| Document and Entity Information | ||
| 3 Months Ended
Mar. 26, 2010 | Apr. 29, 2010
| |
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | 2010-03-26 | |
| Document Fiscal Year Focus | 2,010 | |
| Document Fiscal Period Focus | Q1 | |
| Trading Symbol | HST | |
| Entity Registrant Name | HOST HOTELS & RESORTS, INC. | |
| Entity Central Index Key | 0001070750 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Large Accelerated Filer | |
| Entity Common Stock, Shares Outstanding | 658,204,571 |
| CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | ||
| In Millions | Mar. 26, 2010
| Dec. 31, 2009
|
| ASSETS | ||
| Property and equipment, net | $10,144 | $10,231 |
| Assets held for sale | 3 | 8 |
| Due from managers | 41 | 29 |
| Investments in affiliates | 140 | 153 |
| Deferred financing costs, net | 46 | 49 |
| Furniture, fixtures and equipment replacement fund | 128 | 124 |
| Other | 279 | 266 |
| Restricted cash | 34 | 53 |
| Cash and cash equivalents | 1,245 | 1,642 |
| Total assets | 12,060 | 12,555 |
| Debt | ||
| Senior notes, including $1,132 million and $1,123 million, respectively, net of discount, of Exchangeable Senior Debentures | 4,199 | 4,534 |
| Mortgage debt | 1,098 | 1,217 |
| Other | 86 | 86 |
| Total debt | 5,383 | 5,837 |
| Accounts payable and accrued expenses | 164 | 174 |
| Other | 194 | 194 |
| Total liabilities | 5,741 | 6,205 |
| Non-controlling interests - Host Hotels & Resorts, L.P. | 160 | 139 |
| Host Hotels & Resorts Inc. stockholders' equity: | ||
| Cumulative redeemable preferred stock (liquidation preference $100 million) 50 million shares authorized; 4 million shares issued and outstanding | 97 | 97 |
| Common stock, par value $.01, 1,050 million shares authorized; 652.4 million shares and 646.3 million shares issued and outstanding, respectively | 7 | 6 |
| Additional paid-in capital | 6,916 | 6,875 |
| Accumulated other comprehensive income | 9 | 12 |
| Deficit | (894) | (801) |
| Total equity of Host Hotels & Resorts Inc. stockholders | 6,135 | 6,189 |
| Non-controlling interests-other consolidated partnerships | 24 | 22 |
| Total equity | 6,159 | 6,211 |
| Total liabilities, non-controlling interests and equity | $12,060 | $12,555 |
| CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
| In Millions, except Per Share data | Mar. 26, 2010
| Dec. 31, 2009
|
| Senior notes, Exchangeable Senior Debentures | $1,132 | $1,123 |
| Cumulative redeemable preferred stock, liquidation preference | $100 | $100 |
| Cumulative redeemable preferred stock, shares authorized | 50 | 50 |
| Cumulative redeemable preferred stock, shares issued | 4 | 4 |
| Cumulative redeemable preferred stock, shares outstanding | 4 | 4 |
| Common stock, par value | 0.01 | 0.01 |
| Common stock, shares authorized | 1,050 | 1,050 |
| Common stock, shares issued | 652.4 | 646.3 |
| Common stock, shares outstanding | 652.4 | 646.3 |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | ||
| In Millions, except Per Share data | 3 Months Ended
Mar. 26, 2010 | 3 Months Ended
Mar. 27, 2009 |
| REVENUES | ||
| Rooms | $484 | $500 |
| Food and beverage | 252 | 266 |
| Other | 57 | 69 |
| Total hotel sales | 793 | 835 |
| Rental income | 30 | 29 |
| Total revenues | 823 | 864 |
| EXPENSES | ||
| Rooms | 140 | 134 |
| Food and beverage | 187 | 195 |
| Other departmental and support expenses | 222 | 230 |
| Management fees | 29 | 33 |
| Other property-level expenses | 86 | 81 |
| Depreciation and amortization | 136 | 155 |
| Corporate and other expenses | 25 | 16 |
| Total operating costs and expenses | 825 | 844 |
| OPERATING PROFIT (LOSS) | (2) | 20 |
| Interest income | 1 | 2 |
| Interest expense | (96) | (87) |
| Net gains on property transactions and other | 1 | |
| Losses on foreign currency transactions and derivatives | (2) | (1) |
| Equity in losses of affiliates | (5) | (3) |
| LOSS BEFORE INCOME TAXES | (104) | (68) |
| Benefit for income taxes | 22 | 14 |
| LOSS FROM CONTINUING OPERATIONS | (82) | (54) |
| Loss from discontinued operations, net of tax. | (2) | (6) |
| NET LOSS | (84) | (60) |
| Less: Net loss attributable to non-controlling interests | 1 | |
| NET LOSS ATTRIBUTABLE TO HOST HOTELS & RESORTS, INC. | (84) | (59) |
| Less: Dividends on preferred stock | (2) | (2) |
| NET LOSS AVAILABLE TO COMMON STOCKHOLDERS | ($86) | ($61) |
| Basic and diluted loss per common share: | ||
| Continuing operations | -0.13 | -0.11 |
| Discontinued operations | -0.01 | |
| Basic and diluted loss per common share | -0.13 | -0.12 |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
| In Millions | 3 Months Ended
Mar. 26, 2010 | 3 Months Ended
Mar. 27, 2009 |
| OPERATING ACTIVITIES | ||
| Net loss | ($84) | ($60) |
| Discontinued operations: | ||
| Gain on dispositions | (18) | |
| Depreciation | 1 | 24 |
