Greetings. Welcome to Park Hotels & Resorts Acquisition and First Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Ian Weissman, Senior Vice President-Corporate Strategy. Thank you. You may begin.

Good morning, and welcome everyone. Earlier this morning we issued a press release announcing Park's proposed $2.7 billion acquisition of Chesapeake Lodging Trust. If you haven't yet downloaded the release or detailed presentation both are accessible on Park's website at pkhotelandresorts.com as well as on Chesapeake's website at chesapeakelodgingtrust.com. Along with the acquisition announcement, we also released our first quarter 2019 operating results with the full press release and detailed supplemental package available on our website. This morning, Tom Baltimore, Park's Chairman and CEO; and Sean Dell'Orto, EVP and CFO of Park will discuss the strategic and financial benefits of the proposed transaction as well as discuss Park's first quarter results. Rob Tanenbaum, Park's EVP of Asset Management will also be available for questions. Before we begin, I would like to remind everyone that many of the comments made today are considered forward-looking statements under Federal Securities Laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed and we are not obligated to publicly update or revise these forward-looking statements. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements. Please refer to the documents filed by Park with the SEC, specifically the most recent reports on Form 10-K, 10-Q and 8-K which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. Further on today's call, we may reference certain non-GAAP financial measures. More information regarding these non-GAAP financial measures can be found in the company documents filed with the SEC. With that I will now turn the call over to Tom.

Thank you, Ian. Good morning, everyone and thank you for joining us to discuss the very exciting acquisition of Chesapeake Lodging Trust by Park Hotels & Resorts. As we announced earlier this morning, the Board of Directors of both companies have unanimously approved this highly strategic and compelling combination, a transaction which is expected to be accretive to earnings and advance our business plan to improve the overall quality and diversification of our platform. On a pro forma basis, the combined company will further solidify our position as the second-largest lodging REIT with an enterprise value of nearly $12 billion and ownership in 66 high-quality hotels located in key urban and resort markets throughout the U.S. These pro forma metrics assume the sale of Chesapeake's two New York City assets and three legacy non-core Park assets each of which we expect to sell prior to closing. We also announced this morning, the first quarter 2019 results with Park, which were outstanding for both the top-line and bottom-line performance, which I will touch on a little later. Before discussing the details, I want to note that this transaction process has been incredibly positive for all involved. We have tremendous respect and admiration with what Jim Francis, the Chesapeake team and the Board of Trustees have accomplished since forming the company in 2009, assembling a high-quality well-maintained hotel real estate portfolio, while generating solid returns for shareholders. During our discussions both of our teams worked tirelessly and collaboratively to evaluate the merits and opportunities for this transaction and I could not be more pleased with the goodwill formed throughout this process. This is a great opportunity for Park one that I am confident will create significant value for our shareholders over the next several years. Since spinning out of Hilton in early…

Thanks, Tom, and good morning, everyone. I'm going to tailor my comments to address some of the financial elements of the transaction. Including how they affect the balance sheet, earnings, and the dividend. As noted in the release, total consideration for Chesapeake, was approximately $2.7 billion. We have secured a $1.1 billion commitment, to finance the $670 million cash component as well as the repayment of Chesapeake's $225 million term loan, and two of Chesapeake's mortgages totaling approximately $130 million that are set to mature next year plus a portion of the transaction cost. Taking this financing into account along with the remaining mortgages we expect to assume, pro forma leverage would increase to 4.6 times for the combined enterprise, including Chesapeake's full portfolio of 20 hotels. However, as we note in the investor deck, and as Tom noted earlier, we expect to sell both of Chesapeake's, New York City assets, in addition to three non-core legacy Park assets at/or prior to closing. Proceeds from the sale of these five assets are estimated to be approximately $300 million, which will be used to reduce debt and bring our pro forma leverage down to 4.4 times. We have also identified two additional non-core assets within the Chesapeake portfolio that we would expect to sell after closing for approximately $170 million to $180 million, further reducing pro forma leverage to 4.3 times. Overall, we are confident about our ability to execute on these asset sales, as the acquisition market remains robust. And there's a significant amount of capital pursuing individual hotels. As for earnings, pro forma for these five assets, we expect to sell at/or prior to closing and the approximately $24 million of G&A and operational synergies outlined in our presentation, we expect the transaction to be accretive to FFO per…

Yes. Thank you. [Operator Instructions] Our first question is from Michael Bellisario with Robert W. Baird & Company. Please proceed.

