Host Hotels & Resorts, Inc. Reports RevPAR Increase of 1.7% in Q4 2016; Net Income Dropped $37 Million for the Quarter
February 22, 2017 5:34am
BETHESDA, Md., Feb. 22, 2017 -- Host Hotels & Resorts, Inc. (NYSE:HST) (“Host Hotels” or the “Company”), the nation’s largest lodging real estate investment trust (“REIT”), today announced results of operations for the fourth quarter and the year.
James F. Risoleo, President and Chief Executive Officer of Host Hotels, stated: “We are pleased with the Company’s solid fourth quarter and full year 2016 results, including meaningful year-over-year growth in diluted EPS and Adjusted FFO per share, reflecting outstanding work and successful execution by the talented employees of Host Hotels. This is a great company that is well-positioned for continued success, and as we move into 2017, we look forward to strengthening our culture, empowering employees, and streamlining decision-making to make the Company more nimble in order to accelerate growth and value-creation.”
(1) NAREIT Funds From Operations (“FFO”) per diluted share, Adjusted FFO per diluted share, Adjusted EBITDA and comparable hotel 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 and other non-GAAP financial measures identified in this press release are useful, reconciliations to the most directly comparable GAAP measure, and the limitations on the use of these supplemental measures.
GAAP OPERATING PERFORMANCE
“We saw outstanding margin improvement in both the fourth quarter and full year,” said Gregory J. Larson, Executive Vice President and Chief Financial Officer. “This was primarily driven by a combination of productivity improvements that have resulted from our continued time and motion studies at our larger properties, excellent food and beverage cost management from our operators and lower utility costs that are partially a result of the energy initiatives we have implemented over the last several years.”
ADDITIONAL KEY COMPANY METRICS
On February 16, 2017, the Company purchased the Don CeSar and Beach House Suites complex in St. Pete Beach, Florida for $214 million. The Don CeSar will be operated as an independent hotel and managed by Davidson Hotels & Resorts. The beachfront resort known as “The Pink Palace” has been recognized for excellence by Historic Hotels of America, with 347 rooms and suites along the Florida Gulf coast, award-winning dining options and over 38,000 square feet of meeting space. The resort’s distinct and historical architecture, combined with its unprecedented beach location, make it an ideal hotel for leisure, corporate, and social groups. Additionally, the purchase will be treated as a like-kind exchange with the disposition of the JW Marriott Desert Springs Resort & Spa, discussed below.
"We are excited to add one of the ‘Grand Dame’ Floridian resorts on one of the best beaches in the country to our portfolio. The iconic Don CeSar is exactly the type of irreplaceable asset we look to add to our collection of hotels and it will be one of our top 20 properties in terms of RevPAR. In addition, we believe there are significant value-added opportunities at the property through aggressive asset management, the installation of Davidson as the new operator and ROI initiatives,” said James F. Risoleo, President and Chief Executive Officer.
The Company continued to strategically dispose of assets where it expects lower growth and/or higher capital expenditures requirements. Proceeds from the sales of these assets during the year were utilized to repurchase stock, capital expenditures and other corporate initiatives. Subsequent to year end, the Company sold the JW Marriott Desert Springs Resort & Spa for $172 million, including $12 million of furniture, fixtures and equipment replacement funds retained at the hotel, and expects to recognize a gain of $15 million in the first quarter of 2017. For the 11 properties sold in 2016 and year-to-date 2017, the combined average 2015 RevPAR was $112 compared to the Company’s full year 2016 comparable RevPAR of $177. The following table is a summary of completed dispositions for 2016 and year-to-date 2017 (in US$ millions):
SHARE REPURCHASE PROGRAM, DIVIDENDS AND SPECIAL DIVIDENDS
Over the past 12 months, the Company has distributed approximately $848 million of capital to its stockholders through cash dividends and stock repurchases.
