BETHESDA, Md. - DiamondRock Hospitality Company, a real estate investment trust (REIT), has expanded its portfolio by acquiring the AC Hotel Minneapolis Downtown for $30 million. The transaction, which equates to roughly $122,000 per room, was funded with cash on hand. The 245-room hotel, located in a prime area of downtown Minneapolis, was built in 2016 and is situated among a dense cluster of Fortune 1000 companies and a hub for the biotech and medical sectors.
The acquisition aligns with DiamondRock's strategic goals, aiming to invest in properties that provide immediate yield and require minimal future capital expenditures. Jeffrey Donnelly, CEO of DiamondRock, stated that the purchase of the recently built urban hotel is set within a recovering market that is seeing a resurgence in corporate office activity.
The deal reflects an 8.2% capitalization rate based on the hotel's projected 2024 net operating income. This addition brings DiamondRock's total count to 37 hotels. Notably, the acquisition was not considered in the company's recently updated full-year 2024 guidance issued on November 7, 2024. While the hotel is not expected to significantly affect the company's 2024 Adjusted EBITDA or Adjusted FFO per share, it is anticipated to contribute to the company's comparable metrics, potentially increasing full-year RevPAR growth by 20 basis points and Total (EPA:TTEF) RevPAR growth by 10 basis points.
DiamondRock Hospitality Company is known for owning a diversified portfolio of high-quality hotels and resorts, totaling over 10,000 rooms. Its holdings include both globally branded and independent boutique hotels, particularly in leisure destinations and key gateway markets.
The information reported is based on a press release statement from DiamondRock Hospitality Company. The company cautions that forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially include the impact of pandemics, economic conditions, competition, and regulatory changes. The company emphasizes that these forward-looking statements are based on current expectations, and there is no obligation to update them as circumstances change.
In other recent news, DiamondRock Hospitality reported a steady growth trajectory in its Third Quarter 2024 Earnings Call. Despite facing operational challenges, the company saw a 2.8% increase in comparable RevPAR and a 2.3% rise in total RevPAR year-over-year. Urban hotels performed particularly well, with a 4.2% increase in RevPAR, while resort locations experienced a slight dip.
The call, led by CFO Briony Quinn and CEO Jeff Donnelly, highlighted a 15.7% surge in group demand and a strategic approach to capital management, including share repurchases and debt reduction. The company also revised its full-year guidance and expressed a cautiously optimistic outlook for 2025, with a focus on the leisure and group segments and plans to pursue strategic acquisitions and optimize capital allocation.
Despite a 0.8% fall in resort RevPAR and a decline in banquet and catering revenues, DiamondRock reported an increase in comparable hotel adjusted EBITDA to $82.3 million. The company repurchased 700,000 shares, bringing the total to 3.1 million shares repurchased to date. The net debt-to-EBITDA ratio stood at 3.7 times, with $75 million in corporate cash available. These are some of the recent developments in the company's financial performance.
InvestingPro Insights
DiamondRock Hospitality Company's recent acquisition of the AC Hotel Minneapolis Downtown for $30 million aligns well with its financial position and market strategy. According to InvestingPro data, the company has a market capitalization of $1.89 billion, indicating its substantial presence in the REIT sector.
An InvestingPro Tip reveals that DiamondRock's management has been aggressively buying back shares, which could signal confidence in the company's future prospects and potentially support the stock price. This strategy complements the company's expansion efforts, such as the recent hotel acquisition.
The company's revenue for the last twelve months as of Q3 2024 stood at $1.11 billion, with a modest growth of 4.5% over the same period. This growth, coupled with the new acquisition, may contribute to DiamondRock's financial performance in the coming quarters.
Another InvestingPro Tip suggests that DiamondRock is trading at a low EBITDA valuation multiple, which could indicate that the stock is potentially undervalued relative to its earnings before interest, taxes, depreciation, and amortization. This valuation metric might be of interest to value investors considering the company's recent expansion and potential for growth in recovering markets.
For readers interested in a more comprehensive analysis, InvestingPro offers additional tips and insights on DiamondRock Hospitality Company. In fact, there are 7 more InvestingPro Tips available for this stock, providing a deeper understanding of the company's financial health and market position.
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