Host Marriott Reports Strong Results of Operations for Fourth Quarter

BETHESDA, Md., Feb. 24 /PRNewswire-FirstCall/ -- Host Marriott Corporation , the nation's largest lodging real estate investment trust (REIT), today announced results of operations for the fourth quarter and for the year ended December 31, 2004. Results of operations for 2004 and 2003 were affected by several transactions, including: the 2004 and 2003 debt prepayments; the 2004 preferred stock redemption; the 2003 New York World Trade Center hotel insurance settlement; the 2003 loss on foreign currency forward contracts; and the 2003 directors' and officers' insurance settlement. Fourth quarter and full year results include the following:

(Logo: http://www.newscom.com/cgi-bin/prnh/20040324/HOSTMARRIOTTLOGO ) * Total revenue was $1,181 million and $3,640 million for the fourth quarter and full year 2004, respectively, as compared to $1,042 million and $3,288 million for the fourth quarter and full year 2003, respectively. * Net income (loss) was $61 million and $(0.1) million for the fourth quarter and full year 2004, respectively, as compared to net income of $150 million and $14 million for the fourth quarter and full year 2003, respectively. * Earnings (loss) per diluted share was $.15 and $(.12) for the fourth quarter and full year 2004, respectively, as compared to an earnings (loss) per diluted share of $.46 and $(.07) for the fourth quarter and full year 2003, respectively. * Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, was $267 million and $790 million for the fourth quarter and full year 2004 (both of which have been reduced by approximately $1 million for distributions to minority interest partners of Host Marriott, L.P.), respectively, as compared to $222 million and $709 million for the fourth quarter and full year 2003, respectively. * Funds from Operations (FFO) per diluted share were $.35 and $.77 for the fourth quarter and full year 2004, respectively, as compared to $.53 and $.99 for the fourth quarter and full year 2003, respectively. * For full year 2004, the transactions discussed above resulted in a decrease of approximately $.18 and $.17 for earnings per diluted share and FFO per diluted share, respectively. These transactions did not impact the fourth quarter 2004 results of operations. For full year 2003, these transactions resulted in an increase of approximately $.54 and $.34 for earnings per diluted share and FFO per diluted share, respectively, and a decrease of approximately $8 million in Adjusted EBITDA. For the fourth quarter of 2003, these transactions resulted in an increase of approximately $.48 and $.29 for earnings per diluted share and FFO per diluted share, respectively, and a decrease of approximately $17 million in Adjusted EBITDA. These transactions are further discussed in the "Schedule of Significant Transactions Affecting Earnings per Share, Funds From Operations per Diluted Share and Adjusted EBITDA" attached to this press release.

FFO per diluted share, Adjusted EBITDA and comparable hotel adjusted operating profit margins (discussed below) are non-GAAP financial measures within the meaning of the rules of the Securities and Exchange Commission (SEC). See the discussion included in this press release for information regarding these non-GAAP financial measures.

Operating Results

Comparable hotel RevPAR for the fourth quarter increased 8.6% and comparable hotel adjusted operating profit margins increased 2.0 percentage points when compared to the fourth quarter of 2003. The Company's fourth quarter increase in comparable hotel RevPAR and comparable hotel adjusted operating profit margins were driven by a 5.4% increase in average room rate and a 2.0 percentage point increase in occupancy. Full year 2004 comparable hotel RevPAR increased 7.3% (comprised of a 2.9% increase in average room rate and an increase in occupancy of 2.9 percentage points), while comparable hotel adjusted operating profit margins increased 1.0 percentage point as compared to full year 2003.

Christopher J. Nassetta, president and chief executive officer, stated, "We had a strong fourth quarter, with significant RevPAR growth and margin improvement. We expect the momentum we built in 2004 to carry into 2005."

Balance Sheet

As of December 31, 2004, the Company had $347 million of cash and cash equivalents and $575 million of availability under its credit facility. The Company's total debt balance was reduced by approximately $455 million in 2004 to approximately $5.0 billion, excluding the Company's Convertible Subordinated Debentures which, in accordance with new accounting standards, were classified as debt effective January 1, 2004.

W. Edward Walter, executive vice president and chief financial officer, stated, "In 2004, we continued to increase our financial flexibility, improve our interest coverages and strengthen our balance sheet. Our annual interest obligations decreased approximately $54 million due to our 2004 financing activities and we decreased our weighted average interest rate by approximately 65 basis points." Mr. Walter added, "With our significant available cash and the additional flexibility and capacity of our credit facility, we are well-positioned to take advantage of opportunities that may arise in the future."

