Host Hotels & Resorts
Annual Report 2015

Plain-text annual report

Ho s t Hot els & Reso R ts 2015 ANNUA l R e P o Rt Financial HigHligHts (unaudited, in millions, except per share and hotel statistics) 2015 2014 2013 Operating Data Revenues Operating profit Net income Diluted Earnings per Common Share Earnings from continuing operations Diluted earnings Diluted weighted average shares outstanding Balance Sheet Data Total assets Total debt Total equity Other Data Adjusted EBITDA(1) NAREIT funds from operations per diluted share (1) Adjusted funds from operations per diluted share (1) Stock price on December 31st Comparable Hotel Data(2) Number of properties Number of rooms Average room rate (3) Average occupancy percentage RevPAR (3) $ 5,387 650 571 $ 0.74 $ 0.74 752.9 $ 11,784 4,017 7,082 $ 1,409 1.49 1.54 15.34 96 52,944 $ 220.11 77.4% $ 170.34 $ 5,354 $ 5,166 710 747 512 325 $ 0.96 $ 0.27 $ 0.96 $ 0.42 786.8 747.9 $ 12,172 $ 12,772 3,957 7,368 4,717 7,262 $ 1,402 $ 1,306 1.57 1.50 23.77 1.26 1.31 19.44 96 52,944 $ 213.10 77.0% $ 164.15 (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 non 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 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 2014 results using the same exchange rates that were effective for the comparable periods in 2015, 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 stockholders and together with this 2015 Annual Report forms our annual report to stockholders within the meaning of SEC rules. O n t h e C O v e r : Acquired in June 2015, the PhOeniCian , a 643-room AAA-Five Diamond Luxury Collection Resort, ideally located in one of the premier resort markets in the Southwest. This iconic resort boasts a scenic 300-acre setting at the base of Camelback Mountain with outstanding views of the local natural landmark. Premium brands & OPeratOrs Prime LOcatiOns & markets With investments in 122 PrOPerties thrOughOut the united states and in 15 cOuntries across the globe, we have an unmatched portfolio of quality assets. We have assembled a well- balanced portfolio within select major markets that benefit from strong demand generators that appeal to multiple customer segments, achieve premium rates, and have relatively higher barriers to entry. While we will continually evaluate and refine the portfolio, our primary focus is on the following property types: 3 icOnic resOrts 3 irrePL a ceabLe cOnventiOn destinatiOn PrOPerties 3 signature cit y-center hOteLs 3 Prime suburban and advantaged airPOrt hOteLs We strive for diversified exposure within multiple brands, focused asset classes, and favorable location types. Our hotels primarily are operated under brand names that are among the most respected and widely recognized in the lodging industry. Within these diversified brands, we focus predominately on the upper-upscale and luxury segments, as we believe they have a broad appeal for both the individual and group leisure and business customer. We believe the combination of a superior portfolio, disciplined capital allocation, strong asset management and powerful and flexible capital structure put us in a position to achieve our goals and to drive stockholder value. 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 responsi- bility or liability for any information contained in this annual report. t H e r i t z - c a r L t o n , n a p L e S F a i r m o n t K e a L a n i , m a u i t H e W e S t i n K i e r L a n d r e S o r t & S p a H o t e L a r t S B a r c e L o n a ( J o i n t V e n t u r e H o t e L ) Fort LauderdaLe marriott HarBor BeacH reSort B o S t o n m a r r i o t t c o p L e y p L a c e m a r r i o t t m a r q u i S S a n d i e G o m a r i n a S a n F r a n c i S c o m a r r i o t t m a r q u i S G r a n d H y a t t W a S H i n G t o n S H e r a t o n B o S t o n H o t e L t H e W e S t i n n e W y o r K G r a n d c e n t r a L t H e W e S t i n c H i c a G o r i V e r n o r t H r e n a i S S a n c e p a r i S V e n d o m e H o t e L ( J o i n t V e n t u r e H o t e L ) G r a n d H y a t t a t L a n t a i n B u c K H e a d J W m a r r i o t t r i o d e J a n e i r o t H e W e S t i n W a L t H a m B o S t o n n e W p o r t B e a c H m a r r i o t t H o t e L & S p a tHe WeStin SoutH coaSt pL aza, coSta meSa H y a t t r e G e n c y r e S t o n H y a t t r e G e n c y S a n F r a n c i S c o a i r p o r t IconIc ResoRts IRRePl aceable conventIon destInatIon PRoPeRtIes sIgnatuRe cIt y-centeR Hotels PRIme subuRban & advantaged aIRPoRt Hotels To our STock holderS 5 1 0 2 s t r O s e r & s L e t O h t s O h | 2 t o t a l R e t uR n t o s t o c k H o l d e R s (in millions) $1,500 $1,200 $900 $600 $300 $0 2015 2014 2013 3 stOck buyback 3 dividends Paid W. edWard WaLter