hst-ex992

Host Hotels & Resorts, Inc. is an S&P 500 and Fortune 500 company and is the largest lodging real estate investment trust and one of the largest owners of luxury and upper-upscale hotels. The Company currently owns 88 properties in the United States and six properties internationally totaling approximately 52,500 rooms. The Company also holds non-controlling interests in seven joint ventures, including one in Europe that owns 10 hotels with approximately 3,900 rooms. Guided by a disciplined approach to capital allocation and aggressive asset management, the Company partners with premium brands such as Marriott^®, Ritz-Carlton^®, Westin^®, Sheraton^®, W^®, St. Regis^®, Le Méridien^®, The Luxury Collection^®, Hyatt^®, Fairmont^®, Hilton^®, Swissôtel^®, ibis^®, and Novotel^® as well as independent brands in the operation of properties in over 50 major markets. For additional information, please visit the Company’s website at www.hosthotels.com.

Host Hotels & Resorts, Inc., herein referred to as “we” or “Host Inc.,” is a self-managed and self-administered real estate investment trust (“REIT”) that owns hotel properties. We conduct our operations as an umbrella partnership REIT through an operating partnership, Host Hotels & Resorts, L.P. (“Host LP”), of which we are the sole general partner. When distinguishing between Host Inc. and Host LP, the primary difference is approximately 1% of the partnership interests in Host LP held by outside partners as of September 30, 2017, which is non-controlling interests in Host LP in our consolidated balance sheets and is included in net income attributable to non-controlling interests in our consolidated statements of operations. Readers are encouraged to find further detail regarding our organizational structure in our annual report on Form 10-K.

To facilitate a quarter-to-quarter comparison of our operations, we present certain operating results (revenues, expenses, hotel EBITDA and associated margins) on a comparable hotel basis, which are non-GAAP (U.S. generally accepted accounting principles) financial measures within the meaning of the rules of the Securities and Exchange Commission (“SEC”). These are included in our earnings press release dated November 1, 2017 and related Current Report on Form 8-K filed with the SEC on the same day. In addition to comparable hotel results for Host Inc. as a whole found in the press release (and repeated here starting on page 7) this supplemental information also contains additional detail on comparable hotel EBITDA by market. Also included are reconciliations to the most directly comparable GAAP measures. See the Notes that follow for information on why we believe these supplemental measures are useful and the limitations on their use.

In addition, also included in this supplemental information is our current quarter end leverage ratio, calculated in accordance with our credit facility, a reconciliation to the leverage ratio calculated in accordance with GAAP, and infomation on how this supplemental measure is calculated and why we believe it is useful.

	Quarter ended September 30, 2017
Market⁽¹⁾	No. of Properties		No. of Rooms		Total Revenues		Hotel Net Income⁽²⁾			Plus: Depreciation		Plus: Interest Expense⁽²⁾		Less: Income tax⁽²⁾		Equals: Hotel EBITDA
Hawaii		3		1,682	$	70.0	$	14.9		$	9.2	$	—	$	—	$	24.1
Seattle		2		1,315		37.5		10.9			3.8		—		—		14.7
New York		8		6,961		211.7		10.7			27.1		—		—		37.8
San Francisco		4		2,912		83.5		17.3			7.1		—		—		24.4
Boston		4		3,185		82.9		18.8			8.9		—		—		27.7
San Diego		3		2,981		85.2		14.6			12.5		—		—		27.1
Los Angeles		7		2,843		69.5		14.8			6.6		—		—		21.4
Chicago		6		2,392		53.6		12.5			7.2		—		—		19.7
Denver		2		735		15.3		3.6			1.7		—		—		5.3
Washington, D.C.		12		6,024		124.5		15.7			16.3		—		—		32.0
Atlanta		5		1,939		37.1		5.1			5.2		—		—		10.3
Florida		8		4,559		92.6		(1.6	)		15.3		—		—		13.7
Houston		4		1,716		24.2		0.2			5.5		—		—		5.7
Phoenix		4		1,518		27.9		(2.7	)		5.5		—		—		2.8
Other		9		5,784		93.0		7.5			13.6		—		—		21.1
Domestic		81		46,546		1,108.5		142.3			145.5		—		—		287.8

