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Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2023
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
Commission File Number: 001-14625 (Host Hotels & Resorts, Inc.)
0-25087 (Host Hotels & Resorts, L.P.)
HOST HOTELS & RESORTS, INC.
HOST HOTELS & RESORTS, L.P.
(Exact name of registrant as specified in its charter)
| Maryland (Host Hotels & Resorts, Inc.) | 53-0085950 | |||||||
| Delaware (Host Hotels & Resorts, L.P.) | 52-2095412 | |||||||
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
| 4747 Bethesda Ave**,** Suite 1300 | 20814 | |||||||
| Bethesda, Maryland | (Zip Code) | |||||||
| (Address of Principal Executive Offices) |
(240) 744-1000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||||||||||||||
| Host Hotels & Resorts, Inc. | Common Stock, $0.01 par value | HST | The Nasdaq Stock Market LLC | |||||||||||||||||
| Host Hotels & Resorts, L.P. | None | None | None |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| Host Hotels & Resorts, Inc. | Yes | þ | No | o | ||||||||||
| Host Hotels & Resorts, L.P. | Yes | þ | No | o |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| Host Hotels & Resorts, Inc. | Yes | þ | No | o | ||||||||||
| Host Hotels & Resorts, L.P. | Yes | þ | No | o |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Host Hotels & Resorts, Inc. | |||||||||||
| Large accelerated filer | þ | Accelerated filer | o | ||||||||
| Non-accelerated filer | o | Smaller reporting company | o | ||||||||
| Emerging growth company | o | ||||||||||
| Host Hotels & Resorts, L.P. | |||||||||||
| Large accelerated filer | o | Accelerated filer | o | ||||||||
| Non-accelerated filer | þ | Smaller reporting company | o | ||||||||
| Emerging growth company | o | ||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Host Hotels & Resorts, Inc. | Yes | o | No | þ | ||||||||||
| Host Hotels & Resorts, L.P. | Yes | o | No | þ |
As of November 1, 2023, there were 705,437,012 shares of Host Hotels & Resorts, Inc.’s common stock, $0.01 par value per share, outstanding.
EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q of Host Hotels & Resorts, Inc. and Host Hotels & Resorts, L.P. Unless stated otherwise or the context requires otherwise, references to “Host Inc.” mean Host Hotels & Resorts, Inc., a Maryland corporation, and references to “Host L.P.” mean Host Hotels & Resorts, L.P., a Delaware limited partnership, and its consolidated subsidiaries, in cases where it is important to distinguish between Host Inc. and Host L.P. We use the terms “we,” “our” or “the company” to refer to Host Inc. and Host L.P. together, unless the context indicates otherwise.
Host Inc. operates as a self-managed and self-administered real estate investment trust (“REIT”). Host Inc. owns properties and conducts operations through Host L.P., of which Host Inc. is the sole general partner and of which it holds approximately 99% of the partnership interests (“OP units”). The remaining OP units are owned by various unaffiliated limited partners. As the sole general partner of Host L.P., Host Inc. has the exclusive and complete responsibility for Host L.P.’s day-to-day management and control. Management operates Host Inc. and Host L.P. as one enterprise. The management of Host Inc. consists of the same persons who direct the management of Host L.P. As general partner with control of Host L.P., Host Inc. consolidates Host L.P. for financial reporting purposes, and Host Inc. does not have significant assets other than its investment in Host L.P. Therefore, the assets and liabilities of Host Inc. and Host L.P. are substantially the same on their respective condensed consolidated financial statements and the disclosures of Host Inc. and Host L.P. also are substantially similar. For these reasons, we believe that the combination into a single report of the quarterly reports on Form 10-Q of Host Inc. and Host L.P. results in benefits to management and investors.
The substantive difference between the filings of Host Inc. and Host L.P. is that Host Inc. is a REIT with public stock, while Host L.P. is a partnership with no publicly traded equity. In the condensed consolidated financial statements, this difference primarily is reflected in the equity (or partners’ capital for Host L.P.) section of the consolidated balance sheets and in the consolidated statements of equity (or partners’ capital for Host L.P.). Apart from the different equity treatment, the condensed consolidated financial statements of Host Inc. and Host L.P. are nearly identical.
This combined Form 10-Q for Host Inc. and Host L.P. includes, for each entity, separate interim financial statements (but combined footnotes), separate reports on disclosure controls and procedures and internal control over financial reporting and separate CEO/CFO certifications. In addition, with respect to any other financial and non-financial disclosure items required by Form 10-Q, any material differences between Host Inc. and Host L.P. are discussed separately herein. For a more detailed discussion of the substantive differences between Host Inc. and Host L.P. and why we believe the combined filing results in benefits to investors, see the discussion in the combined Annual Report on Form 10-K for the year ended December 31, 2022 under the heading “Explanatory Note.”
i
HOST HOTELS & RESORTS, INC. AND HOST HOTELS & RESORTS, L.P.
INDEX
ii
HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2023 and December 31, 2022
(in millions, except share and per share amounts)
| September 30, 2023 | December 31, 2022 | ||||||||||
| unaudited | |||||||||||
| ASSETS | |||||||||||
| Property and equipment, net | $ | 9,679 | $ | 9,748 | |||||||
| Right-of-use assets | 553 | 556 | |||||||||
| Due from managers | 78 | 94 | |||||||||
| Advances to and investments in affiliates | 139 | 132 | |||||||||
| Furniture, fixtures and equipment replacement fund | 218 | 200 | |||||||||
| Notes receivable | 322 | 413 | |||||||||
| Other | 387 | 459 | |||||||||
| Cash and cash equivalents | 916 | 667 | |||||||||
| Total assets | $ | 12,292 | $ | 12,269 | |||||||
| LIABILITIES, NON-CONTROLLING INTERESTS AND EQUITY | |||||||||||
| Debt | |||||||||||
| Senior notes | $ | 3,119 | $ | 3,115 | |||||||
| Credit facility, including the term loans of $997 and $998, respectively | 988 | 994 | |||||||||
| Mortgage and other debt | 105 | 106 | |||||||||
| Total debt | 4,212 | 4,215 | |||||||||
| Lease liabilities | 565 | 568 | |||||||||
| Accounts payable and accrued expenses | 228 | 372 | |||||||||
| Due to managers | 72 | 67 | |||||||||
| Other | 184 | 168 | |||||||||
| Total liabilities | 5,261 | 5,390 | |||||||||
| Redeemable non-controlling interests - Host Hotels & Resorts, L.P. | 157 | 164 | |||||||||
| Host Hotels & Resorts, Inc. stockholders’ equity: | |||||||||||
| Common stock, par value $.01, 1,050 million shares authorized, 705.4 million shares and 713.4 million shares issued and outstanding, respectively | 7 | 7 | |||||||||
| Additional paid-in capital | 7,588 | 7,717 | |||||||||
| Accumulated other comprehensive loss | (73) | (75) | |||||||||
| Deficit | (652) | (939) | |||||||||
| Total equity of Host Hotels & Resorts, Inc. stockholders | 6,870 | 6,710 | |||||||||
| Non-redeemable non-controlling interests—other consolidated partnerships | 4 | 5 | |||||||||
| Total equity | 6,874 | 6,715 | |||||||||
| Total liabilities, non-controlling interests and equity | $ | 12,292 | $ | 12,269 |
See notes to condensed consolidated financial statements.
HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter and Year-to-date ended September 30, 2023 and 2022
(unaudited, in millions, except per share amounts)
| Quarter ended September 30, | Year-to-date ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| REVENUES | |||||||||||||||||||||||
| Rooms | $ | 777 | $ | 746 | $ | 2,447 | $ | 2,251 | |||||||||||||||
| Food and beverage | 328 | 330 | 1,174 | 1,032 | |||||||||||||||||||
| Other | 109 | 113 | 367 | 361 | |||||||||||||||||||
| Total revenues | 1,214 | 1,189 | 3,988 | 3,644 | |||||||||||||||||||
| EXPENSES | |||||||||||||||||||||||
| Rooms | 196 | 190 | 590 | 539 | |||||||||||||||||||
| Food and beverage | 241 | 230 | 773 | 675 | |||||||||||||||||||
| Other departmental and support expenses | 314 | 300 | 952 | 873 | |||||||||||||||||||
| Management fees | 51 | 48 | 185 | 150 | |||||||||||||||||||
| Other property-level expenses | 106 | 90 | 290 | 252 | |||||||||||||||||||
| Depreciation and amortization | 174 | 164 | 511 | 498 | |||||||||||||||||||
| Corporate and other expenses | 29 | 29 | 90 | 77 | |||||||||||||||||||
| Gain on insurance and business interruption settlements | (54) | (10) | (57) | (17) | |||||||||||||||||||
| Total operating costs and expenses | 1,057 | 1,041 | 3,334 | 3,047 | |||||||||||||||||||
| OPERATING PROFIT | 157 | 148 | 654 | 597 | |||||||||||||||||||
| Interest income | 22 | 10 | 56 | 17 | |||||||||||||||||||
| Interest expense | (48) | (40) | (142) | (113) | |||||||||||||||||||
| Other gains | 1 | 5 | 70 | 19 | |||||||||||||||||||
| Equity in earnings (losses) of affiliates | (4) | (1) | 7 | 3 | |||||||||||||||||||
| INCOME BEFORE INCOME TAXES | 128 | 122 | 645 | 523 | |||||||||||||||||||
| Provision for income taxes | (15) | (6) | (27) | (29) | |||||||||||||||||||
| NET INCOME | 113 | 116 | 618 | 494 | |||||||||||||||||||
| Less: Net income attributable to non-controlling interests | (2) | (2) | (10) | (8) | |||||||||||||||||||
| NET INCOME ATTRIBUTABLE TO HOST HOTELS & RESORTS, INC. | $ | 111 | $ | 114 | $ | 608 | $ | 486 | |||||||||||||||
| Basic earnings per common share | $ | 0.16 | $ | 0.16 | $ | 0.85 | $ | 0.68 | |||||||||||||||
| Diluted earnings per common share | $ | 0.16 | $ | 0.16 | $ | 0.85 | $ | 0.68 |
See notes to condensed consolidated financial statements.
HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Quarter and Year-to-date ended September 30, 2023 and 2022
(unaudited, in millions)
| Quarter ended September 30, | Year-to-date ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| NET INCOME | $ | 113 | $ | 116 | $ | 618 | $ | 494 | |||||||||||||||
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: | |||||||||||||||||||||||
| Foreign currency translation and other comprehensive income of unconsolidated affiliates | (4) | (5) | 2 | (4) | |||||||||||||||||||
| Change in fair value of derivative instruments | 1 | 2 | — | 3 | |||||||||||||||||||
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | (3) | (3) | 2 | (1) | |||||||||||||||||||
| COMPREHENSIVE INCOME | 110 | 113 | 620 | 493 | |||||||||||||||||||
| Less: Comprehensive income attributable to non-controlling interests | (2) | (2) | (10) | (8) | |||||||||||||||||||
| COMPREHENSIVE INCOME ATTRIBUTABLE TO HOST HOTELS & RESORTS, INC. | $ | 108 | $ | 111 | $ | 610 | $ | 485 |
See notes to condensed consolidated financial statements.
HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year-to-date ended September 30, 2023 and 2022
(unaudited, in millions)
| Year-to-date ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| OPERATING ACTIVITIES | |||||||||||
| Net income | $ | 618 | $ | 494 | |||||||
| Adjustments to reconcile net income to net cash provided by operations: | |||||||||||
| Depreciation and amortization | 511 | 498 | |||||||||
| Amortization of finance costs, discounts and premiums, net | 7 | 8 | |||||||||
| Loss on extinguishment of debt | 4 | — | |||||||||
| Stock compensation expense | 19 | 19 | |||||||||
| Other gains | (70) | (19) | |||||||||
| Gain on property insurance settlement | — | (6) | |||||||||
| Equity in earnings of affiliates | (7) | (3) | |||||||||
| Change in due from/to managers | 16 | 32 | |||||||||
| Distributions from investments in affiliates | 20 | 23 | |||||||||
| Property insurance proceeds - remediation costs | 101 | — | |||||||||
| Changes in other assets | (13) | 7 | |||||||||
| Changes in other liabilities | (72) | 3 | |||||||||
| Net cash provided by operating activities | 1,134 | 1,056 | |||||||||
| INVESTING ACTIVITIES | |||||||||||
| Proceeds from sales of assets, net | 34 | 233 | |||||||||
| Proceeds from loan receivable | 163 | — | |||||||||
| Advances to and investments in affiliates | (22) | (59) | |||||||||
| Capital expenditures: | |||||||||||
| Renewals and replacements | (332) | (117) | |||||||||
| Return on investment | (140) | (240) | |||||||||
| Property insurance proceeds | 34 | 11 | |||||||||
| Net cash used in investing activities | (263) | (172) | |||||||||
| FINANCING ACTIVITIES | |||||||||||
| Financing costs | (10) | — | |||||||||
| Repayment of credit facility | — | (683) | |||||||||
| Mortgage debt and other prepayments and scheduled maturities | (2) | (1) | |||||||||
| Debt extinguishment costs | (3) | — | |||||||||
| Issuance of common stock | — | 1 | |||||||||
| Common stock repurchases | (150) | — | |||||||||
| Dividends on common stock | (420) | (65) | |||||||||
| Distributions and payments to non-controlling interests | (7) | (2) | |||||||||
| Other financing activities | (14) | (9) | |||||||||
| Net cash used in financing activities | (606) | (759) | |||||||||
| Effects of exchange rate changes on cash held | — | (4) | |||||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | 265 | 121 | |||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | 874 | 953 | |||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | $ | 1,139 | $ | 1,074 |
See notes to condensed consolidated financial statements.
HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
Year-to-date ended September 30, 2023 and 2022
(unaudited)
Supplemental disclosure of cash flow information (in millions):
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheet to the amount shown in the statements of cash flows:
| September 30, 2023 | September 30, 2022 | ||||||||||
| Cash and cash equivalents | $ | 916 | $ | 883 | |||||||
| Restricted cash (included in other assets) | 5 | 4 | |||||||||
| Cash included in furniture, fixtures and equipment replacement fund | 218 | 187 | |||||||||
| Total cash and cash equivalents and restricted cash shown in the statements of cash flows | $ | 1,139 | $ | 1,074 |
The following table presents cash paid (received) for the following:
| Year-to-date ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Total interest paid | $ | 129 | $ | 100 | |||||||
| Income taxes paid (refunds received) | $ | 5 | $ | (7) |
Supplemental schedule of noncash investing and financing activities:
In connection with the sales of The Camby, Autograph Collection in March 2023, the Sheraton Boston Hotel in February 2022, and the Sheraton New York Times Square Hotel in April 2022, we issued loans to the buyers for $72 million, $163 million, and $250 million, respectively. The proceeds received from the sales are net of the loans.
On January 20, 2022, we entered into definitive agreements with Noble Investment Group, LLC, and certain other entities and persons related to Noble Investment Group, LLC, pursuant to which we made an investment in a joint venture with Noble Investment Group. In connection with the investment, Host Hotels & Resorts, L.P. issued approximately 3.2 million OP units valued at approximately $56 million.
See notes to condensed consolidated financial statements.
HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2023 and December 31, 2022
(in millions)
| September 30, 2023 | December 31, 2022 | ||||||||||
| unaudited | |||||||||||
| ASSETS | |||||||||||
| Property and equipment, net | $ | 9,679 | $ | 9,748 | |||||||
| Right-of-use assets | 553 | 556 | |||||||||
| Due from managers | 78 | 94 | |||||||||
| Advances to and investments in affiliates | 139 | 132 | |||||||||
| Furniture, fixtures and equipment replacement fund | 218 | 200 | |||||||||
| Notes receivable | 322 | 413 | |||||||||
| Other | 387 | 459 | |||||||||
| Cash and cash equivalents | 916 | 667 | |||||||||
| Total assets | $ | 12,292 | $ | 12,269 | |||||||
| LIABILITIES, LIMITED PARTNERSHIP INTERESTS OF THIRD PARTIES AND CAPITAL | |||||||||||
| Debt | |||||||||||
| Senior notes | $ | 3,119 | $ | 3,115 | |||||||
| Credit facility, including the term loans of $997 and $998, respectively | 988 | 994 | |||||||||
| Mortgage and other debt | 105 | 106 | |||||||||
| Total debt | 4,212 | 4,215 | |||||||||
| Lease liabilities | 565 | 568 | |||||||||
| Accounts payable and accrued expenses | 228 | 372 | |||||||||
| Due to managers | 72 | 67 | |||||||||
| Other | 184 | 168 | |||||||||
| Total liabilities | 5,261 | 5,390 | |||||||||
| Limited partnership interests of third parties | 157 | 164 | |||||||||
| Host Hotels & Resorts, L.P. capital: | |||||||||||
| General partner | 1 | 1 | |||||||||
| Limited partner | 6,942 | 6,784 | |||||||||
| Accumulated other comprehensive loss | (73) | (75) | |||||||||
| Total Host Hotels & Resorts, L.P. capital | 6,870 | 6,710 | |||||||||
| Non-controlling interests—consolidated partnerships | 4 | 5 | |||||||||
| Total capital | 6,874 | 6,715 | |||||||||
| Total liabilities, limited partnership interests of third parties and capital | $ | 12,292 | $ | 12,269 |
See notes to condensed consolidated financial statements.
HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter and Year-to-date ended September 30, 2023 and 2022
(unaudited, in millions, except per unit amounts)
| Quarter ended September 30, | Year-to-date ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| REVENUES | |||||||||||||||||||||||
| Rooms | $ | 777 | $ | 746 | $ | 2,447 | $ | 2,251 | |||||||||||||||
| Food and beverage | 328 | 330 | 1,174 | 1,032 | |||||||||||||||||||
| Other | 109 | 113 | 367 | 361 | |||||||||||||||||||
| Total revenues | 1,214 | 1,189 | 3,988 | 3,644 | |||||||||||||||||||
| EXPENSES | |||||||||||||||||||||||
| Rooms | 196 | 190 | 590 | 539 | |||||||||||||||||||
| Food and beverage | 241 | 230 | 773 | 675 | |||||||||||||||||||
| Other departmental and support expenses | 314 | 300 | 952 | 873 | |||||||||||||||||||
| Management fees | 51 | 48 | 185 | 150 | |||||||||||||||||||
| Other property-level expenses | 106 | 90 | 290 | 252 | |||||||||||||||||||
| Depreciation and amortization | 174 | 164 | 511 | 498 | |||||||||||||||||||
| Corporate and other expenses | 29 | 29 | 90 | 77 | |||||||||||||||||||
| Gain on insurance and business interruption settlements | (54) | (10) | (57) | (17) | |||||||||||||||||||
| Total operating costs and expenses | 1,057 | 1,041 | 3,334 | 3,047 | |||||||||||||||||||
| OPERATING PROFIT | 157 | 148 | 654 | 597 | |||||||||||||||||||
| Interest income | 22 | 10 | 56 | 17 | |||||||||||||||||||
| Interest expense | (48) | (40) | (142) | (113) | |||||||||||||||||||
| Other gains | 1 | 5 | 70 | 19 | |||||||||||||||||||
| Equity in earnings (losses) of affiliates | (4) | (1) | 7 | 3 | |||||||||||||||||||
| INCOME BEFORE INCOME TAXES | 128 | 122 | 645 | 523 | |||||||||||||||||||
| Provision for income taxes | (15) | (6) | (27) | (29) | |||||||||||||||||||
| NET INCOME | 113 | 116 | 618 | 494 | |||||||||||||||||||
| Less: Net income attributable to non-controlling interests | — | (1) | (1) | (1) | |||||||||||||||||||
| NET INCOME ATTRIBUTABLE TO HOST HOTELS & RESORTS, L.P. | $ | 113 | $ | 115 | $ | 617 | $ | 493 | |||||||||||||||
| Basic earnings per common unit | $ | 0.16 | $ | 0.16 | $ | 0.87 | $ | 0.69 | |||||||||||||||
| Diluted earnings per common unit | $ | 0.16 | $ | 0.16 | $ | 0.87 | $ | 0.69 |
See notes to condensed consolidated financial statements.
HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Quarter and Year-to-date ended September 30, 2023 and 2022
(unaudited, in millions)
| Quarter ended September 30, | Year-to-date ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| NET INCOME | $ | 113 | $ | 116 | $ | 618 | $ | 494 | |||||||||||||||
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: | |||||||||||||||||||||||
| Foreign currency translation and other comprehensive income of unconsolidated affiliates | (4) | (5) | 2 | (4) | |||||||||||||||||||
| Change in fair value of derivative instruments | 1 | 2 | — | 3 | |||||||||||||||||||
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | (3) | (3) | 2 | (1) | |||||||||||||||||||
| COMPREHENSIVE INCOME | 110 | 113 | 620 | 493 | |||||||||||||||||||
| Less: Comprehensive income attributable to non-controlling interests | — | (1) | (1) | (1) | |||||||||||||||||||
| COMPREHENSIVE INCOME ATTRIBUTABLE TO HOST HOTELS & RESORTS, L.P. | $ | 110 | $ | 112 | $ | 619 | $ | 492 |
See notes to condensed consolidated financial statements.
HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year-to-date ended September 30, 2023 and 2022
(unaudited, in millions)
| Year-to-date ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| OPERATING ACTIVITIES | |||||||||||
| Net income | $ | 618 | $ | 494 | |||||||
| Adjustments to reconcile net income to net cash provided by operations: | |||||||||||
| Depreciation and amortization | 511 | 498 | |||||||||
| Amortization of finance costs, discounts and premiums, net | 7 | 8 | |||||||||
| Loss on extinguishment of debt | 4 | — | |||||||||
| Stock compensation expense | 19 | 19 | |||||||||
| Other gains | (70) | (19) | |||||||||
| Gain on property insurance settlement | — | (6) | |||||||||
| Equity in earnings of affiliates | (7) | (3) | |||||||||
| Change in due from/to managers | 16 | 32 | |||||||||
| Distributions from investments in affiliates | 20 | 23 | |||||||||
| Property insurance proceeds - remediation costs | 101 | — | |||||||||
| Changes in other assets | (13) | 7 | |||||||||
| Changes in other liabilities | (72) | 3 | |||||||||
| Net cash provided by operating activities | 1,134 | 1,056 | |||||||||
| INVESTING ACTIVITIES | |||||||||||
| Proceeds from sales of assets, net | 34 | 233 | |||||||||
| Proceeds from loan receivable | 163 | — | |||||||||
| Advances to and investments in affiliates | (22) | (59) | |||||||||
| Capital expenditures: | |||||||||||
| Renewals and replacements | (332) | (117) | |||||||||
| Return on investment | (140) | (240) | |||||||||
| Property insurance proceeds | 34 | 11 | |||||||||
| Net cash used in investing activities | (263) | (172) | |||||||||
| FINANCING ACTIVITIES | |||||||||||
| Financing costs | (10) | — | |||||||||
| Repayment of credit facility | — | (683) | |||||||||
| Mortgage debt and other prepayments and scheduled maturities | (2) | (1) | |||||||||
| Debt extinguishment costs | (3) | — | |||||||||
| Issuance of common OP units | — | 1 | |||||||||
| Repurchase of common OP units | (150) | — | |||||||||
| Distributions on common OP units | (426) | (66) | |||||||||
| Distributions and payments to non-controlling interests | (1) | (1) | |||||||||
| Other financing activities | (14) | (9) | |||||||||
| Net cash used in financing activities | (606) | (759) | |||||||||
| Effects of exchange rate changes on cash held | — | (4) | |||||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | 265 | 121 | |||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | 874 | 953 | |||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | $ | 1,139 | $ | 1,074 |
See notes to condensed consolidated financial statements.
HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
Year-to-date ended September 30, 2023 and 2022
(unaudited)
Supplemental disclosure of cash flow information (in millions):
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheet to the amount shown in the statements of cash flows:
| September 30, 2023 | September 30, 2022 | ||||||||||
| Cash and cash equivalents | $ | 916 | $ | 883 | |||||||
| Restricted cash (included in other assets) | 5 | 4 | |||||||||
| Cash included in furniture, fixtures and equipment replacement fund | 218 | 187 | |||||||||
| Total cash and cash equivalents and restricted cash shown in the statements of cash flows | $ | 1,139 | $ | 1,074 |
The following table presents cash paid (received) for the following:
| Year-to-date ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Total interest paid | $ | 129 | $ | 100 | |||||||
| Income taxes paid (refunds received) | $ | 5 | $ | (7) |
Supplemental schedule of noncash investing and financing activities:
In connection with the sales of The Camby, Autograph Collection in March 2023, the Sheraton Boston Hotel in February 2022, and the Sheraton New York Times Square Hotel in April 2022, we issued loans to the buyers for $72 million, $163 million, and $250 million, respectively. The proceeds received from the sales are net of the loans.
On January 20, 2022, we entered into definitive agreements with Noble Investment Group, LLC, and certain other entities and persons related to Noble Investment Group, LLC, pursuant to which we made an investment in a joint venture with Noble Investment Group. In connection with the investment, Host Hotels & Resorts, L.P. issued approximately 3.2 million OP units valued at approximately $56 million.
See notes to condensed consolidated financial statements.
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization
Description of Business
Host Hotels & Resorts, Inc. operates as a self-managed and self-administered real estate investment trust (“REIT”), with its operations conducted solely through Host Hotels & Resorts, L.P. and its subsidiaries. Host Hotels & Resorts, L.P., a Delaware limited partnership, operates through an umbrella partnership structure, with Host Hotels & Resorts, Inc., a Maryland corporation, as its sole general partner. In the notes to these unaudited condensed consolidated financial statements, we use the terms “we” or “our” to refer to Host Hotels & Resorts, Inc. and Host Hotels & Resorts, L.P. together, unless the context indicates otherwise. We also use the term “Host Inc.” specifically to refer to Host Hotels & Resorts, Inc., and the term “Host L.P.” specifically to refer to Host Hotels & Resorts, L.P. in cases where it is important to distinguish between Host Inc. and Host L.P. As of September 30, 2023, Host Inc. holds approximately 99% of Host L.P.’s partnership interests.
