Aaron Reyes - VP Corporate Finance John Arabia - Chief Executive Officer Bryan Giglia - Chief Financial Officer Marc Hoffman - Chief Operating Officer Robert Springer - Chief Investment Officer

Anthony Powell - Barclays Smedes Rose - Citi Lukas Hartwich - Green Street Advisors Ryan Meliker - Canaccord Genuity Michael Bellisario - Baird Bill Crow - Raymond James Shaun Kelley - Bank of America Chris Woronka - Deutsche Bank Jeff Donnelly - Wells Fargo Rich Hightower - Evercore Bryan Mayer - FBR & Company Stephen Grambling - Goldman Sachs

Thank you, Amy, and good morning everyone. By now you should have all received the copy of our first quarter earnings release and supplemental, which were released yesterday.

If you do not yet have a copy you can access them on our website. Before we begin I would like to remind everyone that this call contains forward-looking statements that are subject to risks and uncertainties including those described in our press release, 10-K, and other filings with the SEC, which could cause actual results to differ materially from those projected.

We caution you to consider those factors in evaluating our forward-looking statements. We also note that this call may contain non-GAAP financial information including adjusted EBITDA, adjusted FFO and hotel adjusted EBITDA margins.

We are providing that information as a supplement to information prepared in accordance with Generally Accepted Accounting Principles. With us on the call today are John Arabia, President and Chief Executive Officer; Bryan Giglia, Chief Financial Officer; and Marc Hoffman, Chief Operating Officer; and Robert Springer, Chief Investment Officer.

After our remarks, we will be available to answer your questions. With that, I would like to turn the call over to John.

Please go ahead.

Good morning everyone and thank you for joining us today. I’ll begin the call today by providing an overview of our first quarter operating results and then share our approach to external growth within the current investment environment.

Afterwards Bryan will provide additional color of our balance sheet, cash balance and earnings guidance. Similar to our performance during the fourth quarter of last year, our first quarter RevPAR and hotel profits materially exceeded the top end of our expectations.

For full year RevPAR growth of 5.5%, which was driven entirely by an increase in run rates, exceeded the top line of our guidance by 100 basis points. More importantly our same-store operating level EBITDA increased by 14.5%, driven by a 5.4% increase in same-store portfolio hotel revenues and a 220 basis point increase in hotel EBITDA margins.

These figures were higher than expected and as a result, first quarter adjusted EBITDA and adjusted FFO per diluted share materially exceeded the high end of our guidance for the second quarter in a row. Our portfolio performance in the first quarter benefitted from anticipated events including the presidential inauguration and the Women's March, which boosted our first quarter RevPar by approximately a 110 basis points.

As well as the favorable shift in the Easter holidays, which will reverse itself in the second quarter. With that said underlying fundamentals within the portfolio were better than anticipated even after adjusting for these anticipated events.

19 of our 27 hotels delivered positive first quarter RevPar growth while 18 of our 27 hotels met or exceeded their quarterly RevPar budgets. This figure stands in stark contrast to the second and third quarter of last year when the preponderance of the hotels within our portfolio fell short of quarterly budgets.

I'll particularly note, is the materially stronger than anticipated performance of our two recently repositioned hotels, The Boston Park Plaza and Wailea Beach Resort. We are very pleased with the recent performance of these two hotels, as they are ramping up faster than anticipated, are exceeding or underwriting and yet continue to have compelling growth prospects.

In the first quarter Boston Park Plaza and Wailea Beach Resort generated RevPar gains of 26% and 18% respectively. Furthermore, at the end of the first quarter group pace of Boston Park Plaza and Wailea Beach Resort were up 28% and 21% respectively, due largely due to increases in room rates as both properties are now able to attract higher rated, more profitable groups.

Collectively these two hotels exceeded their first quarter EBITDA budgets by $2 million as transient occupancy in Boston and transient rates in Wailea came in far better than anticipated. These two hotels are now expected to produce EBITDA that is $21 million greater than they did in 2016 excluding the impact of the $5 million Marriott cash flow guarantee.

We remain highly confident that the invested capital and operational modifications at both hotels are working and should deliver outsize growth in revenues and profits over the next few years particularly as group business of both hotels improves. So let's talk in greater detail about the quarter and recent booking trends.