President and Chief Executive Office richard e. marriOtt Chairman of the Board Host Hotels & Resorts is the premier lodging real estate investment company with a com- mitment to a long-term strategic focus. We have thoughtfully assembled and refined a geographically-diverse portfolio of high-quality assets. We have created stockholder value through disciplined allocation of capital and intelligent asset management oversight. We have built on the bedrock of a powerful and flexible capital structure to enable us to be opportunistic at any point throughout the lodging cycle. We are confident in the future of our business and from the boardroom to the back office we are focused on delivering real H o t e l s b y P R o P e R t y t y P e (as a percent of 2015 revenues) Reflecting on our performance in 2015, we had a very active year and executed on a number of initiatives to capitalize on value enhancing opportunities to better position Host value to our stockholders. for continued growth and success. 3 We invested over $1 billion in 2015, including the acquisition of the iconic, AAA-Five Diamond luxury resort, the Phoenician Hotel. We also completed four comprehensive redevelopment and rebranding projects at The Camby in Phoenix, The Logan in Philadelphia, The Axiom in San Francisco and the Houston Airport Marriott at George Bush Intercontinental, while also completing the renovations of 8,000 guestrooms across the portfolio. 3 We sold over $1 billion in hotels, including properties owned in our European and Asia/Pacific joint ventures, further sharpening the portfolio’s focus on major markets. 3 We returned over $1.3 billion of capital to our stockholders through $650 million of dividends and $675 million of stock repurchases that were completed at a significant discount to the estimated net asset value of our assets. 3 icOnic resOrts 15% 3 irrePLaceabLe cOnventiOn destinatiOn hOteLs 38% 3 signature city-center hOteLs 27% 3 Prime suburban & advantaged airPOrt hOteLs 11% 3 Other 9% 3 We repaid or refinanced more than $1.4 billion in debt, reducing our weighted average interest rate by 110 basis points and extending our average debt maturity to six years, all of which further bolstered our industry-leading balance sheet. We delivered solid improvements in operating performance in 2015 as RevPAR at our comparable hotels increased 3.8% (on a constant US Dollar basis). Despite being impacted by significant renovation activity during the first half of the year and adverse economic headwinds in the fourth quarter, we recorded the highest comparable RevPAR in our his- tory, $170.34, driven by occupancy levels of 77.4% and average rates of over $220, far exceeding the industry average, and helping to deliver Adjusted EBITDA of over $1.4 billion and net income of $571 million. Adjusted FFO, which directly reflects our balance sheet initiatives, including our efforts to reduce our annual interest payments and return capital to stockholders, improved to $1.54 per share for the year, while diluted earnings per share was $0.74. For 2016, we expect to continue to execute on our strategic initiatives to drive stockholder value. We expect to complete our exit from our Asia/Pacific markets, thereby simplifying our portfolio and streamlining our focus on North American and European gateway markets. We will continue to focus on creating and mining value from our existing portfolio through capital investments and value enhancement initiatives. We will continue to leverage our experience as the owner of one of the largest and most diverse lodging portfolios to seek to differentiate our assets within their competitive markets, driving improvements in operating performance and enhancing the value of the real estate. While we recognize the volatility of the lodging industry, particularly during the uncertain global macro-economic atmosphere, we intend to continue to deliver value to our stockholders through earnings growth, a meaningful dividend and the continued execution of our stock repurchase program. We are confident that our combination of superior assets, financial strength, and management expertise will continue to create an attractive opportunity for investors. We appreciate your support and will continue to work to provide superior returns to our stockholders. richard e. marriOtt Chairman of the Board march 17, 2016 W. edWard WaLter President and Chief Executive Officer | $1.3+ | billion Returned to stockholders | 38% | Increase in cash dividends paid in 2015 compared to 2014 | 77.4% | Highest comparable hotel occupancy since 2000 | $170 | Record level comparable hotel RevPaR 5 1 0 2 s t r O s e r & s L e t O h t s O h | 3 ic Onic resOrts Our icOnic resOrt prOperties are l Ocated in prime lOcatiOns and feature timeless architecture with high-end amenities. curated by premier Operat Ors, these prOperties are in markets with strOng airlift and limited supply grO wth. Luxury resorts rooMs Meeting space (Sq Ft) the phoenician, a Luxury collection resort Hotel arts Barcelona* Fairmont Kea Lani, Maui the ritz-carlton, naples the ritz-carlton, amelia island the ritz-carlton golf resort, naples upper-upscaLe resorts Hyatt regency Maui resort and spa the Westin Kierland resort & spa 643 483 450 450 446 295 806 732 Fort Lauderdale Marriott Harbor Beach resort & spa 650 coronado island Marriott resort & spa 300 *Hotel owned through joint venture. 