HOST HOTELS & RESORTS, INC. BETHESDA, Md., April 30, 2015 /PRNewswire/ -- Host Hotels & Resorts, Inc. (NYSE: HST), the nation's largest lodging real estate investment trust ("REIT"), today announced results of operations for the first quarter of 2015.
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Operating Results
(in millions, except per share and hotel statistics)
Quarter ended March
31, Percent
--------------------
2015 2014 Change
---- ---- ------
Total revenues $1,317 $1,309 0.6%
Comparable hotel
revenues (1) 1,267 1,231 3.0%
Net income 104 185 (43.8)%
Adjusted EBITDA
(1) 321 308 4.2%
Change in comparable hotel RevPAR:
Domestic
properties 3.9%
International
properties - 1.3%
Constant US$
Total -Constant
US $3.8%
Diluted earnings
per share $.13 $.24 (45.8)%
NAREIT FFO per
diluted share
(1) .35 .32 9.4%
Adjusted FFO per
diluted share
(1) .35 .33 6.1%
___________
-----------
(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 are
useful, reconciliations to the most directly comparable GAAP measure, and the limitations on the use of
these supplemental measures.
First quarter 2015 results reflect the following:
-- Comparable RevPAR on a constant dollar basis improved 3.8% for the
quarter, driven by rate growth of 4.8%, partially offset by a decrease
in occupancy of 0.7 percentage points. The Company's comparable
operating results were significantly affected by disruption related to
the renovation of guest rooms and public spaces. For the 85 hotels with
no renovation disruption in either of the first quarter of 2014 and
2015, RevPAR increased 5.5% on a constant dollar basis.
-- The Boston market had very strong RevPAR growth of 20.5% for the
quarter, benefiting from improvements in group demand in 2015 and less
disruption as a result of the completion of significant renovations in
2014. Consistent with recent trends, the west coast markets had strong
operating results, especially San Francisco where RevPAR increased
15.4%. Driven by strong group and transient demand, this market
experienced a 10.3% improvement in rates with occupancy levels in excess
of 81%.
-- During the first quarter, the Company's New York and Washington, D.C.
markets continued to lag the portfolio. In New York several factors
contributed to softer demand and overall pricing weakness, including a
reduction in city-wide events, particularly the Super Bowl in the first
quarter of 2014, and a series of winter storms, as well as increased
supply. In Washington, D.C., results were negatively affected by
significant room renovations at several of the Company's largest
properties, including the Grand Hyatt Washington, JW Marriott
Washington, D.C. and Hyatt Regency Reston.
-- Total revenues increased 0.6% for the quarter, reflecting revenue growth
of 3.0% at the Company's comparable properties, partially offset by
disposition activity that exceeded acquisitions over the past twelve
months that reduced total revenues by $23 million for the quarter.
-- The Company's comparable room revenue increased 3.0% for the quarter,
reflecting a 3.8% increase in comparable RevPAR on a constant dollar
basis, partially offset by currency translation effects for our
international properties. Comparable results were affected by
international properties, which had a RevPAR increase of 1.3% in
constant dollars. Excluding the Calgary Marriott Downtown from the
international results, which experienced a RevPAR decrease of 42% during
the quarter due to renovations, the Company's international properties
had a RevPAR increase of 6.0% in constant dollars.
-- Adjusted EBITDA increased $13 million in the quarter reflecting
improvements in the operating results of the Company's portfolio. In the
first quarter, Adjusted EBITDA was negatively affected by hotel
dispositions and currency fluctuations. The net effect of dispositions
and acquisitions is estimated to have decreased net income by $4 million
and Adjusted EBITDA by $6 million, while the effect of currency
fluctuations is estimated to have decreased Adjusted EBITDA by $4
million, with no impact to net income.
-- Comparable hotel EBITDA increased 5.0% for the quarter, resulting in an
increase in comparable hotel EBITDA margin of 50 basis points compared
to the first quarter 2014.
-- Adjusted FFO per diluted share increased 6.1% to $0.35 per share for the
quarter.
-- Net income decreased $81 million to $104 million for the quarter, as the
increase in operations was offset by a decrease in gains on asset sales
of $108 million.
Share Repurchase Program
As the Company has achieved its long term balance sheet objectives and expects to continue to generate cash from operations and proceeds from asset sales, its Board of Directors has authorized a program to repurchase up to $500 million of common stock. The common stock may be purchased in the open market or through private transactions from time to time over the next 18 months depending upon market conditions. The level of purchases 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 plan does not obligate the Company to repurchase any specific number of shares and may be suspended at any time at its discretion.
Rebranding and Franchise Opportunities
The Company continued to make significant progress on its strategic initiative to evaluate and opportunistically adjust the operator, brand and contract terms of each of its hotels. This may include new relationships with independent operators that may be an improved fit for smaller or unique properties.
-- During the second quarter the Company completed an agreement to convert
The Ritz-Carlton, Phoenix to an independent hotel to be operated by
Destination Hotels. The property will close in July 2015 for extensive
renovation work and will reopen early in 2016 as part of the Autograph
Collection, a diverse collection of high-personality independent hotels
worldwide.
-- The Company will close its Four Seasons Philadelphia property in June
2015 in order to expedite renovation and rebranding efforts to convert
this property to a contemporary, independent luxury hotel to be operated
by Sage Hospitality. The Company anticipates reopening this property by
the end of the year.
Redevelopment, Return On Investment ("ROI") and Acquisition Capital Projects
The Company invested approximately $45 million in the first quarter on redevelopment, ROI and acquisition capital expenditures. Projects completed during the first quarter include the conversion of a restaurant to 4,800 square feet of meeting space at the Hilton Melbourne South Wharf and the conversion of underutilized space at the Hyatt Regency Maui Resort & Spa into 6,300 square feet of meeting space.
For 2015, the Company anticipates completing several large-scale redevelopment projects which entail the closure of hotels and meeting spaces. The Company expects that redevelopment projects, ROI, and acquisition capital expenditures for 2015 will range from $270 million to $285 million.
Renewal and Replacement Expenditures
The Company invested approximately $125 million in renewal and replacement capital expenditures during the first quarter 2015, an increase of approximately 65% over the first quarter of 2014 and approximately 35% of the forecast expenditures for the year. During the quarter, major projects in process included rooms renovations at the Calgary Marriott Downtown, JW Marriott Washington, D.C., JW Marriott Houston, San Antonio Marriott Riverwalk, Westin South Coast Plaza Costa Mesa and the Westin Chicago River North, as well as lobby and meeting space renovations at the Grand Hyatt Washington, the Westin Seattle and Boston Marriott Copley Place. For 2015, the Company expects that overall renewal and replacement expenditures will total $335 million to $355 million.
