Good day and welcome to the Pebblebrook Hotel Trust’s Third Quarter Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Raymond Martz, Chief Financial Officer. Please go ahead, sir.

Thank you, David. Good morning, everyone. Welcome to our third quarter 2014 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 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 2013, and our other SEC filings, and could cause future results to differ materially from those expressed in, or implied by our comments. The forward-looking statements that we make today are effective only as of today, October 24, 2014 and we undertake no duty to update them later. You can find our SEC reports and our earnings release, which contain the reconciliations of the non-GAAP financial measures we use on our website at pebblebrookhotels.com. Okay, so we have another terrific quarter to talk to you about. Our third quarter performance was much better than we expected on all operating metrics. Same property RevPAR for the total portfolio climbed 11.4% to $225. This exceeded our outlook for RevPAR growth of 7% to 8% due to strong demand across all of our market segments, including group and transient, business and leisure and all across the country throughout the portfolio. Our RevPAR growth was driven by both our West Coast properties, which rose 11.2% as well as our East Coast properties which increased 11%. In addition to the healthy gains in group and transient demand, we continue to see steady growth from inbound international travel, which benefits many of our hotels as a result of our significant concentrations of high quality hotels in major urban gateway locations. Our overall same property RevPAR gains in the quarter came primarily from growth in rate, which increased 8.5%, while occupancy climbed 2.6%…

Thanks, Ray. As Ray said, Q3 was another very strong quarter for both the lodging industry and for Pebblebrook. In fact, performance in the third quarter, when looking at just about all fundamental variables, improved again from the first and second quarters. Industry demand growth, which had increased to 3.8% in the first quarter and 4.5% in the second, accelerated to a very strong 4.8% in the third with demand growth year-to-date at 4.3%. With supply growth again subdued in Q3 at just 0.9%, occupancy rose 3.8% in Q3 and ADR growth picked up significantly more stream in Q3 with year-over-year growth of 5.2%, versus 4.4% in Q2 and 3.8% in Q1. As a result, industry RevPAR grew an exceptionally strong 9.2% in Q3, the strongest quarterly growth since before the last downturn. This acceleration in demand is a result of numerous positive factors coming together at the same time. Domestic leisure and business transient travel remain strong. We finally began to see a very healthy recovery in demand from group customers. Overseas inbound travel not only remained strong, but it’s gotten even stronger this year with growth in the first half of the year of 8%, roughly twice the growth estimates going into the year. Demand socioeconomically has also expanded to the middle class as the economic recovery advances and broadens out. And finally, it seems a greater percentage of increasing discretionary income is being spent for travel and collect experiences. We believe all of these positive trends should continue over the coming years, though we wouldn’t expect demand growth to remain at the current level. So strong third quarter industry performance was broader and more inclusive than any other quarter to date and clearly stronger than we were forecasting. At Pebblebrook, like the industry, we had another great…

Thank you. The question-and-answer is conducted electronically. (Operator instructions) And we’ll go first to Rich Hightower with ISI Group. Richard Hightower – ISI Group: Hey, good morning guys. Excellent quarter of course, which means that people will start to worry about tough comps for next year I think. And I know that we’ve talked about this previously. But there seems to be an impression that I think citywide calendars and several key markets are a little bit softer next year. And I’m just wondering if you could give a little more color on your take specifically on a few of the key market there and how that impacts Pebblebrook’s portfolio specifically.

Sure, Rich. I’m happy to do that. So let’s start on the West Coast where I think the calendars for next year are a little better comparatively than those on the East Coast. I think San Diego is basically flat next year, though, the ups and downs are different by quarter compared to this year. We do think the overall quality of the conventions is a little better meaning we think rates growth is a little better on the convention calendar, but otherwise pretty static with this year. L.A.’s kind of a non-event since it’s not really an impact, and I’d say, we see from one to two citywides a year that actually worked their way out to West L.A. and that isn’t any different next year. In San Francisco, total room nights on the convention calendar are down slightly to this year. But the large citywides are actually up next year. And given the overall strength of San Francisco and in fact the convention calendar this year that we’re comparing it to, we don’t really see any impact on next year other than again, we have these month-to-month and occasionally quarter-to-quarter shift particularly of some of the big ones like Dreamforce or Oracle as they move back and forth across the third and fourth quarters. Portland and Seattle are actually up next year. It’s a little more of an impact in Portland because it’s a good size convention center, in fact, bigger than Seattle. And it’s a little bigger impact on the market. But they’re both up next year. So the West Coast looks as good or better than this year from a convention calendar perspective. On the East Coast, Boston next year is as strong as this year which is a super year. And where we see a little bit of weakness continues to be in Philly and D.C. which are both down slightly, though, again, because they’re running at lower levels, a bit less of an impact on the overall market. Atlanta downtown is down a little bit. But like L.A., doesn’t have much of an impact on Buckhead. Not many of those conventions actually push out that way. Miami is down a little bit next year. Again, not the big factor in the market in terms of percentage of demand. And then I can’t speak to Chicago because we don’t own anything there. I honestly don’t know whether it’s up or down. But that kind of covers the major markets from our perspective. Richard Hightower – ISI Group: Okay, that’ really helpful, Jon. Thanks. And then for me, just a couple of quick modeling questions. And this is question for Ray, I suppose. On the $200 million option to draw down on the term loan, should we assume that that’s only drawn if and when the Boston acquisition closes?