165,000 9,800 36,000 42,000 48,000 16,500 100,000 200,000 67,000 27,000 ri gH t : t He p Ho e n i c i a n , a L u x u r y c oL Le c t i o n re s o r t t He ri t z - ca rL t o n , a MeLi a isL a n d c o r o n a d o isL a n d M a r r i o t t re s o r t & spa | 10 | signature HoteLs | 5,255 | rooMs | 108 | HoLes oF goLF | 711,300 | sF oF Meeting space Superior portfolio Our goal is to be the preeminent owner of high-quality lodging real estate at the epicenter of dynamic, growing markets. Our strategy primarily focuses on upscale, upper-upscale and luxury properties, in locations which we believe have strong demand generators that appeal to multiple customer segments and achieve premium rates. We have invested in 122 high-quality assets predominantly within the top markets and gateway cities in North America and Europe, as well as other key international locations. Characterizing our portfolio by location, brand, operator, or lodging segment does not fully capture the essence of what we believe is the best collection of premier assets in the industry. Our hotels are best described as follows: 3 Iconic Resorts – well-located luxury assets in markets with strong airlift and limited supply growth, which feature world-class amenities and premier operators; 3 Irreplaceable Convention Destination Hotels – group oriented assets in urban/ resort markets, which feature extensive, state-of-the-art meeting facilities; 3 Signature City-Center Hotels – established properties in urban and coastal markets with high barriers to entry and multiple demand drivers for both business and leisure travelers; and 3 Prime Suburban and Advantaged Airport Hotels – high quality assets that either are market leaders in prime suburban commercial locations, connected to airport terminals, or conveniently located on airport grounds. Our portfolio, both here in the United States and abroad, is located in major markets that have historically outperformed the lodging industry in terms of real RevPAR growth. Whether in Los Angeles, San Francisco, New York, Washington, D.C., London, Paris or Berlin, we believe this strategy of combining quality assets with superior locations in recognized global centers of commerce and tourism pro- vides opportunities to achieve room rate and occupancy premiums in excess of our competitors. During 2015, we acquired another iconic asset with the purchase of The Phoenician in Scottsdale, Arizona. Located in a premium resort market with nine food and beverage outlets and approximately 83,500 square feet of indoor meeting space, The Phoenician is one of only a handful of iconic luxury destination resorts in the country that cater to both high-end transient and group customers. L eFt : ax i oM H o t eL 5 1 0 2 s t r O s e r & s l e t O h t s O h | 7 sW i s s Ô t eL cHi c a g o ax i oM H o t eL t He W e s t i n p aL a c e , M a d r i d ( J o i n t V e n t u r e H o t eL ) H o t e l s b y R e g i o n (as a percent of 2015 revenues) 3 3 3 3 3 northeast 3 3 mid-atlantic/southeast 3 3 central 3 3 west 3 3 Other domestic 3 3 international 3 Other Domestic Central International Sheraton Northeast Hilton / Embassy Suites West Novotel, ibis, Pullman Other/Independent Mid-Atlantic / Southeast | 15 | signature assets | 49% | group Mix | 19,499 | rooMs | 1.7 mIllIon | sF oF Meeting space irrepl aceable cOnventiOn destinatiOns Our irreplaceable, grOup- Oriented destinatiOn hO tels are situated in urban and resOrt markets and feature extensive and high-caliber meeting facilities, many cOnnected tO prOminent cOnventiOn centers. urBan core group Focused HoteLs new york Marriott Marquis sheraton new york times square Hotel Manchester grand Hyatt san diego san Francisco Marriott Marquis Marriott Marquis san diego Marina new orleans Marriott sheraton Boston Hotel Boston Marriott copley place sheraton san diego Hotel & Marina san antonio Marriott rivercenter grand Hyatt Washington the Westin seattle Hyatt regency Washington on capitol Hill destination group Focused HoteLs orlando World center Marriott JW Marriott