Host Hotels & Resorts Reports Q2 2014 Net Income of $159 million with RevPAR Rise of 5.1%
August 1, 2014 8:10am
BETHESDA, Md., July 31, 2014 -- Host Hotels & Resorts, Inc. (NYSE: HST), the nation's largest lodging real estate investment trust ("REIT"), today announced results of operations for the second quarter of 2014.
(1) NAREIT Funds From Operations ("FFO") per diluted share, Adjusted FFO per diluted share, Adjusted EBITDA and comparable hotel operating results are non-GAAP (U.S. generally accepted accounting principles) financial measures within the meaning of the rules of the Securities and Exchange Commission ("SEC"). See the Notes to Financial Information on why the Company believes these supplemental measures are useful, reconciliations to the most directly comparable GAAP measure, and the limitations on the use of these supplemental measures.
For the second quarter of 2014, the growth in comparable hotel RevPAR of 5.1%, on a constant US$ basis, was driven by an increase of 4.1% in average room rates, while average occupancy slightly increased to 81%. Comparable food and beverage revenues increased 0.8% for the quarter. The Company's comparable international hotels experienced a RevPAR increase of 16.2% for the quarter, driven by outstanding performance from its Latin American hotels. The increase in total revenues of 2.3% for the quarter reflects the effect of the timing of hotels acquired and sold during the comparable periods, which decreased total revenues by $25 million for the quarter on a net basis. Year-to-date the increase in comparable RevPAR of 5.9%, on a constant US $ basis, was driven by an increase in average room rates of 4.3% and an improvement in occupancy of 110 basis points.
The increase in net income for the second quarter of 2014 primarily reflects the improvement in operations and a decline in interest expense as a result of the refinancing or repayment of debt since the beginning of 2013. Year-to-date 2014, net income also benefited from $108 million of net gains on property sales.
Comparable hotel adjusted operating profit increased 5.5% for the quarter. However, the comparisons of Adjusted EBITDA and Adjusted FFO per diluted share to prior periods were affected by several recent transactions, including: the second quarter 2013 $21 million gain on sale of four acres of excess land adjacent to the Newport Beach Marriott Resort & Spa, the timing of acquisitions and dispositions, as well as costs (primarily selling expenses) associated with the development of timeshare units in Maui through a joint venture, which is expected to be completed by the end of the year. For the quarter, these transactions negatively affected the comparison of Adjusted EBITDA by $39 million, resulting in an overall decline of $20 million.
Comparable hotel adjusted operating profit increased 8.3% year-to-date, helping to drive a $5 million increase in Adjusted EBITDA. However, the above transactions also negatively affected year-to-date Adjusted EBITDA by $57 million.
The Company's policy is that it generally intends to distribute, over time, 100% of its taxable income, which is primarily dependent on the Company's results of operations, as well as gains and losses on property sales. The Company paid a regular quarterly cash dividend of $0.15 per share on its common stock on July 15, 2014 to stockholders of record on June 30, 2014. On July 31, 2014, the Board of Directors authorized a regular quarterly cash dividend of $0.20 per share on its common stock for the third quarter. The dividend will be paid on October 15, 2014 to stockholders of record on September 30, 2014. The third quarter dividend is a 33% increase over the prior quarter and represents the Company's intended regular quarterly dividend for the next several quarters, subject to Board approval. The Company may also pay a special dividend in the fourth quarter so that its annual distribution equates to its taxable income. While the Company intends to use available cash predominantly for acquisitions or other investments in its portfolio, to the extent that the Company does not identify appropriate investments, it may elect in the future to use available cash for other uses, such as special dividends, which would be in addition to taxable income. Any special dividend would be subject to approval by the Company's Board of Directors.
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. Year-to-date, the Company has completed renovations of 2,800 guestrooms, over 100,000 square feet of meeting space and 60,000 square feet of public space.
During the second quarter of 2014, the Company completed the amendment and restatement of its credit facility, scheduled to mature in 2015, and its term loan, scheduled to mature in 2017, extending the final maturity for both to 2019, including extensions. As with the prior facility, the amended facility includes a revolving credit facility in an aggregate principal amount of up to $1 billion and a $500 million term loan. In addition, the all-in pricing was reduced 30 basis points on revolver borrowings, and 32.5 basis points on the term loan based on its current long-term unsecured debt rating. Therefore, U.S. dollar denominated borrowings today would result in an initial all-in rate of 1.35% and 1.28% on the revolver and term loan, respectively. The Company also redeemed $72 million of industrial revenue bonds with a weighted average interest rate of 7.4% in the second quarter of 2014.
The Company has approximately $440 million of cash and cash equivalents and $778 million of available capacity under its credit facility. As of June 30, 2014, the Company's total debt was $4.0 billion, with an average maturity of 5.7 years and an average interest rate of 4.8%, including nearly 79% with a fixed rate of interest.
European Joint Venture
The European joint venture's comparable hotel RevPAR on a constant euro basis increased approximately 0.6% and 1.5% for the second quarter and year-to-date 2014, respectively. The comparable RevPAR results were primarily driven by an increase in transient revenues. Additionally, on July 3, 2014, the joint venture refinanced the €69 million mortgage loan secured by three properties in Brussels, reducing the outstanding principal amount to €47.8 million and extending the maturity to 2019. Interest on the loan is a combination of fixed and floating with an initial all-in rate of 2.0%.
The Company anticipates that its 2014 operating results will increase as follows:
Based upon these parameters, the Company estimates that its 2014 guidance is as follows (in millions, except per share amounts):
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.
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q2 2014 results
Contact: Gregory J. Larson, Chief Financial Officer
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