BETHESDA, Md., Feb. 14, 2012 -- Host Hotels & Resorts,
Inc. (NYSE: HST), the nation's largest lodging real estate investment
trust (REIT), today announced results of operations for the fourth
quarter and full year ended December 31, 2011.
Operating results for the quarter and full year include:
Operating
Results
|
|
(in
millions, except per share and hotel statistics)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended December 31,
|
Year
ended December 31,
|
|
|
|
|
|
|
Percent
|
|
|
Percent
|
|
|
|
|
2011
|
2010
|
Change
|
2011
|
2010
|
Change
|
|
Total
revenues
|
|
|
$ 1,658
|
$ 1,491
|
11.2%
|
$ 4,998
|
$ 4,428
|
12.9%
|
|
Comparable
hotel revenues
|
|
1,414
|
1,333
|
6.1
|
4,315
|
4,087
|
5.6
|
|
Net
income (loss)
|
|
16
|
(6)
|
N/M
|
(16)
|
(132)
|
87.9
|
|
Adjusted
EBITDA
|
|
349
|
292
|
19.5
|
1,018
|
834
|
22.1
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per share
|
|
$ .02
|
$ (.01)
|
N/M
|
$ (.02)
|
$ (.21)
|
90.5%
|
|
NAREIT
FFO per diluted share
|
|
.31
|
.26
|
19.2%
|
.89
|
.68
|
30.9
|
|
Adjusted
FFO per diluted share
|
|
.32
|
.28
|
14.3
|
.92
|
.74
|
24.3
|
|
|
|
|
|
|
|
|
|
|
|
Comparable
hotel RevPAR
|
|
$
131.23
|
$
123.97
|
5.9%
|
$
129.97
|
$
122.47
|
6.1%
|
|
|
|
|
|
|
|
|
|
|
|
N/M=Not
Meaningful
|
|
|
|
|
|
|
|
|
|
|
The increase in total revenues reflects the performance of the
Company's owned hotels and includes the 14 hotels (5,200 rooms)
acquired since July 2010, which
increased revenues by an incremental $83 million and $296 million for
the fourth quarter and full year 2011, respectively. Total revenues
also include incremental property-level revenues for 53 leased, select
service hotels of $54 million for full
year 2011.
The improvements in net income (loss), Adjusted EBITDA (which
is Earnings before Interest Expense, Income Taxes, Depreciation,
Amortization and other items), NAREIT Funds from Operations ("FFO") and
Adjusted FFO reflect the improvement in comparable hotel operations and
the effect of the Company's recent acquisitions. All of these metrics
were negatively impacted by the forfeiture of a $15
million deposit related to the Company's decision in December 2011 not to acquire the Grand Hyatt Washington, D.C.
NAREIT FFO per diluted share, Adjusted FFO per diluted share,
Adjusted EBITDA and comparable hotel adjusted operating profit margins
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 on
why the Company believes these supplemental measures are useful,
reconciliations to the applicable GAAP measure and the limitations on
their use.
OPERATING RESULTS
The increase in comparable hotel RevPAR of 5.9% in the fourth
quarter reflects the improvement in average room rate of 3.8%, combined
with an increase in occupancy of 1.3 percentage points. Similarly, for
full year 2011, the increase in comparable hotel RevPAR of 6.1%
reflects the improvement in average room rate of 4.3% and a 1.3
percentage point increase in occupancy. Comparable hotel revenues also
include an increase in food and beverage revenues of 6.8% and 5.5% for
the quarter and full year, respectively. The increase in revenues drove
improvements in the comparable hotel adjusted operating profit margins
of 100 basis points for the quarter and 90 basis points for the full
year.
INVESTMENTS
- REDEVELOPMENT AND RETURN ON INVESTMENT EXPENDITURES
- The Company invested approximately $202 million in 2011
in redevelopment and return on investment ("ROI") expenditures. These
projects are designed to increase cash flow and improve profitability
by capitalizing on changing market conditions and the favorable
locations of the Company's properties. During the fourth quarter, the
Company substantially completed the redevelopment of 466 rooms along
with 27,000 square feet of meeting space at the Chicago Marriott O'Hare
and over 11,000 square feet of lobby, restaurant and meeting space at
the Hilton Singer Island Oceanfront Resort. The Company expects that
its investment in ROI expenditures for 2012 will total approximately
$155 million to $175 million.
- ACQUISITION EXPENDITURES – In conjunction
with the acquisition of a property, the Company prepares a capital
improvement plan designed to enhance the profitability of the hotel.
Consistent with plans developed for recent acquisitions, during the
fourth quarter of 2011, the Company began work on the renovation of all
270 rooms at the W New York – Union
Square and the rebranding of the New York Helmsley Hotel to a Westin,
including a redesign of all 773 rooms and a new lobby bar and
restaurant. The Company spent approximately $13
million on acquisition projects in 2011 and expects to invest
between $80 million and $100 million in
2012.
- RENEWAL AND REPLACEMENT EXPENDITURES - The
Company also invested approximately $327 million in 2011 in renewal and
replacement expenditures designed to ensure that the high-quality
standards of both the Company and its operators are maintained. During
2011, the Company completed renovations to over 5,300 guestrooms,
98,000 square feet of restaurants, lobbies and other public space and
over 515,000 square feet of ballrooms and meeting space, taking
advantage of favorable construction pricing, while significantly
improving its properties. Major renewal and replacement projects
completed during the fourth quarter included the renovation of all 371
rooms at the JW Marriott, Buckhead Atlanta, all 296 rooms at the Tampa
Airport Marriott and 24,100 square feet of remodeled ballroom and
meeting space at the San Ramon Marriott. The Company expects that
renewal and replacement expenditures for 2012 will total approximately
$310 million to $330 million.
BALANCE SHEET
During the fourth quarter, the Company continued to execute on
its strategic goal of strengthening its balance sheet by balancing debt
maturities through the following transactions:
- on November 18, 2011 the Company issued $300 million of 6%
Series Y senior notes due October 2021.
The net proceeds of approximately $295 million will be used, along with
available cash, to repurchase or repay the $388 million of 2⅝%
exchangeable senior debentures, which are expected to be put to the
Company in April of 2012;
- on November 22, 2011 the
Company closed on a new senior revolving credit facility with a
syndicate of banks. The credit facility allows for borrowings in an
aggregate principal amount of up to $1 billion. The interest rate
spread for LIBOR-based borrowings ranges from 175 to 275 basis points.
Based on the Company's credit statistics at December
31, 2011, the spread would be 200 basis points. The credit
facility has an initial maturity of November
2015 with an option to extend for one additional year, subject
to certain conditions and the payment of an extension fee; and
- in November 2011, the
Company refinanced the mortgage loan on the Hilton Melbourne South
Wharf, which extended the maturity of the loan to 2016 and lowered the
effective interest rate by 400 basis points. For the A$82 million loan, 75% bears interest at a
fixed rate of 6.7%, through an interest rate swap, while the remaining
25% bears interest at a floating rate based on the 3-month Reuters'
Bank Bill Swap Bid Rate (BBSY) plus 230 basis points for a combined
rate of 6.77% at December 31, 2011.
As of December 31, 2011, the Company had approximately $826
million of cash and cash equivalents and $883 million of available
capacity under its credit facility.
