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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): March 31, 2011
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 Current Report on Form 8-K filed by Pebblebrook Hotel Trust (the “Company”) on March 28, 2011 announcing the Company’s entry into an agreement to acquire an upscale, full-service hotel in the San Diego region for $110.0 million, The Westin Gaslamp Quarter, San Diego, to include the historical financial statements and pro forma financial information that will be required by Items 9.01(a) and (b) if the acquisition is consummated.
Item 9.01.   Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
The Westin Gaslamp Quarter, San Diego — probable acquisition
Independent Auditors’ Report
Balance Sheets as of December 31, 2010 and 2009
Statements of Operations for the years ended December 31, 2010 and 2009
Statements of Owner’s Equity in Hotel for the years ended December 31, 2010 and 2009
Statements of Cash Flows for the years ended December 31, 2010 and 2009
Notes to Financial Statements
(b) Pro forma financial information.
Pebblebrook Hotel Trust
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2010
Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2010
(d) Exhibits
         
Exhibit    
Number   Exhibit Description
10.1      
Purchase and Sale Agreement by and between Starwood CMBS I, LLC, as seller, and Bruins Owner LLC, as purchaser, dated as of March 22, 2011, for The Westin Gaslamp, San Diego
 
23.1      
Consent of KPMG LLP

 


 

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
 
 
March 31, 2011  By:   /s/ Raymond D. Martz    
    Name:   Raymond D. Martz   
    Title:   Executive Vice President,Chief Financial Officer,
Treasurer and Secretary
 
 
 

 


 

Independent Auditors’ Report
The Manager
The Westin Gaslamp Quarter, San Diego:
We have audited the accompanying balance sheets of the Westin Gaslamp Quarter, San Diego Hotel (the “Hotel”) as of December 31, 2010 and 2009, and the related statements of operations, owner’s equity in Hotel, and cash flows for the years then ended. These financial statements are the responsibility of the Hotel’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Hotel’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Westin Gaslamp Quarter, San Diego Hotel as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
/s/ KPMG, LLP
McLean, Virginia
March 31, 2011


 

WESTIN GASLAMP QUARTER, SAN DIEGO HOTEL
Balance Sheets
                 
    December 31,  
    2010     2009  
Assets
               
Cash and cash equivalents
  $ 367,651     $ 263,754  
Accounts receivable, net
    810,836       1,373,425  
Inventory
    353,380       341,295  
Prepaid expenses
    290,234       291,481  
 
           
Total current assets
    1,822,101       2,269,955  
 
           
Property and equipment:
               
Land
    6,500,000       6,500,000  
Building and improvements
    101,766,639       99,353,125  
Furniture, fixtures, and equipment
    18,011,074       13,901,664  
 
           
 
    126,277,713       119,754,789  
Accumulated depreciation
    (44,398,105 )     (40,754,569 )
 
           
Total property and equipment, net
    81,879,608       79,000,220  
 
           
Total assets
  $ 83,701,709     $ 81,270,175  
 
           
Liabilities and Owner’s Equity in Hotel
               
Current liabilities:
               
Accounts payable
  $ 366,664     $ 450,781  
Accrued expenses
    1,154,561       793,185  
Advance deposits
    818,753       620,608  
Other liabilities
    162,111       140,866  
 
           
Total current liabilities
    2,502,089       2,005,440  
Owner’s Equity in Hotel
    81,199,620       79,264,735  
 
           
Total liabilities and owner’s equity in Hotel
  $ 83,701,709     $ 81,270,175  
 
           
See accompanying notes to financial statements.

2


 

WESTIN GASLAMP QUARTER, SAN DIEGO HOTEL
Statements of Operations
                 
    Year Ended December 31,  
    2010     2009  
Revenue:
               
Room
  $ 18,508,974     $ 18,749,358  
Food and beverage
    7,134,005       7,183,489  
Other
    2,033,367       2,278,766  
 
           
Total revenues
    27,676,346       28,211,613  
Operating expenses:
               
Room
    4,461,245       4,317,477  
Food and beverage
    5,037,109       5,094,441  
General and administrative
    2,456,198       2,369,795  
Depreciation and amortization
    3,643,536       3,804,165  
Repairs and maintenance
    889,461       822,802  
Utilities
    1,088,890       1,177,213  
Marketing and advertising
    2,393,901       2,066,652  
Property taxes and insurance
    1,261,957       1,335,253  
Other
    831,854       872,172  
 
           
Total operating expenses
    22,064,151       21,859,970  
 
           
 
               
Net income
  $ 5,612,195     $ 6,351,643  
 
           
See accompanying notes to financial statements.

