News Details

Pro forma RevPAR Increased 6.6 Percent; Pro forma Hotel EBITDA Rose 8.2 Percent

BETHESDA, Md.--(BUSINESS WIRE)-- Pebblebrook Hotel Trust (NYSE: PEB) (the “Company”) today reported results for the quarter ended June 30, 2011. The Company’s results include the following:

For the details as to which hotels are included in Pro forma RevPAR, ADR, Occupancy, Hotel Revenues, Hotel Expenses, Hotel EBITDA and Hotel EBITDA Margins for the second quarter and six months ended June 30, 2011, refer to the Pro Forma 2011 Property Inclusion Reference Table later in this press release.

Second Quarter Highlights

• Pro forma RevPAR: Pro forma room revenue per available room (“Pro forma RevPAR”) in the second quarter of 2011 increased 6.6 percent over the same period of 2010 to $146.97. Pro forma average daily rate (“Pro forma ADR”) grew 8.7 percent from the second quarter of 2010 to $189.29, while Pro forma Occupancy decreased 1.8 percent to 78.5 percent.
• Pro forma Hotel EBITDA: The hotels generated $19.5 million of Pro forma Hotel EBITDA for the quarter ended June 30, 2011, an improvement of 8.2 percent compared with the same period of 2010. Pro forma Hotel Revenues increased 6.3 percent, while Pro forma Hotel Expenses rose 5.6 percent. As a result, the Pro forma Hotel EBITDA Margin was 27.1 percent for the quarter ended June 30, 2011 and represents an increase of 48 basis points as compared to the same period last year.
• EBITDA and Adjusted EBITDA: The Company’s EBITDA increased to $16.1 million for the second quarter of 2011, from $(3.6) million for the prior year period. The Company’s Adjusted EBITDA was $18.3 million, an improvement of $18.4 million over the prior year period.
• FFO and Adjusted FFO: The Company generated FFO of $9.4 million in the second quarter of 2011. The Company’s Adjusted FFO was $11.6 million, an improvement of $11.7 million over the prior year period.
• Capital Investments: During the second quarter of 2011, the Company invested $7.5 million of capital throughout its portfolio, including $2.0 million at the Sir Francis Drake, $1.8 million at the Intercontinental Buckhead and $1.3 million at the Westin Gaslamp Quarter.
• Dividends: On June 15, 2011, the Company declared a $0.12 per share quarterly dividend on its common shares and a $0.4921875 per share quarterly dividend on its 7.875% Series A Cumulative Redeemable Preferred Shares.

“Second quarter operating results for our portfolio significantly outpaced our outlook,” said Jon E. Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. “Business travel demand, including both group and transient travel, remained strong throughout the quarter, particularly in San Francisco, West Hollywood, Minneapolis and Philadelphia. Despite the ongoing concerns about the U.S. economy, corporate profits continue to grow, and as a result, corporate travel demand continues to recover, allowing us to increase pricing and yield higher average daily rates. In addition, we continue to see strong booking patterns across our portfolio for the remainder of the year and for 2012, giving us the confidence to increase our outlook for the second half of 2011.”

The renovation of the 140-room Grand Hotel Minneapolis’ guest rooms, lobby, bar, entry and meeting space was completed in the second quarter of 2011. The renovation of the 416-room Sir Francis Drake’s guest rooms was completed in June and the hotel’s lobby renovation and Starlight Room refurbishment are scheduled to be completed by the end of the third quarter of 2011. The renovation of the Westin Gaslamp Quarter’s 450 guest rooms was completed in the second quarter and the comprehensive renovation of the rest of the property, including the hotel’s second and third floor meeting space, ground floor lobby, lounge, restaurant, entry, exterior and fourth floor ballroom is currently underway and expected to be completed in phases over the next three quarters. In addition, the Descent Theme Bar and Lounge at the W Boston is under development and is expected to open in the fourth quarter of 2011.

