Pebblebrook Hotel Trust Announces Full Exercise of Convertible Notes
Pebblebrook Hotel Trust (the “Company”) today announced the successful closing of its previously announced private offering of $400,000,000 aggregate principal amount of 1.625% Convertible Senior Notes due 2030 (the “Notes”) on September 18, 2025. This offering includes $50,000,000 of Notes issued pursuant to the full exercise of the initial purchasers’ over-allotment option, reflecting strong investor demand for the Company’s securities and the attractiveness of the offering terms.
The Notes are senior unsecured obligations of Pebblebrook Hotel Trust and rank equally with all of the Company’s existing and future unsecured debt that is not subordinated. In terms of priority, the Notes are senior to any future subordinated debt of the Company, while remaining junior to any existing and future debt and preferred equity of the Company’s subsidiaries. The Notes pay interest semiannually at a rate of 1.625% per year and are scheduled to mature on January 15, 2030.
A key feature of the Notes is their conversion option. The Notes have an initial conversion rate of 62.9129 shares per $1,000 principal amount of Notes, equivalent to a conversion price of approximately $15.89 per common share of the Company (“Common Shares”). This conversion price represents a premium of approximately 37.5% relative to the closing price of $11.56 per Common Share on September 16, 2025. The initial conversion rate is subject to adjustment in the event of certain corporate actions, though it will not be adjusted for accrued and unpaid interest.
The conversion rights of the Notes are structured in a phased manner. Prior to July 15, 2029, the Notes are convertible only upon the occurrence of specific circumstances or during designated periods. After that date, the Notes may be converted at any time up until the close of business on the second scheduled trading day prior to the maturity date. Upon conversion, holders will receive cash up to the principal amount of the Notes being converted. For any remaining conversion obligation beyond the principal amount, the Company may deliver either cash, Common Shares, or a combination thereof, at its discretion. This flexible structure allows the Company to manage its cash flow and share dilution efficiently while providing holders with multiple options for conversion.
Pebblebrook Hotel Trust intends to use the net proceeds from the offering, together with approximately $4.1 million of existing cash on hand, to repurchase approximately $400 million aggregate principal amount of its outstanding 1.75% Convertible Senior Notes due 2026 (the “2026 Notes”). These repurchases were conducted through private, separately negotiated transactions with certain holders of the 2026 Notes. By refinancing its existing 2026 Notes, the Company is able to extend its debt maturity profile, reduce interest costs, and enhance financial flexibility for future strategic initiatives.
In addition to the Notes repurchase, the Company repurchased approximately 4.3 million Common Shares under its existing common share repurchase program. These transactions were privately negotiated with or through one of the initial purchasers or its affiliates, at a price of $11.56 per share, consistent with the last reported sales price on the New York Stock Exchange on September 16, 2025. The Company’s common share repurchase program is a key part of its strategy to return value to shareholders while managing dilution from convertible securities.
Concurrently with the pricing of the Notes, Pebblebrook Hotel Trust entered into privately negotiated capped call transactions using available cash. The capped call transactions are designed to cover, subject to customary adjustments, the number of Common Shares underlying the Notes. These transactions are generally expected to reduce potential dilution to Common Shares upon any conversion of the Notes and/or offset cash payments that may be required in excess of the principal amount of the converted Notes. The reduction or offset is subject to a cap, providing the Company with a degree of certainty regarding its obligations in the event of conversion. The cap price of the capped call transactions was initially set at $20.23 per Common Share, representing a premium of 75% over the last reported sales price on September 16, 2025. The cap price is also subject to adjustments under the terms of the capped call transactions.
It is important to note that the Notes, as well as any Common Shares issuable upon conversion, have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), nor under any state or foreign securities laws. Consequently, the Notes may not be offered or sold in the United States or to U.S. persons unless registered or in a transaction exempt from registration requirements. The Notes were offered and sold solely to investors reasonably believed to qualify as “qualified institutional buyers” in accordance with Rule 144A under the Securities Act. This press release does not constitute an offer to sell or a solicitation to buy the Notes or any other securities in any jurisdiction where such an offer or solicitation would be unlawful.
The successful completion of this offering reflects strong investor confidence in Pebblebrook Hotel Trust’s business strategy, financial position, and long-term growth prospects. By issuing the 1.625% Convertible Senior Notes due 2030, the Company has taken a significant step toward optimizing its capital structure, extending debt maturities, and lowering overall borrowing costs. The repurchase of the 2026 Notes and the common shares demonstrates a proactive approach to managing debt obligations and returning value to shareholders.
The strategic combination of the Notes issuance, the repurchase of existing debt, and the common share buyback highlights Pebblebrook Hotel Trust’s commitment to maintaining a balanced capital structure while providing flexibility for future growth. The capped call transactions further strengthen the Company’s financial strategy by mitigating potential dilution for shareholders and managing cash outflows associated with conversions of the Notes.
Overall, these financial actions support Pebblebrook Hotel Trust’s objectives of sustaining long-term shareholder value, enhancing liquidity, and maintaining the financial flexibility needed to pursue growth opportunities in the competitive hospitality sector. The Company continues to focus on strengthening its balance sheet, reducing interest expense, and strategically deploying capital in ways that maximize returns for its investors.
