Host Hotels & Resorts, Inc.
), a real estate investment trust (REIT), reported fourth quarter
2012 adjusted FFO (funds from operations) per share of 40 cents,
beating the Zacks Consensus Estimate by 3 cents. This also
exceeded the year-ago adjusted FFO by 25%. The result came on the
back of strong performance of the company's operating properties.
For full year 2012, the core FFO per share increased 19.6% to
$1.10 from 92 cents in 2011. This was also well ahead of the
Zacks Consensus Estimate of $1.03.
Including non-recurring items, FFO in the reported quarter was
$303 million or 40 cents per share compared with $233 million or
31 cents. For 2012, it came in at $790 million or $1.04 per share
compared with $658 million or 89 cents in 2011.
Beneath the Headlines
During the quarter, total revenue increased 6.9% to $1,746
million from $1,634 million in the year-ago quarter. The reported
revenue substantially beat the Zacks Consensus Estimate of $1,731
million. For full year 2012, total revenues hiked 7.4% to $5,286
million from $4,924 million in 2011. This, however, missed the
Zacks Consensus Estimate of $5,293 million.
The increases in quarterly and yearly revenues were driven by
solid RevPAR (revenue per available room) increase at the
company's owned hotels. Notably, the full-year figure was largely
impacted by results of the 10 hotels acquired during 2011 and
Grand Hyatt Washington acquired during the second quarter of
During the fourth quarter, comparable hotel RevPAR climbed 5.8%
to $144.09 from $136.25, driven by a rise in occupancy and
average daily rates. Average room rates increased 2.8% to $198.53
from $193.04 in prior-year quarter. On the other hand, occupancy
rose 20 bps (basis points) to 72.6% from 70.6% in the year-ago
Driven by considerable rise in revenues, comparable hotel
adjusted operating margin increased 80 bps to 24.6% from 23.8% in
the year-ago period. Adjusted EBITDA (earnings before interest,
tax, depreciation and amortization) surged 22.1% to $426 million
from $349 million in the prior-year quarter.
During the fourth quarter, Host Hotels spent around $39 million
on acquisition projects. In concurrence with the acquisition of
the property, the company invested in improvement plans to
maximize profitability the property.
During the quarter, the company completed the refurbishment of
around 750 guestrooms and opened a new lounge in the Harbor Tower
of the Manchester Grand Hyatt San Diego. Also, it commenced
redevelopment of all the rooms of the Grand Hyatt Washington
worth $23 million.
Also, Host Hotels invested around $22 million in the fourth
quarter toward redevelopment and return on investment projects,
which are expected to enhance the company's profitability amid
the challenging market conditions.
Also, the company invested roughly $121 million during the
quarter for restoration and replacement of properties. Major
renovation and replacement projects include the renewal of 459
rooms at the Washington Marriott at Metro Center, 504-room North
Tower of the Orlando World Center Marriott and 130,000 square
feet of meeting space at The Westin Kierland Resort & Spa.
During the quarter, the company sold its 94.8% interest in the
Toronto Airport Marriott (424-room) and generated a net proceed
of around CAD32 million ($32 million).
Subsequent to the end of the quarter, Host Hotels sold the
Atlanta Marriott Marquis (1,663 rooms) for $293 million. The
company will recognize a gain of around $21 million on the sale
in the first quarter of 2013.
Other Notable Transactions
During the quarter, Host Hotels entered into a joint venture (JV)
with Hyatt Residential Group - an affiliate of
Hyatt Hotels Corporation
) - to develop and operate a 131-unit vacation ownership project
in Maui, Hawaii on Ka'anapali Beach. The project titled "Hyatt
Ka'anapali Beach, a Hyatt Residence Club" is expected to open
during late 2014.
Also, Host Hotels acquired 5 hotels in Europe through a JV, in
which it holds a 33.4% ownership interest. The properties were
purchased from Whitehall Real Estate Funds, an affiliate of
The Goldman Sachs Group, Inc.
), for an aggregate amount of about €440 million.
The acquired portfolio includes the 757-room Paris Marriott
Rive Gauche Hotel & Conference Center, the 402-room
Renaissance Amsterdam Hotel, the 327-room Renaissance Paris La
Defense Hotel, the 150-room Courtyard Paris La Defense West -
Colombes as well as the 97-room Renaissance Paris Vendome Hotel.
Host Hotels also aimed to reduce its cost of debt and extend its
debt maturities to strengthen its balance sheet. Year-to-date,
the company has issued $1.5 billion of debt with a weighted
average interest rate of 3.7% and has utilized the proceeds to
repay $1.9 billion of debt with a weighted average interest rate
As of Dec 31, 2012, Host Hotels had $417 million worth of cash
and cash equivalents and $737 million available under its credit
On Feb 19, 2013, Host Hotels announced a dividend of 10 cents per
share on its common stock. This represented a quarterly dividend
increase of 11% from the earlier dividend of 9 cents. The new
dividend will be paid on Apr 15, 2013 to stockholders of record
as of Mar 28, 2013.
For 2013, Host Hotels expects its adjusted FFO per share to come
in the range of $1.19-$1.27 per share.
Significant acquisitions and JV deals have been continuously
boosting the company's performance for quite a long time. Also,
the company's luxury and upper upscale hotels across
hard-to-replicate areas have the potential for significant
Moreover, Host Hotels has been consistently making concerted
efforts towards increasing shareholders' wealth, which is also
noteworthy. We expect all these to provide an upside potential
for the company going forward.
GOLDMAN SACHS (GS): Free Stock Analysis
HYATT HOTELS CP (H): Free Stock Analysis
HOST HOTEL&RSRT (HST): Free Stock Analysis
SIMON PROPERTY (SPG): Free Stock Analysis
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Host Hotels currently holds a Zacks Rank #3 (Hold). Another REIT,
Simon Property Group Inc.
) is more favorably placed and holds a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of
REITs, is obtained after adding depreciation and amortization and
other non-cash expenses to net income.