UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): March 31, 2011

PEBBLEBROOK HOTEL TRUST

(Exact name of registrant as specified in its charter)

Maryland		001-34571		27-1055421
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

2 Bethesda Metro Center, Suite 1530, Bethesda, Maryland		20814
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (240) 507-1300

Not Applicable

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

This Current Report on Form 8-K/A amends and supplements the Current Report on Form 8-K filed by Pebblebrook Hotel Trust (the “Company”) on March 28, 2011 announcing the Company’s entry into an agreement to acquire an upscale, full-service hotel in the San Diego region for $110.0 million, The Westin Gaslamp Quarter, San Diego, to include the historical financial statements and pro forma financial information that will be required by Items 9.01(a) and (b) if the acquisition is consummated.

Item 9.01.		Financial Statements and Exhibits.

Independent Auditors’ Report
Balance Sheets as of December 31, 2010 and 2009
Statements of Operations for the years ended December 31, 2010 and 2009
Statements of Owner’s Equity in Hotel for the years ended December 31, 2010 and 2009
Statements of Cash Flows for the years ended December 31, 2010 and 2009
Notes to Financial Statements

(b) Pro forma financial information.
Pebblebrook Hotel Trust

Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2010
Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2010

(d) Exhibits

Exhibit
Number				Exhibit Description
10.1				Purchase and Sale Agreement by and between Starwood CMBS I, LLC, as seller, and Bruins Owner LLC, as purchaser, dated as of March 22, 2011, for The Westin Gaslamp, San Diego
23.1				Consent of KPMG LLP

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Independent Auditors’ Report

The Manager
The Westin Gaslamp Quarter, San Diego:

We have audited the accompanying balance sheets of the Westin Gaslamp Quarter, San Diego Hotel (the “Hotel”) as of December 31, 2010 and 2009, and the related statements of operations, owner’s equity in Hotel, and cash flows for the years then ended. These financial statements are the responsibility of the Hotel’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Hotel’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Westin Gaslamp Quarter, San Diego Hotel as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

/s/ KPMG, LLP

McLean, Virginia
March 31, 2011

WESTIN GASLAMP QUARTER, SAN DIEGO HOTEL

Balance Sheets

		December 31,
		2010				2009
Assets
Cash and cash equivalents		$	367,651			$	263,754
Accounts receivable, net			810,836				1,373,425
Inventory			353,380				341,295
Prepaid expenses			290,234				291,481
Total current assets			1,822,101				2,269,955
Property and equipment:
Land			6,500,000				6,500,000
Building and improvements			101,766,639				99,353,125
Furniture, fixtures, and equipment			18,011,074				13,901,664
			126,277,713				119,754,789
Accumulated depreciation			(44,398,105	)			(40,754,569	)
Total property and equipment, net			81,879,608				79,000,220
Total assets		$	83,701,709			$	81,270,175
Liabilities and Owner’s Equity in Hotel
Current liabilities:
Accounts payable		$	366,664			$	450,781
Accrued expenses			1,154,561				793,185
Advance deposits			818,753				620,608
Other liabilities			162,111				140,866
Total current liabilities			2,502,089				2,005,440
Owner’s Equity in Hotel			81,199,620				79,264,735
Total liabilities and owner’s equity in Hotel		$	83,701,709			$	81,270,175

See accompanying notes to financial statements.

WESTIN GASLAMP QUARTER, SAN DIEGO HOTEL

Statements of Operations

		Year Ended December 31,
		2010				2009
Revenue:
Room		$	18,508,974			$	18,749,358
Food and beverage			7,134,005				7,183,489
Other			2,033,367				2,278,766
Total revenues			27,676,346				28,211,613
Operating expenses:
Room			4,461,245				4,317,477
Food and beverage			5,037,109				5,094,441
General and administrative			2,456,198				2,369,795
Depreciation and amortization			3,643,536				3,804,165
Repairs and maintenance			889,461				822,802
Utilities			1,088,890				1,177,213
Marketing and advertising			2,393,901				2,066,652
Property taxes and insurance			1,261,957				1,335,253
Other			831,854				872,172
Total operating expenses			22,064,151				21,859,970
Net income		$	5,612,195			$	6,351,643

See accompanying notes to financial statements.

WESTIN GASLAMP QUARTER, SAN DIEGO HOTEL

Statements of Owner’s Equity in Hotel

Balance at December 31, 2008		$	82,643,372
Net distributions to owner			(9,730,280	)
Net income			6,351,643
Balance at December 31, 2009			79,264,735
Net distributions to owner			(3,677,310	)
Net income			5,612,195
Balance at December 31, 2010		$	81,199,620

See accompanying notes to financial statements.