Acquisitions and Dispositions

During the fourth quarter, the Company purchased the 270-suite Scottsdale Marriott at McDowell Mountains for approximately $58 million, including the assumption of approximately $34 million of mortgage debt.

During December 2004, the Company sold two non-core hotels for total proceeds of approximately $95 million and recorded a gain on the sales of approximately $34 million. The Company sold four additional non-core hotels in January 2005 for total proceeds of approximately $128 million and recorded a gain on the sales of approximately $14 million. The Company also announced an agreement to sell 85% of its equity investment in the Courtyard joint venture with Marriott International, Inc. for approximately $92 million. Under the terms of the agreement, the Company has the right to have its remaining interest in the joint venture redeemed under certain conditions between 2007 and 2009. This transaction is subject to several closing conditions and is expected to be completed in March 2005. The proceeds from these sales will be reinvested in either the acquisition of upper-upscale or luxury hotels, return on investment or repositioning projects, repayment of debt or other corporate purposes.

James F. Risoleo, executive vice president, acquisitions and development, stated, "We acquired over $500 million of high-quality assets in 2004, which represents our highest level of acquisitions since 1998. We will continue to pursue single asset and portfolio acquisitions that meet our target profile. As evidenced by our recent sales and our pending Courtyard sale, we also will continue to dispose of non-core assets and recycle our capital to build on our unmatched portfolio of properties."

2005 Outlook

The Company expects comparable hotel RevPAR for the first quarter and full year 2005 to increase approximately 6.0% to 8.0% and 6.5% to 8.5%, respectively. For full year 2005, the Company also expects operating profit margins under GAAP to increase 160 basis points to 240 basis points, respectively, and comparable hotel adjusted operating profit margins to increase 100 basis points to 150 basis points, respectively. Based upon this guidance, the Company estimates that for 2005 its:

* earnings per diluted share should be approximately $.10 to $.12 for the first quarter and $.18 to $.28 for the full year; * net income should be approximately $46 million to $52 million for the first quarter and $100 million to $136 million for the full year; * Adjusted EBITDA should be approximately $864 million to $904 million both of which have been reduced by approximately $6 million for distributions to minority interest partners of Host Marriott, L.P. for the full year; * FFO per diluted share should be approximately $.20 to $.22 for the first quarter and $.98 to $1.07 for the full year (including approximately $40 million, or $.10 per diluted share, related to charges for call premiums and the acceleration of deferred financing costs for debt expected to be refinanced or prepaid in 2005); and * Dividend per common share should be approximately $.07 to $.09 for the first quarter.

Mr. Nassetta stated, "We are very optimistic about our prospects for 2005. With strong demand and limited supply growth, we expect to have meaningful growth in RevPAR, earnings, Adjusted EBITDA and FFO per diluted share, which should result in increasing dividends for our stockholders." Mr. Nassetta added, "We believe that the combination of our strategic vision and disciplined approach to capital allocation will continue to result in increasing stockholder value now and in the future."

Host Marriott is a Fortune 500 lodging real estate company that currently owns or holds controlling interests in 107 upscale and luxury hotel properties primarily operated under premium brands, such as Marriott(R), Ritz-Carlton(R), Hyatt(R), Four Seasons(R), Fairmont(R), Hilton(R) and Westin(R) (1). For further information, please visit the Company's website at http://www.hostmarriott.com/.

This press release contains forward-looking statements within the meaning of federal securities regulations. These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will," "continue" and other similar terms and phrases, including references to assumption and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: national and local economic and business conditions, including the potential for terrorist attacks, that will affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; relationships with property managers; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages, prices, construction procedures and costs; our ability to complete pending acquisitions and dispositions; and our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes and other risks and uncertainties associated with our business described in the Company's filings with the SEC. 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 release is as of February 23, 2005, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

(1) This press release contains registered trademarks that are the exclusive property of their respective owners, which are companies other than us. None of the owners of these trademarks, their affiliates or any of their respective officers, directors, agents or employees, has or will have any responsibility or liability for any information contained in this press release.

