Pebblebrook Hotel Trust IPO Plans to Invest in Luxury Hotel Properties

Dec. 7.09 | About: Pebblebrook Hotel (PEB)

Pebblebrook Hotel Trust (NYSE:PEB), a newly formed REIT which intends to invest in upscale hotel properties located in large US cities, is due to go public this week.

Business Overview (from prospectus)

We are an internally managed hotel investment company recently organized by our Chairman, President and Chief Executive Officer, Jon E. Bortz, to opportunistically acquire and invest in hotel properties located primarily in major United States cities, with an emphasis on the major coastal markets. As a result of construction costs and density, these markets have significant barriers to entry and, as shown in historical industry data, we believe these markets will experience the most robust recovery in meeting and room-night demand as the U.S. economy improves. In addition, we may invest in resort properties located near our primary urban target markets, as well as in select destination markets such as Hawaii, south Florida and southern California. We will seek geographic diversity in our investments, although attractive opportunities will be more important than geographic mix in our investment activity. We intend to focus on full-service hotel properties in the “upper upscale” segment of the lodging industry as defined by Smith Travel Research, Inc., or Smith Travel Research. In addition, we may seek to acquire branded, upscale, select-service properties in our primary urban target markets. We believe that these investments can produce attractive risk-adjusted returns because we expect (i) to acquire properties at cyclically low prices in the current economic and financing environment and (ii) the properties we purchase will benefit from increasing business and leisure travel as the economy improves. We currently do not own any hotel properties and have no properties under contract. We intend to elect and qualify to be taxed as a real estate investment trust, or REIT, for federal income tax purposes.

Offering: 17.5 million shares at $20 per share. Net proceeds of approximately $327.6 million will be used for hotel property investment.

Lead Underwriters: BofA Merrill Lynch (NYSE:BAC), Raymond James (NYSE:RJF), Wells Fargo Securities (NYSE:WFC)

Competitors:

We expect to compete for hotel investment opportunities with institutional investors, private equity investors, other REITs and numerous local, regional and national owners, including franchisors, in each of our target markets. Some of these entities may have substantially greater financial resources than we do and may be able and willing to accept more risk than we can prudently manage. Competition generally may increase the bargaining power of property owners seeking to sell and reduce the number of suitable investment opportunities offered to us or purchased by us.

The hotel industry is highly competitive. Hotels we acquire will compete with other hotels for guests in our markets. Competitive factors include location, convenience, brand affiliation, room rates, range of services, facilities and guest amenities or accommodations offered and quality of guest service. Competition in the markets in which our hotels will operate will include competition from existing, newly renovated and newly developed hotels in the relevant segments. Competition can adversely affect the occupancy, ADR and RevPAR of our hotels, and thus our financial results, and may require us to provide additional amenities, incur additional costs or make capital improvements that we otherwise might not choose to make, which may adversely affect our profitability.

Additional Resources: