Host Hotels & Resorts (HST) 10-Q 2021 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended date September 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission File Number: 001-14625 (Host Hotels & Resorts, Inc.)

0-25087 (Host Hotels & Resorts, L.P.)

HOST HOTELS & RESORTS, INC.

HOST HOTELS & RESORTS, L.P.

(Exact name of registrant as specified in its charter)

Maryland (Host Hotels & Resorts, Inc.) Delaware (Host Hotels & Resorts, L.P.) (State or Other Jurisdiction of Incorporation or Organization)	53-0085950 52-2095412 (I.R.S. Employer Identification No.)
4747 Bethesda Ave, Suite 1300 Bethesda, Maryland (Address of Principal Executive Offices)	20814 (Zip Code)

(240) 744-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

	Title of each class	Trading Symbol	Name of Each Exchange on Which Registered
Host Hotels & Resorts, Inc.	Common Stock, $.01 par value	HST	The Nasdaq Stock Market LLC
Host Hotels & Resorts, L.P.	None	None	None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Host Hotels & Resorts, Inc.	Yes  ☑	No ☐
Host Hotels & Resorts, L.P.	Yes  ☑	No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Host Hotels & Resorts, Inc.	Yes  ☑	No ☐
Host Hotels & Resorts, L.P.	Yes  ☑	No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Host Hotels & Resorts, Inc.
Large accelerated filer    ☑	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐
Host Hotels & Resorts, L.P.
Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer    ☑	Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Host Hotels & Resorts, Inc.	Yes ☐	No ☑
Host Hotels & Resorts, L.P.	Yes ☐	No ☑

As of November 2, 2021, there were 714,035,318 shares of Host Hotels & Resorts, Inc.’s common stock, $.01 par value per share, outstanding.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q of Host Hotels & Resorts, Inc. and Host Hotels & Resorts, L.P. Unless stated otherwise or the context requires otherwise, references to “Host Inc.” mean Host Hotels & Resorts, Inc., a Maryland corporation, and references to “Host L.P.” mean Host Hotels & Resorts, L.P., a Delaware limited partnership, and its consolidated subsidiaries, in cases where it is important to distinguish between Host Inc. and Host L.P. We use the terms “we,” “our” or “the company” to refer to Host Inc. and Host L.P. together, unless the context indicates otherwise.

Host Inc. operates as a self-managed and self-administered real estate investment trust (“REIT”). Host Inc. owns properties and conducts operations through Host L.P., of which Host Inc. is the sole general partner and of which it holds approximately 99% of the partnership interests (“OP units”). The remaining OP units are owned by various unaffiliated limited partners. As the sole general partner of Host L.P., Host Inc. has the exclusive and complete responsibility for Host L.P.’s day-to-day management and control. Management operates Host Inc. and Host L.P. as one enterprise. The management of Host Inc. consists of the same persons who direct the management of Host L.P. As general partner with control of Host L.P., Host Inc. consolidates Host L.P. for financial reporting purposes, and Host Inc. does not have significant assets other than its investment in Host L.P. Therefore, the assets and liabilities of Host Inc. and Host L.P. are substantially the same on their respective condensed consolidated financial statements and the disclosures of Host Inc. and Host L.P. also are substantially similar. For these reasons, we believe that the combination into a single report of the quarterly reports on Form 10-Q of Host Inc. and Host L.P. results in benefits to management and investors.

The substantive difference between Host Inc.’s and Host L.P.’s filings is the fact that Host Inc. is a REIT with public stock, while Host L.P. is a partnership with no publicly traded equity. In the condensed consolidated financial statements, this difference primarily is reflected in the equity (or partners’ capital for Host L.P.) section of the consolidated balance sheets and in the consolidated statements of equity (or partners’ capital for Host L.P.). Apart from the different equity treatment, the condensed consolidated financial statements of Host Inc. and Host L.P. are nearly identical.

This combined Form 10-Q for Host Inc. and Host L.P. includes, for each entity, separate interim financial statements (but combined footnotes), separate reports on disclosure controls and procedures and internal control over financial reporting and separate CEO/CFO certifications. In addition, with respect to any other financial and non-financial disclosure items required by Form 10-Q, any material differences between Host Inc. and Host L.P. are discussed separately herein. For a more detailed discussion of the substantive differences between Host Inc. and Host L.P. and why we believe the combined filing results in benefits to investors, see the discussion in the combined Annual Report on Form 10-K for the year ended December 31, 2020 under the heading “Explanatory Note.”

i

HOST HOTELS & RESORTS, INC. AND HOST HOTELS & RESORTS, L.P.

INDEX

PART I. FINANCIAL INFORMATION

		Page No.
Item 1.	Financial Statements for Host Hotels & Resorts, Inc.:
	Condensed Consolidated Balance Sheets - September 30, 2021 (unaudited) and December 31, 2020	1
	Condensed Consolidated Statements of Operations (unaudited) - Quarter and Year-to-date ended September 30, 2021 and 2020	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) - Quarter and Year-to-date ended September 30, 2021 and 2020	3
	Condensed Consolidated Statements of Cash Flows (unaudited) -Year-to-date ended September 30, 2021 and 2020	4
	Financial Statements for Host Hotels & Resorts, L.P.:
	Condensed Consolidated Balance Sheets - September 30, 2021 (unaudited) and December 31, 2020	6
	Condensed Consolidated Statements of Operations (unaudited) - Quarter and Year-to-date ended September 30, 2021 and 2020	7
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) - Quarter and Year-to-date ended September 30, 2021 and 2020	8
	Condensed Consolidated Statements of Cash Flows (unaudited) - Year-to-date ended September 30, 2021 and 2020	9
	Notes to Condensed Consolidated Financial Statements (unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	46
Item 4.	Controls and Procedures	47
	PART II. OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 6.	Exhibits	49

ii

HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2021 and December 31, 2020

(in millions, except share and per share amounts)

	September 30, 2021			December 31, 2020
	(unaudited)
ASSETS
Property and equipment, net	$	10,124		$	9,416
Right-of-use assets		559			597
Assets held for sale		280			—
Due from managers		58			22
Advances to and investments in affiliates		62			21
Furniture, fixtures and equipment replacement fund		138			139
Other		453			360
Cash and cash equivalents		1,038			2,335
Total assets	$	12,712		$	12,890
LIABILITIES, NON-CONTROLLING INTERESTS AND EQUITY
Debt
Senior notes	$	3,068		$	3,065
Credit facility, including the term loans of $997		2,472			2,471
Other debt		5			5
Total debt		5,545			5,541
Lease liabilities		572			610
Accounts payable and accrued expenses		91			71
Due to managers		55			64
Liabilities held for sale		37			—
Other		167			170
Total liabilities		6,467			6,456
Redeemable non-controlling interests - Host Hotels & Resorts, L.P.		119			108
Host Hotels & Resorts, Inc. stockholders’ equity:
Common stock, par value $.01, 1,050 million shares authorized, 714.0 million shares and 705.4 million shares issued and outstanding, respectively		7			7
Additional paid-in capital		7,700			7,568
Accumulated other comprehensive loss		(75	)		(74	)
Deficit		(1,511	)		(1,180	)
Total equity of Host Hotels & Resorts, Inc. stockholders		6,121			6,321
Non-redeemable non-controlling interests—other consolidated partnerships		5			5
Total equity		6,126			6,326
Total liabilities, non-controlling interests and equity	$	12,712		$	12,890

See notes to condensed consolidated financial statements.

1

HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Quarter and Year-to-date ended September 30, 2021 and 2020

(unaudited, in millions, except per share amounts)

	Quarter ended September 30,						Year-to-date ended September 30,
	2021			2020			2021			2020
REVENUES
Rooms	$	557		$	126		$	1,237		$	813
Food and beverage		191			31			405			372
Other		96			41			250			168
Total revenues		844			198			1,892			1,353
EXPENSES
Rooms		150			69			324			299
Food and beverage		146			72			313			356
Other departmental and support expenses		252			109			621			541
Management fees		27			5			59			33
Other property-level expenses		82			77			239			240
Depreciation and amortization		263			166			597			498
Corporate and other expenses		24			18			73			68
Gain on insurance and business interruption settlements		(5	)		—			(5	)		—
Total operating costs and expenses		939			516			2,221			2,035
OPERATING LOSS		(95	)		(318	)		(329	)		(682	)
Interest income		1			—			2			7
Interest expense		(43	)		(66	)		(128	)		(143	)
Other gains		2			—			4			13
Equity in earnings (losses) of affiliates		2			(5	)		36			(26	)
LOSS BEFORE INCOME TAXES		(133	)		(389	)		(415	)		(831	)
Benefit for income taxes		13			73			81			156
NET LOSS		(120	)		(316	)		(334	)		(675	)
Less: Net loss attributable to non-controlling interests		1			3			3			7
NET LOSS ATTRIBUTABLE TO HOST HOTELS & RESORTS, INC.	$	(119	)	$	(313	)	$	(331	)	$	(668	)
Basic loss per common share	$	(.17	)	$	(.44	)	$	(.47	)	$	(.95	)
Diluted loss per common share	$	(.17	)	$	(.44	)	$	(.47	)	$	(.95	)

See notes to condensed consolidated financial statements.

2

HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Quarter and Year-to-date ended September 30, 2021 and 2020

(unaudited, in millions)

	Quarter ended September 30,						Year-to-date ended September 30,
	2021			2020			2021			2020
NET LOSS	$	(120	)	$	(316	)	$	(334	)	$	(675	)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Foreign currency translation and other comprehensive income of unconsolidated affiliates		(5	)		(5	)		(1	)		(24	)
Change in fair value of derivative instruments		1			—			—			1
OTHER COMPREHENSIVE LOSS, NET OF TAX		(4	)		(5	)		(1	)		(23	)
COMPREHENSIVE LOSS		(124	)		(321	)		(335	)		(698	)
Less: Comprehensive loss attributable to non-controlling interests		1			3			3			7
COMPREHENSIVE LOSS ATTRIBUTABLE TO HOST HOTELS & RESORTS, INC.	$	(123	)	$	(318	)	$	(332	)	$	(691	)

See notes to condensed consolidated financial statements.

3

HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Year-to-date ended September 30, 2021 and 2020

(unaudited, in millions)

	Year-to-date ended September 30,
	2021			2020
OPERATING ACTIVITIES
Net loss	$	(334	)	$	(675	)
Adjustments to reconcile net loss to net cash provided by (used in) operations:
Depreciation and amortization		597			498
Amortization of finance costs, discounts and premiums, net		7			6
Loss on extinguishment of debt		—			28
Stock compensation expense		13			11
Other gains		(4	)		(13	)
Equity in (earnings) losses of affiliates		(36	)		26
Change in due from/to managers		(78	)		130
Distributions from investments in affiliates		4			—
Changes in other assets		(99	)		(161	)
Changes in other liabilities		8			(14	)
Net cash provided by (used in) operating activities		78			(164	)
INVESTING ACTIVITIES
Proceeds from sales of assets, net		8			11
Proceeds from loan receivable		9			28
Advances to and investments in affiliates		(9	)		(4	)
Acquisitions		(1,217	)		—
Capital expenditures:
Renewals and replacements		(92	)		(122	)
Return on investment		(201	)		(262	)
Net cash used in investing activities		(1,502	)		(349	)
FINANCING ACTIVITIES
Financing costs		(3	)		(11	)
Issuances of debt		—			740
Draws on credit facility		—			2,245
Repayment of credit facility		—			(750	)
Repurchase/redemption of senior notes		—			(364	)
Redemption of preferred equity units of Host LP		—			(22	)
Debt extinguishment costs		—			(27	)
Issuance of common stock		138			—
Common stock repurchase		—			(147	)
Dividends on common stock		—			(320	)
Distributions and payments to non-controlling interests		—			(3	)
Other financing activities		(8	)		(4	)
Net cash provided by financing activities		127			1,337
Effects of exchange rate changes on cash held		—			(6	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(1,297	)		818
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD		2,476			1,750
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	1,179		$	2,568

See notes to condensed consolidated financial statements.

