Good day, and welcome to the Hospitality Properties Trust Fourth Quarter and Year-End Results Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I'd like to turn the call over to Senior Manager, Carlynn Finn -- I'm sorry, Senior Manager of Investor Relations, Carlynn Finn. Please go ahead.

Thank you, and good morning. 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. The recording and retransmission of today's call is strictly prohibited without the prior written consent of HPT. Before we begin, today's call, I'd like to read our Safe Harbor statement and set some ground rules concerning certain questions. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on HPT's present beliefs and expectations as of today, March 1, 2013. 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 within the Securities and Exchange Commission or SEC. In addition, this call may contain non-GAAP financial measures, including normalized funds from operation or normalized FFO. A reconciliation of normalized FFO and adjusted EBITDA to net income, as well as components to calculate AFFO, CAB 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 these forward-looking statements. Additional information containing factors that could cause those differences is contained in our Form 10-K filed with the SEC and in our Q4 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. Before I turn the call over to John and Mark, you should be aware that TravelCenters of America has not yet completed its year end reporting and accordingly, the company's remarks today will not referred to TA's fourth quarter or full year 2012 results, and we will be unable to take questions related to TA's fourth quarter or full year 2012 performance. Now I'd like to turn the call over to John Murray.

Thank you, Carlynn. Good morning, and welcome to our fourth quarter 2012 earnings call. At the outset, I'd like to apologize for changing our call from Wednesday to today. Appreciate you joining us. Today, HPT reported fourth quarter normalized FFO of $0.76 per share. As Carlynn mentioned, we are not yet able to update you on TA's performance for the fourth quarter or full year. Because TA is considered an accelerated filer under SEC reporting rules, it has until March 15 to report. As you may recall, TA's performance was very strong through the first 3 quarters of 2012, with EBITDA up $16.9 million or 8% year-over-year. Year-to-date through September, TA's business had reflected modest declines in fuel volumes due to the slow growth economy, driver conservation efforts and fuel and renovations. But the negative effect of the volume declines was more than offset by strong per gallon diesel margins. As a result, TA's fuel margins had increased almost 10% year-to-date through September compared to 2011. Nonfuel revenues and gross margin were up 5.9% and 3.1% respectively year-to-date through September compared to 2011. Focusing on HPT's hotel investments, our fourth quarter was negatively impacted by 33 hotels that were being renovated, causing rooms to be out of service. Also, although Wyndham and Sonesta have been working to gain back occupancy and rate at their rebranded hotels, the rebranding has continued to negatively impact our RevPAR performance. RevPAR growth for our 214 comparable hotels not under renovation and not rebranded in 2012 increased 8.4%, the result of a 1.5 percentage point increase in occupancy to 68.8% and a 6.1% increase in ADR to $101. Our expectation is that operations will not fully stabilize at the rebranded hotels until after renovations are completed in 2013 and early 2014. Please remember these rebranded…

Thanks, John. In the fourth quarter, operating results for our hotel properties continued to be negatively affected by our renovation and rebranding efforts. As John discussed, we had 33 of our hotels under renovation for all or part of the fourth quarter. In addition, results of the 39 hotels we rebranded during 2012 were down substantially versus last year's fourth quarter. During the fourth quarter, revenues at our 214 comparable hotels not under renovation and not rebranded during the year were up 8.4% versus the prior-year quarter on strong ADR growth. On the other hand, we experienced quarter-over-quarter declines in revenue of 1.9% at hotels under renovation during the quarter and 17.8% at hotels rebranded during 2012. These declines were largely the result of lower occupancy. Our portfolios with the highest revenue growth this quarter, were our Carlson and Marriott No. 1 portfolios, with quarter-over-quarter revenue increases of 11.3% and 10.2% respectively. Although our renovation and rebranding activities also had a negative impact on hotel profitability this quarter, the positive results of recently renovated hotels more than offset these declines. Gross operating profit for our 285 comparable hotels was up $5.8 million or 5.5% quarter-over-quarter, and GOP margin percentage increased 80 basis points to 35%. Results were much stronger at our comparable hotels not under renovation during the quarter or rebranded during 2012, with gross operating profit up $15 million or 18.4% for the quarter and GOP margin percentage up 340 basis points to 41.3%. Turning to 2012 fourth quarter coverage of our minimum returns and rents. Despite the impact of our renovation and rebranding activities, cash flow available to pay our minimum returns and rents increased approximately $7 million or 10.4% from the 2011 fourth quarter. Our Marriott 234 and IHG portfolios had fourth quarter coverage of 0.87x and…

