Investor Presentation

Transcription

1 Investor Presentation June 2018 FAIRMONT KEA LANI, MAUI

2 Forward-Looking Statements This investor presentation, and the related discussion, contains forward-looking statements. These include statements about Host Hotels & Resorts plans, strategies, financial performance, prospects or future events. Forward-looking statements are not guarantees of future performance. They involve known and unknown risks, uncertainties and assumptions and many of the factors that will determine these items are beyond our ability to control or predict. Consequently, our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking or listening for words such as approximates, believes, expects, anticipates, intends, plans, would, may or similar expressions in these slides or in the related discussion. Factors that may cause actual results to differ materially from those contemplated by the forward-looking statements include, but are not limited to, (i) changes in national and local economic and business conditions that will affect occupancy rates at our hotels and the demand for hotel products and services; (ii) operating risks associated with the hotel business, including the effect of increasing labor cost; (iii) risks associated with our ability to complete acquisitions and dispositions and develop new properties and the risks that acquisitions and new developments may not perform in accordance with our expectations; (iv) our ability to maintain our properties in a first-class manner, including meeting capital expenditures requirements, and the effect of renovations, including temporary closures, on our hotel occupancy and financial results; (v) our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; and (vi) those factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2017 under the heading Risk Factors, which is available on our website: Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this presentation is as of December 31, 2017 and the results presented are for the year ended December 31, 2017 unless otherwise noted, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or to changes in the Company s expectations. This investor presentation, and the related discussion, also contain certain non-gaap financial measures, which should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with generally accepted accounting principles ( GAAP ). Please refer to the Appendix of this presentation for a reconciliation of these non-gaap financial measures to the most directly comparable financial measures prepared in accordance with GAAP and definitions and calculation methodologies used for other defined terms used in this presentation. The brands and logos used in this presentation are the trademarks of our managers or their affiliates. The trademarked names and their logos are the property of their respective owners and are being used with the express permission of their owners. None of the owners of these trademarks has any responsibility or liability for any information contained in this presentation. Host Hotels & Resorts, L.P. Proprietary 2

3 World s Largest Lodging REIT $ THE WESTIN KIERLAND RESORT & SPA 94 Hotels ~$21 bn RevPAR 2 $228 (Top 40) Total RevPAR 2 $349 (Top 40) Takeaway bar 52,560 Rooms Worldwide Total Enterprise Value 1 $180 (Comparable) $274 (Comparable) THE LOGAN Only Lodging REIT In S&P 500 Highly Liquid Stock >7mm share Average Daily Volume (~$136mm) 3 MARRIOTT MARQUIS SAN DIEGO MARINA & MANCHESTER GRAND HYATT SAN DIEGO 1. See Appendix for calculation of Total Enterprise Value 2. See Appendix for a list of our top 40 hotels and a description of what we consider to be our comparable hotels 3. Average Daily Trading Volume between January 1, 2018 and March 30, Calculated by multiplying the daily share price by the daily volume and taking the average between January 1, 2018 and March 30, Based on data reported by Yahoo Finance as of March 31,

4 Reasons to Own Host JF: realign to fit full page Iconic and Irreplaceable Assets Unprecedented Scale and Integrated Platform Investment- Grade Balance Sheet Acquired $1.4bn of iconic and irreplaceable hotels since early 2017, each with very strong expected growth profiles $4.2bn of acquisitions since 2010, including Andaz Maui, Grand Hyatt San Francisco, Hyatt Regency Coconut Point, The Phoenician, The Don CeSar and Beach House Suites and W Hollywood, among others Top 40 assets have RevPAR and Total RevPAR of $228 and $349, respectively, one of the highest in the public lodging REIT sector Top 40 assets contribute $935mm of EBITDA or ~61% of Host total EBITDA 1 Geographically Diverse Portfolio with Strong Exposure to High Growth Markets No Metropolitan Statistical Area (MSA) represents more than 11% of Hotel EBITDA (11% of Net Income) 1 > 35% of Hotel EBITDA (35% of Net Income) originates from West Coast and Hawaii markets, the top performing markets with minimal supply growth expected in the near-term Multiple assets in specific markets facilitate management and sales force complexing, driving profitability and best practices Integrated Platform to Drive Performance Industry leading Enterprise Analytics platform drives strong operating performance across asset type and manager Resulted in Comparable Hotel EBITDA Margin expansion of ~560bps vs. ~300bps for peers since Track ~1.2bn discrete data points Greatest Leverage to Marriott / Starwood Merger Benefits >78% of Host portfolio (by room count) under global brand leader Marriott Host represents 11% of Marriott s North American full service distribution by room count, its largest customer Merger benefit from expected EBITDA margin expansion of 40bps to 50bps annually through 2020 Industry leading corporate responsibility program that delivers measurable results and recognition 2017 accomplishments and recognitions include NAREIT Leader in the Light Lodging/Resorts award, #1 Hotels, U.S. Listed company and Green Star ranking by GRESB, CDP Leadership ranking and listed on the Dow Jones Sustainability North America Index New Management and Organizational Structure; Best-in-Class Board C-Suite (CEO, CFO and CIO) promotions and additions over the last 18 months Realignment of Investments and Asset Management under CIO and Enterprise Analytics under CFO; changes encourage collaboration via interdepartmental teams to drive real estate value creation Tenured and experienced Board of Directors with demonstrated track record as best-in-class fiduciaries Only investment-grade lodging REIT Leverage 2.7x, interest coverage 9.2x as of March 31, Significant liquidity with ~$323mm of cash and $511mm of revolver capacity as of March 31, 2018 No assets are encumbered by debt, no maturities until 2020, 5+ year weighted average maturity $2.8bn returned to stockholders since 2015 via share buyback ($893mm) and dividends ($1.9bn) 1. See appendix for reconciliation of 2017 Hotel EBITDA to Hotel net income. 2. See slide 15 for further description and for comparable GAAP operating profit margins. 3. Host Leverage Ratio and Interest Coverage Ratio are calculated using Host s credit facility and senior notes definitions. March 31, 2018 GAAP leverage ratio is 6.4x and interest coverage ratio is 3.9x. See appendix for calculation methodology and reconciliations. 4

