Host Hotels & Resorts, Inc. Reports Results for 2018 and the Acquisition of the 1 Hotel South Beach Miami

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BETHESDA, Md., Feb. 19, 2019 (GLOBE NEWSWIRE) — Host Hotels & Resorts, Inc. (NYSE: HST) (“Host Hotels” or the “Company”), the nation’s largest lodging real estate investment trust (“REIT”), today announced results for the fourth quarter and the year.HighlightsComparable hotel RevPAR growth of 2% on a constant dollar basis led to full year results that exceeded the top end of guidance for net income and Adjusted EBITDAre;Completed more than $1.6 billion in acquisitions since the beginning of 2018 – including 1 Hotel South Beach, as well as properties in Hawaii, San Francisco and Florida – further strengthening the Company’s portfolio of iconic and irreplaceable assets;Reduced international exposure to approximately 1.5% of revenues with the disposition of the JW Marriott Hotel Mexico City and the Company’s interest in its European joint venture; andDisposed of over $2.2 billion in non-core assets at attractive pricing.Acquisition of 1 Hotel South Beach MiamiOn February 14, 2019, the Company acquired the fee simple interest in the 1 Hotel South Beach for $610 million. This iconic and irreplaceable luxury resort reopened in 2015 following an extensive $300 million renovation and reprogramming;The 1.1 million square foot, 429-key, LEED-certified resort has a premium location in the vibrant South Beach area of Miami Beach and over 600 linear feet of direct beach access. The resort is the centerpiece of a mixed-use complex that features an additional 155 luxury condominium units; all owners of these units may participate in a rental program through the resort;Features 160,000 square feet of dynamic and flexible meeting space, eight food and beverage outlets, spa, gym, four elevated pools with ocean views and 23,000 square feet of luxury retail space; andRated in the top-10 U.S. hotels by Conde Nast Traveler and recently rated the #1 hotel in Miami Beach by TripAdvisor.James F. Risoleo, President and Chief Executive Officer, said, “2018 was a year of significant achievement for Host Hotels as we successfully executed on our long-term strategic vision. We delivered results at the high end of our guidance and achieved meaningful margin growth throughout the year. On the transaction front, we divested our interest in our European joint venture as we continued to sharpen our focus on the U.S. At the beginning of 2019, we sold The Westin New York Grand Central, and just last week we acquired the iconic 1 Hotel South Beach. Our capital reallocation strategy significantly advanced our ongoing efforts to further strengthen our irreplaceable portfolio while reducing our exposure in New York and international markets.”Mr. Risoleo continued, “Our goal is to drive stockholder value by combining our operational expertise and exceptional portfolio with disciplined and opportunistic investments. This strategy, together with our investment-grade balance sheet and commitment to returning capital to stockholders, positions Host Hotels to be the lodging REIT of choice for investors. We look forward to providing continued growth and value creation for Host Hotel stockholders in 2019 and beyond.”
Operating Results
(unaudited, in millions, except per share and hotel statistics)
Additional detail on the Company’s results, including data for 22 domestic markets and top 40 hotels by RevPAR, is available in the Year End 2018 Supplemental Financial Information available on the Company’s website at www.hosthotels.com.Operating PerformanceGAAP MetricsThe improvements in total revenues of 1.3% for the quarter and 2.5% for the full year were driven by increases in both room and food and beverage revenues.GAAP operating profit margin increased 380 basis points for the quarter, reflecting productivity improvements and impairment expense recorded in the fourth quarter of 2017. For the full year, operating profit margin declined 290 basis points due to impairment expense related to four hotels recorded earlier in 2018.Net income increased by $213 million to $306 million for the quarter and by $580 million to $1,151 million for the full year, primarily due to the increase in gain on sale of assets, partially offset by impairment expense.Diluted earnings per common share increased 241.7% and 93.4% for the quarter and the full year, respectively.Other MetricsComparable RevPAR, on a constant dollar basis, improved 2.3% for the quarter, driven by a 2.0% increase in average room rate and a 20 basis point increase in occupancy. For the full year, comparable RevPAR on a constant dollar basis improved 2.0%, driven by a 1.2% increase in average room rate and a 60 basis point increase in occupancy.Comparable hotel revenues increased 1.9% for the quarter and 2.4% for the full year.Comparable hotel EBITDA increased by $12 million, or3.7%, for the quarter and by $60 million, or 4.6%, for the full year.Comparable hotel EBITDA margins improved 45 basis points for the quarter and 60 basis points for the full year.Adjusted EBITDAre decreased by $3 million, or 0.8%, for the quarter and increased by $52 million, or 3.4%, for the full year.Adjusted FFO per diluted share increased 2.4% for the quarter and 4.7% for the full year.________________________Dispositions
During the fourth quarter, the Company completed the sale of its approximate 33% interest in its European joint venture to its partners for net proceeds of approximately €435 million ($496 million). The net proceeds reflect a gross asset value for Host’s 33% share of the hotels of €700 million ($800 million), net of its share of the joint venture’s debt.On January 9, 2019, the Company sold The Westin New York Grand Central for $302 million, including approximately $20 million of FF&E funds.As noted above, the Company completed over $2.2 billion in asset sales since the beginning of 2018, which include the disposition of value-enhancement projects such as the retail space at the New York Marriott Marquis in the third quarter for $442 million and the sale of the Key Bridge Marriott as a mixed-use redevelopment project for $190 million in January 2018.Capital AllocationDuring the fourth quarter, the Company spent approximately $154 million on capital expenditures, of which $94 million was return on investment (“ROI”) capital expenditures and $60 million was on renewal and replacement projects. For the full year, the Company spent $474 million on capital expenditures, of which $200 million was ROI capital expenditures and $274 million was on renewal and replacement projects.For 