[Operator Instructions] Our first question comes from the line of Jeff Donnelly from Wells Fargo.

A few questions on the NH transaction you guys did. Is the decision to invest more aggressively, I guess, outside the U.S., a sign that you feel that asset prices in the U.S. are no longer as attractive as they maybe once were for investment?

Well, first I want to say that it's just a letter of intent. We haven't documented the deal or closed any part of it. So there's a lot of diligence and work to be done. But it's not a sign that we're losing faith or unhappy with pricing in the U.S. We've bought -- in the fourth quarter, we bought a couple of hotels in Chicago and San Francisco and agreed to buy one in the Atlanta area. So we're finding hotels that we think are attractively priced here. But we think there are opportunities to establish strategic relationships with other companies and so that paved the way for enhanced growth opportunities down the road. So we think the NH opportunity gives us some growth here with the joint venture in New York, but also opportunities in Latin America and possibly Europe going forward.

Yes, I recognize that these aren't closed, but just as it relates to the loan that you contemplate on the European hotels. Can you talk about -- or are you able to talk about what the agreed values on the hotels and maybe what their earnings performance is? Because I'm just trying to understand how that EUR 170 million loan pencils out on, maybe like, a loan-to-value or debt yield basis.

Yes. Right now we're in the diligence period, and we are subject to confidentiality agreement so unfortunately I can't talk about those sort of metrics at this point. Once we hopefully get through the documentation and close, then we will be able to provide full disclosure of that sort of information.

Because like you said you have mentioned getting a little more active on acquisitions in the fourth quarter. If -- does that leave you to think, I guess, if there'll be activities in picking up -- we've been hearing this from brokers out there, does that lead you to think you might end up revisiting -- bringing some of the noncore assets that you had contemplated in selling in 2011 back to a market as we move through 2013 you will begin to finish up some renovations?

Right now, we're not contemplating bringing any hotels to the market. The ones that we had on the market that were Marriott-branded properties, we've -- we're in the throes of renovating. We were expecting -- we've seen some pretty good post renovation growth coming out of the hotels we have renovated, and we're expecting to see the same out of those 18 hotels. So it's not our plan at this juncture to look to sell anything.

And just -- and one last question. I know -- I recognize this pertains to a -- I guess I'll call it a sister company, but given the corporate action that you've given to reading about it, at Commonwealth, they are the, I guess, one scenario out of many where the board at Commonwealth could be compelled to explore alternatives to avoid their own legal risk. I know this doesn't involve HPT directly, but have you guys considered that maybe an outcome on that side could have implications on governance for HPT down the road or is it too premature to make those sort of decisions?

I don't really want to comment on that whole chain of events that transpired this week with one of our affiliates. I would just say that we think we have good corporate governance at HPT, and we're not at all fearful of challenges to it.

Our next question comes from the line of David Loeb. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: A few kind of follow-up to Jeff's questions. John, given that you're only in letter of intent and you're not willing to talk about too much detail about the NHH deal, why did you announce it? Was NHH going to announce it anyway?

