Good day and welcome to the Hospitality Properties Trust second quarter 2010 earnings results conference call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to the Vice President of Investor Relations, Mr. Tim Bonang. Please go ahead.

Thank you and good afternoon. Joining me on today's call are John Murray, President and Mark Kleifges, CFO. John and Mark will make a short presentation, which will be followed by a question-and-answer session. I would also note that the recording and retransmission of today's conference call is strictly prohibited without prior written consent of HPT. Before we begin today's call, I would like to read our Safe Harbor statement. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and federal securities laws. These forward-looking statements are based on HPT's present beliefs and expectations as of today, August 9th, 2010. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call, other than through filings with the Securities and Exchange Commission or SEC. In addition, this call may contain non-GAAP numbers including Funds from operations or FFO. A reconciliation of FFO to net income, as well as components to calculate AFFO, CAD, FAD are available in our supplemental package found in the investor relations section of the company's website. Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our Forms 10-Q and 10-K, filed with the SEC and in our supplemental operating and financial data package found on our website at www.hptreit.com. Investors are cautioned not to place undue reliance upon any forward-looking statements. And now I would like to turn the call over to John Murray.

Thank you, Tim. Good afternoon and welcome to our second quarter 2010 earnings call. Today, HPT reported second quarter FFO per share of $0.81. FFO this quarter excludes two non-cash charges totaling $0.18 per share, related to early extinguishment of debt and asset impairment at three of four hotels HPT has decided to sell. Focusing first on HPT's hotel investments, second quarter RevPAR increased 4.1% across our 289 hotels, driven by a 6.8 percentage point increase in average occupancy to 72.9%, but partially offset by a 5.6% decline in average daily rate to $90.50. RevPAR increased in all regions, except the west central regions, compared with the 2009 second quarter. RevPAR at our Spring Hill Suites, Country Inn and Suites and Hyatt Place Hotels gained 11.4%, 10.1% and 9.5% respectively this quarter, demonstrating the appeal of all-suite select service hotels. HPT's hotels are primarily in suburban locations and are diversified across all segments except economy with a concentration in the upscale and mid-priced without F&B segments of the industry. The average RevPAR increase of our mid-scale without F&B hotels was 4.3%, slightly above that segment's average. However, in the upscale segment, our hotels didn't perform as well as the industry this quarter. Among HPT's upscale branded hotels, only Hyatt Place and Spring Hill Suites exceeded the industry average RevPAR growth this quarter. HPT's upscale RevPAR growth versus the segment as a whole reflects that our upscale hotels are primarily select service suburban assets. In the early part of this recovery, urban and full service upscale hotels have achieved stronger improvement. Nonetheless, we are optimistic that occupancy, rate and RevPAR trends for our hotels are moving in the right direction and indications of our, that these positive trends will continue. Growing and maintaining rate remains a challenge. Although occupancy was up,…

Thanks, John. Hotel portfolio revenues increased $11 million or 4% versus the 2009 second quarter and this represents the first quarter with year-over-year revenue growth, since the 2008 third quarter. Hotel profit margins declined again this quarter with hotel level cash flow available to pay our minimum rents and returns down $2.5 million or 3.5% quarter-over-quarter. As a percentage of revenue, hotel level cash flow available to pay our minimum rents and returns declined 1.8 percentage points versus the 2009 second quarter to 23.7%. This decline in flow-through was due primarily to rising wage and benefit costs resulting from both higher occupancy and wage rate increases, an increase in repair and maintenance expenses associated with previously deferred projects and step-ups in the FF&E reserve percentages for certain of our hotel portfolios in 2010. Although, hotel level cash flow declined again this quarter, the trend has improved significantly from the 2010 first quarter, when cash flow was down 19.6% quarter-over-quarter. In fact, four of our hotel portfolios had quarter-over-quarter growth in cash flow in the second quarter. 2010 second quarter rolling 12 month coverage of our minimum returns and rents was below one times for all of our hotel agreements and while we expect this trend to continue throughout 2010, we believe our available credit support is adequate to cover the expected current year shortfalls. Information regarding security deposit and guarantee balances at the end of the second quarter for all of our agreements is included in note 12 of our Form 10-Q, which we filed earlier today. Turning to our TravelCenter portfolio, performance was very strong this quarter with cash flow available to pay rent up $20.6 million or 30.2% over the 2009 second quarter. Fuel volumes increased 7.1% and non-fuel revenues increased 6.3% quarter-over-quarter. Per gallon fuel margin was…

Thank you. (Operator Instructions) We'll go first to Andrew Wittmann with RW Baird. Andrew Wittmann – R.W. Baird: I just had a question on, starting with I guess TA. The Flying J and Pilot merger is now complete and I know it's still pretty early to see what that means, but just with your initial discussions or ongoing discussions with the folks at TA. Can you just talk about what you feel like the impact of that merger? I guess it's going to be about 570 locations when they're combined, how that impacts their business?