“The capital reinvestment programs at the DoubleTree Bethesda by Hilton Bethesda-Washington, DC, Sir Francis Drake, Grand Hotel Minneapolis, Westin Gaslamp and Affinia Manhattan will enable these hotels to generate meaningful increases in operating cash flow,” advised Mr. Bortz. “In addition to these capital repositioning programs, we remain very excited about the significant operational upside opportunities that exist throughout our portfolio. Our asset managers, along with our entire executive team, are working closely with our hotel managers to aggressively realize these opportunities. We are in the process of implementing our best practices and other expense reduction and revenue enhancement initiatives across all of our hotels and are very encouraged by the results we’ve begun to see.”

Acquisitions

• On April 6, 2011, the Company acquired The Westin Gaslamp Quarter for $110.0 million. The 450-room, upper upscale, full service hotel is located in the historic Gaslamp Quarter of San Diego, California. The property offers three food and beverage outlets, over 32,000 square feet of meeting and event space and is currently undergoing a $25.0 million capital reinvestment plan that is expected to be completed in the first quarter of 2012. Starwood Hotels and Resorts manages the hotel.
• On April 7, 2011, the Company acquired the Hotel Monaco Seattle for $51.2 million. The 189-room, upper upscale, full service hotel is centrally located in the downtown area of Seattle, Washington. The hotel contains 6,000 square feet of meeting space and features the immensely popular Sazerac restaurant, a 135-seat, award-winning, three-meal-a-day, stand-alone restaurant and bar. Kimpton Hotels & Restaurants manages the hotel.
• On May 13, 2011, the Company acquired the Mondrian Los Angeles for $137.0 million. The 237-room, luxurious, full service, boutique-style hotel is located in West Hollywood, California, along the Sunset Strip. The property boasts stunning views of Los Angeles, the Hollywood Hills and Sunset Boulevard, over 1,200 square feet of meeting space and three terrific food and beverage outlets: Asia deCuba, ADCB and SkyBar. Morgans Hotel Group manages the hotel.
• On May 26, 2011, the Company acquired the Viceroy Miami for $36.5 million. The 148-room, luxury, full service hotel is located in downtown Miami, Florida in the ICON Brickell complex. The hotel, which opened in 2009, includes a unique array of amenities, including oversized guest rooms, each with its own convenience kitchen, a full service spa, distinctive meeting and event space and three food and beverage outlets. Viceroy Hotel Group manages the hotel.
• On June 8, 2011, the Company acquired the W Boston for $89.5 million. The 235-room, luxury, full service hotel is located in the Theatre District of downtown Boston, Massachusetts. The property, which opened in late 2009, offers 5,000 square feet of indoor meeting space, the Bliss spa and two food and beverage outlets. Starwood Hotels and Resorts manages the hotel.
• On July 29, 2011, the Company acquired a 49% interest in a joint venture valued at $910.0 million with affiliates of Denihan Hospitality Group that owns six upper upscale and luxury hotels in Manhattan. This six hotel portfolio (the “Manhattan Collection”) includes Affinia Manhattan, Affinia Shelburne, Affinia Dumont, Affinia 50, Affinia Gardens and The Benjamin – which currently comprise 1,640 guest rooms, but will increase the number of guest rooms to 1,730 following the completion of a comprehensive renovation and reconfiguration of the Affinia Manhattan this fall. The Manhattan Collection hotels are well located in the Midtown market of Manhattan, have been well maintained and boast some of the largest guest rooms and suites in New York City, providing a unique competitive advantage in the marketplace. Denihan Hospitality Group manages each hotel in the Manhattan Collection.
  
  The transaction was funded with proceeds from Pebblebrook’s previously completed equity offerings, as well as borrowing under the Company’s unsecured credit facility. The acquisition also includes the assumption of the Company’s 49% pro rata share of $596.6 million of first mortgage and mezzanine debt. The debt is a non-recourse, interest-only loan, subject to a floating interest rate based on the 30-day LIBOR rate plus a weighted average total spread of approximately 325 basis points. The loan matures in February 2013.

“We are very pleased with the high quality hotels that we’ve been able to acquire thus far during the year,” noted Mr. Bortz. “All of these hotels have terrific locations in the heart of high barrier to entry major gateway cities, while continuing to expand our geographic and management company diversification.”

Since its initial public offering in December 2009, the Company has acquired 20 properties (six through a joint venture) totaling $1.6 billion of invested capital.