5 Near-Term Action Plan to Increase FFO and Total Return to Stockholders Acquire iconic and irreplaceable assets Focus on luxury and upper upscale resort and large convention center assets with high RevPAR and total RevPAR where projected supply is low ( supply CAGR 0.5% 1 ), and are located in the faster growing markets in North America Sharpen focus on U.S. by reducing international exposure Foreign exposure represents only 4% of our total EBITDA (5% of net income) Exited Australia in 2017 Explore the sale of our Euro JV interests in 2018 Optimize our financial decision making by utilizing deeper knowledge and experience in domestic markets Continue to leverage unique and proprietary enterprise analytics platform to optimize financial and operational results Established in early 2017 with the goal of creating a single source of truth to prioritize and direct appropriate resources for capital allocation and operating decisions Analyzes 1.2 bn discrete data points by leveraging Host s informational and portfolio scale Continue to focus on benchmarking, deep dives, and operational transformations to drive margin growth Partner with IBM Watson to co-develop a predictive analytics tool powered by artificial intelligence software Maintain an investment-grade balance sheet Keen focus on maintaining investment-grade rating. Provides dividend stability and financial flexibility As the only investment-grade lodging REIT, we are advantaged by our broad access to the most favorable capital costs in the industry Harvest benefit of recent leadership and organizational changes to emphasize real estate maximization Identify redevelopment / repositionings, excess space and land value creation opportunities, and ground lease purchases and modifications Enhance collaboration to make quicker and better informed decisions and increase accountability HYATT REGENCY COCONUT POINT RESORT & SPA GRAND HYATT SAN FRANCISCO ANDAZ MAUI AT WAILEA RESORT 1. Lodging Econometrics supply forecast for U.S. Resort and Convention Center hotels (>700 rooms) as of December

6 Uncomparable Scale Host is the largest lodging REIT by equity market capitalization with significant trading liquidity Equity Market Capitalization 1 (EMC) ($, bn) $13.9 $ x Market Cap of Closest Peer $4.0 $3.5 $3.4 $3.3 Average EMC: $4.0bn $2.4 $2.1 $1.7 Average Daily Trading Volume (ADTV) 3-month average 2 ($, mm) $136.5 $65.7 $ x Higher Liquidity than Closest Peer $31.9 $30.5 $25.6 Average 3-Month ADTV: $41.3mm $24.0 $24.0 $0.6 $8.1 $3.1 HST PK RHP RLJ SHO LHO PEB DRH CHSP AHT HST PK LHO SHO RLJ PEB DRH RHP CHSP AHT 1. Equity Market Capitalization as of March 31, Based on data reported by Yahoo Finance as of March 31, Average Daily Trading Volume calculated by multiplying the daily share price by the daily volume and taking the average between January 1, 2018 and March 30, Based on data reported by Yahoo Finance as of March 31,

7 Iconic and Irreplaceable Assets THE RITZ-CARLTON, NAPLES 7

8 Leading Owner of Iconic Assets Top 40 1 Host Hotels Rooms 26,852 52,560 RevPAR $228 $180 1 Total RevPAR $349 $274 1 Hotel EBITDA / Net Income (for Host) ($, mm) Hotel EBITDA per Key / Net Income per Key (for Host) ($, k) $935 $1,348 1 / $571 $35 $28 1 / $11 Hotel EBITDA Margin / Operating Profit Margin (for Host) 27% 28% 1 / 13% % Host Hotel EBITDA 61% 100% % Marriott / Starwood 74% 81% Note: Hotel EBITDA, EBITDA per key and Hotel EBITDA margins are non-gaap measures. See appendix for definitions of these measures and reconciliations to comparable GAAP measures. 1. Based on our comparable hotel set at December 31,

9 Top 40 Iconic Assets Cannot be Replicated FAIRMONT KEA LANI, MAUI 450 rooms $488 RevPAR $703 Total RevPAR THE RITZ-CARLTON, NAPLES 450 rooms $371 RevPAR $768 Total RevPAR THE W SEATTLE 424 rooms $204 RevPAR $258 Total RevPAR THE RITZ-CARLTON, MARINA DEL REY 304 rooms $299 RevPAR $469 Total RevPAR NEW YORK MARRIOTT MARQUIS 1,966 rooms $293 RevPAR $483 Total RevPAR HYATT REGENCY MAUI RESORT & SPA 806 rooms $279 RevPAR $483 Total RevPAR W HOLLYWOOD 305 rooms $266 RevPAR $473 Total RevPAR SAN FRANCISCO MARRIOTT MARQUIS 1,500 rooms $254 RevPAR $374 Total RevPAR THE RITZ-CARLTON, AMELIA ISLAND 446 rooms $248 RevPAR $563 Total RevPAR GRAND HYATT WASHINGTON 897 rooms $210 RevPAR $302 Total RevPAR MARRIOTT MARQUIS SAN DIEGO MARINA 1,360 rooms $207 RevPAR $353 Total RevPAR THE WESTIN CHICAGO RIVER NORTH 429 rooms $205 RevPAR $296 Total RevPAR 9

10 Top 40 Iconic Assets Cannot be Replicated Top 40 hotels have significant scale and unrivaled quality $228 RevPAR 2017 Host Top 40 1 vs. Peers RevPAR Total RevPAR $228 $349 $350 $207 $302 $349 Total RevPAR 108 RevPAR Index 2 EBITDA $, mm HST Top 40 Closest Peer PEB HST Top 40 Closest Peer RHP Next Closest PEB $935mm of Total EBITDA 1 $935 $758 $35k EBITDA per key HST Top 40 Closest Peer PK CORONADO ISLAND MARRIOTT RESORT & SPA 1. See appendix for reconciliations of EBITDA to net income and a listing of what we consider to be our peer companies. Peer information is based on company filed SEC data; our peers may calculate EBITDA differently and this presentation does not account for those differences. 2. See appendix for a description of how RevPAR index is calculated. 10

