Host Hotels & Resorts
Annual Report 2014

Plain-text annual report

Host Hotels & ResoR ts 2014 ANNUAL REPORT Financial HigHligHts (u n a u d i t e d ) 20 1 4 20 1 3 20 12 OpERATINg D ATA (in millions) Revenues Operating profit Net income DILUTED EARNINgS (LOSS) pER COmmON ShARE Earnings (loss) from continuing operations Diluted earnings Diluted weighted average shares outstanding (in millions) BAL ANCE ShEET DATA (in millions) Total assets Total debt Total equity OThER DATA Adjusted EBITDA(1) (in millions) NAREIT funds from operations per diluted share (1) Adjusted funds from operations per diluted share (1) Stock price on December 31st COmp ARABLE hOTEL DATA (2) Number of properties Number of rooms Average room rate (3) Average occupancy percentage RevpAR (3) $ 5,354 710 747 $ 0.96 $ 0.96 786.8 $ 12,207 3,992 7,368 $ 1,402 1.57 1.50 23.77 106 55,252 $ 210.40 77.0% $ 162.07 $ 5,166 512 325 $ 0.27 $ 0.42 747.9 $ 12,814 4,759 7,262 $ 1,306 1.26 1.31 19.44 106 55,252 $ 200.72 76.4% $ 153.32 $ 5,059 362 63 (.01) $ $ 0.08 719.6 $ 12,994 5,411 6,859 $ 1,190 1.04 1.10 15.67 (1) NAREIT Funds From Operations (FFO) and Adjusted FFO per diluted share and Adjusted Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items (Adjusted EBITDA) are not generally accepted accounting principles (gAAp) financial measures within the meaning of the rules of the Securities & Exchange Commission. These measures have been reconciled to comparable gAAp measures. See page 24 of this report. (2) We define our comparable hotels as properties that are owned or leased by us and the operations of which are included in our consolidated results, whether as continuing operations or discontinued operations, for the entirety of the reporting periods being compared, and that have not sustained substantial property damage or business interruption or undergone large-scale capital projects during the reporting periods being compared. (3) Room revenue per available room (“RevpAR”) represents the combination of average daily room rate charged and the average daily occupancy achieved, and is a commonly used indicator of hotel performance. RevpAR does not include food and beverage or other ancillary revenues generated by the property. Average room rate and RevpAR are presented on a constant US$ basis, which presents 2013 results using the same exchange rates that were effective for the comparable periods in 2014, thereby eliminating the effect of currency fluctuation for the year-over-year comparisons. Our Annual Report on Form 10-K filed with the Securities and Exchange Commission is included in our mailing to stockhold- ers and together with this 2014 Annual Report forms our annual report to stockholders within the meaning of SEC rules. ADJUSTED FFO (per share) ADJUSTED EBITDA (in millions) TOTAL REVENUES (in millions) $1.50 1.25 1.00 0.75 0.50 $1,425 1,325 1,225 1,125 1,025 $5,400 5,200 5,000 4,800 4,600 2012 2013 2014 2012 2013 2014 2012 2013 2014 Premium brands & OPeratOrs • Prime LOcatiOns & markets HOst HOteLs & ResORts Is tHe pRemIeR HOspItaLIty ReaL estate cOmpany. With investments in 139 properties, throughout the United states and over 25 cities across the globe, we have an unmatched portfolio of quality assets in instantly recognizable locations. Our strategy is sharply focused on target markets that have significant barriers to entry and a broad diversity of stable demand drivers with significant appeal to premium corporate, leisure and international travelers. Our properties are operated by world-class operators with well-established brands, as well as smaller, market- focused operators geared towards a more unique travel experience; a combination that we believe will help provide attractive returns on our investment. Our attention to gateway cities, capital allocation and value enhancement, superior asset management and sound financial management position us to achieve our goals and to drive stockholder value. +15.2% saN FRaNCIsCo. our 2014 increase in comparable RevPaR at our san Francisco hotels, which includes the saN FRaNCIsCo MaRRIott MaRQUIs. this gateway city with internationally recognized landmarks like the Golden Gate bridge and alcatraz is home to numerous Fortune 500 and leading tech- nology companies. 77% 139 average occupancy at our comparable hotels in 2014 — approximately 12 percent- age points above the entire industry in the americas (per stR Global data). Hotels in which we have an investment at December 31, 2014, including 114 in our con- solidated portfolio, located in major markets in the U.s. and internationally. 59,000 Rooms in our consolidated portfolio, including 39 hotels with greater than 500 rooms. H o t e l s b y C l a s s (as a percent of revenues) 3 Luxury 22.2% 3 Upper Upscale 74.4% 3 Other/Independent 3.4% 17 Countries in which we have an investment, including consolidated hotels and through joint ventures. 