DiamondRock Hospitality Co. has acquired the 196-room JW Marriott Denver Cherry Creek for $72.6 million. The seller, Denver-based Sage Hospitality and the Sage Restaurant Group, has signed a long-term management agreement to run hotel operations, catering, room service and the restaurant Second Home Kitchen + Bar.
The hotel is located in the heart of Cherry Creek, Denver’s most upscale and affluent in-town neighborhood, adjacent to the 160,000 sq. ft. headquarters of Janus Capital, and walking distance to the high-end Cherry Creek Mall.
“We are excited to acquire this high-quality, newly renovated hotel in Denver,” says Mark Brugger, CEO of Bethesda, Md.-based DiamondRock Hospitality, a publicly traded real estate investment trust (NYSE: DRH).
The hotel, which opened new in 2004, is consistently the market leader among its competitive set and is well positioned to continue capturing high-end demand, according to Brugger.
Since 1987, the Denver market has been one of the top five lodging markets as measured by revenue per available room (RevPAR), substantially outpacing markets such as San Francisco, San Diego, and Seattle.
“Denver has long been one of our target markets, in part because of its superior RevPAR growth rates over the past 25 years and excellent growth prospects,” says Brugger. “With luxury finishes and a 2011 RevPAR of $165, this acquisition enhances the overall quality of the DiamondRock portfolio.”
Earlier this year, the hotel completed a $5 million renovation of its 196 guestrooms, which all feature four-fixture marble bathrooms, as well as the hotel’s 8,400 sq. ft. of meeting space and a new state-of-the-art fitness center.
The hotel benefits from Denver’s 2.2 million sq. ft. convention center, 25 million sq. ft. of downtown office space, and is close to the University of Denver and other local demand generators.
The hotel is the only Denver property to be featured on Conde Nast Traveler’s 2011 Gold List and is home to the acclaimed Second Home Kitchen + Bar, named “Denver's Best American Restaurant” by Westword in 2010.
DiamondRock entered into both a new franchise agreement with Marriott International and a new management agreement with the current manager, Sage Hospitality.
“We believe this deal represents a winning formula: a powerful brand combined with the operating prowess of Sage Hospitality,” says John L. Williams, president and chief operating officer of DiamondRock Hospitality.
“Sage Hospitality is a top-tier independent manager with a proven track record of delivering market leading results at the hotel,” continues Williams. “They are well-respected within the industry and excel at maximizing profitability — particularly of food and beverage operations.”
DiamondRock funded the acquisition of the hotel with corporate cash and the assumption of a $42 million mortgage secured by the hotel. The loan bears an annual fixed interest rate equal to 6.47% and matures on July 1, 2015.
The company expects to incur approximately $750,000 of acquisition costs that will be expensed as incurred.
With the acquisition of the JW Marriott Denver Cherry Creek and the previously announced purchase of the Radisson Lexington Hotel New York, DiamondRock Hospitality owns 25 premium hotels with approximately 11,700 rooms and holds the senior mortgage loan on another premium hotel.
On Thursday, the price of DimaondRock’s stock closed at $10.96 per share, up from $9.68 a year earlier.