Host Hotels & Resorts, Inc.
) - the lodging real estate investment trust (REIT) - disclosed
third-quarter 2013 adjusted funds from operations (FFO) per share
of 25 cents, missing the Zacks Consensus Estimate by a penny.
However, this exceeded the year-ago figure of 23 cents by
8.7%. Quarterly results benefited from the significant rise in
total owned hotels revenues and comparable hotel Revenue Per
Available Room (RevPAR).
Including certain non-recurring items, FFO was 25 cents per
share, up 25.0% from 20 cents in the prior-year quarter.
Total revenue came in at $1,223 million, which marginally
missed the year-ago figure of $1,224 million and also the Zacks
Consensus Estimate of $1,240 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 5.5% year over year to
$1,214 million, driven by the impressive performance of its
comparable and non-comparable properties.
During the reported quarter, comparable hotel RevPAR climbed
5.5% year over year to $150.23, primarily driven by continued
improvement in average room rates and occupancy. Average room
rates and occupancy increased 4.8% year over year to $191.63 and
occupancy rose 50 basis points (bps) to 78.4% on a year-over-year
On the other hand, comparable hotel adjusted operating profit
margin remained flat year over year at 23.7% and adjusted
earnings before interest, tax, depreciation and amortization
(EBITDA) surged 0.7% to $270 million on a year-over-year
Portfolio Restructuring Activity
During the quarter, Host Hotels spent $24 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.
In the quarter under review, Host Hotels' European joint
venture (JV) bought a
Starwood Hotels & Resorts Worldwide Inc.
) branded property - Sheraton Stockholm Hotel - in Sweden for
around €102 million. Also, subsequent to quarter end, the
European JV offloaded the Courtyard Paris La Defense West -
Colombes for €19 million.
Moreover, Host Hotels divested a
Marriott International, Inc.
) branded property - Portland Marriott Downtown Waterfront - for
about $87 million, subsequent to quarter-end. The company
expects to generate a profit of around $40 million in
As of Sep 30, 2013, Host Hotels had cash and cash equivalents
of $354 million, compared with $393 million at the prior-quarter
end. The company has $771 million of capacity available under its
credit facility at the end of the reported quarter.
During the third-quarter, Host Hotels issued 6.0 million
common shares in at-the-market offering and generated net
proceeds of approximately $109 million.
During the quarter, Host Hotels raised its quarterly cash
dividend by 9.1% sequentially to 12 cents per share from 11
cents. The dividend was paid on Oct 15, 2013 to stockholders of
record on Sep 30.
For 2013, Host Hotels revised its outlook and now expects its
adjusted FFO per share in the range of $1.28 - $1.30 (prior
guidance being $1.28 to $1.32).
The updated guidance is based on expectations of an increase
of 5.5% to 5.7% (prior guidance being 5.5% to 6.25%) in
comparable hotel RevPAR and comparable hotel adjusted operating
profit margins in the range of 100 - 105 bps (prior guidance
being 100 bps-120 bps).
An earnings miss at Host Hotels is disappointing but we
believe that given its solid portfolio of luxury and upper
upscale hotels, the company would be able to deliver better
results in the quarters ahead. Notably, the strategic portfolio
restructuring activities bode well for the Host Hotels' long-term
Also, the dividend hike for the 11th consecutive time
boosts investors' confidence in the stock and thus seems
promising. Going forward, we believe that the company's
properties across hard-to-replicate areas have the potential for
significant capital appreciation.
Host Hotels currently carries a Zacks Rank #3 (Hold). Another
REIT that is performing well is
) 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.
CUBESMART (CUBE): Free Stock Analysis Report
STARWOOD HOTELS (HOT): Free Stock Analysis
HOST HOTEL&RSRT (HST): Free Stock Analysis
MARRIOTT INTL-A (MAR): Free Stock Analysis
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