RLJ Lodging Trust Priced Its IPO Below the Range

May.11.11 | About: RLJ Lodging (RLJ)
RLJ Lodging Trust (NYSE:RLJ) priced its 27.5 million share IPO at $18.00, below the indicated range of $19-21. All of the shares are primary shares offered by the company. Proceeds are expected to be used to repay secured indebtedness, associated transfer and assumption costs, and for general corporate purposes. BofA Merrill Lynch, (NYSE:BAC) Barclays (NYSE:BCS), and Wells Fargo (NYSE:WFC) are lead underwriters for the offering.
RLJ is a self-advised and self-administered lodging REIT with a primary focus on focused-service and compact full-service hotels, with the Marriot (NYSE:MAR), Hilton and Hyatt (NYSE:H) flags. The current portfolio consists of 140 hotels with 20,488 rooms. The company will be the third largest lodging REIT by hotel EBITDA and the largest REIT in the focused-service category (as of 12/31/10). It is also the 5th largest Marriot franchisee.
On a pro forma basis for 2010, the company shows revenue of $708.5M, adjusted EBITDA of $206.8M and adjusted FFO of $126.6M. The annualized anticipated dividend is $.60, which represents a forward dividend yield of 3.33%, which is slightly above the peer group average forward dividend yield of just under 3%.
REIT IPOs have had a lackluster performance in the last 17 months. In 2010, there were 9 REIT IPOs that priced, with 5 closing day one above their IPO price (albeit 2 of those were essentially flat), and only three currently above their IPO price (with only PDM up a decent percentage +37%). For 2011, 4 companies have priced their IPOs American Assets Trust, Inc. (NYSE:AAT), Summit Hotel Properties, Inc. (NYSE:INN), Preferred Apartment Communities (NYSEMKT:APTS), and STAG Industrial (STIR); with only AAT closing above its IPO price on day one, and 2 of the four currently above their IPO price (AAT and INN). Of the 13 deals total, five priced below their indicated range, with two others pricing at the low end of their range.

RLJ opened down 4% in its debut Wednesday (May 11) at $17.25.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.