EUROPEAN JOINT VENTURE
Comparable hotel RevPAR for the portfolio of hotels owned by
the joint venture in Europe, in which
the Company holds an approximate one-third partnership interest,
increased 1.0% for the fourth quarter and 5.5% year-to-date on a
constant Euro basis. The growth was driven by an increase in average
room rate of 5.3% and 5.5% for the fourth quarter and full year 2011,
respectively.
DIVIDEND
On January 17, 2012, the Company paid a fourth quarter
dividend of $0.05 per share on its
common stock. The Company's policy on common dividends is generally to
distribute, over time, 100% of its taxable income. Based on its
guidance for 2012, the Company intends to declare, subject to approval
by the Company's board of directors, a quarterly dividend of $.06 per share in the first quarter.
2012 OUTLOOK
The Company anticipates for 2012 that:
- Comparable hotel RevPAR will increase 4% to 6%;
- Operating profit margins under GAAP would increase
approximately 140 basis points to 230 basis points; and
- Comparable hotel adjusted operating profit margins will
increase approximately 25 basis points to 75 basis points.
Based upon these parameters, the Company estimates that its
full year 2012 guidance is as follows:
- earnings per diluted share should range from approximately
$.08 to $.15;
- net income should range from $57
million to $112 million;
- NAREIT and Adjusted FFO per diluted share should be
approximately $.97 to $1.04; and,
- Adjusted EBITDA should be approximately $1,090 million to
$1,145 million.
See the 2012 Forecast Schedules and Notes to Financial
Information for other assumptions used in the forecasts and items that
may affect forecasted results. Effective with this press release the
Company began reporting Adjusted FFO per diluted share. Adjusted FFO
reflects FFO as defined by NAREIT adjusted for costs associated with
financing transactions, acquisition costs and litigation expenses
outside the normal course of operations. For further discussion of
Adjusted FFO and other non-GAAP measures, see the Notes to the
Financial Information included with this press release.
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 105 properties in the
United States and 16 properties internationally totaling
approximately 65,000 rooms. The Company also holds non-controlling
interests in a joint venture in Europe
that owns 13 hotels with approximately 4,200 rooms and a joint venture
in India that is investing in seven
hotels with approximately 1,750 rooms that are in various stages of
development in three cities. Guided by a disciplined approach to
capital allocation and aggressive asset management, the Company
partners with premium brands such as Marriott®, Ritz-Carlton®,
Westin®, Sheraton®, W®, St. Regis®, Le Meridien®,
The Luxury Collection®, Hyatt®, Fairmont®, Four
Seasons®, Hilton®, Swissotel®, ibis®, Pullman®, and
Novotel®* 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 include forecast results and are identified
by their use of terms and phrases such as "anticipate," "believe,"
"could," "estimate," "expect," "intend," "may," "should," "plan,"
"predict," "project," "will," "continue" and other similar terms and
phrases, including references to 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 effect on travel of
potential 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; the risk that the Company's board of directors will
determine to pay dividends at a rate different than currently
anticipated and our ability to continue to satisfy complex rules in
order for us to remain a REIT for federal income tax purposes and other
risks and uncertainties associated with our business described in the
Company's annual report on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K filed with the SEC. Although the
Company believes the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, it can give no
assurance that the expectations will be attained or that any deviation
will not be material. All information in this release is as of February
14, 2012, 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. (Host LP), of which we are the sole general
partner. When distinguishing between Host and Host LP, the primary
difference is approximately 1.5% of the partnership interests in Host
LP held by outside partners as of December 31, 2011, which is
non-controlling interests in Host LP in our consolidated balance sheets
and is included in net income/loss attributable to non-controlling
interests in our consolidated statements of operations. Readers are
encouraged to find further detail regarding our organizational
structure in our annual report on Form 10-K.
For information on our reporting periods and non-GAAP
financial measures (including Adjusted EBITDA, NAREIT and Adjusted 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,
|
December
31,
|
|
|
|
|
2011
|
2010
|
|
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Property
and equipment, net
|
$
11,383
|
$
10,514
|
|
Due
from managers
|
37
|
45
|
|
Investments
in affiliates
|
197
|
148
|
|
Deferred
financing costs, net
|
55
|
44
|
|
Furniture,
fixtures and equipment replacement fund
|
166
|
152
|
|
Other
|
368
|
354
|
|
Restricted
cash
|
36
|
41
|
|
Cash
and cash equivalents
|
826
|
1,113
|
|
Total
assets
|
$
13,068
|
$
12,411
|
|
|
|
|
|
LIABILITIES,
NON-CONTROLLING INTERESTS AND EQUITY
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
Senior
notes, including $902 million and $1,156 million, respectively, net of
discount, of Exchangeable Senior Debentures
|
$ 4,543
|
$ 4,249
|
|
Credit
facility
|
117
|
58
|
|
Mortgage
debt
|
1,006
|
1,025
|
|
Other
|
87
|
145
|
|
Total
debt
|
5,753
|
5,477
|
|
Accounts
payable and accrued expenses
|
175
|
161
|
|
Other
|
269
|
250
|
|
Total
liabilities
|
6,197
|
5,888
|
|
|
|
|
|
Non-controlling
interests-Host Hotels & Resorts, L.P.
|
158
|
191
|
|
|
|
|
|
Host
Hotels & Resorts, Inc. stockholders' equity:
|
|
|
|
Common
stock, par value $.01, 1,050 million shares authorized; 705.1 million
shares and 675.6 million shares issued and outstanding, respectively
|
7
|
7
|
|
Additional
paid-in capital
|
7,750
|
7,236
|
|
Accumulated
other comprehensive income (loss)
|
(1)
|
25
|
|
Deficit
|
(1,079)
|
(965)
|
|
Total
equity of Host Hotels & Resorts, Inc. stockholders
|
6,677
|
6,303
|
|
Non-controlling
interests-other consolidated partnerships
|
36
|
29
|
|
Total
equity
|
6,713
|
6,332
|
|
Total
liabilities, non-controlling interests and equity
|
$
13,068
|
$
12,411
|
|
|
|
|
|
|
(a)
Our consolidated balance sheet as of December 31, 2011 has been
prepared without audit. Certain information and footnote disclosures
normally included in financial statements presented in accordance with
GAAP have been omitted.
