Summit Hotel Properties, Inc.
Q3 2013 Earnings Call Transcript

Published: 6 Nov 2013

[Operator:]

Good day, ladies and gentlemen and welcome to the Third Quarter 2013 Summit Hotel Properties Inc. Earnings Conference Call. My name is Lacy and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of the presentation. As a reminder this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today Dan Boyum, Vice President, of Investor Relations. Please proceed.

[Dan Boyum:]

Thank you, Lacy and good morning. I’m joined today by Summit Hotel Properties’ President and Chief Executive Officer, Dan Hansen; and Executive Vice President and Chief Financial Officer, Stuart Becker. Dan and Stuart have prepared comments related to our third quarter 2013 release and filing. Following these comments you will have an opportunity to address any related questions that you may have. As a reminder this conference call is the property of Summit Hotel Properties. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Summit is prohibited. Please also note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to numerous risks and uncertainties both known and unknown as described in our 10-K for 2012 and our other SEC filings. These risks and uncertainties could cause results to differ materially from those expressed or implied by our comments. Forward-looking statements that we make today are effective only as of today, November 6, 2013. We undertake no duty to update them later. Our earnings release contains reconciliations to non-GAAP financial measures referenced during this call. If you do not have a copy of our release you may view and print it from our website at shpreit.com. Please welcome Summit Hotel Properties’ President and Chief Executive Officer, Dan Hansen.

[Daniel P. Hansen:]

Thanks, Dan. The third quarter had a lot of moving parts. So let me break down what we believe to be the important factors. Our same-store RevPAR growth was up 6.2% over the same quarter of last year in which we reported RevPAR growth of 12.9%. This same-store number compares favorably to the upscale segment of 5.3%. Despite a tough comparison of 11.6% pro forma RevPAR growth in the third quarter 2012 we achieved pro forma RevPAR growth of 3.3% for the third quarter 2013. And if you exclude the five recently acquired New Orleans hotels it was 5.1%, which is in inline with the overall U.S. upscale RevPAR growth of 5.3% as reported by Smith Travel. For the third quarter we achieved adjusted FFO of $0.25 per share aided by a $0.02 tax benefit in the quarter. On our last call we provided adjusted FFO guidance of $0.24 to $0.26. However, the September public offering of 17.25 million shares of common stock had an expected and short-term dilutive effect which would have reduced adjusted FFO guidance to a new range of $0.23 to $0.25. The proceeds from the offering have been invested in two hotels since the close of the quarter with three additional hotels under contract and expected to close by year-end. All five of these acquisitions are expected to provide positive results in 2014. With an expanded unsecured credit facility, freshly renovated properties, terrific acquisitions, an experienced team and opportunities to recycle capital we have a great platform and a clear runway as we enter what is expected to be another positive growth year for the hotel industry. We did experience softening in RevPAR growth in the latter half of the third quarter and into October. We attribute much of the softening to issues with the government sequester and a potential and ultimate shutdown. We had tough comparisons in several of our Southeast hotels that received outsized RevPAR growth in the third and fourth quarter of 2012. These Southeast hotels generated outsize occupancy and revenue growth as a result of significant FEMA and insurance related travel, post Hurricane Isaac. In addition several of our markets, El Paso, Fort Worth Flagstaff and Tampa were particularly affected by specific government group cancellations. We also saw a significant reduction in anticipated group business in our Indianapolis hotels. These recently acquired hotels from our perspective have benefited largely from a focus on group business. When group travel did not build to expectation this year. We didn’t have enough negotiated transient business and business transient relationships to offset the group fall off. We’ve worked directly with our hotel management team to change the revenue mix to better manage during periods of softness in group business. These events combine to hinder our ability to generate revenue and expand margins in-line with our internal expectations. Hotel EBITDA margins improved 60 basis points to 34.8%. We believe there is room for additional margin expansion and have been working closely with our management companies to focus on developing a better segmentation mix and placing less reliance on group demand at several of our recently acquired hotels. We believe these actions and strategies have already taken effect. The softening is largely a result of a few specific areas much of which is out of our control. What is in our control has been addressed and you can be assured we’ll solve all challenges just as we have in the past. With that I will turn it over to Stu Becker, our CFO.