4

HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

Year-to-date ended September 30, 2021 and 2020

(unaudited)

Supplemental disclosure of cash flow information (in millions):

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheet to the amount shown in the statements of cash flows:

	September 30, 2021		September 30, 2020
Cash and cash equivalents	$	1,038	$	2,430
Restricted cash (included in other assets)		3		—
Cash included in furniture, fixtures and equipment replacement fund		138		138
Total cash and cash equivalents and restricted cash shown in the statements of cash flows	$	1,179	$	2,568

The following table presents cash paid for the following:

	Year-to-date ended September 30,
	2021			2020
Total interest paid	$	115		$	126
Income taxes paid (refunds received)	$	(3	)	$	2

Supplemental schedule of noncash investing and financing activities:

In 2021, non-cash consideration for the acquisition of the Four Seasons Resort Orlando at Walt Disney World® Resort included the assumption of hotel-level liabilities of approximately $24 million, consisting primarily of advance deposits received from guests for future stays that were retained by the seller.

In connection with the sale of a parcel of land adjacent to The Phoenician hotel in 2020, we received as consideration a note receivable for $9 million. The proceeds received in 2020 from the sale are net of this note receivable. The note receivable was collected in January 2021.

See notes to condensed consolidated financial statements.

5

HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2021 and December 31, 2020

(in millions)

	September 30, 2021			December 31, 2020
	(unaudited)
ASSETS
Property and equipment, net	$	10,124		$	9,416
Right-of-use assets		559			597
Assets held for sale		280			—
Due from managers		58			22
Advances to and investments in affiliates		62			21
Furniture, fixtures and equipment replacement fund		138			139
Other		453			360
Cash and cash equivalents		1,038			2,335
Total assets	$	12,712		$	12,890
LIABILITIES, LIMITED PARTNERSHIP INTERESTS OF THIRD PARTIES AND CAPITAL
Debt
Senior notes	$	3,068		$	3,065
Credit facility, including the term loans of $997		2,472			2,471
Other debt		5			5
Total debt		5,545			5,541
Lease liabilities		572			610
Accounts payable and accrued expenses		91			71
Due to managers		55			64
Liabilities held for sale		37			—
Other		167			170
Total liabilities		6,467			6,456
Limited partnership interests of third parties		119			108
Host Hotels & Resorts, L.P. capital:
General partner		1			1
Limited partner		6,195			6,394
Accumulated other comprehensive loss		(75	)		(74	)
Total Host Hotels & Resorts, L.P. capital		6,121			6,321
Non-controlling interests—consolidated partnerships		5			5
Total capital		6,126			6,326
Total liabilities, limited partnership interests of third parties and capital	$	12,712		$	12,890

See notes to condensed consolidated financial statements.

6

HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Quarter and Year-to-date ended September 30, 2021 and 2020

(unaudited, in millions, except per unit amounts)

	Quarter ended September 30,						Year-to-date ended September 30,
	2021			2020			2021			2020
REVENUES
Rooms	$	557		$	126		$	1,237		$	813
Food and beverage		191			31			405			372
Other		96			41			250			168
Total revenues		844			198			1,892			1,353
EXPENSES
Rooms		150			69			324			299
Food and beverage		146			72			313			356
Other departmental and support expenses		252			109			621			541
Management fees		27			5			59			33
Other property-level expenses		82			77			239			240
Depreciation and amortization		263			166			597			498
Corporate and other expenses		24			18			73			68
Gain on insurance and business interruption settlements		(5	)		—			(5	)		—
Total operating costs and expenses		939			516			2,221			2,035
OPERATING LOSS		(95	)		(318	)		(329	)		(682	)
Interest income		1			—			2			7
Interest expense		(43	)		(66	)		(128	)		(143	)
Other gains		2			—			4			13
Equity in earnings (losses) of affiliates		2			(5	)		36			(26	)
LOSS BEFORE INCOME TAXES		(133	)		(389	)		(415	)		(831	)
Benefit for income taxes		13			73			81			156
NET LOSS		(120	)		(316	)		(334	)		(675	)
Less: Net income attributable to non-controlling interests		(1	)		(1	)		(1	)		—
NET LOSS ATTRIBUTABLE TO HOST HOTELS & RESORTS, L.P.	$	(121	)	$	(317	)	$	(335	)	$	(675	)
Basic loss per common unit	$	(.17	)	$	(.45	)	$	(.48	)	$	(.97	)
Diluted loss per common unit	$	(.17	)	$	(.45	)	$	(.48	)	$	(.97	)

See notes to condensed consolidated financial statements.

7

HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Quarter and Year-to-date ended September 30, 2021 and 2020

(unaudited, in millions)

	Quarter ended September 30,						Year-to-date ended September 30,
	2021			2020			2021			2020
NET LOSS	$	(120	)	$	(316	)	$	(334	)	$	(675	)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Foreign currency translation and other comprehensive income of unconsolidated affiliates		(5	)		(5	)		(1	)		(24	)
Change in fair value of derivative instruments		1			—			—			1
OTHER COMPREHENSIVE LOSS, NET OF TAX		(4	)		(5	)		(1	)		(23	)
COMPREHENSIVE LOSS		(124	)		(321	)		(335	)		(698	)
Less: Comprehensive income attributable to non-controlling interests		(1	)		(1	)		(1	)		—
COMPREHENSIVE LOSS ATTRIBUTABLE TO HOST HOTELS & RESORTS, L.P.	$	(125	)	$	(322	)	$	(336	)	$	(698	)

See notes to condensed consolidated financial statements.

8

HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Year-to-date ended September 30, 2021 and 2020

(unaudited, in millions)

	Year-to-date ended September 30,
	2021			2020
OPERATING ACTIVITIES
Net loss	$	(334	)	$	(675	)
Adjustments to reconcile net loss to net cash provided by (used in) operations:
Depreciation and amortization		597			498
Amortization of finance costs, discounts and premiums, net		7			6
Loss on extinguishment of debt		—			28
Stock compensation expense		13			11
Other gains		(4	)		(13	)
Equity in (earnings) losses of affiliates		(36	)		26
Change in due from/to managers		(78	)		130
Distributions from investments in affiliates		4			—
Changes in other assets		(99	)		(161	)
Changes in other liabilities		8			(14	)
Net cash provided by (used in) operating activities		78			(164	)
INVESTING ACTIVITIES
Proceeds from sales of assets, net		8			11
Proceeds from loan receivable		9			28
Advances to and investments in affiliates		(9	)		(4	)
Acquisitions		(1,217	)		—
Capital expenditures:
Renewals and replacements		(92	)		(122	)
Return on investment		(201	)		(262	)
Net cash used in investing activities		(1,502	)		(349	)
FINANCING ACTIVITIES
Financing costs		(3	)		(11	)
Issuances of debt		—			740
Draws on credit facility		—			2,245
Repayment of credit facility		—			(750	)
Repurchase/redemption of senior notes		—			(364	)
Redemption of preferred OP units		—			(22	)
Debt extinguishment costs		—			(27	)
Issuance of common OP units		138			—
Repurchase of common OP units		—			(147	)
Distributions on common OP units		—			(323	)
Other financing activities		(8	)		(4	)
Net cash provided by financing activities		127			1,337
Effects of exchange rate changes on cash held		—			(6	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(1,297	)		818
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD		2,476			1,750
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	1,179		$	2,568

See notes to condensed consolidated financial statements.

9

HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

Year-to-date ended September 30, 2021 and 2020

(unaudited)

Supplemental disclosure of cash flow information (in millions):

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheet to the amount shown in the statements of cash flows:

	September 30, 2021		September 30, 2020
Cash and cash equivalents	$	1,038	$	2,430
Restricted cash (included in other assets)		3		—
Cash included in furniture, fixtures and equipment replacement fund		138		138
Total cash and cash equivalents and restricted cash shown in the statements of cash flows	$	1,179	$	2,568

The following table presents cash paid for the following:

	Year-to-date ended September 30,
	2021			2020
Total interest paid	$	115		$	126
Income taxes paid (refunds received)	$	(3	)	$	2

Supplemental schedule of noncash investing and financing activities:

In 2021, non-cash consideration for the acquisition of the Four Seasons Resort Orlando at Walt Disney World® Resort included the assumption of hotel-level liabilities of approximately $24 million, consisting primarily of advance deposits received from guests for future stays that were retained by the seller.

In connection with the sale of a parcel of land adjacent to The Phoenician hotel in 2020, we received as consideration a note receivable for $9 million. The proceeds received in 2020 from the sale are net of this note receivable. The note receivable was collected in January 2021.

See notes to condensed consolidated financial statements.

10

HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization

Description of Business

Host Hotels & Resorts, Inc. operates as a self-managed and self-administered real estate investment trust (“REIT”), with its operations conducted solely through Host Hotels & Resorts, L.P. and its subsidiaries. Host Hotels & Resorts, L.P., a Delaware limited partnership, operates through an umbrella partnership structure, with Host Hotels & Resorts, Inc., a Maryland corporation, as its sole general partner. In the notes to these unaudited condensed consolidated financial statements, we use the terms “we” or “our” to refer to Host Hotels & Resorts, Inc. and Host Hotels & Resorts, L.P. together, unless the context indicates otherwise. We also use the term “Host Inc.” specifically to refer to Host Hotels & Resorts, Inc. and the term “Host L.P.” specifically to refer to Host Hotels & Resorts, L.P. in cases where it is important to distinguish between Host Inc. and Host L.P. As of September 30, 2021, Host Inc. holds approximately 99% of Host L.P.’s partnership interests.

Liquidity and Management’s Plans

The COVID-19 pandemic has had a significant adverse impact on U.S. and global economic activity and has contributed to significant volatility in financial markets beginning in the first quarter of 2020. While many of the restrictive measures put in place in jurisdictions where we own hotels have been lifted, the COVID-19 pandemic continues to negatively impact the U.S. lodging industry generally and our company specifically.

At the start of the pandemic, we suspended operations at 35 hotels. As of September 30, 2021, all hotels that previously suspended operations have resumed operations and are currently open. While the U.S. economic recovery has accelerated and hotel operations have improved during each quarter of the year, the pandemic continues to have a material negative impact on our financial results and cash flows. In 2020, we drew down $1.5 billion on the revolver portion of our credit facility as a precautionary measure in order to increase our cash position and preserve financial flexibility. We are continuing to take measures to maintain our liquidity, including operating expense reductions and the suspension of dividends and common stock repurchases. We also have reached agreements with our hotel managers to temporarily suspend furniture, fixture and equipment (“FF&E”) replacement fund contributions for our hotels and to defer certain hotel initiatives and brand standards.