| Depreciation and amortization | 136 | 155 |
| Amortization of deferred financing costs | 3 | 3 |
| Amortization of debt premiums/discounts, net | 9 | 7 |
| Deferred income taxes | (21) | (15) |
| Net gains on property transactions and other | (1) | |
| Loss on foreign currency transactions and derivatives | 2 | 1 |
| Non-cash loss (gain) on extinguishment of debt | 2 | (3) |
| Equity in losses of affiliates, net | 5 | 3 |
| Change in due from managers | (12) | 3 |
| Changes in other assets | 15 | 7 |
| Changes in other liabilities | (7) | 14 |
| Cash provided by operations | 49 | 120 |
| INVESTING ACTIVITIES | ||
| Proceeds from sales of assets, net | 9 | 108 |
| Return of capital from investments in affiliates | 39 | |
| Capital expenditures: | ||
| Renewals and replacements | (27) | (49) |
| Repositionings and other investments | (23) | (59) |
| Change in furniture, fixtures and equipment (FF&E) replacement fund | (4) | (1) |
| Change in restricted cash designated for FF&E replacement fund | 6 | 3 |
| Cash provided by (used in) investing activities | (39) | 41 |
| FINANCING ACTIVITIES | ||
| Financing costs | (3) | |
| Issuances of debt | 120 | |
| Repurchase/redemption of senior notes, including exchangeable debentures | (346) | (69) |
| Mortgage debt prepayments and scheduled maturities | (124) | (34) |
| Scheduled principal repayments | (2) | (3) |
| Common stock issuance | 55 | |
| Dividends on common stock | (1) | (27) |
| Dividends on preferred stock | (2) | (2) |
| Distributions to non-controlling interests | (1) | |
| Change in restricted cash other than FF&E replacement fund | 13 | 3 |
| Cash used in financing activities | (407) | (16) |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (397) | 145 |
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 1,642 | 508 |
| CASH AND CASH EQUIVALENTS, END OF PERIOD | 1,245 | 653 |
| Supplemental disclosure of cash flow information (in millions): | ||
| Interest paid | 68 | 60 |
| Income taxes paid | $1 | $3 |
| Organization | |
| 3 Months Ended
Mar. 26, 2010 | |
| Organization | 1. Organization Host Hotels Resorts, Inc., or Host, a Maryland corporation operating through an umbrella partnership structure, is the owner of hotel properties. We operate as a self-managed and self-administered real estate investment trust, or REIT, with our operations conducted solely through an operating partnership, Host Hotels Resorts, L.P., or the operating partnership, or Host LP, and its subsidiaries. We are the sole general partner of the operating partnership and, as of March26, 2010, own approximately 98% of the partnership interests of Host LP, which are referred to as OP units. |
| Summary of Significant Accounting Policies | |
| 3 Months Ended
Mar. 26, 2010 | |
| Summary of Significant Accounting Policies | 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 U.S. generally accepted accounting principles, or GAAP, in the accompanying unaudited condensed consolidated financial statements. We believe the disclosures made are adequate to prevent the information presented from being misleading. However, the unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10K for the year ended December31, 2009. 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 March26, 2010 and the results of our operations and cash flows for the quarters ended March26, 2010 and March27, 2009. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations. Business Combinations In conjunction with business combinations, we record the assets acquired, liabilities assumed and non-controlling interests assumed at fair value as of the acquisition date, including contingent consideration. Furthermore, acquisition-related costs, such as due diligence, legal and accounting fees, are expensed in the period incurred and are not capitalized or applied in determining the fair value of the acquired assets. Consolidation of Variable Interest Entities We review all of our non-wholly owned entities to determine whether any of our interests constitute controlling financial interests in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as the enterprise that has both of the following characteristics: a. The power to direct the activities of a variable interest entity that most significantly impact the entitys economic performance. b. The obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. Additionally, an enterprise is required to assess whether it has an implicit financial responsibility to ensure that a variable interest entity operates as designed when determining whether it has the power to direct the activities of the variable interest entity that most significantly impact the entitys economic performance. We perform this analysis on at least a quarterly basis, or more frequently if changes occur in the structure or control of our partnerships. We have reevaluated our interest |