Canada		2		849		16.0		3.2			2.3		—		—		5.5
Latin America		4		962		11.3		0.2			1.5		1.2		—		2.9
International		6		1,811		27.3		3.4			3.8		1.2		—		8.4
Comparable Hotels All Markets		87		48,357	$	1,135.8	$	145.7		$	149.3	$	1.2	$	—	$	296.2
Non-comparable hotels		7		4,203		118.2		5.5			25.5		—		—		31.0
Gain on sale of property and corporate level income/ expense						—		(46.0	)		1.0		41.7		42.0		38.7
Total		94		52,560	$	1,254.0	$	105.2		$	175.8	$	42.9	$	42.0	$	365.9

	Quarter ended September 30, 2016
Market⁽¹⁾	No. of Properties		No. of Rooms		Total Revenues		Hotel Net Income⁽²⁾			Plus: Depreciation		Plus: Interest Expense⁽²⁾		Plus: Income tax⁽²⁾		Equals: Hotel EBITDA
Hawaii		3		1,682	$	67.1	$	13.8		$	8.7	$	—	$	—	$	22.5
Seattle		2		1,315		36.7		10.1			4.1		—		—		14.2
New York		8		6,961		214.3		8.7			30.2		—		—		38.9
San Francisco		4		2,912		79.6		15.2			7.0		—		—		22.2
Boston		4		3,185		85.8		19.8			9.2		—		—		29.0
San Diego		3		2,981		83.5		14.2			12.9		—		—		27.1
Los Angeles		7		2,843		71.1		15.2			6.6		—		—		21.8
Chicago		6		2,392		54.6		14.3			7.0		—		—		21.3
Denver		2		735		15.0		3.4			1.7		—		—		5.1
Washington, D.C.		12		6,024		124.8		14.5			16.5		—		—		31.0
Atlanta		5		1,939		40.3		6.4			5.4		—		—		11.8
Florida		8		4,559		107.5		5.4			15.7		—		—		21.1
Houston		4		1,716		25.7		0.1			5.5		—		—		5.6
Phoenix		4		1,518		25.5		(3.9	)		5.7		—		—		1.8
Other		9		5,784		97.4		9.7			13.9		—		—		23.6
Domestic		81		46,546		1,128.9		146.9			150.1		—		—		297.0

Canada		2		849		15.7		2.7			2.4		—		—		5.1
Latin America		4		962		21.3		7.8			1.8		1.3		—		10.9
International		6		1,811		37.0		10.5			4.2		1.3		—		16.0
Comparable Hotels All Markets		87		48,357	$	1,165.9	$	157.4		$	154.3	$	1.3	$	—	$	313.0
Non-comparable hotels		7		4,203		129.1		13.5			26.8		1.1		—		41.4
Gain on sale of property and corporate level income/ expense						—		(62.9	)		1.0		35.6		19.2		(7.1	)
Total		94		52,560	$	1,295.0	$	108.0		$	182.1	$	38.0	$	19.2	$	347.3

	Year-to-date ended September 30, 2017
Market⁽¹⁾	No. of Properties		No. of Rooms		Total Revenues		Hotel Net Income⁽²⁾			Plus: Depreciation		Plus: Interest Expense⁽²⁾		Plus: Income tax⁽²⁾		Equals: Hotel EBITDA
Hawaii		3		1,682	$	215.4	$	47.6		$	28.5	$	—	$	—	$	76.1
New York		8		6,961		606.6		4.1			84.9		—		—		89.0
San Francisco		4		2,912		247.9		50.5			21.2		—		—		71.7
Seattle		2		1,315		98.9		21.4			11.8		—		—		33.2
Boston		4		3,185		231.4		43.3			26.9		—		—		70.2
San Diego		3		2,981		257.7		46.1			37.8		—		—		83.9
Washington, D.C.		12		6,024		428.2		82.3			49.1		—		—		131.4
Los Angeles		7		2,843		201.6		39.2			19.6		—		—		58.8
Florida		8		4,559		424.4		86.0			45.6		—		—		131.6
Chicago		6		2,392		138.0		22.6			21.5		—		—		44.1
Phoenix		4		1,518		124.0		23.0			16.5		—		—		39.5
Atlanta		5		1,939		122.2		21.8			15.6		—		—		37.4
Denver		2		735		40.5		8.2			5.0		—		—		13.2
Houston		4		1,716		86.8		8.9			16.7		—		—		25.6
Other		9		5,784		319.5		46.1			41.5		—		—		87.6
Domestic		81		46,546		3,543.1		551.1			442.2		—		—		993.3

