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Host Hotels & Resorts Inc.'s Reports 4th Qtr Net Income Dropped 59%,
Projects a Loss for 2009, Suspends Regular Quarterly Dividend
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BETHESDA, Md., February 18, 2009 - Host Hotels & Resorts, Inc. (NYSE: HST), the nation's largest lodging real estate investment trust (REIT), today announced its results of operations for the fourth quarter and for the full year ended December 31, 2008.

  • Total revenue decreased $157 million, or 8.7%, to $1,647 million for the fourth quarter and decreased $123 million, or 2.3%, to $5,288 million for full year 2008. 
  • Net income decreased $172 million to $122 million and net income from continuing operations decreased $146 million to $122 million for the fourth quarter. For the full year 2008, net income decreased $300 million to $427 million and net income from continuing operations decreased $144 million to $402 million compared to 2007. Earnings per diluted share decreased $.35 to $.19 for the fourth quarter and decreased $.57 to $.76 for full year 2008. 
Net income in 2008 included a net gain of approximately $22 million, or $.04 per diluted share, for the full year associated with gains on hotel dispositions and a gain of over $18 million on the repurchase of its 3.25% Exchangeable Senior Debentures. The repurchase of the debentures occurred in the fourth quarter and the gain has no effect on the Company's diluted earnings per share as the debentures are dilutive. By comparison, net income in 2007 included a net gain of approximately $24 million, or $.04 per diluted share, for the fourth quarter and $114 million, or $.21 per diluted share, for the full year associated with gains from hotel dispositions, partially offset by debt refinancing costs. 
  • Funds from Operations (FFO) per diluted share decreased 29.3% from $.75 to $.53 for the fourth quarter and 8.9% from $1.91 to $1.74 for full year 2008. FFO per diluted share was reduced by $.08 for full year 2007 due to costs associated with debt repayments or refinancings, but was not affected by such costs in 2008.
The Company also announced the following results for Host Hotels & Resorts, L.P., (Host LP) through which it conducts all of its operations and, as of December 31, 2008, holds approximately 97% of the partnership interests:
  • Net income decreased $178 million to $126 million for the fourth quarter and decreased $308 million to $445 million for full year 2008. 
  • Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, decreased $126 million to $414 million for the fourth quarter and decreased $156 million to $1,365 million for full year 2008. 
  • For further detail of certain transactions affecting net income of the Company and Host LP, earnings per diluted share and FFO per diluted share, refer to the "Schedule of Significant Transactions Affecting Earnings per Share and Funds From Operations per Diluted Share" attached to this press release.
Adjusted EBITDA, 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 for the fourth quarter of 2008 decreased 9.4% when compared to the fourth quarter of 2007. Full year 2008 comparable hotel RevPAR decreased 2.6% when compared to full year 2007. Comparable hotel adjusted operating profit margins decreased 290 basis points and 140 basis points for the fourth quarter and full year 2008, respectively. For further detail, see "Notes to the Financial Information." 

DISPOSITIONS
The Company sold the Hyatt Regency Boston on February 17, 2009 for approximately $113 million and will record a gain of approximately $21 million on the sale in the first quarter of 2009.

BALANCE SHEET
As of December 31, 2008, the Company had approximately $508 million of cash and cash equivalents, which does not include the $113 million in proceeds from the sale of the Hyatt Regency Boston. The Company's cash balance will generally be utilized for repayments or repurchasing of debt, capital improvements and to maintain higher than historical cash levels for working capital. During the fourth quarter, the Company drew $200 million under the revolver portion of its credit facility. The Company currently has $400 million of available capacity under its credit facility.
In the fourth quarter, the Company repurchased $100 million aggregate principal amount of its 3.25% Exchangeable Senior Debentures for approximately $82 million under its stock and equity-linked security repurchase program. The Company recorded a gain of over $18 million which has been included as a reduction to interest expense but which did not affect diluted FFO per share. 

CAPITAL EXPENDITURES
The Company continued its capital expenditure program which totaled approximately $232 million and $695 million for the fourth quarter and full year 2008, respectively. These expenditures included return on investment (ROI) and repositioning projects of approximately $103 million and $321 million for the fourth quarter and full year 2008, respectively. The Company expects to spend approximately $340 million to $360 million in capital expenditures in 2009, which represents approximately one-half of the 2008 level. 

EUROPEAN JOINT VENTURE
The European joint venture's previously announced agreement to purchase six hotels in France, Germany and The Netherlands for approximately euro 565 million did not close because of a disagreement between the parties over the completion of certain capital improvements that were a condition to closing.

DIVIDEND
The Company intends to suspend its regular quarterly dividend on its common stock in 2009 and instead expects to declare a $.30 to $.35 per share common dividend in the fourth quarter, which may be payable either in cash or in a combination of cash and shares of common stock. The Company plans to continue paying dividends on its preferred stock. 

2009 OUTLOOK
The current recession and volatility in the credit markets have created limited visibility for advance bookings for both transient and group business and, accordingly, our ability to predict operating results for 2009. Continuing the negative trends experienced in the fourth quarter, hotel operating results in January and February have weakened significantly, particularly in luxury and resort properties. In the event that comparable hotel RevPAR were to decline approximately 12% to 16% for the full year 2009, the Company would anticipate that full year 2009 operating profit margins under GAAP would decrease approximately 750 basis points to 900 basis points and its comparable hotel adjusted operating profit margins would decrease approximately 500 basis points to 580 basis points. Based upon these parameters, the Company would estimate the following would occur: 

Host Hotels & Resorts, Inc. 
loss per diluted share should be approximately $.13 to $.26; 
net loss should be approximately $62 million to $129 million; and
FFO per diluted share should be approximately $.79 to $.91. 
Host Hotels & Resorts, L.P. 
net loss should be approximately $64 million to $132 million; and 
Adjusted EBITDA should be approximately $850 million to $930 million.

ABOUT HOST HOTELS & RESORTS
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 116 properties with approximately 63,000 rooms, and also holds a minority interest in a joint venture that owns 11 hotels in Europe with approximately 3,500 rooms. Guided by a disciplined approach to capital allocation and aggressive asset management, the Company partners with premium brands such as Marriott(R), Ritz-Carlton(R), Westin(R), Sheraton(R), W(R), St. Regis(R), The Luxury Collection(R), Hyatt(R), Fairmont(R), Four Seasons(R), Hilton(R) and Swissotel(R)* in the operation of properties in over 50 major markets worldwide. 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 are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will," "continue" and other similar terms and phrases, including references to assumption 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: national and local economic and business conditions, including the potential for terrorist attacks, that will affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; relationships with property managers; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages, prices, construction procedures and costs; our ability to complete acquisitions and dispositions; and our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes and other risks and uncertainties associated with our business described in the Company's filings 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 17, 2009, 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.

* This press release contains registered trademarks that are the exclusive property of their respective owners. None of the owners of these trademarks has any responsibility or liability for any information contained in this press release.

*** Tables to Follow ***

Host Hotels & Resorts, Inc., herein referred to as "we" or "Host," is a self-managed and self-administered real estate investment trust (REIT) that owns hotel properties. We conduct our operations as an umbrella partnership REIT through an operating partnership, Host Hotels & Resorts, L.P., or Host LP, of which we are the sole general partner. For each share of our common stock, Host LP has issued to us one unit of operating partnership interest, or OP Unit. When distinguishing between Host and Host LP, the primary difference is approximately 3% of the partnership interests in Host LP held by outside partners as of December 31, 2008, which is reflected as minority interest in our consolidated balance sheets and minority interest expense 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.
For information on our reporting periods and non-GAAP financial measures (including Adjusted EBITDA, FFO per diluted share and comparable hotel adjusted operating profit margin) which we believe is useful to investors, see the Notes to the Financial Information included in this release.
 
HOST HOTELS & RESORTS, INC.
Consolidated Balance Sheets (a)
(in millions, except shares and per share amounts)

                                                         December 31,
                                                         ------------
                                                      2008           2007
                                                      ----           ----
                                                 (unaudited)
         ASSETS
         ------

    Property and equipment, net                    $10,739        $10,588
    Due from managers                                   65            106
    Investments in affiliates                          229            194
    Deferred financing costs, net                       47             51
    Furniture, fixtures and equipment
     replacement fund                                  119            122
    Other                                              200            198
    Restricted cash                                     44             65
    Cash and cash equivalents                          508            488
                                                       ---            ---
         Total assets                              $11,951        $11,812
                                                   =======        =======

         LIABILITIES AND STOCKHOLDERS' EQUITY
         ------------------------------------

    Debt
      Senior notes, including $992 million
       and $1,088 million, respectively, net of
       discount, of Exchangeable Senior Debentures  $4,019         $4,114
      Mortgage debt                                  1,436          1,423
      Credit facility, including the $210
       million term loan                               410              -
      Other                                             87             88
                                                        --             --
         Total debt                                  5,952          5,625
    Accounts payable and accrued expenses              119            315
    Other                                              183            215
                                                       ---            ---
         Total liabilities                           6,254          6,155
                                                     -----          -----

    Interest of minority partners of Host
     Hotels & Resorts, L.P.                            156            188
    Interest of minority partners of other
     consolidated partnerships                          24             28

    Stockholders' equity
      Cumulative redeemable preferred stock
       (liquidation preference $100 million)
       50 million shares authorized; 4.0
       million shares issued and outstanding            97             97
      Common stock, par value $.01, 750
       million shares authorized; 525.3 million
       shares and 522.6 million shares issued
       and outstanding, respectively                     5              5
      Additional paid-in capital                     5,709          5,673
      Accumulated other comprehensive income             5             45
      Deficit                                         (299)          (379)
                                                      ----           ----
         Total stockholders' equity                  5,517          5,441
                                                     -----          -----
         Total liabilities and stockholders'
          equity                                   $11,951        $11,812
                                                   =======        =======
 

    (a) Our consolidated balance sheet as of December 31, 2008 has been
        prepared without audit. Certain information and footnote disclosures
        normally included in financial statements presented in accordance
        with GAAP have been omitted. The consolidated balance sheets should
        be read in conjunction with the consolidated financial statements and
        notes there to included in our most recent Annual Report on Form 10-K.
 