| Earnings per Common Share | |
| 3 Months Ended
Mar. 26, 2010 | |
| Earnings per Common Share | 3. Earnings per Common Share Basic earnings (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding. Diluted earnings per common share is computed by dividing net income (loss) available to common stockholders as adjusted for potentially dilutive securities, by the weighted average number of shares of common stock outstanding plus potentially dilutive securities. Dilutive securities may include shares granted under comprehensive stock plans, OP units held by non-controlling partners and exchangeable debt securities. No effect is shown for securities that are anti-dilutive. Quarter ended March26, 2010 March27, 2009 (inmillions,exceptpershareamounts) Net loss $ (84 ) $ (60 ) Net loss attributable to non-controlling interests 1 Dividends on preferred stock (2 ) (2 ) Loss available to common stockholders (86 ) (61 ) Assuming deduction of gain recognized for the repurchase of 2004 Debentures (a) (2 ) Diluted loss available to common stockholders $ (86 ) $ (63 ) Basic weighted average shares outstanding 648.1 526.1 Assuming weighted average shares for repurchased 2004 Debentures 3.9 Diluted weighted average shares outstanding 648.1 530.0 Basic and diluted loss per share $ (.13 ) $ (.12 ) (a) During the first quarter of 2009, we repurchased $75million face amount of our 31/4% Exchangeable Senior Debentures (the 2004 Debentures) with a carrying value of $72million for $69million. The adjustments to dilutive earnings per common share include the $3million gain, net of interest expense on the repurchased debentures. |
| Property and Equipment | |
| 3 Months Ended
Mar. 26, 2010 | |
| Property and Equipment | 4. Property and Equipment Property and equipment consists of the following as of: March26, 2010 December31, 2009 (in millions) Land and land improvements $ 1,571 $ 1,574 Buildings and leasehold improvements 11,535 11,502 Furniture and equipment 1,802 1,794 Construction in progress 84 104 14,992 14,974 Less accumulated depreciation and amortization (4,848 ) (4,743 ) $ 10,144 $ 10,231 |
| Debt | |
| 3 Months Ended
Mar. 26, 2010 | |
| Debt | 5. Debt Senior Notes. On January20, 2010, we redeemed the remaining $346million outstanding of our 7% Series M senior notes that were due in August 2012. As a result of the repurchase, we recorded an $8million loss on debt extinguishments which is included in interest expense. Mortgage Debt. On February11, 2010, we repaid the $124million, 7.4% mortgage on the Atlanta Marriott Marquis. |
| Stockholder's Equity | |
| 3 Months Ended
Mar. 26, 2010 | |
| Stockholder's Equity | 6. Stockholders Equity Dividends. On March16, 2010, our Board of Directors declared a dividend of $0.01 per share on our common stock. The dividend was paid on April15, 2010 to stockholders of record as of March31, 2010. On March16, 2010, our Board of Directors declared a cash dividend of $0.5546875 per share on our Class E cumulative redeemable preferred stock. The dividend was paid on April15, 2010 to preferred stockholders of record as of March31, 2010. Common Stock Offering. On August19, 2009, we entered into a Sales Agency Financing Agreement with BNY Mellon Capital Markets, LLC, through which we may issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $400million. The sales will be made in at the market offerings under Securities and Exchange Commission (SEC) rules, including sales made directly on the New York Stock Exchange. BNY Mellon Capital Markets, LLC is acting as sales agent. During the first quarter of 2010, we issued approximately 4.3million shares of common stock through this program at an average price of $12.65 per share for proceeds of $54.8million, net of $0.6million of commissions. We may continue to sell shares of common stock under this program from time to time based on market conditions, although we are not under an obligation to sell any shares. Since the inception of the program, we have issued approximately 32.3million shares for net proceeds of approximately $342million. We currently have approximately $54million available for issuance under this program. Equity is allocated between controlling and non-controlling interests as follows (in millions): HostHotels Resorts, Inc. Non-redeemable non-controlling interests Totalequity Redeemable non-controlling interests Balance, December31, 2009 $ 6,189 $ 22 $ 6,211 $ 139 Net income (loss) (84 ) 1 (83 ) (1 ) Issuance of common stock 55 55 Changes in ownership (22 ) 1 (21 ) 22 Other comprehensive income (loss) (note 8) (3 ) (3 ) Balance, March26, 2010 $ 6,135 $ 24 $ 6,159 $ 160 Host Hotels Resorts, Inc. Non-redeemable non-controlling interests Total equity Redeemable non-controlling interests Balance, December31, 2008 $ 5,590 $ 24 $ 5,614 $ 158 Net income (loss) (60 ) 1 (59 ) (2 ) Changes in ownership 11 (1 ) 10 (9 ) Other comprehensive income (loss) (note 8) (3 ) (3 ) Balance, March27, 2009 $ 5,538 $ 24 $ 5,562 $ 147 |
