Host Reports First Quarter 2006 Net Income of $172 mil

Includes $146 million from Gains on Hotel Dispositions; Comparable RevPAR

• 
  SAVE
• 
  SHARE
• 
  TEXT SIZE
• 
  PRINT
• 
  COMMENT
• 
  PDF

. October 14, 2008

BETHESDA, MD, April 26, 2006. Host Hotels & Resorts, Inc. the nation's largest lodging real estate investment trust (REIT), today announced its results of operations for the first quarter ended March 24, 2006. First quarter results include the following:

Total revenue increased 7.3% to $848 million for the first quarter of 2006.

Net income increased $166 million to $172 million for the first quarter of 2006. Earnings per diluted share increased $.45 to $.44 for the first quarter.

For the first quarter of 2006, net income includes $146 million, or $.39 per diluted share, from gains on hotel dispositions. Bycomparison, for the first quarter of 2005, net income includes a net loss of $1 million from costs associated with the refinancing of senior notes and gains on hotel dispositions. For further detail, refer to the "Schedule of Significant Transactions Affecting Earningsper Share and Funds From Operations per Diluted Share" attached to this press release.

Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes Depreciation, Amortization and other items, increased 9.4% to $210 million for the first quarter of 2006. (Adjusted EBITDA has been reduced by $2 million for the first quarter of 2006 for distributions to minority interest partners of Host Hotels & Resorts, L.P.)

Funds from Operations (FFO) per diluted share increased 42% to $.27 for the first quarter of 2006. FFO per diluted share was reduced by $.04 for the first quarter of 2005 for costs associated with therefinancing of senior notes.

Adjusted EBITDA, FFO per diluted share and comparable hotel adjusted operating profit margins (discussed below) are non-GAAP (generally accepted accounting principles) financial measures within the meaning of the rules of the Securities and Exchange Commission (SEC). See the discussion included in this press release for information regarding these non-GAAP financial measures.

Operating Results

Comparable hotel RevPAR (based on 98 of our 103 full-service hotels as of March 24, 2006) for the first quarter of 2006 increased 7.6% and comparable hotel adjusted operating profit margins increased 2.2 percentage points when compared to the first quarter of 2005. The first quarter increases were driven by a 7.7% increase in average room rate, while occupancy remained stable, with a decline of only 0.1 percentage points. Based on a March 31 calendar quarter end, our comparable hotel RevPAR increased 8.8% over the first quarter of 2005. The first quarter comparable hotel RevPAR was negatively affected by approximately one percentage point as a result of the significant renovation at the JW Marriott Hotel in Washington, D.C.

Christopher J. Nassetta, president and chief executive officer, stated, "The outstanding operating results we accomplished in 2005 continued through the first quarter of 2006, as our RevPAR and operating margin growth led to a strong first quarter FFO per diluted share of $.27, exceeding the high-end of our expectations by $.02 per diluted share."

Starwood Acquisition

On April 10, 2006, the Company completed the acquisition of 28 hotels from Starwood Hotels and Resorts Worldwide, Inc. ("Starwood") for approximately $3.1 billion. The closing of the remaining seven international hotels to be acquired from Starwood (two in Fiji and five in Europe) has been deferred as a result of certain notice periods and approvals that have not yet lapsed or been received.

On March 24, 2006, the Company entered into a joint venture in Europe with Stichting Pensioenfonds ABP and Jasmine Hotels Pte Ltd, a subsidiary of GIC Real Estate Pte Ltd. The Company expects the joint venture will acquire four of the European hotels previously deferred from Starwood on May 3, 2006. The Sheraton Warsaw Hotel & Towers, which was acquired as part of the April 10, 2006 closing, will be contributed by the Company along with approximately $15 million in cash in exchange for an approximate 32% equity investment in the joint venture. The joint venture also is expected to acquire the Westin Europa & Regina in Venice, Italy. The total consideration for the six hotels will be approximately $621 million.

Balance Sheet As of March 24, 2006, the Company had $481 million of cash and cash equivalents. The Company currently has $575 million of availability under its credit facility.

Subsequent to quarter end, the Company issued $800 million of 6 3/4% Series P senior notes due in 2016 for net proceeds of approximately $787 million, which were used, or will be used, to fund a portion of the Starwood acquisition, redeem the remaining $136 million of 7 7/8% Series B senior notes, redeem all of the $150 million 10% Class C preferred stock and other general corporate purposes. In addition, subsequent to quarter end, the Company has received approximately $420 million in net proceeds from the sale of The Drake, New York, funded approximately $750 million of cash, including certain transaction expenses and net of certain cash acquired from Starwood, in the first phase of the Starwood acquisition and paid approximately $60 million in common and preferred dividends. Upon the completion of these transactions, the Company will have approximately $590 million of available cash, $115 million of which we expect to use to purchase the two deferred hotels in Fiji from Starwood and to fund the Company's cash investment in the European joint venture.

During December of 2005 and the first quarter of 2006, the Company completed the conversion of $473 million of Convertible Subordinated Debentures into approximately 30.8 million common shares. On April 5, 2006, the Company redeemed the remaining $2 million of Convertible Subordinated Debentures for cash.

W. Edward Walter, executive vice president, chief financial officer, stated, "The combination of strong operating results, reduced interest costs, and our approach to financing the Starwood transaction, which included an equity issuance, asset sales and the formation of a joint venture, has resulted in significant improvements to our balance sheet. As a result, when evaluated on the basis of our interest coverage ratio, we have the strongest balance sheet in the history of our company."

Other Acquisitions and Dispositions

During the first quarter of 2006, the Company disposed of four hotels, including the Fort Lauderdale Marina Marriott, for net proceeds of approximately $250 million and a combined gain on the sales of approximately $150 million. The Company also completed the sale of The Drake, New York on March 31, 2006 and received net proceeds of approximately $420 million and will recognize a gain of approximately $235 million in the second quarter. The proceeds from these sales were used to fund a portion of the Starwood acquisition.

James F. Risoleo, executive vice president, chief investment officer, stated, "The strategic sales of the Fort Lauderdale Marina Marriott and The Drake in New York allowed us to realize the tremendous real estate value inherent in these assets, which far exceeded their value as hotel properties. As we move forward in 2006, we still see opportunities to acquire high quality assets in North America and Europe that are consistent with our strategy of acquiring luxury and upper upscale hotels in urban and resort destinations."