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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 16, 2011
DiamondRock Hospitality Company
(Exact name of registrant as specified in its charter)
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Maryland
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001-32514
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20-1180098 |
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(State or other jurisdiction
of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.) |
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3 Bethesda Metro Center, Suite 1500
Bethesda, MD
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20814 |
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(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (240) 744-1150
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 7.01. Regulation FD Disclosure
On
May 16, 2011, DiamondRock Hospitality Company issued a press release announcing that it had entered into an
agreement to acquire the Radisson Lexington Hotel New York. A copy of that press release is furnished as Exhibit
99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
The information in this Item 7.01, including Exhibit 99.1 attached hereto, shall not be deemed
filed for any purpose, including for purposes of Section 18 of the Securities Exchange Act of
1934 (the Exchange Act), or otherwise subject to the liabilities of that Section, nor shall it be
deemed incorporated by reference into any filing under the Securities Act of 1933 or the Exchange
Act, regardless of any general incorporation language in such filing.
ITEM 9.01. Financial Statements and Exhibits.
(d) Exhibits.
See Index to Exhibits attached hereto.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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DIAMONDROCK HOSPITALITY COMPANY |
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Date: May 16, 2011
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By:
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/s/ William J. Tennis
William J. Tennis
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Executive Vice President, General Counsel and |
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Corporate Secretary |
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EXHIBIT INDEX
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Exhibit No. |
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Description |
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99.1 |
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Press release dated May 16, 2011 |
exv99w1
Exhibit 99.1
COMPANY CONTACT
Chris King
(240) 744-1150
FOR IMMEDIATE RELEASE
MONDAY, MAY 16, 2011
DIAMONDROCK AGREES TO ACQUIRE 712-ROOM HOTEL LEXINGTON IN MIDTOWN NEW YORK
BETHESDA, Maryland, Monday May 16, 2011 DiamondRock Hospitality Company (the Company) (NYSE:
DRH) today announced that it has entered into a purchase and sale agreement to acquire the 712-room
Radisson Lexington Hotel New York (the Hotel) for a contractual purchase price of $335 million.
The contractual purchase price represents a 13.5 times multiple of 2012 forecasted EBITDA of $24.8
million and a 6.7% capitalization rate on forecasted 2012 net operating income. During the
Companys anticipated 2011 period of ownership, the Hotel is expected to earn approximately $15.8
million in EBITDA.
We are excited to acquire this significant full service hotel located in Midtown New York at
a material discount to replacement cost. The Hotels forecasted 2011 RevPAR is $198, which is 70%
above our portfolio average and it is expected to generate Hotel Adjusted EBITDA margins that are
14 percentage points higher than our portfolio average. The Hotel will increase our exposure to the
dynamic Manhattan market and will be a great addition to the portfolio, stated Mark W. Brugger,
Chief Executive Officer of the Company.
The Hotel is located at the corner of Lexington Avenue and 48th Street in the heart of
Midtown Manhattan. The Hotel is attractive to business and leisure guests because of its proximity
to Grand Central Terminal, headquarters for several Fortune 500 companies, and Fifth Avenue
shopping. It is within walking distance of the United Nations, Chrysler Building, Saint Patricks
Cathedral, Rockefeller Center and Times Square. The Hotel features six separate food and beverage
outlets, five of which are leased to third parties. The Hotel is in excellent physical condition as
its current owners have invested almost $54 million since 1999 into the Hotels infrastructure,
rooms and amenities.
The Company is assessing the optimal branding strategy for the Hotel, which includes potentially
retaining Radisson. The Company expects to assume an amended, short-term Radisson franchise
agreement. Highgate Hotels, operator of the Hotel since 1999, will be retained under a new
management agreement. With a strong international presence, the Radisson brand drives significant
revenue, particularly from overseas travelers, to this gateway market. Additionally, we look
forward to furthering our business relationship with Highgate Hotels, the leading independent hotel
operator in New York City, stated John Williams, President and Chief Operating Officer of the
Company.
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Upon entering into the purchase and sale agreement, the Company made a $33.5 million non-refundable
deposit. The Company expects the acquisition to close within the next 30 days subject to customary
closing requirements and conditions. The Company expects approximately $1.8 million of costs
related to the acquisition of the Hotel to be expensed as incurred. The Company intends to fund the
acquisition of the Hotel with existing corporate cash and a $100 million draw under its corporate
credit facility.
