DiamondRock Acquires L’Auberge, Orchards Inn Resorts in Arizona for $97M
SEDONA, ARIZ. — DiamondRock Hospitality Co. (NYSE: DRH) has purchased the 88-room L’Auberge de Sedona and the adjacent 70-room Orchards Inn Sedona for a total of $97 million. The resorts are situated in the Red Rock region of Sedona on the banks of Oak Creek, just south of Flagstaff.
DiamondRock plans to reposition the resorts through a $5 million capital investment plan, which will enhance the luxury cottages at L’Auberge, among other improvements. The renovations will be completed during the off seasons over the next two years for minimal disruptions.
“This acquisition represents a rare opportunity to own two high-quality resort properties in a coveted, high-barrier-to-entry resort market,” says Mark Brugger, DiamondRock’s president and CEO. “While we believe the initial pricing of the deal is attractive, we have identified significant opportunities to increase profitability.”
About $14 million has been invested in the resorts, its guest rooms and restaurants since 2015. Sedona is one of the highest growth markets in the U.S. hospitality industry, DiamondRock notes, with RevPAR (revenue per available room) increasing 11.3 percent in 2016.
L’Auberge includes dining options Cress on Oak Creek and Etch Kitchen & Bar, while Orchards Inn features 89Agave Mexican restaurant, among other casual dining outlets.
DiamondRock funded the acquisition with existing corporate cash. It currently maintains more than $100 million in unrestricted corporate cash. The Bethesda, Md.-based, self-advised REIT owns 28 premium quality hotels totaling more than 9,600 rooms.
DiamondRock’s stock price closed at $10.87 per share on Tuesday, Feb. 28, up from $9.50 one year ago.
— Nellie Day