While we continue to believe that there is a wide range of potential RevPar outcomes in 2017 and the supply in certain markets will continue to weigh on RevPar growth at certain hotels, our outlook for 2017 has recently improved. As you'll remember we witnessed highly normal groups slippage in mid 2016 as our operators ended up back filling room with discounted transient business, resulting in downward pressure on average daily rates.

As a result we reduced our full year 2016 RevPAR forecast as the year progressed. While similarly in 2017 we are thus far witnessing more stable terms.

In the first quarter of 2017 groups actualized on average of 89% of the room blocks, which exceeded our forecast of 85% in the first quarter historic range of 85% to 88%. Groups not only showed up in larger numbers, but also increased their out of room spend.

Group banquet and audio-visual revenue for group room increased 9.4% in the first quarter driven impact by a more favorable calendar, but also by increase in corporate groups which lends credence the group's trends within our portfolio remains healthy. We continue to see last minute increases in banquet spend which makes forecasting more difficult, but is good news nonetheless.

Similarly, group production in the quarter improved resulting in an increase in our full year group pace. In the quarter -- for the quarter group bookings which are volatile and represent approximately 11% of our first quarter group rooms increased 41%.

Similarly, in the quarter group production for our current and future periods was the second strongest first quarter production since 2007. Because of these positive recent group booking trends our 2017 group pace excluding our two Houston hotels, did witness sizable group cancellations later in 2016, increased to a positive 3.1%.

Furthermore, just over 85% of our budget group room nights for full year 2017 are already on the books, which is above the high end of the 83% to 85% range witnessed in the past three years. Turning to margins total comparable operating expenses increased only 2.3% in the quarter resulting in a 230 basis points increase in hotel EBITDA margins.

Increased margin stem primarily from the Easter shift, higher room rates, productivity initiatives at our larger group hotels and lower energy cost. Excluding the Wailea Beach Resort which was under significant renovation throughout 2016 comparable property level EBITDA margins increased a respectable 190 basis points.

Now let's turn to our external growth initiatives. Over the past 18 months we've sold 3 hotels in an online platform for gross proceeds of nearly $735 million which represents a trailing EBITDA multiple of approximately 22 times.

We characterize these dispositions as either opportunistic in terms of pricing or strategic in advancing our corporate strategy, as many of you are aware of strategy as outlined in our recent annual shareholder ladder, is to own long-term relevant real estate. On strategy hotels that we deem to be long-term relevant real estate account for the lion share of our earnings and total asset value.

That’s said a small portion of our asset value, but a greater portion of the number of hotels and our collective energy consists of commodity or pedestrian hotels that we believe have the inferior long term growth prospect. We view this off-strategy hotels as a bank of value that we expect to methodically harvest and to reinvest into long term relative real estate.

As a result, we expect to continue to dispose of these lower quality assets while at the same time capital recycling meets proceeds in a portion of our sizable current cash balance in the superior assets all the while maintaining our significant balance sheet flexibility and strength. These capital recycling initiatives are likely to take time, but we believe they will unlock unrealized earnings potential and produce sheer superior long term results for our stakeholders.

In regards to the current investment environment, we have witnessed a marginal increase in the quantity and quality of acquisition opportunities while at the same time the number of hotel buyers and pricing expectations remains high. Overall we believe the current transaction environment is generally healthy and then it is accommodated to our capital recycling strategy.

In summary, our portfolio delivered outsized earnings growth in the first quarter of 2017, added by the Presidential inauguration and Easter shift and driven by the contributions of our repositioned Boston and Wailea hotels and generally stronger pricing within our portfolio. We expect our two repositioned hotels to continue to address strong performance as they continue to ramp up for the remainder of 2017 offsetting somewhat muted growth in the rest of the portfolio.

Additionally, our low levered balance sheet and material investment capacity position us well to increase earnings through disciplined external growth and capital recycling. With that let me turn the call over to Bryan for more details regarding our balance sheet as well as an updated outlook regarding our 2017 earnings guidance.

Bryan, please go ahead.

Thank you, John and good morning everyone. As we discussed a few on our last call, we successfully completed our senior un-secured notes offering and unencumbered another hotel in the first quarter.

Inclusive of these transactions we had 442 million of unrestricted cash on hand and 1.2 billion of consolidated debt and preferred securities at the end of the quarter. A large portion of this cash balance represents utilized earnings -- unrealized earnings for our shareholders that will be realized once deployed into quality hotels.

