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HST Sells Marriott Property

Zacks Equity Research

Host Hotels & Resorts, Inc. (HST) disclosed the $62 million divestiture of the Four Seasons Hotel Atlanta and the associated office space. According to Bloomberg, the property is sold to a company owned by Cascade Investment LLC, a company owned by Bill Gates, the CEO of Microsoft Corporation (MSFT).

However, the stock fell marginally (0.81%) following the announcement of this news on Nov 21. We believe that issues regarding the interest rates and impact of the near-term dilution on this divestiture were the reasons for the fall in share price.

The sale is consistent with the company’s ongoing efforts to lessen its exposure to non-target markets. Host Hotels intends to use the proceeds to finance proposed buyouts and for other corporate purposes.

As a matter of fact, Four Seasons Hotel Atlanta – one of the premium branded properties of Marriott International, Inc. (MAR) – is a 244-room five-star hotel located in the center of Atlanta's Midtown district. The property is situated close to local attractions like PiedmontPark, Atlanta Botanical Garden and Margaret Mitchell Museum.

Notably, Host Hotels is well on track to improving its overall portfolio, through the successful execution of its strategic capital recycling program. As part of this, this lodging real estate investment trust (:REIT) is vending assets from time to time. It is reaping decent gains by selling core assets at favorable prices in key markets and consequently investing the proceeds in acquisitions as well as for the development and redevelopment of quality assets.

With the above-mentioned transaction, Host Hotels completed dispositions over $750 million since the beginning of 2012. This includes the major divestiture of Portland Marriott Downtown Waterfront for $293 million in third-quarter 2013 and Courtyard Paris La Defense West – Colombes in the current quarter. We expect such strategic moves to position Host Hotels favorably, going forward.

Host Hotels currently carries a Zacks Rank #3 (Hold). However, Strategic Hotels & Resorts, Inc. (BEE) is a better-ranked REIT -- Hotel/Motel stock, with a Zacks Rank #2 (Buy).

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