BETHESDA, Md., April 28, 2017– Host Hotels & Resorts, Inc. (NYSE:HST) (“Host Hotels” or the “Company”), the nation’s largest lodging real estate investment trust (“REIT”), today announced results of operations for the first quarter of 2017.
James F. Risoleo, President and Chief Executive Officer of Host Hotels, stated: “We are pleased with our first quarter results and we continue to improve our geographically diverse portfolio of irreplaceable assets, with over $430 million of high-quality asset acquisitions during the quarter. By utilizing our scale, access to information, and industry-leading balance sheet, we added the Don CeSar and W Hollywood to our collection of properties. Both properties, without any adjustments for our value-add plans, are immediately in the top ten of our portfolio, based on their 2016 EBITDA results on a per room basis. Combined with our strategic sales of non-core assets, we believe this disciplined capital allocation activity will help us to continue to fulfill our mission of creating value for our stockholders.”
Operating Results (in millions, except per share and hotel statistics) Quarter ended March 31, Percent 2017 2016 Change Total revenues $ 1,348 $ 1,339 0.7 % Comparable hotel revenues (1) 1,209 1,173 3.1 % Net income 161 184 (12.5 )% Adjusted EBITDA (1) 367 345 6.4 % Change in comparable hotel RevPAR: Domestic properties 3.8 % International properties – Constant US$ (7.1 )% Total – Constant US$ 3.4 % Diluted earnings per share 0.21 0.24 (12.5 )% NAREIT FFO and Adjusted FFO per diluted share (1) 0.44 0.41 7.3 % ___________
(1) NAREIT Funds From Operations (“FFO”) per diluted share, Adjusted FFO per diluted share, Adjusted EBITDA and comparable hotel results are non-GAAP (U.S. generally accepted accounting principles) financial measures within the meaning of the rules of the Securities and Exchange Commission (“SEC”). See the Notes to Financial Information on why the Company believes these supplemental measures and other non-GAAP financial measures identified in this press release are useful, reconciliations to the most directly comparable GAAP measure, and the limitations on the use of these supplemental measures.
GAAP OPERATING PERFORMANCE
“We are pleased with the Company’s first quarter results, including strong RevPAR and food and beverage growth, which led to margin improvement that exceeded our expectations,” said Gregory J. Larson, Executive Vice President and Chief Financial Officer. “We were also pleased with our execution on the $400 million Series G senior notes offering, which filled a gap in our maturity schedule and continued to demonstrate the strength and flexibility of our investment grade balance sheet.”
- Net income decreased $23 million to $161 million for the first quarter, primarily due to a decrease of $42 million in gain on sale of assets, as only one hotel was sold during the first quarter of 2017 compared to three dispositions in the first quarter of 2016. Improvements in RevPAR and food and beverage (“F&B”) revenues helped drive GAAP operating profit margin growth of 140 basis points for the quarter.
- Diluted earnings per share decreased by 12.5% for the quarter as a result of the decrease in net income, partially offset by the decrease in the weighted average shares outstanding due to the Company’s repurchase of approximately 14 million shares in 2016. The Company has not repurchased any shares in 2017.
- Total revenues increased 0.7% for the quarter. The growth was driven by an increase in RevPAR at the Company’s comparable hotels, discussed below, as well as an increase in F&B revenues due to a favorable shift in the Easter holiday, partially offset by a decrease of $53 million due to the net effect of the Company’s acquisitions and dispositions in 2017 and 2016.
ADDITIONAL KEY COMPANY METRICS
- Comparable hotel EBITDA improved $20 million, or 6.5%, for the quarter, driven by strong comparable hotel EBITDA margin improvement of 85 basis points for the quarter. Group performance continued to drive comparable revenue growth of 3.1% for the quarter.
- Adjusted EBITDA increased $22 million, or 6.4%, due to the improvement in comparable hotel EBITDA and the very strong performance of the Company’s non-comparable hotels, which was slightly offset by the sale of 11 hotels in 2016 and 2017.
- Comparable RevPAR on a constant dollar basis improved 3.4% for the quarter, driven by a 2.4% increase in average room rate and an 80 basis point increase in occupancy to 75.8%.