WESTIN GASLAMP QUARTER, SAN DIEGO HOTEL

Statements of Cash Flows

		Year Ended December 31,
		2010				2009
Cash flows from operating activities:
Net income		$	5,612,195			$	6,351,643
Adjustments to reconcile net income to net cash provided operating activities:
Depreciation and amortization			3,643,536				3,804,165
Changes in operating assets and liabilities:
Accounts receivable, net			562,589				17,352
Inventory			(12,085	)			16,723
Prepaid expenses			1,247				(9,325	)
Accounts payable			(84,117	)			72,964
Advance deposits			198,145				(305,496	)
Accrued expenses and other liabilities			382,621				33,874
Net cash provided by operating activities			10,304,131				9,981,900
Net cash used in financing activities — distributions to owner of Hotel			(10,200,234	)			(9,868,702	)
Net change in cash and cash equivalents			103,897				113,198
Cash and cash equivalents:
Beginning of period			263,754				150,556
End of period		$	367,651			$	263,754
Supplemental disclosure of cash flow information — investing and financing activities:
Property improvements paid on behalf of Hotel by owner		$	6,522,924			$	138,422

See accompanying notes to financial statements.

WESTIN GASLAMP QUARTER, SAN DIEGO HOTEL

Notes to Financial Statements

December 31, 2010 and 2009

(1)		Description of Business
		The Westin Gaslamp Quarter, San Diego Hotel (the Hotel), is a full service 450-room hotel located at 910 Broadway Circle, San Diego, California. The Hotel is owned by Starwood CMBS I, LLC (CMBS I), a Delaware limited liability company.
		The accompanying financial statements are presented in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. Actual results could differ from those estimates.
		On March 22, 2011, Pebblebrook Hotel Trust (Pebblebrook) executed a purchase and sale agreement to acquire the Hotel for cash consideration of approximately $110 million. In addition, the Hotel is currently undergoing a renovation project. Pebblebrook expects to reimburse the seller for approximately $13 million in renovation costs paid by seller. Total aggregate purchase consideration is expected to be approximately $123 million. The transaction is expected to close in April 2011.
		The Hotel is managed by an affiliate of CMBS I. No intercompany management agreement is in place and no management fees have been charged to the Hotel.

(2)

Summary of Accounting Policies

	(a)		Cash and Cash Equivalents
			The Hotel considers all liquid temporary cash investments with maturities of three months or less at the date of purchase to be cash and cash equivalents.
	(b)		Property and Equipment
			Building and improvements, fixtures, furniture, and equipment are stated at cost. The cost of additions, alterations, and improvements is capitalized. Expenditures for repairs and maintenance are expensed as incurred.
			Depreciation and amortization are computed on the straight-line basis over the following estimated useful lives:

Building and improvements		5 — 40 years
Furniture, fixtures and equipment		3 — 10 years

	(c)		Revenue Recognition
			Hotel revenues are recognized when the services are provided. Revenues consist of room sales, food and beverage sales, and other department revenues such as telephone and gift shop.
	(d)		Accounts Receivable
			Accounts receivable, which primarily represent amounts due from Hotel guests, are presented net of allowances, which were not material at December 31, 2010 or 2009.

WESTIN GASLAMP QUARTER, SAN DIEGO HOTEL

Notes to Financial Statements

December 31, 2010 and 2009

	(e)		Impairment of Long-Lived Assets
			The Hotel evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. No impairment losses were recognized in either period presented.
	(f)		Marketing and Advertising Expenses
			Marketing and advertising costs are expensed as incurred. The Hotel incurred marketing and advertising costs of $2,393,901 and $2,066,652 for the years ended December 31, 2010 and 2009, respectively.
	(g)		Income Taxes
			The Hotel is not directly subject to federal, state or local income taxes. However the owner of the Hotel is a limited liability company and may be subject to certain income taxes and the members of the limited liability company are responsible for reporting their share of taxable income or loss on their respective income tax returns.

(3)		Subsequent Events
		The Hotel has evaluated the need for disclosures and/or adjustments resulting from subsequent events through March 31, 2011, the date the financial statements were available to be issued. See note 1 for disclosure.

