Diamondrock Hospitality (NYSE:DRH) in Times Square Project, Share Offering Follow-Up

After close Wednesday Diamondrock Hospitality (NYSE:DRH) made two announcements. One of a new development in Times Square, and an $11 million follow-up share offering.

Barclays says, "DiamondRock made two announcements after the close: an 11mn share follow-on offering ($138mn at yesterday's closing price) to fund acquisitions, and an agreement to purchase a to-be-developed upscale select-service hotel in NYC's Times Square. Overall, we view the news as mixed. Aside from the $20mn deposit for the Times Square project, DRH has not defined the use of proceeds from the equity offering, although we believe it will likely announce an additional deal or two in the medium term. The NYC project is a long-term positive, in our view, given the prime location and attractive pricing. However, the project has not yet broken ground and will not generate cash flow until 2013, which does carry some risk, in our view."

Barclays maintains an "Equalweight" rating on Diamondrock Hospitality (DRH), which closed Wednesday at $12.13, dropping $0.41, or 3.27 percent. Barclays has a price target of $11 on Diamondrock.