Host Hotels & Resorts Inc. (HST), the largest lodging real estate investment trust (REIT) in the U.S., reported fourth-quarter FFO (funds from operations) of $113 million or 18 cents per share, compared to $289 million or 52 cents per share in the year-earlier quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
 
For full year 2009, FFO was $303 million or 51 cents per share, compared to $945 million or $1.71 per share. The decrease in FFO was primarily due to non-cash interest expenses and impairment charges.

Excluding the non-recurring items, FFO was 24 cents and 79 cents per share for the quarter and for full year 2009, respectively. Total revenue decreased 16.8% during the quarter to $1.3 billion compared to the year-earlier quarter. For full year 2009, total revenue decreased 19.1% to $4.2 billion, compared to the previous year.



Comparable hotel revenue per available room (RevPAR) declined 14.6% during the quarter driven by a decrease in occupancy and sharp fall in average daily rates in tune with the reduced consumer discretionary income due to the prolonged economic downturn. Comparable hotel adjusted operating margins also decreased 430 basis points during the quarter.

For full year 2009, comparable hotel RevPAR decreased 19.9% year over year, while comparable hotel adjusted operating margins decreased 520 basis points. At year-end 2009, Host Hotels had a strong balance sheet with cash and cash equivalents of over $1.6 billion and about $600 million available under its revolving credit facility. During the quarter, Host Hotels issued $400 million of 2.5% Exchangeable Senior Debentures due 2029 and received net proceeds of approximately $391 million. The company utilized the proceeds to redeem the remaining $346 million of the 7% Series M senior notes.
 
Also, Host Hotels issued approximately 15 million common shares for net proceeds of $157 million during the quarter. In addition, the company also repaid $124 million mortgage on the Atlanta Marriott Marquis. Consequently, Host Hotels reduced its outstanding debt by $470 million to approximately $5.4 billion and currently has approximately $1.2 billion of available cash and cash equivalents.



Host Hotels paid a special dividend of 25 cents per share during the quarter through a combination of cash and stock. The special dividend consisted of approximately $15.6 million of cash and approximately 13.4 million shares of common stock valued approximately at $10.46 each. The company anticipates the economic stress to negatively affect its operating results in 2010 as well, with comparable hotel RevPAR expected to decline approximately 0% to 5% for the full year. Host Hotels further anticipates FFO for 2010 in the range of 41 cents to 57 cents per share.

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