Good day everyone and welcome to the Pebblebrook Hotel Trust First Quarter 2013 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Raymond Martz, Chief Financial Officer. You may begin.

Thank you, Deana. Good morning everyone. Welcome to our first quarter 2013 earnings call webcast. Joining me today is Jon Bortz, our Chairman and Chief Executive Officer. But before we start, let me remind everyone that many of our comments for today are considered forward-looking statements under Federal Securities Laws. These statements are subject to numerous risk and uncertainties as described in our 10-K for 2012 and our other SEC filings that could cause future results to differ materially from those expressed in or implied by our comments. Forward-looking statements that we made today are effective only as of today April 26, 2013 and we undertake no duty to update them later. You can find our SEC reports in our earnings release, which contained reconciliations of non-GAAP financial measures we use on our website at pebblebrookhotels.com. Okay so let’s get it started. Just like last year, 2013 is off to a great start for us and the Industry. Our first quarter performance was better than we expected in all operating metrics. Same-Property RevPAR growth for the total portfolio climbed 8.5%. This exceeded our outlook for RevPAR growth of 6% to 7.5%, primarily due to stronger overall demand than we are expecting. For our portfolio on a multi-basis, January RevPAR increased 12.8%, February was up 6.8% and March climbed 6.7% despite the negative holiday shift. On overall, RevPAR gains in the quarter was driven by a combination of occupancy and rate gains. Occupancy rose to healthy 5% to 79.2% and ADR grew 3.4% over the prior year to $202. As a reminder, RevPAR and hotel EBITDA results are same property beginning with our date of ownership and include all hotels we owned as of March 31 and the prior year comparison as whether we own them or not. We exclude hotels…

Thanks Ray. So, as Ray said, 2013 is off to another strong start for both the lodging industry and for Pebblebrook. When we look at the first quarter’s overall industry trends, performance continue to be driven by strengthened both business transient and leisure travel. Demand in the U.S. was a healthy 2.6% in the quarter and with a little supply growth, occupancy grew 1.8%. This provided a foundation for ADR to grow a very healthy 4.5%, resulting in the 12 straight quarterly increased in industry RevPAR of 5% or more. This quarter, the increase was 6.4% even with the negative impact of the Easter Passover holiday shift that’s stifled margins growth. So let me repeat that, since the second quarter of 2010 through seconds and annual scare after annual scare, quarterly RevPAR has grown at least 5% in every quarter for 12 straight quarters. More impressively, it increased at least 6.2% for every quarter since the second quarter of 2010 with the exception of the third quarter of last year, which suffered in September from the negative impact of a holiday shift. And while annual demand growth has moderated to a more sustainable 2% to 3%, average daily rate growth continues to gradually trend upwards as occupancies raised supply growth remains muted, compression days increased and customer mix continues to improve. In the first quarter while transient demand growth was strong, Group travel also continue to recover. So the recovery was temporarily interrupted by the negative effects of a holiday shift that pushed Group from March to April. We continue to believe the recovery in Group, we are much slower and more modest in transient; we’ll follow employment growth, as it has so far and should accelerate whenever the competition for people heats up. At Pebblebrook, we had another terrific…

Thank you. (Operator Instructions) And we’ll go first to Andrew Didora with Bank of America. Andrew Didora – Bank of America Merrill Lynch: Hi, good morning guys. Jon, just one question, I just wanted to gets your thoughts on the demand environment here, the recent Smith Travel data has had a lot of noise of lay just given some of the calendars as we’ve been seeing. And then the airlines have been telling asset business travel is slowing, but it doesn’t seem to be flowing to the hotel industry yet. Have you seen any change in any of our booking patterns or anything like that in terms of your business travelers and are you seeing anything major on the Group started, I know any of your – any Group cancellations in any of your big Group markets?

