Pebblebrook Hotel Trust Announces Closing of Private Placement of $400 Million of 6.375% Senior Notes Due 2029

Rhea-AI Summary

Pebblebrook Hotel Trust (NYSE: PEB) announced the closing of a $400 million private placement of 6.375% Senior Notes due 2029 through its operating partnership. The notes are senior unsecured obligations, initially guaranteed by the Company and its subsidiaries. Approximately $353.3 million of the net proceeds were used to pay down three unsecured term loans, resulting in no meaningful debt maturities until December 2026.

Following the repayments, the remaining outstanding principal amounts of the Operating Partnership's term loans maturing in October 2024, October 2025, and October 2027 are $0, $200.0 million, and $360.0 million, respectively. The notes were offered only to qualified institutional buyers and certain non-U.S. persons in offshore transactions.

Positive

• Successful private placement of $400 million in Senior Notes
• Repayment of $353.3 million in unsecured term loans
• No meaningful debt maturities until December 2026
• Improved debt structure with extended maturity profile

Negative

• Increased long-term debt with 6.375% interest rate
• Potential increase in interest expenses

Insights

Financial Analyst

Pebblebrook Hotel Trust's $400 million private placement of senior notes is a significant financial move with several implications:

• The 6.375% interest rate on the new notes is relatively high, reflecting current market conditions and potentially the company's risk profile.
• Using $353.3 million to pay down existing term loans improves the company's debt maturity profile, with no major maturities until December 2026.
• This refinancing shifts the debt structure from bank loans to bonds, which typically offer more flexibility but at a higher cost.
• The transaction may impact the company's interest expenses and cash flow in the short term, but provides longer-term financial stability.
• Investors should monitor how this affects Pebblebrook's overall leverage and its ability to navigate the challenging hospitality market.

While this move strengthens the balance sheet, it comes at a cost that could pressure profitability in the near term.

Real Estate Investment Specialist

This refinancing transaction by Pebblebrook Hotel Trust reflects broader trends in the REIT sector, particularly for hospitality REITs:

• The company is prioritizing liquidity and financial flexibility, important in the cyclical hotel industry.
• By extending its debt maturity profile, Pebblebrook is better positioned to weather potential economic downturns or industry-specific challenges.
• The high interest rate on the new notes (6.375%) suggests lenders perceive elevated risk in the hotel sector, likely due to ongoing recovery from the pandemic and economic uncertainties.
• This move aligns with a conservative financial strategy, which may be viewed positively by risk-averse investors but could limit growth opportunities in the short term.
• The transaction's impact on funds from operations (FFO), a key metric for REITs, will be important to monitor in upcoming earnings reports.

Overall, this refinancing strengthens Pebblebrook's financial position but may indicate cautious expectations for the hotel market in the coming years.

BETHESDA, Md.--(BUSINESS WIRE)-- Pebblebrook Hotel Trust (NYSE: PEB) (the “Company”) today announced that its operating partnership, Pebblebrook Hotel, L.P. (the “Operating Partnership”), and a wholly owned subsidiary of the Operating Partnership, PEB Finance Corp. (together with the Operating Partnership, the “Issuers”), closed on the private placement (the “Private Placement”) of $400 million aggregate principal amount of their 6.375% Senior Notes due 2029 (the “Notes”). The Notes are senior unsecured obligations of the Issuers and are initially fully and unconditionally guaranteed by the Company and the Operating Partnership’s subsidiaries that guarantee the existing credit facilities of the Operating Partnership.

The Operating Partnership used approximately $353.3 million of the net proceeds from the offering to pay down three of the Operating Partnership’s unsecured term loans. As a result of the repayments, the remaining outstanding principal amounts of the Operating Partnership’s term loans maturing in October 2024, October 2025 and October 2027 are $0, $200.0 million and $360.0 million, respectively. Following the repayments, the Company has no meaningful debt maturities until December 2026.

The Notes and the related guarantees have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), any state securities laws or the securities laws of any other jurisdiction. The Notes were not offered or sold in the United States or to U.S. persons absent an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Notes were offered and sold only to persons reasonably believed to be “qualified institutional buyers” pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons in offshore transactions outside the United States pursuant to Regulation S under the Securities Act. This press release is neither an offer to sell nor a solicitation of an offer to buy the Notes or any other securities and shall not constitute an offer to sell or a solicitation of an offer to buy, or a sale of, the Notes or any other securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

About Pebblebrook Hotel Trust

Pebblebrook Hotel Trust (NYSE: PEB) is a publicly traded real estate investment trust (“REIT”) and the largest owner of urban and resort lifestyle hotels in the United States. The Company owns 46 hotels, totaling approximately 12,000 guest rooms across 13 urban and resort markets. For more information, visit www.pebblebrookhotels.com and follow @PebblebrookPEB.

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20241003174652/en/

Raymond D. Martz, Co-President and Chief Financial Officer, Pebblebrook Hotel Trust - (240) 507-1330

Source: Pebblebrook Hotel Trust

FAQ

What was the size of Pebblebrook Hotel Trust's (PEB) recent private placement?

Pebblebrook Hotel Trust (PEB) closed a $400 million private placement of 6.375% Senior Notes due 2029.

How did Pebblebrook Hotel Trust (PEB) use the proceeds from the private placement?

PEB used approximately $353.3 million of the net proceeds to pay down three of its unsecured term loans.

When is Pebblebrook Hotel Trust's (PEB) next significant debt maturity after this transaction?

Following the repayments, PEB has no meaningful debt maturities until December 2026.

What are the remaining outstanding principal amounts of Pebblebrook Hotel Trust's (PEB) term loans after the repayment?

The remaining outstanding principal amounts are $0 for October 2024, $200.0 million for October 2025, and $360.0 million for October 2027.