Good day, and welcome to the Hospitality Properties Trust First Quarter 2018 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there’ll be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Katie Strohacker, Senior Director, Investor Relations. Please go ahead.

Good morning. Thanks for joining us today. On today’s call, John Murray, President; and Mark Kleifges, Chief Financial Officer, will make a short presentation, which will be followed by a question-and-answer session with analysts. Please note that the recording, retransmission and transcription of today’s conference call is prohibited without the prior written consent of HPT. I’d like to point out that 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, May 9, 2018. 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 financial measures, including normalized funds from operations, or normalized FFO. A reconciliation of normalized FFO and adjusted EBITDA to net income as well as components to calculate AFFO 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 concerning factors that could cause those differences is contained in our Form 10-Q to be filed later today with the SEC and in our supplemental operating and financial data found, once again, on our website at www.hptreit.com. Investors are cautioned not to place undue reliance upon any forward-looking statements. And with that, I’ll turn the call over to John Murray.

Thank you, Katie, and good morning. Earlier this morning, we reported first quarter normalized FFO of $0.94 per share, an increase of 3.3% compared to the $0.91 reported in the first quarter of 2017, due primarily to increased minimum rents and returns resulting from prior year hotel acquisitions and owner funded capital improvements at our hotels and travel centers. Starting with performance of HPT’s travel centers. Fuel margin increased by $18 million or 31.5% in the first quarter due to a retroactive $21.2 million federal biodiesel tax credit related to 2017 that was received in the first quarter 2018. Excluding the biodiesel tax credit, fuel margin decreased by $3.1 million or 5.5% due to a 0.4% decline in fuel volumes sold and a 5% decline in cents per gallon fuel margin. Nonfuel gross margin increased $11.8 million or 5.3%, and site level operating expenses increased $1.8 million or 0.9% compared to 2017. Mark will provide more details on these changes in a moment. Property level rent coverage for the quarter, excluding the biodiesel tax credit, was 1.26x, up from 1.2x in last year’s quarter, despite HPT’s rent increasing 2.9% compared to 2017 due to HPT’s increased investments. Turning to performance of HPT’s hotels. First quarter 2018 comparable RevPAR increased by 2% versus the 2017 quarter, driven mostly by rate growth, while comparable GOP margins decreased by 97 basis points versus the 2017 quarter to 37.8%, primarily due to higher wage and benefit costs and higher food and beverage expenses. Aggregate coverage of annual minimum returns and rents at all of our hotels was 0.82x this quarter, down from 0.88x in 2017. Factors that positively impacted first quarter results included strong performance at our full-service hotels, which benefited from increases in group bookings, ramp-up from renovations and demand related to winter…

Thanks, John. Starting with the performance of our travel center investments. Property level EBITDAR in the 2018 first quarter was higher than the 2017 quarter, due primarily to the benefit of a retroactive tax credit and increases in nonfuel revenues in gross margin percentage. For the quarter, fuel gross margin increased by $18 million or 31.5% due to a $21.2 million federal biodiesel tax credit that was retroactively reinstated for 2017 in February of this year. Excluding the credit, TA’s fuel gross margin decreased by $3.1 million or 5.5% versus the prior year quarter as a result of a 0.4% decline in fuel sales volume and a 5% decrease in cents per gallon margin. A slight fuel volume decline was due to the continued effects of truck fuel efficiency gains and increased competition, while the decline versus the prior year in cents per gallon margin was due primarily to the more favorable fuel purchasing environment experienced in the 2017 first quarter. Nonfuel travel center revenues increased 4.1% versus the prior year due primarily to growth in truck service and reserve parking. Nonfuel gross margin percentage increased 70 basis points from the prior year quarter to 61.9%. As a result, our travel centers grew nonfuel gross margin $11.8 million or 5.3% versus the 2017 quarter to $234.8 million. And nonfuel sales generated approximately 70% of the total gross margin dollars of our travel centers in the quarter. Site level operating expenses increased only 0.9% versus the prior year despite the higher labor costs associated with the increase in nonfuel sales. Excluding the $21.2 million impact of the biodiesel tax credit, first quarter property level EBITDAR of our travel centers still increased by approximately $6.9 million or 8.2% compared to the first quarter of 2017. Annual minimum rent coverage under our travel…

[Operator Instructions] The first question come from Amanda Sweitzer of Baird. Please go ahead.

I wanted to focus on the Clift transition. What was kind of the settlement amount with Morgans? And then how much do you expect to spend on that renovation?

The settlement-related costs were very minimal. Essentially, a working capital settlement true-up. The renovation is well underway in its planning, but we don’t have a fine-tuned budget estimate quite yet, but it’s fair to say that it’s going to be in the neighborhood between room and public space upgrades and the facade upgrades of approximately $60 million. I think -- I don’t know, if you’ve been to San Francisco lately, but currently, the two sides of the hotel facing Geary and Taylor Street are covenant scaffolding because of Morgans had allowed the facade to deteriorate. So that -- it’s going to be an expensive renovation and it’s going to take probably till the middle of 2020 to complete.

And most of those costs will be incurred in 2019 and possibly 2020.

That’s helpful. And then did you guys consider any other brands for that hotel?

We did. We reviewed the options with our independent trustees. But in the end, we thought that because of the duration and magnitude of the required renovations and because of the nature of the, I think, seven different union agreements that it was going to be the -- that the best outcome for our shareholders was to move this hotel to Sonesta rather than try to work out a management agreement with other operators that where we were held up over those issues.

That makes sense. And then, lastly, from me. Can you just talk about how the board thought about the recent dividend increase, just relative to your current leverage levels and then relative to some of your continued renovation activity?

Yes. So we increased -- in April, when we declared a dividend payable this month, we increased the dividend $0.01 a quarter. I think the -- I’ll call that a modest increase. It was our seventh consecutive year with an increase, but really payout ratio remains relatively low. I think -- we think what’s worked well for our shareholders the last several years as we’ve had this continuous, call it, between $200 million and $300 million of capital improvements at our hotels and travel centers that we’ve funded, that we’ve retained between $200 million and $250 million a year of excess cash flow after payment of dividends and used that money to fund our capital improvement program. In looking at the dividends for the remainder of this year, as I mentioned in the prepared remarks, we expect the majority of the capital that we’re going to fund over the remainder of 2018 to be funded from free cash flow. So we’re comfortable where the dividend and our leverage is right now.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to John Murray for any closing remarks.

Thank you very much for joining us this morning. We look forward to seeing some or maybe all of you at either the NYU Conference or NAREIT conferences coming up the next few weeks. Thanks.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.