BETHESDA, Md.—DiamondRock Hospitality Company (the Company) announced today that it recently acquired the Shorebreak Hotel (Hotel) in Huntington Beach, California, for a purchase price of $58.5 million. The purchase price represents a 12.8 multiple on 2015 forecasted Hotel earnings before interest, taxes, depreciation, and amortization (EBITDA).
Mark W. Brugger, president and chief executive officer of DiamondRock Hospitality Company, said, “We are thrilled to announce our acquisition of the Shorebreak Hotel. This was a rare opportunity to buy a truly unique beachfront property in one of Southern California’s premier resort destinations. With ten miles of pristine beaches, Huntington Beach is one of the highest-rated markets in the country, with excellent RevPAR growth potential and high barriers to entry. We believe there is untapped potential at this asset and have brought in Kimpton Hotels & Restaurants as the new manager. Kimpton has a strong track record of operating popular, successful hotels throughout Southern California, including desirable beach destinations, which made them a natural choice for us with this exciting new property,” he said.
The Shorebreak Hotel was constructed and opened six years ago and is a premier beachfront hotel located on the Pacific Coast Highway (PCH) overlooking the Pacific Ocean. Designed as a unique surfing-inspired resort, the Hotel features 157 guestrooms, including 37 suites, and Zimzala Restaurant & Bar. As a boutique hotel with over 3,900 square feet of flexible meeting space, the Hotel is able to attract both groups and corporate guests looking for a unique Southern California experience. Located across from the Huntington Beach Pier at Main Street, the Hotel is well positioned to capture leisure, group, and corporate demand from the over 16 million annual visitors to the area.
The compound annual RevPAR growth rate for the Orange County market was approximately 9.0% for the period 2010 through 2014 and 9.4% for the period 2003 to 2007, according to Smith Travel Research.
In the twelve-month period ended December 31, 2014, the Shorebreak Hotel achieved a RevPAR of $176 from a combination of 83 percent occupancy and an ADR of over $213. The Hotel achieved a compound annual RevPAR growth rate since it has opened of approximately 15%.
Kimpton assumed management of the Hotel upon the closing of the acquisition and plans to use its experience operating boutique hotels to drive enhanced operating results. Kimpton plans to implement an aggressive sales and marketing effort to fully take advantage of the Hotel’s premier product and location in coastal California.
The acquisition of the Shorebreak Hotel brings the total number of properties in the Company’s portfolio to 28 and is the Company’s seventh resort property and fourth property located on the West Coast. The company match-funded the acquisition with proceeds from equity issuance under its at-the-market program.