ForumPLUS: The Season of the Deal

In March of this year, Pebblebrook Hotel Trust approached rival hotel REIT LaSalle Hotel Properties with an all-stock acquisition offer. LaSalle demurred and then demurred again as Pebblebrook made two additional offers. In the meantime, LaSalle was doing its due diligence. It contacted 20 potential buyers, according to chairman of the board Stuart L. Scott. Ten potential buyers were interested enough to execute confidentiality agreements to receive non-public information. In the end, LaSalle agreed to be acquired—but not by Pebblebrook. Rather, some two months after Pebblebrook made its initial offer for LaSalle, the REIT accepted Blackstone Real Estate Partners VIII’s $33.50-per-share bid in an all-cash transaction valued at $4.8 billion.

Few market observers were surprised. Not only had Blackstone just announced it would be taking another REIT private earlier that month—Gramercy Property Trust for $7.6 billion in cash—but the REIT sector overall had been pricing well below private valuations. Indeed, the market has seen several public-to-private transactions and it is expected that more will occur this year.