Host Hotels & Resorts, Inc. Reports Strong Operating Performance For The Second Quarter

The Company's owned hotel revenues increased 9.4% for the second quarter and 7.2% for year-to-date 2013, compared to the 2012 As Adjusted results, due to the strong performance of its comparable properties, as well as incremental revenues of $31 million for the quarter and $52 million year-to-date from the Grand Hyatt Washington, which was acquired in July 2012.

The increase in comparable hotel RevPAR was primarily driven by improvements in average room rates, coupled with continued occupancy growth. For the second quarter and year-to-date 2013, average room rates improved 4.5% and 4.3%, respectively, when compared to the 2012 As Adjusted results, while occupancy improved 1.2 percentage points to 79.8% for the second quarter and 1.0 percentage point to 76.1% for the year-to-date. Revenues from comparable food and beverage increased 6.6% and 3.0% for the quarter and year-to-date, respectively. The increase was driven by improvements in banquet and audio-visual sales, which also led to increased profitability. The improvements in revenues led to strong margin growth as comparable hotel adjusted operating profit margins increased 180 basis points and 140 basis points for the second quarter and year-to-date 2013, respectively, compared to 2012 As Adjusted.

ACQUISITIONS    

On May 31, 2013, the Company acquired the fee-simple interest in the 426-room Hyatt Place Waikiki Beach in Honolulu, Hawaii for $138.5 million. The hotel is located approximately one block from Waikiki Beach and is in close proximity to the Waikiki Aquarium, the Honolulu Zoo and the Kalakaua shopping/entertainment district. Kokua Hospitality will continue to manage the hotel subject to a franchise agreement with Hyatt. 

DISPOSITIONS    

On June 28, 2013, the Company sold The Ritz-Carlton, San Francisco, including the furniture, fixtures & equipment ("FF&E") replacement fund, for a sales price of $161 million. The Company has recorded a deferred gain of approximately $25 million, $14 million of which the Company expects to recognize in the third quarter upon completion of certain post-closing conditions. The remainder of the deferred gain is subject to performance guarantees through which the Company has guaranteed certain annual net operating profit levels for the hotel through 2016, with a maximum payment of $4 million per year, not to exceed $11 million in total.  

INVESTMENTS

• REDEVELOPMENT AND RETURN ON INVESTMENT EXPENDITURES - The Company invested approximately $26 million and $47 million during the second quarter and year-to-date 2013, respectively, in redevelopment and return on investment ("ROI") expenditures. These projects are designed to increase cash flow and improve profitability by capitalizing on changing market conditions and the favorable locations of the Company's properties. Projects completed during the second quarter include the lobby and restaurant renovation at the Philadelphia Airport Marriott and the restaurant and bar renovation at the Hyatt Regency Reston. The Company expects ROI investments for 2013 of approximately $90 million to $100 million.

• CAPITAL EXPENDITURES FOR RECENT ACQUISITIONS - In conjunction with the acquisition of a property, the Company prepares capital and operational improvement plans designed to maximize profitability and enhance the guest experience. The Company invested approximately $7 million and $22 million on these projects during the second quarter and year-to-date 2013, respectively. During the second quarter, the Company completed the renovation of all 1,625 guest rooms at the Manchester Grand Hyatt San Diego. The Company expects that acquisition expenditures will total approximately $35 million to $45 million for 2013.
• RENEWAL AND REPLACEMENT EXPENDITURES - The Company invested approximately $76 million and $163 million in renewal and replacement expenditures during the second quarter and year-to-date 2013, respectively. These expenditures are designed to ensure that the high-quality standards of both the Company and its operators are maintained. During the quarter, major renewal and replacement projects completed include the renovation of 1,452 guestrooms, 47 suites and the concierge lounge at the San Francisco Marriott Marquis and the guestroom and lobby renovation at the San Diego Marriott Mission Valley. The Company expects that renewal and replacement expenditures for 2013 will total approximately $280 million to $300 million. 

