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):June 4, 2010

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

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 Form 8-K/A amends and supplements each of the Registrant’s following Forms 8-K, (i) Form 8-K filed on June 10, 2010 reporting the acquisition of the Doubletree Bethesda Hotel and Executive Meeting Center, (ii) Form 8-K filed on June 25, 2010 reporting the acquisition of the Sir Francis Drake Hotel, and (iii) Form 8-K filed on July 1, 2010 reporting the acquisition of the InterContinental Buckhead Hotel, to include the historical financial statements and unaudited pro forma financial information required by Item 9.01(a) and (b).

Item 9.01. Financial Statements and Exhibits.

Doubletree Bethesda Hotel and Executive Meeting Center
Independent Auditors’ Report
Balance Sheets as of March 31, 2010 (unaudited), December 31, 2009 and 2008
Statements of Operations for the three months ended March 31, 2010 and 2009 (unaudited) and for the years ended December 31, 2009 and 2008
Statements of Owner’s Equity in Hotel for the years ended December 31, 2009 and 2008 and the three months ended March 31, 2010 (unaudited)
Statements of Cash Flows for the three months ended March 31, 2010 and 2009 (unaudited) and for the years ended December 31, 2009 and 2008
Notes to Financial Statements
Sir Francis Drake Hotel
Independent Auditors’ Report
Balance Sheets as of March 31, 2010 (unaudited), December 31, 2009 and 2008
Statements of Operations for the three months ended March 31, 2010 and 2009 (unaudited) and for the years ended December 31, 2009 and 2008
Statements of Owner’s Equity in Hotel for the years ended December 31, 2009 and 2008 and the three months ended March 31, 2010 (unaudited)
Statements of Cash Flows for the three months ended March 31, 2010 and 2009 (unaudited) and for the years ended December 31, 2009 and 2008
Notes to Financial Statements
InterContinental Buckhead Hotel
Independent Auditors’ Report
Balance Sheets as of March 31, 2010 (unaudited), December 31, 2009 and 2008
Statements of Operations for the three months ended March 31, 2010 and 2009 (unaudited) and for the years ended December 31, 2009 and 2008
Statements of Owner’s Equity in Hotel for the years ended December 31, 2009 and 2008 and the three months ended March 31, 2010 (unaudited)
Statements of Cash Flows for the three months ended March 31, 2010 and 2009 (unaudited) and for the years ended December 31, 2009 and 2008
Notes to Financial Statements

Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2010

Unaudited Pro Forma Consolidated Statement of Operations for the three months ended March 31, 2010

Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2009

Exhibit
Number		Exhibit Description
10.1		Purchase and Sale Agreement (Doubletree Bethesda Hotel and Executive Meeting Center)
10.2		Purchase and Sale Agreement (Sir Francis Drake Hotel)
10.3		Purchase and Sale Agreement (InterContinental Buckhead Hotel)

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.

Exhibit Index

Exhibit
Number		Exhibit Description
10.1		Purchase and Sale Agreement (Doubletree Bethesda Hotel and Executive Meeting Center)
10.2		Purchase and Sale Agreement (Sir Francis Drake Hotel)
10.3		Purchase and Sale Agreement (InterContinental Buckhead Hotel)

Independent Auditors’ Report

The Manager of
Doubletree Bethesda Hotel and Executive Meeting Center:

We have audited the accompanying balance sheets of Doubletree Bethesda Hotel and Executive Meeting Center (the “Hotel”) as of December 31, 2009 and 2008, 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 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 Hotel as of December 31, 2009 and 2008, 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
July 9, 2010

DOUBLETREE BETHESDA HOTEL AND EXECUTIVE MEETING CENTER
Balance Sheets

		March 31,
		2010				December 31,
		(Unaudited)				2009				2008
Assets
Cash		$	190,387			$	826,027			$	339,634
Restricted cash			1,029,501				685,181				1,146,210
Accounts receivable, net			1,267,991				691,503				868,403
Reserve funds			281,889				167,766				740,860
Prepaid expenses and other current assets			399,573				442,600				448,797
Total current assets			3,169,341				2,813,077				3,543,904
Property and equipment, at cost			66,122,023				65,972,687				65,443,416
Less: accumulated depreciation			(7,591,964	)			(7,111,605	)			(5,185,696	)
			58,530,059				58,861,082				60,257,720
Other assets			235,464				300,810				652,956
Total assets		$	61,934,864			$	61,974,969			$	64,454,580
Liabilities and Owner’s Equity in Hotel
Note payable		$	38,000,000			$	38,000,000			$	—
Accounts payable			464,616				331,758				294,149
Accrued wages and benefits			362,138				264,756				356,804
Accrued interest payable			165,510				165,510				165,510
Other current lilabilities			529,065				301,624				573,098
Total current liabilities			39,521,329				39,063,648				1,389,561
Note payable			—				—				38,000,000
Total liabilities			39,521,329				39,063,648				39,389,561
Owner’s equity in Hotel			22,413,535				22,911,321				25,065,019
Total liabilities and owner’s equity in Hotel		$	61,934,864			$	61,974,969			$	64,454,580

See accompanying notes to financial statements.