Following the completion of our first quarter financing activity, we have extended the weighted average terms of maturity from four to six years and decreased our weighted average interest rate to 4.2%. Our variable rate debt as a percentage of total debt stands at 22% and 43% of our debt is unsecured.

We now have 22 unencumbered hotels that collectively generated 246 million of EBITDA over the trailing 12-month period and nearly 70% of our EBITDA is now unencumbered. In addition to cash on hand, we have an undrawn $400 million credit facility and no debt maturities before August 2019.

Our balance sheet is the strongest it has ever been and we retain considerable financial flexibility. Now turning to the second quarter and updated full year 2017 guidance.

A full reconciliation can be found on Page 22 of our supplemental as well as in our earnings release. For the second quarter, we expect total portfolio RevPAR to increase between 075% and 2.75%.

We expect second quarter adjusted EBITDA to be between $96 million and $99 million and adjusted FFO per diluted share to be between $0.35 and $0.37. For the full year, we expect total portfolio RevPAR to grow between 1.5% and 3.5%.

As John stated earlier, we increased the midpoint of our guidance range to reflect our fourth quarter performance. This guidance reflects all 27 of our hotels and we estimate that the Wailea Beach Resort will contribute 150 to 200 basis points of the total portfolio growth as the hotel benefits from their recently completed repositioning.

Our full year 2017 adjusted EBITDA guidance was also increased and ranges from $316 million to $334 million and our full year adjusted FFO per diluted share ranges from $1.14 to $1.22. Despite our first quarter performance, we remain cautious and have kept our outlook for the remainder of the year relatively unchanged from prior guidance.

We've raised the bottom end of our RevPAR guidance to reflect the first quarter outperformance but our range does not as assume meaningful acceleration in business travel for the remainder of the year. While this may prove to be conservative, we need to see more signs similar to what we saw in the first quarter before we are ready to increase further.

Now turning to dividends. Our board of directors has declared a $0.05 per common share dividend for the second quarter consistent with our practice and prior years, we expect to continue to pay a regular quarterly cash dividend of $0.05 per share of common stock throughout 2017.

To the extent, that the regular quarterly common dividend for 2017 does not satisfy our annual distribution requirements. We would expect to pay a catchup dividend in early 2018 that would generally be equal to our remaining taxable income.

In addition to common dividends, our board has also approved routine quarterly distributions on both outstanding series of our preferred securities. With that I'd like to now open the call to questions.

Amy, please go ahead.

Question on the group trends that you gave a lot of details on, could you maybe give some detail on group trends excluding Boston and Wailea?

Yeah hold on one second, let's grab those. Anthony we're going to have to grab those in one second, we'll get right back to you, how about you give another question?

Yeah, I guess on acquisitions, given the early success of the redevelopments you've done as look towards deals over the next year or so. Would you do another one like large scale acquisitions and renovation projects or are you holding back on that given kind a where we are in a cycle?

So it will be something that we would consider. I don't think that that is our only investment strategy as one might take away from the fact that are two of our last three acquisitions were deter repositioning.

We would also come down to what we thought we could do with the asset, the potential upside in the asset and I think it's fair to say as well that we could acquire something, but then take our time on repositioning. So, I think that’s on the table, but I wouldn’t say that that’s a foregone conclusion.

Got it. And maybe just one more in terms of the discounting.

I believe a couple of quarters ago, you said that you were concern about the amount of discounting in the sector. It seems like that’s been taken care of with more group strength, but outside of that are you still seeing a lot of discounting overall or do you keep more pricing power [indiscernible]?

Frustration of last year was were at nearly all time high occupancy levels both as a company and as an industry and pricing power remain somewhat elusive. What was going on in the details of that was our groups were not showing up as anticipated and several of our operators were falling back to more discounted transient rates.

As a result, the overall rates were not as strong as anticipated that was a general theme to 2016. What our asset management team, Marc Hoffman and the rest of the asset management team have been working with our operators is to make sure that we are taking on one more groups, but also going back and negotiating corporate accounts whereas before we had a more aggressive rate strategy of trying to fill in more business through borrow rates.

So, I look at that as a somewhat more defensive strategy, that defensive strategy thus far has worked because its resulted in a little bit more pricing pressure. So, I think we’re set up fairly well this year.

All right. Great.

That’s it for me. Thank you.

Yeah. Anthony its Marc Hoffman.

I have your answers on the group trends. So, on the group trends for in the year, for all future years were down set up 41% within the quarter.

