Diamondrock Hospitality Company has announced its acquisition of the fee simple interest in the 245-room AC Hotel Minneapolis Downtown for $30 million, which equates to approximately $122,000 per key with cash on hand. This acquisition increases the company's portfolio to 37 hotels. The acquisition is aligned with the company's strategic objectives, aiming to recycle capital efficiently into hotels at a significant discount to replacement cost with minimal future capital requirements.
The acquisition represents an 8.2% capitalization rate on the hotel’s forecasted 2024 net operating income. Although the acquisition was not contemplated in the company’s updated full-year 2024 guidance, the hotel is expected to contribute approximately 20 basis points to the company’s comparable full-year revpar growth and 10 basis points to the comparable full-year total revpar growth. However, given the timing of the acquisition, the hotel will not contribute meaningfully to the company’s full year 2024 adjusted EBITDA or adjusted FFO per share.
The AC Hotel Minneapolis Downtown was constructed in 2016 and is located in downtown Minneapolis, which is known for its large concentrations of Fortune 1000 companies and its status as a major hub for biotechnology and medical innovation. Jeffrey Donnelly, the CEO of Diamondrock Hospitality Company, emphasized that the hotel represents an opportunity to acquire a recently constructed urban hotel with good in-place cash flow in a rapidly recovering hotel market with a strong roster of companies increasing their return to the office.
Diamondrock Hospitality Company is a self-advised real estate investment trust (REIT) that owns a leading portfolio of geographically diversified hotels concentrated in leisure destinations and top gateway markets. The company currently owns 37 premium quality hotels and resorts with over 10,000 rooms, strategically positioned to be operated both under leading global brand families as well as independent boutique hotels in the lifestyle segment. As a result of these announcements, the company's shares have moved -0.5% on the market, and are now trading at a price of $8.99. For the full picture, make sure to review DiamondRock Hospitality's 8-K report.
