DiamondRock Hospitality Company (DRH) – a hotel real estate investment trust (REIT) – announced the amendment of its $170.4 million mortgage loan secured by The Lexington Hotel in the New York City. The move has helped the company lower its borrowing costs and enjoy a greater term on the loan.
Specifically, though the loan bears interest at an initial floating rate of LIBOR plus 275 basis points, it has a pricing grid which would aid in lowering the spread to as much as 175 basis points, subject to reaching specific hurdles in hotel cash flow.
The move would help the company save around $1.5 million to $2.0 million in annual interest costs. Moreover, the potential term has also been extended by around 30 months to Oct 2019, thereby providing adequate financial flexibility.
Encouraged with this move, we expect this enhanced financial flexibility to help DiamondRock in achieving operational efficiency and meet growth needs. It reflects the hotel’s transformation to the Autograph Collection and its solid operational strength. It also helped the company in leveraging the low interest rate environment.
DiamondRock presently has 27 premium quality hotels with over 11,000 rooms. Thirteen out of them are unencumbered by property-specific mortgage debt. With hotels positioned in the top gateway markets and destination resort locations, this company has solid potential to ride on the growth trajectory and capitalize on the improving fundamentals of the hotel industry.
DiamondRock currently carries a Zacks Rank #2 (Buy). Investors interested in the REIT industry may also consider other stocks like FelCor Lodging Trust Incorporated (FCH), RLJ Lodging Trust (RLJ) and Strategic Hotels & Resorts, Inc. (BEE). All these stocks carry the same rank as DiamondRock.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment