Good day, everyone. Welcome to the Host Hotels & Resorts, Incorporated Third Quarter 2018 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Gee Lingberg, Vice President. Please go ahead. Gee Lingberg - Host Hotels & Resorts, Inc.: Thanks, Nicole. Good morning, everyone. Welcome to the Host Hotels & Resorts third quarter 2018 earnings call. Before we begin, I would like to remind everyone that many of the comments made today are considered to be forward-looking statements under federal securities laws. As described in our filing to 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 EBITDAre and comparable hotel results. You can find this information, together with reconciliation to the most directly comparable GAAP information, in today's earnings 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 discuss our recent transaction, provide an overview of our third quarter results and our outlook for 2018. Michael Bluhm, our Chief Financial Officer, will then provide further details on our third quarter performance, 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. We are pleased to report a quarter that once again exceeded our internal expectations on the bottom line…

Thank you. We'll take our first question from Anthony Powell from Barclays.

Hi. Good morning, everyone. You're building a pretty significant cash balance and investment capacity balance. What's the timeframe for investing in that capacity and if you are unable to transact on an acquisition of a hotel over the next few quarters, would you move quickly to buybacks or are you comfortable holding that cash for long period of time? James F. Risoleo - Host Hotels & Resorts, Inc.: Anthony, thank you for the question. As we think about our capital recycling activity, I do want to point out that the assets that we sold have achieved superior pricing. And they have resulted in following through on two key strategic objectives that we set out about two years ago, when I first became CEO, and that's reducing our exposure in New York City to profitability-challenged assets and really becoming more focused on the U.S. So we've accomplished that in a very attractive manner. With respect to use of proceeds, as we sit back and think about reallocating that capital, we believe that there are three areas that make sense for us. One is buying assets to further upgrade the overall quality and growth and free cash flow generation of the Host portfolio. The second is investing in our portfolio where we can drive meaningful returns by reinventing properties such as – we'll talk about later I'm sure the Marriott transaction that we did – or buying back stock. So I don't think that we are in a rush by any means today to get the capital deployed. I will point out that we have not been shy about buying back stock in the past. Between 2015, 2016, we repurchased $890 million stock at an average price of about $17.15. So as we think about deploying capital, we really do run the screen on an acquisition or investing in our portfolio relative to buying back stock at current prices and that drives our decision making.

All right. Maybe just one more follow-up. I think there were some media reports a few months ago about you were thinking about selling a large portfolio of non-core assets at presumably higher cap rates than your recent deals, is that something you would still consider or have you been able to generate enough proceeds with these recent large, low cap rate transactions? James F. Risoleo - Host Hotels & Resorts, Inc.: Anthony, we're not out to generate proceeds for the sake of generating proceeds. We're out to opportunistically take advantage of dislocation in the market and we start internally for every asset that we consider selling by doing our own internal hold value and that hold value takes into consideration our view of the likely performance of that asset over the near term, looking out over a 10-year timeframe. But obviously, it's a little difficult to forecast anything over 10 years. But certainly over the next three to five years, you can get a pretty good handle on it taking into account that the full capital requirements of any particular property and then, just kind of get back at what we consider to be appropriate discount rates using a market residual cap rate. So, that's where it starts on dispositions. The same way we look at acquisitions. There are always a lot of media reports out there. We don't comment on anything until the deal is either done or we have a hard money contract.

Right. Thank you.

We'll take our next question from Chris Woronka with Deutsche Bank.

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

Yeah. Good morning. So, you're now, it seems like, pretty complete on the strategy to reduce New York. So, I guess the question is as you look across the board, does that – are there certain markets or segments where you'd like more exposure with a higher transaction? You picked up a couple resorts. You picked up San Francisco. Is there anything that kind of stands out to you, again, either market or segment wise? James F. Risoleo - Host Hotels & Resorts, Inc.: We continue to like the resort market, Chris, given the dearth of new supply that that's being built in those markets today. It's particularly the type of properties that we feel we are very good at owning given the scale and access to data and information that we have which differentiates us from others. The business information systems, the business intelligent systems allow us to really understand where we can drive value in resort properties. So, we'll continue to be focused on resorts. The other area that we feel we are differentiated in many ways is in big boxes. Again, the same metrics apply. We have an incredible database of information that allows us to benchmark any potential acquisition against the performance of our existing assets, and from a supply perspective, it is very low. I think it's less than 40 basis points. So those are the two areas that we'll be focused on. Additionally, we will continue to think about assets that will outperform the rest of the portfolio, assets that are more sustainable from a CapEx perspective to fund capital needs out of the FF&E reserve, and thus will result in higher free cash flow generation.

