Hello and welcome to the Hospitality Properties Trust Second Quarter 2018 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will 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 of Investor Relations. Please go ahead ma’am.

Good afternoon. On today’s call, John Murray, President and CEO; 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, August 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 once again in our supplemental operating and financial data found on our website through 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 you John.

Thank you, Katie. Good afternoon. This morning, we reported second quarter normalized FFO of $1.07 per share, an increase of 0.9% compared to $1.06 reported in the second 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 and improved operating performance at our comparable Sonesta portfolio. Starting with performance at HPT’s travel centers, total margin increased by $9.7 million or 3.1% in the second quarter due to a $12.6 million or 5.2% increase in non-fuel margin, offset by a $2.8 million or 4% decline in fuel margin due to modest fuel volume declines and lower per gallon fuel margins in the 2018 second quarter. Site level operating expenses increased $1 million or 0.5% compared to 2017. Mark will provide more details on these changes in a moment. Property level rent coverage for the quarter was 1.69 times, up from 1.6 times in last year's quarter despite HPT's rent increasing 2.5% compared to 2017 due to our increased investments. Turning to performance at HPT's hotels, second quarter 2018 comparable RevPAR increased by 2% versus the 2017 quarter, driven by rate growth. A relative underperformance versus the industry average reflects a combination of HPT's hotel rooms being concentrated in the upscale, chain scale which had the lowest RevPAR growth of all chain scales this quarter, new hotel room supply growth and an increased number of hotels under renovation. Comparable GOP margins were relatively flat versus the 2017 quarter at 43.7%, as increased food and beverage profitability and lower IT expenses were offset by increased wage and benefit costs. Aggregate coverage of annual minimum returns and rents at all of our hotels was 1.22 times this quarter, down from 1.26 times in 2017. All…

Thanks, John. Starting with the performance of our travel center investments, property level EBITDA in the 2018 second quarter was 7.8% higher than the 2017 quarter, due primarily to increases in non-fuel revenues and non-fuel gross margin percentage. For the quarter, fuel gross margin decreased by $2.8 million or 4%, primarily as a result of a slight decline in fuel sales volume and a lower per gallon gross margin in the 2018 second quarter. The fuel volume decline was due to the continued effects of fuel efficiency gains and increased competition, partially offset by PA’s fuel pricing and marketing strategies, while the decline versus the prior year in cents per gallon margin was due primarily to higher loyalty program costs. Non-fuel travel center revenues increased 3.8% versus the prior year, due primarily to growth in truck service and reserve parking and non-fuel gross margin percentage increased 80 basis points from the prior quarter to 60.9%. As a result, our travel centers grew non-fuel gross margin $12.6 million or 5.2% versus the 2017 quarter to $255.7 million. And non-fuel sales generated approximately 79% of total gross margin dollars of our travel centers in the quarter. Site level operating expenses one half a percent versus the prior year, due primarily to increased labor costs associated with the increase in non-fuel revenues. Second quarter property level EBITDA of our travel centers increased by approximately $8.7 million or 7.8% compared to the second quarter of 2017. Annual minimum rent coverage under our travel center leases was a strong 1.69 times for the second quarter compared to 1.6 times last year. Turning to operating results at our 305 comparable hotels this quarter, RevPAR increased 2%, GOP margin percentage increased by 8 basis points and cash flow available to pay HPT's minimum returns and rents increased…

[Operator Instructions] And the first question comes from Bryan Maher with B. Riley FBR.

Regarding Morgans and the Clift property, are you just done with them now? Like, there's no more Morgans, we need to read about in the releases or in the supplementals.

That's correct, yes.

And then regarding that property, what type of renovation work is going to be done and how much do you think you'll spend and how long do you think it'll take.

The renovation will be extensive. There's a significant amount of façade work, building systems work, public space and guest room renovations. So we expect to start with model rooms later this year. We've already been through the planning for that, so that they're in the process of ordering the materials and building out the model rooms. And – but because of how extensive it is, probably it won't be completed until sometime 2020. The permitting process is long and complicated in San Francisco as well, so that's currently our best estimate. And we think that, we're still working on developing the budget, a lot of the building systems are still being evaluated, but it's going to be at least $60 million.

