BETHESDA, Md., Feb. 19, 2014 -- Host Hotels & Resorts, Inc. (NYSE: HST), the nation's largest lodging real estate investment trust ("REIT"), today announced results of operations for the year.
(a) As of January 1, 2013, the Company adopted calendar quarter reporting periods. For further discussion, see "Adjustments for Calendar Quarter Reporting Periods" on page 2 of this release.
(b) NAREIT Funds From Operations ("FFO") per diluted share, Adjusted FFO per diluted share (which excludes debt extinguishment costs and other expenses), Adjusted EBITDA (which is earnings before interest, taxes, depreciation, amortization and other items) and comparable hotel operating results (including comparable hotel revenues and comparable hotel adjusted operating profit margins) are non-GAAP (U.S. generally accepted accounting principles) financial measures within the meaning of the rules of the Securities and Exchange Commission ("SEC"). In addition, the presentation of fourth quarter 2012 As Adjusted results, including total owned hotel revenues and net income (loss), are also non-GAAP financial measures. See the Notes to Financial Information included in this press release on why the Company believes these supplemental measures are useful, reconciliations to the applicable GAAP measure, the limitations on their use and information on the 2012 As Adjusted results calculations.
(c) Percent changes provided are from the fourth quarter 2012 As Adjusted results.
(d) Historical operating results for the fourth quarter 2012 as filed with the SEC on February 21, 2013.
(e) For RevPAR statistics, the Company presents results in constant US$ and nominal US$. Constant US$ results assume that the year-over-year results are translated to U.S. Dollars using the same prevailing exchange rate; thereby eliminating the effect of currency fluctuation for comparative purposes. Nominal US$ results include the effect of currency fluctuations consistent with our financial statement presentation. See Notes to Financial Information.
The Company's owned hotel revenues increased 7.5% for the fourth quarter, compared to the corresponding 2012 "As Adjusted" quarterly results, as described herein, and 6.8% for the full year 2013, compared to 2012. The growth reflects a 6.0% revenue improvement at the Company's comparable hotels for the fourth quarter and a 4.9% increase for the full year.
The improvements in the Company's results were driven by strong growth in comparable RevPAR. On a constant US$ basis, RevPAR increased 6.6% and 5.8% for the fourth quarter and full year, respectively, reflecting strong improvements in average room rates, coupled with continued occupancy growth. The Company believes this presentation is useful to investors because it provides greater clarity with respect to growth in RevPAR in the local currency of the hotel consistent with how the Company would evaluate its domestic portfolio. On a nominal US$ basis, which includes the effect of foreign currency fluctuation, comparable hotel RevPAR increased 6.2% for the fourth quarter and 5.6% for the full year when compared to the 2012 results. For the fourth quarter and full year 2013, average room rates improved 4.1% and 4.2%, respectively, while occupancy improved 1.5 percentage points to 73% for the fourth quarter and one percentage point to 76% for the full year. Additionally, comparable food and beverage revenues increased 6.1% and 4.0% for the fourth quarter and full year, respectively.
The improvements in revenues led to strong margin growth as comparable hotel adjusted operating profit margins increased 130 basis points for the fourth quarter and 100 basis points for the full year.
Adjustments for Calendar Quarter Reporting Periods- As of January 1, 2013, the Company adopted calendar quarter reporting periods, compared to 2012 where the Company reported quarterly results based on the fiscal quarters that had been used by Marriott International. Accordingly, the Company's revenues, net income, Adjusted EBITDA, diluted earnings per share and NAREIT and Adjusted FFO per diluted share quarterly results for 2013 are not comparable to the historical quarterly results of 2012. Because the Company has always reported full year results on a calendar year, full year results for 2013 and 2012 are comparable. To enable investors to evaluate its quarterly performance, the Company has presented 2012 RevPAR and certain historical results on a calendar quarter basis (the "2012 As Adjusted" results). The 2012 As Adjusted fourth quarter results include (i) an adjustment to exclude operations from September 8, 2012 through September 30, 2012 for the Company's Marriott-managed hotels and (ii) an adjustment to exclude the September operations for its hotels managed by Ritz-Carlton, Hyatt, Starwood and other managers who report on a calendar basis, as the Company's historical fourth quarter results included September, October, November and December operations for these properties. Accordingly, the discussion of quarterly operating performance includes a comparison between the three months ended December 31 for both years, which management believes is an important supplemental measure of the Company's performance. For further discussion of the 2012 As Adjusted quarterly results, see the Notes to Financial Information included in this release.