Yes, I think it’s safe to say we have an option, so if we have needs to draw on the line the term loan now is due despite their lower rate and we should anticipate as we use the term loan, we’ll use those opportunities to swap rates on a fixed rate basis. So when you’re modeling whenever you’re assuming if there are acquisitions, assume it’s going to be any debt that’s required through the line of the term loan. Richard Hightower – ISI Group: Okay. That’s helpful. And then finally, just on the mechanics going forward of the long-term performance share payments that hit this quarter. I know you said you’re about 225 basis points off of LaSalle’s margins. Can you just talk about how that’s going to work going forward and maybe what we should think as far as the run rate and when maybe those one timers are going to hit in the future if that’s even possible?

It’s a hard thing to forecast because we know our side of what our margins are forecasted improved to a relative range. And we don’t know LaSalle. So if we ultimately have to wait and ultimately determine in the end of each year and we update our estimates as forecast is changing. Currently, the increased accrual just because our margins, at least we know, our portfolio is improving for the year versus what we thought 90 days ago which is why accrual went up. As we look into 2015 and beyond, we’ll evaluate that. We’ll do our best to estimate it. But again, we only have half the equations so it’s hard to understand where LaSalle will be or not be. We’ll try to do the best of communicating that out to best that we can for our forecasting. Richard Hightower – ISI Group: Okay. That’s all for me. Thanks, guys.

Thank you.

Thank you. We’ll take our next question from Jeff Donnelly with Wells Fargo. Jeffrey Donnelly – Wells Fargo & Company: Hi, good morning guys. Actually, just building on the modeling question quickly. Jon, you mentioned the 2015 renovation benefits and disruptions. Just to clarify, the majority that would have fallen to Q2 of 2015, is that of a similar scale to the amount of disruption you’re thinking about for Q4 or 2014?

Yes. Yes, right now, we think it’s very similar to this year except just flip-flopping Q1 and Q4. Jeffrey Donnelly – Wells Fargo & Company: Got you. And considering the purchases in the Boston region, are you able to give us maybe just a sense of scale with the adjacent commercial property in land represents maybe as a percentage of the total perspective investment? And secondarily, I think you referenced that there was a land component. Is that land something that’s instrumental to the execution of that investment or that’s just sort of ancillary to the property?

So Jeff, unfortunately we’re bound by a confidentially agreement with the seller. And we only filed with the SEC due to the SEC requirements related to percentage of income of the property related to the portfolio for the prior year. And so outside of that, I can’t really give you any information about it. And I would caution everyone to continue to understand that it’s only a potential acquisition. As stated in the K, it’s a contract signed, but it doesn’t mean it will an acquisition made. Jeffrey Donnelly – Wells Fargo & Company: Okay. And maybe just a last question or tow then is that, is you look across your target market and you’re finding yourself consistently uncompetitive for acquisition? I guess to the flip side, are there markets where you think there’s going to be some opportunity for being a contrarian that maybe pricing is moved to a point let’s say Washington D.C. where it’s proving it more attractive to enter?

Yes. I don’t think we’ve really seen that opportunity come about yet. I think the pricing we’ve seen in markets like D.C. from our view point of underwriting, they don’t seem to work at the current values because we don’t think they’ve adjusted for the lower growth that we think will occur over the next several years in D.C. Now again, that’s just view point of the market. It may turn out to be very different than that. But no, we really haven’t seen a lot of the contrarian opportunities yet, meaning we really haven’t seen the markets adjust for these weaker markets. And New York is a good example with a really flood of foreign capital and private equity capital coming in to New York as a global investment market. We’ve actually seen going in yields continued to come down and actually just as we’ve seen in some of the West Coast markets like San Francisco. Jeffrey Donnelly – Wells Fargo & Company: Okay. And do you have any change in your view on New York City maybe being able to absorb the supply that you’ve been talking about coming into the market? Thus far, it seems you’ve done a pretty good job handling it. [Indiscernible].

