Form 8-K
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 19, 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 19, 2011, an affiliate of
DiamondRock Hospitality Company (the Company) completed its acquisition of the JW Marriott
Denver Cherry Creek (the Hotel) for a contractual purchase price of $72.6 million. The
Company financed the acquisition with corporate cash and the assumption of debt.
The Company issued a press release announcing
the completion of the acquisition of the Hotel. 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 19, 2011 |
By: |
/s/ William J. Tennis
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William J. Tennis |
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Executive Vice President, General Counsel and
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 19, 2011 |
Exhibit 99.1
Exhibit 99.1
COMPANY CONTACT
Chris King
(240) 744-1150
FOR IMMEDIATE RELEASE
THURSDAY, MAY 19, 2011
DIAMONDROCK ACQUIRES THE JW MARRIOTT DENVER FOR $72.6 MILLION
BETHESDA, Maryland, Thursday May 19, 2011 DiamondRock Hospitality Company (the Company) (NYSE:
DRH) today announced that it has acquired the 196-room JW Marriott Denver Cherry Creek (the
Hotel) for a contractual purchase price of $72.6 million. The purchase price represents an 11.5
times multiple of 2012 forecasted EBITDA of $6.3 million and a 7.5% capitalization rate on
forecasted 2012 net operating income.
We are excited to acquire this high quality, newly renovated hotel in Denver. The Hotel, which
opened new in 2004, is consistently the market leader among its competitive set and is
well-positioned to continue capturing high-end demand. Denver has long been one of our target
markets, in part because of its superior RevPAR growth rates over the past 25 years and excellent
growth prospects. With luxury finishes and a 2011 RevPAR of $165, this acquisition enhances the
overall quality of the DiamondRock portfolio, stated Mark W. Brugger, Chief Executive Officer of
DiamondRock Hospitality Company.
The Denver market has been one of the top five lodging markets measured by RevPAR growth since 1987
(the first year Smith Travel began keeping records), substantially outpacing markets such as San
Francisco, San Diego, and Seattle. The Hotel is located in the heart of Cherry Creek, Denvers most
upscale and affluent in-town neighborhood, adjacent to the 160,000 square foot headquarters of
Janus Capital, and walking distance to the high-end Cherry Creek Mall. The Hotel benefits from
Denvers 2.2 million square foot convention center, 25 million square feet of downtown office
space, and is close to the University of Denver and other local demand generators. Earlier this
year the Hotel completed a $5 million renovation of its 196 guestrooms, which all feature
four-fixture marble bathrooms, as well as the Hotels 8,400 square feet of meeting space and a new
state-of-the-art Fitness Center. The Hotel is the only Denver property to be featured on Conde
Nast Travelers 2011 Gold List and is home to the acclaimed Second Home Kitchen + Bar, named
Denvers Best American Restaurant by Westword in 2010.
The Company entered into both a new franchise agreement with Marriott International and a new
management agreement with the current manager, Sage Hospitality. We believe this deal represents a
winning formula: a powerful brand combined with the operating prowess of Sage Hospitality. Sage
Hospitality is a top tier independent manager with a proven track record of delivering market
leading results at the Hotel. They are well-respected within the industry and excel at maximizing
profitability particularly of food and beverage operations, stated John L. Williams, President
and Chief Operating Officer of DiamondRock Hospitality Company.
The Company funded the acquisition of the Hotel with existing corporate cash and the assumption of
a $42 million mortgage secured by the Hotel. The loan bears an annual fixed interest rate equal to
6.47% and matures on July 1, 2015.
The Company expects to incur approximately $750,000 of acquisition costs that will be expensed as
incurred.
About the Companies
DiamondRock Hospitality Company
DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an
owner of premium hotel properties. Upon completion of the acquisition of the JW Marriott Denver
Cherry Creek and the previously announced Radisson Lexington Hotel New York, the Company will own
25 premium hotels with approximately 11,700 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.
Sage Hospitality
Founded in 1984, Sage Hospitality has strategically grown into one of the largest privately held
hotel management and ownership companies in the nation operating a variety of large, full-service
hotels as well as extended stay and select-service properties. Sage Hospitalitys comprehensive
portfolio includes major international brands such as Marriott, Sheraton, Renaissance, and Westin,
and as well as independent boutique hotels. Sage Hospitality has further differentiated with the
creation of the Sage Restaurant Group, which has created and is managing 10 unique restaurant
concepts including the acclaimed Mercat a la Planxa in Chicago. For more information, please visit
www.sagehospitality.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 Denver,
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; and the
ability to achieve the returns that the Company expects from the JW Marriott Denver Cherry Creek.
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 ($000s)
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2011 Period |
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2010 |
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2011 |
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2012 |
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of Ownership |
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Full Year |
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Full Year |
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Full Year |
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Estimated Net Income (Loss) |
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$ |
292 |
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$ |
(456 |
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$ |
(200 |
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$ |
840 |
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Income Tax Expense |
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58 |
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81 |
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85 |
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105 |
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Depreciation Expense |
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1,560 |
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2,675 |
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2,675 |
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2,675 |
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Interest Expense |
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1,590 |
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2,800 |
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2,740 |
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2,680 |
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Estimated EBITDA |
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$ |
3,500 |
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$ |
5,100 |
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$ |
5,300 |
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$ |
6,300 |
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Escrow Contributions |
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(460 |
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(750 |
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(760 |
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(850 |
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Estimated Net Operating
Income |
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$ |
3,040 |
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$ |
4,350 |
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$ |
4,540 |
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$ |
5,450 |
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It should be noted that the 2011 results were impacted by the renovation of the Hotel during the
2011 first quarter. Partially as a result of renovation disruption, the Hotels RevPAR declined
2.1% in the first calendar quarter of 2011 compared to a 10.8% increase for the Denver market.
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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