Host Hotels Sells Assets, Curbs New York Portfolio Exposure

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Host Hotels & Resorts, Inc.HST recently announced the sale of the New York Marriott Marquis retail, theater, and signage commercial condominium units to Vornado Realty Trust VNO for $442 million. The company also announced selling of the W New York - Union Square, for $171 million, which was closed earlier this month.

These dispositions come as part of the company's effort to lower its exposure to profitability-challenged assets in the New York market which is plagued with a choppy environment amid supply increases and persistent expense inflation.

Particularly, Host Hotels is monetizing investment prospects at attractive pricing. According to James F. Risoleo, president and chief executive officer, "based on 2018 forecasts, the sale price for these transactions represent a 26x EBITDA multiple".

Moreover, such deals help the company capitalize on the left over like-kind exchange benefits from its Hyatt portfolio purchase earlier this year, per management. Also, such measures offer the company the scope to improve balance-sheet strength and make strategic investments.

In fact, Host Hotels has been lowering its exposure in New York. Apart from the latest dispositions, the company completed the sale of the W New York on Lexington Avenue, for $190 million, during the June-end quarter. Furthermore, the company placed another asset under contract for sale, which is likely to close later this year.

On the other hand, Host Hotels is undertaking a strategic capital-recycling program to enhance portfolio quality and strengthen its position over vibrant markets. Particularly, during first-quarter 2018, Host Hotels completed the acquisition of 301-room Andaz Maui at Wailea Resort, 668-room Grand Hyatt San Francisco, and 454-room Hyatt Regency Coconut Point Resort and Spa, for $1 billion.

In addition to the above, during the April-June quarter, the company expended around $86 million on capital expenditures - $29 million was return on investment (ROI) capital projects, and $57 million for renewal and replacement projects. Also, the company projects capital expenditures of $475-$550 million for the current year. This comprises $185-$220 million in ROI projects, and $290-$330 million in renewal and replacement projects. Such investments are likely to help the company boost its portfolio quality and bolster revenues.

Additionally, its productivity-improvement efforts will likely be conducive to the company's long-term performance. The company also boasts a healthy balance sheet with ample liquidity that augurs well for its growth endeavors.

Nevertheless, elevated supply in some of the company's key markets may hinder its pricing power. Hike in interest rate remains another key concern.

Currently, Host Hotels carries a Zacks Rank #3 (Hold). The stock has rallied 13.6% in the past six months, outperforming 8.7% growth recorded by its industry .

Stocks to Consider

A few better-ranked stocks from the REIT space are Innovative Industrial Properties, Inc. IIPR , Park Hotels & Resorts Inc. PK and W. P. Carey Inc. WPC . While Innovative Industrial Properties sports a Zacks Rank #1 (Strong Buy), Park Hotels and W. P. Carey carry Zacks Rank of 2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Innovative Industrial Properties' Zacks Consensus Estimate for 2018 FFO per share remained unchanged at $1.19 in the last seven days.

Park Hotels & Resorts' current-year FFO per share estimates inched up 1.4% to $2.93 over the last 60 days.

W. P. Carey's FFO per share estimates for 2018 moved 0.7% north to $5.43 in 60 days' time.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) - a widely used metric to gauge the performance of REITs.

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Vornado Realty Trust (VNO): Free Stock Analysis Report

Park Hotels & Resorts Inc. (PK): Free Stock Analysis Report

Host Hotels & Resorts, Inc. (HST): Free Stock Analysis Report

Innovative Industrial Properties, Inc. (IIPR): Free Stock Analysis Report

W.P. Carey Inc. (WPC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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