DOUBLETREE BETHESDA HOTEL AND EXECUTIVE MEETING CENTER
Statements of Operations

		Three Month Ended March 31,								Year Ended December 31,
		2010				2009				2009				2008
		(unaudited)				(unaudited)
Revenues:
Rooms		$	2,197,496			$	2,873,489			$	11,118,997			$	11,579,628
Food and beverage			503,253				528,198				2,184,447				2,326,770
Conference center			329,821				387,835				1,959,241				1,829,544
Other			135,876				77,653				446,409				554,097
Total revenues			3,166,446				3,867,175				15,709,094				16,290,039
Operating expenses:
Rooms			452,802				599,944				2,143,009				2,121,882
Food and beverage			483,034				508,979				2,013,816				2,080,240
Conference center			151,287				137,455				647,787				651,902
General and administrative			274,354				334,667				1,322,334				1,304,393
Marketing			211,760				224,242				1,071,695				925,103
Royalty fees			87,920				114,952				444,787				449,810
Program fees			107,502				160,268				427,471				506,213
Energy			184,496				216,747				729,072				1,332,155
Property operation and maintenance			199,807				178,951				768,050				721,870
Property taxes and insurance			147,451				129,099				491,026				507,233
Depreciation			480,359				472,047				1,925,909				1,888,190
Management fees			94,931				116,015				471,291				488,701
Other expenses			145,995				173,366				550,429				913,428
Total operating expenses			3,021,698				3,366,732				13,006,676				13,891,120
Other (expenses) income:
Interest expense			(648,728	)			(648,728	)			(2,638,350	)			(2,644,971	)
Other income			121				501				2,555				25,638
Total other expenses, net			(648,607	)			(648,227	)			(2,635,795	)			(2,619,333	)
Net income (loss)		$	(503,859	)		$	(147,784	)		$	66,623			$	(220,414	)

See accompanying notes to financial statements.

DOUBLETREE BETHESDA HOTEL AND EXECUTIVE MEETING CENTER
Statements of Owner’s Equity in Hotel

Balance at December 31, 2007		$	25,537,746
Hotel owner distributions, net			(252,313	)
Net loss			(220,414	)
Balance at December 31, 2008			25,065,019
Hotel owner distributions, net			(2,220,321	)
Net income			66,623
Balance at December 31, 2009			22,911,321
Hotel owner distributions, net (unaudited)			6,073
Net loss (unaudited)			(503,859	)
Balance at March 31, 2010 (unaudited)		$	22,413,535

See accompanying notes to financial statements.

DOUBLETREE BETHESDA HOTEL AND EXECUTIVE MEETING CENTER
Statements of Cash Flows

		Three Month Ended March 31,								Year Ended December 31,
		2010				2009				2009				2008
		(unaudited)				(unaudited)
Cash flows from operating activities:
Net income (loss)		$	(503,859	)		$	(147,784	)		$	66,623			$	(220,414	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Amortization of deferred costs			65,346				65,346				271,718				271,718
Depreciation			480,359				472,047				1,925,909				1,888,190
Changes in operating assets and liabilities:
Accounts receivable			(576,488	)			(362,985	)			176,900				(121,480	)
Restricted cash			(344,320	)			157,151				461,029				(146,578	)
Prepaid expenses and other current assets			43,027				47,693				6,197				(73,269	)
Other assets			—				25,914				80,428				78,148
Accounts payable			132,858				153,040				37,609				(283,166	)
Accrued wages and benefits			97,382				(21,678	)			(92,048	)			43,569
Other current liabilities			227,441				(45,993	)			(271,474	)			179,944
Net cash provided by (used in) operating activities			(378,254	)			342,751				2,662,891				1,616,662
Cash flows from investing activities:
Change in reserve funds			(114,123	)			(114,500	)			573,094				(45,361	)
Purchases of property and equipment			(149,336	)			—				(529,271	)			(1,230,121	)
Net cash provided by (used in) investing activities			(263,459	)			(114,500	)			43,823				(1,275,482	)
Contributions (distributions) to hotel owner, net			6,073				39,063				(2,220,321	)			(252,313	)
Net increase (decrease) in cash			(635,640	)			267,314				486,393				88,867
Cash and cash equivalents:
Beginning of period			826,027				339,634				339,634				250,767
End of period		$	190,387			$	606,948			$	826,027			$	339,634
Supplemental cash flow disclosures:
Cash paid for interest		$	595,840			$	595,840			$	2,416,462			$	2,423,083

See accompanying notes to financial statements.