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF PEBBLEBROOK HOTEL TRUST

Pebblebrook Hotel Trust (the “Company”) completed its initial public offering and concurrent private placement of common shares of beneficial interest on December 14, 2009. The Company raised $379.6 million, net of underwriting discounts and offering costs. On July 28, 2010, the Company completed a secondary offering of 19,550,000 common shares, including the underwriters’ overallotment of 2,550,000 common shares, at an offering price of $17.00 per share. The net proceeds to the Company, after underwriters’ discounts and offering costs, were $318.3 million. On March 11, 2011, the Company completed a secondary offering of 5,000,000 7.875% Series A Cumulative Redeemable Preferred Shares at an offering price of $25.00 per share. The net proceeds to the Company, after underwriters’ discounts and offering costs, were $121.1 million.

On February 16, 2011, the Company, through a subsidiary, acquired the Argonaut Hotel San Francisco for a purchase price of $84 million, including assumption of $42 million of debt, plus closing costs and net working capital.

On March 22, 2011, the Company, through a subsidiary, entered into an agreement to acquire The Westin Gaslamp Quarter, San Diego for $110 million, plus closing costs and net working capital. The Company expects the closing of the purchase of The Westin Gaslamp Quarter, San Diego to occur on or before April 6, 2011, 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. The Company expects to fund the acquisition with available cash.

The unaudited pro forma consolidated balance sheet as of December 31, 2010 is presented as if the acquisition of the Argonaut Hotel San Francisco and the probable acquisition of The Westin Gaslamp Quarter, San Diego occurred on December 31, 2010. The unaudited pro forma consolidated statement of operations for the year ended December 31, 2010 is presented as if the acquisition of the Argonaut Hotel San Francisco and the probable acquisition of The Westin Gaslamp Quarter, San Diego and the seven material acquisitions in 2010 all, had been completed on January 1, 2010.

The unaudited pro forma financial information is not necessarily indicative of what the Company’s results of operations or financial condition would have been assuming such transactions had been completed at the beginning of the periods presented, nor is it indicative of the results of operations for future periods. The unaudited pro forma financial information reflects the preliminary application of purchase accounting to the acquisition of the Argonaut Hotel San Francisco and the probable acquisition of The Westin Gaslamp Quarter, San Diego. The preliminary purchase accounting may be adjusted if any of the assumptions underlying the purchase accounting change. In management’s opinion, all adjustments necessary to reflect the effects of the significant acquisitions described above have been made. This unaudited pro forma financial information should be read in conjunction with the historical financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Pebblebrook Hotel Trust
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2010
(in thousands, except share and per-share data)

		Historical								Probable Acquisition of
		Pebblebrook Hotel				Acquisition of Argonaut Hotel				The Westin Gaslamp				Pro Forma Pebblebrook
		Trust				San Francisco (1)				Quarter, San Diego (2)				Hotel Trust
ASSETS
Investment in hotel properties, net		$	599,714			$	83,739			$	123,000			$	806,453
Ground lease asset			10,721				—								10,721
Cash and cash equivalents			221,543				(43,295	)			(123,420	)			54,828
Restricted cash			3,664				—								3,664
Accounts receivable, net			3,924				127								4,051
Deferred financing costs, net			2,718				—								2,718
Prepaid expenses and other assets			13,231				872								14,103
Total assets		$	855,515			$	41,443			$	(420	)		$	896,538
LIABILITIES AND STOCKHOLDERS’ EQUITY
Senior secured credit facility		$	—			$	—			$	—			$	—
Mortgage debt			143,570				42,000				—				185,570
Accounts payable and accrued expenses			15,799				390				—				16,189
Advance deposits			2,482				153				—				2,635
Accrued interest			304				—				—				304
Distribution payable			4,908				—				—				4,908
Total liabilities			167,063				42,543				—				209,606
Commitments and contingencies
Shareholders’ equity:
Preferred shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; no shares issued and outstanding			—				—				—				—
Common shares of beneficial interest, $0.01 par value; 500,000,000 shares authorized; 39,814,760 shares issued and outstanding			398				—				—				398
Additional paid-in capital			698,100				—				—				698,100
Accumulated deficit and distributions			(11,586	)			(1,100	)			(420	)			(13,106	)
Total shareholders’ equity			686,912				(1,100	)			(420	)			685,392
Non-controlling interest			1,540				—				—				1,540
Total equity			688,452				(1,100	)			(420	)			686,932
Total liabilities and equity		$	855,515			$	41,443			$	(420	)		$	896,538

     

Pebblebrook Hotel Trust
Unaudited Pro Forma Income Statement
For the twelve months ended December 31, 2010
(in thousands, except share and per-share data)