If you take out Boston Park Plaza and Wailea were up 28%. And on the information in the year -- for the year for pick up just for the hotels we were up 15.7% and without Boston and Wailea, we were up 13 point.

It’s a pretty raw based strength it seems like.

Correct, yes. Still strong, but less strong than the other two.

All right. Got it.

Thank you.

I wanted to ask if you can just maybe talk about your San Francisco hotel a little more, it's how that fairly well in the quarter. And I was just wondering as the year progresses how was the group looking at that asset and just the market overall.

If you could just provide some colors on that would be great.

Sure. And there is been a lot of attention focused on San Francisco this year, the first quarter San Francisco we held our own as a destination next to market Dero [ph].

Also we participated in the healthcare conference, so I think three to four we didn’t -- we had not participated and they gave us a little bit of boost. Smedes, I would not anticipate that we are immune from what will transpire in San Francisco particularly over the next several quarters.

And we fully anticipated RevPAR to decline in that market as one of our major demand generators for the market as overall with that's compression to come under the knife, that we believe is a well understood just in terms of the number of cancellations that have been at Moscone, the number of the reduction in terms of compression nights I think we're down roughly 20 compression nights in the city this year. That's going to have an impact even though we are further away from Moscone [ph] that is going to impact transient rate and competition for in house group.

So well I think we held our own and were particularly proud of the team up there and our asset managers that did well in the food and beverage front there and reconcepting there, I would tell you we are prepared for few quarters declines, but we believe when you look through Moscone we are incredibly happy that what will happen on the other side and particularly in 2019 which is just a barn burner for the city.

I know it's a small market for you but what are you seeing Houston I'm just looking at oil rig count, that has been growing for a few months now, or a several months really. Is the body language improving there?

Yes, what we've seen in the market there is probably been some stabilization in the market as you are probably aware and remember these are two while their room counts are high, in terms of earnings these are two relatively small earnings generators for us just considering their level of RevPar. But in your case if you remember back to last year we were being boosted by in house piece of training business that protected us versus the market downturn.

That piece of group business has been a little bit softer this year resulted in cancellations late in 2016, one of the reasons that we looked at our group pace, we think it's fair to look at our group pace in terms of our portfolio without the Houston. That is going to cause some weakness particularly in the first couple of quarters of the year.

But what we have seen from the oil companies I would say is generally stable it feels like things have stabilized a bit.

Perfect. And then it looks like your management contract at the Hilton's St.

Charles is up this year's. Is there any plan to play around with the operations of that asset?

Nothing to report as of yet. We have several hotels with the management contracts role overtime and that' something that we will continue to work on this hotel?

Great, that's it from me. Thanks guys.

Just to the couple of questions. First of all with regards to the group pace that you mentioned earlier John, up 3.1% at Houston.

If I recall last quarter you had indicated you were up 3% excluding Houston so does that mean the acceleration you saw in terms of bookings in the first quarter is more for 2018, 2019 et cetera?

Well, we really didn’t talk about the '18 yet. We will be sometime before we do talk about '18.

There was a modest increase, I felt what is on the last call, that we had talked about the pace was roughly flat. So we saw just a modest increase that what I said on the last call, well if you back and pull the transcripts that we have talked about with pace slows roughly flat.

And so we saw just a modest increase let's say couple hundred basis points give or take, remember that number moves around quite a bit around [Multiple Speakers].

Okay it was flat excluding used to last call.

We're looking right now, -- somewhere along those funds. Yes, I think it was some memory line and get you a specific number, but it was around 1% to 2%.

Okay that’s helpful. See a bit of an uptake and then the second question, I was hoping you could give us some color, John and may be this is Robert too.

It sounds like you guys are filling a little bit more optimistic in terms of way you're the portfolio is going throughout the rest of this year, John, I think in the press release you indicated that, you got increase level of confidence in near term earnings prospects. Does that mean that you're starting to shift how you're looking at acquisitions and underwriting on deal or is that unchanged?

I think it's more of the same, we said probably three plus quarters ago that we were looking to capital a cycle of fair amount of our significant cash balance into acquisitions Robert and the team, several of us have spent a considerable amount of time over the past six to eight months. Underwriting various acquisitions nothing to report to date, I would say it’s a competitive market out there, but I also feel that at some point this year or more likely than not, to get something done.

