DiamondRock (DRH) Acquires Fee Simple Interest in Hotel Rex for $29.5M

November 13, 2012 8:19 AM EST Send to a Friend
DiamondRock Hospitality Company (NYSE: DRH) has acquired the fee simple interest in Hotel Rex (the "Hotel") for $29.5 million. The full-service boutique hotel is located in the Union Square district of San Francisco, California and is managed by Joie de Vivre Hospitality, LLC.

The Hotel is forecasted to achieve 2012 revenue per available room ("RevPAR") of over $150, an increase of 20% over the prior year. With occupancy exceeding 85 percent, the Hotel continues to be successful in moving up room rates. Earnings before interest expense, taxes, depreciation and amortization (" EBITDA") in 2012 is projected to be $2.15 million. The EBITDA for the Company's ownership period in 2012 is expected to be approximately $200,000.

For 2013, we anticipate that the Hotel will continue to benefit from strong demand in San Francisco for leisure (40% of revenues), group (15% of revenues) and business transient guests (45% of revenues), with RevPAR increases of over 10%. Budgeted EBITDA for 2013 of $2.45 million would be even greater but for increases to property taxes as a result of the transaction.

The Company intends for the Hotel to continue operating as an independent boutique property and Company is reviewing several upside opportunities. In particular, the Company is evaluating strategic capital investments in the guestrooms which would enable the Hotel to generate additional ADR and reconfiguring the public space to create leased retail opportunities on highly trafficked Sutter Street.

The Company funded the acquisition with existing corporate credit facility capacity generated by the recent disposition of the Westin Atlanta North. Following the transaction, the Company has $95 million of capacity on its corporate credit facility and owns 16 hotels unencumbered by mortgage debt.


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