11 Unprecedented Geographic Diversification While Maintaining Complexing Synergies No MSA represents more than 11% of total EBITDA > 35% of Host Net Income and EBITDA from West Coast Sufficient concentration and scale in each market Drives complexing synergies Reduces volatility to provide long-term operational outperformance Supports comprehensive market knowledge to drive key financial decisions 2017 Host Net Income and EBITDA States with Host Assets Note: Map excludes unconsolidated and international properties. See appendix for reconciliation of EBITDA to net income by market. Location Net Income EBITDA San Diego 7% 11% New York 4% 9% San Francisco/San Jose 11% 8% Washington, D.C. (CBD) 8% 7% Maui/Oahu 8% 7% Boston 7% 6% Phoenix 4% 5% Florida Gulf Coast 6% 5% Orlando 5% 4% Chicago 4% 4% Northern Virginia 4% 4% Atlanta 4% 3% Los Angeles 4% 3% Orange County 3% 3% Seattle 3% 3% Houston 2% 2% New Orleans 3% 2% Jacksonville 3% 2% San Antonio 2% 2% Denver 1% 2% Philadelphia 1% 1% Miami 1% 1% Other Domestic 4% 4% International 1% 2% Total 100% 100% 11

12 Concentration in Resort and Convention Hotels to Benefit from Low Supply, the Best Predictor of RevPAR Growth Higher Concentration of Resort and Convention Hotels Resort and Convention Hotel Mix % of Total Rooms Favorable Supply Outlook U.S. Supply by Location Type 2 CAGR F 46.6% 2.7% 36.5% 0.6% 0.5% HST Peer Average 1 Resort Convention Total United States 1,010 bps greater resort and convention focus vs. peers Outsized benefit from strong leisure business 60 bps projected resort and 50 bps convention supply growth Resort and convention supply growth projected 210 bps lower than Total United States Host room count adjusted to include acquisition of Hyatt portfolio in March 2018 and disposition of Key Bridge Marriott and W New York. 1. See appendix for listing of what we consider to be our Peer companies; peer information is based on company filings. 2. Supply forecasts based on Host internal analysis & Lodging Econometrics pipeline data. 12

13 Unprecedented Scale and Integrated Platform THE PHOENICIAN, A LUXURY COLLECTION RESORT 13

14 Integrated Investment Management Platform to Optimize Operational and Financial Decision Making Enterprise Analytics Investments + Asset Management Development, Design & Construction Data analytics platform that tracks 1.2bn discrete data points Benchmarking historical performance, future opportunities, across all brands, operators, and geographies Top-down market research Identify and quantify value-add opportunities; provide analytics support across entire organization Source and close new property acquisitions and negotiate the related management contracts Execute property sales and development deals Responsible for managing brand relationships and negotiating modifications to existing management contracts to enable value enhancements projects Front line of real estate value creation Implement operational and real estate initiatives Two-way communication with properties and managers Bottom-up market research (i.e. boots on the ground); identify strengths, weaknesses, opportunities, and threats to properties In-house Development, Design & Construction expertise led by former head of development at Las Vegas Sands Manage renovations, replacements, and new developments Manage near and long-term capex needs with proprietary planning tools In-house Engineering & Technical Services protects and improves the value of buildings Procurement, estimating, and benchmarking leverage Host scale to buy below brand-managed programs Unlock the value of existing real estate with in-house entitlement expertise In-House Corporate Finance, Strategy and Legal Platform Accounting, tax, capital markets, investor relations and legal functions all in-house and run by long-tenured experts Serves as internal advisory group to support Host's operational units Platform to drive external growth 14

15 The Host Advantage and Platform Drive Performance Enterprise Analytics Investments Asset Management Development, Design & Construction 560 bps EBITDA margin expansion for our comparable hotels 1 Outperformance relative to peers to 2017 EBITDA Margin Expansion 258 bps 22.3% 27.9% 560 bps 302 bps HST Peer Average 11% CAGR 3 in Adjusted Funds From Operations per share over 7 years despite reduced leverage. 4 $ x MANCHESTER GRAND HYATT SAN DIEGO $ x 2011 March Hotel EBITDA margins are based on comparable hotels in each year, which will vary annually. Operating profit margins under GAAP were 6.5% in 2011 and 12.5% in See appendix for our definition of comparable properties and for reconciliations to the comparable GAAP margins. 2. See appendix for a listing of what we consider to be our peer companies and calculation methodology. Peer data is based on company SEC data; each of our peers may calculate EBITDA margins differently and this presentation does not account for those differences. 3. Earnings (loss) per diluted share: 2017-$0.76; 2012-$0.08; ($0.02); 2012 to 2017 CAGR-57%. See appendix for reconciliation of earnings (loss) per diluted share to Adjusted Funds From Operations per diluted share. 4. Host Leverage Ratio is calculated using Host s credit facility definition. GAAP leverage ratio is not meaningful for 2011 and 6.4x as of March 31, See Appendix for reconciliations. 15

16 Enterprise Analytics: Harvesting Advantages of Scale on Acquisitions 1.5mm ,000 88, bn Data points processed each month Unique charts of accounts Property attributes (e.g., market, size, location) Peer groups / competitive sets used for benchmarking Unique manager account / department combinations Total Discrete Data Points Right Asset and Market Right Price Right Time Strategic Insight group evaluates fit of proposed transaction given strategic framework of markets and asset types expected to outperform Impact to portfolio allocation is evaluated in terms of market concentration and diversity Expected market performance is based on proprietary statistical modeling Feasibility group underwriting reflects market, submarket, and asset potential Revenue Management & Business Intelligence groups identify revenue or margin opportunities, leveraging proprietary Business Intelligence systems Capital Financial Services group benchmarks capital spending requirements Examines impact of proposed transaction on net asset value and cash flow growth Opportunity is weighed against alternatives including other potential acquisitions, stock buyback, ROI investments, and dividend payments MANCHESTER GRAND HYATT SAN DIEGO W SEATTLE 16

17 Significant Benefits from Marriott-Starwood Merger Synergies Outsized Exposure to Marriott Host / Marriott Relationship Benefits Marriott-Starwood Merger Synergies Companies with highest exposure to Marriott-Starwood brands projected to recognize outsized growth benefits as Marriott embarks on 40bps to 50bps expected EBITDA margin expansion annually through 2020 from Starwood merger Focus on Marriott and Starwood Brands 1 78% 100% 77% 59% 51% 49% 42% 19% 17% -- 22% 23% 26% 26% 52% 100% 41% 10% 51% 49% 49% 51% 33% 49% 58% 81% 83% Peer Simple Average 46% 100% 42% Host is the largest owner of Marriott branded hotels in the U.S., with a 25-year relationship Outsized influence on brand standards and system changes Contractually required to spend only 5% of revenues on capex Contractual rights on additional items i.e., loyalty program and credit cards fees Top-Line Projected Growth Group Sales Sheraton brand improvement Projected Expense Savings Procurement Online travel agencies Credit card Rewards Centralized systems Workers compensation 18% 19% 17% HST RHP DRH AHT CHSP SHO RLJ PEB LHO PK Marriott Starwood Other Peer Simple Average Note: Excludes unconsolidated hotels. Host has been adjusted for the acquisition of 3 Hyatt assets and the sale of Key Bridge Marriott and W New York. 1. Percent affiliation to Marriott and Starwood brands is based on room count. 17