Andrew, no we’re really not seeing any change in the trends. I mean the scary thing about daily or weekly Smith Travel data is it often leads the business bounces around. We can have holiday shifts, we have big convention shifts from year-to-year like happened this quarter in markets like Philadelphia and San Diego, and even through a lesser extent in San Francisco. And so we’ve haven’t seen a change in trends at all in the last month. The first quarter was the great booking months for 2013 on both the Group and the Transient side. So the trend was very favorable. We’ve been seeing cancellations in government and government Groups, and government tentatives not going to definite, when the government Group were dealing with, whether it’s a DC or San Diego or Seattle or LA or any market that we are in. When they don’t get funding, and there is less funding for groups, then there was a year ago at this time. Government begin to put a lot of pressure last year on reducing travel spend in general. And so we are continuing to see that and it’s a fairly immaterial impact I think on the industry and for us and we went back and looked at what our government business was last year. And as a percentage of room revenues, government was 2.2% in the portfolio and probably even less of total revenues because governments spend tends to be less on a per occupied rooms than private business. So we think it’s probably around 2% of total revenues and any impact whether it’s 10%, 20%, 30% is fairly immaterial and seems to be being absorbed because of the strength of the markets we’re are in by other business. Andrew Didora – Bank of America Merrill Lynch: That’s helpful, Jon, just a follow-up one, can you remind us when you first started seeing some of those government cancellations coming through. I believe you talked a little bit about it maybe in the back half of last year, just curious if you can remind us, when you first started to seeing those come through. I guess for how long have you been seeing that kind of that trend there?

It’s been since of third quarter of last year and I would say there has probably been a little bit more of it in the last month, probably as a representation of the austerity measure passed by the government. Andrew Didora – Bank of America Merrill Lynch: Okay. Thank you very much.

Fair.

We’ll go next to Jeff Donnelly with Wells Fargo. Jeffrey J. Donnelly – Wells Fargo Securities: Good morning guys, just first question I apologize if I miss this in your early remarks, but what’s been your early experience with, is that relates to pricing, are you finding the properties getting traction at the price point and positioning you had originally hoped?

Yes, it is. We did a soft opening, so we’ve been working a little bit more on getting some trial on top of the demand that wants to be at the property because of the buzz, but we are, we feel good about where we’ve positioned it from a corporate rate perspective, which is at or above the Palomar, and from a public market pricing perspective, we ultimately are going to be pricing it above the Palomar. We should average rates above the Palomar, and I would guess that we should be getting there probably by the third quarter of this year, as we open the restaurant and the bar at the hotel, which are under construction right now by the third party lastly. Jeffrey J. Donnelly – Wells Fargo Securities: Okay.

Okay. Great response so far to the property and the reviews even without the restaurant opened has been really tremendously since we completed the property. Jeffrey J. Donnelly – Wells Fargo Securities: It has been a big change for sure, just actually two questions, I guess it relates to the Washington DC and the government travel issues. I guess have you accept of thinking that there is going to be some sort of a defined step back on government spending and then the City will eventually resume on more normalized growth pace at some point, perhaps next year. I guess, where do you think we are in that pullback stemming from austerity, do you think you are half way through it, you think you are largely through it, what is your sense?

It’s hard to predict something that’s based upon what people in Congress decide to do or not do. But based upon what we know right now Joe, I would say, we are certainly well more than halfway through it. It’s been going on now for probably 10 months and our guess is that it probably rolls through the early part of next year and then we’re adjusted down and we generally grow from there. But you know that’s – considering that, we’ve not lived through this specifically, that’s a gut outlook versus being able to look back at history with any particular guidance. Jeffrey J. Donnelly – Wells Fargo Securities: Other than gut question for you I guess – can you have a guess to may be how much of if you call potential decline in DC demand that we could see establish from direct government spending cuts to travel on events they host versus a indirect impact such as private companies hosting fewer trips to DC because of reductions and government outlays. Do you think that’s an evenly balanced proposition because obviously maybe one segment maybe savors different change scales than others? So I must have to think of this every dollar of government cut backs and spending might relate to another dollar in private spending or giving…