desert springs resort & spa rooMs Meeting space (Sq Ft) 1,966 1,780 1,628 1,500 1,360 1,333 1,220 1,144 1,053 1,001 897 891 838 2,004 884 130,300 60,000 125,000 117,000 80,000 80,000 70,000 70,000 120,000 100,000 42,000 55,000 38,000 399,200 232,700 L eF t : orL a n d o W o rLd ce n t e r M a r r i o t t Hyat t regency WasHington on capitoL HiLL t He W e s t i n se a t tLe | $1+billion | invested in new assets or capital improvements in 2015 | $1+billion | Hotels sold, including joint venture hotels | $1+billion | over $1b value enhancement / redevelopment and Roi projects since 2010 R e d e v e l o p m e n t / Ro i a n d va lu e enHa n c e m e n t p Roj e c t s (in millions) DiSciplineD capital allocation Guided by a strategic long-term view, our goal is to allocate and recycle capital to earn returns that exceed our risk-adjusted cost of capital in locations that we expect to outperform in the long term, creating the greatest value and strong returns on invest- ments for our stockholders. We seek to earn these returns by creating and mining value from our existing portfolio through capital investments and value enhancement initia- tives and appropriately matching each hotel within its specific market with the best operator and brand to optimize operating performance. In line with this approach, we invested more than $1 billion in new assets and capital improvements in 2015. We acquired The Phoenician in Scottsdale, Arizona for $400 million. We invested $275 million in redevelopment, return on investment, and acquisition capital expen- ditures to increase cash flow and improve profitability by capitalizing on changing market conditions and the favorable locations of our properties. During 2015, these projects included our strategic asset repositioning initiatives for four properties: The Logan, The Camby Hotel, The Axiom Hotel and the Houston Airport Marriott at George Bush Intercontinental. Each of these hotels has been completely repositioned and three will be operated by a new management company. Additionally, we invested $388 million in renewal and replacement capital expenditures to maintain the quality and competitiveness of our hotel properties and enhance customer satisfaction. We also negotiated new franchise or management agreements at a total of six properties during the year. Additionally, we look to refine our portfolio through the sale of non-core assets $275 where we believe the potential for growth is constrained or properties with significant capital expenditure requirements that we do not believe would generate a return on the investment. During the last 14 months, we successfully completed the sale of 20 $175 $165 assets, including assets held in joint ventures, for a total of $1 billion of asset sales. Proceeds from the sales have been utilized as a source of funds for our stock repurchase program, capital expenditure programs and other corporate objectives. 5 1 0 2 s t r O s e r & s l e t O h t s O h | 10 2013 2014 2015 ri gHt : t He L o g a n H o u s t o n ai r p o r t M a r r i o t t a t ge o r g e B u sH in t e r c o n t i n e n t aL t He W e s t i n in d i a n a p oLi s | 48 | signature assets | 20,117 | rooMs | 896,028 | sF oF Meeting space $/ | $219 | aVerage d aiLy rate For consoLidated HoteLs signature cit y-center hO tels Our signature assets in cities with high barriers tO entry, these hOtels are lOcated in prime urban and cOastal lOcatiOns and bOast features that are extremely desirable fOr bO th business and leisure travelers. atLanta the Westin Buckhead atlanta grand Hyatt atlanta in Buckhead the ritz-carlton, Buckhead JW Marriott atlanta Buckhead atlanta Marriott suites Midtown Boston Hyatt regency cambridge, overlooking Boston cHicago the Westin chicago river north swissôtel chicago embassy suites by Hilton chicago downtown Magnificent Mile courtyard chicago downtown/river north denVer the Westin denver downtown HaWaii Hyatt place Waikiki Beach Houston the st. regis Houston JW Marriott Houston MiaMi Miami Marriott Biscayne Bay neW yorK W new york - union square W new york the Westin new york grand central new york Marriott downtown pHiLadeLpHia the Logan pHoenix the camby Hotel san Francisco axiom Hotel san Francisco Marriott Fisherman’s Wharf seattLe W seattle WasHington, d.c. JW Marriott Washington dc the Westin georgetown, Washington d.c. Washington Marriott at Metro center the ritz-carlton, tysons corner residence inn arlington pentagon city Key Bridge Marriott otHer u.s. cities the Westin cincinnati the Westin indianapolis Minneapolis Marriott city center san antonio Marriott riverwalk Hyatt place nashville downtown* sheraton Memphis downtown internationaL JW Marriott Hotel rio de Janeiro JW Marriott Hotel Mexico