DiamondRock Hospitality Company (NYSE: DRH) announced that it has acquired Cavallo Point, the Lodge at the Golden Gate, a premier luxury hotel located in the Golden Gate National Recreation Area in Sausalito, California. Cavallo Point is situated at the base of the Golden Gate Bridge with sweeping views of the San Francisco Bay. The Lodge has consistently been recognized by Conde Nast Traveler and Travel + Leisure as one of the top luxury hotels and one of the most sustainable in the world. The acquisition represents a 12.8x multiple on trailing twelve month EBITDA.
Cavallo Point enjoys one of the most unique and attractive locations in the San Francisco Bay Area as an integrated part of the scenic waterfront community of Sausalito with breathtaking views of the Golden Gate Bridge. The Hotel, which achieved LEED Gold certification for its environmentally sustainable design and construction, spans 45 acres and features 142 guest rooms and suites with over 14,600 square feet of meeting space, as well as entitlements for significantly expanding the property in the future. The Hotel’s expansive collection of amenities features the award-winning Murray Circle restaurant and Farley Bar, Cavallo Point Cooking School, Healing Arts Center & Spa, outdoor pool, fitness center, retail space and art gallery.
The acquisition of Cavallo Point has many portfolio benefits for DiamondRock, including increasing the Company’s exposure to West Coast markets, the resort segment, and independent hotels. In addition, the Hotel will be the Company’s second highest RevPAR ($306) property and highest Total RevPAR ($809) hotel. The Company does not anticipate the Hotel to materially contribute to the Company’s EBITDA during the remainder of 2018.
“Cavallo Point is a truly unique opportunity to acquire an irreplaceable, luxury asset in the San Francisco market, which increases both our resort and San Francisco exposure,” said Mark Brugger, President and Chief Executive Officer of DiamondRock. “This acquisition is consistent with our strategy to invest in high-quality destination resorts in high barrier-to-entry markets. With its unique location and wide range of services and amenities, Cavallo Point competes with many of the top luxury resorts in Northern California, as well as hotels in San Francisco’s central business district. Furthermore, we see numerous opportunities to utilize our asset management best practices, as well as implement other value-add expansion opportunities.”
Ideally situated in one of the highest-barrier-to-entry markets in the United States, Cavallo Point provides easy access to the world-class business and leisure destinations of the Bay Area. The Lodge is a short walk to downtown Sausalito, seven miles from San Francisco’s central business district, and in close proximity to the premier wine regions of Napa and Sonoma.
Because of its proximity to San Francisco, Northern California and Silicon Valley, Cavallo Point has consistently attracted a diverse regional and international clientele. San Francisco, the financial headquarters of the Western United States, is home to 35 Fortune 500 companies, many of which operate in the technology, biotechnology and life sciences industries. In addition, San Francisco is home to the Moscone Center, its largest convention, exhibition and meeting facility, and the Golden State Warriors’ $1 billion Chase Center arena and entertainment center slated to open in Fall 2019. The Moscone Center recently completed a multi-year $500 million renovation and expansion, which is expected to drive record citywide room nights in 2019 and 2020.
Cavallo Point is situated within the Golden Gate National Recreation Area, within easy walking distance to a marina, a yacht club, and the Bay Area Discovery Museum. The Hotel opened in 2008 following an extensive two-year redevelopment that included 74 newly constructed guest rooms and a spa, and 68 restored historic guest rooms, as well as the rehabilitation of several other historic buildings that now house the restaurant, bar, cooking school, retail, art gallery and meeting spaces.
Cavallo Point will continue to be managed by Passport Resorts LLC, a San Francisco Bay Area hotel management company, known for its management of high-end destination resorts, including the Post Ranch Inn in Big Sur, California. Passport Resorts’ properties are located in iconic settings and provide guests with first-class services, amenities, and cuisine. Passport Resorts’ business practice is to operate its properties in an environmental and socially responsible manner.
The acquisition was funded through a combination of cash on hand, proceeds from a new unsecured term loan and the issuance of common limited partnership units in the Company’s operating partnership (“OP Units”). The Company issued 796,684 OP Units in connection with the transaction at $11.76 per unit. Additionally, the Company has entered into a new five-year $50 million unsecured term loan for purposes of maintaining qualified non-recourse debt associated with the property. The interest rate on the term loan is based on a pricing grid ranging from 140 to 220 basis points over LIBOR, based on the Company’s leverage ratio. The interest rate is currently 145 basis points over LIBOR.