Good day, and welcome to the Host Hotels & Resorts Incorporated Third Quarter 2017 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. Please go ahead, ma'am. Gee Lingberg - Host Hotels & Resorts, Inc.: Thanks, Julia. Good morning, everyone. Welcome to the Host Hotels & Resorts third quarter 2017 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 reconciliation, to the most directly comparable GAAP information, in today's earning's press release, in our 8-K filed with the SEC, and the supplemental financial information on our website at hosthotels.com. This morning, Jim Risoleo, our President and Chief Executive Officer, will provide an overview of our third quarter results, and provide our outlook for 2017. Greg Larson, our Chief Financial Officer, will then provide greater detail on our third quarter performance by markets, discuss margins, and the balance sheet. Following their remarks, we will be available to respond to your questions. And now, I'd like to turn the call over to Jim. James F. Risoleo - Host Hotels & Resorts, Inc.: Thank you, Gee, and thanks, everyone for joining us this morning. Before I begin, I just want to send our thoughts and prayers to those recovering from Hurricanes…

Thank you, Mr. Larson. We'll go first to Anthony Powell with Barclays.

Hi. Good morning, everyone. James F. Risoleo - Host Hotels & Resorts, Inc.: Good morning, Anthony. Gregory J. Larson - Host Hotels & Resorts, Inc.: Good morning.

Good morning. The Key Bridge sale and The Phoenician opportunity involve some residential redevelopment opportunities. Do you have any more of these opportunities throughout your portfolio particularly in cities like New York? James F. Risoleo - Host Hotels & Resorts, Inc.: Yes. Good question, Anthony. We're looking at options for a number of our New York hotels. I wouldn't say that we're to the point where we're comfortable discussing anything today, and we continue to look at opportunities throughout the portfolio to develop excess land, to convert as we did years ago at the Newport Beach Marriott. We took excess tennis courts out of inventory, and sold that piece of dirt to a local residential developer who put a condo tower there. So, we have a number of initiatives that we're working on today, but the short answer is nothing that I would be comfortable discussing because we're not far enough along.

All right. Got it. And, Greg, thanks a lot for all your help over the years. You've been one of the most helpful executives that I've dealt with. So, good luck in the future. Gregory J. Larson - Host Hotels & Resorts, Inc.: Well, thanks a lot.

All right.

We'll go next to Shaun Kelley with Bank of America.

Hey, good morning, and, yeah, Greg, let me offer my congratulations too. So, Jim, in the prepared remarks, you did mention weighted average supply growth being sort of one of the kind of issues that continues to remain out there for the industry. Could you just talk about how you're thinking about weighted average supply growth in Host's markets for stacking up for 2018? And do you see any signs of kind of a crest or peak out in either 2018 or 2019 especially in maybe a handful of markets like New York? James F. Risoleo - Host Hotels & Resorts, Inc.: I think that, in general, Shaun, we see supply peaking in 2019. And our sense today is that supply will pick up in 2018 and probably level out in 2019, and then we should start to see a decline. Generally, what's happened over the last six months or so is that the lending environment has gotten much more difficult for developers to build new hotels. Obviously, that's something we'd like to see, and we're seeing projects being delayed and projects being put on the shelf. So, I think we'll be right around industry averages, maybe a tick more.

And anything in particular driving those delays that you could elaborate on? James F. Risoleo - Host Hotels & Resorts, Inc.: Well, I think, generally, it's the fact that lenders have clamped down on their underwriting standards. The capital markets are flush with cash today which obviously impacts other pieces of our business. But based on conversations we've had with lenders and talking to folks in the brokerage community and developers and operating partners that we work with, it's just not as easy today to go out and get a construction loan.

Thank you very much.

We'll go next to Rich Hightower with Evercore ISI.

Hi, good morning, guys. James F. Risoleo - Host Hotels & Resorts, Inc.: Morning, Rich.