80% 16 $2.4 billion Revenues from our target markets. since 2009 we have increased our percentage of revenues from our target markets from 71%. Number of relationships with different operators throughout our portfolio, which encompasses 25 different brands and two independently branded properties. Invested in capital expenditures over the past five years to maintain our strong com- petitive position for our properties relative to their market competitors. the brands and logos listed above are the trademarks of our managers or their affiliates. the trademarked names and their logos are the property of their respective owners and are being used with the express permission of their owners. None of the owners of these trademarks has any responsibility or liability for any information contained in this annual Report. TO OUR STOCKHOLDERS We aRe tHe pRemIeR HOspItaL- Ity ReaL estate cOmpany anD We measURe sUccess By Gen- eRatInG sUpeRIOR RetURns FOR OUR stOcKHOLDeRs. tHat sUccess Is tHe ResULt OF caReFUL steWaRDsHIp OF a HIGH-qUaLIty pORtFOLIO OF LODGInG assets In Key maR- Kets tHROUGHOUt tHe WORLD. W. eDWaRD WaLteR President and Chief Executive Officer Our long-term growth is based on a well-integrated asset management team that drives operating profit, while practicing disciplined capital allocation with initiatives that create value for our existing portfolio. Our strength is rooted in an investment grade balance sheet with a flexible capital structure that fosters external growth throughout the business cycle. the result of our efforts is clear, measurable growth in operating profits, dividends and stockholder value. RIcHaRD e . maRRIO tt Chairman of the Board Our 2014 operating performance marked the fifth straight year of strong increase in comparable RevpaR, with growth of 5.7% on a constant dollar basis. Our performance was driven by strong demand resulting in a 77% average occupancy level, which helped our operators drive rate increases in both our transient and group segments. these top-line results were combined with cost-cutting initiatives that led to yet another year of strong margin improvement. some of the other highlights for 2014 include: 3 a 63% increase in our dividend over 2013. In 2014, we declared over $565 million in dividends, or $0.75 per share, including a $0.06 special dividend in the fourth quarter. On February 19, 2015, we announced a quarterly dividend of $0.20 per share and are committed to sustaining this meaningful dividend; 3 net income improved $422 million to $747 million, reflecting a 7.4% increase in adjusted eBItDa to $1.4 billion. adjusted Funds from Operations increased 14.5% to $1.50 per diluted share, while diluted earnings per common share more than doubled to $0.96; 3 We acquired independently operated, lifestyle properties: the powell Hotel and its retail space located in the heart of san Francisco in January for $75 million and the b2 miami downtown hotel in august for $58 million. We recently closed the powell hotel for a transformative H o t e l s b y PRoPeRt y t yPe (as a percent of revenues) 3 Urban 63% 3 Resort/conference 19% 3 suburban 12% 3 airport 6% DIVIDenDs DecLaReD (per share) $0.75 $0.46 $0.30 2012 2013 2014 4 1 0 2 s t R O s e R & s L e t O H t s O H | 2 redevelopment project, which is scheduled for completion in september 2015. Upon its reopening, the hotel will be operated by Kokua Hospitality as the axiom hotel. Our property in miami, renamed the yVe Hotel miami, is managed by Destination Hotels & Resorts. 3 Our joint venture in europe expanded its footprint across key european markets by acquiring and rebranding the sheraton Berlin Grand Hotel esplanade for €81 million in september. the joint venture now owns 19 properties in nine countries with total assets of approximately €2 billion; 3 We completed the development of the 131-unit Hyatt Ka’anapali Beach, a Hyatt Residence club, adjacent to our Hyatt Regency maui Resort & spa. We contributed a combination of excess land and cash for a 67% interest in the joint venture that owns the timeshare project, which recognized $54 million in sales in 2014. 3 We completed the development of the 149-room novotel and the 256-room ibis Rio de Janeiro parque Olimpico in Barra da tijuca for $65 million. Operated by accor, these properties are ideally situated for guests attending the 2016 Olympic Games, as well as providing access to local retail and business districts; 3 In november, we activated the new 25,000 square foot, eight-story tall high-definition digital billboard at the new york marriott marquis, which was developed in conjunction with the redevelopment and lease of the retail space to Vornado Realty trust. the approximately 45,000 square feet of retail space facing Broadway on times square is expected to be fully leased in late 2015; 3 We took advantage of flexibility in our management agree- ments to engage sage Hospitality to operate the Four seasons Hotel philadelphia and the Denver tech marriott; 3 We were able to take advantage of attractive pricing to dispose of five non-core properties for approximately $515 million. these transactions reduced our exposure to markets where we believe long-term growth is constrained and our return on investment is lower; and 3 We repaid $760 million of debt and lowered our leverage ratio, as measured by debt-to-eBItDa, by 60 basis points, the lowest in company history. We believe lodging fundamentals will remain strong in 2015, helping to drive another solid year of growth in our portfolio. We will invest approximately $250 million in rede- velopment, return on investment and value enhancement projects, which we believe will create long-term value, but will impact short-term performance. We have remained focused on our goal to be the premier lodging real estate company, continually refining our strategy to adapt to changes in the lodging real estate industry. We believe our efforts to drive operating performance and well-considered investments will create real growth in stockholder value. We are convinced that our combination of iconic assets, financial strength, and management expertise creates an attractive opportunity for investors. We appreciate your support. RIcHaRD e . maRRIO tt Chairman of the Board W. eDWaRD WaLteR President and Chief Executive Officer march 17, 2015 27% $2.5 billion 63% total stockholder return in 2014, resulting in a five year cumulative stockholder return of 17%, 50 basis points higher than the NaReIt equity Index and almost 200 basis points