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Consolidated
Statements of Operations (a)
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
Year
ended
|
|
|
|
|
December
31,
|
December
31,
|
|
|
|
|
2011
|
2010
|
2011
|
2010
|
|
Revenues
|
|
|
|
|
|
Rooms
|
$ 988
|
$ 880
|
$ 3,022
|
$ 2,661
|
|
Food
and beverage
|
493
|
444
|
1,427
|
1,291
|
|
Other
|
99
|
85
|
296
|
277
|
|
Owned
hotel revenues
|
1,580
|
1,409
|
4,745
|
4,229
|
|
Other
revenues (b)
|
78
|
82
|
253
|
199
|
|
Total
revenues
|
1,658
|
1,491
|
4,998
|
4,428
|
|
Expenses
|
|
|
|
|
|
Rooms
|
269
|
238
|
832
|
734
|
|
Food
and beverage
|
356
|
325
|
1,062
|
965
|
|
Other
departmental and support expenses
|
410
|
376
|
1,261
|
1,151
|
|
Management fees
|
64
|
60
|
189
|
171
|
|
Other
property-level expenses (b)
|
176
|
182
|
569
|
488
|
|
Depreciation and amortization
|
213
|
182
|
652
|
591
|
|
Corporate and other expenses (c)
|
53
|
40
|
111
|
108
|
|
Gain
on insurance settlement
|
(2)
|
(3)
|
(2)
|
(3)
|
|
Total
operating costs and expenses
|
1,539
|
1,400
|
4,674
|
4,205
|
|
Operating
profit
|
119
|
91
|
324
|
223
|
|
Interest
income
|
5
|
5
|
20
|
8
|
|
Interest
expense (d)
|
(112)
|
(116)
|
(371)
|
(384)
|
|
Net
gains on property transactions and other
|
1
|
1
|
7
|
1
|
|
Gain
(loss) on foreign currency transactions and derivatives
|
4
|
-
|
3
|
(6)
|
|
Equity
in earnings (losses) of affiliates
|
7
|
5
|
4
|
(1)
|
|
Income
(loss) before income taxes
|
24
|
(14)
|
(13)
|
(159)
|
|
Benefit
(provision) for income taxes
|
(8)
|
10
|
1
|
31
|
|
Income
(loss) from continuing operations
|
16
|
(4)
|
(12)
|
(128)
|
|
Loss
from discontinued operations, net of tax
|
-
|
(2)
|
(4)
|
(4)
|
|
Net
income (loss)
|
16
|
(6)
|
(16)
|
(132)
|
|
Less:
Net loss attributable to non-controlling interests
|
1
|
-
|
1
|
2
|
|
Net
income (loss) attributable to Host Hotels & Resorts, Inc.
|
17
|
(6)
|
(15)
|
(130)
|
|
Less:
Dividends on preferred stock
|
-
|
-
|
-
|
(4)
|
|
Issuance costs of redeemed preferred stock
|
-
|
-
|
-
|
(4)
|
|
Net
income (loss) available to common stockholders
|
$ 17
|
$ (6)
|
$ (15)
|
$ (138)
|
|
Basic
and diluted earnings (loss) per common share:
|
|
|
|
|
|
Continuing
operations
|
$ .02
|
$ (.01)
|
$ (.01)
|
$ (.20)
|
|
Discontinued
operations
|
-
|
-
|
(.01)
|
(.01)
|
|
Basic
and diluted earnings (loss) per common share
|
$ .02
|
$ (.01)
|
$ (.02)
|
$ (.21)
|
|
|
|
|
|
|
|
|
|
(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) On
July 6, 2010, we terminated the subleases for the 71 select-service
hotels that we leased from Hospitality Properties Trust ("HPT") (18 of
such leases were terminated effective December 31, 2010). As a result
of the transaction, we record the gross hotel revenues and expenses of
these hotels as opposed to rental income earned under the subleases;
however, we are subject to the rental expense due to HPT. HPT rental
revenue recorded in 2011 represents payments that the subtenant made to
us as part of an agreement to satisfy their obligations under the
terminated subleases. The remaining leases will be terminated effective
December 31, 2012. The chart below details the other revenue and other
property-level expenses for the quarter and full year ended 2011 and
2010 related to the HPT properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
Year
ended
|
|
|
|
|
December
31,
|
December
31,
|
|
|
|
|
2011
|
2010
|
2011
|
2010
|
|
Hotel
sales revenue
|
$ 63
|
$ 74
|
$ 214
|
$ 123
|
|
Rental
revenue
|
7
|
-
|
7
|
44
|
|
Total
HPT revenue
|
$ 70
|
$ 74
|
$ 221
|
$ 167
|
|
Property-level
expenses
|
$ 48
|
$ 60
|
$ 159
|
$ 96
|
|
Rental
expense
|
21
|
27
|
68
|
84
|
|
Total
HPT expenses
|
$ 69
|
$ 87
|
$ 227
|
$ 180
|
|
|
|
|
|
|
|
|
|
(c)
Corporate and other expenses for fourth quarter and full year 2011
include a charge of $15 million related to the forfeited deposit due to
our decision not to acquire the Grand Hyatt Washington, D.C.
(d)
Interest expense includes the following items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
Year
ended
|
|
|
|
|
December
31,
|
December
31,
|
|
|
|
|
2011
|
2010
|
2011
|
2010
|
|
Non-cash
interest for exchangeable debentures
|
$ 9
|
$ 9
|
$ 31
|
$ 32
|
|
Debt
extinguishment costs
|
1
|
6
|
9
|
21
|
|
Total
|
$ 10
|
$ 15
|
$ 40
|
$ 53
|
|
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Earnings
per Common Share
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
Year
ended
|
|
|
|
|
December
31,
|
December
31,
|
|
|
|
|
2011
|
2010
|
2011
|
2010
|
|
Net
income (loss)
|
$ 16
|
$ (6)
|
$ (16)
|
$ (132)
|
|
Net
loss attributable to non-controlling interests
|
1
|
-
|
1
|
2
|
|
Dividends
on preferred stock
|
-
|
-
|
-
|
(4)
|
|
Issuance
costs of redeemed preferred stock (a)
|
-
|
-
|
-
|
(4)
|
|
Income
(loss) available to common stockholders
|
17
|
(6)
|
(15)
|
(138)
|
|
Diluted
income (loss) available to common stockholders
|
$ 17
|
$ (6)
|
$ (15)
|
$ (138)
|
|
|
|
|
|
|
|
Basic
weighted average shares outstanding
|
703.2
|
666.1
|
693.0
|
656.1
|
|
Diluted
weighted average shares outstanding (b)
|
705.1
|
666.1
|
693.0
|
656.1
|
|
Basic
and diluted earnings (loss) per share
|
$ .02
|
$ (.01)
|
$ (.02)
|
$ (.21)
|
|
|
|
|
|
|
|
|
|
(a)
Represents the original issuance costs associated with the Class E
preferred stock, which were redeemed during the second quarter of 2010.
|
|
(b)
Dilutive securities may include shares granted under comprehensive
stock plans, preferred operating partnership units ("OP Units") held by
minority partners, exchangeable debt securities and other
non-controlling interests that have the option to convert their limited
partnership interests to common OP Units. No effect is shown for any
securities that were anti-dilutive for the period.
