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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): June 04, 2010
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
Former name or former address, if changed since last report
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 registrant’s Current Reports on Form 8-K/A and Form 8-K, as filed on July 12, 2010 and September 13, 2010, respectively, to include the historical unaudited financial statements for the six months ended June 30, 2010 and 2009 for the InterContinental Buckhead Hotel and the Hotel Monaco Washington D.C., which were acquired on July 1, 2010 and September 9, 2010, respectively. The Current Reports on Form 8-K/A and Form 8-K filed on July 12, 2010 and September 13, 2010, respectively, included unaudited interim financial statements for these two hotels presented as of March 31, 2010 and the three months ended March 31, 2010 and 2009.
Item 9.01. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
InterContinental Buckhead Hotel
Balance Sheet as of June 30, 2010 (unaudited)
Statements of Operations for the six months ended June 30, 2010 and 2009 (unaudited)
Statement of Owner’s Equity in Hotel for the six months ended June 30, 2010 (unaudited)
Statements of Cash Flows for the six months ended June 30, 2010 and 2009 (unaudited)
Notes to Financial Statements
Hotel Monaco Washington D.C.
Balance Sheet as of June 30, 2010 (unaudited)
Statements of Operations for the six months ended June 30, 2010 and 2009 (unaudited)
Statement of Owner’s Equity in Hotel for the six months ended June 30, 2010 (unaudited)
Statements of Cash Flows for the six months ended June 30, 2010 and 2009 (unaudited)
Notes to Financial Statements

 


 

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.
         
  PEBBLEBROOK HOTEL TRUST
 
 
December 23, 2010  By:   /s/ Raymond D. Martz    
    Name:   Raymond D. Martz   
    Title:   Executive Vice President, Chief Financial
Officer, Treasurer and Secretary
 
 

 


 

         
InterContinental Buckhead Hotel
Consolidated Balance Sheet
         
    June 30, 2010  
    (Unaudited)  
Assets
       
Cash and cash equivalents
  $ 50,000  
Accounts receivable, net
    1,160,016  
Prepaid expenses
    127,453  
 
     
Total current assets
    1,337,469  
 
     
Property and equipment:
       
Land
    9,742,453  
Building and improvements
    68,526,838  
Furniture, fixtures, and equipment
    33,900,020  
 
     
 
    112,169,311  
 
       
Accumulated depreciation
    (30,488,402 )
 
     
Total property and equipment, net
    81,680,909  
Other assets
    31,085  
 
     
Total assets
  $ 83,049,463  
 
     
Liabilities and Owner’s Equity in Hotel
       
Current liabilities:
       
Accounts payable
  $ 1,025,248  
Accrued expenses
    1,320,188  
Advance deposits
    449,575  
Other liabilities
    744,342  
 
     
Total current liabilities
    3,539,353  
Owner’s Equity in Hotel
    79,510,110  
 
     
Total liabilities and owner’s equity in Hotel
  $ 83,049,463  
 
     
See accompanying notes to financial statements.

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InterContinental Buckhead Hotel
Statements of Operations
                 
    Six Months Ended June 30,  
    2010     2009  
    (Unaudited)     (Unaudited)  
Revenue:
               
Room
  $ 8,639,332     $ 8,456,080  
Food and beverage
    6,708,742       6,440,569  
Other
    1,028,882       906,516  
 
           
Total revenues
    16,376,956       15,803,165  
 
           
 
               
Operating expenses:
               
Room
    2,551,959       2,450,711  
Food and beverage
    4,100,567       3,973,140  
General and administrative
    1,333,551       1,407,908  
Depreciation
    1,988,421       2,933,090  
Property management
    621,099       548,269  
Utilities
    621,583       568,755  
Marketing and advertising
    1,047,916       1,049,644  
Insurance
    277,068       216,765  
Property taxes
    505,597       462,828  
Other
    304,354       334,086  
 
           
Total operating expenses
    13,352,115       13,945,196  
 
           
Net income
  $ 3,024,841     $ 1,857,969  
 
           
See accompanying notes to financial statements.