Canada		2		849		41.7		4.8			6.9		—		—		11.7
Latin America		4		962		36.0		2.1			4.6		3.6		—		10.3
International		6		1,811		77.7		6.9			11.5		3.6		—		22.0
Comparable Hotels All Markets		87		48,357	$	3,620.8	$	558.0		$	453.7	$	3.6	$	—	$	1,015.3
Non-comparable hotels		7		4,203		422.4		60.5			77.8		1.3		—		139.6
Gain on sale of property and corporate level income/ expense						—		(140.5	)		2.7		120.2		62.5		44.9
Total		94		52,560	$	4,043.2	$	478.0		$	534.2	$	125.1	$	62.5	$	1,199.8

	Year-to-date ended September 30, 2016
Market⁽¹⁾	No. of Properties		No. of Rooms		Total Revenues		Hotel Net Income⁽²⁾		Plus: Depreciation		Plus: Interest Expense⁽²⁾		Plus: Income tax⁽²⁾		Equals: Hotel EBITDA
Hawaii		3		1,682	$	208.0	$	47.3	$	26.2	$	—	$	—	$	73.5
New York		8		6,961		616.0		6.5		92.6		—		—		99.1
San Francisco		4		2,912		251.2		53.1		21.5		—		—		74.6
Seattle		2		1,315		90.6		15.7		12.3		—		—		28.0
Boston		4		3,185		232.3		40.2		27.8		—		—		68.0
San Diego		3		2,981		245.4		41.3		38.4		—		—		79.7
Washington, D.C.		12		6,024		406.4		65.3		49.2		1.0		—		115.5
Los Angeles		7		2,843		202.3		39.8		19.7		—		—		59.5
Florida		8		4,559		439.9		90.3		47.2		—		—		137.5
Chicago		6		2,392		139.1		23.9		20.9		—		—		44.8
Phoenix		4		1,518		119.7		19.4		16.7		—		—		36.1
Atlanta		5		1,939		127.0		22.7		16.0		—		—		38.7
Denver		2		735		37.4		5.8		5.1		—		—		10.9
Houston		4		1,716		91.4		11.5		16.7		—		—		28.2
Other		9		5,784		319.8		44.5		41.4		—		—		85.9
Domestic		81		46,546		3,526.5		527.3		451.7		1.0		—		980.0

Canada		2		849		39.7		2.8		6.7		—		—		9.5
Latin America		4		962		50.1		11.0		5.9		3.9		—		20.8
International		6		1,811		89.8		13.8		12.6		3.9		—		30.3
Comparable Hotels All Markets		87		48,357	$	3,616.3	$	541.1	$	464.3	$	4.9	$	—	$	1,010.3
Non-comparable hotels		7		4,203		476.7		69.0		73.9		3.6		—		146.5
Gain on sale of property and corporate level income/ expense						—		32.9		2.8		107.8		41.7		185.2
Total		94		52,560	$	4,093.0	$	643.0	$	541.0	$	116.3	$	41.7	$	1,342.0
___________

	Quarter ended September 30,						Year-to-date ended September 30,
	2017			2016			2017			2016
Number of hotels		87			87			87			87
Number of rooms		48,357			48,357			48,357			48,357
Change in comparable hotel RevPAR -
Constant US$		(1.8	)%		—			1.0	%		—
Nominal US$		(1.7	)%		—			1.1	%		—
Operating profit margin ⁽²⁾		10.1	%		11.1	%		13.4	%		13.0	%
Comparable hotel EBITDA margin ⁽²⁾		26.1	%		26.85	%		28.0	%		27.9	%
Food and beverage profit margin ⁽²⁾		22.9	%		23.5	%		31.1	%		29.8	%
Comparable hotel food and beverage profit margin⁽²⁾		22.9	%		23.3	%		30.9	%		29.9	%

