Host Hotels & Resorts, Inc. Reports Strong Operating Performance For The Fourth Quarter And Full Year 2012

Feb 21, 2013, 06:00 ET from Host Hotels & Resorts, Inc.

BETHESDA, Md., Feb. 21, 2013 /PRNewswire/ -- Host Hotels & Resorts, Inc. (NYSE: HST), the nation's largest lodging real estate investment trust ("REIT"), today announced results of operations for the fourth quarter and full year ended December 31, 2012.

(Logo: http://photos.prnewswire.com/prnh/20060417/HOSTLOGO )

 

Operating Results

(in millions, except per share and hotel statistics)

Quarter ended December 31,

Percent

Year ended December 31,

Percent

2012

2011

Change

2012

2011

Change

Total revenues

$            1,746

$            1,634

6.9%

$            5,286

$            4,924

7.4%

Comparable hotel revenues*

1,445

1,390

3.9%

4,428

4,195

5.5%

Comparable hotel RevPAR

144.09

136.25

5.8%

142.48

133.87

6.4%

Net income (loss)

15

16

(6.3)%

63

(16)

         N/M

Adjusted EBITDA*

426

349

22.1%

1,190

1,018

16.9%

Diluted earnings (loss) per share

$                 .02

$                 .02

$                 .08

$               (.02)

         N/M

NAREIT FFO per diluted share*

.40

.31

29.0%

1.04

.89

16.9%

Adjusted FFO per diluted share*

.40

.32

25.0%

1.10

.92

19.6%

N/M=Not Meaningful

* NAREIT Funds From Operations ("FFO") per diluted share, Adjusted FFO per diluted share (which excludes debt extinguishment costs and other expenses), Adjusted EBITDA (which is earnings before interest, taxes, depreciation, amortization and other items) and comparable hotel operating results (including comparable hotel revenues and comparable hotel adjusted operating profit margins) are non-GAAP (U.S. generally accepted accounting principles) financial measures within the meaning of the rules of the Securities and Exchange Commission ("SEC"). See the discussion included in this press release on why the Company believes these supplemental measures are useful, reconciliations to the applicable GAAP measure and the limitations on their use.

The increase in total revenues for the fourth quarter and full year 2012 reflect the improved performance of the Company's owned hotels as comparable hotel RevPAR increased 5.8% and 6.4% for the fourth quarter and full year 2012, respectively. In addition, full year 2012 revenues benefited from the results of the ten hotels (nearly 4,000 rooms) that were acquired during 2011 and the acquisition of the Grand Hyatt Washington on July 16, 2012. These acquisitions increased revenues by an incremental $99 million for full year 2012.

The increase in comparable hotel RevPAR primarily was driven by improvements in average room rates, coupled with continued occupancy growth. For the fourth quarter and full year 2012, average room rates improved 2.8% and 3.6%, respectively, while occupancy improved 2.0 percentage points both for the quarter and full year to 72.6% and 74.5%, respectively. The improvements in revenues led to strong margin growth as comparable hotel adjusted operating profit margins increased 80 basis points and 140 basis points for the fourth quarter and full year 2012, respectively.

Investments

  • Redevelopment and Return on Investment Expenditures - The Company invested approximately $22 million and $144 million in the fourth quarter and full year 2012, respectively, in redevelopment and return on investment ("ROI") expenditures. These projects are designed to increase cash flow and improve profitability by capitalizing on changing market conditions and the favorable locations of the Company's properties. Three properties with recently completed extensive redevelopment work, the Atlanta Marriott Perimeter Center, the Chicago Marriott O'Hare and the Sheraton Indianapolis, have performed exceptionally well, as RevPAR increased an average of 41% for full year 2012 compared to the pre-construction period in 2010. Due to the significant capital expenditures affecting nearly every aspect of these properties, the operations are excluded from comparable hotel results. The Company expects investment in redevelopment and ROI expenditures for 2013 will range from $90 million to $100 million.
  • Acquisition Expenditures – In conjunction with the acquisition of a property, the Company prepares capital and operational improvement plans that are designed to maximize profitability and enhance the guest experience. During the fourth quarter 2012, the Company completed the renovation of almost 750 guestrooms and opened the new concierge lounge in the Harbor Tower of the Manchester Grand Hyatt San Diego. The Company also began a $23 million renovation to all 888 rooms of the Grand Hyatt Washington. The Company spent approximately $39 million and $128 million for the fourth quarter and full year 2012, respectively, on acquisition projects and expects to invest between $40 million and $50 million for 2013.
  • Renewal and Replacement Expenditures - The Company invested approximately $121 million and $366 million for the fourth quarter and full year 2012, respectively, in renewal and replacement expenditures. These expenditures are designed to ensure that the high-quality standards of both the Company and its operators are maintained. Major renewal and replacement projects completed during the fourth quarter included 459 rooms at the Washington Marriott at Metro Center, the 504-room North Tower of the Orlando World Center Marriott and 130,000 square feet of meeting space at The Westin Kierland Resort & Spa. The Company expects that renewal and replacement expenditures for 2013 will total approximately $270 million to $290 million. At the mid-point of the Company's guidance, the 2013 renewal and replacement expenditures represent over a 20% decrease when compared to 2012.  