***Tables to Follow*** HOST MARRIOTT CORPORATION Introductory Notes to Financial Information The Company

Host Marriott Corporation, herein referred to as "we" or "Host Marriott," is a self-managed and self-administered real estate investment trust (REIT) that owns primarily hotel properties. We conduct our operations as an umbrella partnership REIT through an operating partnership, Host Marriott, L.P., or Host LP, of which we are the sole general partner. For each share of our common stock, Host LP has issued to us one unit of operating partnership interest, or OP Unit. When distinguishing between Host Marriott and Host LP, the primary difference is the 6% of the partnership interests in Host LP held by outside partners as of December 31, 2004, which is reflected as minority interest in our consolidated balance sheets and minority interest expense 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.

Reporting Periods for Statement of Operations

The results we report in our consolidated statements of operations are based on results of our hotels reported to us by our hotel managers. Our hotel managers use different reporting periods. Marriott International, Inc. ("Marriott International"), the manager of the majority of our properties, uses a fiscal year ending on the Friday closest to December 31 and reports twelve weeks of operations for the first three quarters and sixteen or seventeen weeks for the fourth quarter of the year for its Marriott-managed hotels. In contrast, other managers of our hotels, such as Hyatt, report results on a monthly basis. In addition, Host Marriott, as a REIT, is required by tax laws to report results on a calendar year. As a result, we elected to adopt the reporting periods used by Marriott International except that our fiscal year always ends on December 31 to comply with REIT rules. Our first three quarters of operations end on the same day as Marriott International but our forth quarter ends on December 31 and our full year results, as reported in our statement of operations, always includes the number of days in the calendar year (366 days for 2004 and 365 days for 2003).

Two consequences of the reporting cycle we have adopted are: (1) quarterly start dates will usually differ between years, except for the first quarter which always commences on January 1, and (2) our first and fourth quarters of operations and year-to-date operations may not include the same number of days as reflected in prior years. For example, the third quarter of 2004 ended on September 10, and the third quarter of 2003 ended on September 12, though both quarters reflect twelve weeks of operations. In contrast, fourth quarter results for 2004 reflect 112 days of operations, while our fourth quarter results for 2003 reflected 110 days of operations.

While the reporting calendar we adopted is more closely aligned with the reporting calendar used by the manager of a majority of our properties, one final consequence of our calendar is we are unable to report the month of operations that ends after our fiscal quarter end until the following quarter because our hotel managers using a monthly reporting period do not make mid- month results available to us. Hence, the month of operation that ends after our fiscal quarter-end is included in our quarterly results of operations in the following quarter for those hotel managers (covering approximately one- fourth of our full-service hotels). As a result, our quarterly results of operations include results from hotel managers reporting results on a monthly basis as follows: first quarter (January, February), second quarter (March to May), third quarter (June to August) and fourth quarter (September to December). While this does not affect full year results, it does affect the reporting of quarterly results.

Reporting Periods for Hotel Operating Statistics and Comparable Hotel Results

In contrast to the reporting periods for our statement of operations, our hotel operating statistics (i.e., RevPAR, average daily rate and average occupancy) and our comparable hotel results are always reported based on the reporting cycle used by Marriott International for our Marriott-managed hotels. This facilitates year-to-year comparisons, as each reporting period will be comprised of the same number of days of operations as in the prior year (except in the case of fourth quarters comprised of seventeen weeks (such as fiscal year 2002) versus sixteen weeks). This means, however, that the reporting periods we use for hotel operating statistics and our comparable hotels results may differ slightly from the reporting periods used for our statements of operations for the first and fourth quarters and the full year. Results from hotel managers reporting on a monthly basis are included in our operating statistics and comparable hotels results consistent with their reporting in our statement of operations for the hotel operating statistics and comparable hotel results reported herein:

* Hotel results for the fourth quarter of 2004 reflect 112 days of operations for the period from September 11, 2004 to December 31, 2004 for our Marriott-managed hotels and results from September 1, 2004 to December 31, 2004 for operations of all other hotels which report results on a monthly basis. * Hotel results for the fourth quarter of 2003 reflect 110 days of operations for the period from September 13, 2003 to January 2, 2004 for our Marriott-managed hotels and results from September 1, 2003 to December 31, 2003 for operations of all other hotels which report results on a monthly basis. * Hotel results for full year 2004 reflect 364 days of operations for the period from January 3, 2004 to December 31, 2004 for our Marriott- managed hotels and 366 days of operations for the period from January 1, 2004 to December 31, 2004 for operations of all other hotels which report results on a monthly basis. * Hotel results for full year 2003 reflect 364 days of operations for the period from January 4, 2003 to January 2, 2004 for our Marriott-managed hotels and 365 days of operations for the period from January 1, 2003 to December 31, 2003 for operations of all other hotels which report results on a monthly basis. Comparable Hotel Operating Statistics

