Welcome to the Hospitality Properties Trust First Quarter Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to our host, Mr. Tim Bonang. Please go ahead, sir.

Thank you, and good afternoon. Joining me on today's call are John Murray, President; and Mark Kleifges, Chief Financial Officer. 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'd 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, May 9, 2011. The company undertakes no obligation to revise or publicly release the results of any revisions 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 financial measures, including funds from operations or FFO. A reconciliation of FFO to net income, as well as components to calculate AFFO, CAD or 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 statement. 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 Q1 supplemental operating and financial data found on our website at www.hptreit.com. Investors are cautioned not to place undue reliance upon any forward-looking statements. Now I'd like to turn the call over to John Murray.

Thank you, Tim. Good afternoon, and welcome to our first quarter 2011 earnings call. Today, HPT reported first quarter FFO per share of $0.83, a 9.2% increase over the 2010 first quarter. Focusing first on HPT's hotel investments, first quarter RevPAR increased 7.5% across our 289 hotels, driven by a 3.4 percentage point increase in average occupancy to 67.6% and a 2.1% increase in average daily rate to $93.55. Compared with the 2010 first quarter, RevPAR increased in all regions with double-digit gains in Canada, New England, the East North Central and West South Central regions but only modest improvement in the East South Central and South Atlantic regions. Our Country Inn & Suites, Radisson, Candlewood Suites and InterContinental Hotels all generated RevPAR growth in excess of 10% this quarter versus last year. HPT's hotels are concentrated within the upscale and mid-scale industry segments in suburban locations. The average RevPAR increase of our mid-scale hotels was 11.8%, approximately 6.5 percentage points above the industry average for that segment. However, RevPAR at our upscale hotels increased only 2.9%, compared to the industry segment average of 8.6% this quarter. HPT's upscale hotels' underperformance versus the segment as a whole reflects that our hotels are primarily focused service suburban assets, and also that 22 of our hotels or 12% of our upscale assets are being renovated this quarter. Growing average daily rate remained challenging in the first quarter of 2011. However, along with steady occupancy growth, ADR increased each month of the quarter versus the 2010 period. Importantly, ADR increased in all 11 hotel portfolios this quarter compared to last year. Our operators continue to manage guest mix to reduce this kind of business. And as the recovery continues, they are gaining more confidence in their ability to grow rate during the remainder…

Thanks, John. First, let's review first quarter operating results for our hotel properties. Revenues for our hotel portfolio increased $19.6 million or 7.6% versus the prior year. Our strongest performing portfolios were our IHG No. 4 and IHG No. 2 portfolios with revenue increases of 13.9% and 11.6%, respectively. Our Marriott No. 2 and Marriott No. 3 portfolios were our weakest performing portfolios this quarter with each experiencing small quarter-over-quarter decreases in revenues. However, 11 of the 18 hotels in our Marriott No. 2 portfolio were undergoing renovations this quarter. With continued gains in occupancy and the return of ADR growth in our portfolio and despite significant renovation activity, GOP and cash flow margins both increased this quarter. Gross operating profit increased by $7.6 million or 8.7% quarter-over-quarter. And GOP margin percentage increased 33 basis points to 34.5%. More importantly, net cash flow available to pay our minimum rents and returns increased by approximately $7.6 million or about 16% versus last year. Our IHG hotels had a very strong quarter with net cash flow increasing 34% quarter-over-quarter. Despite the improvement in hotel net cash flow, coverage of our minimum returns and rents on a rolling 12-month basis is still well below 1x for all of our hotel agreements. However, it is encouraging that on a quarter-over-quarter basis, coverage improved for 8 of our hotel agreements. Coverage declined for 3 of our agreements, 2 of which had a significant number of properties under renovation during the quarter. As John noted, our IHG guarantee was exhausted in January, and we applied the security deposit we hold to these agreements to cover the February and March 2011 payment shortfalls. We currently expect the IHG security deposit to be sufficient to cover 2011 payment shortfalls onto these agreements. In addition, we continue to apply…

[Operator Instructions] And our first question will come from the line of Michael Salinsky with RBC.

The first question relates to the Marriott and InterContinental negotiations. Just curious as to when you guys should expect to have a resolution on that. And are you comfortable at this point letting the security deposits run out if there is no resolution and just operating off of the cash flow?