- Comparable RevPAR at the Company’s domestic properties improved 3.8% for the quarter. The Washington D.C. market outperformed the portfolio during the first quarter due to the Presidential inauguration and Women’s March, with a RevPAR increase of 20.1%. The Company’s San Francisco and New York properties lagged the portfolio, with RevPAR decreases for the quarter of 6.3% and 3.9%, respectively. San Francisco’s underperformance was expected due to the expansion of the Moscone Convention Center, while increased supply continues to affect the New York market.
- On a constant dollar basis, RevPAR at the Company’s comparable international properties decreased 7.1% in the first quarter, primarily as a result of a significant decrease at its three properties in Rio de Janeiro, due to the very weak Brazilian economy.
- As a result of the improvements in operating results described above and the Company’s 2016 share repurchase program, Adjusted FFO per diluted share increased 7.3% for the quarter.
CAPITAL ALLOCATION
Acquisitions and Dispositions
As previously announced, the Company acquired the Don CeSar and W Hollywood during the first quarter of 2017. These transactions coincided with formation of the Enterprise Analytics group, which the Company believes will be a key contributor in evaluating future investments to drive portfolio-wide improvement through leveraging technology and deep-dive analytics.
The Company also continued to strategically dispose of non-core assets where it expects lower growth and/or higher capital expenditures requirements. Subsequent to quarter end, the Company sold the Sheraton Memphis Downtown for $67 million and expects to record a gain of approximately $28 million in the second quarter. This is in addition to the sale of the JW Marriott Desert Springs Resort & Spa in the first quarter (as previously announced). The Company also is under contract to sell the Hilton Melbourne South Wharf, which it expects to close in the second quarter, subject to customary closing conditions. The sale of this property will represent the Company’s last hotel in Australia. For the three properties sold or under contract for sale in 2017, the combined average 2016 RevPAR was $134 compared to an average 2016 RevPAR for the two properties acquired in 2017 of $243.
Redevelopment and Return On Investment (“ROI”) Capital Projects
The Company deployed approximately $16 million in the first quarter on redevelopment and ROI capital expenditures.
For full-year 2017, the Company expects to invest a total of approximately $90 million to $115 million in redevelopment projects and ROI capital expenditures, which represents a reduction of approximately $125 million from 2016. Additional information regarding the Company’s capital projects can be found at www.hosthotels.com.
Renewal and Replacement Expenditures
The Company deployed approximately $64 million in the first quarter in renewal and replacement capital expenditures. Projects completed during the first quarter included the renovation of all 285 rooms at the San Francisco Marriott Fisherman’s Wharf and renovation of almost 43,000 square feet of meeting space at the Westfields Marriott Washington Dulles.
For 2017, the Company expects to invest a total of $275 million to $300 million in renewal and replacement capital expenditures.
DIVIDENDS
The Company paid a regular quarterly cash dividend of $0.20 per share on its common stock on April 17, 2017 to stockholders of record as of March 31, 2017. All future dividends are subject to approval by the Company’s Board of Directors.
BALANCE SHEET
The Company’s strong balance sheet remains a key competitive advantage, providing flexibility to take advantage of investment opportunities throughout the lodging cycle. An important component of this strategy is the Company’s investment-grade rating on its long-term unsecured debt and its access to revolving credit facility and term loans, which represent almost all of the Company’s outstanding borrowings.
On March 20, 2017, the Company issued $400 million of Series G senior notes due April of 2024 at an interest rate of 3.875%. The proceeds were used to repay $250 million that had been drawn under the revolver portion of the credit facility earlier in the quarter and for general corporate purposes.
At March 31, 2017, the Company had approximately $411 million of unrestricted cash and $784 million of available capacity remaining under the revolver portion of its credit facility. Total debt as of March 31, 2017, was $4.0 billion, with an average maturity of 5.1 years and an average interest rate of 3.8%.
EUROPEAN JOINT VENTURE
The European joint venture’s comparable hotel RevPAR on a constant euro basis increased approximately 8.2% for the first quarter. The improvement was the result of a favorable comparison to the first quarter of 2016, which experienced the aftermath of the tragic terrorist attacks in Brussels and Paris, leading to an increase in occupancy of 470 basis points, combined with a slight increase to average room rate.
To view full financial release and corresponding tables please click the PDF icon or visit: http://ir.hosthotels.com/phoenix.zhtml?c=60734&p=irol-newsArticle&ID=2266893
