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Monday, 21 May 2018

LaSalle Spurns Pebblebrook, Gets Hitched with Blackstone Under $33.50/Share Agreement

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Commercial Real Estate Direct Staff Report

LaSalle Hotel Properties has decided to spurn Pebblebrook Hotel Trust, and instead is getting hitched with Blackstone Group, which has agreed to pay $33.50/share for the company in an all-cash deal valued at $3.7 billion, before the assumption of debt.

Pebblebrook initially had proposed to buy LaSalle in March in a stock/cash swap valued at roughly $3.4 billion. It held a 4.8 percent stake in its target and claimed that a merger would result in increased management and contracting efficiencies and balance-sheet flexibility. Both companies are based in Bethesda, Md., and own luxury hotels and resorts in many of the same markets.

After being rejected, Pebblebrook sweetened its offer, increasing its cash component and the number of its shares that would be swapped for every LaSalle share. Its value at the time was $32.49/share, or $3.6 billion, not including assumed debt. LaSalle carries $1.1 billion of loans and mortgages on its balance.

Blackstone's offer, meanwhile, calls for every LaSalle share to receive $33.50 in cash, effectively taking the company private. The investment manager is buying the REIT through its Blackstone Real Estate Partners VIII fund.

LaSalle owns 41 full-service hotels with 10,400 guest rooms in 11 markets.

In a statement, LaSalle said the offer was 35 percent greater than the company's stock price on March 27, before Pebblebrook made its initial offer.

"We are pleased to have reached this agreement with Blackstone, which we believe is in the best interests of our shareholders and represents the culmination of a thorough review of strategic alternatives," said Stuart L. Scott, LaSalle's chairman.

Blackstone has been the biggest buyer of hotels and hotel companies since even before the Great Financial Crisis. It bought Hilton Hotels Corp. in 2007 for $26 billion, funding its purchase with $20.6 billion of debt provided by Bear Stearns, Bank of America, Deutsche Bank, Morgan Stanley and Goldman Sachs.

Following the capital markets collapse, when hotel fundamentals tanked, Blackstone in 2009 reduced the carrying value of its investment in the hotel company to $742 million from $1.45 billion. And in 2010 it was able to restructure the financing it had lined up, reducing its principal balance by $3.9 billion through the purchase of $1.8 billion of the debt and the conversion of $2.1 billion of debt to preferred equity.

In late 2013, with valuations for hotels riding high, Blackstone took Hilton public, raising $2.7 billion, valuing the company at $19.7 billion. Since its initial investment, Blackstone substantially increased the size of Hilton's portfolio. It kept a stake of just more than 76 percent at the time, but since has whittled that down.

Last October, HNA Group bought a 25 percent stake in the company from Blackstone for $6.5 billion. It also spun off Park Hotels & Resorts Inc., which owns properties, and Hilton Grand Vacations, a timeshare operator. And last week, the company said it would sell its remaining shares in the hotel giant.

When Pebblebrook made its initial offer, LaSalle started shopping for competing bidders. Through financial advisers Citigroup and Goldman Sachs, LaSalle said it had contacted 20, with 10 signing confidentiality agreements, and received certain non-public information to make more informed offers. It said it received "multiple proposals," and sided with Blackstone's bid because it represented a "significant premium with immediate and certain cash value."

Goodwin Procter and DLA Piper are LaSalle's legal advisers. Blackstone's financial advisers are Morgan Stanley and JPMorgan Securities. Legal counsel is Simpson Thacher & Bartlett.

The deal is slated to be completed before September.

As part of its agreement with Blackstone, LaSalle has agreed not to shop itself around anymore. If it terminates its agreement, it would be subject to a $112 million termination fee. But if the opposite occurs and Blackstone terminates its agreement, it could be subject to a fee of $336 million.

Comments? E-mail Orest Mandzy, or call him at (267) 327-4281.



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“The Weekly”

“The Weekly” is Commercial Real Estate Direct’s PDF newsletter, sent to subscribers every Friday morning. With over 100 news stories published on Commercial Real Estate Direct each week, “The Weekly” features the top stories in commercial real estate that industry participants need to know first. “The Weekly” also contains:

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Additional Info

  • Syndicate to Realpoint: No
  • Sector: Hotel & Resort
  • Subject: Mergers & Acquisitions (M&A), Stock/Equity Offerings (IPO)
  • Company: Blackstone Real Estate Advisors, LaSalle Hotel Properties
  • Private: No
Read 631 times Last modified on Monday, 21 May 2018

Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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