DiamondRock Hospitality Company has entered a purchase and sale agreement to sell the 1,004-room Los Angeles Airport Marriott. This transaction results from a reverse inquiry from the same buyer who purchased the Torrance Marriott from the company in late 2013.
DiamondRock Hospitality acquired the hotel in 2005 for approximately $118 million. It will receive total gross consideration from the sale of the hotel of approximately $160 million, including payment for the hotel's capital reserve. The total consideration represents a 6.6% capitalization rate on the Hotel's net operating income of $10.5 million for the trailing twelve-month period ended September 30, 2014. The Company expects the transaction to close late in 2014, subject to meeting customary closing conditions. Net proceeds are expected to be approximately $158 million, as $2.0 million of the total consideration will be used to defease the existing $82.6 million mortgage secured by the Hotel. The Company will exclude the defeasance cost from its reported Adjusted EBITDA and Adjusted FFO. "Over the past few years, we have transformed our portfolio through strategic divestitures of non-core hotels and targeted acquisitions to focus on premium lodging assets in urban gateway markets. We are pleased to announce the agreement to sell this non-core, airport hotel, illustrating our commitment to take advantage of an attractive transaction market," said Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company.The Company believes that the sale of the Los Angeles Airport Marriott will achieve its strategic objectives to improve the quality of its portfolio and to increase its portfolio allocation to third-party managed hotels. The sale is expected to increase the Company's 2014 pro-forma portfolio RevPAR by approximately $4.50 and increase the Company's exposure to third-party managed hotels by approximately 300 basis points.
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