That’s really a tough one because it’s all mixed up here in DC when it comes to that. I mean it’s a fairly thin line between a private – for a lot of reasons I’m not making a political statement here but it’s fairly cloudy. I mean there is a lot of users in the market that do business with the government to get per diem rate but there are private companies, but they are working on a government contract. So what you call that? On our books, it shows up as government per diem in some cases and other cases it shows up as corporate rate. So it’s really hard to differentiate the two – the thing I would point out about DC is, there is no catastrophe here in DC from our view point. We’ve gone through these periods where government has pulled back whether it was the Reagan years, whether it was even the Clinton years, where the budget was balanced finally with rate increase and then spending cuts. In general, it’s an adjustment period and then it grows from there. And what often happens is, it’s just the dollars gets redirected from one department to another, from one priority to another. And so you’re looking at a market right now running at the highest level of occupancy ever on a trailing 12 month basis through March. So DC was never an explosive market, it was always a plotter, and it has less downside. And well, I think DC is probably likely to be below average for farmer this year now, even with the inauguration and probably a below average performer next year as a combination of some spending cuts and the additional supply coming into the market. I think it gets better after that and due to the adjustments. So I think it’s good to be concerned about Washington, but I wouldn’t overly worry about it. Jeffrey J. Donnelly – Wells Fargo Securities: And just one last question, I’ll see before on the DC. Do you think when the dust settles on this effectively by removing demand out of the market that’s arguably very low-rated demand? I know the loss of room demand isn’t necessarily good, but do you think when the dust settles, we’re going to end up with a market that like you said, if we’re more than halfway through this and the occupancy in the markets at a peak. You would think that average rate in the market is effectively going to raise as a result of their removal and if occupancy is high, the industry could have eventual very good pricing power nonetheless.

Well I think the thing I would comment about on rate is per diem is not low in Washington. And so I don’t have, I mean we can look up the average rate for the DC market and even the CBD market. But my guess is that per diem is at least as good as what the market is. So I don’t know that there’ll be any great lift from there being less government in the market. I think it will vary a little bit between the Downtown and the suburban markets probably more attractive rate in the suburban markets. It’s probably a little less attractive for most of the hotels Downtown. But I think on an overall basis, it’s probably a wash. Jeffrey J. Donnelly – Wells Fargo Securities: Okay thanks guys.

We’ll go next to James Milam with Sandler O’Neill. James Milam – Sandler O’Neill: Hey good morning guys.

Good morning. James Milam – Sandler O’Neill: Jon, you gave us some pretty good color a couple of quarters ago about your view on supply in the New York market, I was wondering if you could just maybe update us on your thoughts in terms of when and where you see supply being delivered and how you think that may affect the Manhattan Collection in particular?

Sure. I think our view on New York supply hasn’t changed, so probably the one development that’s occurred and we actually, I think talked about this last quarter and may be the quarter before. We think there’s about a 3.5% expected increase in gross supply in the market this year offset by four properties being taken out of service as hotels being converted to residential or timeshare. And then there is one or two hotels like the lows, which is actually closed right now for renovations and part of the palace, which is closed for renovation that will reopen later this year or early next year. So we think right now, this year again shapes up to be a pretty good year in New York. Demand continues to exceed the supply growth and that’s giving folks a little more confidence in the market to raise rates and we’re beginning to see that bill. I think as we run into 2014, there is more in the market because we’re looking at somewhere between 7% and 7.5% supply growth, not knowing of course, whether there might be some other conversions out of hotels into residential as residential values raise, and so we’ll see if anything happened in that regard. But we think that’s where the risk is in the market and it may all get absorbed and again the good news is as we said before the market starting at its highest occupancy levels ever, I think the markets running 86.7% on a trailing 12 month basis. So I think there is a little bit of demand for the last five months that’s going to go away that relates to FEMA and the other city displaced owner or renter occupancy programs. So we’ll see little a bit, I think they’re talking about that being about 2,000 rooms, which is little bit more than 2%, maybe 2.2% of demand growth that we’ve seen in the last four months or so. That will go away, but we’re seeing great international demand growth particularly from Asia, Australia, China and that’s more than offsetting the weakness, we’re seeing from Europe. James Milam – Sandler O’Neill: Okay. And then I guess is there anything in terms of the mix of the business traveler given maybe a little bit of shift in the economy, the business economy of New York from financials towards (inaudible) things like that?

Yes, for sure. I mean there is certainly a much more activity in those industries you mentioned, dominated in the Midtown, last Midtown sell markets and Downtown as well. I would say they tend to be a little less users of demand generators for hotels as compared to the big financial institutions, which tend to have more meetings and more trends in travel, but the big positive in New York that we continue to see and expected to continue for many, many years is, it’s the biggest recipient of the global growth in travel that’s going on as the developing world fills middle and upper classes and those people want to travel. And when they come to the United States, the most primary destination is New York, and within New York, it’s Times Square, so if you want to learn in a language in the world just go hang out in Times Square pretty much hear anyone you want. James Milam – Sandler O’Neill: Perfect. Thank you, guys.