Yes. So we never had a view on the absorption in the market. What we’ve always said is there’s a lot more supply coming into the market than in other markets. And that creates more risk from an ownership and investment perspective because we don’t know whether it will all get absorbed or not. But in either case, and as we’ve seen, it has been absorbed. But it does continue to keep pressure on the market in terms of ability to raise average rates in the marketplace. And so New York continues to underperform on a RevPAR basis albeit at low to mid-single digit RevPARs but of course that’s well below the 8% or so that the industry is running and obviously well below all the West Coast markets. So we don’t have an opinion about whether it’s all going to get absorbed or not. It’s obviously very encouraging that it is getting absorbed and it’s keeping the markets from being worse. We think it is likely to continue to be absorbed and we think supply next year will be at a lower rate slightly than it is this year. It looks like we’ll be in the upper fives this year which is a little bit lower than the mid-6, midpoint of our range for this year. Next year, it looks like it’s going to be somewhere between 4% and 5%. Again, all of these numbers are as calculated by Smith Travel and how those numbers will come out when they report their statistics. So we think if the demand growth continues, Jeff. There is potential opportunity. Certainly, better likelihood than there was six months ago to look at New York and say, it should do a little better next year perhaps than it’s doing this year, not just in absorbing the supply but perhaps being able to remix and get a little bit more pricing power and a few more compression nights to drive potentially a solid mid-single digit RevPAR growth in the market. Jeffrey Donnelly – Wells Fargo & Company: And one last question I’ll yield the floor is that, a couple of folks who own hotels in New York have contemplated selling off ground leases under their hotels like let’s say sort of a financing transaction ultimately as a way to maybe monetize the land without potentially impacting the way the public market views the value of the hotel. What’s your thought on that approach or strategy? Is that something you guys do contemplate for your New York investments?

Yes. I mean it’s just totally a financing structure and not something we have an interest in. Jeffrey Donnelly – Wells Fargo & Company: Okay. Thanks guys.

Our next question comes from Jim Sullivan with Cowen Group. James Sullivan – Cowen Group: Thank you. Jon, a couple questions on margin and penetration. In the presentation that you guys have been using for a while, you provide the RevPAR penetration prior peak, what you’ve achieved through the middle of the year and then kind of I guess the potential target to get back and then you put a dollar value on that. Can you give us an update? I don’t know if you have that data through the end of the third quarter in terms of where you think you’ve come back to monitor the RevPAR penetration?

Yes. So year-to-date through Q3, let’s see here, we are up about 200 basis points in RevPAR. James Sullivan – Cowen Group: You’re up 200 basis point, you mean for the year? Okay.

Yes, year-to-date. Yes, through the third quarter, we’re up about 200 basis points. And we were up about 170 basis points in the third quarter. James Sullivan – Cowen Group: And then in terms of the asset management initiatives that they have been pursuing for a while, again, going back to that presentation, of the biggest individual item there was changes in terms of how you manage the SNB business at the assets. And you’ve made some changes of course already that you’ve talked about in prior calls. I’m wondering if you can give us an update if you look forward for the next 12 months about any initiatives that are underway of you expect further gains in terms of returns from SNB revisions.

Sure. We have actually quite a number of projects underway at various points of the process. And at the WLA, we’ve leased – we signed a lease in September with the one group which owns STK, the steak restaurant and other restaurants and bars. I think they also operate all the food and beverage at Gansevoort and New York, the midtown one. And they will be taking over – in fact, they’ve already taken over the existing operations, October 1st at the WLA, the restaurants and the bars. And they will be building out a new restaurant in a reconfigured lobby and bar area inside and then they’ll be doing a new bar and restaurant outside by the pool. And those should both be open and full ramping sometime no later than in the second quarter. We think that will not just add, again, not just add to margins, but will add to overall profitability for that operation by shifting that business to a party who is an expert and provide new energy overall to the property. We’re at various stages of doing similar outsourcing, if you will, of internally managed restaurants at several of our other properties in the portfolio particularly on the West Coast. As you know in Boston, we closed the money losing Jean-Georges Restaurant market. And we moved our food and beverage operations into a lounge and serving all three meals there. And we are working with the local union to see if we can come with an arrangement that would allow us to lease to a third party who could actually lease the space and make money under new arrangements. And so that is – those discussions are underway and I don’t know whether we’ll have success there or not. But in either case, we’ve…

No. No, that’s reflective of the correct count based upon the issuances already done. James Sullivan – Cowen Group: Already done in Q3?

Correct. James Sullivan – Cowen Group: Great. Okay. Thank you.

The next question comes from Wes Golladay with RBC Capital Markets. Wes Golladay – RBC Capital Markets: Good morning guys. If we estimate a similar renovation disruption next year, does this include the price cut in the second half?