 
 
 

                           HOST HOTELS & RESORTS, INC.
                          Consolidated Statements of Operations (a)
                 (unaudited, in millions, except share amounts)

                                     Quarter ended             Year ended
                                      December 31,            December 31,
                                      ------------            ------------
                                    2008        2007        2008        2007
                                    ----        ----        ----        ----
    Revenues
      Rooms                         $980      $1,078      $3,216      $3,293
      Food and beverage              516         571       1,601       1,642
      Other                          112         113         353         356
                                     ---         ---         ---         ---
        Total hotel sales          1,608       1,762       5,170       5,291
      Rental income                   39          42         118         120
                                      --          --         ---         ---
        Total revenues             1,647       1,804       5,288       5,411
                                   -----       -----       -----       -----
    Expenses
      Rooms                          245         254         792         787
      Food and beverage              373         401       1,171       1,192
      Hotel departmental expenses    407         417       1,304       1,287
      Management fees                 74          98         247         269
      Other property-level expenses  125         125         393         393
      Depreciation and amortization  194         164         582         516
      Corporate and other expenses    13          20          58          69
      Gain on insurance
       settlement (b)                  -         (46)         (7)        (51)
                                       -         ---          --         ---
        Total operating costs
         and expenses              1,431       1,433       4,540       4,462
                                   -----       -----       -----       -----
    Operating profit                 216         371         748         949
    Interest income                    7          10          20          37
    Interest expense                (101)       (110)       (341)       (422)
    Net gains on property
     transactions and other            -           1           2           6
    Gain on foreign currency           1           -           1           -
    Minority interest  expense        (2)        (11)        (21)        (32)
    Equity in earnings
     (losses) of affiliates          (13)          6         (10)         11
                                    ----           -        ----          --
    Income before income  taxes      108         267         399         549
    Benefit (provision) for
     income taxes                     14           1           3          (3)
                                      --           -           -          --
    Income from continuing
     operations                      122         268         402         546
    Income from discontinued
     operations ( c )                  -          26          25         181
                                       -          --          --         ---
    Net income                       122         294         427         727
    Less: Dividends on preferred
     stock                            (3)         (3)         (9)         (9)
                                      --          --          --          --
    Net income available to
     common stockholders            $119        $291        $418        $718
                                    ====        ====        ====       =====
    Basic earnings per
     common share:
      Continuing operations         $.23        $.51        $.75       $1.03
      Discontinued operations          -         .05         .05         .35
                                       -         ---         ---         ---
        Basic earnings per
         common share               $.23        $.56        $.80       $1.38
                                    ====        ====        ====       =====
    Diluted earnings per
     common share
      Continuing operations         $.19        $.49        $.71       $1.00
      Discontinued operations          -         .05         .05         .33
                                       -         ---         ---         ---
        Diluted earnings per
         common share               $.19        $.54        $.76       $1.33
                                    ====        ====        ====       =====
 

    (a)   Our consolidated statements of operations presented above have been
          prepared without audit. Certain information and footnote
          disclosures normally included in financial statements presented in
          accordance with GAAP have been omitted.
    (b)   The gain on insurance settlement reflects business interruption
          insurance proceeds from damages incurred from Hurricane Katrina in
          2005 and excludes $2 million and $3 million of management fees and
          other expenses, net, for the full year 2008 and 2007, respectively,
          related to the proceeds.
    ( c ) Reflects the results of operations and gains on sale, net of the
          related income tax, for two properties sold in 2008 and nine
          properties sold in 2007.
 
 

                         HOST HOTELS & RESORTS, INC.
                          Earnings per Common Share
             (unaudited, in millions, except per share amounts)

                                Quarter ended             Quarter ended
                              December 31, 2008         December 31, 2007
                              -----------------         -----------------
                                          Per Share                 Per Share
                           Income  Shares   Amount   Income  Shares   Amount
                           ------  ------   ------   ------  ------   ------

    Net income               $122   523.3     $.23     $294   522.5     $.56
      Dividends on
       preferred stock         (3)      -        -       (3)      -        -
                               --      --       --       --      --       --
    Basic earnings
     available to common
     stockholders (a)(b)      119   523.3      .23      291   522.5      .56
      Assuming distribution
       of common shares
       granted under the
       comprehensive stock
       plan less shares
       assumed purchased at
       average market price     -      .3        -        -     0.7        -
      Assuming conversion
       of minority OP
       units issuable           -       -        -        -     1.2     (.01)
      Assuming deduction of
       gain recognized for
       the repurchase of
       2004 Exchangeable
       Senior
       Debentures ( c )       (18)      -     (.03)       -       -        -
      Assuming conversion
       of 2004 Exchangeable
       Senior
       Debentures ( c )         6    28.8     (.01)       6    30.5     (.01)
                              ---    ----     ----       --    ----     ----
    Diluted earnings
     available to common
     stockholders (a)(b)     $107   552.4     $.19     $297   554.9     $.54
                             ====   =====     ====     ====   =====     ====
 

                                 Year ended                 Year ended
                              December 31, 2008          December 31, 2007
                              -----------------          -----------------
                                          Per Share                 Per Share
                           Income  Shares   Amount   Income  Shares   Amount
                           ------  ------   ------   ------  ------   ------

    Net income               $427   521.6     $.82     $727   522.1    $1.39
      Dividends on
       preferred stock         (9)      -     (.02)      (9)      -     (.01)
                               --      --     ----       --      --     ----
    Basic earnings
     available to common
     stockholders (a)(b)      418   521.6      .80      718   522.1     1.38
      Assuming distribution
       of common shares
       granted under the
       comprehensive stock
       plan less shares
       assumed purchased at
       average market price
                                -      .4        -       -     0.9     (.01)
      Assuming conversion
       of minority OP
       units issuable           -       -        -       -     1.2        -
      Assuming deduction of
       gain recognized for
       the repurchase of
       2004 Exchangeable
       Senior
       Debentures ( c )       (18)      -     (.03)      -       -        -
      Assuming conversion
       of 2004 Exchangeable
       Senior
       Debentures ( c )        19    30.8     (.01)     19    30.5     (.04)
                               --    ----     ----      --    ----     ----
    Diluted earnings
     available to common
     stockholders (a)(b)     $419   552.8     $.76    $737   554.7    $1.33
                             ====   =====     ====    ====   =====    =====
 

    (a)   Basic earnings per common share is computed by dividing net income
          available to common stockholders by the weighted average number of
          shares of common stock outstanding. Diluted earnings per common
          share is computed by dividing net income available to common
          stockholders, as adjusted for potentially dilutive securities by
          the weighted average number of shares of common stock outstanding
          plus potentially dilutive securities. Dilutive securities may
          include shares granted under comprehensive stock plans, preferred
          OP Units held by minority partners, exchangeable debt securities
          and other minority interests that have the option to convert their
          limited partnership interests to common OP Units. No effect is
          shown for any securities that are anti-dilutive.
    (b)   Our results for both periods presented were significantly affected
          by certain transactions.  For further detail, see "Schedule of
          Significant Transactions Affecting Earnings per Share and Funds
          From Operations per Diluted Share."
    ( c ) During the fourth quarter of 2008, the Company repurchased
          $100 million aggregate principal amount of its 2004 Exchangeable
          Senior Debentures for $82 million. The adjustments to dilutive
          earnings per common share related to the 2004 Exchangeable Senior
          Debentures for the full year 2008 consists of an add-back of
          $19 million of interest expense netted with the deduction of the
          $18 million gain, for a net effect of $1 million.  For the fourth
          quarter, the adjustment to diluted earnings includes the deduction
          of the $18 million gain as well as the add-back of $6 million of
          interest expense, for a net deduction to earnings of $12 million.
 