Value Enhancement Projects

On November 9, 2012 the Company entered into a joint venture with Hyatt Residential Group (the "Maui JV") to develop, sell and operate a 131-unit vacation ownership project in Maui, Hawaii adjacent to the Company's Hyatt Regency Maui Resort & Spa. The Company contributed a combination of land and cash to the Maui JV in exchange for a 67% membership interest and recognized a gain on the sale of land of $8 million. In addition to any profits from the sale of timeshare units, the Company also expects to benefit from synergies created with the existing hotel. Construction has begun and the project is expected to open in late 2014. 

Dispositions

On January 11, 2013, the Company sold the 1,663-room Atlanta Marriott Marquis, including the furniture, fixtures & equipment ("FF&E") replacement fund, for a sale price of $293 million and will recognize a gain on the sale of approximately $21 million in the first quarter 2013. On November 15, 2012, the Company sold its 94.8% interest in the 424-room Toronto Airport Marriott for proceeds of approximately CAD32 million ($32 million).

Balance Sheet

During 2012, the Company issued $1.5 billion of debt, with a weighted average interest rate of 3.7%, and used the proceeds, along with available cash, to repay $1.9 billion of debt with a weighted average interest rate of 6.7%. This included the fourth quarter redemption of $100 million of 6¾% Series Q senior notes due 2016. As a result of these transactions, the Company has decreased its weighted average interest rate by approximately 90 basis points, to 5.4%, and lengthened its weighted average debt maturity at year end to 5.1 years. As of December 31, 2012, the Company had $417 million of cash and cash equivalents and $737 million of available capacity under its credit facility. After adjusting for the sales proceeds from the Atlanta Marriott Marquis, the January dividend payment, and a $100 million credit facility repayment, the Company currently has over $530 million of cash and $837 million of credit facility capacity. For 2013, the only debt maturities are $277 million of mortgage loans secured by two properties.

European Joint Venture

Hotel RevPAR for the Company's joint venture in Europe increased 2.0% for the fourth quarter and 2.9% for full year 2012 on a constant Euro basis for the 11 properties in the joint venture with comparable results. The full-year growth was driven by an increase in average room rate of 3.3%, offset by a slight decline in occupancy. On November 30, 2012, the joint venture acquired a portfolio of five hotels consisting of 1,733 rooms in Paris and Amsterdam for approximately €440 million ($572 million) and the payment of an additional €10 million ($13 million) for the FF&E replacement fund. The acquisition was financed, in part, through the issuance of a €250 million ($325 million) mortgage loan by the joint venture. The Company's equity contribution of approximately €70 million ($90 million) to the joint venture in connection with this acquisition was funded with proceeds from the repayment by the seller of a €62 million ($80 million) note receivable that the Company had initially purchased at a discount of 38% in 2010, along with available cash.

Dividend

On November 29, 2012, the Company's Board of Directors authorized a regular quarterly cash dividend of $.09 per share on its common stock. The dividend was paid on January 15, 2013 to stockholders of record on December 31, 2012. On February 19, 2013, the Board of Directors authorized a regular quarterly cash dividend of $.10 per share on its common stock. The dividend will be paid on April 15, 2013 to stockholders of record on March 28, 2013. The amount of any future dividend is dependent on the Company's taxable income and will be determined by the Company's Board of Directors.