higher than the s&P 500 Index. Investment for the acquisition of assets in our consolidated portfolio and through joint ventures since 2009. over the same time period we sold $1.5 billion of assets. Increase in our dividend over 2013. We declared over $565 million in dividends in 2014. the $0.75 per share dividend included a $0.06 special dividend in the fourth quarter. BO sTOn the largest city in new england is home to many healthcare and biotechnology companies that help drive corporate and convention business year round. a major transportation hub, Boston is also a popular tourist destination with world- renowned universities and popular annual events like the Boston marathon and the Head of the charles Regatta that consistently drive strong demand. Our portfolio is clustered in the heart of Boston, with the sHeRatOn BOstOn HOteL, pictured here, contributing to the city skyline. Harvard University mit Financial district back bay boston University Fenway park • sheraton boston Hotel • boston marriott copley place • Hyatt Regency cambridge • the Westin Waltham-boston • sheraton needham Hotel Rooms meeting space (Sq Ft) 1,220 1,144 470 351 247 70,000 70,000 25,000 17,000 15,000 H y a t t R e g e n c y ca m bRi d g e bo s t o n maR Ri o t t c o p l e y pl a c e t He W e s t i n W a l tHa m - bo s t o n GaTEway CiTiES, GLObaL MaRKETS Our strategy is simple: invest in the best assets, in prime locations with multiple demand drivers both for business and leisure travelers, and high barriers that limit new supply. We primarily invest in upper upscale and luxury properties in gateway cities and urban and resort/conference markets. Our concentrated market approach is intended to create efficiencies and increase our knowledge of local market dynamics, data and relationships. to establish a deeper market presence, we may invest in urban, select-service hotels and lifestyle or “boutique” hotels which appeal to the transient customer. We believe this narrow, but deeper approach will enhance growth and profitability over the long term. In the United states, we have properties in locations like seattle, san Francisco, Los angeles, san Diego, Hawaii, Boston, new york, Washington, D.c., chicago, atlanta, miami and Houston, representing major metropolitan areas and international travel destinations from coast to coast. Our recently purchased axiom Hotel is ideally located for travelers to experience the best of luxury shopping in san Francisco, while down the street the san Francisco marriott marquis is the prime conference destination for the city. For visi- tors to the east coast, our portfolio includes landmark hotels like the marriott marquis in times square and the Westin new york Grand central in the heart of midtown manhattan. Our joint venture investment in europe is focused on recognized centers of commerce and tourism like London, paris, Brussels and Barcelona that continue to outperform the broader european marketplace. In 2014, the joint venture acquired a 90% interest in the 394-room sheraton esplanade Grand Hotel in Berlin, a city famous for its culture, diverse economy and a continental hub for air and rail traffic. as the european economy continues to stabilize, we expect the joint venture to opportunistically acquire additional properties to enhance our presence in target cities, while providing value to our partners and stockholders through strategic dispositions. Our properties in Latin america experienced tremendous success in 2014. Fueled by the FIFa World cup in Rio de Janeiro, RevpaR at our Latin american properties increased over 23% on a constant dollar basis and food and beverage revenues increased almost 17%. Renovations at the JW marriott Hotel mexico city completed in 2013 helped to drive a nearly 22% increase in RevpaR at this hotel in 2014, compared to the 2012 pre-renovation period. In the fourth quarter, we celebrated the opening of the novotel and ibis Rio de Janeiro parque Olimpico in Barra da tijuca. Following the success of the World cup, we are excited at the potential for the 2016 Olympic Games, and beyond. 3 Boston H o t e l s b y M aRk e t (as a percent of revenues) 3 New York 3 Washington, D.C. 3 Florida 3 Chicago 3 Houston 3 Seattle 3 San Francisco 3 Los Angeles 3 San Diego 3 Hawaii 3 Latin America 3 Europe 3 Boston 3 new york 3 Washington, D.c. 3 Florida 3 chicago 3 Houston 3 seattle 3 san Francisco 3 Los angeles 3 san Diego 3 Asia-Pacific 3 Other le MéRIDIeN PICCaDIlly, owned through a joint venture, (top left) tHe WestIN PalaCe, MaDRID, owned through a joint venture, (bottom left), and the JW MaRRIott Hotel MexICo CIty (opposite page) 3 Hawaii 3 Latin america 3 europe 3 asia/pacific 3 Other 4 1 0 2 s t R O s e R & s L e t O H t s O H | 6 12.8% SEATTLE. CoMPaRable RevPaR GRoWtH IN 2014, oUR seCoND best PeR- FoRMING U.s. MaRket FoR tHe seCoND yeaR IN a RoW. 23.3% LATIN AMERICA. RevPaR GRoWtH at oUR CoMPa- Rable Hotels IN CoNstaNt Us$, ReFleCtING DeMaND GeNeRateD by tHe 2014 WoRlD CUP aND tIMely ReDeveloPMeNt INvestMeNts. $378 HAWAII. aveRaGe RooM Rate IN 2014 at oUR CoM- PaRable Hotels IN tHIs MaRket, oUtPeRFoRMING oUR otHeR U.s. CItIes. €2 billion EUROPE. valUe oF assets oWNeD by oUR JoINt veNtURe IN eURoPe. oUR FoCUs Is IN CUltURally aND HIstoRICally RICH CItIes, sUCH as PaRIs aND loNDoN. 