BETHESDA, MD- Investment sales activity in the hotel sector is heating up. REITs, for their part, have been on a tear for the last two years as they drank and then drank some more from the trough of the capital markets. Marry the two together and what do you have? A REIT-fueled acquisition spree in the hotel space.

If you are local, the company that comes most immediately to mind is Pebblebrook Hotel Trust, which recently garnered $226.3 million in proceeds from a public offering and has been snapping up hotel after hotel across the country.

Another local REIT, though, is also quietly amassing its own war chest, after running through a more than respectable run of acquisitions in the last year. DiamondRock Hospitality Co. just announced that it has closed on a new $100 million limited recourse loan, secured by a mortgage on the Hilton Minneapolis. The loan has a 10-year term, with a fixed-rate of 5.46%. DiamondRock acquired the Hilton Minneapolis in June 2010 for $157 million unencumbered by debt.
DiamondRock, which did not return a call to GlobeSt.com in time for publication, said in a statement that the proceeds from the transaction adds to its available cash on hand, positioning it to be a preferred buyer in the hotel acquisition market. “At the mid-point of our guidance, we project to have over $300 million of cash available for acquisitions in 2011, not including any incremental debt,” CEO Mark W. Brugger, said in a statement. DiamondRock also raised about
$149.6 million in net proceeds in a public offering earlier this year.

At of the end of 2010, the company had approximately $84 million of unrestricted cash on hand and $781 million of debt outstanding, it said in its latest earnings call. Thirteen of its 23 hotels were unencumbered by mortgage debt, it said, and its $200 million senior unsecured credit facility remained untapped.

It acquired three hotels in 2010, including the Hilton Minneapolis, that had an average full-year RevPAR growth of 11.5% over 2009, it also said in its earnings call. The other two were the 169-room Hilton Garden Inn Chelsea in New York City for $69 million and the 166-room Renaissance Charleston Historic District Hotel in Charleston, SC for $40 million in an off-market deal. This year, in January, it entered into a purchase agreement to buy, when it is finished construction in 2013, a hotel under development on West 42nd St. in Times Square.