Good morning, everyone.

Good morning, Michael. How are you? Nice to, speak with you.

Thanks for taking my question. Just first can you maybe walk us through, the synergy assumption you made particularly the operational ones, and kind of give us an overview of whether you went property-by-property or are you kind of comparing Chesapeake's portfolio to your portfolio and making more broad-based assumptions about the upside there?

I'd say it first Michael if you looked at I think it's page 17 on the deck that we'd uploaded. Clearly, on the G&A side, I think given the strong platform that we have here at Park We're confident obviously in that $17 million. Reality is the friction cost that's taken on this portfolio we believe is about $2 million otherwise we're able to eliminate all of those costs. I would say on the near-term revenue synergies, we broke it into categories both the detailed here as the $11 million identified there and then of course about $2 million on the expense savings. There will be friction costs given Prop 13 and obviously we think the insurance side will be slightly more than probably their run rate. But it was really done on a property by property buildup. Rob Tanenbaum and our feasibility team men and women there who worked incredibly hard the last several weeks really going asset by asset really doing a – I would say a detailed first pass. It's important to note that these types of transactions you're not as permitted to do as much fieldwork. So we think in fact this is the baseline given our track record, we're confident that we will be able to at least meet if not exceed these number. So we're comfortable with the work that we've done today. To answer your question, it's the buildup that's the way we do everything here at Park. It's we build it up, we don't look at averages across we'd like to look at the underlying asset the market dynamics and that level of detail as we've done here in our underwriting.

That's helpful, and then just one on the non-core asset sales. First on the three legacy PK hotels can you maybe give us a sense of the quality there and the pricing around those dispositions? And how we should think about the pricing of the potential Chesapeake dispositions and kind of comparing quality and CapEx needs? And just kind of a better understanding how we should think about the pricing of those assets versus your current trading multiple?

Yeah. It's a good question. Mike these three noncore assets first I want to remind listeners that those assets are under contract. They are non-core so not dissimilar to some of the 15 assets that we've sold obviously over the last couple of years. I'd say RevPAR is 35% to 40% below our portfolio average much lower margins and certainly in need of capital. I would say for the three assets that we're selling probably $40 million to $50 million of incremental capital required to bring those up to brand standards. Clearly, they're noncore not assets that really fit the Park portfolio moving forward. We would expect those assets will trade on a gross multiple probably somewhere in the 12 times to 13 times range. And regarding the two New York assets, clearly we would expect those multiples to be much higher. Those are very attractive assets that are – could be sold unencumbered by management, so we expect that those will be well received in the marketplace.

That’s helpful. Thank you.

Thank you.

Our next question is from Rich Hightower with Evercore ISI. Please proceed.

Hi. Good morning, guys.

Good morning, Rich.

Tom first of all, I want to congratulate you and the company for even getting to the point where you could do a deal like this. And obviously Park came a long way in the last few years so congratulations for that. I want to ask about obviously we had a very high profile M&A process with Pebblebrook LaSalle last summer and you always want to be careful to create comparisons in these situations but as you look at sort of what happened in the back and forth all throughout last summer what are some of the lessons you learned from that process? And also with respect to pro forma leverage and what investors care about at this point in the cycle and some of the other risks involved through the deal so just maybe comment generally on that if you don't mind?

Yeah. First, Rich thank you for your comment. I think it's important to remind listeners here we are in the third year of this journey. In fact another 10 days, we'll be actually three years to the date that I left RLJ to rejoin Hilton to spin out Park. I could not be more energized. I could not be more proud of the men and women we've assembled here. When you think back on where we were what we have accomplished in the short two years, right. Recycling capital using those proceeds to buy back stock. We've obviously returned $2 billion of capital, we've outperformed significantly in the sector by – we're up 3,400 basis points over our peers plus/minus and it really has been that discipline across the company from our finance and accounting teams to our asset management teams to our design and construction. That hard work and that performance kind of put us in a position for this pivot phase two to sort of go on offense and grow the portfolio. So no secret. I have been talking for some time that we're a highly fragmented segment, we should or lodging should consolidate. It tends to be episodic. It tends to be unpredictable. I am talking with my peer CEOs all the time -- things sort of happen when they're meant to happen. Regarding the prior situation -- regarding Pebblebrook and LaSalle, I think this could not be more different and I would say diametrically opposed. Good professional conversations parties committed to create value with shareholders on both sides of the aisle. We've worked through I want to be careful, obviously the details of the process, the discussions all of that will be disclosed in the proxy, but we don't see a repeat of that drama. We…