We present certain operating statistics (i.e., RevPAR, average daily rate and average occupancy) and operating results (revenues, expenses, adjusted operating profit and adjusted operating profit margin) for the periods included in this report on a comparable hotel basis. We define our comparable hotels as full-service properties (i) that are owned or leased by us and the operations of which are included in our consolidated results, whether as continuing operations or discontinued operations, for the entirety of the reporting periods being compared, and (ii) that have not sustained substantial property damage or undergone large-scale capital projects during the reporting periods being compared. Of the 111 full-service hotels that we owned as of December 31, 2004, 103 hotels have been classified as comparable hotels. The operating results of the following eight hotels that we owned as of December 31, 2004 are excluded from comparable hotel results for these periods:

* the JW Marriott, Washington, D.C. (consolidated in our financial statements beginning in the second quarter of 2003); * the Hyatt Regency Maui Resort and Spa (acquired in November 2003); * the Memphis Marriott (construction of a 200-room expansion started in 2003 and completed in 2004); * the Embassy Suites Chicago Downtown-Lakefront Hotel (acquired in April 2004); * the Fairmont Kea Lani Maui (acquired in July 2004); * the Newport Beach Marriott Hotel (major renovation started in July 2004); * the Mountain Shadows Resort Hotel (temporarily closed in September 2004); and * the Scottsdale Marriott at McDowell Mountains (acquired in September 2004).

In addition, the operating results of the 17 hotels we disposed of in 2004 and 2003 are also not included in comparable hotel results for the periods presented herein. Moreover, because these statistics and operating results are for our full-service hotel properties, they exclude results for our non-hotel properties and leased limited-service hotels.

Non-GAAP Financial Measures

Included in this press release 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 generally accepted accounting principles, or GAAP, within the meaning of applicable SEC rules. They are as follows: (i) Funds From Operations (FFO) per diluted share, (ii) EBITDA, (iii) Adjusted EBITDA and (iv) Comparable Hotel Operating Results. The following discussion defines these terms and presents why we believe they are useful supplemental measures of our performance.

FFO per Diluted Share

We present FFO per diluted share as a non-GAAP measure of our performance in addition to our earnings per share (calculated in accordance with GAAP). We calculate FFO per diluted share for a given operating period as our FFO (defined as set forth below) for such period divided by the number of fully diluted shares outstanding during such period. The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as net income (calculated in accordance with GAAP) excluding gains (or losses) from sales of real estate, the cumulative effect of changes in accounting principles, real estate-related depreciation and amortization and adjustments for unconsolidated partnerships and joint ventures. We present FFO on a per share basis after making adjustments for the effects of dilutive securities and the payment of preferred stock dividends, in accordance with NAREIT guidelines.

We believe that FFO per diluted share is a useful supplemental measure of our operating performance and that the presentation of 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 and gains and losses from sales of 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 measure can facilitate comparisons of operating performance between periods and with other REITs, even though 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 definition of FFO in order to promote an industry-wide measure of REIT operating performance.

EBITDA

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 and 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, like FFO per diluted share, it is widely used by management in the annual budget process.

Adjusted EBITDA

Management has historically adjusted EBITDA when evaluating our performance because we believe that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted EBITDA, when combined with the primary GAAP presentation of net income, is beneficial to an investor's complete understanding of our operating performance. We adjust EBITDA for the following items, which may occur in any period, and refer to this measure as Adjusted EBITDA:

* Gains and Losses on Dispositions -- We exclude the effect of gains and losses recorded on the disposition of assets in our consolidated statement of operations because we believe that including them in EBITDA is not consistent with reflecting the ongoing performance of our remaining assets. In addition, material gains or losses from the depreciated value of the assets disposed could be less important to investors given that the depreciated asset often does not reflect the market value of real estate assets (as noted above for FFO). * Consolidated Partnership Adjustments -- We exclude the minority interest in the income or loss of our consolidated partnerships as presented in our consolidated statement of operations because we believe that including these amounts in EBITDA does not reflect the effect of the minority interest position on our performance because these amounts include our minority partners' pro-rata portion of depreciation, amortization and interest expense. However, we believe that the cash distributions paid to minority partners are a more relevant measure of the effect of our minority partners' interest on our performance, and we have deducted these cash distributions from Adjusted EBITDA. * Equity Investment Adjustments -- We exclude the equity in earnings (losses) of unconsolidated investments in partnerships and joint ventures as presented in our consolidated statement of operations because our percentage interest in the earnings (losses) does not reflect the impact of our minority interest position on our performance and these amounts include our pro-rata portion of depreciation, amortization and interest expense. However, we believe that cash distributions we receive are a more relevant measure of the performance of our investment and, therefore, we include the cash distributed to us from these investments in the calculation of Adjusted EBITDA. * Cumulative effect of a change in accounting principle -- Infrequently, the Financial Accounting Standards Board (FASB) promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle. We exclude these one-time adjustments because they do not reflect our actual performance for that period. * Impairment Losses -- We exclude the effect of impairment losses recorded because we believe that including them in EBITDA is not consistent with reflecting the ongoing performance of our remaining assets. In addition, we believe that impairment charges are similar to gains and losses on dispositions and depreciation expense, both of which are also excluded from EBITDA.