[Stuart J. Becker:]

Thanks, Dan. Good morning everyone. As a brief summary of the quarter I provide the following. For the quarter ended September 30, 2013 our same-store generated RevPAR growth of 6.2% when compared to the same quarter in 2012. As we noted we are pleased with that same store RevPAR growth for the quarter, especially when you consider the reported same-store of 12.9% in the third quarter 2012. A combined 19% growth over two years is outstanding and reflects in part positive results from renovations at many of our hotels. Third quarter same-store RevPAR growth consisted of 5.5% ADR growth and 47 basis points of occupancy growth. On a pro forma basis RevPAR growth for the quarter was 3.3%. When excluding the New Orleans hotels we generated RevPAR growth of 5.1% which was at the low end of our expectations. Excluding the New Orleans hotels the growth consisted of 5.8% ADR growth and 60 basis points of occupancy compression. As we are just finishing up the last of the renovations in the New Orleans market we are very positive on this group of hotels and are expecting great results in 2014. Pro forma hotel EBITDA for third quarter 2013 was $28.6 million, an increase of 5.3% as compared to second quarter 2012. Hotel EBITDA margins for the quarter were 34.8% which amounts to expansion of 80 basis points as compared to third quarter 2012. Excluding the New Orleans hotels pro forma hotel EBITDA margins expanded by 70 basis points for the quarter as compared to the third quarter 2012. Margin expansion did not fully meet our expectations for the quarter. Both the slowdown in revenue as we discussed previously and lack of focus in several of our hotel management teams, on cost controls to counter softening revenue contribute to less than expected margin expansion. As Dan mentioned we have taken corrective actions in both our internal operations team and management companies are extremely focused on expense control measures. Adjusted EBITDA for the third quarter 2013 totaled $26.5 million, an increase of 73.7% over third quarter 2012. Our G&A expense in nominal dollars grew by $0.5 million in comparison to third quarter 2012. The increase largely reflects the overall growth in our company. Our G&A run rate includes a lower accrual for executive bonuses, the short-term diluted affects of the last capital raise will reduce the bonus available to our team. Our balance sheet is solid and allows us to execute on our acquisition strategy. As of quarter-end our leverage measured by funded debt-to-EBITDA was 3.7 times. Subsequent to quarter-end we replaced our $150 million senior secured credit facility with a $300 million unsecured facility; $225 million in the form of a revolver and $75 million term debt. As a result we have been able to achieve approximately 50 basis points reduction in funding cost. We anticipate renovation capital spending will be in the range of $15 million to $19 million for fourth quarter on 11 of our hotels, following $12.3 million spent in the third quarter 2013. A majority of capital spend over the past several quarters was on same-store renovations, partially explaining our outsized same-store RevPAR growth performance over the past several quarters. On a go forward basis we anticipate that majority of our capital spend will be for renovations on recently acquired hotels. We expect to see the same positive RevPAR growth results we’ve experience with our same store renovations. Regarding our outlook for fourth quarter 2013 we are providing same store RevPAR growth guidance of 1.5% to 3.5% and pro forma RevPAR growth guidance of 2.5% to plus 4.5%. As a reminder our same stores generated 15.3% RevPAR growth in the fourth quarter of 2012 and pro forma growth was 12.4%. The guidance anticipates 110 to 160 basis points of disruptions as a results of renovations at our hotels during the quarter. As well as an additional 45 to 50 basis points of disruption from the government shutdown in October. Our outlook for adjusted FFO for fully diluted unit is $0.12 to $0.14, with disruptions from renovations and the government shutdowns affecting adjusted FFO by $800,000 to $1.2 million.

[Daniel P. Hansen:]

Thanks Stu. After exceeding consensus estimates for six consecutive quarter our third quarter results fell little short of our internal expectations. [Big flow] from our management companies in August and a soft September eroded much of the gains we achieve in July. However we still fit in a great spot for per share growth in 2014 , we are flush with capital we are patient and we are poised for a very strong year ahead. With that let's open the lines for questions.

[Operator:]

(Operator Instructions). And our first question will come from the line of Jordan Sadler with KeyBanc Capital Markets please proceed.

[Jordan Sadler:]

Hey it's guys [Austin Washerman] here with Jordan. You just ran through some of the anticipated disruption in the fourth quarter from the renovations that you’ve got planned as well as from government disruption. How much of the disruption from renovations was previously in guidance?

[Daniel P. Hansen:]

I would say that as we started the year we have to make some assumptions on what hotels will do renovations to, that somewhat becomes muted we worked throughout the year. I would say that that has been up slightly from where we started the year on our guidance. But obviously probably 50 basis points of that is probably additional renovation work that will be disruptive this quarter then we originally said the guidance.

