Phoenix Resorts Trade for $97M

Phoenix—DiamondRock Hospitality Co. has announced the purchase of L’Auberge de Sedona, a luxury resort, and Orchards Inn Sedona, an adjacent hotel, both located in Sedona, Ariz. The properties traded in an off-market transactions for the contractual purchase price of $97 million.

“This acquisition represents a rare opportunity to own two high-quality resort properties in a coveted, high barrier-to-entry resort market. While we believe the initial pricing of the deal is attractive, we have identified significant opportunities to increase profitability through the implementation of our well-proven asset management practices and thoughtful capital enhancements,” Mark Brugger, president & CEO of DiamondRock Hospitality Co., said in a prepared statement.

The 88-key L’auberge and the adjacent 70-key Orchards Inn are located in the heart of Uptown Sedona and they both offer 5,000 square feet of meeting space and two restaurants. Starting with 2015, more than $14 million were invested into the resorts, including upgrades to the guest rooms and the refurbishment of the two restaurants. Diamond Rock Hospitality plans to invest an additional $5 million in order to modernize the luxury cottages at L’Auverge and reposition the Orchards Inn to capture additional room revenue.

The acquisition has been funded with existing corporate cash and the company currently maintains more than $100 million in unrestricted corporate cash. The purchase price of the property reflects an approximately 8 percent yield and 12.6 multiple on the resorts’ forecasted 2017 earnings before interest, taxes, depreciation and amortization (EBITDA). A series of planned initiatives, such as the addition of labor productivity initiatives, will drive a stabilized EBITDA of roughly $9.5 million over the next three years.

Images courtesy of lauberge.com