 

                          HOST HOTELS & RESORTS, INC.
                        Comparable Hotel Operating Data
                                  (unaudited)

                        Comparable Hotels by Region (a)

                  As of December 31, 2008  Quarter ended December 31, 2008
                  -----------------------  -------------------------------
                                                       Average
                    No. of        No. of    Average   Occupancy
                  Properties       Rooms  Daily Rate Percentages    RevPAR
                  ----------       -----  ---------- -----------    ------
    Pacific               27      15,934     $191.25        66.7%  $127.58
    Mid-Atlantic          11       8,684      291.80        78.9    230.20
    North Central         14       6,175      155.09        63.3     98.12
    Florida                9       5,676      189.48        56.8    107.69
    New England           11       5,663      179.73        67.2    120.70
    DC Metro              13       5,666      205.26        70.3    144.35
    South Central          8       4,358      169.55        66.2    112.30
    Mountain               8       3,364      165.40        60.1     99.35
    Atlanta                7       2,589      191.14        61.9    118.25
    International          7       2,473      166.44        65.5    109.04
                           -       -----
      All Regions        115      60,582      200.99        66.9    134.45
                         ===      ======
 
 

                    Quarter ended December 31, 2007
                    -------------------------------
                               Average                   Percent
                    Average   Occupancy                 Change in
                  Daily Rate Percentages      RevPAR      RevPAR
                  ---------- -----------      ------      ------
    Pacific          $199.68        72.4%    $144.65       (11.8)%
    Mid-Atlantic      303.14        83.0      251.66        (8.5)
    North Central     162.67        67.0      108.96        (9.9)
    Florida           196.94        60.7      119.59       (10.0)
    New England       192.45        75.3      144.97       (16.7)
    DC Metro          210.79        71.5      150.69        (4.2)
    South Central     158.73        66.0      104.75         7.2
    Mountain          166.78        63.8      106.35        (6.6)
    Atlanta           204.88        67.4      138.11       (14.4)
    International     166.21        73.0      121.40       (10.2)
      All Regions     207.90        71.4      148.36        (9.4)
 
 
 

                  As of December 31, 2008   Year ended December 31, 2008
                  -----------------------   ----------------------------
                                                       Average
                    No. of       No. of     Average   Occupancy
                  Properties      Rooms   Daily Rate Percentages    RevPAR
                  ----------      -----   ---------- -----------    ------
    Pacific               27      15,934     $198.45        73.7%  $146.16
    Mid-Atlantic          11       8,684      266.72        79.2    211.16
    North Central         14       6,175      152.23        65.5     99.72
    Florida                9       5,676      211.20        69.7    147.21
    New England           11       5,663      176.34        70.9    125.04
    DC Metro              13       5,666      199.15        74.5    148.30
    South Central          8       4,358      165.49        68.0    112.48
    Mountain               8       3,364      170.73        64.6    110.35
    Atlanta                7       2,589      190.52        65.4    124.68
    International          7       2,473      170.63        68.1    116.22
                           -       -----
      All Regions        115      60,582      199.10        71.6    142.51
                         ===      ======
 
 

                     Year ended December 31, 2007
                     ----------------------------
                               Average                   Percent
                    Average   Occupancy                 Change in
                  Daily Rate Percentages      RevPAR      RevPAR
                  ---------- -----------      ------      ------
    Pacific          $200.99        75.9%    $152.60        (4.2)%
    Mid-Atlantic      260.84        82.6      215.51        (2.0)
    North Central     153.96        69.3      106.63        (6.5)
    Florida           209.60        69.6      145.95         0.9
    New England       176.22        74.7      131.68        (5.0)
    DC Metro          198.34        75.6      150.03        (1.2)
    South Central     158.80        70.1      111.35         1.0
    Mountain          166.75        67.9      113.22        (2.5)
    Atlanta           197.10        68.6      135.13        (7.7)
    International     156.37        69.3      108.30         7.3
      All Regions     197.76        74.0      146.39        (2.6)
 
 

                         HOST HOTELS & RESORTS, INC.
                       Comparable Hotel Operating Data
                                 (unaudited)

                   Comparable Hotels by Property Type (a)

                As of December 31, 2008  Quarter ended December 31, 2008
                -----------------------  -------------------------------
                                                     Average
                  No. of        No. of    Average   Occupancy
                Properties       Rooms  Daily Rate Percentages    RevPAR
                ----------       -----  ---------- -----------    ------
    Urban               53      32,388     $224.92        70.3%  $158.08
    Suburban            34      12,904      156.06        61.1     95.39
    Airport             15       7,208      137.72        71.2     98.12
    Resort/Conference   13       8,082      226.81        58.6    132.96
                        --       -----
      All Types        115      60,582      200.99        66.9    134.45
                       ===      ======
 
 

                        Quarter ended December 31, 2007
                        -------------------------------
                                    Average                  Percent
                         Average   Occupancy                Change in
                      Daily Rate Percentages      RevPAR      RevPAR
                      ---------- -----------      ------      ------
    Urban                $231.39        74.9%    $173.41        (8.8)%
    Suburban              160.24        65.6      105.09        (9.2)
    Airport               143.16        74.4      106.51        (7.9)
    Resort/Conference     240.35        63.5      152.51       (12.8)
      All Types           207.90        71.4      148.36        (9.4)
 
 
 

                As of December 31, 2008   Year ended December 31, 2008
                -----------------------   ----------------------------
                                                     Average
                  No. of        No. of    Average   Occupancy
                Properties       Rooms  Daily Rate Percentages    RevPAR
                ----------       -----  ---------- -----------    ------
    Urban               53      32,388     $215.42        74.1%  $159.60
    Suburban            34      12,904      158.42        65.5    103.81
    Airport             15       7,208      138.39        74.0    102.45
    Resort/Conference   13       8,082      248.61        69.0    171.45
                        --       -----
      All Types        115      60,582      199.10        71.6    142.51
                       ===      ======
 
 

                         Year ended December 31, 2007
                         ----------------------------
                                   Average                   Percent
                        Average   Occupancy                 Change in
                      Daily Rate Percentages      RevPAR      RevPAR
                      ---------- -----------      ------      ------
    Urban                $211.97        77.0%    $163.22        (2.2)%
    Suburban              157.39        67.9      106.90        (2.9)
    Airport               139.04        75.3      104.72        (2.2)
    Resort/Conference     253.45        70.7      179.12        (4.3)
      All Types           197.76        74.0      146.39        (2.6)
 

    (a) See the notes to financial information for a discussion of reporting
        periods and comparable hotel results.
 
 

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

                                         Quarter ended          Year ended
                                          December 31,         December 31,
                                         -------------         ------------
                                        2008       2007       2008      2007
                                        ----       ----       ----      ----

    Number of hotels                     115        115        115       115
    Number of rooms                   60,582     60,582     60,582    60,582
    Percent change in comparable
     hotel RevPAR                     (9.4)%         -      (2.6)%        -
    Operating profit margin under
     GAAP (b)                          13.1%      20.6%      14.1%     17.5%
    Comparable hotel adjusted
     operating profit margin  (b)      25.5%      28.4%      26.2%     27.6%
    Food and beverage profit
     margin under GAAP (b)             27.7%      29.8%      26.9%     27.4%
    Comparable food and beverage
     adjusted profit margin (b)        27.2%      30.2%      26.9%     27.8%

    Comparable hotel sales
      Room                              $946     $1,044     $3,150    $3,233
      Food and beverage ( c )            503        559      1,582     1,630
      Other                              110        112        356       358
                                         ---        ---        ---       ---
        Comparable hotel sales (d)     1,559      1,715      5,088     5,221
                                       -----      -----      -----     -----
    Comparable hotel expenses
      Room                               238        246        776       770
      Food and beverage (e)              366        390      1,157     1,177
      Other                               56         62        189       197
      Management fees, ground
       rent and other costs              502        530      1,632     1,638
                                         ---        ---      -----     -----
        Comparable hotel expenses (f)  1,162      1,228      3,754     3,782
                                       -----      -----      -----     -----
    Comparable hotel adjusted
     operating profit                    397        487      1,334     1,439
    Non-comparable hotel results,
     net (g)                              18         12         40        35
    Office buildings and select service
     properties, net (h)                   8         10          7         9
    Depreciation and amortization       (194)      (164)      (582)     (516)
    Corporate and other expenses         (13)       (20)       (58)      (69)
    Gain on insurance settlement           -         46          7        51
                                           -         --          -        --
    Operating profit                    $216       $371       $748      $949
                                        ====       ====       ====      ====
 

    (a)   See the notes to the financial information for discussion of
          non-GAAP measures, reporting periods and comparable hotel results.
    (b)   Operating profit margins are calculated by dividing the applicable
          operating profit by the related revenue amount. GAAP margins are
          calculated using amounts presented in the consolidated statement of
          operations. Comparable margins are calculated using amounts
          presented in the above table.
    ( c ) The reconciliation of total food and beverage sales per the
          consolidated statements of operations to the comparable food and
          beverage sales is as follows:
 