The Company is committed to maintaining a meaningful dividend, subject to approval by the Company’s Board of Directors. The Company paid a regular quarterly cash dividend of $0.20 per share and a special cash dividend of $0.05 per share on its common stock on January 17, 2017 to stockholders of record as of December 30, 2016. On February 21, 2017, the Board of Directors authorized a regular quarterly cash dividend of $0.20 per share on its common stock, which equates to an approximate 4.5% annualized yield based on the Company’s stock price on that date. The dividend will be paid on April 17, 2017 to stockholders of record on March 31, 2017. All future dividends, including any special dividends, are subject to approval by the Company’s Board of Directors.
The Company repurchased 0.7 million shares at an average price of $15.82 for the quarter and 13.8 million shares at an average price of $15.79 for the full year, for a total purchase of approximately $218 million. The share repurchase program ended on December 31, 2016.
On February 21, 2017, the Board of Directors authorized a new program to repurchase up to $500 million of common stock. The common stock may be purchased from time to time, depending upon market conditions, and may be purchased in the open market or through privately negotiated transactions or by other means, including through one or more trading plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The number of shares purchased will also depend upon operating results, funds generated by sales activity, dividends that may be required by those sales and investment options that may be available, including reinvesting in the portfolio or acquiring new hotels, as well as maintaining the Company’s strong leverage position. The program does not obligate the Company to repurchase any specific number of shares and may be suspended at any time at its discretion.
The Company’s strong balance sheet remains a key competitive advantage, providing flexibility to take advantage of investment opportunities throughout the lodging cycle. An important component of this strategy is the Company’s investment-grade rating on its long-term unsecured debt and its revolving credit facility and term loans, which represent 98% of the Company’s outstanding borrowings.
At December 31, 2016, the Company had approximately $372 million of cash and $788 million of available capacity remaining under the revolver portion of its credit facility. Interest expense decreased $22 million for the quarter and $73 million for the full year, reflecting a reduction of debt extinguishment costs of $20 million and $41 million for the quarter and full year, respectively, as well as a reduction in the overall debt balance. As of December 31, 2016, total debt was $3.6 billion, with an average maturity of 5.2 years and an average interest rate of 3.8%.
REDEVELOPMENT AND RETURN ON INVESTMENT (“ROI”) CAPITAL PROJECTS
The Company invested approximately $39 million and $226 million in the fourth quarter and full year, respectively, on redevelopment and ROI capital expenditures, representing a decrease of $49 million from the full year 2015 spend.
The Company’s ROI projects included:
For full-year 2017, the Company expects to invest a total of approximately $90 million to $115 million in redevelopment projects and ROI capital expenditures. Additional information regarding the Company’s capital projects can be found at www.hosthotels.com.
RENEWAL AND REPLACEMENT EXPENDITURES
The Company invested approximately $75 million and $293 million in the fourth quarter and full year, respectively, in renewal and replacement capital expenditures, representing a decrease of $90 million from the full year 2015 spend. Projects completed during the fourth quarter included the renovation of all 398 rooms at The Ritz-Carlton, Tysons Corner, the renovation of over 45,000 square feet of meeting and public space at the Hyatt Regency Maui Resort & Spa and updates to two restaurants at The Ritz-Carlton, Amelia Island. For 2017, the Company expects to invest a total of $275 million to $300 million in renewal and replacement capital expenditures.
EUROPEAN JOINT VENTURE
The European joint venture’s comparable hotel RevPAR on a constant euro basis declined approximately 1.1% and 2.0% for the fourth quarter and full year, respectively. The decrease in comparable hotel RevPAR was a result of slow economic growth and uncertain political climate that reduced demand, particularly at the joint venture’s properties in Brussels and Paris, where operations have yet to return to levels seen prior to the terrorist attacks in those cities.
To view full financial release and corresponding tables please click the PDF icon or visit:
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q4 2016 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 89 properties in the United States and 7 properties internationally totaling approximately 53,500 rooms. The Company also holds non-controlling interests in seven joint ventures, including one in Europe that owns 10 hotels with approximately 3,900 rooms and one in Asia that has interests in five 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 Méridien®, The Luxury Collection®, Hyatt®, Fairmont®, Hilton®, Swissôtel®, ibis®, Pullman®, and Novotel®, as well as independent brands 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, Chief Financial Officer
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