BETHESDA, Md. – August 5, 2021 – DiamondRock Hospitality Company today announced that it has acquired the Bourbon Orleans Hotel (“Bourbon Orleans” or the “Hotel”), a lifestyle boutique hotel on the famed Bourbon Street in the French Quarter of New Orleans, Louisiana, and Henderson Park Inn (the “Resort”), a beachfront resort situated on the Emerald Coast in Destin, Florida. The combined purchase price for the two hotels is $108.6 million. Inclusive of transaction costs, the total investment is $117.4 million.
The total investment in the 220-room Bourbon Orleans Hotel represents a 7% capitalization rate on 2019 net operating income (“NOI”). The Hotel recently reopened and is expected to generate approximately a 6.3% NOI yield in 2022 and is underwritten to achieve a stabilized 8% NOI yield. The investment in the 37-room Henderson Park Inn was acquired for nearly a 7% capitalization rate on trailing 12-month NOI and is also expected to achieve an 8% yield after the implementation of new professional management and best practices. Both acquisitions were funded with cash proceeds from dispositions closed in the second quarter and the properties are expected to generate positive cash flow in 2021.
“These high-quality acquisitions continue DiamondRock’s multi-year strategic initiative to assemble a leading portfolio of leisure-oriented, experiential hotels and resorts,” said Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company. “Finding off-market acquisitions in unique markets allows DiamondRock to purchase higher quality real estate at better pricing than many others. Moreover, these two deals have numerous attractive attributes we target, including proven cash flow, significant ROI opportunities, irreplaceable locations, high-barrier-to-entry markets, fee simple and fully unencumbered by brand and management.”
Bourbon Orleans Hotel
The Bourbon Orleans Hotel represents a rare opportunity to acquire a large, fully unencumbered, fee simple hotel in the heart of the famed French Quarter of New Orleans. When the property was rebuilt into a modern hotel it retained its historic façade and Parisian grandeur from its time as The Orleans Theatre & Ballroom (1817-1881) and convent for the Sisters of the Holy Family (1881-1964). Today, the Hotel offers guests all the rich legacy of a historic building without having to comprise on modern amenities or services.
The Bourbon Orleans Hotel shows a uniquely sophisticated side of life on Bourbon Street, the single biggest leisure destination in the city. The Hotel has a strong track record of profitability and is traditionally ranked top 10 on TripAdvisor. It has also been recognized by numerous travel publications for its excellence, including Conde Nast (#7 Top Hotel in New Orleans), USA Today (#5 Top Haunted Hotel in the U.S.), and TripAdvisor (2019 Certificate of Excellence).
The French Quarter provides a unique experience of The Big Easy that appeals to the modern traveler. Internationally recognized and one of the country’s most popular leisure destinations, New Orleans draws visitors from all over the world to experience its eclectic culture, award-winning unique restaurants, jazz clubs, shops, casinos, riverboat cruises, festivals and sporting events. The French Quarter is the epicenter of activity and primary demand driver of New Orleans’ tourist economy including 135 festivals, most notably the New Orleans Jazz & Heritage Festival (“Jazz Fest“) and Mardi Gras, and features a bohemian, creole charm that is reflected in the fabric of the community, from the century-old restaurants and historic Spanish architecture to streets adorned with live performers and constant sounds of jazz music. The French Quarter is the primary draw for the nearly 20 million visitors who came to New Orleans in 2019, the city’s 13th consecutive year of tourism growth. The outlook for New Orleans in 2022 is particularly bright with the return of Mardi Gras, Jazz Fest and the NCAA Final Four in the first quarter 2022, as well as a strong convention calendar.
Henderson Park Inn
Situated on Florida’s Emerald Coast, Henderson Park Inn benefits from the strong trend for adults-only, beachfront romantic vacations and retreats. The Resort has a New England-style charm and is situated on nearly two acres of secluded white-sand beach, making it the perfect spot to enjoy spectacular views and luxurious privacy. The Resort’s irreplaceable location and top-quality amenities have made this the #1 resort in Destin on TripAdvisor and garnered attention from numerous travel and leisure publications, including being named the 23rd Best Hotel in the Country (TripAdvisor), Best Luxury Value (Conde Nast 2020 Awards for Excellence), Best Hotel in Destin, FL (U.S. News and Travel), and Ten Best Beach Hotels in Florida (Coastal Living). As one indication of the Resort’s high quality, it achieved an average room rate of over $500 in June.
Known for its 24 miles of pristine beaches and emerald green water, Destin was recently ranked as the #1 Best Beach in Florida and the #3 Best Beach in the U.S. The destination continues to gain immense popularity with urban feeder markets such as Atlanta, Dallas, Nashville, and Houston. Last year alone, the white sand beaches of Destin attracted 4.5 million visitors and The Henderson Park Inn is one of the few beachfront hotels in Destin. The fee-simple interest in the Resort was purchased fully unencumbered by brand and management, previously managed by an owner-operator. The Company has installed a professional management company and has identified several opportunities to dramatically improve revenue management and expects to achieve significant growth.