good morning, guys. Actually, just building on that brand manager strategy, comment, I'd like to broader focus on independent brand and managed hotels. The first part is, where do you see that going as a percentage of your overall platform down the road? And do you think you get there predominantly through conversions of existing hotels or is it through acquisition?

While I am pleased that we've got a few candidates internally we should be able to convert I suspect that the growth will come more from acquisitions then it will from conversions within the portfolio. Yes, it's hard to put a number on that and I think we would certainly be comfortable in the long run with that becoming 10% plus of the portfolio in some ways, but a lot of that's going to be driven by the ability to execute acquisitions and what we're able to get done in the near term in the market.

And just a follow-up on maybe capital allocation is Host hasn't been necessarily a big acquirer, if you will, this cycle. Is it too late to undertake acquisitions of maybe sort of a large-scale institutional hotel, in your view? And how do you weigh acquisitions at this juncture versus using your balance sheet capacity to instead return capital to shareholders versus -- via dividends or share repurchases?

That's a great question. We feel good enough about the length of the cycle that I think we would be -- we certainly are evaluating and pursuing transactions whether they're of a boutique type nature, the independent type nature or our more traditional branded type of a hotel. I think one of the challenges that we face though in going after those in each instance is the fact that we tend to look at things as we evaluate an acquisition over a 10-year timeframe and that has to -- when you're looking over that long of a period, you have to assume some period of time where operating results are a bit softer. And so I think because we're taking that into account and that how we do that will vary by market, but how we take that into account, that I think put us maybe a bit of a competitive pricing disadvantage to folks you might be looking at more buying now and selling in their minds before the cycle turns. And so that group which tends to use higher leverage and has a shorter holding period, I think is ending up being able to push pricing more aggressively than we would. So I think my shorter answer to your question is we would feel comfortable in buying. It would be based upon our conservative and disciplined underwriting criteria. To the extent that we are not able to complete acquisitions like that, I think we've been pretty consistently saying for a while that we've been looking to invest outside the portfolio or inside the portfolio first on theory that drives better returns, but as we complete sales, those will naturally result in higher dividends because of the taxable income associated with those sales. And to the extent there is not opportunities to otherwise invest in either in new -- existing or new hotels, we will be returning capital to shareholder either through a more dividend or by repurchasing stock.

That's great. Thank you.

And we'll now take our next question from Michael Bilerman from Citigbank.

Hi. This is Kevin Barron with Michael. I just wanted to better quantify the renovation disruption in 4Q. Could you just give us a sense of what the RevPAR would be, backing out those hotels under renovation in the comparable portfolio?

I don't know that we have a precise number for how it would hit that. I can tell you that just in terms of the disruption it creates in our group business for the fourth quarter though, our group business would probably be roughly 4% stronger if we didn't have the renovation disruption.

Okay. And then if you think about the group business momentum leading to more favorable mix shift, and then also in your opening comments you talked about the potential for better demand in 2015, we just wanted to get your thoughts on the potential for RevPAR accelerating next year from 2014 levels.

I don't know I see it as a ability, the conditions that would require RevPAR to accelerate next year from the strong levels that we've experienced in the last couple of years I think tie to what are the two primary drivers of our business right now. The two things that I think, the one would be the overall economic growth in the U.S. and secondly would be world-wide economic growth that helps generate international travel. So as I highlighted in my comments, we've been very happy, very pleased with the overall level of international arrivals into the U.S. over the last several years and we believe that's been a primary driver and why demand over the course of the last several years has outpaced historical levels kind of on a relative basis to GDP. So as we think about next year, we certainly are encouraged by the fact that once again most of the major forecasters are expecting stronger economic growth in '15 than what we've seen in '14. I would caution that we probably said that for the last three years in a row, so hopefully '15 is the year that that materializes and then if we also see continued growth on the international front comparable with better than what we've seen, that creates a condition for overall stronger demand growth. Supply does go up a bit next year not a lot. So we don't view supply as the near-term problem rather than a few markets, but overall I am not certain we would be sitting here expecting RevPAR acceleration for next year, but we certainly feel that we should see another strong year in the industry.

