BETHESDA, Md., Nov. 14 /PRNewswire-FirstCall/ -- Host Marriott
Corporation (NYSE:HMT) announced today that it has signed a
definitive merger agreement to acquire 38 luxury and upper upscale
hotels from Starwood Hotels and Resorts ("Starwood") for
approximately $4.04 billion. The portfolio consists of 25 domestic
and 13 international properties and a total of 18,964 rooms managed
under the Westin(R), Sheraton(R), W Hotels(R), The Luxury
Collection(R) and St. Regis(R) brands*. As part of this
transaction, the Company expects to assume approximately $700
million of debt and to issue approximately $2.3 billion of equity
(133,529,412 common shares at the exchange price of $17.00 per
share) to Starwood stockholders. The remainder of the purchase
price will be paid in cash. The transaction is expected to close in
the first quarter of 2006, and is subject to the approval of the
Company's stockholders, as well as other closing conditions. The
boards of directors of both companies have approved the proposed
transaction. (Logo:
http://www.newscom.com/cgi-bin/prnh/20040324/HOSTMARRIOTTLOGO )
Christopher J. Nassetta, president and chief executive officer,
stated, "We are thrilled to announce this acquisition. We believe
these assets represent one of the highest quality lodging
portfolios available and they will complement our existing
portfolio of outstanding hotels. We also believe that we acquired
the portfolio at an attractive price that will be accretive to both
our earnings and our credit and will add to the short-term and
long- term value of the Company." Nassetta also added, "We are very
excited about the opportunity to enhance and grow our relationship
with Starwood, one of the premier innovative operating and brand
companies in the lodging industry. We look forward to working with
Starwood to maximize the value of these properties and intend to
find additional opportunities that will benefit both companies
shareholders." Strong Portfolio The portfolio assets are
high-quality, luxury and upper upscale hotels with an average size
of approximately 500 rooms and an expected RevPAR of $117 for 2005.
Approximately 80% of the portfolio revenues are from properties in
urban, convention or resort locations, six of which are city-center
hotels with over 750 rooms. The portfolio is geographically
diverse, with most assets located in markets with strong growth
profiles and limited near-term supply. In addition, the Company is
launching its expansion into Europe and increasing its presence in
key domestic markets such as New York, Boston, San Diego and
Seattle as a result of this acquisition. "The Starwood portfolio
fits our stated strategy of owning irreplaceable assets in premier
markets with strong growth profiles and limited near-term supply,"
said James F. Risoleo, executive vice president of acquisitions and
development. Enhanced Brand Diversification and Growth Potential As
part of this transaction, the Company is expanding an important
relationship with Starwood, and thereby diversifying its brand
representation. Westin(R), the high-performing and innovative
upper-upscale brand that continues to gain market share, accounts
for 33% of the portfolio revenues (comprised of 25% domestic and 8%
international). Sheraton(R), a brand the Company believes has
significant growth potential driven by recently implemented
improvements in its product and service, accounts for 55% of the
portfolio (comprised of 35% domestic and 20% international). W
Hotels(R), a brand that is emerging as the top hotel choice among
young professionals and gen-Xers, accounts for 9% of the portfolio.
In addition, the Company expects to work with Starwood to add value
to the portfolio through aggressive asset management and believes
that its expanded relationship with Starwood will foster additional
growth opportunities for both companies in the future.