DOUBLETREE BETHESDA HOTEL AND EXECUTIVE MEETING CENTER

Notes to Financial Statements

(1)		Description of Business and Basis of Accounting
		The Doubletree Bethesda Hotel and Executive Meeting Center (the Hotel), is a full service 269-room hotel located in Bethesda, Maryland. The Hotel is owned by THI IV Bethesda, LLC (the Company). The Hotel is managed under an agreement with Thayer Lodging Group, Inc. (Thayer), an affiliate of the Company.
		The accompanying unaudited financial statements of the Hotel as of March 31, 2010 and for the three-month periods ended March 31, 2010 and 2009, have been prepared pursuant to the Securities and Exchange Commission (SEC) rules and regulations. All amounts included in the notes to the financial statements referring to March 31, 2010, and for the three-month periods ended March 31, 2010 and 2009, are unaudited. The accompanying financial statements reflect, in the opinion of management, all adjustments considered necessary for a fair presentation of the interim financial statements. All such adjustments are of a normal and recurring nature.
		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.
		The Hotel collateralizes a note payable obligation of a wholly-owned subsidiary of the Company. Cash from the Hotel’s operations is used to fund interest payments. Although technically an obligation of the Company and not the Hotel, the outstanding principal balance of the note payable, interest expense, deferred financing costs and related amortization are presented in the financial statements. The outstanding principal balance on the note payable is $38 million. The note bears interest equal to 6.72%. The note payable requires monthly interest only payments through maturity. The maturity date was scheduled for November 6, 2010.
		The note contains a debt covenant requiring the Company to maintain a debt service coverage ratio (DSCR). The Company was not in compliance with this DSCR as of and for the years ending December 31, 2009 and 2008. The violation of the DSCR covenant triggered the cash management agreement discussed in footnote 2(b). There were no other consequences of the violation of the DSCR covenant.
		On June 4, 2010, the Hotel was acquired by Pebblebrook Hotel Trust (Pebblebrook) for cash consideration of approximately $67.1 million. Pebblebrook did not assume any amounts due under the note payable obligation. At closing, the settlement agent wired approximately $38 million plus accrued interest to the lender.

DOUBLETREE BETHESDA HOTEL AND EXECUTIVE MEETING CENTER

Notes to Financial Statements

(2)

Significant Accounting Policies

	(a)		Cash and Cash Equivalents
			Includes the Hotel’s operating cash accounts, which may include liquid temporary cash investments with maturities of three months or less at the date of purchase which are considered to be cash and cash equivalents.
	(b)		Restricted Cash
			Pursuant to the terms of a cash management agreement required by the lender, cash receipts are deposited into a bank account controlled by the lender. On a monthly basis, amounts on deposit are first used to fund required escrow accounts, hotel operating expenses, debt service, and management fees. The remaining cash is transferred to the Hotel’s operating account.
			Under the same agreement, monthly deposits to an escrow account are required to fund real estate taxes and insurance premiums. The escrow account also serves as additional collateral for the mortgage loan.
	(c)		Reserve Funds
			Reserve funds consist of funds required by the lender to be set aside as replacement, renovation, and repair reserves. The required monthly deposits to the replacement reserve account are 4% of hotel gross revenues.
	(d)		Property and Equipment
			Building and improvements, furniture, fixtures 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 is computed utilizing the straight-line method over lives of 3 to 40 years.
			Construction in progress totaling $176,222 (unaudited); $26,885; and $589,380 at March 31, 2010 and December 31, 2009 and 2008, respectively, is included in property and equipment. Construction in progress represents renovations to the hotel and is capitalized as the costs are incurred. Renovation projects are generally less than six months in duration, and the hotel remains fully operational while renovations occur. Upon completion of the renovations, depreciation of the improvements commences.
	(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 such impairment losses have been recognized to date.

DOUBLETREE BETHESDA HOTEL AND EXECUTIVE MEETING CENTER

Notes to Financial Statements

	(f)		Revenue Recognition
			Hotel revenues are recognized when the services are provided. Revenues consist of room sales, food and beverage sales, conference center, and other department revenues such as telephone and gift shop. Additionally, the Hotel collects sales, use, occupancy, and similar taxes, which is presented on a net basis (excluded from revenues) on our statements of operations.
	(g)		Accounts Receivable
			Accounts receivable, which represent amounts due from Hotel guests, are presented net of allowances, which were not material at December 31, 2009 or 2008.
	(h)		Deferred Financing Costs
			Deferred financing costs incurred in connection with the note payable are amortized to interest expense using the straight-line method over the contractual life of the note payable, which approximates the effective-interest method.
	(i)		Marketing and Advertising Expenses
			Marketing and advertising costs are expensed as incurred.
	(j)		Income Taxes
			The Hotel is not directly subject to federal, state or local income taxes. The owner of the Hotel is a limited liability company and is taxed as a partnership and the members are individually responsible for reporting their share of taxable income or loss on their income tax returns.

(3)

Related-Party Transactions

	(a)		Management Fees
			The term of the management agreement with affiliates of Thayer is five years and it expires on August 12, 2010. The agreement requires the Hotel to pay a management fee equal to 3% of gross revenues.
	(b)		Due to Manager
			At March 31, 2010 and December 31, 2009 and 2008, the Hotel was obligated to affiliates of Thayer in the amount of $97,966 (unaudited); $66,898; and $26,881, respectively, for management fees and other expenditures made on its behalf.