[Jordan Sadler:]

Thanks that’s helpful. And then a little bit on past calls you’ve mentioned that you felt the government cutbacks impact your portfolio less than some of the peers. I mean do you still feel that, that’s the case going forward?

[Daniel P. Hansen:]

Yeah. The government business isn’t just a DC phenomena. There are state capitals, we have two hotels near helicopter plants, we have hotels in El Paso that are near a military base. So I wouldn’t say that categorically we should have more or less disruption it's really a hotel by hotel basis. But the government sequester and the anticipated shutdown in our view, in our portfolio really built through the year. And the smaller groups and the lack of travel surrounding companies that actually work with the government is at some level kind of a shadow demand that softened throughout the quarter. So I don’t think direct government business as a percentage is obviously not a big part of our occupancy but as it blends out in some of these markets there were some specific cancellations that had an effect.

[Jordan Sadler:]

Thanks for the clarification and just one more sort of looking forward away from then the near term disruptions at your Investor Day you talked about the potential to outperform overall U.S. RevPAR growth in 2014 and potentially '15 just given the favorable landscape. Has anything changed in that view?

[Daniel P. Hansen:]

No, nothing has changed in that view for us. We still feel the portfolio's in good shape as it could be. We continue to renovate our hotels. We are selling the non-strategic hotels. We still feel very confident in our ability to execute over the next several quarters into the next several years into the cycle. So nothing has slowed down our enthusiasm and confidence in our portfolio.

[Jordan Sadler:]

Great, thanks for taking the questions.

[Daniel P. Hansen:]

Thanks Austin.

[Operator:]

And our next question will come from the line of Ryan Meliker with MLV & Company. Please proceed.

[Ryan Meliker:]

Good morning guys. So just as a follow up to what you guys were just talking about with Jordan, sounds like within your same store RevPAR guidance for 4Q a lot of this is very one time in nature in terms of the impact of the government shutdown and it’s nothing that you are seeing on a trending basis, are you seeing any recovery now with the government shutdown is behind us I know you talked later in the fourth quarter is lighter in terms of volumes for your portfolio but any color on trends reverting back to what you were seeing before the government shutdown, you hear a major issue?

[Daniel P. Hansen:]

Yeah, actually the tail end of October, shaped up very strong and that recovery is meaningful but it doesn’t eliminate the lost revenue in the first half of October. October is a pretty big component of our fourth quarter and the rebound doesn’t make up for that loss revenue in the first 16 days of the shutdown but yeah, we have seen it strengthen and come back pretty nicely in October.

[Stuart J. Becker:]

Ryan this Stu, just as a little bit more color. Typically on an average fourth quarter 40%-45% of our revenue is realized in October. You think about us as a transient business, customer base largely that November, December you get past Thanksgiving into Christmas tend to be a less impactful time of the year for business travelers. So when we lose first couple of weeks in October that can be impactful for the whole quarter.

[Ryan Meliker:]

That makes sense, and then with regards to the bounce back that you have seen in the back half of October, does your same store guidance of 1.5% to 3.0%, pro forma guidance of 2.5% to 4.5% in 4Q, assume a continuation of that bounce back or is more modest?

[Stuart J. Becker:]

More modest.

[Ryan Meliker:]

Okay, that’s helpful. And then with regards to your projected asset sales, you outlined 10 hotels that you are moving into held for sale, any timeline of when those asset sales will come to fruition are we talking near term over the next couple of months or are we talking over the next year or so?

[Daniel P. Hansen:]

We would hope we get many of these close prior to year-end. These aren't materially different hotels than we talked about disposing of over the last year. So they take time, there is a lot of factors, there is very low certainty of close. For example, we had several hotels that were scheduled to close already but the government shutdown put the SBA loan officers on furlough which shut everything down. So as you can imagine loan officers getting back to work then have a backlog and it’s not just flipping the switch, it’s takes this process. So there is always several things that drag this out but this group we feel we are at a point where we have a high level of confidence they will get close in the shorter term. We think it’s shorter than a year out but as I said the first part of your question is we would expect a number of those to be close here before the end of the year.

[Ryan Meliker:]

Okay, that’s helpful. And then just real quickly, just help me to understand with your -- in terms of your fourth quarter outlook and the portfolio, you outlined I believe 95 hotels in the FFO guidance you had 92 at the end of the quarter, you closed on two more assets, what’s the third one, is it Santa Barbara, is it Houston, is it the Hyatt Place Minneapolis?