3


 

WESTIN GASLAMP QUARTER, SAN DIEGO HOTEL
Statements of Owner’s Equity in Hotel
         
Balance at December 31, 2008
  $ 82,643,372  
Net distributions to owner
    (9,730,280 )
Net income
    6,351,643  
 
     
Balance at December 31, 2009
    79,264,735  
Net distributions to owner
    (3,677,310 )
Net income
    5,612,195  
 
     
Balance at December 31, 2010
  $ 81,199,620  
 
     
See accompanying notes to financial statements.

4


 

WESTIN GASLAMP QUARTER, SAN DIEGO HOTEL
Statements of Cash Flows
                 
    Year Ended December 31,  
    2010     2009  
Cash flows from operating activities:
               
Net income
  $ 5,612,195     $ 6,351,643  
Adjustments to reconcile net income to net cash provided operating activities:
               
Depreciation and amortization
    3,643,536       3,804,165  
Changes in operating assets and liabilities:
               
Accounts receivable, net
    562,589       17,352  
Inventory
    (12,085 )     16,723  
Prepaid expenses
    1,247       (9,325 )
Accounts payable
    (84,117 )     72,964  
Advance deposits
    198,145       (305,496 )
Accrued expenses and other liabilities
    382,621       33,874  
 
           
Net cash provided by operating activities
    10,304,131       9,981,900  
 
               
Net cash used in financing activities — distributions to owner of Hotel
    (10,200,234 )     (9,868,702 )
 
           
Net change in cash and cash equivalents
    103,897       113,198  
Cash and cash equivalents:
               
Beginning of period
    263,754       150,556  
 
           
End of period
  $ 367,651     $ 263,754  
 
           
Supplemental disclosure of cash flow information — investing and financing activities:
               
Property improvements paid on behalf of Hotel by owner
  $ 6,522,924     $ 138,422  
See accompanying notes to financial statements.

5


 

WESTIN GASLAMP QUARTER, SAN DIEGO HOTEL
Notes to Financial Statements
December 31, 2010 and 2009
(1)   Description of Business
 
    The Westin Gaslamp Quarter, San Diego Hotel (the Hotel), is a full service 450-room hotel located at 910 Broadway Circle, San Diego, California. The Hotel is owned by Starwood CMBS I, LLC (CMBS I), a Delaware limited liability company.
 
    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.
 
    On March 22, 2011, Pebblebrook Hotel Trust (Pebblebrook) executed a purchase and sale agreement to acquire the Hotel for cash consideration of approximately $110 million. In addition, the Hotel is currently undergoing a renovation project. Pebblebrook expects to reimburse the seller for approximately $13 million in renovation costs paid by seller. Total aggregate purchase consideration is expected to be approximately $123 million. The transaction is expected to close in April 2011.
 
    The Hotel is managed by an affiliate of CMBS I. No intercompany management agreement is in place and no management fees have been charged to the Hotel.
(2)   Summary of Accounting Policies
  (a)   Cash and Cash Equivalents
 
      The Hotel considers all liquid temporary cash investments with maturities of three months or less at the date of purchase to be cash and cash equivalents.
 
  (b)   Property and Equipment
 
      Building and improvements, fixtures, furniture, 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
  5 — 40 years
Furniture, fixtures and equipment
  3 — 10 years
  (c)   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.
 
  (d)   Accounts Receivable
 
      Accounts receivable, which primarily represent amounts due from Hotel guests, are presented net of allowances, which were not material at December 31, 2010 or 2009.

6


 

WESTIN GASLAMP QUARTER, SAN DIEGO HOTEL
Notes to Financial Statements
December 31, 2010 and 2009
  (e)   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 impairment losses were recognized in either period presented.
 
  (f)   Marketing and Advertising Expenses
 
      Marketing and advertising costs are expensed as incurred. The Hotel incurred marketing and advertising costs of $2,393,901 and $2,066,652 for the years ended December 31, 2010 and 2009, respectively.
 
  (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 March 31, 2011, the date the financial statements were available to be issued. See note 1 for disclosure.

