Host Hotels (HST) Extends $2.5B Credit Facility, Ups Liquidity
Host Hotels & Resorts, Inc. HST recently announced the amendment and restatement of its existing $2.5 billion credit facility (known as the “Agreement”) to boost liquidity position and financial flexibility.
This involved the extension of the maturity from January 2025 to January 2028, inclusive of all extension options. The Agreement will continue to comprise a $1.5 billion revolving credit facility and two $500 million term loans.
The move did not result in any increase in the pricing of the facilities. It will continue to bear interest in accordance with a credit ratings-based grid ranging from 0.725%-1.600% over the applicable adjusted term Secured Overnight Financing Rate.
Per Sourav Ghosh, executive VP and CFO of Host Hotels, “We are extremely pleased to further enhance the strength and flexibility of our balance sheet with this refinancing, which reflects no increase in pricing.”
The Agreement is also a reflection of Host Hotels’ industry-leading commitment to environmental, social, and governance (ESG) initiatives. It adds incentives linked to portfolio sustainability initiatives, including green building certifications and renewable electricity usage.
As part of its sustainability targets, the company aims to increase the number of hotels in its portfolio with green building certifications to 38% by 2027. It also intends to increase the percentage of electricity used across its consolidated portfolio, which is generated by renewable resources, to 38% by 2027.
There was no outstanding amount under the revolving credit facility other than the existing letters of credit at closing. Under the two term loans, the outstanding amount was $1 billion.
Host Hotels has a portfolio of luxury and upper-upscale hotels in the United States and abroad. With the lodging industry rebounding, HST’s well-located properties in markets with strong demand drivers, like central business districts of main cities, close to airports and in resort/conference destinations, are likely to benefit.
The company has been making concerted efforts to dispose of non-strategic assets that have lower growth potential or properties with significant capital expenditure requirements through its capital-recycling program. It redeploys the proceeds to acquire or invest in premium properties in markets that are anticipated to recover faster.
HST maintains a healthy balance sheet and is the only company with an investment-grade rating among lodging REITs. Moreover, its debt has a weighted average maturity of 5.2 years, an average interest rate of 4.4% and no material maturities until April 2024. With added balance-sheet strength, the company is well-poised to capitalize on long-term growth opportunities and facilitate redevelopment activities.
Shares of this Zacks Rank #3 (Hold) company have gained 4.5% over the past six months against the industry’s fall of 9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties VICI, Equity Commonwealth EQC and Service Properties Trust SVC.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92. VICI carries a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for Equity Commonwealth’s 2022 FFO per share stands at 33 cents. EQC sports a Zacks Rank #1 currently.
The Zacks Consensus Estimate for Service Properties Trust’s ongoing year’s FFO per share is pegged at $1.44. SVC currently carries a Zacks Rank of 2.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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