Host Marriott's earnings increase 23%

Rise in room revenues helps boost funds from operations to 54 cents a share


March 15, 2000|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

Host Marriott Corp. of Bethesda reported yesterday that its fourth-quarter earnings rose 23 percent when compared with the same quarter last year.

The real estate investment trust (REI) posted funds from operations (FFO) of 54 cents per share in the quarter that ended Dec. 31 over pro forma earnings in the comparable three-month period last year.

Also, its earnings before interest expense, income taxes, depreciation and amortization (EBITDA) and other noncash items from continuing operations were $313 million in the 1999 fourth quarter, compared with $260 million for the comparable quarter in 1998.

Host Marriott attributed its growth in funds from operations and EBITDA to its 5 percent increase in room revenue per available room (REVPAR) for the quarter, as well as the quality of the brand names of the hotels.

REVPAR, EBITDA and funds from operations, defined as net income excluding gains or losses from the sale of properties or debt restructuring plus depreciation, are standard measures of the financial well-being of hotel-owning REITs.

The company owns 122 upscale and luxury hotel properties primarily operated under the Marriott, Ritz-Carlton, Hyatt, Four Seasons and Swissotel brand names.

"We continue to benefit from our core strategy of acquiring high quality urban, airport and resort and convention hotels located in strong markets with high barriers to entry," said Terence C. Golden, president and chief executive of Host Marriott.

Host Marriott's common stock closed yesterday at $8.875, down 6.25 cents.

For the year 1999, Host Marriott reported that diluted funds from operations per share increased 17 percent to $1.75 over the pro forma 1998 FFO per share of $1.50. EBITDA for the year was $1 billion, compared to $828 million for 1998. REVPAR for the year was up 4.1 percent.

Host Marriott's earnings were in line with Wall Street expectations, said Marielle Jan de Beur, an analyst who follows the company for Legg Mason Wood Walker of Baltimore.

"Overall, our feeling is they own the best real estate with the highest quality assets at quality locations," she said.

She does express concern that the company will increase its leverage in 2000 with litigation payments and additional renovation projects, among other expenses.

Last month, Host Marriott and Marriott International Inc. tentatively agreed to pay $434 million to settle lawsuits filed by hundreds of investors in hotels who had accused the companies of fraud.

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