Consolidated Portfolio
As of September 30, 2023, our consolidated portfolio, primarily consisting of luxury and upper upscale hotels, is located in the following countries:
| Hotels | |||||
| United States | 72 | ||||
| Brazil | 3 | ||||
| Canada | 2 | ||||
| Total | 77 |
2. Summary of Significant Accounting Policies
We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. generally accepted accounting principles, or GAAP, in the accompanying unaudited condensed consolidated financial statements. We believe the disclosures made herein are adequate to prevent the information presented from being misleading. However, the financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10–K for the year ended December 31, 2022.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly our financial position as of September 30, 2023, and the results of our operations for the quarter and year-to-date periods ended September 30, 2023 and 2022, respectively, and cash flows for the year-to-date periods ended September 30, 2023 and 2022, respectively. Interim results are not necessarily indicative of full year performance because of the effect of seasonal variations.
Four of the partnerships in which we own an interest are considered variable interest entities ("VIEs"), as the general partner of these partnerships maintains control over the decisions that most significantly impact such partnerships. These VIEs include the operating partnership, Host L.P., which is consolidated by Host Inc., of which Host Inc. is the sole general partner and holds approximately 99% of the limited partner interests; the consolidated partnership that owns the Houston Airport Marriott at George Bush Intercontinental; and two unconsolidated partnerships that own hotel properties, of which we hold limited partner interests ranging from 11% - 19%. Host Inc.’s sole significant asset is its investment in Host L.P. and, consequently, substantially all of Host Inc.’s assets and liabilities consists of the assets and liabilities of Host L.P. All of Host Inc.’s debt is an obligation of Host L.P. and may be settled only with assets of Host L.P.
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Earnings Per Common Share (Unit)
Basic earnings (loss) per common share (unit) is computed by dividing net income (loss) attributable to common stockholders (unitholders) by the weighted average number of shares of Host Inc. common stock or Host L.P. common units outstanding. Diluted earnings (loss) per common share (unit) is computed by dividing net income (loss) attributable to common stockholders (unitholders), as adjusted for potentially dilutive securities, by the weighted average number of shares of Host Inc. common stock or Host L.P. common units outstanding plus other potentially dilutive securities. Dilutive securities may include shares granted under comprehensive stock plans or the Host L.P. common units distributed to Host Inc. to support such granted shares, and other non-controlling interests that have the option to convert their limited partner interests to Host L.P. common units. No effect is shown for any securities that are anti-dilutive. There are 9.6 million Host L.P. common units, which are convertible into 9.8 million Host Inc. common shares, that are not included in Host Inc.’s calculation of earnings (loss) per share as their effect is not dilutive. The calculation of Host Inc. basic and diluted earnings per common share is shown below (in millions, except per share amounts):
| Quarter ended September 30, | Year-to-date ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net income | $ | 113 | $ | 116 | $ | 618 | $ | 494 | |||||||||||||||
| Less: Net income attributable to non-controlling interests | (2) | (2) | (10) | (8) | |||||||||||||||||||
| Net income attributable to Host Inc. | $ | 111 | $ | 114 | $ | 608 | $ | 486 | |||||||||||||||
| Basic weighted average shares outstanding | 709.7 | 714.9 | 711.4 | 714.7 | |||||||||||||||||||
| Assuming distribution of common shares granted under the comprehensive stock plans, less shares assumed purchased at market | 2.2 | 2.7 | 2.2 | 2.7 | |||||||||||||||||||
| Diluted weighted average shares outstanding | 711.9 | 717.6 | 713.6 | 717.4 | |||||||||||||||||||
| Basic earnings per common share | $ | 0.16 | $ | 0.16 | $ | 0.85 | $ | 0.68 | |||||||||||||||
| Diluted earnings per common share | $ | 0.16 | $ | 0.16 | $ | 0.85 | $ | 0.68 |
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The calculation of Host L.P. basic and diluted earnings per unit is shown below (in millions, except per unit amounts):
| Quarter ended September 30, | Year-to-date ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net income | $ | 113 | $ | 116 | $ | 618 | $ | 494 | |||||||||||||||
| Less: Net income attributable to non-controlling interests | — | (1) | (1) | (1) | |||||||||||||||||||
| Net income attributable to Host L.P. | $ | 113 | $ | 115 | $ | 617 | $ | 493 | |||||||||||||||
| Basic weighted average units outstanding | 704.4 | 710.0 | 706.4 | 709.6 | |||||||||||||||||||
| Assuming distribution of common units granted under the comprehensive stock plans, less units assumed purchased at market | 2.1 | 2.7 | 2.1 | 2.7 | |||||||||||||||||||
| Diluted weighted average units outstanding | 706.5 | 712.7 | 708.5 | 712.3 | |||||||||||||||||||
| Basic earnings per common unit | $ | 0.16 | $ | 0.16 | $ | 0.87 | $ | 0.69 | |||||||||||||||
| Diluted earnings per common unit | $ | 0.16 | $ | 0.16 | $ | 0.87 | $ | 0.69 |
4. Revenue
Substantially all our operating results represent revenues and expenses generated by property-level operations. Payments are due from customers when services are provided to them. Due to the short-term nature of our contracts and the almost concurrent receipt of payment, we have no material unearned revenue at quarter end. We collect sales, use, occupancy and similar taxes from our customers, which we present on a net basis (excluded from revenues) on our statements of operations.
Disaggregation of Revenues. While we do not consider the following disclosure of hotel revenues by location to consist of reportable segments, we have disaggregated hotel revenues by market location. Our revenues also are presented by country in Note 8 – Geographic Information.
