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HomeHotels & LodgingPebblebrook Hotel Trust acquires the Sofitel Philadelphia Hotel
The property will continue to be managed by Sofitel

Pebblebrook Hotel Trust acquires the Sofitel Philadelphia Hotel

Pebblebrook Hotel Trust announced that it has acquired the Sofitel Philadelphia Hotel for $87.0 million. The 306-room, upper-upscale, full-service, Center City hotel features over 15,000 square feet of meeting space in a historic building that once housed the Philadelphia Stock Exchange. The property will continue to be managed by Sofitel (Accor SA). The transaction includes the assumption of a $56.1 million secured loan, with the remaining proceeds funded by the Company with available cash.

“We are thrilled to acquire the Sofitel Philadelphia Hotel,” said Jon Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. “The hotel is well located in the center of Philadelphia’s financial district and within close proximity to many of the city’s historic landmarks. In addition, the Sofitel Philadelphia Hotel is just steps away from the Philadelphia Convention Center, which is completing an expansion that will double its size. These demand drivers combine to provide the hotel with a diversified mix of corporate, convention and leisure travelers, which we expect will continue to strengthen in-line with the economic and lodging recovery which is underway in Philadelphia.”

"The Sofitel team is delighted at the opportunity to work with Pebblebrook Hotel Trust," said Robert Gaymer Jones, Chief Operating Officer Sofitel Hotels Worldwide. "We are very proud to manage the Philadelphia Sofitel Hotel and look forward to continued success with this beautiful property. The hotel is a landmark in the city and perfectly reflects our new position in the deluxe sector, specifically with its French Elegance and Art de Vivre."

The Sofitel Philadelphia Hotel is located in the heart of downtown Philadelphia, Pennsylvania, just two blocks from historic Rittenhouse Square and a block from both the chic Walnut Street retail corridor and Liberty Place. Philadelphia is a historic city that once served as the nation’s capital and is the sixth largest city in the United States. The city offers an extraordinary array of entertainment, sporting, dining and cultural activities and has long been a favorite destination of leisure travelers, offering attractions that include the Liberty Bell, Independence Hall, Franklin Institute of Science, National Constitution Center, Philadelphia Museum of Art and the Philadelphia Zoo. In addition to the strong collection of leisure attractions, the city has an enviable mix of high-level educational institutions that are headlined by the University of Pennsylvania, Temple University, Villanova University and Drexel University. Philadelphia is also home to an impressive assortment of regional, national and global corporations that include CIGNA, Comcast, Colonial Penn, Aramark, GlaxoSmithKline, Lincoln Financial and Sunoco.

Philadelphia has experienced considerable growth in the lodging market in recent years, with substantial increases to RevPAR over the past decade. This trend is expected to continue with the expansion of the Philadelphia Convention Center. The convention center, which is increasing its space by over 50%, is expected to be complete in the first half of 2011. Following the expansion, the convention center is planned to house approximately one million square feet of saleable space, the largest contiguous exhibit space in the Northeast and the largest convention center ballroom on the East Coast. This is estimated to result in an eight percent increase in room night demand throughout the Philadelphia Center City area.

Converted to a hotel in 2000, the Sofitel Philadelphia Hotel is a high-style property located within two blocks of one of Philadelphia’s most historic areas, Rittenhouse Square. The property consists of 306 elegantly appointed guestrooms, including 68 suites, and places an emphasis on comfort through the inclusion of four-fixture equipped bathrooms with French bath amenities and contemporary French-American design. The property was originally constructed in 1964 and housed the Philadelphia Stock Exchange during the late 1960s. Along with its conversion to a hotel, the building was expanded through the construction of an additional tower which connected seamlessly on all floors. The hotel includes two floors of event space totaling approximately 15,000 square feet, and the property offers on-site underground parking, a well equipped fitness center, a breakfast-only restaurant and the newly renovated bar/lounge Liberte, which serves cocktails, hors d’oeuvres and light dinner fare.

In 2009, the Sofitel Philadelphia Hotel operated at approximately 77% occupancy, with an average daily rate of approximately $169. During the next 12 months, the Company currently forecasts that the hotel will generate earnings before interest, taxes, depreciation and amortization (“EBITDA”) of approximately $4.7 to $5.3 million and net operating income after capital reserves of approximately $3.8 to $4.4 million.

The hotel will continue to be managed by Sofitel (Accor SA), which has managed the property since 2000.

“We are pleased to establish a new relationship with Accor and the Sofitel brand. They have exhibited strong success in the Philadelphia market and have a great reputation of offering a unique hotel experience, blending French elegance with American style,” continued Mr. Bortz. “This is a tremendous opportunity to launch a relationship with an operator that has demonstrated a strong track record in offering high levels of service and value to group, corporate and transient customers alike.”

The Company expects to incur approximately $1.2 million of costs related to the acquisition of this hotel that will be expensed as incurred. The $56.1 million secured loan that is being assumed in connection with the acquisition is a non-recourse, interest-only loan, subject to a floating interest rate based on the 30-day LIBOR rate plus 1.3%. Based on the current 30-day LIBOR rate, the interest rate on the loan is currently 1.56%. The loan matures in February 2012.

The Sofitel Philadelphia Hotel marks the eighth acquisition for the Company since completing its initial public offering in December 2009. The company has previously announced an executed agreement to purchase one additional hotel:

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