If I've got one question, I'm going to try to make it count here. So there's been a lot of chatter surrounding Host recently on the topic of various strategic alternatives, levered share repurchases, programmatic asset sales. There's obviously a lot of levers available, and I certainly appreciate that you guys can't talk about things that haven't been announced. But can you talk about what the current limitations are with respect to an investment-grade rating, with respect to commitment to the dividend throughout the cycle, just how do you guys think about that box that you might be in as we contemplate these other alternatives? Gregory J. Larson - Host Hotels & Resorts, Inc.: Rich, I think that we have consistently said that we intend to maintain our investment-grade rating. And that means that – well, in addition to that, we said that at this point in the cycle, as I mentioned in my prepared remarks, we may be in the late stages of the cycle, we may not, but we're taking a cautious approach today to capital deployment and taking that into consideration in our underwriting criteria. But we have stated that we would be comfortable taking leverage to 2.5x to 3x.And I don't think that's changed by any means. Does that provide a limitation to us? I don't think that it does. Candidly, I think that we are cognizant of the scale, the depth, the breadth of what we have in this company and are looking for ways to create shareholder value over the long term, but we're going to keep the balance sheet in mind, and we're going to keep the dividend in mind as well. James F. Risoleo - Host Hotels & Resorts, Inc.: Yeah, I mean, I agree with Jim. I mean I think Host is in a great position today with leverage at 2.3x and nearly $800 million of cash. I think there's a lot of flexibility to do all the things we mentioned, whether it's buying back stock, reinvesting in our assets, or buying assets. It's still clearly being investment grade. It's still clearly being in a position in a downturn to maintain our dividend.

Okay, guys. Appreciate that color. Thanks.

We'll go next to Stephen Grambling with Goldman Sachs. Stephen Grambling - Goldman Sachs & Co. LLC: I'm going to go ahead and follow up on that one. So you mentioned buying back stock, reinvesting in assets or buying assets. Given your views on the cycle, would you rank any of those as a priority relative to the others? James F. Risoleo - Host Hotels & Resorts, Inc.: It's tough to rank anything in a vacuum, Steve. It really is dependent upon how a particular acquisition opportunity would stack up from an accretion perspective relative to buying back stock, which we will evaluate any potential acquisition opportunity against the stock buyback opportunity concurrently as we're evaluating it. So I can't sit here today and say that one is going to take precedence over another. Stephen Grambling - Goldman Sachs & Co. LLC: Fair enough. I'll jump back in the queue. Thanks.

We'll go next to Thomas Allen with Morgan Stanley. Thomas G. Allen - Morgan Stanley & Co. LLC: Hey. Thank you for the group color around 2018, but any chance you could just give us more thoughts around kind of how you're thinking about 2018 RevPAR guidance? Thanks. James F. Risoleo - Host Hotels & Resorts, Inc.: Yeah, Thomas, it's a little early in the year for us to be talking about 2018 RevPAR guidance. We are in the budget process with our operators. We don't have budgets. So there's really not a lot of color I can add. Thomas G. Allen - Morgan Stanley & Co. LLC: Okay. Gregory J. Larson - Host Hotels & Resorts, Inc.: I can answer that, Jim. Yeah, I mean obviously there are some other wildcards out there as well, right. Are we going to get a tax cut at some point later this year, early next year? And we continue to look at the economic stats. So, as you know, Thomas, what we like to do is give our guidance on our next call, which will be in February. Thomas G. Allen - Morgan Stanley & Co. LLC: All right. I thought it was worth a shot. Can I just ask another question then? I think the market – I mean, you're not alone in highlighting how the hurricanes are having a negative impact on RevPAR. I think investors and we simply thought that there was going to be a bit of a tailwind from people displaced. Can you just talk about kind of the gives and takes there? I mean, could the hurricanes be a positive surprise in the fourth quarter? Thanks. James F. Risoleo - Host Hotels & Resorts, Inc.: Well, the properties that we own are truly in both markets.…