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
By Location. The following table presents hotel revenues for each of the geographic locations in our consolidated hotel portfolio (in millions):
| Quarter ended September 30, | Year-to-date ended September 30, | |||||||||||||||||||||||||
| Location | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| San Diego | $ | 134 | $ | 133 | $ | 389 | $ | 338 | ||||||||||||||||||
| Orlando | 95 | 96 | 357 | 333 | ||||||||||||||||||||||
| Maui/Oahu | 102 | 119 | 352 | 361 | ||||||||||||||||||||||
| San Francisco/San Jose | 92 | 96 | 280 | 238 | ||||||||||||||||||||||
| Phoenix | 52 | 62 | 273 | 274 | ||||||||||||||||||||||
| New York | 89 | 81 | 255 | 224 | ||||||||||||||||||||||
| Washington, D.C. (Central Business District) | 74 | 67 | 252 | 197 | ||||||||||||||||||||||
| Florida Gulf Coast | 66 | 59 | 233 | 290 | ||||||||||||||||||||||
| Miami | 35 | 42 | 181 | 194 | ||||||||||||||||||||||
| Boston | 40 | 31 | 111 | 79 | ||||||||||||||||||||||
| Los Angeles/Orange County | 37 | 37 | 105 | 97 | ||||||||||||||||||||||
| Houston | 31 | 27 | 104 | 84 | ||||||||||||||||||||||
| Chicago | 40 | 43 | 102 | 96 | ||||||||||||||||||||||
| Jacksonville | 30 | 29 | 100 | 97 | ||||||||||||||||||||||
| San Antonio | 24 | 27 | 90 | 83 | ||||||||||||||||||||||
| Seattle | 34 | 33 | 81 | 70 | ||||||||||||||||||||||
| New Orleans | 16 | 19 | 74 | 68 | ||||||||||||||||||||||
| Denver | 29 | 26 | 66 | 62 | ||||||||||||||||||||||
| Austin | 17 | 21 | 65 | 67 | ||||||||||||||||||||||
| Northern Virginia | 21 | 18 | 64 | 53 | ||||||||||||||||||||||
| Philadelphia | 21 | 21 | 63 | 57 | ||||||||||||||||||||||
| Atlanta | 16 | 15 | 51 | 45 | ||||||||||||||||||||||
| Other | 95 | 64 | 271 | 187 | ||||||||||||||||||||||
| Domestic | 1,190 | 1,166 | 3,919 | 3,594 | ||||||||||||||||||||||
| International | 24 | 23 | 69 | 50 | ||||||||||||||||||||||
| Total | $ | 1,214 | $ | 1,189 | $ | 3,988 | $ | 3,644 |
5. Property and Equipment
Property and equipment consists of the following (in millions):
| September 30, 2023 | December 31, 2022 | ||||||||||
| Land and land improvements | $ | 2,011 | $ | 2,020 | |||||||
| Buildings and leasehold improvements | 14,073 | 13,849 | |||||||||
| Furniture and equipment | 2,285 | 2,249 | |||||||||
| Construction in progress | 343 | 313 | |||||||||
| 18,712 | 18,431 | ||||||||||
| Less accumulated depreciation and amortization | (9,033) | (8,683) | |||||||||
| $ | 9,679 | $ | 9,748 |
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. Equity of Host Inc. and Capital of Host L.P.
Equity of Host Inc.
The components of the equity of Host Inc. are as follows (in millions):
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings / (Deficit) | Non-redeemable, non-controlling interests | Total equity | Redeemable, non-controlling interests | |||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | 7 | $ | 7,717 | $ | (75) | $ | (939) | $ | 5 | $ | 6,715 | $ | 164 | |||||||||||||||||||||||||||
| Net income | — | — | — | 608 | 1 | 609 | 9 | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for comprehensive stock plans, net | — | 9 | — | — | — | 9 | — | ||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | (150) | — | — | — | (150) | — | ||||||||||||||||||||||||||||||||||
| Dividends declared on common stock | — | — | — | (321) | — | (321) | — | ||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | — | (1) | (1) | (4) | ||||||||||||||||||||||||||||||||||
| Changes in ownership and other | — | 12 | — | — | (1) | 11 | (12) | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | 2 | — | — | 2 | — | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | 7 | $ | 7,588 | $ | (73) | $ | (652) | $ | 4 | $ | 6,874 | $ | 157 |
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings / (Deficit) | Non-redeemable, non-controlling interests | Total equity | Redeemable, non-controlling interests | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | 7 | $ | 7,671 | $ | (70) | $ | (636) | $ | 5 | $ | 6,977 | $ | 168 | |||||||||||||||||||||||||||
| Net income | — | — | — | 111 | — | 111 | 2 | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for comprehensive stock plans, net | — | 5 | — | — | — | 5 | — | ||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | (100) | — | — | — | (100) | — | ||||||||||||||||||||||||||||||||||
| Dividends declared on common stock | — | — | — | (127) | — | (127) | — | ||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | — | — | — | (1) | ||||||||||||||||||||||||||||||||||
| Changes in ownership and other | — | 12 | — | — | (1) | 11 | (12) | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | (3) | — | — | (3) | — | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | 7 | $ | 7,588 | $ | (73) | $ | (652) | $ | 4 | $ | 6,874 | $ | 157 |
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings / (Deficit) | Non-redeemable, non-controlling interests | Total equity | Redeemable, non-controlling interests | |||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | 7 | $ | 7,702 | $ | (76) | $ | (1,192) | $ | 5 | $ | 6,446 | $ | 126 | |||||||||||||||||||||||||||
| Net income | — | — | — | 486 | 1 | 487 | 7 | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for comprehensive stock plans, net | — | 13 | — | — | — | 13 | — | ||||||||||||||||||||||||||||||||||
| Dividends declared on common stock | — | — | — | (150) | — | (150) | — | ||||||||||||||||||||||||||||||||||
| Issuance of common OP units | — | — | — | — | — | — | 56 | ||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | — | (1) | (1) | (2) | ||||||||||||||||||||||||||||||||||
| Changes in ownership and other | — | 23 | — | — | — | 23 | (22) | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | (1) | — | — | (1) | — | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | 7 | $ | 7,738 | $ | (77) | $ | (856) | $ | 5 | $ | 6,817 | $ | 165 |
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings / (Deficit) | Non-redeemable, non-controlling interests | Total equity | Redeemable, non-controlling interests | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | 7 | $ | 7,729 | $ | (74) | $ | (885) | $ | 5 | $ | 6,782 | $ | 163 | |||||||||||||||||||||||||||
| Net income | — | — | — | 114 | 1 | 115 | 1 | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for comprehensive stock plans, net | — | 10 | — | — | — | 10 | — | ||||||||||||||||||||||||||||||||||
| Dividends declared on common stock | — | — | — | (85) | — | (85) | — | ||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | — | (1) | (1) | (1) | ||||||||||||||||||||||||||||||||||
| Changes in ownership and other | — | (1) | — | — | — | (1) | 2 | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | (3) | — | — | (3) | — | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | 7 | $ | 7,738 | $ | (77) | $ | (856) | $ | 5 | $ | 6,817 | $ | 165 |
Capital of Host L.P.