[Daniel P. Hansen:]

So the numbers that we have got in our outlook relative to, I guess you looked at foot note numbers two.

[Ryan Meliker:]

Footnote number two says adjusted 0.FFO guidance on 95 hotels, and we know you ended the quarter at 92, you -- two closed since the end of the quarter, so what’s the -- that you are assuming is going to close this quarter?

[Daniel P. Hansen:]

The Houston hotel.

[Ryan Meliker:]

Houston, okay, and...

[Daniel P. Hansen:]

We have actually added, in that outlook we have added two hotels we anticipate to close before the end of the quarter and disposed of two.

[Ryan Meliker:]

So you have added Houston and...?

[Daniel P. Hansen:]

And Santa Barbara we included in that number.

[Ryan Meliker:]

Okay, and what [percentage] is scheduled for closing of Minneapolis then?

[Daniel P. Hansen:]

Minneapolis we'd anticipate prior to year-end, I think probably closer to prior, right at year end we've sort of run some soft openings Hyatt has run. We still get a few rooms to complete on that. So I would think absolutely by the end of the year that will be close.

[Ryan Meliker:]

Okay. But that’s not in your guidance.

[Stuart J. Becker:]

It is in guidance only in the sense that, that asset would close by the end of the year. I don’t think it will be impactful to revenue or earnings at all.

[Ryan Meliker:]

Okay, that’s helpful. And then two assets also being sold in the guidance, okay. And then just one last thing and I will jump out and let somebody else jump in, you talked a little bit about fourth quarter renovations. I know fourth quarter makes a lot sense for you guys to renovate your hotels, can you just tell us how this RevPAR disruption is relative to 4Q last year and then how the renovation schedule is shaping up for 2014?

[Stuart J. Becker:]

I think we’re relative to disruption probably little stronger this quarter than last year, probably just the work that we’re doing on the hotels that we’re doing the work on that was the first part of your question, I’m sorry the second part of it?

[Ryan Meliker:]

Was how is the renovation schedule is shaping up for 2014 and are you expecting more disruption or about the same as what you saw this year?

[Stuart J. Becker:]

Got you, yeah, we would anticipate 30%, 40% less renovation in dollar spend next year is sort of our preliminary budget. We’ll provide that at Q4, but I would anticipate a 30%, 40% reduction in dollar spend.

[Ryan Meliker:]

Great, that’s all from me, thanks a lot.

[Daniel P. Hansen:]

Thanks Ryan.

[Operator:]

And our next question will come from the line of David Loeb with Baird. Please proceed.

[David Loeb:]

Good morning gentlemen.

[Daniel P. Hansen:]

Good morning David.

[David Loeb:]

Can you just go a little deeper into the transient weakness and how long it's going to take to correct that, was this stuff you anticipated when you underwrote those hotels or was is kind of the surprised you as got into things.

[Daniel P. Hansen:]

We didn't underwrite -- are you referring to Indianapolis hotels?

[David Loeb:]

Yeah, I think you mentioned a few was it just Indianapolis that has the group cancelation that didn’t have the transients to make up for that.

[Daniel P. Hansen:]

I think in New Orleans and Indianapolis were two markets that there was less transient demand than we originally anticipated not significantly. We knew New Orleans was going to be weak in the second and third quarter. We accelerate some renovations to take advantage of that soft period, but as some of the smaller groups didn’t show up, canceled or rescheduled some of the transient business was harder to come by. So there was a larger effect in the New Orleans mainly because we have some rooms out of service for renovation. In Indianapolis that’s a market with two fairly reasonably built hotels that were the benefit of new conventions and a lot of early demand. So as we got in there it was clear that there was opportunity for work with segmentation and more broad-based sales and marketing to transient and ways to manage the soft shoulder periods. It’s not a negative really on the market on hotels it's just hotel mature and our team gets in there we’re very good at finding opportunities to balance that out. So you have to go through periods and cycles of negotiated rate and also working with the local businesses. So I wouldn’t say it's something that you just flip a switch but something that you work through over several quarters. So we’re still very optimistic and feel very good about our opportunities out there.

[David Loeb:]

In Indianapolis it was your operator that opened those other hotels right, so you think they would anticipated some shift in the mix of business, is that fair?