Net income	$	105		$	108		$	478		$	643
Depreciation and amortization		176			182			534			541
Interest expense		43			38			125			116
Provision for income taxes		42			19			63			42
Gain on sale of property and corporate level income/expense		(39	)		7			(45	)		(185	)
Non-comparable hotel results, net ⁽³⁾		(31	)		(41	)		(140	)		(147	)
Comparable hotel EBITDA	$	296		$	313		$	1,015		$	1,010

	Quarter ended September 30, 2017											Quarter ended September 30, 2016
				Adjustments											Adjustments
	GAAP Results			Non-comparable hotel results, net⁽³⁾			Depreciation and corporate level items			Comparable Hotel Results		GAAP Results			Non-comparable hotel results, net⁽³⁾			Depreciation and corporate level items			Comparable Hotel Results
Revenues
Room	$	860		$	(71	)	$	—		$	789	$	879		$	(76	)	$	—		$	803
Food and beverage		314			(35	)		—			279		336			(40	)		—			296
Other		80			(12	)		—			68		80			(13	)		—			67
Total revenues		1,254			(118	)		—			1,136		1,295			(129	)		—			1,166
Expenses
Room		227			(18	)		—			209		225			(19	)		—			206
Food and beverage		242			(27	)		—			215		257			(30	)		—			227
Other		459			(43	)		—			416		471			(51	)		—			420
Depreciation and amortization		176			—			(176	)		—		182			—			(182	)		—
Corporate and other expenses		24			—			(24	)		—		28			—			(28	)		—
Gain on insurance and business interruption settlements		(1	)		1			—			—		(12	)		12			—			—
Total expenses		1,127			(87	)		(200	)		840		1,151			(88	)		(210	)		853
Operating Profit - Comparable Hotel EBITDA	$	127		$	(31	)	$	200		$	296	$	144		$	(41	)	$	210		$	313

	Year-to-date ended September 30, 2017											Year-to-date ended September 30, 2016
				Adjustments											Adjustments
	GAAP Results			Non-comparable hotel results, net⁽³⁾			Depreciation and corporate level items			Comparable Hotel Results		GAAP Results			Non-comparable hotel results, net⁽³⁾			Depreciation and corporate level items			Comparable Hotel Results
Revenues
Room	$	2,643		$	(244	)	$	—		$	2,399	$	2,655		$	(275	)	$	—		$	2,380
Food and beverage		1,152			(133	)		—			1,019		1,183			(148	)		—			1,035
Other		248			(45	)		—			203		255			(54	)		—			201
Total revenues		4,043			(422	)		—			3,621		4,093			(477	)		—			3,616
Expenses
Room		676			(58	)		—			618		674			(68	)		—			606
Food and beverage		794			(90	)		—			704		830			(104	)		—			726
Other		1,424			(140	)		—			1,284		1,447			(173	)		—			1,274
Depreciation and amortization		534			—			(534	)		—		541			—			(541	)		—
Corporate and other expenses		79			—			(79	)		—		82			—			(82	)		—
Gain on insurance and business interruption settlements		(6	)		6			—			—		(15	)		15			—			—
Total expenses		3,501			(282	)		(613	)		2,606		3,559			(330	)		(623	)		2,606
Operating Profit - Comparable Hotel EBITDA	$	542		$	(140	)	$	613		$	1,015	$	534		$	(147	)	$	623		$	1,010
___________

The following table presents the calculation of Host's leverage ratio using GAAP measures:

The following table presents the calculation of Host's leverage ratio as used in the financial covenants of the credit facility:

To facilitate a quarter-to-quarter comparison of our operations, we present certain operating results (revenues, expenses, hotel EBITDA and associated margins) for the periods included in this supplemental information on a comparable hotel basis.