As of September 30, 2023, Host Inc. is the owner of approximately 99% of Host L.P.’s common OP units. The remaining common OP units are owned by unaffiliated limited partners. Each common OP unit may be redeemed for cash or, at the election of Host Inc., Host Inc. common stock, based on the conversion ratio of 1.021494 shares of Host Inc. common stock for each common OP unit.
In exchange for any shares issued by Host Inc., Host L.P. will issue common OP units to Host Inc. based on the applicable conversion ratio. Additionally, funds used by Host Inc. to pay dividends on its common stock are provided by distributions from Host L.P.
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The components of the Capital of Host L.P. are as follows (in millions):
| General Partner | Limited Partner | Accumulated Other Comprehensive Income (Loss) | Non-controlling interests | Total capital | Limited partnership interests of third parties | ||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | 1 | $ | 6,784 | $ | (75) | $ | 5 | $ | 6,715 | $ | 164 | |||||||||||||||||||||||
| Net income | — | 608 | — | 1 | 609 | 9 | |||||||||||||||||||||||||||||
| Issuance of common OP units to Host Inc. for comprehensive stock plans, net | — | 9 | — | — | 9 | — | |||||||||||||||||||||||||||||
| Repurchase of common OP units | — | (150) | — | — | (150) | — | |||||||||||||||||||||||||||||
| Distributions declared on common OP units | — | (321) | — | — | (321) | (4) | |||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | (1) | (1) | — | |||||||||||||||||||||||||||||
| Changes in ownership and other | — | 12 | — | (1) | 11 | (12) | |||||||||||||||||||||||||||||
| Other comprehensive income | — | — | 2 | — | 2 | — | |||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | 1 | $ | 6,942 | $ | (73) | $ | 4 | $ | 6,874 | $ | 157 |
| General Partner | Limited Partner | Accumulated Other Comprehensive Income (Loss) | Non-controlling interests | Total capital | Limited partnership interests of third parties | ||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | 1 | $ | 7,041 | $ | (70) | $ | 5 | $ | 6,977 | $ | 168 | |||||||||||||||||||||||
| Net income | — | 111 | — | — | 111 | 2 | |||||||||||||||||||||||||||||
| Issuance of common OP units to Host Inc. for comprehensive stock plans, net | — | 5 | — | — | 5 | — | |||||||||||||||||||||||||||||
| Repurchase of common OP units | — | (100) | — | — | (100) | — | |||||||||||||||||||||||||||||
| Distributions declared on common OP units | — | (127) | — | — | (127) | (1) | |||||||||||||||||||||||||||||
| Changes in ownership and other | — | 12 | — | (1) | 11 | (12) | |||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | (3) | — | (3) | — | |||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | 1 | $ | 6,942 | $ | (73) | $ | 4 | $ | 6,874 | $ | 157 |
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| General Partner | Limited Partner | Accumulated Other Comprehensive Income (Loss) | Non-controlling interests | Total capital | Limited partnership interests of third parties | ||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | 1 | $ | 6,516 | $ | (76) | $ | 5 | $ | 6,446 | $ | 126 | |||||||||||||||||||||||
| Net income | — | 486 | — | 1 | 487 | 7 | |||||||||||||||||||||||||||||
| Issuance of common OP units to Host Inc. for comprehensive stock plans, net | — | 13 | — | — | 13 | — | |||||||||||||||||||||||||||||
| Distributions declared on common OP units | — | (150) | — | — | (150) | (2) | |||||||||||||||||||||||||||||
| Issuance of common OP units | — | — | — | — | — | 56 | |||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | (1) | (1) | — | |||||||||||||||||||||||||||||
| Changes in ownership and other | — | 23 | — | — | 23 | (22) | |||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | (1) | — | (1) | — | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | 1 | $ | 6,888 | $ | (77) | $ | 5 | $ | 6,817 | $ | 165 |
| General Partner | Limited Partner | Accumulated Other Comprehensive Income (Loss) | Non-controlling interests | Total capital | Limited partnership interests of third parties | ||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | 1 | $ | 6,850 | $ | (74) | $ | 5 | $ | 6,782 | $ | 163 | |||||||||||||||||||||||
| Net income | — | 114 | — | 1 | 115 | 1 | |||||||||||||||||||||||||||||
| Issuance of common OP units to Host Inc. for comprehensive stock plans, net | — | 10 | — | — | 10 | — | |||||||||||||||||||||||||||||
| Distributions declared on common OP units | — | (85) | — | — | (85) | (1) | |||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | (1) | (1) | — | |||||||||||||||||||||||||||||
| Changes in ownership and other | — | (1) | — | — | (1) | 2 | |||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | (3) | — | (3) | — | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | 1 | $ | 6,888 | $ | (77) | $ | 5 | $ | 6,817 | $ | 165 |
Share Repurchases
During the third quarter of 2023, we repurchased 6.3 million shares at an average price of $15.90 per share, exclusive of commissions, through our common share repurchase program for a total of $100 million. As of year-to-date September 30, 2023, we have repurchased 9.5 million shares at an average price of $15.82 for a total of $150 million. As of September 30, 2023, there was $823 million available for repurchase under our common share repurchase program.
Issuance of Common Stock
On May 31, 2023, we entered into a distribution agreement with J. P. Morgan Securities LLC, BofA Securities, Inc., Goldman Sachs & Co. LLC, Jefferies LLC, Morgan Stanley & Co. LLC, Scotia Capital (USA) Inc., Truist Securities, Inc. and Wells Fargo Securities, LLC, as sales agents pursuant to which Host Inc. may offer and sell, from time to time, shares of Host Inc. common stock having an aggregate offering price of up to $600 million. The sales will be made in transactions that are deemed to be “at the market” offerings under the SEC rules. We may sell shares of Host Inc. common stock under this program from time to time based on market conditions, although we are not under an obligation to sell any shares. The agreement also contemplates that, in
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
addition to the offering and sale of shares to or through the sales agents, we may enter into separate forward sale agreements with each of the forward purchasers named in the agreement. There have been no shares issued year-to-date in 2023. As of September 30, 2023, there was $600 million of remaining capacity under the agreement.
Dividends/Distributions
On September 14, 2023, Host Inc.'s Board of Directors announced a regular quarterly cash dividend of $0.18 per share on its common stock. The dividend was paid on October 16, 2023 to stockholders of record as of September 30, 2023. Accordingly, Host L.P. made a distribution of $0.18386892 per unit on its common OP units based on the current conversion ratio.
7. Fair Value Measurements
We did not elect the fair value measurement option for any of our financial assets or liabilities. The fair values of notes receivable, secured debt and our credit facility are determined based on the expected future payments discounted at risk-adjusted rates. Our senior notes are valued based on quoted market prices. The fair values of financial instruments not included in this table are estimated to be equal to their carrying amounts.