18 Disciplined Capital Recycling Program Recent Acquisitions Recent Dispositions $ 1.4bn Acquisition of high-quality irreplaceable assets: $ 870mm Dispositions including: Andaz Maui at Wailea Resort Grand Hyatt San Francisco Hyatt Regency Coconut Point Resort & Spa JW Marriott Desert Springs Resort & Spa Sheraton Memphis Downtown Sheraton Indianapolis Hotel at Keystone Crossing The Don CeSar and Beach House Suites W Hollywood Hilton Melbourne South Wharf Key Bridge Marriott W New York ~5.8% estimated 2018 cap rate 1 $277 of 2018E RevPAR $449 of 2018E Total RevPAR $47k 2018E EBITDA per key 1 Blended TTM cap rate of 5.4% 2 $152 TTM RevPAR $238 TTM Total RevPAR $18k TTM EBITDA per key 2 Recycle capital into high RevPAR hotels Iconic resorts and large city-center properties, consistent with our acquisition strategy Modern assets in excellent condition and limited near-term capital needs High-growth, desirable coastal markets with high barriers to entry Recycled capital out of low RevPAR hotels Disposed of high capital expenditures assets Marks our exit from low-growth markets that will underperform our portfolio in the near-term E cap rate using GAAP metrics is 4.1% and 2018E net income per key is $29k. See appendix for reconciliations. 2. TTM blended cap rate using GAAP metrics is (2.3)% and TTM net loss per key is $6k. See appendix for reconciliations. 18

19 Corporate Responsibility: Value Creation Through Sustainability Leadership $138mm $41mm $25mm ,000 Engineering Projects with Sustainability Attributes Energy & Water Saving ROI Projects Expected annual savings from combined investments Charities supported Hours volunteered by 200 employees We re committed to enhancing the value and profitability of our hotels through sustainable business practices. Our strategic framework follows three themes in order to inform the integration of sustainability into the business and guide engagement with our CR stakeholders. Responsible Investment Environmental Stewardship Corporate Citizenship Evaluate opportunities and climate change risks, invest in proven sustainability practices and enhance asset value, while improving environmental performance. Set environmental targets, monitor the performance of our responsible investments and measure our progress toward improving the environmental footprint of our properties. Strengthen our local communities through financial support, community engagement and volunteer service Performance Against 2020 Targets 1 GHG Energy Water Waste 2017 Accomplishments and Recognition HYATT REGENCY MAUI RESORT & SPA First resort in Hawaii to achieve LEED Silver EBOM status. Targets Progress 97.5% 28% Reduction Per Square Foot % 15% Reduction Per Square Foot % 25% Reduction Per Occupied Room 2 100% 50% Major reno projects with waste diversion DJSI NA Listed Leadership recognition #1 Hotels & US Listed 1 st Hospitality to achieve Lodging Category Winner Five LEED Properties Leadership Ranking 91% Participation Performance metrics pending assurance. 2. Against 2008 baseline year. 19

20 Investment- Grade Balance Sheet GRAND HYATT WASHINGTON 20

21 Investment-Grade Balance Sheet Positions the Company for Growth Host is the only investmentgrade lodging REIT Only Investment-Grade Hotel REIT (Net Debt + Preferred) / EBITDA vs. Peers 1 9.2x 5.4x 4.3x 4.0x 3.9x 3.7x 3.6x Powerful balance sheet and ample debt capacity provide flexibility to be opportunistic throughout the cycle Strong Liquidity $ 323mm Cash + (as of March 31, 2018) 2.7x 2.6x $ 511mm Revolver capacity 1.7x AHT RHP CHSP RLJ PK DRH PEB HST LHO SHO 5.6x Blue Chip REIT Peer Avg. 4.3x Lodging REIT Peer Avg. 2.7x HST Balanced and Well-Laddered Maturities as of December 31, 2017 ($ in mm) $500 $500 $978 $178 $500 $350 $850 $406 $300 $350 $850 $400 $500 $400 $6 $500 $ Senior Notes 2 2 Term Loan (¹) Revolver (¹) Other Debt No maturity until years of weighted average maturity 100% of consolidated assets unencumbered 1. Host leverage is shown as of March 31, 2018 and calculated using Host s credit facility definition. HST March 31, 2018 GAAP leverage ratio is 6.4x. See Appendix for reconciliations for Host. Peer leverage is based on data reported in company data and SEC filings. Companies may calculate EBITDA and other ratio components differently and this presentation does not account for these differences. See Appendix for listing of what we consider to be our Lodging REIT and Blue Chip peers and calculation methodology The term loan and revolver under Host s credit facility that are due in 2021 have extension options that would extend the maturity of both instruments to 2022, subject to meeting certain conditions, including payment of a fee.

