BETHESDA, Md., Nov. 13, 2012 /PRNewswire/ -- DiamondRock
Hospitality Company (the "Company") (NYSE: DRH) announced today
that it 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.
(Logo: http://photos.prnewswire.com/prnh/20040708/DCTH028 )
"We are excited to be announcing our first acquisition in
San Francisco at an attractive
initial yield and a significant discount to replacement cost. With
no supply on the horizon, we believe San
Francisco can achieve several years of outsized growth. This
acquisition, combined with the recent disposition of the Westin
Atlanta, continues the Company's strategy of disposing of non-core
hotels and reallocating proceeds into faster growing markets at
comparable or better returns," stated Mark
W. Brugger, Chief Executive Officer of DiamondRock
Hospitality Company.
San Francisco is one of the
most desirable hotel markets in the world due to the confluence of
corporate, leisure and group demand. Continued strong growth is
anticipated since there is a strong convention calendar, a diverse
base of both emerging and established companies, and no new supply.
Year-to-date through October 2012,
the city has exhibited strong performance with RevPAR growth of
approximately 14.0%. With a diverse base of demand generators, lack
of new hotel supply and upcoming highly anticipated events such as
The America's Cup, the city's lodging market will continue to see
significant gains in operating performance over the next few years.
The Urban Land Institute recently made San Francisco its top-ranked city in its 2013
Real Estate Forecast.
The 94-room Hotel Rex is located in the Union Square district,
one block from the famed Union Square. Leisure and business guests
enjoy the Hotel's convenient location close to the city's leading
retail, dining and entertainment venues as well business demand
generators including the Moscone Center, the Financial District and
the burgeoning hub of the technology sector in the South of Market
(SoMa) District. Guests enjoy a location less than one block from
San Francisco's Powell Street
Cable Car line, which provides convenient access to the city's key
attractions including Fisherman's Wharf, Nob Hill and
Chinatown.
Originally built in 1907, the Hotel opened as the Hotel Rex in
1996 featuring 94 rooms, including 2 suites, with modern amenities
and is themed after the San
Francisco art and literary salons of the 1920-30's. The
Hotel features distinctive period furnishings, rich and playful
color schemes, shelves of antique books in the lobby and an
impressive artwork collection. The lobby lounge hosts a variety of
events including the evening wine hour, various literary events and
live jazz on Friday evenings. Guests enjoy high quality finishes
and accommodations, more than 1,700 square feet of meeting and
event space, a restaurant and bar and a business center.
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.
About the Company
DiamondRock Hospitality Company is a self-advised real estate
investment trust (REIT) that is an owner of premium hotel
properties. The Company owns 27 premium hotels with
approximately 11,600 rooms and holds the senior mortgage loan on
another premium hotel. The Company's hotels are generally
operated under globally recognized brands such as Hilton, Marriott,
and Westin. For further information, please visit DiamondRock
Hospitality Company's website at www.drhc.com.
This press release contains forward-looking statements within
the meaning of federal securities laws and regulations.
These forward-looking statements are generally identifiable by
use of the words "will," "believe," "expect," "intend,"
"anticipate," "estimate," "project" or similar expressions, whether
in the negative or affirmative. Forward-looking statements are
based on management's current expectations and assumptions and are
not guarantees of future performance. Factors that may cause
actual results to differ materially from current expectations
include those risk factors and other factors discussed from time to
time in our periodic filings with the Securities and Exchange
Commission, including our Annual Report on Form 10-K for the year
ended December 31, 2011. Accordingly,
there is no assurance that our expectations will be realized.
Except as otherwise required by the federal securities laws, we
expressly disclaim any obligations or undertaking to publicly
release any updates or revisions to any forward-looking statement
contained in this press release to reflect events, circumstances or
changes in expectations after the date of this press
release.
Reconciliation of Estimated Net Income to
Estimated EBITDA ($000s)
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2012
Forecast
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2012
Period
of Ownership
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2013
Budget
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Estimated
Net Income
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$
1,135
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$
57
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$
1,430
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Income Tax
Expense
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40
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3
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45
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Depreciation Expense
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975
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140
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975
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Interest
Expense
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-
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-
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-
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Estimated
EBITDA
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$
2,150
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$
200
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$
2,450
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EBITDA is defined as net income (loss) before interest, income
taxes, depreciation and amortization. We believe it is a useful
financial performance measure for us and for our stockholders and
is a complement to net income and other financial performance
measures provided in accordance with GAAP. We use EBITDA to measure
the financial performance of our operating hotels because it
excludes expenses such as depreciation and amortization, income
taxes and interest expense, which are not indicative of operating
performance. By excluding interest expense, EBITDA measures our
financial performance irrespective of our capital structure or how
we finance our properties and operations. By excluding depreciation
and amortization expense, which can vary from hotel to hotel based
on a variety of factors unrelated to the hotels' financial
performance, we can more accurately assess the financial
performance of our hotels. Under GAAP, hotels are recorded at
historical cost at the time of acquisition and are depreciated on a
straight-line basis. By excluding depreciation and amortization, we
believe EBITDA provides a basis for measuring the financial
performance of hotels unrelated to historical cost. However,
because EBITDA excludes depreciation and amortization, it does not
measure the capital we require to maintain or preserve our fixed
assets. In addition, because EBITDA does not reflect interest
expense, it does not take into account the total amount of interest
we pay on outstanding debt nor does it show trends in interest
costs due to changes in our borrowings or changes in interest
rates. EBITDA, as calculated by us, may not be comparable to EBITDA
reported by other companies that do not define EBITDA exactly as we
define the term. Because we use EBITDA to evaluate our financial
performance, we reconcile it to net income (loss) which is the most
comparable financial measure calculated and presented in accordance
with GAAP. EBITDA does not represent cash generated from operating
activities determined in accordance with GAAP, and should not be
considered as an alternative to operating income or net income
determined in accordance with GAAP as an indicator of performance
or as an alternative to cash flows from operating activities as an
indicator of liquidity.
SOURCE DiamondRock Hospitality Company