Pebblebrook Hotel Trust Completes $30.0 Million Sale of Marina City Retail Space and Parking Facilities in Downtown Chicago

Rhea-AI Summary

Pebblebrook Hotel Trust (NYSE: PEB) completed the sale of Marina City retail space and two parking facilities for $30.0 million. The sales reflect an approximate 6.4% capitalization rate and a year of robust activity in property dispositions, with seven property sales totaling $330.8 million in 2023.

Insights

Financial Analyst

The completion of the sale of Marina City retail space and adjacent parking facilities by Pebblebrook Hotel Trust for $30.0 million is a significant transaction within the real estate investment trust (REIT) sector. The disclosed 6.4% capitalization rate is a critical metric, indicating the expected return on the investment, which can be compared to industry benchmarks to assess attractiveness. The capitalization rate is derived from the net operating income (NOI), a key indicator of the property's profitability excluding financing and tax expenses.

The cumulative sales of $330.8 million at a 20.6x EBITDA multiple and a 4.1% NOI capitalization rate, after accounting for capital reserves, suggest a strategic portfolio rebalancing. This rebalancing could potentially enhance the company's financial flexibility, particularly if the proceeds are used to reduce debt, which might improve leverage ratios and interest coverage metrics. The repurchase of common and preferred shares could also signal confidence in the intrinsic value of the company's stock, possibly leading to accretive effects on shareholder value.

Real Estate Investment Analyst

The real estate industry often uses the EBITDA multiple to gauge the value of a property relative to its earnings before interest, taxes, depreciation and amortization. Pebblebrook's reported 20.6x EBITDA multiple suggests a premium valuation compared to typical market multiples, which could reflect the quality of the assets sold or a strong real estate market. However, it is essential to analyze this in the context of the specific market conditions and the quality of the underlying assets.

The 4.1% net operating income capitalization rate, which factors in a 4.0% capital reserve, could be considered low in the current market, potentially indicating high property values or lower yield expectations. Investors should assess this in light of current interest rates, market trends and the company's strategic positioning. The capital reserve is an allowance for property improvements and replacements, ensuring the sustainability of revenue streams.

Debt Analyst

Using proceeds from property sales for debt reduction is a prudent financial strategy that can improve a company's debt profile and decrease future interest obligations, thereby enhancing financial stability. The impact on the company's creditworthiness would depend on the amount of debt retired relative to the total debt outstanding. Additionally, share repurchases can be a double-edged sword; while they may indicate management's belief in undervaluation, they also reduce the company's cash reserves. This strategy's effectiveness hinges on the timing of the repurchase and the company's ability to maintain operational performance without the need for that cash reserve.

BETHESDA, Md.--(BUSINESS WIRE)-- Pebblebrook Hotel Trust (NYSE: PEB) (the “Company”) announced today that on December 21, 2023, it successfully completed the sale of the Marina City retail space and two parking facilities adjacent to its Hotel Chicago Downtown, Autograph Collection, for $30.0 million to a third party.

The sales transaction includes approximately 146,000 square feet of retail space and two parking facilities offering 900 spaces. The transaction reflects an approximate 6.4% capitalization rate based on the estimated net operating income for the year ending December 31, 2023.

Highlighting a year of robust activity in property dispositions, Pebblebrook has successfully executed seven property sales totaling $330.8 million in 2023. These sales cumulatively represent an approximate 20.6x EBITDA multiple and a 4.1% net operating income capitalization rate. This rate is calculated assuming a 4.0% capital reserve against total property revenues based on the trailing twelve-month performance preceding each sale.

Proceeds from the sale will be used for general corporate purposes, which may include reducing the Company’s outstanding debt and repurchasing the Company’s common and preferred shares.

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 us at @PebblebrookPEB.

This press release contains certain “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Forward-looking statements are generally identifiable by the use of forward-looking terminology such as “estimated” and “will” or other similar words or expressions. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections and forecasts and other forward-looking information and estimates. The intended use of proceeds is a forward-looking statement. These forward-looking statements are subject to various risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the state of the U.S. economy, the operating performance of our hotels and the supply of hotel properties, and other factors as are described in greater detail in the Company’s filings with the Securities and Exchange Commission, including, without limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

For further information about the Company’s business and financial results, please refer to the “Management’s Discussion and Analysis of Financial 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 the Company’s website at www.pebblebrookhotels.com.

All information in this press release is as of December 22, 2023. The Company undertakes no duty to update the statements in this press release to conform the statements to actual results or changes in the Company’s expectations.

