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Main Press Release Pebblebrook Hotel Trust Acquires the Nines Hotel in Portland, Oregon - Press Release - Digital Journal

Pebblebrook Hotel Trust Acquires the Nines Hotel in Portland, Oregon - Press Release - Digital Journal


BETHESDA, Md.--(Business Wire)--Pebblebrook Hotel Trust (NYSE:PEB) (the “Company”) today announced thatit has acquired The Nines Hotel for $127.0 million. The 331-room luxuryhotel is located across from Pioneer Square, in the heart of downtownPortland, Oregon. The property will maintain its association withStarwood’s Luxury Collection brand and will continue to be operated bySage Hospitality and Sage Restaurant Group (“Sage”).

“We’re thrilled with our acquisition of The Nines Hotel and theopportunity to further expand our presence in the high- growth Portlandmarket,” said Jon Bortz, Chairman and Chief Executive Officer ofPebblebrook Hotel Trust. “This hotel represents our third hotelinvestment in Portland’s central business district, and the property’sdesirable location across from Pioneer Square ideally places it nearmany of downtown Portland’s most notable demand generators. The hotel’sexcellent downtown location and strong operating fundamentals, includingits position as the market’s rate leader, make this acquisition anoutstanding addition to our high-quality portfolio.”

The Nines Hotel is a 331-room, luxury, full-service hotel located on SWMorrison Street just across from Pioneer Square, one of Portland’s mostvisited sites. The hotel is a short walk from Pioneer Place Mall, SaksFifth Avenue, Nordstrom, Nike Town, the Pearl District and the numerousvenues of the Portland Center for the Performing Arts. The hotel’spremier location is also proximate to major area corporate tenantsincluding US Bank, Deloitte, NRC, Wells Fargo, Intel, Nike and othertop-tier institutions. The nearly one million-square-foot OregonConvention Center, the largest in the Pacific Northwest, is locatedapproximately one mile from the hotel and also provides significantadditional demand. Nearby leisure demand generators include PioneerSquare, Portland Aerial Tram, Powell’s Books, Portland Rose Garden, theColumbia River Gorge, and Multnomah Falls, among others.

The Company acquired a fee simple condominium interest in The NinesHotel. The historic building, originally constructed in 1909 as theMeier &- Frank Building, underwent a comprehensive $140 million adaptivereuse renovation and reopened as The Nines Hotel in October 2008. Thehotel occupies floors six through fifteen and a portion of the firstfloor and basement within the landmark Meier &- Frank Building, locatedat 525 SW Morrison Street, while Macy’s flagship store occupies floorsone through five and most of the basement. The Nines Hotel guestroomsare among the largest of the upper upscale and luxury offerings in themarket, ranging from 365 to 628 square feet. Bathrooms are appointedwith a marble vanity, marble floors and walls, lighted mirrors andchrome fixtures. The hotel includes 13,500 square feet of meeting spacealong with two notable independent restaurants. Urban Farmer Steakhouse,located in the lobby of the hotel, is a modern steakhouse with anemphasis on local and sustainable ingredients, while DepartureRestaurant and Lounge, located on the hotel’s rooftop, serves asPortland’s signature skyline experience, offering unparalleled views ofthe city and surrounding mountains. The Nines Hotel, which has beenawarded a LEED Silver Certification, also features a library withbilliards, a 24-hour fitness center, a business center, a club loungeand valet parking.

In 2013, The Nines Hotel operated at 88 percent occupancy, with anaverage daily rate (“ADR”) of $193 and room revenue per available room(“RevPAR”) of $170. During the next 12 months, the Company currentlyforecasts that the hotel will generate earnings before interest, taxes,depreciation and amortization (“EBITDA”) of $12.0 to $12.6 million andnet operating income after capital reserves (“NOI”) of $10.4 to $11.0million.

In conjunction with the acquisition, the Company is assuming threesecured, non-recourse loans totaling $50.7 million, which are subject toa weighted average interest rate of 7.4%. Each of the loans matures onMarch 5, 2015.