Disposition
In the first quarter, the Company was able to take advantage of strengthening investor demand in secondary/tertiary markets with the sale of the Delta Meadowvale Hotel & Conference Centre, Toronto, for total proceeds of C$42 million ($33 million), including the FF&E fund.
Balance Sheet
As of March 31, 2015, the Company had approximately $485 million of cash and cash equivalents and $815 million of available capacity under its credit facility. As of March 31, 2015, total debt was $4.0 billion, with an average maturity of five years and an average interest rate of 4.8%, including nearly 80% with a fixed rate of interest.
European Joint Venture
The European joint venture's comparable hotel RevPAR on a constant euro basis increased approximately 4.2% for the first quarter 2015. The comparable RevPAR results were driven by strength in transient business, leading to occupancy increases of 1.2 percentage points for the quarter and rate growth of 2.3%. The increase in comparable hotel RevPAR was partially offset by a decrease of 0.8% in comparable food and beverage revenues, which resulted in a total revenue increase of 2.7% at the European joint venture's comparable properties.
Dividend
The Company's policy is that it generally intends to distribute, over time, 100% of its taxable income, which is dependent primarily on the Company's results of operations, as well as tax gains and losses from property sales. The Company paid a regular quarterly cash dividend of $.20 per share on its common stock on April 15, 2015 to stockholders of record on March 31, 2015. Any future dividend is subject to approval by the Company's Board of Directors.
2015 Outlook
The Company expects a solid year of growth in its U.S. portfolio in 2015. Similar to the trends experienced in 2014, RevPAR growth is expected to be driven by strength in several of the Company's west coast markets, while growth in the New York and Washington, D.C. markets continue to be hindered by the recent new supply and renovation activity, respectively. Additionally, the operating results will be affected by the level of acquisitions and dispositions, renovation disruption and the expected continued strength of the US dollar on international operations.
The Company anticipates that its 2015 operating results will change as follows:
Full Year 2015
--------------
Low-end High-end
of range of range
-------- --------
Total comparable hotel RevPAR -
Constant US $4.5% 5.5%
Comparable hotel RevPAR for
domestic properties 4.75% 5.75%
Comparable hotel RevPAR for
international properties -
Constant US $0.0% 2.0%
Total revenues under GAAP 1.3% 2.5%
Total comparable hotel revenues 3.9% 5.0%
Operating profit margin under
GAAP (80 bps) (40 bps)
Comparable hotel EBITDA margins 30 bps 60 bps
Based upon the above parameters, the Company estimates its 2015 guidance as follows (in millions, except per share amounts):
Full Year 2015
--------------
Low-end High-end
of range of range
-------- --------
Earnings per diluted
share $.62 $.66
Net income 483 512
NAREIT and Adjusted FFO
per diluted share 1.52 1.55
Adjusted EBITDA 1,420 1,450
See the 2015 Forecast Schedules and the Notes to Financial Information for other assumptions used in the forecasts and items that may affect forecast results.
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 97 properties in the United States and 16 properties internationally totaling approximately 59,000 rooms. The Company also holds non-controlling interests in five joint ventures, including one in Europe that owns 19 hotels with approximately 6,500 rooms and one in Asia that has interests in four hotels in Australia and 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(®), Hilton(®), Swissotel(®), 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.
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 assumptions 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: changes in national and local economic and business conditions and other factors such as natural disasters, pandemics and weather that will affect occupancy rates at our hotels and the demand for hotel products and services; the impact of geopolitical developments outside the U.S. on lodging demand; volatility in global financial and credit markets; operating risks associated with the hotel business; risks and limitations in our operating flexibility associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; risks associated with our relationships with property managers and joint venture partners; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; the effects of hotel renovations on our hotel occupancy and financial results; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; risks associated with our ability to complete acquisitions and dispositions and develop new properties and the risks that acquisitions and new developments may not perform in accordance with our expectations; our ability to continue to satisfy complex rules in order for us to remain a REIT for federal income tax purposes; risks associated with our ability to effectuate our dividend policy, including factors such as operating results and the economic outlook influencing our board's decision whether to pay further dividends at levels previously disclosed or to use available cash to make special dividends; 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 April 30, 2015, 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 Inc.," 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 Inc. and Host LP, the primary difference is approximately 1% of the partnership interests in Host LP held by outside partners as of March 31, 2015, which is non-controlling interests in Host LP in our consolidated balance sheets and is included in net income 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.
HOST HOTELS & RESORTS, INC.
Consolidated Balance Sheets (1)
(in millions, except shares and per share amounts)
March 31, 2015 December 31, 2014
-------------- -----------------
(unaudited)
ASSETS
Property and equipment, net $10,495 $10,575
Due from managers 149 70
Advances to and investments in affiliates 387 433
Deferred financing costs, net 33 35
Furniture, fixtures and equipment replacement fund 169 129
Other 292 281
Cash and cash equivalents 485 684
--- ---
Total assets $12,010 $12,207
======= =======
LIABILITIES, NON-CONTROLLING INTERESTS AND EQUITY
Debt
Senior notes, including $390 million and $386 million, respectively, $2,888 $2,884
net of discount, of Exchangeable Senior Debentures
Credit facility, including the $500 million term loan 685 704
Mortgage debt 395 404
Total debt 3,968 3,992
Accounts payable and accrued expenses 224 298
Other 304 324
--- ---
Total liabilities 4,496 4,614
----- -----
Non-controlling interests - Host Hotels & Resorts, L.P. 191 225
Host Hotels & Resorts, Inc. stockholders' equity:
Common stock, par value $.01, 1,050 million shares authorized, 8 8
756.3 million shares and 755.8 million shares issued and outstanding,
respectively
Additional paid-in capital 8,519 8,476
Accumulated other comprehensive loss (87) (50)
Deficit (1,151) (1,098)
------ ------
Total equity of Host Hotels & Resorts, Inc. stockholders 7,289 7,336
Non-controlling interests-other consolidated partnerships 34 32
--- ---
Total equity 7,323 7,368
----- -----
Total liabilities, non-controlling interests and equity $12,010 $12,207
======= =======
___________
(1) Our consolidated balance sheet as of March 31, 2015 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 Statement of Operations (1)
(unaudited, in millions, except per share amounts)
Quarter ended March 31,
-----------------------
2015 2014
---- ----
Revenues
Rooms $818 $808
Food and beverage 403 405
Other 96 96
--- ---
Total revenues 1,317 1,309
----- -----
Expenses
Rooms 220 226
Food and beverage 283 284
Other departmental and support expenses 321 315
Management fees 52 50
Other property-level expenses 98 97
Depreciation and amortization 175 172
Corporate and other expenses (2) 24 34
Gain on insurance settlements - (3)
--- ---
Total operating costs and expenses 1,173 1,175
----- -----
Operating profit 144 134
Interest income 1 1
Interest expense (3) (51) (58)
Gain on sale of assets 4 112
Loss on foreign currency transactions and derivatives (1) -
Equity in losses of affiliates (2) (8)
--- ---
Income before income taxes 95 181
Benefit for income taxes 9 4
--- ---
Net income 104 185
Less: Net income attributable to non-controlling interests (6) (6)
--- ---
Net income attributable to Host Inc. $98 $179
=== ====
Basic earnings per common share:
Continuing operations $.13 $.24
Basic earnings per common share $.13 $.24
==== ====
Diluted earnings per common share:
Continuing operations $.13 $.24
Diluted earnings per common share $.13 $.24
==== ====
(1) 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.