International Platform The transaction expands the Company's
geographic distribution into new markets outside of the United
States. Six hotels representing 15% of the portfolio are located in
Europe, and three hotels representing 10% of the portfolio are in
Canada. Additional hotels are located in Fiji and Chile. Many of
these international markets are in the early stages of lodging
recovery, offering the opportunity for additional growth outside of
the domestic lodging cycle. Company Profile Upon completion of the
acquisition, the Company expects to have a total enterprise value
of approximately $16 billion(1), making it the largest lodging
company in the U.S. and the sixth-largest public REIT. Upon
completion of the transaction, the Company will have 145 upper
upscale and luxury hotels with over 74,000 rooms that are
affiliated with 17 brands located in over 50 markets in nine
countries. Financial Considerations The Company expects the
portfolio to generate $355 million to $365 million of Earnings
before Interest Expense, Taxes and Depreciation and Amortization
(EBITDA) in calendar year 2006 on a stand-alone basis. On a
full-year 2006 basis, this transaction would be $.03 to $.05
accretive to the Company's Funds From Operations (FFO) per diluted
share. Taking into consideration the shares expected to be issued
in the transaction and the issuance and assumption of debt to
finance the transaction, the Starwood portfolio is expected to
generate FFO per diluted share of $1.56 to $1.64 for calendar year
2006 on a stand-alone basis(2). The transaction is also expected to
modestly improve the Company's leverage and coverage ratios. W.
Edward Walter, executive vice president and chief financial
officer, stated, "We worked diligently with Starwood to structure a
transaction that is strategically and financially sound for both
parties. Although we have arranged a bridge loan commitment with
Goldman, Sachs & Co. and Deutsche Bank Securities Inc., we
expect to obtain permanent financing through a variety of
attractive options including unsecured and secured debt, asset
sales, and potentially arranging a third party joint venture for
the European assets." EBITDA and FFO per diluted share are non-GAAP
financial measures within the meaning of the rules of the
Securities and Exchange Commission (SEC). See the discussion
included in this press release for information regarding the
non-GAAP financial measures. Transaction Advisors Goldman, Sachs
& Co. served as financial advisor to the Company; Latham &
Watkins LLP served as the Company's lead transaction counsel.
Additionally, Goldman, Sachs & Co. and Deutsche Bank
Securities, Inc. are acting as co-lead arrangers and joint book
running managers for the Company for the bridge loan. Conference
Call Information The Company will host a conference call for
investors and other interested parties today at 10 a.m. Eastern
Time (ET). Interested individuals are invited to listen to the call
on the Internet at http://www.hostmarriott.com/ or by telephone at
719-785-9445. It is recommended that participants call 10 minutes
ahead of the scheduled start time to ensure proper connection.
Additional Information about the Proposed Transaction and Where to
Find It In connection with the proposed transaction, the Company
will file a proxy statement/prospectus as part of a registration
statement on Form S-4 and other documents regarding the proposed
transaction with the Securities and Exchange Commission ("SEC").
Investors and security holders are urged to read the proxy
statement/prospectus when it becomes available because it will
contain important information about the Company, Starwood Hotels
& Resorts and the proposed acquisition. A definitive proxy
statement/prospectus will be sent to stockholders of the Company
seeking their approval of the issuance of Host Marriott Corporation
common stock in the transactions contemplated by the master
agreement. Investors and security holders may obtain a free copy of
the definitive proxy statement/prospectus (when available) and
other documents filed by the Company with the SEC at the SEC's web
site at http://www.sec.gov/. The definitive proxy
statement/prospectus and other relevant documents may also be
obtained, when available, free of cost by directing a request to
Host Marriott Corporation, 6903 Rockledge Drive, Suite 1500,
Bethesda, MD 20817, Attention Investor Relations, (telephone
240-744-1000). Investors and security holders are urged to read the
proxy statement/prospectus and other relevant material when they
become available before making any voting or investment decisions
with respect to the proposed transaction. The Company and its
directors and executive officers may be deemed, under SEC rules, to
be participants in the solicitation of proxies from the