But I will tell you we're very selective in the types of hotels we're looking at and we're going to hold through the price.

Just wanted to clarify one thing, your group up strategy that you mentioned is that applied for all future periods or more of a 2017 in your term comment?

Really depends on the hotel and turn it over to market, but it depends on the hotel and the time period. Obviously, there are stronger markets, weaker markets, but those we saw that there could be some risk, we grouped up a bit.

And particularly in certain time periods. Marc, I go back to when Robert and Marc were in active pursuit of the [indiscernible], one of our major strategies there particularly around Moscone, renovation of Moscone was making sure we grouped up to fuel more trending compression.

So it really depends.

I think look, we believe that having erring on the side of higher group in all of our hotels makes more sense, it's just something statistically I think overtime is proven out and particularly as you get through this length in the cycle and you look at the years at the end of the cycle, it makes sense to group up at this point in the cycle and we continue to push group in '18 and '19.

That’s helpful and then it sounds like '18 and '19 group paces kind healthy across the board, I know you didn’t give matrix on that, but how does that shape your view of the cycle and when you look at potential acquisitions, when you do your underwriting for the next couple of years, does that give you more or less confidence about where we're heading in the industry?

It’s a great question, it's something that we debate quite a bit as you all know we underwrite down turns into our -- within our investment process we underwrite downturns. Now this has been a prolonged expansion, albeit one that I would say is muted and we continue to underwrite assuming a downturn, but I’ll be honest with you while it's -- I believe very strongly that that helps measure the earnings power of that asset.

And we will be wrong in terms of exactly when in the magnitude of that downturn, but I still think from an investment perspective it's the right way to approach it. When and where in that downturn eventually comes and it will come, I think it's a very a fair question.

That makes sense. And just one from me, maybe aside from a potential deeper turn acquisition out there, but what next to the portfolio on the CapEx from and then are there any redevelopment or expansion projects within your current asset base?

There is a couple of different routine -- we always routine capital projects going on, for example, in Ohio we did the rooms, those finished in February. In Marriott Quincy right now has a really a beautiful redevelopment of the restaurant and lobby space that will be wrapped up here in the not so distant future.

And those things Michael really, we don’t even include those as disruption, those are routine costs, they are regularly going-on on our portfolio, do not where it's calling out, they are not like a Boston Park Plaza or a Wailea. We are looking to potentially expand some meeting space at one of our hotels but that is still early in the process, and that isn’t something that we look at necessarily disruptive.

In terms of rooms renovations going into late this year, next year. We have again routine renovations at the Elliot's Renaissance probably start to late this year and then going into next year we have a J.W.

New Orleans and the Marriott Long Wharf. But again I would say that those are a buying large routine although with the Marriott Long Wharf just because it is the higher revenue asset that could be something that might be -- we'll talk about later on in the year as that comes up.

Perfect thanks guys.

Quick question on the Boston Park Plaza, I think as the redevelopment was going on, one of the things you talked about was the David Barton Gym as an amenity and Cyc Cycle, I understand that both close down after relatively short trend. I am just wondering whether there was any recapture of tenant improvement cost, lease term fee, anything like that, that on a long period closure and what your plan is for that space?

Good morning Bill, it's Robert. As people are probably generally aware David Barton Gym nationally went out of business right before Christmas of last year.

Obviously, unfortunate not only for us as one of their landlords, but obviously impacting multiple landlords across the country as they had multiple locations throughout New York City and other cities. So we -- the gym is currently not open to outside members, but is available to hotel guest.

And we are in the process of working to get new equipment. I won’t get into all the details of the ins and outs of closing that lease, but we do have possession of the gym and all the equipment and are in the process of working to hopefully get a new tenant in that place over the course of this year.

Alright, thanks Robert. And John I guess there is some increasing focus in the office REIT community retail exposure in New York and other markets, just curious from a hotel perspective as you look at your portfolio, how much retail and restaurant exposure do you have, I guess maybe not the magnitude, but what you're feeling towards those sectors today?

It's not a huge number for us, we'll get the number in fact -- I don't even know if we have the number here, it's probably that low. So maybe we can circle back on that.

The one hotel that does have a notable amount of retail space is the Boston Port Plaza. The couple of spaces that have been rented out we're very pleased with, in terms of Nick Reno [ph] restaurant and Starbucks which should be opening up here in next couple of months.

