DiamondRock to buy Minnesota's Biggest Hotel

REPORT FROM THE U.S. — DiamondRock Hospitality Company said it is acquiring the biggest hotel in Minnesota and also is selling 20 million shares.

The company is paying approximately US$155.5 million for the 821-room Hilton Minneapolis as part of a purchase and sale agreement to acquire the leasehold interest in the property. Included in the price, the REIT said it is paying US$3.5 million to fund the unidentified seller’s cost to annul its existing mortgage debt.

The hotel features 77,000 square feet of meeting space and is located near the Minneapolis Convention Center. The acquisition is expected to close early in the company’s third fiscal quarter of 2010, subject to a due diligence review and other closing conditions.

Separately, DiamondRock announced it will sell 20 million shares of common stock in an underwritten public offering. Underwriters will be granted a 30-day option to purchase up to an additional 3 million shares to cover overallotments. Wells Fargo and Bank of America Merrill Lynch are joint book-running managers for the offering.

DiamondRock’s stock closed Monday at US$9.24 per share. That would put the value of the offering at US$184.8 million. The REIT said it would use a portion of the proceeds to pay for the acquisition of the Hilton Minneapolis and US$60.5 million would be used to buy the senior mortgage loan secured by the Allerton Hotel from an affiliate of Wells Fargo Securities.

The company last week said it was acquiring the US$69-million mortgage debt of the 443-room Allerton Hotel in downtown Chicago. The deal is expected to close during the coming month.

DiamondRock owns a portfolio of 20 hotels totaling approximately 9,600 rooms.

Reported by:  Hotelnewsnow.com