The discussions are active and ongoing. We'd love to have them completed this quarter. Frankly, we had hoped that we would have them done before this call. But you know, it involves 250 hotels, $4 billion of investments, and there's 8 or 7 different agreements each with different waterfalls. So it's pretty complicated stuff, which is why it's taking so long going hotel by hotel looking at expected operations over the next 5 years or so and looking at capital requirements. So it's a much more cumbersome project than we might have anticipated when we really got into it. But the discussions are going well particularly with Marriott, and I think that one will probably be accomplished sooner than with InterContinental. And in terms of the security, I think we're all working hard towards a resolution. And if we're going through the security before we finalize things then that's the way it will go. We don't have any special plans to act otherwise.

I think it's important to note, Mike, that we've essentially been -- despite the fact we've been drawing on the security deposits, when we draw, that's non-cash income to us. So we've essentially been on a cash flow basis since they went into default on those contracts. And so if anything would be improving results at the properties, we'd expect the impact of not having the security deposits related other than -- from an FFO standpoint clearly some impact but not from a cash flow standpoint.

Fair enough. Sticking with that topic on the discussions that are ongoing, are there discussions about -- obviously, you're pruning for the InterContinental assets. Is Marriott also pushing to reduce some of the properties from the portfolios as well?

I think that we announced at the end of last quarter that we had a valuation adjustment on 53 properties. And with the mix in between Marriott and IHG in that group of properties is about 30 for -- roughly 30 for IHG and roughly 20 related to the Marriott portfolios. And I would characterize it as either pushing for particular properties. I think it's been very much a mutual analysis of the assets -- their ongoing potential and their capital needs.

You not actively marketing any of those at this time correctly.

Not yet.

And then just a final question. Can you give us what the gross operating profit margins were on a hotel portfolio for the first quarter?

The GOP margins for the quarter were -- went up 33 basis points to 34.5%.

[Operator Instructions] Our next question comes from the line of Smedes Rose. [Keefe, Bruyette & Woods] Smedes Rose - Keefe, Bruyette, & Woods, Inc.: I was just wondering with the 4 that you have pretty much locked the for sale now, can you quantify how much the minimum rents from IHG would go down if those are sold?

No, the carrying value which is our estimated fair value of those hotels was about $47 million. So the minimum returns would go down 8% of that amount, so about $3.7 million, $3.8 million.

And our next question comes from Dan Donlan with Janney Capital Markets.

Just a quick question on the asset that you guys could potentially sell. What is the coverage for those assets if you have both?

I don't think we have disclosed that anywhere else, and I don't have it handy either. So I think it would be fair for you to assume that the coverage of the hotels that we're looking to dispose off is less than the coverage of the ones we're planning to keep. But I'm not going to go any further than that unless you want to add anything.

I don't have the numbers in front of me, Dan. But just to put it in perspective, I think those 57 hotels or the 4 that are for sale plus the 52 -- 53 I should say that we identified for possible sale make up less than 5% of the EBITDAR from hotels in the first quarter. So they probably represent closer to 17%, 18% of our total investment in hotels. So you can kind of see -- you can calculate the incremental kind of return roughly of the coverage that they are having.

And then is there anything that precludes you all from keeping the flags but then switching out the operator and the rent agreements with? Could you keep IHG as a flag and then bring in somebody else to operate the hotels?

If we declare a default today under the Marriott agreements, we have the right to change the management but not the brand. And the agreements we have within the continental we have the ability to change either or both of the management and brand, so we have that flexibility to do whichever.

And that's just on capital improvements. I'm sorry if I missed this. What are you guys anticipating [Audio Gap] in the reserve for this year? Or is that kind of still influx given your agreements are still kind of influx with your 2 major operators?

On the Marriott No. 1 and 2 agreements where we're undergoing renovations right now, we're going to fund another $19 million for the remainder of the year. And then with the 4 IHG contracts and the 3 Marriott contracts that are under discussion, that's to be determined whether funding, if any, would be under those modified agreements if we reach agreement on new terms.

And I guess just lastly on the dividend and potential growth prospects there. Any type of clarity -- is there any type of metric we can look at, be it AFFO or CAD? I think you guys have said in the past that you wanted to be above 1x coverage on your portfolios before you look at raising the dividend. Assuming that you guys reach an agreement with Marriott, IHG and then it lowered the minimum rents but then that improves your coverage, will that allow you guys then to maybe raise the dividend potentially looking out to 2012, 2013?

Well, our plan is to complete the negotiations with Marriott and IHG as the first order of business. I don't think that it would do anything but create a concern if we were to change the dividend without having completed those negotiations because investors would wonder if why we felt that we couldn't raise it -- And I don't know that I would jump to the conclusion that you seem to have regarding changes in our rent of returns based on the negotiations. So I think we should just we'll leave it at -- we'll make each quarter we look at the dividend, and we'll look at our cash flow. And once we have these agreements -- these negotiations result with IHG and Marriott, that will make it a little bit easier to see all the parts of that equation, and then we'll go from there.