|
|
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Comparable
Hotel Operating Data (a)
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2011
|
Quarter
ended December 31, 2011
|
Quarter
ended December 31, 2010
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
|
Region
|
Properties
|
Rooms
|
Room
Rate
|
Percentages
|
RevPAR
|
Room
Rate
|
Percentages
|
RevPAR
|
RevPAR
|
|
Pacific
|
26
|
14,581
|
$
173.89
|
71.5%
|
$
124.30
|
$
162.91
|
68.8%
|
$
112.08
|
10.9%
|
|
Mid-Atlantic
|
10
|
8,352
|
275.53
|
82.2
|
226.42
|
263.35
|
80.1
|
211.01
|
7.3
|
|
South
Central
|
9
|
5,687
|
145.04
|
65.9
|
95.61
|
142.54
|
63.8
|
90.93
|
5.1
|
|
Florida
|
9
|
5,677
|
175.38
|
60.1
|
105.40
|
162.47
|
62.0
|
100.71
|
4.7
|
|
DC
Metro
|
12
|
5,416
|
195.65
|
71.3
|
139.49
|
199.44
|
69.9
|
139.39
|
0.1
|
|
North
Central
|
10
|
4,358
|
152.46
|
69.9
|
106.53
|
147.77
|
68.0
|
100.52
|
6.0
|
|
New
England
|
7
|
3,924
|
178.20
|
70.8
|
126.26
|
178.36
|
67.6
|
120.49
|
4.8
|
|
Atlanta
|
7
|
3,846
|
161.05
|
62.8
|
101.11
|
162.60
|
64.7
|
105.27
|
(3.9)
|
|
Mountain
|
7
|
2,889
|
156.60
|
62.3
|
97.58
|
150.63
|
60.2
|
90.68
|
7.6
|
|
International
|
7
|
2,473
|
173.81
|
63.2
|
109.85
|
165.09
|
66.8
|
110.34
|
(0.4)
|
|
All
Regions
|
104
|
57,203
|
188.04
|
69.8
|
131.23
|
181.10
|
68.5
|
123.97
|
5.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2011
|
Year
ended December 31, 2011
|
Year
ended December 31, 2010
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
|
Region
|
Properties
|
Rooms
|
Room
Rate
|
Percentages
|
RevPAR
|
Room
Rate
|
Percentages
|
RevPAR
|
RevPAR
|
|
Pacific
|
26
|
14,581
|
$
172.15
|
75.4%
|
$
129.74
|
$
161.38
|
71.6%
|
$
115.55
|
12.3%
|
|
Mid-Atlantic
|
10
|
8,352
|
241.47
|
77.9
|
188.17
|
225.63
|
79.9
|
180.38
|
4.3
|
|
South
Central
|
9
|
5,687
|
147.86
|
68.6
|
101.36
|
142.83
|
67.1
|
95.80
|
5.8
|
|
Florida
|
9
|
5,677
|
183.14
|
69.7
|
127.71
|
178.23
|
68.7
|
122.37
|
4.4
|
|
DC
Metro
|
12
|
5,416
|
194.48
|
74.0
|
143.90
|
191.55
|
74.0
|
141.83
|
1.5
|
|
North
Central
|
10
|
4,358
|
145.00
|
70.6
|
102.33
|
139.68
|
69.0
|
96.39
|
6.2
|
|
New
England
|
7
|
3,924
|
171.39
|
71.3
|
122.28
|
172.19
|
69.6
|
119.83
|
2.1
|
|
Atlanta
|
7
|
3,846
|
157.31
|
65.0
|
102.32
|
156.55
|
64.5
|
101.00
|
1.3
|
|
Mountain
|
7
|
2,889
|
157.90
|
65.0
|
102.59
|
149.32
|
63.2
|
94.30
|
8.8
|
|
International
|
7
|
2,473
|
170.64
|
65.3
|
111.46
|
157.91
|
65.7
|
103.80
|
7.4
|
|
All
Regions
|
104
|
57,203
|
180.32
|
72.1
|
129.97
|
172.95
|
70.8
|
122.47
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2011
|
Quarter
ended December 31, 2011
|
Quarter
ended December 31, 2010
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
|
Property
Type
|
Properties
|
Rooms
|
Room
Rate
|
Percentages
|
RevPAR
|
Room
Rate
|
Percentages
|
RevPAR
|
RevPAR
|
|
Urban
|
50
|
32,282
|
$
208.02
|
72.7%
|
$
151.22
|
$
202.71
|
71.3%
|
$
144.55
|
4.6%
|
|
Suburban
|
28
|
10,564
|
145.45
|
65.4
|
95.07
|
140.60
|
64.6
|
90.80
|
4.7
|
|
Resort/Conference
|
13
|
8,082
|
208.26
|
60.6
|
126.22
|
192.98
|
58.8
|
113.38
|
11.3
|
|
Airport
|
13
|
6,275
|
127.23
|
74.2
|
94.34
|
118.53
|
72.8
|
86.31
|
9.3
|
|
All
Types
|
104
|
57,203
|
188.04
|
69.8
|
131.23
|
181.10
|
68.5
|
123.97
|
5.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2011
|
Year
ended December 31, 2011
|
Year
ended December 31, 2010
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
|
Property
Type
|
Properties
|
Rooms
|
Room
Rate
|
Percentages
|
RevPAR
|
Room
Rate
|
Percentages
|
RevPAR
|
RevPAR
|
|
Urban
|
50
|
32,282
|
$
194.40
|
73.7%
|
$
143.33
|
$
186.87
|
73.2%
|
$
136.76
|
4.8%
|
|
Suburban
|
28
|
10,564
|
145.56
|
67.9
|
98.77
|
139.45
|
66.0
|
91.98
|
7.4
|
|
Resort/Conference
|
13
|
8,082
|
215.19
|
67.5
|
145.24
|
204.83
|
65.3
|
133.76
|
8.6
|
|
Airport
|
13
|
6,275
|
122.85
|
76.6
|
94.09
|
116.03
|
73.9
|
85.73
|
9.7
|
|
All
Types
|
104
|
57,203
|
180.32
|
72.1
|
129.97
|
172.95
|
70.8
|
122.47
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
See the Notes to Financial Information for a discussion of reporting
periods and comparable hotel results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
Operating Statistics for All Properties (a)
|
|
|
|
|
|
|
|
Quarter
ended December 31
|
Year
ended December 31
|
|
|
|
|
|
|
|
2011
|
2010
|
2011
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
daily rate
|
$
189.96
|
$
183.46
|
$
181.88
|
$
173.17
|
|
|
|
|
|
Average
occupancy
|
69.7%
|
68.0%
|
71.9%
|
70.1%
|
|
|
|
|
|
RevPAR
|
$
132.31
|
$
124.80
|
$
130.70
|
$
121.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
The operating statistics reflect all consolidated properties as of
December 31, 2011 and December 31, 2010, respectively, and include the
results of operations of properties sold or transferred during the year
through the date of their disposition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Comparable
Hotel Operating Data
|
|
Schedule
of Comparable Hotel Results (a)
|
|
(unaudited,
in millions, except hotel statistics)
|
|
|
|
|
|
|
|
|
Quarter
ended December 31
|
Year
ended December 31
|
|
|
2011
|
2010
|
2011
|
2010
|
|
|
|
|
|
|
|
Number
of hotels
|
104
|
104
|
104
|
104
|
|
Number
of rooms
|
57,203
|
57,203
|
57,203
|
57,203
|
|
Percent
change in comparable hotel RevPAR
|
5.9%
|
-
|
6.1%
|
-
|
|
Operating
profit margin under GAAP (b)
|
7.2%
|
6.1%
|
6.5%
|
5.0%
|
|
Comparable
hotel adjusted operating profit margin (b)
|
23.4%
|
22.4%
|
22.3%
|
21.4%
|
|
|
|
|
|
|
|
Comparable
hotel sales
|
|
|
|
|
|
Room
|
$ 870
|
$ 822
|
$ 2,709
|
$ 2,552
|
|
Food
and beverage
|
456
|
427
|
1,334
|
1,265
|
|
Other
|
88
|
84
|
272
|
270
|
|
Comparable
hotel sales (c)
|
1,414
|
1,333
|
4,315
|
4,087
|
|
Comparable
hotel expenses
|
|
|
|
|
|
Room
|
237
|
224
|
745
|
705
|
|
Food
and beverage
|
328
|
313
|
988
|
943
|
|
Other
|
50
|
49
|
157
|
154
|
|
Management
fees, ground rent and other costs
|
468
|
449
|
1,464
|
1,410
|
|
Comparable