| Geographic Information | |
| 3 Months Ended
Mar. 26, 2010 | |
| Geographic Information | 7. Geographic Information We consider each one of our hotels to be an operating segment, none of which meets the threshold for a reportable segment. We also allocate resources and assess operating performance based on individual hotels. All of our other real estate investment activities (primarily our leased hotels and office buildings) are immaterial and meet the aggregation criteria, and thus, we report one segment: hotel ownership. Our foreign operations consist of four properties located in Canada, two properties located in Chile and one property located in Mexico. There were no intercompany sales during the periods presented. The following table presents total revenues for each of the geographical areas in which we operate: Quarter ended March26, 2010 March27, 2009 (in millions) United States $ 795 $ 838 Canada 21 19 Chile 4 4 Mexico 3 3 Total revenue $ 823 $ 864 |
| Comprehensive Income | |
| 3 Months Ended
Mar. 26, 2010 | |
| Comprehensive Income | 8. Comprehensive Income Other comprehensive income consists of unrealized gains and losses on foreign currency translation adjustments and hedging instruments. The following table presents comprehensive income for all periods presented: Quarter ended March26, 2010 March27, 2009 (in millions) Net loss $ (84 ) $ (60 ) Other comprehensive loss (3 ) (3 ) Comprehensive loss (87 ) (63 ) Comprehensive loss attributable to the non- controlling interests 1 Comprehensive loss attributable to Host Hotels Resorts, Inc. $ (87 ) $ (62 ) |
| Dispositions | |
| 3 Months Ended
Mar. 26, 2010 | |
| Dispositions | 9. Dispositions Assets Held for Sale. During the first quarter, we entered into an agreement to sell The Ritz-Carlton, Dearborn and we reclassified the assets and liabilities related to this hotel as of March26,2010. The following table summarizes the property and equipment, other assets and other liabilities for the property classified as held for sale on the respective balance sheet dates: March26, 2010 December31, 2009 (in millions) Property and equipment, net $ 3 $ 8 Other assets Total assets $ 3 $ 8 Total liabilities $ $ Dispositions. In the first quarter of 2010, we received approximately $9million from the sale of the Sheraton Braintree and recorded a nominal gain. Therefore, we included the operations of this hotel, as well as The Ritz-Carlton Dearborn, which is classified as held-for-sale, in discontinued operations. The following table summarizes the revenues, income (loss) before taxes, and the gain on dispositions, net of income tax, of the hotels which have been included in discontinued operations in the unaudited condensed consolidated statements of operations for the periods presented: Quarter ended March26, 2010 March27, 2009 (in millions) Revenues $ 2 $ 22 Loss before income taxes (2 ) (24 ) Gain on dispositions, net of tax 18 Net income attributable to Host Hotels Resorts, Inc. is allocated between continuing and discontinued operations as follows: Quarter ended March26, 2010 March27, 2009 (in millions) Loss from continuing operations, net of tax $ (82 ) $ (53 ) Discontinued operations, net of tax (2 ) (6 ) Net loss attributable to Host Hotels Resorts, Inc. $ (84 ) $ (59 ) |
| Fair Value Measurements | |
| 3 Months Ended
Mar. 26, 2010 | |
| Fair Value Measurements | 10. Fair Value Measurements We have adopted the provisions under GAAP for both recurring and non-recurring fair value measurements. Our recurring fair value measurements consist of the valuation of our derivative instruments, which may or may not be designated as accounting hedges. In evaluating the fair value of both financial and non-financial assets and liabilities, GAAP outlines a valuation framework and creates a fair value hierarchy that distinguishes between market assumptions based on market data (observable inputs) and a reporting entitys own assumptions about market data (unobservable inputs). Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability at the measurement date in an orderly transaction (an exit price). The following table details the fair value of our financial assets and liabilities that are required to be measured at fair value on a recurring basis and the change in fair value of the derivative instruments at March26, 2010. Fair Value at Measurement Date Using QuotedPrices in Active Markets for IdenticalAssets (Level 1) SignificantOther Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Changein fairvalue for theperiodended March 26, 2010 (in millions) Fair Value Measurements on a Recurring Basis: Interest rate swap derivatives (1) $ $ 3.1 $ $ 4.1 Interest rate cap derivative 1.0 (0.8 ) Forward currency purchase contracts (1) 6.6 4.9 (1) These derivative contracts have been designated as hedging instruments. Interest rate swap derivatives. We currently have three interest rate swap agreements for an aggregate notional amount of $300million. We entered into the derivative instruments in order to hedge changes in the fair value of the fixed-rate debt that occur as a result of changes in market interest rates. We have designated these derivatives as fair value hedges. The derivatives are valued based on the prevailing market yield curve on the date of measurement. We also evaluate counterparty credit risk in the calculation of the fair value of the swaps. As of March26, 2010 and December31, 2009, we recorded an asset of $3.1million and a liability of $1million, respectively, related to the fair value of the swaps. We record the change in the fair value of the underlying debt due to change in the LIBOR rate as an addition to the carrying amount of the debt. At March26, 2010, such change was $4.4million. The difference between the change in the fair value of the swap and the change in the fair value in the underlying debt is considered the ineffective portion of the hedging relationship. We recognized a loss of $0.3million related to the ineffective portion of the hedging relationship in the first quarter of 2010. Interest Rate Cap Derivative. We currently have one interest rate cap agreement related to variable rate mortgage debt. The interest rate cap is valued based on the prevailing market yield curve on the date of measurement. We recognized a loss of $.8million based on the changes in the |
| Non-controlling Interests | |
| 3 Months Ended
Mar. 26, 2010 | |
| Non-controlling Interests | 11. Non-controlling Interests Host LP. We adjust the non-controlling interests of Host LP each period so that the amount presented equals the greater of its carrying value based on the accumulated historical cost or its 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 unitholders of Host LP. The redemption value is based on the amount of cash or Host common stock, at our option, that would be paid to the non-controlling interests of the operating partnership if the partnership were terminated. Therefore, we have assumed that the redemption value is equivalent to the number of shares of Host common stock issuable upon conversion of the OP Units owned by non-controlling partners valued at the market price of Host common stock at the balance sheet date. Subsequent to a stock dividend issued in 2009, one OP unit may now be exchanged into 1.021494 shares of Host common stock. Non-controlling interests of Host LP are classified in the mezzanine section of the balance sheet as they do not meet the requirements for equity classification because the redemption feature requires the delivery of registered shares. The table below details the historical cost and redemption values for the non-controlling interests: March26, 2010 December31, 2009 OP Units outstanding (millions) 10.8 11.7 Market price per Host common share $ 14.60 $ 11.67 Shares issuable upon conversion of one OP Unit 1.021494 1.021494 Redemption value (millions) $ 160 $ 139 Historical cost (millions) $ 103 $ 113 Book value (millions) (1) $ 160 $ 139 (1) The book value recorded is equal to the greater of the redemption value or the historical cost. Net income (loss) is allocated to the non-controlling interests of Host LP based on their weighted average ownership percentage during the period. Other Consolidated Partnerships. As of March26, 2010, we consolidate three majority-owned partnerships with mandatorily redeemable non-controlling interests with finite lives ranging from 99 to 100 years that terminate between 2081 and 2095. Third party partnership interests that have finite lives are included in non-controlling interests-other consolidated partnerships in the consolidated balance sheets and totaled $24million and $22million as of March26, 2010 and December31, 2009, respectively. At March26, 2010 and December31, 2009, the fair values of the non-controlling interests in these partnerships were approximately $55million and $44million, respectively. As of March26, 2010, none of our partnerships have infinite lives as defined by GAAP. Net income (loss) attributable to non-controlling interests of Host LP and of other non-controlling consolidated partnerships is not included in the determination of net income (loss). However, net income (loss) has been reduced by the amount attributable to non-controlling interests, which totaled ($1)million for the quarter ended March27, 2009 in the determination of net income (loss) attributable to Host. There was no |