Limitations on the Use of FFO per Diluted Share, EBITDA and Adjusted EBITDA

We calculate FFO per diluted share in accordance with standards established by NAREIT, which may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or calculate FFO per diluted share in accordance with NAREIT guidance. In addition, although FFO per diluted share is a useful measure when comparing our results to other REITs, it may not be helpful to investors when comparing us to non-REITs. EBITDA and Adjusted EBITDA, as presented, may also 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 (for EBITDA and Adjusted EBITDA purposes only) and other items have been and will be incurred and are not reflected in the EBITDA, Adjusted EBITDA and FFO per diluted share presentations. 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, FFO per diluted share, EBITDA and Adjusted 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. In addition, FFO per diluted share does not measure, and should not be used as a measure of, amounts that accrue directly to stockholders' benefit.

Comparable Hotel Operating Results

We present certain operating results for our full-service hotels, such as hotel revenues, expenses and adjusted operating profit (and the related margin), on a comparable hotel, or "same store," basis as supplemental information for investors. Our comparable hotel results present operating results for full-service 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 these comparable hotel operating results by eliminating corporate-level costs and expenses related to our capital structure, as well as depreciation and amortization. We eliminate corporate- level costs and expenses to arrive at property-level results because we believe property-level results provide investors with supplemental information into the ongoing operating performance of our hotels. 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. As noted earlier, because 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.

