STIFEL: HST ($16.48, Buy) - Highlights from Host Hotels & Resorts Investor Day
FULL REPORT
Highlights from Host Hotels & Resorts Investor Day
- Hosting Investor Day. Host Hotels & Resorts (HST, $17.35, Buy) is holding an investor day at the Camby Hotel in Phoenix.
- What Is HST today? Host has a high-quality diversified portfolio with no market accounting for more than 10.0% of EBITDA. The company has created value and will continue to create value. Lastly, the balance sheet is strong and management will continue to return capital to shareholders
- Over the last three years, the company has sold $2.3 billion of assets which consisted of older, suburban, and airport hotels. The average RevPAR for the sold hotels were significantly below portfolio average ($105). Throughout the process HST has essentially exited from Asia. Over the same time-frame HST acquired $1.0 billion of assets and invested over $600 million in redevelopment or ROI projects.
- The portfolio has 1/3 of its hotels with over 1,000 rooms, 1/3 less than 500 rooms, and 1/3 in between. The assets are spread across 12 operators, including 8 independent operators. The portfolio is also quite diversified geographically across the country.
- HST owns 10 resorts in key destination locations. Group pace is +2.5% for 2017. HST has 15 convention hotels, a segment with very little supply. Lastly, the portfolio includes 48 assets in major markets.
- The company looks to create value across all channels. Management has invested money into hotels to improve operating performance and reposition a property. HST has also changed operators at certain hotels to find a better fit. Lastly, the company looks for value enhancement opportunities.
- Some recent redevelopments projects include, The Camby Hotel, the site of the investor day, the Axiom Hotel, The Logan, the Marriott Marquis San Diego Marina, and The Phoenician.
- Over the last 24 months, four properties have experienced a change in operators. The change has resulted into an 18.5% increase in EBITDA. Two more management contracts were renegotiated providing $3.1 million of savings. Over the next five years, 22 contracts expire.
- HST also has undertaken value enhancing projects. Some of those projects include the retail space at the Marriott Marquis in NYC, timeshare units at the Hyatt Regency Maui, and excess land at Chicago O'Hare. Future projects include the Key Bridge, the Orlando World Center, the Fort Lauderdale Marriott Harbor Beach Resort & Spa, and the Ritz-Carlton Naples.
- The balance sheet is quite strong with interest coverage almost 10.0x, almost twice the peer average. Net-debt+preferred is 2.6x, considerably below the peer average (5.1x).
- HST's dividend payout ratio is quite strong. Even post capex, the payout is still well-covered. Management believes it can maintain its dividend in the next downturn.
- Over the last three years, $2.6 billion has been returned to shareholders in the form of dividends and share buybacks. YTD, HST has returned $800 million to shareholders.
Priced intraday 11-14-2016.