                                         Quarter ended          Year ended
                                          December 31,         December 31,
                                         -------------         ------------
                                        2008       2007       2008      2007
                                        ----       ----       ----      ----
    Food and beverage sales per the
     consolidated statements of
     operations                         $516       $571     $1,601    $1,642
    Non-comparable food and
     beverage sales                      (16)       (14)       (50)      (38)
    Food and beverage sales for the
     property for which we record
     rental income                         7          8         28        28
    Adjustment for food and beverage
     sales for comparable hotels to
     reflect a 52-week fiscal year for
     Marriott-managed hotels              (4)        (6)         3        (2)
                                          --         --          -        --
         Comparable food and
          beverage sales                $503       $559     $1,582    $1,630
                                        ====       ====     ======    ======
 

    (d)   The reconciliation of total revenues per the consolidated
          statements of operations to the comparable hotel sales is as
          follows:
 

                                         Quarter ended          Year ended
                                          December 31,         December 31,
                                         -------------         ------------
                                        2008       2007       2008      2007
                                        ----       ----       ----      ----
    Revenues per the consolidated
     statements of operations         $1,647     $1,804     $5,288    $5,411
    Non-comparable hotel sales           (48)       (46)      (161)     (141)
    Hotel sales for the property for
     which we record rental income, net   13         14         51        50
    Rental income for office buildings
     and select service hotels           (33)       (36)       (91)      (92)
    Adjustment for hotel sales for
     comparable hotels to reflect a
     52-week fiscal year for
     Marriott-managed hotels             (20)       (21)         1        (7)
                                         ---        ---          -        --
         Comparable hotel sales       $1,559     $1,715     $5,088    $5,221
                                      ======     ======     ======    ======
 

    (e)   The reconciliation of total food and beverage expenses per the
          consolidated statements of operations to the comparable food and
          beverage expenses is as follows:
 

                                         Quarter ended          Year ended
                                          December 31,         December 31,
                                         -------------         ------------
                                        2008       2007       2008      2007
                                        ----       ----       ----      ----
    Food and beverage expenses per
     the consolidated statements of
     operations                         $373       $401     $1,171    $1,192
    Non-comparable food and
     beverage expense                    (10)       (11)       (35)      (31)
    Food and beverage expenses for
     the property for which we record
     rental income                         5         5         18        18
    Adjustment for food and beverage
     expenses for comparable hotels to
     reflect a 52-week fiscal year for
     Marriott-managed hotels              (2)        (5)         3        (2)
                                          --         --          -        --
         Comparable food and
          beverage expenses             $366       $390     $1,157    $1,177
                                        ====       ====     ======    ======
 

    (f)   The reconciliation of operating costs per the consolidated
          statements of operations to the comparable hotel expenses is as
          follows:
 

                                         Quarter ended          Year ended
                                          December 31,         December 31,
                                         -------------         ------------
                                        2008       2007       2008      2007
                                        ----       ----       ----      ----
    Operating costs and expenses per
     The consolidated statements of
     operations                       $1,431     $1,433     $4,540    $4,462
    Non-comparable hotel expenses        (34)       (39)      (120)     (108)
    Hotel expenses for the property
     for which we record rental income    12         13         51        50
    Rent expense for office buildings
     and select service hotels           (25)       (26)       (84)      (83)
    Adjustment for hotel expenses
     for comparable hotels to reflect
     a 52-week fiscal year for
     Marriott-managed hotels             (15)       (15)         -        (5)
    Depreciation and amortization       (194)      (164)      (582)     (516)
    Corporate and other expenses         (13)       (20)       (58)      (69)
    Gain on insurance settlement           -         46          7        51
                                           -         --          -        --
         Comparable hotel expenses    $1,162     $1,228     $3,754    $3,782
                                      ======     ======     ======    ======
 

    (g)   Non-comparable hotel results, net, includes the following items:
          (i) the results of operations of our non-comparable hotels whose
          operations are included in our consolidated statement of operations
          as continuing operations and (ii) the difference between the number
          of days of operations reflected in the comparable hotel results and
          the number of days of operations reflected in the consolidated
          statements of operations.
    (h)   Represents rental income less rental expense for select service
          properties and office buildings.
 
 

                           HOST HOTELS & RESORTS. INC.
                        Other Financial and Operating Data
                 (unaudited, in millions, except per share amounts)

                                                                December 31,
                                                                ------------
                                                              2008       2007
                                                              ----       ----
    Equity
      Common shares outstanding                              525.3      522.6
      Common shares and minority held common OP Units
       outstanding                                           540.4      540.9
      Preferred OP Units outstanding                           .02        .02
      Class E Preferred shares outstanding                     4.0        4.0

    Security pricing
    ----------------
      Common (a)                                             $7.57     $17.04
      Class E Preferred (a)                                 $17.20     $25.05
      3-1/4% Exchangeable Senior Debentures (b)            $861.51  $1,153.19
      2-5/8% Exchangeable Senior Debentures (b)            $663.70    $855.44

    Dividends declared per share for calendar year
      Common ( c )                                            $.65      $1.00
      Class E Preferred ( c )                                $2.22      $2.22

    Debt
    ----
    Series K senior notes, with a rate of 7-1/8% due
     November 2013                                            $725       $725
    Series M senior notes, with a rate of 7% due
     August 2012                                               348        347
    Series O senior notes, with a rate of 6-3/8% due
     March 2015                                                650        650
    Series Q senior notes, with a rate of 6-3/4% due
     June 2016                                                 800        800
    Series S senior notes, with a rate of 6-7/8% due
     November 2014                                             497        497
    Exchangeable Senior Debentures, with a rate of 3-1/4% due
     April 2024 (d)                                            398        496
    Exchangeable Senior Debentures, with a rate of 2-5/8% due
     April 2027                                                594        592
    Senior notes, with rate of 10.0% due May 2012                7          7
                                                                 -          -
         Total senior notes                                  4,019      4,114
    Mortgage debt (non-recourse) secured by $2.1 billion
     of real estate assets,   with an average interest rate
     of 6.2% and 6.6% at December 31, 2008 and December 31,
     2007, respectively, maturing through December 2023      1,436      1,423
    Credit facility, including the $210 million term loan (e)  410          -
    Other                                                       87         88
                                                                --         --
         Total debt (f)(g)                                  $5,952     $5,625
                                                            ======     ======

    Percentage of fixed rate debt                              88%       100%
    Weighted average interest rate                            5.8%       6.0%
    Weighted average debt maturity                       4.6 years  5.7 years
 

                                           Quarter ended         Year ended
                                            December 31,        December 31,
                                            ------------        ------------
                                          2008       2007     2008       2007
                                          ----       ----     ----       ----

    Hotel Operating Statistics for All
     Properties (h)
      Average daily rate               $198.84    $204.99  $196.70    $194.71
      Average occupancy                  66.6%      70.7%    71.4%      73.3%
      RevPAR                           $132.36    $144.96  $140.35    $142.81
 

    (a)   Share prices are the closing price as reported by the New York
          Stock Exchange.
    (b)   Amount reflects market price of a single $1,000 debenture as
          quoted by Bloomberg L.P.
    ( c ) On December 16, 2008, the Company declared a fourth quarter common
          dividend of $.05 per share and a fourth quarter preferred dividend
          of $.5546875 per share for its Class E cumulative redeemable
          preferred stock.
    (d)   During the fourth quarter, the Company repurchased $100 million
          aggregate principal amount of its 31/4% Senior Exchangeable
          Debentures for approximately $82 million and recorded a gain on
          repurchase of approximately $18 million.
    (e)   Currently, the Company has $400 million of available capacity under
          the revolver portion of the Credit Facility.
    (f)   In accordance with GAAP, total debt includes the debt of entities
          that we consolidate, but do not own 100% of the interests, and
          excludes the debt of entities that we do not consolidate, but have
          a minority ownership interest and record our investment therein
          under the equity method of accounting. As of December 31, 2008, our
          minority partners' share of consolidated debt is $68 million and
          our share of debt in unconsolidated investments is $356 million.
    (g)   Total debt as of December 31, 2008 and December 31, 2007 includes
          net discounts of $10 million and $13 million, respectively.
    (h)   The operating statistics reflect all consolidated properties as of
          December 31, 2008 and December 31, 2007, respectively, including
          the operations for two properties sold in 2008 and nine properties
          sold in 2007, prior to their disposition.
 