It's unfortunate as David -- as Robert said about David Barton Gym, but the good news is that that it's open to our guests and is a very good amenity. Although we're looking forward to having that released to get the income coming falling back in.

Other than that, I'm not too concerned about the rest of our portfolio when it comes to retail.

I mean thinking across the portfolio, Bill, and Mark can jump in here, that Boston is the only hotel that we have today that has vacant retail spaces available that we're actively trying to lease. There might be one or two other spaces that we're trying to cart to see if we can create value, but in terms of just vacant retail spaces, I think Boston the only one that comes to immediate mind.

Right that's it from me. Thank you.

So maybe my first question will just be on the follow up on some of the M&A line of thinking. John, you motioned the pricing environment and the buyers remain competitive.

Just give us a little bit more color, should we get some mixed views from the REIT community about some people I think clearly being in the transaction market other people not so much. So who are you bumping up too in some of these processes.

Is it other public REITs is it private equity disabled, underwrite a little differently as they one or two ago. Just kind a who's out there?

Remember Shaun we see this from a perspective as a buyer and as a seller. As just mentioned and we sold in total $735 million worth of assets including three hotels, including recently the Terminal New Port Beach, which garnered significant interest from a wide array of folks.

But on the -- with the assets that we're looking to buy, we've run into a few of the REITs, we've run into private equity and I think in a couple of spots we've bumped into foreign capital. So I would say we're seeing it from multiple different buyers.

The CMDV the improvement in this CMBS market I think have also brought in certain potential buyers back to the market as well.

That's helpful, and can you just remind us I mean in terms of where exactly you wanted to take the M&A strategy. Is it primarily on full service branded kind of type of assets in the major metros or you guys willing to look at something slightly different when it comes to cash flows on the limited service side or anything else?

Are you talking predominantly, or you talking single asset, transaction or you talking M&A as in company-to-company M&A?

No, no, just typically for kind of what you're looking to underwrite on single assets with the cash sitting on your balance that kind of thing?

Yeah. Our strategy is quite simple, our strategy is down long-term relevant real estate.

And that comes in different shapes and sizes. But it something that you kind of know it when you see it.

And would lead us generally to higher barrier to entry, higher quality hotels that we believe that the demand equation is a good one over very long periods of time. So, it's hard to be more specific than that, but I think that’s where you'll see us take this portfolio not only on filling in the top site of the bucket, so to speak, in terms of acquisitions, but also continuing to remove those assets that do not fit that profile within our existing portfolio.

Perfect. Last question, and this is a smaller one but, you guys broke down with respect to RevPAR how much tailwind you think you're getting from Wailea.

I'm curious do you have a general sense of similar kind of point for the EBITDA margin growth for the year?

Yeah. let's grab the EBITDA margin growth, without Wailea and without Boston, Bryan do you have that number?

Yeah. Good morning, Sean.

On a full year basis Mary [ph] will impact overall margins by somewhere between 50 basis points and 100 basis points. Boston Park Plaza is much less than that because the repositioning ended in -- at the end of the second quarter last year.

So, you have a cleaner comp year-over-year, that’s probably in the 20 basis points to 40 basis points impact range.

Perfect. Thanks very much guys.

Hi. John, I want to ask you you’ve guys have I think outperformed the industry for a couple of quarters now and some of your comments about group showing up better than expected maybe a little bit of pick up in transient rate.

Do you think any of that is due to issues last year with the Marriott Starwood integration or do you think there is anything with online distribution that’s impacting that in a more favorable way this year? It is something more structural beyond just little changes in demand here and there?

No I don’t, if anything its geography, I think its strategy relating to group, I mean Marc and the asset management team have been very aggressive working with our operators to make sure that our slips are well below historic norm or notably below historic norm to make sure that the operators continue to push and not all of a sudden find themselves with last minute holes that need to be filled. I think that might be part of it, but at the end of the day we only have so many group hotels and geographic concentration has to place some impact on that.

Okay, very good. And then wanted to move over to the expense and kind of along the same lines, I'm asking if there is anything secular going on because we are seeing from you and some others some pretty impressive and really consistent on an ongoing basis, improvements in margins outside of the noise of renovations.

Is there something there with whether it's a labor initiative or some of the green initiatives or food and beverages, is that something secular can it continued through the cycle?

