|BETHESDA, Md., May 3, 1999 - Host Marriott Corporation
(NYSE: HMT) today reported its first quarter 1999 results of operations,
noting that diluted Funds From Operations ("FFO", as defined by the National
Association of Real Estate Investment Trusts) increased 15 percent to $.38
per share in 1999 over the pro forma 1998 first quarter FFO per share of
$.33. Earnings Before Interest Expense, Taxes, Depreciation and Amortization
and other non-cash items ("EBITDA") from continuing operations was $226
million for the 1999 first quarter, an increase of 25 percent over the
pro forma EBITDA of $181 million in the 1998 first quarter. The 1998 pro
forma FFO per share and EBITDA reflect the company's conversion to a real
estate investment trust at the end of 1998 and a change in the reporting
period for the company's hotels not managed by Marriott International,
Inc. (NYSE: MAR) which resulted in the inclusion of only two months of
results in the 1999 first quarter versus three months in 1998.
Growth in FFO and EBITDA was driven by an increase in Room Revenue per Available Room ("REVPAR") of 4.4 percent for the company's comparable hotels, as well as incremental EBITDA of $45 million from 1998 acquisitions, net of amounts retained by the company's lessees under the company's leases which were established at the end of 1998.
In 1998, the company made substantial investments in luxury hotels, including the acquisition of the Blackstone portfolio (including two Ritz-Carlton, two Four Seasons, one Grand Hyatt, three Hyatt Regency and four Swissotel properties) along with four additional Ritz-Carlton hotels. Had the results of these hotels been included in comparable results, the pro forma REVPAR increase for the company would have been 4.8 percent.
Mr. Terence C. Golden, president and chief executive officer of Host Marriott, stated, "We are extremely pleased by the strength of our operating results in the first quarter, which are very much in line with our expectations for the year and exceeded the consensus of analysts' estimates for the quarter by $.01 per share."
Mr. Golden added, "We are already seeing the positive impact of the very high quality acquisitions we completed in 1998. In 1999, our strategy continues to emphasize acquiring hotels located in urban centers and other difficult-to-duplicate locations, providing effective asset management of those assets, implementing selected improvements, including expansion and development investments offering superior returns, and selectively disposing of non-core assets. We continue to broaden our shareholder base to include more retail and value-oriented investors. We believe this strategy will enable us to sustain solid REVPAR and earnings growth for the foreseeable future and drive superior returns to our shareholders."
Mr. Robert E. Parsons, Jr., executive vice president and chief financial officer, stated, "During the first quarter of 1999, we continued to build on the solid financial foundation that our company has developed. In February, we took advantage of favorable market conditions to issue $300 million of unsecured senior notes to refinance, or repurchase, existing mortgage debt on certain of our properties. We continue to have $900 million available under our $1.25 billion bank line of credit. Our debt now has a weighted average interest rate of approximately eight percent and an average maturity of over seven years."
Mr. Parsons added, "In addition, in the first quarter we disposed of our Bloomington, Minnesota hotel and entered into an agreement for the disposal of a second property which should close in the second quarter. We will continue to pursue favorable opportunities to divest non-core properties as market conditions permit."
The company reported first quarter 1999 rental income of $286 million versus pro forma rental income of $208 million for the first quarter of 1998. The company noted that first quarter 1998 historical revenues of $805 million reflect the actual sales at the company's hotels while first quarter 1999 revenues represent rental income from leases, which are calculated from property-level sales. Hotel sales for the first quarter of 1999 were $931 million, a 16 percent increase over the 1998 first quarter. Income from continuing operations increased to $45 million in 1999, a 61 percent increase over $28 million for the first quarter of 1998. Net income for the quarter increased by 50 percent to $45 million, compared to $30 million for the first quarter of 1998. Net income for 1998 includes $2 million of income classified as discontinued operations, representing the company's former senior living operations which were distributed to shareholders as part of Crestline Capital Corporation (NYSE: CLJ) at the end of 1998. On a diluted basis, the company reported income from continuing operations of $.19 per share in 1999 versus $.13 per share in 1998, a 46 percent increase. Net income per diluted share increased 36 percent to $.19 per share in 1999.
Mr. Parsons stated, "We are very pleased with the growing strength we have seen in the booking pace and mix of business at our hotel properties. After a brief slowdown at year-end, operating leverage has now returned to normal levels. We continue to expect that, at current levels, each one percent change in REVPAR will yield approximately a $.04 to $.05 per share change in FFO per diluted share on an annual basis."
Mr. Parsons added, "We are encouraged by the recent improvement in our
stock price but we continue to believe that our stock is undervalued."
(b) The acquisition of the Blackstone portfolio (including two Ritz-Carlton, two Four Seasons, one Grand Hyatt, three Hyatt Regency and four Swissotel properties) occurred on December 30, 1998 and, thus, are excluded from the comparable set.
(c) Includes all ten Ritz-Carlton properties owned by Host Marriott. Four of the properties are included in the comparable set.
(d) FFO per diluted share is calculated in conformity with the April 1999 NAREIT draft guidelines for FFO per share reporting. Diluted shares include a provision for partnerships in which Host Marriott's minority partners have an option to trade their equity position for operating partnership units. Whether any of these actually occur, depends on a number of conditions, including in some cases the passage of time. Should these conversions of minority interest into operating partnership units happen, Host Marriott would then receive the additional cash flow and the equity value from the acquired partnership interests.
This press release includes various references to FFO and EBITDA. The company considers EBITDA and FFO to be indicative measures of its operating performance due to the significance of its long-lived assets and because such data is considered useful by the investment community to better understand the company's results, and can be used to measure its ability to service debt, fund capital expenditures and expand its business, however, such information should not be considered as an alternative to net income, operating profit, cash from operations, or any other operating or liquidity performance measure prescribed by generally accepted accounting principles. Cash expenditures for various long-term assets, interest expense (for EBITDA purposes only) and income taxes have been, and will be, incurred which are not reflected in the EBITDA and FFO presentations.
Certain matters discussed in this press release are forward-looking statements within the meaning of federal securities regulations. All forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual transactions, results, performance or achievements to be materially different from any future transactions, results, performance or achievements expressed or implied by such forward-looking statements. Future transactions, results, performance and achievements will be affected by general economic, business and financing conditions, competition and governmental actions.
The cautionary statements set forth in reports filed with
the Securities and Exchange Commission contain important factors with respect
to such forward-looking statements, including: (i) national and local economic
and business conditions that will, among other things, affect demand for
hotels and other properties and the availability and terms of financing;
(ii) the ability to maintain the properties in a first-class manner (including
meeting capital expenditure requirements); (iii) the ability to compete
effectively in areas such as access, location, quality of accommodations
and room rate structures; (iv) the ability to acquire or develop additional
properties and risk that potential acquisitions or developments may not
perform in accordance with expectations; (v) changes in travel patterns,
taxes and government regulations; (vi) governmental approvals, actions
and initiatives; (vii) the effects of tax legislative action; (viii) the
effect on the company of the Year 2000 issues; and (ix) the ability of
the company to satisfy complex rules in order to qualify for taxation as
a REIT for federal income tax purposes and to operate effectively within
the limitations imposed by these rules. Although the company believes the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations
will be attained or that any deviations will not be material. The company
undertakes no obligation to publicly release the result of any revisions
to these forward-looking statements that may be made to reflect any future
events or circumstances.
|Also See:||Host Marriott Announces Formation of a Joint Venture in Asia with Jones Lang Wootton / June 1998|
|Host Marriott Corporation to Add World-Class Luxury Hotel Portfolio for $1.775 Billion / April 1998|