Yes. So our agreement with them is part of a larger series out transactions for NH. In particular NH reached agreement with a Chinese company that's in the airline and tourism business called HNA. And HNA Group was making a 20% investment in the equity of NH. So the combination of the HNA transaction and the HPT transaction taken together is relatively transformative for NH at this stage, and they needed to make an announcement. So we were concerned that if they announced our deal, there will be selective disclosure. So typically we would not have announced this transaction. We would have agreed to a letter of intent and then worked on our diligence and the documentation, and then announced it was once we had a binding agreement. But because NH had to announce, we felt compelled to do so as well. That's principally the reason why our conference call was delayed a couple of days. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: We knew there had to be some good reason even if you couldn't tell us then what it was. If you can't talk about the specifics of the deal, can you talk a little bit about what your return hurdles are in different scenarios and how you balance return hurdles and credit corporate support?

Well, I think I mentioned in the remarks that the returns in Latin America and Europe are expected to be 10%. The returns in New York expected to be 8%. When you do business outside of the U.S., there are taxes that you have to consider and foreign-currency issues. We think that we've found ways to mitigate those, so that our returns on this transaction will be as good as the returns we're getting on other transactions. But I guess I'm reluctant to go further than that at this point. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: I won't get any more out of you about risk or credit or I think that side of the equation.

We'll be willing to talk in much greater depth on this transaction once it's -- if and when it becomes final.

I would say that these are all -- all of these hotels are in the capital cities of the countries where they're located with the exception of one hotel in Mexico, which is in a market that's sort of like maybe their Houston. It's where their largest state-owned petrochemical company PEMEX is based. It's a major port city, and so we think that all of these locations are very strong locations. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: Okay. Just kind of a broader general question. Mark, you mentioned you had ample room on the line to fund upcoming transactions and CapEx. The recent and future acquisitions alone, assuming you close, were on the order of, I guess, $0.5 billion, $526 million. Is your intention to fund all of that on the line, or do you have a different idea about long-term funding? And kind of the follow-up on that is, what's the impact that all of this would have on your distribution requirement and on the dividend?

There's a few questions in there. Let's, I guess, step back first and kind of look at where we are from a commitment standpoint. As I outlined in my prepared remarks, we have about $450 million of funding requirements this year under our hotel and TA agreements. We've also got the $31 million Gwinnett Marriott acquisition. So I guess firm commitments there 400 -- call it $445 million. And we have the possible NH transaction for $375 million. So that brings us to total possible commitments of about $820 million. As we disclosed in the press release, the $170 million euro loan would be funded with a euro borrowing by us. So that takes call it $225 million of the $820 million off the table and leaves us with $595 million. Let's say we generate $95 million of cash flow during -- free cash flow during the year. That leaves us with $0.5 billion of funding. We've got $430 million available under the revolver at the end of the year. So under that scenario we're short. So I think it's pretty clear net aspect that we're going to have to go and visit the capital markets at some point during 2013. If you look at our balance sheet and leverage, at year end, we're at about a 50% debt to total book capitalization, which is the high end of where we like to operate the company. We like to be in that 40% to 50% debt to total book capitalization. So I think it's fair to say that we'll, in all likelihood, assuming the NH transaction takes place, but during 2013 we'll be accessing both the debt and most likely the equity markets. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: So that could be common or preferred or you really mean common?

It could be either. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: Okay, and impact on the dividend?

Yes, in terms of our distribution requirements, we haven't worked through all that yet. We have at, I think coming into the year, we have some cushion on our payout requirements. So I don't think that the tax side of it will drive our need to make distributions. However, we are in the business of making distributions. So our board will continue to evaluate the distribution level each quarter and as our renovation activity gets closer to its end game and if we continue with our successful acquisition pace, then dividend increase would be something I could see then considering. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: But does seem like if you did the NH transaction, that's a big increment to taxable income. Am I missing something on that? Is there a disproportionate...

No, it is. Just it's -- we always evaluate the ability to make a distribution based on cash flow, right? And the tax requirements are based on taxable income where you get the large benefit in the real estate industry of depreciation. So just because you're earning a lot of money doesn't mean you're creating a lot of taxable income if you structure things right. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: Okay, and one final question, maybe more for John. On the RevPAR response to the rebranding in the fourth quarter, what do you think the prospects are once those assets stabilize? Do you think you grow some of that back or are these just -- are the new brands just different RevPAR kinds of hotels?