2013 Outlook

The Company anticipates that for 2013:

  • Comparable hotel RevPAR will increase 5.0% to 7.0%;
  • Total rooms revenues under GAAP will increase 6.7% to 8.7%;
  • Total owned hotel revenues under GAAP will increase 5.4% to 7.5%;
  • Total comparable hotel revenues will increase 3.8% to 5.8%;
  • Operating profit margins under GAAP will increase approximately 270 basis points to 360 basis points; and
  • Comparable hotel adjusted operating profit margins will increase approximately 50 basis points to 110 basis points.

Based upon these parameters, the Company estimates that its 2013 guidance is as follows: 

  • earnings per diluted share should range from approximately $.29 to $.36;
  • net income should range from $217 million to $276 million;
  • NAREIT and Adjusted FFO per diluted share should be approximately $1.19 to $1.27; and
  • Adjusted EBITDA should be approximately $1,250 million to $1,310 million.

See the 2013 Forecast Schedules and Notes to Financial Information for other assumptions used in the forecasts and items that may affect forecasted results.

About Host Hotels & Resorts Host Hotels & Resorts, Inc. is an S&P 500 and Fortune 500 company and is the largest lodging real estate investment trust and one of the largest owners of luxury and upper-upscale hotels. The Company currently owns 103 properties in the United States and 15 properties internationally totaling approximately 62,500 rooms. The Company also holds non-controlling interests in a joint venture in Europe that owns 19 hotels with approximately 6,100 rooms and a joint venture in Asia that owns one hotel in Australia and a minority interest in two hotels in India and five hotels that are in various stages of development in India. Guided by a disciplined approach to capital allocation and aggressive asset management, the Company partners with premium brands such as Marriott®, Ritz-Carlton®, Westin®, Sheraton®, W®, St. Regis®, Le Meridien®, The Luxury Collection®, Hyatt®, Fairmont®, Four Seasons®, Hilton®, Swissotel®, ibis®, Pullman®, and Novotel®* in the operation of properties in over 50 major markets worldwide. For additional information, please visit the Company's website at www.hosthotels.com.

This press release contains forward-looking statements within the meaning of federal securities regulations.  These forward-looking statements include forecast results and are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "plan," "predict," "project," "will," "continue" and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to:  changes in national and local economic and business conditions that will affect occupancy rates at our hotels and the demand for hotel products and services; the impact of geopolitical developments outside the U.S. on lodging demand; volatility in global financial and credit markets; operating risks associated with the hotel business; risks and limitations in our operating flexibility associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; risks associated with our relationships with property managers and joint venture partners; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; the effects of hotel renovations on our hotel occupancy and financial results; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; risks associated with our ability to complete acquisitions and dispositions and develop new properties and the risks that acquisitions and new developments may not perform in accordance with our expectations; our ability to continue to satisfy complex rules in order for us to remain a REIT for federal income tax purposes; and other risks and uncertainties associated with our business described in the Company's annual report on Form 10‑K, quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of February 21, 2013, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

*   This press release contains registered trademarks that are the exclusive property of their respective owners. None of the owners of these trademarks has any responsibility or liability for any information contained in this press release.

*** Tables to Follow ***

Host Hotels & Resorts, Inc., herein referred to as "we" or "Host Inc.," is a self-managed and self-administered real estate investment trust ("REIT") that owns hotel properties. We conduct our operations as an umbrella partnership REIT through an operating partnership, Host Hotels & Resorts, L.P. ("Host LP"), of which we are the sole general partner. When distinguishing between Host Inc. and Host LP, the primary difference is approximately 1.4% of the partnership interests in Host LP held by outside partners as of December 31, 2012, which is presented as non-controlling interests in Host LP in our consolidated balance sheets and is included in net income (loss) attributable to non-controlling interests in our consolidated statements of operations. Readers are encouraged to find further detail regarding our organizational structure in our annual report on Form 10‑K.

For information on our reporting periods and non-GAAP financial measures (including Adjusted EBITDA, NAREIT and Adjusted FFO per diluted share and comparable hotel adjusted operating profit margin) which we believe is useful to investors, see the Notes to the Financial Information included in this release.   

HOST HOTELS & RESORTS, INC. Consolidated Balance Sheets (a) (in millions, except shares and per share amounts)

December 31,

December 31,

2012

2011

    (unaudited)  

ASSETS

Property and equipment, net

$             11,588

$             11,383

Due from managers

80

37

Advances to and investments in affiliates

347

197

Deferred financing costs, net

53

55

Furniture, fixtures and equipment replacement fund

154

166

Other

319