[Daniel P. Hansen:]

That’s fair, I think they have done a nice job getting the hotels opened up and stabilized. Now it’s expanding that business. They’ve been very cooperative, they’re good partner of ours and we’re excited to be challenging these issues together with them.

[David Loeb:]

Okay. on the dispositions it’s great to see you exiting a number of smaller markets and I would anticipate that your RevPAR is going to go up as a result of this. Are there others beyond this wave that you would like to think about exiting, other hotels of this small room count or tertiary markets.

[Daniel P. Hansen:]

This group of 10 is pretty much cleans up a lot of the recycling that we were delayed in from the IPO to-date. There always be a small part of our portfolio that maybe less strategic that we may have opportunities to recycle out of, so recycling capital for us isn't a one-time event it’s a continual event but as far as number of hotels and smaller hotels this cleans up a big portion of it which really is part of the excitement about going forward. We’ve exited markets that for our company don’t have the same growth profile as what we’re buying and I think that’s a good transition to make.

[David Loeb:]

Okay. Finally on acquisition front you mentioned having a very strong pipeline, I guess someone asked about the other side of the balance sheet for that. How would you see financing growth, what’s your appetite for heading towards the top end of your leverage and what’s your appetite for considering equity, have you acquired hotels with that?

[Stuart J. Becker:]

This is Stuart. Relative to you balance sheet and we’re thrilled with where our balance sheet is today. We have capacity to be able to grow through acquisitions without having to raise capital. We’ve changed from a $150 million secured facility to $300 million unsecured credit facility, there's little usage on that today. So if you look at that from a capacity standpoint we’ve got $300 million just as advance on our line but we talked about funded debt-to-EBITDA at 3.7 times. I think we could easily make acquisitions in that $250 million to $300 million range and still leave ourselves five times funded debt-to-EBITDA which would be substantially below our sort of maximum line look at six times. So we feel good we’ve got some good capacity now to continue on our acquisition strategy.

[David Loeb:]

Okay, great. Thank you.

[Daniel P. Hansen:]

Thanks, David.

[Operator:]

And our next question will come from the line of Wes Golladay with RBC Capital Markets. Please proceed.

[Wes Golladay:]

Hey good morning guys now you guys have done a lot of acquisitions over the last few years. Are you going to start to look to use the ATM or start generating using free cash flow to buy the assets, is that may be a preferred method at the moment with the equity price where it is?

[Daniel P. Hansen:]

Yeah obviously we’re probably further away from an equity raise than we’ve been since IPO. And we do have a strong pipeline but I think it’s natural for may be the pace to slow. We’ve got the capital, human capital to execute the financial capital but I think a good way to think about is we’re going to be very deliberate on how we acquire assets. The ATM as we’ve said when we set it up was that we had no immediate plans to use it and have not used it. So I think with the capital or the capacity we have I wouldn’t say that, that's at top of our list either.

[Wes Golladay:]

Okay. And then as we look -- we discussed 2014 a little bit with renovations from the steps for the acquisitions but when we get to the latter half of ’14 and then 2015 that should be a pretty clean run rate for you guys, is that kind of an inflection point as far as disruption goes?

[Stuart J. Becker:]

Yeah this is Stu. I think that’s right. The way we’ve done, since IPO we’ve put capital and made some really we think are strategic acquisitions. We’ve done significant amount of renovations we’ll continue to finish up renovations on these recently acquired hotels and what we find ourselves is really strong embedded earnings per share growth. I mean we realize that over the next couple of years with the supply still very much at a minimum these days and what we’ve put together as a portfolio we expect some really strong earnings over the next two years from our company.

[Wes Golladay:]

Okay. So going back to the acquisitions to the -- you probably get more free cash flow I guess target your acquisition pipeline with the lower renovations and higher free cash flow?

[Stuart J. Becker:]

I think that’s fair to say.

[Wes Golladay:]

Okay. Thanks a lot guys.

[Operator:]

(Operator Instructions). And our next question will come from the line of Chris Woronka with Deutsche Bank. Please proceed.

[Chris Woronka:]

Hey, good morning guys. Dan I guess as you think about 2014 and some of these markets that probably end up under performing this year New Orleans and Indianapolis a few others and for different reasons but how do you think about those, do you think some of those same things that happened this year. So overall do you think an easy comp will help and then things also get better or how do you think about some of your most important markets next year?

