Host Hotels & Resorts Acquires 1 Hotel Central Park and Completes Acquisition of The Ritz-Carlton O’ahu, Turtle Bay

Rhea-AI Summary

Host Hotels & Resorts (NASDAQ: HST) has made two significant acquisitions, enhancing its portfolio with luxury properties. The company acquired the 234-room 1 Hotel Central Park for $265 million, representing an 11.1x EBITDA multiple. This property is expected to be among Host's top-10 assets based on 2024 estimates, with projected RevPAR of $545 and EBITDA per key over $100,000.

Additionally, Host completed the acquisition of The Ritz-Carlton O'ahu, Turtle Bay, a 450-room resort in Hawaii, for approximately $680 million. This acquisition includes a 49-acre land parcel for future development. The deal represents a 16.3x EBITDA multiple based on 2024 estimates, with potential for improvement as the property stabilizes.

These acquisitions total $1.5 billion in 2024, with a blended 13.6x EBITDA multiple, bringing Host closer to its target of $3 billion in acquisitions outlined at its investor day.

Positive

• Acquisition of 1 Hotel Central Park for $265 million, expected to be a top-10 asset
• 1 Hotel Central Park projected to have high RevPAR of $545 and EBITDA per key over $100,000
• Completed acquisition of The Ritz-Carlton O'ahu, Turtle Bay for $680 million
• Total acquisitions of $1.5 billion in 2024 at a blended 13.6x EBITDA multiple
• Progress towards $3 billion acquisition target at lower than assumed EBITDA multiple

Negative

• High acquisition costs may impact short-term financial performance
• Potential integration challenges for newly acquired properties
• Dependence on luxury market performance, which can be volatile

Insights

Financial Analyst

Host Hotels & Resorts' recent acquisitions of 1 Hotel Central Park and The Ritz-Carlton O'ahu, Turtle Bay represent a significant strategic move in the luxury hospitality sector. The $265 million acquisition of 1 Hotel Central Park at an 11.1% EBITDA multiple and 8.1% cap rate suggests a strong potential for immediate returns. With expected RevPAR of $545 and Total RevPAR of $735, this property is poised to be among Host's top-10 assets.

The Ritz-Carlton O'ahu acquisition, at $680 million, presents a longer-term play with a higher initial EBITDA multiple of 16.3% and 5.3% cap rate. However, the projected improvement to a 13.5% EBITDA multiple by 2025 indicates potential for value appreciation.

These acquisitions, totaling $1.5 billion, are part of Host's ambitious plan to reach $2 billion in EBITDA. The company has already achieved half of its $3 billion acquisition target at a lower blended EBITDA multiple than initially projected, which is a positive sign for operational efficiency and strategic execution.

For investors, these moves signal Host's commitment to portfolio enhancement and market positioning in high-value locations. The focus on luxury properties in top RevPAR markets like New York City and Hawaii could provide resilience against economic fluctuations and potential for premium pricing. However, the high acquisition costs and reliance on continued strong performance in the luxury segment also present risks that investors should monitor closely.

Real Estate Investment Analyst

Host Hotels & Resorts' latest acquisitions demonstrate a calculated approach to portfolio expansion in the luxury hospitality REIT sector. The 1 Hotel Central Park deal, at $265 million, stands out for its attractive 8.1% cap rate, which is notably high for a prime New York City location. This suggests potential for immediate positive cash flow and value appreciation, especially given the property's proximity to Central Park and Fifth Avenue's luxury retail district.

The Ritz-Carlton O'ahu acquisition, while carrying a lower initial cap rate of 5.3%, includes a valuable 49-acre land parcel with development rights. This additional asset provides Host with future expansion opportunities, potentially enhancing long-term returns beyond the hotel's operational income.

Host's strategy of targeting LEED-certified properties and sustainable luxury brands like 1 Hotels aligns with growing ESG investment trends, which could attract a broader investor base and potentially command premium valuations in the future.

The company's progress towards its $3 billion acquisition target at lower-than-expected EBITDA multiples is impressive, indicating disciplined deal-making in a competitive market. However, investors should be mindful of the execution risks associated with rapid expansion and the potential for market saturation in the luxury segment.