(2) Corporate and other expenses include the following items:
Quarter ended March 31,
-----------------------
2015 2014
---- ----
General and administrative costs $25 $23
Non-cash stock-based compensation expense 5 4
Litigation (recoveries)/accruals and
acquisition costs, net (6) 7
--- ---
Total $24 $34
=== ===
(3) Interest expense includes the following items:
Quarter ended March
31,
--------------------
2015 2014
---- ----
Non-cash interest for exchangeable
debentures $4 $4
Debt extinguishment costs - 2
--- ---
Total $4 $6
=== ===
HOST HOTELS & RESORTS, INC.
Earnings per Common Share
(unaudited, in millions, except per share amounts)
Quarter ended March 31,
-----------------------
2015 2014
---- ----
Net income $104 $185
Less: Net income attributable to non-controlling interests (6) (6)
--- ---
Net income attributable to Host Inc. 98 179
Assuming conversion of exchangeable senior debentures - 7
--- ---
Diluted income attributable to Host Inc. $98 $186
=== ====
Basic weighted average shares outstanding 756.0 754.9
Assuming weighted average shares for conversion of - 29.9
exchangeable senior debentures
Assuming distribution of common shares granted under .3 .3
the comprehensive stock plans, less shares assumed
purchased at market
Diluted weighted average shares outstanding (1) 756.3 785.1
===== =====
Basic earnings per common share $.13 $.24
==== ====
Diluted earnings per common share $.13 $.24
==== ====
___________
(1) Dilutive securities may include shares granted under comprehensive stock plans, preferred operating partnership units ("OP Units") held by minority partners, exchangeable debt securities
and other non-controlling interests that have the option to convert their limited partnership interests to common OP Units. No effect is shown for any securities that were anti-dilutive for
the period.
HOST HOTELS & RESORTS, INC.
Hotel Operating Data for Consolidated Hotels(1)
Comparable Hotels by Market in Constant US$
As of March 31, 2015 Quarter ended March 31, 2015 Quarter ended March 31, 2014
-------------------- ---------------------------- ----------------------------
Market (2) No. of No. of Average Average RevPAR Average Average RevPAR Percent
Properties Rooms Room Rate Occupancy Room Rate Occupancy Change in
Percentage Percentage RevPAR
--- ---------- ---------- ------
Boston 5 3,432 $189.44 67.0% $126.98 $172.94 60.9% $105.36 20.5%
New York 9 7,224 241.96 75.1 181.60 246.13 77.6 190.89 (4.9)
Washington, D.C. 12 6,016 205.24 66.2 135.95 205.70 69.6 143.14 (5.0)
Atlanta 6 2,280 183.47 74.4 136.50 171.62 74.8 128.36 6.3
Florida 8 4,965 288.09 83.1 239.33 269.40 82.6 222.60 7.5
Chicago 7 2,857 150.72 57.8 87.17 142.64 59.6 85.01 2.5
Denver 3 1,363 154.94 60.4 93.53 145.62 62.0 90.33 3.5
Houston 3 1,141 219.29 68.8 150.77 227.30 73.5 166.99 (9.7)
Phoenix 4 1,522 283.87 81.7 232.00 245.17 82.6 202.58 14.5
Seattle 3 1,774 166.85 72.2 120.47 163.37 72.1 117.75 2.3
San Francisco 5 3,701 237.18 81.1 192.46 214.98 77.6 166.78 15.4
Los Angeles 8 3,228 186.54 80.5 150.25 171.01 81.2 138.80 8.3
San Diego 4 3,331 199.26 81.7 162.84 186.57 80.9 150.98 7.9
Hawaii 3 1,682 351.79 90.2 317.19 343.83 87.6 301.12 5.3
Other 12 7,650 176.39 68.8 121.33 170.89 70.3 120.17 1.0
--- ----- ------ ---- ------ ------ ---- ------ ---
Domestic 92 52,166 218.18 73.6 160.67 208.73 74.1 154.65 3.9
--- ------ ------ ---- ------ ------ ---- ------ ---
Asia-Pacific 8 1,544 $152.74 86.7% $132.41 $139.93 85.2% $119.17 11.1%
Canada 2 845 169.51 49.2 83.48 168.00 63.5 106.67 (21.7)
Latin America 4 1,075 247.16 61.7 152.43 214.66 69.1 148.25 2.8
--- ----- ------ ---- ------ ------ ---- ------ ---
International 14 3,464 181.32 69.9 126.72 166.94 74.9 125.11 1.3
--- ----- ------ ---- ------ ------ ---- ------ ---
All Markets - 106 55,630 215.98 73.4 158.55 206.09 74.1 152.80 3.8
Constant US$
All Owned Hotels in Constant US$ (3)
As of March 31, 2015 Quarter ended March 31, 2015 Quarter ended March 31, 2014
-------------------- ---------------------------- ----------------------------
No. of No. of Average Average RevPAR Average Average RevPAR Percent
Properties Rooms Room Rate Occupancy Room Rate Occupancy Change in
Percentage Percentage RevPAR
---------- ---------- ------
Comparable Hotels 106 55,630 $215.98 73.4% $158.55 $206.09 74.1% $152.80 3.8%
Non-comparable Hotels:
Renovations/Pro Forma 5 2,663 215.08 71.0 152.71 191.32 81.8 156.55 (2.5)
Acquisitions
Subtotal 111 58,293 215.94 73.3 158.28 205.35 74.5 152.97 3.5
Development 2 407 74.59 34.3 25.59 - - - N/M
--- --- ----- ---- ----- --- --- --- ---
All Hotels 113 58,700 215.48 73.0 157.36 205.35 74.5 152.97 2.9
=== ======
Comparable Hotels in Nominal US$
As of March 31, 2015 Quarter ended March 31, 2015 Quarter ended March 31, 2014
-------------------- ---------------------------- ----------------------------
No. of No. of Average Average RevPAR Average Average RevPAR Percent
Properties Rooms Room Rate Occupancy Room Rate Occupancy Change in
Percentage Percentage RevPAR
---------- ---------- ------
Asia-Pacific 8 1,544 $152.74 86.7% $132.41 $157.66 85.2% $134.27 (1.4)%
Canada 2 845 169.51 49.2 83.48 189.04 63.5 120.03 (30.4)
Latin America 4 1,075 247.16 61.7 152.43 249.10 69.1 172.04 (11.4)
--- ----- ------ ---- ------ ------ ---- ------ -----
International 14 3,464 181.32 69.9 126.72 190.11 74.9 142.47 (11.1)
--- ----- ------ ---- ------ ------ ---- ------ -----
Domestic 92 52,166 218.18 73.6 160.67 208.73 74.1 154.65 3.9
--- ------ ------ ---- ------ ------ ---- ------ ---