And it's Michael Bilerman, I just wanted to follow-up on your comment about 4% in terms of the renovation, are you effectively saying, if group is call it 37% of the business which Greg did sort of said, that didn't have seasonal that wasn’t in the fourth quarter that effectively there is a 1.5% drag on RevPAR just 4% behind what it normally would be? Is that effectively the math you want us to make? I just didn't know how to quantify what the 4% meant.

Yes I think that's -- what I was trying to highlight is that our group bookings would be about 4% higher if we didn't end the fourth quarter if we didn't have the renovation. So that it may not be too far off Michael. It's just that you got a trade off there that we will sell in some of that shortfall with Transient and so it's probably not quite as direct to what you have there, but that's probably directionally correct.

I think that's right. As you know Michael, if we could, if group business was stronger that would also help us on the Transient side as well because really not except some of the weaker Transient and really push the Transient also.

Yes, and that would also all F&B and all the other…

That is correct.

All right. So I just didn't know if you actually had an EBITDA number that we could sort of isolate for the fourth quarter where if he market disappointed with the fourth quarter guidance trying to put together the pieces that sort of get you from where the street was or where they were relative to where you think you're going to be? I think that's what we are trying to isolate?

We don't have that number right now.

Okay. All right. Thank you.

Thanks.

And we'll now take our next question from Rich Hightower from ISI Group.

Good morning, guys. A question on the disposition side -- I am wondering if you can tell us within the portfolio, what portion of the hotels are either unencumbered by brand entirely, or are so far along in the contract such as the breakage costs might be minimal to a potential buyer that might be interested in converting those to something else.

Roughly about 40% of our domestic portfolio, we have either absolute contract flexibility or put it along the lines which you were describing very near term contract flexibility. And I would tell you that we in most instances the reason we have that is because we've negotiated for it over the years, but nor surprisingly the bulk of that flexibility fits within the assets that are in non-core markets entirely or non-core sub markets within our target markets. So I think roughly 75% of the assets that we have flexibility on are assets that we could -- we would be open to selling over the next few years. And we're well situated in part because over the years we've targeted to accomplish that to have contract flexibility for assets we would like to sell.

Okay. That's very helpful. Thanks for the specifics there. And my second question concerns New York and D.C. Your revenue and EBITDA concentration in those two markets combined, I think it is still above 20%, maybe not as high as it was about a year ago. But just over time, with the puts in takes in the portfolio that you’ve talked about, where do you see the ideal concentration in those two markets in the future?

I think over time we would be expecting to reduce our presence in New York. I don't think that as we look at these either some of our suburban assets in DC that we would be intending on selling, but we're not uncomfortable with the overall waiting in DC with using a long-term perspective, but I do think there is some reduction happening there. Over time I would like to see some reduction in New York too.

Okay. That's all for me.

And we'll now take our next question from Thomas Allen from Morgan Stanley.

Hey, good morning. You talked a few times high level about the setup for the U.S. lodging industry heading into 2015. Given you also have international exposure, can you just give us some initial thoughts there, too? Thank you.

Yes, I would say if you look at where we have our biggest international presence, it's Europe and I think generally Europe has been difficult to predict frankly because there are fits and starts to their economic recovery has been challenging. I would point out though that one of the things that makes Europe a bit different than the U.S. is the importance of international travel throughout our European portfolio. Where in the U.S. we probably would think that plus or minus 20% of our demand comes from international travel. In Europe our portfolio probably gets 40% to 45% of its demand from international. So that helps pushing Europe from some of the weakness that we've seen in the economy. Overall I think so far this year we're running around 3.5% or so in Europe on RevPAR growth. I would like to think that next year we will reach that level, but I think we're going to need to see a little bit more -- we will be interested to see what develops as we go through the budget process, try to have some better insight in the back. Outside of that, I think in Latin America we probably will not see the same strength that we've seen this year for two reasons. One the World Cup will not be repeating in Rio De Janeiro -- in Brazil, which is going to probably drive those markets to be slightly down for next year and we've had extraordinary performance in Mexico City, but some of that's been construction delay meaning that we had construction the prior year. So I would expect that Mexico we will see growth that's roughly comparable with folks are expecting in the U.S. And then in our assets in Australia and New Zealand we don't -- I would say there we're probably looking at may be single digit RevPAR growth.

