Market Overview

Pebblebrook Hotel Trust Sends Letter to Board of Lasalle Hotel Properties


Pebblebrook Hotel Trust (NYSE:PEB) ("Pebblebrook") today sent a letter
to the Board of Trustees of LaSalle Hotel Properties (NYSE:LHO)
("LaSalle") to reconfirm its proposal for a strategic combination of the
two companies, which remains outstanding, request that the LaSalle Board
reevaluate our proposal given the current facts and circumstances, and
that LaSalle determine it to be "Superior."

This press release features multimedia. View the full release here:

"We continue to believe that the proposed strategic combination of
LaSalle and Pebblebrook will deliver materially higher immediate and
long-term value than Blackstone's $33.50 per share ‘take-under'
proposal," said Jon E. Bortz, Chairman, President and Chief Executive
Officer of Pebblebrook Hotel Trust. "We are reconfirming our outstanding
offer and requesting that the LaSalle Board reevaluate the merits of our
proposal in light of material changes in facts and circumstances,
including continued improvement in lodging industry performance, the
fact that LaSalle common shares have consistently traded at a
substantial premium to the Blackstone price since LaSalle announced that
agreement, the continued strong price performance of Pebblebrook common
shares and overwhelming ongoing support among LaSalle shareholders for
our proposal."

"It has been nearly two months since LaSalle executed its merger
agreement with Blackstone, yet LaSalle has neither filed a definitive
proxy nor set a meeting date to put the deal to a vote. LaSalle
shareholders continue to demonstrate their significant opposition to the
Blackstone agreement and their strong support for our cash/stock
proposal through public and private letters and calls to the LaSalle
Board and to us. We urge the LaSalle Board to reconsider our superior
offer, which remains outstanding, and make the determination that it
constitutes a superior proposal to the Blackstone agreement, in order to
be consistent with the determination already clearly made by LaSalle's
shareholders. We are ready to move quickly to complete a value-creating

The full text of the letter sent to the LaSalle Board follows.

Letter from Pebblebrook to LaSalle Dated July
20, 2018

July 20, 2018

Michael D. Barnello
Stuart L. Scott
Denise M. Coll
T. Foland
Darryl Hartley-Leonard
Jeffrey L. Martin
A. Washburn
LaSalle Hotel Properties
7550 Wisconsin Avenue,
10th Floor
Bethesda, MD 20814

Ladies and Gentlemen,

Given the change in facts and circumstances, including the market's
reaction to the Blackstone agreement, it is absolutely clear that
LaSalle shareholders will not approve LaSalle's merger with Blackstone.
That is good, since it affords you, as the LaSalle Board, an opportunity
and ability to provide increased value to the LaSalle shareholders by
finalizing a merger agreement with us regarding our superior proposal.
We strongly believe that LaSalle shareholders will readily approve a
strategic combination of our two companies on the terms set forth in our
offer, if you give them a chance to do so. Accordingly, we are
reconfirming our superior offer, which has remained outstanding, for a
strategic combination of our two companies, a combination that we and
LaSalle shareholders believe will deliver materially higher value to

As I'm sure you are aware, since the execution of LaSalle's agreement
with Blackstone, lodging industry performance has continued to improve
and investor support for our cash/stock proposal has been overwhelming.
LaSalle shareholders clearly see the upside in the industry and from
strategically combining our two similar companies. Furthermore,
investors have made it clear through their trading of LaSalle common
shares that LaSalle's stated rationale for rejecting our offer of June
11 (i.e., the need to provide certainty of the $33.50 fixed cash price)
is certainly not valid or desired by LaSalle shareholders. Indeed, since
the announcement of the Blackstone agreement, over 109 million LaSalle
common shares have traded above the proposed transaction price of
$33.50. Therefore, it is almost certain that all investors who wanted
that certainty have already captured that value and more, and existing
LaSalle shareholders recognize and prefer the higher value of our offer.
With LaSalle common shares consistently trading at a substantial premium
to what is now a take-under price from Blackstone, LaSalle shareholders
are, in effect, voting with their wallets. LaSalle's continued promotion
of a transaction at a price per LaSalle common share lower than every
trading price of LaSalle common shares since the Blackstone transaction
announcement as well as the current market price, is a disservice to all
LaSalle shareholders and ignores the clear desires of the holders of the
vast majority of LaSalle common shares. And, they have been clear about
their strong preference for our offer through the many public and
private letters you have likely received since announcing the Blackstone

Pursuant to our proposal, LaSalle shareholders would be able to elect to
receive for each LaSalle common share they own either a) a fixed amount
of $37.80 in cash; or b) a fixed exchange ratio of 0.92 Pebblebrook
share. A maximum of 20% of the outstanding LaSalle shares will receive
cash and those electing cash will be subject to pro rata cutbacks in the
event more than 20% of LaSalle shares elect cash. Our proposal takes
into account the $112 million termination fee agreed to in the current
agreement with Blackstone. LaSalle shareholders who receive Pebblebrook
common shares will be able to participate in the future upside potential
of the combined company, including significantly higher dividend income
than LaSalle shareholders have received.

We have already provided you with a draft merger agreement essentially
identical to the Blackstone agreement, adapted of course to reflect the
superior economics of our offer and our merger structure. Working with
you, we believe we can complete a transaction within the next 75 to 90
days, including receiving approvals from shareholders of each company
within that timeframe. Pursuant to our proposal, the combined company
would also retain a substantial number of the current LaSalle employees
post-merger. We have attached as Exhibit A to this letter a summary of
the key terms of our offer and the process for entering into a
definitive agreement.

Our offer provides LaSalle shareholders with materially superior value
to that of the Blackstone agreement. As of market close on July 19,
2018, the implied price per share of our offer provides premiums to the
Blackstone price of:

  • $3.29 per share, or 9.8%, based on the closing price per Pebblebrook
    common share1;
  • $2.90 per share, or 8.6%, based on the 5-day VWAP of Pebblebrook
    common shares1;
  • $2.99 per share, or 8.9%, based on the 30-day VWAP
    of Pebblebrook common shares1; and
  • $2.48 per share, or 7.4%, based on the 60-day VWAP of Pebblebrook
    common shares1

Given the consistent trading of Pebblebrook common shares over the last
90 days, each of these premiums has either continued to increase over
time, as has been the case for the 30-, and 60- day VWAPs, or remained
substantial as compared to the Blackstone price.

The strong trading levels in both LaSalle's and Pebblebrook's common
shares are not simply the result of deal speculation. Macro trends in
our industry are favorable and recognized as such by the investment
community. We believe shareholders have made it clear that they desire
the upside inherent in a combination of our two companies.

Of course, assuming you designate our offer as superior, Blackstone has
the right to increase its cash offer price to a level that LaSalle
shareholders ultimately find acceptable. However, we caution that we are
not aware of any listed equity REIT M&A transaction since 20062
in which a target has agreed to a cash offer at a discount of greater
than 1% compared to a competing share or share/cash offer. In fact, a
survey of trends in public REIT M&A transactions recently published by
your legal counsel clearly states that cash transaction prices are
generally less attractive than shares or cash/share alternatives.3
Their research has shown that all-cash buyers typically pay higher
premiums than cash/stock buyers in public M&A transactions4,
not the other way around. Currently, Blackstone's cash offer represents
a significant discount to the implied price of our offer,
regardless of which time period is considered. We have attached as
Exhibit B to this letter a copy of the relevant section from your legal
counsel's advisory publication and provide the URL to the entire report
in the footnote below.

As the holder of 10.8 million LaSalle common shares (9.8%), it is our
view that if you accept a revised take-under price from Blackstone and
agree to a higher termination fee, for which there would be no logical
rationale, you would clearly be acting against the best interests of
LaSalle shareholders. In that case, you would be enabling an egregious
transfer of LaSalle's value to Blackstone while disadvantaging our
superior proposal with artificial and unnecessary transaction costs and
not allowing shareholders to vote on our more attractive offer. This
tactic would be a gross disservice to all LaSalle shareholders, and in
our view, a violation of your fiduciary duties.

In stark contrast to the discounted take-under price of the Blackstone
agreement, we are offering to pay a full and fair price to LaSalle
shareholders for a strategic combination with immediate higher value and
long-term upside potential. Moreover, we want to point out that if you
choose to move forward with a shareholder vote of the existing
agreement, and shareholders reject the current Blackstone take-under
agreement – an outcome we believe is all but certain, and as set forth
in LaSalle's preliminary proxy, you have already deemed our proposal
superior to remaining independent, and shareholders will expect you to
immediately enter into an agreement with us on the terms we have
offered, which we will be prepared to do.