22 Strong Free Cash Flow Generation Provides Multiple Levers to Improve Stockholder Returns Strong Free Cash Flow Generation 1 ($ mm) Robust Dividend Coverage Ratio, and Flexibility to Grow $1, F Adjusted EBITDAre 1 Ability to continue to pay dividends even through significant downturns differentiates Host from peers ($178) 2018F Cash Interest Expense ($310) 2018F Renewals & Replacement Capex ($76) 2018F Adjustment for Taxes & Other $ F Free Cash Flow $1, F EBITDAre 25% EBITDAre Decline $1, F EBITDAre $178 $310 $57 $600 Cash Interest Payments Renewals & Replacement Capex Adj. for Taxes & Others cash still available to cover dividends ($600) 2018F Dividend 2 $ F Discretionary Free Cash Flow 3 2 Significant balance sheet capacity provides Host flexibility to opportunistically acquire assets or buyback shares while maintaining investment-grade rating 1. Figures represent mid-point of Company provided guidance for FY 2018 as of May 2, Figures in millions. See appendix for reconciliation of net income to Adjusted EBITDAre. 2. Assumes $0.80/sh of annual dividends based on the regular dividend of $0.20 declared in Q All dividends are subject to approval by the Board of Directors F GAAP Cash Provided by Operating Activities is $1,271 million. See appendix for reconciliation of 2018F GAAP Cash Provided by Operating Activities to Discretionary Free Cash Flow. 22

23 Premier Management Team THE DON CESAR 23

24 Experienced Management Team JAMES F. RISOLEO PRESIDENT & CEO EXPERIENCE: 40 YEARS HOST TENURE: 21 YEARS MICHAEL D. BLUHM EVP & CFO EXPERIENCE: 28 YEARS HOST TENURE: <1 YEAR NATHAN S. TYRRELL EVP & CIO EXPERIENCE: 23 YEARS HOST TENURE: 13 YEARS ELIZABETH A. ABDOO EVP & GENERAL COUNSEL EXPERIENCE: 30 YEARS HOST TENURE: 17 YEARS JOANNE G. HAMILTON EVP, HUMAN RESOURCES EXPERIENCE: 35 YEARS HOST TENURE: 8 YEARS MICHAEL E. LENTZ MD, DESIGN, DEVELOPMENT & CONSTRUCTION EXPERIENCE: 31 YEARS HOST TENURE: 2 YEARS BRET D.S. MCLEOD SVP & TREASURER EXPERIENCE: 14 YEARS HOST TENURE: 14 YEARS JEFFREY S. CLARK SVP, TAX EXPERIENCE: 35 YEARS HOST TENURE: 13 YEARS BRIAN G. MACNAMARA SVP, CORPORATE CONTROLLER EXPERIENCE: 29 YEARS HOST TENURE: 22 YEARS SOURAV GHOSH SVP, ENTERPRISE ANALYTICS EXPERIENCE: 20 YEARS HOST TENURE: 9 YEARS CHRIS OSTAPOVICZ SVP, ASSET MANAGEMENT EXPERIENCE: 28 YEARS HOST TENURE: 10 YEARS 24

25 Accomplished Board of Directors RICHARD E. MARRIOTT CHAIRMAN OF THE BOARD Served as Chairman since 1993 JAMES F. RISOLEO PRESIDENT & CEO MARY L. BAGLIVO Former chair and chief executive officer of the Americas for Saatchi & Saatchi Worldwide. Member of the board of directors of PVH Corp and Ruth s Hospitality Group SHEILA C. BAIR Former Chair of the FDIC. Member of the board of directors for Thomson Reuters Corporation, Volcker Alliance, Avant, Inc. and Paxos Trust Company ANN MCLAUGHLIN KOROLOGOS Former Chair of the RAND Corporation Board of Trustees. Member of the board of directors for Michael Kors SANDEEP L. MATHRANI Current CEO and Director of GGP. Inc. Member of the board of directors for Century 21, Inc. JOHN B. MORSE, JR. Former CFO of The Washington Post Company. Chairman of the board for AES Corporation MARY HOGAN PREUSSE Former managing director and co-head of Americas Real Estate at APG Asset Management. Member of the board of directors for Digital Realty, Kimco Realty and VEREIT WALTER C. RAKOWICH Former CEO of Prologis. Member of the board of directors for Iron Mountain Incorporated and Ventas GORDON H. SMITH Former United States Senator & current CEO of the National Association of Broadcasters. Chairman of the board of Smith Frozen Foods A. WILLIAM STEIN CEO and Director of Digital Realty Trust, Inc. Best-In-Class Governance Diverse Board (36% women) Strong independent oversight 9 out of 11 directors independent, with Chairman of the Board separate from CEO, independent Lead Director and four Audit Committee members are financial experts Adopted proxy access rights Stockholder power to amend Bylaws Allowed Company s stockholder rights plan to expire Opted out of the Maryland Control Share Acquisition Act Opted out of the provisions of the Maryland Unsolicited Takeover Act that permit the Board to classify itself without a stockholder vote 25

26 Investor Relations Contacts BOSTON MARRIOTT COPLEY PLACE GEE LINGBERG BRET MCLEOD VP Corporate Finance & IR SVP & Treasurer Corporate Finance & IR

27 Case Studies ANDAZ MAUI AT WAILEA RESORT 27

28 Acquired Three Iconic Hyatt Hotels ANDAZ MAUI AT WAILEA RESORT 301 ROOMS 70k FT 2 MEETING SPACE 5 F&B OUTLETS 4 POOLS FITNESS CENTER & SPA GRAND HYATT SAN FRANCISCO 668 ROOMS 30k FT 2 MEETING SPACE 2 F&B OUTLETS FITNESS & BUSINESS CENTERS HYATT REGENCY COCONUT POINT RESORT & SPA 454 ROOMS 75k FT 2 MEETING SPACE 7 F&B OUTLETS 4 POOLS SPA, SALON, TENNIS COURTS, GYM & KIDS CLUB Investment Highlights Acquired March 29, 2018 Three iconic assets in expected high-growth coastal markets Total price of $1bn; ~$700k/key Going-in 5% cap rate targeted to stabilize at 6.4% by 2020 Strong existing Hyatt relationship Host-initiated process Previous relationship with property general managers Owned 10 Hyatts prior to transaction Increased opportunity to complex existing assets Outstanding capital recycling Sold: $870mm of low growth, low RevPAR, high-capex, asset sales at just north of 5% cap rate Acquired: $1bn of high growth, high RevPAR, low-capex iconic assets for 5% cap rate The Host Advantage Deal Metrics Iconic and Irreplaceable Assets 2017 RevPAR of $277 and 2017 Total RevPAR of $430; portfolio collectively ranks top 10 in RevPAR; Andaz Maui ranks #2 and Grand Hyatt San Francisco #8 High free cash flow conversion given high RevPAR of properties Top growth markets in the country with virtually no expected near-term supply. RevPAR growth projected significantly higher than existing portfolio Beneficiaries of $270mm capital spend since 2010; minimal near-term capital required; each asset exemplary of Hyatt brand; high RevPAR means higher likelihood of living within reserve Unprecedented Scale and Integrated Platform Leveraging Host s strong relationship (largest third-party owner of Hyatt hotels) with Hyatt and ability to move quickly; under contract within 4 weeks Using Enterprise Analytics platform to identify cost savings opportunities through complexing and benchmarking to our existing assets in Maui, San Francisco and West Florida Investment-Grade Balance Sheet Ability to fund 100% with cash, utilizing balance sheet capacity to close a large transaction with certainty; differentiation from peers during period of incredible market volatility (January 2018) Purchase price $1 billion, or $700k per key GOING-IN 1 5.0% Cap rate STABILIZED 2 6.4% Cap rate 1. Going-in cap rate on 2018E, 2018E cap rate using GAAP metrics is 3.6%; See appendix for reconciliation. 2. Stabilized cap rate on 2020E. 2020E cap rate using GAAP metrics is 5.1%; See appendix for reconciliation estimated results are illustrative only, as actual results are expected to vary, which variations have been material in the past. See appendix for items that may affect forecasted results. 28