4 1 0 2 s t R O s e R & s L e t O H t s O H | 8 t He W e s t i n c Hi c a g o R iVeR noRtH W neW y oRk – U n i o n sqU aRe H y a t t R e g e n c y W a sHi n g t o n o n ca p i t o l H i l l R e n a i s s a n c e p aRi s V e n d o m e H o t e l le méRi d i e n g Ra n d H o t e l n U Re m b eRg cOnsOLidated HOteLs JOint Venture HOteLs HOteLs under deVeLOPment cOrPOrate HeadQuarters regiOnaL Or JOint Venture Office tHe F a iRm o n t k e a l a n i , ma Ui s HeRa t o n sa n t i a g o H o t e l & c o nVe n t i o n ce n t eR J W maR Ri o t t H o t e l R i o d e J a n e iRo H o t e l a Rt s baRc e l o n a H i l t o n me l b oU Rn e soUtH W HaR F CapiTaL aLLOCaTiOn & VaLuE EnHanCEMEnT Our business is capital intensive and whether we are acquiring premium hotel assets or enhancing and refining our existing portfolio, our goal is to drive future revenue growth and create long-term stockholder value. Having acquired quality assets, we pursue oppor- tunities that we believe represent the highest and best uses of all aspects of our properties. While these projects require thoughtful and careful planning decisions that often involve multi-year time horizons, they can be a significant driver of value for our stockholders. the December 2014 opening of the 131–unit Hyatt Ka’anapali Beach, a Hyatt Residence club, is a prime example of executing on strategic value enhancement initiative almost ten years in the making. Developed on a beachfront parking lot acquired in 2003 with the adjacent Hyatt Regency maui Resort & spa, we expect to benefit from the sale and financing of timeshare units, as well as synergies created for the hotel. today, this 12-story timeshare boasts several luxurious pools, a relaxing day lounge, fitness center and units with retractable glass wall that open to spacious lanais providing unparalleled oceanfront views. every year our asset managers identify redevelopment and targeted return on investment projects designed to take advantage of changing market conditions and the favorable location of our properties. consistent with our concentrated market approach, we look for opportuni- ties to leverage adjacent properties to help offset lost revenues during construction. a prime example is the recently completed $84 million multi-year renova- tion of all of the guestrooms, 100,000 square feet of meeting space and expansion of the fitness center at the manchester Grand Hyatt san Diego. Having completed this project, in December 2014 we began demolition of the existing conference center at the adjacent marriott marquis san Diego marina, the first step in developing the $106 million, 180,000 square-foot exhibit Hall, which we expect to be completed by mid-2016. ReDeVeLOpment/ROI anD VaLUe enHancement pROJects (in millions) $342 $175 $165 capital allocation also means realignment of our portfolio toward target markets through our disposition strategy. prior to the sale of an asset, we look for opportunities to increase the sales price, including targeted capital expenditures and ground lease exten- sions. For the year, we completed more than $515 million in dispositions, bringing our total sales since 2009 to $1.5 billion, exiting assets where we believe the potential for growth is con- strained, including disposing of domestic assets with an average RevpaR of $109 and replacing them through the acquisition of assets with RevpaR in excess of $200. 2014 2013 2012 4 1 0 2 s t R O s e R & s L e t O H t s O H | 10 31,000 Rooms renovated in the last 5 years, including 4,000 in 2014. 2.3 million 750,000 square feet of meeting space renovated since 2010, including 535,000 square feet renovated in 2014. square feet of public space renovated in the last 5 years, including 128,000 in 2014. tHe Novotel and IbIs RIo De JaNeIRo PaRQUe olIMPICo Hotels (top left), Hyatt ka’aNaPalI beaCH, a Hyatt Residence Club, owned through a joint venture (above), and tHe WestIN NeW yoRk GRaND CeNtRal (left). san DiegO a perennial favorite for convention travelers because of its pleasant climate and numerous tourist attractions, the city draws strong group and leisure demand. Beaches, museums and various parks attract a large number of visitors while its military, government and manufacturing industries provide a diverse and stable demand for lodging. Our centrally located collection of premium hotels is ideally situated to provide for the needs of both the business and leisure traveler, including the mancHesteR GRanD Hyatt san DIeGO and san DIeGO maRRIOtt maRqUIs & maRIna pictured here. qualcomm stadium sea World san diego airport san diego Zoo gaslamp quarter petco park convention center coronado Rooms meeting space (Sq Ft) 1,628 • manchester grand Hyatt san diego • san diego marriott marquis & marina • sheraton san diego Hotel & marina • san diego marriott mission Valley • coronado island marriott Resort & spa 300 1,360 1,053 350 125,000 80,000 120,000 28,000 25,000 s HeRa t o n sa n di e g o H o t e l & maRi n a sa n di e g o maR Ri o t t mi s s i o n V a l l e y c oRo n a d o is l a n d maR Ri o t t R e s oRt & sp a SupERiOR aSSET ManaGEMEnT assuring strong growth in a global marketplace requires executing on our strategic vision every day. We work with our operators to develop the optimal business mix for each property to drive operating profit through revenue growth strategies and cost control initiatives. Our position as the nation’s largest lodging ReIt, combined with long- term relationships with leading brands and independent operators and the size and composition of our portfolio, provides us with a diversified perspective that is unmatched in the industry. We look to create flexibility in our man- agement agreements to optimize the operator, brand and contract terms for each hotel. For two of our recent acquisitions, the axiom Hotel in san Francisco and the yVe Hotel miami, we determined that the size, location and unique demand drivers in their respective markets would benefit from an independent operator. We also successfully negoti- ated new operating agreements for two of our existing properties, the Four seasons philadelphia