 

                          HOST HOTELS & RESORTS, INC.
         Reconciliation of Net Income Available to Common Stockholders
                   to Funds From Operations per Common Share
              (unaudited, in millions, except per share amounts)

                               Quarter ended             Quarter ended
                             December 31, 2008         December 31, 2007
                             -----------------         -----------------
                                          Per Share                 Per Share
                           Income  Shares   Amount   Income  Shares   Amount
                           ------  ------   ------   ------  ------   ------

    Net income available to
     common stockholders     $119   523.3     $.23     $291   522.5     $.56
    Adjustments:
      Gains on dispositions,
       net of taxes             -       -        -      (25)      -     (.05)
      Gain on insurance
       settlement (a)           -       -        -      (16)      -     (.03)
      Amortization of deferred
       gains and other
       property transactions,
       net of taxes            (1)      -        -       (1)      -        -
      Depreciation and
       amortization
                              191       -      .36      164       -      .31
      Partnership adjustments   6       -      .01       10       -      .02
      FFO of minority partners
       of Host LP (b)         (10)      -     (.02)     (14)      -     (.03)
    Adjustments for dilutive
     securities:
      Assuming distribution
       of common shares
       granted under the
       comprehensive stock
       plan less shares
       assumed purchased at
       average market price     -      .3        -        -      .7        -
      Assuming deduction
       of gain recognized
       for the repurchase
       of 2004 Exchangeable
       Senior
       Debentures ( c )       (18)      -     (.03)       -       -        -
      Assuming conversion of
       2004 Exchangeable
       Senior Debentures
       outstanding ( c )        6    28.8     (.02)       6    30.5     (.03)
                              ---    ----     ----        -    ----     ----
    FFO per diluted
     share (d)(e)            $293   552.4     $.53     $415   553.7     $.75
                             ====   =====     ====     ====   =====     ====
 

                                 Year ended                Year ended
                             December 31, 2008         December 31, 2007
                             -----------------         -----------------
                                          Per Share                 Per Share
                           Income  Shares   Amount   Income  Shares   Amount
                           ------  ------   ------   ------  ------   ------
    Net income available to
     common stockholders     $418   521.6     $.80     $718   522.1    $1.38
    Adjustments:
      Gains on dispositions,
       net of taxes           (23)      -     (.04)    (164)      -     (.31)
      Gain on insurance
       settlement (a)           -       -        -      (22)      -     (.04)
      Amortization of
       deferred gains and
       other property
       transactions,
       net of taxes            (4)      -     (.01)      (6)      -     (.01)
      Depreciation and
       amortization
                              578       -     1.11      519       -      .99
      Partnership
       adjustments             28       -      .05       30       -      .06
      FFO of minority
       partners of
       Host LP (b)            (38)      -     (.07)     (37)      -     (.07)
    Adjustments for
     dilutive securities:
      Assuming distribution
       of common shares
       granted under the
       comprehensive stock
       plan less shares
       assumed purchased at
       average market price     -      .4        -        -      .9     (.01)
      Assuming deduction
       of gain recognized
       for the repurchase
       of 2004 Exchangeable
       Senior
       Debentures ( c )       (18)      -     (.03)       -       -        -
      Assuming conversion of
       2004 Exchangeable
       Senior
       Debentures ( c )        19    30.8     (.07)      19    30.5     (.08)
                               --    ----     ----       --    ----     ----
    FFO per diluted
     share (d)(e)            $960   552.8    $1.74   $1,057   553.5    $1.91
                             ====   =====    =====   ======   =====    =====

    (a)   Represents the gain during the period for the settlement of
          property insurance claims, including the gains that are included in
          discontinued operations related to hotels that we have sold.
    (b)   Represents FFO attributable to the minority interests in Host LP.
    ( c ) During the fourth quarter of 2008, the Company repurchased $100
          million aggregate principal amount of its 2004 Exchangeable Senior
          Debentures for $82 million. The adjustments to dilutive FFO related
          to the 2004 Exchangeable Senior Debentures for the full year 2008
          consists of an add-back of $19 million of interest expense netted
          with the deduction of the $18 million gain, for a net increase to
          FFO of $1 million.  For the fourth quarter, the adjustment to
          diluted FFO includes the deduction of the $18 million gain as well
          as the add-back of $6 million of interest expense, for a net
          deduction to FFO of $12 million.
    (d)   FFO per diluted share in accordance with NAREIT is adjusted for the
          effects of dilutive securities. Dilutive securities may include
          shares granted under comprehensive stock plans, preferred OP Units
          held by minority partners, exchangeable debt securities and other
          minority interests that have the option to convert their limited
          partnership interest to common OP Units. No effect is shown for
          securities if they are anti-dilutive.
    (e)   FFO per diluted share was significantly affected by certain
          transactions. For further detail see "Schedule of Significant
          Transactions Affecting Earnings per Diluted Share and Funds From
          Operations per Diluted Share."
 
 

                            HOST HOTELS & RESORTS, INC.
        Schedule of Significant Transactions Affecting Earnings per Share
                    and Funds From Operations Per Diluted Share
                 (unaudited, in millions, except per share amount)

                                          Quarter ended      Quarter ended
                                        December 31, 2008  December 31, 2007
                                        -----------------  -----------------
                                        Net Income         Net Income
                                          (Loss)      FFO    (Loss)      FFO
                                        ----------   ----  -----------   ---

    Gain on hotel dispositions, net of taxes $-        $-      $25        $-
    Minority interest expense (a)             -         -       (1)        -
                                              -         -       --         -
        Total (b)                            $-        $-      $24        $-
                                             ==        ==      ===        ==
        Diluted shares                        -         -    554.9     553.7
        Per diluted share                    $-        $-     $.04        $-
                                             ==        ==      ===        ==
 
 

                                            Year ended        Year ended
                                        December 31, 2008  December 31, 2007
                                        -----------------  -----------------
                                        Net Income         Net Income
                                          (Loss)      FFO    (Loss)      FFO
                                        ----------   ----  -----------   ---
    Senior notes redemptions and debt
     prepayments ( c )                       $-        $-     $(46)     $(46)
    Gain on hotel dispositions, net of taxes 23         -      164         -
    Minority interest income (expense) (a)   (1)        -       (4)        2
                                             --         -       --         -
        Total (b)                           $22        $-     $114      $(44)
                                            ===        ==     ====     =====
        Diluted shares                    552.8         -    554.7     553.5
        Per diluted share                  $.04        $-     $.21     $(.08)
                                           ====        ==     ====     =====
 

    (a)   Represents the portion of the significant transactions attributable
          to minority partners in Host LP.
    (b)   Net income of Host LP was also affected by the transactions
          discussed above, with the exception of the minority interest income
          (expense) item discussed in footnote (a). Accordingly, the total
          adjustments to the net income of Host LP were approximately
          $23 million and $118 million for the year ended 2008 and 2007, and
          $25 million for the fourth quarter ended 2007. The fourth quarter
          2008 $18 million gain on the repurchase of the 2004 Debentures is
          not included in the above calculation as the Debentures are
          dilutive and, therefore, the gain has no effect on diluted earnings
          or FFO per share.
    ( c ) Represents call premiums and the acceleration of original issue
          discounts and deferred financing costs, as well as incremental
          interest during the call or prepayment notice period, included in
          interest expense in the consolidated statements of operations. We
          recognized these costs in conjunction with the prepayment or
          refinancing of senior notes and mortgages during the periods
          presented.
 
 

                            HOST HOTELS & RESORTS, L.P.
                       Consolidated Statements of Operations
              (unaudited, in millions, except per share unit amounts)

                                      Quarter ended             Year ended
                                       December 31,            December 31,
                                       ------------            ------------
                                     2008        2007        2008        2007
                                     ----        ----        ----        ----
    Revenues
       Rooms                         $980      $1,078      $3,216      $3,293
       Food and beverage              516         571       1,601       1,642
       Other                          112         113         353         356
                                      ---         ---         ---         ---
         Total hotel sales          1,608       1,762       5,170       5,291
       Rental income                   39          42         118         120
                                       --          --         ---         ---
         Total revenues             1,647       1,804       5,288       5,411
                                    -----       -----       -----       -----
    Expenses
       Rooms                          245         254         792         787
       Food and beverage              373         401       1,171       1,192
       Hotel departmental expenses    407         417       1,304       1,287
       Management fees                 74          98         247         269
       Other property-level expenses  125         125         393         393
       Depreciation and amortization  194         164         582         516
       Corporate and other expenses    13          20          58          69
       Gain on insurance settlement     -         (46)         (7)        (51)
                                        -         ---         ---         ---
         Total operating costs
          and expenses              1,431       1,433       4,540       4,462
                                    -----       -----       -----       -----
    Operating profit                  216         371         748         949
    Interest income                     7          10          20          37
    Interest expense                 (101)       (110)       (341)       (422)
    Net gains on property
     transactions and other             -           1           2           6
    Gain on foreign currency            1           -           1           -
    Minority interest
     income/(expense)                   2          (1)         (3)         (6)
    Equity in earnings (losses)
     of affiliates                    (13)          6         (10)         11
                                      ---           -         ---          --
    Income before income taxes        112         277         417         575
    Provision for income taxes         14           1           3          (3)
                                       --           -           -         ---
    Income from Continuing
     operations                       126         278         420         572
    Income from discontinued
     operations (b)                     -          26          25         181
                                        -          --          --         ---
    Net income                        126         304         445         753
    Less: Distributions
     on preferred units                (3)         (3)         (9)         (9)
                                       --          --          --          --
    Net income available
     to common unitholders           $123        $301        $436        $744
                                     ====        ====        ====        ====
    Basic earnings per common unit:
      Continuing operations          $.23        $.51        $.76       $1.04
      Discontinued operations           -         .05         .05         .34
                                        -         ---         ---         ---
    Basic earnings per
     common unit                     $.23        $.56        $.81       $1.38
                                     ====        ====        ====       =====
    Diluted earnings per
     common unit:
      Continuing operations          $.20        $.49        $.72       $1.01
      Discontinued operations           -         .05         .04         .32
                                        -         ---         ---         ---
    Diluted earnings per
     common unit                     $.20        $.54        $.76       $1.33
                                     ====        ====        ====       =====
 

    (a) Our consolidated statements of operations presented above have been
        prepared without audit. Certain information and footnote disclosures
        normally included in financial statements presented in accordance
        with GAAP have been omitted. When distinguishing between Host and
        Host LP, the primary difference is the partnership interests in Host
        LP held by outside partners, which is reflected as minority interest
        in Host's consolidated balance sheets and minority interest expense
        in Host's consolidated statements of operations. The consolidated
        statements of operations should be read in conjunction with the
        consolidated financial statements and notes thereto included in our
        most recent Annual Report on Form 10-K.
    (b) Reflects the results of operations and gain on sale, net of the
        related income tax, for two properties sold in 2008 and nine
        properties sold in 2007.
 