Okay. Very good. Thanks, Jim. James F. Risoleo - Host Hotels & Resorts, Inc.: Sure thing.

And our next question comes from Shaun Kelley from Bank of America.

Hey. Good morning, everyone. I was just wondering if you could comment a little bit more about what you guys are seeing on the Marriott integration front. I think last quarter you were very clear in your comments. Some other peers or competitors are out discussing that they are continuing to see some latent disruption issues. And then also if you could just kind of hit on the union point, if you have any hotels exposed, and if that's dragging down your 4Q expectations at all. James F. Risoleo - Host Hotels & Resorts, Inc.: Sure, Shaun. Let me talk about the union point first and then I'll get to the Marriott integration question that you asked. We had experienced strikes at our Westin in Seattle and the Chicago River – Westin Chicago River North property. Both of those strikes have been settled. The union is currently striking in San Francisco and in Boston. We are monitoring the situation very closely and have a good handle on what's happening at the hotels. I am not in a position, given the sensitivity of the negotiations, to talk about whether performance is up or performance is down at either property. I will tell you that we've taken the likely performance of those hotels into consideration as we've developed our forecasts for the balance of this year and our full year guidance. Now, with respect to Marriott integration, we continue to monitor it very closely. Of course, there were a few hiccups along the way, but really no measurable negative impact. What distinguishes Host from others who may have experienced more disruption is first, the scale of our portfolio, but really, the size of our hotels. Our properties have our sales management teams on site. So, there was not a need to transition those sales teams to regional offices, and the attendant disruption that came from that. And I understand there was disruption for others, but I can tell you we saw no measurable impact at our properties. And more importantly, on a very positive front is that now our Starwood legacy hotels have access to 30,000 additional business-to-business accounts that Marriott had. And we've seen benefits already inuring to the Starwood legacy properties as a result of having access to that account information. So we receive benefits on the top line and lower cost on the bottom line as well.

Thank you very much.

And we'll take our next question from Michael Bellisario from Baird. Michael J. Bellisario - Robert W. Baird & Co., Inc.: Good morning, everyone. James F. Risoleo - Host Hotels & Resorts, Inc.: Good morning, Mike. Michael D. Bluhm - Host Hotels & Resorts, Inc.: Good morning. Michael J. Bellisario - Robert W. Baird & Co., Inc.: Just wanted to talk on – and ask on 2019 outlook – maybe one just on group pace and how you're seeing that shape up for next year. But then just high level, how you're thinking about the macro backdrop heading into next year, especially relative to the performance that you guys have achieved this year? James F. Risoleo - Host Hotels & Resorts, Inc.: Sure. I'd talk about the macro backdrop a bit. And as I said in my prepared remarks, we think that industry fundamentals are on solid grounds today, and we're optimistic that steady as she goes will continue. The hotels are running at record occupancies. All of the indicators that we focus on non-residential fixed investment, consumer confidence, GDP, corporate profits, they're all strong. As I mentioned, our third quarter occupancy was the highest it's been since 2000. So the table is set for continued growth. We're also and have been keeping a keen eye on supply. And while we'll have some new supply next year, it's manageable. And we expect it will see just a bit more in 2020 and then supply taper down. So our view is steady as she goes. Things are looking pretty positive next year given the fact that we're 100 months into the cycle right now. So that said, we are keeping an eye on other things. We're keeping an eye on the impact the potential trade wars could have on the U.S.…

We'll take our next question from Smedes Rose from Citi.

