Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from David Loeb – Robert W. Baird & Co., Inc.
David Loeb – Robert W. Baird & Co., Inc.
I have some interest in a couple of things if you don’t mind going a little bit deeper. The Mass Mutual portfolio, you said in the press release that the present value of the hotels securing loans is currently less than the outstanding principle amount. I wonder if you could just expand a little on that, how important is the cap ex requirement relative to the value because looking at the numbers it looks like on NOI it’s providing about an 8.4% yield which does not look terrible in this environment.
Arthur L. Buser
That’s right and it’s good that you pick up on it. There are really two points there, one you have a cap ex for those hotels could be $60,000 to $70,000 a key over the next five years so that number is significant. Secondly, the trailing number EBITDA and the forward-looking number are probably fairly different as well because you’re right on a trailing basis it is a decent yield.
David Loeb – Robert W. Baird & Co., Inc.
Going back to the acquisition opportunities, how would you gage the probability of closing one or more acquisitions in the next two quarters, four quarters? And, do you plan on any external financing on those or will those likely be all cash?
Arthur L. Buser
Likely to be all cash. As I said, we’re comfortable with our amount of debt but we expect really to naturally delever over time. Can I go back to your first question because I think I told you cap ex of $60,000 to $70,000 a key and I think that number is more like $25,000 a key. Sorry about that.
David Loeb – Robert W. Baird & Co., Inc.
So probability of closings in the next two quarters or four quarters?
Arthur L. Buser
You know, acquisitions always involve the other party being as engaged and focused as you are. It is interesting to observe that when you advertise $400 million in the bank that prices go up. So, it’s difficult to say. As we noted, we’re continuing to send out letters of intent or verbal expressions and so it could be soon or it may not be at all again depending on what the other party does as we negotiate with them.
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