Pebblebrook, LaSalle Ready to Approve Merger, Release Q3 Results

NATIONAL REPORT—Ahead of its planned merger, LaSalle Hotel Properties and Pebblebrook Hotel Trust released third quarter earnings results and will hold a special meeting to approve the acquisition deal on Nov. 27.

The transaction, which is subject to customary closing conditions, including regulatory approvals and approval by LaSalle shareholders and Pebblebrook shareholders, is expected to close on Nov. 30. The Pebblebrook board recommends that shareholders vote for the proposal to approve the merger and other transactions contemplated by the merger agreement, according to the company. Pebblebrook and LaSalle shareholders of record, as of the close of business on Oct. 23, will be entitled to vote at the applicable special meeting of shareholders.

Prior to the execution of the merger agreement, three of LaSalle’s hotels were placed under a hard-money contract to be sold just prior to the closing of the merger for a total of approximately $715 million. Following the completion of the merger agreement, the company announced a $500 million to $1 billion disposition program to sell select LaSalle properties beyond the initial three hotels to quickly reduce the company’s leverage and to take advantage of a healthy transaction market.

In accordance with this disposition program, a fourth hotel was recently placed under an additional hard-money contract with a separate third-party buyer to be sold just prior to the closing of the merger for approximately $38.75 million. The company has already retained brokers to market for sale more than $750 million of additional assets. After completing a thorough review of the portfolio and touring each of the properties, the company is increasing the range of its disposition program to $750 million to $1.25 billion. Overall, the company has increased the dollar volume of potential assets to be sold and has also accelerated the expected timing of some of the sales.

Pebblebrook Q3 Results

“During the third quarter, our overall results topped our expectations as operating fundamentals remained solid,” said Jon E. Bortz, chairman, president/CEO of Pebblebrook Hotel Trust. “Both group and transient business along with leisure travel demand remained healthy in the industry and across our portfolio. Our hotels located in San Francisco led the portfolio during the quarter, aided by an active convention calendar, demonstrating the robust RevPAR growth the city should continue to experience following the completion of the Moscone Convention Center expansion later this year. As we look ahead, our 2019 portfolio-wide pace continues to be strong, with revenues on the books for 2019 up 20.5% over the same time last year, as both group and transient booking demand trends remain very positive. We are increasingly excited about 2019 and believe our portfolio is well positioned to take advantage of a growing economy with healthy underlying operating fundamentals.”


  • Net income: The company’s net income was $29.9 million in the third quarter of 2018, decreasing $0.7 million as compared to the same period of 2017.
  • Same-Property Total RevPAR and Same-Property RevPAR: Same-Property Total RevPAR for the quarter increased 1.5% versus 2017 to $321.65. Same-Property RevPAR grew 1% percent over the same period of 2017 to $231.94. Same-Property ADR improved 1.1% over the prior year to $259.25. Same-Property Occupancy fell 0.1% to 89.5%.
  • Same-Property EBITDA: The company’s hotels generated $75.9 million of Same-Property EBITDA for the quarter ended September 30, 2018, increasing 1.7% over the same period of 2017. Same-Property Revenues grew 1.5%, while Same-Property Expenses were held to growth of only 1.4%. Same-Property EBITDA Margin increased 6 basis points to 37.8% for the third quarter of 2018, as compared to the same period last year.
  • Adjusted EBITDAre: The company’s Adjusted EBITDAre declined to $69.4 million from $70.1 million in the prior-year period, a decrease of 1%. The Adjusted EBITDAre metric was previously reported as Adjusted EBITDA.
  • Adjusted FFO: The company’s Adjusted FFO decreased 8.1% to $51.2 million from $55.8 million in the prior-year period. The decrease is partly due to the company’s increased interest expense related to the strategic acquisition of LaSalle Hotel Properties common shares, which amounted to an estimated $3.8 million of additional expense in the third quarter of 2018.
  • Dividends: On Sept. 17, 2018, the company declared a regular quarterly cash dividend of $0.38 per share on its common shares, a regular quarterly cash dividend of $0.40625 per share on its 6.5% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest and a regular quarterly cash dividend of $0.39844 per share on its 6.375% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest.

LaSalleQ3 Results

“During the third quarter, the industry and our portfolio continued to benefit from strong lodging demand, and we are pleased to have exceeded our expectations. We remain focused on building on this momentum as we take an important next step to maximize value through our combination with Pebblebrook. We are committed to working closely with Pebblebrook to complete the transaction on November 30th and realize the full benefits of our strategic combination,” said Michael D. Barnello, president/CEO of LaSalle.


  • Net Loss: The company’s net loss attributable to common shareholders was $87 million. The third quarter 2018 was negatively impacted by $112 million of merger-related termination costs paid by Pebblebrook Hotel Trust, on behalf of the company, directly to affiliates of The Blackstone Group L.P., as required by the previously announced merger agreement between LaSalle and Blackstone. The company recorded an expense of $112 million related to its obligation to pay the termination fee under the Blackstone Merger Agreement and a corresponding liability on its balance sheet, as Pebblebrook was required to fund the termination fee under the terms of the merger agreement between LaSalle and Pebblebrook.
  • RevPAR: The company’s third quarter 2018 RevPAR grew 2.7% to $223, driven by a 1.5% increase in average daily rate to $247 and an occupancy growth of 1.2% to 90.1%. Excluding the company’s hotels managed by Kimpton and Marriott, RevPAR increased 3.5% versus last year. Kimpton has been working on systems integration with the IHG platform throughout 2018, and Marriott has been doing the same with Starwood’s former systems. Excluding the company’s two resorts in Key West, RevPAR increased 2.2% compared to the third quarter 2017.
  • Hotel EBITDAre Margin: The company’s hotel EBITDAre margin was 35.2%—an increase of 49 basis points.
  • Adjusted EBITDAre: The company’s adjusted EBITDAre was $99 million—an increase of $5 million year-over-year.
  • Adjusted FFO: The company generated adjusted FFO of $81 million, or $0.74 per diluted share/unit, compared to $77 million, or $0.68 per diluted share/unit, for the third quarter 2017.