The Company expects to invest $6.0 to $8.0 million of capital to refreshthe guestrooms and public areas, which it anticipates commencing in thefourth quarter of 2015.

The Company will assume the hotel’s existing franchise agreement withStarwood’s Luxury Collection. The Nines Hotel will continue to bemanaged by Sage under a new hotel operating agreement.

“We’re excited about the opportunity to form a strategic relationshipwith Sage,” continued Mr. Bortz. “We believe their performance-driven,results-oriented strategies and extensive experience with The NinesHotel will maximize the hotel’s long term value.”

“We are thrilled to be developing a new relationship with PebblebrookHotel Trust,” said Sage’s Co-Founder, President and CEO, WalterIsenberg. “We believe the hotel has tremendous long term growthpotential and we look forward to unlocking additional value at one ofthe premier hotels in the West.”

The Company expects to incur approximately $0.8 million of costs relatedto the acquisition of the hotel that will be expensed as incurred.

The acquisition of The Nines Hotel brings the total number of propertiesin the Company’s portfolio to 31 and marks the Company’s thirdinvestment in downtown Portland, Oregon.

About Pebblebrook Hotel Trust

Pebblebrook Hotel Trust is a publicly traded real estate investmenttrust (“REIT”) organized to opportunistically acquire and investprimarily in upper upscale, full-service hotels located in urban marketsin major gateway cities. The Company owns 31 hotels, including 25 whollyowned hotels with a total of 6,046 guest rooms and a 49% joint ventureinterest in six hotels with a total of 1,775 guest rooms. The Companyowns, or has an ownership interest in, hotels located in ten states andthe District of Columbia, including: Los Angeles, California (Hollywood,Santa Monica, West Hollywood and Westwood)- San Diego, California- SanFrancisco, California- Miami, Florida- Buckhead, Georgia- Bethesda,Maryland- Boston, Massachusetts- Minneapolis, Minnesota- New York, NewYork- Portland, Oregon- Philadelphia, Pennsylvania- Columbia RiverGorge, Washington- Seattle, Washington- and Washington, DC. For moreinformation, please visit us at www.pebblebrookhotels.comand follow us on Twitter at @PebblebrookPEB.

About Sage Hospitality

Founded in 1984, Sage Hospitality has strategically grown into one ofthe largest privately held hotel investment, management and developmentcompanies in the nation operating a variety of large, full-servicehotels and extended stay and select-service properties. SageHospitality's comprehensive management portfolio includes majorinternational brands for Marriott, Starwood, Hilton and IHG as well asthe independent boutique hotels. Sage Hospitality has furtherdifferentiated with the creation of the Sage Restaurant Group, which hascreated and is managing over nine unique restaurant concepts includingthe acclaimed Mercat a la Planxa restaurant in Chicago. For moreinformation, please visit www.sagehospitality.com.

This press release contains certain “forward-looking statements”relating to, among other things, potential property acquisitions, hotelEBITDA, hotel net operating income after capital reserves, acquisitioncosts and projected demand. Forward-looking statements aregenerally 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,” “plan” or other similarwords or expressions. Forward-looking statements are based oncertain assumptions and can include future expectations, future plansand strategies, financial and operating projections or otherforward-looking information. Examples of forward-lookingstatements include the following: projections of hotel-level EBITDA andnet operating income after capital reserves- projections of acquisitioncosts- descriptions of the Company’s plans or objectives for futureoperations, acquisitions or services- forecasts of future economicperformance- and descriptions of assumptions underlying or relating toany of the foregoing expectations regarding the timing of theiroccurrence. These forward-looking statements are subject tovarious risks and uncertainties, many of which are beyond the Company’scontrol, which could cause actual results to differ materially from suchstatements. These risks and uncertainties include, but are notlimited to, the state of the U.S. economy, supply and demand inthe hotel industry and other factors as are described in greater detailin the Company’s filings with the Securities and Exchange Commission(“SEC”), including, without limitation, the Company’s Annual Report onForm 10-K for the year ended December 31, 2013. Unless legallyrequired, the Company disclaims any obligation to update anyforward-looking statements, whether as a result of new information,future events or otherwise.