Consolidated Portfolio

As of September 30, 2021, our consolidated portfolio, primarily consisting of luxury and upper upscale hotels, is located in the following countries:

	Hotels
United States		80
Brazil		3
Canada		2
Total		85

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HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2. Summary of Significant Accounting Policies

We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited condensed consolidated financial statements. We believe the disclosures made herein are adequate to prevent the information presented from being misleading. However, the financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10–K for the year ended December 31, 2020.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly our financial position as of September 30, 2021, and the results of our operations for the quarter and year-to-date periods ended September 30, 2021 and 2020, respectively, and cash flows for the year-to-date periods ended September 30, 2021 and 2020, respectively. Interim results are not necessarily indicative of full year performance because of the effect of seasonal variations as well as the impact from the COVID-19 pandemic.

Three of the partnerships in which we own an interest are considered variable interest entities (VIEs) as the general partner maintains control over the decisions that most significantly impact such partnerships. These VIEs include the operating partnership, Host L.P., which is consolidated by Host Inc., of which Host Inc. is the sole general partner and holds approximately 99% of its partnership interests; the consolidated partnership that owns the Houston Airport Marriott at George Bush Intercontinental; and the unconsolidated partnership that owns the Philadelphia Marriott Downtown. Host Inc.’s sole significant asset is its investment in Host L.P. and, consequently, substantially all of Host Inc.’s assets and liabilities consists of the assets and liabilities of Host L.P. All of Host Inc.’s debt is an obligation of Host L.P. and may be repaid only with assets of Host L.P.

Reclassifications

Certain prior year financial statement amounts have been reclassified to conform with the current year presentation.  

3. Earnings (Loss) Per Common Share (Unit)

Basic earnings (loss) per common share (unit) is computed by dividing net income (loss) attributable to common stockholders (unitholders) by the weighted average number of shares of Host Inc. common stock or Host L.P. common units outstanding. Diluted earnings (loss) per common share (unit) is computed by dividing net income (loss) attributable to common stockholders (unitholders), as adjusted for potentially dilutive securities, by the weighted average number of shares of Host Inc. common stock or Host L.P. common units outstanding plus other potentially dilutive securities. Dilutive securities may include shares granted under comprehensive stock plans or the Host L.P. common units distributed to Host Inc. to support such shares granted, and other non-controlling interests that have the option to convert their limited partner interests to Host L.P. common units. No effect is shown for any securities that are anti-dilutive. We have 7.1 million Host L.P. common units, which are convertible into 7.3 million Host Inc. common shares, that are not included in

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HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Host Inc.’s calculation of earnings (loss) per share as their effect is not dilutive. The calculation of Host Inc. basic and diluted earnings (loss) per common share is shown below (in millions, except per share amounts):

	Quarter ended September 30,						Year-to-date ended September 30,
	2021			2020			2021			2020
Net loss	$	(120	)	$	(316	)	$	(334	)	$	(675	)
Less: Net loss attributable to non-controlling interests		1			3			3			7
Net loss attributable to Host Inc.	$	(119	)	$	(313	)	$	(331	)	$	(668	)
Basic weighted average shares outstanding		713.9			705.2			709.0			706.1
Diluted weighted average shares outstanding		713.9			705.2			709.0			706.1
Basic loss per common share	$	(.17	)	$	(.44	)	$	(.47	)	$	(.95	)
Diluted loss per common share	$	(.17	)	$	(.44	)	$	(.47	)	$	(.95	)

The calculation of Host L.P. basic and diluted earnings (loss) per unit is shown below (in millions, except per unit amounts):

	Quarter ended September 30,						Year-to-date ended September 30,
	2021			2020			2021			2020
Net loss	$	(120	)	$	(316	)	$	(334	)	$	(675	)
Less: Net income attributable to non-controlling interests		(1	)		(1	)		(1	)		—
Net loss attributable to Host L.P.	$	(121	)	$	(317	)	$	(335	)	$	(675	)
Basic weighted average units outstanding		706.0			697.6			701.3			698.6
Diluted weighted average units outstanding		706.0			697.6			701.3			698.6
Basic loss per common unit	$	(.17	)	$	(.45	)	$	(.48	)	$	(.97	)
Diluted loss per common unit	$	(.17	)	$	(.45	)	$	(.48	)	$	(.97	)

4. Revenue

Substantially all our operating results represent revenues and expenses generated by hotel-level operations. Payments are due from customers when services are provided to them. Due to the short-term nature of our contracts and the almost concurrent receipt of payment, we have no material unearned revenue at quarter end. We collect sales, use, occupancy and similar taxes from our customers, which we present on a net basis (excluded from revenues) on our statements of operations.

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HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Disaggregation of Revenues. While we do not consider the following presentation of revenues by location to consist of reportable segments, we have disaggregated hotel revenues by market location. Our revenues also are presented by country in Note 11 – Geographic Information.

By Location. The following table presents hotel revenues for each of the geographic locations in our consolidated hotel portfolio (in millions):

	Quarter ended September 30,				Year-to-date ended September 30,
Location	2021		2020		2021		2020
Maui/Oahu	$	118	$	4	$	260	$	98
Florida Gulf Coast		49		33		215		160
Phoenix		54		17		171		108
Miami		40		12		152		77
San Diego		85		16		140		108
Orlando		52		2		97		58
New York		51		9		87		102
Los Angeles/Orange County		42		16		81		75
San Francisco/San Jose		44		12		80		124
Washington, D.C. (Central Business District)		29		4		72		61
Jacksonville		29		16		72		44
Houston		21		7		53		36
San Antonio/Austin		27		3		53		21
Atlanta		22		9		51		42
Boston		29		2		42		38
Chicago		25		4		38		22
Northern Virginia		18		5		37		27
Philadelphia		17		6		33		20
Denver		17		4		29		21
New Orleans		11		5		24		29
Seattle		16		2		23		20
Other		39		8		68		44
Domestic		835		196		1,878		1,335
International		9		2		14		18
Total	$	844	$	198	$	1,892	$	1,353

5. Property and Equipment

Property and equipment consists of the following (in millions):

	September 30, 2021			December 31, 2020
Land and land improvements	$	2,297		$	2,033
Buildings and leasehold improvements		14,084			13,609
Furniture and equipment		2,441			2,471
Construction in progress		235			166
		19,057			18,279
Less accumulated depreciation and amortization		(8,933	)		(8,863	)
	$	10,124		$	9,416

n

6. Debt

Senior Notes. As of September 30, 2021, we have met the minimum financial covenant levels under our senior notes indentures, which reinstates our ability to incur additional debt so long as we maintain these covenant levels and subject to the provisions of our credit facility and senior notes indentures.

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HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Credit Facility. As of September 30, 2021, we have $12 million of available capacity under the revolver portion of our credit facility. On June 26, 2020 and February 9, 2021, we entered into amendments to the existing senior unsecured bank credit facility with Bank of America, N.A., as administrative agent, (collectively, the “Amendments”). The Amendments suspend requirements to comply with all existing financial maintenance covenants under the credit facility for the period which began on July 1, 2020 and ending on the required financial statement reporting date for the second quarter of 2022 (such period, the “Covenant Relief Period”). Subsequent to quarter end, we terminated the Covenant Relief Period prior to its expiration, as we met the minimum fixed charge coverage ratio required for our first phase-in quarterly test period.

7.	Equity of Host Inc. and Capital of Host L.P.
	Equity of Host Inc.

The components of the Equity of Host Inc. are as follows (in millions):

	Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings / (Deficit)			Non-redeemable, non-controlling interests		Total equity			Redeemable, non-controlling interests
Balance, December 31, 2020	$	7	$	7,568		$	(74	)	$	(1,180	)	$	5	$	6,326		$	108
Net loss		—		—			—			(331	)		—		(331	)		(3	)
Issuance of common stock for comprehensive stock plans, net		—		8			—			—			—		8			—
Common stock issuances		—		138			—			—			—		138			—
Changes in ownership and other		—		(14	)		—			—			—		(14	)		14
Other comprehensive loss		—		—			(1	)		—			—		(1	)		—
Balance, September 30, 2021	$	7	$	7,700		$	(75	)	$	(1,511	)	$	5	$	6,126		$	119

	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings / (Deficit)			Non-redeemable, non-controlling interests		Total equity			Redeemable, non-controlling interests
Balance, June 30, 2021	$	7	$	7,688	$	(71	)	$	(1,392	)	$	5	$	6,237		$	125
Net loss		—		—		—			(119	)		—		(119	)		(1	)
Issuance of common stock for comprehensive stock plans, net		—		6		—			—			—		6			—
Common stock issuances		—		—		—			—			—		—			—
Changes in ownership and other		—		6		—			—			—		6			(5	)
Other comprehensive loss		—		—		(4	)		—			—		(4	)		—
Balance, September 30, 2021	$	7	$	7,700	$	(75	)	$	(1,511	)	$	5	$	6,126		$	119

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

	Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings / (Deficit)			Non-redeemable, non-controlling interests			Total equity			Redeemable, non-controlling interests
Balance, December 31, 2019	$	7	$	7,675		$	(56	)	$	(307	)	$	6		$	7,325		$	142
Net loss		—		—			—			(668	)		—			(668	)		(7	)
Issuance of common stock for comprehensive stock plans, net		—		7			—			—			—			7			—
Repurchase of common stock		—		(147	)		—			—			—			(147	)		—
Dividends declared on common stock		—		—			—			(141	)		—			(141	)		—
Distributions to non-controlling interests		—		—			—			—			—			—			(2	)
Changes in ownership and other		—		54			—			1			(1	)		54			(53	)
Other comprehensive loss		—		—			(23	)		—			—			(23	)		—
Balance, September 30, 2020	$	7	$	7,589		$	(79	)	$	(1,115	)	$	5		$	6,407		$	80

	Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings / (Deficit)			Non-redeemable, non-controlling interests		Total equity			Redeemable, non-controlling interests
Balance, June 30, 2020	$	7	$	7,586		$	(74	)	$	(802	)	$	5	$	6,722		$	81
Net loss		—		—			—			(313	)		—		(313	)		(3	)
Issuance of common stock for comprehensive stock plans, net		—		6			—			—			—		6			—
Changes in ownership and other		—		(3	)		—			—			—		(3	)		2
Other comprehensive loss		—		—			(5	)		—			—		(5	)		—
Balance, September 30, 2020	$	7	$	7,589		$	(79	)	$	(1,115	)	$	5	$	6,407		$	80

Capital of Host L.P.

As of September 30, 2021, Host Inc. is the owner of approximately 99% of Host L.P.’s common OP units. The remaining common OP units are owned by unaffiliated limited partners. Each common OP unit may be redeemed for cash or, at the election of Host Inc., Host Inc. common stock, based on the conversion ratio of 1.021494 shares of Host Inc. common stock for each common OP unit. Under the credit facility, all redemptions must be made with Host Inc. common stock until Host L.P.’s leverage ratio (as calculated under the credit facility) is below 7.25x.

