DiamondRock Hospitality Company has completed the sale of its leasehold interest in the 189-key Courtyard by Marriott New York Manhattan/Fifth Avenue. The hotel was acquired by an undisclosed buyer for $33,000,000, according to the company.
DiamondRock reported that the pricing for the Midtown Manhattan select-service hotel equates to a 6.3x multiple on the asset’s projected 2025 adjusted EBITDA. On a net operating income basis, the sale reflects a 13.3% cap rate on the hotel’s expected 2025 NOI, highlighting how the company’s underwriting incorporated near-term operating performance into the valuation.
In its disclosure, DiamondRock also framed the trade in the context of upcoming capital and expense pressures at the property. The company identified approximately $12,000,000 of capital expenditures anticipated over the near term, along with a contractual increase in the ground lease payment and rising labor costs expected over the next several years.
Taking these factors into account, DiamondRock estimates that the transaction represents a stabilized cap rate of roughly 7.8% on the leasehold sale. On a hypothetical fee simple basis, the company indicated that the stabilized yield would equate to about a 6.5% cap rate, providing an additional reference point for investors evaluating the pricing.
DiamondRock CEO Jeffrey J. Donnelly noted that the property’s net operating income trajectory has been strong in recent years. He said that from 2019 to 2025, the hotel’s NOI more than doubled, which he attributed to value creation by the company’s asset management team and its operating partners.
Donnelly added that despite the NOI growth, the combination of planned capital expenditures and structural expense headwinds led the company to conclude that expected future returns at the Courtyard by Marriott New York Manhattan/Fifth Avenue would not meet its investment thresholds. As a result, DiamondRock opted to dispose of the leasehold interest and reallocate capital.
The CEO characterized the disposition as consistent with DiamondRock’s emphasis on disciplined capital allocation and its focus on growing free cash flow per share. The company framed the sale as part of an ongoing effort to adjust its portfolio to align with its return targets and shareholder objectives.
