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Pebblebrook to Sell $1.72 Billion in Hotel Assets to Help Cover $5.2 Billion Purchase Price of LaSalle

Sales Already Penned for Park Central San Francisco, Park Central New York and WestHouse Hotel
September 14, 2018
Pebblebrook already has agreed to sell three LaSalle properties for $715 million, including Park Central New York, and expects to unload as much as $1 billion in assets.

Pebblebrook Hotel Trust Chief Executive Jon Bortz’s plans to bring the two luxury lodging groups he founded under one roof include asset sales of as much as $1.715 billion of LaSalle Hotel Properties’ hotels.

Bortz told analysts he intends to follow up on a promise he made during the drawn-out bidding for the LaSalle real estate investment trust that began in May. It ended last week after Pebblebrook bested Blackstone Group with its $5.2 billion-plus-debt offer.

It was a personal win for Bortz, who founded LaSalle in 1998 in Bethesda, Maryland, and ran it until his retirement in 2009. Soon after, he started Pebblebrook by buying distressed properties in the depths of the Great Recession. The two headquarters are only a block away from each other.

Pebblebrook already has agreed to sell three LaSalle properties for $715 million and expects to unload as much as $1 billion in assets as it finds ways to better finance the combination of the two luxury hotel groups.

LaSalle’s Park Central San Francisco, Park Central New York and the WestHouse Hotel in New York are already under contract, executives said on the call. The properties were sold in a package, Bortz said, and the individual prices of each were not broken down.

Pebblebrook also expects to shave $18 million to $20 million in expenses tied to senior-level salaries and the costs associated with meeting regulatory requirements for a public company. Bortz will lead the combined companies, but it’s unclear which other senior executives will stay on.

Executives did not name or disclose the number of hotels that were on the block, noting that it could hurt hotel operations.

“We are already actively working on this disposition plan, and we’re very optimistic that we will be able to begin executing on our plans relatively quickly in order to reduce our leverage ... quickly,” Raymond Martz, Pebblebrook’s chief financial officer, said on the call Wednesday.

“The acquisition market remains robust and there is a significant amount of equity pursuing these individual hotels and we expect that trend to continue,” he added. He expects those sales to take six months to a year.

Martz said much of the LaSalle takeover legwork will be completed by the third week in October, after which time both companies can take the deal to shareholders for a vote. The closing date is targeted for late November to early December.

Jennifer Waters, Chicago Reporter  CoStar Group   
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