And then when we look at the occupancy year-over-year decline in the second quarter of roughly 2 percentage points, I know some of that was related to renovations, some was new supply. Would you put the break out of that 2%? How much would be renovation and how much would be supply, just kind of a guess?

There was a dip during -- a pretty decent dip during May in occupancy at the Clift hotel associated with the conversion from Morgans to Sonesta. But I would say that coupled with renovations was probably –

Yeah. So on the comparable portfolio, occupancy was down 0.4 points; in the 20 non-comp , it was down 20 or so points.

Did that answer your question?

Yeah. It did Thank you. On the Wyndham agreement, that seems to continue to be pretty soft. What are your thoughts there for those 22 hotels? At what point do you come to the conclusion that things aren’t getting really better and you want them to and maybe it's time to think about a change. I mean, clearly, you guys have put in place Sonesta for those types of purposes many years ago. What is the thought process internally on Wyndham? How long does that get the drag on?

Well, we have an agreement with Wyndham, which they are living up to, or both sides are living up to. So there’s no unilateral right to do something different there. I think that the properties that Wyndham started with and the properties that Sonesta started with, right after the last recession, were pretty challenged group of properties. And a couple of the properties in this portfolio are in markets like Houston and Dallas, where they’ve had some challenges between weakness in the energy sector and the effects of some significant natural disasters and hurricanes. I think we're giving them -- Wyndham the benefit of the doubt. I think, it falls back to there being two main properties, Chicago and Hamilton Park in New Jersey that make up about half of the performance of that portfolio. And on the revenue side, the New Jersey property is ramping up well. This past quarter, it had some issues on the expense side that needed to be worked out. I think that long story short, now that Wyndham has their spin off done and now that they have their acquisition of La Quinta done, they have the ability to be a little bit more focused and I think that they have, because of the larger scale, they have more levers to pull in terms of trying to apply different strategies to the Hawthorns than the full service hotels to improve performance. So I'm optimistic that we're going to see things get better at the Wyndham portfolio in the second half, and I think that if Wyndham felt differently about it, then they wouldn't -- they would be taking a different approach rather than just operating and continuing the way they have, so we're optimistic that we're going to turn the corner there.

TA this week talked about ramping up growth through TA Express properties, which I'm sure you know will be slightly smaller versions of what they have now. How interested is HPT in getting involved in the TA Express business and helping that to grow?

We don't presently have an interest in investing in TA Express properties. We haven't even seen one yet. We're not really -- we're not looking at TA sites generally. We’re looking at -- to the extent, we're looking to do more than complete the renovations in our hotel portfolio than we're looking at hotel acquisitions where we can do add-ons and try to improve existing portfolios. So my impression is that the hope that TA is that -- while they may own some of those smaller scale travel centers that that’s going to be a bit of an engine for a franchising push. So –

[Operator Instructions] And the next question comes from Michael Bellisario with Baird.

Just on the two hotel acquisitions, could you maybe provide the underwritten EBITDA multiples or cap rates that you guys expect there in year one?

Yeah. We underwrote the Radisson Blu, it was about an 8% cap rate on projected 2018 EBITDA. And the ES Suites was underwritten, but I mean, the Staybridge Suites, I’m sorry, Baton Rouge was underwritten with about a 10.5% cap rate on 2017 actual cash flow.

And then just on your one Hawaii property and that agreement, can you maybe specifically, anything changed your thinking now that that hotel is finally above 1 times coverage for the first time in four years?

I mean, we're very happy to see it above one times coverage after quite a bit of time. I think a lot of that is driven by the volcano on one island, essentially shutting off tourism there. Also increased airlift, which has definitely helped our hotel and I think the fact that there's a number of resorts in the Caribbean that remain closed has also caused more travelers from a – particularly from the East Coast to the United States to decide on Hawaiian vacations. So, I think there's several different reasons why the performance has improved. I think Marriott has done a good job managing the hotel this year, no question about it and their increased scale from having where is also beneficial. Whether that is a long term change or just a shorter term phenomenon remains to be seen. But in terms of the relationship between Marriott and HPT, we’re in continued discussions regarding the future of that property and, but no resolution has been found yet.

And then I assume there's no major impact as yet from M&A that’s going on currently on the Marriott side?

No impact from that.

Thank you. And as there are no more questions, I would like to return the call to John Murray for any closing comments.

Thank you very much for joining us today. We look forward to seeing some of you soon.