						Completed Material Acquisitions																																								Probable Acquisition
		Historical Pebblebrook Hotel Trust				Acquisition of DoubleTree by Hilton Bethesda- Washington DC Hotel(1)				Acquisition of Sir Francis Drake Hotel(2)				Acquisition of InterContinental Buckhead Hotel (3)				Acquisition of Hotel Monaco Washington DC (4)				Acquisition of Skamania Lodge (5)				Acquisition of Sheraton Delfina Santa Monica Hotel (6)				Acquisition of Sofitel Philadelphia Hotel (7)				Acquisition of Argonaut Hotel San Francisco (8)				ProForma Adjustments				Pro Forma Pebblebrook Hotel Trust before probable acquisition				Acquisition of The Westin Gaslamp Quarter, San Diego (16)				Pro Forma Adjustments				Pro Forma Pebblebrook Hotel Trust
REVENUE
Room		$	32,804			$	4,404			$	7,184			$	8,639			$	9,021			$	6,919			$	15,348			$	13,007			$	14,777			$	—			$	112,103				18,509			$	—			$	130,612
Food and beverage			21,984				1,593				6,639				6,709				4,618				8,028				3,331				5,298				4,849				—				63,049				7,134				—				70,183
Other operating department			2,973				233				1,039				1,029				425				2,211				1,156				1,066				918				—				11,050				2,033				—				13,083
Total revenues			57,761				6,230				14,862				16,377				14,064				17,158				19,835				19,371				20,544				—				186,202				27,676				—				213,878
EXPENSES
Hotel operating expenses:
Room			9,718				854				3,320				2,552				2,304				1,714				3,518				3,902				4,296				11	(9)			32,189				4,461				—				36,650
Food and beverage			15,113				1,122				5,144				4,101				3,330				5,258				3,015				4,471				3,370				—				44,924				5,037				—				49,961
Other direct expenses			1,288				150				557				304				304				1,280				679				884				408				—				5,854				832				—				6,686
Other indirect expenses			16,724				2,162				4,437				3,624				4,261				3,985				6,858				5,208				4,820				451	(9)			52,530				6,828				554	(9)			59,912
Total hotel operating expenses			42,843				4,288				13,458				10,581				10,199				12,237				14,070				14,465				12,894				462				135,497				17,158				554				153,209
Depreciation and amortization			5,776				—				—				1,988				491				—				—				—				1,124				9,308	(10)			18,687				3,644				(169	)(10)			22,162
Real estate taxes, personal property taxes & insurance			2,220				225				752				783				284				526				838				857				1,115								7,600				1,262				—				8,862
Ground rent			124				—				—				—				212				—				—				—				1,393				340	(11)			2,069				—				—				2,069
General and administrative			8,319				—				—				—				—				—				—				—				—								8,319				—				—				8,319
Acquisition transaction costs			6,581				—				—				—				—				—				—				—				—				1,100	(12)			7,681				—				420	(12)			8,101
Total operating expenses			65,863				4,513				14,210				13,352				11,186				12,763				14,908				15,322				16,526				11,210				179,853				22,064				805				202,722
Operating income (loss)			(8,102	)			1,717				652				3,025				2,878				4,395				4,927				4,049				4,018				(11,210	)			6,349				5,612				(805	)			11,156
Interest income			3,020				—				—				—				—				—				—				—				—				(3,020	)(13)			—				—								—
Interest expense			(1,640	)			—				(805	)			—				(1,430	)			—				—				—				(2,449	)			103	(14)			(6,221	)			—				—				(6,221	)
Other income			—				—				—				—				—								—				—				—								—				—				—				—
Income (loss) before income taxes			(6,722	)			1,717				(153	)			3,025				1,448				4,395				4,927				4,049				1,569				(14,127	)			128				5,612				(805	)			4,935
Income tax benefit (expense)			80				—				—				—				—				—				—				—				—				(1,028	)(15)			(948	)			—				(221	)(15)			(1,169	)
Net income (loss)		$	(6,642	)		$	1,717			$	(153	)		$	3,025			$	1,448			$	4,395			$	4,927			$	4,049			$	1,569			$	(15,155	)		$	(820	)		$	5,612			$	(1,026	)		$	3,766
(Loss) income per common share, basic and diluted		$	(0.23	)																																																		$	0.09
Weighted average number of common shares, basic and diluted			28,669,851																																																	(17)			39,810,590

Exhibit Index

Exhibit
Number				Exhibit Description
10.1				Purchase and Sale Agreement by and between Starwood CMBS I, LLC, as seller, and Bruins Owner LLC, as purchaser, dated as of March 22, 2011, for The Westin Gaslamp, San Diego
23.1				Consent of KPMG LLP