We'll go next to Michael Bellisario with Baird. Michael J. Bellisario - Robert W. Baird & Co., Inc.: Good morning, gentlemen. James F. Risoleo - Host Hotels & Resorts, Inc.: Good morning, Mike. Michael J. Bellisario - Robert W. Baird & Co., Inc.: Just kind of want to circle back to Rich's question a little bit, maybe ask it slightly differently, but not looking for specifics on the – call it European exit, for example. But what needs to happen or what do you need to see to maybe act on some of these options that you have embedded within your portfolio? Is it something on the macro front or is it a capital markets decision? What's kind of the thing that needs to happen for you to say, 'Okay, it's time to do X, Y or Z?' James F. Risoleo - Host Hotels & Resorts, Inc.: Yeah. I think what has to happen first and foremost, Mike, is we have to get the new senior teams aligned and integrated, and come together with a plan of how we want to see Host in the future. And Michael is not even on board to-date, so I think it's going to take some time for us to wrap our arms around the new vision and the way forward. Gregory J. Larson - Host Hotels & Resorts, Inc.: Yeah. I think what I would add is, look and I know you guys are talking about maybe some bigger things. But I would add also to Jim's comments that he had in his prepared remarks is that I think the team is doing a great job already, right. If you look at the Key Bridge potential sale later this year or next year, I think that's a fantastic transaction, even the land sale…

We'll go next to Smedes Rose with Citi.

Hi. Thanks and, Greg, best of luck to you going forward. Gregory J. Larson - Host Hotels & Resorts, Inc.: Thank you.

I wanted to ask just Jim on the underwriting side. Are you seeing any changes in pricing of hotels just given where we are in the cycle and maybe departure of some buyers that might have been more present, say a year ago or so? Are you seeing anything there? James F. Risoleo - Host Hotels & Resorts, Inc.: A couple observations on the investment side, Smedes. First of all, I would tell you that until very recently, we did not identify product on the market that fit our criteria. I've stated in the past that given where we may be in the cycle, it's not a time to be a buyer of commodity-type hotels. Obviously, we like the resort space. We like big boxes a lot. We're prepared to move beyond the top 10 or 15 markets and look out to the top 25 markets. What we've seen happening over the last 60 days or so is a number of hotels have come to market, some being formally marketed by intermediaries and one or two others that we're working on a direct basis or an off-market basis. Yes. Seller expectations are lofty. That doesn't mean that they're going to transact. We are still seeing a number of situations contrary to the comment I made earlier with respect to the tightness in construction lending, we are starting to see situations and continuing to see situations, I should say, where current owners of hotels, if they can't clear the market at a price that they find attractive, they can refinance a property today at very attractive terms and very attractive proceeds. So there are a handful of deals out there that we're looking at today. I think it's TBD to see where they clear the market. We certainly don't intend to stray from our underwriting. We don't feel that we have a need to stray from our underwriting. We're going to continue to be disciplined. And if we can wrestle a deal down that makes sense for us and creates stockholder value, then we'll pursue it.

Okay. Thank you. I just wanted to ask you as well. As you look at labor costs moving into 2018, are there any particular markets that just sort of stand out in terms of higher costs, either that are being sort of legislated in or there are perhaps union contracts coming due or anything along those lines that we should just be keeping in mind as we think about 2018? Gregory J. Larson - Host Hotels & Resorts, Inc.: Hey, Smedes. This is Greg. I think it will depend on the market. I mean, certain markets – Arizona is probably a good example – we are experiencing some tight labor markets in Arizona and some other markets. There will be some union contracts coming due in '18. Obviously, we've experienced some of those pressures this year, but because of the benefits of technology and time/motion studies and other things, we've been able to mitigate some of those cost increases. In fact, as Jim said, during the quarter we were able to decrease our overall comp expenses by $13 million. So, yeah, I think we will have some pressure on labor in 2018, but I think we'll continue to benefit from technology and, obviously, the merger between Marriott and Starwood will also be helpful and gives us some tailwinds to offset that as well.

Great. Okay. Thank you.

We'll go next to Jeff Donnelly with Wells Fargo.