2019, the Company expects capital expenditures of between $550 million and $625 million. This comprises $315 million to $350 million in ROI projects and between $235 million and $275 million in renewal and replacement projects. This includes approximately $225 million in brand reinvestment capital projects that are part of the previously announced agreement with Marriott International to complete 17 transformational projects over a four-year period. These portfolio investments are designed to better position the assets to compete in their respective markets and enhance long-term performance. The Company expects to spend an average of $175 million per year over the four-year period. In exchange, Marriott has provided additional priority returns on the agreed upon investments and operating profit guarantees, including an estimated $23 million in 2019, to offset expected business disruption.DividendsThe Company paid a quarterly cash dividend of $0.25 per share on its common stock on January 15, 2019 to stockholders of record as of December 31, 2018, which included a $0.05 special dividend. On February 19, 2019, the Board of Directors authorized a regular quarterly cash dividend of $0.20 on its common stock. The dividend will be paid on April 15, 2019 to stockholders of record on March 29, 2019. All future dividends, including any special dividends, are subject to approval by the Company’s Board of Directors.Balance SheetMichael D. Bluhm, Chief Financial Officer, said, “We enter 2019 in the strongest financial position in our company’s history, as we have significantly strengthened Host Hotel’s investment grade balance sheet and enhanced our liquidity position through active portfolio management. Our financial flexibility positions us to capitalize on significant opportunities to enhance our irreplaceable hotel portfolio, invest in our assets, return capital to stockholders and drive value creation.” At December 31, 2018, the Company had approximately $1,542 million of unrestricted cash, not including $213 million in the FF&E escrow reserves, and $945 million of available capacity under the revolver portion of its credit facility. Total debt as of December 31, 2018, was $3.8 billion, with an average maturity of 4.2 years and an average interest rate of 4.4%. The Company has no debt maturities until 2020. The Company’s cash activity after year end included the following (in millions):As previously announced, the Company entered into a distribution agreement by which the Company may issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $500 million in “at the market” offerings. No shares were issued in 2018. The Company also has $500 million of capacity available under its current common share repurchase program. No shares were repurchased in 2018.2019 OutlookFor 2019, the Company’s forecast for comparable hotel RevPAR growth is 0% to 2%. The RevPAR guidance reflects an estimated 45 basis points of disruption impact from the incremental capital expenditures associated with the Marriott agreement discussed above. However, the estimated effect to earnings caused by these expenditures is offset by Marriott’s operating profit guarantees. The Company expects to receive $23 million of operating profit guarantees in 2019, of which $10 million is included in comparable hotel EBITDA, to offset the disruption to operations caused by the incremental spend on those properties. The Company anticipates that its 2019 operating results as compared to the prior year will change in the following range:__________Based upon the above parameters, the Company estimates its 2019 guidance as follows:
See the 2019 Forecast Schedules and the Notes to Financial Information for other assumptions used in the forecasts and items that may affect forecast results.About Host Hotels & ResortsHost Hotels & Resorts, Inc. is an S&P 500 company and is the largest lodging real estate investment trust and one of the largest owners of luxury and upper-upscale hotels. The Company currently owns 88 properties in the United States and five properties internationally totaling approximately 52,000 rooms. The Company also holds non-controlling interests in six domestic and one international joint ventures. Guided by a disciplined approach to capital allocation and aggressive asset management, the Company partners with premium brands such as Marriott®, Ritz-Carlton®, Westin®, Sheraton®, W®, St. Regis®, The Luxury Collection®, Hyatt®, Fairmont®, Hilton®, Swissôtel®, ibis® and Novotel®, as well as independent brands in the operation of properties in over 50 major markets. For additional information, please visit the Company’s website at www.hosthotels.com.Note: This press release contains forward-looking statements within the meaning of federal securities regulations. These forward-looking statements include forecast results and are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “plan,” “predict,” “project,” “will,” “continue” and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: changes in national and local economic and business conditions and other factors such as natural disasters, pandemics and weather that will affect occupancy rates at our hotels and the demand for hotel products and services; the impact of geopolitical developments outside the U.S. on lodging demand; volatility in global financial and credit markets; operating risks associated with the hotel business; risks and limitations in our operating flexibility associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; risks associated with our relationships with property managers and joint venture partners; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; the effects of hotel renovations on our hotel occupancy and financial results; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; risks associated with our ability to complete acquisitions and dispositions and develop new properties and the risks that acquisitions and new developments may not perform in accordance with our expectations; our ability to continue to satisfy complex rules in order for us to remain a REIT for federal income tax purposes; risks associated with our ability to effectuate our dividend policy, including factors such as operating results and the economic outlook influencing our board’s decision whether to pay further dividends at levels previously disclosed or to use available cash to make special dividends; and other risks and uncertainties associated with our business described in the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of February 19, 2019, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.
 
