e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2010
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number 001-34571
PEBBLEBROOK HOTEL TRUST
(Exact Name of Registrant as Specified in Its Charter)
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Maryland
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27-1055421 |
(State of Incorporation or Organization)
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(I.R.S. Employer Identification No.) |
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2 Bethesda Metro Center, Suite 1530
Bethesda, Maryland
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20814 (Zip Code) |
(Address of Principal Executive Offices)
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(240) 507-1300
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such
files). o Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer þ
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Smaller reporting company o |
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(do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). o Yes þ No
Indicate the number of shares outstanding of each of the issuers classes of common stock, as
of the latest practicable date.
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Class
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Outstanding at May 3, 2010 |
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Common Shares of Beneficial Interest ($0.01 par value per share)
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20,344,337 |
Pebblebrook Hotel Trust
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Pebblebrook Hotel Trust
Consolidated Balance Sheets
(In thousands)
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March 31, 2010 |
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December 31, 2009 |
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(unaudited) |
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ASSETS |
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Cash and cash equivalents |
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$ |
302,898 |
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$ |
319,119 |
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Investments |
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85,000 |
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70,000 |
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Prepaid expenses and other assets |
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409 |
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284 |
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Total assets |
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$ |
388,307 |
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$ |
389,403 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Accounts payable and accrued expenses |
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$ |
1,367 |
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$ |
1,927 |
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Accrued underwriter fees |
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8,050 |
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8,050 |
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Total Liabilities |
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9,417 |
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9,977 |
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Commitments and contingencies |
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Shareholders equity |
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Common shares of beneficial interest, $.01 par value, 500,000,000 shares authorized; 20,260,590
issued and outstanding at March 31, 2010; 20,260,000 issued and outstanding at December 31,
2009 |
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203 |
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203 |
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Additional paid-in capital, net of underwriting discounts and offering costs |
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379,433 |
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379,370 |
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Retained deficit |
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(746 |
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(147 |
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Total shareholders equity |
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378,890 |
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379,426 |
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Total liabilities and shareholders equity |
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$ |
388,307 |
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$ |
389,403 |
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The accompanying notes are an integral part of these financial statements.
3
Pebblebrook Hotel Trust
Consolidated Statement of Operations
For the three months ended March 31, 2010
(In thousands, except share data)
(unaudited)
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Revenues |
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$ |
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Expenses |
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General and administrative |
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1,576 |
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Total operating expenses |
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1,576 |
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Operating loss |
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(1,576 |
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Interest income |
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977 |
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Net loss and net loss attributable to common shareholders |
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(599 |
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Loss per common share, basic and diluted |
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(0.03 |
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Weighted average number of common shares, basic and diluted |
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20,260,046 |
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The accompanying notes are an integral part of this financial statement.
4
Pebblebrook Hotel Trust
Consolidated Statement of Cash Flows
For the three months ended March 31, 2010
(In thousands)
(Unaudited)
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Operating activities |
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Net loss |
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(599 |
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Adjustments to reconcile net loss to net cash provided by
operating activities |
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Depreciation |
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5 |
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Share-based compensation |
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444 |
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Changes in assets and liabilities |
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Prepaid expenses and other assets |
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(112 |
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Accounts payable and accrued expenses |
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681 |
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Net cash provided by operating activities |
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419 |
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Investing activities |
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Investment in certificates of deposits |
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(15,000 |
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Purchase of corporate office equipment and furniture |
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(158 |
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Net cash used in investing activities |
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(15,158 |
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Financing activities |
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Offering costs paid |
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(1,482 |
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Net cash used in financing activities |
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(1,482 |
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Net change in cash and cash equivalents |
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(16,221 |
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Cash and cash equivalents, beginning of year |
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319,119 |
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Cash and cash equivalents, end of year |
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$ |
302,898 |
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The accompanying notes are an integral part of this financial statement.
5
PEBBLEBROOK HOTEL TRUST
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Organization
Pebblebrook Hotel Trust (the Company) was formed as a Maryland real estate investment trust
on October 2, 2009 to opportunistically acquire and invest in hotel properties located primarily in
major United States cities, with an emphasis on major coastal markets. On December 14, 2009, the
Company raised $379.6 million, net of underwriting discounts and offering costs, in an initial
public offering and concurrent private placement of common shares of beneficial interest (common
shares). As of March 31, 2010, the Company had not entered into any contracts to acquire hotel
properties.