BALANCE SHEET

The Company has worked diligently to maintain a strong balance sheet with a low leverage level and balanced debt maturities. During the second quarter, as previously announced, the Company repaid or redeemed $846 million of debt with an average interest rate of 7.2%, which was funded through the issuance of $400 million of 3.75% Series D senior notes and available cash. Since January 1, 2012, the Company has reduced its total debt by $1 billion, decreased its weighted average interest rate to 5.0% and extended its weighted average debt maturities to 5.6 years. As a result of these financing transactions, on an annual pro forma basis, cash interest expense decreased to approximately $225 million. As of June 30, 2013, the Company has approximately $393 million of cash and $798 million of available capacity under its credit facility.

Also, during the quarter, the Company issued 4.8 million shares of common stock, at an average price of $18.31 per share, for net proceeds of approximately $87 million. These issuances were made in "at-the-market" offerings pursuant to Sales Agency Financing Agreements with BNY Mellon Capital Markets, LLC and Scotia Capital (USA) Inc. There is approximately $110 million of issuance capacity remaining under the current agreements.

EUROPEAN JOINT VENTURE           

On June 20, 2013, the Company's joint venture in Europe refinanced a mortgage loan secured by a portfolio of five properties located in Spain, Italy, the United Kingdom and Poland. The loan matures in 2016 and has a one year extension option subject to meeting certain conditions. The loan has a fixed and floating rate component with an initial, all-in interest rate of 4.5%. The joint venture also reduced the outstanding principal amount of the mortgage loan from €337 million to €242 million. The Company funded its portion of the principal reduction, as well as certain closing costs and other funding requirements, through a €37 million ($48 million) draw on its credit facility. 

DIVIDEND

On July 15, 2013, the Company paid a regular quarterly cash dividend of $.11 per share on its common stock to stockholders of record on June 28, 2013. The amount of any future dividend is dependent on the Company's taxable income and will be determined by the Company's Board of Directors.

2013 OUTLOOK

The Company anticipates that for 2013:

• Comparable hotel RevPAR will increase 5.5% to 6.25%;
• Total owned hotel revenues under GAAP will increase 6.8% to 7.7%;
• Total comparable hotel revenues will increase 4.3% to 5.1%;
• Operating profit margins under GAAP will increase approximately 280 basis points to 310 basis points; and
• Comparable hotel adjusted operating profit margins will increase approximately 100 basis points to 120 basis points.

Based upon these parameters, the Company estimates that its 2013 guidance is as follows: 

• earnings per diluted share should range from approximately $.34 to $.38;
• net income should range from $265 million to $290 million;
• NAREIT FFO per diluted share should range from approximately $1.24 to $1.27;
• Adjusted FFO per diluted share should range from approximately $1.28 to $1.32; and
• Adjusted EBITDA should be approximately $1,290 million to $1,315 million.

See the 2013 Forecast Schedules and the Notes to Financial Information for other assumptions used in the forecasts and items that may affect forecasted results. Effective April 1, 2013, the Company modified its definition of Adjusted EBITDA to exclude gains or losses associated with litigation outside the ordinary course of business, which is consistent with the Company's definition of Adjusted FFO. See the Notes to Financial Information for more information on this change.  

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 103 properties in the United States and 15 properties internationally totaling approximately 62,700 rooms. The Company also holds non-controlling interests in a joint venture in Europe that owns 19 hotels with approximately 6,100 rooms and a joint venture in Asia that owns one hotel in Australia and a minority interest in two hotels in India. Guided by a disciplined approach to capital allocation and aggressive asset management, the Company partners with premium brands such as Marriott , Ritz-Carlton , Westin , Sheraton , W , St. Regis , Le Meridien , The Luxury Collection , Hyatt , Fairmont , Four Seasons , Hilton , Swissotel , ibis , Pullman , and Novotel in the operation of properties in over 50 major markets worldwide. For additional information, please visit the Company's website at www.hosthotels.com.

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 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; 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 August 2, 2013, 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.