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InterContinental Buckhead Hotel
Statement of Owner’s Equity in Hotel
         
Balance at December 31, 2009
  $ 82,428,832  
Hotel owner distributions (unaudited)
    (5,943,563 )
Net income (unaudited)
    3,024,841  
 
     
Balance at June 30, 2010 (unaudited)
  $ 79,510,110  
 
     
See accompanying notes to financial statements.

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InterContinental Buckhead Hotel
Statements of Cash Flows
                 
    Six Months Ended June 30,  
    2010     2009  
    (unaudited)     (unaudited)  
Cash flows from operating activities:
               
Net income
  $ 3,024,841     $ 1,857,969  
Adjustments to reconcile net income to net cash provided operating activities:
               
Depreciation
    1,988,421       2,933,090  
Changes in operating assets and liabilities:
               
Accounts receivable, net
    (688,843 )     (951,756 )
Prepaid expenses
    172,364       14,115  
Other assets
    192,554       (121,318 )
Accounts payable
    613,155       248,387  
Advance deposits
    76,446       (119,398 )
Accrued expenses and other liabilities
    504,979       903,505  
 
           
 
Net cash provided by operating activities
    5,883,917       4,764,594  
 
               
Cash flows from investing activities — purchase of property and equipment
          (42,688 )
 
               
Cash flows from financing activities — Hotel owner distributions
    (5,943,563 )     (4,674,169 )
 
           
 
               
Net change in cash and cash equivalents
    (59,646 )     47,737  
 
               
Cash and cash equivalents:
               
Beginning of period
    109,646       150,136  
 
           
End of period
  $ 50,000     $ 197,873  
 
           
See accompanying notes to financial statements.

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INTERCONTINENTAL BUCKHEAD HOTEL
Notes to Financial Statements
(1)   Description of Business and Basis of Accounting
 
    The InterContinental Buckhead Hotel (the Hotel), is a full-service 422-room hotel located at 3315 Peachtree Road, Atlanta, Georgia. The Hotel is owned by IHC Buckhead, LLC, a Georgia limited liability company (the Company).
 
    The accompanying unaudited financial statements of the Hotel as of June 30, 2010 and for the six-month periods ended June 30, 2010 and 2009, have been prepared pursuant to the Securities and Exchange Commission (SEC) rules and regulations. All amounts included in the notes to the financial statements referring to June 30, 2010, and for the six-month periods ended June 30, 2010 and 2009, are unaudited. The accompanying financial statements reflect, in the opinion of management, all adjustments considered necessary for a fair presentation of the interim financial statements. All such adjustments are of a normal and recurring nature.
 
    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.
 
    IHC Buckhead, LLC was a party to a title/leasehold interest exchange arrangement with the Development Authority of Fulton County. The purpose of the arrangement was to obtain a reduction of real estate taxes through 2014. A subsidiary of Pebblebrook was assigned the rights under the agreement in connection with the acquisition of the Hotel. The arrangement with the Development Authority of Fulton County is cancelable by Pebblebrook at any time.
 
(2)   Summary of Accounting Policies
  (a)   Cash and Cash Equivalents
 
      Includes the Hotel’s operating cash accounts, which may include liquid temporary cash investments with maturities of three months or less at the date of purchase which are considered to be cash and cash equivalents.
 
  (b)   Property and Equipment
 
      Building and improvements, furniture, fixtures, 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
  20 – 50 years
Furniture, fixtures and equipment
  3 – 10 years

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INTERCONTINENTAL BUCKHEAD HOTEL
Notes to Financial Statements
  (c)   Impairment of Long-Lived Assets
 
      Long-lived assets are evaluated 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 such impairment losses have been recognized to date.
 
  (d)   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. Additionally, we collect sales, use, occupancy and similar taxes at our hotels which we present on a net basis (excluded from revenues) on our statements of operations.
 
  (e)   Accounts Receivable
 
      Accounts receivable, which primarily represent amounts due from Hotel guests, are presented net of allowances, which were not material at December 31, 2009 or 2008.
 
  (f)   Marketing and Advertising Expenses
 
      Marketing and advertising costs are expensed as incurred.
 
  (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 December 22, 2010, the date the financial statements were available to be issued. On July 1, 2010, the Hotel was acquired by Pebblebrook Hotel Trust (Pebblebrook) for cash consideration of approximately $105 million.

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HOTEL MONACO WASHINGTON, D.C.
Balance Sheet
         
    June 30, 2010  
    (Unaudited)  
Assets
       
Cash
  $ 2,420,852  
Restricted cash
    3,408,354  
Accounts receivable, net
    453,051  
Prepaid expenses
    227,613  
Other assets
    303,015  
 
     
Total current assets
    6,812,885  
 
       
Leasehold improvements
  $ 25,437,000  
Furniture, fixtures, and equipment
    9,817,973  
 
     
 
    35,254,973  
Accumulated depreciation
    (12,854,961 )
 
     
Property and equipment, net
    22,400,012  
 
       
Deferred financing fees, net
    122,727  
 
     
Total assets
  $ 29,335,624  
 
     
Liabilities and Owner’s Deficit in Hotel
       
Accounts payable
  $ 510,987  
Accrued liabilities
    1,246,971  
Advance deposits
    446,325  
Due to affiliates
    97,413  
 
     
Total current liabilities
    2,301,696  
Long-term debt
  $ 35,000,000  
 
     
Total liabilities
    37,301,696  
 
     
Owner’s deficit in Hotel
    (7,966,072 )
 
     
Total liabilities and owner’s deficit in Hotel
  $ 29,335,624  
 
     
See accompanying notes to financial statements.

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HOTEL MONACO WASHINGTON, D.C.
Statements of Operations
                 
    Six Months Ended June 30,  
    2010     2009  
    (unaudited)     (unaudited)  
Revenues:
               
Rooms
  $ 6,871,655     $ 7,606,368  
Food and beverage
    3,261,860       3,384,575  
Other
    298,838       367,674  
 
           
 
               
Total revenues
    10,432,353       11,358,617  
 
           
 
               
Operating expenses:
               
Rooms
    1,647,942       1,815,069  
Food and beverage
    2,372,361       2,439,904  
General and administrative
    895,266       1,019,854  
Marketing
    545,308       595,563  
Energy
    490,704       459,811  
Property operation and maintenance
    384,059       394,625  
Property taxes and insurance
    242,396       190,340  
Depreciation and amortization
    491,329       445,403  
Rent
    219,948       357,097  
Management fee
    797,986       581,675  
Other
    229,806       210,835  
 
           
 
               
Total operating expenses
    8,317,105       8,510,176  
 
           
 
               
Other expenses:
               
Interest expense
    (1,036,340 )     (1,045,360 )
 
           
 
               
Net income
  $ 1,078,908     $ 1,803,081  
 
           
See accompanying notes to financial statements.

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HOTEL MONACO WASHINGTON, D.C.
Statement of Owner’s Deficit in Hotel
         
Balance at December 31, 2009
  $ (6,922,030 )
 
       
Hotel owner distributions (unaudited)
    (2,122,950 )
Net income (unaudited)
    1,078,908  
 
     
 
       
Balance at June 30, 2010 (unaudited)
  $ (7,966,072 )
 
     
See accompanying notes to financial statements.