Year-to-Date Highlights

• Pro forma RevPAR: Pro forma RevPAR for the six months ended June 30, 2011 increased by 7.3 percent over the same period of 2010 to $135.71. Year-to-date, Pro forma ADR grew 9.0 percent from the comparable period of 2010 to $184.20, while Pro forma Occupancy declined 1.7 percent to 74.5 percent.
• Pro forma Hotel EBITDA: The Company’s hotels generated $27.5 million of Pro forma Hotel EBITDA for the six months ended June 30, 2011, an improvement of 12.8 percent compared with the same period of 2010. Pro forma Hotel Revenues increased 7.0 percent, while Pro forma Hotel Expenses rose 5.3 percent. As a result, Pro forma Hotel EBITDA Margin for the six months ended June 30, 2011 increased 123 basis points to 23.9 percent as compared to the same period last year.
• EBITDA and Adjusted EBITDA: The Company’s EBITDA grew to $20.4 million for the six months ended June 30, 2011, compared with $(4.2) million for the prior year period. The Company’s Adjusted EBITDA rose to $24.7 million, from $(0.2) million for the prior year period.
• FFO and Adjusted FFO: For the six months ended June 30, 2011, the Company’s FFO was $10.6 million. The Company’s Adjusted FFO increased to $14.9 million, compared with $(0.3) million for the prior year period.

Balance Sheet

As of June 30, 2011, the Company had $252.1 million in outstanding debt at a weighted average interest rate of 4.5 percent and had no outstanding balance on its $200.0 million senior unsecured credit facility. On June 30, 2011, the Company had $140.0 million of cash and cash equivalents on its balance sheet, a consolidated fixed charge coverage ratio of 4.3 times and the Company’s total net debt to trailing 12 month Corporate EBITDA (as defined in the Company’s credit agreement) was 2.0 times. The diluted weighted average number of common shares and units outstanding for the quarter ended June 30, 2011 was 51.3 million.

Capital Markets

Between the months of April 2011 and July 2011, the Company completed several capital transactions to help fund strategic growth and maintain its strong balance sheet.

• On April 6, 2011, the Company closed an underwritten public offering of 10.9 million common shares, resulting in net proceeds of $226.3 million.
• On June 3, 2011, the Company amended and restated its senior credit agreement. The new bank facility, which is now unsecured, has $200 million of availability, an increase from $150 million, with a maturity of June 2014 that can be extended to June 2015. The facility provides the Company with an accordion option to upsize the available amount of the credit facility to $400 million. In addition, pricing on the new unsecured credit facility was reduced from, and terms were substantially improved over, the prior secured facility agreement.
• On July 12, 2011, the Company directly sold 600,000 shares of its 7.875% Series A Cumulative Redeemable Preferred Shares to CBRE Clarion Securities LLC at a price of $25.25 per share, resulting in net proceeds of approximately $15.1 million.

2011 Outlook

As a result of the Company’s recently completed acquisitions and capital market activities, the Company is amending and increasing its 2011 outlook to the following:

“We are increasing our 2011 outlook due to the strong performance at our hotels to-date, as well as a strengthening booking pace, particularly for the fourth quarter,” advised Mr. Bortz. “Group and transient booking patterns remain healthy and we continue to be very encouraged by our asset management efforts, which have begun to yield positive results.”

The Company’s revised 2011 outlook is based on the following estimates and assumptions:

• Additional acquisitions are not included beyond the 20 properties that have been acquired as of July 29, 2011;
• Hotel industry RevPAR to increase 7.0 to 8.0 percent over 2010;
• Pro forma RevPAR growth of 7.5 to 9.0 percent over 2010 to $155 to $157 and 6.0 to 8.0 percent over the third quarter of 2010 to $170 to $173;
• Pro forma Hotel EBITDA of $84.3 to $87.3 million;
• Pro forma Hotel EBITDA Margin to increase between 240 and 300 basis points over the 2010 Pro forma Hotel EBITDA Margin to 25.9 to 26.5 percent;
• Corporate cash general and administrative expenses of $7.0 to $7.5 million;
• Corporate non-cash general and administrative expenses of $2.7 million;
• Acquisition and related expenses of $11.7 million;
• Total capital investments related to renovations, capital maintenance and return on investment projects of approximately $63.0 to $68.0 million;
• Interest expense, including the non-cash amortization of deferred financing fees, of $20.0 million;
• Interest income of $0.9 million;
• Weighted average outstanding debt of $277.4 million. Including the Company’s 49% pro-rata interest in the non-recourse debt assumed with the Manhattan Collection, the weighted average outstanding debt is $398.3 million; and
• Weighted average fully diluted shares and operating partnership units of 49.0 million.

