Bethesda, Md.-based DiamondRock Hospitality Company amended a $170.4 million senior mortgage secured by the Lexington New York City hotel in Midtown, to extend the loan’s term and reduce the REIT’s borrowing costs, the company said in a release.
Citibank provided the initial three-year debt on the 725-key, full-service hotel at 511 Lexington Avenue in March 2012, city records show.
The amended loan carries an initial floating interest rate of Libor plus 275 basis points and “features a pricing grid that will further reduce the spread to as low as 175 basis points,” if the hotel meets certain cash-flow targets, according to the borrower.
The adjusted debt, which has a five-year term, including two one-year extension options, will extend the potential term of the original Citibank loan by about 30 months to October 2019.
The reduced borrowing costs are expected to save DiamondRock between $1.5 million and $2 million in annual interest payments, the company reported.
“This loan amendment allowed DiamondRock to take advantage of the current low rate interest rate environment and favorable lending conditions,” said Sean Mahoney, the company’s executive vice president and chief financial officer. “Our strong relationships with the existing lenders facilitated this advantageous transaction.”
The 28-story hotel joined Marriott International‘s independent hospitality branding program Autograph Collection last year and completed a $46 million renovation at the time. DiamondRock acquired the boutique hotel in June 2011 for $333.7 million. The property was built in 1929.
Thirteen of DiamondRock ‘s 27 hotels remain unencumbered by property-backed debt, according to the release.