Host Marriott 2004 Annual Report - Host Hotels & Resorts, Inc

COMPARABLE BY PROPERTY TYPE
AS OF DECEMBER 31, 2004 YEAR ENDED DECEMBER 31, 2004 YEAR ENDED DECEMBER 31, 2003
PERCENT
NO. OF NO. OF AVERAGE AVERAGE AVERAGE AVERAGE CHANGE IN
PROPERTIES ROOMS DAILY RATE OCCUPANCY REVPAR DAILY RATE OCCUPANCY REVPAR REVPAR
Urban 40 25,068 $165.67 74.4% $123.21 $159.79 72.2% $115.40 6.8%
Suburban 38 14,081 121.44 67.2 81.63 117.25 65.4 76.72 6.4
Airport 16 7,332 113.12 74.6 84.37 111.66 67.5 75.36 12.0
Resort/
Conference 9 5,582 192.56 69.6 133.99 190.79 65.7 125.26 7.0
All Types 103 52,063 149.64 71.9 107.66 145.42 69.0 100.35 7.3
The following statistics are for all of our full-service
properties as of December 31, 2004 and 2003, respectively,
and the results of operations for nine hotels sold in 2004
and eight hotels sold in 2003 prior to their disposition.
ALL FULL-SERVICE PROPERTIES
YEAR ENDED
DECEMBER 31, 2004 2003
Average Room Rate $152.03 $141.93
Average Occupancy 72.0% 69.1%
RevPAR $109.51 $ 98.01
LIQUIDITY AND CAPITAL RESOURCES
CASH REQUIREMENTS
Host Marriott is required to distribute to its stockholders at
least 90% of its taxable income in order to qualify as a
REIT. Funds used by Host Marriott to make these distributions
are provided from Host LP. Because we are required
to distribute almost all of our taxable income, we depend
primarily on external sources of capital to finance future
growth, including acquisitions.
Cash Balances. As of December 31, 2004, we had
$347 million of cash and cash equivalents, which was a
decrease of $417 million from December 31, 2003. The
decrease is primarily attributable to significant debt prepayments
and acquisitions in 2004. For a further discussion, see
“Sources and Uses of Cash” below. In the third quarter of
2004, we amended and restated our credit facility, which now
provides aggregate revolving loan commitments of $575 million,
an increase of $275 million. We have no amounts outstanding
under the credit facility. Due to the volatile operating
environment in 2002 and 2003, our cash balances have been
in excess of the $100 million to $150 million which we had
historically maintained. With the added flexibility and capacity
of our new credit facility and the continuing growth of the
economy, we expect to lower our cash balances to previous
levels over the next several quarters.
As of December 31, 2004, we also had an additional
$154 million of cash which was restricted as a result of lender
requirements (including reserves for debt service, real estate
taxes, insurance, as well as cash collateral and excess cash
flow deposits). The restricted cash balance includes $37 million
which is held in escrow in accordance with debt covenant
requirements where cash flows after debt service from certain
properties did not meet certain required minimum levels (see
“Financial Condition—Mortgage Debt” below). The restricted
cash balances do not have a significant effect on our liquidity.
Debt Repayments and Refinancings. With the proceeds from
asset sales and the insurance proceeds received for the New York
Marriott World Trade Center hotel, we repaid or redeemed a total
of approximately $400 million of debt in 2004. We also made
$61 million of scheduled principal payments. In addition, we refinanced
approximately $830 million of our debt in 2004. The
combined effect of these transactions lowered our average interest
rate by approximately 65 basis points. As a result of the repayments
and refinancings completed during both 2003 and 2004, our
annual interest expense obligations, excluding the effect of call
premiums and accelerated deferred financing costs, have
declined approximately $80 million based on interest rates as
of December 31, 2004. We have no significant debt maturities
prior to February 2006, though principal amortization will total
approximately $66 million in 2005. We believe we have sufficient
cash to deal with our near-term debt maturities, as well as any
unanticipated decline in the cash flow from our business.
Reducing our leverage and future interest payments through
debt repayments and refinancings remains a key management
priority. In November 2003, Host Marriott’s Board of Directors
authorized us to purchase or retire up to $600 million of
our senior notes with proceeds from additional asset sales
($317 million of which remains available under this authorization).
Senior notes redeemed in connection with a refinancing transaction
do not affect the availability under this authorization. As a
result, we may continue to redeem or refinance additional senior
notes, our Convertible Preferred Securities (QUIPs) debt and
mortgage debt from time to time to take advantage of favorable
market conditions. We may purchase senior notes and QUIPs
debt for cash through open market purchases, privately negotiated
transactions, a tender offer or, in some cases, through the
early redemption of such securities pursuant to their terms.
Repurchases of debt, if any, will depend on prevailing market
conditions, our liquidity requirements, contractual restrictions
and other factors. Any refinancing or retirement before the
maturity date would affect earnings and FFO per diluted share, as
defined herein, as a result of the payment of any applicable call
premiums and the acceleration of previously deferred financing
costs. During 2004, we incurred interest expense resulting from
the payment of call premiums of approximately $40 million and
the acceleration of deferred financing costs and original issue
discounts totaling approximately $14 million.
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HOST MARRIOTT 2004