DiamondRock Hospitality Acquires The Hotel Rex In San Francisco
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 ofSan Francisco, California and is managed by Joie de Vivre Hospitality, LLC.
San Franciscois 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 throughOctober 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 madeSan Franciscoits 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 fromSan 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 theSan Franciscoart 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 inSan Franciscofor 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 millionwould 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 traffickedSutter 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 millionof capacity on its corporate credit facility and owns 16 hotels unencumbered by mortgage debt.
About DiamondRock Hospitality Company
DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of a leading portfolio of geographically diversified hotels concentrated in top gateway markets and destination resort locations. The Company owns 31 premium quality hotels with over 10,000 rooms. The Company has strategically positioned its hotels to be operated both under leading global brand families as well as unique boutique hotels in the lifestyle segment. For further information on the Company and its portfolio, please visit DiamondRock Hospitality Company's website at www.drhc.com.