Company Reports

Pebblebrook Hotel Trust is the largest US lodging REIT focused on owning independent and boutique hotels. The company owns 44 upper upscale hotels with 11,052 rooms, located primarily in urban gateway markets. Historically, Pebblebrook's combined portfolio has had higher revenue per available room and EBITDA margins than its hotel REIT peers.

Pebblebrook Hotel Trust reported adjusted funds from operations of $0.68 per share and comparable hotel EBITDA growth of 7.1% in the second quarter.

Pebblebrook Hotel Trust is the largest US lodging REIT focused on owning independent and boutique hotels. The company owns 44 upper upscale hotels with 11,052 rooms, located primarily in urban gateway markets. Historically, Pebblebrook's combined portfolio has had higher revenue per available room and EBITDA margins than its hotel REIT peers.

Pebblebrook Hotel Trust reported adjusted funds from operations of $0.32 per share and comparable hotel EBITDA growth of 27.6% in the first quarter.

Pebblebrook Hotel Trust is the largest US lodging REIT focused on owning independent and boutique hotels. The company owns 44 upper upscale hotels with 11,052 rooms, located primarily in urban gateway markets. Historically, Pebblebrook's combined portfolio has had a higher revenue per available room price point and EBITDA margin than its hotel REIT peers.

Pebblebrook Hotel Trust reported adjusted funds from operations of $0.27 per share and a comparable hotel EBITDA growth of 3.9% in the fourth quarter.

Pebblebrook Hotel Trust reported adjusted funds from operations of $0.51 per share and a comparable hotel EBITDA decline of 7.0% in the third quarter.

Pebblebrook Hotel Trust is the largest US lodging REIT focused on owning independent and boutique hotels. After Pebblebrook merged with LaSalle Hotel Properties in November 2018, the company owns 46 upper upscale hotels with 11,933 rooms, located primarily in urban gateway markets. Historically, Pebblebrook's combined portfolio has had a higher revenue per available room price point and EBITDA margin than its hotel REIT peers.

Pebblebrook Hotel Trust reported adjusted funds from operations of $0.65 per share, and comparable hotel EBITDA declined 6.7% in the second quarter.

Pebblebrook Hotel Trust is the largest US lodging REIT focused on owning independent and boutique hotels. After Pebblebrook merged with LaSalle Hotel Properties in November 2018, the company owns 46 upper upscale hotels with 11,933 rooms, located primarily in urban gateway markets. Historically, Pebblebrook's combined portfolio has had a higher revenue per available room price point and EBITDA margin than its hotel REIT peers.

Pebblebrook Hotel Trust reported adjusted funds from operations of $0.16 per share, and comparable hotel EBITDA declined 8.6% in the first quarter.

Performance of the REIT sector remains negatively correlated with interest rate movements with performance over the past three years demonstrating strong statistical relationship with 10-year US Treasury movements.

Pebblebrook Hotel Trust is the largest US lodging REIT focused on owning independent and boutique hotels. After Pebblebrook merged with LaSalle Hotel Properties in November 2018, the company owns 46 upper upscale hotels with 11,933 rooms, located primarily in urban gateway markets. Historically, Pebblebrook's combined portfolio has had a higher revenue per available room price point and EBITDA margin than its hotel REIT peers.

Pebblebrook Hotel Trust reported fourth-quarter results that were slightly ahead of our expectations, giving us confidence in our $23.50 for the no-moat company. Same-store occupancy improved 310 basis points year over year to 67.4%, though average daily rate was down 3.7% in the fourth quarter. Combined, revenue per available room increased just 0.9%, though that was in line with our estimate of 1.1% growth. While hotel operating expenses increased 4.0% in the quarter and caused hotel EBITDA margins to fall 170 basis points to 19.4% and hotel EBITDA to fall 6.1%, that was better than our estimate of EBITDA margins of 18.4% and a hotel EBITDA decline of 8.2%. As a result, Pebblebrook reported adjusted funds from operations of $0.20 per share in the fourth quarter that beat our $0.11 estimate for the quarter.

Over the past few years, we have observed an inverse relationship between share prices in the REIT sector and interest-rate movements. We believe a major reason is that all commercial real estate valuations are connected to interest rates. Capitalization rates directly indicate the return expectations for a real estate investment and expectations for risk and growth. Historically, we have observed that commercial real trades at cap rates consistently spread above the 10-year US Treasury. If interest rates rise, investors will require a higher return, and thus a higher cap rate, to accept the risk associated with an investment in a real estate asset. Since return expectations have held relatively steady for most real estate sectors over the past few years, higher cap rates translate to falling prices for real estate.

Pebblebrook Hotel Trust is the largest US lodging REIT focused on owning independent and boutique hotels. After Pebblebrook merged with LaSalle Hotel Properties in November 2018, the company owns 46 upper upscale hotels with more than 11,900 rooms, located primarily in urban gateway markets. Historically, Pebblebrook's combined portfolio has had a higher revenue per available room price point and EBITDA margin than its hotel REIT peers.

Third-quarter results for no-moat Pebblebrook Hotel Trust were slightly better than anticipated, giving us confidence in our $25.50 fair value estimate. Same-store occupancy increased to 78.5% compared with 75.4% in the third quarter of 2023. While average daily rate fell 1.9% year over year, the occupancy gain drove revenue per available room growth of 2.2%, which was better than our estimate of 0.5% growth. However, hotel operating expenses were up 4.3% in the quarter, leading to hotel EBITDA margins falling 100 basis points to 28.2% and hotel EBITDA declining 1.0% year over year, though that is better than our estimate of a 7.9% decline in hotel EBITDA. As a result, Pebblebrook reported adjusted funds from operations of $0.59 per share in the third quarter, and while that is down two cents from the $0.61 figure reported in the third quarter of 2023, it is better than our $0.50 estimate.

The REIT sector in the US offers many companies that should see relatively stable cashflow growth over the next several years. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years with many reaching historical levels of net operating income growth, the REIT sector underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that is due to the sector’s negative correlation with interest rates, as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. Still, we still view many of companies in the US REIT sector as being undervalued as the companies should continue to produce solid long-term growth.

Despite a rally over the past two months, we still view the US REIT sector as being undervalued. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors led combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years, with many reaching historical levels of net operating income growth, the REIT sector has underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that the cause has been due to the sector's negative correlation with interest rates as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. We believe that US REITs will continue to see share price movements that are inverse of interest rate movements.

Pebblebrook Hotel Trust reported second quarter results that were better than we expected, giving us confidence in our $25.50 fair value estimate for the no-moat company. Same-store occupancy continues to improve as it was up 3.8% in the quarter to 76.6%. However, the average daily rate fell 2.0%, which is the sixth straight quarter of rates declining. Combined, revenue per available room improved 1.7% for the second quarter, relatively in line with our estimate of 2.1% growth. However, food and beverage revenue grew 4.3% while other hotel revenue was up 3.7%, leading to same-store revenue growth of 2.6%. Additionally, same-store operating expenses were down 0.1% in part due to real estate taxes falling 37.6%. As a result, same-store hotel EBITDA margins went up 180 basis points to 31.5%, better than our 30.3% EBITDA margin estimate, and same-store hotel EBITDA grew 8.9%, better than our 4.1% growth estimate. The higher hotel EBITDA led to Pebblebrook reporting adjusted funds from operations of $0.67 per share for the second quarter that beat our $0.61 estimate.