(4)

Royalty Fee, Program Fee, and Services Contribution

	(a)		Royalty Fee
			The Hotel entered into a franchise agreement with Hilton Hotels Corporation (HHC) commencing on February 28, 2006, and expiring February 27, 2016. Under the agreement, the Company is required to pay a royalty fee to HHC, as follows:

		March 1, 2007 — February 28, 2008		3% of rooms revenue
		March 1, 2008 — February 28, 2016		4% of rooms revenue

DOUBLETREE BETHESDA HOTEL AND EXECUTIVE MEETING CENTER

Notes to Financial Statements

	(b)		Program Fee and Services Contribution
			The Hotel is assessed a monthly program fee by HHC for advertising, promotions, marketing, reservation services, and other administrative support services. The assessment is 4% of gross room revenue.

(5)		Subsequent Event
		The Hotel has evaluated the need for disclosures and/or adjustments resulting from subsequent events through July 9, 2010, the date the financial statements were available to be issued.

Independent Auditors’ Report

The Manager of
Sir Francis Drake Hotel:

We have audited the accompanying balance sheets of Sir Francis Drake Hotel (the “Hotel”) as of December 31, 2009 and 2008, and the related statements of operations, owner’s equity (deficit) 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 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 Hotel as of December 31, 2009 and 2008, 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
July 9, 2010

SIR FRANCIS DRAKE HOTEL

Balance Sheets

		March 31,
		2010				December 31,
		(Unaudited)				2009				2008
Assets
Cash and cash equivalents		$	930,010			$	689,995			$	1,945,150
Restricted cash — (replacement reserve fund)			411,900				519,733				344,373
Accounts receivable, net			590,680				636,172				567,956
Deferred financing costs, net			44,173				88,344				94,198
Prepaid expenses			907,980				668,780				561,350
Total current assets			2,884,743				2,603,024				3,513,027
Property and equipment:
Land			23,995,825				23,995,825				23,995,825
Building and improvements			43,947,747				43,947,747				43,755,379
Intangible assets			3,837,946				3,837,946				3,837,946
Furniture, fixtures, and equipment			17,972,226				17,684,955				17,185,669
			89,753,744				89,466,473				88,774,819
Accumulated depreciation			(21,482,664	)			(20,107,789	)			(14,669,060	)
Total property and equipment, net			68,271,080				69,358,684				74,105,759
Restricted cash (tax escrow)			266,820				91,670				142,237
Other assets			507,682				765,848				783,173
Total assets		$	71,930,325			$	72,819,226			$	78,544,196
Liabilities and Owner’s Equity (Deficit) in Hotel
Current liabilities:
Note payable		$	68,500,000			$	68,500,000			$	68,500,000
Accounts payable			1,702,851				1,096,624				659,497
Accrued expenses			1,340,234				1,152,268				1,941,217
Advance deposits			388,129				480,377				664,711
Other liabilities			814,857				1,107,454				617,692
Total current liabilities			72,746,071				72,336,723				72,383,117
Owner’s equity (deficit) in Hotel			(815,746	)			482,503				6,161,079
Total liabilities and owners’ equity (deficit) in Hotel		$	71,930,325			$	72,819,226			$	78,544,196

See accompanying notes to financial statements.

SIR FRANCIS DRAKE HOTEL

Statements of Operations

		Three Months Ended March 31,								Year Ended December 31,
		2010				2009				2009				2008
		(unaudited)				(unaudited)
Revenue:
Room		$	3,353,558			$	3,406,087			$	16,064,602			$	21,386,617
Food and beverage			3,249,420				3,426,079				14,348,867				17,438,459
Other			482,277				588,688				2,063,677				1,820,070
Total revenues			7,085,255				7,420,854				32,477,146				40,645,146
Operating expenses:
Room			1,598,133				1,669,270				6,969,660				7,098,155
Food and beverage			2,539,290				2,696,618				10,766,856				12,264,512
General and administrative			767,657				949,764				3,501,234				4,397,960
Asset management fees			106,277				111,311				487,148				610,573
Depreciation and amortization			1,374,875				1,347,369				5,438,729				5,449,555
Management fees			282,523				293,300				1,291,732				1,612,614
Property management			362,399				383,221				1,478,808				1,674,333
Utilities			323,890				308,026				1,300,182				1,248,530
Marketing and advertising			486,435				378,649				1,632,501				1,671,584
Liability insurance			135,636				168,333				756,309				673,106
Property taxes			250,185				246,336				1,000,128				651,204
Other			256,170				368,688				758,977				934,400
Total operating expenses			8,483,470				8,920,885				35,382,264				38,286,526
Other (expenses) income:
Interest expense			(460,494	)			(503,019	)			(1,957,757	)			(3,530,303	)
Other income			107				2,367				5,326				18,861
Total other expenses			(460,387	)			(500,652	)			(1,952,431	)			(3,511,442	)
Net loss		$	(1,858,602	)		$	(2,000,683	)		$	(4,857,549	)		$	(1,152,822	)

See accompanying notes to financial statements.

