Good day and welcome to Hospitality Properties Trust First Quarter 2019 Financial 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 Senior Director of Investor Relations, Katie Strohacker. Please go ahead.

Good morning. Joining me on today's call are John Murray, President and Chief Executive Officer; and Brian Donley, Chief Financial Officer. Today's call includes a presentation by management followed by a question-and-answer session with analyst. Please note that the recording, retransmission, and transcription of today's conference call is prohibited without the prior written consent of HPT. I would 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 security laws. These forward-looking statements are based on HPT's present beliefs and expectations as of today May 10 2019. 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 and adjusted EBITDAre. Reconciliations of normalized FFO and adjusted EBITDAre 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 on our website at www.hptreit.com. Investors are cautioned not to place undue reliance upon any forward-looking statements. And with that, I will turn the call over to you John.

Thank you, Katie and good morning. This morning we reported first quarter normalized FFO of $0.88 per share, a decrease of 6.4% compared to the $0.94 reported in the first quarter of 2018, primarily related to our sale of 20 travel centers and lease amendments with TravelCenters of America completed in January. As a reminder we agreed to sell 20 travel centers to TA for $308.2 million and amend our leases. As a result of the sale and the amendments, HPT recorded a gain on sale of approximately $160 million. We accelerated the payment of deferred rent starting this year over a four-year period of $70.5 million and we reduced TA's rent to reflect the sale which should increase coverage going forward. Brian will discuss TA's first quarter performance in a moment. Moving to performance of HPT's hotels, first quarter 2019 comparable RevPAR decreased by 3.2% versus the 2018 quarter, driven by 2.9 percentage point decline in occupancy, partially offset by a 1% increase in rate. HPT's comparable RevPAR performance lagged industry results this quarter for several reasons most notably renovation disruption. This quarter we had 28 hotels under renovation including 11 full-service hotels compared to 23 hotels last year only three of which were full service. The first quarter is generally our weakest quarter and it was by design that we scheduled as many renovations into this period as we could to reduce negative impact during our seasonally stronger quarters. In addition to renovation disruption, we experienced negative weather-related impact primarily due to the loss of FEMA and hurricane recovery demand that occurred in 2018 and the impact of 11 main winter storms in 2019 confirmed disruption from the U.S. government shutdown and headwinds associated with competition from new room supply. The hotels not impacted by these events comparable…

Thanks, John. Starting with operating results at our 323 comparable hotels this quarter RevPAR decreased 3.2%, GOP margin percentage decreased by 172 basis points and cash flow available to pay HPT's minimum returns and rents decreased by 11.3% reflecting the negative impact of renovations supply growth and other non-repeat business versus last year as well as increased operating costs. 3.2% decrease in RevPAR this quarter resulted from a 2.9 percentage point decrease in occupancy, partially offset by a 1% increase in ADR. Our comparable Radisson and Wyndham portfolios had the weakest RevPAR performance with declines of 12.6% and 9.9% respectively versus the prior year quarter. Our Radisson portfolio had four out of eight comparable hotels under renovation during the quarter. Our Wyndham portfolio was heavily impacted by soft market conditions in Chicago and Houston. Our comparable Sonesta portfolio RevPAR decreased 0.7% versus the prior year quarter as growth at our newly renovated ES Suites was offset by renovation activity at several full-service hotels. GOP margin percentage for our comparable hotels decreased by 172 basis points from the 2018 quarter to 34.5% and gross operating profit decreased approximately $12.9 million. All of our comparable portfolios experience declines in GOP, but four of the portfolios caused the majority of the decrease. GOP margin at our comparable IHG portfolio decreased 187 basis points to 36.5%, resulting in a $5.6 million decrease in gross operating profit driven by the closure of the Crowne Plaza Ravinia Hotel, non-repeat FEMA business and competition from new supply. It's worth noting that Crowne Plaza Ravinia Hotel reopened during the first quarter in this ramping up post-renovation. GOP margin out of comparable Radisson portfolio decreased 933 basis points to 28.9%, resulting in a $2 million decrease in gross operating profit primarily driven by renovation activity. Our comparable Sonesta portfolio…

Thank you. Mr. Donley. We will now begin the question-and-answer session. [Operator Instructions] And your first questions will be from Michael Bellisario of Baird. Please go ahead.

Good morning, everyone.

Good morning.

Good morning.

Just first on the Milwaukee acquisition. Why was there no security deposit added like the D.C. transaction from earlier this year? And then how does that affect the economics of the transaction for you?