Helpful. Thank you. And then, just one more question, playing devil's advocate here a little bit. Your RevPAR was up 8%, which is obviously very good and an acceleration from the trends we are seeing, but your peers saw it closer to 9%. Anything driving the slight underperformance for you guys versus them? Thank you.

Again if you look at how our entire portfolio performed in the year and you include all of the assets in our portfolio and don't exclude some that we would typically exclude because of the way we approach issues around comparability, our portfolio ran at 9% in the third quarter also. So I don't know that there was a big of a difference it may seem when you look at the numbers in a little bit more detail. I would say though maybe a little bit more broadly is that we're up against -- we're at this point now enjoying practically forever peak occupancy level and so one of the things that we're very focused on with our operators is looking drive rate. And so a big part of our success next year is going to come down to our ability to drive rate in all forms of our business. We're quite encouraged by the improvements we were seeing in our bookings in our group business in 2014 and especially more lately I highlighted some statistics that overall rate in our bookings in 2014, 2015 was up 5% late in the third quarter, bookings in 2015 was up 10%. As those trends -- if those trends continue and we certainly hope and expect that they will, that will certainly help us in pushing rate next year and that obviously is very beneficial on what it will do for the bottom line.

So can one imply by those comments that you gave up a bit of occupancy index to drive rate index, which obviously benefited your EBITDA and drove the strong beat in the quarter?

I suspect -- yes, I think if you -- compared to the broader market, not compared to our individual comp set, but compared to the broader market, I think the broader market had slightly more occupancy improvement because it starts at a far lower base than us, but we had better rate growth. And at the end of the day, if I had a choice between the two, I would rather see higher rates.

Yes, as you said Thomas, that's certainly powerful on the margin front and that's one of the reasons why our margins were up 305 basis points, which frankly probably I think that's our best margin growth in over a decade.

Yes congratulations. Okay. Thanks, bye.

And we'll now take our next question from Joe Greff from JPMorgan.

Good morning, all. I have two questions, one on acquisitions and then one renovations. Ed, with the stuff you are looking to buy, single assets or portfolios, whether they are small or large, with what you are looking at right now would you characterize that as more fine-tuning your market and brand mix? Or is there anything in there that you would characterize as EBITDA needle movement?

It's probably more the former than the latter. Obviously the real issue there comes down to scale and size of the acquisition and we certainly have the capability to do something larger, but I stand on what we've said for a number of years, which is we don't need to be bigger just to be bigger, it's really just about improving overall levels of growth and improving earnings per share. So I think in the near term, it's always hard to predict the big deal is going to happen. We're certainly interested in looking, but I suspect that the more likely activity would be more along the lines of fine-tuning.

Got it. And then, with renovations, I know you are not providing anything on next year. But just given what you know about next year and the project CapEx and work that you are thinking about for next year, when you think about next year, do you think the renovation disruption in '15 is the same or less than what you have experienced in full year '14?

I think we're going to have to wait until February to answer that. We obviously are having some disruption now. There are a couple of projects like what we will end up doing with the Philadelphia Four Seasons in converting that to a new -- a different brand or a soft brand and so things we're looking after some other projects that the actual way we proceed and whether or not there is an absolute closure of that hotel or not, will dictate to either whether the renovation effect next year is larger than this year or not. So it's certainly something we're focused on and obviously the benefits of any projects like that to the extent that they do hit '15 we should start to see some good benefit of that in '16.

Thank you.

And we'll now take our next question from Steven Kent, Goldman Sachs. Mr. Kent, your line is open.

Can you hear me?

Now we can.

Okay. Sorry about that. Can you talk a little bit about your renovation schedule? I still don't completely understand how different it is versus the years before. And, also, and how it's going to affect you? And then, the second is, you mentioned urban select service a couple of times. How do you see the portfolio mix between that full and select service over the next few years for Host?