7


 

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF PEBBLEBROOK HOTEL TRUST
Pebblebrook Hotel Trust (the “Company”) completed its initial public offering and concurrent private placement of common shares of beneficial interest on December 14, 2009. The Company raised $379.6 million, net of underwriting discounts and offering costs. On July 28, 2010, the Company completed a secondary offering of 19,550,000 common shares, including the underwriters’ overallotment of 2,550,000 common shares, at an offering price of $17.00 per share. The net proceeds to the Company, after underwriters’ discounts and offering costs, were $318.3 million. On March 11, 2011, the Company completed a secondary offering of 5,000,000 7.875% Series A Cumulative Redeemable Preferred Shares at an offering price of $25.00 per share. The net proceeds to the Company, after underwriters’ discounts and offering costs, were $121.1 million.
On February 16, 2011, the Company, through a subsidiary, acquired the Argonaut Hotel San Francisco for a purchase price of $84 million, including assumption of $42 million of debt, plus closing costs and net working capital.
On March 22, 2011, the Company, through a subsidiary, entered into an agreement to acquire The Westin Gaslamp Quarter, San Diego for $110 million, plus closing costs and net working capital. The Company expects the closing of the purchase of The Westin Gaslamp Quarter, San Diego to occur on or before April 6, 2011, however, because the acquisition is subject to customary closing requirements and conditions, the Company can give no assurance that the transaction will be consummated during that time period or at all. The Company expects to fund the acquisition with available cash.
The unaudited pro forma consolidated balance sheet as of December 31, 2010 is presented as if the acquisition of the Argonaut Hotel San Francisco and the probable acquisition of The Westin Gaslamp Quarter, San Diego occurred on December 31, 2010. The unaudited pro forma consolidated statement of operations for the year ended December 31, 2010 is presented as if the acquisition of the Argonaut Hotel San Francisco and the probable acquisition of The Westin Gaslamp Quarter, San Diego and the seven material acquisitions in 2010 all, had been completed on January 1, 2010.
The unaudited pro forma financial information is not necessarily indicative of what the Company’s results of operations or financial condition would have been assuming such transactions had been completed at the beginning of the periods presented, nor is it indicative of the results of operations for future periods. The unaudited pro forma financial information reflects the preliminary application of purchase accounting to the acquisition of the Argonaut Hotel San Francisco and the probable acquisition of The Westin Gaslamp Quarter, San Diego. The preliminary purchase accounting may be adjusted if any of the assumptions underlying the purchase accounting change. In management’s opinion, all adjustments necessary to reflect the effects of the significant acquisitions described above have been made. This unaudited pro forma financial information should be read in conjunction with the historical financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

 


 

Pebblebrook Hotel Trust
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2010
(in thousands, except share and per-share data)
                                 
    Historical             Probable Acquisition of        
    Pebblebrook Hotel     Acquisition of Argonaut Hotel     The Westin Gaslamp     Pro Forma Pebblebrook  
    Trust     San Francisco (1)     Quarter, San Diego (2)     Hotel Trust  
ASSETS
                               
Investment in hotel properties, net
  $ 599,714     $ 83,739     $ 123,000     $ 806,453  
Ground lease asset
    10,721                     10,721  
Cash and cash equivalents
    221,543       (43,295 )     (123,420 )     54,828  
Restricted cash
    3,664                     3,664  
Accounts receivable, net
    3,924       127               4,051  
Deferred financing costs, net
    2,718                     2,718  
Prepaid expenses and other assets
    13,231       872               14,103  
 
                       
Total assets
  $ 855,515     $ 41,443     $ (420 )   $ 896,538  
 
                       
 
                               
LIABILITIES AND STOCKHOLDERS’ EQUITY
                               
Senior secured credit facility
  $     $     $     $  
Mortgage debt
    143,570       42,000             185,570  
Accounts payable and accrued expenses
    15,799       390             16,189  
Advance deposits
    2,482       153             2,635  
Accrued interest
    304                   304  
Distribution payable
    4,908                   4,908  
 
                       
Total liabilities
    167,063       42,543             209,606  
Commitments and contingencies
                               
Shareholders’ equity:
                               
Preferred shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; no shares issued and outstanding
                       
Common shares of beneficial interest, $0.01 par value; 500,000,000 shares authorized; 39,814,760 shares issued and outstanding
    398                   398  
Additional paid-in capital
    698,100                   698,100  
Accumulated deficit and distributions
    (11,586 )     (1,100 )     (420 )     (13,106 )
 
                       
Total shareholders’ equity
    686,912       (1,100 )     (420 )     685,392  
 
                       
Non-controlling interest
    1,540                   1,540  
Total equity
    688,452       (1,100 )     (420 )     686,932  
 
                       
Total liabilities and equity
  $ 855,515     $ 41,443     $ (420 )   $ 896,538  
 
                       
 
    Footnotes:
 
(1)   Reflects the acquisition of the Argonaut Hotel San Francisco as if it had occurred on December 31, 2010 for $83,739. The acquisition was funded with a combination of available cash and the assumption of existing debt of $42,000. The pro forma adjustment reflects the following estimates: Purchase of land, building, and furniture, fixtures and equipment of $83,739; Assumption of existing mortgage debt of $42,000; Cash paid of $1,100 for hotel acquisition costs; and Net working capital of $456.
 
