Pebblebrook Expands $750M Facility. Guess What Happened Next.

BETHESDA, MD—Curious about a REIT's acquisition plans? Reliable clues can often be found in the company's capital market and banking transactions. In short, when a company announces an expanded credit facility, that announcement is often followed by an acquisition. So it went with Pebblebrook Hotel Trust recently.

Shortly before the start of the Memorial Day weekend, the locally-based REIT announced it acquired the Naples, FL-based LaPlaya Beach Resort, a 189-room, waterfront, luxury resort and LaPlaya Beach Club, for a combined $185.5 million. It is Pebblebrook's first acquisition in this market.

Simply put, the luxury resort is very nice: it sits on 6 acres of beachfront property surrounded by the Gulf of Mexico and Vanderbilt Bay. The resort was originally built in 1968 and underwent a $54 million renovation and redesign in 2002, adding an additional tower, the private beach club and parking.

The REIT didn't reveal how it was funding the acquisition but according to earlier announcement in May, Pebblebrook increased the capacity of its senior unsecured revolving credit facility from $600 million to $750 million. The increased credit facility is composed of a $450 million unsecured revolving credit facility and an existing $300 million unsecured term loan.

Almost on cue, this is what CFO Raymond D. Martz said about the expanded facility in a prepared statement at the time: "The upsizing of our facility provides us with additional capacity and flexibility for our ongoing capital reinvestment projects, working capital needs and potential future acquisition opportunities."

At that point, Pebblebrook had $40 million outstanding on its $450 million unsecured revolving credit facility, which matures in January 2020.

In April, Pebblebrook announced it had executed a new 7-year, $100 million term loan that matures in April 2022. The term loan also includes an accordion option, allowing Pebblebrook to request additional lender commitments up to a total of $200 million.

This transaction appeared to be part balance sheet re-engineering and part funding for additional acquisitions. According to Martz, " the additional capital will be used to support future financing activities such as paying down the company's unsecured revolving credit facility, capital reinvestments in renovations and repositionings, and potential future acquisition opportunities as they may arise."

Back to the LaPlaya transaction: Pebblebrook reports it was operating at 77% occupancy, with an average daily rate of $337 and room revenue per available room of $261, at the end of 2014. During the next 12 months, the company forecasts it will generate EBITDA of $14.3 to $15.3 million and NOI of $12.5 to $13.5 million. LaPlaya will continue to be managed by Noble House Hotels & Resorts under a new operating agreement.