Host Hotels conserving cash, putting acquisitions on hold in light of market conditions

By Jennifer Lanning Drey

Portland, Ore., Oct. 10 - Host Hotels & Resorts, Inc. plans to maintain higher-than-normal levels of cash and hold off on making acquisitions until visibility into the 2009 operating environment is clearer, W. Edward Walter, chief executive officer of Host, said during a Friday conference call held to discuss the company's third-quarter results.

"I would caution that the overall situation remains quite fluid, especially as it relates to the impact of the financial crisis on the economy and on the lodging business, and we are quite focused on managing our response to challenging business conditions," Walter said.

The company ended the third quarter with $494 million of cash and cash equivalents on Sept. 5. Following the close of the quarter, Host increased available cash by $200 million through a draw on its revolving credit facility.

The company has access to an additional $400 million under the facility, which Walter said it would consider drawing for additional cash if the company became concerned about the health of bank participants in the credit facility.

Acquisitions on hold

With regard to making acquisitions, Walter said Host's ability to gain confidence into potential returns would dictate timing more than pricing. The CEO said he expected that confidence to return sometime in late 2009 or early 2010 and added that Host would be opportunistic about acquisitions as market conditions begin to change.

"The extreme turbulence in the financial markets and the lack of clarity and visibility regarding the operating outlook suggest that we would be better served by letting events further evolve before committing to any acquisitions," Walter said.

Host also continues to work to facilitate asset sales but the state of the credit markets is challenging for buyers in need of funding, he said.

In the third quarter, Host's total revenue decreased by $29 million, or 2.4%, while net income decreased to $52 million, down from $95 million in the prior-year third quarter.

"Given the environment, we are reasonably pleased with our third-quarter results but expect the remainder of the year and 2009 will continue to be a challenge," Walter said.

Host Hotels is a Bethesda, Md.-based real estate investment trust that primarily engages in the ownership and operation of hotel properties.

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