Host Marriott's profit up 63% in 2nd quarter Gain attributed to investments in upscale hotels; Lodging

THE BALTIMORE SUN

Host Marriott Corp. rung up a 63 percent gain in earnings in the second quarter of 1997, thanks to the performance of its upscale hotels amid a continued nationwide demand for rooms and a lack of new construction, the company said yesterday.

The Bethesda-based lodging owner's $174 million in earnings before interest expense, taxes and noncash charges -- a standard measure of financial viability for real estate owners -- dovetails with one of the biggest hotel booms of this century.

Host Marriott's net income more than tripled in the quarter ended June 20 quarter to $26 million, or 13 cents per share. Revenue in the quarter climbed to $270 million, a 62 percent gain.

The company's increase in profit can be directly attributed to its decision to invest heavily in luxury, upscale and so-called full-service hotels, primarily with brand names of Ritz-Carlton and Marriott.

Since the start of 1996, the company has spent $2.5 billion buying into the high end of the lodging market.

"We are continuing to realize substantial financial benefits from the favorable supply and demand relationship in the full-service segment of the hotel market and from the superior quality of our assets," said Terence C. Golden, Host Marriott's president and chief executive officer.

And more purchases are likely. Host Marriott has already hit its $1 billion acquisition target for 1997, and recently increased the figure by $300 million.

In all, the company now owns 87 full-service properties, with an asset value of $5.3 billion.

The company intends to fund future buying with the proceeds of a $600 million private placement bond sale that it completed last week, and a new $500 million revolving line of credit with Bankers Trust New York Corp. and other lenders.

Host Marriott's results are equally impressive in the first nine months of the year, a signal that its past hotel purchases are generating bottom line results.

For the three quarters ended in June, Host Marriott generated earnings before interest expense, taxes and noncash charges of $328 million, an 80 percent increase from the same period in 1996.

At the same time, net income rose to $37 million, or 18 cents a share, reversing a net loss of $5 million.

Revenue jumped to $522 million, a 76 percent increase.

Host Marriott's stock rose 19 cents yesterday, closing at $19.375 a share.

Pub Date: 7/22/97

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