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ATLANTA-Two large local hotels belonging to Bethesda, MD-basedDiamondRock Hospitality Co. are being put on the market as the REITattempts to overcome declining profits and reduce its exposure toweaker markets. Sources point to the 369-room Westin AtlantaPerimeter North and the 318-room Atlanta Marriott Alpharetta, bothwhich are suburban properties.

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DiamondRock on Wednesday posted 9% lower funds from operationsfor its third quarter ending Sept. 5, to $30.5 million from $33.4million a year ago. The company cited the overall economy anddeclining demand for hotel rooms as reasons for the fallingFFO.

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"We expect fundamentals to remain difficult over the nextseveral quarters and are managing the business accordingly,"DiamondRock CEO Mark Brugger said in a prepared statement. He addedthat the company's management is focused on containing costs tomaximize profits.

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John Williams, Diamond president and chief operating officer,said during Wednesday's earnings call that tough economic times,like storms, are difficult to read and predict. "Our objective isto react promptly to what we know and prepare prudently for what wedon't know," he said.

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Williams indicated that Atlanta is currently among the company'sweaker markets, along with Chicago and Orlando, FL. DiamondRockowns the Conrad Chicago, the Chicago Marriott Downtown MagnificentMile and the Orlando Marriott Airport in those cities.

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DiamondRock, which also owns the 521-room Renaissance WaverlyHotel in Atlanta, bought the Westin Perimeter North in 2006 for$61.5 million and the Marriott Alpharetta in 2005 for $39.3million, plus the added expense of ballroom renovations earlierthis year. Local hotel brokers say they aren't certain how muchthose properties will fetch in the current market, given reduceddemand and the ongoing credit crunch.

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The good news for DiamondRock is that its third-quarter FFO wasin line with analysts' expectations, while its 3% decline inrevenue of $161.4 million was not as deep as they thought it wouldbe. The company stated that it tapped into a $55-million creditline in late summer "to manage perceived risks of some bankparticipants during the recent market turmoil."

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Across the board, hotel companies have taken a hit during theongoing economic downturn. Some analysts are predicting declines inrevenue per available room of nearly 6% next year, followed by 2%in 2010, and foresee a U-shaped recovery.

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