DiamondRock makes two acquisitions for $108.6M

DiamondRock Hospitality Company has acquired the Bourbon Orleans Hotel, a lifestyle boutique hotel on Bourbon St. in the French Quarter of New Orleans, and Henderson Park Inn, a beachfront resort situated on the Emerald Coast in Destin, FL. The combined purchase price for the two hotels is $108.6 million. Inclusive of transaction costs, the total investment is $117.4 million.

The total investment in the 220-room Bourbon Orleans Hotel represents a 7% capitalization rate on 2019 net operating income. The hotel recently reopened and is expected to generate approximately a 6.3% NOI yield in 2022 and is underwritten to achieve a stabilized 8% NOI yield.

The investment in the 37-room Henderson Park Inn was acquired for nearly a 7% capitalization rate on trailing 12-month NOI and is also expected to achieve an 8% yield after the implementation of new professional management and best practices. Both acquisitions were funded with cash proceeds from dispositions closed in the second quarter and the properties are expected to generate positive cash flow in 2021.

“These high-quality acquisitions continue DiamondRock’s multi-year strategic initiative to assemble a leading portfolio of leisure-oriented, experiential hotels and resorts,” said Mark W. Brugger, president/CEO, DiamondRock Hospitality Company. “Finding off-market acquisitions in unique markets allows DiamondRock to purchase higher quality real estate at better pricing than many others. Moreover, these two deals have numerous attractive attributes we target, including proven cash flow, significant ROI opportunities, irreplaceable locations, high-barrier-to-entry markets, fee simple and fully unencumbered by brand and management.”

Bourbon Orleans Hotel
The Bourbon Orleans Hotel represents a rare opportunity to acquire a large, fully unencumbered, fee simple hotel in the heart of the French Quarter of New Orleans, the company reports. When the property was rebuilt into a modern hotel it retained its historic facade and Parisian grandeur from its time as The Orleans Theatre & Ballroom (1817-1881) and convent for the Sisters of the Holy Family (1881-1964). Today, the Hotel offers guests all the rich legacy of a historic building without having to comprise on modern amenities or services.

Henderson Park Inn
Situated on Florida’s Emerald Coast, Henderson Park Inn benefits from the strong trend for adults-only, beachfront romantic vacations and retreats, the company reports. The resort has a New England-style charm and is situated on nearly two acres of secluded white-sand beach.

The fee-simple interest in the resort was purchased fully unencumbered by brand and management, previously managed by an owner-operator. The company has installed a professional management company and has identified several opportunities to dramatically improve revenue management and expects to achieve significant growth.