Sure.

We will go next to Ian Weissman with ISI Group. Ian Weissman – ISI Group: Yes, good morning. Jon just quickly outside of New York, Miami and even DC, what other markets do you see face the risk of future supply?

I’m not sure I quit Miami necessarily into the same category. And I think DC is pretty much concentrated right now into 2014, with the big conventional hotel opening but it has been the predominant amount of supply coming into the market. But I think the markets that have the biggest exposure to supply and therefore the way we would describe them is having greater risk from a performance perspective would include Chicago, which has over 2,000 rooms under construction today, which represents about 6% to 7% of the market. Austin, which has 2,000 rooms under construction and is a much smaller market than Chicago, although much faster growing from a demand perspective, but that’s a lot of rooms in Austin. Nashville has a lot of rooms, I think 2,000 rooms there as well. Those are really the big, the markets with the big exposure. At this point in time, the West Coast is generally almost zero in most of those markets. And while it will come and we’re beginning to hear of announcements, there is very, very little that actually started yet in the major West Coast markets. Ian Weissman – ISI Group: Do you think just given the analyst supply of QE money, banks and lenders opening their pocket books a little bit easier in just ground up development at this point?

It’s interesting and I think there’s obviously some more that’s coming from the banks. It continues to be – I’d say expensive, it’s expensive from an equity perspective. They are still requiring a lot of equity and so you need a very, very well financed development in order to get even 50%, 60% construction financing. So you need a lot of equity, which is restraining the market and should continue to restrain the markets for sometime. It’s being augmented by alternative lenders, so there actually is a much more rational approach to construction lending right now. I come from the development business all the way back to the early 80s and I never really understood why construction financing was priced so well given the risk involved and the extra cost involved on the part of the lender in terms of administration. And today it’s actually much more expensive than it used to be and a lot of what you are seeing particularly any of the large projects, a lot of them are being financed by alternative capital whether it’s the opportunity funds, the [maze] lenders, the Starwood Capital’s of the world, the Ackman-Ziffs. It’s a different market that’s providing the capital and it’s much more expensive. And so, there is stuff that can happen although it have to have great sponsorship need to be in one of the major markets I think. And so I think we are going to continue to see supply growth and new construction build gradually just like what we’ve been seeing. I think that goes on for another year at least and then we look around again and see if economic activity and if this pick its development any more. But clearly that will happen as we get closer and closer to replacement costs. And you can justify to a lender, the underlying value of what you are building. Ian Weissman – ISI Group: Okay and just final question. In the gateway cities in your markets you consistently hear that many of the markets are back to peak occupancy, I would say that the consensus that rate growth has been a bit disappointing to this point, and lot people point to the job picture in unemployment rate. Have you been surprised by the inability to push rate as aggressively as you would hoped at this point in the cycle and when do you think that inflection point occurs?

I think our view has been that there is a lack of confidence in a lot of the markets to push pricing. I think if you look historically, and by the way that lack of confidence is not really surprise and giving the media reporting and the headwinds that we see on these sort of events that seem to be more globally interconnected today whether it’s in Europe or Cyprus or other events that are going on in the world that seem to worry people in the U.S. I think after what happened in 2008 and 2009 everybody sees their shadow pretty quickly when they hear something bad and worried about, but significant decline economically and obviously that’s flowing into the lodging business. So I think there’s been a lack, a general lack of confidence, again we stated this for more so on the East Coast and then there is on the West Coast. I think we see much stronger pricing power in the West Coast in general. I think it comes from slightly stronger economies, but a better attitude overall. And so I do think that the underlying occupancy, the strength in the markets particularly the gateway cities, because of what you said is being passed prior peaks and some unprecedented levels. There’s a lot of potential for upside growth when we begin to gain more confidence. And that can be shown in some other markets out west, like in San Francisco, where interesting last year there wasn’t any demand growth in the market, but we had double-digit ADR growth in the market, so no lack of confidence in raising rates and in them sticking in the market. Ian Weissman – ISI Group: Okay. Thank you very much, helpful.

Sure.

We’ll go next to Bill Crow with Raymond James. William A. Crow – Raymond James: Good morning guys.