city calgary Marriott downtown toronto Marriott downtown eaton centre Hotel Hilton Melbourne south Wharf sheraton Berlin grand Hotel esplanade* Le Méridien piccadilly* renaissance paris Vendôme Hotel* the Westin palace, Madrid* renaissance amsterdam Hotel* Brussels Marriott Hotel grand place* sheraton stockholm Hotel* *Hotels owned through joint ventures L eFt : L e M é r i d i e n pi c c a d iL L y ( J o i n t V e n t u r e H o t eL ) M i aMi M a r r i o t t B i s c a y n e B a y t He W e s t i n de nVe r do W n t o W n Strong aSSet ManageMent We believe our experienced team creates value through careful application of intelligent asset management and capital investment decision making. We are in a unique position to work with our managers to drive operating performance and implement value-added real estate decisions. Our asset managers are supported by a feasibility team that provides independent underwriting of ROI and value- enhancement projects, as well as dedicated resources around business intelligence, revenue management and restaurant and bar operations. We also carefully evaluate and monitor our property agreements, including our management and franchise agreements, in an effort to obtain flexibility and drive overall value. At the brand and manager levels, our industry leading proprietary business intelligence system drives better results through brand benchmarking, allowing executive focus on underperforming assets and the ability to ensure brand-level programs, technology investment and resource deployment are beneficial to Host. Our frequent evaluations of brands and operators ensure optimum allocation of sales resources and allow us to guide digital and e-commerce strategies that improve RevPAR performance and reduce costs. Our concentrated market ownership provides greater insights and an intuitive feel for local demand generators that focus our operators on increasing market share of group business, driving stronger group revenues, higher transient rates, and incremental banquet revenue. At the individual asset-level, our asset managers establish and monitor key performance indicators annually, while conducting deep dives on operations to identify and implement cost savings. We leverage external consultants, skilled in refining and evaluating operating procedures to find new ways to reduce cost and drive profitability, including reviewing hotel and market pricing, segment mix, distribution, and merchandising. We look to improve overall banquet and catering revenue at the individual asset level through improved function space management, better group contribution, and advanced analytics. As a result of these efforts, food and beverage profit at our comparable hotels increased over 10% during the year. Ultimately, our goal is to differentiate our assets within their competitive market, drive operating performance and enhance the value of the real estate. L eFt : t He caM B y H o t eL 5 1 0 2 s t r O s e r & s l e t O h t s O h | 15 sa n F r a n c i s c o M a r r i o t t F i sHe rMa n ’ s W Ha rF M a r r i o t t M a r q u i s sa n di e g o M a r i n a a n d M a n cHe s t e r gr a n d H y a t t sa n di e g o Hy a t t pL a c e n a sH ViL Le d o W n t o W n ( J o i n t V e n t u r e H o t eL ) H o t e l s b y b Ra n d (as a percent of 2015 revenues) Ritz Carlton W, St. Regis, Luxury Collection The Westin, Le Meridien Sheraton Hyatt Hilton / Embassy Suites Fairmont Novotel, ibis, Pullman Other/Independent Marriott 3 3 3 3 marriott, Jw marriott, 3 autograph collection, 3 residence inn 3 3 ritz-carlton 3 3 w, the luxury collection, 3 3 3 the westin, le meridien 3 3 sheraton st. regis 3 grand hyatt, hyatt place, hyatt regency 3 hilton, curio, embassy suites 3 fairmont, swissôtel 3 novotel, ibis, pullman 3 Other/independent prime suburban & advantaged airpOrt hO tels when city dwellers and travelers lOOk fOr cOnvenience and relaxatiOn, they visit One Of these hO tels. these prOperties are prO ven tO be market leaders in prime suburban lOcatiOns Or are strategically l Ocated at advantaged airpOrt terminals Or near airpOrt grOunds. priMe suBurBan santa clara Marriott newport Beach Marriott Hotel & spa Hyatt regency reston Houston Marriott at the texas Medical center the Westin south coast plaza, costa Mesa Marina del rey Marriott san ramon Marriott the Westin Waltham Boston atlanta Marriott perimeter center renaissance paris La defense Hotel* the ritz-carlton, Marina del rey scottsdale Marriott at Mcdowell Mountains newport Beach Marriott Bayview scottsdale Marriott suites old town adVantaged airport Hyatt regency san Francisco airport newark Liberty international airport Marriott Houston airport Marriott at george Bush intercontinental philadelphia