stockholders of Host Marriott Corporation in respect of the
proposed transaction. Information about the Company and its
directors and executive officers, and their ownership of securities
in the Company, is set forth in the proxy statement for Host
Marriott Corporation's 2005 Annual Meeting of Stockholders, which
was filed with the SEC on April 11, 2005. Additional information
regarding the direct and indirect interests of those persons may be
obtained by reading the proxy statement/prospectus regarding the
proposed transaction when it becomes available. This communication
shall not constitute an offer to sell or the solicitation of an
offer to sell or the solicitation of an offer to buy any
securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended. About Host Marriott Host Marriott is a Fortune 500 lodging
real estate company that currently owns or holds controlling
interests in 107 upper upscale and luxury hotel properties
primarily operated under premium brands, such as Marriott(R), Ritz-
Carlton(R), Hyatt(R), Four Seasons(R), Fairmont(R), Hilton(R) and
Westin(R) (*). For further information, please visit the Company's
website at http://www.hostmarriott.com/. Cautionary Language
Concerning Forward-Looking Statements 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," "plan," predict,"
"project," "will," "continue" and other similar terms and phrases,
including references to assumption and forecasts of future results,
statements about the expected scope and timing of the acquisition,
expected earnings, FFO per diluted share and credit effects of the
acquisition, consequences of management efforts, opportunities for
growth and expectations as to timing, nature and terms of financing
and other sources of funds. 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: national and local economic and business
conditions, including the potential for terrorist attacks, that
will affect occupancy rates at our hotels and the demand for hotel
products and services; operating risks associated with the hotel
business; risks associated with the level of our indebtedness and
our ability to meet covenants in our debt agreements; relationships
with property managers; our ability to maintain our properties in a
first-class manner, including meeting capital expenditure
requirements; our ability to compete effectively in areas such as
access, location, quality of accommodations and room rate
structures; changes in travel patterns, taxes and government
regulations which influence or determine wages, prices,
construction procedures and costs; our ability to complete pending
acquisitions and dispositions; and our ability to continue to
satisfy complex rules in order for us to qualify as a real estate
investment trust for federal income tax purposes and other risks
and uncertainties associated with our business described in the
Company's filings with the SEC. The completion of the transaction
with Starwood (either in whole or in part relating to the
acquisition of certain hotels) is subject to numerous closing
conditions and there can be no assurances that the transactions as
a whole, or portions of it will be completed. These closing
conditions include, but are not limited to: the Company receiving
approval from its stockholders to issue shares to Starwood's Class
B holders, obtaining various lender consents and regulatory
approvals, the accuracy of representations and warranties and
compliance with covenants, the absence of material events or
conditions, and other customary closing conditions. Our
expectations as to the financial consequences of the acquisition
may be affected by the risks noted above and factors unique to
acquisitions, including the timing and successful integration these
hotels into our portfolio and the number and location of the hotels
we ultimately acquire with the acquisition. 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 November 13, 2005, 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) Based
on a share price of $17 per share, a fully diluted share count
(including minority holders of operating partnership interests of
Host Marriott, L.P.) of approximately 570 million shares and net
debt of approximately $6.4 billion. (2) The forecast 2006 EBITDA
and FFO per diluted share information for the Starwood portfolio
are provided on a stand-alone basis and assume a January 1, 2006
closing. The effect of the acquisition on the Company's 2006
results will depend on the timing of the closing of the transaction
and, as noted earlier, the closing is not expected to occur until
the first quarter of 2006 and the closing of some or all of the
assets may not occur, or could be deferred until a later time,
depending on various circumstances. (*) This press release contains
registered trademarks that are the exclusive property of their