and Denver tech marriott, both of which will undergo transformative repositioning projects and reopen with a new operator, sage Hospitality. Our asset management team continuously reviews our properties to identify the needs of our customers and work with our managers to respond in a first-class manner. We develop individualized capital plans that are designed to take advantage of specific demand drivers unique to that market. In 2014, we added over 11,000 square feet of meeting space in popular conference destinations, including san Diego. We also made progress on our strategic food and beverage initiative to create a more relevant dining experience throughout the day, includ- ing outsourcing outlets when a viable partnership may improve profitability and increase our neighborhood presence. In 2014, these efforts helped to drive a 7% increase in food and bever- age operating profit. We expect to see this trend continue in 2015 as we recently completed six additional restaurant renovations, including a new waterside patio restaurant at the Ritz- carlton, marina del Rey. We systematically conduct detailed strategic reviews for each property on market pricing and segment mix to develop the appropriate mix of group and transient business and establish market share targets. In 2014, we experienced growth in both transient and group business, as an increase in group demand allowed our managers to increase transient rates by almost 5% and improve our overall revenue growth. at the same time, our business intelligence system is utilized by our asset managers to work with our operators to control costs and drive profit- ability by employing best practices. In 2014, these efforts were a significant driver of the strong bottom line growth for the company. H o t e l s b y b RaN D (as a percent of revenues) 3 3 3 3 3 marriott 3 3 Ritz-carlton 3 3 W, st. Regis 3 3 the Westin, Le meridien, 3 3 3 Marriott Ritz Carlton Fairmont W, St. Regis The Westin, Le Meridien, Sheraton Hyatt Hilton Novotel, ibis, Pullman Other/Independent sheraton 3 Hyatt 3 Hilton 3 novotel, ibis, pullman 3 Other/Independent 4 1 0 2 s t R O s e R & s L e t O H t s O H | 14 GRaND Hyatt WasHINGtoN (top left), tHe RItz-CaRltoN MaRINa Del Rey (above), and the sHeRatoN stoCkHolM Hotel, owned through a joint venture, (left) fLOrida timeless coastal resorts and chic city life make Florida a prime destination. palm trees and beaches are synonymous with travelers’ impressions of miami, a gateway city to the caribbean and south america and a melting pot of vibrant and dynamic cultures. and who among us can resist the lure of the ORLanDO WORLD centeR maRRIOtt, a business and vacation destination with over 450,000 square feet of meeting space and spacious new pool facilities featuring a slide tower and splash zone. What more can we offer? • orlando World center marriott • Harbor beach marriott Resort & spa • miami marriott biscayne bay • the Ritz-carlton, naples • the Ritz-carlton, amelia island • tampa airport marriott • the Ritz-carlton golf Resort, naples • yVe Hotel miami • Hilton singer island oceanfront Resort Rooms meeting space (Sq Ft) 2,003 450,000 650 600 450 446 298 295 242 222 100,000 20,000 42,000 48,000 22,000 16,000 1,000 6,000 t He R i tZ - caRl t o n , na p l e s mi a m i maR Ri o t t bi s c a y n e ba y t He R i tZ - caRl t o n , am e l i a is l a n d FinanCiaL ManaGEMEnT We have maintained our focus on disciplined financial management since our inception; methodically improving our balance sheet and credit standings with a view towards long-term, sustainable strength. We believe this strategy will result in a lower overall cost of capital, allow us to complete opportunistic investments and acquisitions, and will position us to manage potential declines in operations caused by the inherent volatility in the lodging industry. today, as we evaluate the ever-evolving landscape of the lodging industry, the resultant access to capital and financial strength is a key competitive advantage that positions us for external growth. Over the past five years, we have systematically decreased our weighted average interest rate by 140 basis points to 4.8%, decreased our cash interest by 44%, and cut our percentage of secured debt in half. We have increased our fixed charge coverage ratio by 320 basis points and decreased our leverage ratio as measured by debt-to-eBItDa by 240 basis points. currently, these financial metrics, as defined in our credit facility, are stronger than at any point since we split from marriott International in 1993. During 2014, we repaid approximately $760 million of debt and completed an amendment and restatement of our senior unsecured credit facility, which lowered our all-in pricing by 30 basis points on the revolver and 32.5 basis points on the term loan, and extended the maturity for both to 2019, including extensions (which are subject to meeting certain conditions). We have structured our debt profile to maintain a balanced maturity schedule. currently, no more than 22% of our debt is due in any year and we have minimized the number of assets that are encumbered by mortgage debt. approximately 90% of our debt consists of senior notes, exchangeable debentures and borrowings under our credit facility, none of which are collateralized by specific hotel properties and, equally important, 96% of our hotels (as measured by revenues) are unencumbered by mortgage debt. Our senior unsecured debt has been rated investment grade by moody’s Investor services and standard & poor’s Rating service. We believe this investment grade rating and lower leverage levels will deliver the most consistent access to capital, allowing us to continue to