RLJ Lodging Trust, a Bethesda-based hotel company started by Black Entertainment Television founder Robert L. Johnson, made its debut Wednesday as a public company, with shares closing slightly below their initial public offering price.
The company’s stock closed at $17.68 per share, down 32 cents from its initial price of $18. The company originally hoped to price its offering at $19 to $21 a share.
The IPO, based on 27.5 million shares outstanding, raised $495 million for the company, which plans to use most of the proceeds to repay debt.
RLJ Lodging chief executive Thomas J. Baltimore Jr. declined to comment on the stock’s performance but said he is “looking forward to the next chapter.”
As a private operation, RLJ amassed a portfolio of 140 hotels — with more than 20,400 rooms — in 19 states, operating under the Marriott, Hilton and Hyatt brands. Baltimore said the offering provided the company with “significant growth capital” to buy more hotels in the future.
Pension funds such as the California Public Employees’ Retirement System and the California State Teachers’ Retirement System hold substantial shares in RLJ, as do the company’s managing partners, including the firm’s namesake Johnson. That may have dampened investor enthusiasm at the start, one analyst said.
“You have very large investors whose allocations look large, and they’re likely going to pare down their exposure later,” said Enrique Torres, an analyst at Green Street Advisors.
RLJ Lodging Trust, formed in February, comprises the hotel investments of the privately held RLJ Development and its two private-equity funds, valued at about $743 million and $1.2 billion, respectively.
On a pro forma basis, the company reported revenue of $545.6 million for 2010, a 13.1 percent increase from the previous year. That uptick in revenue speaks to a larger rebound in the hotel industry, where a resurgence in leisure and business travel has justified increased room prices. Average occupancy at hotels in the United States rose 5.7 percent, to 54.9 percent, in the first quarter, while average daily rates increased 3.1 percent, to $99.37.
Overall, revenue-per-available room, a key industry metric, was $54.56, up 9 percent from a year earlier.
Matt Therian, a research analyst at Renaissance Capital, said RLJ should do well in the current economy because it tends to focus on limited service hotels that lack large meeting spaces and other features that can boost operating costs.
“That should drive the performance of RLJ going forward,” he said.
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