In a prepared statement, Chris King, DiamondRock's vice president of finance, says the company plans to reposition the hotel with a $10-million to $12-million capital improvement plan; replace the current independent manager with Marriott International; and increase room rates "by adjusting customer segmentation."
As part of the transaction, Marriott International is providing financial support and is receiving a long-term management contract. "Although we anticipate some disruption in 2006, associated with the capital-plan improvements and adjusting segmentation, the investment in the hotel represents a less than 9.5 multiple of projected 2007 earnings before interest expense, taxes, depreciation and amortization," King says.
He notes that Orlando International Airport is one of the fastest-growing airports in the country with forecasts indicating that "air traffic will increase 67% from 2005 through 2020, accommodating more than 51.8 million travelers per year." Also expected to boost area hotel occupancy in the near future is the growing attendance at the Orange County Convention Center, the second largest convention center in the US with 2.1 million sf of exhibition space and a gross area of four million sf.
"This off-market opportunity came to us through our 'first look' sourcing relationship with Marriott International," Bill McCarten, chairman and CEO of DiamondRock, says in the same statement. "We are excited about the asset, the Orlando market and our ability to drive returns with our repositioning strategy."
John Williams, president and chief operating officer of DiamondRock, expressed his confidence in the buy, "particularly in 2007 when the hotel's repositioning is complete." For 2007, the company projects estimated net income of $1.83 million; income taxes of $162,338; depreciation expense of $2.4 million; and interest expense of $4.51 million. Estimated total Ebitda is $8.91 million. After completing the Orlando Airport Marriott acquisition, DiamondRock will own 15 hotels with 6,119 rooms in 10 states and one US territory.
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