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LaSalle Hotel Properties cuts dividend 50%, slams Pebblebrook growth estimates

LaSalle Hotel Properties disclosed plans to pay a reduced dividend beginning in the second quarter and elaborated on its rejection of a merger offer from Pebblebrook Hotel Trust.

LaSalle said it expects to pay quarterly dividends of 22.5 cents per common share for the second, third and fourth quarters of 2018. The new quarterly payment represents a 50% reduction from LaSalle's first-quarter dividend of 45 cents per common share.

To the extent that the regular quarterly dividends for 2018 do not satisfy IRS requirements for annual real estate investment trust distributions, LaSalle said it expects to satisfy the requirements by paying a special dividend in January 2019.

LaSalle's share price fell sharply in February after the company said a dividend cut was likely. In the same March 28 news release in which it formally announced the cut, LaSalle said the merger offer from Pebblebrook exploits a "short-term dislocation" in LaSalle's share price.

LaSalle said it rejected the offer in part because the offer "significantly undervalues" LaSalle's hotel portfolio. Pebblebrook proposed exchanging 0.8655 of its common shares for each LaSalle common share.

The company also jabbed at what it characterized as Pebblebrook's history of consistently missing its guidance for growth in revenue per available room over the past three years. LaSalle said its board has "significant concerns that Pebblebrook's share price reflects its overly optimistic growth targets."

LaSalle also said it is "surprised" that Pebblebrook has not waived change-in-control agreements that it said would trigger vesting of outstanding equity awards and the payment of bonuses to Pebblebrook executives.