Good morning. And yeah, I'll certainly echo the concern or the comments earlier, Greg, that you'll certainly be missed, but we'll look for you trackside next year. But I'm curious just on earlier question came in about just constraints on your options for maximizing value. I'm just curious, how do you guys think about managing around monetizing low-tax-basis assets like the Key Bridge Marriott because of the need to either recycle that capital or pay a special dividend? James F. Risoleo - Host Hotels & Resorts, Inc.: Yeah. I think, a couple things on Key Bridge in particular, Jeff. It's something that we thought about, obviously, because it is a low-basis asset. It's been in the company from inception, and I think it was the second hotel that Marriott Corp. built many, many years ago. It was built 1959, I believe. So, we do have a very low tax basis in that asset. And as we're thinking about whether or not we have a special dividend as a result of the sale, I think, one of the things we're thinking about today is, is it possible to do a like-kind exchange for that hotel? It's also going to depend on when the deal closes. So, there are a lot of factors here that go into the equation. Obviously, if it closes in 2017, and we don't feel that there is a high probability of executing on a like-kind exchange, then a special dividend is something we'll be thinking about internally and talking about among the management team here. If it closes in 2018, it might have a slightly different color on it.

And maybe just one follow-up, if I could. And I know it's early, but Marriott is considering changing its occupancy threshold around rewards redemption to maybe more of a waterfall. I know nothing has been concluded, but as someone who has a good number of Marriott managed hotels, who I think probably operates near those occupancy thresholds, could you talk a little bit about how those affects pricing in your mind and maybe, conceptually, what the opportunity could be if it was modified? James F. Risoleo - Host Hotels & Resorts, Inc.: We're having some conversations with Marriott around the rewards program. I mean, they're doing a lot of work on rewards today. They have to – they want to and they have to harmonize the Starwood rewards program along with Marriott rewards. They are hopeful that they'll get this done by the end of 2018. We have an active seat at the table. We're having conversations. And I think to say anything more than that, I wouldn't be comfortable with that.

Yeah. Thanks, guys.

We'll go next to Joe Greff with JPMorgan.

Good morning, everybody, and similar sentiment to you, Greg. You'll be missed. Gregory J. Larson - Host Hotels & Resorts, Inc.: Thanks, Joe.

When you guys think about the 2018 and I heard your comment, Jim, on the group revenue pace for 2018, would you expect that the group segment to lead or lag relative to business transient leisure? But then when you think about 2018 overall, would you expect your overall portfolio to lead or lag relative to the U.S. industry RevPAR results? James F. Risoleo - Host Hotels & Resorts, Inc.: I think a lot of what happens in 2018, Jeff (sic) [Joe], is going to really be dependent upon the psychology of travelers in general, but of businesses in particular. And if we see a tax bill come out of Washington, D.C. that gets close to doing what is being proposed, i.e., take the corporate tax rate down to 20%, if we see a repatriation of profits that are trapped overseas right now and see a big inflow to the U.S. Treasury that maybe leads to an infrastructure build at some point during 2018, then I think that we feel really good about what that's going to mean for our business. But sitting here today, the only thing I can really tell you is that we're sitting today with the same amount of group business on the books in 2018 as we had in 2017 at the same time in 2016. Gregory J. Larson - Host Hotels & Resorts, Inc.: With the same increases. James F. Risoleo - Host Hotels & Resorts, Inc.: Same increases, yeah. And we have about 67% of our 2018 group business on the books already. So, we feel good about it. Do we want to see the return of the business transient traveler? Absolutely. Do we want to see group bookings pick up? Sure, we do. That can lead us to a billion dollar question. When is this going to happen? If we had that answer, I think we'd all be in a much better place. Gregory J. Larson - Host Hotels & Resorts, Inc.: And we could give guidance. James F. Risoleo - Host Hotels & Resorts, Inc.: And we'd give guidance.

We'll go next to Chris Woronka with Deutsche Bank.