Good morning. William A. Crow – Raymond James: Two questions, Jon. Following up on the cyclical kind of analysis, where are we from a Group perspective compared to prior cycles, it feels like we’re may be a year behind scheduled from that perspective?

We’re probably well more than that behind on Group, I mean the Group demand is still off, I think 13%, I’m sorry 11.5% from the peak in ‘06. Now interestingly, obviously that peak before the downturn in the economy, so that would suggest that there are some other things that work, in terms of maybe low, particularly low, things like training, there might be being done on the Internet, as that’s become a lot easier to do. But I think that we’re still ways of in the recovery in some big pieces of demand like the cultural meetings that companies have the incentive trips, some might call them boondoggles, be in business column alternatives to cash compensation. And I think that will come at some point as the employment market strengthen and then there is more competition for people and companies need to be more proactive in growing loyalty and trying to keep people happy. But I can’t tell you when that’s going to be, it’s likely to be a gradual process like it’s been, and so I think we’ve got several years to go build it seems like in the recovery of Group demand. William A. Crow – Raymond James: Okay, that’s helpful; Jon on the Affinia, the Manhattan collection, any success moving gas down the Street to the Benjamin with rooms out of service of the 50?

Yeah, I mean we’ve definitely – that’s definitely happened to some extent, the Benjamin is doing very well, parts of that’s been from moving gas from Affinia 50 of them choosing to go down or part of that is due to closure of the lows and the powers to tower there and as being able to take some corporate business that was at those properties into the Benjamin. The other benefits that we had at Affinia 50 we’ve had very strong rate growth beyond the market, because we basically have to house available, we got 100 room hotel lot of the business we’ve been able to avoid has been lower rated discounted promoted business, which we haven’t had to take it. So it’s actually done a little bit better than what we’ve thought so far, but we haven’t gotten into the very visible disruptive phase. William A. Crow – Raymond James: And Jon, with the completion of the Affinia 50, do you think about Affinia as a brand whether if or not think of it as a brand. Is the quality now such that – guess that might go to one month might one the other will not be disappointed or surprised?

I think so, I mean the properties have either been recently renovated or they’ve been gradually renovated over the last few years, so all of the properties are in pretty good shape. And I’d say this, the size of the rooms even following a reconfiguration, we still have probably some of the largest rooms in the market at Affinia 50 on average and for anyone who has gone through the model room or will go through the model room, you will see how large the room is after being reconfigured. So I think there is a lot of consistency between the five Affinia’s that are in New York, and even interestingly, I believe with the completion of the full renovation of Affinia 50 from a physical product perspective, it is nice or nicer than The Benjamin. William A. Crow – Raymond James: Right. Jon, one final question from me, when you started putting together the budget and the outlook for this year and thinking about the industry, thinking about Pebblebrook, where did you see the highest risk? Was it early in the year because of calendar issues? It seems like and you touched on some of these items that shift in the fourth of July, the September in New York last year, you got some easy comps coming up. Is it fair to think that the risk to the outlook was really front-end loaded and if we kind of get through the second quarter, should we smoother sailing or is that the wrong way to think about it?

I think from micro perspective that’s true, Bill. The specific supply demand fundamentals and the holiday shifts and such I mean it’s interesting because I think as the year goes on, we continue to build occupancies in all the markets. We move into the higher compression period and yeah, I think from a micro perspective there is less risk. I think from a macro perspective, you can make an argument that there is more risk just because of the fiscal drag aspect. And people saying that may be the first quarter is the strongest quarter of the year from a economic growth perspective, I don’t really know. But I think there are little bit offsetting and so may be the macro-risk continues to be a little bit more second half of the year focused, but the micro-risk probably was more in the first half of the year. William A. Crow – Raymond James: Great, thanks guys.

We will go next to Jim Sullivan with Cowen Group. James W. Sullivan – Cowen and Company: Thank you. Jon, in your prepared comments, you touched a little bit on the outlook for San Francisco for the balance of the year and I just wonder if you could spend a few minutes talking about your expectations over the balance of the year for both San Diego and the Pacific Northwest?