I think look we've been working for the last few years on some distinct labor initiatives time and motion at our large boxes and working through those and then lastly we continue to work very aggressively on that catering side and maximizing revenues there and on the restaurant side and room service side taking costs out, we made some significant changes in cost in San Francisco, we removed rooms service and went to a modern approach, we've put a market in and we've done that in the few hotels and will continue to do that.

Okay, very good. Thanks guys.

Well, I guess my first question was on your improved food and beverage margin, what was behind that was that mostly driven by what's going on in San Francisco, your revenues picked up nicely and your cost actually fell?

It's a combination of two things, it's mix in the strength that we had in group food and beverage and AV and it's also mix from our other large boxes and it includes savings in San Francisco as well as our New York Kelton [ph], where we made some changes structurally in food and beverage, small ones.

Great, and then the question I had for you is on. As you are thinking about deploying some of your capital do you have a preference for resort hotels or [technical difficulty] hotels and presumably you are looking at bigger acquisitions couple of $100 million to for [technical difficulty], is that the right way to think about it?

I wouldn’t say that we have a preference we've looked at recently we've looked at both resort and urban the size of the acquisitions have ranged anywhere from roughly 50 to 60 million all the way up to a couple of $100 million. We have the capacity to do deals across that range.

I think what we are looking for most importantly is again long-term relevant real-estates that we think that we can produce attractive returns we're suggesting returns above our cost of capital. And so far, nothing to announce, but we continue to endeavor to do that, and if we cannot find the right opportunity we will remain patient.

Great, thanks guys.

Two questions one just on I guess I recognized that you probably do not delve into looking at Trail Core [ph], but I was just curious what -- any conclusion you might have taken from that combination or that transaction and whether or not from your prospective you might see other combinations in the coming year.

Not for me to comment what so ever on M&A of other companies, as you and I have talked about for long-term Jeff, I think some M&A combinations could make sense, up until that transaction was announced and may be excluding the [indiscernible] transactions never occurred. I continue to believe that there are some impediments to those types of transactions happening.

But we'll see.

And just one other one on San Francisco, I apologize if I might have missed this, but I was just curious what you guys have seen in, I guess across the local submarkets there and I think the concern actually was there might be able to bit of a price war develop between the different submarkets and I was curious how that's shaken out as, we move for this period with [indiscernible] being closed and just what your sense was?

You go back to the comments, I forget who asked the other questions on San Francisco, but it will be natural to see more competition for in house group and you would have to assume that over the next couple of quarter with fewer compression nights, you're just going to have less transient compression. Mid-week we like where we're position next to Embraceor [ph] it doesn’t mean that competition again for in house group or low transient rates going to impact us, but we really like where we sit with that hotel considering there is a couple of million square feet of office space immediately attached.

More on the topic of capital allocation and recycling and so forth. I'm just curious, so it sounds like the way you guys underwrite, you're probably more conservative than the average market participant in the sense that you do underwrite down turns, as do we.

So my question is, how do you get an edge in that process, is it certainty to close, something else outside of perhaps the cap rate that you’re willing to pay? How do you get an edge and when deals is going forward in this environment?

Let me first comment that it's not necessary we're winning deals, it's getting the right deals and getting things and prices that we're comfortable with. If that means that we are runner up or don’t quite pay the price and then so be it, we have a very good portfolio and I think we're going to find our spots.

I will say that I'm very proud of the fact that we do an enormous amount of underwriting and due diligence leading into the process, and I think that sellers see the amount of work Robert, Marc our asset management team, our Vice-President of engineering, our design and construction professions put into each potential acquisition, I think that give us a leg up. And then quite honestly our large cash balance without financing contingencies, once we’re ready to go, that also speaks well to potential sellers.

So I do think we're well position, but at the same time I believe given what has inspired of late I believe we are disciplined on price.

All right, that’s helpful John. And then my second question here, you made reference earlier to the fact that a lot of your non-core asset to comprise a very small portion of the overall asset value for the portfolio, I am just curious, how you guys think about maybe the spread in cap rates between your best and your -- I am not going to call them worst, but your non-core assets throughout portfolio?

Hard to be so specific, Rich, because there are assets in our portfolio that I would say are incredibly low cap rate assets. And then unfortunately just given the growth prospects there is probably a couple, being quite honest, that are high.

I could see a 10 cap or so on a couple of assets. So I would say the range is the range from highest to lowest is actually fairly wide.

We will continue to endeavor to sell those assets that do not fit our strategy, but fit other strategies quite well. We will continue to look at monetizing those at the right time.

I think that our track record on that thus for is very good as evidenced by the 22 times EBITDA multiple on trailing. But I would not at all suggest that the next round of transactions would be anywhere close to that level of really aggressive pricing.

All right, that’s helpful thanks.

Quick question, how did you explain -- look on Friday we had host report earnings and kind of talked down their group component and pulled down the whole sector, including yourselves stock wise and then here we did the next week and both Hilton and yourselves are putting up pretty favorable group commentary. How do you reconcile that?

Is it out hustling, is it where you are geographically located and the groups or kind of moving around, kind of piggybacking Chris Woronka's question. How do you think about that or explain that?

We can really only comment on what we are seeing and our portfolio. On the margin, we do feel little better as evidenced by what was a strong first quarter, stronger than anticipated, good growth and the things that we are hyper focused on when it comes to trying to figure out which what these markets are going.

Overall things up ticked a little bit for us. So I leave it up to the investment community to make the reconciliation in those comments.

But I would tell you what we saw so far this year and on the back of a similar trend in the fourth quarter of '16 is on the margin, we saw things a little bit better. And that doesn’t mean that things can change again or decelerate, but just trying to pass along the best information we have available to us.

It doesn’t look like that has been a modest uptick.

And then on the business transient leisure side, as we sit here kind of nicely into the second quarter, how are you feeling about those trends?

Overall stable, we haven't seen, I know that there is from last year there were concerns that overall transient would continue to decline or pushing rate more specifically would be difficult. I think what we've seen as of late is stability in transient business.

Although I would tell you is piggybacked on Bryan Giglia's comments in the prepared remarks, if there is that anticipation of a significant acceleration given the change of administration, we haven't seen that, we are not baking that into our numbers. But overall, it seems that transient is stable, now what I would also tell you about that is last year '16 we took -- we had going into the year of several of our hotels somewhat of an aggressive tactic in trying to push [technical difficulty] borrow rates because we thought the business would be there.

This year we took somewhat of a more defensive stance and Marc, our managers and our operators went back and opened up more special corporate volume accounts. That strategy for us and I can only again talk about us, that strategy seems to be working.

If we were to see a massive ramp in business transient, could we potentially leave a couple of bucks on the table? Maybe, probably, but that's a bet and a strategy that at this point we're willing to make.

And I think my hats off to Mark and team. I think they're navigating this really well.

Two quick follow ups. I guess on the heels of last question, are you seeing the better group demand for many specific type of events or industry.

And are you seeing any changes by industry in corporate transient that under the surface on that stabilization?

Not really. We ask that quite a bit and we really haven't seen any major changes in where the business is coming from.

One trend to note that hasn't come up yet thus far, and again this gets back to our group slip strategy, is we've actually seen a number of attendees picking up. And as I said in my prepared remarks, we've actually been pleasantly surprised although this is volatile.

We've been pleasantly surprised in the amount of food and beverage and increased events within group. But nothing related to types of industries attendees.

Okay and then as a follow up that, FMB point and then asked to an earlier question, you mentioned that there were structural changes in San Francisco and New York and FMB. And maybe you can talk to what exactly happened.

Is that moving to third party and are there other opportunities elsewhere in the portfolio?

Yeah, I would tell that in San Francisco it was the changing of an operation where we did away with what I would call typical room service in the hotel, which allowed us to reduce considerable bodies and went through a -- build a really great looking market which generated basically similar revenues, but generated significantly more profits. And in the New York, Hilton, it was a similar type of test that we done in Q2 that we're going to be looking at and working for and how we can continue that with some again investment opportunities down the road.

Is there any sense in terms of how many properties you can actually implement that?

Yeah. Not at this time, we’re looking at it in several properties, but not at this time.

We’ve done that in several properties already. And again, it's not just to focus on profit, but it's also a focus on what the customer wants, meaning you have the opportunity to take a look at the grab and go in San Francisco, the type of food, the quality of food, the quality of the service.

It’s a competitive advantage in that hotel, it's beautiful and it's what the customer wants. So, we think again hats off to Marc and our design and construction team, there for implementing that.

I think it's been a real win.

That’s great. Thanks so much.

Thank you.

Well, thank you again everybody for your interest in Sunstone and we look forward to seeing many of you at upcoming conferences. And if there are any follow-up questions, the entire senior management team is in the office today and available to you.

Have a great day. Thank you.