airport Marriott tampa airport Marriott *Hotel owned through joint venture. rooMs Meeting space (Sq Ft) 759 532 518 394 390 370 368 351 341 327 304 266 254 243 789 591 573 419 298 27,000 25,000 32,000 8,500 35,000 18,000 16,500 20,500 16,800 7,500 30,000 14,000 3,800 8,700 54,000 27,400 30,000 17,700 25,300 ri gHt : t He ri t z - ca rL t o n , M a r i n a d eL re y sc o t t s d aLe M a r r i o t t a t M cdo W eL L M o u n t a i n s H o u s t o n ai r p o r t M a r r i o t t a t ge o r g e B u sH in t e r c o n t i n e n t aL | 19 | signature assets | 8,087 | rooMs | 417,700 | sF oF Meeting space %/ | 5.2% | increase in reVpar For consoLidated HoteLs powerful anD flexible capital Structure We have remained focused on maintaining a flexible capital structure that allows us to execute our strategy throughout the lodging cycle. We believe that a strong balance sheet is a key competitive advantage that affords us a lower cost of capital and positions us for external growth. As such, we remain committed to maintaining an investment grade rating and have structured our debt profile to maintain financial flexibility and a balanced maturity schedule. During the year, we leveraged favorable market conditions and our investment grade rating to repay or refinance $1.4 billion of debt. We decreased our weighted average interest rate by 110 basis points, to 3.7%, and extended our weighted average debt maturity by 0.8 years, to 6.0 years, with no more than 21% of our outstanding debt due in any given year, further strengthening one of the best balance sheets in the entire REIT space. We have strategically maximized the flexibility of our balance sheet by minimizing the number of properties with secured debt, as only 6 of our hotels are encumbered by mortgages, and more than 90% of our debt consists of senior notes and borrow- ings under our credit facility. At year end, we had a debt balance of $4 billion and approximately $702 million of available capacity under the revolver portion of our credit facility. Our balance sheet continues to be one of the strongest in the industry, and achieves our overall balance sheet goal of a 2.5x to 3.0x leverage ratio. Since 2010, we have increased our fixed charge coverage ratio, as defined in our credit facility, by 3.5 times, making it the strongest in our history. Our strong financial credit statistics reduce our overall cost of capital and earnings volatility and increase access to capital, thereby allowing us to take advantage of investment opportunities so we can continue to focus on providing stockholder value. | 3.7% | Weighted average interest rate at 12/31/15. a 250 bps decrease since 2010 | $24 | million decrease in annualized interest expense due to debt repayments and refinancing in 2015 | $1.4 | billion debt repaid or refinanced in 2015 de b t ba l a n c e s (in millions) $5,000 $4,000 $3,000 $2,000 $1,000 $0 5 1 0 2 s t r O s e r & s l e t O h t s O h | 19 L eFt : H y a t t p L a c e W a iK iK i B e a cH s He r at o n sa n di e g o H o t eL & M a r i n a W neW y o rK – un i o n sq u a r e 2015 2014 2013 3 secured debt 3 unsecured debt reSponSible corporate citizen Corporate Responsibility is our strategic approach to managing the environmental, social and governance (ESG) impacts for our business. We are committed to enhancing the value and profitability of our hotels and driving investor returns through sustainable business practices. stRategy and commitments Our strategy focuses on three themes: 3 Responsible Investment: We invest in proven sustainability practices that we believe enhance the profitability and valuation of our assets. 3 Environmental Stewardship: We establish measurable goals and actively monitor progress toward reducing the environmental footprint of our proper- ties, including a reduction of energy consumption, greenhouse gas emissions and water usage. 3 Corporate Citizenship: We strengthen our local communities through direct financial support, community engagement and volunteer service. We have developed policies and procedures for corporate responsibility that cover a wide array of ESG issues. They help guide our development and value enhancement projects, including how we engage with our suppliers, employees, third-party management companies, contractors and communities. Our execu- tion of this strategy is carefully monitored at the highest levels of our company, including our President and Chief Executive Officer, the Nominating and Corporate Governance Committee of our Board of Directors and members of senior management. 