29 Andaz Maui at Wailea Resort 301 ROOMS 70k FT 2 MEETING SPACE 5 F&B OUTLETS 4 POOLS FITNESS CENTER AND SPA Asset Profile 2017 Operating results: ADR: $531 Occupancy 85% RevPAR $453 (Ranks #2 in the portfolio) EBITDA per key $72k 1 Reopened in 2013 after a $150mm repositioning minimal capex needs over the next 5 years Location benefits from over 600 feet of direct beachfront along Mokapu Beach, with immediate proximity to Wailea s diverse offerings: Three championship golf courses Retail, including the Shops at Wailea Multiple destination dining and entertainment options Fee simple, 15.5 acres on prime oceanfront land in Wailea, Maui Investment Highlights Newest asset on the best beach in Hawaii in one of the strongest expected growth markets in the U.S. Full transformative $150mm repositioning ($498k/key of capex) from Renaissance to Andaz in 2013 Identified $2.5mm - $3mm of initial cost savings: Work to optimize and close EBITDA margin gap: Andaz EBITDA margin of 27% vs Fairmont Kea Lani s EBITDA margin of 35%; EBITDA per key gap closure ($90k vs $72k) 1 Each 100bps increase in margin equates to ~20bps increase in cap rate Potential cost savings from time and motion studies and from implementing best practices derived from our proprietary Business Intelligence system Complexing synergies with our Hyatt Regency Maui Resort and Fairmont Kea Lani, Maui Solar Energy ROI Re-evaluation of retail spaces Potential to develop 19 new high-end villas: Not underwritten, an incremental opportunity, although the carrying cost of land is included in operating expense Additional revenue opportunities: Luau, increase in resort fees, implement parking fees 1. Andaz Maui 2017 net income per key is $46k and GAAP operating profit margin is 17%; See appendix for reconciliations. 29

30 Grand Hyatt San Francisco 668 ROOMS 30k FT 2 MEETING SPACE 2 F&B OUTLETS FITNESS AND BUSINESS CENTERS Asset Profile 2017 Operating results: ADR: $296 Occupancy 92% RevPAR $272 (Ranks #8 in the portfolio) EBITDA per key $27k 1 Since 2010, $84mm of renovations minimal capex needs over the next 5 years Located 4 blocks from financial district and within 15 minutes walking distance of Moscone Center Flagship Apple store on premises Investment Highlights Prime location, best urban location in the U.S.; Union Square San Francisco Positioned to benefit from record-setting citywide pace following Moscone expansion Asset in excellent condition $84mm of renovations ($126k/key) since 2010 Identified $3mm - $6mm of initial cost savings: Work to close EBITDA margin gap: Grand Hyatt EBITDA margin of 22% vs Marriott Marquis EBITDA margin of 26% 1 Each 100bps increase in margin equates to ~20bps increase in cap rate Potential cost savings from time and motion studies and from implementing best practices derived from our proprietary Business Intelligence system Complexing synergies with our Hyatt Regency San Francisco Airport and San Francisco Marriott Marquis Restaurant and catering reconcepting initiatives Fee Simple, 0.87 acres in superior Union Square location 1. Grand Hyatt San Francisco 2017 net income per key is $12k and GAAP operating profit margin is 10%; See appendix for reconciliations. 30

31 Hyatt Regency Coconut Point Resort & Spa 454 ROOMS 75k FT 2 MEETING SPACE 7 F&B OUTLETS 4 POOLS SPA, SALON, TENNIS COURTS, FITNESS CENTER AND KIDS CLUB Asset Profile 2017 Operating results ADR: $224 Occupancy 74% RevPAR $166 EBITDA per key $32k 1 $40mm in renovations since 2012 minimal capex needs over next 10 years Activity-filled amenity base: Two-acre pool area with waterfalls, lazy river, and three 3-story waterslides 18-hole Raptor Bay golf course Video Arcade Rock Climbing Kayaking Camp Hyatt Fee Simple, 26 acres overlooking Estero Bay and Gulf of Mexico Investment Highlights Prime gulf coast Florida resort Positioned to benefit from demand from the Caribbean and expected continued leisure demand strength Hyatt Regency branded hotel in excellent condition 26 acres providing potential for ROI opportunities, not underwritten No near-term competitive supply Benchmark with The Ritz-Carlton, Naples, The Don CeSar and Fort Lauderdale Marriott Harbor Beach Resort & Spa Operational Opportunities: identified potential $800k of cost savings from time and motion studies and from implementing best practices derived from our proprietary Business Intelligence system Additional revenue opportunities: parking fees net income per key is $20k; See appendix for reconciliations. 31