Sure. I mean they are two very different markets. The Pacific Northwest is very strong. Seattle is running a couple of 100 basis points higher on trailing 12 occupancy than its historical peak. You have very strong corporate growth in that market. You have some of that in Portland. It’s like a little brother or little sister. And so you have some strong corporate growth maybe not has deep in Portland. And so we see both of those markets has very good for the balance of the year. I think San Diego is a bumpy year. It’s convincing calendar the bumps around, but it’s generally a little bit weaker than last year, a little bit weaker in rooms and a little bit weaker in the rated types of conventions it is. So we saw some of that in the first quarter when the city had a great January and not so great March. And we’re going to see that in the second, third and fourth quarters. There are some really good months and there are some pretty bad months in San Diego, because of the convincing calendar. But I think if San Diego continues to grow from a demand perspective because of the weather and the desirability in the market. And as we began to look out in the future years, the convention calendar, which doesn’t move a lot between years, it’s a little better, little worse each year. It definitely gets a lot better in 2015 and 2016 and I think part of that is anticipation of the expansion of the convention center though that’s probably not likely to happen and so at least 2016 at this point. James W. Sullivan – Cowen and Company: And Jon just continuing on the West Coast, your portfolio has a significant rating in the West Coast already, and you touched earlier on your outlook for supply generally being a lower level coming in the West Coast. As you think about acquisition opportunities for the balance of this year. How do you think about either pretty more capital work in the West Coast number one and number two, I think your risk adjuster factor that lower risk of new supply into the cap rates you are willing to pay in the market?

Well, I think we look at each market individually and things – when we’re forecasting the next five years, we’re looking at supply and demand in the market and it will factor itself into what we think the growth rates are going to be. So that’s certainly part of it and that effectively in a way gets factored into the risk side of it. So we do look at the risk and take that into account, perhaps gets a little more built into what the growth expectations are in the market, assuming or being honest with the future which there is no reason for us not to be in our own underwriting. So yeah, I mean that’s pretty much how we taken into account and it would vary by market depending upon what we see as the supply/demand specifics of that market. James W. Sullivan – Cowen and Company: And in terms of your waiting in the West Coast generally, are you – would you be happy to increase it if the valuation is right?

Fair question. Yeah, we are not uncomfortable with the weighting on the West Coast becoming larger. We think the trends that we see today supply coming later and it being lower are the same trends we’ve seen for the last 25 years. It’s harder to build out there, it takes longer, it’s more expensive in many cases. And so, yes, as a company we are very comfortable with the waiting on the West Coast being higher than the waiting on the East Coast and that waiting growing from where it is right now. James W. Sullivan – Cowen and Company: Okay and two other quick questions in for the Boston W Hotel. Can you give us kind of an update on what’s happening at the lower level there, at the club level as well as the potential for signage revenue with the asset?

I didn’t follow, what do you mean by at the club level? James W. Sullivan – Cowen and Company: Well the night club, I believe is closed.

Yeah, yeah, we closed the night club at the end of last year. It’s leased to a local third party with experience, very successful experience in the night club business and I think it’s due to open, reopen. I think next month and they’re just finishing out some modifications to the space and getting their permits and approvals. So we’ve turned something that was losing a significant amount of money into something that’s going to pay us significant amount of money through the lease. As it relates to the signage, I think you’re mentioning, we have a garden, a local approval as part of the being in the Theatre District to add a digital sign on the exterior of the building, large digital sign on the exterior of the building. And I think there is some final state approvals required, we expect to get those and we look to have, we have a lease in place with a billboard operator and we would expect that we begin receiving rent towards the end of the year. And that rent is ramps up over time but it certainly becomes fairly substantial in a couple of years in the $200,000 to $300,000 year range. James W. Sullivan – Cowen and Company: Okay then finally for me. In the first quarter, Miami was an exceptional market and you have asserted well, how much of that first quarter number do you attribute to the international in demand and where do you see that going over the balance of the year?

Yeah I think a good number, Jim, we’ve seen a strength in Brazil coming back, in travel due to the strength of the economy improving and the exchange rate with the Real, I think Miami has also got, it’s got a buzz to it as sort of a hot destination, March had some great festivals and events including the Ultra Music Festival which stretch from historically one week end to two week ends in March this year and really help drive occupancy and rate in the marketplace. So Miami is a well passed to the prior peak from an occupancy perspective and we think it’s going to continue to improve dramatically from a demand perspective, so long as South America and the South American economies continue to be healthy. James W. Sullivan – Cowen and Company: Okay. Thank you.

