The Washington Investing column in the Nov. 21 Business section imprecisely described real estate investment trusts. They must return 90 percent of taxable income as dividends. They also must follow standard accounting rules in reporting earnings, although they usually emphasize other measurements, such as funds from operations.
Host Marriott, Out of the Shadow
What do you call a company that's the biggest in its business, valued by Wall Street at more than $16 billion?
The poor relation.
That's long been the status of Host Marriott Corp., the Bethesda real estate investment trust that invests exclusively in hotels.
Even though Host Marriott's revenue totaled $2.65 billion for the year through Sept. 9, it has never been as well known or as well understood as its corporate sibling, Marriott International Inc., which is the world's biggest operator of hotels, with revenue of $7.91 billion so far this year.
That underappreciated status could change with completion of a deal announced last week. Host Marriott will pay $4 billion for 38 hotels with almost 19,000 rooms from Starwood Hotels and Resorts Worldwide Inc., owner of Westin, Sheraton and other brands.
To make certain everyone gets the message that Host Marriott is no longer the poor relation of Marriott International, the company is changing its name to Host Hotels and Resorts.
The name change is more than symbolic. After purchasing a batch of Sheraton and Westin hotels, the company will not be as dependent on Marriott brand names, which generate 70 percent of its revenue. That will drop to a little more than 50 percent after the Starwood transaction. And the Marriott brand is likely to account for less than half of Host's future business because the company plans to sell some of its existing properties.
Diversifying brands is a plus for Host as far as Wall Street is concerned, especially considering that the company is hooking up with Starwood, whose Sheraton, Westin and W hotels are viewed as hotter brands than Marriott.
Some will no doubt find Freudian symbolism in the effort of Host to escape from the shadow of Marriott.
The real estate company's chairman is Richard E. Marriott, 66, the younger brother of J.W. "Bill" Marriott Jr., 73, chairman and chief executive of Marriott International.
Freudian, schmeudian. Bill and Richard Marriott are both so successful, they don't have to worry about sibling rivalry. Both are private, low-profile people, not given to self-aggrandizement.
The bifurcation of the family business into a hotel-operating company and a hotel-owning company was not the result of family differences but of federal tax laws and accounting rules.