Wednesday, real estate investment trust Host Hotels & Resorts Inc. (HST) posted a loss for the third quarter, as revenues declined from last year. Furthermore, funds from operations dipped, yet topped the Street view. In addition, the company declared a special dividend and said it now expects a narrower loss for fiscal 2009.
Q3 Results
The Bethesda, Maryland-based company's third-quarter net loss available to common stockholders was $57 million, compared to a profit of $45 million in the prior-year quarter. On a per share basis, loss amounted to $0.09, compared to a profit of $0.09 in the same quarter of last year.
Net loss attributable to common stockholders, before dividends on preferred stock, totaled $55 million, versus a profit of $47 million a year ago.
The company reported net loss from continuing operations of $69 million or $0.11 per share, compared to a profit of $29 million or $0.05 per share in the previous year.
Funds from operations or FFO for the recent quarter plunged to $66 million or $0.11 per share from $170 million or $0.31 per share in the year-earlier quarter, affected by the non-cash interest expense for all periods presented and non-cash impairment charges for the first half of 2009. FFO per share was reduced by $0.01 for the third quarter of 2009 due to non-cash interest expense.
On average, 19 analysts polled by Thomson Reuters expected the company to post earnings of $0.08 per share. Analysts' estimates typically exclude special items.
Total revenues declined 19.9% to $912 million from the prior-year's $1.14 billion, but surpassed the fourteen Wall Street analysts' consensus revenue estimate of $889.38 million. Total hotel sales were $890 million, down from $1.12 billion in the third quarter of fiscal 2008. Comparable hotel RevPAR decreased 21.3% for the third quarter.
Host Hotels noted that the operating results for 2009 and 2008 were affected by an increase in non-cash interest expense related to the company's exchangeable debentures, as well as non-cash impairment charges recorded in the first half of 2009, partially offset by gains associated with hotel dispositions. The net effect of these items on loss per share was an increase in earnings of $6 million, or $0.01 per share for both the third quarter of 2009 and 2008.
Further, the company said its results of operations included a $12 million tax benefit, or $0.02 for both the loss per share and FFO per share associated with the sale of its four non-core properties.
Year-To-Date Synopsis
For the nine-month period, the company posted a net loss available to common stockholders of $188 million or $0.33 per share, compared to a profit of $179 million or $0.53 per share in the year-earlier period.
Net loss attributable to common stockholders, before dividends on preferred stock, was $182 million, compared to a profit of $285 million earned in the same period of last year.
Net loss from continuing operations amounted to $184 million or $0.33 per share, compared to a profit of $267 million or $0.46 per share in the year-ago period.
Funds from operations dropped to $189 million or $0.33 per share from $656 million or $1.19 per share in the previous year.
Year-to-date revenues decreased 20.2% to $2.84 billion from $3.56 billion reported in the comparable period of the previous year. Total hotel sales were $2.76 billion, a decline from the previous year's hotel sales of $3.48 billion.
Dividend
In addition, the company declared a special common dividend of $.25 per share, payable on December 18, 2009 to stockholders of record on November 6, 2009, with cash, shares of common stock or a combination of cash and shares of common stock based on stockholder elections, provided the cash component of this dividend would be about 10% of the aggregate dividend, or $0.025 per share. Previously, the company had suspended its regular quarterly dividend. However, it now intends to continue paying a cash dividend on its preferred stock.
Road Ahead
Looking forward, the company currently projects fiscal 2009 loss to range between $250 million and $282 million or $0.42 and $0.47 per share. Earlier, the company had expected a loss of $267 million - $310 million or $0.46 - $0.53 per share for the year. Net loss available to common stockholders is now estimated to be in the range of $282 million - $251 million.
FFO per share is now expected to be in the range of about $278 million - $308 million or $0.46 - $0.51, compared to the prior forecast range of $253 million - $294 million or $0.43 - $0.50 per share. Analysts are looking for $0.50 per share for the year.
As the current recessionary climate and its effect on business and leisure travel continues to hinder the company's ability to predict future operating results, the company assumes comparable hotel RevPAR to decline about 20% - 22% for the full year 2009. Given this assumption, Host Hotels expects operating profit margins under GAAP to decrease about 1,180 basis points - 1,260 basis points and its comparable hotel adjusted operating profit margins to decline about 600 basis points - 640 basis points.
Peer Review
Among Host Hotels' peers, LaSalle Hotel Properties (LHO) is scheduled to release third-quarter results on October 21, with analysts expecting earnings of $0.44 per share, on revenues of $162.74 million.
Stock Quotes
Host Hotels shares, which have been trading between $3.08 and $12.10 in the past 52 weeks, closed Tuesday's trading session at $11.28.
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