5 1 0 2 s t r O s e r & s l e t O h t s O h | 20 ri gHt : F a i rMo n t K e a L a n i , M a u i Harnessing tHe poWer oF tHe sun in 2015, we brought 1.2 megawatts of clean, renewable power on-line at two properties and had another project under construction, totaling 1.7 megawatts. this represents sufficient energy to power over 350 average-sized u.s. homes. the Hyatt regency Maui resort and spa boasts one of the largest rooftop solar photovoltaic arrays on maui. the solar panels at the recently acquired tHe pHoenician, a Luxury coLLection resort were also designed to shade vehicles from the harsh desert sun by being installed atop parking structures. When complete in 2016, the FairMont Kea Lani’s system will generate over 10% of the property’s total annual electrical usage. the solar thermal panels at the Hyatt Ka’anapaLi BeacH, a Hyatt residence cLuB supplement an estimated 15% of the property’s domestic hot water. H y a t t K a ’ a n a p aLi B e a cH , a H y a t t re s i d e n c e c L uB H y a t t re g e n c y M a u i re s o r t a n d sp a H y a t t K a ’ a n a p aLi B e a cH , a H y a t t re s i d e n c e c L uB | 150+ | number of sustainability projects we invested in to improve the environmental and financial performance of our properties | 84% | Percentage of our u.s. hotels that have a green building certification including leed®, eneRgy staR, tripadvisor® greenleaders, green key eco-Rating Program or green seal Hotels and lodging | $114+ | Thousand Raised for st. jude children’s Research Hospital 5 1 0 2 s t r O s e r & s L e t O h t s O h | 22 2015 RecognItIon mIlestones and PeRFoRmance HIgHlIgHts aWaRds, RecognItIons and ceRtIFIcatIons Responsible Investment 3 Invested in over 150 sustainability projects to improve the environmental and financial perfor- mance of our properties, including our first renewable energy projects. 3 Established long-term capital investment plans to improve efficiency and conserve natural resources through the implementation of energy-efficient, water-efficient and low carbon technologies. Environmental Stewardship 3 CDP: Recognized as an S&P 500 climate change leader, achieving a position on the 2015 Climate Disclosure Leadership Index and among the 5% of respondents included on CDP’s 2015 Global 2015 CLIMATE “A” List. 3 Global Real Estate Sustainability Benchmark: Named 2015 Global and North American Regional Sector Leader for top performance within the hotels sector 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 2015 Lodging/Resorts Leader in the Light award, as one of the REIT industry’s leading com- 3 Reduced greenhouse gas emissions by 18.2%, surpassing our 2017 goal of a 12% reduction. panies in the area of sustainability. 3 Achieved 14.7% reduction in water use per occupied room, nearly reaching our 2017 goal of a 3 TripAdvisor®: 96 of Host’s eligible properties have been recognized with a TripAdvisor 15% reduction from 2008 levels. GreenLeaders Badge. 3 Diverted more than 560 tons of waste from landfill as part of our construction and renovation projects. Corporate Citizenship 3 Volunteered more than 440 hours of community service (across six company-organized service events). outlook Our 2015 achievements were made possible through the dedication of our employees and in close collaboration with the third-party management companies responsible for the daily operations at our hotels. In 2016, we will continue to identify, validate and execute on viable projects and track our progress against our three themes, while developing new goals for future years that build on 3 Contributed to over 160 charities and programs to support local communities and address our past success. targeted issues, including public health and youth empowerment. Through engagement with key stakeholders, we continue to monitor critical issues and oppor- Sus tainable Rea l Est ate P ractices tunities related to climate change, water and sustainable development that impact the lodging and real estate industry. Visit the Corporate Responsibility section on our website for more information. 5 1 0 2 s t r O s e r & s L e t O h t s O h | 23 SourcinG SuStainaBLy We actively engage with our network of over 300 design, construction and renovation suppliers and develop strategic relationships that foster innovative and environmentally responsible business practices, which include the use of recycled, local, low volatile organic compound and third-party certified materials for our construction and renovation projects. We also partner with project managers and designers to support our sustainable sourcing objectives. the axiom HoteLtm, designed to achieve leed silver certification, offers sustainable features such as a high efficiency Hvac system with integrated energy management, led lighting, and is conveniently located near public transportation. at tHe camBy HoteL, there are filtered ice and water stations