All Markets 106 55,630 215.98 73.4 158.55 207.55 74.1 153.89 3.0
=== ======
Comparable Hotels by Type in Nominal US$
As of March 31, 2015 Quarter ended March 31, 2015 Quarter ended March 31, 2014
-------------------- ---------------------------- ----------------------------
Property type (2) No. of No. of Average Average RevPAR Average Average RevPAR Percent
Properties Rooms Room Rate Occupancy Room Rate Occupancy Change in
Percentage Percentage RevPAR
--- ---------- ---------- ------
Urban 56 33,399 $211.49 72.3% $152.80 $207.60 73.4% $152.45 0.2%
Suburban 27 9,433 183.77 68.7 126.31 168.83 68.1 114.95 9.9
Resort 13 8,024 299.45 82.6 247.31 284.51 81.3 231.37 6.9
Airport 10 4,774 150.41 75.3 113.28 140.06 79.0 110.63 2.4
--- ----- ------ ---- ------ ------ ---- ------ ---
All Types 106 55,630 215.98 73.4 158.55 207.55 74.1 153.89 3.0
=== ======
___________
(1) See the Notes to Financial Information for a discussion of comparable hotel operating statistics and constant US$ presentation. Nominal US$ results include the effect of currency fluctuations, consistent with our financial statement presentation.
(2) See the Notes to Financial Information for a description of these markets and property types.
(3) Operating statistics are presented for all consolidated properties owned as of March 31, 2015 and do not include the results of operations for properties sold in 2015 or 2014. Additionally, all owned hotel operating statistics include hotels that we did not own for the entirety of the periods presented and properties that are undergoing large-scale capital projects during the periods presented and, therefore, are not
considered comparable hotel information upon which we usually evaluate our performance. Specifically, comparable RevPAR is calculated as revenues divided by the available room nights, which will rarely vary on a year-over-year basis. Conversely, the available room nights included in the non-comparable RevPAR statistic will vary widely based on the timing of hotel closings, the scope of a capital project, or the development
of a new property. As a result, the RevPAR change of 2.9% for the quarter for the 113 hotels owned as of March 31, 2015 is non-comparable because the available room nights are not consistent and certain of these properties had little or no revenues during those periods. See the Notes to Financial Information for further information on these pro forma statistics and the limitations on their use. The following hotels are
considered non-comparable for the periods presented:
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Non-comparable hotels - Renovations/pro forma acquisitions - This represents three hotels under significant renovations, Four Seasons Philadelphia, the Houston Airport Marriott at George Bush Intercontinental and the Marriott Marquis San Diego Marina. It also includes the YVE Hotel Miami which was acquired in August 2014 and The Axiom Hotel which was acquired in January 2014. We were able to obtain historical operating data
for periods prior to our ownership for the YVE Hotel Miami and The Axiom Hotel, which are presented on a pro forma basis assuming we owned the hotels as of January 1, 2014. As a result, the RevPAR decrease of 2.5% for the quarter for these five hotels is considered non-comparable.
Non-comparable hotels - Development - This represents hotels that were under development and includes the Novotel and ibis Rio de Janeiro
Parque Olimpico hotels, which we developed and were opened late in the fourth quarter of 2014. As a result, the RevPAR change for the quarter for these hotels is considered non-meaningful (N/M).
For the full year, we expect the following additional hotels to be non-comparable due to significant renovations: Sheraton Santiago Hotel & Convention Center, San Cristobal Tower, Santiago and The Ritz-Carlton, Phoenix.
HOST HOTELS & RESORTS, INC.
Hotel Operating Data - European Joint Venture
As of March 31, 2015 Quarter ended March 31, 2015 Quarter ended March 31, 2014
-------------------- ---------------------------- ----------------------------
No. of No. of Average Average RevPAR Average Average RevPAR Percent
Properties Rooms Room Rate Occupancy Room Rate Occupancy Change in
Percentage Percentage RevPAR
Total comparable - 18 6,077 EUR 169.56 68.4% EUR 115.96 EUR 165.73 67.2% EUR 111.34 4.2%
in Constant
Euros (1)
Total comparable - 18 6,077 169.56 68.4 115.96 164.65 67.2 110.60 4.8
in Nominal
Euros (1)
All Hotels (Pro 19 6,471 166.81 68.1 113.63 162.91 66.9 108.96 4.3
Forma) - in
Constant
Euros (2)
___________
-----------
(1) Total comparable statistics include the operating performance for the 18 properties in the joint venture with comparable results (determined on the same basis as our consolidated comparable hotel portfolio). The total comparable statistics exclude one hotel acquired in 2014 as the joint venture did not own the hotel for the entirety of the periods presented. See Notes to Financial Information for a discussion of
the constant Euro and nominal Euro presentation.
(2) Operating statistics presented are for all properties owned by the joint venture as of March 31, 2015. The results exclude the operations for one property sold in 2014. The results of the Sheraton Berlin Grand Hotel Esplanade are presented on a pro forma basis, assuming the hotel was owned as of January 1, 2014. See Notes to Financial Information for further information on these pro forma statistics and limitations
on their use.
HOST HOTELS & RESORTS, INC.
