News for the Hospitality Executive
DiamondRock Hospitality Company Acquires the 169-room
Hilton Garden Inn
Chelsea New York City for $68.4 million (approximately $404,000 per room)
BETHESDA, Md., September 13, 2010 - DiamondRock Hospitality Company (the "Company") (NYSE: DRH) today announced that it has acquired the 169-room Hilton Garden Inn Chelsea New York City (the "Hotel"). The purchase price of $68.4 million represents a 12.9 multiple of 2010 EBITDA and a 7% capitalization rate on 2010 net operating income.
"We are extremely pleased to acquire our third hotel in New York City at an attractive valuation that will be immediately accretive to earnings. New York City has proven to be one of the best hotel markets in the United States and is exhibiting robust growth in 2010. The Hotel was particularly desirable to DiamondRock because of its ability to charge essentially full-service room rates with a more profitable limited service cost structure as a result of its strong Hilton Garden Inn branding, access to Hilton Worldwide's powerful reservations system, and traveler loyalty generated from the Hilton guest rewards program," said Mark W. Brugger, Chief Executive Officer of DiamondRock Hospitality Company.
The Hotel is recently constructed and opened at the end of 2007. The Hotel occupies a convenient location in Chelsea on West 28th Street, between 6th and 7th Avenues (121 W 28th St) in New York City. Chelsea has become one of the most desirable 24-hour destinations in Manhattan given its abundance of restaurants, nightlife and shopping. The location produces leisure demand from its close proximity to prime travel destinations such as Times Square, the Empire State Building and Madison Square Garden. Moreover, Chelsea derives strong business transient demand from its central access to both Midtown and Downtown as well as major transportation hubs. Importantly, the Hotel is located only one block from a Subway Station.
The New York City lodging market has produced the highest long-term RevPAR growth in the United States and is viewed as one of the most desirable hotel markets in the country. The market was significantly impacted by the global financial crisis in 2008 and 2009 and is currently in the early stages of a strong recovery. The strength of the Manhattan market has provided consistent demand and recent pricing power as evidenced by market occupancy of close to 80% and average daily rate of over$200 through the first seven months of 2010.
The purchase price of $68.4 million represents a 12.9 multiple of the Hotel's 2010 full-year forecasted EBITDA of $5.3 millionand better than a 7% capitalization rate on forecasted 2010 full-year net operating income of $4.8 million. The Hotel is projected to generate approximately $2.5 million of EBITDA during the Company's 2010 ownership period and approximately$6.0 million in 2011. The Company expects the Hotel to generate RevPAR growth of over 20% in 2010 with an average daily rate of over $200 and an EBITDA margin of approximately 45%. Additionally, the Hotel has outperformed its competitive set in terms of both occupancy and average rate through the first seven months of 2010 resulting in a RevPAR penetration of over 100 percent.
The Company retained the current Hotel manager subject to a new, short-term management agreement. The acquisition was funded by the Company's corporate cash. The Company now expects to end 2010 with an unrestricted cash balance of approximately $90 million, no near-term debt maturities, and an untapped $200 million corporate revolver.
About the Company
This press release contains forward-looking statements within the meaning of federal securities laws and regulations.
DiamondRock Hospitality Company
|Also See:||DiamondRock Signs Agreement to Purchase the 821-room Hilton Minneapolis for $155.5 Million / May 2010|
|DiamondRock Acquires the 166-room Renaissance Charleston Historic District Hotel for $39 million; Completes $200 Million Unsecured Credit Facility / August 2010|