 

                            HOST HOTELS & RESORTS, L.P.
            Reconciliation of Net Income to EBITDA and Adjusted EBITDA
                              (unaudited, in millions)

                                               Quarter ended     Year ended
                                                December 31,    December 31,
                                                ------------    ------------
                                                2008    2007    2008    2007
 

    Net income                                  $126    $304    $445    $753
      Interest expense                           101     110     341     422
      Depreciation and amortization              194     164     582     516
      Income taxes                               (14)     (1)     (3)      3
      Discontinued operations (a)                  -       1       1       4
                                                   -       -       -       -
    EBITDA                                       407     578   1,366   1,698
      Gains on dispositions                        -     (24)    (24)   (163)
      Amortization of deferred gains              (1)     (1)     (4)     (6)
      Property insurance gains                     -     (16)      -     (22)
      Equity investment adjustments:
        Equity in (earnings)/losses of affiliates 13      (6)     10     (11)
        Pro rata EBITDA of equity investments      1      15      30      40
      Consolidated partnership adjustments:
        Minority interest expense                 (2)      1       3       6
        Pro rata EBITDA of minority partners      (4)     (7)    (16)    (21)
                                                  --      --     ---     ---
    Adjusted EBITDA of Host LP                  $414    $540  $1,365  $1,521
                                                ====    ====  ======  ======
 

    (a) Reflects the interest expense, depreciation and amortization and
        income taxes included in discontinued operations.
 
 

                            HOST HOTELS & RESORTS, INC.
         Reconciliation of Net Income Available to Common Stockholders to
     Funds From Operations per Diluted Share for Full Year 2009 Forecasts (a)
                 (unaudited, in millions, except per share amounts)

                                                        Low-end of Range
                                                        ----------------
                                                     Full Year 2009 Forecast
                                                     -----------------------
                                                                   Per Share
                                                     Income  Shares   Amount
                                                     ------  ------   ------
    Forecast net income available to common
     stockholders                                     $(138)  529.4    $(.26)
    Adjustments:
      Depreciation and amortization                     595       -     1.12
      Gain on dispositions, net of taxes                (34)      -     (.06)
      Partnership adjustments                             6       -      .01
      FFO of minority partners of Host LP (b)           (11)      -     (.02)
    Adjustment for dilutive securities:
      Assuming distribution of common shares granted
       under the comprehensive stock plan less shares
       assumed purchased at average market price          -     1.3        -
                                                         --     ---       --
    FFO per diluted Share                              $418   530.7    $0.79
                                                       ====   =====    =====
 

                                                        High-end of Range
                                                        -----------------
                                                     Full Year 2009 Forecast
                                                     -----------------------
                                                                   Per Share
                                                     Income  Shares   Amount
                                                     ------  ------   ------
    Forecast net income available to common
     stockholders                                      $(71)  529.4    $(.13)
    Adjustments:
      Depreciation and amortization                     595       -     1.12
      Gain on dispositions, net of taxes                (34)      -     (.07)
      Partnership adjustments                             8       -      .02
      FFO of minority partners of Host LP (b)           (13)      -     (.03)
    Adjustment for dilutive securities:
      Assuming distribution of common shares granted
       under the comprehensive stock plan less shares
       assumed purchased at average market price          -     1.3        -
                                                       ----   -----    -----
    FFO per diluted share                              $485   530.7     $.91
                                                       ====   =====    =====
 

    (a) The full year 2009 forecasts were based on the following assumptions:
        -- Comparable hotel RevPAR will decrease 12% to 16% for the full year
           for the high and low ends of the forecasted range, respectively.
        -- Comparable hotel adjusted operating profit margins will range from
           a decrease of 500 basis points to 580 basis points for the full
           year for the high and low ends of the forecasted range,
           respectively.
        -- Beginning in 2009 (as reflected in our forecasted results) the
           Company will adopt the provisions under FASB Staff Position, APB
           14-1, "Accounting for Convertible Debt Instruments That May Be
           Settled in Cash Upon Conversion (Including Partial Cash
           Settlement)" and will restate prior year earnings and FFO per
           diluted share.  The implementation of the standard will increase
           the non-cash interest expense applied to the 2004 and 2007
           Exchangeable Senior Debentures by approximately $30 million and
           will decrease earnings and FFO per diluted share by approximately
           $.04. For further detail, see the Company's quarterly report on
           form 10-Q filed October 15, 2008.
        -- We do not anticipate that any acquisitions will be made during
           2009.
        -- We expect to spend approximately $340 to $360 million on capital
           expenditures in 2009.
        -- Fully diluted weighted average shares for FFO per diluted share
           and earnings per diluted share will be approximately 530.7 million
           for the full year.
        The amounts shown in these forecasts are based on these and other
        assumptions, as well as management's estimate of operations for 2009.
        These forecasts are forward-looking and are not guarantees of future
        performance and involve known and unknown risks, uncertainties and
        other factors which may cause actual transactions, results and
        performance to differ materially from those expressed or implied by
        these forecasts. Although we believe the expectations reflected in
        the forecasts are based upon reasonable assumptions, we can give no
        assurance that the expectations will be attained or that the results
        will be materially different. Risks that may affect these assumptions
        and forecasts include the following:
        -- the level of RevPAR and margin growth or decline may change
           significantly and, as noted previously, the current recession and
           volatility in the credit markets have created limited visibility
           for advance bookings for both transient and group business and
           accordingly, our ability to predict operating results for 2009;
        -- the amount and timing of acquisitions and dispositions of hotel
           properties is an estimate that can substantially affect financial
           results, including such items as net income, depreciation and
           gains on dispositions;
        -- the level of capital expenditures may change significantly, which
           will directly affect the level of depreciation expense and net
           income;
        -- the amount and timing of debt payments may change significantly
           based on market conditions, which will directly affect the level
           of interest expense and net income;
        -- the number of shares of the Company's common stock or Exchangeable
           Senior Debentures repurchased may change based on market
           conditions; and
        -- other risks and uncertainties associated with our business
           described herein and in the Company's filings with the SEC.
    (b) Represents FFO attributable to the minority interests in Host LP.
 
 

                           HOST HOTELS & RESORTS, INC.
          Schedule of Comparable Hotel Adjusted Operating Profit Margin
                         for Full Year 2009 Forecasts (a)
                (unaudited, in millions, except hotel statistics)

                                                          Full Year 2009
                                                          --------------
                                                        Low-end   High-end
                                                        of range  of range
                                                        --------  --------
    Operating profit margin under GAAP (b)                  5.1%      6.6%
    Comparable hotel adjusted operating profit
     margin ( c )                                          20.4%     21.2%

    Comparable hotel sales
      Room                                                $2,734    $2,864
      Other                                                1,716     1,796
                                                           -----     -----
          Comparable hotel sales (d)                       4,450     4,660
                                                           -----     -----
    Comparable hotel expenses
      Rooms and other departmental costs                   1,931     2,047
      Management fees, ground rent and other costs         1,611     1,627
                                                           -----     -----
          Comparable hotel expenses (e)                    3,542     3,674
                                                           -----     -----
    Comparable hotel adjusted operating profit               908       986
    Non-comparable hotel results, net                        (15)      (14)
    Office buildings and select service properties, net        -         -
    Depreciation and amortization                           (597)     (597)
    Corporate and other expenses                             (70)      (70)
                                                            ----      ----
          Operating profit                                  $226      $305
                                                            ====      ====
 

    (a)   Forecasted comparable hotel results include assumptions on the
          number of hotels that will be included in our comparable hotel set
          in 2009. We have assumed that 116 hotels will be classified as
          comparable as of December 31, 2009. No assurances can be made as to
          the hotels that will be in the comparable hotel set for 2009. Also,
          see the notes following the table reconciling net income available
          to common shareholders to Funds From Operations per Diluted Share
          for assumptions relating to the full year 2009.
    (b)   Operating profit margin under GAAP is calculated as the operating
          profit divided by the forecast total revenues per the consolidated
          statements of operations. See (d) below for forecasted revenues.
    ( c ) Comparable hotel adjusted operating profit margin is calculated as
          the comparable hotel adjusted operating profit divided by the
          comparable hotel sales per the table above. We forecasted a
          decrease in margins of 500 basis points to 580 basis points under
          the 2008 comparable hotel adjusted operating profit margin of
          26.2%. The forecasted decline in the comparable hotel adjusted
          operating profit margin includes two items which accounted for 50
          basis points of the above decline. (1) The 2008 comparable hotel
          operating profit includes business interruption proceeds of
          approximately $5 million, net of expenses, received in 2008 for
          the New Orleans Marriott which had previously been non-comparable.
          We do not expect to receive any business interruption proceeds in
          2009. (2) The Company will incur additional expenses in 2009 due
          to the treatment of the ground lease payments related to the New
          York Marriott Marquis.  Since the renegotiation of the ground lease
          on the New York Marriott Marquis in 1998, the ground lease payments
          have reduced the deferred ground rent liability and, more recently,
          have been applied against the deferred purchase price of the land.
          As a result, there was no operating profit reduction for these
          payments. In 2009, a small portion of our payments will fully fund
          the deferred purchase price and the remainder will be deducted
          from operating profit.