Schedule of Comparable Hotel Results (1)
(unaudited, in millions, except hotel statistics)
Quarter ended March 31,
-----------------------
2015 2014
---- ----
Number of hotels 106 106
Number of rooms 55,630 55,630
Change in comparable hotel RevPAR -
Constant US $3.8% -
Nominal US $3.0% -
Operating profit margin (2) 10.9% 10.2%
Comparable hotel EBITDA margin (2) 25.6% 25.1%
Comparable hotel revenues
Room $794 $771
Food and beverage (3) 399 386
Other 74 74
--- ---
Comparable hotel revenues (4) 1,267 1,231
----- -----
Comparable hotel expenses
Room 213 214
Food and beverage (5) 277 270
Other 33 38
Management fees, ground rent and
other costs 420 400
--- ---
Comparable hotel expenses (6) 943 922
--- ---
Comparable hotel EBITDA 324 309
Non-comparable hotel results, net
(7) 19 31
Depreciation and amortization (175) (172)
Interest expense (51) (58)
Benefit for income taxes 9 4
Gain on sale of property and
corporate level (22) 71
income/expense
Net income $104 $185
==== ====
___________
(1) As previously disclosed, the adoption of the 11th edition of the Uniform System of Accounts for the Lodging Industry
("USALI") on January 1, 2015 will impact the Company's comparative operating results. The impact of USALI in the first
quarter reduced each of the Company's comparable RevPAR growth and comparable hotel EBITDA margins by approximately 20
basis points, while increasing comparable food and beverage revenue growth by approximately 300 basis points. For the
full year, the implementation is expected to lower the Company's comparable RevPAR growth and comparable hotel EBITDA
margin growth by approximately 20 basis points each, while comparable food and beverage revenue growth is expected to
increase by an additional 300 basis points (primarily reflecting new reporting for service charges). These changes will
not affect the Company's forecast net income, comparable hotel EBITDA, or Adjusted EBITDA. See the Notes to Financial
Information for a discussion of non-GAAP measures and the calculation of comparable hotel results. For additional
information on comparable hotel EBITDA by market, see the supplemental information posted on our website.
(2) Operating profit margins are calculated by dividing the applicable operating profit by the related revenue amount.
GAAP operating profit margins are calculated using amounts presented in the consolidated statements of operations.
Comparable hotel EBITDA margins are calculated using amounts presented in the above table.
(3) The reconciliation of total food and beverage sales per the consolidated statements of operations to the comparable
food and beverage sales is as follows (as discussed above, 2014 amounts have not been adjusted for the adoption of the
11th edition of USALI):
Quarter ended March 31,
-----------------------
2015 2014
---- ----
Food and beverage sales per the
consolidated $403 $405
statements of operations
Non-comparable hotel food and
beverage sales (16) (30)
Food and beverage sales for the
property for which 12 11
we record rental income
Comparable food and beverage sales $399 $386
==== ====
HOST HOTELS & RESORTS, INC
Schedule of Comparable Hotel Results (1)
(unaudited, in millions, except hotel statistics)
(4) The reconciliation of total revenues per the consolidated statements of operations to the comparable hotel
revenues is as follows (as discussed above, 2014 amounts have not been adjusted for the adoption of the 11th
edition of USALI):
Quarter ended March 31,
-----------------------
2015 2014
---- ----
Revenues per the
consolidated statements
of $1,317 $1,309
operations
Non-comparable hotel revenues (66) (94)
Hotel revenues for the property for
which we record 16 16
rental income, net
Comparable hotel revenues $1,267 $1,231
====== ======
(5) The reconciliation of total food and beverage expenses per the consolidated statements of
operations to the comparable food and beverage expenses is as follows (as discussed above, 2014
amounts have not been adjusted for the adoption of the 11th edition of USALI):
Quarter ended March 31,
-----------------------
2015 2014
---- ----
Food and beverage
expenses per the
consolidated $283 $284
statements of operations
Non-comparable hotel
food and beverage
expenses (13) (20)
Food and beverage
expenses for the
property for 7 6
which we record rental
income
Comparable food and
beverage expenses $277 $270
==== ====
(6) The reconciliation of operating costs and expenses per the consolidated statements of operations to the comparable hotel expenses is as follows (as discussed above, 2014
amounts have not been adjusted for the adoption of the 11th edition of USALI):
Quarter ended March 31,
-----------------------
2015 2014
---- ----
Operating costs and expenses per the consolidated $1,173 $1,175
statements of operations
Non-comparable hotel expenses (47) (63)
Hotel expenses for the property for which we record 16 16
rental income
Depreciation and amortization (175) (172)
Corporate and other expenses (24) (34)
--- ---
Comparable hotel expenses $943 $922
==== ====
(7) Non-comparable hotel results, net, includes the following items: (i) the results of operations of our non-comparable hotels and sold hotels, which operations are included in
our consolidated statements of operations as continuing operations, (ii) gains on property insurance settlements, and (iii) the results of our office buildings.
HOST HOTELS & RESORTS, INC.
Other Financial Data
(unaudited, in millions, except per share amounts)
March 31, 2015 December 31, 2014
-------------- -----------------
Equity
------
Common shares outstanding 756.3 755.8
Common shares outstanding assuming conversion of OP Units (1) 765.8 765.2
Preferred OP Units outstanding .02 .02
Security pricing
----------------
Common stock (2) $20.18 $23.77
2 (1)/2% Exchangeable Senior Debentures(3) $1,581.3 $1,877.8
Quarter ended
March 31,
---------
Dividends declared per common share
-----------------------------------
2015 $.20
2014 .14
Debt
Senior debt Rate Maturity date March 31, 2015 December 31, 2014
----------- ---- ------------- -------------- -----------------
Series V 6% 11/2020 $500 $500
Series X 5 7/8% 6/2019 498 498
Series Z 6% 10/2021 300 300
Series B 5 (1)/4% 3/2022 350 350
Series C 4 (3)/4% 3/2023 450 450
Series D 3 (3)/4% 10/2023 400 400
Exchangeable senior debentures (4) 2 (1)/2% 10/2029 390 386
Credit facility term loan 1.3% 6/2017 500 500
Credit facility revolver (5) 1.5% 6/2018 185 204
3,573 3,588
Mortgage debt and other
-----------------------
Mortgage debt (non-recourse) 3.3-6.5% 2/2016-1/2024 395 404
Total debt (6)(7) $3,968 $3,992
====== ======
Percentage of fixed rate debt 79% 79%
Weighted average interest rate 4.8% 4.8%
Weighted average debt maturity 5 years 5.2 years
Forecast cash interest (8) $178
___________
(1) Each OP Unit is redeemable for cash or, at our option, for 1.021494 common shares of Host Inc. At March 31, 2015 and December 31, 2014, there were 9.2 million and 9.3 million common OP Units, respectively, held by non-controlling interests.
(2) Share prices are the closing price as reported by the New York Stock Exchange.
(3) Amount reflects market trading price of a single $1,000 debenture as quoted by Bloomberg L.P.
(4) At March 31, 2015, the principal balance outstanding of the 21/2% Exchangeable Senior Debentures due 2029 is $400 million. The discount related to these debentures is amortized through October 15, 2015, the first date at which holders can require us to
repurchase the debentures for cash.
(5) The interest rate shown is the weighted average rate of the outstanding credit facility at March 31, 2015.
(6) 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 March 31, 2015, our non-controlling partners' share of consolidated debt is $92 million and our share of debt in unconsolidated investments is $466 million.