Our current expectation is we grow it back. They're heading in that direction. They have a ways to go. But that is our definite expectation is the thing. You grow back to where they were before they were rebranded and then continue to grow from there. And I'm optimistic that, that will happen. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: You think that's a 1 year trend or does that take a couple of years?

I think it takes a couple because most of the hotels are going to be under renovation for a decent part of this year. Some of them -- some of the full-service hotels for both Wyndham and Sonesta will be renovated towards the end of this year or beginning of 2014. And then there'll be a ramp up period after that. So obviously, Wyndham is a stronger, better-known brand, so I would expect that their pace would be a little bit faster than Sonesta's, which is a smaller, perhaps less well known brand today.

Our next question comes from the line of Ryan Meliker. Ryan Meliker - MLV & Co LLC, Research Division: Just, I guess, a quick question, a little bit of a follow-up for what David had mentioned. And Mark, you indicated that you might have to tap into the capital markets at some point this year just with your leverage levels at the high end of the current range. Can you give us an idea of a, where you're comfortable or where you'd like to see that level be at the -- after you tap into the capital markets. And then, b, if there are more acquisition opportunities that maybe when you tap into the capital markets you might want to build in some, I guess, some buffer into that level just to give us an idea of what we could be expecting throughout the course of the year.

Yes. Well, I guess, first off, I'd say that we're in no -- we don't have a gun to our head to do anything in the near-term given what we have available to us under the revolver today. And as I've said, I think many times in the past, we like to operate the company with debt to total book capitalization between 40% and 50%. Where we end up within that range is going to be influenced by the strength of the capital markets themselves, our view of where the capital markets are going in the near-term, as well as what we think the horizon looks like in terms of additional acquisition opportunities. So I can't -- I'm not really in a position here to lock in to where we want to end up 2013 except to say within that range of 40% to 50%. I think if you go back in time, we've been pretty consistent at running the company along those metrics. Ryan Meliker - MLV & Co LLC, Research Division: Sure. I guess, what I'm trying to get at is, are you guys more inclined to do one large equity raise or maybe do one equity raise near-term to get you to within the range that you're looking for if these acquisitions close, but then be forced to do more equity raises if you guys do move forward with more acquisitions?

Ryan, I think decisions -- capital -- decisions on capital market transactions are driven by the facts at the time you decide to execute on one, and whether there even is an equity offering is something that will be determined down the line. Ryan Meliker - MLV & Co LLC, Research Division: Okay, fair enough. And then the second question I apologize if I missed this, but it sounded like you said that the Clift Hotel was a $6 million lease payment that will have CPI step ups. That seems to be on the $120 million acquisition price of 5% yield on your investment. What's going to get that to your target investment hurdles that, I guess, you look at? I'm assuming 5% is way below what you guys are looking at certainly given your cost of equity.

That is a return that's gotten below where we would like it to be, but there are built in adjustments to the rental rates, and in particular in 2014, there'll be a minimum increase of at least 20%, which will move the return closer to -- from 5% to 6%, and then there'll be subsequent increases after that. We feel like it's a good investment in terms of cost per key, and it's a good investment in a very strong market in San Francisco. And we think we've added an attractive price and with interest rates low, we're willing to go a little bit below our normal hurdle rates to get a hotel of this quality. And we think that it's being well operated by Morgans today. Ryan Meliker - MLV & Co LLC, Research Division: I guess you mentioned it going up from a 5% -- a 5% yield to a 6% yield, but still seems drastically below what you're generally looking at from a yield perspective and certainly where your cost of equity is. I understand that it can be an attractive market, and it can be a good deal, I guess, so to speak, but at the same time if your cost to fund outweighs your yield on those funds, I question how you guys think about whether that's a prudent investment for your shareholders and if you're going to be doing anything, that will get that yield higher than the 5% to 6% that we just talked about.

