DiamondRock Hospitality Acquires The Hotel Rex In San Francisco
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.
Forward - Looking Statements
This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "forecast," "should," "will," "continue" and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to the Company's ability to integrate the Acquisition Portfolio into the Company portfolio; risks related to the Company's ability to complete the Company's planned capital expenditure programs at each of the hotels in the Acquisition Portfolio on time, on budget, or at all; risks related to the Company's implementation of the planned asset management initiatives and the expected results of these initiatives; risks related to the Company's forecasts with regard to the Acquisition Portfolio; the potential adverse consequences related to financing the acquisition with debt; national and local economic and business conditions that will affect occupancy rates at the Company's hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of the Company's indebtedness and its ability to meet covenants in its debt agreements; relationships with property managers; the Company's ability to maintain its properties in a first-class manner, including meeting capital expenditure requirements; the Company's ability to complete planned renovations on budgetor on time; the Company's ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages, prices, construction procedures and costs; the Company's ability to complete future acquisitions; the Company's ability to raise equity capital; the performance of acquired properties after they are acquired; necessary capital expenditures on the acquired properties; and the Company's ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes; and other risks and uncertainties associated with the Company's business described from time to time in the Company's filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of the date of this release, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.