All right. Thanks for that comment, Tom. Really quickly maybe just to turn the leverage question on its head for a second here. You mentioned the forecasted FFO accretion under the current parameters it's not a huge number in the next couple of years. I mean do you think that there's flex if investors may want a little more FFO accretion sort of in the shorter term maybe given where we are in the cycle in terms of certainty around that? And then NAV accretion it's sort of a separate argument I'm wondering how -- if you could comment on how you think about that as well? And then I'll hop back.

If your -- if the question is would we lever up Rich, I want make sure I understand your question.

Yes it's maybe what's the incremental appetite for more leverage again to turn that question on its head if the FFO accretion numbers that reported earlier maybe aren't what investors are looking for hypothetically?

Yes, we were comfortable with the leverage today and want to bring that down, long-term as you know we aspire to low 3s as we get to investment grade that takes time we're nowhere near that at this point. But levering up more is not something that we really want to contemplate at this point.

Right. Thank you, Tom.

Thank you.

Our next question is from Smedes Rose with Citi. Please proceed.

Hi. Good morning.

Hi.

I just wanted to ask on the -- the part of the strategy of Chesapeake is to group up with that -- on that portfolio but they have a lot less meeting space per key. So are there any incremental investment plans to add more meeting space? Or is there something you can do without the same number of amount of group space on a per key basis?

Yes. Smedes, it's a great question. I'd make a couple of observations because sometimes the perception of Park is that we're all of these sort of big group houses We do have nine hotels obviously that are greater than 125,000 square feet of meeting space. Our top 10 assets obviously, account for about 60%, 65% of our EBITDA pre-merger with Chesapeake, but we do have a number of other hotels with 20,000, 25,000, 30,000, 40,000 square feet of meeting space. We would -- we think by bolting on this portfolio at Chesapeake that there is an opportunity to group up that portfolio as well. The work that Rob and his team have done and our feasibility team have done so far, we think incrementally 150 basis points there at about 20%, 20.5%. So moving that from that to 22% to 22.5% we think is very achievable. And again, with the great success that we've shown with Park, by anchoring your business with group, layering in contract business and then it allows you to more efficiently yield your transient. And every time that we've done that you've seen the benefit of that in our first quarter. Again, sector-leading performance again of 4.5% of RevPAR. As we look out to third quarter, we're looking for our group pace to be up 35%. So we really think in this climate, group has a real competitive advantage and we've had stripped partly with our management partner, in this case Hilton, we look forward to doing with that with our expanded partners to making sure that we can, as Rob likes to say, remix the mix, so I’ll steal his phrase for a second, which I think has been really beneficial for us.

Okay. Can I just ask you too on the Hilton Caribe, which I guess opens -- reopens in the next week or so. Does your guidance contemplate including business interruption as that continues to ramp up? Or how -- where does that stand in terms of the insurance proceeds there, on the business interruption side?

Hey, Smedes, this is Sean. Our guidance does contemplate kind of what we did last year as well, receipt of business interruption proceeds, as well as operational profits this year, now that it will be open, to equate to kind of EBITDA levels that it had prior to the storm, it's about $8 million, so that’s been contemplated.

Great. All right. Thank you.

Thanks, Smedes.

Our next question is from David Katz with Jefferies. Please proceed.

Hi. Good morning and congratulations…

Good morning, David.

…everyone. I just have one question that occurred to us this morning as certainly plenty of detail in the deck. But have you contemplated or are there any exercises around changing any of the brands within the portfolio or rebranding anything in there? Is that a possibility?