hotel expenses (d)
|
1,083
|
1,035
|
3,354
|
3,212
|
|
Comparable
hotel adjusted operating profit
|
331
|
298
|
961
|
875
|
|
Non-comparable
hotel results, net (e)
|
53
|
28
|
132
|
60
|
|
Income
(loss) from hotels leased from HPT
|
1
|
(13)
|
(6)
|
(13)
|
|
Depreciation
and amortization
|
(213)
|
(182)
|
(652)
|
(591)
|
|
Corporate
and other expenses
|
(53)
|
(40)
|
(111)
|
(108)
|
|
Operating
profit
|
$ 119
|
$ 91
|
$ 324
|
$ 223
|
|
|
|
|
|
|
|
|
|
(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 revenues per the consolidated statements of
operations to the comparable hotel sales is as follows:
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended December 31
|
Year
ended December 31
|
|
|
2011
|
2010
|
2011
|
2010
|
|
Revenues
per the consolidated statements of operations
|
$ 1,658
|
$ 1,491
|
$ 4,998
|
$ 4,428
|
|
Non-comparable
hotel revenues (e)
|
(188)
|
(97)
|
(513)
|
(222)
|
|
Hotel
sales for which we record rental income, net
|
14
|
13
|
51
|
48
|
|
Revenues
for hotels leased from HPT
|
(70)
|
(74)
|
(221)
|
(167)
|
|
Comparable
hotel sales
|
$ 1,414
|
$ 1,333
|
$ 4,315
|
$ 4,087
|
|
|
|
|
|
|
|
|
|
(d)
The reconciliation of operating costs per the consolidated statements
of operations to the comparable hotel expenses is as follows:
|
|
|
|
|
Quarter
ended December 31
|
Year
ended December 31
|
|
|
2011
|
2010
|
2011
|
2010
|
|
Operating
costs and expenses per the consolidated
statements of operations
|
$ 1,539
|
$ 1,400
|
$ 4,674
|
$ 4,205
|
|
Non-comparable
hotel expenses (e)
|
(135)
|
(69)
|
(381)
|
(162)
|
|
Hotel
expenses for which we record rental income
|
14
|
13
|
51
|
48
|
|
Expense
for hotels leased from HPT
|
(69)
|
(87)
|
(227)
|
(180)
|
|
Depreciation
and amortization
|
(213)
|
(182)
|
(652)
|
(591)
|
|
Corporate
and other expenses
|
(53)
|
(40)
|
(111)
|
(108)
|
|
Comparable
hotel expenses
|
$ 1,083
|
$ 1,035
|
$ 3,354
|
$ 3,212
|
|
|
|
|
|
|
|
|
|
(e)
Non-comparable hotel results, net, includes the results of operations
of our non-comparable hotels, whose operations are included in our
consolidated statements of operations as continuing operations, gains
on insurance settlements, the results of our office buildings and 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.
|
|
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Other
Financial and Operating Data
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
December
31,
|
|
|
|
|
|
|
2011
|
2010
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Common
shares outstanding
|
705.1
|
675.6
|
|
Common
shares outstanding assuming conversion of non-controlling interest OP
Units (a)
|
715.8
|
686.3
|
|
Preferred
OP Units outstanding
|
.02
|
.02
|
|
|
|
|
|
|
|
|
|
Security
pricing
|
|
|
|
|
|
Common
(b)
|
$ 14.77
|
$ 17.87
|
|
3 1/4%
Exchangeable Senior Debentures (c)
|
$
1,084.0
|
$
1,179.4
|
|
2 5/8%
Exchangeable Senior Debentures (c)
|
$
1,002.6
|
$ 991.9
|
|
2 1/2%
Exchangeable Senior Debentures (c)
|
$
1,242.6
|
$
1,416.6
|
|
|
|
|
|
|
|
|
|
Dividends
declared per share for calendar year
|
|
|
|
Common
|
|
|
$ .14
|
$ .04
|
|
Class
E Preferred
|
|
|
$ -
|
$ .95
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
notes
|
Rate
|
Maturity
date
|
|
|
|
Series
K
|
7 1/8%
|
11/2013
|
$ -
|
$ 250
|
|
Series
O
|
6 3/8%
|
3/2015
|
650
|
650
|
|
Series
Q
|
6 3/4%
|
6/2016
|
800
|
800
|
|
Series
S
|
6 7/8%
|
11/2014
|
498
|
498
|
|
Series
T
|
9%
|
5/2017
|
390
|
388
|
|
Series
V
|
6%
|
11/2020
|
500
|
500
|
|
Series
W (d)
|
5 7/8%
|
6/2019
|
496
|
-
|
|
Series
Y
|
6%
|
10/2021
|
300
|
-
|
|
Exchangeable
senior debentures
|
3 1/4%
|
4/2024
|
175
|
325
|
|
Exchangeable
senior debentures (e)
|
2 5/8%
|
4/2027
|
385
|
502
|
|
Exchangeable
senior debentures (e)
|
2 1/2%
|
10/2029
|
342
|
329
|
|
Senior
notes
|
10%
|
5/2012
|
7
|
7
|
|
Credit
facility (f)
|
3.4%
|
11/2015
|
117
|
58
|
|
|
|
|
|
|
4,660
|
4,307
|
|
Mortgage
debt and other
|
|
|
|
|
|
Mortgage
debt (non-recourse)
|
3.4-8.5%
|
4/2013-12/2023
|
1,006
|
1,025
|
|
Other
|
7.0-7.8%
|
10/2014-12/2017
|
87
|
145
|
|
Total
debt (g) (h)
|
|
|
$ 5,753
|
$ 5,477
|
|
|
|
|
|
|
|
|
|
Percentage
of fixed rate debt
|
|
|
90%
|
90%
|
|
Weighted
average interest rate
|
|
|
6.3%
|
6.2%
|
|
Weighted
average debt maturity
|
|
|
4.4
years
|
4.4
years
|
|
|
|
|
|
|
|
|
|
(a)
Each OP Unit is redeemable for cash or, at the option of the Company,
for 1.021494 common shares of Host. At both December 31, 2011 and
December 31, 2010, there were 10.5 million common OP Units held by
non-controlling interests.
|
|
(b)
Share prices are the closing price as reported by the New York Stock
Exchange.
|
|
(c)
Amount reflects market price of a single $1,000 debenture as quoted by
Bloomberg L.P.
|
|
(d)
The 5 7/8% Series W senior notes were exchanged for 5 7/8% Series X
senior notes in January 2012.
|
|
(e)
The principal balance outstanding of the 2 5/8% Exchangeable Senior
Debentures due 2027 and the 2 1/2% Exchangeable Senior Debentures due
2029 is $388 million and $400 million, respectively. The discounts
related to these debentures are amortized through April 2012 and
October 2015, respectively.
|
|
(f)
The interest rate shown is the weighted average rate of the outstanding
credit facility at December 31, 2011, which reflects borrowings in
Canadian dollars at a rate of 3.4% and British pounds at a rate of
3.0%. Based on our current credit statistics, our U.S. Dollar
denominated borrowings could be drawn at a rate of LIBOR plus 200 basis
points.
|
|
(g) In
accordance with GAAP, total debt includes the debt of entities that we
consolidate, but of which we do not own 100%, and excludes the debt of
entities that we do not consolidate, but of which we have a
non-controlling ownership interest and record our investment therein
under the equity method of accounting. As of December 31, 2011, our
non-controlling partners’ share of consolidated debt is $67 million and
our share of debt in unconsolidated investments is $328 million.