On January 21, 2014, the Company acquired the 151-room Powell Hotel in San Francisco, along with 8,554 square feet of retail space, and the fee simple interest in the land for $75 million. The property is located in the heart of downtown San Francisco, two blocks from Union Square and three blocks from the Moscone Convention Center. The hotel will be managed by Kokua Hospitality. The retail space is occupied by Sephora, a leading provider of perfume and cosmetics, under a long-term lease. The Company intends to invest approximately $22 million in an extensive redevelopment of the property beginning late 2014.
In December 2013, the Company made the final incremental payment of $19.9 million for the purchase of the fee simple interest in the land at the New York Marriott Marquis Times Square. In addition, $25 million of the payments made pursuant to the terms of the ground lease have been attributed toward the purchase of the land. The purchase was completed in conjunction with the Company's 2012 lease of the existing retail space to Vornado Realty Trust and its on-going redevelopment, which is expected to be completed in early 2015.
On November 20, 2013, the Company sold the Four Seasons Hotel Atlanta, including the furniture, fixtures and equipment ("FF&E") replacement fund, for a sale price of $63 million and recognized a gain on sale of approximately $11 million. On December 18, 2013, the Company sold the Dallas/Addison Marriott Quorum by the Galleria for a sale price of $56 million, including the FF&E replacement fund, and recognized a gain on sale of approximately $15 million.
On January 10, 2014, the Company sold an 89% interest in the Philadelphia Marriott Downtown to Clearview and funds managed by Oaktree Capital Management L.P. based on a market value of $303 million. The partnership owning the hotel entered into a $230 million mortgage loan to facilitate the transaction and the Company retained an $8 million equity interest in the hotel. The Company also completed the sale of the Courtyard Nashua, New Hampshire on February 12, 2014 for $10 million. In the last twelve months, the Company has sold six properties for a total sale price of approximately $667 million. The proceeds were used to repay debt and for general corporate purposes.
The Company continues to pursue opportunities to enhance asset value through select capital improvements, while ensuring that its high standards for product quality are maintained. For full year 2013, the Company has completed renovations of 6,900 guestrooms, over 420,000 square feet of meeting space and approximately 150,000 square feet of public space.
Redevelopment and Return on Investment Expenditures - The Company invested approximately $26 million and $97 million in the fourth quarter and full year 2013, respectively, in redevelopment and return on investment ("ROI") capital expenditures. These projects are designed to increase cash flow and to improve profitability by capitalizing on changing market conditions and the favorable locations of the Company's properties. Projects completed during the fourth quarter include the significant renovation of the food and beverage program at The Ritz-Carlton, Naples, including a repositioning of the Terrazza, Dusk and Grill outlets. The Company expects that ROI capital expenditures for 2014 will range from $70 million to $80 million.
Capital Expenditures for Recent Acquisitions - In conjunction with the acquisition of a property, the Company prepares capital and operational improvement plans designed to maximize profitability and to enhance the guest experience. The Company invested approximately $7 million and $36 million on these projects during the fourth quarter and full year 2013, respectively. The Company expects that acquisition capital expenditures will total $30 million to $35 million for 2014.
Renewal and Replacement Expenditures - The Company invested approximately $64 million and $303 million in renewal and replacement capital expenditures during the fourth quarter and full year 2013, respectively. During the fourth quarter, major renewal and replacement projects completed include the renovation of 230 suites at the Fairmont Kea Lani, Maui and renovation of the 35,000 square foot ballroom at the JW Marriott Washington, D.C. The Company expects that renewal and replacement expenditures for 2014 will total approximately $320 million to $340 million.
