Host Hotels & Resorts, Inc. Reports Results of Operations for the First Quarter of 2010
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Host Hotels & Resorts, Inc. Reports Results of Operations for the First Quarter of 2010
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Category: Worldwide - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2010-04-28
Host Hotels & Resorts, Inc. (NYSE: HST), the nation's largest lodging real estate investment trust (REIT), today announced results of operations for the first quarter ended March 26, 2010. The results for the quarter exceeded the Company's expectations for several metrics, including RevPAR, earnings and FFO per diluted share and Adjusted EBITDA, that were incorporated into the Company's full year 2010 guidance issued on February 17, 2010.
(Logo: http://www.newscom.com/cgi-bin/prnh/20060417/HOSTLOGO )
-- Total revenue was $823 million for the first quarter 2010, which
was a decrease of 5% compared to 2009.
-- Net loss was $84 million for the first quarter of 2010 compared to
net loss of $60 million for the first quarter of 2009. Loss per
diluted share was $.13 for the first quarter of 2010 compared to
loss per diluted share of $.12 in 2009.
Operating results for the first quarter of 2010 were affected by
costs associated with the repayment of debt and an additional
accrual for the potential litigation loss related to the San
Antonio Marriott Rivercenter. Operating results for the first
quarter 2009 were affected by a gain on the disposition of one
hotel, as well as non-cash impairment charges. The net effect of
these items on loss per diluted share was a decrease in earnings
of $11 million, or $.01 per diluted share, for the first quarter
of 2010 and a decrease in earnings of $21 million, or $.04 per
diluted share, for the first quarter of 2009.
-- Funds from Operations (FFO) per diluted share was $.08 for the
first quarter of 2010 compared to $.10 per diluted share for the
first quarter of 2009. The net effect of the above transactions
affecting operating results also decreased FFO per share by $.01
and $.08 for the first quarter of 2010 and 2009, respectively.
-- Adjusted EBITDA, which is Earnings before Interest Expense, Income
Taxes, Depreciation, Amortization and other items was $126 million
for the first quarter 2010, which was a decrease of $48 million
compared to 2009.
For further detail of the transactions affecting net income, earnings per diluted share and FFO per diluted share, refer to the notes to the "Reconciliation of Net Income to EBITDA, Adjusted EBITDA and FFO per Diluted Share."
Adjusted EBITDA, FFO per diluted share and comparable hotel adjusted operating profit margins (discussed below) are non-GAAP (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 for information regarding these non-GAAP financial measures.
OPERATING RESULTS
Comparable hotel RevPAR for the first quarter 2010 decreased 2.3% when compared to 2009. Comparable hotel adjusted operating profit margins decreased 275 basis points for the first quarter. This includes the effect of approximately $12 million of revenues from incremental attrition and cancellation fees recorded in the first quarter of 2009 compared to the first quarter of 2010, which accounted for 110 basis points of the overall reduction in our comparable hotel adjusted operating margin for the first quarter of 2010. For further detail, see "Notes to the Financial Information."
BALANCE SHEET
As of March 26, 2010, the Company had over $1.2 billion of cash and cash equivalents and $600 million of available capacity under its credit facility. During the first quarter, the Company redeemed $346 million of 7% Series M senior notes and repaid the $124 million mortgage on the Atlanta Marriott Marquis.
The Company issued approximately 4 million shares of common stock at an average price of $12.65 per share under its continuous equity offering program for net proceeds of approximately $55 million in the first quarter. Currently, there is approximately $54 million of availability remaining under the program.
INVESTMENTS
On April 13, 2010, the Company acquired, at a discount, the most junior tranches of a euro 427 million mortgage loan that is secured by six hotels located in Europe. The two junior tranches purchased by the Company have a face value of euro 64 million and are subordinate to euro 363 million of senior debt. The Company will earn interest on the face amount based on the 90-day EURIBOR plus 303 basis points, or currently approximately 3.8%.
DISPOSITIONS
During the first quarter, the Company sold the 374-room Sheraton Braintree for $9 million and recorded a gain of approximately $1 million on the sale.
CAPITAL EXPENDITURES
Capital expenditures totaled approximately $50 million for the quarter, which included return on investment (ROI) and repositioning projects of approximately $23 million. Projects completed during the quarter included the renovation of over 95,000 square feet of ballroom and meeting space at the San Francisco Marriott Marquis. In 2010, the Company has begun a $190 million project at the 1,362-room San Diego Marriott Hotel & Marina, which will include a complete renovation of all guest rooms, the pool and fitness center, as well as the planned development of new meeting space and an exhibit hall. The Company will also be adding a new ballroom and renovating meeting space at the Westin Kierland Resort & Spa. The Company intends to accelerate the timing of certain capital projects to benefit from lower construction costs in anticipation of the further strengthening of the lodging recovery. The Company anticipates that capital expenditures will be between $300 million to $340 million during 2010.
DIVIDEND
The Company paid a $.01 per share common dividend on April 15, 2010 and expects to continue to pay a quarterly $.01 per share common dividend in 2010 regardless of taxable income.
2010 OUTLOOK
The Company believes that recent improvements in the economy will continue to positively affect the lodging industry and hotel operating results for the remainder of 2010. Although the strength and speed of the recovery is difficult to predict and booking pace remains short, the Company now anticipates that for 2010:
* RevPAR will increase 1% to 4%;
* Operating profit margins under GAAP would increase approximately 100 basis points to 220 basis points; and
* Comparable hotel adjusted operating profit margins would decrease approximately 125 basis points to 50 basis points.
Based upon these parameters, the Company estimates that its full year 2010 guidance is as follows:
* loss per diluted share should be approximately $.32 to $.25;
* net loss should be approximately $205 million to $158 million;
* FFO per diluted share should be approximately $.58 to $.65; and
* Adjusted EBITDA should be approximately $750 million to $800 million.
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 110 properties with approximately 61,000 rooms, and also holds a non-controlling interest in a joint venture that owns 11 hotels in Europe with approximately 3,500 rooms. Guided by a disciplined approach to capital allocation and aggressive asset management, the Company partners with premium brands such as Marriott(R), Ritz-Carlton(R), Westin(R), Sheraton(R), W(R), St. Regis(R), The Luxury Collection(R), Hyatt(R), Fairmont(R), Four Seasons(R), Hilton(R) and Swissotel(R)* in the operation of properties in over 50 major markets worldwide. For additional information, please visit the Company's website at www.hosthotels.com.
Note: This press release contains forward-looking statements within the meaning of federal securities regulations. These forward-looking statements 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 assumption 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: national and local economic and business conditions, including the effect on travel of potential terrorist attacks, that will affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; relationships with property managers; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages, prices, construction procedures and costs; our ability to complete acquisitions and dispositions; and 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 filings 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 April 27, 2010, 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," 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., or Host LP, of which we are the sole general partner. When distinguishing between Host and Host LP, the primary difference is approximately 2% of the partnership interests in Host LP held by outside partners as of March 26, 2010, which is 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 10K.
For information on our reporting periods and non-GAAP financial measures (including Adjusted EBITDA, 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.
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