Equity of Host Inc. and Capital of Host L.P.

3 Months Ended

Mar. 31, 2013

Equity of Host Inc. and Capital of Host L.P.

6. Equity of Host Inc. and Capital of Host L.P.

Equity of Host Inc.

Equity of Host Inc. is allocated between controlling and non-controlling interests as follows (in millions):

	Equity of Host Inc.			Non-redeemable non-controlling interests		Total equity			Redeemable non-controlling interests
Balance, December 31, 2012	$	6,825		$	34	$	6,859		$	158
Net income		56			3		59			1
Issuance of common stock		280			—		280			—
Dividends declared on common stock		(74	)		—		(74	)		—
Other changes in ownership		(18	)		2		(16	)		16
Other comprehensive income		2			—		2			—
Balance, March 31, 2013	$	7,071		$	39	$	7,110		$	175

Capital of Host L.P.

As of March 31, 2013, Host Inc. is the owner of approximately 98.7% of Host L.P.’s common OP units. The remaining 1.3% of the common OP units are held by third party limited partners. Each OP unit may be redeemed for cash or, at the election of Host Inc., Host Inc. common stock, based on the conversion ratio of 1.021494 shares of Host Inc. common stock for each OP unit.

In exchange for any shares issued by Host Inc., Host L.P. will issue OP units to Host Inc. based on the applicable conversion ratio. Additionally, funds used by Host Inc. to pay dividends on its common stock are provided by distributions from Host L.P.

Capital of Host L.P. is allocated between controlling and non-controlling interests as follows (in millions):

	Capital of Host L.P.			Non-controlling interests		Total Capital			Limited Partnership Interests of Third Parties
Balance, December 31, 2012	$	6,825		$	34	$	6,859		$	158
Net income		56			3		59			1
Issuance of common OP units		280			—		280			—
Distributions declared on common OP units		(74	)		—		(74	)		(1)
Other changes in ownership		(18	)		2		(16	)		17
Other comprehensive income		2			—		2			—
Balance, March 31, 2013	$	7,071		$	39	$	7,110		$	175

Issuance of Common Stock

During the first quarter of 2013, Host Inc. issued 6.1 million shares of common stock, at an average price of $16.78 per share, for net proceeds of approximately $102 million. These issuances were made in “at-the-market” offerings pursuant to Sales Agency Financing Agreements with BNY Mellon Capital Markets, LLC and Scotia Capital (USA) Inc. In connection with the common stock issuance, Host L.P. issued 6.0 million common OP units. There is approximately $198 million of issuance capacity remaining under the current agreements.

Dividends/Distributions

On February 20, 2013, Host Inc.’s Board of Directors declared a regular dividend of $0.10 per share on its common stock. The dividend was paid on April 15, 2013 to stockholders of record as of March 28, 2013. Accordingly, Host L.P. made a distribution of $.1021494 per unit on its common OP units based on the current conversion ratio.

Senior Executive Share Based Compensation

On February 6, 2013, Host Inc. granted 1.6 million restricted shares for performance year 2013 (which represent the maximum number of shares that can be earned during the year if performance is at the “high” level of achievement). Approximately 50% of the restricted shares are performance-based awards, with vesting based on the level of achievement with respect to specific management business objectives in 2013. The remaining awards are market-based awards and vesting is based on Host Inc.’s performance on relative shareholder return as compared to three indices: the S&P 500 Index, the NAREIT Equity Index, and a lodging company index consisting of eight companies. Any performance-based awards and market-based awards that do not vest are forfeited. In addition, the company awarded approximately .4 million stock options with an exercise price of $16.55 per share for performance year 2013. During the first quarter of 2013, we recorded approximately $3.3 million of stock compensation expense associated with the 2013 grant.