And our next question will come from Ryan Meliker with Morgan Stanley.

Just a quick question here regarding dispositions. I guess last quarter you talked about -- I thought 2 hotels being sold for $47 million in the call, and it sounds like you're talking about 4 hotels for $47 million. Can you give us a little more clarity on what transpired between February when you talked about those 2 IHG properties trading and them not having traded yet, and then what's going on with the 4 now?

Well, I think maybe there's a little bit of a misunderstanding and that they were -- it was always 4. It was just that we had -- 2 were under -- we had gotten acceptable letters of intent at the time of the last call. And the other 2, which are adjacent properties in Dallas. At the time of our February call, we didn't have an accepted letter of intent yet, and so that's what's changed. But it is always a 4, and the valuation on our books was $47 million. They're now all 4. We have letters of intent, and there's diligence programs going on. Again, it's a difficult process because when we're negotiating the purchase in sale and other agreements related to the transaction, it's not just HPT as the seller and a prospective buyer looking at contracts or looking at the letter of intent, but we're also having to review it with InterContinental because it impacts the ongoing relationship that we have with them. So it's just a little bit more of a cumbersome process, but that's what's going on.

That make sense. And the 2 you had initial letters of intent on those the ones that you think are more likely to close at some point in the second quarter?

Yes.

Can you give us what the proceeds might be from those 2 in the second quarter?

They are consistent with what our expectations were when we valued the properties down to the $47 million. But I'm not going to give you the property level. They're not closed yet, so I'm just going to leave it there.

And your next question will come from Bryan Maher with Citadel Securities.

Can you help us think through TA's press release this morning whereby after getting a rent reduction from you guys earlier this year, they're out buying truck stops. It looks like maybe 8 truck stops for about $36 million that they announced. It just seems a little peculiar to us that they seem to be cash strapped. And now that they have a new deal with you, they're out and they're buying assets.

I don't want to spend too much time talking about TA's strategy on HPT's call. But I think that their belief is that those acquisitions -- well certainly the re-negotiation of the lease with HPT gave them a little bit more, better clarity as to their cash position and their sources and uses of funds. And there was a belief that these particular assets were unusual opportunities because of the stress situations, and they were in locations where they didn't have a strong presence and in locations where they thought they could -- there'll be a strategic benefit to the portfolio and would make them a stronger company. So that's why they pursued those opportunities. But HPT wasn't a part of the analysis. We're not part of the financing. So I don't really know too much more of the details than that.

So there's no kind of right or first refusal on your part built on your truck stop portfolio if you wanted to through TA, would that be correct?

If they finance them, I think we have a right to look at that. But I don't -- if they want to buy other truck stops, we don't have the ability to stop them from that are to force them to allow us to buy them.

Your next question comes from Phil Wilhelm with UBS O'Connor.

I have a balance sheet question and an income state question. The balance sheet question is, given the rent reduction at TA, how is that not tripped in impairment? And the income state question is I just would like your commentary on -- I was surprised that your coverages didn't improve commensurate with your RevPAR change. And I was wondering whether you could provide commentary on what you feel the flow-through from RevPAR to coverage will be going forward.

On the balance sheet question on whether the reduction in the TA rents -- why the reduction in TA rents didn't result in any type of impairment charge is because when he walked through the impairment analysis that we do every quarter, as required under Generally Accepted Accounting Principles and looked at the future expected cash flows from the properties, there is no impairment issue.

Do you believe that you could sell the investment for $2.5 billion today given the lower rent payments?

I don't know what we could sell the properties for. But keep in mind, GAAP is -- it's a historical cost, not a fair value presentation of assets and liabilities or most assets and liabilities. So I don't know whether we could sell them for $2.5 billion today.

We don't provide guidance on what our expected flow-through is from our properties. We push our operators to try and achieve at least 50% flow-through. But that ebbs and flows with depending on the market and depending on the type of hotel and depending on what the mix is between occupancy and rate growth. And as they've started just this year to achieve rate increases and not just occupancy increases, flow-through has picked up. But we're hopeful that they're going to continue to achieve rate increases and hopefully growing rate increases, and that the flow-through will improve as a result. But I'm not going to give you a projection on that.

And at this time, there are no further questions. Please continue, Mr. Murray.

Thank you very much for joining us on the call today, and we hope to see all of you either at NAREIT or at the NYU Hotel Conference. Thanks once again.