|
|
(h)
Total debt as of December 31, 2011 and December 31, 2010 includes net
discounts of $63 million and $95 million, respectively.
|
|
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Reconciliation
of Net Income (Loss) to EBITDA and Adjusted EBITDA
|
|
(unaudited,
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended December 31,
|
Year
ended December 31,
|
|
|
|
|
2011
|
2010
|
2011
|
2010
|
|
Net
income (loss)
|
$ 16
|
$ (6)
|
$ (16)
|
$ (132)
|
|
Interest
expense
|
112
|
116
|
371
|
384
|
|
Depreciation
and amortization
|
208
|
182
|
647
|
591
|
|
Income
taxes
|
8
|
(10)
|
(1)
|
(31)
|
|
Discontinued
operations (a)
|
-
|
1
|
-
|
-
|
|
EBITDA
|
344
|
283
|
1,001
|
812
|
|
Losses
on dispositions
|
-
|
1
|
-
|
2
|
|
Acquisition
costs
|
-
|
6
|
5
|
10
|
|
Non-cash
impairment charges (b)
|
5
|
-
|
8
|
-
|
|
Amortization
of deferred gains
|
(1)
|
-
|
(7)
|
-
|
|
Equity
investment adjustments:
|
|
|
|
|
|
Equity
in (earnings) losses of affiliates
|
(7)
|
(5)
|
(4)
|
1
|
|
Pro
rata Adjusted EBITDA of equity investments
|
11
|
11
|
29
|
23
|
|
Consolidated
partnership adjustments:
|
|
|
|
|
|
Pro
rata Adjusted EBITDA attributable to non-controlling partners in other
consolidated partnerships
|
(3)
|
(4)
|
(14)
|
(14)
|
|
Adjusted
EBITDA
|
$ 349
|
$ 292
|
$ 1,018
|
$ 834
|
|
|
|
|
|
|
|
|
|
(a)
Reflects the interest expense, depreciation and amortization and
incomes taxes included in discontinued operations.
|
|
(b)
The $8 million of impairment charges for the year ended December 31,
2011 includes $3 million of charges that are presented in discontinued
operations in our statement of operations.
|
|
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Reconciliation
of Net Income (Loss) to NAREIT
|
|
and
Adjusted Funds From Operations per Diluted Share
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended December 31,
|
Year
ended December 31,
|
|
|
2011
|
2010
|
2011
|
2010
|
|
Net
income (loss)
|
$ 16
|
$ (6)
|
$ (16)
|
$ (132)
|
|
Less:
Net loss attributable to non-controlling interests
|
1
|
-
|
1
|
2
|
|
Dividends on preferred stock
|
-
|
-
|
-
|
(4)
|
|
Issuance costs of redeemed preferred stock
|
-
|
-
|
-
|
(4)
|
|
Net
income (loss) available to common stockholders
|
17
|
(6)
|
(15)
|
(138)
|
|
Adjustments:
|
|
|
|
|
|
Losses
on dispositions, net of taxes
|
-
|
1
|
-
|
2
|
|
Amortization
of deferred gains and other property
transactions, net of taxes
|
(1)
|
-
|
(7)
|
-
|
|
Depreciation
and amortization
|
207
|
182
|
645
|
591
|
|
Non-cash
impairment charges
|
5
|
-
|
8
|
-
|
|
Partnership
adjustments
|
(1)
|
3
|
4
|
4
|
|
FFO of
non-controlling interests of Host LP
|
(3)
|
(3)
|
(9)
|
(7)
|
|
NAREIT
FFO
|
224
|
177
|
626
|
452
|
|
Adjustments:
|
|
|
|
|
|
Losses
on the extinguishment of debt (a)
|
1
|
8
|
10
|
26
|
|
Acquisition
costs (b)
|
3
|
6
|
8
|
10
|
|
Litigation
losses for non-ordinary course litigation
|
5
|
-
|
5
|
4
|
|
Loss
attributable to non-controlling interests
|
-
|
-
|
-
|
(1)
|
|
Adjusted
FFO
|
$ 233
|
$ 191
|
$ 649
|
$ 491
|
|
|
|
|
|
|
|
Adjustments
for dilutive securities (c):
|
|
|
|
|
|
Assuming
conversion of Exchangeable Senior
Debentures
|
$ 9
|
$ 10
|
$ 30
|
$ 13
|
|
Assuming
deduction of interest -
redeemed/exchanged 2004 Debentures
|
-
|
-
|
2
|
-
|
|
Diluted
NAREIT FFO (c)
|
$ 233
|
$ 187
|
$ 658
|
$ 465
|
|
Diluted
Adjusted FFO (c)
|
$ 242
|
$ 201
|
$ 681
|
$ 504
|
|
|
|
|
|
|
|
Diluted
weighted average shares outstanding-EPS
|
705.1
|
666.1
|
693.0
|
656.1
|
|
Assuming
issuance of common shares granted under
the
Comprehensive Stock Plan
|
-
|
3.0
|
2.0
|
2.9
|
|
Assuming
conversion of Exchangeable Senior
Debentures
|
39.8
|
49.6
|
39.8
|
21.2
|
|
Weighted
average outstanding shares -
redeemed/exchanged 2004 Debentures
|
-
|
-
|
4.7
|
-
|
|
Diluted
weighted average shares outstanding-
NAREIT FFO and Adjusted FFO
|
744.9
|
718.7
|
739.5
|
680.2
|
|
NAREIT
FFO per diluted share (c) (d)
|
$ .31
|
$ .26
|
$ .89
|
$ .68
|
|
Adjusted
FFO per diluted share (c)(d)
|
$ .32
|
$ .28
|
$ .92
|
$ .74
|
|
|
|
|
|
|
|
|
|
(a)
Represents costs associated with the redemption of the Series K senior
notes and 2007 Debentures in 2011 and the Series M senior notes in 2010
and the original issuance costs of Class E preferred stock, which were
redeemed on June 18, 2010.
|
|
(b)
Includes approximately $3 million for the quarter and year ended
December 31, 2011 related to the Company’s share of acquisition costs
incurred by unconsolidated joint ventures.
|
|
(c)
Earnings/loss per diluted share, NAREIT FFO per diluted share and
Adjusted FFO per diluted share are adjusted for the effects of dilutive
securities. Dilutive securities may include shares granted under
comprehensive stock plans, preferred OP Units held by non-controlling
partners, exchangeable debt securities and other non-controlling
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.
|
|
(d)
NAREIT FFO per diluted share and Adjusted FFO per diluted share for the
quarter and year ended December 31, 2011 was reduced by $.02 per
diluted share due to the $15 million deposit forfeited as a result of
the terminated Grand Hyatt Washington, D.C. acquisition.
