NEW YORK CITY — DiamondRock Hospitality Co. has entered into an agreement to acquired the Radisson Lexington Hotel New York for $335 million. Located in the heart of Midtown Manhattan at the intersection of Lexington Avenue and 48th Street, the hotel contains 712 guestrooms and six food and beverage outlets. The undisclosed seller has invested approximately $54 million in capital improvements to the hotel since acquiring it in 1999.
Per terms of the agreement, DiamondRock has made a $33.5 million earnest deposit. The company expects the deal to close within the next 30 days. It will use cash on hand and a $100 million draw from its corporate credit facility to fund the purchase. The contractual purchase price represents a 13.5 times multiple of the property's 2012 forecasted EBITDA of $24.8 million and a 6.7 percent capitalization rate.
“We are excited to acquire this significant full-service hotel located in Midtown New York at a material discount to replacement cost,” said Mark Brugger, DiamondRock CEO, in a statement. “The hotel's forecasted 2011 RevPAR is $198, which is 70 percent above our portfolio average, and it is expected to generate hotel-adjusted EBITDA margins that are 14 percentage points higher than our portfolio average.”
In the near term DiamonRock plans to extend the hotel's franchise agreement with Radisson. The hotel's current operator, Highgate Hotels, will continue to manage it.
— Coleman Wood