Hi. Thank you. I wanted to just ask a little bit about some of the parameters around the performance guarantees that Marriott is providing? And I guess – first, are they allocated on a per asset basis or is it a sort of a large sum that you can draw from depending on the amount of disruption? And then also, as the Marquis San Francisco kind of being retroactively added to this pool now? I couldn't tell from your opening remarks, if that was in that set or not? James F. Risoleo - Host Hotels & Resorts, Inc.: Sure, Smedes. Let me let me back up before I answer your specific questions and maybe give you get a bit of color on the program. I think I was pretty clear in the prepared remarks as to why we think this is a good use of capital. But it might be helpful to frame it so that so then you can see how the priority returns and the disruption operating guarantees work. So as we step back and – yeah, San Francisco was, I would say, the – as we call it the Bell Cow here. The property needed to be reinvented. It's a main-in-main asset and one of the best markets in the country. So we had talked with Marriott about what could we do together to really – I'll use a word that you hear other times, really make that hotel relevant. To make it number one in its competitive set in the market. And let me stop on competitive set for a moment, because our objective on every brand transformation project we undertake is to bring that property to number one in its competitive set. And we had worked out a deal with Marriott where they would provide…

Okay. Fair enough, thank you. Then just Michael you mentioned the dividend paid in October as we head into yearend, would you expect to have to kind of true up in order to distribute 100% of taxable income above the $0.20? Michael D. Bluhm - Host Hotels & Resorts, Inc.: Yeah. I think – I'm sorry. Yes. Again, our policy is to get 100% of our taxable income.

So you would expect this special dividend in addition to the regular dividend in the fourth quarter or... Michael D. Bluhm - Host Hotels & Resorts, Inc.: We can't comment on that at this point.

All right. Thank you.

Our next question comes from Rich Hightower with Evercore ISI.

Hey, good morning, guys. I'm going to waste a bullet here on a follow up to Smedes question on the guarantee in terms of the mechanics. So when we talk about full operating profit protection, is that based on a prior time period or some sort of baseline projection for the asset just in terms of how we come up with that number? And then can you also walk us through the timing on the spending. Is it pretty ratable across the next four years in terms of that incremental $150 million to $200 million or is it more concentrated in certain periods over that four years? Just help us in terms of the modeling mechanics there. James F. Risoleo - Host Hotels & Resorts, Inc.: Yeah. So let me clarify one thing, Rich. When we're talking about four years, it starts with 2018 because the Marriott Marquis in San Francisco, as we've talked about before, is a $110 million brand transformation. So it's 2019 and the next three years, and it is ratable over that period of time. We spend, on average, roughly $500 million a year on maintenance, repair and replacement FF&E. And we've been doing that now for 25 years. Part of enterprise analytics is a group, it's capital financial planning. And every year, as we develop our capital plans, we determine what the attendant disruption is going to be and we factor that into our budget. So, we have really solid data across all markets with all types of assets, and have a very good handle on what a room's renovation is going to do to the bottom line, what a ballroom renovation is going to do the bottom line, what repositioning the lobby will do to the bottom line. And that's how we developed the anticipated disruption in connection with the brand transformation project and that is the amount of guarantee that we negotiated with Marriott.

Okay, Jim. That is helpful color. Let me ask you one follow-up here. We haven't spent a whole lot of time on labor expense on this call as I think we have in the past. Can you – I know you said kind of a 3% to 4% CAGR is probably a good run rate for the next few years. Is there a way to break that down across East Coast, West Coast or union versus nonunion hotels, just so we understand the differentiation there as you roll up to the aggregate? James F. Risoleo - Host Hotels & Resorts, Inc.: Yeah. There's really not, Rich. I think it really does vary by market and it's across the board and it's not consistent in any given market. It's really property by property.

Got it. Thank you.

Our next question comes from Jared Shojaian with Wolfe Research.

Hey, good morning, everyone. Thanks for taking my question. I just want to go back to some of your group comments, because I think last quarter you were seeing good production in terms of what you had on the books for 2019, as far as the bookings in the quarter for 2019. So to be a bit behind on group room nights in 2019, that seems like it's lower from where you were before, but can you just confirm if that's the case and maybe talk about why that is? And then if you could also just tell us your total group production in the quarter for all future periods? Thank you. James F. Risoleo - Host Hotels & Resorts, Inc.: Well, what I talked about last quarter was activity in the quarter. What I'm talking about today is actual – use it in a different way, pace – and what we're seeing from a pace perspective. And I don't think that there has really been any change quarter-to-quarter from what we've been seeing. We've been focused on the assets in markets where there are weak citywides. I will tell you this that our pace for 2020 and 2023 right now is up 6.4%. So we're very bullish as we see the booking window continue to extend and beyond 2019 and into 2020 and beyond.

