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DiamondRock Acquires L'Auberge de Sedona and Orchards Inn Sedona for $97 Million
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PR Newswire
BETHESDA, Md., Feb. 28, 2017
BETHESDA, Md., Feb. 28, 2017 /PRNewswire/ -- DiamondRock Hospitality Company (the "Company") (NYSE: DRH) today announced that it has acquired L'Auberge de Sedona ("L'Auberge"), an award-winning luxury resort, and the Orchards Inn Sedona ("Orchards Inn"), an adjacent hotel, each located in the heart of Sedona, Arizona (collectively, the "Resorts") in an off-market transaction. The contractual purchase price of $97 million represents an approximately 8% yield and 12.6 multiple on the Resorts' forecasted 2017 Hotel earnings before interest, taxes, depreciation and amortization ("EBITDA").
"This acquisition represents a rare opportunity to own two high-quality resort properties in a coveted, high barrier-to-entry resort market," said Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company. "While we believe the initial pricing of the deal is attractive, we have identified significant opportunities to increase profitability through the implementation of our well-proven asset management practices and thoughtful capital enhancements."
Ranked as the number one hotel in the Southwest by Condé Nast in 2016, the 88-room L'Auberge and the adjacent 70-room Orchards Inn are situated within the heart of Uptown Sedona. Combined, the Resorts include 158 guest rooms, 5,000 square feet of premium meeting space, including some of the Southwest's most unique outdoor wedding venues, and two restaurants. Since 2015, over $14 million has been invested into the Resorts, focusing on the guest rooms and a re-concepting of the two restaurants.
The Company plans to position the Resorts to capture additional revenue and market share through a $5 million capital investment plan that will enhance the luxury cottages at L'Auberge and reposition the Orchards Inn to capture additional room revenue. These renovations are expected to be minimally disruptive and completed in the off-seasons over the next two years. The Company has a number of asset management initiatives it plans to implement in order to increase cash flow, including labor productivity initiatives, lowering food & beverage costs and creating additional revenue sources. The Company expects these initiatives will drive a stabilized EBITDA of approximately $9.5 million over the next two to three years.
The Sedona market is one of the highest-growth markets in the US, with RevPAR increasing 11.3% in 2016. The market's RevPAR grew at a 5.7% CAGR over the last 10 years, over 200bps greater than the long-run US average. Sedona has no new hotel supply under development in the near-term.
Sedona's climate and unique natural landscape consistently generate strong hotel demand and make it one of the top resort markets in the country with annual RevPAR similar to Napa, CA. Proximity to Phoenix and the Grand Canyon make Sedona an ideal destination for visitors to the greater Southwest region. The Resorts are located within two hours of multiple cities and National Parks, including Phoenix, Flagstaff and the Grand Canyon. The recently completed Arizona highway improvement project has improved accessibility to Sedona and ease of travel throughout the state.
Sedona benefits from a vibrant outdoor and artistic climate. Located within the 1.8 million acre Coconino National Forest, the massive Red Rock formations and 100 hiking trails attract hikers, mountain bikers, and Jeep enthusiasts year round. Downtown Sedona is home to nearly 100 eclectic art galleries, primarily located in art-focused retail developments. Additionally, Sedona has hosted several annual art festivals a year, including the Sedona International Film Festival, the Illuminate Film Festival and the Sedona Arts Festival.
The Company funded the acquisition with existing corporate cash and currently maintains over $100 million in unrestricted corporate cash.
Updated Guidance
The Company is updating its guidance for 2017 to reflect the acquisitions of the Resorts. There are no other updates to the Company's guidance. Achievement of the anticipated results is subject to the risks disclosed in the Company's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2016. Refer to pages 5 and 6 of this press release for a reconciliation of the below non-GAAP financial measures to the most directly comparable GAAP financial measure.
| | Previous Guidance | Adjustment | Current Guidance | | ||
| Metric | Low End | High End | Low End | High End | | |
| | ||||||
| Comparable RevPAR Growth
| -1.0 percent | 1.0 percent | -- | -1.0 percent | 1.0 percent | |
| Adjusted EBITDA
| $231 million | $244 million | $7.5 million | $238.5 million | $251.5 million | |
| Adjusted FFO
| $186 million | $196 million | $7.0 million | $193 million | $203 million | |
| Adjusted FFO per share (based on 201.5 million shares)
| $0.92 per share | $0.97 per share | $0.04 per share | $0.96 per share | $1.01 per share | |
About the Company
DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of a leading portfolio of geographically diversified hotels concentrated in top gateway markets and destination resort locations. The Company, as of the date herein, owns 28 premium quality hotels with over 9,600 rooms. The Company has strategically positioned its hotels to be operated both under leading global brands such as Hilton, Marriott, and Westin and boutique hotels in the lifestyle segment. For further information on the Company and its portfolio, please visit DiamondRock Hospitality Company's website at www.drhc.com.
This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are generally identifiable by use of the words "will," "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions, whether in the negative or affirmative and include statements related to the Company's expectations regarding forecasted EBITDA, including Stabilized EBITDA, repositioning plans and capital investments, profit margin improvements, and future refinancing initiatives. Forward-looking statements are based on management's current expectations and assumptions and are not guarantees of future performance. Factors that may cause actual results to differ materially from current expectations include those risk factors and other factors discussed from time to time in our periodic filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2016. Accordingly, there is no assurance that our expectations will be realized. Except as otherwise required by the federal securities laws, we expressly disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this press release to reflect events, circumstances or changes in expectations after the date of this press release.
Reconciliation of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures as defined under Securities and Exchange Commission (SEC) Rules. These measures are not in accordance with, or an alternative to, measures prepared in accordance with U.S. generally accepted accounting principles, or GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the hotel's results of operations determined in accordance with GAAP. Refer to "Non-GAAP Financial Measures" in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.
The following table is a reconciliation of GAAP net income to EBITDA and Adjusted EBITDA:
| | Previous Full Year 2017 Guidance | | Updated Full Year 2017 Guidance | ||||||||||||
| | Low End | | High End | | Low End | | High End | ||||||||
| Net income | $ | 87,800 | | | $ | 98,800 | | | $ | 91,700 | | | $ | 102,700 | |
| Interest expense | 38,000 | | | 37,000 | | | 38,000 | | | 37,000 | | ||||
| Income tax expense | 7,000 | | | 11,000 | | | 7,500 | | | 11,500 | | ||||
| Real estate related depreciation and amortization | 94,000 | | | 93,000 | | | 97,100 | | | 96,100 | | ||||
| EBITDA | 226,800 | | | 239,800 | | | 234,300 | | | 247,300 | | ||||
| Non-cash ground rent | 6,100 | | | 6,100 | | | 6,100 | | | 6,100 | | ||||
| Non-cash amortization of favorable and unfavorable contract liabilities, net | (1,900) | | | (1,900) Werbung Mehr Nachrichten zur DiamondRock Hospitality Aktie kostenlos abonnieren
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