Host Hotels & Resorts Reports Q3 2016 Net Income of $108 million, Compared to $87 million in the Year Ago Period; RevPAR up 3.8%
November 2, 2016 9:43am
BETHESDA, Md., Nov. 02, 2016 (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 of operations for the third quarter of 2016.
“We are pleased with our financial performance during the third quarter, as strong RevPAR growth drove significant comparable hotel profit increases,” said W. Edward Walter, President and Chief Executive Officer. “We have continued our disciplined approach to capital allocation and active portfolio management, which includes realizing profits as we completed our exit from New Zealand, and are now seeing the benefits of our broader strategy reflected in double-digit diluted EPS and Adjusted FFO per share growth year-over-year. We are also excited about the value we are creating through transformational redevelopment projects at several of our hotels, and looking ahead, see additional opportunities to enhance and further unlock the value of our real estate. We remain committed to delivering significant value to stockholders and have returned $802 million through dividends and stock repurchases year-to-date.”
(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
ADDITIONAL KEY COMPANY METRICS
SHARE REPURCHASE PROGRAM, DIVIDENDS AND SPECIAL DIVIDENDS
Since January 1, 2016, the Company has distributed $802 million of capital to its stockholders through cash dividend distributions and stock repurchases.
The Company is committed to maintaining a meaningful dividend, subject to approval by the Company’s Board of Directors. The Company paid a regular quarterly cash dividend of $0.20 per share on its common stock on October 17, 2016 to stockholders of record as of September 30, 2016. The Company currently anticipates declaring a $0.25 dividend in the fourth quarter, which includes a special dividend of $0.05. All future dividends, including any special dividends, are subject to approval by the Company’s Board of Directors.
The Company repurchased 2.8 million shares at an average price of $16.04 for the quarter and 13.1 million shares at an average price of $15.79 year-to-date, for a total year-to-date purchase of approximately $206 million. The Company has $117 million of remaining authorized repurchase capacity under its share repurchase program. The common stock may be purchased in the open market or through private transactions from time to time through December 31, 2016, depending upon market conditions. The plan does not obligate the Company to repurchase any specific number of shares and may be suspended at any time at its discretion.
The Company continued to strategically dispose of non-core assets in markets where it expects lower growth or higher capital expenditure requirements. Proceeds from the sales of these assets have been utilized for the stock repurchase program, capital expenditures, and other corporate initiatives to enhance stockholder value. During the third quarter, the Company disposed of its final two properties in New Zealand for $31 million and recognized a gain of $10 million. For the 10 properties disposed of in 2016, the combined average 2015 RevPAR was $109 compared to the Company’s year-to-date 2016 comparable RevPAR of $179. The following table is a summary of completed dispositions activity for 2016 (in US$ millions):
The 2016 full year guidance includes net income (excluding gains on sale) of $10 million and Adjusted EBITDA of $13 million that were earned by the hotels that have been sold during the year.
HOTEL MANAGEMENT OPPORTUNITIES
The Company continues to pursue opportunities to appropriately align each hotel with the best operator and brand to optimize operating performance within its specific market, in addition to improving brand flexibility at its properties. Currently, the Company has 13 consolidated properties managed by independent operators or subject to franchise agreements and an additional 16 agreements that have termination rights that, subject to certain conditions, can provide additional flexibility to the management agreement(1). During the third quarter, the Company renegotiated an additional management agreement resulting in a reduction in the overall management fee and added the ability to franchise the property at any time.
The Company’s strong balance sheet is a key competitive advantage that provides 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, which along with its credit facility revolver and term loans, represents 98% of the Company’s outstanding borrowings. During the quarter, the Company drew down $50 million on the revolver portion of its credit facility.
At September 30, 2016, the Company had approximately $340 million of cash. Interest expense decreased $8 million for the quarter and $51 million year-to-date, reflecting a reduction in weighted average interest rates compared to prior year, as well as a reduction in debt extinguishment costs of $21 million year-to-date. As of September 30, 2016, total debt was $3.8 billion, with an average maturity of 5.3 years and an average interest rate of 3.7%. Subsequent to quarter end, the Company had net draws of $60 million on the revolver portion of its credit facility and currently has $628 million of available capacity remaining thereunder.
REDEVELOPMENT, RETURN ON INVESTMENT (“ROI”) AND ACQUISITION CAPITAL PROJECTS
The Company invested approximately $46 million and $187 million in the third quarter and year-to-date 2016, respectively, on redevelopment, ROI and acquisition capital expenditures. For full-year 2016, the Company expects to invest a total of approximately $200 million to $215 million in redevelopment projects, ROI, and acquisition capital expenditures.
Some of the Company’s current ROI projects include:
Additional information regarding the Company’s capital projects can be found at www.hosthotels.com.
RENEWAL AND REPLACEMENT EXPENDITURES
The Company invested approximately $57 million and $218 million in the third quarter and year-to-date 2016, respectively, in renewal and replacement capital expenditures. For 2016, the Company expects to invest a total of $300 million to $310 million in renewal and replacement capital expenditures.
EUROPEAN JOINT VENTURE
The European joint venture’s comparable hotel RevPAR on a constant euro basis declined approximately 2.6% and 2.3% for the third quarter and year-to-date 2016, respectively. The decrease in comparable hotel RevPAR was a result of slow economic growth and uncertain political climate that reduced demand, particularly at the joint venture’s properties in Brussels and Paris where operations have yet to return to the levels seen prior to the terrorist attacks in those cities.
To view full financial release and corresponding tables please click the PDF icon or visit:
Tags: host hotels & resorts,
q3 2016 results
Host Hotels & Resorts, Inc. is an S&P 500 and Fortune 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 89 properties in the United States and 7 properties internationally totaling approximately 54,000 rooms. The Company also holds non-controlling interests in six joint ventures, including one in Europe that owns 10 hotels with approximately 3,900 rooms and one in Asia that has interests in five hotels in India . 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®, Le Méridien®, The Luxury Collection®, Hyatt®, Fairmont®, Hilton®, Swissôtel®, ibis®, Pullman®, and Novotel® as well as independent brands in the operation of properties in over 50 major markets worldwide. For additional information, please visit the Company’s website at www.hosthotels.com.
Contact: Gregory J. Larson,
Chief Financial Officer
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