take advantage of investment opportunities, both large and small, that can provide value to both our company and our stockholders. as a result, we’re able, ready and willing to be opportunistic investors at any point in the lodging cycle. DeBt BaL ances (in millions) $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 4 1 0 2 s t R O s e R & s L e t O H t s O H | 18 2012 2013 2014 3 secured Debt Unsecured Debt 4.8% our weighted average interest rate at December 31, 2014, a 140 basis points decrease since 2010. $188 million 96% our cash interest expense for 2014, a decrease of over $200 million since 2007. of our hotels (as measured by revenue) are unencumbered by mortgage debt. sCottsDale MaRRIott at MCDoWell MoUNtaINs (top left), tHe WestIN seattle (above), and the sWIssÔtel CHICaGo (left) CORpORa TE RESpOnSibiLiTy corporate Responsibility (cR) is our strategic approach to managing the environmental, social and governance risks and opportunities for our business. cR is an important component of our asset management strategy, which increases the profitability of our properties and creates value for our company, investors, employees, stakeholders and communities. Our management team maintains a deep focus on delivering measurable results across three themes: 3 Responsible investment: Investing in proven sustainability practices that enhance the profitability and valuation of our assets. 3 environmental stewardship: monitoring and improving the resource efficiency and environmental footprint of our properties. 3 corporate citizenship: strengthening our local communities through financial support, community engagement and volunteer service. Our commitment to cR resides at the highest levels within our company. Host’s executive Vice president, Human Resources and managing Director, Global Development, Design and construction are executive champions of our cR program; and Host’s president & ceO and the nominating and corporate Governance committee of our Board of Directors are responsible for oversight of our cR strategy and program. Responsible inVestment through our Responsible Investment theme, we incorporate sustainability into our asset management approach. During the acquisition of new properties, we assess both sustainability opportunities and climate change related risks as part of our due diligence process. During the ownership of our properties, we invest in proven sustainability practices in our redevelopment and return on investment (ROI) projects that can enhance asset value while also improving environmental performance. In 2015, we plan to invest in eight high efficiency chiller plants at seven of our properties that are expected to generate significant annual energy savings. sHeRatoN NeW yoRk tIMes sQUaRe Hotel (top left): In 2014, we began to eliminate reliance on less efficient local utilities by installing central boiler plants at this hotel and the New york Marriott Marquis. as a result, we will reduce related operational costs and decrease our carbon emissions intensity by at least 20%. Hyatt ReGeNCy MaUI ResoRt & sPa (right): In 2014, this hotel achieved leeD® silver eboM certification and features innovative technologies and best-in-class sustainability practices such as a state- of-the-art guest room energy management system and equipment that recycles heat energy from the HvaC system to heat the resort pool and domestic water. the installation of an intelligent irrigation system combined with grey water use reduced landscape irrigation water by over 27%. 4 1 0 2 s t R O s e R & s L e t O H t s O H | 20 100+ 85% the number of sustainability projects we invested in to improve the environmental and financial performance of our properties. the percentage of our U.s. hotels that have a green building certification. the cer- tifications include one or more of the fol- lowing: tripadvisor® Greenleaders, Green key eco-Rating Program, Green Globes existing buildings, Green seal Hotels and lodging, leeD® and eNeRGy staR. $103,000+ the record-breaking fundraising total achieved by our 200+ employees to sup- port the Crohn’s and Colitis Foundation of america’s take steps Walk. Host received recognition as the top fundraising team in the country. More than 70 Host employees, friends and family participated in the walk. tHe Novotel and IbIs RIo De JaNeIRo PaRQUe olIMPICo Hotels feature roof-mounted solar thermal panels that supplement the hot water delivered to guestrooms, kitchens, and public areas. the systems are designed to reduce the environ- mental footprint while reducing energy expense. enViRonmental steW aRdsHip through our environmental stewardship theme, we seek to improve the environmen- tal footprint of our properties, and we have established goals to reduce energy use and carbon emissions by 12% and water use by 15% by 2017 across our portfolio. as part of our asset management approach, we work closely with our hotel managers to monitor environmental performance and support implementation of operational best prac- tices. In our redevelopment and ROI projects, we target specific environmental efficiency projects, equipment upgrades and replacements that reduce energy and water consumption and offer appropriate returns on investment. across our portfolio, we continue to pursue green building certification opportunities where appropriate and currently have three projects underway that are designed to achieve LeeD® certification. 