Substantially all of the Companys assets are held by, and all of the operations are conducted
through, Pebblebrook Hotel, L.P., (the Operating Partnership). The Company is the sole general
partner of the Operating Partnership. At March 31, 2010, the Company owned 100 percent of the
Operating Partnership. The Company intends to elect and qualify to be taxed as a real estate
investment trust (REIT) for federal income tax purposes, commencing with its short taxable year
ended December 31, 2009. For the Company to qualify as a REIT under the Code, it cannot operate
the hotels it acquires. Therefore, its Operating Partnership and its subsidiaries will lease its
hotel properties to its taxable REIT subsidiary (TRS) lessees, who will in turn engage eligible
third party independent contractors to manage the hotels. Each of these lessees will be treated as
a TRS for federal income tax purposes and will be consolidated into the Companys financial
statements for accounting purposes. However, since both the Operating Partnership and TRS lessees
are controlled by the Company, the principal source of funds on a consolidated basis will be from
the operations of the Companys hotels.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim consolidated financial statements and related notes have
been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and in
conformity with the rules and regulations of the Securities and Exchange Commission (SEC)
applicable to interim financial information. As such, certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP have been omitted in
accordance with the rules and regulations of the SEC. These unaudited consolidated financial
statements include all adjustments considered necessary for a fair presentation of the consolidated
balance sheets, consolidated statement of operations and consolidated statement of cash flows for
the periods presented. Interim results are not necessarily indicative of full year performance due
to the impact of seasonal and other short-term variations. These consolidated financial statements
should be read in conjunction with the audited consolidated financial statements and accompanying
notes included in the Companys Annual Report on Form 10-K for the year ended December 31, 2009.
The consolidated financial statements include all of the accounts of the Company and its
subsidiaries in accordance with U.S. GAAP. All intercompany balances and transactions have been
eliminated in consolidation.
The Companys comprehensive loss equals its net loss available to common shareholders and the
Company had no items classified in accumulated other comprehensive loss for the three months ended
March 31, 2010.
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are
prepared using managements best judgment, after considering past, current and expected events and
economic conditions. Actual results could differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand deposits with financial institutions
and short term liquid investments with an original maturity of three months or less. Cash balances
in individual banks may exceed federally insurable limits.
Investments
The Companys investments consist of certificates of deposits with an original maturity of six
months from the date of investment. The carrying value of the certificates of deposits
approximates fair value due to their short maturity. Interest income is earned on such
investments.
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Prepaid Expenses and Other Assets
The Companys prepaid expenses and other assets consist of prepaid insurance, deposits,
deferred financing costs, and corporate office equipment and furniture.
Earnings Per Share
Basic earnings per share (EPS) is computed by dividing the net income (loss) available for
common shareholders by the weighted average number of common shares outstanding for the period.
Diluted EPS is computed by dividing net income (loss) available for common shareholders as adjusted
for potentially dilutive securities, by the weighted average number of common shares outstanding
plus potentially dilutive securities. Any anti-dilutive securities are excluded from the diluted
per share calculation.
Recent Accounting Standards
In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic
820): Improving Disclosures about Fair Value Measurements. This update provides amendments to Topic
820 that will provide more robust disclosures about (1) the different classes of assets and
liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity
in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3. ASU 2010-06
is effective for interim and annual reporting periods beginning after December 15, 2009 with early
adoption permitted, except for the disclosures about purchases, sales, issuances, and settlements
in the roll forward of Level 3 activity. Those disclosures are effective for fiscal years beginning
after December 15, 2010 and for interim periods within those fiscal years with early adoption
permitted. The adoption of this standard did not have a material impact on the Companys financial
statements.
In June 2009, the FASB issued ASU No. 2009-17, Consolidations (Topic 810)Improvements to
Financial Reporting by Enterprises Involved with Variable Interest Entities that requires
enterprises to perform a more qualitative approach to determining whether or not a variable
interest entity will need to be consolidated. This evaluation will be based on an enterprises
ability to direct and influence the activities of a variable interest entity that most
significantly impact its economic performance. It requires ongoing reassessments of whether an
enterprise is the primary beneficiary of a variable interest entity. This accounting standard is
effective for fiscal years beginning after November 15, 2009. Early adoption is not permitted. The
Company adopted this accounting standard during this quarter and the adoption of this accounting
standard did not have impact on the Companys financial statements.
