HST
#You know, Steve, it's a good ---+ let me deal with the second one ---+ question first.
It's a good question about whether we should be orienting more as a select service.
And if you look at what we've acquired over the course of the last couple of years, we have acquired some assets in that segment as a business.
Given what I just said about supply, I probably ---+ and the fact that the bulk of the supply that we are seeing is directly targeted at the select service segment, I'd probably be reluctant right now, if we were in an investment mode, I would probably be reluctant to deploy a lot of capital into that space, because I think I would be concerned about the ---+ just the high degree of supply that's coming into that sector.
And what we've traditionally seen over time is that new select service competes incredibly effectively with older select service.
And so is the fact that you are seeing the increase in supply being so squarely centered in those segments would concern me in terms of accelerating our investments in select service assets at this point.
Now thinking longer-term, as we think about where the Company would be in four to six to seven years, I would certainly expect that select service would be a bigger part of our portfolio looking out.
But this is probably not quite the right time to be a buyer of those assets if we were in a buying mode.
As it relates to the Q3/Q4 comparison, I think some of what you are seeing on the EBITDA side is really related to some improvements, as <UNK> highlighted in his comments, some improvements in Europe.
And then you are also seeing on compensation, the low stock price at the end of the quarter, when run through the appropriate models for calculating stock compensation expense.
Really, what we hope, at least, is move some compensation expense out of the third quarter and into the fourth quarter.
We'll obviously see how that plays out at the end of the year, but I'm sure you could all guess how we are rooting.
But that ---+ I think there was some deltas that happened as a result of that.
<UNK>, what do you want to add to that.
Obviously, in the fourth quarter, October certainly will be one of the better quarters ---+ or better months of the year on one hand.
On the other hand, certainly, I think the ---+ our hotel forecast for October today is lower than what it was a quarter ago.
And I'd say the same thing about our fourth quarter in general.
Our fourth quarter in general rates to be pretty decent.
But as we sit here today, I think our forecast as a hotel forecast for the fourth quarter is lower today than what it was a quarter ago.
No, we did not, Joe.
I don't ---+ we just don't have a number quite yet.
But it's certainly been running better than what we've seen for the rest of the year, but I don't have an updated number yet for the month.
You know, I think we're ---+ we are constantly evaluating a variety of different options for the portfolio.
Certainly, one of the questions we've gotten before is about whether we should ---+ whether we could sell some of these assets in a portfolio sale context, for instance.
And that's something we've looked at throughout the year, and the last couple of years, frankly.
And we'll continue to look at.
So far, the response we've gotten from the market has suggested that the tact we're taking, which is individual asset sales, is probably the most productive one in the long-term.
But to the extent that the opportunity presents itself to sell assets in bulk, similar to what we did in Europe ---+ albeit that transaction took almost a year to complete ---+ then we would try to take advantage of that.
You know, as you look at other types of transactions, I know that there's been a lot of discussion about spins and things like that in the market over the course of the last couple of years.
I think in the current environment, when the entire ---+ all of the lodging REIT stocks are trading at a significant discount to NAV, it's hard to imagine that a spin is necessarily going to close that gap as effectively as asset sales.
Because you are still going to ---+ after the spin, you are still going to have two entities that would ---+ are going to trade ---+ while you may see an improvement in multiple in general from having taken the step, I don't know that you are necessarily going to radically have those companies trade at a different multiple and a different relationship to NAV than the rest of the industry.
So, all this is evolving.
We frankly have only been in this sort of situation where the stocks are trading at this big of a discount to NAV for sort of half of this year.
We are trying to take advantage of that as best as we can.
We're trying to take advantage of the balance sheet strength that we have to deploy that right now to benefit from that.
And we'll continue to evaluate all sorts of options as we work our way through 2016 and 2017.
It's hard to deal with that question in the abstract, just because you need to know ---+ you ultimately need to know who is combining or who is buying who.
So it's sort of tricky to say.
I mean, our contract rights flow out of individual contracts or corporate level agreements with Starwood and Marriott.
And so I don't know that those particular corporate level agreements are necessarily ---+ in fact, I'm fairly confident that they are not specifically affected by any transactions that might happen at the corporate level by any of those companies.
So ultimately, I think our valuation of whatever might occur, whatever combinations would occur or whatever change in ownership would occur, are going to be based upon who's in charge and what their plans are for the brands and the properties that we own.
Well, first of all, we don't think the cycle is coming to an end.
We see solid growth in 2016.
And as we look out past that point in time, assuming that economic growth continues to be at least at the levels that we've seen lately, we don't see why the cycle wouldn't be continuing past that.
You know, I think there's a lot of different reasons to sell assets.
In our case, it's not necessarily because we think we are timing it at the top.