See I think there are a couple of points we were trying to make about the renovation activity. In general, the way this year is playing out, is that about 35% of our CapEx is happening in the fourth quarter. So obviously on a weighted basis, that's a little bit higher, but more importantly as we step back and looked at which projects were being affected, we had a number of larger hotels and I had detailed them in my comments that we are undergoing either room renovations or somewhat disruptive meeting room renovations and those were happening in the fourth quarter. When we look more broadly at the activity that was happening in the fourth quarter and we had noticed this and we were aware that last quarter as I highlighted in my comments that we expected some renovation disruption in Q4, which is one of the reasons we were saying Q3 would be stronger than Q4 as we were finishing out moving at the end of the year there. We were saying that roughly half of the renovation CapEx that would be disruptive to our numbers EBITDA generation that's happening in the fourth quarter, I can't exactly compare that to prior years on the slide. But it's certainly higher then where we were last year because last year we just had lighter construction activity weeks of a disruptive nature in the fourth quarter. So I think that's really why we were highlighting that here and it's highlighted in the prior quarter. In terms of the growth of select service within our portfolio, it's still a very small percentage. I think the rate of growth will probably be meaningful in the sense that small numbers can easily be grown, but the reality is that in the near term, I don't think that it's going to rise to a significant part of our portfolio in part because these tend to be smaller properties too. So when you are a $20 billion company, obviously you got to buy a fair amount of something just to move it up to a 1% or 2% of the size of the company. So absent a portfolio transaction, which I would generally say it's unlikely in this arena, it will grow 1% or 2% at a time.

Yes, I agree with you Ed on the percentage because even if we are successful on acquiring several of these select service properties, at the same time, we could also invest in one or more upper upscale properties. So the percentages may not actually move much.

W. Edward Walter:

Thanks.

And we'll now take our next question from Anthony Powell form Barclays.

Hi. Good morning. On the stats you gave 2015, were they pace stats for overall or for group? And if they are for overall revenue, could you provide some color on how the group pace is trending for next year?

Those stats that we gave on the call were relative to group

Got it. Great. Thank you. And just on the Orlando asset, it seems like that's ramping up pretty well. Could you give us an update on where you are in that ramp up, after the renovation, and how much incremental growth that could drive maybe next year?

At this point we have finished all of the construction work at the Orlando asset. I think that some of the side work that we had -- that was so disruptive to operations was completed in the first quarter this year, but the remaining -- my sense in general is that the remaining three quarters of the year for that asset is generally not affected by construction. So I would say that we've had very big lift this year from that asset in out of its construction site and had its work done. I suspect we will get some minor lift in the first quarter of last year and after that it should be more normalized.

Yes, I think that hotel, it will have a good year next year and because of that, when we think about our hotels in Florida next year, those hotels should outperform our portfolio.

And, one final one on the Marriott Marquis in New York. How is the retail and the signage construction going? And how much incremental EBITDA could that generate next year? Thank you.

Again it's early to speculate on the actual impact of EBITDA next year because we're not exactly the marketing process has gone extremely well, but having said that Vornado has not announced any signed leases yet. But from a construction perspective we've talked previously about a $10 million to $12 million benefit rolling from the completion of that improvement. We'll see some of that next year, but it's more likely the full benefit of that is more likely to hit '16. From a construction perspective, my understanding is the sign is virtually complete and I think that there is probably going to be more noise and more press around that in the middle of next month, but we couldn’t be happier with how that whole process has gone. We couldn’t have been happier with having Vornado as a partner here and we're very excited to get the sign operational, get the retail space leased and open and a lot of the hotels have started taking advantages of those new outside observatory jacks that will sit on top of the sign.

All right. Great. Thank you.

And we'll now take our next question from Ryan Meliker from MLV & Company. Ryan Meliker - MLV & Company: Hi. Good morning, guys. I just had a quick question. Most of mine have been answered. But I was hoping you could give us some color on the acquisition market and types of things you are looking for. Obviously, you guys have done a good job being particularly disciplined this year and last year as well, with regards to acquisitions, given where cap rates are and values have really grown. But, what you have bought and what it seemed to indicate in your press release, is that you might be a little more focused today on some smaller independent assets in gateway markets. I am just trying to figure out how you balance acquisitions of those types of assets with a like-kind exchange for a $200 million Tampa asset. Are you guys are going to be stretching valuations to try to find a like-kind exchange so that things work out from a taxation standpoint, or are you less likely to do that? Just help me think about the implications of that like-kind dynamic. Thanks.