Because these statistics and operating results relate only to our hotel properties, they exclude results for our non-hotel properties and other real estate investments. We define our comparable hotels as properties:

(i) that are owned or leased by us and the operations of which are included in our consolidated results for the entirety of the reporting periods being compared; and

(ii) that have not sustained substantial property damage or business interruption, or undergone large-scale capital projects (as further defined below) during the reporting periods being compared.

The hotel business is capital-intensive and renovations are a regular part of the business. Generally, hotels under renovation remain comparable hotels. A large scale capital project that would cause a hotel to be excluded from our comparable hotel set is an extensive renovation of several core aspects of the hotel, such as rooms, meeting space, lobby, bars, restaurants and other public spaces. Both quantitative and qualitative factors are taken into consideration in determining if the renovation would cause a hotel to be removed from the comparable hotel set, including unusual or exceptional circumstances such as: a reduction or increase in room count, rebranding, a significant alteration of the business operations, or the closing of the hotel during the renovation.

We do not include an acquired hotel in our comparable hotel set until the operating results for that hotel have been included in our consolidated results for one full calendar year. For example, we acquired The Don CeSar in February 2017. The hotel will not be included in our comparable hotels until January 1, 2019. Hotels that we sell are excluded from the comparable hotel set once the transaction has closed. Similarly, hotels are excluded from our comparable hotel set from the date that they sustain substantial property damage or business interruption or commence a large-scale capital project. In each case, these hotels are returned to the comparable hotel set when the operations of the hotel have been included in our consolidated results for one full calendar year after completion of the repair of the property damage or cessation of the business interruption, or the completion of large-scale capital projects, as applicable.

Of the 94 hotels that we owned on September 30, 2017, 87 have been classified as comparable hotels. The operating results of the following hotels that we owned as of September 30, 2017 are excluded from comparable hotel results for these periods:

The operating results of 14 hotels disposed of in 2017 and 2016 are not included in comparable hotel results for the periods presented herein. None of our hotels have been excluded from our comparable hotel results due to Hurricanes Harvey or Irma.

We evaluate the operating performance of our comparable hotels based on market. The division is generally consistent with groupings recognized in the lodging industry.

The comparable hotel results included in this supplemental information are “non-GAAP financial measures,” which are measures of our historical or future financial performance that are not calculated and presented in accordance with GAAP, within the meaning of applicable SEC rules. The following discussion defines these measures and presents why we believe they are useful supplemental measures of our performance.

Earnings before Interest Expense, Income Taxes, Depreciation and Amortization (“EBITDA”) is a commonly used measure of performance in many industries. Management believes EBITDA provides useful information to investors regarding our results of operations because it helps us and our investors evaluate the ongoing operating performance of our properties after removing the impact of the Company’s capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization). Management also believes the use of EBITDA facilitates comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital-intensive companies. Management uses EBITDA to evaluate property-level results and as one measure in determining the value of acquisitions and dispositions and is widely used by management in the annual budget process and for our compensation programs.

EBITDA, as presented, may not be comparable to measures calculated by other companies. This information should not be considered as an alternative to net income, operating profit, cash from operations or any other operating performance measure calculated in accordance with GAAP. Cash expenditures for various long-term assets (such as renewal and replacement capital expenditures), interest expense and other items have been and will be made and are not reflected in the EBITDA presentation. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our consolidated statement of operations and cash flows include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures. Additionally, EBITDA should not be considered as a measure of our liquidity or indicative of funds available to fund our cash needs, including our ability to make cash distributions.

We present certain operating results for our hotels, such as hotel revenues, expenses, food and beverage profit, and EBITDA (and the related margins), on a comparable hotel, or “same store,” basis as supplemental information for investors. Our comparable hotel results present operating results for hotels owned during the entirety of the periods being compared without giving effect to any acquisitions or dispositions, significant property damage or large scale capital improvements incurred during these periods. We present comparable hotel EBITDA to help us and our investors evaluate the ongoing operating performance of our comparable properties after removing the impact of the Company’s capital structure (primarily interest expense), and its asset base (primarily depreciation and amortization). Corporate-level costs and expenses are also removed to arrive at property-level results. We believe these property-level results provide investors with supplemental information into the ongoing operating performance of our comparable hotels. Comparable hotel results are presented both by region and for the Company’s comparable properties in the aggregate. We eliminate depreciation and amortization because, even though depreciation and amortization are property-level expenses, these non-cash expenses, which are based on historical cost accounting for real estate assets, implicitly assume that the value of real estate assets diminishes predictably over time. Because real estate values have historically risen or fallen with market conditions, many real estate industry investors have considered presentation of historical cost accounting for operating results to be insufficient by themselves.