32 The Phoenician, A Luxury Collection Resort k 9 SPA, SALON, GOLF, TENNIS COURTS, ROOMS FT 2 EVENT SPACE FITNESS CENTER, AND RETAIL SHOPS F&B OUTLETS POOLS 7 Investment Highlights Acquired June 8, 2015 Renowned resort icon AAA Fivediamond luxury trophy destination resort Landmark site with 300 acres of land on Camelback Mountain Significant discount to replacement cost (est. $650mm) Rooms considerably larger than market average, with all accommodations offering private balconies or patios Value creation opportunities on 60 acres of land The Host Advantage Deal Metrics Iconic and Irreplaceable Assets Generational trophy asset; top 40 Host asset 2017 RevPAR of $193 and 2017 Total RevPAR of $417; 2017 EBITDA per key of $34k 1 Unprecedented Scale and Integrated Platform ~$500mm capital investment limited bidder universe Host saw significant opportunity to benchmark against its other assets in the Scottsdale market and other resorts to potentially increase profitability by 400bps; Complexing w/ The Westin Kierland Resort & Spa Entitled additional 38 acres of golf course for residential development, creating $60 - $70mm of potential net proceeds in excess of underwriting for 2019 and beyond Investment-Grade Balance Sheet Ability to fund 100% with cash, utilizing balance sheet capacity to close a large transaction with certainty Capability to take on full redevelopment project without material impact to portfolio-level performance Invested capital of $484mm GOING-IN 2 6.6% Cap rate STABILIZED 3 7.9% Cap rate net income per key is $(1)k ; See appendix for reconciliations. 2. Going-in cap rate on 2015E at time of underwriting and $400mm purchase price cap rate using GAAP metrics is 4.2%; See appendix for reconciliation. 3. Stabilized cap rate on 2020E and net invested capital of $436mm, calculated as $400mm purchase price + $84mm capital improvement - $48mm NPV of net proceeds from land sale (NPV assumes $60mm in net proceeds in three years and 8% discount rate). 2020E cap rate using GAAP metrics is 4.0%; See appendix for reconciliation estimated results are illustrative only, as actual results are expected to vary, which variations have been material in the past. See appendix for items that may affect forecasted results. 32

33 The Don CeSar k 7 SPA, SALON, POOLS, WATER SPORTS RENTALS, ROOMS FT 2 EVENT SPACE F&B OUTLETS FITNESS CENTER AND RETAIL SHOPS Investment Highlights Acquired February 16, 2017 An iconic, beachfront landmark on Florida s Gulf Coast Conversion from brand managed (Loews) to independent managed (Davidson and Pivot Hotels) Significant discount to replacement cost Limited supply growth / high barriers to entry Cost savings identified in due diligence from benchmarking of Host-owned assets Additional upside via shovel-ready ROI opportunities that could produce incremental IRRs of 15-18% The Host Advantage Deal Metrics Iconic and Irreplaceable Assets The legendary pink palace of St. Pete Beach 2017 RevPAR of $208 and 2017 Total RevPAR of $434; 2017 EBITDA per key of $46k 1 Unprecedented Scale and Integrated Platform Enterprise Analytics identified $3mm - $4mm of potential cost saving opportunities early on during due diligence by benchmarking to similar Florida beach resorts. Savings primarily from labor and productivity improvements Host was able to leverage its relationship with Davidson Hotels & Resorts Pivot group to capitalize on the iconic and historical nature of the resort to convert to an independent brand, eliminating all brand-related expenses without sacrificing top line performance Investment-Grade Balance Sheet Ability to fund 100% with cash, utilizing balance sheet capacity to close a large transaction with certainty Purchase price $214mm GOING-IN 2 6.6% Cap rate STABILIZED 3 7.9% Cap rate net income per key is $31k ; See appendix for reconciliations. 2. Going-in cap rate on 2017E at time of underwriting and $214mm purchase price. 2017F cap rate using GAAP metrics is 4.7%; See appendix for reconciliation. 3. Stabilized cap rate on 2018E and net invested capital of $215mm, calculated as $214mm purchase price + $1.3mm capital improvement. 2018E cap rate using GAAP metrics is 5.9%; See appendix for reconciliation. See appendix for items that may affect forecasted results. 33

34 New 280k Square Foot Exhibit Hall at Marriott Marquis San Diego Marina 1,360 ROOMS 150k FT 2 ADDITIONAL EVENT SPACE 85k FT 2 OF OUTDOOR USABLE SPACE Investment Highlights Completed June 2016 on-time and below budget Opportunity to create a best-in-class meeting space platform, with two 36k sf ballrooms, 60k sf of foyer space and a 27k sf terrace event venue Enabled the asset to selectively participate in citywide events and focus on higher rated in-house group business Improved yield management of room inventory as well as profitability Enabled 22-year land lease extension option 127k / 280k sf event space prior / post Certified LEED Silver The Host Advantage Deal Metrics Iconic and Irreplaceable Assets Waterfront hotel within walking distance to the best of downtown 2017 RevPAR of $207 and 2017 Total RevPAR of $353; 2017 EBITDA per key of $42k 1 Unprecedented Scale and Integrated Platform Disruption minimized by transferring groups to neighboring Manchester Grand Hyatt San Diego In-house Development, Design & Construction team was able to effectively manage the $100mm+ project and minimize cost overruns Enterprise Analytics team projected property revenues and optimized construction start date based on historical group and leisure patterns Created gross real estate value of $311mm 2 Investment-Grade Balance Sheet Ability to fund 100% with cash, utilizing balance sheet capacity to reposition the asset Built a new state-ofthe-art exhibit hall, ballroom and prefunction area PROJECT COST $103mm $675 per sf 2015 Pre-reno NOI / 2017 Post-reno NOI $35mm / $48mm REALIZED CASH- ON-CASH RETURN 13% net income per key is $18k ; See appendix for reconciliations. 2. Includes $103mm investment plus $208mm value creation ($13mm incremental NOI at a 6.25% cap rate). 34