Sure. I think as I suggested earlier, the market is competitive. I say that we have an active pipeline of deals that we're reviewing, but compared to that I might have looked at the well four years ago. My assessment of the probability that we actually complete those transactions would suggest that we will -- our hit rate is going to be a lot lower now than it was earlier in the cycle. I don't think there is anything about that that's unexpected that's what you would naturally expect as you work your way into the cycle that a lot of capital plays to the party and then tends to pay bigger prices, that's one of the reasons why we're active seller right now and we tend to be an active seller. As you think about the right king of exchange element of this, I think that your question is a great question and the short answer is that we're not going to stretch on purchases, jut to complete the right kind of exchange. Now I think we're not uncomfortable in paying a higher dividend. We're not uncomfortable in generating proceeds from deals and using that to either pay more of a dividend or buyback stock if that's the right answer. And so the reality is that I mentioned before, we're comfortable with the scale of the company. We're trying to refine the markets that we operate in. If the deal fits our parameters or presents a unique opportunity, then we're going to -- we would be happy to be an investor, but on the other hand to the extent that we don't, we're fine looking for ways to return capital or looking for other ways to return capital. Ryan Meliker - MLV & Company: Got you. It is good to hear that the like-kind dynamic isn't a driver of acquisitions. That's all for me. Nice quarter. Thanks a lot.

Thank you.

And we'll now take our next question with Chris Woronka from Deutsche Bank.

Hey. Good morning, guys. Just want to ask you, as you look up and down your portfolio, and certainly you have a number of kind of the large battleship and group hotels, but as you look at some of the smaller ones in nonunion markets, are you guys kind of evaluating any opportunities to almost convert those to limited service? That seems to be kind of where we are trending as an industry and just wanted your sense as to what is possible within your portfolio.

Yes, it's an interesting question Chris. You know what I would say is that I don't know that we would think about converting them to limited service in the sense of down branding them because I doubt that the risk on the rate would be worth that, but what we are trying to do and certainly this is something we've been trying to do for a while is try to pick up some of the best elements of limited service operation and apply them to our hotel. So in another words where we have hotels that in-house managed or operator managed food and beverage we're looking at opportunities to outsource that food and beverage platform or consolidate that food and beverage platform. So it doesn’t make it a select service or limited service hotel, but what it does is to the extent that we can outsource that or reduce the importance of that to the hotel, we're at least looking at a way or trying to identify ways to improve our margins and reduce our risk on the food and beverage side, so that more and more of our hotel is based on the rooms operations, which is we all know tends to generate higher levels of profitability. So there are a few specific instances in our portfolio over the years where we have made the decision that best thing to do was to covert a Marriott to a courtyard and I think that's happened a couple of times. But generally I don't think that's going to be the preferred route, but looking for ways to modify the operating model to make the hotel more efficient to king of capturing the best of the limited service operating platform, while maintaining the full service rate. That's the strategy we would like to push wherever it makes sense.

Sure. Great. Understood. And then, just as we think about the New York market, from where we sit, we probably think that the supply maybe is having more of an impact on the Marquis, given the number of rooms. Is that a fair assessment? And is it a very significant impact if we looked at New York RevPAR ex-Marquis?

No I wouldn’t say that the Marquis is really struggling at all because of flex servicing let's say. The level of supply in New York has been high and I would say the entire New York market has felt some impact from the supply and I think most folks would describe that less about a occupancy problem and more about a challenge in being able to raise rate. But to be honest, the hotels like the Marquis that can accommodate larger groups and plus have that kind of a ground zero location within Times Square, we're still running comfortably north of 90% at the Marquis, which is where we've been running for the last several years. So I don't think I actually think that our in a lot of ways that you look at our performance was in New York. We've been doing slightly better than the market for the last two years and I think we're less affected by a lot of our select service supply that has come into New York then some other hotels might be and partly because we have the customer base for our key hotels is far more diversified than what a flex service hotel typically attracts.

And you can that even in the third quarter Chris, where our RevPAR in New York was up 4.1%, which obviously outperformed the star data for New York.

Okay. Very good. Thanks guys.