Now the price cut is not likely to start until the end of next year. And it’s likely to be closed for renovation. So it will impact our overall profitability slightly probably in the fourth quarter. We don’t have a firm schedule yet, Wes, because we don’t even have the full scope yet. We’re just early in the process. But it would be in the fourth quarter impact. And it’s likely to be very limited. Wes Golladay – RBC Capital Markets: Okay. And then as you look to next year, which markets do you want to aggressively hold back the pace and switch the mix?

Well, we don’t really approach it that way. We look at each property individually. We have some hotels where we’re increasing group because it’s a better mix for the hotel. And an example to that would be the intercom in Buckhead would include the Westin Gaslamp in San Diego would include not only the Affinia Manhattan but some of the other Manhattan collection properties. It would include the Sir Francis Drake where by adding better priced group with food and beverage, it’s actually more attractive than the lower end of the transient that were otherwise taking at those properties. So it really varies by property. There are some properties where we’re seeking to do less prime day of the week group. So prime month, prime Tuesdays and Wednesdays. Our first objective in many cases would be to move that group business if we can to shoulder nights with Sunday check-ins versus Monday or Tuesday check-ins with Thursday shoulders or potentially even Friday shoulders. So it’s not an approach to hold back and wait till the last minute. Although, I would tell you, there are times during the year at various properties where it’s not just group. It’s really all business where we might believe that if we hold back inventory in what we perceive to be a high compression week that we’d rather be a last to fill than an early to fill. So it really varies totally throughout the portfolio. Wes Golladay – RBC Capital Markets: Okay. Thanks a lot and good quarter.

Thank you.

(Operator instructions) We’ll take our next question from Lukas Hartwich with Green Street Advisors. Lukas Hartwich – Green Street Advisors: Great. Thank you. Good morning guys.

Hey, Luke. Lukas Hartwich – Green Street Advisors: Jon, can you talk a bit about the acquisition pipeline? Do you still expect 2014 to be the last year of acquisitions.

Yes, good question Lukas. I think what we’ve been saying is because we’ve seen supply gets stretched out a least a year, the micro cycle, i.e, the supply and demand for customers and supply of rooms, looks to be more favorable for a longer period of time. And the macro cycle also seems to be stretched out, although we claim far less expertise in forecasting economic cycles versus the micro cycle. So this point in time, I’d say we’re going to – we’ll continue to look and potentially be active into at least the first half of next year. But we are highly sensitive to changes in the starts in various markets in terms of new supply and when that supply might ultimately come in to those markets. So as the cycle is going on, we’ve tended to be less competitive in markets. We get more and more conservative about in terms of the ongoing outlook. And so while we may be continuing to look and acquire in general, our markets get narrower – our focus gets narrower and narrower. And we get pickier and pickier. Lukas Hartwich – Green Street Advisors: All right. That’s helpful. Another question, the Denihan JV loan. The coupon on that is almost 10%. I’m just curious whether you expect that loan to be prepaid given that there’s no prepayment penalty.

There have been no discussion about that, Lukas. Lukas Hartwich – Green Street Advisors: Okay. And then lastly, did you guys talk about your 15Ks at all?

We did not. I’m happy to do that. Lukas Hartwich – Green Street Advisors: That would be nice.

Sure. So overall, pays from a revenue perspective is up 7.2% at the end of the third quarter. That’s 3.1% in room nights and 4% in ADR. Those numbers are combined group and transient. On a group basis, room nights are up 0.6%, ADR is up 3.2% and revenue is up 3.8%. One observation – a couple of observations about the numbers. One is keep in mind that growth and rate for both transient and group tends to be more short-term meaning the business you put on further out and for us, further out is not that long, but it seems long when we have corporations booking 30 days in advance. But the rate growth is much more aggressive and higher for the shorter-term booking than it is for the further out booking. The second thing is as it relates to overall pays, we’re really in a position running the portfolio at 85% this year, give or take. That focus continues to be on growing rate and much less so in terms of overall room nights for the portfolio. So when we are ahead on room nights, it’s giving you an indication that we have pricing power by getting that base on the books ahead of time. And there should be an acceleration in the ADR growth from what’s on the books to where we ultimately end up. Lukas Hartwich – Green Street Advisors: Great. That’s it for me. Thank you.

(Operation instructions) I guess we have no further questions in the queue at this time. I’d like to turn the conference back over to our speakers for any additional or concluding remarks.

Thanks, David, and thank you all for participating in the call and your support and your confidence in us. And we look forward to reporting to you early next year with our final 2014 results and our outlook for 2015. Thank you.

Thank you. That does conclude today’s conference. We thank you for your participation.