Note 3. Share-Based Compensation Plan
The Company maintains the 2009 Equity Incentive Plan to attract and retain independent
trustees, executive officers and other key employees and service providers. The plan provides for
the grant of options to purchase common shares, share awards, share appreciation rights,
performance units and other equity based awards. Share awards under this plan generally vest over
three to five years. The Company will pay dividends on unvested shares. Certain share awards may
provide for accelerated vesting if there is a change in control. As of March 31, 2010, there were
309,189 common shares available for issuance under the 2009 Equity Incentive Plan.
The following table provides a summary of restricted share activity for 2010:
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Weighted-Average |
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Grant Date Fair |
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Shares |
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Value |
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Unvested at January 1, 2010
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15,000 |
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$ |
20.00 |
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Granted |
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68,747 |
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21.04 |
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Vested |
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Forfeited |
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Unvested at March 31, 2010 |
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83,747 |
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$ |
20.85 |
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The fair value of each restricted share award is determined based on the trading price of the
Companys common shares on the grant date. For the three months ended March 31, 2010, the Company
recognized approximately $51 thousand in expense related to these restricted shares in the
consolidated statement of operations. As of March 31, 2010, there was $1.7 million of total
unrecognized compensation cost related to unvested restricted shares. The cost is expected to be
recognized over the weighted average of 3.1 years.
Long-Term Incentive Partnership Units
Long-Term Incentive Partnership, or LTIP, units, which are also referred to as profits
interest units, may be issued to eligible
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participants for the performance of services to or for
the benefit of the Operating Partnership. LTIP units are a class of partnership unit in the
Companys Operating Partnership and will receive, whether vested or not, the same per unit profit
distributions as the other outstanding units in the Operating Partnership, which equal per share distributions on common
shares. Initially, LTIP units have a capital account balance of zero, and do not have full parity
with the common Operating Partnership units with respect to liquidating distributions. If such
parity is reached, vested LTIP units may be converted, at any time, into an equal number of common
Operating Partnership units, and thereafter, possess all of the rights and interests of a common
Operating Partnership unit, including the right to redeem the common Operating Partnership unit for
a common share in the REIT or cash, at the option of the Operating Partnership.
On December 14, 2009, upon completion of the Companys initial public offering and concurrent
private placement, the Companys Operating Partnership issued 881,750 LTIP units to executives and
officers of the Company under the 2009 Equity Incentive Plan. On January 11, 2010, the Companys
Operating Partnership issued 47,349 LTIP units to a new executive officer of the Company. These
LTIP units vest ratably on each of the first five anniversaries of the date of grant.
The LTIP units were valued using a Monte Carlo simulation method model. The LTIP grants in
December and January were valued at $8.50 per LTIP unit on the respective grant dates. Because the
Company is a newly formed entity, the Company used an expected volatility of 55 percent and
expected stabilized dividend yield of 5 percent which are based on the published historical data of
comparable hospitality REITs. The risk-free interest rate of 3.08 percent is based on the U.S.
Treasury yield in effect at the time of grant. The fair value of the award was modeled over an
expected life of seven years which is the period of time over which the Company expects that the
LTIP units will become expired, converted into common Operating Partnership units or rendered
worthless following the occurrence of a transaction.
The fair value estimate also considered the inherent uncertainty that the LTIP units will
never reach parity and therefore will have zero economic value to the grantee because either a
revaluation event never occurs or because such an event occurs but the value of the business has
not increased sufficiently for the LTIP unit holder to reach parity. In reaching the assumption of
this uncertainty, the Company considered a number of factors, including but not limited to: the
threshold to reach parity would require significant value creation; hotel company stocks are
volatile and have trended downward with the Bloomberg REIT Index experiencing an approximately
negative 45 percent return over the past 16 years; the Company owned no assets, other than the
proceeds from the initial public offering and had no operating
history as of the date of grant; the hospitality business continues to face very challenging operating conditions
experiencing significant declines in RevPAR and ADR in the last two years and there are no
assurances that these declines will not continue; the Company is heavily dependent on the efforts
and service of the Companys CEO and other key members of management to execute the Companys
business plan; the Company had no acquisition pipeline as of the date of grant; a number of other
hotel companies and investors are actively pursuing hotel acquisitions which may increase the costs
of potential or acquired hotel assets and reduce projected returns; the Companys financial
resources may be less than the financial resources of its peers potentially limiting the Companys
ability to compete for attractive acquisitions, and various other economic factors and conditions
that have adversely impacted the hotel industry. The valuation approach assumes that there is a 50
percent chance that a revaluation event will not occur or will occur, but the value of the business
will have declined or will not have increased by an amount that allows for the LTIP units to reach
parity with the common Operating Partnership unit holders and thus the LTIP units expire worthless.