For further information about the Company’s business and financialresults, please refer to the “Management’s Discussion and Analysis ofFinancial 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 theCompany’s website at www.pebblebrookhotels.comand at www.sec.gov.

All information in this release is as of July 17, 2014. The Companyundertakes no duty to update the statements in this release to conformthe statements to actual results or changes in the Company’sexpectations. The Company assumes no responsibility for thecontents or accuracy of the information on any of the non-Companywebsites mentioned herein, which are included solely for ease ofreference.

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

   
Pebblebrook Hotel Trust
The Nines Hotel
Reconciliation of Hotel Net Income to Hotel EBITDA and Hotel NetOperating Income
12-Month Forecast
(Unaudited, in millions)
 
Range
LowHigh
 
Hotel net income

$8.0

to

$8.6

 
Adjustment:
Depreciation and amortization(1)4.04.0
  
Hotel EBITDA

$12.0

 

$12.6

 
 
Adjustment:
Capital reserve

(1.6

)

(1.6

)
  
Hotel Net Operating Income

$10.4

 $11.0 
 
(1) Depreciation and amortization have been estimated based on apreliminary purchase price allocation. A change, if any, in theallocation will affect the amount of depreciation and amortizationand the resulting change may be material.
 

This press release includes certain non-GAAP financial measuresas defined under Securities and Exchange Commission (SEC) Rules.These measures are not in accordance with, or an alternative to,measures prepared in accordance with U.S. generally acceptedaccounting principles, or GAAP, and may be different from non-GAAPmeasures used by other companies. In addition, these non-GAAPmeasures are not based on any comprehensive set of accountingrules or principles. Non-GAAP measures have limitations in thatthey do not reflect all of the amounts associated with the hotel’sresults of operations determined in accordance with GAAP.

 

The Company has presented forecasted hotel EBITDA andforecasted hotel net operating income after capital reserves,because it believes these measures provide investors and analystswith an understanding of the hotel-level operating performance.These non-GAAP measures do not represent amounts available formanagement’s discretionary use, because of needed capitalreplacement or expansion, debt service obligations or othercommitments and uncertainties, nor are they indicative of fundsavailable to fund the Company’s cash needs, including its abilityto make distributions.

 

The Company’s presentation of the hotel’s forecasted EBITDA andforecasted net operating income after capital reserves should notbe considered as an alternative to net income (computed inaccordance with GAAP) as an indicator of the hotel’s financialperformance. The table above is a reconciliation of the hotel’sforecasted EBITDA and net operating income after capital reservescalculations to net income in accordance with GAAP.

 
 
Pebblebrook Hotel Trust
Historical Operating Data - Entire Portfolio
($ in millions, except ADR and RevPAR)
(Unaudited)
     
 
Historical Operating Data:
First QuarterSecond QuarterThird QuarterFourth QuarterFull Year
20132013201320132013
 
Occupancy79%87%88%81%84%
ADR$195$221$230$224$218
RevPAR$155$192$202$181$183
 
Hotel Revenues$142.7$173.8$178.4$169.2$664.2
Hotel EBITDA$30.8$55.3$57.9$49.7$193.7
 
First Quarter
2014
 
Occupancy80%
ADR$209
RevPAR$168
 
Hotel Revenues$153.8
Hotel EBITDA$37.3
 

These historical hotel operating results include informationfor all of the hotels the Company owned as of July 17, 2014. Thehotel operating results for the Manhattan Collection only includes49% of the results for the 6 properties to reflect the Company's49% ownership interest in the hotels. These historical operatingresults include periods prior to the Company's ownership of thehotels. The information above does not reflect the Company'scorporate general and administrative expense, interest expense,property acquisition costs, depreciation and amortization, taxesand other expenses. Any differences are a result of rounding.

 

The information above has not been audited and has beenpresented only for comparison purposes.

 

Pebblebrook Hotel Trust
Raymond D. Martz
Chief FinancialOfficer
240-507-1330