In exchange for any shares issued by Host Inc., Host L.P. will issue common OP units to Host Inc. based on the applicable conversion ratio. Additionally, funds used by Host Inc. to pay dividends on its common stock are provided by distributions from Host L.P.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The components of the Capital of Host L.P. are as follows (in millions):

	General Partner		Limited Partner			Accumulated Other Comprehensive Income (Loss)			Non-controlling interests		Total capital			Limited partnership interests of third parties
Balance, December 31, 2020	$	1	$	6,394		$	(74	)	$	5	$	6,326		$	108
Net loss		—		(331	)		—			—		(331	)		(3	)
Issuance of common OP units to Host Inc. for comprehensive stock plans, net		—		8			—			—		8			—
Common OP unit issuances		—		138			—			—		138			—
Changes in ownership and other		—		(14	)		—			—		(14	)		14
Other comprehensive loss		—		—			(1	)		—		(1	)		—
Balance, September 30, 2021	$	1	$	6,195		$	(75	)	$	5	$	6,126		$	119

	General Partner		Limited Partner			Accumulated Other Comprehensive Income (Loss)			Non-controlling interests		Total capital			Limited partnership interests of third parties
Balance, June 30, 2021	$	1	$	6,302		$	(71	)	$	5	$	6,237		$	125
Net loss		—		(119	)		—			—		(119	)		(1	)
Issuance of common OP units to Host Inc. for comprehensive stock plans, net		—		6			—			—		6			—
Common OP unit issuances		—		—			—			—		—			—
Changes in ownership and other		—		6			—			—		6			(5	)
Other comprehensive loss		—		—			(4	)		—		(4	)		—
Balance, September 30, 2021	$	1	$	6,195		$	(75	)	$	5	$	6,126		$	119

	General Partner		Limited Partner			Accumulated Other Comprehensive Income (Loss)			Non-controlling interests			Total capital			Limited partnership interests of third parties
Balance, December 31, 2019	$	1	$	7,374		$	(56	)	$	6		$	7,325		$	142
Net loss		—		(668	)		—			—			(668	)		(7	)
Issuance of common OP units to Host Inc. for comprehensive stock plans, net		—		7			—			—			7			—
Repurchase of common OP units		—		(147	)		—			—			(147	)		—
Distributions declared on common OP units		—		(141	)		—			—			(141	)		(2	)
Changes in ownership and other		—		55			—			(1	)		54			(53	)
Other comprehensive loss		—		—			(23	)		—			(23	)		—
Balance, September 30, 2020	$	1	$	6,480		$	(79	)	$	5		$	6,407		$	80

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HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

	General Partner		Limited Partner			Accumulated Other Comprehensive Income (Loss)			Non-controlling interests		Total capital			Limited partnership interests of third parties
Balance, June 30, 2020	$	1	$	6,790		$	(74	)	$	5	$	6,722		$	81
Net loss		—		(313	)		—			—		(313	)		(3	)
Issuance of common OP units to Host Inc. for comprehensive stock plans, net		—		6			—			—		6			—
Changes in ownership and other		—		(3	)		—			—		(3	)		2
Other comprehensive loss		—		—			(5	)		—		(5	)		—
Balance, September 30, 2020	$	1	$	6,480		$	(79	)	$	5	$	6,407		$	80

Share Repurchases

As of September 30, 2021, we have $371 million available for repurchase under our common share repurchase program. In accordance with the restrictions in our amended credit facility, there have been 0 share repurchases year-to-date in 2021.

Issuance of Common Stock

On May 6, 2021, we entered into a distribution agreement with J. P. Morgan Securities LLC, BofA Securities, Inc., BTIG, LLC, Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, Scotia Capital (USA) Inc., Truist Securities, Inc. and Wells Fargo Securities, LLC, as sales agents, pursuant to which we may issue and sell, from time to time, shares having an aggregate offering price of up to $600 million. The sales will be made in “at the market” offerings under the SEC rules. We may sell shares of Host Inc. common stock under this program from time to time based on market conditions, although we are not under an obligation to sell any shares. NaN shares were issued during the third quarter. Year-to-date, we have issued approximately 7.8 million shares under the program at an average price of $17.99 per share, for net proceeds of approximately $138 million. In connection with the common stock issuance by Host Inc., Host L.P. issued 7.6 million common OP units to Host Inc. At September 30, 2021, there was $460 million of remaining capacity under the agreement.

Dividends/Distributions

As part of our response to the COVID-19 pandemic and in order to preserve cash and future financial flexibility, we have suspended our regular quarterly common cash dividends. Additionally, based on the terms of the credit facility amendments, we are restricted from paying a quarterly common cash dividend in excess of $0.01 per share during the Covenant Relief Period, unless a higher amount is required to allow Host Inc. to maintain its REIT status or to avoid the payment of corporate income or excise taxes, until after the covenant waiver period expires. Subsequent to quarter end, we terminated the Covenant Relief Period early, as we met the minimum fixed charge coverage ratio required for our first phase-in quarterly test period.

8. Acquisitions

During the quarter, we acquired the 200-room Baker's Cay Resort Key Largo, Curio Collection by Hilton, for $200 million, a 223-room luxury downtown Houston hotel for $65 million and the 59-room Alila Ventana Big Sur for $150 million.

9. Dispositions

Subsequent to quarter end, we sold the Westfields Marriott Washington Dulles, San Ramon Marriott, The Westin Buckhead Atlanta, The Westin Los Angeles Airport and The Whitley for $551 million, including approximately $11 million for the FF&E replacement funds. As of September 30, 2021, these hotels were classified as held for sale. We anticipate recording a gain of approximately $300 million in the fourth quarter.

10. Fair Value Measurements

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HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

We did not elect the fair value measurement option for any of our financial liabilities. The fair value of our credit facility is determined based on expected future payments discounted at a risk-adjusted rate. Our senior notes are valued based on quoted market prices. The fair values of financial instruments not included in this table are estimated to be equal to their carrying amounts.

The fair value of certain financial liabilities is shown below (in millions):

	September 30, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial liabilities
Senior notes (Level 1)	$	3,068	$	3,273	$	3,065	$	3,284
Credit facility (Level 2)		2,472		2,483		2,471		2,483

We assess our property and equipment, primarily comprised of hotel properties, for impairment when events or changes in circumstances occur that indicate the carrying value may not be recoverable. Due to the impact of the COVID-19 pandemic on our operations, we performed recoverability assessments on all of our hotel properties. Additionally, during the third quarter, due to changes in expected hold periods, the book value for certain property and equipment exceeded its undiscounted future cash flows. Therefore, we recorded impairment expense of $92 million based on third party assessments of values, including broker estimates and purchase offers, which are considered observable inputs other than quoted prices (Level 2) in the GAAP fair value hierarchy. The impairment expense is included in depreciation and amortization on the condensed consolidated statements of operations. The fair value of the impaired property and equipment following the write-down was $393 million.

E

11. Geographic Information

We consider each of our hotels to be an operating segment, as we allocate resources and assess operating performance based on individual hotels. All of our hotels meet the aggregation criteria for segment reporting and our other real estate investment activities (primarily our retail spaces and office buildings) are immaterial. As such, we report one segment: hotel ownership. Our consolidated foreign operations consist of hotels in two countries as of September 30, 2021. There were no intersegment sales during the periods presented.

The following table presents total revenues and property and equipment, net, for each of the geographical areas in which we operate (in millions):

	Total Revenues								Property and Equipment, net
	Quarter ended September 30,				Year-to-date ended September 30,				September 30,		December 31,
	2021		2020		2021		2020		2021		2020
United States	$	835	$	196	$	1,878	$	1,335	$	10,047	$	9,331
Brazil		3		1		5		6		31		34
Canada		6		1		9		12		46		51
Total	$	844	$	198	$	1,892	$	1,353	$	10,124	$	9,416

12. Non-controlling Interests

Host Inc.’s treatment of the non-controlling interests of Host L.P.: Host Inc. adjusts the amount of the non-controlling interests of Host L.P. each period so that the amount presented equals the greater of their carrying amount based on accumulated historical cost or their redemption value. The historical cost is based on the proportional relationship between the historical cost of equity held by our common stockholders relative to that of the common unitholders of Host L.P. The redemption value is based on the amount of cash or Host Inc. common stock, at our option, that would be paid to the non-controlling interests of Host L.P. if it were terminated. Therefore, the redemption value of the common OP units is equivalent to the number of common shares that would be issued upon conversion of the common OP units held by third parties valued at the market price of Host Inc. common stock at the balance sheet date. One common OP unit may be exchanged for 1.021494 shares of Host Inc. common stock. Redeemable non-controlling interests of Host L.P. are classified in the mezzanine section of our balance sheets as they do not meet the requirements for equity classification because the redemption feature requires the delivery of registered shares. Under the Amendments,

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

all redemptions must be made with Host Inc. common stock until we are in compliance with the leverage ratio financial test required by the credit facility.

The table below details the historical cost and redemption values for the non-controlling interests:

	September 30, 2021		December 31, 2020
Common OP units outstanding (millions)		7.1		7.2
Market price per Host Inc. common share	$	16.33	$	14.63
Shares issuable upon conversion of one common OP unit		1.021494		1.021494
Redemption value (millions)	$	119	$	108
Historical cost (millions)		63		67
Book value (millions) ⁽¹⁾		119		108

(1) The book value recorded is equal to the greater of redemption value or historical cost.

Other Consolidated Partnerships. We consolidate 2 majority-owned partnerships that have third-party, non-controlling ownership interests. The third-party limited partner interests are included in non-redeemable non-controlling interests — other consolidated partnerships on the balance sheets and totaled $5 million as of both September 30, 2021 and December 31, 2020.

13. Legal Proceedings

We are involved in various legal proceedings in the ordinary course of business regarding the operation of our hotels and company matters. To the extent not covered by insurance, these legal proceedings generally fall into the following broad categories: disputes involving hotel-level contracts, employment litigation, compliance with laws such as the Americans with Disabilities Act, tax disputes and other general matters. Under our management agreements, our operators have broad latitude to resolve individual hotel-level claims for amounts generally less than $150,000. However, for matters exceeding such threshold, our operators may not settle claims without our consent.

Based on our analysis of legal proceedings with which we are involved or of which we currently are aware and our experience in resolving similar claims in the past, we have recorded immaterial accruals as of September 30, 2021 related to such claims. We have estimated that, in the aggregate, our losses related to these proceedings will not be material. We are not aware of any matters with a reasonably possible unfavorable outcome for which disclosure of a loss contingency is required. No assurances can be given as to the outcome of any pending legal proceedings.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this report. Host Inc. operates as a self-managed and self-administered REIT. Host Inc. is the sole general partner of Host L.P. and holds approximately 99% of its partnership interests. Host L.P. is a limited partnership operating through an umbrella partnership structure. The remaining common OP units are owned by various unaffiliated limited partners.

Forward-Looking Statements

In this quarterly report on Form 10-Q, we make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “expect,” “may,” “intend,” “predict,” “project,” “plan,” “will,” “estimate” and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are based on management’s current expectations and assumptions and are not guarantees of future performance. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results to differ materially from those anticipated at the time the forward-looking statements are made.