The Company’s 2011 outlook for corporate cash and non-cash general and administrative expenses does not include the $11.7 million of costs related to acquisitions, such as due diligence, transfer taxes and legal and accounting fees, which are required to be expensed when incurred and which are detailed separately above. In addition, the 2011 outlook includes the effects of the Company’s 49% pro-rata interest in the Manhattan Collection.

For the details as to which hotels are included in Pro forma RevPAR, ADR, Occupancy, Hotel Revenues, Hotel Expenses, Hotel EBITDA and Hotel EBITDA Margins for the Company’s 2011 Outlook, refer to the Pro Forma 2011 Property Inclusion Reference Table later in this press release.

Earnings Call

The Company will conduct its quarterly analyst and investor conference call on Wednesday, August 3, 2011 at 9:00 AM EDT. To participate in the conference call, please dial (877) 857-6161 approximately ten minutes before the call begins. Additionally, a live webcast of the conference call will be available through the Company’s website. To access the webcast, log on to http://www.pebblebrookhotels.com ten minutes prior to the conference call. A replay of the conference call webcast will be archived and available online through the Investor Relations section of http://www.pebblebrookhotels.com.

About Pebblebrook Hotel Trust

Pebblebrook Hotel Trust is a publicly traded real estate investment trust (“REIT”) organized to opportunistically acquire and invest primarily in upper upscale, full service hotels located in large urban and resort markets with an emphasis on the major coastal cities. The Company owns 20 hotels, comprised of 14 wholly-owned hotels, with a total of 3,812 guest rooms and a 49% joint venture interest in 6 hotels with 1,730 guest rooms. The Company owns, or has an ownership interest in, hotels located in nine states and the District of Columbia, including 14 markets: Bethesda, Maryland; San Francisco, California; Buckhead, Georgia; Washington, DC; Minneapolis, Minnesota; Stevenson, Washington; Santa Monica, California; Philadelphia, Pennsylvania; San Diego, California; Seattle, Washington; West Hollywood, California; Miami, Florida; Boston, Massachusetts; and New York, New York. For more information, please visit www.pebblebrookhotels.com.

This press release contains certain “forward-looking” statements relating to, among other things, potential property acquisitions and projected financial and operating results.Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “forecast,” “continue,” “assume,” “plan” and reference to “outlook” or other similar words or expressions.Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections and forecasts and other forward-looking information and estimates.Examples of forward-looking statements include the following: projections and forecasts of net income, FFO, EBITDA, Adjusted FFO, Adjusted EBITDA, RevPAR, EBITDA Margin and the Company’s expenses, share count or other financial items; descriptions of the Company’s plans or objectives for future operations, acquisitions or services; forecasts of the Company’s future economic performance and its share of future markets; forecasts of hotel industry performance; and descriptions of assumptions underlying or relating to any of the foregoing expectations including assumptions regarding the timing of their occurrence.These forward-looking statements are subject to various risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results to differ materially from such statements.These risks and uncertainties include, but are not limited to, the state of the U.S. economy and the supply of hotel properties, and other factors as are described in greater detail in the Company’s filings with the Securities and Exchange Commission, including, without limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

For further information about the Company’s business and financial results, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the Company’s SEC filings, including, but not limited to, its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, copies of which may be obtained at the Investor Relations section of the Company’s website at www.pebblebrookhotels.com.

All information in this release is as of August 2, 2011.The Company undertakes no duty to update the statements in this release to conform the statements to actual results or changes in the Company’s expectations.

For additional information or to receive press releases via email, please visit our website at www.pebblebrookhotels.com

Source: Pebblebrook Hotel Trust

Pebblebrook Hotel Trust

Raymond D. Martz, Chief Financial Officer, 240-507-1330