Host Hotels & Resorts Inc.
) reported second quarter 2012 FFO (funds from operations) of $246
million or 32 cents per share compared with $221 million or 30
cents per share in the year-earlier quarter.
Reported FFO missed the Zacks Consensus Estimate by a
penny. Funds from operations, 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.
Adjusted FFO in the reported quarter was $261 million or 34
cents per share versus $227 million or 31 cents per share in the
Total revenue increased 6.5% year over year to $1,368 million
from $1,284 million and exceeded the Zacks Consensus Estimate of
$1,363 million. The increase in revenue was driven by solid
performance of the company's owned hotelsand improvements in
comparable food and beverage revenues.
Comparable hotel revenue per available room (RevPAR) jumped 6.1%
to $151.47, driven by a rise in occupancy and average daily rates.
Average room rates increased 3.7% to $194.37 during the quarter,
while occupancy rose 1.7% to 77.6%.
Comparable hotel adjusted operating margin increased 120 basis
points (bps) during the quarter. Adjusted EBITDA (earnings before
interest, tax, depreciation and amortization) increased 11.2% to
During the second quarter of 2012, the company completed the
renovation of the 1,778-room Sheraton New York Hotel & Towers
and the conversion of one tower at the Sheraton Indianapolis into
The company also acquired the 888-room Grand Hyatt Washington,
D.C. for approximately $400 million. The hotel includes over 43,000
square feet of meeting space and is strategically located with easy
access to historic monuments, museums and the convention
During the quarter, the company invested $50 million on
redevelopment and return on investment (ROI) projects, which are
expected to enhance the company's profitability amid the
challenging market conditions. Further, Host Hotels incurred
renewal and replacement expenditures of approximately $79 million
to ensure the standards of its portfolio. Additionally, the company
spent $50 million in acquisitions projects during the reported
quarter to improve their profitability.
During the reported quarter, the company issued approximately
3.1 million shares at an average price of $15.75 per share totaling
Additionally, the company entered into a $100 million mortgage
loan secured by the Hyatt Regency Reston scheduled to mature in
2016 with a one-year extension option. The loan carries interest at
a rate of 1-month LIBOR plus 310 basis points. The company
utilized the proceeds from the equity offer to repay debts of
approximately $1 billion during the reported quarter.
At the end of the second quarter, Host Hotels had over $150
million in cash and cash equivalents and about $760 million
available under its credit facility. Total debt of the company
stood at $5.3 billion.
Host Hotels anticipates the gradual revival of the overall
economy to boost its operating results in 2012, with comparable
hotel RevPAR expected to increase in the range of 5.5% to 7.0% for
the full year.
For fiscal 2012, Host Hotels expects to incur approximately $310
million to $330 million in renewal and replacement expenditures;
$165 million-$175 million in ROI expenditure; and $115 million-$125
million in acquisition expenditures. The company currently expects
adjusted FFO for 2012 in the range of $1.04 to $1.09 per share.
Host Hotels currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. We are also maintaining our
long-term Neutral recommendation on the stock. One of its
La Salle Hotel Properties
) holds a Zacks #3 Rank.
HOST HOTEL&RSRT (HST): Free Stock Analysis
LASALLE HTL PRP (LHO): Free Stock Analysis
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