BETHESDA, MD—Pebblebrook Hotel Trust plans to sell off nearly $1 billion in assets as it nears an official merger with LaSalle Hotel Properties in a strategic move to reduce debt as a newly combined company. Prior to closing the merger, $750 million of property sales are expected to be completed—Park Central New York, WestHouse New York and Park Central San Francisco and more property sales will occur in the months ahead.
“The proceeds from these sales will be used to partially fund the cash component of our merger price as well as to reduce debt if more stock is elected by the LaSalle shareholders,” said Ray Martz, CFO, Pebblebrook Hotel Trust, in a recent conference call. “In the next six to 12 months, our strategic plan is to sell an additional $500 million to $1 billion of properties beyond the three sales that are currently committed. The acquisition market remains robust and there is a significant amount of equity and debt pursuing individual hotels and we expect these trends to continue. We look to take advantage of this environment, which certainly favors sellers of high quality hotels.”
The combined LaSalle/Pebblebrook Company will have 66 upper-upscale and luxury independent and branded hotels located in key urban and resort markets in the United States. In addition, the merger will create the largest owner of independent and collection branded hotels in the country and the third largest publicly traded hotel REIT.
“This larger portfolio will provide us with increased influence and negotiating strength with management companies, brands and the OTAs and will benefit from stronger banking relationships and more equity liquidity,” Jon Bortz, chairman/CEO, Pebblebrook Hotel Trust.
For LaSalle, this outcome represents the culmination of a thorough strategic alternatives process, focusing on maximizing value for its shareholders.
“The form of consideration is also important. First, shareholders will have the right to receive up to 30% of the total consideration in the form of cash at $37.80 per share, which is a 10.8% premium to LaSalle’s current stock price. This provides certain and immediate value,” said Mike Barnello, LaSalle Hotel Properties CEO. “In addition, due to the equity consideration, which is expected to be tax free, LaSalle shareholders will have the opportunity to benefit from the additional upside of the combined company.”