It's really driven more by an approach to how we manage our portfolio and a long-term perspective to reduce exposure to certain markets, and then, over time, increase it to others, is the way of managing the portfolio.
I would envision that other than in those periods of time that are shortly after a decline, where we probably would be ---+ wouldn't be comfortable that we were getting fair value for our hotels, we tend to be a seller throughout a significant chunk of the cycle.
So I don't know that I would read a lot into that other than this is just a continuation of a program that we've been working on for awhile.
You know, and I think this is ---+ obviously, <UNK>, as you know, this is sort of a unique situation right now where we can sell assets that are sort of in the bottom sort of, call it, bottom quartile of our portfolio, assets that maybe have slower growth rates, higher CapEx issues.
But we can sell those assets at sort of lower cap rates than where we trade today.
Right.
And then take those proceeds and either put it out in the form of a dividend or buy back our stock at, which today, is close to an 8% cap rate.
And then I think lastly in terms of the notion of buying stock back at this point in time, I mean, that's something that we obviously give a lot of thought to.
But I think we are comfortable, especially at these levels, that buying the stock is a good investment.
And I think we are being thoughtful about how we pursue that, because nobody knows exactly what the future holds.
But at this point in time, as we are sort of ---+ in effect, we are shrinking the Company with some of these sales.
And shrinking and buying back stock is a way to help sort of get the benefit of that shrinkage.
I don't know that we've gotten quite that formulaic about it, <UNK>.
It's sort of ---+ we've been in a good position, I guess, in terms of how we thought about it since we've initiated the programs.
It's been relatively easy to be comfortable that buying our stock was the best alternative for the capital that we had or that we would be generating.
Now, if you go back to what we would've talked about in April, when our stock price was higher and we spoke about this, our assessment at that point in time was, as we generated capital from asset sales or from other sources, we would look at buying ---+ the returns from buying the stock relative to the returns from investing in other things, whether it was new assets or whether it would be ROI investments.
And so, as you look ---+ as we look to a point in time that I hope happens sooner or later, which is that the gap closes between NAV and our stock ---+ and by the way, I'm hoping that happens because our stock is going up, of course ---+ as we get ---+ as that gap starts to close, then we will continue to evaluate what are those best options for the capital that we are generating if, at that future time, you could see an acceleration in ROI investments if those proved to be more attractive.
But if, on the other hand, we are at a point in the cycle where we don't think it makes sense to make new investments or new acquisitions, then you might ---+ you would still be buying the stock back at that environment, even though the returns might not be as attractive as they are today.
I think that's a good insight.
It's just ---+ there's a lot of activity on the individual basis.
But as you start to move up in bulk, the number of players is thinner.
And I don't ---+ I haven't had an opportunity to read everything that Strategic published.
But while I think they had a high level of interest, it seems like I heard that at the end of the day, there was really ---+ there were only a few serious bidders.
And so that is somewhat of an indication of what you are describing.
Well, I think in the near-term, that's exactly what we're doing.
I mean, we're obviously going to cut all the overhead that was in Asia-Pacific region.
We only have the international offices in Europe ---+ are the only ones that would be left sort of as we get into early next year.
In Europe, I think we've got a number of opportunities to enhance the value of the remaining 10 hotels that we have.
And I think the decision has been made at this stage, is to continue to work that portfolio and then watch for what opportunities might develop in the long run.
But certainly at this point in time, as we deal with worldwide capital flows, which we are making investing in Asia very difficult to do, at least on our parameters, the best markets to focus on right now are in the US.
Sure.
So, as <UNK> mentioned, right, we are currently marketing $1 billion worth of assets.
Certainly, I'm not sure if all of those assets will actually complete.
But as we sell those assets and complete those sales in 2016, certainly that will increase our taxable income.
And so, look it, I think the way we look at it is, at a minimum, as <UNK> mentioned, approximately half of the proceeds will go out in the form of a dividend.
And so at a minimum, we could just put it out in a special dividend next year, which would be in the fourth quarter; or to minimize that special dividend, what you could see us do at some point next year is raise our standard dividend.
And so, effectively, we've have the same dividend for the year out in 2016.
But you could see us stair-step ---+ increase our standard dividend, which would effectively reduce that special dividend at the end of 2016.
Look, it's too early to know that, but I think at the end of the day, you could do the math, <UNK>.
Right.
If we sell X number of assets and if 50% of the proceeds go into the form of a dividend, divide that by our share count, you can see what we are talking about in the form of an extra dividend.
Thank you all for joining us on the call today.
We appreciate the opportunity to discuss our third-quarter results and outlook.
We look forward to talking with you in February to discuss both our year-end 2015 results and provide much more detailed insights into 2016.
Have a great day, everybody.
