Host Hotels & Resorts, Inc.
) - a real estate investment trust (REIT) - reported
second-quarter 2013 adjusted funds from operations (FFO) per
share of 45 cents, beating the Zacks Consensus Estimate by 3
cents. Moreover, this exceeded the year-ago figure of 33 cents by
Quarterly results benefited from strong operating portfolio
performance. Including certain non-recurring items, FFO was 39
cents per share, up 25.8% from 31 cents in prior-year
Total revenue increased 4.8% to $1,420 million year over year
but missed the Zacks Consensus Estimate of $1,437 million.
Notably, on Jan 1, 2013, Host Hotels shifted to calendar
quarter reporting periods, instead of the fiscal quarter
reporting period that it followed earlier. Consequently, the
company adjusted the 2012 fiscal figures on a calendar-quarter
Behind the Headlines
Total owned hotel revenue climbed 9.4% year over year to
$1,407 million, driven by solid performance of its comparable
properties along with additional revenue of $31 million from
Grand Hyatt Washington acquired in Jul 2012.
During the reported quarter, comparable hotel RevPAR climbed
6.1% year over year to $162.69, primarily driven by a rise in
average room rates and occupancy. Average room rates and
occupancy increased 4.5% year over year to $203.79 and occupancy
rose 110 basis points (bps) to 79.8% on year-over-year
Driven by impressive growth in revenues, comparable hotel
adjusted operating profit margin increased 180 bps year over year
to 29.0% and adjusted earnings before interest, tax, depreciation
and amortization (EBITDA) surged 23.1% to $431 million on
Portfolio Restructuring Activity
During the quarter, Host Hotels bought Hawaii-based premium
property, Hyatt Place Waikiki Beach for $138.5 million. The
426-room property was acquired from an affiliate of Chartres
Lodging Group, LLC - Kokua Hospitality - and Morgan Stanley Real
Estate Fund VII Global of
Moreover, the company sold a
Marriott International, Inc
) branded property - Ritz-Carlton, San Francisco - for about $161
Furthermore, during the quarter, Host Hotels spent $26 million
in redevelopment and return on investment (ROI) expenditures. The
company also expended nearly $76 million in renewal and
replacement expenses. Additionally, Host Hotels used up
approximately $7 million for capital and operational improvement
of the acquired asset.
Going forward, in 2013, Host Hotels anticipates ROI
investments of around $90-$100 million. The company also projects
renewal and replacement expenditures to total around $280-$300
million in 2013. Moreover, Host Hotels expects to shell out
$35-$45 million for capital and operational improvement expenses
As of Jun 30, 2013, Host Hotels had cash and cash equivalents
of $393 million, compared with $1,075 at the prior-quarter end.
The company has $798 million of capacity available under its
credit facility at the end of the reported quarter.
Moreover, Host Hotels issued 4.8 million common shares in
at-the-market offering and generated net proceeds of
approximately $87 million during the quarter.
Additionally, the company's European joint venture (JV)
refinanced a mortgage loan collateralized by a portfolio of five
properties situated in Spain, Italy, the United Kingdom and
Poland. The JV also reduced the outstanding principal amount of
the loan to €242 million from €337 million.
During the quarter, Host Hotels raised its quarterly cash
dividend by 10% sequentially to 11 cents per share from 10 cents.
The new dividend was paid on Jul 15 to shareholders of record as
of Jun 28, 2013.
For 2013, Host Hotels revised its outlook and now expects its
adjusted FFO per share in the range of $1.28 to $1.32 (prior
guidance being $1.25-$1.33). The updated guidance is based on
expectations of an increase of 5.5% to 6.25% in comparable hotel
RevPAR and comparable hotel adjusted operating profit margins in
the range of 100 bps-120 bps.
Although the revenues miss is not encouraging, Host Hotels'
adjusted FFO beat depicts strong comparable properties'
performance and adjusted EBITDA growth. Moreover, strategic
portfolio restructuring activities continued to benefit Host
Hotels. Going forward, the company's luxury and upper upscale
hotels across hard-to-replicate areas have the potential for
significant capital appreciation. In addition, the dividend hike
boosts investors' confidence in the stock and thus seems
Host Hotels currently carries a Zacks Rank #2 (Buy). Another
) also carries the same Zacks rank as Host Hotels.
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.
CUBESMART (CUBE): Free Stock Analysis Report
HOST HOTEL&RSRT (HST): Free Stock Analysis
MARRIOTT INTL-A (MAR): Free Stock Analysis
MORGAN STANLEY (MS): Free Stock Analysis
To read this article on Zacks.com click here.