David, it's a great question. Yes, one of the things that we really like about this opportunity is really the optionality. We think that there will be brand opportunities -- brand changes to upgrade. We also think that there will be manager opportunity as well. Again, we'll evaluate that over time. But those are areas again where, I think, Park really excels. Think about the branding success and the branding changes that we've made. If you look at Santa Barbara, taking that from a DoubleTree up to a Hilton. We're now working in our DoubleTree in San Jose and we're going to convert that to a Hilton. So we think that there will be similar opportunities that we really look forward. One of the exciting things is to now be back into the Marriott and the Hyatt family of brands. We love our relationship and partnership with Hilton, but we're excited about getting back into -- back with Marriott and with Hyatt and in supporting and building those relationships and in expanding. We've got new -- eight new operators, which we also think would give us the opportunity to look at some best practices and apply that across our portfolio as well. We see that as incremental upside, none of that is taken into the underwriting. So we, again -- more to follow in the weeks and months ahead as the transaction hopefully move towards the closing.

Got it. Thank you very much.

Our next question is from Patrick Scholes with SunTrust Robinson Humphrey. Please proceed.

Hi. Good morning.

Hi, Patrick. Good morning.

Congratulations here.

Thank you.

Question for you on the selling of the New York City properties. I'm wondering, how initially are you seeing that bidding process? How competitive is it? What are some of the characteristics of the potential buyers? And certainly, we've seen the hotel REITs getting out of New York, but I'm quite curious who is rushing to get it in? Thank you.

It's a fair question. And, obviously, as you can imagine with the document-rich merger which is just being signed last night and obviously being announced this morning, we haven’t engaged with any potential brokers or potential buyers but the New York is, as we all know, one of the great cities of the world. There is still a very healthy appetite of capital in both equity capital and debt capital. We think given the quality of these two assets, they're well located and management could also be available that this will appeal to both domestic and perhaps foreign buyers as well. So we see a very low risk in being able to execute and to sell these assets. We're happy with our footprint, we love the Hilton Midtown. Again anchored with that asset as we look at it from a capital allocation standpoint, we want to allocate capital elsewhere. They should be two attractive assets to sell and again as we look to delever the portfolio.

Okay. Thank you, very much. That’s it.

Our next question is from Stephen Grambling with Goldman Sachs. Please proceed.

Hey good morning. Thanks for taking the question. With the initial spin, I think one of the competitive advantages that you talked about was some of the flexibility you had from being so close to Hilton and being able to enact change, I think with a direct line of communication. As you diversify away from their brand, does that dynamic change? And how do you balance that or assess the potential financial benefits from brand diversification?

It's a fair question Steve. And I would tell you that given my past life at peak, I think we had 17 operators and we were large Hilton, Marriott and Hyatt. I actually think that's the best of all worlds. Because you get -- to really understand the strength of those brand platforms as well as those operating relationships, not only with the brands, but also through other independent operators. So I have a lot of experience with that. I know that Rob Tanenbaum and our Asset Management does as well. So we think long-term that's only going to sharpen the knife. That's only going to make us more successful. We believe candidly by partnering with strong operators that they make us better owners and we think we make the management companies better managers by having that sort of push and pull discussions that occur at that level. So we think it's a net positive. We think of having a diversified platform across multiple brands makes them long term.

Okay. And then I don't know if I've seen this in the release or not, but on capital spending, you mentioned the 35k per key over the past five years at Chesapeake, what's the expected CapEx for the combined business over the next few years? And then what -- how are you thinking about maintenance CapEx longer term for the combined business?

Now we've been more conservative than probably most of our peers. Again most of our peers are probably in the 4%, 4.5%. We're generally using a run rate in the 5% to 6% strictly given our larger full-service that have got more expansive meeting and public space. Now you’re probably safe to be in that 5% range on a go-forward basis. We probably are 5% to 6% depending on the asset as what we're doing here at Park. The Chesapeake portfolio is well maintained. We don't see a lot of PIP risk and a lot of CapEx risk which is another attractive thing in the portfolio. There will be ROI opportunities, but those again will have an associated return for us.

As a very quick follow-up, are there any economies of scale on the CapEx front as you think about ROI projects going forward or just general maintenance CapEx?

Huge opportunities. Great question. Carl Mayfield who heads up our design and construction I think best-in-class. We have -- with this again one of the many benefits, but this gives us purchasing power. We think our benefits of scale lower cost of capital purchasing power not only with brands, but with vendors as well. So we see this as a real net positive. I don't know candidly or do know candidly, but not all those benefits are baked into the underwriting as well. So we think the outlook from the transaction only gets better not worse as we dig into it over time.

Helpful, thanks so much, congratulations.

Our next question is from Robin Farley with UBS. Please proceed.