We want to give LaSalle shareholders greater value for their shares now
and unlock the true potential of LaSalle over the long-term as a
combined company with Pebblebrook. We remain ready to move quickly to
complete a transaction and urge you to engage with us to designate our
offer as superior, and finalize a merger agreement. Our extensive
knowledge of LaSalle's assets and markets makes us the best partner to
maximize value for LaSalle shareholders and the shareholders of a
combined company.

Sincerely yours,

Jon E. Bortz
Chairman, President & CEO
Pebblebrook Hotel

Exhibit A

Summary of Key Terms of Non-Binding Proposed Combination of
Pebblebrook Hotel Trust ("Pebblebrook") and LaSalle Hotel Properties

1. Merger Consideration (cash or shares; maximum of 20%
of the outstanding LaSalle shares will receive cash):

  • For each LaSalle common share held, each LaSalle shareholder may elect
    to receive:
    • $37.80 in cash; or
    • a fixed exchange ratio of 0.92 Pebblebrook share
  • A maximum of 20% of the outstanding LaSalle shares will receive cash
    and those electing cash will be subject to pro rata cutbacks in the
    event more than 20% of LaSalle shares elect cash
  • Pebblebrook to exchange new preferred shares for LaSalle's existing
    preferred shares (with substantially identical terms)

2. Management:

  • Pebblebrook senior executives to manage combined company

3. Financing Sources (no financing contingencies):

  • Pebblebrook to assume or repay LaSalle's term loans and first mortgage

4. Due Diligence (no diligence contingencies):

  • Proposal is not contingent on further due diligence

5. Representations, Warranties and Covenants (customary and

  • Customary and reciprocal to both LaSalle and Pebblebrook as set forth
    in our proposed merger agreement

6. Break-up Fee:

  • $112.0 million

7. Pebblebrook Board Approval:

  • Pebblebrook's Board of Trustees has approved the terms contained herein

8. Above terms subject to the following assumptions and conditions:

  • Termination of the Blackstone agreement and concurrent execution of a
    definitive merger agreement with Pebblebrook
  • No payments or vesting under change in control severance agreements
    for Pebblebrook's executive officers

This summary is non-binding and neither party shall be under any legal
obligation with respect to a merger transaction unless and until each
party executes a definitive merger agreement.

Exhibit B

Excerpt from: Goodwin Insights, Trends in Public REIT M&A 2012-2017,
published by Goodwin Procter, January 29, 2018.

"As evident in the table above, premiums logically tend to decrease when
stock is included as a component of the merger consideration, with the
highest premiums coming in all-cash go-private transactions and the
lowest premiums coming in all stock so-called "merger of equal"
transactions. When shareholders are exchanging their shares for all cash
in a "no tomorrow" transaction, buyers will pay as robust a premium as
the market will bear in exchange for capturing all future upside in the
target business. Conversely, when shareholders are receiving shares in
the combined company, which will almost always be a larger and more
diverse company, buyers have less of a compelling reason to provide
target shareholders with a robust up-front premium because they will
receive the future economic benefits of the combined enterprise."

About Pebblebrook Hotel Trust

Pebblebrook Hotel Trust is a publicly traded real estate investment
trust ("REIT") organized to opportunistically acquire and invest
primarily in upper upscale, full-service hotels located in urban markets
in major gateway cities. The Company owns 28 hotels, with a total of
6,973 guest rooms. The Company owns hotels located in 9 states and the
District of Columbia, including: Los Angeles, California (Beverly Hills,
Santa Monica and West Hollywood); San Diego, California; San Francisco,
California; Washington, DC; Coral Gables, Florida; Naples, Florida;
Buckhead, Georgia; Boston, Massachusetts; Minneapolis, Minnesota;
Portland, Oregon; Philadelphia, Pennsylvania; Nashville, Tennessee;
Columbia River Gorge, Washington; and Seattle, Washington. For more
information, please visit us at
and follow us on Twitter at @PebblebrookPEB.