In addition, the valuation approach assumes there is a 50 percent chance that the Company will have
sufficient cash flows to pay the assumed dividend rate.
The Company recorded $0.4 million in compensation expense related to the LTIP units for the
three months ended March 31, 2010. As of March 31, 2010, there was $7.4 million of total
unrecognized compensation cost related to LTIP units. This cost is expected to be recognized over
the weighted average of 4.8 years which represents the average remaining vesting period of the LTIP
units. As of March 31, 2010, none of the LTIP units have reached parity.
Note 4. Subsequent Events
On May 6, 2010, a wholly-owned subsidiary of the Company entered into an agreement to acquire an
upscale full-service hotel in the Washington D.C./Baltimore metropolitan area for $67.1 million.
The Company will fund the purchase price from the proceeds of its initial public offering, which
was completed in December 2009. The closing is expected to occur within 45 days, however, because
the acquisition is subject to customary closing requirements and conditions, the Company can give
no assurance that the transaction will be consummated during that time period, or at all.
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Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
The following discussion and analysis should be read in conjunction with the consolidated
financial statements and related notes included elsewhere in this report. Pebblebrook Hotel Trust
is a Maryland self-administered real estate investment trust, or REIT. Substantially all of the
operations are conducted through Pebblebrook Hotel, L.P., (the Operating Partnership), a Delaware
limited partnership of which Pebblebrook is the sole general partner and in which it holds 100
percent of the partnership interests as of March 31, 2010. In this report, we use the terms we
or our to refer to Pebblebrook Hotel Trust and its subsidiaries, unless the context indicates
otherwise.
Forward-Looking Statements
This report, together with other statements and information publicly disseminated by the
Company, contains certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. We intend such forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and
include this statement for purposes of complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe our future plans, strategies and
expectations, are generally identifiable by use of the words believe, expect, intend,
anticipate, estimate, project,forecast or similar expressions. Forward-looking statements
in this report include, among others, statements about our business strategy, including our
acquisition and development strategies, industry trends, estimated revenues and expenses, ability
to realize deferred tax assets and expected liquidity needs and sources (including capital
expenditures and the ability to obtain financing or raise capital). You should not rely on
forward-looking statements since they involve known and unknown risks, uncertainties and other
factors that are, in some cases, beyond our control and which could materially affect actual
results, performances or achievements. Factors that may cause actual results to differ materially
from current expectations include, but are not limited to:
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the timing and availability of potential hotel acquisitions and our ability to
identify and complete hotel acquisitions in accordance with our business strategy; |
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risks associated with the hotel industry, including competition, increases in
employment costs, energy costs and other operating costs, or decreases in demand
caused by actual or threatened terrorist attacks, any type of flu or disease-related
pandemic, or downturns in general and local economic conditions; |
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the availability and terms of financing and capital and the general volatility of
securities markets; |
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our dependence on third-party managers of our hotels, including our inability to
implement strategic business decisions directly; |
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risks associated with the real estate industry, including environmental
contamination and costs of complying with the Americans with Disabilities Act and
similar laws; |
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interest rate increases; |
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our possible failure to qualify as a REIT and the risk of changes in laws
affecting REITs; |
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the possibility of uninsured losses; and |
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the other factors discussed under the heading Risk Factors in the Companys
Annual Report on Form 10-K for the year ended December 31, 2009, as updated
elsewhere in this report. |
Accordingly, there is no assurance that our expectations will be realized. Except as otherwise
required by the federal securities laws, we disclaim any obligations or undertaking to publicly
release any updates or revisions to any forward-looking statement contained herein (or elsewhere)
to reflect any change in our expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based.
Overview
On December 14, 2009, we completed our initial public offering and concurrent private
placement of our common shares of beneficial interest (common shares), netting $379.6 million,
after underwriting discounts and offering costs. Proceeds from the initial public offering and
concurrent private placement have been invested in short term liquid money market and certificates
of deposit accounts with highly rated financial institutions. We owned no properties at March 31,
2010. We are currently evaluating opportunities to acquire hotel assets, and we intend to invest
in hotel properties as suitable opportunities arise.
The economy has begun to recover from the recent
recession with improvements in corporate profits and increase in business travel.