Great, thanks. I know this idea about consolidation among the REITs that's been out there for a little while that's something that you've talked about. What do you think it was about the timing of sort of why now that this came through? Is it that the REITs are down from their 52-week highs and it would -- so maybe made for more willing seller? Or maybe you could just give us some color on this kind of why now in terms of timing?

It's a fair question Robin. I want to be responsive, but let me just say that as you know M&A tends to be episodic a little uneven and this is one that just -- it came together at this point. We will have much more to say in the proxy disclosure in the coming weeks and we will answer all those questions in great detail. I think you can appreciate why I'm not able to answer that question at this point.

Okay. Sure. And then just a follow-up question on your results and your guidance. When you look at the strong RevPAR growth especially so much of it coming from rate rather than occupancy increase, I guess can you help us think about what that 400 basis points or 390 basis points in rate in Q1 here with about 100 basis points of margin? Can you help us think about with your full year guidance that kind of 3.5% at the midpoint? Maybe think about how much of that will be coming from rate versus occupancy and why that gets to that. I guess that kind of 30 -- or at this point 50 basis points at the midpoint in terms of full year margin?

Let me also say Robin we're -- it's we're being conservative. Obviously, at this point of where we are in the cycle and given our revenue management strategies, we are generating significant RevPAR growth and doing I think a wonderful job at yielding strictly working closely with our partners at Hilton and with great encouragement from Rob Tanenbaum and asset management team. So, we feel very good about the guidance we've -- being anchored so much in group business really helps this portfolio really plays to our strengths. So, if anything I would signal that we're very, very confident with the back half of the year and the guidance we provided at this point.

I guess that maybe I was looking for a little bit of maybe a sensitivity to margin if it's 100 basis points of rate versus 100 basis points of occupancy just to think about kind of what's driving the margin?

Well, look clearly there's cost pressure. But again based on a number of the productivity initiatives, based on good work that we're doing with our partners we've been able to mitigate that. We don't call it data analytics here at Park, we call it just good blocking and tackling what we're doing. And I think that Rob and team have demonstrated that time and time again.

Thank you.

Our next question is from Bill Crow with Raymond James. Please proceed.

Thanks. Congratulations Tom.

Thank you.

Appreciate it. Just curious once this deal comes together you sell the five assets that you've announced; two from them, three from you. Should we expect more portfolio churn? I mean are you going to get a little more active on selling assets -- selling core assets not just the non-core stuff in order to kind of continue to refine the portfolio maybe further concentrate in certain markets, et cetera?

Great question. The answer is a resounding yes. If I've learned anything in this business over many years is that portfolio management it's critical as you continue to evaluate assets in their lifecycle markets looking at demand trends, so we love the additions that we get obviously by bolting on Chesapeake in the 20 that we think obviously 18 assets. But -- and our exposure to San Francisco it goes up 300 basis points and we'll have 4,200 rooms in the CBD of San Francisco. We think obviously one of the top hotel markets. Clearly, this improves our footprint in Boston about 300 basis points. We pick up Los Angeles, Denver, we pick up Miami, good footprint there. But we still will have non-core assets on the legacy Park. As you think about the Park portfolio, we have 51 assets now. Again included in that are 11 joint ventures and we'll continue to retool and hopefully be divesting capital out of those over time as well. But remember our top 25 assets account for about 90% of that value. So, you will continue to see us recycle capital in the higher growth markets or if there is a dislocation and buying back stock, certainly where that makes sense. But clearly continuing the managed portfolio is a fundamental tenant of the good work that we're doing here at Park.

Great. And the -- quick follow-up Sean any impact on G&A or other items from the first quarter related to this transaction?

No, nothing material on G&A for this transaction.

Okay. That's it for me. Thanks.

Thanks.

Our next question is from Jeff Donnelly with Wells Fargo. Please proceed.

Hi, good morning, guys. And maybe just the first question for you Tom

Good morning.

Good morning. Thanks. On synergies, are you able to share just maybe what the breakup fee is for the transaction? And maybe what is the transaction cost for the deal?

Yes. Jeff transaction costs I believe we disclosed $120 million plus or minus. And with regard breakup fees the merger agreement has been filed. And I believe a couple of your peers may have already picked up, but all that information is publicly available.