SIR FRANCIS DRAKE HOTEL

Statements of Owner’s Equity (Deficit) in Hotel

Balance at December 31, 2007		$	10,760,159
Net loss			(1,152,822	)
Hotel owner distribution, net			(3,446,258	)
Balance at December 31, 2008			6,161,079
Net loss			(4,857,549	)
Hotel owner distribution, net			(821,027	)
Balance at December 31, 2009			482,503
Hotel owner funding, net (unaudited)			560,353
Net loss (unaudited)			(1,858,602	)
Balance at March 31, 2010 (unaudited)		$	(815,746	)

See accompanying notes to financial statements.

SIR FRANCIS DRAKE HOTEL

Statements of Cash Flows

		Three Months Ended March 31,								Year Ended December 31,
		2010				2009				2009				2008
		(unaudited)				(unaudited)
Cash flows from operating activities:
Net loss		$	(1,858,602	)		$	(2,000,683	)		$	(4,857,549	)		$	(1,152,822	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization			1,374,875				1,347,369				5,438,729				5,449,555
Amortization of deferred financing costs			44,171				49,241				182,544				85,625
Changes in operating assets and liabilities:
Accounts receivable, net			45,492				(479,072	)			(68,216	)			(79,420	)
Prepaid expenses			(239,200	)			48,587				(107,430	)			(152,828	)
Other assets			258,166				306,232				17,325				(186,998	)
Accounts payable			606,227				303,182				437,127				(1,226,648	)
Advance deposits			(92,248	)			(80,666	)			(184,334	)			(68,824	)
Accrued expenses and other liabilities			(104,631	)			391,202				(299,187	)			(991,008	)
Restricted cash (tax escrow)			(175,150	)			(236,533	)			50,567				1,214,076
Net cash (used in) provided by operating activities			(140,900	)			(351,141	)			609,576				2,890,708
Cash flows from investing activities:
Additions to property and equipment			(287,271	)			(463,125	)			(691,654	)			(1,770,019	)
Change in restricted cash (reserve replacement fund)			107,833				38,806				(175,360	)			825,162
Net cash used in investing activities			(179,438	)			(424,319	)			(867,014	)			(944,857	)
Cash flows from financing activities:
Deferred financing costs			—				—				(176,690	)			(179,823	)
Hotel owner (distribution) funding, net			560,353				(184,674	)			(821,027	)			(3,446,258	)
Net cash (used in) provided by financing activities			560,353				(184,674	)			(997,717	)			(3,626,081	)
Net change in cash and cash equivalents			240,015				(960,134	)			(1,255,155	)			(1,680,230	)
Cash and cash equivalents:
Beginning of period			689,995				1,945,150				1,945,150				3,625,380
End of period		$	930,010			$	985,016			$	689,995			$	1,945,150
Supplemental disclosure of cash flow information:
Cash paid for interest		$	460,494			$	503,019			$	1,615,180			$	3,222,502

See accompanying notes to financial statements.

SIR FRANCIS DRAKE HOTEL
Notes to Financial Statements

(1)		Description of Business and Basis of Accounting
		The Sir Francis Drake Hotel (the Hotel), is a full service 416-room hotel located at 450 Powell Street, San Francisco, California. The Hotel is owned by SFD Partners, LLC, a Delaware limited liability company (the Company).
		The accompanying unaudited financial statements of the Hotel as of March 31, 2010 and for the three-month periods ended March 31, 2010 and 2009, have been prepared pursuant to the Securities and Exchange Commission (SEC) rules and regulations. All amounts included in the notes to the financial statements referring to March 31, 2010, and for the three-month periods ended March 31, 2010 and 2009, are unaudited. The accompanying financial statements reflect, in the opinion of management, all adjustments considered necessary for a fair presentation of the interim financial statements. All such adjustments are of a normal and recurring nature.
		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.
		The Hotel collateralizes a note payable obligation of SFD Partners, LLC. Cash from the Hotel’s operations account is used to fund interest payments. Although technically an obligation of SFD Partners, LLC and not the Hotel, the outstanding principal balance of the note payable, interest expense, deferred financing costs and related amortization are presented in the financial statements. The outstanding principal balance on the note payable is $68.5 million. The note bears interest equal to 30-day LIBOR plus 220 basis points, or 2.43% and 3.49%, at December 31, 2009 and 2008, respectively. The note payable requires monthly interest only payments through maturity. The maturity date was scheduled for July 7, 2010.
		On June 22, 2010, the Hotel was acquired by Pebblebrook Hotel Trust (Pebblebrook) for cash consideration of approximately $90 million. Pebblebrook did not assume any amounts due under the note payable obligation. At closing, the settlement agent wired $68.5 million plus accrued interest to the lender.
(2)		Summary of Accounting Policies

	(a)		Cash and Cash Equivalents
			Includes the Hotel’s operating cash accounts, which may include liquid temporary cash investments with maturities of three months or less at the date of purchase which are considered to be cash and cash equivalents.
	(b)		Replacement Reserve Fund and Tax Escrow
			In accordance with the management agreement with the Kimpton Hotels & Restaurant Group, LLC (the Management Company), a replacement reserve fund for the purpose of replacements to, and additions of, property improvements, adjacent grounds, furniture, fixtures, and equipment is required. The replacement reserve fund is funded with an amount equal to 3% of gross revenue, as defined, on a monthly basis.

SIR FRANCIS DRAKE HOTEL
Notes to Financial Statements

		In accordance with the loan agreement between the Hotel’s owner and Column Financial Inc. (the Lender), a tax escrow account is required.
		(c)   Property and Equipment
		Building and improvements, furniture, fixtures, 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		15 — 39 years
Intangible assets — trade names and franchise value		20 years
Furniture, fixtures and equipment		5 years

		Construction in progress totaling $0 and $241,291 at December 31, 2009 and 2008, respectively, and $0 at March 31, 2010 (unaudited), is included in furniture, fixtures and equipment. Construction in progress represents renovations to the Hotel and is capitalized as the costs are incurred. Renovation projects are generally less than six months in duration, and the Hotel remains fully operational while renovations occur. Upon completion of the renovations, depreciation of the improvements commences.
		(d)   Deferred Financing Costs
		Deferred financing costs incurred in connection with the note payable are amortized to interest expense using the straight-line method over the contractual life of the note payable, which approximates the effective-interest method.
		(e)   Other Assets
		Other assets consist of inventories and the Hotel liquor license. Inventories are stated at the lower of cost or market, with market determined on a first-in, first-out basis.
		(f)   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.
		(g)    Accounts Receivable
		Accounts receivable, which represent amounts due from Hotel guests, are presented net of allowances, which were not material at December 31, 2009 or 2008.

SIR FRANCIS DRAKE HOTEL
Notes to Financial Statements

		(h)   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 estimated 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 such impairment losses have been recognized to date.
		(i)   Marketing and Advertising Expenses
		Marketing and advertising costs are expensed as incurred.
		(j)   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)		Related-Party Transactions
		The Charters Lodging Group, LLC, an investor in SFD Partners, LLC, provides asset management services for the Hotel for a fee equal to 1.5% of gross revenues as defined in the agreement. The Hotel incurred asset management fees of $487,148 and $610,573 for the years ended December 31, 2009 and 2008, respectively, and $106,277 and $111,313 for the quarters ended March 31, 2010 and 2009 (unaudited), respectively.
(4)		Management Agreement with Kimpton Hotel and Restaurant Group, LLC
		The owner of the Hotel entered into a management agreement with Kimpton Hotels & Restaurant Group, LLC (the Management Company) for the operation, management, maintenance, and marketing of the Hotel. The agreement expires on April 30, 2024. Under the agreement, the Management Company manages the Hotel for a base fee equal to 3% of the Gross Revenue, as defined, and an incentive fee equal to 1% of the Gross Revenue up to the amount of cash available from Cash Flow, as defined, after debt service. The Management Company is reimbursed for its costs and expenses, including but not limited to compensation of its employees, up to 1% of Gross Revenue. Total reimbursable expenses for the years ended December 31, 2009 and 2008 were $250,047 and $290,870, respectively. Base management fees totaling $968,797 and $1,209,462 were incurred for the years ended December 31, 2009 and 2008, respectively, and are included in management fees in the accompanying statements of operations. Incentive management fees totaling $322,935 and $403,152 were earned for the years ended December 31, 2009 and 2008, respectively, and are included in management fees in the accompanying statements of operations.
		Certain of the Hotel’s expenses were paid on behalf of the Hotel by affiliates of SFD Partners, LLC in the normal course of business. The Hotel reimburses these affiliates on a regular basis for disbursements made on its behalf. All such disbursements and reimbursements are accounted for by the Hotel as due to or from affiliates of SFD Partners, LLC and presented net of management fees due to affiliates. These amounts were $57,619 and $135,516 at December 31, 2009 and 2008, respectively, and included in accounts payable in the accompanying balance sheets.

SIR FRANCIS DRAKE HOTEL
Notes to Financial Statements

(5)		Subsequent Events
		The Hotel has evaluated the need for disclosures and/or adjustments resulting from subsequent events through July 9, 2010, the date the financial statements were available to be issued.

Independent Auditors’ Report

The Manager of
the InterContinental Buckhead Hotel:

We have audited the accompanying balance sheets of the InterContinental Buckhead Hotel (the “Hotel”) as of December 31, 2009 and 2008, 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 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 Hotel as of December 31, 2009 and 2008, 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
July 9, 2010

InterContinental Buckhead Hotel

Balance Sheets

		March 31,
		2010				December 31,
		(Unaudited)				2009				2008
Assets
Cash and cash equivalents		$	85,356			$	109,646			$	150,136
Accounts receivable, net			1,451,578				471,173				1,832,067
Prepaid expenses			224,753				299,817				405,383
Total current assets			1,761,687				880,636				2,387,586
Property and equipment:
Land			9,742,453				9,742,453				9,742,453
Building and improvements			68,526,838				68,526,838				68,452,458
Furniture, fixtures, and equipment			33,898,162				33,901,070				33,769,969
			112,167,453				112,170,361				111,964,880
Accumulated depreciation			(29,495,385	)			(28,499,981	)			(22,792,395	)
Total property and equipment, net			82,672,068				83,670,380				89,172,485
Other assets			264,346				223,639				109,707
Total assets		$	84,698,101			$	84,774,655			$	91,669,778
Liabilities and Owner’s Equity in Hotel
Current liabilities:
Accounts payable		$	509,898			$	412,093			$	227,142
Accrued expenses			1,565,470				1,304,651				1,318,139
Advance deposits			964,572				373,129				821,210
Other liabilities			605,614				255,950				254,029
Total current liabilities			3,645,554				2,345,823				2,620,520
Owner’s Equity in Hotel			81,052,547				82,428,832				89,049,258
Total liabilities and owner’s equity in Hotel		$	84,698,101			$	84,774,655			$	91,669,778

See accompanying notes to financial statements.

