Ahead Of The Bell: LaSalle Hotel Properties

NEW YORK (AP) — Analysts said Wednesday that LaSalle Hotel Properties' public offering of an additional 6.5 million shares is most likely designed to position it for future growth instead of just paying down debt, as the company had said.

FBR Capital Markets analyst C. Patrick Scholes said the sale would generate $110 million to $115 million, more than enough to make debt payments due in the next two years.

He said he believes LaSalle intends to use some of the money to build the business. LaSalle is a real estate investment trust that owns 31 upscale hotels in 11 states and the District of Columbia.

"With only about $13 million of debt coming due in 2010 and $20 million in 2011, our sense is the equity sale was made with an eye on future development activity and even more likely on property acquisitions," Scholes told investors in a research note.

But, investors sent the shares lower by more than 7 percent to $15 in premarket trading Wednesday.

The stock dropped late Tuesday after the announcement of the stock offering. Stock offerings dilute current shareholders' stakes, and shares of companies tend to sell off initially after announcing such a move.