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Host Hotels & Resorts, Inc., herein referred to as “we” or “Host Inc.,” is a self-managed and self-administered real estate investment trust that owns hotel properties. We conduct our operations as an umbrella partnership REIT through an operating partnership, Host Hotels & Resorts, L.P. (“Host LP”), of which we are the sole general partner. When distinguishing between Host Inc. and Host LP, the primary difference is approximately 1% of the partnership interests in Host LP held by outside partners as of December 31, 2018, which is non-controlling interests in Host LP in our consolidated balance sheets and is included in net income attributable to non-controlling interests in our consolidated statements of operations. Readers are encouraged to find further detail regarding our organizational structure in our annual report on Form 10-K. 
HOST HOTELS & RESORTS, INC.
Condensed Consolidated Balance Sheets
(unaudited, in millions, except shares and per share amounts)
(1)   Please see our Year End 2018 Supplemental Financial Information for more detail on our debt balances.HOST HOTELS & RESORTS, INC.
Condensed Consolidated Statements of Operations
(unaudited, in millions, except per share amounts)




HOST HOTELS & RESORTS, INC.

Earnings per Common Share
(unaudited, in millions, except per share amounts)


HOST HOTELS & RESORTS, INC.

Hotel Operating Data for Consolidated Hotels (1)
Comparable Hotels by Location in Constant US$
All Owned Hotels in Constant US$ (2)Comparable Hotels in Nominal US$
HOST HOTELS & RESORTS, INC.
Hotel Operating Data for Consolidated Hotels (1)
Comparable Hotels by Location in Constant US$All Owned Hotels in Constant US$ (2)Comparable Hotels in Nominal US$ 

HOST HOTELS & RESORTS, INC.
Schedule of Comparable Hotel Results (1)
(unaudited, in millions, except hotel statistics)




HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income to
EBITDA, EBITDAre and Adjusted EBITDAre (1)
(unaudited, in millions)


HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income to NAREIT and
Adjusted Funds From Operations per Diluted Share (1)
(unaudited, in millions, except per share amounts)
  


HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income to EBITDA, EBITDAre, Adjusted EBITDAre and
NAREIT and Adjusted Funds From Operations per Diluted Share for 2019 Forecasts (1)
(unaudited, in millions, except per share amounts)
(1)   The forecasts are based on the below assumptions:Total comparable hotel RevPAR in constant US$ will increase 0.0% to 2.0% for the low and high end of the forecast range, which excludes the effect of changes in foreign currency. However, the effect of estimated changes in foreign currency has been reflected in the forecast of net income, EBITDA, earnings per diluted share and Adjusted FFO per diluted share.Comparable hotel EBITDA margins will decrease 50 basis points or increase 10 basis points for the low and high ends of the forecasted RevPAR range, respectively.We expect to spend approximately $315 million to $350 million on ROI capital expenditures and approximately $235 million to $275 million on renewal and replacement capital expenditures.
For a discussion of additional items that may affect forecasted results, see the Notes to Financial Information.
HOST HOTELS & RESORTS, INC.
Schedule of Comparable Hotel Results
for 2019 Forecasts (1)
(unaudited, in millions, except hotel statistics)

        Acquisitions:
Andaz Maui at Wailea Resort (acquired in March 2018)Grand Hyatt San Francisco (acquired in March 2018)Hyatt Regency Coconut Point Resort and Spa (acquired in March 2018)1 Hotel South Beach (acquired in February 2019)        Renovations:The Ritz-Carlton, Naples (business disruption beginning in the second quarter of 2018)San Francisco Marriott Marquis (business disruption beginning in the third quarter of 2018)Costa Mesa Marriott (business disruption in 2019)Minneapolis Marriott City Center (business disruption in 2019)San Antonio Marriott Rivercenter (business disruption in 2019)        Dispositions or properties under contract (includes forecast or actual results from January 1, 2019 through the anticipated or actual sale date):The Westin New York Grand Central (sold January 9, 2019)
HOST HOTELS & RESORTS, INC.
Notes to Financial Information

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