    (d)   The reconciliation of forecast total revenues to the forecast
          comparable hotel sales is as follows (in millions):
 

                                                          Full Year 2009
                                                          --------------
                                                        Low-end   High-end
                                                        of range  of range
                                                        --------  --------
    Revenues                                              $4,425    $4,636
    Non-comparable hotel sales                                66        65
    Hotel sales for the property for which we record
     rental income, net                                       44        44
    Rental income for office buildings and select
     service hotels                                          (85)      (85)
                                                             ---      ----
         Comparable hotel sales                           $4,450    $4,660
                                                          ======    ======
 

    (e)   The reconciliation of forecast operating costs and expenses to the
          comparable hotel expenses is as follows (in millions):
 

                                                          Full Year 2009
                                                          --------------
                                                        Low-end   High-end
                                                        of range  of range
                                                        --------  --------

    Operating costs and expenses                          $4,199    $4,331
    Non-comparable hotel expenses                             51        51
    Hotel expenses for the property for which we
     record rental income                                     44        44
    Rent expense for office buildings and select
     service hotels                                          (85)      (85)
    Depreciation and amortization                           (597)     (597)
    Corporate and other expenses                             (70)      (70)
                                                             ---       ---
         Comparable hotel expenses                        $3,542    $3,674
                                                          ======    ======
 

                           HOST HOTELS & RESORTS, INC.
            Reconciliation of Net Income to EBITDA and Adjusted EBITDA
                         for Full Year 2009 Forecasts(a)
                            (unaudited, in millions)

                                                          Full Year 2009
                                                          --------------
                                                        Low-end   High-end
                                                        of range  of range
                                                        --------  --------

    Net income                                             $(132)     $(64)
      Interest expense                                       430       430
      Depreciation and amortization                          597       597
      Income taxes                                           (30)      (18)
                                                             ---       ---
    EBITDA                                                   865       945
      Gains on dispositions                                  (34)      (34)
      Equity investment adjustments:
       Equity in earnings of affiliates                        5         5
       Pro rata Adjusted EBITDA of equity investments         29        29
      Consolidated partnership adjustments:
       Minority interest expense                              (1)       (1)
       Pro rata Adjusted EBITDA of minority partners         (14)      (14)
                                                             ---       ---
    Adjusted EBITDA of Host LP                              $850      $930
                                                            ====      ====
 

    (a) See the notes following the table reconciling net income available to
        common shareholders to Funds From Operations per Diluted Share for
        assumptions relating to the full year 2009.
 
 
 
 