(7) Total debt as of March 31, 2015 and December 31, 2014 includes net discounts of $12 million and $16 million, respectively.
(8) Reflects forecast cash interest expense based on existing debt as of the balance sheet date. The following chart reconciles forecast cash interest expense to Forecast Full Year 2015 GAAP interest expense. See footnote (1) to the Reconciliation of Net
Income to EBITDA, Adjusted EBITDA and NAREIT and Adjusted Funds From Operations per diluted share for 2015 Forecasts for full year forecast assumptions:
Forecast GAAP interest expense
full year 2015 $199
Non-cash interest for
exchangeable debentures (13)
Amortization of deferred
financing costs (8)
Forecast cash interest full year
2015 $178
====
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income to
EBITDA and Adjusted EBITDA (1)
(unaudited, in millions)
Quarter ended March 31,
-----------------------
2015 2014
---- ----
Net income (2) $104 $185
Interest expense 51 58
Depreciation and amortization 175 172
Income taxes (9) (4)
--- ---
EBITDA (2) 321 411
Gain on dispositions (3) (3) (112)
Acquisition costs - 1
Equity investment adjustments:
Equity in losses of affiliates 2 8
Pro rata Adjusted EBITDA of equity investments 10 8
Consolidated partnership adjustments:
Pro rata Adjusted EBITDA attributable to non- (9) (8)
controlling partners in other consolidated
partnerships
Adjusted EBITDA (2) $321 $308
==== ====
___________
(1) See the Notes to Financial Information for discussion of non-GAAP measures.
(2) Net Income, EBITDA, Adjusted EBITDA, NAREIT FFO and Adjusted FFO include a gain of $1 million for the quarter ended March 31, 2015 for the sale of the portion
of land attributable to individual units sold by the Maui timeshare joint venture.
(3) Reflects the sale of an 89% controlling interest in one hotel in 2014 and the sale of one hotel in each of 2014 and 2015.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income to NAREIT and
Adjusted Funds From Operations per Diluted Share (1)
(unaudited, in millions, except per share amounts)
Quarter ended March 31,
-----------------------
2015 2014
---- ----
Net income (2) $104 $185
Less: Net loss attributable to non-controlling interests (6) (6)
--- ---
Net income attributable to Host Inc 98 179
Adjustments:
Gain on dispositions, net of taxes (3) (3) (109)
Depreciation and amortization 174 171
Equity investment adjustments:
Equity in losses of affiliates 2 8
Pro rata FFO of equity investments 4 1
Consolidated partnership adjustments:
FFO adjustment for non-controlling partnerships (2) (2)
FFO adjustments for non-controlling interests of (2) (1)
Host L.P.
NAREIT FFO (2) 271 247
Adjustments to NAREIT FFO:
Loss on debt extinguishment - 2
Acquisition costs - 1
Adjusted FFO (2) $271 $250
==== ====
For calculation on a per share basis:
Adjustments for dilutive securities (4):
Assuming conversion of Exchangeable Senior $7 $7
Debentures
Diluted NAREIT FFO $278 $254
==== ====
Diluted Adjusted FFO $278 $257
==== ====
Diluted weighted average shares outstanding - EPS 756.3 785.1
Assuming conversion of Exchangeable Senior 31.1 -
Debentures
Diluted weighted average shares outstanding - 787.4 785.1
NAREIT FFO and Adjusted FFO
NAREIT FFO per diluted share $.35 $.32
==== ====
Adjusted FFO per diluted share $.35 $.33
==== ====
___________
-----------
(1-3) Refer to the corresponding footnote on the Reconciliation of Net Income to EBITDA and Adjusted EBITDA.
(4) Earnings per diluted share and NAREIT FFO 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 interests to common OP units. No effect is shown for securities if they are anti-dilutive.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income to EBITDA, Adjusted EBITDA and
NAREIT and Adjusted Funds From Operations per Diluted Shares for 2015 Forecasts (1)
(unaudited, in millions, except per share amounts)
Full Year 2015
--------------
Low-end High-end
of range of range
-------- --------
Net income $483 $512
Interest expense 199 199
Depreciation and amortization 700 700
Income taxes 19 20
--- ---
EBITDA 1,401 1,431
Gain on dispositions (3) (3)
Equity investment adjustments:
Equity in earnings of affiliates (17) (17)
Pro rata Adjusted EBITDA of
equity investments 64 64
Consolidated partnership
adjustments:
Pro rata Adjusted EBITDA
attributable to non-controlling
partners in other consolidated
partnerships (25) (25)
--- ---
Adjusted EBITDA $1,420 $1,450
====== ======
Full Year 2015
--------------
Low-end High-end
of range of range
-------- --------
Net income $483 $512
Less: Net income attributable to
non-controlling interests (13) (13)
--- ---
Net income attributable to Host
Inc 470 499
Gain on dispositions, net of tax (3) (3)
Depreciation and amortization 696 696
Equity investment adjustments:
Equity in earnings of affiliates (17) (17)
Pro rata FFO of equity
investments 42 42
Consolidated partnership
adjustments:
FFO adjustment for non-
controlling partners in other
consolidated partnerships (9) (9)
FFO adjustment for non-
controlling interests of Host LP (8) (8)
--- ---
NAREIT and Adjusted FFO 1,171 1,200
===== =====
Adjustment for dilutive
securities:
Assuming conversion of
Exchangeable Senior Debentures 25 25
--- ---
Diluted NAREIT and
Adjusted FFO $1,196 $1,225
====== ======
Weighted average diluted shares -
EPS (2) 757.1 757.1
Weighted average diluted shares -
NAREIT and Adjusted FFO (2) 788.8 788.8
Earnings per diluted
share $0.62 $0.66
NAREIT and Adjusted
FFO per diluted share $1.52 $1.55
___________
(1) The forecasts are based on the below assumptions:
Total comparable hotel RevPAR in constant US$ will increase 4.5% to 5.5% for the low and high end of the
forecast range. Comparable hotel RevPAR for our domestic portfolio will increase 4.75% to 5.75% for the low
and high end of the forecast range, respectively, while comparable hotel RevPAR for our international
properties in constant US$, which excludes the effect of changes in foreign currency, will remain flat for
the low end and increase 2.0% for the high end of the forecast range. However, the effect of estimated
changes in foreign currency has been reflected in the forecast of net income, EBITDA, earnings per diluted
share and Adjusted FFO per diluted share.
Comparable hotel EBITDA margins will increase 30 basis points to
60 basis points for the low and high ends of the forecasted range, respectively, which includes the effect
of the adoption of the 11th Edition of USALI in 2015 that will reduce margin growth by approximately 20
basis points.
Interest expense includes approximately $21 million related to non-cash interest expense for
exchangeable senior debentures, amortization of original issue discounts and deferred financing fees.