Okay. Thank you. That's helpful. And just a quick housekeeping for me. Can you just tell us how much your competitive industry supply in your markets is up this year and next year, and then you had mentioned an acceleration into 2020. So that would be helpful to get that year as well. James F. Risoleo - Host Hotels & Resorts, Inc.: I would say this year, next year roughly 2.3% to 2.5%, and then 2020, we're seeing a decline.

A decline. Okay. Thank you. James F. Risoleo - Host Hotels & Resorts, Inc.: Yeah. A decline in 2020. Right.

And we'll take our next question from Robin Farley with UBS.

Hi. Most of my questions have been answered. I guess maybe just circling back from a moment to the Marriott deal just to better understand that. And I certainly understand from your perspective why you do it. It seems like a great deal if you have a guarantee to be made whole kind of well into the cycle here. But just to understand how it works when we think about those properties and how performance might compare next year versus this year. When you talked about the process of kind of estimating the disruption impact and then Marriott would sort of guarantee that amount of disruption impact. But I assume if performance is down because of disruption, one can always debate sort of what the cause of it is. So I guess I just want to understand, is the guarantee that basically your first x percent of decline, whether that's 5% or 15% or 20%, whatever, that from the EBITDA in 2018 that you report, that the first x percent of that decline you're going to be made whole. Is that the way to think about? So from an EBITDA perspective, we wouldn't even know there's anything going on at those properties unless you dropped below a certain amount of decline. Is that the right way to think about it? James F. Risoleo - Host Hotels & Resorts, Inc.: Robin, no. I think it is based on the anticipated disruption. So, you can paint two scenarios. One scenario is that we have a meaningful reacceleration in top line performance and an attendant increase in flow-through in EBITDA at a hotel that's part of this program. The operating guarantee still gets paid, okay? So it's regardless.

So, there is less... James F. Risoleo - Host Hotels & Resorts, Inc.: And it goes the other way as well. If the EBITDA declines, the operating guarantee is set at a fixed amount.

Okay. So, you'll make that amount. In theory, if there were no disruption, you would have an increase in EBITDA from that property because you're going to get paid that amount anyway. Is that the way to think about it? James F. Risoleo - Host Hotels & Resorts, Inc.: Yeah. I think that's the right way to think about it. Yes.

Okay. And I guess, I don't know, and maybe this is really a question for Marriott, because again it seems like a great deal for Host, and I guess I'm just trying to think about, the Host, more typically, you will do renovations and add meeting space and ballroom space, and you do this at properties all the time without typically getting that kind of guarantee. So, I guess just trying to understand what's different now. Was it just a decision on Host's part that you didn't want to have CapEx pick up to the level that maybe some of these properties required or like, I guess, why the change in what is sort of typically the case for kind of who bears the cost of renovations and the risk of disruption and all of that. I guess what's sort of behind that? Thanks. James F. Risoleo - Host Hotels & Resorts, Inc.: A couple of things, Robin. Our renovations have typically been staged over a number of years. To paint the backdrop, you do rooms in a property in 2018, and then in 2019 or 2020 you might touch the meeting space. And then you're going to get into the F&B outlets in the lobby, and then you're right back to doing your rooms again. So the thought here was we accelerate the spend. We're going to spend a little more than we typically would have. But when we are done in a compressed period of time, we're going to have a fully renovated hotel that plays very well to the consumers and will clearly be number one in its competitive set. I think what's important to Marriott is the fact that we own the best Marriotts in the system. Some of the assets that I mentioned, the New York Marriott Marquis, Orlando World Center, Boston Marriott Copley San Francisco and down the list. And I think from a brand perspective, to be able to showcase what brand transformation means, they've undertaken this exercise in other properties like the Charlotte Marriott, the Portland Marriott and a few others along the way. But to be able to showcase these assets, I think and I'm hopeful that other owners of Marriott hotels will follow down the same path.

Okay. Great. Thank you very much.

And that is all the time we have for today's Q&A session. I would like to hand the conference back over to our speakers for any concluding remarks. James F. Risoleo - Host Hotels & Resorts, Inc.: Well, thanks everyone for joining us on the call. We appreciate the opportunity to discuss our third quarter results and outlook with you. We look forward to talking to you in San Francisco. And if you're not in San Francisco in February, to discuss our yearly 2018 results, as well as providing you with more insight into 2019. Have a great day.

And once again ladies and gentlemen, that does conclude today's conference. We appreciate your participation today.