Hey. Good morning, guys. James F. Risoleo - Host Hotels & Resorts, Inc.: Hey, Chris.

I want to ask you. Jim, there's been a lot of talk about the Marriott-Starwood merger and some of the benefits that accrue to owners. And I heard your comments, you expect to see those more later next year, 2019, and I think a lot of that is probably on the expense side. I want to ask you if you think there's any top line benefits that are – that either have or going to materialize from that merger? I think that was, part of the – if not spoken, at least part of the implied idea when that happened. And I don't know you guys don't give a specific brand data, but maybe some comments on whether you think there are top line benefits coming out of that as well. James F. Risoleo - Host Hotels & Resorts, Inc.: I think I can answer that with an unequivocal, yes. Marriott's group sales engine, in my opinion and I think the opinion of everyone here at Host, is second to none in the industry. Starwood had a good group sales platform. I think, Marriott's is superior. Marriott is in the process right now of integrating the two organizations. We're working closely with them to understand what that means. Again, not unlike the rewards program, we do have a seat at the table and we are having conversations with them. So, we fully expect that as the two sales organizations are integrated that we should see yield index increase for our Starwood legacy hotels. The Sheraton RevPAR index today is not a fair share. It's 90%plus or minus. So, we see a lot of upside going forward.

Okay. Great. And I also want to pass along best wishes to Greg. And, Greg, I'm sure you'll miss those trips to Fiji, but we'll see you around.

We'll go next to Robin Farley with UBS.

Great. Thanks. Two questions or really just clarifications. I know you're not giving guidance for 2018 RevPAR, but it's one we're sort of expecting a similar increase in U.S. RevPAR or something in that sort of 1% to 2% range for next year. You talked about a lot of the programs targeting expenses. Is it reasonable to think that you could keep margins flat next year, if RevPAR is only up in that 1% range? I know it looks like you will be able to have done that this year, but just wondering how you feel about that, just going into 2018. And then just the other clarification, your commentary on group pace for 2018, having the same increases this time last year did for 2017. Can you just remind us where 2017 group is coming in for the year, what the increase is coming in for 2017 group? Thanks. Gregory J. Larson - Host Hotels & Resorts, Inc.: Hey, Robin. This is Greg. So, yeah, this year, I think it's been as we've mentioned an extraordinary year on the cost front and margin front. I mean, if you look at the low end of our guidance, we're going to have breakeven margins and 1.15% RevPAR, and frankly, revenue growth is going to be under 0.5%. So, I think those are remarkable results. I think we still as I've talked and Jim talked about, we still have some things that will help us next year. Again, we still – because we have a lot of these things more complicated hotels, I think, technology is going to continue to help us next year. Certainly, as Jim just mentioned, yes, obviously there's a revenue bump because of the Starwood-Marriott merger, but I think there'll clearly be some expense benefits occurring to us both in 2018 and 2019. So, I think, we're going to do better next year than a typical year. But I guess without giving – getting too specific, I don't think, we'll be – look, this was a record year, right, to have flat margins with 1.15% RevPAR growth, right. I think the breakeven margins growth will be higher than that, but certainly better than an average year.

Okay. Great. Thanks. On the group, where group is coming in for 2017? Gregory J. Larson - Host Hotels & Resorts, Inc.: I'm sorry, Robin, we didn't – I didn't hear you on that.

Oh, sure. The other question was just you mentioned that your 2018 booking pace for group is similar to what 2017 looked like at the same time last year. Can you just remind us where your 2017 group is now coming in for the year now that 98% of that is on the book? Gregory J. Larson - Host Hotels & Resorts, Inc.: Yeah. It's single. It's up over 2%.

Okay. Great. And best wishes with everything. Greg, let me add that to everyone else's. Thanks. Gregory J. Larson - Host Hotels & Resorts, Inc.: Well, thanks, Robin, for that. James F. Risoleo - Host Hotels & Resorts, Inc.: Thanks, Robin.

Well go next to Wes Golladay with RBC Capital.