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 operating profit margin 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, of the Company, 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 MARRIOTT CORPORATION Consolidated Balance Sheets (a) (unaudited, in millions, except share amounts) December 31, 2004 2003 ASSETS Property and equipment, net $7,274 $7,085 Assets held for sale 113 73 Notes and other receivables 7 54 Due from managers 75 62 Investments in affiliates (b) 69 74 Deferred financing costs, net 70 82 Furniture, fixtures and equipment replacement fund 151 144 Other 161 138 Restricted cash 154 116 Cash and cash equivalents 347 764 Total assets $8,421 $8,592 LIABILITIES AND STOCKHOLDERS' EQUITY Debt Senior notes, including $491 million, net of discount, of Exchangeable Senior Debentures as of December 31, 2004 $2,890 $3,180 Mortgage debt 2,043 2,205 Convertible Subordinated Debentures (b) 492 - Other 98 101 Total debt 5,523 5,486 Accounts payable and accrued expenses 113 108 Liabilities associated with assets held for sale 26 2 Other 156 166 Total liabilities 5,818 5,762 Interest of minority partners of Host Marriott L.P. 122 130 Interest of minority partners of other consolidated partnerships 86 89 Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary whose sole assets are convertible subordinated debentures due 2026 ("Convertible Preferred Securities") (b) - 475 Stockholders' equity Cumulative redeemable preferred stock (liquidation preference $350 million and $354 million, respectively), 50 million shares authorized; 14.0 million shares and 14.1 million shares issued and outstanding, respectively 337 339 Common stock, par value $.01, 750 million shares authorized; 350.3 million shares and 320.3 million shares issued and outstanding, respectively 3 3 Additional paid-in capital 2,953 2,617 Accumulated other comprehensive income 13 28 Deficit (911) (851) Total stockholders' equity 2,395 2,136 Total liabilities and stockholders' equity $8,421 $8,592 (a) Our consolidated balance sheets as of December 31, 2004 and 2003 have been prepared without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted. The consolidated balance sheets should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10- K. (b) We adopted Financial Interpretation No. 46 "Consolidation of Variable Interest Entities" (FIN 46) in 2003. Under FIN 46, our limited purpose trust subsidiary that was formed to issue trust-preferred securities (the "Convertible Preferred Securities") was accounted for on a consolidated basis as of December 31, 2003 since we were the primary beneficiary under FIN 46. In December 2003, the FASB issued a revision to FIN 46, which we refer to as FIN 46R. Under FIN 46R, we are not the primary beneficiary and we are required to deconsolidate the accounts of the Convertible Preferred Securities Trust (the "Trust"). We adopted the provisions of FIN 46R on January 1, 2004. As a result, we recorded the $492 million in debentures (the "Convertible Subordinated Debentures") issued by the Trust and eliminated the $475 million of Convertible Preferred Securities that were previously classified in the mezzanine section of our consolidated balance sheet prior to January 1, 2004. The difference of $17 million is our investment in the Trust, which is included in "Investments in affiliates" on our consolidated balance sheet. Additionally, we classified the related dividend payment of approximately $10 million and $32 million for the fourth quarter and full year 2004, respectively, as interest expense. We adopted FIN 46R prospectively and, therefore, did not restate prior periods. The adoption of FIN 46R had no effect on our net loss, loss per diluted share or the financial covenants under our senior notes indentures. HOST MARRIOTT CORPORATION Consolidated Statements of Operations (a) (in millions, except per share amounts) Quarter ended Year ended December 31, December 31, 2004 2003 2004 2003 Revenues Rooms $686 $592 $2,153 $1,914 Food and beverage 387 352 1,141 1,042 Other 75 69 239 220 Total hotel sales 1,148 1,013 3,533 3,176 Rental income (b) 32 29 106 100 Other income 1 - 1 12 Total revenues 1,181 1,042 3,640 3,288 Expenses Rooms 168 151 536 483 Food and beverage 282 262 856 786 Hotel departmental expenses 315 276 983 888 Management fees 47 41 145 132 Other property-level expenses (b) 86 82 292 293 Depreciation and amortization 111 108 354 347 Corporate and other expenses 24 21 67 60 Total expenses 1,033 941 3,233 2,989 Operating profit 148 101 407 299 Interest income 3 4 11 11 Interest expense, including interest expense for the Convertible Subordinated Debentures in 2004 (c) (127) (166) (483) (488) Net gains on property transactions 7 1 17 5 Loss on foreign currency and derivative contracts (4) (17) (6) (19) Minority interest expense (6) (16) (4) (5) Equity in losses of affiliates (4) (9) (16) (22) Dividends on Convertible Preferred Securities (c) - (10) - (32) Income (loss) before income taxes 17 (112) (74) (251) Benefit from income taxes 8 4 10 13 Income (loss) from continuing operations 25 (108) (64) (238) Income from discontinued operations (d) 36 234 64 252 Income (loss) before cumulative effect of a change in accounting principle 61 126 - 14 Cumulative effect of a change in accounting principle (e) - 24 - - Net income (loss) 61 150 - 14 Less: Dividends on preferred stock (9) (8) (37) (35) Issuance costs of redeemed Class A preferred stock (f) - - (4) - Net income (loss) available to common stockholders $52 $142 $(41) $(21) Basic and diluted earnings (loss) per common share $0.15 $0.46 $(0.12) $(0.07) (a) Our consolidated statements of operations presented above have been prepared without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted. The consolidated statements of operations should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10- K. (b) Rental income and expense for the quarters ended and years ended December 31, 2004 and 2003 are as follows: Quarter ended Year ended December 31, December 31, 2004 2003 2004 2003 Rental income Full-service $5 $5 $26 $25 Limited service and office buildings 27 24 80 75 $32 $29 $106 $100 Rental and other expenses (included in other property-level expenses) Full-service $2 $2 $7 $7 Limited service and office buildings 24 24 78 74 $26 $26 $85 $81 (c) See discussion of FIN 46R in footnote (b) to the consolidated balance sheets. Interest expense also includes approximately $59 million for full year 2004 and $36 million and $33 million for full year 2003 and the fourth quarter of 2003, respectively, for the payment of call premiums, the acceleration of deferred financing costs and incremental interest expense related to the debt redemptions and repayments. (d) Reflects the results of operations and gain on sale, net of the related income tax, for nine properties sold in 2004 and eight properties sold in 2003, as well as the results of operations for four properties classified as held for sale as of December 31, 2004 and the gain on disposition and business interruption proceeds for the New York Marriott World Trade Center hotel. (e) We adopted SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" on June 21, 2003 and recorded a loss of $24 million as a cumulative effect of change in accounting principle in the third quarter of 2003. Subsequently, on November 7, 2003, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) 150-3 indefinitely deferring the application of a portion of SFAS 150 with respect to minority interests in consolidated ventures entered into prior to November 5, 2003, effectively reversing its guidance of October 8, 2003. In accordance with the FSP 150-3, we recorded a gain from a cumulative effect of a change in accounting principle of $24 million in the fourth quarter of 2003, reversing the impact of our adoption of SFAS 150 with respect to consolidated ventures with finite lives. (f) Emerging Issues Task Force Topic D-42, "The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock," requires that the excess of the fair value of the consideration transferred to the holders of preferred stock redeemed over the carrying amount of the preferred stock should be subtracted from net earnings to determine net earnings available to common stockholders in the calculation of earnings per share. On August 3, 2004, the fair value paid to holders of our Class A preferred stock, or $104 million (which was equal to the redemption price and par value) exceeded the carrying value of the preferred stock ($100 million, which was net of $4 million of original issuance costs). Accordingly, the $4 million of original issuance costs has been included in the determination of net loss available to common stockholders for the purpose of calculating our full year 2004 basic and diluted loss per share. HOST MARRIOTT CORPORATION Earnings (Loss) per Common Share (unaudited, in millions, except per share amount) Quarter ended Quarter ended December 31, 2004 December 31, 2003 Income Income Per (loss) Per (loss) Shares Share (Numer-) Shares Share (Numerator) (Denominator) Amount (ator) (Denominator) Amount Net income $61 350.2 $0.17 $150 310.7 $0.48 Dividends on preferred stock (9) - (0.02) (8) - (0.02) Basic earnings available to common stockholders per share (a) 52 350.2 0.15 142 310.7 0.46 Assuming distribution of common shares granted under the comprehensive stock plan, less shares assumed purchased at average market price - 2.9 - - - - Diluted earnings available to common stockholders per share (a)(b) $52 353.1 $0.15 $142 310.7 $0.46 Year ended Year ended December December 31, 2004 31, 2003 Income Income Per (loss) Per (loss) Shares Share (Numer-) Shares Share (Numerator) (Denominator) Amount (ator) (Denominator) Amount Net income (loss) $- 337.3 $- $14 281 $0.05 Dividends on preferred stock (37) - (0.11) (35) - (0.12) Issuance costs of redeemed Class A preferred stock(c) (4) - (0.01) - - - Basic and diluted loss available to common stockholders per share(a)(b) $(41) 337.3 $(0.12) $(21) 281.0 $(0.07) (a) Basic earnings (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per common