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SEC Filings, Earing Reports, Press Releases
Host Hotels & Resorts Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: July 25, 2011 03:40PM
Host Hotels & Resorts Inc. (HST) filed Quarterly Report for the period ended 2011-06-17.
Highlight of Business Operations:
On April 29, 2011, we acquired a 75% common voting interest and a preferred interest in the entity that indirectly owns the 364-room Hilton Melbourne South Wharf, Australia. The hotel is an integral part of the broader complex of the Melbourne Convention and Exhibition Center, which has over 484,000 square feet of available conference facilities. The total transaction value, including the 25% voting interest retained by the third party, is AUD 142 million ($152 million) and includes an existing AUD 80 million ($86 million) mortgage loan. We drew $50 million on our credit facility to fund the acquisition, which we subsequently repaid during the quarter. We are entitled to receive a cumulative priority return of 12% based on our initial investment of AUD 45 million ($48 million), plus 75% of the distributable cash after our partners subordinated preferred interest.
Return on Investment capital expenditures. We invested $75 million and $121 million in return on investment (ROI) projects during the second quarter and year-to-date of 2011, respectively. These projects are designed to increase cash flow and improve profitability by capitalizing on changing market conditions and the favorable locations of our properties. Major ROI projects substantially completed during the second quarter include: the first phase of our re-development project at our 1,756-room Sheraton New York Hotel & Towers and the expansion and renovation of 21,000 square feet of meeting space at the St. Regis Hotel, Houston. We expect that our investment in ROI expenditures for 2011 will total approximately $220 million to $240 million.
Renewal and Replacement Capital Expenditures. We also spent approximately $71 million and $119 million in the second quarter and year-to-date of 2011, respectively, for renewal and replacement expenditures designed to ensure that the high-quality standards of both ourselves and our operators are maintained. Major renewal and replacement projects completed during the second quarter include the renovation of 991 rooms at the New York Marriott Marquis and the renovation of the meeting space and the 1,200 rooms in the main tower of the Philadelphia Marriott Downtown. We expect that renewal and replacement expenditures for 2011 will total approximately $320 million to $345 million.
Debt Transactions. During the second quarter of 2011, we issued $500 million of 5 7/8% Series W senior notes. Proceeds were used to repay the remaining $250 million of the 7 1/8% Series K senior notes that were due November 2013 and to repay the $50 million outstanding under our credit facility that had been drawn in the second quarter to
On May 27, 2011, we gave notice of our intent to redeem $150 million of the outstanding $325 million 3.25% Exchangeable Senior Debentures (the 2004 Debentures). Subsequent to the end of the second quarter, holders of approximately $134 million of the debentures elected to exchange their debentures for shares of Hosts common stock totaling approximately 8.8 million shares, rather than receive the cash redemption proceeds, while the remaining $16 million of debentures were redeemed for cash. We also repaid $41 million under our credit facility and transferred the Le Méridien Piccadilly, including the £32 million ($52 million) mortgage and £38 million ($61 million) capital lease obligation associated with the property, to the Euro JV Fund II. As a result of these transactions, our total debt outstanding decreased by $304 million to approximately $5.6 billion and we have $479 million of available capacity under our credit facility.
Equity Transactions. On April 21, 2011, we entered into a Sales Financing Agreement with BNY Mellon Capital Markets, LLC, through which Host Inc. may issue and sell, from time to time, shares having an aggregate offering price of up to $400 million. The sales will be made in at the market offerings under Securities and Exchange Commission (SEC) rules, including sales made directly on the New York Stock Exchange (NYSE). BNY Mellon Capital Markets, LLC is acting as sales agent. During the second quarter, we issued 11 million common shares under our at the market offering program. The shares were issued at an average price of $17.29 for net proceeds of $189 million, net of $2 million of commissions. Year-to-date (including sales under our prior at the market program), we have issued 16.7 million shares at an average price of $17.45 per share for net proceeds of $288 million. We may continue to sell shares of common stock under the current program from time to time based on market conditions, although we are not under an obligation to sell any shares. We have $209 million of issuance capacity remaining under the current program.
Stocks Discussed: HST,