And we’ll go next to Wes Golladay with RBC Capital Markets. Wes Golladay – RBC Capital Markets: Hey good morning guys. Looking at the wider group on the books versus transient business, is some of this result of electing to allocate more of the rooms to [Hurricane] Transient customers?

Yeah there is definitely some of that, I mean particularly in San Francisco, there is a few of our properties like the, where that has been a specific strategy, we’re also finding in that market as an example that some of the Group is still price sensitive and our rates have just outgrown their ability to afford us. So, even with that, at the Argonaut as an example, we’re going to run at much higher occupancies than last year as we continue to try to drive rate. But we look like right now, we’re going to run into the low 90s for the year. And we’re trying desperately to raise our rates to lower that. But we’re not having, I guess we’re not desperate enough. Wes Golladay – RBC Capital Markets: Okay. Now looking at the furloughs of the air traffic controllers, will this have any impact on the business in your mind?

I don’t know, I mean I don’t how much longer it’s going to last. The Senate passed the bill last night. The House is expected to take it up and pass it today. Those guys don’t like to be inconvenience when they travel. Wes Golladay – RBC Capital Markets: Okay.

And they certainly had a lot of pressure on them just in five days. And so it seems like that’s going to go away anyway. But even if it didn’t, we’ve gone through periods historically in this industry, where they’ve changed the security measures and its caused significant delays and it hasn’t really impacted travel demand and I wouldn’t expect it to be material even if the folks in DC didn’t give the FAA more flexibility. Wes Golladay – RBC Capital Markets: Yeah, it’s good point; I forgot being inconvenience as well. Now looking at the acquisition pipeline, I mean most of (inaudible) cost of debt, cost of preferred is pretty attractive. Do you see the deal pipeline improving right now?

I think the acquisition market, the transaction market. I think they will continue to be as active as last year, particularly in the second half. And so lot of times the years are a little slow getting going, because properties don’t come to market until the first quarter and they take time to go through the process. And then I think in sort of more cases this year than may be last year, more than we’ll involve assumption of debt. And that process can take 90 days or 120 days and much of that is added to the overall process. So it seems like deals are taking a little longer on average than they have historically. I mean the deal we did in San Diego West, we started that deal in September and didn’t close till the end of January because of the loan assumption. Wes Golladay – RBC Capital Markets: Okay.

I would expect, I mean there is a decent number of assets on the market. We know there is a decent number of deals getting done, you’re beginning to see some of those with announcements in the market. And I think that will accelerate over the course of the quarter and the rest of the year, just like it did last year. Wes Golladay – RBC Capital Markets: Okay. And has pricing moved materially from say where you were buying W Los Angeles last year?

Well I think the pricing continues to move up from a nominal basis, because the underlying cash flows continue to move up. I don’t think we’ve had a drop in cap rates and I don’t think we’ve seen really an increase in cap rates if you will in first year yields. Although that obviously is not the basis for valuations in our industry, but there often is the mathematical result of underwriting. So I think what’s happened is in general, you’ve had a slight increase in prices and values, because of underlying cash flows. You have I think most underwriting showing lower [cagers] than they were a year-ago and you’ve probably seen another 100 basis point decline in un-levered IRRs. Wes Golladay – RBC Capital Markets: Okay thanks.

In the past year. Wes Golladay – RBC Capital Markets: Okay. Thanks for the color guys.

Sure.

And we’ll go next to Lukas Hartwich with Green Street Advisors. Lukas Hartwich – Green Street Advisors: Thank you, guys. Just a quick one, what are the plans of the Delfina, when that franchise contract close in November?

Yeah, good question. We are in the process of valuating alternatives there. There really are three, we can keep it as a share and renew the franchise arrangements with Starwood, we can rebrand it as a big brand and our desire would be to upper end it because of the quality of the property and the strength of the market. And so that’s a second alternative and the third is to de-flag it and make it independent and run it as an independent hotel, all of which would be done with the existing operator which is the Viceroy Group. So no final decision has been made, the arrangement is up in November, the current franchise agreement and we’ll let you know as soon as we make a final decision. Lukas Hartwich – Green Street Advisors: Great, thank you.

Sure.

And there are no further questions in the queue at this time.

All right; thank you all for taking the time to participate today and we look forward to another terrific quarter in Q2 and to updating you following that quarter. Thanks.

Again it does conclude today’s presentation. We thank you for your participation.