As a result of the elimination of corporate-level costs and expenses and depreciation and amortization, the comparable hotel operating results we present do not represent our total revenues, expenses, operating profit or net income and should not be used to evaluate our performance as a whole. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our consolidated statements of operations include such amounts, all of which should be considered by investors when evaluating our performance.

We present these hotel operating results on a comparable hotel basis because we believe that doing so provides investors and management with useful information for evaluating the period-to-period performance of our hotels and facilitates comparisons with other hotel REITs and hotel owners. In particular, these measures assist management and investors in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations at comparable hotels (which represent the vast majority of our portfolio) or from other factors, such as the effect of acquisitions or dispositions. While management believes that presentation of comparable hotel results is a “same store” supplemental measure that provides useful information in evaluating our ongoing performance, this measure is not used to allocate resources or to assess the operating performance of each of these hotels, as these decisions are based on data for individual hotels and are not based on comparable hotel results. For these reasons, we believe that comparable hotel operating results, when combined with the presentation of GAAP operating profit, revenues and expenses, provide useful information to investors and management.

Host L.P.’s credit facility contains certain financial covenants which we are required to meet, including allowable leverage ratio, which is determined using EBITDA and net debt, each as calculated under the terms of our credit facility (“Adjusted Credit Facility EBITDA” and “Net Debt,” respectively). The leverage ratio is defined as Net Debt to Adjusted Credit Facility EBITDA. This calculation is based on pro forma results for the prior four fiscal quarters, giving effect to transactions such as acquisitions, dispositions and financings as if they occurred at the beginning of the period. Under the terms of the credit facility, interest expense excludes items such as the gains and losses on the extinguishment of debt, deferred financing charges related to the senior notes or the credit facility, amortization of debt premiums or discounts that were recorded at issuance of a loan to establish its fair value and non-cash interest expense, all of which are included in interest expense on our consolidated statement of operations.

Additionally, total debt used in the calculation of our leverage ratio is based on a “net debt” concept, under which cash and cash equivalents in excess of $100 million are deducted from our total debt balance. In this supplemental financial information we have presented our credit facility leverage ratio, which is considered a non-GAAP financial measure. Management believes this financial ratio provides useful information to investors by demonstrating where the company is in terms of meeting this important financial covenant, and accordingly our ability to access the capital markets and in particular debt financing.

	Leverage Ratio per Credit Facility
	September 30, 2017
Net debt ⁽¹⁾	$	3,310
Adjusted Credit Facility EBITDA - trailing twelve months ⁽²⁾		1,425
Leverage Ratio		2.3	x
___________

	September 30, 2017
Debt	$	3,961
Deferred financing cost		28
Contingent obligations		6
Less: Unrestricted cash over $100 million		(685	)
Net debt per credit facility definition	$	3,310

	Trailing twelve months
	September 30, 2017
Net income	$	606
Interest expense		163
Depreciation and amortization		717
Income taxes		61
EBITDA		1,547
Gain on dispositions		(109	)
Acquisition costs		1
Gain on property insurance settlement		(1	)
Partnership EBITDA adjustments		38
Adjusted EBITDA		1,476
Pro forma EBITDA - Acquisitions		11
Pro forma EBITDA - Dispositions		(31	)
Restricted stock expense and other non-cash items		8
Non-cash partnership adjustments		(39	)
Adjusted Credit Facility EBITDA	$	1,425
___________
Net Debt/EBITDA (per credit facility definition)		2.3	x

	GAAP Leverage Ratio
	September 30, 2017
Debt	$	3,961
Net income - trailing twelve months		606
GAAP Leverage Ratio		6.5	x