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Host Hotels & Resorts Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 2, 2011 12:25PM
Host Hotels & Resorts Inc. (HST) filed Quarterly Report for the period ended 2011-03-25.
Highlight of Business Operations:
Return on Investment capital expenditures. Our return on investment (ROI) projects totaled $46 million in the first quarter of 2011 compared to $23 million in the first quarter of 2010. These projects are designed to increase cash flow and improve profitability by capitalizing on changing market conditions and the favorable locations of our properties. These expenditures include approximately $30 million for significant redevelopment projects at several of our properties, including the Sheraton New York, Sheraton Indianapolis and the San Diego Marriott Marquis & Marina. On February 28, 2011, the San Diego Marriott Marquis & Marina became one of only five hotels in the country to earn the Marquis distinction from Marriott International, Inc., as key elements of its extensive multi-year renovation project were completed. We expect that our investment in ROI expenditures will total approximately $230 million to $250 million in 2011.
Renewal and Replacement Capital Expenditures. In addition to the ROI expenditures described above, we spent $48 million and $27 million on renewal and replacement expenditures during the first quarter of 2011 and 2010, respectively. Major renovation projects that were completed during the first quarter of 2011 include 98,700 square feet of meeting space at the Sheraton Boston, 87,500 square feet of meeting space at the Philadelphia Marriott Downtown, 36,000 square feet of meeting space at the Hyatt Regency Washington on Capitol Hill and 1,001 rooms at the San Antonio Marriott Rivercenter. These expenditures are designed to ensure that our high standards for product quality are maintained and to enhance the overall competitiveness of our properties in the marketplace. We expect that renewal and replacement expenditures for 2011 will be approximately $300 million to $325 million.
Debt Transactions. During the first quarter of 2011, we repaid the CAD129 million ($132 million) mortgage debt on our portfolio of hotels in Canada and drew CAD100 million ($103 million) under our credit facility to partially fund this repayment. Additionally, during the quarter we entered into an NZD105 million ($80 million) mortgage as part of our acquisition of a portfolio of seven midscale and upscale hotels in New Zealand. This loan matures in 2016.
Equity Transactions. On April 21, 2011, we entered into a new Sales Financing Agreement with BNY Mellon Capital Markets, LLC, through which Host Inc. may issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $400 million. The sales will be made in at the market offerings under SEC rules, including sales made directly on the NYSE. BNY Mellon Capital Markets, LLC is acting as sales agent. Host Inc. may sell shares of common stock under its new program from time to time based on market conditions, although it is not under an obligation to sell any shares. As of April 28, 2011, we have not sold any shares under the new program. The 2011 agreement replaces the prior Sales Agency Financing Agreement with BNY Mellon Capital Markets, LLC that we entered into on August 19, 2010. We completed all sales under the prior Sales Agency Financing Agreement through the issuance in the first quarter of 2011 of 5.6 million shares of common stock at an average price of $17.76 per share for proceeds of $99 million, net of $1 million of commissions.
Other revenues. For 2011, the increase was primarily driven by the inclusion of the HPT hotel revenue. On July 6, 2010, we terminated the subleases for 71 hotels leased from HPT because the subtenants failed to meet net worth covenants. Accordingly, beginning on July 7, 2010, we record the gross hotel revenues of these hotels instead of rental income, both of which were recorded in other revenues on our consolidated statements of operations. For the first quarter of 2011, we recognized revenues for the 53 Courtyard by Marriott properties leased from HPT of $45 million. For the first quarter of 2010, other revenues includes rental income of $18 million related to the 71 properties leased from HPT at that time, prior to the termination of the Residence Inn sublease for 18 hotels on December 31, 2010. The property revenues and rental income recorded less the hotel expenses and rental expenses for the HPT hotels resulted in a loss of approximately $6 million and $1 million as of March 25, 2011 and March 26, 2010, respectively.
Stocks Discussed: HST,