And we'll now take our next question with Jim Sullivan with Cowen and Group.

Okay. And forgive me if this question relates to something you may be addressed in your prepared comments, Ed, but on the four seasons in Philadelphia, I am not sure if you’ve finalized your budget or your plans there, so whatever you can give us in terms of an update on timing and cost for that conversion.

Jim we don't have that completely finalize right now. I would broadly say that the direction we're leaning there is going to be an independent hotel, but likely soft branded. It will be affiliated with one of the major brands and the exact timing for when we will start construction is not yet set, but I suspect that some of that work will start sometime in the middle of next year.

And do you have some preliminary budget or some range that you could share with us?

Not at this point in time. We're still working through that with the operator that we're working with.

Okay. The second question, just a minor question on the management fee. That line item group grew more than hotel revenues. Is that attributable to IMS in the period and can you give us an outlook for IMS as we go forward in what's a fairly robust topline environment?

Hey Jim, this is Greg. I think if you look at our management fees this year, I think in general obviously base fees have been increasing. I think that this year in particular incentive management fee year-to-date the increase has been fairly minimal and there are several reason for that. And Ed mentioned earlier in this call, we've had several negotiations with certain managers where we've been successful in sort of minimizing incentive management fees for this year. So I think when you look at it, our incentive management fees in the first half of the year were actually down on a year-over-year basis and in the second half of the year, our incentive management fees will be up around 4%.

And when you look out to next year, I know obviously you're not giving guidance for next year in this call, but the environment is very positive. Supply in most markets, while it is increasing, remains below demand growth. Should we be assuming that IMS will increase for the full year next year, too early to say?

I think next year as you said, I think a lot of people including us were expecting very good results for next year on the topline and with EBITDA growth and I think with great EBITDA growth, we'll have sort of what I would consider normal incentive management fee growth next year.

Okay. And a follow-up question on the earlier question about Europe. I wonder if you could talk to us about acquisition pricing in Europe, how it's moved this year versus acquisition pricing in the U.S. And, as you think about the comparative growth rates over the next one to two years, how strong your appetite is? I know you just announced an acquisition in Europe, but how strong your appetite is to do more acquisitions over the next -- over the coming quarters?

Pricing in Europe is probably one way to think about it might be the cap rates there are 100 to 150 basis points higher in at least in the markets that we've been focused which would be Germany relative to what we're seeing in the U.S. pricing in London and in Paris is probably comparable to pricing in the best markets in the U.S. and so very aggressive. Now I think you're looking at sort of in the 4% to 5% range as it relates to cap rates for either in those markets. Given that our outlook for Europe would be for slower growth than what we would be expecting in the U.S. there is -- one of the reason why we are buying in Germany is we generally think that Germany will have better growth that the rest of Europe and we think the pricing levels make more sense relative to opportunities we might see elsewhere. I think that both Paris and London while they are spectacular long-term markets, but right now their capital is aggressively seeking assets in those markets is one of the reason why we sold the Sheraton Skyline and the pricing levels there are such that we would not view that as a good allocation of capital in the near term absent an unusual situation to be able to meaningfully create value at the hotel. I think our we're in the process of marketing some other hotels in Europe, but we're actually trying to take advantage of some of the optimism that the broader world has in terms of investing in European hotels to see if we can reduce the size of our portfolio. We're still interested in acquiring more, but it will be fairly selective in terms of the markets that we will enter.

Okay. Just to kind of follow up in terms of what you just said, obviously, the long-term debt markets are very favorable in Europe. How do you balance the appeal of that with the desire to sell assets? We tend to think that assets that are not encumbered by debt are easier to sell. How do you balance those two contradictory factors?

That's a good question. Now as we stand currently, in Europe we tend to approach our financings on an asset by asset basis, but to some degree we're not forced to confront that issue in part because we've dealt with all the financings that we need to address over the course of the last couple of years. We've also built in the flexibility and most of those financings to be able to sell some of the assets earlier. Financing that offer tends to be shorter term than what we will typically see in the U.S. and what we would typically employ in the U.S. So I think that we're looking at the not unlike the way we're thinking about some of the assets we would like to in the U.S. but back in the financial markets have gotten a bit more aggressive and certainly I would say that the delta in Europe is even larger than what we've seen here not that they’ve gotten that much cheaper than where we are in the U.S., but the delta compared to last year they’ve got a lot cheaper. We're sort of a mind this is a good time to try to take advantage of that which is why we're marketing some of our properties there. We're not looking to sell our best assets, but I would say we're looking to sell some of the middle of the pack.