We think that -- we take a long-term view of acquisitions and we expect that interest rates are going to be very low for the next couple, few years. We think that the returns on this hotel are going to grow and over the longer haul, it's going to have more impressive returns than what you're seeing today. What happens with the hotel going forward and what changes may occur will just be a matter of subjectiveness. Right now the hotel's triple net lease for a long-term to Morgans Hotel Group and they are current in their rent payments. And unless that changes, there isn't that much that we're going to do to change what's happening there. Ryan Meliker - MLV & Co LLC, Research Division: Okay, but if they weren't current in the rent payments at some point in time, you might be interested in choosing another path to that property?

I think it's a very attractive hotel on a good location and that if there was ever a default that we would have various options without -- I don't have much doubt about that.

Our next question comes from the line of Will Marks.

Just had some broad operating questions. I guess first, I know you don't give guidance, but any thoughts it seems like the range is kind of 5% to 7% for the industry and do you concur with that and will your redevelopments cause much good disparity from that?

As I mentioned, most of our operators have come in, in the 5% to 7% range, and we're very comfortable with those ranges. I think if you ask me if I thought they were likely to come in towards the higher end or lower end, I think I would probably say that we expect that they might be more -- if they miss, they'll miss towards the higher end because, for instance, IHG is expected to be much higher up in the teens for RevPAR growth. The only portfolio that is below that sort of 5% to 7% range is on the Sonesta brands where virtually every one of their hotels will be under renovation during 2013. So they're expecting across the portfolio flat RevPAR. But otherwise, we're pretty optimistic. As I mentioned, our January RevPAR growth has been very, very strong at hotels that have been renovated and those that haven't been rebranded. So we feel pretty good about where our number is going to come out this coming year. None of us have a crystal ball. So obviously there's changes going on in Washington and there's budget cuts happening. And so that may have some modest impact on performance, but because of the renovations and because of low supply growth and because the economy continues to chug along, which we expect will continue, we're optimistic.

And where do these type of ranges put your coverage?

We're expecting RevPAR to increase and margins to increase, so we're expecting a couple of years for it to improve. I don't -- we don't typically provide guidance on where we expect coverage to come out.

But our expectation is that we'd see, despite the continued renovation disruptions, that we'd see improved coverage across all of our portfolios in 2013.

[Operator Instructions] Our next question comes from the line of Bryan Maher.

I think you might have answered my question earlier on, but I wanted to talk a little bit about TA and with what they're doing there seeking out underperforming possibly distressed truck stops that they can renovate, reposition, rebrand as TA and get the EBITDA of those properties up as they build out their portfolio. So my question would be to you, as they do that, is there any interest on HPT's part to buy one or a basket of more mature, stabilized truck stops that TA has acquired on their own going forward, or do you think that you're pretty filled out on the acquisition front on the hotel side?

Our primary focus is on hotel acquisitions. However, if TA were to come to us with one or more mature TravelCenters that they had ramped up and that had proven cash flows, we would not be against acquiring those and adding those properties to existing leases or a new lease. But it's not really our focus right now. The properties that TA has bought as you mentioned have been sort of underperforming turnaround opportunities, and -- so they've got some work to do before that would become an issue for us.

Okay, and then secondarily, just on the NH Hotels deal, can you tell us how that deal kind of came about? Did they approach you? Did you approach them? Was it a broker deal?

It came about over a long period of time and there have been bankers involved at various points. But I think that, if I remember back, that we approached them.

There are no further questions in the queue. I'd now like to turn the call back over to John Murray. Please go ahead.

Thank you, all, very much for joining us today and again I apologize for moving the date on you, but appreciate you being with us.

That does conclude our conference for today. Thank you for your participation and using AT&T Executive Teleconference service. You may now disconnect.