About the Company
DiamondRock Hospitality Company is a self-advised real estate investment trust that is an owner of
premium hotel properties. Upon completion of the acquisition of the Hotel, the Company will own 24
premium hotels with approximately 11,500 rooms and holds the senior mortgage loan on another
premium hotel. The Companys hotels are generally operated under globally recognized brands such
as Hilton, Marriott, Westin and Renaissance. For further information, please visit DiamondRock
Hospitality Companys 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 identified by their use of terms and
phrases such as believe, expect, intend, project, and other similar terms and phrases,
including references to assumptions and forecasts of future results. Forward-looking statements
are not guarantees of future performance and involve known and unknown risks, uncertainties and
other factors which may cause the actual results to differ materially from those anticipated at the
time the forward-looking statements are made. These risks include, but are not limited to:
national and local economic and business conditions including an economic downturn in New York
City, including the potential for additional terrorist attacks, that will affect occupancy rates at
our hotels and the demand for hotel products and services; operating risks associated with the
hotel business; risks associated with the level of the Companys indebtedness; relationships with
property managers; the ability to compete effectively in areas such as access, location, quality of
accommodations and room rate structures; changes in travel patterns, taxes and government
regulations which influence or determine wages, prices, construction procedures and costs; the
ability to complete the Radisson Lexington Hotel New York acquisition; and the ability to achieve
the returns that the Company expects from the Radisson Lexington Hotel New York. Although the
Company believes the expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that the expectations will be attained or that any
deviation will not be material. All information in this release is as of the date of this release,
and the Company undertakes no obligation to update any forward-looking statement to conform the
statement to actual results or changes in the Companys expectations.
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Reconciliation of Estimated Net Income to Estimated EBITDA and Estimated Net Operating Income |
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($000s) |
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2011 Period of |
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Ownership |
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2011 Full Year |
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2012 Full Year |
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Estimated Net Income |
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$ |
4,850 |
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$ |
2,460 |
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$ |
6,150 |
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Income Tax Expense |
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240 |
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300 |
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360 |
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Depreciation Expense |
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8,310 |
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14,240 |
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14,240 |
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Interest Expense |
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2,350 |
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4,000 |
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4,000 |
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Estimated EBITDA |
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$ |
15,750 |
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$ |
21,000 |
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$ |
24,750 |
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Escrow Contributions |
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(1,440 |
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(2,160 |
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(2,390 |
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Estimated Net Operating Income |
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$ |
14,310 |
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$ |
18,840 |
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$ |
22,360 |
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EBITDA is defined as net income (loss) before interest, income taxes, depreciation and
amortization. We believe it is a useful financial performance measure for us and for our
stockholders and is a complement to net income and other financial performance measures provided in
accordance with GAAP. We use EBITDA to measure the financial performance of our operating hotels
because it excludes expenses such as depreciation and amortization, income taxes and interest
expense, which are not indicative of operating performance. By excluding interest expense, EBITDA
measures our financial performance irrespective of our capital structure or how we finance our
properties and operations. By excluding depreciation and amortization expense, which can vary from
hotel to hotel based on a variety of factors unrelated to the hotels financial performance, we can
more accurately assess the financial performance of our hotels. Under GAAP, hotels are recorded at
historical cost at the time of acquisition and are depreciated on a straight-line basis. By
excluding depreciation and amortization, we believe EBITDA provides a basis for measuring the
financial performance of hotels unrelated to historical cost. However, because EBITDA excludes
depreciation and amortization, it does not measure the capital we require to maintain or preserve
our fixed assets. In addition, because EBITDA does not reflect interest expense, it does not take
into account the total amount of interest we pay on outstanding debt nor does it show trends in
interest costs due to changes in our borrowings or changes in interest rates. EBITDA, as calculated
by us, may not be comparable to EBITDA reported by other companies that do not define EBITDA
exactly as we define the term. Because we use EBITDA to evaluate our financial performance, we
reconcile it to net income (loss) which is the most comparable financial measure calculated and
presented in accordance with GAAP. EBITDA does not represent cash generated from operating
activities determined in accordance with GAAP, and should not be considered as an alternative to
operating income or net income determined in accordance with GAAP as an indicator of performance or
as an alternative to cash flows from operating activities as an indicator of liquidity.
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