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Host Hotels (HST) Closes Sale Of 6 Non-Core Hotels For $415M

Zacks Equity Research

Host Hotels & Resorts, Inc. HST has completed the previously-announced sale of all six non-core hotels for a combined price of roughly $415 million. The six properties consist of Scottsdale Marriott Suites Old Town, Scottsdale Marriott at McDowell Mountains, The Westin Indianapolis, Costa Mesa Marriott, Atlanta Marriott Suites Midtown and Chicago Marriott Suites O’Hare. The transactions were completed in August 2019.

The lucrative transaction market has likely enabled Host Hotels to opportunistically monetize these low RevPAR assets at attractive valuations. Further, since these properties entailed high capital expenditure needs, the latest move reduces the company’s capex requirements.

Per management, sale proceeds from the latest deal will further strengthen the company’s investment-grade balance sheet as well as offer additional scope to make strategic investments and execute share buybacks. Through these efforts, Host Hotels remains committed to drive near- and long-term value creation for its shareholders.

Moreover, the company’s long-term strategic vision entails ownership of iconic and irreplaceable properties that enjoy high RevPAR and limited near-term capex needs. Furthermore, focus on expansion of its footprint in strategic markets that have underlying strong demand generators positions Host Hotels for continued growth.

Notably, since the beginning of the year through Aug 6, the company has completed sale of six properties for $570 million. These efforts come as part of the company’s accretive capital-recycling program aimed at improving portfolio quality and hotel RevPAR.

However, these transactions might have a near-term earnings-dilution impact. In fact, management anticipates the asset sales to reduce the company’s 2019 Adjusted EBITDAre by $21 million and adjusted funds from operations (FFO) per share by 3 cents.

Currently, Host Hotels carries a Zacks Rank #4 (Sell). Over the past three months, shares of the company have declined 8.8%, as against the industry’s growth of 6%.


You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Additionally, amid global slowdown and uncertainty surrounding the ongoing trade deals, businesses have taken a cautious outlook. This has resulted in a decline in business-transient demand. With the absence of any near-term catalyst to reverse the softer operating environment, a number of hoteliers and hotel real estate investment trusts (REITs), including Marriott International, Inc. MAR, Pebblebrook Hotel Trust PEB and Park Hotels & Resorts PK, have trimmed the 2019 guidance to temper these expectations.   

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Marriott International (MAR) : Free Stock Analysis Report
 
Park Hotels & Resorts Inc. (PK) : Free Stock Analysis Report
 
Pebblebrook Hotel Trust (PEB) : Free Stock Analysis Report
 
Host Hotels & Resorts, Inc. (HST) : Free Stock Analysis Report
 
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