James F. Risoleo
President, Chief Executive Officer and Director at Host Hotels & Resorts
Thank you, Jaime, and thanks to everyone for joining us this morning. Despite the uncertainty of COVID-19 variants, we significantly outperformed expectations during the fourth quarter and substantially beat consensus metrics for the year. We delivered adjusted EBITDAre of $242 million, which exceeded our interest in capital expenditures by $68 million and achieved adjusted FFO per share of $0.29 during the quarter. In addition to delivering positive metrics each quarter, we achieved meaningful sequential increases each quarter throughout 2021. Pro forma total revenues in the fourth quarter grew 20% compared to the third quarter while pro forma hotel level operating expenses increased only 15%. RevPAR for the fourth quarter was $148 as volume and rates continue to hold up at our hotels in Sunbelt markets. This is the highest quarterly RevPAR we have seen since the onset of the pandemic and closed out a year of strong sequential improvements. RevPAR improved 13% compared to the third quarter despite some softening of demand in late December due to the Omicron variant. Our recent acquisitions, which I will touch on shortly, all contributed to our outperformance during the fourth quarter and are exceeding our underwriting expectations. Preliminary January RevPAR, it's expected to be approximately $105, a 130% increase over January 2021. Our preliminary February RevPAR forecast is expected to be $150 to $155, and we expect a significant pickup across business segments in March, which is consistent with the recovery we experienced following the Delta variant. In addition to delivering significant operational improvements, we continue to be recognized as a global leader in corporate responsibility.
Our 2025 emissions target is verified by the Science Based Targets initiative at the 1.5-degree Celsius ambition level, making Host the first hospitality company and among the first three real estate companies in North America to set emissions reduction targets in line with the Paris Agreement's highest level of ambition. To complement our environmental targets, we were the first lodging REIT to issue social targets, including two diversity-related targets and one employee engagement target. We also continue to execute on our three strategic objectives, all of which are aimed at elevating the EBITDA growth profile of our portfolio. As a reminder, our objectives include redefining the hotel operating model with our operators, gaining market share at renovated hotels and strategically allocating capital. As it relates to the last strategic objective, during the fourth quarter, we acquired two hotels and sold six hotels. Subsequent to quarter end, we sold one additional hotel. This brings our total early cycle acquisitions to $1.6 billion at a blended 13 times EBITDA multiple, and our dispositions to approximately $1 billion at a 15.4 times EBITDA multiple, including estimated foregone capital expenditures of $290 million. This is a continuation of our strategy to deploy capital into assets that we believe will elevate the EBITDA growth profile of our portfolio. As a refresher, our 2021 acquisitions included the Hyatt Regency Austin, Four Seasons Orlando at Walt Disney World, Baker's Cay Resort and Key Largo, The Laura Hotel in Houston, Alila Ventana Big Sur, the Alida, Savannah and Hotel Van Zandt in Austin. We also acquired the Royal Kaanapali, and Kaanapali Kai golf courses in Maui. All of our recent acquisitions are performing substantially ahead of our underwriting expectations. For the full year 2021, EBITDA at our new acquisitions was $37 million higher than the full year 2021 EBITDA that was estimated in underwriting, which represents a 73% increase and the golf courses were $4 million higher. Turning to our fourth quarter acquisitions. In December, we closed on the Alida, Savannah, a 173 key boutique hotel for approximately $103 million. This newly constructed hotel opened in October 2018 and benefits from soft branding and Marriott's Tribute portfolio. With no expected near-term capex, favorable operating costs and multiple demand drivers stabilization for the Alida is expected in the 2024 to 2025 time frame at approximately 11 to 12 times EBITDA. In addition, in December, we acquired our second hotel in Austin, the Hotel Van Zandt, a 319 key luxury lifestyle hotel for approximately $246 million including its $4 million FF&E reserve. The acquisition price represents a 13.2 times multiple on 2019 EBITDA.
We funded the acquisition with approximately $140 million in proceeds from recent dispositions and assumed approximately $102 million of existing secured debt. Located adjacent to Austin's popular Rainey Street entertainment district, this recently constructed hotel opened in 2015 and is poised to benefit from continued large-scale development. We expect the hotel to stabilize at approximately 10 to 12 times EBITDA in the 2025 to 2027 time frame. On the dispositions front, we sold the 305 key W Hollywood in December for $197 million or 25 times 2019 EBITDA. When calculating the EBITDA multiple, we included $33 million of estimated foregone capex over the next five years. This is the third ground lease asset we sold in 2021. In addition, subsequent to quarter end, we sold the 1,220 key Sheraton Boston for $233 million or 14.2 times 2019 EBITDA. When calculating the EBITDA multiple, we included $135 million of estimated foregone capex over the next five years. In connection with the sale, we are providing a $163 million bridge loan to the purchaser, which we expect will be repaid within its first six-month term. Looking back on our transaction activity since 2018, we have acquired $3.2 billion of assets at a 14 times EBITDA multiple and disposed of $4.5 billion of assets at a 17 times EBITDA multiple, including $793 million of foregone capex over the next five years. With these transactions, we have dramatically improved the quality of our portfolio. Comparing pro forma 2019 results for our current portfolio to 2017, we have increased the RevPAR of our assets by 11%. The EBITDA per key by 20% and the EBITDA margins by 120 basis points. As we continue to evaluate capital allocation opportunities going forward, our efforts will remain focused on assets that further bolster our EBITDA growth profile. As part of our capital allocation efforts, in January, we acquired a 49% interest in the asset management platform of Noble Investment Group to cultivate innovative hospitality opportunities within Noble's private fund platform. We invested $90.7 million in its fee-based asset management business, comprising $35 million of cash and $55.7 million of equity or three million operating partnership units, which are subject to a 1-year lockup period. In the future, we also have the ability to acquire an additional 26% to 51% in Noble, which would bring our aggregate interest to between 75% and 100%.