For a discussion of additional items that may affect forecasted results, see the Notes to Financial
Information.
(2) NAREIT and Adjusted FFO per diluted share include 31.7 million shares for the dilution of exchangeable
senior debentures. The exchangeable senior debentures are anti-dilutive for earnings per share.
HOST HOTELS & RESORTS, INC.
Schedule of Comparable Hotel Results
for 2015 Forecasts (1)
(unaudited, in millions, except hotel statistics)
Full Year 2015
--------------
Low-end High-end
of range of range
-------- --------
Operating profit margin under GAAP
(2) 12.5% 12.9%
Comparable hotel EBITDA margin (3) 27.1% 27.4%
Comparable hotel sales
Room $3,385 $3,417
Food and beverage 1,547 1,569
Other 281 287
--- ---
Comparable hotel sales (4) 5,213 5,273
----- -----
Comparable hotel expenses
Rooms, food and beverage and other
departmental costs 2,093 2,114
Management fees, ground rent and
other costs 1,708 1,716
----- -----
Comparable hotel expenses (5) 3,801 3,830
----- -----
Comparable hotel EBITDA 1,412 1,443
Non-comparable hotel results, net 67 65
Depreciation and amortization (700) (700)
Interest expense (199) (199)
Benefit (provision) for income
taxes (19) (20)
Gain on sale of property and
corporate level (78) (77)
income/expense
Net income $483 $512
==== ====
___________
(1) Forecast comparable hotel results include 103 hotels that we have assumed will be classified as comparable as
of December 31, 2015. See "Comparable Hotel Operating Statistics" in the Notes to Financial Information. No
assurances can be made as to the hotels that will be in the comparable hotel set for 2015. Also, see the notes to
the "Reconciliation of Net Income to EBITDA, Adjusted EBITDA and NAREIT and Adjusted Funds From Operations per
Diluted Share for Full Year 2015 Forecasts" for other forecast assumptions and further discussion of our
comparable hotel set.
(2) Operating profit margin under GAAP is calculated as the operating profit divided by the forecast total revenues
per the consolidated statements of operations. See (4) below for forecast revenues.
(3) Comparable hotel EBITDA margin is calculated as the comparable hotel EBTIDA divided by the comparable hotel
sales per the table above.
(4) The reconciliation of forecast total revenues to the forecast comparable hotel sales is as follows (in
millions):
Low-end High-end
of range of range
-------- --------
Revenues $5,426 $5,489
Non-comparable hotel revenues (267) (270)
Hotel revenues for the property for
which we record rental income, net 54 54
--- ---
Comparable hotel sales $5,213 $5,273
====== ======
(5) The reconciliation of forecast operating costs and expenses to the comparable hotel expenses is as
follows (in millions):
Low-end High-end
of range of range
-------- --------
Operating costs and
expenses $4,748 $4,782
Non-comparable hotel
and other expenses (200) (205)
Hotel expenses for
the property for
which we record
rental income 54 54
Depreciation and
amortization (700) (700)
Corporate and other
expenses (101) (101)
---- ----
Comparable hotel
expenses $3,801 $3,830
====== ======
HOST HOTELS & RESORTS, INC.
Notes to Financial Information
Forecasts
Our forecast of earnings per diluted share, NAREIT and Adjusted FFO per diluted share, EBITDA, Adjusted EBITDA and comparable hotel EBITDA 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.
Comparable Hotel Operating Statistics
To facilitate a quarter-to-quarter comparison of our operations, we present certain operating statistics (i.e., RevPAR, average daily rate and average occupancy) and operating results (revenues, expenses, hotel EBITDA and associated margins) for the periods included in this report on a comparable hotel basis.
Because these statistics and operating results relate only to our hotel properties, they exclude results for our non-hotel properties and other real estate investments. 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 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 (as further defined below) during the reporting periods being compared.
The hotel business is capital-intensive and renovations are a regular part of the business. Generally, hotels under renovation remain comparable hotels. A large scale capital project that would cause a hotel to be excluded from our comparable hotel set is an extensive renovation of several core aspects of the hotel, such as rooms, meeting space, lobby, bars, restaurants and other public spaces. Both quantitative and qualitative factors are taken into consideration in determining if the renovation would cause a hotel to be removed from the comparable hotel set, including unusual or exceptional circumstances such as: a reduction or increase in room count, rebranding, a significant alteration of the business operations, or the closing of the hotel during the renovation.
We do not include an acquired hotel in our comparable hotel set until the operating results for that hotel have been included in our consolidated results for one full calendar year. For example, we acquired the YVE Miami Hotel in August of 2014. The hotel will not be included in our comparable hotels until January 1, 2016. Hotels that we sell are excluded from the comparable hotel set once the transaction has closed. Similarly, hotels are excluded from our comparable hotel set from the date that they sustain substantial property damage or business interruption or commence a large-scale capital project. In each case, these hotels are returned to the comparable hotel set when the operations of the hotel have been included in our consolidated results for one full calendar year after completion of the repair of the property damage or cessation of the business interruption, or the completion of large-scale capital projects, as applicable.
Of the 113 hotels that we owned on March 31, 2015, 106 have been classified as comparable hotels. The operating results of the following hotels that we owned as of March 31, 2015 are excluded from comparable hotel results for these periods:
Renovations/pro forma acquisitions: Hotels undergoing large-scale capital projects, as well as new acquisitions where comparable historical information for periods prior to our ownership is available:
-- Four Seasons Philadelphia, removed in the first quarter of 2015
(business interruption due to rebranding, including a reduction in
available rooms, partial closure of the only food and beverage outlet
and reduced staffing resulting in a reduction in certain rooms and other
lodging services);
-- Houston Airport Marriott at George Bush Intercontinental, removed in the
first quarter of 2015 (business interruption due to complete
repositioning of the hotel, including guest room renovations and the
closing of two restaurants to create a new food and beverage outlet and
lobby experience);
-- Marriott Marquis San Diego Marina, removed in the first quarter of 2015
(business interruption due to the demolition of the existing conference
center and new exhibit hall);
-- YVE Hotel Miami (acquired as the b2 miami downtown hotel in August
2014); and
-- Axiom Hotel (acquired as the Powell Hotel in January 2014).
Development: Hotels that were under development:
-- Novotel Rio de Janeiro Parque Olimpico (opened in the fourth quarter of
2014); and
-- ibis Rio de Janeiro Parque Olimpico (opened in the fourth quarter of
2014).
The operating results of six hotels disposed of in 2015 and 2014 are not included in comparable hotel results for the periods presented herein. These operations are also excluded from the hotel operating data for all owned hotels on pages 9 and 10.
