NEW YORK CITY — DiamondRock Hospitality Co. has signed a purchase agreement to acquire a hotel currently under construction in New York City's Times Square. The deal could be valued as high as $178 million.
Highgate Holdings and an affiliate of Walton Street Capital are currently developing the hotel at the intersection of West 42nd Street and Broadway. It is under a 24- to 30-month construction timetable that would have the hotel open in 2013. Current plans call for the construction of 250 to 300 guest rooms. However, the number of guest rooms could increase to 400 if the developers are able to obtain necessary approvals.
DiamondRock's purchase price for the hotel is based on the number of rooms it contains upon completion as well as the completion date. The original purchase price is based on a per-room price of $450,000, which would put the total price between $112.5 and $135 million. If 400 guest rooms are constructed, the purchase price will be $445,000 per room, which totals $178 million.
DiamondRock has committed to an initial deposit of $20 million. Once certain construction milestones are reached, the company will make an additional $5 million deposit. If approvals are obtained to construct more than 250 rooms, DiamondRock will be required to make an additional deposit equal to $45,000 per guest room for every room in excess of 250.
Highgate Holdings' affiliate Highgate Hotels is expected to operate the hotel once it opens. DiamondRock is in the process of submitting a franchise application to a global hotel company to brand the new hotel with a well known, upscale, select service brand.
“We are very excited to enter into this agreement to purchase our fourth hotel in New York City,” said Mark Brugger, CEO of DiamondRock, in a statement. “This acquisition furthers our strategy of enhancing our full-service portfolio with urban select service hotels in top MSAs. Additionally, we look forward to enhancing our business relationship with Highgate Hotels.
DiamondRock currently owns three hotels in Manhattan. They include the 307-room Courtyard New York Manhattan/Midtown East, the 189-room Courtyard New York Manhattan/Fifth Avenue and the 169-room Hilton Garden Inn New York/Chelsea.
— Coleman Wood