BETHESDA, Maryland -- Host Hotels & Resorts, Inc., the nation's largest lodging real estate investment trust (REIT), today announced results of operations for the third quarter ended September 9, 2011.
- Owned hotel revenues increased 15% to $1.085 billion for the third quarter of 2011 and increased 12% to $3.166 billion for year-to-date 2011.
- Revenues for the Company's comparable properties increased 5.3% for both periods. The 14 hotels acquired since July 2010 contributed revenues of $99 million and $213 million for the third quarter and year-to-date, respectively.
- Total revenues increased 14% for both the third quarter and year-to-date 2011 to $1.142 billion and $3.340 billion, respectively, reflecting the performance of the Company's owned hotels and the inclusion of property-level revenues for 53 leased, select-service hotels for which the Company previously recorded rental income.
- Net loss was $35 million, or $.05 per diluted share, for the third quarter of 2011 compared to net loss of $61 million, or $.09 per diluted share, for the third quarter of 2010. For year-to-date 2011, net loss was $32 million, or $.05 per diluted share, compared to a net loss of $126 million, or $.20 per diluted share, for year-to-date 2010.
- The Company's operating results include transactions, such as losses on debt extinguishments, litigation costs, acquisition costs and non-cash impairment charges that can affect earnings and Funds From Operations ("FFO") per diluted share. The net effect of these items was a decrease in earnings per diluted share of $.01 and $.02 in the third quarter of 2011 and 2010, respectively, and $.03 and $.04 for year-to-date 2011 and 2010, respectively. FFO was $112 million, or $.16 per diluted share, for the third quarter of 2011 compared to $75 million, or $.11 per diluted share, for the third quarter of 2010.
- FFO was $399 million, or $.57 per diluted share, and $275 million, or $.42 per diluted share, for year-to-date 2011 and 2010, respectively. There was no FFO per share impact from the above transactions affecting operating results for the third quarter of 2011, but they did decrease FFO per diluted share by $.02 in the third quarter of 2010 and $.03 and $.04 for year-to-date 2011 and 2010, respectively.Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, increased 27.7% to $212 million for the quarter and 23.2% to $669 million for year-to-date 2011.
For further detail of the transactions affecting net income, earnings per diluted share, FFO and FFO per diluted share, refer to the notes to the "Reconciliation of Net Loss to EBITDA, Adjusted EBITDA and FFO per Diluted Share." Adjusted EBITDA, FFO, FFO per diluted share and comparable hotel adjusted operating profit margins (discussed below) are non-GAAP (generally accepted accounting principles) financial measures within the meaning of the rules of the Securities and Exchange Commission (SEC). See the discussion included in this press release for information regarding these non-GAAP financial measures.
OPERATING RESULTS
Comparable hotel RevPAR increased 6.4% for the third quarter, as a result of the improvement of average room rate of 3.7%, combined with an increase in occupancy of 1.9 percentage points to 75.8%. For year-to-date 2011, comparable hotel RevPAR increased 6.3%, with the majority of the increase driven by rate improvement of 4.5%, combined with an increase in occupancy of 1.2 percentage points to 73.1%. Comparable hotel adjusted operating profit margins increased 110 basis points and 80 basis points for the third quarter and year-to-date 2011, respectively.
EUROPEAN JOINT VENTURE
On September 30, 2011, the Company's European joint venture's second fund (the "Euro JV Fund II"), in which the Company owns a 33.4% interest, completed the previously announced acquisition of the 396-room Pullman Bercy in Paris for approximately euro 96 million, including customary transfer taxes and notary fees. With a strong location in Paris' growing business district of Bercy, the hotel provides a first-class meeting platform with 19,400 square feet of meeting space. The Euro JV Fund II will invest an additional euro 9 million for the renovation of the rooms and public space at the hotel and Accor will continue to operate the hotel under the Pullman brand. The Euro JV Fund II now owns two hotels and has approximately euro 360 million of committed equity investment capacity remaining.
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INVESTMENTS
On August 30, 2011, the Company purchased the remaining interest in Tiburon Golf Ventures, L.P., which owns the golf club surrounding The Ritz-Carlton, Naples Golf Resort, for $11 million. The Company previously held a 49% limited partner interest in the entity.
