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•	Become the clear leader in the lodging REIT sector and the second-largest lodging REIT as measured by equity market capitalization;

•	Own the premier, best-in-class portfolio comprised of 69 primarily upper-upscale and luxury independent and branded hotels and resorts located in or near key urban markets in the United States;

•	Own a portfolio of hotels and resorts well-diversified by brand and management company, including a significant number of unique market-leading independent and branded hotels;

•	Have increased influence and negotiating strength with management companies and brands;

•	Benefit from similar portfolio strategies that should allow for a smooth operational transition and the ability to create material cost synergies to benefit shareholders;

•	Benefit from increased balance sheet flexibility, increasing capacity for the acquisition or disposition of properties or other value-enhancing strategies such as share repurchases;

•	Generate strong cash flow, providing for a more stable dividend to shareholders that would represent a significant premium to the anticipated LaSalle dividend based on the potential 50% reduction discussed on LaSalle’s recent year-end earnings call;

•	Provide improved liquidity for shareholders as a result of the larger shareholder base and increased equity market capitalization;

•	Provide lower costs for debt and preferred equity, and provide a clear path to public investment-grade debt opportunities;

•	Benefit from the continuity provided by certain LaSalle trustees joining the combined company’s board of trustees; and

•	Benefit from the well-regarded executive management team of Pebblebrook, which would lead the combined company and has demonstrated a track record of creating value, evidenced by the 45% outperformance of Pebblebrook’s share price (+69%) relative to LaSalle’s (+24%) since Pebblebrook’s IPO.

1.	Transaction Structure: The combination will be structured as a tax-free, 100% equity exchange. Pebblebrook will issue new shares to LaSalle’s shareholders and remain as the surviving ultimate parent entity. This structure allows LaSalle’s shareholders to participate as equity holders in the benefits and upside of the combined entity.

2.	Price and Form of Consideration: An implied merger price of $30.00 per share3 for 100% of LaSalle’s outstanding common shares, paid in Pebblebrook’s common shares utilizing a fixed exchange ratio. This

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3.	Financing Sources: Pebblebrook expects to issue its common shares for the common equity consideration of the transaction and assume LaSalle’s existing preferred shares, term loans and first mortgage loans or establish new loans to refinance such indebtedness and will require no financial contingencies.

4.

Timing: Pebblebrook anticipates that it could complete its due diligence and negotiate and execute definitive documentation for the transaction within 30 days with your cooperation. We have the necessary senior personnel, advisors and resources to complete the diligence review and documentation in this timeframe. Pebblebrook further anticipates that the transaction could be consummated as soon as practicable following the receipt of shareholder approval from both Pebblebrook and LaSalle, and regulatory and other approvals.

5.	Due Diligence: Over the last several months, we have reviewed significant amounts of publicly available information regarding LaSalle. Consequently, we anticipate being able to conduct our necessary confirmatory due diligence regarding key financial, operational, environmental, regulatory, legal and tax aspects of LaSalle within the relatively short time period set forth in paragraph 4 above.

6.

Approvals and Conditions: Although a combination as contemplated in this letter will be subject to the approval of both Pebblebrook’s and LaSalle’s shareholders, we are confident that the terms set forth herein would be supported by both sets of shareholders particularly given the significant shareholder overlap between the two companies. Our top 100 shareholders (owning 97% of our common shares) also own 66% of LaSalle’s common shares.6

7.	Exclusivity: Pebblebrook and LaSalle will enter into a customary exclusivity agreement providing that neither party nor their respective advisors will solicit or encourage other non-parties to submit an offer for another transaction for an agreed number of days from the date of such exclusivity agreement.

8.	Financial and Legal Advisor Contacts: Pebblebrook intends to engage Raymond James & Associates, Inc. to serve as its financial advisor and Hunton & Williams LLP to serve as its legal counsel.

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