Host Marriott Corporation , the nation`s largest lodging real estate
investment trust (REIT), today announced results of operations for the
third quarter of 2003. Third quarter results include the following:
* Total revenue was $760 million and $2,422 million, respectively, for the
third quarter and year-to-date 2003 as compared to $777 million and $2,463
million, respectively, for the same periods of 2002. * Net loss was $88
million and $136 million, respectively, for the third quarter and
year-to-date 2003 as compared to $38 million and $13 million,
respectively, for the third quarter and year-to-date 2002. (The net loss
includes the cumulative effect of a change in accounting principle
relating to SFAS No. 150, discussed on page 10, of $24 million in the
quarter and year-to-date 2003.) * The Company`s diluted loss per share was
$.35 and $.61, respectively, for the third quarter and year-to-date 2003
as compared to diluted loss per share of $.18 and $.15, respectively, for
the same periods of 2002. * Funds From Operations, or FFO, per diluted
share, was $.03 and $.40, respectively, for the third quarter and
year-to-date 2003 as compared to $.14 and $.75 per diluted share,
respectively, for the third quarter and year-to-date 2002. * Adjusted
EBITDA, which is Earnings before Interest Expense, Income Taxes,
Depreciation, Amortization and other items, was $122 million and $487
million, respectively, for the third quarter and year-to-date 2003 versus
$153 million and $581 million, respectively, for the same periods of 2002.
FFO per diluted share and Adjusted EBITDA are non-GAAP financial measures
within the meaning of the Securities and Exchange Commission, or SEC,
rules. See the discussion beginning on page 5 of this press release for
additional information on the use of these measures.
Comparable hotel RevPAR for the third quarter declined 2.5% as a result of
a 1.5% reduction in average room rate and an occupancy decline of 0.7
percentage points compared to the same period in 2002. Year-to-date
comparable hotel RevPAR declined 5.6% with a decline in room rate of 2.6%
and a decrease in occupancy of 2.2 percentage points compared to the same
period in 2002. The Company`s earnings and FFO per diluted share include
certain unusual items described on page 22.
Christopher J. Nassetta, president and chief executive officer, stated,
“Our results for the third quarter were generally in line with
expectations, with RevPAR at the higher end of our range and margins at
the lower end. Our RevPAR results have clearly improved over the first
half of the year. Further improvement should occur in 2004, as lodging
demand benefits from a strengthening economy and levels of new supply
continue to decline.”
Acquisitions and Dispositions
The Company recently announced that it has signed an agreement to acquire
the 806-room Hyatt Regency Maui Resort and Spa, a premier luxury resort
hotel in Hawaii for $321 million, or $398,000 per room. In addition to
increasing the geographic diversity of the portfolio, the hotel benefits
from extremely high barriers to entry for new supply. The acquisition is
consistent with Host Marriott`s strategy of acquiring high quality
properties in difficult to duplicate locations. The purchase is subject to
customary closing conditions and is expected to close by year-end.
“We are pleased with the pending acquisition of the Hyatt Regency Maui. It
will be the Company`s first property in Hawaii, a market that should
continue to perform well. We are continuing to pursue additional
acquisitions that are consistent with our target profile of upscale and
luxury properties in markets with significant barriers to entry,” said
James F. Risoleo, executive vice president, acquisitions and development.
As of September 12, 2003, the Company had $547 million in cash on hand and
$250 million of availability under its credit facility. The Company does
not believe that it will need to borrow under the credit facility for the
remainder of 2003.
During August 2003, the Company issued 27.5 million shares of common stock
for net proceeds of $251 million, which will be used to partially fund the
purchase of the Hyatt Regency Maui.
Also in August, the Company entered into two, four-year interest rate swap
agreements, which mature October 2007, effectively converting its $242
million Series G senior notes to floating rate debt. The Company also
redeemed $71 million of its Series A senior notes using the proceeds from
the sale of three non-core properties. In September, we refinanced the $95
million mortgage debt secured by the JW Marriott Hotel in Washington, D.C.
with an $88 million floating-rate mortgage loan. The effect of these
transactions is that the Company`s total fixed rate debt has been reduced
from 90% to 84%.
W. Edward Walter, executive vice president and chief financial officer,
stated, “The combination of our equity issuance, which will facilitate the
acquisition of the Hyatt Regency Maui, the senior notes redemption, the
swap transaction and the mortgage refinancing have furthered our progress
toward reducing our leverage and adding flexibility to our balance sheet.”
The Company`s updated guidance for RevPAR for full year 2003 is for a
decline of approximately 4% to 5% and fourth quarter RevPAR of flat to
down 2.5%. Based upon this guidance, the Company estimates the following
for full year 2003:
* Diluted loss per share should be approximately $.75 to $.71; * Net loss
should be approximately $174 million to $160 million; * FFO per diluted
share should be approximately $.62 to $.66; and * Adjusted EBITDA should
be approximately $715 million to $730 million.
Although the Company has more than adequate liquidity, based upon the
current forecast, the Company believes that it is unlikely that a fourth
quarter 2003 dividend will be paid on its preferred or common shares due
to limitations in the Company`s senior notes indenture and credit
facility, both of which restrict the Company`s ability to pay dividends
when the Company`s EBITDA to interest coverage ratio (as defined in our
senior notes indenture) is below 2.0 to 1.0.