Host Hotels & Resorts, Inc. Reports Results for the Fourth Quarter and Full Year 2011

The increase in total revenues reflects the performance of the Company's owned hotels and includes the 14 hotels (5,200 rooms) acquired since July 2010, which increased revenues by an incremental $83 million and $296 million for the fourth quarter and full year 2011, respectively. Total revenues also include incremental property-level revenues for 53 leased, select service hotels of $54 million for full year 2011.    

The improvements in net income (loss), Adjusted EBITDA (which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items), NAREIT Funds from Operations ("FFO") and Adjusted FFO reflect the improvement in comparable hotel operations and the effect of the Company's recent acquisitions.  All of these metrics were negatively impacted by the forfeiture of a $15 million deposit related to the Company's decision in December 2011 not to acquire the Grand Hyatt Washington, D.C.

NAREIT FFO per diluted share, Adjusted FFO per diluted share, Adjusted EBITDA and comparable hotel adjusted operating profit margins 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 on why the Company believes these supplemental measures are useful, reconciliations to the applicable GAAP measure and the limitations on their use.

OPERATING RESULTS

The increase in comparable hotel RevPAR of 5.9% in the fourth quarter reflects the improvement in average room rate of 3.8%, combined with an increase in occupancy of 1.3 percentage points. Similarly, for full year 2011, the increase in comparable hotel RevPAR of 6.1% reflects the improvement in average room rate of 4.3% and a 1.3 percentage point increase in occupancy. Comparable hotel revenues also include an increase in food and beverage revenues of 6.8% and 5.5% for the quarter and full year, respectively.  The increase in revenues drove improvements in the comparable hotel adjusted operating profit margins of 100 basis points for the quarter and 90 basis points for the full year.

INVESTMENTS

• REDEVELOPMENT AND RETURN ON INVESTMENT EXPENDITURES - The Company invested approximately $202 million in 2011 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. During the fourth quarter, the Company substantially completed the redevelopment of 466 rooms along with 27,000 square feet of meeting space at the Chicago Marriott O'Hare and over 11,000 square feet of lobby, restaurant and meeting space at the Hilton Singer Island Oceanfront Resort. The Company expects that its investment in ROI expenditures for 2012 will total approximately $155 million to $175 million.
• ACQUISITION EXPENDITURES – In conjunction with the acquisition of a property, the Company prepares a capital improvement plan designed to enhance the profitability of the hotel. Consistent with plans developed for recent acquisitions, during the fourth quarter of 2011, the Company began work on the renovation of all 270 rooms at the W New York – Union Square and the rebranding of the New York Helmsley Hotel to a Westin, including a redesign of all 773 rooms and a new lobby bar and restaurant. The Company spent approximately $13 million on acquisition projects in 2011 and expects to invest between $80 million and $100 million in 2012.
• RENEWAL AND REPLACEMENT EXPENDITURES - The Company also invested approximately $327 million in 2011 in renewal and replacement expenditures designed to ensure that the high-quality standards of both the Company and its operators are maintained. During 2011, the Company completed renovations to over 5,300 guestrooms, 98,000 square feet of restaurants, lobbies and other public space and over 515,000 square feet of ballrooms and meeting space, taking advantage of favorable construction pricing, while significantly improving its properties. Major renewal and replacement projects completed during the fourth quarter included the renovation of all 371 rooms at the JW Marriott, Buckhead Atlanta, all 296 rooms at the Tampa Airport Marriott and 24,100 square feet of remodeled ballroom and meeting space at the San Ramon Marriott. The Company expects that renewal and replacement expenditures for 2012 will total approximately $310 million to $330 million.  

BALANCE SHEET

During the fourth quarter, the Company continued to execute on its strategic goal of strengthening its balance sheet by balancing debt maturities through the following transactions:

• on November 18, 2011 the Company issued $300 million of 6% Series Y senior notes due October 2021. The net proceeds of approximately $295 million will be used, along with available cash, to repurchase or repay the $388 million of 2?% exchangeable senior debentures, which are expected to be put to the Company in April of 2012;
• on November 22, 2011 the Company closed on a new senior revolving credit facility with a syndicate of banks. The credit facility allows for borrowings in an aggregate principal amount of up to $1 billion. The interest rate spread for LIBOR-based borrowings ranges from 175 to 275 basis points. Based on the Company's credit statistics at December 31, 2011, the spread would be 200 basis points. The credit facility has an initial maturity of November 2015 with an option to extend for one additional year, subject to certain conditions and the payment of an extension fee; and
• in November 2011, the Company refinanced the mortgage loan on the Hilton Melbourne South Wharf, which extended the maturity of the loan to 2016 and lowered the effective interest rate by 400 basis points. For the A$82 million loan, 75% bears interest at a fixed rate of 6.7%, through an interest rate swap, while the remaining 25% bears interest at a floating rate based on the 3-month Reuters' Bank Bill Swap Bid Rate (BBSY) plus 230 basis points for a combined rate of 6.77% at December 31, 2011.

As of December 31, 2011, the Company had approximately $826 million of cash and cash equivalents and $883 million of available capacity under its credit facility.

EUROPEAN JOINT VENTURE

Comparable hotel RevPAR for the portfolio of hotels owned by the joint venture in Europe, in which the Company holds an approximate one-third partnership interest, increased 1.0% for the fourth quarter and 5.5% year-to-date on a constant Euro basis. The growth was driven by an increase in average room rate of 5.3% and 5.5% for the fourth quarter and full year 2011, respectively.

DIVIDEND

On January 17, 2012, the Company paid a fourth quarter dividend of $0.05 per share on its common stock. The Company's policy on common dividends is generally to distribute, over time, 100% of its taxable income.  Based on its guidance for 2012, the Company intends to declare, subject to approval by the Company's board of directors, a quarterly dividend of $.06 per share in the first quarter.

2012 OUTLOOK

The Company anticipates for 2012 that:

• Comparable hotel RevPAR will increase 4% to 6%;
• Operating profit margins under GAAP would increase approximately 140 basis points to 230 basis points; and
• Comparable hotel adjusted operating profit margins will increase approximately 25 basis points to 75 basis points.

Based upon these parameters, the Company estimates that its full year 2012 guidance is as follows:

• earnings per diluted share should range from approximately $.08 to $.15;
• net income should range from $57 million to $112 million;
• NAREIT and Adjusted FFO per diluted share should be approximately $.97 to $1.04; and,
• Adjusted EBITDA should be approximately $1,090 million to $1,145 million.

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 105 properties in the United States and 16 properties internationally totaling approximately 65,000 rooms. The Company also holds non-controlling interests in a joint venture in Europe that owns 13 hotels with approximately 4,200 rooms and a joint venture in India that is investing in seven hotels with approximately 1,750 rooms that are in various stages of development in three cities. 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.

Host Hotels & Resorts, Inc., herein referred to as "we" or "Host," 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 and Host LP, the primary difference is approximately 1.5% of the partnership interests in Host LP held by outside partners as of December 31, 2011, which is non-controlling interests in Host LP in our consolidated balance sheets and is included in net income/loss 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.

For information on our reporting periods and non-GAAP financial measures (including Adjusted EBITDA, NAREIT and Adjusted FFO per diluted share and comparable hotel adjusted operating profit margin) which we believe is useful to investors, see the Notes to the Financial Information included in this release.

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