HOST HOTELS & RESORTS, INC.
Notes to Financial Information
REPORTING PERIODS FOR STATEMENT OF OPERATIONS
The results we report in our consolidated statements of operations are based on results of our hotels reported to us by our hotel managers. Our hotel managers use different reporting periods. Marriott International, Inc., or Marriott, the manager of the majority of our properties, uses a fiscal year ending on the Friday closest to December 31 and reports twelve weeks of operations for the first three quarters and sixteen or seventeen weeks for the fourth quarter of the year for its Marriott-managed hotels. In contrast, other managers of our hotels, such as Starwood and Hyatt, report results on a monthly basis. Additionally, Host, as a REIT, is required by tax laws to report results on a calendar year. As a result, we elected to adopt the reporting periods used by Marriott except that our fiscal year always ends on December 31 to comply with REIT rules. Our first three quarters of operations end on the same day as Marriott but our fourth quarter ends on December 31 and our full year results, as reported in our consolidated statement of operations, always includes the same number of days as the calendar year. 
Two consequences of the reporting cycle we have adopted are: (1) quarterly start dates will usually differ between years, except for the first quarter which always commences on January 1, and (2) our first and fourth quarters of operations and year-to-date operations may not include the same number of days as reflected in prior years. For example, the third quarter of 2008 ended on September 5, and the third quarter of 2007 ended on September 7, though both quarters reflect twelve weeks of operations. In contrast, the fourth quarter results for 2008 reflect 117 days of operations, while our fourth quarter results for 2007 reflect 115 days of operations. 
While the reporting calendar we adopted is more closely aligned with the reporting calendar used by the manager of a majority of our properties, one final consequence of our calendar is we are unable to report the month of operations that ends after our fiscal quarter-end until the following quarter because our hotel managers using a monthly reporting period do not make mid-month results available to us. Hence, the month of operation that ends after our fiscal quarter-end is included in our quarterly results of operations in the following quarter for those hotel managers (covering approximately 41% of our hotels). As a result, our quarterly results of operations include results from hotel managers reporting results on a monthly basis as follows: first quarter (January, February), second quarter (March to May), third quarter (June to August) and fourth quarter (September to December). While this does not affect full-year results, it does affect the reporting of quarterly results.
REPORTING PERIODS FOR HOTEL OPERATING STATISTICS AND COMPARABLE HOTEL RESULTS
In contrast to the reporting periods for our consolidated statement of operations, our hotel operating statistics (i.e., RevPAR, average daily rate and average occupancy) and our comparable hotel results are reported based on the reporting cycle used by Marriott for our Marriott-managed hotels. However, for years such as 2008, where Marriott reports its operations based on a 53-week year and a fourth quarter of 17 weeks, for comparative purposes, we exclude the extra week of operations and still reflect 52 weeks for the full year and 16 weeks for the fourth quarter. This facilitates year-to-year comparisons, as each reporting period will be comprised of the same number of days of operations as in the prior year. This means, however, that the reporting periods we use for hotel operating statistics and our comparable hotels results will typically differ slightly from the reporting periods used for our statements of operations for the first and fourth quarters and the full year. Results from hotel managers reporting on a monthly basis are included in our operating statistics and comparable hotels results consistent with their reporting in our consolidated statement of operations herein: 
Hotel results for the fourth quarter of 2008 reflect 16 weeks of operations for the period from September 6, 2008 to December 26, 2008 for our Marriott-managed hotels and results from September 1, 2008 to December 31, 2008 for operations of all other hotels which report results on a monthly basis. 
Hotel results for the fourth quarter of 2007 reflect 16 weeks of operations for the period from September 8, 2007 to December 28, 2007 for our Marriott-managed hotels and results from September 1, 2007 to December 31, 2007 for operations of all other hotels which report results on a monthly basis. 
Hotel results for full year 2008 reflect 52 weeks for the period from December 29, 2007 to December 26, 2008 for our Marriott-managed hotels and results from January 1, 2008 to December 31, 2008 for operations of all other hotels which report results on a monthly basis. 
Hotel results for full year 2007 reflect 52 weeks for the period from December 30, 2006 to December 28, 2007 for our Marriott-managed hotels and results from January 1, 2007 to December 31, 2007 for operations of all other hotels which report results on a monthly basis. 
COMPARABLE HOTEL OPERATING STATISTICS
We present certain operating statistics (i.e., RevPAR, average daily rate and average occupancy) and operating results (revenues, expenses, adjusted operating profit and adjusted operating profit margin) for the periods included in this report on a comparable hotel basis. We define our comparable hotels as properties (i) that are owned or leased by us and the operations of which are included in our consolidated results, whether as continuing operations or discontinued operations, for the entirety of the reporting periods being compared, and (ii) that have not sustained substantial property damage or business interruption or undergone large-scale capital projects during the reporting periods being compared. Of the 117 hotels that we owned as of December 31, 2008, 115 hotels have been classified as comparable hotels. The operating results of the following hotels that we owned as of December 31, 2008 are excluded from comparable hotel results for these periods: 
Atlanta Marriott Marquis (a two-year major renovation that was completed in June 2008); and 
New Orleans Marriott (property damage and business interruption from Hurricane Katrina in August 2005). 
The operating results of the two hotels we disposed of in 2008 and the nine hotels we disposed of in 2007 are also not included in comparable hotel results for the periods presented herein. Moreover, because these statistics and operating results are for our hotel properties, they exclude results for our non-hotel properties and other real estate investments. 
NON-GAAP FINANCIAL MEASURES
Included in this press release are certain "non-GAAP financial measures," which are measures of our historical or future financial performance that are not calculated and presented in accordance with GAAP, within the meaning of applicable SEC rules. They are as follows: (i) FFO per diluted share of Host, (ii) EBITDA of Host LP, (iii) Adjusted EBITDA of Host LP and (iv) Comparable Hotel Operating Results of Host. The following discussion defines these terms and presents why we believe they are useful supplemental measures of our performance.
FFO per Diluted Share
We present FFO per diluted share as a non-GAAP measure of our performance in addition to our earnings per share (calculated in accordance with GAAP). We calculate FFO per diluted share for a given operating period as our FFO (defined as set forth below) for such period divided by the number of fully diluted shares outstanding during such period. The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as net income (calculated in accordance with GAAP) excluding gains (losses) from sales of real estate, the cumulative effect of changes in accounting principles, real estate-related depreciation and amortization and adjustments for unconsolidated partnerships and joint ventures. We present FFO on a per share basis after making adjustments for the effects of dilutive securities and the payment of preferred stock dividends, in accordance with NAREIT guidelines. 
We believe that FFO per diluted share is a useful supplemental measure of our operating performance and that the presentation of FFO per diluted share, when combined with the primary GAAP presentation of earnings per share, provides beneficial information to investors. By excluding the effect of real estate depreciation, amortization and gains and losses from sales of real estate, all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance, we believe such measures can facilitate comparisons of operating performance between periods and with other REITs, even though FFO per diluted share does not represent an amount that accrues directly to holders of our common stock. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. As noted by NAREIT in its April 2002 "White Paper on Funds From Operations," since real estate values have historically risen or fallen with market conditions, many industry investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For these reasons, NAREIT adopted the definition of FFO in order to promote an industry-wide measure of REIT operating performance.
EBITDA
Earnings before Interest Expense, Income Taxes, Depreciation and Amortization (EBITDA) is a commonly used measure of performance in many industries. Management believes EBITDA provides useful information to investors regarding our results of operations because it helps us and our investors evaluate the ongoing operating performance of our properties and facilitates comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital-intensive companies. Management uses EBITDA to evaluate property-level results and as one measure in determining the value of acquisitions and dispositions and, like FFO per diluted share, it is widely used by management in the annual budget process. 
Adjusted EBITDA
As of December 31, 2008, Host owns approximately 97% of the partnership interest of Host LP and is its sole general partner. We conduct all of our operations through Host LP, and Host LP is the obligor on our senior notes and on our credit facility. Historically, management has adjusted EBITDA when evaluating our performance because we believe that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted EBITDA, when combined with the primary GAAP presentation of net income, is beneficial to an investor's complete understanding of our operating performance. In addition, the Adjusted EBITDA of Host LP is presented because we believe it is a relevant measure in calculating certain credit ratios, since Host LP is the owner of all of our hotels and is the obligor on our debt noted above. We adjust EBITDA for the following items, which may occur in any period, and refer to this measure as Adjusted EBITDA:
Real Estate Transactions - We exclude the effect of gains and losses, including the amortization of deferred gains, recorded on the disposition of assets and property insurance gains in our consolidated statement of operations because we believe that including them in Adjusted EBITDA is not consistent with reflecting the ongoing performance of our remaining assets. In addition, material gains or losses from the depreciated value of the disposed assets could be less important to investors given that the depreciated asset often does not reflect the market value of real estate assets (as noted above for FFO). 
Equity Investment Adjustments - We exclude the equity in earnings (losses) of unconsolidated investments in partnerships and joint ventures as presented in our consolidated statement of operations because it includes our pro-rata portion of depreciation, amortization and interest expense. We include our pro rata share of the Adjusted EBITDA of our equity investments as we believe this more accurately reflects the performance of our investment. The pro rata Adjusted EBITDA of equity investments is defined as the EBITDA of our equity investments adjusted for any gains or losses on property transactions multiplied by our percentage ownership in the partnership or joint venture. 
Consolidated Partnership Adjustments - We exclude the minority interest in the income or loss of our consolidated partnerships as presented in our consolidated statement of operations because it includes our minority partners' pro-rata portion of depreciation, amortization and interest expense. We deduct the minority partners' pro rata share of the Adjusted EBITDA of our consolidated partnerships as we believe this more accurately reflects the minority owners' interest in our consolidated partnerships. The pro rata Adjusted EBITDA of minority partners is defined as the EBITDA of our consolidated partnerships adjusted for any gains or losses on property transactions multiplied by the minority partners' positions in the partnership or joint venture.
Cumulative Effect of a Change in Accounting Principle - Infrequently, the Financial Accounting Standards Board (FASB) promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle. We exclude these one-time adjustments because they do not reflect our actual performance for that period.
Impairment Losses - We exclude the effect of impairment losses recorded because we believe that including them in Adjusted EBITDA is not consistent with reflecting the ongoing performance of our remaining assets. In addition, we believe that impairment charges are similar to gains (losses) on dispositions and depreciation expense, both of which are also excluded from EBITDA.
Limitations on the Use of FFO per Diluted Share, EBITDA and Adjusted EBITDA
We calculate FFO per diluted share in accordance with standards established by NAREIT, which may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or calculate FFO per diluted share in accordance with NAREIT guidance. In addition, although FFO per diluted share is a useful measure when comparing our results to other REITs, it may not be helpful to investors when comparing us to non-REITs. EBITDA and Adjusted EBITDA, as presented, may also not be comparable to measures calculated by other companies. This information should not be considered as an alternative to net income, operating profit, cash from operations or any other operating performance measure calculated in accordance with GAAP. Cash expenditures for various long-term assets (such as renewal and replacement capital expenditures), interest expense (for EBITDA and Adjusted EBITDA purposes only) and other items have been and will be incurred and are not reflected in the EBITDA, Adjusted EBITDA and FFO per diluted share presentations. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our consolidated statement of operations and cash flows include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures. Additionally, FFO per diluted share, EBITDA and Adjusted EBITDA should not be considered as a measure of our liquidity or indicative of funds available to fund our cash needs, including our ability to make cash distributions. In addition, FFO per diluted share does not measure, and should not be used as a measure of, amounts that accrue directly to stockholders' benefit. 
Comparable Hotel Operating Results
We present certain operating results for our hotels, such as hotel revenues, expenses, adjusted operating profit (and the related margin) and food and beverage adjusted profit (and the related margin), on a comparable hotel, or "same store," basis as supplemental information for investors. Our comparable hotel results present operating results for hotels owned during the entirety of the periods being compared without giving effect to any acquisitions or dispositions, significant property damage or large scale capital improvements incurred during these periods. We present these comparable hotel operating results by eliminating corporate-level costs and expenses related to our capital structure, as well as depreciation and amortization. We eliminate corporate-level costs and expenses to arrive at property-level results because we believe property-level results provide investors with supplemental information into the ongoing operating performance of our hotels. We eliminate depreciation and amortization because, even though depreciation and amortization are property-level expenses, these non-cash expenses, which are based on historical cost accounting for real estate assets, implicitly assume that the value of real estate assets diminishes predictably over time. As noted earlier, because real estate values have historically risen or fallen with market conditions, many industry investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. 
As a result of the elimination of corporate-level costs and expenses and depreciation and amortization, the comparable hotel operating results we present do not represent our total revenues, expenses, operating profit or operating profit margin and should not be used to evaluate our performance as a whole. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our consolidated statements of operations include such amounts, all of which should be considered by investors when evaluating our performance.
We present these hotel operating results on a comparable hotel basis because we believe that doing so provides investors and management with useful information for evaluating the period-to-period performance of our hotels and facilitates comparisons with other hotel REITs and hotel owners. In particular, these measures assist management and investors in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations at comparable hotels (which represent the vast majority of our portfolio) or from other factors, such as the effect of acquisitions or dispositions. While management believes that presentation of comparable hotel results is a "same store" supplemental measure that provides useful information in evaluating our ongoing performance, this measure is not used to allocate resources or to assess the operating performance of each of these hotels, as these decisions are based on data for individual hotels and are not based on comparable hotel results. For these reasons, we believe that comparable hotel operating results, when combined with the presentation of GAAP operating profit, revenues and expenses, provide useful information to investors and management.

      
 

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Contact:

Host Hotels & Resorts, Inc.
http://www.hosthotels.com
 

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Also See: Host Hotels Records Net Income of $738 million for Full Year 2006; Nation's Largest Lodging REIT Reports RevPAR Up 8.1% While Occupancy Declined 0.9 Percentage Points / Hotel Operating Statistics / February 2007
The Largest U.S. Hotel Real Estate Investment Trust, Host Hotels & Resorts, Reports 3rd Qtr Net Income Fell 44% to $54 million form $97 million a Year Ago; Two Hawaii Properties Report Decline in Business / Hotel Operating Data / October 2008
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