I think it's too early to tell on what that impact will be. Obviously, that acquisition closing for Pilot makes them the 800-pound gorilla in the segment and just remains to be seen how they do business going forward. I don't think there's really any way to answer the question. Andrew Wittmann – R.W. Baird: It does sound like they tried to pull out a lot of competitive changes to their model but I guess only time will tell. Just, again, on TA, I guess in their conference call, they mentioned that they're optimistic that by the end of the year they hope to have a resolution with you guys. Is that something you disagree with, that it's potential that we might get to a resolution for a long-term solution there this year?

Well, I definitely agree that they hope there will be a resolution. I think it will be a positive for both sides if the ongoing relationship and their ability to make full payments is clarified. And we haven't had any discussions about that as of yet, but I think the current situation, as defined as it is, creates uncertainty and every time there's uncertainty in the public markets, that has – creates an overhang for the shares. So I think it will be good for both sides to resolve the relationship going forward. Andrew Wittmann – R.W. Baird: Okay. But it sounds like they hope to engage you formally starting very shortly. Is that true?

I believe that's their intent.

Andrew, that's really required, given that the deferral agreement – their ability to defer rent ends at the end of this year. So I think that really will force both parties to the table to discuss the agreement. Andrew Wittmann – R.W. Baird: Okay. Then just a couple here on the balance sheet. Looks like you announced the closing of the tender offer, something like $139 million, $140 million and then announced here at the quarter a little bit more. So you're doing more open market purchases there is the implication. And then the question is, are you continuing to buy in the open market as much exchangeable notes as you can at par? Is that the strategy we should look for going forward?

Yes. Well, subsequent to the completion of the tender offer, we had a couple of reverse inquiries into us with people willing to sell at an amount slightly below par and we took advantage of those. But we're not actively out in the market looking to redeem additional notes. We're just being opportunistic when situations present themselves. Andrew Wittmann – R.W. Baird: Okay. That makes sense. On the other side of that, just in terms of – I'm sure, Mark, you're continuing to monitor the unsecured market. What are your thoughts about where pricing would be today and your appetite to maybe pay down some of the line or do another bond offering to fund the capital structures today?

Well, as of today, unfortunately, we don't have a whole loss of uses today for capital. I agree; the markets are extremely attractive. I saw something earlier today where our 2018 senior notes were trading at a yield of about 577. I'm not saying we could issue 10 year paper there today; it would be obviously higher than that. But it is attractive; we only have as of today about $48 million out on the revolver. So just don't have a lot of uses for capital at this stage, absent our ability to be successful in the acquisition front. Andrew Wittmann – R.W. Baird: Okay. Good. I'll chime back in if I have any more.

Thanks.

(Operator Instructions) We'll go next to Jeffrey Donnelly with Wells Fargo. Jeffrey Donnelly – Wells Fargo: Good afternoon, guys.

Hi, Jeff. Jeffrey Donnelly – Wells Fargo: Just because, you used the term non-economic with IHG. I guess how does that process work? Are we at the beginning of a stream of hotels that could be ruled non-economic or was that more of a one-off event?

Well, there's a provisions in each of our agreements with IHG and I think in some of our other agreements as well but it varies probably between agreements. With IHG, the hotels need to have less than one-times coverage of our returns for three straight years and I don't think that – I don't think this is the beginning of something larger. I think these are four properties, actually three properties that clearly meet the test and one property that may get there, but happens to be adjacent to one of the other properties. So it just makes sense they that they would be considered for sale together. But I think that this is probably the extent of the sales that are driven by this particular definition and most of our agreements, because we are portfolio fanatics, there's limits of how many hotels in any given portfolio can be considered non-economic, regardless of what the actual test is. So it's possible over the next year or two that you'll see more pruning take place. But I think in terms of non-economic hotels, this is – I think this is probably it. Jeffrey Donnelly – Wells Fargo: I like the portfolio fanatic term. I'm not sure, Mark, if you're able to do this. Had you – are you, may be quantity for us, if you had sold those non-economic hotels, maybe what your lease coverage would have been on those IHG lease without them? I'm trying to figure out how impactful they would have been.

We really can't do that until we know the sales price, Jeff. Because the way the contract works is the minimum return under the agreement will go down by a percentage of the sales proceeds. So until we know what we sell the hotels for, we can't do that math. Jeffrey Donnelly – Wells Fargo: Okay. And the write-down does not trigger that at all?