|
|
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Reconciliation
of Net Income to EBITDA, Adjusted EBITDA and NAREIT
|
|
and
Adjusted Funds From Operations per Diluted Share
|
|
for
Full Year 2012 Forecasts (a)
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Full
Year 2012
|
|
|
|
|
Low-end
|
High-end
|
|
|
|
|
of
range
|
of
range
|
|
Net
income
|
$ 57
|
$ 112
|
|
Interest
expense
|
362
|
362
|
|
Depreciation
and amortization
|
652
|
652
|
|
Income
taxes
|
9
|
9
|
|
EBITDA
|
1,080
|
1,135
|
|
Amortization
of deferred gains
|
(4)
|
(4)
|
|
Equity
investment adjustments:
|
|
|
|
Equity
in earnings of affiliates
|
(1)
|
(1)
|
|
Pro
rata Adjusted EBITDA of equity investments
|
30
|
30
|
|
Consolidated
partnership adjustments:
|
|
|
|
Pro
rata Adjusted EBITDA attributable to non-controlling partners in other
consolidated partnerships
|
(15)
|
(15)
|
|
Adjusted
EBITDA
|
$ 1,090
|
$ 1,145
|
|
|
|
|
|
|
|
|
|
|
Full
Year 2012 Forecast
|
|
|
|
|
Low-end
|
High-end
|
|
|
of
range
|
of
range
|
|
Net
income
|
$ 57
|
$ 112
|
|
Less:
Net income attributable to non-controlling interests
|
(3)
|
(3)
|
|
Net
income available to common stockholders
|
54
|
109
|
|
Adjustments:
|
|
|
|
Depreciation
and amortization
|
650
|
650
|
|
Amortization
of deferred gains
|
(4)
|
(4)
|
|
Partnership
adjustments
|
11
|
11
|
|
FFO of
non-controlling interests of Host LP
|
(10)
|
(11)
|
|
NAREIT
FFO
|
701
|
755
|
|
Adjustments:
|
|
|
|
Debt
extinguishment and acquisition costs
|
4
|
4
|
|
Adjusted
FFO
|
705
|
759
|
|
Adjustment
for dilutive securities:
|
|
|
|
Assuming
conversion of exchangeable senior debentures
|
31
|
31
|
|
Diluted
Adjusted FFO
|
$ 736
|
$ 790
|
|
|
|
|
|
Weighted
average diluted shares - EPS
|
717.2
|
717.2
|
|
Weighted
average diluted shares- NAREIT and Adjusted FFO (b)
|
757.9
|
757.9
|
|
Earnings
per diluted share
|
$ .08
|
$ .15
|
|
NAREIT
and Adjusted FFO per diluted share
|
$ .97
|
$ 1.04
|
|
|
|
|
|
|
|
|
|
(a)
The full year 2012 forecasts were based on the below assumptions:
|
|
- Comparable
hotel RevPAR will increase 4.0% to 6.0% for the low and high ends of
the forecasted range, respectively.
- Comparable
hotel adjusted operating profit margins will increase 25 basis points
to 75 basis points for the low and high ends of the forecasted range,
respectively.
- Interest
expense includes approximately $32 million related to non-cash interest
expense for exchangeable senior debentures, amortization of original
issue discounts and deferred financing fees.
- We
expect to spend approximately $155 million to $175 million on
ROI/redevelopment capital expenditures and approximately $80 million to
$100 million on acquisition capital expenditures.
- We
expect to spend approximately $310 million to $330 million on renewal
and replacement expenditures.
- We
expect to complete dispositions of between $100 million and $115
million in the first half of 2012.
For a
discussion of additional items that may affect forecasted results, see
Notes to the Financial Information.
|
|
(b)
The full year 2012 forecast Adjusted FFO per diluted share includes 41
million shares for the dilution of exchangeable senior debentures.
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Schedule
of Comparable Hotel Adjusted Operating Profit Margin
|
|
for
Full Year 2012 Forecasts (a)
|
|
(unaudited,
in millions, except hotel statistics)
|
|
|
|
|
|
|
|
|
|
|
Full
Year 2012
|
|
|
|
|
Low-end
|
High-end
|
|
|
|
|
of
range
|
of
range
|
|
Operating
profit margin under GAAP (b)
|
7.9%
|
8.8%
|
|
Comparable
hotel adjusted operating profit margin (c)
|
22.7%
|
23.2%
|
|
|
|
|
|
Comparable
hotel sales
|
|
|
|
Room
|
$ 2,908
|
$ 2,966
|
|
Other
|
1,693
|
1,727
|
|
Comparable
hotel sales (d)
|
4,601
|
4,693
|
|
Comparable
hotel expenses
|
|
|
|
Rooms
and other departmental costs
|
1,989
|
2,026
|
|
Management
fees, ground rent and other costs
|
1,566
|
1,577
|
|
Comparable
hotel expenses (e)
|
3,555
|
3,603
|
|
Comparable
hotel adjusted operating profit
|
1,046
|
1,090
|
|
Non-comparable
hotel results, net
|
120
|
130
|
|
Loss
from hotels leased from HPT
|
(8)
|
(8)
|
|
Depreciation
and amortization
|
(652)
|
(652)
|
|
Corporate
and other expenses
|
(93)
|
(93)
|
|
Operating
profit
|
$ 413
|
$ 467
|
|
|
|
|
|
|
|
(a)
Forecasted comparable hotel results include 107 hotels that we have
assumed will be classified as comparable as of December 31, 2012. No
assurances can be made as to the hotels that will be in the comparable
hotel set for 2012. Also, see the notes to the "Reconciliation of Net
Income to EBITDA, Adjusted EBITDA and Adjusted Funds From Operations
per Diluted Share For Full Year 2012 Forecasts" for other forecast
assumptions.
|
|
(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.
|
|
(d)
The reconciliation of forecast total revenues to the forecast
comparable hotel sales is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Full
Year 2012
|
|
|
|
|
Low-end
|
High-end
|
|
|
|
|
of
range
|
of
range
|
|
Revenues
|
$ 5,224
|
$ 5,325
|
|
Non-comparable
hotel revenues
|
(447)
|
(456)
|
|
Revenues
for hotels leased from HPT
|
(229)
|
(229)
|
|
Hotel
sales for which we record rental income, net
|
53
|
53
|
|
Comparable
hotel sales
|
$ 4,601
|
$ 4,693
|
|
|
|
|
|
|
|
(e)
The reconciliation of forecast operating costs and expenses to the
comparable hotel expenses is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Full
Year 2012
|
|
|
|
|
Low-end
|
High-end
|
|
|
|
|
of
range
|
of
range
|
|
Operating
costs and expenses
|
$ 4,811
|
$ 4,858
|
|
Non-comparable
hotel and other expenses
|
(327)
|
(326)
|
|
Expenses
for hotels leased from HPT
|
(237)
|
(237)
|
|
Hotel
expenses for which we record rental income
|
53
|
53
|
|
Depreciation
and amortization
|
(652)
|
(652)
|
|
Corporate
and other expenses
|
(93)
|
(93)
|
|
Comparable
hotel expenses
|
$ 3,555
|
$ 3,603
|
|
|
|
|
|
|
HOST HOTELS & RESORTS, INC.
Notes to Financial Information
FORECASTS
Our forecast of earnings per diluted share, Adjusted FFO per
diluted share, EBITDA, Adjusted EBITDA and comparable hotel adjusted
operating profit margins are forward-looking statements and are not
guarantees of future performance and involve known and unknown risks,
uncertainties and other factors which may cause actual 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 not be materially different. Risks that may affect these
assumptions and forecasts include the following: potential changes in
overall economic outlook make it inherently difficult to forecast the
level of RevPAR and margin growth; 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 amount and timing of transactions involving shares of our
common stock may change based on market conditions; and other risks and
uncertainties associated with our business described herein and in our
annual report on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K filed with the SEC.