(2)   Reflects the probable acquisition of The Westin Gaslamp Quarter, San Diego as of it had occurred on December 31, 2010 for $110,000. The property is currently undergoing a renovation project, the Company also expects to reimburse the seller for approximately $13,000 for renovation costs incurred and paid by the seller through the date of closing. Subsequent to the closing, Pebblebrook will fund all remaining renovation costs. The acquisition, if consummated, will be funded with available cash. The pro forma adjustment reflects the following estimates: Purchase of land, building, and furniture, fixtures, and equipment of $123,000 and estimated hotel acquisition costs of $420.


 

     
Pebblebrook Hotel Trust
Unaudited Pro Forma Income Statement
For the twelve months ended December 31, 2010
(in thousands, except share and per-share data)
                                                                                                                 
            Completed Material Acquisitions       Probable Acquisition    
    Historical
Pebblebrook
Hotel Trust
    Acquisition of
DoubleTree by
Hilton Bethesda-
Washington DC
Hotel(1)
    Acquisition of Sir
Francis Drake
Hotel(2)
    Acquisition of
InterContinental
Buckhead
Hotel (3)
    Acquisition of
Hotel Monaco
Washington DC (4)
    Acquisition of
Skamania Lodge (5)
    Acquisition of
Sheraton Delfina
Santa Monica
Hotel (6)
    Acquisition of
Sofitel
Philadelphia
Hotel (7)
    Acquisition of
Argonaut Hotel
San Francisco (8)
    ProForma
Adjustments
    Pro Forma
Pebblebrook
Hotel Trust
before probable
acquisition
    Acquisition of
The Westin Gaslamp
Quarter, San
Diego (16)
    Pro Forma
Adjustments
    Pro Forma
Pebblebrook
Hotel Trust
 
REVENUE
                                                                                                               
Room
  $ 32,804     $ 4,404     $ 7,184     $ 8,639     $ 9,021     $ 6,919     $ 15,348     $ 13,007     $ 14,777     $     $ 112,103       18,509     $     $ 130,612  
Food and beverage
    21,984       1,593       6,639       6,709       4,618       8,028       3,331       5,298       4,849             63,049       7,134             70,183  
Other operating department
    2,973       233       1,039       1,029       425       2,211       1,156       1,066       918             11,050       2,033             13,083  
 
                                                                                   
Total revenues
    57,761       6,230       14,862       16,377       14,064       17,158       19,835       19,371       20,544             186,202       27,676             213,878  
 
                                                                                   
 
                                                                                                               
EXPENSES
                                                                                                               
Hotel operating expenses:
                                                                                                               
Room
    9,718       854       3,320       2,552       2,304       1,714       3,518       3,902       4,296       11 (9)     32,189       4,461             36,650  
Food and beverage
    15,113       1,122       5,144       4,101       3,330       5,258       3,015       4,471       3,370             44,924       5,037             49,961  
Other direct expenses
    1,288       150       557       304       304       1,280       679       884       408             5,854       832             6,686  
Other indirect expenses
    16,724       2,162       4,437       3,624       4,261       3,985       6,858       5,208       4,820       451 (9)     52,530       6,828       554 (9)     59,912  
 
                                                                                   
Total hotel operating expenses
    42,843       4,288       13,458       10,581       10,199       12,237       14,070       14,465       12,894       462       135,497       17,158       554       153,209  
 
                                                                                   
 
                                                                                                               
Depreciation and amortization
    5,776                   1,988       491                         1,124       9,308 (10)     18,687       3,644       (169 )(10)     22,162  
Real estate taxes, personal property taxes & insurance
    2,220       225       752       783       284       526       838       857       1,115               7,600       1,262             8,862  
Ground rent
    124                         212                         1,393       340 (11)     2,069                   2,069  
General and administrative
    8,319                                                               8,319                   8,319  
Acquisition transaction costs
    6,581                                                       1,100 (12)     7,681             420 (12)     8,101  
 
                                                                                   
Total operating expenses
    65,863       4,513       14,210       13,352       11,186       12,763       14,908       15,322       16,526       11,210       179,853       22,064       805       202,722  
 