During the quarter, the Company refinanced the 5.55%, $134 million mortgage loan on the Harbor Beach Marriott Resort and Spa through the issuance of a new $150 million mortgage loan, with an interest rate of 4.75% that matures in January 2024. Additionally, the Company prepaid the 8.5%, $31 million mortgage loan on The Westin Denver Downtown. Subsequent to year end, the Company redeemed the remaining $150 million of 6¾% Series Q senior notes at 101.125%, which reflects a $2 million call premium, and repaid $225 million borrowed under its credit facility. Additionally, the Company intends to repay the $300 million mortgage note on The Ritz-Carlton, Naples and Newport Beach Marriott Hotel & Spa when due on March 1, 2014 with available cash.
The Company's senior notes were recently upgraded by Standard & Poor's to a BBB investment grade rating, due in part to its low leverage levels, balanced debt maturities and large pool of unencumbered assets. Since January 1, 2013, including the debt repayments discussed above, the Company has reduced its total debt by $1.3 billion and extended its weighted average debt maturity to 6.0 years. As a result of these efforts, 2014 cash interest expense is forecast to be approximately $195 million, compared to cash interest expense of $282 million in 2013.
After adjusting for the acquisition, dispositions and dividend payments that have occurred in the first quarter of 2014, as well as the debt repayments discussed above, the Company has approximately $779 million of available capacity under its credit facility and a debt balance of $4,084 million. Additionally, after giving effect to these transactions, the Company has $310 million of available cash as detailed in the below table:
Cash balance at December 31, 2013
Proceeds from the sale of 89% of the Philadelphia Marriott Downtown
Repayment of credit facility
Redemption of the 6¾% Series Q senior notes
January 15, 2014 dividend payment
Acquisition of Powell Hotel
Proceeds from the sale of the Courtyard Nashua, New Hampshire
Expected repayment of The Ritz-Carlton, Naples and Newport Beach Marriott mortgage
Cash balance at March 1, 2014
European Joint Venture
On December 12, 2013, the Company's joint venture in Europe entered into a €17 million mortgage loan secured by the Le Méridien Grand Hotel Nuremburg. The mortgage loan matures in 2016 and bears interest at an initial rate of 3%. The joint venture's comparable hotel RevPAR on a constant euro basis increased 5.1% in the fourth quarter and 1.9% for full year 2013 for the 12 properties with comparable results. The comparable RevPAR results exclude one hotel that was under extensive renovations in 2012, five hotels that were purchased by the joint venture in 2012 and one hotel that was acquired in 2013.
The Company paid a regular quarterly cash dividend of $.13 per share on its common stock on January 15, 2014 to stockholders of record on December 31, 2013. This dividend brings the total dividend for 2013 to $.46 per share, which represents a 53% increase over the total dividend for 2012. On February 18, 2014, the Board of Directors authorized a regular quarterly cash dividend of $.14 per share on its common stock. The dividend will be paid on April 15, 2014 to stockholders of record on March 31, 2014. The amount of any future dividend is dependent on the Company's taxable income and will be determined by the Company's Board of Directors.
The Company anticipates that the following 2014 statistics will increase compared to 2013 as follows:
See the 2014 Forecast Schedules and the Notes to Financial Information for other assumptions used in the forecasts and items that may affect forecast results.
Host Hotels & Resorts, Inc. is an S&P 500 and Fortune 500 company and is the largest lodging real estate investment trust and one of the largest owners of luxury and upper-upscale hotels. The Company currently owns 99 properties in the United States and 15 properties internationally totaling approximately 59,800 rooms. The Company also holds non-controlling interests in a joint venture in Europe that owns 19 hotels with approximately 6,400 rooms and a joint venture in Asia that owns one hotel in Australia and a minority interest in two hotels in India. Guided by a disciplined approach to capital allocation and aggressive asset management, the Company partners with premium brands such as Marriott®, Ritz-Carlton®, Westin®, Sheraton®, W®, St. Regis®, Le 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.
Contact: Gregory J. Larson, CFO or Gee Lingberg, Vice President