9
In 2010, we expect industry demand for rooms in the U.S. to increase
while supply rises to a lesser extent, resulting in an increase in occupancy. However, we also
expect a decline in U.S. industry average daily rates (ADR) due to the weakened economic
environment. Combined, we expect 2010 room revenue per available room (RevPAR) for the U.S.
industry to be up 1% to 3% compared to 2009.
While we are encouraged by the improvements in economic fundamentals, the unprecedented declines in operating
performance experienced by the hotel industry since the recession began will continue to make it a challenging
environment for owners and lenders.
We believe our Company is well positioned to take
advantage of opportunities created by this difficult operating environment by acquiring hotels in
the early years of an economic and lodging industry recovery at attractive historical valuations.
Results of Operations
Results for the initial period of our operations are not indicative of the results we expect
when our investment strategy has been fully implemented. Our net loss attributable to common
shareholders for the three months ended March 31, 2010 was ($599,000). We earned $977,000 in
interest income on cash and short term investment balances and incurred $1,576,000 in general and
administrative expenses. The general and administrative expenses primarily consist of employee
compensation costs (including non-cash share-based compensation cost of $444,000), professional
fees, insurance, and acquisition costs.
Critical Accounting Policies
Our consolidated financial statements have been prepared in conformity with GAAP, which
requires management to make estimates and assumptions that affect the reported amount of assets and
liabilities at the date of our financial statements and the reported amounts of revenues and
expenses during the reporting period. While we do not believe the reported amounts would be
materially different, application of these policies involves the exercise of judgment and the use
of assumptions as to future uncertainties and, as a result, actual results could differ from these
estimates. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on
experience and on various other assumptions that are believed to be reasonable under the
circumstances. All of our significant accounting policies, including certain critical accounting
policies, are disclosed in our Annual Report on Form 10-K.
Recent Accounting Standards
See Note 2, Summary of Significant Accounting Policies, to our consolidated interim financial
statements for additional information relating to recently adopted accounting pronouncements.
Liquidity and Capital Resources
On December 14, 2009, we raised $379.6 million, net of underwriting discounts and offering
costs, in an initial public offering and concurrent private placement of our common shares. The net
proceeds from our initial public offering and concurrent private placement are available to fund
investments in hotel properties that meet our investment criteria. We intend to limit the sum of
the outstanding principal amount of our consolidated net indebtedness and the liquidation
preference of any outstanding preferred shares to not more than 4.5x our EBITDA for the 12-month
period preceding the incurrence of such debt or the issuance of such preferred shares. Net
indebtedness consists of total debt less cash and cash equivalents and investments. Compliance
with this limitation will be judged at the time debt is incurred, and a subsequent decrease in
EBITDA will not require us to repay debt. In addition, if we assume or incur debt in connection
with our initial hotel acquisitions, our debt level could exceed the general limitation described
above.
We expect to meet our short-term liquidity requirements generally through net cash provided by
operations, existing cash balances and, if necessary, short-term borrowings under an anticipated
revolving credit facility. Our existing cash balances will fund our operating costs in the near
term. As we acquire hotel assets, we believe that our net cash provided by operations will be
adequate to fund operating requirements, pay interest on any borrowings and fund dividends in
accordance with the REIT requirements of the federal income tax laws.
We expect to meet our long-term liquidity requirements, such as hotel property acquisitions
through the cash available from the initial public offering and the concurrent private placement
and borrowings as well as through cash provided by operations. We intend to invest in hotel
properties only as suitable opportunities arise. Following the utilization of the cash available
from the initial public offering and concurrent private placement, we intend to finance future
investments with the net proceeds from additional issuances of common shares, issuances of
preferred shares, issuances of units of limited partnership interest in our operating partnership,
secured and unsecured borrowings, and cash provided by operations. The success of our business
strategy may depend, in part, on our ability to access additional capital through issuances of debt
and equity securities, which is dependent on favorable market conditions.
We anticipate arranging and utilizing a revolving credit facility to fund future acquisitions
(following investment of the net proceeds of this offering and the concurrent private placement),
as well as for property redevelopments, return on investment
10
initiatives and working capital requirements. We intend to repay indebtedness incurred under our credit facility from time to time
out of cash flow and from the net proceeds of issuances of additional equity and debt securities,
as market conditions permit. No assurances can be given that we will obtain such credit facility,
or, if we do, what the amount and terms will be.