The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:



the duration and scope of the COVID-19 pandemic and its short and longer-term impact on the demand for travel, transient and group business, and levels of consumer confidence; actions governments, businesses and individuals take in response to the pandemic, including limiting or banning travel; the ability of our hotel managers to operate hotels in a way that facilitates social distancing, implement enhanced cleaning protocols and other COVID-19 pandemic mitigation practices; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies, travel, and economic activity, including the duration and magnitude of its impact on unemployment rates, business investment and consumer discretionary spending; the pace of recovery as the COVID-19 pandemic subsides; general economic uncertainty in U.S. markets where we own hotels and the potential for low levels of economic growth in these markets; and the effects on hotel operations of steps that our hotel managers take to reduce operating costs in response to the COVID-19 pandemic;



the effect on lodging demand of (i) changes in national and local economic and business conditions, including concerns about the pace of U.S. economic growth, global economic prospects, consumer confidence and the value of the U.S. dollar, and (ii) factors that may shape public perception of travel to a particular location, such as natural disasters, weather, changes in the international political climate, and the occurrence or potential occurrence of terrorist attacks, all of which will affect occupancy rates at our hotels and the demand for hotel products and services;



the impact of geopolitical developments outside the United States, such as the pace of economic growth in Europe, the effects of the United Kingdom’s withdrawal from the European Union, escalating trade tensions between the United States and its trading partners such as China, or conflicts in the Middle East, all of which could affect the relative volatility of global credit markets generally, global travel and lodging demand within the United States;



risks that U.S. immigration policies, border closings related to the COVID-19 pandemic and travel bans will suppress international travel to the United States;



volatility in global financial and credit markets, in particular because of the COVID-19 pandemic, and the impact of budget deficits and potential U.S. governmental action to address such deficits through reductions in spending and similar austerity measures, which could materially adversely affect U.S. and global economic conditions, business activity, credit availability, borrowing costs, and lodging demand;



operating risks associated with the hotel business, including the effect of labor stoppages or strikes, increasing operating or labor costs or changes in workplace rules that affect labor costs and risks relating to the response to the COVID-19 pandemic, such as increased costs relating to severance and furloughed hotel employees as a result of measures taken by our hotel managers in response to the COVID-19 pandemic and risks associated with our managers’ ability to successfully increase staffing levels to meet expected increases in lodging demand due to the challenging labor environment;



the effect of rating agency downgrades of our debt securities on the cost and availability of new debt financings;



the reduction in our operating flexibility and the limitation on our ability to incur debt, pay dividends and make distributions resulting from restrictive covenants in our debt agreements, including the waivers we obtained under our credit facility as a result of not meeting the original covenant thresholds that otherwise would have been required and other risks associated with the amount of our indebtedness or related to restrictive covenants in our debt agreements, including the risk that a default could occur as a result of the decline in operations due to the COVID-19 pandemic;

21



our ability to maintain our hotels in a first-class manner, including meeting capital expenditures requirements, and the effect of renovations, including temporary closures, on our hotel occupancy and financial results;



the ability of our hotels to compete effectively against other lodging businesses in the highly competitive markets in which we operate in terms of access, location, quality of accommodations and room rate structures;



our ability to acquire or develop additional hotels and the risk that potential acquisitions or developments may not perform in accordance with our expectations;



the ability to complete hotel renovations on schedule and under budget and the potential for increased costs and construction delays due to government restrictions on non-essential activities and shortages of supplies as a result of supply chain disruptions due to the COVID-19 pandemic;



relationships with property managers and joint venture partners and our ability to realize the expected benefits of our joint ventures and other strategic relationships;



risks associated with a single manager, Marriott International, managing a significant portion of our hotels;



changes in the desirability of the geographic regions of the hotels in our portfolio or in the travel patterns of hotel customers;



the ability of third-party internet and other travel intermediaries to attract and retain customers;



our ability to recover fully under our existing insurance policies for terrorist acts and our ability to maintain adequate or full replacement cost “all-risk” property insurance policies on our hotels on commercially reasonable terms;



the effect of a data breach or significant disruption of hotel operator information technology networks as a result of cyber attacks;



the effects of tax legislative action and other changes in laws and regulations, or the interpretation thereof, including the need for compliance with new environmental and safety requirements;



the ability of Host Inc. and each of the REITs acquired, established or to be established by Host Inc. to continue to satisfy complex rules in order to qualify as REITs for federal income tax purposes and Host Inc.’s and Host L.P.’s ability and the ability of our subsidiaries, and similar entities to be acquired or established by us, to operate effectively within the limitations imposed by these rules; and



risks associated with our ability to execute our dividend policy, including factors such as the need to preserve cash and financial flexibility in response to the COVID-19 pandemic, investment activity, operating results and the economic outlook, any or all of which may influence the decision of our board of directors as to whether to pay future dividends at levels previously disclosed or to use available cash to pay special dividends.

We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions, including those risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2020 and in other filings with the Securities and Exchange Commission (“SEC”). Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that we will attain these expectations or that any deviations will not be material.

Operating Results and Outlook

COVID-19 Response

The COVID-19 pandemic has significantly adversely impacted U.S. and global economic activity and has contributed to significant volatility in financial markets beginning in the first quarter of 2020. While many of the restrictive measures put in place in jurisdictions where we own hotels have been lifted, the pandemic continues to have a material adverse effect on operations and future bookings and is expected to continue to have a material negative impact on our financial results and cash flows.

We have not filed for any relief under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) or the American Rescue Plan Act; however, several of our operators, including Hyatt and Marriott, have filed for the Employee Retention Credit (“ERC”) to partially offset the costs of their furloughed hotel employees under Title II of the CARES Act, as discussed below. Benefits received by our operators from the ERC related to their employees working at our hotels ultimately benefit us as we bear the expense for the wages and benefits of all persons working at our hotels. Benefit costs for furloughed employees did not have a significant impact on the third quarter 2021 results, as they were eligible to be reimbursed through the American Rescue Plan Act, the

22

reimbursement for which our managers have applied. We also expect that these benefit costs will not have a significant impact on our fourth quarter results.

In response to the pandemic, we and our managers, as applicable, have accomplished the following:



Implemented portfolio-wide cost reductions, resulting in a reduction of pro forma hotel operating costs across the portfolio by approximately 30% in the third quarter of 2021, compared to 2019. While we expect that certain initiatives, including modernized brand standards, streamlined operating departments and accelerated adoption of cost-saving technologies, may lead to long-term expense reductions, we also expect hotel operating costs to increase more in line with total revenues over time as hotels continue to transition from their contingency level operational plans to increased staffing levels and controllable spending;



Suspended contributions to certain of our hotels’ FF&E escrow accounts;



Accessed the full $1.5 billion under the revolver portion of the credit facility in 2020 as a precautionary measure in order to increase our cash position and preserve financial flexibility, while further amending the credit agreement governing our $1.5 billion revolving credit facility and two $500 million term loans in 2021. Under the amendments, the quarterly-tested financial covenants were waived beginning July 1, 2020 until the required financial statement reporting date for the second quarter of 2022. Subsequent to quarter end, we exited the waiver period prior to the first scheduled covenant test, and will be required to meet the modified financial covenants, under the terms of the amendment, for the subsequent five quarters; and



Suspended regular quarterly common cash dividends and stock repurchases until further notice. All future dividends are subject to approval by the Board of Directors.

The impact of the COVID-19 pandemic on the company remains fluid, as does our corporate and property-level response, together with the response of our hotel operators. While vaccination rates have increased during the first three quarters of the year, there remains a great deal of uncertainty surrounding the trends and duration of the COVID-19 pandemic, and we are monitoring developments on an ongoing basis. We, and our hotel managers, may take additional actions in response to future developments.

Operating Results

The following table reflects certain line items from our statements of operations and significant operating statistics (in millions, except per share and hotel statistics):

Historical Income Statement Data:
	Quarter ended September 30,									Year-to-date ended September 30,
	2021			2020			Change			2021			2020			Change
Total revenues	$	844		$	198			326.3	%	$	1,892		$	1,353			39.8	%
Net loss		(120	)		(316	)		62.0	%		(334	)		(675	)		50.5	%
Operating loss		(95	)		(318	)		70.1	%		(329	)		(682	)		51.8	%
Operating loss margin under GAAP		(11.3	)%		(160.6	)%		14,930 bps			(17.4	)%		(50.4	)%		3,300 bps
EBITDAre⁽¹⁾	$	179		$	(154	)	N/M			$	295		$	(180	)	N/M
Adjusted EBITDAre⁽¹⁾		177			(111	)	N/M				290			(136	)	N/M
Diluted loss per common share		(0.17	)		(0.44	)		61.4	%		(0.47	)		(0.95	)		50.5	%
NAREIT FFO per diluted share⁽¹⁾		0.20			(0.21	)	N/M				0.33			(0.25	)	N/M
Adjusted FFO per diluted share⁽¹⁾		0.20			(0.11	)	N/M				0.33			(0.14	)	N/M

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All Owned Hotel Data (2):
	Quarter ended September 30,									Year-to-date ended September 30,
	2021			2020			Change			2021			2020			Change
All owned hotel revenues (pro forma)⁽¹⁾	$	853		$	220			287.7	%	$	1,978		$	1,429			38.4	%
All owned hotel EBITDA (pro forma)⁽¹⁾		196			(98	)	N/M				364			(80	)	N/M
All owned hotel EBITDA margin (pro forma)⁽¹⁾		23.0	%		(44.5	)%	N/M				18.4	%		(5.6	)%	N/M
Change in all owned hotel Total RevPAR - Constant US$		288.5	%								38.7	%
Change in all owned hotel RevPAR - Constant US$		307.3	%								51.5	%
Change in all owned hotel RevPAR - Nominal US$		307.5	%								51.4	%
Change in domestic RevPAR		306.8	%								52.4	%
Change in international RevPAR - Constant US$		342.8	%								(17.6	)%
___________

(1)

EBITDAre, Adjusted EBITDAre, NAREIT FFO per diluted share and Adjusted FFO per diluted share and all owned hotel operating results (including hotel revenues and hotel EBITDA and margins) are non-GAAP financial measures within the meaning of the rules of the SEC. See “Non-GAAP Financial Measures” for more information on these measures, including why we believe these supplemental measures are useful, reconciliations to the most directly comparable GAAP measure, and the limitations on the use of these supplemental measures.

(2)

Due to the COVID-19 pandemic and its effects on operations, we are temporarily presenting hotel operating results on an All Owned Hotel pro forma basis. Thus, operating results are presented for all consolidated hotels owned as of September 30, 2021 and do not include the results of operations for hotels sold through the reporting date. Additionally, operating results for acquisitions as of September 30, 2021 are reflected for full calendar years, which include results for periods prior to our ownership.

N/M = Not meaningful.

Operations

While still well below pre-pandemic levels, total revenues increased $646 million, or 326.3%, for the third quarter as compared to the third quarter of 2020 due to strong leisure demand at our resort hotels and limited return of group business. For the year-to-date, total revenues increased $539 million, or 39.8%, with quarter over quarter improvement in the first three quarters of 2021. All owned hotel RevPAR and Total RevPAR on a constant US$ basis for the quarter increased 307.3% and 288.5%, respectively, due to increases in occupancy and food and beverage revenues. For the year-to-date, all owned hotel RevPAR and Total RevPAR on a constant US$ basis increased 51.5% and 38.7%, respectively.

During the quarter, all owned hotel Total RevPAR in our Jacksonville, Maui, and Miami markets totaled $683, $635 and $334, respectively, representing increases of 32.2%, 14.6% and 13.5%, compared to 2019, due to strong leisure demand. Our hotels in New York and San Francisco/San Jose, our two largest markets by room count, experienced all owned hotel Total RevPAR of $131 and $104, respectively, representing declines of 61.7% and 65.5%, compared to 2019, as operations at these hotels begin to ramp up following the lifting of many of the COVID-19 restrictions previously in place in these markets. All owned hotel Total RevPAR was lowest for our New Orleans property, at $92, a decline of 47.6% compared to 2019, due to the impact of Hurricane Ida.