35 SAN FRANCISCO MARRIOTT MARQUIS Appendix 35

36 APPENDIX PAGE NO. APPENDIX TABLE OF CONTENTS Key Terms and Statistics... A-1 Defined Terms... A-1 Non-GAAP Financial Measures... A-1 Lodging and Blue Chip REIT Peer Groups... A-6 Comparable Hotel Operating Statistics... A-7 Items that may Affect Forecast Results, Projections and Other Estimates... A-8 Top 40 Domestic Hotels by RevPAR (Slides 3, 4, 8, 10)... A-9 Host Portfolio Statistics vs. Peers A-11 Performance metrics (RevPAR, Total RevPAR, EBITDA) (Slide 10)... A-11 Resorts & Convention Mix (Slide 12)... A-11 Reconciliation of Hotel EBITDA to Hotel Net Income by Location (Slides 4, 11)... A-12 Capitalization and Total Enterprise Value (Slide 3)... A-13 Comparison of Comparable Hotel EBITDA Margin Growth to Lodging REITs (Slides 4, 8, 15)... A-14 Reconciliation of GAAP Leverage Ratio to Credit Facility Leverage Ratio (Slides 4, 15, 21)... A-18 Leverage Ratios of Blue Chip REITs and Lodging REITs Peer Groups (Slide 21)... A-20 Reconciliation of GAAP Interest Coverage Ratio to EBITDA Interest Coverage Ratio (Slides 4)... A- 21 Reconciliation of Net Income to Adjusted FFO per Diluted Share and CAGR (Slide 15)... A-22 Acquisitions & Dispositions Metrics (Slides 18, 28-34)... A Outlook (Slide 22)... A-25 Reconciliation of Net Income to EBITDA, EBITDAre, and Adjusted EBITDAre for 2018 Forecast... A-25 Reconciliation of GAAP Cash Provided By Operating Activities to Discretionary Free Cash Flow for 2018 Forecast... A-25

37 Key Terms and Statistics DEFINED TERMS Cash-on-cash return The cash return for the first year of operations from a respective Investment. It is calculated as the incremental increase in cash flow from operations as a result of the project, including any cost savings, divided by the Investment. CAGR Compound Annual Growth Rate. The mean annual growth rate of an investment over a specified period of time longer than one year. Cap Rate Capitalization Rate, calculated as Net Operating Income (NOI) divided by sales price. Investment Our investment of cash, land or other property. IRR Internal rate of return. Net Operating Income (NOI) NOI for a specific hotel or capital expenditure project is calculated as the hotel or entity level EBITDA less an estimate for the annual contractual reserve requirements for renewal and replacement expenditures. Replacement Cost The cost to develop a new hotel in the same lodging segment based on current estimated costs. RevPAR Index RevPAR Index measures a hotel s fair market share of their competitive set s revenue per available room within a given market by dividing the property s RevPAR by the average RevPAR of the competitive set. If a hotel is capturing its fair market share, the index will be 100; if capturing less than its fair market share, a hotel s index will be less than 100; and if capturing more than its fair market share, a hotel s index will be greater than 100. For each property, the market competitive set is based on the set agreed to with the manager and is included within the respective property s management agreement. The competitive set can be used for various purposes, including for determining the hotel general manager s compensation as well as owner s performance based termination rights under the hotel management agreement. Therefore, it represents an arm s length negotiated set of hotels which the parties agree represent the hotel s most direct competition. However, it does not necessarily represent all the hotels against which the hotel competes and may exclude hotels in other segments (e.g., select service hotels) even though those hotels may compete with the hotel for certain customers. RevPAR The product of the average daily room rate charged and the average daily occupancy achieved. Total RevPAR A summary measure of hotel results calculated by dividing the sum of room, food and beverage and other ancillary service revenue by room nights available to guests for the period. It includes ancillary revenues not included within RevPAR. TTM Trailing twelve months NON-GAAP FINANCIAL MEASURES Included in this presentation are certain 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. They are as follows: (i) FFO and FFO per diluted share (both NAREIT and Adjusted), (ii) EBITDA, (iii) EBITDAre and Adjusted EBITDAre (iv) Comparable Hotel Property Level Operating Results, including Comparable Hotel EBITDA margin and (v) Discretionary Free Cash Flow. Additionally, we have presented leverage and interest coverage ratios, which are used to determine compliance with financial covenants under our credit facility and senior notes indenture that are not calculated and presented in A-1

38 Key Terms and Statistics accordance with GAAP. The following discussion defines these measures and presents why we believe they are useful supplemental measures of our performance. NAREIT FFO and NAREIT FFO per Diluted Share We present NAREIT FFO and NAREIT FFO per diluted share as non-gaap measures of our performance in addition to our earnings per share (calculated in accordance with GAAP). We calculate NAREIT FFO per diluted share as our NAREIT FFO (defined as set forth below) for a given operating period, as adjusted for the effect of dilutive securities, divided by the number of fully diluted shares outstanding during such period, in accordance with NAREIT guidelines. NAREIT defines FFO as net income (calculated in accordance with GAAP) excluding gains and losses from sales of real estate, the cumulative effect of changes in accounting principles, real estate-related depreciation, amortization and impairments and adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect our pro rata share of the FFO of those entities on the same basis. We believe that NAREIT FFO per diluted share is a useful supplemental measure of our operating performance and that the presentation of NAREIT FFO per diluted share, when combined with the primary GAAP presentation of earnings per share, provides beneficial information to investors. By excluding the effect of real estate depreciation, amortization, impairments and gains and losses from sales of depreciable real estate, all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance, we believe that such measures can facilitate comparisons of operating performance between periods and with other REITs, even though NAREIT FFO per diluted share does not represent an amount that accrues directly to holders of our common stock. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. As noted by NAREIT in its April 2002 White Paper on Funds From Operations, since real estate values have historically risen or fallen with market conditions, many industry investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For these reasons, NAREIT adopted the FFO metric in order to promote an industry-wide measure of REIT operating performance. Adjusted FFO per Diluted Share We also present Adjusted FFO per diluted share when evaluating our performance because management believes that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance. Management historically has made the adjustments detailed below in evaluating our performance, in our annual budget process and for our compensation programs. We believe that the presentation of Adjusted FFO per diluted share, when combined with both the primary GAAP presentation of earnings per share and FFO per diluted share as defined by NAREIT, provides useful supplemental information that is beneficial to an investor s understanding of our operating performance. We adjust NAREIT FFO per diluted share for the following items, which may occur in any period, and refer to this measure as Adjusted FFO per diluted share: Gains and Losses on the Extinguishment of Debt We exclude the effect of finance charges and premiums associated with the extinguishment of debt, including the acceleration of the write-off of deferred financing costs associated with the original issuance of the debt being redeemed or retired and incremental interest expense incurred during the refinancing period. We also exclude the gains on debt repurchases and the original issuance costs associated with the retirement of preferred stock. We believe that these items are not reflective of our ongoing finance costs. Litigation Gains and Losses We exclude the effect of gains or losses associated with litigation recorded under GAAP that we consider outside the ordinary course of business. We believe that including these items is not consistent with our ongoing operating performance. A-2