InterContinental Buckhead Hotel

Statements of Operations

		Three Months Ended March 31,								Year Ended December 31,
		2010				2009				2009				2008
		(Unaudited)				(Unaudited)
Revenue:
Room		$	4,302,604			$	4,567,532			$	16,188,439			$	20,887,725
Food and beverage			3,340,804				3,235,374				12,344,683				15,086,269
Other			475,071				420,912				2,077,462				2,050,888
Total revenues			8,118,479				8,223,818				30,610,584				38,024,882
Operating expenses:
Room			1,281,393				1,290,551				4,774,663				6,111,494
Food and beverage			2,069,504				2,052,108				7,749,219				9,878,389
General and administrative			651,025				781,860				2,572,470				3,742,779
Depreciation			995,404				1,466,545				5,707,586				5,840,285
Property management			287,474				292,170				1,052,915				1,211,991
Utilities			297,220				297,009				1,166,102				1,528,306
Marketing and advertising			514,603				526,802				2,086,031				2,221,358
Insurance			174,429				111,254				473,074				447,874
Property taxes			271,836				371,403				787,532				965,973
Other			149,723				169,408				650,423				842,627
Total operating expenses			6,692,611				7,359,110				27,020,015				32,791,076
Net income		$	1,425,868			$	864,708			$	3,590,569			$	5,233,806

See accompanying notes to financial statements.

InterContinental Buckhead Hotel

Statements of Owner’s Equity in Hotel

Balance at December 31, 2007		$	95,244,437
Hotel owner distributions			(11,428,985	)
Net income			5,233,806
Balance at December 31, 2008			89,049,258
Hotel owner distributions			(10,210,995	)
Net income			3,590,569
Balance at December 31, 2009			82,428,832
Hotel owner distributions (unaudited)			(2,802,153	)
Net income (unaudited)			1,425,868
Balance at March 31, 2010 (unaudited)		$	81,052,547

See accompanying notes to financial statements.

InterContinental Buckhead Hotel

Statements of Cash Flows

		Three Month Ended March 31,								Year Ended December 31,
		2010				2009				2009				2008
		(unaudited)				(unaudited)
Cash flows from operating activities:
Net income		$	1,425,868			$	864,708			$	3,590,569			$	5,233,806
Adjustments to reconcile net income to net cash provided operating activities:
Depreciation			995,404				1,466,545				5,707,586				5,840,285
Changes in operating assets and liabilities:
Accounts receivable, net			(980,405	)			(1,518,413	)			1,360,894				525,749
Prepaid expenses			75,064				(196,846	)			105,566				(13,441	)
Other assets			(40,707	)			(128,326	)			(113,932	)			297,251
Accounts payable			97,805				132,833				184,951				(453,735	)
Advance deposits			591,443				(46,053	)			(448,081	)			306,539
Accrued expenses and other liabilities			613,391				977,613				(11,567	)			(272,826	)
Net cash provided by operating activities			2,777,863				1,552,061				10,375,986				11,463,628
Cash flows from investing activities — purchase of property and equipment			—				(27,688	)			(205,481	)			(168,072	)
Cash flows from financing activities — Hotel owner distributions			(2,802,153	)			(1,506,947	)			(10,210,995	)			(11,428,985	)
Net change in cash and cash equivalents			(24,290	)			17,426				(40,490	)			(133,429	)
Cash and cash equivalents:
Beginning of period			109,646				150,136				150,136				283,565
End of period		$	85,356			$	167,562			$	109,646			$	150,136

See accompanying notes to financial statements.

INTERCONTINENTAL BUCKHEAD HOTEL

Notes to Financial Statements

(1)		Description of Business and Basis of Accounting
		The Intercontinental Buckhead Atlanta hotel (the Hotel), is a full service 422-room hotel located at 3315 Peachtree Road, Atlanta, Georgia. The Hotel is owned by IHC Buckhead, LLC, a Georgia limited liability company (the Company).
		The accompanying unaudited financial statements of the Hotel as of March 31, 2010 and for the three-month periods ended March 31, 2010 and 2009, have been prepared pursuant to the Securities and Exchange Commission (SEC) rules and regulations. All amounts included in the notes to the financial statements referring to March 31, 2010, and for the three-month periods ended March 31, 2010 and 2009, are unaudited. The accompanying financial statements reflect, in the opinion of management, all adjustments considered necessary for a fair presentation of the interim financial statements. All such adjustments are of a normal and recurring nature.
		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 July 1, 2010, the Hotel was acquired by Pebblebrook Hotel Trust (Pebblebrook) for cash consideration of approximately $105 million.
		IHC Buckhead, LLC was a party to a title/leasehold interest exchange arrangement with the Development Authority of Fulton County. The purpose of the arrangement was to obtain a reduction of real estate taxes through 2014. A subsidiary of Pebblebrook was assigned the rights under the agreement in connection with the acquisition of the Hotel. The arrangement with the Development Authority of Fulton County is cancelable by Pebblebrook at any time.
(2)		Summary of Accounting Policies

	(a)		Cash and Cash Equivalents
			Includes the Hotel’s operating cash accounts, which may include liquid temporary cash investments with maturities of three months or less at the date of purchase which are considered to be cash and cash equivalents.
	(b)		Property and Equipment
			Building and improvements, furniture, fixtures, and equipment are stated at cost. The cost of additions, alterations, and improvements is capitalized. Expenditures for repairs and maintenance are expensed as incurred.

INTERCONTINENTAL BUCKHEAD HOTEL

Notes to Financial Statements

Depreciation and amortization are computed on the straight-line basis over the following estimated useful lives:

Building and improvements		20 – 50 years
Furniture, fixtures and equipment		3 – 10 years

	(c)		Impairment of Long-Lived Assets
			Long-lived assets are evaluated 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 such impairment losses have been recognized to date.
	(d)		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. Additionally, we collect sales, use, occupancy and similar taxes at our hotels which we present on a net basis (excluded from revenues) on our statements of operations.
	(e)		Accounts Receivable
			Accounts receivable, which primarily represent amounts due from Hotel guests, are presented net of allowances, which were not material at December 31, 2009 or 2008.
	(f)		Marketing and Advertising Expenses
			Marketing and advertising costs are expensed as incurred.
	(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 July 9, 2010, the date the financial statements were available to be issued.

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 June 4, 2010, the Company acquired the 269-room Doubletree Bethesda Hotel and Executive Meeting Center in Bethesda, Maryland for a purchase price of $67.1 million, plus closing costs and net working capital.

On June 22, 2010, the Company acquired the 416-room Sir Francis Drake Hotel in San Francisco, California for a purchase price of $90.0 million, plus closing costs and net working capital.

On July 1, 2010, the Company acquired the 422-room InterContinental Buckhead Hotel in Atlanta, Georgia for a purchase price of $105.0 million, plus closing costs and net working capital.

The unaudited pro forma consolidated balance sheet as of March 31, 2010 is presented as if the acquisitions of the Doubletree Bethesda Hotel and Executive Meeting Center, Sir Francis Drake Hotel, and InterContinental Buckhead Hotel occurred on March 31, 2010. The unaudited pro forma consolidated statements of operations for the three months ended March 31, 2010 and for the year ended December 31, 2009 are presented as if the acquisitions of the Doubletree Bethesda Hotel and Executive Meeting Center, Sir Francis Drake Hotel, and InterContinental Buckhead Hotel had been completed at the beginning of 2009.

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 acquisitions of the Doubletree Bethesda Hotel and Executive Meeting Center, Sir Francis Drake Hotel, and InterContinental Buckhead Hotel. 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, 2009, and the Quarterly Report on Form 10-Q for the three months ended March 31, 2010.

Pebblebrook Hotel Trust
Unaudited Pro Forma Consolidated Balance Sheet
As of March 31, 2010
(in thousands, except share and per share data)

						Acquisition of
						Doubletree								Acquisition of
		Historical				Bethesda Hotel and				Acquisition of				InterContinental				Pro Forma
		Pebblebrook				Executive Meeting				Sir Francis				Buckhead Hotel				Pebblebrook Hotel
		Hotel Trust				Center (1)				Drake Hotel (2)				(3)				Trust
ASSETS
Investment in hotel properties, net		$	—			$	67,100			$	90,000			$	105,000			$	262,100
Cash and cash equivalents			302,898				(68,882	)			(91,096	)			(103,858	)			39,062
Accounts receivable, net			—				203				121				7				331
Investments			85,000				—				—				—				85,000
Prepaid expenses and other assets			409				144				545				61				1,159
Total assets		$	388,307			$	(1,435	)		$	(430	)		$	1,210			$	387,652
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable and accrued expenses		$	1,367			$	280			$	404			$	1,171			$	3,222
Accrued underwriter fees			8,050				—				—				—				8,050
Advance deposits			—				85				266				439				790
Other liabilities			—				—				—				—				—
Total liabilities			9,417				365				670				1,610				12,062
Commitments and contingencies
Shareholders’ equity:
Common shares of beneficial interest, $0.01 par value; 500,000,000 shares authorized; 20,260,590 shares issued and outstanding			203				—				—				—				203
Additional paid-in capital			379,433				—				—				—				379,433
Retained deficit			(746	)			(1,800	)			(1,100	)			(400	)			(4,046	)
Total shareholders’ equity			378,890				(1,800	)			(1,100	)			(400	)			375,590
Total liabilities and shareholders’ equity		$	388,307			$	(1,435	)		$	(430	)		$	1,210			$	387,652