On the Milwaukee acquisition we negotiated for IHG to share 50% of the cost of the renovation of the hotel. We're estimating approximately $6 million to renovate. They are going to pay $3 million. We're going to pay $3 million. We just decided on this particular transaction that we would rather have them co-invest because the security deposit is at or very close to $100 million. We felt like we have sufficient security, but we wanted them to buy into the hotel as much as we felt we had bought into it.

And what's your estimated cap rate of return expectation for the property?

No. The property was in need in significant need of rooms renovation. So its performance wasn't particularly great. So going in cap rate was in the mid-7s, but we're going to get an 8% return on our investment from IHG. We expect the cash flow will cover that by the time the renovation is completed.

And then you mentioned the discussions with Wyndham on the restructuring. How should we think about maybe potential disruption if any on the performance side related to any potential outcome there? And then just to clarify you're really just restructuring the guarantee in the waterfall right not necessarily the management agreements or the branding of those properties, correct?

Yes I mean I don't want to get into the details because we're in discussions with them and that always goes better privately done on a conference call. But I think, it's fair to say that both sides are considering the possibility of disposing of some of the weaker performing properties and maybe the addition of one or two properties to the portfolio. And so to be a change in the mix of properties as well as a result of the change in mix, there will be a change in the owner's priority because it will go down for the ones we sell and up for anything we buy. So those will be the main -- the goal will be to arrive at a revised portfolio that has coverage of the owner's priority return, so that we can get a full owner's priority return and Wyndham can get a management fee.

And as far as disruption, I mean they continue to pay the 85%. So as far as modeling I think we're good at that level for now.

Okay. That's fair. And then just lastly same kind of topic on Marriott 5, any update there on the progress, the conversations about the outcomes of that portfolio?

We're still talking. I wouldn't say that there's necessarily been progress, but hopefully by that time the second quarter rolls around, we'll have more to share. There have been term sheets back and fourth. There's still a fair amount of work to be done before anything is in acceptable form to both sides. So yes, there's really nothing to report there. It may result in some similar changes that we may -- there may be a change in credit support. There may be a reduction in -- we may dispose of some weaker-performing properties. I think whatever transpires will be healthy with respect to the longer-term view on coverage and portfolio performance.

Got it. That’s helpful. That’s all for me. Thank you.

Thank you.

[Operator Instructions] Your next questions will be from Bryan Maher of B. Riley FBR. Please go ahead.

Yes, kind of on a housekeeping nature, when you're doing renovations to hotels and the property underperforms and maybe there's a shortfall to the minimum rents that you could go against the security deposits, is that waived during a renovation or is that still stay in place?

That stays in place, Bryan.

And then shifting gears a little bit, John can you talk about your acquisition appetite for 2019? And are you seeing any change in the availability of product and/or pricing given again lateness of this very long cycle and kind of the economic uncertainty that we're seeing unfold here?

Yeah, sure. I think that's a good question. We're always looking at the acquisition market for potential additions to existing portfolios. We did on a couple of properties where we were not successful this quarter. So, potentially we could have had a higher acquisition number that we did. But, we are concerned that -- we’re in the 10th year of the cycle, unemployment is so low and the economy apparently continues to be fairly strong. So it's -- there's a lot of pressure on wages and benefits. And a lot of times in some markets, it's just very hard to feel all your open positions, and so you need to go to agencies in some cases, which is a very expensive way to run a hotel. And so we're nervous about -- or cautious I maybe should say about being late cycle and feeling margin pressures from particularly in wages and benefits, but insurance and real estate taxes are also creeping up. And so, we're trying to be more conservative and we're trying to be mindful of our leverage levels and mindful of the amount of renovations that we're doing. So, I think there are a couple of hundred million dollars that we'll invest in hotels in 2019. It will be more than a lot of RIETs will invest in acquisitions in a year. So I think the acquisitions we've done so far coupled with our hotel renovations is -- we'll probably will be happy with that for this year. Although I do expect that we'll make additional acquisitions between now and the end of the year.

And just as a follow-up to that. What type of buyers, without naming names specifically, are you losing out to? Who's being more aggressive out there in the marketplace?

I haven't seen an announcement of who won the bids that we lost. So I can't say for sure. But I think that they were seeing some institutional investors, private equity, family offices, high net worth individuals. My sense is that accepting in unusual situations that most of the lodging REITs have sort of taken the same approach as we are. They are being a little more cautious about where they invest and at what price.

Thank you, John.

Thank you.

Ladies and gentlemen, this will conclude our question-and-answer session. I would like to hand the conference back to John Murray for any closing remarks.

Thank you for joining us today. We look forward to seeing you at The NYU Hotel Conference or NAREIT in early June. Thank you.

Thank you, sir. Ladies and gentlemen, the conference has concluded. Thank you for attending today's presentation. At this time, you may disconnect your lines.