10


 

HOTEL MONACO WASHINGTON, D.C.
Statements of Cash Flows
                 
    Six Months Ended June 30,  
    2010     2009  
    (unaudited)     (unaudited)  
Cash flows from operating activities:
               
Net income
  $ 1,078,908     $ 1,803,081  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Amortization of deferred costs
    36,818       36,818  
Depreciation and amortization
    491,329       445,403  
Changes in operating assets and liabilities:
               
Accounts receivable
    (305,822 )     (93,439 )
Prepaid expenses
    1,626       32,724  
Other assets
    (35,259 )     212,453  
Accounts payable
    158,921       98,121  
Other current liabilities
    444,226       (338,845 )
 
           
 
               
Net cash provided by operating activities
    1,870,747       2,196,316  
 
           
 
               
Cash flows from investing activities:
               
Change in restricted cash (FFE reserve)
    (162,635 )     183,014  
Additions to leasehold improvements and furniture, fixtures, and equipment
    (447,221 )     (831,484 )
 
           
 
               
Net cash used in investing activities
    (609,856 )     (648,470 )
 
           
 
               
Cash flows from financing activities — Hotel owner distributions
    (2,122,950 )     (758,866 )
 
           
 
               
Net increase (decrease) in cash
    (862,059 )     788,980  
 
               
Cash and cash equivalents:
               
Beginning of year
    3,282,911       2,889,810  
 
           
End of year
  $ 2,420,852     $ 3,678,790  
 
           
 
               
Supplemental cash flow disclosures:
               
Cash paid for interest
  $ 994,000     $ 994,000  
See accompanying notes to financial statements.

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HOTEL MONACO WASHINGTON, D.C.
Notes to Financial Statements
(1)   Description of Business and Basis of Accounting
 
    The Hotel Monaco Washington, D.C. (the Hotel), is a full service 183-room hotel located at 700 F Street, NW, Washington, DC. The Hotel is owned by Tariff Building Associates, L.P., a California limited partnership (the Partnership). The Partnership is an affiliate of Kimpton Group, the manager of the Hotel.
 
    The accompanying unaudited financial statements of the Hotel as of June 30, 2010 and for the six-month periods ended June 30, 2010 and 2009, have been prepared pursuant to the Securities and Exchange Commission (SEC) rules and regulations. All amounts included in the notes to the financial statements referring to June 30, 2010, and for the six-month periods ended June 30, 2010 and 2009, are unaudited. The accompanying financial statements reflect, in the opinion of management, all adjustments considered necessary for a fair presentation of the interim financial statements. All such adjustments are of a normal and recurring nature.
 
    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.
 
    The Hotel collateralizes a note payable obligation of the Partnership. Cash from the Hotel’s operations account may be used to fund debt service. Although technically an obligation of the Partnership and not the Hotel, the outstanding principal balance of the note payable, interest expense, deferred financing costs, and related amortization are presented in the financial statements of the Hotel. The outstanding principal balance on the note payable is $35 million. The note bears interest equal to 5.68%. The note payable requires monthly interest only payments through March 2012, the maturity date. In September 2010, Pebblebrook Hotel Trust (Pebblebrook) acquired the Hotel and assumed this note payable obligation (see note 5).
 
(2)   Significant Accounting Policies
  (a)   Cash and Cash Equivalents
 
      Includes the Hotel’s operating cash accounts, which may include liquid temporary cash investments with maturities of three months or less at the date of purchase which are considered to be cash and cash equivalents.
 
  (b)   Restricted Cash
 
      In accordance with the operating agreement, a replacement reserve fund for the purpose of replacements to, and additions of, furniture and equipment is required. The replacement reserve fund is funded with an amount equal to 3% of gross revenue, as defined, on a monthly basis.
 
  (c)   Leasehold Improvements and Furniture, Fixtures and Equipment
 
      The Partnership owns a leasehold interest in the Hotel, which is subject to a leasehold with the U.S. Government (see note 3). Leasehold improvements, furniture, fixtures and equipment are stated at cost. The cost of additions, alterations, and improvements is capitalized. Expenditures for repairs and maintenance are expensed as incurred. Amortization of the leasehold interest and depreciation of the

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HOTEL MONACO WASHINGTON, D.C.
Notes to Financial Statements
      furniture, fixtures and equipment is computed utilizing the straight-line method over lives of 3 to 40 years.
 
