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Host Hotels Sells Atlanta Marriott

HST MAR

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Host Hotels & Resorts, Inc. (HST - Analyst Report) announced the disposition of an Atlanta-based hotel – Atlanta Marriott Marquis – for $293 million to an undisclosed buyer. This move is in line with the company’s ongoing successful execution of its assets disposition strategy.

The company intends to utilize the sales proceeds to fund potential acquisitions, reduce outstanding debt and for other corporate purposes. The property sale reduced Host Hotels’ Atlanta presence to about 3% of total revenues. Host Hotels – the largest lodging real estate investment trust (REIT) – currently owns seven properties in the Atlanta market.

Atlanta Marriott Marquis is a 52-story hotel comprising 1,663 rooms. This 14th-tallest skyscraper in the city was managed by Marriott International, Inc. (MAR - Analyst Report). According to Databank Inc., Host Hotels acquired the property early in 1998 for $229.5 million.

In our viewpoint, the deal is a strategic fit for Host Hotels as it would help finance the upscale assets acquisition and accelerate its portfolio restructuring initiatives. Also, the portfolio of hotels under premium brands, such as Marriott, Westin, Sheraton and Hyatt, promises steady source of income.

Lately, Host Hotels is actively selling off its non-core assets and restructuring its portfolio through addition of core assets. Accordingly, the company sold four hotels in 2012 and generated net proceeds of around $450 million. The shedding of the Host Hotels’ 94.8% ownership interest in the Toronto Airport Marriott Hotel for CAD$30.6 million (USD $30.6) in late-November 2012 is a noteworthy one.

Host Hotels is scheduled to release its fourth-quarter 2012 results on Feb 21, 2013, prior to the opening bell. The Zacks Consensus Estimate for the company’s fourth-quarter FFO (funds from operations) is currently pegged at 37 cents per share.

The Earnings ESP (Expected Surprise Prediction), the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for Host Hotels is 0.00%. This, combined with a Zacks Rank #3 (Hold), indicates that the company may report in line with the Zacks Consensus Estimate in the fourth quarter.

Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.

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