share is computed by dividing net income (loss) available to common stockholders as adjusted for potentially dilutive securities, by the weighted average number of shares of common stock outstanding plus other potentially dilutive securities. Dilutive securities may include shares granted under comprehensive stock plans, those preferred OP Units held by minority partners, other minority interests that have the option to convert their limited partnership interests to common OP Units, the Exchangeable Senior Debentures and the Convertible Subordinated Debentures. No effect is shown for any securities that are anti-dilutive. (b) Our results for 2004 and 2003 were significantly affected by several transactions, which are detailed in the table entitled, "Schedule of Significant Transactions Affecting Earnings per Share, Funds from Operations per Diluted Share and Adjusted EBITDA." (c) For discussion of accounting treatment, see footnote (f) to the consolidated statements of operations. HOST MARRIOTT CORPORATION Hotel Operational Data Comparable Hotels by Region (a) (unaudited) As of December 31, 2004 No. of No. of Properties Rooms Pacific 20 10,720 Florida 12 7,337 Mid-Atlantic 10 6,720 Atlanta 13 5,940 North Central 13 4,923 South Central 7 4,816 DC Metro 10 3,890 New England 7 3,413 Mountain 6 2,351 International 5 1,953 All Regions 103 52,063 Quarter ended December 31, 2004 Average Average Occupancy Daily Rate Percentages RevPAR Pacific $149.43 68.8% $102.83 Florida 159.17 66.9 106.41 Mid-Atlantic 212.85 79.9 170.16 Atlanta 148.36 63.3 93.86 North Central 134.43 66.2 88.99 South Central 136.64 70.8 96.73 DC Metro 161.54 72.6 117.26 New England 156.11 72.2 112.70 Mountain 107.67 54.0 58.14 International 127.57 71.4 91.10 All Regions 156.58 69.2 108.34 Quarter ended December 31, 2003 Percent Average Average Change Daily Occupancy in Rate Percentages RevPAR RevPAR Pacific $146.08 65.8% $96.11 7.0% Florida 150.18 64.1 96.32 10.5 Mid-Atlantic 197.99 76.4 151.34 12.4 Atlanta 141.96 62.9 89.30 5.1 North Central 128.42 64.9 83.37 6.7 South Central 131.61 73.8 97.06 (0.3) DC Metro 152.68 67.4 102.90 14.0 New England 149.34 67.1 100.27 12.4 Mountain 100.68 55.0 55.39 5.0 International 116.94 71.9 84.07 8.4 All Regions 148.49 67.2 99.74 8.6 As of December 31, 2004 No. of No. of Properties Rooms Pacific 20 10,720 Florida 12 7,337 Mid-Atlantic 10 6,720 Atlanta 13 5,940 North Central 13 4,923 South Central 7 4,816 DC Metro 10 3,890 New England 7 3,413 Mountain 6 2,351 International 5 1,953 All Regions 103 52,063 Year ended December 31, 2004 Average Average Occupancy Daily Rate Percentages RevPAR Pacific $148.93 73.3% $109.10 Florida 163.16 71.5 116.69 Mid-Atlantic 189.17 78.3 148.19 Atlanta 143.30 67.1 96.15 North Central 123.93 67.8 84.06 South Central 131.73 75.1 98.87 DC Metro 155.75 73.4 114.29 New England 146.12 73.0 106.72 Mountain 102.34 59.7 61.10 International 122.86 72.3 88.87 All Regions 149.64 71.9 107.66 Year ended December 31, 2003 Percent Average Average Change Daily Occupancy in Rate Percentages RevPAR RevPAR Pacific $148.71 67.9% $101.03 8.0% Florida 158.40 68.8 109.00 7.1 Mid-Atlantic 180.11 74.3 133.85 10.7 Atlanta 138.16 65.6 90.67 6.0 North Central 123.52 66.6 82.28 2.2 South Central 131.46 75.9 99.79 (0.9) DC Metro 148.07 70.7 104.65 9.2 New England 142.32 67.5 96.11 11.0 Mountain 97.56 61.0 59.52 2.7 International 114.67 66.0 75.64 17.5 All Regions 145.42 69.0 100.35 7.3 HOST MARRIOTT CORPORATION Comparable Hotel Operating Data Comparable Hotels by Property Type (a) (unaudited) As of December 31, 2004 No. of No. of Properties Rooms Urban 40 25,068 Suburban 38 14,081 Airport 16 7,332 Resort/Conference 9 5,582 All Types 103 52,063 Quarter ended December 31, 2004 Average Average Occupancy Daily Rate Percentages RevPAR Urban $178.66 72.3% $129.16 Suburban 124.40 64.6 80.31 Airport 115.21 72.3 83.31 Resort/Conference 186.61 62.8 117.19 All Types 156.58 69.2 108.34 Quarter ended December 31, 2003 Percent Average Average Change Daily Occupancy in Rate Percentages RevPAR RevPAR Urban $168.08 71.3% $119.85 7.8% Suburban 117.73 63.3 74.51 7.8 Airport 111.12 66.5 73.92 12.7 Resort/Conference 179.40 59.2 106.28 10.3 All Types 148.49 67.2 99.74 8.6 As of December 31, 2003 No. of No. of Properties Rooms Urban 40 25,068 Suburban 38 14,081 Airport 16 7,332 Resort/Conference 9 5,582 All Types 103 52,063 Year ended December 31, 2004 Average Average Occupancy Daily Rate Percentages RevPAR Urban $165.67 74.4% $123.21 Suburban 121.44 67.2 81.63 Airport 113.12 74.6 84.37 Resort/Conference 192.56 69.6 133.99 All Types 149.64 71.9 107.66 Year ended December 31, 2003 Percent Average Average Change Daily Occupancy in Rate Percentages RevPAR RevPAR Urban $159.79 72.2% $115.40 6.8% Suburban 117.25 65.4 76.72 6.4 Airport 111.66 67.5 75.36 12.0 Resort/Conference 190.79 65.7 125.26 7.0 All Types 145.42 69.0 100.35 7.3 (a) See the introductory notes to financial information for a discussion of reporting periods and comparable hotel results.

FIRST AND FINAL ADD -- TABULAR MATERIAL -- TO FOLLOW