Great. And then maybe back on your operations, specifically Hawaii and San Francisco. Can you walk us through how we should be thinking about the progression of quarters for Q2 through Q4 for those two markets? Is it fair to say that the best days lay ahead for Hawaii, but maybe for San Francisco the -- some of the strongest RevPAR is maybe in its past at this point?

Yes. I mean listen San Francisco continues -- as you know we were up 24% in Q1. As we think about the balance of the year, clearly first quarter will be the strongest. We fully expect to finish the year at high single-digits. We have very strong group pace throughout the year. So in Q3 and Q4 both 30 -- over 30% again group pace for the year is about 31%. So San Francisco will continue to be strong. I'll let Rob jump in on Hawaii and give you some moving parts there, but as you know we continue to outperform there and had significant share growth there as well as our two assets there in Hawaii.

Yes, Jeff. Hawaii it's -- team did a great job, RevPAR was up 50 basis points and $242. Our group grew 22% in the quarter, while transient was down 5%. Really amazing job they did generated flow-through at that property. We feel very good about this team and Southwest Airlines now beginning service to Hawaii and expected additional service route over the next few months once the FAA and Boeing read the 737 Max issues. But we've seen fare drops coming into the market which is fantastic for driving demand. And our far east production continues to grow, so we're very encouraged by what we're seeing in Hawaii as we go forward here.

Thanks guys.

We now have a follow-up question by Smedes Rose with Citi. Please proceed.

It's Michael Bilerman I'm here with Smedes. Just talking about the.

Good morning.

Good morning. So the break fee is only $38.5 million or call it about $0.60 of Chesapeake share for about a month until early June and then rises to 68 -- sorry $62.5 million or $1 a share thereafter. Can you -- and it doesn't appear that they have any sort of go-shop, but maybe you can just sort of talk a little bit about the process in terms of how long you've been talking with them, when you went exclusive with them and sort of the rationale for a one month lower break?

Mike, it's all great questions. Mike, as you know that puts me in a tough position of being advised by the counsel that I'm not able to answer those questions at this point. We did file a merger agreement obviously a deal for us members of our team have already done a quick review of it. As you know merger agreements and discussions are complicated and we will follow-up with those process, timelines through the proxy. We think this is a very fair deal for both parties both organizations are excited about it and we look forward to moving it forward.

How much time have you spent with them from an integration standpoint in bringing the hotels on? I'm just trying to get a sense of how far along are you in sort of the integration process to give us a sense of where this came up over the last couple of weeks? Has this been an intense negotiation over the last couple of months? Just give us a little bit of perspective on that?

Again Michael, we will provide color and a timeline. I think you know that we tend to be very disciplined here at Park that we've - we don't shoot from the hip. I'll leave it at that. But again we will provide all possible disclosure and in the proxy and the S-4 that will be filed here in the next several weeks.

Now is there - I would just want to make sure we're reading it right there is no official go shop they're not allowed to solicit proposals, it's just the fact that the break fee is set lower for a month where someone was in part of the process they'd be able to make a bid with a lower break fee, is that correct?

You are correct, no shop.

The $120 million is about 4.5% $120 million transaction cost is about 4.5% of your total value of the transaction. Can you at least take the $120 million and put it into its composite parts? How much of it was sort of advisers, lawyers, bankers? How much of it is severance to the management team? And then a third bucket of all the other?

Hey Michael. Sean Dell'Orto here. I -- we won't get too much into those buckets at this point. But clearly the others are -- there's advisory fees involved there's financing fees that we have all kind of market-related kind of fees. And then ultimately, we kind of -- you have transfer taxes involved trading of real estate in there as well and you can obviously through proxies and whatnot can determine if there's a cash severance component. So we're just kind of leave it at that. But the four things I just mentioned earlier are pretty much the bulk of what you're seeing.

You're not going to roll the financing fees and the cost of the financing and amortize them there?

They will be, but from a cash outlay standpoint there is that what we've captured.

You've put them into the $120 million?

They’re in the sources and uses, correct.

All right. Thank you.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Tom Baltimore for closing comments.

Thank you. We appreciate all of you taking time today. We are headed to meet with many of you over the next couple of days and we look forward to continuing the discussion. Thank you for taking time today. We are excited about our future at Park both this potential transaction with Chesapeake, in addition to the strong operating results. Looking forward to talking with you soon.

Ladies and gentlemen thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.