Pebblebrook Hotel Trust (PEB - Snapshot Report) recently invested $152.0 million for a 49.0% stake in a joint venture that owns six luxury hotels in Manhattan with affiliates of the Denihan Hospitality Group.
The deal values the six hotels for approximately $910 million. The hotels are currently subject to approximately $600 million in existing first mortgage and mezzanine debt financing. Pebblebrook plans to fund its investment with cash and borrowings from its credit facility.
Both Pebblebrook and Denihan will jointly control all operating and financing decisions. Affiliates of Denihan holding the remaining 51.0% stake will continue to manage the hotels. The transaction is expected to close within the next 90 days.
This transaction will be a win-win situation for both the companies. Pebblebrook Hotel already has its presence in Manhattan and with this deal its presence will be strengthened in the Manhattan markets. Denihan on the other hand plans to accelerate its growth strategy in the U.S urban markets with the capital infusion, extensive knowledge and expertise of Pebblebrook in operating hotels.
Pebblebrook, through Pebblebrook Hotel, L.P., operates as a real estate investment trust (REIT). The company acquires and invests in hotel properties located primarily in major U. S. cities, with an emphasis on the major coastal markets. The company intends to focus on full-service hotel properties in the upscale segment of the lodging industry.
Pebblebrook currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Host Hotels & Resorts Inc (HST - Analyst Report) currently retains a Zacks #3 Rank.