DIAMONDROCK HOSPITALITY COMPANY COMPLETES SALE OF THE WESTIN WASHINGTON, D.C. CITY CENTER

Rhea-AI Summary

DiamondRock Hospitality Company (NYSE: DRH) has completed the sale of the 410-room Westin Washington, D.C. City Center for $92.0 million on February 19, 2025. The transaction represents significant metrics:

- 11.2x multiple on 2024 Hotel EBITDA
- 7.5% capitalization rate on 2024 Hotel net operating income
- 5.6% cap rate including projected capital expenditures

Excluding one-time property tax credit and temporary franchise fee discounts received in 2024, the metrics adjust to:
- 11.9x multiple on 2024 Hotel EBITDA
- 7.0% capitalization rate on net operating income
- 5.2% cap rate including projected capital expenditures

Positive

• Sale of Westin D.C. property for $92.0 million
• Strong EBITDA multiple of 11.2x on 2024 earnings
• Favorable capitalization rate of 7.5% on 2024 NOI

Negative

• One-time property tax credit and franchise fee discounts artificially enhanced 2024 performance metrics

Insights

Real Estate Investment Analyst

The $92.0 million disposition of the Westin Washington, D.C. City Center represents a strategically timed exit that provides DiamondRock with significant capital redeployment flexibility. The transaction metrics reveal important insights about both the property's performance and market conditions.

The deal's 11.2x EBITDA multiple (11.9x adjusted for one-time benefits) suggests strong pricing relative to current market conditions, particularly for full-service urban hotels. The 7.5% cap rate (7.0% adjusted) positions this transaction favorably against comparable urban hotel sales, which have typically traded at higher cap rates in the current environment.

Several key implications emerge from this transaction:

• The timing indicates DRH's proactive approach to portfolio optimization, selling from a position of strength rather than necessity
• The pricing reflects robust investor interest in well-located urban assets, despite broader market uncertainties
• The sale provides immediate capital for redeployment, with potential opportunities in higher-growth markets or property types
• The transaction's structure, accounting for one-time benefits in the 2024 performance, demonstrates transparent pricing and market-aligned valuation

The disposal of this 410-room property signals DRH's shift toward optimizing its portfolio composition. The company's emphasis on driving "long-term earnings and cash flow per share growth" suggests potential reinvestment in markets with stronger growth dynamics or properties requiring less capital investment. This strategic repositioning could enhance DRH's competitive position in the evolving hospitality REIT landscape.

BETHESDA, Md., Feb. 19, 2025 /PRNewswire/ -- DiamondRock Hospitality Company (the "Company") (NYSE: DRH) announced today that on February 19, 2025, it completed the sale of the 410-room Westin Washington, D.C. City Center (the "Hotel") for a contract price of $92.0 million. The sales price represents an 11.2x multiple on 2024 Hotel EBITDA and a 7.5% capitalization rate on 2024 Hotel net operating income, or a capitalization rate of 5.6% inclusive of the Company's projected capital expenditures. Excluding a one-time property tax credit and temporary discount on franchise fees the Hotel received in 2024, the sales price represents an 11.9x multiple on 2024 Hotel EBITDA and a 7.0% capitalization rate on 2024 Hotel net operating income, or a capitalization rate of 5.2% inclusive of the Company's projected capital expenditures.

"The sale of the Westin D.C. City Center marks an important step in our strategy to drive long-term earnings and cash flow per share growth and we plan to prudently redeploy the proceeds to create exceptional value for our shareholders," said Jeffrey J. Donnelly, Chief Executive Officer of DiamondRock Hospitality Company.

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 leisure destinations and top gateway markets. The Company currently owns 36 premium quality hotels and resorts with approximately 9,600 rooms. The Company has strategically positioned its portfolio to be operated both under leading global brand families as well as independent boutique hotels in the lifestyle segment. For further information on the Company and its portfolio, please visit DiamondRock Hospitality Company's website at www.drhc.com.

 

Reconciliation of Hotel Net Income to Hotel Net Operating Income
(Unaudited, in millions)
Hotel net income	$          3.9
Adjustment:
Depreciation and amortization	4.3
Hotel EBITDA	$          8.2
Adjustment:
Capital reserve	(1.3)
Hotel net operating income	$          6.9
Hotel revenues	$        32.5

Hotel EBITDA and net operating income are non-GAAP financial measures as defined under Securities and Exchange Commission (SEC) Rules. The Company's presentation of the Hotel's forecasted EBITDA and forecasted net operating income after capital reserves should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of the Hotel's financial performance. The table above is a reconciliation of the Hotel's forecasted EBITDA and net operating income after capital reserves calculations to hotel net income in accordance with GAAP. The Company has presented forecasted Hotel EBITDA and forecasted Hotel net operating income after capital reserves, because it believes these measures provide investors and analysts with an understanding of the Hotel-level operating performance.

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," "forecast," "plan" 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: the adverse impact of any future pandemic, epidemic or outbreak of any highly infectious disease on the U.S., regional and global economies, travel, the hospitality industry, and the financial condition and results of operations of the Company and its hotels; national and local economic and business conditions, including the potential for additional terrorist attacks, that will affect occupancy rates at the Company's hotels and the demand for hotel products and services; operating risks associated with the hotel business; 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 other risk factors contained in the Company's filings with the SEC. 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 Company's expectations.

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SOURCE DiamondRock Hospitality Company

FAQ

What was the sale price of the Westin Washington, D.C. City Center by DiamondRock (DRH)?

DiamondRock Hospitality Company sold the Westin Washington, D.C. City Center for $92.0 million on February 19, 2025.

What was the EBITDA multiple for DRH's Westin D.C. sale?

The sale represented an 11.2x multiple on 2024 Hotel EBITDA, or 11.9x excluding one-time benefits.

What was the capitalization rate for DRH's Westin D.C. sale?

The sale represented a 7.5% capitalization rate on 2024 Hotel net operating income, or 7.0% excluding one-time benefits.

How many rooms did the Westin Washington, D.C. City Center have?

The Westin Washington, D.C. City Center had 410 rooms.

What will DRH do with the proceeds from the Westin D.C. sale?

DiamondRock plans to prudently redeploy the proceeds to create exceptional value for shareholders and drive long-term earnings and cash flow per share growth.