RLJ Lodging Trust plans to expand following latest public offering

RLJ Lodging Trust is not ready to stop buying hotels this year.

To fund upcoming deals, the Bethesda-based real estate investment firm announced last week that it has issued an additional 15.8 million common shares of its stock for $21.60 a share.

The public offering is estimated to bring in $327.6 million for the company. RLJ Lodging Trust — which was co-founded by Black Entertainment Television creator Robert L. Johnson in 2000 — currently owns 147 hotels, including the Homewood Suites in downtown Washington.

“We waited two years since our [initial public offering to offer shares again], and given the fact that our company has done well and we have a very active deal pipeline, we felt it was the right time to go back into the market and raise capital,” said Thomas J. Baltimore Jr., president and chief executive of the company.

In March, the lodging trust announced the purchase of a $79.5 million historic complex in Houston that included two hotels, as well as a high-rise apartment building that the firm plans to convert into a 166-room Spring Hill Suites.

“They have one of the best balance sheets in the lodging [industry] right now,” said Lukas Hartwich, an analyst for the research firm Green Street Advisors. “I don’t know what their secret sauce is, but they have been able to find deals that are well below market value.”

At the end of 2012, the company had $115.9 million of unrestricted cash. It was pretty clear, Hartwich said, that RLJ would have to find a way to raise more money if it were to continue expanding at the rate it wanted to.

“They had used up most of their cash,” Hartwich said. “They basically had two options: Leverage up or [hold a public offering], and they’d made it very clear that they wanted to run a low-leverage business.”

Following its latest stock offering, the company has a total of 120.6 million outstanding shares.

The deal was underwritten by 11 banks, with Barclays, Merrill Lynch and Wells Fargo backing the majority of new shares, according to a prospectus filed with the Securities and Exchange Commission.

Abha Bhattarai covers local retail, hospitality and banking for The Washington Post. She has previously written for The New York Times, The Wall Street Journal, Reuters and the St. Petersburg (Fla.) Times.

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