No. Jeffrey Donnelly – Wells Fargo: Okay. I guess or maybe – I'm not sure if you can go more broadly with that is. Are there a small handful of assets in each one of your pools, not just IHG but some of the other ones as well that to the extent that you did effectuate a sale you could see a material change in your lease coverage rates? I guess I'm wondering if there's a small number of assets that represent the greatest amount of call it underperformance?

I don't think I would say that. Whenever you have a portfolio, there's obviously in any given quarter, there's those that are at the top and those that are at the bottom. But what we find is and the reason why it's a three year test in our agreements is what we find is the assets that may have a tough year this year have a great year next year or vice versa. There's usually – well, there's often regional or industry or natural disaster type reasons why particular hotels or particular regions are negatively impacted in any one year. But it's not usual that that continues for a prolonged period. So we don't sort of have a list of properties that we would love to get rid of. They're all pretty steady performers. Jeffrey Donnelly – Wells Fargo: And just one last question, on the Intercon lease, I know there was about a $36 million or $37 million security deposit if you will but there's also a limited corporate guarantee. Can you just remind us I guess how that functions and is there a dollar amount that's limited to and I guess what that stands at today?

It is $125 million the corporate guarantee is capped at $125 million. The outstanding or the remaining balance on that guarantee at the end of the second quarter was $37.7 million and that guarantee covers all four of the Intercon portfolios. In addition, there's an almost $37 million security deposit, that security deposit relates to all of the Intercon portfolios, excluding the number two portfolio. Jeffrey Donnelly – Wells Fargo: Great. Thank you, guys.

Yes.

Our next question is from Michael Salinsky, RBC Capital Markets. Michael Salinsky – RBC Capital Markets: Good morning, guys.

Hey, Mike. Michael Salinsky – RBC Capital Markets: Couple quick questions. First, to start on the acquisition pipeline, you mentioned opportunities were still not quite where you wanted. I mean, how far off are we talking at this point? Also, are you seeing any more portfolio opportunities? I think in the past you talked specifically about one-off acquisitions being more attractive, just be interested to get a sense of pricing as well.

That's always a tough question to answer because for all the deals that are sort of that are being marketed out there, not only do you, does your confidentiality limit you to not repeating the confidential information but in most cases it even prohibits you from identifying, which transactions you're talking about. So we have submitted offers on an additional portfolio this quarter that we haven't talked about previously. I think, we were in the top tier of in terms of the amount offered but the terms that we wanted were not acceptable to the seller. So, I think the second round is probably going right now and we're not part of that. We're not willing to part with hundreds of millions of dollars and have it be possible that the hotel manager could be making a management fee, when we're not earning a reasonable return for our shareholders and so that's a part of our strategy that we're just not willing to change at this point. And so, that's why we were not successful in that transaction, even though I think our purchase price offer was fairly competitive. There are a number of transactions that are being announced that we just wouldn't be competitive on, I think, that there have been a couple of recent transactions announced which at least through the rumor mill that the implication is that they're trading at somewhere between 2% and 4% cap rates on recent performance and expected upcoming performance and there's a limit to how much growth we're willing to factor into our models in pricing transactions today, so. Michael Salinsky – RBC Capital Markets: I'm just curious because with your debt you were talking about 5.5% pricing in the unsecured market right now. I'm just curious as to, I mean, what kind of IRRs are you targeting right now or what kind of cap rates? Can you give us that kind of sense, I mean, I understand the confidentiality, but can you kind of give a sense as to how you're kind of looking at it?

I think the best way to describe it is that we like to have returns in the range of 8% cash yields going in. Michael Salinsky – RBC Capital Markets: Okay. That's helpful. Second of all, a question for Mark there. Obviously, you went through in detail the 2010 CapEx spend but as you start to look at budgets here and planning out for the next couple years, any sense as to if that's a recurring amount, as you look ahead to 2011, will there be additional amounts you're going to have to spend?

Yeah. We're starting to, just starting to take a look at next year and I think there's a good chance that we will be funding amounts in excess of the FF&E reserves next year. I know for a fact that there are certain hotels in the Marriott Number One agreement, certain of our Courtyard hotels that we plan on renovating next year that are not in the current year plan. So, I think you will see that amount for at least, a similar amount, probably, for next year, although we'll probably provide a little more color on that on the third and fourth quarter calls. Michael Salinsky – RBC Capital Markets: That's all from me, guys. Thanks.

Thanks.

And next we'll go to Fred Taylor with MJX Asset Management. Fred Taylor – MJX Asset Management: Actually mine were about the convertible buy-in and possible bond issuance, so mine's been answered. Thank you.

Great. Thank you.