[Daniel P. Hansen:]

I would say in New Orleans specifically a solid I think that the convention calendar and the market is built and rebounded, everything in the convention market and group market cycles. There are some new markets that are opening up to go after some conventions but the bigger markets Las Vegas, New Orleans, Orlando, those type of markets are very sought after markets for big conventions. I think there probably is a trend away from the huge megacity wide events that there have been in the past and may be smaller and more regional events. But we are still very positive on New Orleans for next year and the following years. We’ve got freshly renovated properties we’ve got dominant brands and we’ve got a great asset management team in place to work and build it out. So I don’t think there is an ongoing problem. We hit it early and we identified it early. We didn’t buy it for the short term. We bought for the balance of the cycle and we think it compares very well.

[Chris Woronka:]

Okay great and then on the pipeline, on the acquisition pipeline what are you seeing from, I guess sellers these days, are they I mean are expectations going up, are they going down and you how are you guys there, are you seeing there a variance in expectations among different groups of sellers?

[Daniel P. Hansen:]

Yeah, the short answer is yes. I think that some sellers have because of strength in bound they expect better pricing, some sellers are more desperate. They are later in the cycle and they need capital. So I think there is some delta between owners and based on their personal capital situation, whether they need to have debt coming due whether they need a renovation. And that’s our job is to find those assets that have that dislocation and to take advantage of those. That’s why sometime it's hard to pinpoint specific assets in our pipeline because they move up. Now we have assets that as we dig deeper in and due diligence towards the end there may be one or two things that tighten up our numbers and we may have something that we have the ability to push back on pricing, that from a return standpoint moves it up. So it is pretty fluid and there is quite a delta between sellers. Logically pricing should be better. Interest rates have risen there. We are little bit further in the cycle. So I think that’s only natural for us to expect and we will continue to push back on pricing where appropriate. But yeah, I think because of the fragmentation of the select service industry there will always be opportunities for us.

[Chris Woronka:]

Okay, got you. And then just finally, I think you covered some of the margin issues pretty well and some of the things you identified with your new managers and operators. But I mean in the event you have, first of all if you have any care issues, do you have any care provisions in the contracts and any, I guess hopefully unlike the event that some of these issues crop up again what kind of would be some potential outcomes?

[Daniel P. Hansen:]

Yeah I think every -- we’ve got six new management companies over the last year. So every management contract is a little bit different. I don’t think any one of the management companies is we label them as good or bad. I think they are -- we label them all as partners and there are certain times when certain properties don’t meet our expectations and I don’t think it's a fair assumption to assume one’s good and one's bad. It's really a property by property focus for us. It's a people business. We have a general manager, a director of sales in these hotels that can make the difference. And so the focus really in our view is not so much on the management company but on the people in place. I mean there are sophistication levels that vary but most of our management companies have embraced technology, revenue management, expense management but where the rubber meets the road in the hotel is where the work needs to be done. So you know as far as care provisions for the management company that, as I said that does vary but care provisions in the hotel is pretty simple. I think everybody, our management companies and our team included is focused on generating performance and where that’s not met we need to change our leaders in the hotel. So I hope that answers your question, Chris.

[Chris Woronka:]

Yeah and actually just one more if I could. You know I know that the Fort Smith market those were several new hotels that you identified as being for sale this quarter. Did that -- I am guessing you had those on your radar for a while, but is your decision to sell them kind of accelerated by the -- is there a more heavier government or military contingence there?

[Daniel P. Hansen:]

No, actually it was interest from a buyer. We’re opportunistic and we had a buyer that was interested in two of our smaller hotels in that market and wanted to make an offer for all three together. So as always we look at the cost of the opportunities set in each market. There was some renovation coming due and we felt it was a good time to exit the market. So it wasn’t specifically tied to any government concern but really just looking at the opportunity to redeploy capital into what would be a better growth market for us.

[Chris Woronka:]

Okay, got it, very good. Thanks Dan.

[Operator:]

At this time we have no further questions in queue. I would like to turn the call back to Dan Hansen, CEO for closing comments.

[Daniel P. Hansen:]

I'd just like to close today by borrowing a quote from Arne Sorenson that he used on Marriott’s call which is "success is never final". We continue to work diligently to unlock value in our portfolio through strategic investment and focused asset management and that we appreciate you dialing in, look forward to the next call. Thanks everyone.

[Operator:]

Thank you for your participation in today’s conference. This concludes the presentation. You may all disconnect. Good day everyone.