BETHESDA, MD-DiamondRock Hospitality, a REIT that has shown it can recycle capital in this economic cycle with the best of them, is now reaping the fruit of its past sales. It has entered into an agreement with a Blackstone affiliate to purchase a four-asset hotel portfolio for $495 million, or $339,000 per key. The hotels are the Hilton Boston; the Westin Washington DC; the Westin San Diego; and the Hilton Burlington.
As part of this off-market deal, Blackstone is taking a $75-million stake in the REIT, according to Mark Brugger, CEO of DiamondRock. The driver of the deal, however, was not necessarily just a desire to acquire these four assets, although as he notes, the four properties have higher RevPAR and EBITDA margins than the average property in DiamondRock’s existing portfolio. “They wanted to make a strategic investment in DiamondRock and we wanted to build on our relationship with them, so we tried to find a mutually beneficial transaction that would accomplish that,” he tells GlobeSt.com.
In short, more deals between the two firms could occur. “They are one of the largest owners of hotel real estate in the world,” Brugger says. “We look forward to leveraging the relationship for new opportunities.”
DiamondRock will fund the acquisition with a combination of borrowings under its senior unsecured credit facility, its cash on hand and the $75-million private placement with Blackstone. It also plans to sell 20 million shares of common stock in an initial public follow-on offering to fund the transaction. The acquisition is expected to close in July. Goldman, Sachs & Co. acted as financial advisor to DiamondRock in the purchase and is serving as sole book-running manager for the public offering.
As GlobeSt.com previously reported, other recent trades by the REIT include the sale of a three-hotel portfolio to Inland American, for $262.5 million, and last year’s acquisition of the 712-room Radisson Lexington Hotel in New York City, for $335 million.
In general, Brugger says, now is a great time to be an acquirer in the hotel industry. “It's a good time in the cycle and we continue to look at acquisitions.” Sales as well, he adds. “We’ll continue to recycle capital.”
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