Operating trends continue to be positive in the third quarter of 2021, as vaccine distribution has continued and many jurisdictions have lifted COVID-19 restrictions. In particular, hotels in Florida, Arizona and Hawaii continue to drive the portfolio, with RevPAR levels that are approaching or exceeding 2019 levels. At the same time, hotel-level operating costs are increasing at lower rates, as hiring did not keep pace with the improvement in operations at these resort destinations. The lag in hiring is due to the challenging labor environment across the industry, coupled with improving occupancy, which has hindered our managers' ability to adjust staffing levels commensurate with the increase in demand. We anticipate that hotel-level operating costs over time will increase at a higher rate, as our hotel managers adjust back to more normalized levels of operations.

Although operations remain below pre-pandemic levels, as a result of continued operational improvements at our hotels since the COVID-19 pandemic began in mid-March 2020, third quarter and year-to-date 2021 results improved when compared to 2020 as follows:



net loss decreased $196 million for the quarter and $341 million year-to-date;



diluted loss per share for the quarter decreased $0.27 for the quarter and $0.48 year-to-date;

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

Adjusted EBITDAre increased $288 million for the quarter and $426 million year-to-date; and



Adjusted FFO per diluted share increased $0.31 for the quarter and $0.47 year-to-date.

Outlook

While the COVID-19 pandemic has severely impacted macroeconomic and industry expectations for 2021, year-over-year growth in real GDP and business investment have seen a strong rebound from 2020, supported by recent stimulus, low interest rates, vaccine distribution, and the lifting of many government-imposed restrictions across the U.S. Blue Chip Economic Indicators consensus currently estimates an increase in real GDP of 5.7% for 2021, while business investment is anticipated to increase 7.9%. Though analysts believe the unemployment rate peaked in 2020, it is anticipated to remain elevated in 2021, with an expected average of 5.6% for the year. The range of potential outcomes on the economy and the lodging industry specifically remains exceptionally wide, reflecting the unprecedented nature of the pandemic and varying analyst assumptions surrounding the impact of supply chain disruptions, labor shortages in key industries and inflation expectations.

Hotel supply growth is anticipated to remain below the long-term historical average in 2021, as social distancing measures and supply chain challenges have resulted in project delays across the U.S. However, the pandemic has had an outsized impact on our industry demand. As a result, RevPAR recovery to pre-pandemic levels is lagging that of the broader U.S. economy, despite lower supply growth. Luxury and upper upscale hotels in top U.S. markets, where a majority of our hotels are located, have been most heavily affected by the pandemic, due in part to the sharp decline in air travel, particularly from international arrivals, and the slower recovery of corporate and group demand. While we have seen improving trends across all location types, we anticipate that these factors will persist through the remainder of 2021.

As a result of the significant uncertainties related to the impact of new virus variants, the pace of vaccination, particularly for school-aged children, and broader macroeconomic trends in 2021, we anticipate that the industry outlook will continue to be weighed down by the slower return of corporate and group travel, as many businesses and employees remain cautious. While strong leisure demand has supported growing investor optimism throughout 2021, the delayed return to office is likely to continue to constrain business transient and group travel in the near term. Therefore, the timing and trajectory of the recovery is difficult to forecast due to a wide range of customer responses to vaccines and the virus, seasonal shifts in the mix of business and leisure demand, as well as a condensed booking window for hotel rooms. While we currently anticipate RevPAR growth for the remainder of the year, we cannot provide a full year forecast for RevPAR at this time. We believe that the continued recovery within the lodging industry is highly dependent on the strength of the economy, consumer confidence and the return of corporate and group travel. Accordingly, we believe that the impact of the recovery on specific markets and industries will be uneven.

As noted above, the current outlook for the lodging industry remains highly uncertain. There can be no assurances as to the extent and timing for a recovery in lodging demand for any number of reasons, including, but not limited to, slower than anticipated return of group and business travel.

Strategic Initiatives

Balance Sheet and Financing Transactions. As of September 30, 2021, we had $1.0 billion of cash and cash equivalents. As of September 30, 2021, we have met the minimum financial covenant levels under our senior notes indentures, which reinstates our ability to incur additional debt so long as we maintain these covenant levels and subject to the provisions of our credit facility and senior notes indentures. We also exited our credit facility Covenant Relief Period as discussed in more detail in subsequent sections.

Acquisitions. During the third quarter, we acquired the 200-room Baker's Cay Resort Key Largo, Curio Collection by Hilton, for $200 million, a 223-room luxury downtown Houston hotel for $65 million and the 59-room Alila Ventana Big Sur for $150 million. The downtown Houston hotel has been renamed The Laura Hotel, part of the Autograph Collection by Marriott, and will be managed by HEI Hotels & Resorts. It is expected to open in the fourth quarter of 2021.

Dispositions. Subsequent to quarter end, we sold the Westfields Marriott Washington Dulles, San Ramon Marriott, The Westin Buckhead Atlanta, The Westin Los Angeles Airport and The Whitley for $551 million, including approximately $11 million for the FF&E replacement funds.

Capital Projects. We are utilizing the low occupancy environment to accelerate certain projects and minimize future disruption. During the first three quarters of 2021, we spent approximately $201 million on ROI capital projects and $92 million on renewal and replacement projects. For full year 2021, we expect total capital expenditures of $410 million to $465 million. This total amount consists of ROI projects of approximately $285 million to $320 million and renewal and replacement expenditures of $125 million to $145 million. ROI projects include approximately $115 million to $140 million for the Marriott transformational capital program discussed below.

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During the third quarter, we completed the development of the multi-year renovation at the New York Marriott Marquis, including all 1,966 guestrooms, over 140,000 square feet of meeting space, the addition of a skybridge and a renovated lobby with new bars and upgraded restaurants. Additionally, we completed the multi-year renovation at the Orlando World Center Marriott, including all 2,010 guestrooms, a redesigned 18th hole at the golf course and an updated lobby. The projects at both properties were part of the Marriott transformational capital program, discussed below.

We have made substantial progress on the Marriott transformational capital program, which began in 2018 and is expected to be substantially complete by the end of 2022, and includes 16 of our hotels. We believe this program will position these hotels to be more competitive in their respective markets and will enhance long-term performance through increases in RevPAR and market yield index. We agreed to invest amounts in excess of the FF&E reserves required under our management agreements and, in exchange, Marriott has provided additional priority returns on the agreed upon investments and operating profit guarantees of up to $83 million, before reductions for incentive management fees, to offset expected business disruption. Approximately 79% of the total estimated costs of the program have been spent as of September 30, 2021, and we expect to complete approximately 85% of the program by the end of 2021. Of the 16 hotels included in the program, we have completed projects at the Coronado Island Marriott Resort & Spa, New York Marriott Downtown, San Francisco Marriott Marquis, and Santa Clara Marriott in 2019 and projects at the Minneapolis Marriott City Center, San Antonio Marriott Rivercenter and JW Marriott Atlanta Buckhead in 2020. So far during 2021, we have completed the projects at The Ritz-Carlton Amelia Island, New York Marriott Marquis and Orlando World Center Marriott and we expect to substantially complete the projects at Houston Marriott Medical Center.

Results of Operations

The following table reflects certain line items from our statements of operations (in millions, except percentages):

	Quarter ended September 30,									Year-to-date ended September 30,
	2021			2020			Change			2021			2020			Change
Total revenues	$	844		$	198			326.3	%	$	1,892		$	1,353			39.8	%
Operating costs and expenses:
Property-level costs ⁽¹⁾		920			498			84.7			2,153			1,967			9.5
Corporate and other expenses		24			18			33.3			73			68			7.4
Operating loss		(95	)		(318	)		70.1			(329	)		(682	)		51.8
Interest expense		43			66			(34.8	)		128			143			(10.5	)
Other gains		2			—		N/M				4			13			(69.2	)
Benefit for income taxes		13			73			(82.2	)		81			156			(48.1	)
Host Inc.:
Net loss attributable to non-controlling interests		(1	)		(3	)		66.7			(3	)		(7	)		57.1
Net loss attributable to Host Inc.		(119	)		(313	)		62.0			(331	)		(668	)		50.4
Host L.P.:
Net income attributable to non-controlling interests		1			1		—				1			—		N/M
Net loss attributable to Host L.P.		(121	)		(317	)		61.8			(335	)		(675	)		50.4
___________

(1) Amount represents total operating costs and expenses from our unaudited condensed consolidated statements of operations, less corporate and other expenses.

N/M=Not meaningful.

26

Statement of Operations Results and Trends

The COVID-19 pandemic began to significantly impact hotel operations beginning in mid-March of 2020. However, RevPAR has increased during 2021, from $44.29 in January to $126.23 in September. There can be no assurances that the increases in RevPAR will continue.

Hotel Sales Overview

The following table presents total revenues in accordance with GAAP and includes all consolidated hotels (in millions, except percentages):

	Quarter ended September 30,							Year-to-date ended September 30,
	2021		2020		Change			2021		2020		Change
Revenues:
Rooms	$	557	$	126		342.1	%	$	1,237	$	813		52.2	%
Food and beverage		191		31		516.1			405		372		8.9
Other		96		41		134.1			250		168		48.8
Total revenues	$	844	$	198		326.3		$	1,892	$	1,353		39.8

While still below pre-pandemic levels, operations have improved in the third quarter of 2021 compared to 2020. This has impacted operations as follows:

Rooms. Total rooms revenues increased $431 million for the quarter and increased $424 million, or 52.2%, year-to-date.

Food and beverage. Total food and beverage (“F&B”) revenues increased $160 million for the quarter and increased $33 million, or 8.9%, year-to-date. Banquet and AV revenues for the third quarter 2021 increased significantly compared to the second quarter of 2021, while year-to-date, F&B revenue growth has primarily been driven by the performance of our outlets.

Other revenues. Total other revenues increased $55 million for the quarter and increased $82 million, or 48.8%, year-to-date, due primarily to strong ancillary revenues.

Property-level Operating Expenses

The following table presents property-level operating expenses in accordance with GAAP and includes all consolidated hotels (in millions, except percentages):

	Quarter ended September 30,							Year-to-date ended September 30,
	2021		2020		Change			2021		2020		Change
Expenses:
Rooms	$	150	$	69		117.4	%	$	324	$	299		8.4	%
Food and beverage		146		72		102.8			313		356		(12.1	)
Other departmental and support expenses		252		109		131.2			621		541		14.8
Management fees		27		5		440.0			59		33		78.8
Other property-level expenses		82		77		6.5			239		240		(0.4	)
Depreciation and amortization		263		166		58.4			597		498		19.9
Total property-level operating expenses	$	920	$	498		84.7		$	2,153	$	1,967		9.5

Our operating costs and expenses, which have both fixed and variable components, are affected by several factors. Rooms expenses are affected mainly by occupancy, which drives costs related to items such as housekeeping, reservation systems, room supplies, laundry services and front desk costs. Food and beverage expenses correlate closely with food and beverage revenues and are affected by occupancy and the mix of business between banquet, audio-visual and outlet sales. However, the most significant expense for the rooms, food and beverage, and other departmental and support expenses is wages and employee benefits, which comprise approximately 55% of these expenses. Due to a significant decline in operations and implementation of portfolio-wide cost reductions in response to the COVID-19 pandemic, staffing levels at our hotels declined significantly, leading to a reduction to wages and benefits expense compared to pre-pandemic levels, despite above inflationary growth in hourly wages, which we expect to continue

27

into 2022. Portfolio-wide hotel operating costs in the third quarter and year-to-date 2021, excluding severance, were nearly 30% and 44% lower, respectively, compared to the same periods in 2019. In addition, included in these amounts for the year-to-date 2021 is a reduction to wages and benefits of approximately $11 million, related to the ERC recorded by our managers, the benefit of which was passed on to us.