The fair value of certain financial assets and financial liabilities is shown below (in millions):
| September 30, 2023 | December 31, 2022 | ||||||||||||||||||||||
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||||||
| Financial assets | |||||||||||||||||||||||
| Notes receivable (Level 2) | $ | 322 | $ | 323 | $ | 413 | $ | 404 | |||||||||||||||
| Financial liabilities | |||||||||||||||||||||||
| Senior notes (Level 1) | 3,119 | 2,776 | 3,115 | 2,768 | |||||||||||||||||||
| Credit facility (Level 2) | 988 | 1,000 | 994 | 1,000 | |||||||||||||||||||
| Mortgage debt (Level 2) | 100 | 86 | 102 | 95 |
As of September 30, 2023, notes receivable consists of two loans issued to the buyers in connection with the sales of The Camby, Autograph Collection and the Sheraton New York Times Square Hotel. During the third quarter of 2023, the loan to the buyer of the Sheraton Boston Hotel was repaid in full. Subsequent to quarter end, on October 18, 2023, the loan to the buyer of the Sheraton New York Times Square Hotel matured. We entered into a forbearance agreement with the buyer on October 18, 2023, by which we will forbear exercising our remedies until November 8, 2023.
8. Geographic Information
We consider each one of our hotels to be an operating segment, as we allocate resources and assess operating performance based on individual hotels. All of our hotels meet the aggregation criteria for segment reporting and our other real estate investment activities (primarily our retail spaces and office buildings) are immaterial. As such, we report one segment: hotel ownership. Our consolidated foreign operations consist of hotels in two countries as of September 30, 2023. There were no intersegment sales during the periods presented.
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents total revenues and property and equipment, net, for each of the geographical areas in which we operate (in millions):
| Total Revenues | Property and Equipment, net | ||||||||||||||||||||||||||||||||||
| Quarter ended September 30, | Year-to-date ended September 30, | September 30, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||
| United States | $ | 1,190 | $ | 1,166 | $ | 3,919 | $ | 3,594 | $ | 9,611 | $ | 9,678 | |||||||||||||||||||||||
| Brazil | 5 | 5 | 16 | 12 | 35 | 33 | |||||||||||||||||||||||||||||
| Canada | 19 | 18 | 53 | 38 | 33 | 37 | |||||||||||||||||||||||||||||
| Total | $ | 1,214 | $ | 1,189 | $ | 3,988 | $ | 3,644 | $ | 9,679 | $ | 9,748 |
9. Non-controlling Interests
Host Inc.’s treatment of the non-controlling interests of Host L.P.: Host Inc. adjusts the amount of the non-controlling interests of Host L.P. each period so that the amount presented equals the greater of its carrying amount based on accumulated historical cost or its redemption value. The historical cost is based on the proportional relationship between the historical cost of equity held by our common stockholders relative to that of the common unitholders of Host L.P. The redemption value is based on the amount of cash or Host Inc. common stock, at our option, that would be paid to the non-controlling interests of Host L.P. if it were terminated. We have estimated that the redemption value of the common OP units is equivalent to the number of common shares issuable upon conversion of the common OP units held by third parties valued at the market price of Host Inc. common stock at the balance sheet date. One common OP unit may be exchanged for 1.021494 shares of Host Inc. common stock. Redeemable non-controlling interests of Host L.P. are classified in the mezzanine section of our balance sheets as they do not meet the requirements for equity classification because the redemption feature requires the delivery of registered shares.
The table below details the historical cost and redemption values for the non-controlling interests of Host L.P.:
| September 30, 2023 | December 31, 2022 | ||||||||||
| Common OP units outstanding (millions) | 9.6 | 10.0 | |||||||||
| Market price per Host Inc. common share | $ | 16.07 | $ | 16.05 | |||||||
| Shares issuable upon conversion of one common OP unit | 1.021494 | 1.021494 | |||||||||
| Redemption value (millions) | $ | 157 | $ | 164 | |||||||
| Historical cost (millions) | 96 | 97 | |||||||||
| Book value (millions) ⁽¹⁾ | 157 | 164 |
(1)The book value recorded is equal to the greater of redemption value or historical cost.
Other Consolidated Partnerships. As of September 30, 2023, we consolidate two majority-owned partnerships that have third-party, non-controlling ownership interests. The third-party limited partner interests are included in non-redeemable non-controlling interests — other consolidated partnerships on the balance sheets and totaled $4 million and $5 million as of September 30, 2023 and December 31, 2022, respectively.
10. Contingencies
While the majority of our hotels in Florida were affected by Hurricane Ian, which made landfall on September 28, 2022, the most significant damage sustained during the storm occurred at The Ritz-Carlton, Naples and Hyatt Regency Coconut Point Resort and Spa. The Hyatt Regency Coconut Point reopened to guests in November 2022, with the final phase of reconstruction, the resort's waterpark, completed in June 2023. On July 6, 2023, The Ritz-Carlton, Naples reopened the guestrooms, suites and amenities, including the new tower expansion.
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Our current estimate of the book value of the property and equipment written off and remediation costs is approximately $130 million for which we recorded a corresponding insurance receivable. As of September 30, 2023, we have received $184 million of insurance proceeds related to these claims, of which $130 million reduced our receivable to zero and, during the third quarter, $54 million of these proceeds were recognized as a gain on business interruption, which is included in gain on insurance and business interruption settlements on our unaudited consolidated statements of operations. Subsequent to quarter end, we received an additional $24 million of business interruption proceeds. Our expected potential insurance recovery is $310 million for covered costs, including the property remediation and reconstruction costs and the near-term loss of business; however, there can be no assurances that we will be able to collect the full amount.
11. Legal Proceedings
We are involved in various legal proceedings in the ordinary course of business regarding the operation of our hotels and Company matters. To the extent not covered by insurance, these legal proceedings generally fall into the following broad categories: disputes involving hotel-level contracts, employment litigation, compliance with laws such as the Americans with Disabilities Act, tax disputes and other general matters. Under our management agreements, our operators have broad latitude to resolve individual hotel-level claims for amounts generally less than $150,000. However, for matters exceeding such threshold, our operators may not settle claims without our consent.
Based on our analysis of legal proceedings with which we are involved or of which we currently are aware and our experience in resolving similar claims in the past, we have recorded immaterial accruals as of September 30, 2023 related to such claims. We have estimated that, in the aggregate, our losses related to these proceedings will not be material. We are not aware of any matters with a reasonably possible unfavorable outcome for which disclosure of a loss contingency is required. No assurances can be given as to the outcome of any pending legal proceedings.
Next: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations