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Pebblebrook Wins Bidding War for LaSalle

Deal Expected to Close by Year End; LaSalle Pays Blackstone $112 Million Breakup Fee
September 6, 2018

Pebblebrook Hotel Trust's headquarters building located just outside Washington, D.C., in Bethesda, Maryland.

Jon Bortz is getting his company back. The chief executive of Pebblebrook Hotel Trust has won the protracted bidding war for real estate investment trust LaSalle Hotel Properties, a lodging company he founded in 1998 and led until his 2009 retirement.

Shortly after leaving LaSalle, he started Pebblebrook by scooping up troubled properties in key coastal locations. Now, almost a decade later, he's bringing the two Bethesda, Maryland, REITs under one roof, outbidding Blackstone Group in a near six-month pursuit of LaSalle.

The result of the $5.2 billion takeover agreed to Thursday makes Pebblebrook the largest U.S. owner of unique, independent luxury hotels and resorts at a time when economic and hotel industry fundamentals are strong.

Jon Bortz, chairman and CEO of Pebblebrook.
Photo Credit: Sard Verbinnen & Co.

"We are very pleased to have reached an agreement to bring Pebblebrook and LaSalle together in a strategic combination that represents a terrific value-maximizing opportunity for both LaSalle and Pebblebrook shareholders," Bortz said in a statement.

The remarks came a day after LaSalle, which had been rebuffing Pebblebrook’s repeated offers to better capitalize and stabilize the business in favor of Blackstone, admitted that the Pebblebrook purchase offer was a "superior proposal" to Blackstone’s rival bid.

Blackstone waived the requirement of a four-business-day notice that LaSalle issued Wednesday when it said it wanted to terminate the all-cash $4.8 billion merger agreement reached in May.

The deal is still subject to a shareholder vote and is expected to close in the fourth quarter.

LaSalle paid a $112 million exit fee to Blackstone, according to a filing with the Securities and Exchange Commission, and canceled a planned shareholder vote on the Blackstone deal.

Pebblebrook’s cash and share-swap buyout of LaSalle’s stock calls for a fixed per-share amount of $37.80. The stock swap was set at 0.92 of a Pebblebrook share for every share of LaSalle stock. However, only 30 percent of the proportion of LaSalle common shares could be exchanged.

The combined company will include 66 properties described as "primary upper-upscale and luxury independent and collection branded hotels and resorts located in or near key urban markets in the U.S., with a greater presence in higher-growth U.S. markets."

"We are confident that shareholders will benefit from this premium portfolio of high-quality independent and branded hotels through its capacity to generate strong cash flow, provide for a stable dividend and capitalize on market opportunities, including improving hotel industry fundamentals," said Bortz, who will lead the combined company. "We look forward to moving swiftly to complete this transaction and to welcoming LaSalle employees to our team."

The deal also includes the sale of three LaSalle properties that have not been named. A conference call with shareholders is scheduled for Sept. 13.

Jennifer Waters, Chicago Reporter  CoStar Group   

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