respective owners, which are companies other than us. The owners of
these trademarks have no responsibility or liability for the
information contained in this press release. Starwood Portfolio
Asset Listing # Asset City State Country Rooms 1 Sheraton New York
Hotel New York NY USA 1,746 2 Sheraton Centre Toronto Hotel Toronto
Canada 1,377 3 Sheraton Boston Hotel Boston MA USA 1,216 4 Sheraton
San Diego Hotel & Marina San Diego CA USA 1,044 5 The Westin
Seattle Seattle WA USA 891 6 Le Centre Sheraton Montreal Hotel
Montreal Canada 825 7 The Westin Los Angeles Airport Los Angeles CA
USA 740 8 W New York New York NY USA 688 9 Sheraton Roma Hotel
& Conference Center Rome Italy 634 10 The Westin Indianapolis
Indianapolis IN USA 573 11 Sheraton Indianapolis Hotel & Suites
Indianapolis IN USA 560 12 The Westin Mission Hills Resort &
Rancho Spa Mirage CA USA 512 13 The Westin Palace, Madrid, a Luxury
Collection Hotel Madrid Spain 468 14 The Westin Cincinnati
Cincinnati OH USA 456 15 Sheraton Stamford Hotel Stamford CT USA
448 16 The Westin Tabor Center Denver CO USA 430 17 W Seattle
Seattle WA USA 426 18 The Westin South Coast Plaza Costa Mesa CA
USA 390 19 Sheraton Milwaukee Brookfield Hotel Brookfield WI USA
389 20 Sheraton Santiago Hotel and Convention Center Santiago Chile
379 21 Sheraton Braintree Hotel Braintree MA USA 374 22 Sheraton
Parsippany Hotel Parsippany NJ USA 370 23 Sheraton Skyline Hotel
& Hayes United Conference Centre Kingdom 350 24 Sheraton Warsaw
Hotel & Towers Warsaw Poland 350 25 The Westin Waltham-Boston
Waltham MA USA 346 26 Sheraton Hamilton Hotel Hamilton Canada 301
27 Sheraton Fiji Resort Nadi Fiji 281 28 The Westin Royal Denarau
Resort Nadi Fiji 273 29 The Westin Grand, Washington, D.C.
Washington D.C. USA 263 30 Sheraton Suites Tampa Airport Tampa FL
USA 259 31 Sheraton Needham Hotel Needham MA USA 247 32 St. Regis
Hotel, Houston Houston TX USA 232 33 The Westin Palace, Milan, a
Luxury Collection Hotel Milan Italy 228 34 Sheraton Tucson Hotel
& Suites Tucson AZ USA 216 35 Sheraton Providence Airport Hotel
Warwick RI USA 206 36 The Westin Europa & Regina, Venice Venice
Italy 185 37 Capitol Hill Suites Washington D.C. USA 152 38 San
Cristobal Tower a Luxury Collection Hotel Santiago Chile 139 Total
Portfolio 18,964 Percentage of Revenues for Host Marriott
Corporation and the Starwood Portfolio by Region, Brand and
Property Type based on Forecast 2005 Revenues Host New Marriott
Portfolio Combined Percentage Region % % % Change Atlanta 8% 0% 6%
(2)% DC Metro 11% 2% 9% (2)% Florida 15% 1% 12% (3)% Hawaii 5% 0%
4% (1)% International 3% 29% 9% 6% Middle Atlantic 16% 21% 17% 1%
Mountain 3% 2% 2% (1)% New England 5% 12% 7% 2% North Central 7% 7%
7% 0% Pacific 20% 24% 21% 1% South Central 7% 2% 6% (1)% Host New
Marriott Portfolio Combined Percentage Brand % % % Change
Marriott(R) 70% 0% 53% (17)% Ritz-Carlton(R) 12% 0% 9% (3)%
Hyatt(R) 9% 0% 7% (2)% Fairmont(R) 2% 0% 2% 0% Westin(R) 1% 33% 9%
8% Sheraton(R) 0% 55% 14% 14% W Hotels(R) 0% 9% 2% 2% Other 6% 3%
4% (2)% Host New Marriott Portfolio Combined Percentage Type % % %
Change Urban 52% 71% 57% 5% Resort 20% 9% 17% (3)% Suburban 19% 10%
17% (2) Airport 9% 10% 9% 0% HOST MARRIOTT CORPORATION
Reconciliation of Net Income to EBITDA for the Starwood Portfolio
on a Stand-Alone Basis for the Calendar Year 2006 Forecasts (1)
(unaudited, in millions) Calendar Year 2006 Forecasts Low-end
High-end of Range of Range Forecast net income $93 $103 Interest
expense 135 135 Depreciation and amortization 120 120 Income taxes
7 7 Property-level EBITDA $355 $365 See the notes following the
table reconciling net income to FFO per diluted share for
assumptions relating to the calendar year 2006 forecasts. HOST
MARRIOTT CORPORATION Reconciliation of Net Income to Funds From
Operations per Diluted Share for the Starwood Portfolio on a
Stand-Alone Basis for the Calendar Year 2006 Forecasts (1)
(unaudited, in millions, except per share amounts) Low-end of Range
Calendar Year 2006 Forecast Income Per Share (Loss) Shares Amount
Forecast net income $93 133.5 $0.69 Adjustments: Depreciation and
amortization 120 - 0.90 Incremental corporate expenses (4) - (0.03)
FFO per diluted share $209 133.5 $1.56 High-end of Range Calendar
Year 2006 Forecast Income Per Share (Loss) Shares Amount Forecast
net income $103 133.5 $0.77 Adjustments: Depreciation and
amortization 120 - 0.90 Incremental corporate expenses (4) - (0.03)
FFO per diluted share $219 133.5 $1.64 (1) The calendar year 2006
forecasts are based on the following assumptions: - RevPAR will
increase 7% to 9% for the calendar year 2006 for the low and high
ends of the forecasted range, respectively; - The issuance of
133,529,412 shares of common stock at a per share price of $17.00;
- The assumption of approximately $700 million of debt at an
