Host Hotels & Resorts Inc. (HST), the largest lodging real estate investment trust (REIT) in the U.S., reported first quarter 2010 FFO (funds from operations) of 8 cents per share, compared to 10 cents 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.
Total revenue decreased 5% during the quarter to $823 million compared to the year-earlier quarter. Comparable hotel revenue per available room (RevPAR) declined 2.3% 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 275 basis points during the quarter.
During the quarter, Host Hotels sold the 374-room Sheraton Braintree Hotel for $9 million for a profit of approximately $1 million. Total capital expenditures during the quarter were $50 million, which included return on investment (ROI) and repositioning projects of approximately $23 million. Host Hotels completed the renovation of over 95,000 square feet of ballroom and meeting space at the San Francisco Marriott Marquis hotel during the quarter. In addition, the company has begun a renovation project at the 1,362-room San Diego Marriott Hotel & Marina, which is expected to cost approximately $190 million.
At quarter end, Host Hotels had a strong balance sheet with cash and cash equivalents of over $1.2 billion and about $600 million available under its revolving credit facility. During the quarter, Host Hotels redeemed $346 million of the 7% Series M senior notes, and repaid a mortgage loan of $124 million collateralized by Atlanta Marriott Marquis. Also, the company issued approximately 4 million common shares at an average price of $12.65 each for net proceeds of $55 million during the quarter.
Host Hotels anticipates the gradual revival of the overall economy to positively affect its operating results in 2010, with comparable hotel RevPAR expected to increase in the range of 1% to 4% for the full year. Host Hotels further anticipates FFO for 2010 in the range of 58 cents to 65 cents per share, up from its earlier guidance of 41 cents to 57 cents.
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