And we'll go next to Andrew Wittmann with R W. Baird. Andrew Wittmann – R.W. Baird: Yeah. Just kind of follow-up on, I guess, cost controls and margins. I think, John, in your comments, you mentioned that even if we're on this continued glide path of improvement for the rest of this year you still expect same store NOIs to be down. I guess the question is where do we have to be with RevPAR for the back half of the year to see kind of year-over-year NOI same store expansion?

I'm not sure if I have a good answer for that question. I think where our projections are today, it's roughly, for the full year we're expecting about somewhere between 1% and 3% RevPAR growth and I think our projections are roughly 2010 over 2009 for a decline in margins of about 150 basis points. So we would have to see RevPAR gains continue and be higher than the forecast average that I just mentioned and I think, what would be more important is that right now all of our RevPAR gains are coming from, they're all occupancy driven. We're still seeing ADR declines. If we get to a point where we're seeing ADR increase then I think we'll be well on the way to very strong RevPAR and margin growth so that's really the key. I think the fact that we have four portfolios this quarter that are about 80% occupancy, should be getting to the point where our operators should be able to push rate more. But there's some contracts that are lingering that need to be worked out, some mix issues that need to be resolved. Andrew Wittmann – R W. Baird:

Well, I think, that it's clearly easier in the large urban hotels and the luxury segments, both of which have RevPAR increases well into the teens this past quarter. Those are segments that had been beaten down probably harder than the upscale and mid-priced category and so their recovery is stronger. But I think in terms of our managers' conviction to wanting to push rate, I think they're trying to push it everywhere. They're just initially finding more success in the luxury and urban full service hotels and it's a little bit more challenging in the suburban business hotels. But it will come. It's just a question of whether it comes next quarter or whether it comes early in 2011. Andrew Wittmann – R W. Baird: Okay. That makes a lot of sense. Thank you.

And we'll go to Smedes Rose with KBW. Smedes Rose – KBW: Thanks. I just wanted to make sure on something. You're refunding a security deposit in the fourth quarter as well, is that right? Can you just remind us how much that is?

It is roughly a $17 million security deposit on the Marriott 2 portfolio for the 18 Residence Inns and at the end, that lease expires at the end of this year and Host Marriott has indicated that they're not planning to renew. So assuming there's no default between now and then, we will refund that deposit to Host. Smedes Rose – KBW: Okay. So your non-escrowed cash balance at a little less than $4 million at the end of the second quarter, should we just assume all these are drawn on the credit line, the incremental capital expenditures and the security deposit?

Yeah. Well, for the most part. I mean, there will be some free cash flow generated by the business. We're not at 100% payout ratio. Smedes Rose – KBW:

Smedes Rose – KBW: Okay. And then, just as a reminder, when you make these incremental investments, you do get – you get sort of a guaranteed return on the incremental investment, right, in terms of your rents going up?

Yes. The returns in rents that are due to HPT for these capital expenditures are rent increases as we fund those improvements. Smedes Rose – KBW:

On the Marriott 1 and 2 portfolios, yes, that's correct. Smedes Rose – KBW: Okay. Thank you.

Thank you.

We have a follow-up from Jeffrey Donnelly with Wells Fargo. Jeffrey Donnelly – Wells Fargo: Yeah. Actually just a question on TA, I know it's a way off, but as you guys think about the restructuring of the TA lease, I guess how do you weigh that tradeoff between maybe maximizing your collections from TA but arguably sustains some coverage risks in the future and might make TA uncompetitive versus conversely giving them a bit more breathing room under a renegotiated lease. And while you get less cash, that could increase the value of the lease to HPT because of the reduced risk. I mean, have you guys given that much thought one way or the other at this point or is it still a little early?

I think that's across of the decision making process that needs to take place and I'm sure we're going to vet that all very carefully but I don't want to pre-negotiate it over the phone on the call today I guess. Jeffrey Donnelly – Wells Fargo: I can understand. But actually one other question on the same topic is some of the more admittedly, I'll call them retail convenience store oriented sale leasebacks, do have a gas station component to them, but they're not diesel for trucks. They tend to get down around 1.5 to 2 times cash flow coverage of the market rent. Do you think that's going to be something like these market comps that get factored into renegotiations or do you think it's less driven by that?

I think it will be based on what we believe the earnings; the long-term earning power of TA is not market comps. Jeffrey Donnelly – Wells Fargo: Okay. Great. Thanks, guys.

Thank you.

That concludes our question-and-answer session. I'll turn the conference over to John Murray for any additional or closing comments.

Thank you very much for joining us today. We look forward to seeing you at upcoming conferences and on our call next quarter. Have a nice day.

And that does conclude today's conference. Thank you for your participation.