BETHESDA, Maryland--DiamondRock Hospitality Company today announced that it has entered into a purchase and sale agreement to acquire a portfolio of four hotels from affiliates of Blackstone Real Estate Partners VI ("Blackstone") for a contractual purchase price of approximately $495 million. The hotels under contract to be acquired are the Hilton Boston, the Westin Washington D.C., the Westin San Diego and the Hilton Burlington (collectively, the "Acquisition Portfolio"). The contractual purchase price represents an approximately 14.4 times multiple of 2012 forecasted EBITDA and approximately $339,000 per key.
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Mark Brugger, Chief Executive Officer of DiamondRock, said, "We are excited to acquire these four high quality hotels from affiliates of Blackstone in an off-market deal and equally pleased that Blackstone is taking a $75 million ownership stake in DiamondRock as part of this transaction. We believe that these four hotels with higher RevPAR and EBITDA margins than those of our existing assets will enhance the overall quality of our portfolio."
Jonathan D. Gray, Global Head of Real Estate at Blackstone stated: "We are pleased to announce this transaction with DiamondRock, a company with solid assets and a strong management team led by Mark Brugger. We believe in the continued lodging recovery and are excited about receiving an ownership stake in the company."
The Company intends to fund the acquisition with a combination of borrowings under the Company's senior unsecured credit facility, cash on hand, net proceeds from a public equity offering and the issuance of shares of the Company's common stock to Blackstone in a private placement, based on its closing stock price as of July 9, 2012, subject to a floor of $10.00 and a cap of $10.50.
The Company expects to complete the acquisition of the Acquisition Portfolio in July 2012. The completion of the acquisition is subject to customary closing conditions and is not subject to a financing or due diligence condition or the receipt of third-party consents. The Company made a $50 million initial deposit upon execution of the purchase agreement that is non-refundable except in the case of a material default by the sellers or the sellers' failure to satisfy a closing condition.
Goldman, Sachs & Co. acted as financial advisor to the Company in connection with the acquisition.
Acquisition Portfolio - Historical Operating Results and Forecast
The Hilton Boston is a 362-room full-service hotel located in the Financial District of downtown Boston with over 10,000 square feet of meeting space. We believe the Hilton Boston is well located for business transient customers. In addition, the Hilton Boston's location is proximate to the waterfront (one block) and the BCEC convention center (1.1 miles). The historic Art Deco building was converted to a hotel in 1999 after undergoing a major renovation.
Westin Washington, D.C.
The Westin Washington, D.C. is a 406-room full-service hotel located in downtown Washington, D.C. with over 12,000 square feet of meeting space. The hotel opened in 1982 and converted to the Westin brand in 2006 after undergoing a major renovation. The hotel is centrally located to appeal to business and leisure guests visiting the K Street business corridor, White House, Washington Convention Center, National Mall and U.S. Capitol.
Westin San Diego
The Westin San Diego is a 436-room full-service hotel located in downtown San Diego featuring over 19,000 square feet of meeting space. The hotel opened in 1991 as part of a San Diego mixed-use facility and was converted to the Westin brand in 2007 after undergoing a major renovation. The hotel is within walking distance of several major group and leisure demand generators, including the San Diego Convention Center, Seaport Village, Little Italy, Gaslamp Quarter and is across the street from the new Federal Courthouse (expected to open in late 2012).
The Hilton Burlington is a 258-room full-service hotel located in downtown Burlington, Vermont with almost 16,000 square feet of meeting space. The hotel was constructed in 1976 and converted to the Hilton brand in 2007 after undergoing a major renovation in 2007. The hotel is the only full-service hotel in downtown Burlington. The hotel, which is located near Lake Champlain, is a summertime destination resort and attracts state and regional association groups year round. Additionally, its proximity to the University of Vermont enables it to capture additional business.
Second Quarter Preliminary Results
Our second fiscal quarter ended on June 15, 2012. The preliminary estimated financial information set forth below for the fiscal quarter ended June 15, 2012, specifically Adjusted EBITDA and the related items for reconciliation to estimated net income, has been derived from our preliminary unaudited financial statements. Our preliminary unaudited financial statements for the fiscal quarter ended June 15, 2012 represent preliminary operating results and are derived from preliminary hotel operating results and preliminary corporate level expenses.
We and our auditors have not completed our normal quarterly review procedures for the second quarter and there can be no assurance that our final results for this quarterly period will not differ from these estimates, including as a result of quarter-end closing procedures or review adjustments, and any such difference could be material. In addition, these estimates should not be viewed as a substitute for full interim financial statements prepared in accordance with GAAP or as a measure of our performance. These preliminary results for the second quarter of 2012 are not necessarily indicative of the results to be achieved for the remainder of 2012 or any future period and investors are cautioned not to place undue reliance on this preliminary financial information.
While we have not completed our quarterly financial statement closing process and preparation of our final financial statements and related notes thereto, we currently expect to report the following financial and operating results for the second fiscal quarter of 2012.
RevPAR: We expect our pro forma RevPAR to be approximately $136.07, which is an increase of 5.8 percent compared to the second fiscal quarter in 2011. Our preliminary estimated pro forma RevPAR assumes that we owned all of our hotels since January 1, 2011 but excludes the operating results of the Frenchman's Reef & Morning Star Marriott Beach Resort ("Frenchman's Reef") due to the impact of the extensive renovation of the hotel in 2011. If Frenchman's Reef was included, our preliminary estimated second quarter 2012 RevPAR would be $139.98, which would represent a 6.5 percent increase over the comparable period of 2011.
Adjusted EBITDA: We expect our Adjusted EBITDA to be between $47.5 million and $48.5 million, compared to Adjusted EBITDA of $41.1 million in the second fiscal quarter of 2011.