Overall, these acquisitions position Host to capitalize on the recovery and growth in high-end travel markets, but also increase its exposure to the cyclical nature of luxury hospitality and location-specific risks.

BETHESDA, Md., July 31, 2024 (GLOBE NEWSWIRE) -- Host Hotels & Resorts, Inc. (NASDAQ: HST) (“Host” or the “Company”), the nation’s largest lodging real estate investment trust, today announced that it has acquired the fee simple interest in the 234-room 1 Hotel Central Park (the “Property”) for approximately $265 million in cash. The acquisition price represents an 11.1x EBITDA multiple or a cap rate of approximately 8.1% on the Property’s 2024 estimated results¹.

The Property is expected to be among Host’s top-10 assets based on estimated full year 2024 results, with expected RevPAR of $545, Total RevPAR of $735, and EBITDA per key of over $100,000², further improving the quality of the Company’s portfolio.

James F. Risoleo, President and Chief Executive Officer, said, “We are excited to add the 1 Hotel Central Park to our portfolio and further diversify Host’s presence in New York City, one of the top performing RevPAR markets in the country. This high performing hotel will provide exposure to the luxury guest in Upper Manhattan, the top RevPAR submarket in the city. This is our third 1 Hotel acquisition, after Nashville and South Beach, and we look forward to continuing our strong partnership with the sustainable luxury brand.”

Risoleo continued, “With meaningful in-place cash flow, no near-term anticipated capital expenditures, extremely low expected supply growth, and an irreplaceable location just one block from Central Park and Fifth Avenue’s luxury shopping district, we expect the Property to drive additional value creation for our stockholders.”

Opened in 2015, the LEED Certified^® 1 Hotel Central Park is a sustainable luxury property with 234 keys, including 25 suites and a recently added 5-key penthouse that offers large terraces and a presidential suite. The lobby level features Jams, a three-meal restaurant and bar affiliated with James Beard award winner Jonathan Waxman. The second floor offers 2,000 square feet of contiguous and flexible meeting space, as well as a naturally lit fitness center and business center.

Additionally, the Company anticipates closing on the previously announced acquisition of the fee simple interest in the 450-room Ritz-Carlton O’ahu, Turtle Bay (the “Resort,”), later today. The Resort is located on the North Shore of Oahu, Hawaii, and includes a 49-acre land parcel entitled for development (the “Land Parcel”). The Company acquired the Resort and Land Parcel for approximately $680 million, net of key money. The acquisition price represents a 16.3x EBITDA multiple or a cap rate of approximately 5.3% on the Resort’s 2024 estimated results³. Based on preliminary 2025 forecasts and the conversion to a Ritz-Carlton, the acquisition price represents an approximate 13.5x EBITDA multiple or a cap rate of approximately 6.7%⁴.

Risoleo continued, “In 2024, we have acquired $1.5 billion of iconic and irreplaceable hotels at a blended 13.6x EBITDA multiple⁵. This represents over $100 million in estimated full-year EBITDA that we believe will grow as the assets we acquired stabilize. Looking back at the path to $2 billion of EBITDA we laid out just over a year ago at our investor day, we are halfway toward our target of $3 billion of acquisitions at a lower blended EBITDA multiple than assumed. We are extremely proud of the progress we have made with these diverse acquisitions, and we remain focused on being opportunistically positioned moving forward.”

ABOUT HOST HOTELS & RESORTS

Host Hotels & Resorts, Inc. is an S&P 500 company and is the largest lodging real estate investment trust and one of the largest owners of luxury and upper-upscale hotels. The Company currently owns 76 properties in the United States and five properties internationally totaling approximately 43,400 rooms. The Company also holds non-controlling interests in seven domestic and one international joint ventures.

FORWARD LOOKING STATEMENTS

Note: This press release contains forward-looking statements within the meaning of federal securities regulations. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “plan,” “predict,” “project,” “will,” “continue” and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: general economic uncertainty in the Oahu and New York City markets  and the possibility that future growth in these markets will not meet current expectations or the stabilized results we expect to achieve; other factors such as natural disasters and weather that will affect occupancy rates at the property and the demand for hotel products and services; the impact of economic and geopolitical developments on lodging demand and the Oahu and New York City markets in particular; operating risks associated with the hotel business; ; risks that hotel supply in these markets will increase greater than expected or will have a larger impact on occupancy at the properties than currently forecasted; transition risks associated with our changing the manager of the The Ritz-Carlton, O’ahu, Turtle Bay and the risk that the new manager will not be able to achieve the results we expect them to achieve; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; the effects of hotel renovations on our hotel occupancy and financial results; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; risks that the acquisitions of the properties and any new developments at the properties may not perform in accordance with our expectations; and other risks and uncertainties associated with our business described in the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of the date of this release and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

1	Consistent with industry practice, Host calculates the EBITDA multiple as the ratio of the purchase price to the property’s EBITDA and the capitalization rate as the ratio of property’s net operating income to its purchase price. EBITDA and net operating income are non-GAAP measures. The comparable GAAP metric to EBITDA multiple is the ratio of the purchase price to net income. The ratio of the purchase price to 2024 net income is 16x based on expected net income of $16 million. The comparable GAAP metric to capitalization rate utilizing 2024 estimated net income is the ratio of net income to the purchase price which is 6.2%. The difference between estimated 2024 net income and EBITDA is depreciation expense of $8 million. The difference between EBITDA and net operating income is $3 million for the annual contractual reserve requirements for renewal and replacement expenditures for 2024.
2	The comparable GAAP metric to EBITDA per key is net income per key, which is $70,000 based on 2024 forecast net income of $16 million.
3	The ratio of the purchase price to 2024 estimated net income is 29x based on expected net income of $22 million. The comparable GAAP metric to capitalization rate utilizing 2024 estimated net income is the ratio of net income to the purchase price which is 3.4%. The difference between estimated 2024 net income and EBITDA is depreciation expense of $17 million. The difference between EBITDA and net operating income is $6 million for the annual contractual reserve requirements for renewal and replacement expenditures for 2024. The purchase price was calculated net of key money and the amount allocated to the Land Parcel.
4	The ratio of the purchase price to estimated 2025 net income is 21x based on expected net income of $29 million. The comparable GAAP metric to capitalization rate utilizing 2025 estimated net income is the ratio of net income to the purchase price which is 4.7%. The difference between estimated 2025 net income and EBITDA is depreciation expense of $17 million. The difference between EBITDA and net operating income is $4 million for the annual contractual reserve requirements for renewal and replacement expenditures for 2025. The purchase price was calculated net of key money and the amount allocated to the Land Parcel.
5	For the four hotels acquired in 2024, the ratio of the purchase price to 2024 net income is 23x based on expected net income of $61 million. The difference between estimated 2024 net income and EBITDA is depreciation expense of $43 million.

SOURAV GHOSH Chief Financial Officer (240) 744-5267

JAIME MARCUS Investor Relations (240) 744-5117 ir@hosthotels.com

FAQ

What properties did Host Hotels & Resorts (HST) acquire in 2024?

In 2024, Host Hotels & Resorts (HST) acquired the 234-room 1 Hotel Central Park for $265 million and the 450-room Ritz-Carlton O'ahu, Turtle Bay for approximately $680 million.

What is the total value of Host Hotels & Resorts' (HST) acquisitions in 2024?

Host Hotels & Resorts (HST) acquired properties totaling $1.5 billion in 2024, with a blended 13.6x EBITDA multiple.

What is the expected RevPAR for the 1 Hotel Central Park acquired by Host Hotels & Resorts (HST)?

The 1 Hotel Central Park, acquired by Host Hotels & Resorts (HST), is expected to have a RevPAR of $545 based on 2024 estimates.

How does the Ritz-Carlton O'ahu, Turtle Bay acquisition fit into Host Hotels & Resorts' (HST) strategy?

The Ritz-Carlton O'ahu, Turtle Bay acquisition aligns with Host Hotels & Resorts' (HST) strategy to acquire iconic and irreplaceable hotels, and includes a 49-acre land parcel for potential future development.