RLJ Development Checks Out, Cashes In - Black Enterprise
Black Enterprise Magazine July/August 2018 Issue

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bobjohnson2BET founder Robert L. Johnson’s real estate investment company, RLJ Development L.L.C. (No. 8 on the BE INDUSTRIAL/SERVICE 100 list with $460 million in sales), recently sold 22 full- and select-service hotels to the Inland American Lodging Corp. for approximately $900 million.

The 4,061-room portfolio consists of high-end full- and select-service hotels primarily located in major urban markets including Boston, Baltimore, Chicago, and Washington, D.C. These assets, which are expected to net RLJ a profit of more than $300 million, are currently operated by industry leading brands, including Marriott, Hilton, and Hyatt.

“[RLJ] demonstrated very good skill in identifying properties that would appreciate rapidly,” says Paul Adornato, senior REIT (real estate investment trust) analyst for BMO Capital Markets. “There is more of an interest in urban real estate these days. If you are able to buy in a built-up city then you are protected from new competition to some extent.”

“As a part of our investment strategy we renovated a number of the hotels, changed management companies, and implemented a number of value-added strategies to create incremental value for this portfolio,” says Thomas J. Baltimore Jr., president of RLJ. “Inland approached us about buying the entire portfolio and made a very compelling offer that was too attractive to pass on.”

Although they had planned to hold those assets for five to seven years, the company was able to launch the RLJ Urban Lodging Fund, deploy their capital, implement their strategies, and sell the assets in less than four years, according to Baltimore.

“Four years is a relatively quick time frame, but not unheard of. The hotel market has held up pretty well, up until now,” says Adornato. “If the economy does poorly, then hotels generally do very poorly.” Hotels are sensitive to the economy, considering that the majority of their business comes from business travelers, notes Adornato.

“We were able to sign the contract in August before the credit crunch, and closed this transaction in February,” says Baltimore, explaining why the closing was profitable under present financial conditions. “We were able to take advantage of a very favorable environment last summer and maintain an attractive price despite the credit turmoil”

According to RLJ Development’s Website, the portfolio has outperformed its peers, returning a cash-on-cash yield of more than 20% to its investors. “To see a large portfolio [like this] change hands is noteworthy in this environment. These days the real estate market is slow in terms of the number of transactions,” Adornato says.

“In one sense, Inland may be betting that the economy won’t dip into a deep recession, and perhaps [RLJ Development] may have a more pessimistic view or just want to monetize some of the profits that they have built up in their portfolio while going into this uncertain economic outlook,” Adornato theorizes.

RLJ still owns 114 hotels and manages more than $2.5 billion in assets. Baltimore says the company has just launched its third private equity fund, RLJ Real Estate Fund III, which raised

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Marcia Wade Talbert

Marcia is a multimedia content producer focusing on technology at Black Enterprise Magazine. In this capacity she writes and assigns stories to educate readers about social media; digital integration; gadgets, apps, and software for business and professional development; minority tech startups; and careers in STEM (Science, Technology, Engineering, and Mathematics). In 2012, she received two Salute to Excellence Awards from the National Association of Black Journalists and was recognized by Blacks in Technology (BiT) as one of the Top 10 Black achievers in the tech arena for 2011 at SXSW in Austin, Texas. She has spoken about technology on panels for New York Social Media Week, at The 2012 Rainbow/PUSH Wall Street Summit, as well as at Black Enterprise’s Entrepreneurs Conference and Women of Power Summit. In 2011, SocialWayne.com chose her as one of 28 People of Color Impacting the Social Web, and through crowdsourcing she was listed as one of BlackWeb2.0's/HP's 50 Most Notable African American Tastemakers in Social Media and Technology for 2010. Since taking on the role of Tech editor in September 2010, she has conceived and produced five cover stories on Technology and/or STEM and countless articles, videos, and slideshows online. Before joining BlackEnterprise.com as an interactive general assignment reporter in 2008, she freelanced with Black Enterprise beginning in 2003 while working as the technical editor at Prepared Foods magazine. There she further honed her writing skills and became an authority on food ingredients, including ingredients used in food fortification and enrichment. Meanwhile, her freelancing with Black Enterprise and BlackEnterprise.com helped her stay current on issues pertaining to the financial and business welfare of African Americans. As a general reporter for Black Enterprise she attended and reported on the Democratic and Republican National Conventions, where she interviewed Valerie Jarrett, senior advisor and assistant to President Barack Obama and U.S. Attorney General Eric Holder. Marcia has a Bachelor of Science degree in Agriculture with an emphasis in food science from the University of Minnesota, and a Master of Science degree in journalism from Roosevelt University in Chicago. En route to her secondary degree, she served as the editor-in-chief of the Roosevelt University Torch, a weekly, student-run newspaper. An avid photographer and videographer, Marcia is one of several employees at BLACK ENTERPRISE who interned for the publishing company as a college student. She lives in New Jersey with her husband, a food scientist; her seventeen-month-old daughter; and “The Cat”, but still considers Chicago home.


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