Host Hotels & Resorts, Inc. ( HST ), a real estate
investment trust (REIT), reported first quarter 2013 adjusted FFO
(funds from operations) per share of 28 cents, beating both the
Zacks Consensus Estimate and the year-ago FFO per share by 4 cents.
The company has also raised its outlook for 2013.ACADIA RLTY TR (AKR): Free Stock Analysis
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Quarterly results benefited from a 5.1% rise in comparable hotel
RevPAR (revenue per available room) and solid performances at its
luxury and resort and conference center properties.
Including certain items, FFO in the reported quarter was $218
million or 29 cents per share compared with $173 million or 24
Notably, Host Hotels shifted to calendar quarter reporting
periods, instead of the fiscal quarter reporting period that it
followed earlier. As a result, the company has adjusted the 2012
fiscal figures on a calendar-quarter basis.
Beneath the Headlines
During the quarter, total revenue increased 31.8% to $1,255
million from $952 million in the year-ago quarter. The reported
revenues substantially beat the Zacks Consensus Estimate of $1,166
million. Total owned hotel revenues climbed up 4.6% year over year
to $1,238 million.
The increases revenues were driven by solid performance of its
comparable properties along with additional revenues of $21 million
from the Grand Hyatt Washington acquired in July 2012.
During the first quarter, comparable hotel RevPAR climbed 5.1% to
$142.87 from $135.98, primarily driven by a rise in average room
rates. Average room rates increased 4.0% to $197.57 from $189.94 in
the prior-year quarter. On the other hand, occupancy rose 70 bps
(basis points) to 72.3% from 71.6% in the year-ago
Driven by considerable rise in revenues, comparable hotel adjusted
operating profit margin increased 85 bps to 23.4% from 22.55% in
the year-ago period. Adjusted EBITDA (earnings before interest,
tax, depreciation and amortization) surged 10.1% to $283 million
from $257 million in the prior-year quarter.
During the reported quarter, Host Hotels invested around $21
million in redevelopment and return on investment (ROI)
expenditures. Further, the company anticipates ROI investments of
around $90 million - $100 million in 2013.
Host Hotels invested nearly $87 million in renewal and replacement
expenses during the first quarter and projects renewal and
replacement expenditures to total around $270 million - $290
million in 2013.
Moreover, during the first quarter, Host Hotels used up
approximately $15 million on properties purchased in the past 2
years. The company expects to invest $40 million - $50 million in
As of Mar 31, 2013, Host Hotels had cash and cash equivalents of
$1,075 million, compared with $417 million as of the prior-quarter
However, the company has made a number of transactions during the
quarter and subsequently as well, which are aimed at reducing
interest expenses, extending its debt maturities and loan repayment
so as to strengthen its balance sheet. Following such transactions,
the company will have around $380 million of cash and cash
equivalents, $692 million of available capacity under its credit
facility and about $4.8 billion of debt.
On Apr 15, 2013, Host Hotels paid a regular quarterly cash
dividend of 10 cents per share on its common stock to stockholders
of record on Mar 28, 2013.
For 2013, Host Hotels has raised its outlook and now expects its
adjusted FFO per share in the range of $1.25 - $1.33, up from the
prior range of $1.19 - $1.27 per share. The updated guidance is
backed by expectations of an increase in comparable hotel RevPAR to
5.0% to 7.0% and comparable hotel adjusted operating profit margins
to move up approximately 60 bps to 120 basis points.
We are encouraged with the decent results of Host Hotels in the
first quarter, which were aided by a rise in room rates. The
company also continues to benefit from its strategic acquisitions
and joint venture deals. Going forward, the company's luxury and
upper upscale hotels across hard-to-replicate areas have the
potential for significant capital appreciation.
Yet, its concentration of properties in the upscale segments
expose it to the risk of lower demand during the economic downturn,
as in such periods, customers prefer lower priced brands over the
Host Hotels' premium ones. Moreover, continuous acquisitions
involve significant upfront operating expenses, which drag down
margins till these stabilize.
Host Hotels currently carries a Zacks Rank #3 (Hold). Other REITs
that are performing better and are worth a look include
Simon Property Group Inc. ( SPG ), Acadia
Realty Trust ( AKR ) and
CubeSmart ( CUBE ), all carrying 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.