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

Pebblebrook Hotel Trust
Marina City Retail Space
Reconciliation of Hotel Net Income to Hotel EBITDA and Hotel Net Operating Income
Estimated December 2023 Trailing Twelve Months
(Unaudited, in millions)
			Estimated Twelve Months Ending December 31,
			2023
Hotel net income (loss)			$1.4
Adjustment:
Depreciation and amortization			0.8
Hotel EBITDA			$2.2
Adjustment:
Capital reserve			(0.3)
Hotel Net Operating Income			$1.9
This press release includes certain non-GAAP financial measures as 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 accepted accounting principles, or GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the hotel’s results of operations determined in accordance with GAAP. The Company has presented estimated trailing twelve-month hotel EBITDA, estimated trailing twelve-month hotel net operating income after capital reserves, and an estimated adjustment for the impact of a one-time real estate tax true up credit because it believes these measures provide investors and analysts with an understanding of the hotel-level operating performance. These non-GAAP measures do not represent amounts available for management’s discretionary use, because of needed capital replacement or expansion, debt service obligations or other commitments and uncertainties, nor are they indicative of funds available to fund the Company’s cash needs, including its ability to make distributions. The Company’s presentation of the hotel’s estimated trailing twelve-month EBITDA, estimated trailing twelve-month net operating income after capital reserves and an estimated adjustment for the impact of a one-time real estate tax true up credit should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of the hotel’s financial performance. The table above is a reconciliation of the hotel’s estimated trailing twelve-month EBITDA and net operating income after capital reserves calculations to net income in accordance with GAAP. Any differences are a result of rounding.

Pebblebrook Hotel Trust
Historical Operating Data
($ in millions, except ADR and RevPAR)
(Unaudited)
Historical Operating Data:
				First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year
				2019		2019		2019		2019		2019
Occupancy				74%		86%		86%		77%		81%
ADR				$251		$275		$272		$250		$263
RevPAR				$186		$236		$234		$192		$212
Hotel Revenues				$294.3		$375.5		$372.5		$318.8		$1,361.0
Hotel EBITDA				$74.2		$132.7		$126.5		$84.9		$418.3
Hotel EBITDA Margin				25.2%		35.3%		34.0%		26.6%		30.7%
				First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year
				2022		2022		2022		2022		2022
Occupancy				49%		69%		73%		61%		63%
ADR				$301		$324		$326		$297		$314
RevPAR				$146		$224		$238		$180		$197
Hotel Revenues				$229.3		$361.8		$382.8		$304.5		$1,278.4
Hotel EBITDA				$46.7		$124.5		$121.9		$63.1		$356.3
Hotel EBITDA Margin				20.4%		34.4%		31.8%		20.7%		27.9%
				First Quarter		Second Quarter		Third Quarter
				2023		2023		2023
Occupancy				59%		73%		75%
ADR				$303		$312		$312
RevPAR				$177		$229		$235
Hotel Revenues				$290.2		$372.1		$383.0
Hotel EBITDA				$59.1		$110.5		$111.9
Hotel EBITDA Margin				20.4%		29.7%		29.2%
These historical hotel operating results include information for all of the hotels the Company owned as of December 21, 2023, (excluding LaPlaya Beach Club & Resort), following the sale of Marina City Retail Space. These historical operating results include periods prior to the Company's ownership of the hotels. The information above does not reflect the Company's corporate general and administrative expense, interest expense, property acquisition costs, depreciation and amortization, taxes and other expenses. Any differences are a result of rounding. The information above has not been audited and has been presented only for comparison purposes.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231221395978/en/

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

Source: Pebblebrook Hotel Trust

FAQ

What did Pebblebrook Hotel Trust (NYSE: PEB) announce?

Pebblebrook Hotel Trust announced the successful completion of the sale of Marina City retail space and two parking facilities for $30.0 million to a third party.

How much did the sales transaction reflect in terms of capitalization rate?

The sales transaction reflected an approximate 6.4% capitalization rate based on the estimated net operating income for the year ending December 31, 2023.

What were the total property sales in 2023 for Pebblebrook Hotel Trust (NYSE: PEB)?

Pebblebrook executed seven property sales totaling $330.8 million in 2023.

How will the proceeds from the sale be used?

Proceeds from the sale will be used for general corporate purposes, which may include reducing the Company’s outstanding debt and repurchasing the Company’s common and preferred shares.