Host Hotels & Resorts, Inc. HST offered an update on its strategic deals and revealed that it has already begun repurchasing shares under its second $500 million share repurchase authorization.
Specifically, Host Hotels disclosed that on Nov 12, the company sold the 273-room Novotel Queenstown hotel for $59.7 million (NZ$91.3 million), including the FF&E reserve. This comes as part of the company’s effort to wind down its business in Asia-Pacific region. With the proceeds from the transaction, the company plans to pay back the property’s current mortgage loan of NZ$30 million. It intends to also meet other corporate needs and fund share buybacks.
Since its earnings call on Oct 29, 2015, Host Hotels has repurchased $110 million of its common stock as of Nov 16 for an average price of $17.15. Its initial $500 million share buyback authorization is already exhausted and the company has commenced share repurchases under the second $500 million program. The second program currently has $490 million of capacity left.
Along with these updates, Host Hotels disclosed that its European joint venture had closed on the refinancing of two mortgage loans. The European joint venture is now planning to close a third loan refinancing by the end of November. Importantly, these three refinancing activities are projected to generate savings of around €10 million in annual debt service for the European joint venture and make term extensions of the loans until 2020.
Notably, in late September, Host Hotels revealed its strategic plan to exit the Asia-Pacific market, initiate share buybacks and work on hotel management alterations. (Read: Host Hotels Revises 2015 Outlook, Cuts RevPar Estimate)
Going forward, we believe that a solid portfolio of upscale hotels across lucrative markets, a strategic capital recycling program and an improved balance sheet would position the company for growth. Share buybacks also augur well for the company. However, asset dispositions are expected to lead to near-term earnings dilution, while a strong U.S. dollar and an anticipated hike in interest rate would add to its woes.
Host Hotels currently has a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider stocks like Highwoods Properties Inc. HIW, Public Storage PSA and RLJ Lodging Trust RLJ. All these stocks carry a Zacks Rank #2 (Buy).
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