RETURN ON INVESTMENT EXPENDITURES
The Company invested $32 million and $153 million in return on investment (ROI) projects during the third quarter and year-to-date of 2011, respectively. These projects are designed to increase cash flow and improve profitability by capitalizing on changing market conditions and the favorable locations of the Company's properties. During the third quarter, the Company completed the reinvention of the lobby at the New York Marriott Marquis, including two signature restaurants and lounges. Other on-going ROI projects include the renovation of all guest-facing areas at the Atlanta Marriott Perimeter Center, which encompasses the lobbies, rooms, restaurants and meeting space, and the major redevelopment project at the Sheraton Indianapolis, which includes the conversion of one tower of the hotel to apartment rental units. The Company expects that its investment in ROI expenditures for 2011 will total approximately $220 million to $240 million.
RENEWAL AND REPLACEMENT EXPENDITURES
The Company also spent approximately $63 million and $182 million in the third quarter and year-to-date of 2011, respectively, for renewal and replacement expenditures designed to ensure that the high-quality standards of both the Company and its operators are maintained. Major renewal and replacement projects substantially completed during the third quarter include the renovation of the 45,000 square foot Broadway ballroom at the New York Marriott Marquis. During the quarter, the Company also began work on extensive room renovations at the JW Marriott, Desert Springs Resort & Spa and the renovation of 40,000 square feet of ballroom and meeting space at the New Orleans Marriott. The Company expects that renewal and replacement expenditures for 2011 will total approximately $300 million to $320 million.
BALANCE SHEET
The Company utilized the proceeds from the second quarter issuance of $500 million of 5 7/8% Series W senior notes to repurchase approximately $105 million face amount of its 2 5/8% Exchangeable Senior Debentures ("2007 Debentures"), for $106 million. The 2007 Debentures are puttable to the Company in April 2012 and, based on the Company's current stock price, the Company anticipates that the holders will exercise this option.
As of September 9, 2011, the Company had approximately $524 million of cash and cash equivalents and approximately $481 million of available capacity under its credit facility. Additionally, the Company exercised its option to extend the maturity date of its credit facility to September 2012.
DIVIDEND
On September 19, 2011, the Company's board of directors authorized a regular quarterly cash dividend of $0.04 per share on its common stock. The dividend is payable on October 17, 2011 to stockholders of record on September 30, 2011. Based on the current guidance for 2011, the Company intends to declare, subject to approval by the Company's board of directors, a fourth quarter dividend of $0.04 or $0.05 per share.
2011 OUTLOOK
The Company anticipates that for 2011:
Comparable hotel RevPAR will increase 6.25% to 6.75%;
Operating profit margins under GAAP would increase approximately 170 basis points to 190 basis points; and
Comparable hotel adjusted operating profit margins will increase approximately 80 basis points to 90 basis points.
Based upon these parameters, the Company estimates that its full year 2011 guidance is as follows:
- earnings (loss) per diluted share should range from approximately $(.03) to $(.01);
- net income (loss) should range from $(22) million to $(9) million;
- FFO per diluted share should be approximately $.86 to $.88 (including the effect of a reduction of $.03 due to debt extinguishment costs, pursuit costs for completed acquisitions and non-cash impairments); and
- Adjusted EBITDA should be approximately $1,015 million to $1,025 million.
The Company previously announced that it had reached an agreement to acquire the 888-room Grand Hyatt Washington, D.C. for $442 million, which included a $15 million deposit and the possible assumption of a $166 million mortgage loan. The guidance issued by the Company on July 20, 2011, in conjunction with its second quarter earnings, assumed that the Grand Hyatt hotel acquisition would close in September. The July guidance included $9 million of EBITDA related to the acquisition. The Company recently amended the agreement to extend the closing date to December 14, 2011, subject to customary closing conditions. Therefore, the Company's current guidance assumes the transaction will close on that date and there would be minimal EBITDA generated by the hotel during the Company's ownership period. If the transaction is not consummated, the Company will forfeit its $15 million deposit, but will not incur closing costs and, as a result, the current forecast would decrease for both the high and the low range for earnings per diluted share and FFO per diluted share by $.01. In addition, forecasted net income and Adjusted EBITDA would decrease $8 million and $15 million, respectively.
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