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. (Marriott), the manager of approximately
54% 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 2011 ended on September 9, and the third
quarter of 2010 ended on September 10, though both quarters reflect
twelve weeks of operations. In contrast, the fourth quarter results for
2011 reflect 113 days of operations, while our fourth quarter results
for 2010 reflect 112 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 46% 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 always reported based on the reporting cycle used by
Marriott for our Marriott-managed hotels. 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 (except in the case
of fourth quarters comprised of seventeen weeks (such as fiscal year
2008) versus sixteen weeks). 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 2011 reflect 16
weeks of operations for the period from September 10, 2011 to December
30, 2011 for our Marriott-managed hotels and results from September 1,
2011 to December 31, 2011 for operations of all other hotels which
report results on a monthly basis.
- Hotel results for the fourth quarter of 2010 reflect 16
weeks of operations for the period from September 11, 2010 to December
31, 2010 for our Marriott-managed hotels and results from September 1,
2010 to December 31, 2010 for operations of all other hotels which
report results on a monthly basis.
- Hotel results for full year 2011 reflect 52 weeks for the
period from January 1, 2011 to December 30, 2011 for our
Marriott-managed hotels and results from January 1, 2011 to December
31, 2011 for operations of all other hotels which report results on a
monthly basis.
- Hotel results for full year 2010 reflect 52 weeks for the
period from January 2, 2010 to December 31, 2010 for our
Marriott-managed hotels and results from January 1, 2010 to December
31, 2010 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 associated margins) 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 121 hotels that we owned on December 31, 2011,
104 have been classified as comparable hotels. The operating results of
the following hotels that we owned or leased as of December 31, 2011
are excluded from comparable hotel results for these periods:
- Hilton Melbourne South Wharf (acquired in April 2011);
- New York Helmsley Hotel (acquired in March
2011);
- Manchester Grand Hyatt San Diego (acquired in March 2011);
- The portfolio of seven hotels in New
Zealand (acquired in February 2011);
- JW Marriott, Rio de Janeiro
(acquired in September 2010);
- W New York-Union Square
(acquired in September 2010);
- Westin Chicago River North (acquired in August 2010);
- Atlanta Marriott Perimeter Center (business interruption
due to significant renovations);
- Chicago Marriott O'Hare (business interruption due to
significant renovations);
- Sheraton Indianapolis Hotel at Keystone Crossing (business
interruption due to significant renovations); and
- San Diego Marriott Marquis & Marina (business
interruption due to significant renovations).
The operating results of the Le Meridien Piccadilly, which was
transferred to the Euro JV Fund II, and of three hotels we disposed of
in 2011 and 2010, as well as the 53 Courtyard by Marriott properties
leased from HPT, are 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. The 107
comparable hotels projected for 2012 includes the 2011 comparable set,
as well as the addition of the three hotels purchased in 2010: the JW
Marriott, Rio de Janeiro, W New York-Union Square and Westin Chicago
River North less any hotels disposed of in 2012.
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 and FFO per diluted share (both NAREIT and Adjusted), (ii)
EBITDA, (iii) Adjusted EBITDA and (iv) Comparable Hotel Operating
Results. The following discussion defines these terms and presents why
we believe they are useful supplemental measures of our performance.
NAREIT FFO and NAREIT FFO per
Diluted Share
We present NAREIT FFO and NAREIT FFO per diluted share as
non-GAAP measures of our performance in addition to our earnings per
share (calculated in accordance with GAAP). We calculate NAREIT FFO per
diluted share as our NAREIT FFO (defined as set forth below) for a
given operating period, as adjusted for the effect of dilutive
securities, divided by the number of fully diluted shares outstanding
during such period in accordance with NAREIT guidelines. 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, amortization
and impairments and adjustments for unconsolidated partnerships and
joint ventures. Adjustments for unconsolidated partnerships and joint
ventures are calculated to reflect our pro rata FFO of those entities
on the same basis.
We believe that NAREIT FFO per diluted share is a useful
supplemental measure of our operating performance and that the
presentation of NAREIT 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, impairments 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
NAREIT 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 FFO metric in order to promote an
industry-wide measure of REIT operating performance.
Adjusted FFO per Diluted Share
Effective with this press release, we also present Adjusted
FFO per diluted share when evaluating our performance because
management believes that the exclusion of certain additional items
described below provides useful supplemental information to investors
regarding our ongoing operating performance. While we are presenting
Adjusted FFO per diluted share as part of this earnings release for the
first time, management has historically made the adjustments detailed
below in evaluating our performance, in our annual budget process and
for our compensation programs. We believe that the presentation of
Adjusted FFO per diluted share, when combined with both the primary
GAAP presentation of earnings per share and FFO per diluted share as
defined by NAREIT, provides useful supplemental information that is
beneficial to an investor's complete understanding of our operating
performance. We adjust NAREIT FFO per diluted share for the following
items, which may occur in any period, and refer to this measure as
Adjusted FFO per diluted share:
- Gains and Losses on the Extinguishment of Debt – We exclude
the effect of finance charges and premiums associated with the
extinguishment of debt, including the acceleration of deferred
financing costs associated with the original issuance of the debt being
redeemed or retired. We also exclude the gains on debt repurchases and
the original issuance costs associated with the retirement of preferred
stock. We believe that these items are not reflective of the ongoing
finance costs for the Company.
- Acquisition Costs – Under GAAP, costs associated with
completed property acquisitions are expensed in the year incurred. We
exclude the effect of these costs because we believe they are not
reflective of the ongoing performance of the Company.
- Litigation Gains and Losses – We exclude the effect of
gains or losses associated with litigation recorded under GAAP that we
consider outside the ordinary course of business. We believe that
including these items is not consistent with the ongoing operating
performance of the Company.
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 after removing the impact of the Company's capital structure
(primarily interest expense) and its asset base (primarily depreciation
and amortization). Management also believes the use of EBITDA
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 and Adjusted FFO per diluted share, it is widely used by
management in the annual budget process and for our compensation
programs.
Adjusted EBITDA
Historically, management has adjusted EBITDA when evaluating
our performance because we believe that the exclusion of certain
additional 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. Adjusted EBITDA is
also a relevant measure in calculating certain credit ratios. 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 or acquisition 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 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 value often
does not reflect the market value of real estate assets as noted above.
- 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, which are excluded from EBITDA. 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 deduct the
non-controlling partners' pro rata share of Adjusted EBITDA of our
consolidated partnerships as this reflects the non-controlling owners'
interest in the EBITDA of our consolidated partnerships. The pro rata
Adjusted EBITDA of non-controlling partners is defined as the EBITDA of
our consolidated partnerships adjusted for any gains or losses on
property transactions multiplied by the non-controlling 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,
which are based off of historical cost accounting values, are similar
to gains (losses) on dispositions and depreciation expense, both of
which are excluded from EBITDA.
- Acquisition Costs – Under GAAP, costs associated with
completed property acquisitions are expensed in the year incurred. We
exclude the effect of these costs because we believe they are not
reflective of the ongoing performance of the Company.
Limitations on the Use of NAREIT FFO per Diluted Share,
Adjusted FFO per Diluted Share, EBITDA and Adjusted EBITDA
We calculate NAREIT 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 do not 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. We also
calculate Adjusted FFO per diluted share, which is not in accordance
with NAREIT guidance and may not be comparable to measures calculated
by other 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, NAREIT
FFO per diluted share and Adjusted 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, NAREIT FFO
per diluted share, Adjusted 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, NAREIT FFO per diluted
share and Adjusted FFO per diluted share do 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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