Sources and Uses of Cash
At March 31, 2010, we had $302.9 million of cash and cash equivalents and $85.0 million in
short-term investments. Short term investments consist of certificates of deposits. On December
14, 2009, we raised $379.6 million, net of underwriting discounts and offering costs, in an initial
public offering and concurrent private placement of our common shares. As of March 31, 2010 we
have not invested any of the proceeds from the offering in hotel properties. The Company accrued
underwriters commissions of $8.1 million that, in accordance with the underwriters agreement,
will be payable at the time the Company invests the net proceeds from the offering. For the three
months ended March 31, 2010, we earned interest income of $977,000 and had cash flow from
operations of $419,000.
Contractual Obligations and Off-Balance Sheet Arrangements
As of March 31, 2010, we were under no contractual obligations and had no off-balance sheet
arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Interest Rate Sensitivity
We earn interest income from cash and cash equivalents and investments. At March 31, 2010, we
had $387.9 million in cash and cash equivalents and short term investments. If interest rates on
our cash and cash equivalents and short term investments increase or decrease by 0.1 percent, our
interest income will increase or decrease by approximately $0.4 million, respectively.
Item 4T.
Controls and Procedures.
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our
disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the
period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that these disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting during our most
recent fiscal quarter that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
We are not involved in any material litigation nor, to our knowledge, are any material
litigation threatened against us.
Item 1A. Risk Factors.
There have been no material changes from the risk factors disclosed in the Risk Factors
section of the Companys Annual Report on Form 10-K for the year ended December 31, 2009.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Use of Proceeds
Our registration statement on Form S-11, as amended (Registration No. 333-162412) (the
Registration Statement), with respect to our initial public offering (the Offering) of common
shares, par value $0.01 per share, registered up to $402.5 million of common shares and was
declared effective on December 8, 2009. We sold a total of 20,125,000 common shares in the
Offering, including 2,625,000 common shares issued and sold pursuant to the underwriters exercise
of the overallotment option for gross
proceeds of $402.5 million. The Offering was completed on December 14, 2009. As of the date of
filing this report, the Offering has terminated and all of the securities registered pursuant to
the Registration Statement have been sold. The joint book-running managers
11
of the Offering were Merrill Lynch, Pierce, Fenner & Smith Incorporated, Raymond James & Associates, Inc., and Wells
Fargo Securities, LLC. Co-managers of the offering were Calyon Securities (USA) Inc. and RBC
Capital Markets Corporation. The expenses of the offering were as follows (in millions):
|
|
|
|
|
Underwriting discounts and commissions |
|
$ |
24.2 |
|
Expenses paid to or for our underwriters |
|
$ |
0.0 |
|
Other expenses |
|
$ |
1.4 |
|
|
|
|
|
|
|
|
|
|
Total underwriting discounts and expenses |
|
$ |
25.6 |
|
All of the foregoing underwriting discounts and expenses were direct or indirect payments
to persons other than: (i) our trustees, officers or any of their associates; (ii) persons owning
ten percent (10 percent) or more of our common shares; or (iii) our affiliates.
The net proceeds to us of the Offering were approximately $376.9 million, after the underwriting
discount and offering expenses. In accordance with the underwriting agreement, $8.1 million of the
underwriting discount and commissions have been accrued and will be paid when the Company purchases
assets in accordance with our investment strategy described above under Business in an amount
equal to at least the amount of the net proceeds. Until that time, the net proceeds including the
unpaid underwriting discount and commission have been invested in short-term, interest-bearing,
investment-grade securities, and money market accounts that are consistent with our intention to
qualify as a REIT.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. (Removed and Reserved).
Item 5. Other information.
None.
Item 6. Exhibits.
The following exhibits are filed as part of this report:
|
|
|
Exhibit |
|
|
Number |
|
Description of Exhibit |
3.3
|
|
First Amended and Restated Agreement of Limited Partnership of Pebblebrook Hotel, L. P. |
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
Filed electronically herewith. |
12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
PEBBLEBROOK HOTEL TRUST
|
|
Date: May 6, 2010 |
/s/ Jon E. Bortz
|
|
|
Jon E. Bortz |
|
|
Chairman, President and
Chief Executive Officer |
|
13
Exhibit Index
|
|
|
Exhibit |
|
|
Number |
|
Description of Exhibit |
3.3
|
|
First Amended and Restated Agreement of Limited Partnership of Pebblebrook Hotel. L.P. |
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
Filed electronically herewith. |
14