at the club lounge, spa and kitchen for banquets. unitinG to Support our community our employees ignited their collective passion and character through our 2015 fundraising activities and community service projects. We were recognized in 2015 as a top fundraising team in Washington, d.c. for the St. Jude WaLK to end cHiLdHood cancer, raising over $114,000 for St. Jude cHiLdren’S reSearcH HoSpitaL®. our employees volunteered over 240 hours to teach financial literacy to local students in collaboration with junior achievement. they also assembled dog toys and privacy curtains at the WaSHinGton Humane Society to supplement a donation of over 250 pet-related items collected for the shelter animals. a x i o m H o t e L t H e c a m B y H o t e L J u n i o r a c H i e V e m e n t Wa S H i n G t o n H u m a n e S o c i e t y Selected Financial d ata Reconciliation of Net income to NAREIT and Adjusted Funds From Operations per Diluted Share (a) (UnaUdITed, In mILLIOns, eXcePT Per sHa re amOUnTs) neT IncOme Less: net income attributable to non-controlling interests neT IncOme avaILabLe TO cOmmOn sTOckHOLders adjustments: Gain on dispositions, net of taxes Gain on property insurance settlement 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 Y ea r ended december 31, 2015 2014 2013 $ 571 (13) $ 747 (15) $ 325 (8) 558 (93) (2) 712 — (70) 45 (9) (7) 732 (232) (1) 692 6 (26) 51 (9) (6) 1,134 1,207 45 1 — — 4 3 — (61) 317 (97) — 703 1 17 26 (8) (8) 951 40 1 (11) 8 adjusted FFO $1,180 $1,153 $ 989 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) (UnaUdITed, In mILLIOns) 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 equity investment adjustments: equity in (earnings) losses of affiliates Pro rata adjusted ebITda of equity investments consolidated partnership adjustments: Pro rata adjusted ebITda attributable to non-controlling partners in other consolidated partnerships adjUsTed ebITda(a) $ 22 $1,156 $1,202 752.9 778.3 $ 1.49 $ 1.54 $ 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 Year en de d december 31, 2015 2014 2013 $ 571 234 716 9 — $ 747 214 695 14 — $ 325 304 696 21 15 1,530 (93) (2) 1 — — — (70) 68 (25) 1,670 (233) (1) 2 — (61) 6 (26) 68 (23) 1,361 (98) — 1 (11) 8 1 17 48 (21) $1,409 $1,402 $1,306 (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. 5 1 0 2 S T R O S E R & S L E T O H T S O H | 24 DIRECTORS Richard E. Marriott Chairman of the Board W. Edward Walter President, Chief Executive Officer and Director Mary L. Baglivo 2 Vice President for Global Marketing and Chief Marketing Officer, Northwestern University Terence C. Golden Chairman, Bailey Capital Corporation Gordon H. Smith 2 President, Chief Executive Officer, National Association of Broadcasters Sheila C. Bair 1 President of Washington College Ann McLaughlin Korologos 2, 3 John B. Morse, Jr. 1, 3 Walter C. Rakowich 1, 3 1 Audit Committee 2 Compensation Policy Committee 3 Nominating and Corporate Governance Committee MANA gEMENT TEAM W. Edward Walter President, Chief Executive Officer and Director Gregory J. Larson Executive Vice President, Chief Financial Officer Elizabeth A. Abdoo Executive Vice President, General Counsel and Secretary James F. Risoleo Executive Vice President & Managing Director, Europe & West Coast Joanne G. Hamilton Executive Vice President, Human Resources Minaz B. Abji Executive Vice President, Asset Management Michael E. Lentz Managing Director, Global Development, Design & Construction Peter T. Meyer Managing Director, Asia Nathan S. Tyrrell Managing Director, East Coast Jeffrey S. Clark Senior Vice President, Global Tax and Foreign JV Accounting Jay L. Johnson Senior Vice President,Treasurer Brian G. Macnamara Senior Vice President, Corporate Controller Sukhvinder Singh Senior Vice President, Information Technology CORPORATE INFORMATION 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 Stockholders of Record 20,162 at February 19, 2016 Independent Registered Public Accountants kPmG LLP, mcLean, va Annual Meeting The 2016 annual meeting of stockholders will be held at 11 a.m., may 12, 2016, at The ritz carlton, Tysons corner, 1700 Tysons boulevard, mcLean, va 22102. Registrar 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 2014 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2015 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter s TOck PrIce dIvIdends decLared HIGH LOw Per s Har e $20.47 22.77 23.09 24.33 $24.14 20.73 21.29 17.85 $18.00 20.05 21.20 20.23 $20.04 19.40 15.39 15.20 $0.14 0.15 0.20 0.26 $0.20 0.20 0.20 0.20 deSign: vivo deSign inc., printing: weStland printerS, inc. 6903 R o c k l e d g e d Ri v e , S u i t e 15 00 B e t h eSd a , M aRy l a n d 2 0 81 7 

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