The ramp up in staffing at several hotels during 2021 continues to lag the increase in demand due to the challenging labor market across the industry, which could result in upward pressure on wages and benefits going forward. However, the expiration of supplemental unemployment benefits may temper possible increases. As a result of the lag in hiring, portfolio-wide operating expenses were only 21% higher compared to the second quarter of 2021, despite an approximately 25% increase in total revenues quarter over quarter. Other property-level expenses consist of property taxes, the amounts and structure of which are highly dependent on local jurisdiction taxing authorities, and property and general liability insurance, all of which do not necessarily increase or decrease based on similar changes in revenues at our hotels.

The change in expenses for the third quarter compared to 2020 for rooms, food and beverage, other departmental and support, and management fees predominantly are due to the start of the recovery from the impact of the COVID-19 pandemic. While our operators have maintained a reduced level of expenses compared to pre-pandemic levels, an increase in occupancy and hotel operations has led to increases in expenses for the third quarter of 2021 compared to 2020. For the year-to-date period, despite pre-pandemic results in January and February of 2020, improving occupancy in 2021 led to an increase in most expenses for 2021 compared to 2020, with the exception of F&B expenses and other property level expenses. As a result, expenses changed as follows:

Rooms. Rooms expenses increased $81 million for the quarter, and increased $25 million, or 8.4%, year-to-date.

Food and beverage. F&B expenses increased $74 million for the quarter and decreased $43 million, or 12.1%, year-to-date. The decrease year-to-date reflects the pre-pandemic expense levels for January and February of 2020.

Other departmental and support expenses. Other departmental and support expenses increased $143 million, or 131.2%, for the quarter and increased $80 million, or 14.8%, year-to-date.

Management fees. Base management fees, which generally are calculated as a percentage of total revenues, increased $19 million for the quarter, and increased $16 million, or 41.0%, year-to-date. Incentive management fees, which generally are based on the amount of operating profit at each hotel after we receive a priority return on our investment, increased $3 million for the quarter and $10 million year-to-date.

Other property-level expenses. These expenses generally do not vary significantly based on occupancy and include expenses such as property taxes and insurance. Other property level expenses increased $5 million, or 6.5%, for the quarter and decreased $1 million, or 0.4%, year-to-date. Other property-level expenses also were partially offset by operating profit guarantees received from Marriott under the transformational capital program.

Depreciation and amortization. Depreciation and amortization increased $97 million, or 58.4%, for the quarter and $99 million, or 19.9%, for the year-to-date, primarily due to impairment expense of $92 million recorded in the third quarter of 2021.

Other Income and Expense

Corporate and other expenses. The following table details our corporate and other expenses for the quarter and year-to-date (in millions):

	Quarter ended September 30,				Year-to-date ended September 30,
	2021		2020		2021		2020
General and administrative costs	$	20	$	14	$	60	$	57
Non-cash stock-based compensation expense		4		4		13		11
Total	$	24	$	18	$	73	$	68

28

Interest expense. Interest expense decreased for the quarter and year-to-date primarily due to refinancing of senior notes and the make-whole premium paid to retire senior notes in the third quarter of 2020. The following table details our interest expense for the quarter and year-to-date (in millions):

	Quarter ended September 30,				Year-to-date ended September 30,
	2021		2020		2021		2020
Cash interest expense ⁽¹⁾	$	41	$	36	$	121	$	109
Non-cash interest expense		2		3		7		6
Non-cash debt extinguishment costs		—		1		—		1
Cash debt extinguishment costs ⁽¹⁾		—		26		—		27
Total interest expense	$	43	$	66	$	128	$	143

_________

(1)

Including the change in accrued interest, total cash interest paid was $32 million and $53 million for the quarters ended September 30, 2021 and 2020, respectively, and $115 million and $126 million for the year-to-date 2021 and 2020, respectively.

Other gains. Other gains increased $2 million for the quarter and decreased $9 million, or 69.2%, year-to-date. The decrease year-to-date is primarily due to the sale of a parcel of land adjacent to The Phoenician hotel in the second quarter of 2020, which resulted in a gain of approximately $12 million.

Equity in earnings (losses) of affiliates. Equity in earnings of affiliates increased $7 million for the third quarter and $62 million year-to-date, due to improvements in operations at the affiliates as well as unrealized gains on our investment in Fifth Wall Ventures, L.P. in 2021, while 2020 year-to-date included an impairment of inventory at our Maui timeshare of $14 million.

Benefit for income taxes. We lease substantially all our properties to consolidated subsidiaries designated as taxable REIT subsidiaries (“TRS”) for federal income tax purposes. Taxable income or loss generated/incurred by the TRS primarily represents hotel-level operations and the aggregate rent paid to Host L.P. by the TRS, on which we record an income tax provision or benefit. For the quarter and year-to-date, we recorded an income tax benefit of $13 million and $81 million, respectively, due primarily to the domestic net operating loss incurred by our TRS. Any domestic net operating loss incurred by our TRS in 2021 may be carried forward indefinitely, its use in future years being subject to a limit of 80% of annual taxable income. Our TRS is expected to generate additional net operating losses in 2021.

Hotel RevPAR Overview

To facilitate a quarter-to-quarter comparison of our operations, we typically present certain operating statistics for the periods included in this presentation on a comparable hotel basis. However, due to the COVID-19 pandemic and its effects on operations, there is little comparability between periods. For this reason, we temporarily suspended our comparable hotel presentation to instead present pro forma hotel operating results for all hotels. See “All Owned Hotel Pro Forma Hotel Operating Statistics and Results” for a complete description of our methodology. We also discuss our Hotel RevPAR results by geographic location and mix of business (i.e., transient, group, or contract).

29

Hotel Operating Data by Location

The following tables set forth performance information for our hotels by geographic location for the quarter and year-to-date ended September 30, 2021 compared to 2020 and to 2019, respectively, to provide a comparison of hotel statistics in the current period to last year as well as pre-pandemic levels:

All Owned Hotels (pro forma) by Location in Constant US$

	As of September 30, 2021				Quarter ended September 30, 2021									Quarter ended September 30, 2020
Location	No. of Properties		No. of Rooms		Average Room Rate		Average Occupancy Percentage			RevPAR		Total RevPAR		Average Room Rate		Average Occupancy Percentage			RevPAR		Total RevPAR		Percent Change in RevPAR			Percent Change in Total RevPAR
Maui/Oahu		4		2,007	$	514.34		82.8	%	$	425.86	$	635.28	$	172.74		11.3	%	$	19.47	$	25.42		2,087.7	%		2,399.1	%
Jacksonville		1		446		465.60		68.7			319.90		683.35		419.23		43.3			181.67		383.23		76.1			78.3
Miami		3		1,276		364.54		55.2			201.40		333.79		209.34		26.8			56.08		98.65		259.1			238.3
Florida Gulf Coast		5		1,842		314.16		45.2			141.93		286.62		288.56		33.7			97.38		194.67		45.7			47.2
Phoenix		4		1,822		245.88		57.7			141.92		321.83		201.12		22.0			44.33		110.66		220.1			190.8
Orlando		2		2,448		332.90		37.4			124.35		228.19		433.28		7.0			30.40		63.13		309.1			261.5
Los Angeles/    Orange County		5		2,119		218.60		71.1			155.40		216.04		182.68		26.4			48.15		62.24		222.8			247.1
Philadelphia		2		810		191.85		79.1			151.74		223.07		147.01		32.2			47.36		68.09		220.4			227.6
San Diego		3		3,288		247.61		72.1			178.55		281.14		203.85		15.6		��	31.78		52.66		461.8			433.9
Houston		4		1,716		149.60		66.6			99.67		133.88		105.12		32.4			34.07		47.93		192.5			179.3
Atlanta		4		1,682		178.31		56.6			100.94		142.30		139.03		31.6			43.89		60.57		130.0			134.9
Northern Virginia		3		1,252		169.41		60.6			102.70		156.44		157.90		19.7			31.11		43.91		230.1			256.3
San Antonio/    Austin		3		1,960		181.37		56.1			101.79		152.09		130.06		15.4			20.04		28.10		408.0			441.3
Washington, D.C. (CBD)		5		3,238		185.06		37.1			68.65		96.94		163.25		6.3			10.22		12.42		571.6			680.6
Denver		3		1,340		169.25		65.4			110.75		141.64		122.10		21.5			26.24		34.58		322.0			309.6
Chicago		4		1,816		191.01		62.4			119.27		149.38		124.78		17.6			21.95		26.96		443.2			454.1
New York		3		4,261		217.90		46.2			100.72		130.88		187.37		11.0			20.70		23.16		386.5			465.2
Seattle		2		1,315		202.49		53.5			108.25		130.03		172.32		6.1			10.48		12.33		932.5			954.7
New Orleans		1		1,333		136.76		54.3			74.30		91.66		112.64		26.6			30.00		35.57		147.7			157.7
San Francisco/    San Jose		7		4,530		163.42		50.0			81.72		104.30		165.35		13.1			21.59		27.13		278.4			284.5
Boston		3		2,715		204.56		48.1			98.46		117.58		135.30		4.9			6.62		9.43		1,387.8			1,146.4
Other		8		2,759		252.92		53.8			136.07		189.18		198.70		26.0			51.63		73.67		163.6			156.8
Domestic		79		45,975		236.65		55.7			131.82		199.00		184.34		17.6			32.40		51.32		306.8			287.7
International		5		1,499		90.99		51.4			46.77		66.43		93.15		11.3			10.56		14.14		342.8			369.8
All Locations - Constant US$		84		47,474		232.40		55.6			129.14		194.82		182.46		17.4			31.71		50.15		307.3			288.5
All Owned Hotels (pro forma) in Nominal US$
	As of September 30, 2021				Quarter ended September 30, 2021									Quarter ended September 30, 2020
	No. of Properties		No. of Rooms		Average Room Rate		Average Occupancy Percentage			RevPAR		Total RevPAR		Average Room Rate		Average Occupancy Percentage			RevPAR		Total RevPAR		Percent Change in RevPAR			Percent Change in Total RevPAR
International		5		1,499	$	90.99		51.4	%	$	46.77	$	66.43	$	88.93		11.3	%	$	10.08	$	13.50		363.8	%		392.0	%
Domestic		79		45,975		236.65		55.7			131.82		199.00		184.34		17.6			32.40		51.32		306.8			287.7
All Locations		84		47,474		232.40		55.6			129.14		194.82		182.37		17.4			31.69		50.13		307.5			288.7