                                                                                                               
Operating income (loss)
    (8,102 )     1,717       652       3,025       2,878       4,395       4,927       4,049       4,018       (11,210 )     6,349       5,612       (805 )     11,156  
Interest income
    3,020                                                       (3,020 )(13)                          
Interest expense
    (1,640 )           (805 )           (1,430 )                       (2,449 )     103 (14)     (6,221 )                 (6,221 )
Other income
                                                                                       
 
                                                                                   
Income (loss) before income taxes
    (6,722 )     1,717       (153 )     3,025       1,448       4,395       4,927       4,049       1,569       (14,127 )     128       5,612       (805 )     4,935  
 
                                                                                   
Income tax benefit (expense)
    80                                                       (1,028 )(15)     (948 )           (221 )(15)     (1,169 )
 
                                                                                   
Net income (loss)
  $ (6,642 )   $ 1,717     $ (153 )   $ 3,025     $ 1,448     $ 4,395     $ 4,927     $ 4,049     $ 1,569     $ (15,155 )   $ (820 )   $ 5,612     $ (1,026 )   $ 3,766  
 
                                                                                   
(Loss) income per common share, basic and diluted
  $ (0.23 )                                                                                                   $ 0.09  
 
                                                                                                           
Weighted average number of common shares, basic and diluted
    28,669,851                                                                                               (17)     39,810,590  
 
                                                                                                           
 
Footnotes:
 
(1)   Reflects the historical unaudited statement of operations of the DoubleTree by Hilton Bethesda-Washington DC Hotel from January 1, 2010 through the date of acquisition.
 
(2)   Reflects the historical unaudited statement of operations of the Sir Francis Drake Hotel from January 1, 2010 through the date of acquistion.
 
(3)   Reflects the historical unaudited statement of operations of the InterContinental Buckhead Hotel from January 1, 2010 through the date of acquisition.
 
(4)   Reflects the historical unaudited statement of operations of the Hotel Monaco Washington DC from January 1, 2010 through the date of acquisition.
 
(5)   Reflects the historical unaudited statement of operations of the Skamania Lodge from January 1, 2010 through the date of acquisition.
 
(6)   Reflects the historical unaudited statement of operations of the Sheraton Delfina Santa Monica Hotel from January 1, 2010 through the date of acquisition.
 
(7)   Reflects the historical unaudited statement of operations of the Sofitel Philadelphia Hotel from January 1, 2010 through the date of acquisition.

 


 

(8)   Reflects the historical unaudited statement of operations of the Argonaut Hotel San Francisco for the year ended December 31, 2010.
 
(9)   Reflects adjustment to record management fee and related costs for the InterContinental Buckhead Hotel and The Westin Gaslamp Quarter, San Diego as no such fees or costs are included in the historical amounts presented because these hotels were previously self managed.
 
(10)   Reflects adjustment to depreciation expense based on the Company’s cost basis in the acquired hotel properties and its accounting policy for depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 years for building and seven years for furniture, fixtures and equipment.
 
(11)   Reflects adjustment to include additional ground rent expense and amortize the ground lease intangible asset associated with the Hotel Monaco Washington DC.
 
(12)   Reflects acquisition costs for the acquisitions of the Argonaut Hotel San Francisco and The Westin Gaslamp Quarter, San Diego.
 
(13)   Reflects removal of historical interest income associated with a reduction in cash invested in interest bearing accounts in conjunction with the completed acquisitions and the probable acquisition.
 
(14)   Reflects removal of historical interest expense associated with debt which was not assumed in conjunction with the acquisition of the Sir Francis Drake Hotel and adjustment to include interest expense for the Sofitel Philadelphia Hotel where we assumed the debt .
 
(15)   Reflects adjustment to record pro forma income taxes related to the Company’s taxable REIT subsidiary subsequent to the hotel acquisitions. The Company’s REIT subsidiary’s pro forma pre-tax net income was $2,923 for the year ended December 31, 2010. The pro forma income tax was calculated using the Company’s taxable REIT subsidiary’s estimated effective tax rate of 40%.
 
(16)   Reflects the historical audited statement of operations of The Westin Gaslamp Quarter, San Diego for the year ended December 31, 2010.
 
(17)   Reflects number of common shares issued and outstanding as if the Company’s secondary offering which occurred in July 2010 had occurred on January 1, 2010.

 


 

Exhibit Index
         
Exhibit    
Number   Exhibit Description
10.1      
Purchase and Sale Agreement by and between Starwood CMBS I, LLC, as seller, and Bruins Owner LLC, as purchaser, dated as of March 22, 2011, for The Westin Gaslamp, San Diego
 
23.1      
Consent of KPMG LLP