Hey. Good morning, everyone. Going back to that group outlook for next year, are there any markets that are driving that? I know you invested a lot of money in some of your group hotels, and I wonder if these are just Host specific. And then for D.C., are you seeing any uptick in short-term group as legislative activity looks to pick up? Gregory J. Larson - Host Hotels & Resorts, Inc.: I think, it's too – look, D.C. has been a great market for us. And when we look at sort of the city-wide for 2018 and 2019, D.C. looks quite strong. And my guess is based on what you were just talking about, we could see additional activity in D.C. So, we – clearly, we feel pretty good about D.C. There are other markets for us that that look good. But as we said earlier, we're not giving guidance for 2018 at this point. And our group revenues looks solid on our books today. So, I'm not sure that we're going to get into it too much further at this point.

Okay. Well, congrats, Greg. Gregory J. Larson - Host Hotels & Resorts, Inc.: Hey, thank you. James F. Risoleo - Host Hotels & Resorts, Inc.: Thank you.

We'll go next to Bill Crow with Raymond James. Bill A. Crow - Raymond James & Associates, Inc.: Good morning, guys. Greg, let me express my well wishes for your wife who has to deal with you a lot more at home. So, good luck to Piper. Gregory J. Larson - Host Hotels & Resorts, Inc.: (01: 02: 00). Bill A. Crow - Raymond James & Associates, Inc.: I hope you spend a little more time out in wine country. Gregory J. Larson - Host Hotels & Resorts, Inc.: All right. Bill A. Crow - Raymond James & Associates, Inc.: My question is twofold, very quick here. Any update on the COO search? Is it still under way? Or have you rethought that position? And number two, The Ritz-Carlton rebranding in Buckhead, is that something that you approached Marriott on? Or Marriott came to you? And how did that play out? James F. Risoleo - Host Hotels & Resorts, Inc.: Yeah, Bill. Happy to give you an update on both of those. With respect to the COO search, we have suspended the search. By marrying up asset management with investments, we think we're accomplishing what we wanted to accomplish, which was integrating the two disciplines to really be completely focused on real estate value creation. We have a strong enterprise analytics team that is mining data for us and providing a competitive edge, as well as strong asset managers as we go forward. So, at present, the management changes are done internally. With respect to The Ritz-Carlton in Buckhead, we're having conversations with Marriott regarding the right way forward for that hotel. The hotel was in need of a material renovation. We looked at some options outside of Ritz, but keeping it within the Marriott family, and landed on The Whitley, a luxury collection hotel, as the best alternative to drive stockholder value. We put HEI in to manage that property. And what we haven't discussed is that we also own The Westin in Buckhead, and HEI is managing The Westin as well. So, we see incremental benefit of complexing and sales, and catering by having one manager manage two properties within the same brand family. Bill A. Crow - Raymond James & Associates, Inc.: Jim, is it fair to assume that there will be a restaurant flag in Buckhead eventually? James F. Risoleo - Host Hotels & Resorts, Inc.: That, I don't know. I've asked that question in the past. And to my knowledge today, there is nothing planned. Bill A. Crow - Raymond James & Associates, Inc.: Great. All right. Thanks, guys. Appreciate it. Gregory J. Larson - Host Hotels & Resorts, Inc.: Thanks, Bill. James F. Risoleo - Host Hotels & Resorts, Inc.: Sure.

And that concludes the question-and-answer session. I would like to turn the conference back over to Mr. Risoleo for closing remarks. James F. Risoleo - Host Hotels & Resorts, Inc.: Thank you for joining us on the call today. As I said earlier, we are pleased with our solid results and earnings beat, particularly after weathering the impact of two major storms. I am looking forward to seeing many of you at NAREIT in a couple of weeks and hope you will join us at our informal meet and greet on Monday prior to the conference start. Otherwise, we look forward to discussing 2017 results and our 2018 outlook on our year-end call in February. Have a great day, everyone.

And that concludes today's conference. We thank you for your participation. You may now disconnect.