30

All Owned Hotels (pro forma) by Location in Constant US$

	As of September 30, 2021				Quarter ended September 30, 2021									Quarter ended September 30, 2019
Location	No. of Properties		No. of Rooms		Average Room Rate		Average Occupancy Percentage			RevPAR		Total RevPAR		Average Room Rate		Average Occupancy Percentage			RevPAR		Total RevPAR		Percent Change in RevPAR			Percent Change in Total RevPAR
Maui/Oahu		4		2,007	$	514.34		82.8	%	$	425.86	$	635.28	$	385.51		91.5	%	$	352.78	$	554.15		20.7	%		14.6	%
Jacksonville		1		446		465.60		68.7			319.90		683.35		363.69		69.0			251.05		516.90		27.4			32.2
Miami		3		1,276		364.54		55.2			201.40		333.79		235.65		73.9			174.18		294.09		15.6			13.5
Florida Gulf Coast		5		1,842		314.16		45.2			141.93		286.62		242.93		61.6			149.63		302.07		(5.1	)		(5.1	)
Phoenix		4		1,822		245.88		57.7			141.92		321.83		197.07		57.9			114.19		287.59		24.3			11.9
Orlando		2		2,448		332.90		37.4			124.35		228.19		250.13		61.0			152.55		315.38		(18.5	)		(27.6	)
Los Angeles/    Orange County		5		2,119		218.60		71.1			155.40		216.04		229.84		86.3			198.43		289.80		(21.7	)		(25.5	)
Philadelphia		2		810		191.85		79.1			151.74		223.07		207.13		88.2			182.60		295.52		(16.9	)		(24.5	)
San Diego		3		3,288		247.61		72.1			178.55		281.14		256.92		83.5			214.41		372.78		(16.7	)		(24.6	)
Houston		4		1,716		149.60		66.6			99.67		133.88		170.32		67.0			114.07		159.84		(12.6	)		(16.2	)
Atlanta		4		1,682		178.31		56.6			100.94		142.30		168.37		85.6			144.09		219.82		(29.9	)		(35.3	)
Northern Virginia		3		1,252		169.41		60.6			102.70		156.44		199.70		72.7			145.09		217.46		(29.2	)		(28.1	)
San Antonio/    Austin		3		1,960		181.37		56.1			101.79		152.09		171.99		70.8			121.83		182.42		(16.4	)		(16.6	)
Washington, D.C. (CBD)		5		3,238		185.06		37.1			68.65		96.94		211.15		84.4			178.19		254.63		(61.5	)		(61.9	)
Denver		3		1,340		169.25		65.4			110.75		141.64		184.28		84.5			155.64		218.16		(28.8	)		(35.1	)
Chicago		4		1,816		191.01		62.4			119.27		149.38		220.91		85.5			188.78		264.29		(36.8	)		(43.5	)
New York		3		4,261		217.90		46.2			100.72		130.88		271.11		92.0			249.40		341.59		(59.6	)		(61.7	)
Seattle		2		1,315		202.49		53.5			108.25		130.03		260.45		90.2			234.96		291.64		(53.9	)		(55.4	)
New Orleans		1		1,333		136.76		54.3			74.30		91.66		156.82		77.0			120.78		175.05		(38.5	)		(47.6	)
San Francisco/    San Jose		7		4,530		163.42		50.0			81.72		104.30		266.18		84.2			224.20		301.99		(63.6	)		(65.5	)
Boston		3		2,715		204.56		48.1			98.46		117.58		243.00		91.1			221.28		291.41		(55.5	)		(59.6	)
Other		8		2,759		252.92		53.8			136.07		189.18		199.21		80.2			159.70		245.36		(14.8	)		(22.9	)
Domestic		79		45,975		236.65		55.7			131.82		199.00		236.51		80.5			190.47		291.96		(30.8	)		(31.8	)
International		5		1,499		90.99		51.4			46.77		66.43		147.24		75.9			111.82		155.21		(58.2	)		(57.2	)
All Locations - Constant US$		84		47,474		232.40		55.6	��		129.14		194.82		233.84		80.4			187.97		287.63		(31.3	)		(32.3	)
All Owned Hotels (pro forma) in Nominal US$
	As of September 30, 2021				Quarter ended September 30, 2021									Quarter ended September 30, 2019
	No. of Properties		No. of Rooms		Average Room Rate		Average Occupancy Percentage			RevPAR		Total RevPAR		Average Room Rate		Average Occupancy Percentage			RevPAR		Total RevPAR		Percent Change in RevPAR			Percent Change in Total RevPAR
International		5		1,499	$	90.99		51.4	%	$	46.77	$	66.43	$	159.14		75.9	%	$	120.86	$	166.88		(61.3	)%		(60.2	)%
Domestic		79		45,975		236.65		55.7			131.82		199.00		236.51		80.5			190.47		291.96		(30.8	)		(31.8	)
All Locations		84		47,474		232.40		55.6			129.14		194.82		234.20		80.4			188.26		288.00		(31.4	)		(32.4	)

31

All Owned Hotels (pro forma) by Location in Constant US$

	As of September 30, 2021				Year-to-date ended September 30, 2021									Year-to-date ended September 30, 2020
Location	No. of Properties		No. of Rooms		Average Room Rate		Average Occupancy Percentage			RevPAR		Total RevPAR		Average Room Rate		Average Occupancy Percentage			RevPAR		Total RevPAR		Percent Change in RevPAR			Percent Change in Total RevPAR
Maui/Oahu		4		2,007	$	470.97		67.4	%	$	317.20	$	480.87	$	415.84		29.7	%	$	123.66	$	186.54		156.5	%		157.8	%
Jacksonville		1		446		506.77		57.8			293.02		587.76		405.40		42.8			173.66		356.40		68.7			64.9
Miami		3		1,276		472.94		57.4			271.38		424.17		370.39		35.3			130.64		211.54		107.7			100.5
Florida Gulf Coast		5		1,842		416.57		54.8			228.24		426.68		369.22		40.7			150.28		314.92		51.9			35.5
Phoenix		4		1,822		301.23		56.5			170.12		346.53		317.49		32.0			101.46		238.55		67.7			45.3
Orlando		2		2,448		398.72		27.3			108.98		196.25		347.84		21.5			74.64		159.82		46.0			22.8
Los Angeles/    Orange County		5		2,119		190.62		53.1			101.25		138.42		204.60		33.9			69.42		100.22		45.9			38.1
Philadelphia		2		810		169.58		58.7			99.52		147.38		160.15		35.2			56.35		88.08		76.6			67.3
San Diego		3		3,288		218.39		45.3			98.85		155.68		234.30		26.4			61.82		120.05		59.9			29.7
Houston		4		1,716		140.32		59.7			83.73		113.03		145.80		35.9			52.30		76.89		60.1			47.0
Atlanta		4		1,682		170.45		48.0			81.83		111.31		171.23		34.7			59.48		91.63		37.6			21.5
Northern Virginia		3		1,252		161.62		44.3			71.60		107.52		187.00		26.7			50.00		79.88		43.2			34.6
San Antonio/    Austin		3		1,960		162.63		43.8			71.26		103.90		176.22		23.1			40.72		65.85		75.0			57.8
Washington, D.C. (CBD)		5		3,238		161.96		42.2			68.41		81.26		223.18		21.5			48.07		68.76		42.3			18.2
Denver		3		1,340		149.35		42.1			62.95		80.24		145.92		26.5			38.63		56.80		63.0			41.3
Chicago		4		1,816		168.03		37.4			62.92		77.59		134.05		25.0			33.45		45.13		88.1			71.9
New York		3		4,261		189.90		31.7			60.17		75.05		190.05		32.4			61.49		87.59		(2.1	)		(14.3	)
Seattle		2		1,315		188.47		27.8			52.43		63.79		191.36		20.4			38.98		55.62		34.5			14.7
New Orleans		1		1,333		128.95		37.6			48.51		65.71		176.44		30.6			54.04		78.28		(10.2	)		(16.1	)
San Francisco/    San Jose		7		4,530		153.68		31.5			48.40		62.82		266.39		25.5			67.87		98.41		(28.7	)		(36.2	)
Boston		3		2,715		180.00		25.7			46.18		56.54		173.40		19.3			33.48		50.97		37.9			10.9
Other		8		2,759		245.69		43.7			107.40		151.39		187.25		32.7			61.21		88.43		75.5			71.2
Domestic		79		45,975		240.30		42.5			102.15		156.04		235.37		28.5			67.02		111.88		52.4			39.5
International		5		1,499		85.10		28.0			23.85		34.15		119.06		24.3			28.94		43.76		(17.6	)		(22.0	)
All Locations - Constant US$		84		47,474		237.03		42.1			99.68		152.19		232.21		28.3			65.82		109.72		51.5			38.7
All Owned Hotels (pro forma) in Nominal US$
	As of September 30, 2021				Year-to-date ended September 30, 2021									Year-to-date ended September 30, 2020
	No. of Properties		No. of Rooms		Average Room Rate		Average Occupancy Percentage			RevPAR		Total RevPAR		Average Room Rate		Average Occupancy Percentage			RevPAR		Total RevPAR		Percent Change in RevPAR			Percent Change in Total RevPAR
International		5		1,499	$	85.10		28.0	%	$	23.85	$	34.15	$	121.49		24.3	%	$	29.53	$	44.01		(19.3	)%		(22.4	)%
Domestic		79		45,975		240.30		42.5			102.15		156.04		235.37		28.5			67.02		111.88		52.4			39.5
All Locations		84		47,474		237.03		42.1			99.68		152.19		232.27		28.3			65.84		109.73		51.4			38.7

32

	As of September 30, 2021				Year-to-date ended September 30, 2021									Year-to-date ended September 30, 2019
Location	No. of Properties		No. of Rooms		Average Room Rate		Average Occupancy Percentage			RevPAR		Total RevPAR		Average Room Rate		Average Occupancy Percentage			RevPAR		Total RevPAR		Percent Change in RevPAR			Percent Change in Total RevPAR
Maui/Oahu		4		2,007	$	470.97		67.4	%	$	317.20	$	480.87	$	401.92		90.9	%	$	365.45	$	577.41		(13.2	)%		(16.7	)%
Jacksonville		1		446		506.77		57.8			293.02		587.76		383.37		77.2			296.02		652.91		(1.0	)		(10.0	)
Miami		3		1,276		472.94		57.4			271.38		424.17		318.31		80.1			254.98		401.39		6.4			5.7
Florida Gulf Coast		5		1,842		416.57		54.8			228.24		426.68		340.73		72.8			247.94		507.99		(7.9	)		(16.0	)
Phoenix		4		1,822		301.23		56.5			170.12		346.53		292.22		71.7			209.42		472.19		(18.8	)		(26.6	)
Orlando		2		2,448		398.72		27.3			108.98		196.25		285.49		70.7			201.76		412.06		(46.0	)		(52.4	)
Los Angeles/    Orange County		5		2,119		190.62		53.1			101.25		138.42		223.42		86.0			192.10		285.12		(47.3	)		(51.5	)
Philadelphia		2		810		169.58		58.7			99.52		147.38		216.10		85.4			184.46		301.70		(46.0	)		(51.1	)
San Diego		3		3,288		218.39		45.3			98.85		155.68		255.81		81.2			207.62		372.41		(52.4	)		(58.2	)
Houston		4		1,716		140.32		59.7			83.73		113.03		178.46		72.4			129.22		184.58		(35.2	)		(38.8	)
Atlanta		4		1,682		170.45		48.0			81.83		111.31		193.72		79.7			154.41		241.44		(47.0	)		(53.9	)
Northern Virginia		3		1,252		161.62		44.3			71.60		107.52		208.03		72.1			150.02		245.90		(52.3	)		(56.3	)
San Antonio/    Austin		3		1,960		162.63		43.8			71.26		103.90		192.68		76.3			146.98		225.63		(51.5	)		(54.0	)
Washington, D.C. (CBD)