160 seRvICe HoURs IN a CaMPUs CleaN -UP aND beaUtIFICatIoN leD by Host’s ePIC seRvICe teaM , 40 eMPloyees volUNteeReD PRoJeCt at tHe NatIoNal CeNteR FoR CHIlDReN & FaMIlIes FaCIlIty IN betHesD a, MaRylaND. coRpoRate citiZensHip through our corporate citizenship theme, Host is committed to being a responsible corporate citizen and to strengthening our local communities. We do this through financial support, com- munity engagement, volunteer service, and industry collaboration. Our approach to corporate citizenship is underpinned by our code of Business conduct and ethics and periodic engagement with key stakeholders to understand their cR priorities. Our corporate citizenship effort is driven in large part by the strong support of our employees. We continue to refine our charitable giving strategy to align our community and stakeholder engagement activities with our cR strategy and themes, including focusing on and expanding our strategic collaborations with select community organizations. One example is Habitat for Humanity where our employees volunteer to work on community build projects and we donate furniture, fixtures and equipment from hotel renovation projects to local Habitat for Humanity Restore® centers. 2013-14 peRFoRmance HigH ligHts We are proud of the cR accomplishments we achieved in 2013 and 2014 through the hard work and dedication of our cR team, the broader company and our hotel managers: 3 Responsible investment: In 2014, over 100 sustainability projects were implemented to improve the environmental and financial performance of our properties. 12% oUR Goal by 2017 Is to ReDUCe oUR eNeRGy Use aND GReeNHoUse Gas eMIssIoNs by 12%. 15% oUR Goal by 2017 Is to ReDUCe oUR WateR Use by 15%. 140+ IN 2014, We sUPPoRteD oveR 140 CHaRItable aND PHIlaNtHRoPIC oRGaNIzatIoNs aND DoNateD oveR 675 HoURs oF CoMMUNIty seRvICe. 4 1 0 2 s t R O s e R & s L e t O H t s O H | 22 leed ceRtiFication the Hyatt Regency Maui Resort & spa is the first resort in Hawaii to achieve leeD® silver eboM status and the first Host leeD® certified property. the redevelop- ment included many design and operational elements that enhance the property’s envi- ronmental performance, for example: • an estimated 6+ million gallons of water will be saved annually through the instal- lation of new reduced flow shower heads in all guest rooms; • Digital signage replaces print signage; • Motion-sensing air conditioning that turns off when lanai doors are open, or when guests leave the room — energy saving feature like this and others are expected to make the property 30% more energy effi- cient compared to similar resorts; and, • about 1,500 pounds of food waste per day are being diverted from landfill disposal through donations to a local pig farm. 3 environmental stewardship: We have made strong progress toward our 2017 goals: 2014 Recognition • energy/Greenhouse Gas (GHG) emissions: By the end of 2013, Host had reduced energy use and GHG emissions across its U.s. portfolio by 11% per square foot and available room (Goal is 12% by 2017). • Water: By the end of 2013, Host had reduced water use across its U.s. portfolio by 13.5% per occupied room (Goal is 15% by 2017). 3 corporate citizenship: In 2014, we supported over 140 charities and philanthropic organiza- tions and donated over 675 hours of community service. 2014 aWaRds and Recognition We are proud of the cR awards and recognition honors that we received in 2014: 3 cdp: Recognized as an s&p 500 climate change leader, achieving a position on the climate Disclosure Leadership Index and cDp’s Global “a List,” the climate performance Leadership Index. 3 global Real estate sustainability benchmark: named 2014 Global sector Leader for Hotels and designated as a “Green star” for outstanding management and implementation of key sustainability issues. 3 national association of Real estate investment trusts (naReit): Received naReIt’s 2014 Lodging/Resorts Leader in the Light award, recognizing Host as one of the ReIt industry’s leading com- panies in the area of sustainability. 3 tripadvisor: 82 of Host’s eligible U.s. properties have been recognized with a tripadvisor® GreenLeaders Badge. Visit the corporate Responsibility section on our website for more information on our program and progress on our three themes. IN 2014, Host oRGaNIzeD tWo CoMMUNIty bUIlD Days WItH HabItat FoR HUMaNIty MetRo MaRylaND , WHeRe eMPloyees aND exeCUtIves W oRkeD toGetHeR to CoMPlete CoNstRUCtIoN oN 19 aFFoRD able toWNHoMes IN tHe MaPle HIll t oWNHoMe C oMMUNIty. 4 1 0 2 s t R O s e R & s L e t O H t s O H | 23 selected Financial d ata Reconciliation of net income to naReit and adjusted funds fRom opeRations peR diluted shaRe (a) ( U N A U D I T E D, I N M I L L I O N s , E X C E P T P E R sH A R E A M O U N Ts ) NET INCOmE Less: Net income attributable to non-controlling interests NET INCOmE AVAIL ABLE TO COmmON STOCK hOLDERS Adjustments: gain on dispositions, net of taxes gain on property insurance settlement Amortization of deferred gains and other property transactions, net of taxes Depreciation and amortization Non-cash impairment loss Equity in (earnings) losses of affiliates pro rata FFO of equity investments FFO adjustment for non-controlling partnerships FFO adjustments for non-controlling interests of host Lp NAREIT funds from operations Adjustments to NAREIT FFO: Loss on debt extinguishment Acquisition costs Recognition of deferred gain on land condemnation Litigation (gain) loss Loss attributable to non-controlling interests Adjusted FFO Adjustments for dilutive securities (b): Assuming conversion of Exchangeable Senior Debentures Diluted NAREIT FFO (a) Diluted Adjusted FFO (a) Diluted weighted average shares outstanding – EpS Diluted weighted average shares outstanding – NAREIT FFO and Adjusted FFO NAREIT FFO pER DILUTED ShARE (a) ADJUSTED FFO pER DILUTED ShARE (a) Reconciliation of net income to eBitda and adjusted eBitda (a) YE A R E N D E D DE C EmB E R 31, 2014 