Operating statistics for the non-comparable hotels listed above are included in the hotel operating data for all owned hotels. By definition, the RevPAR results for these properties are not comparable due to the reasons listed above, and, therefore, are not indicative of the overall trends for our portfolio. The operating results for the YVE Hotel Miami acquired in 2014 is included in the all owned hotel operating data on a pro forma basis, which includes operating results assuming it was owned as of January 1, 2014 and based on actual results obtained from the managers for periods prior to our ownership. For this hotel, since the year-over-year comparison includes periods prior to our ownership, the changes will not necessarily correspond to changes in our actual results. All owned hotel operating statistics are provided for completeness and to show the difference between our comparable hotel information (upon which we usually evaluate performance) and all of our hotels, including non-comparable hotels. Also, while they may not be illustrative of trends (as compared to comparable hotel operating statistics), changes in all owned hotel statistics will have an effect on our overall revenues. We also present all owned hotel statistics for our joint venture in Europe using the same methodology as our consolidated hotels.
We evaluate the operating performance of our comparable hotels based on both market and property type. These divisions are generally consistent with groupings recognized in the lodging industry.
Our markets consist of the following:
Domestic
-- Boston - Greater Boston Metropolitan area;
-- New York - Greater New York Metropolitan area, including northern New
Jersey;
-- Washington, D.C. - Metropolitan area, including the Maryland and
Virginia suburbs;
-- Atlanta - Atlanta Metropolitan area;
-- Florida - All Florida locations;
-- Chicago - Chicago Metropolitan area;
-- Denver - Denver Metropolitan area;
-- Houston - Houston Metropolitan area;
-- Phoenix - Phoenix Metropolitan area, including Scottsdale;
-- Seattle - Seattle Metropolitan area;
-- San Francisco - Greater San Francisco Metropolitan area, including San
Jose;
-- Los Angeles - Greater Los Angeles area, including Orange County;
-- San Diego - San Diego Metropolitan area;
-- Hawaii - All Hawaii locations; and
-- Other - Select cities in California, Indiana, Louisiana, Minnesota,
Missouri, Ohio, Pennsylvania, Tennessee and Texas.
International
-- Asia-Pacific - Australia and New Zealand;
-- Canada - Toronto and Calgary; and
-- Latin America - Brazil, Chile and Mexico.
Our property types consist of the following:
-- Urban - Hotels located in primary business districts of major cities;
-- Suburban - Hotels located in office parks or smaller secondary markets;
-- Resort - Hotels located in resort destinations such as Arizona, Florida,
Hawaii and Southern California; and
-- Airport - Hotels located at or near airports.
Constant US$, Nominal US$ and Constant Euros
Operating results denominated in foreign currencies are translated using the prevailing exchange rates on the date of the transaction, or monthly based on the weighted average exchange rate for the period. For comparative purposes, we also present the RevPAR results for the prior year assuming the results for our foreign operations were translated using the same exchange rates that were effective for the comparable periods in the current year, thereby eliminating the effect of currency fluctuation for the year-over-year comparisons. For the full year forecast results, we use the applicable forward currency curve (as published by Bloomberg L.P.) for each monthly period to estimate forecast foreign operations in U.S. dollars and have restated the prior year RevPAR results using the same forecast exchange rates to estimate year-over-year growth in RevPAR in constant US$. We believe this presentation is useful to investors as it shows growth in RevPAR in the local currency of the hotel consistent with how we would evaluate our domestic portfolio. However, the estimated effect of changes in foreign currency has been reflected in the actual and forecast results of net income, EBITDA, earnings per diluted share and Adjusted FFO per diluted share. Nominal US$ results include the effect of currency fluctuations, consistent with our financial statement presentation.
We also present RevPAR results for our joint venture in Europe in constant Euros using the same methodology as used for the constant US$ presentation.
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 Property Level Operating Results. The following discussion defines these measures 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 and 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 share of the 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 depreciable real estate, all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance, we believe that 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
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. Management historically has 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 the write-off of deferred financing
costs associated with the original issuance of the debt being redeemed
or retired and incremental interest expense incurred during the
refinancing period. 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 our ongoing
finance costs.
-- 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 our ongoing operating performance.
In unusual circumstances, we may also adjust NAREIT FFO for gains or losses that management believes are not representative of the Company's current operating performance. For example, in the first quarter of 2013, management excluded the $11 million gain from the eminent domain claim for land adjacent to the Atlanta Marriott Perimeter Center for which we received the cash proceeds in 2007, but, pending the resolution of certain contingencies, was not recognized until 2013. Typically, gains from the disposition of non-depreciable property are included in the determination of NAREIT and Adjusted FFO.
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, is widely used by management in the annual budget process and for our compensation programs.
Adjusted EBITDA
Historically, management has adjusted EBITDA when evaluating the performance of Host Inc. and Host LP 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 also is 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 depreciable 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 book value of the disposed assets could be
less important to investors given that the depreciated asset book 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 affiliates as presented in our consolidated statement of
operations because it includes our pro rata portion of the depreciation,
amortization and interest expense related to such investments, which are
excluded from EBITDA. We include our pro rata share of the Adjusted
EBITDA of our equity investments as we believe this reflects more
accurately the performance of our investments. 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' percentage
ownership in the partnership or joint venture.
-- Cumulative Effect of a Change in Accounting Principle - Infrequently,
the Financial Accounting Standards Board 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 expense 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 expense, which is based
on historical cost book values, is similar to gains and 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.
-- 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, which is consistent with the definition
of Adjusted FFO that we adopted effective January 1, 2011. We believe
that including these items is not consistent with our ongoing operating
performance.
In unusual circumstances, we may also adjust EBITDA for gains or losses that management believes are not representative of the Company's current operating performance. For example, in the first quarter of 2013, management excluded the $11 million gain from the eminent domain claim for land adjacent to the Atlanta Marriott Perimeter Center for which we received the cash proceeds in 2007, but, pending the resolution of certain contingencies, was not recognized until 2013. Typically, gains from the disposition of non-depreciable property are included in the determination of Adjusted EBITDA.
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 made 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 Property Level Operating Results
We present certain operating results for our hotels, such as hotel revenues, expenses, EBITDA (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 comparable hotel EBITDA to help us and our investors evaluate the ongoing operating performance of our comparable properties after removing the impact of the Company's capital structure (primarily interest expense), and its asset base (primarily depreciation and amortization). Corporate-level costs and expenses are also removed to arrive at property-level results. We believe these property-level results provide investors with supplemental information into the ongoing operating performance of our comparable hotels. Comparable hotel results are presented both by region and for the Company's comparable properties in the aggregate. 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 real estate industry investors have considered presentation of historical cost accounting for operating results 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 net income 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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SOURCE Host Hotels & Resorts, Inc.