      Construction in progress totaling $426,233 (unaudited) at June 30, 2010 is included in leasehold improvements and furniture, fixtures and equipment. Construction in progress represents renovations to the hotel and is capitalized as the costs are incurred. Renovation projects are generally less than six months in duration, and the hotel remains fully operational while renovations occur. Upon completion of the renovations, depreciation of the improvements commences.
 
  (d)   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 such impairment losses have been recognized to date.
 
  (e)   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 audio/visual. Additionally, we collect sales, use, occupancy and similar taxes at our hotels which we present on a net basis (excluded from revenues) on our statements of operations.
 
  (f)   Accounts Receivable
 
      Accounts receivable, which represent amounts due from Hotel guests, are presented net of allowances, which were not material at June 30, 2010.
 
  (g)   Deferred Financing Costs
 
      Deferred financing costs incurred in connection with the note payable are amortized to interest expense using the straight-line method over the contractual life of the note payable, which approximates the effective-interest method.
 
  (h)   Marketing and Advertising Expenses
 
      Marketing and advertising costs are expensed as incurred.
 
  (i)   Income Taxes
 
      The Hotel is not directly subject to federal, state or local income taxes. However the owner of the Hotel is a limited partnership and may be subject to certain income or other taxes, and the members of the limited partnership are responsible for reporting their share of taxable income or loss on their respective income tax returns.

13


 

HOTEL MONACO WASHINGTON, D.C.
Notes to Financial Statements
(3)   Ground Lease
 
    The owner of the Hotel leases the building structure and land under a noncancelable lease with the United States General Services Administration, expiring on November 30, 2059. The lease has been accounted for as an operating lease. The Hotel is required to pay the greater of a base rent or a percentage of gross hotel revenues in excess of $10,000,000 (as adjusted for CPI increases) and gross food and beverage revenues in excess of $4,000,000 (as adjusted for CPI increase), as defined. The percentage of gross hotel revenues and food and beverage revenues ranges from 3% in the initial years to 8.5% in the later years of the lease. In addition, the Hotel is also required to pay a Participation Rent that equals to 20%—25% of net cash flow, as defined in the lease, if certain thresholds are exceeded. Under the lease agreement, the Hotel is also required to distribute to the landlord a portion of the net cash proceeds generated upon the sale or refinancing of the Hotel, after the partners in the Hotel receive their capital and achieve certain internal rate of return on their investment as described in the lease. Percentage rent for the six month periods ended June 30, 2010 and 2009 were approximately $111,000 and $243,000, respectively. There was no participation rent as of June 30, 2010 and 2009.
 
    Base rent was approximately $90,000 for the six month periods ended June 30, 2010 and 2009. Base rent is adjusted upward for the increase, if any, in the Consumer Price Index.
 
(4)   Related-Party Transactions
 
    The Hotel has entered into a hotel operating agreement with the Kimpton Group to manage the Hotel. In accordance with the hotel operating agreement, the Hotel pays a base management fee of 4% of gross revenues and an incentive fee of 16% of the Hotel’s distributable cash, as defined in the agreement, after payment of a preferred return to the owner of the Hotel.
 
    Under the operating agreement, the Hotel also reimburses the Kimpton Group for the Hotel’s pro rata share of certain group service costs, as defined in the agreement. In addition, the Hotel reimburses the Kimpton Group for the Hotel’s pro rata share of initial development costs and recurring operating costs related to the central reservation system, and costs associated with the guest loyalty program Kimpton In-Touch. Total reimbursements were $132,510 and $144,443 for the six month periods ended June 20, 2010 and 2009, respectively.
 
    The Hotel shares certain costs with other hotels and entities that are managed by or affiliated with the Kimpton Group. The Hotel has total outstanding payables due to the Kimpton Group of $97,413 as of June 30, 2010.
 
(5)   Subsequent Event
 
    The Hotel has evaluated the need for disclosures and/or adjustments resulting from subsequent events through December 22, 2010, the date the financial statements were available to be issued. On September 9, 2010, Pebblebrook acquired the Hotel for $74 million, which includes the assumption of the $35 million note payable.

14