average rate of 7.5%; - Debt financing of $1.2 billion at an
average rate of approximately 7.0%; - Estimated incremental
corporate expenses for the Company of approximately $4 million; and
- Transaction costs of approximately 2% to 3% of the purchase
price. The amounts shown in the forecasts are based on these and
other assumptions, as well as management's estimate of operations
for calendar year 2006 for the Starwood Portfolio on a stand-alone
basis. These forecasts are forward-looking and are not guarantees
of future performance and involve known and unknown risks,
uncertainties and other factors which may cause actual
transactions, results and performance to differ materially from
those expressed or implied by these forecasts. Although the Company
believes the expectations reflected in the forecasts are based upon
reasonable assumptions, it can give no assurance that the
expectations will be attained or that the results will not be
materially different than those expressed above. Risks that may
affect these assumptions and forecasted results include, but are
not limited to, the following: - the level of RevPAR growth may
change significantly as the result of the completion of individual
hotel budgets later this year; - the level of capital expenditures
may change significantly as the result of completion of individual
hotel budgets later this year; any increase or decrease in capital
expenditures will directly affect the level of depreciation expense
and net income; and - other risks and uncertainties associated with
our business described herein and in the Company's filings with the
SEC. The effect of the acquisition on the Company's 2006 results
will depend on the timing of the transaction. The closing is not
expected to occur until near the end of the first quarter 2006 and
the closing of some or all of the assets may be later. However, for
purposes of estimating a full-year's accretion to the Company's FFO
per diluted share, a January 1, 2006 closing was assumed. HOST
MARRIOTT CORPORATION Notes to Financial Information Non-GAAP
Financial Measures Included in this press release are certain
"non-GAAP financial measures," which are measures of historical or
future financial performance that are not calculated and presented
in accordance with U.S. generally accepted accounting principles,
or GAAP, within the meaning of applicable SEC rules. They are as
follows: (i) Funds From Operations (FFO) per diluted share and (ii)
Earnings before Interest Expense, Income Taxes, Depreciation and
Amortization (EBITDA). The following discussion defines these terms
and presents why we believe they are useful supplemental measures
of performance. FFO per Diluted Share We present FFO per diluted
share as a non-GAAP measure of performance in addition to earnings
per share (calculated in accordance with GAAP). We calculate FFO
per diluted share for a given operating period as FFO (defined as
set forth below) for such period divided by the number of fully
diluted shares outstanding during such period. The National
Association of Real Estate Investment Trusts (NAREIT) defines FFO
as net income (calculated in accordance with GAAP) excluding gains
(losses) from sales of real estate, the cumulative effect of
changes in accounting principles, real estate-related depreciation
and amortization and adjustments for unconsolidated partnerships
and joint ventures. We present FFO on a per share basis after
making adjustments for the effects of dilutive securities and the
payment of preferred stock dividends, in accordance with NAREIT
guidelines. FFO per diluted share of the Starwood portfolio on a
stand-alone basis was calculated by determining the FFO of the
portfolio at the property level and then subtracting (1) estimated
interest expense of the debt we expect to incur or assume to
finance the portfolio and (2) estimated incremental corporate
expenses incurred as a result of the acquisition. The resulting FFO
amount was divided by the number of shares expected to be issued to
Starwood shareholders in the acquisition to determine a per diluted
share amount. We believe that FFO per diluted share is a useful
supplemental measure of operating performance and that the
presentation of FFO per diluted share, when combined with the
primary GAAP presentation of earnings per share, provides
beneficial information to investors. By excluding the effect of
real estate depreciation, amortization and gains and losses from
sales of real estate, all of which are based on historical cost
accounting and which may be of lesser significance in evaluating
current performance, we believe such measures can facilitate
comparisons of operating performance between periods and with other
REITs, even though FFO per diluted share does not represent an
amount that accrues directly to holders of our common stock.
