Grade: F — Major Red Flags (REIT-Structural)
Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles
Data: SEC EDGAR 10-K (Filed 2026-02-25, FY ended December 31, 2025) + Yahoo Finance
Auditor: KPMG LLP — Unqualified opinion
CIK: 0001070750
One-line verdict: Host Hotels' F grade is a single-issue failure: cash of $827M covers only 14% of $5.6B debt. The hotel REIT otherwise operates cleanly — zero goodwill, 52.6% gross margin, CFFO/NI of 1.97, FCF of $863M, and Debt/EBITDA of 3.1x. Revenue grew 7.6% to $6.1B. SG&A/Gross Profit of 3.9% is among the lowest in this batch. The hotel sector is the most operationally volatile REIT subsector (rooms are leased nightly, not annually), which makes the clean operating metrics more impressive.
| Metric | Result |
|---|---|
| Red Flags | **1** (Cash-to-debt 14%) |
| Watch Items | **0** |
| Checks Completed | **14/18** (4 N/A) |
| Beneish M-Score | N/A (insufficient data) |
| Auditor | KPMG LLP — Unqualified opinion |
Hotel REIT Operations
Per the 10-K (in millions):
| Metric | FY2024 | FY2025 | Change |
|---|---|---|---|
| Total Revenues | $5,684 | $6,114 | +7.6% |
| Net Income | $707 | $776* | +9.8% |
| Operating Profit | $875 | $855 | -2.3% |
*Net income grew 9.8% while operating profit declined 2.3% — the divergence likely reflects non-operating gains or favorable tax treatment below the operating line.
Host presents "comparable hotel" operating results including "hotel revenues, expenses, food and beverage profit, and EBITDA" on a same-store basis. This comparable metric excludes acquisitions and dispositions, providing a cleaner view of underlying performance.
CFFO/NI of 1.97 means every dollar of net income is backed by nearly two dollars of operating cash. FCF of $863M comfortably covers REIT distribution requirements. Zero goodwill and 3.1x Debt/EBITDA place Host among the least leveraged REITs in this batch.
The 18-Point Screening
| # | Check | Result | Detail |
|---|---|---|---|
| A1-A2 | Revenue Quality | — | Insufficient data (hotel billing patterns) |
| A3 | Revenue vs CFFO | ✅ | Revenue +7.6%, CFFO +0.8% |
| B1-B4 | Expense Quality | ✅ | 52.6% gross margin, 3.9% SG&A ratio |
| C1-C3 | Cash Flow | ✅ | CFFO/NI 1.97, FCF $863M, accruals -5.7% |
| C4 | Cash vs Debt | ❌ | Cash $827M = 14% of $5.6B |
| D1 | Goodwill | ✅ | Zero goodwill |
| D2 | Leverage | ✅ | Debt/EBITDA = 3.1x (healthy) |
| D3-D4 | Balance Sheet | ✅ | Normal |
| E1-E2 | Acquisition Risk | ✅ | Clean |
Summary
Grade: F is purely REIT-structural. Host Hotels has zero watch items alongside the single cash-to-debt failure. With Debt/EBITDA of 3.1x (the lowest among REITs in this batch), zero goodwill, and strong FCF, this is one of the healthiest companies to receive an F grade. The primary risk is cyclical — hotel revenue is the most economically sensitive REIT subsector, and any recession would immediately impact room rates and occupancy.
**Disclaimer**: This report is based on Host Hotels' FY2025 10-K filed with SEC EDGAR on February 25, 2026. This is NOT investment advice.
Data: SEC EDGAR 10-K + Yahoo Finance
Auditor: KPMG LLP (Unqualified opinion)
Fiscal year ended: December 31, 2025