This communication does not constitute an offer to buy or solicitation
of an offer to sell any securities. This communication relates to a
proposal which Pebblebrook has made for a business combination
transaction with LaSalle. In furtherance of this proposal and subject to
future developments, Pebblebrook (and, if a negotiated transaction is
agreed, LaSalle) may file one or more registration statements, proxy
statements, tender or exchange offer statements, prospectuses or other
documents with the SEC. This communication is not a substitute for any
proxy statement, registration statement, tender or exchange offer
statement, prospectus or another document Pebblebrook or LaSalle may
file with the SEC in connection with the proposed transaction. INVESTORS
definitive proxy statement or prospectus (if and when available) will be
delivered to shareholders of LaSalle or Pebblebrook, as applicable.
Investors and security holders will be able to obtain free copies of
these documents (if and when available) and other documents filed with
the SEC by Pebblebrook through the website maintained by the SEC at

Pebblebrook or LaSalle and their respective trustees and executive
officers and other members of management and employees may be deemed to
be participants in the solicitation of proxies in respect of the
proposed transaction. You can find information about Pebblebrook's
executive officers and trustees in Pebblebrook's definitive proxy
statement filed with the SEC on April 27, 2018. You can find information
about LaSalle's executive officers and trustees in LaSalle's definitive
proxy statement filed with the SEC on March 22, 2018. Additional
information regarding the interests of such potential participants will
be included in one or more registration statements, proxy statements,
tender or exchange offer statements or other documents filed with the
SEC if and when they become available. You may obtain free copies of
these documents using the sources indicated above.

This document shall not constitute an offer to sell or the solicitation
of an offer to buy any securities, nor shall there be any sale of
securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the requirements
of Section 10 of the Securities Act of 1933, as amended.

Forward-Looking Statements

This communication may include "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include, but are not limited to, statements
regarding Pebblebrook's offer to acquire LaSalle, its financing of the
proposed transaction, its expected future performance (including
expected results of operations and financial guidance), and the combined
company's future financial condition, operating results, strategy and
plans. Forward-looking statements may be identified by the use of the
words "anticipates," "expects," "intends," "plans," "should," "could,"
"would," "may," "will," "believes," "estimates," "potential," "target,"
"opportunity," "tentative," "positioning," "designed," "create,"
"predict," "project," "seek," "ongoing," "upside," "increases" or
"continue" and variations or similar expressions. These statements are
based upon the current expectations and beliefs of management and are
subject to numerous assumptions, risks and uncertainties that change
over time and could cause actual results to differ materially from those
described in the forward-looking statements. These assumptions, risks
and uncertainties include, but are not limited to, assumptions, risks
and uncertainties discussed in Pebblebrook's most recent annual or
quarterly report filed with the SEC and assumptions, risks and
uncertainties relating to the proposed transaction, as detailed from
time to time in Pebblebrook's and LaSalle's filings with the SEC, which
factors are incorporated herein by reference. Important factors that
could cause actual results to differ materially from the forward-looking
statements made in this communication are set forth in other reports or
documents that Pebblebrook may file from time to time with the SEC, and
include, but are not limited to: (i) the ultimate outcome of any
possible transaction between Pebblebrook and LaSalle, including the
possibilities that LaSalle will reject a transaction with Pebblebrook,
(ii) the ultimate outcome and results of integrating the operations of
Pebblebrook and LaSalle if a transaction is consummated, (iii) the
ability to obtain regulatory approvals and meet other closing conditions
to any possible transaction, including the necessary shareholder
approvals, and (iv) the risks and uncertainties detailed by LaSalle with
respect to its business as described in its reports and documents filed
with the SEC. All forward-looking statements attributable to Pebblebrook
or any person acting on Pebblebrook's behalf are expressly qualified in
their entirety by this cautionary statement. Readers are cautioned not
to place undue reliance on any of these forward-looking statements.
These forward-looking statements speak only as of the date hereof.
Pebblebrook undertakes no obligation to update any of these
forward-looking statements to reflect events or circumstances after the
date of this communication or to reflect actual outcomes.

For additional information or to receive press releases via email,
please visit our website at

1 Based on Pebblebrook's closing price of $39.72, 5-day VWAP
of $39.18, 30-day VWAP of $39.31 and 60-day VWAP of $38.61, all as of
July 19, 2018.

2 The only listed equity REIT M&A transaction since 2006 in
which a lower cash offer was accepted compared to a competing stock and
cash offer was Blackstone's acquisition of Equity Office Properties in
2007. In that transaction, Blackstone's offer represented a discount to
the competing cash/stock offer of less than 1%.

3 Goodwin Insights, Trends in Public
REIT M&A 2012-2017,
published by Goodwin Procter, January 29,

4 Ibid

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