Its time for Host Hotels & Resorts Inc. (HST) to rejoice as the company has won a Texas Supreme Court lawsuit associated with the San Antonio Marriott Rivercenter hotel. Reflecting positive investor sentiments, the shares were up over 2.4% during yesterday’s regular trading session on the NYSE.
This favorable ruling would result in the company reversing the $69 million loss contingency (recorded earlier under GAAP). Moreover, with the release of a court-ordered bond, the company would be able to recover its $25 million escrow funded earlier.
This litigation ended in favor of the company as early this month the Texas Supreme Court refused the motion of rehearing from Keystone-Texas Holding Corp. Notably, the Texas Supreme Court, in Jun 2014, overruled a lower court's $57.3 million judgment against the company, for allegations of prying with attempts to vend a San Antonio shopping mall as well as the nearby land underlying San Antonio Marriott Rivercenter hotel.
Apart from the favorable judgment being a positive, we believe that Host Hotels’ solid portfolio of upscale hotels across vibrant markets will provide the necessary potential for significant capital appreciation. Particularly, the West Coast market remains attractive with strong lodging demand and lower supply.
Host Hotels is scheduled to announce third-quarter 2014 results on Oct 30. The Zacks Consensus Estimate for Funds from operations (FFO) is currently pegged at 32 cents.
Host Hotels currently carries a Zacks Rank #3 (Hold). However, investors interested in REITs may consider better-ranked stocks like FelCor Lodging Trust Incorporated (FCH), RLJ Lodging Trust (RLJ) and Strategic Hotels & Resorts, Inc. (BEE). All these stocks hold a Zacks Rank #2 (Buy).
Note: Funds from operations (FFO), a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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