In addition, we have made a $150 million LP commitment to the next Noble fund. Based on our current ownership interest, we are targeting average net expected earnings of $7 million to $10 million annually over the next three years. Over the past three decades, Noble has invested nearly $5 billion in acquiring and developing approximately 150 assets and the branded upscale select service and extended-stay segments across 84 markets in the U.S. Founded in 1993 by Mit Shah, who remains the CEO, the Noble team has a multi-cycle track record and extensive experience sourcing investment opportunities in real estate and capital markets. Our investment represents yet another opportunity to elevate the EBITDA growth profile of our portfolio by creating a new income source from recurring management and development fees and allowing for investment in select service hotels, extended-stay hotels and new development opportunities. The partnership will combine Noble's strong track record, development, achievement in the select service and extended-stay categories and fund management experience with our scale, market insights and data analytics to source differentiated investment opportunities. By capitalizing on Noble's deep expertise, we will have the ability to incubate and invest in future lodging adjacent strategies, thereby creating additional paths for long-term strategic value creation. Those strategies include property technology solutions, development and alternative lodging. We believe a fund vehicle is one of the best ways to gain change, scale, diversification, as Noble's expertise with select service and extended-stay hotels will preserve our focus on investing in upper upscale and luxury hotels and resorts. Moving on to fourth quarter operations, we continue to close the gap to 2019. Transient demand in the fourth quarter was 82% of 2019 levels compared to 77% in the third quarter and 58% in the first half of 2021, and we are encouraged that transient rate in each of the four quarters in 2021 exceeded rates in 2019. Our hotels also saw continued improvement in group during the fourth quarter compared to the third quarter, driven by demand growth of 15% and a 17% rate improvement. Also bolstering our group results was the continued meaningful improvement in banquets. Banquet and AV revenue was $150 million in the fourth quarter, up 84% over the third quarter after having doubled from the second quarter to the third quarter.
Sourav will get into more detail on business mix in the fourth quarter shortly. In addition to successfully deploying capital this year, we continue to focus on our three strategic objectives. As a reminder, we are targeting a potential $267 million to $342 million of incremental stabilized EBITDA on an annual basis from the initiatives and projects underlying our strategic objectives. Approximately $120 million is expected to come from the seven acquisitions we completed in 2021. The $100 million to $150 million is expected to come from potential long-term cost savings over time based on 2019 revenues from redefining our operating model with our managers. We have taken steps towards 50% to 60% of these savings to date. Another $22 million to $37 million of incremental stabilized EBITDA and is related to our goal of gaining three to five points of weighted index growth at the 16 Marriott Transformational Capital Program hotels and eight other hotels where major renovations have been recently completed or are underway. In 2021, we completed three Marriott Transformational Capital program properties. And subsequent to quarter end, we completed two more, bringing the number of completed properties in this program to 12 out of 16. In August, we completed the final phase of construction at the New York Marriott Marquis. And in October, we completed the final phase at the Orlando World Center Marriott closing out both of these three-year transformational renovation programs. Other properties completed over the past year include the Houston Marriott Medical Center, the Marina del Rey Marriott and the Ritz-Carlton, Amelia Island. We completed approximately 85% of the program as of year-end, and we expect to substantially complete it by the end of 2022. The remaining Marriott Transformational Capital Program properties include Boston Copley, the San Diego Marriott Marquis, Marriott at Metro Center and the JW Marriott in Houston. We expect to receive approximately $11 million in operating profit guarantees under the Marriott Transformational Capital Program in 2022.
Additionally, this year, we added three hotels to our list of major renovations. The Westin Denver Downtown, Miami Marriott Biscayne Bay and the Westin Georgetown in Washington, D.C. Finally, the remaining $25 million to $35 million of incremental stabilized EBITDA over time on an annual basis is expected to come from recently completed and ongoing ROI development projects. These projects are at different stages of renovation and development and stabilization is expected to occur two to three years after completion. To date, our ROI development projects at the Andaz Maui villas and the one Hotel Beach Club, have reduced returns significantly greater than our original underwriting. Our 2022 capital expenditure guidance range is $500 million to $600 million, which reflects our continued focus on reinvesting in our properties during the early phase of the recovery to position our portfolio for future demand. The plan includes $245 million for redevelopment and repositioning projects such as the completion of the Ritz-Carlton Naples beach transformation and tower expansion, a transformational renovation of the Fairmont Kea Lani and completion of the Orlando World Center water park and meeting space expansion. It is worth noting that our capital expenditure range at the midpoint is $125 million higher than last year, which is driven by increased investment and ROI development projects as well as more normalized maintenance capex spend. To conclude my remarks, we made significant strides towards improving the quality of our portfolio in 2021. Despite the recent volatility, we remain encouraged by the recovery we are seeing across the lodging industry. Our capital allocation efforts over the past few years, combined with the geographic diversity of our portfolio and our strong balance sheet, leave us very well positioned to create significant long-term value for our stockholders. With that, I will now turn the call over to Sourav.