Host Marriott Corp. announced yesterday that it has agreements to buy two full-service hotels and controlling interests in three others.
The Bethesda-based company also announced plans to sell 25 million shares of stock in hopes of raising $290 million to finance its buying spree.
The company filed a registration statement on the offering with the Securities and Exchange Commission and estimated that it will sell the shares based on Wednesday's common stock closing price of $11.625. After the offering, Host Marriott would have 184 million outstanding shares.
Host Marriott stock closed yesterday at $11.875, up 25 cents.
The last time the company issued stock was in late 1993. The 20.1 million shares netted $230 million, which was used to leverage about $600 million in buying power, said Host Marriott spokesman Robert T. Souers.
Host Marriott said it will invest $119 million toward the five acquisitions.
The hotels are:
* The San Diego Marriott Hotel and Marina, which consists of a 1,355-room hotel and conference center, and 446-slip marina on San Diego Bay. Host Marriott will invest $13 million to become managing general partner of the $225 million complex, which is subject to a $206 million nonrecourse mortgage.
* The Pittsburgh Hyatt Regency, which will be operated under a joint venture agreement between Interstate Hotel Corporation and Host Marriott, which bought ownership for $18.5 million with plans to invest another $6.5 million to renovate the 400-room hotel.
* The Delta Meadowvale Hotel and Conference Centre, a 374-room hotel near the Toronto International Airport, which Host Marriott bought for $25 million.
* The 600-room Continental Plaza Aeropuerto Hotel and the 314-room Polanco Hotel in Mexico City. Host Marriott will contribute $56 million for a majority interest in those hotels, which are worth $133 million.
The purchases would fall in line with last year's buying rampage, when the company spent $390 million to grab nine hotels with a total of 3,900 rooms. In 1994, Host Marriott spent $530 million to add 18 full-service hotels with a total of 7,390 rooms. Much of that was fed by the 1993 stock sale.
In December, Host Marriott split its hotel properties from its food concessions in a move aimed at allowing both operations to better focus on their businesses. It said it intends to further pare its Courtyard properties as it expands its full-service hotel chain.
The latest buying spree is part of Host Marriott's ambitious goal of doubling, from 50, the number of full-service hotels it owns by the end of the decade. On average, the company's full-service properties maintain a 77 percent occupancy rate -- the industry average is 66 percent -- and they command daily room rates of $110.
Yesterday's agreements will add 3,043 rooms to the company's holdings and bring the number of properties in its portfolio to 95 -- 60 of them full-service hotels.
In most cases, Host Marriott buys hotels at a 30 percent discount off replacement cost, because lenders are eager to shed hotels acquired through foreclosures when the market became saturated a decade ago.
Full-service hotels seem to be a sound investment, because few new ones are being built though demand is increasing. But there are some risks.
"It's a very good time to be an owner of full-service hotels," said Camille E. Humphries, an analyst at Alex. Brown & Sons Inc. "You still can buy them cheaper than you can build them.
"The only problem is in the short term," she said. "If we go into an economic recession, we wouldn't see a healthy growth. It wouldn't be a disaster. It just wouldn't be an exciting time to be an owner of Host Marriott hotels."