Okay. And then finally for me and I think this is a Greg question, Greg, I wonder if you could walk us through the reasons for the difference between the $69 million positive impact of the litigation reserve reversal and the $59 million add back to get to the adjusted EBITDA?

Yes, so Jim as you know we're fortunate enough to win the San Antonio case. So we're in a great -- because of that we're not going to have to put out $70 million, which is a good thing. We had $25 million in the restricted cash account that was now back in our hands. So we're pretty happy to say the least. The other thing that happens as you pointed out is that there is a GAAP impact of $69 million, so you'll see that when you look at our GAAP earnings, but from an EBITDA perspective the impact is really, really just the interest that we've been accruing on this year. So we've reversed out the interest from this year and then we have some interest accruals from last year that also will flow through EBITDA and so as you correctly point out in total for San Antonio the $10 million EBITDA benefit, but the flip side to that is we have an increase in other litigation expense and so net, net when you take into account that benefit and the increase in the accrual on other litigation expense it's approximately a $4 million EBITDA benefit. And as you know, that's not -- that's not hotel EBITDA right and so obviously $4 million helps our entire EBITDA for the company, but had no impact on our margin growth -- hotel margin growth of 305 basis points.

Okay. Very good. Thank you.

And we'll now take our next question from Wes Golladay, RBC.

Hey everyone. Can you give us an update on the supply and demand picture for group on the prime nights for group? Are you seeing the ability to push some of the group business to the softer nights?

Yes, that one of the interesting challenges that we have as we get into this part of the cycle is that given how robust transient demand has been in a number of markets and given the fact that so many of our hotels are running very high occupancies in the middle of the week and on Saturday. And part of what's happening on the group side now is trying to -- try to push that business to what we would describe as a shoulder night. So it's hard -- we actually had an extensive discussion about that when we were going through our quarterly review with our asset management team and I wish I had a statistic to be able to describe how successful we're being with that, but the reality is that clearly for business being booked now for '15 and '16.

Yes, it's a great situation to put the group in a weaker time because you know what, when you do that, sometimes it could skew the rate growth that we are talking about for next year because if you're booking during the weaker time, that's a great outcome and allows us to book transient business in a stronger times, but if you looking at year-over-year rate growth in group, that obviously will impact and lower than number.

Okay. And can we go back to the Marquis asset? When will you guys be able to discuss the numbers more and the opportunity to dispose of the asset for the signage in retail? Is there a time we can get more color on that?

You mean as it relates to our options around exercising some ability to be able to sell the retail itself.

Yes.

To be honest, there is no reason for us to do anything there until we're comfortable that we have Vorando because they're in control of this and so Vorando has maximized the benefit of the retail space in this signage. So the retail space I would assume will get leased over the first part of next year, the signage part of this, the retail will not be taking all of the signage. So I think there is going to be some period of time where they continue to market the signage and users get comfortable with the fact that we've now created -- or they’ve created that they get TV screen in one of the best market in the world from a publicity perspective. So I don't think that this is anything that we're going to be moving forward aggressively on in the near term in part because I think there is a big opportunity here and we would love to see that maximize it before we try to exercise any right.

Okay. As we get to the opening of that, though, can you talk more about the value creation as maybe where you see it value at once it is opened? Or, it seems to be an ignored asset for you guys right now.

Well, it's not an ignored asset from a perspective of what it does for EBITDA, but I think it's a good question we could try to provide more color on that in the future.

Okay. Thanks a lot everyone.

Thank you.

Thank you. There are no further questions at this time and I would now like to hand the call back to Mr. Ed Walter for any closing remarks. Please go ahead sir.

Great. Well thank you for joining us on the call today. We appreciate the opportunity to discuss our third quarter results and outlook with you and we look forward to talking with you in February to discuss our yearend results and provide much more detailed insight into 2015. Have a great day everybody.