DiamondRock Hospitality Company (NYSE: DRH) announced today that it recently completed the sale of the 485-room Orlando Airport Marriott Lakeside for a total consideration of approximately $67 million, inclusive of the Hotel's capital expenditure reserve account. The total consideration, adjusted to include the cost of projected near-term capital expenditures, represents a 7.2% capitalization rate on the Hotel's net operating income for the year ended December 31, 2015 and an 11.5x multiple on the Hotel's Adjusted EBITDA for the year ending December 31, 2015.
"We are pleased to complete the sale of the Orlando Airport Marriott and execute upon our strategy of disposing of non-core assets and building strategic capacity to remain opportunistic and flexible at this stage of the cycle. This hotel represents the lowest RevPAR property in our portfolio, requires significant near-term capital investment, and reached prior peak Hotel Adjusted EBITDA that has grown nearly 60% over the last two years. We expect to pursue the disposition of additional non-core hotels and be a net seller for the remainder of 2016." stated Mark W. Brugger, President and Chief Executive Officer of the Company.
For the year ending December 31, 2015, the Hotel generated RevPAR of approximately $92, which was over 45% below the Company's 2015 Pro Forma RevPAR of $171.79. The sale raises the Company's average 2015 RevPAR by nearly $4 pro forma for the disposition.
The total consideration, including near-term capital expenditures, represents a 4.9% capitalization rate on the Hotel's average net operating income and a 16.2x multiple on the Hotel's average Hotel Adjusted EBITDA for the five year period ended December 31, 2015.
The Company expects to record a gain on the sale, which will be excluded from its reported Adjusted EBITDA and Adjusted FFO and does not expect to adjust its dividend to account for the gain. The Company's full year 2016 guidance assumed the Hotel generated Adjusted EBITDA and Adjusted FFO of approximately $3.1 millionand $2.7 million, respectively, following the sale, which closed on June 8, 2016. The sale will also reduce the Company's second quarter Adjusted EBITDA and Adjusted FFO by approximately $0.3 million.
The cash proceeds from the sale were used to repay the $20 million outstanding on its senior unsecured credit facility and to build unrestricted cash, further enhancing the Company's liquidity.
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 owns 28 premium quality hotels with approximately 10,400 rooms. The Company has strategically positioned its hotels to generally be operated under leading global brands such as Hilton, Marriott, and Westin, as well as boutique brands in the lifestyle segment. For further information on the Company and its portfolio, please visit DiamondRock Hospitality Company's website at www.drhc.com.