Historical cost accounting for real estate assets implicitly
assumes that the value of real estate assets diminishes predictably
over time. As noted by NAREIT in its April 2002 "White Paper on
Funds From Operations," since real estate values have historically
risen or fallen with market conditions, many industry investors
have considered presentation of operating results for real estate
companies that use historical cost accounting to be insufficient by
themselves. For these reasons, NAREIT adopted the definition of FFO
in order to promote an industry- wide measure of REIT operating
performance. Property-level EBITDA EBITDA is a commonly used
measure of performance in many industries. Management believes
property-level EBITDA provides useful information to investors
regarding the results of operations because it helps us and our
investors evaluate the ongoing operating performance of our
properties and facilitates comparisons between us and other lodging
REITs, hotel owners who are not REITs and other capital-intensive
companies. Management uses EBITDA to evaluate property-level
results and as one measure in determining the value of acquisitions
and dispositions and, like FFO per diluted share, it is widely used
by management in the annual budget process. Limitations on the Use
of FFO per Diluted Share and EBITDA We calculate FFO per diluted
share in accordance with standards established by NAREIT, which may
not be comparable to measures calculated by other companies who do
not use the NAREIT definition of FFO or calculate FFO per diluted
share in accordance with NAREIT guidance. In addition, although FFO
per diluted share is a useful measure when comparing our results to
other REITs, it may not be helpful to investors when comparing us
to non-REITs. EBITDA, as presented, may also not be comparable to
measures calculated by other companies. This information should not
be considered as an alternative to net income, operating profit,
cash from operations or any other operating performance measure
calculated in accordance with GAAP. Cash expenditures for various
long-term assets (such as renewal and replacement capital
expenditures), interest expense (for EBITDA) and other items have
been and will be incurred and are not reflected in the EBITDA and
FFO per diluted share presentations. In addition, because the
EBITDA presented is at the property level, corporate expenses
(including incremental corporate expenses expected to be incurred
as a result of the acquisition) are not reflected in the
presentation. Management compensates for these limitations by
separately considering the impact of these excluded items to the
extent they are material to operating decisions or assessments of
our operating performance. Our consolidated statement of operations
and cash flows include interest expense, capital expenditures, and
other excluded items, all of which should be considered when
evaluating our performance, as well as the usefulness of our
non-GAAP financial measures. Additionally, FFO per diluted share
and EBITDA should not be considered measures of our liquidity or
indicative of funds available to fund our cash needs, including our
ability to make cash distributions. In addition, FFO per diluted
share does not measure, and should not be used as a measure of,
amounts that accrue directly to stockholders' benefit.
http://www.newscom.com/cgi-bin/prnh/20040324/HOSTMARRIOTTLOGODATASOURCE:
Host Marriott Corporation CONTACT: Kevin J. Jacobs, Vice President,
+1-240-744-5212, or Gregory J. Larson, Senior Vice President,
+1-240-744-5120 Web site: http://www.hostmarriott.com/
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