2013 $ 747 (15) $ 325 (8) 20 12 $ 63 (2) 732 (232) (1) — 692 6 (26) 51 (9) (6) 1,207 4 3 — (61) — 317 (97) — — 703 1 17 26 (8) (8) 951 40 1 (11) 8 — 61 (48) (2) (4) 691 60 (2) 20 (7) (10) 759 35 10 — — (1) $1,153 $ 989 $ 803 27 $1,234 $1,180 786.8 786.8 $ 1.57 $ 1.50 26 $ 977 $1,015 747.9 777.4 $ 1.26 $ 1.31 31 $ 790 $ 834 719.6 760.0 $ 1.04 $ 1.10 YE A R E N D E D DE C EmB E R 31, 2014 2013 ( U N A U D I T E D, I N M I L L I O Ns ) NET INCOmE Interest expense Depreciation and amortization Income taxes Discontinued operations EBITDA gain on dispositions gain on property insurance settlement Acquisition costs Recognition of deferred gain on land condemnation Litigation (gain) loss Non-cash impairment loss Amortization of deferred gains and other property transactions Equity investment adjustments: Equity in (earnings) losses of affiliates pro rata Adjusted EBITDA of equity investments Consolidated partnership adjustments: 4 1 0 2 S T R O S E R & S L E T O h T S O h | 24 $ 747 214 695 14 — 1,670 (233) (1) 2 — (61) 6 — (26) 68 $ 325 304 696 21 15 1,361 (98) — 1 (11) 8 1 — 17 48 (21) 20 12 $ 63 373 662 31 32 1,161 (48) (2) 7 — — 60 (4) (2) 34 (16) pro rata Adjusted EBITDA attributable to non-controlling partners in other consolidated partnerships (23) ADJUSTED EBITDA(a) $1,402 $1,306 $1,190 (a) For further discussion of why we believe NAREIT FFO and Adjusted FFO per diluted share and Adjusted EBITDA are useful supplemental measures of our performance and the limitations on their use, see our Annual Report on Form 10-K included in our mailing to stockholders. (b) NAREIT FFO and Adjusted FFO per diluted share are adjusted for the effects of dilutive securities. Dilutive securities may include shares granted under comprehensive stock plans, preferred Op Units held by non-controlling partners, exchangeable debt securities and other non-controlling interests that have the option to convert their limited partnership interest to common Op Units. No effect is shown for securities if they are anti-dilutive. Richard E. Marriott Chairman of the Board W. Edward Walter President, Chief Executive Officer Mary L. Baglivo 2 Vice President for Global Marketing and Chief Marketing Officer, Northwestern University W. Edward Walter President, Chief Executive Officer Elizabeth A. Abdoo Executive Vice President, General Counsel and secretary James F. Risoleo Executive Vice President & Managing Director, Europe Peter T. Meyer Managing Director, Asia Brian G. Macnamara senior Vice President, Corporate Controller CORpORATE hEADqUARTERS host hotels & Resorts, Inc. 6903 Rockledge Drive, Suite 1500 Bethesda, mD 20817 240/744-1000 WEBSITE Visit the company’s website at: www.hosthotels.com STOCK ExChANgE LISTINg New York Stock Exchange Ticker Symbol: hST STOCK hOLDERS OF RECORD 21,066 at February 20, 2015 DI R E C TO R S Sheila C. Bair 1 senior Advisor, Pew Charitable Trusts Terence C. Golden Chairman, Bailey Capital Corporation Ann McLaughlin Korologos 2, 3 John B. Morse, Jr. 1, 3 m A N A gEmE N T TE Am Gregory J. Larson Executive Vice President, Chief Financial Officer Minaz B. Abji Executive Vice President, Asset Management Gerard E. Haberman Managing Director, Global Development Design and Construction Jeffrey S. Clark senior Vice President, Global Tax and Foreign JV Accounting Sukhvinder Singh senior Vice President, Information Technology C O RpO R AT E I N F O RmAT I O N Walter C. Rakowich 1, 3 Gordon H. Smith 2 President, Chief Executive Officer National Association of Broadcasters 1 Audit Committee 2 Compensation Policy Committee 3 Nominating and Corporate Governance Committee Struan B. Robertson Executive Vice President, Chief Investment Officer Joanne G. Hamilton Executive Vice President, Human Resources Timothy A. Marvin Managing Director, Americas Elisa C. Gois senior Vice President, Global Business strategy & Analytics Nathan S. Tyrrell senior Vice President, Treasurer RE gISTRAR AND TRANSFER AgENT If you have any questions concerning transfer pro ce dures or other stock account matters, please contact the transfer agent at the following address: Computershare Trust Company, N.A. Shareholder Relations p.O. BOx 30170 College Station, Tx 77842-3170 866/367-6351 COmmON STOCK ST O C K p R I C E h Ig h L O W DI V I D E N D S DE C L A R E D p E R S hA R E $17.73 18.77 18.70 19.44 $20.47 22.77 23.09 24.33 $16.14 16.02 16.41 17.09 $18.00 20.05 21.20 20.23 $0.10 0.11 0.12 0.13 $0.14 0.15 0.20 0.26 2013 1st quarter 2nd quarter 3rd quarter 4th quarter 2014 1st quarter 2nd quarter 3rd quarter 4th quarter INDEpENDENT RE gISTERED pUBLIC ACCOUNTANTS Kpmg LLp, mcLean, VA ANNUAL mEETINg The 2015 annual meeting of stockholders will be held at 11 a.m., may 14, 2015, at hyatt Regency Reston, 1800 presidents Street, Reston, Virginia 20190. design: vivo design inc., printing: westland printers, inc. 4 1 0 2 S T R O S E R & S L E T O h T S O h | 6 36% 492 83 PARIS Beria corum re quis sequi cus ese voluptaquo officium quas volo et utate exceria prenima ximinimet imusame officte moluptur? Qui consequis estio blam aut aut renime et voloreceaqui optaquatur? Quidipi delest, torum nostiore la dolo CHICAGO Beria corum re quis sequi cus ese voluptaquo officium quas volo et utate exceria prenima ximinimet imusame officte moluptur? Qui consequis estio blam aut aut renime et voloreceaqui optaquatur? BE ThE S D A , m A R Y L A N D 20 817 6903 RO C K L E DgE DR I V E , SU I T E 150 0 LOS ANGELES Beria corum re quis sequi cus ese voluptaquo officium quas volo et utate exceria prenima ximinimet imusame officte moluptur? Qui consequis estio blam aut aut renime et voloreceaqui optaquatur? Quidipi delest, torum nostiore 

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